Talya Nevo-Hacohen - Chief Investment Officer Rick Matros - Chairman and CEO Harold Andrews - CFO.

Josh Federline - Bank of America George Hoglund - Jefferies Cole Allen - FBR.

Please standby. Good day, ladies and gentlemen. And welcome to the Sabra Health Care REIT's Third Quarter 2015 Earnings Conference Call. This call is being recorded. I would like to now turn the conference over to Talya Nevo-Hacohen, Chief Investment Officer. Please go ahead..

Thank you.

Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our acquisition and investment plans, our expectations regarding our financing plans, our expectations regarding our Forest Park investments and our expectations regarding our future results of operations.

These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31, 2014 and our Form 10-Q for the quarter ended June 30, 2015 that are on file with the SEC, as well as in our earnings press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC yesterday.

We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances. And you should not assume later in the quarter that the comments we make today are still valid. In addition, references will be made during this call to non-GAAP financial results.

Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliation of these measures to the comparable GAAP results included at the end of our earnings press release and the supplemental information materials included as Exhibits 99.1 and 99.2, respectively, to the Form 8-K we furnished to the SEC yesterday.

These materials can also be accessed in the Investor Relations section of our website at www.sabrahealth.com. And with that, let me turn the call over to Rick Matros, Chairman and CEO of Sabra Health Care REIT.

Rick?.

Thanks, Talya. Good morning, everybody. Thanks for joining us. Harold will cover Forest Park in detail including more detail around the updated guidance that we gave on our earnings release and we'll talk about 2016 as well.

Then we'll give you a range of impacts on various matters to provide a better sense of the financial outcomes providing more realistic assumptions than what we see reflected in the stock price. Let me start off by talking about where we are other than Forest Park and where we're going from a strategic perspective.

2015 is extremely productive from an investment perspective. As such we'll have strong earnings growth going to 2016, including any variety of outcomes in Forest Park. So we've got no need or desire to push to get more done at this point.

We did close one senior housing facility in Canada and we'll be closing the Forest Park facility but both of those were contemplated in the $200 million that we anticipated closing that we noted on the last call. So, in other words we are taking our foot of the pedal at this point and obviously the whole group's down.

In terms of stock performance we are down even more obviously because of the overhang. We won't be issuing any equity to the ATM or otherwise. Once Forest Park is resolved and the overhang is removed we will reevaluate our cost to capital and the acquisition environment.

Proceeds from the sales of Frisco and debts at Dallas and Fort Worth if that were to be recovered will be used to delever the balance sheet and potentially buy back stock as well. Additionally we do believe that there will be expansion capital as we go into 2016, as noted on the last call and we continue to see, recycle period of busted deals.

We see a slowing down of a relevant product and a product that we see is of lower quality all of which we think are indications that there's been a peak in the acquisition market and a peak in pricing as well. The public REITs have all been excursing restraint in terms of pricing.

We are the only sort of group out there that isn't exercising any restraint on pricing and the PEs as it pertains to senior housing. We don't anticipate that changing and as we see the PEs doing the same thing in other real estate sectors, not just senior housing sector.

But from our perspective as sellers come to us and are comfortable with a public REIT, people will expect that pricing will be as generous as it's been and guys still happy to sell. So looking sort of at the Forest's expansion on cap rates as we go into 2016.

And so we have a minimal increase in -- that the Fed is going to do in terms of interest rates should be immaterial to any capital expansion that we think will come out going forward. In terms of -- let me mention our pipeline.

Our pipeline is down approximately $400 million which is well also more it was early this year but actually reflects where it normally is and everything in the pipeline except for that $30 million in senior housing, that $30 million is we are saying they are probably [indiscernible] but we're not looking at the hospitals.

But again a lot of the stuff that we see in the pipeline isn't the quality that we would like to see and again we're not really interested in doing any more right now anyway.

Let me move on to the business fundamentals; our business fundamentals were good in our portfolio, our skilled transitional care portfolio, EBITDA coverage improved from 1.25 to 1.27. Our senior housing coverage improved from 1.21 to 1.25 and our coverage is up sequentially on our rent coverage of the last portfolio.

Genesis improved to 1.27, Tenet Health improved to 2.44 and Holiday we see a comfortable 1.17. Occupancy in the skilled nursing transitional care portfolio dropped 70 basis points to 87.3%, while skilled mix improved 150 basis points to 39% and it's up sequentially. I want to make a note here, I see a lot of comments about quality mix.

Quality mix is actually not a good determining factor in terms of where the skilled business is going. Quality mix is something that we used back in the day really that included all non-Medicaid revenue. So Medicare, managed care and private pay.

But when you look at private pay rates today, private pay rates today aren't really indicative of what's happening in the business. Private pay rates today they will come close to either Medicare rates or managed care rates in the skilled sector. They actually were very close in numerous states to Medicaid rates.

So from our perspective if you really want the good indicators to whether operators in your skilled portfolio are moving their business to sort of a new world business model, which is short stay transitional care post surgical and [lowers] the complex medical care like pulmonary and ventilations you have to look at skilled mix, which is Medicare and managed care.

So we will continue to report on our skilled mix. We will not report on quality mix and I think we have done with that for about 15 years. So I mean getting this from an operator's perspective.

And in certain states Medicaid is actually a good thing because there are a number of states like Pennsylvania, and now in probably the 15 or so others that provide Medicaid rates that equal Medicare rates for high acuity patients because they want to keep them in their hospitals.

So you've got vent rates in Pennsylvania and Maryland for example that are the same or better than Medicare fee to service rates. Then you've got Medicaid rates in states like Idaho that are for bariatric patients that approximates Medicare rates.

So my suggestion is that everybody looks at this a little bit differently and focuses on -- need more accurate metrics to focus on whether the operating companies are moving strategically the way they need to be moving as the business model continues to evolve.

Our senior housing occupancy was up 200 basis points to 90.8% and we believe we still have room there for improvement. And one note before I turn it over to Harold, on the Frisco Hospital and that is that since the debtor and possession financing is put in place that this is the first time in months that they've actually had liquidity.

We've seen relatively material increase in their volume and that they still have a ways to go obviously.

But when you look at their volume, the week before the debt was put in place and the week after it changed almost overnight because now they have got the funds available to get on with the financing and take all the cases they want and we continue to see that volume increase. So that's in regards to the outcome of this debt that's a good thing.

And with that, I will turn it over to Harold who has about an hour worth of comments about [11 minutes] on Forest Park and about a minute on everything else..

Thanks, Rick, and thanks everybody for joining the call. It won't be quite that long, but I do want to get into quite a bit of details to paint an appropriate picture here.

But I'll provide an overview of the results of our operations for this third quarter and our financial position as of the end of the quarter as well as provide some additional details on our Forest Park and our full year earnings expectations.

For the three months ended September 30, 2015, we recorded revenues of $59.9 million compared to $44 million for the same period in 2014, an increase of 36.3%. As of September 30, 2015, 32.8% of our annualized revenues are derived from our leases to Genesis, down from 37.4% a year ago.

In addition, our annualized revenues from senior housing assets have increased to 37.1%, up from 31% a year ago. FFO for the quarter was $35.6 million and on a normalized basis was $38 million or $0.58 per share.

This was normalized to exclude reserves booked during the quarter for $2.3 million of Forest Park-Frisco straight line rental income that was recognized in prior periods. This normalized FFO compares to $24.6 million or $0.51 per share for the third quarter of 2014, a per share increase of 13.7%.

AFFO, which excludes from the FFO acquisition pursuit costs and certain non-cash revenues and expenses, was $34.5 million or $0.53 per share compared to $24.6 million or $0.51 per share for the third quarter of 2014, a per share increase of 3.9%.

For the third quarter of 2015, we reported net income attributable to common stock holders of $15.5 million or $0.24 per diluted common share, compared to $14.6 million or $0.31 per share in 2014.

As I will discuss further near the end of my comments, there's been a quite a bit of concern over the financial struggles at the Forest Park-Frisco and Forest Park-Dallas hospitals.

In order to provide some perspective on the impact our investments in these assets had on our financial performance for the third quarter of 2015; I would like to note here that the normalized FFO and AFFO for the quarter included no revenues from our fiscal investment and $2.2 million of interest income from the Dallas loan, representing $0.03 per share or 5.2% of our total normalized FFO and 5.7% of our total AFFO for the quarter.

Excluding the revenue that was recorded for Dallas during the quarter our normalized FFO and AFFO would have been $0.55 and $0.50 per share, respectively and that would represent completely eliminating the Forest Park investments from our numbers in the quarter.

Moving on to our expenses, G&A costs for the quarter totaled $4 million and included stock-based compensation expense of $0.7 million, $0.4 million of operating costs for our RIDEA joint venture investments, and acquisition pursuit costs of $0.5 million.

Our ongoing corporate level cash G&A costs were $2.3 million compared to $2.2 million in the third quarter of 2014, representing a 3.8% of revenues for the quarter compared to 5% of revenues for the same period of 2014.

During the quarter we recorded $2.5 million provision for doubtful accounts, including $2.4 million to fully reserve all straight line rental income receivables related to the Forest Park-Frisco hospital lease discussed previously.

The reserve was increased to 100% on the straight line rent receivables for Frisco due to our current expectation that the in place lease agreement will be substantially modified or cancelled upon resolution of the bankruptcy proceedings.

Interest expense for the third quarter totaled $15.2 million, compared to $10.5 million for the same period in 2014, and included the amortization of deferred financing costs of $1.3 million in 2015 and $0.9 million in 2014.

Based on debt outstanding as of September 30, 2015, our weighted average interest rate excluding borrowings under our unsecured revolving credit facility was 4.6% compared to 4.7% at the end of 2014.

During the quarter, we recorded an adjustment to the fair value of contingent consideration liability associated with an acquisition, resulting in non-cash other expense of $0.1 million. In addition, we recorded a $1.8 million net loss on sale of real estate associated with the disposition of three skilled nursing facilities.

The loss we have associated with one of the assets that was previously leased to Genesis and therefore having a carryover basis from before the formation with Sabra. The other two asset sales resulted in a small net gain and were acquired in 2011. Net proceeds from these sales, totaled $14 million.

Switching to activity during the quarter and the impact on the statements of cash flows and balance sheet, our investment activity for the quarter totaled $93.8 million and included nine senior housing facilities in two separate portfolio transactions and two new preferred equity investments associated with two senior housing facility developments.

We have made total investments during 2015 of $471.1 million with an aggregate weighted average year one yield of 7.6%, including an additional $28 million of investments made subsequent to September 30, in a senior housing facility and a preferred equity investment associated with a senior housing development.

The senior housing facility acquisition is our second investment in Canada and is structured as a 100% owned RIDEA investment that will be managed by the entity we did our first Canadian acquisition with.

This investment activity during and after the quarter was funded with our revolving line of credit and cash on hand, resulting in an increase in our revolving line of credit from a $122 million at June 30th to $204 million at September 30th.

On September 30, 2015, we completed the final charge of HUD mortgage loan refinancings we've been working on the past several quarters, which provided $28.7 million of proceeds, having an interest rate of 3.64% and maturing in 2045.

The proceeds from this financing are included in the $31.5 million of cash and cash equivalents as of the quarter end and we had used to fund the $28 million of investments closed after quarter end.

As of September 30, 2015 we had total liquidity of $277.4 million consisting of currently available funds under our revolving credit facility of $246 million and available cash and cash equivalents of $31.4 million. Cash flows from operations totaled $79.1 million for the nine months ended September 30, 2015 compared to $71.2 million in 2014 up 11%.

During the quarter we had no activity in our equity ATM program and as of quarter end we had $76.5 million available for future issuance under the program. We have suspended our ATM program for the near-term given the current trading levels of our stock.

We will reactivate the program at a time we believe acquisition activity in our stock price, while its considering the utilization of the program again. On November 9th, we declared a $0.41 per share cash dividend to be paid to common stock holders on November 30, 2015. This represents 77% of our AFFO for the quarter.

We remain in compliance with all of our debt covenants under our senior notes indentures, our secured revolving line of credit agreement and our term notes as of September 30, 2015 and continue to maintain strong credit metrics as follows.

Net debt through adjusted EBITDA of 5.8 times, consolidated fixed charge coverage ratio of 3.3 times, minimum interest coverage ratio 4.3 times, total debt to asset value of 47% and secured debt to asset value 6%, the ratio of unencumbered asset value to unsecured debt 226%.

As stated previously, we did not access our equity ATM program during the quarter and do not anticipate accessing the equity markets for the balance of 2015 through the ATM program or otherwise.

We expect to fund current pending acquisitions that total approximately $59 million and any loan of preferred equity investment fundings with current partners in the near-term with borrowings under our revolving credit facility. This is expected to increase our net debt to adjusted EBITDA to approximately 6 times by year end.

This is higher than our historical range and exceeds our long-term target of between 4.5 times and 5.5 times, with a bias to the low of that range.

While this level is not a concern for us, bringing our leverage back down toward our long-term targeted range continues to be a priority and achieving that target will depend on achieving a higher share price level or applying any proceeds from the sale of Forest Park assets that I'll discuss shortly.

With the current reaction in our stock price to the Forest Park investments, we believe that painting more clarity toward the final resolution of Forest Park is a key element to begin with the move forward with that process of delevering. With that I would like to provide an update on Forest Park investments.

As of September 30, 2015, our total net investment for the assets is $284.4 million plus accrued in unpaid interest net of reserves of $4.9 million and the DIP financing balance of $3.3 million, all representing 11.9% of our total assets.

I will walk you through the current status for each of the three investments in common on current estimated values and possible outcomes. I will start with Frisco, where we have $109 million net investment in the hospital and a related parking structure plus accrued in unpaid rents net of reserves of $2.3 million.

In addition, we have funded the $3.3 million debtor in possession financing as of the end of the quarter.

On August 10, 2015 the Memorandum of Understanding dated July 21, 2015 with the Frisco tenant to restructure the terms of the lease was cancelled due to their failure to pay additional financing as required under the MOU and their failure to comply with other terms of the MOU. On September 25th, the Frisco tenant filed Chapter 11 Bankruptcy.

As part of the bankruptcy we agreed to provide up to $18.5 million in debtor in possession financing to the Frisco tenant subject to terms of a senior secured super-priority debtor in possession loan and security agreement.

The DIP loan provides among other conditions that monthly rents due under our lease totaling $0.9 million per month will be paid in full starting October 1, 2015 until the sale process is concluded or the bankruptcy court orders otherwise.

We did not record any revenues for Frisco during the three months ended September 30, 2015 and increased our reserve associated with a cumulative straight line rental income receivable balance by $2.3 million to fully reserve all straight line rents associated with Frisco as I mentioned above.

The tenant have engaged an investment bank to market the assets and that marketing process has began. The bankruptcy proceedings are progressing as expected and we will continue to fund the DIP financing and keep the hospital operating as long as we believe it is prudent to do so to maximize the value of the asset.

As of today our total funded amount under the DIP loan is $8.2 million and the hospital continues to increase its case volume as it moves towards the end of the year. Ultimately we expect to either enter into a new lease agreement with the new operator or sell our interest in Frisco.

Our course of action will be based on what we believe to be the best resolution taking into account the impact on the realization of the DIP loan and prior rents due and the value of a potential lease arrangement as compared to selling the Frisco asset. The process and outcome is subject to bankruptcy court approval.

In addition we have individual personal guarantees from the various possession owners of the Frisco tenant totaling $21.3 million, which provides additional sources for realizing our investment. The ultimate realized value of this investment is very difficult to estimate until we get further into the sales process.

However, we believe certain of our options could provide an outcome that will result in no loss on our investment amounts including the option if we were successful in bringing in a new operator under revised lease agreements at what we believe to be market terms.

In a down side scenario, where we sell our investment completely, we believe it is unlikely that we would incur a loss on any such transaction in excess of $30 million. And that's assuming we fund the entire $18.5 million DIP financing which may or may not occur.

Switching over to Dallas, our investment in Dallas is a $110 million mortgage loan plus accrued in unpaid interest of $2.3 million secured by the hospital and the related parking structure. The borrower did not make its monthly payment of interest due October 1, 2015 and was served with a Notice of Default.

We will exercise all remedies available to us under the Dallas mortgage loan and have served the Dallas borrower with a Notice of Foreclosure with the foreclosure sales schedule for December 1, 2015 barring any action by the borrower to judicially stop the sale.

This foreclosure sale could result in the pay off of our loans including all interest penalties and late fees due or in our option we could credit bid the asset and acquire it ourselves in an amount just above the highest bidder whereby we would then have the option of bringing in a new tenant or selling the asset in a fully marketed transaction.

The collateral for this investment was recently appraised at a $115 million. We also hold an option to purchase this asset in a value to be determined based on rents from the lease between our borrower and the hospital operating company with a floor of a $115 million.

Given the small spread between the estimated value and the real estate in our invested amount we have not assumed any value of the purchase option and no value is included in our financial statements.

If we acquire the assets through foreclosure or otherwise and cancel the current lease we will consider both selling the asset or finding a high credit quality tenant to lease the asset from us under a new lease agreement.

Based on the appraisal, we currently don't expect to incur any loss on the resolution of the default on this loan including collecting the $2.3 million of past due interest. The foreclosure process will progress over the coming weeks and we will gain more clarity as to the ultimate course of action and outcome in the next several weeks.

Switching now to Forest Park-Fort Worth, our investment there is a $61 million construction loan with unpaid interest of $0.4 million secured by a recently built campus which includes a hospital, a 79,000 square foot MOB and the related parking structure.

The borrower did not make its monthly payment of interest due October 1, 2015 and was served with a Notice of Default.

We intend to exercise all our remedies available to us under the Fort Worth construction loan and have served the Fort Worth borrower with a Notice of Foreclosure with the foreclosure sales scheduled also for December 1, 2015, barring any action by the borrower to judicially stop the sale.

This foreclosure sale could result in the pay off of our loan including all interest penalties and late fees due or in our option we could credit bid the asset and acquire it ourselves at an amount just above the highest bidder, whereby we would then have the option to bring in a new tenant or sell the asset in a fully marketed transaction.

There remain $6 million of availability under the construction loan that we've suspended funding pending the outcome of the foreclosure process. The majority of this available funding would be used to build out the tenant improvements in the MOB.

A recent appraisal estimated the value of this campus securing our loan at $122 million indicating excess collateral value of approximately $61 million.

We understand there have been offers for the MOB asset which supports the value assumed in the appraisal and indicate an ability to quickly sell the MOB if we were to acquire the assets through foreclosure.

In addition, we hold an option to purchase the hospital and parking structure assets at a value to be determined based on rents from the lease between our borrower and the hospital operating company. We estimate the value at this option to be up to $20 million depending on the ultimate value of the real estate.

We have not recorded any separate value on our financial statements associated with this purchase option and therefore any value realized on the option would result in a gain in our financial statements. If we obtain ownership of the assets due to the foreclosure process we believe there's a significant upside to be realized from this investment.

Taking into consideration the current situation in each of these assets and the progress we're making in resolving the issues we believe we will have additional clarity on the outcome for each asset by year end and expect to have ultimate resolution around the end of the first quarter of 2016.

Because of the range of outcomes, it's hard to estimate a specific dollar impact on 2016 FFO and AFFO. Based on current information we believe that in the -- under any of the expected potential outcomes, the impact will result in some combination of reduced interest on rent from the current contractual levels in each agreements.

We anticipate that any such reduction will be partially offset by a redeployment of proceeds from asset sales or by rents under any revised leases for the investments that we may retain.

We expect that the full year 2015 normalized FFO and normalized AFFO will include between $0.18 and $0.25 per share from the three Forest Park investments, depending on the potential need for additional reserves.

This includes $0.06 from the Fort Worth loan which as mentioned before we believe will be resolved with no negative financial impact to Sabra.

Based on these potential outcomes I discussed, we believe 2016 normalized FFO and AFFO from revenues generated by these assets or from utilizing the proceeds from their sale to pay down debt and reduce interest expense will range from $0.08 to $0.33 per share.

This indicates a range from reduction in normalized FFO and AFFO of $0.17 per share to an increase of $0.15 per share in 2016 compared to 2015 for these specific assets. We do not believe any of the potential outcomes will result in a significant impact on the financial health of Sabra.

In addition proceeds from any sales or the pay off of any of our loan investments would likely be used to pay down the revolver and bring leverage down to as low as 5.5 times without any other deleveraging activities.

Taking all this into consideration along with the success we have had in 2015, making accretive investments, we believe, we will achieve normalized FFO and AFFO per share growth in 2016, even assuming we make no additional investments in 2016. And I'll close up finally with a couple of comments related to our updated guidance for 2015.

Because of the circumstances surrounding the Forest Park investments, we've revised our normalized FFO per share guidance range from between $2.21 to $2.24 to between $2.13 and $2.23 and our normalized AFFO per share guidance range from between $2.12 to $2.15, to $2.01 and $2.12.

This increased range in our guidance reflects the range of potential outcomes surrounding the bankruptcy proceeding in Frisco and the foreclosure proceedings in Dallas and Forth Worth.

The revised guidance assumes we record no interest income on the Dallas loan during the fourth quarter and assumes we stop [incurring] interest on the Fort Worth loan effective November of 2015 when we commenced foreclosure proceedings.

In addition the low end of the range assumes the $4.5 million of accrued and unpaid rent from Frisco and interest from Dallas as being unlikely to be collected and therefore will be fully reserved. The total impact of these Forest Park assumptions reduced the low end of our guidance numbers for both normalized FFO and AFFO by $0.13.

The difference between the low end guidance reduction of $0.08 and this $0.13 being the positive results we've had in excess of our prior guidance estimates.

Finally, it should be noted that if we put the Fort Worth and Dallas loans on a non-accrual basis as reflected in the revised guidance, it is not an indication that we believe that unreported interest will not be recovered to the foreclosure process or otherwise.

Rather it is a reflection of the proper accounting treatment under our accounting policies. In that circumstances we expect to realize those unreported amounts upon disposition of the assets. And with that I'll turn it back over to Rick..

Thanks, Harold. Before I turn it over to Q&A, just one comment on the Canadian facility we acquired.

Going back to 2012 when RIDEA just became popular we have consistently said that we're not interested in pursuing RIDEA as a growth strategy, that we will only do it in certain circumstances that make sense for us and an operating partner that we want to grow with and not with the case here. It's immaterial.

It should have been a signal to anybody that we're going to pursue these things on a go forward basis. These are really the partners, we do want to grow with them and I think some of you may be aware may be aware, but Daybridge, this is the same operating group that acquired the Amica portfolio a couple of months ago in Canada.

So, very strong, highly respected operating company in Canada. So, again it's one-off to be material and it doesn't -- shouldn't be viewed as any change in our view of RIDEA or our strategy going forward. And with that, let's go into Q&A..

Thank you. [Operator Instructions] Our first question will come from Juan Sanabria of Bank of America Merrill Lynch..

It's actually Josh Federline with Juan.

For Dallas and Fort Worth have any of the bidders in Frisco expressed any interest in those assets?.

That's a good question. Actually the books have gone out and as it pertains to Frisco we have got some strong interest and some positive conversations, it's too early to speculate our valuation at this point but the responses have been relatively quick.

And yes, we specifically have gotten interest on Dallas as well and our expectation is that the sales process of Frisco may lead to resolution to the other hospitals in the portfolio as well, including Southlake which is owned by another REIT.

But that said, the direction the broker has is regardless of how much interest in as many of the hospitals, that they don’t take their eyes of the ball. Frisco has to be closed.

In other words, even if there is interest in our two other assets and it's tied to Frisco, we are not going to want to hold the resolution on Frisco pending other potential outcomes. When we get Frisco closed then we are obviously happy to pursue the others as well and it may happen simultaneously.

But we are not going to kick off both with Frisco because that's, that really is the biggest issue..

Okay, great. And then I guess for your kind of a slightly different topic on Genesis.

What's the expectation for how coverage leverage will change as they buy back some leases from you?.

Yes. Buying the leases from us is immaterial, but they thought they can be buying leases from their REIT landlords as well. And so when you add -- because we have a corporate guarantee when you aggregate all the transactions that they are going to be involved with, with all the REITs that will have a positive impact on coverage.

I don’t know exactly where it's going to go but they reported actually a really nice quarter and I believe they are the only post-acute company of any type for the third quarter that reported a quarter that met expectations. So they gained better even in the absence of those transactions and those transactions will hold.

But I couldn’t give you a specific number as to how much coverage will improve just to make sure it improved..

Okay. I appreciate that. I think you actually answered most of my questions on Forest Park in the prepared commentary. So I'll jump the floor now. Thank you..

Thanks Josh..

[Operator Instructions] Will go next to Tayo Okusanya with Jefferies..

Hi, guys.

This is actually George on for Tayo and I'm sorry if I missed this earlier, but just on the foreclosure of the Forest Park assets, I don’t know if you commented on if also likelihood that the buyer -- the current owner actually tries to prevent the foreclosure sale from happening?.

Yes. I did make a brief comment but I will expand on it a little bit. The only way they can stop the foreclosure is through a judicial process, because the way our loan agreements were drafted, were we provided them with Notice of Default. They -- through the loan agreements they've waived their rights to share the default.

So basically the loan was accelerated immediately. And so the acceleration of loan triggers our ability to take it to sales. So in other words, they can just come and pay our interest and get current on interest and stop the foreclosure, they will still continue down that path.

So that really thinking it through the most likely way they can try to slow it down would be to file bankruptcy at the OpCo entity.

But that could provide challenges for them if -- and this is what we believe is the case, if we are the only creditor in that entity and the only real assets in the entity are our hospital, we have been told by our attorney that the judge would likely not allow that to slowdown the process dramatically. But it could slow it down a month or two.

So we will see how that plays out. And frankly given the value in Forest, either they are going to want to come to us I believe and try to negotiate something or do whatever they can stop it because of that obviously significant value that's in those assets. So that will play itself out over the next couple of weeks..

Yes. I want to add some to essentially one point Harold made, so that everybody is clear on it. We are the only credit issuer for both of these assets. So we're really in a fantastic position from that perspective..

Yes. That's a good point. These are in special purpose entities. They are not tied up with the operations of the hospitals. Those are under lease agreements with the hospital. So it purely is the real estate assets and our loan and that's pretty much what's in those entities..

Okay.

Before trying to ballpark what's an estimated timeframe of when sort of final resolution happens on these assets, what sort of our I guess ballpark the one you could actually get final resolution?.

I think on Frisco, it's probably not unrealistic to think that we wouldn't have some other contracts whether it's an OpCo or a complete sale by the end of the year, but that is going to take another couple of months so to close.

So, I think sometime in the latter part of the first quarter for Frisco and may be that long for the other team but maybe a lot sooner for the other team.

We have held that line because there are a number of potential outcomes on Dallas and Fort Worth and because we've got real value there that we could recognize we want to be careful that we do everything we can to capture that value and not move too precipitously..

And then I'm sorry if I missed this earlier, but when given where the stock price is now, I mean it's obviously it's sold off significantly and would you guys consider doing a share buyback?.

Yes, I did mention that earlier. Once we -- we're not going to use liquidity that we have available. We're not going to use the full amount of liquidity right now to do it, and that would --because it would take a significant amount of liquidity to have any sort of an impact.

But as I noted earlier, once we resolve the Forest Park issue then assuming that we're going to have proceeds from between one to three of those assets, we will use those proceeds to pay down debt and we will seriously consider using those proceeds to buy back stock as well.

And certainly we agree that it's really grossly over sold when you look at the actual impact on the company. There's no relationship between the impact on the company and the stock being off [75%]..

And then I guess one last from me right now, I mean in terms of the coverage at Holiday, can you serve comment on how those -- that portfolio is performing?.

Yes, actually performing really well. Coverage ticked down a little bit, but we're not uncomfortable with it. In terms of where they are with their lenders and their debt covenants, they are actually ahead of schedule there. We have talked with the CEO about it.

There were some rumors otherwise about five weeks ago or so, but they're actually doing very well, as they are ahead of their projections as it pertains to their lender. So, they're good right now..

Okay. Thanks. I will yield the floor..

[Operator Instructions] We'll go next to Dan Altscher of FBR..

This is actually Cole Allen on for Dan. Just a couple of quick ones, you guys have done a really great job of giving a lot of color on the Forest Park assets, so I'll shift to another aspect of the company. I noticed G&A was kind of down quarter-over-quarter.

I guess could you just talk to about that, like what the run rate may be for that is going forward?.

Well, it is down quarter-over-quarter, a big part of that was the outsized transaction costs we had in 2014 on the Holiday acquisition. So our transaction costs were down and just call it $0.5 million for the quarter which really is kind of closer to our typical run rate.

So we have about $2.5 million of cash G&A cost this quarter which is up against $2.4 million last year.

So I think if we take somewhere in that range for our corporate G&A cost on a cash basis and then our transaction costs typically are going to run somewhere around $25 million and then our stock compensation frankly can vary dramatically depending on the stock price.

But that's typically -0- it was extremely low this quarter compared to last quarters as well because of the drop in the stock price. And then the RIDEA portfolio runs about $0.5 million a quarter.

So, if you -- I think the bogey is what is our stock comp to and it's kind of hard to estimate, but everything else, where we were in this quarter kind of feels like an appropriate run rate given the normal level of acquisition volume..

And maybe about $4 million a quarter round about..

Right..

That sounds good. That makes a lot of sense. I guess, moving forward to these loans at Forest -- the Forest Park getting worked out, you will have either buy the properties or a lot of cash coming back.

Does this like turn you guys on more to the loan portfolios? Are you doing more loans like this or doing less loans like this? I guess what is the goal going forward for your loan segment on your portfolio?.

No. It's not going to incentivize us to do more loans, because the purpose of the loans that we've made, whether it's been here or development starts for whatever has been to -- is sort of path to our ownership. So, we're not a bank. We're not going to do loans, just to do loans.

To the extent that we do well with these two then we had loans in place for a few years, where we have gotten 8% interest and that's great, but that's not really what the point of the loans are. The point of the loans are to give us a path for ownership. So that you won't see us using our balance sheet to be [indiscernible]..

Perfect. Thank you guys so much..

We will take a follow up question from Tayo Okusanya of Jefferies..

This is George again.

Just one thing, I'm considering the experience the Forest Park assets, does this change your view on the hospital sector in general?.

We've always said a couple of things that I still believe. One, I think the hospital sector, generally is a winner in the Affordable Care Acts.

I think part of the problem here even though we've said all along that part of the problem and it's a big part of problem with Forest Park was the operating company just really failed to execute on the transitions to be a net worth model.

One of the things that I think data shows and I've actually gone back to look at research from sort of the think tank of the industry to project how sectors are going to be impacted by ACA. But ACA clearly hurts the physician hospital model, because ACA precluded the physician hospitals from participating in Medicare, Medicaid.

For any hospital that I spoke about, once the legislation was signed towards 2009, I believe it was. And while the physicians were happy not to take Medicare and Medicaid because the reimbursement really isn't very good.

And if you look at Forest Park, if they have had a volume that would have been available from Medicare and Medicaid while they transitioned that would have given them a lot more cushion to transition. So, that's something that is one of the things that you don't pick up in research or diligence.

We outsourced our diligence to a third party beyond our normal diligence on this deal to assess the models, the market rates, everything that is going on. So this is much more extensive than anything we have ever done. So but in hindsight that clearly was a factor.

So with all that said, if we were to announce a hospital deal tomorrow, I think people will probably take me out and shoot me. I think we'll be focused on seeing new housing and skilled nursing and that's going to be it on a go forward basis.

I would point out though that, our Texas regional medical center, once we've switched out to a good operator and the good operator being kind of hospital corporation, that hospital is doing great.

And the shame of all of this is that if we wind up getting out completely which is still probably the most likely outcome, we're going to sit by the sidelines and watch a good operator realize everything we have thought that these assets could do, but it is what it is. So, senior housing and skilled nursing that's what it is going forward..

Thanks, Rick. Appreciate the color..

We'll take a follow up question from Juan Sanabria..

A question on Forest Park, what you guys put a value on as far as like the bed, like price per bed at your Frisco or Dallas or Fort Worth facility? Kind of looking at comps across the industry it seems like perhaps a little over 800,000 is what most people have paid in the past for price per bed, just trying to get a sense..

We actually haven't looked at price per bed at all because and I feel the same way price per bed when you look at senior housing and skilled nursing and this is from a guy who has been doing deals for 30 years in this sector.

Price per bed has never been that meaningful a metric because it's so market specific and the composition of the product affects it so dramatically. I bought business that had dramatic differences in price per bed because of the market we are in, but the margins are the same, the yields are the same.

So we really haven't looked at it and these really are very unique assets which the problems that surround the portfolio, putting that aside, they are very unique assets in terms of comparing them to comps because when you just look at the real estate itself, this is new real estate. These are elite certified facilities.

These are arguably the nicest acute hospital real estate assets in the country. I mean you may find some that are close to but you are not going to find any that are nicer so that makes it a little bit harder to judge and to judge as well..

Got it, thanks. Appreciate it..

And we have no other questions at this time. I'd like to turn the conference back to our presenters for any additional or closing remarks..

I appreciate everybody's time today. I know it's a busy day to everybody. Ventas has their Investor Day.

We would -- normally we schedule our calls early than this but because of the events that were unfolding with Forest Park, we wanted to make sure that you were aware and we thought we would be with the bankruptcy court hearings on Frisco and the news report that came out on Dallas about a week and a half ago, even though that was unsubstantiated and kind of a shame that actually got reported on because things are up in the air.

We needed to wait and make some decisions on Dallas and Fort Worth as well as, so that we could be as specific with you guys as possible. And that really -- that extra time allowed us to provide as much clarity as we've been able to provide in this call and to update guidance and give some outlook on 2016 as well.

So appreciate everybody's attention this morning and Harold and I, as always are available for calls and we look forward to seeing a number of you at NAREIT next week. Take care..

That does conclude today’s conference. Thank you all for your participation..