Real Estate	9 Months Ended
Sep. 30, 2011
Real Estate
Real Estate	NOTE 2. REAL ESTATE At September 30, 2011, exclusive of assets held for sale, we had investments in 93 health care real estate properties leased to operators, of which 41 properties were leased to National HealthCare Corporation ("NHC"), a publicly-held company and our largest customer. The 41 properties leased to NHC include four facilities subleased to and operated by other companies, the lease payments of which are guaranteed by NHC. Our current lease with NHC expires December 31, 2021 (excluding 3 additional 5-year renewal options). For the nine months ended September 30, 2011, rental income from continuing operations was $56,259,000, of which $27,156,000 (48.3%) was recognized from NHC consisting of base rent of $25,275,000 and percentage rent of $1,881,000, $635,000 of which related to final determination of NHC's 2010 revenues. For the nine months ended September 30, 2010, rental income from continuing operations was $53,355,000, of which $26,530,000 (49.7%) was recognized from NHC consisting of base rent of $25,275,000 and percentage rent of $1,255,000, $485,000 of which related to final determination of NHC's 2009 revenues. For purposes of the percentage rent calculation described in the master lease agreement, NHC's annual revenue by facility for a given year is certified to NHI by March 31^st of the following year. Acquisitions and New Leases of Real Estate In May 2011, we completed a $15,000,000 purchase of four assisted living facilities totaling 183 units in Louisiana. The facilities, which have an average age of 13 years, are being leased to an affiliate of Selah Management Group over 15 years at an initial lease amount of $1,275,000 per year plus annual fixed escalators. In September 2011, we completed a $5,400,000 purchase of a 60-unit assisted living facility in Greensboro, Georgia and have leased the facility to Senior Living Management. The facility, which was built in 1998, is being leased for an initial term of nine years at an initial lease rate of 8.5% plus annual fixed escalators. Also in September 2011, we entered into a $21,500,000 development and lease transaction with affiliates of Polaris Hospital Company to develop a 60-bed general acute care hospital in Murfreesboro, Tennessee that will provide acute psychiatric and in-patient rehabilitation services. Construction commenced in October 2011 and the hospital is expected to open in the fourth quarter of 2012. Once the facility is open, the lease rate of 10% will be calculated on NHI's total invested amount with annual fixed escalators beginning in the second year. The initial lease term is for 15 years. At September 30, 2011, our investment in land and pre-construction costs was $3,922,000. Planned or Completed Dispositions of Certain Real Estate In December 2009, we entered into an agreement with our current lessee, affiliates of Fundamental Long Term Care Holdings, LLC ("Fundamental"), to sell six skilled nursing facilities in Texas. The planned sale of these facilities meets the accounting criteria as being held for sale and is expected to close when HUD financing is arranged by Fundamental. In January 2011, the first of these six facilities having a carrying value of $4,039,000 was sold for total cash proceeds of $4,500,000. As of September 30, 2011, the carrying value of $29,381,000 represented the lesser of the remaining five facilities' net book value or estimated fair value less cost to sell. We have reclassified the results of operations of these facilities as discontinued operations for all periods presented in our Condensed Consolidated Statements of Income. In December 2010, we agreed to the terms of sale with the current tenant of two medical office buildings. The sale of these facilities met the accounting criteria as being held for sale. At December 31, 2010, the carrying value of $3,433,000 represented the lesser of the properties' net book value or estimated fair value less cost to sell. We have reclassified the results of operations of these facilities as discontinued operations for all periods presented in our Condensed Consolidated Statements of Income. The sale transaction was completed in February 2011 with receipt of cash proceeds of $5,271,000. In August 2011, we completed the sale of a 60-unit assisted living facility located in Daytona Beach, Florida with a carrying value of $2,152,000 to the current tenant, for cash proceeds of $3,200,000. The summary of operating results of all facilities classified as discontinued operations is shown in Note 11.

NOTE 2. REAL ESTATE

At September 30, 2011, exclusive of assets held for sale, we had investments in 93 health care real estate properties leased to operators, of which 41 properties were leased to National HealthCare Corporation ("NHC"), a publicly-held company and our largest customer. The 41 properties leased to NHC include four facilities subleased to and operated by other companies, the lease payments of which are guaranteed by NHC. Our current lease with NHC expires December 31, 2021 (excluding 3 additional 5-year renewal options). For the nine months ended September 30, 2011, rental income from continuing operations was $56,259,000, of which $27,156,000 (48.3%) was recognized from NHC consisting of base rent of $25,275,000 and percentage rent of $1,881,000, $635,000 of which related to final determination of NHC's 2010 revenues. For the nine months ended September 30, 2010, rental income from continuing operations was $53,355,000, of which $26,530,000 (49.7%) was recognized from NHC consisting of base rent of $25,275,000 and percentage rent of $1,255,000, $485,000 of which related to final determination of NHC's 2009 revenues. For purposes of the percentage rent calculation described in the master lease agreement, NHC's annual revenue by facility for a given year is certified to NHI by March 31^st of the following year.

Acquisitions and New Leases of Real Estate

In May 2011, we completed a $15,000,000 purchase of four assisted living facilities totaling 183 units in Louisiana. The facilities, which have an average age of 13 years, are being leased to an affiliate of Selah Management Group over 15 years at an initial lease amount of $1,275,000 per year plus annual fixed escalators.

In September 2011, we completed a $5,400,000 purchase of a 60-unit assisted living facility in Greensboro, Georgia and have leased the facility to Senior Living Management. The facility, which was built in 1998, is being leased for an initial term of nine years at an initial lease rate of 8.5% plus annual fixed escalators.

Also in September 2011, we entered into a $21,500,000 development and lease transaction with affiliates of Polaris Hospital Company to develop a 60-bed general acute care hospital in Murfreesboro, Tennessee that will provide acute psychiatric and in-patient rehabilitation services. Construction commenced in October 2011 and the hospital is expected to open in the fourth quarter of 2012. Once the facility is open, the lease rate of 10% will be calculated on NHI's total invested amount with annual fixed escalators beginning in the second year. The initial lease term is for 15 years. At September 30, 2011, our investment in land and pre-construction costs was $3,922,000.

Planned or Completed Dispositions of Certain Real Estate

In December 2009, we entered into an agreement with our current lessee, affiliates of Fundamental Long Term Care Holdings, LLC ("Fundamental"), to sell six skilled nursing facilities in Texas. The planned sale of these facilities meets the accounting criteria as being held for sale and is expected to close when HUD financing is arranged by Fundamental. In January 2011, the first of these six facilities having a carrying value of $4,039,000 was sold for total cash proceeds of $4,500,000. As of September 30, 2011, the carrying value of $29,381,000 represented the lesser of the remaining five facilities' net book value or estimated fair value less cost to sell. We have reclassified the results of operations of these facilities as discontinued operations for all periods presented in our Condensed Consolidated Statements of Income.

In December 2010, we agreed to the terms of sale with the current tenant of two medical office buildings. The sale of these facilities met the accounting criteria as being held for sale. At December 31, 2010, the carrying value of $3,433,000 represented the lesser of the properties' net book value or estimated fair value less cost to sell. We have reclassified the results of operations of these facilities as discontinued operations for all periods presented in our Condensed Consolidated Statements of Income. The sale transaction was completed in February 2011 with receipt of cash proceeds of $5,271,000.

In August 2011, we completed the sale of a 60-unit assisted living facility located in Daytona Beach, Florida with a carrying value of $2,152,000 to the current tenant, for cash proceeds of $3,200,000.

The summary of operating results of all facilities classified as discontinued operations is shown in Note 11.