NOTE 4. MORTGAGE NOTES RECEIVABLE

The following is a summary of the terms and amounts of mortgage notes receivable (dollar amounts in thousands):


Final	Number		Original Face			Carrying Amount
Payment	of		Amount of		December 31,
Date	Loans	Payment Terms in 2011	Mortgage(s)			2011		2010
2011	1	Monthly payment of interest at 14.5%; principal due at maturity	$	1,000	$	-	$	1,000

2012	7	Monthly payments of $9 to $69, which include interest at 6.9%		40,526		16,604		19,049

2012	1	Monthly payment of $120, including interest at 9.0%⁽¹⁾ Balloon payment due at maturity		12,162		5,197		5,732

2013	1	Monthly payment of $29, including interest at 6.5%⁽¹⁾⁽²⁾ Balloon payment due at maturity		5,506		1,274		649

2014	8	Note A: $11.6 million with monthly payments of interest at 8.5% with principal due at maturity; Note B: $9.7 million with principal and interest at 3.0% due at maturity		26,293		21,337		21,322

2014	1	Monthly payments of interest at a variable rate, current rate is 12.0% (next adjustment in October 2012 with principal due at maturity; additional $50,000 to be drawn during 2012)		850		800		800

2014	1	Monthly payment of interest at 13.0%; principal due at maturity		2,500		2,500		-

2015	1	Monthly payment of interest at 14.0%; principal due at maturity		1,000		1,000		1,000

2015	1	Interest accrues at 10.0% during construction; monthly payment of interest only; principal due at maturity		13,870		11,870		7,520

2018	1	Monthly payment of $38, including interest at 7.47%		5,033		3,809		3,850

2027-2032	6	Monthly payments of $19 to $32, which include interest ranging from 8.0 to 9.6%		20,774		14,281		14,543

			$	129,514	$	78,672	$	75,465

(1) We recognize interest income in the period in which cash is received because this loan was previously classified as non-performing.

(2) During 2011, we acquired the remaining interest in this mortgage note at a discount.

At December 31, 2011, we had investments in mortgage notes receivable secured by real estate and UCC liens on the personal property of 30 health care properties. The mortgage notes receivable are secured by mortgages on the real property and UCC liens on the personal property of the facilities. Certain of the notes receivable are also secured by guarantees of significant parties and by cross-collateralization on properties with the same respective owner.

We have a construction loan commitment to provide up to $13,870,000 to Santé Mesa, LLC ("Santé") for the development and construction of a 70-bed transitional rehabilitation center with a skilled nursing license in Mesa, Arizona. Construction on the facility began in June 2010 and was completed in March 2011. NHI has the option to purchase and lease back the facility when it reaches a predetermined level of stabilized net operating income. The $13,870,000 commitment includes an $11,870,000 construction loan and an additional $2,000,000 supplemental draw available to the borrower when the facility achieves certain operating metrics. The loan is for a period of five years and requires monthly payments of interest only at an annual rate of 10%. Per the terms of the loan agreement, interest payments were accrued as part of the construction loan balance until the full loan amount was drawn. During the year ended December 31, 2011, we funded $4,350,000 of our loan commitment.

In July 2011, we funded a second mortgage loan of $2,500,000 to Fore Ranch Senior Housing, LLC for the development and construction of a 120-unit assisted living facility in Ocala, Florida. The three year loan has two one-year extension options and requires monthly payments of interest only at an annual rate of 13%.

In September 2011, we acquired for $700,000 from a lender the remaining interest in an existing mortgage note receivable maturing in September 2013 in which we were the majority creditor. The effective annual yield on this discounted portion of the note receivable is 21%.

In February 2010, and as described in Note 3, a portion of the acquisition of the six Florida skilled nursing facilities from Care Foundation of America, Inc. ("CFA") was funded with the full satisfaction of $22,936,000 in mortgage note principal and $364,000 in accrued interest due from CFA. It is our policy to recognize mortgage interest income on non-performing mortgage loans in the period in which cash is received. During the year ended December 31, 2010, we received payment and recognized interest income of $560,000 from CFA.

In March 2010, we entered into a $3,000,000 second mortgage loan secured by three skilled nursing facilities in Texas totaling 311 beds. Our loan was part of a bridge to long-term financing for the borrower. The mortgage included a maximum term of five years and a fixed interest rate of 14%. This loan was paid off during the third quarter of 2010.

In May 2010, we entered into a $1,000,000 second mortgage loan secured by a 116-bed skilled nursing facility and a 28-unit assisted living facility located in Texas. The mortgage includes a term of five years and a fixed interest rate of 14%.

In May 2010, we entered into a $1,000,000 participation agreement on a $6,500,000 bridge loan secured by a 125-bed skilled nursing facility located in Texas. Our loan is part of a bridge to long-term financing for the borrower. The mortgage includes a term of one year and a fixed interest rate of 14.5%.

Loan Recoveries

During 2011, we received payments totaling $99,000 as a recovery of a previous note write-down. The payments resulted from the full payoff of a note receivable secured by a skilled nursing facility in Oklahoma.

Allgood Healthcare, Inc. ("Allgood") – In February 2009, we received payment in full of $3,150,000 on the pro-rata portion of a note secured by a skilled nursing facility and recorded a recovery of amounts previously written down of $1,077,000. During 2010, we received payments totaling $573,000 as a recovery of previous write-downs. The payments resulted from the settlement of bankruptcy proceedings. We continue to hold mortgage notes from a successor borrower on three remaining facilities at a carrying value of $5,197,000 at December 31, 2011.