FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 of 15(d)
of the Securities Exchange Act of 1934
For quarter ended September 30, 1998 Commission file number 333-37173
NATIONAL HEALTH REALTY, INC.
(Exact name of registrant as specified in its Charter)
Maryland 52-2059888
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
100 Vine Street
Murfreesboro, TN 37130
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (615) 890-2020
Indicate by check mark whether the registrant
(1) Has filed all reports required to be filed by Section 13 or
15(d), of the Securities Exchange Act of 1934 during the
preceding 12 months.
Yes x No
(2) Has been subject to such filing requirements for the past 90
days.
Yes x No
9,447,693 shares of common stock were outstanding as of October 31, 1998.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
Sept. 30 Dec. 31
1998 1997
<S> <C> <C>
ASSETS (unaudited)
Real estate properties:
Land $ 19,531 $ 18,340
Buildings and improvements 129,710 113,767
Construction in progress 4,620 12,508
153,861 144,615
Less accumulated depreciation (4,819) ---
Real estate properties, net 149,042 144,615
Mortgage and other notes receivable 93,691 94,439
Interest and rent receivable 344 ---
Cash and cash equivalents 6,791 3,229
Deferred costs and other assets 186 212
Total Assets $250,054 $242,495
LIABILITIES
Long-term debt $ 97,241 $ 89,855
Minority interest in consolidated
subsidiaries 20,497 20,942
Accounts payable and other accrued expenses 59 ---
Accrued interest 239 ---
Dividends payable 3,141 ---
Distributions payable to partners 436 ---
Commitments, contingencies and guarantees --- ---
Total Liabilities 121,613 110,797
STOCKHOLDERS' EQUITY
Cumulative convertible preferred stock,
$.01 par value; 5,000,000 shares
authorized; none issued and
outstanding --- ---
Common stock, $.01 par value:
75,000,000 shares authorized;
9,447,693 and 8,237,423 shares,
respectively, issued and outstanding 94 82
Capital in excess of par value of
common stock 131,599 131,616
Cumulative net income 6,119 ---
Cumulative dividends (9,371) ---
Total Stockholders' Equity 128,441 131,698
Total Liabilities and Stockholders'
Equity $250,054 $242,495
</TABLE>
The accompanying notes to interim condensed consolidated
financial statements are an integral part of these
financial statements.
The interim condensed balance sheet at December 31, 1997
is derived from the audited financial statements at that date.
2
<PAGE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998
(in thousands, (in thousands,
except share amounts)except share amounts)
<S> <C> <C>
REVENUES:
Rental income $ 3,486 $ 9,695
Mortgage interest income 2,462 7,326
Investment interest and other income 79 203
6,027 17,224
EXPENSES:
Interest 1,772 4,980
Depreciation of real estate 1,682 4,819
Amortization of loan and organi-
zation costs 10 30
General and administrative 138 418
3,602 10,247
NET INCOME BEFORE MINORITY INTEREST IN
CONSOLIDATED SUBSIDIARIES $ 2,425 $ 6,977
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARIES 295 858
NET INCOME $ 2,130 $ 6,119
NET INCOME PER COMMON SHARE:
Basic $ .23 $ .67
Diluted $ .22 $ .64
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 9,439,115 9,183,239
Diluted 9,514,647 9,518,510
Common dividends per share
declared $ .3325 $ .9975
</TABLE>
The accompanying notes to interim condensed consolidated financial
statements are an integral part of these financial statements.
3
<PAGE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
<TABLE>
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,130 $ 6,119
Depreciation of real estate 1,682 4,819
Amortization of loan and organization
costs 10 30
(Increase) decrease in interest &
rent receivable 2 (344)
(Increase) decrease in other assets 5 (4)
Increase (decrease)in accounts payable and
accrued liabilities (13) 298
NET CASH PROVIDED BY
OPERATING ACTIVITIES 3,816 10,918
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to and acquisitions of property &
equipment-net (9,246) (9,246)
Decrease in mortgage notes
receivable - net 460 748
NET CASH USED IN
INVESTING ACTIVITIES (8,786) (8,498)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 8,253 8,253
Payments on debt --- (867)
Dividends paid to stockholders (3,120) (6,230)
Increase (decrease) in minority interests
in subsidiaries (142) (14)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 4,991 1,142
INCREASE IN CASH AND CASH EQUIVALENTS 21 3,562
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,770 3,229
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,791 $ 6,791
Supplemental Information:
Cash payments for interest expense $ 1,805 $ 4,741
During the nine months and three months ended
September 30, 1998, $18,438,000 and $1,000,000,
respectively, of Senior Subordinated Convertible
Notes were converted into 1,210,270 and 65,765
shares of NHC common stock, respectively. NHR is
obligated to issue NHR common stock upon the
conversion of the Notes:
Common stock --- $ 12
Capital in excess of par --- $ (12)
</TABLE>
The accompanying notes to interim condensed consolidated
financial statements are an integral part of these
financial statements.
4
<PAGE>
<TABLE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(dollars in thousands)
<CAPTION>
Cumulative Convertible Capital in Total
Preferred Stock Common Stock Excess of Cumulative Cumulative Stockholders'
Shares Amount Shares Amount Par Value Net Income Dividends Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT 12/31/97 -- $ -- 8,237,423 $ 82 $131,616 $ -- $ -- $131,698
Net income -- -- -- -- -- 6,119 -- 6,119
Shares issued in con-
version of con-
vertible debentures
to common stock -- -- 1,210,270 12 (17) -- -- (5)
Dividends to common
shareholders ($.9975
per share) -- -- -- -- -- -- (9,371) (9,371)
BALANCE AT 9/30/98 -- $ -- 9,447,693 $ 94 $131,599 $ 6,119 $(9,371) $128,441
</TABLE>
The accompanying notes to interim condensed consolidated
financial statements are an integral part of these
financial statements.
5
<PAGE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES:
The unaudited financial statements furnished herein in the
opinion of the management include all adjustments which are
necessary to fairly present the financial position, results of
operations and cash flows of National Health Realty, Inc. ("NHR" or
the "Company") and its majority owned subsidiaries. NHR assumes
that users of the interim financial statements herein have read or
have access to the audited financial statements and Management's
Discussion and Analysis of Financial Condition and Results of
Operations for the preceding fiscal year ended December 31, 1997,
and that the adequacy of additional disclosure needed for a fair
presentation, except in regard to material contingencies, may be
determined in that context. Accordingly, footnotes and other
disclosures which would substantially duplicate the disclosure
contained in the Company's most recent annual report to
stockholders have been omitted. The interim financial information
contained herein is not necessarily indicative of the results that
may be expected for a full year because of various reasons
including changes in interest rates, rents and the timing of debt
and equity financings.
NOTE 2. EARNINGS PER SHARE
Basic earnings per share is based on the weighted average
number of common shares outstanding during the year.
Diluted earnings per share assumes the conversion of
convertible subordinated debentures and the exercise of all stock
options using the treasury stock method.
The following table summarizes the earnings and the average
number of common shares and common equivalent shares used in the
calculation of basic and diluted earnings per share.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998
<S> <C> <C>
BASIC:
Weighted average common shares 9,439,115 9,183,239
Net income available to common shareholders $ 2,130,000 $ 6,119,000
Net income per common share $ .23 $ .67
DILUTED:
Weighted average common shares 9,439,115 9,183,239
Stock options 20,000 20,000
Shares issuable upon conversion of NHC
subordinated convertible notes 55,532 315,271
Average common shares outstanding 9,514,647 9,518,510
Net income available to common shareholders $ 2,130,000 $ 6,119,000
Net income per common share $ .22 $ .64
</TABLE>
6
<PAGE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
NOTE 3. COMMITMENTS, CONTINGENCIES AND GUARANTEES:
At September 30, 1998, NHR is obligated to issue at the
election of the holders 20,000 shares of its common stock related
to stock options originally issued by National HealthCare
Corporation ("NHC") and 46,954 shares of its common stock related
to the conversion of certain 6% subordinated convertible notes (the
Notes) issued by NHC. The Notes are the obligation of NHC and
mature July 1, 2000. The stock options are exercisable and the
Notes are convertible at the election of the holders into an equal
number of shares of the common stock of NHC and NHR. Thus, NHR is
obligated to issue NHR common stock upon the exercise of the stock
options and conversion of the Notes. NHR will receive no proceeds
from the exercise of the stock options and the conversion of the
Notes. NHR has reserved an additional 66,954 shares of common
stock for the exercise of the stock options and the conversion of
the Notes.
NOTE 4. NEW ACCOUNTING PRONOUNCEMENT:
In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("SFAS 131") effective for
fiscal years beginning after December 15, 1997. This statement
establishes standards for the way that public business enterprises
report information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial reports.
It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. NHR
will be required to adopt SFAS 131 in the fourth quarter of 1998
and is currently determining the impact that SFAS 131 will have on
its financial statements. If appropriate, NHR will begin
disclosing the required information accordingly.
NOTE 5. STOCK OPTION PLAN:
On January 1, 1998, NHR granted options to purchase 30,000
shares of NHR common stock at $18.88 per share. During the nine
months ended September 30, 1998, no options to purchase shares of
NHR were exercised.
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation ("SFAS 123"). SFAS 123
establishes new financial accounting and reporting standards for
stock-based compensation plans. NHR has adopted the disclosure-only
provisions of SFAS 123. As a result, no compensation cost has
been recognized for NHI's stock option plans. Based on the number
of options outstanding and the historical and expected future
trends of factors affecting valuation of those options, any
compensation cost attributable to options granted is immaterial.
7
<PAGE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
NOTE 6. EVENT SUBSEQUENT TO THE BALANCE SHEET DATE
On October 30, 1998, NHC, NHR's investment advisor and primary
lessee, announced terms of its settlement of litigation with
Florida Convalescent Centers, Inc. of Sarasota, Florida (FCC).
FCC is NHR's primary mortgagee. Under the terms of NHC's
settlement with FCC, NHR may receive prepayment of up to
approximately $71 million in notes receivable. NHR will make every
effort to reinvest any amounts prepaid. However, if NHR uses the
money to pay down existing debt, it will result in a reduction of
cash flow which may cause the cash dividend paid by NHR to remain
flat for the near future. Under the terms of the settlement,
prepayment may be made at any time and is expected to occur by July
1, 1999.
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Overview
National Health Realty, Inc. (NHR) is a real estate investment
trust that began operations on January 1, 1998. NHR, through its
subsidiary NHR/OP, L.P. (the Operating Partnership) acquired
ownership of 24 health care facilities including 16 licensed
skilled nursing facilities, one 160 bed certificate of need, six
assisted living facilities and one independent living center (the
Healthcare Facilities), plus 50 first and second mortgage secured
promissory notes with an initial principal balance of $94.4 million
(the Notes) from its then sole owner National HealthCare L.P. NHR
then leased (the Leases) the Healthcare Facilities to National
HealthCare Corporation (NHC) a successor by merger to National
HealthCare L.P. NHR also assumed certain debt, initially in the
amount of $86.4 million. The Leases covering the Healthcare
Facilities are "triple net" leases.
NHR entered into an Advisory, Administrative Services and
Facilities Agreement with NHC pursuant to which NHC will provide
NHR with investment advice, office space and personnel. This
agreement also provides that prior to the earlier to occur of (i)
the termination of the Advisory Agreement for any reason and (ii)
NHC ceasing to be actively engaged as the investment advisor for
National Health Investors, Inc. (NHI), NHR will not (without the
prior approval of NHI) transact business with any party, person,
company or firm other than NHC. It is the intent of the foregoing
restriction that NHR will not be actively or passively engaged in
the pursuit of additional investment opportunities, but rather will
focus upon its capacities as landlord and note holder of those
certain assets conveyed to it by National HealthCare L.P.
8
<PAGE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
September 30, 1998
(Unaudited)
Capital Resources and Liquidity
The assets of NHR as of September 30, 1998 include mortgage
and other notes receivable (book value of $93,691,000) and the real
property of 16 long-term care centers, six assisted living
facilities and one independent living center (total book value of
$149,042,000). Long-term debt of $97,241,000 includes a term loan
with a principal amount of $75,000,000 which matures in 2002.
Approximately $73,905,000 of the mortgage and other notes
receivable are due from a single debtor that operates 16 licensed
nursing centers in Florida. NHR is the primary lender to that
entity.
NHR has generated net cash from operating activities during
the nine months ended September 30, 1998 in the amount of $3.8
million. The funds were used along with $8.3 million of proceeds
from long-term debt to fund acquisitions of property and equipment
in the amount of $9.2 million and to pay dividends to stockholders
of $3.1 million.
NHR is leasing each of the 24 facilities to NHC. Each lease
is for an initial term expiring December 31, 2007, with two
additional five year renewal terms at the option of NHC, assuming
no defaults. NHR accounts for its leases as operating leases.
During the initial term and each renewal term, NHC is
obligated to pay NHR annual base rent on the 24 facilities of
$12,417,000. In addition to base rent, in each year after 1999,
NHC must pay percentage rent to NHR equal to 3% of the amount by
which gross revenues of each facility in such later year exceed the
gross revenues of such facility in 1999. Each lease is a "triple
net lease" under which NHC is responsible for paying all taxes,
utilities, insurance premium costs, repairs and other charges
relating to the operation of the facilities.
NHR has entered into an advisory services agreement with NHC
whereby the services related to investment activities and day-to-day
management and operations are provided to NHR by NHC. Because
of the competitive restrictions contained in the advisory services
agreement, NHR does not intend to seek further health care-related
investment opportunities or to provide lease or mortgage financing
for such investments. NHR expects to continue to engage in
transactions with NHC.
NHR intends to pay quarterly distributions to its stockholders
in an amount at least sufficient to satisfy the distribution
requirements of a real estate investment trust. Such requirements
necessitate that at least 95% of NHR's taxable income be
distributed annually. The primary source for distributions will be
rental and interest income NHR earns on the real property and
mortgage notes receivable transferred to it by NHC. It is
estimated that $1.33 per share will be declared for payment during
1998.
Certain of the real properties transferred by NHC to NHR were
under construction at December 31, 1997. NHR anticipates that NHC
will complete the construction of these properties and, upon
completion of the construction, NHR
9
<PAGE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
September 30, 1998
(Unaudited)
will purchase the additional constructed assets from NHC. NHR's
cash on hand, its operating and investing cash flows, and, as
necessary, its borrowing capacity are expected to be adequate to
fund the purchase of the constructed assets.
Results of Operations
Three Months Ended September 30, 1998.
For the quarter ended September 30, 1998, the Company's net
revenues of $6,027,000 were derived from three sources:
a. Rental income of $3,486,000 (58%);
b. Mortgage interest income of $2,462,000 (41%); and
c. Investment interest and other income of $79,000 (1%).
During the same period, the Company's expenses of $3,602,000
were composed as follows:
a. Interest on debt of $1,772,000 (49%);
b. Depreciation and amortization of $1,682,000 (47%);
c. Amortization of loan and organization costs of $10,000 (0%);
d. General and administrative of $138,000 (4%).
Net income for the period was $2,425,000 or 23 cents per
share, basic, and 22 cents per share, diluted.
Nine Months Ended September 30, 1998.
For the nine months ended September 30, 1998, the Company's
net revenues of $17,224,000 were derived from three sources:
a. Rental income of $9,695,000 (56%);
b. Mortgage interest income of $7,326,000 (43%); and
c. Investment interest and other income of $203,000 (1%).
During the same period, the Company's expenses of $10,247,000
were composed as follows:
a. Interest on debt of $4,980,000 (49%);
b. Depreciation and amortization of $4,819,000 (47%);
c. Amortization of loan and organization costs of $30,000 (0%);
d. General and administrative of $418,000 (4%).
Net income for the period was $6,977,000 or 67 cents per
share, basic, and 64 cents per share, diluted.
NHR's revenues will be derived primarily from NHC or from
facilities managed by NHC under the Leases and the interest and
principal payments of the Notes. NHC is the manager of all nursing
facilities securing the Notes, and the Notes are due and payable
upon termination of the NHC management contract.
10
<PAGE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
September 30, 1998
(Unaudited)
Forty-three of the Notes (representing approximately $73.9
million of the principal amount and collateralized with 16 nursing
facilities) are from Florida Convalescent Centers, Inc. (FCC) and
are personally guaranteed by its sole shareholder. The FCC Notes
bear interest at 10.25% and most are due in 2004. The balance of
the Notes are secured by seven nursing facilities and seven
separate makers and guarantors.
NHR's results of operations will depend upon the rental and
interest income it earns on the real property and mortgage notes
receivable. NHR expects that the rental and interest income it
earns on the health care centers and mortgage notes receivable and,
if needed, additional borrowings, will be sufficient to satisfy its
capital expenditures, working capital, and debt requirements.
Because of the competitive restrictions contained in its advisory
services agreement with NHC, NHR does not intend to seek further
health care-related investment opportunities or to provide lease or
mortgage financing for such investments.
Settlement of litigation by NHC and FCC after the balance sheet
date--
On October 30, 1998, NHC, NHR's investment advisor and primary
lessee announced terms of its settlement of litigation with Florida
Convalescent Center of Sarasota, Florida (FCC).
FCC is NHR's primary mortgagee. Under the terms of NHC's
settlement with FCC, NHR may receive prepayments of up to
approximately $71 million in notes receivable. NHR will make every
effort to reinvest any amounts prepaid. However, if NHR uses the
money to pay down existing debt, it will result in a reduction of
cash flow which may cause the cash dividend paid by NHR to remain
flat for the near future. Under the terms of the settlement,
prepayment may be made at any time and is expected to occur by July
1, 1999.
Impact of Inflation--
Inflation may affect NHR in the future by changing the
underlying value of NHR's real estate or by impacting NHR's cost of
financing its operations.
Revenues of NHR are primarily from long-term investments.
NHR's leases with NHC require increases in rent income based on
increases in the revenues of the leased facilities.
Year 2000 Compliance
NHR has evaluated its information technology systems and
embedded technology with respect to potential Year 2000 problems.
Although management believes that the majority of NHR's information
technology systems and embedded technology is already Year 2000
compliant, NHR will complete the testing of its information
technology systems and embedded technology in the third quarter of
1999. In addition, NHR has developed corrective plans for any
technology assessed to be non-compliant.
11
<PAGE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
September 30, 1998
(Unaudited)
As a result of its advisory agreement with NHC, NHR is reliant
upon NHC for much of its information technology systems and
embedded technology. NHC has performed an evaluation of its
information technology as it relates to NHR. Although NHR believes
that the majority of NHC's information technology systems and
embedded technology is already Year 2000 compliant, NHC will
complete the testing of its information technology systems and
embedded technology in the third quarter of 1999. NHR believes
that NHC has developed corrective plans for any technology assessed
to be non-compliant.
Costs incurred to date for NHR's internal Year 2000
remediation efforts have not been material, and NHR does not expect
that the cost of future internal actions will be material to its
financial condition or results of operations. NHR does not
anticipate any material disruption in its operations as a result of
any failure by NHR to be in compliance.
NHR also depends upon the proper functioning of information
technology systems and embedded technology operated by certain
other third parties. These third parties include commercial banks
and other lenders, and vendors such as telecommunications and
utilities providers. NHR is currently evaluating and obtaining
information concerning the Year 2000 compliance status of these
third parties. If third parties have Year 2000 problems that are
not remedied, the following problems could result: (i) in the case
of banks and other lenders, in the disruption of capital flows
potentially resulting in liquidity stress; or (ii) in the case of
vendors, in disruption of important services upon which NHR
depends, such as telecommunications and electrical power.
Based upon current information, NHR anticipates successful
completion and testing of its Year 2000 remediation efforts during
1999. However, there can be no guarantee that the Year 2000 will
not have a material adverse effect on NHR's operations, financial
position or liquidity if NHR's remediation efforts are not
successful or completed in a timely manner. NHR is currently
developing a contingency plan in the event that it is not able to
achieve Year 2000 compliance. This contingency plan is expected to
include establishing sources of liquidity that could be drawn upon
in the event of systems disruption and identifying alternative
vendors and back-up processes that do not rely on computers,
whenever possible. The contingency plan is expected to be
completed in the third quarter of 1999.
Item 3. Quantitative and Qualitative Information About Market Risk
Not Applicable
12
<PAGE>
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
September 30, 1998
(Unaudited)
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. Not applicable
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) List of exhibits - Exhibit 27 - Financial Data Schedule
(for SEC purposes only)
(b) Reports on Form 8-K - none required
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
NATIONAL HEALTH REALTY, INC.
(Registrant)
Date November 13, 1998 /s/ Richard F. LaRoche, Jr.
Richard F. LaRoche, Jr.
Secretary
Date November 13, 1998 /s/ Donald K. Daniel
Donald K. Daniel
Principal Accounting Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001047334
<NAME> NATIONAL HEALTH REALTY, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,791,000
<SECURITIES> 0
<RECEIVABLES> 94,035,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 153,861,000
<DEPRECIATION> (4,819,000)
<TOTAL-ASSETS> 250,054,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 94,000
<OTHER-SE> 128,347,000
<TOTAL-LIABILITY-AND-EQUITY> 250,054,000
<SALES> 0
<TOTAL-REVENUES> 17,224,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 418,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,980,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,119,000
<EPS-PRIMARY> .67
<EPS-DILUTED> .64
</TABLE>
