Note 2 - Relationship with National Health Investors, Inc.

12 Months Ended

Dec. 31, 2012

Operating Leases of Lessee Disclosure [Table Text Block]

Note 2 - Relationship with National Health Investors, Inc.

In 1991, we formed National Health Investors, Inc. ("NHI") as a wholly-owned subsidiary.  We then transferred to NHI certain healthcare facilities owned by NHC and distributed the shares of NHI to NHC’s stockholders.  The distribution had the effect of separating NHC and NHI into two independent public companies.  As a result of the distribution, all of the outstanding shares of NHI were distributed to the then NHC investors.  NHI is listed on the New York Stock Exchange under the symbol NHI.

Leases

On October 17, 1991, concurrent with our conveyance of real property to NHI, we leased from NHI the real property of certain health care centers.  At December 31, 2012, we lease the real property of 38 long-term health care centers, six assisted living centers and three independent living centers.  As part of our lease with NHI, we sublease four Florida long-term care centers to four separate corporations, none of which we own or control.

A 15-year lease extension began on January 1, 2007, and included three additional five-year renewal options, each at fair market value.  On December 26, 2012, we extended the lease agreement through the first of the three additional five-year renewal options; therefore, extending the master lease date through 2026 and the two additional five-year renewal options still remain.  Under the terms of the lease, base rent for 2007 totaled $33,700,000 with rent thereafter escalating by 4% of the increase in facility revenue over a 2007 base year.  The percentage rent is based on a quarterly calculation of revenue increases and is payable on a quarterly basis.  Percentage rent expense for 2012, 2011, and 2010 was approximately $2,591,000, $2,969,000, and $1,122,000, respectively.

Each lease with NHI is a "triple net lease" under which we are responsible for paying all taxes, utilities, insurance premium costs, repairs and other charges relating to the ownership of the facilities.  We are obligated at our expense to maintain adequate insurance on the facilities' assets.

We have a right of first refusal with NHI to purchase any of the properties transferred from us should NHI receive an offer from an unrelated party during the term of the lease or up to 180 days after termination of the related lease.

Base rent expense to NHI was $33,700,000 in 2012.  At December 31, 2012, the approximate future minimum base rent to be paid by us on non-cancelable operating leases with NHI are as follows:

	Total Commitments Including Florida Facilities		Total Commitments Excluding Florida Facilities
2013	$	33,700,000	$	28,948,000
2014		33,700,000		28,948,000
2015		33,700,000		28,948,000
2016		33,700,000		33,700,000
2017		33,700,000		33,700,000
Thereafter		303,300,000		303,300,000

Investment in NHI Common Stock

At December 31, 2012 and 2011, we own 1,630,642 shares (or 5.9%) of NHI’s outstanding common stock.  We account for our investment in NHI common stock as available for sale marketable securities in accordance with the provisions of ASC Topic 320, Investments.