Equity-Method Investment And Other Assets

6 Months Ended

Jun. 30, 2013

Investment In Unconsolidated Entity And Other Assets [Abstract]

Equity Method Investments and Joint Ventures Disclosure [Text Block]

EQUITY-METHOD INVESTMENT AND OTHER ASSETS

Our equity-method investment in OpCo and other assets consist of the following (in thousands):

	June 30, 2013		December 31, 2012
Equity-method investment in OpCo	$	9,261	$	8,353
Loan costs and prepaid expenses, net	2,804		1,837
Escrow deposit for real estate purchase	2,500		166
Replacement reserve and tax escrows - Fannie Mae	1,075		—
Accounts receivable and other assets	1,897		1,816
	$	17,537	$	12,172

In June 2013, we made an escrow deposit of $2,500,000 toward the purchase of the ElderTrust facilities as discussed in Note 4. Additionally, in June 2013, we recorded escrow deposits for replacement reserves and taxes in connection with our assumption of Fannie Mae secured debt as described in Note 7.

In connection with the acquisition of the Care and Bickford properties in June 2013, a sale and assignment was entered into whereby the operations of the 17 facilities were conveyed by an affiliate of Bickford to OpCo. As provided for under the agreements, the transaction resulted in the effective cut-off of operating revenues and expenses and the settlement of operating assets and liabilities as of the acquisition date. Specified remaining net tangible assets were assigned to OpCo at the transferor's carryover basis, resulting in an adjustment of $817,000 to NHI's equity-method investment in OpCo and to our capital in excess of par value.

OpCo is intended to be self-financing, and aside from initial investments therein, no direct support has been provided by NHI to OpCo since inception on September 30, 2012. While PropCo's rental revenues associated with the related properties are sourced from OpCo, a decision to furnish additional direct support would be at our discretion and not obligatory. As a result, NHI believes its maximum exposure to loss at June 30, 2013, due to its involvement with OpCo, would be limited to its equity interest. We have concluded that OpCo meets the accounting criteria to be considered a VIE. However, because we do not control the entity, nor do we have any role in the day-to-day management, we are not the primary beneficiary of the entity, and we account for our investment using the equity method. There have been no distributions declared during the six months ended June 30, 2013.

At inception, we tentatively valued our equity interest in OpCo based on the total consideration for the underlying assets at their estimated relative fair values. During the measurement period granted under provisions of ASC Topic 805, we have ascertained and ascribed value to all identifiable assets acquired, liabilities assumed and implied goodwill. As the result of the culmination of this process, the asset values disclosed as preliminary in prior filings have been finalized without further revision. We continue to monitor and periodically review for impairment our equity method investment in OpCo to determine whether a decline, if any, in the value of the investment is other than temporary. We noted no decline in value as of June 30, 2013.

Summary financial information for OpCo, for which our pro rata share of the equity in its net income is presented in our Condensed Consolidated Statement of Income, is presented below (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Revenues	$	6,131	$	—	$	12,320	$	—
Operating expenses, including management fees	3,938		—		7,994		—
Lease expenses	2,093		—		4,174		—
Depreciation and amortization	18		—		45		—
Net Income	$	82	$	—	$	107	$	—