For Release:  May 10, 2005

Contact:  Gerald Coggin, Senior VP of Corporate Relations

Phone:  (615) 890-2020

NHR reports first quarter income

            MURFREESBORO, Tenn. -- National Health Realty, Inc., (AMEX: NHR) a long-term health care real estate investment trust, announced net income for the quarter ended March 31 of $2,783,000 compared to $3,104,000 last year.

For the three months ended March 31, net income per share was 29 cents basic and 28 cents diluted compared to 32 cents, basic and diluted, for the first quarter last year. Basic and diluted funds from operations were 42 cents per share compared to 46 cents and 45 cents per share, basic and diluted, last year.  Revenues for the quarter totaled $4,900,000 compared to $5,410,000 last year.

The results of the prior year first quarter include interest income of approximately $502,000 on $30,384,000 of 10.25% mortgage notes receivable which were repaid to us on February 27, 2004.  The first quarter results last year also include interest expense of approximately $163,000 on debt of $31,175,000 which we prepaid in February, 2004.  Accordingly, net income decreased by $339,000, compared to the prior year due to the prepayment.

            NHR owns the real property of 16 skilled nursing facilities, six assisted living centers and one retirement center. NHR also owns first and second mortgage notes totaling $13.5 million. These notes are secured by operating skilled nursing facilities and other health care properties. The company trades on the American Stock Exchange with the symbol NHR.

Statements in this press release that are not historical facts are forward looking statements. NHR cautions investors that any forward-looking statements made involve risks and uncertainties and are not guarantees of future performance. All forward-looking statements represent NHR’s best judgment as of the date of this release.

 NHR earnings

NHR earnings

Reconciliation of Funds From Operations ⁽¹⁾

            The following table reconciles net income applicable to common stockholders to funds from operations applicable to common stockholders:

⁽¹⁾We believe that funds from operations is an important supplemental measure of operating performance.  We, therefore, disclose funds from operations, although it is a measurement that is not defined by accounting principles generally accepted in the United States.  We generally use the National Association of Real Estate Investment Trusts (NAREIT) measure of funds from operations.  We define funds from operations as income before extraordinary items adjusted for certain non-cash items, primarily real estate depreciation, less gains/losses on sales of facilities.  Our measure may not be comparable to similarly titled measures used by other REITs.  Consequently, our funds from operations may not provide a meaningful measure of our performance as compared to that of other REITs.  Funds from operations does not represent cash generated from operating activities as defined by accounting principles generally accepted in the United States (funds from operations does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity. 

NHR earnings

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