NHR Tenant Experiences Loss from Fire

October 3, 2003

National Health Realty announced that NHC HealthCare/Nashville, LLC, a wholly owned subsidiary of its investment advisor, National HealthCare Corporation (“NHC”) is the operator of a long-term care facility in Nashville, Tenn. which suffered fire damage on Sept. 25.

The fire resulted in the death of eight of the 117 patients and there may be additional loss of life. NHR reportedly has no ownership or involvement in the damaged facility.

Although NHR does not own the damaged facility, NHR currently owns or leases 14 facilities to NHC subsidiaries. The leases require the operator to maintain replacement cost property and casualty insurance, including business interruption coverage, with NHR being the loss payee. NHR is also reportedly an additional named insured on a professional and general liability policy issued by a subsidiary of NHC.

Under the terms of the leases, the operator is required to maintain limits of not less than $1,000,000 per occurrence and $1,000,000 in the aggregate. NHR was reportedly advised that the current policy limits exceed these requirements.

NHC and its subsidiaries are the largest group of tenants of NHR and their potential liability from this incident and the impact, if any, on NHR reportedly cannot be determined at this time.

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