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    June 30, 1999           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






9,588,823 shares of common stock were outstanding as of July 31, 1999.
<PAGE>
                     PART I.  FINANCIAL INFORMATION

Item 1.   Financial Statements.
<TABLE>
             NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

             INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
                  (in thousands, except share amounts)
<CAPTION>
                                                        June 30     Dec. 31
                                                         1999         1998
                                                      (unaudited)
<S>                                                      <C>        <C>
ASSETS
   Real estate properties:
       Land                                              $ 19,531   $ 19,531
       Buildings and improvements                         144,769    144,769
       Construction in progress                             1,189      1,189
                                                          165,489    165,489
       Less accumulated depreciation                      (10,107)    (6,579)
          Real estate properties, net                     155,382    158,910

   Mortgage and other notes receivable                     95,874     93,099
   Interest and rent receivable                               666        367
   Cash and cash equivalents                                  203      2,897
   Deferred costs and other assets                            463        171
     Total Assets                                        $252,588   $255,444

LIABILITIES
   Long-term debt                                        $102,764   $103,628
   Minority interest in consolidated subsidiaries          16,466     20,351
   Accounts payable and other accrued expenses                263        110
   Accrued interest                                           112        325
   Dividends payable                                        3,188      3,141
   Distributions payable to partners                          404        436
     Total Liabilities                                    123,197    127,991

   Commitments, contingencies and guarantees

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;
     9,588,823 and 9,477,693 shares,
     respectively, issued and outstanding                      96         94
   Capital in excess of par value of common stock         135,270    131,604
   Cumulative net income                                   12,913      8,267
   Cumulative dividends                                   (18,888)   (12,512)
     Total Stockholders' Equity                           129,391    127,453
     Total Liabilities and Stockholders' Equity          $252,588   $255,444

</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, 1998 is derived from
the audited financial statements at that date.


                                       2
<PAGE>
<TABLE>
               NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

            INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)

<CAPTION>
                                            Three Months Ended             Six Months Ended
                                                  June 30,                     June 30,
                                            1999          1998           1999           1998
                                                  (in thousands, except share amounts)
<S>                                     <C>            <C>            <C>            <C>
REVENUES:
  Rental income                         $    3,872     $    3,105     $    7,743     $    6,209
  Mortgage interest income                   2,366          2,448          4,714          4,864
  Investment interest and other income         126             61            156            124
                                             6,364          5,614         12,613         11,197

EXPENSES:
  Interest                                   1,669          1,591          3,375          3,208
  Depreciation of real estate                1,764          1,563          3,528          3,137
  Amortization of loan and organi-
    zation costs                                10             10             20             20
  General and administrative                   292            123            455            280
                                             3,735          3,287          7,378          6,645

INCOME BEFORE MINORITY INTEREST IN
     CONSOLIDATED SUBSIDIARIES               2,629          2,327          5,235          4,552

MINORITY INTEREST IN CONSOLIDATED
     SUBSIDIARIES                              296            285            589            563

NET INCOME                              $    2,333     $    2,042     $    4,646     $    3,989

NET INCOME PER COMMON SHARE:
  Basic                                 $      .24     $      .22     $      .48     $      .44
  Diluted                               $      .24     $      .21     $      .48     $      .42
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
  Basic                                  9,588,823      9,381,302      9,557,155      9,053,219
  Diluted                                9,604,086      9,516,497      9,579,956      9,518,360
Common dividends per share
  declared                              $    .3325     $    .3325     $    .6650     $    .6650

</TABLE>

The accompanying notes to interim condensed consolidated
financial statements are an integral part of these financial statements.







                                     3
<PAGE>
<TABLE>
                  NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

             INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<CAPTION>
                                                               Six Months Ended
                                                                   June 30,
                                                              1999           1998
                                                                 (in thousands)
<S>                                                         <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                               $ 4,646        $  3,989
   Depreciation of real estate                                3,528           3,137
   Amortization of loan and organization costs                   20              20
   Minority interests in consolidated subsidiaries              589             563
   Increase in interest & rent receivable                      (299)           (346)
   Increase in other assets                                    (312)             (9)
   Increase (decrease)in accounts payable and
     accrued liabilities                                        (60)            311
        NET CASH PROVIDED BY OPERATING ACTIVITIES             8,112           7,665

CASH FLOWS FROM INVESTING ACTIVITIES:
   (Increase) decrease in mortgage notes receivable - net    (2,775)            288
        NET CASH USED IN INVESTING ACTIVITIES                (2,775)            288

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on debt                                            (864)           (867)
   Dividends paid to stockholders                            (6,329)         (3,110)
   Distribution paid to partners                               (838)            (435)
        NET CASH PROVIDED BY FINANCING ACTIVITIES            (8,031)         (4,412)

INCREASE IN CASH AND CASH EQUIVALENTS                        (2,694)          3,541
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                2,897           3,229
CASH AND CASH EQUIVALENTS, END OF PERIOD                    $   203        $  6,770

Supplemental Information:
   Cash payments for interest expense                       $ 3,588        $  2,936

During the six months ended
   June 30, 1999 and June 30, 1998,
   $710,000 and $17,438,000, respectively,
   of Senior Subordinated Convertible
   Notes were converted into 46,690 shares and
   1,146,742 shares of NHC common stock.  NHR is
   obligated to issue NHR common stock upon the
   conversion of the Notes:
          Common stock                                      $    (1)       $     12
          Capital in excess of par                          $(2,379)       $    (12)
          Minority interest in consolidated subsidiaries    $ 2,380        $    ---

During the six months ended June 30, 1999,
   94,440 units of NHR/OP, L.P. units were
   exchanged for 94,440 shares of NHR common
   stock
          Common stock                                      $    (1)       $    ---
          Capital in excess of par                          $(1,287)       $    ---
          Minority interest in consolidated subsidiaries    $ 1,288        $    ---
</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 SIX MONTHS ENDED JUNE 30, 1999
                                  (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 12/31/98          -- $     --   9,447,693   $ 94   $131,604    $  8,267  $ (12,512)    $127,453
Net income                   --       --          --     --         --       4,646         --        4,646
Shares issued in con-
  version of con-
  vertible debentures
  to common stock            --       --      46,690      1       2,379         --         --        2,380
Shares issued in exchange
 for NHR/OP, L.P. Units      --       --      94,440      1       1,287         --         --        1,288
Dividends to common
  shareholders ($.6650
  per share)                 --       --          --     --         --          --     (6,376)      (6,376)

BALANCE AT 6/30/99           -- $     --   9,588,823   $ 96   $135,270    $ 12,913  $ (18,888)    $129,391

BALANCE AT 12/31/97          -- $     --   8,237,423   $ 82   $131,616    $     --  $      --     $131,698
Net income                   --       --          --     --         --       3,989         --        3,989
Shares issued in con-
  version of con-
  vertible debentures
  to common stock            --       --   1,145,508     12        (16)         --         --           (4)
Dividends to common
  shareholders ($.6650
  per share)                 --       --          --     --         --          --     (6,230)      (6,230)

BALANCE AT 6/30/98           -- $     --   9,382,931   $ 94   $131,600    $  3,989  $  (6,230)    $129,453
</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

                          June 30, 1999
                           (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, 1998, 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 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.

















                                         6
<PAGE>
                   NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

            NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   June 30, 1999
                                    (Unaudited)
<TABLE>
<CAPTION>
                           Three Months Ended                  Six Months Ended
                               June 30                          June 30, 1999
                         1999          1998               1999                1998
<S>                 <C>            <C>                 <C>                 <C>
BASIC:
Weighted average
  common shares        9,588,823     9,381,302          9,557,155           9,053,219
Net income avail-
  able to common
  shareholders       $ 2,333,000   $ 2,042,000         $4,646,000          $3,989,000

Net income per
  common share       $       .24   $       .22         $      .48          $      .44

DILUTED:
Weighted average
  common shares        9,588,823     9,381,302          9,557,155           9,053,219
Stock options             15,000        15,000             15,000              15,000
Shares issuable
  upon conversion
  of NHC subordi-
  nated convertible
  notes                      263       120,195              7,801             450,141
Average common
  shares out-
  standing             9,604,086     9,516,497          9,579,956           9,518,360

Net income avail-
  able to common
  shareholders       $ 2,333,000   $ 2,042,000         $4,646,000          $3,989,000

Net income per
  common share       $       .24   $       .21         $      .48          $      .42

</TABLE>

NOTE 3.  COMMITMENTS, CONTINGENCIES AND GUARANTEES:

  As of June 30, 1999, NHR is obligated to issue at the election of the
option and note holders 15,000 shares of its common stock related to stock
options originally issued by National HealthCare Corporation ("NHC") and 263
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 15,263 shares of common stock for the exercise of the stock options
and the conversion of the Notes.


                                7
<PAGE>
          NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

   NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                          June 30, 1999
                           (Unaudited)


NOTE 4. MORTGAGE PREPAYMENT CONTINGENCY:

  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 $62 million in
notes receivable.  NHR will make every effort to reinvest any amounts prepaid.
However, if NHR were to use the cash received to pay down existing debt, it
would result in a reduction of cash flow which could 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 currently expected to
occur within the next year.



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 23 health care
facilities including 16 licensed skilled nursing facilities, six assisted
living facilities and one independent living center (the Healthcare
Facilities), plus 51 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.


Competitive Restrictions

  NHR entered into an advisory services 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

                         June 30, 1999
                          (Unaudited)


Capital Resources and Liquidity

  The assets of NHR as of June 30, 1999 include mortgage and other notes
receivable (book value of $95,874,000) and the real estate of 23 properties,
including 16 long-term care centers, six assisted living facilities and one
independent living center (total book value of $155,382,000).  Long-term debt
of $102,764,000 includes a term loan with a principal amount of $90,500,000
which matures in 2002.

  Approximately $62,045,000 of the mortgage and other notes receivable is
due from Florida Convalescent Centers, Inc. (FCC) of Sarasota, Florida.  FCC
operates 16 licensed nursing centers that are managed by NHC.  NHR is the
primary lender to FCC. On October 30, 1998, NHC announced terms of its
settlement of litigation with FCC.  Under the terms of NHC's settlement with
FCC, NHR may receive prepayments without penalty of up to $62,045,000 from
FCC.  NHR will attempt to reinvest any amounts prepaid.  Although NHR's
existing line of credit requires a portion of the prepayments to be used to
reduce bank debt, NHR may seek to obtain a waiver of this requirement.  In the
event that NHR uses the money to pay down existing debt, it will result in a
reduction of cash flow.  This could result in dividends per share remaining
constant.  However, no dividend reductions are expected in the near future.
Under the terms of the settlement, prepayments may be made at any time.

  FCC may also elect to terminate its management contract with NHC prior
to repaying its notes owed to NHR.  In this event, NHR's assets will no longer
be solely managed by NHC.

  NHR is leasing each of the 23 owned 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 (commencing for each center when construction is
complete) on the 23 facilities of $15,449,000.  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 with operations other than
NHC but expects to continue to engage in the existing transactions with NHC
and potentially new investments.



                                9
<PAGE>
          NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

                          June 30, 1999
                           (Unaudited)


Sources and Uses of Funds

  NHR's leasing and mortgage services generated net cash from operating
activities during the six months ended June 30, 1999 in the amount of $8.1
million compared to $7.7 million in the prior period.

  Net cash from operating activities generally includes net income plus
non-cash expenses, such as depreciation and amortization and provision for
loan losses, if any, and working capital charges.  The funds from operating
activities and the beginning cash balance were used to fund mortgage notes
receivable in the net amount of $2.8 million, to fund payments on debt of $.9
million, to pay dividends to stockholders of $6.3 million, and to pay cash
distributions to partners of $.8 million.

Commitments

  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 cash distributions in the amount of $1.33 per share will be
declared for payment for 1999.


Results of Operations

Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998

  Net income for the three months ended June 30, 1999 is $2,333,000 versus
$2,042,000 for the same period in 1998, an increase of 14.3%.  Diluted
earnings per common share increased 3 cents or 14.3% to 24 cents in the 1999
period from 21 cents in the 1998 period.

  Total revenues for the three months ended June 30, 1999 increased
$750,000 or 13.4% to $6,364,000 from $5,614,000 for the three months ended
June 30, 1998.  Revenues from rental income increased $767,000 or 24.7% when
compared to the same period in 1998.  Revenues from mortgage interest
decreased $82,000 or 3.3% in 1999 as compared to the same period in 1998.

  The increase in rental income is due to additions to and acquisitions of
property and equipment of $20,874,000 during the last eighteen months.

  The decrease in mortgage interest income resulted primarily from
decreased mortgage notes receivable due to the receipt of monthly payments.







                               10
<PAGE>
          NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

                          June 30, 1999
                           (Unaudited)


  Total expenses for the 1999 three month period increased $448,000 or
$13.6% to $3,735,000 from $3,287,000 for the 1998 three month period.
Interest expense increased $78,000 or 4.9% in the 1999 three month period as
compared to the 1998 period.  Depreciation of real estate increased $201,000
or 12.9%.  General and administrative costs increased $169,000 or 137.4%.

  Interest expense increased due to increased debt of $13,776,000 compared
to a year ago.  Depreciation increased as a result of the Company placing
newly constructed assets in service and property acquisitions.  General and
administrative expense increased due to increased franchise taxes.


Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998

  Net income for the six months ended June 30, 1999 is $4,646,000 versus
$3,989,000 for the same period in 1998, an increase of 16.5%.  Diluted
earnings per common share increased 6 cents or 14.3% to 48 cents in the 1999
period from 42 cents in the 1998 period.

  Total revenues for the six months ended June 30, 1999 increased
$1,416,000 or 12.6% to $12,613,000 from $11,197,000 for the six months ended
June 30, 1998.  Revenues from rental income increased $1,534,000 or 24.7% when
compared to the same period in 1998.  Revenues from mortgage interest
decreased $150,000 or 3.1% in 1999 as compared to the same period in 1998.

  The increase in rental income is due to additions to and acquisitions of
property and equipment of $20,874,000 during the last eighteen months.

  The decrease in mortgage interest income resulted primarily from
decreased mortgage notes receivable due to the receipt of monthly payments.

  Total expenses for the 1999 six month period increased $733,000 or 11.0%
to $7,378,000 from $6,645,000 for the 1998 six month period.  Interest expense
increased $167,000 or 5.2% in the 1999 six month period as compared to the
1998 period.  Depreciation of real estate increased $391,000 or 12.5%.
General and administrative costs increased $175,000 or 62.5%.

  Interest expense increased due to increased debt of $13,776,000 compared
to a year ago.  Depreciation increased as a result of the Company placing
newly constructed assets in service and property acquisitions.  General and
administrative expenses increased due to increased franchise taxes.

  The rental income revenues are believed by management to be secure.
However, all of the rental income is from NHC, NHR's sole lessee.
Approximately 60% of NHC's revenues are from participation in the Medicare and
Medicaid programs.  During 1997, the federal government enacted the Balanced
Budget Act of 1997 (BBA) which contains numerous Medicare and Medicaid
cost-saving measures.  As part of these cost saving measures, the BBA requires
that nursing homes transition to a prospective payment system over a three
year transition period.



                               11
<PAGE>
          NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

                          June 30, 1999
                           (Unaudited)

The BBA also contains certain measures which have or will lead to reductions
in Medicare payments for home health agency services and therapy services.
Furthermore, NHC has stated in its financial statements that it is a defendant
in a lawsuit filed under the Qui Tam provisions of the Federal False Claims
Act.  NHR and NHC are unable to predict the ultimate effect the enactment of
the BBA or the pending lawsuit will have on NHC's ability to make its lease
payments to NHR.

  Excluding the possibility of mortgage prepayments as previously
discussed, mortgage interest income revenues are also believed by management
to be secure.  However, the mortgages are with five different owners and are
secured with the property of 23 long-term health care centers located in two
states, all of which are currently managed by NHC.  The revenues of the 23
health care centers are subject to the cost-saving measures of the BBA.
Furthermore, the healthcare centers may be subject to additional liabilities
related to NHC's lawsuit filed under the Federal False Claims Act.  NHR and
NHC are unable to predict the ultimate effect the enactment of the BBA or the
pending lawsuit will have on the ability of the 23 health care centers to make
their debt service payments to NHR.

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

  The Year 2000 issue generally relates to computer programs that were
written using two digits rather than four to define the applicable year.  In
those programs, the year 2000 may be incorrectly identified as the year 1900,
which can result in a system failure or miscalculations causing a disruption
of operations, including a temporary inability to process transactions,
prepare financial statements or engage in other normal business activities.
The following discussion identifies the actions taken by NHR to assess and
address its Year 2000 issues.

State of Readiness--

  NHR has developed a plan to address its Year 2000 issues, and is
utilizing its internal resources to assess, remediate and test its systems.
As a result of its advisory agreement with NHC, NHR is completely reliant upon
NHC for its information technology systems and embedded technology.  NHC is
also NHR's sole lessee.  NHC is currently performing an evaluation of its
information technology and embedded technology that are utilized in the
operations of NHR.  The Year 2000 readiness plan developed by NHC and NHR
includes an inventory and review of



                               12
<PAGE>
          NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

                          June 30, 1999
                           (Unaudited)


all core application systems, networks, desktop systems, infrastructure and
critical supply chains.  NHR's Year 2000 readiness plan is focused on
addressing Year 2000 readiness in the following four categories: (1) mainframe
computer operations, critical applications and related networks, (2) personal
computer hardware and software, (3) third party mortgagees and lessees, and
(4) other third party vendors that provide such services a telecommunications
and electrical power.

  For each of the above categories, NHR, through its advisor (NHC), will
perform or has performed the phases of assessment, remediation and testing of
the applicable hardware, software or equipment, as applicable.  The assessment
phase has been completed for category 1.  The remediation phase is underway and
modifications of non-compliant application programs have begun.  NHR has
historically developed the majority of its application programs internally.
All internally developed systems have been assessed and inventoried and plans
have been made to modify or replace them, if necessary, in order to make them
Year 2000 compliant.  Purchased applications are either being modified,
replaced or upgraded.  Most critical applications, whether internally
developed or purchased externally, have been tested and are already Year 2000
compliant.  All server hardware, dumb terminals and printers have also been
assessed, repaired as necessary and tested and are now Year 2000 compliant.
It is expected that the remediation and testing phases related to category 1
will be completed by October 1, 1999.

  NHR is currently in the assessment phase for categories 2, 3 and 4.  For
personal computer software vendors, NHR is aware of the packages that will not
be Year 2000 compliant and is currently in the process of assessing the types
of packages utilized by each personal computer.  This assessment is expected
to be completed by October 1, 1999 with remediation and testing to be
completed by December 31, 1999.  NHR has also requested all mortgagees,
lessees and other third party vendors (financial institutions, electrical
providers, etc.) to disclose their current Year 2000 readiness and their plan
for achieving Year 2000 readiness.  Responses have been received from most
vendors and third parties. For those vendors and third parties that have not
yet responded, NHR is in the process of sending out additional requests.
Although most third party vendors have indicated that they are currently Year
2000 compliant or expect to be compliant prior to January 1, 2000, there can
be no assurance that such third parties will achieve Year 2000 compliance by
January 1, 2000.

  NHR's sole lessee, NHC, is currently in the process of evaluating its
Year 2000 issues.  NHC has formed an internal task force and is utilizing its
internal resources to assess, remediate and test its Year 2000 compliance.
NHC's Year 2000 readiness plan is focused on addressing Year 2000 readiness in
the following five categories: (1) mainframe computer operations, critical
applications and related networks, (2) personal computer hardware and
software, (3) other internal equipment such as infusion pumps, phone systems,
monitoring devices and smoke/fire alarms which rely on embedded technology
(microchips) or telecommunications, (4) third party payors, and (5) other
third party vendors utilized by NHC's healthcare centers such as financial
institutions, electrical

                               13
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          NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

                          June 30, 1999
                           (Unaudited)

providers, and food services suppliers.  NHC has completed the assessment
phase related to its mainframe computer operations and related networks.
Although the majority of NHC's information technology applications are already
Year 2000 compliant, NHC is currently modifying or replacing applications and
hardware necessary.  NHC is expected to complete the remediation and testing
of any non-compliant applications and hardware by October 1, 1999.  NHC is
currently in the assessment phase of its plan for personal computer
applications and hardware, internal equipment utilizing embedded technology,
third party payors and other third party vendors.  NHC is expected to complete
the assessment phase for its personal computer applications and hardware and
for its internal equipment by October 1, 1999 and to complete remediation and
testing by December 31, 1999.  It is expected that the assessments of third
party payors and third party vendors will be an ongoing process that will
continue through December 31, 1999.

  NHR's mortgagees and NHC participate in the Medicare and Medicaid
programs.  NHC and the mortgagees are reimbursed under these programs through
fiscal intermediaries.  The Health Care Financing Administration ("HCFA"), the
government agency that administers the Medicare program, had previously
publicly stated that it would be Year 2000 compliant by December 31, 1998.
HCFA announced that it required all fiscal intermediaries to be Year 2000
compliant by December 31, 1998 and that it expected state Medicaid agencies to
be Year 2000 compliant by March 31, 1999.  While HCFA has made no public
announcement as to whether the fiscal intermediaries and state Medicaid
agencies have met this schedule, recent reports by the General Accounting
Office report that the various states may not currently be in compliance.
With respect to itself, HCFA recently issued a Provider Correspondence Letter
dated January 12, 1999 indicating that they have not met their schedule.  This
letter states that HCFA's systems will function on January 1, 2000 and will be
able to process "acceptable" claims.

  NHC and the mortgagees have little or no control over the Year 2000
compliance of governmental payors and fiscal intermediaries and it is expected
that this assessment phase will be an ongoing process throughout 1999.  NHR
will continue to request and seek information through all sources available
related to the Year 2000 readiness of NHC, the mortgagees, governmental payors
and fiscal intermediaries.

Year 2000 Costs--

  As a result of its advisory agreement with NHC, costs related to NHR's
Year 2000 readiness plan have not been material and are not expected to be
material in future periods.  No additional advisory fees have been charged to
NHR related to the assessment, remediation or testing of NHR's Year 2000
compliance.

Year 2000 Risks--

  The failure of NHR or third parties to be fully Year 2000 compliant for
essential systems and equipment by January 1, 2000 could result in
interruptions of normal business operations.  Based on all available
information as of June 30, 1999, management's estimate of NHR's most
reasonably likely worst case scenario includes: (i) delayed collection of rent
mortgage principal payments and interest
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          NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

                          June 30, 1999
                           (Unaudited)


payments, (ii) the disruption of capital flows from banks or other lenders
resulting in liquidity stress, and (iii) the disruption of important services
upon which NHR depends, such as telecommunications and electrical power.  Each
of these events could have a material adverse impact on NHR's business,
results of operations and financial condition.

Contingency Plans--

  Contingency plans for NHR's Year 2000 issues continue to be developed
and include, but are not limited to, the identification of alternate
suppliers, alternate technologies and alternate manual systems and processes.
NHR's contingency plans are expected to be completed by October 1, 1999.

  NHR's Year 2000 efforts are ongoing and its overall plan and cost
estimations will continue to evolve as new information becomes available.  The
costs of NHR's Year 2000 compliance plan and the date on which NHR expects to
complete it are based on current estimates, which reflect numerous assumptions
about future events, including the continued availability of certain
resources, the timing and effectiveness of third party remediation plans and
other factors.  NHR can give no assurance that these estimates will be
achieved, and actual results could differ materially from NHR's plans.
Specific factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct relevant computer source codes and embedded
technology, the results of internal assessment, remediation and testing and
the timeliness and effectiveness of remediation efforts of third parties.  In
addition, NHR's analysis of its Year 2000 issues is based in part on
information from third parties.  There can be no assurance that such
information is accurate or complete.


Item 3.     Quantitative and Qualitative Information About Market Risk

INTEREST RATE RISK

  The Company's cash and cash equivalents consist of highly liquid
investments with a maturity of less than three months.  All of the Company's
mortgage and other notes receivable bear interest at fixed interest rates.  As
a result of the short-term nature of the Company's cash instruments and
because the interest rates on the Company's investments in notes receivable
are fixed, a hypothetical 10% change in interest rates would have no impact on
the Company's future earnings and cash flows related to these instruments.  A
hypothetical 10% change in interest rates would also have an immaterial impact
on the fair values of these instruments.

  As of June 30, 1999, $93,700,000 of the Company's long-term debt bears
interest at floating interest rates.  Because the interest rates of these
instruments are variable, a hypothetical 10% increase in interest rates would
result in additional annual interest expense of approximately $660,000 and
likewise, a reduction in interest rates would result in annual interest
expense declining by approximately $660,000.  A hypothetical 10% change in
interest rates would not have a material impact on the fair values of these
instruments.
                               15
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          NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

                          June 30, 1999
                           (Unaudited)


  The remaining $9,064,000 of the Company's long-term debt bears interest
at fixed rates.  Because the interest rates of these instruments are fixed, a
hypothetical 10% change in interest rates would have no impact on the
Company's future earnings and cash flows related to these instruments.  A
hypothetical 10% change in interest rates would not have a material impact on
the fair values of these instruments.

  The Company currently does not use any derivative instruments to hedge
its interest rate expense or for trading purposes. The use of such instruments
would be subject to strict approvals by the Company's senior officers.
Therefore, the Company's exposure related to such derivative instruments is
not material to the Company's financial position, results of operations or
cash flows.


                   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















                               16
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          NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES

                          June 30, 1999
                           (Unaudited)



                            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   August 12, 1999          /s/ Richard F. LaRoche, Jr.
                                Richard F. LaRoche, Jr.
                                Secretary



Date   August 12, 1999          /s/ Donald K. Daniel
                                Donald K. Daniel
                                Principal Accounting Officer































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