UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File number 1-8923

HEALTH CARE REIT, INC.

(Exact name of registrant as specified in its charter)

Delaware		34-1096634
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
One SeaGate, Suite 1500, Toledo, Ohio		43604
(Address of principal executive office)		(Zip Code)

(419) 247-2800

(Former name, former address and former fiscal year, if changed since last report)

     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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.

Yes þ      No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o      No þ

     As of April 30, 2007, the registrant had 80,519,995 shares of common stock outstanding.

 

 

TABLE OF CONTENTS

				Page
PART I.		FINANCIAL INFORMATION
Item 1.		Financial Statements (Unaudited)
		Consolidated Balance Sheets — March 31, 2007 and December 31, 2006			3
		Consolidated Statements of Income — Three months ended March 31, 2007 and 2006			4
		Consolidated Statements of Stockholders’ Equity — Three months ended March 31, 2007 and 2006			5
		Consolidated Statements of Cash Flows — Three months ended March 31, 2007 and 2006			6
		Notes to Unaudited Consolidated Financial Statements			7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			30
Item 4.		Controls and Procedures			31
PART II.		OTHER INFORMATION
Item 1A.		Risk Factors			31
Item 5.		Other Information			31
Item 6.		Exhibits			31
Signatures					32
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS
HEALTH CARE REIT, INC. AND SUBSIDIARIES

		March 31,				December 31
		2007				2006
		(Unaudited)				(Note)
		(In thousands)
Assets
Real estate investments:
Real property owned
Land		$	394,002			$	386,693
Buildings & improvements			3,783,163				3,659,065
Acquired lease intangibles			85,110				84,082
Real property held for sale, net of accumulated depreciation			4,236				14,796
Construction in progress			169,782				138,222
			4,436,293				4,282,858
Less accumulated depreciation and amortization			(381,448	)			(347,007	)
Total real property owned			4,054,845				3,935,851
Loans receivable			256,945				194,448
Less allowance for losses on loans receivable			(7,406	)			(7,406	)
			249,539				187,042
Net real estate investments			4,304,384				4,122,893
Other assets:
Equity investments			4,700				4,700
Deferred loan expenses			19,767				20,657
Cash and cash equivalents			31,293				36,216
Receivables and other assets			98,510				96,144
			154,270				157,717
Total assets		$	4,458,654			$	4,280,610
Liabilities and stockholders’ equity
Liabilities:
Borrowings under unsecured lines of credit arrangements		$	381,000			$	225,000
Senior unsecured notes			1,542,103				1,541,814
Secured debt			377,013				378,972
Liability to subsidiary trust issuing preferred securities			52,205				52,215
Accrued expenses and other liabilities			95,595				101,588
Total liabilities			2,447,916				2,299,589
Minority interests			2,354				2,228
Stockholders’ equity:
Preferred stock, $1.00 par value:			338,993				338,993
Authorized - 25,000,000 shares
Issued and outstanding - 13,174,989 shares at March 31, 2007 and December 31, 2006
Common stock, $1.00 par value:			73,931				73,152
Authorized - 125,000,000 shares
Issued - 74,195,044 shares at March 31, 2007 and 73,272,052 shares at December 31, 2006
Outstanding - 74,091,131 shares at March 31, 2007 and 73,192,128 at December 31, 2006
Capital in excess of par value			1,902,186				1,873,811
Treasury stock			(3,941	)			(2,866	)
Cumulative net income			962,526				932,853
Cumulative dividends			(1,267,462	)			(1,238,860	)
Accumulated other comprehensive income			(135	)			(135	)
Other equity			2,286				1,845
Total stockholders’ equity			2,008,384				1,978,793
Total liabilities and stockholders’ equity		$	4,458,654			$	4,280,610

NOTE:           The consolidated balance sheet at December 31, 2006 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
HEALTH CARE REIT, INC. AND SUBSIDIARIES

		Three Months Ended
		March 31,
		2007				2006
		(In thousands, except per share data)
Revenues:
Rental income		$	105,904			$	71,380
Interest income			5,149				4,262
Other income			1,592				366
			112,645				76,008
Expenses:
Interest expense			31,922				23,523
Property operating expenses			7,168				0
Depreciation and amortization			33,860				21,825
General and administrative			9,793				5,976
Loan expense			1,267				711
Provision for loan losses			0				250
			84,010				52,285
Income before minority interests			28,635				23,723
Minority interests			(126	)			0
Income from continuing operations			28,509				23,723
Discontinued operations:
Net gain (loss) on sales of properties			977				1,553
Income (loss) from discontinued operations, net			187				(298	)
			1,164				1,255
Net income			29,673				24,978
Preferred stock dividends			6,317				5,333
Net income available to common stockholders		$	23,356			$	19,645
Average number of common shares outstanding:
Basic			73,224				58,178
Diluted			73,791				58,535
Earnings per share:
Basic:
Income from continuing operations available to common stockholders		$	0.30			$	0.32
Discontinued operations, net			0.02				0.02
Net income available to common stockholders*		$	0.32			$	0.34
Diluted:
Income from continuing operations available to common stockholders		$	0.30			$	0.31
Discontinued operations, net			0.02				0.02
Net income available to common stockholders*		$	0.32			$	0.34
Dividends declared and paid per common share		$	0.2991			$	0.6200

*   Amounts may not sum due to rounding

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
HEALTH CARE REIT, INC. AND SUBSIDIARIES

		Three Months Ended March 31, 2007
																										Accumulated
										Capital in																Other
		Preferred				Common				Excess of				Treasury				Cumulative				Cumulative				Comprehensive				Other
		Stock				Stock				Par Value				Stock				Net Income				Dividends				Income				Equity				Total
		(In thousands)
Balances at beginning of period		$	338,993			$	73,152			$	1,873,811			$	(2,866	)		$	932,853			$	(1,238,860	)			($135	)		$	1,845			$	1,978,793
Comprehensive income:
Net income																			29,673																29,673
Other comprehensive income:																																			0
Total comprehensive income																																			29,673
Proceeds from issuance of common shares from dividend reinvestment and stock incentive plans, net of forfeitures							779				28,375				(1,075	)															(100	)			27,979
Compensation expense related to stock options																															541				541
Cash dividends paid:
Common stock-$0.2991 per share																							(22,285	)											(22,285	)
Preferred stock, Series D-$0.4922 per share																							(1,969	)											(1,969	)
Preferred stock, Series E-$0.3750 per share																							(28	)											(28	)
Preferred stock, Series F-$0.4766 per share																							(3,336	)											(3,336	)
Preferred stock, Series G-$0.4688 per share																							(984	)											(984	)
Balances at end of period		$	338,993			$	73,931			$	1,902,186			$	(3,941	)		$	962,526			$	(1,267,462	)		$	(135	)		$	2,286			$	2,008,384

		Three Months Ended March 31, 2006
																										Accumulated
										Capital In																Other
		Preferred				Common				Excess of				Treasury				Cumulative				Cumulative				Comprehensive				Other
		Stock				Stock				Par Value				Stock				Net Income				Dividends				Income				Equity				Total
		(In thousands)
Balances at beginning of period		$	276,875			$	58,050			$	1,306,471			$	(2,054	)		$	830,103			$	(1,039,032	)		$	0			$	343			$	1,430,756
Comprehensive income:
Net income																			24,978																24,978
Other comprehensive income:																																			0
Total comprehensive income																																			24,978
Proceeds from issuance of common shares from dividend reinvestment and stock incentive plans, net of forfeitures							635				20,391				(660	)															(18	)			20,348
SFAS 123(R) reclassification											(521	)																			521				0
Compensation expense related to stock options																															491				491
Cash dividends paid:
Common stock-$0.62 per share																							(36,323	)											(36,323	)
Preferred stock, Series D-$0.4922 per share																							(1,969	)											(1,969	)
Preferred stock, Series E-$0.3750 per share																							(28	)											(28	)
Preferred stock, Series F-$0.4766 per share																							(3,336	)											(3,336	)
Balances at end of period		$	276,875			$	58,685			$	1,326,341			$	(2,714	)		$	855,081			$	(1,080,688	)		$	0			$	1,337			$	1,434,917

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
HEALTH CARE REIT, INC. AND SUBSIDIARIES

		Three Months Ended
		March 31,
		2007				2006
		(In thousands)
Operating activities
Net income		$	29,673			$	24,978
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization			33,860				23,262
Other amortization expenses			1,174				693
Capitalized interest			(2,327	)			(665	)
Provision for loan losses			0				250
Stock-based compensation expense			3,177				2,514
Minority interests			126				0
Rental income less than (in excess of) cash received			(2,613	)			7,910
(Gain) loss on sales of properties			(977	)			(1,553	)
Increase (decrease) in accrued expenses and other liabilities			(3,001	)			8,809
Decrease (increase) in receivables and other assets			2,266				(1,645	)
Net cash provided from (used in) operating activities			61,358				64,553
Investing activities
Investment in real property			(161,675	)			(89,994	)
Investment in loans receivable			(80,427	)			(5,324	)
Other investments, net of payments			(2,716	)			0
Principal collected on loans receivable			17,929				24,094
Proceeds from sales of properties			11,537				14,527
Other			(523	)			(496	)
Net cash provided from (used in) investing activities			(215,875	)			(57,193	)
Financing activities
Net increase (decrease) under unsecured lines of credit arrangements			156,000				6,000
Principal payments on secured debt			(1,894	)			(643	)
Net proceeds from the issuance of common stock			24,467				18,985
Decrease (increase) in deferred loan expense			(377	)			(525	)
Cash distributions to stockholders			(28,602	)			(41,656	)
Net cash provided from (used in) financing activities			149,594				(17,839	)
Increase (decrease) in cash and cash equivalents			(4,923	)			(10,479	)
Cash and cash equivalents at beginning of period			36,216				36,237
Cash and cash equivalents at end of period		$	31,293			$	25,758
Supplemental cash flow information-interest paid		$	21,934			$	17,477

See notes to unaudited consolidated financial statements

HEALTH CARE REIT, INC.

NOTE A – Basis of Presentation

          The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered for a fair presentation have been included. Operating results for the three months ended March 31, 2007 are not necessarily an indication of the results that may be expected for the year ending December 31, 2007. For further information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K/A for the year ended December 31, 2006.

NOTE B – Windrose Medical Properties Trust Merger

          As discussed in our Annual Report on Form 10-K/A for the year ended December 31, 2006, we completed our merger with Windrose Medical Properties Trust on December 20, 2006. These operations are the principal component of our operating property segment (see Note M). Allocation of the purchase price has not been finalized and is subject to adjustment.

NOTE C – Real Estate Investments

          During the three months ended March 31, 2007, we invested $161,675,000 of cash in real property (including $36,162,000 of cash advances for construction in progress) and provided cash loan financings of $80,427,000. We also converted $6,921,000 of completed construction projects into operating lease properties during the three months ended March 31, 2007. As of March 31, 2007, we had $339,893,000 of unfunded construction commitments relating to existing construction in progress projects. Also during the three months ended March 31, 2007, we sold real property generating $11,537,000 of net cash proceeds and collected $17,929,000 of cash as repayment of principal on loans receivable.

NOTE D – Equity Investments

          Equity investments consist of investments in private companies where we do not have the ability to exercise influence and are accounted for under the cost method. Under the cost method of accounting, investments in private companies are carried at cost and are adjusted only for other-than-temporary declines in fair value, distributions of earnings and additional investments. For investments in public companies, if any, that have readily determinable fair market values, we classify our equity investments as available-for-sale and, accordingly, record these investments at their fair market values with unrealized gains and losses included in accumulated other comprehensive income, a separate component of stockholders’ equity. These investments represent a minimal ownership interest in these companies. In connection with the Windrose merger, we assumed a $1,000,000 investment in an unconsolidated subsidiary that holds trust preferred securities and is accounted for under the cost method.

NOTE E – Distributions Paid to Common Stockholders

          On February 20, 2007, we paid a dividend of $0.2991 per share to stockholders of record on January 31, 2007. This represents a total dividend of $0.64 per share when combined with the prorated dividend of $0.3409 per share paid on December 28, 2006 in connection with the Windrose merger. These dividends related to the period from October 1, 2006 through December 31, 2006.

NOTE F – Fair Value of Derivative Instruments

          We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates. We may elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to match our variable rate investments with comparable borrowings, but are also based on the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates. Derivatives are recorded at fair market value on the balance sheet as assets or liabilities.

HEALTH CARE REIT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

          On May 6, 2004, we entered into two interest rate swap agreements (the “Swaps”) for a total notional amount of $100,000,000 to hedge changes in fair value attributable to changes in the LIBOR swap rate of $100,000,000 of fixed rate debt with a maturity date of November 15, 2013. The Swaps are treated as fair-value hedges for accounting purposes and we utilize the short-cut method to assess effectiveness. The Swaps are with highly rated counterparties in which we receive a fixed rate of 6.0% and pay a variable rate based on six-month LIBOR plus a spread. At March 31, 2007, the Swaps were reported at their fair value as a $1,230,000 other asset ($902,000 other asset at December 31, 2006). For the three months ended March 31, 2007, we generated $1,000 of savings related to the Swaps that was recorded as a reduction to interest expense. For the three months ended March 31, 2006, we incurred $15,000 of losses related to the Swaps that was recorded as an addition to interest expense.

          The valuation of derivative instruments requires us to make estimates and judgments that affect the fair value of the instruments. Fair values for our derivatives are estimated by a third party consultant, which utilizes pricing models that consider forward yield curves and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates that may change in the future.

NOTE G – Discontinued Operations

          One assisted living facility was held for sale as of March 31, 2007. We did not recognize an impairment loss on this asset as the fair value less estimated costs to sell exceeded our carrying value. During the three months ended March 31, 2007, we sold two assisted living facilities with carrying values of $10,560,000 for a net gain of $977,000. In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we have reclassified the income and expenses attributable to all properties sold and attributable to the properties held for sale at March 31, 2007 to discontinued operations. Expenses include an allocation of interest expense based on property carrying values and our weighted average cost of debt. The following illustrates the reclassification impact of Statement No. 144 as a result of classifying properties as discontinued operations for the periods presented (in thousands):

		Three Months Ended
		March 31,
		2007				2006
Revenues:
Rental income		$	264			$	2,079
Expenses:
Interest expense			77				715
Provision for depreciation			0				1,437
General and administrative			0				225
Income (loss) from discontinued operations, net		$	187			$	(298	)

NOTE H – Contingent Liabilities

          We have an outstanding letter of credit issued for the benefit of certain insurance companies that provide workers’ compensation insurance to one of our tenants. Our obligation under the letter of credit matures in 2009. At March 31, 2007, our obligation under the letter of credit was $2,450,000.

          As of March 31, 2007, we had $339,893,000 of unfunded construction commitments.

NOTE I – Accumulated Other Comprehensive Income

          Accumulated other comprehensive income includes unrealized gains or losses on our equity investments and unrecognized actuarial losses from the adoption of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans — An amendment of FASB Statements No. 87, 88, 106 and 132(R) on December 31, 2006. These items are included as a component of stockholders’ equity. We did not recognize any comprehensive income other than the recorded net income for the three months ended March 31, 2007 or 2006.

HEALTH CARE REIT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE J – Earnings Per Share

          The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

		Three Months Ended
		March 31,
		2007				2006
Numerator for basic and diluted earnings per share — net income available to common stockholders		$	23,356			$	19,645
Denominator for basic earnings per share — weighted average shares			73,224				58,178
Effect of dilutive securities:
Employee stock options			178				97
Non-vested restricted shares			389				260
Dilutive potential common shares			567				357
Denominator for diluted earnings per share — adjusted weighted average shares			73,791				58,535
Basic earnings per share		$	0.32			$	0.34
Diluted earnings per share		$	0.32			$	0.34

          The diluted earnings per share calculation excludes the dilutive effect of 124,000 stock options for the three months ended March 31, 2007 because the exercise prices were greater than the average market price. The diluted earnings per share calculation excludes the dilutive effect of 257,000 stock options for the three months ended March 31, 2006 because the exercise prices were greater than the average market price. The Series E Cumulative Convertible and Redeemable Preferred Stock, the Series G Cumulative Convertible Preferred Stock and the $345,000,000 senior unsecured convertible notes due December 2026 were not included in these calculations as the effect of the conversions into common stock were anti-dilutive for the relevant periods presented.

NOTE K – Other Equity

          Other equity consists of accumulated option compensation expense which represents the amount of amortized compensation costs related to stock options awarded to employees and directors subsequent to January 1, 2003. Expense, which is recognized as the options vest based on the market value at the date of the award, totaled $541,000 for the three months ended March 31, 2007 and $491,000 for the same period in 2006.

NOTE L – Stock Incentive Plans

          Our 2005 Long-Term Incentive Plan authorizes up to 2,200,000 shares of common stock to be issued at the discretion of the Compensation Committee of the Board of Directors. The 2005 Plan replaced the 1995 Stock Incentive Plan and the Stock Plan for Non-Employee Directors. The options granted to officers and key employees under the 1995 Plan continue to vest through 2010 and expire ten years from the date of grant. Our non-employee directors, officers and key employees are eligible to participate in the 2005 Plan. The 2005 Plan allows for the issuance of, among other things, stock options, restricted stock, deferred stock units and dividend equivalent rights. Vesting periods for options, deferred stock units and restricted shares range from three years for directors to five years for officers and key employees. Options expire ten years from the date of grant.

HEALTH CARE REIT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Valuation Assumptions

          The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted-average assumptions:

		Three Months Ended				Three Months Ended
		March 31, 2007				March 31, 2006
Dividend yield (1)			5.60	%			6.79	%
Expected volatility			19.9	%			20.3	%
Risk-free interest rate			4.74	%			4.35	%
Expected life (in years)			5				5
Weighted-average fair value (1)		$	8.31			$	5.26

          The dividend yield represented the dividend yield of our common stock on the dates of grant. Our computation of expected volatility was based on historical volatility. The risk-free interest rates used were the 10-year U.S. Treasury Notes yield on the dates of grant. The expected life was based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations regarding future employee behavior.

Option Award Activity

          The following table summarizes information about stock option activity for the three months ended March 31, 2007:

		Number
		of				Weighted				Weighted Average				Aggregate
		Shares				Average				Remaining				Intrinsic
Stock Options		(000’s)				Exercise Price				Contract Life (years)				Value ($000’s)
Options at beginning of year			917			$	30.79				7.9
Options granted			124				45.73
Options exercised			(332	)			28.18
Options terminated			(2	)			39.67
Options at end of period			707			$	34.61				7.7			$	6,565
Options exercisable at end of period			325			$	30.94				6.7			$	4,214
Weighted average fair value of options granted during the period						$	8.31

          The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the quoted price of our common stock for the options that were in-the-money at March 31, 2007. During the three months ended March 31, 2007, the aggregate intrinsic value of options exercised under our stock incentive plans was $5,341,000 determined as of the date of option exercise. During the three months ended March 31, 2006, the aggregate intrinsic value of options exercised under our stock incentive plans was $1,825,000 determined as of the date of option exercise. Cash received from option exercises under our stock incentive plans for the three months ended March 31, 2007 was $9,354,000. Cash received from option exercises under our stock incentive plans for the three months ended March 31, 2006 was $2,232,000.

          As of March 31, 2007, there was approximately $3,074,000 of total unrecognized compensation cost related to unvested stock options granted under our stock incentive plans. That cost is expected to be recognized over a weighted average period of three years. As of March 31, 2007, there was approximately $11,966,000 of total unrecognized compensation cost related to unvested restricted stock granted under our stock incentive plans. That cost is expected to be recognized over a weighted average period of four years.

HEALTH CARE REIT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

          The following table summarizes information about non-vested stock incentive awards as of March 31, 2007 and changes for the three months ended March 31, 2007:

		Stock Options								Restricted Stock
		Number of				Weighted Average				Number of				Weighted Average
		Shares				Grant Date				Shares				Grant Date
		(000’s)				Fair Value				(000’s)				Fair Value
Non-vested at December 31, 2006			478			$	5.35				248			$	34.07
Vested			(218	)			3.78				(118	)			35.22
Granted			124				8.31				260				44.85
Terminated			(2	)			7.55				(1	)			39.36
Non-vested at March 31, 2007			382			$	7.20				389			$	40.91

NOTE M – Segment Reporting

          Our business consists primarily of financing and leasing senior housing and health care real estate. We evaluate our business and make resource allocations on our two business segments — investment properties and operating properties. Under the investment property segment, we invest in senior housing and health care real estate through acquisition and financing of primarily single tenant properties. Properties acquired are primarily leased under triple-net leases and we are not involved in the management of the property. Our primary investment property types include skilled nursing facilities, assisted living facilities, independent living/continuing care retirement communities and specialty care facilities. Under the operating property segment, we primarily invest in medical office buildings that are typically leased under gross leases, modified gross leases or triple-net leases, to multiple tenants, and generally require a certain level of property management. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2006). There are no intersegment sales or transfers. We evaluate performance based upon net operating income of the combined properties in each segment.

          Non-segment revenue consists mainly of interest income on non-real estate investments and other income. Non-segment assets consist of corporate assets including cash, accounts receivable and deferred financing costs among others. Non-property specific revenues and expenses are not allocated to individual segments in determining our performance measure.

          Summary information for the reportable segments during the three months ended March 31, 2007 and 2006 is as follows (in thousands):

																		Property				Net				Real Estate
		Rental				Interest				Other				Total				Operating				Operating				Depreciation/				Interest				Total
		Income (1)				Income				Income				Revenues (1)				Expenses				Income (2)				Amortization (1)				Expense (1)				Assets
Three months ended March 31, 2007:
Investment Properties		$	80,603			$	5,149							$	85,752							$	85,752			$	24,379			$	2,310			$	3,331,385
Operating Properties			25,565												25,565			$	7,168				18,397				9,481				4,305				972,999
Non-segment/Corporate										$	1,592				1,592																25,384				154,270
		$	106,168			$	5,149			$	1,592			$	112,909			$	7,168			$	104,149			$	33,860			$	31,999			$	4,458,654
Three months ended March 31, 2006:
Investment Properties		$	73,459			$	4,262							$	77,721							$	77,721			$	23,262			$	1,978			$	2,909,603
Operating Properties
Non-segment/Corporate										$	366				366																22,260				103,037
		$	73,459			$	4,262			$	366			$	78,087			$	0			$	77,721			$	23,262			$	24,238			$	3,012,640

HEALTH CARE REIT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE N – New Accounting Pronouncements

          On January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. The Interpretation prescribes guidance for recognizing, measuring, reporting and disclosing a tax position taken or expected to be taken in a tax return. The adoption of the Interpretation did not have a material impact on our financial position or results of operations.

          In September 2006, the FASB also issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 will be effective for fiscal year 2007. Adoption of SFAS 157 is not expected to have a material impact on our financial position, although additional disclosures may be required.

          In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), which permits companies to elect to measure certain eligible items at fair value. Subsequent unrealized gains and losses on those items will be reported in earnings. Upfront costs and fees related to those items will be reported in earnings as incurred and not deferred. SFAS 159 is effective for fiscal years beginning after November 15, 2007. If a company elects to apply the provisions of the SFAS 159 to eligible items existing at that date, the effect of the remeasurement to fair value will be reported as a cumulative effect adjustment to the opening balance of retained earnings. Retrospective application will not be permitted. We are currently assessing whether we will elect to use the fair value option for any eligible items.

NOTE O – Significant Changes and Events

Common Stock Issuance

          On April 18, 2007, we completed a public offering of 6,325,000 shares of common stock with net proceeds to the company of approximately $265,337,000.

Line of Credit Extension

          Subsequent to March 31, 2007, we extended the maturity of our $40,000,000 unsecured line of credit arrangement from May 31, 2007 to May 30, 2008 and reduced the pricing from 0.9% to 0.8% over LIBOR interest rate.

Rendina/Paramount Acquisition

          On January 11, 2007, we announced an agreement to purchase a portfolio of medical office buildings from affiliates of Rendina Companies. As part of the transaction, we also agreed to acquire Paramount Real Estate Services, the property management group of Rendina Companies. The property portfolio includes 17 medical office buildings in ten states. The transactions are anticipated to close in the second quarter of 2007.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

          The following discussion and analysis is based primarily on the consolidated financial statements of Health Care REIT, Inc. for the periods presented and should be read together with the notes thereto contained in this Quarterly Report on Form 10-Q. Other important factors are identified in our Annual Report on Form 10-K/A for the year ended December 31, 2006, including factors identified under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Executive Overview

Business

          Health Care REIT, Inc. is a self-administered, equity real estate investment trust that invests in the full spectrum of senior housing and health care real estate. Founded in 1970, we were the first REIT to invest exclusively in health care facilities. The following table summarizes our portfolio as of March 31, 2007:

		Investments (1)				Percentage of				Revenues (2)				Percentage of				Number of				# Beds/Units				Investment per				Operators/
Type of Property		(in thousands)				Investments				(in thousands)				Revenues (2)				Properties				or Sq. Ft.				metric (3)				Tenants				States
Independent living/CCRCs		$	550,462				13	%		$	10,223				9	%			48			5,685 units				$129,977 per unit					20				20
Assisted living facilities			1,045,546				24	%			26,528				23	%			208			12,590 units				91,598 per unit					26				33
Skilled nursing facilities			1,547,904				36	%			43,494				39	%			233			31,668 beds				49,233 per bed					22				28
Medical office buildings			899,599				21	%			23,788				21	%			90			3,317,476 sq. ft.				271 per sq. ft.					636				13
Specialty care facilities			270,729				6	%			7,284				7	%			18			1,391 beds				218,044 per bed					9				9
Other income											1,592				1	%
Totals		$	4,314,240				100	%		$	112,909				100	%			597

          Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in rental and interest income and portfolio growth. To meet these objectives, we invest across the full spectrum of senior housing and health care real estate and diversify our investment portfolio by property type, operator/tenant and geographic location.

          Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals and interest earned on outstanding loans receivable. These items represent our primary source of liquidity to fund distributions and are dependent upon our obligors’ continued ability to make contractual rent and interest payments to us. To the extent that our obligors experience operating difficulties and are unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by the type of property and operator/tenant. Our asset management process includes review of monthly financial statements for each property, periodic review of obligor credit, periodic property inspections and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. In monitoring our portfolio, our personnel use a proprietary database to collect and analyze property-specific data. Additionally, we conduct extensive research to ascertain industry trends and risks. Through these asset management and research efforts, we are typically able to intervene at an early stage to address payment risk, and in so doing, support both the collectibility of revenue and the value of our investment.

          In addition to our asset management and research efforts, we also structure our investments to help mitigate payment risk. We typically limit our investments to no more than 90% of the appraised value of a property. Operating leases and loans are normally credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other loans, operating leases or agreements between us and the obligor and its affiliates.

          For the three months ended March 31, 2007, rental income and interest income represented 94% and 5%, respectively, of total gross revenues (including revenues from discontinued operations). Substantially all of our operating leases are designed with either fixed

or contingent escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectibility assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Our yield on loans receivable depends upon a number of factors, including the stated interest rate, the average principal amount outstanding during the term of the loan and any interest rate adjustments.

          Depending upon the availability and cost of external capital, we anticipate investing in additional properties. New investments are generally funded from temporary borrowings under our unsecured lines of credit arrangements, internally generated cash and the proceeds from sales of real property. Our investments generate internal cash from rent and interest receipts and principal payments on loans receivable. Permanent financing for future investments, which replaces funds drawn under the unsecured lines of credit arrangements, is expected to be provided through a combination of public and private offerings of debt and equity securities and the incurrence or assumption of secured debt. We believe our liquidity and various sources of available capital are sufficient to fund operations, meet debt service obligations (both principal and interest), make dividend distributions and finance future investments.

          Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders. During the three months ended March 31, 2007, we completed $243,657,000 of gross new investments and had $24,742,000 of investment payoffs, resulting in net investments of $218,915,000. We expect to complete gross new investments of $1.0 billion to $1.2 billion during 2007, including acquisitions of approximately $700,000,000 to $800,000,000 and funded new development of approximately $300,000,000 to $400,000,000. We anticipate the sale of real property and the repayment of loans receivable totaling approximately $100,000,000 to $200,000,000 resulting in net new investments of $800,000,000 to $1.1 billion during 2007. It is possible that additional loan repayments or sales of real property may occur in the future. To the extent that loan repayments and real property sales exceed new investments, our revenues and cash flows from operations could be adversely affected. We expect to reinvest the proceeds from any loan repayments and real property sales in new investments. To the extent that new investment requirements exceed our available cash on hand, we expect to borrow under our unsecured lines of credit arrangements. At March 31, 2007, we had $31,293,000 of cash and cash equivalents and $359,000,000 of available borrowing capacity under our unsecured lines of credit arrangements.

Windrose Medical Properties Trust Merger

          As discussed in our Annual Report on Form 10-K/A for the year ended December 31, 2006, we completed our merger with Windrose Medical Properties Trust on December 20, 2006. These operations are the principal component of our operating property segment (see Note M to our unaudited consolidated financial statements). The results of operations for this segment represent the primary change in our consolidated results of operations from the prior year. Allocation of the purchase price has not been finalized and is subject to adjustment.

Rendina/Paramount Acquisition

          On January 11, 2007, we announced an agreement to purchase a portfolio of medical office buildings from affiliates of Rendina Companies. As part of the transaction, we also agreed to acquire Paramount Real Estate Services, the property management group of Rendina Companies. The property portfolio includes 17 medical office buildings in ten states. The transactions are anticipated to close in the second quarter of 2007.

Key Transactions in 2007

          We have completed the following key transactions to date in 2007:

	•		our Board of Directors increased our quarterly dividend to $0.66 per share, which represents a two cent increase from the quarterly dividend of $0.64 paid for 2006. The dividend declared for the quarter ended March 31, 2007 represents the 144th consecutive dividend payment;
	•		we completed $243,657,000 of gross investments and had $24,742,000 of investment payoffs during the three months ended March 31, 2007;
	•		we completed a public offering of 6,325,000 shares of common stock with net proceeds to the company of approximately $265,337,000 in April 2007; and
	•		we extended our $40,000,000 unsecured line of credit which was scheduled to mature in May 2007 to May 2008 and reduced pricing by 10 basis points.

Key Performance Indicators, Trends and Uncertainties

          We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to operating performance, concentration risk and credit strength. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results, in making operating decisions and for budget planning purposes.

          Operating Performance. We believe that net income available to common stockholders (“NICS”) is the most appropriate earnings measure. Other useful supplemental measures of our operating performance include funds from operations (“FFO”) and funds available for distribution (“FAD”); however, these supplemental measures are not defined by U.S. generally accepted accounting

principles (“U.S. GAAP”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion of FFO and FAD and for reconciliations of FFO and FAD to NICS. These earnings measures and their relative per share amounts are widely used by investors and analysts in the valuation, comparison and investment recommendations of companies. The following table reflects the recent historical trends of our operating performance measures for the periods presented (in thousands, except per share data):

		Three Months Ended
		March 31,				June 30,				September 30,				December 31,				March 31,
		2006				2006				2006				2006				2007
Net income (loss) available to common stockholders		$	19,645			$	22,668			$	21,480			$	17,494			$	23,356
Funds from operations			41,354				45,870				45,898				44,459				56,207
Funds available for distribution			49,975				47,071				48,032				46,809				53,825
Per share data (fully diluted):
Net income (loss) available to   common stockholders		$	0.34			$	0.37			$	0.34			$	0.27			$	0.32
Funds from operations			0.71				0.74				0.73				0.69				0.76
Funds available for distribution			0.85				0.76				0.76				0.72				0.73

          Concentration Risk. We evaluate our concentration risk in terms of asset mix, investment mix, customer mix and geographic mix. Concentration risk is a valuable measure in understanding what portion of our investments could be at risk if certain sectors were to experience downturns. Asset mix measures the portion of our investments that are real property. In order to qualify as an equity REIT, at least 75% of our real estate investments must be real property whereby each property, which includes the land, buildings, improvements, intangibles and related rights, is owned by us and leased to a tenant pursuant to a long-term operating lease. Investment mix measures the portion of our investments that relate to our various property types. Customer mix measures the portion of our investments that relate to our top five customers. Geographic mix measures the portion of our investments that relate to our top five states. The following table reflects our recent historical trends of concentration risk for the periods presented:

		March 31,				June 30,				September 30,				December 31,				March 31,
		2006				2006				2006				2006				2007
Asset mix:
Real property			94	%			94	%			93	%			95	%			94	%
Loans receivable			6	%			6	%			7	%			5	%			6	%
Investment mix:
Independent living/CCRCs			15	%			15	%			16	%			13	%			13	%
Assisted living facilities			33	%			33	%			32	%			25	%			24	%
Skilled nursing facilities			45	%			45	%			46	%			34	%			36	%
Medical office buildings															22	%			21	%
Specialty care facilities			7	%			7	%			6	%			6	%			6	%
Customer mix:
Emeritus Corporation			12	%			12	%			11	%			9	%			8	%
Brookdale Senior Living Inc.			10	%			10	%			9	%			7	%			7	%
Home Quality Management, Inc.											8	%			6	%			6	%
Life Care Centers of America, Inc.			7	%			8	%			7	%			6	%			6	%
Merrill Gardens L.L.C.			7	%			7	%			6	%			4	%			4	%
Tara Cares, LLC.							6	%
Delta Health Group, Inc.			6	%
Remaining operators			58	%			57	%			59	%			68	%			69	%
Geographic mix:
Florida			14	%			14	%			15	%			17	%			16	%
Texas			8	%			8	%			8	%			11	%			13	%
Massachusetts			12	%			11	%			11	%			8	%			8	%
California															7	%			7	%
Ohio			9	%			9	%			8	%			6	%			6	%
North Carolina			7	%			7	%			6	%
Remaining states			50	%			51	%			52	%			51	%			50	%

          Credit Strength. We measure our credit strength both in terms of leverage ratios and coverage ratios. Our leverage ratios include debt to book capitalization and debt to market capitalization. The leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt. The coverage ratios indicate our ability to service interest and fixed charges (interest, secured debt principal amortization and preferred dividends). We expect to maintain capitalization ratios and coverage ratios sufficient to maintain investment grade ratings with Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings. The coverage ratios are based on earnings before interest, taxes, depreciation and amortization (“EBITDA”) which is discussed in further detail, and reconciled to net income, below in “Non-GAAP Financial Measures.” Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, investment recommendations and rating of companies. The following table reflects the recent historical trends for our credit strength measures for the periods presented:

		Three Months Ended
		March 31,				June 30,				September 30,				December 31,				March 31,
		2006				2006				2006				2006				2007
Debt to book capitalization ratio			52	%			49	%			51	%			53	%			54	%
Debt to market capitalization ratio			38	%			37	%			36	%			39	%			40	%
Interest coverage ratio			2.99	x			3.16	x			2.98	x			2.75	x			2.82	x
Fixed charge coverage ratio			2.41	x			2.52	x			2.41	x			2.23	x			2.28	x

          We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved and actual results may differ materially from our expectations. Factors that may cause actual results to differ from expected results are described in more detail in “Forward-Looking Statements and Risk Factors” and other sections of this Quarterly Report on Form 10-Q. Management regularly monitors economic and other factors to develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends. Please refer to our Annual Report on Form 10-K/A for the year ended December 31, 2006, under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of these risk factors.

Portfolio Update

          Investment Properties. Payment coverages of the operators in our investment property portfolio continue to remain strong. Our overall payment coverage is at 1.94 times, which is consistent with the prior year. The table below reflects our recent historical trends of portfolio coverages. Coverage data reflects the 12 months ended for the periods presented. CBMF represents the ratio of facilities’ earnings before interest, taxes, depreciation, amortization, rent and management fees to contractual rent or interest due us. CAMF represents the ratio of earnings before interest, taxes, depreciation, amortization, and rent (but after imputed management fees) to contractual rent or interest due us.

		December 31, 2004								December 31, 2005								December 31, 2006
		CBMF				CAMF				CBMF				CAMF				CBMF				CAMF
Independent living/CCRCs (1)											1.45	x			1.23	x			1.39	x			1.19	x
Assisted living facilities			1.47	x			1.25	x			1.52	x			1.30	x			1.56	x			1.35	x
Skilled nursing facilities			2.15	x			1.64	x			2.21	x			1.63	x			2.19	x			1.57	x
Specialty care facilities			3.00	x			2.37	x			3.19	x			2.60	x			2.77	x			2.21	x
Weighted averages			1.84	x			1.48	x			1.94	x			1.54	x			1.94	x			1.51	x