EX-99.1

EXHIBIT 99.1


Item 2.	*Properties*

We lease our corporate headquarters located at One SeaGate, Suite 1500, Toledo, Ohio 43604. We also own corporate offices in Tennessee, lease corporate offices in Florida and have ground leases relating to certain of our investment properties and medical office buildings. The following table sets forth certain information regarding the properties that comprise our investments as of December 31, 2008 (dollars in thousands):


	Number of		Number of		Total		Annualized
Property Location	Properties		Units		Investment		Income(1)

Assisted Living Facilities:
Arizona		3		132	$	12,446	$	1,609
California		9		637		56,879		7,577
Colorado		1		46		3,950		583
Connecticut		5		529		38,265		5,509
Delaware		1		97		19,433		2,504
Florida		13		763		44,173		4,452
Georgia		2		107		4,098		558
Illinois		7		687		96,592		4,010
Indiana		2		78		4,585		718
Iowa		1		237		24,280		0
Kansas		1		119		9,998		1,287
Louisiana		1		123		6,669		1,295
Massachusetts		5		397		94,008		10,691
Mississippi		1		78		7,106		1,010
Montana		3		205		13,752		1,948
Nevada		4		494		54,976		3,246
New Jersey		2		90		6,780		1,025
New York		4		284		49,961		4,319
North Carolina		40		1,866		162,797		22,533
Ohio		7		481		38,562		5,090
Oklahoma		17		644		30,006		3,877
Oregon		2		70		7,634		1,289
Pennsylvania		4		302		32,029		1,513
South Carolina		2		124		6,638		946
Tennessee		5		322		45,393		4,255
Texas		24		1,122		93,284		10,456
Utah		2		150		12,110		1,673
Virginia		4		225		31,201		3,942
Washington		5		342		92,447		8,067
Wisconsin		9		546		73,696		6,081

Total Assisted Living Facilities		186		11,297		1,173,748		122,063


	Number of		Number of		Total		Annualized
Property Location	Properties		Units		Investment		Income(1)

Independent Living Facilities/CCRCs:
Arizona		2		105	$	12,084	$	942
California		8		1,299		166,988		18,168
Colorado		4		580		74,159		7,047
Florida		7		1,230		193,981		14,351
Georgia		4		418		75,197		7,608
Idaho		1		254		12,778		1,800
Indiana		3		597		101,077		11,290
Kansas		1		120		11,837		1,158
Maryland		1		0		2,667		0
Massachusetts		7		219		59,551		4,494
Missouri		1		65		5,713		574
Nevada		1		103		6,749		1,185
New York		1		0		799		0
North Carolina		3		343		46,352		4,098
Ohio		1		288		49,117		0
Pennsylvania		4		0		28,779		2,316
South Carolina		10		1,197		210,800		8,187
Texas		2		518		18,116		2,391
Washington		1		70		5,079		549
Wisconsin		1		138		23,637		2,113

Total Independent Living Facilities/CCRCs		63		7,544		1,105,460		88,271


	Number of				Total		Annualized
Property Location	Properties		Sq. Ft.		Investment		Income(1)

Medical Office Buildings:
Alabama		5		303,316	$	43,715	$	4,187
Alaska		1		63,383		28,674		2,505
Arizona		6		339,205		100,567		5,885
California		7		384,520		122,366		8,989
Colorado		1		36,386		7,221		585
Florida		27		935,943		268,853		18,641
Georgia		15		358,566		75,982		6,559
Illinois		3		71,345		16,981		1,558
Indiana		1		90,403		21,953		1,894
Kentucky		1		112,638		15,076		0
Missouri		1		50,156		16,406		1,412
Nevada		9		324,845		112,540		8,286
New Jersey		5		406,454		79,183		5,010
New York		7		276,104		59,845		5,801
North Carolina		10		156,251		23,854		2,239
Ohio		1		20,106		7,352		696
Oklahoma		1		44,803		12,373		1,097
Pennsylvania		1		98,132		22,097		2,030
South Carolina		1		47,114		16,987		1,335
Tennessee		7		295,017		67,171		6,123
Texas		16		839,711		203,671		14,774
Virginia		1		56,775		3,584		0
Wisconsin		1		293,629		53,266		0

Total Medical Office Buildings		128		5,604,802		1,379,717		99,606


	Number of		Number of		Total		Annualized
Property Location	Properties		Beds		Investment		Income(1)

Specialty Care Facilities:
California		5		569	$	119,596	$	7,346
Idaho		1		60		23,929		2,246
Illinois		1		72		51,012		4,796
Indiana		2		90		30,147		3,203
Kentucky		1		60		30,110		2,866
Louisiana		1		50		11,615		744
Massachusetts		4		240		43,450		4,367
Nebraska		1		60		28,073		0
New Jersey		1		76		37,740		3,594
Ohio		2		84		40,211		4,725
Oklahoma		2		91		11,991		1,102
Texas		9		397		167,218		16,121
Wisconsin		1		62		24,578		2,602

Total Specialty Care Facilities		31		1,911		619,670		53,712

Total All Properties		633			$	5,861,679	$	546,801


(1)		Reflects contract rate of interest for loans, annual straight-line rent for leases with fixed escalators or annual cash rent for leases with contingent escalators, net of collectability reserves if applicable.

The following table sets forth occupancy and average annualized income for these property types:


							Average Annualized
	Occupancy (1)						Income (2)
	2008			2007			2008		2007
Medical office buildings		90.4	%		91.3	%	$	18	$	17	per sq ft
Investment properties:
Independent living / CCRCs		90.6	%		92.7	%	$	11,701	$	7,865	per unit
Assisted living facilities		88.8	%		88.7	%	$	10,805	$	9,308	per unit
Skilled nursing facilities		83.9	%		84.8	%	$	5,972	$	5,936	per bed
Specialty care facilities		49.5	%		55.8	%	$	28,107	$	20,645	per bed


(1)		Medical office building occupancy represents the percentage of total rentable square feet leased and occupied (including month-to-month and holdover leases and excluding terminations and discontinued operations) as of December 31, 2008 and 2007. Occupancy for investment properties represents average quarterly operating occupancy based on the quarters ended September 30, 2008 and 2007 and excludes properties that are unstabilized, closed or for which data is not available or meaningful. The Company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate occupancy for investment properties and has not independently verified the information.

(2)		Average annualized income represents annualized income divided by total beds, units or square feet.

The following table sets forth information regarding lease expirations as of December 31, 2008 (dollars in thousands):


	Independent		Assisted		Skilled		Specialty		Total		Medical
	Living /		Living		Nursing		Care		Investment		Office		Total Rental
Year	CCRCs		Facilities		Facilities		Facilities		Properties		Buildings		Income (1)

2009	$	—	$	—	$	332	$	—	$	332	$	12,443	$	12,775
2010		—		—		—		—		—		9,181		9,181
2011		9		1,681		5,295		—		6,985		10,526		17,511
2012		5,056		3,754		6,904		—		15,714		11,468		27,182
2013		7,909		567		—		—		8,476		8,368		16,844
2014		—		2,872		8,356		—		11,228		8,029		19,257
2015		—		—		1,927		—		1,927		7,852		9,779
2016		—		582		6,435		—		7,017		13,319		20,336
2017		—		14,780		3,627		2,106		20,513		5,455		25,968
2018		3,594		35,877		16,241		6,330		62,042		2,080		64,122
Thereafter		62,912		49,665		114,929		41,526		269,032		10,885		279,917

Total	$	79,480	$	109,778	$	164,046	$	49,962	$	403,266	$	99,606	$	502,872


(1)		Rental income represents annualized base rent for effective lease agreements. The amounts are derived from the current contracted monthly base rent including straight-line for leases with fixed escalators or annual cash rent for leases with contingent escalators, net of collectability reserves, if applicable. Rental income does not include common area maintenance charges or the amortization of above/below market lease intangibles.


Item 6.	*Selected Financial Data*

The following selected financial data for the five years ended December 31, 2008 are derived from our audited consolidated financial statements (in thousands, except per share data):


	Year Ended December 31,
	2004			2005			2006			2007			2008
Operating Data
Revenues (1)	$	187,625		$	227,328		$	275,167		$	438,105		$	535,725
Expenses:
Interest expense (1)		58,279			67,402			84,601			133,046			132,464
Depreciation and amortization (1)		48,329			58,886			75,474			129,035			149,257
Property operating expenses (1)		0			0			1,039			34,707			43,990
General and administrative (1)		15,756			15,881			25,922			37,465			47,193
Provision for loan losses		1,200			1,200			1,000			0			94
Realized loss on derivatives		0			0			0			0			23,393
Loss (gain) on extinguishment of debt		0			21,484			0			(1,081	)		(2,094	)

Total expenses		123,564			164,853			188,036			333,172			394,297

Income before income taxes		64,061			62,475			87,131			104,933			141,428
Income tax (expense) benefit		(42	)		(282	)		(82	)		(188	)		(1,306	)

Income from continuing operations		64,019			62,193			87,049			104,745			140,122
Income from discontinued operations, net (1)		21,352			22,093			15,607			33,848			143,303

Net income		85,371			84,286			102,656			138,593			283,425
Preferred stock dividends		12,737			21,594			21,463			25,130			23,201
Net income attributable to noncontrolling interests		0			0			13			238			126

Net income attributable to common stockholders	$	72,634		$	62,692		$	81,180		$	113,225		$	260,098

Other Data
Average number of common shares outstanding:
Basic		51,544			54,110			61,661			78,861			93,732
Diluted		52,082			54,499			62,045			79,409			94,309
Per Share Data
Basic:
Income from continuing operations attributable to common stockholders	$	0.99		$	0.75		$	1.06		$	1.01		$	1.25
Discontinued operations, net		0.41			0.41			0.25			0.43			1.53

Net income attributable to common stockholders *	$	1.41		$	1.16		$	1.32		$	1.44		$	2.77

Diluted:
Income from continuing operations attributable to common stockholders	$	0.98		$	0.74		$	1.06		$	1.00		$	1.24
Discontinued operations, net		0.41			0.41			0.25			0.43			1.52

Net income attributable to common stockholders *	$	1.39		$	1.15		$	1.31		$	1.43		$	2.76

Cash distributions per common share	$	2.385		$	2.46		$	2.8809		$	2.2791		$	2.70


*		Amounts may not sum due to rounding


Item 7.	*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 the Annual Report on Form 10-K for the year ended December 31, 2008. Other important factors are identified in “Item 1 — Business” and “Item 1A — Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2008.

Executive Overview

Company Overview

Health Care REIT, Inc., an S&P 500 company, is a real estate investment trust that invests in senior housing and health care real estate. Founded in 1970, we were the first REIT to invest exclusively in health care properties. The following table summarizes our portfolio as of December 31, 2008:


	Investments		Percentage of			Number of		# Beds/Units		Investment per
Type of Property	(in thousands)		Investments			Properties		or Sq. Ft.		metric(1)		States

Independent living/CCRCs	$	1,105,460		18.9	%		63		7,544 units	$	170,861 per unit		20
Assisted living facilities		1,173,748		20.0	%		186		11,297 units		116,625 per unit		30
Skilled nursing facilities		1,583,084		27.0	%		225		30,669 beds		52,420 per bed		27
Specialty care facilities		619,670		10.6	%		31		1,911 beds		463,039 per bed		13
Medical office buildings		1,379,717		23.5	%		128		5,604,802 sq. ft.		266 per sq. ft.		23

Totals	$	5,861,679		100.0	%		633


(1)		Investment per metric was computed by using the total investment amount of $6,590,957,000 which includes real estate investments and unfunded construction commitments for which initial funding has commenced which amounted to $5,861,679,000 and $729,278,000, respectively.

Health Care Industry

The demand for health care services, and consequently health care properties, is projected to reach unprecedented levels in the near future. The Centers for Medicare and Medicaid Services projects that national health expenditures will rise to $3.8 trillion in 2015 or 18.8% of gross domestic product (“GDP”). This is up from $2 trillion or 15.9% of GDP in 2005. Health expenditures per capita are projected to rise 5.8% per year from 2005 to 2015. While demographics are the primary driver of demand, economic conditions and availability of services contribute to health care service utilization rates. We believe the health care property market is less susceptible to fluctuations and economic downturns relative to other property sectors. Investor interest in the market remains strong, especially in specific sectors such as medical office, regardless of the current stringent lending environment. As a REIT, we believe we are positioned to benefit from any turbulence in the capital markets due to our access to capital.

The total U.S. population is projected to increase by 22% through 2030. The elderly are an important component of health care utilization, especially independent living services, assisted living services, skilled nursing services, inpatient and outpatient hospital services and physician ambulatory care. The elderly population aged 65 and over is projected to increase by 83% through 2030. Most health care services are provided within a health care facility such as a hospital, a physician’s office or a senior housing facility. Therefore, we believe there will be continued demand for companies such as ours with expertise in health care real estate.

The following chart illustrates the projected increase in the elderly population aged 65 and over:

Source: U.S. Census Bureau

Health care real estate investment opportunities tend to increase as demand for health care services increases. We recognize the need for health care real estate as it correlates to health care service demand. Health care providers require real estate to house their businesses and expand their services. We believe that investment opportunities in health care real estate will continue to be present due to the:


	•	Specialized nature of the industry which enhances the credibility and experience of our company;

	•	Projected population growth combined with stable or increasing health care utilization rates which ensures demand; and

	•	On-going merger and acquisition activity.

Economic Outlook

Beginning in late 2007 and throughout 2008, the U.S. and global economy entered a serious recession. The current economic environment is characterized by a severe residential housing slump, depressed commercial real estate valuations, weakened consumer confidence, rising unemployment and concerns regarding inflation, deflation and stagflation. Numerous financial systems around the globe have become illiquid and banks have become less willing to lend to other banks and borrowers. Further, capital markets have become and remain volatile as risk is repriced and investments are revalued. Uncertainty remains in terms of the depth and duration of these adverse economic conditions.

The conditions described above have created an environment of limited capital availability and increasing capital costs. This was most evident in the credit markets, where lending institutions cut back on loans, tightened credit standards and significantly increased interest rate spreads. The equity markets were characterized by sporadic accessibility until late 2008, when share prices in most sectors declined significantly. Continued volatility in the capital markets could limit our ability to access debt or equity funds which, in turn, could impact our ability to finance future investments and react to changing economic and business conditions. This difficult operating environment also may make it more difficult for some of our operators/tenants to meet their obligations to us.

During 2008, our focus gradually shifted from investment to capital preservation. To that end, our efforts in 2009 will be directed towards: liquidity, portfolio management and investment rationalization.


	•	Liquidity. Liquidity became increasingly important and we concentrated efforts on further strengthening our balance sheet. We raised over $1 billion in funds during 2008 from a combination of three common stock offerings, our dividend reinvestment plan, our new equity shelf program, property sales and loan payoffs. As always, we will continue to closely monitor the credit and capital markets for opportunities to raise reasonably priced capital.


	•	Portfolio Management. Our investment approach has produced a portfolio that is very diverse with strong property level payment coverages. Yet, today’s adverse economic conditions can negatively impact even the strongest portfolio. Our portfolio management program is designed to maintain our portfolio’s strength through a combination of extensive industry research, stringent origination and underwriting protocols and a rigorous asset management process.

	•	Investment Strategy. For the short-term, we expect to fund our ongoing development projects and will evaluate new investments selectively and only when funding sources are clearly identified. However, we will continue to strengthen our existing customer relationships and begin to cultivate new relationships. As we enter 2009, we remain focused on preserving liquidity, but we intend to take advantage of what we believe will be increasingly attractive investment opportunities over time.

Business Strategy

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 collectability 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. 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 year ended December 31, 2008, rental income and interest income represented 91% and 7%, respectively, of total gross revenues (including 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 collectability 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 believe our liquidity is sufficient to fund operations, meet debt service obligations (both principal and interest), make dividend distributions and complete construction projects in process. We also anticipate evaluating opportunities to finance future investments. New investments are generally funded from temporary borrowings under our unsecured line of credit arrangement, 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 line of credit arrangement, has historically been provided through a combination of public and private offerings of debt and equity securities and the incurrence or assumption of secured debt.

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. We expect to complete gross new investments of $600,000,000 in 2009, comprised of funded new development. We anticipate the sale of real property and the repayment of loans receivable totaling approximately $200,000,000 to $300,000,000 during 2009. 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 line of credit arrangement. At December 31, 2008, we had $23,370,000 of cash and cash equivalents, $154,070,000 of restricted cash and $580,000,000 of available borrowing capacity under our unsecured line of credit arrangement. Our investment activity may exceed our borrowing capacity under our unsecured line of credit. To the extent that we are unable to issue equity or debt securities to provide additional capital, we may not be able to fund all of our potential investments, which could have an adverse effect on our revenues and cash flows from operations.

Key Transactions in 2008

We completed the following key transactions during the year ended December 31, 2008:


	•	our Board of Directors increased our quarterly dividend to $0.68 per share, which represents a two cent increase from the quarterly dividend of $0.66 paid for 2007. The dividend declared for the quarter ended December 31, 2008 represented the 151st consecutive dividend payment;

	•	we completed $1,234,088,000 of gross investments offset by $194,243,000 of investment payoffs;

	•	we recognized $163,933,000 of gains on sales of real property, generating net proceeds of approximately $287,047,000;

	•	we completed a public offering of 3,000,000 shares of common stock with net proceeds of approximately $118,555,000 in March 2008;

	•	we completed a public offering of 4,600,000 shares of common stock with net proceeds of approximately $193,157,000 in July 2008;

	•	we completed a public offering of 8,050,000 shares of common stock with net proceeds of approximately $369,699,000 in September 2008;

	•	we issued 1,546,074 shares of common stock under our dividend reinvestment plan with net proceeds of approximately $67,055,000; and

	•	we issued 794,221 shares of common stock under our equity shelf program with net proceeds of approximately $30,272,000.

Recent Events

S&P 500 Inclusion Offering. On February 3, 2009, we completed an offering of 5,816,870 shares of common stock for $214,352,000 of gross proceeds. The offering was made in connection with the Company’s inclusion in the S&P 500 Index at the close of trading on January 29, 2009.

LandAmerica Settlement. During 2008, we engaged in two Internal Revenue Code section 1031 like kind exchange transactions, and we retained LandAmerica 1031 Exchange Services, Inc. (“LES”) to act as a qualified intermediary. On November 26, 2008, LES and its parent, LandAmerica Financial Group, filed for bankruptcy protection. At that time, we had approximately $136,855,000 in two segregated escrow accounts (the “Exchange Funds”) held by Centennial Bank, an affiliate of LES. Although the terms of our agreements with LES required that the Exchange Funds be returned to us, the return of the Exchange Funds was stayed by the bankruptcy proceedings. On February 23, 2009, the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division, entered an order approving the stipulation and settlement agreement among LES, the unsecured creditors committees and us. Pursuant to the terms of that settlement agreement, the Exchange Funds plus $918,000 of interest were returned to us on February 23, 2009, and we made a settlement payment of $2,000,000 to the LES

bankruptcy estate. In connection with these proceedings, we incurred approximately $500,000 in expenses. The settlement payment and expenses were recorded as reductions of gains on sales in 2008.

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, credit strength and concentration risk. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results and in making operating decisions.

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 net operating income (“NOI”); 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 NOI and for reconciliations of FFO and NOI. These earning measures and their relative per share amounts are widely used by investors and analysts in the valuation, comparison and investment recommendations of REITs. The following table reflects the recent historical trends of our operating performance measures (in thousands, except per share data):


	Year Ended
	December 31, 2006		December 31, 2007		December 31, 2008

Net income attributable to common stockholders	$	81,180	$	113,225	$	260,098
Funds from operations		177,473		248,070		258,868
Net operating income		327,273		455,680		526,136

Per share data (fully diluted):
Net income attributable to common stockholders	$	1.31	$	1.43	$	2.76
Funds from operations		2.86		3.12		2.74

Credit Strength. We measure our credit strength both in terms of leverage ratios and coverage ratios. Our leverage ratios include debt to book capitalization, debt to undepreciated book capitalization and debt to market capitalization. The leverage ratios indicate how much of our balance sheet capitalization is related to total debt. Our coverage ratios include interest coverage ratio and fixed charge coverage ratio. The coverage ratios indicate our ability to service interest and fixed charges (interest plus preferred dividends and secured debt principal amortizations). 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 adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted 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:


	Year Ended
	December 31, 2006			December 31, 2007			December 31, 2008

Debt to book capitalization ratio		52	%		52	%		47	%
Debt to undepreciated book capitalization ratio		48	%		48	%		43	%
Debt to market capitalization ratio		39	%		39	%		38	%

Adjusted interest coverage ratio		3.05	x		2.94	x		3.84	x
Adjusted fixed charge coverage ratio		2.45	x		2.41	x		3.20	x

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 an operator 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:


	December 31,			December 31,			December 31,
	2006			2007			2008

Asset mix:
Real property		95	%		92	%		92	%
Loans receivable		5	%		8	%		8	%
Investment mix:
Assisted living facilities		25	%		21	%		20	%
Skilled nursing facilities		34	%		32	%		27	%
Independent/CCRC		13	%		15	%		19	%
Specialty care facilities		6	%		7	%		11	%
Medical office buildings		22	%		25	%		23	%
Customer mix:
Senior Living Communities, LLC					4	%		6	%
Signature Healthcare LLC					6	%		5	%
Brookdale Senior Living Inc		7	%		5	%		5	%
Life Care Centers of America, Inc.		6	%		5	%		5	%
Emeritus Corporation		9	%		7	%		4	%
Home Quality Management, Inc.		6	%
Merrill Gardens L.L.C.		4	%
Remaining portfolio		68	%		73	%		75	%
Geographic mix:
Florida		17	%		15	%		14	%
Texas		11	%		13	%		11	%
California		7	%		7	%		8	%
Massachusetts		8	%		7	%		7	%
Tennessee					6	%		6	%
Ohio		6	%
Remaining portfolio		51	%		52	%		54	%

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. Management regularly monitors various 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 “Item 1A — Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2008 for further discussion.

Portfolio Update

Net operating income. The primary performance measure for our properties is net operating income (“NOI”) as discussed below in “Non-GAAP Financial Measures.” The following table summarizes our net operating income for the periods indicated (in thousands):


	Year Ended
	December 31,		December 31,		December 31,
	2006		2007		2008

Net operating income:
Investment properties	$	324,479	$	379,516	$	436,811
Medical office buildings		2,132		74,636		87,633
Non-segment/corporate		662		1,528		1,692

Net operating income	$	327,273	$	455,680	$	526,136

Payment coverage. Payment coverage of the operators in our investment property portfolio have stabilized. Our overall payment coverage is at 1.96 times and represents a decrease of three basis points from 2007 and an increase of three basis point from 2006. The following table reflects our recent historical trends of portfolio coverage. 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.


	September 30, 2006						September 30, 2007						September 30, 2008
	CBMF			CAMF			CBMF			CAMF			CBMF			CAMF

Independent living/CCRCs		1.41	x		1.21	x		1.47	x		1.26	x		1.31	x		1.11	x
Assisted living facilities		1.54	x		1.33	x		1.57	x		1.35	x		1.55	x		1.32	x
Skilled nursing facilities		2.17	x		1.55	x		2.25	x		1.65	x		2.26	x		1.66	x
Specialty care facilities		2.88	x		2.34	x		2.72	x		2.16	x		2.26	x		1.83	x

Weighted averages		1.93	x		1.50	x		1.99	x		1.55	x		1.96	x		1.52	x

Corporate Governance

Maintaining investor confidence and trust has become increasingly important in today’s business environment. Our Board of Directors and management are strongly committed to policies and procedures that reflect the highest level of ethical business practices. Our corporate governance guidelines provide the framework for our business operations and emphasize our commitment to increase stockholder value while meeting all applicable legal requirements. The Board of Directors adopted and annually reviews its Corporate Governance Guidelines. These guidelines meet the listing standards adopted by the New York Stock Exchange and are available on the Internet at www.hcreit.com and from us upon written request sent to the Senior Vice President — Administration and Corporate Secretary, Health Care REIT, Inc., One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio, 43603-1475.

Liquidity and Capital Resources

Sources and Uses of Cash

Our primary sources of cash include rent and interest receipts, borrowings under our unsecured line of credit arrangement, public and private offerings of debt and equity securities, proceeds from the sales of real property and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property acquisitions, loan advances and general and

administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows and are discussed in further detail below.

The following is a summary of our sources and uses of cash flows (dollars in thousands):


	Year Ended						One Year Change						Year Ended			One Year Change						Two Year Change
	Dec. 31, 2006			Dec. 31, 2007			$			%			Dec. 31, 2008			$			%			$			%

Cash and cash equivalents at beginning of period	$	36,237		$	36,216		$	(21	)		0	%	$	30,269		$	(5,947	)		(16	)%	$	(5,968	)		(16	)%
Cash provided from (used in) operating activities		220,789			283,987			63,198			29	%		360,683			76,696			27	%		139,894			63	%
Cash provided from (used in) investing activities		(565,158	)		(905,440	)		(340,282	)		60	%		(1,035,525	)		(130,085	)		14	%		(470,367	)		83	%
Cash provided from (used in) financing activities		344,348			615,506			271,158			79	%		667,943			52,437			9	%		323,595			94	%

Cash and cash equivalents at end of period	$	36,216		$	30,269		$	(5,947	)		(16	)%	$	23,370		$	(6,899	)		(23	)%	$	(12,846	)		(35	)%

Operating Activities. The increases in net cash provided from operating activities are primarily attributable to increases in net income, excluding non-cash items such as depreciation and amortization, stock-based compensation, impairments, capitalized interest and net straight-line rental income. Net income and the provisions for depreciation and amortization increased primarily as a result of net new investments in properties owned by us. See the discussion of investing activities below for additional details. To the extent that we acquire or dispose of additional properties in the future, our net income and provisions for depreciation and amortization will change accordingly.

The following is a summary of our straight-line rent (dollars in thousands):


	Year Ended						One Year Change						Year Ended			One Year Change						Two Year Change
	Dec. 31, 2006			Dec. 31, 2007			$			%			Dec. 31, 2008			$			%			$			%

Gross straight-line rental income	$	9,432		$	17,029		$	7,597			81	%	$	20,489		$	3,460			20	%	$	11,057			117	%
Cash receipts due to real property sales		(3,544	)		(4,527	)		(983	)		28	%		(2,187	)		2,340			(52	)%		1,357			(38	)%
Prepaid rent receipts		(17,017	)		(12,942	)		4,075			(24	)%		(26,095	)		(13,153	)		102	%		(9,078	)		53	%
Amortization related to above/ (below) market leases, net		60			792			732			1220	%		1,039			247			31	%		979			1632	%

	$	(11,069	)	$	352		$	11,421			n/a		$	(6,754	)	$	(7,106	)		n/a		$	4,315			(39	)%

Gross straight-line rental income represents the non-cash difference between contractual cash rent due and the average rent recognized pursuant to Statement of Financial Accounting Standards No. 13 Accounting for Leases (“SFAS 13”) for leases with fixed rental escalators, net of collectability reserves, if any. This amount is positive in the first half of a lease term (but declining every year due to annual increases in cash rent due) and is negative in the second half of a lease term. The increase in gross straight-line rental income and above/below amortization is primarily due to an increase in the number of our leases with fixed annual increases resulting primarily from the Windrose merger completed in December 2006 and the Rendina/Paramount acquisition completed in May 2007. The fluctuation in cash receipts due to real property sales is attributable to a decline in straight-line rent receivable balances on properties sold. The change in prepaid rent cash receipts is due to the mix of real property acquisitions during the periods presented. We typically receive prepaid rent in connection with investment property acquisitions.

Investing Activities. The changes in net cash used in investing activities are primarily attributable to changes in loans receivable and real property investments. The following is a summary of our investment and disposition activities (dollars in thousands):


	Year Ended
	December 31, 2006(1)					December 31, 2007(2)					December 31, 2008
	Facilities		Amount			Facilities		Amount			Facilities			Amount

Real property acquisitions:
Independent living/CCRCs		5	$	56,417			1	$	43,000			2		$	68,300
Assisted living facilities		8		77,600			4		36,233			3			45,490
Skilled nursing facilities		18		148,955			8		122,875			1			11,360
Specialty care facilities				0			1		11,923			7			196,303
Medical office buildings				0			28		381,134			7			121,809
Land parcels				10,250					8,928			1			10,000

Total acquisitions		31		293,222			42		604,093			21			453,262
Less:
Assumed debt				(25,049	)				(166,188	)					0
Assumed other assets/(liabilities), net				0					(2,432	)					(1,899	)

Cash disbursed for acquisitions				268,173					435,473						451,363
Construction in progress additions				149,843					295,102						595,452
Capital improvements to existing properties				11,167					39,976						25,561

Total cash invested in real property				429,183					770,551						1,072,376
Real property dispositions:
Independent living/CCRCs		1		12,745			1		5,346			2			15,547
Assisted living facilities		12		52,541			10		57,351			30			148,075
Skilled nursing facilities		3		10,079			7		18,107			4			6,290
Specialty care facilities				0					0			1			8,735
Medical office buildings				0					0			1			6,781
Land parcels				423					3,073						73

Total dispositions		16		75,788			18		83,877			38			185,501
Less:
Gains on sales of real property				1,267					14,437						163,933
LandAmerica settlement				0					0						2,500
Extinguishment of other assets/(liabilities)				0					0						(116	)
Seller financing on sales of real property				(7,168	)				0						(64,771	)

Proceeds from real property sales				69,887					98,314						287,047

Net cash investments in real property		15	$	359,296			24	$	672,237			(17	)	$	785,329

Advances on real estate loans receivable:
Investments in new loans			$	75,209				$	205,770					$	121,493
Draws on existing loans				11,781					30,124						21,265

Total gross investments in real estate loans				86,990					235,894						142,758
Less:
Seller financing on sales of real property															(59,649	)

Net cash advances on real estate loans receivable				86,990					235,894						83,109
Receipts on real estate loans receivable:
Loan payoffs				65,002					42,028						8,815
Principal payments on loans				17,253					10,318						9,354

Total principal receipts on real estate loans				82,255					52,346						18,169

Net cash advances/(receipts) on real estate loans			$	4,735				$	183,548					$	64,940


(1)		2006 excludes the Windrose merger.

(2)		2007 includes the Rendina/Paramount acquisition.

The investment in Windrose during 2006 primarily represented $183,139,000 of cash provided to Windrose to extinguish secured debt and cash used to pay advisory fees, lender consents and other merger-related costs totaling $15,023,000. These cash uses were offset by $15,591,000 of cash assumed from Windrose on the effective date of the merger. The investment in Rendina/Paramount primarily represented cash consideration of $141,967,000 offset by $4,000 of cash assumed from Paramount.

Financing Activities. The changes in net cash provided from or used in financing activities are primarily attributable to changes related to our debt, common stock issuances, preferred stock issuances and cash distributions to stockholders.

The changes in our senior unsecured notes include: (i) the issuance of $345,000,000 of our 4.75% convertible senior unsecured notes in November 2006; (ii) the issuance $400,000,000 of our 4.75% convertible senior unsecured notes in July 2007; (iii) the extinguishment of $52,500,000 of 7.5% senior unsecured notes in August 2007; (iv) the extinguishment of $42,330,000 of 7.625% senior unsecured notes in March 2008.

During the year ended December 31, 2008, we extinguished eight secured debt loans totaling $50,475,000 with a weighted-average interest rate of 6.67% and recognized extinguishment gains of $2,094,000. During the year ended December 31, 2007, we extinguished five secured debt loans totaling $29,797,000 with a weighted-average interest rate of 7.34%.

In November 2007, we repurchased $50,000,000 liquidation amount of preferred securities of a subsidiary trust and, in December 2007, obtained the satisfaction and discharge of a related $51,000,000 liability of an operating partnership and recorded a $1,081,000 gain on extinguishment of debt.

The change in common stock is primarily attributable to public issuances and common stock issuances related to our dividend reinvestment and stock purchase plan (“DRIP”). The remaining difference in common stock issuances is primarily due to issuances pursuant to stock incentive plans.

The following is a summary of our common stock issuances for the years presented (dollars in thousands, except per share amounts):


Date Issued	Shares Issued		Average Price		Gross Proceeds		Net Proceeds

April 2006 public issuance		3,222,800	$	36.00	$	116,021	$	109,748
2006 Dividend reinvestment plan issuances		1,876,377		36.34		68,184		68,184
2006 Option exercises		226,961		22.62		5,133		5,049

2006 Totals(1)		5,326,138			$	189,338	$	182,981

April 2007 public issuance		6,325,000	$	44.01	$	278,363	$	265,294
December 2007 public issuance		3,500,000		42.14		147,490		147,139
2007 Dividend reinvestment plan issuances		1,626,000		41.81		67,985		67,985
2007 Option exercises		401,630		27.82		11,175		11,175

2007 Totals		11,852,630			$	505,013	$	491,593

March 2008 public issuance		3,000,000	$	41.44	$	124,320	$	118,555
July 2008 public issuance		4,600,000		44.50		204,700		193,157
September 2008 public issuance		8,050,000		48.00		386,400		369,699
2008 Dividend reinvestment plan issuances		1,546,074		43.37		67,055		67,055
2008 Equity shelf program issuances		794,221		39.28		31,196		30,272
2008 Option exercises		118,895		29.83		3,547		3,547

2008 Totals		18,109,190			$	817,218	$	782,285


(1)		2006 excludes $912,000 of costs related to the Windrose merger.

In order to qualify as a REIT for federal income tax purposes, we must distribute at least 90% of our taxable income (including 100% of capital gains) to our stockholders. The increases in dividends are primarily attributable

to increases in the number of outstanding common and preferred shares as discussed above, increases in our annual common stock dividend per share and the payment of a prorated dividend of $0.3409 in December 2006 in conjunction with the Windrose merger.

The following is a summary of our dividend payments (in thousands, except per share amounts):


	Year Ended
	December 31, 2006				December 31, 2007				December 31, 2008
	Per Share		Amount		Per Share		Amount		Per Share		Amount

Common Stock	$	2.8809	$	178,365	$	2.2791	$	182,969	$	2.70	$	253,659
Series D Preferred Stock		1.96875		7,875		1.96875		7,875		1.96875		7,875
Series E Preferred Stock		1.50		112		1.50		112		1.50		112
Series F Preferred Stock		1.90625		13,344		1.90625		13,344		1.90625		13,344
Series G Preferred Stock		0.0625		132		1.875		3,799		1.875		1,870

Totals			$	199,828			$	208,099			$	276,860

Off-Balance Sheet Arrangements

At December 31, 2008, we had four outstanding letter of credit obligations totaling $4,615,130 and expiring between 2009 and 2013. Please see Note 11 to our consolidated financial statements for additional information.

We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates. We may or may not elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on the general trend in interest rates at the applicable dates, our perception of the future volatility of interest rates and our relative levels of variable rate debt and variable rate investments. Our interest rate swaps are discussed below in “Results of Operations.”

Contractual Obligations

The following table summarizes our payment requirements under contractual obligations as of December 31, 2008 (in thousands):


	Payments Due by Period
Contractual Obligations	Total		2009		2010-2011		2012-2013		Thereafter

Unsecured line of credit arrangement	$	570,000	$	0	$	570,000	$	0	$	0
Senior unsecured notes(1)		1,845,000		0		0		550,000		1,295,000
Secured debt(1)		448,378		39,657		67,434		75,908		265,379
Contractual interest obligations		1,215,495		140,260		270,624		230,295		574,316
Capital lease obligations		0		0		0		0		0
Operating lease obligations		163,978		4,220		8,352		7,831		143,575
Purchase obligations		744,556		209,068		531,296		4,192		0
Other long-term liabilities		4,828		337		488		4,003		0

Total contractual obligations	$	4,992,235	$	393,542	$	1,448,194	$	872,229	$	2,278,270


(1)		Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.

and was 0.6% at December 31, 2008. In addition, we pay a facility fee annually to each bank based on the bank’s commitment under the revolving credit facility. The facility fee depends on our ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services and was 0.15% at December 31, 2008. We also pay an annual agent’s fee of $50,000. Principal is due upon expiration of the agreement. At December 31, 2008, we had $570,000,000 outstanding under the unsecured line of credit arrangement and estimated total contractual interest obligations of $18,189,000. Contractual interest obligations are estimated based on the assumption that the balance of $570,000,000 at December 31, 2008 is constant until maturity at interest rates in effect at December 31, 2008.

We have $1,845,000,000 of senior unsecured notes principal outstanding with fixed annual interest rates ranging from 4.75% to 8.0%, payable semi-annually. Total contractual interest obligations on senior unsecured notes totaled $1,060,949,000 at December 31, 2008. $745,000,000 of our senior unsecured notes are convertible notes that also contain put features. Please see Note 9 to our consolidated financial statements for additional information.

Additionally, we have mortgage loans with total outstanding principal of $448,378,000, collateralized by owned properties, with fixed annual interest rates ranging from 4.89% to 8.08%, payable monthly. The carrying values of the properties securing the mortgage loans totaled $773,673,000 at December 31, 2008. Total contractual interest obligations on mortgage loans totaled $136,357,000 at December 31, 2008.

At December 31, 2008, we had operating lease obligations of $163,978,000 relating primarily to ground leases at certain of our properties and office space leases.

Purchase obligations are comprised of unfunded construction commitments and contingent purchase obligations. At December 31, 2008, we had outstanding construction financings of $639,419,000 for leased properties and were committed to providing additional financing of approximately $729,278,000 to complete construction. At December 31, 2008, we had contingent purchase obligations totaling $15,278,000. These contingent purchase obligations primarily relate to deferred acquisition fundings and capital improvements. Deferred acquisition fundings are contingent upon a tenant satisfying certain conditions in the lease. Upon funding, amounts due from the tenant are increased to reflect the additional investment in the property.

Other long-term liabilities relate to our Supplemental Executive Retirement Plan (“SERP”) and certain non-compete agreements. We have a SERP, a non-qualified defined benefit pension plan, which provides certain executive officers with supplemental deferred retirement benefits. The SERP provides an opportunity for participants to receive retirement benefits that cannot be paid under our tax-qualified plans because of the restrictions imposed by ERISA and the Internal Revenue Code of 1986, as amended. Benefits are based on compensation and length of service and the SERP is unfunded. No contributions by the Company are anticipated for the 2009 fiscal year. Benefit payments are expected to total $4,003,000 during the next five fiscal years and no benefit payments are expected to occur during the succeeding five fiscal years. We use a December 31 measurement date for the SERP. The accrued liability on our balance sheet for the SERP was $3,109,000 at December 31, 2008 ($1,915,000 at December 31, 2007).

In connection with the Windrose merger, we entered into consulting agreements with Fred S. Klipsch and Frederick L. Farrar, which expired in December 2008. We entered into a new consulting agreement with Mr. Farrar in December 2008, which expires in December 2009 and may be terminated at any time by Mr. Farrar. Each consultant has agreed not to compete with the Company for a period of two years following termination or expiration of the agreement. In exchange for complying with the covenant not to compete, Messers. Klipsch and Farrar will receive eight quarterly payments of $75,000 and $37,500, respectively, with the first payment to be made on the date of termination or expiration of the agreement. The first payment to Mr. Klipsch was made in December 2008.

Capital Structure

As of December 31, 2008, we had total equity of $3,238,285,000 and a total outstanding debt balance of $2,847,676,000, which represents a debt to total book capitalization ratio of 47%. Our ratio of debt to market capitalization was 38% at December 31, 2008. For the twelve months ended December 31, 2008, our adjusted interest coverage ratio was 3.84 to 1.00. For the twelve months ended December 31, 2008, our adjusted fixed charge

coverage ratio was 3.20 to 1.00. Also, at December 31, 2008, we had $23,370,000 of cash and cash equivalents, $154,070,000 of restricted cash and $580,000,000 of available borrowing capacity under our unsecured line of credit arrangement.

Our debt agreements contain various covenants, restrictions and events of default. Among other things, these provisions require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of December 31, 2008, we were in compliance with all of the covenants under our debt agreements. None of our debt agreements contain provisions for acceleration which could be triggered by our debt ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services. However, under our unsecured line of credit arrangement, these ratings on our senior unsecured notes are used to determine the fees and interest payable.

As of February 16, 2009, our senior unsecured notes were rated Baa2 (stable), BBB- (stable) and BBB (stable) by Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings, respectively. We plan to manage the company to maintain investment grade status with a capital structure consistent with our current profile. Any downgrades in terms of ratings or outlook by any or all of the noted rating agencies could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.

On May 12, 2006, we filed an open-ended automatic or “universal” shelf registration statement with the Securities and Exchange Commission covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units. As of February 16, 2009, we had an effective registration statement on file in connection with our enhanced DRIP program under which we may issue up to 10,760,247 shares of common stock. As of February 16, 2009, 7,926,634 shares of common stock remained available for issuance under this registration statement. In November 2008, we entered into an Equity Distribution Agreement with UBS Securities LLC relating to the offer and sale from time to time of up to $250,000,000 aggregate amount of our common stock (“Equity Shelf Program”). As of February 16, 2009, we had $218,804,000 of remaining capacity under the Equity Shelf Program. Depending upon market conditions, we anticipate issuing securities under our registration statements to invest in additional properties and to repay borrowings under our unsecured line of credit arrangement.

Results of Operations

Our primary sources of revenue include rent and interest. Our primary expenses include interest expense, depreciation and amortization, property operating expenses and general and administrative expenses. These revenues and expenses are reflected in our Consolidated Statements of Income and are discussed in further detail below. The following is a summary of our results of operations (dollars in thousands except per share amounts):


	Year Ended				One Year					Year Ended		One Year					Two Year
	Dec. 31,		Dec. 31,		Change					Dec. 31,		Change					Change
	2006		2007		$		%			2008		$		%			$		%
Net income attributable to common stockholders	$	81,180	$	113,225	$	32,045		39	%	$	260,098	$	146,873		130	%	$	178,918		220	%
Funds from operations		177,473		248,070		70,597		40	%		258,868		10,798		4	%		81,395		46	%
Net operating income		327,273		455,680		128,407		39	%		526,136		70,456		15	%		198,863		61	%
Adjusted EBITDA		308,478		439,702		131,224		43	%		595,365		155,663		35	%		286,887		93	%

The components of the changes in revenues, expenses and other items are discussed in detail below. The following is a summary of certain items that impact the results of operations for the year ended December 31, 2008:


	•	$2,094,000 ($0.02 per diluted share) of net gains on extinguishments of debt;

	•	$2,500,000 ($0.03 per diluted share) of additional other income related to a lease termination;

	•	$2,291,000 ($0.02 per diluted share) of non-recurring terminated transaction costs;

	•	$1,325,000 ($0.01 per diluted share) of non-recurring income tax expense;


	•	$23,393,000 ($0.25 per diluted share) of realized loss on derivatives;

	•	$32,648,000 ($0.35 per diluted share) of impairment charges; and

	•	$163,933,000 ($1.74 per diluted share) of gains on the sales of real property.


	•	$1,750,000 ($0.02 per diluted share) of one-time acquisition finders’ fees;

	•	$1,081,000 ($0.01 per diluted share) of net gains on extinguishments of debt;

	•	$3,900,000 ($0.05 per diluted share) of additional other income related to the payoff of a warrant equity investment; and

	•	$14,437,000 ($0.18 per diluted share) of gains on the sales of real property.

The following is a summary of certain items that impact the results of operations for the year ended December 31, 2006:


	•	$5,213,000 ($0.08 per diluted share) of merger-related expenses; and

	•	$1,267,000 ($0.02 per diluted share) of gains on the sales of real property.

The increase in fully diluted average common shares outstanding is primarily the result of the Windrose merger, public and private common stock offerings and common stock issuances pursuant to our DRIP. The following table represents the changes in outstanding common stock for the period from January 1, 2006 to December 31, 2008 (in thousands):


	Year Ended
	Dec. 31,		Dec. 31,		Dec. 31,
	2006		2007		2008		Totals

Beginning balance		58,125		73,192		85,496		58,125
Windrose merger		9,679		0		0		9,679
Public offerings		3,223		9,825		16,444		29,492
DRIP issuances		1,877		1,626		1,546		5,049
Preferred stock conversions		0		212		975		1,187
Option exercises		227		402		119		748
Other, net		61		239		124		424

Ending balance		73,192		85,496		104,704		104,704

Average number of common shares outstanding:
Basic		61,661		78,861		93,732
Diluted		62,045		79,409		94,309

We evaluate our business and make resource allocations on our two business segments — investment properties and medical office buildings. Under the investment property segment, properties are primarily leased under triple-net leases and we are not involved in the management of the property. Under the medical office building segment, our properties 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. There are no intersegment sales or transfers. Non-segment revenue consists mainly of interest income on non-real estate investments and other income. Non-property specific revenues and expenses are not allocated to individual segments in determining net operating income. Please see Note 19 to our consolidated financial statements for additional information.

Investment Properties

The following is a summary of our results of operations for the investment properties segment (dollars in thousands):


	Year Ended						One Year						Year Ended			One Year						Two Year
	Dec. 31,			Dec. 31,			Change						Dec. 31,			Change						Change
	2006			2007			$			%			2008			$			%			$			%
Revenues:
Rental income	$	249,393		$	297,697		$	48,304			19	%	$	356,178		$	58,481			20	%	$	106,785			43	%
Interest income		18,829			25,823			6,994			37	%		40,063			14,240			55	%		21,234			113	%
Other income		3,262			8,010			4,748			146	%		7,899			(111	)		-1	%		4,637			142	%

		271,484			331,530			60,046			22	%		404,140			72,610			22	%		132,656			49	%

Expenses:
Interest expense		(6,462	)		(1,646	)		4,816			-75	%		130			1,776			n/a			6,592			n/a
Depreciation and amortization		74,462			86,845			12,383			17	%		100,786			13,941			16	%		26,324			35	%
Gain on extinguishment of debt		0			0			0			n/a			(808	)		(808	)		n/a			(808	)		n/a
Provision for loan losses		1,000			0			(1,000	)		-100	%		94			94			n/a			(906	)		-91	%

		69,000			85,199			16,199			23	%		100,202			15,003			18	%		31,202			45	%

Income from continuing operations before income taxes		202,484			246,331			43,847			22	%		303,938			57,607			23	%		101,454			50	%
Income tax (expense) benefit		0			293			293			n/a			(1,693	)		(1,986	)		n/a			(1,693	)		n/a

Income from continuing operations		202,484			246,624			44,140			22	%		302,245			55,621			23	%		99,761			49	%
Discontinued operations:
Gain on sales of properties		1,267			14,437			13,170			1039	%		164,998			150,561			1043	%		163,731			12923	%
Income from discontinued operations, net		14,381			21,186			6,805			47	%		14,602			(6,584	)		-31	%		221			2	%

		15,648			35,623			19,975			128	%		179,600			143,977			404	%		163,952			1048	%

Net income	$	218,132		$	282,247		$	64,115			29	%	$	481,845		$	199,598			71	%	$	263,713			121	%

The increase in rental income is primarily attributable to the acquisitions of new investment properties from which we receive rent. See the discussion of investing activities in “Liquidity and Capital Resources” above for further information. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the tenant’s properties. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase. Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues. Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income. Interest income increased from 2007 and 2006 primarily due to an increase in the balance of outstanding loans.

Interest expense for the years ended December 31, 2008, 2007 and 2006 represents $7,176,000, $8,763,000 and $9,042,000, respectively, of secured debt interest expense offset by interest allocated to discontinued operations. The change in secured debt interest expense is due to the net effect and timing of assumptions, extinguishments and principal amortizations. During the year ended December 31, 2008, we extinguished four investment property secured debt loans and recognized extinguishment gains of $808,000. The following is a summary of our investment property secured debt principal activity (dollars in thousands):


	Year Ended December 31, 2006						Year Ended December 31, 2007						Year Ended December 31, 2008
				Weighted Average						Weighted Average						Weighted Average
	Amount			Interest Rate			Amount			Interest Rate			Amount			Interest Rate

Beginning balance	$	107,540			7.328	%	$	129,617			7.134	%	$	114,543			7.000	%
Debt assumed		25,049			6.315	%
Debt extinguished								(12,083	)		8.421	%		(17,821	)		7.022	%
Principal payments		(2,972	)		7.251	%		(2,991	)		7.085	%		(2,488	)		6.974	%

Ending balance	$	129,617			7.134	%	$	114,543			7.000	%	$	94,234			6.996	%

Monthly averages	$	125,375			7.173	%	$	121,562			7.065	%	$	103,927			6.996	%

Depreciation and amortization increased primarily as a result of additional investments in properties owned directly by us. See the discussion of investing activities in “Liquidity and Capital Resources” above for additional details. To the extent that we acquire or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly.

At December 31, 2008, we had one specialty care facility that satisfied the requirements of Statement No. 144 for held for sale treatment. 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 year ended December 31, 2008, we sold 30 assisted living facilities, two independent living facilities, four skilled nursing facilities, one specialty care facility and one parcel of land with carrying values of $178,720,000 for net gains of $164,998,000 and a deferred gain of $3,708,000. During the six months ended June 30, 2009, we sold 15 investment properties. Also, at June 30, 2009, we had six skilled nursing facilities classified as held-for-sale. The following illustrates the reclassification impact as a result of classifying investment properties as discontinued operations for the periods presented. Please refer to Note 4 to our consolidated financial statements for further discussion.


	Year Ended December 31,
	2006		2007		2008
Revenues:
Rental Income	$	52,995	$	47,986	$	32,671

Expenses:
Interest expense		15,504		10,409		7,046
Depreciation and amortization		21,990		16,391		11,023
General and adminstrative		1,120		0		0

Income (loss) from discontinued operations, net	$	14,381	$	21,186	$	14,602

During the three months ended December 31, 2007, we recognized $3,900,000 of additional other income related to the payoff of a warrant equity investment. During the three months ended March 31, 2008, we determined that $1,325,000 of income taxes were due in connection with that investment gain. During the three months ended December 31, 2008, we recognized $2,500,000 of additional other income related to a lease termination.

As a result of our quarterly evaluations, we recorded a $94,000 addition to the allowance for loan losses at December 31, 2008. The provision for loan losses is related to our critical accounting estimate for the allowance for loan losses and is discussed below in “Critical Accounting Policies.”

Medical Office Buildings

The following is a summary of our results of operations for the medical office building segment (dollars in thousands):


	Year Ended						One Year						Year Ended			One Year						Two Year
	Dec. 31,			Dec. 31,			Change						Dec. 31,			Change						Change
	2006			2007			$			%			2008			$			%			$			%
Revenues:
Rental income	$	3,021		$	104,550		$	101,529			3361	%	$	128,963		$	24,413			23	%	$	125,942			4169	%
Other income		0			497			497			n/a			930			433			87	%		930			n/a

		3,021			105,047			102,026			3377	%		129,893			24,846			24	%		126,872			4200	%
Expenses:
Interest expense		519			21,407			20,888			4025	%		20,279			(1,128	)		-5	%		19,760			3807	%
Property operating expenses		1,039			34,707			33,668			3240	%		43,990			9,283			27	%		42,951			4134	%
Depreciation and amortization		1,012			42,190			41,178			4069	%		48,471			6,281			15	%		47,459			4690	%
Gain on extinguishment of debt		0			(1,081	)		(1,081	)		n/a			(1,286	)		(205	)		19	%		(1,286	)		n/a

		2,570			97,223			94,653			3683	%		111,454			14,231			15	%		108,884			4237	%

Income from continuing operations before income taxes		451			7,824			7,373			1635	%		18,439			10,615			136	%		17,988			3988	%
Income tax (expense) benefit		0			12			12			n/a			(51	)		(63	)		n/a			(51	)		n/a

Income from continuing operations		451			7,836			7,385			1637	%		18,388			10,552			135	%		17,937			3977	%
Discontinued operations:
Loss on sales of properties		0			0			0			n/a			(1,065	)		(1,065	)		n/a			(1,065	)		n/a
Impairment of assets		0			0			0			n/a			(32,648	)		(32,648	)		n/a			(32,648	)		n/a
Income from discontinued operations, net		(41	)		(1,775	)		(1,734	)		4229	%		(2,584	)		(809	)		46	%		(2,543	)		6202	%

		(41	)		(1,775	)		(1,734	)		4229	%		(36,297	)		(34,522	)		1945	%		(36,256	)		88429	%

Net income (loss)		410			6,061			5,651			1378	%		(17,909	)		(23,970	)		n/a			(18,319	)		n/a
Net income (loss) attributable to noncontrolling interests		13			238			225			1731	%		126			(112	)		-47	%		113			869	%

Net income (loss) attributable to common stockholders	$	397		$	5,823		$	5,426			1367	%	$	(18,035	)	$	(23,858	)		n/a		$	(18,432	)		n/a

As discussed in Note 2 to our consolidated financial statements, we completed our merger with Windrose Medical Properties Trust on December 20, 2006. These operations are the principal component of our medical office building segment and represent the primary component of the change in results of operations for this segment from 2006 to 2007. Additionally, in May 2007, we completed the acquisition of 17 medical office buildings and Paramount Real Estate Services, a property management company, from affiliates of Rendina Companies. The results of operations for these properties and Paramount have been included in our consolidated results of operations from the date of acquisition and represent the primary component of change in results of operations for this segment from 2007 to 2008.

The increase in rental income is primarily attributable to the acquisitions of medical office buildings from which we receive rent. See the discussion of investing activities in “Liquidity and Capital Resources” above for further information. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If the Consumer Price Index does not

increase, a portion of our revenues may not continue to increase. Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues. Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income. The increase in other income is attributable to third party management fee income.

Interest expense for the years ended December 31, 2008, 2007 and 2006 represents $21,828,000, $20,174,000 and $498,000, respectively, of secured debt interest expense offset by interest allocated to discontinued operations. Interest expense for the years ended December 31, 2007 and 2006 also includes $3,104,000 and $112,000, respectively, of interest expense related to the subsidiary trust liability. The change in secured debt interest expense is primarily due to the net effect and timing of assumptions, extinguishments and principal amortizations. During the year ended December 31, 2008, we extinguished four medical office building secured debt loans and recognized extinguishment gains of $1,286,000. The following is a summary of our medical office building secured debt principal activity (dollars in thousands):


	Year Ended December 31, 2006						Year Ended December 31, 2007						Year Ended December 31, 2008
				Weighted Average						Weighted Average						Weighted Average
	Amount			Interest Rate			Amount			Interest Rate			Amount			Interest Rate

Beginning balance	$	0			0.000	%	$	248,783			5.939	%	$	392,430			5.854	%
Debt assumed		248,844			5.939	%		166,331			5.808	%
Debt extinguished								(17,713	)		6.599	%		(32,653	)		6.473	%
Principal payments		(61	)		5.939	%		(4,971	)		5.881	%		(5,631	)		5.741	%

Ending balance	$	248,783			5.939	%	$	392,430			5.854	%	$	354,146			5.799	%

Monthly averages	$	248,813			5.939	%	$	335,234			5.892	%	$	365,661			5.802	%

At December 31, 2006, we had $51,000,000 of trust preferred liability principal outstanding with a fixed annual interest rate of 7.22%. On November 6, 2007, we purchased all $50,000,000 of the outstanding trust preferred securities at par for the purpose of unwinding this financing arrangement and extinguishing the liability of the operating partnership to the subsidiary trust and recorded a $1,081,000 gain on extinguishment of debt.

The increase in property operating expenses is primarily attributable to the acquisition of new medical office buildings for which we incur certain property operating expenses offset by property operating expenses associated with discontinued operations.

Income tax expense is related to third party management fee income.

Noncontrolling interests primarily relate to certain joint venture properties acquired in connection with the Windrose merger in December 2006.

At December 31, 2008, we had 14 medical office buildings that satisfied the requirements of Statement No. 144 for held for sale treatment. In determining the fair value of the assets, we used a combination of third party appraisals based on market comparable transactions, other market listings and asset quality as well as management calculations based on projected net operating income and published capitalization rates. Management’s estimates projected that the carrying value of the assets was less than the estimated fair value and an impairment charge of $32,648,000 was recorded to reduce the properties to their estimated fair value. During the year ended December 31, 2008, we sold one medical office building with a carrying value of $6,781,000 for a loss of $1,065,000. The following illustrates the reclassification impact as a result of classifying these medical office buildings as

discontinued operations for the periods presented. Please refer to Note 4 to our consolidated financial statements for further discussion.


	Year Ended December 31,
	2006			2007			2008

Revenues:
Rental Income	$	226		$	7,064		$	4,369
Expenses:
Interest expense		91			1,871			1,549
Property operating expenses		76			2,768			2,639
Depreciation and amortization		100			4,200			2,765

Income (loss) from discontinued operations, net	$	(41	)	$	(1,775	)	$	(2,584	)

Non-Segment/Corporate

The following is a summary of our results of operations for the non-segment/corporate activities (dollars in thousands):


	Year Ended						One Year Change						Year Ended			One Year Change						Two Year Change
	Dec. 31, 2006			Dec. 31, 2007			$			%			Dec. 31, 2008			$			%			$			%
Revenues:
Other income	$	662		$	1,528		$	866			131	%	$	1,692		$	164			11	%	$	1,030			156	%
Expenses:
Interest expense		90,544			113,285			22,741			25	%		112,055			(1,230	)		-1	%		21,511			24	%
General and administrative		25,922			37,465			11,543			45	%		47,193			9,728			26	%		21,271			82	%
Realized loss on derivatives		0			0			0			n/a			23,393			23,393			n/a			23,393			n/a

		116,466			150,750			34,284			29	%		182,641			31,891			21	%		66,175			57	%

Loss on continuing operations before income taxes		(115,804	)		(149,222	)		(33,418	)		29	%		(180,949	)		(31,727	)		21	%		(65,145	)		56	%
Income tax (expense) benefit		(82	)		(493	)		(411	)		501	%		438			931			n/a			520			n/a

Loss on continuing operations		(115,886	)		(149,715	)		(33,829	)		29	%		(180,511	)		(30,796	)		21	%		(64,625	)		56	%
Preferred stock dividends		21,463			25,130			3,667			17	%		23,201			(1,929	)		-8	%		1,738			8	%

Loss attributable to common stockholders	$	(137,349	)	$	(174,845	)	$	(37,496	)		27	%	$	(203,712	)	$	(28,867	)		17	%	$	(66,363	)		48	%

Other income primarily represents income from non-real estate activities such as interest earned on temporary investments of cash reserves.

The following is a summary of our non-segment/corporate interest expense (dollars in thousands):


	Year Ended						One Year Change						Year Ended			One Year Change						Two Year Change
	Dec. 31, 2006			Dec. 31, 2007			$			%			Dec. 31, 2008			$			%			$			%
Senior unsecured notes	$	80,176		$	104,665		$	24,489			31	%	$	111,544		$	6,879			7	%	$	31,368			39	%
Unsecured lines of credit		11,397			15,653			4,256			37	%		18,878			3,225			21	%		7,481			66	%
Capitalized interest		(4,470	)		(12,526	)		(8,056	)		180	%		(25,029	)		(12,503	)		100	%		(20,559	)		460	%
SWAP losses (savings)		197			(89	)		(286	)		n/a			(161	)		(72	)		81	%		(358	)		n/a
Loan expense		3,244			5,582			2,338			72	%		6,823			1,241			22	%		3,579			110	%

Totals	$	90,544		$	113,285		$	22,741			25	%	$	112,055		$	(1,230	)		-1	%	$	21,511			24	%

The change in interest expense on senior unsecured notes is due to the net effect and timing of issuances and extinguishments. The following is a summary of our senior unsecured notes activity (dollars in thousands):


	Year Ended December 31, 2006					Year Ended December 31, 2007						Year Ended December 31, 2008
			Weighted Average						Weighted Average						Weighted Average
	Amount		Interest Rate			Amount			Interest Rate			Amount			Interest Rate

Beginning balance	$	1,194,830		6.566	%	$	1,539,830			6.159	%	$	1,887,330			5.823	%
Debt issued		345,000		4.750	%		400,000			4.750	%
Debt extinguished							(52,500	)		7.500	%		(42,330	)		7.625	%

Ending balance	$	1,539,830		6.159	%	$	1,887,330			5.823	%	$	1,845,000			5.782	%

Monthly averages	$	1,244,445		6.494	%	$	1,704,253			5.991	%	$	1,854,768			5.792	%

The change in interest expense on unsecured lines of credit arrangements is due primarily to changes in average amounts outstanding and fluctuating variable interest rates. The following is a summary of our unsecured lines of credit arrangements (dollars in thousands):


	Year Ended December 31,
	2006			2007			2008

Balance outstanding at December 31	$	225,000		$	307,000		$	570,000
Maximum amount outstanding at any month end		276,000			434,000			744,000
Average amount outstanding (total of daily principal balances divided by days in year)		164,905			234,392			500,561
Weighted average interest rate (actual interest expense divided by average borrowings outstanding)		6.91	%		6.68	%		3.77	%

We capitalize certain interest costs associated with funds used to finance the construction of properties owned directly by us. The amount capitalized is based upon the borrowings outstanding during the construction period using the rate of interest that approximates our cost of financing. Our interest expense is reduced by the amount capitalized. Capitalized interest for the years ended December 31, 2006, 2007 and 2008 totaled $4,470,000, $12,526,000 and $25,029,000, respectively.

On May 6, 2004, we entered into two interest rate swap agreements (the “2004 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 2004 Swaps were treated as fair-value hedges for accounting purposes and we utilized the short-cut method to assess effectiveness. The 2004 Swaps were with highly rated counterparties in which we received a fixed rate of 6.0% and paid a variable rate based on six-month LIBOR plus a spread. For the year ended December 31, 2006, we incurred $197,000 of losses related to the 2004 Swaps that was recorded as an addition to interest expense. For the year ended December 31, 2007, we generated $89,000 of savings related to the 2004 Swaps that was recorded as a reduction of interest expense. On September 12, 2007, we terminated the 2004 Swaps and we received a $2,125,000 cash settlement. The unamortized amount of this settlement at December 31, 2008 was $1,634,000 ($1,973,000 at December 31, 2007) and is recorded as an adjustment to the hedged item. This amount will be amortized to interest expense over the life of the hedged debt using the effective interest method. For the year ended December 31, 2008, $339,000 of amortization was recognized as a reduction to senior unsecured notes interest expense.

On July 2, 2007, we entered into two forward-starting interest rate swaps (the “July 2007 Swaps”), with an aggregate notional amount of $200,000,000 that were designated as cash flow hedges of the variability in forecasted interest payments attributable to changes in the LIBOR swap rate, on long-term fixed rate debt forecasted to be issued in 2007. The July 2007 Swaps had the economic effect of fixing $200,000,000 of our debt at 4.913% for five years. The July 2007 Swaps were settled on July 17, 2007, which was the date that the forecasted debt was priced. The cash settlement value of these contracts at July 17, 2007 was $733,000. This amount represented the effective portion of the hedges as there was no hedge ineffectiveness. Therefore, the $733,000 settlement value was deferred in accumulated other comprehensive income (“AOCI”) and will be amortized to interest expense using the effective interest method. The unamortized amount of AOCI related to these contracts at December 31, 2008 is $521,000

($668,000 at December 31, 2007). For the years ended December 31, 2008 and 2007, we reclassified $147,000 and $65,000, respectively, out of AOCI as a reduction of interest expense.

On September 12, 2007, we entered into two forward-starting interest rate swaps (the “September 2007 Swaps”) for a total notional amount of $250,000,000 to hedge 10 years of interest payments associated with a long-term borrowing that was expected to occur in 2008. The September 2007 Swaps each had an effective date of September 12, 2008 and a maturity date of September 12, 2018. We expected to settle the 2007 Swaps when the debt was to be priced. The September 2007 Swaps were to have the economic effect of fixing $250,000,000 of our future debt at 4.469% plus a credit spread for 10 years. The September 2007 Swaps had been designated as cash flow hedges and we expected the 2007 Swaps to be highly effective at offsetting changes in cash flows of interest payments on $250,000,000 of our future debt due to changes in the LIBOR swap rate. Therefore, effective changes in the fair value of the September 2007 Swaps were recorded in AOCI and were to be reclassified to interest expense when the hedged forecasted transactions affected earnings (as interest payments are made on the expected debt issuance). The ineffective portion of the changes in fair value was to be recorded directly in earnings.

At December 31, 2007, the September 2007 Swaps were reported at their fair value of $7,990,000 and were included in other liabilities and AOCI. During the year ended December 31, 2008, as a result of the severe dislocation in the credit markets, we terminated plans to issue debt and also terminated the September 2007 Swaps for $23,393,000. Amounts previously recorded in AOCI were reclassified to realized loss on derivatives resulting in $23,393,000 of expense as the forecasted transaction was no longer probable to occur.

Loan expense represents the amortization of deferred loan costs incurred in connection with the issuance and amendments of debt. The change in loan expense is primarily due to costs associated with the issuance of $345,000,000 of senior unsecured convertible notes in November and December 2006, the issuance of $400,000,000 of senior unsecured convertible notes in July 2007 and costs associated with the extension and expansion of our unsecured line of credit in August 2007.

General and administrative expenses as a percentage of revenues (including revenues from discontinued operations) for the year ended December 31, 2008 were 8.24%, as compared with 7.64% and 8.26% for the same periods in 2007 and 2006. The increase from 2006 to 2007 is primarily related to the Windrose merger completed on December 20, 2006, the Paramount acquisition completed in May 2007, $1,750,000 of acquisition finders’ fees paid during the three months ended June 30, 2007 and costs associated with our initiatives to attract and retain appropriate personnel to achieve our business objectives. During the quarter ended June 30, 2007, we recorded $1,750,000 of one-time acquisition finders’ fees paid to former Windrose management in connection with the closing of the Rendina/Paramount transaction. These fees relate to services rendered prior to the consummation of the Windrose merger in December 2006. Due to the recipients’ current employment status with the company, the fees have been expensed as compensation rather than included in the purchase price of the acquisition, as is typical with such fees. The increase from 2007 to 2008 is primarily due to $2,291,000 of non-recurring terminated transaction costs and costs associated with our initiatives to attract and retain appropriate personnel to achieve our business objectives. The terminated transaction costs primarily related to the termination of the Arcapita/Sunrise agreement.

The change in preferred dividends is primarily due to the change in average outstanding preferred shares. The following is a summary of our preferred stock activity:


	Year Ended December 31, 2006					Year Ended December 31, 2007						Year Ended December 31, 2008
			Weighted Average						Weighted Average						Weighted Average
	Shares		Dividend Rate			Shares			Dividend Rate			Shares			Dividend Rate

Beginning balance		11,074,989		7.704	%		13,174,989			7.672	%		12,879,189			7.676	%
Shares issued		2,100,000		7.500	%
Shares converted							(295,800	)		7.500	%		(1,362,887	)		7.500	%

Ending balance		13,174,989		7.672	%		12,879,189			7.676	%		11,516,302			7.696	%

Monthly averages		11,236,527		7.701	%		13,129,481			7.672	%		12,138,161			7.686	%

of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after June 30, 2010. Each Series G Preferred Share is convertible by the holder into our common stock at a conversion price of $34.93, equivalent to a conversion rate of 0.7157 common shares per Series G Preferred Share. These shares were recorded at $29.58 per share, which was deemed to be the fair value at the date of issuance.

Non-GAAP Financial Measures

We believe that net income, as defined by U.S. GAAP, is the most appropriate earnings measurement. However, we consider FFO to be a useful supplemental measure of our operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (“NAREIT”) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

Net operating income (“NOI”) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and interest expense. We believe NOI provides investors relevant and useful information because it measures the operating performance of our properties at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties.

EBITDA stands for earnings before interest, taxes, depreciation and amortization. A covenant in our line of credit arrangement contains a financial ratio based on a definition of EBITDA that is specific to that agreement. Failure to satisfy this covenant could result in an event of default that could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. Due to the materiality of this debt agreement and the financial covenant, we have disclosed Adjusted EBITDA, which represents EBITDA as defined above and adjusted for stock-based compensation expense, provision for loan losses and gain/loss on extinguishment of debt. We use Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents Adjusted EBITDA divided by fixed charges on a trailing twelve months basis. Fixed charges include total interest (excluding capitalized interest), secured debt principal amortization and preferred dividends. Our covenant requires an adjusted fixed charge ratio of at least 1.75 times.

Other than Adjusted EBITDA, our supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. Management uses these financial measures to facilitate internal and external comparisons to our historical operating results and in making operating decisions. Additionally, these measures are utilized by the Board of Directors to evaluate management. Adjusted EBITDA is used solely to determine our compliance with a financial covenant of our line of credit arrangement and is not being presented for use by investors for any other purpose. None of our supplemental measures represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental reporting measures, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. Multi-period amounts may not equal the sum of the individual quarterly amounts due to rounding.

The table below reflects the reconciliation of FFO to net income available to common stockholders, the most directly comparable U.S. GAAP measure, for the periods presented. The provisions for depreciation and amortization include provisions for depreciation and amortization from discontinued operations. Amounts are in thousands except for per share data.


	Year Ended
	December 31,			December 31,			December 31,
	2006			2007			2008

FFO Reconciliation:
Net income attributable to common stockholders	$	81,180		$	113,225		$	260,098
Depreciation and amortization		97,564			149,626			163,045
Loss (gain) on sales of properties		(1,267	)		(14,437	)		(163,933	)
Noncontrolling interests		(4	)		(344	)		(342	)

Funds from operations	$	177,473		$	248,070		$	258,868

Average common shares outstanding:
Basic		61,661			78,861			93,732
Diluted		62,045			79,409			94,309

Per share data:
Net income attributable to common stockholders
Basic	$	1.32		$	1.44		$	2.77
Diluted		1.31			1.43			2.76

Funds from operations
Basic	$	2.88		$	3.15		$	2.76
Diluted		2.86			3.12			2.74

The table below reflects the reconciliation of NOI for the periods presented. All amounts include amounts from discontinued operations, if applicable. Amounts are in thousands.


	Year Ended
	December 31,		December 31,		December 31,
	2006		2007		2008

NOI Reconciliation:
Total revenues:
Investment properties:
Rental income:
Independent living/CCRCs	$	36,474	$	43,072	$	66,402
Assisted living facilities		103,899		108,475		117,009
Skilled nursing facilities		149,248		167,718		161,642
Specialty care facilities		12,767		26,418		43,796

Investment property rental income		302,388		345,683		388,849
Interest income		18,829		25,823		40,063
Other income		3,262		8,010		7,899

Total investment property revenues		324,479		379,516		436,811
Medical office buildings:
Rental income		3,247		111,614		133,332
Other income		0		497		930

Total medical office building revenues		3,247		112,111		134,262
Corporate other income		662		1,528		1,692

Total revenues		328,388		493,155		572,765
Property operating expenses:
Investment properties		0		0		0
Medical office buildings		1,115		37,475		46,629
Non-segment/corporate		0		0		0

Total property operating expenses		1,115		37,475		46,629
Net operating income:
Investment properties		324,479		379,516		436,811
Medical office buildings		2,132		74,636		87,633
Non-segment/corporate		662		1,528		1,692

Net operating income	$	327,273	$	455,680	$	526,136

The table below reflects the reconciliation of Adjusted EBITDA to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Interest expense and the provisions for depreciation and amortization include discontinued operations. Dollars are in thousands.


	Year Ended
	December 31,			December 31,			December 31,
	2006			2007			2008

Adjusted EBITDA Reconciliation:
Net income	$	102,656		$	138,593		$	283,425
Interest expense		100,196			145,326			141,059
Tax expense/(benefit)		82			188			1,306
Depreciation and amortization		97,564			149,626			163,045
Stock-based compensation expense		6,980			7,050			8,530
Provision for loan losses		1,000			0			94
Loss/(gain) on extinguishment of debt, net		0			(1,081	)		(2,094	)

Adjusted EBITDA	$	308,478		$	439,702		$	595,365

Interest Coverage Ratio:
Interest expense	$	100,196		$	145,326		$	141,059
Non-cash interest expense		(3,403	)		(8,413	)		(11,231	)
Capitalized interest		4,470			12,526			25,029

Total interest		101,263			149,439			154,857
Adjusted EBITDA	$	308,478		$	439,702		$	595,365

Adjusted interest coverage ratio		3.05	x		2.94	x		3.84	x

Fixed Charge Coverage Ratio:
Total interest	$	101,263		$	149,439		$	154,857
Secured debt prinicipal amortization		3,033			7,950			8,119
Preferred dividends		21,463			25,130			23,201

Total fixed charges		125,759			182,519			186,177
Adjusted EBITDA	$	308,478		$	439,702		$	595,365

Adjusted fixed charge coverage ratio		2.45	x		2.41	x		3.20	x

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions. Management considers an accounting estimate or assumption critical if:


	•	the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and

	•	the impact of the estimates and assumptions on financial condition or operating performance is material.

Management has discussed the development and selection of its critical accounting policies with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the disclosure presented below relating to them. Management believes the current assumptions and other considerations used to estimate amounts reflected in our consolidated financial statements are appropriate and are not reasonably likely to change in the future. However, since these estimates require assumptions to be made that were uncertain at the time the estimate was made, they bear the risk of change. If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial condition. Please refer to Note 1 of our audited consolidated financial statements for further information on significant accounting policies that impact us. There were no material changes to these policies in 2008.

The following table presents information about our critical accounting policies, as well as the material assumptions used to develop each estimate:


Nature of Critical		Assumptions/
Accounting Estimate		Approach Used


*Allowance for Losses on Loans Receivable*
We maintain an allowance for losses on loans receivable in accordance with Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan, as amended, and SEC Staff Accounting Bulletin No. 102, Selected Loan Loss Allowance Methodology and Documentation Issues. The allowance for loan losses is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the allowance is based on a quarterly evaluation of all outstanding loans. If this evaluation indicates that there is a greater risk of loan charge-offs, additional allowances or placement on non-accrual status may be required. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the original loan agreement. Consistent with this definition, all loans on non-accrual are deemed impaired. To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to full accrual status.		The determination of the allowance is based on a quarterly evaluation of all outstanding loans, including general economic conditions and estimated collectability of loan payments and principal. We evaluate the collectability of our loans receivable based on a combination of factors, including, but not limited to, delinquency status, historical loan charge-offs, financial strength of the borrower and guarantors and value of the underlying property. As a result of our quarterly evaluation, we recorded a $94,000 addition to the allowance for losses on loans receivable at December 31, 2008, resulting in an allowance of $7,500,000 relating to loans with outstanding balances of $121,893,000. Also at December 31, 2008, we had loans with outstanding balances of $72,770,000 on non-accrual status.

*Business Combinations* Substantially all of the properties owned by us are leased under operating leases and are recorded at cost. The cost of our real property is allocated to land, buildings, improvements and intangibles in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations.		We compute depreciation and amortization on our properties using the straight-line method based on their estimated useful lives which range from 15 to 40 years for buildings and five to 15 years for improvements. Lives for intangibles are based on the remaining term of the underlying leases. For the year ended December 31, 2008, we recorded $118,204,000, $32,212,000 and $12,629,000 as provisions for depreciation and amortization relating to buildings, improvements and intangibles, respectively, including amounts reclassified as discontinued operations. The average useful life of our buildings, improvements and intangibles was 35.5 years, 10.6 years and 6.6 years, respectively, for the year ended December 31, 2008.

*Impairment of Long-Lived Assets*
We review our long-lived assets for potential impairment in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets (“SFAS 144”). An impairment charge must be recognized when the carrying value of a long-lived asset is not recoverable. The carrying value is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that a permanent impairment of a long-lived asset has occurred, the carrying value of the asset is reduced to its fair value and an impairment charge is recognized for the difference between the carrying value and the fair value. When assets are identified that meet the criteria for held for sale classification in accordance with SFAS 144 an analysis is completed that compares the estimated fair value (estimated sales value less cost of sales) to the carrying value of the assets. If it is determined that the carrying value of these assets is in excess of the estimated fair value, the assets are reduced to the estimated fair value.		The net book value of long-lived assets is reviewed quarterly on a property by property basis to determine if there are indicators of impairment. These indicators may include anticipated operating losses at the property level, the tenant’s inability to make rent payments, a decision to dispose of an asset before the end of its estimated useful life and changes in the market that may permanently reduce the value of the property. If indicators of impairment exist, then the undiscounted future cash flows from the most likely use of the property are compared to the current net book value. This analysis requires us to determine if indicators of impairment exist and to estimate the most likely stream of cash flows to be generated from the property during the period the property is expected to be held. At December 31, 2008, it was determined that 14 medical office buildings met the criteria for the held for sale classification. In determining the fair value of the assets, we used a combination of third party appraisals based on market comparable transactions, other market listings and asset quality as well as management calculations based on projected net operating income and published capitalization rates. Management’s estimates projected that the carrying value of the assets was less than the estimated fair value and an impairment charge of $32,648,000 was recorded to reduce the properties to their estimated fair value.


Nature of Critical		Assumptions/
Accounting Estimate		Approach Used


*Fair Value of Derivative Instruments* The valuation of derivative instruments is accounted for in accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), as amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. SFAS 133, as amended, requires companies to record derivatives at fair market value on the balance sheet as assets or liabilities.		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 utilizing pricing models that consider forward yield curves and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates which may change in the future. We were not party to any derivative instruments as of December 31, 2008.

*Revenue Recognition*
Revenue is recorded in accordance with Statement of Financial Accounting Standards No. 13, Accounting for Leases, and SEC Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements, as amended (“SAB 104”). SAB 104 requires that revenue be recognized after four basic criteria are met. These four criteria include persuasive evidence of an arrangement, the rendering of service, fixed and determinable income and reasonably assured collectability. If the collectability of revenue is determined incorrectly, the amount and timing of our reported revenue could be significantly affected. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risk. Substantially all of our operating leases contain fixed and/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 collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period.		We evaluate the collectability of our revenues and related receivables on an on-going basis. We evaluate collectability based on assumptions and other considerations including, but not limited to, the certainty of payment, payment history, the financial strength of the investment’s underlying operations as measured by cash flows and payment coverages, the value of the underlying collateral and guaranties and current economic conditions. If our evaluation indicates that collectability is not reasonably assured, we may place an investment on non-accrual or reserve against all or a portion of current income as an offset to revenue. For the year ended December 31, 2008, we recognized $40,063,000 of interest income and $522,181,000 of rental income, including discontinued operations. Cash receipts on leases with deferred revenue provisions were $28,282,000 as compared to gross straight-line rental income recognized of $20,489,000 for the twelve months ended December 31, 2008. At December 31, 2008, our straight-line receivable balance was $44,963,000, net of reserves totaling $251,000. Also at December 31, 2008, we had loans with outstanding balances of $72,770,000 on non-accrual status.

Impact of Inflation

During the past three years, inflation has not significantly affected our earnings because of the moderate inflation rate. Additionally, our earnings are primarily long-term investments with fixed rates of return. These investments are mainly financed with a combination of equity, senior unsecured notes and borrowings under our unsecured lines of credit arrangements. During inflationary periods, which generally are accompanied by rising interest rates, our ability to grow may be adversely affected because the yield on new investments may increase at a slower rate than new borrowing costs. Presuming the current inflation rate remains moderate and long-term interest rates do not increase significantly, we believe that inflation will not impact the availability of equity and debt financing for us.


Item 8.	*Financial Statements and Supplementary Data*

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Health Care REIT, Inc.

We have audited the accompanying consolidated balance sheets of Health Care REIT, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedules listed in Item 15(a) (2) of the Annual Report on Form 10-K for the year ended December 31, 2008. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Health Care REIT, Inc. at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Health Care REIT, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2009 (not included herein) expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Toledo, Ohio

February 27, 2009,
except for Notes 4 and 22, as to which the date is August 5, 2009

HEALTH CARE REIT, INC.

CONSOLIDATED BALANCE SHEETS


	December 31,
	2008			2007
	(In thousands)
ASSETS
Real estate investments:
Real property owned
Land and land improvements	$	504,907		$	447,029
Buildings and improvements		4,653,871			4,224,955
Acquired lease intangibles		133,324			131,312
Real property held for sale, net of accumulated depreciation		48,054			0
Construction in progress		639,419			313,709

		5,979,575			5,117,005
Less accumulated depreciation and amortization		(600,781	)		(478,373	)

Total real property owned		5,378,794			4,638,632

Loans receivable		482,885			381,394
Less allowance for losses on loans receivable		(7,500	)		(7,406	)

		475,385			373,988

Net real estate investments		5,854,179			5,012,620

Other assets:
Equity investments		1,030			1,408
Deferred loan expenses		23,579			30,499
Cash and cash equivalents		23,370			30,269
Restricted cash		154,070			17,575
Receivables and other assets		136,890			121,485

		338,939			201,236


Total assets	$	6,193,118		$	5,213,856


LIABILITIES AND EQUITY
Liabilities:
Borrowings under unsecured lines of credit arrangements	$	570,000		$	307,000
Senior unsecured notes		1,831,151			1,869,284
Secured debt		446,525			507,476
Accrued expenses and other liabilities		107,157			95,145

Total liabilities		2,954,833			2,778,905

Equity:
Preferred stock, $1.00 par value:		289,929			330,243
Authorized — 50,000,000 shares
Issued and outstanding — 11,516,302 shares in 2008 and 12,879,189 shares in 2007 at liquidation preference
Common stock, $1.00 par value:		104,635			85,412
Authorized — 225,000,000 shares
Issued — 104,835,626 shares in 2008 and 85,600,333 shares in 2007
Outstanding — 104,703,702 shares in 2008 and 85,496,164 shares in 2007
Capital in excess of par value		3,204,690			2,394,099
Treasury stock		(5,145	)		(3,952	)
Cumulative net income		1,354,400			1,071,101
Cumulative dividends		(1,723,819	)		(1,446,959	)
Accumulated other comprehensive income		(1,113	)		(7,381	)
Other equity		4,105			2,701

Total Health Care REIT, Inc. stockholders’ equity		3,227,682			2,425,264
Noncontrolling interests		10,603			9,687

Total equity		3,238,285			2,434,951

Total liabilities and equity	$	6,193,118		$	5,213,856

See accompanying notes

HEALTH CARE REIT, INC.

CONSOLIDATED STATEMENTS OF INCOME


	Year Ended December 31,
	2008			2007			2006
	(In thousands, except per share data)
Revenues:
Rental income	$	485,141		$	402,247		$	252,414
Interest income		40,063			25,823			18,829
Other income		10,521			10,035			3,924

		535,725			438,105			275,167

Expenses:
Interest expense		132,464			133,046			84,601
Property operating expenses		43,990			34,707			1,039
Depreciation and amortization		149,257			129,035			75,474
General and administrative		47,193			37,465			25,922
Realized loss on derivatives		23,393			0			0
Loss (gain) on extinguishment of debt		(2,094	)		(1,081	)		0
Provision for loan losses		94			0			1,000

		394,297			333,172			188,036


Income from continuing operations before income taxes		141,428			104,933			87,131
Income tax (expense) benefit		(1,306	)		(188	)		(82	)


Income from continuing operations		140,122			104,745			87,049

Discontinued operations:
Gain (loss) on sales of properties		163,933			14,437			1,267
Impairment of assets		(32,648	)		0			0
Income from discontinued operations, net		12,018			19,411			14,340

		143,303			33,848			15,607


Net income		283,425			138,593			102,656

Less: Preferred stock dividends		23,201			25,130			21,463
Net income attributable to noncontrolling interests		126			238			13

Net income attributable to common stockholders	$	260,098		$	113,225		$	81,180


Average number of common shares outstanding:
Basic		93,732			78,861			61,661
Diluted		94,309			79,409			62,045

Earnings per share:
Basic:
Income from continuing operations attributable to common stockholders	$	1.25		$	1.01		$	1.06
Discontinued operations, net		1.53			0.43			0.25

Net income attributable to common stockholders*	$	2.77		$	1.44		$	1.32


Diluted:
Income from continuing operations attributable to common stockholders	$	1.24		$	1.00		$	1.06
Discontinued operations, net		1.52			0.43			0.25

Net income attributable to common stockholders*	$	2.76		$	1.43		$	1.31


*		Amounts may not sum due to rounding

See accompanying notes

HEALTH CARE REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


																	Accumulated
						Capital in											Other
	Preferred			Common		Excess of			Treasury			Cumulative		Cumulative			Comprehensive			Other			Noncontrolling
	Stock			Stock		Par Value			Stock			Net Income		Dividends			Income			Equity			Interest			Total

	(In thousands, except per share data)
Balances at December 31, 2005	$	276,875		$	58,050	$	1,306,471		$	(2,054	)	$	830,103	$	(1,039,032	)	$	0		$	343		$	0		$	1,430,756
Net income													102,643											13			102,656

Total comprehensive income																											102,656

Adjustment to adopt SFAS 158																		(135	)								(135	)
Adjustment to adopt FSP14-1							6,410																				6,410
Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures					2,200		75,081			(812	)										(85	)					76,384
Option compensation expense																					1,066						1,066
Shares issued in Windrose Medical Properties Trust merger		62,118			9,679		386,255																	2,215			460,267
Proceeds from issuance of common stock					3,223		106,525																				109,748
SFAS123(R) reclassification							(521	)													521						0
Cash dividends:
Common stock-$2.8809 per share															(178,365	)											(178,365	)
Preferred stock, Series D-$1.96875 per share															(7,875	)											(7,875	)
Preferred stock, Series E-$1.50 per share															(112	)											(112	)
Preferred stock, Series F-$1.90625 per share															(13,344	)											(13,344	)
Preferred stock, Series G-$0.0625 per share															(132	)											(132	)

Balances at December 31, 2006		338,993			73,152		1,880,221			(2,866	)		932,746		(1,238,860	)		(135	)		1,845			2,228			1,987,324
Net income													138,355											238			138,593
Other comprehensive income
Unrealized loss on equity investments																		(192	)								(192	)
Unrealized actuarial gain/(loss)																		140									140
Cash flow hedge activity																		(7,194	)								(7,194	)

Total comprehensive income																											131,347

Adjustment to adopt FSP14-1							17,652																				17,652
Contributions by noncontrolling interests																								7,640			7,640
Distributions to noncontrolling interests																								(419	)		(419	)
Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures					2,223		85,080			(1,086	)										(250	)					85,967
Conversion of preferred stock		(8,750	)		212		8,538																				0
Option compensation expense																					1,106						1,106
Net proceeds from sale of common stock					9,825		402,608																				412,433
Cash dividends:
Common stock-$2.2791 per share															(182,969	)											(182,969	)
Preferred stock, Series D-$1.96875 per share															(7,875	)											(7,875	)
Preferred stock, Series E-$1.50 per share															(112	)											(112	)
Preferred stock, Series F-$1.90625 per share															(13,344	)											(13,344	)
Preferred stock, Series G-$1.875 per share															(3,799	)											(3,799	)

Balances at December 31, 2007		330,243			85,412		2,394,099			(3,952	)		1,071,101		(1,446,959	)		(7,381	)		2,701			9,687			2,434,951
Net income													283,299											126			283,425
Other comprehensive income:
Unrealized loss on equity investments																		(846	)								(846	)
Unrecognized actuarial gain/(loss)																		(715	)								(715	)
Cash flow hedge activity																		7,829									7,829

Total comprehensive income																											289,693

Contributions by noncontrolling interests																								3,556			3,556
Distributions to noncontrolling interests																								(2,766	)		(2,766	)
Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures					1,804		76,013			(1,193	)										(99	)					76,525
Conversion of preferred stock		(40,314	)		975		39,339																				0
Option compensation expense																					1,503						1,503
Net proceeds from sale of common stock					16,444		695,239																				711,683
Cash dividends:
Common stock-$2.70 per share															(253,659	)											(253,659	)
Preferred stock, Series D-$1.96875 per share															(7,875	)											(7,875	)
Preferred stock, Series E-$1.50 per share															(112	)											(112	)
Preferred stock, Series F-$1.90625 per share															(13,344	)											(13,344	)
Preferred stock, Series G-$1.875 per share															(1,870	)											(1,870	)

Balances at December 31, 2008	$	289,929		$	104,635	$	3,204,690		$	(5,145	)	$	1,354,400	$	(1,723,819	)	$	(1,113	)	$	4,105		$	10,603		$	3,238,285

See accompanying notes

HEALTH CARE REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
	2008			2007			2006
	(In thousands)
Operating activities
Net income	$	283,425		$	138,593		$	102,656
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization		163,045			149,626			97,564
Other amortization expenses		14,837			9,065			3,197
Stock-based compensation expense		8,530			7,050			6,980
Provision for loan losses		94			0			1,000
Impairment of assets		32,648			0			0
Loss (gain) on extinguishment of debt, net		(2,094	)		(1,081	)		0
Gain on investment		0			(3,900	)		0
Amortization of above/below market leases, net		(1,039	)		(792	)		(60	)
Rental income less than (in excess of) cash received		7,793			440			11,129
Loss (gain) on sales of properties		(163,933	)		(14,437	)		(1,267	)
Deferred gain on sales of properties		3,708			0			0
Increase (decrease) in accrued expenses and other liabilities		17,363			(3,253	)		5,810
Decrease (increase) in receivables and other assets		(3,694	)		2,676			(6,220	)

Net cash provided from (used in) operating activities		360,683			283,987			220,789

Investing activities
Investment in real property		(1,072,376	)		(631,209	)		(429,183	)
Capitalized interest		(25,029	)		(12,526	)		(4,470	)
Investment in loans receivable		(83,109	)		(235,894	)		(86,990	)
Other investments, net of payments		(12,458	)		(22,998	)		(11,761	)
Principal collected on loans receivable		18,169			52,346			82,255
Investment in Windrose, net of cash assumed		0			0			(182,571	)
Investment in Rendina/Paramount, net of cash assumed		0			(141,963	)		0
Decrease (increase) in restricted cash		(138,502	)		(7,578	)		127
Proceeds from sales of properties		287,047			98,314			69,887
Other		(9,267	)		(3,932	)		(2,452	)

Net cash provided from (used in) investing activities		(1,035,525	)		(905,440	)		(565,158	)

Financing activities
Net increase (decrease) under unsecured lines of credit arrangements		263,000			82,000			30,000
Proceeds from derivative transactions		0			2,858			0
Proceeds from issuance of senior unsecured notes		0			388,943			337,517
Payments to extinguish senior unsecured notes		(42,330	)		(52,500	)		0
Payments to extinguish liability to subsidiary trust issuing preferred securities		0			(50,000	)		0
Principal payments on secured debt		(58,594	)		(37,758	)		(3,033	)
Net proceeds from the issuance of common stock		782,285			491,593			182,069
Contributions by noncontrolling interests		3,556			2,865			0
Distributions to noncontrolling interests		(2,766	)		(419	)		0
Decrease (increase) in deferred loan expense		(348	)		(3,977	)		(2,377	)
Cash distributions to stockholders		(276,860	)		(208,099	)		(199,828	)

Net cash provided from (used in) financing activities		667,943			615,506			344,348

Increase (decrease) in cash and cash equivalents		(6,899	)		(5,947	)		(21	)
Cash and cash equivalents at beginning of year		30,269			36,216			36,237

Cash and cash equivalents at end of year	$	23,370		$	30,269		$	36,216

See accompanying notes

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.	Accounting Policies and Related Matters

Industry

Health Care REIT, Inc., with headquarters in Toledo, Ohio, is an equity real estate investment trust (“REIT”) that invests in senior housing and health care real estate. Our full service platform also offers property management and development services to our customers. As of December 31, 2008, our broadly diversified portfolio consisted of 633 properties in 39 states. Founded in 1970, we were the first real estate investment trust to invest exclusively in health care facilities. More information is available on the Internet at www.hcreit.com.

Principles of Consolidation

The consolidated financial statements include our accounts, the accounts of our wholly-owned subsidiaries and the accounts of our majority owned and controlled joint ventures. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

Revenue is recorded in accordance with Statement of Financial Accounting Standards No. 13, Accounting for Leases, and SEC Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements, as amended (“SAB 104”). SAB 104 requires that revenue be recognized after four basic criteria are met. These four criteria include persuasive evidence of an arrangement, the rendering of service, fixed and determinable income and reasonably assured collectability. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risk. Substantially all of our operating leases contain 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 collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period.

Cash and Cash Equivalents

Cash and cash equivalents consist of all highly liquid investments with an original maturity of three months or less.

Restricted Cash

Restricted cash primarily consists of amounts held in escrow for use in an Internal Revenue Code Section 1031 exchange. Restricted cash also includes amounts held by lenders to provide future payments for real estate taxes, insurance, tenant and capital improvements and amounts held in escrow relating to acquisitions we are entitled to receive over a period of time as outlined in the escrow agreement.

Deferred Loan Expenses

Deferred loan expenses are costs incurred by us in connection with the issuance, assumption and amendments of debt arrangements. We amortize these costs over the term of the debt using the straight-line method, which approximates the effective interest method.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Equity Investments

Equity investments at December 31, 2008 and 2007 include an investment in a public company that has a readily determinable fair market value. We classify this equity investment as available-for-sale and, accordingly, record this investment at its fair market value with unrealized gains and losses included in accumulated other comprehensive income, a separate component of stockholders’ equity. Additionally, equity investments at December 31, 2008 include an investment in a private company. We do not have the ability to exercise influence over the company, so the investment was 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, return of capital and additional investments. These equity investments represented a minimal ownership interest in these companies.

Real Property Owned

Real property developed by us is recorded at cost, including the capitalization of construction period interest. The cost of real property acquired is allocated to net tangible and identifiable intangible assets based on their respective fair values in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations. Substantially all of the properties owned by us are leased under operating leases and are recorded at cost. These properties are depreciated on a straight-line basis over their estimated useful lives which range from 15 to 40 years for buildings and five to 15 years for improvements.

The remaining purchase price is allocated among identifiable intangible assets primarily consisting of the above or below market component of in-place leases and the value of in-place leases. The value allocable to the above or below market component of the acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in acquired lease intangibles and below market leases are included in other liabilities in the balance sheet and are amortized to rental income over the remaining terms of the respective leases.

The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The estimated aggregate amortization expense for acquired lease intangibles is expected to be recognized over a weighted average period of 28.9 years and is as follows for the periods indicated (in thousands):


2009	$	11,791
2010		10,079
2011		8,031
2012		6,305
2013		5,337
Thereafter		60,329

Totals	$	101,872

The net book value of long-lived assets is reviewed quarterly on a property by property basis to determine if facts and circumstances suggest that the assets may be impaired or that the depreciable life may need to be changed. We consider external factors relating to each asset. If these external factors and the projected undiscounted cash flows of the asset over the remaining depreciation period indicate that the asset will not be recoverable, the carrying value is reduced to the estimated fair market value.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Capitalization of Construction Period Interest

We capitalize interest costs associated with funds used to finance the construction of properties owned directly by us. The amount capitalized is based upon the balance outstanding during the construction period using the rate of interest which approximates our cost of financing. We capitalized interest costs of $25,029,000, $12,526,000, and $4,470,000 during 2008, 2007 and 2006, respectively, related to construction of real property owned by us. Our interest expense reflected in the consolidated statements of income has been reduced by the amounts capitalized.

Gain on Sale of Assets

We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received from purchasers prior to closing are recorded as deposits and classified as other assets on our Consolidated Balance Sheets. Gains on assets sold are recognized using the full accrual method upon closing when the collectability of the sales price is reasonably assured, we are not obligated to perform significant activities after the sale to earn the profit, we have received adequate initial investment from the buyer and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate under Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate.

Real Estate Loans Receivable

Real estate loans receivable consist of mortgage loans and other real estate loans. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risks. The loans are primarily collateralized by a first, second or third mortgage lien, a leasehold mortgage on, or an assignment of the partnership interest in, the related properties, corporate guaranties and/or personal guaranties.

Allowance for Losses on Loans Receivable

The allowance for losses on loans receivable is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the allowance is based on a quarterly evaluation of these loans, including general economic conditions and estimated collectability of loan payments. We evaluate the collectability of our loans receivable based on a combination of factors, including, but not limited to, delinquency status, historical loan charge-offs, financial strength of the borrower and guarantors and value of the underlying collateral. If such factors indicate that there is greater risk of loan charge-offs, additional allowances or placement on non-accrual status may be required. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the original loan agreement. Consistent with this definition, all loans on non-accrual are deemed impaired. At December 31, 2008, we had loans with outstanding balances of $72,770,000 on non-accrual status ($799,000 at December 31, 2007). To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to full accrual status. While a loan is on non-accrual status, any cash receipts are applied against the outstanding principal balance.

Fair Value of Derivative Instruments

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 utilizing 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. See Note 10 for additional information.

Federal Income Tax

No provision has been made for federal income taxes since we have elected to be treated as a real estate investment trust under the applicable provisions of the Internal Revenue Code, and we believe that we have met the

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

requirements for qualification as such for each taxable year. Our taxable REIT subsidiaries are subject to federal, state and local income taxes. See Note 14 for additional information.

Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares outstanding for the period adjusted for non-vested shares of restricted stock. The computation of diluted earnings per share is similar to basic earnings per share, except that the number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

Segment Reporting

We report consolidated financial statements in accordance with Financial Accounting Standards Board Statement No. 131, Disclosure about Segments of an Enterprise and Related Information. Segments are based on our method of internal reporting which classifies operations by leasing activities. Our segments include investment properties and medical office buildings. See Note 19 for additional information.

New Accounting Standards

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), Business Combinations (“SFAS 141(R)”) and Statement of Financial Accounting Standards No. 160, Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”). SFAS 141(R) will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. Early adoption is prohibited for both standards. The provisions of SFAS 141(R) and SFAS 160, effective on January 1, 2009, are to be applied prospectively; however, the disclosure provisions of SFAS 160 are to be applied retrospectively. In accordance with SFAS 141(R), we have elected to expense all development costs for projects in progress when it was determined they would not be completed prior to the adoption of SFAS 141(R). The amount expensed during the three months ended December 31, 2008 was de minimis. See Note 22 for additional information.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures About Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 expands quarterly disclosure requirements in SFAS 133 concerning an entity’s derivative instruments and hedging activities. SFAS 161 is effective for fiscal years beginning after November 15, 2008. Adoption of SFAS 161 is not expected to have a material impact on our consolidated financial position, although additional disclosures may be required.

In May 2008, the FASB issued FASB Staff Position APB 14-1 (“FSP”), which provides guidance on accounting for debt that may be settled in cash upon conversion. The FSP requires bifurcation of the convertible debt instrument into a debt component and an equity component. The value of the debt component is based upon the estimated fair value of a similar debt instrument without the conversion feature. The difference between the contractual principal on the debt and the value allocated to the debt is recorded as an equity component and represents the conversion feature of the instrument. The excess of the contractual principal amount of the debt over its estimated fair value is amortized to interest expense using the effective interest method over the life of the debt. The equity component remains on the balance sheet until it is derecognized through either the payoff or conversion. The FSP is effective for fiscal years beginning after December 16, 2008, and interim periods within those fiscal years. Earlier application is not permitted. Retrospective application is required for all periods presented in the annual financial statements for

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents the purchase price calculation and the allocation to assets acquired and liabilities assumed, based upon their estimated fair values (in thousands):


Common stock	$	396,846
Preferred stock		62,118
Cash consideration		183,139
Assumed debt		301,641
Assumed liabilities and minority interests		26,034
Acquisition costs		29,139

Purchase price		998,917
Merger-related expenses		5,213
Capitalized equity issuance costs		912

Net purchase price	$	992,792

Land and land improvements	$	126,079
Buildings and improvements		774,634
Acquired lease intangibles		42,595
Above market lease intangibles		32,352
Cash and cash equivalents		15,587
Receivables and other assets		22,526

Total assets acquired		1,013,773
Below market lease intangibles		20,981

Net purchase price		992,792
Secured debt		249,424
Liability to subsidiary trust issuing preferred securities		52,217
Accrued expenses and other liabilities		19,044

Total liabilities assumed		320,685
Minority interests		6,989

Net assets acquired	$	665,118

The following pro forma consolidated results of operations have been prepared as if the acquisition of Windrose had occurred as of January 1, 2005 (in thousands, except per share):


	Year Ended December 31, 2006
	(Unaudited)

Revenues	$	416,311
Income from continuing operations available to common stockholders		62,481
Income from continuing operations available to common stockholders per share — basic		0.88
Income from continuing operations available to common stockholders per share — diluted		0.87

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	Real Property Owned

The following is a summary of our real property investment activity for the periods presented (in thousands):


	Year Ended
	December 31, 2008									December 31, 2007									December 31, 2006
				Medical									Medical
	Investment			Office						Investment			Office						Investment
	Properties			Buildings			Totals			Properties			Buildings			Totals(2)			Properties			Totals(1)

Real property acquisitions:
Independent living/CCRCs	$	68,300					$	68,300		$	43,000					$	43,000		$	56,417		$	56,417
Assisted living facilities		45,490						45,490			36,233						36,233			77,600			77,600
Skilled nursing facilities		11,360						11,360			122,875						122,875			148,955			148,955
Specialty care facilities		196,303						196,303			11,923						11,923						0
Medical office buildings				$	121,809			121,809					$	381,134			381,134						0
Land parcels		10,000						10,000			8,928						8,928			10,250			10,250

Total acquisitions		331,453			121,809			453,262			222,959			381,134			604,093			293,222			293,222
Less:
Assumed debt								0						(166,188	)		(166,188	)		(25,049	)		(25,049	)
Assumed other assets/(liabilities)					(1,899	)		(1,899	)					(2,432	)		(2,432	)					0

Cash disbursed for acquisitions		331,453			119,910			451,363			222,959			212,514			435,473			268,173			268,173
Construction in progress additions:
Independent living/CCRCs		272,136						272,136			154,648						154,648			58,335			58,335
Assisted living facilities		147,486						147,486			55,929						55,929			69,218			69,218
Skilled nursing facilities		29,429						29,429			21,924						21,924			20,270			20,270
Specialty care facilities		77,642						77,642			60,326						60,326			6,464			6,464
Medical office buildings					93,907			93,907						14,688			14,688						0

Total CIP additions		526,693			93,907			620,600			292,827			14,688			307,515			154,287			154,287
Less:
Capitalized interest		(22,716	)		(2,313	)		(25,029	)		(12,134	)		(279	)		(12,413	)		(4,444	)		(4,444	)
Capitalized other		(119	)					(119	)								0						0

Cash disbursed for CIP		503,858			91,594			595,452			280,693			14,409			295,102			149,843			149,843
Capital improvements		17,468			8,093			25,561			34,680			5,296			39,976			11,167			11,167

Total cash invested in real property	$	852,779		$	219,597		$	1,072,376		$	538,332		$	232,219		$	770,551		$	429,183		$	429,183


(1)		2006 excludes the Windrose merger.

(2)		2007 includes the Rendina/Paramount acquisition.

The following is a summary of the development projects that were placed into service and began earning rent during the periods presented (in thousands):


	Year Ended
	December 31, 2008						December 31, 2007						December 31, 2006
			Medical						Medical
	Investment		Office				Investment		Office				Investment
	Properties		Buildings		Totals		Properties		Buildings		Totals		Properties		Totals

Construction in progress conversions:
Development projects:
Independent living/CCRCs	$	144,088			$	144,088	$	22,601			$	22,601			$	0
Assisted living facilities		45,956				45,956		56,599				56,599	$	15,813		15,813
Skilled nursing facilities		16,918				16,918		16,568				16,568		6,330		6,330
Medical office buildings			$	11,823		11,823			$	0		0				0
Specialty care facilities		35,151				35,151		33,771				33,771				0

Total development projects		242,113		11,823		253,936		129,539		0		129,539		22,143		22,143
Expansion projects		40,954				40,954		2,489				2,489		2,187		2,187

Total construction conversions	$	283,067	$	11,823	$	294,890	$	132,028	$	0	$	132,028	$	24,330	$	24,330

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes certain information about our real property owned as of December 31, 2008 (dollars in thousands):


					Building,				Accumulated
	Number of				Intangibles &		Gross		Depreciation
	Properties		Land		Improvements		Investment		and Amortization

Assisted Living Facilities:
Arizona		3	$	3,060	$	10,493	$	13,553	$	1,836
California		8		8,390		50,629		59,019		10,036
Colorado		1		940		3,721		4,661		711
Connecticut		5		8,030		36,799		44,829		6,565
Delaware		1		560		21,220		21,780		2,347
Florida		10		3,877		47,260		51,137		16,074
Georgia		2		1,080		3,688		4,768		670
Illinois		5		8,817		37,147		45,964		929
Indiana		2		220		5,520		5,740		1,155
Kansas		1		600		10,590		11,190		1,192
Louisiana		1		1,100		10,161		11,261		4,592
Massachusetts		5		5,590		49,051		54,641		6,296
Mississippi		1		520		7,675		8,195		1,089
Montana		3		1,460		14,772		16,232		2,480
Nevada		3		1,820		25,126		26,946		4,727
New Jersey		2		740		7,447		8,187		1,407
New York		3		1,930		31,917		33,847		2,126
North Carolina		40		15,514		181,381		196,895		34,100
Ohio		7		3,294		30,984		34,278		8,844
Oklahoma		16		2,374		30,403		32,777		8,113
Oregon		2		1,077		8,989		10,066		2,431
Pennsylvania		2		2,234		13,409		15,643		2,229
South Carolina		2		642		7,308		7,950		1,312
Tennessee		5		6,436		41,579		48,015		2,623
Texas		23		9,282		93,366		102,648		14,483
Utah		2		1,420		12,842		14,262		2,152
Virginia		4		2,509		32,425		34,934		3,732
Washington		5		5,010		35,051		40,061		2,887
Wisconsin		7		5,010		54,633		59,643		3,534
Construction in progress		13		0		0		163,106		0

		184		103,536		915,586		1,182,228		150,672
Independent Living/CCRC Facilities:
Arizona		1	$	950	$	9,086	$	10,036	$	2,104
California		8		20,174		156,951		177,125		10,137
Colorado		3		8,690		57,179		65,869		1,895
Florida		4		9,772		127,059		136,831		16,217
Georgia		4		9,696		74,819		84,515		11,818
Idaho		1		550		14,740		15,290		2,512
Indiana		3		3,120		100,623		103,743		2,666
Kansas		1		1,400		11,000		12,400		563
Missouri		1		510		5,490		6,000		287
Nevada		1		1,144		10,831		11,975		5,226
North Carolina		3		15,970		32,195		48,165		1,814
South Carolina		4		8,200		71,062		79,262		5,906
Texas		2		5,670		16,620		22,290		4,174
Washington		1		620		4,780		5,400		664
Wisconsin		1		400		23,237		23,637		0
Construction in progress		7		0		0		281,927		0

		45		86,866		715,672		1,084,465		65,983

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


					Building,				Accumulated
	Number of				Intangibles &		Gross		Depreciation
	Properties		Land		Improvements		Investment		and Amortization

Skilled Nursing Facilities:
Alabama		7	$	2,520	$	36,990	$	39,510	$	6,392
Arizona		2		1,870		15,978		17,848		1,503
Colorado		4		3,460		31,246		34,706		4,493
Connecticut		6		2,700		22,738		25,438		4,583
Florida		42		23,312		280,503		303,815		50,313
Georgia		3		2,650		14,932		17,582		2,330
Idaho		3		4,110		27,496		31,606		4,333
Illinois		4		1,110		24,700		25,810		10,955
Indiana		6		1,959		36,904		38,863		7,811
Kansas		1		1,120		8,360		9,480		755
Kentucky		10		3,015		65,433		68,448		8,556
Louisiana		7		784		34,717		35,501		3,491
Maryland		2		840		14,760		15,600		1,303
Massachusetts		21		19,690		221,388		241,078		36,798
Mississippi		11		1,625		52,651		54,276		11,189
Missouri		3		1,247		23,827		25,074		8,295
New Hampshire		1		340		4,360		4,700		434
New Jersey		1		1,850		3,050		4,900		504
Ohio		20		11,785		192,144		203,929		23,800
Oklahoma		3		1,464		21,883		23,347		3,951
Oregon		1		300		5,316		5,616		1,779
Pennsylvania		3		2,979		19,839		22,818		6,010
Tennessee		22		8,730		122,604		131,334		25,545
Texas		19		11,222		145,770		156,992		13,272
Utah		1		991		6,850		7,841		624
Virginia		10		7,121		58,779		65,900		3,098
Construction in progress		2		0		0		22,105		0

		215		118,794		1,493,218		1,634,117		242,117
Specialty Care Facilities:
California		3	$	6,200	$	72,103	$	78,303	$	903
Idaho		1		3,600		20,802		24,402		473
Illinois		1		3,650		19,915		23,565		6,343
Indiana		2		870		19,931		20,801		428
Kentucky		1		3,800		26,700		30,500		390
Louisiana		1		1,928		10,509		12,437		821
Massachusetts		2		3,075		48,320		51,395		21,495
New Jersey		1		0		38,300		38,300		560
Ohio		1		1,200		12,800		14,000		0
Oklahoma		2		3,149		9,898		13,047		1,057
Texas		8		9,825		156,711		166,536		10,075
Wisconsin		1		4,700		20,669		25,369		791
Construction in progress		3		0		0		75,509		0
Assets held for sale		1		0		0		26,211		0

		28		41,997		456,658		600,375		43,336

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


					Building,				Accumulated
	Number of				Intangibles &		Gross		Depreciation
	Properties		Land		Improvements		Investment		and Amortization

Medical Office Buildings:
Alabama		5	$	2,902	$	44,542	$	47,444	$	3,729
Alaska		1		217		30,492		30,709		2,036
Arizona		6		17,456		92,064		109,520		8,953
California		7		7,560		125,407		132,967		10,601
Colorado		1		877		6,708		7,585		363
Florida		25		39,686		246,041		285,727		22,313
Georgia		7		13,264		61,212		74,476		6,462
Illinois		3		4,762		13,624		18,386		1,405
Indiana		1		0		22,134		22,134		181
Missouri		1		336		17,247		17,583		1,177
Nevada		9		16,804		104,108		120,912		8,372
New Jersey		4		9,804		46,653		56,457		2,119
New York		7		4,173		60,782		64,955		5,109
North Carolina		10		7,816		19,149		26,965		3,111
Ohio		1		610		7,420		8,030		677
Oklahoma		1		132		13,008		13,140		767
Pennsylvania		1		86		23,230		23,316		1,219
South Carolina		1		171		18,362		18,533		1,546
Tennessee		5		9,266		60,500		69,766		4,460
Texas		14		17,792		193,378		211,170		14,073
Construction in progress		4		0		0		96,772		0
Assets held for sale		14		0		0		21,843		0

		128		153,714		1,206,061		1,478,390		98,673

Total Real Property Owned		600	$	504,907	$	4,787,195	$	5,979,575	$	600,781

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of our real estate intangibles as of the dates indicated (dollars in thousands):


	December 31, 2008			December 31, 2007

Assets:
In place lease intangibles	$	81,500		$	81,068
Above market tenant leases		9,658			9,592
Below market ground leases		39,806			40,652
Lease commissions		2,360			0

Gross historical cost		133,324			131,312
Accumulated amortization		(31,452	)		(18,289	)

Net book value	$	101,872		$	113,023

Weighted-average amortization period in years		28.9			28.4
Liabilities:
Below market tenant leases	$	25,265		$	25,186
Above market ground leases		3,419			3,499

Gross historical cost		28,684			28,685
Accumulated amortization		(8,671	)		(4,446	)

Net book value	$	20,013		$	24,239

Weighted-average amortization period in years		8.9			10.0

At December 31, 2008, future minimum lease payments receivable under operating leases are as follows (in thousands):


2009	$	479,984
2010		473,333
2011		464,948
2012		453,132
2013		438,081
Thereafter		2,835,888

Totals	$	5,145,366

We purchased $23,097,000 and $11,204,000 of real property that had previously been financed by the Company with loans in 2008 and 2006, respectively. We acquired properties, which included the assumption of debt totaling $166,188,000 and $326,690,000 in 2007 and 2006, respectively. Certain of our acquisitions included deferred acquisition payments totaling $2,000,000 for 2006. These non-cash activities are appropriately not reflected in the accompanying statements of cash flows. See Note 18 for non-cash investing activity related to the Windrose merger.


4.	Dispositions, Assets Held for Sale and Discontinued Operations

During the year ended December 31, 2008, we completed the sale of 38 properties and recognized $163,933,000 of net gains on sales. At December 31, 2008, we had one specialty care facility and 14 medical office buildings that satisfied the requirements of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”) for held for sale treatment. We did not recognize any impairment loss on the specialty care facility as the fair value less estimated costs to sell exceeded our carrying value. The fair value was estimated based on a third party offer to purchase. In determining the fair value of

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the medical office buildings, we used a combination of third party appraisals based on market comparable transactions, other market listings and asset quality as well as management calculations based on projected net operating income and published capitalization rates. Management’s estimates projected that the carrying value of the assets was greater than the estimated fair value and an impairment charge of $32,648,000 was recorded to reduce the properties to their estimated fair value less costs to sell. The following is a summary of our real property disposition activity for the periods presented (in thousands):


	Year Ended
	December 31, 2008									December 31, 2007						December 31, 2006
				Medical								Medical
	Investment			Office						Investment		Office				Investment
	Properties			Buildings			Totals			Properties		Buildings		Totals		Properties			Totals

Real property dispositions:
Independent living/CCRCs	$	15,547					$	15,547		$	5,346			$	5,346	$	12,745		$	12,745
Assisted living facilities		148,075						148,075			57,351				57,351		52,541			52,541
Skilled nursing facilities		6,290						6,290			18,107				18,107		10,079			10,079
Medical office buildings				$	6,781			6,781				$	0		0					0
Specialty care facilities		8,735						8,735							0					0
Land parcels		73						73			3,073				3,073		423			423

Total dispositions		178,720			6,781			185,501			83,877		0		83,877		75,788			75,788
Adjusted for:
Gain/(loss) on sales		164,998			(1,065	)		163,933			14,437				14,437		1,267			1,267
LandAmerica settlement		2,500						2,500							0					0
Other assets/(liabilities) disposal					(116	)		(116	)						0					0
Seller financing		(59,649	)		(5,122	)		(64,771	)						0		(7,168	)		(7,168	)

Proceeds from real property sales	$	286,569		$	478		$	287,047		$	98,314	$	0	$	98,314	$	69,887		$	69,887

During the year ended December 31, 2008, we completed the sale of 29 properties to Emeritus Corporation for $299,413,000, consisting of $249,413,000 in cash proceeds and $50,000,000 of seller financing, and we recognized a gain on sale of $145,646,000. Total funds of $299,413,000 were held in escrow for use in an Internal Revenue Code Section 1031 exchange, of which $162,558,000 was utilized during the year ended December 31, 2008. Please see Note 21 for additional information.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the six months ended June 30, 2009, we sold 15 investment properties. Also, at June 30, 2009, we had six skilled nursing facilities classified as held-for-sale. In accordance with SFAS 144, we have reclassified the income and expenses attributable to all properties sold prior to or held for sale at June 30, 2009 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 SFAS 144 as a result of classifying properties as discontinued operations for the periods presented (in thousands):


	Year Ended December 31,
	2008		2007		2006
Revenues:
Rental Income	$	37,040	$	55,050	$	53,221
Expenses:
Interest expense		8,595		12,280		15,595
Property operating expenses		2,639		2,768		76
Depreciation and amortization		13,788		20,591		22,090
General and adminstrative		0		0		1,120

Income (loss) from discontinued operations, net	$	12,018	$	19,411	$	14,340


5.	Real Estate Loans Receivable

The following is a summary of real estate loans receivable (in thousands):


	December 31,
	2008		2007

Mortgage loans	$	137,292	$	143,091
Other real estate loans		345,593		238,303

Totals	$	482,885	$	381,394

All real estate loans receivable are in our investment property segment. The following is a summary of our real estate loan activity for the periods presented (in thousands):


	Year Ended December 31,
	2008			2007		2006
	Amount			Amount		Amount

Advances on real estate loans receivable:
Investments in new loans	$	121,493		$	205,770	$	75,209
Draws on existing loans		21,265			30,124		11,781

Total gross investments in real estate loans		142,758			235,894		86,990
Less: Seller financing on sales of real property		(59,649	)		0		0

Net cash advances on real estate loans receivable		83,109			235,894		86,990
Receipts on real estate loans receivable:
Loan payoffs		8,815			42,028		65,002
Principal payments on loans		9,354			10,318		17,253

Total principal receipts on real estate loans		18,169			52,346		82,255

Net cash advances (receipts) on real estate loans receivable	$	64,940		$	183,548	$	4,735

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of mortgage loans at December 31, 2008:


Final	Number			Principal
Payment	of			Amount at		Carrying
Due	Loans		Payment Terms	Inception		Amount
				(In thousands)

2009		12	Monthly payments from $8,099 to $83,355, including interest from 4.46% to 19.26%	$	59,099	$	49,599
2010		1	Monthly payments of $20,310, including interest of 9.25%		2,635		2,635
2011		3	Monthly payments from $2,960 to $26,072, including interest from 11.84% to 19.26%		6,127		6,702
2012		3	Monthly payments from $26,278 to $132,889, including interest from 7.00% to 19.26%		28,741		18,506
2013		2	Monthly payments from $18,403 to $114,960, including interest from 5.32% to 7.60%		22,300		21,951
2015		1	Monthly payments of $2,734, including interest of 9.00%		65		365
2020		2	Monthly payments from $37,493 to $317,978, including interest of 10.39%		38,500		37,534

			Totals	$	157,467	$	137,292


6.	Allowance for Losses on Loans Receivable

The following is a summary of the allowance for losses on loans receivable (in thousands):


	Year Ended December 31,
	2008		2007		2006

Balance at beginning of year	$	7,406	$	7,406	$	6,461
Provision for loan losses		94		0		1,000
Charge-offs		0		0		(55	)

Balance at end of year	$	7,500	$	7,406	$	7,406

The following is a summary of our loan impairments (in thousands):


	December 31,
	2008		2007		2006

Balance of impaired loans at year end	$	72,770	$	799	$	10,529
Allowance for loan losses		7,500		7,406		7,406

Balance of impaired loans not reserved(1)	$	65,270	$	0	$	3,123

Average impaired loans for the year	$	36,785	$	5,664	$	13,650
Interest recognized on impaired loans(2)		3,288		0		2,495


(1)		At December 31, 2007, the allowance for losses on loans receivable exceeds the balance of impaired loans. See Note 1 for additional information.

(2)		Represents interest recognized prior to placement on non-accrual status.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


7.	Concentration of Risk

As of December 31, 2008, long-term care facilities, which include skilled nursing, independent living/continuing care retirement communities and assisted living facilities, comprised 66% (68% at December 31, 2007) of our real estate investments and were located in 39 states. The following table summarizes certain information about our customer concentration as of December 31, 2008 (dollars in thousands):


	Number of		Total		Percent of
	Properties		Investment		Investment(1)

Concentration by investment:
Senior Living Communities, LLC		10	$	345,974		6	%
Signature Healthcare LLC		34		317,284		5	%
Brookdale Senior Living, Inc		86		298,143		5	%
Life Care Centers of America, Inc.		25		264,578		5	%
Emeritus Corporation		21		245,741		4	%
Remaining portfolio		457		4,389,959		75	%

Totals		633	$	5,861,679		100	%



	Number of		Total		Percent of
	Properties		Revenue(2)		Revenue(3)
Concentration by revenue(4):
Signature Healthcare LLC		34	$	41,291		7	%
Emeritus Corporation		21		40,553		7	%
Brookdale Senior Living, Inc		86		38,065		7	%
Life Care Centers of America, Inc.		25		27,671		5	%
Merrill Gardens LLC		13		19,816		3	%
Remaining portfolio		454		394,848		69	%
Other income		n/a		10,521		2	%

Totals		633	$	572,765		100	%


(1)		Investments with top five customers comprised 27% of total investments at December 31, 2007.

(2)		Revenues include gross revenues and revenues from discontinued operations for the year ended December 31, 2008.

(3)		Revenues from top five customers were 30% and 43% for the years ended December 31, 2007 and 2006, respectively.

(4)		All of our top five customers are in our investment properties segment.


8.	Borrowings Under Line of Credit Arrangement and Related Items

At December 31, 2008, we had an unsecured credit arrangement with a consortium of sixteen banks providing for a revolving line of credit in the amount of $1,150,000,000, which is scheduled to expire on August 5, 2011 (with the ability to extend for one year at our discretion if we are in compliance with all covenants). Borrowings under the agreement are subject to interest payable in periods no longer than three months at either the agent bank’s prime rate of interest or the applicable margin over LIBOR interest rate, at our option (1.07% at December 31, 2008). The applicable margin is based on our ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services and was 0.6% at December 31, 2008. In addition, we pay a facility fee annually to each bank based on the bank’s commitment under the revolving credit facility. The facility fee depends on our ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services and was 0.15% at December 31, 2008. We also pay an annual agent’s fee of $50,000. Principal is due upon expiration of the agreement.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following information relates to aggregate borrowings under the unsecured lines of credit arrangements (dollars in thousands):


	Year Ended December 31,
	2008			2007			2006

Balance outstanding at December 31	$	570,000		$	307,000		$	225,000
Maximum amount outstanding at any month end	$	744,000		$	434,000		$	276,000
Average amount outstanding (total of daily principal balances divided by days in year)	$	500,561		$	234,392		$	164,905
Weighted average interest rate (actual interest expense divided by average borrowings outstanding)		3.77	%		6.68	%		6.91	%


9.	Senior Unsecured Notes and Secured Debt

We have $1,831,151,000 of senior unsecured notes with annual interest rates ranging from 4.75% to 8.00%. The carrying amounts of the senior unsecured notes represent the par value of $1,845,000,000 adjusted for any unamortized premiums or discounts and other basis adjustments related to hedging the debt with derivative instruments. See Note 1 for further discussion regarding derivative instruments.

In November and December 2006, we issued $345,000,000 of 4.75% senior unsecured convertible notes due December 2026, generating net proceeds of $337,517,000. The notes are convertible, in certain circumstances, into cash and, if applicable, shares of common stock at an initial conversion rate of 20.8833 shares per $1,000 principal amount of notes, which represents an initial conversion price of approximately $47.89 per share. In general, upon conversion, the holder of each note would receive, in respect of the conversion value of such note, cash up to the principal amount of such note and common stock for the note’s conversion value in excess of such principal amount. In addition, on each of December 1, 2011, December 1, 2016 and December 1, 2021, holders may require us to purchase all or a portion of their notes at a purchase price in cash equal to 100% of the principal amount of the notes to be purchased, plus any accrued and unpaid interest.

In July 2007, we issued $400,000,000 of 4.75% senior unsecured convertible notes due July 2027, generating net proceeds of $388,943,000. The notes are convertible, in certain circumstances, into cash and, if applicable, shares of our common stock at an initial conversion rate of 20.0000 shares per $1,000 principal amount of notes, which represents an initial conversion price of approximately $50.00 per share. In general, upon conversion, the holder of each note would receive, in respect of the conversion value of such note, cash up to the principal amount of such note and common stock for the note’s conversion value in excess of such principal amount. In addition, on each of July 15, 2012, July 15, 2017 and July 15, 2022, holders may require us to purchase all or a portion of their notes at a purchase price in cash equal to 100% of the principal amount of the notes to be purchased, plus any accrued and unpaid interest.

We have mortgage loans totaling $446,525,000, collateralized by owned properties, with annual interest rates ranging from 4.89% to 8.08%. The carrying amounts of the mortgages represent the par value of $448,378,000 adjusted for any unamortized fair value adjustments. The carrying values of the properties securing the mortgage loans totaled $773,673,000 at December 31, 2008.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2008, the annual principal payments on these debt obligations are as follows (in thousands):


	Senior		Secured
	Unsecured Notes(1)		Debt(1)		Totals

2009	$	0	$	39,657	$	39,657
2010		0		15,120		15,120
2011		0		52,314		52,314
2012		250,000		13,710		263,710
2013		300,000		62,198		362,198
Thereafter		1,295,000		265,379		1,560,379

Totals	$	1,845,000	$	448,378	$	2,293,378


(1)		Amounts above represent principal amounts due and do not include unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.


10.	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 CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

term borrowing that was expected to occur in 2008. The September 2007 Swaps each had an effective date of September 12, 2008 and a maturity date of September 12, 2018. We expected to settle the 2007 Swaps when the debt was to be priced. The September 2007 Swaps were to have the economic effect of fixing $250,000,000 of our future debt at 4.469% plus a credit spread for 10 years. The September 2007 Swaps had been designated as cash flow hedges and we expected the 2007 Swaps to be highly effective at offsetting changes in cash flows of interest payments on $250,000,000 of our future debt due to changes in the LIBOR swap rate. Therefore, effective changes in the fair value of the September 2007 Swaps were recorded in AOCI and were to be reclassified to interest expense when the hedged forecasted transactions affected earnings (as interest payments are made on the expected debt issuance). The ineffective portion of the changes in fair value was to be recorded directly in earnings.


11.	Commitments and Contingencies

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 to provide the letter of credit terminates in 2009. At December 31, 2008, our obligation under the of credit was $2,450,000.

We have an outstanding letter of credit issued for the benefit of certain insurance companies that provide liability and property insurance to one of our tenants. Our obligation to provide the letter of credit terminates in 2013. At December 31, 2008, our obligation under the letter of credit was $1,000,000.

We have an outstanding letter of credit issued for the benefit of a village in Illinois that secures the completion and installation of certain public improvements by one of our tenants in connection with the development of a facility. Our obligation to provide the letter of credit terminates in 2010. At December 31, 2008, our obligation under the letter of credit was $679,320.

We have an outstanding letter of credit issued for the benefit of a municipality in Pennsylvania in connection with the completion and installation of certain facility improvements by one of our subsidiaries. The improvements are expected to be completed in 2009. At December 31, 2008, our obligation under the letter of credit was $485,810.

At December 31, 2008, we had outstanding construction financings of $639,419,000 for leased properties and were committed to providing additional financing of approximately $729,278,000 to complete construction. At December 31, 2008, we had contingent purchase obligations totaling $15,278,000. These contingent purchase obligations primarily relate to deferred acquisition fundings and capital improvements. Deferred acquisition fundings are contingent upon an operator satisfying certain conditions such as payment coverage and value tests. Amounts due from the tenant are increased to reflect the additional investment in the property.

At December 31, 2008, we had operating lease obligations of $163,978,000 relating to certain ground leases and Company office space. We incurred rental expense relating to our Company office space of $1,452,000, $678,000 and $939,000 for the years ended December 31, 2008, 2007 and 2006, respectively. Regarding the property leases, we have sublease agreements with certain of our operators that require the operators to reimburse us for our monthly operating lease obligations. At December 31, 2008, aggregate future minimum rentals to be received under these noncancelable subleases totaled $31,234,000.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2008, future minimum lease payments due under operating leases are as follows (in thousands):


2009	$	4,220
2010		4,123
2011		4,229
2012		3,910
2013		3,921
Thereafter		143,575

Totals	$	163,978


12.	Stockholders’ Equity

Preferred Stock

In July 2003, we closed a public offering of 4,000,000 shares of 7.875% Series D Cumulative Redeemable Preferred Stock. These shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after July 9, 2008.

In September 2003, we issued 1,060,000 shares of 6% Series E Cumulative Convertible and Redeemable Preferred Stock as partial consideration for an acquisition of assets by the Company, with the shares valued at $26,500,000 for such purposes. The shares were issued to Southern Assisted Living, Inc. and certain of its stockholders without registration in reliance upon the federal statutory exemption of Section 4(2) of the Securities Act of 1933, as amended. The shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after August 15, 2008. The preferred shares are convertible into common stock at a conversion price of $32.66 per share at any time. At December 31, 2008 and 2007, there were 74,989 of such shares outstanding.

In September 2004, we closed a public offering of 7,000,000 shares of 7.625% Series F Cumulative Redeemable Preferred Stock. These shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after September 14, 2009.

In conjunction with the acquisition of Windrose Medical Properties Trust in December 2006, we issued 2,100,000 shares of 7.5% Series G Cumulative Convertible Preferred Stock. These shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after June 30, 2010. Each Series G Preferred Share is convertible by the holder into our common stock at a conversion price of $34.93, equivalent to a conversion rate of 0.7157 common shares per Series G Preferred Share. The Series G Preferred Shares require cumulative distributions. During the year ended December 31, 2007, certain holders of our Series G Preferred Stock converted 295,800 shares into 211,702 shares of our common stock, leaving 1,804,200 of such shares outstanding at December 31, 2007. During the year ended December 31, 2008, certain holders of our Series G Preferred Stock converted 1,362,887 shares into 975,397 shares of our common stock, leaving 441,313 of such shares outstanding at December 31, 2008.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Common Stock

The following is a summary of our common stock issuances for the years presented (dollars in thousands, except per share amounts):


Date Issued	Shares Issued		Average Price		Gross Proceeds		Net Proceeds

April 2006 public issuance		3,222,800	$	36.00	$	116,021	$	109,748
2006 Dividend reinvestment plan issuances		1,876,377		36.34		68,184		68,184
2006 Option exercises		226,961		22.62		5,133		5,049

2006 Totals(1)		5,326,138			$	189,338	$	182,981

April 2007 public issuance		6,325,000	$	44.01	$	278,363	$	265,294
December 2007 public issuance		3,500,000		42.14		147,490		147,139
2007 Dividend reinvestment plan issuances		1,626,000		41.81		67,985		67,985
2007 Option exercises		401,630		27.82		11,175		11,175

2007 Totals		11,852,630			$	505,013	$	491,593

March 2008 public issuance		3,000,000	$	41.44	$	124,320	$	118,555
July 2008 public issuance		4,600,000		44.50		204,700		193,157
September 2008 public issuance		8,050,000		48.00		386,400		369,699
2008 Dividend reinvestment plan issuances		1,546,074		43.37		67,055		67,055
2008 Equity shelf program issuances		794,221		39.28		31,196		30,272
2008 Option exercises		118,895		29.83		3,547		3,547

2008 Totals		18,109,190			$	817,218	$	782,285


(1)		2006 excludes $912,000 of costs related to the Windrose merger.

Accumulated Other Comprehensive Income

The following is a summary of accumulated other comprehensive income (loss) as of the dates indicated (in thousands):


	December 31,			December 31,
	2008			2007

Fair value of cash flow hedges	$	635		$	(7,194	)
Unrecognized gains (losses) on equity investments		(1,038	)		(192	)
Unrecognized actuarial gains (losses)		(710	)		5

Totals	$	(1,113	)	$	(7,381	)

Please see Note 10 for a discussion of cash flow hedge activity. For the years ended December 31, 2008 and 2007, we recognized $846,000 and $192,000, respectively, of unrealized losses on equity investments. Additionally, for the years ended December 31, 2008 and 2007, we recognized $715,000 of unrealized actuarial losses and $140,000 of unrealized actuarial gains, respectively.

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.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Expense, which is recognized as the options vest based on the market value at the date of the award, totaled $1,503,000, $1,106,000 and $1,066,000 for the years ended December 31, 2008, 2007 and 2006, respectively.


13.	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 generally range from three years for non-employee directors to five years for officers and key employees. Options expire ten years from the date of grant. We granted 161,101, 272,057 and 97,815 restricted shares during 2008, 2007 and 2006, respectively, including 14,504, 10,717 and 13,426 shares to non-employee directors in 2008, 2007 and 2006, respectively.

Option Valuation Assumptions

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


	2008			2007			2006

Dividend yield(1)		6.47	%		5.60	%		6.79	%
Expected volatility		20.5	%		19.9	%		20.3	%
Risk-free interest rate		3.42	%		4.74	%		4.35	%
Expected life (in years)		6.5			5.0			5.0
Weighted-average fair value(1)	$	6.25		$	8.31		$	5.26


(1)		Certain options granted to employees include dividend equivalent rights. The fair value of options with DERs also includes the net present value of projected future dividend payments over the expected life of the option discounted at the dividend yield rate.

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 7-year U.S. Treasury Notes yield on the date of grant for the 2008 grants and the 5-year U.S. Treasury Notes yield on the date of grant for the 2007 and 2006 grants. 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.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Option Award Activity

The following table summarizes information about stock option activity for the periods indicated (shares in thousands):


	Year Ended December 31,
	2008					2007					2006
	Number			Weighted Average		Number			Weighted Average		Number			Weighted Average
Stock Options	of Shares			Exercise Price		of Shares			Exercise Price		of Shares			Exercise Price

Options at beginning of year		637		$	35.54		917		$	30.79		685		$	26.87
Options granted		307			40.83		124			45.73		460			32.42
Options exercised		(119	)		29.83		(402	)		27.82		(227	)		22.24
Options terminated		(8	)		42.00		(2	)		39.72		(1	)		36.50

Options at end of year		817		$	38.29		637		$	35.54		917		$	30.79

Options exercisable at end of year		281		$	33.94		256		$	32.26		462		$	28.83
Weighted average fair value of options granted during the year				$	6.25				$	8.31				$	5.26

The following table summarizes information about stock options outstanding at December 31, 2008 (options in thousands):


	Options Outstanding						Options Exercisable
					Weighted
Range of Per			Weighted		Average				Weighted
Share Exercise	Number		Average		Remaining		Number		Average
Prices	Outstanding		Exercise Price		Contract Life		Exercisable		Exercise Price

$16-$20		8	$	16.81		2.0		8	$	16.81
$20-$30		66		25.63		4.7		66		25.63
$30-$40		321		36.28		7.1		185		36.27
$40 +		422		42.22		9.7		22		45.73

Totals		817	$	38.29		8.2		281	$	33.94

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 December 31, 2008. During the years ended December 31, 2008, 2007 and 2006, the aggregate intrinsic value of options exercised under our stock incentive plans was $2,042,000, $6,600,000 and $3,140,000, respectively, determined as of the date of option exercise. Cash received from option exercises under our stock incentive plans for the years ended December 31, 2008, 2007 and 2006 was $3,547,000, $17,775,000 and $4,872,000, respectively.

As of December 31, 2008, there was approximately $2,091,000 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 December 31, 2008, there was approximately $8,869,000 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 three years.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes information about non-vested stock incentive awards as of December 31, 2008 and changes for the year ended December 31, 2008:


	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, 2007		382		$	7.20		398		$	40.94
Vested		(147	)		6.02		(112	)		37.03
Granted		307			6.25		161			41.05
Terminated		(8	)		7.04		(4	)		42.11

Non-vested at December 31, 2008		534		$	6.98		443		$	41.95

We adopted the fair value-based method of accounting for share-based payments effective January 1, 2003 using the prospective method described in Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. Currently, we use the Black-Scholes-Merton option pricing model to estimate the value of stock option grants and expect to continue to use this acceptable option valuation model. Because we adopted Statement No. 123 using the prospective transition method (which applied only to awards granted, modified or settled after the adoption date of Statement No. 123), compensation cost for some previously granted awards that were not recognized under Statement No. 123 will now be recognized effective with the adoption of Statement No. 123(R) on January 1, 2006. In addition, we previously amortized compensation cost for share-based payments to the date that the awards became fully vested or to the expected retirement date, if sooner. Effective with the adoption of Statement No. 123(R), we began recognizing compensation cost to the date the awards become fully vested or to the retirement eligible date, if sooner. Compensation cost totaled $8,530,000, $7,050,000 and $6,980,000 for the years ended December 31, 2008, 2007 and 2006, respectively.


14.	Income Taxes and Distributions

To qualify as a real estate investment trust for federal income tax purposes, 90% of taxable income (including 100% of capital gains) must be distributed to stockholders. Real estate investment trusts that do not distribute a certain amount of current year taxable income in the current year are also subject to a 4% federal excise tax. The main differences between undistributed net income for federal income tax purposes and financial statement purposes are the recognition of straight-line rent for reporting purposes, differing useful lives and depreciation and amortization methods for real property and the provision for loan losses for reporting purposes versus bad debt expense for tax purposes. At December 31, 2008, we had U.S. federal tax losses of $17,182,000, as well as apportioned state tax losses of $17,260,000 available for carryforward. Valuation allowances have been provided for those items for which, based upon an assessment, it is more likely than not that some portion may not be realized. The U.S. federal and state tax loss carryforwards expire from 2009 through 2029.

Cash distributions paid to common stockholders, for federal income tax purposes, are as follows:


	Year Ended December 31,
	2008		2007		2006

Per Share:
Ordinary income	$	1.6196	$	1.8295	$	1.7461
Return of capital		0.8904		0.3596		1.1348
1250 gains		0.1900		0.0900		0.0000

Totals	$	2.7000	$	2.2791	$	2.8809

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


15.	Earnings Per Share

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


	Year Ended December 31,
	2008		2007		2006

Numerator for basic and diluted earnings per share — net income attributable to common stockholders	$	260,098	$	113,225	$	81,180

Denominator for basic earnings per share — weighted average shares		93,732		78,861		61,661
Effect of dilutive securities:
Employee stock options		82		150		136
Non-vested restricted shares		443		398		248
Convertible senior unsecured notes		52		0		0

Potentially dilutive common shares		577		548		384

Denominator for diluted earnings per share — adjusted weighted average shares		94,309		79,409		62,045

Basic earnings per share	$	2.77	$	1.44	$	1.32

Diluted earnings per share	$	2.76	$	1.43	$	1.31

The diluted earnings per share calculation excludes the dilutive effect of 123,000 options for 2007 because the exercise price was greater than the average market price. The Series E Cumulative Convertible and Redeemable Preferred Stock and the Series G Cumulative Convertible Preferred Stock were not included in the calculations for 2008, 2007 and 2006 as the effect of the conversions was anti-dilutive to income from continuing operations available to common stockholders (the “control number” as defined by Statement of Financial Accounting Standards No. 128). The $345,000,000 Convertible Senior Notes due December 2026 were not included in the calculation for 2007 and 2006 as the effect of the conversion was anti-dilutive. The $400,000,000 Convertible Senior Notes due July 2027 were not included in the calculation for 2008 and 2007 as the effect of the conversion was anti-dilutive.


16.	Disclosure about Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

Mortgage Loans and Other Real Estate Loan Receivable — The fair value of mortgage loans and other real estate loans receivable is generally estimated by discounting the estimated future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Cash and Cash Equivalents — The carrying amount approximates fair value.

Equity Investments — Equity investments are recorded at their fair market value.

Borrowings Under Unsecured Lines of Credit Arrangements — The carrying amount of the unsecured line of credit arrangement approximates fair value because the borrowings are interest rate adjustable.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Senior Unsecured Notes — The fair value of the senior unsecured notes payable was estimated based on publicly available trading prices.

Secured Debt — The fair value of all secured debt is estimated by discounting the estimated future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Interest Rate Swap Agreements — Interest rate swap agreements, if any, are recorded as assets or liabilities on the balance sheet at fair market value. Fair market value is estimated by a third party consultant, which utilizes pricing models that consider forward yield curves and discount rates.

The carrying amounts and estimated fair values of our financial instruments are as follows (in thousands):


	December 31, 2008				December 31, 2007
	Carrying		Fair		Carrying			Fair
	Amount		Value		Amount			Value

Financial Assets:
Mortgage loans receivable	$	137,292	$	143,285	$	143,091		$	149,144
Other real estate loans receivable		345,593		302,584		238,303			239,951
Equity investments		1,030		1,030		1,408			1,408
Cash and cash equivalents		23,370		23,370		30,269			30,269
Interest rate swap agreements		0		0		(7,990	)		(7,990	)
Financial Liabilities:
Borrowings under unsecured lines of credit arrangements	$	570,000	$	570,000	$	307,000		$	307,000
Senior unsecured notes		1,831,151		1,605,770		1,869,284			1,902,031
Secured debt		446,525		452,262		507,476			515,989

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 introduces a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. SFAS 157 for financial assets and liabilities is effective for fiscal years beginning after November 15, 2007, and was adopted as the standard for those assets and liabilities as of January 1, 2008. The impact of adoption was not significant. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Interest rate swap agreements are valued using models that assume a hypothetical transaction to sell the asset or transfer the liability in the principal market for the asset or liability based on market data derived from interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment timing, loss severities, credit risks and default rates.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The market approach is utilized to measure fair value for our financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.


	Fair Value Measurements as of December 31, 2008
	Total		Level 1		Level 2		Level 3

Equity investments(1)	$	561	$	561	$	0	$	0

Totals	$	561	$	561	$	0	$	0


(1)		Unrealized gains or losses on equity investments are recorded in accumulated other comprehensive income (loss) at each measurement date.


17.	Retirement Arrangements

Under the retirement plan and trust (the “401(k) Plan”), eligible employees may make contributions, and we may make matching contributions and a profit sharing contribution. Our contributions to the 401(k) Plan totaled $864,000, $441,000 and $413,000 in 2008, 2007 and 2006, respectively.

We have a Supplemental Executive Retirement Plan (“SERP”), a non-qualified defined benefit pension plan, which provides certain executive officers with supplemental deferred retirement benefits. The SERP provides an opportunity for participants to receive retirement benefits that cannot be paid under our tax-qualified plans because of the restrictions imposed by ERISA and the Internal Revenue Code of 1986, as amended. Benefits are based on compensation and length of service and the SERP is unfunded. No contributions by the Company are anticipated for the 2009 fiscal year. Benefit payments are expected to total $4,003,000 during the next five fiscal years and no benefit payments are expected to occur during the succeeding five fiscal years. We use a December 31 measurement date for the SERP. The accrued liability on our balance sheet for the SERP was $3,109,000 at December 31, 2008 ($1,915,000 at December 31, 2007).

The following tables provide a reconciliation of the changes in the SERP’s benefit obligations and a statement of the funded status for the periods indicated (in thousands):


	Year Ended December 31,
	2008		2007

Reconciliation of benefit obligation:
Obligation at January 1	$	1,915	$	1,597
Service cost		364		362
Interest cost		115		96
Actuarial (gain)/loss		715		(140	)

Obligation at December 31	$	3,109	$	1,915


	December 31,
	2008			2007

Funded status:
Funded status at December 31	$	(3,109	)	$	(1,915	)
Unrecognized (gain)/loss		0			0

Prepaid/(accrued) benefit cost	$	(3,109	)	$	(1,915	)

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


18.	Supplemental Cash Flow Information


	Year Ended December 31,
	2008		2007		2006
	(In thousands)

Supplemental cash flow information — interest paid	$	156,914	$	140,166	$	98,890
Supplemental cash flow information — taxes paid		1,789		238		126
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from real property acquisitions:
Secured debt	$	0	$	19,731	$	25,049
Other liabilities		1,899		3,597		0
Other assets		0		712		0
Assets and liabilities assumed from business combinations:
Real estate investments	$	0	$	285,302	$	975,660
Other assets acquired		0		10,050		22,526
Secured debt		0		146,457		249,424
Liability to subsidiary trust issuing preferred securities		0		0		52,217
Other liabilities		0		6,932		40,025
Minority interests		0		0		6,989
Issuance of common stock		0		0		396,846
Issuance of preferred stock		0		0		62,118


19.	Segment Reporting

We invest in senior housing and health care real estate. We evaluate our business and make resource allocations on our two business segments — investment properties and medical office buildings. 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 medical office building segment, our properties 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 in Note 1. 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, deferred loan expenses and corporate office equipment among others. Non-property specific revenues and expenses are not allocated to individual segments in determining net operating income.

During the year ended December 31, 2008, we changed the name of the operating properties segment to medical office buildings and reclassified certain assets and related revenues. Four specialty care facilities that were formerly classified as operating properties have been reclassified to investment properties. Accordingly, we have reclassified the following 2007 amounts to be consistent with the current year classification: (i) rental income of $7,673,000; (ii) real estate depreciation/amortization of $2,604,000; and (iii) total assets of $83,283,000. We have also reclassified the following 2006 amounts to be consistent with the current year classification: (i) rental income of $227,000; (ii) real estate depreciation/amortization of $101,000; and (iii) other income of $2,911,000.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Additionally, we have restated the following 2007 non-segment/corporate assets and revenues to be included in the related business segments to be consistent with the current year classification: (i) $5,597,000 of other income has been reclassified to investment properties; (ii) $76,324,000 of total assets has been reclassified to investment properties; and (iii) $51,682,000 of total assets has been reclassified to medical office buildings.

Summary information for the reportable segments is as follows (in thousands):


									Property		Net		Real Estate
	Rental		Interest		Other		Total		Operating		Operating		Depreciation/		Interest		Total
	Income (1)		Income		Income		Revenues		Expenses (1)		Income (2)		Amortization (1)		Expense (1)		Assets
Year ended December 31, 2008:
Investment properties	$	388,849	$	40,063	$	7,899	$	436,811	$	0	$	436,811	$	111,809	$	7,176	$	4,698,807
Medical office buildings		133,332		0		930		134,262		46,629		87,633		51,236		21,828		1,421,548
Non-segment/corporate		0		0		1,692		1,692		0		1,692		0		112,055		72,763

	$	522,181	$	40,063	$	10,521	$	572,765	$	46,629	$	526,136	$	163,045	$	141,059	$	6,193,118


									Property		Net		Real Estate
	Rental		Interest		Other		Total		Operating		Operating		Depreciation/		Interest		Total
	Income (1)		Income		Income		Revenues		Expenses (1)		Income (2)		Amortization (1)		Expense (1)		Assets
Year ended December 31, 2007:
Investment properties	$	345,683	$	25,823	$	8,010	$	379,516	$	0	$	379,516	$	103,236	$	8,763	$	3,864,296
Medical office buildings		111,614		0		497		112,111		37,475		74,636		46,390		23,278		1,276,330
Non-segment/corporate		0		0		1,528		1,528		0		1,528		0		113,285		73,230

	$	457,297	$	25,823	$	10,035	$	493,155	$	37,475	$	455,680	$	149,626	$	145,326	$	5,213,856


									Property		Net		Real Estate
	Rental		Interest		Other		Total		Operating		Operating		Depreciation/		Interest
	Income (1)		Income		Income		Revenues		Expenses (1)		Income (2)		Amortization (1)		Expense (1)
Year ended December 31, 2006:
Investment properties	$	302,388	$	18,829	$	3,262	$	324,479	$	0	$	324,479	$	96,452	$	9,042
Medical office buildings		3,247		0		0		3,247		1,115		2,132		1,112		610
Non-segment/corporate		0		0		662		662		0		662		0		90,544

	$	305,635	$	18,829	$	3,924	$	328,388	$	1,115	$	327,273	$	97,564	$	100,196


(1)		Includes amounts from discontinued operations.

(2)		Net operating income (“NOI”) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property level operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and interest expense. We believe NOI provides investors relevant and useful information because it measures the operating performance of our properties at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


20.	Quarterly Results of Operations (Unaudited)

The following is a summary of our unaudited quarterly results of operations for the years ended December 31, 2008 and 2007 (in thousands, except per share data). The sum of individual quarterly amounts may not agree to the annual amounts per the consolidated statements of income due to rounding.

Year Ended December 31, 2008

1st Quarter

2nd Quarter ⁽²⁾

3rd Quarter

4th Quarter ⁽³⁾

Revenues — as reported

135,852

135,888

145,096

147,123

Discontinued operations

(11,966

)

(6,703

)

(5,747

)

(3,819

)

Revenues — as adjusted ⁽¹⁾

123,886

129,185

139,349

143,304

Net income attributable to common stockholders

29,249

155,410

53,589

21,850

Net income attributable to common stockholders per share:

Basic

0.34

1.74

0.56

0.21

Diluted

0.34

1.73

0.55

0.21


	Year Ended December 31, 2007
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter ⁽⁴⁾
Revenues — as reported	$	112,645		$	119,252		$	125,076		$	133,532
Discontinued operations		(14,254	)		(13,483	)		(12,563	)		(12,100	)

Revenues — as adjusted ⁽¹⁾	$	98,391		$	105,769		$	112,513		$	121,432

Net income attributable to common stockholders	$	23,036		$	25,299		$	23,326		$	41,565

Net income attributable to common stockholders per share:
Basic	$	0.31		$	0.32		$	0.29		$	0.50
Diluted		0.31			0.32			0.29			0.50


(1)		In accordance with FASB Statement No. 144, we have reclassified the income attributable to the properties sold prior to or held for sale at June 30, 2009 to discontinued operations. See Note 4.

(2)		The increases in net income and amounts per share are primarily attributable to gains on sales of real property ($118,168,000).

(3)		The decreases in net income and amounts per share are primarily attributable to impairment charges ($32,648,000) and realized loss on derivatives ($23,393,000) offset by gains on sales of real property ($33,120,000).

(4)		The increases in net income and amounts per share are primarily attributable to gains on sales of real property ($11,662,000), additional other income related to the payoff of a warrant equity investment ($3,900,000) and gains on extinguishment of debt ($1,081,000).


21.	Subsequent Events

Management Changes. On January 29, 2009, we announced that Raymond W. Braun entered into a consulting agreement with the Company effective February 1, 2009. Mr. Braun no longer serves as President of the Company and has resigned from the Board of Directors. Mr. Braun has agreed to provide consulting services through December 31, 2009 and will receive a base consulting fee of $800,000 during the term of the agreement. Additionally, we expect to recognize $3,909,000 of non-recurring expenses during the three months ended March 31, 2009 in connection with the departure of Mr. Braun.

HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

22. Retrospective Adoption of New Accounting Standards

We adopted FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”), and FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP 14-1”), effective January 1, 2009, each of which required retrospective application. SFAS 160 changed the accounting and reporting for minority interests, which have been re-characterized as non-controlling interests and classified as a component of equity. FSP 14-1 provides guidance on accounting for convertible debt that may be settled in cash upon conversion. It requires bifurcation of the convertible debt instrument into a debt component and an equity component. The value of the debt component is based upon the estimated fair value of a similar debt instrument without the conversion feature. The difference between the contractual principal on the debt and the value allocated to the debt is recorded as an equity component and represents the conversion feature of the instrument. The excess of the contractual principal amount of the debt over its estimated fair value is amortized to interest expense using the effective interest method over the period used to estimate the fair value. The following tables illustrate the retrospective restatement of our previously reported consolidated balance sheet amounts to reflect the application of SFAS 160 and FSP 14-1for the periods indicated (in thousands):


	As of December 31, 2008
	As Previously			FSP 14-1			SFAS 160			As
	Reported			Adjustment			Adjustment			Adjusted
Liabilities:
Borrowings under unsecured lines of credit arrangements	$	570,000								$	570,000
Senior unsecured notes		1,847,247		$	(16,096	)					1,831,151
Secured debt		446,525									446,525
Accrued expenses and other liabilities		107,157									107,157

Total liabilities		2,970,929			(16,096	)		0			2,954,833
Minority interests		10,603						(10,603	)		0
Equity:
Preferred stock		289,929									289,929
Common stock		104,635									104,635
Capital in excess of par value		3,180,628			24,062						3,204,690
Treasury stock		(5,145	)								(5,145	)
Cumulative net income		1,362,366			(7,966	)					1,354,400
Cumulative dividends		(1,723,819	)								(1,723,819	)
Accumulated other comprehensive income		(1,113	)								(1,113	)
Other equity		4,105									4,105

Total Health Care REIT, Inc. stockholders’ equity		3,211,586			16,096			0			3,227,682
Noncontrolling interests		0						10,603			10,603

Total equity		3,211,586			16,096			10,603			3,238,285

Total liabilities and equity	$	6,193,118		$	0		$	0		$	6,193,118


	As of December 31, 2007
	As Previously			FSP 14-1			SFAS 160			As
	Reported			Adjustment			Adjustment			Adjusted
Liabilities:
Borrowings under unsecured lines of credit arrangements	$	307,000								$	307,000
Senior unsecured notes		1,890,192		$	(20,908	)					1,869,284
Secured debt		507,476									507,476
Accrued expenses and other liabilities		95,145									95,145

Total liabilities		2,799,813			(20,908	)		0			2,778,905
Minority interests		9,687						(9,687	)		0
Equity:
Preferred stock		330,243									330,243
Common stock		85,412									85,412
Capital in excess of par value		2,370,037			24,062						2,394,099
Treasury stock		(3,952	)								(3,952	)
Cumulative net income		1,074,255			(3,154	)					1,071,101
Cumulative dividends		(1,446,959	)								(1,446,959	)
Accumulated other comprehensive income		(7,381	)								(7,381	)
Other equity		2,701									2,701

Total Health Care REIT, Inc. stockholders’ equity		2,404,356			20,908			0			2,425,264
Noncontrolling interests		0						9,687			9,687

Total equity		2,404,356			20,908			9,687			2,434,951

Total liabilities and equity	$	5,213,856		$	0		$	0		$	5,213,856

The following tables illustrate the retrospective restatement of our previously reported consolidated statements of income amounts to reflect the application of SFAS 160 and FSP 14-1 as well as the SFAS 144 discontinued operation reclassifications for the periods indicated (amounts in thousands, except per share amounts):


	Year Ended December 31, 2008
	As Previously			FSP 14-1			SFAS 160		SFAS 144			As
	Reported			Adjustment			Adjustment		Adjustment			Adjusted
Revenues:
Rental income	$	500,630		$	0		$	0	$	(15,489	)	$	485,141
Interest income		40,063											40,063
Other income		10,521											10,521

		551,214			0			0		(15,489	)		535,725
Expenses:
Interest expense		130,813			4,812					(3,161	)		132,464
Property operating expenses		43,990											43,990
Depreciation and amortization		156,154								(6,897	)		149,257
General and administrative		47,193											47,193
Realized loss on derivatives		23,393											23,393
Loss (gain) on extinguishment of debt		(2,094	)										(2,094	)
Provision for loan losses		94											94

		399,543			4,812			0		(10,058	)		394,297

Income from continuing operations before income taxes and minority interests		151,671			(4,812	)		0		(5,431	)		141,428
Income tax (expense) benefit		(1,306	)										(1,306	)

Income before minority interests		150,365			(4,812	)		0		(5,431	)		140,122
Minority interests		(126	)					126					0

Income from continuing operations		150,239			(4,812	)		126		(5,431	)		140,122
Discontinued operations:
Gain (loss) on sales of properties		163,933											163,933
Impairment of assets		(32,648	)										(32,648	)
Income from discontinued operations, net		6,587								5,431			12,018

		137,872			0			0		5,431			143,303

Net income		288,111			(4,812	)		126		0			283,425
Less: Preferred stock dividends		23,201											23,201
Net income attributable to noncontrolling interests		0						126					126

Net income attributable to common stockholders	$	264,910		$	(4,812	)	$	0	$	0		$	260,098


Average number of common shares outstanding:
Basic		93,732			93,732			93,732		93,732			93,732
Diluted		94,309			94,309			94,309		94,309			94,309

Earnings per share:
Basic:
Income from continuing operations attributable to common stockholders	$	1.36		$	(0.05	)	$	0.00	$	(0.06	)	$	1.25
Discontinued operations, net		1.47			0.00			0.00		0.06			1.53

Net income attributable to common stockholders*	$	2.83		$	(0.05	)	$	0.00	$	0.00		$	2.77


Diluted:
Income from continuing operations attributable to common stockholders	$	1.35		$	(0.05	)	$	0.00	$	(0.06	)	$	1.24
Discontinued operations, net		1.46			0.00			0.00		0.06			1.52

Net income attributable to common stockholders*	$	2.81		$	(0.05	)	$	0.00	$	0.00		$	2.76


	Year Ended December 31, 2007
	As Previously			FSP 14-1			SFAS 160		SFAS 144			As
	Reported			Adjustment			Adjustment		Adjustment			Adjusted
Revenues:
Rental income	$	417,673		$	0		$	0	$	(15,426	)	$	402,247
Interest income		25,823											25,823
Other income		10,035											10,035

		453,531			0			0		(15,426	)		438,105
Expenses:
Interest expense		131,893			3,047					(1,894	)		133,046
Property operating expenses		34,707											34,707
Depreciation and amortization		135,224								(6,189	)		129,035
General and administrative		37,465											37,465
Loss (gain) on extinguishment of debt		(1,081	)										(1,081	)

		338,208			3,047			0		(8,083	)		333,172

Income from continuing operations before income taxes and minority interests		115,323			(3,047	)		0		(7,343	)		104,933
Income tax (expense) benefit		(188	)										(188	)

Income before minority interests		115,135			(3,047	)		0		(7,343	)		104,745
Minority interests		(238	)					238					0

Income from continuing operations		114,897			(3,047	)		238		(7,343	)		104,745
Discontinued operations:
Gain (loss) on sales of properties		14,437											14,437
Income from discontinued operations, net		12,068								7,343			19,411

		26,505			0			0		7,343			33,848

Net income		141,402			(3,047	)		238		0			138,593
Less: Preferred stock dividends		25,130											25,130
Net income attributable to noncontrolling interests		0						238					238

Net income attributable to common stockholders	$	116,272		$	(3,047	)	$	0	$	0		$	113,225


Average number of common shares outstanding:
Basic		78,861			78,861			78,861		78,861			78,861
Diluted		79,409			79,409			79,409		79,409			79,409

Earnings per share:
Basic:
Income from continuing operations attributable to common stockholders	$	1.14		$	(0.04	)	$	0.00	$	(0.09	)	$	1.01
Discontinued operations, net		0.34			0.00			0.00		0.09			0.43

Net income attributable to common stockholders*	$	1.47		$	(0.04	)	$	0.00	$	0.00		$	1.44


Diluted:
Income from continuing operations attributable to common stockholders	$	1.13		$	(0.04	)	$	0.00	$	(0.09	)	$	1.00
Discontinued operations, net		0.33			0.00			0.00		0.09			0.43

Net income attributable to common stockholders*	$	1.46		$	(0.04	)	$	0.00	$	0.00		$	1.43


	Year Ended December 31, 2006
	As Previously			FSP 14-1			SFAS 160		SFAS 144			As
	Reported			Adjustment			Adjustment		Adjustment			Adjusted
Revenues:
Rental income	$	265,489		$	0		$	0	$	(13,075	)	$	252,414
Interest income		18,829											18,829
Other income		3,924											3,924

		288,242			0			0		(13,075	)		275,167
Expenses:
Interest expense		88,383			107					(3,889	)		84,601
Property operating expenses		1,039											1,039
Depreciation and amortization		81,828								(6,354	)		75,474
General and administrative		25,922											25,922
Provision for loan losses		1,000											1,000

		198,172			107			0		(10,243	)		188,036

Income from continuing operations before income taxes and minority interests		90,070			(107	)		0		(2,832	)		87,131
Income tax (expense) benefit		(82	)										(82	)

Income before minority interests		89,988			(107	)		0		(2,832	)		87,049
Minority interests		(13	)					13					0

Income from continuing operations		89,975			(107	)		13		(2,832	)		87,049
Discontinued operations:
Gain (loss) on sales of properties		1,267											1,267
Income from discontinued operations, net		11,508								2,832			14,340

		12,775			0			0		2,832			15,607

Net income		102,750			(107	)		13		0			102,656
Less: Preferred stock dividends		21,463											21,463
Net income attributable to noncontrolling interests		0						13					13

Net income attributable to common stockholders	$	81,287		$	(107	)	$	0	$	0		$	81,180


Average number of common shares outstanding:
Basic		61,661			61,661			61,661		61,661			61,661
Diluted		62,045			62,045			62,045		62,045			62,045

Earnings per share:
Basic:
Income from continuing operations attributable to common stockholders	$	1.11		$	0.00		$	0.00	$	(0.05	)	$	1.06
Discontinued operations, net		0.21			0.00			0.00		0.05			0.25

Net income attributable to common stockholders*	$	1.32		$	0.00		$	0.00	$	0.00		$	1.32


Diluted:
Income from continuing operations attributable to common stockholders	$	1.10		$	0.00		$	0.00	$	(0.05	)	$	1.06
Discontinued operations, net		0.21			0.00			0.00		0.05			0.25

Net income attributable to common stockholders*	$	1.31		$	0.00		$	0.00	$	0.00		$	1.31


*		Amounts may not sum due to rounding

In addition to the changes noted above for consolidated balance sheets and statements of income, conforming revisions have been made to the consolidated statements of stockholders’ equity and the consolidated statements of cash flows as well as Notes 1, 4, 9, 15, 16, 19 and 20 to the consolidated financial statements. The following is a summary of comprehensive income for the periods indicated (in thousands):


	Year Ended December 31,
	2008			2007			2006
Cash flow hedge activity	$	7,829		$	(7,194	)	$	0
Unrecognized losses on equity investments		(846	)		(192	)		0
Unrecognized actuarial gains/(losses)		(715	)		140			0

Total other comprehensive income		6,268			(7,246	)		0
Net income attributable to controlling interests		283,299			138,355			102,643

Comprehensive income attributable to controlling interests		289,567			131,109			102,643
Net and comprehensive income attributable to noncontrolling interests		126			238			13

Total comprehensive income	$	289,693		$	131,347		$	102,656

We adopted FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (“EITF 03-6-1”), effective January 1, 2009, which required retrospective application. EITF 03-6-1 clarifies that instruments granted in share-based payment transactions that are considered to be participating securities prior to vesting should be included in the earnings allocation under the two-class method of calculating earnings per share. We determined that our restricted shares granted under our long-term incentive plans are participating securities because the restricted shares participate in non-forfeitable dividends prior to vesting. Applying EITF 03-6-1 did not have an impact on previously reported amounts on any period presented.

HEALTH CARE REIT, INC.

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2008


									Gross Amount at Which
			Initial Cost to Company				Cost Capitalized		Carried at Close of Period
					Buildings &		Subsequent to				Buildings &		Accumulated		Year		Year
Description	Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Depreciation		Acquired		Built
							(Dollars in thousands)

Assisted Living Facilities:
Alhambra, CA	$	0	$	420	$	2,534	$	0	$	420	$	2,534	$	552		1999		1999
Asheboro, NC(2)		3,397		290		5,032		165		290		5,197		754		2003		1998
Asheville, NC		0		204		3,489		0		204		3,489		1,002		1999		1999
Asheville, NC		0		280		1,955		351		280		2,306		379		2003		1992
Azusa, CA		0		570		3,141		0		570		3,141		716		1998		1988
Bartlesville, OK		0		100		1,380		0		100		1,380		505		1996		1995
Bellevue, WI		0		1,740		18,260		0		1,740		18,260		1,215		2006		2004
Bradenton, FL		0		252		3,298		0		252		3,298		1,225		1996		1995
Bradenton, FL		0		100		1,700		942		100		2,642		1,215		1999		1996
Bremerton, WA		0		390		2,210		123		390		2,333		119		2006		1999
Burlington, NC		0		280		4,297		707		280		5,004		720		2003		2000
Burlington, NC		0		460		5,467		0		460		5,467		812		2003		1997
Butte, MT		0		550		3,957		43		550		4,000		890		1998		1999
Canton, OH		0		300		2,098		0		300		2,098		602		1998		1998
Cape Coral, FL		0		530		3,281		0		530		3,281		621		2002		2000
Cary, NC		0		1,500		4,350		986		1,500		5,336		1,389		1998		1996
Cedar Hill, TX		0		171		1,490		0		171		1,490		525		1997		1996
Chapel Hill, NC		0		354		2,646		783		354		3,429		595		2002		1997
Chelmsford, MA(1)		8,514		1,040		10,951		0		1,040		10,951		1,525		2003		1997
Chickasha, OK		0		85		1,395		0		85		1,395		505		1996		1996
Claremore, OK		0		155		1,428		0		155		1,428		496		1996		1996
Clarksville, TN		0		330		2,292		0		330		2,292		651		1998		1998
Cleburne, TX		0		520		5,369		0		520		5,369		219		2006		2007
Columbia, TN		0		341		2,295		0		341		2,295		654		1999		1999
Concord, NC(2)		4,478		550		3,921		55		550		3,976		654		2003		1997
Corpus Christi, TX		0		155		2,935		15		155		2,950		1,806		1997		1996
Corpus Christi, TX		0		420		4,796		139		420		4,935		3,405		1996		1997
Crystal Lake, IL		0		840		7,290		0		840		7,290		51		2007		2008
Danville, VA		0		410		3,954		722		410		4,676		701		2003		1998
Dayton, OH		0		690		2,970		1,428		690		4,398		1,271		2003		1994
DeForest, WI		0		250		5,350		0		250		5,350		247		2007		2006
Desoto, TX		0		205		1,383		0		205		1,383		474		1996		1996
Duncan, OK		0		103		1,347		0		103		1,347		482		1995		1996
Durham, NC		0		1,476		10,659		2,196		1,476		12,855		5,747		1997		1999
Eden, NC(2)		2,904		390		4,877		0		390		4,877		743		2003		1998
Edmond, OK		0		175		1,564		0		175		1,564		550		1995		1996
Elizabeth City, NC		0		200		2,760		2,011		200		4,771		1,086		1998		1999
Encinitas, CA		0		1,460		7,721		0		1,460		7,721		1,883		2000		2000
Enid, OK		0		90		1,390		0		90		1,390		508		1995		1995
Everett, WA		0		1,400		5,476		0		1,400		5,476		1,464		1999		1999
Fairfield, CA		0		1,460		14,040		0		1,460		14,040		2,708		2002		1998
Fairhaven, MA		0		770		6,230		0		770		6,230		786		2004		1999
Fayetteville, NY		0		410		3,962		500		410		4,462		826		2001		1997
Findlay, OH		0		200		1,800		0		200		1,800		589		1997		1997
Florence, NJ		0		300		2,978		0		300		2,978		560		2002		1999
Forest City, NC(2)		2,977		320		4,497		0		320		4,497		689		2003		1999
Fredericksburg, VA(4)		6,882		1,000		20,000		303		1,000		20,303		1,976		2005		1999
Gastonia, NC		0		310		3,096		22		310		3,118		492		2003		1994
Gastonia, NC(2)		3,959		470		6,129		0		470		6,129		903		2003		1998
Gastonia, NC(2)		3,790		400		5,029		120		400		5,149		759		2003		1996
Georgetown, TX		0		200		2,100		0		200		2,100		672		1997		1997
Greenfield, WI		0		600		6,626		0		600		6,626		252		2006		2006
Greensboro, NC		0		330		2,970		554		330		3,524		542		2003		1996
Greensboro, NC		0		560		5,507		1,013		560		6,520		994		2003		1997
Greenville, NC(2)		3,484		290		4,393		168		290		4,561		662		2003		1998
Greenville, SC		0		310		4,750		0		310		4,750		594		2004		1997
Hamden, CT		0		1,470		4,530		0		1,470		4,530		1,009		2002		1998
Hamilton, NJ		0		440		4,469		0		440		4,469		846		2001		1998
Harlingen, TX		0		92		2,057		127		92		2,184		1,304		1997		1989
Hemet, CA		0		870		3,405		0		870		3,405		152		2007		1996
Henderson, NV		0		380		9,220		65		380		9,285		2,450		1998		1998
Henderson, NV		0		380		4,360		41		380		4,401		964		1999		2000
Hickory, NC		0		290		987		232		290		1,219		251		2003		1994


									Gross Amount at Which
			Initial Cost to Company				Cost Capitalized		Carried at Close of Period
					Buildings &		Subsequent to				Buildings &		Accumulated		Year		Year
Description	Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Depreciation		Acquired		Built
							(Dollars in thousands)

Highlands Ranch, CO	$	0	$	940	$	3,721	$	0	$	940	$	3,721	$	711		2002		1999
High Point, NC		0		560		4,443		793		560		5,236		790		2003		2000
High Point, NC		0		370		2,185		410		370		2,595		419		2003		1999
High Point, NC(2)		2,531		330		3,395		28		330		3,423		521		2003		1994
High Point, NC(2)		2,856		430		4,143		0		430		4,143		625		2003		1998
Hopedale, MA		0		130		8,170		0		130		8,170		850		2005		1999
Houston, TX		0		360		2,640		0		360		2,640		481		2002		1999
Houston, TX		0		360		2,640		0		360		2,640		475		2002		1999
Hutchinson, KS		0		600		10,590		0		600		10,590		1,192		2004		1997
Irving, TX		0		1,030		6,823		0		1,030		6,823		48		2007		2008
Jackson, TN		0		540		1,633		3,015		540		4,648		443		2003		1998
Jonesboro, GA		0		460		1,304		0		460		1,304		206		2003		1992
Kalispell, MT		0		360		3,282		0		360		3,282		919		1998		1998
Kenner, LA		0		1,100		10,036		125		1,100		10,161		4,592		1998		2000
Kent, WA		0		940		20,318		253		940		20,571		542		2007		2000
Kirkland, WA(1)		4,660		1,880		4,315		0		1,880		4,315		639		2003		1996
Knoxville, TN		0		315		2,754		0		315		2,754		476		2002		1998
Lake Havasu City, AZ		0		450		4,223		0		450		4,223		1,109		1998		1999
Lake Havasu City, AZ		0		110		2,244		136		110		2,380		665		1998		1994
Lecanto, FL		0		200		6,900		0		200		6,900		828		2004		1986
Lenoir, NC		0		190		3,748		641		190		4,389		658		2003		1998
Lexington, NC		0		200		3,900		1,015		200		4,915		832		2002		1997
Longview, TX		0		610		5,520		0		610		5,520		236		2006		2007
Manassas, VA(1)		3,547		750		7,446		0		750		7,446		1,055		2003		1996
Mansfield, TX		0		660		5,251		0		660		5,251		227		2006		2007
Margate, FL		0		500		7,303		2,459		500		9,762		5,426		1998		1972
Martinsville, NC		0		349		0		0		349		0		0		2003
Marysville, CA		0		450		4,172		44		450		4,216		941		1998		1999
Matthews, NC(2)		3,630		560		4,738		0		560		4,738		747		2003		1998
McHenry, IL		0		1,632		0		0		1,632		0		0		2006
McHenry, IL		0		3,550		15,300		6,510		3,550		21,810		822		2006		2004
Menomonee Falls, WI		0		1,020		6,984		0		1,020		6,984		234		2006		2007
Miami, FL		0		960		4,037		0		960		4,037		91		2008		1987
Middleburg Heights, OH		0		960		7,780		0		960		7,780		894		2004		1998
Middleton, WI		0		420		4,006		600		420		4,606		750		2001		1991
Midwest City, OK		0		95		1,385		0		95		1,385		507		1996		1995
Missoula, MT(3)		6,218		550		7,490		0		550		7,490		671		2005		1998
Monroe, NC		0		470		3,681		648		470		4,329		666		2003		2001
Monroe, NC		0		310		4,799		857		310		5,656		819		2003		2000
Monroe, NC(2)		3,248		450		4,021		114		450		4,135		630		2003		1997
Morehead City, NC		0		200		3,104		1,648		200		4,752		1,072		1999		1999
Mt. Vernon, WA		0		400		2,200		156		400		2,356		123		2006		2001
Nacogdoches, TX		0		390		5,754		0		390		5,754		234		2006		2007
Nashville, TN		0		4,910		29,590		0		4,910		29,590		398		2008		2007
New York, NY		0		1,440		21,460		975		1,440		22,435		1,130		2006		1959
Newark, DE		0		560		21,220		0		560		21,220		2,347		2004		1998
Newburyport, MA		0		960		8,290		0		960		8,290		1,511		2002		1999
Norman, OK		0		55		1,484		0		55		1,484		626		1995		1995
North Augusta, SC		0		332		2,558		0		332		2,558		718		1999		1998
North Miami Beach, FL		0		300		5,709		2,006		300		7,715		4,161		1998		1987
North Oklahoma City, OK		0		87		1,508		0		87		1,508		518		1996		1996
Ogden, UT		0		360		6,700		0		360		6,700		778		2004		1998
Oklahoma City, OK		0		130		1,350		0		130		1,350		484		1995		1996
Oklahoma City, OK		0		220		2,943		0		220		2,943		770		1999		1999
Oklahoma City, OK		0		590		7,513		0		590		7,513		104		2007		2008
Oneonta, NY		0		80		5,020		0		80		5,020		170		2007		1996
Oshkosh, WI		0		900		3,800		3,687		900		7,487		472		2006		2005
Oswego, IL		0		900		8,047		0		900		8,047		56		2006		2008
Owasso, OK		0		215		1,380		0		215		1,380		479		1996		1996
Palestine, TX		0		173		1,410		0		173		1,410		491		1996		1996
Palestine, TX		0		180		4,320		0		180		4,320		297		2006		2005
Paris, TX		0		490		5,452		0		490		5,452		786		2005		2006
Paso Robles, CA		0		1,770		8,630		0		1,770		8,630		1,654		2002		1998
Pinehurst, NC		0		290		2,690		484		290		3,174		506		2003		1998
Piqua, OH		0		204		1,885		0		204		1,885		566		1997		1997
Pittsburgh, PA		0		1,750		8,572		115		1,750		8,687		917		2005		1998
Ponca City, OK		0		114		1,536		0		114		1,536		557		1995		1995
Portland, OR		0		628		3,585		232		628		3,817		1,000		1998		1999
Quincy, MA		0		2,690		15,410		0		2,690		15,410		1,624		2004		1999
Reidsville, NC		0		170		3,830		857		170		4,687		805		2002		1998
Reno, NV		0		1,060		11,440		0		1,060		11,440		1,313		2004		1998


									Gross Amount at Which
			Initial Cost to Company				Cost Capitalized		Carried at Close of Period
					Buildings &		Subsequent to				Buildings &		Accumulated		Year		Year
Description	Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Depreciation		Acquired		Built
							(Dollars in thousands)

Ridgeland, MS(1)	$	4,505	$	520	$	7,675	$	0	$	520	$	7,675	$	1,089		2003		1997
Rocky Hill, CT		0		1,460		7,040		0		1,460		7,040		1,420		2002		1998
Rocky Hill, CT		0		1,090		6,710		0		1,090		6,710		1,001		2003		1996
Romeroville, IL		0		1,895		0		0		1,895		0		0		2006
Roswell, GA		0		620		2,200		184		620		2,384		464		2002		1997
Salem, OR		0		449		5,172		0		449		5,172		1,432		1999		1998
Salisbury, NC(2)		3,519		370		5,697		168		370		5,865		856		2003		1997
Salt Lake City, UT		0		1,060		6,142		0		1,060		6,142		1,374		1999		1986
San Angelo, TX		0		260		8,800		0		260		8,800		990		2004		1997
San Juan Capistrano, CA		0		1,390		6,942		0		1,390		6,942		1,430		2000		2001
Sarasota, FL		0		475		3,175		0		475		3,175		1,179		1996		1995
Scottsdale, AZ		0		2,500		3,890		0		2,500		3,890		62		2008		1999
Seven Fields, PA		0		484		4,663		59		484		4,722		1,313		1999		1999
Shawnee, OK		0		80		1,400		0		80		1,400		508		1996		1995
Sheboygan, WI		0		80		5,320		0		80		5,320		364		2006		2006
Sherman, TX		0		700		5,221		0		700		5,221		283		2005		2006
Smithfield, NC(2)		3,389		290		5,680		0		290		5,680		850		2003		1998
Statesville, NC		0		150		1,447		266		150		1,713		272		2003		1990
Statesville, NC		0		310		6,183		8		310		6,191		890		2003		1996
Statesville, NC(2)		2,376		140		3,627		0		140		3,627		545		2003		1999
Stillwater, OK		0		80		1,400		0		80		1,400		512		1995		1995
Texarkana, TX		0		192		1,403		0		192		1,403		486		1996		1996
Troy, OH		0		200		2,000		0		200		2,000		643		1997		1997
Tyler, TX		0		650		5,268		0		650		5,268		226		2006		2007
Valparaiso, IN		0		112		2,557		1		112		2,558		541		2001		1998
Valparaiso, IN		0		108		2,962		0		108		2,962		614		2001		1999
Vero Beach, FL		0		263		3,187		0		263		3,187		654		2001		1999
Vero Beach, FL		0		297		3,263		0		297		3,263		676		2001		1996
W. Hartford, CT		0		2,650		5,980		0		2,650		5,980		807		2004		1905
Wake Forest, NC		0		200		3,003		1,742		200		4,745		1,146		1998		1999
Waterford, CT		0		1,360		12,539		0		1,360		12,539		2,328		2002		2000
Waxahachie, TX		0		154		1,429		0		154		1,429		497		1996		1996
Waxahachie, TX		0		650		5,763		0		650		5,763		93		2007		2008
Weatherford, TX		0		660		5,261		0		660		5,261		228		2006		2007
Westerville, OH		0		740		8,287		2,736		740		11,023		4,280		1998		2001
Wilmington, NC		0		210		2,991		0		210		2,991		821		1999		1999
Winston-Salem, NC		0		360		2,514		459		360		2,973		456		2003		1996

Total Assisted Living Facilities		80,864		103,536		868,344		47,242		103,536		915,586		150,672
Skilled Nuring Facilities:
Agawam, MA		0		880		16,112		2,134		880		18,246		3,121		2002		1993
Akron, OH		0		290		8,219		491		290		8,710		772		2005		1961
Akron, OH		0		630		7,535		184		630		7,719		540		2006		1915
Alexandria, VA		0		1,330		7,820		0		1,330		7,820		0		2008		1955
Alliance, OH(5)		4,856		270		7,723		107		270		7,830		627		2006		1982
Amarillo, TX		0		540		7,260		0		540		7,260		745		2005		1986
Arcadia, LA		0		240		5,460		0		240		5,460		504		2006		2006
Atlanta, GA		0		460		5,540		0		460		5,540		618		2005		1972
Auburndale, FL		0		750		5,950		0		750		5,950		631		2005		1983
Austin, TX		0		730		18,970		0		730		18,970		893		2007		2006
Baltic, OH(5)		3,980		50		8,709		189		50		8,898		694		2006		1983
Baytown, TX		0		450		6,150		0		450		6,150		1,148		2002		2000
Beachwood, OH		0		1,260		23,478		0		1,260		23,478		4,570		2001		1990
Beattyville, KY		0		100		6,900		0		100		6,900		654		2005		1972
Bernice, LA		0		16		1,017		0		16		1,017		197		2005		1969
Birmingham, AL		0		390		4,902		0		390		4,902		852		2003		1977
Birmingham, AL		0		340		5,734		0		340		5,734		937		2003		1974
Boise, ID		0		810		5,401		0		810		5,401		1,903		1998		1966
Boonville, IN		0		190		5,510		0		190		5,510		1,034		2002		2000
Bountiful, UT		0		991		6,850		0		991		6,850		624		2005		1987
Boynton Beach, FL		0		980		8,112		0		980		8,112		1,040		2004		1999
Braintree, MA		0		170		7,157		1,290		170		8,447		4,906		1997		1968
Brandon, MS		0		115		9,549		0		115		9,549		1,571		2003		1963
Bridgewater, NJ		0		1,850		3,050		0		1,850		3,050		504		2004		1970
Brighton, MA		0		240		3,859		2,126		240		5,985		591		2005		1982
Broadview Heights, OH		0		920		12,400		0		920		12,400		2,420		2001		1984
Bunnell, FL		0		260		7,118		0		260		7,118		966		2004		1985
Butler, AL		0		90		3,510		0		90		3,510		516		2004		1960
Byrdstown, TN		0		0		2,414		0		0		2,414		764		2004		1982
Canton, MA		0		820		8,201		263		820		8,464		1,674		2002		1993


									Gross Amount at Which
			Initial Cost to Company				Cost Capitalized		Carried at Close of Period
					Buildings &		Subsequent to				Buildings &		Accumulated		Year		Year
Description	Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Depreciation		Acquired		Built
							(Dollars in thousands)

Carrollton, TX	$	0	$	730	$	2,770	$	0	$	730	$	2,770	$	356		2005		1976
Centerville, MA		0		1,490		9,650		8,443		1,490		18,093		1,363		2004		1982
Cheswick, PA		0		384		6,041		1,293		384		7,334		2,225		1998		1933
Clarksville, TN		0		480		5,020		0		480		5,020		374		2006		1989
Clearwater, FL		0		160		7,218		0		160		7,218		887		2004		1961
Clearwater, FL		0		1,260		2,740		0		1,260		2,740		378		2005		1983
Cleveland, MS		0		0		1,850		0		0		1,850		1,018		2003		1977
Cleveland, TN		0		350		5,000		122		350		5,122		1,073		2001		1987
Coeur d’Alene, ID		0		600		7,878		0		600		7,878		2,430		1998		1996
Colorado Springs, CO		0		310		6,290		0		310		6,290		685		2005		1985
Columbia, TN		0		590		3,787		0		590		3,787		735		2003		1974
Columbus, IN		0		530		5,170		1,540		530		6,710		1,122		2002		2001
Columbus, OH		0		1,070		11,726		1,204		1,070		12,930		1,062		2005		1968
Columbus, OH		0		1,860		16,624		1,077		1,860		17,701		1,366		2006		1978
Columbus, OH(5)		4,533		1,010		4,931		91		1,010		5,022		441		2006		1983
Corpus Christi, TX		0		307		443		0		307		443		129		2005		1985
Corpus Christi, TX		0		400		1,916		0		400		1,916		259		2005		1985
Dade City, FL		0		250		7,150		0		250		7,150		905		2004		1975
Daytona Beach, FL		0		470		5,930		0		470		5,930		817		2004		1986
Daytona Beach, FL		0		490		5,710		0		490		5,710		816		2004		1961
Daytona Beach, FL		0		1,850		2,650		0		1,850		2,650		379		2005		1964
DeBary, FL		0		440		7,460		0		440		7,460		940		2004		1965
Dedham, MA		0		1,360		9,830		0		1,360		9,830		2,008		2002		1996
Defuniak Springs, FL		0		1,350		10,250		0		1,350		10,250		688		2006		1980
DeLand, FL		0		220		7,080		0		220		7,080		900		2004		1967
Denton, MD		0		390		4,010		0		390		4,010		778		2003		1982
Denver, CO		0		2,530		9,514		0		2,530		9,514		842		2005		1986
Douglasville, GA		0		1,350		7,471		0		1,350		7,471		1,304		2003		1975
Easton, PA		0		285		6,315		0		285		6,315		3,023		1993		1959
Eight Mile, AL		0		410		6,110		0		410		6,110		1,111		2003		1973
El Paso, TX		0		539		8,961		0		539		8,961		926		2005		1970
El Paso, TX		0		642		3,958		1,100		642		5,058		496		2005		1969
Elizabethton, TN		0		310		4,604		336		310		4,940		1,082		2001		1980
Erin, TN		0		440		8,060		134		440		8,194		1,647		2001		1981
Eugene, OR		0		300		5,316		0		300		5,316		1,779		1998		1972
Fairfield, AL		0		530		9,134		0		530		9,134		1,512		2003		1965
Fall River, MA		0		620		5,829		4,856		620		10,685		2,937		1996		1973
Farmerville, LA		0		147		4,087		0		147		4,087		457		2005		1984
Florence, AL		0		320		3,975		0		320		3,975		778		2003		1972
Fork Union, VA		0		310		2,490		0		310		2,490		0		2008		1990
Fort Myers, FL		0		636		6,026		0		636		6,026		2,785		1998		1984
Fort Pierce, FL		0		440		3,560		0		440		3,560		365		2005		1973
Goochland, VA		0		350		3,697		0		350		3,697		0		2008		1991
Goshen, IN		0		210		6,120		0		210		6,120		473		2005		2006
Graceville, FL		0		150		13,000		0		150		13,000		848		2006		1980
Grand Prairie, TX		0		574		3,426		0		574		3,426		425		2005		1982
Granite City, IL		0		610		7,143		842		610		7,985		3,792		1998		1973
Granite City, IL		0		400		4,303		707		400		5,010		2,325		1999		1964
Greeneville, TN		0		400		8,290		0		400		8,290		1,145		2004		1979
Hanover, IN		0		210		4,430		0		210		4,430		587		2004		2000
Hardin, IL		0		50		5,350		135		50		5,485		2,290		2002		1996
Harriman, TN		0		590		8,060		158		590		8,218		1,759		2001		1972
Herculaneum, MO		0		127		10,373		393		127		10,766		4,367		2002		1984
Hilliard, FL		0		150		6,990		0		150		6,990		2,078		1999		1990
Homestead, FL		0		2,750		11,750		0		2,750		11,750		784		2006		1994
Houston, TX		0		600		2,700		0		600		2,700		351		2005		1974
Houston, TX		0		860		18,715		0		860		18,715		630		2007		2006
Houston, TX		0		630		5,970		750		630		6,720		1,204		2002		1995
Huron, OH		0		160		6,088		252		160		6,340		543		2005		1983
Jackson, MS		0		410		1,814		0		410		1,814		367		2003		1968
Jackson, MS		0		0		4,400		0		0		4,400		2,420		2003		1980
Jackson, MS		0		0		2,150		0		0		2,150		1,183		2003		1970
Jamestown, TN		0		0		6,707		0		0		6,707		2,124		2004		1966
Jefferson, OH		0		80		9,120		0		80		9,120		783		2006		1984
Jefferson City, MO		0		370		6,730		301		370		7,031		2,840		2002		1982
Jonesboro, GA		0		840		1,921		0		840		1,921		409		2003		1992
Kalida, OH		0		480		8,173		0		480		8,173		306		2006		2007
Kissimmee, FL		0		230		3,854		0		230		3,854		492		2004		1972
LaBelle, FL		0		60		4,946		0		60		4,946		685		2004		1986
Lake Placid, FL		0		150		12,850		0		150		12,850		1,662		2004		1984
Lakeland, FL		0		696		4,843		0		696		4,843		2,254		1998		1984


										Gross Amount at Which
			Initial Cost to Company				Cost Capitalized			Carried at Close of Period
					Buildings &		Subsequent to					Buildings &		Accumulated		Year		Year
Description	Encumbrances		Land		Improvements		Acquisition			Land		Improvements		Depreciation		Acquired		Built
							(Dollars in thousands)

Lawrenceville, VA	$	0	$	170	$	4,780	$	0		$	170	$	4,780	$	0		2008		1989
Lee, MA		0		290		18,135		927			290		19,062		3,486		2002		1998
Littleton, MA		0		1,240		2,910		0			1,240		2,910		654		1996		1975
Longview, TX		0		293		1,707		0			293		1,707		246		2005		1971
Longwood, FL		0		480		7,520		0			480		7,520		969		2004		1980
Louisville, KY		0		490		10,010		0			490		10,010		1,237		2005		1978
Louisville, KY		0		430		7,135		163			430		7,298		1,538		2002		1974
Louisville, KY		0		350		4,675		110			350		4,785		1,029		2002		1975
Lowell, MA		0		370		7,450		1,550			370		9,000		850		2004		1977
Lufkin, TX		0		416		1,184		(74	)		342		1,184		248		2005		1919
Manchester, NH		0		340		4,360		0			340		4,360		434		2005		1984
Marianna, FL		0		340		8,910		0			340		8,910		580		2006		1997
McComb, MS		0		120		5,786		0			120		5,786		930		2003		1973
Memphis, TN		0		970		4,246		0			970		4,246		795		2003		1981
Memphis, TN		0		480		5,656		0			480		5,656		980		2003		1982
Memphis, TN		0		940		5,963		0			940		5,963		941		2004		1951
Merrillville, IN		0		643		7,084		3,526			643		10,610		4,068		1997		1999
Mesa, AZ		0		940		2,579		0			940		2,579		350		2005		1985
Midwest City, OK		0		470		5,673		0			470		5,673		2,554		1998		1958
Midwest City, OK		0		484		5,516		0			484		5,516		596		2005		1987
Millbury, MA		0		930		4,570		0			930		4,570		681		2004		1972
Mobile, AL		0		440		3,625		0			440		3,625		687		2003		1982
Monteagle, TN		0		310		3,318		0			310		3,318		598		2003		1980
Monterey, TN		0		0		4,195		0			0		4,195		1,328		2004		1977
Monticello, FL		0		140		4,471		0			140		4,471		637		2004		1986
Morgantown, KY		0		380		3,705		0			380		3,705		631		2003		1965
Moss Point, MS		0		120		7,280		0			120		7,280		958		2004		1933
Mountain City, TN		0		220		5,896		660			220		6,556		2,318		2001		1976
Naples, FL		0		550		5,450		0			550		5,450		688		2004		1968
Natchitoches, LA		0		190		4,096		0			190		4,096		435		2005		1975
Needham, MA		0		1,610		13,715		366			1,610		14,081		2,838		2002		1994
New Haven, CT		0		160		4,778		1,266			160		6,044		1,046		2006		1958
New Haven, IN		0		176		3,524		0			176		3,524		528		2004		1981
New Port Richey, FL		0		624		7,307		0			624		7,307		3,361		1998		1984
North Miami, FL		0		430		3,918		0			430		3,918		682		2004		1968
North Miami, FL		0		440		4,830		0			440		4,830		687		2004		1963
Norwalk, CT		0		410		2,118		2,201			410		4,319		981		2004		1971
Oklahoma City, OK		0		510		10,694		0			510		10,694		800		1998		1979
Ormond Beach, FL		0		0		2,739		73			0		2,812		932		2002		1983
Overland Park, KS		0		1,120		8,360		0			1,120		8,360		755		2005		1970
Owensboro, KY		0		240		6,760		0			240		6,760		739		1993		1966
Owensboro, KY		0		225		13,275		0			225		13,275		1,359		2005		1964
Owenton, KY		0		100		2,400		0			100		2,400		302		2005		1979
Panama City, FL		0		300		9,200		0			300		9,200		1,194		2004		1992
Pasadena, TX		0		720		24,080		0			720		24,080		1,117		2007		2005
Pigeon Forge, TN		0		320		4,180		117			320		4,297		963		2001		1986
Pikesville, MD		0		450		10,750		0			450		10,750		525		2007		1983
Plano, TX		0		1,305		9,095		0			1,305		9,095		962		2005		1977
Plymouth, MA		0		440		6,220		2,330			440		8,550		756		2004		1968
Port St. Joe, FL		0		370		2,055		0			370		2,055		468		2004		1982
Post Falls, ID		0		2,700		14,217		0			2,700		14,217		0		2007		2008
Prospect, CT		0		820		1,441		2,407			820		3,848		835		2004		1970
Pueblo, CO		0		370		6,051		0			370		6,051		2,099		1998		1989
Pueblo, CO		0		250		9,391		0			250		9,391		867		2005		1985
Quincy, FL		0		200		5,333		0			200		5,333		765		2004		1983
Quitman, MS		0		60		10,340		0			60		10,340		1,281		2004		1976
Richmond, VA		0		1,211		2,889		0			1,211		2,889		665		2003		1995
Richmond, VA		0		760		12,640		0			760		12,640		630		2007		1969
Ridgely, TN		0		300		5,700		97			300		5,797		1,195		2001		1990
Ringgold, LA		0		30		4,174		0			30		4,174		428		2005		1984
Rochdale, MA		0		675		11,847		2,024			800		13,746		2,341		2002		1995
Rockledge, FL		0		360		4,117		0			360		4,117		1,102		2001		1970
Rockwood, TN		0		500		7,116		741			500		7,857		1,643		2001		1979
Rogersville, TN		0		350		3,278		0			350		3,278		593		2003		1980
Royal Palm Beach, FL		0		980		8,320		0			980		8,320		1,104		2004		1984
Ruleville, MS		0		0		50		0			0		50		28		2003		1978
Ruston, LA		0		130		9,403		0			130		9,403		854		2005		1965
San Antonio, TX		0		560		7,315		0			560		7,315		1,377		2002		2000
San Antonio, TX		0		640		13,360		0			640		13,360		647		2007		2004
Sandwich, MA		0		1,140		11,190		335			1,140		11,525		1,154		2004		1987
Sarasota, FL		0		560		8,474		0			560		8,474		2,194		1999		2000


									Gross Amount at Which
			Initial Cost to Company				Cost Capitalized		Carried at Close of Period
					Buildings &		Subsequent to				Buildings &		Accumulated		Year		Year
Description	Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Depreciation		Acquired		Built
							(Dollars in thousands)

Sarasota, FL	$	0	$	600	$	3,400	$	0	$	600	$	3,400	$	478		2004		1982
Scituate, MA		0		1,740		10,640		0		1,740		10,640		890		2005		1976
Seville, OH		0		230		1,770		0		230		1,770		246		2005		1981
Shelby, MS		0		60		5,340		0		60		5,340		682		2004		1979
Shelbyville, KY		0		630		3,870		0		630		3,870		401		2005		1965
South Boston, MA		0		385		2,002		5,218		385		7,220		2,064		1995		1961
South Pittsburg, TN		0		430		5,628		0		430		5,628		840		2004		1979
Southbridge, MA		0		890		8,110		3,000		890		11,110		1,267		2004		1976
Spring City, TN		0		420		6,085		2,580		420		8,665		1,704		2001		1987
St. Louis, MO		0		750		6,030		0		750		6,030		1,088		1995		1994
Starke, FL		0		120		10,180		0		120		10,180		1,310		2004		1990
Staunton, VA		0		310		11,090		0		310		11,090		559		2007		1959
Stuart, FL		0		390		8,110		0		390		8,110		1,035		2004		1985
Swanton, OH		0		330		6,370		0		330		6,370		760		2004		1950
Tampa, FL		0		830		6,370		0		830		6,370		1,012		2004		1968
Torrington, CT		0		360		1,261		829		360		2,090		469		2004		1966
Troy, OH		0		470		16,730		0		470		16,730		1,921		2004		1971
Tucson, AZ		0		930		13,399		0		930		13,399		1,154		2005		1985
Tupelo, MS		0		740		4,092		0		740		4,092		751		2003		1980
Uhrichsville, OH		0		24		6,716		0		24		6,716		542		2006		1977
Venice, FL		0		500		6,000		0		500		6,000		744		2004		1987
Vero Beach, FL		0		660		9,040		1,462		660		10,502		4,725		1998		1984
Wareham, MA		0		875		10,313		1,701		875		12,014		2,183		2002		1989
Warren, OH		0		240		3,810		0		240		3,810		420		2005		1973
Waterbury, CT		0		370		2,166		1,416		370		3,582		621		2006		1972
Webster, TX		0		360		5,940		0		360		5,940		1,114		2002		2000
West Haven, CT		0		580		1,620		1,235		580		2,855		629		2004		1971
West Palm Beach, FL		0		696		8,037		0		696		8,037		4,346		1998		1984
West Worthington, OH		0		510		5,090		0		510		5,090		434		2006		1980
Westlake, OH		0		1,330		17,926		0		1,330		17,926		3,545		2001		1985
Westlake, OH		0		571		5,411		0		571		5,411		1,807		1998		1957
Westmoreland, TN		0		330		1,822		2,634		330		4,456		944		2001		1994
White Hall, IL		0		50		5,550		670		50		6,220		2,549		2002		1971
Whitemarsh, PA		0		2,310		6,190		0		2,310		6,190		762		2005		1967
Williamsburg, VA		0		1,360		7,440		0		1,360		7,440		376		2007		1970
Williamstown, KY		0		70		6,430		0		70		6,430		665		2005		1987
Winchester, VA		0		640		1,510		0		640		1,510		0		2008		1964
Winnfield, LA		0		31		6,480		0		31		6,480		617		2005		1964
Woodbridge, VA		0		680		4,423		0		680		4,423		868		2002		1977
Worcester, MA		0		1,100		5,400		2,750		1,100		8,150		968		2004		1962
Worcester, MA		0		2,300		9,060		0		2,300		9,060		64		2008		1993

Total Skilled Nursing Facilities		13,369		118,743		1,420,437		72,832		118,794		1,493,218		242,117
Independent Living Facilities:
Amelia Island, FL		0		3,290		24,310		18,195		3,290		42,505		2,071		2005		1998
Anderson, SC		0		710		6,290		0		710		6,290		951		2003		1986
Atlanta, GA		0		2,059		14,914		0		2,059		14,914		6,444		1997		1999
Aurora, CO		0		2,600		5,906		7,915		2,600		13,821		818		2006		1988
Aurora, CO		0		1,379		0		29,233		2,440		28,172		189		2006		2006
Austin, TX		0		880		9,520		0		880		9,520		2,695		1999		1998
Carmel, IN		0		2,370		57,175		0		2,370		57,175		854		2006		2007
Columbia, SC		0		2,120		4,860		2,185		2,120		7,045		1,002		2003		2000
Denver, CO		0		3,650		14,906		280		3,650		15,186		888		2006		1987
Douglasville, GA		0		90		217		0		90		217		39		2003		1985
Fremont, CA		0		3,400		25,300		0		3,400		25,300		2,003		2005		1987
Gardnerville, NV		0		1,144		10,831		0		1,144		10,831		5,226		1998		1999
Gilroy, CA		0		760		13,880		23,860		760		37,740		1,179		2006		2007
Houston, TX		0		4,790		7,100		0		4,790		7,100		1,479		2003		1974
Indianapolis, IN		0		495		6,287		22,565		495		28,852		1,381		2006		1981
Indianapolis, IN		0		255		2,473		12,123		255		14,596		431		2006		1981
Lauderhill, FL		0		1,836		25,216		0		1,836		25,216		2,372		2002		1976
Loma Linda, CA		0		2,214		9,586		0		2,214		9,586		190		2008		1976
Manteca, CA		0		1,300		12,125		0		1,300		12,125		986		2005		1985
Marysville, WA		0		620		4,780		0		620		4,780		664		2003		1998
Mesa, AZ		0		950		9,087		0		950		9,087		2,104		1999		2000
Mount Airy, NC		0		270		6,430		0		270		6,430		510		2005		1998
Naples, FL		0		1,716		17,306		0		1,716		17,306		10,283		1997		1999
Oshkosh, WI		0		400		23,237		0		400		23,237		0		2007		2008
Pawleys Island, SC		0		1,010		32,590		5,421		2,020		37,001		2,650		2005		1997


									Gross Amount at Which
			Initial Cost to Company				Cost Capitalized		Carried at Close of Period
					Buildings &		Subsequent to				Buildings &		Accumulated		Year		Year
Description	Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Depreciation		Acquired		Built
							(Dollars in thousands)

Raleigh, NC	$	0	$	10,000	$	0	$	0	$	10,000	$	0	$	0		2008
Raytown, MO		0		510		5,490		0		510		5,490		287		2006		2000
Rohnert Park, CA		0		6,500		18,700		0		6,500		18,700		1,501		2005		1985
Roswell, GA		0		1,107		9,627		0		1,107		9,627		4,695		1997		1999
Sonoma, CA		0		1,100		18,400		0		1,100		18,400		1,468		2005		1988
Spartanburg, SC		0		3,350		15,750		4,975		3,350		20,725		1,303		2005		1997
St. Simon’s Island, GA		0		6,440		50,060		0		6,440		50,060		640		2008		2007
Twin Falls, ID		0		550		14,740		0		550		14,740		2,512		2002		1991
Vacaville, CA		0		900		17,100		0		900		17,100		1,372		2005		1986
Vallejo, CA		0		4,000		18,000		0		4,000		18,000		1,438		2005		1989
Vero Beach, FL		0		2,930		40,070		1,963		2,930		42,033		1,491		2007		2003
Wichita, KS		0		1,400		11,000		0		1,400		11,000		563		2006		1997
Winston-Salem, NC		0		2,850		13,550		15,065		5,700		25,765		1,304		2005		1997

Total Independent Living Facilities		0		81,945		576,813		143,780		86,866		715,672		65,983
Specialty Care Facilities:
Amarillo, TX		0		72		11,928		1,399		72		13,327		1,100		2005		1986
Bellaire, TX		0		4,028		45,900		205		4,551		46,105		2,656		2006		2005
Boardman, OH		0		1,200		12,800		0		1,200		12,800		0		2008		2008
Bowling Green, KY		0		3,800		26,700		0		3,800		26,700		390		2008		1992
Chicago, IL		0		3,650		7,505		12,410		3,650		19,915		6,343		2002		1979
Corpus Christi, TX		0		77		3,923		0		77		3,923		415		2005		1968
Crown Point, IN		0		700		11,699		0		700		11,699		187		2007		2008
El Paso, TX		0		112		15,888		0		112		15,888		1,437		2005		1994
El Paso, TX		0		2,400		32,800		0		2,400		32,800		1,056		2008		2003
Fresno, CA		0		2,500		35,800		0		2,500		35,800		523		2008		1991
Ft. Wayne, IN		0		170		8,232		0		170		8,232		241		2006		2006
Lafayette, LA		0		1,928		10,483		26		1,928		10,509		821		2006		1993
Marlton, NJ		0		0		38,300		0		0		38,300		560		2008		1994
Meridian, ID		0		3,600		20,802		0		3,600		20,802		473		2006		2008
Midwest City, OK		0		146		3,854		0		146		3,854		398		2005		1996
Plano, TX		0		195		14,805		500		195		15,305		1,343		2005		1995
San Antonio, TX		0		0		17,303		0		0		17,303		1,038		2007		2007
San Bernardino, CA		0		3,700		14,300		0		3,700		14,300		149		2008		1993
San Diego, CA		0		0		22,003		0		0		22,003		230		2008		1992
Springfield, MA		0		2,100		22,913		160		2,100		23,073		10,178		1996		1952
Stoughton, MA		0		975		25,247		0		975		25,247		11,318		1996		1958
Tulsa, OK		0		3,003		6,025		19		3,003		6,044		659		2006		1992
Waukesha, WI		0		4,700		20,669		0		4,700		20,669		791		2007		2007
Webster, TX		0		2,418		12,028		32		2,418		12,060		1,030		2006		1991

Total Specialty Care Facilitiies		0		41,474		441,907		14,751		41,997		456,658		43,336
Medical Office Buildings:
Arcadia, CA(6)		10,513		5,408		23,219		563		5,618		23,782		2,235		2006		1984
Atlanta, GA		0		4,931		18,720		491		4,983		19,211		2,026		2006		1992
Aurora, IL		0		540		9,023		17		540		9,040		661		2006		1996
Aurora, IL		0		2,803		1,711		34		2,803		1,745		434		2006		1989
Austell, GA(6)		4,433		2,223		8,362		12		2,223		8,374		1,446		2006		1999
Bartlett, TN(7)		8,747		0		15,015		152		187		15,167		1,082		2007		2004
Bellaire, TX		0		2,972		33,445		181		2,972		33,626		2,202		2006		2005
Birmingham, AL		0		651		39,552		1,316		651		40,868		3,074		2006		1971
Boca Raton, FL(6)		14,298		109		34,002		481		109		34,483		2,622		2006		1995
Boynton Beach, FL(6)		4,349		0		6,574		143		214		6,717		421		2007		2004
Boynton Beach, FL(6)		4,766		2,048		7,692		21		2,048		7,713		839		2006		1995
Boynton Beach, FL(7)		4,275		2,048		7,403		174		2,048		7,577		636		2006		1997
Boynton Beach, FL(7)		6,384		0		11,235		291		109		11,526		919		2007		1996
Claremore, OK(7)		8,557		0		12,829		179		132		13,008		767		2007		2005
Coral Springs, FL		0		1,598		10,627		136		1,600		10,763		1,127		2006		1993
Dallas, TX(6)		16,081		137		29,357		232		137		29,589		3,400		2006		1995
Decatur, GA		0		934		1,837		83		934		1,920		621		2006		1971
Delray Beach, FL		0		1,882		34,767		996		1,941		35,763		3,351		2006		1985
Denton, TX(7)		12,623		0		19,407		0		0		19,407		955		2007		2005
Durham, NC		0		6,814		10,825		926		6,854		11,751		2,236		2006		1980
Durham, NC		0		0		0		39		1		39		5		2006		1980
El Paso, TX		0		600		6,700		0		600		6,700		0		2008		2003
El Paso, TX(6)		10,765		677		17,075		217		677		17,292		1,389		2006		1997
Fayetteville, GA(6)		3,438		959		7,540		269		959		7,809		678		2006		1999
Franklin, TN		0		2,338		12,138		0		2,338		12,138		822		2007		1988
Frisco, TX		0		0		15,309		308		0		15,617		900		2007		2004
Frisco, TX(7)		9,587		0		18,635		0		0		18,635		1,088		2007		2004


									Gross Amount at Which
			Initial Cost to Company				Cost Capitalized		Carried at Close of Period
					Buildings &		Subsequent to				Buildings &		Accumulated		Year		Year
Description	Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Depreciation		Acquired		Built
							(Dollars in thousands)

Germantown, TN	$	0	$	3,049	$	12,456	$	561	$	3,049	$	13,017	$	898		2006		2002
Glendale, CA(7)		8,627		0		18,558		0		37		18,558		1,188		2007		2002
Greeley, CO		0		877		6,711		0		877		6,711		365		2007		1997
Jupiter, FL(6)		7,511		2,252		11,415		22		2,252		11,437		977		2006		2001
Jupiter, FL(7)		4,681		0		5,858		0		2,825		5,858		430		2007		2004
Lakeway, TX		0		2,801		0		0		2,801		0		0		2007
Lakewood, CA		0		146		14,885		62		146		14,947		1,137		2006		1993
Las Vegas , NV(6)		6,287		74		15,287		69		74		15,356		1,416		2006		2000
Las Vegas, NV		0		6,127		0		0		6,127		0		0		2007
Las Vegas, NV		0		6,734		54,886		89		6,734		54,975		3,614		2006		1991
Las Vegas, NV(6)		4,663		2,319		4,612		55		2,319		4,667		493		2006		1991
Las Vegas, NV(7)		3,215		0		6,921		0		433		6,921		439		2007		1997
Lawrenceville, GA		0		2,279		10,732		20		2,279		10,752		859		2006		2001
Lawrenceville, GA(6)		2,437		1,054		4,974		9		1,054		4,983		414		2006		2002
Los Alamitos, CA(7)		8,763		0		18,635		28		39		18,663		1,116		2007		2003
Los Gatos, CA		0		488		22,832		170		488		23,002		2,646		2006		1993
Loxahatchee, FL		0		1,340		6,509		6		1,340		6,515		503		2006		1993
Loxahatchee, FL		0		1,637		5,048		170		1,646		5,218		329		2006		1997
Loxahatchee, FL(6)		2,804		1,553		4,694		109		1,562		4,803		322		2006		1994
Merrillville, IN		0		0		22,134		0		0		22,134		181		2008		2006
Mesa, AZ		0		1,558		9,561		0		1,558		9,561		428		2008		1989
Middletown, NY		0		1,756		20,364		71		1,756		20,435		2,493		2006		1998
Morrow, GA		0		818		8,064		99		833		8,163		417		2007		1990
Mount Juliet, TN(9)		6,032		1,566		12,885		0		1,566		12,885		824		2007		2005
Nashville , TN		0		1,806		7,165		128		1,806		7,293		833		2006		1986
Niagra Falls, NY		0		1,335		17,702		164		1,335		17,866		1,368		2007		1990
Ocala, FL		0		885		4,982		37		885		5,019		670		2006		1991
Okatie, SC(7)		8,271		0		18,282		80		171		18,362		1,546		2007		1998
Orange Village, OH		0		610		7,419		0		610		7,419		677		2007		1985
Palm Springs , CA		0		365		12,396		951		365		13,347		1,323		2006		1998
Palm Springs, FL		0		1,174		7,834		71		1,182		7,905		930		2006		1997
Palm Springs, FL(6)		2,872		733		4,078		7		739		4,085		372		2006		1993
Palmer, AK(7)		19,980		0		29,705		787		217		30,492		2,036		2007		2006
Pearland, TX(6)		2,477		781		5,522		5		781		5,527		524		2006		2000
Pearland, TX(6)		1,523		948		4,599		19		948		4,618		450		2006		2002
Pelham, AL		0		915		1,455		23		915		1,478		247		2006		1990
Phoenix, AZ		0		11,872		0		0		11,872		0		0		2007
Phoenix, AZ(6)		30,348		1,149		49,586		142		1,150		49,728		6,447		2006		1998
Pineville, NC		0		961		6,974		385		961		7,359		871		2006		1988
Plano, TX		0		5,423		20,752		0		5,423		20,752		346		2008		2007
Plantation, FL(6)		10,182		8,563		10,666		459		8,563		11,125		1,184		2006		1997
Plantation, FL(6)		9,494		8,848		9,423		47		8,896		9,470		2,117		2006		1996
Reno, NV		0		1,117		22,090		103		1,117		22,193		2,410		2006		1991
Sacramento, CA(6)		5,086		866		12,756		352		866		13,108		955		2006		1990
San Antonio, TX(6)		6,690		2,050		16,251		194		2,050		16,445		1,935		2006		1999
Somerville, NJ		0		3,400		22,244		0		3,400		22,244		232		2008		2007
St. Louis, MO(7)		7,892		0		17,247		0		336		17,247		1,177		2007		2001
Tempe, AZ(7)		5,715		0		9,112		84		1,486		9,196		832		2007		1996
Tomball, TX(6)		3,030		1,404		5,142		25		1,404		5,167		884		2006		1982
Trussville, AL		0		1,336		2,177		19		1,336		2,196		408		2006		1990
Tucson, AZ		0		1,302		4,925		0		1,302		4,925		176		2008		1995
Tucson, AZ(7)		10,673		89		18,339		314		89		18,653		1,069		2007		2004
Union City, TN		0		320		0		0		320		0		0		2006		1999
Voorhees, NJ		0		6,404		24,251		158		6,404		24,409		1,887		2006		1997
Warrington, PA		0		85		23,231		0		85		23,231		1,219		2008		2001
Wellington , FL(7)		6,579		0		13,697		0		381		13,697		783		2007		2003
Wellington, FL(6)		7,335		107		16,933		14		107		16,947		1,319		2006		2000
West Palm Beach, FL(6)		6,900		610		14,618		9		610		14,627		1,351		2006		1991
West Palm Beach, FL(6)		7,472		628		14,740		52		628		14,792		1,112		2006		1993
West Seneca, NY(8)		13,276		917		22,435		44		1,082		22,479		1,248		2007		1990
Yorkville, IL		0		1,419		2,816		23		1,419		2,839		310		2006		1980

Total Medical Office Buildings		339,631		146,522		1,192,564		13,497		153,714		1,206,061		98,673

Construction in Progress		0		0		639,419		0		0		639,419		0

		433,864		492,220		5,139,484		292,102		504,907		5,426,614		600,781
Assets Held For Sale:
Edinburg, TX(6),(10)		6,204		431		3,517		0		431		3,517		0		2006		1996
Lewisville, TX(10)		0		142		2,484		0		142		2,484		0		2006		1997
New Albany, OH		0		3,020		27,445		0		3,020		27,445		4,254		2002		2003


									Gross Amount at Which
			Initial Cost to Company				Cost Capitalized		Carried at Close of Period
					Buildings &		Subsequent to				Buildings &		Accumulated		Year		Year
Description	Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Depreciation		Acquired		Built
							(Dollars in thousands)

Palm Bay, FL(6),(10)	$	2,002	$	790	$	1,075	$	0	$	790	$	1,075	$	0		2006		1997
Suwanee, GA(10)		0		1,776		469		0		1,776		469		0		2006		1998
Suwanee, GA(10)		0		1,437		2,042		0		1,437		2,042		0		2006		2001
Suwanee, GA(10)		0		1,046		1,199		0		1,046		1,199		0		2006		2003
Union City, TN(10)		0		130		1,735		0		130		1,735		0		2006		1999
West Palm Beach, FL(6),(10)		6,308		780		2,790		0		780		2,790		0		2006		1995

Total Assets Held For Sale		14,514		9,552		42,756		0		9,552		42,756		4,254

Total Investment in Real Property Owned	$	448,378	$	501,772	$	5,182,240	$	292,102	$	514,459	$	5,469,370	$	605,035


(1)		In September 2003, four wholly-owned subsidiaries of the Company completed the acquisitions of four assisted living facilities from Emeritus Corporation. The properties were subject to existing mortgage debt of $24,291,000. The four wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company.

(2)		In September 2003, 15 wholly-owned subsidiaries of the Company completed the acquisitions of 15 assisted living facilities from Southern Assisted Living, Inc. The properties were subject to existing mortgage debt of $54,492,000. The 15 wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company.

(3)		In September 2005, one wholly-owned subsidiary of the Company completed the acquisition of one assisted living facility from Emeritus Corporation. The property was subject to existing mortgage debt of $6,705,000. The wholly-owned subsidiary is included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiary be a separate legal entity wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company.

(4)		In January 2005, one wholly-owned subsidiary of the Company completed the acquisition of one assisted living facility from Emeritus Corporation. The property was subject to existing mortgage debt of $7,875,000. The wholly-owned subsidiary is included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiary be a separate legal entity wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company.

(5)		In March 2006, three wholly-owned subsidiaries of the Company completed the acquisition of three skilled nursing facilities from Provider Services, Inc. The properties were subject to existing mortgage debt of $14,193,000. The wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company.

(6)		In December 2006, the Company completed the acquisition of Windrose Medical Properties Trust. Certain of the properties were subject to existing mortgage debt of $248,844,000. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries related to the aforementioned properties be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company.

(7)		In May 2007, a wholly-owned subsidiary of the Company completed the acquisition of 17 medical office buildings from Rendina Companies. Certain of the properties were subject to existing mortgage debt of $146,335,000. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries related to the aforementioned properties be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company.

(8)		In August 2007, a wholly-owned subsidiary of the Company completed the acquisition of a medical office building from C06 Holdings, LLC. The property was subject to existing mortgage debt of $13,623,000. The wholly-owned subsidiary is included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiary be a separate legal entity wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company.

(9)		In December 2007, a wholly-owned subsidiary of the Company completed the acquisition of a medical office building from Sports Docs, L.L.C. The property was subject to existing mortgage debt of $6,374,000. The wholly-owned subsidiary is included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiary be a separate legal entity wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company.


(10)		In December 2008, the Company recognized $32,648,000 of impairment charges related to medical office buildings that it intends to sell. This charge was treated as a reduction of the initial cost to the Company.

HEALTH CARE REIT, INC.


	Year Ended December 31,
	2008			2007			2006
	(In thousands)

Investment in real estate:
Balance at beginning of year	$	5,117,005		$	4,282,858		$	2,936,800
Additions:
Acquisitions		451,363			435,473			913,160
Improvements		646,161			333,520			169,811
Conversions from loans receivable		23,097			0			11,204
Deferred acquisition payments		0			0			2,000
Assumed other assets/(liabilities), net		1,899			2,432			24,488
Assumed debt		0			166,188			326,690
SFAS 141 adjustments		0			2,189			0
Reclassification of lease commissions		2,359			0			0

Total additions		1,124,879			939,802			1,447,353
Deductions:
Cost of real estate sold		(219,079	)		(105,655	)		(94,466	)
Reclassification of accumulated depreciation for assets held for sale		(10,582	)		0			(6,829	)
Impairment of assets		(32,648	)		0			0

Total deductions		(262,309	)		(105,655	)		(101,295	)

Balance at end of year(1)	$	5,979,575		$	5,117,005		$	4,282,858

Accumulated depreciation:
Balance at beginning of year	$	478,373		$	347,007		$	274,875
Additions:
Depreciation and amortization expenses		163,045			149,626			97,638
Amortization of above market leases		3,477			3,518			0
Reclassification of lease commissions		423			0			0

Total additions		166,945			153,144			97,638
Deductions:
Sale of properties		(33,578	)		(21,778	)		(18,677	)
Reclassification of accumulated depreciation for assets held for sale		(10,959	)		0			(6,829	)

Total deductions		(44,537	)		(21,778	)		(25,506	)

Balance at end of year	$	600,781		$	478,373		$	347,007


(1)		The aggregate cost for tax purposes for real property equals $5,977,346,000, $5,110,696,000 and $4,049,675,000 at December 31, 2008, 2007 and 2006, respectively.

HEALTH CARE REIT, INC.

SCHEDULE IV — MORTGAGE LOANS ON REAL ESTATE

December 31, 2008


						(In thousands)
												Principal Amount
												of Loans Subject
			Final		Periodic					Carrying		to Delinquent
	Interest		Maturity		Payment	Prior		Face Amount		Amount of		Principal or
Description	Rate		Date		Terms	Liens		of Mortgages		Mortgages		Interest(1)

First mortgage loan relating to		10.39%		09/30/20	Monthly Payments	$	0	$	34,000	$	33,205	$	0
two skilled nursing facilities in Florida					$317,978
First mortgage loan relating to		7.600%		06/30/13	Monthly Payments		0		40,000		17,800		0
one assisted living facility in New York					$114,960
First mortgage loan relating to		11.95%		09/01/12	Monthly Payments		0		12,700		12,201		0
one skilled nursing facility in Florida					$132,889
First mortgage loan relating to		4.46%		09/07/09	Monthly Payments		0		12,000		11,550		0
one specialty care facility in Massachusetts					$42,928
First mortgage loan relating to		15.21%		07/01/09	Monthly Payments		0		7,400		7,145		0
one skilled nursing facility in Pennsylvania					$83,355
Second mortgage loan realting to		19.26%		09/09/09	Monthly Payments		13,764		5,700		5,700		1,165
one independent living facility in Massachusetts					$48,165
First mortgage loan relating to		9.63%		05/01/09	Monthly Payments		0		18,800		5,518		500
one specialty care facility in California					$44,282
First mortgage loan realting to		19.26%		03/31/09	Monthly Payments		0		5,410		5,410		1,106
one independent living facility in Massachusetts					$45,715
First mortgage loan realting to		10.39%		07/01/20	Monthly Payments		0		4,500		4,329		0
one skilled nursing facility in Michigan					$37,493
First mortgage loan realting to		5.32%		01/01/13	Monthly Payments		0		4,500		4,151		0
one independent living facility in Arizona					$18,403
Four first mortgage loans		From		From	Monthly Payments		0		21,087		8,862		79
relating to one independent		7.00% to		09/1/09 to	from $2,734
living facility, one assisted living facility, and seven skilled nursing facilities		19.00%		12/01/15	to $76,514
Eight second mortgage loans		From		From	Monthly Payments		15,881		20,741		18,407		1,560
relating to six independent		11.84% to		04/08/09 to	from $2,960
living facilities, one skilled nursing facility and one specialty care facility		19.26%		01/31/12	to $26,278
Two third mortgage loans		From		From	Monthly Payments		3,945		3,109		3,014		352
relating to two independent		19.00% to		06/30/09 to	from $10,093
living facilities		19.26%		12/31/09	to $12,675

Totals						$	33,590	$	189,947	$	137,292	$	4,762


(1)		Represents allocation of allowance for losses on loans receivable, if applicable.


	December 31
	2004		2005		2006		2007		2008
Balance Sheet Data
Net real estate investments	$	2,441,972	$	2,849,518	$	4,122,893	$	5,012,620	$	5,854,179
Total assets		2,552,171		2,972,164		4,280,610		5,213,856		6,193,118
Total long-term obligations		1,192,958		1,500,818		2,191,698		2,683,760		2,847,676
Total liabilities		1,216,892		1,541,408		2,293,286		2,778,905		2,954,833
Total redeemable preferred stock		283,751		276,875		338,993		330,243		289,929
Total equity		1,335,279		1,430,756		1,987,324		2,434,951		3,238,285


(1)		Includes collection of negative principal amortization.

(2)		In 2007, the Company reclassified all loans that did not have a first, second or third mortgage lien to other real estate loans.