This summary highlights selected information from this proxy statement/prospectus. It does not contain all of the information that may be important to you. You should carefully read this entire proxy statement/prospectus and the other documents to which this document refers for a more complete understanding of the matters being considered at the special meeting. See “Where You Can Find More Information” in this proxy statement/prospectus.

 

Health Care REIT, Inc.

One SeaGate, Suite 1500

Toledo, Ohio 43604

(419) 247-2800

 

Health Care REIT is a self-administered, equity real estate investment trust, or REIT, that invests in health care and senior housing facilities. Founded in 1970, Health Care REIT was the first real estate investment trust to invest exclusively in health care facilities.

 

As of September 30, 2006, Health Care REIT had $3.1 billion of net real estate investments, inclusive of credit enhancements, in 477 facilities located in 37 states and managed by 58 different operators. At that date, the portfolio included 39 independent living/continuing care retirement communities, 204 assisted living facilities, 220 skilled nursing facilities and 14 specialty care facilities.

 

Health Care REIT seeks to increase funds from operations and funds available for distribution and to enhance stockholder value through relationship investing with public and private regionally focused operators. The primary components of this strategy are set forth below.

 

Relationship Investing.  Health Care REIT establishes relationships with, and provides financing to, operators throughout their growth cycles. Health Care REIT targets companies with experienced management teams, regionally focused operations, substantial inside ownership interests or venture capital backing and significant growth potential.

 

By maintaining close ties to operators, Health Care REIT is able to structure investments designed to support an operator’s business plan and monitor Health Care REIT’s investments on an ongoing basis. Health Care REIT’s investments are typically structured as master operating leases for the acquisition and development of facilities in a geographic region. Economic terms typically include annual rate increasers and fair market value-based purchase options.

 

Portfolio Management.  Portfolio strength is derived from diversity by operator, property sector and geographic location. Health Care REIT emphasizes long-term investment structures that result in a predictable asset base with attendant recurring income, funds from operations and funds available for distribution. Generally, master leases have a 12 to 15 year term and mortgage loans provide three to eight years of prepayment protection. Health Care REIT also regularly monitors the portfolio with its proprietary database system.

 

Depth of Management.  Health Care REIT’s management team is comprised of eight individuals who have an aggregate of approximately 158 years of experience in health care and real estate finance. The management team has successfully implemented Health Care REIT’s investment strategy of emphasizing relationship financings with strong, emerging operators.

 

Health Care REIT’s Internet address is http://www.hcreit.com. The information on or connected to Health Care REIT’s Internet Web site is not, and shall not be deemed to be, a part of, or incorporated into, this proxy statement/prospectus.

 

For additional information regarding Health Care REIT, see “Where You Can Find More Information” on page 96.

Heat Merger Sub, LLC

c/o Health Care REIT, Inc.

One SeaGate, Suite 1500

Toledo, Ohio 43604

(419) 247-2800

 

Heat Merger Sub is a Delaware limited liability company and a wholly-owned subsidiary of Health Care REIT. Heat Merger Sub was formed on September 12, 2006 solely for the purpose of effecting the merger. It has not carried on any activities other than in connection with the merger agreement.

 

Heat OP Merger Sub, L.P.

c/o Health Care REIT, Inc.

One SeaGate, Suite 1500

Toledo, Ohio 43604

(419) 247-2800

 

Heat OP Merger Sub is a Virginia limited partnership and a wholly-owned, indirect subsidiary of Health Care REIT. Heat OP Merger Sub was organized on September 12, 2006 solely for the purpose of effecting the operating partnership merger. It has not carried on any activities other than in connection with the merger agreement.

 

Windrose Medical Properties Trust

3502 Woodview Trace, Suite 210

Indianapolis, Indiana 46268

(317) 860-8180

 

Windrose is a self-managed specialty medical properties REIT. Windrose was organized in March 2002 as a Maryland REIT with perpetual existence and is taxed as a REIT under the federal income tax laws. Windrose completed its initial public offering and began operations in August 2002. Windrose was formed to acquire, selectively develop, and manage specialty medical properties, such as:

 

 

Windrose’s Internet address is http://www.windrosempt.com. The information on or connected to Windrose’s Internet Web site is not, and shall not be deemed to be, a part of, or incorporated into, this proxy statement/prospectus.

 

For additional information regarding Windrose, see “Where You Can Find More Information” on page 96.

 

Windrose Medical Properties, L.P.

c/o Windrose Medical Properties Trust, general partner

3502 Woodview Trace, Suite 210

Indianapolis, Indiana 46268

(317) 860-8180

 

Windrose owns its properties and conducts its business through Windrose Medical Properties, L.P. (which we refer to in this proxy statement/prospectus as Windrose OP). Windrose serves as the sole general partner of Windrose OP. As of September 30, 2006, Windrose owned an approximate 98.4% partnership interest in Windrose OP. For additional information regarding Windrose OP, see “Where You Can Find More Information” on page 96.

 

A special meeting of Windrose shareholders will be held at the Holiday Inn, 3850 DePauw Boulevard, Indianapolis, Indiana 46268, on December 14, 2006 at 3:00 p.m., local time. At the special meeting, the Windrose shareholders will be asked to consider and vote upon a proposal to approve the merger described in this proxy statement/prospectus and to consider and act upon any other business that may properly come before the special meeting (including any proposal to adjourn or postpone the special meeting).

 

Windrose’s board of trustees has fixed the close of business (5:30 p.m., local time) on November 8, 2006 as the record date for determining the shareholders of Windrose that are entitled to notice of, and to vote at, the special meeting. Only holders of record of Windrose common shares or Windrose preferred shares at the close of business on the record date are entitled to notice of the special meeting. Only holders of record of Windrose common shares at the close of business on the record date are entitled to vote at the special meeting. At the close of business on the record date, there were [•] Windrose common shares outstanding and entitled to vote at the special meeting.

 

Windrose shareholders will have one vote on any matter that may properly come before the special meeting for each Windrose common share that they owned on the record date.

 

Windrose’s amended and restated declaration of trust (which we refer to in this proxy statement/prospectus as Windrose’s declaration of trust) and bylaws require that the merger be affirmatively approved by holders of a majority of the Windrose common shares outstanding on the record date. Although considered present for the purposes of determining a quorum, abstentions and “broker non-votes” are not counted as votes in favor of the merger and the other transactions contemplated by the merger agreement and, therefore, have the same effect as a vote “against” the merger proposal.

 

In order for your Windrose common shares to be included in the vote, you must submit your proxy for your shares by returning the enclosed proxy card, or by telephone or through the Internet by following the instructions included with your proxy card, or you must vote in person at the special meeting. If you hold your shares through a broker or other nominee, you may receive separate voting instructions with the proxy statement. Your broker or nominee may provide proxy submission through the Internet or by telephone. Please contact your broker or nominee to determine how to authorize your vote.

 

At the close of business on the record date, Windrose’s trustees and executive officers and their affiliates were entitled to vote approximately [•] Windrose common shares (or approximately [•]% of the aggregate number of Windrose common shares outstanding on that date). Fred S. Klipsch, Windrose’s chairman and chief executive officer, and Frederick L. Farrar, Windrose’s president, chief operating officer and treasurer, have agreed pursuant to a support agreement to vote the Windrose common shares that they own “FOR” the merger proposal.

 

Windrose’s board of trustees believes that the merger is advisable on the terms set forth in the merger agreement, unanimously voted to approve the merger agreement and unanimously recommends that you vote “FOR” the merger.

 

In deciding to approve the merger, Windrose’s board of trustees considered the opinion of its financial advisor, J.P. Morgan Securities Inc. (which we refer to in this proxy statement/prospectus as JPMorgan), that, as of the date of its opinion, and subject to and based on the considerations referred to in its opinion, the exchange ratio is fair, from a financial point of view, to holders of Windrose common shares. The full text of this opinion is attached as Appendix D to this proxy statement/prospectus. Windrose urges its shareholders to read the opinion of JPMorgan in its entirety.

 

In considering the recommendation of Windrose’s board of trustees with respect to the merger, you should be aware that certain trustees and executive officers of Windrose have interests in, and will receive benefits from, the merger and certain other transactions contemplated by the merger agreement that are different from, or in addition to, the interests of Windrose shareholders generally. Windrose’s board of trustees was aware of these interests and considered them, among other matters, when approving the merger agreement, determining that the merger is advisable and recommending that Windrose shareholders vote to approve the merger. In addition, Windrose’s management team continues to pursue acquisition opportunities, subject to compliance with its pre-merger closing covenants contained in the merger agreement. In connection with these acquisition opportunities, certain of Windrose’s executive officers may receive finder’s fees from Windrose. See “The Mergers — Interests of Windrose’s Trustees and Executive Officers in the Mergers,” “The Mergers — Interests of Windrose’s Trustees and Executive Officers in the Mergers — Acquisition Opportunities; Finder’s Fees” and “Risk Factors — Windrose’s trustees and executive officers have interests and arrangements that could have influenced their decisions to support or approve the mergers.”

 

Fred S. Klipsch, Windrose’s chairman and chief executive officer, will be appointed to the Health Care REIT board of directors upon completion of the merger, provided that such appointment would not be in violation of any applicable legal requirements or rules of the New York Stock Exchange. In the event Mr. Klipsch cannot or will not serve on Health Care REIT’s board, Windrose will nominate a replacement to be appointed by the Health Care REIT board. Mr. Klipsch will not receive compensation for his services as a director of Health Care REIT during the term of his consulting agreement.

 

The conversion of Windrose common shares and Windrose OP units into Health Care REIT common stock in the mergers will result in differences between your rights as a Windrose shareholder, governed by the Maryland REIT Law and Windrose’s declaration of trust and bylaws, on the one hand, and your rights as a Health Care REIT stockholder, governed by the Delaware General Corporation Law, or DGCL, and Health Care REIT’s certificate of incorporation and by-laws, on the other. See “Comparison of the Rights of Holders of Windrose Common Shares and Health Care REIT Common Stock” for a discussion of these differences.

 

Each Windrose preferred share outstanding at the effective time of the merger will be converted into one share of newly issued preferred stock of Health Care REIT designated as the 7.5% Series G Cumulative Convertible Preferred Stock. The Health Care REIT preferred stock will have rights, preferences, privileges and voting power substantially similar to those of the Windrose preferred shares. See “Capitalization and

Description of Health Care REIT Securities — Description of Health Care REIT Preferred Stock” for a description of the dividend and liquidation rights and preferences, voting rights, conversion rights and other rights of holders of the Health Care REIT preferred stock and the redemption provisions and restrictions on ownership and transfer relating to the Health Care REIT preferred stock.

 

The merger is intended to qualify as a reorganization within the provisions of Section 368(a) of the Code. If the merger so qualifies, then for U.S. federal income tax purposes, (i) Windrose shareholders who receive Health Care REIT common stock in exchange for their Windrose common shares in the merger are not expected to recognize any gain or loss, except with respect to cash received instead of a fractional share of Health Care REIT common stock, and (ii) holders of Windrose preferred shares who receive Health Care REIT preferred stock in exchange for their Windrose preferred shares in the merger are not expected to recognize any gain or loss.

 

The exchange of Windrose OP units for Health Care REIT common stock pursuant to the operating partnership merger will be treated as a taxable sale of those units for U.S. federal income tax purposes. As a result, holders of Windrose OP units will recognize gain or loss, as the case may be, as a result of the operating partnership merger. The sale of Windrose OP units in the operating partnership merger and the transfer of Windrose’s units in Windrose OP as a result of the merger will not result in Windrose OP or Heat OP Merger Sub recognizing gain or loss for federal income tax purposes.

 

Tax matters are complicated and Windrose shareholders and holders of Windrose OP units are urged to read carefully the section titled “Material U.S. Federal Income Tax Considerations” and to consult their own tax advisors for a fuller understanding of the tax consequences of their participation in the mergers.

 

It is expected that the merger will be accounted for as a purchase of Windrose by Health Care REIT under U.S. generally accepted accounting principles (which we refer to in this proxy statement/prospectus as GAAP). Under the purchase method of accounting, the assets and liabilities of Windrose will be, as of the completion of the merger, recorded at their respective fair values and added to those of Health Care REIT.

 

No material regulatory approvals are required in order to complete the mergers and the other transactions contemplated by the merger agreement.

 

Pursuant to the Maryland REIT Law, holders of Windrose common shares are not entitled to any dissenters’ or appraisal rights with respect to the merger.

 

Subject to specified exceptions, the merger agreement precludes Windrose and its subsidiaries and representatives, whether directly or indirectly, from inviting, initiating, soliciting or encouraging any inquiries, proposals, discussions or negotiations or the making or implementation of any proposal or offer with respect to, or engaging in any discussions or negotiations that may reasonably be expected to lead to any direct or indirect acquisition proposal (as defined in “The Merger Agreement — Covenants and Agreements — No Solicitation”).

 

The closing is subject to various closing conditions, including, without limitation, (a) the approval of Windrose shareholders, (b) the listing of the shares of common stock to be issued in the mergers and the shares of Health Care REIT common stock reserved for issuance upon exercise of converted options on the New York Stock Exchange, (c) the receipt of all specified consents and approvals, (d) the performance in all material respects of all obligations required to be performed by each party under the merger agreement and (e) a bring-down of representations and warranties and the absence of any material adverse change affecting Windrose or Health Care REIT. In assessing whether a change has a material adverse effect on Windrose or Health Care REIT, among other items, the parties will not take into consideration (i) conditions generally affecting the healthcare industry or, with respect to a material adverse effect on Health Care REIT, the skilled nursing or retirement care industry, (ii) a decrease in the market price of Windrose common shares or shares of Health Care REIT common stock, (iii) changes in general national economic or financial conditions or changes in the securities market in general, (iv) a failure by either Windrose or Health Care REIT to report earnings or revenue results consistent with its historic earnings or revenue results, (v) changes in any laws or regulations or accounting regulations or principles applicable to Windrose or Health Care REIT, (vi) any outbreak or escalation of armed hostilities or acts of terrorism, (vii) the announcement, execution or consummation of the merger agreement and the transactions contemplated thereby or (viii) changes the adverse effects of which are covered by insurance. Health Care REIT and Windrose will not be precluded from claiming that a material adverse effect has occurred with respect to an event or change underlying either a decrease in the other party’s share price as described in (ii) above or a failure of the other party to report earnings or revenue results as described in (iv) above.

 

The merger agreement may be terminated at any time prior to the effective times of the mergers:

 

 

 

Windrose will be obligated to pay Health Care REIT all or a portion, as described below, of the following: (i) a maximum termination fee equal to $16.9 million, (ii) an amount up to $900,000, as reimbursement for fees and expenses paid by Health Care REIT in connection with the merger agreement and the merger, and (iii) an amount up to $2.5 million, as reimbursement of Health Care REIT’s expenses incurred in connection with obtaining certain third party consents to the mergers, in the event that the merger agreement is terminated:

 

 

 

 

Under any such scenario, Windrose will pay Health Care REIT 50% of the termination fee at the time of the termination of the merger agreement. If Windrose enters into a definitive agreement with respect to, or completes, an acquisition proposal made by a third party other than Health Care REIT or Heat Merger Sub within the 12 months following the termination of the merger agreement, Windrose will pay Health Care REIT the remaining 50% of such termination fee and the other amounts described above concurrent with the closing of such transaction.

 

Windrose will pay Health Care REIT 100% of the amounts described above upon the completion of an acquisition proposal with a third party other than Health Care REIT or Heat Merger Sub if:

 

 

In the event that Health Care REIT terminates the merger agreement for the reasons described in the seventh bullet point under the heading “— Termination of the Merger Agreement,” Windrose will pay Health Care REIT up to $3.0 million as reimbursement of Health Care REIT’s expenses incurred in connection with the merger agreement and the merger and up to $2.5 million as reimbursement for fees and expenses paid by Health Care REIT’s in connection with obtaining certain third party consents to the merger.

 

In the event that Windrose terminates the merger agreement for the reasons described in the eighth bullet point under the heading “— Termination of the Merger Agreement,” Health Care REIT will pay Windrose up to $3.0 million as reimbursement of Windrose’s expenses incurred in connection with the merger agreement.

 

Each of Fred S. Klipsch, Windrose’s chairman and chief executive officer, and Frederick L. Farrar, Windrose’s president, chief operating officer and treasurer, has entered into a consulting agreement with Health Care REIT. Daniel R. Loftus, Windrose’s executive vice president, secretary and general counsel, has entered into an employment agreement with Health Care REIT. See “The Merger Agreement — Related Agreements — Consulting and Employment Agreements.”

 

In connection with the merger agreement, each of Fred S. Klipsch and Frederick L. Farrar has entered into a support agreement with Health Care REIT, pursuant to which he has agreed, among other things, to vote all of the Windrose common shares beneficially owned by him, representing an aggregate of approximately 1.4% of the outstanding Windrose common shares as of September 12, 2006, in favor of the approval of the merger agreement and the merger.

 

Each of Fred S. Klipsch and Frederick L. Farrar, Steve Klipsch and Mike Klipsch, the sons of Mr. Klipsch, Charles Lanham, a former Windrose trustee, Robin Barksdale, a current Windrose employee, and O.B. McCoin, an executive vice president of Windrose, has entered into separate tax indemnity agreements with Health Care REIT as described under “The Merger Agreement — Related Agreements — Tax Indemnity Agreements.”

 

Health Care REIT will use its reasonable best efforts to cause the shares of Health Care REIT common stock and Health Care REIT preferred stock to be issued in the mergers and the shares reserved for issuance upon exercise of converted options to be listed, upon official notice of issuance, on the New York Stock Exchange.

 

The following selected historical consolidated financial data for each of the years in the five-year period ended December 31, 2005 have been derived from Health Care REIT’s audited consolidated financial statements. These financial statements have been audited by Ernst & Young LLP, Health Care REIT’s independent registered public accounting firm. The following selected historical consolidated financial data as of and for the nine months ended September 30, 2006 and 2005 have been derived from Health Care REIT’s unaudited interim consolidated financial statements. In the opinion of Health Care REIT’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations as of such dates and for such periods. Results for the interim periods are not necessarily indicative of the results to be expected for the full year. This information is only a summary, and you should read it together with Health Care REIT’s historical consolidated financial statements and notes thereto and the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Health Care REIT’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 and Health Care REIT’s Current Report on Form 8-K filed October 20, 2006, which updates certain financial information included in its Annual Report on Form 10-K for the year ended December 31, 2005, each of which is incorporated by reference into this proxy statement/prospectus. Amounts are in thousands, except per share data.

 

 

 

The following selected historical consolidated financial data for (i) each of the years in the three-year period ended December 31, 2005 and for the period from August 16, 2002 (inception) to December 31, 2002 for Windrose and (ii) the period from January 1, 2002 to August 15, 2002 and the year ended December 31, 2001 for Windrose’s accounting predecessor have been derived from Windrose’s audited consolidated financial statements. These financial statements have been audited by KPMG LLP, Windrose’s independent registered public accounting firm. The following selected historical consolidated financial data as of and for the nine months ended September 30, 2006 and 2005 have been derived from Windrose’s unaudited interim consolidated financial statements. In the opinion of Windrose’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations as of such dates and for such periods. Results for the interim periods are not necessarily indicative of the results to be expected for the full year. This information is only a summary and you should read it together with Windrose’s historical consolidated financial statements and notes thereto and the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Windrose’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 and Windrose’s Annual Report on Form 10-K for the year ended December 31, 2005, each of which is incorporated by reference into this proxy statement/prospectus. Amounts are in thousands, except per share data.

 

 

 

 

 

The following selected unaudited pro forma condensed consolidated financial data is presented as if the mergers had occurred as of January 1, 2005 for income statement purposes and on September 30, 2006 for balance sheet purposes. This data should be read in conjunction with, and the information is qualified in its entirety by, (i) the unaudited pro forma condensed consolidated financial statements and notes appearing elsewhere in this proxy statement/prospectus, (ii) Health Care REIT’s historical consolidated financial statements and notes thereto contained in its Current Report on Form 8-K filed on October 20, 2006, which updates certain financial information included in its Annual Report on Form 10-K for the year ended December 31, 2005, and its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 and (iii) Windrose’s historical consolidated financial statements and notes thereto contained in its Annual Report on Form 10-K for the year ended December 31, 2005 and its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006, each of which have been incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” on page 96.

 

The unaudited pro forma condensed consolidated financial data should be read in conjunction with the unaudited pro forma condensed consolidated financial statements and notes appearing in this proxy statement/prospectus under the heading “Unaudited Pro Forma Condensed Consolidated Financial Statements” beginning on page F-1. The pro forma amounts in the table below are presented for illustrative purposes only. You should not rely on the pro forma amounts as being indicative of the financial position or results of operations of the combined company that would have actually occurred had the mergers been completed as of the dates indicated above, nor is it necessarily indicative of the future operating results or financial position of the combined company. Amounts are in thousands, except per share data.

 

 

 

The table below presents, for the periods indicated, selected historical per share data for Health Care REIT common stock and Windrose common shares, as well as unaudited pro forma combined per share amounts and unaudited pro forma combined per share equivalent amounts for Windrose common shares after giving effect to the mergers, under the purchase method of accounting, assuming the issuance of 9,876,000 shares of Health Care REIT common stock in the mergers. The pro forma financial information provided below is presented as if the mergers had occurred as of January 1, 2005 for income statement purposes and on September 30, 2006 for balance sheet purposes. The unaudited pro forma combined per share equivalent amounts for Windrose have been calculated by multiplying the unaudited pro forma combined per share amounts by 0.4579 (the mid-point between the maximum and minimum exchange ratio).

 

You should read this information in conjunction with, and the information is qualified in its entirety by, the consolidated financial statements and accompanying notes of Health Care REIT and Windrose and the unaudited pro forma condensed consolidated financial statements and accompanying notes included in this proxy statement/prospectus or incorporated by reference into this proxy statement/prospectus. Please see “Where You Can Find More Information” beginning on page 96 and “Unaudited Pro Forma Condensed Consolidated Financial Statements” beginning on page F-1. The pro forma amounts in the table below are presented for illustrative purposes only. You should not rely on the pro forma amounts as being indicative of the financial position or results of operations of the combined company that actually would have occurred had the mergers been completed as of the dates indicated above, nor is it necessarily indicative of the future operating results or financial position of the combined company.

 

 

Health Care REIT common stock is listed on the New York Stock Exchange under the symbol “HCN.” Windrose common shares are listed on the New York Stock Exchange under the symbol “WRS.” The table below sets forth the high, low and closing sale prices per share of Health Care REIT common stock and Windrose common shares as reported on the New York Stock Exchange on September 12, 2006, the last full trading day prior to the announcement of the merger agreement, and on November [•], 2006, the most recent practicable date prior to the mailing of this proxy statement/prospectus to the Windrose shareholders. The table also sets forth the equivalent price per share of Windrose common shares on September 12, 2006 and on November [•], 2006. The equivalent price per share is equal to the high, low and closing sale price of a share of Health Care REIT common stock, as reported on the New York Stock Exchange, on each such date multiplied by 0.4579 (the mid-point between the maximum and minimum exchange ratio). These prices will fluctuate prior to the special meeting and the completion of the mergers. Windrose shareholders are urged to obtain current market quotations prior to making any decision with respect to the mergers.

 

 

The table below presents, for the periods indicated: (i) the high and low sales prices per share of Health Care REIT common stock and Windrose common shares as reported on the New York Stock Exchange and (ii) the cash dividends paid per share of Health Care REIT common stock and Windrose common shares.