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EX-24 - TIAA REAL ESTATE ACCOUNT | c64399_ex24.htm |
EX-23.(B) - TIAA REAL ESTATE ACCOUNT | c64399_ex23b.htm |
EX-23.(C) - TIAA REAL ESTATE ACCOUNT | c64399_ex23c.htm |
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As filed with the Securities and Exchange Commission on March 17, 2011 |
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Registration No. 333-______ |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
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TIAA REAL ESTATE ACCOUNT |
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(Exact Name of Registrant as Specified in its Charter) |
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New York |
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(State or other jurisdiction of incorporation or organization) |
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(Not applicable) |
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(Primary Standard Industrial Classification Code Number) |
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(Not applicable) |
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(I.R.S. Employer Identification No.) |
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c/o Teachers Insurance and Annuity Association of America |
730 Third Avenue |
New York, New York 10017-3206 |
(212) 490-9000 |
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(Address including zip code, and telephone number, |
including area code, of registrants principal executive offices) |
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Keith F. Atkinson, Esquire |
Teachers Insurance and Annuity Association of America |
8500 Andrew Carnegie Blvd. |
Charlotte, North Carolina 28226 |
(704) 988-1000 |
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(Name, address, including zip code, and telephone number, |
including area code, of agent for service) |
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Copy to: |
Jeffrey S. Puretz, Esquire |
Dechert LLP |
1775 I Street, N.W. |
Washington, D.C. 20006 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of the registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer x |
Smaller Reporting Company o |
Pursuant to Rule 429 under the Securities Act, the prospectus contained herein also relates to and constitutes a post-effective amendment to Securities Act registration statements 33-92990, 333-13477, 333-22809, 333-59778, 333-83964, 333-113602, 333-121493, 333-132580, 333-141513, 333-149862, 333-158136 and 333-165286 (collectively, the Prior Registration Statements).
CALCULATION OF REGISTRATION FEE
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Title of Each Class |
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Amount to be |
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Proposed Maximum Offering |
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Proposed |
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Amount |
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Accumulation units in TIAA Real Estate Account |
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$2,000,000,000** |
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$232,200** |
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The securities are not issued in predetermined amounts or units, and the maximum aggregate offering price is estimated solely for purposes of determining the registration fee pursuant to Rule 457(o) under the Securities Act. |
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In addition to the $2,000,000,000 of accumulation units registered hereunder, the registrant is carrying forward securities which remain unsold but which were previously registered under the Prior Registration Statements for which filing fees were previously paid. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.
PROSPECTUS
TIAA REAL ESTATE ACCOUNT
A Tax-Deferred Variable Annuity Option
Offered by Teachers Insurance
and Annuity Association of America
This prospectus tells you about the TIAA Real Estate Account, an investment option offered through individual and group variable annuity contracts issued by TIAA. Please read it carefully before investing and keep it for future reference.
The Real Estate Account, which we refer to sometimes as the Account in this prospectus, invests primarily in real estate and real estate-related investments. TIAA, one of the largest and most experienced mortgage and real estate investors in the nation, manages the Accounts assets.
The Real Estate Account is designed as an option for retirement and tax-deferred savings plans for employees of non-profit and governmental institutions. TIAA currently offers the Real Estate Account under the following annuity contracts:
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RA and GRAs (Retirement Annuities and Group Retirement Annuities) |
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SRAs (Supplemental Retirement Annuities) |
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GSRAs (Group Supplemental Retirement Annuities) |
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Retirement Choice and Retirement Choice Plus Annuity |
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GAs (Group Annuities) and Institutionally-Owned GSRAs |
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Classic and Roth IRAs (Individual Retirement Annuities) including SEP IRAs (Simplified Employee Pension Plans) |
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Keoghs |
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ATRAs (After-Tax Retirement Annuities) |
Note that state regulatory approval may be pending for certain of these contracts and they may not currently be available in your state. TIAA may also offer the Real Estate Account as an investment option under additional contracts, both at the individual and plan sponsor level, in the future.
Neither the Securities and Exchange Commission (SEC) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy of the information in this prospectus. Any representation to the contrary is a criminal offense.
An investment in the Real Estate Account is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
TABLE OF CONTENTS
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Managements Discussion and |
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187 |
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Please see Appendix C for definitions of certain special terms used in this prospectus. |
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The Real Estate Account securities offered by this prospectus are only being offered in those jurisdictions where it is legal to do so. No person may make any representation to you or give you any information about the offering that is not in the prospectus. If anyone provides you with information about the offering that is not in the prospectus, you shouldnt rely on it. |
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TIAA REAL ESTATE ACCOUNT |
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You should read this summary together with the more detailed information regarding the Account, including the Accounts financial statements and related notes, appearing elsewhere in this prospectus. More information about the Account may be obtained by writing us at 730 Third Avenue, New York, NY 10017-3206, calling us at 877 518-9161 or visiting our website at www.tiaa-cref.org. Information contained on this website is expressly not incorporated into this prospectus.
ABOUT THE TIAA REAL ESTATE ACCOUNT
The TIAA Real Estate Account was established in February 1995 as a separate account of Teachers Insurance and Annuity Association of America (TIAA) and interests in the Account were first offered to eligible participants on October 2, 1995. The Account offers individual and group accumulating annuity contracts (with contributions made on a pre-tax or after-tax basis), as well as individual lifetime and term-certain variable payout annuity contracts (including the payment of death benefits to beneficiaries). Investors are entitled to transfer funds to or from the Account under certain circumstances. Funds invested in the Account for each category of contract are expressed in terms of units, and unit values will fluctuate depending on the Accounts performance.
INVESTMENT OBJECTIVE
INVESTMENT STRATEGY
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Direct ownership interests in real estate, |
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Direct ownership of real estate through interests in joint ventures, |
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Indirect interests in real estate through real estate-related securities, such as: |
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TIAA Real Estate Account § Prospectus 3
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real estate limited partnerships, |
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real estate investment trusts (REITs), which investments may consist of common or preferred stock interests, |
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investments in equity or debt securities of companies whose operations involve real estate (i.e., that primarily own or manage real estate) which may not be REITs, and |
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conventional mortgage loans, participating mortgage loans, and collateralized mortgage obligations, including commercial mortgage-backed securities (CMBS) and other similar investments. |
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U.S. treasury securities, |
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securities issued by U.S. government agencies or U.S. government sponsored entities, |
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corporate debt securities, |
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money market instruments, and |
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stock of companies that do not primarily own or manage real estate. |
4 Prospectus § TIAA Real Estate Account
TIAA Real Estate Account § Prospectus 5
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the Account will maintain outstanding debt in an aggregate principal amount not to exceed the principal amount of debt outstanding as of the date of adoption of such guidelines in July 2009 (approximately $4.0 billion); and |
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subject to this $4.0 billion limitation, the Account may incur and/or maintain debt on its properties (including refinancing outstanding debt, assuming debt on the Accounts properties, extending the maturity date of outstanding debt and/or incurring new debt on its properties). |
6 Prospectus § TIAA Real Estate Account
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Type of Expense Deduction |
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Estimated |
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Services Performed |
Investment Management |
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For investment advisory, investment management, portfolio accounting, custodial and similar services, including independent fiduciary and appraisal fees |
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Administration |
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For administration and operations of the Account and the contracts, including administrative services such as receiving and allocating premiums and calculating and making annuity payments |
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Distribution |
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For services and expenses associated with distributing the annuity contracts |
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Mortality and Expense Risk |
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For TIAAs bearing certain mortality and expense risks |
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Liquidity Guarantee |
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For TIAAs liquidity guarantee |
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Total Annual Expense Deduction1,2,3 |
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Total |
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TIAA guarantees that the total annual expense deduction will not exceed an annual rate of 2.50% of average net assets. |
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TIAA currently does not impose a fee on transfers from the Account, but reserves the right to impose a fee on transfers from the Account in the future. |
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Property-level expenses, including property management fees and transfer taxes, are not reflected in the table above; instead these expenses are charged directly to the Accounts properties. |
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TIAA Real Estate Account |
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SUMMARY RISK FACTORS
The value of your investment in the Account will fluctuate based on the value of the Accounts assets and the income the assets generate. You may lose money by investing in this Account. The Accounts assets and income can be affected by many factors, and you should consider the specific risks presented in this prospectus before investing in the Account. The principal risks include the following:
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Acquiring and Owning Real Estate: The risks associated with acquiring and owning real property, including general economic and real estate market conditions, the availability of, and economic cost associated with, financing the Accounts properties, the risk that the Accounts properties become too concentrated (whether by geography, sector or by tenant mix), competition for acquiring real estate properties, leasing risk (including tenant defaults) and the risk of uninsured losses at properties (including due to terrorism and acts of violence); |
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Selling Real Estate: The risk that the sales price of a property might differ, perhaps significantly, from its estimated or appraised value, leading to losses or reduced profits to the Account, the risk that the Account might not be able to |
TIAA Real Estate Account § Prospectus 7
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sell a property at a particular time for a price which management believes represents its fair or full value, the lack of availability of financing (for potential purchasers of the Accounts properties), disruptions in the credit and capital markets, and the risk that the Account may be required to make significant expenditures before the Account is able to market and/or sell a property; |
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Valuation: The risks associated with property valuations, including the fact that appraisals can be subjective in a number of respects, the fact that the Accounts appraisals are generally obtained on a quarterly basis and there may be periods in between appraisals of a property during which the value attributed to the property for purposes of the Accounts daily accumulation unit value may be more or less than the actual realizable value of the property; |
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Borrowing: Risks associated with financing the Accounts properties, including the risk of default on loans secured by the Accounts properties (which could lead to foreclosure), the risk associated with high loan to value ratios on the Accounts properties (including the fact that the Account may have limited, or no net value in such a property), the risk that significant sums of cash could be required to make principal and interest payments on the loans and the risk that the Account may not have the ability to obtain financing or refinancing on favorable terms (or at all), which may be aggravated by general disruptions in credit and capital markets; |
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Participant Transactions and Cash Management: Investment risk associated with participant transactions, in particular that (i) significant net participant transfers out of the Account may impair our ability to pursue or consummate new investment opportunities that are otherwise attractive to the Account and/or may result in sales of real estate-related assets to generate liquidity and (ii) significant net participant transfers into the Account may result, on a temporary basis, in our cash holdings and/or holdings in liquid real estate-related investments exceeding our long-term targeted holding levels; |
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Joint Venture Investments: The risks associated with joint venture partnerships, including the risk that a co-venturer may have interests or goals inconsistent with that of the Account, that a co-venturer may have financial difficulties, and the risk that the Account may have limited rights with respect to operation of the property and transfer of the Accounts interest; |
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Regulatory Matters: Uncertainties associated with environmental and other regulatory matters; |
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Foreign Investments: The risks associated with purchasing, owning and disposing foreign investments (primarily real estate properties), including political risk and the risk associated with currency fluctuations; |
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Conflicts of Interests: Conflicts of interest associated with TIAA serving as investment manager of the Account and provider of the liquidity guarantee at the same time as TIAA and its affiliates are serving as an investment manager to other real estate accounts or funds, including conflicts associated |
8 Prospectus § TIAA Real Estate Account
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with satisfying its fiduciary duties to all such accounts and funds associated with purchasing, selling and leasing of properties; |
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Required Property Sales: The risk that, if TIAA were to own too large a percentage of the Accounts accumulation units through funding the liquidity guarantee (as determined by the independent fiduciary), the independent fiduciary could require the sales of properties to reduce TIAAs ownership interest, which sales could occur at times and at prices that depress the sale proceeds to the Account; and |
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Liquid Assets and Securities: Risks associated with investments in real estate-related liquid assets (which could include, from time to time, REIT securities and CMBS), and non-real estate-related liquid assets, including financial/credit risk, market volatility risk, interest rate volatility risk and deposit/money market risk. |
VALUING THE ACCOUNTS ASSETS
The assets of the Account are valued at the close of each Valuation Day and the Account calculates and publishes a unit value, which is available on TIAA-CREFs website (www.tiaa-cref.org), for each Valuation Day. The values of the Accounts properties are adjusted daily to account for capital expenditures and appraisals as they occur.
In general, the Account obtains appraisals of its real estate properties spread out throughout the quarter, which is intended to result in appraisal adjustments and thus adjustments to the valuations of its holdings (to the extent adjustments are made) that happen regularly throughout each quarter and not on one specific day in each period. In addition, an estimated daily equivalent of net operating
TIAA Real Estate Account § Prospectus 9
income is taken into consideration and is adjusted for actual transactional activity. The remaining assets in the Account are primarily marketable securities that are priced on a daily basis and are included in the Accounts daily unit value.
PAST PERFORMANCE
Worst quarter: 9.96%, for the quarter ended June 30, 2009.
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13.3% |
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11.1% |
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1.8% |
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3.3% |
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ABOUT TIAA AND TIAAS ROLE WITH THE ACCOUNT
10 Prospectus § TIAA Real Estate Account
Liquidity Guarantee. In the event that the Accounts level of liquidity is not sufficient to guarantee that Account participants may redeem their accumulation units, the TIAA General Account will purchase accumulation units issued by the Account (sometimes called liquidity units) in accordance with its liquidity guarantee. The cost of this guarantee is embedded in the overall expense charge of the Account. This liquidity guarantee is not a guarantee of either investment performance or the value of units in the Account.
TIAA Real Estate Account § Prospectus 11
THE CONTRACTS
TIAA offers the Account as a variable option for the annuity contracts listed on the cover page of this prospectus, although some employer plans may not offer the Account as an option for certain contracts. Each payment to the Account buys a number of accumulation units. Similarly, any transfer or withdrawal from the Account results in the redemption of a number of accumulation units. The price you pay for an accumulation unit, and the price you receive for an accumulation unit when you redeem accumulation units, is the accumulation unit value (which we sometimes call the AUV) calculated for the business day on which we receive your purchase, redemption or transfer request in good order (unless you ask for a later date for a redemption or transfer).
The
Right To Cancel Your Contract. Generally, you may
cancel any RA, SRA, GSRA, Classic IRA, Roth IRA, ATRA or Keogh contract in
accordance with the contracts Right to Examine provision (unless we have begun
making annuity payments from it) and subject to the time period regulated by
the state in which the contract is issued. Although the contract terms and
state law provisions differ, you will generally have between 10 and 60 days to
exercise this cancellation right.
Transfers and Withdrawals. Subject to the terms of the contracts and your employers plan, you can move your money to and from the Account in the following ways:
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from the Account to a CREF investment account, a TIAA Access variable account (if available), TIAAs traditional annuity or a fund (including TIAA-CREF affiliated funds) or other option available under your plan; |
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to the Account from a CREF investment account, a TIAA Access variable account (if available), TIAAs traditional annuity (transfers from TIAAs traditional annuity under RA, GRA or Retirement Choice contracts are subject to restrictions), a TIAA-CREF affiliated fund or from other companies/plans; |
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by withdrawing cash; and/or |
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by setting up a program of automatic withdrawals or transfers. |
12 Prospectus § TIAA Real Estate Account
TIAA Real Estate Account § Prospectus 13
The value of your investment in the Account will fluctuate based on the value of the Accounts assets, the income the assets generate and the Accounts expenses. You can lose money by investing in the Account. There is risk associated with an investor attempting to time an investment in the Accounts units, or effecting a redemption of an investors units. The Accounts assets and income can be affected by many factors, and you should consider the specific risks presented below before investing in the Account. In particular, for a discussion of how forward-looking statements contained in this prospectus are subject to uncertainties that are difficult to predict, which may be beyond managements control and which could cause actual results to differ materially from historical experience or managements present expectations, please refer to the subsection entitled Forward-Looking Statements, which is contained in the section entitled Managements Discussion and Analysis of the Accounts Financial Condition and Results of Operations.
RISKS ASSOCIATED WITH REAL ESTATE INVESTING
General Risks of Acquiring and Owning Real Property: As referenced elsewhere in this prospectus, the substantial majority of the Accounts net assets are comprised of direct ownership interests in real estate. As such, the Account is particularly subject to the risks inherent in acquiring and owning real property, including in particular the following:
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Adverse Global and Domestic Economic Conditions. The economic conditions in the markets where the Accounts properties are located may be adversely impacted by factors which include: |
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adverse domestic or global economic conditions, particularly in the event of a deep recession which results in significant employment losses across many sectors of the economy and reduced levels of consumer spending; |
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a weak market for real estate generally and/or in specific locations where the Account may own property; |
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the availability of financing (both for the Account and potential purchasers of the Accounts properties); |
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an oversupply of, or a reduced demand for, certain types of real estate properties; |
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business closings, industry or sector slowdowns, employment losses and related factors; |
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natural disasters, flooding and other significant and severe weather-related events, including those caused by global climate change; |
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terrorist attacks and/or other man-made events; and |
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decline in population or shifting demographics. |
14 Prospectus § TIAA Real Estate Account
The incidence of some or all of these factors could reduce occupancy, rental rates and the market value of the Accounts real properties or interests in investment vehicles (such as limited partnerships) which directly hold real properties.
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Concentration Risk. The Account may experience periods in which its investments are geographically concentrated, either regionally or in certain markets with similar demographics. Further, while the Account seeks diversification across its four primary property types: office, industrial, retail and multi-family residential properties, the Account may experience periods where it has concentration in one property type, increasing the potential exposure if there were to be an oversupply of, or a reduced demand for, certain types of real estate properties in the markets in which the Account operates. Also, the Account may experience periods in which its tenant base is concentrated within a particular industry sector. In particular, the Account owns and operates a number of industrial properties, which typically feature larger tenant concentration. The insolvency and/or closing of a single tenant in one of our industrial properties may significantly impair the income generated by an industrial property, and may also depress the value of such property. If any or all of these events occur, the Accounts income and performance may be adversely impacted disproportionately by deteriorating economic conditions in those areas or industry sectors in which the Accounts investments are concentrated. Also, the Account could experience a more rapid negative change in the value of its real estate investments than would be the case if its real estate investments were more diversified. |
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Leasing Risk. A number of factors could cause the Accounts rental income, a key source of the Accounts revenue and investment return, to decline, which would adversely impact the Accounts results and investment returns. These factors include the following: |
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A property may be unable to attract new tenants or retain existing tenants. This situation could be exacerbated if a concentration of lease expirations occurred during any one time period or multiple tenants exercise early termination at the same time. |
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The financial condition of our tenants may be adversely impacted, particularly in a prolonged economic downturn. The Account could lose revenue if tenants do not pay rent when contractually obligated, request some form of rent relief and/or default under a lease at one of the Accounts properties. Such a default could occur if a tenant declared bankruptcy, suffered from a lack of liquidity, failed to continue to operate its business or for other reasons. In the event of any such default, we may experience a delay in, or an inability to effect, the enforcement of our rights against that tenant, particularly if that tenant filed for bankruptcy protection. Further, any disputes with tenants could involve costly and time consuming litigation. |
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In the event a tenant vacates its space at one of the Accounts properties, whether as a result of a default, the expiration of the lease term, rejection of |
TIAA Real Estate Account § Prospectus 15
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the lease in bankruptcy or otherwise, given current market conditions, we may not be able to re-lease the vacant space either (i) for as much as the rent payable under the previous lease or (ii) at all. Also, we may not be able to re-lease such space without incurring substantial expenditures for tenant improvements and other lease-up related costs, while still being obligated for any mortgage payments, real estate taxes and other expenditures related to the property. |
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In some instances, our properties may be specifically suited to and/or outfitted for the particular needs of a certain tenant based on the type of business the tenant operates. For example, many companies desire space with an open floor plan. We may have difficulty obtaining a new tenant for any vacant space in our properties, particularly if the floor plan limits the types of businesses that can use the space without major renovation, which may require us to incur substantial expense in re-planning the space. Also, upon expiration of a lease, the space preferences of our major tenants may no longer align with the space they previously rented, which could cause those tenants to not renew their lease, or may require us to expend significant sums to reconfigure the space to their needs. |
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The Account owns and operates retail properties, which, in addition to the risks listed above, are subject to specific risks, including variations in rental revenues due to customary percentage rent clauses which may be in place for retail tenants and the insolvency and/or closing of an anchor tenant. Many times, anchor tenants will be big box stores and other large retailers that can be particularly adversely impacted by a global recession and reduced consumer spending generally. Factors that can impact the level of consumer spending include increases in fuel and energy costs, residential and commercial real estate and mortgage conditions, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors. |
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Under certain circumstances, co-tenancy clauses in tenants leases may allow certain tenants in a retail property to terminate their leases, reduce or withhold rental payments when overall occupancy at the property falls below certain minimum levels. The insolvency and/or closing of an anchor tenant may also cause such tenants to terminate their leases, or to fail to renew their leases at expiration. |
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Competition. The Account may face competition for real estate investments from multiple sources, including individuals, corporations, insurance companies or other insurance company separate accounts, as well as real estate limited partnerships, real estate investment funds, commercial developers, pension plans, other institutional and foreign investors and other entities engaged in real estate investment activities. Some of these competitors may have similar financial and other resources as the Account, and/or they may have investment strategies and policies (including the ability to incur significantly more leverage than the Account) that allow them to compete more aggressively for real estate investment opportunities, which |
16 Prospectus § TIAA Real Estate Account
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could result in the Account paying higher prices for investments, experiencing delays in acquiring investments or failing to consummate such purchases. Any resulting delays in the acquisition of investments, or the failure to consummate acquisitions the Account deems desirable, may increase the Accounts costs or otherwise adversely affect the Accounts investment results. |
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In addition, the Accounts properties may be located close to properties that are owned by other real estate investors and that compete with the Account for tenants. These competing properties may be better located, more suitable for tenants than our properties or have owners who may compete more aggressively for tenants, resulting in a competitive advantage for these other properties. We may also face similar competition from other properties that may be developed in the future. This competition may limit the Accounts ability to lease space, increase its costs of securing tenants, limit our ability to maximize our rents and/or require the Account to make capital improvements it otherwise would not, in order to make its properties more attractive to prospective tenants. |
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Operating Costs. A propertys cash flow could decrease if operating costs, such as property taxes, utilities, litigation expenses associated with a property, maintenance and insurance costs that are not reimbursed by tenants increase in relation to gross rental income, or if the property needs unanticipated repairs and renovations. In addition, our expenses of owning and operating a property are not necessarily reduced when our income from a property is reduced. |
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Condemnation. A governmental agency may condemn and convert for a public use (i.e., through eminent domain) all or a portion of a property owned by the Account. While the Account would receive compensation in connection with any such condemnation, such compensation may not be in an amount the Account believes represents equivalent value for the condemned property. Further, a partial condemnation could impair the ability of the Account to maximize the value of the property during its operation, including making it more difficult to find new tenants or retain existing tenants. Finally, a property which has been subject to a partial condemnation may be more difficult to sell at a price the Account believes is appropriate. |
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Terrorism and Acts of War and Violence. Terrorist attacks may harm our property investments. The Account cannot assure you that there will not be further terrorist attacks against the United States, U.S. businesses or elsewhere in the world. These attacks or armed conflicts may directly or indirectly impact the value of the property we own or that secure our loans. Losses resulting from these types of events may be uninsurable or not insurable to the full extent of the loss suffered. Moreover, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economy. Such events could also result in economic uncertainty in the United States or abroad. Adverse economic conditions resulting from terrorist |
TIAA Real Estate Account § Prospectus 17
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activities could reduce demand for space in the Accounts properties and thereby reduce the value of the Accounts properties and therefore your investment return. |
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General Risks of Selling Real Estate Investments: Among the risks of selling real estate investments are: |
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The sale price of an Account property might differ, perhaps significantly, from its estimated or appraised value, leading to losses or reduced profits to the Account. |
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The Account might not be able to sell a property at a particular time for a price which management believes represents its fair or full value. This illiquidity may result from the cyclical nature of real estate, general economic conditions impacting the location of the property, disruption in the credit markets or the availability of financing on favorable terms or at all, and the supply of and demand for available tenant space, among other reasons. This might make it difficult to raise cash quickly which could impair the Accounts liquidity position (particularly during any period of sustained significant net participant outflows) and also could lead to Account losses. Further, the liquidity guarantee does not serve as a working capital facility or credit line to enhance the Accounts liquidity levels generally, as its purpose is tied to participants having the ability to redeem their accumulation units upon demand (thus, alleviating the Accounts need to dispose of properties solely to increase liquidity levels in what management deems a suboptimal sales environment). |
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The Account may need to provide financing to a purchaser if no cash buyers are available, or if buyers are unable to receive financing on terms enabling them to consummate the purchase. Such seller financing introduces a risk that the counterparty may not perform its obligations to repay the amounts borrowed from the Account to complete the purchase. |
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For any particular property, the Account may be required to make expenditures for improvements to, or to correct defects in, the property before the Account is able to market and/or sell the property. |
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Valuation and Appraisal Risks: Investments in the Accounts assets are stated at fair value, which is defined as the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date. Determination of fair value, particularly for real estate assets, involves significant judgment. Valuation of the Accounts real estate properties (which comprise a substantial majority of the Accounts net assets) are based on real estate appraisals, which are estimates of property values based on a professionals opinion and may not be accurate predictors of the amount the Account would actually receive if it sold a property. Appraisals can be subjective in certain respects and rely on a variety of assumptions and conditions at that property or in the market in which the property is located, which may change materially after the appraisal is conducted. Among other things, market prices for comparable real estate may be |
18 Prospectus § TIAA Real Estate Account
Further, as the Account generally obtains appraisals on a quarterly basis, there may be circumstances in the period between appraisals or interim valuation adjustments in which the true realizable value of a property is not reflected in the Accounts daily net asset value calculation or in the Accounts periodic financial statements. This disparity may be more apparent when the commercial and/or residential real estate markets experience an overall and possibly dramatic decline (or increase) in property values in a relatively short period of time between appraisals.
If the appraised values of the Accounts properties as a whole are too high, those participants who purchased accumulation units prior to (i) a downward valuation adjustment of a property or multiple properties or (ii) a property or properties being sold for a lower price than the appraised value will be credited with less of an interest than if the value had previously been adjusted downward. Also, those participants who redeem during any such period will have received more than their pro rata share of the value of the Accounts assets, to the detriment of other non-redeeming participants. In particular, appraised property values may prove to be too high (as a whole) in a rapidly declining commercial real estate market. Further, implicit in the Accounts definition of fair value is a principal assumption that there will be a reasonable time to market a given property and that the property will be exchanged between a willing buyer and willing seller in a non-distressed scenario. However, an appraised value may not reflect the actual realizable value that would be obtained in a rush sale where time was of the essence. Also, appraised values may lag actual realizable values to the extent there is significant and rapid economic deterioration in a particular geographic market or a particular sector within a geographic market.
If the appraised values of the Accounts properties as a whole are too low, those participants who redeem prior to (i) an upward valuation adjustment of a property or multiple properties or (ii) a property or properties being sold for a higher price than the appraised value will have received less than their pro rata share of the value of the Accounts assets, and those participants who purchase units during any such period will be credited with more than their pro rata share of the value of the Accounts assets.
Finally, the Account recognizes items of income (such as net operating income from real estate investments, distributions from real estate limited partnerships or joint ventures, or dividends from REIT stocks) and expense in many cases on
TIAA Real Estate Account § Prospectus 19
an intermittent basis, where the Account cannot predict with certainty the magnitude or the timing of such item. As such, even as the Account estimates items of net operating income on a daily basis, the AUV for the Account may fluctuate, perhaps significantly, from day to day, as a result of adjusting these estimates for the actual recognized item of income or expense.
20 Prospectus § TIAA Real Estate Account
Among the risks of borrowing money or otherwise investing in a property subject to a mortgage are:
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General Economic Conditions. General economic conditions, dislocations in the capital or credit markets generally or the market conditions then in effect in the real estate finance industry, may hinder the Accounts ability to obtain financing or refinancing for its property investments on favorable terms or at all, regardless of the quality of the Accounts property for which financing or refinancing is sought. Such unfavorable terms might include high interest rates, increased fees and costs and restrictive covenants applicable to the Accounts operation of the property. Longer term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could adversely affect our access to financing necessary to make profitable real estate investments. Our failure to obtain financing or refinancing on favorable terms due to the current state of the credit markets or otherwise could have an adverse impact on the returns of the Account. |
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Default Risk. The property may not generate sufficient cash flow to support the debt service on the loan, the property may fail to meet certain financial or operating covenants contained in the loan documents and/or the property may have negative equity (i.e., the loan balance exceeds the value of the property). In any of these circumstances, we may default on the loan, including due to the failure to make required debt service payments when |
TIAA Real Estate Account § Prospectus 21
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due. If a loan is in default, the Account may determine that it is not economically desirable and/or in the best interests of the Account to continue to make payments on the loan (including accessing other sources of funds to support debt service on the loan), and/or the Account may not be able to otherwise remedy such default on commercially reasonable terms or at all. In either case, the lender then could accelerate the outstanding amount due on the loan and/or foreclose on the underlying property, in which case the Account could lose the value of its investment in the foreclosed property. Further, any such default or acceleration could trigger a default under loan agreements in respect of other Account properties pledged as security for the defaulted loan. Finally, any such default could increase the Accounts borrowing costs, or result in less favorable terms, with respect to financing future properties. |
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Balloon Maturities. If the Account obtains a mortgage loan that involves a balloon payment, there is a risk that the Account may not be able to make the lump sum principal payment due under the loan at the end of the loan term, or otherwise obtain adequate refinancing on terms commercially acceptable to the Account or at all. The Account then may be forced to sell the property or other properties under unfavorable market conditions or default on its mortgage, resulting in the lender exercising its remedies, which may include repossession of the property, and the Account could lose the value of its investment in that property. |
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Variable Interest Rate Risk. If the Account obtains variable-rate loans, the Accounts returns may be volatile when interest rates are volatile. Further, to the extent that the Account takes out fixed-rate loans and interest rates subsequently decline, this may cause the Account to pay interest at above-market rates for a significant period of time. Any hedging activities the Account engages in to mitigate this risk may not fully protect the Account from the impact of interest rate volatility. |
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Valuation Risk. The market valuation of mortgage loans payable could have an adverse impact on the Accounts performance. Valuations of mortgage loans payable are generally based on the amount at which the liability could be transferred in a current transaction, exclusive of transaction costs, and such valuations are subject to a number of assumptions and factors with respect to the loan and the underlying property, a change in any of which could cause the value of a mortgage loan to fluctuate. |
22 Prospectus § TIAA Real Estate Account
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The co-venturer may have interests or goals inconsistent with those of the Account, including during times when a co-venturer may be experiencing financial difficulty. For example: |
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a co-venturer may desire a higher current income return on a particular investment than does the Account (which may be motivated by a longer-term investment horizon or exit strategy), or vice versa, which could cause difficulty in managing a particular asset; |
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a co-venturer may desire to maximize or minimize leverage in the venture, which may be at odds with the Accounts strategy; |
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a co-venturer may be more or less likely than the Account to agree to modify the terms of significant agreements (including loan agreements) binding the venture, or may significantly delay in reaching a determination whether to do so, each of which may frustrate the business objectives of the Account; and |
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for reasons related to its own business strategy, a co-venturer may have different concentration standards as to its investments (geographically, by sector, or by tenant), which might frustrate the execution of the business plan for the joint venture. |
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The co-venturer may be unable to fulfill its obligations (such as to fund its pro rata share of committed capital, expenditures or guarantee obligations of the venture) during the term of such agreement or may become insolvent or bankrupt, any of which could expose the Account to greater liabilities than expected and frustrate the investment objective of the venture. |
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If a co-venturer doesnt follow the Accounts instructions or adhere to the Accounts policies, the jointly owned properties, and consequently the Account, might be exposed to greater liabilities than expected. |
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The Account may have limited rights with respect to the underlying property pursuant to the terms of the joint venture, including the right to operate, manage or dispose of a property, and a co-venturer could have approval rights over the marketing or the ultimate sale of the underlying property. |
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The terms of the Accounts ventures often provide for complicated agreements which can impede our ability to direct the sale of the property owned by the venture at times the Account views most favorable. One such agreement is a buy-sell right, which may force us to make a decision (either to buy our co-venturers interest or sell our interest to our co-venturer) at inopportune times. |
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A co-venturer can make it harder for the Account to transfer its equity interest in the venture to a third party, which could adversely impact the valuation of the Accounts interest in the venture. |
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Regulatory Risks: Government regulation at the federal, state and local levels, including, without limitation, zoning laws, rent control or rent stabilization laws, laws regulating housing on the Accounts multifamily residential properties, the Americans with Disabilities Act, property taxes and fiscal, accounting,
TIAA Real Estate Account § Prospectus 23
24 Prospectus § TIAA Real Estate Account
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There may be delays or unexpected increases in the cost of property development, redevelopment and construction due to strikes, bad weather, material shortages, increases in material and labor costs or other events. |
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If we were viewed as developing or redeveloping underperforming properties, suffering losses on our investments, or defaulting on any loans on our properties, our reputation could be damaged. Damage to our reputation could make it more difficult to successfully develop or acquire properties in the future and to continue to grow and expand our relationships with our lenders, venture partners and tenants. |
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Because external factors may have changed from when the project was originally conceived (e.g., slower growth in the local economy, higher interest rates, overbuilding in the area or the regulatory and permitting environment), the property may not attract tenants on the schedule we originally planned and/or may not operate at the income and expense levels first projected. |
TIAA Real Estate Account § Prospectus 25
are subject to many of the same general risks associated with direct real property ownership. In particular, equity REITs may be affected by changes in the value of the underlying properties owned by the entity, while mortgage REITs may be affected by the quality of any credit extended. In addition to these risks, because REIT investments are securities, they may be exposed to market risk and potentially significant price volatility due to changing conditions in the financial markets and, in particular, changes in overall interest rates, regardless of the value of the underlying real estate such REIT may own.
RISKS OF MORTGAGE-BACKED SECURITIES
The Account from time to time has invested in mortgage-backed securities and may in the future invest in such securities. Mortgage-backed securities, such as CMBS, are subject to many of the same general risks inherent in real estate investing, making mortgage loans and investing in debt securities. The underlying mortgage loans may experience defaults with greater frequency than projected when such mortgages were underwritten, which would impact the values of these securities, and could hamper our ability to sell such securities. In particular, these types of investments may be subject to prepayment risk or extension risk (i.e., the risk that borrowers will repay the loans earlier or later than anticipated). If the underlying mortgage assets experience faster than anticipated prepayments of principal, the Account could fail to recoup some or all of its initial investment in these securities, since the original price paid by the Account was based in part on assumptions regarding the receipt of interest payments. If the underlying mortgage assets are repaid later than anticipated, the Account could lose the opportunity to reinvest the anticipated cash flows at a time when interest rates might be rising. The rate of prepayments depends on a variety of geographic, social and other functions, including prevailing market interest rates and general economic factors.
26 Prospectus § TIAA Real Estate Account
RISKS OF U.S. GOVERNMENT AGENCY SECURITIES AND CORPORATE OBLIGATIONS
The Account invests in securities issued by U.S. government agencies and U.S. government-sponsored entities. Some of these issuers may not have their securities backed by the full faith and credit of the U.S. government, which could adversely affect the pricing and value of such securities. Also, the Account invests in corporate obligations (such as commercial paper) and while the Account seeks out such holdings in short-term, higher-quality liquid instruments, the ability of the Account to sell these securities may be uncertain, particularly when there are general dislocations in the finance or credit markets, such as has recently been the case. Any such volatility could have a negative impact on the value of these securities. Further, transaction activity generally may fluctuate significantly from time to time, which could impair the Accounts ability to dispose of a security at a favorable time, regardless of the credit quality of the underlying issuer. Further, inherent with investing in any corporate obligation is the risk that the credit quality of the issuer will deteriorate, which could cause the obligations to be downgraded and hamper the value or the liquidity of these securities.
RISKS OF LIQUID INVESTMENTS
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Financial / Credit Risk The risk, for debt securities, that the issuer will not be able to pay principal and interest when due (and/or declare bankruptcy or be subject to receivership) and, for equity securities such as common or preferred stock, that the issuers current earnings will fall or that its overall financial soundness will decline, reducing the securitys value. |
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Market Volatility Risk The risk that the Accounts investments will experience price volatility due to changing conditions in the financial markets even regardless of the credit quality or financial condition of the underlying issuer. This risk is particularly acute to the extent the Account holds equity securities, which have experienced significant short-term price volatility over the past year. Also, to the extent the Account holds debt securities, changes in overall interest rates can cause price fluctuations. |
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Interest Rate Volatility The risk that interest rate volatility may affect the Accounts current income from an investment. |
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Deposit / Money Market Risk The risk that, to the extent the Accounts cash held in bank deposit accounts exceeds federally insured limits as to that bank, the Account could experience losses if banks fail. In addition, there is some risk that investments held in money market accounts or funds can suffer losses. |
TIAA Real Estate Account § Prospectus 27
RISKS OF FOREIGN INVESTMENTS
In addition to other investment risks noted above, foreign investments present the following special risks:
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The value of foreign investments or rental income can increase or decrease due to changes in currency rates, currency exchange control regulations, possible expropriation or confiscatory taxation, political, social, and economic developments and foreign regulations. The Account translates into U.S. dollars purchases and sales of securities, income receipts and expense payments made in foreign currencies at the exchange rates prevailing on the respective dates of the transactions. The effect of any changes in currency exchange rates on investments and mortgage loans payable is included in the Accounts net realized and unrealized gains and losses. As such, fluctuations in currency exchange rates may impair the Accounts returns. |
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The Account may, but is not required to, hedge its exposure to changes in currency rates, which could involve extra costs. Further, any hedging activities might not be successful. |
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Foreign real estate markets may have different liquidity and volatility attributes than U.S. markets. |
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The
regulatory environment in non-U.S. jurisdictions may disfavor owners and
operators of real estate investment properties, resulting in less predictable
and/or economically harmful outcomes if the Account were to face a
significant dispute with a tenant or with a regulator itself.
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It may be more difficult to obtain and collect a judgment on foreign investments than on domestic investments, and the costs associated with contesting claims relating to foreign investments may exceed those costs associated with a similar claim on domestic investments. |
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We may invest from time to time in securities issued by (1) entities domiciled in foreign countries, (2) domestic affiliates of such entities and/or (3) foreign domiciled affiliates of domestic entities. Such investments could be subject to the risks associated with investments subject to foreign regulation, including political unrest or the repatriation or nationalization of the issuers assets. These events could depress the value of such securities and/or make such securities harder to sell on favorable terms, if at all. |
28 Prospectus § TIAA Real Estate Account
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General Risks of Mortgage Loans. The Account will be subject to the risks inherent in making mortgage loans, including: |
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The borrower may default on the loan, requiring that the Account foreclose on the underlying property to protect the value of its mortgage loan. Since its mortgage loans are usually non-recourse, the Account must rely solely on the value of a property for its security. |
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The larger the mortgage loan compared to the value of the property securing it, the greater the loans risk. Upon default, the Account may not be able to sell the property for its estimated or appraised value. Also, certain liens on the property, such as mechanics or tax liens, may have priority over the Accounts security interest. |
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A deterioration in the financial condition of tenants, which could be caused by general or local economic conditions or other factors beyond the control of the Account, or the bankruptcy or insolvency of a major tenant, may adversely affect the income of a property, which could increase the likelihood that the borrower will default under its obligations. |
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The borrower may be unable to make a lump sum principal payment due under a mortgage loan at the end of the loan term, unless it can refinance the mortgage loan with another lender. |
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If interest rates are volatile during the loan period, the Accounts variable-rate mortgage loans could have volatile yields. Further, to the extent the Account makes mortgage loans with fixed interest rates, it may receive lower yields than that which is then available in the market if interest rates rise generally. |
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Prepayment Risks. The Accounts mortgage loan investments will usually be subject to the risk that the borrower repays a loan early. Also, we may be unable to reinvest the proceeds at as high an interest rate as the original mortgage loan rate. |
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Interest Limitations. The interest rate we charge on mortgage loans may inadvertently violate state usury laws that limit rates, if, for example, state law changes during the loan term. If this happens, we could incur penalties or may be unable to enforce payment of the loan. |
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Risks of Participations. To the extent the Account invested in a participating mortgage, the following additional risks would apply: |
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The participation feature, in tying the Accounts returns to the performance of the underlying asset, might generate insufficient returns to make up for the higher interest rate the loan would have obtained without the participation feature. |
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In very limited circumstances, a court may characterize the Accounts participation interest as a partnership or joint venture with the borrower and the Account could lose the priority of its security interest or become liable for the borrowers debts. |
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TIAA Real Estate Account § Prospectus 29
CONFLICTS OF INTEREST WITHIN TIAA
30 Prospectus § TIAA Real Estate Account
NO OPPORTUNITY FOR PRIOR REVIEW OF PURCHASE
Investors do not have the opportunity to evaluate the economic or financial merit of the purchase of a property or other investment before the Account completes the purchase, so investors will need to rely solely on TIAAs judgment and ability to select investments consistent with the Accounts investment objective and policies. Further, the Account may change its investment objective and pursue specific investments in accordance with any such amended investment objective without the consent of the Accounts investors.
RISKS OF REGISTRATION UNDER THE INVESTMENT COMPANY ACT OF 1940
The Account has not registered, and management intends to continue to operate the Account so that it will not have to register, as an investment company under the Investment Company Act of 1940, as amended (the Investment Company Act). Generally, a company is an investment company and required to register under the Investment Company Act if, among other things, it holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, or it is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of such companys total assets (exclusive of government securities and cash items) on an unconsolidated basis.
If the Account were obligated to register as an investment company, the Account would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things, limitations on capital structure, restrictions on certain investments, compliance with reporting, record keeping, voting and proxy disclosure requirements and other rules and regulations that could significantly increase its operating expenses and reduce its operating flexibility. To maintain compliance with the exemptions from the Investment Company Act, the Account may be unable to sell assets it would otherwise want to sell and may be unable to purchase securities it would otherwise want to purchase, which might materially adversely impact the Accounts performance.
THE ACCOUNTS INVESTMENT OBJECTIVE AND STRATEGY
TIAA Real Estate Account § Prospectus 31
Investment Strategy:
Real
Estate-Related Investments. The Account intends to have between 75% and 85% of its net assets
invested directly in real estate or real estate-related investments with the
goal of producing favorable long-term returns primarily through rental income
and appreciation. These investments may consist of:
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Direct ownership interests in real estate, |
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Direct ownership of real estate through interests in joint ventures, |
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Indirect interests in real estate through real estate-related securities, such as: |
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real estate limited partnerships, |
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real estate investment trusts (REITs), which investments may consist of common or preferred stock interests, |
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investments in equity or debt securities of companies whose operations involve real estate (i.e., that primarily own or manage real estate) which may not be REITs, and |
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conventional mortgage loans, participating mortgage loans, and collateralized mortgage obligations, including commercial mortgage-backed securities (CMBS) and other similar investments. |
The Accounts principal strategy is to purchase direct ownership interests in income-producing real estate, primarily office, industrial, retail and multi-family residential properties. The Account is targeted to hold between 65% and 80% of the Accounts net assets in such direct ownership interests at any time. Historically, over 70% of the Accounts net assets have been comprised of such direct ownership interests in real estate.
In addition, while the Account is authorized to hold up to 25% of its net assets in liquid real estate-related securities, such as REITs and CMBS, management intends that the Account will not hold more than 10% of its net assets in such securities on a long-term basis. Historically, less than 10% of the Accounts net assets have been comprised of interests in these securities. In particular, under the Accounts current investment guidelines, the Account is authorized to hold up to 10% of its net assets in CMBS. As of December 31, 2010, REIT securities comprised approximately 4.6% of the Accounts net assets, and the Account held no CMBS as of such date.
Non Real Estate-Related Investments. The Account will invest the remaining portion of its assets (targeted to be between 15% and 25% of its net assets) in publicly-traded, liquid investments; namely:
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U.S. treasury securities, |
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securities issued by U.S. government agencies or U.S. government sponsored entities, |
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corporate debt securities, |
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money market instruments, and |
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stock of companies that do not primarily own or manage real estate. |
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32 Prospectus § TIAA Real Estate Account
However,
from time to time (and most recently between late 2008 and mid 2010), the
Accounts non real estate-related liquid investments may comprise less than 15%
(and possibly less than 10%) of its assets (on a net basis and/or a gross
basis), especially during and immediately following periods of significant net
participant outflows, in particular due to significant participant transfer
activity. In addition, the Account, from time to time and on a temporary basis,
may hold in excess of 25% of its net assets in non-real estate related liquid
investments, particularly during times of significant inflows into the Account
and/or there is a lack of attractive real estate related investments available
in the market.
Liquid Securities. Primarily due to managements need to manage fluctuations in cash flows, in particular during and immediately following periods of significant participant net transfer activity into or out of the Account, the Account may, on a temporary basis (i) exceed the upper end of its targeted holdings (currently 35% of the Accounts net assets) in liquid securities of all types, including both publicly-traded non real estate-related liquid investments and liquid real estate-related securities, such as REITs and CMBS, or (ii) be below the low end of its targeted holdings in such liquid securities (currently 15% of the Accounts net assets).
The portion of the Accounts net assets invested in liquid investments of all types may exceed the upper end of its target, for example, if (i) the Account receives a large inflow of money in a short period of time, in particular due to significant participant transfer activity into the Account, (ii) the Account receives significant proceeds from sales of direct real estate assets, (iii) there is a lack of attractive direct real estate investments available on the market, and/or (iv) the Account anticipates more near-term cash needs, including to apply to acquire direct real estate investments, pay expenses or repay indebtedness.
At December 31, 2010, the Accounts net assets totaled approximately $10.8 billion. As of that date, the Accounts investments in real estate properties, real estate joint ventures, limited partnerships and real estate related marketable securities, net of the fair value of mortgage loans payable on real estate, represented 77.6% of the Accounts net assets.
As discussed in more detail on page 42 under Establishing and Managing the Account The Role of TIAA Liquidity Guarantee and pursuant to its existing liquidity guarantee obligation, TIAA has agreed to purchase accumulation units issued by the Account in the event the Account has insufficient cash and liquid investments to ensure the ability, on its own, to fund participant transfer, redemption or withdrawal requests. This liquidity guarantee was first exercised in December 2008 and as of the date of this prospectus, was last exercised in June 2009.
Borrowing. The Account may borrow money
and assume or obtain a mortgage on a property. Under the Accounts current
investment guidelines, the Account intends to maintain a loan to value ratio at
or below 30% (however, through December 31, 2011, the Account may incur
leverage up to an aggregate principal amount of approximately $4.0 billion).
See About the Accounts Investments In General below for more information.
TIAA Real Estate Account § Prospectus 33
At
December 31, 2010, the Account held a total of 99 real estate property
investments (including its interests in 11 real estate-related joint ventures),
representing 75.0% of the Accounts total investments, measured on a gross
asset value basis (Total Investments). As of that date, the Account also held
investments in REIT equity securities (representing 3.9% of Total Investments),
real estate limited partnerships (representing 2.1% of Total Investments),
government agency notes (representing 11.8% of Total Investments) and U.S.
Treasury Bills (representing 7.2% of Total Investments).
ABOUT THE ACCOUNTS INVESTMENTS IN GENERAL
DIRECT INVESTMENTS IN REAL ESTATE
Direct Purchase: The Account will generally
buy direct ownership interests in existing or newly constructed
income-producing properties, primarily office, industrial, retail, and
multi-family residential properties. The Account will invest mainly in
established properties with existing rent and expense schedules or in newly
constructed properties with predictable cash flows or in which a seller agrees
to provide certain minimum income levels. On occasion, the Account might invest
in real estate development projects or engage in redevelopment projects. The
Account does not directly invest in single-family residential real estate, nor
does it currently invest in residential mortgage-backed securities (RMBS),
although it may invest in such securities in the future.
Purchase-Leaseback Transactions: Although it has not yet done so, the Account can enter into purchase-leaseback transactions (leasebacks) in which it would buy land and income-producing improvements on the land (such as buildings), and simultaneously lease the land and improvements to a third party (the lessee). Leasebacks are generally for very long terms. Usually, the lessee is responsible for operating the property and paying all operating costs, including taxes and mortgage debt. The Account can also give the lessee an option to buy the land and improvements.
In some leasebacks, the Account may purchase only the land under an income-producing building and lease the land to the building owner. In those cases, the Account could seek to share (or participate) in any increase in property value from building improvements or in the lessees revenues from the building above a base amount. The Account can invest in leasebacks that are subordinated to other interests in the land, buildings, and improvements (e.g., first mortgages); in that case, the leaseback interest would be subject to greater risks.
INVESTMENTS IN MORTGAGES
General: The Account can originate or acquire interests in mortgage loans, generally on the same types of properties it might otherwise buy i.e., the Account will be a creditor. These mortgage loans may pay fixed or variable interest rates or have participating features (as described below). Normally the Accounts mortgage loans will be secured by properties that have income-
34 Prospectus § TIAA Real Estate Account
producing potential. They usually will not be insured or guaranteed by the U.S. government, its agencies or anyone else. They usually will be non-recourse, which means they wont be the borrowers personal obligations. Most will be first mortgage loans on existing income-producing property, with first-priority liens on the property. These loans may be amortized (i.e., principal is paid over the course of the loan), or may provide for interest-only payments, with a balloon payment at maturity. In addition, the Account may originate a mortgage loan on a property it has recently sold (this is sometimes called seller financing).
Participating Mortgage Loans: The Account may make mortgage loans which permit the Account to share (have a participation) in the income from or appreciation of the underlying property. These participations let the Account receive additional interest, usually calculated as a percentage of the income the borrower receives from operating, selling or refinancing the property. The Account may also have an option to buy an interest in the property securing the participating loan.
Managing Mortgage Loan Investments: TIAA can manage the Accounts mortgage loans in a variety of ways, including:
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renegotiating and restructuring the terms of a mortgage loan; |
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extending the maturity of any mortgage loan made by the Account; |
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consenting to a sale of the property subject to a mortgage loan; |
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financing the purchase of a property by making a new mortgage loan in connection with the sale; and/or |
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selling the mortgage loans, or portions of them, before maturity. |
OTHER REAL ESTATE-RELATED INVESTMENTS
Joint Investment Vehicles Involved in Real Estate Activities: The Account can hold interests in joint ventures, limited partnerships, funds, and other commingled investment vehicles involved in real estate-related activities, including owning, financing, managing, or developing real estate. Many times, the Account will have limited voting and management rights in a commingled vehicle, including over the selection and disposition of the underlying real estate-related assets owned by the vehicle, and the Accounts ability to sell freely its interests in commingled vehicles may be restricted by the terms of the governing agreements. From time to time, the Account may also serve as the manager or administrator for such a vehicle, for which it may earn fees. The Account will not hold real property jointly with TIAA or its affiliates.
Real Estate Investment Trusts: The Account
may invest in REITs, which are entities (usually publicly owned and traded)
that lease, manage, acquire, hold mortgages on, and develop real estate.
Normally the Account will buy the common or preferred stock of an individual
REIT, although at times it may gain exposure to REITs by purchasing index funds
or exchange traded funds, or by purchasing REIT debt securities. REITs seek to
maximize share value and increase cash flows by acquiring and developing new
real estate projects, upgrading existing
TIAA Real Estate Account § Prospectus 35
properties or renegotiating
existing arrangements to increase rental rates and occupancy levels. REITs must
distribute at least 90% of their taxable income to shareholders in order to
benefit from a special tax structure, which means they may pay high dividends.
The value of a particular REIT can be affected by such factors as general
economic and market conditions (in particular as to publicly traded REITs), the
performance of the real estate sector in which the REIT primarily invests, cash
flow, the skill of its management team, and defaults by its lessees or
borrowers.
Mortgage-Backed Securities: The Account can invest in mortgage-backed securities and other mortgage-related or asset-backed instruments, including CMBS, RMBS, mortgage-backed securities issued or guaranteed by agencies or instrumentalities of the U.S. government, non-agency mortgage instruments, and collateralized mortgage obligations that are fully collateralized by a portfolio of mortgages or mortgage-related securities. Mortgage-backed securities are instruments that directly or indirectly represent a participation in, or are secured by and payable from, one or more mortgage loans secured by real estate. In most cases, mortgage-backed securities distribute principal and interest payments on the mortgages to investors. Interest rates on these instruments can be fixed or variable. Some classes of mortgage-backed securities may be entitled to receive mortgage prepayments before other classes do. Therefore, the prepayment risk for a particular instrument may be different than for other mortgage-related securities. Many classes of mortgage-backed securities have experienced volatility in pricing and liquidity since 2008.
Stock of Companies Involved in Real Estate Activities: From time to time, the Account can invest in common or preferred stock of companies whose business involves real estate. These stocks may be listed on U.S. or foreign stock exchanges or traded over-the-counter in the U.S. or abroad.
NON-REAL ESTATE-RELATED INVESTMENTS
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The Account can also invest in: |
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U.S. treasury or U.S. government agency securities; |
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Money market instruments and other cash equivalents. These will usually be high-quality, short-term debt instruments, including U.S. government or government agency securities, commercial paper, certificates of deposit, bankers acceptances, repurchase agreements, interest-bearing time deposits, and corporate debt securities; |
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Corporate debt or asset-backed securities of U.S. or foreign entities, or debt securities of foreign governments or multinational organizations, but only if theyre investment-grade and rated in the top four categories by a nationally recognized rating organization (or, if not rated, deemed by TIAA to be of equal quality); and |
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Common or preferred stock, or other ownership interests, of U.S. or foreign companies that arent involved in real estate, to a limited extent. |
36 Prospectus § TIAA Real Estate Account
FOREIGN REAL ESTATE AND OTHER FOREIGN INVESTMENTS
The
Account from time to time will also make foreign real estate investments. The
Account from time to time will invest in foreign real estate or real
estate-related investments. It might also invest in securities or other
instruments of foreign government or private issuers. Under the Accounts
investment guidelines, investments in direct foreign real estate, together with
foreign real estate-related securities and foreign non-real estate related
liquid investments, may not comprise more than 25% of the Accounts net assets.
However, through the date of this prospectus, such foreign real estate related
investments have never represented more than 7.5% of the Accounts net assets
and management does not intend such foreign investments to exceed 10% of the
Accounts net assets. As of the date of this prospectus, the Account holds
interests in two foreign property investments (one in the United Kingdom and
one in France), which, after netting out the fair value of debt on such
properties, as of December 31, 2010, represented approximately 2.5% of the
Accounts net assets. See Appendix B for more information, including valuation
information, concerning these investments.
Depending on investment opportunities, the Accounts foreign investments could at times be concentrated in one or two foreign countries. We will consider the special risks involved in foreign investing before investing in foreign real estate and wont invest unless our standards are met.
GENERAL INVESTMENT AND OPERATING POLICIES
STANDARDS FOR REAL ESTATE INVESTMENTS
Buying Real Estate or Making Mortgage Loans: Before the Account purchases real estate or makes a mortgage loan, TIAA will consider such factors as:
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the location, condition, and use of the underlying property; |
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its operating history and its future income-producing capacity; and |
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the quality, operating experience, and creditworthiness of the tenants or the borrower. |
TIAA will also analyze the fair market value of the underlying real estate, taking into account the propertys operating cash flow (based on the historical and projected levels of rental and occupancy rates and expenses), as well as the general economic conditions in the area where the property is located.
Diversification: We havent placed
percentage limitations on the type and location of properties that the Account
can buy. However, the Account seeks to diversify its investments by type of
property, geographic location and tenant mix. How much the Account diversifies
will depend upon whether suitable investments are available, the Accounts
ability to divest of properties that are in over-concentrated locations or
sectors, and how much the Account has available to invest.
Special Criteria for Making Mortgage Loans: Ordinarily, the Account will only make a mortgage loan if the loan, when added to any existing debt, will not
TIAA Real Estate Account § Prospectus 37
exceed 85% of the appraised value of the mortgaged property when the loan is made, unless the Account is compensated for taking additional risk.
Selling Real Estate Investments: The
Account doesnt intend to buy and sell its real estate investments simply to
make short-term profits, although proceeds from sales of real estate
investments do play a role in the Accounts cash management generally. Rather,
the Accounts general strategy in selling real estate investments is to dispose
of those assets which management believes:
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have maximized in value; |
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have underperformed or face deteriorating property-specific or market conditions; |
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represent properties needing significant capital infusions in the future; |
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management deems are appropriate to dispose of in order to remain consistent with its intent to diversify the Account by property type and geographic location (including reallocating the Accounts exposure to or away from certain property types in certain geographic locations); and/or |
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otherwise do not satisfy the investment objectives or strategy of the Account. |
The
Account will reinvest any sale proceeds that management doesnt believe it will
need to pay operating expenses, fund other obligations (such as debt
obligations and funding commitments under limited partnership agreements) or to
meet redemption requests (e.g., cash
withdrawals or transfers).
OTHER REAL ESTATE-RELATED POLICIES
Appraisals and Valuations of Real Estate Assets: The Account will rely on TIAAs own analysis, normally along with an independent external appraisal, in connection with the purchase of a property by the Account. The Account will normally receive an independent external appraisal performed by a third party appraisal firm at or before the time it buys a real estate asset, and the Account also generally obtains an independent appraisal when it makes mortgage loans.
Subsequently,
each of the Accounts real properties are appraised, and mortgage loans are
valued, at least once every calendar quarter. Each of the Accounts real estate
properties are appraised each quarter by an independent third party appraiser
who is a member of a professional appraisal organization. In addition, TIAAs
internal appraisal staff performs a review of each independent appraisal of
each real estate property as the final step in the Accounts process of
determining the value, in conjunction with the Accounts independent fiduciary,
and TIAAs internal appraisal staff or the independent fiduciary may request an
additional appraisal or valuation outside of this quarterly cycle. Any
differences in the conclusions of TIAAs internal appraisal staff and the
independent appraiser will be reviewed by the independent fiduciary, which will
make a final determination on the matter (which may include ordering a
subsequent independent appraisal).
38 Prospectus § TIAA Real Estate Account
See
Valuing the Accounts Assets on page 55 for more information on how each
class of the Accounts investments (including assets other than real estate
properties) are valued.
Borrowing: The Account may borrow money and assume or obtain a mortgage on a property i.e., make leveraged real estate investments. Under the Accounts current investment guidelines, management intends to maintain the Accounts loan to value ratio at or below 30%. However, through December 31, 2011:
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the Account will maintain outstanding debt in an aggregate principal amount not to exceed the principal amount of debt outstanding as of the date of adoption of such guidelines in July 2009 (approximately $4.0 billion); and |
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subject to this $4.0 billion limitation, the Account is permitted under its investment guidelines to incur and/or maintain debt on its properties (including (i) refinancing outstanding debt, (ii) assuming debt on the Accounts properties, (iii) extending the maturity date of outstanding debt and/or (iv) incurring new debt on its properties). |
The Accounts loan to value ratio at any time is based on the ratio of the outstanding principal amount of the Accounts debt to the Accounts total gross asset value. The Accounts total gross asset value, for these purposes, is equal to the total fair value of the Accounts assets (including the fair value of the Accounts interest in joint ventures), with no reduction associated with any indebtedness on such assets. By December 31, 2011, management intends the Accounts loan to value ratio to be 30% or less and thereafter intends to maintain its loan to value ratio at or below 30% (measured at the time of incurrence and after giving effect thereto).
In
times of high net inflow activity, in particular during times of high net
participant transfer inflows, management may determine to apply a portion of
such cash flows to make prepayments of indebtedness prior to scheduled
maturity, which would have the effect of reducing the Accounts loan to value
ratio. Such prepayments may require the Account to pay fees or yield
maintenance amounts to lenders.
In calculating outstanding indebtedness, we will include only the Accounts actual percentage interest in any borrowings on a joint venture investment and not that of any joint venture partner. Also, at the time the Account (or a joint venture in which the Account is a partner) enters into a revolving line of credit, management deems the maximum amount which may be drawn under that line of credit as fully incurred, regardless of whether the maximum amount available has been drawn from time to time.
As
of December 31, 2010, the aggregate principal amount of the Accounts
outstanding debt (including the Accounts share of debt on its joint venture
investments) was approximately $3.5 billion and the Accounts loan to value
ratio was approximately 24.3%.
The Account may only borrow up to 70% of the then current value of a property, although construction loans may be for 100% of costs incurred in developing the property. Except for construction loans, any mortgage loans on a
TIAA Real Estate Account § Prospectus 39
property will be non-recourse to the Account, meaning that if there is a default on a loan in respect of a specific property, the lender will have recourse to (i.e., be able to foreclose on) only the property encumbered (or the joint venture owning the property), or to other specific Account properties that may have been pledged as security for the defaulted loan, but not to any other assets of the Account. When possible, the Account will seek to have loans mature at different times to limit the risks of borrowing.
The Account will not obtain mortgage financing on properties it owns from TIAA or any of its affiliates. Under certain circumstances, TIAA or an affiliate may provide a loan to a third party purchaser of a property sold by the Account, but no such financing will be made with respect to a property the Account still owns. However, the Account may place an intra-company mortgage on an Account property held by a subsidiary for tax planning or other purposes. This type of mortgage will not be subject to the general limitations on borrowing described above.
When
the Account assumes or obtains a mortgage on a property, it will bear the
expense of mortgage payments. It will also be exposed to certain additional
risks, which are described in Risk Factors Risks of Borrowing on page 21.
In
addition, while it has not done so through the date of this prospectus, the
Account may obtain a line of credit to meet short-term cash needs, which line
of credit may be unsecured and/or contain terms that may require the Account to
secure a loan with one or more of its properties. Management expects the
proceeds from any such short-term borrowing would be used to meet the cash flow
needs of the Accounts properties and real estate related investments, but
depending on the circumstances, proceeds could be used for Account-level
funding needs (including the need to honor unexpected participant withdrawal
activity).
Discretion to Evict or Foreclose: TIAA may, in its discretion, evict defaulting tenants or foreclose on defaulting borrowers to maintain the value of an investment, when it decides that it is in the Accounts best interests.
Property Management and Leasing Services: The Account usually will hire a national or regional independent third party property management company to perform the day-to-day management services for each of the Accounts properties, including supervising any on-site personnel, negotiating maintenance and service contracts, providing advice on major repairs and capital improvements and assisting the Account in ensuring compliance with environmental regulations. The property manager will also recommend changes in rent schedules and create marketing and advertising programs to attain and maintain high levels of occupancy by responsible tenants. The Account may also hire independent third party leasing companies to perform or coordinate leasing and marketing services to fill any vacancies. The fees paid to the property management company, along with any leasing commissions and expenses, will reduce the Accounts cash flow from a property.
Insurance: We intend to arrange for, or require proof of, comprehensive insurance, including liability, fire, and extended coverage, for the Accounts real properties and properties securing mortgage loans or subject to purchase-
40 Prospectus § TIAA Real Estate Account
leaseback transactions. The
Account currently participates in property, casualty and other related
insurance programs as part of TIAAs property insurance programs, and the
Account only bears the cost of insuring only the properties it owns. The terms
and conditions of the insurance coverage the Account has on its properties, in
conjunction with the type of loss actually suffered at a property, may subject
the property, or the Account as a whole, to a cap on insurance proceeds that is
less than the loss or losses suffered. In addition, the Accounts insurance
policies on its properties currently include catastrophic coverage for wind,
earthquakes and terrorist acts, but we cant assure you that it will be
adequate to cover all losses. We also cant assure you that we will be able to
obtain coverage for wind, earthquakes and terrorist acts at an acceptable cost,
if at all, at the time a policy expires. While the Account will seek to have
coverage placed with highly rated, financially healthy insurance carriers, the
Account is reliant on the continued financial health of the third-party
insurers it engages.
OTHER POLICIES
Investment Company Act of 1940: The Account has not registered, and we intend to operate the Account so that it will not have to register, as an investment company under the Investment Company Act. This will require monitoring the Accounts portfolio so that it wont have more than 40 percent of total assets, other than U.S. government securities and cash items, in investment securities. As a result, the Account may be unable to make some potentially profitable investments, it may be unable to sell assets it would otherwise want to sell or it may be forced to sell investments in investment securities before it would otherwise want to do so.
Changing Operating Policies or Winding Down: Under the terms of the contracts and in accordance with applicable insurance law, TIAA can decide to change, in its sole discretion, the operating policies of the Account or to wind it down. If the Account is wound down, you may need to transfer your accumulations or annuity income to TIAAs traditional annuity or any CREF account available under your employers plan. All investors in the Account will be notified in advance if we decide to change a significant policy or wind down the Account.
ESTABLISHING AND MANAGING THE ACCOUNT
THE ROLE OF TIAA
ESTABLISHING THE ACCOUNT
TIAAs Board of Trustees established the Real Estate Account as a separate account of TIAA under New York law on February 22, 1995. The Account is regulated by the New York State Insurance Department (NYID) and the insurance departments of the other jurisdictions in which the annuity contracts are offered. Although TIAA owns the assets of the Real Estate Account, and the Accounts obligations are obligations of TIAA, the Accounts income, investment gains, and investment losses are credited to or charged against the assets of the Account
TIAA Real Estate Account § Prospectus 41
without regard to TIAAs other income, gains, or losses. Under New York insurance law, we cant charge the Account with liabilities incurred by any other TIAA business activities or any other TIAA separate account.
MANAGING THE ACCOUNT
TIAA
employees, under the direction and control of TIAAs Board of Trustees and its
Investment Committee, manage the investment of the Accounts assets, following
investment management procedures TIAA has adopted for the Account. The Account
does not have officers, directors or employees. TIAAs investment management
responsibilities include:
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identifying and recommending purchases, sales and financings of appropriate real estate-related and other investments; |
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providing (including by arranging for others to provide) all portfolio accounting, custodial, and related services for the Account; and |
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arranging for others to provide certain advisory or other management services to the Accounts joint ventures or other investments. |
In
addition, TIAA performs administration functions for the Account (which include
receiving and allocating premiums, calculating and making annuity payments and
providing recordkeeping and other services). Distribution services for the Account
(which include, without limitation, distribution of the annuity contracts,
advising existing annuity contract owners in connection with their
accumulations and helping employers implement and manage retirement plans) are
performed by Services. TIAA and Services provide investment management,
administration and distribution services, as applicable, on an at-cost basis.
For more information about the charge for investment management, administration
and distribution services, see Expense Deductions on page 62.
You
dont have the right to vote for TIAA Trustees. See General Matters Voting
Rights on page 131. For information about the Trustees, certain executive
officers of TIAA and the Accounts portfolio management team, see Appendix A of
this prospectus.
TIAAs ERISA Fiduciary Status. To the extent that assets of a plan subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA) are allocated to the Account, TIAA will be acting as an investment manager and a fiduciary under ERISA with respect to those assets.
LIQUIDITY GUARANTEE
The TIAA General Account provides the Account with a liquidity guarantee enabling the Account to have funds available to meet participant redemption, transfer or cash withdrawal requests. This guarantee is required by the NYID. If the Account cant fund participant requests from the Accounts own cash flow and liquid investments, the TIAA General Account will fund such requests by purchasing accumulation units (accumulation units that are purchased by TIAA are generally referred to as liquidity units) issued by the Account. TIAA guarantees
42 Prospectus § TIAA Real Estate Account
that you can redeem your
accumulation units at their accumulation unit value next determined after your
transfer or cash withdrawal request is received in good order. Whether the
liquidity guarantee is exercised is based on the cash level of the Account from
time to time, as well as recent participant withdrawal activity and the Accounts
expected working capital, debt service and cash needs, all subject to the
oversight of the independent fiduciary. While the proceeds from liquidity unit
purchases are not placed in a segregated account solely to fund participant
requests, the guarantee is in place to meet participant needs. Liquidity units
owned by TIAA are valued in the same manner as accumulation units owned by the
Accounts participants. Importantly, however, this liquidity guarantee is not a
guarantee of the investment performance of the Account or a guarantee of the
value of your units. Transfers from the Account to a CREF or TIAA account, or
another investment option, are limited to once every calendar quarter (except
for specifically prescribed systematic transfers established in accordance with
the terms of the participants contract and employers plan), and cash
withdrawals may be further restricted by the terms of your plan.
TIAAs obligation to provide Account participants liquidity through purchases of liquidity units is not subject to an express regulatory or contractual limitation, although as described below under Role of the Independent Fiduciary, the independent fiduciary may (but is not obligated to) require the reduction of TIAAs interest through sales of assets from the Account if TIAAs interest exceeds a predetermined trigger point. Even if this trigger point were reached and regardless of whether the independent fiduciary has required the Account to dispose of any assets, TIAAs obligation to provide liquidity under the guarantee will continue.
The
independent fiduciary is vested with oversight and approval over any redemption
of TIAAs liquidity units, acting in the best interests of Real Estate Account
participants. Management expects that, unless the trigger point has been
reached, redemptions would only occur: (i) once the Account has experienced net
participant inflows for an extended period of time and (ii) if the Account is
otherwise projected to maintain a level of non real estate-related liquid
assets, taking into account reasonably foreseeable uses of cash (including for
acquisition of real estate and real estate related investments and paying debt
service and outstanding principal balances at maturity), above 25% of the Accounts
net assets. While the Account held 22.3% of its net assets in non real
estate-related liquid assets at December 31, 2010, as of the date of this
prospectus, management cannot predict when the independent fiduciary will
approve or require a redemption in part or in full of the liquidity units held
by TIAA. The independent fiduciary may, however, authorize or direct the
redemption of TIAAs liquidity units (or a portion thereof) at any time and
TIAA will request the approval of the independent fiduciary before liquidity
units are redeemed. Upon termination and liquidation of the Account (wind-up),
any liquidity units held by TIAA will be the last units redeemed, unless the
independent fiduciary directs otherwise.
Finally, TIAA may redeem its liquidity units more frequently than once per calendar quarter, subject at all times to the oversight and approval of the Accounts
TIAA Real Estate Account § Prospectus 43
independent fiduciary
(discussed in more detail in the subsection entitled Role of the Independent
Fiduciary immediately below). The Account pays TIAA for the risk associated
with providing the liquidity guarantee through a daily deduction from the
Accounts net assets. See Expense Deductions on page 62.
Primarily
as a result of significant net participant transfers throughout 2008 (in
particular, in the second half of 2008), pursuant to this liquidity guarantee
obligation, the TIAA General Account first purchased liquidity units on
December 24, 2008. Through the date of this prospectus, the TIAA General
Account has paid an aggregate of approximately $1.2 billion to purchase
liquidity units in a number of separate transactions, with the last such
transaction occurring in June 2009. As of the date of this prospectus, no
liquidity units have been redeemed by TIAA. Management cannot predict whether
future liquidity unit purchases will be required under the liquidity guarantee.
ROLE OF THE INDEPENDENT FIDUCIARY
Because TIAAs ability to purchase and sell liquidity units raises certain technical issues under ERISA, TIAA applied for and received a prohibited transaction exemption from the U.S. Department of Labor in 1996 (PTE 96-76). In connection with the exemption, TIAA has appointed an independent fiduciary for the Real Estate Account, with overall responsibility for reviewing Account transactions to determine whether they are in accordance with the Accounts investment guidelines. Real Estate Research Corporation, a real estate consulting firm whose principal offices are located in Chicago, Illinois, was initially appointed as independent fiduciary effective March 1, 2006 and currently serves as the Accounts independent fiduciary. The independent fiduciarys responsibilities include:
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reviewing and approving the Accounts investment guidelines and monitoring whether the Accounts investments comply with those guidelines; |
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reviewing and approving valuation procedures for the Accounts properties; |
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approving adjustments to any property valuations that change the value of the property or the Account as a whole above or below certain prescribed levels, or that are made within three months of the annual independent appraisal; |
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reviewing and approving how the Account values accumulation and annuity units; |
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approving the appointment of all independent appraisers; |
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reviewing the purchase and sale of units by TIAA to ensure that the Account uses the correct unit values; and |
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requiring appraisals besides those normally conducted, if the independent fiduciary believes that any of the properties have changed materially, or that an additional appraisal is necessary to ensure the Account has correctly valued a property. |
In addition, Real Estate Research Corporation has certain responsibilities with respect to the Account that it had historically undertaken or is currently
44 Prospectus § TIAA Real Estate Account
undertaking with respect to
TIAAs purchase and ownership of liquidity units, including among other things,
reviewing the purchases and redemption of liquidity units by TIAA to ensure the
Account uses the correct unit values. In connection therewith, as set forth in
PTE 96-76, the independent fiduciarys responsibilities include:
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establishing the percentage of total liquidity units that TIAAs ownership should not exceed (the trigger point) and creating a method for changing the trigger point; |
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approving any adjustment of TIAAs ownership interest in the Account and, in its discretion, requiring an adjustment if TIAAs ownership of liquidity units reaches the trigger point; and |
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once the trigger point has been reached, participating in any program to reduce TIAAs ownership in the Account by utilizing cash flow or liquid investments in the Account, or by utilizing the proceeds from asset sales. If the independent fiduciary were to determine that TIAAs ownership should be reduced following the trigger point, its role in participating in any asset sales program would include: |
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(i) |
participating in the selection of properties for sale, |
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(ii) |
providing sales guidelines, and |
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(iii) |
approving those sales if, in the independent fiduciarys opinion, such sales are desirable to reduce TIAAs ownership of liquidity units. |
As
of the date of this prospectus, the independent fiduciary, which has the right
to adjust the trigger point, has established the trigger point at 45% of the
outstanding accumulation units and it will continue to monitor TIAAs ownership
interest in the Account and provide further recommendations as necessary. As of
December 31, 2010, TIAA owned approximately 9.8% of the outstanding
accumulation units of the Account. In establishing the appropriate trigger
point, including whether or not to require certain actions once the trigger
point has been reached, the independent fiduciary will assess, among other
things and to the extent consistent with PTE 96-76 and the independent
fiduciarys duties under ERISA, the risk that a conflict of interest could
arise due to the level of TIAAs ownership interest in the Account.
A special subcommittee consisting of five (5) independent outside members of the Investment Committee of TIAAs Board of Trustees renewed the appointment of Real Estate Research Corporation as the independent fiduciary for an additional three-year term, which appointment was effective as of January 1, 2009, and continues through February 29, 2012. This subcommittee may renew the independent fiduciary appointment, remove the independent fiduciary, or appoint its successor. The independent fiduciary can be removed for cause by the vote of three (3) out of the five (5) subcommittee members and will not be reappointed if two (2) of the subcommittee members disapprove the reappointment. The independent fiduciary can resign after at least 180 days written notice.
TIAA Real Estate Account § Prospectus 45
TIAA pays the independent fiduciary directly. The investment management charge paid to TIAA includes TIAAs costs for retaining the independent fiduciary. Under PTE 96-76, the independent fiduciary must receive less than 5% of its annual gross revenues (including payment for its services to the Account) from TIAA and its affiliates.
When you decide as a participant or plan fiduciary to invest in the Account, after TIAA has provided you with full and fair disclosure, including the disclosure in this prospectus, you are also acknowledging that you approve and accept Real Estate Research Corporation or any successor to serve as the Accounts independent fiduciary.
CONFLICTS OF INTEREST
General. Employees of TIAA that provide advice with respect to the Real Estate Account may also provide investment advice with respect to investments managed by Teachers Advisors, Inc. (Advisors), an indirect, wholly owned subsidiary of TIAA and a registered investment adviser. In addition, TIAA and its affiliates offer (and may in the future offer) other accounts and investment products that are not managed under an at cost expense structure. Therefore, TIAA and its employees may at times face various conflicts of interest. For example, the TIAA General Account and a privately offered core property investment fund managed by Advisors (the core property investment fund) may sometimes compete with the Real Estate Account in the purchase of investments. (Each of the TIAA General Account, the Real Estate Account and the core property investment fund together with any other real estate accounts or funds that are established or may be established by TIAA or its affiliates in the future, are herein referred to as an account.)
Many of the personnel of TIAA involved in performing services to the Real Estate Account will have competing demands on their time. The personnel will devote such time to the affairs of the Account as TIAAs management determines, in its sole discretion exercising good faith, is necessary to properly service the Account. TIAA believes that it has sufficient personnel to discharge its responsibility to the Real Estate Account, the General Account, the core property investment fund and other accounts to avoid conflicts of interest. TIAA or its affiliates may form other real estate investment vehicles in the future and we will take steps to assure that those vehicles are integrated into these conflict of interest policies. TIAA does not accept acquisition or placement fees for the services it provides to the Account.
Allocation Procedure. TIAA and its
affiliates allocate new investments (including real property investments and
discrete real estate-related investment opportunities, but generally not
limited partnership investments) among the accounts in accordance with a
written allocation procedure as adopted by TIAA and modified from time to time.
Generally, the portfolio managers for each of the accounts will identify
acquisition opportunities which conform to the investment strategy of the
account. If more than one account expresses an interest and an
46 Prospectus § TIAA Real Estate Account
informal resolution cannot be reached, a special TIAA Allocation Committee, consisting primarily of senior TIAA real estate professionals (including the portfolio managers for each account), will seek to resolve any conflict by considering a number of factors, including the investment strategy of the bidding account, the relative capital available for investment by each account, liquidity requirements, portfolio diversification, whether the property would be at a competitive disadvantage to properties owned by another account in the subject market and such other factors deemed relevant by the Allocation Committee (and subject to any investment limitations or other requirements in the accounts governing documents, investment guidelines or applicable laws or regulations (including ERISA and insurance laws)). If this analysis does not determine, by a unanimous vote of the Allocation Committee, which account should participate in a transaction, a strict rotation system will be used whereby the interested account highest on the list will be allowed to participate in the transaction, and then such account will drop to the bottom of the list thereafter. The secretary of the Allocation Committee will prepare a quarterly report describing the allocations made during the previous quarter based on this allocation procedure. This report will also be reviewed by a committee of senior TIAA executives which is separate from the Allocation Committee and which functions as an internal monitor of compliance with this allocation procedure.
In
addition, non-discretionary mandates within an account, where the account is a
major co-investor, will be included as part of that accounts rotation and will
not have a separate place in the foregoing rotation among accounts. If an
account has more than one non-discretionary mandate with overlapping investment
strategies, the portfolio manager for that account will maintain a strict
rotation system to allocate among such mandates any opportunities that fit the
mandates investment strategies and which the portfolio manager has elected to
offer to the mandates. Records of allocations made pursuant to intra-account
rotations will be included on the quarterly real estate allocation report and
provided to the Allocation Committee as described above.
Leasing Conflicts. Conflicts could also arise because some properties in the TIAA General Account, the core property investment fund and other accounts may compete for tenants with the Real Estate Accounts properties. Management believes the potential for leasing conflicts are minimized by the unique characteristics of each property, including location, submarket, physical characteristics, amenities and lease rollover schedules. Management believes the differing business strategies of the accounts also reduce potential conflicts. If a conflict arises, as appropriate, the competing accounts will arrange that different property managers and leasing brokers are engaged, each charged with using their best efforts to support the property management and leasing activity for each particular property and an ethical screen will be placed between the internal asset managers for the respective properties. Any conflicts that arise will be reported to the next occurring TIAA Allocation Committee review meeting.
TIAA Real Estate Account § Prospectus 47
Sales Conflicts. Conflicts could also potentially arise when two TIAA accounts attempt to sell properties located in the same market or submarket, especially if there are a limited number of potential purchasers and/or if such purchaser has an ongoing business relationship with TIAA or one of its specific accounts.
Liquidity Guarantee. TIAAs ownership of
liquidity units (including potential changes in future ownership levels) could
result in the perception that TIAA is taking into account its own economic
interests while serving as investment manager for the Account. In particular,
there is the concern that TIAA could make investment decisions (and other
management decisions) with respect to the Account which serve the interest of
the TIAA General Account, at the expense of those participants that have chosen
the Account as an investment option. This could manifest itself, among other ways,
by the Account disposing its properties solely to raise liquidity in avoidance
of having a need for the liquidity guarantee, or by foregoing otherwise
attractive investment opportunities so as not to impair liquid asset levels.
Management
believes that any conflict (or potential conflict) is mitigated by, among other
things, the detailed valuation procedure for the Accounts properties, which
includes independent appraisals and the oversight of the independent fiduciary.
Also, the independent fiduciary oversees the liquidity guarantee execution to
ensure the proper unit values are applied, and the independent fiduciary will
oversee any liquidity unit redemptions. Further, the independent fiduciary is
vested with the right to establish a trigger point, which is a level of
ownership at which the fiduciary is empowered, but not required, to reduce
TIAAs ownership interest (with the goal to mitigate any potential conflict of
interest) through the means described in the immediately preceding section. For
example, the independent fiduciary could perceive a conflict of interest if it
believed that management directed the sale of properties solely to increase
liquidity (not in accordance with the Accounts investment guidelines or at
fire sale prices) with the sole goal of avoiding the need for further TIAA
liquidity unit purchases under the liquidity guarantee. In such case, the
independent fiduciary would be authorized to adjust the trigger point, at which
time the fiduciary would have control over the sales of properties (including
the timing and pricing) to ensure such sales are in the best interests of the
Account.
While it retains the oversight over the Accounts investment guidelines, valuation and appraisal matters and the liquidity guarantee as described above in Role of the Independent Fiduciary, the independent fiduciarys authority to override investment management decisions made by TIAAs managers acting on behalf of the Account is limited to those circumstances after which the trigger point has been reached or during a wind-down of the Account.
INDEMNIFICATION
The Account has agreed to indemnify TIAA and its affiliates, including its officers and trustees, against certain liabilities to the extent permitted by law, including liabilities under the Securities Act of 1933. The Account may make such indemnification out of its assets.
48 Prospectus § TIAA Real Estate Account
SUMMARY OF THE ACCOUNTS PROPERTIES
THE PROPERTIES IN GENERAL
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38 office property investments (four of which were held in joint ventures and one property located in London, United Kingdom); |
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25 industrial property investments (including one held in a joint venture); |
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20 apartment property investments; |
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15 retail property investments (including five held in joint ventures and one property located in Paris, France); and |
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a 75% joint venture interest in a portfolio of storage facilities located throughout the United States. |
COMMERCIAL (NON-RESIDENTIAL) PROPERTIES
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Office. 38 property investments containing approximately 18.6 million square feet located in 12 states, the District of Columbia and the United Kingdom. As of December 31, 2010, the Accounts office properties had an aggregate market value of approximately $5.3 billion. |
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Industrial. 25 property investments containing approximately 30.2 million square feet located in 11 states, including a 60% interest in a portfolio of industrial properties located throughout the United States. As of December 31, 2010, the Accounts industrial properties had an aggregate market value of approximately $1.3 billion. |
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TIAA Real Estate Account § Prospectus 49
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Retail. 15 property investments containing approximately 17.3 million square feet located in five states, the District of Columbia and Paris, France. As of December 31, 2010, the Accounts retail properties had an aggregate market value of approximately $1.4 billion. One of the retail property investments is an 85% interest in a portfolio containing 43 individual retail shopping centers located throughout the Eastern and Southeastern states. |
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office property investments were 91.8% leased on a market value weighted basis and 86.7% leased on a weighted basis; |
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industrial property investments were 95.3% leased on a market value weighted basis and 92.8% leased on a weighted basis; |
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retail property investments were 92.7% leased on a market value weighted basis and 84.7% leased on a weighted basis; and |
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the storage portfolio was 84.0% leased. |
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MAJOR OFFICE TENANTS |
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Occupied |
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Percentage of Total |
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Percentage of Total |
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BHP Petroleum (Americas), Inc.(1) |
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510,659 |
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2.7% |
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0.8% |
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Deloitte and Touche USA LLP(1) |
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487,193 |
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2.6% |
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0.7% |
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Crowell & Moring LLP(1) |
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377,911 |
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2.0% |
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0.6% |
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The Bank of New York Mellon Corporation(2) |
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372,909 |
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2.0% |
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0.6% |
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Microsoft Corporation(1) |
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361,528 |
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1.9% |
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0.5% |
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Atmos Energy Corporation(1) |
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319,035 |
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1.7% |
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0.5% |
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GE Healthcare(1) |
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309,278 |
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1.7% |
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0.5% |
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Yahoo! Inc.(2) |
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302,324 |
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1.6% |
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0.5% |
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Metropolitan Life Insurance Co.(3) |
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243,349 |
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1.3% |
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0.4% |
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Pearson Education, Inc.(1) |
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225,299 |
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1.2% |
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0.3% |
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50 Prospectus § TIAA Real Estate Account
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MAJOR INDUSTRIAL TENANTS |
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Occupied |
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Percentage of Total |
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Percentage of Total |
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Wal-Mart Stores, Inc.(1) |
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1,099,112 |
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3.6% |
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1.7% |
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General Electric Company(1) |
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1,004,000 |
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3.3% |
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1.5% |
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Regal West Corporation(1) |
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968,535 |
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3.2% |
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1.5% |
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Restoration Hardware Inc.(1) |
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886,052 |
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2.9% |
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1.3% |
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Kuehne & Nagel(1) |
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840,902 |
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2.8% |
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1.3% |
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Kumho Tire U.S.A. Inc.(1) |
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830,485 |
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2.7% |
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1.3% |
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Tyco Healthcare Retail Group, Inc.(1) |
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800,000 |
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2.6% |
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1.2% |
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Michelin North America, Inc(1) |
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756,690 |
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2.5% |
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1.1% |
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Technicolor Videocassette of |
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Michigan, Inc.(1) |
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708,532 |
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2.3% |
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1.1% |
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Del Monte Fresh Produce, N.A., Inc.(1) |
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689,660 |
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2.3% |
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1.0% |
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MAJOR RETAIL TENANTS |
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Occupied |
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Percentage of Total |
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Percentage of Total |
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Publix Super Markets, Inc.(3) |
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490,634 |
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2.8% |
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0.7% |
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Dicks Sporting Goods, Inc.(2) |
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477,486 |
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2.8% |
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0.7% |
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Wal-Mart Stores, Inc.(2) |
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415,056 |
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2.4% |
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0.6% |
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Ross Stores, Inc.(2) |
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414,732 |
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2.4% |
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0.6% |
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Belk, Inc.(2) |
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371,706 |
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2.2% |
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0.6% |
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PetSmart, Inc.(2) |
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370,037 |
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2.1% |
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0.6% |
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Michaels Stores, Inc.(3) |
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359,047 |
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2.1% |
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0.5% |
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Bed Bath & Beyond Inc.(3) |
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350,418 |
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2.0% |
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0.5% |
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Kohls Corporation(2) |
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348,057 |
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2.0% |
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0.5% |
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Best Buy Co., Inc.(3) |
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277,720 |
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1.6% |
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0.4% |
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(1) |
Tenant occupied space within wholly owned property investments. |
(2) |
Tenant occupied space within joint venture investments. |
(3) |
Tenant occupied space within wholly owned property investments and joint venture investments. |
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OFFICE PROPERTIES |
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Rentable Area Subject |
) |
Percentage of Total Rentable Area of |
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2011 |
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1,904,179 |
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10.2% |
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2012 |
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1,259,844 |
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6.8% |
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2013 |
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1,521,804 |
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8.2% |
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2014 |
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2,222,745 |
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11.9% |
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2015 |
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1,895,299 |
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10.2% |
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2016 and thereafter |
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7,135,067 |
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38.3% |
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Total |
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15,938,938 |
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85.6% |
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TIAA Real Estate Account § Prospectus 51
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INDUSTRIAL PROPERTIES |
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Rentable Area Subject |
) |
Percentage of Total Rentable Area of |
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2011 |
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3,895,917 |
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12.9% |
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2012 |
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3,128,561 |
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10.4% |
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2013 |
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5,241,902 |
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17.3% |
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2014 |
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2,039,814 |
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6.8% |
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2015 |
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6,676,316 |
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22.1% |
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2016 and thereafter |
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6,898,302 |
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22.8% |
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Total |
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27,880,812 |
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92.3% |
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RETAIL PROPERTIES |
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Rentable Area Subject |
) |
Percentage of Total Rentable Area of |
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2011 |
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1,694,912 |
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9.8% |
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2012 |
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1,882,945 |
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10.9% |
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2013 |
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1,769,038 |
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10.2% |
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2014 |
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1,307,870 |
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7.6% |
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2015 |
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1,466,010 |
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8.5% |
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2016 and thereafter |
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6,321,120 |
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36.6% |
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Total |
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14,441,895 |
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83.6% |
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RESIDENTIAL PROPERTIES
RECENT TRANSACTIONS
52 Prospectus § TIAA Real Estate Account
Office Properties
TIAA Real Estate Account § Prospectus 53
On September 30, 2010 the Account repaid a total of $326.0 million of its mortgage loans payable associated with its wholly owned real estate investments at 701 Brickell and Four Oaks Place.
54 Prospectus § TIAA Real Estate Account
We value the Accounts assets as of the close of each valuation day by taking the sum of:
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the value of the Accounts cash, cash equivalents, and short-term and other debt instruments; |
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the value of the Accounts other securities and other non-real estate assets; |
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the value of the individual real properties (based on the most recent valuation of that property) and other real estate-related investments owned by the Account; |
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an estimate of the net operating income accrued by the Account from its properties, other real estate-related investments and non real estate-related investments (including short-term marketable securities) since the end of the prior valuation day; and |
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actual net operating income earned from the Accounts properties, other real estate-related investments and non real estate-related investments (but only to the extent any such item of income differs from the estimated income accrued for on such investments), |
and then reducing the sum by
the Accounts liabilities, including the daily investment management,
administration and distribution fees and certain other fees and expenses
attributable to operating the Account. See Expense Deductions on page 62.
TIAA Real Estate Account § Prospectus 55
Fair value for the Accounts assets is based upon quoted market prices in active exchange markets, where available. If listed prices or quotes in such markets are not available, fair value is based upon vendor-provided, evaluated prices or internally developed models that primarily use market-based or independently sourced market data, including interest rate yield curves, market spreads, and currency rates. Valuation adjustments may be made to reflect credit quality, a counterpartys creditworthiness, the Accounts creditworthiness, liquidity, and other observable and unobservable data that are applied consistently over time.
The methods described above are considered to produce a fair value calculation that represents a good faith estimate as to what an unaffiliated buyer in the market place would pay to purchase the asset or receive to transfer the liability. Since fair value calculations involve significant professional judgment in the application of both observable and unobservable attributes, actual realizable values or future fair values may differ from amounts reported. Furthermore, while the Account believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments, while reasonable, could result in different estimates of fair value at the reporting date.
VALUING REAL ESTATE INVESTMENTS
Valuing Real Property: Investments in real estate properties are stated at fair value, as determined in accordance with policies and procedures reviewed by the Investment Committee of the TIAA Board of Trustees (the Board) and in accordance with the responsibilities of the Board as a whole. Accordingly, the Account does not record depreciation.
Fair
value for real estate properties is defined as the price that would be received
to sell the asset in an orderly transaction between market participants at the
measurement date. Determination of fair value involves significant levels of
judgment because the actual market value of real estate can be determined only
by negotiation between the parties in a sales transaction. Property and
investment values are affected by, among other things, the availability of
capital, occupancy rates, rental rates, and interest and inflation rates. As a
result, determining real estate and investment values involves many
assumptions. Amounts ultimately realized from each investment may vary
significantly from the market value presented. Actual results could differ from
those estimates. See Risk Factors Risks Associated with Real Estate Investing
Valuation and Appraisal Risks on page 18.
In accordance with the Accounts procedures designed to comply with Fair Value Measurements and Disclosures in U.S. Generally Accepted Accounting Principles, the Account values real estate properties purchased by the Account initially based on an independent appraisal at the time of the closing of the purchase, which may result in a potential unrealized gain or loss reflecting the difference between an investments fair value (i.e., exit price) and its cost basis (which is inclusive of transaction costs).
56 Prospectus § TIAA Real Estate Account
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Subsequently, each property will be valued each quarter by an independent appraiser and the property value is updated as appropriate. In general, the Account obtains independent appraisals of its real estate properties spread out throughout the quarter, which is intended to result in appraisal adjustments, and thus, adjustments to the valuations of its holdings (to the extent such adjustments are made), that happen regularly throughout each quarter and not on one specific day in each quarter. |
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Further, management reserves the right to order an appraisal and/or conduct another valuation outside of the normal quarterly process when facts or circumstances at a specific property change (for example, under certain circumstances a valuation adjustment could be made when bids are obtained for properties held for sale). The Accounts independent fiduciary, Real Estate Research Corporation, oversees the Accounts entire appraisal process and, among other things, must approve all independent appraisers used by the Account. TIAAs internal appraisal staff oversees the entire appraisal process and reviews each independent quarterly appraisal, in conjunction with the Accounts independent fiduciary, prior to the value reflected in that appraisal being recorded in the Account. Any differences in the conclusions of TIAAs internal appraisal staff and the independent appraiser will be reviewed by the independent fiduciary, which will make a final determination on the matter (which may include ordering a subsequent independent appraisal). |
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Real estate appraisals are estimates of property values based on a professionals opinion. All appraisals are performed in accordance with Uniform Standards of Professional Appraisal Practices (USPAP), the real estate appraisal industry standards created by The Appraisal Foundation. Appraisals of properties held outside of the U.S. are performed in accordance with industry standards commonly applied in the applicable jurisdiction. Further, these independent appraisers (as well as TIAAs internal appraisal staff) are always expected to be MAI-designated members of the Appraisal Institute (or its European equivalent, Royal Institute of Chartered Surveyors) and state certified appraisers from national or regional firms with relevant property type experience and market knowledge. Under the Accounts current procedures, each independent appraisal firm will be rotated off of a particular property at least every three years, although such appraisal firm may perform appraisals of other Account properties subsequent to such rotation. |
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We intend that the overarching principle and primary objective when valuing our real estate investments will be to produce a valuation that represents a fair and accurate estimate of the fair value of our investments. Implicit in our definition of fair value is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: |
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Buyer and seller are typically motivated; |
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Both parties are well informed or well advised, and acting in what they consider their best interests; |
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A reasonable time is allowed for exposure in the open market; |
TIAA Real Estate Account § Prospectus 57
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Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and |
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The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. |
The Accounts net asset value will include the value of any note receivable (an amount that someone else owes the Account) from selling a real estate-related investment. Well estimate the value of the note by applying a discount rate appropriate to then-current market conditions.
Development Properties. Development properties will be carried at fair value, which is anticipated initially to equal the Accounts cost, and the value will be adjusted as additional development costs are incurred. At a minimum, once a property receives a certificate of occupancy, within one year from the initial funding by the Account, or the property is substantially leased, whichever is earlier, the property will be appraised by an independent external appraiser, approved by the independent fiduciary. We may also have the properties independently appraised earlier if circumstances warrant.
Property Portfolios. The Account may, at times, value individual properties together (whether or not purchased at the same time) in a portfolio as a single asset, to the extent we believe that the property may be sold as one portfolio. The Account may also realize efficiencies in property management by pooling a number of properties into a portfolio. The value assigned to the portfolio as a whole may be more or less than the valuation of each property individually. The Account will also, from time to time, sell one or more individual properties that comprise a portfolio, with the Account retaining title to the remaining individual properties comprising that portfolio. In such a circumstance, the Account could determine to no longer designate such remaining properties as one portfolio.
Because of the nature of real estate assets and because the fair value of our investments is not reduced by transaction costs that will be incurred to sell the investments, the Accounts net asset value wont necessarily reflect the net realizable value of its real estate assets (i.e., what the Account would receive if it sold them). See Valuation Adjustments below.
Valuing Real Property Subject to a Mortgage: When a real estate property is subject to a mortgage, the mortgage is valued independently of the property and its fair value is reported separately. The independent fiduciary reviews and approves all mortgage valuation adjustments before such adjustments are recorded by the Account. The Account will continue to use the revised value for each real estate property and mortgage loan payable to calculate the Accounts daily net asset value until the next valuation review or appraisal.
Valuing Mortgage Loans Receivable (i.e., the Account as a creditor): Mortgage loans receivable are stated at fair value and are initially valued at the face amount of the mortgage loan funding. Subsequently, mortgage loans receivable are valued at least quarterly based on market factors, such as market interest rates and spreads for comparable loans, the liquidity for mortgage loans
58 Prospectus § TIAA Real Estate Account
of similar characteristics, the performance of the underlying collateral and the credit quality of the counterparty.
Valuing Mortgage Loans Payable (i.e., the Account as a debtor): Mortgage loans payable are stated at fair value. The estimated fair value of mortgage loans payable is generally based on the amount at which the liability could be transferred in a current transaction, exclusive of transaction costs. Fair values are estimated based on market factors, such as market interest rates and spreads on comparable loans, the liquidity for mortgage loans of similar characteristics, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying collateral), the maturity date of the loan, the return demands of the market, and the credit quality of the Account. Different assumptions or changes in future market conditions could significantly affect estimated fair values. At times, the Account may assume debt in connection with the purchase of real estate.
Valuing Real Estate Joint Ventures: Real estate joint ventures are stated at the fair value of the Accounts ownership interests in the underlying entities. The Accounts ownership interests are valued based on the fair value of the underlying real estate, any related mortgage loans payable, and other factors, such as ownership percentage, ownership rights, buy/sell agreements, distribution provisions and capital call obligations. In addition, any restrictions on the right of the Account to transfer its ownership interest to third parties could adversely affect the value of the Accounts interest. Upon the disposition of all real estate investments by an investee entity, the Account will continue to state its equity in the remaining net assets of the investee entity during the wind down period, if any, that occurs prior to the dissolution of the investee entity.
Valuing Real Estate Limited Partnerships: Limited partnerships are stated at the fair value of the Accounts ownership in the partnership, which is based on the most recent net asset value of the partnership, as reported by the sponsor. Since market quotations are not readily available, the limited partnership interests are valued at fair value as determined in good faith under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. As circumstances warrant, prior to the receipt of financial statements of the limited partnership, the Account will estimate the value of its interests in good faith and will from time to time seek input from the issuer or the sponsor of the investment vehicle.
Net Operating Income: The Account usually receives operating income from its investments intermittently, not daily. In fairness to participants, we estimate the Accounts net operating income rather than applying it when we actually receive it, and assume that the Account has earned (accrued) a proportionate amount of that estimated amount daily. You bear the risk that, until we adjust the estimates when we receive actual items of income, the Accounts net assets could be under- or over-valued.
Every year, we prepare a month-by-month estimate of the revenues and expenses (estimated net operating income) for each of the Accounts properties.
TIAA Real Estate Account § Prospectus 59
Each day, we add the appropriate fraction of the estimated net operating income for the month to the Accounts net asset value.
Every month, the Account receives a report of the actual operating results for the prior month for each property (actual net operating income). We then recognize the actual net operating income on the accounting records of the Account and adjust the outstanding daily accrued receivable accordingly. As the Account actually receives income from a property, well adjust the daily accrued receivable and other accounts appropriately.
|
|
Valuation Adjustments: General. Management reserves the right to order an appraisal and/or conduct another valuation outside of the normal quarterly process when facts or circumstances at a specific property change. Also, the independent fiduciary can require additional appraisals if it believes a propertys value may have changed materially and such change is not reflected in the quarterly valuation review, or otherwise to ensure that the Account is valued appropriately. For example, under certain circumstances a valuation adjustment could be made when bids are obtained for properties held for sale by the Account. In addition, adjustments may be made for events or circumstances indicating an impairment of a tenants ability to pay amounts due to the Account under a lease (including due to a bankruptcy filing of that tenant). Also, adjustments may be made to reflect factors (such as sales values for comparable properties or local employment rate) bearing uniquely on a particular region in which the Account holds properties. We may not always be aware of each event that might require a valuation adjustment, and because our evaluation is based on subjective factors and we give different weight to different factors, we may not in all cases make a valuation adjustment where changing conditions could potentially affect the value of an investment. |
|
Required Approvals. The independent fiduciary will need to approve adjustments to any valuation of one or more properties or real estate related assets that:
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|
|
is made within three months of the annual independent appraisal, or |
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|
|
results in an increase or decrease of: |
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|
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|
|
|
|
more than 6 percent of the value of any of the Accounts properties since the last independent annual appraisal; |
|
|
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|
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|
more than 2 percent in the value of the Account since the prior calendar month; and/or |
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|
|
|
more than 4 percent in the value of the Account within any calendar quarter. |
Right to Change Valuation Methods: If we decide that a different valuation method would reflect the value of a real estate-related investment more accurately, we may use that method if the independent fiduciary consents. Changes in TIAAs valuation methods could change the Accounts net asset value and change the values at which participants purchase or redeem Account interests.
60 Prospectus § TIAA Real Estate Account
VALUING OTHER INVESTMENTS (INCLUDING CERTAIN REAL ESTATE-RELATED INVESTMENTS)
Debt Securities and Money Market Instruments: We value debt securities (excluding money market instruments) for which market quotations are readily available based on the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality and type). We derive these values utilizing an independent pricing service, such as FT Interactive Data Corp, Reuters and Bloomberg, except when we believe the prices do not accurately reflect the securitys fair value. We value money market instruments with maturities of one year or less in the same manner as debt securities, or by using a pricing matrix that has various types of money market instruments along one axis and various maturities along the other. Debt securities for which market quotations are not readily available are valued at fair value as determined in good faith by the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole.
Equity Securities: We value equity securities (including REITs) listed or traded on the New York Stock Exchange (or any of its affiliated exchanges) at their last sale price on the valuation day. If no sale is reported that day, we use the mean of the last bid and asked prices, exclusive of transaction costs. Equity securities listed or traded on any other exchange are valued in a comparable manner on the principal exchange where traded.
We value equity securities traded on the Nasdaq Stock Market at the Nasdaq Official Closing Price on the valuation day. If no sale is reported that day, we use the mean of the last bid and asked prices, exclusive of transaction costs. Other U.S. over-the-counter equity securities are valued at the mean of the last bid and asked prices.
Mortgage-Backed Securities: We value mortgage-backed securities, including CMBS and RMBS, in the same manner in which we value debt securities, as described above.
Foreign Securities: To value equity and fixed income securities traded on a foreign exchange or in foreign markets, we use their closing values under the generally accepted valuation method in the country where traded, as of the valuation date. We convert this to U.S. dollars at the exchange rate in effect on the valuation day. Under certain circumstances (for example, if there are significant movements in the United States markets and there is an expectation the securities traded on foreign markets will adjust based on such movements when the foreign markets open the next day), the Account may adjust the value of equity or fixed income securities that trade on a foreign exchange or market after the foreign exchange or market has closed.
Investments Lacking Current Market Quotations: We value securities or other assets for which current market quotations are not readily available at fair value as determined in good faith under the direction of the Investment Committee of TIAAs Board of Trustees and in accordance with the responsibilities of TIAAs Board as a whole. In evaluating fair value for the Accounts interest in certain
TIAA Real Estate Account § Prospectus 61
commingled investment vehicles, the Account will generally look to the value periodically assigned to interests by the issuer. When possible, the Account will seek to have input in formulating the issuers valuation methodology.
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|
Expense deductions are made each Valuation Day from the net assets of the Account for various services to manage the Accounts investments, administer the Account and the contracts, distribute the contracts and to cover certain risks borne by TIAA. Investment management, administration and distribution services are provided at cost by TIAA and Services. Currently, TIAA provides investment management services and administration services for the Account, and Services provides distribution services for the Account. In addition, TIAA charges the Account a fee to bear certain mortality and expense risks, and risks associated with providing the liquidity guarantee. TIAA guarantees that in the aggregate, the expense charges will never be more than 2.50% of average net assets per year. |
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The estimated annual expense deduction rate that appears in the expense table below reflects an estimate of the amount we currently expect to deduct to approximate the costs that the Account will incur from May 1, 2011 through April 30, 2012. Actual expenses may be higher or lower. |
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Type of Expense Deduction |
|
Estimated |
|
Services Performed |
Investment Management |
|
____% |
|
For investment advisory, investment management, portfolio accounting, custodial and similar services, including independent fiduciary and appraisal fees |
|
||||
Administration |
|
____% |
|
For administration and operations of the Account and the contracts, including administrative services such as receiving and allocating premiums and calculating and making annuity payments |
|
||||
Distribution |
|
____% |
|
For services and expenses associated with distributing the annuity contracts |
|
||||
Mortality and Expense Risk |
|
____% |
|
For TIAAs bearing certain mortality and expense risks |
|
||||
Liquidity Guarantee |
|
____% |
|
For TIAAs liquidity guarantee |
|
||||
Total Annual Expense Deduction1,2,3 |
|
____% |
|
Total |
|
|
|
|
|
|
|
1 |
TIAA guarantees that the total annual expense deduction will not exceed an annual rate of 2.50% of average net assets. |
2 |
TIAA currently does not impose a fee on transfers from the Account, but reserves the right to impose a fee on transfers from the Account in the future. |
3 |
Property-level expenses, including property management fees and transfer taxes, are not reflected in the table above; instead these expenses are charged directly to the Accounts properties. |
|
|
Since expenses for services provided to the Account are charged to the Account at cost, they are estimates for the year based on projected expense and asset levels. Administration charges include certain costs associated with the provision by TIAA entities of recordkeeping and other services for retirement plans and other pension products in addition to the Account. A portion of these expenses are allocated to the Account in accordance with applicable allocation |
|
62 Prospectus § TIAA Real Estate Account
procedures. In limited circumstances, TIAA may pay third parties for providing certain recordkeeping services for the Account.
At the end of every quarter, we reconcile the amount deducted from the Account during that quarter as discussed above with the expenses the Account actually incurred. If there is a difference, we add it to or deduct it from the Account in equal daily installments over the remaining days in the immediately following quarter, provided that material differences may be repaid in the current calendar quarter in accordance with generally accepted accounting principles (GAAP). Our at-cost deductions are based on projections of Account assets and overall expenses, and the size of any adjusting payments will be directly affected by how different our projections are from the Accounts actual assets or expenses. The expenses identified in the table above do not include any fees which may be imposed by your employer under a plan maintained by your employer.
The size of the Accounts assets can be affected by many factors, including changes in the value of portfolio holdings, net income earned on the Accounts investments, premium activity and participant transfers into or out of the Account and participant cash withdrawals from the Account. In addition, our operating expenses can fluctuate based on a number of factors including participant transaction volume, operational efficiency, and technological, personnel and other infrastructure costs. Historically, the adjusting payments have resulted in both upward and downward adjustments to the Accounts expense deductions for the following quarter.
TIAAs Board of Trustees can revise the estimated expense rates (the daily deduction rate before the quarterly adjustment referenced above) for the Account from time to time, usually on an annual basis, to keep deductions as close as possible to actual expenses.
Currently there are no deductions from premiums, transfers or withdrawals, but we reserve the right to change this in the future.
EMPLOYER PLAN FEE WITHDRAWALS
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|
Your employer may, in accordance with the terms of your plan, and in accordance with TIAAs policies and procedures, withdraw amounts from your Real Estate Account accumulation under your Retirement Choice or Retirement Choice Plus contract, and, on a limited basis, under your GA, GSRA, GRA or Keogh contract, to pay fees associated with the administration of the plan. These fees are separate from the expense deductions of the Account, and are not included for purposes of TIAAs guarantee that the total annual expense deduction of the Account will not exceed 2.50% of average net assets per year. |
|
The amount and the effective date of an employer plan fee withdrawal will be in accordance with the terms of your plan. TIAA will determine all values as of the end of the effective date. An employer plan fee withdrawal cannot be revoked after its effective date. Each employer plan fee withdrawal will be made on a pro rata basis from all your available TIAA and CREF accounts. An employer plan fee withdrawal reduces the accumulation from which it is paid by the amount withdrawn.
TIAA Real Estate Account § Prospectus 63
CERTAIN RELATIONSHIPS WITH TIAA
As noted elsewhere in this prospectus, the TIAA General Account plays a significant role in operating the Real Estate Account, including providing a liquidity guarantee, and investment advisory, administration and other services. In addition, Services, a wholly owned subsidiary of TIAA, provides distribution services for the Account.
|
|
Liquidity Guarantee. As noted above under Establishing and Managing the Account The Role of TIAA Liquidity Guarantee, if the Accounts liquid assets and its cash flow from operating activities and participant transactions are insufficient to fund redemption requests, the TIAA General Account has agreed to purchase liquidity units. TIAA thereby guarantees that a participant can redeem accumulation units at their net asset value next determined. |
|
In the years ended December 31, 2008 and December 31, 2009, TIAA purchased liquidity units in a number of separate transactions at a purchase price equal to $155.6 million and approximately $1.1 billion, respectively. Since January 1, 2010 and through the date of this prospectus, the TIAA General Account has purchased no additional liquidity units. These liquidity units are valued in the same manner as are accumulation units held by the Accounts participants.
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|
For the years ended December 31, 2010, December 31, 2009 and December 31, 2008, the Account expensed $13.1 million, $12.4 million and $19.7 million, respectively, for this liquidity guarantee from TIAA through a daily deduction from the net assets of the Account. |
|
Investment Advisory, Administration and Distribution Services/Mortality and Expense Risks Borne by TIAA. As noted above under Expense Deductions on page 62, deductions are made each Valuation Day from the net assets of the Account for various services required to manage investments, administer the Account and distribute the contracts. These services are performed at cost by TIAA and Services. Deductions are also made each Valuation Day to cover mortality and expense risks borne by TIAA. |
|
For the years ended December 31, 2010, December 31, 2009 and December 31, 2008, the Account expensed $50.2 million, $42.5 million and $47.6 million, respectively, for investment advisory services and $4.4 million, $4.7 million and $8.1 million, respectively, for mortality and expense risks provided/borne by TIAA. For the same period, the Account expensed $28.1 million, $35.8 million and $77.6 million, respectively, for administrative and distribution services provided by TIAA and Services, as applicable. |
|
The Account is party to various claims and routine litigation arising in the ordinary course of business. As of the date of this prospectus, management of the Account does not believe that the results of any such claims or litigation, individually or in the aggregate, will have a material effect on the Accounts business, financial position or results of operations.
64 Prospectus § TIAA Real Estate Account
|
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|
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|
|
|
Years Ended December 31, |
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|||||||||||||
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|
|||||||||||||||
|
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
|||||
Investment income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate income, net |
|
$ |
421,162 |
|
$ |
479,657 |
|
$ |
500,434 |
|
$ |
529,412 |
|
$ |
444,783 |
|
Income from real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
joint ventures and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
limited partnerships |
|
|
89,268 |
|
|
114,578 |
|
|
116,889 |
|
|
93,724 |
|
|
60,789 |
|
Dividends and interest |
|
|
8,581 |
|
|
1,733 |
|
|
81,523 |
|
|
141,914 |
|
|
135,407 |
|
Total investment income |
|
|
519,011 |
|
|
595,968 |
|
|
698,846 |
|
|
765,050 |
|
|
640,979 |
|
Expenses |
|
|
95,779 |
|
|
95,473 |
|
|
153,040 |
|
|
140,294 |
|
|
83,449 |
|
Investment income, net |
|
|
423,232 |
|
|
500,495 |
|
|
545,806 |
|
|
624,756 |
|
|
557,530 |
|
Net realized and unrealized gains (losses) on investments and mortgage loans payable |
|
|
756,968 |
|
|
(3,612,505 |
) |
|
(2,513,024 |
) |
|
1,438,435 |
|
|
1,056,671 |
|
Net increase (decrease) in net assets resulting from operations |
|
|
1,180,200 |
|
|
(3,112,010 |
) |
|
(1,967,218 |
) |
|
2,063,191 |
|
|
1,614,201 |
|
Participant transactions |
|
|
1,743,026 |
|
|
(1,575,700 |
) |
|
(4,339,995 |
) |
|
1,464,653 |
|
|
1,969,781 |
|
TIAA Purchase of Liquidity Units |
|
|
|
|
|
1,058,700 |
|
|
155,600 |
|
|
|
|
|
|
|
Net increase (decrease) in net assets |
|
$ |
2,923,226 |
|
$ |
(3,629,010 |
) |
$ |
(6,151,613 |
) |
$ |
3,527,844 |
|
$ |
3,583,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|||||||||||||
|
|
|||||||||||||||
|
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
|||||
Total assets |
|
$ |
12,839,962 |
|
$ |
9,912,703 |
|
$ |
13,576,954 |
|
$ |
19,232,767 |
|
$ |
15,759,961 |
|
Total liabilities |
|
|
2,036,822 |
|
|
2,032,789 |
|
|
2,068,030 |
|
|
1,572,230 |
|
|
1,627,268 |
|
Total net assets |
|
$ |
10,803,140 |
|
$ |
7,879,914 |
|
$ |
11,508,924 |
|
$ |
17,660,537 |
|
$ |
14,132,693 |
|
Number of accumulation units outstanding |
|
|
48,070 |
|
|
39,473 |
|
|
41,542 |
|
|
55,106 |
|
|
50,146 |
|
Net asset value, per accumulation unit |
|
$ |
219,173 |
|
$ |
193,454 |
|
$ |
267,348 |
|
$ |
311,410 |
|
$ |
273,650 |
|
Mortgage loans payable |
|
$ |
1,860,157 |
|
$ |
1,858,110 |
|
$ |
1,830,040 |
|
$ |
1,392,093 |
|
$ |
1,437,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIAA Real Estate Account § Prospectus 65
QUARTERLY SELECTED FINANCIAL INFORMATION
The
following quarterly selected unaudited financial data for each full quarter of
2010 and 2009 are derived from the financial statements of the Account for the
years ended December 31, 2010 and 2009 (amounts in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
Year Ended |
|
|||||||||||
|
|
|
|
|||||||||||||
|
|
For the Three Months Ended |
|
|
||||||||||||
|
|
|
|
|||||||||||||
|
|
March 31 |
|
June 30 |
|
September 30 |
|
December 31 |
|
|
||||||
Investment income, net |
|
$ |
96,557 |
|
$ |
115,940 |
|
$ |
112,639 |
|
$ |
98,096 |
|
$ |
423,232 |
|
Net realized and unrealized (loss) gain on investments and mortgage loans payable |
|
|
(249,065 |
) |
|
240,970 |
|
|
300,772 |
|
|
464,291 |
|
|
756,968 |
|
Net (decrease) increase in net assets resulting from operations |
|
$ |
(152,508 |
) |
$ |
356,910 |
|
$ |
413,411 |
|
$ |
562,387 |
|
$ |
1,180,200 |
|
Total return |
|
|
1.94 |
% |
|
4.44 |
% |
|
4.68 |
% |
|
5.68 |
% |
|
13.29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
Year Ended |
|
|||||||||||
|
|
|
|
|||||||||||||
|
|
For the Three Months Ended |
|
|
||||||||||||
|
|
|
|
|||||||||||||
|
|
March 31 |
|
June 30 |
|
September 30 |
|
December 31 |
|
|
||||||
Investment income, net |
|
$ |
119,440 |
|
$ |
130,429 |
|
$ |
135,536 |
|
$ |
115,090 |
|
$ |
500,495 |
|
Net realized and unrealized loss on investments and mortgage loans payable |
|
|
(1,074,437 |
) |
|
(1,166,159 |
) |
|
(836,451 |
) |
|
(535,458 |
) |
|
(3,612,505 |
) |
Net decrease in net assets resulting from operations |
|
$ |
(954,997 |
) |
$ |
(1,035,730 |
) |
$ |
(700,915 |
) |
$ |
(420,368 |
) |
$ |
(3,112,010 |
) |
Total return |
|
|
8.36 |
% |
|
9.96 |
% |
|
7.64 |
% |
|
5.05 |
% |
|
27.64 |
% |
66 Prospectus § TIAA Real Estate Account
MANAGEMENTS DISCUSSION AND ANALYSIS OF THE ACCOUNTS FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of our financial condition and results of
operations should be read together with our financial statements and notes
contained in this prospectus and with consideration to the sub-section entitled
Forward-Looking Statements, which begins below, and the section entitled
Risk Factors. The past performance of the Account is not indicative of future
results.
FORWARD-LOOKING STATEMENTS
Some statements in this prospectus which are not historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about managements expectations, beliefs, intentions or strategies for the future, include the assumptions and beliefs underlying these forward-looking statements, and are based on current expectations, estimates and projections about the real estate industry, domestic and global economic conditions, including conditions in the credit and capital markets, the sectors, and markets in which the Account invests and operates, and the transactions described in this prospectus. While management believes the assumptions underlying any of its forward-looking statements and information to be reasonable, such information may be subject to uncertainties and may involve certain risks which may be difficult to predict and are beyond managements control. These risks and uncertainties could cause actual results to differ materially from those contained in any forward-looking statement. These risks and uncertainties include, but are not limited to, the following:
|
|
|
|
|
Acquiring and Owning Real Estate: The risks associated with acquiring and owning real property, including general economic and real estate market conditions, the availability of, and economic cost associated with, financing the Accounts properties, the risk that the Accounts properties become too concentrated (whether by geography, sector or by tenant mix), competition for acquiring real estate properties, leasing risk (including tenant defaults) and the risk of uninsured losses at properties (including due to terrorism and acts of violence); |
|
|
|
|
|
Selling Real Estate: The risk that the sales price of a property might differ, perhaps significantly, from its estimated or appraised value, leading to losses or reduced profits to the Account, the risk that the Account might not be able to sell a property at a particular time for a price which management believes represents its fair or full value, the lack of availability of financing (for potential purchasers of the Accounts properties), disruptions in the credit and capital markets, and the risk that the Account may be required to make significant expenditures before the Account is able to market and/or sell a property; |
|
|
|
|
|
Valuation: The risks associated with property valuations, including the fact that appraisals can be subjective in a number of respects, the fact that the |
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TIAA Real Estate Account § Prospectus 67
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Accounts appraisals are generally obtained on a quarterly basis and there may be periods in between appraisals of a property during which the value attributed to the property for purposes of the Accounts daily accumulation unit value may be more or less than the actual realizable value of the property; |
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Borrowing: Risks associated with financing the Accounts properties, including the risk of default on loans secured by the Accounts properties (which could lead to foreclosure), the risk associated with high loan to value ratios on the Accounts properties (including the fact that the Account may have limited, or no net value in such a property), the risk that significant sums of cash could be required to make principal and interest payments on the loans and the risk that the Account may not have the ability to obtain financing or refinancing on favorable terms (or at all), which may be aggravated by general disruptions in credit and capital markets; |
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Participant Transactions and Cash Management: Investment risk associated with participant transactions, in particular that (i) significant net participant transfers out of the Account may impair our ability to pursue or consummate new investment opportunities that are otherwise attractive to the Account and/or may result in sales of real estate-related assets to generate liquidity and (ii) significant net participant transfers into the Account may result, on a temporary basis, in our cash holdings and/or holdings in liquid real estate-related investments exceeding our long-term targeted holding levels; |
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Joint Venture Investments: The risks associated with joint venture partnerships, including the risk that a co-venturer may have interests or goals inconsistent with that of the Account, that a co-venturer may have financial difficulties, and the risk that the Account may have limited rights with respect to operation of the property and transfer of the Accounts interest; |
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Regulatory Matters: Uncertainties associated with environmental and other regulatory matters; |
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Foreign Investments: The risks associated with purchasing, owning and disposing foreign investments (primarily real estate properties), including political risk and the risk associated with currency fluctuations; |
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Conflicts of Interests: Conflicts of interest associated with TIAA serving as investment manager of the Account and provider of the liquidity guarantee at the same time as TIAA and its affiliates are serving as an investment manager to other real estate accounts or funds, including conflicts associated with satisfying its fiduciary duties to all such accounts and funds associated with purchasing, selling and leasing of properties; |
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Required Property Sales: The risk that, if TIAA were to own too large a percentage of the Accounts accumulation units through funding the liquidity guarantee (as determined by the independent fiduciary), the independent fiduciary could require the sales of properties to reduce TIAAs ownership interest, which sales could occur at times and at prices that depress the sale proceeds to the Account; and |
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68 Prospectus § TIAA Real Estate Account
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Liquid Assets and Securities: Risks associated with investments in real estate-related liquid assets (which could include, from time to time, REIT securities and CMBS), and non-real estate-related liquid assets, including financial/credit risk, market volatility risk, interest rate volatility risk and deposit/money market risk. |
More detailed discussions of certain of these risk factors are contained in the section of this prospectus entitled Risk Factors and in this section below and also in the section entitled Quantitative and Qualitative Disclosures About Market Risk, that could cause actual results to differ materially from historical experience or managements present expectations.
Caution should be taken not to place undue reliance on managements forward-looking statements, which represent managements views only as of the date of this prospectus. Neither management nor the Account undertake any obligation to update publicly or revise any forward-looking statement, whether as a result of new information, changed assumptions, future events or otherwise.
Commercial real estate market statistics discussed in this section are obtained by the Account from sources that management considers reliable, but some of the data are preliminary for the year or quarter ended December 31, 2010 and may be subsequently revised. Prior period data may have been adjusted to reflect updated calculations. Investors should not rely exclusively on the data presented below in forming a judgment regarding the current or prospective performance of the commercial real estate market generally.
2010 U.S. ECONOMIC AND COMMERCIAL REAL ESTATE OVERVIEW
Economic and Capital Markets Overview and Outlook
While the U.S. economic recovery slowed during the second half of the year, there were indications that it was back on track as 2010 came to a close. Federal Reserve Chairman Ben Bernanke noted in a January 7, 2011, testimony before the U.S. Senate Committee on the Federal Budget that there was increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold. The housing market remains weak and the unemployment rate elevated, but the increase in consumer and business spending in the fourth quarter of 2010 suggested the pace of economic recovery seems likely to be moderately stronger in 2011 than it was in 2010. For 2010 as a whole, gross domestic product (GDP) grew 2.9%, including 2.6% growth in the third quarter and a preliminary estimate of 3.2% GDP growth in the fourth quarter. The increase in growth during the fourth quarter provided solid evidence that the recovery is on a self-sustaining pace, but the U.S. economy has so far been unable to produce the job growth needed to absorb the large numbers of unemployed. In 2010, 1.1 million net new jobs were generated, leaving considerable ground to make up after the 8.5 million jobs that were lost during the recession. Despite the official end to the recession in June 2009, the unemployment rate stood at an elevated 9.4% as 2010 drew to a close.
While
macroeconomic conditions in the U.S. slightly strengthened in the fourth
quarter, growth in Europe weakened, and prospects for the European economy in
TIAA Real Estate Account § Prospectus 69
2011 grew more tenuous as a
result of the ongoing sovereign debt crisis. After the bailouts of Greece and
Ireland were completed, focus was directed to Portugal, Spain, and Italy, which
also have sizeable deficits. Recently successful bond sales have temporarily
assuaged fears of a further spread in the crisis, but investors remain
skeptical that economic growth will be strong enough to achieve mandated
deficit reductions, particularly given the planned cutbacks in government
spending. The European Central Bank has pledged to make use of all of the tools
at its disposal, but the uncertainty associated with these countries poses
significant risk for global capital markets. While growth in emerging markets has
been robust, concerns about a real estate bubble in China along with rising
inflation in China, India and other developing nations has some potential to
slow the global economy.
Despite the uncertain macroeconomic environment, the Dow Jones Industrial Average added 7% in the fourth quarter of 2010 and gained 11% for 2010 as a whole. Similarly, the S&P 500 added 10% during the fourth quarter and 11% for the year. Investors responded positively to strong earnings reports from U.S. companies, and particularly those with sizeable international operations. At the same time, gold prices soared due to surging demand from the developing world, the perception of gold as a safe haven in times of economic uncertainty and speculation. Following reports that the economic recovery had stalled, yields on the 10-year Treasury hit a 2010 low of 2.38% early in the fourth quarter of 2010, but subsequently rose to close to 3.50% following the Federal Reserves announcement of additional Treasury purchases and the expectation that extension of the Bush-era tax cuts and other stimulus programs would produce stronger economic growth in 2011. The dollar weakened against the euro and most other major currencies, giving up the gains from the first half of the year. Still, U.S. exports remained relatively strong during the second half of 2010 which benefited the manufacturing sector.
Notwithstanding the various potential downside risks, most economists expect the U.S. economy to grow at a modest pace in 2011, and for economic activity to strengthen over the course of the year. Prospects for 2011 are encouraging due in part to the recent pickup in consumer spending which is expected to continue in 2011. Consumer spending is expected to grow 2.6% in 2011 vs. 1.7% in 2010. The real driving force behind growth, however, is expected to remain with the business sector where investment spending will continue to thrive. Corporate profits soared in 2010 leaving businesses flush with cash and the appetite for investment in equipment and software to improve operational efficiency. Economists expect capital spending to taper off over the course of 2011, but with businesses increasing hiring in order to meet growing demand for their products.
The
December 2010 consensus of economists surveyed by the Blue Chip Economic
Indicators publication is for GDP to grow 2.6% in 2011, with GDP growing at a
modest 2.52.7% rate in the first half of the year and at a slightly stronger
3.03.2% rate in the second half of the year. Again, growth of this magnitude
would not be strong enough to significantly reduce the unemployment rate. The
mediocre growth expectations for 2011 reflect the ongoing drag from the
depressed housing market, weak consumer confidence, tight credit for consumers
70 Prospectus § TIAA Real Estate Account
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Forecast |
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2010 |
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2010Q1 |
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2010Q2 |
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2010Q3 |
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2010Q4 |
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2011 |
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2012 |
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Economy(1) |
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|
|
Gross Domestic Product (GDP) |
|
|
2.9 |
% |
|
3.7 |
% |
|
1.7 |
% |
|
2.6 |
% |
|
3.2 |
% |
|
3.1 |
% |
|
3.2 |
% |
Employment Growth (Thousands) |
|
|
1,124 |
|
|
261 |
|
|
570 |
|
|
91 |
|
|
384 |
|
|
2,200 |
|
|
3,200 |
|
Interest Rates(2) |
|
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10 Year Treasury |
|
|
3.22 |
% |
|
3.72 |
% |
|
3.49 |
% |
|
2.79 |
% |
|
2.86 |
% |
|
3.50 |
% |
|
4.20 |
% |
Federal Funds Rate |
|
|
0.00.25 |
% |
|
0.00.25 |
% |
|
0.00.25 |
% |
|
0.00.25 |
% |
|
0.00.25 |
% |
|
N/A |
|
|
N/A |
|
|
|
|
Sources: BEA, BLS, Federal Reserve, Blue Chip Consensus Forecasts, and Economy.com. |
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* |
Data subject to revision. |
(1) |
GDP growth rates are annual rates. |
(2) |
The Treasury rates are an average over the stated time period. The Federal Funds rates are as of the end of the stated time period. |
N/A indicates data not available. |
TIAA Real Estate Account § Prospectus 71
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Full Year |
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October |
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November |
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December |
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2009 |
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2010 |
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Consumer Confidence (1985 = 100) |
|
|
45.2 |
|
|
53.3 |
|
|
49.9 |
|
|
54.3 |
|
|
53.3 |
|
% Change from prior month or year |
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|
|
Inflation (Consumer Price Index) |
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|
0.4 |
% |
|
1.6 |
% |
|
0.2 |
% |
|
0.1 |
% |
|
0.5 |
% |
Retail Sales (excl. auto, parts & gas) |
|
|
2.0 |
% |
|
4.5 |
% |
|
0.8 |
% |
|
0.6 |
% |
|
0.4 |
% |
Existing Home Sales |
|
|
4.9 |
% |
|
4.8 |
% |
|
2.2 |
% |
|
6.1 |
% |
|
12.3 |
% |
New Home Sales |
|
|
22.7 |
% |
|
14.4 |
% |
|
11.7 |
% |
|
0.0 |
% |
|
17.5 |
% |
Single-family Housing Starts |
|
|
28.4 |
% |
|
5.8 |
% |
|
3.1 |
% |
|
5.8 |
% |
|
9.0 |
% |
Annual or Monthly Average |
|
|
|
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|
|
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|
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Unemployment Rate |
|
|
9.3 |
% |
|
9.6 |
% |
|
9.7 |
% |
|
9.8 |
% |
|
9.4 |
% |
|
* Data subject to revision |
Inflation is the year-over-year percentage change in the unadjusted annual average. |
Sources: Conference Board, Census Bureau, Bureau of Labor Statistics, National Association of Realtors |
72 Prospectus § TIAA Real Estate Account
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Sales Price Change |
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National |
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Top 10 MSAs* |
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Nov 2009- |
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3Q09- |
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3Q09- |
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All Property Types |
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2.8 |
% |
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|
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Apartments |
|
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|
|
15.5 |
% |
|
|
3.5 |
% |
|
Industrial |
|
|
|
|
|
|
|
1.2 |
% |
|
|
9.6 |
% |
|
Office |
|
|
|
|
|
|
|
4.4 |
% |
|
|
21.9 |
% |
|
Retail |
|
|
|
|
|
|
|
11.6 |
% |
|
|
6.7 |
% |
|
|
* Based on the total value of property sold by Metropolitan Statistical Area (MSA) |
Source: Moodys/REAL CPPI |
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TIAA Real Estate Account § Prospectus 73
74 Prospectus § TIAA Real Estate Account
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Metropolitan Area |
|
Account % Leased |
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# of Property |
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Metro Areas as a |
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Metro Area as a |
|
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Washington-Arlington-Alexandria DC-VA-MD-WV |
|
|
96.2% |
|
|
8 |
|
|
14.2% |
|
|
10.6% |
|
Boston-Quincy MA |
|
|
87.2% |
|
|
5 |
|
|
7.4% |
|
|
5.5% |
|
Los Angeles-Long Beach-Glendale CA |
|
|
93.4% |
|
|
8 |
|
|
7.2% |
|
|
5.4% |
|
San Francisco-San Mateo-Redwood City CA |
|
|
92.8% |
|
|
4 |
|
|
6.7% |
|
|
5.0% |
|
Houston-Bay Town-Sugar Land TX |
|
|
94.6% |
|
|
3 |
|
|
6.4% |
|
|
4.8% |
|
|
|
* |
Weighted by market value, which differs from the calculations provided for market comparisons to CBRE-EA data and are used here to reflect the fair market value of the Accounts monetary investments in those markets. |
Office
|
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|
|
Total Sector |
|
% of Total |
|
Account Weighted |
|
Metropolitan Area |
|
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|
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Sector |
|
Metropolitan Area |
|
|
|
|
|
2010Q4 |
|
2010Q3 |
|
2010Q4 |
|
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Office |
|
National |
|
|
|
|
|
|
|
14.2 |
% |
|
13.3 |
% |
|
16.6 |
% |
|
16.4 |
% |
|
1 |
|
Washington-Arlington-Alexandria |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DC-VA-MD-WV |
|
$ |
1,171.5 |
|
|
9.3% |
|
5.8 |
% |
|
6.1 |
% |
|
13.1 |
% |
|
12.9 |
% |
|
2 |
|
Boston-Quincy MA |
|
$ |
675.9 |
|
|
5.4% |
|
13.9 |
% |
|
13.8 |
% |
|
13.2 |
% |
|
13.0 |
% |
|
3 |
|
San Francisco-San Mateo- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redwood City CA |
|
$ |
560.8 |
|
|
4.4% |
|
9.0 |
% |
|
8.4 |
% |
|
14.1 |
% |
|
13.7 |
% |
|
4 |
|
Seattle-Bellevue-Everett WA |
|
$ |
471.8 |
|
|
3.7% |
|
9.3 |
% |
|
8.1 |
% |
|
16.8 |
% |
|
16.8 |
% |
|
5 |
|
Los Angeles-Long Beach-Glendale CA |
|
$ |
404.7 |
|
|
3.2% |
|
20.5 |
% |
|
20.3 |
% |
|
17.2 |
% |
|
17.3 |
% |
|
|
|
* |
Source: CBRE-EA. Vacancy is defined as the percentage of space vacant. The Accounts vacancy is defined as the weighted percentage of unleased space. |
TIAA Real Estate Account § Prospectus 75
Industrial
Conditions
in the industrial market are influenced to a large degree by GDP growth,
industrial production and international trade flows. Despite five consecutive
quarters of GDP growth, growth in industrial production, and a pick up in
trade, U.S. industrial market conditions remained weak. However, industrial
availabilities have declined for two consecutive quarters, which suggests that
a recovery is slowly underway. According to CBRE-EA, the national industrial
availability rate was 14.3% during the fourth quarter of 2010 as compared to
14.6% during the third quarter of 2010. By comparison, the vacancy rate for the
Accounts industrial property portfolio declined more sharply and averaged 7.2%
in the fourth quarter of 2010 as compared with 9.2% in the third quarter of
2010. As shown in the table below, the average vacancy rate of the Accounts
properties in all but one of its major markets was well below the comparative
market vacancy rate. The only exception was Los Angeles, where the average
vacancy of the Accounts properties declined in the fourth quarter of 2010, but
at 11.7% was still above the metro area average of 7.5%, as the re-leasing of
space due to the expiration and default of several small tenants continues.
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sector |
|
% of Total |
|
Account Weighted |
|
Metropolitan Area |
|
||||||||||
|
|
|
|
|
|
|
|
||||||||||||||
Sector |
|
Metropolitan Area |
|
|
|
|
|
2010Q4 |
|
2010Q3 |
|
2010Q4 |
|
||||||||
Industrial |
|
National |
|
|
|
|
|
|
|
9.2 |
% |
|
7.2 |
% |
|
14.6 |
% |
|
14.3 |
% |
|
1 |
|
Riverside-San Bernardino-Ontario CA |
|
$ |
380.6 |
|
|
3.0% |
|
0.0 |
% |
|
0.2 |
% |
|
15.5 |
% |
|
14.8 |
% |
|
2 |
|
Dallas-Plano-Irving TX |
|
$ |
179.0 |
|
|
1.4% |
|
8.9 |
% |
|
7.2 |
% |
|
16.5 |
% |
|
15.9 |
% |
|
3 |
|
Chicago-Naperville-Joliet IL |
|
$ |
109.7 |
|
|
0.9% |
|
1.9 |
% |
|
2.2 |
% |
|
15.8 |
% |
|
15.8 |
% |
|
4 |
|
Los Angeles-Long Beach-Glendale CA |
|
$ |
95.5 |
|
|
0.8% |
|
15.8 |
% |
|
11.7 |
% |
|
7.8 |
% |
|
7.5 |
% |
|
5 |
|
Atlanta-Sandy Springs-Marietta GA |
|
$ |
87.8 |
|
|
0.7% |
|
5.0 |
% |
|
5.0 |
% |
|
19.6 |
% |
|
19.0 |
% |
|
|
|
* |
Source: CBRE-EA. Availability is defined as the percentage of space available for rent. The Accounts vacancy is defined as the weighted percentage of unleased space. |
Multi-Family
Preliminary
data from CBRE-EA indicate that the recovery in the apartment market
strengthened during the second half of 2010. Apartment vacancies averaged 6.0%
as of fourth quarter 2010 as compared to 7.4% at year-end 2009. (Year-over-year
comparisons are necessary to account for seasonal leasing patterns.) The
improvement in market conditions has been due to a decline in home-ownership
rates resulting from the housing crisis and an increase in household formations
as a result of modest job growth. Markets have also benefited from modest
apartment construction. The vacancy rate of the Accounts multi-family
portfolio averaged 3.3% in the fourth quarter of 2010 versus 2.7% in the third
quarter of 2010. As shown in the table below, the average vacancy rates for the
Accounts properties in its top apartment markets were all well below their
comparative market averages.
76 Prospectus § TIAA Real Estate Account
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sector |
|
% of Total |
|
Account Weighted |
|
Metropolitan Area |
|
||||||||||
|
|
|
|
|
|
|
|
||||||||||||||
Sector |
|
Metropolitan Statistical Area |
|
|
|
|
|
2010Q4 |
|
2010Q3 |
|
2010Q4 |
|
||||||||
Apartment |
|
National |
|
|
|
|
|
|
|
2.7 |
% |
|
3.3 |
% |
|
5.8 |
% |
|
6.0 |
% |
|
1 |
|
Houston-Bay Town-Sugar Land TX |
|
$ |
224.5 |
|
|
1.8% |
|
3.3 |
% |
|
3.0 |
% |
|
9.7 |
% |
|
9.9 |
% |
|
2 |
|
Denver-Aurora CO |
|
$ |
208.4 |
|
|
1.7% |
|
2.5 |
% |
|
4.7 |
% |
|
4.8 |
% |
|
4.7 |
% |
|
3 |
|
Atlanta-Sandy Springs-Marietta GA |
|
$ |
128.1 |
|
|
1.0% |
|
1.9 |
% |
|
2.7 |
% |
|
9.3 |
% |
|
9.5 |
% |
|
5 |
|
New York-Wayne-White Plains NY-NJ |
|
$ |
123.0 |
|
|
1.0% |
|
0.0 |
% |
|
0.0 |
% |
|
5.8 |
% |
|
5.5 |
% |
|
4 |
|
Phoenix-Mesa-Scottsdale AZ |
|
$ |
119.0 |
|
|
0.9% |
|
3.4 |
% |
|
3.2 |
% |
|
9.6 |
% |
|
9.1 |
% |
|
|
|
* |
Source: CBRE-EA. Vacancy is defined as the percentage of units vacant. The Accounts vacancy is defined as the weighted percentage of unleased space. |
Retail
Macroeconomic support for the retail sector strengthened over the course of 2010. While U.S. households remained cautious, they started spending again to refresh wardrobes and home décor. Advanced estimates from the U.S. Census Bureau indicated that retail sales excluding motor vehicles increased 2.6% during the fourth quarter 2010 as compared to the third quarter. While 2010 comparisons are favorable partly because 2009 sales were extremely weak, many retailers have reported both healthy profits and sales growth. Most importantly, virtually all types of retailers, from discounters to department stores to luxury retailers, have reported growth in same store sales, a key industry metric. Growth in consumer spending is expected to continue in 2011 as economic conditions improve. Availability rates in community and neighborhood shopping centers were unchanged in the fourth quarter of 2010 averaging 13.0% as compared to 13.0% in the third quarter of 2010. The stabilization in availability rates coupled with growth in retail sales bodes well for retail market prospects. Reflective of both the modest improvement in the retail market and the challenging economic and leasing environment that remains, the vacancy rate for the Accounts retail portfolio declined to 15.3% during the fourth quarter of 2010 from 16.3% in the third quarter of 2010.
2010 Summary and 2011 Outlook
Typically
lagging overall economic trends, commercial real estate market conditions
responded to the economic recovery during the second half of 2010. Fundamentals
do remain challenging, however, with minimal employment growth in particular
keeping vacancy rates elevated. Rents in most markets and for most property
types have stabilized, but demand remains weak and tenants typically have
multiple space options. However, with demand growing slowly and likely to
continue to increase as the economy strengthens, Management believes there
should be opportunities for the Account to achieve growth in property rental
income and portfolio net operating income as vacant space is leased and rent
growth resumes. Further, there is very minimal new construction underway which,
by limiting new supply, should allow vacancy rates to respond to improving
demand. The turnaround in property values began in mid-2010 following the
expectation early in the year that the economic recovery was strengthening.
TIAA Real Estate Account § Prospectus 77
Property values on average
have recouped a modest amount of the 30-40% decline from the 2007 peak, which
could provide the potential for further capital appreciation in 2011 and
beyond.
During 2010, Management continued efforts to realign geographic and property sector concentrations to target major markets and a balanced mix of property types. In support of this strategy, 24 individual properties were sold in 2010; one wholly owned property and 23 properties from within the Accounts joint venture investments. The gross sales prices totaled $508.6 million ($92.5 million and $416.1 million related to a wholly owned property and properties within the Accounts investments in joint ventures, respectively). Of these sales, $119.4 million was sold in the fourth quarter, $92.5 million and $26.9 million related to a wholly owned property and properties within the Accounts investments in joint ventures, respectively. Additionally, Management was successful in reducing the Accounts level of debt and significantly lowered the overall interest rate. As of December 31, 2010, the Accounts loan to value ratio was 24.3%. The Accounts commercial property portfolio was 92.5% leased at December 31, 2010. Account returns in the fourth quarter of 2010 were bolstered by a 5.50% capital return and 1.79% income return. As shown in the graph below, returns for the fourth quarter of 2010 topped third quarter returns and were the highest quarterly returns in the Accounts history.
ACCOUNT RETURNS
Cash
management will be the Accounts primary focus for 2011 in response to the
significant inflows during 2010 which continued into the early part of 2011.
Management intends to manage the inflow of funds to maximize the performance of
the Account in accordance with its investment objectives and strategy. This
cash management will include the active pursuit of new acquisitionsprimarily
direct, privately owned real estate but such activity may also include liquid
real estate-related securities, as it did in the second half of 2010. As the
industry moves further into the recovery phase, the Accounts core investment
strategy will continue to focus on institutional quality properties and
markets. Potential
78 Prospectus § TIAA Real Estate Account
acquisitions will be
evaluated in the context of overall Account objectives, with an emphasis on
industrial, retail, and multi-family properties in order to reduce the
Accounts exposure to the office sector and at the same time diversifying the
Accounts retail holdings. Management believes that the ongoing rebalancing of
the portfolio has positioned the Account to build on the returns achieved in
2010.
Investments as of December 31, 2010
As of December 31, 2010, the Account had total net assets of $10.8 billion, a 12.9% increase from the end of the third quarter of 2010 and a 37.1% increase from December 31, 2009. The increase in the Accounts net assets from December 31, 2009 to December 31, 2010 was primarily caused by an increase in participant transactions into the account in addition to the appreciation in value of the Accounts wholly owned real estate properties and those owned in joint venture investments.
As of December 31, 2010, the Account owned a total of 99 real estate property investments (88 of which were wholly owned, 11 of which were held in joint ventures). The real estate portfolio included 38 office property investments (four of which were held in joint ventures and one located in London, England), 25 industrial property investments (including one held in a joint venture), 20 apartment property investments, 15 retail property investments (including five held in joint ventures and one located in Paris, France), and one 75% owned joint venture interest in a portfolio of storage facilities.
Of the 99 real estate property investments, 29 are subject to debt (including seven joint venture property investments). Total principal outstanding on the Accounts wholly owned real estate portfolio as of December 31, 2010 was $1.9 billion. The Accounts joint venture values shown in the Statement of Investments are presented net of debt; however, when the debt of the Accounts joint ventures are also considered, total principal outstanding on the Accounts portfolio as of December 31, 2010 was $3.5 billion. As of December 31, 2010, the loan to value ratio of the Account is 24.3%. As of December 31, 2010, the Account has no outstanding debt on which the Account itself is an obligor.
Management
believes that the Accounts real estate portfolio is diversified by location
and property type. The Accounts largest investment, 1001 Pennsylvania Avenue
located in Washington, DC, represented 6.2% of total real estate investments
and 4.7% of total investments. As discussed in this prospectus, the Account
does not intend to buy and sell its real estate investments simply to make
short-term profits. Rather, the Accounts general strategy in selling real
estate investments is to dispose of those assets that management believes (i)
have maximized in value, (ii) have underperformed or face deteriorating
property-specific or market conditions, (iii) need significant capital
infusions in the future, (iv) are appropriate to dispose of in order to remain
consistent with the Accounts intent to diversify the Account by property type
and geographic location, (including reallocating the Accounts exposure to or
away from certain property types in certain geographic locations), or (v)
otherwise do not satisfy the
TIAA Real Estate Account § Prospectus 79
investment objectives of the
Account. The Account could reinvest any sale proceeds that it does not need to
pay operating expenses or to meet debt service or redemption requests (e.g., cash withdrawals or transfers, and
any redemption of TIAAs liquidity units in the future).
During 2010 there were no property investment acquisitions.
During
2010, the Account sold one wholly owned property investment for a net sales
price of $91.9 million, its 50% interest in one joint venture for a net sales
price of $28.5 million, and 22 retail properties in various locations by the
Accounts DDR TC LLC joint venture (the DDR Joint Venture). The Account holds
an 85% interest in this joint venture. The Accounts portion of the net sales
price was $47.2 million (after taking into account the pay down of $6.1 million
and the assumption by the purchaser of the Accounts portion of debt on the
properties equal to $329.5 million) and the Account realized a loss of $181.7
million, the majority of which had been previously recognized as an unrealized
loss.
PROPERTY INVESTMENTS SOLD IN 2010
|
|
|
|
|
|
|
|
|
|
|
Property Name |
|
Property Type |
|
City |
|
State |
|
Net Sales Price |
) |
|
Wholly Owned |
|
|
|
|
|
|
|
|
|
|
Inverness Center |
|
Office |
|
Birmingham |
|
AL |
|
$ |
91,882 |
|
Joint Ventures |
|
|
|
|
|
|
|
|
|
|
Tysons Executive Plaza II(1) |
|
Office |
|
McLean |
|
VA |
|
|
28,500 |
|
DDR TC LLC(2), (3) |
|
Retail |
|
Various |
|
Various |
|
|
47,217 |
|
Total |
|
|
|
|
|
|
|
$ |
167,599 |
|
|
|
(1) |
The Account sold its entire 50% interest in this joint venture. |
(2) |
Represents the cumulative sale of 22 properties from within the Accounts investment from in the joint venture. |
(3) |
Net of $335.6 million of debt paid in conjunction with the sales. |
The
following charts reflect the diversification of the Accounts real estate
assets by region and property type and list its ten largest investments by
gross market value. All information is based on the fair values of the
investments at December 31, 2010.
DIVERSIFICATION BY FAIR VALUE(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
|
West |
|
South |
|
Midwest |
|
Foreign |
(2) |
Total |
|
||||||
Office |
|
|
24.5% |
|
|
17.5% |
|
|
10.4% |
|
|
1.2% |
|
|
2.7% |
|
|
56.3% |
|
Apartment |
|
|
2.6% |
|
|
6.2% |
|
|
5.4% |
|
|
0.0% |
|
|
0.0% |
|
|
14.2% |
|
Industrial |
|
|
1.3% |
|
|
7.0% |
|
|
4.1% |
|
|
1.3% |
|
|
0.0% |
|
|
13.7% |
|
Retail |
|
|
3.2% |
|
|
0.9% |
|
|
8.5% |
|
|
0.3% |
|
|
2.4% |
|
|
15.3% |
|
Storage |
|
|
0.2% |
|
|
0.2% |
|
|
0.1% |
|
|
0.0% |
|
|
0.0% |
|
|
0.5% |
|
Total |
|
|
31.8% |
|
|
31.8% |
|
|
28.5% |
|
|
2.8% |
|
|
5.1% |
|
|
100.0% |
|
|
|
(1) |
Wholly-owned properties are represented at fair value and gross of any debt, while joint venture properties are represented at the net equity value. |
(2) |
Represents real estate investments in the United Kingdom and France. |
80 Prospectus § TIAA Real Estate Account
Properties
in the East region are located in: CT, DC, DE, KY, MA, MD, ME, NC, NH, NJ,
NY, PA, RI, SC, VA, VT, WV
Properties in the West region are located in: AK, AZ, CA, CO, HI, ID, MT, NM,
NV, OR, UT, WA, WY
Properties in the South region are located in: AL, AR, FL, GA, LA, MS, OK,
TN, TX
Properties in the Midwest region are located in: IA, IL, IN, KS, MI, MN, MO,
ND, NE, OH, SD, WI
TOP TEN LARGEST REAL ESTATE INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Investment Name |
|
City |
|
State |
|
Type |
|
Value ($M)(a) |
|
Property as a |
|
Property as a |
|
|
1001 Pennsylvania Avenue |
|
Washington |
|
DC |
|
Office |
|
589.8 |
(b) |
|
6.23 |
|
4.67 |
|
Four Oaks Place |
|
Houston |
|
TX |
|
Office |
|
383.7 |
|
|
4.05 |
|
3.04 |
|
Fourth and Madison |
|
Seattle |
|
WA |
|
Office |
|
330.0 |
(c) |
|
3.48 |
|
2.61 |
|
50 Fremont |
|
San Francisco |
|
CA |
|
Office |
|
315.1 |
(d) |
|
3.33 |
|
2.49 |
|
DDR Joint Venture |
|
Various |
|
USA |
|
Retail |
|
303.9 |
(e) |
|
3.21 |
|
2.40 |
|
780 Third Avenue |
|
New York City |
|
NY |
|
Office |
|
300.6 |
|
|
3.17 |
|
2.38 |
|
Westferry Circus |
|
London |
|
UK |
|
Office |
|
260.0 |
(f) |
|
2.74 |
|
2.06 |
|
99 High Street |
|
Boston |
|
MA |
|
Office |
|
255.0 |
(g) |
|
2.69 |
|
2.02 |
|
The Newbry |
|
Boston |
|
MA |
|
Office |
|
252.0 |
|
|
2.66 |
|
1.99 |
|
1900 K Street |
|
Washington |
|
DC |
|
Office |
|
246.1 |
|
|
2.60 |
|
1.95 |
|
|
|
(a) |
Value as reported in the December 31, 2010 Statement of Investments. Investments owned 100% by the Account are reported based on fair value. Investments in joint ventures are reported at fair value and are presented at the Accounts ownership interest which is net of any debt. |
(b) |
This property investment is presented gross of debt. The value of the Accounts interest less the fair value of leverage is $221.8 million. |
(c) |
This property investment is presented gross of debt. The value of the Accounts interest less the fair value of leverage is $150.7 million. |
(d) |
This property investment is presented gross of debt. The value of the Accounts interest less the fair value of leverage is $139.3 million. |
(e) |
This property is held in a 85% / 15% joint venture with DDR, and consists of 43 retail properties located in 13 states and is presented net of debt with fair value of $987.1 million. |
(f) |
This property investment is presented gross of debt. The value of the Accounts interest less the fair value of leverage is $210.2 million. |
(g) |
This property investment is presented gross of debt. The value of the Accounts interest less the fair value of leverage is $183.8 million. |
As of December 31, 2010, the Accounts net assets totaled $10.8 billion. At December 31, 2010, the Account held 75.0% of its total investments in real estate and real estate joint ventures. The Account also held investments in government agency notes representing 11.8% of total investments, U.S. Treasury securities representing 7.2% of total investments, real estate-related equity securities representing 3.9% of total investments, and real estate limited partnerships, representing 2.1% of total investments.
RESULTS OF OPERATIONS
Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
Performance
The
Accounts total return was 13.3% for the year ended December 31, 2010 as
compared to -27.6% for the year ended 2009. The Accounts performance during
the year ended December 31, 2010 reflects an increase in the aggregate value of
TIAA Real Estate Account § Prospectus 81
the Accounts real estate
property investments, including investments owned in joint ventures and limited
partnerships resulting from the strengthened economy, financial and credit
markets.
The Accounts annualized total returns over the one, three, five, and ten year periods ended December 31, 2010 were 13.3%, 11.1%, 1.8%, and 3.3%, respectively. As of December 31, 2010, the Accounts annualized total return since inception was 5.2%.
The Accounts total net assets increased from $7.9 billion at December 31, 2009 to $10.8 billion at December 31, 2010. The primary driver of this 37.1% increase was net participant inflows into the Account in addition to appreciation in value of the Accounts wholly owned, joint venture, and limited partnership real estate investments.
Income and Expenses
The table below shows the net investment income for the years ended December 31, 2010 and 2009 and the dollar and percentage changes for those periods (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
Change |
|||||||||
|
|
|
|||||||||||
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
||||
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate income, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
862,529 |
|
$ |
948,315 |
|
$ |
(85,786 |
) |
|
9.0 |
% |
Real estate property level expenses and taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
219,976 |
|
|
238,705 |
|
|
(18,729 |
) |
|
7.8 |
% |
Real estate taxes |
|
|
114,653 |
|
|
128,734 |
|
|
(14,081 |
) |
|
10.9 |
% |
Interest expense |
|
|
106,738 |
|
|
101,219 |
|
|
5,519 |
|
|
5.5 |
% |
Total real estate property level expenses and taxes |
|
|
441,367 |
|
|
468,658 |
|
|
(27,291 |
) |
|
5.8 |
% |
Real estate income, net |
|
|
421,162 |
|
|
479,657 |
|
|
(58,495 |
) |
|
12.2 |
% |
Income from real estate joint ventures and |
|
|
89,268 |
|
|
114,578 |
|
|
(25,310 |
) |
|
22.1 |
% |
Interest |
|
|
2,963 |
|
|
1,733 |
|
|
1,230 |
|
|
71.0 |
% |
Dividends |
|
|
5,618 |
|
|
|
|
|
5,618 |
|
|
N/M |
|
TOTAL INVESTMENT INCOME |
|
|
519,011 |
|
|
595,968 |
|
|
(76,957 |
) |
|
12.9 |
% |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment advisory charges |
|
|
50,225 |
|
|
42,521 |
|
|
7,704 |
|
|
18.1 |
% |
Administrative and distribution charges |
|
|
28,061 |
|
|
35,805 |
|
|
(7,744 |
) |
|
21.6 |
% |
Mortality and expense risk charges |
|
|
4,373 |
|
|
4,736 |
|
|
(363 |
) |
|
7.7 |
% |
Liquidity guarantee charges |
|
|
13,120 |
|
|
12,411 |
|
|
709 |
|
|
5.7 |
% |
TOTAL EXPENSES |
|
|
95,779 |
|
|
95,473 |
|
|
306 |
|
|
0.3 |
% |
INVESTMENT INCOME, NET |
|
$ |
423,232 |
|
$ |
500,495 |
|
$ |
(77,263 |
) |
|
15.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/M - Not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
82 Prospectus § TIAA Real Estate Account
The
$85.8 million decrease in real estate rental income for the year ended December
31, 2010 as compared to the same period in 2009 is primarily a result of the
seven full and six partial wholly owned property investment sales that occurred
in the second half of 2009. These disposed properties accounted for $54.0
million, or 62.9%, of the $85.8 million total change. The remaining $31.8
million is attributed to increased vacancies at certain properties, reduced
rental rates, and rent concessions for renewed leases, as well as unfavorable
common area adjustments resulting from the properties maintaining lower
property operating expenses.
Operating expenses declined 7.8% for the 12 months ended December 31, 2010 as compared to the same period in 2009 as a result of fewer property investments under management. Property investments that were sold accounted for $15.3 million, or 81.8%, of the total decline in operating expenses. The remaining decreases in expenses were primarily related to decreases in security expenses, insurance, and professional fees. The expense declines were partially offset by increases in utilities, general building expenses, and bad debt expense.
Real estate taxes decreased 10.9% for the year ended December 31, 2010 as compared to the prior year. This was a result of fewer property investments under management and lower tax assessments across the existing properties held by the Account.
Interest expense increased $5.5 million, or 5.5%, for the year ended December 31, 2010 as compared to the same period in 2009. This increase is a result of higher interest rates on new loan agreements entered into by the Account during the year ended December 31, 2010 as compared to the loan agreements that matured during 2010. See Note 9Mortgage Loans Payable to the financial statements included herein.
The $25.3 million decline in income from real estate joint ventures and limited partnerships for the year ended December 31, 2010 as compared to the same period in 2009 was primarily due to a decrease in revenues as a result of an increase in vacancies as well as rent concessions across the joint venture portfolios held by the Account and the sale of 22 properties from within the DDR Joint Venture and the Accounts interest in Tysons Executive Plaza II during 2010.
The
Account incurred overall Account level expenses of $95.8 million for the year
ended December 31, 2010, which represents a 0.3% increase from $95.5 million
for 2009. Administrative and distribution charges declined as a result of the
general decline in costs allocated to manage and distribute the Account and the
reduction in the average net assets of the Account. Unlike administrative and
distribution charges, investment advisory charges do not decline at the same
rate as average net assets as certain portions of investment advisory charges
are fixed and not directly associated to the average net asset value of the
Account. Investment advisory charges increased primarily due to costs
associated with new investments in technology. Mortality and expense risk
charges declined during the year ended December 31, 2010 primarily due to lower
average net assets as compared to the same period in 2009. Liquidity guarantee
expenses increased as a result of the
TIAA Real Estate Account § Prospectus 83
increase in the fees that
TIAA charges to provide the liquidity guarantee from 10 basis points to 15
basis points, which was effective as of May 1, 2009.
Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable
The table below shows the net realized and unrealized gain (loss) on investment and mortgage loans payable for the years ended December 31, 2010 and 2009 and the dollar and percentage changes for those periods (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
Change |
|||||||||
|
|
|
|||||||||||
|
|
|
2010 |
|
|
2009 |
|
|
$ |
|
|
% |
|
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate properties |
|
$ |
(12,508 |
) |
$ |
(281,798 |
) |
$ |
269,290 |
|
|
95.6 |
% |
Real estate joint ventures and limited partnerships |
|
|
(185,753 |
) |
|
|
|
|
(185,753 |
) |
|
N/M |
|
Marketable securities |
|
|
429 |
|
|
1 |
|
|
428 |
|
|
N/M |
|
Mortgage loans payable |
|
|
|
|
|
(371 |
) |
|
371 |
|
|
N/M |
|
Net realized (loss) on investments |
|
|
(197,832 |
) |
|
(282,168 |
) |
|
84,336 |
|
|
29.9 |
% |
Net change in unrealized appreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate properties |
|
|
638,183 |
|
|
(2,244,931 |
) |
|
2,883,114 |
|
|
128.4 |
% |
Real estate joint ventures and limited partnerships |
|
|
357,477 |
|
|
(1,030,179 |
) |
|
1,387,656 |
|
|
134.7 |
% |
Marketable securities |
|
|
15,032 |
|
|
22 |
|
|
15,010 |
|
|
N/M |
|
Mortgage loans receivable |
|
|
3,727 |
|
|
(494 |
) |
|
4,221 |
|
|
N/M |
|
Mortgage loans payable |
|
|
(59,619 |
) |
|
(54,755 |
) |
|
(4,864 |
) |
|
8.9 |
% |
Net change in unrealized appreciation |
|
|
954,800 |
|
|
(3,330,337 |
) |
|
4,285,137 |
|
|
128.7 |
% |
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON |
|
$ |
756,968 |
|
$ |
(3,612,505 |
) |
$ |
4,369,473 |
|
|
121.0 |
% |
N/M - Not meaningful
During
the year ended December 31, 2010, the Account experienced a net realized and
unrealized gain on investments and mortgage loans payable of $757.0 million,
compared to a net realized and unrealized loss of $3.6 billion for the year
ended December 31, 2009. The net realized and unrealized gains on investments
and mortgage loans payable was primarily driven by net realized and unrealized
gains on the Accounts wholly owned real estate property investments of $625.7
million for the year ended December 31, 2010 compared to a loss of $2.5 billion
during the same period in 2009. The net realized and unrealized gains in the
Account continue to be due to improved market conditions and real estate values
that occurred throughout the year 2010. For the two International properties
held by the Account, the foreign exchange fluctuations (losses) for the year
ended December 31, 2010,partially offset the total net realized and unrealized
gain by $20.3 million. The Account experienced losses from the foreign exchange
fluctuation in the first two quarters of 2010, a reverse effect in the third
quarter 2010 and stable rates during the fourth quarter of 2010.
84 Prospectus § TIAA Real Estate Account
Real
estate joint ventures and limited partnerships experienced a net realized and
unrealized gain of $171.7 million for the year ended December 31, 2010 compared
to a $1.0 billion loss for the year ended December 31, 2009. The net realized
and unrealized gains on joint ventures and limited partnerships were due to
increases in value of the Accounts existing real estate assets, which
reflected the net effects of an improving overall economy, and an increase in value
of the underlying property investments within the joint ventures and limited
partnership funds.
During the year ended December 31, 2010, the Accounts marketable securities position was $2.9 billion, which was comprised of $495.3 million of real estate-related marketable securities and $2.4 billion of other securities such as U. S. Treasury securities and government agency notes. The net realized and unrealized gain of $15.5 million experienced by the Account on marketable securities was primarily due to increases in the value of real estate-related equity securities.
For the year ended December 31, 2010, the Account had a net unrealized gain on the mortgage loan receivable of $3.7 million compared to $0.5 million loss for the comparable period in 2009 as a result of the mortgage loan receivable being settled in full at its face value during September 2010.
Mortgage loans payable experienced a net realized and unrealized loss of $59.6 million during the year ended December 31, 2010 compared to net realized and unrealized loss of $55.1 million in the comparable period in 2009. Valuation adjustments associated with mortgage loans payable are highly dependent upon interest rates, spreads, investment return demands, the performance of the underlying real estate investment, and where applicable, foreign exchange. Of the $59.6 million realized and unrealized loss associated with mortgage loans payable, $66.2 million was related to valuation increases in mortgage loans payable offset in part by foreign exchange fluctuations of $6.6 million.
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
Performance
The Accounts total return was 27.6% for the year ended December 31, 2009 as compared to 14.2% for the year ended December 31, 2008. The Accounts performance during the year ended December 31, 2009 reflects a decline in the aggregate net asset value of the Accounts real estate property investments, including investments owned in joint ventures and limited partnerships, lower income from marketable securities and unrealized losses from the mortgage loans payable. The twelve months of 2009 saw continued valuation declines resulting from the weakened economy and tightened financial and credit markets. Transaction activity continued to remain at historically low levels and capital depreciation occurred in most markets.
The
Accounts annualized total returns (after expenses) over the one, three, five,
and ten year periods ended December 31, 2009 were 27.6%, 10.9%, 1.7% and
3.1% respectively. As of December 31, 2009, the Accounts annualized total
return since inception was 4.7%.
TIAA Real Estate Account § Prospectus 85
The
Accounts total net assets decreased from $11.5 billion at December 31, 2008 to
$7.9 billion at December 31, 2009. The primary driver of this 31.5% decrease
was depreciation in value of the Accounts wholly owned, joint venture, and
limited partnership real estate investments (86.0% of the decrease), while net
participant withdrawals and transfers out of the Account (net of the $1.1
billion of liquidity units purchased by TIAA) accounted for 14.0% of the
decrease.
Income and Expenses
The table below shows the net investment income for the years ended December 31, 2009 and 2008 and the dollar and percentage changes for those periods (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
Change |
|
|||||||
|
|
|
||||||||||
|
|
2009 |
|
2008 |
|
$ |
|
% |
|
|||
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
Real estate income, net: |
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
948,315 |
|
$ |
979,295 |
|
$ |
(30,980 |
) |
3.2 |
% |
Real estate property level expenses and taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
238,705 |
|
|
257,351 |
|
|
(18,646 |
) |
7.2 |
% |
Real estate taxes |
|
|
128,734 |
|
|
132,979 |
|
|
(4,245 |
) |
3.2 |
% |
Interest expense |
|
|
101,219 |
|
|
88,531 |
|
|
12,688 |
|
14.3 |
% |
Total real estate property level expenses and taxes |
|
|
468,658 |
|
|
478,861 |
|
|
(10,203 |
) |
2.1 |
% |
Real estate income, net |
|
|
479,657 |
|
|
500,434 |
|
|
(20,777 |
) |
4.2 |
% |
Income from real estate joint ventures and |
|
|
114,578 |
|
|
116,889 |
|
|
(2,311 |
) |
2.0 |
% |
Interest |
|
|
1,733 |
|
|
76,444 |
|
|
(74,711 |
) |
97.7 |
% |
Dividends |
|
|
|
|
|
5,079 |
|
|
(5,079 |
) |
N/M |
|
TOTAL INVESTMENT INCOME |
|
|
595,968 |
|
|
698,846 |
|
|
(102,878 |
) |
14.7 |
% |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Investment advisory charges |
|
|
42,521 |
|
|
47,622 |
|
|
(5,101 |
) |
10.7 |
% |
Administrative and distribution charges |
|
|
35,805 |
|
|
77,577 |
|
|
(41,772 |
) |
53.8 |
% |
Mortality and expense risk charges |
|
|
4,736 |
|
|
8,116 |
|
|
(3,380 |
) |
41.6 |
% |
Liquidity guarantee charges |
|
|
12,411 |
|
|
19,725 |
|
|
(7,314 |
) |
37.1 |
% |
TOTAL EXPENSES |
|
|
95,473 |
|
|
153,040 |
|
|
(57,567 |
) |
37.6 |
% |
INVESTMENT INCOME, NET |
|
$ |
500,495 |
|
$ |
545,806 |
|
$ |
(45,311 |
) |
8.3 |
% |
N/M - Not meaningful
The Accounts real estate holdings, including real estate joint ventures and limited partnerships, generated 99.7% and 88.3% of the Accounts total investment income (before deducting Account level expenses) during the years ended December 31, 2009 and 2008, respectively. The 14.7% decrease in the Accounts total investment income was primarily due to a 97.9% decrease in the Accounts dividend income and interest income and a 4.2% decrease in net real estate income.
Gross
real estate rental income decreased by $31.0 million or 3.2% for the year ended
December 31, 2009, as compared to the same period in 2008. Approximately $19.2
million of the decrease is primarily due to the property investment sales that
occurred during 2008 and 2009. In addition to the reduction in rental income
due to property investment sales, the Account also experienced a decrease in
revenue
86 Prospectus § TIAA Real Estate Account
due to various
property specific items such as rent concessions, lower rents, increased
vacancies at certain properties and reductions in common charges for many
properties as a result of lower overall property operating expenses.
Total real estate property level expenses and taxes for wholly owned property investments for the year ended December 31, 2009 decreased to $468.7 million as compared to $478.9 million of the year ended December 31, 2008. The overall decline in expenses is primarily due to a 7.2% decrease in operating expenses, a 3.2% decrease in real estate taxes offset by a 14.3% increase in interest expense. Operating expenses decreased during 2009 primarily due to an overall reduction in repairs and maintenance, utility expense, insurance expense, bad debt expense, and various other miscellaneous operating expenses. In addition to the reduction of general expenses, the property investment sales during 2008 and 2009 eliminated some operating expenses. Real estate taxes decreased due to lower tax assessments and reduced number of properties under management. The increase in interest expense is due to $557 million of new debt financing that was obtained during the third and fourth quarters of 2008.
Income from real estate joint ventures and limited partnerships was $114.6 million for the year ended December 31, 2009 compared to $116.9 million for the year ended December 31, 2008. This 2.0% decrease was due to a decrease in gross rental income from joint venture properties as a result of increased vacancies and select rent reductions. More specifically, the DDR Joint Venture experienced an increase in vacancies in late 2008 which resulted in lower income in 2009.
Investment income on the Accounts investments in marketable securities decreased 97.9%, from $81.5 million for the year ended December 31, 2008 to $1.7 million for the comparable period in 2009. The variance was due to the decrease in the rates of return on the marketable securities as well as a lower marketable security invested balance for 2009 compared to the year ended December 31, 2008.
The
Account incurred overall Account level expenses of $95.5 million for the year
ended December 31, 2009, which represents a 37.6% decrease from $153.0 million
for the same period in 2008. The decreases in investment advisory and
administrative and distribution charges are due to two factors. First, during
the first quarter of 2008, increased costs were allocated to the Account
associated with new technology investments in 2008 that were reduced
significantly during the year ended December 31, 2009. Finally, the general
decline in the costs allocated to manage and distribute the Account is
consistent with the reduction in the average net assets of the Account. In the
future, investment advisory charges are not expected to decline at the same
rate as net assets as certain portions of these costs are not directly
associated to the net asset value of the Account. Mortality and expense risk
charges and liquidity guarantee expenses declined during the year ended
December 31, 2009 primarily due to lower net assets as compared to the same
period in 2008. The decline of the liquidity guarantee expenses resulting from
the decline in net assets was partially offset by the increase in the fees that
TIAA charges to provide the liquidity guarantee from 10 basis points to 15
basis points which was effective as of May 1, 2009.
TIAA Real Estate Account § Prospectus 87
|
|
|
|
|
Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable |
The table below shows the net realized and unrealized gain (loss) on investments and mortgage loans payable for the years ended December 31, 2009 and 2008 and the dollar and percentage changes for those periods (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
Change |
|
|||||||
|
|
|
||||||||||
|
|
2009 |
|
2008 |
|
$ |
|
% |
|
|||
NET REALIZED AND UNREALIZED GAIN |
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Real estate properties |
|
$ |
(281,798 |
) |
$ |
(18,097 |
) |
$ |
(263,701 |
) |
N/M |
|
Real estate joint ventures and limited partnerships |
|
|
|
|
|
(17 |
) |
|
17 |
|
N/M |
|
Marketable securities |
|
|
1 |
|
|
(11,041 |
) |
|
11,042 |
|
N/M |
|
Mortgage loans payable |
|
|
(371 |
) |
|
|
|
|
(371 |
) |
N/M |
|
Net realized (loss) on investments |
|
|
(282,168 |
) |
|
(29,155 |
) |
|
(253,013 |
) |
867.8 |
% |
Net change in unrealized appreciation (depreciation) on: |
|
|
|
|
|
|
|
|
|
|
|
|
Real estate properties |
|
|
(2,244,931 |
) |
|
(1,905,930 |
) |
|
(339,001 |
) |
17.8 |
% |
Real estate joint ventures and limited partnerships |
|
|
(1,030,179 |
) |
|
(702,797 |
) |
|
(327,382 |
) |
46.6 |
% |
Marketable securities |
|
|
22 |
|
|
15,820 |
|
|
(15,798 |
) |
99.9 |
% |
Mortgage loans receivable |
|
|
(494 |
) |
|
(753 |
) |
|
259 |
|
34.4 |
% |
Mortgage loans payable |
|
|
(54,755 |
) |
|
109,791 |
|
|
(164,546 |
) |
149.9 |
% |
Net change in unrealized appreciation |
|
|
(3,330,337 |
) |
|
(2,483,869 |
) |
|
(846,468 |
) |
34.1 |
% |
NET REALIZED AND UNREALIZED GAIN |
|
$ |
(3,612,505 |
) |
$ |
(2,513,024 |
) |
$ |
(1,099,481 |
) |
43.8 |
% |
N/M - Not meaningful
The
Account had net realized and unrealized losses on investments and mortgage
loans payable of $3.6 billion for the year ended December 31, 2009, a $1.1
billion increase when compared to a net realized and unrealized loss of $2.5
billion for the year ended December 31, 2008. The increase in net realized and
unrealized losses on investments and mortgage loans payable was primarily
driven by net realized and unrealized losses on the Accounts wholly owned real
estate property investments of $2.5 billion for the year ended December 31,
2009 compared to a loss of $1.9 billion during the same period in 2008. The
Accounts interests in joint ventures and limited partnerships posted a net
realized and unrealized loss of $909.3 million and $120.9 million,
respectively, for a net total of over $1.0 billion for the year ended December
31, 2009. When compared to the year ended December 31, 2008, joint ventures and
limited partnerships posted a net realized and unrealized loss of $652.4
million and $50.4 million, respectively, for a net total of $702.8 million.
88 Prospectus § TIAA Real Estate Account
Mortgage loans payable experienced a net realized and unrealized loss of $55.1 million during the year ended December 31, 2009 compared to net realized and unrealized gain of $109.8 million in the same period in 2008. Valuation adjustments associated with mortgage loans payable are highly dependent upon interest rates, spreads, investment return demands, the performance of the underlying real estate investment, and where applicable, foreign exchange. Of the $55.1 million realized and unrealized loss, foreign exchange fluctuations (due to a weakening U.S. dollar during the year ended 2009) accounted for $23.8 million of the total year-to-date loss. The remaining $30.9 million loss related to mortgage payable values is reflected in the fluctuations in the U.S. Treasury rates and higher loan to value ratios on the Accounts underlying properties (as a result of the significant declines in property values) and a $0.4 million realized loss due to the debt that was assumed in connection with the sale of a property investment.
During the year ended December 31, 2009, the Account also sold one retail property investment, one industrial property investment, five office property investments and eight partial apartment property investments for net proceeds of $394.8 million and realized a loss of $281.8 million.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2010 and 2009, the Accounts liquid assets (i.e., cash and non-real estate-related marketable securities) had a value of $2.4 billion and $696.1 million, respectively (22.3% and 8.8% of the Accounts net assets at such dates, respectively). When compared to December 31, 2009, the Accounts non-real estate-related liquid assets have increased by $1.7 billion. This increase is primarily the result of increased net participant activity into the Account (in particular, transfers into the Account), income generated from its real estate investments, income earned from joint venture investments, and proceeds from selective sales of real estate properties.
TIAA Real Estate Account § Prospectus 89
Liquidity Guarantee
Primarily as a result of significant net participant transfers out of the Account during late 2008 and early 2009, pursuant to TIAAs existing liquidity guarantee obligation, the TIAA general account purchased $1.2 billion of accumulation units (liquidity units) issued by the Account in a number of separate transactions between December 24, 2008 and June 1, 2009. Subsequent to June 1, 2009 and through the date of this prospectus, the TIAA general account has not purchased any additional liquidity units. As disclosed under Establishing and Managing the Account the Role of TIAA Liquidity Guarantee, in accordance with this liquidity guarantee obligation, TIAA guarantees that all participants in the Account may redeem their accumulation units at their accumulation unit value next determined after their transfer or cash withdrawal request is received in good order.
Net participant transfers out of the Account significantly slowed following the first quarter of 2009, and net participant transfer activity turned to inflows in early 2010, which has continued through the date of this prospectus. As a result, while management cannot predict whether any future TIAA liquidity unit purchases will be required under the liquidity guarantee, it is unlikely that additional purchases will be required in the near term. However, management cannot predict for how long net inflows will continue to occur. In addition, effective March 31, 2011, individual participants will be limited from making internal transfers into their Account accumulation if, after giving effect to such transfer, the total value of such participants Account accumulation (under all contracts issued to such participant) would exceed $150,000. This limitation is subject to certain exceptions and will be in effect in the jurisdictions that have approved the limitation. Management expects that participant inflow activity will be tempered, perhaps to a significant degree, following the effective date of this limitation. If net outflows were again to occur (even if not at the same intensity as in 2008 and early 2009), it could have a negative impact on the Accounts operations and returns and could require TIAA to purchase additional liquidity units, perhaps to a significant degree, as was the case in late 2008 and early 2009.
90 Prospectus § TIAA Real Estate Account
|
|
|
|
|
establishing the percentage of total accumulation units that TIAAs ownership should not exceed (the trigger point) and creating a method for reviewing the trigger point; |
|
|
|
|
|
approving any adjustment of TIAAs ownership interest in the Account and, in its discretion, requiring an adjustment if TIAAs ownership of liquidity units reaches the trigger point; and |
|
|
|
|
|
once the trigger point has been reached, participating in any program to reduce TIAAs ownership in the Account by utilizing cash flow or liquid investments in the Account, or by utilizing the proceeds from asset sales. If the independent fiduciary were to determine that TIAAs ownership should be reduced following the trigger point, its role in participating in any asset sales program would include (i) participating in the selection of properties for sale, (ii) providing sales guidelines and (iii) approving those sales if, in the independent fiduciarys opinion, such sales are desirable to reduce TIAAs ownership of liquidity units. |
As of the date of this prospectus, the independent fiduciary, which has the right to adjust the trigger point, has established the trigger point at 45% of the outstanding accumulation units, and it will continue to monitor TIAAs ownership interest in the Account and provide further recommendations as necessary. As of December 31, 2010, TIAA owned 9.8% of the outstanding accumulation units of the Account. In establishing the appropriate trigger point, including whether or not to require certain actions once the trigger point has been reached, the independent fiduciary will assess, among other things and to the extent consistent with the Prohibited Transaction Exemption (PTE 96-76) issued by the U.S. Department of Labor in 1996 with respect to the liquidity guarantee and the independent fiduciarys duties under ERISA, the risk that a conflict of interest could arise due to the level of TIAAs ownership interest in the Account.
TIAA Real Estate Account § Prospectus 91
The Accounts net investment income continues to be an additional source of liquidity for the Account. Net investment income decreased from $500.5 million for the twelve months ended December 31, 2009 to $423.2 million for the twelve months ended December 31, 2010. The total decline was a result of wholly owned property investment sales that occurred in the second half of 2009, joint venture sale and joint venture property sales that occurred during 2010, as well as increased vacancies at certain properties, reduced rental rates, rent concessions for renewed leases, and lower common area charges resulting from the properties maintaining lower property operating expenses in 2010.
The Accounts investment strategy remains to invest between 75% and 85% of its net assets directly in real estate or real estate-related investments with the goal of producing favorable long-term returns primarily through rental income and appreciation. As of December 31, 2010, cash and real estate-related and non real estate-related marketable securities comprised 26.9% of the Accounts net assets. The Accounts liquid assets continue to be available to purchase additional suitable real estate properties and to meet the Accounts debt obligations, expense needs, and participant redemption requests (i.e., cash withdrawals, benefit payments, or transfers).
As of December 31, 2010, the Account had $263.0 million in principal amount of debt obligations due during 2011 of which $13.1 million was related to wholly owned real estate investments and $249.9 million was related to the Accounts share of debt associated with its investments in joint ventures. Management believes that the Account, and the joint venture entities in which the Account invests, will have the ability to address these obligations in a number of ways, including among others, refinancing or extending such debt or repaying the principal due at maturity.
Leverage
The Account may borrow money and assume or obtain a mortgage on a property to make leveraged real estate investments. Also, to meet any short-term cash needs, the Account may obtain a line of credit that may be unsecured and/or contain terms that may require the Account to secure the loan with one or more of its properties.
92 Prospectus § TIAA Real Estate Account
|
|
|
|
|
placing new debt on properties; |
|
|
|
|
|
refinancing outstanding debt; |
|
|
|
|
|
assuming debt on acquired properties or interests in the Accounts properties; and/or |
|
|
|
|
|
extending the maturity date of outstanding debt. |
In calculating this limit, only the Accounts actual percentage interest in any borrowings is included, and not that percentage interest held by any joint venture partner. Further, the Account may only borrow up to 70% of the then-current value of a property, although construction loans may be for 100% of the costs incurred in developing a property. As of December 31, 2010 the Account did not have any construction loans. Also, at the time the Account (or a joint venture in which the Account is a partner) enters into a revolving line of credit, management deems the maximum amount which may be drawn under that line of credit as fully incurred, regardless of whether the maximum amount available has been drawn from time to time.
As of December 31, 2010, management reduced the Accounts ratio of outstanding principal amount of debt to total gross asset value (i.e., a loan to value ratio) to less than 30% and intends to maintain its loan to value ratio at or below 30% (this ratio is measured at the time of incurrence and after giving effect thereto). The Accounts total gross asset value, for these purposes, is equal to the total fair value of the Accounts assets (including the fair value of the Accounts interest in joint ventures), with no reduction associated with any indebtedness on such assets.
In times of high net inflow activity, in particular during times of high net participant transfer inflows, management may determine to apply a portion of such cash flows to make prepayments of indebtedness prior to scheduled maturity, which would have the effect of reducing the Accounts loan to value ratio.
As of December 31, 2010, the Accounts loan to value ratio was 24.3%.
RECENT TRANSACTIONS
The following describes property transactions by the Account in the fourth quarter of 2010. Except as noted, the expenses for operating the properties purchased are either borne or reimbursed, in whole or in part, by the property tenants, although the terms vary under each lease. The Account is responsible for operating expenses not reimbursed under the terms of a lease. All rental rates are quoted on an annual basis unless otherwise noted.
PURCHASES
TIAA Real Estate Account § Prospectus 93
DDR TC LLC
On November 2, 2010, a retail property located in Southern Pines, North Carolina was sold by the Accounts DDR Joint Venture. The Account holds an 85.0% interest in the DDR Joint Venture. The Accounts portion of the net sales price was $1.3 million (net of the Accounts portion of debt on the property equal to $2.5 million). The Account realized a loss from the sale of $1.4 million, the majority of which had been previously recognized as an unrealized loss in the Accounts Statements of Operations. The Accounts portion of the costs to date (excluding selling costs) at the date of the sale were $5.2 million (excluding debt) according to the records of the Account.
On November 9, 2010, a retail property located in Columbia, South Carolina was sold by the Accounts DDR Joint Venture. The Accounts portion of the sales price was $1.6 million. After consideration of the Accounts portion of debt on the property equal to $1.8 million, the Account contributed an additional $0.3 million to the DDR Joint Venture as part of the closing of the sale. The Account realized a loss from the sale of $6.6 million, the majority of which had been previously recognized as an unrealized loss in the Accounts Statements of Operations. The Accounts portion of the costs to date (excluding selling costs) at the date of the sale were $8.2 million (excluding debt) according to the records of the Account.
On December 23, 2010, four retail properties were sold in various locations by the Accounts DDR TC LLC joint venture with DDR. The Accounts portion of the net sales price was $18.8 million (net of the Accounts portion of debt on one of these properties equal to $1.8 million). The Account realized a loss from the sale of $21.0 million, the majority of which had been previously recognized as an unrealized loss in the Accounts Statements of Operations. The Accounts portion of the costs to date (excluding selling costs) at the date of the sale were $41.6 million (excluding debt) according to the records of the Account.
Inverness Center
On December 9, 2010, the Account sold an office property investment located in Birmingham, Alabama for a net sale price of $91.9 million and the Account realized a loss of $11.1 million from the sale, the majority of which had been previously recognized as an unrealized loss in the Accounts Statements of Operations. The Accounts costs to date (excluding selling costs) at the date of the sale were $103.0 million.
FINANCINGS
94 Prospectus § TIAA Real Estate Account
The following table sets forth a summary regarding the Accounts known contractual obligations, including required interest payments for those items that are interest bearing, at December 31, 2010 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Due During Years Ending December 31, |
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 |
|
Thereafter |
|
Total |
|
|||||||
Mortgage Loans Payable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Payments |
|
$ |
13,082 |
|
$ |
215,236 |
|
$ |
552,853 |
|
$ |
225,273 |
|
$ |
462,525 |
|
$ |
373,945 |
|
$ |
1,842,914 |
|
Interest Payments(1) |
|
|
105,265 |
|
|
104,863 |
|
|
93,349 |
|
|
63,860 |
|
|
35,766 |
|
|
59,589 |
|
|
462,692 |
|
Total Mortgage Loans Payable |
|
|
118,347 |
|
|
320,099 |
|
|
646,202 |
|
|
289,133 |
|
|
498,291 |
|
|
433,534 |
|
|
2,305,606 |
|
Joint Venture Funding Commitments |
|
|
263 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
263 |
|
Other Commitments(2) |
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|
33,689 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,689 |
|
Tenant improvements(3) |
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|
101,234 |
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|
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|
|
|
|
|
|
|
|
101,234 |
|
Total Contractual Obligations |
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$ |
253,533 |
|
$ |
320,099 |
|
$ |
646,202 |
|
$ |
289,133 |
|
$ |
498,291 |
|
$ |
433,534 |
|
$ |
2,440,792 |
|
|
|
(1) |
These amounts represent interest payments due on mortgage loans payable of wholly owned real estate properties based on the stated rates and, where applicable, the foreign currency exchange rates at December 31, 2010. |
(2) |
This includes the Accounts commitment to purchase interest in four limited partnerships, which could be called by the partner at any time. |
(3) |
This amount represents tenant improvements and leasing inducements committed to by the Account in tenant leases that have not been incurred as of the year ended December 31, 2010. |
Note that the Contractual Obligations table above does not include payments on debt held in Investments in Joint Ventures which are the obligation of the individual joint venture entities. See Note 7Investments in Joint Ventures to the Accounts financial statements.
EFFECTS OF INFLATION AND INCREASING OPERATING EXPENSES
Inflation, along with increased insurance, taxes, utilities and security costs, may increase property operating expenses in the future. Any such increases in operating expenses are generally billed to tenants either through contractual lease provisions in office, industrial, and retail properties or through rent increases in apartment complexes. The Account remains responsible for the expenses for unleased space in a property as well as expenses which may not be reimbursed under the terms of an existing lease.
Critical Accounting Policies
The financial statements of the Account are prepared in conformity with accounting principles generally accepted in the United States of America.
TIAA Real Estate Account § Prospectus 95
The following is a description of the valuation methodologies used to determine the fair value of the Accounts investments and investment related mortgage payables.
Valuation of Real Estate Properties - Investments in real estate properties are stated at fair value, as determined in accordance with policies and procedures reviewed by the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. Accordingly, the Account does not record depreciation. Determination of fair value involves judgment because the actual fair value of real estate can be determined only by negotiation between the parties in a sales transaction. The Accounts primary objective when valuing its real estate investments will be to produce a valuation that represents a reasonable estimate of the fair value of its investments. Implicit in the Accounts definition of fair value is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
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Buyer and seller are typically motivated; |
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Both parties are well informed or well advised, and acting in what they consider their best interests; |
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A reasonable time is allowed for exposure in the open market; |
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Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and |
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The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. |
Property and investment values are affected by, among other things, the availability of capital, occupancy rates, rental rates, and interest and inflation rates. As a result, determining real estate and investment values involves many assumptions. Key inputs and assumptions include rental income and expense amounts, related rental income and expense growth rates, discount rates and capitalization rates. Valuation techniques include discounted cash flow analysis, prevailing market capitalization rates or multiples applied to earnings from the property, analysis of recent comparable sales transactions, actual sale negotiations and bona fide purchase offers received from third parties. Amounts ultimately realized from each investment may vary significantly from the fair value presented.
96 Prospectus § TIAA Real Estate Account
Subsequently, each property is appraised each quarter by an independent third party appraiser, reviewed by TIAAs internal appraisal staff and as applicable the Accounts independent fiduciary. In general, the Account obtains appraisals of its real estate properties spread out throughout the quarter, which is intended to result in appraisal adjustments, and thus, adjustments to the valuations of its holdings (to the extent such adjustments are made) that happen regularly throughout each quarter and not on one specific day or month in each period.
Further, management reserves the right to order an appraisal and/or conduct another valuation outside of the normal quarterly process when facts or circumstances at a specific property change. For example, under certain circumstances a valuation adjustment could be made when the account receives a bona fide bid for the sale of a property held within the Account or one of the Accounts joint ventures. In addition, adjustments may be made for events or circumstances indicating an impairment of a tenants ability to pay amounts due to the Account under a lease (including due to a bankruptcy filing of that tenant). Alternatively, adjustments may be made to reflect the execution or renewal of a significant lease. Also, adjustments may be made to reflect factors (such as sales values for comparable properties or local employment rate) bearing uniquely on a particular region in which the Account holds properties. TIAAs internal appraisal staff oversees the entire appraisal process, in conjunction with the Accounts independent fiduciary (the independent fiduciary is more fully described in the paragraph below). Any differences in the conclusions of TIAAs internal appraisal staff and the independent appraiser will be reviewed by the independent fiduciary, which will make a final determination on the matter (which may include ordering a subsequent independent appraisal).
TIAA Real Estate Account § Prospectus 97
Valuation of Real Estate Joint Ventures Real estate joint ventures are stated at the fair value of the Accounts ownership interests of the underlying entities. The Accounts ownership interests are valued based on the fair value of the underlying real estate, any related mortgage loans payable, and other factors, such as ownership percentage, ownership rights, buy/sell agreements, distribution provisions and capital call obligations. Upon the disposition of all real estate investments by an investee entity, the Account will continue to state its equity in the remaining net assets of the investee entity during the wind down period, if any, which occurs prior to the dissolution of the investee entity.
Valuation of Real Estate Limited Partnerships Limited partnership interests are stated at the fair value of the Accounts ownership in the partnership which is based on the most recent net asset value of the partnership, as reported by the sponsor. Since market quotations are not readily available, the limited partnership interests are valued at fair value as determined in good faith under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole.
Valuation of Marketable Securities Equity securities listed or traded on any national market or exchange are valued at the last sale price as of the close of the principal securities market or exchange on which such securities are traded or, if there is no sale, at the mean of the last bid and asked prices on such market or exchange, exclusive of transaction costs.
Debt securities, other than money market instruments, are generally valued at the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality and type). Money market instruments, with maturities of one year or less, are valued in the same manner as debt securities or derived from a pricing matrix.
98 Prospectus § TIAA Real Estate Account
Valuation of Mortgage Loans Receivable Mortgage loans receivable are stated at fair value and are initially valued at the face amount of the mortgage loan funding. Subsequently, mortgage loans receivable are valued at least quarterly based on market factors, such as market interest rates and spreads for comparable loans, the liquidity for mortgage loans of similar characteristics, the performance of the underlying collateral and the credit quality of the counterparty.
Valuation of Mortgage Loans Payable Mortgage loans payable are stated at fair value. The estimated fair value of mortgage loans payable are based on the amount at which the liability could be transferred to a third party exclusive of transaction costs. Mortgage loans payable are valued internally by TIAAs internal appraisal department, as reviewed by the Accounts independent fiduciary, at least quarterly based on market factors, such as market interest rates and spreads for comparable loans, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying collateral), the liquidity for mortgage loans of similar characteristics, the maturity date of the loan, the return demands of the market, and the credit quality of the Account. Interest expense for mortgage loans payable is recorded on the accrual basis taking into account the outstanding principal and contractual interest rates.
See Note 6Assets and Liabilities Measured at Fair Value on a Recurring Basis for further discussion and disclosure regarding the determination of the Accounts investments fair values.
Foreign currency transactions and translation: Portfolio investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of securities, income receipts and expense payments made in foreign currencies are translated into U.S. dollars at the exchange rates prevailing on the respective dates of the transactions. The effect of any changes in foreign currency exchange rates on portfolio investments and mortgage loans payable are included in net realized and unrealized gains and losses on real estate properties and mortgage loans payable. Net realized gains and losses on foreign currency transactions include disposition of foreign currencies, and currency gains and losses between the accrual and receipt dates of portfolio investment income and between the trade and settlement dates of portfolio investment transactions.
TIAA Real Estate Account § Prospectus 99
Accounting for Investments: The investments held by the Account are accounted as follows:
Real Estate Properties Rent from real estate properties consists of all amounts earned under tenant operating leases, including base rent, recoveries of real estate taxes and other expenses and charges for miscellaneous services provided to tenants. Rental income is recognized in accordance with the billing terms of the lease agreements. The Account bears the direct expenses of the real estate properties owned. These expenses include, but are not limited to, fees to local property management companies, property taxes, utilities, maintenance, repairs, insurance, and other operating and administrative costs. An estimate of the net operating income earned from each real estate property is accrued by the Account on a daily basis and such estimates are adjusted when actual operating results are determined.
Real Estate Joint Ventures The Account has limited ownership interests in various real estate joint ventures (collectively, the Joint Ventures). The Account records its contributions as increases to its investments in the Joint Ventures, and distributions from the Joint Ventures are treated as income within income from real estate joint ventures and limited partnerships in the Accounts Statements of Operations. Distributions that are identified as returns of capital or capital gains or losses are recorded as unrealized gains and realized gains and losses, respectively. Income from the Joint Ventures is recorded based on the Accounts proportional interest of the income distributed by the Joint Ventures. Income earned by the Joint Venture, but not yet distributed to the Account by the Joint Ventures is recorded as unrealized gains and losses.
100 Prospectus § TIAA Real Estate Account
Marketable Securities Transactions in marketable securities are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned. Dividend income is recorded on the ex-dividend date within dividend income. Dividends that are identified as returns of capital or capital gains or losses are recorded as unrealized gains and realized gains or losses, respectively. Realized gains and losses on securities transactions are accounted for on the specific identification method.
Realized and Unrealized Gains and Losses Unrealized gains and losses are recorded as the fair values of the Accounts investments are adjusted, and as discussed within the Real Estate Joint Ventures and Limited Partnership sections above. Realized gains and losses are recorded at the time an investment is sold or a distribution is received from the Joint Ventures or Limited Partnerships. Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties close (settlement date). The Account recognizes a realized gain on the sale of a real estate property to the extent that the contract sales price exceeds the cost-to-date of the property being sold. A realized loss occurs when the cost-to-date exceeds the sales price.
Net Assets The Accounts net assets as of the close of each valuation day are valued by taking the sum of:
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the value of the Accounts cash; cash equivalents, and short-term and other debt instruments; |
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the value of the Accounts other securities and other non-real estate assets; |
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the value of the individual real properties (based on the most recent valuation of that property) and other real estate-related investments owned by the Account; |
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an estimate of the net operating income accrued by the Account from its properties, other real estate-related investments and non real estate-related investments (including short-term marketable securities) since the end of the prior valuation day; and |
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actual net operating income earned from the Accounts properties, other real estate-related investments and non real estate-related investments (but only to the extent any such item of income differs from the estimated income accrued for on such investments). |
and then reducing the sum by liabilities held within the Account, including the daily investment management fee, administration and distribution fees and certain other expenses attributable to operating the Account.
TIAA Real Estate Account § Prospectus 101
Federal Income Taxes: Based on provisions of the Internal Revenue Code, Section 817, the Account is taxed as a segregated asset account of TIAA and as such, the Account should incur no material federal income tax attributable to the net investment activity of the Account. Management has concluded that the Account does not have any uncertain tax positions as of December 31, 2010.
New Accounting Pronouncements
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS No. 167), which amends guidance related to the identification of a variable interest entity, variable interests, the primary beneficiary, and expands required note disclosures to provide greater transparency to the users of financial statements. In December 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which amended the Codification with the guidance contained in SFAS No. 167. In February 2010, the FASB issued ASU No. 2010-10, Amendments for Certain Investment Funds, which defers the applicability of ASU No. 2009-17 in certain instances. These standards were effective on January 1, 2010 and did not result in a significant impact to the Accounts financial position or results of operations.
102 Prospectus § TIAA Real Estate Account
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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General Real Estate Risk The risk that the Accounts property values or rental and occupancy rates could go down due to general economic conditions, a weak market for real estate generally, disruptions in the credit and/or capital markets, or changing supply and demand for certain types of properties; |
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Appraisal Risk The risk that the sale price of an Account property (i.e., the value that would be determined by negotiations between independent parties) might differ substantially from its estimated or appraised value, leading to losses or reduced profits to the Account upon sale; |
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Risk Relating to Property Sales The risk that the Account might not be able to sell a property at a particular time for its full value, particularly in a poor market. This might make it difficult to raise cash quickly and also could lead to Account losses; |
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Risks of Borrowing The risk that interest rate changes may impact Account returns if the Account takes out a mortgage on a property, buys a property subject to a mortgage or holds a property subject to a mortgage; and |
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Foreign Currency Risk The risk that the value of the Accounts foreign investments, related debt, or rental income could increase or decrease due to changes in foreign currency exchange rates or foreign currency exchange control regulations, and hedging against such changes, if undertaken by the Account, may entail additional costs and be unsuccessful. |
The Account believes the diversification of its real estate portfolio, both geographically and by sector, along with its quarterly valuation procedure, helps manage the real estate and appraisal risks described above.
As of December 31, 2010, 22.9% of the Accounts Total Investments were comprised of marketable securities. As of December 31, 2010, marketable securities include high-quality debt instruments (i.e., government agency notes) and REIT securities. The Statement of Investments for the Account sets forth the general financial terms of these instruments, along with their fair values, as determined in accordance with procedures described earlier in Critical Accounting Policies section above and in Note 1Organization and Significant Accounting Policies to the Accounts financial statements included herewith. The Accounts marketable securities are considered held for trading purposes. Currently, the Account does not invest in derivative financial investments, nor does the Account engage in any hedging activity.
TIAA Real Estate Account § Prospectus 103
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Financial/Credit Risk The risk, for debt securities, that the issuer will not be able to pay principal and interest when due (and/or declare bankruptcy or be subject to receivership) and, for equity securities such as common or preferred stock, that the issuers current earnings will fall or that its overall financial soundness will decline, reducing the securitys value. |
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Market Volatility Risk The risk that the Accounts investments will experience price volatility due to changing conditions in the financial markets regardless of the credit quality or financial condition of the underlying issuer. This risk is particularly acute to the extent the Account holds equity securities, which have experienced significant short-term price volatility over the past year. Also, to the extent the Account holds debt securities; changes in overall interest rates can cause price fluctuations. |
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Interest Rate Volatility The risk that interest rate volatility may affect the Accounts current income from an investment. |
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Deposit/Money Market Risk The risk that, to the extent the Accounts cash held in bank deposit accounts exceeds federally insured limits as to that bank, the Account could experience losses if banks fail. The Account does not believe it has exposure to significant concentration of deposit risk. In addition, there is some risk that investments held in money market accounts can suffer losses. |
In addition, to the extent the Account were to hold mortgage-backed securities (including commercial mortgage-backed securities) these securities are subject to prepayment risk or extension risk (i.e., the risk that borrowers will repay the loans earlier or later than anticipated). If the underlying mortgage assets experience faster than anticipated repayments of principal, the Account could fail to recoup some or all of its initial investment in these securities, since the original price paid by the Account was based in part on assumptions regarding the receipt of interest payments. If the underlying mortgage assets are repaid later than anticipated, the Account could lose the opportunity to reinvest the anticipated cash flows at a time when interest rates might be rising. The rate of prepayment depends on a variety of geographic, social and other functions, including prevailing market interest rates and general economic factors. The market value of these securities is also highly sensitive to changes in interest rates. Note that the potential for appreciation, which could otherwise be expected to result from a decline in interest rates, may be limited by any increased prepayments. These securities may be harder to sell than other securities.
104 Prospectus § TIAA Real Estate Account
Importantly, neither TIAA nor CREF guarantee the investment performance of the Account nor do they guarantee the value of your units at any time.
RA (RETIREMENT ANNUITY) AND GRA (GROUP RETIREMENT ANNUITY)
RA and GRA contracts are used mainly for employee retirement plans. RA contracts are issued directly to you. GRA contracts, which are group contracts, are issued through an agreement between your employer and TIAA.
SRA (SUPPLEMENTAL RETIREMENT ANNUITY) AND
GSRA (GROUP SUPPLEMENTAL RETIREMENT ANNUITY)
These are generally limited to supplemental voluntary tax-deferred annuity (TDA) plans and supplemental 401(k) plans. SRA contracts are issued directly to you. GSRA contracts, which are group contracts, are issued through an agreement between your employer and TIAA. Generally, your employer pays premiums in pre-tax dollars through salary reduction. Your employer may offer you the option of making contributions in the form of after-tax Roth IRA-style contributions, though you wont be able to take tax deductions for these
TIAA Real Estate Account § Prospectus 105
contributions. Although you cant pay premiums directly, you can transfer amounts from other TDA plans.
RETIREMENT CHOICE/RETIREMENT CHOICE PLUS ANNUITIES
These are very similar in operation to the GRAs and GSRAs, respectively, except that, unlike GRAs, they are issued directly to your employer or your plans trustee, and they may be issued to your employer directly without participant recordkeeping. Among other rights, the employer retains the right to transfer accumulations under these contracts to alternate funding vehicles.
CLASSIC IRA AND ROTH IRA
We cant issue a joint Classic IRA or Roth IRA contract. Your employer may offer SEP IRAs (Simplified Employee Retirement Plans), which are subject to different rules.
Classic and Roth IRAs may together be referred to as IRAs in this prospectus.
GA (GROUP ANNUITY) AND INSTITUTIONALLY OWNED GSRAS
These are used exclusively for employer retirement plans and are issued directly to your employer or your plans trustee. Your employer pays premiums directly to TIAA (you cant pay the premiums directly to TIAA) and your employer or the plans trustee may control the allocation of contributions and transfers to and from these contracts including withdrawing completely from the Account. If a GA or Institutionally Owned GSRA contract is issued pursuant to your plan, the rules relating to transferring and withdrawing your money, receiving any annuity income or death benefits, and the timing of payments may be different, and are determined by your plan. Ask your employer or plan administrator for more information.
106 Prospectus § TIAA Real Estate Account
KEOGH CONTRACTS
TIAA also offers contracts under Keogh plans. If you are a self-employed individual who owns an unincorporated business, you can use the Accounts Keogh contracts for a Keogh plan, and cover common law employees, subject to the Accounts eligibility requirements.
ATRA (AFTER-TAX RETIREMENT ANNUITY)
The after-tax retirement annuities (ATRA) are individual non-qualified deferred annuity contracts, issued to participants who are eligible and would like to remit personal premiums under the contractual provisions of their RA contract. To be eligible, you must have an active and premium-paying or paid up RA contract.
ELIGIBILITY FOR IRA AND KEOGH CONTRACTS
Each of you and your spouse can open a Classic or Roth IRA or a Keogh if youre a current or retired employee or trustee of an Eligible Institution, or if you own a TIAA or CREF annuity contract or a TIAA individual insurance contract. To be considered a retired employee for this purpose, an individual must be at least 55 years old and have completed at least three years of service at an Eligible Institution. In the case of partnerships, at least half the partners must be eligible individuals and the partnership itself must be primarily engaged in education or research. Eligibility may be restricted by certain income limits on opening Roth IRA contracts.
STATE REGULATORY APPROVAL
State regulatory approval may be pending for certain of these contracts and they may not currently be available in your state.
STARTING OUT
TIAA Real Estate Account § Prospectus 107
If we receive premiums from your employer and, where applicable, a completed application from you before we receive your specific allocation instructions (or if your allocation instructions violate employer plan restrictions or do not total 100%), we will invest all premiums remitted on your behalf in the default option your employer has designated. We consider your employers designation of a default option to be an instruction to us to allocate your premiums to that option as described above. You should consult your plan documents or sales representative to determine your employers designated default option and to obtain information about that option. Further, to the extent you hold an IRA contract, the default option will be that fund or account specified in your IRA forms. When we receive complete allocation instructions from you, well follow your instructions for future premiums. However, if you want the premiums previously allocated to the default option (and earnings and losses on them) to be transferred to the options identified in your instructions, you must specifically request that we transfer these amounts from the default option to your investment option choices.
In most cases (subject to any restriction we may impose, as described in this prospectus), TIAA accepts premiums to a contract during your accumulation period. Once your first premium has been paid, your TIAA contract cant lapse or be forfeited for nonpayment of premiums. However, TIAA can stop accepting premiums to the Real Estate Account at any time.
108 Prospectus § TIAA Real Estate Account
Note that we cannot accept money orders or travelers checks. In addition, we will not accept a third-party check where the relationship of the payor to the account owner cannot be identified from the face of the check.
For locations where a third-party service administers the receipt of mail, we will not be deemed to have received any premiums sent to the addresses designated for remitting premiums until the third-party service that administers the receipt of mail through those addresses has processed the payment on our behalf.
If you have any accumulations in the Account, you will be sent a statement in each quarter which sets forth the following information:
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(1) |
Premiums paid during the quarter; |
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(2) |
The number and dollar value of accumulation units in the Account credited to you during the quarter and in total; |
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(3) |
Cash withdrawals, if any, from the Account during the quarter; and (4) Any transfers during the quarter. |
You also will receive reports containing the financial statements of the Account and certain information about the Accounts investments.
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT
To help the U.S. government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.
What this means for you: When you open an account, we will ask for your name, street address (not a post office box), date of birth, Social Security number and other information that will allow us to identify you, such as your home telephone number and drivers license or certain other identifying documents. Until you provide us with the information needed, we may not be able to open an account or effect any transactions for you. Furthermore, if we are unable to verify your identity, or that of another person authorized to act on your behalf, or if it is believed that potentially criminal activity has been identified, we reserve the right to take such action as deemed appropriate, which may include closing your account.
CHOOSING AMONG INVESTMENT ACCOUNTS
TIAA Real Estate Account § Prospectus 109
choice. You
can also allocate premiums to TIAAs traditional annuity, the CREF variable
investment accounts, the TIAA Access variable annuity accounts, other TIAA
annuities and separate accounts offered from time to time (if available under
the terms of your employers plan) and, in some cases, certain funds if the
account or fund is available under your employers plan.
You can change your allocation choices for future premiums by:
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writing to our office at P.O. Box 1259, Charlotte, N.C. 28201; |
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using the TIAA-CREF Web Centers account access feature at www.tiaa-cref.org; or |
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calling our Automated Telephone Service (24 hours a day) at 800 842-2252. |
THE RIGHT TO CANCEL YOUR CONTRACT
Generally,
you may cancel any RA, SRA, GSRA, Classic IRA, Roth IRA, ATRA or Keogh contract
in accordance with the contracts Right to Examine provision (unless we have
begun making annuity payments from it) and subject to the time period regulated
by the state in which the contract is issued. Although the contract terms and
state law provisions differ, you will generally have between 10 and 60 days to
exercise this cancellation right. To cancel a contract, mail or deliver the
contract with your cancellation instructions (or signed Notice of Cancellation
when such has been provided with your contract) to our home office. Well
cancel the contract, then send either the current accumulation or the premium,
depending on the state in which your contract was issued, to whomever originally
submitted the premiums. Unless we are returning premiums paid as required by
state law, you will bear the investment risk during this period.
DETERMINING THE VALUE OF YOUR INTEREST IN THE ACCOUNT ACCUMULATION UNITS
Each payment to the Real Estate Account buys a number of accumulation units. Similarly, any withdrawal from the Account results in the redemption of a number of accumulation units. The price you pay for accumulation units, and the price you receive for accumulation units when you redeem accumulation units, is the value of the accumulation units calculated for the business day on which we receive your purchase, redemption or transfer request in good order (unless you ask for a later date for a redemption or transfer). This date is called the effective date. Therefore, if we receive your purchase, redemption or transfer request in good order before the NYSE closes, that business day will be considered the effective date of your order. If we receive your request in good order after the NYSE closes, the next business day will be considered the effective date of your order.
Payments and orders to redeem accumulation units (or adjustments thereto) may be processed after the effective date. Processed means when amounts are credited or debited to you in the Account. In the event there are market fluctuations between the effective date and the processing date and the price of accumulation units on the processing date is higher or lower than your price on
110 Prospectus § TIAA Real Estate Account
the effective date, that difference will be paid or retained by Services, the Accounts distributor. This amount, which may be positive or negative, together with similar amounts paid or retained by Services in connection with transactions involving other investment products offered under pension plans administered by TIAA or its affiliates and the amount of interest, if any, paid by Services to participants in connection with certain delayed payments, is apportioned to the Account pursuant to an agreement with Services, under which the Account reimburses Services for the services it has provided to the Account.
The accumulation unit value reflects the Accounts investment experience (i.e., the real estate net operating income accrued, as well as dividends, interest and other income accrued), realized and unrealized capital gains and losses, as well as Account expense charges.
Calculating Accumulation Unit Values: We calculate the Accounts accumulation unit value at the end of each valuation day. To do that, we multiply the previous days value by the net investment factor for the Account. The net investment factor is calculated as A divided by B, where A and B are defined as:
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The value of the Accounts net assets at the end of the current valuation period, less premiums received during the current valuation period. |
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The value of the Accounts net assets at the end of the previous valuation period, plus the net effect of transactions made at the start of the current valuation period. |
HOW TO TRANSFER AND WITHDRAW YOUR MONEY
Generally, TIAA allows you to move your money to or from the Real Estate Account in the following ways:
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from the Real Estate Account to a CREF investment account, a TIAA Access variable account (if available) or TIAAs traditional annuity; |
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to the Real Estate Account from a CREF investment account, a TIAA Access variable account (if available) or TIAAs traditional annuity (transfers from TIAAs traditional annuity under RA, GRA or Retirement Choice contracts are subject to restrictions); |
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from the Real Estate Account to a fund (including TIAA-CREF affiliated funds), if available under your plan; |
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to the Real Estate Account from a TIAA-CREF affiliated fund, if available under your plan; |
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depending on the terms of your plan, contracts and governing instruments, to the Real Estate Account from other TIAA annuity products and separate accounts, and/or from the Real Estate Account to other TIAA annuity products and separate accounts; |
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from the Real Estate Account to investment options offered by other companies, if available under your plan; |
TIAA Real Estate Account § Prospectus 111
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to the Real Estate Account from other companies/plans; |
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by withdrawing cash; and |
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by setting up a program of automatic withdrawals or transfers. |
For
more information regarding the transfer policies of CREF, TIAA Access, TIAAs
traditional annuity or another investment option listed above, please see the
respective contract, prospectus or other governing instrument. These options
may be limited by the terms of your employers plan, by current tax law, or by
the terms of your contract, as set forth below.
Currently,
transfers from the Real Estate Account to any TIAA annuity offered by your
employers plan, to one of the CREF accounts or to funds offered under the
terms of your plan must generally be at least $1,000 (except for systematic
transfers, which must be at least $100) or your entire accumulation, if less.
In the future, we may eliminate these minimum transaction levels. Cash
withdrawals from the Real Estate Account and transfers to other companies are
not subject to a minimum amount. Transfers and cash withdrawals are currently
free. TIAA can place restrictions on transfers or charge fees for transfers
and/or withdrawals in the future.
As indicated, transfers and cash withdrawals are effective at the end of the business day we receive your request and all required documentation in good order. You can also choose to have transfers and withdrawals take effect at the close of any future valuation day. For any transfers to TIAAs traditional annuity, the crediting rate will be the rate in effect at the close of business of the first day that you participate in TIAAs traditional annuity, which is the next business day after the effective date of the transfer.
To
request a transfer or to withdraw cash, you may:
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write to TIAAs office at P.O. Box 1259, Charlotte, N.C. 28201; |
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call us at 800 842-2252; or |
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for internal transfers, using the TIAA-CREF Web Centers account access feature at www.tiaa-cref.org |
If you are married, and all or part of your accumulation is attributable to contributions made under
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an employer plan subject to ERISA; or |
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an employer plan that provides for spousal rights to benefits, then |
only
to the extent required by the IRC or ERISA or the terms of your employer plan,
your rights to choose certain benefits are restricted by the rights of your
spouse to benefits.
You may be required to complete and return certain forms to effect these transactions. We can limit, suspend or terminate your ability to transact by telephone, over the Internet, or by fax at any time, for any reason. Note that, currently, all requests to make lump-sum transfers out of the Real Estate Account to another investment option (whether or not affiliated with TIAA-CREF) may not be made by means of TIAA-CREFs internet website.
112 Prospectus § TIAA Real Estate Account
Before
you transfer or withdraw cash, please make sure that you consult the terms of
your employers plan, as it may contain additional restrictions. In addition,
please make sure you understand the possible federal and other income tax
consequences. See Taxes on page 125.
TRANSFERS TO AND FROM OTHER TIAA-CREF ACCOUNTS AND FUNDS
Transfers
from the Real Estate Account. Once every calendar
quarter you can transfer some or all of your accumulation in the Real Estate
Account to TIAAs traditional annuity, to another TIAA annuity offered by your
employers plan, to one of the CREF accounts, to a TIAA Access variable annuity
account or to funds (which may include TIAA-CREF affiliated funds) offered
under the terms of your employers plan. Transfers to TIAAs traditional
annuity or other TIAA annuities or accounts, a CREF account or to certain other
options may be restricted by your employers plan, current tax law or by the
terms of your contract. In addition, there are important exceptions to this
once per calendar quarter limitation, as outlined below under Market Timing /
Excessive Trading Policy.
Transfers to the Real Estate Account. Currently, you can also transfer some or all of your accumulation in TIAAs traditional annuity, in your CREF accounts, TIAA Access variable annuity accounts or in the funds or TIAA annuities offered under the terms of your plan to the Real Estate Account, if your employers plan offers the Account; subject to the terms of the plan, current tax law and the terms of your contract. Transfers from TIAAs traditional annuity to the Real Estate Account under RA, GRA or Retirement Choice contracts can only be effected over a period of time (up to 10 annual installments) and may be subject to other limitations, as specified in your contract. Amounts held under an ATRA contract cannot be transferred to or from any retirement plan contract.
Currently,
these transfers must generally be at least $1,000 (except for systematic
transfers, which must be at least $100) or your entire accumulation, if less.
Because excessive transfer activity can hurt Account performance and other
participants, subject to applicable state law and the terms of your contract,
we may seek to further limit how often, or in what amounts, you may make
transfers, or we may otherwise modify the transfer privilege generally. See
Restrictions on Premiums and Transfers to the Account below.
TRANSFERS TO OTHER COMPANIES
Generally
you may transfer funds from the Real Estate Account to a company other than
TIAA or CREF, subject to certain tax restrictions. This right may be limited by
your employers plan or the terms of your contract. If your employer
participates in our special transfer services program, we can make automatic
monthly transfers from your RA or GRA contract to another company. Roth amounts
in a 403(b) or 401(a) plan can only be rolled over to another Roth account
under such plan or to a Roth IRA, as permitted by applicable law and the terms
of the plans.
TIAA Real Estate Account § Prospectus 113
Under the Retirement Choice and Retirement Choice Plus contracts, your employer could transfer monies from the Account and apply it to another account or investment option, subject to the terms of your plan, and without your consent.
TRANSFERS FROM OTHER COMPANIES/PLANS
Subject to your employers plan and federal tax law, you can usually transfer or roll over money from another 403(b), 401(a)/403(a) or governmental 457(b) retirement plan to your qualified TIAA contract. You may also roll over before-tax amounts in a Classic IRA to 403(b) plans, 401(a)/403(a) plans or eligible governmental 457(b) plans, provided such employer plans agree to accept the rollover. Similarly, subject to your employers plan, you may be able to roll over funds from 401(a), 403(a), 403(b) and governmental 457(b) plans to a TIAA Classic IRA or, subject to applicable income limits, from an IRA containing funds originally contributed to such plans, to either a TIAA Classic or Roth IRA, subject to rules applicable to Roth IRA conversion. Roth amounts in a 403(b) or 401(a) plan can only be rolled over to another Roth account under such plan or to a Roth IRA, as permitted by applicable law and the terms of the plans. Funds in a private 457(b) plan can be transferred to another private 457(b) plan only. Accumulations in private 457(b) plans may not be rolled over to a qualified plan (e.g., a 401(a) plan), a 403(b) plan, a governmental 457(b) plan or an IRA.
WITHDRAWING CASH
You
may withdraw cash from your SRA, GSRA, IRA, ATRA or Keogh Real Estate Account
accumulation at any time during the accumulation period, provided federal tax
law permits it (see below) and to the extent permitted under the terms of your
employers plan. Normally, you cant withdraw money from a contract if youve
already applied that money to begin receiving lifetime annuity income. Current
federal tax law restricts your ability to make cash withdrawals from your
accumulation under most voluntary salary reduction agreements.
Withdrawals
are generally available only if you reach age 59½, leave your job, become disabled, die, satisfy
requirements related to qualified distributions or if your employer terminates
its retirement plan. If your employers plan permits, you may also be able to
withdraw money if you encounter hardship, as defined by the IRS, but hardship
withdrawals can be from contributions only, and not investment earnings. You
may be subject to a 10% penalty tax if you make a withdrawal before you reach
age 59½, unless an exception applies to your situation.
Under current federal tax law, you are not permitted to withdraw from 457(b) plans earlier than the calendar year in which you reach age 70½, leave your job or are faced with an unforeseeable emergency (as defined by law). There are generally no early withdrawal tax penalties if you withdraw under any of these circumstances (i.e., no 10% tax on distributions prior to age 59½). If youre married, you may be required by law or your employers plan to show us advance written consent from your spouse before TIAA makes certain transactions on your behalf.
114 Prospectus § TIAA Real Estate Account
Special rules and restrictions apply to Classic and Roth IRAs.
If
you request a withdrawal, we will send the proceeds by check to the address of
record, or by electronic funds transfer to the bank account on file. A letter
of instruction with a bank signature guarantee is required if the withdrawal is
sent to a bank account not on file, to an address other than the address of
record, or to an address of record that has been changed within the last 14 calendar
days. You may obtain a signature guarantee from some commercial or savings
banks, credit unions, trust companies, or member firms of a U.S. stock
exchange. A notary public cannot provide a signature guarantee. Please contact
us for further information. We reserve the right to require a signature
guarantee on any redemption.
SYSTEMATIC WITHDRAWALS AND TRANSFERS
If
your employers plan allows, you can set up a program to make cash withdrawals
or transfers automatically by specifying that we withdraw from your Real Estate
Account accumulation, or transfer to or from the Real Estate Account, any fixed
number of accumulation units, dollar amount, or percentage of accumulation
until you tell us to stop or until your accumulation is exhausted. Currently,
the program must be set up so that at least $100 is automatically transferred
or withdrawn at a time. Further, a systematic plan of this type may allow
pre-specified transfers or withdrawals to be made more often than quarterly,
depending on the terms of your employers plan.
WITHDRAWALS TO PAY ADVISORY FEES
You
may authorize a series of systematic withdrawals to pay the fees of a financial
advisor. Such systematic withdrawals are subject to all provisions applicable
to systematic withdrawals, except as otherwise described in this section. One
series of systematic withdrawals to pay financial advisor fees may be in effect
at the same time that one other series of systematic withdrawals is also in
effect. Systematic withdrawals to pay financial advisor fees must be scheduled
to be made quarterly only, on the first day of each calendar quarter. The
amount withdrawn from each investment account must be specified in dollars or
percentage of accumulation, and will be in proportion to the accumulations in
each account at the end of the business day prior to the withdrawal. The
financial advisor may request that we stop making withdrawals. We reserve the
right to determine the eligibility of financial advisors for this type of fee reimbursement.
Before you set up this program, make sure you understand the possible tax
consequences of these withdrawals. See the discussion under Taxes below.
RESTRICTIONS ON PREMIUMS AND TRANSFERS TO THE
ACCOUNT
From time to time we may stop accepting premiums for and/or transfers into the Account. We might do so if, for example, we cant find enough appropriate real estate related investment opportunities at a particular time. Whenever reasonably possible, we will notify you before we decide to restrict premiums and/or transfers. However, because we may need to respond quickly to changing market
TIAA Real Estate Account § Prospectus 115
conditions or to the liquidity needs and demands of the Account, we reserve the right (subject to the terms of some contracts) to stop accepting premiums and/or transfers at any time without prior notice.
Effective
March 31, 2011 (or such later date as indicated in the contract or contract
endorsement), individual participants in certain jurisdictions will be limited
from making internal transfers into their Account accumulation if, after giving
effect to such transfer, the total value of such participants Account
accumulation (under all contracts issued to such participant) would exceed
$150,000. This limitation currently impacts those participants with contracts
issued in a jurisdiction that has approved the limitation. When and to the
extent a jurisdiction approves this limitation, we will mail participants
appropriate contracts or contract endorsements detailing the limitation and the
effective date thereof. These contracts or endorsements will contain important
details with respect to this limitation.
Under this limitation, an internal transfer means the movement (or attempted movement) of accumulations from any of the following to the Account:
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a TIAA Traditional annuity accumulation, |
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a Real Estate Account accumulation (from one contract to another), |
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a companion CREF certificate, |
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other TIAA separate account accumulations, and |
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any other funding vehicle accumulation which is administered by TIAA or CREF on the same record-keeping system as the contract. |
The following transfers are currently not subject to this limitation:
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systematic transfers, |
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automatic rebalancing activity, |
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any transaction arising from a TIAA-sponsored advice product or service, and |
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Transfer Payout Annuity payments directed to the Account. |
This limitation does not apply to most types of premium contributions and certain group contracts recordkept on non-TIAA platforms. Minimum Distribution Option (MDO) contracts will be subject to this limitation, but the limitation does not apply to other annuity pay-out contracts.
A
transfer which cannot be applied pursuant to this limitation, along with any
other attempted movements of funds submitted as part of a noncompliant transfer
request into the Account, will be rejected in its entirety and therefore the
funds that were to be transferred will remain in the investment option from
which the transfer was to be made. The Account accumulation unit values used in
applying this provision will be those calculated as of the valuation day
preceding the day on which the proposed transfer is to be effective. A
participant will not be required to reduce his or her accumulation to a level
at or below $150,000 if the total value of the participants Account
accumulation under all contracts exceeds $150,000 as of March 31, 2011 or such
later date as indicated in the contract or contract endorsement. TIAA reserves
the right in the future to modify the nature
116 Prospectus § TIAA Real Estate Account
of this
limitation and to include categories of transactions associated with services
that may be introduced in the future.
If we decide to stop accepting premiums into the Account, amounts that would otherwise be allocated to the Account will be allocated to the default option designated by your employer instead (or the default option specified on your IRA forms), unless you give us other allocation instructions. We will not transfer these amounts out of the default option designated by your employer when the restriction period is over, unless you request that we do so. However, we will resume allocating premiums to the Account on the date we remove the restrictions.
ADDITIONAL LIMITATIONS
Federal law requires us to obtain, verify and record information that identifies each person who opens an account. Until we receive the information we need, we may not be able to effect transactions for you. Furthermore, if we are unable to verify your identity, or that of another person authorized to act on your behalf, or if we believe that we have identified potentially criminal activity, we reserve the right to take such action as we deem appropriate, which may include closing your account.
MARKET TIMING / EXCESSIVE TRADING POLICY
There
are participants who may try to profit from making transactions back and forth
among the CREF accounts, the Real Estate Account, the TIAA Access variable
accounts and the funds or other investment options available under the terms of
your plan in an effort to time the market or for other reasons. As money is
shifted in and out of these accounts, the accounts or funds may incur
transaction costs, including, among other things, expenses for buying and
selling securities. These costs are borne by all participants, including
long-term investors who do not generate these costs. In addition, excessive
trading can interfere with efficient portfolio management and cause dilution if
traders are able to take advantage of pricing inefficiencies. Consequently, the
Account is not appropriate for market timing or frequent trading and you should
not invest in the Account if you want to engage in such activity.
To discourage this activity, transfers of accumulations from the Real Estate Account to a CREF or TIAA account, or another investment option, are limited to once every calendar quarter. A few limited exceptions to this once per calendar quarter limitation apply, including:
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systematic transfers out of the Real Estate Account (as described on page 115 in Systematic Withdrawals and Transfers), |
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annual portfolio rebalancing activities, |
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plan or plan-sponsor initiated transactions, including transfers and rollovers made to external carriers, |
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participants enrolled in TIAAs qualified managed account for retirement plan assets, |
TIAA Real Estate Account § Prospectus 117
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single-sum distributions where funds are moved from one TIAA annuity contract or certificate to another, as well as those made directly to a participant, |
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asset allocation programs and similar programs approved by TIAAs management, |
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death and hardship withdrawals or withdrawals made pursuant to a quali-fied domestic relations order (QDRO), and |
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certain transactions made within a retirement or employee benefit plan, such as contributions, mandatory (or minimum) distributions and loans. |
TIAA reserves the right to reject any purchase or exchange request with respect to the Account, including when it is believed that a request would be disruptive to the Accounts efficient portfolio management. TIAA also may suspend or terminate your ability to transact in the Account by telephone, fax or over the Internet for any reason, including the prevention of excessive trading. A purchase or exchange request could be rejected or electronic trading privileges could be suspended because of the timing or amount of the investment or because of a history of excessive trading by the participant. Because TIAA has discretion in applying this policy, it is possible that similar transaction activity could be handled differently because of the surrounding circumstances. Notwithstanding such discretion, TIAA seeks to apply its excessive trading policies and procedures uniformly to all Account participants. As circumstances warrant, TIAA may request transaction data from intermediaries from time to time to verify whether the Accounts policies are being followed and/or to instruct intermediaries to take action against participants who have violated the Accounts policies. TIAA has the right to modify these policies and procedures at any time without advance notice.
The Account is not appropriate for excessive trading. You should not invest in the Account if you want to engage in excessive trading or market timing activity.
Participants seeking to engage in excessive trading may deploy a variety of strategies to avoid detection, and, despite TIAAs efforts to discourage excessive trading, there is no guarantee that TIAA or its agents will be able to identify all such participants or curtail their trading practices.
If you invest in the Account through an intermediary, including through a retirement or employee benefit plan, you may be subject to additional market timing or excessive trading policies implemented by the intermediary or plan. Please contact your intermediary or plan sponsor for more details.
THE ANNUITY PERIOD IN GENERAL
You can receive an income stream from all or part of your Real Estate Account accumulation. Unless you opt for a lifetime annuity, generally you must be at least age 59½ to begin receiving annuity income payments from your annuity contract free of a 10 percent early distribution penalty tax. Your employers plan may also
118 Prospectus § TIAA Real Estate Account
restrict when
you can begin income payments. Under the minimum distribution rules of the
Internal Revenue Code, you generally must begin receiving some payments from
your contract shortly after you reach the later of age 70½ or you retire. Please consult your tax advisor. For
more information, see Taxes Minimum Distribution Requirements, on page 127.
Also, you cant begin a one-life annuity after you reach age 90, nor may you
begin a two-life annuity after either you or your annuity partner reach age 90.
Your income payments may be paid out from the Real Estate Account through a variety of income options. You can pick a different income option for different portions of your accumulation, but once youve started payments you usually cant change your income option or annuity partner for that payment stream. Usually income payments are monthly. You can choose quarterly, semi-annual, and annual payments as well. (TIAA has the right to not make payments at any interval that would cause the initial payment to be less than $100.) Well send your payments by mail to your home address or, on your request, by mail or electronic funds transfer to your bank.
Your initial income payments are based on the value of your accumulation on the last valuation day before the annuity starting date. Your payments change after the initial payment based on the Accounts investment experience and the income change method you choose.
There
are two income change methods for annuity payments: annual and monthly. Under
the annual income change method, payments from the Account change each May 1,
based on the net investment results during the prior year (from the day
following the last valuation day in March of the prior year through the last
valuation day in the March of the current year). Under the monthly income
change method, payments from the Account change every month, based on the net
investment results during the previous month. For the formulas used to calculate
the amount of annuity payments, see page 122. The total value of your annuity
payments may be more or less than your total premiums. TIAA reserves the right
to modify or stop offering the annual or monthly change methods at any time.
ANNUITY STARTING DATE
Ordinarily,
annuity payments begin on the date you designate as your annuity starting date,
provided we have received all documentation necessary for the income option
youve picked. If somethings missing, well defer your annuity starting date
until we receive the missing items and/or information. You may designate any
future date for your annuitization request, in accordance with our procedures
and as long as it is one on which we process annuitizations. Your first annuity
check may be delayed while we process your choice of income options and
calculate the amount of your initial payment. Any premiums received within 70
days after payments begin may be used to provide additional annuity income.
Premiums received after 70 days will remain in your accumulating annuity
contract until you have given us further instructions. Ordinarily, your first
annuity payment can be made on any business day between the first and twentieth
of any month.
TIAA Real Estate Account § Prospectus 119
ANNUITY INCOME OPTIONS
Both the number of annuity units you purchase and the amount of your income payments will depend on which income option you pick. Your employers plan, tax law and ERISA may limit which income options you can use to receive income from an RA or GRA, GSRA, Retirement Choice, Retirement Choice Plus or Keogh contract. Ordinarily youll choose your income options shortly before you want payments to begin, but you can make or change your choice any time before your annuity starting date. After your annuity starting date, you cannot change your income option.
All Real Estate Account income options provide variable payments, and the amount of income you receive depends in part on the investment experience of the Account. The current options are:
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One-Life Annuity with or without Guaranteed Period: Pays income as long as you live. If you opt for a guaranteed period (10, 15 or 20 years) and you die before its over, income payments will continue to your beneficiary until the end of the period. If you dont opt for a guaranteed period, all payments end at your death so that its possible for you to receive only one payment if you die less than a month after payments start. |
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Annuity for a Fixed Period: Pays income for any period you choose from 5 to 30 years (2 to 30 years for RAs, SRAs and GRAs). This option is not available under all contracts. |
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Two-Life Annuities: Pays income to you as long as you live, then continues at either the same or a reduced level for the life of your annuity partner. There are four types of two-life annuity options, all available with or without a guaranteed period Full Benefit to Survivor, Two-Thirds Benefit to Survivor, 75% Benefit to Annuity Partner and a Half-Benefit to Annuity Partner. Under the Two-Thirds Benefit to Survivor option, payments to you will be reduced upon the death of your annuity partner. |
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Minimum Distribution Option (MDO) Annuity: Generally available only if you must begin annuity payments under the Internal Revenue Code minimum distribution requirements. (Some employer plans allow you to elect this option earlier contact TIAA for more information.) The option pays an amount designed to fulfill the distribution requirements under federal tax law. Please consult your tax advisor for more information. |
You
must apply your entire accumulation under a contract if you want to use the MDO
annuity. It is possible that income under the MDO annuity will cease during
your lifetime. Prior to age 90, and subject to applicable plan and legal
restrictions, you can elect a distribution option other than the MDO option and
apply any remaining part of an accumulation applied to the MDO annuity to any
other income option for which youre eligible. Using an MDO wont affect your
right to take a cash withdrawal of any accumulation not yet distributed. This
pay-out annuity is not available under Retirement Choice or Retirement Choice
Plus contracts, and is not available for IRA contracts issued on or after
October 11,
120 Prospectus § TIAA Real Estate Account
If you havent picked an income option when the annuity starting date arrives for your contract, TIAA usually will assume you want the one-life annuity with 10-year guaranteed period if youre unmarried, subject to the terms of your plan, paid from TIAAs traditional annuity. If youre married, we may assume for you a survivor annuity with half-benefit to annuity partner with a 10-Year guaranteed period, with your spouse as your annuity partner, paid from TIAAs traditional annuity. If you havent picked an income option when the annuity starting date arrives for your IRA, we may assume you want the minimum distribution option annuity.
TRANSFERS DURING THE ANNUITY PERIOD
After you begin receiving annuity income, you can transfer all or part of the future annuity income payable once each calendar quarter (i) from the Real Estate Account into a comparable annuity payable from a CREF or TIAA account or TIAAs traditional annuity, or (ii) from a CREF account into a comparable annuity payable from the Real Estate Account. Comparable annuities are those which are payable under the same income option, and have the same first and second annuitant, and remaining guaranteed period.
Well process your transfer on the business day we receive your request in good order. You can also choose to have a transfer take effect at the close of any future business day. Transfers under the annual income payment method will affect your annuity payments beginning on the May 1 following the March 31 which is on or after the effective date of the transfer. Transfers under the monthly income payment method and all transfers into TIAAs traditional annuity will affect your annuity payments beginning with the first payment due after the monthly
TIAA Real Estate Account § Prospectus 121
ANNUITY PAYMENTS
The amount of annuity payments we pay you or your beneficiary (annuitant) will depend upon the number and value of the annuity units payable. The number of annuity units is first determined on the day before the annuity starting date. The amount of the annuity payments will change according to the income change method chosen.
Under the monthly income change method, the value of an annuity unit for payments is determined on the payment valuation day, which is the 20th day of the month preceding the payment due date or, if the 20th is not a business day, the preceding business day. The monthly changes in the value of an annuity unit reflect the net investment experience of the Real Estate Account. The formulas for calculating the number and value of annuity units payable are described below.
Calculating the Number of Annuity Units Payable: When a participant or a beneficiary converts the value of all or a portion of his or her accumulation into an income-paying contract, the number of annuity units payable from the Real Estate Account under an income change method is determined by dividing the value of the Account accumulation to be applied to provide the annuity payments by the product of the annuity unit value for that income change method and an annuity factor. The annuity factor as of the annuity starting date is the value of an annuity in the amount of $1.00 per month beginning on the first day such annuity units are payable, and continuing for as long as such annuity units are payable.
The annuity factor will reflect interest assumed at the effective annual rate of 4 percent, and the mortality assumptions for the person(s) on whose life (lives) the annuity payments will be based. Mortality assumptions will be based on the then-current settlement mortality schedules for this Account. Annuitants bear no mortality risk under their contracts actual mortality experience will not reduce annuity payments after they have started. TIAA may change the mortality assumptions used to determine the number of annuity units payable for any future accumulations converted to provide annuity payments.
The number of annuity units payable under an income change method under your contract will be reduced by the number of annuity units you transfer out of that income change method under your contract. The number of annuity units
122 Prospectus § TIAA Real Estate Account
payable will be increased by any internal transfers you make to that income change method under your contract.
For participants under the monthly income change method, the value of the annuity unit for payments changes on the payment valuation day of each month for the payment due on the first of the following month.
Further, certain variable annuity payouts might not be available if issuing the payout annuity would violate state law.
TIAA reserves the right, subject to approval by the Board of Trustees, to modify the manner in which the number and/or value of annuity units is calculated in the future. No such modification will reduce any participants benefit once the participants annuitization period has commenced.
AVAILABILITY; CHOOSING BENEFICIARIES
Subject to the terms of your employers plan, TIAA may pay death benefits if you or your annuity partner dies. When you purchase your annuity contract, you name one or more beneficiaries to receive the death benefit if you die. You can change your beneficiaries anytime before you die, and, unless you instruct otherwise, your annuity partner can do the same after your death.
YOUR SPOUSES RIGHTS
Your choice of beneficiary for death benefits may, in some cases, be subject to the consent of your spouse. Similarly, if you are married at the time of your death, federal law may require a portion of the death benefit be paid to your spouse even
TIAA Real Estate Account § Prospectus 123
if you have named someone else as beneficiary. If you die without having named any beneficiary, any portion of your death benefit not payable to your spouse will go to your estate.
AMOUNT OF DEATH BENEFIT
If you die during the accumulation period, the death benefit is the amount of your accumulation. If you and your annuity partner die during the annuity period while payments are still due under a fixed-period annuity or for the remainder of a guaranteed period, the death benefit is the present value, based on interest at the effective annual rate of 4%, of the unit annuity payments due for the remainder of the period.
PAYMENT OF DEATH BENEFIT
To authorize payment and pay a death benefit, we must have received all necessary forms and documentation, including proof of death and the selection of the method of payment.
METHODS OF PAYMENT OF DEATH BENEFITS
Payments During the Accumulation Period: Currently, the available methods of payment for death benefits from funds in the accumulation period are:
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Single-Sum Payment, in which the entire death benefit is paid to your beneficiary at once; |
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One-Life Annuity with or without Guaranteed Period, in which the death benefit is paid monthly for the life of the beneficiary or through the guaranteed period; |
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Annuity for a Fixed Period of 5 to 30 years (not available under Retirement Choice or Retirement Choice Plus), in which the death benefit is paid for a fixed period (This option is not available under all contracts); |
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Accumulation-Unit Deposit Option, which pays a lump sum at the end of a fixed period, ordinarily two to five years, during which period the |
124 Prospectus § TIAA Real Estate Account
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accumulation units deposited participate in the Accounts investment experience (generally the death benefit value must be at least $5,000); (This option is not available under all contracts) and |
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Minimum Distribution Option (also called the TIAA-CREF Savings & Investment Plan), which automatically pays income according to the Internal Revenue Codes minimum distribution requirements. This option is not available under Retirement Choice or Retirement Choice Plus contracts, and is not available for IRA contracts issued on or after October 11, 2010. It operates in much the same way as the MDO annuity income option. Its possible, under this method, that your beneficiary wont receive income for life. |
Payments During the Annuity Period: If you and your annuity partner die during the annuity period, your beneficiary can choose to receive any remaining guaranteed periodic payments due under your contract. Alternatively, your beneficiary can choose to receive the commuted value of those payments in a single sum unless you have indicated otherwise. The amount of the commuted value will be different than the total of the periodic payments that would otherwise be paid.
Ordinarily, death benefits are subject to federal estate tax. Generally, if taken as a lump sum, death benefits would be taxed like complete withdrawals. If taken as annuity benefits, death benefits would be taxed like annuity payments. For more information on death benefits, see the discussion under Taxes below, or for further detail, contact TIAA.
This section offers general information concerning federal taxes. It doesnt cover every situation. Tax treatment varies depending on the circumstances, and state and local taxes may also be involved. For complete information on your personal tax situation, check with a qualified tax advisor.
HOW THE REAL ESTATE ACCOUNT IS TREATED FOR TAX PURPOSES
The Account is not a separate taxpayer for purposes of the Internal Revenue Code its earnings are taxed as part of TIAAs operations. Although TIAA is not expected to owe any federal income taxes on the Accounts earnings, if TIAA does incur taxes attributable to the Account, it may make a corresponding charge against the Account.
TIAA Real Estate Account § Prospectus 125
TAXES IN GENERAL
EARLY DISTRIBUTIONS
If you want to withdraw funds or begin receiving income from any 401(a), 403(a), or 403(b) retirement plan or an IRA before you reach age 59½, you may have to pay a 10 percent early distribution tax on the taxable amount. Distributions from a Roth IRA generally are not taxed, except that, once aggregate distributions exceed contributions to the Roth IRA, income tax and a 10% penalty tax may apply to distributions made (1) before age 59½ (subject to certain exceptions) or (2) during the five taxable years starting with the year in which the first contribution is made to any Roth IRA. A 10 percent penalty tax may apply to amounts attributable to a conversion from an IRA if they are distributed during the five taxable years beginning with the year in which the conversion was made. You wont have to pay this tax in certain circumstances. Early distributions from 457(b) plans are not subject to a 10% penalty tax unless, in the case of a governmental 457(b) plan, the distribution includes amounts rolled over to the plan from an IRA, 401(a)/403(a), or 403(b) plan. Consult your tax advisor for more information.
126 Prospectus § TIAA Real Estate Account
MINIMUM DISTRIBUTION REQUIREMENTS
WITHHOLDING ON DISTRIBUTIONS
If we pay an eligible rollover distribution directly to you, federal law requires us to withhold 20 percent from the taxable portion. On the other hand, if we roll over such a distribution directly to an IRA or employer plan, we do not withhold any federal income tax. The 20 percent withholding also does not apply to certain types of distributions that are not considered eligible rollovers such as payments from IRAs, hardship withdrawals, lifetime annuity payments, substantially equal periodic payments over your life expectancy or over 10 or more years, or minimum distribution payments.
For the taxable portion of non-eligible rollover distributions, we will usually withhold federal income taxes unless you tell us not to and you are eligible to avoid withholding. However, if you tell us not to withhold but we dont have your taxpayer identification number on file, we still are required to deduct taxes. These rules also apply to distributions from governmental 457(b) plans. In general, all amounts received under a private 457(b) plan are taxable and are subject to federal income tax withholding as wages. Nonresident aliens who pay U.S. taxes are subject to different withholding rules.
SPECIAL RULES FOR AFTER-TAX RETIREMENT ANNUITIES
If you paid premiums directly to an RA and the premiums are not subject to your employers retirement plan, or if you have been issued an ATRA contract, the following general discussion describes our understanding of current federal income tax law that applies to these accumulations. This discussion does not apply to premiums paid on your behalf under the terms of your employers retirement plan. It also does not cover every situation and does not address all possible circumstances.
In General. These annuities are generally not taxed until distributions occur. When distributions occur, they are taxed as follows:
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Withdrawals, including withdrawals of the entire accumulation under the contract, are generally taxed as ordinary income to the extent that the |
TIAA Real Estate Account § Prospectus 127
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contracts value is more than your investment in the contract (i.e., what you have paid into it). |
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Annuity payments are generally treated in part as taxable ordinary income and in part as non-taxable recovery of your investment in the contract until you recover all of your investment in the contract. After that, annuity payments are taxable in full as ordinary income. |
Required Distributions. In general, if you die after you start your annuity payments but before the entire interest in the annuity contract has been distributed, the remaining portion must be distributed at least as quickly as under the method in effect on the date of your death. If you die before your annuity payments begin, the entire interest in your annuity contract generally must be distributed within five years after your death, or be used to provide payments that begin within one year of your death and that will be made for the life of your designated beneficiary or for a period not extending beyond the life expectancy of your designated beneficiary. The designated beneficiary refers to a natural person you designate and to whom ownership of the contract passes because of your death. However, if the designated beneficiary is your surviving spouse, your surviving spouse can continue the annuity contract as the new owner.
Death Benefit Proceeds. Death benefit proceeds are taxed like withdrawals of the entire accumulation in the contract if distributed in a single sum and are taxed like annuity payments if distributed as annuity payments. Your beneficiary may be required to take death benefit proceeds within a certain time period.
Penalty Tax on Certain Distributions. You may have to pay a penalty tax (10 percent of the amount treated as taxable income) on distributions you take prior to age 59½. There are some exceptions to this rule, however. You should consult a tax advisor for information about those exceptions.
Withholding. Annuity distributions are generally subject to federal income tax withholding but most recipients can usually choose not to have the tax withheld.
Certain Designations or Exchanges. Designating an annuitant, payee or other beneficiary, or exchanging a contract may have tax consequences that should be discussed with a tax advisor before you engage in any of these transactions.
Multiple Contracts. All non-qualified deferred annuity contracts issued by us and certain of our affiliates to the same owner during a calendar year must generally be treated as a single contract in determining when and how much income is taxable and how much income is subject to the 10 percent penalty tax (see above).
Diversification Requirements. The investments of the Real Estate Account must be adequately diversified in order for the ATRA Contracts to be treated as annuity contracts for Federal income tax purposes. It is intended that Real Estate Account will satisfy these diversification requirements.
Owner Control. In certain circumstances, owners of non-qualified variable annuity contracts have been considered for Federal income tax purposes to be the owners of the assets of the separate account supporting their contracts due to
128 Prospectus § TIAA Real Estate Account
their ability to exercise investment control over those assets. When this is the case, the contract owners have been currently taxed on income and gains attributable to the variable account assets. While we believe that the ATRA Contracts do not give you investment control over assets in the Real Estate Account or any other separate account underlying your ATRA Contract, we reserve the right to modify the ATRA Contracts as necessary to prevent you from being treated as an owner of the assets in the Real Estate Account.
FEDERAL ESTATE TAXES
While no attempt is being made to discuss the Federal estate tax implications of the Contract, you should keep in mind that the value of an annuity contract owned by a decedent and payable to a beneficiary by virtue of surviving the decedent is included in the decedents gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning advisor for more information.
GENERATION-SKIPPING TRANSFER TAX
Under certain circumstances, the Internal Revenue Code may impose a generation skipping transfer tax when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner. Regulations issued under the Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS.
RESIDENTS OF PUERTO RICO
The IRS has announced that income from an annuity received by residents of Puerto Rico is U.S.-source income that is generally subject to United States federal income tax.
ANNUITY PURCHASES BY NONRESIDENT ALIENS
The discussion above provides general information regarding U.S. federal income tax consequences to annuity purchasers that are U.S. citizens or residents. Purchasers that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchasers country of citizenship or residence. Prospective purchasers who are nonresident aliens are advised to consult with a qualified tax adviser regarding U.S., state, and foreign taxation with respect to an annuity contract purchase.
TIAA Real Estate Account § Prospectus 129
SPECIAL RULES FOR WITHDRAWALS TO PAY ADVISORY FEES
If you have arranged for us to pay advisory fees to your financial advisor from your accumulations, those partial withdrawals generally will not be treated as taxable distributions as long as:
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the payment is for expenses that are ordinary and necessary; |
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the payment is made from a Section 401 or 403 retirement plan or an IRA; |
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your financial advisors payment is only made from the accumulations in your retirement plan or IRA, as applicable, and not directly by you or anyone else, under the agreement with your financial advisor; and |
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once advisory fees begin to be paid from your retirement plan or IRA, as applicable, you continue to pay those fees solely from your plan or IRA, as applicable, and not from any other source. |
However, withdrawals to pay advisory fees to your financial advisor from your accumulations under an ATRA contract will be treated as taxable distributions.
FOREIGN TAX CREDIT
The Account may be subject to foreign taxes on investments in other countries, including capital gains tax on any appreciation in value when a real estate investment in a foreign jurisdiction is eventually sold. Any potential tax impact will not be reflected in the valuation of the foreign investment and may not be fully reflected in a tax accrual by the Account. Upon payment of any foreign tax by the Account, TIAA will receive a foreign tax credit, which may be available to reduce its U.S. tax burden. The Account is a segregated asset account of TIAA and incurs no material federal income tax attributable to the investment performance of the Account under the Internal Revenue Code. As a result, the Account will not realize any tax benefit from any foreign tax credit that may be available to TIAA; however, to the extent that TIAA can utilize the foreign tax credit in its consolidated tax return, TIAA will reimburse the Account for that benefit at that time. The extent to which TIAA is able to utilize the credits when the Account incurs a foreign tax will determine the amount and timing of reimbursement from TIAA to the Account for the resulting foreign tax credit. The Accounts unit values may be adversely impacted in the future if a foreign tax is paid, and TIAA is not able to utilize (and therefore does not reimburse the Account for), either immediately or in the future, the foreign tax credit earned as a result of the foreign tax paid by the Account.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of your contract could change by legislation or otherwise. Consult a tax advisor with respect to legislative developments and their effect on your contract.
We have the right to modify the contract in response to legislative changes that could otherwise diminish the favorable tax treatment that annuity contract
130 Prospectus § TIAA Real Estate Account
owners currently receive. We make no guarantee regarding the tax status of any contract and do not intend the above discussion as tax advice.
MAKING CHOICES AND CHANGES
You may have to make certain choices or changes (e.g., changing your income option, making a cash withdrawal) by written notice satisfactory to us and received at our home office or at some other location that we have specifically designated for that purpose. When we receive a notice of a change in beneficiary or other person named to receive payments, well execute the change as of the date it was signed, even if the signer has died in the meantime. We execute all other changes as of the date received.
TELEPHONE AND INTERNET TRANSACTIONS
You can use our Automated Telephone Service (ATS) or the TIAA-CREF Web Centers account access feature to check your account balances, transfer to TIAAs traditional annuity, TIAA Access variable annuity accounts or CREF, and/or allocate future premiums among the accounts and funds available to you through TIAA-CREF. Note that, currently, all requests to make lump-sum transfers out of the Real Estate Account to another investment option (whether or not affiliated with TIAA or CREF) may not be made by means of TIAA-CREFs internet website. You will be asked to enter your Personal Identification Number (PIN) and Social Security number for both systems. (You can establish a PIN by calling us.) Both will lead you through the transaction process and will use reasonable procedures to confirm that instructions given are genuine. If we use such procedures, we are not responsible for incorrect or fraudulent transactions. All transactions made over the ATS and Internet are electronically recorded.
To use the ATS, you need a touch-tone phone. The toll free number for the ATS is 800 842-2252. To use the Internet, go to the account access feature of the TIAA-CREF Web Center at www.tiaa-cref.org. We can suspend or terminate your ability to transact by telephone, over the Internet, or by fax at any time, for any reason.
VOTING RIGHTS
You dont have the right to vote on the management and operation of the Account directly; however, you may send ballots to advise the TIAA Board of Overseers about voting for nominees for the TIAA Board of Trustees.
ELECTRONIC PROSPECTUS
If you received this prospectus electronically and would like a paper copy, please call 877 518-9161 and we will send it to you. Under certain circumstances where we are legally required to deliver a prospectus to you, we cannot send you a prospectus electronically unless youve consented.
TIAA Real Estate Account § Prospectus 131
HOUSEHOLDING
To lower costs and eliminate duplicate documents sent to your home, we may begin mailing only one copy of the Accounts prospectus, prospectus supplements or any other required documents to your household, even if more than one participant lives there. If you would prefer to continue receiving your own copy of any of these documents, you may call us toll-free at 877 518-9161, or write us.
MISCELLANEOUS POLICIES
Amending the Contracts: The contract may be amended by agreement of TIAA and the contractholder without the consent of any other person, provided that such change does not reduce any benefit purchased under the contract up to that time. Any endorsement or amendment of the contract, waiver of any of its provisions, or change in rate schedule will be valid only if in writing and signed by an executive officer of TIAA.
If Youre Married: If youre married, you may be required by law or your employers plan to get advance written consent from your spouse before we make certain transactions for you. If youre married at your annuity starting date, you may also be required by law or your employers plan to choose an income option that provides survivor annuity income to your spouse, unless he or she waives that right in writing. There are limited exceptions to the waiver requirement.
Texas Optional Retirement Program Restrictions: If youre in the Texas Optional Retirement Program, you or your beneficiary can redeem some or all of your accumulation only if you retire, die, or leave your job in the states public institutions of higher education.
Assigning Your Contract: Generally, neither you nor your beneficiaries can assign your ownership of a TIAA retirement contract to anyone else.
Overpayment of Premiums: If your employer mistakenly sends more premiums on your behalf than youre entitled to under your employers retirement plan or the Internal Revenue Code, well refund them to your employer as long as were requested to do so (in writing) before you start receiving annuity income.
Any time theres a question about premium refunds, TIAA will rely on information from your employer. If youve withdrawn or transferred the amounts involved from your accumulation, we wont refund them.
Errors or Omissions: We reserve the right to correct any errors or omissions on any form, report, or statement that we send you.
Payment to an Estate, Guardian, Trustee, etc.: We reserve the right to pay in one sum the commuted value of any benefits due an estate, corporation, partnership, trustee, or other entity not a natural person. Neither TIAA nor the Account will be responsible for the conduct of any executor, trustee, guardian, or other third party to whom payment is made.
Benefits Based on Incorrect Information: If the amounts of benefits provided under a contract were based on information that is incorrect, benefits will be
132 Prospectus § TIAA Real Estate Account
recalculated on the basis of the correct data. If the Account has overpaid or underpaid, appropriate adjustments will be made.
Proof of Survival: We reserve the right to require satisfactory proof that anyone named to receive benefits under a contract is living on the date payment is due. If we have not received this proof after we request it in writing, the Account will have the right to make reduced payments or to withhold payments entirely until such proof is received.
The annuity contracts are offered continuously by Services, which is registered with the SEC as a broker-dealer and a registered investment adviser and is a member of the Financial Industry Regulatory Authority (FINRA). Teachers Personal Investors Services, Inc. (TPIS), also a broker-dealer registered with the SEC and a member of FINRA, may participate in the distribution of the contracts on a limited basis. Services and TPIS are direct or indirect wholly owned subsidiaries of TIAA. Their addresses are at 730 Third Avenue, New York, NY 10017-3206. No commissions are paid for distributing the contracts.
TIAA, the Real Estate Account, and the contracts (including any proposed modification thereto) are subject to regulation by the NYID as well as by the insurance regulatory authorities of certain other states and jurisdictions.
TIAA and the Real Estate Account must file with the NYID both quarterly and annual statements. The Accounts books and assets are subject to review and examination by the NYID at all times, and a full examination into the affairs of the Account is made at least every five years. In addition, a full examination of the Real Estate Account operations is usually conducted periodically by some other states.
All matters involving state law and relating to the contracts, including TIAAs right to issue the contracts, have been passed upon by Jonathan Feigelson, Senior Vice President and General Counsel of TIAA. Dechert LLP has provided legal advice to the Account related to certain matters under the federal securities laws.
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The financial statements as of December 31, 2010 and December 31, 2009 and for each of the three years in the period ended December 31, 2010 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. |
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TIAA Real Estate Account § Prospectus 133
INFORMATION AVAILABLE AT THE SEC
The Account has filed with the SEC a registration statement under the Securities Act of 1933, which contains this prospectus and additional information related to the offering described in this prospectus. The Account also files annual, quarterly, and current reports, along with other information, with the SEC, as required by the Securities Exchange Act of 1934. You may read and copy the full registration statement, and any reports and information filed with the SEC for the Account, at the SECs Public Reference Room at 100 F Street, N.E., Washington, DC 20549. This information can also be obtained through the SECs website on the Internet (www.sec.gov). The public may obtain information on the operation of the SECs Public Reference Room by calling the SEC at 800 SEC-0330.
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FURTHER INFORMATION; REPORTS TO PARTICIPANTS |
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TIAA will mail to each participant in the Real Estate Account periodic reports providing information relating to their accumulations in the Account, including premiums paid, number and value of accumulations, and withdrawals or transfers during the period, as well as such other information as may be required by applicable law or regulations. Further information may be obtained from TIAA at 730 Third Avenue, New York, NY 10017-3206. |
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CUSTOMER COMPLAINTS |
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Customer
complaints may be directed to our Participant Relations Unit, P. O. Box 1259,
Charlotte, NC 28201-1259, telephone 800 842-2252.
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The financial statements of the TIAA Real Estate Account and condensed unaudited statutory-basis financial statements of TIAA follow within this prospectus. The full audited statutory-basis financial statements of TIAA, which are incorporated into this prospectus by reference, are available upon request by calling 877 518-9161.
The financial statements of TIAA should be distinguished from the financial statements of the Account and should be considered only as bearing on the ability of TIAA to meet its obligations under the contracts. They should not be considered as bearing upon the assets held in the Account.
134 Prospectus § TIAA Real Estate Account
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TIAA REAL ESTATE ACCOUNT |
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TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA |
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[To be filled via Amendment]
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TIAA Real Estate Account § Prospectus 135
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To the Participants of the TIAA Real Estate Account: |
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The accompanying financial statements of the TIAA Real Estate Account (Account) of Teachers Insurance and Annuity Association of America (TIAA) are the responsibility of TIAAs management. They have been prepared in accordance with accounting principles generally accepted in the United States of America and have been presented fairly and objectively in accordance with such principles. |
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TIAA has established and maintains an effective system of internal controls over financial reporting designed to provide reasonable assurance that assets are properly safeguarded, that transactions are properly executed in accordance with managements authorization, and to carry out the ongoing responsibilities of management for reliable financial statements. In addition, TIAAs internal audit personnel provide regular reviews and assessments of the internal controls and operations of the Account, and the Senior Vice President of Internal Audit regularly reports to the Audit Committee of the TIAA Board of Trustees. |
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The independent registered public accounting firm of PricewaterhouseCoopers LLP has audited the accompanying financial statements for the years ended December 31, 2010, 2009 and 2008. To maintain auditor independence and avoid even the appearance of a conflict of interest, it continues to be the Accounts policy (consistent with TIAAs specific auditor independence policies, which are designed to avoid such conflicts) that any management advisory or consulting services would be obtained from a firm other than the independent accounting firm. The independent auditors report expresses an independent opinion on the fairness of presentation of the Accounts financial statements. |
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The Audit Committee of the TIAA Board of Trustees, comprised entirely of independent, non-management trustees, meets regularly with management, representatives of the independent registered public accounting firm and internal audit group personnel to review matters relating to financial reporting, internal controls and auditing. In addition to the annual independent audit of the Accounts financial statements, the New York State Insurance Department and other state insurance departments regularly examine the operations and financial statements of the Account as part of their periodic corporate examinations. |
March 17, 2011
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/s/ Roger W. Ferguson, Jr. |
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/s/ Virginia M. Wilson |
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Roger W. Ferguson, Jr. |
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Virginia M. Wilson |
President and |
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Executive Vice President and |
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136 Prospectus § TIAA Real Estate Account
TIAA Real Estate Account § Prospectus 137
Jeffrey R. Brown, Audit Committee Member
Lawrence H. Linden, Audit Committee Member
Donald K. Peterson, Audit Committee Member
David L. Shedlarz, Audit Committee Member
138 Prospectus § TIAA Real Estate Account
TIAA REAL ESTATE ACCOUNT
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December 31, |
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(In thousands, except per accumulation unit amounts) |
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2010 |
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2009 |
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ASSETS |
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Investments, at fair value: |
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Real estate properties |
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(cost: $9,449,056 and $9,408,978) |
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$ |
8,115,516 |
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$ |
7,437,344 |
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Real estate joint ventures and limited partnerships |
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(cost: $2,223,304 and $2,437,795) |
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1,629,110 |
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1,514,876 |
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Marketable securities: |
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Real estate related |
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(cost: $480,363 and $) |
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495,294 |
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Other |
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(cost: $2,396,615 and $671,235) |
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2,396,746 |
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671,267 |
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Mortgage loan receivable |
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(cost: $ and $75,000) |
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71,273 |
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Total investments |
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(cost: $14,549,338 and $12,593,008) |
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12,636,666 |
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9,694,760 |
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Cash and cash equivalents |
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12,932 |
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24,859 |
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Due from investment advisor |
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11,054 |
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4,290 |
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Other |
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179,310 |
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188,794 |
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TOTAL ASSETS |
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12,839,962 |
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9,912,703 |
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LIABILITIES |
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Mortgage loans payable, at fair valueNote 9 (principal outstanding: $1,842,914 and $1,907,090) |
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1,860,157 |
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1,858,110 |
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Payable for securities transactions |
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49 |
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Accrued real estate property level expenses |
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153,742 |
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151,808 |
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Security deposits held |
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22,923 |
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22,822 |
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TOTAL LIABILITIES |
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2,036,822 |
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2,032,789 |
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COMMITMENTS AND CONTINGENCIESNote 12 |
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NET ASSETS |
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Accumulation Fund |
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10,535,737 |
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7,636,115 |
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Annuity Fund |
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267,403 |
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243,799 |
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TOTAL NET ASSETS |
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$ |
10,803,140 |
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$ |
7,879,914 |
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NUMBER OF ACCUMULATION UNITS OUTSTANDINGNotes 10 and 11 |
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48,070 |
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39,473 |
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NET ASSET VALUE, PER ACCUMULATION UNITNote 10 |
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$ |
219.173 |
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$ |
193.454 |
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See notes to financial statements |
TIAA Real Estate Account § Prospectus 139 |
TIAA REAL ESTATE ACCOUNT
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Years Ended December 31, |
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(In thousands) |
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2010 |
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2009 |
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2008 |
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INVESTMENT INCOME |
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Real estate income, net: |
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Rental income |
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$ |
862,529 |
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$ |
948,315 |
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$ |
979,295 |
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Real estate property level expenses and taxes: |
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Operating expenses |
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219,976 |
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238,705 |
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257,351 |
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Real estate taxes |
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114,653 |
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128,734 |
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132,979 |
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Interest expense |
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106,738 |
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101,219 |
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88,531 |
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Total real estate property level expenses and taxes |
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441,367 |
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468,658 |
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478,861 |
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Real estate income, net |
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421,162 |
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479,657 |
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500,434 |
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Income from real estate joint ventures and limited partnerships |
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89,268 |
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114,578 |
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116,889 |
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Interest |
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2,963 |
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1,733 |
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76,444 |
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Dividends |
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5,618 |
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5,079 |
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TOTAL INVESTMENT INCOME |
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519,011 |
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595,968 |
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698,846 |
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EXPENSESNOTE 2: |
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Investment advisory charges |
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50,225 |
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42,521 |
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47,622 |
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Administrative charges |
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22,081 |
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28,026 |
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58,080 |
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Distribution charges |
|
|
5,980 |
|
|
7,779 |
|
|
19,497 |
|
Mortality and expense risk charges |
|
|
4,373 |
|
|
4,736 |
|
|
8,116 |
|
Liquidity guarantee charges |
|
|
13,120 |
|
|
12,411 |
|
|
19,725 |
|
TOTAL EXPENSES |
|
|
95,779 |
|
|
95,473 |
|
|
153,040 |
|
INVESTMENT INCOME, NET |
|
|
423,232 |
|
|
500,495 |
|
|
545,806 |
|
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE |
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on investments: |
|
|
|
|
|
|
|
|
|
|
Real estate properties |
|
|
(12,508 |
) |
|
(281,798 |
) |
|
(18,097 |
) |
Real estate joint ventures and limited partnerships |
|
|
(185,753 |
) |
|
|
|
|
(17 |
) |
Marketable securities |
|
|
429 |
|
|
1 |
|
|
(11,041 |
) |
Mortgage loans payable |
|
|
|
|
|
(371 |
) |
|
|
|
Net realized (loss) on investments |
|
|
(197,832 |
) |
|
(282,168 |
) |
|
(29,155 |
) |
Net change in unrealized appreciation (depreciation) on: |
|
|
|
|
|
|
|
|
|
|
Real estate properties |
|
|
638,183 |
|
|
(2,244,931 |
) |
|
(1,905,930 |
) |
Real estate joint ventures and limited partnerships |
|
|
357,477 |
|
|
(1,030,179 |
) |
|
(702,797 |
) |
Marketable securities |
|
|
15,032 |
|
|
22 |
|
|
15,820 |
|
Mortgage loans receivable |
|
|
3,727 |
|
|
(494 |
) |
|
(753 |
) |
Mortgage loans payable |
|
|
(59,619 |
) |
|
(54,755 |
) |
|
109,791 |
|
Net change in unrealized appreciation (depreciation) on investments and mortgage loans payable |
|
|
954,800 |
|
|
(3,330,337 |
) |
|
(2,483,869 |
) |
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE |
|
|
756,968 |
|
|
(3,612,505 |
) |
|
(2,513,024 |
) |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
1,180,200 |
|
$ |
(3,112,010 |
) |
$ |
(1,967,218 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
140 Prospectus § TIAA Real Estate Account |
See notes to financial statements |
TIAA REAL ESTATE ACCOUNT
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|||||||
|
|
|||||||||
(In thousands) |
|
2010 |
|
2009 |
|
2008 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
FROM OPERATIONS |
|
|
|
|
|
|
|
|
|
|
Investment income, net |
|
$ |
423,232 |
|
$ |
500,495 |
|
$ |
545,806 |
|
Net realized loss on investments |
|
|
(197,832 |
) |
|
(282,168 |
) |
|
(29,155 |
) |
Net change in unrealized appreciation |
|
|
954,800 |
|
|
(3,330,337 |
) |
|
(2,483,869 |
) |
NET INCREASE (DECREASE) IN NET ASSETS |
|
|
1,180,200 |
|
|
(3,112,010 |
) |
|
(1,967,218 |
) |
|
|
|
|
|
|
|
|
|
|
|
FROM PARTICIPANT TRANSACTIONS |
|
|
|
|
|
|
|
|
|
|
Premiums |
|
|
2,594,502 |
|
|
1,065,801 |
|
|
1,985,661 |
|
Purchase of Liquidity Units by TIAA |
|
|
|
|
|
1,058,700 |
|
|
155,600 |
|
Annuity payments |
|
|
(19,121 |
) |
|
(26,872 |
) |
|
(35,834 |
) |
Withdrawals and death benefits |
|
|
(832,355 |
) |
|
(2,614,629 |
) |
|
(6,289,822 |
) |
NET INCREASE (DECREASE) IN NET ASSETS |
|
|
1,743,026 |
|
|
(517,000 |
) |
|
(4,184,395 |
) |
NET INCREASE (DECREASE) IN NET ASSETS |
|
|
2,923,226 |
|
|
(3,629,010 |
) |
|
(6,151,613 |
) |
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS |
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
7,879,914 |
|
$ |
11,508,924 |
|
|
17,660,537 |
|
End of period |
|
$ |
10,803,140 |
|
$ |
7,879,914 |
|
$ |
11,508,924 |
|
|
|
See notes to financial statements |
TIAA Real Estate Account § Prospectus 141 |
TIAA REAL ESTATE ACCOUNT
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|||||||
|
|
|||||||||
(In thousands) |
|
2010 |
|
2009 |
|
2008 |
|
|||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets |
|
$ |
1,180,200 |
|
$ |
(3,112,010 |
) |
$ |
(1,967,218 |
) |
Adjustments to reconcile net increase |
|
|
|
|
|
|
|
|
|
|
Net realized loss on investments |
|
|
197,832 |
|
|
282,168 |
|
|
29,155 |
|
Net change in unrealized (appreciation) |
|
|
(954,800 |
) |
|
3,330,337 |
|
|
2,483,869 |
|
Purchase of real estate properties |
|
|
|
|
|
|
|
|
(164,104 |
) |
Capital improvements on real estate properties |
|
|
(130,367 |
) |
|
(141,493 |
) |
|
(131,926 |
) |
Proceeds from sale of real estate properties |
|
|
91,882 |
|
|
408,794 |
|
|
93,113 |
|
Proceeds from mortgage loan receivable |
|
|
75,000 |
|
|
|
|
|
|
|
Proceeds from long term investments |
|
|
97,239 |
|
|
|
|
|
480,952 |
|
Purchases of long term investments |
|
|
(598,299 |
) |
|
(81,308 |
) |
|
(61,041 |
) |
(Increase) decrease in other investments |
|
|
(1,646,761 |
) |
|
(160,084 |
) |
|
2,864,516 |
|
Decrease in payable for securities transactions |
|
|
(49 |
) |
|
(59 |
) |
|
(758 |
) |
Change in due (from) to investment advisor |
|
|
(6,764 |
) |
|
(14,182 |
) |
|
21,088 |
|
Decrease (increase) in other assets |
|
|
8,744 |
|
|
14,319 |
|
|
(1,290 |
) |
(Decrease) increase in accrued real estate |
|
|
(11,340 |
) |
|
(1,900 |
) |
|
6,801 |
|
Increase (decrease) in security deposits held |
|
|
101 |
|
|
(1,294 |
) |
|
(516 |
) |
NET CASH (USED IN) PROVIDED BY |
|
|
(1,697,382 |
) |
|
523,288 |
|
|
3,652,641 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
Mortgage loans proceeds received |
|
|
273,255 |
|
|
|
|
|
548,567 |
|
Principal payments of mortgage loans payable |
|
|
(330,826 |
) |
|
(3,556 |
) |
|
(830 |
) |
Premiums |
|
|
2,594,502 |
|
|
1,065,801 |
|
|
1,985,661 |
|
Purchase of Liquidity Units by TIAA |
|
|
|
|
|
1,058,700 |
|
|
155,600 |
|
Annuity payments |
|
|
(19,121 |
) |
|
(26,872 |
) |
|
(35,834 |
) |
Withdrawals and death benefits |
|
|
(832,355 |
) |
|
(2,614,629 |
) |
|
(6,289,822 |
) |
NET CASH PROVIDED BY (USED IN) |
|
|
1,685,455 |
|
|
(520,556 |
) |
|
(3,636,658 |
) |
NET (DECREASE) INCREASE IN |
|
|
(11,927 |
) |
|
2,732 |
|
|
15,983 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
24,859 |
|
|
22,127 |
|
|
6,144 |
|
End of period |
|
$ |
12,932 |
|
$ |
24,859 |
|
$ |
22,127 |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
106,075 |
|
$ |
102,572 |
|
$ |
88,723 |
|
Debt transferred in sale of property |
|
$ |
|
|
$ |
(23,500 |
) |
$ |
|
|
|
|
142 Prospectus § TIAA Real Estate Account |
See notes to financial statements |
TIAA REAL ESTATE ACCOUNT
Note
1Organization and Significant Accounting Policies
Business: The TIAA Real Estate Account (Account) is a segregated investment account of Teachers Insurance and Annuity Association of America (TIAA) and was established by resolution of TIAAs Board of Trustees (the Board) on February 22, 1995, under the insurance laws of the State of New York, for the purpose of funding variable annuity contracts issued by TIAA. The Account offers individual and group accumulating annuity contracts (with contributions made on a pre-tax or after-tax basis), as well as individual lifetime and term-certain variable payout annuity contracts (including the payment of death benefits to beneficiaries). Investors are entitled to transfer funds to or from the Account, and make withdrawals from the Account on a daily basis under certain circumstances. Funds invested in the Account for each category of contract are expressed in terms of units, and unit values will fluctuate depending on the Accounts performance.
The investment objective of the Account is a favorable long-term rate of return primarily through rental income and capital appreciation from real estate and real estate-related investments owned by the Account. The Account holds real estate properties directly and through subsidiaries wholly owned by TIAA for the benefit of the Account. The Account also holds interests in real estate joint ventures and limited partnerships in which the Account does not hold a controlling interest; as such, such interests are not consolidated into these financial statements. The Account also has invested in mortgage loans receivable collateralized by commercial real estate properties. Additionally, the Account invests in real estate-related and non real estate-related publicly-traded securities, cash and other instruments to maintain adequate liquidity levels for operating expenses, capital expenditures and to fund benefit payments (withdrawals, transfers and related transactions).
The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which may require the use of estimates made by management. Actual results may vary from those estimates and such differences may be material. The following is a summary of the significant accounting policies of the Account.
Basis of Presentation: The accompanying financial statements include the Account and those subsidiaries wholly owned by TIAA for the benefit of the Account. All significant intercompany accounts and transactions between the Account and such subsidiaries have been eliminated.
Determination of Investments at Fair Value:
The Account reports all investments and investment related mortgage loans
payable at fair value. The Financial Accounting Standards Board (FASB) has
defined fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants.
TIAA Real Estate Account § Prospectus 143
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
The
following is a description of the valuation methodologies used to determine the
fair value of the Accounts investments and investment related mortgage
payables.
Valuation of Real Estate Properties Investments in real estate properties are stated at fair value, as determined in accordance with policies and procedures reviewed by the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. Accordingly, the Account does not record depreciation. Determination of fair value involves significant levels of judgment because the actual fair value of real estate can be determined only by negotiation between the parties in a sales transaction. The Accounts primary objective when valuing its real estate investments will be to produce a valuation that represents a reasonable estimate of the fair value of its investments. Implicit in the Accounts definition of fair value is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
|
|
|
|
|
Buyer and seller are typically motivated; |
|
|
|
|
|
Both parties are well informed or well advised, and acting in what they consider their best interests; |
|
|
|
|
|
A reasonable time is allowed for exposure in the open market; |
|
|
|
|
|
Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and |
|
|
|
|
|
The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. |
Property and investment values are affected by, among other things, the availability of capital, occupancy rates, rental rates, and interest and inflation rates. As a result, determining real estate and investment values involves many assumptions. Key inputs and assumptions include rental income and expense amounts, related rental income and expense growth rates, discount rates and capitalization rates. Valuation techniques include discounted cash flow analysis, prevailing market capitalization rates or multiples applied to earnings from the property, analysis of recent comparable sales transactions, actual sale negotiations and bona fide purchase offers received from third parties. Amounts ultimately realized from each investment may vary significantly from the fair value presented.
Real
estate properties owned by the Account are initially valued based on an
independent third party appraisal, as reviewed by TIAAs internal appraisal
staff and as applicable the Accounts independent fiduciary at the time of the
closing of the purchase, which may result in a potential unrealized gain or
loss reflecting the difference between an investments fair value (i.e., exit price) and its cost basis
(which is inclusive of transaction costs).
144 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
Subsequently,
each property is appraised each quarter by an independent third party
appraiser, reviewed by TIAAs internal appraisal staff and as applicable the
Accounts independent fiduciary. In general, the Account obtains appraisals of
its real estate properties spread out throughout the quarter, which is intended
to result in appraisal adjustments, and thus, adjustments to the valuations of
its holdings (to the extent such adjustments are made) that happen regularly
throughout each quarter and not on one specific day or month in each period.
Further, management reserves the right to order an appraisal and/or conduct another valuation outside of the normal quarterly process when facts or circumstances at a specific property change. For example, under certain circumstances a valuation adjustment could be made when the account receives a bona fide bid for the sale of a property held within the Account or one of the Accounts joint ventures. In addition, adjustments may be made for events or circumstances indicating an impairment of a tenants ability to pay amounts due to the Account under a lease (including due to a bankruptcy filing of that tenant). Alternatively, adjustments may be made to reflect the execution or renewal of a significant lease. Also, adjustments may be made to reflect factors (such as sales values for comparable properties or local employment rate) bearing uniquely on a particular region in which the Account holds properties. TIAAs internal appraisal staff oversees the entire appraisal process, in conjunction with the Accounts independent fiduciary (the independent fiduciary is more fully described in the paragraph below). Any differences in the conclusions of TIAAs internal appraisal staff and the independent appraiser will be reviewed by the independent fiduciary, which will make a final determination on the matter (which may include ordering a subsequent independent appraisal).
The
independent fiduciary, Real Estate Research Corporation has been appointed by a
special subcommittee of the Investment Committee of the Board to, among other
things, oversee the appraisal process. The independent fiduciary must approve
all independent appraisers used by the Account. All appraisals are performed in
accordance with Uniform Standards of Professional Appraisal Practices, the real
estate appraisal industry standards created by The Appraisal Foundation. Real
estate appraisals are estimates of property values based on a professionals
opinion. Appraisals of properties held outside of the U.S. are performed in
accordance with industry standards commonly applied in the applicable
jurisdiction. These independent appraisers are always expected to be
MAI-designated members of the Appraisal Institute (or its European equivalent,
Royal Institute of Chartered Surveyors) and state certified appraisers from
national or regional firms with relevant property type experience and market
knowledge. Under the Accounts current procedures, each independent appraisal
firm will be rotated off of a particular property at least every three years,
although
TIAA Real Estate Account § Prospectus 145
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
such
appraisal firm may perform appraisals of other Account properties subsequent to
such rotation.
Also, the independent fiduciary can require additional appraisals if factors or events have occurred that could materially change a propertys value (including those identified above) and such change is not reflected in the quarterly valuation review, or otherwise to ensure that the Account is valued appropriately. The independent fiduciary must also approve any valuation change of real estate-related assets where a propertys value changed by more than 6% from the most recent independent annual appraisal, or if the value of the Account would change by more than 4% within any calendar quarter or more than 2% since the prior calendar month. When a real estate property is subject to a mortgage, the property is valued independently of the mortgage and the property and mortgage fair values are reported separately (see Valuation of Mortgage Loans Payable below). The independent fiduciary reviews and approves all mortgage valuation adjustments before such adjustments are recorded by the Account. The Account continues to use the revised value for each real estate property and mortgage loan payable to calculate the Accounts daily net asset value until the next valuation review or appraisal.
Valuation of Real Estate Joint Ventures Real estate joint ventures are stated at the fair value of the Accounts ownership interests of the underlying entities. The Accounts ownership interests are valued based on the fair value of the underlying real estate, any related mortgage loans payable, and other factors, such as ownership percentage, ownership rights, buy/sell agreements, distribution provisions and capital call obligations. Upon the disposition of all real estate investments by an investee entity, the Account will continue to state its equity in the remaining net assets of the investee entity during the wind down period, if any, which occurs prior to the dissolution of the investee entity.
Valuation of Real Estate Limited Partnerships Limited partnership interests are stated at the fair value of the Accounts ownership in the partnership which is based on the most recent net asset value of the partnership, as reported by the sponsor. Since market quotations are not readily available, the limited partnership interests are valued at fair value as determined in good faith under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole.
Valuation of Marketable Securities Equity securities listed or traded on any national market or exchange are valued at the last sale price as of the close of the principal securities market or exchange on which such securities are traded or, if there is no sale, at the mean of the last bid and asked prices on such market or exchange, exclusive of transaction costs.
Debt
securities, other than money market instruments, are generally valued at the
most recent bid price or the equivalent quoted yield for such securities (or
146 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
those
of comparable maturity, quality and type). Money market instruments, with
maturities of one year or less, are valued in the same manner as debt
securities or derived from a pricing matrix.
Equity and fixed income securities traded on a foreign exchange or in foreign markets are valued using their closing values under the valuation methods generally accepted in the country where traded, as of the valuation date. This value is converted to U.S. dollars at the exchange rate in effect on the valuation day. Under certain circumstances (for example, if there are significant movements in the United States markets and there is an expectation the securities traded on foreign markets will adjust based on such movements when the foreign markets open the next day), the Account may adjust the value of equity or fixed income securities that trade on a foreign exchange or market after the foreign exchange or market has closed.
Valuation of Mortgage Loans Receivable Mortgage loans receivable are stated at fair value and are initially valued at the face amount of the mortgage loan funding. Subsequently, mortgage loans receivable are valued at least quarterly based on market factors, such as market interest rates and spreads for comparable loans, the liquidity for mortgage loans of similar characteristics, the performance of the underlying collateral and the credit quality of the counterparty.
Valuation of Mortgage Loans Payable Mortgage loans payable are stated at fair value. The estimated fair values of mortgage loans payable are based on the amount at which the liability could be transferred to a third party exclusive of transaction costs. Mortgage loans payable are valued internally by TIAAs internal appraisal department, as reviewed by the Accounts independent fiduciary, at least quarterly based on market factors, such as market interest rates and spreads for comparable loans, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying collateral), the liquidity for mortgage loans of similar characteristics, the maturity date of the loan, the return demands of the market, and the credit quality of the Account. Interest expense for mortgage loans payable is recorded on the accrual basis taking into account the outstanding principal and contractual interest rates.
See Note 6Assets and Liabilities Measured at Fair Value on a Recurring Basis for further discussion and disclosure regarding the determination of the fair value of the Accounts investments.
Foreign currency transactions and translation:
Portfolio investments and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Purchases and sales of securities, income receipts and
expense payments made in foreign currencies are translated into U.S. dollars at
the exchange rates prevailing on the respective dates of the transactions. The
effect of any changes in foreign currency exchange rates on portfolio
investments and mortgage loans payable are included
TIAA Real Estate Account § Prospectus 147
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
in
net realized and unrealized gains and losses on real estate properties and
mortgage loans payable. Net realized gains and losses on foreign currency
transactions include disposition of foreign currencies, and currency gains and
losses between the accrual and receipt dates of portfolio investment income and
between the trade and settlement dates of portfolio investment transactions.
Accumulation and Annuity Funds: The accumulation fund represents the net assets attributable to participants in the accumulation phase of their investment (Accumulation Fund). The annuity fund represents the net assets attributable to the participants currently receiving annuity payments (Annuity Fund). The net increase or decrease in net assets from investment operations is apportioned between the accounts based upon their relative daily net asset values. Once an Account participant begins receiving lifetime annuity income benefits, payment levels are not adjusted as a result of the Accounts mortality experience. In addition, the contracts pursuant to which the Account is offered are required to stipulate the maximum expense charge for all Account level expenses that can be assessed, which is not to exceed to 2.5% of average net assets per year. The Account pays a fee to TIAA to assume mortality and expense risks.
Accounting for Investments: The investments held by the Account are accounted as follows:
Real Estate Properties Rent from real estate properties consists of all amounts earned under tenant operating leases, including base rent, recoveries of real estate taxes and other expenses and charges for miscellaneous services provided to tenants. Rental income is recognized in accordance with the billing terms of the lease agreements. The Account bears the direct expenses of the real estate properties owned. These expenses include, but are not limited to, fees to local property management companies, property taxes, utilities, maintenance, repairs, insurance, and other operating and administrative costs. An estimate of the net operating income earned from each real estate property is accrued by the Account on a daily basis and such estimates are adjusted when actual operating results are determined.
Real
Estate Joint Ventures The Account has limited ownership interests in
various real estate joint ventures (collectively, the Joint Ventures). The
Account records its contributions as increases to its investments in the Joint
Ventures, and distributions from the Joint Ventures are treated as income
within income from real estate joint ventures and limited partnerships in the
Accounts Statements of Operations. Distributions that are identified as
returns of capital or capital gains or losses are recorded as unrealized gains
and realized gains and losses, respectively. Income from the Joint Ventures is
recorded based on the Accounts proportional interest of the income distributed
by the Joint Ventures. Income earned by the Joint Venture, but not yet
distributed to the Account by the Joint Ventures is recorded as unrealized
gains and losses.
148 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
Marketable Securities Transactions in marketable securities are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned. Dividend income is recorded on the ex-dividend date within dividend income. Dividends that are identified as returns of capital or capital gains or losses are recorded as unrealized gains and realized gains and losses, respectively. Realized gains and losses on securities transactions are accounted for on the specific identification method.
Realized and Unrealized Gains and Losses Unrealized gains and losses are recorded as the fair values of the Accounts investments are adjusted, and as discussed within the Real Estate Joint Ventures and Limited Partnership sections above.
Realized gains and losses are recorded at the time an investment is sold or a distribution is received from the Joint Ventures or Limited Partnerships. Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties close (settlement date). The Account recognizes a realized gain on the sale of a real estate property to the extent that the contract sales price exceeds the cost-to-date of the property being sold. A realized loss occurs when the cost-to-date exceeds the sales price.
Net Assets The Accounts net assets as of the close of each valuation day are valued by taking the sum of:
|
|
|
|
|
the value of the Accounts cash; cash equivalents, and short-term and other debt instruments; |
|
|
|
|
|
the value of the Accounts other securities and other non-real estate assets; |
|
|
|
|
|
the value of the individual real properties (based on the most recent valuation of that property) and other real estate-related investments owned by the Account; |
TIAA Real Estate Account § Prospectus 149
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
|
|
|
|
|
an estimate of the net operating income accrued by the Account from its properties, other real estate-related investments and non real estate-related investments (including short-term marketable securities) since the end of the prior valuation day; and |
|
|
|
|
|
actual net operating income earned from the Accounts properties, other real estate-related investments and non real estate-related investments (but only to the extent any such item of income differs from the estimated income accrued for on such investments). |
and then reducing the sum by liabilities held within the Account, including the daily investment management fee, administration and distribution fees, mortality and expense fee, and liquidity guarantee fee, and certain other expenses attributable to operating the Account.
After the end of every quarter, the Account reconciles the amount of expenses deducted from the Account (which is established in order to approximate the costs that the Account will incur) with the expenses the Account actually incurred. If there is a difference, the Account adds it to or deducts it from the Account in equal daily installments over the remaining days of the following quarter. Material differences may be repaid in the current calendar quarter. The Accounts at-cost deductions are based on projections of Account assets and overall expenses, and the size of any adjusting payments will be directly affected by the difference between managements projections and the Accounts actual assets or expenses.
Cash and Cash Equivalents: Cash and cash equivalents are balances held by the Account in bank deposit accounts which, at times, exceed federally insured limits. The Accounts management monitors these balances to mitigate the exposure of risk due to concentration and has not experienced any losses from such concentration.
Federal Income Taxes: Based on provisions of the Internal Revenue Code, Section 817, the Account is taxed as a segregated asset account of TIAA and as such, the Account should incur no material federal income tax attributable to the net investment activity of the Account. Management has analyzed the Accounts tax positions taken for all open federal income tax years (20052009) and has concluded no provisions for federal income tax is required as of December 31, 2010.
150 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
Changes in Net Assets: Premiums include
premiums paid by existing accumulation unit holders in the Account and
transfers into the Account. Withdrawals and death benefits include withdrawals
out of the Account which include transfers out of the Account and required
minimum distributions.
Due from Investment Advisor: Due to/from investment advisor represents amounts that were paid or received by TIAA on behalf of the Account. Amounts generally are paid or received by the Account within one or two business days and no interest is contractually charged on these amounts.
Reclassifications: The Account has reclassified the presentation in the statements of changes in net assets with regard to transfers to and from TIAA, CREF Accounts, and TIAA-CREF Funds. Transfers into the Account have been reclassified to Premiums, and transfers out of the Account have been reclassified amongst annuity and other periodic payments and withdrawals and death benefits as appropriate.
Certain other prior period amounts have been reclassified to conform to the current presentation. These reclassifications did not affect the Accounts total net assets, results of operations or net changes in net assets previously reported.
Note 2Management Agreements and Arrangements
Investment advisory services for the Account are provided by TIAA employees, under the direction of the Board and its Investment Committee, pursuant to investment management procedures adopted by TIAA for the Account. TIAAs investment management decisions for the Account are subject to review by the Accounts independent fiduciary. TIAA also provides all portfolio accounting and related services for the Account.
The
Account is a party to the Distribution
Agreement for the Contracts Funded by the TIAA Real Estate Account (the
Distribution Agreement), dated January 1, 2008, by and among TIAA, for itself
and on behalf of the Account, and TIAA-CREF Individual and Institutional
Services, LLC (Services), a wholly owned subsidiary of TIAA, a registered
broker-dealer and a member of the Financial Industry Regulatory Authority.
Pursuant to the Distribution Agreement, Services performs distribution services
for the Account which include, among other things, (i) distribution of annuity
contracts issued by TIAA and funded by the Account, (ii) advising existing
annuity contract owners in connection with their accumulations and (iii)
helping employers implement and manage retirement plans. In addition, TIAA
performs administrative functions for the Account, which include, among other
things, (i) computing the Accounts daily unit value, (ii) maintaining
accounting records and performing accounting services, (iii) receiving and
allocating premiums, (iv) calculating and making annuity payments, (v)
processing withdrawal requests, (vi) providing regulatory compliance and
TIAA Real Estate Account § Prospectus 151
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
reporting
services, (vii) maintaining the Accounts records of contract ownership and
(viii) otherwise assisting generally in all aspects of the Accounts
operations. Both distribution services (pursuant to the Distribution Agreement)
and administrative services are provided to the Account by Services and TIAA,
as applicable, on an at cost basis.
The Distribution Agreement is terminable by either party upon 60 days written notice and terminates automatically upon any assignment thereof.
TIAA and Services provide their services at cost. TIAA and Services receive payments from the Account on a daily basis according to formulas established each year and adjusted periodically with the objective of keeping the payments as close as possible to the expenses actually incurred. Any differences between actual expenses and the amounts paid by the Account are adjusted quarterly.
TIAA also provides a liquidity guarantee to the Account, for a fee, to ensure that sufficient funds are available to meet participant transfer and cash withdrawal requests in the event that the Accounts cash flows and liquid investments are insufficient to fund such requests. TIAA ensures sufficient funds are available for such transfer and withdrawal requests by purchasing accumulation units of the Account. See Note 3 Related Party Transactions below.
To the extent TIAA owns accumulation units issued pursuant to the liquidity guarantee, the independent fiduciary monitors and oversees, among other things, TIAAs ownership interest in the Account and may require TIAA to eventually redeem some of its units, particularly when the Account has uninvested cash or liquid investments available. TIAA also receives a fee for assuming certain mortality and expense risks.
The expenses for the services noted above that are provided to the Account by TIAA and Services are identified in the accompanying Statements of Operations and are reflected in Note 10 Condensed Financial Information.
Note 3Related Party Transactions
Pursuant to its existing liquidity guarantee obligation, as of December 31, 2010, the TIAA General Account owned 4.7 million accumulation units (which are generally referred to as liquidity units) issued by the Account. Since December 2008 and through December 31, 2010, TIAA paid an aggregate of $1.2 billion to purchase these liquidity units in multiple transactions. TIAA has purchased no liquidity units since June 1, 2009.
In
accordance with this liquidity guarantee obligation, TIAA guarantees that all
participants in the Account may redeem their accumulation units at their
accumulation unit value next determined after their transfer or cash withdrawal
request is received in good order. liquidity units owned by TIAA are valued in
the same manner as accumulation units owned by the Accounts participants.
152 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
Management
believes that TIAA has the ability to meet its obligations under the liquidity
guarantee.
As discussed in the Accounts prospectus and in accordance with a prohibited transaction exemption from the U.S. Department of Labor (PTE 96-76), the Accounts independent fiduciary, Real Estate Research Corporation, has certain responsibilities with respect to the Account that it has undertaken or is currently undertaking with respect to TIAAs purchase of liquidity units, including among other things, reviewing the purchase and redemption of liquidity units by TIAA to ensure the Account uses the correct unit values. In addition, as set forth in PTE 96-76, the independent fiduciarys responsibilities include:
|
|
|
|
|
establishing the percentage of total accumulation units that TIAAs ownership should not exceed (the trigger point) and creating a method for changing the trigger point; |
|
|
|
|
|
approving any adjustment of TIAAs ownership interest in the Account and, in its discretion, requiring an adjustment if TIAAs ownership of liquidity units reaches the trigger point; and |
|
|
|
|
|
once the trigger point has been reached, participating in any program to reduce TIAAs ownership in the Account by utilizing cash flow or liquid investments in the Account, or by utilizing the proceeds from asset sales. The independent fiduciarys role in participating in any such asset sales program would include (i) participating in the selection of properties for sale, (ii) providing sales guidelines and (iii) approving those sales if, in the independent fiduciarys opinion, such sales are desirable to reduce TIAAs ownership of liquidity units. |
The independent fiduciary, which has the right to adjust the trigger point, has established the trigger point at 45% of the outstanding accumulation units and it will continue to monitor TIAAs ownership interest in the Account and provide further recommendations as necessary. As of December 31, 2010, TIAA owned 9.8% of the outstanding accumulation units of the Account.
As discussed in Note 2 Management Agreements and Arrangements, TIAA and Services provide services to the Account on an at cost basis. See Note 10 Condensed Financial Information for details of the expense charge and expense ratio.
Note 4Credit Risk Concentrations
Concentrations
of credit risk may arise when a number of properties or tenants are located in
a similar geographic region such that the economic conditions of that region
could impact tenants obligations to meet their contractual obligations or
cause the values of individual properties to decline. The Account has no
significant concentrations of tenants as no single tenant has annual contract
rent that makes up more than 2% of the rental income of the Account.
TIAA Real Estate Account § Prospectus 153
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
The
substantial majority of the Accounts wholly owned real estate investments and
investments in joint ventures are located in the United States. The following
table represents the diversification of the Accounts portfolio by region and
property type:
DIVERSIFICATION BY FAIR VALUE(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
|
West |
|
South |
|
Midwest |
|
Foreign(2) |
|
Total |
|
||||||
Office |
|
24.5 |
% |
|
17.5 |
% |
|
10.4 |
% |
|
1.2 |
% |
|
2.7 |
% |
|
56.3 |
% |
|
Apartment |
|
2.6 |
% |
|
6.2 |
% |
|
5.4 |
% |
|
0.0 |
% |
|
0.0 |
% |
|
14.2 |
% |
|
Industrial |
|
1.3 |
% |
|
7.0 |
% |
|
4.1 |
% |
|
1.3 |
% |
|
0.0 |
% |
|
13.7 |
% |
|
Retail |
|
3.2 |
% |
|
0.9 |
% |
|
8.5 |
% |
|
0.3 |
% |
|
2.4 |
% |
|
15.3 |
% |
|
Storage |
|
0.2 |
% |
|
0.2 |
% |
|
0.1 |
% |
|
0.0 |
% |
|
0.0 |
% |
|
0.5 |
% |
|
Total |
|
31.8 |
% |
|
31.8 |
% |
|
28.5 |
% |
|
2.8 |
% |
|
5.1 |
% |
|
100.0 |
% |
|
|
|
(1) |
Wholly-owned properties are represented at fair value and gross of any debt, while joint venture properties are represented at the net equity value. |
(2) |
Represents real estate investments in the United Kingdom and France. |
|
Properties in the East region are located in: CT, DC, DE, KY, MA, MD, ME, NC, NH, NJ, NY, PA, RI, SC, VA, VT, WV |
|
Properties in the West region are located in: AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY |
|
Properties in the South region are located in: AL, AR, FL, GA, LA, MS, OK, TN, TX |
|
Properties in the Midwest region are located in: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI |
Note 5Leases
The Accounts wholly owned real estate properties are leased to tenants under operating lease agreements which expire on various dates through 2038. Aggregate minimum annual rentals for the wholly owned properties owned, excluding short-term residential leases, are as follows (in thousands):
|
|
|
|
|
|
|
Years Ending December 31, |
|
|
2011 |
|
$ |
518,286 |
|
2012 |
|
|
472,741 |
|
2013 |
|
|
419,681 |
|
2014 |
|
|
356,530 |
|
2015 |
|
|
273,085 |
|
Thereafter |
|
|
1,009,995 |
|
Total |
|
$ |
3,050,318 |
|
Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts.
Note 6Assets and Liabilities Measured at Fair Value on a Recurring Basis
Valuation Hierarchy: The Accounts fair
value measurements are grouped categorically into three levels, as defined by
the FASB. The levels are defined as follows:
154 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
Level
1Valuations using unadjusted quoted prices for assets traded in active
markets, such as stocks listed on the New York Stock Exchange. Active markets
are defined as having the following characteristics for the measured asset or
liability: (i) many transactions, (ii) current prices, (iii) price quotes not
varying substantially among market makers, (iv) narrow bid/ask spreads and (v)
most information regarding the issuer is publicly available. Level 1 assets
held by the Account are generally marketable equity securities.
Level 2Valuations for assets and liabilities traded in less active, dealer or broker markets. Fair values are primarily obtained from third party pricing services for identical or comparable assets or liabilities. Level 2 inputs for fair value measurements are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include:
|
|
|
|
a. |
Quoted prices for similar assets or liabilities in active markets; |
|
|
|
|
b. |
Quoted prices for identical or similar assets or liabilities in markets that are not active (that is, markets in which there are few transactions for the asset (or liability), the prices are not current, price quotations vary substantially either over time or among market makers (for example, some brokered markets), or in which little information is released publicly); |
|
|
|
|
c. |
Inputs other than quoted prices that are observable within the market for the asset (or liability) (for example, interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates that are observable at commonly quoted intervals); and |
|
|
|
|
d. |
Inputs that are derived principally from or corroborated by observable market data by correlation or other means (for example, market-corroborated inputs). |
Examples of securities which may be held by the Account and included in Level 2 include certificates of deposit, commercial paper, government agency notes, variable notes, United States Treasury securities, and debt securities.
Level
3Valuations for assets and liabilities that are derived from other valuation
methodologies, including pricing models, discounted cash flow models and
similar techniques, and are not based on market exchange, dealer, or
broker-traded transactions. Level 3 valuations incorporate certain assumptions
and projections that are not observable in the market, and require significant
professional judgment in determining the fair value assigned to such assets or
liabilities. Examples of Level 3 assets and liabilities which may be held by
the Account from time to time include investments in real estate, investments
in joint ventures and limited partnerships, and mortgage loans receivable and
payable.
TIAA Real Estate Account § Prospectus 155
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
An
investments categorization within the valuation hierarchy described above is
based upon the lowest level of input that is significant to the fair value
measurement.
The Accounts determination of fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon vendor-provided, evaluated prices or internally-developed models that primarily use market-based or independently-sourced market data, including interest rate yield curves, market spreads, and currency rates. Valuation adjustments will be made to reflect changes in credit quality, counterpartys creditworthiness, the Accounts creditworthiness, liquidity, and other observable and unobservable inputs that are applied consistently over time.
The
methods described above are considered to produce fair values that represent a
good faith estimate of what an unaffiliated buyer in the marketplace would pay
to purchase the asset or would receive to transfer the liability. Since fair
value calculations involve significant professional judgment in the application
of both observable and unobservable attributes, actual realizable values or
future fair values may differ from amounts reported. Furthermore, while the
Account believes its valuation methods are appropriate and consistent with
other market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments, while reasonable,
could result in different estimates of fair value at the reporting date. As
discussed in Note 1Organization and
Significant Accounting Policies in more detail, the Account
generally obtains independent third party appraisals on a quarterly basis;
there may be circumstances in the interim in which the true realizable value of
a property is not reflected in the Accounts daily net asset value calculation
or in the Accounts periodic financial statements. This disparity may be more
apparent when the commercial and/or residential real estate markets experience
an overall and possibly dramatic decline (or increase) in property values in a
relatively short period of time between appraisals.
156 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
The
following tables show the major categories of assets and liabilities measured
at fair value on a recurring basis as of December 31, 2010 and December 31,
2009, using unadjusted quoted prices in active markets for identical assets
(Level 1); significant other observable inputs (Level 2); and significant
unobservable inputs (Level 3) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description |
|
Level 1: |
|
Level 2: |
|
Level 3: |
|
Total at |
|
||||
Real estate properties |
|
$ |
|
|
$ |
|
|
$ |
8,115,516 |
|
$ |
8,115,516 |
|
Real estate joint ventures |
|
|
|
|
|
|
|
|
1,358,826 |
|
|
1,358,826 |
|
Limited partnerships |
|
|
|
|
|
|
|
|
270,284 |
|
|
270,284 |
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate related |
|
|
495,294 |
|
|
|
|
|
|
|
|
495,294 |
|
Government agency notes |
|
|
|
|
|
1,484,774 |
|
|
|
|
|
1,484,774 |
|
United States Treasury securities |
|
|
|
|
|
911,972 |
|
|
|
|
|
911,972 |
|
Total Investments at |
|
$ |
495,294 |
|
$ |
2,396,746 |
|
$ |
9,744,626 |
|
$ |
12,636,666 |
|
Mortgage loans payable |
|
$ |
|
|
$ |
|
|
$ |
(1,860,157 |
) |
$ |
(1,860,157 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description |
|
Level 1: |
|
Level 2: |
|
Level 3: |
|
Total at |
|
||||
Real estate properties |
|
$ |
|
|
$ |
|
|
$ |
7,437,344 |
|
$ |
7,437,344 |
|
Real estate joint ventures |
|
|
|
|
|
|
|
|
1,314,603 |
|
|
1,314,603 |
|
Limited partnerships |
|
|
|
|
|
|
|
|
200,273 |
|
|
200,273 |
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government agency notes |
|
|
|
|
|
465,092 |
|
|
|
|
|
465,092 |
|
United States Treasury securities |
|
|
|
|
|
206,175 |
|
|
|
|
|
206,175 |
|
Mortgage loan receivable |
|
|
|
|
|
|
|
|
71,273 |
|
|
71,273 |
|
Total Investments at |
|
$ |
|
|
$ |
671,267 |
|
$ |
9,023,493 |
|
$ |
9,694,760 |
|
Mortgage loans payable |
|
$ |
|
|
$ |
|
|
$ |
(1,858,110 |
) |
$ |
(1,858,110 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIAA Real Estate Account § Prospectus 157
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
The
following tables show the reconciliation of the beginning and ending balances
for assets and liabilities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) during the years ended December 31,
2010 and December 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate |
|
Real
Estate |
|
Limited |
|
Mortgage |
Total |
|
Mortgage |
|
|||||||
For the year ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance |
|
$ |
7,437,344 |
|
$ |
1,314,603 |
|
$ |
200,273 |
|
$ |
71,273 |
|
$ |
9,023,493 |
|
$ |
(1,858,110 |
) |
Total
realized and unrealized |
|
|
625,675 |
|
|
106,841 |
|
|
64,883 |
|
|
3,727 |
|
|
801,126 |
|
|
(59,619 |
) |
Purchases,
sales, issuances, |
|
|
52,497 |
|
|
(62,618 |
) |
|
5,128 |
|
|
(75,000 |
) |
|
(79,993 |
) |
|
57,572 |
|
Ending
balance |
|
$ |
8,115,516 |
|
$ |
1,358,826 |
|
$ |
270,284 |
|
|
|
|
$ |
9,744,626 |
|
$ |
(1,860,157 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate |
|
Real
Estate |
|
Limited |
|
Mortgage |
|
Total |
|
Mortgage |
|
||||||
For the year ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance |
|
$ |
10,305,040 |
|
$ |
2,176,711 |
|
$ |
286,485 |
|
$ |
71,767 |
|
$ |
12,840,003 |
|
$ |
(1,830,040 |
) |
Total
realized and unrealized |
|
|
(2,526,729 |
) |
|
(909,324 |
) |
|
(120,855 |
) |
|
(494 |
) |
|
(3,557,402 |
) |
|
(55,126 |
) |
Purchases,
sales, issuances, |
|
|
(340,967 |
) |
|
47,216 |
|
|
34,643 |
|
|
|
|
|
(259,108 |
) |
|
27,056 |
|
Ending
balance |
|
|
7,437,344 |
|
|
1,314,603 |
|
|
200,273 |
|
|
71,273 |
|
|
9,023,493 |
|
|
(1,858,110 |
) |
|
|
(1) |
This line includes the net of contributions, distributions, and accrued operating income for real estate joint ventures and limited partnerships, principal payments received on mortgage loan receivable and principal payments made on mortgage loans payable. |
During
the years ended December 31, 2010 and 2009 there were no transfers in or out of
Levels 1, 2 or 3.
158 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate |
|
Real
Estate |
|
Limited |
|
Mortgage |
|
Total |
|
Mortgage |
|
||||||
For the
year ended |
|
$ |
628,044 |
|
$ |
113,326 |
|
$ |
64,883 |
|
$ |
|
|
$ |
806,253 |
|
$ |
(59,619 |
) |
For the
year ended |
|
$ |
(2,520,545 |
) |
$ |
(909,324 |
) |
$ |
(120,855 |
) |
$ |
(494 |
) |
$ |
(3,551,218 |
) |
$ |
(54,881 |
) |
TIAA Real Estate Account § Prospectus 159
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
December 31, 2009 |
|
||
|
||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
Real estate properties, at fair value |
|
|
|
|
|
$4,454,893 |
|
|
$4,618,202 |
|
Other assets |
|
|
|
|
|
141,813 |
|
|
89,569 |
|
|
||||||||||
Total assets |
|
|
|
|
|
$4,596,706 |
|
|
$4,707,771 |
|
|
||||||||||
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
Mortgage loans payable, at fair value |
|
|
|
|
|
$2,276,928 |
|
|
$2,526,666 |
|
Other liabilities |
|
|
|
|
|
97,525 |
|
|
52,639 |
|
|
||||||||||
Total liabilities |
|
|
|
|
|
2,374,453 |
|
|
2,579,305 |
|
Equity |
|
|
|
|
|
2,222,253 |
|
|
2,128,466 |
|
|
||||||||||
Total liabilities and equity |
|
|
|
|
|
$4,596,706 |
|
|
$4,707,771 |
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
Year Ended |
|
Year Ended |
|
|||
|
||||||||||
Operating Revenues and Expenses |
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
$466,479 |
|
|
$519,239 |
|
|
$562,031 |
|
Expenses |
|
|
287,627 |
|
|
317,428 |
|
|
333,700 |
|
|
||||||||||
Excess of revenues over expenses |
|
|
$178,852 |
|
|
$201,811 |
|
|
$228,331 |
|
|
|
|
|
|
|
|
|
Amount |
|
|
2011* |
|
$ |
310,369 |
|
2012 |
|
|
727,109 |
|
2013 |
|
|
96,148 |
|
2014 |
|
|
8,168 |
|
2015 |
|
|
258,660 |
|
Thereafter |
|
|
931,521 |
|
Total maturities |
|
$ |
2,331,975 |
|
|
|
* |
Includes DDR Joint Venture revolving line of credit. |
|
160 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
TIAA Real Estate Account § Prospectus 161
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
|
|
|
|
|
|
|
|
|
Property |
|
Interest Rate and |
(3) |
Principal |
|
Maturity |
|
|
Ontario Industrial Portfolio(1) |
|
7.42% paid monthly |
|
$ |
8,216 |
|
May 1, 2011 |
|
1 & 7 Westferry Circus(2)(5) |
|
5.40% paid quarterly |
|
|
210,150 |
|
November 15, 2012 |
|
Reserve at Sugarloaf(1)(5) |
|
5.49% paid monthly |
|
|
24,738 |
|
June 1, 2013 |
|
South Frisco Village |
|
5.85% paid monthly |
|
|
26,251 |
|
June 1, 2013 |
|
Fourth & Madison |
|
6.40% paid monthly |
|
|
145,000 |
|
August 21, 2013 |
|
1001 Pennsylvania Avenue |
|
6.40% paid monthly |
|
|
210,000 |
|
August 21, 2013 |
|
50 Fremont |
|
6.40% paid monthly |
|
|
135,000 |
|
August 21, 2013 |
|
Pacific Plaza(1)(5) |
|
5.55% paid monthly |
|
|
8,400 |
|
September 1, 2013 |
|
Wilshire Rodeo Plaza(5) |
|
5.28% paid monthly |
|
|
112,700 |
|
April 11, 2014 |
|
1401 H Street(1)(5) |
|
5.97% paid monthly |
|
|
113,677 |
|
December 7, 2014 |
|
1050 Lenox Park Apartments(5)(9) |
|
4.43% paid monthly |
|
|
24,000 |
|
August 1, 2015 |
|
San Montego Apartments(5)(6)(9) |
|
4.47% paid monthly |
|
|
21,780 |
|
August 1, 2015 |
|
Montecito Apartments(5)(6)(9) |
|
4.47% paid monthly |
|
|
20,250 |
|
August 1, 2015 |
|
Phoenician Apartments(5)(6)(9) |
|
4.47% paid monthly |
|
|
21,280 |
|
August 1, 2015 |
|
The Colorado(1)(5) |
|
5.65% paid monthly |
|
|
85,568 |
|
November 1, 2015 |
|
99 High Street |
|
5.52% paid monthly |
|
|
185,000 |
|
November 11, 2015 |
|
The Legacy at Westwood(1)(5) |
|
5.95% paid monthly |
|
|
40,999 |
|
December 1, 2015 |
|
Regents Court(1)(5) |
|
5.76% paid monthly |
|
|
35,011 |
|
December 1, 2015 |
|
The Caruth(1)(5) |
|
5.71% paid monthly |
|
|
40,949 |
|
December 1, 2015 |
|
Lincoln Centre |
|
5.51% paid monthly |
|
|
153,000 |
|
February 1, 2016 |
|
The Legend at Kierland(5)(7)(9) |
|
4.97% paid monthly |
|
|
21,825 |
|
August 1, 2017 |
|
The Tradition at Kierland(5)(7)(9) |
|
4.97% paid monthly |
|
|
25,800 |
|
August 1, 2017 |
|
Red Canyon at Palomino Park(5)(8)(9) |
|
5.34% paid monthly |
|
|
27,120 |
|
August 1, 2020 |
|
Green River at Palomino Park(5)(8)(9) |
|
5.34% paid monthly |
|
|
33,220 |
|
August 1, 2020 |
|
Blue Ridge at Palomino Park(5)(8)(9) |
|
5.34% paid monthly |
|
|
33,380 |
|
August 1, 2020 |
|
Ashford Meadows(5)(6)(9) |
|
5.17% paid monthly |
|
|
44,600 |
|
August 1, 2020 |
|
Publix at Weston Commons(5) |
|
5.08% paid monthly |
|
|
35,000 |
|
January 1, 2036 |
|
Total Principal Outstanding |
|
|
|
|
1,842,914 |
|
|
|
Fair Value Adjustment(4) |
|
|
|
|
17,243 |
|
|
|
Total mortgage loans payable, at fair value |
|
|
|
$ |
1,860,157 |
|
|
|
|
|
(1) |
The mortgage is adjusted monthly for principal payments. |
(2) |
The mortgage is denominated in British pounds and the principal payment had been converted to U.S. dollars using the exchange rate as of December 31, 2010. The interest rate is fixed. The cumulative foreign currency translation adjustment (since inception) was an unrealized gain of $22 million. |
(3) |
Interest rates are fixed, unless stated otherwise. |
(4) |
The fair value adjustment consists of the difference (positive or negative) between the principal amount of the outstanding debt and the fair value of the outstanding debt. See Note 1Organization and Significant Accounting Policies. |
(5) |
These properties are each owned by separate wholly owned subsidiaries of TIAA for benefit of the Account. The assets and credit of each of these borrowing entities are not available to satisfy the debts and other obligations of the Account or any other entity or person other than such borrowing entity. |
(6) |
Represents mortgage loans payable on these individual properties which are held within the Houston Apartment Portfolio. |
(7) |
Represents mortgage loans payable on these individual properties which are held within the Kierland Apartment Portfolio. |
(8) |
Represents mortgage loans payable on these individual properties which are held within the Palomino Park. |
(9) |
During the year ended December 31, 2010 the Account entered into several new loans in the aggregate amount of $273.3 million. |
|
162 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
|
|
|
|
|
|
|
Amount |
|
|
2011 |
|
$ |
13,082 |
|
2012 |
|
|
215,236 |
|
2013 |
|
|
552,853 |
|
2014 |
|
|
225,273 |
|
2015 |
|
|
462,525 |
|
Thereafter |
|
|
373,945 |
|
Total maturities |
|
$ |
1,842,914 |
|
|
TIAA Real Estate Account § Prospectus 163
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
Selected condensed financial information for an Accumulation Unit of the Account is presented below. Per Accumulation Unit data is calculated on average units outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|||||||||||||
|
|
|
||||||||||||||
|
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
|||||
|
||||||||||||||||
|
||||||||||||||||
PER ACCUMULATION UNIT DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
19.516 |
|
$ |
22.649 |
|
$ |
18.794 |
|
$ |
17.975 |
|
$ |
16.717 |
|
Real estate property level |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses and taxes |
|
|
9.987 |
|
|
11.193 |
|
|
9.190 |
|
|
8.338 |
|
|
7.807 |
|
|
||||||||||||||||
Real estate income, net |
|
|
9.529 |
|
|
11.456 |
|
|
9.604 |
|
|
9.637 |
|
|
8.910 |
|
Other income |
|
|
2.214 |
|
|
2.778 |
|
|
3.808 |
|
|
4.289 |
|
|
3.931 |
|
|
||||||||||||||||
Total income |
|
|
11.743 |
|
|
14.234 |
|
|
13.412 |
|
|
13.926 |
|
|
12.841 |
|
Expense charges(1) |
|
|
2.167 |
|
|
2.280 |
|
|
2.937 |
|
|
2.554 |
|
|
1.671 |
|
|
||||||||||||||||
Investment income, net |
|
|
9.576 |
|
|
11.954 |
|
|
10.475 |
|
|
11.372 |
|
|
11.170 |
|
Net realized and unrealized gain |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(loss) on investments and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage loans payable |
|
|
16.143 |
|
|
(85.848 |
) |
|
(54.541 |
) |
|
26.389 |
|
|
22.530 |
|
|
||||||||||||||||
Net (decrease) increase in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulation Unit Value |
|
|
25.719 |
|
|
(73.894 |
) |
|
(44.066 |
) |
|
37.761 |
|
|
33.700 |
|
Accumulation Unit Value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
193.454 |
|
|
267.348 |
|
|
311.414 |
|
|
273.653 |
|
|
239.953 |
|
|
||||||||||||||||
End of period |
|
|
219.173 |
|
|
193.454 |
|
|
267.348 |
|
|
311.414 |
|
|
273.653 |
|
|
||||||||||||||||
TOTAL RETURN |
|
|
13.29 |
% |
|
(27.64 |
)% |
|
(14.15 |
)% |
|
13.80 |
% |
|
14.04 |
% |
|
||||||||||||||||
RATIOS TO AVERAGE NET ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses(1) |
|
|
1.09 |
% |
|
1.01 |
% |
|
0.95 |
% |
|
0.87 |
% |
|
0.67 |
% |
Investment income, net |
|
|
4.84 |
% |
|
5.29 |
% |
|
3.38 |
% |
|
3.88 |
% |
|
4.49 |
% |
Portfolio turnover rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate properties(2) |
|
|
1.01 |
% |
|
0.75 |
% |
|
0.64 |
% |
|
5.59 |
% |
|
3.62 |
% |
Marketable securities(3) |
|
|
19.18 |
% |
|
0.00 |
% |
|
25.67 |
% |
|
13.03 |
% |
|
51.05 |
% |
Accumulation Units outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at end of period (in thousands): |
|
|
48,070 |
|
|
39,473 |
|
|
41,542 |
|
|
55,106 |
|
|
50,146 |
|
Net assets end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
$ |
10,803,140 |
|
$ |
7,879,914 |
|
$ |
11,508,924 |
|
$ |
17,660,537 |
|
$ |
14,132,693 |
|
|
|
|
(1) |
Expense charges per Accumulation Unit and the Ratio of Expenses to average net assets reflect the year to date Account-level expenses and exclude real estate property level expenses which are included in real estate income, net. If the real estate property level expenses were included, the expense charge per Accumulation Unit for the twelve months ended December 31, 2010 would be $12.154 ($13.473, $12.127, $10.892, and $9.478 for the years ended December 31, 2009, 2008, 2007 and 2006, respectively), and the Ratio of Expenses to average net assets for the twelve months ended December 31, 2010 would be 6.14% (5.96%, 3.91%, 3.71%, and 3.81% for the years ended December 31, 2009, 2008, 2007 and 2006, respectively). |
(2) |
Real estate investment portfolio turnover rate is calculated by dividing the lesser of purchases or sales of real estate property investments (including contributions to, or return of capital distributions received from, existing joint venture and limited partnership investments) by the average value of the portfolio of real estate investments held during the period. |
(3) |
Marketable securities portfolio turnover rate is calculated by dividing the lesser of purchases or sales of securities, excluding securities having maturity dates at acquisition of one year or less, by the average value of the portfolio securities held during the period. |
164 Prospectus § TIAA Real Estate Account
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
Changes in the number of Accumulation Units outstanding were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended, |
|
|||||||
|
|
|
||||||||
|
|
2010 |
|
2009 |
|
2008 |
|
|||
|
||||||||||
Outstanding: |
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
39,473 |
|
|
41,542 |
|
|
55,106 |
|
Credited for premiums |
|
|
12,853 |
|
|
4,807 |
|
|
6,417 |
|
Credited for purchase of |
|
|
|
|
|
|
|
|
|
|
units by TIAA (see Note 3) |
|
|
|
|
|
4,139 |
|
|
577 |
|
Annuity, other periodic payments, |
|
|
|
|
|
|
|
|
|
|
withdrawals and death benefits |
|
|
(4,256 |
) |
|
(11,015 |
) |
|
(20,558 |
) |
|
||||||||||
End of period |
|
|
48,070 |
|
|
39,473 |
|
|
41,542 |
|
|
Note 12Commitments, Contingencies, and Subsequent Events
CommitmentsAs of December 31, 2010, the Account had outstanding commitments to purchase additional interests in three of its limited partnership investments. As of December 31, 2010, the Accounts remaining commitments totaled $33.7 million, which can be called in full or in part by each limited partnership at any time.
As of December 31, 2010, the Account has committed to fund $0.3 million to one of its joint venture investments for an expansion project for that venture.
As of December 31, 2010 the Account has committed a total of $101.2 million to various tenants for tenant improvements and leasing inducements which as of December 31, 2010 have not been incurred.
ContingenciesThe Account is party to various claims and routine litigation arising in the ordinary course of business. Management of the Account does not believe the results of any such claims or litigation, individually, or in the aggregate, will have a material effect on the Accounts business, financial position, or results of operations.
Subsequent EventsDuring February 2011, the revolving line of credit agreement held in the Accounts investment within the DDR Joint Venture was amended to extend the maturity date from February 2011 to February 2012. The maximum amount that may be drawn under this revolving line of credit agreement is $213.0 million, reduced by any outstanding letters of credit.
TIAA Real Estate Account § Prospectus 165
|
|
NOTES TO FINANCIAL STATEMENTS |
continued |
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS No. 167), which amends guidance related to the identification of a variable interest entity, variable interests, the primary beneficiary, and expands required note disclosures to provide greater transparency to the users of financial statements. In December 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which amended the Codification with the guidance contained in SFAS No. 167. In February 2010, the FASB issued ASU No. 2010-10, Amendments for Certain Investment Funds, which defers the applicability of ASU No. 2009-17 in certain instances. These standards were effective on January 1, 2010 and did not result in a significant impact to the Accounts financial position or results of operations.
166 Prospectus § TIAA Real Estate Account
|
|
|
|
|
|
|
|
|
|||||||
|
|||||||
TIAA REAL ESTATE ACCOUNT § DECEMBER
31, 2010 AND 2009 |
|
||||||
|
|||||||
|
|
Fair Value |
|
||||
|
|||||||
Location/DescriptionType |
|
2010 |
|
2009 |
|
||
|
|||||||
REAL ESTATE PROPERTIES64.22% AND 76.71% |
|
|
|
|
|
|
|
|
|||||||
ALABAMA: |
|
|
|
|
|
|
|
Inverness CenterOffice |
|
$ |
|
|
$ |
90,315 |
|
ARIZONA: |
|
|
|
|
|
|
|
Camelback CenterOffice |
|
|
33,213 |
|
|
37,774 |
|
Kierland Apartment PortfolioApartments |
|
|
96,002 |
(1) |
|
78,060 |
|
Phoenix Apartment PortfolioApartments |
|
|
22,978 |
|
|
21,767 |
|
CALIFORNIA: |
|
|
|
|
|
|
|
3 Hutton Centre DriveOffice |
|
|
32,195 |
|
|
28,752 |
|
50 Fremont StreetOffice |
|
|
315,072 |
(1) |
|
284,283 |
(1) |
88 Kearny StreetOffice |
|
|
65,407 |
|
|
61,600 |
|
275 Battery StreetOffice |
|
|
180,364 |
|
|
164,390 |
|
Rancho Cucamonga Industrial PortfolioIndustrial |
|
|
83,400 |
|
|
57,327 |
|
Centerside IOffice |
|
|
34,000 |
|
|
27,012 |
|
Centre Pointe and Valley ViewIndustrial |
|
|
19,946 |
|
|
18,929 |
|
Great West Industrial PortfolioIndustrial |
|
|
73,500 |
|
|
65,000 |
|
Larkspur CourtsApartments |
|
|
70,098 |
|
|
50,111 |
|
Northern CA RA Industrial PortfolioIndustrial |
|
|
39,730 |
|
|
42,437 |
|
Ontario Industrial PortfolioIndustrial |
|
|
223,700 |
(1) |
|
167,998 |
(1) |
Pacific PlazaOffice |
|
|
56,201 |
(1) |
|
60,075 |
(1) |
Regents CourtApartments |
|
|
65,005 |
(1) |
|
50,505 |
(1) |
Southern CA RA Industrial PortfolioIndustrial |
|
|
75,512 |
|
|
75,817 |
|
The Legacy at WestwoodApartments |
|
|
93,242 |
(1) |
|
77,836 |
(1) |
WellpointOffice |
|
|
41,000 |
|
|
37,400 |
|
WestcreekApartments |
|
|
29,616 |
|
|
23,061 |
|
West Lake North Business ParkOffice |
|
|
40,765 |
|
|
32,407 |
|
Westwood MarketplaceRetail |
|
|
89,001 |
|
|
77,077 |
|
Wilshire Rodeo PlazaOffice |
|
|
165,513 |
(1) |
|
151,209 |
(1) |
COLORADO: |
|
|
|
|
|
|
|
Palomino ParkApartments |
|
|
168,708 |
(1) |
|
143,907 |
|
The Lodge at Willow CreekApartments |
|
|
39,709 |
|
|
31,624 |
|
CONNECTICUT: |
|
|
|
|
|
|
|
Ten & Twenty Westport RoadOffice |
|
|
100,663 |
|
|
126,860 |
|
FLORIDA: |
|
|
|
|
|
|
|
701 Brickell AvenueOffice |
|
|
201,170 |
|
|
198,630 |
(1) |
North 40 Office ComplexOffice |
|
|
36,353 |
|
|
33,969 |
|
Plantation GroveRetail |
|
|
9,400 |
|
|
9,600 |
|
Pointe on Tampa BayOffice |
|
|
35,188 |
|
|
35,060 |
|
Publix at Weston CommonsRetail |
|
|
45,200 |
(1) |
|
38,100 |
(1) |
Quiet Waters at Coquina LakesApartments |
|
|
23,730 |
|
|
19,918 |
|
Seneca Industrial ParkIndustrial |
|
|
63,267 |
|
|
62,341 |
|
South Florida Apartment PortfolioApartments |
|
|
60,029 |
|
|
48,366 |
|
Suncrest Village Shopping CenterRetail |
|
|
12,600 |
|
|
12,329 |
|
The Fairways of CarolinaApartments |
|
|
22,317 |
|
|
18,628 |
|
Urban CentreOffice |
|
|
89,727 |
|
|
80,282 |
|
|
TIAA Real Estate Account § Prospectus 167
|
|
|
|
|
|
|
|
|
|||||||
STATEMENTS OF INVESTMENTS |
continued |
||||||
|
|||||||
TIAA REAL ESTATE ACCOUNT § DECEMBER
31, 2010 AND 2009 |
|
||||||
|
|
Fair Value |
|
||||
|
|||||||
Location/DescriptionType |
|
2010 |
|
2009 |
|
||
|
|||||||
FRANCE: |
|
|
|
|
|
|
|
Printemps de LHommeRetail |
|
$ |
223,743 |
|
$ |
200,995 |
|
GEORGIA: |
|
|
|
|
|
|
|
Atlanta Industrial PortfolioIndustrial |
|
|
38,800 |
|
|
39,519 |
|
Glenridge WalkApartments |
|
|
33,605 |
|
|
30,326 |
|
Reserve at SugarloafApartments |
|
|
43,720 |
(1) |
|
37,710 |
(1) |
Shawnee Ridge Industrial PortfolioIndustrial |
|
|
49,001 |
|
|
52,219 |
|
Windsor at Lenox ParkApartments |
|
|
50,805 |
(1) |
|
48,223 |
|
ILLINOIS: |
|
|
|
|
|
|
|
Chicago Caleast Industrial PortfolioIndustrial |
|
|
50,801 |
|
|
48,304 |
|
Chicago Industrial PortfolioIndustrial |
|
|
58,865 |
|
|
60,908 |
|
Oak Brook Regency TowersOffice |
|
|
70,574 |
|
|
64,265 |
|
Parkview PlazaOffice |
|
|
43,112 |
|
|
44,360 |
|
MARYLAND: |
|
|
|
|
|
|
|
Broadlands Business ParkIndustrial |
|
|
24,200 |
|
|
23,600 |
|
GE Appliance East Coast Distribution FacilityIndustrial |
|
|
29,100 |
|
|
28,900 |
|
MASSACHUSETTS: |
|
|
|
|
|
|
|
99 High StreetOffice |
|
|
255,014 |
(1) |
|
253,557 |
(1) |
Needham Corporate CenterOffice |
|
|
18,566 |
|
|
16,196 |
|
Northeast RA Industrial PortfolioIndustrial |
|
|
22,077 |
|
|
24,845 |
|
The NewbryOffice |
|
|
252,017 |
|
|
230,375 |
|
MINNESOTA: |
|
|
|
|
|
|
|
Champlin MarketplaceRetail |
|
|
12,712 |
|
|
13,801 |
|
NEVADA: |
|
|
|
|
|
|
|
Fernley Distribution FacilityIndustrial |
|
|
7,100 |
|
|
7,600 |
|
NEW JERSEY: |
|
|
|
|
|
|
|
Konica Photo Imaging HeadquartersIndustrial |
|
|
14,505 |
|
|
15,100 |
|
MarketfairRetail |
|
|
66,245 |
|
|
65,594 |
|
Morris Corporate Center IIIOffice |
|
|
71,896 |
|
|
66,478 |
|
Plainsboro PlazaRetail |
|
|
27,504 |
|
|
26,962 |
|
South River Road IndustrialIndustrial |
|
|
38,465 |
|
|
28,656 |
|
NEW YORK: |
|
|
|
|
|
|
|
780 Third AvenueOffice |
|
|
300,616 |
|
|
240,077 |
|
The ColoradoApartments |
|
|
123,039 |
(1) |
|
110,144 |
(1) |
PENNSYLVANIA: |
|
|
|
|
|
|
|
Lincoln WoodsApartments |
|
|
29,124 |
|
|
28,728 |
|
TENNESSEE: |
|
|
|
|
|
|
|
Airways Distribution CenterIndustrial |
|
|
12,113 |
|
|
12,600 |
|
Summit Distribution CenterIndustrial |
|
|
15,800 |
|
|
12,300 |
|
TEXAS: |
|
|
|
|
|
|
|
Dallas Industrial PortfolioIndustrial |
|
|
140,638 |
|
|
125,275 |
|
Four Oaks PlaceOffice |
|
|
383,676 |
|
|
409,027 |
(1) |
Houston Apartment PortfolioApartments |
|
|
186,924 |
(1) |
|
179,717 |
|
Lincoln CentreOffice |
|
|
195,416 |
(1) |
|
202,029 |
(1) |
Pinnacle Industrial PortfolioIndustrial |
|
|
38,400 |
|
|
34,148 |
|
South Frisco VillageRetail |
|
|
29,000 |
(1) |
|
26,900 |
(1) |
The CaruthApartments |
|
|
56,083 |
(1) |
|
49,641 |
(1) |
The MaronealApartments |
|
|
37,614 |
|
|
32,179 |
|
|
168 Prospectus § TIAA Real Estate Account
|
|
|
|
|
|
|
|
|
|||||||
STATEMENTS OF INVESTMENTS |
continued |
||||||
|
|||||||
TIAA REAL ESTATE ACCOUNT § DECEMBER
31, 2010 AND 2009 |
|
||||||
|
|
Fair Value |
|
||||
|
|||||||
Location/DescriptionType |
|
2010 |
|
2009 |
|
||
|
|||||||
UNITED KINGDOM: |
|
|
|
|
|
|
|
1 & 7 Westferry CircusOffice |
|
$ |
260,045 |
(1) |
$ |
239,036 |
(1) |
VIRGINIA: |
|
|
|
|
|
|
|
8270 Greensboro DriveOffice |
|
|
27,895 |
|
|
34,200 |
|
Ashford Meadows ApartmentsApartments |
|
|
95,436 |
(1) |
|
71,105 |
|
One Virginia SquareOffice |
|
|
51,700 |
|
|
40,503 |
|
The Ellipse at BallstonOffice |
|
|
76,716 |
|
|
65,505 |
|
WASHINGTON: |
|
|
|
|
|
|
|
Creeksides at CenterpointOffice |
|
|
16,611 |
|
|
18,724 |
|
Fourth and MadisonOffice |
|
|
330,007 |
(1) |
|
295,000 |
(1) |
Millennium Corporate ParkOffice |
|
|
125,228 |
|
|
116,548 |
|
Northwest RA Industrial PortfolioIndustrial |
|
|
17,000 |
|
|
17,800 |
|
Rainier Corporate ParkIndustrial |
|
|
66,800 |
|
|
65,277 |
|
Regal Logistics CampusIndustrial |
|
|
52,500 |
|
|
47,955 |
|
WASHINGTON DC: |
|
|
|
|
|
|
|
1001 Pennsylvania AvenueOffice |
|
|
589,839 |
(1) |
|
480,622 |
(1) |
1401 H Street, NWOffice |
|
|
179,294 |
(1) |
|
143,555 |
(1) |
1900 K Street, NWOffice |
|
|
246,054 |
|
|
204,000 |
|
Mazza GallerieRetail |
|
|
76,000 |
|
|
65,500 |
|
|
|
|
|
||||
TOTAL REAL ESTATE PROPERTIES |
|
|
|
|
|
|
|
(Cost $9,449,056 and $9,408,978) |
|
|
8,115,516 |
|
|
7,437,344 |
|
|
|
|
|
||||
|
TIAA Real Estate Account § Prospectus 169
|
|
|
|
|
|
|
|
|
|||||||
STATEMENTS OF INVESTMENTS |
continued |
||||||
|
|||||||
TIAA REAL ESTATE ACCOUNT § DECEMBER
31, 2010 AND 2009 |
|
||||||
OTHER REAL ESTATE-RELATED INVESTMENTS12.89% AND 15.63% |
|||||||
REAL ESTATE JOINT VENTURES10.75% AND 13.56% |
|||||||
|
|
Fair Value |
|
||||
|
|||||||
Location/Description |
|
2010 |
|
2009 |
|
||
|
|||||||
CALIFORNIA: |
|
|
|
|
|
|
|
CA-Colorado Center LP |
|
|
|
|
|
|
|
Yahoo Center (50% Account Interest) |
|
$ |
157,452 |
(2) |
$ |
133,227 |
(2) |
CA-Treat Towers LP |
|
|
|
|
|
|
|
Treat Towers (75% Account Interest) |
|
|
67,108 |
|
|
66,435 |
|
FLORIDA: |
|
|
|
|
|
|
|
Florida Mall Associates, Ltd |
|
|
|
|
|
|
|
The Florida Mall (50% Account Interest) |
|
|
238,966 |
(2) |
|
252,432 |
(2) |
TREA Florida Retail, LLC |
|
|
|
|
|
|
|
Florida Retail Portfolio (80% Account Interest) |
|
|
165,458 |
|
|
162,204 |
|
West Dade Associates |
|
|
|
|
|
|
|
Miami International Mall (50% Account Interest) |
|
|
93,221 |
(2) |
|
76,856 |
(2) |
GEORGIA: |
|
|
|
|
|
|
|
GA-Buckhead LLC |
|
|
|
|
|
|
|
Prominence in Buckhead (75% Account Interest) |
|
|
39,799 |
|
|
30,952 |
|
MASSACHUSETTS: |
|
|
|
|
|
|
|
MA-One Boston Place REIT |
|
|
|
|
|
|
|
One Boston Place (50.25% Account Interest) |
|
|
150,276 |
|
|
129,922 |
|
TENNESSEE: |
|
|
|
|
|
|
|
West Town Mall, LLC |
|
|
|
|
|
|
|
West Town Mall (50% Account Interest) |
|
|
50,613 |
(2) |
|
37,262 |
(2) |
VIRGINIA: |
|
|
|
|
|
|
|
Teachers REA IV, LLC |
|
|
|
|
|
|
|
Tysons Executive Plaza II (50% Account Interest) |
|
|
|
|
|
26,275 |
|
VARIOUS: |
|
|
|
|
|
|
|
DDR TC LLC |
|
|
|
|
|
|
|
DDR Joint Venture (85% Account Interest) |
|
|
303,866 |
(2,3) |
|
312,182 |
(2,3) |
Storage Portfolio I, LLC |
|
|
|
|
|
|
|
Storage Portfolio (75% Account Interest) |
|
|
52,812 |
(2,3) |
|
46,269 |
(2,3) |
Strategic Ind Portfolio I, LLC |
|
|
|
|
|
|
|
IDI Nationwide Industrial Portfolio (60% Account Interest) |
|
|
39,255 |
(2,3) |
|
40,587 |
(2,3) |
|
|
|
|
||||
TOTAL REAL ESTATE JOINT VENTURES |
|
|
|
|
|
|
|
(Cost $1,922,397 and $2,142,016) |
|
|
1,358,826 |
|
|
1,314,603 |
|
|
|
|
|
||||
LIMITED PARTNERSHIPS2.14% AND 2.07% |
|
|
|
|
|
|
|
Cobalt Industrial REIT (10.998% Account Interest) |
|
|
26,317 |
|
|
20,341 |
|
Colony Realty Partners LP (5.27% Account Interest) |
|
|
18,100 |
|
|
12,123 |
|
Heitman Value Partners Fund (8.43% Account Interest) |
|
|
17,300 |
|
|
13,736 |
|
Lion Gables Apartment Fund (18.46% Account Interest) |
|
|
190,024 |
|
|
142,999 |
|
MONY/Transwestern Mezz RP II (16.67% Account Interest) |
|
|
9,694 |
|
|
9,267 |
|
Transwestern Mezz Realty Partners III, LLC (11.708% Account Interest) |
|
|
8,849 |
|
|
1,807 |
|
|
|
|
|
||||
TOTAL LIMITED PARTNERSHIPS |
|
|
|
|
|
|
|
(Cost $300,907 and $295,779) |
|
|
270,284 |
|
|
200,273 |
|
|
|
|
|
||||
TOTAL REAL ESTATE JOINT VENTURES AND LIMITED PARTNERSHIPS |
|
|
|
|
|
|
|
(Cost $2,223,304 and $2,437,795) |
|
|
1,629,110 |
|
|
1,514,876 |
|
|
|
|
|
||||
|
170 Prospectus § TIAA Real Estate Account
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
STATEMENTS OF INVESTMENTS |
continued |
|||||||||||
|
||||||||||||
TIAA REAL ESTATE ACCOUNT § DECEMBER
31, 2010 AND 2009 |
|
|
|
|||||||||
MARKETABLE SECURITIES22.89% AND 6.93% |
||||||||||||
REAL ESTATE-RELATED MARKETABLE SECURITIES3.92% AND 0.00% |
||||||||||||
|
||||||||||||
Shares |
|
|
|
Fair Value |
|
|||||||
|
|
|||||||||||
2010 |
|
2009 |
|
Issuer |
|
2010 |
|
2009 |
|
|||
|
||||||||||||
|
50,398 |
|
|
|
Acadia Realty Trust |
|
$ |
919 |
|
$ |
|
|
|
11,416 |
|
|
|
Agree Realty Corporation |
|
|
299 |
|
|
|
|
|
2,574 |
|
|
|
Alexanders, Inc. |
|
|
1,061 |
|
|
|
|
|
66,883 |
|
|
|
Alexandria Real Estate Equities, Inc. |
|
|
4,900 |
|
|
|
|
|
200,791 |
|
|
|
AMB Property Corporation |
|
|
6,367 |
|
|
|
|
|
81,463 |
|
|
|
American Campus Communities, Inc. |
|
|
2,587 |
|
|
|
|
|
142,051 |
|
|
|
Apartment Investment and Management Company |
|
|
3,671 |
|
|
|
|
|
65,637 |
|
|
|
Ashford Hospitality Trust, Inc. |
|
|
633 |
|
|
|
|
|
52,433 |
|
|
|
Associated Estates Realty Corporation |
|
|
802 |
|
|
|
|
|
102,725 |
|
|
|
Avalonbay Communities, Inc. |
|
|
11,562 |
|
|
|
|
|
155,007 |
|
|
|
BioMed Realty Trust, Inc. |
|
|
2,891 |
|
|
|
|
|
168,877 |
|
|
|
Boston Properties, Inc. |
|
|
14,540 |
|
|
|
|
|
157,851 |
|
|
|
Brandywine Realty Trust |
|
|
1,839 |
|
|
|
|
|
77,519 |
|
|
|
BRE Properties, Inc. |
|
|
3,372 |
|
|
|
|
|
83,321 |
|
|
|
Camden Property Trust |
|
|
4,498 |
|
|
|
|
|
37,593 |
|
|
|
Campus Crest Communities, Inc. |
|
|
527 |
|
|
|
|
|
75,517 |
|
|
|
CapLease, Inc. |
|
|
440 |
|
|
|
|
|
167,965 |
|
|
|
CBL & Associates Properties, Inc. |
|
|
2,939 |
|
|
|
|
|
70,256 |
|
|
|
Cedar Shopping Centers, Inc. |
|
|
442 |
|
|
|
|
|
8,763 |
|
|
|
Chatham Lodging Trust |
|
|
151 |
|
|
|
|
|
20,047 |
|
|
|
Chesapeake Lodging Trust |
|
|
377 |
|
|
|
|
|
54,270 |
|
|
|
Cogdell Spencer Inc. |
|
|
315 |
|
|
|
|
|
95,610 |
|
|
|
Colonial Properties Trust |
|
|
1,726 |
|
|
|
|
|
20,917 |
|
|
|
CoreSite Realty Corporation |
|
|
285 |
|
|
|
|
|
80,891 |
|
|
|
Corporate Office Properties Trust |
|
|
2,827 |
|
|
|
|
|
123,682 |
|
|
|
Cousins Properties Incorporated |
|
|
1,032 |
|
|
|
|
|
253,113 |
|
|
|
DCT Industrial Trust Inc. |
|
|
1,344 |
|
|
|
|
|
309,541 |
|
|
|
Developers Diversified Realty Corporation |
|
|
4,361 |
|
|
|
|
|
188,954 |
|
|
|
DiamondRock Hospitality Company |
|
|
2,267 |
|
|
|
|
|
107,907 |
|
|
|
Digital Realty Trust, Inc. |
|
|
5,562 |
|
|
|
|
|
113,097 |
|
|
|
Douglas Emmett, Inc. |
|
|
1,877 |
|
|
|
|
|
298,785 |
|
|
|
Duke Realty Corporation |
|
|
3,723 |
|
|
|
|
|
72,632 |
|
|
|
DuPont Fabros Technology, Inc. |
|
|
1,545 |
|
|
|
|
|
33,167 |
|
|
|
EastGroup Properties, Inc. |
|
|
1,404 |
|
|
|
|
|
65,151 |
|
|
|
Education Realty Trust, Inc. |
|
|
506 |
|
|
|
|
|
56,762 |
|
|
|
Entertainment Properties Trust |
|
|
2,625 |
|
|
|
|
|
37,659 |
|
|
|
Equity Lifestyle Properties, Inc. |
|
|
2,106 |
|
|
|
|
|
58,543 |
|
|
|
Equity One, Inc. |
|
|
1,064 |
|
|
|
|
|
339,604 |
|
|
|
Equity Residential |
|
|
17,642 |
|
|
|
|
|
38,018 |
|
|
|
Essex Property Trust, Inc. |
|
|
4,342 |
|
|
|
|
|
21,898 |
|
|
|
Excel Trust, Inc. |
|
|
265 |
|
|
|
|
|
107,440 |
|
|
|
Extra Space Storage Inc. |
|
|
1,869 |
|
|
|
|
|
73,740 |
|
|
|
Federal Realty Investment Trust |
|
|
5,747 |
|
|
|
|
|
TIAA Real Estate Account § Prospectus 171
|
|
|
|
STATEMENTS OF INVESTMENTS |
continued |
|
|
TIAA REAL ESTATE ACCOUNT § DECEMBER 31, 2010 AND 2009 |
|
(Dollar values shown in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
Fair Value |
|
||||||||
|
|
|
|||||||||||
2010 |
|
2009 |
|
Issuer |
|
2010 |
|
2009 |
|
||||
|
|||||||||||||
|
122,336 |
|
|
|
|
FelCor Lodging Trust Incorporated |
|
$ |
861 |
|
$ |
|
|
|
71,146 |
|
|
|
|
First Industrial Realty Trust, Inc. |
|
|
623 |
|
|
|
|
|
57,529 |
|
|
|
|
First Potomac Realty Trust |
|
|
968 |
|
|
|
|
|
98,729 |
|
|
|
|
Franklin Street Properties Corp. |
|
|
1,407 |
|
|
|
|
|
560,577 |
|
|
|
|
General Growth Properties, Inc. |
|
|
8,678 |
|
|
|
|
|
28,271 |
|
|
|
|
Getty Realty Corp. |
|
|
884 |
|
|
|
|
|
10,676 |
|
|
|
|
Gladstone Commercial Corporation |
|
|
201 |
|
|
|
|
|
107,080 |
|
|
|
|
Glimcher Realty Trust |
|
|
899 |
|
|
|
|
|
38,023 |
|
|
|
|
Government Properties Income Trust |
|
|
1,019 |
|
|
|
|
|
387,498 |
|
|
|
|
HCP, Inc. |
|
|
14,256 |
|
|
|
|
|
175,223 |
|
|
|
|
Health Care REIT, Inc. |
|
|
8,348 |
|
|
|
|
|
79,299 |
|
|
|
|
Healthcare Realty Trust Incorporated |
|
|
1,679 |
|
|
|
|
|
209,343 |
|
|
|
|
Hersha Hospitality Trust |
|
|
1,382 |
|
|
|
|
|
84,755 |
|
|
|
|
Highwoods Properties, Inc. |
|
|
2,699 |
|
|
|
|
|
45,795 |
|
|
|
|
Home Properties, Inc. |
|
|
2,541 |
|
|
|
|
|
150,100 |
|
|
|
|
Hospitality Properties Trust |
|
|
3,458 |
|
|
|
|
|
798,787 |
|
|
|
|
Host Hotels & Resorts, Inc. |
|
|
14,274 |
|
|
|
|
|
88,294 |
|
|
|
|
HRPT Properties Trust |
|
|
2,252 |
|
|
|
|
|
20,487 |
|
|
|
|
Hudson Pacific Properties, Inc. |
|
|
308 |
|
|
|
|
|
109,424 |
|
|
|
|
Inland Real Estate Corporation |
|
|
963 |
|
|
|
|
|
98,903 |
|
|
|
|
Investors Real Estate Trust |
|
|
887 |
|
|
|
|
|
1,500,000 |
|
|
|
|
iShares Dow Jones US Real Estate Index Fund |
|
|
83,943 |
|
|
|
|
|
61,706 |
|
|
|
|
Kilroy Realty Corporation |
|
|
2,250 |
|
|
|
|
|
485,461 |
|
|
|
|
Kimco Realty Corporation |
|
|
8,758 |
|
|
|
|
|
83,099 |
|
|
|
|
Kite Realty Group Trust |
|
|
450 |
|
|
|
|
|
86,269 |
|
|
|
|
LaSalle Hotel Properties |
|
|
2,278 |
|
|
|
|
|
165,849 |
|
|
|
|
Lexington Realty Trust |
|
|
1,318 |
|
|
|
|
|
138,566 |
|
|
|
|
Liberty Property Trust |
|
|
4,423 |
|
|
|
|
|
30,038 |
|
|
|
|
LTC Properties, Inc. |
|
|
843 |
|
|
|
|
|
93,900 |
|
|
|
|
Mack-Cali Realty Corporation |
|
|
3,104 |
|
|
|
|
|
53,134 |
|
|
|
|
Maguire Properties, Inc. |
|
|
146 |
|
|
|
|
|
136,282 |
|
|
|
|
Medical Properties Trust, Inc. |
|
|
1,476 |
|
|
|
|
|
41,729 |
|
|
|
|
Mid-America Apartment Communities, Inc. |
|
|
2,649 |
|
|
|
|
|
20,269 |
|
|
|
|
Mission West Properties, Inc. |
|
|
136 |
|
|
|
|
|
44,989 |
|
|
|
|
Monmouth Real Estate Investment Corporation |
|
|
382 |
|
|
|
|
|
34,293 |
|
|
|
|
National Health Investors, Inc. |
|
|
1,544 |
|
|
|
|
|
101,670 |
|
|
|
|
National Retail Properties, Inc. |
|
|
2,694 |
|
|
|
|
|
152,266 |
|
|
|
|
Nationwide Health Properties, Inc. |
|
|
5,539 |
|
|
|
|
|
120,251 |
|
|
|
|
Omega Healthcare Investors, Inc. |
|
|
2,698 |
|
|
|
|
|
16,016 |
|
|
|
|
One Liberty Properties, Inc. |
|
|
267 |
|
|
|
|
|
27,787 |
|
|
|
|
Parkway Properties, Inc. |
|
|
487 |
|
|
|
|
|
63,708 |
|
|
|
|
Pennsylvania Real Estate Investment Trust |
|
|
926 |
|
|
|
|
|
77,918 |
|
|
|
|
Piedmont Office Realty Trust, Inc. |
|
|
1,569 |
|
|
|
|
|
196,790 |
|
|
|
|
Plum Creek Timber Company, Inc. |
|
|
7,370 |
|
|
|
|
|
59,612 |
|
|
|
|
Post Properties, Inc. |
|
|
2,164 |
|
|
|
|
|
49,003 |
|
|
|
|
Potlatch Corporation |
|
|
1,595 |
|
|
|
|
|
681,117 |
|
|
|
|
ProLogis |
|
|
9,835 |
|
|
|
|
|
|
172 Prospectus § TIAA Real Estate Account
|
|
|
|
STATEMENTS OF INVESTMENTS |
continued |
|
|
TIAA REAL ESTATE ACCOUNT § DECEMBER 31, 2010 AND 2009 |
|
(Dollar values shown in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
Fair Value |
|
||||||||
|
|
|
|||||||||||
|
2010 |
|
|
2009 |
|
Issuer |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,706 |
|
|
|
|
PS Business Parks, Inc. |
|
$ |
1,265 |
|
$ |
|
|
|
153,807 |
|
|
|
|
Public Storage, Inc. |
|
|
15,599 |
|
|
|
|
|
42,225 |
|
|
|
|
Ramco-Gershenson Properties Trust |
|
|
526 |
|
|
|
|
|
97,616 |
|
|
|
|
Rayonier Inc. |
|
|
5,127 |
|
|
|
|
|
141,919 |
|
|
|
|
Realty Income Corporation |
|
|
4,854 |
|
|
|
|
|
97,060 |
|
|
|
|
Regency Centers Corporation |
|
|
4,100 |
|
|
|
|
|
17,498 |
|
|
|
|
Saul Centers, Inc. |
|
|
829 |
|
|
|
|
|
150,706 |
|
|
|
|
Senior Housing Properties Trust |
|
|
3,306 |
|
|
|
|
|
352,460 |
|
|
|
|
Simon Property Group, Inc. |
|
|
35,066 |
|
|
|
|
|
93,168 |
|
|
|
|
SL Green Realty Corp. |
|
|
6,290 |
|
|
|
|
|
34,147 |
|
|
|
|
Sovran Self Storage, Inc. |
|
|
1,257 |
|
|
|
|
|
186,401 |
|
|
|
|
Strategic Hotels & Resorts, Inc. |
|
|
986 |
|
|
|
|
|
24,737 |
|
|
|
|
Sun Communities, Inc. |
|
|
824 |
|
|
|
|
|
29,324 |
|
|
|
|
Sun Healthcare Group, Inc. |
|
|
540 |
|
|
|
|
|
137,832 |
|
|
|
|
Sunstone Hotel Investors, L.L.C. |
|
|
1,424 |
|
|
|
|
|
49,191 |
|
|
|
|
Tanger Factory Outlet Centers, Inc. |
|
|
2,518 |
|
|
|
|
|
50,042 |
|
|
|
|
Taubman Centers, Inc. |
|
|
2,526 |
|
|
|
|
|
11,532 |
|
|
|
|
Terreno Realty Corporation |
|
|
207 |
|
|
|
|
|
155,462 |
|
|
|
|
The Macerich Company |
|
|
7,364 |
|
|
|
|
|
220,400 |
|
|
|
|
UDR, Inc. |
|
|
5,184 |
|
|
|
|
|
5,400 |
|
|
|
|
UMH Properties, Inc. |
|
|
55 |
|
|
|
|
|
16,113 |
|
|
|
|
Universal Health Realty Income Trust |
|
|
589 |
|
|
|
|
|
27,120 |
|
|
|
|
Urstadt Biddle Properties Inc. |
|
|
527 |
|
|
|
|
|
119,610 |
|
|
|
|
U-Store-It Trust |
|
|
1,140 |
|
|
|
|
|
188,915 |
|
|
|
|
Ventas, Inc. |
|
|
9,914 |
|
|
|
|
|
219,149 |
|
|
|
|
Vornado Realty Trust |
|
|
18,262 |
|
|
|
|
|
78,376 |
|
|
|
|
Washington Real Estate Investment Trust |
|
|
2,429 |
|
|
|
|
|
142,411 |
|
|
|
|
Weingarten Realty Investors |
|
|
3,384 |
|
|
|
|
|
646,348 |
|
|
|
|
Weyerhaeuser Company |
|
|
12,235 |
|
|
|
|
|
22,256 |
|
|
|
|
Winthrop Realty Trust |
|
|
285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REAL ESTATE-RELATED MARKETABLE SECURITIES |
|
|
495,294 |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
OTHER MARKETABLE SECURITIES18.97% AND 6.93% |
|||||||||||||||
GOVERNMENT AGENCY NOTES11.75% AND 4.80% |
|||||||||||||||
Principal |
|
|
|
|
|
Fair Value |
|
||||||||
|
|
|
|
|
|||||||||||
2010 |
|
2009 |
|
Issuer |
Yield(4) |
Maturity |
|
2010 |
|
2009 |
|
||||
|
$ |
|
|
$4,700 |
|
Fannie Mae Discount Notes |
0.041% |
1/13/10 |
|
|
$ |
|
|
$4,700 |
|
|
|
|
|
25,000 |
|
Fannie Mae Discount Notes |
0.091% |
1/19/10 |
|
|
|
|
|
25,000 |
|
|
|
|
|
49,300 |
|
Fannie Mae Discount Notes |
0.020% |
1/27/10 |
|
|
|
|
|
49,299 |
|
|
|
|
|
25,000 |
|
Fannie Mae Discount Notes |
0.051% |
2/4/10 |
|
|
|
|
|
24,999 |
|
|
|
|
|
20,000 |
|
Fannie Mae Discount Notes |
0.091% |
2/8/10 |
|
|
|
|
|
19,999 |
|
|
|
|
|
18,873 |
|
Fannie Mae Discount Notes |
0.071% |
2/16/10 |
|
|
|
|
|
18,872 |
|
|
|
|
|
10,000 |
|
Fannie Mae Discount Notes |
0.101% |
3/1/10 |
|
|
|
|
|
9,999 |
|
|
|
|
|
17,470 |
|
Fannie Mae Discount Notes |
0.167% |
5/5/10 |
|
|
|
|
|
17,463 |
|
|
|
TIAA Real Estate Account § Prospectus 173
|
|
|||||||||||
|
|
|||||||||||
STATEMENTS OF INVESTMENTS |
continued |
|||||||||||
|
|
|||||||||||
TIAA REAL ESTATE ACCOUNT § DECEMBER 31, 2010 AND 2009 |
|
|||||||||||
(Dollar values shown in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
|
Fair Value |
|
||||||||
|
|
|
|
|
|||||||||||
2010 |
|
2009 |
|
Issuer |
Yield(4) |
Maturity |
|
2010 |
|
2009 |
|
||||
|
$15,070 |
|
$ |
|
|
Fannie Mae Discount Notes |
0.172% |
1/18/11 |
|
$ |
15,070 |
|
$ |
|
|
|
21,225 |
|
|
|
|
Fannie Mae Discount Notes |
0.172% |
2/1/11 |
|
|
21,224 |
|
|
|
|
|
43,640 |
|
|
|
|
Fannie Mae Discount Notes |
0.183% |
2/3/11 |
|
|
43,637 |
|
|
|
|
|
13,515 |
|
|
|
|
Fannie Mae Discount Notes |
0.183% |
2/14/11 |
|
|
13,514 |
|
|
|
|
|
50,000 |
|
|
|
|
Fannie Mae Discount Notes |
0.137% |
2/15/11 |
|
|
49,995 |
|
|
|
|
|
32,479 |
|
|
|
|
Fannie Mae Discount Notes |
0.162-0.178% |
3/1/11 |
|
|
32,474 |
|
|
|
|
|
32,445 |
|
|
|
|
Fannie Mae Discount Notes |
0.172% |
3/2/11 |
|
|
32,440 |
|
|
|
|
|
14,000 |
|
|
|
|
Fannie Mae Discount Notes |
0.162% |
3/8/11 |
|
|
13,998 |
|
|
|
|
|
19,600 |
|
|
|
|
Fannie Mae Discount Notes |
0.178% |
3/21/11 |
|
|
19,596 |
|
|
|
|
|
31,935 |
|
|
|
|
Fannie Mae Discount Notes |
0.162% |
3/23/11 |
|
|
31,928 |
|
|
|
|
|
20,210 |
|
|
|
|
Fannie Mae Discount Notes |
0.178% |
4/13/11 |
|
|
20,204 |
|
|
|
|
|
31,800 |
|
|
|
|
Federal Farm Credit Bank Discount Notes |
0.172% |
5/9/11 |
|
|
31,786 |
|
|
|
|
|
|
|
|
10,990 |
|
Federal Home Loan Bank Discount Notes |
0.001% |
1/4/10 |
|
|
|
|
|
10,990 |
|
|
|
|
|
4,419 |
|
Federal Home Loan Bank Discount Notes |
0.041% |
1/13/10 |
|
|
|
|
|
4,419 |
|
|
|
|
|
44,000 |
|
Federal Home Loan Bank Discount Notes |
0.081% |
1/15/10 |
|
|
|
|
|
44,000 |
|
|
|
|
|
25,300 |
|
Federal Home Loan Bank Discount Notes |
0.071% |
1/22/10 |
|
|
|
|
|
25,300 |
|
|
|
|
|
41,200 |
|
Federal Home Loan Bank Discount Notes |
0.051% |
2/24/10 |
|
|
|
|
|
41,200 |
|
|
|
|
|
15,770 |
|
Federal Home Loan Bank Discount Notes |
0.081% |
3/5/10 |
|
|
|
|
|
15,770 |
|
|
29,975 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.162% |
1/5/11 |
|
|
29,975 |
|
|
|
|
|
25,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.162% |
1/7/11 |
|
|
25,000 |
|
|
|
|
|
30,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.172% |
1/12/11 |
|
|
30,000 |
|
|
|
|
|
50,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.183% |
1/14/11 |
|
|
49,999 |
|
|
|
|
|
30,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.177% |
1/19/11 |
|
|
29,999 |
|
|
|
|
|
15,800 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.157% |
1/20/11 |
|
|
15,800 |
|
|
|
|
|
30,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.177% |
1/21/11 |
|
|
29,999 |
|
|
|
|
|
36,400 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.122% |
1/26/11 |
|
|
36,399 |
|
|
|
|
|
49,977 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.157-0.172% |
1/28/11 |
|
|
49,975 |
|
|
|
|
|
|
39,060 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.167-0.178% |
2/2/11 |
|
|
39,057 |
|
|
|
|
|
|
30,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.167% |
2/4/11 |
|
|
29,998 |
|
|
|
|
|
20,115 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.157% |
2/9/11 |
|
|
20,113 |
|
|
|
|
|
47,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.147% |
2/16/11 |
|
|
46,995 |
|
|
|
|
|
41,381 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.157-0.183% |
2/18/11 |
|
|
41,377 |
|
|
|
|
|
|
35,415 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.183% |
2/23/11 |
|
|
35,411 |
|
|
|
|
|
25,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.188% |
2/25/11 |
|
|
24,997 |
|
|
|
|
|
32,810 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.162% |
3/9/11 |
|
|
32,804 |
|
|
|
|
|
27,700 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.162% |
3/11/11 |
|
|
27,695 |
|
|
|
|
|
25,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.162% |
3/16/11 |
|
|
24,995 |
|
|
|
|
|
23,810 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.178% |
4/15/11 |
|
|
23,803 |
|
|
|
|
|
16,115 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.178% |
4/29/11 |
|
|
16,109 |
|
|
|
|
|
20,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.271% |
5/6/11 |
|
|
19,996 |
|
|
|
|
|
100,000 |
|
|
|
|
Federal Home Loan Bank Discount Notes |
0.269% |
8/12/11 |
|
|
99,978 |
|
|
|
|
|
|
|
|
10,000 |
|
Freddie Mac Discount Notes |
0.091% |
1/20/10 |
|
|
|
|
|
10,000 |
|
|
|
|
|
50,541 |
|
Freddie Mac Discount Notes |
0.041-0.076% |
1/25/10 |
|
|
|
|
|
50,540 |
|
|
174 Prospectus § TIAA Real Estate Account
|
|
|
|
STATEMENTS OF INVESTMENTS |
continued |
|
|
TIAA REAL ESTATE ACCOUNT § DECEMBER 31, 2010 AND 2009 |
|
(Dollar values shown in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
|
Fair Value |
|
||||||||
|
|
|
|
|
|||||||||||
2010 |
|
2009 |
|
Issuer |
Yield(4) |
Maturity |
|
2010 |
|
2009 |
|
||||
|
|||||||||||||||
|
$ |
|
|
$11,800 |
|
Freddie Mac Discount Notes |
0.051% |
2/2/10 |
|
$ |
|
|
$ |
11,800 |
|
|
|
|
|
47,000 |
|
Freddie Mac Discount Notes |
0.030% |
2/16/10 |
|
|
|
|
|
46,998 |
|
|
|
|
|
19,010 |
|
Freddie Mac Discount Notes |
0.132% |
2/26/10 |
|
|
|
|
|
19,009 |
|
|
|
|
|
5,736 |
|
Freddie Mac Discount Notes |
0.081% |
3/1/10 |
|
|
|
|
|
5,736 |
|
|
|
|
|
9,000 |
|
Freddie Mac Discount Notes |
0.071% |
3/8/10 |
|
|
|
|
|
8,999 |
|
|
45,880 |
|
|
|
|
Freddie Mac Discount Notes |
0.157-0.162% |
1/3/11 |
|
|
45,880 |
|
|
|
|
|
82,710 |
|
|
|
|
Freddie Mac Discount Notes |
0.183% |
1/10/11 |
|
|
82,709 |
|
|
|
|
|
27,960 |
|
|
|
|
Freddie Mac Discount Notes |
0.152% |
1/25/11 |
|
|
27,959 |
|
|
|
|
|
28,150 |
|
|
|
|
Freddie Mac Discount Notes |
0.172% |
1/31/11 |
|
|
28,149 |
|
|
|
|
|
18,100 |
|
|
|
|
Freddie Mac Discount Notes |
0.142% |
2/22/11 |
|
|
18,098 |
|
|
|
|
|
49,430 |
|
|
|
|
Freddie Mac Discount Notes |
0.162-0.178% |
3/7/11 |
|
|
49,421 |
|
|
|
|
|
26,710 |
|
|
|
|
Freddie Mac Discount Notes |
0.162% |
3/14/11 |
|
|
26,705 |
|
|
|
|
|
14,900 |
|
|
|
|
Freddie Mac Discount Notes |
0.172% |
3/21/11 |
|
|
14,897 |
|
|
|
|
|
24,600 |
|
|
|
|
Freddie Mac Discount Notes |
0.183% |
4/18/11 |
|
|
24,592 |
|
|
|
|
|
10,085 |
|
|
|
|
Freddie Mac Discount Notes |
0.193% |
4/19/11 |
|
|
10,082 |
|
|
|
|
|
50,000 |
|
|
|
|
Freddie Mac Discount Notes |
0.252-0.257% |
11/9/11 |
|
|
49,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
TOTAL GOVERNMENT AGENCY NOTES |
|
|
|
|
1,484,774 |
|
|
465,092 |
|
||||||
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED STATES TREASURY SECURITIES7.22% AND 2.13% |
|||||||||||||||
|
|
|
|
24,515 |
|
United States Treasury Bills |
0.066-0.152% |
2/25/10 |
|
|
|
|
|
24,514 |
|
|
|
|
|
47,200 |
|
United States Treasury Bills |
0.137-0.162% |
4/22/10 |
|
|
|
|
|
47,189 |
|
|
|
|
|
52,530 |
|
United States Treasury Bills |
0.122-0.147% |
5/13/10 |
|
|
|
|
|
52,506 |
|
|
|
|
|
62,015 |
|
United States Treasury Bills |
0.127-0.147% |
5/20/10 |
|
|
|
|
|
61,981 |
|
|
|
|
|
20,000 |
|
United States Treasury Bills |
0.137% |
5/27/10 |
|
|
|
|
|
19,985 |
|
|
32,300 |
|
|
|
|
United States Treasury Bills |
0.130% |
1/13/11 |
|
|
32,300 |
|
|
|
|
|
31,600 |
|
|
|
|
United States Treasury Bills |
0.152% |
1/27/11 |
|
|
31,599 |
|
|
|
|
|
32,430 |
|
|
|
|
United States Treasury Bills |
0.129% |
2/10/11 |
|
|
32,427 |
|
|
|
|
|
30,000 |
|
|
|
|
United States Treasury Bills |
0.133% |
2/17/11 |
|
|
29,996 |
|
|
|
|
|
30,000 |
|
|
|
|
United States Treasury Bills |
0.140% |
2/24/11 |
|
|
29,995 |
|
|
|
|
|
90,990 |
|
|
|
|
United States Treasury Bills |
0.106-0.137% |
3/3/11 |
|
|
90,972 |
|
|
|
|
|
41,400 |
|
|
|
|
United States Treasury Bills |
0.132-0.178% |
3/10/11 |
|
|
41,391 |
|
|
|
|
|
46,320 |
|
|
|
|
United States Treasury Bills |
0.142-0.163% |
3/17/11 |
|
|
46,310 |
|
|
|
|
|
34,000 |
|
|
|
|
United States Treasury Bills |
0.141% |
3/24/11 |
|
|
33,991 |
|
|
|
|
|
30,000 |
|
|
|
|
United States Treasury Bills |
0.147% |
3/31/11 |
|
|
29,991 |
|
|
|
|
|
50,000 |
|
|
|
|
United States Treasury Bills |
0.137% |
4/7/11 |
|
|
49,982 |
|
|
|
|
|
38,150 |
|
|
|
|
United States Treasury Bills |
0.173% |
4/14/11 |
|
|
38,135 |
|
|
|
|
|
30,000 |
|
|
|
|
United States Treasury Bills |
0.173% |
4/21/11 |
|
|
29,988 |
|
|
|
|
|
25,000 |
|
|
|
|
United States Treasury Bills |
0.173% |
4/28/11 |
|
|
24,989 |
|
|
|
|
|
28,630 |
|
|
|
|
United States Treasury Bills |
0.153% |
5/5/11 |
|
|
28,616 |
|
|
|
|
|
55,000 |
|
|
|
|
United States Treasury Bills |
0.162-0.184% |
5/12/11 |
|
|
54,971 |
|
|
|
|
|
49,225 |
|
|
|
|
United States Treasury Bills |
0.190-0.210% |
5/19/11 |
|
|
49,197 |
|
|
|
|
|
47,130 |
|
|
|
|
United States Treasury Bills |
0.170-0.200% |
5/26/11 |
|
|
47,102 |
|
|
|
|
|
205 |
|
|
|
|
United States Treasury Bills |
0.167% |
6/9/11 |
|
|
205 |
|
|
|
|
|
19,325 |
|
|
|
|
United States Treasury Bills |
0.178% |
6/16/11 |
|
|
19,310 |
|
|
|
|
|
|
TIAA Real Estate Account § Prospectus 175
|
|
STATEMENTS OF INVESTMENTS |
continued |
|
|
TIAA REAL ESTATE ACCOUNT § DECEMBER 31, 2010 AND 2009 |
|
(Dollar values shown in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
|
Fair Value |
|
||||||||
|
|
|
|
|
|||||||||||
2010 |
|
2009 |
|
Issuer |
Yield(4) |
Maturity |
|
2010 |
|
2009 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 4,300 |
|
|
$ |
|
United States Treasury Bills |
0.181% |
6/23/11 |
|
$ |
4,296 |
|
$ |
|
|
|
29,480 |
|
|
|
|
United States Treasury Notes |
0.148% |
2/28/11 |
|
|
29,511 |
|
|
|
|
|
50,800 |
|
|
|
|
United States Treasury Notes |
0.174-0.227% |
3/31/11 |
|
|
50,883 |
|
|
|
|
|
21,450 |
|
|
|
|
United States Treasury Notes |
0.245% |
4/30/11 |
|
|
21,499 |
|
|
|
|
|
33,650 |
|
|
|
|
United States Treasury Notes |
0.237% |
6/30/11 |
|
|
33,805 |
|
|
|
|
|
30,350 |
|
|
|
|
United States Treasury Notes |
0.273% |
9/30/11 |
|
|
30,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL UNITED STATES TREASURY SECURITIES |
|
|
|
|
|
|
|
||||||||
(Cost $911,921 and $206,163) |
|
|
911,972 |
|
|
206,175 |
|
||||||||
|
|
|
|
||||||||||||
TOTAL OTHER MARKETABLE SECURITIES |
|
|
|
|
|
|
|
||||||||
(Cost $2,396,615 and $671,235) |
|
|
2,396,746 |
|
|
671,267 |
|
||||||||
|
|
|
|
||||||||||||
TOTAL MARKETABLE SECURITIES |
|
|
|
|
|
|
|
||||||||
(Cost $2,876,978 and $671,235) |
|
|
2,892,040 |
|
|
671,267 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MORTGAGE LOAN RECEIVABLE0.00% AND 0.73% |
|||||||||||||||
|
|
|
|
|
|
Borrower |
Current |
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
75,000 |
|
Klingle Corporation |
|
|
|
|
|
|
|
71,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|||||||||||||||
TOTAL MORTGAGE LOAN RECEIVABLE |
|
|
|
|
|
|
|
|
|||||||
(Cost $ and $75,000) |
|
|
|
|
|
|
71,273 |
|
|||||||
|
|
|
|
|
|||||||||||
TOTAL INVESTMENTS |
|
|
|
|
|
|
|
|
|||||||
(Cost $14,549,338 and $12,593,008) |
|
|
$ |
12,636,666 |
|
$ |
9,694,760 |
|
|||||||
|
|
|
|
|
|
|
(1) |
The investment has a mortgage loan payable outstanding, as indicated in Note 9. |
(2) |
The market value reflects the Accounts interest in the joint venture and is net of debt. |
(3) |
Properties within this investment are located throughout the United States. |
(4) |
Yield represents the annualized yield at the date of purchase. |
(5) |
At December 31, 2009, the interest rate on this investment was 1.04%, the loan was paid in full as of December 31, 2010. |
176 Prospectus § TIAA Real Estate Account
To the Participants of the TIAA Real Estate Account and the Board of Trustees of Teachers Insurance and Annuity Association of America:
March 17, 2011
TIAA Real Estate Account § Prospectus 177
The Real Estate Account has no officers or directors. The Trustees and certain principal executive officers of TIAA as of the date hereof, their dates of birth, and their principal occupations during the past five years, are as follows:
|
|
|
TRUSTEES |
|
|
|
|
|
|
||
Name & Date of Birth (DOB) |
|
Principal Occupations During Past 5 Years |
|
|
|
Ronald L.
Thompson |
|
Former Chairman and Chief Executive Officer, Midwest Stamping and Manufacturing Company from 1993 through 2005. Director, Chrysler Group, LLC and Washington University in St. Louis. Member, Plymouth Ventures Partnership II Advisory Board. |
|
|
|
Jeffrey R. Brown |
|
William G. Karnes Professor of Finance and Director of the Center for Business and Public Policy, University of Illinois at Urbana-Champaign. Research Associate of the National Bureau of Economic Research (NBER) and Associate Director of the NBER Retirement Research Center. Former member of the Social Security Advisory Board from 2006 to 2008, and Director of the American Risk and Insurance Association and the Countryside School. |
|
|
|
Robert C. Clark |
|
Harvard University Distinguished Service Professor and Austin Wakeman Scott Professor of Law, Harvard Law School, Harvard University. Formerly Dean and Royall Professor of Law, Harvard Law School from 1989 to 2003. Director of the Hodson Trust, Time Warner, Inc. and Omnicom Group. |
|
|
|
Lisa W. Hess |
|
President and Managing Partner, Sky Top Capital. Former Chief Investment Officer of Loews Corporation from 2002 to 2008. Founding partner of Zesiger Capital Group. Trustee of the WT Grant Foundation, the Chapin School, and the Pomfret School. |
|
|
|
Edward M.
Hundert, M.D. |
|
Senior lecturer in Medical Ethics, Harvard Medical School. President, Case Western Reserve University from 2002 to 2006. Formerly, Dean, 2000-2002, University of Rochester School of Medicine and Dentistry, Professor of Medical Humanities and Psychiatry, 1997 to 2002. Board Member, Rock and Roll Hall of Fame. |
|
|
|
Lawrence H.
Linden |
|
Retired Managing Director and former General Partner at Goldman Sachs, retiring in 2008. After joining Goldman Sachs in 1992, served at various times the Head of Technology, Head of Operations, and Co-Chairman of the Global Control and Compliance Committee. Founding Trustee of the Linden Trust for Conservation, trustee of Resources for the Future, Co-Chairman of the Board of Directors of the World Wildlife Fund and co-founder of, and senior advisor to, the Redstone Strategy Group. Member, Energy Initiative Advisory Board, Massachusetts Institute of Technology. |
|
|
|
Maureen OHara |
|
R.W. Purcell Professor of Finance at Johnson Graduate School of Management, Cornell University, where she has taught since 1979. Chair of the board of Investment Technology Group, Inc. since 2007, and member of the board since 2003. Director of New Star Financial, Inc. and Chair of the FINRA Economic Advisory Board. |
|
|
|
Donald K.
Peterson |
|
Former Chairman and Chief Executive Officer, Avaya Inc. from 2002 to 2006 and President and Chief Executive Officer from 2000 to 2001. Formerly, Executive Vice President and Chief Financial Officer, Lucent Technologies from 1996 to 2000. Member and former chairman of the board of Worcester Polytechnic Institute, overseer of the Tuck School of Business Administration at Dartmouth College, and trustee of the Committee for Economic Development. Director of Sanford C. Bernstein Fund Inc. |
|
|
|
178 Prospectus § TIAA Real Estate Account
|
|
|
TRUSTEES |
|
(continued) |
|
|
|
|
||
Name & Date of Birth (DOB) |
|
Principal Occupations During Past 5 Years |
|
|
|
Sidney A. Ribeau |
|
President, Howard University since 2008. Formerly, President, Bowling Green State University, 1995-2008. Director, Worthington Industries. |
|
|
|
Dorothy K. Robinson |
|
Vice President and General Counsel, Yale University since 1995. Formerly General Counsel, Yale University, 1986-1995. Trustee, Newark Public Radio Inc., Director, Yale Southern Observatory, Inc., Youth Rights Media, Inc. and Friends of New Haven Legal Assistance. |
|
|
|
David L.
Shedlarz |
|
Former Vice Chairman of Pfizer Inc. from 2006 to 2007, Executive Vice President from 1999 to 2005 and Chief Financial Officer of Pfizer from 1995 to 2005. Director, Pitney Bowes Inc. and the Hershey Corporation. Director, Multiple Sclerosis Society of New York City Chapter. |
|
|
|
David F. Swensen |
|
Chief Investment Officer, Yale University since 1985, and adjunct professor of investment strategy at Yale School of Management and lecturer in Yales Department of Economics. Member, Brookings Institution and President Obamas Economic Recovery Advisory Board. Senior Trustee of the Carnegie Institution for Science and Hamden Hall Country Day School. Fellow of the American Academy of Arts and Sciences. |
|
|
|
Marta Tienda |
|
Maurice P. During 22 Professor in Demographic Studies and Professor of Sociology and Public Affairs, Princeton University, since 1997. Visiting Research Scholar at the New York University Center for Advanced Research in Social Sciences, 2010 to 2011. Director, Office of Population Research, Princeton University, 1998-2002. Commissioner, National Key Indicators Commission. Trustee, Sloan Foundation and Jacobs Foundation. Member of Visiting Committee, Harvard University Kennedy School of Government. Member, Adrenalina Research Advisory Board. |
|
|
|
Rosalie J. Wolf |
|
Managing Partner, Botanica Capital Partners LLC. Formerly, Senior Advisor and Managing Director, Offit Hall Capital Management LLC and its predecessor company, Laurel Management Company LLC from 2001 to 2003; formerly, Treasurer and Chief Investment Officer, The Rockefeller Foundation. Director, North European Oil Royalty Trust, Director and former Chairman of The Sanford C. Bernstein Fund, Inc. Member of the Brock Capital Group, LLC. |
|
|
|
|
||
|
|
|
OFFICER-TRUSTEES |
|
|
|
|
|
|
||
Name & Date of Birth |
|
Principal Occupations During Past 5 Years |
|
|
|
Roger W.
Ferguson, Jr. |
|
President and Chief Executive Officer of TIAA and CREF since April 2008. Formerly, Chairman of Swiss Re America Holding Corporation and Head of Financial Services and member of the Executive Committee, Swiss Re from 2006 to 2008; Vice Chairman and member of the Board of the U.S. Federal Reserve from 1999 to 2006 and a member of its Board of Governors from 1997 to 1999; and Partner and Associate, McKinsey & Company from 1984 to 1997. Currently a member of the advisory board of Brevan Howard Asset Management LLP, a director of International Flavors and Fragrances, Inc., and a member of the Presidents Council on Jobs and Competitiveness. Fellow of the American Academy of Arts & Sciences and member of its Commission on the Humanities and Social Sciences. Board member at the Institute for Advanced Study, Memorial Sloan-Kettering Cancer Center, and the Committee for Economic Development. Member of the Harvard University Visiting Committee for the Memorial Church, the Economic Club of New York, the Council on Foreign Relations and the Group of Thirty. |
|
|
|
TIAA Real Estate Account § Prospectus 179
|
|
|
OFFICERS |
|
|
|
|
|
|
||
Name & Date of Birth |
|
Principal Occupations During Past 5 Years |
|
|
|
Virginia M.
Wilson |
|
Executive Vice President and Chief Financial Officer, TIAA and CREF since 2010. Served from 2006 to 2009 as Executive Vice President and Chief Financial Officer of Wyndham Worldwide Corporation, one of the worlds largest hospitality firms, following its 2006 spin-off from Cendant Corporation, a multinational holding company with operations in the real estate, travel, car rental, hospitality, mortgage banking and other service sectors. Served from 2003 to 2006 as Cendants Executive Vice President and Chief Accounting Officer. Corporate controller of MetLife, Inc. from 1999 to 2003 and was senior vice president and controller of Transamerica Corporation (which was acquired by AEGON NV in 1999) from 1995 to 1999. Prior to 1995, was an audit partner at Deloitte & Touche LLP. Currently a director of the Los Angeles Child Guidance Clinic and a trustee and vice chair for Catholic Charities in New York. |
|
|
|
Scott C. Evans |
|
Executive Vice President of TIAA since 1999 and Head of Asset Management since 2006 of TIAA and CREF, the TIAA-CREF Funds, the TIAA-CREF Life Funds and TIAA Separate Account VA-1 (collectively, the TIAA-CREF Funds). Also served as Chief Investment Officer of TIAA between 2004 and 2006 and the TIAA-CREF Funds between 2003 and 2006. Trustee, IFRS Foundation; member of the ABP Investment Committee of Stichting Pensioenfond BP/Algemene; and member of the Tufts University Investment Committee. |
|
|
|
Edward D. Van
Dolsen |
|
Executive Vice President and Chief Operating Officer of TIAA and CREF since 2010. Formerly Executive Vice President, Product Development and Management of TIAA from 2009 to 2010, Executive Vice President, Institutional Client Services from 2006 to 2009, and Executive Vice President, Product Management of TIAA from 2005 to 2006, and Executive Vice President of the TIAA-CREF Funds since 2008. Also served as Senior Vice President, Pension Products from 2003 to 2006. |
|
|
|
Jorge Gutierrez |
|
Vice President and Treasurer, TIAA since September, 2008. Assistant Treasurer, TIAA from 2004 to 2008. |
|
|
|
William J.
Mostyn III |
|
Senior Vice President and Corporate Secretary of TIAA and the TIAA-CREF Funds since April 2008; Deputy General Counsel and Corporate Secretary of Bank of America Corporation from 2005 to 2007; Deputy General Counsel, Secretary and Corporate Governance Officer of The Gillette Company from 1974 to 2005. |
|
|
|
|
|
|
PORTFOLIO MANAGEMENT TEAM |
||
|
|
|
Name & Date of Birth |
|
Principal Occupations During Past 5 Years |
|
|
|
Margaret A.
Brandwein |
|
Managing Director and Portfolio Manager, TIAA Real Estate Account since 2004. From 2001 to 2004, Head of Commercial Mortgages West Coast for TIAA. |
|
|
|
Thomas C.
Garbutt |
|
Senior Managing Director and Head of Global Real Estate, TIAA. |
|
|
|
180 Prospectus § TIAA Real Estate Account
APPENDIX B DESCRIPTION OF PROPERTIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
Location |
|
Year Built |
|
Year |
|
Rentable |
)(1) |
Percent |
|
Annual Avg. |
(2) |
Fair Value(3) |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OFFICE PROPERTIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1001 Pennsylvania Ave |
|
Washington, DC |
|
1987 |
|
2004 |
|
756,499 |
|
97 |
% |
$ |
34.40 |
|
$ |
589,839 |
(4) |
|
Four Oaks Place |
|
Houston, TX |
|
1983 |
|
2004 |
|
1,758,378 |
|
93 |
% |
|
17.14 |
|
|
383,676 |
|
|
Fourth & Madison |
|
Seattle, WA |
|
2002 |
|
2004 |
|
845,533 |
|
99 |
% |
|
27.74 |
|
|
330,007 |
(4) |
|
50 Fremont Street |
|
San Francisco, CA |
|
1983 |
|
2004 |
|
810,089 |
|
98 |
% |
|
27.98 |
|
|
315,072 |
(4) |
|
780 Third Avenue |
|
New York, NY |
|
1984 |
|
1999 |
|
487,501 |
|
91 |
% |
|
48.29 |
|
|
300,616 |
|
|
1 & 7 Westferry Circus |
|
London, UK |
|
1992, 1993 |
|
2005 |
|
396,140 |
|
98 |
% |
|
48.63 |
|
|
260,045 |
(4)(5) |
|
99 High Street |
|
Boston, MA |
|
1971 |
|
2005 |
|
731,204 |
|
84 |
% |
|
34.64 |
|
|
255,014 |
(4) |
|
The Newbry |
|
Boston, MA |
|
1940-1961 |
(6) |
2006 |
|
607,422 |
|
90 |
% |
|
39.80 |
|
|
252,017 |
|
|
1900 K Street |
|
Washington, DC |
|
1996 |
|
2004 |
|
339,060 |
|
99 |
% |
|
28.95 |
|
|
246,054 |
|
|
701 Brickell |
|
Miami, FL |
|
1986 |
(8) |
2002 |
|
676,149 |
|
92 |
% |
|
31.87 |
|
|
201,170 |
|
|
Lincoln Centre |
|
Dallas, TX |
|
1984 |
|
2005 |
|
1,638,132 |
|
82 |
% |
|
16.32 |
|
|
195,416 |
(4) |
|
275 Battery |
|
San Francisco, CA |
|
1988 |
|
2005 |
|
475,138 |
|
87 |
% |
|
30.98 |
|
|
180,364 |
|
|
1401 H Street NW |
|
Washington, D.C. |
|
1992 |
|
2006 |
|
340,656 |
|
92 |
% |
|
34.65 |
|
|
179,294 |
(4) |
|
Wilshire Rodeo Plaza |
|
Beverly Hills, CA |
|
1935, 1984 |
|
2006 |
|
261,932 |
|
97 |
% |
|
49.68 |
|
|
165,513 |
(4) |
|
Yahoo! Center(7) |
|
Santa Monica, CA |
|
1984 |
|
2004 |
|
1,185,119 |
|
90 |
% |
|
32.44 |
|
|
157,452 |
|
|
Mellon Financial Center at One Boston Place(10) |
|
Boston, MA |
|
1970 |
(8) |
2002 |
|
804,444 |
|
89 |
% |
|
42.45 |
|
|
150,276 |
|
|
Millennium Corporate Park |
|
Redmond, WA |
|
1999, 2000 |
|
2006 |
|
536,884 |
|
95 |
% |
|
15.35 |
|
|
125,228 |
|
|
Ten & Twenty Westport Road |
|
Wilton, CT |
|
1974(8), 2001 |
|
2001 |
|
526,617 |
|
94 |
% |
|
21.39 |
|
|
100,663 |
|
|
Urban Centre |
|
Tampa, FL |
|
1984, 1987 |
|
2005 |
|
548,056 |
|
83 |
% |
|
19.21 |
|
|
89,727 |
|
|
The Ellipse at Ballston |
|
Arlington, VA |
|
1989 |
|
2006 |
|
194,972 |
|
91 |
% |
|
26.29 |
|
|
76,716 |
|
|
Morris Corporate Center III |
|
Parsippany, NJ |
|
1990 |
|
2000 |
|
525,533 |
|
85 |
% |
|
14.87 |
|
|
71,896 |
|
|
Oak Brook Regency Towers |
|
Oakbrook, IL |
|
1977 |
(8) |
2002 |
|
402,318 |
|
96 |
% |
|
14.68 |
|
|
70,574 |
|
|
Treat Towers(11) |
|
Walnut Creek, CA |
|
1999 |
|
2003 |
|
372,255 |
|
83 |
% |
|
17.11 |
|
|
67,108 |
|
|
88 Kearny Street |
|
San Francisco, CA |
|
1986 |
|
1999 |
|
227,160 |
|
84 |
% |
|
37.54 |
|
|
65,407 |
|
|
|
TIAA Real Estate Account § Prospectus 181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
Location |
|
Year Built |
|
Year |
|
Rentable |
)(1) |
Percent |
|
Annual Avg. |
(2) |
Fair Value(3) |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pacific Plaza |
|
San Diego, CA |
|
2000, 2002 |
|
2007 |
|
217,680 |
|
70 |
% |
|
18.52 |
|
|
56,201 |
(4) |
|
One Virginia Square |
|
Arlington, VA |
|
1999 |
|
2004 |
|
116,077 |
|
100 |
% |
|
37.68 |
|
|
51,700 |
|
|
Parkview Plaza |
|
Oakbrook, IL |
|
1990 |
|
1997 |
|
265,175 |
|
91 |
% |
|
15.84 |
|
|
43,112 |
|
|
Wellpoint |
|
Westlake Village, CA |
|
1986 1998 |
|
2006 |
|
216,571 |
|
100 |
% |
|
16.75 |
|
|
41,000 |
|
|
West Lake North Business Park |
|
Westlake Village, CA |
|
2000 |
|
2004 |
|
197,288 |
|
78 |
% |
|
19.97 |
|
|
40,765 |
|
|
Prominence in Buckhead(11) |
|
Atlanta, GA |
|
1999 |
|
2003 |
|
441,795 |
|
69 |
% |
|
9.29 |
|
|
39,799 |
|
|
The North 40 Office Complex |
|
Boca Raton, FL |
|
1983, 1984 |
|
2006 |
|
350,000 |
|
97 |
% |
|
9.71 |
|
|
36,353 |
|
|
The Pointe on Tampa Bay |
|
Tampa, FL |
|
1982 |
(8) |
2002 |
|
253,296 |
|
78 |
% |
|
10.17 |
|
|
35,188 |
|
|
Centerside I |
|
San Diego, CA |
|
1982 |
|
2004 |
|
202,913 |
|
68 |
% |
|
19.30 |
|
|
34,000 |
|
|
Camelback Center |
|
Phoenix, AZ |
|
2001 |
|
2007 |
|
231,345 |
|
82 |
% |
|
19.97 |
|
|
33,213 |
|
|
3 Hutton Centre |
|
Santa Ana, CA |
|
1985 |
(8) |
2003 |
|
198,217 |
|
81 |
% |
|
19.21 |
|
|
32,195 |
|
|
8270 Greensboro Drive |
|
McLean, VA |
|
2000 |
|
2005 |
|
158,110 |
|
87 |
% |
|
20.94 |
|
|
27,895 |
|
|
Needham Corporate Center |
|
Needham, MA |
|
1987 |
|
2001 |
|
138,259 |
|
90 |
% |
|
15.60 |
|
|
18,566 |
|
|
Creeksides at Centerpoint |
|
Kent, WA |
|
1985 |
|
2006 |
|
218,166 |
|
53 |
% |
|
5.28 |
|
|
16,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
SubtotalOffice Properties |
|
|
|
|
|
|
|
|
|
|
87 |
% |
|
|
|
$ |
5,335,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Percent leased weighted by property fair valueOffice (9) |
|
|
|
|
|
92 |
% |
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INDUSTRIAL PROPERTIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ontario Industrial Portfolio |
|
Various, CA |
|
1997-1998 |
|
1998, 2000, 2004 |
|
3,981,894 |
|
100 |
% |
|
3.08 |
|
|
223,700 |
(4) |
|
Dallas Industrial Portfolio |
|
Dallas and Coppell, TX |
|
1997-2001 |
|
2000-2002 |
|
3,684,941 |
|
97 |
% |
|
2.51 |
|
|
140,638 |
|
|
Rancho Cucamonga Industrial Portfolio |
|
Rancho Cucamonga, CA |
|
2000-2002 |
|
2000; 2001; |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002; 2004 |
|
1,490,235 |
|
100 |
% |
|
2.92 |
|
|
83,400 |
|
|
Southern California RA Industrial Portfolio |
|
Los Angeles, CA |
|
1982 |
|
2004 |
|
920,078 |
|
92 |
% |
|
5.22 |
|
|
75,512 |
|
|
Great West Industrial Portfolio |
|
Rancho Cucamonga |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Fontana, CA |
|
2004-2005 |
|
2008 |
|
1,369,645 |
|
100 |
% |
|
4.60 |
|
|
73,500 |
|
|
Rainier Corporate Park |
|
Fife, WA |
|
1991-1997 |
|
2003 |
|
1,104,646 |
|
94 |
% |
|
4.15 |
|
|
66,800 |
|
|
Seneca Industrial Park |
|
Pembroke Park, FL |
|
1999-2001 |
|
2007 |
|
882,182 |
|
90 |
% |
|
3.75 |
|
|
63,267 |
|
|
Chicago Industrial Portfolio |
|
Chicago and Joliet, IL |
|
1997-2000 |
|
1998; 2000 |
|
1,427,699 |
|
97 |
% |
|
3.15 |
|
|
58,865 |
|
|
Regal Logistics Campus |
|
Seattle, WA |
|
1999-2004 |
|
2005 |
|
968,535 |
|
100 |
% |
|
3.84 |
|
|
52,500 |
|
|
Chicago CALEast Industrial Portfolio(13) |
|
Chicago, IL |
|
1974-2005 |
|
2003 |
|
1,145,152 |
|
98 |
% |
|
3.81 |
|
|
50,801 |
|
|
Shawnee Ridge Industrial Portfolio |
|
Atlanta, GA |
|
2000-2005 |
|
2005 |
|
1,422,922 |
|
90 |
% |
|
2.75 |
|
|
49,001 |
|
|
Northern California RA Industrial Portfolio |
|
Oakland, CA |
|
1981 |
|
2004 |
|
657,602 |
|
84 |
% |
|
3.91 |
|
|
39,730 |
|
|
IDI National Portfolio(12) |
|
Various, U.S. |
|
1999-2004 |
|
2004 |
|
3,655,671 |
|
93 |
% |
|
2.49 |
|
|
39,255 |
|
|
Atlanta Industrial Portfolio |
|
Lawrenceville, GA |
|
1996-1999 |
|
2000 |
|
1,295,440 |
|
100 |
% |
|
2.71 |
|
|
38,800 |
|
|
South River Road Industrial |
|
Cranbury, NJ |
|
1999 |
|
2001 |
|
858,957 |
|
100 |
% |
|
3.85 |
|
|
38,465 |
|
|
|
182 Prospectus § TIAA Real Estate Account
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Property |
|
Location |
|
Year Built |
|
Year |
|
Rentable |
)(1) |
Percent |
|
Annual Avg. |
(2) |
Fair Value |
(3) |
|||
Pinnacle Industrial/DFW Trade Center |
|
Grapevine. TX |
|
2003, 2004, 2006 |
|
2006 |
|
899,200 |
|
100 |
% |
|
3.65 |
|
|
38,400 |
|
|
GE Appliance East Coast Distribution Facility |
|
Perryville, MD |
|
2003 |
|
2005 |
|
1,004,000 |
|
100 |
% |
|
2.82 |
|
|
29,100 |
|
|
Broadlands Business Park |
|
Elkton, MD |
|
2006 |
|
2006 |
|
756,600 |
|
100 |
% |
|
3.15 |
|
|
24,200 |
|
|
Northeast RA Industrial Portfolio |
|
Boston, MA |
|
2000 |
|
2004 |
|
384,000 |
|
70 |
% |
|
3.13 |
|
|
22,077 |
|
|
Centre Pointe and Valley View |
|
Los Angeles County, CA |
|
1965-1989 |
|
2004 |
|
307,685 |
|
81 |
% |
|
4.78 |
|
|
19,946 |
|
|
Northwest RA Industrial Portfolio |
|
Seattle, WA |
|
1996 |
|
2004 |
|
312,321 |
|
100 |
% |
|
4.36 |
|
|
17,000 |
|
|
Summit Distribution Center |
|
Memphis, TN |
|
2002 |
|
2003 |
|
708,532 |
|
100 |
% |
|
2.04 |
|
|
15,800 |
|
|
Konica Photo Imaging Headquarters |
|
Mahwah, NJ |
|
1999 |
|
1999 |
|
168,000 |
|
100 |
% |
|
6.27 |
|
|
14,505 |
|
|
Airways Distribution Center |
|
Memphis, TN |
|
2005 |
|
2006 |
|
556,600 |
|
|
% |
|
0.00 |
|
|
12,113 |
|
|
UPS Distribution Facility |
|
Fernley, NV |
|
1998 |
|
1998 |
|
256,000 |
|
|
80 |
% |
|
2.55 |
|
|
7,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
SubtotalIndustrial Properties |
|
|
|
|
|
|
|
|
|
|
93 |
% |
|
|
|
$ |
1,294,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Percent leased weighted by property fair valueIndustrial (9) |
|
|
|
|
|
95 |
% |
|
|
|
|
|
|
|||||
RETAIL PROPERTIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DDR Joint Venture(14) |
|
Various |
|
Various |
|
2007 |
|
12,205,571 |
|
83 |
% |
|
10.40 |
|
|
303,866 |
|
|
The Florida Mall(15) |
|
Orlando, FL |
|
1986 |
(8) |
2002 |
|
986,972 |
|
99 |
% |
|
40.06 |
|
|
238,966 |
|
|
Printemps de lHomme |
|
Paris, FR |
|
1930 |
|
2007 |
|
142,363 |
|
100 |
% |
|
77.27 |
|
|
223,743 |
(5) |
|
Florida Retail Portfolio(16) |
|
Various, FL |
|
1974-2005 |
|
2006 |
|
1,259,829 |
|
84 |
% |
|
12.66 |
|
|
165,458 |
|
|
Miami International Mall(15) |
|
Miami, FL |
|
1982 |
(8) |
2002 |
|
291,500 |
|
96 |
% |
|
38.36 |
|
|
93,221 |
|
|
Westwood Marketplace |
|
Los Angeles, CA |
|
1950 |
(8) |
2002 |
|
202,201 |
|
100 |
% |
|
30.49 |
|
|
89,001 |
|
|
Mazza Gallerie |
|
Washington, DC |
|
1975 |
|
2004 |
|
293,935 |
|
93 |
% |
|
15.76 |
|
|
76,000 |
|
|
Marketfair |
|
West Windsor, NJ |
|
1987 |
|
2006 |
|
240,297 |
|
94 |
% |
|
23.56 |
|
|
66,245 |
|
|
West Town Mall(15) |
|
Knoxville, TN |
|
1972 |
(8) |
2002 |
|
772,648 |
|
98 |
% |
|
22.58 |
|
|
50,613 |
|
|
Publix at Weston Commons |
|
Weston, FL |
|
2005 |
|
2006 |
|
126,922 |
|
99 |
% |
|
24.09 |
|
|
45,200 |
(4) |
|
South Frisco Village |
|
Frisco, TX |
|
2002 |
|
2006 |
|
227,175 |
|
90 |
% |
|
11.40 |
|
|
29,000 |
(4) |
|
Plainsboro Plaza |
|
Plainsboro, NJ |
|
1987 |
|
2005 |
|
218,653 |
|
78 |
% |
|
9.52 |
|
|
27,504 |
|
|
Champlin Marketplace |
|
Champlin, MN |
|
1998-1999, 2005 |
|
2007 |
|
103,577 |
|
97 |
% |
|
10.76 |
|
|
12,712 |
|
|
Suncrest Village |
|
Orlando, FL |
|
1987 |
|
2005 |
|
93,358 |
|
84 |
% |
|
10.62 |
|
|
12,600 |
|
|
Plantation Grove |
|
Ocoee, FL |
|
1995 |
|
1995 |
|
73,655 |
|
91 |
% |
|
9.46 |
|
|
9,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
SubtotalRetail Properties |
|
|
|
|
|
|
|
|
|
|
85 |
% |
|
|
|
$ |
1,443,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Percent leased weighted by property fair valueRetail(9) |
|
|
|
|
|
93 |
% |
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
TIAA Real Estate Account § Prospectus 183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
Location |
|
Year Built |
|
Year |
|
Rentable |
)(1) |
Percent |
|
Annual Avg. |
(2) |
Fair Value(3) |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RESIDENTIAL PROPERTIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston Apartment Portfolio(17) |
|
Houston, TX |
|
1984-2004 |
|
2006 |
|
N/A |
|
98 |
% |
|
N/A |
|
|
186,924 |
(4) |
|
Palomino Park Apartments |
|
Denver, CO |
|
1996-2001 |
|
2005 |
|
N/A |
|
95 |
% |
|
N/A |
|
|
168,708 |
(4) |
|
The Colorado |
|
New York, NY |
|
1987 |
|
1999 |
|
N/A |
|
100 |
% |
|
N/A |
|
|
123,039 |
(4) |
|
Kierland Apartment Portfolio(17) |
|
Scottsdale, AZ |
|
1996-2000 |
|
2006 |
|
N/A |
|
97 |
% |
|
N/A |
|
|
96,002 |
(4) |
|
Ashford Meadows Apartments |
|
Herndon, VA |
|
1998 |
|
2000 |
|
N/A |
|
97 |
% |
|
N/A |
|
|
95,436 |
(4) |
|
The Legacy at Westwood Apartments |
|
Los Angeles, CA |
|
2001 |
|
2002 |
|
N/A |
|
95 |
% |
|
N/A |
|
|
93,242 |
(4) |
|
Larkspur Courts |
|
Larkspur, CA |
|
1991 |
|
1999 |
|
N/A |
|
96 |
% |
|
N/A |
|
|
70,098 |
|
|
Regents Court Apartments |
|
San Diego, CA |
|
2001 |
|
2002 |
|
N/A |
|
100 |
% |
|
N/A |
|
|
65,005 |
(4) |
|
South Florida Apartment Portfolio |
|
Boca Raton and Plantation, FL |
|
1986 |
|
2001 |
|
N/A |
|
96 |
% |
|
N/A |
|
|
60,029 |
|
|
The Caruth |
|
Dallas, TX |
|
1999 |
|
2005 |
|
N/A |
|
99 |
% |
|
N/A |
|
|
56,083 |
(4) |
|
1050 Lenox Park |
|
Atlanta, GA |
|
2001 |
|
2005 |
|
N/A |
|
97 |
% |
|
N/A |
|
|
50,805 |
(4) |
|
The Reserve at Sugarloaf |
|
Duluth, GA |
|
2000 |
|
2005 |
|
N/A |
|
97 |
% |
|
N/A |
|
|
43,720 |
(4) |
|
The Lodge at Willow Creek |
|
Denver, CO |
|
1997 |
|
1997 |
|
N/A |
|
96 |
% |
|
N/A |
|
|
39,709 |
|
|
The Maroneal |
|
Houston, TX |
|
1998 |
|
2005 |
|
N/A |
|
94 |
% |
|
N/A |
|
|
37,614 |
|
|
Glenridge Walk |
|
Atlanta, GA |
|
1996, 2001 |
|
2005 |
|
N/A |
|
98 |
% |
|
N/A |
|
|
33,605 |
|
|
Westcreek Apartments |
|
Westlake Village, CA |
|
1988 |
|
1997 |
|
N/A |
|
96 |
% |
|
N/A |
|
|
29,616 |
|
|
Lincoln Woods Apartments |
|
Lafayette Hill, PA |
|
1991 |
|
1997 |
|
N/A |
|
93 |
% |
|
N/A |
|
|
29,124 |
|
|
Quiet Water at Coquina Lakes |
|
Deerfield Beach, FL |
|
1995 |
|
2001 |
|
N/A |
|
94 |
% |
|
N/A |
|
|
23,730 |
|
|
Phoenix Apartment Portfolio(17) |
|
Greater Phoenix Area, AZ |
|
1995-1998 |
|
2006 |
|
N/A |
|
96 |
% |
|
N/A |
|
|
22,978 |
|
|
The Fairways of Carolina |
|
Margate, FL |
|
1993 |
|
2001 |
|
N/A |
|
98 |
% |
|
N/A |
|
|
22,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
SubtotalResidential Properties |
|
|
|
|
|
|
|
|
|
|
97 |
% |
|
|
|
$ |
1,347,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Percent leased weighted by property fair valueResidential(9) |
|
|
|
|
|
|
|
97 |
% |
|
|
|
|
|
|
|||
|
||||||||||||||||||
OTHER COMMERCIAL PROPERTIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage Portfolio I(18) |
|
Various, U.S. |
|
1972-1990 |
|
2003 |
|
2,295,410 |
|
|
84 |
% |
|
10.12 |
|
|
52,812 |
|
SubtotalCommercial Properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8,126,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
TotalAll PropertiesPercent Leased weighted by property fair value |
|
|
|
|
|
|
|
93 |
% |
|
|
|
$ |
9,474,342 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
184 Prospectus § TIAA Real Estate Account
|
|
|
|
(1) |
The square footage is an approximate measure and is subject to periodic remeasurement. |
(2) |
Based on total contractual rent for leases existing as of December 31, 2010. The contractual rent can be either on a gross or net basis, depending on the terms of the leases. |
(3) |
Fair value reflects the value determined in accordance with the procedures described in the Accounts prospectus and as stated in the Statement of Investments. |
(4) |
Property is subject to a mortgage. The fair value shown represents the Accounts interest gross of debt. |
(5) |
1 & 7 Westferry Circus is located in the United Kingdom. Printemps de lHomme is located in France. The fair value of each property is converted from local currency to U.S. Dollars at the exchange rate as of December 31, 2010. |
(6) |
This property was renovated in 2004 and 2006. |
(7) |
This property is held in 50%/50% joint venture with Equity Office Properties Trust. Fair value shown reflects the value of the Accounts interest in the joint venture, net of debt. |
(8) |
Undergone extensive renovations since original construction. |
(9) |
Values shown are based on the property fair value weighted as a percent of the total fair value and based upon the percent leased for each property. |
(10) |
The Account purchased a 50.25% interest in a private REIT, which owns this property. A 49.70% interest is owned by Societe Immobiler Trans-Quebec, and .05% is owned by 100 individuals. Fair value shown reflects the value of the Accounts interest in the joint venture. |
(11) |
This investment property is held in a 75%/25% joint venture with Equity Office Properties Trust. Fair value shown reflects the value of the Accounts interest in the joint venture. |
(12) |
This investment property held in 60%/40% joint venture with Industrial Development International. Fair value shown reflects the value of the Accounts interest in the joint venture, net of debt. |
(13) |
A portion of this portfolio was sold in 2008. |
(14) |
This investment property consists of 43 properties located in 13 states and is held in a 85%/15% joint venture with Developers Diversified Realty Corporation (DDR). Fair value shown reflects the value of the Accounts interest in the joint venture, net of debt. |
(15) |
This investment property is held in a 50%/50% joint venture with the Simon Property Group. Fair value shown reflects the value of the Accounts interest in the joint venture, net of debt. |
(16) |
This investment property is held in a 80%/20% joint venture with Weingarten Realty Investors. Fair value shown reflects the value of the Accounts interest in the joint venture. This portfolio contains seven neighborhood and/or community shopping centers located in Ft. Lauderdale, Miami, Orlando, and Tampa, Florida areas. |
(17) |
A portion of this portfolio was sold in 2009. |
(18) |
This investment property is held in a 75%/25% joint venture with Storage USA. Fair value shown reflects the value of the Accounts interest in the joint venture, net of debt. |
|
TIAA Real Estate Account § Prospectus 185
Residential Property Portfolio. The table below contains more detailed information regarding the apartment complexes in the Accounts portfolio as of December 31, 2010 and should be read in conjunction with the immediately preceding table.
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
Location |
|
Number |
|
Average |
) |
Avg. Rent |
|
|||
Houston Apartment Porfolio(1) |
|
Houston, TX |
|
|
1,777 |
|
|
1,013 |
|
|
$1,448 |
|
Palomino Park(1) |
|
Highlands Ranch, CO |
|
|
1,184 |
|
|
1,096 |
|
|
1,078 |
|
Kierland Apartment Portfolio(1) |
|
Scottsdale, AZ |
|
|
724 |
|
|
1,048 |
|
|
979 |
|
South Florida Apartment Portfolio(1) |
|
Boca Raton and Plantation, FL |
|
|
550 |
|
|
906 |
|
|
1,055 |
|
Ashford Meadows Apartments |
|
Herndon, VA |
|
|
440 |
|
|
1,050 |
|
|
1,569 |
|
Windsor at Lenox Park |
|
Atlanta, GA |
|
|
407 |
|
|
1,024 |
|
|
1,389 |
|
The Caruth |
|
Dallas, TX |
|
|
338 |
|
|
1,168 |
|
|
1,541 |
|
Reserve at Sugarloaf |
|
Duluth, GA |
|
|
333 |
|
|
1,220 |
|
|
1,031 |
|
The Lodge at Willow Creek |
|
Lone Tree, CO |
|
|
316 |
|
|
995 |
|
|
1,005 |
|
The Maroneal |
|
Houston, TX |
|
|
309 |
|
|
928 |
|
|
1,431 |
|
Glenridge Walk |
|
Sandy Springs, GA |
|
|
296 |
|
|
1,146 |
|
|
1,349 |
|
The Colorado |
|
New York, NY |
|
|
256 |
|
|
622 |
|
|
2,930 |
|
Regents Court |
|
San Diego, CA |
|
|
251 |
|
|
886 |
|
|
1,664 |
|
Larkspur Courts |
|
Larkspur, CA |
|
|
248 |
|
|
1,001 |
|
|
2,016 |
|
Phoenix Apartment Portfolio |
|
Chandler, AZ |
|
|
240 |
|
|
976 |
|
|
817 |
|
Lincoln Woods Apartments |
|
Lafayette Hill, PA |
|
|
216 |
|
|
774 |
|
|
1,250 |
|
The Fairways of Carolina |
|
Margate, FL |
|
|
208 |
|
|
1,026 |
|
|
1,189 |
|
Quiet Waters at Coquina Lakes |
|
Deerfield Beach, FL |
|
|
200 |
|
|
1,048 |
|
|
1,275 |
|
Legacy at Westwood |
|
Los Angeles, CA |
|
|
187 |
|
|
1,181 |
|
|
4,773 |
|
Westcreek |
|
Westlake Village, CA |
|
|
126 |
|
|
951 |
|
|
1,620 |
|
(1) Represents a portfolio containing multiple properties.
186 Prospectus § TIAA Real Estate Account
Accumulation: The total value of your accumulation units in the Real Estate Account.
Accumulation Period: The period that begins with your first premium and continues until the entire accumulation has been applied to purchase annuity income, transferred from the Account, or paid to you or a beneficiary.
Accumulation Unit: A share of participation in the Real Estate Account for someone in the accumulation period. The Accounts accumulation unit value changes daily.
Annuity Unit: A measure used to calculate the amount of annuity payments due a participant.
Beneficiary: Any person or institution named to receive benefits if you die during the accumulation period or if you (and your annuity partner, if you have one) die before the guaranteed period of your annuity ends.
Business Day: Any day the New York Stock Exchange (NYSE) is open for trading. A business day ends at 4 p.m. Eastern Time, or when trading closes on the NYSE, if earlier.
Calendar Day: Any day of the year. Calendar days end at the same time as business days.
Commuted Value: The present value of annuity payments due under an income option or method of payment not based on life contingencies. Present value is adjusted for investment gains or losses since the annuity unit value was last calculated.
Eligible Institution: A nonprofit institution, including any governmental institution, organized in the United States.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
General Account: All of TIAAs assets other than those allocated to the Real Estate Account or to other existing or future TIAA separate accounts.
Good Order: Actual receipt of an order along with all information and supporting legal documentation necessary to effect the transaction. This information and documentation generally includes your complete application and any other information or supporting documentation we may require. With respect to purchase requests, good order also generally includes receipt of sufficient funds by us to effect the purchase. We may, in our sole discretion, determine whether any particular transaction request is in good order and reserve the right to change or waive any good order requirement at any time either in general or with respect to a particular plan, contract or transaction.
TIAA Real Estate Account § Prospectus 187
Income Change Method: The method under which you choose to have your annuity payments revalued. Under the annual income change method, your payments are revalued once each year. Under the monthly income change method, your payments are revalued every month.
Separate Account: An investment account legally separated from the general assets of TIAA, whose income and investment gains and losses are credited to or charged against its own assets, without regard to TIAAs other income, gains or losses.
Valuation Period: The time from the end of one valuation day to the end of the next.
188 Prospectus § TIAA Real Estate Account
PART II
INFORMATION NOT REQUIRED IN A PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
|
|
|
|
|
SEC Registration Fees |
|
$ |
232,200 |
|
Costs of printing and engraving |
|
|
600,000 |
* |
Legal fees |
|
|
50,000 |
* |
Accounting fees |
|
|
30,000 |
* |
Blue Sky Registration Fees |
|
|
5,000 |
* |
Miscellaneous |
|
|
7,800 |
* |
|
|
|
|
|
Total |
|
$ |
925,000 |
* |
|
|
|
|
|
|
|
* Approximate |
Item 14. Indemnification of Directors and Officers.
Trustees, officers, and employees of TIAA may be indemnified against liabilities and expenses incurred in such capacity pursuant to Article Six of TIAAs bylaws (see Exhibit 3(B)). Article Six provides that, to the extent permitted by law, TIAA will indemnify any person made or threatened to be made a party to any action, suit or proceeding by reason of the fact that such person is or was a trustee, officer, or employee of TIAA or, while a trustee, officer, or employee of TIAA, served any other organization in any capacity at TIAAs request. To the extent permitted by law, such indemnification could include judgments, fines, amounts paid in settlement, and expenses, including attorneys fees. TIAA has in effect an insurance policy that will indemnify its trustees, officers, and employees for liabilities arising from certain forms of conduct. No payment of indemnification, advance or allowance under the foregoing provisions shall be made unless a notice shall have been filed with the Superintendent of Insurance of the State of New York not less than thirty days prior to such payment specifying the persons to be paid, the amounts to be paid, the manner in which payment is authorized and the nature and status, at the time of such notice, of the litigation or threatened litigation.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the Securities Act) may be permitted to trustees, officers, or employees of TIAA, pursuant to the foregoing provision or otherwise, TIAA has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in that Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a trustee, officer, or employee in the successful defense of any action, suit or proceeding) is asserted by a trustee, officer, or employee in connection with the securities being registered, TIAA will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in that Act and will be governed by the final adjudication of such issue.
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
|
|
|
|
|
(1) |
(A) |
Distribution Agreement for the Contracts Funded by the TIAA Real Estate Account, dated as of January 1, 2008, by and among Teachers Insurance and Annuity Association of America, for itself and on behalf of the Account, and TIAA-CREF Individual & Institutional Services, LLC.5 |
|
(3) |
(A) |
Charter of TIAA.8 |
|
|
(B) |
Restated Bylaws of TIAA (as amended). 9 |
|
(4) |
(A) |
Forms of RA, GRA, GSRA, SRA, IRA Real Estate Account Endorsements2, Keogh Contract,3 Retirement Select and Retirement Select Plus Contracts and Endorsements1 and Retirement Choice and Retirement Choice Plus Contracts.3 |
|
|
(B) |
Forms of Income-Paying Contracts2 |
|
|
(C) |
Form of Contract Endorsement for Internal Transfer Limitation10 |
|
(5) |
|
Opinion and Consent of Jonathan Feigelson, Esq.** |
|
|
|
|
|
(10) |
(A) |
Independent Fiduciary Agreement, dated February 22, 2006, by and among TIAA, the Registrant, and Real Estate Research Corporation4 |
|
|
(B) |
Amendment to Independent Fiduciary Agreement, dated December 17, 2008, between TIAA, on behalf of the Registrant, and Real Estate Research Corporation6 |
|
|
(C) |
Custodian Agreement, dated as of March 3, 2008, by and between TIAA, on behalf of the Registrant, and State Street Bank and Trust Company, N.A. 7 |
|
(23) |
(A) |
Consent of Jonathan Feigelson, Esq. (included in Exhibit 5)** |
|
|
(B) |
Consent of Dechert LLP* |
|
|
(C) |
Consent of PricewaterhouseCoopers LLP* |
|
(24) |
|
Powers of Attorney* |
|
|
|
|
* |
Filed herewith. |
** |
To be filed by Amendment. |
1 |
Previously filed and incorporated herein by reference to the Accounts Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed April 29, 2004 (File No. 333-113602). |
2 |
Previously filed and incorporated herein by reference to the Accounts Post-Effective Amendment No. 2 to the Registration Statement on Form S-1 filed April 30, 1996 (File No. 33-92990). |
3 |
Previously filed and incorporated herein by reference to the Accounts Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed May 2, 2005 (File No. 333-121493). |
4 |
Previously filed and incorporated herein by reference to Exhibit 10.(a) to the Annual Report on Form 10-K of the Account for the period ended December 31, 2005, filed with the Commission on March 15, 2006 (File No. 33-92990). |
5 |
Previously filed and incorporated herein by reference to the Accounts Current Report on Form 8-K, filed with the Commission on January 7, 2008 (File No. 33-92990). |
6 |
Previously filed and incorporated herein by reference to the Accounts Current Report on Form 8-K, filed with the Commission on December 22, 2008 (File No. 33-92990). |
7 |
Previously filed and incorporated herein by reference to Exhibit 10.(b) to the Annual Report on Form 10-K of the Account for the fiscal year ended December 31, 2007 and filed with the Commission on March 20, 2008 (File No. 33-92990). |
8 |
Previously filed and incorporated by reference to Exhibit 3(A) to the Accounts Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 and filed with the Commission on August 13, 2009 (File No. 33-92990). |
|
|
9 |
Previously filed and incorporated by reference to Exhibit 3(B) to the Accounts Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 and filed with the Commission on August 13, 2009 (File No. 33-92990). |
|
|
10 |
Previously filed and incorporated by reference to Exhibit 4(C) to the Accounts Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 and filed with the Commission on November 12, 2010 (File No. 33-92990). |
|
|
(b) |
Financial Statement Schedules |
All Schedules have been omitted because they are not required under the related instructions or are inapplicable.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
|
|
|
|
(i) |
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. |
|
|
|
|
(ii) |
To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement. |
|
|
|
|
(iii) |
To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. |
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) To provide the full financial statements of TIAA promptly upon written or oral request.
(5) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(6) That, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
|
|
|
(i) |
Any preliminary prospectus or prospectuses of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424; |
|
|
|
|
(ii) |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant; |
|
|
|
|
(iii) |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and |
|
|
|
|
(iv) |
Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser. |
[The full audited financial statements of TIAA will be filed by amendment to this Registration Statement on Form S-1.]
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant, TIAA Real Estate Account, has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 17th day of March, 2011.
|
|
|
|
TIAA REAL ESTATE ACCOUNT |
|
|
|
|
|
By: TEACHERS INSURANCE AND ANNUITY |
|
|
ASSOCIATION OF AMERICA |
|
|
|
|
|
|
|
|
By: |
/s/ Roger W. Ferguson, Jr. |
|
|
|
|
|
Roger W. Ferguson, Jr. |
|
|
President and Chief Executive |
|
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Officer and Trustee |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following trustees and officers of Teachers Insurance and Annuity Association of America, in the capacities and on the dates indicated.
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Signature |
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Title |
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Date |
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/s/ Roger W. Ferguson, Jr. |
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President
and Chief Executive Officer |
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March 17, 2011 |
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Roger W. Ferguson, Jr. |
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/s/ Virginia M. Wilson |
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Executive
Vice President and Chief |
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March 17, 2011 |
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Virginia M. Wilson |
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* |
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Chairman of the Board of Trustees |
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March 17, 2011 |
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Ronald L. Thompson |
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* |
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Trustee |
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March 17, 2011 |
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Jeffrey R. Brown |
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* |
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Trustee |
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March 17, 2011 |
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Robert C. Clark |
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* |
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Trustee |
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March 17, 2011 |
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Lisa W. Hess |
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* |
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Trustee |
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March 17, 2011 |
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Edward M. Hundert, M.D. |
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Trustee |
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March 17, 2011 |
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Lawrence H. Linden |
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* |
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Trustee |
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March 17, 2011 |
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Maureen OHara |
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Trustee |
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March 17, 2011 |
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Donald K. Peterson |
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* |
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Trustee |
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March 17, 2011 |
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Sidney A. Ribeau |
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* |
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Trustee |
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March 17, 2011 |
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Dorothy K. Robinson |
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Trustee |
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March 17, 2011 |
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David L. Shedlarz |
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Trustee |
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March 17, 2011 |
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David F. Swensen |
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* |
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Trustee |
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March 17, 2011 |
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Marta Tienda |
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* |
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Trustee |
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March 17, 2011 |
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Rosalie J. Wolf |
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/s/ Stewart P. Greene |
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* Signed by Stewart P. Greene as attorney in fact pursuant to powers of attorney filed herewith