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EX-32 - EXHIBIT 32 - TIAA REAL ESTATE ACCOUNTexhibit3263017.htm
EX-31 - EXHIBIT 31 - TIAA REAL ESTATE ACCOUNTexhibit3163017.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2017
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________to __________
Commission file number: 33-92990; 333-216849

TIAA REAL ESTATE ACCOUNT
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction
of incorporation or organization)
NOT APPLICABLE
(I.R.S. Employer Identification No.)
C/O TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
730 THIRD AVENUE
NEW YORK, NEW YORK 10017-3206
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (212) 490-9000
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES ý  NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES ý  NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer o
Non-accelerated filer ý (Do not check if a smaller reporting company)
 
Smaller Reporting Company o
 
 
Emerging Growth Company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o  NO ý





PART I. FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
TIAA REAL ESTATE ACCOUNT
June 30, 2017


2



TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In millions, except per accumulation unit amounts)
 
June 30,
 
December 31,
 
2017
 
2016
 
(Unaudited)
 
 
 
ASSETS
 
 
 
 
 
Investments, at fair value:
 
 
 
 
 
Real estate properties
(cost: $12,777.7 and $12,818.1)
$
15,496.6

 
 
$
15,452.8

 
       Real estate joint ventures and limited partnerships
(cost: $4,833.1 and $4,530.4)
6,086.3

 
 
5,759.9

 
Marketable securities:
 
 
 
 
 
Real estate-related
(cost: $883.6 and $883.9)
1,114.7

(1) 
 
1,081.5

(1) 
Other
(cost: $4,107.2 and $4,054.0)
4,106.5

 
 
4,053.8

 
Loans receivable
(cost: $296.4 and $294.8)
297.3

 
 
295.7

 
Total investments
(cost: $22,898.0 and $22,581.2)
27,101.4

 
 
26,643.7

 
Cash and cash equivalents
14.3

 
 
3.0

 
Due from investment manager
9.0

 
 
5.9

 
Other
231.1

(2) 
 
332.6

(2) 
TOTAL ASSETS
27,355.8

 
 
26,985.2

 
LIABILITIES
 
 
 
 
 
   Mortgage loans payable, at fair value
(principal outstanding: $2,268.0 and $2,316.5)
2,290.1

 
 
2,332.1

 
Accrued real estate property expenses
192.1

 
 
202.2

 
Payable for collateral for securities loaned
10.4

 
 
93.0

 
Other
54.3

 
 
53.2

 
TOTAL LIABILITIES
2,546.9

 
 
2,680.5

 
COMMITMENTS AND CONTINGENCIES

 
 

 
NET ASSETS
 
 
 
 
 
Accumulation Fund
24,308.8

 
 
23,813.5

 
Annuity Fund
500.1

 
 
491.2

 
TOTAL NET ASSETS
$
24,808.9

 
 
$
24,304.7

 
NUMBER OF ACCUMULATION UNITS OUTSTANDING
62.5

 
 
62.4

 
NET ASSET VALUE, PER ACCUMULATION UNIT
$
389.048

 
 
$
381.636

 

(1) Includes securities loaned of $10.2 million at June 30, 2017 and $91.2 million at December 31, 2016.
(2) Includes cash collateral for securities loaned of $10.4 million at June 30, 2017 and $93.0 million at December 31, 2016.






See notes to the consolidated financial statements

3



TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions)
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
2017
 
2016
 
2017
 
2016
INVESTMENT INCOME
 
 
 
 
 
 
 
Real estate income, net:
 
 
 
 
 
 
 
Rental income
$
265.3

 
$
252.6

 
$
523.7

 
$
498.5

Real estate property level expenses and taxes:
 
 
 
 
 
 
 
Operating expenses
52.7

 
51.1

 
108.0

 
108.7

Real estate taxes
41.6

 
38.4

 
84.1

 
76.5

Interest expense
22.3

 
23.5

 
44.8

 
40.9

Total real estate property level expenses and taxes
116.6

 
113.0

 
236.9

 
226.1

Real estate income, net
148.7

 
139.6

 
286.8

 
272.4

Income from real estate joint ventures and limited partnerships
47.5

 
50.5

 
93.4

 
78.3

Interest
12.0

 
6.5

 
21.7

 
11.5

Dividends
8.5

 
7.5

 
7.8

 
10.7

TOTAL INVESTMENT INCOME
216.7

 
204.1

 
409.7

 
372.9

Expenses:
 
 
 
 
 
 
 
Investment management charges
16.9

 
19.8

 
37.4

 
34.2

Administrative charges
15.7

 
14.1

 
31.3

 
31.4

Distribution charges
6.0

 
7.4

 
13.2

 
14.1

Mortality and expense risk charges
0.3

 
0.3

 
0.6

 
0.6

Liquidity guarantee charges
11.8

 
9.5

 
22.0

 
17.9

TOTAL EXPENSES
50.7

 
51.1

 
104.5

 
98.2

INVESTMENT INCOME, NET
166.0

 
153.0

 
305.2

 
274.7

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
 
 
 
 
 
 
 
Net realized gain (loss) on investments:
 
 
 
 
 
 
 
Real estate properties
0.4

 
1.8

 
(16.8
)
 
10.1

Real estate joint ventures and limited partnerships

 
0.2

 

 
0.2

Marketable securities
8.1

 
4.5

 
12.7

 
18.5

Net realized gain (loss) on investments
8.5

 
6.5

 
(4.1
)
 
28.8

Net change in unrealized appreciation (depreciation) on:
 
 
 
 
 
 
 
Real estate properties
32.4

 
113.0

 
84.2

 
205.3

Real estate joint ventures and limited partnerships
0.8

 
(17.8
)
 
61.8

 
128.0

Marketable securities
8.7

 
66.9

 
32.0

 
110.2

Mortgage loans payable
(18.1
)
 
(24.1
)
 
(6.5
)
 
(25.7
)
Net change in unrealized appreciation on
investments and mortgage loans payable
23.8

 
138.0

 
171.5

 
417.8

NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
32.3

 
144.5

 
167.4

 
446.6

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$
198.3

 
$
297.5

 
$
472.6

 
$
721.3

See notes to the consolidated financial statements

4



TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(In millions)
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
2017
 
2016
 
2017
 
2016
FROM OPERATIONS
 
 
 
 
 
 
 
Investment income, net
$
166.0

 
$
153.0

 
$
305.2

 
$
274.7

Net realized gain (loss) on investments
8.5

 
6.5

 
(4.1
)
 
28.8

Net change in unrealized appreciation on investments and mortgage loans payable
23.8

 
138.0

 
171.5

 
417.8

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS
198.3

 
297.5

 
472.6

 
721.3

FROM PARTICIPANT TRANSACTIONS
 
 
 
 
 
 
 
Premiums
648.7

 
833.2

 
1,428.2

 
1,591.4

Annuity payments
(10.6
)
 
(10.1
)
 
(21.5
)
 
(20.0
)
Withdrawals and death benefits
(675.2
)
 
(472.3
)
 
(1,375.1
)
 
(974.5
)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM PARTICIPANT TRANSACTIONS
(37.1
)
 
350.8

 
31.6

 
596.9

NET INCREASE IN NET ASSETS
161.2

 
648.3

 
504.2

 
1,318.2

NET ASSETS
 
 
 
 
 
 
 
Beginning of period
24,647.7

 
23,029.9

 
24,304.7

 
22,360.0

End of period
$
24,808.9

 
$
23,678.2

 
$
24,808.9

 
$
23,678.2

























See notes to the consolidated financial statements

5



TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
For the Six Months Ended June 30,
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net increase in net assets resulting from operations
$
472.6

 
$
721.3

Adjustments to reconcile net changes in net assets resulting from operations to net cash provided by (used in) operating activities:
 
 
 
Net realized (gain) loss on investments
4.1

 
(28.8
)
Net change in unrealized appreciation on investments
and mortgage loans payable
(171.5
)
 
(417.8
)
Purchase of real estate properties
(33.5
)
 
(328.3
)
Capital improvements on real estate properties
(59.5
)
 
(80.1
)
Proceeds from sale of real estate properties
115.4

 
94.9

Purchases of long term investments
(318.8
)
 
(77.2
)
Proceeds from long term investments
66.3

 
39.6

Increase in loans receivable
(1.6
)
 

Increase in other investments
(53.2
)
 
(1,080.1
)
Change in due from investment manager
(3.1
)
 
(3.1
)
(Increase) decrease in other assets
101.5

 
(12.9
)
Increase (decrease) in other liabilities
(90.5
)
 
8.5

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
28.2

 
(1,164.0
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Mortgage loan proceeds received

 
563.5

Payments of mortgage loans
(48.5
)
 
(0.4
)
Premiums
1,428.2

 
1,591.4

Annuity payments
(21.5
)
 
(20.0
)
Withdrawals and death benefits
(1,375.1
)
 
(974.5
)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
(16.9
)
 
1,160.0

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
11.3

 
(4.0
)
CASH AND CASH EQUIVALENTS
 
 
 
Beginning of period
3.0

 
11.9

End of period
$
14.3

 
$
7.9

SUPPLEMENTAL DISCLOSURES:
 
 
 
Cash paid for interest
$
44.9

 
$
39.1





See notes to the consolidated financial statements

6



TIAA REAL ESTATE ACCOUNT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Organization and Significant Accounting Policies
Business: The TIAA Real Estate Account (“Account”) is an insurance separate account of Teachers Insurance and Annuity Association of America (“TIAA”) and was established by resolution of TIAA’s 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 Account’s performance.
The investment objective of the Account is to seek favorable long-term returns primarily through rental income and appreciation of 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 limited interests in real estate joint ventures and limited partnerships, as well as investments in loans receivable with commercial real estate properties as underlying collateral. 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 Consolidated Financial Statements were prepared in accordance with accounting principles generally accepted in the United States of America, which requires 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 Consolidated 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.
The Accumulation Unit Value (“AUV”) used for financial reporting purposes may differ from the AUV used for processing transactions. The AUV used for financial reporting purposes includes security and participant transactions effective through the period end date to which this report relates. Total return is computed based on the AUV used for processing transactions.
Determination of Investments at Fair Value: The Account reports all investments at fair value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies. Further in accordance with the adoption of the fair value option allowed under ASC 825, Financial Instruments, and at the election of Account management, mortgage loans payable are reported at fair value. The 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.
The following is a description of the valuation methodologies used to determine the fair value of the Account’s investments and investment related mortgage loans payable.
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.

7



The Account’s 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 Account’s definition of fair value are 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, capital expenditures, 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 TIAA’s internal appraisal staff and as applicable by the Account’s independent fiduciary at the time of the closing of the purchase. Such initial valuation may result in a potential unrealized gain or loss reflecting the difference between an investment’s fair value (i.e., exit price) and its cost basis (which is inclusive of transaction costs).
Subsequently, each property is appraised each quarter by an independent third party appraiser, reviewed by TIAA’s internal appraisal staff and as applicable the Account’s 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 Account’s joint ventures. Adjustments may be made for events or circumstances indicating an impairment of a tenant’s 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. TIAA’s internal appraisal staff oversees the entire appraisal process, in conjunction with the Account’s independent fiduciary (the independent fiduciary is more fully described in the following paragraph). Any differences in the conclusions of TIAA’s 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, RERC, LLC, has been appointed by a special subcommittee of the Investment Committee of the Board to, among other things, oversee the entire 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 professional’s 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 Account’s 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.

8



Also, the independent fiduciary may require additional appraisals if factors or events have occurred that could materially change a property’s value (including those identified previously) 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 property’s 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). 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 Account’s 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 Account’s ownership interests of the underlying entities. The Account’s 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 Account’s ownership in the partnership which are recorded based upon the changes in the net asset values of the limited partnerships as determined from the financial statements of the limited partnerships when received by the Account. Prior to the receipt of the financial statements from the limited partnerships, the Account estimates the value of its interest in good faith and will from time to time seek input from the issuer or the sponsor of the investments. Since market quotations are not readily available, the limited partnership interests are valued at fair value as determined in good faith by management 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 with readily available market quotations, 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). 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.
Short-term investments are valued in the same manner as debt securities, as described above.
Money market instruments are valued at amortized cost, which approximates fair value.
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 U.S. 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 Loans Receivable (i.e., the Account as a creditor)—Loans receivable are stated at fair value and are initially valued at the face amount of the loan funding. Subsequently, loans receivable are valued at least quarterly by TIAA’s internal valuation department based on market factors, such as market interest rates and spreads for comparable loans, the liquidity for 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) and the credit quality of the counterparty. The independent f

9



iduciary reviews and approves all loan receivable valuation adjustments before such adjustments are recorded by the Account. The Account continues to use the revised value for each loan receivable to calculate the Account’s daily net asset value until the next valuation review.
Valuation of Mortgage Loans Payable (i.e., the Account as a debtor)—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 TIAA’s internal valuation department, as reviewed by the Account’s 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 credit quality of the Account and the return demands of the market.
See Note 4Assets and Liabilities Measured at Fair Value on a Recurring Basis for further discussion and disclosure regarding the determination of the fair value of the Account’s 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 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 funds based upon their relative daily net asset values. Once an Account participant begins receiving lifetime annuity income benefits, payment levels cannot be reduced as a result of the Account’s actual 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 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 for 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 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 Account’s consolidated statements of operations. Distributions that are identified as returns of capital are recorded as a reduction to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Income distributions from the joint ventures are recorded based on the Account’s proportional interest of the income distributed by the joint ventures. Income earned but not yet distributed to the Account by the joint ventures is recorded as unrealized gains and losses.
Limited Partnerships—The Account has ownership interests in various private real estate funds (primarily limited partnerships) and a private real estate investment trust (collectively, the “limited partnerships”). The Account records its contributions as increases to the investments, and distributions from the investments are treated as income within income fr

10



om real estate joint ventures and limited partnerships in the Account’s consolidated statements of operations. Distributions that are identified as returns of capital are recorded as a reduction to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Unrealized gains and losses are recorded based upon the changes in the net asset values of the limited partnerships as determined from the financial statements of the limited partnerships when received by the Account. Prior to the receipt of the financial statements from the limited partnerships, the Account estimates the value of its interest in good faith and will from time to time seek input from the issuer or the sponsor of the investments. Changes in value based on such estimates are recorded by the Account as unrealized gains and losses.
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 are recorded as a reduction to the cost basis of the investment, whereas dividends identified as capital gains or losses are recorded as realized gains or losses. Realized gains and losses on securities transactions are accounted for on the specific identification method.
Loans Receivable—The Account has ownership interests in loans receivable. Loans receivable are stated at fair value and are initially valued at the face amount of the loan funding. Subsequently, loans receivable are valued at least quarterly by TIAA’s internal valuation department with changes in fair value flowing through unrealized gain (loss). Interest income from loans receivable is recognized using the effective interest method over the expected life of the loan. All loans receivable held to date were originated directly by the Account.
Realized and Unrealized Gains and Losses—Realized gains and losses are recorded at the time an investment is sold or a distribution is received in relation to an investment sale from a joint venture or limited partnership. 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.
Unrealized gains and losses are recorded as the fair values of the Account’s investments are adjusted, and as discussed within the Real Estate Joint Ventures and Limited Partnerships sections above.
Net Assets—The Account’s net assets as of the close of each valuation day are valued by taking the sum of:
the value of the Account’s cash; cash equivalents, and short-term and other debt instruments;
the value of the Account’s 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;
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 Account’s 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 fees, and the liquidity guarantee fee, and certain other expenses attributable to operating the Account. Daily estimates of net operating income are adjusted to reflect actual net operating income on a monthly basis, at which time such adjustments (if any) are reflected in the Account’s unit value.
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 Account’s at cost deductions are based on projections of Account assets and overall expenses, and the size of any

11



adjusting payments will be directly affected by the difference between management’s projections and the Account’s actual assets or expenses.
Income from Securities Lending: The Account may lend securities to qualified borrowers to generate additional income. When loaning securities, the Account retains the benefits of owning the securities, including the economic equivalent of dividends or interest generated by the securities. Cash collateral received for securities on loan is maintained exclusively in an interest-bearing deposit account. All income generated by the securities lending program is reflected within interest income on the consolidated statements of operations.
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 Account’s management monitors these balances to mitigate the exposure of risk due to concentration and has not experienced any losses from such concentration.
Other Assets and Other Liabilities: Other assets and other liabilities consist of operating assets and liabilities utilized and held at each individual real estate property investment. Other assets consist of, among other items, cash, tenant receivables and prepaid expenses; whereas other liabilities primarily consist of security deposits. Other assets also include cash collateral held for securities on loan.
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 incurs no material federal income tax attributable to the net investment activity of the Account. The Account’s federal income tax return is generally subject to examination for a period of three years after it is filed. State and local tax returns may be subject to examination for an additional period of time depending on the jurisdiction. Management has analyzed the Account’s tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Account’s Consolidated Financial Statements.
Restricted Cash: The Account held $41.9 million and $45.8 million as of June 30, 2017 and December 31, 2016, respectively, in escrow accounts for security deposits, as required by certain states, as well as property taxes, insurance, and various other property related matters as required by certain creditors related to outstanding mortgage loans payable collateralized by certain real estate investments. These amounts are recorded within other assets on the consolidated statements of assets and liabilities. See Note 6—Mortgage Loans Payable for additional information regarding the Account’s outstanding mortgage loans payable.
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 to/from Investment Manager: Due to/from investment manager represents amounts that are to be 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.
New Accounting Pronouncements: In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 supersedes all existing revenue recognition guidance and establishes a five-step model to measure and recognize revenue. ASU 2014-09 will be effective for fiscal years beginning after December 15, 2017 and the Account plans to adopt the new revenue guidance as of January 1, 2018. The Account has completed its initial scoping for the adoption of ASU 2014-09 and has determined that a limited number of asset management agreements will be in the scope of the new guidance. However, the revenue recognition patterns related to the services performed under the asset management agreements are not expected to be significantly different from the revenue recognition pattern under existing GAAP. For the adoption of ASU 2014-09, the Account is planning to utilize the modified retrospective adoption approach. Management is currently in the process of evaluating the final impact of the new standard.
In January 2016, the FASB issued ASU 2016-1 Financial Instruments (Topic 825)—Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-1”). This ASU amends, among other items, certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. These amendments are effective for public business entities for fiscal years and interim periods within those fiscal years beginning after December 15, 20

12



17. Management is currently assessing the impact of ASU 2016-1 on the Account’s Consolidated Financial Statements.
In February 2016, the FASB issued ASU 2016-2 Leases (Topic 842) (“ASU 2016-2”) which will supersede Topic 840, Leases. This ASU applies to all entities that enter into a lease. Lessees will be required to report assets and liabilities that arise from leases. Lessor accounting is expected to remain unchanged except in certain circumstances. This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, including all interim periods within those fiscal years. Management is currently assessing the impact of ASU 2016-2 on the Account’s Consolidated Financial Statements.
In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 clarifies how to present cash receipts and cash payments for certain activity in the Statement of Cash Flows. These amendments are effective for public business entities within those fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Management is currently assessing the impact of ASU 2016-15 on the Account's Consolidated Financial Statements.
In November 2016, FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). The statement of cash flows should present beginning-of-period and end-of-period total amounts that include cash and restricted cash. Transfers between cash and restricted cash will no longer be presented as operating, investing, or financing activities within the statement of cash flows. ASU 2016-18 is effective for annual financial statements issued for fiscal years beginning after December 15, 2017. Management is currently assessing the impact of ASU 2016-18 on the Account's Consolidated Financial Statements.
In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 further clarifies when a reporting entity has acquired a business and should account for the acquisition as a business combination. ASU 2017-01 is effective for annual financial statements issued for fiscal years beginning after December 15, 2017. Management's assessment of ASU 2017-01 concluded that there is no impact to the Account.
In March 2017, the FASB issued ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The amendments in ASU 2017-05 clarify the scope and application of ASC 610-20 on the sale or transfer of nonfinancial assets and in substance nonfinancial assets to noncustomers, including partial sales. ASU 2017-05 is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Management is currently assessing the impact of ASU 2017-05 on the Account’s Consolidated Financial Statements.
Note 2—Management Agreements, Arrangements and Related Party Transactions
Investment advisory services for the Account are provided by TIAA officers, under the direction and control of the Board, pursuant to investment management procedures adopted by TIAA for the Account. TIAA’s investment management decisions for the Account are subject to review by the Account’s independent fiduciary. TIAA also provides various 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) distributing 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) maintaining accounting records and performing accounting services, (ii) receiving and allocating premiums, (iii) calculating and making annuity payments, (iv) processing withdrawal requests, (v) providing regulatory compliance and reporting services, (vi) maintaining the Account’s records of contract ownership and (vii) otherwise assisting generally in all aspects of the Account’s ope

13



rations. 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 investment management, administrative and distribution 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 Account’s 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 Account’s 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.
To the extent TIAA owns accumulation units issued pursuant to the liquidity guarantee, the independent fiduciary monitors and oversees, among other things, TIAA’s ownership interest in the Account and may require TIAA to eventually redeem some of its units, particularly when the Account has un-invested 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 consolidated statements of operations and are reflected in Note 7—Financial Highlights.
Note 3—Credit 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 3% of the rental income of the Account.
The Account’s wholly-owned real estate investments and investments in joint venture are located in the United States. The following table represents the diversification of the Account’s portfolio by region and property type as of June 30, 2017:
Diversification by Fair Value(1)
 
 
 
 
 
 
 
 
 
 
 
West
 
East
 
South
 
Midwest
 
Total
Office
16.9
%
 
20.5
%
 
5.6
%
 
%
 
43.0
%
Apartment
8.6
%
 
8.2
%
 
3.9
%
 
%
 
20.7
%
Retail
7.6
%
 
3.1
%
 
7.9
%
 
0.5
%
 
19.1
%
Industrial
7.7
%
 
2.0
%
 
3.8
%
 
0.8
%
 
14.3
%
Other(2)
0.3
%
 
2.4
%
 
0.1
%
 
0.1
%
 
2.9
%
Total
41.1
%
 
36.2
%
 
21.3
%
 
1.4
%
 
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 interest in Storage Portfolio investment and a fee interest encumbered by a ground lease real estate investment.
Properties in the “West” region are located in: AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY
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 “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

14



Note 4—Assets and Liabilities Measured at Fair Value on a Recurring Basis
Valuation Hierarchy: The Account’s fair value measurements are grouped categorically into three levels, as defined by the FASB. The levels are defined as follows:
Level 1—Valuations 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 2—Valuations 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, implied 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 3—Valuations 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 loans receivable and payable.
An investment’s categorization within the valuation hierarchy described above is based upon the lowest level of input that is significant to the fair value measurement. The Account’s limited partnership investments are valued using the net asset value per share as a practical expedient, which excludes the investments from the valuation hierarchy.
The Account’s 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, counterparty’s creditworthiness, the Account’s 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

15



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 Account’s daily net asset value calculation or in the Account’s periodic Consolidated 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.
The following tables show the major categories of assets and liabilities measured at fair value on a recurring basis as of June 30, 2017 (unaudited) and December 31, 2016, using unadjusted quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3); and practical expedient (in millions):
Description
 
Level 1: Quoted Prices in Active Markets for Identical Assets
 
Level 2: Significant Other Observable Inputs
 
Level 3: Significant Unobservable Inputs
 
Fair Value Using Practical Expedient
 
Total at
June 30, 2017
Real estate properties
 
$

 
$

 
$
15,496.6

 
$

 
$
15,496.6

Real estate joint ventures
 

 

 
5,946.8

 

 
5,946.8

Limited partnerships
 

 

 

 
139.5

 
139.5

Marketable securities:
 
 
 
 
 
 
 
 
 
 
Real estate-related
 
1,114.7

 

 

 

 
1,114.7

Government agency notes
 

 
3,152.2

 

 

 
3,152.2

United States Treasury securities
 

 
954.3

 

 

 
954.3

Loans receivable
 

 

 
297.3

 

 
297.3

Total Investments at
June 30, 2017
 
$
1,114.7

 
$
4,106.5

 
$
21,740.7

 
$
139.5

 
$
27,101.4

Mortgage loans payable
 
$

 
$

 
$
(2,290.1
)
 
$

 
$
(2,290.1
)

Description
 
Level 1: Quoted Prices in Active Markets for Identical Assets
 
Level 2: Significant Other Observable Inputs
 
Level 3: Significant Unobservable Inputs
 
Fair Value Using Practical Expedient
 
Total at December 31, 2016
Real estate properties
 
$

 
$

 
$
15,452.8

 
$

 
$
15,452.8

Real estate joint ventures
 

 

 
5,622.4

 

 
5,622.4

Limited partnerships
 

 

 

 
137.5

 
137.5

Marketable securities:
 
 
 
 
 
 
 
 
 
 
Real estate-related
 
1,081.5

 

 

 

 
1,081.5

Government agency notes
 

 
2,308.9

 

 

 
2,308.9

United States Treasury securities
 

 
1,744.9

 

 

 
1,744.9

Loans receivable
 

 

 
295.7

 

 
295.7

Total Investments at December 31, 2016
 
$
1,081.5

 
$
4,053.8

 
$
21,370.9

 
$
137.5

 
$
26,643.7

Mortgage loans payable
 
$

 
$

 
$
(2,332.1
)
 
$

 
$
(2,332.1
)

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 three and six months ended June 30, 2017 and 2016 (in millions, unaudited):

16



 
 
Real Estate
Properties
 
Real Estate
Joint Ventures
 
Loans
Receivable
 
Total
Level 3
Investments
 
Mortgage
Loans
Payable
For the three months ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
Beginning balance April 1, 2017
 
$
15,401.5

 
$
5,936.5

 
$
296.7

 
$
21,634.7

 
$
(2,320.3
)
Total realized and unrealized gains (losses) included in changes in net assets
 
32.8

 
0.1

 

 
32.9

 
(18.1
)
    Purchases(1)
 
62.3

 
10.8

 
0.6

 
73.7

 

    Sales
 

 

 

 

 

    Settlements(2)
 

 
(0.6
)
 

 
(0.6
)
 
48.3

Ending balance June 30, 2017
 
$
15,496.6

 
$
5,946.8

 
$
297.3

 
$
21,740.7

 
$
(2,290.1
)
 
 
Real Estate
Properties
 
Real Estate
Joint Ventures
 
Loans
Receivable
 
Total
Level 3
Investments
 
Mortgage
Loans
Payable
For the six months ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
Beginning balance January 1, 2017
 
$
15,452.8

 
$
5,622.4

 
$
295.7

 
$
21,370.9

 
$
(2,332.1
)
Total realized and unrealized gains (losses) included in changes in net assets
 
67.4

 
62.8

 

 
130.2

 
(6.5
)
    Purchases(1)
 
91.8

 
262.5

 
1.6

 
355.9

 

    Sales
 
(115.4
)
 

 

 
(115.4
)
 

    Settlements(2)
 

 
(0.9
)
 

 
(0.9
)
 
48.5

Ending balance June 30, 2017
 
$
15,496.6

 
$
5,946.8

 
$
297.3

 
$
21,740.7

 
$
(2,290.1
)
 
 
Real Estate
Properties
 
Real Estate
Joint Ventures
 
Loan Receivable
 
Total
Level 3
Investments
 
Mortgage
Loans
Payable
For the three months ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
Beginning balance April 1, 2016
 
$
14,762.2

 
$
4,221.0

 
$
100.6

 
$
19,083.8

 
$
(1,795.8
)
Total realized and unrealized gains (losses) included in changes in net assets
 
114.8

 
(17.2
)
 

 
97.6

 
(24.1
)
    Purchases(1)
 
258.9

 
36.6

 

 
295.5

 
(563.5
)
    Sales
 
(4.6
)
 

 

 
(4.6
)
 

    Settlements(2)
 

 
(1.5
)
 

 
(1.5
)
 
0.2

Ending balance June 30, 2016
 
$
15,131.3

 
$
4,238.9

 
$
100.6

 
$
19,470.8

 
$
(2,383.2
)
 
 
Real Estate
Properties
 
Real Estate
Joint Ventures
 
Loan
Receivable
 
Total
Level 3
Investments
 
Mortgage
Loans
Payable
For the six months ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
Beginning balance January 1, 2016
 
$
14,606.2

 
$
4,068.4

 
$
100.6

 
$
18,775.2

 
$
(1,794.4
)
Total realized and unrealized gains (losses) included in changes in net assets
 
215.4

 
133.5

 

 
348.9

 
(25.7
)
    Purchases(1)
 
404.6

 
38.7

 

 
443.3

 
(563.5
)
    Sales
 
(94.9
)
 

 

 
(94.9
)
 

    Settlements(2)
 

 
(1.7
)
 

 
(1.7
)
 
0.4

Ending balance June 30, 2016
 
$
15,131.3

 
$
4,238.9

 
$
100.6

 
$
19,470.8

 
$
(2,383.2
)

(1) 
Includes purchases, contributions for joint ventures, capital expenditures, and lending for mortgage loans receivable.
(2) 
Includes operating income for real estate joint ventures, net of distributions, and principal payments and extinguishments of mortgage loans payable.

17




The following table shows quantitative information about unobservable inputs related to the Level 3 fair value measurements as of June 30, 2017 (unaudited).
Type
Asset Class
Valuation
Technique(s)
Unobservable
Inputs
Range (Weighted Average)
Real Estate Properties and Joint Ventures
Office
Income Approach—Discounted Cash Flow
Discount Rate
Terminal Capitalization Rate
5.5% - 8.0% (6.5%)
4.3% - 7.3% (5.5%)
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
3.8% - 7.0% (4.8%)
 
Industrial
Income Approach—Discounted Cash Flow
Discount Rate
Terminal Capitalization Rate
5.7% - 8.6% (6.6%)
4.8% - 8.0% (5.5%)
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
4.0% - 7.5% (4.9%)
 
Apartment
Income Approach—Discounted Cash Flow
Discount Rate
Terminal Capitalization Rate
5.0% - 7.3% (6.1%)
4.0% - 6.0% (4.8%)
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
3.3% - 5.5% (4.2%)
 
Retail
Income Approach—Discounted Cash Flow
Discount Rate
Terminal Capitalization Rate
5.0% - 10.4% (6.4%)
4.3% - 8.8% (5.2%)
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
3.8% - 8.5% (4.6%)
Mortgage Loans Payable
Office and Industrial
Discounted Cash Flow
Loan to Value Ratio
Equivalency Rate
34.8% - 69.4% (43.3%)
3.4% - 4.9% (3.7%)
 
 
Net Present Value
Loan to Value Ratio
Weighted Average Cost of Capital Risk
Premium Multiple
34.8% - 69.4% (43.3%)
1.2 - 1.6 (1.3)
 
Apartment
Discounted Cash Flow
Loan to Value Ratio
Equivalency Rate
28.5% - 65.8% (41.4%)
2.7% - 3.6% (3.1%)
 
 
Net Present Value
Loan to Value Ratio
Weighted Average Cost of Capital Risk
Premium Multiple
28.5% - 65.8% (41.4%)
1.2 - 1.5 (1.3)
 
Retail
Discounted Cash Flow
Loan to Value Ratio
Equivalency Rate
18.1% - 50.6% (31.8%)
2.7% - 4.4% (3.5%)
 
 
Net Present Value
Loan to Value Ratio
Weighted Average Cost of Capital Risk
Premium Multiple
18.1% - 50.6% (31.8%)
1.1 - 1.3 (1.2)
Loans Receivable
Office, Retail and Storage
Discounted Cash Flow
Loan to Value Ratio
Equivalency Rate
58.9% - 79.2% (75.9%)
4.2% - 8.3% (6.3%)

Real Estate Properties and Joint Ventures: The significant unobservable inputs used in the fair value measurement of the Account’s real estate property and joint venture investments are the selection of certain investment rates (Discount Rate, Terminal Capitalization Rate, and Overall Capitalization Rate). Significant increases (decreases) in any of those inputs in isolation would result in significantly lower (higher) fair value measurements, respectively.
Mortgage Loans Payable: The significant unobservable inputs used in the fair value measurement of the Account’s mortgage loans payable are the loan to value ratios and the selection of certain credit spreads and weighted average cost of capital risk premiums. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value, respectively.
Loans Receivable: The significant unobservable inputs used in the fair value measurement of the Account’s loans receivable are the loan to value ratios and the selection of certain credit spreads. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value, respectively.
During the six months ended June 30, 2017 and 2016, there were no transfers between Levels 1, 2 or 3.

18



The amount of total net unrealized gains (losses) included in changes in net assets attributable to the change in net unrealized gains (losses) relating to Level 3 investments and mortgage loans payable using significant unobservable inputs still held as of the reporting date is as follows (in millions, unaudited):
 
Real Estate
Properties
 
Real Estate
Joint
Ventures
 
Loans
Receivable
 
Total
Level 3
Investments
 
Mortgage
Loans
Payable
For the three months ended June 30, 2017
$
32.4

 
$
0.1

 
$

 
$
32.5

 
$
(18.1
)
For the six months ended June 30, 2017
$
71.0

 
$
62.8

 
$

 
$
133.8

 
$
(6.5
)
For the three months ended June 30, 2016
$
114.8

 
$
(25.2
)
 
$

 
$
89.6

 
$
(24.1
)
For the six months ended June 30, 2016
$
216.2

 
$
133.5

 
$

 
$
349.7

 
$
(25.7
)
As of June 30, 2017, zero of the limited partnership investments were in dissolution. Colony Realty Partners LP began liquidation in May 2014, with final dissolution anticipated during 2017. Lion Gables Apartment Fund began liquidation in February 2015 and has dissolved all of the Fund’s assets. Final dissolution of the entity is anticipated during 2017.
Transwestern Mezzanine Realty Partners III, LLC (“Transwestern”) may engage in liquidation activities in 2017 based on the terms of its partnership agreement. The Account may elect to sell or transfer its ownership units by giving notice and acquiring consent from the management committee of Transwestern, which requires approval by a majority of the members. Redemption of the Account’s interest in Transwestern prior to liquidation is prohibited, unless a supermajority of the members approves the redemption request.
Clarion Gables Multi-Family Trust LP allows redemptions with an advanced notice of three months or more. Redemptions are funded using the partnership’s available cash, which may not immediately be in excess of the redemption amount, and may not be sufficient to fund the redemption amount for several months. The general partner has sole discretion in identifying how much cash is available to process redemptions. The partnership allows the Account to sell its interest in the partnership, subject to the consent and approval of the general partner.
Taconic New York City GP Fund, LP prohibits redemptions in the partnership prior to liquidation. Liquidation of the partnership is estimated to begin no earlier than 2024. The partnership allows the Account to sell its interest in the partnership, subject to the consent and approval of the general partner.
Note 5—Investments in Joint Ventures
The Account owns interests in several real estate properties through joint ventures and receives distributions and allocations of profits and losses from the joint ventures based on the Account’s ownership interest in those investments. Several of these joint ventures have mortgage loans payable collateralized by the properties owned by the aforementioned joint ventures. At June 30, 2017, the Account held investments in joint ventures with ownership interest percentages that ranged from 33.3% to 97.5%. Certain joint ventures are subject to adjusted distribution percentages when earnings in the investment reach a pre-determined threshold. The fair value of the Account’s equity interest in these joint ventures was $5.9 billion and $5.6 billion at June 30, 2017 and December 31, 2016, respectively.
A condensed summary of the results of operations of the joint ventures are shown below (in millions, unaudited):
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Operating Revenue and Expenses
 
 

 
 
 
 
Revenues
$
215.1

 
$
163.8

 
$
427.0

 
$
318.9

Expenses
102.8

 
81.4

 
206.7

 
164.9

Excess of revenues over expenses
$
112.3

 
$
82.4

 
$
220.3

 
$
154.0


19



Note 6—Mortgage Loans Payable
At June 30, 2017, the Account had outstanding mortgage loans payable secured by the following properties (in millions):
Property
 
Annual Interest Rate and
Payment Frequency
(2)
 
Principal
Amounts Outstanding as of
 
Maturity
June 30, 2017
 
December 31, 2016
 
 
 
 
 
(Unaudited)
 
 
 
 
The Legend at Kierland(4) (5) 
 
4.97% paid monthly
 
$

 
$
21.8

 
August 1, 2017
The Tradition at Kierland(4) (5)
 
4.97% paid monthly
 

 
25.8

 
August 1, 2017
Mass Court(4)
 
2.88% paid monthly
 
92.6

 
92.6

 
September 1, 2019
Red Canyon at Palomino Park(4) (6)
 
5.34% paid monthly
 
27.1

 
27.1

 
August 1, 2020
Green River at Palomino Park(4) (6)
 
5.34% paid monthly
 
33.2

 
33.2

 
August 1, 2020
Blue Ridge at Palomino Park(4) (6)
 
5.34% paid monthly
 
33.4

 
33.4

 
August 1, 2020
Ashford Meadows(4) 
 
5.17% paid monthly
 
44.6

 
44.6

 
August 1, 2020
The Corner(4) 
 
4.66% paid monthly
 
105.0

 
105.0

 
June 1, 2021
The Palatine(1)(4) 
 
4.25% paid monthly
 
79.5

 
80.0

 
January 10, 2022
The Forum at Carlsbad(1)(4)
 
4.25% paid monthly
 
89.6

 
90.0

 
March 1, 2022
The Colorado(4)
 
3.69% paid monthly
 
91.7

 
91.7

 
November 1, 2022
The Legacy at Westwood(4)
 
3.69% paid monthly
 
46.7

 
46.7

 
November 1, 2022
Regents Court(4)
 
3.69% paid monthly
 
39.6

 
39.6

 
November 1, 2022
The Caruth(4)
 
3.69% paid monthly
 
45.0

 
45.0

 
November 1, 2022
Fourth & Madison(4)
 
3.75% paid monthly
 
200.0

 
200.0

 
June 1, 2023
1001 Pennsylvania Avenue
 
3.70% paid monthly
 
330.0

 
330.0

 
June 1, 2023
1401 H Street NW(4)
 
3.65% paid monthly
 
115.0

 
115.0

 
November 5, 2024
32 South State Street(4)
 
4.48% paid monthly
 
24.0

 
24.0

 
June 6, 2025
780 Third Avenue(4) 
 
3.55% paid monthly
 
150.0

 
150.0

 
August 1, 2025
780 Third Avenue(4) 
 
3.55% paid monthly
 
20.0

 
20.0

 
August 1, 2025
701 Brickell Avenue(4) 
 
3.66% paid monthly
 
184.0

 
184.0

 
April 1, 2026
55 Second Street(4) (7)
 
3.74% paid monthly
 
137.5

 
137.5

 
October 1, 2026
1900 K Street, NW
 
3.93% paid monthly
 
163.0

 
163.0

 
April 1, 2028
501 Boylston Street(4) 
 
3.70% paid monthly
 
216.5

 
216.5

 
April 1, 2028
Total Principal Outstanding
 
 
 
$
2,268.0

 
$
2,316.5

 
 
Fair Value Adjustment(3)
 
 
 
22.1

 
15.6

 
 
Total Mortgage Loans Payable
 
 
 
$
2,290.1

 
$
2,332.1

 
 
(1) 
The mortgage is adjusted monthly for principal payments.
(2) 
Interest rates are fixed. Some mortgages held by the Account are structured to begin principal and interest payments after an initial interest only period.
(3) 
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 1—Organization and Significant Accounting Policies.
(4) 
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.
(5) 
Mortgage loans on the individual properties in the Kierland Apartment Portfolio were paid off on May 1, 2017.
(6) 
Represents mortgage loans on these individual properties which are held within the Palomino Park portfolio.
(7) 
This mortgage is comprised of three individual loans, all with equal recourse, interest rate and maturity. The principal balances by loan are $79.0 million, $45.0 million and $13.5 million.

20



Note 7—Financial Highlights
Selected condensed financial information for an Accumulation Unit of the Account is presented below. Per Accumulation Unit data is calculated on average units outstanding.
 
For the Six Months Ended June 30, 2017
 
Years Ended December 31,
2016
 
2015
 
2014
 
(Unaudited)
 
 
 
 
 
 
Per Accumulation Unit Data:
 
 
 
 
 
 
 
Rental income
$
8.386

 
$
16.433

 
$
15.538

 
$
15.862

Real estate property level expenses and taxes
3.793

 
7.534

 
7.319

 
7.788

Real estate income, net
4.593

 
8.899

 
8.219

 
8.074

Other income
1.968

 
3.594

 
3.342

 
3.459

Total income
6.561

 
12.493

 
11.561

 
11.533

Expense charges(1)
1.673

 
3.290

 
3.092

 
2.880

Investment income, net
4.888

 
9.203

 
8.469

 
8.653

Net realized and unrealized gain on investments and mortgage loans payable
2.524

 
9.660

 
18.911

 
27.868

Net increase in Accumulation Unit Value
7.412

 
18.863

 
27.380

 
36.521

Accumulation Unit Value:
 
 
 
 
 
 
 
Beginning of period
381.636

 
362.773

 
335.393

 
298.872

End of period
$
389.048

 
$
381.636

 
$
362.773

 
$
335.393

Total return(3)
1.94
%
 
5.20
%
 
8.16
%
 
12.22
%
Ratios to Average net assets(2):
 
 
 
 
 
 
 
Expenses(1)
0.86
%
 
0.86
%
 
0.86
%
 
0.89
%
Investment income, net
2.50
%
 
2.41
%
 
2.37
%
 
2.68
%
Portfolio turnover rate(3):
 
 
 
 
 
 
 
Real estate properties(4)
0.6
%
 
1.3
%
 
5.7
%
 
6.5
%
Marketable securities(5)
4.3
%
 
3.5
%
 
10.0
%
 
15.9
%
Accumulation Units outstanding at end of period (in millions)
62.5

 
62.4

 
60.4

 
57.9

Net assets end of period (in millions)
$
24,808.9

 
$
24,304.7

 
$
22,360.0

 
$
19,829.0

(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.
(2) 
Percentages for the six months ended June 30, 2017 are annualized.
(3) 
Percentages for the six months ended June 30, 2017 are not annualized.
(4) 
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.
(5) 
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.


21



Note 8—Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows (in millions):
 
For the Six Months Ended June 30, 2017
 
For the Year Ended December 31, 2016
 
(Unaudited)
 
 
Outstanding:
 
 
 
Beginning of period
62.4

 
60.4

Credited for premiums
3.7

 
8.2

Annuity, other periodic payments, withdrawals and death benefits
(3.6
)
 
(6.2
)
End of period
62.5

 
62.4

Note 9—Commitments and Contingencies
Commitments—The Account had $32.0 million and $39.0 million of outstanding immediately callable commitments to purchase additional interests in its limited partnership investments as of June 30, 2017 and December 31, 2016, respectively. The commitment at June 30, 2017 and December 31, 2016 is related to the Taconic New York City GP Fund, LP, in which the Account has entered into an agreement to provide funding. As of June 30, 2017, $13.0 million of the commitment has been funded. Once the remaining commitment is funded, the Account anticipates holding a 60%-90% interest in the fund.
Contingencies—The 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 Account’s business, financial position, or results of operations.
Note 10—Securities Lending
The Account may lend securities to qualified borrowers to earn additional income.  The Account receives cash collateral against the loaned securities and maintains cash collateral in an amount not less than 100% of the market value of loaned securities during the period of the loan; any additional collateral required due to changes in security values is delivered to the Account the next business day. Cash collateral received by the Account is invested exclusively in an interest-bearing deposit account.  The value of the loaned securities and the liability to return the cash collateral received are reflected in the consolidated statements of assets and liabilities. 
As of June 30, 2017, securities lending transactions are for real-estate related equity securities, and the resulting loans are continuous, can be recalled at any time, and have no set maturity. Securities lending income recognized by the Account consists of interest earned on cash collateral and lending fees, net of any rebates to the borrower and compensation to the agent. Such income is reflected within interest income on the consolidated statements of operations.  In lending its securities, the Account bears the market risk with respect to the investment of collateral and the risk that the agent may default on its contractual obligations to the Account. The agent bears the risk that the borrower may default on its obligation to return the loaned securities as the agent is contractually obligated to indemnify the Account if at the time of a default by a borrower some or all of the loan securities have not been returned.

22

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)



REAL ESTATE PROPERTIES—57.2% and 58.0%
Location/Description
 
Type
 
Fair Value at
June 30, 2017
 
December 31, 2016
 
 
 
 
(Unaudited)
 
 
 
Arizona:
 
 
 
 
 
 
 
 
Camelback Center
 
Office
 
$
57.3

 
 
$
56.4

 
Kierland Apartment Portfolio
 
Apartments
 
131.1

 
 
127.9

(1) 
California:
 
 
 
 
 
 
 
 
55 Second Street
 
Office
 
348.7

(1) 
 
335.0

(1) 
88 Kearny Street
 
Office
 
176.9

 
 
172.3

 
200 Middlefield Road
 
Office
 
60.7

 
 
60.5

 
BLVD63
 
Apartments
 
160.1

 
 
157.0

 
Castro Station
 
Office
 
162.0

 
 
158.2

 
Centre Pointe and Valley View
 
Industrial
 
44.0

 
 
42.8

 
Cerritos Industrial Park
 
Industrial
 
134.0

 
 
126.3

 
Charleston Plaza
 
Retail
 
93.0

 
 
92.0

 
Great West Industrial Portfolio
 
Industrial
 
157.7

 
 
166.1

 
Holly Street Village
 
Apartments
 
147.0

 
 
146.0

 
Larkspur Courts
 
Apartments
 
141.0

 
 
140.5

 
Northern CA RA Industrial Portfolio
 
Industrial
 
83.7

 
 
76.7

 
Oakmont IE West Portfolio
 
Industrial
 
85.7

 
 
82.7

 
Oceano at Warner Center
 
Apartments
 
88.7

 
 
88.3

 
Ontario Industrial Portfolio
 
Industrial
 
442.1

 
 
438.0

 
Ontario Mills Industrial Portfolio
 
Industrial
 
53.6

 
 
52.0

 
Pacific Plaza
 
Office
 
115.1

 
 
115.0

 
Rancho Cucamonga Industrial Portfolio
 
Industrial
 
177.6

 
 
174.2

 
Regents Court
 
Apartments
 
94.6

(1) 
 
89.9

(1) 
Southern CA RA Industrial Portfolio
 
Industrial
 
135.3

 
 
135.0

 
Stella
 
Apartments
 
175.9

 
 
173.1

 
Stevenson Point
 
Industrial
 
49.6

 
 
49.3

 
The Forum at Carlsbad
 
Retail
 
218.0

(1) 
 
221.5

(1) 
The Legacy at Westwood
 
Apartments
 
142.0

(1) 
 
142.1

(1) 
Township Apartments
 
Apartments
 
88.9

 
 
89.6

 
West Lake North Business Park
 
Office
 
60.1

 
 
60.0

 
Westcreek
 
Apartments
 
49.7

 
 
48.2

 
Westwood Marketplace
 
Retail
 
132.3

 
 
125.0

 
Wilshire Rodeo Plaza
 
Office
 
324.0

 
 
320.7

 
Colorado:
 
 
 
 
 
 
 
 
Palomino Park
 
Apartments
 
322.4

(1) 
 
314.1

(1) 
South Denver Marketplace
 
Retail
 
73.9

 
 
73.0

 
Connecticut:
 
 
 
 
 
 
 
 
Wilton Woods Corporate Campus
 
Office
 
134.0

 
 
141.9

 
Florida:
 
 
 
 
 
 
 
 
701 Brickell Avenue
 
Office
 
373.3

(1) 
 
380.7

(1) 

23

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Location/Description
 
Type
 
Fair Value at
June 30, 2017
 
December 31, 2016
 
 
 
 
(Unaudited)
 
 
 
Casa Palma
 
Apartments
 
$
100.0

 
 
$
97.0

 
Publix at Weston Commons
 
Retail
 
73.8

 
 
73.0

 
Seneca Industrial Park
 
Industrial
 
106.4

 
 
102.7

 
South Florida Apartment Portfolio
 
Apartments
 
105.1

 
 
104.1

 
The Manor Apartments
 
Apartments
 
53.6

 
 
53.6

 
The Manor at Flagler Village
 
Apartments
 
150.0

 
 
150.8

 
The Residences at the Village of Merrick Park
 
Apartments
 
74.3

 
 
74.1

 
Urban Centre
 
Office
 
130.9

 
 
121.4

 
Weston Business Center
 
Industrial
 
93.9

 
 
92.7

 
Georgia:
 
 
 
 
 
 
 
 
Atlanta Industrial Portfolio
 
Industrial
 
30.3

(6) 
 
62.8

 
Shawnee Ridge Industrial Portfolio
 
Industrial
 
88.3

 
 
86.7

 
Illinois:
 
 
 
 
 
 
 
 
32 South State Street
 
Retail
 
47.4

(1) 
 
46.5

(1) 
Chicago Caleast Industrial Portfolio
 
Industrial
 
79.7

 
 
81.8

 
Chicago Industrial Portfolio
 
Industrial
 
95.8

 
 
85.5

 
Maryland:
 
 
 
 
 
 
 
 
Landover Logistics Center
 
Industrial
 
43.8

 
 
39.8

 
The Shops at Wisconsin Place
 
Retail
 
92.8

 
 
92.8

 
Massachusetts:
 
 
 
 
 
 
 
 
99 High Street
 
Office
 
512.0

 
 
514.1

 
501 Boylston Street
 
Office
 
495.2

(1) 
 
490.3

(1) 
Fort Point Creative Exchange Portfolio
 
Office
 
218.6

 
 
223.0

 
Northeast RA Industrial Portfolio
 
Industrial
 
40.2

 
 
41.3

 
One Beeman Road
 
Industrial
 
33.6

 
 

 
New Jersey:
 
 
 
 
 
 
 
 
200 Milik Street
 
Industrial
 
51.7

 
 
51.2

 
Marketfair
 
Retail
 
106.1

 
 
104.2

 
Amazon Distribution Center
 
Industrial
 
107.0

 
 
101.0

 
South River Road Industrial
 
Industrial
 
86.2

 
 
71.9

 
New York:
 
 
 
 
 
 
 
 
21 Penn Plaza
 
Office
 
269.1

 
 
275.2

 
250 North 10th Street
 
Apartments
 
164.0

 
 
162.0

 
425 Park Avenue
 
Ground Lease
 
453.0

 
 
450.0

 
430 West 15th Street
 
Office
 
138.0

 
 
116.1

 
780 Third Avenue
 
Office
 
428.0

(1) 
 
425.0

(1) 
837 Washington Street
 
Office
 
209.0

 
 
215.0

 
The Colorado
 
Apartments
 
255.1

(1) 
 
258.1

(1) 
The Corner
 
Apartments
 
251.1

(1) 
 
250.0

(1) 
Oregon:
 
 
 
 
 
 
 
 
The Cordelia
 
Apartments
 
49.0

 
 
50.0

 

24

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Location/Description
 
Type
 
Fair Value at
June 30, 2017
 
December 31, 2016
 
 
 
 
(Unaudited)
 
 
 
Pennsylvania:
 
 
 
 
 
 
 
 
1619 Walnut Street
 
Retail
 
$
23.4

 
 
$
23.4

 
The Pepper Building
 
Apartments
 
53.3

 
 
52.9

 
South Carolina:
 
 
 
 
 
 
 
 
Greene Crossing
 
Apartments
 
66.8

 
 
65.8

 
Tennessee:
 
 
 
 
 
 
 
 
Southside at McEwen
 
Retail
 
48.2

 
 
48.8

 
Texas:
 
 
 
 
 
 
 
 
Beltway North Commerce Center
 
Industrial
 
19.3

 
 
19.5

 
Cliffs at Barton Creek
 
Apartments
 
45.1

 
 
45.8

 
Dallas Industrial Portfolio
 
Industrial
 
210.6

 
 
201.3

 
Houston Apartment Portfolio
 
Apartments
 
151.3

 
 
159.3

 
Lincoln Centre
 
Office
 
351.0

 
 
347.0

 
Northwest Houston Industrial Portfolio
 
Industrial
 
70.0

 
 
68.2

 
Park 10 Distribution
 
Industrial
 
10.3

 
 
11.3

 
Pinnacle Industrial Portfolio
 
Industrial
 
53.5

 
 
52.8

 
Pinto Business Park
 
Industrial
 
129.1

 
 
134.2

 
The Caruth
 
Apartments
 
86.5

(1) 
 
84.3

(1) 
The Maroneal
 
Apartments
 
52.6

 
 
52.1

 
Virginia:
 
 
 
 
 
 
 
 
8270 Greensboro Drive
 
Office
 
47.5

 
 
47.6

 
Ashford Meadows Apartments
 
Apartments
 
105.1

(1) 
 
107.2

(1) 
Plaza America
 
Retail
 
112.0

 
 
109.0

 
The Ellipse at Ballston
 
Office
 
86.3

 
 
79.8

 
The Palatine
 
Apartments
 
121.1

(1) 
 
130.9

(1) 
Washington:
 
 
 
 
 
 
 
 
Circa Green Lake
 
Apartments
 
93.5

 
 
92.5

 
Fourth and Madison
 
Office
 
525.0

(1) 
 
521.0

(1) 
Millennium Corporate Park
 
Office
 
180.0

 
 
190.1

 
Northwest RA Industrial Portfolio
 
Industrial
 
35.9

 
 
31.7

 
Pacific Corporate Park
 
Industrial
 
44.0

 
 
42.0

 
Prescott Wallingford Apartments
 
Apartments
 
60.5

 
 
58.8

 
Rainier Corporate Park
 
Industrial
 
113.2

 
 
104.0

 
Regal Logistics Campus
 
Industrial
 
91.5

 
 
83.1

 
Union - South Lake Union
 
Apartments
 
108.0

 
 
105.3

 
Washington DC:
 
 
 
 
 
 
 
 
1001 Pennsylvania Avenue
 
Office
 
804.2

(1) 
 
810.0

(1) 
1401 H Street, NW
 
Office
 
221.3

(1) 
 
230.0

(1) 
1900 K Street, NW
 
Office
 
331.0

(1) 
 
335.0

(1) 
Mass Court
 
Apartments
 
169.0

(1) 
 
169.0

(1) 
Mazza Gallerie
 
Retail
 

 
 
78.0

 

25

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Location/Description
 
Type
 
Fair Value at
June 30, 2017
 
December 31, 2016
 
 
 
 
(Unaudited)
 
 
 
The Ashton
 
Apartments
 
$
38.5

 
 
$
39.2

 
The Louis at 14th
 
Apartments
 
180.0

 
 
183.2

 
The Woodley
 
Apartments
 
191.0

 
 
203.0

 
TOTAL REAL ESTATE PROPERTIES
 
 
 
 
 
 
 
(Cost $12,777.7 and $12,818.1)
 
 
 
$
15,496.6

 
 
$
15,452.8

 

REAL ESTATE JOINT VENTURES AND LIMITED PARTNERSHIPS—22.4% and 21.6%
REAL ESTATE JOINT VENTURES—21.9% and 21.1%
Location/Description
 
Type
 
Fair Value at
June 30, 2017
 
December 31, 2016
 
 
 
 
(Unaudited)
 
 
 
California:
 
 
 
 
 
 
CA—Colorado Center LP
Colorado Center (50% Account Interest)
 
Office
 
$
588.0

 
 
$
567.8

 
PC Borrower, LLC
Pacific City (70% Account Interest)
 
Retail
 
133.8

 
 
128.5

 
TREA Campus Pointe 1, LLC
Campus Pointe 1 (45% Account Interest)
 
Office
 
140.4

 
 
137.5

 
TREA Campus Pointe 2, LLC
Campus Pointe 2 (42.72% Account Interest)
 
Office
 
100.5

 
 
85.7

 
T-C 1500 Owens, LLC
1500 Owens Street (49.9% Account Interest)
 
Office
 
76.7

 
 
74.8

 
T-C Foundry Square II Venture LLC
Foundry Square II (50.1% Account Interest)
 
Office
 
257.6

 
 
200.1

(2) 
T-C Illinois Street, LLC
409-499 Illinois Street (40% Account Interest)
 
Office
 
204.1

 
 
196.8

 
Valencia Town Center Associates LP
Valencia Town Center (50% Account Interest)
 
Retail
 
137.3

(2) 
 
128.0

(2) 
Florida:
 
 
 
 
 
 
Florida Mall Associates, Ltd
The Florida Mall (50% Account Interest)
 
Retail
 
754.6

(2) 
 
755.8

(2) 
TREA Florida Retail, LLC
Florida Retail Portfolio (80% Account Interest)
 
Retail
 
148.9

 
 
147.6

 
West Dade County Associates
Miami International Mall (50% Account Interest)
 
Retail
 
163.1

(2) 
 
161.1

(2) 
Maryland:
 
 
 
 
 
 
WP Project Developer
The Shops at Wisconsin Place (33.33% Account Interest)
 
Retail
 
19.2

 
 
19.4

 
Massachusetts:
 
 
 
 
 
 
One Boston Place REIT
One Boston Place (50.25% Account Interest)
 
Office
 
231.9

 
 
224.2

 
T-C 225 Binney, LLC
225 Binney Street (70% Account Interest)
 
Office
 
195.5

 
 
194.9

 
Nevada
 
 
 
 
 
 
 
 
Fashion Show Holding I, LLC
Fashion Show (50% Account Interest)
 
Retail
 
840.5

(2) 
 
839.1

(2) 

26

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Location/Description
 
Type
 
Fair Value at
June 30, 2017
 
December 31, 2016
 
 
 
 
(Unaudited)
 
 
 
New York:
 
 
 
 
 
 
401 West 14th Street, LLC
401 West 14th Street (42.19% Account Interest)
 
Retail
 
$
46.2

(2) 
 
$
41.1

(2) 
817 Broadway Owner, LLC
817 Broadway (61.46% Account Interest)
 
Office
 
23.0

(2) 
 
20.8

(2) 
MRA Hub 34 Holding, LLC
The Hub (95% Account Interest)
 
Office
 
56.3

(2) 
 
54.9

(2) 
RGM 42, LLC
MiMA (70% Account Interest)
 
Apartments
 
187.5

(2) 
 
194.7

(2) 
TREA 35th Street LIC Investor Member, LLC
Matsil Building (97.5% Account Interest)
 
Industrial
 
57.4

 
 

 
Tennessee:
 
 
 
 
 
 
West Town Mall, LLC
West Town Mall (50% Account Interest)
 
Retail
 
152.2

(2) 
 
$
154.4

(2) 
Texas:
 
 
 
 
 
 
Four Oaks Venture LP
Four Oaks Place LP (51% Account Interest)
 
Office
 
342.6

(2) 
 
342.3

(2) 
Washington:
 
 
 
 
 
 
T-C REA 400 Fairview Investor, LLC
400 Fairview (90% Account Interest)
 
Office
 
248.9

 
 
243.6

 
Various:
 
 
 
 
 
 
DDRTC Core Retail Fund, LLC
DDR Joint Venture (85% Account Interest)
 
Retail
 
671.8

(2,3) 
 
552.8

(2,3) 
Storage Portfolio I, LLC
Storage Portfolio (75% Account Interest)
 
Storage
 
168.8

(2,3) 
 
156.5

(2,3) 
TOTAL REAL ESTATE JOINT VENTURES
(Cost $4,692.9 and $4,393.2)
 
 
 
$
5,946.8

 
 
$
5,622.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIMITED PARTNERSHIPS—0.5% and 0.5%
 
 
 
 
Clarion Gables Multi-Family Trust LP (8.353% Account Interest)
 
$
122.9

 
 
$
121.6

 
Colony Realty Partners LP (5.27% Account Interest)
 

(10) 
 
3.1

(10) 
Lion Gables Apartment Fund (18.46% Account Interest)
 
0.2

(5) 
 
0.2

(5) 
Taconic New York City GP Fund, LP (60% Account Interest)
 
11.2

 
 
4.8

 
Transwestern Mezz Realty Partners III, LLC (11.708% Account Interest)
 
5.2

 
 
7.8

 
TOTAL LIMITED PARTNERSHIPS
(Cost $140.2 and $137.2)
 
 
 
$
139.5

 
 
$
137.5

 
TOTAL REAL ESTATE JOINT VENTURES AND LIMITED PARTNERSHIPS
(Cost $4,833.1 and $4,530.4)
 
$
6,086.3

 
 
$
5,759.9

 

27

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


MARKETABLE SECURITIES—19.3% and 19.3%
REAL ESTATE-RELATED MARKETABLE SECURITIES—4.1% and 4.1%

Shares
 
Issuer
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
(Unaudited)
 
 
 
84,437

 
84,437

 
Acadia Realty Trust
 
$
2.4

 
 
$
2.8

 
26,717

 
26,717

 
Agree Realty Corporation
 
1.2

 
 
1.2

 
2,132

 
2,132

 
Alexander's, Inc.
 
0.9

 
 
0.9

 
90,031

 
83,175

 
Alexandria Real Estate Equities, Inc.
 
10.9

 
 
9.2

 
48,980

 

 
Altisource Residential Corp.
 
0.6

 
 

 
40,188

 
41,010

 
American Assets Trust, Inc.
 
1.6

 
 
1.8

 
133,888

 
138,467

 
American Campus Communities, Inc.
 
6.3

 
 
6.9

 

 
6,347

 
American Farmland Company
 

 
 
0.1

 
226,050

 
233,916

 
American Homes 4 Rent
 
5.1

 
 
4.9

 
422,914

 
443,315

 
American Tower Corp.
 
56.0

 
 
46.8

 
155,985

 
163,592

 
Apartment Investment and Management Company
 
6.7

 
 
7.4

 
210,602

 
223,733

 
Apple Hospitality Inc.
 
3.9

 
 
4.5

 
47,395

 
38,282

 
Armada Hoffler Properties Inc.
 
0.6

 
 
0.6

 
27,462

 
27,631

 
Ashford Hospitality Prime Inc.
 
0.3

 
 
0.4

 
75,865

 
96,553

 
Ashford Hospitality Trust, Inc.
 
0.5

 
 
0.7

 
137,873

 
143,728

 
Avalonbay Communities, Inc.
 
26.5

 
 
25.5

 
24,509

 
21,354

 
Bluerock Residential Growth, Inc.
 
0.3

 
 
0.3

 
154,212

 
160,997

 
Boston Properties, Inc.
 
19.0

 
 
20.3

 
172,155

 
183,336

 
Brandywine Realty Trust
 
3.0

 
 
3.0

 
305,457

 
319,555

 
Brixmore Property Group Inc
 
5.5

 
 
7.8

 
86,366

 
91,727

 
Camden Property Trust
 
7.4

 
 
7.7

 
84,176

 
89,419

 
Care Capital Properties, Inc.
 
2.3

 
 
2.2

 
72,464

 
64,966

 
CareTrust REIT Inc.
 
1.3

 
 
1.0

 
43,788

 
43,788

 
Catchmark Timber Trust, Inc.
 
0.5

 
 
0.5

 
167,957

 
178,895

 
CBL & Associates Properties, Inc.
 
1.4

(9) 
 
2.1

 
92,124

 
92,124

 
Cedar Shopping Centers, Inc.
 
0.5

 
 
0.6

 
39,759

 
39,759

 
Chatham Lodging Trust
 
0.8

 
 
0.8

 
58,946

 
63,363

 
Chesapeake Lodging Trust
 
1.4

 
 
1.6

 
15,330

 

 
Clipper Realty, Inc.
 
0.2

(9) 
 

 
541,689

 

 
Colony Northstar, Inc.
 
7.6

 
 

 
110,515

 
50,961

 
Colony Starwood Homes
 
3.8

 
 
1.5

 
122,581

 
130,704

 
Columbia Property Trust Inc.
 
2.7

 
 
2.8

 

 
161,499

 
Communication Sales & Leasing, Inc.
 

 
 
4.1

 
13,231

 
13,231

 
Community Healthcare Trust, Inc.
 
0.3

 
 
0.3

 
117,713

 
117,878

 
CoreCivic, Inc.
 
3.3

 
 
2.9

 
12,695

 
12,695

 
Corenergy Infrastructure Trust, Inc.
 
0.4

(9) 
 
0.4

 
33,863

 
35,452

 
CoreSite Realty Corporation
 
3.5

 
 
2.8

 

28

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Shares
 
Issuer
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
(Unaudited)
 
 
 
99,369

 
98,668

 
Corporate Office Properties Trust
 
$
3.5

 
 
$
3.1

 
414,681

 
358,876

 
Cousins Properties Incorporated
 
3.7

 
 
3.1

 
365,963

 
378,286

 
Crown Castle International Corporation
 
36.7

 
 
32.8

 
180,122

 
189,128

 
Cubesmart
 
4.3

 
 
5.1

 
86,428

 
80,245

 
CyrusOne Inc.
 
4.8

 
 
3.6

 
92,007

 
95,203

 
DCT Industrial Trust, Inc.
 
4.9

 
 
4.6

 
308,806

 
326,844

 
DDR Corp
 
2.8

 
 
5.0

 
198,919

 
211,566

 
DiamondRock Hospitality Company
 
2.2

 
 
2.4

 
159,738

 
166,911

 
Digital Realty Trust, Inc.
 
18.0

 
 
16.4

 
144,167

 
146,715

 
Douglas Emmett, Inc.
 
5.5

 
 
5.4

 
355,455

 
371,513

 
Duke Realty Corporation
 
9.9

 
 
9.9

 
77,727

 
79,039

 
DuPont Fabros Technology, Inc.
 
4.8

 
 
3.5

 
38,107

 
38,107

 
Easterly Government Properties, Inc.
 
0.8

 
 
0.8

 
32,984

 
34,448

 
EastGroup Properties, Inc.
 
2.8

 
 
2.5

 
73,142

 
76,609

 
Education Realty Trust, Inc.
 
2.8

 
 
3.2

 
125,679

 
128,313

 
Empire State Realty Trust
 
2.6

 
 
2.6

 
62,943

 
66,086

 
EPR Properties
 
4.5

 
 
4.7

 
77,765

 
74,499

 
Equinix Inc.
 
33.4

 
 
26.6

 
120,619

 
132,412

 
Equity Commonwealth
 
3.8

 
 
4.0

 
81,386

 
81,207

 
Equity Lifestyle Properties, Inc.
 
7.0

 
 
5.9

 

 
97,735

 
Equity One, Inc.
 

 
 
3.0

 
357,043

 
378,516

 
Equity Residential
 
23.5

 
 
24.4

 
39,142

 
39,142

 
Escrow Winthrop Realty Trust
 
0.3

 
 
0.3

 
65,422

 
68,928

 
Essex Property Trust, Inc.
 
16.8

 
 
16.0

 
121,584

 
123,598

 
Extra Space Storage, Inc.
 
9.5

 
 
9.5

 
33,146

 
20,247

 
Farmland Partners, Inc.
 
0.3

 
 
0.2

(9) 
72,018

 
75,390

 
Federal Realty Investment Trust
 
9.1

 
 
10.7

 
128,971

 
146,636

 
FelCor Lodging Trust Incorporated
 
0.9

 
 
1.2

 
115,650

 
122,078

 
First Industrial Realty Trust, Inc.
 
3.3

 
 
3.4

 
62,454

 
62,454

 
First Potomac Realty Trust
 
0.7

 
 
0.7

 
242,943

 
247,510

 
Forest City Realty Trust A
 
5.9

 
 
5.2

 
62,347

 
62,347

 
Four Corners Property Trust
 
1.6

 
 
1.3

 
105,457

 
105,457

 
Franklin Street Properties Corp.
 
1.2

 
 
1.4

 
196,699

 
215,403

 
Gaming and Leisure Properties, Inc.
 
7.4

 
 
6.6

 
616,628

 
528,439

 
General Growth Properties, Inc.
 
14.5

 
 
13.2

 
121,553

 
75,332

 
GEO Group Inc./The
 
3.6

 
 
2.7

 
27,304

 
27,304

 
Getty Realty Corp.
 
0.7

 
 
0.7

 
24,752

 
24,752

 
Gladstone Commercial Corporation
 
0.5

 
 
0.5

 
14,323

 
14,323

 
Global Medical REIT, Inc.
 
0.1

(9) 
 
0.1

(9) 
66,375

 
169,785

 
Global Net Lease, Inc.
 
1.5

 
 
1.3

 
69,166

 
74,542

 
Government Properties Income Trust
 
1.3

 
 
1.4

 

29

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Shares
 
Issuer
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
(Unaudited)
 
 
 
150,155

 
439,336

 
Gramercy Property Trust Inc.
 
$
4.5

 
 
$
4.0

 
469,941

 
488,199

 
HCP, Inc.
 
15.0

 
 
14.5

 
114,778

 
121,172

 
Healthcare Realty Trust Inc.
 
3.9

 
 
3.7

 
189,006

 
148,194

 
Healthcare Trust of America
 
5.9

 
 
4.3

 
38,921

 
38,921

 
Hersha Hospitality Trust
 
0.7

 
 
0.8

 
100,544

 
105,127

 
Highwoods Properties, Inc.
 
5.1

 
 
5.4

 
162,463

 
172,557

 
Hospitality Properties Trust
 
4.8

 
 
5.5

 
730,412

 
784,264

 
Host Hotels & Resorts, Inc.
 
13.3

 
 
14.8

 
156,033

 
130,545

 
Hudson Pacific Properties, Inc.
 
5.3

 
 
4.5

 
70,772

 
64,154

 
Independence Realty Trust, Inc.
 
0.7

 
 
0.6

 
130,841

 
130,841

 
Investors Real Estate Trust
 
0.8

 
 
0.9

 
87,831

 

 
Invitation Homes
 
1.9

 
 

 
262,389

 
251,283

 
Iron Mountain Inc.
 
9.0

 
 
8.2

 
1,500,000

 
1,500,000

 
iShares Dow Jones US Real Estate Index Fund
 
119.7

 
 
115.4

(9) 
96,468

 
96,739

 
Kilroy Realty Corporation
 
7.3

 
 
7.1

 
413,143

 
446,152

 
Kimco Realty Corporation
 
7.6

 
 
11.2

 
82,157

 
86,474

 
Kite Realty Group Trust
 
1.6

 
 
2.0

 
82,861

 
86,839

 
Lamar Advertising Corporation
 
6.1

 
 
5.8

 
113,248

 
118,625

 
LaSalle Hotel Properties
 
3.4

 
 
3.6

 
233,615

 
246,697

 
Lexington Realty Trust
 
2.3

 
 
2.7

 
147,200

 
154,875

 
Liberty Property Trust
 
6.0

 
 
6.1

 
45,893

 
48,870

 
Life Storage, Inc.
 
3.4

 
 
4.2

 
39,429

 
41,261

 
LTC Properties, Inc.
 
2.0

 
 
1.9

 
91,244

 
93,046

 
Mack-Cali Realty Corporation
 
2.5

 
 
2.7

 
29,800

 
23,475

 
Medequities Realty Trust, Inc.
 
0.4

 
 
0.3

 
362,242

 
337,220

 
Medical Properties Trust, Inc.
 
4.7

 
 
4.1

 
113,412

 
118,873

 
Mid-America Apartment Communities, Inc.
 
12.0

 
 
11.6

 
71,720

 
69,038

 
Monmouth Real Estate Investment Corporation
 
1.1

 
 
1.1

 
167,694

 
175,519

 
Monogram Residential Trust Inc.
 
1.6

 
 
1.9

 
39,678

 
38,542

 
National Health Investors, Inc.
 
3.1

 
 
2.9

 
148,742

 
154,142

 
National Retail Properties, Inc.
 
5.8

 
 
6.8

 
44,249

 
44,249

 
National Storage Affiliates Trust
 
1.0

 
 
1.0

 
83,324

 
83,324

 
New Senior Investment Group
 
0.8

 
 
0.8

 

 
175,401

 
New York REIT
 

 
 
1.8

 
17,140

 
17,140

 
Nexpoint Residential Trust, Inc.
 
0.4

 
 
0.4

 
54,554

 
59,329

 
NorthStar Realty Europe Corp.
 
0.7

 
 
0.7

 

 
189,799

 
NorthStar Realty Finance Corp.
 

 
 
2.9

 
194,823

 
181,435

 
Omega Healthcare Investors, Inc.
 
6.4

(9) 
 
5.7

 
16,324

 
16,324

 
One Liberty Properties, Inc.
 
0.4

 
 
0.4

 
138,381

 
144,614

 
Outfront Media Inc.
 
3.2

 
 
3.6

 

30

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Shares
 
Issuer
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
(Unaudited)
 
 
 
198,430

 
157,741

 
Paramount Group Inc.
 
$
3.2

 
 
$
2.5

 
129,434

 

 
Park Hotels & Resorts, Inc.
 
3.5

 
 

 
42,820

 
45,533

 
Parkway Properties, Inc.
 
1.0

 
 
1.0

 
68,431

 
75,815

 
Pebblebrook Hotel Trust
 
2.2

(9) 
 
2.3

 
69,866

 
69,866

 
Pennsylvania Real Estate Investment Trust
 
0.8

 
 
1.3

 
153,031

 
141,267

 
Physicians Realty Trust
 
3.1

 
 
2.7

 
144,783

 
153,053

 
Piedmont Office Realty Trust, Inc.
 
3.1

 
 
3.2

 
40,092

 
39,487

 
Potlatch Corporation
 
1.8

 
 
1.6

 
30,894

 
25,352

 
Preferred Apartment Communities, Inc.
 
0.5

 
 
0.4

 
527,584

 
549,455

 
ProLogis
 
30.9

 
 
29.0

 
19,639

 
20,916

 
PS Business Parks, Inc.
 
2.6

 
 
2.4

 
148,165

 
152,197

 
Public Storage, Inc.
 
30.9

 
 
34.0

 
46,326

 
47,125

 
QTS Realty Trust, Inc.
 
2.4

 
 
2.3

 
96,479

 
98,883

 
Quality Care Properties
 
1.8

 
 
1.5

 
78,232

 
82,342

 
Ramco-Gershenson Properties Trust
 
1.0

 
 
1.4

 
127,625

 
129,796

 
Rayonier, Inc.
 
3.7

 
 
3.4

 
273,351

 
270,184

 
Realty Income Corporation
 
15.1

 
 
15.5

 
149,168

 
109,616

 
Regency Centers Corporation
 
9.3

 
 
7.6

 
107,617

 
113,887

 
Retail Opportunity Investment
 
2.1

 
 
2.4

 
236,713

 
247,302

 
Retail Properties of America
 
2.9

 
 
3.8

 
67,197

 
67,197

 
Rexford Industrial Realty Inc.
 
1.8

 
 
1.6

 
122,494

 
131,026

 
RLJ Lodging Trust
 
2.4

 
 
3.2

 
44,005

 
50,994

 
Ryman Hospitality Properties
 
2.8

 
 
3.2

 
64,057

 
68,440

 
Sabra Health Care REIT Inc.
 
1.5

 
 
1.7

 
11,082

 
14,267

 
Saul Centers, Inc.
 
0.6

 
 
0.9

 
120,173

 

 
SBA Communications Corporation
 
16.2

 
 

 
63,334

 
71,466

 
Select Income Real Estate Investment Trust
 
1.5

 
 
1.8

 
235,142

 
248,749

 
Senior Housing Properties Trust
 
4.8

 
 
4.7

 

 
36,820

 
Silver Bay Realty Trust Corp.
 

 
 
0.6

 
311,341

 
329,687

 
Simon Property Group, Inc.
 
50.4

 
 
58.6

 
99,324

 
106,453

 
SL Green Realty Corp.
 
10.5

 
 
11.4

 
483,394

 
483,032

 
Spirit Realty Capital Inc.
 
3.6

 
 
5.2

 
88,381

 
78,649

 
Stag Industrial, Inc.
 
2.4

 
 
1.9

 
170,571

 
162,012

 
STORE Capital Corporation
 
3.8

 
 
4.0

 
101,582

 
88,627

 
Summit Hotel Properties, Inc.
 
1.9

 
 
1.4

 
75,320

 
68,173

 
Sun Communities, Inc.
 
6.6

 
 
5.2

 
219,530

 
227,526

 
Sunstone Hotel Investors, L.L.C.
 
3.5

 
 
3.5

 
93,587

 
100,862

 
Tanger Factory Outlet Centers, Inc.
 
2.4

 
 
3.6

 
59,024

 
63,335

 
Taubman Centers, Inc.
 
3.5

 
 
4.7

 
48,484

 
48,484

 
Terreno Realty Corporation
 
1.6

 
 
1.4

 

31

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Shares
 
Issuer
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
(Unaudited)
 
 
 
136,929

 
150,999

 
The Macerich Company
 
$
8.0

 
 
$
10.7

 
50,411

 
50,411

 
Tier Inc.
 
0.9

 
 
0.9

 
265,245

 
280,233

 
UDR, Inc.
 
10.3

 
 
10.2

 
27,329

 
27,329

 
UMH Properties, Inc.
 
0.5

 
 
0.4

 
165,032

 

 
UNITI Group, Inc.
 
4.2

 
 

 
13,049

 
14,676

 
Universal Health Realty Income Trust
 
1.0

 
 
1.0

 
97,222

 
93,500

 
Urban Edge Properties
 
2.3

 
 
2.6

 
31,959

 
31,959

 
Urstadt Biddle Properties, Inc.
 
0.6

 
 
0.8

 
355,021

 
371,296

 
Ventas, Inc.
 
24.7

 
 
23.2

 
975,362

 
1,012,629

 
VEREIT, Inc.
 
7.9

 
 
8.6

 
172,179

 
177,780

 
Vornado Realty Trust
 
16.2

 
 
18.6

 
185,508

 
193,859

 
Washington Prime Group, Inc.
 
1.6

 
 
2.0

 
76,866

 
78,200

 
Washington Real Estate Investment Trust
 
2.5

 
 
2.6

 
119,216

 
120,820

 
Weingarten Realty Investors
 
3.6

 
 
4.3

 
366,989

 
380,425

 
Welltower Inc.
 
27.5

 
 
25.5

 
746,696

 
783,938

 
Weyerhaeuser Company
 
25.0

 
 
23.6

 
38,883

 
32,110

 
Whitestone Real Estate Investment Trust B
 
0.5

 
 
0.5

 
105,577

 
95,234

 
WP Carey Inc.
 
7.0

 
 
5.6

 
107,316

 
113,720

 
Xenia Hotels & Resorts Inc.
 
2.1

 
 
2.2

 
TOTAL REAL ESTATE-RELATED MARKETABLE SECURITIES
(Cost $883.6 and $883.9)
 
$
1,114.7

 
 
$
1,081.5

 

OTHER MARKETABLE SECURITIES—15.2% and 15.2%
GOVERNMENT AGENCY NOTES—11.7% and 8.7%
Principal
 
Issuer
 
Yield(4)
 
Maturity
Date
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
$

 
$
22.0

 
Fannie Mae Discount Notes
 
0.416%
 
2/1/2017
 
$

 
$
22.0


 
42.0

 
Fannie Mae Discount Notes
 
0.366% - 0.482%
 
3/1/2017
 

 
42.0


 
10.0

 
Fannie Mae Discount Notes
 
0.427%
 
3/3/2017
 

 
10.0


 
20.0

 
Fannie Mae Discount Notes
 
0.427%
 
3/6/2017
 

 
20.0


 
20.0

 
Fannie Mae Discount Notes
 
0.406%
 
3/13/2017
 

 
20.0


 
30.3

 
Fannie Mae Discount Notes
 
0.406%
 
3/27/2017
 

 
30.3


 
25.0

 
Fannie Mae Discount Notes
 
0.406%
 
3/28/2017
 

 
25.0


 
30.0

 
Fannie Mae Discount Notes
 
0.518%
 
4/18/2017
 

 
29.9


 
24.0

 
Fannie Mae Discount Notes
 
0.483% - 0.579%
 
4/19/2017
 

 
24.0


 
31.5

 
Fannie Mae Discount Notes
 
0.447% - 0.539%
 
5/1/2017
 

 
31.5


 
49.9

 
Fannie Mae Discount Notes
 
0.518%
 
5/2/2017
 

 
49.9


 
39.9

 
Fannie Mae Discount Notes
 
0.539%
 
5/5/2017
 

 
39.9

30.0

 

 
Fannie Mae Discount Notes
 
0.842%
 
7/10/2017
 
30.0

 

33.4

 

 
Fannie Mae Discount Notes
 
0.752%
 
7/11/2017
 
33.4

 

35.1

 

 
Fannie Mae Discount Notes
 
0.605%
 
7/12/2017
 
35.1

 

30.0

 

 
Fannie Mae Discount Notes
 
0.783%
 
7/17/2017
 
30.0

 


32

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Principal
 
Issuer
 
Yield(4)
 
Maturity
Date
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
$
15.1

 
$

 
Fannie Mae Discount Notes
 
0.783%
 
7/18/2017
 
$
15.1

 
$

25.0

 

 
Fannie Mae Discount Notes
 
0.782%
 
7/19/2017
 
25.0

 

15.0

 

 
Fannie Mae Discount Notes
 
0.802%
 
7/21/2017
 
15.0

 

37.1

 

 
Fannie Mae Discount Notes
 
0.793% - 0.812%
 
7/24/2017
 
37.1

 

20.0

 

 
Fannie Mae Discount Notes
 
0.793%
 
7/25/2017
 
20.0

 

40.1

 

 
Fannie Mae Discount Notes
 
0.793%
 
7/26/2017
 
40.1

 

34.1

 

 
Fannie Mae Discount Notes
 
0.793%
 
7/28/2017
 
34.1

 

30.0

 

 
Fannie Mae Discount Notes
 
0.793%
 
8/1/2017
 
30.0

 

22.1

 

 
Fannie Mae Discount Notes
 
0.793%
 
8/2/2017
 
22.1

 

20.1

 

 
Fannie Mae Discount Notes
 
0.793%
 
8/4/2017
 
20.1

 

30.1

 

 
Fannie Mae Discount Notes
 
0.803%
 
8/7/2017
 
30.1

 

20.0

 

 
Fannie Mae Discount Notes
 
0.813%
 
8/10/2017
 
20.0

 

44.1

 

 
Fannie Mae Discount Notes
 
0.905%
 
8/29/2017
 
44.0

 

30.0

 

 
Fannie Mae Discount Notes
 
0.875%
 
9/5/2017
 
29.9

 

30.0

 

 
Fannie Mae Discount Notes
 
0.946%
 
9/26/2017
 
29.9

 

40.1

 

 
Fannie Mae Discount Notes
 
0.925%
 
9/27/2017
 
40.0

 

18.1

 

 
Fannie Mae Discount Notes
 
0.946%
 
9/29/2017
 
18.0

 

34.9

 

 
Fannie Mae Discount Notes
 
0.987%
 
10/2/2017
 
34.8

 

47.1

 

 
Fannie Mae Discount Notes
 
1.017% - 1.038%
 
10/11/2017
 
46.9

 

35.1

 

 
Fannie Mae Discount Notes
 
1.027%
 
10/12/2017
 
35.0

 

33.6

 

 
Fannie Mae Discount Notes
 
1.017%
 
10/13/2017
 
33.5

 

20.1

 

 
Fannie Mae Discount Notes
 
1.017%
 
10/19/2017
 
20.0

 

15.1

 

 
Fannie Mae Discount Notes
 
1.038%
 
10/23/2017
 
15.1

 

20.0

 

 
Fannie Mae Discount Notes
 
1.038%
 
10/25/2017
 
19.9

 

40.0

 

 
Fannie Mae Discount Notes
 
1.038%
 
10/27/2017
 
39.9

 


 
19.9

 
Farmer Mac Discount Notes
 
0.682%
 
6/1/2017
 

 
19.9


 
15.5

 
Federal Farm Credit Bank Discount Notes
 
0.376% - 0.381%
 
2/22/2017
 

 
15.5

13.1

 

 
Federal Farm Credit Bank Discount Notes
 
0.793%
 
7/25/2017
 
13.1

 


 
34.7

 
Federal Home Loan Bank Discount Notes
 
0.304% - 0.355%
 
1/3/2017
 

 
34.7


 
40.0

 
Federal Home Loan Bank Discount Notes
 
0.345%
 
1/4/2017
 

 
40.0


 
29.2

 
Federal Home Loan Bank Discount Notes
 
0.355% - 0.447%
 
1/6/2017
 

 
29.2


 
7.1

 
Federal Home Loan Bank Discount Notes
 
0.299% - 0.345%
 
1/9/2017
 

 
7.1


 
25.0

 
Federal Home Loan Bank Discount Notes
 
0.325%
 
1/10/2017
 

 
25.0


 
50.0

 
Federal Home Loan Bank Discount Notes
 
0.304% - 0.396%
 
1/11/2017
 

 
50.0


 
33.0

 
Federal Home Loan Bank Discount Notes
 
0.365% - 0.396%
 
1/12/2017
 

 
33.0


 
50.0

 
Federal Home Loan Bank Discount Notes
 
0.386%
 
1/13/2017
 

 
50.0


 
36.0

 
Federal Home Loan Bank Discount Notes
 
0.345%
 
1/17/2017
 

 
36.0


 
42.1

 
Federal Home Loan Bank Discount Notes
 
0.294% - 0.365%
 
1/18/2017
 

 
42.1


 
20.0

 
Federal Home Loan Bank Discount Notes
 
0.284%
 
1/20/2017
 

 
20.0


 
50.0

 
Federal Home Loan Bank Discount Notes
 
0.335%
 
1/23/2017
 

 
50.0


 
47.0

 
Federal Home Loan Bank Discount Notes
 
0.345%
 
1/24/2017
 

 
47.0


 
34.8

 
Federal Home Loan Bank Discount Notes
 
0.304% - 0.360%
 
1/25/2017
 

 
34.8


 
45.0

 
Federal Home Loan Bank Discount Notes
 
0.294% - 0.406%
 
1/27/2017
 

 
45.0


33

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Principal
 
Issuer
 
Yield(4)
 
Maturity
Date
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
$

 
$
25.0

 
Federal Home Loan Bank Discount Notes
 
0.416%
 
1/30/2017
 
$

 
$
25.0


 
34.7

 
Federal Home Loan Bank Discount Notes
 
0.467% - 0.497%
 
2/1/2017
 

 
34.7


 
42.0

 
Federal Home Loan Bank Discount Notes
 
0.406%
 
2/3/2017
 

 
42.0


 
15.0

 
Federal Home Loan Bank Discount Notes
 
0.416%
 
2/7/2017
 

 
15.0


 
10.2

 
Federal Home Loan Bank Discount Notes
 
0.376%
 
2/10/2017
 

 
10.2


 
50.0

 
Federal Home Loan Bank Discount Notes
 
0.386% - 0.487%
 
2/17/2017
 

 
50.0


 
30.0

 
Federal Home Loan Bank Discount Notes
 
0.365%
 
2/21/2017
 

 
30.0


 
30.0

 
Federal Home Loan Bank Discount Notes
 
0.437%
 
2/22/2017
 

 
30.0


 
50.0

 
Federal Home Loan Bank Discount Notes
 
0.396%
 
2/24/2017
 

 
50.0


 
20.0

 
Federal Home Loan Bank Discount Notes
 
0.533%
 
2/27/2017
 

 
20.0


 
10.1

 
Federal Home Loan Bank Discount Notes
 
0.518%
 
3/3/2017
 

 
10.1


 
15.0

 
Federal Home Loan Bank Discount Notes
 
0.523%
 
3/6/2017
 

 
15.0


 
30.0

 
Federal Home Loan Bank Discount Notes
 
0.538%
 
3/8/2017
 

 
30.0


 
45.8

 
Federal Home Loan Bank Discount Notes
 
0.447% - 0.574%
 
3/10/2017
 

 
45.8


 
20.0

 
Federal Home Loan Bank Discount Notes
 
0.543%
 
3/14/2017
 

 
20.0


 
40.5

 
Federal Home Loan Bank Discount Notes
 
0.528% - 0.579%
 
3/17/2017
 

 
40.5


 
49.9

 
Federal Home Loan Bank Discount Notes
 
0.538%
 
3/20/2017
 

 
49.9


 
36.1

 
Federal Home Loan Bank Discount Notes
 
0.533%
 
3/22/2017
 

 
36.1


 
28.0

 
Federal Home Loan Bank Discount Notes
 
0.427% - 0.518%
 
3/23/2017
 

 
28.0


 
40.0

 
Federal Home Loan Bank Discount Notes
 
0.528%
 
3/24/2017
 

 
40.0


 
25.0

 
Federal Home Loan Bank Discount Notes
 
0.548%
 
3/28/2017
 

 
25.0


 
31.0

 
Federal Home Loan Bank Discount Notes
 
0.558%
 
3/29/2017
 

 
31.0


 
6.4

 
Federal Home Loan Bank Discount Notes
 
0.477%
 
3/31/2017
 

 
6.4


 
49.9

 
Federal Home Loan Bank Discount Notes
 
0.559%
 
4/17/2017
 

 
49.9


 
26.0

 
Federal Home Loan Bank Discount Notes
 
0.548% - 0.605%
 
4/19/2017
 

 
26.0


 
20.1

 
Federal Home Loan Bank Discount Notes
 
0.488%
 
4/28/2017
 

 
20.1


 
25.0

 
Federal Home Loan Bank Discount Notes
 
0.538% - 0.600%
 
5/5/2017
 

 
25.0


 
37.2

 
Federal Home Loan Bank Discount Notes
 
0.558% - 0.641%
 
5/12/2017
 

 
37.2

25.0

 

 
Federal Home Loan Bank Discount Notes
 
0.777%
 
7/3/2017
 
25.0

 

15.6

 

 
Federal Home Loan Bank Discount Notes
 
0.883%
 
7/5/2017
 
15.6

 

15.0

 

 
Federal Home Loan Bank Discount Notes
 
0.833%
 
7/6/2017
 
15.0

 

20.1

 

 
Federal Home Loan Bank Discount Notes
 
0.828%
 
7/7/2017
 
20.1

 

7.3

 

 
Federal Home Loan Bank Discount Notes
 
0.812%
 
7/10/2017
 
7.3

 

48.7

 

 
Federal Home Loan Bank Discount Notes
 
0.863% - 0.949%
 
7/13/2017
 
48.7

 

90.8

 

 
Federal Home Loan Bank Discount Notes
 
0.823% - 0.934%
 
7/14/2017
 
90.7

 

20.0

 

 
Federal Home Loan Bank Discount Notes
 
0.863%
 
7/17/2017
 
20.0

 

25.6

 

 
Federal Home Loan Bank Discount Notes
 
0.793% - 1.015%
 
7/18/2017
 
25.6

 

12.2

 

 
Federal Home Loan Bank Discount Notes
 
0.640% - 1.015%
 
7/19/2017
 
12.2

 

25.1

 

 
Federal Home Loan Bank Discount Notes
 
0.646%
 
7/21/2017
 
25.1

 

10.0

 

 
Federal Home Loan Bank Discount Notes
 
0.965%
 
7/26/2017
 
10.0

 

6.0

 

 
Federal Home Loan Bank Discount Notes
 
1.016%
 
8/1/2017
 
6.0

 

24.1

 

 
Federal Home Loan Bank Discount Notes
 
0.874%
 
8/2/2017
 
24.0

 

22.2

 

 
Federal Home Loan Bank Discount Notes
 
0.651%
 
8/3/2017
 
22.2

 


34

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Principal
 
Issuer
 
Yield(4)
 
Maturity
Date
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
$
20.0

 
$

 
Federal Home Loan Bank Discount Notes
 
0.864%
 
8/4/2017
 
$
20.0

 
$

30.0

 

 
Federal Home Loan Bank Discount Notes
 
1.025%
 
8/7/2017
 
30.0

 

47.1

 

 
Federal Home Loan Bank Discount Notes
 
0.676% - 0.844%
 
8/9/2017
 
47.0

 

52.5

 

 
Federal Home Loan Bank Discount Notes
 
0.681% - 0.854%
 
8/16/2017
 
52.4

 

50.0

 

 
Federal Home Loan Bank Discount Notes
 
0.854%
 
8/23/2017
 
49.9

 

40.0

 

 
Federal Home Loan Bank Discount Notes
 
0.692%
 
8/25/2017
 
39.9

 

25.2

 

 
Federal Home Loan Bank Discount Notes
 
0.895%
 
8/28/2017
 
25.1

 

25.0

 

 
Federal Home Loan Bank Discount Notes
 
0.865%
 
8/30/2017
 
25.0

 

47.0

 

 
Federal Home Loan Bank Discount Notes
 
0.966%
 
8/31/2017
 
46.9

 

32.1

 

 
Federal Home Loan Bank Discount Notes
 
0.834%
 
9/1/2017
 
32.0

 

21.0

 

 
Federal Home Loan Bank Discount Notes
 
0.986%
 
9/5/2017
 
21.0

 

30.1

 

 
Federal Home Loan Bank Discount Notes
 
0.844%
 
9/8/2017
 
30.0

 

25.0

 

 
Federal Home Loan Bank Discount Notes
 
0.895%
 
9/11/2017
 
24.9

 

20.0

 

 
Federal Home Loan Bank Discount Notes
 
0.956%
 
9/12/2017
 
20.0

 

46.1

 

 
Federal Home Loan Bank Discount Notes
 
0.956%
 
9/18/2017
 
46.0

 

14.8

 

 
Federal Home Loan Bank Discount Notes
 
0.956%
 
9/20/2017
 
14.8

 

50.1

 

 
Federal Home Loan Bank Discount Notes
 
0.956% - 1.037%
 
9/22/2017
 
50.0

 

50.0

 

 
Federal Home Loan Bank Discount Notes
 
0.956% - 1.037%
 
9/25/2017
 
49.9

 

10.9

 

 
Federal Home Loan Bank Discount Notes
 
0.987%
 
9/26/2017
 
10.9

 

30.8

 

 
Federal Home Loan Bank Discount Notes
 
0.968%
 
10/6/2017
 
30.7

 

30.0

 

 
Federal Home Loan Bank Discount Notes
 
1.053%
 
10/10/2017
 
29.9

 

4.0

 

 
Federal Home Loan Bank Discount Notes
 
1.049%
 
10/13/2017
 
4.0

 

44.2

 

 
Federal Home Loan Bank Discount Notes
 
1.063%
 
10/18/2017
 
44.0

 

39.6

 

 
Federal Home Loan Bank Discount Notes
 
1.008% - 1.039%
 
10/20/2017
 
39.4

 

10.1

 

 
Federal Home Loan Bank Discount Notes
 
1.049%
 
10/23/2017
 
10.0

 

42.2

 

 
Federal Home Loan Bank Discount Notes
 
1.013%
 
10/24/2017
 
42.0

 

18.2

 

 
Federal Home Loan Bank Discount Notes
 
1.048%
 
10/25/2017
 
18.2

 

37.1

 

 
Federal Home Loan Bank Discount Notes
 
1.048%
 
10/30/2017
 
37.0

 

25.9

 

 
Federal Home Loan Bank Discount Notes
 
1.019%
 
11/1/2017
 
25.8

 

43.2

 

 
Federal Home Loan Bank Discount Notes
 
1.048%
 
11/2/2017
 
43.0

 

30.0

 

 
Federal Home Loan Bank Discount Notes
 
1.024%
 
11/3/2017
 
29.9

 

38.2

 

 
Federal Home Loan Bank Discount Notes
 
1.048%
 
11/7/2017
 
38.0

 

25.0

 

 
Federal Home Loan Bank Discount Notes
 
1.069%
 
11/8/2017
 
24.9

 

15.2

 

 
Federal Home Loan Bank Discount Notes
 
1.069%
 
11/27/2017
 
15.1

 


 
16.1

 
Freddie Mac Discount Notes
 
0.345%
 
1/9/2017
 

 
16.1


 
25.0

 
Freddie Mac Discount Notes
 
0.335%
 
1/10/2017
 

 
25.0


 
30.0

 
Freddie Mac Discount Notes
 
0.391%
 
1/20/2017
 

 
30.0


 
13.1

 
Freddie Mac Discount Notes
 
0.426%
 
1/30/2017
 

 
13.1


 
40.0

 
Freddie Mac Discount Notes
 
0.447%
 
2/6/2017
 

 
40.0


 
36.9

 
Freddie Mac Discount Notes
 
0.436% - 0.457%
 
2/7/2017
 

 
36.9


 
44.2

 
Freddie Mac Discount Notes
 
0.360%
 
2/8/2017
 

 
44.2


 
25.0

 
Freddie Mac Discount Notes
 
0.360%
 
2/10/2017
 

 
25.0


 
40.0

 
Freddie Mac Discount Notes
 
0.365%
 
2/13/2017
 

 
40.0


35

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Principal
 
Issuer
 
Yield(4)
 
Maturity
Date
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
$

 
$
30.0

 
Freddie Mac Discount Notes
 
0.376%
 
2/14/2017
 
$

 
$
30.0


 
20.0

 
Freddie Mac Discount Notes
 
0.467%
 
2/21/2017
 

 
20.0


 
27.0

 
Freddie Mac Discount Notes
 
0.386%
 
2/27/2017
 

 
27.0


 
15.0

 
Freddie Mac Discount Notes
 
0.401%
 
3/3/2017
 

 
15.0


 
35.2

 
Freddie Mac Discount Notes
 
0.406%
 
3/7/2017
 

 
35.2


 
14.0

 
Freddie Mac Discount Notes
 
0.411%
 
3/14/2017
 

 
14.0


 
50.0

 
Freddie Mac Discount Notes
 
0.427%
 
3/21/2017
 

 
49.9


 
18.0

 
Freddie Mac Discount Notes
 
0.600%
 
4/21/2017
 

 
18.0


 
39.9

 
Freddie Mac Discount Notes
 
0.457%
 
5/3/2017
 

 
39.9


 
22.9

 
Freddie Mac Discount Notes
 
0.483%
 
5/4/2017
 

 
22.9

39.1

 

 
Freddie Mac Discount Notes
 
0.722%
 
7/5/2017
 
39.1

 

30.0

 

 
Freddie Mac Discount Notes
 
0.772%
 
7/7/2017
 
30.0

 

43.1

 

 
Freddie Mac Discount Notes
 
0.772%
 
7/10/2017
 
43.1

 

35.0

 

 
Freddie Mac Discount Notes
 
0.783%
 
7/13/2017
 
35.0

 

30.3

 

 
Freddie Mac Discount Notes
 
0.834%
 
8/8/2017
 
30.2

 

20.1

 

 
Freddie Mac Discount Notes
 
0.834%
 
8/10/2017
 
20.1

 

43.1

 

 
Freddie Mac Discount Notes
 
0.824%
 
8/11/2017
 
43.1

 

35.4

 

 
Freddie Mac Discount Notes
 
0.834%
 
8/14/2017
 
35.3

 

27.1

 

 
Freddie Mac Discount Notes
 
0.844%
 
8/18/2017
 
27.0

 

30.0

 

 
Freddie Mac Discount Notes
 
0.844%
 
8/21/2017
 
30.0

 

50.0

 

 
Freddie Mac Discount Notes
 
0.844%
 
8/22/2017
 
49.9

 

15.1

 

 
Freddie Mac Discount Notes
 
0.855%
 
8/28/2017
 
15.1

 

50.0

 

 
Freddie Mac Discount Notes
 
0.855%
 
8/29/2017
 
49.9

 

38.3

 

 
Freddie Mac Discount Notes
 
0.865% - 0.885%
 
9/6/2017
 
38.2

 

25.0

 

 
Freddie Mac Discount Notes
 
0.875%
 
9/12/2017
 
24.9

 

26.2

 

 
Freddie Mac Discount Notes
 
0.875%
 
9/13/2017
 
26.1

 

30.0

 

 
Freddie Mac Discount Notes
 
0.901%
 
9/15/2017
 
29.9

 

39.2

 

 
Freddie Mac Discount Notes
 
0.885%
 
9/19/2017
 
39.1

 

40.0

 

 
Freddie Mac Discount Notes
 
0.911%
 
9/20/2017
 
39.9

 

45.2

 

 
Freddie Mac Discount Notes
 
0.997%
 
10/3/2017
 
45.0

 

42.2

 

 
Freddie Mac Discount Notes
 
0.997%
 
10/4/2017
 
42.0

 

40.0

 

 
Freddie Mac Discount Notes
 
1.013%
 
10/16/2017
 
39.9

 

37.1

 

 
Freddie Mac Discount Notes
 
1.013%
 
10/17/2017
 
37.0

 

35.2

 

 
Freddie Mac Discount Notes
 
1.028%
 
10/26/2017
 
35.1

 

15.0

 

 
Freddie Mac Discount Notes
 
1.079%
 
11/6/2017
 
15.0

 

TOTAL GOVERNMENT AGENCY NOTES
(Cost $3,152.6 and $2,309.0)
 
$
3,152.2

 
$
2,308.9


UNITED STATES TREASURY SECURITIES—3.5% and 6.5%
Principal
 
Issuer
 
Yield(4)
 
Maturity
Date
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
$

 
$
35.9

 
United States Treasury Bills
 
0.345% - 0.369%
 
 
1/5/2017
 
$

 
$
35.9


 
47.9

 
United States Treasury Bills
 
0.423% - 0.428%
 
 
1/19/2017
 

 
48.0


36

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Principal
 
Issuer
 
Yield(4)
 
Maturity
Date
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
$

 
$
36.1

 
United States Treasury Bills
 
0.371% - 0.401%
 
 
1/26/2017
 
$

 
$
36.1


 
60.1

 
United States Treasury Bills
 
0.363% - 0.423%
 
 
2/2/2017
 

 
60.1


 
75.0

 
United States Treasury Bills
 
0.315% - 0.426%
 
 
2/9/2017
 

 
75.0


 
48.0

 
United States Treasury Bills
 
0.325% - 0.437%
 
 
2/16/2017
 

 
48.0


 
48.0

 
United States Treasury Bills
 
0.448% - 0.473%
 
 
2/23/2017
 

 
48.0


 
36.0

 
United States Treasury Bills
 
0.368% - 0.477%
 
 
3/2/2017
 

 
36.0


 
48.7

 
United States Treasury Bills
 
0.386% - 0.518%
 
 
3/9/2017
 

 
48.7


 
59.9

 
United States Treasury Bills
 
0.406% - 0.481%
 
 
3/16/2017
 

 
60.0


 
129.0

 
United States Treasury Bills
 
0.380% - 0.533%
 
 
3/23/2017
 

 
129.0


 
25.9

 
United States Treasury Bills
 
0.396% - 0.518%
 
 
3/30/2017
 

 
25.9


 
58.9

 
United States Treasury Bills
 
0.411% - 0.509%
 
 
4/6/2017
 

 
58.9


 
130.8

 
United States Treasury Bills
 
0.518% - 0.529%
 
 
4/13/2017
 

 
130.8


 
49.9

 
United States Treasury Bills
 
0.514% - 0.559%
 
 
4/20/2017
 

 
49.9


 
48.2

 
United States Treasury Bills
 
0.554% - 0.781%
 
 
4/27/2017
 

 
48.2


 
49.9

 
United States Treasury Bills
 
0.514%
 
 
5/4/2017
 

 
49.9


 
42.0

 
United States Treasury Bills
 
0.601% - 0.623%
 
 
5/11/2017
 

 
42.0


 
30.1

 
United States Treasury Bills
 
0.584% - 0.620%
 
 
5/18/2017
 

 
30.1


 
32.0

 
United States Treasury Bills
 
0.587%
 
 
6/8/2017
 

 
32.0

31.4

 

 
United States Treasury Bills
 
0.605% - 0.850%
 
 
7/6/2017
 
31.4

 

7.6

 

 
United States Treasury Bills
 
0.821%
 
 
7/13/2017
 
7.6

 

75.0

 
74.8

 
United States Treasury Bills
 
0.541% - 0.654%
 
 
7/20/2017
 
75.0

 
74.7

75.0

 

 
United States Treasury Bills
 
0.606%
 
 
7/27/2017
 
75.0

 

30.0

 

 
United States Treasury Bills
 
0.791% - 0.914%
 
 
8/3/2017
 
30.0

 

10.0

 

 
United States Treasury Bills
 
0.909%
 
 
8/10/2017
 
10.0

 

87.0

 
86.7

 
United States Treasury Bills
 
0.574% - 0.591%
 
 
8/17/2017
 
86.9

 
86.6

50.0

 

 
United States Treasury Bills
 
0.657% - 0.925%
 
 
8/24/2017
 
49.9

 

50.0

 

 
United States Treasury Bills
 
0.855% - 0.910%
 
 
9/7/2017
 
49.9

 

46.5

 
34.8

 
United States Treasury Bills
 
0.696% - 0.934%
 
 
9/14/2017
 
46.5

 
34.8

40.0

 

 
United States Treasury Bills
 
0.936%
 
 
9/21/2017
 
39.9

 

35.1

 

 
United States Treasury Bills
 
0.947%
 
 
9/28/2017
 
35.0

 

50.0

 

 
United States Treasury Bills
 
0.927%
 
 
10/5/2017
 
49.9

 

49.0

 

 
United States Treasury Bills
 
0.768%
 
 
12/7/2017
 
48.8

 


 
69.9

 
United States Treasury Notes
 
0.431% - 0.451%
 
 
1/31/2017
 

 
69.9


 
46.9

 
United States Treasury Notes
 
0.441% - 0.471%
 
 
2/15/2017
 

 
47.0


 
49.7

 
United States Treasury Notes
 
0.502%
 
 
2/28/2017
 

 
49.7


 
50.0

 
United States Treasury Notes
 
0.542%
 
 
3/15/2017
 

 
50.0


 
50.0

 
United States Treasury Notes
 
0.515%
 
 
3/31/2017
 

 
50.0


 
69.6

 
United States Treasury Notes
 
0.550% - 0.621%
 
 
5/31/2017
 

 
69.6


 
40.1

 
United States Treasury Notes
 
0.580%
 
 
6/15/2017
 

 
40.1


 
50.0

 
United States Treasury Notes
 
0.586%
 
 
6/30/2017
 

 
50.0

50.0

 
30.0

 
United States Treasury Notes
 
0.668% - 0.710%
 
 
7/31/2017
 
50.0

 
30.0

49.9

 

 
United States Treasury Notes
 
0.660% - 0.663%
 
 
8/15/2017
 
49.9

 

43.0

 

 
United States Treasury Notes
 
0.704% -0.705%
 
 
8/31/2017
 
42.9

 

10.0

 

 
United States Treasury Notes
 
0.963%
 
 
9/15/2017
 
10.0

 

50.0

 

 
United States Treasury Notes
 
0.768%
 
 
10/31/2017
 
49.9

 


37

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Principal
 
Issuer
 
Yield(4)
 
Maturity
Date
 
Fair Value at
June 30, 2017
 
December 31, 2016
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
$
21.1

 
$

 
United States Treasury Notes
 
0.812% - 0.935%
 
 
11/30/2017
 
$
21.0

 
$

5.0

 

 
United States Treasury Notes
 
0.997%
 
 
12/15/2017
 
5.0

 

25.0

 

 
United States Treasury Notes
 
1.187%
 
 
1/31/2018
 
25.0

 

17.1

 

 
United States Treasury Notes
 
1.183%
 
 
2/15/2018
 
17.0

 

48.0

 

 
United States Treasury Notes
 
0.441%
 
 
2/28/2018
 
47.8

 

TOTAL UNITED STATES TREASURY SECURITIES
(Cost $954.6 and $1,745.0)
 
$
954.3

 
$
1,744.9

TOTAL OTHER MARKETABLE SECURITIES
(Cost $4,107.2 and $4,054.0)
 
$
4,106.5

 
$
4,053.8

TOTAL MARKETABLE SECURITIES
(Cost $4,990.8 and $4,937.9)
 
 
 
$
5,221.2

 
$
5,135.3

 
LOANS RECEIVABLE—1.1% and 1.1%
 
 
 
Fair Value at
 
 
 
 
Borrower
 
Interest Rate(7)
 
 
Maturity Date
 
June 30, 2017
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)

 
 
 
 
 
 
DJM Capital Partners(8)
 
4.200%
 
 
7/1/2018
 
$
33.9

 
$
32.3

 
 
 
 
Simply Self Storage Portfolio
 
8.250%
 
 
9/6/2021
 
37.6

 
37.6

 
 
 
 
State Street Financial Center Junior Mezz
 
6.500%
 
 
11/10/2021
 
125.2

 
125.2

 
 
 
 
Charles River Plaza North
 
6.080%
 
 
4/6/2029
 
100.6

 
100.6

TOTAL LOANS RECEIVABLE
(Cost $296.4 and $294.8)
 
 
 
$
297.3

 
$
295.7

TOTAL INVESTMENTS
(Cost $22,898.0 and $22,581.2)
 
 
 
$
27,101.4

 
$
26,643.7

(1) 
The investment has a mortgage loan payable outstanding, as indicated in Note 6.
(2) 
The fair value reflects the Account’s 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.
(5) 
The assets held in this investment were liquidated on February 18, 2015; the investment is currently in dissolution.
(6) 
A partial disposition of assets held by the portfolio was completed on February 1, 2017.
(7) 
Represents fixed interest rate.
(8) 
This loan has the option to increase the principal balance up to $35.0 million and includes a one year extension option at a 5.0% annual interest only rate.
(9) 
All or a portion of these securities are out on loan. The aggregate value of securities on loan is $10.4 million as of June 30, 2017.
(10) 
The assets held in this investment were in liquidation as of May 2014, with final dissolution expected in 2017.




38



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Account’s financial condition and results of operations should be read together with the consolidated financial statements and notes contained in this report and with consideration to the sub-section entitled “Forward-Looking Statements,” which begins below, and the section of the Account’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “Form 10-K”) entitled “Item 1A. Risk Factors.” The past performance of the Account is not indicative of future results.
Forward-looking Statements
Some statements in this Form 10-Q 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 management’s 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 Form 10-Q. 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 management’s 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 risks associated with 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 Account’s properties, the risk that the Account’s 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, natural disasters, 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 risk of a lack of availability of financing (for potential purchasers of the Account’s properties), risks associated with 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 and the fact that the Account’s 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 Account’s daily accumulation unit value may be more or less than the actual realizable value of the property;
Borrowing: Risks associated with financing the Account’s properties, including the risk of default on loans secured by the Account’s properties (which could lead to foreclosure), the risk associated with high loan to value ratios on the Account’s 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;
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, (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

39



and (iii) high levels of cash in the Account during times of appreciating real estate values can impair the Account’s overall return;
Joint Venture Investments: The risks associated with joint ventures organized as limited partnerships or limited liability companies, as applicable, including the risk that a co-venturer may have interests or goals inconsistent with those 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 Account’s interest;
Regulatory Matters: Uncertainties associated with environmental liability and regulations and other governmental regulatory matters such as zoning laws, rent control laws, and property taxes;
Foreign Investments: The risks associated with purchasing, owning and disposing foreign investments (primarily real estate properties), including political risk, the risk associated with currency fluctuations (whether hedged or not), regulatory and taxation risks and risks of enforcing judgments;
Conflicts of Interest: 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;
Required Property Sales: The risk that, if TIAA were to own too large a percentage of the Account’s accumulation units through funding the liquidity guarantee (as determined by the independent fiduciary), the independent fiduciary could require the sales of properties to reduce TIAA’s ownership interest, which sales could occur at times and at prices that depress the sale proceeds to the Account;
Government and Government Agency Securities: Risks associated with investment securities issued by U.S. government agencies and U.S. government-sponsored entities, including the risk that the issuer may not have their securities backed by the full faith and credit of the U.S. government, and that transaction activity may fluctuate significantly from time to time, which could negatively impact the value of the securities and the Account’s ability to dispose of a security at a favorable time; and
Liquid Assets and Securities: Risks associated with investments in real estate-related liquid assets (which could include, from time to time, registered or unregistered real estate investment trust (“REIT”) securities and commercial mortgage-backed securities (“CMBS”)), and non-real estate-related liquid assets, including:
Financial/credit risk—Risks that the issuer will not be able to pay principal and interest when due or that the issuer’s earnings will fall;
Market volatility risk—Risk that the changing conditions in financial markets may cause the Account’s investments to experience price volatility;
Interest rate volatility risk—Risk that interest rate volatility may affect the Account’s current income from an investment; and
Deposit/money market risk—Risks that the Account could experience losses if banks fail.
More detailed discussions of certain of these risk factors are contained in the section of the Form 10-K entitled “Item 1A. Risk Factors” and in this section below and also in the section below entitled “Quantitative and Qualitative Disclosures About Market Risk.” These risks could cause actual results to differ materially from historical experience or management’s present expectations.
Caution should be taken not to place undue reliance on management’s forward-looking statements, which represent management’s views only as of the date that this report is filed. 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 period ended June 30, 2017 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.



40



ABOUT THE TIAA REAL ESTATE ACCOUNT
The Account was established in February 1995 as an insurance separate account of 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 Account’s performance.
Investment Objective and Strategy
The Account seeks favorable long-term returns primarily through rental income and appreciation of real estate and real estate investments owned by the Account. The Account will also invest in non-real estate-related publicly traded securities and short-term higher quality liquid investments that are easily converted to cash to enable the Account to meet participant redemption requests, purchase or improve properties, or cover other expense needs.
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:
Direct ownership interests in real estate;
Direct ownership of real estate through interests in joint ventures; or
Indirect interests in real estate through real estate-related securities, such as:
public and/or privately placed registered and unregistered equity investments in REITs, which investments may consist of common or preferred stock interests;
real estate limited partnerships and limited liability companies;
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
conventional commercial mortgage loans, participating mortgage loans, secured mezzanine loans and collateralized mortgage obligations, including CMBS and other similar investments.
The Account’s principal investment 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 Account’s net assets in such direct ownership interests at any time. Historically, approximately 70% of the Account’s 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. Traditionally, less than 10% of the Account’s net assets have been comprised of interests in these securities; although, the Account has recently held approximately 10% of its net assets in equity REIT securities at times. In addition, under the Account’s current investment guidelines, the Account is authorized to hold up to 10% of its net assets in CMBS. As of June 30, 2017, REIT securities comprised approximately 4.5% of the Account’s 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:
Short-term government-related instruments, including U.S. Treasury bills;
Long-term government-related instruments, such as securities issued by U.S. government agencies or U.S. government sponsored entities;
Short-term non-government-related instruments, such as money market instruments and commercial paper;
Long-term non-government-related instruments, such as corporate debt securities; and
Stock of companies that do not primarily own or manage real estate.

41



However, from time to time, the Account’s 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 a lack of attractive real estate-related investments available in the market.
Liquid Securities. Primarily due to management’s 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 Account’s 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 Account’s net assets).
The portion of the Account’s 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 or financings 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.
Foreign Investments. The Account from time to time will also make foreign real estate investments. Under the Account’s 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 Account’s net assets. As of June 30, 2017, the Account did not hold any foreign real estate investments.
SECOND QUARTER 2017 U.S. ECONOMIC AND COMMERCIAL REAL ESTATE OVERVIEW
The Account invests primarily in high-quality, core real estate in order to meet its investment objective of obtaining favorable long-term returns through rental income and the appreciation of its real estate holdings.
Economic Overview and Outlook
The U.S. economic expansion regained some momentum during the second quarter of 2017. According to the “advance estimate” from the Bureau of Economic Analysis, U.S. Gross Domestic Product (“GDP”) increased at a 2.6% annual rate during second quarter as compared to 1.2% during the first quarter. The increase in growth was largely related to a strong contribution from consumer spending during the quarter. International trade made a small positive contribution, as did government and fixed investment. The labor market expansion also accelerated during the quarter. The Bureau of Labor Statistics reported that 581,000 jobs were added during the second quarter as compared to 498,000 during first quarter. The labor market has added an average of 180,000 jobs per month in 2017, more than enough to absorb growth in the working-age population. Consequently, the unemployment rate decreased to end the second quarter of 2017 to 4.4% from 4.5% in the first quarter of 2017, even as the labor force expanded.

42



Economic Indicators*
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
4Q 2016
1Q 2017
2Q 2017
 
Forecast
 
2017
 
2018
Economy(1)
 
 
 
 
 
 
 
 
 
 
Gross Domestic Product (GDP)
 
1.5%
 
1.8%
1.2%
2.6%
 
2.2%
 
2.4%
Employment Growth (Thousands)
 
2,240
 
443
498
581
 
1,990
 
1,800
Unemployment Rate
 
4.9%
 
4.7%
4.5%
4.4%
 
4.4%
 
4.2%
Interest Rates(2)
 
 
 
 
 
 
 
 
 
 
10 Year Treasury
 
1.8%
 
2.1%
2.4%
2.3%
 
2.5%
 
3.0%
Sources: Blue Chip Economic Indicators, Blue Chip Financial Forecasts, BEA, Bureau of Labor Statistics, Federal Reserve and Moody’s Analytics
*
Data subject to revision

(1) 
GDP growth rates are annual rates. Quarterly unemployment rates are the reported value for the final month of the quarter while annual values represent a twelve-month average.
(2) 
Treasury rates are an average over the stated period.
Noting “that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year”, the Federal Open Market Committee (“FOMC”) voted in June to raise the federal funds rate as anticipated. The 25 basis point increase was the second this year and brought the federal funds rate to a range of 1.00%-1.25%. Economic projections were also released following the meeting which suggested an additional interest rate increase in 2017. Committee members reaffirmed the gradual adjustment of monetary policy, intended to support continued economic growth and further labor market strengthening. The FOMC also announced more details surrounding the plan to begin normalizing its balance sheet this year, starting perhaps as early as September.
Underlying economic conditions remained solid during the second quarter. Both GDP and job growth rebounded from a relatively soft first quarter while inflation moderated largely in response to weakness in energy prices. The FOMC noted that inflation was running somewhat below their 2.0% target rate, however the lower rate is generally considered transitory, rather than a reflection of weakening demand. Yields on ten-year U.S. Treasuries remained low, averaging 2.2% in June before increasing in early July.
Economists’ expectations for the U.S. economy were little changed during the second quarter of 2017. It appears increasingly unlikely that wide-scale fiscal stimulus will be approved by Congress this year. In the July 2017 Blue Chip Economic Indicators publication, economists place odds at less than 40% that either corporate or individual tax cuts will be enacted by year-end. As such, Blue Chip economists expect steady and trend-like GDP growth for the rest of 2017 and 2018. Odds of a recession remain low at 12.3% in 2017 and 23.0% in 2018. Job growth is expected to moderate during the second half of the year as the labor market approaches or eclipses full employment, but overall growth will remain strong enough to push the unemployment rate down further. Inflation is expected to drift back up towards the 2.0% target rate. Continued GDP and employment growth of this magnitude would support ongoing improvement in commercial real estate market conditions.
Real Estate Market Conditions and Outlook
Commercial real estate activity and conditions generally moderated or remained steady during the second quarter of 2017. Nationwide, tenant demand was generally enough to digest new supply and keep vacancy stable. Transaction activity declined, but pricing was relatively steady. Real Capital Analytics (“RCA”) reported that sales of office, industrial, retail, and multi-family properties totaled $97.8 billion during second quarter 2017, a 5% decline from second quarter 2016, but a 6.4% increase compared to first quarter 2017. RCA notes that at this point in the cycle, sellers appear unmotivated to concede pricing. At the same time, buyers have become more cautious, contributing to fewer deals but sticky pricing. Property pricing as calculated by the Green Street Advisor Commercial Property Price Index (“CPPI”) was essentially unchanged on a year-over-year basis. The index posted a small decline of 1.0% during second quarter as compared to first quarter.

43



The NAREIT All Equity REIT index increased 2.3% during the second quarter of 2017, as compared to a 2.5% increase during first quarter. For the quarter ending June 30, 2017, the NCREIF Fund Index Open-End Diversified Core Equity (“NFI-ODCE”) Equal Weight total return, net of fees was 1.51% as compared to 1.62% during the first quarter of 2017.
Occupancy in the Account’s holdings held relatively steady during the second quarter of 2017; properties averaged 91.4% leased as compared with 91.3% during the first quarter of 2017. The Account’s real estate assets generated a 1.11% total return during the second quarter. Total returns were positive for the 29th consecutive quarter, but at this stage in the cycle, the benefits from appreciation have waned, replaced by income as the primary driver of returns.

tiaa-realest_chartx20367.jpg
Data for the Account’s top five markets in terms of market value as of June 30, 2017 are provided below. These five markets represent nearly half of the Account’s total real estate portfolio. The Account’s properties in four of its five top markets average at or better than 85% leased.
Top 5 Metro Areas by Fair Market Value
Account % Leased Fair Value Weighted*
Number of Property Investments
Metro Area Fair Value as a % of Total RE Portfolio**
Metro Area Fair Value as a % of Total Investments
New York-Jersey City-White Plains, NY-NJ
93.5%
16
13.0%
10.3%
Washington-Arlington-Alexandria, DC-VA-MD-WV
87.4%
13
11.4%
9.0%
Los Angeles-Long Beach-Glendale, CA
84.3%
12
9.8%
7.8%
Boston, MA
91.1%
5
7.0%
5.5%
Seattle-Bellevue-Everett, WA
89.2%
6
5.7%
4.5%
*
Weighted by fair value, which differs from the calculations provided for market comparisons to CBRE-EA data and are used here to reflect the fair value of the Account’s monetary investments in those markets.
**
Wholly-owned properties are represented at fair value and gross of any debt, while joint venture properties are represented at the net equity value.

Office
CB Richard Ellis Econometric Advisors (“CBRE-EA”) reported that the national office vacancy rate held at 13.0% during the second quarter of 2017. CBRE-EA noted that the office market may be nearing a plateau for this cycle with the national vacancy rate closing in on the previous cyclical low of 12.4%. A number of major markets maintained single-digit vacancy rates including Boston, New York, San Francisco, Austin, and Seattle. Demand for office space is highly dependent on job growth in the finance, professional and business services sectors. During the second quarter,

44



the financial services sector added 46,000 jobs as compared to 39,000 in the first quarter. The professional and business services sector, which includes many facets of tech employment, added 137,000 jobs as compared to 152,000 previously. The demand outlook appears solid given current job growth in these key office-using sectors. However, more efficient layouts and mobile workforces are reducing corporate space needs nationwide.
Market vacancy rates as reported by CBRE-EA increased or remained steady in all five of the Account’s top office markets during the second quarter of 2017. The vacancy rate for the Account’s office portfolio averaged 14.8% during the second quarter, up from 14.0% in the first quarter. The average vacancy rate for the Account’s properties in San Francisco increased but remained below its market average due to a law firm vacating space in one of its buildings. The increase in the vacancy rate in the Account’s New York properties is reflective of a new acquisition undergoing a repositioning, which will likely contribute to additional increases in coming quarters.
 
 
 
 
 
 
Account Square
Foot Weighted
Average Vacancy
 
Market
Vacancy*
Top 5 Office Metropolitan Areas
 
Total Sector
by Metro Area
($M)
 
% of Total
Investments
 
2017 Q2
 
2017 Q1
 
2017 Q2
 
2017 Q1
Account / Nation
 
 
 
 
 
14.8
%
 
14.0
%
 
13.0
%
 
13.0
%
Washington-Arlington-Alexandria, DC-VA-MD-WV
 
$
1,490.3

 
5.5
%
 
13.7
%
 
12.9
%
 
15.6
%
 
15.2
%
Boston, MA
 
1,457.6

 
5.4
%
 
11.3
%
 
11.9
%
 
9.8
%
 
9.8
%
San Francisco-Redwood City-South San Francisco, CA
 
1,124.8

 
4.2
%
 
6.6
%
 
3.8
%
 
7.4
%
 
7.2
%
New York-Jersey City-White Plains, NY-NJ
 
1,123.4

 
4.1
%
 
20.0
%
 
17.8
%
 
9.5
%
 
9.5
%
Los Angeles-Long Beach-Glendale, CA
 
972.1

 
3.6
%
 
27.6
%
 
28.0
%
 
13.7
%
 
13.7
%
*
Source: CBRE - EA.
Market vacancy is defined as the percentage of space vacant. The Account’s vacancy is defined as the square foot-weighted percentage of unleased space.
Industrial
Industrial market conditions are influenced by GDP growth and consumer spending, which contribute to more goods being produced, shipped and stored throughout the U.S. Growing e-commerce sales have also increasingly contributed to warehouse demand. Global trade, and particularly growth in imports, has been an important generator of warehouse demand in port markets. During the second quarter, CBRE-EA reported that the national industrial availability rate decreased to 7.8% after ending the first quarter at 7.9%. With supply beginning to increase, industrial market conditions may fluctuate between modest improvements and a general flattening in availability at this point in the cycle. Healthy economic conditions are expected to provide continued support for warehouse space demand, even as new supply delivers.
As shown in the following table, the average availability rate of the Account’s industrial properties declined to 8.2% in the second quarter from 8.8% during the first quarter. Availability rates in each of the Account’s top industrial markets were near or well below their respective market averages and mostly improved during the quarter. The Account’s properties in Riverside, a key distribution channel for southern California port markets, total 8.0 million sq. ft. and are fully occupied.


45



 
 
 
 
 
 
Account Square
Foot Weighted
Average Vacancy
 
Market
Vacancy*
Top 5 Industrial Metropolitan Areas
 
Total Sector
by Metro Area
($M)
 
% of Total
Investments
 
2017 Q2
 
2017 Q1
 
2017 Q2
 
2017 Q1
Account / Nation
 
 
 
 
 
8.2
%
 
8.8
%
 
7.8
%
 
7.9
%
Riverside-San Bernardino-Ontario, CA
 
$
916.7

 
3.4
%
 
0.0
%
 
0.0
%
 
6.4
%
 
6.8
%
Los Angeles-Long Beach-Glendale, CA
 
313.3

 
1.2
%
 
5.1
%
 
6.0
%
 
3.9
%
 
3.9
%
New York-Jersey City-White Plains, NY-NJ
 
302.3

 
1.1
%
 
3.2
%
 
3.3
%
 
7.0
%
 
7.0
%
Tacoma-Lakewood, WA
 
284.6

 
1.1
%
 
4.1
%
 
2.7
%
 
4.8
%
 
4.5
%
Dallas-Plano-Irving, TX
 
264.2

 
1.0
%
 
6.1
%
 
8.3
%
 
8.1
%
 
7.9
%
*
Source: CBRE-EA.
Market availability is the percentage of space available for rent. Account vacancy is the square foot-weighted percentage of unleased space.
Note—CBRE-EA considers Tacoma part of the Seattle industrial market. Market vacancy rates reflect the Seattle-Tacoma total.
Multi-Family
Apartment demand is conditional upon a multitude of economic, demographic and socio-economic factors including job growth and household formations. Demand-side factors have been supportive of apartment market conditions, but the sector is also facing the largest supply pipeline. Accordingly, expectations are that vacancy will drift up and rent growth will soften, both of which have begun to occur in some markets. Others, however, still have room for further growth. Nationally, the apartment vacancy rate increased for the fifth consecutive quarter on a year-over-year basis and is now 4.6%, as compared to 4.4% during the second quarter of 2016. Vacancy declined compared to the first quarter of 2017, which reflects typical seasonal leasing patterns. Supply is expected to peak in 2017-2018, and taper off thereafter. Economic and labor market conditions should provide continued support for the apartment market once new supply has been fully integrated.
The vacancy rate of the Account’s multi-family properties decreased to 7.0% during second quarter as compared with 7.1% in the first quarter. As shown in the following table, average vacancy rates in the Account’s top five apartment markets are above their comparable market averages. Concessions have increased for luxury buildings and more recent construction as demand has softened, particularly in large, urban markets such as New York and Washington, DC. The Account’s experience in those markets largely reflects that trend.
 
 
 
 
 
 
Account Units
Foot Weighted
Average Vacancy
 
Market
Vacancy*
Top 5 Apartment Metropolitan Areas
 
Total Sector
by Metro Area
($M)
 
% of Total
Investments
 
2017 Q2
 
2017 Q1
 
2017 Q2
 
2017 Q1
Account / Nation
 
 
 
 
 
7.0
%
 
7.1
%
 
4.6
%
 
4.9
%
New York-Jersey City-White Plains, NY-NJ
 
$
857.7

 
3.2
%
 
4.8
%
 
3.9
%
 
3.1
%
 
3.5
%
Washington-Arlington-Alexandria, DC-VA-MD-WV
 
804.7

 
3.0
%
 
8.6
%
 
7.9
%
 
4.5
%
 
4.7
%
Los Angeles-Long Beach-Glendale, CA
 
553.7

 
2.0
%
 
5.9
%
 
7.7
%
 
4.3
%
 
3.9
%
Denver-Aurora-Lakewood, CO
 
322.4

 
1.2
%
 
5.3
%
 
7.9
%
 
5.2
%
 
6.0
%
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL
 
303.6

 
1.1
%
 
12.3
%
 
10.2
%
 
5.8
%
 
5.6
%
*
Source: CBRE-EA.
Market vacancy is the percentage of units vacant. The Account’s vacancy is the percentage of unleased units.



46



Retail
Retail market conditions have been challenged by e-commerce growth which is accelerating the shakeout of weaker retail concepts. Consumer spending has generally been healthy over the past couple of years, but due mainly to strength in durables like autos rather than non-durable shopping center-type goods. Preliminary data from the U.S. Census Bureau indicate that retail sales excluding motor vehicles and parts increased 0.2% from the first quarter of 2017 and 3.5% on a year-over-year basis. Declines in gasoline prices were the primary cause of weaker retail sales numbers during the quarter. Retail market conditions remained steady in the first quarter when the national availability rate held at 10.1%. The vacancy rate for the Account’s retail portfolio remained very low at 4.7% in the second quarter of 2017. All but one of the Account’s retail investments have vacancy rates below 10.0%, which is reflective of the overall high quality of the retail portfolio.
Outlook
The current economic expansion is one of the longest in U.S. history. There are no indications of an imminent downturn and economic growth is expected to perform in line with prevailing rates achieved during most of the recovery. With the labor market near or at full employment, wage growth should begin to meaningfully pick up. Inflation pulled back during the quarter, but softness is viewed as transitory and not a reflection of underlying economic weakness. The real estate cycle is indeed mature; moderation of returns has occurred and is to be expected, however, cycles do not end simply because of longevity; imbalances in one or more segments of the economy are typically the cause and none are currently evident. Property market conditions have generally remained stable. Regional conditions have varied depending on their economic drivers, but U.S. real estate markets on the whole are largely well-balanced.
Economists expect GDP growth of 2.2% in 2017 and 2.4% in 2018 and for job growth to slow, but remain expansive enough to bring the unemployment rate down further. Interest rates are expected to rise at a gradual pace, while inflation is likely to return to and remain around the Fed’s target rate. Key risks include equity markets at record levels with unusually low volatility and higher political and policy uncertainty. Nonetheless, real estate market conditions should remain healthy during 2017 if domestic economic conditions approximate economist expectations.

47



Investments as of June 30, 2017
As of June 30, 2017, the Account had total net assets of $24.8 billion, a 2.1% increase from December 31, 2016. The increase in the Account’s net assets was primarily driven by net investment income and appreciation in value of the Account’s investments.
As of June 30, 2017, the Account owned a total of 130 real estate investments (105 of which were wholly-owned, 25 of which were held in joint ventures). The real estate portfolio included 38 office investments (including 12 held in joint ventures), 33 industrial investments (including one held in a joint venture), 36 apartment investments (including one held in a joint venture), 21 retail investments (including ten held in joint ventures), one 75% owned joint venture interest in a portfolio of storage facilities, and one leasehold interest encumbered by a ground lease. Of the real estate investments, 31 are subject to debt (including 12 joint venture investments).
The outstanding principal on mortgage loans payable on the Account’s wholly-owned real estate portfolio as of June 30, 2017 was $2.3 billion. The Account’s proportionate share of outstanding principal on mortgage loans payable within its joint venture investments was $1.9 billion, which is netted against the underlying properties when determining the joint venture investment’s fair value presented on the consolidated schedules of investments. When the mortgage loans payable within the joint venture investments are considered, total outstanding principal on the Account’s portfolio as of June 30, 2017 was $4.2 billion, which represented a loan to value ratio of 14.2%. The Account has no Account-level debt.
Management believes that the Account’s real estate portfolio is diversified by location and property type. The Account’s largest investment, Fashion Show located in Las Vegas, NV, represented 3.9% of total real estate investments and 3.1% of total investments. As discussed in the Account’s prospectus, the Account does not intend to buy and sell its real estate investments simply to make short-term profits. Rather, the Account’s 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 Account’s intent to diversify the Account by property type and geographic location (including reallocating the Account’s exposure to or away from certain property types in certain geographic locations), or (v) otherwise do not satisfy the investment objectives of the Account. Management, from time to time, will evaluate the need to manage liquidity in the Account as part of its analysis as to whether to undertake a particular asset sale. 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., participant withdrawals or benefit payments).

48



The following table lists the Account's ten largest investments as of June 30, 2017. For information regarding the Account's diversification of real estate assets by region and property type, see Note 3—Credit Risk Concentrations.

Ten Largest Real Estate Investments
Property Investment Name
 
City
 
State
 
Type
 
Fair Value
(in millions)
(1)
 
Property as a
% of Total
Real Estate
Portfolio
 
Property as a
% of Total
Investments
Fashion Show
 
Las Vegas
 
NV
 
Retail
 
$
840.5

 
(2) 
 
3.9
%
 
3.1
%
1001 Pennsylvania Avenue
 
Washington
 
DC
 
Office
 
804.2

 
(3) 
 
3.8
%
 
3.0
%
The Florida Mall
 
Orlando
 
FL
 
Retail
 
754.6

 
(4) 
 
3.5
%
 
2.8
%
DDR
 
Various
 
USA
 
Retail
 
671.8

 
(5) 
 
3.1
%
 
2.5
%
Colorado Center
 
Santa Monica
 
CA
 
Office
 
588.0

 
(6) 
 
2.7
%
 
2.2
%
Fourth and Madison
 
Seattle
 
WA
 
Office
 
525.0

 
(7) 
 
2.4
%
 
1.9
%
99 High Street
 
Boston
 
MA
 
Office
 
512.0

 

 
2.4
%
 
1.9
%
501 Boylston Street
 
Boston
 
MA
 
Office
 
495.2

 
(8) 
 
2.3
%
 
1.8
%
425 Park Avenue
 
New York
 
NY
 
Ground Lease
 
453.0

 
 
 
2.1
%
 
1.7
%
Ontario Industrial Portfolio
 
Ontario
 
CA
 
Industrial
 
442.1

 

 
2.1
%
 
1.6
%

(1) 
Fair Value as reported in the June 30, 2017 Consolidated Schedules of Investments. Investments owned 100% by the Account are reported at net equity value on a fair value basis, and are presented at the Account's ownership interest.
(2) 
Fashion Show is held in a joint venture with General Growth Properties, in which the Account holds 50% interest, and is presented net of debt. As of June 30, 2017, this debt had a fair value of $429.4 million.
(3) 
1001 Pennsylvania Avenue is presented gross of debt. The value of the Account's interest less the fair value of leverage is $472.8 million.
(4) 
The Florida Mall is held in a joint venture with Simon Property Group, L.P., in which the Account hold a 50% interest, and is presented net of debt. As of June 30, 2017, this debt had a fair value of $177.7 million.
(5) 
DDR Joint Venture, in which the Account holds an 85% interest, consists of 25 retail properties located in 11 states and is presented net of debt. As of June 30, 2017, this debt had a fair value of $526.7 million.
(6) 
Colorado Center is held in a joint venture with EOP Operating LP, in which the Account holds a 50% interest.
(7) 
Fourth and Madison is presented gross of debt. The value of the Account's interest less the fair value of leverage is $322.3 million.
(8) 
501 Boylston Street is presented gross of debt. The value of the Account's interest less the fair value of leverage is $282.7 million.

At June 30, 2017, the Account held 79.1% of its total investments in real estate and real estate joint ventures. The Account also held investments in government agency notes representing 11.7% of total investments, real estate-related equity securities representing 4.1% of total investments, U.S. Treasury securities representing 3.5% of total investments, loans receivable representing 1.1% of total investments, and real estate limited partnerships representing 0.5% of total investments.

49



Results of Operations
Six months ended June 30, 2017 compared to six months ended June 30, 2016
Net Investment Income
The following table shows the results of operations for the six months ended June 30, 2017 and 2016 and the dollar and percentage changes for those periods (dollars in millions, unaudited).
 
 
For the Six Months Ended June 30,
 
Change
2017
 
2016
 
$
 
%
INVESTMENT INCOME
 
 
 
 
 
 
 
 
Real estate income, net:
 
 
 
 
 
 
 
 
Rental income
 
$
523.7

 
$
498.5

 
$
25.2

 
5.1
 %
Real estate property level expenses:
 
 
 
 
 
 
 
 
Operating expenses
 
108.0

 
108.7

 
(0.7
)
 
(0.6
)%
Real estate taxes
 
84.1

 
76.5

 
7.6

 
9.9
 %
Interest expense
 
44.8

 
40.9

 
3.9

 
9.5
 %
Total real estate property level expenses
 
236.9

 
226.1

 
10.8

 
4.8
 %
Real estate income, net
 
286.8

 
272.4

 
14.4

 
5.3
 %
Income from real estate joint ventures and limited partnerships
 
93.4

 
78.3

 
15.1

 
19.3
 %
Interest
 
21.7

 
11.5

 
10.2

 
88.7
 %
Dividends
 
7.8

 
10.7

 
(2.9
)
 
(27.1
)%
TOTAL INVESTMENT INCOME
 
409.7

 
372.9

 
36.8

 
9.9
 %
Expenses:
 
 
 
 
 
 
 
 
Investment management charges
 
37.4

 
34.2

 
3.2

 
9.4
 %
Administrative charges
 
31.3

 
31.4

 
(0.1
)
 
(0.3
)%
Distribution charges
 
13.2

 
14.1

 
(0.9
)
 
(6.4
)%
Mortality and expense risk charges
 
0.6

 
0.6

 

 
 %
Liquidity guarantee charges
 
22.0

 
17.9

 
4.1

 
22.9
 %
TOTAL EXPENSES
 
104.5

 
98.2

 
6.3

 
6.4
 %
INVESTMENT INCOME, NET
 
$
305.2

 
$
274.7

 
$
30.5

 
11.1
 %
Rental Income:
Rental income increased $25.2 million, or 5.1%, primarily due to increased rental rates and reduced leasing incentives in the industrial and retail sectors coupled with net real estate acquisitions.
Operating Expenses:
Operating expenses decreased $0.7 million, or 0.6%. The slight decrease is primarily due to general reductions in operating expenses across the apartment portfolio partially offset by the impact of net real estate acquisitions.
Real Estate Taxes:
Real estate taxes increased $7.6 million, or 9.9%, primarily due to net real estate acquisitions coupled with higher property tax assessments resulting from increases in property value in the apartment, retail and office sectors.
Interest Expense:
Interest expense increased $3.9 million, or 9.5%, due to higher average outstanding principal balances through the six months ended June 30, 2017, as compared to the same period in 2016.

50



Income from Real Estate Joint Ventures and Limited Partnerships:
Income from real estate joint ventures and limited partnerships increased $15.1 million, or 19.3%, as a result of net acquisitions subsequent to June 30, 2016 and increased occupancy in the retail and office sectors.
Interest and Dividend Income:
Interest income increased $10.2 million primarily due to interest income earned on a larger loan receivable portfolio in 2017 as compared to the same period in 2016. Dividend income decreased $2.9 million when compared to the same period in 2016 due to lower dividend yields on the Account's real-estate related securities coupled with return of capital adjustments recorded in 2017.
Expenses:
Expense ratios, as a percentage of average net assets, for investment advisory, administrative and distribution charges were 0.33% and 0.35% for the six month period ended June 30, 2017 and 2016, respectively. Costs increased period over period, however, average net assets increased at a higher velocity reducing the overall expense ratio. These costs have fixed and variable components, the latter of which generally correspond to the level of the Account’s net assets under management and other cost drivers.
Mortality and expense risk and liquidity guarantee charges are contractual charges to the Account from TIAA for TIAA’s assumption of these risks and provision of the guarantee. The rates for these charges were established effective May 1, 2017, for the twelve month period ending April 30, 2018, and are charged based on the Account’s net assets.
Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable
The following table shows the net realized and unrealized gains and losses on investments and mortgage loans payable for the six months ended June 30, 2017 and 2016 and the dollar and percentage changes for those periods (dollars in millions, unaudited).
 
 
For the Six Months Ended June 30,
 
Change
2017
 
2016
 
$
 
%
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
 
 
 
 
 
 
 
 
Net realized gain (loss) on investments:
 
 
 
 
 
 
 
 
Real estate properties
 
$
(16.8
)
 
$
10.1

 
$
(26.9
)
 
N/M

Real estate joint ventures and limited partnerships
 

 
0.2

 
(0.2
)
 
N/M

Marketable securities
 
12.7

 
18.5

 
(5.8
)
 
(31.4
)%
Total realized gain (loss) on investments:
 
(4.1
)
 
28.8

 
(32.9
)
 
N/M

Net change in unrealized appreciation (depreciation) on:
 
 
 
 
 
 
 
 
Real estate properties
 
84.2

 
205.3

 
(121.1
)
 
(59.0
)%
Real estate joint ventures and limited partnerships
 
61.8

 
128.0

 
(66.2
)
 
(51.7
)%
Marketable securities
 
32.0

 
110.2

 
(78.2
)
 
(71.0
)%
Mortgage loans payable
 
(6.5
)
 
(25.7
)
 
19.2

 
(74.7
)%
Net change in unrealized appreciation on investments and mortgage loans payable
 
171.5

 
417.8

 
(246.3
)
 
(59.0
)%
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
 
$
167.4

 
$
446.6

 
$
(279.2
)
 
(62.5
)%
N/M—Not meaningful
Real Estate Properties, Joint Ventures and Limited Partnerships:
Net realized losses in the Account are due to the disposition of wholly-owned real estate properties. See the Recent Transactions section herein for additional disclosure regarding the sale of the Account’s real estate property investments.

51



Real Estate Properties:
Wholly-owned real estate investments experienced net realized and unrealized gains of $67.4 million during the first six months of 2017 compared to $215.4 million during the comparable period of 2016. While the rate of appreciation has slowed in 2017, it has remained positive due to favorable movements in market rents and occupancy in the apartment, industrial and office sectors.
Real Estate Joint Ventures and Limited Partnerships:
Real estate joint ventures and limited partnerships experienced net realized and unrealized gains of $61.8 million during the first six months of 2017, compared to $128.2 million during the comparable period of 2016. While the rate of appreciation has slowed in 2017, it has remained positive due to favorable market rents and occupancy in the apartment and office sectors.
Marketable Securities:
The Account’s marketable securities experienced net realized and unrealized gains of $44.7 million during the first six months of 2017 compared to $128.7 million during the comparable period of 2016. The markets for REITs in the U.S. increased 4.9% as measured by the FTSE NAREIT All Equity REITs Index during the six month period ended June 30, 2017, compared to a increase of 13.7% in the same period of 2016. Appreciation on the Account's real estate related equity securities moved in line with the market movements. Additionally, as of June 30, 2017, the Account held $4.1 billion of investments in government agency notes and U.S. Treasury securities, which had nominal changes due to the short-term nature of these investments.
Mortgage Loans Payable:
Mortgage loans payable experienced unrealized losses of $6.5 million during the first six months 2017 compared to unrealized losses of $25.7 million during the comparable period of 2016. The unrealized losses were consistent with the directional movement of Treasury rates during the comparable period.

52



Results of Operations
Three months ended June 30, 2017 compared to three months ended June 30, 2016
Net Investment Income
The following table shows the results of operations for the three months ended June 30, 2017 and 2016 and the dollar and percentage changes for those periods (dollars in millions, unaudited).
 
 
For the Three Months Ended June 30,
 
Change
2017
 
2016
 
$
 
%
INVESTMENT INCOME
 
 
 
 
 
 
 
 
Real estate income, net:
 
 
 
 
 
 
 
 
Rental income
 
$
265.3

 
$
252.6

 
$
12.7

 
5.0
 %
Real estate property level expenses:
 
 
 

 

 

Operating expenses
 
52.7

 
51.1

 
1.6

 
3.1
 %
Real estate taxes
 
41.6

 
38.4

 
3.2

 
8.3
 %
Interest expense
 
22.3

 
23.5

 
(1.2
)
 
(5.1
)%
Total real estate property level expenses
 
116.6

 
113.0

 
3.6

 
3.2
 %
Real estate income, net
 
148.7

 
139.6

 
9.1

 
6.5
 %
Income from real estate joint ventures and limited partnerships
 
47.5

 
50.5

 
(3.0
)
 
(5.9
)%
Interest
 
12.0

 
6.5

 
5.5

 
84.6
 %
Dividends
 
8.5

 
7.5

 
1.0

 
13.3
 %
TOTAL INVESTMENT INCOME
 
216.7

 
204.1

 
12.6

 
6.2
 %
Expenses:
 
 
 

 

 

Investment management charges
 
16.9

 
19.8

 
(2.9
)
 
(14.6
)%
Administrative charges
 
15.7

 
14.1

 
1.6

 
11.3
 %
Distribution charges
 
6.0

 
7.4

 
(1.4
)
 
(18.9
)%
Mortality and expense risk charges
 
0.3

 
0.3

 

 
 %
Liquidity guarantee charges
 
11.8

 
9.5

 
2.3

 
24.2
 %
TOTAL EXPENSES
 
50.7

 
51.1

 
(0.4
)
 
(0.8
)%
INVESTMENT INCOME, NET
 
$
166.0

 
$
153.0

 
$
13.0

 
8.5
 %
Rental Income:
Rental income increased $12.7 million, or 5.0%, primarily due to net real estate acquisitions coupled with improved occupancy in the industrial and office sectors.
Operating Expenses:
Operating expenses increased $1.6 million, or 3.1%, attributed mainly to higher expenses at industrial properties within the portfolio.
Real Estate Taxes:
Real estate taxes increased $3.2 million, or 8.3%, primarily due to net real estate acquisitions and rising tax value of properties in the portfolio.
Interest Expense:
Interest expense decreased $1.2 million, or 5.1%, due to lower average principal balances through the three months ended June 30, 2017, as compared to the same period in 2016.

53



Income from Real Estate Joint Ventures and Limited Partnerships:
Income from real estate joint ventures and limited partnerships decreased $3.0 million, or 5.9%, for the three months ended June 30, 2017, when compared to the same period of 2016, due to higher than average distributions received from a joint venture investment that holds a number of retail properties during the second quarter of 2016.
Interest and Dividend Income:
Interest income increased $5.5 million primarily due to interest income earned on a larger loan receivable portfolio in 2017 as compared to the same period in the previous year. Dividend income increased $1.0 million; dividend income as a percentage of REIT holdings remained consistent with the comparable quarter of 2016.
Expenses:
Expense ratios, as a percentage of average net assets, for investment advisory, administrative and distribution charges were 0.16% and 0.18% for the three month periods ended June 30, 2017 and 2016, respectively. Costs decreasing period over period, coupled with an increase in average net assets, reduced the overall expense ratio. These costs have fixed and variable components, the latter of which generally correspond to the level of the Account’s net assets under management and other cost drivers.
Mortality and expense risk and liquidity guarantee charges are contractual charges to the Account from TIAA for TIAA’s assumption of these risks and provision of the guarantee. The rates for these charges were established effective May 1, 2017, for the twelve month period ending April 30, 2018, and are charged based on the Account’s net assets.
Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable
The following table shows the net realized and unrealized gains and losses on investments and mortgage loans payable for the three months ended June 30, 2017 and 2016 and the dollar and percentage changes for those periods (dollars in millions, unaudited).
 
 
For the Three Months Ended June 30,
 
Change
2017
 
2016
 
$
 
%
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
 
 
 
 
 
 
 
 
Net realized gain (loss) on investments:
 
 
 
 
 
 
 
 
Real estate properties
 
$
0.4

 
$
1.8

 
$
(1.4
)
 
(77.8
)%
Real estate joint ventures and limited partnerships
 

 
0.2

 
(0.2
)
 
N/M

Marketable securities
 
8.1

 
4.5

 
3.6

 
80.0
 %
Total realized gain (loss) on investments:
 
8.5

 
6.5

 
2.0

 
30.8
 %
Net change in unrealized appreciation (depreciation) on:
 
 
 
 
 
 
 
 
Real estate properties
 
32.4

 
113.0

 
(80.6
)
 
(71.3
)%
Real estate joint ventures and limited partnerships
 
0.8

 
(17.8
)
 
18.6

 
N/M

Marketable securities
 
8.7

 
66.9

 
(58.2
)
 
(87.0
)%
Mortgage loans payable
 
(18.1
)
 
(24.1
)
 
6.0

 
(24.9
)%
Net change in unrealized appreciation on investments and mortgage loans payable
 
23.8

 
138.0

 
(114.2
)
 
(82.8
)%
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
 
$
32.3

 
$
144.5

 
$
(112.2
)
 
(77.6
)%
N/M—Not meaningful

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Real Estate Properties:
Wholly-owned real estate investments experienced net realized and unrealized gains of $32.8 million during the second quarter of 2017 compared to $114.8 million during the comparable period of 2016. While the rate of appreciation has slowed in 2017, it has remained positive due to moderately favorable market rents and occupancy.
Real Estate Joint Ventures and Limited Partnerships:
Real estate joint ventures and limited partnerships experienced net realized and unrealized gains of $0.8 million during the second quarter of 2017, compared to losses of $17.6 million during the comparable period of 2016. The joint venture portfolio experienced unrealized valuation losses during the second quarter of 2017 due to anchor tenants vacating space at two smaller retail properties, however, this was offset by increased income earned by the joint ventures primarily due to net acquisitions subsequent to June 30, 2016.
Marketable Securities:
The Account’s marketable securities experienced net realized and unrealized gains of $16.8 million during the second quarter of 2017 compared to $71.4 million during the comparable period of 2016. The markets for REITs in the U.S. increased 2.3% as measured by the FTSE NAREIT All Equity REITs Index during the three month period ended June 30, 2017, compared to a increase of 7.4% in the same period of 2016. Appreciation on the Account's real estate related equity securities moved in line with the market movements. Additionally, as of June 30, 2017, the Account held $4.1 billion of investments in government agency notes and U.S. Treasury securities, which had nominal changes due to the short-term nature of these investments.
Mortgage Loans Payable:
Mortgage loans payable experienced unrealized losses of $18.1 million during the second quarter of 2017 compared to unrealized losses of $24.1 million during the comparable period of 2016. The unrealized losses were consistent with the directional movement of Treasury rates during the comparable period.
Liquidity and Capital Resources
As of June 30, 2017 and December 31, 2016, the Account’s cash and cash equivalents and non-real estate-related marketable securities had a value of $4.1 billion representing 16.6% and 16.7% of the Account’s net assets at such dates, respectively.
Participant Flows: Six months ended June 30, 2017 compared to six months ended June 30, 2016
During the six months ended June 30, 2017, the Account received $1.4 billion in premiums from participants offset by participant outflows of $1.4 billion in annuity payments and withdrawals and death benefits. During the six months ended June 30, 2016, the Account received $1.6 billion in premiums from participants offset by participant outflows of $1.0 billion in annuity payments and withdrawals and death benefits.
Net Income and Marketable Securities
The Account’s net investment income continues to be an additional source of liquidity for the Account. Net investment income was $305.2 million for the six months ended June 30, 2017, as compared to $274.7 million for the comparable period of 2016. The increase in total net investment income is described more fully in the Results of Operations section.
As of June 30, 2017, cash and cash equivalents, along with real estate-related and non-real estate related marketable securities comprised 21.1% of the Account’s net assets. The Account’s real estate-related marketable securities primarily consist of publicly traded REITs. The Account’s liquid assets continue to be available to purchase suitable real estate properties, meet the Account’s debt obligations, expense needs, and participant redemption requests (i.e., participant withdrawals or benefit payments).

55



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.
The Account is authorized to borrow money in accordance with its investment guidelines. Under the Account’s current investment guidelines, the Account’s loan to value ratio (as described below) is to be maintained at or below 30%. Such incurrences of debt from time to time may include:
placing new debt on properties;
refinancing outstanding debt;
assuming debt on acquired properties or interests in the Account’s properties; and/or
long term extensions of the maturity date of outstanding debt.
In calculating this limit, only the Account’s 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 June 30, 2017, one construction loan was held within the Account’s joint venture investment Four Oaks Place, L.P. At the time the Account (or a joint venture in which the Account is a partner) enters into a revolving line of credit, for the purpose of calculating the loan to value ratio, 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 June 30, 2017, the Account’s ratio of outstanding principal amount of debt (inclusive of the Account’s proportionate share of debt held within its joint venture investments) to total gross asset value (i.e., a “loan to value ratio”) was 14.2%. The Account 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 Account’s total gross asset value, for these purposes, is equal to the total fair value of the Account’s assets (including the fair value of the Account’s interest in joint ventures), with no reduction associated with any indebtedness on such assets.
As of June 30, 2017, there are no mortgage obligations secured by real estate investments wholly-owned by the Account maturing within the next twelve months. The Account currently has sufficient liquidity in the form of cash and cash equivalents and securities to meet its current mortgage obligations.
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 Account’s loan to value ratio.
Recent Transactions

The following describes property transactions by the Account during the second quarter of 2017. 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.
Purchases
One Beeman Road—Northborough, MA
On April 12, 2017, the Account purchased an industrial property located in Northborough, Massachusetts for $33.5 million.
Financings
Foundry Square II—San Francisco, CA
On April 3, 2017, an office property in which the Account holds a 50.1% interest, extinguished $55.1 million (the Account's share) of outstanding mortgage debt.

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Tradition at Kierland—Scottsdale, AZ
On May 1, 2017, the Account extinguished a $25.8 million mortgage loan associated with the property.
Legend at Kierland—Scottsdale, AZ
On May 1, 2017, the Account extinguished a $21.8 million mortgage loan associated with the property.
West Town Mall—Knoxville, TN
On June 29, 2017, a retail property in which the Account holds a 50% interest, refinanced $105.0 million (the Account's share) of outstanding mortgage debt associated with the property.
Critical Accounting Policies
The Account's Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America.
In preparing the Account’s Consolidated Financial Statements, management is required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Determination of Investments at Fair Value: The Account reports all investments and investment related mortgage loans payable at fair value. The 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.
The following is a description of the valuation methodologies used to determine the fair value of the Account’s 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 Account’s 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 Account’s definition of fair value are 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 TIAA’s internal appraisal staff and as applicable the Account’s independent fiduciary at the time of the

57



closing of the purchase, which may result in a potential unrealized gain or loss reflecting the difference between an investment’s fair value (i.e., exit price) and its cost basis (which is inclusive of transaction costs).
Subsequently, each property is appraised each quarter by an independent third party appraiser, reviewed by TIAA’s internal appraisal staff and as applicable the Account’s 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 Account’s joint ventures. In addition, adjustments may be made for events or circumstances indicating an impairment of a tenant’s 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. TIAA’s internal appraisal staff oversees the entire appraisal process, in conjunction with the Account’s independent fiduciary (the independent fiduciary is more fully described in the paragraph below). Any differences in the conclusions of TIAA’s 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, RERC, LLC, has been appointed by a special subcommittee of the Investment Committee of the Board to, among other things, oversee the entire 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 professional’s 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 Account’s 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.
Also, the independent fiduciary can require additional appraisals if factors or events have occurred that could materially change a property’s 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 property’s 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 Account’s 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 Account’s ownership interests of the underlying entities. The Account’s 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 Account’s ownership in the partnership. Such limited partnerships are recorded based upon the changes in the net asset values

58



of the limited partnerships as determined from the financial statements of the limited partnerships when received by the Account. Prior to the receipt of the financial statements from the limited partnerships, the Account estimates the value of its interest in good faith and will from time to time seek input from the issuer or the sponsor of the investments. Since market quotations are not readily available, the limited partnership interests are valued at fair value as determined in good faith by management 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 with readily available market quotations, 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). 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.
Short-term investments are valued in the same manner as debt securities, as described above.
Money market instruments are valued at amortized cost, which approximates fair value.
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 Loans Receivable (i.e., the Account as a creditor)—Loans receivable are stated at fair value and are initially valued at the face amount of the loan funding. Subsequently, loans receivable are valued at least quarterly by TIAA’s internal valuation department based on market factors, such as market interest rates and spreads for comparable loans, the liquidity for 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) and the credit quality of the counterparty. The Account’s loans receivable are classified within level 3 of the valuation hierarchy.
Valuation of 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 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 TIAA’s internal appraisal department, as reviewed by the Account’s 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.
See Note 4—Assets and Liabilities Measured at Fair Value on a Recurring Basis for further discussion and disclosure regarding the determination of the fair value of the Account’s 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 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.

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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 cannot be reduced as a result of the Account’s adverse 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 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 for 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 applicable lease agreement. 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 Account’s consolidated statements of operations. Distributions that are identified as returns of capital are recorded as a reduction to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Income from the joint ventures is recorded based on the Account’s proportional interest of the income distributed by the joint ventures. Income earned by the joint ventures, but not yet distributed to the Account by the joint ventures is recorded as unrealized gains and losses.
Limited Partnerships—The Account has limited ownership interests in various private real estate funds (primarily limited partnerships) and a private real estate investment trust (collectively, the “limited partnerships”). The Account records its contributions as increases to the investments, and distributions from the investments are treated as income within income from real estate joint ventures and limited partnerships in the Account’s consolidated statements of operations. Distributions that are identified as returns of capital are recorded as a reduction to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Unrealized gains and losses are recorded based upon the changes in the net asset values of the limited partnerships as determined from the financial statements of the limited partnerships when received by the Account. Prior to the receipt of the financial statements from the limited partnerships, the Account estimates the value of its interest in good faith and will from time to time seek input from the issuer or the sponsor of the investment. Changes in value based on such estimates are recorded by the Account as unrealized gains and losses.
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 are recorded as a reduction to the cost basis of the investment, whereas dividends identified as capital gains or losses are recorded as realized gains or losses. Realized gains and losses on securities transactions are accounted for on the specific identification method.
Loans Receivable—The Account has ownership interest in loans receivable. Loans receivable are stated at fair value and are initially valued at the face amount of the loan funding. Subsequently, loans receivable are valued at least quarterly by TIAA’s internal valuation department with changes in fair value flowing through unrealized gain (loss). Interest income from mortgage loans receivable is recognized using the effective interest method over the expected life of the loan.
Realized and Unrealized Gains and Losses—Realized gains and losses are recorded at the time an investment is sold or a distribution is received in relation to an investment sale from a joint venture or limited partnership. Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties

60



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.
Unrealized gains and losses are recorded as the fair values of the Account’s investments are adjusted, and as discussed within the Real Estate Joint Ventures and Limited Partnerships sections above.
Net Assets—The Account’s net assets as of the close of each valuation day are valued by taking the sum of:
the value of the Account’s cash; cash equivalents, and short-term and other debt instruments;
the value of the Account’s 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;
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 Account’s 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. Daily estimates of net operating income are adjusted to reflect actual net operating income on a monthly basis, at which time such adjustments (if any) are reflected in the Account’s unit value.
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 Account’s 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 management’s projections and the Account’s actual assets or expenses.
Federal Income Taxes: Based on provisions of Section 817 of the Internal Revenue Code 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Account’s real estate holdings, including real estate joint venture, limited partnerships and loans receivable, which, as of June 30, 2017, represented 80.7% of the Account’s total investments, expose the Account to a variety of risks. These risks include, but are not limited to:
General Real Estate Risk—The risk that the Account’s 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;
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;
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;
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 hedging against such interest rate changes, if undertaken by the Account, may entail additional costs and be unsuccessful; and

61



Foreign Currency Risk—The risk that the value of the Account’s 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 currency 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 June 30, 2017, 19.3% of the Account’s total investments were comprised of marketable securities. Marketable securities include high-quality debt instruments (i.e., U.S. government agency notes) and REIT securities. The consolidated schedule 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 the Critical Accounting Policies section above and in Note 1—Organization and Significant Accounting Policies to the Account’s Consolidated Financial Statements included herewith. As of the date of this report, the Account does not invest in derivative financial investments, nor does the Account engage in any hedging activity, although it may do so in selected circumstances in the future.
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.
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 issuer’s current earnings will fall or that its overall financial soundness will decline, reducing the security’s value.
Market Volatility Risk—The risk that the Account’s 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.
Interest Rate Volatility—The risk that interest rate volatility may affect the Account’s current income from an investment.
Deposit/Money Market Risk—The risk that, to the extent the Account’s 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 fair 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.
In addition to these risks, real estate equity securities (such as REIT stocks and mortgage-backed securities) would be subject to many of the same general risks inherent in real estate investing, making mortgage loans and investing in debt securities. For more information on the risks associated with all of the Account’s investments, see the Account’s most recent prospectus.

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ITEM 4. CONTROLS AND PROCEDURES
(a) The registrant maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the registrant’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including TIAA’s Executive Vice President, Institutional Investment & Endowment Services (Principal Executive Officer (“PEO”)) and TIAA’s Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer (“PFO”)), as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and participation of the registrant’s management, including the registrant’s PEO and PFO, the registrant conducted an evaluation of the effectiveness of the registrant’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of June 30, 2017. Based upon management’s review, the PEO and PFO concluded that the registrant’s disclosure controls and procedures provide reasonable assurance that material information required to be included in the Account's periodic reports is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms.
(b) Changes in internal control over financial reporting. There have been no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal quarter that materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Account is party to various claims and routine litigation arising in the ordinary course of business. 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 Account’s business, financial position or results of operations.
ITEM 1A. RISK FACTORS.
There have been no material changes from the Account’s risk factors as previously reported in the Account’s Annual Report on Form 10-K for the year ended December 31, 2016.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
The Code of Ethics for TIAA’s senior financial officers, including its principal executive officer, principal financial officer, principal accounting officer, or controller, and persons performing similar functions, has been filed as an exhibit to the Account’s Annual Report on Form 10-K for the year ended December 31, 2016 and can also be found on the following web site, http://www.tiaa.org/public/prospectuses/index.html.


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ITEM 6. 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, LLC1
(3)
(A)
Restated Charter of TIAA (as amended)2
 
(B)
Amended Bylaws of TIAA3
(4)
(A)
Forms of RA, GRA, GSRA, SRA, IRA Real Estate Account Endorsements,4 Keogh Contract,5 Retirement Choice and Retirement Choice Plus Contracts5 and Retirement Select and Retirement Select Plus Contracts and Endorsements6
 
(B)
Forms of Income-Paying Contracts4
 
(C)
Form of Contract Endorsement for Internal Transfer Limitation7
 
(D)
Form of Non-ERISA Retirement Choice Plus Contract10
 
(E)
Form of Trust Company Retirement Choice Contract11
 
(F)
Form of Trust Company Retirement Choice Plus Contract12
(10)
(A)
Amended and Restated Independent Fiduciary Letter Agreement, dated as of February 2, 2015, between TIAA, on behalf of the Registrant, and RERC, LLC8
 
(B)
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.9
(31)
 
Rule 13(a)-15(e)/ Rule 13a-15(e)/15d-15(e) Certifications*
(32)
 
Section 1350 Certifications*
(101)
 
The following financial information from the Quarterly Report on Form 10-Q for the period ended June 30, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Assets and Liabilities, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Changes in Net Assets, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial Statements.**
*
Filed herewith.
**
Furnished electronically herewith.
(1) 
Previously filed and incorporated herein by reference to Exhibit 1(A) to the Account’s Registration Statement on Form S-1, filed with the Commission on March 15, 2013 (File No. 333-187309).
(2) 
Previously filed and incorporated herein by reference to Exhibit 3(A) to the Account’s Registration Statement on Form S-1, filed with the Commission on April 22, 2015 (File No. 333-202583).
(3) 
Previously filed and incorporated herein by reference to Exhibit 3(B) to the Account’s Registration Statement on Form S-1, filed with the Commission on April 22, 2015 (File No. 333-202583).
(4) 
Previously filed and incorporated herein by reference to the Account’s Post-Effective Amendment No. 2 to the Registration Statement on Form S-1, filed with the Commission on April 30, 1996 (File No. 33-92990).
(5) 
Previously filed and incorporated herein by reference to the Account’s Post-Effective Amendment No. 1 to the Registration Statement on Form S-1, filed with the Commission on May 2, 2005 (File No. 333-121493).
(6) 
Previously filed and incorporated herein by reference to the Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1, filed with the Commission on April 29, 2004 (File No. 333-113602).
(7) 
Previously filed and incorporated by reference to Exhibit 4(C) to the Account’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, filed with the Commission on November 12, 2010 (File No. 33-92990).
(8) 
Previously filed and incorporated herein by reference to Exhibit 10.1 to the Account’s Current Report on Form 8-K, filed with the Commission on February 6, 2015 (File No. 33-92990).
(9) 
Previously filed and incorporated herein by reference to Exhibit 10(D) to the Account’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the Commission on March 14, 2013 (File No. 33-92990).
(10) 
Previously filed and incorporated herein by reference to Exhibit 4(D)(1) and 4(D)(2) to the Account’s Registration Statement on Form S-1, filed with the Commission on March 21, 2017 (File No. 333-216849).
(11) 
Previously filed and incorporated herein by reference to Exhibit 4(E)(1) and 4(E)(2) to the Account’s Registration Statement on Form S-1, filed with the Commission on March 21, 2017 (File No. 333-216849).
(12) 
Previously filed and incorporated herein by reference to Exhibit 4(F)(1) and 4(F)(2) to the Account’s Registration Statement on Form S-1, filed with the Commission on March 21, 2017 (File No. 333-216849).


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant, TIAA Real Estate Account, has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 8th day of August, 2017.
 
TIAA REAL ESTATE ACCOUNT
 
 
 
 
 
By:
 
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
 
 
 
 
August 8, 2017
By:
 
/s/ Carol W. Deckbar
 
 
 
Carol W. Deckbar
Executive Vice President, Institutional Investment & Endowment Services
Teachers Insurance and Annuity Association of America
(Principal Executive Officer)
 
 
 
 
August 8, 2017
By:
 
/s/ Virginia M. Wilson
 
 
 
Virginia M. Wilson
Senior Executive Vice President and Chief Financial Officer,
Teachers Insurance and Annuity Association of America
(Principal Financial and Accounting Officer)


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