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Tiaa Real Estate Account · S-1/A · On 5/1/08

Filed On 5/1/08 10:25am ET   ·   SEC Files 33-92990, 333-113602, 333-121493, 333-132580, 333-13477, 333-141513, 333-149862, 333-22809, 333-59778, 333-83964   ·   Accession Number 930413-8-2737

  in   Show  and 
  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 5/01/08  Tiaa Real Estate Account          S-1/A                  5:433                                    Command Financial...Corp

Pre-Effective Amendment to Registration Statement (General Form)   ·   Form S-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-1/A       Pre-Effective Amendment to Registration Statement   HTML  3,133K 
                          (General Form)                                         
 2: EX-5        Opinion re: Legality                                HTML     10K 
 3: EX-23.(C)   Consent of Experts or Counsel                       HTML      5K 
 4: EX-23.(D)   Consent of Experts or Counsel                       HTML      6K 
 5: EX-23.(E)   Consent of Experts or Counsel                       HTML      6K 


S-1/A   ·   Pre-Effective Amendment to Registration Statement (General Form)
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
5About the Real Estate Account and TIAA
"The Account s Investment Objective and Strategy
7Past Performance
"Summary of Account s Expense Deductions
9About the Account s Investments In General
12General Investment and Operating Policies
14Risks
20The Account
26Establishing and Managing the Account The Role of TIAA
30Description of Properties
40Legal Proceedings
41Selected Financial Data
42Quarterly Selected Financial Information
43Management s Discussion and Analysis of Financial Condition and Results of Operations
67Quantitative and Qualitative Disclosures About Market Risk
68Valuing the Account s Assets
74Expense Deductions
75Certain Relationships With TIAA
76The Contracts
82How to Transfer and Withdraw Your Money
87Receiving Annuity Income
91Death Benefits
93Taxes
99General Matters
101Distribution
"State Regulation
"Legal Matters
"Experts
103Additional Information
104Financial Statements
105Index to Financial Statements
106104
"Report of Management Responsibility
107105
"Report of the Audit Committee
109107
"Statements of Assets and Liabilities
110108
"Statements of Operations
111109
"Statements of Changes in Net Assets
112110
"Statements of Cash Flows
113111
"Notes to Financial Statements
125123
"Statements of Investments
144142
"Report of Independent Registered Public Accounting Firm
145143
"Pro Forma Condensed Statement of Assets and Liabilities
"Pro Forma Condensed Statement of Operations
146144
"Notes to Pro Forma Condensed Financial Statements
148146
"Joint Venture with Developers Diversified Realty Corporation
152150
"Printemps de l Homme (Paris, France)
155153
"8600 114th Avenue North, Champlin, Minnesota
158156
"Seneca Industrial Park, Pembroke Park, Florida
161159
"Preston Sherry, Dallas, Texas
164162
"Camelback Center, Phoenix, Arizona
168165
"Pacific Plaza, San Diego, California
170168
"Calabash I, Fontana, California and Haven Distribution Center, Rancho Cucamonga, California
173Teachers Insurance and Annuity Association of America
"171
"Condensed Statutory-Basis Financial Statements Information
174172
"Basis of Presentation
182Appendix A Management of TIAA
185Appendix B Special Terms
193Report of Independent Auditors
194Statements of Admitted Assets, Liabilities and Capital and Contingency Reserves
196Statements of Changes in Capital and Contingency Reserves
197Statements of Cash Flow

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         As filed with the Securities and Exchange Commission on May 1, 2008

Registration No. 333-149862




 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

 

AMENDMENT NO. 1
TO


 

FORM S-1

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933

 


 

TIAA REAL ESTATE ACCOUNT

(Exact name of registrant as specified in its charter)


 

 

 

New York

(Not applicable)

(Not applicable)

(State or other jurisdiction of

(Primary Standard Industrial

(I.R.S. Employer

incorporation or organization)

Classification Code Number)

Identification No.)


 

c/o Teachers Insurance and Annuity Association of America

730 Third Avenue

New York, New York 10017-3206

(212) 490-9000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 


 

Keith F. Atkinson, Esquire

Teachers Insurance and Annuity Association of America
8500 Andrew Carnegie Blvd.

Charlotte, North Carolina 28226
(704) 988-1000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 


 

Copy to:

Jeffrey S. Puretz, Esquire
Dechert LLP

1775 I Street, N.W.
Washington, D.C. 20006

 


          Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of the registration statement.

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

          Pursuant to Rule 429 under the Securities Act, the prospectus contained herein also relates to and constitutes a post-effective amendment to Securities Act registration statements 33-92990, 333-13477, 333-22809, 333-59778, 333-83964, 333-113602, 333-121493, 333-132580 and 333-141513 (collectively, the “Prior Registration Statements”).

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

          Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller Reporting Company o




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CALCULATION OF REGISTRATION FEE

 

 

 

 

 

 

 

 

 










Title of Each Class of
Securities to be Registered

 

Amount to be
Registered

 

Proposed
Maximum
Offering Price
Per Unit

 

Proposed
Maximum
Aggregate
Offering Price

 

Amount of
Registration Fee(1)










Accumulation units in TIAA Real Estate Account

 

*

 

*

 

$5,000,000,000**

 

$196,500**











 

 

*

The securities are not issued in predetermined amounts or units, and the maximum aggregate offering price is estimated solely for purposes of determining the registration fee pursuant to Rule 457(o) under the Securities Act.

 

 

**

In addition to the $5,000,000,000 of accumulation units registered hereunder, the registrant is carrying forward securities which remain unsold but which were previously registered under the Prior Registration Statements for which filing fees were previously paid.


 

 

(1)

Registration fee previously paid.



          The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.



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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MAY 1, 2008

PROSPECTUS
________, 2008

TIAA REAL ESTATE ACCOUNT

A Tax-Deferred Variable Annuity Option Offered by Teachers Insurance and Annuity Association of America

This prospectus tells you about the TIAA Real Estate Account, an investment option offered through individual and group variable annuity contracts issued by TIAA. Please read it carefully before investing and keep it for future reference.

The Real Estate Account, which we refer to sometimes as the Account in this prospectus, invests primarily in real estate and real estate-related investments. TIAA, one of the largest and most experienced mortgage and real estate investors in the nation, manages the Account’s assets.

The value of your investment in the Real Estate Account will go up or down depending on how the Account performs and you could lose money. The Account’s performance depends mainly on the value of the Account’s real estate and other real estate-related investments, and the income generated by those investments. The Account’s returns could go down if, for example, real estate values or rental and occupancy rates, or the value of real estate related securities, decrease due to general economic conditions and/or a weak market for real estate generally. Property operating costs and government regulations, such as zoning or environmental laws, could also affect a property’s profitability. TIAA does not guarantee the investment performance of the Account, and you will bear the entire investment risk. For a detailed discussion of the specific risks of investing in the Account, see “Risks” on page 12.


We take deductions daily from the Account’s net assets for the Account’s operating and investment management expenses. The Account also pays TIAA for bearing mortality and expense risks and for providing a liquidity guarantee. The current estimated annual expense deductions from the Account’s net assets total 0.840%.

The Real Estate Account is designed as an option for retirement and tax-deferred savings plans for employees of nonprofit institutions. TIAA offers the Real Estate Account under the following annuity contracts:

 

 

RA and GRAs (Retirement Annuities and Group Retirement Annuities)

 

 

SRAs (Supplemental Retirement Annuities)

 

 

GSRAs (Group Supplemental Retirement Annuities)

 

 

Retirement Choice and Retirement Choice Plus Annuity

 

 

GAs (Group Annuities) and Institutionally-Owned GSRAs

 

 

Classic and Roth IRAs (Individual Retirement Annuities) including SEP IRAs
(Simplified Employee Pension Plans)

 

 

Keoghs

 

 

ATRAs (After-Tax Retirement Annuities)

Note that state regulatory approval may be pending for certain of these contracts and they may not currently be available in your state.

Neither the Securities and Exchange Commission (SEC) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy of the information in this prospectus. Any representation to the contrary is a criminal offense.

An investment in the Real Estate Account is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Picture -- (TIAA CREF LOGO)


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TABLE OF CONTENTS

 

 

 

About the Real Estate Account and TIAA

 

3

 

 

 

The Account’s Investment Objective and Strategy

 

3

 

 

 

Past Performance

 

5

 

 

 

Summary of Account’s Expense Deductions

 

5

 

 

 

About the Account’s Investments — In General

 

7

 

 

 

General Investment and Operating Policies

 

10

 

 

 

Risks

 

12

 

 

 

Establishing and Managing the Account — The Role of TIAA

 

24

 

 

 

Description of Properties

 

28

 

 

 

Legal Proceedings

 

38

 

 

 

Selected Financial Data

 

39

 

 

 

Quarterly Selected Financial Information

 

40

 

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

41

 

 

 

Quantitative and Qualitative Disclosures About Market Risk

 

65

 

 

 

Valuing the Account’s Assets

 

66

 

 

 

Expense Deductions

 

72

 

 

 

Certain Relationships With TIAA

 

73

 

 

 

The Contracts

 

74

 

 

 

How to Transfer and Withdraw Your Money

 

80

 

 

 

Receiving Annuity Income

 

85

 

 

 

Death Benefits

 

89

 

 

 

Taxes

 

91

 

 

 

General Matters

 

97

 

 

 

Distribution

 

99

 

 

 

State Regulation

 

99

 

 

 

Legal Matters

 

99

 

 

 

Experts

 

99

 

 

 

Additional Information

 

101

 

 

 

Financial Statements

 

102

 

 

 

Index to Financial Statements

 

103

 

 

 

Appendix A — Management of TIAA

 

180

 

 

 

Appendix B — Special Terms

 

183


Please see Appendix B for definitions of certain special terms used in this prospectus.

The Real Estate Account securities offered by this prospectus are only being offered in those jurisdictions where it is legal to do so. No person may make any representation to you or give you any information about the offering that is not in the prospectus. If anyone provides you with information about the offering that is not in the prospectus, you shouldn’t rely on it.



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 ABOUT THE REAL ESTATE ACCOUNT AND TIAA

          The TIAA Real Estate Account was established in February 1995 as a separate account of Teachers Insurance and Annuity Association of America (TIAA). TIAA is a life insurance company founded in 1918 by the Carnegie Foundation for the Advancement of Teaching. Its home office is at 730 Third Avenue, New York, NY 10017-3206 and its telephone number is 212 490-9000. In addition to issuing variable annuities, whose returns depend upon the performance of certain specified investments, TIAA also offers traditional fixed annuities.

          With its 60 years in the real estate business and interests in properties located across the U.S. and internationally, TIAA is one of the nation’s largest and most experienced investors in mortgages and real estate equity interests. As of December 31, 2007, TIAA’s general account had a mortgage and real property portfolio of approximately $22.1 billion.


          TIAA is the companion organization of the College Retirement Equities Fund (CREF), the first company in the United States to issue a variable annuity. CREF is a nonprofit membership corporation established in New York State in 1952. Together, TIAA and CREF form the principal retirement system for the nation’s education and research communities and one of the largest pension systems in the U.S., based on assets under management. TIAA-CREF serves approximately 3.3 million people and over 15,000 institutions. As of December 31, 2007, TIAA’s assets were approximately $196.4 billion; the combined assets for TIAA and CREF totaled approximately $417.8 billion (although CREF does not stand behind TIAA’s guarantees).

          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.


          More information about the Account may be obtained by writing us at 730 Third Avenue, New York, NY 10017-3206, calling us at 877 518-9161 or visiting our website at www.tiaa-cref.org.

 THE ACCOUNT’S INVESTMENT OBJECTIVE AND STRATEGY

          Investment Objective: The Real Estate Account seeks favorable long-term returns primarily through rental income and appreciation of real estate investments owned by the Account. The Account also will invest in publicly traded securities and other investments that are easily converted to cash to make redemptions, purchase or improve properties or cover other expenses.

          Investment Strategy: The Account intends to invest between 75 percent and 85 percent of its assets directly in real estate or real estate-related investments.

TIAA Real Estate Account § Prospectus 3


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The Account’s principal strategy is to purchase direct ownership interests in income-producing real estate, such as office, industrial, retail, and multi-family residential properties. The Account can also invest in other real estate or real estate-related investments through joint ventures, real estate partnerships or common or preferred stock or other equity securities of companies whose operations involve real estate (i.e., that primarily own or manage real estate). To a limited extent, the Account can also invest in conventional mortgage loans, participating mortgage loans, and collateralized mortgage obligations, including commercial mortgage-backed securities and other similar investments. The Account may also make foreign investments, which are expected to comprise no more than 25 percent of the Account’s total assets.

          The Account will invest the remaining portion of its assets in government and corporate debt securities, money market instruments and, at times, stock of companies that do not primarily own or manage real estate. In some circumstances, the Account can increase the portion of its assets invested in debt securities or money market instruments. This could happen if the Account receives a large inflow of money in a short period of time, there is a lack of attractive real estate investments available on the market, or the Account anticipates a need to have more cash available.

          The amount the Account invests in real estate and real estate-related investments at a given time will vary depending on market conditions and real estate prospects, among other factors. As of December 31, 2007, the Account’s net assets totaled $17,660,536,799. At December 31, 2007, the Account held a total of 111 real estate property investments (including its interests in 12 real estate-related joint ventures) and one remaining equity interest in a joint venture in which the Account sold its real estate investment during the third quarter of 2007, representing 77.91% of the Account’s total investment portfolio (“Total Investments”).

          As of that date, the Account also held investments in a mortgage loan receivable, representing 0.38% of Total Investments, real estate equity securities, representing 2.24% of Total Investments, real estate limited partnerships, representing 1.74% of Total Investments, commercial paper, representing 9.23% of Total Investments, certificates of deposit, representing 2.22% of Total Investments, variable notes, representing 0.26% of Total Investments, bankers acceptance, representing 0.20% of Total Investments, and government agency bonds, representing 5.82% of Total Investments.

          Risks: An investment in the Account is subject to the risks associated with real estate investing, including the risks of acquiring, owning and selling real property, interest rate risk, market risk, credit risk, and regulatory and environmental risks. Further risks include the risks associated with making mortgage loan investments and investing in mortgage-backed securities, liquid investments and foreign real estate investments. These risks, among others, are described in “Risks” beginning on page 12. You may lose money by investing in this Account.

4 Prospectus § TIAA Real Estate Account


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 PAST PERFORMANCE

          The bar chart and performance table below helps illustrate some of the risks of investing in the Account, and how investment performance during the accumulation period varies. The bar chart shows the Account’s total return during the accumulation period over the last ten calendar years and the performance table shows the Account’s returns during the accumulation period for the one-, three-, five- and ten-year periods through December 31, 2007. How the Account has performed in the past is not necessarily an indication of how it will perform in the future.

Picture -- (BAR CHART)


Best quarter: 4.69%, for the quarter ended June 30, 2006.
Worst quarter: 0.72%, for the quarter ended December 31, 2002.

AVERAGE ANNUAL TOTAL RETURN (AS OF DECEMBER 31, 2007)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Year

 

5 Year

 

10 Year

 











TIAA Real Estate Account

 

 

13.80%

 

 

13.96%

 

 

12.35%

 

 

9.79%

 















 

 

 

 

 

 

 

 

 

 SUMMARY OF ACCOUNT’S EXPENSE DEDUCTIONS


          Expense deductions are made each Valuation Day from the net assets of the Account for various services to manage investments, administer the Account and the contracts, distribute the contracts and to cover certain risks borne by TIAA. Services are provided “at cost” by TIAA and TIAA-CREF Individual & Institutional Services, LLC (“Services”), a registered broker-dealer and wholly owned subsidiary of TIAA. Currently, TIAA provides investment management services and administration services for the Account, and Services provides distribution services for the Account. TIAA guarantees that in the aggregate, the expense charges will never be more than 2.50% of average net assets per year.

TIAA Real Estate Account § Prospectus 5


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          The estimated annual expense deduction rate that appears in the expense table below reflects an estimate of the amount we currently expect to deduct to approximate the costs that the Account will incur from May 1, 2008 through April 30, 2009. Actual expenses may be higher or lower.

 

 

 

 

 

Type of Expense Deduction

 

Estimated
Percent of Net
Assets Annually

 

Services Performed






Investment Management

 

0.270%

 

For investment advisory, investment management, portfolio accounting, custodial and similar services, including independent fiduciary and appraisal fees

 

 

 

 

 

Administration

 

0.335%

 

For administration and operations of the Account and the contracts, including administrative services such as receiving and allocating premiums and calculating and making annuity payments

 

 

 

 

 

Distribution

 

0.085%

 

For services and expenses associated with distributing the annuity contracts

 

 

 

 

 

Mortality and Expense Risk

 

0.050%

 

For TIAA’s bearing certain mortality and expense risks

 

 

 

 

 

Liquidity Guarantee

 

0.100%

 

For TIAA’s liquidity guarantee

 

 

 

 

 

Total Annual Expense Deduction1,2

 

0.840%

 

For total services to the Account






 

 

 

 


 

 

1

TIAA guarantees that the total annual expense deduction will not exceed an annual rate of 2.50% of average net assets.

 

 

2

TIAA currently does not impose a fee on transfers from the Account, but reserves the right to impose a fee on transfers from the Account in the future.

 

 

 

 

 

 

Please see “Selected Financial Data” on page 39 for additional information.

          Effective January 1, 2008, TIAA commenced performing administration functions previously performed for the Account by Services (which include receiving and allocating premiums, calculating and making annuity payments and providing recordkeeping and other services). Distribution services for the Account, which include, without limitation, distribution of the annuity contracts, advising existing annuity contract owners in connection with their accumulations and helping employers implement and manage retirement plans, continue to be performed by Services.

          TIAA and Services provide administration and distribution services, as applicable, on an at-cost basis. Since expenses are charged at cost, the expenses described are estimates for the year based on projected expense and asset levels. Administration charges include certain costs associated with the provision by TIAA entities of recordkeeping and other services for retirement plans and other pension products in addition to the Account. A portion of these expenses are allocated to the Account in accordance with applicable allocation procedures. Any differences between actual and estimated expenses are adjusted quarterly. The expenses identified in the table above do not include any fees which may be imposed by your employer under a plan maintained by your employer. For more information, see “Expense Deductions” on page 72.

          The following table shows you an example of the expenses you would incur on a hypothetical investment of $1,000 in the TIAA Real Estate Account over several

6 Prospectus § TIAA Real Estate Account


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periods. The table assumes a 5% annual return on assets and an annual expense deduction equal to 0.840%. These figures do not represent actual expenses or investment performance, which may differ.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Year

 

3 Year

 

5 Year

 

10 Year

 











TIAA Real Estate Account

 

 

$ 9

 

 

$ 27

 

 

$ 47

 

 

$ 104

 















 ABOUT THE ACCOUNT’S INVESTMENTS — IN GENERAL

DIRECT INVESTMENTS IN REAL ESTATE

          Direct Purchase: The Account will generally buy direct ownership interests in existing or newly constructed income-producing properties, including office, industrial, retail, and multi-family residential properties. The Account will invest mainly in established properties with existing rent and expense schedules or in newly constructed properties with predictable cash flows or in which a seller agrees to provide certain minimum income levels. On occasion, the Account also might invest in real estate development projects.

          Purchase-Leaseback Transactions: Although it has not yet done so, the Account can enter into purchase-leaseback transactions (leasebacks) in which it would buy land and income-producing improvements on the land (such as buildings), and simultaneously lease the land and improvements to a third party (the lessee). Leasebacks are generally for very long terms. Usually, the lessee is responsible for operating the property and paying all operating costs, including taxes and mortgage debt. The Account can also give the lessee an option to buy the land and improvements.

          In some leasebacks, the Account may purchase only the land under an income-producing building and lease the land to the building owner. In those cases, the Account likely would seek to share (or “participate”) in any increase in property value from building improvements or in the lessee’s revenues from the building above a base amount. The Account can invest in leasebacks that are subordinated to other interests in the land, buildings, and improvements (e.g., first mortgages); in that case, the leaseback interest would be subject to greater risks.

INVESTMENTS IN MORTGAGES

          General: The Account can originate or acquire interests in mortgage loans, generally on the same types of properties it might otherwise buy. These mortgage loans may pay fixed or variable interest rates or have “participating” features (as described below). Normally the Account’s mortgage loans will be secured by properties that have income-producing potential. They usually will not be insured or guaranteed by the U.S. government, its agencies or anyone else. They usually will be non-recourse, which means they won’t be the borrower’s personal obligations. Most will be first mortgage loans on existing income-producing property, with first-priority liens on the property. These loans may be amortized

TIAA Real Estate Account § Prospectus 7


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(i.e., principal is paid over the course of the loan), or may provide for interest-only payments, with a balloon payment at maturity.

          Participating Mortgage Loans: The Account may make mortgage loans which permit the Account to share (have a “participation”) in the income from or appreciation of the underlying property. These participations let the Account receive additional interest, usually calculated as a percentage of the income the borrower receives from operating, selling or refinancing the property. The Account may also have an option to buy an interest in the property securing the participating loan.

          Managing Mortgage Loan Investments: TIAA can manage the Account’s mortgage loans in a variety of ways, including:

 

 

 

 

renegotiating and restructuring the terms of a mortgage loan,

 

 

 

 

extending the maturity of any mortgage loan made by the Account,

 

 

 

 

consenting to a sale of the property subject to a mortgage loan,

 

 

 

 

financing the purchase of a property by making a new mortgage loan in connection with the sale, and

 

 

 

 

selling the mortgage loans, or portions of them, before maturity

OTHER REAL ESTATE-RELATED INVESTMENTS

          Real Estate Investment Trusts: The Account may invest in real estate investment trusts (REITs), which are publicly owned entities that lease, manage, acquire, hold mortgages on, and develop real estate. Normally the Account will buy the common or preferred stock of a REIT, although at times it may purchase REIT debt securities. REITs seek to maximize share value and increase cash flows by acquiring and developing new real estate projects, upgrading existing properties or renegotiating existing arrangements to increase rental rates and occupancy levels. REITs must distribute at least 90% of their taxable income to shareholders in order to benefit from a special tax structure, which means they may pay high dividends. The value of a particular REIT can be affected by such factors as cash flow, the skill of its management team, and defaults by its lessees or borrowers.

          Stock of Companies Involved in Real Estate Activities: The Account can invest in common or preferred stock of companies whose business involves real estate. These stocks may be listed on U.S. or foreign stock exchanges or traded over-the-counter in the U.S. or abroad.

          Mortgage-Backed Securities: The Account can invest in mortgage-backed securities and other mortgage-related or asset-backed instruments, including commercial mortgage-backed securities (CMBSs), residential mortgage-backed securities, mortgage-backed securities issued or guaranteed by agencies or instrumentalities of the U.S. government, non-agency mortgage instruments, and collateralized mortgage obligations that are fully collateralized by a portfolio of mortgages or mortgage-related securities. Mortgage-backed securities are instruments that directly or indirectly represent a participation in, or are secured

8 Prospectus § TIAA Real Estate Account


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by and payable from, one or more mortgage loans secured by real estate. In most cases, mortgage-backed securities distribute principal and interest payments on the mortgages to investors. Interest rates on these instruments can be fixed or variable. Some classes of mortgage-backed securities may be entitled to receive mortgage prepayments before other classes do. Therefore, the prepayment risk for a particular instrument may be different than for other mortgage-related securities.

          Investment Vehicles Involved in Real Estate Activities: The Account can hold interests in limited partnerships, funds, and other commingled investment vehicles involved in real estate-related activities, including owning, financing, managing, or developing real estate.

NON-REAL ESTATE-RELATED INVESTMENTS

          The Account can also invest in:

 

 

 

 

U.S. government or government agency securities

 

 

 

 

Money market instruments and other cash equivalents. These will usually be high-quality short-term debt instruments, including U.S. government or government agency securities, commercial paper, certificates of deposit, bankers’ acceptances, repurchase agreements, interest-bearing time deposits, and corporate debt securities

 

 

 

 

 

 

Corporate debt or asset-backed securities of U.S. or foreign entities, or debt securities of foreign governments or multinational organizations, but only if they’re investment-grade and rated in the top four categories by a nationally recognized rating organization (or, if not rated, deemed by TIAA to be of equal quality)

 

 

 

 

 

 

Common or preferred stock, or other ownership interests, of U.S. or foreign companies that aren’t involved in real estate, to a limited extent

FOREIGN REAL ESTATE AND OTHER FOREIGN INVESTMENTS

          The Account may invest in foreign real estate or real estate-related investments. It might also invest in securities or other instruments of foreign government or private issuers. While the percentage will vary, we expect that foreign investments will comprise no more than 25 percent of the Account’s total assets.

          Depending on investment opportunities, the Account’s foreign investments could at times be concentrated in one or two foreign countries. We will consider the special risks involved in foreign investing before investing in foreign real estate and won’t invest unless our standards are met.

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 GENERAL INVESTMENT AND OPERATING POLICIES

STANDARDS FOR REAL ESTATE INVESTMENTS

          General Criteria for Buying Real Estate or Making Mortgage Loans: Before the Account purchases real estate or makes a mortgage loan, TIAA will consider such factors as:

 

 

 

 

the location, condition, and use of the underlying property

 

 

 

 

its operating history, and its future income-producing capacity

 

 

 

 

the quality, operating experience, and creditworthiness of the borrower

          TIAA will analyze the fair market value of the underlying real estate, taking into account the property’s operating cash flow (based on the historical and projected levels of rental and occupancy rates and expenses), as well as the general economic conditions in the area where the property is located.

          Diversification: We haven’t placed percentage limitations on the type and location of properties that the Account can buy. However, the Account seeks to diversify its investments by type of property and geographic location. How much the Account diversifies will depend upon whether suitable investments are available and how much the Account has available to invest.

          Special Criteria for Making Mortgage Loans: Ordinarily, the Account will only make a mortgage loan if the loan, when added to any existing debt, will not exceed 85 percent of the appraised value of the mortgaged property when the loan is made, unless the Account is compensated for taking additional risk.

          Selling Real Estate Investments: The Account doesn’t 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 which have either maximized in value, underperformed or represent properties needing significant capital infusions in the future. The Account will reinvest any sale proceeds that it doesn’t need to pay operating expenses or to meet redemption requests (e.g., cash withdrawals or transfers).

OTHER REAL ESTATE-RELATED POLICIES


          Appraisals: The Account will rely on TIAA’s own analysis, normally along with an independent external appraisal, in connection with the purchase of a property by the Account. The Account will normally receive an independent external appraisal performed by a third party appraisal firm at or before the time it buys a real estate asset, and the Account also generally obtains an independent appraisal when it makes mortgage loans. The Account’s properties and mortgage loans will then be appraised or valued once a year by an independent state-certified appraiser who is a member of a professional appraisal organization. In addition, TIAA’s appraisal staff will perform a valuation of each real estate property on a quarterly basis and on occasion, the Account will obtain independent appraisals on a quarterly basis. See “Valuing the Account’s Assets” on page 66.

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          Borrowing: The Account may borrow money and assume or obtain a mortgage on a property — i.e., make leveraged real estate investments. In addition, to meet short-term cash needs, the Account may obtain a line of credit with terms requiring that the Account secure a loan with one or more of its properties. The Account’s total borrowings may not exceed 30% of the Account’s total net asset value at the time of incurrence. In calculating the 30% limit, we will include only the Account’s actual percentage interest in any borrowings and not that of any joint venture partner. The Account may only borrow up to 70% of the then current value of a property, although construction loans may be for 100% of costs incurred in developing the property. Except for construction loans, any mortgage loans on a property will be non-recourse, meaning that if the Account defaults on its loan, the lender will have recourse only to the property encumbered or the joint venture owning the property, and not to any other assets of the Account. When possible, the Account will seek to have loans mature at different times to limit the risks of borrowing.

          The Account will not obtain mortgage financing from TIAA or any of its affiliates. However, the Account may place an intra-company mortgage on an Account property held by a subsidiary for tax planning or other purposes. This type of mortgage will not be subject to the general limitations on borrowing described above.

          When the Account assumes or obtains a mortgage on a property, it will bear the expense of mortgage payments. It will also be exposed to certain additional risks, which are described in “Risks—Risks of Borrowing” on page 16.

          Joint Investments: The Account can hold property jointly through general or limited partnerships, joint ventures, leaseholds, tenancies-in-common, or other legal arrangements. However, the Account will not hold real property jointly with TIAA or its affiliates.

          Discretion to Evict or Foreclose: TIAA may, in its discretion, evict defaulting tenants or foreclose on defaulting borrowers to maintain the value of an investment, when it decides that it is in the Account’s best interests.

          Property Management and Leasing Services: The Account usually will hire a national or regional independent third party property management company to perform the day-to-day management services for each of the Account’s properties, including supervising any on-site personnel, negotiating maintenance and service contracts, and providing advice on major repairs and capital improvements. The property manager will also recommend changes in rent schedules and create marketing and advertising programs to attain and maintain high levels of occupancy by responsible tenants. The Account may also hire independent third party leasing companies to perform or coordinate leasing and marketing services to fill any vacancies. The fees paid to the property management company, along with any leasing commissions and expenses, will reduce the Account’s cash flow from a property.

          Insurance: We will try to arrange for, or require proof of, comprehensive insurance, including liability, fire, and extended coverage, for the Account’s real

TIAA Real Estate Account § Prospectus 11


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property and properties securing mortgage loans or subject to purchase-leaseback transactions. The Account’s insurance policies on its properties currently include some coverage for earthquakes and terrorist acts, but we can’t assure you that it will be adequate to cover all losses. We also can’t assure you that we will be able to obtain coverage for earthquakes and terrorist acts at an acceptable cost, if at all, at the time a policy expires.

OTHER POLICIES

          Liquid Assets: At times, a significant percentage of the Account may be invested in liquid assets (which may or may not be real estate-related) while we look for suitable real property investments. The Account can temporarily increase the percentage of its liquid assets under some circumstances, including the rapid inflow of participants’ funds, lack of suitable real estate investments, or a need for greater liquidity.

          Investment Company Act of 1940: The Account has not registered, and we intend to operate the Account so that it will not have to register, as an “investment company” under the Investment Company Act of 1940 (the 1940 Act). This will require monitoring the Account’s portfolio so that it won’t have more than 40 percent of total assets, other than U.S. government securities and cash items, in investment securities. As a result, the Account may be unable to make some potentially profitable investments, it may be unable to sell assets it would otherwise want to sell or it may be forced to sell investments in investment securities before it would otherwise want to do so.

          Changing Operating Policies or Winding Down: Under the terms of the contracts and in accordance with applicable insurance law, TIAA can decide to change, in its sole discretion, the operating policies of the Account or to wind it down. If the Account is wound down, you may need to transfer your accumulations or annuity income to TIAA’s traditional annuity or any CREF account available under your employer’s plan. All investors in the Account will be notified in advance if we decide to change a significant policy or wind down the Account.

 RISKS

          The value of your investment in the Account will fluctuate based on the value of the Account’s assets and the income the assets generate. You can lose money by investing in the Account. The value of an investment in the Account will fluctuate based on the value of the Account’s assets and the income the assets generate. There is risk associated with an investor attempting to “time” an investment in the Account’s units, or effecting a redemption of an investor’s units. The Account’s assets and income can be affected by many factors, and you should consider the specific risks presented below before investing in the Account. Please refer to the section entitled “Statements Regarding Forward-Looking Information,” which is contained in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

12 Prospectus § TIAA Real Estate Account


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RISKS OF REAL ESTATE INVESTING

          General Risks of Acquiring and Owning Real Property: The Account is subject to the risks inherent in acquiring and owning real property, including in particular the following:

 

 

 

 

 

Economic Conditions. The economic conditions in the markets where the Account’s properties are located may be adversely impacted by factors which include:

 

 

 

 

 

 

general global economic conditions;

 

 

 

 

 

 

a weak market for real estate generally and/or in specific locations;

 

 

 

 

 

 

availability of financing;

 

 

 

 

 

 

an oversupply of, or a reduced demand for, certain types of real estate properties;

 

 

 

 

 

 

business closings, industry slowdowns, employment losses and related factors;

 

 

 

 

 

 

natural disasters, terrorist attacks and/or other man-made events; and

 

 

 

 

 

 

decline in population or shifting demographics.

          The incidence of some or all of these factors could reduce occupancy or rental rates and the market value of the Account’s real properties. Further, the Account may experience periods in which its investments are geographically concentrated, either regionally or in certain markets with similar demographics. Also, the Account may experience periods in which its tenant base is concentrated within a particular industry sector. In these events, the Account’s income and performance may be adversely impacted disproportionately by deteriorating economic conditions in those areas or industry sectors in which the Account’s investments are concentrated.

 

 

 

 

Competition. The Account may face competition for real estate investments from multiple sources, including individuals, corporations, insurance companies or other insurance company separate accounts, as well as real estate limited partnerships, real estate investment funds, commercial developers, pension plans, other institutional and foreign investors and other entities engaged in real estate investment activities. Some of these competitors may have similar financial and other resources as the Account, and/or they may have investment strategies that allow them to compete more aggressively for real estate investment opportunities, which could result in the Account paying higher prices for investments, experiencing delays in acquiring investments or failing to consummate such purchases. Any resulting delays in the acquisition of investments, or the failure to consummate acquisitions the Account deems desirable, may increase the Account’s costs or otherwise adversely affect the Account’s investment results.

 

 

 

 

 

In addition, the Account’s properties may be located close to properties that are owned by other real estate investors and that compete with the Account for tenants. These competing properties may be better located and more

TIAA Real Estate Account § Prospectus 13


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suitable for tenants than our properties, resulting in a competitive advantage for these other properties. We may also face similar competition from other properties that may be developed in the future. This competition may limit the Account’s ability to lease space, increase its costs of securing tenants, limit our ability to maximize our rents and/or require the Account to make capital improvements it otherwise would not, in order to make its properties more attractive to prospective tenants.

 

 

 

 

Leasing Risk. A number of factors could cause the Account’s rental income, a key source of the Account’s revenue, to decline, which would adversely impact the Account’s results and investment returns. These factors include:

 

 

 

 

 

 

A property may be unable to attract tenants. This situation could be exacerbated if a concentration of lease expirations occurred during any one time period.

 

 

 

 

 

 

The Account could lose revenue if tenants do not pay rent when contractually obligated, or if the Account is forced to terminate a lease for nonpayment.

 

 

 

 

 

 

Tenants may default under a lease at one of the Account’s properties, and in the event of any such default, we may experience a delay in, or an inability to effect, the enforcement of our rights against that tenant. Further, any disputes with tenants could involve costly litigation.

 

 

 

 

 

 

In the event a tenant vacates its space at an Account property, whether as a result of a default, the expiration of the lease term or otherwise, we may not be able to re-lease the vacant space for as much as the rent payable under the previous lease or not at all. Also, we may not be able to re-lease such space without incurring substantial expenditures for tenant improvements and other lease-up related costs, while still being obligated for any mortgage payments, real estate taxes and other expenditures related to the property.

 

 

 

 

 

 

In some instances, our properties may be specifically suited to and/or outfitted for the particular needs of a certain tenant based on the type of business the tenant operates. For example, many companies desire space with an open floor plan. We may have difficulty obtaining a new tenant for any vacant space in our properties, particularly if the floor plan limits the types of businesses that can use the space without major renovation, which may require us to incur substantial expense in re-planning the space.

 

 

 

 

 

 

The Account owns and operates retail properties, which, in addition to the risks listed above, are subject to specific risks, including variations in rental revenues due to customary “percentage rent” clauses which may be in place for retail tenants and the insolvency and/or closing of an anchor tenant. Under certain circumstances, the leases may allow other tenants in a retail property to terminate their leases, reduce or withhold rental payments. The insolvency and/or closing of an anchor tenant may also cause such tenants to fail to renew their leases at expiration.

 

 

 

 

 

Operating Costs. A property’s cash flow could decrease if operating costs, such as property taxes, utilities, maintenance and insurance costs that are not

14 Prospectus § TIAA Real Estate Account


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reimbursed by tenants increase in relation to gross rental income, or if the property needs unanticipated repairs and renovations.

 

 

 

 

Terrorism and Acts of War and Violence. Terrorist attacks may harm our property investments and therefore your investment return. The Account cannot assure you that there will not be further terrorist attacks against the United States, U.S. businesses or elsewhere in the world. These attacks or armed conflicts may directly or indirectly impact the value of the property we own or that secure our loans. Losses resulting from these types of events may be uninsurable or not insurable to the full extent of the loss suffered. Moreover, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economy. Such events could also result in economic uncertainty in the United States or abroad. Adverse economic conditions resulting from terrorist activities could reduce demand for space in the Account’s properties and thereby reduce the value of the Account’s properties.

          General Risks of Selling Real Estate Investments: Among the risks of selling real estate investments are:

 

 

 

 

The sale price of an Account property might differ from its estimated or appraised value, leading to losses or reduced profits to the Account.

 

 

 

 

Due to the cyclical nature of real estate, general economic conditions impacting the location of the property, potential disruption in the credit markets and the availability of financing on favorable terms or at all, and the supply of and demand for available tenant space, among other reasons, the Account might not be able to sell a property at a particular time for its full value. This might make it difficult to raise cash quickly and also could lead to Account losses.

 

 

 

 

The Account may need to provide financing to a purchaser if no cash buyers are available.

 

 

 

 

For any particular property, the Account may be required to make expenditures for improvements to, or to correct defects in, the property before the Account is able to market and/or sell the property.

          Appraisal Risks: Real estate appraisals are estimates of property values based on a professional’s opinion and may not be accurate predictors of the amount the Account would actually receive if it sold a property. Appraisals can be subjective in certain respects and rely on a variety of assumptions and conditions at that property or in the market (including, without limitation, a potential lack of recent transaction activity in such market) in which the property is located, which may change materially after the appraisal is conducted. If an appraisal is too high, the Account’s value could go down upon reappraisal or if the property is sold for a lower price than the appraisal. If an appraisal is too low, those who redeem prior to an adjustment to the valuation or a property sale will have received less than their pro rata share of the value of the Account’s assets. Further, as the Account

TIAA Real Estate Account § Prospectus 15


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generally obtains appraisals on a quarterly basis, there may be circumstances in the interim in which the true value of a property is not reflected in the Account’s daily net asset value calculation or in the Account’s periodic financial statements. This disparity may be more apparent when the commercial and/or residential real estate markets experience an overall and possibly dramatic decline in property values in a relatively short period of time between appraisals.

          Risks of Borrowing: The Account acquires some of its properties subject to existing financing or by borrowing new funds at the time of purchase, and may from time to time place new leverage on, or increase the leverage already placed on, existing properties the Account owns. The Account may borrow, in the aggregate, either directly or through its joint venture investments, an amount up to 30% of the Account’s Total Net Assets, and the Account may borrow up to 70% of the then-current value of a particular property. Among the risks of borrowing money and investing in a property subject to a mortgage are:

 

 

 

 

Regardless of the quality of the Account’s property for which financing is sought, general economic conditions, or the market conditions then in effect in the real estate finance industry, may hinder the Account’s ability to obtain financing for its property investments on favorable terms or at all. Such unfavorable terms might include high interest rates, increased fees and costs and restrictive covenants applicable to the Account’s operation of the property.

 

 

 

 

The Account may be unable to make its loan payments, which could result in a default on its loan. The lender then could foreclose on the underlying property and the Account would lose the value of its investment in the foreclosed property.

 

 

 

 

If the Account obtains a mortgage loan that involves a balloon payment, there is a risk that the Account may not be able to make the lump sum principal payment due under the loan at the end of the loan term, or otherwise obtain adequate refinancing on terms commercially acceptable to the Account or at all. The Account then may be forced to sell the property or other properties under unfavorable market conditions or default on its mortgage, resulting in the lender exercising its remedies, which may include repossession of the property.

 

 

 

 

If the Account takes out variable-rate loans, the Account’s returns may be volatile when interest rates are volatile. Further, to the extent that the Account takes out fixed-rate loans and interest rates subsequently decline, this may cause the Account to pay interest at above-market rates for a significant period of time.

 

 

 

 

The market valuation of mortgage loans payable could have an adverse impact on the Account’s performance.

A general disruption in the credit markets, such as the credit markets have been recently experiencing, may aggravate some or all of these risks.

          Investment Risk Associated with Participant Transactions. The amount we have available to invest in new properties and other real estate related assets will depend, in large part, on the level of participant premiums coming into the

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Account, as well as the level of net participant transfers into or out of the Account. If the amount of such premiums and/or net participant transfers into the Account were to experience a significant decline for a period of time, we may not have enough available funds to pursue, or consummate, every new investment opportunity presented to us that is otherwise attractive to the Account. This, in turn, could harm the Account’s returns.

          Regulatory Risks: Government regulation at the federal, state and local levels, including, without limitation, zoning laws, rent control or rent stabilization laws, laws regulating housing on the Account’s multifamily residential properties, the Americans with Disabilities Act, property taxes and fiscal, accounting, environmental or other government policies, could operate or change in a way that adversely affects the Account and its properties. For example, these regulations could raise the cost of owning, improving or maintaining properties, present barriers to otherwise desirable investment opportunities or make it harder to sell, rent, finance, or refinance properties either on economically desirable terms, or at all, due to the increased costs associated with regulatory compliance.

          Environmental Risks: The Account may be liable for damage to the environment or injury to individuals caused by hazardous substances used or found on its properties. Under various environmental regulations, the Account may also be liable, as a current or previous property owner or mortgagee, for the cost of removing or cleaning up hazardous substances found on a property, even if it didn’t know of and wasn’t responsible for the hazardous substances. If any hazardous substances are present or the Account doesn’t properly clean up any hazardous substances, or if the Account fails to comply with regulations requiring it to actively monitor the business activities on its premises, the Account may have difficulty selling or renting a property or be liable for monetary penalties. Further, environmental laws may impose restrictions on the manner in which a property may be used, the tenants which may be allowed, or the manner in which businesses may be operated, which may require the Account to expend funds, and such laws may also cause the most ideal use of the property to differ from that originally contemplated and as a result could impair the Account’s returns. The cost of any required cleanup relating to a single real estate investment (including remediating contaminated property) and the Account’s potential liability for environmental damage, including paying personal injury claims and performing under indemnification obligations to third parties, could exceed the value of the Account’s investment in a property, the property’s value, or in an extreme case, a significant portion of the Account’s assets.

          Uninsurable Losses: Certain catastrophic losses (e.g., from earthquakes, wars, terrorist acts, nuclear accidents, floods or environmental or industrial hazards or accidents) may be uninsurable or so expensive to insure against that it is economically disadvantageous to buy insurance for them. If a disaster that we haven’t insured against occurs, or if the insurance contains a high deductible, the Account could lose both its original investment and any future profits from the property affected. In addition, some leases may permit a tenant to terminate its

TIAA Real Estate Account § Prospectus17


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obligations in certain situations, regardless of whether those events are fully covered by insurance. In that case, the Account would not receive rental income from the property while that tenant’s space is vacant.

          Risks of Developing Real Estate or Buying Recently Constructed Properties: If the Account chooses to develop a property or buys a recently constructed property, it may face the following risks:

 

 

 

 

In developing real estate, there may be delays or unexpected increases in the cost of property development and construction due to strikes, bad weather, material shortages, increases in material and labor costs or other events.

 

 

 

 

Because external factors may have changed from when the project was originally conceived (e.g., slower growth in local economy, higher interest rates, or overbuilding in the area), the property may not operate at the income and expense levels first projected or may not be developed in the way originally planned.

          Risks of Joint Ownership: Investing in joint venture partnerships or other forms of joint property ownership may involve special risks.

 

 

 

 

The co-venturer may have interests or goals inconsistent with those of the Account.

 

 

 

 

 

 

If a co-venturer doesn’t follow the Account’s instructions or adhere to the Account’s policies, the jointly owned properties, and consequently the Account, might be exposed to greater liabilities than expected.

 

 

 

 

 

 

The Account may have limited rights pursuant to the terms of the joint venture, including the right to operate, manage or dispose of a property.

 

 

 

 

A co-venturer can make it harder for the Account to transfer its property interest, particularly if the co-venturer has the right to decide whether and when to sell the property.

 

 

 

 

The co-venturer may be unable to fulfill its obligations (such as to fund its pro rata share of expenditures or guarantee obligations of the venture) during the term of such agreement or may become insolvent or bankrupt, either of which could expose the Account to greater liabilities than expected.

          Risks with Purchase-Leaseback Transactions: The major risk of purchase leaseback transactions is that the third party lessee will be unable to make required payments to the Account. If the leaseback interest is subordinate to other interests in the real property, such as a first mortgage or other lien, the risk to the Account increases because the lessee may have to pay the senior lienholder to prevent foreclosure before it pays the Account. If the lessee defaults or the leaseback is terminated prematurely, the Account might not recover its investment unless the property is sold or leased on favorable terms.

RISKS OF MAKING MORTGAGE LOAN INVESTMENTS

          General Risks of Mortgage Loans: The Account will be subject to the risks inherent in making mortgage loans, including:

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The borrower may default on the loan, requiring that the Account foreclose on the underlying property to protect the value of its mortgage loan. Since its mortgage loans are usually non-recourse, the Account must rely solely on the value of a property for its security.

 

 

 

 

The larger the mortgage loan compared to the value of the property securing it, the greater the loan’s risk. Upon default, the Account may not be able to sell the property for its estimated or appraised value. Also, certain liens on the property, such as mechanic’s or tax liens, may have priority over the Account’s security interest.

 

 

 

 

A deterioration in the financial condition of tenants, which could be caused by general or local economic conditions or other factors beyond the control of the Account, or the bankruptcy or insolvency of a major tenant, may adversely affect the income of a property, which could increase the likelihood that the borrower will default under its obligations.

 

 

 

 

The borrower may be unable to make a lump sum principal payment due under a mortgage loan at the end of the loan term, unless it can refinance the mortgage loan with another lender.

 

 

 

 

If interest rates are volatile during the loan period, the Account’s variable-rate mortgage loans could have volatile yields. Further, to the extent the Account makes mortgage loans with fixed interest rates, it may receive lower yields that that which is then available in the market if interest rates rise generally.

 

 

Prepayment Risks: The Account’s mortgage loan investments will usually be subject to the risk that the borrower repays a loan early. Also, we may be unable to reinvest the proceeds at as high an interest rate as the original mortgage loan rate.

 

 

Interest Limitations: The interest rate we charge on mortgage loans may inadvertently violate state usury laws that limit rates, if, for example, state law changes during the loan term. If this happens, we could incur penalties or may be unable to enforce payment of the loan.

 

 

Risks of Participations: Participating mortgages are subject to the following additional risks:

 

 

 

 

The participation feature, in tying the Account’s returns to the performance of the underlying asset, might generate insufficient returns to make up for the higher interest rate the loan would have obtained without the participation feature.

 

 

 

 

In very limited circumstances, a court may characterize the Account’s participation interest as a partnership or joint venture with the borrower and the Account could lose the priority of its security interest or become liable for the borrower’s debts.

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RISKS OF INVESTING IN REAL ESTATE INVESTMENT TRUST (“REIT”) SECURITIES

          Investments in REIT securities are subject to many of the same general risks associated with direct real property ownership. In particular, equity REITs may be affected by changes in the value of the underlying property owned by the trust, while mortgage REITs may be affected by the quality of any credit extended. In addition to these risks, because REIT investments are securities, they may be exposed to market risk and potentially significant price volatility due to changing conditions in the financial markets and, in particular, changes in overall interest rates, regardless of the value of the underlying real estate such REIT may own.

          In addition, REITs are tax regulated entities established to invest in real estate-related assets. REITs do not pay federal income taxes if they distribute most of their earnings to their shareholders and meet other tax requirements. As a result, REITs are subject to tax risk in continuing to qualify as a REIT.

RISKS OF MORTGAGE-BACKED SECURITIES

          Mortgage-backed securities are subject to many of the same general risks inherent in real estate investing, making mortgage loans and investing in debt securities. In particular, these types of investments may be subject to prepayment risk or extension risk (i.e., the risk that borrowers will repay the loans earlier or later than anticipated). If the underlying mortgage assets experience faster than anticipated prepayments of principal, the Account could fail to recoup some or all of its initial investment in these securities, since the original price paid by the Account was based in part on assumptions regarding the receipt of interest payments. If the underlying mortgage assets are repaid later than anticipated, the Account could lose the opportunity to reinvest the anticipated cash flows at a time when interest rates might be rising. The rate of prepayments depends on a variety of geographic, social and other functions, including prevailing market interest rates and general economic factors. Further, the underlying mortgage loans may experience defaults with greater frequency than projected when such mortgages were underwritten, which would impact the values of these securities, and could hamper our ability to sell such securities.

          Importantly, the market value of these securities is also highly sensitive to changes in interest rates, liquidity of the secondary market and economic conditions impacting financial institutions and the credit markets generally. 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. Further, volatility and disruption in the mortgage market and credit markets generally (such as has recently been the case) may cause there to be a very limited secondary market for these securities and they may be harder to sell than other securities.

CONFLICTS OF INTEREST WITHIN TIAA

          TIAA and its affiliates (including Teachers Advisors, Inc., its wholly owned subsidiary) have interests in other real estate programs and accounts and also engage in other business activities and as such, they will have conflicts of interest in

20 Prospectus § TIAA Real Estate Account


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allocating their time between the Account’s business and these other activities. Also, the Account may be buying properties at the same time as TIAA affiliates that may have similar investment objectives to those of the Account. There is also a risk that TIAA will choose a property that provides lower returns to the Account than a property purchased by TIAA and its affiliates. Further, the Account will likely acquire properties in geographic areas where TIAA and its affiliates own properties. In addition, the Account may desire to sell a property at the same time another TIAA affiliate is selling a property in an overlapping market. Conflicts could also arise because some properties owned by TIAA and its affiliates may compete with the Account’s properties for tenants. Among other things, if one of the TIAA entities attracts a tenant that the Account is competing for, the Account could suffer a loss of revenue due to delays in locating another suitable tenant. TIAA has adopted allocation policies and procedures applicable to the purchasing conflicts scenario, but the resolution of such conflicts may be economically disadvantageous to the Account. As a result of TIAA’s and its affiliates’ obligations to other current and potential TIAA-sponsored investment vehicles with similar objectives to those of the Account, there is no assurance that the Account will be able to take advantage of every attractive investment opportunity that otherwise is in accordance with the Account’s investment objectives. For a discussion of the relevant allocation policies and procedures TIAA has established, see “Establishing and Managing the Account – the Role of TIAA – Conflicts of Interest.”

RISKS OF U.S. GOVERNMENT AGENCY SECURITIES AND CORPORATE OBLIGATIONS

          The Account invests in securities issued by U.S. government agencies and U.S. government sponsored entities. Some of these issuers may not have their securities backed by the full faith and credit of the U.S. government, which could adversely affect the pricing and value of such securities. Also, the Account invests in corporate obligations (such as commercial paper) and while the Account seeks out such holdings in short-term, higher-quality liquid instruments, the ability of the Account to sell these securities may be uncertain, particularly if there is a general dislocation in the finance or credit markets. Any such volatility could have a negative impact on the value of these securities. Further, inherent with investing in any corporate obligation is the risk that the credit quality of the issuer will deteriorate which could cause the obligations to be downgraded, which could hamper the value or the liquidity of these securities.

RISKS OF LIQUID INVESTMENTS

          The Account’s investments in marketable securities and mortgage loans receivable are subject to the following general risks:

 

 

 

 

Financial Risk — The risk, for debt securities, that the issuer will not be able to pay principal and interest when due and, for 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.

TIAA Real Estate Account § Prospectus 21


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Market Risk — The risk that the Account’s investments will experience price volatility due to changing conditions in the financial markets and, particularly for debt securities, changes in overall interest rates.

 

 

 

 

Interest Rate Volatility — The risk that interest rate volatility may affect the Account’s current income from an investment.

          Further, to the extent that a significant portion of the Account’s net assets at any particular time are comprised of cash, cash equivalents and marketable securities, the Account’s returns may suffer as compared to the return that could have been generated by more profitable investments.

RISKS OF FOREIGN INVESTMENTS

          In addition to other investment risks noted above, foreign investments present the following special risks:

 

 

 

 

The value of foreign investments or rental income can increase or decrease due to changes in currency rates, currency exchange control regulations, possible expropriation or confiscatory taxation, political, social, and economic developments, and foreign regulations.

 

 

 

 

Foreign real estate markets may have different liquidity and volatility attributes than U.S. markets.

 

 

 

 

It may be more difficult to obtain and collect a judgment on foreign investments than on domestic investments, and the costs associated with contesting claims relating to foreign investments may exceed those costs associated with a similar claim on domestic investments.

 

 

 

 

 

 

We may invest from time to time in securities issued by (1) entities domiciled in foreign countries, (2) domestic affiliates of such entities and/or (3) foreign domiciled affiliates of domestic entities. Such investments could be subject to the risks associated with investments subject to foreign regulation, including political unrest or the repatriation or nationalization of the issuer’s assets. These events could depress the value of such securities and/or make such securities harder to sell on favorable terms, if at all.

 

 

 

 

 

 

The Account may, but is not required to, seek to hedge its exposure to changes in currency rates, which could involve extra costs. Further, any hedging activities might not be successful.

NO OPPORTUNITY FOR PRIOR REVIEW OF PURCHASE

          Investors do not have the opportunity to evaluate the economic or financial merit of the purchase of a property or other investment before the Account completes the purchase, so investors will need to rely solely on TIAA’s judgment and ability to select investments consistent with the Account’s investment objective and policies. Further, the Account may change its investment objective and pursue specific investments without the consent of the Account’s investors.

22 Prospectus § TIAA Real Estate Account


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RISKS OF REGISTRATION UNDER THE INVESTMENT COMPANY ACT OF 1940

          The Account has not registered, and management intends to continue to operate the Account so that it will not have to register, as an “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Generally, a company is an “investment company” and required to register under the Investment Company Act if, among other things, it holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, or it is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of such company’s total assets (exclusive of government securities and cash items) on an unconsolidated basis.

          If the Account were obligated to register as an investment company, the Account would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things, limitations on capital structure, restrictions on certain investments, compliance with reporting, record keeping, voting and proxy disclosure requirements and other rules and regulations that could significantly increase its operating expenses and reduce its operating flexibility. To maintain compliance with the exemptions from the Investment Company Act, the Account may be unable to sell assets it would otherwise want to sell and may be unable to purchase securities it would otherwise want to purchase, which might materially adversely impact the Account’s performance.

TIAA Real Estate Account § Prospectus 23


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 ESTABLISHING AND MANAGING THE ACCOUNT —
THE ROLE OF TIAA

ESTABLISHING THE ACCOUNT

          TIAA’s Board of Trustees established the Real Estate Account as a separate account of TIAA under New York law on February 22, 1995. The Account is regulated by the State of New York Insurance Department (NYID) and the insurance departments of some other jurisdictions in which the annuity contracts are offered. Although TIAA owns the assets of the Real Estate Account, and the Account’s obligations are obligations of TIAA, the Account’s income, investment gains, and investment losses are credited to or charged against the assets of the Account without regard to TIAA’s other income, gains, or losses. Under New York insurance law, we can’t charge the Account with liabilities incurred by any other TIAA business activities or any other TIAA separate account.

MANAGING THE ACCOUNT

          TIAA employees, under the direction and control of TIAA’s Board of Trustees and its Investment Committee, manage the investment of the Account’s assets, following investment management procedures TIAA adopted for the Account. The Account does not have officers, directors or employees. TIAA’s investment management responsibilities include:

 

 

 

 

identifying, recommending and purchasing appropriate real estate-related and other investments

 

 

 

 

providing (including by arranging for others to provide) all portfolio accounting, custodial, and related services for the Account

 

 

 

 

arranging for others to provide certain advisory or other management services to the Account’s joint ventures or other investments

          TIAA and its affiliates provide all services to the Account at cost. For more information about the charge for investment management services, see “Expense Deductions” on page 72.

          You don’t have the right to vote for TIAA Trustees. See “Voting Rights” on page 97. For information about the Trustees, certain executive officers of TIAA and the Account’s portfolio managment team, see Appendix A of this prospectus on page 180.

          TIAA’s ERISA Fiduciary Status. To the extent that assets of a plan subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA) are allocated to the Account, TIAA will be acting as an “investment manager” and a fiduciary under ERISA with respect to those assets.

LIQUIDITY GUARANTEE

          TIAA provides the Account with a liquidity guarantee — i.e., TIAA ensures that the Account has funds available to meet participant transfer or cash withdrawal requests. If the Account can’t fund participant requests from the

24 Prospectus § TIAA Real Estate Account


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Account, TIAA’s general account will fund them by purchasing Account accumulation units (liquidity units). TIAA guarantees that you can redeem your accumulation units at their accumulation unit value next determined after your transfer or cash withdrawal request is received in good order. Importantly, however, this liquidity guarantee is not a guarantee of the investment performance of the Account or a guarantee of the value of your units. Of course, you can make a cash withdrawal only if allowed by the terms of your plan. The Account pays TIAA for the liquidity guarantee through a daily deduction from the Account’s net assets. See “Expense Deductions” on page 72.

          An independent fiduciary (described below) monitors the Account to ensure, among other things, that TIAA does not own too much of the Account and may require TIAA to redeem some of its liquidity units, particularly when the Account has uninvested cash or liquid investments available. The independent fiduciary may also propose properties for the Account to sell so that TIAA can redeem liquidity units. TIAA does not currently own liquidity units.

CONFLICTS OF INTEREST

          TIAA does not accept acquisition or placement fees for the services it provides to the Account. Employees of TIAA may also provide investment advice with respect to investments managed by Teachers Advisors, Inc. (“Advisors”), an indirect, wholly owned subsidiary of TIAA. In addition, TIAA and its affiliates offer (and may in the future offer) other investment products that are not managed under an “at cost” expense structure. Therefore, TIAA may at times face various conflicts of interest. For example, TIAA’s General Account, a privately offered core property investment fund (the “core property investment fund”), TIAA-CREF U.S. Real Estate Fund I, L.P. (the “U.S. Real Estate Fund” which, along with the core property investment fund, is managed by Advisors), may sometimes compete with the Real Estate Account in the purchase of investments. (Each of TIAA’s General Account, the Real Estate Account, the core property investment fund and the U.S. Real Estate Fund, together with any other real estate accounts or funds that may be established by TIAA or its affiliates in the future, are herein referred to as an “account.”)

          Allocation Procedure. TIAA and its affiliates allocate new investments among the accounts in accordance with a written allocation procedure as adopted by TIAA and modified from time to time. Generally, the portfolio managers for each of the accounts will identify acquisition opportunities which conform to the investment strategy of the account. If more than one account expresses an interest and an informal resolution cannot be reached, a special TIAA Allocation Committee, consisting primarily of senior TIAA real estate professionals (including the portfolio managers for each account), will seek to resolve any conflict by considering a number of factors, including the investment strategy of the bidding account, the relative capital available for investment by each account, liquidity requirements, portfolio diversification, whether the property would be at a competitive disadvantage to properties owned by another account in the subject

TIAA Real Estate Account § Prospectus 25


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market and such other factors deemed relevant by the Allocation Committee (and subject to any investment limitations or other requirements in the account’s governing documents, Investment Guidelines or applicable laws or regulations (including ERISA and insurance laws)). If this analysis does not determine, by a unanimous vote of the Allocation Committee, which account should participate in a transaction, a strict rotation system will be used whereby the interested account highest on the list will be allowed to participate in the transaction, and then such account will drop to the bottom of the list thereafter. The secretary of the Allocation Committee will prepare a quarterly report describing the allocations made during the previous quarter based on this allocation procedure. This report will also be reviewed by a committee of senior TIAA executives which is separate from the Allocation Committee and which functions as an internal monitor of compliance with this allocation procedure.

          Conflicts could also arise because some properties in TIAA’s General Account, the core property investment fund, the U.S. Real Estate Fund and other accounts may compete for tenants with the Real Estate Account’s properties. We will seek to resolve this conflict by determining the tenant’s preference between the two properties, how much the tenant is willing to pay for rent, and which property can best afford to pay any required costs associated with such leasing. Finally, conflicts could potentially arise when two TIAA accounts attempt to sell properties located in the same market or submarket, especially if there are a limited number of potential purchasers.

          Many of the personnel of TIAA involved in performing services to the Real Estate Account will have competing demands on their time. The personnel will devote such time to the affairs of the Account as TIAA’s management determines, in its sole discretion exercising good faith, is necessary to properly service the Account. TIAA believes that it has sufficient personnel to discharge its responsibility to the Real Estate Account, the General Account, the core property investment fund and the U.S. Real Estate Fund to avoid conflicts of interest. TIAA or its affiliates may form other real estate investment vehicles in the future and we will take steps to assure that those vehicles are integrated into these conflict of interest policies.

INDEMNIFICATION

          The Account has agreed to indemnify TIAA and its affiliates, including its officers and trustees, against certain liabilities to the extent permitted by law, including liabilities under the Securities Act of 1933. The Account may make such indemnification out of its assets.

ROLE OF THE INDEPENDENT FIDUCIARY

          Because TIAA’s ability to purchase and sell liquidity units raises certain technical issues under ERISA, TIAA applied for and received a prohibited transaction exemption from the U.S. Department of Labor (PTE 96-76). In connection with the exemption, TIAA has appointed an independent fiduciary for

26 Prospectus § TIAA Real Estate Account


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the Real Estate Account, with overall responsibility for reviewing Account transactions to determine whether they are in accordance with the Account’s investment guidelines.

          Real Estate Research Corporation, a real estate consulting firm whose principal offices are located in Chicago, Illinois, currently serves as the Account’s independent fiduciary. The independent fiduciary’s responsibilities include:

 

 

 

 

reviewing and approving the Account’s investment guidelines and monitoring whether the Account’s investments comply with those guidelines;

 

 

 

 

reviewing and approving valuation procedures for the Account’s properties;

 

 

 

 

approving adjustments to any property valuations that change the value of the property or the Account as a whole above or below certain prescribed levels, or that are made within three months of the annual independent appraisal;

 

 

 

 

reviewing and approving how the Account values accumulation and annuity units;

 

 

 

 

approving the appointment of all independent appraisers;

 

 

 

 

reviewing the purchase and sale of units by TIAA to ensure that the Account uses the correct unit values; and

 

 

 

 

requiring appraisals besides those normally conducted, if the independent fiduciary believes that any of the properties have changed materially, or that an additional appraisal is necessary to ensure the Account has correctly valued a property.

          The independent fiduciary also must monitor TIAA’s ownership in the Account and supervise any winding down of the Account’s operations. Its responsibilities include:

 

 

 

 

calculating the percentage of total accumulation units that TIAA’s ownership shouldn’t exceed (the trigger point) and creating a method for changing the trigger point;

 

 

 

 

approving any adjustment of TIAA’s interest in the Account and requiring an adjustment if TIAA’s investment reaches the trigger point; and

 

 

 

 

participating in any program to reduce TIAA’s ownership in the Account or to facilitate winding down the Account, including selecting properties for sale, providing sales guidelines, and approving those sales that, in the independent fiduciary’s opinion, are desirable.

          A special subcommittee consisting of five (5) independent outside members of the Investment Committee of TIAA’s Board of Trustees appointed Real Estate Research Corporation as the independent fiduciary for a three-year term, starting March 1, 2006. This subcommittee may renew the independent fiduciary appointment, remove the independent fiduciary, or appoint its successor. The independent fiduciary can be removed for cause by the vote of three (3) out of the five (5) subcommittee members and will not be reappointed if two (2) of the

TIAA Real Estate Account § Prospectus 27


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subcommittee members disapprove the reappointment. The independent fiduciary can resign after at least 180 days’ written notice.

          TIAA pays the independent fiduciary directly. The investment management charge paid to TIAA includes TIAA’s costs for retaining the independent fiduciary. The independent fiduciary will receive less than 5 percent of its annual income (including payment for its services to the Account) from TIAA and its affiliates.

          When you decide as a participant or plan fiduciary to invest in the Account, after TIAA has provided you with full and fair disclosure including the disclosure in this prospectus, you are also acknowledging that you approve and accept Real Estate Research Corporation or any successor to serve as the Account’s independent fiduciary.

 DESCRIPTION OF PROPERTIES

THE PROPERTIES — IN GENERAL

          As of December 31, 2007, the Account owned a total of 111 real estate property investments (99 of which were wholly owned and 12 of which were held in real estate related joint ventures and one remaining equity interest in a joint venture in which the Account sold its real estate holdings during the third quarter of 2007) representing 77.91% of the Account’s total investment portfolio. The real estate portfolio included:

 

 

 

 

46 office properties (five of which were held in joint ventures and one property located in London, United Kingdom),

 

 

 

 

27 industrial properties (including one held in a joint venture),

 

 

 

 

21 apartment complexes,

 

 

 

 

16 retail properties (including five held in joint ventures and one property located in Paris, France), and

 

 

 

 

a 75% joint venture interest in a portfolio of storage facilities located throughout the United States.

          Of the 111 real estate property investments, 20 were subject to debt (including seven joint venture property investments).

          In the table immediately below you will find general information about each of the Account’s portfolio property investments as of December 31, 2007. The Account’s property investments include both properties that are wholly owned by the Account and properties owned by the Account’s joint venture investments. Certain property investments are comprised of a portfolio of properties.

28 Prospectus § TIAA Real Estate Account


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Property

 

Location

 

Year Built

 

Year
Purchased

 

Rentable
Area
(Sq. ft.)

(1)

Percent
Leased

 

Annual Avg.
Base Rent
Per Leased
Sq. Ft.

(2)

 

Market Value

(3)


















OFFICE PROPERTY INVESTMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1001 Pennsylvania Ave

 

Washington, DC

 

1987

 

2004

 

756,603

 

100

%

$

37.15

 

$

640,149,632

(4)

Fourth & Madison(5)

 

Seattle, WA

 

2002

 

2004

 

845,533

 

98

%

 

27.53

 

$

487,000,000

(4)

50 Fremont Street

 

San Francisco, CA

 

1983

 

2004

 

817,412

 

97

%

 

30.25

 

$

478,000,000

(4)

1 & 7 Westferry Circus

 

London, UK

 

1992, 1993

 

2005

 

386,206

 

81

%

 

64.08

 

$

436,127,130

(4)(6)

Four Oaks Place

 

Houston, TX

 

1983

 

2004

 

1,754,334

 

96

%

 

18.73

 

$

419,270,107

 

The Newbry

 

Boston, MA

 

1940–1961

(7)

2006

 

607,424

 

100

%

 

26.47

 

$

389,880,008

 

780 Third Avenue

 

New York, NY

 

1984

 

1999

 

487,566

 

95

%

 

50.01

 

$

375,000,000

 

Yahoo! Center(8)

 

Santa Monica, CA

 

1984

 

2004

 

1,087,952

 

92

%

 

32.66

 

$

369,402,407

 

99 High Street

 

Boston, MA

 

1971

 

2005

 

731,204

 

96

%

 

29.99

 

$

344,688,328

(4)

Lincoln Centre

 

Dallas, TX

 

1984

 

2005

 

1,638,132

 

87

%

 

16.95

 

$

305,000,000

(4)

1900 K Street

 

Washington, DC

 

1996

 

2004

 

333,098

 

100

%

 

44.27

 

$

285,000,000

 

701 Brickell

 

Miami, FL

 

1986

(9)

2002

 

677,667

 

94

%

 

29.60

 

$

275,941,582

 

275 Battery(10)

 

San Francisco, CA

 

1988

 

2005

 

472,261

 

90

%

 

34.73

 

$

271,917,498

 

Mellon Financial Center at One Boston Place(11)

 

Boston, MA

 

1970

(9)

2002

 

804,444

 

95

%

 

38.74

 

$

246,440,493

 

Wilshire Rodeo Plaza

 

Beverly Hills, CA

 

1935, 1984

 

2006

 

261,932

 

98

%

 

46.81

 

$

230,439,415

(4)

1401 H Street NW

 

Washington, D.C.

 

1992

 

2006

 

350,635

 

100

%

 

41.20

 

$

224,576,156

(4)

Ten & Twenty Westport Road

 

Wilton, CT

 

1974(9), 2001

 

2001

 

538,840

 

100

%

 

30.07

 

$

183,006,040

 

980 9th Street and 1010 8th
Street(12)

 

Sacramento, CA

 

1992

 

2005

 

447,865

 

95

%

$

23.66

 

$

178,000,000

 

Millennium Corporate Park

 

Redmond, VA

 

1999, 2000

 

2006

 

536,884

 

100

%

 

13.80

 

$

158,000,000

 

Urban Centre

 

Tampa, FL

 

1984, 1987

 

2005

 

547,979

 

91

%

 

21.16

 

$

135,577,463

 

Pacific Plaza

 

San Diego, CA

 

2000, 2002

 

2007

 

215,758

 

87

%

 

26.48

 

$

127,130,076

(4)

Inverness Center

 

Birmingham, AL

 

1980–1985

 

2005

 

903,857

 

100

%

 

12.27

 

$

125,521,529

 

88 Kearny Street

 

San Francisco, CA

 

1986

 

1999

 

228,358

 

94

%

 

41.48

 

$

123,822,200

 

Morris Corporate Center III

 

Parsippany, NJ

 

1990

 

2000

 

526,052

 

78

%

 

20.06

 

$

119,600,001

 

Treat Towers(13)

 

Walnut Creek, CA

 

1999

 

2003

 

367,313

 

85

%

 

23.39

 

$

118,997,021

 

Prominence in Buckhead(13)

 

Atlanta, GA

 

1999

 

2003

 

423,916

 

95

%

 

27.68

 

$

115,427,071

 

The Ellipse at Ballston

 

Arlington, VA

 

1989

 

2006

 

194,914

 

100

%

 

32.81

 

$

92,504,000

 

Oak Brook Regency Towers

 

Oakbrook, IL

 

1977

(9)

2002

 

402,318

 

78

%

 

13.09

 

$

86,891,650

 

Camelback Center

 

Phoenix, AZ

 

2001

 

2007

 

231,345

 

94

%

 

24.38

 

$

80,000,000

 

West Lake North Business Park

 

Westlake Village, CA

 

2000

 

2004

 

198,558

 

93

%

 

27.58

 

$

68,621,818

 

TIAA Real Estate Account § Prospectus 29


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Property

 

Location

 

Year Built

 

Year
Purchased

 

Rentable
Area
(Sq. ft.)

(1)

Percent
Leased

 

Annual Avg.
Base Rent
Per Leased
Sq. Ft.

(2)

 

Market Value

(3)


















Centerside I

 

San Diego, CA

 

1982

 

2004

 

202,913

 

67

%

 

19.06

 

$

67,500,000

 

The North 40 Office Complex

 

Boca Raton, FL

 

1983, 1984

 

2006

 

350,000

 

93

%

 

10.44

 

$

67,003,544

 

Parkview Plaza

 

Oakbrook, IL

 

1990

 

1997

 

264,461

 

95

%

 

15.98

 

$

66,066,513

 

3 Hutton Centre

 

Santa Ana, CA

 

1985

(9)

2003

 

197,819

 

96

%

 

20.04

 

$

64,200,000

 

8270 Greensboro Drive

 

McLean, VA

 

2000

 

2005

 

158,110

 

100

%

 

35.93

 

$

63,500,000

 

The Pointe on Tampa Bay

 

Tampa, FL

 

1982

(9)

2002

 

250,357

 

97

%

 

23.93

 

$

60,971,897

 

One Virginia Square

 

Arlington, VA

 

1999

 

2004

 

116,077

 

100

%

 

17.18

 

$

59,538,690

 

Capitol Place

 

Sacramento, CA

 

1988

(9)

2003

 

167,920

 

96

%

 

26.72

 

$

53,539,218

 

Wellpoint

 

Westlake Village, CA

 

1986, 1998

 

2006

 

216,751

 

100

%

 

12.93

 

$

51,000,000

 

Park Place on Turtle Creek

 

Dallas, TX

 

1986

 

2006

 

177,169

 

93

%

 

22.43

 

$

48,282,785

 

4200 West Cypress Street

 

Tampa, FL

 

1989

 

2003

 

219,815

 

100

%

 

22.36

 

$

48,043,650

 

Preston Sherry Plaza

 

Dallas, TX

 

1986

 

2007

 

147,008

 

95

%

 

24.03

 

$

45,500,000

 

Tysons Executive Plaza II(14)

 

McLean, VA

 

1988

 

2000

 

259,614

 

81

%

 

23.50

 

$

44,178,210

 

Creeksides at Centerpoint

 

Kent, WA

 

1985

 

2006

 

218,712

 

84

%

 

12.30

 

$

42,000,000

 

Needham Corporate Center

 

Needham, MA

 

1987

 

2001

 

138,259

 

87

%

 

20.00

 

$

33,275,228

 

Columbus Portfolio

 

Various, OH

 

1997–1998

 

1999–2001

 

259,686

 

92

%

 

9.90

 

$

26,314,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Subtotal—Office Property Investments

 

 

 

 

 

 

 

 

 

94

%

 

 

 

$

8,332,846,046

 



















INDUSTRIAL PROPERTY INVESTMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ontario Industrial Portfolio(15)

 

Various, CA

 

1997–1998

 

1998, 2000, 2004

 

3,981,894

 

100

%

 

3.08

 

$

355,398,714

(4)

Dallas Industrial Portfolio(16)(17)

 

Dallas and Coppell, TX

 

1997–2001

 

2000–2002

 

3,684,941

 

96

%

 

2.98

 

$

154,055,892

 

Rancho Cucamonga Industrial Portfolio(18)

 

Rancho Cucamonga, CA

 

2000–2002

 

2000, 2001,

 

1,490,235

 

100

%

 

3.31

 

$

133,000,000

 

 

 

 

 

 

 

2002, 2004

 

 

 

 

 

 

 

 

 

 

 

Seneca Industrial Park

 

Pembroke Park, FL

 

1999–2001

 

2007

 

882,182

 

96

%

 

5.62

 

$

122,334,422

 

Southern California RA Industrial Portfolio

 

Los Angeles, CA

 

1982

 

2004

 

920,078

 

98

%

$

6.44

 

$

110,718,042

 

Chicago Industrial Portfolio(17)

 

Chicago and Joliet, IL

 

1997–2000

 

1998, 2000

 

1,427,699

 

100

%

 

3.94

 

$

86,420,886

 

Rainier Corporate Park

 

Fife, WA

 

1991–1997

 

2003

 

1,104,646

 

100

%

 

3.52

 

$

81,160,792

 

Chicago CALEast Industrial Portfolio(17)

 

Chicago, IL

 

1974–2005

 

2003

 

1,280,784

 

100

%

 

3.62

 

$

77,642,826

 

Shawnee Ridge Industrial Portfolio

 

Atlanta, GA

 

2000–2005

 

2005

 

1,422,922

 

100

%

 

3.19

 

$

76,742,231

 

IDI National Portfolio(19)

 

Various, U.S.

 

1999–2004

 

2004

 

3,655,671

 

100

%

 

3.50

 

$

76,536,044

 

Regal Logistics Campus

 

Seattle, WA

 

1999–2004

 

2005

 

968,535

 

100

%

 

4.15

 

$

71,000,000

 

Northern California RA Industrial Portfolio(17)

 

Oakland, CA

 

1981

 

2004

 

657,602

 

98

%

 

4.11

 

$

69,601,997

 

30 Prospectus § TIAA Real Estate Account


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Atlanta Industrial Portfolio(17)

 

Lawrenceville, GA

 

1996–1999

 

2000

 

1,295,440

 

95

%

 

2.64

 

$

58,300,000

 

South River Road Industrial

 

Cranbury, NJ

 

1999

 

2001

 

858,957

 

53

%

 

2.57

 

$

53,400,000

 

GE Appliance East Coast

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution Facility

 

Perryville, MD

 

2003

 

2005

 

1,004,000

 

100

%

 

2.82

 

$

48,000,000

 

Pinnacle Industrial/DFW Trade Center

 

Grapevine, TX

 

2003, 2004, 2006

 

2006

 

899,200

 

100

%

 

3.47

 

$

46,700,000

 

New Jersey CALEast Industrial Portfolio

 

Cranbury, NJ

 

1982–1989

 

2003

 

807,773

 

50

%

 

2.23

 

$

42,225,000

 

East North Central RA Industrial Portfolio

 

Chicago, IL

 

1978

 

2004

 

541,266

 

98

%

 

4.25

 

$

38,016,397

 

Broadlands Business Park

 

Elkton, MD

 

2006

 

2006

 

756,600

 

100

%

 

2.85

 

$

35,500,000

 

Centre Pointe and Valley View

 

Los Angeles County, CA

 

1965–1989

 

2004

 

307,685

 

58

%

 

4.62

 

$

34,142,741

 

Northeast RA Industrial Portfolio

 

Boston, MA

 

2000

 

2004

 

384,000

 

88

%

 

5.71

 

$

33,300,000

 

Summit Distribution Center

 

Memphis, TN

 

2002

 

2003

 

708,532

 

100

%

 

2.52

 

$

27,500,000

 

Airways Distribution Center

 

Memphis, TN

 

2005

 

2006

 

556,600

 

100

%

 

3.20

 

$

24,300,000

 

Konica Photo Imaging Headquarters

 

Mahwah, NJ

 

1999

 

1999

 

168,000

 

100

%

 

2.87

 

$

23,500,000

 

Northwest RA Industrial Portfolio

 

Seattle, WA

 

1996

 

2004

 

312,321

 

100

%

 

3.21

 

$

23,401,540

 

UPS Distribution Facility

 

Fernley, NV

 

1998

 

1998

 

256,000

 

100

%

 

3.39

 

$

15,900,000

 

FEDEX Distribution Facility

 

Crofton, MD

 

1998

 

1998

 

110,842

 

100

%

 

2.99

 

$

9,900,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Subtotal—Industrial Property Investments

 

 

 

 

 

 

 

 

 

96

%

 

 

 

$

1,928,697,524

 



















RETAIL PROPERTY INVESTMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DDR Joint Venture(20)

 

Various, U.S.

 

Various

 

2007

 

16,183,158

 

95

%

$

11.46

 

$

1,028,297,460

 

The Florida Mall(21)

 

Orlando, FL

 

1986

(9)

2002

 

1,061,308

(22)

99

%

 

41.99

 

$

296,486,153

 

Printemps de l’Homme

 

Paris, France

 

1930

 

2007

 

142,363

 

100

%

 

84.73

 

$

279,077,542

(6)

Florida Retail Portfolio(23)

 

Various, FL

 

1974–2005

 

2006

 

1,259,554

 

95

%

 

15.63

 

$

260,879,060

 

Miami International Mall(21)

 

Miami, FL

 

1982

(9)

2002

 

296,746

(22)

98

%

 

36.41

 

$

109,944,638

 

Mazza Gallerie

 

Washington, DC

 

1975

 

2004

 

293,935

 

99

%

 

19.84

 

$

97,000,019

 

Westwood Marketplace

 

Los Angeles, CA

 

1950

(9)

2002

 

202,201

 

100

%

 

29.93

 

$

96,562,192

 

Marketfair

 

West Windsor, NJ

 

1987

 

2006

 

244,469

 

99

%

 

23.04

 

$

95,500,000

 

West Town Mall(21)

 

Knoxville, TN

 

1972

(9)

2002

 

759,447

(22)

97

%

 

21.10

 

$

75,826,066

 

Publix at Weston Commons

 

Weston, FL

 

2005

 

2006

 

126,922

 

96

%

 

23.98

 

$

55,200,000

(4)

Plainsboro Plaza

 

Plainsboro, NJ

 

1987

 

2005

 

206,503

 

87

%

 

10.67

 

$

51,000,000

 

South Frisco Village

 

Frisco, TX

 

2002

 

2006

 

227,175

 

99

%

 

13.85

 

$

48,500,000

(4)

The Market at Southpark

 

Littleton, CO

 

1988

 

2004

 

190,104

 

98

%

 

10.16

 

$

35,800,000

 

Suncrest Village

 

Orlando, FL

 

1987

 

2005

 

93,358

 

98

%

 

10.89

 

$

19,500,000

 

Champlin Marketplace

 

Champlin, MN

 

1998–1999, 2005

 

2007

 

88,577

 

100

%

 

13.47

 

$

18,375,000

 

Plantation Grove

 

Ocoee, FL

 

1995

 

1995

 

73,655

 

99

%

 

11.82

 

$

15,400,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Subtotal—Retail Property Investments

 

 

 

 

 

 

 

 

 

97

%

 

 

 

$

2,583,348,130

 



















TIAA Real Estate Account § Prospectus 31


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Property

 

Location

 

Year Built

 

Year
Purchased

 

Rentable
Area
(Sq. ft.)

(1)

Percent
Leased

 

Annual Avg.
Base Rent
Per Leased
Sq. Ft.

(2)

 

Market Value

(3)



















RESIDENTIAL PROPERTY INVESTMENTS(24)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Houston Apartment Portfolio(25)

 

Houston, TX

 

1984–2004

 

2006

 

NA

 

93

%

 

NA

 

$

296,241,497

 

Palomino Park Apartments

 

Denver, CO

 

1996–2001

 

2005

 

NA

 

92

%

 

NA

 

$

194,001,036

 

Kierland Apartment Portfolio(26)

 

Scottsdale, AZ

 

1996–2000

 

2006

 

NA

 

97

%

 

NA

 

$

170,084,494

 

Phoenix Apartment Portfolio(27)

 

Greater Phoenix Area, AZ

 

1995–1998

 

2006

 

NA

 

96

%

 

NA

 

$

156,109,517

 

The Legacy at Westwood Apartments

 

Los Angeles, CA

 

2001

 

2002

 

NA

 

79

%

 

NA

 

$

126,579,694

 

The Colorado

 

New York, NY

 

1987

 

1999

 

NA

 

98

%

 

NA

 

$

113,033,240

 

Larkspur Courts

 

Larkspur, CA

 

1991

 

1999

 

NA

 

94

%

 

NA

 

$

97,000,000

 

Ashford Meadows Apartments

 

Herndon, VA

 

1998

 

2000

 

NA

 

96

%

 

NA

 

$

94,059,776

 

1050 Lenox Park

 

Atlanta, GA

 

2001

 

2005

 

NA

 

97

%

 

NA

 

$

85,500,000

 

Regents Court Apartments

 

San Diego, CA

 

2001

 

2002

 

NA

 

99

%

 

NA

 

$

69,000,000

 

South Florida Apartment Portfolio

 

Boca Raton and Plantation, FL

 

1986

 

2001

 

NA

 

92

%

 

NA

 

$

68,248,605

 

The Caruth

 

Dallas, TX

 

1999

 

2005

 

NA

 

88

%

 

NA

 

$

65,427,458

 

Glenridge Walk

 

Atlanta, GA

 

1996, 2001

 

2005

 

NA

 

94

%

 

NA

 

$

52,900,000

 

The Reserve at Sugarloaf

 

Duluth, GA

 

2000

 

2005

 

NA

 

92

%

 

NA

 

$

52,000,000

(4)

The Lodge at Willow Creek

 

Denver, CO

 

1997

 

1997

 

NA

 

97

%

 

NA

 

$

43,500,000

 

The Maroneal

 

Houston, TX

 

1998

 

2005

 

NA

 

97

%

 

NA

 

$

40,033,822

 

Westcreek Apartments

 

Westlake Village, CA

 

1988

 

1997

 

NA

 

87

%

 

NA

 

$

39,189,673

 

Lincoln Woods Apartments

 

Lafayette Hill, PA

 

1991

 

1997

 

NA

 

95

%

 

NA

 

$

37,917,165

 

The Fairways of Carolina

 

Margate, FL

 

1993

 

2001

 

NA

 

96

%

 

NA

 

$

27,207,661

 

Royal St. George

 

W. Palm Beach, FL

 

1995

 

1996

 

NA

 

96

%

 

NA

 

$

27,000,000

 

Quiet Water at Coquina Lakes

 

Deerfield Beach, FL

 

1995

 

2001

 

NA

 

97

%

 

NA

 

$

26,204,860

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Subtotal—Residential Property Investments

 

 

 

 

 

 

 

 

 

94

%

 

 

 

$

1,881,238,498

 



















OTHER COMMERCIAL PROPERTY INVESTMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Storage Portfolio I(28)

 

Various, U.S.

 

1972–1990

 

2003

 

2,301,187

 

84

%

$

9.83

 

$

81,943,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Subtotal—Commercial Property Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

12,926,835,021

 



















TOTAL—ALL PROPERTY INVESTMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

14,808,073,519

 



















32 Prospectus § TIAA Real Estate Account


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(1)

The square footage is an approximate measure and is subject to periodic remeasurement.

 

 

(2)

Based on total contractual rent for leases existing as of December 31, 2007. For those properties purchased in fourth quarter of 2007 the rent is based on the existing leases as of the date of purchase. The contractual rent can be either on a gross or net basis, depending on the terms of the leases.

 

 

(3)

Market value reflects the value determined in accordance with the procedures described in the Account’s prospectus and as stated in the Statement of Investments. The account joint venture interest in 161 North Clark Street was sold on August 24, 2007. A residual value of $3.15 million remains in the statement of investments but not on the property list.

 

 

(4)

Market value shown represents the Account’s interest gross of debt.

 

 

(5)

Formerly known as “IDX Tower”.

 

 

(6)

1 & 7 Westferry Circus is located in the United Kingdom, and the market value reflects the Account’s interest gross of debt. Printemps de l’Homme is located in France. The market value of each property is converted from local currency to U.S. Dollars at the exchange rate as of December 31, 2007.

 

 

(7)

This property was substantially renovated in 1961, 2004 and 2006.

 

 

(8)

Formerly known as “Colorado Center”, this property is held in a 50%/50% joint venture with Equity Office Properties Trust. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.

 

 

(9)

Undergone extensive renovations since original construction.

 

 

(10)

Formerly known as “Embarcadero Plaza.”

 

 

(11)

The Account purchased a 50.25% interest in a private REIT, which owns this property. A 49.70% interest is owned by Societe Immobiler Trans-Quebec, and .05% is owned by 100 individuals. Market value shown reflects the value of the Account’s interest in the joint venture.

 

 

(12)

Formerly known as “U.S. Bank Plaza.”

 

 

(13)

This investment property is held in a 75%/25% joint venture with Equity Office Properties Trust. Market value shown reflects the value of the Account’s interest in the joint venture.

 

 

(14)

This investment property is held in a 50%/50% joint venture with Tennessee Consolidated Retirement System. Market value shown reflects the value of the Account’s interest in the joint venture.

 

 

(15)

The Ontario Industrial Portfolio contains six investment properties, including one portfolio which consists of 1.1 million square feet located in Mira Loma, California. As of January 30, 2007, 1900 South Burgundy Place was added to the Ontario Industrial Portfolio.

 

 

(16)

The Dallas Industrial Portfolio contains ten warehouse distribution properties located in Dallas and Coppell, Texas.

 

 

(17)

A portion of this portfolio was sold on June 27, 2007.

 

 

(18)

Formerly known as “Cabot Industrial Portfolio”. As of January 31, 2007 the Weber Distribution property was consolidated into the existing Rancho Cucamonga Industrial Portfolio.

 

 

(19)

Property held in a 60%/40% joint venture with Industrial Development International. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.

 

 

(20)

This property investment consists of 65 properties located in 13 states and is held in a 85%/15% joint venture with Developers Diversified Realty Corporation. Market Value shown reflects the value of the Account’s interest in the joint venture, net of debt.

 

 

(21)

These property investments are held in 50%/50% joint ventures with the Simon Property Group. Market values shown reflect the value of the Account’s interest in the joint ventures, net of debt.

 

 

(22)

Reflects the square footage owned by the joint venture.

 

 

(23)

This investment property is held in a 80%/20% joint venture with Weingarten Realty Investors. Market value shown reflects the value of the Account’s interest in the joint venture net of debt. This portfolio contains seven neighborhood and/or community shopping centers located in the Ft. Lauderdale, Miami, Orlando and Tampa, Florida areas.

 

 

(24)

For the average unit size and annual average rent per unit for each residential property, see “Residential Properties” below.

 

 

(25)

The Houston Apartment Portfolio contains 11 properties that are a mix of two and three-story luxury garden style apartments and are located in Houston, Texas.

 

 

(26)

The Kierland Apartment Portfolio contains three properties that are a mix of two and three-story luxury garden style apartments and are located in Scottsdale, Arizona.

 

 

(27)

The Phoenix Apartment Portfolio contains four properties that are a mix of two and three-story luxury garden style apartments and are located in the greater Phoenix area in Arizona.

 

 

(28)

Property held in 75%/25% joint venture with Storage USA. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.

TIAA Real Estate Account § Prospectus 33


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COMMERCIAL (NON-RESIDENTIAL) PROPERTIES

          At December 31, 2007, the Account held 90 commercial (non-residential) property investments in its portfolio, including a portfolio of storage facilities located throughout the United States. Twelve of these property investments were held through joint ventures, and 19 were subject to mortgages (including seven joint venture property investments). Although the terms vary under each lease, certain expenses, such as real estate taxes and other operating expenses, are paid or reimbursed in whole or in part by the tenants.

          Management believes that the Account’s portfolio is diversified by both property type and geographic location. The portfolio consists of:

 

 

 

 

46 office properties containing approximately 21 million square feet located in 14 states, the District of Columbia and the United Kingdom;

 

 

 

 

27 industrial properties containing approximately 30 million square feet located in 11 states, including a 60% interest in a portfolio of industrial properties located throughout the United States; and

 

 

 

 

16 retail properties containing approximately 21.4 million square feet located in eight states, the District of Columbia, the United Kingdom and Paris, France.

          One of the retail property investments is an 85% interest in a portfolio containing 65 individual retail shopping centers located throughout the Eastern and Southeastern states. In addition, the Account has a 75% interest in a portfolio of storage facilities located throughout the United States containing approximately 2.3 million square feet.

          As of December 31, 2007, the average overall occupancy rate of the Account’s commercial real estate portfolio was 95%. On an average basis, the Account’s office properties were 94% leased, industrial properties were 96% leased, retail properties were 97% leased and the storage portfolio was 84% leased.

          Major Tenants: The following tables list the Account’s major commercial tenants based on the total space they occupied as of December 31, 2007 in the Account’s properties.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of Total Rentable Area of Account’s

 

 

Occupied

 


MAJOR OFFICE TENANTS

 

Square Feet

 

Office Properties

 

Non-Residential Properties









Deloitte & Touche

 

 

517,855

 

 

2.5

%

 

0.7

%

BHP Petroleum

 

 

463,734

 

 

2.2

%

 

0.6

%

Mellon (Boston Co)

 

 

457,248

 

 

2.2

%

 

0.6

%

Southern Company Services, Inc

 

 

456,235

 

 

2.2

%

 

0.6

%

Yahoo!

 

 

448,147

 

 

2.1

%

 

0.6

%

Microsoft

 

 

361,527

 

 

1.7

%

 

0.5

%

Crowell & Moring

 

 

320,539

 

 

1.5

%

 

0.4

%

ATMOS Energy

 

 

293,835

 

 

1.4

%

 

0.4

%

Fourth & Madison

 

 

284,630

 

 

1.3

%

 

0.4

%

Kirkpatrick & Lockhart Preston Gates Ellis

 

 

248,982

 

 

1.2

%

 

0.3

%












34 Prospectus § TIAA Real Estate Account


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Percentage of Total Rentable Area of Account’s

 

 

Occupied

 


MAJOR INDUSTRIAL TENANTS

 

Square Feet

 

Industrial Properties

 

Non-Residential Properties









Meiko America

 

 

1,115,000

 

 

3.7

%

 

1.5

%

Walmart

 

 

1,099,112

 

 

3.6

%

 

1.5

%

General Electric

 

 

1,004,000

 

 

3.3

%

 

1.4

%

Priority Fulfillment

 

 

993,120

 

 

3.3

%

 

1.4

%

Regal West

 

 

968,535

 

 

3.2

%

 

1.3

%

Covidien (FKA Tyco)

 

 

800,000

 

 

2.6

%

 

1.1

%

Michelin (TNT)

 

 

756,600

 

 

2.5

%

 

1.0

%

Hewlett-Packard

 

 

708,532

 

 

2.3

%

 

1.0

%

Del Monte

 

 

689,660

 

 

2.3

%

 

0.9

%

RR Donnelley

 

 

659,157

 

 

2.2

%

 

0.9

%













 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of Total Rentable Area of Account’s

 

 

Occupied

 


MAJOR RETAIL TENANTS

 

Square Feet

 

Retail Properties

 

Non-Residential Properties









Walmart

 

 

944,437

 

 

4.4

%

 

1.3

%

Kohl’s

 

 

609,529

 

 

2.8

%

 

0.8

%

Goody’s

 

 

589,392

 

 

2.7

%

 

0.8

%

Publix Super Markets

 

 

565,187

 

 

2.6

%

 

0.8

%

Ross

 

 

564,927

 

 

2.6

%

 

0.8

%

Dick’s Sporting Goods

 

 

522,486

 

 

2.4

%

 

0.7

%

PetSmart

 

 

496,595

 

 

2.3

%

 

0.7

%

Michael’s

 

 

492,636

 

 

2.3

%

 

0.7

%

Bed, Bath & Beyond

 

 

455,510

 

 

2.1

%

 

0.6

%

Linens ’N Things

 

 

426,523

 

 

2.0

%

 

0.6

%












          The following tables list the rentable area subject to expiring leases during the next five years, and an aggregate figure for expirations in 2013 and thereafter, in the Account’s commercial (non-residential) properties.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rentable Area Subject

 

Percentage of Total Rentable Area of

OFFICE PROPERTIES

 

to Expiring Leases

 

Account’s Office Properties

Year of Lease Expiration

 

(sq. ft.

)

Represented by Expiring Leases







2008

 

 

2,025,032

 

 

9.6

%

2009

 

 

1,841,797

 

 

8.7

%

2010

 

 

2,254,954

 

 

10.7

%

2011

 

 

2,673,274

 

 

12.7

%

2012

 

 

1,731,962

 

 

8.2

%

2013 and thereafter

 

 

8,606,526

 

 

40.9

%









Total

 

 

19,133,545

 

 

90.8

%









 

 

 

 

 

 

 

 

 

 

Rentable Area Subject

 

Percentage of Total Rentable Area of

INDUSTRIAL PROPERTIES

 

to Expiring Leases

 

Account’s Industrial Properties

Year of Lease Expiration

 

(sq. ft.

)

Represented by Expiring Leases









2008

 

 

4,373,313

 

 

14.4

%

2009

 

 

4,120,869

 

 

13.5

%

2010

 

 

4,570,510

 

 

15.0

%

2011

 

 

4,336,083

 

 

14.2

%

2012

 

 

1,542,068

 

 

5.1

%

2013 and thereafter

 

 

9,800,725

 

 

32.2

%









Total

 

 

28,743,568

 

 

94.4

%









TIAA Real Estate Account § Prospectus 35


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Rentable Area Subject

 

Percentage of Total Rentable Area of

 

RETAIL PROPERTIES

 

to Expiring Leases

 

Account’s Retail Properties

 

Year of Lease Expiration

 

(sq. ft. )

 

Represented by Expiring Leases

 







2008

 

 

1,325,407

 

 

6.2%

 

2009

 

 

1,244,001

 

 

5.8%

 

2010

 

 

1,789,246

 

 

8.3%

 

2011

 

 

2,224,269

 

 

10.4%

 

2012

 

 

2,289,812

 

 

10.7%

 

2013 and thereafter

 

 

11,315,396

 

 

52.7%

 







Total

 

 

20,188,131

 

 

94.1%

 









RESIDENTIAL PROPERTIES

          The Account’s residential property portfolio currently consists of 21 property investments comprised of first class or luxury multi-family, garden, midrise, and high-rise apartment buildings. The portfolio contains approximately 10,650 units located in nine states and has a 94% average occupancy rate as of December 31, 2007. One of the residential properties in the portfolio is subject to a mortgage. The complexes generally contain one- to three-bedroom apartment units with a range of amenities, such as patios or balconies, washers and dryers, and central air conditioning. Many of these apartment communities have on-site fitness facilities, including some with swimming pools. Rents on each of the properties tend to be comparable with competitive communities and are not subject to rent regulation. The Account is responsible for the expenses of operating its residential properties.

          The table below contains detailed information regarding the apartment complexes in the Account’s portfolio as of December 31, 2007.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Avg. Rent

 

 

 

 

Number

 

Unit Size

 

 

Per Unit/

Property

 

Location

 

of Units

 

(Square Feet)

 

 

Per Month











Houston Apartment Portfolio

 

Houston, TX

 

2,295

 

1,351

 

$

1,341

Palomino Park

 

Highlands Ranch, CO

 

1,184

 

1,095

 

$

1,153

Kierland Apartment Portfolio

 

Scottsdale, AZ

 

1,000

 

1,047

 

$

1,260

Phoenix Apartment Portfolio

 

Greater Phoenix, AZ

 

1,176

 

1,094

 

$

1,122

Legacy at Westwood

 

Los Angeles, CA

 

187

 

1,181

 

$

4,212

The Colorado

 

New York, NY

 

256

 

617

 

$

3,173

Larkspur Courts

 

Larkspur, CA

 

248

 

1,001

 

$

2,382

Ashford Meadows

 

Herndon, VA

 

440

 

1,057

 

$

1,493

1050 Lenox Park

 

Atlanta, GA

 

407

 

1,023

 

$

1,386

Regents Court

 

San Diego, CA

 

251

 

884

 

$

2,208

South Florida Apartment Portfolio

 

Boca Raton, Plantation, FL

 

550

 

906

 

$

1,109

Caruth at Lincoln Park

 

Dallas, TX

 

338

 

1,168

 

$

1,723

Glenridge Walk

 

Atlanta, GA

 

296

 

1,142

 

$

1,409

The Reserve at Sugarloaf

 

Duluth, GA

 

333

 

1,222

 

$

1,175

The Lodge at Willow Creek

 

Denver, CO

 

316

 

996

 

$

1,082

The Maroneal

 

Houston, TX

 

309

 

926

 

$

1,224

Westcreek Apartments

 

Westlake Village, CA

 

126

 

951

 

$

2,019

Lincoln Woods Apartments

 

Lafayette Hill, PA

 

216

 

774

 

$

1,264

Fairways of Carolina

 

Margate, FL

 

208

 

1,026

 

$

1,181

The Royal St. George Apts

 

West Palm Beach, FL

 

224

 

870

 

$

1,094

Quiet Waters Apartments

 

Deerfield Beach, FL

 

200

 

1,048

 

$

1,241











36 Prospectus § TIAA Real Estate Account


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RECENT TRANSACTIONS

          The following describes property transactions by the Account since October 5, 2007, the date of the last supplement to the Account’s prospectus describing property purchases. Except as noted, the expenses for operating the properties purchased are either borne or reimbursed, in whole or in part, by the property tenants, although the terms vary under each lease. The Account is responsible for operating expenses not reimbursed under the terms of a lease. All rental rates are quoted on an annual basis unless otherwise noted.

PURCHASES

Office Properties

          Pacific Plaza – San Diego, CA

          On November 11, 2007, the Account purchased a three building, Class A, office development in San Diego, California for approximately $127.1 million, subject to $8.9 million in debt, for a net investment of approximately $118.2 million. The $8.9 million mortgage loan bears an interest rate of 5.55% and matures in September 2013. The property was built in 2000 and 2002, and it contains a total of 220,405 square feet of office space, of which 82% was occupied at the time of purchase. The three largest tenants are Qualcomm Incorporated (85,329 square feet), Iomega Corporation (39,045 square feet) and Cisco Systems (23,292 square feet). Rental rates for the office space average $30.00 per square foot plus utilities, which is below the current average market rent for comparable properties. The property is located in the Del Mar Heights/Carmel Valley submarket, which had an inventory of 3.4 million square feet and an 11.6% vacancy rate at the time of purchase.

Industrial Properties

          Seneca Industrial Park – Ft. Lauderdale (Pembroke Pines), FL

          On December 14, 2007, the Account purchased six industrial buildings in Pembroke Pines, Florida for approximately $122.3 million. The properties contain 882,000 square feet and were 96% occupied at the time of purchase. The properties were built in 1999 through 2001. The three largest tenants are Mohawk Industries, Inc. (258,270 square feet), Royal Caribbean Cruises Ltd (154,405 square feet) and Sound Advice (111,985 square feet). Rental rates average $6.50 per square foot, net of expenses, which is below the current average market rent for comparable properties. They are located in the industrial submarket of Southeast Broward which had an inventory of 30.7 million square feet and a vacancy rate of 3.3% at the time of purchase.


          Great West Industrial Portfolio – Rancho Cucamonga and Fontana, CA

          On April 4, 2008, the Account purchased two industrial distribution buildings in Rancho Cucamonga and Fontana, California for approximately $117.7 million. The properties contain an aggregate of 1.37 million square feet and are 100% leased each to a single tenant at the time of purchase. The properties were built between 2004 and 2005. The two tenants are Kumho Tires (841,325 square feet) and Dorel Juvenile Group (528,440 square feet) in Rancho Cucamonga and Fontana,

TIAA Real Estate Account § Prospectus 37


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respectively. Rental rates average $3.96 per square foot, net of expenses, which is below the current average market rent for comparable properties. The buildings are located in the industrial submarket of Inland Empire West, which had an inventory of 243.5 million square feet and a vacancy rate of 6.6% at the time of purchase.

Retail Properties

          The Colorado – New York, NY

          On February 12, 2008, the Account purchased a tenant’s leasehold interest in approximately 40,000 square feet of retail space for approximately $42.7 million. The Colorado is a 35-story high-rise apartment building and was acquired by the Account in 1999. There are two tenants who occupy substantially all of the retail space; Banana Republic (approximately 17,000 square feet) and Yoga & Fitness (approximately 22,000 square feet). This transaction provides the Account with control of all of the property’s rentable space.

SALES

Office Properties

          10 Waterview – Parsippany, NJ

          On October 18, 2007, the Account sold an office building located in Parsippany, New Jersey for net sales proceeds of approximately $36.6 million. The Account purchased the property for an original investment of $31.1 million. At the time of sale, the property had a market value of $39.0 million and a cost to date of $36.7 million in the records of the Account.

          9 Hutton Centre – Santa Ana, CA

          On October 31, 2007, the Account sold an office building located in Santa Ana, California for net sales proceeds of approximately $36.5 million. The Account purchased the property for an original investment of $20.4 million. At the time of sale, the property had a market value of $38.5 million and a cost to date of $25.6 million in the records of the Account.

          One Monument Place – Fairfax, VA

          On November 29, 2007, the Account sold an office building located in Fairfax, Virginia for net sales proceeds of approximately $60.3 million. The Account purchased the property for an original investment of $34.6 million. At the time of sale, the property had a market value of $63.1 million and a cost to date of $42.6 million in the records of the Account.

LEGAL PROCEEDINGS 

          The Account is party to various claims and routine litigation arising in the ordinary course of business. As of the date of this prospectus, management of the Account does not believe that the results of any such claims or litigation, individually or in the aggregate, will have a material effect on the Account’s business, financial position or results of operations.

38 Prospectus § TIAA Real Estate Account


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SELECTED FINANCIAL DATA 

          The following selected financial data should be considered in conjunction with the Account’s financial statements and notes provided in this prospectus.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

 

 


 

 

 

2007

 

2006

 

2005

 

2004

 

2003

 













Investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate income, net

 

$

529,412,759

 

$

444,782,843

 

$

340,089,550

 

$

239,429,500

 

$

224,938,080

 

Income from real estate joint ventures and limited partnerships

 

 

93,724,569

 

 

60,788,998

 

 

71,826,443

 

 

71,390,397

 

 

31,989,569

 

Dividends and interest

 

 

141,913,253

 

 

135,407,210

 

 

70,999,212

 

 

27,508,560