SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________________ to ________________________
Commission File Numbers 33-92990, 333-13477, 333-22809, 333-59778, 333-83964,
333-113602, and 333-121493
TIAA REAL ESTATE ACCOUNT
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of
incorporation or organization)
NOT APPLICABLE
(IRS Employer Identification No.)
C/O TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
730 THIRD AVENUE
NEW YORK, NEW YORK
(address of principal executive offices)
10017-3206
(Zip code)
(212) 490-9000
(Registrant’s telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
INDEX TO UNAUDITED FINANCIAL STATEMENTS
OF THE TIAA REAL ESTATE ACCOUNT
JUNE 30, 2005
Page | |||||
Statements of Assets and Liabilities | 3 | ||||
Statements of Operations | 4 | ||||
Statements of Changes in Net Assets | 5 | ||||
Statements of Cash Flows | 6 | ||||
Notes to Financial Statements | 7 | ||||
Statement of Investments | 13 |
2
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2005 | December 31, 2004 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Investments, at value: | |||||||
Real estate properties | |||||||
(cost: $5,821,775,126 and $5,315,565,355) | $6,097,815,142 | $5,391,469,250 | |||||
Real estate joint ventures and limited partnerships | |||||||
(cost: $998,837,078 and $1,085,720,475) | 1,262,357,184 | 1,288,715,399 | |||||
Marketable securities: | |||||||
Real estate related | |||||||
(cost: $368,392,611 and $326,109,979) | 405,289,143 | 369,744,168 | |||||
Other | |||||||
(cost: $1,825,399,562 and $676,124,265) | 1,825,086,248 | 675,989,673 | |||||
Total Investments | |||||||
(cost: $9,014,404,377 and $7,403,520,074) | 9,590,547,717 | 7,725,918,490 | |||||
Cash | 17,529,944 | — | |||||
Due from investment advisor | 9,691,391 | 4,185,034 | |||||
Other | 126,111,012 | 113,876,400 | |||||
TOTAL ASSETS | 9,743,880,064 | 7,843,979,924 | |||||
LIABILITIES | |||||||
Mortgage notes payable—Note 5 | 684,393,231 | 499,479,256 | |||||
Amount due to bank | — | 231,476 | |||||
Payable for securities transactions | 43,628,661 | — | |||||
Accrued real estate property level expenses | 80,908,012 | 84,959,882 | |||||
Security deposits held | 14,466,125 | 13,759,324 | |||||
TOTAL LIABILITIES | 823,396,029 | 598,429,938 | |||||
NET ASSETS | |||||||
Accumulation Fund | 8,648,973,720 | 7,015,717,162 | |||||
Annuity Fund | 271,510,315 | 229,832,824 | |||||
TOTAL NET ASSETS | $8,920,484,035 | $7,245,549,986 | |||||
NUMBER OF ACCUMULATION UNITS | |||||||
OUTSTANDING—Notes 6 and 7 | 38,782,879 | 33,337,597 | |||||
NET ASSET VALUE, PER ACCUMULATION UNIT—Note 6 | $223.01 | $210.44 | |||||
See notes to financial statements.
3
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF OPERATIONS (Unaudited)
For the | For the | ||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30 | June 30 | ||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||
(Restated) | (Restated) | ||||||||||||||
INVESTMENT INCOME | |||||||||||||||
Real estate income, net: | |||||||||||||||
Rental income | $145,633,320 | $ 92,538,090 | $285,712,598 | $182,902,863 | |||||||||||
Real estate property level expenses and taxes: | |||||||||||||||
Operating expenses | 36,947,719 | 22,730,526 | 71,205,870 | 47,239,545 | |||||||||||
Real estate taxes | 21,962,749 | 13,473,538 | 41,438,579 | 26,261,557 | |||||||||||
Interest expense | 9,482,304 | — | 17,497,914 | — | |||||||||||
Total real estate property level | |||||||||||||||
expenses and taxes | 68,392,772 | 36,204,064 | 130,142,363 | 73,501,102 | |||||||||||
Real estate income, net | 77,240,548 | 56,334,026 | 155,570,235 | 109,401,761 | |||||||||||
Income from real estate joint ventures | 15,329,894 | 4,104,571 | 31,531,447 | 14,157,562 | |||||||||||
Interest | 11,251,893 | 3,083,439 | 17,126,514 | 4,856,242 | |||||||||||
Dividends | 7,547,397 | 5,641,403 | 12,290,791 | 9,595,439 | |||||||||||
TOTAL INCOME | 111,369,732 | 69,163,439 | 216,518,987 | 138,011,004 | |||||||||||
Expenses—Note 2: | |||||||||||||||
Investment advisory charges | 4,312,907 | 2,748,599 | 8,327,349 | 5,903,085 | |||||||||||
Administrative and distribution charges | 5,970,843 | 3,186,726 | 11,927,701 | 7,213,819 | |||||||||||
Mortality and expense risk charges | 1,457,241 | 944,898 | 2,752,778 | 1,811,960 | |||||||||||
Liquidity guarantee charges | 823,551 | 428,490 | 1,404,892 | 800,088 | |||||||||||
TOTAL EXPENSES | 12,564,542 | 7,308,713 | 24,412,720 | 15,728,952 | |||||||||||
INVESTMENT INCOME, NET | 98,805,190 | 61,854,726 | 192,106,267 | 122,282,052 | |||||||||||
REALIZED AND UNREALIZED | |||||||||||||||
GAIN (LOSS) ON INVESTMENTS | |||||||||||||||
Net realized gain (loss) on: | |||||||||||||||
Real estate properties | 20,030,078 | (74,394) | 20,013,809 | (74,394) | |||||||||||
Marketable securities | 15,110,869 | 7,012,352 | 20,064,403 | 20,969,395 | |||||||||||
Total realized gain (loss) on investments | 35,140,947 | 6,937,958 | 40,078,212 | 20,895,001 | |||||||||||
Net change in unrealized appreciation (depreciation) on: | |||||||||||||||
Real estate properties | 162,431,924 | 17,477,647 | 190,624,615 | 3,894,001 | |||||||||||
Other real estate related investments | 41,014,573 | 55,035,158 | 60,525,182 | 82,328,998 | |||||||||||
Marketable securities | 24,513,609 | (22,971,394) | (6,916,377) | (11,443,724) | |||||||||||
Net change in unrealized appreciation on investments | 227,960,106 | 49,541,411 | 244,233,420 | 74,779,275 | |||||||||||
NET REALIZED AND UNREALIZED | |||||||||||||||
GAIN ON INVESTMENTS | 263,101,053 | 56,479,369 | 284,311,632 | 95,674,276 | |||||||||||
NET INCREASE IN NET ASSETS | |||||||||||||||
RESULTING FROM OPERATIONS | $361,906,243 | $118,334,095 | $476,417,899 | $217,956,328 | |||||||||||
See notes to financial statements.
4
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
For the | For the | ||||||||||
Three Months Ended | Six Months Ended | ||||||||||
June 30 | June 30 | ||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||
(Restated) | (Restated) | ||||||||||
FROM OPERATIONS | |||||||||||
Investment income, net | $ 98,805,190 | $ 61,854,726 | $ 192,106,267 | $ 122,282,052 | |||||||
Net realized gain (loss) on investments | 35,140,947 | 6,937,958 | 40,078,212 | 20,895,001 | |||||||
Net change in unrealized appreciation (depreciation)on investments | 227,960,106 | 49,541,411 | 244,233,420 | 74,779,275 | |||||||
NET INCREASE IN NET ASSETS | |||||||||||
RESULTING FROM OPERATIONS | 361,906,243 | 118,334,095 | 476,417,899 | 217,956,328 | |||||||
FROM PARTICIPANT TRANSACTIONS | |||||||||||
Premiums | 246,067,474 | 172,376,902 | 471,857,748 | 337,227,547 | |||||||
Net transfers from TIAA | 55,210,135 | 31,090,911 | 91,330,741 | 51,364,495 | |||||||
Net transfers from CREF Accounts | 485,466,880 | 228,347,284 | 746,952,115 | 388,932,268 | |||||||
Net transfers from (to) TIAA-CREF Institutional Mutual Funds | 11,355,472 | (6,928,080) | 12,516,400 | (6,928,080) | |||||||
Annuity and other periodic payments | (8,740,524) | (5,817,072) | (17,590,450) | (12,042,335) | |||||||
Withdrawals and death benefits | (54,107,707) | (47,667,424) | (106,550,404) | (72,794,157) | |||||||
NET INCREASE IN NET | |||||||||||
ASSETS RESULTING FROM | |||||||||||
PARTICIPANT TRANSACTIONS | 735,251,730 | 371,402,521 | 1,198,516,150 | 685,759,738 | |||||||
NET INCREASE IN NET ASSETS | 1,097,157,973 | 489,736,616 | 1,674,934,049 | 903,716,066 | |||||||
NET ASSETS | |||||||||||
Beginning of period | 7,823,326,062 | 5,207,401,611 | 7,245,549,986 | 4,793,422,161 | |||||||
End of period | $8,920,484,035 | $5,697,138,227 | $8,920,484,035 | $5,697,138,227 | |||||||
See notes to financial statements.
5
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CASH FLOWS (Unaudited)
For the | For the | ||||||||||
Three Months Ended | Six Months Ended | ||||||||||
June 30 | June 30 | ||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||
(Restated) | (Restated) | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net increase in net assets resulting | |||||||||||
from operations | $ 361,906,243 | $ 118,334,095 | $ 476,417,899 | $ 217,956,328 | |||||||
Adjustments to reconcile net increase in | |||||||||||
net assets resulting from operations to | |||||||||||
net cash used in operating activities: | |||||||||||
Purchase of real estate properties | (297,563,731) | (192,250,941) | (315,950,189) | (203,482,658) | |||||||
Capital improvements on real estate properties | (14,829,750) | (14,591,174) | (34,379,424) | (23,859,118) | |||||||
Proceeds from sale of real | |||||||||||
estate properties | 117,886,588 | — | 121,711,588 | — | |||||||
Increase in other investments | (585,934,891) | (140,961,550) | (1,166,699,570) | (595,308,827) | |||||||
(Increase) decrease in other assets | (19,675,968) | 48,070,931 | (17,740,969) | 16,268,528 | |||||||
(Decrease) increase in amounts due to bank | — | (756,189) | (231,476) | 250,903 | |||||||
Increase (decrease) in accrued real estate | |||||||||||
property level expenses and taxes | 4,805,920 | (13,405,656) | (4,051,870) | (1,353,195) | |||||||
Increase (decrease) in security | |||||||||||
deposits held | 567,906 | (847,068) | 706,801 | (557,423) | |||||||
Increase (decrease) in other liabilities | (22,162,626) | (118,515,600) | 43,542,636 | — | |||||||
Net realized gain on total investments | (35,140,947) | (6,937,958) | (40,078,212) | (20,895,001) | |||||||
Unrealized gain on total investments | (227,960,106) | (49,541,411) | (244,233,420) | (74,779,275) | |||||||
NET CASH USED IN | |||||||||||
OPERATING ACTIVITIES | (718,101,362) | (371,402,521) | (1,180,986,206) | (685,759,738) | |||||||
CASH FLOWS FROM PARTICIPANT TRANSACTIONS | |||||||||||
Premiums | 246,067,474 | 172,376,902 | 471,857,748 | 337,227,547 | |||||||
Net transfers from TIAA | 55,210,135 | 31,090,911 | 91,330,741 | 51,364,495 | |||||||
Net transfers from CREF Accounts | 485,466,880 | 228,347,284 | 746,952,115 | 388,932,268 | |||||||
Net transfers from (to) TIAA-CREF | |||||||||||
Institutional Mutual Funds | 11,355,472 | (6,928,080) | 12,516,400 | (6,928,080) | |||||||
Annuity and other periodic payments | (8,740,524) | (5,817,072) | (17,590,450) | (12,042,335) | |||||||
Withdrawals and death benefits | (54,107,707) | (47,667,424) | (106,550,404) | (72,794,157) | |||||||
NET CASH PROVIDED BY | |||||||||||
PARTICIPANT TRANSACTIONS | 735,251,730 | 371,402,521 | 1,198,516,150 | 685,759,738 | |||||||
NET INCREASE IN CASH | 17,150,368 | — | 17,529,944 | — | |||||||
CASH | |||||||||||
Beginning of period | 379,576 | — | — | ||||||||
End of period | $ 17,529,944 | $ — | $ 17,529,944 | $ — | |||||||
Supplemental disclosure: cash paid | |||||||||||
for interest | $ 9,411,395 | $ — | $ 17,427,005 | $ — | |||||||
Debt assumed in acquisition of property | $ 185,000,000 | $ — | $ 185,000,000 | $ — | |||||||
See notes to financial statements.
6
TIAA REAL ESTATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Note 1—Significant Accounting Policies
The TIAA Real Estate Account (“Account”) is a segregated investment account of Teachers Insurance and Annuity Association of America (“TIAA”) and was established by resolution of TIAA’s Board of Trustees on February 22, 1995, under the insurance laws of the State of New York, for the purpose of funding variable annuity contracts issued by TIAA. The investment objective of the Account is a favorable long-term rate of return primarily through rental income and capital appreciation from real estate investments owned by the Account. The Account holds real estate properties directly and through wholly-owned subsidiaries. The Account also holds interests in limited partnerships and owns real estate joint ventures in which the Account does not hold a controlling interest. Such joint ventures are not consolidated for financial statement purposes. The Account also invests in publicly-traded securities and other instruments to maintain adequate liquidity for operating expenses, capital expenditures and to make benefit payments. The financial statements were prepared in accordance with U. S. generally accepted accounting principles which may require the use of estimates made by management. Actual results may vary from those estimates. The following is a summary of the significant accounting policies of the Account. See the December 31, 2004 10K of the Account for complete notes to the financial statements.
Basis of Presentation: The accompanying financial statements include the Account and those subsidiaries wholly-owned by TIAA for the benefit of the Account. All significant intercompany accounts and transactions have been eliminated in consolidation.
Valuation of Real Estate Properties: Investments in real estate properties are stated at fair value, as determined in accordance with procedures approved by the Investment Committee of the TIAA Board of Trustees and in accordance with the responsibilities of the Board as a whole; accordingly, the Account does not record depreciation. Fair value for real estate properties is defined as the most probable price for which a property will sell in a competitive market under all conditions requisite to a fair sale. Determination of fair value involves subjective judgment because the actual market value of real estate can be determined only by negotiation between the parties in a sales transaction. Real estate properties owned by the Account are initially valued at their respective purchase prices (including acquisition costs). Subsequently, independent appraisers value each real estate property at least once a year. The independent fiduciary, The Townsend Group, must approve all independent appraisers used by the Account. The independent fiduciary can require additional appraisals if it believes that a property’s value has changed materially and that such change is not reflected in the quarterly appraisal, or otherwise to ensure that the Account is valued correctly. The independent fiduciary must also approve an appraisal where a property’s value changed by 6% or more from the most recent annual appraisal. The independent fiduciary, The Townsend Group, is appointed by a special subcommittee of TIAA’s Board of Trustees. TIAA’s appraisal staff performs a valuation review of each real estate property on a quarterly basis and updates the property value if it believes that the value of the property has changed since the previous valuation review or appraisal. Real estate properties subject to a mortgage are generally valued as described; however, the value of the property may be adjusted if it is determined that the fair value of the outstanding debt could have a material affect on the equity investment value of the property. The independent fiduciary reviews and approves any such valuation adjustments which exceed certain prescribed limits before such adjustments are recorded by the Account. The Account continues to use the revised value to calculate the Account’s net asset value until the next valuation review or appraisal.
Valuation of Real Estate Joint Ventures: Real estate joint ventures are stated at the Account’s equity in the net assets of the underlying entities, which value their real estate holdings and mortgage notes payable at fair value.
Valuation of Marketable Securities: Equity securities listed or traded on any national market or exchange are valued at the last sale price as of the close of the principal securities exchange on which such securities are traded or, if there is no sale, at the mean of the last bid and asked prices on such exchange.
7
Debt securities, other than money market instruments, are valued at the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality and type). Money market instruments, with maturities of one year or less, are valued in the same manner as debt securities or derived from a pricing matrix that has various types of money market instruments along one axis and various maturities along the other. Portfolio securities and limited partnership interests for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Investment Committee of the TIAA Board of Trustees and in accordance with the responsibilities of the Board as a whole.
Accounting for Investments: Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties close (settlement date). Rent from real estate properties consists of all amounts earned under tenant operating leases, including base rent, recoveries of real estate taxes and other expenses and charges for miscellaneous services provided to tenants. Rental income is recognized in accordance with the billing terms of the lease agreements. The Account bears the direct expenses of the real estate properties owned. These expenses include, but are not limited to, fees to local property management companies, property taxes, utilities, maintenance, repairs, insurance and other operating and administrative costs. An estimate of the net operating income earned from each real estate property is accrued by the Account on a daily basis and such estimates are adjusted as soon as actual operating results are determined. The Account recognizes a gain to the extent that the contract sales price exceeds the cost-to-date of the property being sold. A loss occurs when the cost-to-date exceeds the sales price. As the Account is marked-to-market and all properties are appraised quarterly, any accumulated unrealized gains and losses are reversed in the calculation of realized gains/losses.
Income from joint ventures is recorded based on the Account’s proportional interest in the income earned by the joint venture that has been distributed from the joint venture to the Account.
Securities transactions are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned and includes accrual of discount and amortization of premium. Dividend income is recorded on the ex-dividend date. Realized gains and losses on securities transactions are accounted for on the specific identification method.
Federal Income Taxes: Based on provisions of the Internal Revenue Code, Section 817, the Account is taxed as a segregated asset account of TIAA. The Account should incur no material federal income tax attributable to the net investment experience of the Account.
Restatement and Reclassifications: In prior years’ financial statements, the Account had consolidated joint ventures in which it held a majority financial interest and had joint control over significant decisions with its minority partner. It was determined that such investments should not have been consolidated because the Account did not have a majority of the voting rights to control significant decisions. As a result, the Account has restated its interim 2004 financial statements to conform to the treatment used at December 31, 2004, which reflects the Account’s equity in net assets and operations of the underlying entities. This restatement did not affect the Account’s total net assets, net asset value per accumulation unit, net increase in net assets resulting from operations or the Account’s total return, as previously reported in the Account’s 2004 and financial statements. In addition, the Account changed the presentation of operating results in its interim 2004 financial statements to eliminate discontinued operations reporting, which more appropriately reflects the Account’s business activities.
Note 2—Management Agreements
Investment advisory services for the Account are provided by TIAA employees, under the direction of TIAA’s Board of Trustees and its Investment Committee, pursuant to investment management procedures adopted by TIAA for the Account. TIAA’s investment management decisions for the Account are also subject to review by the Account’s independent fiduciary, The Townsend Group. TIAA also provides all portfolio accounting and related services for the Account.
8
Distribution and administrative services for the Account are provided by TIAA-CREF Individual & Institutional Services, Inc. (“Services”) pursuant to a Distribution and Administrative Services Agreement with the Account. Services, a wholly-owned subsidiary of TIAA, is a registered broker-dealer and member of the National Association of Securities Dealers, Inc.
The services provided by TIAA and Services are provided at cost. TIAA and Services receive payments from the Account on a daily basis according to formulas established each year with the objective of keeping the payments as close as possible to the Account’s actual expenses. Any differences between actual expenses and the amounts paid are adjusted quarterly.
TIAA also provides a liquidity guarantee to the Account, for a fee, to ensure that sufficient funds are available to meet participant transfer and cash withdrawal requests in the event that the Account’s cash flows and liquid investments are insufficient to fund such requests. TIAA also receives a fee for assuming certain mortality and expense risks.
Note 3—Leases
The Account’s real estate properties are leased to tenants under operating lease agreements which expire on various dates through 2104. Aggregate minimum annual rentals for the properties owned, excluding short-term residential and storage facility leases, are as follows:
Years Ending | |
December 31, | |
2005 | $ 560,649,151 |
2006 | 554,125,280 |
2007 | 512,152,856 |
2008 | 456,891,705 |
2009 | 401,273,483 |
2010-2104 | 1,276,288,797 |
| |
Total | $3,761,381,272 |
Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts.
9
Note 4—Investment in Unconsolidated Joint Ventures
The Account owns several real estate properties through unconsolidated joint ventures and receives distributions and allocations of profits and losses from the joint ventures based on the Account’s ownership interest percentages. Several of these joint ventures have mortgage notes payable on the properties owned. The Account’s allocated portion of the mortgage notes payable at June 30, 2005 is $344,401,007. The Accounts’ equity in the joint ventures at June 30, 2005 is $1,220,878,728. A condensed summary of the financial position and results of operations of the joint ventures is shown below.
June 30, 2005 | December 31, 2004 | |||||||||
Assets | ||||||||||
Real estate properties | $2,771,523,949 | $2,760,426,300 | ||||||||
Other assets | 62,825,107 | 55,021,655 | ||||||||
Total assets | $2,834,349,056 | $2,815,447,955 | ||||||||
Liabilities and Equity | ||||||||||
Mortgage notes payable, | ||||||||||
including accrued interest | $617,302,014 | $618,773,569 | ||||||||
Other liabilities | 63,180,551 | 47,389,201 | ||||||||
Total liabilities | 680,482,565 | 666,162,770 | ||||||||
Equity | 2,153,866,491 | 2,149,285,185 | ||||||||
Total liabilities and equity | $2,834,349,056 | $2,815,447,955 | ||||||||
Three Months | Three Months | Six Months | Six Months | |||||
Ended | Ended | Ended | Ended | |||||
June 30, 2005 | June 30, 2004 | June 30, 2005 | June 30, 2004 | |||||
Restated | Restated | |||||||
Operating Revenues and Expenses | ||||||||
Revenues | $67,061,693 | $56,788,339 | $129,340,661 | $112,072,146 | ||||
Expenses | 32,908,282 | 28,234,947 | 67,827,683 | 55,805,022 | ||||
Excess of revenues over expenses | $34,153,411 | $28,553,392 | $ 61,512,978 | $ 56,267,124 | ||||
Note 5—Mortgage Payable
Property | Interest Rate | Amount | Due | |||
50 Fremont | 6.40% paid monthly | $135,000,000 | August 21, 2013 | |||
Ontario Industrial Portfolio | 7.24% paid monthly | 9,393,231(a) | May 01, 2011 | |||
IDX Tower | 6.40% paid monthly | 145,000,000 | August 21, 2013 | |||
1001 Pennsylvania Ave | 6.40% paid monthly | 210,000,000 | August 21, 2013 | |||
99 High Street | 4.50% paid monthly(b) | 185,000,000 | January 9, 2008 | |||
Total | $684,393,231 | |||||
(a) Principal payments due monthly with balloon payment of $8,127,115 due on May 1, 2011.
(b) Debt assumed in conjunction with property acquired during the three months ended June 30, 2005. The interest rate is 30 day Libor plus 1.42%.
Principal on mortgage notes payable is due as follows:
Amount | |
2005 | $ 87,335 |
2006 | 186,862 |
2007 | 201,415 |
2008 | 185,215,163 |
2009 | 233,858 |
Thereafter | 498,468,598 |
Total | $684,393,231 |
10
Note 6—Condensed Financial Information
Selected condensed financial information for an Accumulation Unit of the Account is presented below.
For the | ||||||||||||||
Six Months | ||||||||||||||
Ended | For the Years Ended December 31, | |||||||||||||
June 30, | ||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||
(Unaudited) | (Restated) | (Restated) | (Restated) | (Restated) | ||||||||||
Per Accumulation Unit Data: | ||||||||||||||
Rental income | $ 7.803 | $ 13.422 | $ 15.584 | $ 14.225 | $ 14.862 | $ 14.530 | ||||||||
Real estate property | ||||||||||||||
level expenses | 3.554 | 5.331 | 5.890 | 4.819 | 4.754 | 4.674 | ||||||||
Real estate income, net | 4.249 | 8.091 | 9.694 | 9.406 | 10.108 | 9.856 | ||||||||
Income from real estate | ||||||||||||||
joint ventures | .861 | 1.935 | 1.379 | 0.807 | 0.130 | 0.056 | ||||||||
Dividends and interest | .804 | 1.406 | 0.839 | 1.249 | 1.950 | 2.329 | ||||||||
Total income | 5.914 | 11.432 | 11.912 | 11.462 | 12.188 | 12.241 | ||||||||
Expense charges (1) | .667 | 1.241 | 1.365 | 1.101 | 0.995 | 0.998 | ||||||||
Investment income, net | 5.247 | 10.191 | 10.547 | 10.361 | 11.193 | 11.243 | ||||||||
Net realized and unrealized gain (loss) on investments | 7.319 | 13.314 | 2.492 | (4.621) | (1.239) | 3.995 | ||||||||
Net increase in Accumulation Unit Value | 12.566 | 23.505 | 13.039 | 5.740 | 9.954 | 15.238 | ||||||||
Accumulation Unit Value: | ||||||||||||||
Beginning of year | 210.444 | 186.939 | 173.900 | 168.160 | 158.206 | 142.968 | ||||||||
End of period | $223.010 | $210.444 | $186.939 | $173.900 | $168.160 | $158.206 | ||||||||
Total return | 5.97% | 12.57% | 7.50% | 3.41% | 6.29% | 10.66% | ||||||||
Ratios to Average Net Assets: | ||||||||||||||
Expenses (1) | 0.31% | 0.63% | 0.76% | 0.67% | 0.61% | 0.67% | ||||||||
Investment income, net | 2.63% | 5.17% | 5.87% | 5.65% | 6.81% | 7.50% | ||||||||
Portfolio turnover rate: | ||||||||||||||
Real estate properties | 1.77% | 2.32% | 5.12% | 0.93% | 4.61% | 3.87% | ||||||||
Securities | 38.17% | 143.47% | 71.83% | 52.08% | 40.62% | 32.86% | ||||||||
Thousands of Accumulation Units | ||||||||||||||
Outstanding at end of period | 38,783 | 33,338 | 24,724 | 20,347 | 18,456 | 14,605 | ||||||||
Net assets end of period | ||||||||||||||
(in thousands) | $8,920,484 | $7,245,550 | $4,793,422 | $3,675,989 | $3,213,667 | $2,387,122 |
(1) | Expense charges per Accumulation Unit and the Ratio of Expenses to Average Net Assets exclude real estate property level expenses. If the real estate property level expenses were included, the expense charge per Accumulation Unit for the six months ended June 30, 2005 would be $4.221 ($6.572, $7.255, $5.920, $5.749 and $5.672 for the years ended December 31, 2004, 2003, 2002, 2001 and 2000 respectively), and the Ratio of Expenses to Average Net Assets for the six months ended June 30, 2005 would be 1.94% (3.33%, 4.04%, 3.61%, 3.50% and 3.79% for the years ended December 31, 2004, 2003, 2002, 2001 and 2000 respectively). |
11
Note 7—Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows:
For the | For the | |||||
Six Months | Year | |||||
Ended | Ended | |||||
June 30, 2005 | December 31, 2004 | |||||
(Unaudited) | ||||||
Accumulation Units: | ||||||
Credited for premiums | 2,196,391 | 3,746,093 | ||||
Credited (cancelled) for transfers, net disbursements and amounts applied to the Annuity Fund | 3,248,891 | 4,867,321 | ||||
Outstanding: | ||||||
Beginning of year | 33,337,597 | 24,724,183 | ||||
End of period | 38,782,879 | 33,337,597 | ||||
Note 8—Commitments and Subsequent Events
During the normal course of business, the Account enters into discussions and agreements to purchase or sell real estate properties. As of June 30, 2005 the Account had outstanding commitments to purchase one office property for approximately $105.7 million, which has closed, and a limited partnership interest for $30 million (approximately $4.5 million has been funded at the time of this filing) and to purchase shares in a private real estate investment trust for $25 million. In addition to these commitments, the Account has received authorization to enter into a commitment to place leverage on a property owned by the Account.
Subsequent to June 30, 2005, the Account entered into commitments to purchase two multi-family properties and one office property for approximately $343 million (including assumed debt), one of which has closed. The Account also entered into commitments to sell two multi-family and one office properties, which have all closed, for a total of approximately $57 million.
12
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
REAL ESTATE PROPERTIES—63.58% and 69.78% | Value | ||||
Location / Description | 6/30/05 | 12/31/04 | |||
Alabama: | (Unaudited) | ||||
Inverness Center—Office building | $ 92,726,839 | $ — | |||
Arizona: | |||||
Biltmore Commerce Center—Office building | 37,441,806 | 34,104,182 | |||
Mountain RA Industrial Portfolio—Industrial building | 5,655,004 | 5,513,947 | |||
California: | |||||
3 Hutton Centre Drive—Office building | 46,148,671 | 41,106,333 | |||
9 Hutton Centre—Office building | 24,766,142 | 23,169,449 | |||
50 Fremont—Office building | 326,600,000(1) | 323,264,602(1) | |||
88 Kearny Street—Office building | 74,936,489 | 69,026,718 | |||
Cabot Industrial Portfolio—Industrial building | 67,000,000 | — | |||
Capitol Place—Office building | 42,400,000 | 42,400,000 | |||
Centerside I—Office building | 64,000,000 | 65,037,900 | |||
Centre Pointe and Valley View—Industrial building | 25,000,000 | 25,329,023 | |||
Eastgate Distribution Center—Industrial building | 20,000,000 | 18,800,000 | |||
Kenwood Mews—Apartments | 28,211,024 | 27,700,000 | |||
Larkspur Courts—Apartments | 73,000,000 | 66,000,000 | |||
The Legacy at Westwood—Apartments | 97,603,200 | 90,750,000 | |||
Northern CA RA Industrial Portfolio—Industrial building | 58,148,898 | 59,169,642 | |||
Northpoint Commerce Center—Industrial building | 48,112,241 | 46,000,000 | |||
Ontario Industrial Portfolio—Industrial building | 197,193,231(1) | 187,079,256(1) | |||
Regents Court—Apartments | 57,500,000 | 56,700,000 | |||
Southern CA RA Industrial Portfolio—Industrial building | 83,028,922 | 89,097,299 | |||
Westcreek—Apartments | 29,150,023 | 28,161,865 | |||
West Lake North Business Park—Office building | 52,149,471 | 50,021,000 | |||
Westwood Marketplace—Shopping center | 82,500,000 | 80,019,410 | |||
Colorado: | |||||
The Lodge at Willow Creek—Apartments | 33,500,000 | 32,201,274 | |||
The Market at Southpark—Shopping center | 33,000,000 | 33,522,400 | |||
Monte Vista—Apartments | 23,463,081 | 22,501,650 | |||
Connecticut: | |||||
Ten & Twenty Westport Road—Office building | 157,000,000 | 148,000,000 | |||
Delaware: | |||||
Mideast RA Industrial Portfolio—Industrial building | 13,500,000 | 16,543,121 | |||
Florida: | |||||
701 Brickell—Office building | 184,548,412 | 177,000,000 | |||
4200 West Cypress Street—Office building | 34,069,022 | 33,900,000 | |||
The Fairways of Carolina—Apartments | 18,533,000 | 18,100,000 | |||
Golfview—Apartments | 29,048,740 | 28,543,437 | |||
The Greens at Metrowest—Apartments | 13,500,000 | 14,623,330 | |||
Maitland Promenade One—Office building | 36,823,074 | 36,053,639 | |||
Plantation Grove—Shopping center | 12,500,000 | 11,200,000 | |||
Pointe on Tampa Bay—Office building | 42,277,669 | 40,551,310 | |||
Quiet Waters at Coquina Lakes—Apartments | 19,532,000 | 19,200,000 | |||
Royal St. George—Apartments | 20,100,000 | 19,400,000 | |||
Sawgrass Office Portfolio—Office building | 55,500,000 | 52,000,000 | |||
South Florida Apartment Portfolio—Apartments | 49,128,892 | 47,700,000 | |||
Suncrest Village—Shopping center | 15,400,000 | — |
See notes to financial statements.
13
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
Value | |||||
Location / Description | 6/30/05 | 12/31/04 | |||
Georgia: | (Unaudited) | ||||
Alexan Buckhead—Apartments | $ 36,010,775 | $ 37,500,000 | |||
Atlanta Industrial Portfolio—Industrial building | 37,300,000 | 37,750,840 | |||
Illinois: | |||||
Chicago Caleast Industrial Portfolio—Industrial building | 39,300,000 | 42,000,000 | |||
Chicago Industrial Portfolio—Industrial building | 71,012,433 | 70,002,239 | |||
Columbia Centre III—Office building | 27,800,000 | 28,900,000 | |||
East North Central RA Industrial Portfolio—Industrial building | 37,007,885 | 23,734,331 | |||
Oak Brook Regency Towers—Office building | 73,000,000 | 68,400,000 | |||
Parkview Plaza—Office building | 49,203,690 | 48,700,000 | |||
Rolling Meadows—Shopping center | 17,500,000 | 15,750,000 | |||
Kentucky: | |||||
IDI Kentucky Portfolio—Industrial building | 58,017,626 | 49,000,000 | |||
Maryland: | |||||
Corporate Boulevard—Office building | — | 65,038,710 | |||
FEDEX Distribution Facility—Industrial building | 8,500,000 | 8,200,000 | |||
Massachusetts: | |||||
99 High Street—Office building | 273,220,261(1) | — | |||
Batterymarch Park II—Office building | 10,703,043 | 10,700,000 | |||
Longwood Towers—Apartments | 104,000,000 | 82,500,000 | |||
Needham Corporate Center—Office building | 16,100,000 | 15,030,046 | |||
Northeast RA Industrial Portfolio—Industrial building | 27,705,091 | 33,110,903 | |||
Michigan: | |||||
Indian Creek—Apartments | 18,009,200 | 18,825,000 | |||
Minnesota: | |||||
Interstate Crossing—Industrial building | 7,200,000 | 7,300,000 | |||
River Road Distribution Center—Industrial building | 4,829,983 | 4,600,000 | |||
Nevada: | |||||
UPS Distribution Facility—Industrial building | 13,200,000 | 12,900,000 | |||
New Jersey: | |||||
10 Waterview Boulevard—Office building | 26,900,000 | 26,400,000 | |||
371 Hoes Lane—Office building | 11,104,287 | 10,666,570 | |||
Konica Photo Imaging Headquarters—Industrial building | 24,000,000 | 21,200,000 | |||
Morris Corporate Center III—Office building | 82,900,090 | 82,300,000 | |||
NJ Caleast Industrial Portfolio—Industrial building | 40,400,000 | 39,300,000 | |||
South River Road Industrial—Industrial building | 50,739,904 | 34,900,000 | |||
New York: | |||||
780 Third Avenue—Office building | 215,000,000 | 197,000,000 | |||
The Colorado—Apartments | 58,598,659 | 58,156,056 | |||
Ohio: | |||||
Bent Tree—Apartments | 13,521,262 | 13,600,000 | |||
Columbus Portfolio—Office building | 22,400,000 | 21,500,000 | |||
Oregon: | |||||
Five Centerpointe—Office building | 21,514,041 | 14,500,000 | |||
Pennsylvania: | |||||
Lincoln Woods—Apartments | 31,529,072 | 31,472,870 | |||
Tennessee: | |||||
Memphis Caleast Industrial Portfolio—Industrial building | 50,606,319 | 47,400,000 | |||
Summit Distribution Center—Industrial building | 25,400,000 | 23,800,000 |
See notes to financial statements.
14
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
Location / Description | ||||||||
Texas: | ||||||||
Butterfield Industrial Park—Industrial building | $ 4,600,000 | $ 4,600,000(2) | ||||||
Dallas Industrial Portfolio—Industrial building | 164,676,897 | 138,500,000 | ||||||
Four Oaks Place—Office building | 268,277,062 | 255,357,238 | ||||||
The Legends at Chase Oaks—Apartments | 27,015,049 | 27,051,851 | ||||||
Utah: | ||||||||
Landmark at Salt Lake City (Building #4)—Industrial building | 12,876,608 | 12,500,000 | ||||||
Virginia: | ||||||||
8270 Greensboro Drive—Office building | 60,100,000 | — | ||||||
Ashford Meadows—Apartments | 77,736,101 | 68,000,000 | ||||||
Fairgate at Ballston—Office building | 32,500,000 | 28,500,017 | ||||||
Monument Place—Office building | 41,530,675 | 37,000,000 | ||||||
One Virginia Square—Office building | 44,500,000 | 42,500,000 | ||||||
Washington: | ||||||||
IDX Tower—Office building | 353,000,000(1) | 347,978,282(1) | ||||||
Northwest RA Industrial Portfolio—Industrial building | 17,600,000 | 19,438,852 | ||||||
Rainier Corporate Park—Industrial building | 57,039,634 | 56,035,878 | ||||||
Washington DC: | ||||||||
1001 Pennsylvania Avenue—Office building | 480,533,475(1) | 466,424,940(1) | ||||||
1015 15th Street—Office building | 66,862,557 | 59,000,134 | ||||||
1900 K Street—Office building | 220,016,736 | 219,453,706 | ||||||
The Farragut Building—Office building | 57,500,000 | 46,500,000 | ||||||
Mazza Gallerie—Shopping center | 82,520,876 | 81,000,000 | ||||||
TOTAL REAL ESTATE PROPERTIES | ||||||||
(Cost $5,821,775,126 and $5,315,565,355) | 6,097,815,142 | 5,391,469,250 | ||||||
OTHER REAL ESTATE RELATED INVESTMENTS—13.16% and 16.68% | ||||||||
REAL ESTATE JOINT VENTURE—12.73% and 16.28% | ||||||||
Teachers REA LLC, which owns | ||||||||
Cabot Industrial Portfolio (100% Account Interest) | — | 60,600,000 | ||||||
Bisys Crossings I, LLC | ||||||||
BISYS Fund Services Building (96% Account Interest) | — | 34,751,940 | ||||||
GA-Buckhead LLC | ||||||||
Prominence in Buckhead (75% Account Interest) | 90,327,024 | 80,618,771 | ||||||
IL-161 Clark Street LLC | ||||||||
161 North Clark Street (75% Account Interest) | 155,695,278 | 157,282,972 | ||||||
One Boston Place REIT | ||||||||
One Boston Place (50.25% Account Interest) | 141,351,188 | 139,382,942 | ||||||
Storage Portfolio I, LLC | ||||||||
Storage Portfolio (3) (75% Account Interest) | 61,227,047(4) | 50,430,399(4) | ||||||
CA-Treat Towers LP | ||||||||
Treat Towers (75% Account Interest) | 89,806,225 | 88,524,364 | ||||||
Strategic Ind Portfolio I, LLC | ||||||||
IDI Nationwide Industrial Portfolio (3) (60% Account Interest) | 65,342,305(4) | 64,041,442(4) | ||||||
CA-Colorado Center LP | ||||||||
Yahoo Center (50% Account Interest) | 244,233,941 | 222,702,820 | ||||||
Florida Mall Associates, Ltd. | ||||||||
The Florida Mall (50% Account Interest) | 172,936,525(4) | 162,632,565(4) |
See notes to financial statements.
15
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
Location / Description | ||||||||
Teachers REA IV, LLC, which owns | ||||||||
Tyson’s Executive Plaza II (50% Account Interest) | $ 29,147,754 | $ 27,894,742 | ||||||
West Dade Associates | ||||||||
Miami International Mall (50% Account Interest) | 63,162,946(4) | 61,577,257(4) | ||||||
West Town Mall, LLC | ||||||||
West Town Mall (50% Account Interest) | 107,648,495(4) | 107,452,790(4) | ||||||
TOTAL REAL ESTATE JOINT VENTURE (Cost $963,102,994 and $1,060,788,630) | 1,220,878,728 | 1,257,893,004 | ||||||
LIMITED PARTNERSHIPS— 0.43% and 0.40% | ||||||||
Cobalt Industrial REIT (9.09% Account Interest) | 4,489,733 | — | ||||||
Essex Apartment Value Fund, L.P. (10% Account Interest) | 10,475,332 | 11,434,495 | ||||||
Heitman Value Part Fund (8.43% Account Interest) | 7,417,705 | 3,766,214 | ||||||
MONY/Transwestern Fund II (16.66% Account Interest) | 10,310,988 | 3,134,952 | ||||||
MONY/Transwestern Mezzanine Realty Partners L.P. | ||||||||
(19.75% Account Interest) | 8,784,698 | 12,486,734 | ||||||
TOTAL LIMITED PARTNERSHIP | ||||||||
(Cost $35,734,084 and $24,931,845) | 41,478,456 | 30,822,395 | ||||||
TOTAL OTHER REAL ESTATE RELATED INVESTMENTS | ||||||||
(Cost $998,837,078 and $1,085,720,475) | 1,262,357,184 | 1,288,715,399 | ||||||
MARKETABLE SECURITIES—23.26% and 13.54%
REAL ESTATE RELATED—4.23% and 4.79%
REAL ESTATE INVESTMENT TRUSTS—3.83% and 4.25%
Issuer | ||||||||||
200,000 | — | Aames Investment Corp. | 1,944,000 | — | ||||||
— | 70,000 | Acadia Realty Trust | — | 1,141,000 | ||||||
550,000 | 550,000 | Affordable Residential Communities | 7,342,500 | 7,892,500 | ||||||
36,685 | 36,685 | AMB Property Corp. | 1,593,230 | 1,481,707 | ||||||
244,000 | 446,100 | American Campus Communities | 5,533,920 | 10,032,789 | ||||||
79,000 | — | American Financial Realty | 1,215,020 | — | ||||||
140,000 | 140,000 | Amli Residential Properties | 4,376,400 | 4,480,000 | ||||||
46,000 | 46,000 | Archstone—Smith Trust | 1,776,520 | 1,761,800 | ||||||
232,900 | 232,900 | Ashford Hospitality Trust | 2,515,320 | 2,531,623 | ||||||
40,000 | — | Avalonbay Communities Inc. | 3,232,000 | — | ||||||
— | 150,000 | Boston Properties Inc. | — | 9,700,500 | ||||||
— | 150,000 | Brandywine Realty Trust | — | 4,408,500 | ||||||
51,800 | 35,000 | BRE Properties | 2,167,830 | 1,410,850 | ||||||
270,000 | — | Brookfield Properties | 7,776,000 | — | ||||||
60,000 | 60,000 | Capital Lease Funding Inc. | 651,000 | 750,000 | ||||||
241,000 | — | Catellus Development Corp. | 7,904,800 | — | ||||||
88,000 | — | Cedar Shopping Centers Inc. | 1,298,000 | — | ||||||
197,045 | 60,000 | Centerpoint Properties Trust | 8,335,004 | 2,873,400 | ||||||
143,000 | 143,000 | Corporate Office Properties | 4,211,350 | 4,197,050 | ||||||
751,000 | — | Deerfield Triarc Capital Cor | 11,783,190 | — |
See notes to financial statements.
16
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
Issuer | |||||||||||||
434,000 | 434,000 | Developers Diversified Realty | $ 19,946,640 | $ 19,256,580 | |||||||||
— | 1,072,990 | Digital Realty Trust Inc. | — | 14,453,175 | |||||||||
236,000 | — | Duke Realty Corp. | 7,471,760 | — | |||||||||
700,000 | — | ECC Capital Corp. | 4,662,000 | — | |||||||||
100,000 | — | Education Realty Trust Inc. | 1,830,000 | — | |||||||||
100,000 | — | Equity Inns Inc. | 1,330,000 | — | |||||||||
— | 31,875 | Equity Lifestyle Properties | — | 1,139,532 | |||||||||
— | 147,518 | Equity Office Properties Trust | — | 4,295,724 | |||||||||
180,000 | 180,000 | Equity Residential | 6,627,600 | 6,512,400 | |||||||||
530,577 | 594,500 | Extra Space Storage Inc. | 7,603,168 | 7,924,685 | |||||||||
— | 413,873 | Falcon Financial Investment | — | 2,897,111 | |||||||||
1,367,000 | 1,367,000 | Feldman Mall Properties | 19,069,650 | 17,784,670 | |||||||||
200,000 | — | Gables Residential Trust | 8,646,000 | — | |||||||||
110,000 | 110,000 | General Growth Properties | 4,519,900 | 3,977,600 | |||||||||
— | 75,000 | Glenborough Realty Trust Inc. | — | 1,596,000 | |||||||||
887,000 | 912,000 | GMH Communities Trust | 12,284,950 | 12,859,200 | |||||||||
— | 38,818 | Gramercy Capital Corp. | — | 799,651 | |||||||||
— | 72,550 | Great Wolf Resorts Inc. | — | 1,620,767 | |||||||||
7,200 | 75,000 | HealthCare Realty Trust Inc. | 277,992 | 3,052,500 | |||||||||
562,000 | 350,000 | Hersha Hospitality Trust | 5,361,480 | 4,007,500 | |||||||||
110,000 | — | Hilton Hotels Corp. | 2,623,500 | — | |||||||||
236,600 | 168,000 | Home Properties Inc. | 10,178,532 | 7,224,000 | |||||||||
250,000 | 325,000 | Homebanc Corp/Ga | 2,272,500 | 3,146,000 | |||||||||
— | 74,257 | Impac Mortgage Holdings Inc. | — | 1,683,406 | |||||||||
150,000 | — | Innkeepers USA Trust | 2,241,000 | — | |||||||||
300,000 | 300,000 | Interstate Hotels & Resorts | 1,473,000 | 1,608,000 | |||||||||
100,000 | — | Istar Financial Inc. | 4,159,000 | — | |||||||||
1,958,000 | 1,908,000 | Jameson Inns Inc. | 4,522,980 | 3,758,760 | |||||||||
54,000 | 54,000 | Kimco Realty Corp. | 3,181,140 | 3,131,460 | |||||||||
324,443 | 324,443 | Kite Realty Group Trust | 4,866,645 | 4,957,489 | |||||||||
252,000 | — | La Quinta Corp—Paired | 2,351,160 | — | |||||||||
120,000 | — | Lasalle Hotel Properties | 3,937,200 | — | |||||||||
— | 215,078 | Lexington Corporate Properties Trust | — | 4,856,461 | |||||||||
1,266,660 | 1,266,660 | Lodgian Inc. | 13,008,598 | 15,579,918 | |||||||||
— | 162,000 | LTC Properties Inc. | — | 3,225,420 | |||||||||
150,000 | 150,000 | Macerich Company/The | 10,057,500 | 9,420,000 | |||||||||
30,420 | 30,420 | Mack-Cali Realty Corp. | 1,378,026 | 1,400,233 | |||||||||
40,000 | 40,000 | Mills Corp/The | 2,431,600 | 2,550,400 | |||||||||
150,000 | 150,000 | Mission West Properties | 1,540,500 | 1,596,000 | |||||||||
110,000 | — | NewCastle Investment Corp. | 3,316,500 | — | |||||||||
270,000 | New York Mortgage Trust Inc. | — | 3,024,000 | ||||||||||
75,000 | 100,000 | Northstar Realty Finance Cor | 786,750 | 1,145,000 | |||||||||
120,000 | — | Novastar Financial Inc. | 4,698,000 | — | |||||||||
525,000 | 525,000 | Origen Financial Inc. | 3,885,000 | 3,927,000 | |||||||||
— | 70,700 | Parkway Properties | — | 3,588,025 | |||||||||
75,000 | 75,000 | Prentiss Properties Trust | 2,733,000 | 2,865,000 | |||||||||
327,400 | 200,000 | Prologis Trust | 13,174,576 | 8,666,000 | |||||||||
57,000 | — | Public Storage, Inc. | 3,605,250 | — | |||||||||
See notes to financial statements.
17
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
Value | |||||||||||||||||||||
Issuer | |||||||||||||||||||||
679,853 | 507,000 | Reckson Associates Realty Corp. | $ 22,809,068 | $ 16,634,670 | |||||||||||||||||
— | 45,000 | Regency Centers Corp. | — | 2,493,000 | |||||||||||||||||
255,721 | 255,900 | Simon Property Group Inc. | 18,537,215 | 16,549,053 | |||||||||||||||||
300,000 | — | Starwood Hotels & Resorts | 17,571,000 | — | |||||||||||||||||
303,820 | 303,820 | Sunset Financial Resources | 2,877,175 | 3,162,766 | |||||||||||||||||
240,000 | 315,000 | Sunstone Hotel Investors Inc. | 5,822,400 | 6,545,700 | |||||||||||||||||
111,200 | 268,200 | Thomas Properties Group | 1,391,112 | 3,416,868 | |||||||||||||||||
400,000 | 1,500,000 | Trizec Properties Inc. | 8,228,000 | 28,380,000 | |||||||||||||||||
100,000 | 100,000 | United Dominion Realty Trust | 2,405,000 | 2,480,000 | |||||||||||||||||
160,000 | 77,558 | Ventas Inc. | 4,832,000 | 2,125,865 | |||||||||||||||||
50,000 | 50,000 | Vornado Realty Trust | 4,020,000 | 3,806,500 | |||||||||||||||||
175,231 | — | Windrose Medical Properties | 2,458,491 | — | |||||||||||||||||
TOTAL REAL ESTATE INVESTMENT TRUSTS | |||||||||||||||||||||
(Cost $329,792,063 and $284,166,107) | 366,660,642 | 327,785,808 | |||||||||||||||||||
COMMERCIAL MORTGAGE BACKED SECURITIES—0.40% and 0.54% | |||||||||||||||||||||
Issuer, Current Rate and Maturity Date | |||||||||||||||||||||
$ 9,953,327 | $10,000,000 | Bear Stearns CMS | |||||||||||||||||||
3.436% 05/14/16 | 9,958,304 | 10,006,950 | |||||||||||||||||||
6,703,589 | 10,000,000 | COMM 2004 HTL1 A1 | |||||||||||||||||||
3.460% 07/15/16 | 6,708,885 | 10,013,820 | |||||||||||||||||||
10,000,000 | 10,000,000 | GSMS 2001—Rock A2FL | |||||||||||||||||||
3.700% 05/03/18 | 10,087,950 | 10,070,610 | |||||||||||||||||||
10,000,000 | 10,000,000 | MSDWC 2001—280 A2F | |||||||||||||||||||
3.730% 02/03/16 | 9,923,270 | 9,915,150 | |||||||||||||||||||
1,940,947 | 1,940,947 | Trize 2001—TZHA A3FL | |||||||||||||||||||
3.590% 03/15/13 | 1,950,092 | 1,951,830 | |||||||||||||||||||
TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES | |||||||||||||||||||||
(Cost $38,600,548 and $41,943,872) | 38,628,501 | 41,958,360 | |||||||||||||||||||
TOTAL REAL ESTATE RELATED | |||||||||||||||||||||
(Cost $368,392,611 and $326,109,979) | 405,289,143 | 369,744,168 | |||||||||||||||||||
OTHER—19.03% and 8.75% | |||||||||||||||||||||
COMMERCIAL PAPER—9.62% and 4.51% | |||||||||||||||||||||
25,000,000 | — | Abbey National North America LLC | |||||||||||||||||||
3.100% 07/18/05. | 24,997,500 | — | |||||||||||||||||||
20,000,000 | — | ABN AMRO North America Finance, Inc. | |||||||||||||||||||
3.320% 08/29/05. | 19,882,000 | — | |||||||||||||||||||
15,200,000 | — | Air Products & Chemicals, Inc. | |||||||||||||||||||
3.210% 07/05/05. | 15,194,376 | — | |||||||||||||||||||
24,900,000 | — | American Express Centurion Bank | |||||||||||||||||||
3.290% 08/01/05. | 24,900,221 | — | |||||||||||||||||||
9,000,000 | 25,000,000 | American Honda Finance, Corp. | |||||||||||||||||||
3.040% 07/07/05. | 8,995,050 | 24,981,667 | |||||||||||||||||||
15,000,000 | — | American Honda Finance, Corp. | |||||||||||||||||||
3.220% 08/09/05. | 14,946,300 | — |
See notes to financial statements
18
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
Issuer, Current Rate and Maturity Date | |||||||||||||||
$ 1,800,000 | $ — | Barclay’s U.S. Funding Corp. | |||||||||||||
3.330% 09/06/05. | $ 1,788,840 | $ — | |||||||||||||
435,000 | — | Barclay’s U.S. Funding Corp. | |||||||||||||
3.230% 08/24/05. | 432,842 | — | |||||||||||||
15,000,000 | — | Becton Dickinson & Co. | |||||||||||||
3.290% 08/26/05. | 14,922,000 | — | |||||||||||||
— | 10,000,000 | Beta Finance, Inc. | |||||||||||||
2.770% 05/19/05. | — | 9,991,445 | |||||||||||||
— | 15,000,000 | Beta Finance, Inc. | |||||||||||||
2.980% 06/20/05. | — | 14,980,050 | |||||||||||||
17,890,000 | 18,100,000 | BMW US Capital Corp. | |||||||||||||
3.350% 07/01/05. | 17,890,000 | 18,077,073 | |||||||||||||
12,360,000 | — | Canadian Imperial Bank of Commerce | |||||||||||||
3.080% 07/15/05. | 12,344,179 | — | |||||||||||||
25,000,000 | — | Catepillar Inc. | |||||||||||||
3.180% 07/08/05. | 24,984,000 | — | |||||||||||||
19,000,000 | 13,000,000 | CC (USA), Inc. | |||||||||||||
3.050% 07/20/05. | 18,966,750 | 12,988,878 | |||||||||||||
1,330,000 | — | CC (USA), Inc. | |||||||||||||
3.240% 08/19/05. | 1,323,962 | — | |||||||||||||
9,000,000 | 3,100,000 | Ciesco LP | |||||||||||||
3.080% 07/18/05 | 8,985,870 | 3,097,537 | |||||||||||||
16,000,000 | — | Ciesco LP | |||||||||||||
3.310% 09/12/05 | 15,889,440 | — | |||||||||||||
25,000,000 | — | Citigroup Funding Inc. | |||||||||||||
3.070% 07/25/05 | 24,945,750 | — | |||||||||||||
14,000,000 | — | Coca Cola Co | |||||||||||||
2.980% 07/01/05 | 14,000,000 | — | |||||||||||||
6,400,000 | 25,000,000 | Corporate Asset Funding Corp, Inc. | |||||||||||||
3.100% 07/20/05. | 6,388,800 | 24,949,625 | |||||||||||||
10,000,000 | — | Corporate Asset Funding Corp, Inc. | |||||||||||||
3.270% 09/08/05 | 9,934,900 | — | |||||||||||||
8,440,000 | — | Corporate Asset Funding Corp, Inc. | |||||||||||||
3.330% 08/23/05 | 8,409,616 | — | |||||||||||||
20,000,000 | — | Dexia Bank | |||||||||||||
3.010% 07/05/05. | 19,999,400 | — | |||||||||||||
5,000,000 | — | Dexia Bank | |||||||||||||
3.080% 07/19/05. | 4,999,450 | — | |||||||||||||
14,000,000 | — | Dorada Finance Inc. | |||||||||||||
3.060% 07/18/05. | 13,978,020 | — | |||||||||||||
11,000,000 | — | Dorada Finance Inc. | |||||||||||||
3.180% 08/16/05. | 10,953,250 | — | |||||||||||||
15,000,000 | — | FCAR Owner Trust I | |||||||||||||
3.250% 08/04/05. | 14,952,900 | — | |||||||||||||
— | 2,670,000 | Fortune Brands | |||||||||||||
2.850% 05/10/05 | — | 2,668,205 | |||||||||||||
12,000,000 | — | General Electric Capital Corp. | |||||||||||||
3.240% 08/18/05. | 11,947,320 | — | |||||||||||||
See notes to financial statements.
19
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
Issuer, Current Rate and Maturity Date | |||||||||||||||
$13,000,000 | $ — | General Electric Capital Corp. | |||||||||||||
3.530% 12/19/05. | $ 12,780,170 | $ — | |||||||||||||
15,000,000 | 15,000,000 | Govco Incorporated | |||||||||||||
3.055% 07/19/05. | 14,975,100 | 14,990,833 | |||||||||||||
1,335,000 | 10,000,000 | Govco Incorporated | |||||||||||||
3.530% 12/15/05. | 1,312,759 | 9,986,700 | |||||||||||||
8,500,000 | — | Govco Incorporated | |||||||||||||
3.360% 09/16/05. | 8,437,950 | — | |||||||||||||
25,000,000 | — | Grampian Funding LLC | |||||||||||||
3.330% 09/19/05. | 24,809,500 | — | |||||||||||||
10,000,000 | 25,000,000 | Greyhawk Funding LLC | |||||||||||||
3.220% 08/17/05 | 9,956,400 | 24,948,000 | |||||||||||||
15,000,000 | — | Greyhawk Funding LLC | |||||||||||||
3.220% 08/22/05 | 14,927,250 | — | |||||||||||||
— | 10,750,000 | Harley—Davidson Funding Corp. | |||||||||||||
2.230% 02/14/05 | — | 10,718,556 | |||||||||||||
10,000,000 | — | Harrier Finance Funding (US) LLC | |||||||||||||
3.240% 09/26/05. | 9,917,000 | — | |||||||||||||
2,500,000 | — | Harrier Finance Funding (US) LLC | |||||||||||||
3.330% 09/12/05. | 2,482,725 | — | |||||||||||||
12,000,000 | — | Harrier Finance Funding (US) LLC | |||||||||||||
3.080% 07/15/05. | 11,984,520 | — | |||||||||||||
10,500,000 | — | HBOS Treasury Srvcs Plc | |||||||||||||
3.220% 08/10/05. | 10,461,675 | — | |||||||||||||
11,450,000 | — | IBM Capital Inc | |||||||||||||
3.010% 07/13/05. | 11,437,405 | — | |||||||||||||
13,326,000 | 15,000,000 | Kitty Hawk Funding Corp | |||||||||||||
3.080% 07/11/05. | 13,313,740 | 14,975,300 | |||||||||||||
— | 9,565,000 | Kitty Hawk Funding Corp | |||||||||||||
2.740% 04/12/05. | — | 9,550,461 | |||||||||||||
15,000,000 | — | Links Finance L.L.C. | |||||||||||||
3.170% 08/11/05. | 14,943,300 | — | |||||||||||||
10,000,000 | — | Links Finance L.L.C. | |||||||||||||
3.150% 08/08/05. | 9,965,000 | — | |||||||||||||
19,910,000 | 10,000,000 | Paccar Financial Corp. | |||||||||||||
3.270% 08/15/05. | 19,827,971 | 9,984,800 | |||||||||||||
10,000,000 | — | PNC Bank, NA | |||||||||||||
3.610% 12/30/05. | 10,000,900 | — | |||||||||||||
25,000,000 | — | Preferred Receivables Funding Corp. | |||||||||||||
3.210% 08/15/05 | 24,895,250 | — | |||||||||||||
5,560,000 | 10,000,000 | Private Export Funding Corporation | |||||||||||||
3.060% 07/29/05. | 5,545,878 | 9,992,667 | |||||||||||||
19,000,000 | — | Private Export Funding Corporation | |||||||||||||
3.170% 08/29/05. | 18,896,640 | — | |||||||||||||
9,000,000 | — | Proctor & Gamble | |||||||||||||
3.210% 08/31/05 | 8,949,330 | — | |||||||||||||
16,000,000 | — | Proctor & Gamble | |||||||||||||
3.240% 08/03/05 | 15,952,160 | — | |||||||||||||
See notes to financial statements.
20
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
Issuer, Current Rate and Maturity Date | |||||||||||||||||
$13,000,000 | $25,000,000 | Rabobank USA Financial Corp. | |||||||||||||||
3.250% 08/08/05 | $ 12,955,020 | $ 24,946,375 | |||||||||||||||
11,245,000 | — | Rabobank USA Financial Corp. | |||||||||||||||
3.135% 08/10/05 | 11,203,956 | — | |||||||||||||||
5,784,000 | — | Ranger Funding Company LLC | |||||||||||||||
3.015% 07/05/05 | 5,781,860 | — | |||||||||||||||
19,000,000 | — | Ranger Funding Company LLC | |||||||||||||||
3.260% 07/07/05 | 18,989,550 | — | |||||||||||||||
25,000,000 | 23,135,000 | Royal Bank of Canada | |||||||||||||||
3.220% 08/25/05 | 24,996,500 | 23,108,626 | |||||||||||||||
25,000,000 | 16,430,000 | Royal Bank of Scotland PLC | |||||||||||||||
3.280% 09/01/05 | 24,857,000 | 16,393,690 | |||||||||||||||
14,000,000 | — | Scaldis Capital LLC | |||||||||||||||
3.240% 08/30/05 | 13,920,760 | — | |||||||||||||||
18,600,000 | — | Shell Finance (U.K.) PLC | |||||||||||||||
3.030% 07/01/05. | 18,600,000 | — | |||||||||||||||
6,000,000 | — | Shell Finance (U.K.) PLC | |||||||||||||||
3.190% 08/12/05. | 5,977,020 | — | |||||||||||||||
— | 2,000,000 | Sherwin-Williams Co. | |||||||||||||||
2.240% 01/20/05 | — | 1,997,467 | |||||||||||||||
19,242,000 | 15,000,000 | Sigma Finance Inc. | |||||||||||||||
3.120% 07/28/05 | 19,194,087 | 14,965,875 | |||||||||||||||
5,000,000 | — | Sigma Finance Inc. | |||||||||||||||
3.370% 08/30/05 | 4,971,800 | — | |||||||||||||||
25,000,000 | — | Societe Generale North America, Inc. | |||||||||||||||
3.270% 08/22/05 | 24,880,750 | — | |||||||||||||||
20,000,000 | 25,000,000 | Toronto Dominion Bank | |||||||||||||||
3.160% 09/14/05 | 19,989,000 | 24,977,213 | |||||||||||||||
25,000,000 | 25,000,000 | UBS Finance, (Delaware) Inc. | |||||||||||||||
3.180% 09/06/05. | 24,845,000 | 24,990,500 | |||||||||||||||
18,000,000 | — | Wal-Mart Stores | |||||||||||||||
3.240% 08/05/05. | 17,942,760 | — | |||||||||||||||
6,428,000 | — | Wal-Mart Stores | |||||||||||||||
3.050% 07/06/05. | 6,425,107 | — | |||||||||||||||
3,075,000 | — | Yorktown Capital, LLC | |||||||||||||||
3.330% 11/10/05. | 3,035,517 | — | |||||||||||||||
12,966,000 | — | Yorktown Capital, LLC | |||||||||||||||
3.360% 09/19/05. | 12,867,458 | — | |||||||||||||||
9,000,000 | — | Yorktown Capital, LLC | |||||||||||||||
3.410% 09/26/05. | 8,925,300 | — | |||||||||||||||
TOTAL COMMERCIAL PAPER | |||||||||||||||||
(Cost $923,300,629 and $348,329,276) | 923,083,805 | 348,261,543 | |||||||||||||||
GOVERNMENT AGENCY BONDS—9.41% and 4.24% | |||||||||||||||||
— | 9,380,000 | Federal Farm Credit Banks | |||||||||||||||
1.780% 03/15/05 | — | 9,334,882 | |||||||||||||||
— | 8,603,000 | Federal Farm Credit Banks | |||||||||||||||
1.220% 01/07/05 | — | 8,599,403 |
See notes to financial statements.
21
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
Issuer, Current Rate and Maturity Date | |||||||||||||||
$ 5,717,000 | $ 7,860,000 | Federal Home Loan Banks | |||||||||||||
3.150% 07/29/05 | $ 5,702,822 | $ 7,798,928 | |||||||||||||
3,865,000 | 18,000,000 | Federal Home Loan Banks | |||||||||||||
2.940% 08/24/05 | 3,846,100 | 17,992,475 | |||||||||||||
33,520,000 | 22,825,000 | Federal Home Loan Banks | |||||||||||||
3.380% 10/12/05 | 33,195,862 | 22,795,841 | |||||||||||||
25,000,000 | 20,700,000 | Federal Home Loan Banks | |||||||||||||
3.380% 10/11/05 | 24,760,500 | 20,636,761 | |||||||||||||
13,590,000 | 11,245,000 | Federal Home Loan Banks | |||||||||||||
3.230% 09/02/05 | 13,510,091 | 11,227,214 | |||||||||||||
73,590,000 | 8,510,000 | Federal Home Loan Banks | |||||||||||||
2.950% 07/01/05 | 73,590,000 | 8,471,280 | |||||||||||||
8,044,000 | — | Federal Home Loan Banks | |||||||||||||
3.160% 08/12/05 | 8,013,433 | — | |||||||||||||
25,000,000 | — | Federal Home Loan Banks | |||||||||||||
3.010% 07/15/05 | 24,969,000 | — | |||||||||||||
16,500,000 | — | Federal Home Loan Banks | |||||||||||||
3.040% 07/22/05 | 16,469,310 | — | |||||||||||||
41,900,000 | — | Federal Home Loan Banks | |||||||||||||
3.045% 07/20/05 | 41,829,608 | — | |||||||||||||
25,000,000 | — | Federal Home Loan Banks | |||||||||||||
3.150% 07/07/05 | 24,986,750 | — | |||||||||||||
27,659,000 | 20,000,000 | Federal Home Loan Mortgage Corp. | |||||||||||||
3.090% 07/12/05 | 27,631,894 | 19,995,222 | |||||||||||||
21,600,000 | 15,000,000 | Federal Home Loan Mortgage Corp. | |||||||||||||
2.980% 07/19/05 | 21,565,440 | 14,993,546 | |||||||||||||
35,000,000 | 15,540,000 | Federal Home Loan Mortgage Corp. | |||||||||||||
3.455%12/13/05 | 34,440,000 | 15,516,366 | |||||||||||||
25,000,000 | — | Federal Home Loan Mortgage Corp. | |||||||||||||
3.180% 08/02/05 | 24,927,500 | — | |||||||||||||
25,000,000 | — | Federal Home Loan Mortgage Corp. | |||||||||||||
2.970% 07/11/05 | 24,977,750 | — | |||||||||||||
15,920,000 | — | Federal Home Loan Mortgage Corp. | |||||||||||||
3.180% 08/01/05 | 15,875,265 | — | |||||||||||||
50,000,000 | — | Federal Home Loan Mortgage Corp | |||||||||||||
3.430% 12/05/05 | 49,239,000 | — | |||||||||||||
1,100,000 | — | Federal Home Loan Mortgage Corp. | |||||||||||||
3.470% 12/27/05 | 1,080,915 | — | |||||||||||||
50,000,000 | — | Federal Home Loan Mortgage Corp | |||||||||||||
3.260% 09/13/05 | 49,654,500 | — | |||||||||||||
14,065,000 | — | Federal Home Loan Mortgage Corp. | |||||||||||||
3.310% 09/20/05 | 13,958,669 | — | |||||||||||||
18,085,000 | — | Federal Home Loan Mortgage Corp. | |||||||||||||
3.250% 08/30/05 | 17,986,798 | — | |||||||||||||
16,025,000 | — | Federal Home Loan Mortgage Corp. | |||||||||||||
2.950% 07/08/05 | 16,015,064 | — | |||||||||||||
25,000,000 | — | Federal Home Loan Mortgage Corp. | |||||||||||||
2.970% 07/14/05 | 24,971,250 | — |
See notes to financial statements.
22
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2005
Issuer, Current Rate and Maturity Date | ||||||||||||||||||||||||||
$34,000,000 | $ — | Federal Home Loan Mortgage Corp. | ||||||||||||||||||||||||
3.010% 07/21/05 | $ 33,939,820 | $ — | ||||||||||||||||||||||||
25,000,000 | — | Federal Home Loan Mortgage Corp. | ||||||||||||||||||||||||
2.990% 07/13/05 | 24,973,500 | — | ||||||||||||||||||||||||
24,533,000 | — | Federal Home Loan Mortgage Corp. | ||||||||||||||||||||||||
3.205% 07/26/05 | 24,478,537 | — | ||||||||||||||||||||||||
18,800,000 | — | Federal Home Loan Mortgage Corp. | ||||||||||||||||||||||||
3.120% 08/16/05 | 18,721,604 | — | ||||||||||||||||||||||||
6,000,000 | — | Federal Home Loan Mortgage Corp. | ||||||||||||||||||||||||
3.480% 12/30/05 | 5,894,160 | — | ||||||||||||||||||||||||
18,545,000 | 22,280,000 | Federal National Mortgage Association | ||||||||||||||||||||||||
3.150% 07/13/05 | 18,525,342 | 22,094,408 | ||||||||||||||||||||||||
27,175,000 | 50,000,000 | Federal National Mortgage Association | ||||||||||||||||||||||||
3.100% 09/07/05 | 27,002,439 | 49,942,208 | ||||||||||||||||||||||||
17,475,000 | 25,000,000 | Federal National Mortgage Association | ||||||||||||||||||||||||
3.220% 08/24/05 | 17,389,547 | 24,980,590 | ||||||||||||||||||||||||
3,460,000 | 31,925,000 | Federal National Mortgage Association | ||||||||||||||||||||||||
3.340% 11/23/05 | 3,412,321 | 31,919,281 | ||||||||||||||||||||||||
31,742,000 | 32,184,000 | Federal National Mortgage Association | ||||||||||||||||||||||||
3.330% 09/21/05 | 31,499,174 | 32,174,390 | ||||||||||||||||||||||||
18,777,000 | 9,270,000 | Federal National Mortgage Association | ||||||||||||||||||||||||
3.270% 08/31/05 | 18,673,351 | 9,255,335 | ||||||||||||||||||||||||
1,630,000 | — | Federal National Mortgage Association | ||||||||||||||||||||||||
3.090% 08/03/05 | 1,625,126 | — | ||||||||||||||||||||||||
47,280,000 | — | Federal National Mortgage Association | ||||||||||||||||||||||||
3.060% 07/27/05 | 47,171,256 | — | ||||||||||||||||||||||||
10,000,000 | — | Federal National Mortgage Association | ||||||||||||||||||||||||
3.295% 09/14/05 | 9,930,000 | — | ||||||||||||||||||||||||
25,580,000 | — | Federal National Mortgage Association | ||||||||||||||||||||||||
3.230% 07/06/05 | 25,568,745 | — | ||||||||||||||||||||||||
TOTAL GOVERNMENT AGENCY BONDS | ||||||||||||||||||||||||||
(Cost $902,098,933 and $327,794,989) | 902,002,443 | 327,728,130 | ||||||||||||||||||||||||
TOTAL OTHER | ||||||||||||||||||||||||||
(Cost $1,825,399,562 and $676,124,265) | 1,825,086,248 | 675,989,673 | ||||||||||||||||||||||||
TOTAL MARKETABLE SECURITIES | ||||||||||||||||||||||||||
(Cost $2,193,792,173 and $1,002,234,244) | 2,230,375,391 | 1,045,733,841 | ||||||||||||||||||||||||
TOTAL INVESTMENTS—100.00% | ||||||||||||||||||||||||||
(Cost $9,014,404,377 and $7,403,520,074) | $9,590,547,717 | $7,725,918,490 | ||||||||||||||||||||||||
(1) | The property has a mortgage note payable outstanding, as indicated in Note 5. | ||
(2) | Leasehold interest only. | ||
(3) | Located throughout the U.S. | ||
(4) | The market value reflects the Account’s interest in the joint venture, net of any debt. |
See notes to financial statements
23
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF ACCOUNT’S FINANCIAL CONDITION AND OPERATING RESULTS.
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and notes contained in this report.
As of June 30, 2005, the TIAA Real Estate Account owned a total of 104 real estate properties, representing 76.31% of the Account’s total investment portfolio (11 of which were held in joint ventures). This real estate portfolio included 43 office properties (six of which are held in joint ventures), 30 industrial properties (including one joint venture), 21 apartment complexes, 9 retail properties (including three held in joint ventures), and a 75% joint venture partnership interest in a portfolio of storage facilities.
During the second quarter of 2005, the Account closed ten transactions. The Account purchased six properties: three office properties including one subject to debt for an approximate total of $425 million, two industrial properties for an approximate total amount of $41 million, and one retail property for approximately $15 million. In addition to the six purchases, the Account entered into one commitment to purchase a limited partnership interest in an existing real estate fund in the amount of $25 million and one commitment to purchase shares of a private real estate investment trust in the amount of $30 million (of which approximately $4.5 million has been funded subsequent to June 30, 2005). As part of its business plan, the Account also sold two office properties (one of which is subject to leverage) for approximately $119 million. Subsequent to June 30, 2005, there has been seven additional transactions: the purchase of two office and two multi-family properties for an approximate total of $343 million (including assumed debt of $26.4 million on one of the properties) and the sale of two multi-family properties and one office property for an approximate total of $57 million.
The Account’s real estate portfolio is diversified by location and property type and no single property represents more than approximately 5.01% of its Total Investments, or 6.6% of its Total Real Estate Investments as stated in the attached statement of investments. The following charts reflect the diversification of the Account’s real estate assets. All information is based on the value of each property as stated in the Account’s financial statements as of June 30, 2005.
Office (43) | 26.9% | 4.5% | 11.0% | 18.8% | 0.0% | 61.2% | |||||||
Industrial (30) | 3.0% | 2.2% | 3.9% | 8.3% | 0.9% | 18.3% | |||||||
Apartment (21) | 3.7% | 0.4% | 2.9% | 4.7% | 0.0% | 11.7% | |||||||
Retail (9) | 1.1% | 0.2% | 5.1% | 1.6% | 0.0% | 8.0% | |||||||
Other (1) ** | 0.0% | 0.0% | 0.0% | 0.0% | 0.8% | 0.8% | |||||||
TOTAL | 34.7% | 7.3% | 22.9% | 33.4% | 1.7% | 100.00% | |||||||
( ) Number of properties in parentheses.
* Represents a portfolio of storage facilities and a portfolio of industrial properties located in various regions across the U.S.
** Represents a portfolio of storage facilities located in various regions across the U.S.
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Top Ten Real Estate Holdings
% of | |||||||||||||
Value(1) | Real Estate | % of Total | |||||||||||
Property Name | State | Property Type | (000,000) | Investments | Investments | ||||||||
1001 Pennsylvania Avenue | Washington, D.C. | Office | $480.5(2) | 6.57% | 5.01% | ||||||||
IDX Tower | WA | Office | $353.0(3) | 4.82% | 3.68% | ||||||||
50 Fremont | CA | Office | $326.6(4) | 4.46% | 3.41% | ||||||||
99 High Street | MA | Office | $273.2(5) | 3.73% | 2.85% | ||||||||
Four Oaks Place | TX | Office | $268.3 | 3.67% | 2.80% | ||||||||
Yahoo! Center (50% interest) | CA | Office | $244.2 | 3.34% | 2.55% | ||||||||
1900 K Street | Washington, D.C. | Office | $220.0 | 3.01% | 2.29% | ||||||||
780 Third Avenue | NY | Office | $215.0 | 2.94% | 2.24% | ||||||||
Ontario Industrial Portfolio | CA | Industrial | $197.2(6) | 2.69% | 2.06% | ||||||||
701 Brickell | FL | Office | $184.5 | 2.52% | 1.92% | ||||||||
(1) Value as reported in the 06/30/05 Statement of Investments. Investments owned 100% are reported based on market value. Investments in joint ventures are reported based on the equity method of accounting.
(2) This property has a mortgage note payable outstanding. The value of the Account’s interest, net of the mortgage note payable, is $270.5 million, representing 3.70% of the Total Real Estate Investments and 2.82% of Total Investments.
(3) This property has a mortgage note payable outstanding. The value of the Account’s interest, net of the mortgage note payable, is $208.0 million, representing 2.84% of the Total Real Estate Investments and 2.17% of Total Investments.
(4) This property has a mortgage note payable outstanding. The value of the Account’s interest, net of the mortgage note payable, is $191.6 million, representing 2.62% of the Total Real Estate Investments and 2.00% of Total Investments.
(5) This property has a mortgage note payable outstanding. The value of the Account’s interest, net of the mortgage note payable, is $88.2 million, representing 1.21% of the Total Real Estate Investments and 0.92% of Total Investments.
(6) This property has a mortgage note payable outstanding. The value of the Account’s interest, net of the mortgage note payable, is $187.8 million, representing 2.57% of the Total Real Estate Investments and 1.96% of Total Investments.
As of June 30, 2005, the Account also held investments in real estate limited partnerships representing 0.43% of the Total Investments, real estate equity securities, representing 3.83% of the Total Investments, commercial mortgage backed securities (CMBS), representing 0.40% of the Total Investments, commercial paper representing 9.62% of the Total Investments, and government agency bonds, representing 9.41% of the Total Investments.
Real Estate Market Outlook in General
In his June 2005 testimony to the Joint Economic Committee, U.S. Congress, Alan Greenspan noted that the pace of economic activity had been uneven in recent months, but “…the most recent data support the view that the soft readings on the economy observed in early spring were not presaging a more serious slowdown.” His opinion was borne out by The Bureau of Labor Statistics (BLS), which subsequently reported that payroll employment rose by 146,000 in June. In addition, the gains in May were revised upward to 104,000 versus 78,000 initially. The growth has been broadly based as The Federal Reserve’s June 2005 Beige Book reported that business activity continued to expand in all twelve Federal Reserve Districts from mid-April through May.
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On balance, economic and property market fundamentals appear promising. Employment growth, which is historically correlated with demand for all commercial property types and apartments has been solid. This was reflected by ongoing improvement in office and industrial market conditions. Torto Wheaton Research, a widely used source of office and industrial market data, reported that office market vacancies averaged 14.6% as of the end of the second quarter of 2005 and have now declined for eight consecutive quarters. Similarly, industrial market vacancies averaged 10.5% as of the end of second quarter 2005, and have declined for four consecutive quarters. In the June 2005 “Beige Book”, ten of the twelve Federal Reserve Districts cited positive factors in commercial real estate markets such as healthy leasing activity, firming of rents, and companies moving ahead with expansion plans.
Apartment market conditions also improved. Reis, Inc., a widely used source of apartment market data, reported that vacancy rates in the top 67 metropolitan areas in the United States fell to 6.4% as of the second quarter of 2005 compared with 6.6% as of the first quarter of 2005. While gains in occupancy were due in part to developers’ conversions of apartments into condominiums, which has reduced the supply of rental units, local job growth also spurred rental demand. Average rents also increased slightly during the period.
Nationally, the retail sales moderated during the first quarter of 2005 with the more modest growth largely attributable to the effects of higher energy prices. Reis, Inc. reported that vacancies in shopping malls averaged 5.3% as of the end of the first quarter of 2005, which is the lowest level in three and one-half years. Vacancies in neighborhood and community centers were 6.9% in the first quarter of 2005 compared with 6.8% in the fourth quarter of 2004. (Data for the second quarter of 2005 are not yet available.)
Looking ahead, supply/demand conditions appear favorable. Office construction nationally is expected to total roughly 40 million square feet in 2005 versus an annual average of 90 million square feet during the 1999-2001 period cyclical peak. Similarly, warehouse construction is expected to total roughly 90 million square feet in 2005, compared with a cyclical high of 150 million square feet per year during the same period. Multi-family construction has not slowed significantly; however, a growing number of these units are being built for sale rather than rent. (Comparable data on retail construction are not available.) Ongoing growth in employment coupled with moderate construction bode well for commercial real estate markets.
Results of Operations
Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
Performance
For the six months ended June 30, 2005, the Account’s total net return was 5.97%. This was 175 basis points higher than the return of 4.22% for the six months ending June 30, 2004. The Account’s strong performance in the 2005 period was primarily due to substantial capital appreciation on the Account’s real estate assets, including joint ven-
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tures. The total net assets grew 57% from June 30, 2004 to June 30, 2005. This increase in total net assets was due to a 61% increase in real estate assets, including joint venture interests, as well as a 58% increase in short term assets over the same time period.
At the end of the second quarter of 2005, the Account had a 119% net increase in net assets resulting from operations, $476,417,899 as of the end of the second quarter 2005, as compared to $217,956,328 as of the end of the second quarter 2004. The primary reason for this was a net increase in real estate income as a result of real estate acquisitions over the period, as well as a 197% increase in net realized and unrealized gain on investments during the period.
Income and Expenses
The Account’s net investment income, after deduction of all expenses, increased by 57% for the six months ended June 30, 2005 compared to the same period in 2004. This was due to the increase in total net assets.
The Account’s real estate holdings including real estate joint ventures and limited partnerships generated approximately 86% of the Account’s total investment income (before deducting Account level expenses) during the six months ended June 30, 2005, as compared to 90% for the six-month period ended June 30, 2004. The remaining portion of the Account’s total investment income was generated by investments in marketable securities.
Gross real estate rental income increased 56% in the six months ended June 30, 2005 compared with the same period in 2004. The increase in real estate income for the six months ended June 30, 2005 was due primarily to the increase in the number of properties owned by the Account. Income from real estate joint ventures and limited partnerships in the six months ended June 30, 2005 compared with the same period in 2004 was $31,531,447 as compared to $14,157,562. This 123% increase reflects the purchase of additional joint venture interests during the second half of 2004. Interest income on the Account’s marketable securities investments for the six months ended June 30, 2005 and 2004 totaled $17,126,514 and $4,856,242, respectively. This increase was due to an increase in the amount of non-real estate assets held by the Account. Dividend income on the Account’s investments in real estate equity securities increased to $12,290,791 from $9,595,439 for the six months ended June 30, 2005 and June 30, 2004, respectively.
Total property level expenses for the six months ended June 30, 2005 and 2004 were $130,142,363 and $73,501,102, respectively. The 77% increase in property level expenses during the six months ended June 30, 2005 is a result of the increased number of properties held in the Account, and the interest expense incurred in 2005 of $17,497,914 for mortgages on several of its real estate holdings. Without the interest expense, the increase would be 53% on a year to year basis, which is a direct reflection of the increase in real estate assets as well as customary market driven increases in property level expenses.
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The Account also incurred expenses for the six months ended June 30, 2005 and 2004 of $8,327,349 and $5,903,085, respectively, for investment advisory services, $11,927,701 and $7,213,819 respectively, for administrative and distribution services and $4,157,670 and $2,612,048, respectively, for the mortality, expense risk and liquidity guarantee charges. The aggregate 55% increase in these expenses is a result of the larger net asset base of the Account and the increased costs associated with managing the Account.
Net Realized and Unrealized Gains and Losses on Investments
The Account had net realized and unrealized gains of $284,311,632 and $95,674,276 for the six months ended June 30, 2005 and 2004, respectively. The difference is primarily due to the substantial increase in net realized and unrealized gains of $210,638,424 compared to $3,819,607 on its real estate investments for the six months ended June 30, 2005 and 2004, respectively. The increase in net realized and unrealized gain for the real estate is due to the capital appreciation of real estate assets resulting from continued inflow of capital into the real estate market from institutional and other investors, which has had the effect of increasing the value of real estate investments. The Account had unrealized gains on its real estate joint venture and limited partnership holdings of $60,525,182 for the six months ended June 30, 2005, as compared to unrealized gains of $82,328,998 for the same period in 2004. The differential in unrealized gains on the Account’s joint venture and limited partnership holdings is due in part to a moderation in the unrealized gains posted on the three regional malls in which the Account has an interest. In addition, during the six months ended June 30, 2005, the Account sold its interest in a joint venture, which produced a realized gain of $9.3 million.
During the six months ended June 30, 2005, the Account sold three properties for total net proceeds of approximately $122 million for a cumulative net gain of $20 million.
Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
Performance
For the three months ended June 30, 2005, the Account’s total net return was 4.38%. This was 221 basis points higher than the return of 2.17% for the three months ending June 30, 2004. The returns were significantly higher as compared to the same period in 2004 primarily due to the strong performance of the Account’s real estate and real estate related assets.
Income and Expenses
The Account’s net investment income, after deduction of all expenses, increased by 60% for the three months ended June 30, 2005 compared to the same period in 2004. This increase was due to a 61% increase in the Account’s real estate holdings, including joint ventures. As of June 30, 2004, the Account owned 90 real estate properties representing 75.09% of total net assets as compared to 104 properties representing 76.31% of total net assets at the end of the same period 2005.
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The Account’s real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 83% of the Account’s total investment income (before deducting Account level expenses) during the three months ended June 30, 2005, as compared to 87% for the three-month period ended June 30, 2004. The remaining portion of the Account’s total investment income was generated by investments in marketable securities.
Gross real estate rental income increased 57% in the three months ended June 30, 2005, compared with the same period in 2004. The higher real estate income for the three months ended June 30, 2005 was due primarily to the increase in the number of properties owned by the Account. Income from real estate joint ventures and limited partnerships increased by 273%, primarily due to the purchase of additional joint venture interest as of June 30, 2005 as compared to same period 2004. Interest income on the Account’s marketable securities investments for the three months ended June 30, 2005 and 2004 totaled $11,251,893 and $3,083,439, respectively. This increase was due to an increase in the amount of non-real estate assets held by the Account. Dividend income on the Account’s investments in real estate equity securities increased to $7,547,397 from $5,641,403 for the three months ended June 30, 2005 and June 30, 2004, respectively.
Total property level expenses for the three months ended June 30, 2005 and 2004 were $68,392,772 and $36,204,064, respectively. The 89% increase in property level expenses during the three months ended June 30, 2005 reflected the increased number of properties held in the Account. In addition, during the three months ended June 30, 2005 the Account incurred interest expense of $9,482,304 for mortgages on five of its real estate holdings.
The Account also incurred expenses for the three months ended June 30, 2005 and 2004 of $4,312,907 and $2,748,599, respectively, for investment advisory services, $5,970,843 and $3,186,726 respectively, for administrative and distribution services and $2,280,792 and $1,373,388, respectively, for the mortality, expense risk and liquidity guarantee charges. The 72% increase in these expenses is a result of the larger net asset base of the Account and the increased costs associated with managing the Account.
Net Realized and Unrealized Gains and Losses on Investments
The Account had net realized and unrealized gains of $263,101,053 and $56,479,369 for the three months ended June 30, 2005 and 2004, respectively. The increase in net realized and unrealized gains was due to substantial net realized and unrealized gains during the period ended June 30, 2005 as compared to same period 2004 on the Account’s real estate of $182,462,002 and $17,403,253, respectfully. The increase in net realized and unrealized gain for the real estate is due to the capital appreciation of real estate assets resulting from the continued inflow of capital into the real estate market from institutional and other investors, which has had the effect of increasing the value of real estate investments. The Account had unrealized gains on its real estate joint venture and limited partnership holdings of $41,014,573 for the three months ended June 30, 2005, as compared to unrealized gains of $55,035,138 for the same period in 2004. The Account’s marketable securities also posted net realized and
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unrealized gains of $39,624,478 as of the three months ended June 30, 2005 as compared to net realized and unrealized losses of $16,033,436 for the three months ended June 30, 2004.
During the three months ended June 30, 2005, the Account sold two properties for $120 million.
Liquidity and Capital Resources
At June 30, 2005 and 2004, the Account’s liquid assets (i.e., its real estate equity securities, CMBSs, commercial paper, government securities and cash) had a value of $2,230,375,391 and $1,463,977,860, respectively. The increase in the Account’s liquid assets is primarily due to net positive inflow of transfers and premiums into the Account.
During the six months ended June 30, 2005, the Account received $471,857,748 in premiums and $850,799,256 in net participant transfers from TIAA, the CREF Accounts and affiliated mutual funds, while for the same period in 2004, the Account received $337,227,547 in premiums and $433,368,683 in net participant transfers. The Account’s liquid assets, will continue to be available to purchase additional suitable real estate properties and to meet expense needs and redemption requests (i.e., cash withdrawals, benefits or transfers). In the unlikely event that the Account’s liquid assets and its cash flow from operating activities and participant transactions are not sufficient to meet its cash needs, including redemption requests, TIAA’s general account will purchase liquidity units in accordance with TIAA’s liquidity guarantee to the Account.
The Account, under certain conditions more fully described in the Account’s prospectus, may borrow money and assume or obtain a mortgage on a property — i.e., to make leveraged real estate investments. Note that the Account recently changed its borrowing policy to expand the circumstances under which it could borrow. Also, to meet any short-term cash needs, the Account may obtain a line of credit whose terms may require that the Account secure a loan with one or more of its properties. The Account’s total borrowings may not exceed 20% of the Account’s total net assets.
Effects of Inflation and Increasing Operating Expenses
Inflation, along with increased insurance and security costs, may increase property operating expenses in the future. We anticipate that these increases in operating expenses will generally be billed to tenants either through contractual lease provisions in office, industrial, and retail properties or through rent increases in apartment complexes. However, depending on how long any vacant space in a property remains unleased, the Account may not be able to recover the full amount of such increases in operating expenses.
Critical Accounting Policies
The financial statements of the Account are prepared in conformity with accounting principles generally accepted in the United States.
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In preparing the Account’s financial statements, management is required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances—the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Management believes that the following policies related to the valuation of the Account’s assets reflected in the Account’s financial statements affect the significant judgments, estimates and assumptions used in preparing its financial statements:
Valuation of Real Estate Properties: Investments in real estate properties are stated at fair value, as determined in accordance with procedures approved by the Investment Committee of the TIAA Board of Trustees. Fair value for real estate properties is defined as the most probable price for which a property will sell in a competitive market under all conditions requisite to a fair sale. Determination of fair value involves subjective judgment because the actual market value of real estate can be determined only by negotiation between the parties in a sales transaction. The Account’s properties are initially valued at their respective purchase prices (including acquisition costs). Subsequently, independent appraisers value each real estate property at least once a year. TIAA’s appraisal staff performs a valuation of each real estate property on a quarterly basis and updates the property value if it believes that the value of the property has changed since the previous valuation or appraisal. The appraisals are performed in accordance with Uniform Standards of Professional Appraisal Practices (USPAP), the real estate appraisal industry standards created by The Appraisal Foundation. Real estate appraisals are estimates of property values based on a professional’s opinion.
Valuation of Real Estate Joint Ventures: Real estate joint ventures are stated at the Account’s equity in the net assets of the underlying joint venture entities, which value their real estate holdings and mortgage notes payable at fair value.
Valuation of Marketable Securities: Equity securities listed or traded on any United States national securities exchange are valued at the last sale price as of the close of the principal securities exchange on which such securities are traded or, if there is no sale, at the mean of the last bid and asked prices on such exchange. Short-term money market instruments are stated at market value. Portfolio securities and limited partnership interests for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Investment Committee of the Board of Trustees and in accordance with the responsibilities of the Board as a whole.
Accounting for Investments: Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties close (settlement date). Rent from real estate properties consists of all amounts earned under tenant operating leases, including base rent, recoveries of real estate taxes and other expenses and charges for miscellaneous services provided to tenants. Rental income is recognized in accordance with the billing terms of the lease agreements. The Account
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bears the direct expenses of the real estate properties owned. These expenses include, but are not limited to, fees to local property management companies, property taxes, utilities, maintenance, repairs, insurance and other operating and administrative costs. An estimate of the net operating income earned from each real estate property is accrued by the Account on a daily basis and such estimates are adjusted as soon as actual operating results are determined.
Income from joint ventures is recorded based on the Account’s proportional interest in the income earned by the joint venture that has been distributed from the joint venture to the Account.
Securities transactions are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned and includes accrual of discount and amortization of premium. Dividend income is recorded on the ex-dividend date or as soon as the Account is informed of the dividend. Realized gains and losses on securities transactions are accounted for on the specific identification method.
Forward-Looking Statements
Some statements in this report which are not historical facts may be “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or management’s present expectations.
Caution should be taken not to place undue reliance on management’s forward-looking statements, which represent management’s views only as of the date this report is filed. Neither management nor the Account undertake any obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of June 30, 2005, 23% of the Account’s investments were in market risk sensitive instruments, comprised entirely of marketable securities. These include real estate equity securities, commercial mortgage backed securities (CMBSs), and high-quality short-term debt instruments (i.e., commercial paper and government agency bonds). The Statement of Investments for the Account sets forth the terms of these instruments, along with their fair value, as determined in accordance with procedures described in Note 1 to the Account’s financial statements. Note that the Account does not currently invest in derivative financial instruments.
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The Account’s investments in marketable securities are subject to the following general risks:
- financial risk — for debt securities, the possibility that the issuer won’t be able to pay principal and interest when due, and for common or preferred stock, the possibility that the issuer’s current earnings will fall or that its overall financial soundness will decline, reducing the security’s value.
- market risk — price volatility due to changing conditions in the financial markets and, particularly for debt securities, changes in overall interest rates.
- interest rate volatility, which may affect current income from an investment.
In addition, mortgage-backed securities are subject to prepayment risk (i.e., the risk that borrowers will repay the loans early). If the underlying mortgage assets experience greater than anticipated payments of principal, the Account could fail to recoup some or all of its initial investment in these securities. The market value of these securities is also highly sensitive to changes in interest rates. Note that the potential for appreciation, which could otherwise be expected to result from a decline in interest rates, may be limited by any increased prepayments.
In addition to these risks, REITs and 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. For more information on the risks associated with all of the Account’s investments, see the Account’s most recent prospectus.
Item 4. CONTROLS AND PROCEDURES.
(a) Evaluation of disclosure controls and procedures. The registrant maintains a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in the registrant’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the registrant’s Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and participation of the registrant’s management, including the registrant’s CEO and CFO, the registrant conducted an evaluation of the effectiveness of the registrant’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of June 30, 2005. Based upon management’s review, the CEO and the CFO concluded that the registrant’s disclosure controls and procedures were effective as of June 30, 2005, except as noted below.
The registrant had previously consolidated its investments in certain joint ventures prior to December 31, 2004, as a result of the registrant’s majority financial interest in, and shared control of, those joint ventures. Based on consultations with Ernst & Young LLP in connection with its audit of the registrant’s 2004 financial statements, it was determined that the investments in certain joint ventures that had previously been treated as
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consolidated subsidiaries in 2003 and 2002 should instead be treated as investments in unconsolidated joint ventures, despite the fact that the registrant owned a majority financial interest in the entities. Ernst & Young LLP audited both the registrant’s 2003 and 2002 consolidated financial statements. The registrant’s 2003 and 2002 financial statements were restated in the registrant’s 2004 Form 10-K, filed in April 2005, to show the treatment of these investments consistently with the 2004 treatment, which reflected the registrant’s equity in the net assets and operations of the underlying entities. The interim 2004 financial statements contained herein have been restated to conform to the 2004 treatment. This restatement did not affect the registrant’s total net assets, net asset value per accumulation unit, net increase in net assets resulting from operations nor the Account’s total return, as previously reported in the Account’s interim 2004 financial statements.
Ernst & Young LLP determined, in connection with its audit of the registrant’s 2004 financial statements, that pursuant to Public Company Accounting Oversight Board’s Auditing Standard No. 2, a restatement of the registrant’s previously issued financial statements indicated a material weakness, notwithstanding the fact that the adjustment had no net impact on net assets and operations. This determination was reported to the registrant’s Audit Committee.
Subsequent to the review of its disclosure controls, the registrant revised its controls related to the presentation of joint ventures. The CEO and the CFO have concluded that the disclosure controls and procedures that are now in place at the registrant are effective to ensure compliance with the Exchange Act.
Management believes that this matter has been adequately addressed by the corrective action summarized herein.
(b) Changes in internal controls over financial reporting. There have been no significant changes in the registrant’s internal controls over financial reporting that occurred during the registrant’s last fiscal quarter that materially affected, or are reasonably likely to materially affect, the registrant’s internal controls over financial reporting, except as noted in Item 4(a) above.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
There are no material current or pending legal proceedings that the Account is a party to, or to which the Account’s assets are subject.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not applicable.
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Item 5. OTHER INFORMATION.
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
(3) (A) Charter of TIAA (as amended)1
(B) Bylaws of TIAA (as amended)1
(4) (A) Forms of RA, GRA, GSRA, SRA, IRA Real Estate Account Endorsements3, Keogh Contract,4 Retirement Select and Retirement Select Plus Contracts and Endorsements2 and Retirement Choice and Retirement Choice Plus Contracts.4
(B) Forms of Income-Paying Contracts3
(10) (A) Independent Fiduciary Agreement by and among TIAA, the Registrant, and The Townsend Group5, as amended6
(B) Custodial Services Agreement by and between TIAA and Morgan Guaranty Trust Company of New York with respect to the Real Estate Account (Agreement assigned to Bank of New York, January 1996) 3
(C) Distribution and Administrative Services Agreement by and between TIAA and TIAA-CREF Individual & Institutional Services, Inc. (as amended) (filed previously as Exhibit (1))2
(31) Rule 13a-15(e)/15d-15(e) Certifications
(32) Section 1350 Certifications
1 - Previously filed and incorporated herein by reference to the Account’s Pre-Effective Amendment No. 1 to the Registration statement on Form S-1 filed December 22, 2004 (File No. 333-121493).
2 - Previously filed and incorporated herein by reference to the Account’s Pre-Effective Amendment No. 1 to the Registration statement on Form S-1 filed April 29, 2004 (File No. 333-113602).
3 - Previously filed and incorporated herein by reference to Post-Effective Amendment No. 2 to the Account’s Registration Statement on Form S-1 filed April 30, 1996 (File No. 33-92990).
4 - Previously filed and incorporated herein by reference to the Account’s Post-Effective Amendment No. 1 to the Registration statement on Form S-1 filed May 2, 2005 (File No. 333-121493).
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5 - Previously filed and incorporated herein by reference to Post-Effective Amendment No. 6 to the Account’s Registration Statement on Form S-1 filed April 26, 2000 (File No. 333-22809).
6 - Previously filed and incorporated herein by reference to the Account’s Post-Effective Amendment No. 2 to the Registration statement on Form S-1 filed April 29, 2003 (File No. 333-83964).
(b) REPORTS ON 8-K. The Account filed a report on Form 8-K on May 6, 2005 under Items 4.01 and 9.01 of the form with respect to appointment and engagement of the Account’s certifying accountant. After the end of the quarter, the Account filed a report on Form 8-K on July 18, 2005 under Items 7.01, 8.01 and 9.01 to report certain property transactions and to furnish non-standard quarterly performance information about the Account for Regulation FD purposes.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE: August 12, 2005
TIAA REAL ESTATE ACCOUNT | |||
| By: | TEACHERS INSURANCE AND ANNUITY | |
ASSOCIATION OF AMERICA | |||
By: | /s/ Herbert M. Allison, Jr. | ||
Herbert M. Allison, Jr. | |||
Chairman of the Board, President | |||
and Chief Executive Officer |
DATE: August 12, 2005
By: | /s/ Russell Noles | ||||||
Russell Noles Vice President and Acting Chief Financial Officer |
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