SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark One) |
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE |
ACT OF 1934 |
For the quarterly period ended March 31, 2006 |
oTRANSITION 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.
Yesx Noo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
oLarge accelerated filer o Accelerated filer x Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yeso Nox
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
OF TIAA REAL ESTATE ACCOUNT
MARCH 31, 2006
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 the Financial Statements | 7 | |
Statement of Investments | 13 |
2
STATEMENTS OF ASSETS AND LIABILITIES
ASSETS | ||||||
Investments, at value: | ||||||
Real estate properties | ||||||
(cost: $7,446,609,275 and $7,386,769,868) | $ | 8,152,413,396 | $ | 7,977,600,751 | ||
Real estate joint ventures and limited partnerships | ||||||
(cost: $1,092,079,703 and $1,086,041,287) | 1,483,092,084 | 1,418,583,542 | ||||
Marketable securities: | ||||||
Real estate-related | ||||||
(cost: $487,994,410 and $433,482,015) | 557,305,698 | 448,662,598 | ||||
Other | ||||||
(cost: $2,272,179,609 and $1,640,676,190) | 2,272,314,401 | 1,640,894,515 | ||||
Total investments | ||||||
(cost: $11,298,862,997 and $10,546,969,360) | 12,465,125,579 | 11,485,741,406 | ||||
Cash | 957,200 | 1,211,370 | ||||
Due from investment advisor | 11,640,624 | 7,717,256 | ||||
Other | 175,758,677 | 190,756,381 | ||||
TOTAL ASSETS | 12,653,482,080 | 11,685,426,413 | ||||
LIABILITIES | ||||||
Mortgage notes payable | ||||||
(principal outstanding: $1,096,485,538 and $941,135,080)—Note 5 | 1,128,515,401 | 973,502,186 | ||||
Payable for securities transactions | 24,990,022 | 993,809 | ||||
Accrued real estate property level expenses | 115,238,400 | 145,789,277 | ||||
Security deposits held | 16,001,417 | 16,430,039 | ||||
TOTAL LIABILITIES | 1,284,745,240 | 1,136,715,311 | ||||
NET ASSETS | ||||||
Accumulation Fund | 11,020,547,155 | 10,227,655,797 | ||||
Annuity Fund | 348,189,685 | 321,055,305 | ||||
TOTAL NET ASSETS | $ | 11,368,736,840 | $ | 10,548,711,102 | ||
NUMBER OF ACCUMULATION UNITS | ||||||
OUTSTANDING—Notes 6 and 7 | 44,498,355 | 42,623,491 | ||||
NET ASSET VALUE, PER ACCUMULATION UNIT—Note 6 | $ | 247.66 | $ | 239.95 | ||
See notes to the financial statements.
3
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF OPERATIONS
(Unaudited)
INVESTMENT INCOME | ||||||||
Real estate income net: | ||||||||
Rental income | $ | 188,850,329 | $ | 140,079,278 | ||||
Real estate property level expenses and taxes: | ||||||||
Operating expenses | 48,990,475 | 34,258,151 | ||||||
Real estate taxes | 24,185,915 | 19,475,830 | ||||||
Interest expense | 15,920,768 | 8,015,610 | ||||||
Total real estate property level expenses and taxes | 89,097,158 | 61,749,591 | ||||||
Real estate income, net | 99,753,171 | 78,329,687 | ||||||
Income from real estate joint ventures and limited partnerships | 10,231,748 | 16,201,553 | ||||||
Interest | 22,615,133 | 5,874,621 | ||||||
Dividends | 3,090,872 | 4,743,394 | ||||||
TOTAL INCOME | 135,690,924 | 105,149,255 | ||||||
Expenses—Note 2: | ||||||||
Investment advisory charges | 6,592,265 | 4,014,442 | ||||||
Administrative and distribution charges | 8,996,205 | 5,956,858 | ||||||
Mortality and expense risk charges | 1,887,992 | 1,295,537 | ||||||
Liquidity guarantee charges | 934,393 | 581,341 | ||||||
TOTAL EXPENSES | 18,410,855 | 11,848,178 | ||||||
INVESTMENT INCOME, NET | 117,280,069 | 93,301,077 | ||||||
NET REALIZED AND UNREALIZED | ||||||||
GAIN (LOSS) ON INVESTMENTS | ||||||||
Net realized gain (loss) on investments: | ||||||||
Real estate properties | (629,643 | ) | (16,269 | ) | ||||
Marketable securities | (4,815,208 | ) | 4,953,534 | |||||
Total realized gain (loss) on investments: | (5,444,851 | ) | 4,937,265 | |||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Real estate properties and debt | 114,978,279 | 28,192,691 | ||||||
Real estate joint ventures and limited partnerships | 66,185,795 | 19,510,609 | ||||||
Marketable securities | 54,047,172 | (31,429,986 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 235,211,246 | 16,273,314 | ||||||
NET REALIZED AND UNREALIZED | ||||||||
GAIN (LOSS) ON INVESTMENTS | 229,766,395 | 21,210,579 | ||||||
NET INCREASE IN NET ASSETS RESULTING | ||||||||
FROM OPERATIONS | $ | 347,046,464 | $ | 114,511,656 | ||||
See notes to the financial statements.
4
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
FROM OPERATIONS | ||||||||
Investment income, net | $ | 117,280,069 | $ | 93,301,077 | ||||
Net realized gain (loss) on investments | (5,444,851 | ) | 4,937,265 | |||||
Net change in unrealized appreciation on investments | 235,211,246 | 16,273,314 | ||||||
NET INCREASE IN NET ASSETS | ||||||||
RESULTING FROM OPERATIONS | 347,046,464 | 114,511,656 | ||||||
FROM PARTICIPANT TRANSACTIONS | ||||||||
Premiums | 264,251,599 | 225,790,274 | ||||||
Net transfers from TIAA | 58,341,523 | 36,120,606 | ||||||
Net transfers from CREF Accounts | 264,380,541 | 261,485,235 | ||||||
Net transfers from (to) TIAA-CREF Institutional Mutual Funds | (1,328,649 | ) | 1,160,928 | |||||
Annuity and other periodic payments | (13,654,031 | ) | (8,849,926 | ) | ||||
Withdrawals and death benefits | (99,011,709 | ) | (52,442,697 | ) | ||||
NET INCREASE IN NET ASSETS RESULTING | ||||||||
FROM PARTICIPANT TRANSACTIONS | 472,979,274 | 463,264,420 | ||||||
NET INCREASE IN NET ASSETS | 820,025,738 | 577,776,076 | ||||||
NET ASSETS | ||||||||
Beginning of period | 10,548,711,102 | 7,245,549,986 | ||||||
End of period | $ | 11,368,736,840 | $ | 7,823,326,062 | ||||
See notes to the financial statements.
5
STATEMENTS OF CASH FLOWS
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net increase in net assets resulting from operations | $ | 347,046,464 | $ | 114,511,656 | ||||
Adjustments to reconcile net increase in net assets resulting | ||||||||
from operations to net cash used in operating activities: | ||||||||
Purchase of real estate properties | (34,692,647 | ) | (18,386,458 | ) | ||||
Capital improvements on real estate properties | (19,424,317 | ) | (19,549,674 | ) | ||||
Proceeds from sale of real estate properties | — | 3,825,000 | ||||||
Increase in other investments | (695,500,814 | ) | (580,764,679 | ) | ||||
Decrease in other assets | 11,074,336 | 1,934,999 | ||||||
Decrease in amounts due to bank. | — | (231,476 | ) | |||||
Decrease in accrued real estate property level expenses | (30,550,877 | ) | (8,857,790 | ) | ||||
Increase(Decrease) in security deposits held | (428,622 | ) | 138,895 | |||||
Increase in other liabilities | 179,009,428 | 65,705,262 | ||||||
Net realized (gain) loss on total investments | 5,444,851 | (4,937,265 | ) | |||||
Unrealized gain on total investments | (235,211,246 | ) | (16,273,314 | ) | ||||
NET CASH USED IN OPERATING ACTIVITIES | (473,233,444 | ) | (462,884,844 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Premiums | 264,251,599 | 225,790,274 | ||||||
Net transfers from TIAA | 58,341,523 | 36,120,606 | ||||||
Net transfers from CREF Accounts | 264,380,541 | 261,485,235 | ||||||
Net transfers from (to) TIAA-CREF Institutional Mutual Funds | (1,328,649 | ) | 1,160,928 | |||||
Annuity and other periodic payments | (13,654,031 | ) | (8,849,926 | ) | ||||
Withdrawals and death benefits | (99,011,709 | ) | (52,442,697 | ) | ||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 472,979,274 | 463,264,420 | ||||||
NET INCREASE (DECREASE) IN CASH | (254,170 | ) | 379,576 | |||||
CASH | ||||||||
Beginning of period | 1,211,370 | — | ||||||
End of period | $ | 957,200 | $ | 379,576 | ||||
Supplemental disclosure: Cash paid for interest | $ | 15,601,043 | $ | 8,015,610 | ||||
See notes to the financial statements.
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TIAA REAL ESTATE ACCOUNT
NOTES TO THE 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, 2005 Form 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, Real Estate Research Corporation, 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, Real Estate Research Corporation, 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; the value of the mortgage is appraised independently of the property, and its fair value is reported separately. 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.
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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 fair valued 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.
Mortgage Notes Payable:Commencing in 2005, the Account separately reports mortgage notes payable at estimated market value. Estimated market values are based on the amount at which the liability could be settled (either transferred or paid back) in a current transaction exclusive of direct transaction costs. Different assumptions or changes in future market conditions could significantly affect estimated market value. At times, the Account may assume debt in connection with the purchase of real estate. For debt assumed, the Account allocates a portion of the purchases price to the below or above market debt and amortizes the premium or discount over the remaining life of the debt.
Foreign currency transactions and translation:Portfolio investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of securities, income receipts and expense payments made in foreign currencies are translated into U.S. dollars at the exchange rates prevailing on the respective dates of the transactions. The effect of changes in foreign currency exchange rates on portfolio investments are included in the net realized and unrealized gains and losses on investments. Net realized gains and losses on foreign currency transactions include maturities of forward foreign currency contracts, disposition of foreign currencies, and currency gains and losses between the accrual and receipt dates of portfolio investment income and between the trade and settlement dates of portfolio investment transactions.
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.
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
8
subject to review by the Account’s independent fiduciary, Real Estate Research Corporation. TIAA also provides all portfolio accounting and related services for the Account.
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 2027. Aggregate minimum annual rentals for the properties owned, excluding short-term residential and storage facility leases, are as follows:
Years Ending | |||
December 31, | |||
2006 | $ | 677,929,312 | |
2007 | $ | 648,205,873 | |
2008 | $ | 583,475,485 | |
2009 | $ | 524,637,870 | |
2010 | $ | 437,731,637 | |
2011 – 2027 | $ | 1,307,373,115 | |
Total | $ | 4,179,353,292 | |
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 Joint Ventures
The Account owns several real estate properties through joint ventures and receives distributions and allocations of profits and losses from the joint ventures based on the Account’s ownership interest percentages. Several of these joint ventures have mortgage notes payable on the properties owned. The Account’s allocated portion of the mortgage notes payable is $474,597,665 and $468,664,313 at March 31, 2006 and December 31, 2005, respectively. The Account’s equity in the joint ventures at March 31, 2006 and December 31, 2005 was $1,284,187,919 and $1,222,036,564, respectively. A condensed summary of the financial position and results of operations of the joint ventures is shown below.
Assets | ||||||
Real estate properties, at value | $ | 3,112,156,094 | $ | 2,989,209,293 | ||
Other assets | 76,348,344 | 80,768,265 | ||||
Total assets | $ | 3,188,504,438 | $ | 3,069,977,558 | ||
Liabilities and Equity | ||||||
Mortgage notes payable | $ | 880,612,279 | $ | 865,828,626 | ||
Other liabilities | 62,599,271 | 70,471,251 | ||||
Total liabilities | 943,211,550 | 936,299,877 | ||||
Equity | 2,245,292,888 | 2,133,677,681 | ||||
Total liabilities and equity | $ | 3,188,504,438 | $ | 3,069,977,558 | ||
Operating Revenues and Expenses | ||||||
Revenues | $ | 71,894,001 | $ | 270,519,206 | ||
Expenses | 37,817,155 | 142,782,169 | ||||
Excess of revenues over expenses | $ | 34,076,846 | $ | 127,737,037 | ||
Note 5—Mortgage Notes Payable
At March 31, 2006 and December 31, 2005, the Account had outstanding mortgage balances on the properties as follows:
Property | ||||||||||
50 Fremont | 6.40paid monthly(d) | $ | 135,000,000 | $ | 135,000,000 | August 21, 2013 | ||||
Ontario Industrial Portfolio | 7.24 paid monthly(a) | 9,258,131 | 9,305,895 | May 1, 2011 | ||||||
IDX Tower | 6.40 paid monthly(d) | 145,000,000 | 145,000,000 | August 21, 2013 | ||||||
1001 Pennsylvania Ave | 6.40 paid monthly(d) | 210,000,000 | 210,000,000 | August 21, 2013 | ||||||
99 High Street | 5.5245 paid monthly(b) | 185,000,000 | 185,000,000 | November 11, 2015 | ||||||
Reserve at Sugarloaf | 5.49 paid monthly(c) | 26,400,000 | 26,400,000 | June 1, 2013 | ||||||
Westferry Circus | 5.4003 paid quarterly(d) | 232,827,407 | 230,429,185 | November 15, 2012 | ||||||
Lincoln Centre | 5.51 paid monthly(d) | 153,000,000 | — | February 1, 2016 | ||||||
Total principal outstanding | $ | 1,096,485,538 | $ | 941,135,080 | ||||||
Fair value adjustment | 32,029,863 | 32,367,106 | ||||||||
Total Mortgage Notes Payable | $ | 1,128,515,401 | $ | 973,502,186 | ||||||
(a) | Principal and interest payments due monthly with a balloon payment of $8,127,115 due on May 1, 2011. Debt assumed in conjunction with property acquired in 2004 at a fixed rate of 7.24%. |
(b) | Debt assumed in conjunction with property acquired in 2005; the mortgage was refinanced on October 21, 2005 at a fixed rate of 5.5245%. |
(c) | Debt assumed in conjunction with property acquired in 2005 at a fixed rate of 5.49%. |
(d) | The mortgage is denominated in British pounds, converted to U.S. dollars at the exchange rates as of the dates indicated, and is interest only with a balloon payment at maturity. The interest rate is fixed. |
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Principal on mortgage notes payable is due as follows:
2006 | $ | 139,098 | ||
2007 | 201,415 | |||
2008 | 215,163 | |||
2009 | 233,858 | |||
2010 | 252,070 | |||
Thereafter | 1,095,443,934 | |||
Total principal outstanding | $ | 1,096,485,538 | ||
Note 6—Condensed Financial Information
Selected condensed financial information for an Accumulation Unit of the Account is presented below.
Per Accumulation Unit data: | ||||||||||||||||||||
Rental income | $ | 4.303 | $ | 15.604 | $ | 13.422 | $ | 15.584 | $ | 14.225 | ||||||||||
Real estate property level expenses and taxes | 2.030 | 7.026 | 5.331 | 5.890 | 4.819 | |||||||||||||||
Real estate income, net | 2.273 | 8.578 | 8.091 | 9.694 | 9.406 | |||||||||||||||
Income from real estate joint ventures | ||||||||||||||||||||
and limited partnerships | 0.233 | 1.604 | 1.935 | 1.379 | 0.807 | |||||||||||||||
Dividends and interest | 0.586 | 1.998 | 1.406 | 0.839 | 1.249 | |||||||||||||||
Total income | 3.092 | 12.180 | 11.432 | 11.912 | 11.462 | |||||||||||||||
Expense charges(1) | 0.420 | 1.415 | 1.241 | 1.365 | 1.101 | |||||||||||||||
Investment income, net | 2.672 | 10.765 | 10.191 | 10.547 | 10.361 | |||||||||||||||
Net realized and unrealized gain (loss) | ||||||||||||||||||||
on investments | 5.037 | 18.744 | 13.314 | 2.492 | (4.621 | ) | ||||||||||||||
Net increase in Accumulation Unit Value | 7.709 | 29.509 | 23.505 | 13.039 | 5.740 | |||||||||||||||
Accumulation Unit Value: | ||||||||||||||||||||
Beginning of period | 239.953 | 210.444 | 186.939 | 173.900 | 168.160 | |||||||||||||||
End of period | $ | 247.662 | $ | 239.953 | $ | 210.444 | $ | 186.939 | $ | 173.900 | ||||||||||
Total return | 3.21% | 14.02% | 12.57% | 7.50% | 3.41% | |||||||||||||||
Ratios to Average Net Assets: | ||||||||||||||||||||
Expenses(1) | 0.17% | 0.63% | 0.63% | 0.76% | 0.67% | |||||||||||||||
Investment income, net | 1.07% | 4.82% | 5.17% | 5.87% | 5.65% | |||||||||||||||
Portfolio turnover rate: | ||||||||||||||||||||
Real estate properties | 0% | 6.72% | 2.32% | 5.12% | 0.93% | |||||||||||||||
Securities | 71.43% | 77.63% | 143.47% | 71.83% | 52.08% | |||||||||||||||
Thousands of Accumulation Units | ||||||||||||||||||||
outstanding at end of period | 44,498 | 42,623 | 33,338 | 24,724 | 20,347 | |||||||||||||||
Net assets end of period (in thousands) | $ | 11,368,737 | $ | 10,548,711 | $ | 7,245,550 | $ | 4,793,422 | $ | 3,675,989 |
(1) | Expense charges per Accumulation Unit and the Ratio of Expenses to Average Net Assets exclude real estate property level expenses and, for the three months ended March 31, 2006, are not annualized. If the real estate property level expenses were included, the expense charge per Accumulation Unit for the three months ended March 31, 2006 would be $2.450 ($8.441, $6.572, $7.255 and $5.920 for the years ended December 31, 2005, 2004, 2003 and 2002, respectively), and the Ratio of Expenses to Average Net Assets for the three months ended March 31, 2005 would be 1.149% (3.78%, 3.33%, 4.04% and 3.61% for the years ended December 31, 2005, 2004, 2003 and 2002, respectively). |
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Note 7—Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows:
Accumulation Units: | |||||||
Credited for premiums | 1,062,003 | 4,335,121 | |||||
Credited for transfers, net disbursements and | |||||||
amounts applied to the Annuity Fund | 812,861 | 4,950,773 | |||||
Outstanding: | |||||||
Beginning of period | 42,623,491 | 33,337,597 | |||||
End of period | 44,498,355 | 42,623,491 | |||||
Note 8—Commitments
During the normal course of business, the Account enters into discussions and agreements to purchase or sell real estate properties. As of March 31, 2006, the Account had one outstanding commitment to purchase a mixed use project comprised of an office building and a retail component for a total amount of $197.6 million, which will be subject to approximately $112.7 million in debt.
In addition, the Account has outstanding commitments to purchase interests in six limited partnerships and to purchase shares in a private real estate equity investment trust, which total $366.7 million. As of March 31, 2006, $97.1 million remains to be funded under these commitments.
Other than lawsuits in the ordinary course of business that are expected to have no material impact, there are no lawsuits in which the Account is a party.
12
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
REAL ESTATE PROPERTIES—65.40% and 69.46% | |||||||
Location / Description | |||||||
Alabama: | |||||||
Inverness Center—Office building | $ | 103,800,000 | $ | 98,090,987 | |||
Arizona: | |||||||
Mountain RA Industrial Portfolio—Industrial building | 6,300,000 | 5,754,652 | |||||
California: | |||||||
3 Hutton Centre Drive—Office building | 48,604,800 | 48,349,580 | |||||
9 Hutton Centre—Office building | 27,229,122 | 26,746,837 | |||||
50 Fremont—Office building | 376,000,019 | (1) | 373,010,003 | (1) | |||
88 Kearny Street—Office building | 80,679,630 | 81,567,474 | |||||
Cabot Industrial Portfolio—Industrial building | 78,000,000 | 77,000,000 | |||||
Capitol Place—Office building | 49,928,939 | 48,000,000 | |||||
Centerside I—Office building | 66,000,000 | 66,000,000 | |||||
Centre Pointe and Valley View—Industrial building | 29,500,000 | 28,000,000 | |||||
Eastgate Distribution Center—Industrial building | 22,600,000 | 22,000,000 | |||||
Embarcadero Center West—Office building | 207,000,000 | 205,965,261 | |||||
Kenwood Mews—Apartments | 33,600,000 | 30,000,000 | |||||
Larkspur Courts—Apartments | 86,000,000 | 86,000,000 | |||||
The Legacy at Westwood—Apartments | 110,100,000 | 100,000,000 | |||||
Northern CA RA Industrial Portfolio—Industrial building | 61,602,666 | 62,325,024 | |||||
Ontario Industrial Portfolio—Industrial building | 234,295,727 | (1) | 230,000,000 | (1) | |||
Regents Court—Apartments | 66,000,000 | 62,500,000 | |||||
Southern CA RA Industrial Portfolio—Industrial building | 91,919,081 | 89,017,793 | |||||
U.S. Bank Plaza—Office building | 168,000,000 | 159,000,000 | |||||
Westcreek—Apartments | 31,000,000 | 30,939,671 | |||||
West Lake North Business Park—Office building | 57,711,503 | 57,600,000 | |||||
Westwood Marketplace—Shopping center | 89,013,600 | 86,000,000 | |||||
Colorado: | |||||||
The Lodge at Willow Creek—Apartments | 36,200,000 | 34,600,000 | |||||
The Market at Southpark—Shopping center | 34,500,000 | 34,001,746 | |||||
Monte Vista—Apartments | 25,000,000 | 24,647,901 | |||||
Palomino Park—Apartments | 176,800,000 | 176,232,394 | |||||
Connecticut: | |||||||
Ten & Twenty Westport Road—Office building | 160,000,000 | 157,000,000 | |||||
Delaware: | |||||||
Mideast RA Industrial Portfolio—Industrial building | 14,601,993 | 14,258,555 | |||||
Florida: | |||||||
701 Brickell—Office building | 206,457,111 | 201,173,724 | |||||
4200 West Cypress Street—Office building | 37,000,000 | 36,691,519 | |||||
The Fairways of Carolina—Apartments | 22,099,351 | 21,100,000 | |||||
Golfview—Apartments | 31,110,000 | 30,835,506 | |||||
The Greens at Metrowest—Apartments | 18,500,000 | 18,200,000 | |||||
Maitland Promenade One—Office building | 39,021,408 | 37,817,891 | |||||
Plantation Grove—Shopping center | 13,807,008 | 13,800,000 | |||||
Pointe on Tampa Bay—Office building | 45,404,873 | 44,711,876 | |||||
Quiet Waters at Coquina Lakes—Apartments | 21,800,000 | 20,912,293 | |||||
Royal St. George—Apartments | 22,300,000 | 21,400,000 | |||||
Sawgrass Office Portfolio—Office building | 64,800,000 | 59,700,000 | |||||
South Florida Apartment Portfolio—Apartments | 57,000,000 | 56,400,000 | |||||
Suncrest Village—Shopping center | 16,700,000 | 16,400,000 | |||||
Urban Centre—Office building | 107,106,582 | 106,007,400 |
See notes to the financial statements.
13
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
Location / Description | |||||||
Georgia: | |||||||
Alexan Buckhead—Apartments | $ | 36,300,000 | $ | 34,800,000 | |||
Atlanta Industrial Portfolio—Industrial building | 73,900,000 | 73,825,000 | |||||
Reserve at Sugarloaf—Apartments | 45,200,000 | (1) | 44,800,000 | (1) | |||
Glenridge Walk—Apartments | 45,300,000 | 45,300,000 | |||||
1050 Lenox Park—Apartments | 71,000,000 | 71,000,000 | |||||
Shawnee Ridge Industrial Portfolio—Industrial building | 44,050,000 | 44,418,860 | |||||
Illinois: | |||||||
Chicago Caleast Industrial Portfolio—Industrial building | 74,808,223 | 74,622,731 | |||||
Chicago Industrial Portfolio—Industrial building | 72,000,000 | 72,000,000 | |||||
Columbia Centre III—Office building | 29,000,000 | 28,700,000 | |||||
East North Central RA Industrial Portfolio—Industrial building | 37,000,000 | 37,717,159 | |||||
Oak Brook Regency Towers—Office building | 74,800,000 | 73,400,000 | |||||
Parkview Plaza—Office building | 54,800,000 | 54,500,000 | |||||
Kentucky: | |||||||
IDI Kentucky Portfolio—Industrial building | 58,500,000 | 58,500,000 | |||||
Maryland: | |||||||
Broadlands Business Park—Industrial building | 34,692,647 | — | |||||
FEDEX Distribution Facility—Industrial building | 8,500,000 | 8,500,000 | |||||
GE Appliance East Coast Distribution Facility—Industrial building | 47,000,000 | 46,470,475 | |||||
Massachusetts: | |||||||
99 High Street—Office building | 276,200,000 | (1) | 276,266,900 | (1) | |||
Batterymarch Park II—Office building | 11,948,670 | 11,472,283 | |||||
Needham Corporate Center—Office building | 18,795,720 | 17,143,612 | |||||
Northeast RA Industrial Portfolio—Industrial building | 30,900,000 | 29,000,000 | |||||
Nevada: | |||||||
UPS Distribution Facility—Industrial building | 15,000,000 | 15,000,000 | |||||
New Jersey: | |||||||
10 Waterview Boulevard—Office building | 27,500,000 | 27,500,000 | |||||
371 Hoes Lane—Office building | 12,200,000 | 11,700,000 | |||||
Konica Photo Imaging Headquarters—Industrial building | 25,700,000 | 25,300,000 | |||||
Morris Corporate Center III—Office building | 97,400,000 | 97,400,000 | |||||
NJ Caleast Industrial Portfolio—Industrial building | 42,000,000 | 42,000,000 | |||||
Plainsboro Plaza—Shopping center | 50,900,000 | 50,745,252 | |||||
South River Road Industrial—Industrial building | 55,000,000 | 55,000,000 | |||||
New York: | |||||||
780 Third Avenue—Office building | 233,000,000 | 230,000,000 | |||||
The Colorado—Apartments | 85,000,000 | 85,048,163 | |||||
Ohio: | |||||||
Columbus Portfolio—Office building | 23,700,000 | 23,000,000 | |||||
Pennsylvania: | |||||||
Lincoln Woods—Apartments | 35,500,000 | 35,528,316 | |||||
Tennessee: | |||||||
Memphis Caleast Industrial Portfolio—Industrial building | 54,026,397 | 54,000,000 | |||||
Summit Distribution Center—Industrial building | 26,300,000 | 25,900,000 |
See notes to the financial statements.
14
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
Location / Description | |||||||||
Texas: | |||||||||
Butterfield Industrial Park—Industrial building | $ | 4,640,000 | (2) | $ | 4,618,955 | (2) | |||
Dallas Industrial Portfolio—Industrial building | 146,000,000 | 146,000,000 | |||||||
Four Oaks Place—Office building | 296,156,070 | 295,239,109 | |||||||
The Caruth—Apartments | 61,200,000 | 61,200,000 | |||||||
The Legends at Chase Oaks—Apartments | 28,500,000 | 28,499,971 | |||||||
Lincoln Centre—Office building | 256,300,000 | (1) | 255,311,299 | ||||||
The Maroneal—Apartments | 37,000,000 | 35,000,000 | |||||||
United Kingdom: | |||||||||
1 & 7 Westferry Circus—Office building | 357,733,732 | (1) | 373,116,817 | (1) | |||||
Utah: | |||||||||
Landmark at Salt Lake City (Building #4)—Industrial building | 14,800,000 | 14,700,000 | |||||||
Virginia: | |||||||||
8270 Greensboro Drive—Office building | 61,000,000 | 60,200,000 | |||||||
Ashford Meadows—Apartments | 85,400,000 | 78,904,526 | |||||||
Fairgate at Ballston—Office building | 37,100,000 | 35,300,000 | |||||||
Monument Place—Office building | 53,000,000 | 53,000,000 | |||||||
One Virginia Square—Office building | 49,500,000 | 47,000,000 | |||||||
Washington: | |||||||||
IDX Tower—Office building | 382,000,000 | (1) | 370,000,000 | (1) | |||||
Northwest RA Industrial Portfolio—Industrial building | 19,500,000 | 19,700,000 | |||||||
Rainier Corporate Park—Industrial building | 63,900,000 | 64,273,372 | |||||||
Regal Logistics Campus—Industrial building | 63,000,000 | 63,103,879 | |||||||
Washington DC: | |||||||||
1001 Pennsylvania Avenue—Office building | 526,654,471 | (1) | 502,993,710 | (1) | |||||
1015 15th Street—Office building | 75,012,068 | 73,121,166 | |||||||
1900 K Street—Office building | 241,000,000 | 230,000,000 | |||||||
Mazza Gallerie—Shopping center | 90,001,985 | 86,001,109 | |||||||
TOTAL REAL ESTATE PROPERTIES | |||||||||
(Cost $7,446,609,275 and $7,386,769,868) | 8,152,413,396 | 7,977,600,751 | |||||||
OTHER REAL ESTATE-RELATED INVESTMENTS—11.90% and 12.35% | |||||||||
REAL ESTATE JOINT VENTURES—10.30% and 10.64% | |||||||||
GA—Buckhead LLC | |||||||||
Prominence in Buckhead (75% Account Interest) | 100,041,777 | 97,142,406 | |||||||
IL—161 Clark Street LLC | |||||||||
161 North Clark Street (75% Account Interest) | 186,114,448 | 175,578,714 | |||||||
One Boston Place REIT | |||||||||
One Boston Place (50.25% Account Interest) | 152,695,329 | 149,723,498 | |||||||
Storage Portfolio I, LLC | |||||||||
Storage Portfolio (3) (75% Account Interest) | 68,255,510 | (4) | 63,237,298 | (4) | |||||
CA—Treat Towers LP | |||||||||
Treat Towers (75% Account Interest) | 94,713,346 | 93,964,192 | |||||||
Strategic Ind Portfolio I, LLC | |||||||||
IDI Nationwide Industrial Portfolio (3) (60% Account Interest) | . | 66,440,618 | (4) | 66,871,766 | (4) | ||||
CA—Colorado Center LP | |||||||||
Yahoo Center (50% Account Interest) | 163,230,356 | (4) | 138,531,366 | (4) | |||||
Florida Mall Associates, Ltd | |||||||||
The Florida Mall (50% Account Interest) | 213,001,108 | (4) | 208,013,192 | (4) |
See notes to the financial statements.
15
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
Location / Description | |||||||||||
Teachers REA IV, LLC, which owns | |||||||||||
Tyson’s Executive Plaza II (50% Account Interest) | $ | 34,888,712 | $ | 34,032,806 | |||||||
West Dade Associates | |||||||||||
Miami International Mall (50% Account Interest) | 88,747,015 | (4) | 82,290,482 | (4) | |||||||
West Town Mall, LLC | |||||||||||
West Town Mall (50% Account Interest) | 116,059,700 | (4) | 112,650,844 | (4) | |||||||
TOTAL REAL ESTATE JOINT VENTURES | |||||||||||
(Cost $891,993,548 and $888,034,873) | 1,284,187,919 | 1,222,036,564 | |||||||||
LIMITED PARTNERSHIPS— 1.60% and 1.71% | |||||||||||
Cobalt Industrial REIT (10.3554% Account Interest) | 10,878,808 | 8,352,409 | |||||||||
Colony Realty Partners, LP (5.27% Account Interest) | 13,402,604 | 13,481,704 | |||||||||
Essex Apartment Value Fund, LP (10% Account Interest) | 487,306 | 487,306 | |||||||||
�� Heitman Value Partners, LP (8.43% Account Interest) | 9,121,217 | 8,106,810 | |||||||||
Lion Gables Apartment Fund, LP (18.46% Account Interest) | 150,000,000 | 150,000,000 | |||||||||
MONY/Transwestern Mezzanine Realty Partners II, LLC | |||||||||||
(16.67% Account Interest) | 13,834,770 | 14,142,822 | |||||||||
MONY/Transwestern Mezzanine Realty Partners, LP | |||||||||||
(19.75% Account Interest) | 1,179,460 | 1,975,927 | |||||||||
TOTAL LIMITED PARTNERSHIPS | |||||||||||
(Cost $200,086,155 and $198,006,414) | 198,904,165 | 196,546,978 | |||||||||
TOTAL OTHER REAL ESTATE-RELATED INVESTMENTS | |||||||||||
(Cost $1,092,079,703 and $1,086,041,287) | 1,483,092,084 | 1,418,583,542 | |||||||||
MARKETABLE SECURITIES—22.70% and 18.19% | |||||||||||
REAL ESTATE-RELATED—4.47% and 3.91% | |||||||||||
REAL ESTATE EQUITY SECURITIES—4.30% and 3.72% | |||||||||||
2005 | Issuer | ||||||||||
— | 75,000 | Aames Investment Corp | — | 484,500 | |||||||
487,700 | 550,000 | Affordable Residential Communities | 5,120,850 | 5,241,500 | |||||||
146,685 | 36,685 | AMB Property Corp | 7,960,595 | 1,803,801 | |||||||
40,000 | 40,000 | American Campus Communities | 1,036,400 | 992,000 | |||||||
593,031 | 919,000 | American Financial Realty | 6,908,811 | 11,028,000 | |||||||
450,000 | 450,000 | Archstone-Smith Trust | 21,946,500 | 18,850,500 | |||||||
100,000 | 150,000 | Ashford Hospitality Trust | 1,240,000 | 1,573,500 | |||||||
106,300 | 40,000 | Avalonbay Communities Inc | 11,597,330 | 3,570,000 | |||||||
— | 150,000 | Bimini Mortgage Management-A | — | 1,357,500 | |||||||
185,000 | — | Biomed Realty Trust Inc | 5,483,400 | — | |||||||
310,700 | — | Boston Properties Inc | 28,972,775 | — | |||||||
77,000 | 30,000 | BRE Properties | 4,312,000 | 1,364,400 | |||||||
270,000 | 270,000 | Brookfield Properties | 9,220,500 | 7,943,400 | |||||||
150,000 | 194,000 | Carramerica Realty Corp | 6,691,500 | 6,718,220 | |||||||
424,000 | 424,000 | Cedar Shopping Centers Inc | 6,716,160 | 5,965,680 | |||||||
— | 50,000 | Centerpoint Properties Trust | — | 2,474,000 | |||||||
280,000 | 280,000 | Cogdell Spencer Inc | 5,969,600 | 4,729,200 | |||||||
62,100 | — | Corporate Office Properties | 2,840,454 | — |
See notes to the financial statements.
16
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
Shares | ||||||||||
2006 | 2005 | Issuer | ||||||||
976,000 | 976,000 | Deerfield Triarc Capital Cor | $ | 13,166,240 | $ | 13,371,200 | ||||
380,000 | 380,000 | Developers Diversified Realty | 20,805,000 | 17,867,600 | ||||||
193,400 | 193,400 | Duke Realty Corp | 7,339,530 | 6,459,560 | ||||||
80,000 | — | Eastgroup Properties Inc | 3,795,200 | — | ||||||
— | 1,087,000 | ECC Capital Corp | — | 2,456,620 | ||||||
600,000 | 600,000 | Education Realty Trust Inc | 9,180,000 | 7,734,000 | ||||||
433,000 | 180,000 | Equity Residential | 20,260,070 | 7,041,600 | ||||||
435,577 | 580,577 | Extra Space Storage Inc | 7,487,569 | 8,940,886 | ||||||
1,367,000 | 1,367,000 | Feldman Mall Properties | 16,745,750 | 16,417,670 | ||||||
111,600 | 111,600 | First Potomac Realty Trust | 3,152,700 | 2,968,560 | ||||||
384,000 | 110,000 | General Growth Properties | 18,766,080 | 5,168,900 | ||||||
126,150 | — | Glenborough Realty Trust Inc | 2,743,763 | — | ||||||
404,800 | 404,800 | GMH Communities Trust | 4,711,872 | 6,278,448 | ||||||
— | 348,700 | Gramercy Capital Corp | — | 7,943,386 | ||||||
— | 300,000 | Great Wolf Resorts Inc | — | 3,093,000 | ||||||
562,000 | 562,000 | Hersha Hospitality Trust | 5,501,980 | 5,063,620 | ||||||
150,000 | 150,000 | Highland Hospitality Corp | 1,906,500 | 1,657,500 | ||||||
— | 60,000 | Hilton Hotels Corp | — | 1,446,600 | ||||||
80,000 | 80,000 | Home Properties Inc | 4,088,000 | 3,264,000 | ||||||
404,380 | 450,000 | Homebanc Corp/Ga | 3,554,500 | 3,366,000 | ||||||
300,000 | 300,000 | Host Marriott Corp | 6,420,000 | 5,685,000 | ||||||
300,000 | 300,000 | Interstate Hotels & Resorts | 1,605,000 | 1,311,000 | ||||||
— | 80,000 | Istar Financial Inc | — | 2,852,000 | ||||||
1,958,000 | 1,958,000 | Jameson Inns Inc | 4,797,100 | 4,209,700 | ||||||
— | 100,000 | JER Investors Trust Inc | — | 1,695,000 | ||||||
45,200 | — | Kilroy Realty Corp | 3,492,152 | — | ||||||
331,900 | 108,000 | Kimco Realty Corp | 13,488,416 | 3,464,640 | ||||||
426,000 | 426,000 | Kite Realty Group Trust | 6,794,700 | 6,590,220 | ||||||
300,000 | 300,000 | KKR Financial Corp | 6,729,000 | 7,197,000 | ||||||
200,000 | 200,000 | Lasalle Hotel Properties | 8,200,000 | 7,344,000 | ||||||
120,000 | 120,000 | Lexington Corporate Properties Trust | 2,502,000 | 2,556,000 | ||||||
612,963 | 1,266,660 | Lodgian Inc | 8,514,056 | 13,591,262 | ||||||
200,000 | 200,000 | LTC Properties Inc | 4,652,000 | 4,206,000 | ||||||
90,000 | 75,000 | Macerich Company/The | 6,655,500 | 5,035,500 | ||||||
290,000 | 400,000 | Mack-Cali Realty Corp | 13,920,000 | 17,280,000 | ||||||
200,000 | 200,000 | Medical Properties Trust Inc | 2,160,000 | 1,956,000 | ||||||
79,000 | 40,000 | Mills Corp/The | 2,212,000 | 1,677,600 | ||||||
100,000 | 100,000 | Mission West Properties | 1,175,000 | 974,000 | ||||||
331,200 | 331,200 | Monmouth REIT-CLA | 2,788,704 | 2,656,224 | ||||||
— | 300,000 | Mortgageit Holdings Inc | — | 4,098,000 | ||||||
— | 130,000 | NewCastle Investment Corp | — | 3,230,500 | ||||||
37,500 | 100,000 | Novastar Financial Inc | 1,254,000 | 2,811,000 | ||||||
— | 525,000 | Origen Financial Inc | — | $3,738,000 | ||||||
292,583 | 328,100 | Parkway Properties | 12,780,025 | 13,169,934 | ||||||
400,000 | 400,000 | Prologis Trust | 21,400,000 | 18,688,000 | ||||||
189,400 | 30,000 | Public Storage, Inc | 15,384,962 | 2,031,600 | ||||||
100,000 | 100,000 | RAIT Investment Trust | 2,824,000 | 2,592,000 | ||||||
162,000 | — | Reckson Associates Realty Corp | 7,422,840 | — |
See notes to the financial statements.
17
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
Shares | ||||||||||
2006 | 2005 | Issuer | ||||||||
95,000 | 236,000 | Regency Centers Corp | $ | 6,383,050 | $ | 13,912,200 | ||||
293,223 | 384,000 | Republic Property Trust | 3,451,235 | 4,608,000 | ||||||
305,721 | 305,721 | Simon Property Group Inc | 25,723,365 | 23,427,400 | ||||||
116,500 | — | SL Green Realty Corp | 11,824,750 | — | ||||||
350,000 | 350,000 | Starwood Hotels & Resorts | 23,705,500 | 22,351,000 | ||||||
— | 303,820 | Sunset Financial Resources | — | 2,576,394 | ||||||
111,200 | 111,200 | Thomas Properties Group | 1,513,432 | 1,391,112 | ||||||
50,000 | 50,000 | Trizec Properties Inc | 1,286,500 | 1,146,000 | ||||||
57,500 | — | U-Store-IT Trust | 1,158,625 | — | ||||||
165,300 | 100,000 | United Dominion Realty Trust | 4,717,662 | 2,344,000 | ||||||
95,000 | 95,000 | Ventas Inc | 3,152,100 | 3,041,900 | ||||||
217,000 | 200,000 | Vornado Realty Trust | 20,832,000 | 16,694,000 | ||||||
130,000 | — | Weingarten Realty Investors | 5,297,500 | — | ||||||
— | 944 | Windrose Medical Properties | — | 14,028 | ||||||
TOTAL REAL ESTATE EQUITY SECURITIES | ||||||||||
(Cost $466,390,451 and $411,877,936) | 535,438,803 | 426,781,565 | ||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES—0.17% and 0.19% | ||||||||||
Principal | ||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | ||||||||
$10,000,000 | $10,000,000 | GSMS 2001-Rock A2FL | ||||||||
4.760% 05/03/18 | 10,206,480 | 10,217,650 | ||||||||
10,000,000 | 10,000,000 | MSDWC 2001-280 A2F | ||||||||
4.790% 02/03/16 | 10,058,810 | 10,061,730 | ||||||||
1,601,634 | 1,601,634 | Trize 2001—TZHA A3FL | ||||||||
5.120% 03/15/13 | 1,601,605 | 1,601,653 | ||||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES | ||||||||||
(Cost $21,603,959 and $21,604,079) | 21,866,895 | 21,881,033 | ||||||||
TOTAL REAL ESTATE-RELATED | ||||||||||
(Cost $487,994,410 and $433,482,015) | 557,305,698 | 448,662,598 | ||||||||
OTHER—18.23% and 14.28% | ||||||||||
COMMERCIAL PAPER—15.16% and 11.67% | ||||||||||
25,000,000 | 25,000,000 | Abbey National North America LLC | ||||||||
4.440% 04/12/06 | 24,970,000 | 24,994,000 | ||||||||
25,000,000 | 25,000,000 | Abbey National PLC | ||||||||
4.520% 04/14/06 | 24,997,750 | 24,999,500 | ||||||||
25,000,000 | — | ABN Ambro North America Finance, Inc | ||||||||
4.560% 04/06/06 | 24,990,000 | |||||||||
— | 10,000,000 | Alabama Power Co | ||||||||
4.250% 01/12/06 | — | 9,989,100 | ||||||||
20,000,000 | 25,000,000 | American Express Centurion Bank | ||||||||
4.750% 05/26/06 | 19,997,800 | 25,000,000 | ||||||||
18,500,000 | — | American Express Centurion Bank | ||||||||
4.730% 04/21/06 | 18,499,630 | — | ||||||||
— | 2,430,000 | American Honda Finance, Corp | ||||||||
4.240% 01/09/06 | — | 2,428,250 |
See notes to the financial statements.
18
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | |||||||||
$29,900,000 | $10,000,000 | Atlantis One Funding Corp | |||||||||
4.620% | 04/27/06 | $ | 29,804,320 | $ | 9,936,500 | ||||||
10,000,000 | 25,000,000 | Atlantis One Funding Corp | |||||||||
4.650% | 05/01/06 | 9,962,700 | 24,890,750 | ||||||||
20,000,000 | 25,000,000 | Bank of Montreal | |||||||||
4.990% | 09/20/06 | 19,992,000 | 24,999,500 | ||||||||
15,000,000 | 30,000,000 | Barclay’s Bank, PLC | |||||||||
4.760% | 08/30/06 | 15,000,150 | 29,998,200 | ||||||||
30,000,000 | 15,000,000 | Barclay’s Bank, PLC | |||||||||
4.750% | 05/12/06 | 29,997,600 | 14,999,400 | ||||||||
5,000,000 | — | Barclay’s Bank, PLC | |||||||||
4.880% | 06/12/06 | 4,999,750 | — | ||||||||
— | 18,040,000 | Becton Dickinson & Co | |||||||||
4.210% | 01/24/06 | — | 17,994,719 | ||||||||
28,000,000 | 13,100,000 | Beta Finance, Inc | |||||||||
4.550% | 04/11/06 | 27,970,040 | 13,085,590 | ||||||||
20,000,000 | 11,000,000 | Beta Finance, Inc | |||||||||
4.490% | 04/21/06 | 19,952,000 | 10,981,190 | ||||||||
8,000,000 | — | BMW US Capital Corp | |||||||||
4.710% | 05/19/06 | 7,950,800 | — | ||||||||
40,285,000 | — | BMW US Capital Corp | |||||||||
4.670% | 05/31/06 | 39,969,971 | — | ||||||||
20,000,000 | 20,000,000 | Calyon | |||||||||
4.670% | 05/12/06 | 19,996,200 | 19,997,800 | ||||||||
10,000,000 | — | Calyon | |||||||||
4.440% | 04/11/06 | 9,989,400 | — | ||||||||
19,080,000 | — | Calyon | |||||||||
4.400% | 04/04/06 | 19,077,520 | — | ||||||||
25,000,000 | — | Canadian Imperial Holdings, Inc | |||||||||
4.760% | 06/07/06 | 24,780,250 | — | ||||||||
— | 10,000,000 | Canadian Wheat Board (The) | |||||||||
4.320% | 02/06/06 | — | 9,959,500 | ||||||||
27,600,000 | 14,000,000 | CC (USA), Inc | |||||||||
4.500% | 04/17/06 | 27,548,388 | 13,982,920 | ||||||||
15,000,000 | — | CC (USA), Inc | |||||||||
4.560% | 04/26/06 | 14,953,950 | — | ||||||||
1,375,000 | — | CC (USA), Inc | |||||||||
4.780% | 05/30/06 | 1,364,440 | — | ||||||||
13,000,000 | 40,000,000 | Ciesco LP | |||||||||
4.630% | 04/24/06 | 12,963,600 | 39,903,200 | ||||||||
10,000,000 | 10,000,000 | Ciesco LP | |||||||||
4.750% | 05/19/06 | 9,938,400 | 9,936,500 | ||||||||
5,220,000 | — | Ciesco LP | |||||||||
4.750% | 05/03/06 | 5,199,120 | — | ||||||||
13,000,000 | 13,000,000 | Citigroup Funding Inc | |||||||||
4.610% | 04/25006 | 12,962,300 | 12,923,560 | ||||||||
37,000,000 | 37,000,000 | Citigroup Funding Inc | |||||||||
4.730% | 05/11/06 | 36,813,520 | 36,925,260 |
See notes to the financial statements.
19
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
Issuer, Current Rate and Maturity Date | ||||||||||||
$ | — | $24,150,000 | Colgate-Palmolive Co | |||||||||
4.250% | 01/06/06 | $ | — | $ | 24,141,306 | |||||||
12,000,000 | 15,000,000 | Corporate Asset Funding Corp, Inc | ||||||||||
4.760% | 04/27/06 | 11,961,600 | 14,981,700 | |||||||||
10,000,000 | 5,035,000 | Corporate Asset Funding Corp, Inc | ||||||||||
4.670% | 04/28/06 | 9,966,700 | 5,022,815 | |||||||||
8,000,000 | 16,000,000 | Corporate Asset Funding Corp, Inc | ||||||||||
4.740% | 05/15/06 | 7,955,040 | 15,957,440 | |||||||||
20,000,000 | 5,905,000 | Corporate Asset Funding Corp, Inc | ||||||||||
4.680% | 05/04/06 | 19,917,400 | 5,884,982 | |||||||||
— | 2,020,000 | Corporate Asset Funding Corp, Inc | ||||||||||
4.360% | 02/17/06 | — | 2,008,930 | |||||||||
25,000,000 | 50,000,000 | Dexia Bank | ||||||||||
4.870% | 06/21/06 | 24,997,750 | 49,998,000 | |||||||||
25,000,000 | — | Dexia Bank | ||||||||||
4.900% | 06/29/06 | 24,999,500 | — | |||||||||
20,000,000 | 25,000,000 | Deutsche Bank | ||||||||||
4.690% | 05/17/06 | 19,996,200 | 24,997,000 | |||||||||
20,000,000 | — | Deutsche Bank | ||||||||||
4.440% | 04/03/06 | 20,000,000 | — | |||||||||
21,000,000 | 20,000,000 | Dorada Finance Inc | ||||||||||
4.610% | 04/25/06 | 20,938,470 | 19,865,600 | |||||||||
8,160,000 | 8,000,000 | Dorada Finance Inc | ||||||||||
4.600% | 04/26/06 | 8,134,949 | 7,980,640 | |||||||||
20,000,000 | 21,500,000 | Dorada Finance Inc | ||||||||||
4.640% | 04/28/06 | 19,933,400 | 21,384,975 | |||||||||
12,000,000 | 13,000,000 | Edison Asset Securitization, LLC | ||||||||||
4.740% | 04/26/06 | 11,963,160 | 12,977,770 | |||||||||
7,248,000 | 7,248,000 | Edison Asset Securitization, LLC | ||||||||||
4.420% | 04/07/06 | 7,244,086 | 7,162,981 | |||||||||
20,000,000 | 20,000,000 | Edison Asset Securitization, LLC | ||||||||||
4.630% | 05/01/06 | 19,925,200 | 19,877,800 | |||||||||
10,780,000 | — | Edison Asset Securitization, LLC | ||||||||||
4.690% | 05/09/06 | 10,728,040 | — | |||||||||
20,000,000 | 20,000,000 | FCAR Owner Trust I | ||||||||||
4.740% | 05/10/06 | 19,901,200 | 19,915,000 | |||||||||
17,000,000 | 17,000,000 | First Tennessee National Bank | ||||||||||
4.650% | 05/08/06 | 16,996,940 | 16,999,660 | |||||||||
10,000,000 | — | Gannett Inc | ||||||||||
4.720% | 04/26/06 | 9,969,400 | — | |||||||||
21,590,000 | 21,590,000 | General Electric Capital Corp | ||||||||||
4.440% | 04/28/06 | 21,518,753 | 21,282,342 | |||||||||
25,000,000 | 25,000,000 | General Electric Capital Corp | ||||||||||
4.520% | 06/28/06 | 24,709,000 | 24,435,000 | |||||||||
17,000,000 | 35,000,000 | Goldman Sachs Group, LP | ||||||||||
4.810% | 11/02/06 | 16,486,770 | 34,870,150 | |||||||||
30,000,000 | 29,140,000 | Govco Incorporated | ||||||||||
4.450% | 04/10/06 | 29,971,800 | 29,118,436 |
See notes to the financial statements.
20
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
2005 | Issuer, Current Rate and Maturity Date | ||||||||||
$11,000,000 | $10,000,000 | Govco Incorporated | |||||||||
4.500% | 04/18/06 | $ | 10,978,000 | $ | 9,981,700 | ||||||
2,500,000 | 9,000,000 | Govco Incorporated | |||||||||
4.830% | 06/21/06 | 2,473,100 | 8,922,420 | ||||||||
6,376,000 | — | Govco Incorporated | |||||||||
4.820% | 06/19/06 | 6,309,179 | — | ||||||||
25,000,000 | 20,000,000 | Grampian Funding LLC | |||||||||
4.550% | 06/19/06 | 24,737,500 | 19,929,600 | ||||||||
10,000,000 | 5,015,000 | Grampian Funding LLC | |||||||||
4.880% | 08/11/06 | 9,820,400 | 5,002,814 | ||||||||
5,000,000 | 10,000,000 | Greyhawk Funding LLC | |||||||||
4.640% | 04/10/06 | 4,995,300 | 9,996,300 | ||||||||
20,000,000 | — | Greyhawk Funding LLC | |||||||||
4.610% | 04/11/06 | 19,978,600 | — | ||||||||
24,800,000 | — | Greyhawk Funding LLC | |||||||||
4.650% | 05/01/06 | 24,707,248 | — | ||||||||
13,100,000 | 25,000,000 | Harrier Finance Funding (US) LLC | |||||||||
4.460% | 04/20/06 | 13,070,263 | 24,933,500 | ||||||||
12,000,000 | — | Harrier Finance Funding (US) LLC | |||||||||
4.740% | 05/25/06 | 11,916,120 | — | ||||||||
25,000,000 | — | Harrier Finance Funding (US) LLC | |||||||||
4.630% | 05/02/06 | 24,903,250 | — | ||||||||
3,895,000 | 10,085,000 | HBOS Treasury Srvcs Plc | |||||||||
4.640% | 05/16/06 | 3,872,759 | 10,033,163 | ||||||||
17,565,000 | — | HBOS Treasury Srvcs Plc | |||||||||
4.760% | 06/09/06 | 17,406,739 | — | ||||||||
25,000,000 | — | HSBC Finance Corporation | |||||||||
4.540% | 04/27/06 | 24,920,250 | — | ||||||||
23,200,000 | — | HSBC Finance Corporation | |||||||||
4.640% | 05/01/06 | 23,113,696 | — | ||||||||
40,000,000 | 31,740,000 | Kitty Hawk Funding Corp | |||||||||
4.700% | 04/20/06 | 39,909,200 | 31,705,086 | ||||||||
10,000,000 | 10,000,000 | Kitty Hawk Funding Corp | |||||||||
4.780% | 05/18/06 | 9,939,600 | 9,947,600 | ||||||||
20,000,000 | 25,000,000 | Links Finance L.L.C. | |||||||||
4.730% | 05/12/06 | 19,895,800 | 24,884,750 | ||||||||
11,000,000 | 25,000,000 | Links Finance L.L.C. | |||||||||
4.770% | 06/08/06 | 10,901,660 | 24,787,750 | ||||||||
14,000,000 | — | Links Finance L.L.C. | |||||||||
4.700% | 05/24/06 | 13,904,100 | — | ||||||||
16,403,000 | — | Nestle Capital Corp | |||||||||
4.600% | 04/26/062 | 16,353,135 | — | ||||||||
36,000,000 | 10,000,000 | Paccar Financial Corp | |||||||||
4.450% | 04/12/06 | 35,957,160 | 9,989,200 | ||||||||
2,670,000 | 13,655,000 | Paccar Financial Corp | |||||||||
4.670% | 05/18/06 | 2,654,033 | 13,557,913 | ||||||||
35,578,000 | 20,080,000 | Park Avenue Receivables Corp | |||||||||
4.790% | 05/23/06 | 35,337,848 | 20,021,166 |
See notes to the financial statements.
21
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
2005 | Issuer, Current Rate and Maturity Date | |||||||||||
$ | — | $10,000,000 | Park Avenue Receivables Corp | |||||||||
4.290% | 01/04/06 | $ | — | $ | 9,998,800 | |||||||
10,000,000 | 10,000,000 | Preferred Receivables Funding Corp | ||||||||||
4.670% | 05/04/06 | 9,958,400 | 9,996,300 | |||||||||
5,000,000 | 15,000,000 | Private Export Funding Corporation | ||||||||||
4.400% | 04/04/06 | 4,999,350 | 14,926,500 | |||||||||
11,000,000 | 5,000,000 | Private Export Funding Corporation | ||||||||||
4.720% | 06/13/06 | 10,894,840 | 4,944,250 | |||||||||
14,000,000 | 9,000,000 | Private Export Funding Corporation | ||||||||||
4.660% | 07/06/06 | 13,821,360 | 8,929,260 | |||||||||
5,000,000 | 19,150,000 | Private Export Funding Corporation | ||||||||||
4.530% | 05/09/06 | 4,976,150 | 19,070,145 | |||||||||
15,000,000 | — | Private Export Funding Corporation | ||||||||||
4.590% | 05/15/06 | 14,916,450 | — | |||||||||
12,250,000 | 20,000,000 | Proctor & Gamble | ||||||||||
4.490% | 04/04/06 | 12,248,408 | 19,983,200 | |||||||||
— | 3,500,000 | Proctor & Gamble | ||||||||||
4.090% | 01/26/06 | — | 3,490,445 | |||||||||
16,527,000 | 50,000,000 | Ranger Funding Company LLC | ||||||||||
4.640% | 04/19/06 | 16,491,632 | 49,914,500 | |||||||||
1,525,000 | — | Ranger Funding Company LLC | ||||||||||
4.680% | 04/25/06 | 1,520,532 | — | |||||||||
9,440,000 | — | Ranger Funding Company LLC | ||||||||||
4.790% | 06/12/06 | 9,350,414 | — | |||||||||
8,195,000 | — | Ranger Funding Company LLC | ||||||||||
4.760% | 05/05/06 | 8,160,007 | — | |||||||||
— | 17,000,000 | Regions Bank (Alabama) | ||||||||||
4.180% | 01/30/06 | — | 16,998,130 | |||||||||
25,000,000 | — | Royal Bank of Canada | ||||||||||
4.590% | 04/24/06 | 24,930,750 | — | |||||||||
11,000,000 | — | Royal Bank of Canada | ||||||||||
4.710% | 05/22/06 | 10,998,020 | — | |||||||||
10,680,000 | — | Royal Bank of Canada | ||||||||||
4.850% | 07/28/06 | 10,675,194 | — | |||||||||
25,000,000 | — | Royal Bank of Scotland PLC | ||||||||||
4.420% | 04/05/06 | 24,993,500 | — | |||||||||
17,633,000 | — | Scaldis Capital LLC | ||||||||||
4.820% | 05/30/06 | 17,497,226 | — | |||||||||
20,515,000 | — | Scaldis Capital LLC | ||||||||||
4.840% | 07/17/06 | 20,218,763 | — | |||||||||
11,960,000 | — | Sheffield Receivable Corporation | ||||||||||
4.640% | 04/07/06 | 11,953,542 | — | |||||||||
5,000,000 | — | Sheffield Receivable Corporation | ||||||||||
4.820% | 09/05/06 | 4,892,200 | — | |||||||||
13,245,000 | — | Shell International Finance B.V. | ||||||||||
4.620% | 05/18/06 | 13,165,795 | — | |||||||||
23,600,000 | — | Shell International Finance B.V. | ||||||||||
4.570% | 05/02/06 | 23,509,612 | — |
See notes to the financial statements.
22
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | |||||||||
$13,000,000 | $ — | Shell International Finance B.V. | |||||||||
4.850% | 06/30/06 | $ | 12,840,624 | $ | — | ||||||
— | 540,000 | Sherwin-Williams Co | |||||||||
4.070% | 02/07/06 | — | 537,732 | ||||||||
13,975,000 | 14,390,000 | Sigma Finance Inc | |||||||||
4.470% | 04/05/06 | 13,971,227 | 14,374,171 | ||||||||
17,000,000 | 8,000,000 | Sigma Finance Inc | |||||||||
4.610% | 05/05/06 | 16,927,410 | 7,937,120 | ||||||||
— | 5,000,000 | Sigma Finance Inc | |||||||||
3.940% | 03/01/06 | — | 4,965,150 | ||||||||
— | 17,000,000 | Sigma Finance Inc | |||||||||
4.220% | 01/31/06 | — | 16,942,370 | ||||||||
— | 5,575,000 | Sigma Finance Inc | |||||||||
4.340% | 02/27/06 | — | 5,537,536 | ||||||||
4,578,000 | 6,030,000 | Societe Generale North America, Inc | |||||||||
4.560% | 04/03/06 | 4,578,000 | 5,974,283 | ||||||||
5,500,000 | — | Societe Generale North America, Inc | |||||||||
4.660% | 05/08/06 | 5,474,535 | — | ||||||||
10,000,000 | — | Societe Generale North America, Inc | |||||||||
4.830% | 10/06/06 | 9,739,700 | — | ||||||||
24,000,000 | — | Societe Generale North America, Inc | |||||||||
4.420% | 04/06/06 | 23,990,400 | — | ||||||||
25,000,000 | 27,600,000 | Swedish Export Credit Corp | |||||||||
4.750% | 05/08/06 | 24,884,250 | 27,550,596 | ||||||||
13,810,000 | — | The Stanley Works | |||||||||
4.640% | 05/01/06 | 13,758,627 | — | ||||||||
11,165,000 | — | Toronto Dominion Holdings (U.S.) | |||||||||
4.610% | 04/27/06 | 11,129,607 | — | ||||||||
9,935,000 | — | Toronto Dominion Holdings (U.S.) | |||||||||
4.610% | 05/01/06 | 9,898,241 | — | ||||||||
9,000,000 | — | Toronto Dominion Holdings (U.S.) | |||||||||
4.740% | 06/08/06 | 8,920,170 | — | ||||||||
3,775,000 | — | Toronto Dominion Holdings (U.S.) | |||||||||
4.800% | 10/27/06 | 3,665,034 | — | ||||||||
15,000,000 | 15,000,000 | Toyota Motor Credit Corp | |||||||||
4.640% | 10/10/06 | 15,001,200 | 15,000,900 | ||||||||
12,000,000 | 24,000,000 | UBS Finance, (Delaware) Inc | |||||||||
4.580% | 04/10/06 | 11,988,840 | 23,891,280 | ||||||||
6,000,000 | 3,120,000 | UBS Finance, (Delaware) Inc | |||||||||
4.850% | 06/30/06 | 5,928,480 | 3,079,190 | ||||||||
3,120,000 | — | UBS Finance, (Delaware) Inc | |||||||||
4.440% | 04/19/06 | 3,113,417 | — | ||||||||
4,560,000 | — | UBS Finance, (Delaware) Inc | |||||||||
4.620% | 04/20/06 | 4,549,786 | — | ||||||||
24,400,000 | — | UBS Finance, (Delaware) Inc | |||||||||
4.610% | 04/24/06 | 24,332,412 | — | ||||||||
18,910,000 | 25,000,000 | Variable Funding Capital Corporation | |||||||||
4.450% | 04/03/06 | 18,910,000 | 24,993,750 |
See notes to the financial statements.
23
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | |||||||||
$ 6,670,000 | $ — | Variable Funding Capital Corporation | |||||||||
4.780% | 05/23/06 | $ | 6,624,978 | $ | — | ||||||
5,000,000 | — | Variable Funding Capital Corporation | |||||||||
4.760% | 05/19/06 | 4,969,000 | — | ||||||||
9,800,000 | — | Wal-Mart Stores | |||||||||
4.760% | 06/20/06 | 9,696,806 | — | ||||||||
— | 5,010,000 | Washington Gas Light Co | |||||||||
4.330% | 01/09/06 | — | 5,006,393 | ||||||||
29,000,000 | 20,000,000 | Wells Fargo | |||||||||
4.770% | 05/05/06 | 28,999,130 | 19,999,600 | ||||||||
4,990,000 | — | Wells Fargo | |||||||||
4.810% | 05/22/06 | 4,990,050 | — | ||||||||
15,000,000 | 19,460,000 | Yorktown Capital, LLC | |||||||||
4.700% | 04/18/06 | 14,970,000 | 19,457,665 | ||||||||
5,265,000 | 2,625,000 | Yorktown Capital, LLC | |||||||||
4.630% | 04/21/06 | 5,252,364 | 2,611,893 | ||||||||
— | 4,066,000 | Yorktown Capital, LLC | |||||||||
4.350% | 01/06/06 | — | 4,064,496 | ||||||||
TOTAL COMMERCIAL PAPER | |||||||||||
(Cost $1,890,094,585 and $1,340,511,661) | 1,890,188,330 | 1,340,656,583 | |||||||||
GOVERNMENT AGENCY BONDS—3.07% and 2.61% | |||||||||||
63,080,000 | 7,030,000 | Federal Home Loan Banks | |||||||||
4.480% | 04/17/06 | 62,965,825 | 7,027,383 | ||||||||
10,412,000 | — | Federal Home Loan Banks | |||||||||
4.630% | 05/19/06 | 10,349,216 | — | ||||||||
15,095,000 | — | Federal Home Loan Banks | |||||||||
4.490% | 04/19/06 | 15,063,753 | — | ||||||||
8,140,000 | — | Federal Home Loan Banks | |||||||||
4.510% | 04/26/06 | 8,115,824 | — | ||||||||
11,122,000 | — | Federal Home Loan Banks | |||||||||
4.580% | 05/09/06 | 11,069,504 | — | ||||||||
16,380,000 | 30,000,000 | Federal Home Loan Mortgage Corp | |||||||||
4.800% | 09/12/06 | 16,017,347 | 30,000,000 | ||||||||
735,000 | 18,000,000 | Federal Home Loan Mortgage Corp | |||||||||
4.860% | 12/01/06 | 710,150 | 17,922,240 | ||||||||
50,000,000 | 50,000,000 | Federal Home Loan Mortgage Corp | |||||||||
4.460% | 04/13/06 | 49,935,500 | 49,839,500 | ||||||||
10,000,000 | 3,840,000 | Federal Home Loan Mortgage Corp | |||||||||
4.670% | 04/25/06 | 9,971,600 | 3,837,351 | ||||||||
26,140,000 | — | Federal Home Loan Mortgage Corp | |||||||||
4.610% | 05/16/06 | 25,992,570 | — | ||||||||
65,245,000 | — | Federal Home Loan Mortgage Corp | |||||||||
4.580% | 05/01/060 | 65,005,551 | — | ||||||||
14,941,000 | — | Federal Home Loan Mortgage Corp | |||||||||
4.490% | 04/18/06 | 14,912,015 | — | ||||||||
8,395,000 | 37,615,000 | Federal National Mortgage Association | |||||||||
4.790% | 08/30/06 | 8,225,757 | 37,584,908 |
See notes to the financial statements.
24
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
March 31, 2006 and December 31, 2005
Principal | ||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | ||||||||
$36,705,000 | $23,940,000 | Federal National Mortgage Association | ||||||||
4.410% 04/07/06 | $ | 36,685,913 | $ | 23,797,557 | ||||||
24,945,000 | 46,555,000 | Federal National Mortgage Association | ||||||||
4.590% 05/03/06 | 24,846,966 | 46,512,169 | ||||||||
22,441,000 | 29,320,000 | Federal National Mortgage Association | ||||||||
4.720% 06/01/06 | 22,258,580 | 29,217,380 | ||||||||
— | 1,766,000 | Federal National Mortgage Association | ||||||||
3.960% 02/15/06 | — | 1,757,135 | ||||||||
— | 50,000,000 | Federal National Mortgage Association | ||||||||
4.240% 02/17/06 | — | 49,737,500 | ||||||||
— | 3,015,000 | Federal National Mortgage Association | ||||||||
4.110% 02/01/06 | — | 3,004,809 | ||||||||
TOTAL GOVERNMENT AGENCY BONDS | ||||||||||
(Cost $382,085,024 and $300,164,529) | 382,126,071 | 300,237,932 | ||||||||
TOTAL OTHER | ||||||||||
(Cost $2,272,179,609 and $1,640,676,190) | 2,272,314,401 | 1,640,894,515 | ||||||||
TOTAL MARKETABLE SECURITIES | ||||||||||
(Cost $2,760,174,019 and $2,074,158,205) | 2,829,620,099 | 2,089,557,113 | ||||||||
TOTAL INVESTMENTS—100.00% | ||||||||||
(Cost $11,298,862,997 and $10,546,969,360) | $ | 12,465,125,579 | $ | 11,485,741,406 | ||||||
(1) | The investment has a mortgage 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 the financial statements.
25
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 March 31, 2006, the TIAA Real Estate Account had Total Net Assets in the amount of $11,368,736,840, a 7.8% increase from December 31, 2005. The growth in net assets was primarily due to the increase in the flow of new money into the Account, which includes real estate income, dividends and interest, premiums and transfers into the Account.
As of March 31, 2006, the Account owned a total of 110 real estate properties (eleven of which were held in joint ventures) representing 75.70% of the Account’s total investment portfolio. The real estate portfolio included 45 office properties (six of which were held in joint ventures), 31 industrial properties (including one joint venture), 24 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 first quarter of 2006, the Account’s real estate transactional volume was light, which is not uncommon within the real estate industry. Real estate trading activity by the Account tends to be less active early in the year and to increase during the third and fourth quarters. As a result, the Account’s investments in real estate properties (including joint ventures) decreased to 75.70% of Total Investments at March 31, 2006, compared to 80.10% of Total Investments at December 31, 2005. The Account closed two transactions in the first quarter of 2006: the purchase of one industrial property located in Maryland for approximately $34.7 million, and the borrowing of approximately $153 million through a mortgage note payable secured by an office building in Texas which the Account purchased in December 2005.
The Account’s real estate portfolio is diversified by location and property type and no single property represents more than 4.23% of its Total Investments, or 5.58% 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 Statement of Investments as of March 31, 2006.
Diversification by Market Value
Office | (45) | 21.9% | 18.2% | 13.4% | 3.9% | 0.0% | 3.8% | 61.2% | ||||||||
Apartment | (24) | 2.2% | 6.0% | 5.2% | 0.0% | 0.0% | 0.0% | 13.4% | ||||||||
Industrial | (31) | 3.3% | 7.4% | 3.7% | 2.0% | 0.7% | 0.0% | 17.1% | ||||||||
Retail | (9) | 1.5% | 1.3% | 4.8% | 0.0% | 0.0% | 0.0% | 7.6% | ||||||||
Other*** | (1) | 0.0% | 0.0% | 0.0% | 0.0% | 0.7% | 0.0% | 0.7% | ||||||||
TOTAL | (110) | 28.9% | 32.9% | 27.1% | 5.9% | 1.4% | 3.8% | 100.0% |
( ) | 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 foreign real estate investment in the United Kingdom |
*** | Represents a portfolio of storage facilities located in various regions across the U.S. |
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% of Total | ||||||||||||
State/ | Property | Real Estate | % of Total | |||||||||
Property Name | City | Country | Type | Portfolio | Investments | |||||||
1001 Pennsylvania Ave | Washington | DC | Office | 5.58% | 4.23% | |||||||
IDX Tower | Seattle | WA | Office | 4.05% | 3.06% | |||||||
50 Fremont Street | San Francisco | CA | Office | 3.98% | 3.02% | |||||||
1 & 7 Westferry Circus | London | UK | Office | 3.79% | 2.87% | |||||||
Four Oaks Place | Houston | TX | Office | 3.14% | 2.38% | |||||||
99 High Street | Boston | MA | Office | 2.93% | 2.22% | |||||||
Lincoln Centre | Dallas | TX | Office | 2.72% | 2.06% | |||||||
1900 K Street | Washington | DC | Office | 2.55% | 1.93% | |||||||
Ontario Industrial | ||||||||||||
Portfolio | Ontario | CA | Industrial | 2.48% | 1.88% | |||||||
780 Third Avenue | New York City | NY | Office | 2.47% | 1.87% |
(a) | Value as reported in the March 31, 2006 Statement of Investments. Investments owned 100% by TIAA are reported based on market value. Investments in joint ventures are reported based on the equity method of accounting. |
(b) | This property is shown gross of debt; the value of the Account’s interest less leverage is $304.0M. |
(c) | This property is shown gross of debt; the value of the Account’s interest less leverage is $228.6M. |
(d) | This property is shown gross of debt; the value of the Account’s interest less leverage is $233.1M. |
(e) | This property is shown gross of debt; the value of the Account’s interest less leverage is $122.0M. The market value has been converted to U.S dollars from British pounds at the exchange rate as of March 31, 2006. |
(f) | This property is shown gross of debt; the value of the Account’s interest less leverage is $91.0M. |
(g) | This property is shown gross of debt; the value of the Account’s interest less leverage is $104.3M. |
(h) | This property is shown gross of debt; the value of the Account’s interest less leverage is $224.3M. |
% | # of | % of Total | |||||
Metropolitian Statistical Area | Leased | Investments | Investments | ||||
Washington, D.C.-Arlington-Alexandria | 97.9 | 10 | 10.06 | ||||
San Francisco-San Mateo-Redwood City | 91.5 | 4 | 6.01 | ||||
Los Angeles-Long Beach-Glendale | 96.6 | 7 | 4.61 | ||||
Chicago-Naperville-Joliet | 83.1 | 7 | 4.24 | ||||
Dallas-Plano-Irving | 87.5 | 4 | 3.95 |
As of March 31, 2006, the Account also held investments in real estate limited partnerships, representing 1.60% of Total Investments, real estate equity securities, representing 4.30% of Total Investments, commercial mortgage-backed securities (CMBS), representing 0.17% of Total Investments, commercial paper representing 15.16% of Total Investments, and government agency bonds, representing 3.07% of Total Investments.
Real Estate Market Outlook In General
United States real estate markets continued to improve during the first quarter of 2006 along with the overall economy. While real estate market fundamentals have improved over the last several years, real estate values are still subject to cyclical variations impacted by job growth, new construction levels and other factors.
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Payroll employment in the United States grew by 590,000 in the first quarter 2006, as compared with 457,000 in the fourth quarter of 2005. Job growth was broadly based with service-producing sectors experiencing the largest gains. Employment in the Account’s top five metropolitan areas grew at a healthy pace during the first quarter 2006. Of the Account’s five top markets, employment growth was strongest in the Dallas metropolitan area, where employment grew 3.8% during the quarter. In the Washington, D.C. metropolitan area, the Account’s largest exposure, employment grew 2.5% . The Account’s other top markets also experienced employment growth during the first quarter 2006; San Francisco grew by 1.4%, Los Angeles by 1.3%, and Chicago by 1.2%, compared with the overall employment growth of 1.5% for the United States.
Growth in employment is highly correlated with tenant demand for commercial real estate, though demand for space often lags employment growth due to the nature of the leasing cycle. As reported by the Bureau of Labor Statistics, the United States economy has created 2.1 million jobs during the twelve month period ended March 2006, and employment has had positive growth for 31 consecutive months. Consequently, improvements in commercial real estate market conditions are evident. Torto Wheaton Research, a widely used source of real estate market data, reported that office market vacancies averaged 13.3% in the first quarter 2006, compared with 13.5% in the fourth quarter 2005. In comparison, for the first quarter 2006, the vacancy rate of the Account’s office portfolio was lower than the national average at 10.8% . While office vacancies have now declined for eleven consecutive quarters, the decline in the first quarter 2006 was the smallest since late-2003.
Conditions in the Account’s top office markets have improved. For example, office vacancies in the Washington, D.C. metropolitan area are well below the national average and have fallen to 8.9% as of first quarter of 2006, compared with 9.3% as of fourth quarter 2005. The office market in the Washington, D.C. metro area has undoubtedly benefited from healthy employment growth in the region. The average vacancy of the Account’s office portfolio in the Washington, D.C. metropolitan area was 2.1% as of first quarter 2006. In San Francisco, vacancies have declined to 12.9% as of first quarter 2006 as compared with 13.1% in the fourth quarter 2005. Similarly, the remaining top five metropolitan areas for the Account (Los Angeles, Chicago and Dallas) have experienced sizeable declines in vacancies over the past year, with average vacancies as of the first quarter 2006 of 11.4%, 16.2% and 23.0%, respectively.
Through the fourth quarter 2005, industrial market vacancies had declined for six consecutive quarters. However, industrial vacancies were unchanged at 9.8% during the first quarter 2006. Demand for industrial space remained healthy during the first quarter but was matched by new supply. Nonetheless, vacancies declined during the quarter in 34 of the 53 markets tracked by Torto Wheaton. The vacancy rate for the Account’s industrial portfolio averaged 6.0% in the first quarter 2006.
The Account’s top industrial markets include the nation’s top distribution hubs, such as Riverside and Los Angeles, where vacancies averaged 6.4% and 4.7%, respectively, for the first quarter 2006. Vacancies in Chicago (12.5%), Dallas (12.3%) and Atlanta (12.9%) are higher, but these markets continue to benefit from ongoing growth in U.S. industrial production.
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Apartment market conditions continue to improve. Torto Wheaton reported that vacancy rates in the nation’s largest metropolitan markets averaged 4.6% for the first quarter 2006, compared with 5.0% for the fourth quarter 2005. Apartment markets have benefited from more modest demand for single-family housing, healthy employment growth and condominium conversions, which have taken units out of the rental market. The average vacancy rate for the Account’s apartment portfolio was 2.5% for the first quarter 2006.
U.S. retail markets remained healthy as well. According to Torto Wheaton, vacancies in neighborhood and community centers averaged 8.1% at the end of the first quarter of 2006, compared with 7.7% at the end of the fourth quarter of 2005. However, there is a seasonal aspect to vacancy rates (stores will stay open through the holiday season in order to maximize sales), and the first quarter 2006 vacancy rate was unchanged compared with the first quarter of 2005. The average vacancy for the Account’s retail portfolio was 3.9%, and, for its neighborhood and community centers, was 4.5% as of first quarter 2006.
Overall, commercial real estate construction remains at appropriate levels. According to Torto Wheaton Research, office construction nationally is expected to total 40 million square feet in 2006, which is similar to annual average construction of 35 million square feet during 2003-2005, and well below annual average construction of 90 million square feet during the 1999-2002 cyclical peak. Industrial construction is expected to total 170 million square feet nationally in 2006 as compared with an annual average of 235 million square feet during the 1998-2001 cyclical peak. Torto Wheaton expects apartment construction to drop sharply in 2006, with construction of 142,000 units nationally versus 353,000 units in 2005 and 260,000 in 2004. Retail construction is expected to increase to 32.5 million sq. ft. in 2006, up from 23.3 million square feet in 2004. However, Torto Wheaton Research expects retail space absorption to remain strong and the national vacancy rate to increase minimally during the year.
On balance, economic and property market fundamentals remain solid, and near term prospects appear promising. Employment growth remains solid and has accelerated in many metropolitan areas in recent months. Notwithstanding these considerations, real estate markets are cyclical, and the current positive conditions may not continue in the future. In fact, recent data suggest that improvements in office, industrial, and retail market conditions may be slowing. Apartment market conditions continue to improve but there are concerns that condominiums purchased by speculators and units still owned by converters may eventually be offered for rent. Continued employment growth is needed to maintain fundamentals and sustain demand for all types of commercial real estate.
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Results of Operations
Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
Performance
For the three months ended March 31, 2006, the Account’s total net return was 3.21% . This was 169 basis points higher than the return of 1.52% for the three months ended March 31, 2005. The Account’s strong performance in the first quarter 2006 period was primarily due to capital appreciation on the Account’s real estate-related assets, including interests in joint ventures and real estate equity securities, and an increase in interest rates earned on other marketable securities. The Account’s real estate holdings, including its joint venture holdings, which represent 75.70% of the Account’s total portfolio, had a gross total return of 3.59% . Its real estate equity securities, representing 4.30% of the Account’s total investments, had a gross total return of 11.62% . The market value of the Account’s real estate and real estate-related portfolios continued to benefit from robust economic conditions and the substantial amount of liquidity in the capital markets, which continues to be invested into real estate markets by institutional and foreign investors.
Income and Expenses
The Account’s net investment income, after deduction of all expenses, increased by 26% for the three months ended March 31, 2006 compared to the same period in 2005. This was due to 45.32% increase in total net assets, which included a 40.20% increase in real estate and joint ventures holdings.
The Account’s real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 81% of the Account’s total investment income (before deducting Account level expenses) during the three months ended March 31, 2006, as compared to 90% for the three month period ended March 31, 2005. The decline is due to the effect of the increase of total net assets, a decline in the total percentage of the Account’s assets held in real estate and joint ventures, and the corresponding growth in non-real estate assets owned by the Account. As of March 31, 2006, the Account held 75.70% of its assets in real estate and joint ventures and 18.23% in non real estate-related marketable securities, compared to 80.46% and 14.50%, respectively, in the same period 2005.
Gross real estate rental income increased 35% in the three months ended March 31, 2006 compared with the same period in 2005. The increase in real estate income for the three months ended March 31, 2006 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 three months ended March 31, 2006 was $10,231,748 as compared to $16,201,553 for the same period in 2005. This 37% decrease reflected the fact that several of the properties owned by joint ventures are funding certain expenditures, including capital improvements, within the joint ventures, thereby decreasing joint venture distributions. Interest income on the Account’s interest earning marketable
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securities for the three months ended March 31, 2006 and 2005 totaled $22,615,133 and $5,874,621, respectively. This increase was due to an increase in the amount of non-real estate assets held by the Account. In addition, interest rates earned on these investments were higher during the period ended March 31, 2006. Dividend income on the Account’s investments in real estate equity securities decreased to $3,090,872 from $4,743,394 for the three months ended March 31, 2006 and 2005, respectively.
Total property level expenses for the three months ended March 31, 2006 and 2005 were $89,097,158 and $61,749,591, respectively. The 44% increase in property level expenses during the three months ended March 31, 2006 was a result of the increased number of properties held in the Account and an increase in the overall leverage of the Account. The interest expense incurred in the first quarter 2006 was $15,920,768, as compared to $8,015,610 for the same period in 2005. Without the interest expense, the increase in property level expenses would have been 36% on a period-to-period comparison, which is relatively equivalent to the increase in real estate assets.
The Account also incurred expenses for the three months ended March 31, 2006 and 2005 of $6,592,265 and $4,014,442, respectively, for investment advisory services, $8,996,205 and $5,956,858, respectively, for administrative and distribution services and $2,822,385 and $1,876,878, 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 in the Account and the increased costs associated with managing and administering the Account.
Net Realized and Unrealized Gains and Losses on Investments
The Account had net realized and unrealized gains on investments of $229,766,395 and $21,210,579 for the three months ended March 31, 2006 and 2005, respectively. The difference is primarily due to the substantial increase in net realized and unrealized gains on the Account’s real estate properties and debt; $114,348,636 compared to $28,176,422 for the three months ended March 31, 2006 and 2005, respectively. In addition, the Account had unrealized gains on joint ventures and limited partnerships of $66,185,795 in the first quarter of 2006, as compared to unrealized gains of $19,510,609 in the same period of 2005. This substantial increase in net realized and unrealized gains is due to the increase in market value of real estate assets owned by the joint ventures and appreciation of the Account’s interests in the limited partnerships. In addition, the Account’s marketable securities posted net realized and unrealized gains of $49,231,964 as of the three months ended March 31, 2006, as compared to net realized and unrealized losses of $26,476,452 for same period in 2005.
During the three months ended March 31, 2006, the Account had no real estate sales. The $629,643 of realized loss in the three months ended March 31, 2006 was due to post-closing adjustments made in the current period for properties sold in 2005.
Liquidity and Capital Resources
At March 31, 2006 and December 31, 2005, the Account’s liquid assets (i.e., real estate equity securities, commercial mortgage-backed securities, commercial paper, gov-
31
ernment agency bonds and cash) had a value of $2,830,577,299 and $2,090,768,483, respectively. The increase in the Account’s liquid assets is primarily due to net positive inflow of transfers and premiums into the Account, which is in response to the strong relative performance of the Account.
During the three months ended March 31, 2006, the Account received $264,251,599 in premiums and $321,393,415 in net participant transfers from TIAA, the CREF Accounts and affiliated mutual funds, while, for the same period in 2005, the Account received $225,790,274 in premiums and $298,766,769 in net participant transfers. The Account’s liquid assets are 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). 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 Increased Operating Expenses
Inflation, along with increased insurance, utilities and security costs, may increase property operating expenses in the future. These increases in operating expenses are generally billed to tenants either through contractual lease provisions in office, industrial, and retail properties or through rent increases in apartment complexes. 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.
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.
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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 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. 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.
Accumulation and Annuity Fund:The Accumulation Fund represents the net assets attributable to participants in the accumulation phase of their investment. The Annuity Fund represents the net assets attributable to the participants currently receiving annuity payments. The net increase or decrease in net assets from investment operations is apportioned between the accounts based upon their relative daily net asset values. Once an Account participant begins receiving lifetime annuity income benefits, monthly payment levels cannot be reduced as a result of the Account’s adverse mortality experience. In addition, the contracts are required to stipulate the maximum expense
33
charge that can be assessed, which is equal to 2.50% of average net assets per year. Accordingly, a small risk charge is paid by the Account to TIAA to assume these risks.
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 has limited partnerships interests in various real estate funds (limited partnerships). The Account records its contributions as increases to the investments, and distributions from the investments are treated as either income or return of capital, as determined by the management of the limited partnerships. Unrealized gains and losses are calculated and recorded quarterly when the Account’s accounting records are compared to the fund’s financial statements and the Account’s equity values are adjusted.
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.
Mortgage Notes Payable:Commencing in 2005, the Account separately reports mortgage notes payable at estimated market value. Estimated market values are based on the amount at which the liability could be settled (either transferred or paid back) in a current transaction exclusive of direct transaction costs. Different assumptions or changes in future market conditions could significantly affect estimated market value. At times, the Account may assume debt in connection with the purchase of real estate. For debt assumed, the Account allocates a portion of the purchases price to the below or above market debt and amortizes the premium or discount over the remaining life of the debt.
Foreign currency transactions and translation:Portfolio investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of securities, income receipts and expense payments made in foreign currencies are translated into U.S. dollars at the exchange rates prevailing on the respective dates of the transac-
34
tions. The effect of changes in foreign currency exchange rates on portfolio investments are included in the net realized and unrealized gains and losses on investments. Net realized gains and losses on foreign currency transactions include maturities of forward foreign currency contracts, disposition of foreign currencies, and currency gains and losses between the accrual and receipt dates of portfolio investment income and between the trade and settlement dates of portfolio investment transactions.
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.
The Account’s real estate and real estate-related investments, which as of March 31, 2006 represented 77.30% of the Account’s investments (not including real estate-related marketable securities), expose the Account to a variety of risks. These risks include, but are not limited to:
- General Real Estate Risk — The risk that the Account’s property values or rentaland occupancy rates could go down due to general economic conditions, a weakmarket for real estate generally, and changing supply and demand for certain typesof properties;
- Appraisal Risk — The risk that the sale price of an Account property (i.e., the valuethat would be determined by negotiations between independent parties) might differ substantially from its estimated or appraised value, leading to losses or reducedprofits to the Account upon sale;
- Risk Relating to Property Sales — the risk that the Account might not be able tosell a property at a particular time for its full value, particularly in a poor market.This might make it difficult to raise cash quickly and also could lead to Accountlosses; and
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- Risks of Borrowing — The risk that interest rate changes may impact Accountreturns if the Account takes out a mortgage on a property or buys a property subject to a mortgage.
As of March 31, 2006, 22.70% 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 (CMBS), 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 values, 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.
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 topay 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 marketsand, 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, real estate equity securities 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 regis-
36
trant’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 March 31, 2006. Based upon management’s review, the CEO and the CFO concluded that the registrant’s disclosure controls and procedures were effective as of March 31, 2006.
(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.
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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. UNREGISTERED SALES OF EQUITY 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 SECURITYHOLDERS.
Not applicable.
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Item 5. OTHER INFORMATION.
Not applicable
Item 6. 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,4Retirement Select and Retirement Select Plus Contracts | |||
and Endorsements2and 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 Real Estate Research Corporation5 | |||
(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)2and the Amendment thereto6 | |||
(31) | Rule 13a-15(e)/15d-15(e) Certifications | ||
(32) | Section 1350 Certifications |
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 the Account’s Post-Effective Amendment No. 2 to the 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).
5- Previously filed and incorporated herein by reference to the Annual Report of the Account filed on March 15, 2006 (File No. 033-92990).
6- Previously filed and incorporated herein by reference to Pre-Effective Amendment No. 1 to the Account’s Registration Statement on Form S-1 filed May 1, 2006 (File No. 333-132582).
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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: May 12, 2006 | |||
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: May 12, 2006 | |||
By: | /s/ Russell Noles | ||
Russell Noles | |||
Vice President and | |||
Acting Chief Financial Officer |
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