SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2006
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________________________ to ________________________
Commission File Numbers 33-92990, 333-13477, 333-22809, 333-59778, 333-83964,
333-113602, and 333-121493
TIAA REAL ESTATE ACCOUNT
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of
incorporation or organization)
NOT APPLICABLE
(IRS Employer Identification No.)
C/O TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
730 THIRD AVENUE
NEW YORK, NEW YORK
(address of principal executive offices)
10017-3206
(Zip code)
(212) 490-9000
(Registrant’s telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No[ ]
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):
[ ] Large filer [ ] 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).
Yes [ ] No [X]
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
INDEX TO UNAUDITED FINANCIAL STATEMENTS
OF TIAA REAL ESTATE ACCOUNT
JUNE 30, 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
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2005 | |||||||
(Unaudited) | |||||||
ASSETS | |||||||
Investments, at value: | |||||||
Real estate properties | |||||||
(cost: $8,467,013,184 and $7,386,769,868) | $ | 9,491,566,609 | $ | 7,977,600,751 | |||
Real estate joint ventures and limited partnerships | |||||||
(cost: $1,117,996,240 and $1,086,041,287) | 1,607,594,611 | 1,418,583,542 | |||||
Marketable securities: | |||||||
Real estate related | |||||||
(cost: $531,438,696 and $433,482,015) | 584,125,292 | 448,662,598 | |||||
Other | |||||||
(cost: $1,875,041,558 and $1,640,676,190) | 1,874,997,180 | 1,640,894,515 | |||||
Mortgage loan receivable | |||||||
(cost: $75,000,000) | 75,000,000 | — | |||||
Total investments | |||||||
(cost: $12,066,489,678 and $10,546,969,360) | 13,633,283,692 | 11,485,741,406 | |||||
Cash | 142,418,378 | 1,211,370 | |||||
Due from investment advisor | 16,423,504 | 7,717,256 | |||||
Other | 205,619,317 | 190,756,381 | |||||
TOTAL ASSETS | 13,997,744,891 | 11,685,426,413 | |||||
LIABILITIES | |||||||
Mortgage loans payable—Note 5 | 1,214,965,581 | 973,502,186 | |||||
(Principal outstanding: $1,224,556,283 and $941,135,080) | |||||||
Payable for securities transactions | 4,564,958 | 993,809 | |||||
Accrued real estate property level expenses | 305,754,966 | 145,789,277 | |||||
Security deposits held | 18,001,715 | 16,430,039 | |||||
TOTAL LIABILITIES | 1,543,287,220 | 1,136,715,311 | |||||
NET ASSETS | |||||||
Accumulation Fund | 12,086,166,207 | 10,227,655,797 | |||||
Annuity Fund | 368,291,464 | 321,055,305 | |||||
TOTAL NET ASSETS | $ | 12,454,457,671 | $ | 10,548,711,102 | |||
NUMBER OF ACCUMULATION UNITS | |||||||
OUTSTANDING—Notes 6 and 7 | 46,613,298 | 42,623,491 | |||||
NET ASSET VALUE, PER ACCUMULATION UNIT—Note 6 | $ | 259.29 | $ | 239.95 | |||
See notes to the financial statements.
3
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF OPERATIONS
(Unaudited)
For the | For the | |||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
INVESTMENT INCOME | ||||||||||||||||
Real estate income net: | ||||||||||||||||
Rental income | $ | 197,334,348 | $ | 145,633,320 | $ | 386,184,677 | $ | 285,712,598 | ||||||||
Real estate property level expenses and taxes: | ||||||||||||||||
Operating expenses | 47,292,424 | 36,947,719 | 96,282,898 | 71,205,870 | ||||||||||||
Real estate taxes | 26,982,852 | 21,962,749 | 51,168,767 | 41,438,579 | ||||||||||||
Interest expense | 16,763,342 | 9,482,304 | 32,684,110 | 17,497,914 | ||||||||||||
Total real estate property level expenses andtaxes | 91,038,618 | 68,392,772 | 180,135,775 | 130,142,363 | ||||||||||||
Real estate income, net | 106,295,730 | 77,240,548 | 206,048,902 | 155,570,235 | ||||||||||||
Income from real estate joint ventures and limited | ||||||||||||||||
partnerships | 13,642,202 | 18,706,861 | 24,553,167 | 35,897,681 | ||||||||||||
Interest | 29,954,222 | 11,251,893 | 52,569,354 | 17,126,514 | ||||||||||||
Dividends | 4,811,864 | 4,170,430 | 7,223,519 | 7,924,557 | ||||||||||||
TOTAL INCOME | 154,704,018 | 111,369,732 | 290,394,942 | 216,518,987 | ||||||||||||
Expenses—Note 2: | ||||||||||||||||
Investment advisory charges | 5,958,340 | 4,312,907 | 12,550,605 | 8,327,349 | ||||||||||||
Administrative and distribution charges | 11,010,515 | 5,970,843 | 20,006,720 | 11,927,701 | ||||||||||||
Mortality and expense risk charges | 1,652,512 | 1,457,241 | 3,540,505 | 2,752,778 | ||||||||||||
Liquidity guarantee charges | 927,841 | 823,551 | 1,862,232 | 1,404,892 | ||||||||||||
TOTAL EXPENSES | 19,549,208 | 12,564,542 | 37,960,062 | 24,412,720 | ||||||||||||
INVESTMENT INCOME, NET | 135,154,810 | 98,805,190 | 252,434,880 | 192,106,267 | ||||||||||||
NET REALIZED AND UNREALIZED | ||||||||||||||||
GAIN (LOSS) ON INVESTMENTS | ||||||||||||||||
AND MORTGAGE LOANS PAYABLE | ||||||||||||||||
Net realized gain (loss) on investments: | ||||||||||||||||
Real estate properties | (6,050 | ) | 20,030,078 | (635,693 | ) | 20,013,809 | ||||||||||
Marketable securities | 2,236,929 | 15,110,869 | (2,578,279 | ) | 20,064,403 | |||||||||||
Total realized gain (loss) on investments: | 2,230,879 | 35,140,947 | (3,213,972 | ) | 40,078,212 | |||||||||||
Net change in unrealized appreciation | ||||||||||||||||
(depreciation) on: | ||||||||||||||||
Real estate properties | 294,852,148 | 165,498,449 | 409,493,184 | 220,291,140 | ||||||||||||
Real estate joint ventures and limited partnerships | 103,907,559 | 41,014,573 | 170,093,354 | 60,525,182 | ||||||||||||
Marketable securities | (13,280,130 | ) | 24,513,609 | 40,767,042 | (6,916,377 | ) | ||||||||||
Mortgage loans payable | 23,899,362 | (3,066,525 | ) | 24,236,605 | (29,666,525 | ) | ||||||||||
Net change in unrealized appreciation on | ||||||||||||||||
investments and mortgage loans payable | 409,378,939 | 227,960,106 | 644,590,185 | 244,233,420 | ||||||||||||
NET REALIZED AND UNREALIZED GAIN | ||||||||||||||||
ON INVESTMENTS AND | ||||||||||||||||
MORTGAGE LOANS PAYABLE | 411,609,818 | 263,101,053 | 641,376,213 | 284,311,632 | ||||||||||||
NET INCREASE IN NET ASSETS RESULTING | ||||||||||||||||
FROM OPERATIONS | $ | 546,764,628 | $ | 361,906,243 | $ | 893,811,093 | $ | 476,417,899 | ||||||||
See notes to the financial statements.
4
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
For the | For the | |||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
FROM OPERATIONS | ||||||||||||||||
Investment income, net | $ | 135,154,810 | $ | 98,805,190 | $ | 252,434,880 | $ | 192,106,267 | ||||||||
Net realized gain (loss) on investments | 2,230,879 | 35,140,947 | (3,213,972 | ) | 40,078,212 | |||||||||||
Net change in unrealized appreciation on | ||||||||||||||||
investments and mortgage loans payable | 409,378,939 | 227,960,106 | 644,590,185 | 244,233,420 | ||||||||||||
NET INCREASE IN NET ASSETS | ||||||||||||||||
RESULTING FROMOPERATIONS | 546,764,628 | 361,906,243 | 893,811,093 | 476,417,899 | ||||||||||||
FROM PARTICIPANT TRANSACTIONS | ||||||||||||||||
Premiums | 266,744,344 | 246,067,474 | 530,995,943 | 471,857,748 | ||||||||||||
Net transfers from TIAA | 41,751,124 | 55,210,135 | 100,092,647 | 91,330,741 | ||||||||||||
Net transfers from CREF Accounts | 346,049,773 | 485,466,880 | 610,430,314 | 746,952,115 | ||||||||||||
Net transfers from (to) TIAA-CREF | ||||||||||||||||
Institutional Mutual Funds | (4,696,416 | ) | 11,355,472 | (6,025,065 | ) | 12,516,400 | ||||||||||
Annuity and other periodic payments | (12,949,809 | ) | (8,740,524 | ) | (26,603,840 | ) | (17,590,450 | ) | ||||||||
Withdrawals and death benefits | (97,942,813 | ) | (54,107,707 | ) | (196,954,523 | ) | (106,550,404 | ) | ||||||||
NET INCREASE IN NET ASSETS | ||||||||||||||||
RESULTING FROM PARTICIPANT | ||||||||||||||||
TRANSACTIONS | 538,956,203 | 735,251,730 | 1,011,935,476 | 1,198,516,150 | ||||||||||||
NET INCREASE IN NET ASSETS | 1,085,720,831 | 1,097,157,973 | 1,905,746,569 | 1,674,934,049 | ||||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 11,368,736,840 | 7,823,326,062 | 10,548,711,102 | 7,245,549,986 | ||||||||||||
End of period | $ | 12,454,457,671 | $ | 8,920,484,035 | $ | 12,454,457,671 | $ | 8,920,484,035 | ||||||||
See notes to the financial statements.
5
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CASH FLOWS
(Unaudited)
For the | For the | |||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
CASH FLOWS FROM OPERATING | ||||||||||||||||
ACTIVITIES | ||||||||||||||||
Net increase in net assets resulting | ||||||||||||||||
from operations | $ | 546,764,628 | $ | 361,906,243 | $ | 893,811,093 | $ | 476,417,899 | ||||||||
Adjustments to reconcile net increase | ||||||||||||||||
in net assets resulting from operations | ||||||||||||||||
to net cash used in operating activities: | ||||||||||||||||
Purchase of real estate properties | (904,294,008 | ) | (297,563,731 | ) | (938,986,655 | ) | (315,950,189 | ) | ||||||||
Capital improvements on real | ||||||||||||||||
estate properties | (29,659,721 | ) | (14,829,750 | ) | (49,084,038 | ) | (34,379,424 | ) | ||||||||
Proceeds from sale of real estate | ||||||||||||||||
properties | — | 117,886,588 | — | 121,711,588 | ||||||||||||
(Increase) decrease in other investments . | 341,206,070 | (585,934,891 | ) | (354,631,987 | ) | (1,166,699,570 | ) | |||||||||
Increase in mortgage loan receivable | (75,000,000 | ) | — | (75,000,000 | ) | — | ||||||||||
Increase in other assets | (34,643,521 | ) | (19,675,968 | ) | (23,569,185 | ) | (17,740,969 | ) | ||||||||
Increase in amounts due to bank | — | — | — | (231,476 | ) | |||||||||||
(Decrease) increase in accrued real | ||||||||||||||||
estate property level expenses | 190,516,570 | 4,805,920 | 159,965,693 | (4,051,870 | ) | |||||||||||
Increase in security deposits held | 2,000,298 | 567,906 | 1,571,676 | 706,801 | ||||||||||||
Increase (decrease) in other liabilities | (22,775,523 | ) | (22,162,626 | ) | 3,571,148 | 43,542,636 | ||||||||||
Net realized (gain) loss | ||||||||||||||||
on total investments | (2,230,879 | ) | (35,140,947 | ) | 3,213,972 | (40,078,212 | ) | |||||||||
Unrealized gain on total investments and | ||||||||||||||||
mortgage loans payable | (409,378,939 | ) | (227,960,106 | ) | (644,590,185 | ) | (244,233,420 | ) | ||||||||
NET CASH USED IN | ||||||||||||||||
OPERATING ACTIVITIES | (397,495,025 | ) | (718,101,362 | ) | (1,023,728,468 | ) | (1,180,986,206 | ) | ||||||||
CASH FLOWS FROM FINANCING | ||||||||||||||||
ACTIVITIES | ||||||||||||||||
Mortgage loan acquired | — | — | 153,000,000 | — | ||||||||||||
Premiums | 266,744,344 | 246,067,474 | 530,995,943 | 471,857,748 | ||||||||||||
Net transfers from TIAA | 41,751,124 | 55,210,135 | 100,092,647 | 91,330,741 | ||||||||||||
Net transfers from CREF Accounts | 346,049,773 | 485,466,880 | 610,430,314 | 746,952,115 | ||||||||||||
Net transfers from (to) TIAA-CREF | ||||||||||||||||
Institutional Mutual Funds | (4,696,416 | ) | 11,355,472 | (6,025,065 | ) | 12,516,400 | ||||||||||
Annuity and other periodic payments | (12,949,809 | ) | (8,740,524 | ) | (26,603,840 | ) | (17,590,450 | ) | ||||||||
Withdrawals and death benefits | (97,942,813 | ) | (54,107,707 | ) | (196,954,523 | ) | (106,550,404 | ) | ||||||||
NET CASH PROVIDED BY | ||||||||||||||||
FINANCING ACTIVITIES | 538,956,203 | 735,251,730 | 1,164,935,476 | 1,198,516,150 | ||||||||||||
NET INCREASE IN CASH | 141,461,178 | 17,150,368 | 141,207,008 | 17,529,944 | ||||||||||||
CASH | ||||||||||||||||
Beginning of period | 957,200 | 379,576 | 1,211,370 | — | ||||||||||||
End of period | $ | 142,418,378 | 17,529,944 | $ | 142,418,378 | $ | 17,529,944 | |||||||||
SUPPLEMENTAL DISCLOSURES: | ||||||||||||||||
Cash paid for interest | $ | 17,158,966 | 9,411,395 | $ | 32,760,009 | $ | 17,427,005 | |||||||||
Debt assumed in acquisition of properties | $ | 112,700,000 | $ | 185,000,000 | $ | 112,700,000 | $ | 185,000,000 | ||||||||
See notes to the financial statements.
6
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.
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. 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. The independent fiduciary can also require additional appraisals if it believes that a property’s value has changed materially and that such change is not reflected in the quarterly valuation review, 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. 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.
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
7
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.
Mortgage Loans Receivable:Mortgage loans receivable are stated at fair value and are initially valued at the face amount of the mortgage loan funding. Subsequently, mortgage loans receivable are valued quarterly based on market factors, such as market interest rates and spreads for comparable loans, and the performance of the underlying collateral.
Mortgage Loans Payable:Commencing in 2005, the Account separately reports mortgage loans 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 purchase 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.
Accumulation and Annuity Funds: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 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 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.
The Account has limited partnership 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 financial statements of the limited partnerships.
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.
8
Securities transactions are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned and includes accrual of discount and amortization of premium. Dividend income is recorded on the ex-dividend date. Realized gains and losses on securities transactions are accounted for on the specific identification method.
Federal Income Taxes:Based on provisions of the Internal Revenue Code, Section 817, the Account is taxed as a segregated asset account of TIAA. The Account should incur no material federal income tax attributable to the net investment experience of the Account.
Reclassifications:Certain prior year amounts have been reclassified to conform to the current presentation. These reclassifications did not affect the total assets, total net assets or net increase in net assets previously reported.
Note 2—Management AgreementsInvestment advisory services for the Account are provided by TIAA employees, under the direction of TIAA’s Board of Trustees and its Investment Committee, pursuant to investment management procedures adopted by TIAA for the Account. TIAA’s investment management decisions for the Account are also subject to review by the Account’s independent fiduciary, 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, LLC (“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.
The expenses for the services noted above that are provided to the Account by TIAA and other related parties are identified in the accompanying statements of operations.
Note 3—LeasesThe Account’s real estate properties are leased to tenants under operating lease agreements which expire on various dates through 2035. Aggregate minimum annual rentals for the properties owned, excluding short-term residential and storage facility leases, are as follows:
Years Ending | |||
December 31, | |||
2006 | $ | 696,917,734 | |
2007 | 685,693,752 | ||
2008 | 620,072,601 | ||
2009 | 554,266,684 | ||
2010 | 467,771,010 | ||
2011 – 2035 | 1,466,924,613 | ||
Total | $ | 4,491,646,394 | |
9
Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts.
Note 4—Investment in Joint Ventures and Limited Partnerships
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 $459,921,721 and $468,664,313 at June 30, 2006 and December 31, 2005, respectively. The Account’s equity in the joint ventures at June 30, 2006 and December 31, 2005 was $1,359,990,226 and $1,222,036,564, respectively. A condensed summary of the financial position and results of operations of the joint ventures is shown below.
(Unaudited) | ||||||
Assets | ||||||
Real estate properties, at value | $ | 3,225,913,892 | $ | 2,989,209,293 | ||
Other assets | 77,041,436 | 80,768,265 | ||||
Total assets | $ | 3,302,955,328 | $ | 3,069,977,558 | ||
Liabilities and Equity | ||||||
Mortgage notes payable | $ | 852,680,381 | $ | 865,828,626 | ||
Other liabilities | 59,521,020 | 70,471,251 | ||||
Total liabilities | 912,201,401 | 936,299,877 | ||||
Equity | 2,390,753,927 | 2,133,677,681 | ||||
Total liabilities and equity | $ | 3,302,955,328 | $ | 3,069,977,558 | ||
Operating Revenues and Expenses | ||||||
Revenues | $ | 144,413,930 | $ | 270,519,206 | ||
Expenses | 76,588,033 | 142,782,169 | ||||
Excess of revenues over expenses | $ | 67,825,897 | $ | 127,737,037 | ||
The Account invests in limited partnerships that own real estate properties and receives distributions from the limited partnerships based on the Account’s ownership interest percentages, which range from 5.27% to 19.75% of the limited partnerships. The Account’s investment in limited partnerships was $247,604,385 and $196,546,978 at June 30, 2006 and December 31, 2005, respectively.
Note 5—Mortgage Loans Payable
At June 30, 2006, the Account had outstanding mortgage balances on the following properties:
Property | ||||||||||
50 Fremont | 6.40 paid monthly | 135,000,000 | August 21, 2013 | |||||||
Ontario Industrial Portfolio | 7.24 paid monthly | 9,213,265 | May 1, 2011 | |||||||
IDX Tower | 6.40 paid monthly | 145,000,000 | August 21, 2013 | |||||||
1001 Pennsylvania Ave | 6.40 paid monthly | 210,000,000 | August 21, 2013 | |||||||
99 High Street | 5.5245 paid monthly | 185,000,000 | November 11, 2015 | |||||||
Reserve at Sugarloaf | 5.49 paid monthly | 26,400,000 | June 1, 2013 | |||||||
Westferry Circus | 5.4003 paid quarterly | (a) | 248,243,018 | November 15, 2012 | ||||||
Lincoln Centre | 5.51 paid monthly | 153,000,000 | February 1, 2016 | |||||||
Wilshire Rodeo Plaza | 5.28 paid monthly | 112,700,000 | April 11, 2014 | |||||||
Total principal outstanding | $ | 1,224,556,283 | ||||||||
Fair value adjustment | (9,590,702 | ) | ||||||||
Total Mortgage Loans Payable | $ | 1,214,965,581 | ||||||||
(a) | The mortgage is denominated in British pounds, converted to U.S. dollars at the exchange rate as of the date indicated, and is interest only with a balloon payment at maturity. The interest rate is fixed. |
10
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 | $ | 8.333 | $ | 15.604 | $ | 13.422 | $ | 15.584 | $ | 14.225 | ||||||||||
Real estate property level expenses and taxes | 3.887 | 7.026 | 5.331 | 5.890 | 4.819 | |||||||||||||||
Real estate income, net | 4.446 | 8.578 | 8.091 | 9.694 | 9.406 | |||||||||||||||
Income from real estate joint ventures | ||||||||||||||||||||
and limited partnerships | 0.500 | 1.604 | 1.935 | 1.379 | 0.807 | |||||||||||||||
Dividends and interest | 1.362 | 1.998 | 1.406 | 0.839 | 1.249 | |||||||||||||||
Total income | 6.308 | 12.180 | 11.432 | 11.912 | 11.462 | |||||||||||||||
Expense charges(1) | 0.819 | 1.415 | 1.241 | 1.365 | 1.101 | |||||||||||||||
Investment income, net | 5.489 | 10.765 | 10.191 | 10.547 | 10.361 | |||||||||||||||
Net realized and unrealized gain (loss) | ||||||||||||||||||||
on investments | 13.844 | 18.744 | 13.314 | 2.492 | (4.621 | ) | ||||||||||||||
Net increase in Accumulation Unit Value | 19.333 | 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 | $ | 259.286 | $ | 239.953 | $ | 210.444 | $ | 186.939 | $ | 173.900 | ||||||||||
Total return | 8.06 | % | 14.02 | % | 12.57 | % | 7.50 | % | 3.41 | % | ||||||||||
Ratios to Average Net Assets: | ||||||||||||||||||||
Expenses(1) | 0.33 | % | 0.63 | % | 0.63 | % | 0.76 | % | 0.67 | % | ||||||||||
Investment income, net | 2.22 | % | 4.82 | % | 5.17 | % | 5.87 | % | 5.65 | % | ||||||||||
Portfolio turnover rate: | ||||||||||||||||||||
Real estate properties | 0.00 | % | 6.72 | % | 2.32 | % | 5.12 | % | 0.93 | % | ||||||||||
Securities | 39.04 | % | 77.63 | % | 143.47 | % | 71.83 | % | 52.08 | % | ||||||||||
Thousands of Accumulation Units | ||||||||||||||||||||
outstanding at end of period | 46,613 | 42,623 | 33,338 | 24,724 | 20,347 | |||||||||||||||
Net assets end of period (in thousands) | $ | 12,454,458 | $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 six months ended June 30, 2006, are not annualized. If the real estate property level expenses were included, the expense charge per Accumulation Unit for the six months ended June 30, 2006 would be $4.706 ($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 six months ended June 30, 2005 would be 1.92% (3.78%, 3.33%, 4.04% and 3.61% for the years ended December 31, 2005, 2004, 2003 and 2002, respectively). |
11
Note 7—Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows:
For the | For the | ||||
Six Months | Year | ||||
Ended | Ended | ||||
June 30, 2006 | December 31, 2005 | ||||
(Unaudited) | |||||
Accumulation Units: | |||||
Credited for premiums | 2,087,006 | 4,335,121 | |||
Credited for transfers, net disbursements and | |||||
amounts applied to the Annuity Fund | 1,902,801 | 4,950,773 | |||
Outstanding: | |||||
Beginning of period | 42,623,491 | 33,337,597 | |||
End of period | 46,613,298 | 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 June 30, 2006, the Account had outstanding commitments in the total gross amount of $357.6 million to purchase three properties: an office property for $208.2 million which will be subject to approximately $115.0 million in debt, a retail property for $55.7 million which will be subject to approximately $35.0 million in debt, and a retail property for $93.7 million.
In addition, the Account had outstanding commitments to purchase interests in six limited partnerships and to purchase shares in a private real estate equity investment trust, which totaled $366.7 million in the aggregate. As of June 30, 2006, $76.6 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 to which the Account is a party.
12
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
REAL ESTATE PROPERTIES—69.62% and 69.46% | ||||||||
Location / Description | ||||||||
(Unaudited) | ||||||||
Alabama: | ||||||||
Inverness Center—Office building | $ | 104,500,000 | $ | 98,090,987 | ||||
Arizona: | ||||||||
Mountain RA Industrial Portfolio—Industrial building | 6,300,000 | 5,754,652 | ||||||
Kierland Apartment Portfolio—Apartments | 230,596,665 | — | ||||||
Phoenix Apartment Portfolio—Apartments | 178,143,731 | — | ||||||
California: | ||||||||
3 Hutton Centre Drive—Office building | 57,000,000 | 48,349,580 | ||||||
9 Hutton Centre—Office building | 28,100,086 | 26,746,837 | ||||||
50 Fremont—Office building | 390,000,000 | (1) | 373,010,003 | (1) | ||||
88 Kearny Street—Office building | 92,200,000 | 81,567,474 | ||||||
Cabot Industrial Portfolio—Industrial building | 85,300,000 | 77,000,000 | ||||||
Capitol Place—Office building | 50,100,000 | 48,000,000 | ||||||
Centerside I—Office building | 67,100,000 | 66,000,000 | ||||||
Centre Pointe and Valley View—Industrial building | 30,400,000 | 28,000,000 | ||||||
Eastgate Distribution Center—Industrial building | 25,500,000 | 22,000,000 | ||||||
Embarcadero Center West—Office building | 214,000,000 | 205,965,261 | ||||||
Kenwood Mews—Apartments | 33,500,000 | 30,000,000 | ||||||
Larkspur Courts—Apartments | 90,000,000 | 86,000,000 | ||||||
The Legacy at Westwood—Apartments | 110,000,000 | 100,000,000 | ||||||
Northern CA RA Industrial Portfolio—Industrial building | 64,700,351 | 62,325,024 | ||||||
Ontario Industrial Portfolio—Industrial building | 260,426,826 | (1) | 230,000,000 | (1) | ||||
Regents Court—Apartments | 69,000,000 | 62,500,000 | ||||||
Southern CA RA Industrial Portfolio—Industrial building | 91,500,000 | 89,017,793 | ||||||
980 9th Street and 1018 8th Street—Office building | 168,000,000 | 159,000,000 | ||||||
Westcreek—Apartments | 33,500,000 | 30,939,671 | ||||||
West Lake North Business Park—Office building | 58,800,000 | 57,600,000 | ||||||
Westwood Marketplace—Shopping center | 89,500,000 | 86,000,000 | ||||||
Wilshire Rodeo Plaza—Office building | 196,273,111 | (1) | — | |||||
Colorado: | ||||||||
The Lodge at Willow Creek—Apartments | 38,100,000 | 34,600,000 | ||||||
The Market at Southpark—Shopping center | 35,700,000 | 34,001,746 | ||||||
Monte Vista—Apartments | 25,009,447 | 24,647,901 | ||||||
Palomino Park—Apartments | 181,000,000 | 176,232,394 | ||||||
Connecticut: | ||||||||
Ten & Twenty Westport Road—Office building | 160,000,000 | 157,000,000 | ||||||
Delaware: | ||||||||
Mideast RA Industrial Portfolio—Industrial building | 15,220,016 | 14,258,555 | ||||||
Florida: | ||||||||
701 Brickell—Office building | 216,262,047 | 201,173,724 | ||||||
4200 West Cypress Street—Office building | 40,100,000 | 36,691,519 | ||||||
The Fairways of Carolina—Apartments | 24,500,000 | 21,100,000 | ||||||
Golfview—Apartments | 33,958,986 | 30,835,506 | ||||||
The Greens at Metrowest—Apartments | 21,500,000 | 18,200,000 | ||||||
Maitland Promenade One—Office building | 43,100,000 | 37,817,891 | ||||||
The North 40 Office Complex—Office building | 63,233,789 | — | ||||||
Plantation Grove—Shopping center | 14,700,000 | 13,800,000 | ||||||
Pointe on Tampa Bay—Office building | 47,200,000 | 44,711,876 |
See notes to the financial statements.
13
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Location / Description | ||||||||
(Unaudited) | ||||||||
Florida: (continued) | ||||||||
Quiet Waters at Coquina Lakes—Apartments | $ | 24,500,000 | $ | 20,912,293 | ||||
Royal St. George—Apartments | 24,400,000 | 21,400,000 | ||||||
Sawgrass Office Portfolio—Office building | 70,200,000 | 59,700,000 | ||||||
South Florida Apartment Portfolio—Apartments | 63,000,000 | 56,400,000 | ||||||
Suncrest Village—Shopping center | 18,000,000 | 16,400,000 | ||||||
Urban Centre—Office building | 115,114,292 | 106,007,400 | ||||||
Georgia: | ||||||||
Alexan Buckhead—Apartments | 40,000,000 | 34,800,000 | ||||||
Atlanta Industrial Portfolio—Industrial building | 75,008,500 | 73,825,000 | ||||||
Reserve at Sugarloaf—Apartments | 46,600,000 | (1) | 44,800,000 | (1) | ||||
Glenridge Walk—Apartments | 47,000,000 | 45,300,000 | ||||||
1050 Lenox Park—Apartments | 74,000,000 | 71,000,000 | ||||||
Shawnee Ridge Industrial Portfolio—Industrial building | 44,250,000 | 44,418,860 | ||||||
Illinois: | ||||||||
Chicago Caleast Industrial Portfolio—Industrial building | 73,521,322 | 74,622,731 | ||||||
Chicago Industrial Portfolio—Industrial building | 75,812,495 | 72,000,000 | ||||||
Columbia Centre III—Office building | 31,900,000 | 28,700,000 | ||||||
East North Central RA Industrial Portfolio—Industrial building | 36,995,280 | 37,717,159 | ||||||
Oak Brook Regency Towers—Office building | 76,600,000 | 73,400,000 | ||||||
Parkview Plaza—Office building | 55,200,000 | 54,500,000 | ||||||
Kentucky: | ||||||||
IDI Kentucky Portfolio—Industrial building | 63,500,000 | 58,500,000 | ||||||
Maryland: | ||||||||
Broadlands Business Park—Industrial building | 35,000,000 | — | ||||||
FEDEX Distribution Facility—Industrial building | 8,600,000 | 8,500,000 | ||||||
GE Appliance East Coast Distribution Facility—Industrial building | 47,500,000 | 46,470,475 | ||||||
Massachusetts: | ||||||||
99 High Street—Office building | 291,500,000 | (1) | 276,266,900 | (1) | ||||
Batterymarch Park II—Office building | 12,400,000 | 11,472,283 | ||||||
Needham Corporate Center—Office building | 21,200,000 | 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 | 28,200,000 | 27,500,000 | ||||||
371 Hoes Lane—Office building | 14,820,007 | 11,700,000 | ||||||
Konica Photo Imaging Headquarters—Industrial building | 24,800,000 | 25,300,000 | ||||||
Morris Corporate Center III—Office building | 99,000,000 | 97,400,000 | ||||||
NJ Caleast Industrial Portfolio—Industrial building | 42,100,000 | 42,000,000 | ||||||
Plainsboro Plaza—Shopping center | 50,925,004 | 50,745,252 | ||||||
South River Road Industrial—Industrial building | 60,000,000 | 55,000,000 | ||||||
New York: | ||||||||
780 Third Avenue—Office building | 268,000,000 | 230,000,000 | ||||||
The Colorado—Apartments | 90,049,240 | 85,048,163 |
See notes to the financial statements.
14
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Location / Description | ||||||||
(Unaudited) | ||||||||
Ohio: | ||||||||
Columbus Portfolio—Office building | $ | 23,700,000 | $ | 23,000,000 | ||||
Pennsylvania: | ||||||||
Lincoln Woods—Apartments | 36,027,473 | 35,528,316 | ||||||
Tennessee: | ||||||||
Memphis Caleast Industrial Portfolio—Industrial building | 53,400,000 | 54,000,000 | ||||||
Summit Distribution Center—Industrial building | 26,300,000 | 25,900,000 | ||||||
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 | 296,007,593 | 295,239,109 | ||||||
Houston Apartment Portfolio—Apartments | 304,421,046 | — | ||||||
Park Place on Turtle Creek—Office building | 44,325,666 | — | ||||||
The Caruth—Apartments | 61,200,000 | 61,200,000 | ||||||
The Legends at Chase Oaks—Apartments | 29,000,187 | 28,499,971 | ||||||
Lincoln Centre—Office building | 262,000,000 | (1) | 255,311,299 | |||||
The Maroneal—Apartments | 39,006,323 | 35,000,000 | ||||||
United Kingdom: | ||||||||
1 & 7 Westferry Circus—Office building | 397,875,849 | (1) | 373,116,817 | (1) | ||||
Utah: | ||||||||
Landmark at Salt Lake City (Building #4)—Industrial building | 16,600,000 | 14,700,000 | ||||||
Virginia: | ||||||||
8270 Greensboro Drive—Office building | 62,000,000 | 60,200,000 | ||||||
Ashford Meadows—Apartments | 85,646,829 | 78,904,526 | ||||||
Fairgate at Ballston—Office building | 45,400,000 | 35,300,000 | ||||||
Monument Place—Office building | 55,000,000 | 53,000,000 | ||||||
One Virginia Square—Office building | 50,000,000 | 47,000,000 | ||||||
Washington: | ||||||||
IDX Tower—Office building | 382,000,000 | (1) | 370,000,000 | (1) | ||||
Northwest RA Industrial Portfolio—Industrial building | 19,529,028 | 19,700,000 | ||||||
Rainier Corporate Park—Industrial building | 65,565,420 | 64,273,372 | ||||||
Regal Logistics Campus—Industrial building | 63,200,000 | 63,103,879 | ||||||
Washington DC: | ||||||||
1001 Pennsylvania Avenue—Office building | 535,000,000 | (1) | 502,993,710 | (1) | ||||
1015 15th Street—Office building | 79,100,000 | 73,121,166 | ||||||
1900 K Street—Office building | 244,000,000 | 230,000,000 | ||||||
Mazza Gallerie—Shopping center | 85,000,000 | 86,001,109 | ||||||
TOTAL REAL ESTATE PROPERTIES | ||||||||
(Cost $8,467,013,184 and $7,386,769,868) | 9,491,566,609 | 7,977,600,751 | ||||||
OTHER REAL ESTATE RELATED INVESTMENTS—11.79% and 12.35% | ||||||||
REAL ESTATE JOINT VENTURES—9.98% and 10.64% | ||||||||
GA—Buckhead LLC | ||||||||
Prominence in Buckhead (75% Account Interest) | 104,048,254 | 97,142,406 | ||||||
IL—161 Clark Street LLC | ||||||||
161 North Clark Street (75% Account Interest) | 184,384,099 | 175,578,714 | ||||||
One Boston Place REIT | ||||||||
One Boston Place (50.25% Account Interest) | 167,229,279 | 149,723,498 |
See notes to the financial statements.
15
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Location / Description | ||||||||||||
(Unaudited) | ||||||||||||
Storage Portfolio I, LLC | ||||||||||||
Storage Portfolio(3)(75% Account Interest) | $ | 73,028,196 | (4) | $ | 63,237,298 | (4) | ||||||
CA—Treat Towers LP | ||||||||||||
Treat Towers (75% Account Interest) | 95,143,573 | 93,964,192 | ||||||||||
Strategic Ind Portfolio I, LLC | ||||||||||||
IDI Nationwide Industrial Portfolio(3)(60% Account Interest) | 69,479,409 | (4) | 66,871,766 | (4) | ||||||||
CA—Colorado Center LP | ||||||||||||
Yahoo Center (50% Account Interest) | 183,521,486 | (4) | 138,531,366 | (4) | ||||||||
Florida Mall Associates, Ltd. | ||||||||||||
The Florida Mall (50% Account Interest) | 234,503,353 | (4) | 208,013,192 | (4) | ||||||||
Teachers REA IV, LLC, which owns | ||||||||||||
Tyson’s Executive Plaza II (50% Account Interest) | 37,935,328 | 34,032,806 | ||||||||||
West Dade Associates | ||||||||||||
Miami International Mall (50% Account Interest) | 92,210,904 | (4) | 82,290,482 | (4) | ||||||||
West Town Mall, LLC | ||||||||||||
West Town Mall (50% Account Interest) | 118,506,345 | (4) | 112,650,844 | (4) | ||||||||
TOTAL REAL ESTATE JOINT VENTURE | ||||||||||||
(Cost $897,689,879 and $888,034,873) | 1,359,990,226 | 1,222,036,564 | ||||||||||
LIMITED PARTNERSHIPS—1.81% and 1.71% | ||||||||||||
Cobalt Industrial REIT (11.0132% Account Interest) | 20,045,936 | 8,352,409 | ||||||||||
Colony Realty Partners, LP (5.27% Account Interest) | 24,394,129 | 13,481,704 | ||||||||||
Essex Apartment Value Fund, LP (10% Account Interest) | 80,587 | 487,306 | ||||||||||
Heitman Value Partners, LP (8.43% Account Interest) | 9,498,977 | 8,106,810 | ||||||||||
Lion Gables Apartment Fund, LP (18.45% Account Interest) | 174,519,721 | 150,000,000 | ||||||||||
MONY/Transwestern Mezzanine Realty Partners II, LLC | ||||||||||||
(16.67% Account Interest) | 17,260,251 | 14,142,822 | ||||||||||
MONY/Transwestern Mezzanine Realty Partners, LP | ||||||||||||
(19.75% Account Interest) | 1,804,784 | 1,975,927 | ||||||||||
TOTAL LIMITED PARTNERSHIP | ||||||||||||
(Cost $220,306,361 and $198,006,414) | 247,604,385 | 196,546,978 | ||||||||||
TOTAL OTHER REAL ESTATE RELATED INVESTMENTS | ||||||||||||
(Cost $1,117,996,240 and $1,086,041,287) | 1,607,594,611 | 1,418,583,542 | ||||||||||
MORTGAGE LOAN RECEIVABLE— 0.55% and 0.00% | ||||||||||||
Principal | ||||||||||||
Borrower, Current Rate and Maturity Date | ||||||||||||
— | Klingle Corporation | |||||||||||
6.150% 07/10/11 | 75,000,000 | — | ||||||||||
TOTAL MORTGAGE LOAN RECEIVABLE | ||||||||||||
(Cost $75,000,000) | 75,000,000 | — | ||||||||||
See notes to the financial statements.
16
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
MARKETABLE SECURITIES—18.04% and 18.19% | |||||||||||
REAL ESTATE RELATED—4.29% and 3.91% | |||||||||||
REAL ESTATE EQUITY SECURITIES—4.09% and 3.72% | |||||||||||
Shares | |||||||||||
2006 | 2005 | Issuer | |||||||||
(Unaudited) | |||||||||||
— | 75,000 | Aames Investment Corp | $ | — | $ | 484,500 | |||||
53,300 | — | Acadia Realty Trust | 1,260,545 | — | |||||||
86,700 | 550,000 | Affordable Residential Communities | 932,025 | 5,241,500 | |||||||
47,900 | — | Alexandria Real Estate Equities, Inc | 4,247,772 | — | |||||||
163,585 | 36,685 | AMB Property Corp | 8,269,222 | 1,803,801 | |||||||
30,000 | 40,000 | American Campus Communities | 745,500 | 992,000 | |||||||
— | 919,000 | American Financial Realty | — | 11,028,000 | |||||||
181,000 | — | Apartment Investment & Management Co | 7,864,450 | — | |||||||
399,200 | 450,000 | Archstone-Smith Trust | 20,307,304 | 18,850,500 | |||||||
100,000 | 150,000 | Ashford Hospitality Trust | 1,262,000 | 1,573,500 | |||||||
33,300 | — | Associated Estates Realty Corp | 412,920 | — | |||||||
138,300 | 40,000 | Avalonbay Communities Inc | 15,298,746 | 3,570,000 | |||||||
— | 150,000 | Bimini Mortgage Management-A | — | 1,357,500 | |||||||
103,000 | — | Biomed Realty Trust Inc | 3,083,820 | — | |||||||
211,200 | — | Boston Properties Inc | 19,092,480 | — | |||||||
29,500 | — | Boykin Lodging Company | 321,255 | — | |||||||
161,300 | — | Brandywine Realty Trust | 5,189,021 | — | |||||||
90,100 | 30,000 | BRE Properties | 4,955,500 | 1,364,400 | |||||||
439,400 | 270,000 | Brookfield Properties | 14,135,498 | 7,943,400 | |||||||
105,200 | — | Camden Property Trust | 7,737,460 | — | |||||||
103,000 | 194,000 | Carramerica Realty Corp | 4,588,650 | 6,718,220 | |||||||
115,000 | — | CBL & Associates Properties | 4,476,950 | — | |||||||
65,000 | 424,000 | Cedar Shopping Centers Inc | 956,800 | 5,965,680 | |||||||
— | 50,000 | Centerpoint Properties Trust | — | 2,474,000 | |||||||
— | 280,000 | Cogdell Spencer Inc | — | 4,729,200 | |||||||
79,000 | — | Colonial Properties Trust | 3,902,600 | — | |||||||
70,400 | — | Corporate Office Properties | 2,962,432 | — | |||||||
90,000 | — | Cousins Properties Inc | 2,783,700 | — | |||||||
179,000 | — | Crescent Real Estate Equity Company | 3,322,240 | — | |||||||
— | 976,000 | Deerfield Triarc Capital Cor | — | 13,371,200 | |||||||
204,000 | 380,000 | Developers Diversified Realty | 10,644,720 | 17,867,600 | |||||||
48,600 | — | Digital Realty Trust Inc | 1,199,934 | — | |||||||
252,100 | 193,400 | Duke Realty Corp | 8,861,315 | 6,459,560 | |||||||
45,000 | — | Eastgroup Properties Inc | 2,100,600 | — | |||||||
— | 1,087,000 | ECC Capital Corp | — | 2,456,620 | |||||||
49,900 | 600,000 | Education Realty Trust Inc | 830,835 | 7,734,000 | |||||||
89,800 | — | Equity Inns Inc | 1,487,088 | — | |||||||
38,800 | — | Equity Lifestyle Properties | 1,700,604 | — | |||||||
697,000 | — | Equity Office Properties Trust | 25,447,470 | — | |||||||
127,000 | — | Equity One Inc | 2,654,300 | — | |||||||
545,500 | 180,000 | Equity Residential | 24,400,215 | 7,041,600 | |||||||
41,000 | — | Essex Property Trust Inc | 4,578,060 | — | |||||||
— | 580,577 | Extra Space Storage Inc | — | 8,940,886 |
See notes to the financial statements.
17
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Shares | |||||||||||
2006 | 2005 | Issuer | |||||||||
(Unaudited) | |||||||||||
93,000 | — | Federal Realty Investment Trust | $ | 6,510,000 | $ | — | |||||
101,000 | — | Felcor Lodging Trust Inc | 2,195,740 | — | |||||||
1,159,100 | 1,367,000 | Feldman Mall Properties | 12,703,736 | 16,417,670 | |||||||
41,600 | 111,600 | First Potomac Realty Trust | 1,239,264 | 2,968,560 | |||||||
78,500 | — | First Industrial Realty Trust | 2,978,290 | — | |||||||
444,700 | 110,000 | General Growth Properties | 20,038,182 | 5,168,900 | |||||||
63,750 | — | Glenborough Realty Trust Inc | 1,373,175 | — | |||||||
60,300 | — | Glimcher Realty Trust | 1,496,043 | — | |||||||
73,800 | 404,800 | GMH Communities Trust | 972,684 | 6,278,448 | |||||||
— | 348,700 | Gramercy Capital Corp | — | 7,943,386 | |||||||
— | 300,000 | Great Wolf Resorts Inc | — | 3,093,000 | |||||||
— | 562,000 | Hersha Hospitality Trust | — | 5,063,620 | |||||||
79,300 | — | Heritage Property Investment | 2,769,156 | — | |||||||
— | 150,000 | Highland Hospitality Corp | — | 1,657,500 | |||||||
95,200 | — | Highwoods Properties Inc | 3,444,336 | — | |||||||
— | 60,000 | Hilton Hotels Corp | — | 1,446,600 | |||||||
56,000 | 80,000 | Home Properties Inc | 3,108,560 | 3,264,000 | |||||||
— | 450,000 | Homebanc Corp/Ga | — | 3,366,000 | |||||||
127,900 | — | Hospitality Properties Trust | 5,617,368 | — | |||||||
976,270 | — | Host Hotels and Resorts Inc | 21,351,025 | — | |||||||
— | 300,000 | Host Marriott Corp | — | 5,685,000 | |||||||
366,700 | — | HRPT Properties Trust | 4,239,052 | — | |||||||
72,000 | — | Innkeepers USA Trust | 1,244,160 | — | |||||||
— | 300,000 | Interstate Hotels & Resorts | — | $ | 1,311,000 | ||||||
— | 80,000 | Istar Financial Inc | — | 2,852,000 | |||||||
— | 1,958,000 | Jameson Inns Inc | — | 4,209,700 | |||||||
— | 100,000 | JER Investors Trust Inc | — | 1,695,000 | |||||||
59,400 | — | Kilroy Realty Corp | 4,291,650 | — | |||||||
445,900 | 108,000 | Kimco Realty Corp | 16,270,891 | 3,464,640 | |||||||
66,000 | 426,000 | Kite Realty Group Trust | 1,028,940 | 6,590,220 | |||||||
— | 300,000 | KKR Financial Corp | — | 7,197,000 | |||||||
75,000 | 200,000 | Lasalle Hotel Properties | 3,472,500 | 7,344,000 | |||||||
— | 120,000 | Lexington Corporate Properties Trust | — | 2,556,000 | |||||||
157,000 | — | Liberty Property Trust | 6,939,400 | — | |||||||
— | 1,266,660 | Lodgian Inc | — | 13,591,262 | |||||||
— | 200,000 | LTC Properties Inc | — | 4,206,000 | |||||||
131,600 | 75,000 | Macerich Company/The | 9,238,320 | 5,035,500 | |||||||
110,000 | 400,000 | Mack-Cali Realty Corp | 5,051,200 | 17,280,000 | |||||||
81,000 | — | Maguire Properties Inc | 2,848,770 | — | |||||||
— | 200,000 | Medical Properties Trust Inc | — | 1,956,000 | |||||||
37,000 | — | Mid-America Apartment Comm | 2,062,750 | — | |||||||
100,200 | 40,000 | Mills Corp/The | 2,680,350 | 1,677,600 | |||||||
— | 100,000 | Mission West Properties | — | 974,000 | |||||||
— | 331,200 | Monmouth REIT-CLA | — | 2,656,224 | |||||||
— | 300,000 | Mortgageit Holdings Inc | — | 4,098,000 | |||||||
— | 130,000 | NewCastle Investment Corp | — | 3,230,500 | |||||||
185,000 | — | New Plan Excel Realty Trust | 4,567,650 | — | |||||||
— | 100,000 | Novastar Financial Inc | — | 2,811,000 |
See notes to the financial statements.
18
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Shares | |||||||||||
2006 | 2005 | Issuer | 2006 | 2005 | |||||||
(Unaudited) | |||||||||||
— | 525,000 | Origen Financial Inc | $ | — | $ | 3,738,000 | |||||
72,000 | — | Pan Pacific Retail Properties Trust | 4,994,640 | — | |||||||
25,100 | 328,100 | Parkway Properties | 1,142,050 | 13,169,934 | |||||||
62,400 | — | Penn Real Estate Investment Trust | 2,519,088 | — | |||||||
69,300 | — | Post Properties, Inc | 3,142,062 | — | |||||||
453,600 | 400,000 | Prologis Trust | 23,641,632 | 18,688,000 | |||||||
37,100 | — | PS Business Parks Inc | 2,188,900 | — | |||||||
243,700 | 30,000 | Public Storage, Inc | 18,496,830 | 2,031,600 | |||||||
28,500 | — | Ramco-Gershenson Properties | 767,505 | — | |||||||
— | 100,000 | RAIT Investment Trust | — | 2,592,000 | |||||||
147,000 | — | Reckson Associates Realty Corp | 6,082,860 | — | |||||||
121,300 | 236,000 | Regency Centers Corp | 7,538,795 | 13,912,200 | |||||||
— | 384,000 | Republic Property Trust | — | 4,608,000 | |||||||
28,600 | — | Saul Centers Inc | 1,166,308 | — | |||||||
81,700 | — | Shurgard Storage Centers-A | 5,106,250 | — | |||||||
416,621 | 305,721 | Simon Property Group Inc | 34,554,545 | 23,427,400 | |||||||
80,300 | — | SL Green Realty Corp | 8,790,441 | — | |||||||
29,100 | — | Sovran Self Storage Inc | 1,477,989 | — | |||||||
— | 350,000 | Starwood Hotels & Resorts | — | 22,351,000 | |||||||
134,700 | — | Strategic Hotel Capital Inc | 2,793,678 | — | |||||||
30,900 | — | Sun Communities Inc | 1,005,177 | — | |||||||
— | 303,820 | Sunset Financial Resources | — | 2,576,394 | |||||||
100,000 | — | Sunstone Hotel Investors Inc | 2,906,000 | — | |||||||
52,300 | — | Tanger Factory Outlet Center | 1,692,951 | — | |||||||
86,400 | — | Taubman Centers Inc | 3,533,760 | — | |||||||
— | 111,200 | Thomas Properties Group | — | 1,391,112 | |||||||
280,000 | 50,000 | Trizec Properties Inc | 8,019,200 | 1,146,000 | |||||||
95,400 | — | U-Store-IT Trust | 1,799,244 | — | |||||||
250,400 | 100,000 | United Dominion Realty Trust | 7,013,704 | 2,344,000 | |||||||
— | 95,000 | Ventas Inc | — | 3,041,900 | |||||||
263,000 | 200,000 | Vornado Realty Trust | 25,655,650 | 16,694,000 | |||||||
74,500 | — | Washington Real Estate Inv | 2,734,150 | — | |||||||
159,600 | — | Weingarten Realty Investors | 6,109,488 | — | |||||||
44,700 | — | Winston Hotels Inc | 547,575 | — | |||||||
— | 944 | Windrose Medical Properties | — | 14,028 | |||||||
TOTAL REAL ESTATE EQUITY SECURITIES | |||||||||||
(Cost $504,834,858 and $411,877,936 ) | 557,167,695 | 426,781,565 | |||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES—0.20% and 0.19% | |||||||||||
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | |||||||||
5,000,000 | — | Credit Suisse Mortgage | |||||||||
5.320% 04/15/21 | 5,001,200 | — | |||||||||
10,000,000 | 10,000,000 | GSMS 2001-Rock A2FL | |||||||||
5.710% 05/03/18 | 10,204,840 | 10,217,650 | |||||||||
10,000,000 | 10,000,000 | MSDWC 2001-280 A2F | |||||||||
5.740% 02/03/16 | 10,149,880 | 10,061,730 |
See notes to the financial statements.
19
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | 2006 | 2005 | |||||||
(Unaudited) | |||||||||||
1,601,634 | 1,601,634 | Trize 2001—TZHA A3FL | |||||||||
5.570% 03/15/13 | $ | 1,601,677 | $ | 1,601,653 | |||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES | |||||||||||
(Cost $26,603,838 and $21,604,079) | 26,957,597 | 21,881,033 | |||||||||
TOTAL REAL ESTATE RELATED | |||||||||||
(Cost $531,438,696 and $433,482,015) | 584,125,292 | 448,662,598 | |||||||||
OTHER—13.75% and 14.28% | |||||||||||
COMMERCIAL PAPER—10.61% and 11.67% | |||||||||||
— | 25,000,000 | Abbey National North America LLC | |||||||||
4.440% 04/12/06 | — | $ | 24,994,000 | ||||||||
20,000,000 | — | Abbey National PLC | |||||||||
5.000% 07/14/06 | 19,998,000 | — | |||||||||
25,000,000 | 25,000,000 | Abbey National PLC | |||||||||
5.000% 07/18/06 | 24,996,500 | 24,999,500 | |||||||||
— | 10,000,000 | Alabama Power Co | |||||||||
4.250% 01/12/06 | — | 9,989,100 | |||||||||
11,000,000 | 25,000,000 | American Express Centurion Bank | |||||||||
4.950% 07/06/06 | 10,999,670 | 25,000,000 | |||||||||
9,000,000 | — | American Express Centurion Bank | |||||||||
5.440% 09/26/06 | 9,000,900 | — | |||||||||
20,000,000 | — | American Express Centurion Bank | |||||||||
5.300% 07/28/06 | 20,000,400 | — | |||||||||
10,000,000 | — | American Express Centurion Bank | |||||||||
5.300% 07/28/06 | 10,000,200 | — | |||||||||
20,000,000 | 2,430,000 | American Honda Finance, Corp | |||||||||
5.010% 08/03/06 | 19,908,800 | 2,428,250 | |||||||||
— | 10,000,000 | Atlantis One Funding Corp | |||||||||
4.620% 04/27/06 | — | 9,936,500 | |||||||||
— | 25,000,000 | Atlantis One Funding Corp | |||||||||
4.650% 05/01/06 | — | 24,890,750 | |||||||||
20,000,000 | 25,000,000 | Bank of Montreal | |||||||||
4.990% 09/20/06 | 19,979,000 | 24,999,500 | |||||||||
25,000,000 | — | Bank of Montreal | |||||||||
5.050% 07/13/06 | 24,998,250 | — | |||||||||
15,000,000 | 30,000,000 | Barclay’s Bank, PLC | |||||||||
5.290% 08/30/06 | 14,999,550 | 29,998,200 | |||||||||
22,000,000 | 15,000,000 | Barclay’s Bank, PLC | |||||||||
5.110% 08/14/06 | 21,993,620 | 14,999,400 | |||||||||
— | 18,040,000 | Becton Dickinson & Co. | |||||||||
4.210% 01/24/06 | — | 17,994,719 | |||||||||
20,000,000 | 13,100,000 | Beta Finance, Inc | |||||||||
4.970% 07/10/06 | 19,979,200 | 13,085,590 | |||||||||
13,000,000 | 11,000,000 | Beta Finance, Inc | |||||||||
5.070% 07/25/06 | 12,957,750 | 10,981,190 | |||||||||
17,000,000 | 20,000,000 | Calyon | |||||||||
5.070% 07/21/06 | 16,997,960 | 19,997,800 |
See notes to the financial statements.
20
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | |||||||||
(Unaudited) | |||||||||||
9,000,000 | — | Calyon | |||||||||
4.960% 07/11/06 | $ | 8,989,470 | $ | — | |||||||
5,375,000 | — | Calyon | |||||||||
4.960% 08/11/06 | 5,344,201 | — | |||||||||
20,000,000 | — | Canadian Imperial Holdings, Inc | |||||||||
5.310% 08/28/06 | 19,833,600 | — | |||||||||
— | 10,000,000 | Canadian Wheat Board (The) | |||||||||
4.320% 02/06/06 | — | 9,959,500 | |||||||||
9,150,000 | — | Caterpillar Financial Services Corporation | |||||||||
5.100% 07/05/06 | 9,147,346 | — | |||||||||
17,000,000 | 14,000,000 | CC (USA), Inc | |||||||||
5.030% 07/10/06 | 16,982,320 | 13,982,920 | |||||||||
2,153,000 | — | CC (USA), Inc | |||||||||
5.270% 08/24/06 | 2,136,357 | — | |||||||||
5,000,000 | — | CC (USA), Inc | |||||||||
5.010% 07/12/06 | 4,993,300 | — | |||||||||
25,000,000 | — | CC (USA), Inc | |||||||||
5.010% 07/24/06 | 24,922,500 | — | |||||||||
5,000,000 | 40,000,000 | Ciesco LP | |||||||||
5.020% 07/11/06 | 4,994,050 | 39,903,200 | |||||||||
10,000,000 | 10,000,000 | Ciesco LP | |||||||||
5.050% 07/14/06 | 9,983,700 | 9,936,500 | |||||||||
20,000,000 | — | Ciesco LP | |||||||||
5.330% 08/24/06 | 19,845,400 | — | |||||||||
15,000,000 | — | Ciesco LP | |||||||||
5.320% 09/19/06 | 14,824,050 | — | |||||||||
13,000,000 | 13,000,000 | Citigroup Funding Inc. | |||||||||
4.980% 07/24006 | 12,960,090 | 12,923,560 | |||||||||
29,170,000 | 37,000,000 | Citigroup Funding Inc. | |||||||||
5.030% 07/27/06 | 29,067,613 | 36,925,260 | |||||||||
— | 24,150,000 | Colgate-Palmolive Co | |||||||||
4.250% 01/06/06 | — | 24,141,306 | |||||||||
15,000,000 | 15,000,000 | Corporate Asset Funding Corp, Inc | |||||||||
5.030% 07/13/06 | 14,977,800 | 14,981,700 | |||||||||
8,000,000 | 5,035,000 | Corporate Asset Funding Corp, Inc | |||||||||
5.050% 07/28/06 | 7,970,400 | 5,022,815 | |||||||||
— | 16,000,000 | Corporate Asset Funding Corp, Inc | |||||||||
4.740% 05/15/06 | — | 15,957,440 | |||||||||
— | 5,905,000 | Corporate Asset Funding Corp, Inc | |||||||||
4.680% 05/04/06 | — | 5,884,982 | |||||||||
— | 2,020,000 | Corporate Asset Funding Corp, Inc | |||||||||
4.360% 02/17/06 | — | 2,008,930 | |||||||||
24,000,000 | 50,000,000 | Dexia Bank | |||||||||
5.370% 08/29/06 | 24,001,440 | 49,998,000 | |||||||||
25,000,000 | 25,000,000 | Deutsche Bank | |||||||||
4.930% 07/05/06 | 24,999,500 | 24,997,000 | |||||||||
5,000,000 | — | Deutsche Bank | |||||||||
5.050% 07/17/06 | 4,999,500 | — |
See notes to the financial statements.
21
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | 2006 | 2005 | |||||||
(Unaudited) | |||||||||||
20,000,000 | — | Deutsche Bank | |||||||||
5.050% 07/12/06 | $ | 19,998,800 | $ | — | |||||||
5,300,000 | 20,000,000 | Dorada Finance Inc | |||||||||
5.010% 07/10/06 | 5,294,488 | 19,865,600 | |||||||||
3,085,000 | 8,000,000 | Dorada Finance Inc | |||||||||
5.010% 07/31/06 | 3,072,228 | 7,980,640 | |||||||||
25,000,000 | 21,500,000 | Dorada Finance Inc | |||||||||
5.100% 08/25/06 | 24,803,000 | 21,384,975 | |||||||||
7,000,000 | 13,000,000 | Edison Asset Securitization, LLC | |||||||||
5.000% 08/23/06 | 6,946,870 | 12,977,770 | |||||||||
10,100,000 | 7,248,000 | Edison Asset Securitization, LLC | |||||||||
5.050% 08/08/06 | 10,046,066 | 7,162,981 | |||||||||
1,000,000 | 20,000,000 | Edison Asset Securitization, LLC | |||||||||
5.150% 08/30/06 | 991,340 | 19,877,800 | |||||||||
21,000,000 | — | Edison Asset Securitization, LLC | |||||||||
5.030% 08/02/06 | 20,906,550 | — | |||||||||
— | 20,000,000 | FCAR Owner Trust I | |||||||||
4.740% 05/10/06 | — | 19,915,000 | |||||||||
17,000,000 | 17,000,000 | First Tennessee National Bank | |||||||||
5.100% 08/07/06 | 16,995,920 | 16,999,660 | |||||||||
13,650,000 | — | Gannett Inc | |||||||||
5.250% 07/18/06 | 13,619,970 | — | |||||||||
25,000,000 | 21,590,000 | General Electric Capital Corp | |||||||||
5.030% 08/04/06 | 24,883,000 | 21,282,342 | |||||||||
— | 25,000,000 | General Electric Capital Corp | |||||||||
4.520% 06/28/06 | — | 24,435,000 | |||||||||
17,000,000 | 35,000,000 | Goldman Sachs Group, LP | |||||||||
4.810% 11/02/06 | 16,684,820 | 34,870,150 | |||||||||
11,000,000 | 29,140,000 | Govco Incorporated | |||||||||
4.950% 07/19/06 | 10,973,930 | 29,118,436 | |||||||||
4,400,000 | 10,000,000 | Govco Incorporated | |||||||||
5.340% 12/18/06 | 4,286,304 | 9,981,700 | |||||||||
21,200,000 | 9,000,000 | Govco Incorporated | |||||||||
5.310% 08/15/06 | 21,064,956 | 8,922,420 | |||||||||
29,000,000 | 20,000,000 | Grampian Funding LLC | |||||||||
5.270% 07/05/06 | 28,978,773 | 19,929,600 | |||||||||
10,000,000 | 5,015,000 | Grampian Funding LLC | |||||||||
4.960% 09/05/06 | 9,904,200 | 5,002,814 | |||||||||
10,000,000 | — | Grampian Funding LLC | |||||||||
4.880% 08/11/06 | 9,942,200 | — | |||||||||
1,010,000 | — | Grampian Funding LLC | |||||||||
5.310% 09/15/06 | 998,759 | — | |||||||||
5,000,000 | 10,000,000 | Greyhawk Funding LLC | |||||||||
4.960% 07/11/06 | 4,994,050 | 9,996,300 | |||||||||
20,000,000 | — | Greenwich Capital Holdings, Inc | |||||||||
5.340% 10/19/06 | 19,674,800 | — | |||||||||
13,000,000 | 25,000,000 | Harrier Finance Funding (US) LLC | |||||||||
4.970% 07/12/06 | 12,982,580 | 24,933,500 |
See notes to the financial statements.
22
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | |||||||||
(Unaudited) | |||||||||||
7,000,000 | — | Harrier Finance Funding (US) LLC | |||||||||
5.050% 07/14/06 | $ | 6,988,590 | $ | — | |||||||
12,775,000 | — | Harrier Finance Funding (US) LLC | |||||||||
5.020% 07/13/06 | 12,756,093 | — | |||||||||
13,505,000 | 10,085,000 | HBOS Treasury Srvcs Plc | |||||||||
4.980% 07/19/06 | 13,473,398 | 10,033,163 | |||||||||
15,000,000 | — | HBOS Treasury Srvcs Plc | |||||||||
5.050% 08/08/06 | 14,920,800 | — | |||||||||
4,270,000 | — | HBOS Treasury Srvcs Plc | |||||||||
5.050% 08/18/06 | 4,241,007 | — | |||||||||
24,000,000 | — | HSBC Finance Corporation | |||||||||
5.030% 07/20/06 | 23,940,000 | — | |||||||||
41,110,000 | 31,740,000 | Kitty Hawk Funding Corp | |||||||||
5.290% 07/26/06 | 40,969,815 | 31,705,086 | |||||||||
— | 10,000,000 | Kitty Hawk Funding Corp | |||||||||
4.780% 05/18/06 | — | 9,947,600 | |||||||||
4,000,000 | 25,000,000 | Links Finance L.L.C. | |||||||||
4.940% 07/06/06 | 3,998,240 | 24,884,750 | |||||||||
— | 25,000,000 | Links Finance L.L.C. | |||||||||
4.770% 06/08/06 | — | 24,787,750 | |||||||||
25,000,000 | — | McGraw-Hill, Inc | |||||||||
5.260% 07/28/06 | 24,908,250 | — | |||||||||
32,000,000 | — | Merrill Lynch & Company, Inc. | |||||||||
5.260% 07/06/06 | 31,985,920 | — | |||||||||
48,000,000 | — | Morgan Stanley | |||||||||
5.270% 07/06/06 | 47,978,880 | — | |||||||||
17,000,000 | 10,000,000 | Paccar Financial Corp | |||||||||
5.040% 08/10/06 | 16,905,140 | 9,989,200 | |||||||||
10,000,000 | 13,655,000 | Paccar Financial Corp | |||||||||
5.060% 08/15/06 | 9,936,700 | 13,557,913 | |||||||||
10,000,000 | 20,080,000 | Park Avenue Receivables Corp | |||||||||
5.280% 07/26/06 | 9,965,800 | 20,021,166 | |||||||||
— | 10,000,000 | Park Avenue Receivables Corp | |||||||||
4.290% 01/04/06 | — | 9,998,800 | |||||||||
— | 10,000,000 | Preferred Receivables Funding Corp | |||||||||
4.670% 05/04/06 | — | 9,996,300 | |||||||||
10,000,000 | 15,000,000 | Private Export Funding Corporation | |||||||||
4.990% 07/05/06 | 9,997,100 | 14,926,500 | |||||||||
15,000,000 | 5,000,000 | Private Export Funding Corporation | |||||||||
5.020% 08/09/06 | 14,918,100 | 4,944,250 | |||||||||
14,000,000 | 9,000,000 | Private Export Funding Corporation | |||||||||
4.660% 07/06/06 | 13,993,840 | 8,929,260 | |||||||||
— | 19,150,000 | Private Export Funding Corporation | |||||||||
4.530% 05/09/06 | — | 19,070,145 | |||||||||
— | 20,000,000 | Proctor & Gamble | |||||||||
4.490% 04/04/06 | — | 19,983,200 | |||||||||
— | 3,500,000 | Proctor & Gamble | |||||||||
4.090% 01/26/06 | — | 3,490,445 |
See notes to the financial statements.
23
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | 2006 | ||||||||
(Unaudited) | |||||||||||
9,500,000 | — | Rabobank USA Financial Corp | |||||||||
4.960% 07/13/06 | $ | 9,486,130 | $ | — | |||||||
40,340,000 | — | Rabobank USA Financial Corp | |||||||||
4.970% 09/29/06 | 39,809,126 | — | |||||||||
27,000,000 | 50,000,000 | Ranger Funding Company LLC | |||||||||
5.330% 08/16/06 | 26,824,230 | 49,914,500 | |||||||||
— | 17,000,000 | Regions Bank (Alabama) | |||||||||
4.180% 01/30/06 | — | 16,998,130 | |||||||||
20,000,000 | — | Royal Bank of Canada | |||||||||
5.170% 09/21/06 | 19,988,600 | — | |||||||||
10,680,000 | — | Royal Bank of Canada | |||||||||
4.850% 07/28/06 | 10,676,262 | — | |||||||||
20,515,000 | — | Scaldis Capital LLC | |||||||||
5.230% 07/17/06 | 20,472,329 | — | |||||||||
10,000,000 | — | Scaldis Capital LLC | |||||||||
5.110% 09/15/06 | 9,888,700 | — | |||||||||
7,175,000 | — | Sheffield Receivable Corporation | |||||||||
5.290% 07/21/06 | 7,155,843 | — | |||||||||
5,000,000 | — | Sheffield Receivable Corporation | |||||||||
4.820% 09/05/06 | 4,952,100 | — | |||||||||
20,000,000 | — | Shell International Finance B.V. | |||||||||
5.000% 07/31/06 | 19,918,200 | — | |||||||||
8,600,000 | — | Shell International Finance B.V. | |||||||||
5.260% 07/03/06 | 8,596,230 | — | |||||||||
— | 540,000 | Sherwin-Williams Co | |||||||||
4.070% 02/07/06 | — | 537,732 | |||||||||
8,500,000 | 14,390,000 | Sigma Finance Inc | |||||||||
5.030% 07/20/06 | 8,478,580 | 14,374,171 | |||||||||
— | 8,000,000 | Sigma Finance Inc | |||||||||
4.610% 05/05/06 | — | 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 | |||||||||
18,800,000 | 6,030,000 | Societe Generale North America, Inc | |||||||||
5.030% 08/22/06 | 18,661,256 | 5,974,283 | |||||||||
10,280,000 | — | Societe Generale North America, Inc | |||||||||
5.010% 09/25/06 | 10,151,089 | — | |||||||||
10,000,000 | — | Societe Generale North America, Inc | |||||||||
4.830% 10/06/06 | 9,857,600 | — | |||||||||
10,021,000 | — | Societe Generale North America, Inc | |||||||||
5.060% 08/23/06 | 9,945,542 | — | |||||||||
20,000,000 | — | Suntrust | |||||||||
5.080% 05/01/07 | 20,001,000 | — | |||||||||
5,000,000 | 27,600,000 | Swedish Export Credit Corp | |||||||||
5.000% 07/11/06 | 4,994,150 | 27,550,596 |
See notes to the financial statements.
24
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | 2006 | 2005 | |||||||
(Unaudited) | |||||||||||
5,000,000 | — | Swedish Export Credit Corp | |||||||||
5.000% 07/12/06 | $ | 4,993,400 | $ | — | |||||||
30,000,000 | — | Swedish Export Credit Corp | |||||||||
5.290% 08/31/06 | 29,726,942 | — | |||||||||
21,000,000 | — | Toronto Dominion Bank | |||||||||
5.180% 09/22/06 | 20,988,240 | — | |||||||||
3,775,000 | — | Toronto Dominion Holdings (U.S.) | |||||||||
4.800% 10/27/06 | 3,708,900 | — | |||||||||
15,000,000 | 15,000,000 | Toyota Motor Credit Corp | |||||||||
5.090% 10/10/06 | 15,000,750 | 15,000,900 | |||||||||
— | 24,000,000 | UBS Finance, (Delaware) Inc | |||||||||
4.580% 04/10/06 | — | 23,891,280 | |||||||||
— | 3,120,000 | UBS Finance, (Delaware) Inc | |||||||||
4.850% 06/30/06 | — | 3,079,190 | |||||||||
15,000,000 | 25,000,000 | Variable Funding Capital Corporation | |||||||||
4.920% 07/03/06 | 15,000,000 | 24,993,750 | |||||||||
— | 5,010,000 | Washington Gas Light Co | |||||||||
4.330% 01/09/06 | — | 5,006,393 | |||||||||
— | 20,000,000 | Wells Fargo | |||||||||
4.770% 05/05/06 | — | 19,999,600 | |||||||||
— | 19,460,000 | Yorktown Capital, LLC | |||||||||
4.700% 04/18/06 | — | 19,457,665 | |||||||||
— | 2,625,000 | Yorktown Capital, LLC | |||||||||
4.630% 04/21/06 | — | 2,611,893 | |||||||||
— | 4,066,000 | Yorktown Capital, LLC | |||||||||
4.350% 01/06/06 | — | 4,064,496 | |||||||||
TOTAL COMMERCIAL PAPER | |||||||||||
(Cost $1,447,039,450 and $1,340,511,661) | |||||||||||
GOVERNMENT AGENCY BONDS—3.14% and 2.61% | |||||||||||
30,000,000 | 7,030,000 | Federal Home Loan Banks | |||||||||
4.950% 08/18/06 | 29,801,700 | 7,027,383 | |||||||||
32,260,000 | — | Federal Home Loan Banks | |||||||||
4.900% 07/07/06 | 32,241,612 | — | |||||||||
12,000,000 | — | Federal Home Loan Banks | |||||||||
5.110% 07/19/06 | 11,972,520 | — | |||||||||
50,000,000 | — | Federal Home Loan Banks | |||||||||
5.060% 07/06/06 | 49,978,500 | — | |||||||||
28,535,000 | 30,000,000 | Federal Home Loan Mortgage Corp | |||||||||
5.180% 08/01/06 | 28,416,294 | 30,000,000 | |||||||||
16,380,000 | 18,000,000 | Federal Home Loan Mortgage Corp | |||||||||
4.800% 09/12/06 | 16,210,958 | 17,922,240 | |||||||||
735,000 | 50,000,000 | Federal Home Loan Mortgage Corp | |||||||||
4.860% 12/01/06 | 718,815 | 49,839,500 | |||||||||
13,990,000 | 3,840,000 | Federal Home Loan Mortgage Corp | |||||||||
4.870% 07/25/06 | 13,945,932 | 3,837,351 | |||||||||
30,000,000 | — | Federal Home Loan Mortgage Corp | |||||||||
4.965% 07/26/06 | 29,871,000 | — |
See notes to the financial statements.
25
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
June 30, 2006 and December 31, 2005
Principal | |||||||||||
2006 | 2005 | Issuer, Current Rate and Maturity Date | 2006 | 2005 | |||||||
(Unaudited) | |||||||||||
5,150,000 | — | Federal Home Loan Mortgage Corp | |||||||||
5.020% 11/14/06 | $ | 5,049,575 | $ | — | |||||||
2,070,000 | — | Federal Home Loan Mortgage Corp | |||||||||
4.940% 08/21/06 | 2,055,427 | — | |||||||||
30,555,000 | — | Federal Home Loan Mortgage Corp | |||||||||
4.940% 08/15/06 | 30,366,170 | — | |||||||||
10,000,000 | — | Federal Home Loan Mortgage Corp | |||||||||
4.940% 08/16/06 | 9,936,800 | — | |||||||||
5,740,000 | 37,615,000 | Federal National Mortgage Association | |||||||||
5.240% 08/16/06 | 5,703,723 | 37,584,908 | |||||||||
30,345,000 | 23,940,000 | Federal National Mortgage Association | |||||||||
4.910% 07/11/06 | 30,310,407 | 23,797,557 | |||||||||
17,710,000 | 46,555,000 | Federal National Mortgage Association | |||||||||
4.900% 07/21/06 | 17,664,308 | 46,512,169 | |||||||||
7,405,000 | 29,320,000 | Federal National Mortgage Association | |||||||||
4.890% 07/26/06 | 7,380,638 | 29,217,380 | |||||||||
30,000,000 | 1,766,000 | Federal National Mortgage Association | |||||||||
5.180% 07/24/06 | 29,896,400 | 1,757,135 | |||||||||
20,000,000 | 50,000,000 | Federal National Mortgage Association | |||||||||
4.920% 07/19/06 | 19,954,200 | 49,737,500 | |||||||||
10,000,000 | 3,015,000 | Federal National Mortgage Association | |||||||||
4.930% 09/01/06 | 9,912,800 | 3,004,809 | |||||||||
38,577,000 | — | Federal National Mortgage Association | |||||||||
4.950% 08/21/06 | 38,305,418 | — | |||||||||
8,395,000 | — | Federal National Mortgage Association | |||||||||
4.790% 08/30/06 | 8,325,070 | — | |||||||||
TOTAL GOVERNMENT AGENCY BONDS | |||||||||||
(Cost $428,002,108 and $300,164,529 ) | 428,018,267 | 300,237,932 | |||||||||
TOTAL OTHER | |||||||||||
(Cost $1,875,041,558 and $1,640,676,190 ) | 1,874,997,180 | 1,640,894,515 | |||||||||
TOTAL MARKETABLE SECURITIES | |||||||||||
(Cost $2,406,480,254 and $2,074,158,205) | 2,459,122,472 | 2,089,557,113 | |||||||||
TOTAL INVESTMENTS—100.00% | |||||||||||
(Cost $12,066,489,678 and $10,546,969,360) | $ | 13,633,283,692 | $ | 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. |
26
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and notes contained in this report.
As of June 30, 2006, the TIAA Real Estate Account (the “Account”) had Total Net Assets in the amount of $12,454,457,671, an 18.1% increase from December 31, 2005. The growth in net assets continues to be fueled by the strong flow of funds into the Account, which includes real estate income, dividends and interest, premiums and net transfers into the Account.
As of June 30, 2006, the Account owned a total of 116 real estate properties (eleven of which were held in joint ventures) representing 79.60% of the Account’s total investment portfolio. The real estate portfolio included 48 office properties (six of which were held in joint ventures and one of which was located in London, England), 31 industrial properties (including one held in a joint venture), 27 apartment complexes, 9 retail properties (including three held in joint ventures), and a 75% joint venture partnership interest in a portfolio of storage facilities.
The Account was active in the real estate market during the second quarter of 2006, closing on six real estate transactions. As a result, the Account’s investments in real estate properties (including joint ventures) increased to 79.60% of Total Investments at June 30, 2006, compared to 75.70% of Total Investments at March 31, 2006. In addition to real estate purchases, the Account originated its first mortgage loan in the amount of $75 million, secured by an apartment complex located in Washington, D.C. The mortgage has a 5 year term and a floating interest rate.
The Account’s six real estate acquisitions during the second quarter of 2006 totaled $1,016.9 million. The Account purchased three office buildings located in: Beverly Hills, California for an investment of $196.3 million, subject to $112.7 million in debt; Dallas, Texas for $44.3 million; and Boca Raton, Florida for $63.2 million. The Account also purchased three portfolios of apartments, two located in Phoenix and Scottsdale, Arizona and one in Houston, Texas, for $178.1 million, $230.6 million and $304.4 million, respectively.
The Account’s real estate portfolio is diversified by location and property type and, at June 30, 2006, no single property represented more than 3.92% of its Total Investments, or 4.93% of its Total Real Estate 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 June 30, 2006.
Diversification by Market Value |
Office | (48) | 20.0 | % | 18.2 | % | 12.9 | % | 3.4 | % | 0.0 | % | 3.7 | % | 58.2 | % | ||||||||
Apartment | (27) | 2.0 | % | 9.1 | % | 7.7 | % | 0.0 | % | 0.0 | % | 0.0 | % | 18.8 | % | ||||||||
Industrial | (31) | 3.1 | % | 6.9 | % | 3.2 | % | 1.7 | % | 0.6 | % | 0.0 | % | 15.5 | % | ||||||||
Retail | (9) | 1.3 | % | 1.1 | % | 4.4 | % | 0.0 | % | 0.0 | % | 0.0 | % | 6.8 | % | ||||||||
Other*** | (1) | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.7 | % | 0.0 | % | 0.7 | % | ||||||||
TOTAL | (116) | 26.4 | % | 35.3 | % | 28.2 | % | 5.1 | % | 1.3 | % | 3.7 | % | 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 - United Kingdom |
*** | Represents a portfolio of storage facilities located in various regions across the U.S. |
27
Property Name | ||||||||||||||
1001 Pennsylvania Ave | Washington | DC | Office | $535.0 | (b) | 4.93% | 3.92% | |||||||
1& 7 Westferry Circus | London | UK | Office | $397.9 | (c) | 3.67% | 2.92% | |||||||
50 Fremont Street | San Francisco | CA | Office | $390.0 | (d) | 3.59% | 2.86% | |||||||
IDX Tower | Seattle | WA | Office | $382.0 | (e) | 3.52% | 2.80% | |||||||
Houston Apartment | ||||||||||||||
Portfolio | Houston | TX | Apartment | $304.4 | 2.81% | 2.23% | ||||||||
Four Oaks Place | Houston | TX | Office | $296.0 | 2.73% | 2.17% | ||||||||
99 High Street | Boston | MA | Office | $291.5 | (f) | 2.69% | 2.14% | |||||||
780 Third Avenue | New York City | NY | Office | $268.0 | 2.47% | 1.97% | ||||||||
Lincoln Centre | Dallas | TX | Office | $262.0 | (g) | 2.41% | 1.92% | |||||||
Ontario Industrial | ||||||||||||||
Portfolio | Ontario | CA | Industrial | $260.4 | (h) | 2.40% | 1.91% |
(a) | Value as reported in the June 30, 2006 Statement of Investments. Investments owned 100% by the Account 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 $321.1 M. |
(c) | This property is shown gross of debt. The value of the Account’s interest less leverage is $152.0 M. The market value has been converted to U.S. dollars from British pounds at the exchange rate as of June 30, 2006. |
(d) | This property is shown gross of debt. The value of the Account’s interest less leverage is $252.7 M. |
(e) | This property is shown gross of debt. The value of the Account’s interest less leverage is $234.0 M. |
(f) | This property is shown gross of debt. The value of the Account’s interest less leverage is $114.9 M. |
(g) | This property is shown gross of debt. The value of the Account’s interest less leverage is $116.5 M. |
(h) | This property is shown gross of debt. The value of the Account’s interest less leverage is $250.6 M. |
| |||||||||
# of | % of Total | ||||||||
Metropolitan Statistical Area | Investments | Investments | |||||||
Washington D.C.-Arlington-Alexandria | 97 | % | 10 | 9.38 | % | ||||
Los Angeles-Long Beach-Glendale | 98 | % | 8 | 5.82 | % | ||||
San Francisco-San Mateo-Redwood City | 94 | % | 4 | 5.77 | % | ||||
Houston-Bay Town-Sugar Land | 96 | % | 3 | 4.69 | % | ||||
Dallas-Plano-Irving | 91 | % | 5 | 3.98 | % |
As of June 30, 2006, the Account also held investments in real estate limited partnerships, representing 1.81% of Total Investments, real estate equity securities, representing 4.09% of Total Investments, mortgages, representing 0.55% of Total Investments, commercial mortgage-backed securities (CMBS), representing 0.20% of Total Investments, commercial paper representing 10.61% of Total Investments, and government agency bonds, representing 3.14% of Total Investments.
Real Estate Market Outlook In General
United States real estate markets and the national economy experienced modest improvement during the second quarter of 2006. Real estate market fundamentals continued to strengthen and the market is healthy, but the rates of improvement in market conditions and the growth of the national economy slowed during the quarter. Still,
28
investor interest and purchases of commercial real estate remained strong and continue to support real estate values. Nonetheless, real estate values can be affected by prospective changes in economic and capital market conditions as well as by changes in real estate supply and demand at the local level.
Payroll employment in the United States grew by 325,000 in the second quarter of 2006, as compared with an increase of 529,000 in the first quarter of 2006. The largest employment gains were reported by the health care, professional and business services sectors. Financial services, a key office-using sector, saw minimal job growth during the quarter. Employment in the Account’s top five metropolitan areas grew at a healthy pace during the second quarter of 2006. Of the Account’s five top markets, employment growth was strongest in the Dallas metropolitan area, where employment grew 3.6% 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 second quarter of 2006: Houston grew by 2.9%, San Francisco by 1.4%, Los Angeles by 1.2%, and Chicago by 1.2% . The overall employment growth for the United States was 1.4% in the second quarter of 2006.
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. With the United States economy creating 854,000 jobs during the first two quarters of 2006, 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 13.1% in the second quarter of 2006, compared with 13.4% in the first quarter of 2006. In comparison, for the second quarter of 2006, the vacancy rate of the Account’s office portfolio was 10.1%, 3.0% lower than the national average. While office vacancy rates have now declined for twelve consecutive quarters, the declines in the national vacancy rate during the second quarter of 2006 and the first quarter of 2006 were the smallest quarterly declines since late 2003.
Real estate conditions in the Account’s top office markets have experienced measurable improvement in recent quarters. For example, office vacancies in the Washington, D.C. metropolitan area are well below the national average and stand at 9.2% at the end of the second quarter of 2006; vacancies in the District of Columbia, where the largest concentration of the Account’s investments are located, averaged 6.2% at the end of the second quarter of 2006. In San Francisco, vacancies have declined to 12.5% in the second quarter of 2006 as compared with 12.9% in the first quarter of 2006. Similarly, vacancies in Boston, Los Angeles, and Seattle, which are the Account’s remaining top office markets, have experienced steady declines in vacancies over the past year. Average vacancies in Boston, Los Angeles, and Seattle at the end of the second quarter of 2006 were 13.4%, 10.4% and 10.6%, respectively.
For the second consecutive quarter, industrial market vacancies in the United States at the end of the second quarter of 2006 were unchanged at 9.9% . While the national vacancy rate was unchanged, Torto Wheaton Research noted that vacancies in the second quarter declined in 30 of the 55 industrial markets that it tracks, and, in addition, noted that, “demand for industrial space is still moving in the right direction”. The vacancy rate for the Account’s industrial portfolio averaged 4.5% in the second quarter of 2006.
29
The Account’s top industrial markets include the nation’s top distribution hubs, such as Riverside and Los Angeles, where vacancies averaged 6.8% and 4.7%, respectively, in the second quarter of 2006. Vacancies in Chicago (12.1%) and Dallas (12.2%) were above the national average, but vacancies declined in both markets during the second quarter. Vacancies in Atlanta increased to 13.2% in the second quarter of 2006 from 12.9% in the first quarter of 2006, but have declined from 14.1% in the second quarter of 2005. The vacancy rates at the end of the second quarter for the Account’s industrial portfolios in the Riverside, Los Angeles, Chicago, and Atlanta markets were 0%, 6.0%, 8.3%, and 12.5%, respectively. In Dallas, the Account owns one portfolio of industrial properties, which was 30% vacant at June 30, 2006.
Apartment market conditions showed modest improvement during the second quarter of 2006. Torto Wheaton Research reported that vacancy rates in the nation’s largest metropolitan markets averaged 4.4% in the second quarter of 2006, compared with 4.5% in the first quarter of 2006. Torto Wheaton noted that “rental apartments continue to benefit from the slowing housing market and expanding employment; however, the pace of improvement has slowed considerably and is likely to slow even more through year-end.” The average vacancy rate for the Account’s apartment portfolio was 2.5% for the second quarter of 2006.
U.S. retail markets remained relatively healthy during the second quarter of 2006. According to Torto Wheaton Research, vacancies in neighborhood and community centers averaged 8.5% at the end of the second quarter of 2006 versus 8.2% for the first quarter of 2006. Vacancies have now increased for two consecutive quarters, and Torto Wheaton Research believes that “high gas prices and the weak housing market have begun to wear on consumers’ discretionary spending.” Still, vacancies declined in 15 of the 41 retail markets that Torto Wheaton Research tracks. The average vacancy rate for the Account’s retail portfolio was 3.4%, and, for its neighborhood and community centers, was 3.5% at the end of the second quarter of 2006.
Overall, Torto Wheaton Research believes that commercial real estate construction remains at manageable levels. According to Torto Wheaton Research, office construction nationally is expected to total roughly 55 million square feet in 2006, which is well below the average annual construction of 90 million square feet per year during the 1999-2002 cyclical peak. Industrial construction is expected to total 172 million square feet nationally in 2006 as compared with the average annual construction of 235 million square feet per year during the 1998-2001 cyclical peak. Torto Wheaton Research expects apartment construction to total 220,000 units in 2006, up from 205,000 units in 2005. Nevertheless, Torto Wheaton Research expects apartment vacancies to decline slightly in 2006. Further, Torto Wheaton Research believes that retail construction is expected to total 23 million square feet in 2006, which is virtually the same amount built in 2005. Torto Wheaton Research expects retail vacancies to increase slightly over the remainder of 2006 because of reduced retail space demand as consumer spending weakens.
On balance, management believes that economic and property market fundamentals remain solid, and near term prospects appear promising. However, real estate markets are cyclical, and current market conditions, while positive, are subject to change in the
30
future. While employment growth remains steady, it moderated during the second quarter of 2006, and a number of economists expect employment growth to remain modest during the balance of 2006. Further, recent data suggest that improvements in office, industrial, and apartment market conditions are slowing. For the retail sector, market conditions remain healthy but vacancies increased during the first half of the year and could increase further if consumer spending continues to be constrained by high gas and energy prices and a softer housing market. Continued employment growth is needed to maintain market fundamentals and sustain demand for all types of commercial real estate.
Results of OperationsSix Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
PerformanceFor the six months ended June 30, 2006, the Account’s total net return was 8.06% . This was 209 basis points higher than the return of 5.97% for the six months ending June 30, 2005. The Account’s strong performance in the 2006 period was primarily due to substantial capital appreciation on the Account’s real estate assets, including joint ventures, as well as an increase in interest rates on its marketable securities. The Account’s total net assets grew 40% from June 30, 2005 to June 30, 2006. The primary drivers of this growth were significant net participant transactions and the Account’s realized and unrealized gains on its investments over the last twelve months.
Income and ExpensesThe Account’s net investment income, after deduction of all expenses, increased by 31% for the six months ended June 30, 2006 compared to the same period in 2005. This was due to a 40% increase in total net assets, which included a 48% increase in real estate and joint ventures holdings.
The Account’s real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 79% of the Account’s total investment income (before deducting Account level expenses) during the six months ended June 30, 2006, as compared to 88% for the six-month period ended June 30, 2005. The remaining portion of the Account’s total investment income was generated by investments in marketable securities, including real estate equity securities, commercial paper and government bonds. The decline in the percentage of the Account’s total investment income derived from its real estate holdings was primarily due to increased income from its marketable securities and a decline in joint venture income.
Gross real estate rental income increased 35% in the six months ended June 30, 2006 compared to the same period in 2005. The increase in real estate income for the six months ended June 30, 2006 was due primarily to the increase in the number and size of properties owned by the Account (116 as of June 30, 2006 vs. 104 at June 30, 2005). Income from real estate joint ventures and limited partnerships during the six months ended June 30, 2006 was $24,553,167, as compared to $35,897,681 for the same period in 2005. The 32% decrease was due to the properties owned by the joint ventures hold-
31
ing more cash in order to fund certain expenditures, including capital improvements, thereby decreasing joint venture distributions. Investment income on the Account’s marketable securities for the six months ended June 30, 2006 and 2005 totaled $59,792,873 and $25,051,071, respectively. This increase was due to an increase in the amount of non-real estate assets held by the Account relative to Total Investments, and an increase in market interest rates during the first six months of 2006.
Total property level expenses for the six months ended June 30, 2006 and 2005 were $180,135,775 and $130,142,363, respectively. The 38% increase in property level expenses during the six months ended June 30, 2006 was a result of the increased number and size of properties held in the Account and interest expense incurred in 2006, due to an increase in the overall leverage on the Account. The interest expense incurred in the six months ended June 30, 2006 was $32,684,110, as compared to $17,497,914 for the same period in 2005. Without the interest expense, the increase in property level expenses would have been 31% on a period-to-period comparison.
The Account also incurred expenses for the six months ended June 30, 2006 and 2005 of $12,550,605 and $8,327,349, respectively, for investment advisory services, $20,006,720 and $11,927,701 respectively, for administrative and distribution services and $5,402,737 and $4,157,670, respectively, for the mortality, expense risk and liquidity guarantee charges. The aggregate 55% increase in these expenses was a result of the larger net asset base of the Account and the increased costs associated with managing the Account.
Net Realized and Unrealized Gains and Losses on Investments
The Account had net realized and unrealized gains on investments and mortgage notes payable of $641,376,213 and $284,311,632 for the six months ended June 30, 2006 and 2005, respectively. The difference was primarily due to the substantial increase in net realized and unrealized gains of $408,857,491 compared to $240,304,949 on its real estate properties for the six months ended June 30, 2006 and 2005, respectively. The increase in net realized and unrealized gain on real estate was due to the capital appreciation of real estate assets resulting from the continued inflow of capital into the real estate market from institutional and other investors, which has had the effect of increasing the value of real estate investments. The Account had unrealized gains on its real estate joint venture and limited partnership holdings of $170,093,354 for the six months ended June 30, 2006, as compared to unrealized gains of $60,525,182 for the same period in 2005. This difference on a year-to-year comparison reflects the substantial capital appreciation of the properties owned by the joint ventures. The Account’s marketable securities posted substantial net realized and unrealized gains of $38,188,763 for the six months ended June 30, 2006, as compared to $13,148,026 for the same period in 2005. In addition, the net change in unrealized appreciation on the Account’s mortgage loans payable was a gain of $24,236,605 for the six months ended June 30, 2006, as compared to an unrealized loss of $29,666,525 for the same period in 2005. Every quarter the mortgages on the properties owned by the Account are valued. During the six months ended June 30, 2006, the net effect of these valuations was positive due to the increase in market interest rates.
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During the six months ended June 30, 2006, the Account had no real estate sales. The $635,693 of realized loss in the six months ended June 30, 2006 was due to post-closing adjustments made in the current period for properties sold in 2005.
Three Months Ended June 30, 2006 Compared to Three Months Ended June 30, 2005
PerformanceFor the three months ended June 30, 2006, the Account’s total net return was 4.69% . This was 31 basis points higher than the total net return of 4.38% for the three months ended June 30, 2005 and 148 basis points higher than the total net return of 3.21% for the three months ended March 31, 2006. The Account’s strong performance in the second quarter of 2006 was primarily due to capital appreciation on the Account’s real estate-related assets, including interests in joint ventures and real estate limited partnerships, and an increase in interest earned on marketable securities. The Account’s real estate holdings, including its joint venture holdings, which represented 79.60% of the Account’s total portfolio, had a gross total return of 6.15% . Its real estate limited partnership interests, which represented 1.81% of the Account’s total investments, had a gross total return of 13.92% . The market value of the Account’s real estate and real estate-related portfolios benefited from healthy economic conditions and the continued strengthening of real estate market fundamentals. The substantial amounts of equity available in the capital markets for investment in real estate by institutional and foreign investors continued to drive market values upward, albeit at a marginally slower pace than at the same time last year.
Income and ExpensesThe Account’s net investment income, after deduction of all expenses, increased by 37% for the three months ended June 30, 2006 compared to the same period in 2005.
The Account’s real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 78% of the Account’s total investment income (before deducting Account level expenses) during the three months ended June 30, 2006, as compared to 86% for the three month period ended June 30, 2005. The decline was primarily due to increased income from the Account’s marketable securities and a decrease in joint venture income distributed in the three months ended June 30, 2006.
Gross real estate rental income increased 36% in the three months ended June 30, 2006 as compared with the same period in 2005. The increase in real estate income for the three months ended June 30, 2006 was due primarily to the increase in the number and size of properties owned by the Account. Income from real estate joint ventures and limited partnerships in the three months ended June 30, 2006 was $13,642,202, as compared to $18,706,861 for the same period in 2005. The 27% decrease was due to the properties owned by the joint ventures holding more cash in order to fund certain expenditures, including capital improvements, thereby decreasing joint venture distributions. Interest income on the Account’s interest earning marketable securities for the three months ended June 30, 2006 and 2005 totaled $29,954,222 and $11,251,893, respectively. This increase was due to
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an increase in the amount of non-real estate assets held by the Account relative to Total Investments during the first six months of 2006. In addition, interest rates earned on these investments were higher during the period ended June 30, 2006. Dividend income on the Account’s investments in real estate equity securities declined slightly to $4,811,864 from $4,170,430 for the three months ended June 30, 2006 and 2005, respectively.
Total property level expenses for the three months ended June 30, 2006 and 2005 were $91,038,618 and $68,392,772, respectively. The 33% increase in property level expenses during the three months ended June 30, 2006 was a result of the increased number and size of properties held in the Account and an increase in the overall leverage of the Account. The interest expense incurred in the second quarter of 2006 was $16,763,342, as compared to $9,482,304 for the same period in 2005. Without the interest expense, the increase in property level expenses would have been 26% on a period-to-period comparison.
The Account also incurred expenses for the three months ended June 30, 2006 and 2005 of $5,958,340 and $4,312,907, respectively, for investment advisory services, $11,010,515 and $5,970,843, respectively, for administrative and distribution services and $ 2,580,353 and $2,280,792, respectively, for the mortality, expense risk and liquidity guarantee charges. The aggregate 56% increase in these expenses was 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 and mortgage loans payable of $411,609,818 and $263,101,053 for the three months ended June 30, 2006 and 2005, respectively. The difference was primarily due to the substantial increase in net realized and unrealized gains on the Account’s real estate properties, which totaled $294,846,098 for the three months ended June 30, 2006, as compared to $185,528,527 for the three months ended June 30, 2005. In addition, the Account had unrealized gains on joint ventures and limited partnerships of $103,907,559 in the second quarter of 2006, as compared to unrealized gains of $41,014,573 in the same period of 2005. This substantial increase in unrealized gains was 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. The Account’s marketable securities posted net realized and unrealized losses of $11,043,201 for the three months ended June 30, 2006, as compared to net realized and unrealized gains of $39,624,478 for the same period in 2005. The change was due to a decline in realized gains from sales of marketable securities (to $2,236,929 in the second quarter of 2006 from $15,110,869 in the second quarter of 2005) and an increase in market interest rates during the second quarter of 2006 as compared to the same period in 2005. In addition, the net change in unrealized appreciation on the Account’s mortgage loans payable was a gain of $23,899,362 for the six months ended June 30, 2006 as compared to a loss of $3,066,525 for the same period 2005, due to an increase in market interest rates in 2006.
During the three months ended June 30, 2006, the Account had no real estate sales. The $6,050 of realized loss in the three months ended June 30, 2006 was due to post-closing adjustments made in the current period for properties sold in 2005.
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Liquidity and Capital Resources
At June 30, 2006 and 2005, the Account’s liquid assets (i.e., real estate equity securities, commercial mortgage-backed securities, commercial paper, government agency bonds and cash) had a value of $2,601,540,850 and $2,247,905,335, respectively. The increase in the Account’s liquid assets was primarily due to the net positive inflow of transfers and premiums into the Account, which management believes was in response to the strong relative performance of the Account.
During the six months ended June 30, 2006, the Account received $530,995,943 in premiums and $704,497,896 in net participant transfers from TIAA, the CREF Accounts and affiliated mutual funds, while, for the same period in 2005, the Account received $471,857,748 in premiums and $850,799,256 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 level operating expenses and real estate taxes 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 or any other contractual restrictions in the existing leases, the Account may not be able to recover the full amount of such increases in operating expenses and /or real estate taxes.
Critical Accounting PoliciesThe 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 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.
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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 partnership 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 Loans Payable:Commencing in 2005, the Account separately reports mortgage loans 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 purchase 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 for-
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eign 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 StatementsSome 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, some of which are referenced below in “Item 3. Quantitative and Qualitative Disclosures About Market Risk,” 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, changed assumptions, 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 June 30, 2006 represented 81.96% 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 dif-fer 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
- 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.
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- Foreign Currency Risk — The value of the Account’s foreign investments, relateddebt or rental income can increase or decrease due to changes in foreign currencyexchange rates or foreign currency exchange control regulations, and hedgingagainst such changes, if undertaken by the Account, may entail additional costsand be unsuccessful.
As of June 30, 2006, 18.04% 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 general financial 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 to pay principal and interest when due, and for common or preferred stock, the possibility that the issuer’s current earnings will fall or that its overall financial soundness will decline, reducing the security’s value.
- market risk — price volatility due to changing conditions in the financial 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 or extension risk — i.e., the risk that borrowers will repay the loans early or later than anticipated. 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. If the underlying mortgage assets are repaid later than anticipated, the Account could lose the opportunity to reinvest the anticipated cash flows at a time when interest rates might be rising. The 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 informa-
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tion required to be disclosed in the registrant’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the registrant’s Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and participation of the registrant’s management, including the registrant’s CEO and CFO, the registrant conducted an evaluation of the effectiveness of the registrant’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of June 30, 2006. Based upon management’s review, the CEO and the CFO concluded that the registrant’s disclosure controls and procedures were effective as of June 30, 2006.
(b)Changes in internal controls over financial reporting.There have been no 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 legal proceedings that the Account is a party to, or to which the Account’s assets are subject.
Item 1A. RISK FACTORS.
Not applicable.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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Item 5. OTHER INFORMATION.
Not applicable
Item 6. EXHIBITS.
(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, dated February 22, 2006, by and among TIAA, the Registrant, and Real Estate Research Corporation5 |
(B) | Custodial Services Agreement, dated as of June 1, 1995, by and between TIAA and Morgan Guaranty Trust Company of New York on behalf of the Real Estate Account (Agreement assigned to Bank of New York, January 1996)3 | |
(C) | Distribution and Administrative Services Agreement, dated September 29, 1995, by and between TIAA and TIAA-CREF Individual & Institutional Services, Inc.3(as amended effective as of May 1, 2005)4and as amended, effective April 28, 20066 | |
(31) | Rule 13a-15(e)/15d-15(e) Certifications | |
(32) | Section 1350 Certifications | |
1- Previously filed and incorporated herein by reference to the Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed December 21, 2004 (File No. 333-121493).
2- Previously filed and incorporated herein by reference to the Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed April 29, 2004 (File No. 333-113602).
3- Previously filed and incorporated herein by reference to 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 Exhibit 10.(a) 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 Exhibit 1 to the Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed May 1, 2006 (File No. 333-132580).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE: August 11, 2006TIAA REAL ESTATE ACCOUNT | |||
By: | TEACHERS INSURANCE AND ANNUITY | ||
ASSOCIATION OF AMERICA | |||
By: | /s/ Herbert M. Allison, Jr. | ||
Herbert M. Allison, Jr. | |||
Chairman of the Board, President | |||
and Chief Executive Officer | |||
DATE: August 11, 2006 | |||
By: | /s/ Georganne C. Proctor | ||
Georganne C. Proctor | |||
Executive Vice President and | |||
Chief Financial Officer |
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