The Account’s total return was 14.04% for the year ended December 31, 2006, two basis points higher than the 2005 annual return of 14.02%. The Account’s overall performance on a year-to-year basis reflected the continued strong performance of the Account’s real estate property investments and an increase in interest rates on its marketable securities.
As of December 31, 2006 the Account’s total return (after expenses) over the prior three, five and 10 years ended December 31, 2006 was 13.53%, 10.22% and 9.43%, respectively.
The Account’s total net assets grew 34% from December 31, 2005 to December 31, 2006. The primary drivers of this growth were significant net participant transactions, the Account’s net investment income from its investment portfolio and the Account’s realized and unrealized gains on its investments over the prior year. Management believes that the net participant transfers into the Account were due to its positive historical performance and its low return volatility relative to other available investment options.
The Account’s net investment income, after deduction of all expenses, was 30.6% higher for the year ended December 31, 2006, as compared to 2005. This increase was related to the increase in total net assets, which included a 35.1% increase in the Account’s real estate properties, joint venture holdings and limited partnerships.
The Account’s real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 79% and 85% of the Account’s total investment income (before deducting Account level expenses) during 2006 and 2005, respectively. The remaining portion of the Account’s total investment income was generated by investments in marketable securities, including real estate equity securities, commercial paper, government bonds, and an investment in a commercial mortgage loan receivable. The decline in the percentage of the Account’s total investment income derived from its real estate holdings was primarily due to an increase in the Account’s interest income from its marketable securities and mortgage loan receivable.
Gross real estate rental income increased approximately 35% in the year ended December 31, 2006, as compared to 2005. This increase was primarily due to the increased number and size of the Account’s wholly-owned property investments (98 at December 31, 2005 compared to 109 at December 31, 2006). Income from real estate joint ventures and limited partnerships was $60,788,998 for the year ended December 31, 2006, as compared with $71,826,443 for the year ended December 31, 2005. This 15% decrease was due to the timing of distributions from the joint venture partners. Investment income on the Account’s investments in marketable securities increased by 91%, from $70,999,212 in 2005 to $135,407,210 in 2006. This increase was due to an increase in the number of marketable securities investments and higher interest rates in 2006.
Total property level expenses for wholly-owned property investments for the years ended December 31, 2006 and 2005 were $389,672,945 and $278,544,030, respectively. In 2006, operating expenses and real estate taxes represented 53% and 28% of the total property level expenses, respectively, with the remaining 19% representing interest payments on mortgages. In comparison, operating expenses, real estate taxes, and interest expense represented 54%, 32% and 14% of total property level expenses, respectively, in 2005. Overall, property level expenses increased by 40% from 2005 to 2006. The majority of this increase (71%) was due to increases in operating expenses and real estate taxes associated with the Account’s larger portfolio of wholly-owned property investments. The increase in the interest expense paid on properties subject to a mortgage accounted for 29% of the overall increase. As of year-end 2006, there were 12 wholly-owned properties subject to debt, as compared to seven leveraged properties at year-end 2005.
The Account also incurred expenses for the years ended December 31, 2006 and 2005 for investment advisory services ($26,899,307 and $19,603,225, respectively), administrative and distribution services ($45,712,473 and $27,130,406, respectively), and mortality, expense risk and liquidity guarantee charges ($10,836,884 and $9,366,566 respectively). The total 49% increase in these expenses was a result of the larger net asset base in the Account, on which the fees are calculated, and the increased costs associated with managing and administering the Account.
Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable
The Account had net realized and unrealized gains on investments and mortgage loans payable of $1,056,670,295 for the year ended December 31, 2006, as compared with net realized and unrealized gains on investments and mortgage loans payable of $765,970,272 for the year ended December 31, 2005. The overall increase was partially driven by the increase in net realized and unrealized gains on the Account’s real estate properties to $735,507,509 for the year ended December 31, 2006 from $610,734,011 for 2005. The Account also posted substantial net realized and unrealized gains on its marketable securities of $130,710,746 for the year ended 2006, as compared to $8,770,726 in 2005. In addition, the Account had unrealized gains on its real estate joint ventures and limited partnership holdings of $217,360,271 for the year ended December 31, 2006, as compared to unrealized gains of $175,619,683 for 2005. The increase in net realized and unrealized gains on the Account’s property investments, including those held in joint ventures, was due to the positive effect of the strong inflow of capital into the real estate market from investors, combined with improved real estate market fundamentals, which had the effect of increasing the value of the Account’s existing real estate assets. This trend was also evidenced by the net realized gains on the properties sold in 2006. During the year ended December 31, 2006, the Account sold nine properties for total net proceeds, after selling expenses, of $381.9 million, for a cumulative net gain of $76.1 million, based on the properties’ capitalized costs. The unrealized gains on the Account’s marketable securities in 2006 were primarily associated with the Account’s investments in real estate equity securities.
Liquidity and Capital Resources
At year-end 2007 and 2006, the Account’s liquid assets (i.e., cash and marketable securities) had a value of $3,804,639,841 and $2,747,445,678, respectively. The increase in the
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Account’s liquid assets was primarily due to an increase in its net investment income and the continued net positive inflow from participant transfers and premiums into the Account.
In 2007, the Account received $1,186,870,080 in premiums and $934,307,324 in net participant transfers from TIAA, CREF Accounts and affiliated mutual funds, while, for 2006, the Account received $1,085,057,614 in premiums and $1,354,697,847 in net participant transfers. The Account’s net investment income increased from $557,530,387 for the year ended December 31, 2006 to $624,756,134 for the year ended December 31, 2007.
The Account’s liquid assets continue to be available to purchase additional suitable real estate properties and to meet the Account’s expense needs and participant 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 participant transfer or cash withdrawal requests, TIAA’s general account will purchase accumulation units (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 (as supplemented from time to time), may borrow money and assume or obtain a mortgage on a property (i.e., 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 the loan with one or more of its properties. The Account’s total borrowings may not exceed 30% of the Account’s Total Net Assets. In calculating this limit, only the Account’s actual percentage interest in any borrowings is included, and not that of any joint venture partner. Further, the Account may only borrow up to 70% of the then-current value of a property, although construction loans may be for 100% of the costs incurred in developing a property.
Contractual Obligations
The following table sets forth a summary regarding our known contractual obligations, including required interest payments for those items that are interest bearing, at December 31, 2007:
| | | | | | | | | | | | | | | | | | | | | |
| | Amounts Due During Years Ending December 31, | | | | |
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| | 2008 | | 2009 | | 2010 | | 2011 | | 2012 | | Thereafter | | Total |
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Mortgage Loans Payable: | | | | | | | | | | | | | | | | | | | | | |
Principal Payments | | $ | 736,371 | | $ | 788,911 | | $ | 2,161,722 | | $ | 10,241,993 | | $ | 269,313,872 | | $ | 1,144,614,574 | | $ | 1,427,857,443 |
Interest Payments(1) | | | 83,561,479 | | | 83,440,048 | | | 83,353,568 | | | 82,863,631 | | | 80,543,446 | | | 124,780,243 | | | 538,542,415 |
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Total Mortgage Loans Payable | | | 84,297,850 | | | 84,228,959 | | | 85,515,290 | | | 93,105,624 | | | 349,857,318 | | | 1,269,394,817 | | | 1,966,399,858 |
Commitment to Purchase Leasehold Interest(2) | | | 42,728,299 | | | — | | | — | | | — | | | — | | | — | | | 42,728,299 |
Other Commitments(3) | | | 87,562,894 | | | — | | | — | | | — | | | — | | | — | | | 87,562,894 |
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Total Contractual Obligations | | $ | 214,589,043 | | $ | 84,228,959 | | $ | 85,515,290 | | $ | 93,105,624 | | $ | 349,857,318 | | $ | 1,269,394,817 | | $ | 2,096,691,051 |
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(1) | These amounts represent interest payments due on mortgage loans payable based on the stated rates and, where applicable, the foreign currency exchange rates at December 31, 2007. |
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(2) | The Account purchased this leasehold interest on February 12, 2008. |
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(3) | This includes the Account’s commitment to purchase interest in six limited partnerships and to purchase shares in a private real estate equity investment trust. |
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Effects of Inflation and Increasing Operating Expenses
Inflation, along with increased insurance, taxes, utilities and security costs, may increase property operating expenses in the future. These increases in operating expenses are generally billed to tenants either through contractual lease provisions in office, industrial, and retail properties or through rent increases in apartment complexes. The Account remains responsible for the expenses for unleased space in a property as well as expenses which may not be reimbursed under the terms of an existing lease.
Critical Accounting Policies
The financial statements of the Account are prepared in conformity with accounting principles generally accepted in the United States of America.
In preparing the Account’s financial statements, management is required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Management believes that the following policies related to the valuation of the Account’s assets reflected in the Account’s historical financial statements affect the significant judgments, estimates and assumptions used in preparing its historical 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 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 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, the properties are valued on a quarterly cycle with an independent appraisal value completed for each real estate property at least once a year. An independent fiduciary, Real Estate Research Corporation, has been appointed by a special subcommittee of TIAA’s Board of Trustees. The independent fiduciary must approve all independent appraisers used by the Account. TIAA’s appraisal staff performs the other quarterly valuations for each real estate property and updates the property value as appropriate. 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. The independent fiduciary can also require additional appraisals if a property’s value has changed materially and such change is not reflected in the quarterly
44
valuation review, or otherwise to ensure that the Account is valued appropriately. The independent fiduciary must also approve any valuation change where a property’s value changed by more than 6% from the most recent independent annual appraisal, or if the value of the Account would change by more than 4% within any calendar quarter or more than 2% since the prior month. When a real estate property is subject to a mortgage, the mortgage is valued independently of the property and its fair value is reported separately. The independent fiduciary reviews and approves mortgage valuation adjustments which exceed certain prescribed limits before such adjustments are recorded by the Account. The Account continues to use the revised value for each real estate property and mortgage loan payable to calculate the Account’s daily net asset value until the next valuation review or appraisal.
Valuation of Real Estate Joint Ventures and Limited Partnerships
Real estate joint ventures and limited partnerships are stated at the Account’s equity in the net assets of the underlying entities and, for the joint ventures, are adjusted to value their real estate holdings and mortgage notes payable at fair value. Upon the disposition of all real estate investments by an investee entity, the Account will continue to state its equity in the remaining net assets of the investee entity during the wind down period, if any, that occurs prior to the dissolution of the investee entity.
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.
Mortgage Loans Receivable
Mortgage loans receivable are initially valued at the face amount of the mortgage loan funding as representative of fair value. 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.
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Mortgage Loans Payable
Mortgage loans payable are stated at fair value. Estimated market values of mortgage loans payable 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 effects of any changes in foreign currency exchange rates on portfolio investments and mortgage loans payable are included in the net realized and unrealized gains and losses on investments and mortgage loans payable. 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 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. The Account pays a fee to TIAA to assume the mortality and expense 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). The Account recognizes a gain on the sale of a real estate property to the extent that the contract sales price exceeds the cost-to-date of the property being sold. A loss occurs when the cost-to-date exceeds the sales price. Any accumulated unrealized gains and losses are reversed in the calculation of realized gains and losses.
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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 ownership interests in various real estate funds (limited partnerships and one limited liability corporation) and a private REIT (collectively, the “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 of the income distributed by the joint venture. Income earned by the joint venture, but not yet distributed to the Account by the joint venture investment, is recorded as unrealized gains and losses on real estate joint ventures.
Transactions in marketable securities are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned and includes accrual of discount and amortization of premium as applicable. 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.
New Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) 48, an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and is effective for fiscal years beginning after December 31, 2006. The adoption of FIN 48 did not have a significant impact on the Account’s financial position and results of operations.
In September 2006, FASB issued Statement No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and requires additional disclosures about fair value measurements. This Statement does not require any new fair value measurements, but the application of this Statement could change current practices in determining fair value. This statement is effective January 1, 2008 for the Account. The Account has assessed the impact of Statement No. 157 and determined that it will not significantly change the Account’s financial position and results of operations at the effective date.
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In February 2007, FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This Statement permits entities to choose to measure financial instruments and certain other items at fair value and is expected to expand the use of fair value measurement when warranted. The Account effectively adopted Statement 159 on January 1, 2008 and plans to report all existing and future Mortgage Loans Payable at fair value using this Statement. Historically, the Account recorded Mortgage Loans Payable at fair value. The Account has assessed the impact of Statement 159 in comparison to historical reporting and determined that it will not significantly change the Account’s financial position and results of operations.
In June 2007, the Accounting Standards Executive Committee (“ACSEC”) of the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position (SOP) 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies. The SOP clarifies which entities are required to apply the provisions of the Investment Companies Audit and Accounting Guide (“Guide”) and provides guidance on accounting by parent companies and equity method investors for investments in investment companies. The SOP is effective for fiscal years beginning on or after December 15, 2007. In February 2008, FASB issued Staff Position (“FSP”) SOP 07-1-1 indefinitely delaying the effective date of SOP 07-1 to allow FASB time to consider significant issues related to the implementation of SOP 07-1. Management of the Account will continue to monitor FASB developments and will evaluate the financial reporting implications to the Account, as necessary.
In December 2007, FASB issued Statement No. 141(R), “Business Combinations,” which establishes principles and requirements for how the acquirer shall recognize and measure in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree and goodwill acquired in a business combination or a gain from a bargain purchase. This Statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Account is currently assessing the impact that Statement No. 141(R) will have on its financial position and results of operations.
In December 2007, FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51,” which establishes and expands accounting and reporting standards for minority interests, which will be recharacterized as noncontrolling interests, in a subsidiary and the deconsolidation of a subsidiary. This Statement is effective for fiscal years beginning on or after December 15, 2008. The Account is currently assessing the potential impact that Statement No. 160 will have on its financial position and results of operations.
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ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
The Account’s real estate holdings, including real estate joint ventures and limited partnerships, which, as of December 31, 2007 represented 79.7% of the Account’s total investments, expose the Account to a variety of risks. These risks include, but are not limited to:
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• | General Real Estate Risk — The risk that the Account’s property values or rental and occupancy rates could go down due to general economic conditions, a weak market for real estate generally, or changing supply and demand for certain types of properties; |
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• | Appraisal Risk — The risk that the sale price of an Account property (i.e., the value that would be determined by negotiations between independent parties) might differ substantially from its estimated or appraised value, leading to losses or reduced profits to the Account upon sale; |
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• | Risk Relating to Property Sales — The risk that the Account might not be able to sell a property at a particular time for its full value, particularly in a poor market. This might make it difficult to raise cash quickly and also could lead to Account losses; |
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• | Risks of Borrowing — The risk that interest rate changes may impact Account returns if the Account takes out a mortgage on a property or buys a property subject to a mortgage; and |
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• | Foreign Currency Risk — The risk that the value of the Account’s foreign investments, related debt or rental income could increase or decrease due to changes in foreign currency exchange rates or foreign currency exchange control regulations, and hedging against such changes, if undertaken by the Account, may entail additional costs and be unsuccessful. |
As of December 31, 2007, 20.3% of the Account’s total investments were in market risk sensitive instruments, comprised of marketable securities and an adjustable rate mortgage loan receivable. Marketable securities 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 and mortgage loans receivable are subject to the following general risks:
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• | Financial Risk — The risk, for debt securities, that the issuer will not be able to pay principal and interest when due and, for common or preferred stock, that the issuer’s current earnings will fall or that its overall financial soundness will decline, reducing the security’s value. |
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• | Market Risk — The risk that the Account’s investments will experience price volatility due to changing conditions in the financial markets and, particularly for debt securities, changes in overall interest rates. |
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• | Interest Rate Volatility — The risk that interest rate volatility may affect the Account’s 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 earlier or later than anticipated). If the underlying mortgage assets experience faster than anticipated repayments of principal, the Account could fail to recoup some or all of its initial investment in these securities, since the original price paid by the Account was based in part on assumptions regarding the receipt of interest payments. If the underlying mortgage assets are repaid later than anticipated, the Account could lose the opportunity to reinvest the anticipated cash flows at a time when interest rates might be rising. The rate of prepayment depends on a variety of geographic, social and other functions, including prevailing market interest rates and general economic factors. The 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. These securities may be harder to sell than other securities.
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.
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ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
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INDEX TO FINANCIAL STATEMENTS |
TIAA REAL ESTATE ACCOUNT |
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REPORT OF MANAGEMENT RESPONSIBILITY
To the Participants of the
TIAA Real Estate Account:
The accompanying financial statements of the TIAA Real Estate Account (“Account”) of Teachers Insurance and Annuity Association of America (“TIAA”) are the responsibility of TIAA’s management. They have been prepared in accordance with accounting principles generally accepted in the United States of America and have been presented fairly and objectively in accordance with such principles.
TIAA has established and maintains an effective system of internal controls over financial reporting designed to provide reasonable assurance that assets are properly safeguarded, that transactions are properly executed in accordance with management’s authorization, and to carry out the ongoing responsibilities of management for reliable financial statements. In addition, TIAA’s internal audit personnel provide regular reviews and assessments of the internal controls and operations of the Account, and the Senior Vice President of Internal Audit regularly reports to the Audit Committee of the TIAA Board of Trustees.
The independent registered public accounting firm of PricewaterhouseCoopers LLP has audited the accompanying financial statements for the years ended December 31, 2007, 2006 and 2005. To maintain auditor independence and avoid even the appearance of a conflict of interest, it continues to be the Account’s policy (consistent with TIAA’s specific auditor independence policies, which are designed to avoid such conflicts) that any management advisory or consulting services would be obtained from a firm other than the independent accounting firm. The independent auditors’ report expresses an independent opinion on the fairness of presentation of the Account’s financial statements.
The Audit Committee of the TIAA Board of Trustees, comprised entirely of independent, non-management trustees, meets regularly with management, representatives of the independent registered public accounting firm and internal audit group personnel to review matters relating to financial reporting, internal controls and auditing. In addition to the annual independent audit of the Account’s financial statements, the New York State Insurance Department and other state insurance departments regularly examine the operations and financial statements of the Account as part of their periodic corporate examinations.
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March 20, 2008 | /s/ Herbert M. Allison, Jr. |
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| Herbert M. Allison, Jr. |
| Chairman, President and |
| Chief Executive Officer |
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| /s/ Georganne C. Proctor |
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| Georganne C. Proctor |
| Executive Vice President and |
| Chief Financial Officer |
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REPORT OF THE AUDIT COMMITTEE
To the Participants of the
TIAA Real Estate Account:
The TIAA Audit Committee (“Committee”) oversees the financial reporting process of the TIAA Real Estate Account (“Account”) on behalf of TIAA’s Board of Trustees. The Committee operates in accordance with a formal written charter (copies of which are available upon request) which describes the Audit Committee’s responsibilities. All members of the Committee are independent, as defined under the listing standards of the New York Stock Exchange.
Management has the primary responsibility for the Account’s financial statements, development and maintenance of a strong system of internal controls and disclosure controls, and compliance with applicable laws and regulations. In fulfilling its oversight responsibilities, the Committee reviewed and approved the audit plans of the internal audit group and the independent registered public accounting firm in connection with their respective audits of the Account. The Committee also meets regularly with the internal audit group and the independent registered public accounting firm, both with and without management present, to discuss the results of their examinations, their evaluation of internal controls, and the overall quality of financial reporting. As required by its charter, the Committee will evaluate rotation of the independent registered public accounting firm whenever circumstances warrant, but in no event will the evaluation be later than between their fifth and tenth years of service.
The Committee reviewed and discussed the accompanying audited financial statements with management, including a discussion of the quality and appropriateness of the accounting principles and financial reporting practices followed, the reasonableness of significant judgments, and the clarity and completeness of disclosures in the financial statements. The Committee has also discussed the audited financial statements with PricewaterhouseCoopers LLP, the independent registered public accounting firm responsible for expressing an opinion on the conformity of these audited financial statements with accounting principles generally accepted in the United States of America.
The discussion with PricewaterhouseCoopers LLP focused on their judgments concerning the quality and appropriateness of the accounting principles and financial reporting practices followed by the Account, the clarity and completeness of the financial statements and related disclosures, and other significant matters, such as any significant changes in accounting policies, internal controls, management judgments and estimates, and the nature of any uncertainties or unusual transactions. In addition, the Committee discussed with PricewaterhouseCoopers LLP the auditors’ independence from management and the Account, and has received a written disclosure regarding such independence, as required by the Securities and Exchange Commission.
Based on the review and discussions referred to above, the Committee has approved the release of the accompanying audited financial statements for publication and filing with appropriate regulatory authorities.
Rosalie J. Wolf, Audit Committee Chair
Glenn A. Britt, Audit Committee Member
Donald K. Peterson, Audit Committee Member
David L. Shedlarz, Audit Committee Member
March 20, 2008
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TIAA REAL ESTATE ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
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| | December 31,
2007 | | December 31,
2006 | |
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ASSETS | | | | | | | |
Investments, at value: | | | | | | | |
Real estate properties
(cost: $9,804,488,802 and $9,462,471,032) | | $ | 11,983,715,574 | | $ | 10,743,487,689 | |
Real estate joint ventures and limited partnerships
(cost: $2,260,919,575 and $1,413,322,924) | | | 3,158,870,373 | | | 1,948,028,002 | |
Marketable securities: | | | | | | | |
Real estate-related
(cost: $439,154,248 and $569,326,795) | | | 426,630,212 | | | 704,922,323 | |
Other
(cost: $3,371,895,300 and $2,038,681,194) | | | 3,371,865,684 | | | 2,038,938,210 | |
Mortgage loans receivable
(cost: $75,000,000 and $75,000,000) | | | 72,519,684 | | | 74,660,626 | |
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|
Total investments
(cost: $15,951,457,925 and $13,558,801,945) | | | 19,013,601,527 | | | 15,510,036,850 | |
| | | | | | | |
Cash | | | 6,143,945 | | | 3,585,145 | |
| | | | | | | |
Due from investment advisor | | | 11,195,734 | | | 8,461,793 | |
| | | | | | | |
Other | | | 201,826,038 | | | 237,877,545 | |
| |
|
| |
|
| |
|
TOTAL ASSETS | | | 19,232,767,244 | | | 15,759,961,333 | |
| |
|
| |
|
| |
|
LIABILITIES | | | | | | | |
| | | | | | | |
Mortgage loans payable—Note 5
(principal outstanding: $1,427,857,443 and $1,415,032,586) | | | 1,392,092,982 | | | 1,437,149,148 | |
| | | | | | | |
Payable for securities transactions | | | 866,209 | | | 1,219,323 | |
| | | | | | | |
Accrued real estate property level expenses | | | 154,638,976 | | | 169,657,402 | |
| | | | | | | |
Security deposits held | | | 24,632,278 | | | 19,242,948 | |
| |
|
| |
|
| |
|
TOTAL LIABILITIES | | | 1,572,230,445 | | | 1,627,268,821 | |
| |
|
| |
|
| |
|
NET ASSETS | | | | | | | |
| | | | | | | |
Accumulation Fund | | | 17,160,703,167 | | | 13,722,700,176 | |
| | | | | | | |
Annuity Fund | | | 499,833,632 | | | 409,992,336 | |
| |
|
| |
|
| |
|
TOTAL NET ASSETS | | $ | 17,660,536,799 | | $ | 14,132,692,512 | |
| |
|
| |
|
| |
|
NUMBER OF ACCUMULATION UNITS OUTSTANDING—Notes 6 and 7 | | | 55,105,718 | | | 50,146,354 | |
| |
|
| |
|
| |
NET ASSET VALUE, PER ACCUMULATION UNIT—Note 6 | | $ | 311.41 | | $ | 273.65 | |
| |
|
| |
|
| |
See notes to the financial statements.
54
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF OPERATIONS
| | | | | | | | | | |
| | Years Ended December 31, | |
| |
| |
| | 2007 | | 2006 | | 2005 | |
| |
| |
| |
| |
|
INVESTMENT INCOME | | | | | | | | | | |
Real estate income, net: | | | | | | | | | | |
Rental income | | $ | 987,434,298 | | $ | 834,455,788 | | $ | 618,633,580 | |
| |
|
| |
|
| |
|
| |
Real estate property level expenses and taxes: | | | | | | | | | | |
Operating expenses | | | 247,473,125 | | | 207,452,982 | | | 150,501,136 | |
Real estate taxes | | | 126,925,585 | | | 110,059,852 | | | 88,014,264 | |
Interest expense | | | 83,622,829 | | | 72,160,111 | | | 40,028,630 | |
| |
|
| |
|
| |
|
| |
Total real estate property level expenses and taxes | | | 458,021,539 | | | 389,672,945 | | | 278,544,030 | |
| |
|
| |
|
| |
|
| |
Real estate income, net | | | 529,412,759 | | | 444,782,843 | | | 340,089,550 | |
Income from real estate joint ventures and limited partnerships | | | 93,724,569 | | | 60,788,998 | | | 71,826,443 | |
Interest | | | 129,473,616 | | | 118,621,441 | | | 54,114,448 | |
Dividends | | | 12,439,637 | | | 16,785,769 | | | 16,884,764 | |
| |
|
| |
|
| |
|
| |
TOTAL INCOME | | | 765,050,581 | | | 640,979,051 | | | 482,915,205 | |
| |
|
| |
|
| |
|
| |
Expenses—Note 2: | | | | | | | | | | |
Investment advisory charges | | | 49,239,366 | | | 26,899,307 | | | 19,603,225 | |
Administrative and distribution charges | | | 63,593,008 | | | 45,712,473 | | | 27,130,406 | |
Mortality and expense risk charges | | | 8,052,314 | | | 6,931,833 | | | 6,196,549 | |
Liquidity guarantee charges | | | 19,409,759 | | | 3,905,051 | | | 3,170,017 | |
| |
|
| |
|
| |
|
| |
TOTAL EXPENSES | | | 140,294,447 | | | 83,448,664 | | | 56,100,197 | |
| |
|
| |
|
| |
|
| |
INVESTMENT INCOME, NET | | | 624,756,134 | | | 557,530,387 | | | 426,815,008 | |
| |
|
| |
|
| |
|
| |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE | | | | | | | | | | |
Net realized gain (loss) on: | | | | | | | | | | |
Real estate properties | | | 127,834,921 | | | 76,137,064 | | | 76,164,380 | |
Real estate joint ventures and limited partnerships | | | 70,765,537 | | | — | | | 8,599,762 | |
Marketable securities | | | 47,179,736 | | | 10,257,108 | | | 36,871,417 | |
| |
|
| |
|
| |
|
| |
Total realized gain on investments | | | 245,780,194 | | | 86,394,172 | | | 121,635,559 | |
| |
|
| |
|
| |
|
| |
Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | |
Real estate properties | | | 898,172,653 | | | 659,370,445 | | | 534,569,631 | |
Real estate joint ventures and limited partnerships | | | 391,332,636 | | | 217,360,271 | | | 167,019,921 | |
Marketable securities | | | (148,659,083 | ) | | 120,453,638 | | | (28,100,691 | ) |
Mortgage loan receivable | | | (2,140,942 | ) | | (339,374 | ) | | — | |
Mortgage loans payable | | | 53,949,280 | | | (26,568,857 | ) | | (29,154,148 | ) |
| |
|
| |
|
| |
|
| |
Net change in unrealized appreciation on
investments and mortgage loans payable | | | 1,192,654,544 | | | 970,276,123 | | | 644,334,713 | |
| |
|
| |
|
| |
|
| |
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS AND
MORTGAGE LOANS PAYABLE | | | 1,438,434,738 | | | 1,056,670,295 | | | 765,970,272 | |
| |
|
| |
|
| |
|
| |
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS | | $ | 2,063,190,872 | | $ | 1,614,200,682 | | $ | 1,192,785,280 | |
| |
|
| |
|
| |
|
| |
See notes to the financial statements.
55
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | | | |
| | Years Ended December 31, | |
| |
| |
| | 2007 | | 2006 | | 2005 | |
| |
| |
| |
| |
FROM OPERATIONS | | | | | | | | | | |
Investment income, net | | $ | 624,756,134 | | $ | 557,530,387 | | $ | 426,815,008 | |
Net realized gain on investments | | | 245,780,194 | | | 86,394,172 | | | 121,635,559 | |
Net change in unrealized appreciation on investments and mortgage loans payable | | | 1,192,654,544 | | | 970,276,123 | | | 644,334,713 | |
| |
|
| |
|
| |
|
| |
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS | | | 2,063,190,872 | | | 1,614,200,682 | | | 1,192,785,280 | |
| |
|
| |
|
| |
|
| |
FROM PARTICIPANT TRANSACTIONS | | | | | | | | | | |
Premiums | | | 1,186,870,080 | | | 1,085,057,614 | | | 968,189,436 | |
Net transfers from TIAA | | | 153,136,947 | | | 215,893,898 | | | 172,305,147 | |
Net transfers from CREF Accounts | | | 832,782,037 | | | 1,154,122,836 | | | 1,238,160,587 | |
Net transfers from (to) TIAA-CREF Institutional Mutual Funds | | | (51,611,660 | ) | | (15,318,887 | ) | | 24,967,250 | |
Annuity and other periodic payments | | | (95,776,359 | ) | | (65,192,000 | ) | | (44,487,142 | ) |
Withdrawals and death benefits | | | (560,747,630 | ) | | (404,782,733 | ) | | (248,759,442 | ) |
| |
|
| |
|
| |
|
| |
NET INCREASE IN NET ASSETS RESULTING
FROM PARTICIPANT TRANSACTIONS | | | 1,464,653,415 | | | 1,969,780,728 | | | 2,110,375,836 | |
| |
|
| |
|
| |
|
| |
NET INCREASE IN NET ASSETS | | | 3,527,844,287 | | | 3,583,981,410 | | | 3,303,161,116 | |
| | | | | | | | | | |
NET ASSETS | | | | | | | | | | |
Beginning of period | | | 14,132,692,512 | | | 10,548,711,102 | | | 7,245,549,986 | |
| |
|
| |
|
| |
|
| |
End of period | | $ | 17,660,536,799 | | $ | 14,132,692,512 | | $ | 10,548,711,102 | |
| |
|
| |
|
| |
|
| |
See notes to the financial statements.
56
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CASH FLOWS
| | | | | | | | | | |
| | Years Ended December 31, | |
| |
| |
| | 2007 | | 2006 | | 2005 | |
| |
| |
| |
| |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | | |
Net increase in net assets resulting from operations | | $ | 2,063,190,872 | | $ | 1,614,200,682 | | $ | 1,192,785,280 | |
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: | | | | | | | | | | |
Purchase of real estate properties | | | (639,704,090 | ) | | (2,016,229,061 | ) | | (1,864,646,776 | ) |
Amortization of discount on debt | | | 530,626 | | | 461,761 | | | 170,352 | |
Capital improvements on real estate properties | | | (133,714,188 | ) | | (117,041,456 | ) | | (83,150,771 | ) |
Proceeds from sale of real estate properties | | | 568,120,000 | | | 387,290,000 | | | 511,500,399 | |
Net increase in other investments | | | (1,904,858,906 | ) | | (836,478,000 | ) | | (1,313,958,742 | ) |
Increase in mortgage loan receivable | | | — | | | (74,660,626 | ) | | — | |
Decrease (increase) in other assets | | | 33,317,566 | | | (47,865,701 | ) | | (80,412,203 | ) |
Decrease in amounts due to bank | | | — | | | — | | | (231,476 | ) |
Increase (decrease) in accrued real estate property level expenses and taxes | | | (15,018,427 | ) | | 23,868,125 | | | 60,829,395 | |
Increase in security deposits held | | | 5,389,330 | | | 2,812,909 | | | 2,670,715 | |
Increase (decrease) in other liabilities | | | (353,114 | ) | | 225,514 | | | (1,162,347 | ) |
Net realized gain on investments | | | (245,780,194 | ) | | (86,394,172 | ) | | (121,635,559 | ) |
Net unrealized gain on investments and mortgage loans payable | | | (1,192,654,544 | ) | | (970,276,123 | ) | | (644,334,713 | ) |
| |
|
| |
|
| |
|
| |
NET CASH USED IN
OPERATING ACTIVITIES | | | (1,461,535,069 | ) | | (2,120,086,148 | ) | | (2,341,576,446 | ) |
| |
|
| |
|
| |
|
| |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | |
Mortgage loan acquired | | | — | | | 153,000,000 | | | 232,585,341 | |
Principal payments on mortgage loans payable | | | (559,546 | ) | | (320,805 | ) | | (173,361 | ) |
Premiums | | | 1,186,870,080 | | | 1,085,057,614 | | | 968,189,436 | |
Net transfers from TIAA | | | 153,136,947 | | | 215,893,898 | | | 172,305,147 | |
Net transfers from CREF Accounts | | | 832,782,037 | | | 1,154,122,836 | | | 1,238,160,587 | |
Net transfers from (to) TIAA-CREF Institutional Mutual Funds | | | (51,611,660 | ) | | (15,318,887 | ) | | 24,967,250 | |
Annuity and other periodic payments | | | (95,776,359 | ) | | (65,192,000 | ) | | (44,487,142 | ) |
Withdrawals and death benefits | | | (560,747,630 | ) | | (404,782,733 | ) | | (248,759,442 | ) |
| |
|
| |
|
| |
|
| |
NET CASH PROVIDED BY
FINANCING ACTIVITIES | | | 1,464,093,869 | | | 2,122,459,923 | | | 2,342,787,816 | |
| |
|
| |
|
| |
|
| |
NET INCREASE IN CASH | | | 2,558,800 | | | 2,373,775 | | | 1,211,370 | |
CASH | | | | | | | | | | |
Beginning of period | | | 3,585,145 | | | 1,211,370 | | | — | |
| |
|
| |
|
| |
|
| |
End of period | | $ | 6,143,945 | | $ | 3,585,145 | | $ | 1,211,370 | |
| |
|
| |
|
| |
|
| |
SUPPLEMENTAL DISCLOSURES: | | | | | | | | | | |
Cash paid for interest | | $ | 83,063,017 | | $ | 68,034,179 | | $ | 38,267,618 | |
| |
|
| |
|
| |
|
| |
Debt assumed in acquisition of properties | | $ | 8,922,033 | | $ | 288,950,559 | | $ | 211,400,000 | |
| |
|
| |
|
| |
|
| |
See notes to the financial statements.
57
TIAA REAL ESTATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Note 1—Organization and Significant Accounting Policies
Business: 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 real estate joint ventures and limited partnerships in which the Account does not hold a controlling interest; as such, they are not consolidated for financial statement purposes. The Account also invests in mortgage loans receivable collateralized by commercial real estate properties. The Account also invests in publicly-traded securities and other instruments to maintain adequate liquidity for operating expenses, capital expenditures and benefit payments.
The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America 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.
Reclassifications: During 2007, the Account determined that its pro rata share of 2006 undistributed earnings from joint venture investments totaling approximately $24 million was reported as income from real estate joint ventures and limited partnerships for the year ended December 31, 2006 when the Account should have reported this amount as unrealized appreciation on real estate joint ventures and limited partnerships. Accordingly, the Statement of Operations for the year ended December 31, 2006 has been adjusted to reflect a reclassification of these undistributed earnings to unrealized appreciation on real estate joint ventures and limited partnerships equal to this amount. There is no impact to the Account’s total assets, total net assets or net asset value per accumulation unit for the periods presented as a result of this reclassification.
Certain other prior period 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.
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 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, the properties are valued on a quarterly cycle with an independent appraisal value completed for each real estate property at least once a year. An independent fiduciary, Real Estate Research Corporation, has been appointed by a special subcommittee of TIAA’s Board of Trustees. The independent fiduciary must approve all independent appraisers used by the Account. TIAA’s appraisal staff performs the other quarterly valuations for each real estate property and updates the property value as appropriate. 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. The independent fiduciary can also require additional appraisals if a property’s value has changed materially and such change is not
58
reflected in the quarterly valuation review, or otherwise to ensure that the Account is valued appropriately. The independent fiduciary must also approve any valuation change where a property’s value changed by more than 6% from the most recent independent annual appraisal, or if the value of the Account would change by more than 4% within any calendar quarter or more than 2% since the prior month. When a real estate property is subject to a mortgage, the mortgage is valued independently of the property and its fair value is reported separately. The independent fiduciary reviews and approves mortgage valuation adjustments which exceed certain prescribed limits before such adjustments are recorded by the Account. The Account continues to use the revised value for each real estate property and mortgage loan payable to calculate the Account’s daily net asset value until the next valuation review or appraisal.
Valuation of Real Estate Joint Ventures and Limited Partnerships: Real estate joint ventures and certain limited partnerships are stated at the Account’s equity in the net assets of the underlying entities, and for the joint ventures, are adjusted to value their real estate holdings and mortgage notes payable at fair value. Upon the disposition of all real estate investments by an investee entity, the Account will continue to state its equity in the remaining net assets of the investee entity during the wind down period, if any, that occurs prior to the dissolution of the investee entity.
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 certain 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 initially valued at the face amount of the mortgage loan funding as representive of fair value. 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: Mortgage loans payable are stated at fair value. Estimated market values of mortgage loans payable 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 any changes in foreign currency exchange rates on portfolio investments and mortgage loans payable is included in the net realized and unrealized gains and losses on investments and mortgage loans payable. 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
59
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. The Account pays a fee to TIAA to assume these mortality and expense 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). The Account recognizes a gain on the sale of a real estate property to the extent that the contract sales price exceeds the cost-to-date of the property being sold. A loss occurs when the cost-to-date exceeds the sales price. Any accumulated unrealized gains and losses are reversed in the calculation of realized gains and losses.
Rent from real estate properties consists of all amounts earned under tenant operating leases, including base rent, recoveries of real estate taxes and other expenses and charges for miscellaneous services provided to tenants. Rental income is recognized in accordance with the billing terms of the lease agreements. The Account bears the direct expenses of the real estate properties owned. These expenses include, but are not limited to, fees to local property management companies, property taxes, utilities, maintenance, repairs, insurance, and other operating and administrative costs. An estimate of the net operating income earned from each real estate property is accrued by the Account on a daily basis and such estimates are adjusted when actual operating results are determined.
The Account has limited ownership interests in various real estate funds (limited partnerships and one limited liability corporation) and a private real estate investment trust (“REIT”) (collectively, the “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 when the financial statements of the limited partnerships are received by the Account.
Income from real estate joint ventures is recorded based on the Account’s proportional interest of the income distributed by the joint venture. Income earned by the joint venture, but not yet distributed to the Account by the joint venture investment, is recorded as unrealized gains and losses on real estate joint ventures.
Transactions in marketable securities are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned and includes accrual of discount and amortization of premium as applicable. 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.
Federal Income Taxes: Based on provisions of the Internal Revenue Code, Section 817, the Account is taxed as a segregated asset account of TIAA and as such, the Account should incur no material federal income tax attributable to the net investment activity of the Account.
Note 2—Management Agreements and Arrangements
Investment advisory services for the Account are provided by TIAA employees, under the direction of TIAA’s Board of Trustees and its Investment Committee, pursuant to investment management procedures adopted by TIAA for the Account. TIAA’s investment management decisions for the Account are subject to review by the Account’s independent fiduciary. TIAA also provides all portfolio accounting and related services for the Account.
Through December 31, 2007, administrative and distribution 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 a member of the Financial Industry Regulatory Authority.
60
TIAA and Services provide their services 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 expenses actually incurred. Any differences between actual expenses and the amounts paid by the Account are adjusted quarterly.
TIAA also provides a liquidity guarantee to the Account, for a fee, to ensure that sufficient funds are available to meet participant transfer and cash withdrawal requests in the event that the Account’s cash flows and liquid investments are insufficient to fund such requests. TIAA would fund any such transfer and withdrawal requests by purchasing accumulation units in the Account. TIAA also receives a fee for assuming certain mortality and expense risks.
The expenses for the services noted above that are provided to the Account by TIAA and Services are identified in the accompanying Statements of Operations and are reflected in the Condensed Financial Information disclosed in Note 6.
Effective January 1, 2008, the Account entered into a Distribution Agreement for the Contracts Funded by the TIAA Real Estate Account (the “New Distribution Agreement”), dated as of January 1, 2008, by and among TIAA, for itself and on behalf of the Account, and Services.
Pursuant to the New Distribution Agreement, distribution services for the Account, which include, among other things, (i) distribution of annuity contracts issued by TIAA and funded by the Account, (ii) advising existing annuity contract owners in connection with their accumulations, and (iii) providing assistance in designing, installing and providing administrative services for contract owners or institutions, will be performed by Services. The New Distribution Agreement is terminable by either party upon 60 days written notice and terminates automatically upon any assignment thereof.
Effective January 1, 2008, the administrative functions previously performed for the Account by Services, which include, among other things, (i) computing the Account’s daily unit value, (ii) maintaining accounting records and performing accounting services, (iii) receiving and allocating premiums, (iv) calculating and making annuity payments, (v) processing withdrawal requests, (vi) providing regulatory compliance and reporting services, (vii) maintaining the Account’s records of contract ownership, and (viii) otherwise assisting generally in all aspects of the Account’s operations, will be performed by TIAA.
Both distribution services (pursuant to the New Distribution Agreement) and administrative services will continue to be provided to the Account by Services and TIAA, as applicable, on an at cost basis.
Note 3—Leases
The Account’s real estate properties are leased to tenants under operating lease agreements which expire on various dates through 2058. Aggregate minimum annual rentals for the properties owned, excluding short-term residential and storage facility leases, are as follows:
| | | | |
Years Ending
December 31, | | | | |
| | | | |
2008 | | $ | 975,895,973 | |
2009 | | | 906,194,738 | |
2010 | | | 797,243,797 | |
2011 | | | 659,462,763 | |
2012 | | | 549,590,444 | |
2013-2058 | | | 1,934,542,421 | |
| |
|
| |
| |
Total | | $ | 5,822,930,136 | |
| |
|
| |
Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts.
61
Note 4—Investment in Joint Ventures and Limited Partnerships
The Account owns interests in several real estate properties through joint ventures and receives distributions and allocations of profits and losses from the joint ventures based on the Account’s ownership interest percentages. Several of these joint ventures have mortgage notes payable on the properties owned. At December 31, 2007, the Account held 12 joint venture investments with non-controlling ownership interest percentages that ranged from 50% to 85%. The Account’s allocated portion of the mortgage notes payable was $1,991,782,600 and $472,167,225 at December 31, 2007 and December 31, 2006, respectively. The Account’s equity in the joint ventures at December 31, 2007 and December 31, 2006 was $2,827,508,939 and $1,668,744,951, respectively. A condensed summary of the financial position and results of operations of the joint ventures is shown below.
| | | | | | | |
| | December 31, 2007 | | December 31, 2006 | |
| |
| |
| |
Assets | | | | | | | |
Real estate properties, at value | | $ | 7,001,687,137 | | $ | 3,650,902,513 | |
Other assets | | | 99,798,401 | | | 63,839,503 | |
| |
|
| |
|
| |
Total assets | | $ | 7,101,485,538 | | $ | 3,714,742,016 | |
| |
|
| |
|
| |
Liabilities and Equity | | | | | | | |
Mortgage loans payable, at value | | $ | 2,707,160,513 | | $ | 875,560,195 | |
Other liabilities | | | 64,738,173 | | | 47,949,271 | |
| |
|
| |
|
| |
Total liabilities | | | 2,771,898,686 | | | 923,509,466 | |
Equity | | | 4,329,586,852 | | | 2,791,232,550 | |
| |
|
| |
|
| |
Total liabilities and equity | | $ | 7,101,485,538 | | $ | 3,714,742,016 | |
| |
|
| |
|
| |
| | | | | | | | | | |
| | Year Ended
December 31, 2007 | | Year Ended
December 31, 2006 | | Year Ended
December 31, 2005 | |
| |
| |
| |
| |
Operating Revenues and Expenses | | | | | | | | | | |
Revenues | | $ | 534,468,876 | | $ | 299,078,956 | | $ | 270,519,206 | |
Expenses | | | 315,076,922 | | | 157,806,671 | | | 142,782,169 | |
| |
|
| |
|
| |
|
| |
Excess of revenues over expenses | | $ | 219,391,954 | | $ | 141,272,285 | | $ | 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 non-controlling ownership interest percentages. At December 31, 2007, the Account held five limited partnership investments with non-controlling ownership interest percentages that ranged from 5.27% to 18.45%. The Account’s investment in limited partnerships was $331,361,434 and $279,283,051 at December 31, 2007 and December 31, 2006, respectively.
62
Note 5—Mortgage Loans Payable
At December 31, 2007, the Account had outstanding mortgage loans payable on the following properties:
| | | | | | | | | | | | | | |
Property | | Interest Rate
Percentage and
Payment Frequency | | Amount
December 31, 2007 | | Due | |
| |
| |
| |
| |
50 Fremont | | | | 6.40 paid monthly | | | | $ | 135,000,000 | | | | August 21, 2013 | |
Ontario Industrial Portfolio(a,b) | | | | 7.42 paid monthly | | | | | 8,917,619 | | | | May 1, 2011 | |
Fourth & Madison | | | | 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 | | | | 5.52 paid monthly | | | | | 185,000,000 | | | | November 11, 2015 | |
Reserve at Sugarloaf(a) | | | | 5.49 paid monthly | | | | | 25,891,337 | | | | June 1, 2013 | |
1 & 7 Westferry Circus | | | | 5.40 paid quarterly(c) | | | | 267,188,869 | | | | November 15, 2012 | |
Lincoln Centre | | | | 5.51 paid monthly | | | | | 153,000,000 | | | | February 1, 2016 | |
Wilshire Rodeo Plaza(b) | | | | 5.28 paid monthly | | | | | 112,700,000 | | | | April 11, 2014 | |
1401 H Street(b) | | | | 5.97 paid monthly | | | | | 115,000,000 | | | | December 7, 2014 | |
South Frisco Village(b) | | | | 5.85 paid monthly | | | | | 26,250,559 | | | | June 1, 2013 | |
Pacific Plaza(a) | | | | 5.55 paid monthly | | | | | 8,909,059 | | | | September 1, 2013 | |
Publix at Weston Commons(b) | | | | 5.08 paid monthly | | | | | 35,000,000 | | | | January 1, 2036 | |
| | | | | | | |
|
| | | | | |
Total principal outstanding | | | | | | | | | 1,427,857,443 | | | | | |
Unamortized discount | | | | | | | | | (4,746,752 | ) | | | | |
| | | | | | | |
|
| | | | | |
Amortized principal | | | | | | | | | 1,423,110,691 | | | | | |
Fair value adjustment | | | | | | | | | 3,585,820 | | | | | |
Cumulative foreign currency translation | | | | | | | | | (34,603,529 | ) | | | | |
| | | | | | | |
|
| | | | | |
Total mortgage loans payable | | | | | | | | $ | 1,392,092,982 | | | | | |
| | | | | | | |
|
| | | | | |
| |
(a) | The mortgage is adjusted monthly for principal payments. |
| |
(b) | The mortgage was acquired at a discount which is amortized monthly. |
| |
(c) | The mortgage is denominated in British pounds and the principal has been converted to U.S. dollars using the exchange rate as of December 31, 2007. The quarterly payments are interest only, with a balloon payment at maturity. The interest rate is fixed. |
Principal on mortgage loans payable is due as follows:
| | | | |
| | Amount | |
| |
| |
2008 | | $ | 736,371 | |
2009 | | | 788,911 | |
2010 | | | 2,161,722 | |
2011 | | | 10,241,993 | |
2012 | | | 269,313,872 | |
Thereafter | | | 1,144,614,574 | |
| |
|
| |
Total maturities | | $ | 1,427,857,443 | |
| |
|
| |
63
Note 6—Condensed Financial Information
Selected condensed financial information for an Accumulation Unit of the Account is presented below.
| | | | | | | | | | | | | | | | |
| | Years Ended December 31, | |
| |
| |
| | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| |
| |
| |
| |
| |
| |
Per Accumulation Unit data: | | | | | | | | | | | | | | | | |
Rental income | | $ | 17.975 | | $ | 16.717 | | $ | 15.604 | | $ | 13.422 | | $ | 15.584 | |
Real estate property level expenses and taxes | | | 8.338 | | | 7.807 | | | 7.026 | | | 5.331 | | | 5.890 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Real estate income, net | | | 9.637 | | | 8.910 | | | 8.578 | | | 8.091 | | | 9.694 | |
Other income | | | 4.289 | | | 3.931 | | | 3.602 | | | 3.341 | | | 2.218 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total income | | | 13.926 | | | 12.841 | | | 12.180 | | | 11.432 | | | 11.912 | |
Expense charges (1) | | | 2.554 | | | 1.671 | | | 1.415 | | | 1.241 | | | 1.365 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Investment income, net | | | 11.372 | | | 11.170 | | | 10.765 | | | 10.191 | | | 10.547 | |
Net realized and unrealized gain (loss) on investments and mortgage loans payable | | | 26.389 | | | 22.530 | | | 18.744 | | | 13.314 | | | 2.492 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Net increase in Accumulation Unit Value | | | 37.761 | | | 33.700 | | | 29.509 | | | 23.505 | | | 13.039 | |
Accumulation Unit Value: | | | | | | | | | | | | | | | | |
Beginning of year | | | 273.653 | | | 239.953 | | | 210.444 | | | 186.939 | | | 173.900 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
End of year | | $ | 311.414 | | $ | 273.653 | | $ | 239.953 | | $ | 210.444 | | $ | 186.939 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total return | | | 13.80 | % | | 14.04 | % | | 14.02 | % | | 12.57 | % | | 7.50 | % |
Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
Expenses (1) | | | 0.87 | % | | 0.67 | % | | 0.63 | % | | 0.63 | % | | 0.76 | % |
Investment income, net | | | 3.88 | % | | 4.49 | % | | 4.82 | % | | 5.17 | % | | 5.87 | % |
Portfolio turnover rate: | | | | | | | | | | | | | | | | |
Real estate properties | | | 5.59 | % | | 3.62 | % | | 6.72 | % | | 2.32 | % | | 5.12 | % |
Marketable securities | | | 13.03 | % | | 51.05 | % | | 77.63 | % | | 143.47 | % | | 71.83 | % |
Accumulation Units outstanding at end of year (in thousands) | | | 55,105 | | | 50,146 | | | 42,623 | | | 33,338 | | | 24,724 | |
Net assets end of year (in thousands) | | $ | 17,660,537 | | $ | 14,132,693 | | $ | 10,548,711 | | $ | 7,245,550 | | $ | 4,793,422 | |
| |
(1) | Expense charges per Accumulation Unit and the Ratio of Expenses to Average Net Assets reflect Account-level expenses and exclude real estate property level expenses which are included in net real estate income. If the real estate property level expenses were included, the expense charge per Accumulation Unit for the year ended December 31, 2007 would be $10.892 ($9.478, $8.441, $6.572, and $7.255 for the years ended December 31, 2006, 2005, 2004, and 2003, respectively), and the Ratio of Expenses to Average Net Assets for the year ended December 31, 2007 would be 3.71% (3.81%, 3.78%, 3.33%, and 4.04% for the years ended December 31, 2006, 2005, 2004, and 2003, respectively). |
64
Note 7—Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows:
| | | | | | | | | | |
| | For the Years Ended December 31, | |
| |
| |
| | | 2007 | | | 2006 | | | 2005 | |
| |
| |
| |
| |
Credited for premiums | | | 3,795,126 | | | 4,056,196 | | | 4,335,121 | |
Net units credited for transfers, net disbursements and amounts applied to the Annuity Fund | | | 1,164,238 | | | 3,466,667 | | | 4,950,773 | |
Outstanding: | | | | | | | | | | |
Beginning of year | | | 50,146,354 | | | 42,623,491 | | | 33,337,597 | |
| |
|
| |
|
| |
|
| |
End of year | | | 55,105,718 | | | 50,146,354 | | | 42,623,491 | |
| |
|
| |
|
| |
|
| |
Note 8—Commitments and Subsequent Events
During the normal course of business, the Account enters into discussions and agreements to purchase or sell real estate properties. As of December 31, 2007, the Account had an outstanding commitment to purchase a leasehold interest in approximately 40,000 square feet of retail space located in an apartment property owned by the Account in New York and has subsequently purchased for approximately $42.7 million.
As of December 31, 2007, the Account entered into a commitment to purchase an interest in a limited partnership in the amount of $50 million. Together with the Account’s outstanding commitments to purchase interests in five other limited partnerships and to purchase shares in a private real estate equity investment trust, as of December 31, 2007, $87.6 million remains to be funded under these commitments.
The Account is party to various other claims and routine litigation arising in the ordinary course of business. Management of the Account does not believe that the results of any such claims or litigation, individually, or in the aggregate, will have a material effect on the Account’s business, financial position, or results of operations.
Effective March 3, 2008, the Account has entered into an agreement with State Street Bank and Trust Company (“State Street”) to serve as the Account’s service provider to perform certain custodial functions, as well as investment accounting, recordkeeping, and valuation functions relating to portfolio transactions in securities made through the Account, and to provide other data and information as described in the agreement.
Note 9—New Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) 48, an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and is effective for fiscal years beginning after December 31, 2006. The adoption of FIN 48 did not have a significant impact on the Account’s financial position and results of operations.
In September 2006, FASB issued Statement No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and requires additional disclosures about fair value measurements. This Statement does not require any new fair value measurements, but the application of this Statement could change current practices in determining fair value. This Statement is effective January 1, 2008 for the Account. The Account has assessed the impact of Statement No. 157 and determined that it will not significantly change the Account’s financial position and results of operations at the effective date.
In February 2007, FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This Statement permits entities to choose to measure financial instruments and certain other items at fair
65
value and is expected to expand the use of fair value measurement when warranted. The Account effectively adopted Statement 159 on January 1, 2008 and plans to report all existing and future Mortgage Loans Payable at fair value using this Statement. Historically, the Account recorded Mortgage Loans Payable at fair value. The Account has assessed the impact of Statement 159 in comparison to historical reporting and determined that it will not significantly change the Account’s financial position and results of operations.
In June 2007, the Accounting Standards Executive Committee (“ACSEC”) of the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position (SOP) 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies. The SOP clarifies which entities are required to apply the provisions of the Investment Companies Audit and Accounting Guide (“Guide”) and provides guidance on accounting by parent companies and equity method investors for investments in investment companies. The SOP is effective for fiscal years beginning on or after December 15, 2007. In February 2008, FASB issued Staff Position (“FSP”) SOP 07-1-1 indefinitely delaying the effective date of SOP 07-1 to allow FASB time to consider significant issues related to the implementation of SOP 07-1. Management of the Account will continue to monitor FASB developments and will evaluate the financial reporting implications to the Account, as necessary.
In December 2007, FASB issued Statement No. 141(R), “Business Combinations,” which establishes principles and requirements for how the acquirer shall recognize and measure in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree and goodwill acquired in a business combination or a gain from a bargain purchase. This Statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Account is currently assessing the impact that Statement No. 141(R) will have on its financial position and results of operations.
In December 2007, FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51,” which establishes and expands accounting and reporting standards for minority interests, which will be recharacterized as noncontrolling interests, in a subsidiary and the deconsolidation of a subsidiary. This Statement is effective for fiscal years beginning on or after December 15, 2008. The Account is currently assessing the potential impact that Statement No. 160 will have on its financial position and results of operations.
66
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | |
| | | Value | |
| | |
| |
Location / Description | | | 2007 | | 2006 | |
| | |
| |
| |
REAL ESTATE PROPERTIES—63.04% and 69.27% | | | | | | | |
Alabama: | | | | | | | |
Inverness Center - Office building | | $ | 125,521,529 | | $ | 112,256,914 | |
Arizona: | | | | | | | |
Camelback Center - Office building | | | 80,000,000 | | | — | |
Kierland Apartment Portfolio - Apartments | | | 170,084,494 | | | 206,100,000 | |
Mountain RA Industrial Portfolio - Industrial building | | | — | | | 6,605,429 | |
Phoenix Apartment Portfolio - Apartments | | | 156,109,517 | | | 182,900,000 | |
California: | | | | | | | |
3 Hutton Centre Drive - Office building | | | 64,200,000 | | | 59,011,323 | |
9 Hutton Centre - Office building | | | — | | | 29,000,000 | |
50 Fremont - Office building | | | 478,000,000 | (1) | | 421,000,000 | (1) |
88 Kearny Street - Office building | | | 123,822,200 | | | 90,310,024 | |
275 Battery - Office building | | | 271,917,498 | | | 231,000,000 | |
980 9th Street and 1010 8th Street - Office building | | | 178,000,000 | | | 168,000,000 | |
Rancho Cucamonga Industrial Portfolio - Industrial building | | | 133,000,000 | | | 109,000,000 | |
Capitol Place - Office building | | | 53,539,218 | | | 50,331,828 | |
Centerside I - Office building | | | 67,500,000 | | | 67,000,000 | |
Centre Pointe and Valley View - Industrial building | | | 34,142,741 | | | 32,385,980 | |
Eastgate Distribution Center - Industrial building | | | — | | | 25,558,962 | |
Larkspur Courts - Apartments | | | 97,000,000 | | | 93,043,346 | |
Northern CA RA Industrial Portfolio - Industrial building | | | 69,601,997 | | | 71,317,741 | |
Ontario Industrial Portfolio - Industrial building | | | 355,398,714 | (1) | | 298,045,226 | (1) |
Pacific Plaza - Office building | | | 127,130,076 | (1) | | — | |
Regents Court - Apartments | | | 69,000,000 | | | 67,800,000 | |
Southern CA RA Industrial Portfolio - Industrial building | | | 110,718,042 | | | 97,558,473 | |
The Legacy at Westwood - Apartments | | | 126,579,694 | | | 110,231,593 | |
Wellpoint - Office building | | | 51,000,000 | | | 49,000,000 | |
Westcreek - Apartments | | | 39,189,673 | | | 35,300,000 | |
West Lake North Business Park - Office building | | | 68,621,818 | | | 61,000,000 | |
Westwood Marketplace - Shopping center | | | 96,562,192 | | | 91,467,954 | |
Wilshire Rodeo Plaza - Office building | | | 230,439,415 | (1) | | 204,084,734 | (1) |
Colorado: | | | | | | | |
Palomino Park - Apartments | | | 194,001,036 | | | 184,000,000 | |
The Lodge at Willow Creek - Apartments | | | 43,500,000 | | | 39,501,399 | |
The Market at Southpark - Shopping center | | | 35,800,000 | | | 35,800,000 | |
Connecticut: | | | | | | | |
Ten & Twenty Westport Road - Office building | | | 183,006,040 | | | 175,000,000 | |
Delaware: | | | | | | | |
Mideast RA Industrial Portfolio - Industrial building | | | — | | | 16,014,758 | |
Florida: | | | | | | | |
701 Brickell - Office building | | | 275,941,582 | | | 231,239,379 | |
4200 West Cypress Street - Office building | | | 48,043,650 | | | 43,100,425 | |
Plantation Grove - Shopping center | | | 15,400,000 | | | 15,010,406 | |
Pointe on Tampa Bay - Office building | | | 60,971,897 | | | 50,573,824 | |
Publix at Weston Commons - Shopping center | | | 55,200,000 | (1) | | 54,411,436 | (1) |
67
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | |
| | | Value | |
| | |
| |
Location / Description | | | 2007 | | 2006 | |
| | |
| |
| |
Quiet Waters at Coquina Lakes - Apartments | | $ | 26,204,860 | | $ | 24,006,100 | |
Royal St. George - Apartments | | | 27,000,000 | | | 25,000,000 | |
Sawgrass Office Portfolio - Office building | | | — | | | 72,000,000 | |
Seneca Industrial Park - Industrial building | | | 122,334,422 | | | — | |
South Florida Apartment Portfolio - Apartments | | | 68,248,605 | | | 65,099,785 | |
Suncrest Village - Shopping center | | | 19,500,000 | | | 17,009,378 | |
The Fairways of Carolina - Apartments | | | 27,207,661 | | | 25,309,965 | |
The Greens at Metrowest - Apartments | | | — | | | 21,011,825 | |
The North 40 Office Complex - Office building | | | 67,003,544 | | | 63,500,000 | |
Urban Centre - Office building | | | 135,577,463 | | | 121,000,000 | |
France: | | | | | | | |
Printemps De L’Homme - Shopping center | | | 279,077,542 | | | — | |
Georgia: | | | | | | | |
1050 Lenox Park - Apartments | | | 85,500,000 | | | 79,470,836 | |
Atlanta Industrial Portfolio - Industrial building | | | 58,300,000 | | | 77,863,416 | |
Glenridge Walk - Apartments | | | 52,900,000 | | | 48,710,574 | |
Reserve at Sugarloaf - Apartments | | | 52,000,000 | (1) | | 49,500,000 | (1) |
Shawnee Ridge Industrial Portfolio - Industrial building | | | 76,742,231 | | | 76,117,193 | |
Illinois: | | | | | | | |
Chicago Caleast Industrial Portfolio - Industrial building | | | 77,642,826 | | | 74,999,590 | |
Chicago Industrial Portfolio - Industrial building | | | 86,420,886 | | | 89,104,640 | |
East North Central RA Industrial Portfolio - Industrial building | | | 38,016,397 | | | 37,503,284 | |
Oak Brook Regency Towers - Office building | | | 86,891,650 | | | 83,200,000 | |
Parkview Plaza - Office building | | | 66,066,513 | | | 59,400,000 | |
Kentucky: | | | | | | | |
IDI Kentucky Portfolio - Industrial building | | | — | | | 66,552,034 | |
Maryland: | | | | | | | |
Broadlands Business Park - Industrial building | | | 35,500,000 | | | 35,002,731 | |
FEDEX Distribution Facility - Industrial building | | | 9,900,000 | | | 8,500,000 | |
GE Appliance East Coast Distribution Facility - Industrial building | | | 48,000,000 | | | 48,000,000 | |
Massachusetts: | | | | | | | |
99 High Street - Office building | | | 344,688,328 | (1) | | 291,806,564 | (1) |
Batterymarch Park II - Office building | | | — | | | 13,234,314 | |
Needham Corporate Center - Office building | | | 33,275,228 | | | 22,712,550 | |
Northeast RA Industrial Portfolio - Industrial building | | | 33,300,000 | | | 30,900,000 | |
The Newbry - Office building | | | 389,880,008 | | | 370,745,525 | |
Minnesota: | | | | | | | |
Champlin Marketplace - Shopping center | | | 18,375,000 | | | — | |
Nevada: | | | | | | | |
UPS Distribution Facility - Industrial building | | | 15,900,000 | | | 15,000,000 | |
New Jersey: | | | | | | | |
10 Waterview Boulevard - Office building | | | — | | | 32,100,000 | |
Konica Photo Imaging Headquarters - Industrial building | | | 23,500,000 | | | 23,100,000 | |
Marketfair - Shopping center | | | 95,500,000 | | | 94,058,427 | |
Morris Corporate Center III - Office building | | | 119,600,001 | | | 114,857,104 | |
NJ Caleast Industrial Portfolio - Industrial building | | | 42,225,000 | | | 41,920,988 | |
68
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | |
| | | Value | |
| | |
| |
Location / Description | | | 2007 | | 2006 | |
| | |
| |
| |
Plainsboro Plaza - Shopping center | | $ | 51,000,000 | | $ | 50,900,000 | |
South River Road Industrial - Industrial building | | | 53,400,000 | | | 60,600,000 | |
New York: | | | | | | | |
780 Third Avenue - Office building | | | 375,000,000 | | | 298,000,000 | |
The Colorado - Apartments | | | 113,033,240 | | | 100,000,000 | |
Ohio: | | | | | | | |
Columbus Portfolio - Office building | | | 26,314,686 | | | 24,600,000 | |
Pennsylvania: | | | | | | | |
Lincoln Woods - Apartments | | | 37,917,165 | | | 37,781,555 | |
Tennessee: | | | | | | | |
Airways Distribution Center - Industrial building | | | 24,300,000 | | | 24,857,278 | |
Memphis Caleast Industrial Portfolio - Industrial building | | | — | | | 52,500,000 | |
Summit Distribution Center - Industrial building | | | 27,500,000 | | | 26,300,000 | |
Texas: | | | | | | | |
Butterfield Industrial Park - Industrial building | | | — | | | 5,100,000 | (2) |
Dallas Industrial Portfolio - Industrial building | | | 154,055,892 | | | 153,210,519 | |
Four Oaks Place - Office building | | | 419,270,107 | | | 306,200,984 | |
Houston Apartment Portfolio - Apartments | | | 296,241,497 | | | 306,042,523 | |
Lincoln Centre - Office building | | | 305,000,000 | (1) | | 270,000,000 | (1) |
Park Place on Turtle Creek - Office building | | | 48,282,785 | | | 44,573,669 | |
Pinnacle Industrial /DFW Trade Center - Industrial building | | | 46,700,000 | | | 45,874,807 | |
Preston Sherry Plaza - Office building | | | 45,500,000 | | | — | |
South Frisco Village - Shopping center | | | 48,500,000 | (1) | | 47,014,065 | (1) |
The Caruth - Apartments | | | 65,427,458 | | | 60,007,237 | |
The Legends at Chase Oaks - Apartments | | | — | | | 29,025,236 | |
The Maroneal - Apartments | | | 40,033,822 | | | 39,113,694 | |
United Kingdom: | | | | | | | |
1 & 7 Westferry Circus - Office building | | | 436,127,130 | (1) | | 428,574,628 | (1) |
Utah: | | | | | | | |
Landmark at Salt Lake City (Building #4) - Industrial building | | | — | | | 16,509,871 | |
Virginia: | | | | | | | |
8270 Greensboro Drive - Office building | | | 63,500,000 | | | 62,000,000 | |
Ashford Meadows - Apartments | | | 94,059,776 | | | 89,091,341 | |
Monument Place - Office building | | | — | | | 58,600,000 | |
One Virginia Square - Office building | | | 59,538,690 | | | 53,000,000 | |
The Ellipse at Ballston - Office building | | | 92,504,000 | | | 85,439,350 | |
Washington: | | | | | | | |
Creeksides at Centerpoint - Office building | | | 42,000,000 | | | 40,508,139 | |
Fourth & Madison - Office building | | | 487,000,000 | (1) | | 398,990,017 | (1) |
Millennium Corporate Park - Office building | | | 158,000,000 | | | 139,107,181 | |
Northwest RA Industrial Portfolio - Industrial building | | | 23,401,540 | | | 20,684,499 | |
Rainier Corporate Park - Industrial building | | | 81,160,792 | | | 69,362,219 | |
Regal Logistics Campus - Industrial building | | | 71,000,000 | | | 66,000,000 | |
69
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | |
| | | Value | |
| | |
| |
Location / Description | | | 2007 | | 2006 | |
| | |
| |
| |
Washington DC: | | | | | | | |
1001 Pennsylvania Avenue - Office building | | $ | 640,149,632 | (1) | $ | 552,502,209 | (1) |
1401 H Street, NW - Office building | | | 224,576,156 | (1) | | 207,806,286 | (1) |
1900 K Street - Office building | | | 285,000,000 | | | 255,002,226 | |
Mazza Gallerie - Shopping center | | | 97,000,018 | | | 86,350,179 | |
| |
|
| |
|
| |
| | | | | | | |
TOTAL REAL ESTATE PROPERTIES
(Cost $9,804,488,802 and $9,462,471,032) | | | 11,983,715,574 | | | 10,743,487,689 | |
| |
|
| |
|
| |
OTHER REAL ESTATE-RELATED INVESTMENTS—16.61% and 12.56% | | | | | | | |
| | | | | | | |
REAL ESTATE JOINT VENTURES—14.87% and 10.76% | | | | | | | |
CA - Colorado Center LP
Yahoo! Center (50% Account Interest) | | | 369,402,407 | (3) | | 187,766,625 | (3) |
CA -Treat Towers LP
Treat Towers (75% Account Interest) | | | 118,997,021 | | | 94,023,131 | |
GA -Buckhead LLC
Prominence in Buckhead (75% Account Interest) | | | 115,427,071 | | | 107,256,320 | |
Florida Mall Associates, Ltd.
The Florida Mall (50% Account Interest) | | | 296,486,153 | (3) | | 237,919,775 | (3) |
IL -161 Clark Street LLC
161 North Clark Street (75% Account Interest) | | | 3,150,995 | (4) | | 189,183,793 | |
MA -One Boston Place REIT
One Boston Place (50.25% Account Interest) | | | 246,440,493 | | | 177,900,327 | |
DDR TC LLC
DDR Joint Venture -Various (85% Account Interest) | | | 1,028,297,460 | (3,5) | | — | |
Storage Portfolio I, LLC
Storage Portfolio (75% Account Interest) | | | 81,943,321 | (3,5) | | 74,864,074 | (3,5) |
Strategic Ind Portfolio I, LLC
IDI Nationwide Industrial Portfolio (60% Account Interest) | | | 76,536,044 | (3,5) | | 70,348,753 | (3,5) |
Teachers REA IV, LLC
Tyson’s Executive Plaza II (50% Account Interest) | | | 44,178,210 | | | 40,570,382 | |
TREA Florida Retail, LLC
Florida Retail Portfolio (80% Account Interest) | | | 260,879,060 | | | 265,396,677 | |
West Dade Associates
Miami International Mall (50% Account Interest) | | | 109,944,638 | (3) | | 97,300,131 | (3) |
West Town Mall, LLC
West Town Mall (50% Account Interest) | | | 75,826,066 | (3) | | 126,214,963 | (3) |
| |
|
| |
|
| |
TOTAL REAL ESTATE JOINT VENTURES
(Cost $2,005,340,226 and $1,168,027,179) | | | 2,827,508,939 | | | 1,668,744,951 | |
| |
|
| |
|
| |
| | | | | | | |
LIMITED PARTNERSHIPS—1.74% and 1.80% | | | | | | | |
Cobalt Industrial REIT (10.998% Account Interest) | | | 32,840,031 | | | 26,506,381 | |
Colony Realty Partners LP (5.27% Account Interest) | | | 32,505,008 | | | 26,382,659 | |
Heitman Value Partners Fund (8.43% Account Interest) | | | 24,488,535 | | | 24,578,388 | |
Lion Gables Apartment Fund (18.45% Account Interest) | | | 205,162,203 | | | 179,013,211 | |
70
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | |
| | | Value | |
| | |
| |
Location / Description | | | 2007 | | 2006 | |
| | |
| |
| |
MONY/Transwestern Mezzanine Fund RP (19.75% Account Interest) | | $ | — | | $ | 454,319 | |
MONY/Transwestern Mezz RP II (16.67% Account Interest) | | | 36,365,657 | | | 22,348,093 | |
| | |
| | |
| |
|
TOTAL LIMITED PARTNERSHIPS
(Cost $255,579,349 and $245,295,745) | | | 331,361,434 | | | 279,283,051 | |
| | |
| | |
| |
|
TOTAL REAL ESTATE JOINT VENTURES AND LIMITED PARTNERSHIPS
(Cost $2,260,919,575 and $1,413,322,924) | | | 3,158,870,373 | | | 1,948,028,002 | |
| |
|
| |
|
| |
| | | | | | | |
MARKETABLE SECURITIES—19.97% and 17.69% | | | | | | | |
| | | | | | | |
REAL ESTATE-RELATED MARKETABLE SECURITIES—2.24% and 4.54% | | | | | | | |
| | | | | | | |
REAL ESTATE EQUITY SECURITIES—2.24% and 3.99% | | | | | | | |
| | | | | | | | | | | |
Shares | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
51,200 | | 53,300 | | Acadia Realty Trust | | | 1,311,232 | | | 1,333,566 | |
— | | 68,700 | | Affordable Residential Communities LP | | | — | | | 800,355 | |
— | | 68,700 | | Affordable Residential Communities LP share rights
(expired 1/23/07) | | | — | | | 16,488 | |
3,300 | | 3,800 | | Alexander’s Inc. | | | 1,165,725 | | | 1,594,670 | |
53,100 | | 54,400 | | Alexandria Real Estate Equities Inc. | | | 5,398,677 | | | 5,461,760 | |
164,585 | | 166,985 | | AMB Property Corp. | | | 9,473,513 | | | 9,786,991 | |
45,100 | | 42,500 | | American Campus Communities Inc. | | | 1,210,935 | | | 1,209,975 | |
214,600 | | 244,900 | | American Financial Realty Trust | | | 1,721,092 | | | 2,801,656 | |
159,700 | | 181,500 | | Apartment Investment & Management Co. | | | 5,546,381 | | | 10,167,630 | |
— | | 408,900 | | Archstone-Smith Trust | | | — | | | 23,802,069 | |
200,000 | | 118,500 | | Ashford Hospitality Trust Inc. | | | 1,438,000 | | | 1,475,325 | |
27,500 | | 33,300 | | Associated Estates Realty Corp. | | | 259,600 | | | 457,542 | |
132,200 | | 138,900 | | AvalonBay Communities Inc. | | | 12,445,308 | | | 18,063,945 | |
109,100 | | 122,400 | | BioMed Realty Trust Inc. | | | 2,527,847 | | | 3,500,640 | |
198,600 | | 217,200 | | Boston Properties Inc. | | | 18,233,466 | | | 24,300,336 | |
148,100 | | 171,500 | | Brandywine Realty Trust | | | 2,655,433 | | | 5,702,375 | |
86,500 | | 94,200 | | BRE Properties Inc. | | | 3,505,845 | | | 6,124,884 | |
341,650 | | 220,300 | | Brookfield Properties Corp. | | | 6,576,763 | | | 8,664,399 | |
93,500 | | 105,200 | | Camden Property Trust | | | 4,502,025 | | | 7,769,020 | |
110,900 | | 121,500 | | CBL & Associates Properties Inc. | | | 2,651,619 | | | 5,267,025 | |
74,900 | | 74,900 | | Cedar Shopping Centers Inc. | | | 766,227 | | | 1,191,659 | |
75,400 | | 87,600 | | Colonial Properties Trust | | | 1,706,302 | | | 4,106,688 | |
79,500 | | 80,600 | | Corporate Office Properties Trust | | | 2,504,250 | | | 4,067,882 | |
71,100 | | 75,500 | | Cousins Properties Inc. | | | 1,571,310 | | | 2,662,885 | |
— | | 179,000 | | Crescent Real Estate Equities Company | | | — | | | 3,535,250 | |
281,100 | | — | | DCT Industrial Trust Inc. | | | 2,617,041 | | | — | |
205,000 | | 204,000 | | Developers Diversified Realty Corp. | | | 7,849,450 | | | 12,841,800 | |
157,000 | | 125,500 | | DiamondRock Hospitality Co. | | | 2,351,860 | | | 2,260,255 | |
99,000 | | 84,100 | | Digital Realty Trust Inc. | | | 3,798,630 | | | 2,878,743 | |
164,400 | | 123,500 | | Douglas Emmett Inc. | | | 3,717,084 | | | 3,283,865 | |
71
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Shares | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
243,000 | | 252,100 | | Duke Realty Corp. | | $ | 6,337,440 | | $ | 10,310,890 | |
51,700 | | — | | Dupont Fabros Technology | | | 1,013,320 | | | — | |
39,400 | | 42,900 | | EastGroup Properties Inc. | | | 1,648,890 | | | 2,297,724 | |
49,900 | | 49,900 | | Education Realty Trust Inc. | | | 560,876 | | | 737,023 | |
— | | 103,400 | | Equity Inns Inc. | | | — | | | 1,650,264 | |
37,300 | | 38,800 | | Equity Lifestyle Properties Inc. | | | 1,703,491 | | | 2,111,884 | |
— | | 654,500 | | Equity Office Properties Trust | | | — | | | 31,527,265 | |
60,800 | | 69,900 | | Equity One Inc. | | | 1,400,224 | | | 1,863,534 | |
452,300 | | 544,300 | | Equity Residential | | | 16,495,381 | | | 27,623,225 | |
42,000 | | 43,600 | | Essex Property Trust Inc. | | | 4,094,580 | | | 5,635,300 | |
108,700 | | 120,200 | | Extra Space Storage Inc. | | | 1,553,323 | | | 2,194,852 | |
93,700 | | 103,200 | | Federal Realty Investment Trust | | | 7,697,455 | | | 8,772,000 | |
101,300 | | 115,300 | | FelCor Lodging Trust Inc. | | | 1,579,267 | | | 2,518,152 | |
74,700 | | 84,300 | | First Industrial Realty Trust Inc. | | | 2,584,620 | | | 3,952,827 | |
41,600 | | 41,600 | | First Potomac Realty Trust | | | 719,264 | | | 1,210,976 | |
384,500 | | 423,600 | | General Growth Properties Inc. | | | 15,833,710 | | | 22,124,628 | |
62,700 | | 69,600 | | Glimcher Realty Trust | | | 895,983 | | | 1,859,016 | |
64,200 | | 73,800 | | GMH Communities Trust | | | 354,384 | | | 749,070 | |
360,900 | | — | | HCP Inc | | | 12,552,102 | | | — | |
141,700 | | — | | Health Care REIT Inc | | | 6,332,573 | | | — | |
84,600 | | — | | Healthcare Realty Trust Inc | | | 2,147,994 | | | — | |
70,900 | | 59,500 | | Hersha Hospitality Trust | | | 673,550 | | | 674,730 | |
— | | 107,500 | | Highland Hospitality Corp. | | | — | | | 1,531,875 | |
96,300 | | 101,700 | | Highwoods Properties Inc. | | | 2,829,294 | | | 4,145,292 | |
55,500 | | 64,000 | | Home Properties Inc. | | | 2,489,175 | | | 3,793,280 | |
155,800 | | 147,900 | | Hospitality Properties Trust | | | 5,019,876 | | | 7,029,687 | |
869,070 | | 973,570 | | Host Hotels & Resorts Inc. | | | 14,808,953 | | | 23,901,143 | |
375,400 | | 396,700 | | HRPT Properties Trust | | | 2,901,842 | | | 4,899,245 | |
95,300 | | 116,700 | | Inland Real Estate Corp. | | | 1,349,448 | | | 2,184,624 | |
— | | 84,800 | | Innkeepers USA Trust | | | — | | | 1,314,400 | |
54,100 | | 59,400 | | Kilroy Realty Corp. | | | 2,973,336 | | | 4,633,200 | |
365,921 | | 409,521 | | Kimco Realty Corp. | | | 13,319,524 | | | 18,407,969 | |
47,600 | | 55,300 | | Kite Realty Group Trust | | | 726,852 | | | 1,029,686 | |
66,600 | | 75,000 | | LaSalle Hotel Properties | | | 2,124,540 | | | 3,438,750 | |
151,900 | | 167,000 | | Liberty Property Trust | | | 4,376,239 | | | 8,206,380 | |
121,000 | | 135,900 | | Macerich Co./The | | | 8,598,260 | | | 11,764,863 | |
111,900 | | 118,700 | | Mack-Cali Realty Corp. | | | 3,804,600 | | | 6,053,700 | |
59,900 | | 81,000 | | Maguire Properties Inc. | | | 1,765,253 | | | 3,240,000 | |
42,300 | | 44,000 | | Mid-America Apartment Communities | | | 1,808,325 | | | 2,518,560 | |
— | | 100,200 | | Mills Corp./The | | | — | | | 2,004,000 | |
155,200 | | — | | Nationwide Health Properties Inc. | | | 4,868,624 | | | — | |
— | | 198,000 | | New Plan Excel Realty Trust | | | — | | | 5,441,040 | |
25,400 | | 25,100 | | Parkway Properties Inc./Md | | | 939,292 | | | 1,280,351 | |
65,900 | | 69,500 | | Pennsylvania Real Estate Investment Trust | | | 1,955,912 | | | 2,736,910 | |
72,200 | | 79,300 | | Post Properties Inc. | | | 2,535,664 | | | 3,624,010 | |
427,900 | | 462,500 | | Prologis | | | 27,120,302 | | | 28,106,125 | |
72
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Shares | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
26,900 | | 30,200 | | PS Business Parks Inc. | | $ | 1,413,595 | | $ | 2,135,442 | |
214,614 | | 241,114 | | Public Storage Inc. | | | 15,754,814 | | | 23,508,615 | |
31,500 | | 28,500 | | Ramco-Gershenson Properties | | | 673,155 | | | 1,086,990 | |
— | | 157,000 | | Reckson Associates Realty Corp. | | | — | | | 7,159,200 | |
115,100 | | 129,300 | | Regency Centers Corp. | | | 7,422,799 | | | 10,107,381 | |
19,300 | | 20,600 | | Saul Centers Inc. | | | 1,031,199 | | | 1,136,914 | |
139,600 | | — | | Senior Housing Properties Trust | | | 3,166,128 | | | — | |
373,221 | | 412,821 | | Simon Property Group Inc. | | | 32,417,976 | | | 41,814,639 | |
98,507 | | 86,300 | | SL Green Realty Corp. | | | 9,206,464 | | | 11,458,914 | |
36,500 | | 33,500 | | Sovran Self Storage Inc. | | | 1,463,650 | | | 1,918,880 | |
124,300 | | 134,700 | | Strategic Hotels & Resorts Inc. | | | 2,079,539 | | | 2,935,113 | |
27,800 | | 30,900 | | Sun Communities Inc. | | | 585,746 | | | 999,924 | |
98,200 | | 109,400 | | Sunstone Hotel Investors Inc. | | | 1,796,078 | | | 2,924,262 | |
52,300 | | 58,300 | | Tanger Factory Outlet Centers | | | 1,972,233 | | | 2,278,364 | |
88,800 | | 98,400 | | Taubman Centers Inc. | | | 4,368,072 | | | 5,004,624 | |
224,000 | | — | | UDR, Inc. | | | 4,446,400 | | | — | |
— | | 250,400 | | United Dominion Realty Trust Inc. | | | — | | | 7,960,216 | |
17,000 | | — | | Universal Health Realty Income Trust | | | 602,480 | | | — | |
78,500 | | 95,400 | | U-Store-It Trust | | | 719,060 | | | 1,960,470 | |
221,800 | | — | | Ventas Inc. | | | 10,036,450 | | | — | |
237,100 | | 245,800 | | Vornado Realty Trust | | | 20,852,945 | | | 29,864,700 | |
77,700 | | 85,500 | | Washington Real Estate Investment | | | 2,440,556 | | | 3,420,000 | |
133,000 | | 148,500 | | Weingarten Realty Investors | | | 4,181,520 | | | 6,847,335 | |
— | | 44,700 | | Winston Hotels Inc. | | | — | | | 592,275 | |
| | | | | |
|
| |
|
| |
TOTAL REAL ESTATE EQUITY SECURITIES
(Cost $439,154,248 and $484,071,757) | | | 426,630,212 | | | 619,342,386 | |
| | | | | |
|
| |
|
| |
COMMERCIAL MORTGAGE-BACKED SECURITIES—0.00% and 0.55% | | | | | | | |
| | | | | | | | | | | |
Principal | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer, Interest Rate and Maturity Date | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
— | | 10,000,000 | | Commercial Mortgage Pass
5.450% 12/15/20 | | | — | | | 10,000,000 | |
— | | 3,389,773 | | Credit Suisse Mortgage Company
5.470% 4/15/21 | | | — | | | 3,390,255 | |
— | | 10,000,000 | | GS Mortgage Securities Co
5.682% 5/3/18 | | | — | | | 10,186,930 | |
— | | 8,780,566 | | GS Mortgage Securities Co
5.420% 6/6/20 | | | — | | | 8,782,059 | |
— | | 9,996,970 | | JP Morgan Chase Commercial
5.440% 11/15/18 | | | — | | | 9,996,970 | |
— | | 9,298,609 | | Lehman Brothers Floating
5.430% 9/15/21 | | | — | | | 9,298,971 | |
— | | 9,143,864 | | Morgan Stanley Capital
5.440% 7/15/19 | | | — | | | 9,144,605 | |
73
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer, Interest Rate and Maturity Date | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
— | | 10,000,000 | | Morgan Stanley Dean Witter
5.712% 2/3/16 | | $ | — | | $ | 10,137,150 | |
— | | 14,642,368 | | Wachovia Bank Commercial
5.440% 9/15/21 | | | — | | | 14,642,997 | |
| | | | | |
|
| |
|
| |
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(Cost $0 and $85,255,038) | | | — | | | 85,579,937 | |
| | | | | |
|
| |
|
| |
TOTAL REAL ESTATE-RELATED MARKETABLE SECURITIES
(Cost $439,154,248 and $569,326,795) | | | 426,630,212 | | | 704,922,323 | |
| | | | | |
|
| |
|
| |
OTHER MARKETABLE SECURITIES—17.73% and 13.15% | | | | | | | |
| | | | | | | |
CERTIFICATES OF DEPOSIT—2.22% and .86% | | | | | | | |
— | | 10,000,000 | | American Express Bank, FSB
5.565% 1/8/07 | | | — | | | 10,000,235 | |
— | | 1,500,000 | | American Express Bank, FSB
5.290% 1/12/07 | | | — | | | 1,499,996 | |
— | | 24,000,000 | | American Express Bank, FSB
5.280% 1/18/07 | | | — | | | 23,999,578 | |
25,000,000 | | — | | American Express Centurion Bank
4.750% 2/4/08 | | | 25,001,875 | | | — | |
20,000,000 | | — | | American Express Centurion Bank
4.750% 2/5/08 | | | 20,001,556 | | | — | |
— | | 25,000,000 | | American Express Centurion Bank
5.290% 1/3/07 | | | — | | | 24,999,988 | |
— | | 19,165,000 | | American Express Centurion Bank
5.290% 1/8/07 | | | — | | | 19,164,962 | |
— | | 20,000,000 | | American Express Centurion Bank
5.290% 1/9/07 | | | — | | | 19,999,954 | |
10,000,000 | | — | | Bank of Montreal
5.030% 2/14/08 | | | 10,004,439 | | | — | |
45,000,000 | | — | | Bank of Montreal
5.100% 3/7/08 | | | 45,031,437 | | | — | |
25,000,000 | | — | | Bank of Nova Scotia
5.060% 1/16/08 | | | 25,003,988 | | | — | |
25,000,000 | | — | | Barclays Bank
4.990% 2/27/08 | | | 25,012,510 | | | — | |
10,000,000 | | — | | Calyon
4.820% 1/31/08 | | | 10,001,100 | | | — | |
50,000,000 | | — | | Calyon
5.050% 3/12/08 | | | 50,032,645 | | | — | |
25,000,000 | | — | | Deutsche Bank
4.950% 1/24/08 | | | 25,004,197 | | | — | |
— | | 3,000,000 | | Deutsche Bank
5.290% 1/9/07 | | | — | | | 2,999,962 | |
74
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer, Interest Rate and Maturity Date | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
— | | 30,000,000 | | Deutsche Bank
5.300% 1/22/07 | | $ | — | | $ | 29,999,154 | |
32,000,000 | | — | | Dexia Banque SA
4.990% 3/10/08 | | | 32,016,554 | | | — | |
20,000,000 | | — | | Dexia Banque SA
4.880% 3/25/08 | | | 20,008,286 | | | — | |
30,000,000 | | — | | Rabobank Nederland
5.020% 3/5/08 | | | 30,016,305 | | | — | |
30,000,000 | | — | | Royal Bank of Canada
5.060% 1/25/08 | | | 30,007,494 | | | — | |
20,000,000 | | — | | SunTrust Banks, Inc.
4.845% 1/28/08 | | | 19,998,920 | | | — | |
40,000,000 | | — | | Toronto Dominion Bank
5.300% 1/22/08 | | | 40,014,108 | | | — | |
15,000,000 | | — | | Toronto Dominion Bank
5.040% 2/26/08 | | | 15,008,718 | | | — | |
| | | | | |
|
| |
|
| |
TOTAL CERTIFICATES OF DEPOSIT
(Cost $422,007,080 and $132,665,429) | | | 422,164,132 | | | 132,663,829 | |
| |
|
| |
|
| |
COMMERCIAL PAPER—9.23% and 9.81% | | | | | | | |
|
| | | | Issuer, Yield(6)and Maturity Date | | | | | | | |
| | | |
| | | | | | | |
10,000,000 | | — | | Abbey National North America LLC
4.670% 1/8/08 | | | 9,989,577 | | | — | |
20,000,000 | | — | | Abbey National North America LLC
4.930% 1/9/08 | | | 19,976,550 | | | — | |
— | | 25,000,000 | | Abbey National North America LLC
5.260% 1/17/07 | | | — | | | 24,945,207 | |
50,000,000 | | — | | American Express Credit Corp.
4.510% 1/14/08 | | | 49,908,220 | | | — | |
32,490,000 | | — | | American Honda Finance Corp.
4.50-4.510% 1/29/08 | | | 32,369,946 | | | — | |
2,137,000 | | — | | American Honda Finance Corp.
4.380% 1/4/08 | | | 2,135,879 | | | — | |
15,438,000 | | — | | American Honda Finance Corp.
4.310% 2/11/08 | | | 15,355,978 | | | — | |
7,050,000 | | | | American Honda Finance Corp.
4.250% 2/28/08 | | | 6,996,781 | | | — | |
— | | 50,000,000 | | American Honda Finance Corp.
5.210-5.240% 1/22/07 | | | — | | | 49,853,055 | |
— | | 17,475,000 | | American Honda Finance Corp.
5.240% 2/9/07 | | | — | | | 17,377,605 | |
— | | 10,000,000 | | Anheuser - Busch Co.
5.250% 1/19/07 | | | — | | | 9,975,019 | |
20,000,000 | | — | | Bank of America Corp
4.970% 1/15/08 | | | 19,960,666 | | | — | |
75
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | Issuer, Yield(6)and Maturity Date | |
| |
2007 | | 2006 | | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
13,200,000 | | — | | Bank of America Corp
4.780% 3/6/08 | | $ | 13,087,663 | | $ | — | |
30,000,000 | | — | | Bank of America Corp
4.800% 4/8/08 | | | 29,604,246 | | | — | |
27,400,000 | | — | | Bank of Scotland
4.710% 2/26/08 | | | 27,200,523 | | | — | |
34,525,000 | | — | | Bank of Scotland
4.720% 2/29/08 | | | 34,259,731 | | | — | |
— | | 25,000,000 | | Barclay’s U.S. Funding Corp.
5.240% 1/26/07 | | | — | | | 24,912,383 | |
— | | 20,000,000 | | BMW US Capital Corp.
5.210% 2/7/07 | | | — | | | 19,894,400 | |
— | | 23,050,000 | | BMW US Capital Corp.
5.240% 2/9/07 | | | — | | | 22,921,533 | |
20,000,000 | | — | | Canadian Imperial Holdings, Inc.
4.703% 1/29/08 | | | 19,926,098 | | | — | |
— | | 25,000,000 | | Ciesco LP
5.250% 1/9/07 | | | — | | | 24,973,942 | |
— | | 14,000,000 | | Ciesco LP
5.260% 1/25/07 | | | — | | | 13,952,299 | |
40,000,000 | | — | | Citigroup Funding Inc.
4.850% 1/23/08 | | | 39,880,984 | | | — | |
25,000,000 | | — | | Citigroup Funding Inc.
4.650% 2/12/08 | | | 24,864,937 | | | — | |
25,000,000 | | — | | Citigroup Funding Inc.
4.650% 2/7/08 | | | 24,880,483 | | | — | |
— | | 50,000,000 | | Citigroup Funding Inc.
5.250% 1/11/07 | | | — | | | 49,934,060 | |
— | | 35,825,000 | | Citigroup Funding Inc.
5.260% 2/5/07 | | | — | | | 35,647,365 | |
5,255,000 | | — | | Coca Cola Co.
4.200% 2/15/08 | | | 5,224,421 | | | — | |
20,000,000 | | — | | Coca Cola Co.
4.430% 2/19/08 | | | 19,873,054 | | | — | |
13,000,000 | | — | | Coca Cola Co.
4.390% 2/25/08 | | | 12,907,098 | | | — | |
— | | 6,000,000 | | Corporate Asset Funding Corp, Inc.
5.260% 1/22/07 | | | — | | | 5,982,193 | |
— | | 8,760,000 | | Corporate Asset Funding Corp, Inc.
5.250% 1/29/07 | | | — | | | 8,725,048 | |
— | | 25,000,000 | | Corporate Asset Funding Corp, Inc.
5.250% 2/7/07 | | | — | | | 24,867,250 | |
— | | 54,000,000 | | Corporate Asset Funding Corp, Inc.
5.260% 2/8/07 | | | — | | | 53,705,295 | |
76
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | Issuer, Yield(6)and Maturity Date | |
| |
2007 | | 2006 | | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
30,000,000 | | — | | Danske Corp.
4.920% 3/6/08 | | $ | 29,746,338 | | $ | — | |
— | | 7,000,000 | | Dorada Finance Inc.
5.230% 1/9/07 | | | — | | | 6,992,704 | |
20,000,000 | | — | | Edison Asset Securitization, LLC
4.740% 3/11/08 | | | 19,789,840 | | | — | |
— | | 24,000,000 | | Edison Asset Securitization, LLC
5.240% 1/19/07 | | | — | | | 23,939,287 | |
— | | 10,000,000 | | Edison Asset Securitization, LLC
5.240% 2/1/07 | | | — | | | 9,955,666 | |
— | | 32,900,000 | | Fairway Finance Company, LLC
5.260% 1/17/07 | | | — | | | 32,826,521 | |
20,460,000 | | — | | General Electric Capital Corp.
4.510% 2/19/08 | | | 20,330,987 | | | — | |
15,340,000 | | — | | General Electric Capital Corp.
4.550% 2/20/08 | | | 15,241,250 | | | — | |
30,000,000 | | — | | General Electric Capital Corp.
4.580% 4/8/08 | | | 29,606,721 | | | — | |
— | | 23,760,000 | | General Electric Capital Corp.
5.250% 1/18/07 | | | — | | | 23,704,454 | |
— | | 13,155,000 | | General Electric Capital Corp.
5.240% 2/8/07 | | | — | | | 13,084,017 | |
— | | 30,000,000 | | General Electric Capital Corp.
5.240% 2/15/07 | | | — | | | 29,807,499 | |
30,540,000 | | — | | General Electric Co
4.540% 3/4/08 | | | 30,290,195 | | | — | |
13,200,000 | | — | | Goldman Sachs Group Inc
5.200% 1/08/08 | | | 13,186,155 | | | — | |
12,000,000 | | — | | Govco Incorporated
4.680% 1/28/08 | | | 11,948,442 | | | — | |
20,000,000 | | — | | Govco Incorporated
5.400% 2/12/08 | | | 19,869,924 | | | — | |
37,860,000 | | — | | Govco Incorporated
5.100% 2/20/08 | | | 37,570,693 | | | — | |
29,000,000 | | — | | Govco Incorporated
4.850% 3/13/08 | | | 28,687,505 | | | — | |
— | | 25,700,000 | | Govco Incorporated
5.230% 3/8/07 | | | — | | | 25,454,668 | |
— | | 50,000,000 | | Govco Incorporated
5.330% 1/5/07 | | | — | | | 49,977,665 | |
35,140,000 | | — | | Greenwich Capital Holding
4.850% 4/14/08 | | | 34,649,576 | | | — | |
— | | 33,000,000 | | Greyhawk Funding LLC
5.260% 2/6/07 | | | — | | | 32,829,314 | |
6,990,000 | | — | | Harley-Davidson Funding
4.480% 2/21/08 | | | 6,943,777 | | | — | |
77
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | Issuer, Yield(6)and Maturity Date | |
| |
2007 | | 2006 | | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
— | | 8,415,000 | | HBOS Treasury Srvcs PLC
5.250% 3/21/07 | | $ | — | | $ | 8,319,680 | |
30,000,000 | | — | | HSBC Finance Corporation
4.700% 2/21/08 | | | 29,757,135 | | | — | |
— | | 40,000,000 | | HSBC Finance Corporation
5.250% 1/26/07 | | | — | | | 39,859,012 | |
25,000,000 | | — | | IBM Capital Inc
4.250% 3/10/08 | | | 24,773,325 | | | — | |
— | | 22,200,000 | | IBM Capital Inc.
5.220% 3/16/07 | | | — | | | 21,963,166 | |
10,000,000 | | — | | IBM International Group
4.725% 1/14/08 | | | 9,981,644 | | | — | |
18,900,000 | | — | | IBM International Group
4.725% 1/15/08 | | | 18,862,829 | | | — | |
20,000,000 | | — | | IBM International Group
4.220% 2/27/08 | | | 19,851,712 | | | — | |
5,420,000 | | — | | IBM (International Business Machines Corp.)
4.230% 1/3/08 | | | 5,417,868 | | | — | |
— | | 19,000,000 | | IBM (International Business Machines Corp.)
5.250% 1/10/07 | | | — | | | 18,966,750 | |
20,000,000 | | — | | ING (US) Finance
4.730% 1/30/08 | | | 19,924,332 | | | — | |
25,000,000 | | — | | ING (US) Finance
4.820% 2/22/08 | | | 24,832,460 | | | — | |
— | | 25,000,000 | | ING (US) Finance
5.240% 3/27/07 | | | — | | | 24,695,265 | |
— | | 24,000,000 | | Johnson & Johnson
5.270% 1/2/07 | | | — | | | 24,000,000 | |
— | | 25,000,000 | | Johnson & Johnson
5.200% 1/18/07 | | | — | | | 24,941,555 | |
— | | 20,259,000 | | Kimberly-Clark Worldwide, Inc.
5.230% 1/29/07 | | | — | | | 20,179,184 | |
22,904,000 | | — | | Kitty Hawk Funding Corp
5.030% 3/14/08 | | | 22,653,437 | | | — | |
— | | 10,000,000 | | Links Finance L.L.C.
5.250% 1/16/07 | | | — | | | 9,979,190 | |
— | | 30,000,000 | | Morgan Stanley Dean Witter
5.240% 2/12/07 | | | — | | | 29,819,598 | |
20,000,000 | | — | | Nestle Capital Corp
4.740% 2/6/08 | | | 19,906,862 | | | — | |
14,500,000 | | — | | Nestle Capital Corp
5.090% 3/11/08 | | | 14,367,337 | | | — | |
20,000,000 | | — | | Nestle Capital Corp
5.210% 3/5/08 | | | 19,833,636 | | | — | |
78
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer, Yield(6)and Maturity Date | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
9,300,000 | | — | | Paccar Financial Corp
4.730% 1/14/08 | | $ | 9,283,038 | | $ | — | |
10,000,000 | | — | | Paccar Financial Corp
4.490% 2/11/08 | | | 9,947,220 | | | — | |
15,300,000 | | — | | Paccar Financial Corp
4.500% 2/28/08 | | | 15,185,256 | | | — | |
10,000,000 | | — | | Park Avenue Receivables
4.650% 3/18/08 | | | 9,884,430 | | | — | |
19,645,000 | | — | | Pfizer Inc
4.410% 5/15/08 | | | 19,285,726 | | | — | |
— | | 11,601,000 | | Pitney Bowes Inc.
5.300% 1/4/07 | | | — | | | 11,597,578 | |
28,000,000 | | — | | Private Export Funding Corporation
4.640-4.750% 1/30/08 | | | 27,893,365 | | | — | |
1,500,000 | | — | | Private Export Funding Corporation
4.530% 1/31/08 | | | 1,494,098 | | | — | |
10,000,000 | | — | | Private Export Funding Corporation
4.680% 2/11/08 | | | 9,946,870 | | | — | |
20,000,000 | | — | | Private Export Funding Corporation
4.740% 2/5/08 | | | 19,908,760 | | | — | |
10,000,000 | | — | | Private Export Funding Corporation
4.680% 3/3/08 | | | 9,919,045 | | | — | |
— | | 20,500,000 | | Private Export Funding Corporation
5.220% 1/3/07 | | | — | | | 20,496,976 | |
— | | 1,845,000 | | Private Export Funding Corporation
5.260% 1/11/07 | | | — | | | 1,842,553 | |
— | | 23,000,000 | | Private Export Funding Corporation
5.22-5.23% 1/18/07 | | | — | | | 22,945,922 | |
— | | 6,000,000 | | Private Export Funding Corporation
5.220% 1/23/07 | | | — | | | 5,981,485 | |
— | | 15,000,000 | | Private Export Funding Corporation
5.230% 2/15/07 | | | — | | | 14,903,199 | |
— | | 14,120,000 | | Private Export Funding Corporation
5.230% 3/6/07 | | | — | | | 13,989,828 | |
— | | 25,000,000 | | Procter & Gamble Co
5.230% 1/12/07 | | | — | | | 24,963,380 | |
— | | 25,000,000 | | Procter & Gamble International S.C.
5.250% 2/1/07 | | | — | | | 24,890,625 | |
— | | 50,000,000 | | Procter & Gamble International S.C.
5.250% 2/14/07 | | | — | | | 49,686,455 | |
10,000,000 | | — | | Procter & Gamble International S.C.
4.740% 1/16/08 | | | 9,979,155 | | | — | |
10,000,000 | | — | | Procter & Gamble International S.C.
4.750% 1/18/08 | | | 9,976,550 | | | — | |
10,000,000 | | — | | Procter & Gamble International S.C.
4.200% 1/31/08 | | | 9,960,914 | | | — | |
79
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer, Yield(6)and Maturity Date | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
4,665,000 | | — | | Procter & Gamble International S.C.
4.750% 1/4/08 | | $ | 4,662,569 | | $ | — | |
30,000,000 | | — | | Procter & Gamble International S.C.
4.740% 2/14/08 | | | 29,830,500 | | | — | |
17,000,000 | | — | | Procter & Gamble International S.C.
4.600% 2/1/08 | | | 16,931,441 | | | — | |
8,000,000 | | — | | Procter & Gamble International S.C.
4.350% 3/12/08 | | | 7,925,696 | | | — | |
9,000,000 | | — | | Procter & Gamble International S.C.
4.190% 3/14/08 | | | 8,913,882 | | | — | |
12,000,000 | | — | | Ranger Funding Company LLC
5.110% 1/10/08 | | | 11,981,685 | | | — | |
31,573,000 | | — | | Ranger Funding Company LLC
5.080-5.580% 1/18/08 | | | 31,486,411 | | | — | |
— | | 10,000,000 | | Ranger Funding Company LLC
5.260% 1/24/07 | | | — | | | 9,967,385 | |
— | | 20,000,000 | | Ranger Funding Company LLC
5.260% 1/25/07 | | | — | | | 19,931,856 | |
— | | 23,760,000 | | Ranger Funding Company LLC
5.300% 2/12/07 | | | — | | | 23,616,311 | |
25,000,000 | | — | | Royal Bank of Scotland
4.740% 2/8/08 | | | 24,877,365 | | | — | |
— | | 10,000,000 | | Scaldis Capital LLC
5.250% 1/10/07 | | | — | | | 9,988,068 | |
— | | 25,000,000 | | Sheffield Receivables Corporation
5.240% 1/12/07 | | | — | | | 24,962,735 | |
— | | 35,750,000 | | Sheffield Receivables Corporation
5.260% 1/17/07 | | | — | | | 35,670,156 | |
10,000,000 | | — | | Shell International Financial
4.470% 3/28/08 | | | 9,884,402 | | | — | |
20,000,000 | | — | | Societe Generale North America, Inc.
5.155% 1/10/08 | | | 19,973,944 | | | — | |
15,000,000 | | — | | Societe Generale North America, Inc.
4.780% 2/1/08 | | | 14,939,506 | | | — | |
25,000,000 | | — | | Societe Generale North America, Inc.
4.830% 3/26/08 | | | 24,718,170 | | | — | |
17,420,000 | | — | | Societe Generale North America, Inc.
4.640% 4/4/08 | | | 17,201,414 | | | — | |
— | | 7,850,000 | | Societe Generale North America, Inc.
5.250% 1/10/07 | | | — | | | 7,836,262 | |
— | | 25,000,000 | | Societe Generale North America, Inc.
5.250% 1/19/07 | | | — | | | 24,937,902 | |
— | | 20,000,000 | | SunTrust Banks, Inc.
5.245% 5/1/07 | | | — | | | 20,001,700 | |
18,505,000 | | — | | Svensk Exportkredit AB
4.720-4.820% 01/14/08 | | | 18,471,249 | | | — | |
80
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer, Yield(6)and Maturity Date | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
17,800,000 | | — | | Svensk Exportkredit AB
4.860% 1/15/08 | | $ | 17,765,215 | | $ | — | |
36,000,000 | | — | | Svensk Exportkredit AB
4.740% 1/17/08 | | | 35,920,267 | | | — | |
16,000,000 | | — | | Svensk Exportkredit AB
4.370% 3/12/08 | | | 15,851,392 | | | — | |
10,000,000 | | — | | Svensk Exportkredit AB
4.720% 04/09/08 | | | 9,867,500 | | | — | |
— | | 14,675,000 | | Swedish Export Credit Corp.
5.240% 1/10/07 | | | — | | | 14,657,788 | |
— | | 33,895,000 | | Swedish Export Credit Corp.
5.24-5.26% 1/16/07 | | | — | | | 33,825,624 | |
— | | 30,000,000 | | Swedish Export Credit Corp.
5.240% 2/13/07 | | | — | | | 29,816,250 | |
— | | 5,800,000 | | The Concentrate Manufacturing Company of Ireland 5.260% 1/9/07 | | | — | | | 5,790,695 | |
10,000,000 | | — | | Toronto-Dominion Holdings
5.060% 01/31/08 | | | 9,960,914 | | | — | |
25,000,000 | | — | | Toronto-Dominion Holdings
4.710% 2/11/08 | | | 24,868,050 | | | — | |
19,000,000 | | — | | Toyota Motor Credit Corp.
4.520% 1/8/08 | | | 18,980,196 | | | — | |
30,000,000 | | — | | Toyota Motor Credit Corp.
4.880% 2/15/08 | | | 29,826,579 | | | — | |
30,000,000 | | — | | Toyota Motor Credit Corp.
4.740% 2/25/08 | | | 29,787,012 | | | — | |
20,000,000 | | — | | Toyota Motor Credit Corp.
4.530% 2/28/08 | | | 19,850,008 | | | — | |
— | | 50,000,000 | | Toyota Motor Credit Corp.
5.230% 1/23/07 | | | — | | | 49,846,580 | |
— | | 30,000,000 | | Toyota Motor Credit Corp.
5.230% 1/25/07 | | | — | | | 29,899,221 | |
20,000,000 | | — | | UBS Finance, (Delaware) Inc.
5.030% 2/13/08 | | | 19,889,486 | | | — | |
17,215,000 | | — | | UBS Finance, (Delaware) Inc.
5.000% 2/21/08 | | | 17,101,908 | | | — | |
25,000,000 | | — | | UBS Finance, (Delaware) Inc.
4.910% 4/7/08 | | | 24,675,782 | | | — | |
— | | 17,500,000 | | UBS Finance, (Delaware) Inc.
5.250% 2/20/07 | | | — | | | 17,375,018 | |
3,970,000 | | — | | Unilever Capital Corp
4.230% 1/11/08 | | | 3,964,274 | | | — | |
10,000,000 | | — | | United Parcel Service Inc
4.300% 3/18/08 | | | 9,898,686 | | | — | |
30,000,000 | | — | | United Parcel Service Inc
4.400% 3/31/08 | | | 29,640,321 | | | — | |
81
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer, Yield(6)and Maturity Date | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
20,000,000 | | — | | United Parcel Service Inc
4.340% 4/28/08 | | $ | 19,680,880 | | $ | — | |
20,000,000 | | — | | United Parcel Service Inc
4.340% 4/29/08 | | | 19,678,000 | | | — | |
20,000,000 | | — | | United Parcel Service Inc
4.380% 4/1/08 | | | 19,757,426 | | | — | |
7,831,000 | | — | | Variable Funding Capital Corporation
4.640% 4/15/08 | | | 7,694,387 | | | — | |
— | | 34,530,000 | | Variable Funding Capital Corporation
5.250% 2/2/07 | | | — | | | 34,371,217 | |
— | | 30,000,000 | | Variable Funding Capital Corporation
5.250% 2/5/07 | | | — | | | 29,848,698 | |
— | | 25,000,000 | | Variable Funding Capital Corporation
5.250% 2/6/07 | | | — | | | 24,870,208 | |
30,000,000 | | — | | Yorktown Capital, LLC
4.875% 4/15/08 | | | 29,527,943 | | | — | |
— | | 23,415,000 | | Yorktown Capital, LLC
5.260% 1/4/07 | | | — | | | 23,408,027 | |
| | | | | |
|
| |
|
| |
|
TOTAL COMMERCIAL PAPER
(Cost $1,755,527,807 and $1,520,729,804) | | | 1,755,075,702 | | | 1,520,881,551 | |
| | |
|
| |
|
| |
| | | | | | | |
GOVERNMENT AGENCY BONDS—5.82% and 2.36% | | | | | | | |
| | | | | | | |
| | | | Issuer, Interest Rate and Maturity Date | | | | | | | |
| | | |
| | | | | | | |
— | | 17,700,000 | | Federal Home Loan Banks
5.130% 1/5/07 | | | — | | | 17,694,938 | |
— | | 19,745,000 | | Federal Home Loan Banks
5.180% 1/12/07 | | | — | | | 19,719,628 | |
— | | 39,969,000 | | Federal Home Loan Banks
5.200% 1/19/07 | | | — | | | 39,877,711 | |
— | | 23,753,000 | | Federal Home Loan Banks
5.180% 2/28/07 | | | — | | | 23,563,451 | |
25,000,000 | | — | | Federal Home Loan Banks
4.450% 1/2/08 | | | 25,000,000 | | | — | |
25,000,000 | | — | | Federal Home Loan Banks
4.450% 1/3/08 | | | 24,997,275 | | | — | |
28,850,000 | | — | | Federal Home Loan Banks
4.661% 1/4/08 | | | 28,843,711 | | | — | |
34,945,000 | | — | | Federal Home Loan Banks
4.450% 1/7/08 | | | 34,925,990 | | | — | |
41,450,000 | | — | | Federal Home Loan Banks
4.260-4.900% 1/11/08 | | | 41,409,379 | | | — | |
77,800,000 | | — | | Federal Home Loan Banks
4.280-4.290% 1/16/08 | | | 77,681,433 | | | — | |
32,500,000 | | — | | Federal Home Loan Banks
4.260% 1/25/08 | | | 32,418,620 | | | — | |
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TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer, Interest Rate and Maturity Date | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
43,830,000 | | — | | Federal Home Loan Banks
4.300% 1/28/08 | | $ | 43,705,917 | | $ | — | |
2,000,000 | | — | | Federal Home Loan Banks
4.480% 2/1/08 | | | 1,993,134 | | | — | |
25,000,000 | | — | | Federal Home Loan Banks
4.200% 2/13/08 | | | 24,879,825 | | | — | |
23,694,000 | | — | | Federal Home Loan Banks
4.250% 3/12/08 | | | 23,504,638 | | | — | |
30,000,000 | | — | | Federal Home Loan Banks
4.270% 3/17/08 | | | 29,743,140 | | | — | |
20,000,000 | | — | | Federal Home Loan Banks
4.270% 3/19/08 | | | 19,824,180 | | | — | |
85,900,000 | | — | | Federal Home Loan Banks
4.260% 3/24/08 | | | 85,095,804 | | | — | |
15,000,000 | | — | | Federal Home Loan Bank Systems
4.700% 11/20/08 | | | 14,991,900 | | | — | |
— | | 13,654,000 | | Federal Home Loan Mortgage Corporation
5.110% 1/2/07 | | | — | | | 13,654,000 | |
— | | 22,250,000 | | Federal Home Loan Mortgage Corporation
5.130% 1/16/07 | | | — | | | 22,208,704 | |
— | | 43,400,000 | | Federal Home Loan Mortgage Corporation
5.150% 1/24/07 | | | — | | | 43,269,887 | |
— | | 50,000,000 | | Federal Home Loan Mortgage Corporation
5.130% 1/30/07 | | | — | | | 49,807,250 | |
— | | 33,675,000 | | Federal Home Loan Mortgage Corporation
5.150% 1/31/07 | | | — | | | 33,540,367 | |
— | | 30,000,000 | | Federal National Mortgage Association
5.150% 2/6/07 | | | — | | | 29,854,650 | |
— | | 23,768,000 | | Federal National Mortgage Association
5.150% 1/8/07 | | | — | | | 23,751,029 | |
— | | 50,000,000 | | Federal National Mortgage Association
5.160% 3/21/07 | | | — | | | 49,452,450 | |
32,465,000 | | — | | Fannie Mae Discount Notes
4.330% 1/4/08 | | | 32,457,922 | | | — | |
18,990,000 | | — | | Fannie Mae Discount Notes
4.230% 2/15/08 | | | 18,894,366 | | | — | |
20,000,000 | | — | | Fannie Mae Discount Notes
4.200% 2/19/08 | | | 19,890,140 | | | — | |
16,600,000 | | — | | Fannie Mae Discount Notes
4.280% 2/21/08 | | | 16,505,015 | | | — | |
25,000,000 | | — | | Fannie Mae Discount Notes
4.270% 2/22/08 | | | 24,854,075 | | | — | |
23,725,000 | | — | | Fannie Mae Discount Notes
4.170% 3/5/08 | | | 23,554,345 | | | — | |
44,000,000 | | — | | Fannie Mae Discount Notes
4.260% 3/6/08 | | | 43,678,492 | | | — | |
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TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer, Interest Rate and Maturity Date | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
29,045,000 | | — | | Fannie Mae Discount Notes
4.190-4.280% 3/20/08 | | $ | 28,786,354 | | $ | — | |
30,000,000 | | — | | Fannie Mae Discount Notes
4.280% 3/21/08 | | | 29,729,430 | | | — | |
12,840,000 | | — | | Fannie Mae Discount Notes
4.285% 3/26/08 | | | 12,716,864 | | | — | |
22,518,000 | | — | | Fannie Mae Discount Notes
4.190-4.240% 3/27/08 | | | 22,299,485 | | | — | |
17,890,000 | | — | | Fannie Mae Discount Notes
4.270% 3/28/08 | | | 17,714,356 | | | — | |
30,000,000 | | — | | Fannie Mae Discount Notes
4.220% 4/24/08 | | | 29,613,930 | | | — | |
41,650,000 | | — | | Fannie Mae Discount Notes
4.150-4.180% 4/30/08 | | | 41,085,518 | | | — | |
31,901,000 | | — | | Fannie Mae Discount Notes
4.100% 5/28/08 | | | 31,359,658 | | | — | |
30,000,000 | | — | | Freddie Mac Discount Note
4.330% 1/24/08 | | | 29,928,120 | | | — | |
32,470,000 | | — | | Freddie Mac Discount Note
4.320% 1/31/08 | | | 32,367,460 | | | — | |
22,400,000 | | — | | Freddie Mac Discount Note
4.220% 2/14/08 | | | 22,289,770 | | | — | |
25,487,000 | | — | | Freddie Mac Discount Note
4.210% 2/20/08 | | | 25,344,069 | | | — | |
10,000,000 | | — | | Freddie Mac Discount Note
4.320% 2/21/08 | | | 9,942,780 | | | — | |
8,500,000 | | — | | Freddie Mac Discount Note
4.240% 3/3/08 | | | 8,440,806 | | | — | |
17,925,000 | | — | | Freddie Mac Discount Note
4.120% 3/31/08 | | | 17,737,868 | | | — | |
26,735,000 | | — | | Freddie Mac Discount Note
4.145% 4/10/08 | | | 26,433,563 | | | — | |
20,817,000 | | — | | Freddie Mac Discount Note
4.175% 4/18/08 | | | 20,563,324 | | | — | |
10,795,000 | | — | | Freddie Mac Discount Note
4.180% 4/25/08 | | | 10,654,849 | | | — | |
| |
|
| |
|
| |
TOTAL GOVERNMENT AGENCY BONDS
(Cost $1,105,524,756 and $366,282,560) | | | 1,105,857,505 | | | 366,394,065 | |
| |
|
| |
|
| |
VARIABLE NOTES—0.26% and 0.12% | | | | | | | |
— | | 19,000,000 | | US Bank NA
5.735% 12/5/07 | | | — | | | 18,998,765 | |
25,000,000 | | — | | Wells Fargo Bank
4.600% 1/7/08 | | | 24,999,308 | | | — | |
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TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2007 and December 31, 2006
| | | | | | | | | | | |
Principal | | | | Value | |
| | | |
| |
2007 | | 2006 | | Issuer, Interest Rate and Maturity Date | | 2007 | | 2006 | |
| |
| |
| |
| |
| |
25,000,000 | | — | | Wells Fargo Bank
4.600% 1/8/08 | | $ | 24,999,210 | | $ | — | |
| | | | | |
|
| |
|
| |
| TOTAL VARIABLE NOTES
(Cost $50,000,000 and $19,003,401) | | | 49,998,518 | | | 18,998,765 | |
| | | | | |
|
| |
|
| |
BANKERS ACCEPTANCE—0.20% and 0.00% | | | | | | | |
4,359,000 | | — | | JPMorgan Chase Bank
4.400% 1/18/08 | | | 4,349,127 | | | — | |
10,000,000 | | — | | Wachovia Bank
4.380% 4/21/08 | | | 9,850,480 | | | — | |
25,000,000 | | — | | Wachovia Bank
4.300% 5/7/08 | | | 24,570,220 | | | — | |
| | | | | |
|
| |
|
| |
| TOTAL BANKERS ACCEPTANCE
(Cost $38,835,657 and $0) | | | 38,769,827 | | | — | |
| | | | | |
|
| |
|
| |
| TOTAL OTHER MARKETABLE SECURITIES
(Cost $3,371,895,300 and $2,038,681,194) | | | 3,371,865,684 | | | 2,038,938,210 | |
| | | | | |
|
| |
|
| |
| TOTAL MARKETABLE SECURITIES
(Cost $3,811,049,548 and $2,608,007,989) | | | 3,798,495,896 | | | 2,743,860,533 | |
| | | | | |
|
| |
|
| |
MORTGAGE LOAN RECEIVABLE—0.38% and 0.48% | | | | | | | |
75,000,000 | | 75,000,000 | | Klingle Corporation
6.17% 07/10/11 | | | 72,519,684 | | | 74,660,626 | |
| | | | | |
|
| |
|
| |
| | | | | | | | | | | |
| TOTAL MORTGAGE LOAN RECEIVABLE
(Cost $75,000,000 and $75,000,000) | | | 72,519,684 | | | 74,660,626 | |
| | | | | |
|
| |
|
| |
| TOTAL INVESTMENTS
(Cost $15,951,457,925 and $13,558,801,945) | | $ | 19,013,601,527 | | $ | 15,510,036,850 | |
| | |
|
| |
|
| |
| |
(1) | The investment has a mortgage loan payable outstanding, as indicated in Note 5. |
| |
(2) | Leasehold interest only. |
| |
(3) | The market value reflects the Account’s interest in the joint venture, net of any debt. |
| |
(4) | The market value reflects the final settlement due the Account. The investment was sold on 8/24/07. |
| |
(5) | Located throughout the U.S. |
| |
(6) | Yield represents the annualized yield at the date of purchase. |
85
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants of the TIAA Real Estate Account and the
Board of Trustees of Teachers Insurance and Annuity Association of America:
In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations, changes in net assets and cash flows, present fairly, in all material respects, the financial position of the TIAA Real Estate Account (the “Account”) at December 31, 2007 and December 31, 2006 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Account’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 20, 2008
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ADDITIONAL INFORMATION
| |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
Not applicable.
| |
ITEM 9A. | CONTROLS AND PROCEDURES. |
(a) The registrant maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that that information required to be disclosed in the registrant’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the registrant’s Chief Executive Officer and the Chief Financial Officer, 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 December 31, 2007. Based upon the management’s review, the CEO and the CFO concluded that the registrant’s disclosure controls and procedures were effective as of December 31, 2007.
(b)Management’s Report on Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Account. The Account’s internal control over financial reporting is a process designed under the supervision of the Account’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Account’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has made a comprehensive review, evaluation, and assessment of the Account’s internal control over financial reporting as of December 31, 2007. In making its assessment of internal control over financial reporting, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control-Integrated Framework. Based on that assessment, management concluded that, as of December 31, 2007, the Account’s internal control over financial reporting is effective.
87
This annual report does not include an attestation report of the registrant’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Registrant’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
(c)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.
88
PART III
| |
ITEMS 10 AND 11. | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE OF THE REGISTRANT; EXECUTIVE COMPENSATION. |
The Real Estate Account has no officers or directors and no TIAA trustee or executive officer receives compensation from the Account. The Trustees and certain principal executive officers of TIAA as of March 1, 2008, their dates of birth, and their principal occupations during the last five years, are as follows:
Trustees
Elizabeth E. Bailey, 11/26/38
John C. Hower Professor of Public Policy and Management, Wharton School, University of Pennsylvania. Director, CSX Corporation and Altria Group, Inc. Chair, National Bureau of Economic Research. Honorary Trustee, The Brookings Institution.
Glenn A. Britt, 3/6/49
Chief Executive Officer, Time Warner Cable, since 2001, where he has held several positions since 1972. Executive Committee of National Cable & Telecommunications Association, Director of Walter Kaitz Foundation and Xerox Corporation; Trustee of Polytechnic University.
Robert C. Clark, 2/26/44
Harvard University Distinguished Service Professor and Austin Wakeman Scott Professor of Law, Harvard Law School, Harvard University; Formerly Dean and Royall Professor of Law, Harvard Law School from 1989 to 2003. Director, Collins & Aikman Corporation, Time Warner, Inc. and Omnicom Group.
Edward M. Hundert, M.D., 10/1/56
Senior lecturer in Medical Ethics, Harvard Medical School. President, Case Western Reserve University from 2002 to 2006. Formerly, Dean, 2000-2002, University of Rochester School of Medicine and Dentistry, Professor of Medical Humanities and Psychiatry, 1997-2002. Board Member, Rock and Roll Hall of Fame.
Marjorie Fine Knowles, 7/4/39
Professor of Law, Georgia State University College of Law.
Donald K. Peterson, 8/13/49
Former Chairman and Chief Executive Officer, Avaya Inc. from 2002 to 2006 and President and Chief Executive Officer from 2000-01 Formerly, Executive Vice President and Chief Financial Officer, Lucent Technologies. Chairman, Board of Trustees, Worcester Polytechnic Institute. Director, Sanford C. Bernstein Fund Inc. and Emerj Inc.
Sidney A. Ribeau, 12/3/47
President, Bowling Green University. Director, The Andersons, Convergys and Worthington Industries.
89
Dorothy K. Robinson, 2/18/51
Vice President and General Counsel, Yale University since 1986. Trustee, Newark Public Radio Inc., Youth Rights Media, Inc. and Friends of New Haven Legal Assistance.
David L. Shedlarz, 4/17/48
Retired Vice Chairman of Pfizer Inc. from 2006 to 2007, Executive Vice President from 1999 to 2005 and Chief Financial Officer from 1995 to 2005. Director, Pitney Bowes Inc. Trustee of International Accounting Standards Committee Foundation and member of J.P. Morgan Chase & Co. National Advisory Board. Chairman of the Board, Multiple Sclerosis Society of New York.
David F. Swensen, 1/26/54
Chief Investment Officer, Yale University, and adjunct professor of investment strategy. Trustee, The Brookings Institution, Wesleyan University; Member, University of Cambridge Investment Board.
Ronald L. Thompson, 6/17/49
Former Chairman and Chief Executive Officer, Midwest Stamping and Manufacturing Company through 2005. Director, Washington University in St. Louis.
Marta Tienda, 8/10/50
Maurice P. During ’22 Professor of Demographic Studies, Princeton University. Director, Office of Population Research, Princeton University, 1998-2002. Director, Corporation of Brown University, Sloan Foundation, Jacobs Foundation and RAND Corporation.
Rosalie J. Wolf, 5/8/41
Managing Partner, Botanica Capital Partners LLC. Formerly, Senior Advisor and Managing Director, Offit Hall Capital Management LLC and its predecessor company, Laurel Management Company LLC from 2001 to 2003; formerly, Treasurer and Chief Investment Officer, The Rockefeller Foundation. Director, North European Oil Royalty Trust; Chairman, Sanford C. Bernstein Fund, Inc.
Officer—Trustees
Herbert M. Allison, Jr., 8/2/43
Chairman, President and Chief Executive Officer, TIAA. President and Chief Executive Officer, CREF. Formerly, President, Chief Operating Officer and Member of the Board of Directors of Merrill Lynch & Co., Inc., 1997-1999 and President and Chief Executive Officer of Alliance for LifeLong Learning, 2000-2002. Advisory Board, Stanford Business School and Yale School of Management; Chair, Business-Higher Education Forum; Director, The Conference Board; Trustee, The Economic Club of New York.
90
Other TIAA Executive Officers
Georganne C. Proctor, 10/25/56
Executive Vice President and Chief Financial Officer, TIAA and CREF since 2006. Executive Vice President of Finance for Golden West Financial Corporation, the holding company of World Savings Bank, from 2003 through 2005. From 1994 through 2002, served as Senior Vice President, Chief Financial Officer and a member of the board of directors of Bechtel Group, Inc. Director of Redwood Trust, Inc. and Kaiser Aluminum Corporation.
Scott C. Evans, 5/11/59
Executive Vice President of TIAA since 1999 and Head of Asset Management since 2006 of TIAA and CREF, the TIAA-CREF Mutual Funds, the TIAA-CREF Institutional Mutual Funds, the TIAA-CREF Life Funds and TIAA Separate Account VA-1 (collectively, the “TIAA-CREF Funds”). Also served as Chief Investment Officer of TIAA between 2004 and 2006 and the TIAA-CREF Funds between 2003 and 2006.
Mary (Maliz) E. Beams, 3/29/56
Executive Vice President of TIAA and the TIAA-CREF Funds since 2007. President and Chief Executive Officer, TIAA-CREF Individual & Institutional Services, LLC since 2007. Senior Managing Director and Head of Wealth Management Group of TIAA since 2004. Partner, Spyglass Investments from 2002 to 2003.
Gary Chinery, 11/28/49
Vice President and Treasurer, TIAA and CREF.
Marjorie M. Pierre-Merritt, 5/28/66
Vice President of TIAA and Acting Corporate Secretary of TIAA and the TIAA-CREF Funds since 2007; Assistant Corporate Secretary of TIAA from 2006-2007. Assistant Corporate Secretary of The Dun & Bradstreet Corporation from 2003 to 2006. Counsel, The New York Times Company from 2001 to 2003.
Portfolio Management Team
Margaret A. Brandwein, 11/26/46
Managing Director and Portfolio Manager, TIAA Real Estate Account since 2004. From 2001 to 2004, Head of Commercial Mortgages—West Coast for TIAA.
Thomas C. Garbutt, 10/12/58
Managing Director and Head of Global Real Estate Equity Division, TIAA.
Philip J. McAndrews, 12/15/58
Managing Director and Head of Real Estate Portfolio Management, TIAA-CREF Global Real Estate since 2005. Between 2003 and 2005, portfolio manager for the Real Estate Account. Between 1997 and 2003, Head of the Real Estate Acquisitions and Joint Ventures group for TIAA.
91
Audit Committee Financial Expert
On August 20, 2003, the Board of Trustees of TIAA determined that Rosalie J. Wolf was qualified and would serve as the audit committee financial expert on TIAA’s audit committee. Ms. Wolf is independent (as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934) and has not accepted, directly or indirectly, any consulting, advisory or other compensatory fee from TIAA, other than in her capacity as Trustee.
Code of Ethics
The Board of Trustees of TIAA has a code of ethics for senior financial officers, including its principal executive officer, principal financial officer, principal accounting officer, or controller, and persons performing similar functions, in conformity with rules promulgated under the Sarbanes-Oxley Act of 2002. The code of ethics is filed as an exhibit to this annual report.
During the reporting period, there were no implicit or explicit waivers granted by the Registrant from any provision of the code of ethics.
| |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
Not applicable.
| |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
TIAA’s general account plays a significant role in operating the Real Estate Account, including providing a liquidity guarantee, and investment advisory and other services. In addition, Services, a wholly-owned subsidiary of TIAA, provides administration and distribution services for the Account.
Liquidity Guarantee. If the Account’s liquid assets and its cash flow from operating activities and participant transactions are insufficient to fund redemption requests, TIAA’s general account has agreed to purchase liquidity units. TIAA thereby guarantees that a participant can redeem accumulation units at their then-current daily net asset value. For the year ended December 31, 2007, the Account expensed $19,409,759 for this liquidity guarantee from TIAA through a daily deduction from the net assets of the Account.
Investment Advisory and Administrative Services/Certain Risks Borne by TIAA.
Deductions are made each valuation day from the net assets of the Account for various services required to manage investments, administer the Account and distribute the contracts. These services are performed at cost by TIAA and Services. Deductions are also made each valuation day to cover mortality and expense risks borne by TIAA.
92
For the year ended December 31, 2007, the Account expensed $49,239,366 for investment advisory services and $8,052,314 for mortality and expense risks provided/borne by TIAA. For the same period, the Account expensed $63,593,008 for administrative and distribution services provided by Services.
| |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
PricewaterhouseCoopers LLP (“PwC”) performs independent audits of the registrant’s financial statements. To maintain auditor independence and avoid even the appearance of conflicts of interest, the registrant, as a policy, does not engage PwC for management advisory or consulting services.
Audit Fees. PwC’s fees for professional services rendered for the audits of the Registrant’s annual financial statements for the years ended December 31, 2007, 2006, and 2005 and review of financial statements included in the registrant’s quarterly reports were $654,000, $665,000, and $989,300, respectively.
Tax Fees. PwC had no tax fees for the years ended December 31, 2007, 2006 and 2005.
All Other Fees. Other than as set forth above, there were no additional fees with respect to registrant.
Preapproval Policy. In June of 2003, TIAA’s audit committee (“Audit Committee”) adopted a Preapproval Policy for External Audit Firm Services (the “Policy”). The Policy describes the types of services that may be provided by the independent auditor to the registrant without impairing the auditor’s independence. Under the Policy, the Audit Committee is required to preapprove services to be performed by the registrant’s independent auditor in order to ensure that such services do not impair the auditor’s independence.
The Policy requires the Audit Committee to: (i) appoint the independent auditor to perform the financial statement audit for the registrant and certain of its affiliates, including approving the terms of the engagement and (ii) preapprove the audit, audit-related and tax services to be provided by the independent auditor and the fees to be charged for provision of such services from year to year.
93
PART IV
| |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
| | | | |
(a) | | 1. | | Financial Statements. See Item 8 for required financial statements. |
| | | | |
| | 2. | | Financial Statement Schedules. See Item 8 for required financial statements. |
| | | | |
(b) | | | | Exhibits. |
| | | | |
(1) | | (A) | | Distribution Agreement for the Contracts Funded by the TIAA Real Estate |
| | | | Account, dated as of January 1, 2008, by and among Teachers Insurance and |
| | | | Annuity Association of America, for itself and on behalf of the Account, and |
| | | | TIAA-CREF Individual & Institutional Services, LLC.7 |
| | | | |
(3) | | (A) | | Charter of TIAA (as amended)1 |
| | | | |
| | (B) | | Bylaws of TIAA (as amended)6 |
(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)* | | Custodian Agreement, dated as of March 3, 2008, by and between TIAA, on |
| | | | behalf of the Registrant, and State Street Bank and Trust Company, N.A. |
(14) | * | | | Code of Ethics of TIAA |
(31) | * | | | Rule 13a-15(e)/15d-15(e) Certifications |
(32) | * | | | Section 1350 Certifications |
| |
* | Filed herewith. |
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 on Form 10-K of the Account filed on March 15, 2006. |
6 | Previously filed and incorporated herein by reference to Exhibit 3(B) to the Account’s Quarterly Report on Form 10-Q for the period ended September 30, 2006 and filed with the Commission on November 14, 2006. |
7 | Previously filed and incorporated herein by reference to the Account’s Current Report on Form 8-K, filed with the Commission on January 7, 2008. |
94
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant, TIAA Real Estate Account, has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 20th day of March, 2008.
| | | |
| TIAA REAL ESTATE ACCOUNT |
| | | |
| By: TEACHERS INSURANCE AND ANNUITY |
| ASSOCIATION OF AMERICA |
| | | |
| By: | | /s/ Herbert M. Allison, Jr. |
| | |
|
| | | Herbert M. Allison, Jr. |
| | | Chairman, President and |
| | | Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed by the following trustees and officers of Teachers Insurance and Annuity Association of America, in the capacities and on the dates indicated.
| | | | |
Signature | | Title | | Date |
| |
| |
|
| | | | |
/s/ Herbert M. Allison, Jr. | | Chairman, President and Chief Executive | | 3/20/08 |
| | Officer (Principal Executive Officer) and Trustee | | |
Herbert M. Allison, Jr. | | | | |
| | | | |
/s/ Georganne C. Proctor | | Executive Vice President and Chief Financial | | 3/20/08 |
| | Officer (Principal Financial and Accounting | | |
Georganne C. Proctor | | Officer) | | |
95
| | | | | |
Signature of Trustee | | Title | | | Date |
| |
| | |
|
|
/s/ Elizabeth E. Bailey | | Trustee | | 3/20/08 |
| | | | |
Elizabeth E. Bailey | | | | |
| | | | |
/s/ Glenn A Britt | | Trustee | | 3/20/08 |
| | | | |
Glenn A Britt | | | | |
| | | | |
/s/ Robert C. Clark | | Trustee | | 3/20/08 |
| | | | |
Robert C. Clark | | | | |
| | | | |
/s/ Edward M. Hundert, M.D. | | Trustee | | 3/20/08 |
| | | | |
Edward M. Hundert, M.D. | | | | |
| | | | |
/s/ Marjorie Fine Knowles | | Trustee | | 3/20/08 |
| | | | |
Marjorie Fine Knowles | | | | |
| | | | |
/s/ Donald K. Peterson | | Trustee | | 3/20/08 |
| | | | |
Donald K. Peterson | | | | |
| | | | |
/s/ Sidney A. Ribeau | | Trustee | | 3/20/08 |
| | | | |
Sidney A. Ribeau | | | | |
| | | | |
/s/ Dorothy K. Robinson | | Trustee | | 3/20/08 |
| | | | |
Dorothy K. Robinson | | | | |
| | | | |
/s/ David L. Shedlarz | | Trustee | | 3/20/08 |
| | | | |
David L. Shedlarz | | | | |
| | | | |
/s/ David F. Swensen | | Trustee | | 3/20/08 |
| | | | |
David F. Swensen | | | | |
| | | | |
/s/ Ronald L. Thompson | | Trustee | | 3/20/08 |
| | | | |
Ronald L. Thompson | | | | |
| | | | |
/s/ Marta Tienda | | Trustee | | 3/20/08 |
| | | | |
Marta Tienda | | | | |
| | | | |
/s/ Rosalie J. Wolf | | Trustee | | 3/20/08 |
| | | | |
Rosalie J. Wolf | | | | |
96
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
Because the Registrant has no voting securities, nor its own management or board of directors, no annual report or proxy materials will be sent to contractowners holding interests in the Account.
97
