Tiaa Real Estate Account 10-K 2009 FY Annual report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

S ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009

OR

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 33-92990; 333-158136

TIAA REAL ESTATE ACCOUNT
(Exact name of registrant as specified in its charter)

NEW YORK
(State or other jurisdiction of incorporation or organization)

NOT APPLICABLE
(I.R.S. Employer Identification No.)

C/O TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
730 THIRD AVENUE
NEW YORK, NEW YORK 10017-3206
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (212) 490-9000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES£ NOS

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act:

YES£ NOS

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YESS NO£

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 or regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: S Not Applicable

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES£ NO£

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

Large accelerated filer£	Accelerated filer£
Non-accelerated filerS	Smaller Reporting Company£
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES£ NOS

Aggregate market value of voting stock held by non-affiliates: Not Applicable
Documents Incorporated by Reference: None

TABLE OF CONTENTS

	Item		Page
Part I
	Item 1.	Business		3
	Item 1A.	Risk Factors		7
	Item 1B.	Unresolved Staff Comments		17
	Item 2.	Properties		18
	Item 3.	Legal Proceedings		25
	Item 4.	Reserved		25
Part II
	Item 5.	Market for Registrant’s Common Stock, Related Stockholder Matters, and Issuer Purchases of Equity Securities		26
	Item 6.	Selected Financial Data		27
	Item 7.	Management’s Discussion and Analysis of Account’s Financial Condition and Operating Results		29
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		55
	Item 8.	Financial Statements and Supplementary Data		58
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		87
	Item 9A.	Controls and Procedures		87
Part III
	Items 10 and 11.	Directors, Executive Officers, and Corporate Governance of the Registrant; Executive Compensation		88
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		90
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		90
	Item 14.	Principal Accountant Fees and Services		91
Part IV
	Item 15.	Exhibits and Financial Statement Schedules		92
Signatures				93

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PART I

ITEM 1. BUSINESS.

General. The TIAA Real Estate Account (the “Real Estate Account”, the “Account” or the “Registrant”) was established on February 22, 1995, as an insurance company separate account of Teachers Insurance and Annuity Association of America (“TIAA”), a New York insurance company, by resolution of TIAA’s Board of Trustees. The Account, which invests mainly in real estate and real estate-related investments, is a variable annuity investment option offered through individual, group and tax-deferred annuity contracts available to employees in the academic, medical, cultural and research fields. The Account commenced operations on July 3, 1995, and interests in the Account were first offered to eligible participants on October 2, 1995.

The Account offers individual and group accumulating annuity contracts (with contributions made on a pre-tax or after-tax basis), as well as individual lifetime and term-certain variable payout annuity contracts (including the payment of death benefits to beneficiaries). Investors are entitled to transfer funds to or from the Account under certain circumstances. Funds invested in the Account for each category of contract are expressed in terms of units, and unit values will fluctuate depending on the Account’s performance.

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

• RA and GRAs (Retirement Annuities and Group Retirement Annuities)

• SRAs (Supplemental Retirement Annuities)

• GSRAs (Group Supplemental Retirement Annuities)

• Retirement Choice and Retirement Choice Plus Annuity

• GAs (Group Annuities) and Institutionally-Owned GSRAs

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

• Keoghs

• ATRAs (After-Tax Retirement Annuities)

Investors should note that state regulatory approval may be pending for certain of these contracts and they may not currently be available in every state.

The Account is regulated by the New York State Insurance Department (“NYID”) and the insurance departments of some other jurisdictions in which the annuity contracts are offered. Although TIAA owns the assets of the Real Estate Account, and the Account’s obligations are obligations of TIAA, the Account’s income, investment gains, and investment losses are credited to or charged against the assets of the Account without regard to TIAA’s other income, gains, or losses. Under New York insurance law, the Account cannot be charged with liabilities incurred by any other TIAA business activities or any other TIAA separate account.

Investment Objective. The Real Estate Account seeks favorable long-term returns primarily through rental income and appreciation of real estate investments owned by the Account. The Account will also invest in publicly-traded securities and short-term higher quality liquid investments that are easily converted to cash to enable the Account to meet participant redemption requests, purchase or improve properties, or cover expense needs.

Investment Strategy. The Account intends to have between 75% and 85% of its assets invested directly in real estate or real estate-related investments with the goal of producing favorable long-term returns primarily through rental income and appreciation. The Account’s principal strategy is to purchase direct ownership interests in income-producing real estate, primarily office, industrial, retail, and multi-family residential properties. The Account can also invest in real estate or real estate-related investments through joint ventures, real estate partnerships or real estate equity securities. To a limited extent, the Account can also invest in conventional mortgage loans, participating mortgage loans, common or preferred stock of

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companies whose operations involve real estate (i.e., that primarily own or manage real estate including real estate investment trusts (“REITs”)), and collateralized mortgage obligations, including commercial mortgage-backed securities and other similar instruments.

The Account will invest the remaining portion of its assets (intended to be between 15% and 25% of its assets) in liquid investments; namely, securities issued by U.S. government agencies or U.S. government sponsored entities, corporate debt securities, money market instruments, and, at times, stock of companies that do not primarily own or manage real estate.

There will be periods of time (including since late 2008) during which the Account’s liquid investments will comprise less than 15% (and possibly less than 10%) of its total assets, especially during and immediately following periods of significant net participant outflows. Alternatively, in some circumstances, the portion of the Account’s assets invested in liquid investments may exceed 25%. This could happen, for example, if the Account receives a large inflow of money in a short period of time, there is a lack of attractive real estate investments available on the market, and/or the Account anticipates more near-term cash needs.

The amount the Account invests in real estate and real estate-related investments at a given time will vary depending on its liquidity position (including the Account’s obligation to meet participant redemption requests) as well as market conditions and real estate prospects, among other factors.

The Account from time to time will also make foreign investments in real estate and real estate related assets, which are expected to comprise no more than 25% of the Account’s total assets. As of December 31, 2009, the Account held interests in two foreign property investments (one in the United Kingdom and one in France) which represent approximately 4.4% of the total assets of the Account. See “Item 2. Properties” for more information, including valuation information, concerning these investments.

More detailed information concerning the composition of the Account’s properties, including the Account’s foreign investments and information regarding significant tenants in the Account’s properties, is contained below under the heading “Item 2. Properties.”

Net Assets and Portfolio Investments. As of December 31, 2009, the Account’s net assets totaled approximately $7.9 billion. At December 31, 2009, the Account held a total of 101 real estate property investments (including its interests in 12 real estate-related joint ventures), representing 90.27% of the Account’s Total Investments. As of that date, the Account also held investments in a mortgage loan receivable, representing 0.73% of Total Investments, real estate limited partnerships, representing 2.07% of Total Investments, United States treasury bills, representing 2.13% of Total Investments, and government agency notes, representing 4.80% of Total Investments.

Borrowing. The Account may borrow money and assume or obtain a mortgage on a property—i.e., make leveraged real estate investments. In addition, to meet short-term cash needs, the Account may obtain a line of credit that may be unsecured and/or contain terms that may require the Account secure a loan with one or more of its properties. Management expects the proceeds from any such short-term borrowing would be used to meet the cash flow needs of the Account’s properties and real estate related investments, but depending on the circumstances, proceeds could be used for Account-level funding needs (including the need to honor unexpected participant withdrawal activity).

Under the Account’s current investment guidelines, which were amended as to borrowing in mid 2009, management intends to maintain the Account’s loan to value ratio (as defined below) at or below 30%. However, through December 31, 2009:

• the Account will maintain outstanding debt in an aggregate principal amount not to exceed the aggregate principal amount of debt outstanding as of the date of adoption of such guideline (approximately $4.0 billion); and

• subject to this $4.0 billion limitation, the Account may incur and/or maintain debt on its properties (including (i) refinancing outstanding debt, (ii) assuming debt on the Account’s properties, (iii) extending the maturity date of outstanding debt and/or (iv) incurring new debt on its properties) based on the ratio of the outstanding principal amount of the Account’s debt to the Account’s total gross asset value (a “loan to value ratio”).

By December 31, 2011, management intends the Account’s ratio loan to value ratio to be 30% or less and thereafter intends to maintain its loan to value ratio at or below 30% (measured at the time of

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incurrence and after giving effect thereto). In calculating outstanding indebtedness, we will include only the Account’s actual percentage interest in any borrowings on a joint venture investment and not that of any joint venture partner. Also, at the time the Account (or a joint venture in which the Account is a partner) enters into a revolving line of credit, management deems the maximum amount which may be drawn under that line of credit as fully incurred, regardless of whether the maximum amount available has been drawn from time to time.

As of December 31, 2009, the aggregate principal amount of the Account’s outstanding debt (including the Account’s share of debt on its joint venture investments) was approximately $3.9 billion and the Account’s loan to value ratio was approximately 33.1%.

The Account may only borrow up to 70% of the then current value of a property, although construction loans may be for 100% of costs incurred in developing the property.

Except for construction loans, any mortgage loans on a property will be non-recourse to the Account, meaning that if there is a default on a loan in respect of a specific property, the lender will have recourse to (i.e., be able to foreclose on) only the property encumbered (or the joint venture owning the property), or to other specific Account properties that may have been pledged as security for the defaulted loan, but not to any other assets of the Account. When possible, the Account will seek to have loans mature at varying times to limit the risks of borrowing.

Risk Factors. The Account’s assets and income can be affected by a variety of risk factors. These risks are more fully described under Item 1A of this Report and in the Account’s prospectus (as supplemented from time to time).

Personnel and Management. The Account does not directly employ any persons nor does the Account have its own management or board of directors. Rather, TIAA employees, under the direction and control of TIAA’s Board of Trustees and Investment Committee, manage the investment of the Account’s assets, following investment management procedures TIAA has adopted for the Account. In addition, TIAA performs administration functions for the Account (which includes receiving and allocating premiums, calculating and making annuity payments and providing recordkeeping and other services). Distribution services for the Account (which include, without limitation, distribution of the annuity contracts, advising existing annuity contract owners in connection with their accumulations and helping employers implement and manage retirement plans) are performed by TIAA-CREF Individual & Institutional Services, LLC (“Services”), a wholly owned subsidiary of TIAA and registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”). TIAA and Services provide administration and distribution services, as applicable, on an “at-cost” basis.

Appraisals and Valuations. With respect to the Account’s real property investments, following the initial purchase of a property or the making of a mortgage loan on a property by the Account (at which time the Account normally receives an independent appraisal on such property), each of the Account’s real properties are appraised, and mortgage loans are valued, at least once every calendar quarter. Each of the Account’s real estate properties are appraised each quarter by an independent external state-certified (or its foreign equivalent) appraiser (which we refer to in this report as an “independent appraiser”) who is a member of a professional appraisal organization. In addition, TIAA’s internal appraisal staff performs a review of each quarterly appraisal, in conjunction with the Account’s independent fiduciary, and TIAA’s internal appraisal staff or the independent fiduciary may request an additional appraisal or valuation outside of this quarterly cycle. Any differences in the conclusions of TIAA’s internal appraisal staff and the independent appraiser will be reviewed by the independent fiduciary, which will make a final determination on the matter (which may include ordering a subsequent independent appraisal).

In general, the Account obtains appraisals of its real estate properties spread out throughout the quarter, which is intended to result in appraisal adjustments and thus adjustments to the valuations of its holdings (to the extent adjustments are made) that happen regularly throughout each quarter and not on one specific day in each period. In addition, an estimated daily equivalent of net operating income is taken into consideration and is adjusted for actual transactional activity. The remaining assets in the Account are primarily marketable securities that are priced on a daily basis. See “Management’s Discussion and Analysis of Results of Operations and Financial Condition—Critical Accounting Policies” in this Form 10-K for more information on how each class of the Account’s investments are valued.

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Liquidity Guarantee. The TIAA general account provides the Account with a liquidity guarantee enabling the Account to have funds available to meet participant redemption, transfer or cash withdrawal requests. If the Account cannot fund participant requests from the Account’s own cash flow and liquid investments, the TIAA General Account will fund them by purchasing accumulation units issued by the Account (accumulation units that are purchased by TIAA are generally referred to as “liquidity units”). This liquidity guarantee is required by the NYID. TIAA guarantees that participants can redeem their accumulation units at the accumulation unit value determined after their transfer or cash withdrawal request is received in good order. Liquidity units owned by TIAA are valued in the same manner as accumulation units owned by the Account’s participants.

Importantly, however, this liquidity guarantee is not a guarantee of the investment performance of the Account or a guarantee of the value of a participant’s units. The Account pays TIAA for the liquidity guarantee through a daily deduction from the Account’s net assets. As a result of significant net participant transfers since December 2008 (in particular, in the first half of 2009), pursuant to this liquidity guarantee obligation, the TIAA general account purchased an aggregate of $1.2 billion of liquidity units issued by the Account through June 30, 2009. Since July 1, 2009 and through the date of filing this Form 10-K, no further liquidity units have been purchased.

As of the date of filing this Form 10-K, no accumulation units have been redeemed by TIAA. Management cannot predict the extent to which future accumulation unit purchases will be required under this liquidity guarantee, nor can management predict when such liquidity units will be redeemed in part, or in full. Please refer to the “Liquidity and Capital Resources” section in “Management’s Discussion and Analysis of the Account’s Financial Condition and Results of Operations” for more disclosure surrounding the Liquidity Guarantee.

Independent Fiduciary. Because TIAA’s ability to purchase and sell liquidity units raises certain technical issues under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), TIAA applied for and received a prohibited transaction exemption from the U.S. Department of Labor in 1996 (PTE 96-76). In connection with the exemption, TIAA has appointed an independent fiduciary for the Account, with overall responsibility for reviewing the Account’s transactions to determine whether they are in accordance with the Account’s investment guidelines. Real Estate Research Corporation, a real estate consulting firm whose principal offices are located in Chicago, Illinois, was appointed as independent fiduciary effective March 1, 2006 and currently serves as the Account’s independent fiduciary. The independent fiduciary’s responsibilities include:

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

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

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

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

• approving the appointment of all independent appraisers;

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

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

In addition, the independent fiduciary has certain responsibilities with respect to the Account that it had historically undertaken or is currently undertaking with respect to TIAA’s purchase and ownership of liquidity units, including among other things, reviewing the purchases and redemption of liquidity units by TIAA to ensure the Account uses the correct unit values. In addition, as set forth in PTE 96-76, the independent fiduciary’s responsibilities include:

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• establishing the percentage of total accumulation units that TIAA’s ownership should not exceed (the “trigger point”) and creating a method for changing the trigger point;

• approving any adjustment of TIAA’s ownership interest in the Account and, in its discretion, requiring an adjustment if TIAA’s ownership of liquidity units reaches the trigger point; and

• once the trigger point has been reached, participating in any program to reduce TIAA’s ownership in the Account by utilizing cash flow or liquid investments in the Account, or by utilizing the proceeds from asset sales. If the independent fiduciary were to determine that TIAA’s ownership should be reduced following the trigger point, its role in participating in any asset sales program would include (i) participating in the selection of properties for sale, (ii) providing sales guidelines, and (iii) approving those sales if, in the independent fiduciary’s opinion, such sales are desirable to reduce TIAA’s ownership of liquidity units.

As of the date of this Form 10-K, the independent fiduciary, which has the right to adjust the trigger point, has established the trigger point at 45% of the outstanding accumulation units and it will continue to monitor TIAA’s ownership interest in the Account and provide further recommendations as necessary. As of December 31, 2009, TIAA owned approximately 12.0% of the outstanding accumulation units of the Account.

Available Information. The Account’s annual report on Form 10-K, and quarterly reports on Form 10-Q, and any amendments to those reports, filed by the Account with the Securities and Exchange Commission on or after the date hereof, can be accessed free of charge at www.tiaa-cref.org. Information contained on this website is expressly not incorporated by reference into this Annual Report on Form 10-K.

ITEM 1A. RISK FACTORS.

The value of your investment in the Account will fluctuate based on the value of the Account’s assets and the income the assets generate and the Account’s expenses. Participants can lose money by investing in the Account. There is risk associated with an investor attempting to “time” an investment in the Account’s units, or effecting a redemption of an investor’s units. The Account’s assets and income can be affected by many factors, and you should consider the specific risks presented below before investing in the Account. In particular, for a discussion of how forward-looking statements contained in this Annual Report on Form 10-K are subject to uncertainties that are difficult to predict, which may be beyond management’s control and which could cause actual results to differ materially from historical experience or management’s present expectations, please refer to the subsection entitled “Forward-Looking Statements,” which is contained in the section entitled “Management’s Discussion and Analysis of the Account’s Financial Condition and Results of Operations.”

RISKS ASSOCIATED WITH REAL ESTATE INVESTING

General Risks of Acquiring and Owning Real Property:As referenced elsewhere in this report, the substantial majority of the Account’s net assets are comprised of direct ownership interests in real estate. As such, the Account is particularly subject to the risks inherent in acquiring and owning real property, including in particular the following:

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

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adverse domestic or global economic conditions, particularly in the event of a deep recession which results in significant employment losses across many sectors of the economy and reduced levels of consumer spending;

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a weak market for real estate generally and/or in specific locations where the Account may own property;

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the availability of financing (both for the Account and potential purchasers of the Account’s properties);

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

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• business closings, industry or sector slowdowns, employment losses and related factors;

• natural disasters, flooding and other significant severe weather-related events, including those caused by global climate changes;

• terrorist attacks and/or other man-made events; and

• decline in population or shifting demographics.

The incidence of some or all of these factors could reduce occupancy, rental rates and the market value of the Account’s real properties or interests in investment vehicles (such as limited partnerships) which directly hold real properties.

• Concentration Risk.The Account may experience periods in which its investments are geographically concentrated, either regionally or in certain markets with similar demographics. Further, while the Account seeks diversification across its four primary property types: office, industrial, retail and multi-family residential properties, the Account may experience periods where it has concentration in one property type, increasing the potential exposure if there were to be an oversupply of, or a reduced demand for, certain types of real estate properties in the markets in which the Account operates. Also, the Account may experience periods in which its tenant base is concentrated within a particular industry sector. If any or all of these events occur, the Account’s income and performance may be adversely impacted disproportionately by deteriorating economic conditions in those areas or industry sectors in which the Account’s investments are concentrated. Also, the Account could experience a more rapid negative change in the value of its real estate investments than would be the case if its real estate investments were more diversified.

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

• A property may be unable to attract new tenants or retain existing tenants. This situation could be exacerbated if a concentration of lease expirations occurred during any one time period or multiple tenants exercise early termination at the same time.

• The financial condition of our tenants may be adversely impacted, particularly in a prolonged economic downturn. The Account could lose revenue if tenants do not pay rent when contractually obligated, request some form of rent relief and/or default under a lease at one of the Account’s properties. Such a default could occur if a tenant declared bankruptcy, suffered from a lack of liquidity, failed to continue to operate its business or for other reasons. In the event of any such default, we may experience a delay in, or an inability to effect, the enforcement of our rights against that tenant, particularly if that tenant filed for bankruptcy protection. Further, any disputes with tenants could involve costly and time consuming litigation.

• In the event a tenant vacates its space at one of the Account’s properties, whether as a result of a default, the expiration of the lease term, rejection of the lease in bankruptcy or otherwise, given current market conditions, we may not be able to re-lease the vacant space either (i) for as much as the rent payable under the previous lease or (ii) at all. Also, we may not be able to re-lease such space without incurring substantial expenditures for tenant improvements and other lease-up related costs, while still being obligated for any mortgage payments, real estate taxes and other expenditures related to the property.

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

• The Account owns and operates retail properties, which, in addition to the risks listed above, are subject to specific risks, including variations in rental revenues due to customary “percentage rent” clauses which may be in place for retail tenants and the insolvency and/or closing of an anchor tenant. Many times, anchor tenants will be ‘big box’ stores and other large retailers that can be particularly

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adversely impacted by a global recession and reduced consumer spending generally. Factors that can impact the level of consumer spending include increases in fuel and energy costs, residential and commercial real estate and mortgage conditions, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors. Under certain circumstances, the leases may allow other tenants in a retail property to terminate their leases, reduce or withhold rental payments. The insolvency and/or closing of an anchor tenant may also cause such tenants to fail to renew their leases at expiration.

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

  

In addition, the Account’s properties may be located close to properties that are owned by other real estate investors and that compete with the Account for tenants. These competing properties may be better located, more suitable for tenants than our properties or have owners who may compete more aggressively for tenants, resulting in a competitive advantage for these other properties. We may also face similar competition from other properties that may be developed in the future. This competition may limit the Account’s ability to lease space, increase its costs of securing tenants, limit our ability to maximize our rents and/or require the Account to make capital improvements it otherwise would not, in order to make its properties more attractive to prospective tenants.

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Operating Costs. A property’s cash flow could decrease if operating costs, such as property taxes, utilities, litigation expenses associated with a property, maintenance and insurance costs that are not reimbursed by tenants increase in relation to gross rental income, or if the property needs unanticipated repairs and renovations.

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Condemnation. A governmental agency may condemn all or a portion of a property owned by the Account. While the Account would receive compensation in connection with any such condemnation, such compensation may not be in an amount the Account believes represents equivalent value for the condemned property. Further, a partial condemnation could impair the ability of the Account to maximize the value of the property during its operation, including making it more difficult to find new tenant or retain existing tenants. Finally, a property which has been subject to a partial condemnation may be more difficult to sell at a price the Account believes is appropriate.

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

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

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

• The Account might not be able to sell a property at a particular time for a price which management believes represents its fair or full value. This illiquidity may result from the cyclical nature of real

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	estate, general economic conditions impacting the location of the property, disruption in the credit markets or the availability of financing on favorable terms or at all, and the supply of and demand for available tenant space, among other reasons. This might make it difficult to raise cash quickly which could impair the Account’s liquidity position (particularly during any period of sustained significant net participant outflows) and also could lead to Account losses. Further, the liquidity guarantee does not serve as a working capital facility or credit line to enhance the Account’s liquidity levels generally, as its purpose is tied to participants having the ability to redeem their accumulation units upon demand (thus, alleviating the Account’s need to dispose of properties solely to increase liquidity levels in what management deems a suboptimal sales environment).
•	The Account may need to provide financing to a purchaser if no cash buyers are available, or if buyers are unable to receive financing on terms enabling them to consummate the purchase.
•	For any particular property, the Account may be required to make expenditures for improvements to, or to correct defects in, the property before the Account is able to market and/or sell the property.

Valuation and Appraisal Risks:Investments in the Account’s assets are stated at fair value which is defined as the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date. Determination of fair value, particularly for real estate assets, involves significant judgment. Valuation of the Account’s real estate properties (which comprise a substantial majority of the Account’s net assets) are based on real estate appraisals, which are estimates of property values based on a professional’s opinion and may not be accurate predictors of the amount the Account would actually receive if it sold a property. Appraisals can be subjective in certain respects and rely on a variety of assumptions and conditions at that property or in the market in which the property is located, which may change materially after the appraisal is conducted. Among other things, market prices for comparable real estate may be volatile, in particular if there has been a lack of recent transaction activity in such market. Recent disruptions in the macroeconomy, real estate markets and the credit markets have led to a significant decline in transaction activity in most markets and sectors and the lack of observable transaction data may have made it more difficult for an appraisal to determine the fair value of the Account’s real estate.

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

If the appraised values of the Account’s properties as a whole are too high, those participants who purchased accumulation units prior to (i) a downward valuation adjustment of a property or multiple properties or (ii) a property or properties being sold for a lower price than the appraised value will be credited with less of an interest than if the value had previously been adjusted downward. Also, those participants who redeem during any such period will have received more than their pro rata share of the value of the Account’s assets, to the detriment of other non-redeeming participants. In particular, appraised property values may prove to be too high (as a whole) in a rapidly declining commercial real estate market. Further, implicit in the Account’s definition of fair value is a principal assumption that there will be a reasonable time to market a given property and that the property will be exchanged between a willing buyer and willing seller in a non-distressed scenario. However, an appraised value may not reflect the actual realizable value that would be obtained in a rush sale where time was of the essence. Also, appraised values may lag actual realizable values to the extent there is significant and rapid economic deterioration in a particular geographic market or a particular sector within a geographic market.

If the appraised values of the Account’s properties as a whole are too low, those participants who redeem prior to (i) an upward valuation adjustment of a property or multiple properties or (ii) a property or properties being sold for a higher price than the appraised value will have received less than their pro rata share of the value of the Account’s assets, and those participants who purchase units during any such period will be credited with more than their pro rata share of the value of the Account’s assets.

Finally, the Account recognizes items of income (such as net operating income from real estate investments, distributions from real estate limited partnerships or joint ventures, or dividends from REIT stocks) and expense in many cases on an intermittent basis, where the Account cannot predict with certainty

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the magnitude or the timing of such item. As such, even as the Account estimates items of net operating income on a daily basis, the Accumulation Unit Value (“AUV”) for the Account may fluctuate, perhaps significantly, from day to day, as a result of adjusting these estimates for the actual recognized item of income or expense.

Investment Risk Associated with Participant Transactions:The amount we have available to invest in new properties and other real estate related assets will depend, in large part, on the level of net participant transfers into or out of the Account, as well as participant premiums into the Account. As noted elsewhere in this report, the Account intends to hold between 15% and 25% of its assets in investments other than real estate and real estate related investments, primarily comprised of highly liquid investments. These liquid assets are intended to be available to purchase real estate related investments in accordance with the Account’s investment objective and strategy and are also available to meet the participant redemption requests and the Account’s expense needs (including, from time to time, obligations on maturing debt). During 2008 (and in particular, the second half of 2008), the Account experienced significant net participant transfers out of the Account. Due in large part to this activity, the TIAA liquidity guarantee was initially executed in December 2008. While the rate of net participant transfers out of the Account declined throughout each quarter of 2009, the Account experienced net participant outflows in each quarter of 2009. The Account’s liquid assets represented less than 10% of the Account’s total assets throughout all of 2009 and, as of December 31, 2009, representing approximately 7.0% of the Account’s total assets. See “Establishing and Managing the Account—The Role of TIAA—Liquidity Guarantee.”

If the amount of net participant transfers out of the Account were to continue, particularly at an increase rate similar to that experienced in late 2008, we may not have enough available liquid assets to pursue, or consummate, new investment opportunities presented to us that are otherwise attractive to the Account. This, in turn, could harm the Account’s returns. Management cannot predict with precision whether net participant transfers will cease in the near term (i.e., during 2010). Additionally, even if net transfers out of the Account ceased for a period of time, there is no guarantee that redemption activity would not increase again, perhaps in a significant and rapid manner.

Risks of Borrowing:The Account acquires some of its properties subject to existing financing and from time to time borrows new funds at the time of purchase. Also, the Account may from time to time place new leverage on, increase the leverage already placed on, or refinance maturing debt on, existing properties the Account owns. Under the Account’s current investment guidelines, the Account may maintain indebtedness, in the aggregate, either directly or through its joint venture investments, in an amount up to approximately $4.0 billion, and following December 31, 2011, the Account intends to maintain a loan to value ratio at or below 30% (measured at the time of incurrence and after giving effect thereto). Also, the Account may borrow up to 70% of the then-current value of a particular property. Non-construction mortgage loans on a property will be non-recourse to the Account.

Among the risks of borrowing money or otherwise investing in a property subject to a mortgage are:

• General Economic Conditions.General economic conditions, dislocations in the capital or credit markets generally or the market conditions then in effect in the real estate finance industry, may hinder the Account’s ability to obtain financing or refinancing for its property investments on favorable terms or at all, regardless of the quality of the Account’s property for which financing or refinancing is sought. Such unfavorable terms might include high interest rates, increased fees and costs and restrictive covenants applicable to the Account’s operation of the property. Longer term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could adversely affect our access to financing necessary to make profitable real estate investments. Our failure to obtain financing or refinancing on favorable terms due to the current state of the credit markets or otherwise could have an adverse impact on the returns of the Account.

• Default Risk.The property may not generate sufficient cash flow to support the debt service on the loan, the property may fail to meet certain financial or operating covenants contained in the loan documents, and/or the property may have negative equity (i.e. the loan balance exceeds the value of the property). In any of these circumstances, we may default on the loan, including due to the failure to make required debt service payments when due. If a loan is in default, the Account may determine that it is not economically desirable and/or in the best interests of the Account to continue to make

11

	payments on the loan (including accessing other sources of funds to support debt service on the loan), and/or the Account may not be able to otherwise remedy such default on commercially reasonable terms or at all. In either case, the lender then could accelerate the outstanding amount due on the loan and/ or foreclose on the underlying property, in which case and the Account could lose the value of its investment in the foreclosed property. Further, any such default or acceleration could trigger a default under loan agreements in respect of other Account properties pledged as security for the defaulted loan. Finally, any such default could increase the Account’s borrowing costs, or result in less favorable terms, with respect to financing future properties.
•	Balloon Maturities. If the Account obtains a mortgage loan that involves a balloon payment, there is a risk that the Account may not be able to make the lump sum principal payment due under the loan at the end of the loan term, or otherwise obtain adequate refinancing on terms commercially acceptable to the Account or at all. The Account then may be forced to sell the property or other properties under unfavorable market conditions or default on its mortgage, resulting in the lender exercising its remedies, which may include repossession of the property and the Account could lose the value of its investment in that property.
•	Variable Interest Rate Risk. If the Account obtains variable-rate loans, the Account’s returns may be volatile when interest rates are volatile. Further, to the extent that the Account takes out fixed-rate loans and interest rates subsequently decline, this may cause the Account to pay interest at above-market rates for a significant period of time. Any hedging activities the Account engages in to mitigate this risk may not fully protect the Account from the impact of interest rate volatility.
•	Valuation Risk. The market valuation of mortgage loans payable could have an adverse impact on the Account’s performance. Valuations of mortgage loans payable are generally based on the amount at which the liability could be transferred in a current transaction, exclusive of transaction costs, and such valuations are subject to a number of assumptions and factors with respect to the loan and the underlying property, a change in any of which could cause the value of a mortgage loan to fluctuate.

A general disruption in the credit markets, such as the credit markets have been recently experiencing, may aggravate some or all of these risks. For a discussion of the recent credit market disruptions, please see “Management’s Discussion and Analysis of the Account’s Financial Condition and Results of Operations.”

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

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

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Uninsurable Losses:Certain catastrophic losses (e.g., from earthquakes, wars, terrorist acts, nuclear accidents, wind, floods or environmental or industrial hazards or accidents) may be uninsurable or so expensive to insure against that it is economically disadvantageous to buy insurance for them. Further, the terms and conditions of the insurance coverage the Account has on its properties, in conjunction with the type of loss actually suffered at a property, may subject the property, or the Account as a whole, to a cap on insurance proceeds that is less than the loss or losses suffered. If a disaster that we have not insured against occurs, if the insurance contains a high deductible, and/or if the aggregate insurance proceeds for a particular type of casualty are capped, the Account could lose some of its original investment and any future profits from the property. Further, the Account may not have sufficient access to external sources of funding to repair or reconstruct a damaged property to the extent insurance proceeds do not cover the full loss. In addition, some leases may permit a tenant to terminate its obligations in certain situations, regardless of whether those events are fully covered by insurance. In that case, the Account would not receive rental income from the property while that tenant’s space is vacant.

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

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

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

Risks of Joint Ownership:Investing in joint venture partnerships or other forms of joint property ownership may involve special risks, many of which are exacerbated when the consent of parties other than the Account are required to take action.

• The co-venturer may have interests or goals inconsistent with those of the Account, including during times when a co-venturer may be experiencing financial difficulty. For example:

•

  

a co-venturer may desire a higher current income return on a particular investment than does the Account (which may be motivated by a longer-term investment horizon or exit strategy), or vise versa, which could cause difficulty in managing a particular asset;

•

  

a co-venturer may desire to maximize or minimize leverage in the venture, which may be at odds with the Account’s strategy;

•

  

a co-venturer may be more or less likely than the Account to agree to modify the terms of significant agreements (including loan agreements) binding the venture, or may significantly delay in reaching a determination whether to do so, each of which may frustrate the business objectives of the Account; and

•

  

For reasons related to its own business strategy, a co-venturer may have different concentration standards as to its investments (geographically, by sector, or by tenant), which might frustrate the execution of the business plan for the joint venture.

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

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

• The Account may have limited rights with respect to the underlying property pursuant to the terms of the joint venture, including the right to operate, manage or dispose of a property, and a co-venturer could have approval rights over the sale of the underlying property.

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• A co-venturer can make it harder for the Account to transfer its equity interest in the venture to a third party, which could adversely impact the valuation of the Account’s interest in the venture.

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

RISKS OF INVESTING IN MORTGAGE LOANS

The Account’s investment strategy includes, to a limited extent, investments in mortgage loans (i.e., the Account serving as lender).

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

•

  

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

•

  

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

•

  

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

•

  

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

•

  

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

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

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

• Risks of Participations:To the extent the Account invested in a participating mortgage, the following additional risks would apply:

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

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

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

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

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

RISKS OF INVESTING IN MORTGAGE-BACKED SECURITIES

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

Importantly, the market value of these securities is also highly sensitive to changes in interest rates, liquidity of the secondary market and economic conditions impacting financial institutions and the credit markets generally. Note that the potential for appreciation, which could otherwise be expected to result from a decline in interest rates, may be limited by any increased prepayments. Further, volatility and disruption in the mortgage market and credit markets generally (such as has recently been the case) may cause there to be a very limited or even no secondary market for these securities and they therefore may be harder to sell than other securities.

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

The Account invests in securities issued by U.S. government agencies and U.S. government sponsored entities. Some of these issuers may not have their securities backed by the full faith and credit of the U.S. government, which could adversely affect the pricing and value of such securities. Also, the Account invests in corporate obligations (such as commercial paper) and while the Account seeks out such holdings in short-term, higher-quality liquid instruments, the ability of the Account to sell these securities may be uncertain, particularly when there are general dislocations in the finance or credit markets, such as has recently been the case. Any such volatility could have a negative impact on the value of these securities. Further, transaction activity generally may fluctuate significantly from time to time, which could impair the Account’s ability to dispose of a security at a favorable time, regardless of the credit quality of the underlying issuer. Further, inherent with investing in any corporate obligation is the risk that the credit quality of the issuer will deteriorate, which could cause the obligations to be downgraded, and hamper the value or the liquidity of these securities.

RISKS OF LIQUID INVESTMENTS

The Account’s investments in cash equivalents, marketable securities (whether debt or equity) and mortgage loans receivable are subject to the following general risks:

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• Financial / Credit Risk—The risk, for debt securities, that the issuer will not be able to pay principal and interest when due (and/or declare bankruptcy or be subject to receivership) and, for equity securities such as 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.

• Market Volatility Risk—The risk that the Account’s investments will experience price volatility due to changing conditions in the financial markets even regardless of the credit quality or financial condition of the underlying issuer. This risk is particularly acute to the extent the Account holds equity securities, which have experienced significant short-term price volatility over the past year. Also, to the extent the Account holds debt securities, changes in overall interest rates can cause price fluctuations.

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

• Deposit / Money Market Risk—The risk that, to the extent the Account’s cash held in bank deposit accounts exceeds federally insured limits as to that bank, the Account could experience losses if banks fail. In addition, there is some risk that investments held in money market accounts or funds can suffer losses.

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

RISKS OF FOREIGN INVESTMENTS

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

• The value of foreign investments or rental income can increase or decrease due to changes in currency rates, currency exchange control regulations, possible expropriation or confiscatory taxation, political, social, and economic developments and foreign regulations. The Account translates into U.S. dollars purchases and sales of securities, income receipts and expense payments made in foreign currencies at the exchange rates prevailing on the respective dates of the transactions. The effect of any changes in currency exchange rates on investments and mortgage loans payable is included in the Account’s net realized and unrealized gains and losses. As such, fluctuations in currency exchange rates may impair the Account’s returns.

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

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

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

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

CONFLICTS OF INTEREST WITHIN TIAA

TIAA and its affiliates (including Teachers Advisors, Inc., its wholly owned subsidiary and a registered investment adviser) have interests in other real estate programs and accounts and also engage in other business activities and as such, they will have conflicts of interest in allocating their time between the Account’s business and these other activities. Also, the Account may be buying properties at the same time as TIAA affiliates that may have similar investment objectives to those of the Account. There is also a risk that TIAA will choose a property that provides lower returns to the Account than a property purchased by

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TIAA and its affiliates. Further, the Account will likely acquire properties in geographic areas where TIAA and its affiliates own properties. In addition, the Account may desire to sell a property at the same time another TIAA affiliate is selling a property in an overlapping market. Conflicts could also arise because some properties owned by TIAA and its affiliates may compete with the Account’s properties for tenants. Among other things, if one of the TIAA entities attracts a tenant that the Account is competing for, the Account could suffer a loss of revenue due to delays in locating another suitable tenant. TIAA has adopted allocation policies and procedures applicable to the purchasing conflicts scenario, but the resolution of such conflicts may be economically disadvantageous to the Account. As a result of TIAA’s and its affiliates’ obligations to other current and potential TIAA sponsored investment vehicles with similar objectives to those of the Account, there is no assurance that the Account will be able to take advantage of every attractive investment opportunity that otherwise is in accordance with the Account’s investment objectives.

In addition, as discussed elsewhere in this report, the TIAA General Account provides a liquidity guarantee to the Account. While an independent fiduciary is responsible for establishing a “trigger point” (a percentage of TIAA’s ownership of liquidity units beyond which TIAA’s ownership may be reduced at the fiduciary’s direction), there is no express cap on the amount TIAA may be obligated to fund under this guarantee. TIAA’s ownership of liquidity units (including the potential of higher levels of ownership in the future) could result in the perception that TIAA is taking into account its own economic interests while serving as investment manager for the Account. Any perception of a conflict of interest could cause participants to transfer accumulations out of the Account to another investment option, which could have an adverse impact on the Account’s ability to act most optimally upon its investment strategy.

NO OPPORTUNITY FOR PRIOR REVIEW OF PURCHASE

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

RISKS OF REGISTRATION UNDER THE INVESTMENT COMPANY ACT OF 1940

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

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

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

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ITEM 2. PROPERTIES.

THE PROPERTIES—IN GENERAL

In the table below, participants will find general information about each of the Account’s property investments as of December 31, 2009. The Account’s property investments include both properties that are wholly-owned by the Account and properties owned by the Account’s joint venture investments. Certain investments are comprised of a portfolio of properties. Fair value amounts are in thousands.

Property	Location	Year Built	Year Purchased	Rentable Area (Sq. ft.)(1)		Percent Leased			Annual Avg. Base Rent Per Leased Sq. Ft.(2)			Fair Value(3)
OFFICE PROPERTIES
1001 Pennsylvania Ave	Washington, DC	1987	2004		756,603		100	%		$	39.74		$	480,622	(4)
Four Oaks Place	Houston, TX	1983	2004		1,754,334		94	%			17.47			409,027	(4)
Fourth & Madison	Seattle, WA	2002	2004		845,533		96	%			29.78			295,000	(4)
50 Fremont Street	San Francisco, CA	1983	2004		817,412		98	%			33.46			284,283	(4)
99 High Street	Boston, MA	1971	2005		731,204		94	%			35.83			253,557	(4)
780 Third Avenue	New York, NY	1984	1999		487,566		87	%			49.88			240,077
1 & 7 Westferry Circus	London, UK	1992, 1993	2005		391,442		100	%			49.51			239,036	(4)(5)
The Newbry	Boston, MA	1940- 1961(6)	2006		607,424		90	%			39.31			230,375
1900 K Street	Washington, DC	1996	2004		339,060		100	%			45.34			204,000
Lincoln Centre	Dallas, TX	1984	2005		1,638,132		84	%			17.09			202,029	(4)
701 Brickell	Miami, FL	1986(8)	2002		675,424		93	%			28.20			198,630	(4)
275 Battery	San Francisco, CA	1988	2005		472,261		91	%			29.57			164,390
Wilshire Rodeo Plaza	Beverly Hills, CA	1935, 1984	2006		264,287		97	%			45.71			151,209	(4)
1401 H Street NW	Washington, D.C.	1992	2006		350,635		64	%			30.20			143,555	(4)
Yahoo! Center(7)	Santa Monica, CA	1984	2004		1,185,119		90	%			25.31			133,227
Mellon Financial Center at One Boston Place(10)	Boston, MA	1970(8)	2002		804,444		90	%			44.41			129,922
Ten & Twenty Westport Road	Wilton, CT	1974(8); 2001	2001		538,840		94	%			21.56			126,860
Millennium Corporate Park	Redmond, VA	1999, 2000	2006		536,884		97	%			12.56			116,548
Inverness Center	Birmingham, AL	1980-1985	2005		903,857		96	%			12.33			90,315
Urban Centre	Tampa, FL	1984, 1987	2005		547,979		89	%			19.21			80,282
Morris Corporate Center III	Parsippany, NJ	1990	2000		526,052		77	%			20.32			66,478
Treat Towers(11)	Walnut Creek, CA	1999	2003		367,313		69	%			19.17			66,435
The Ellipse at Ballston	Arlington, VA	1989	2006		194,914		96	%			30.79			65,505
Oak Brook Regency Towers	Oakbrook, IL	1977(8)	2002		402,318		80	%			13.83			64,265
88 Kearny Street	San Francisco, CA	1986	1999		228,358		84	%			38.50			61,600
Pacific Plaza	San Diego, CA	2000, 2002	2007		215,758		65	%			23.68			60,075	(4)
Parkview Plaza	Oakbrook, IL	1990	1997		264,461		92	%			15.95			44,360
One Virginia Square	Arlington, VA	1999	2004		116,077		100	%			40.70			40,503
Camelback Center	Phoenix, AZ	2001	2007		231,345		93	%			20.89			37,774
Wellpoint	Westlake Village, CA	1986 1998	2006		216,571		100	%			13.47			37,400
The Pointe on Tampa Bay	Tampa, FL	1982(8)	2002		250,357		71	%			18.05			35,060
8270 Greensboro Drive	McLean, VA	2000	2005		158,110		100	%			26.19			34,200

18

Property	Location	Year Built	Year Purchased	Rentable Area (Sq. ft.)(1)		Percent Leased			Annual Avg. Base Rent Per Leased Sq. Ft.(2)			Fair Value(3)
The North 40 Office Complex	Boca Raton, FL	1983, 1984	2006		350,000		88	%		$	11.16		$	33,969
West Lake North Business Park	Westlake Village, CA	2000	2004		198,558		92	%			17.11			32,407
Prominence in Buckhead(11)	Atlanta, GA	1999	2003		423,916		84	%			11.14			30,952
3 Hutton Centre	Santa Ana, CA	1985(8)	2003		197,819		80	%			15.85			28,752
Centerside I	San Diego, CA	1982	2004		202,913		67	%			19.13			27,012
Tysons Executive Plaza II(12)	McLean, VA	1988	2000		257,740		94	%			27.04			26,275
Creeksides at Centerpoint	Kent, WA	1985	2006		218,712		52	%			8.02			18,724
Needham Corporate Center	Needham, MA	1987	2001		138,259		83	%			19.23			16,196
Subtotal—Office Properties							91	%					$	5,000,886
Percent leased weighted by property market value— Office(9)							92	%
INDUSTRIAL PROPERTIES
Ontario Industrial Portfolio	Various, CA	1997-1998	1998, 2000, 2004		3,981,894		78	%		$	3.23		$	167,998	(4)
Dallas Industrial Portfolio(13)	Dallas and Coppell, TX	1997-2001	2000-2002		3,684,941		92	%			2.60			125,275
Southern California RA Industrial Portfolio	Los Angeles, CA	1982	2004		920,078		85	%			5.31			75,817
Rainier Corporate Park	Fife, WA	1991-1997	2003		1,104,646		94	%			4.22			65,277
Great West Industrial Portfolio	Rancho Cucamonga and Fontana, CA	2004-2005	2008		1,358,925		100	%			4.21			65,000
Seneca Industrial Park	Pembroke Park, FL	1999-2001	2007		882,182		93	%			3.50			62,341
Chicago Industrial Portfolio(13)	Chicago and Joliet, IL	1997-2000	1998; 2000		1,427,699		100	%			3.11			60,908
Rancho Cucamonga Industrial Portfolio	Rancho Cucamonga, CA	2000-2002	2000; 2001; 2002; 2004		1,490,235		62	%			2.05			57,327
Shawnee Ridge Industrial Portfolio	Atlanta, GA	2000-2005	2005		1,422,922		96	%			3.29			52,219
Chicago CALEast Industrial Portfolio(15)	Chicago, IL	1974-2005	2003		1,145,152		98	%			3.43			48,304
Regal Logistics Campus	Seattle, WA	1999-2004	2005		968,535		100	%			4.15			47,955
Northern California RA Industrial Portfolio(13)	Oakland, CA	1981	2004		657,602		83	%			4.20			42,437
IDI National Portfolio(14)	Various, U.S.	1999-2004	2004		3,655,671		85	%			2.62			40,587
Atlanta Industrial Portfolio(13)	Lawrenceville, GA	1996-1999	2000		1,295,440		98	%			2.76			39,519
Pinnacle Industrial/DFW Trade Center	Grapevine. TX	2003, 2004, 2006	2006		899,200		100	%			3.59			34,148
GE Appliance East Coast Distribution Facility	Perryville, MD	2003	2005		1,004,000		100	%			2.82			28,900
South River Road Industrial	Cranbury, NJ	1999	2001		858,957		72	%			2.38			28,656
Northeast RA Industrial Portfolio	Boston, MA	2000	2004		384,000		75	%			3.41			24,845
Broadlands Business Park	Elkton, MD	2006	2006		756,600		100	%			2.88			23,600
Centre Pointe and Valley View	Los Angeles County, CA	1965-1989	2004		307,685		99	%			5.61			18,929

19

Property	Location	Year Built	Year Purchased	Rentable Area (Sq. ft.)(1)		Percent Leased			Annual Avg. Base Rent Per Leased Sq. Ft.(2)			Fair Value(3)
Northwest RA Industrial Portfolio	Seattle, WA	1996	2004		312,321		100	%		$	5.06		$	17,800
Konica Photo Imaging Headquarters	Mahwah, NJ	1999	1999		168,000		—	%			0.00			15,100
Airways Distribution Center	Memphis, TN	2005	2006		556,600		70	%			0.94			12,600
Summit Distribution Center	Memphis, TN	2002	2003		708,532		5	%			0.00			12,300
UPS Distribution Facility	Fernley, NV	1998	1998		256,000		100	%			2.37			7,600
Subtotal—Industrial Properties							88	%					$	1,175,442
Percent leased weighted by property market value—Industrial(9)							87	%
RETAIL PROPERTIES
DDR Joint Venture(16)	Various	Various	2007		16,183,158		83	%		$	10.14		$	312,182
The Florida Mall(17)	Orlando, FL	1986(8)	2002		988,011		97	%			38.41			252,432
Printemps de l’Homme	Paris, FR	1930	2007		130,372		100	%			73.84			200,995	(5)
Florida Retail Portfolio(18)	Various, FL	1974-2005	2006		1,289,825		84	%			12.83			162,204
Westwood Marketplace	Los Angeles, CA	1950(8)	2002		202,201		100	%			29.93			77,077
Miami International Mall(17)	Miami, FL	1982(8)	2002		295,400		97	%			36.05			76,856
Marketfair	West Windsor, NJ	1987	2006		240,297		97	%			17.59			65,594
Mazza Gallerie	Washington, DC	1975	2004		293,935		100	%			12.16			65,500
Publix at Weston Commons	Weston, FL	2005	2006		126,922		99	%			23.43			38,100	(4)
West Town Mall(17)	Knoxville, TN	1972(8)	2002		764,219		97	%			21.56			37,262
Plainsboro Plaza	Plainsboro, NJ	1987	2005		218,653		77	%			9.39			26,962
South Frisco Village	Frisco, TX	2002	2006		227,175		79	%			9.89			26,900	(4)
Champlin Marketplace	Champlin, MN	1998-99, 2005	2007		103,577		97	%			10.59			13,801
Suncrest Village	Orlando, FL	1987	2005		93,358		85	%			10.03			12,329
Plantation Grove	Ocoee, FL	1995	1995		73,655		92	%			10.41			9,600
Subtotal—Retail Properties							86	%					$	1,377,794
Percent leased weighted by property market value—Retail(9)							92	%
RESIDENTIAL PROPERTIES
Houston Apartment Portfolio(19)	Houston, TX	1984-2004	2006		N/A		92	%			N/A		$	179,717
Palomino Park Apartments	Denver, CO	1996-2001	2005		N/A		96	%			N/A			143,907
The Colorado	New York, NY	1987	1999		N/A		99	%			N/A			110,144	(4)
Kierland Apartment Portfolio(19)	Scottsdale, AZ	1996-2000	2006		N/A		96	%			N/A			78,060
The Legacy at Westwood Apartments	Los Angeles, CA	2001	2002		N/A		95	%			N/A			77,836	(4)
Ashford Meadows Apartments	Herndon, VA	1998	2000		N/A		94	%			N/A			71,105
Regents Court Apartments	San Diego, CA	2001	2002		N/A		99	%			N/A			50,505	(4)
Larkspur Courts	Larkspur, CA	1991	1999		N/A		95	%			N/A			50,111
The Caruth	Dallas, TX	1999	2005		N/A		99	%			N/A			49,641	(4)

20

Property	Location	Year Built	Year Purchased	Rentable Area (Sq. ft.)(1)		Percent Leased			Annual Avg. Base Rent Per Leased Sq. Ft.(2)			Fair Value(3)
South Florida Apartment Portfolio	Boca Raton and Plantation, FL	1986	2001		N/A		98	%			N/A		$	48,366
1050 Lenox Park	Atlanta, GA	2001	2005		N/A		96	%			N/A			48,223
The Reserve at Sugarloaf	Duluth, GA	2000	2005		N/A		98	%			N/A			37,710	(4)
The Maroneal	Houston, TX	1998	2005		N/A		96	%			N/A			32,179
The Lodge at Willow Creek	Denver, CO	1997	1997		N/A		97	%			N/A			31,624
Glenridge Walk	Atlanta, GA	1996, 2001	2005		N/A		98	%			N/A			30,326
Lincoln Woods Apartments	Lafayette Hill, PA	1991	1997		N/A		88	%			N/A			28,728
Westcreek Apartments	Westlake Village, CA	1988	1997		N/A		99	%			N/A			23,061
Phoenix Apartment Portfolio(19)	Greater Phoenix Area, AZ	1995-1998	2006		N/A		93	%			N/A			21,767
Quiet Water at Coquina Lakes	Deerfield Beach, FL	1995	2001		N/A		97	%			N/A			19,918
The Fairways of Carolina	Margate, FL	1993	2001		N/A		99	%			N/A			18,628
Subtotal—Residential Properties							96	%					$	1,151,556
Percent leased weighted by property market value—Residential(9)							96	%
OTHER COMMERCIAL PROPERTIES
Storage Portfolio I(20)	Various, U.S.	1972-1990	2003		2,295,410		83	%		$	12.78		$	46,269
Subtotal—Commercial Properties													$	7,600,391
Total—All Properties—Percent Leased weighted by property market value							92	%					$	8,751,947

(1)	The square footage is an approximate measure and is subject to periodic remeasurement.
(2)	Based on total contractual rent for leases existing as of December 31, 2009. The contractual rent can be either on a gross or net basis, depending on the terms of the leases.
(3)	Market value reflects the value determined in accordance with the procedures described in the Account’s prospectus and as stated in the Statement of Investments.
(4)	Property is subject to a mortgage. The market value shown represents the Account’s interest gross of debt.
(5)	1 & 7 Westferry Circus is located in the United Kingdom, and the market value reflects the Account’s interest gross of debt. Printemps de l’Homme is located in France. The market value of each property is converted from local currency to U.S. Dollars at the exchange rate as of December 31, 2009.
(6)	This property was renovated in 2004 and 2006.
(7)	This property is held in 50%/50% joint venture with Equity Office Properties Trust. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.
(8)	Undergone extensive renovations since original construction.
(9)	Values shown are based on the property market value weighted as a percent of the total market value and based upon the percent leased for each property.
(10)	The Account purchased a 50.25% interest in a private REIT, which owns this property. A 49.70% interest is owned by Societe Immobiler Trans-Quebec, and .05% is owned by 100 individuals. Market value shown reflects the value of the Account’s interest in the joint venture.

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(11)	This investment property is held in a 75%/25% joint venture with Equity Office Properties Trust. Market value shown reflects the value of the Account’s interest in the joint venture.
(12)	This investment property is held in a 50%/50% joint venture with Tennessee Consolidated Retirement System. Market value shown reflects the value of the Account’s interest in the joint venture.
(13)	A portion of this portfolio was sold in 2007.
(14)	This investment property held in 60%/40% joint venture with Industrial Development International. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.
(15)	A portion of this portfolio was sold in 2007 and 2008.
(16)	This investment property consists of 65 properties located in 13 states and is held in a 85% / 15% joint venture with Developers Diversified Realty Corporation. Market Value shown reflects the value of the Account’s interest in the joint venture, net of debt.
(17)	This investment property is held in a 50%/50% joint venture with the Simon Property Group. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.
(18)	This investment property is held in a 80%/20% joint venture with Weingarten Realty Investors. Market value shown reflects the value of the Account’s interest in the joint venture. This portfolio contains seven neighborhood and/or community shopping centers located in Ft. Lauderdale, Miami, Orlando, and Tampa, Florida areas.
(19)	A portion of this portfolio was sold in 2009.
(20)	This investment property is held in a 75%/25% joint venture with Storage USA. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.

Commercial (Non-Residential) Properties

At December 31, 2009, the Account held 81 commercial (non-residential) property investments in its portfolio, including a portfolio of storage facilities located throughout the United States. Twelve of these property investments were held through joint ventures, and 26 were subject to mortgages (including seven joint venture property investments). Although the terms vary under each lease, certain expenses, such as real estate taxes and other operating expenses, are paid or reimbursed in whole or in part by the tenants.

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

• Office. 40 property investments containing approximately 19.8 million square feet located in 14 states, the District of Columbia and the United Kingdom. As of December 31, 2009, the Account’s office properties had an aggregate market value of approximately $5.0 billion.

• Industrial. 25 property investments containing approximately 30.2 million square feet located in 11 states, including a 60% interest in a portfolio of industrial properties located throughout the United States. As of December 31, 2009, the Account’s industrial properties had an aggregate market value of approximately $1.2 billion.

• Retail. 15 property investments containing approximately 21.2 million square feet located in five states, the District of Columbia and Paris, France. As of December 31, 2009, the Account’s retail properties had an aggregate market value of approximately $1.4 billion. One of the retail property investments is an 85% interest in a portfolio containing 65 individual retail shopping centers located throughout the Eastern and Southeastern states.

In addition, the Account has a 75% interest in a portfolio of storage facilities located throughout the United States containing approximately 2.3 million square feet. As of December 31, 2009, the Account’s interest in this portfolio had a market value of approximately $46.3 million.

As of December 31, 2009, the market value weighted average occupancy rate of the Account’s entire commercial real estate portfolio was 91%. On a weighted basis, the overall occupancy rate of the Account’s commercial real estate portfolio was 87%. The Account’s:

• office property investments were 92% leased on a market value weighted basis and 91% leased on a weighted basis;

• industrial property investments were 87% leased on a market value weighted basis and 88% leased on a weighted basis;

22

• retail property investments were 92% leased on a market value weighted basis and 86% leased on a weighted basis; and

• storage portfolio was 83% leased.

Major Tenants: The following tables list the Account’s ten most significant tenants based on the total space they occupied as of December 31, 2009 in each of the Account’s commercial property types.

Major Office Tenants	Occupied Square Feet		Percentage of Total Rentable Area of Account’s Office Properties			Percentage of Total Rentable Area Of Account’s Non-Residential Properties
Deloitte & Touche		516,864		2.6	%		0.7	%
Yahoo!		467,564		2.4	%		0.7	%
Southern Company Services		459,457		2.3	%		0.6	%
BHP Petroleum		451,177		2.3	%		0.6	%
Mellon Financial		362,293		1.8	%		0.5	%
Microsoft		361,528		1.8	%		0.5	%
Crowell & Moring		334,757		1.7	%		0.5	%
ATMOS Energy		313,326		1.6	%		0.4	%
GE Healthcare		309,278		1.6	%		0.4	%
Pearson		225,299		1.1	%		0.3	%

Major Industrial Tenants	Occupied Square Feet		Percentage of Total Rentable Area of Account’s Industrial Properties			Percentage of Total Rentable Area Of Account’s Non-Residential Properties
Walmart		1,099,112		3.6	%		1.5	%
General Electric		1,004,000		3.3	%		1.4	%
Regal West		968,535		3.2	%		1.4	%
Kumho Tire		830,485		2.7	%		1.2	%
PFSweb, Inc.		825,520		2.7	%		1.2	%
First Quality		800,000		2.6	%		1.1	%
Michelin North America		756,690		2.5	%		1.1	%
Del Monte		689,660		2.3	%		1.0	%
R.R. Donnelley		659,157		2.2	%		0.9	%
Global Equipment		647,228		2.1	%		0.9	%

Major Retail Tenants	Occupied Square Feet		Percentage of Total Rentable Area of Account’s Retail Properties			Percentage of Total Rentable Area Of Account’s Non-Residential Properties
Walmart		802,437		3.8	%		1.1	%
Publix Super Markets		630,037		3.0	%		0.9	%
Ross Dress for Less		565,488		2.7	%		0.8	%
Dick’s Sporting Goods		522,486		2.5	%		0.7	%
Kohl’s		521,225		2.5	%		0.7	%
PetSmart		496,525		2.3	%		0.7	%
Michael’s		474,759		2.2	%		0.7	%
Bed Bath & Beyond		457,744		2.2	%		0.6	%
Belk		372,812		1.8	%		0.5	%
Old Navy		371,779		1.8	%		0.5	%

23

The following tables list the rentable area subject to expiring leases during the next five years, and an aggregate figure for expirations in 2015 and thereafter, in the Account’s commercial (non-residential) properties. While many of the leases contain renewal options with varying terms, these charts assume that none of the tenants exercise their renewal options.

Office Properties

Year of Lease Expiration	Rentable Area Subject to Expiring Leases (sq. ft.)		Percentage of Total Rentable Area of Account’s Office Properties Represented by Expiring Leases
2010		2,690,373		13.7%
2011		2,428,555		12.4%
2012		1,397,417		7.1%
2013		1,871,047		9.5%
2014		2,259,027		11.5%
2015 and thereafter		7,167,998		36.5%
Total		17,814,417		90.7%

Industrial Properties

Year of Lease Expiration	Rentable Area Subject to Expiring Leases (sq. ft.)		Percentage of Total Rentable Area of Account’s Industrial Properties Represented by Expiring Leases
2010		5,101,177		16.8%
2011		3,188,963		10.5%
2012		3,098,960		10.2%
2013		3,980,578		13.1%
2014		2,266,111		7.5%
2015 and thereafter		8,989,904		29.6%
Total		26,625,693		87.7%

Retail Properties

Year of Lease Expiration	Rentable Area Subject to Expiring Leases (sq. ft.)		Percentage of Total Rentable Area of Account’s Retail Properties Represented by Expiring Leases
2010		1,988,898		9.4%
2011		2,096,211		9.9%
2012		2,521,401		11.9%
2013		2,149,270		10.2%
2014		1,549,783		7.3%
2015 and thereafter		7,757,049		36.8%
Total		18,062,612		85.5%

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Residential properties

The Account’s residential property portfolio currently consists of 20 property investments comprised of first class or luxury multi-family, garden, mid-rise, and high-rise apartment buildings. The portfolio contains approximately 8,600 units located in nine states and has a 96% average occupancy rate as of December 31, 2009. Four of the residential properties in the portfolio are subject to mortgages. The complexes generally contain one- to three-bedroom apartment units with a range of amenities, such as patios or balconies, washers and dryers, and central air conditioning. Many of these apartment communities have on-site fitness facilities, including some with swimming pools. Rents on each of the properties tend to be comparable with competitive communities and are not subject to rent regulation. The Account is responsible for the expenses of operating its residential properties.

The table below contains detailed information regarding the apartment complexes in the Account’s portfolio as of December 31, 2009.

Property	Location	Number Of Units		Average Unit Size (Square Feet)		Avg. Rent Per Unit/ Per Month
Houston Apartment Portfolio(1)	Houston, TX		1,777		1,021		$	1,327
Palomino Park	Highlands Ranch, CO		1,184		1,109			1,100
Kierland Apartment Portfolio(1)	Scottsdale, AZ		724		1,004			1,237
South Florida Apartment Portfolio(1)	Boca Raton and Plantation, FL		550		906			1,147
Ashford Meadows	Herndon, VA		440		1,030			1,541
1050 Lenox Park	Atlanta, GA		407		1,168			1,388
The Caruth Apartments	Dallas, TX		338		1,220			1,522
The Reserve at Sugarloaf	Duluth, GA		333		996			1,024
The Lodge at Willow Creek	Denver, CO		316		928			958
Maroneal	Houston, TX		309		1,146			1,373
Glenridge Walk	Sandy Springs, GA		296		617			1,375
The Colorado	New York, NY		256		886			2,884
Regents Court	San Diego, CA		251		1,001			1,757
Larkspur Courts Apartments	Larkspur, CA		248		976			2,082
Phoenix Apartment Portfolio	Greater Phoenix Area, AZ		240		976			1,100
Lincoln Woods Apartments	Lafayette Hill, PA		216		774			1,285
The Fairways at Carolina	Margate, FL		208		1,026			1,065
Quiet Waters at Coquina	Deerfield Beach, FL		200		1,048			1,136
Legacy at Westwood	Los Angeles, CA		187		1,181			4,267
Westcreek Apartments	Westlake Village, CA		126		951			1,973

⁽¹⁾ Represents a portfolio containing multiple properties.

ITEM 3. LEGAL PROCEEDINGS.

The Account is party to various 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.

ITEM 4. RESERVED

25

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S SECURITIES, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

(a) Market Information. There is no established public trading market for securities issued by the Account. Accumulation units in the Account are sold to eligible participants at the Account’s current accumulation unit value, which is based on the value of the Account’s then current net assets and are redeemable in accordance with the terms of the participant’s contract. For the period from January 1, 2009 to December 31, 2009, the high and low accumulation unit values for the Account were $267.644 and $193.376, respectively. For the period January 1, 2008 to December 31, 2008, the high and low accumulation unit values for the Account were $314.978 and $267.348, respectively.

Holders. The approximate number of Account contract owners at December 31, 2009 was 1,025,000..

Dividends. Not applicable.

Securities Authorized for Issuance under Equity Compensation Plans. Not applicable.

(b) Use of Proceeds: Not applicable.

(c) Purchases of Equity Securities by Issuer: Not applicable.

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ITEM 6. SELECTED FINANCIAL DATA.

The following selected financial data should be considered in conjunction with the Account’s financial statements and notes provided in this Form 10-K (amounts in thousands except for per accumulation unit amounts).

	Years Ended December 31,
	2009				2008				2007			2006			2005
Investment income:
Real estate income, net		$	479,657			$	500,434			$	529,412		$	444,783		$	340,090
Income from real estate joint ventures and limited partnerships			114,578				116,889				93,724			60,789			71,826
Dividends and interest			1,733				81,523				141,914			135,407			70,999
Total investment income			595,968				698,846				765,050			640,979			482,915
Expenses			95,473				153,040				140,294			83,449			56,100
Investment income, net			500,495				545,806				624,756			557,530			426,815
Net realized and unrealized (losses) gain on investments and mortgage loans payable			(3,612,505	)			(2,513,024	)			1,438,435			1,056,671			765,970
Net (decrease) increase in net assets resulting from operations			(3,112,010	)			(1,967,218	)			2,063,191			1,614,201			1,192,785
Participant transactions			(1,575,700	)			(4,339,995	)			1,464,653			1,969,781			2,110,376
TIAA Purchase of Liquidity units			1,058,700				155,600				—			—			—
Net (decrease) increase in net assets		$	(3,629,010	)		$	(6,151,613	)		$	3,527,844		$	3,583,982		$	3,303,161

	Years Ended December 31,
	2009			2008			2007			2006			2005
Total assets		$	9,912,703		$	13,576,954		$	19,232,767		$	15,759,961		$	11,685,426
Total liabilities			2,032,789			2,068,030			1,572,230			1,627,268			1,136,715
Total net assets		$	7,879,914		$	11,508,924		$	17,660,537		$	14,132,693		$	10,548,711
Number of accumulation units outstanding			39,473			41,542			55,106			50,146			42,623
Net asset value, per accumulation unit		$	193.45		$	267.35		$	311.41		$	273.65		$	239.95
Mortgage loans payable		$	1,858,110		$	1,830,040		$	1,392,093		$	1,437,149		$	973,502

27

Quarterly Selected Financial Information Data

The following selected unaudited financial data for each full quarter of 2009 and 2008 are derived from the financial statements of the Account for the years ended December 31, 2009 and 2008 (amounts in thousands).

	2009																Year Ended December 31, 2009
	For the Three Months Ended
	March 31				June 30				September 30				December 31
Investment income, net		$	119,440			$	130,429			$	135,536			$	115,090			$	500,495
Net realized and unrealized loss on investments and mortgage loans payable			(1,074,437	)			(1,166,159	)			(836,451	)			(535,458	)			(3,612,505	)
Net decrease in net assets resulting from operations		$	(954,997	)		$	(1,035,730	)		$	(700,915	)		$	(420,368	)		$	(3,112,010	)
Total return			-8.36	%			-9.96	%			-7.64	%			-5.05	%			-27.64	%

	2008																Year Ended December 31, 2008
	For the Three Months Ended
	March 31				June 30				September 30				December 31
Investment income, net		$	150,587			$	147,564			$	129,345			$	118,310			$	545,806
Net realized and unrealized loss on investments and mortgage loans payable			(28,912	)			(101,069	)			(462,819	)			(1,920,224	)			(2,513,024	)
Net increase (decrease) in net assets resulting from operations		$	121,675			$	46,495			$	(333,474	)		$	(1,801,914	)		$	(1,967,218	)
Total return			0.69	%			0.27	%			-2.07	%			-13.18	%			-14.15	%

28

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE ACCOUNT’S FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and notes contained in this report and with consideration to the sub-section entitled “Forward-Looking Statements,” which begins below, and the section entitled “Item 1A. Risk Factors.” The past performance of the Account is not indicative of future results.

Forward-Looking Statements

Some statements in this Form 10-K which are not historical facts may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about management’s expectations, beliefs, intentions or strategies for the future, include the assumptions underlying these forward-looking statements, and are based on current expectations, estimates and projections about the real estate industry, domestic and global economic conditions, including conditions in the credit and capital markets, the sector markets in which the Account invests and operates, management’s beliefs, assumptions made by management and the transactions described in this Form 10-K. While management believes the assumptions underlying any of its forward-looking statements and information to be reasonable, such information may be subject to uncertainties and may involve certain risks which may be difficult to predict and are beyond management’s control. These risks and uncertainties could cause actual results to differ materially from those contained in any forward-looking statement. These risks and uncertainties include, but are not limited to, the following:

• The risks associated with acquiring, owning and selling real property, including general economic and real estate market conditions, the availability of financing (both for the Account and potential purchasers of the Account’s properties), disruptions in the credit and capital markets, competition for real estate properties, leasing risk (including tenant defaults), risks of holding foreign investments, and the risk of uninsured losses at properties (including due to terrorism and acts of violence);

• The risks associated with property valuations, including the fact that appraisals can be subjective in a number of respects, the fact that the Account’s appraisals are generally obtained on a quarterly basis and there may be periods in between appraisals of a property in which the value attributed to the property for purposes of the Account’s daily accumulation unit value may be more or less than the actual realizable value of the property;

• Risks associated with financing the Account’s properties, including the risk that the Account may not have the ability to obtain financing on favorable terms (or at all), which may be aggravated by general disruptions in credit and capital markets;

• Investment risk associated with participant transactions, including the fact that significant net participant transfers out of the Account may impair its ability to pursue or consummate new investment opportunities that are otherwise attractive to the Account or that significant net participant transfers into the Account may take time to invest in attractive investment opportunities;

• The risks associated with joint venture partnerships, including the risk that a co-venturer may have interests or goals inconsistent with that of the Account, that a co-venturer may have financial difficulties, and the risk that the Account may have limited rights with respect to operation of the property and transfer of the Account’s interest;

• Uncertainties associated with environmental and other regulatory matters;

• Conflicts of interest, including those associated with other real estate accounts and funds which TIAA or its affiliates manage and any perceived conflicts associated with TIAA’s liquidity guarantee; and

• Risks associated with investments in liquid assets, including financial/credit risk, market volatility risk, interest rate volatility risk and deposit/money market risk.

More detailed discussions of certain of these risk factors are contained in the section of this Form 10-K entitled “Item 1A. Risk Factors” and in this report below and also in the section entitled “Item 7A. Quantitative

29

and Qualitative Disclosures About Market Risk,” that could cause actual results to differ materially from historical experience or management’s present expectations.

Caution should be taken not to place undue reliance on management’s forward-looking statements, which represent management’s views only as of the date that this report is filed. Neither management nor the Account undertake any obligation to update publicly or revise any forward-looking statement, whether as a result of new information, changed assumptions, future events or otherwise.

Commercial real estate market statistics discussed in this section are obtained by the Account from sources that management considers reliable, but some of the data are preliminary for the year or quarter ended December 31, 2009 and may be subsequently revised. Prior period data may have been adjusted to reflect updated calculations. Investors should not rely exclusively on the data presented below in forming a judgment regarding the current or prospective performance of the commercial real estate market generally.

2009 U.S. ECONOMIC AND COMMERCIAL REAL ESTATE OVERVIEW

The TIAA Real Estate Account (the “Account”) invests primarily in high-quality, core commercial real estate in order to meet its investment objective of obtaining favorable long-term returns through rental income and the appreciation of its real estate holdings. The Account does not directly invest in either single-family residential real estate or residential mortgage-backed securities.

Economic and Capital Markets Overview and Outlook

Global economic and capital market conditions improved considerably during the second half of 2009. Preliminary estimates of Gross Domestic Product (“GDP”) suggest that economic output grew 5.7% during the fourth quarter of 2009, following a 2.2% increase in the third quarter of 2009, which was the first such increase in GDP since mid-2008. Federal stimulus programs played a big role in promoting growth, including the ready availability of funds from the Troubled Asset Relief Program (“TARP”) which bolstered bank balance sheets and provided a lifeline to the troubled auto industry. For consumers, the “cash for clunkers” program and financial assistance programs for first-time home buyers helped to stimulate automobile and housing demand. Similarly, the accommodative monetary policies of the Federal Reserve kept mortgage interest rates low and perked up the moribund housing market.

The second half of 2009 also provided evidence that capital and credit markets were stabilizing. For example, major banks were able to access the equity markets for new capital and a portion of those proceeds were used to repay outstanding TARP loans. The Treasury Department subsequently announced that TARP would require approximately $150 billion less than expected and that the program would likely be ended in the Fall of 2010. With signs that a recovery was forthcoming, investors returned to the equity markets, which produced a strong rally. The Dow Jones Industrial Average and S&P 500 started the year at depressed levels, but ultimately gained 23% and 28%, respectively, for the year. Similarly, credit markets experienced a revival, with lending activity increasing modestly and credit spreads declining dramatically over the course of the year.

The commercial real estate market received a boost from the Federal Reserve’s Term Asset-Backed Securities Loan Facility (“TALF”) program, which supported the issuance of the first new commercial mortgage-backed securities (“CMBS”) in over a year. The CMBS market subsequently began to stir and several other CMBS issuances occurred without TALF loans. Public Real Estate Investment Trust (“REIT”) shares also experienced a strong rally, and a number of companies solidified their balance sheets with funds raised from issuing new shares.

Nonetheless, the economy still remains weak. In particular, most companies have not started hiring. Though the pace of job losses moderated significantly in the fourth quarter of 2009 compared with prior quarters, more than four million jobs were lost during 2009. The first monthly job gains since December 2007 were reported in November 2009, which may be an indicator of an eventual growth in payrolls. Still, the unemployment rate, traditionally a lagging indicator, ended the year at approximately 10%, a level not seen since the 1982-1983 recession.

Despite the overall improvement in the capital and credit markets, considerable weakness remains. First, credit is largely available only to the most creditworthy companies; weaker companies and small businesses

30

continue to lack ready access to capital. Second, banks continue to experience sizeable losses in their consumer and commercial real estate loan portfolios and are limited in their ability to lend. Further, the outlook for companies which borrowed significant amounts from the federal government such as AIG, General Motors, GMAC, and Fannie Mae remains tenuous, as several have indicated that they will need additional financial support in the future.

Economic activity expanded at a faster pace in the fourth quarter of 2009 than during the third quarter of 2009, however, most economists believe that much of the growth in GDP during those quarters was attributable to the beneficial effects of the government’s fiscal stimulus programs. For the year, GDP declined 2.4%, which was the largest annual decline since 1946. Consequently, many economists believe persistent unemployment, limited access to credit, and tepid consumer spending will hamper the recovery. While certain monetary policy programs will be wound down, the Federal Reserve reiterated at its final meeting in 2009 that it intends to keep the federal funds rate at or near the 0.0%-0.25% target range for “an extended period.” Similarly, purchases of agency residential mortgage-backed securities (“RMBS”) and Fannie Mae and Freddie Mac debt are ongoing, though they are expected to be terminated during the first quarter of 2010. While the recovery may be on shaky ground, the Fed’s monetary policies and indirect support of the mortgage and housing markets are expected to bolster overall economic activity in 2010 and are likely to remain in place until the recovery is firmly established.

Basic economic indicators are summarized in the table below and the data support the belief that an economic recovery is forthcoming. Evidence includes the 5.7% growth in GDP in the fourth quarter, which was due to increases in consumer spending, exports, and a slower pace of private inventory reduction. Similarly, the moderation in job losses over the course of the year suggests that businesses are winding down their payroll and cost cutting programs. However, significant job growth is not expected until the latter half of 2010 at best. Nonetheless, economists’ forecasts, which are summarized below, reflect expectations of healthy GDP growth in 2010 and 2011.

Economic Indicators*

	2008			2009			2009Q1			2009Q2			2009Q3			2009Q4			Forecasted
																			2010			2011
Economy(1)
Gross Domestic Product (GDP)		0.4	%		-2.4	%		-6.4	%		-0.7	%		2.2	%		5.7	%		2.8	%		3.1	%
Employment Growth (Thousands)		-3,078			-4,164			-2,074			-1,285			-597			-208			N/A			N/A
Interest Rates(2)
10 Year Treasury		3.66	%		3.26	%		2.74	%		3.31	%		3.52	%		3.46	%		3.90	%		4.60	%
Federal Funds Rate		0.0-0.25	%		0.0-0.25	%		0.0-0.25	%		0.0-0.25	%		0.0-0.25	%		0.0-0.25	%		N/A			N/A

Sources: BEA, BLS, Federal Reserve, Blue Chip Consensus Forecasts

*	Data subject to revision
(1)	GDP growth rates are annual rates; employment numbers are monthly changes.
(2)	The Treasury rates are an average over the stated time period. The Federal Funds rates are as of the end of the stated time period.

N/A indicates data not available.

Other economic indicators, shown in the table below, reveal that the recovery will need to gather strength before it is self-sustaining and broad-based. Consumer confidence trended upwards in the fourth quarter, but remains at historically low levels. Retail sales, excluding motor vehicles and gasoline, likewise gained some ground in the fourth quarter, but took a step back in December. The slowdown was attributed to unusually cold weather in much of the country. Inflation remained tame; the modest increase in overall prices in 2009 was due to an increase in energy prices as compared with their lows in 2008. Thus far, excess production capacity and the moderate nature of the recovery is helping to keep price levels stable overall.

Housing activity in the third and fourth quarters of 2009 was largely the result of the government’s tax credits for first-time home buyers; however, the recovery in the housing market remains in question. A sizeable inventory of unsold homes remains, despite the fact that housing construction declined in 2009

31

following an even steeper decline in 2008. As of December, single-family home building ran at an annualized rate of 456,000 units, as compared with a low of 357,000 units during the first two months of the year. Overall, housing construction remains depressed and near historic lows; permits issued for new homes, which are a leading indicator for future construction, in 2009 were 37.5% below 2008 levels.

Broad Economic Indicators*

Index 1985=100	Full Year						October 2009			November 2009			December 2009
	2008			2009
Consumer Confidence		58.0			45.2			48.7			50.6			53.6
% Change(1)
Inflation (Consumer Price Index)		0.1	%		2.7	%		0.3	%		0.4	%		0.1	%
Retail Sales (excl. auto, parts & gas)		1.6	%		-1.8	%		0.1	%		1.0	%		-0.3	%
Existing Home Sales		-13.1	%		4.9	%		9.9	%		7.4	%		-16.7	%
New Home Sales		-37.5	%		-22.9	%		4.3	%		-9.3	%		-7.6	%
Single-family Housing Starts		-40.5	%		-28.7	%		-7.3	%		4.0	%		-6.9	%
Unemployment Rate		5.8	%		9.3	%		10.1	%		10.0	%		10.0	%

*	Data subject to revision
(1)	Monthly figures represent change from the preceding month. Full year figures represent change from the preceding year.
	Annual inflation is calculated as the year over year percent change in December. Unemployment rates for the full year are the annual average.

Sources: Conference Board, Census Bureau, Bureau of Labor Statistics

The Federal Reserve Bank’s January 2010 Beige Book, which reported on economic conditions in the twelve Federal Reserve Districts (“Districts”) through mid-December, generally reflected the modest improvement in the overall economy. Holiday spending was noted to have picked up from depressed 2008 levels but was, nonetheless, anemic compared with typical seasonal spending. Auto sales appeared to have retained some momentum even after the expiration of the “cash for clunkers” program. Generally, there was only sporadic hiring as labor markets remained weak across the nation. A few Districts reported signs of modest wage increases, while others reported a continuation of wage freezes. Within the financial services sector, loan demand among banks was characterized as weak or having declined further. The tepid recovery was noted to have kept price pressures low in nearly all Districts.

Commercial real estate conditions were characterized as weak across the nation, with several Districts reporting further declines. In general, vacancy rates rose across most Districts and landlords in several were offering rent discounts and concessions in order to maintain occupancy levels.

Economists’ views about the prospects for 2010 improved over the course of 2009. Most believe that monetary and fiscal policies helped avoid an even bigger decline in economic activity and that the policies and programs that were enacted have established a foundation for a sustainable, though modest, expansion. Notwithstanding the high level of unemployment, tight credit and anemic housing market, economic activity in the fourth quarter built on the gains reported in the third quarter of 2009. With two consecutive quarters of growth under its belt, the economy is expected to improve over the course of 2010 and 2011 once household finances improve and businesses begin hiring again. The consensus forecast of economists surveyed as part of the January 2010 Blue Chip Economic Indicators publication was for GDP growth of 2.8% in 2010, followed by growth of 3.1% in 2011. The Federal Reserve Open Market Committee (“FOMC”) staff generally concurred with this assessment but expected that the severity of the financial crisis will temper the strength of the recovery. Overall, FOMC staff expects GDP to grow slightly above its inherent long-term potential over the upcoming two year period. Employment growth is expected to be moderate, with the unemployment rate lingering at relatively high levels as businesses only slowly begin hiring again. Excess production capacity is keeping inflationary expectations low and there appears to be minimal risk of rising prices over the near term. However, there is concern among some economists that inflation could spike over the longer term, unless the $1 trillion of fiscal stimulus used to stem the financial crisis can be pulled out of circulation at a propitious point in the economic cycle.

32

Real Estate Market Conditions and Outlook

(Beginning with the fourth quarter of 2009, all of the Account’s vacancy data will be calculated as a percentage of net rentable space leased, weighted by square footage. The third quarter 2009 data presented below has been adjusted to reflect this change. Industry sources such as CB Richard Ellis—Econometric Advisors (“CBRE-EA”), formerly known as Torto Wheaton Research, calculate vacancy and availability data based on similar square footage calculations. Investors should not rely exclusively on the data presented below in forming a judgment regarding the current or prospective performance of the commercial real estate market generally).

Preliminary data from Real Capital Analytics (“RCA”), a frequently cited industry source of commercial real estate transactions data, showed that transactional volume fell 63% in 2009 and was down nearly 90% from the peak in 2007. Nonetheless, $17.6 billion of property was sold during the fourth quarter of 2009, which was an increase of 43% over the third quarter of 2009. The improvement in sales in the latter half of 2009 was due to the combination of a modest improvement in credit availability and some sellers’ acceptance of current market pricing. According to the Moody’s/REAL Commercial Property Price Index (“CPPI”), commercial real estate prices in the fourth quarter of 2009 were 41% below the peak achieved in late 2007. The CPPI increased 4.1% in December of 2009, which was the second consecutive monthly increase. While data from other sources such as the National Council of Real Estate Investment Fiduciaries (“NCREIF”) show smaller (31%) but still significant value declines, the table below summarizes commercial property price declines as estimated by the Moody’s CPPI. Overall, Moody’s estimates that property prices have declined 29% over the past 12 months. Within the property sectors, apartment, office, and industrial property value declines were all on the order of 20% as of the end of the fourth quarter of 2009. Retail fared better with a 19.0% decline, but the sector was impacted earlier in the cycle, and its cumulative decline has been of a similar magnitude.

	Sales Price Change
	December 2008- December 2009			3Q08 to 3Q09 National			Top 10 MSAs*
All Property Types		-29.2	%
Apartments					-20.4	%		-24.4	%
Office					-19.8	%		-14.6	%
Retail					-19.0	%		-18.4	%
Industrial					-23.2	%		-27.3	%

^* Based on total value of property sold in Metropolitan Statistical Area (“MSA”).

Source: Moody’s/REAL CPPI and Real Capital Analytics.

Recent moderation in property value declines was noted by Moody’s, consistent with fourth quarter of 2009 data from NCREIF, which showed that the appreciation or value component of the NCREIF National Property Index (“NPI”) index declined 3.7% in the fourth quarter as compared with a decline of 4.9% in the third quarter. Overall, total returns, which were -2.11% in the fourth quarter of 2009, experienced a smaller rate of decline. For 2009 as a whole, however, total NCREIF NPI returns were -16.8%. Nonetheless, the declines moderated over the course of the year. For the year as a whole, the appreciation component declined 22.0%. Income returns were 1.6% in the fourth quarter and a solid 6.2% for the year.

Commercial real estate market conditions, which historically lag trends in the overall economy, have not yet benefited from the recent modest improvement in economic conditions. For example, vacancy rates for all property types rose in the fourth quarter; however, the rate of increase was more moderate compared with prior quarters. Given the likelihood of a lackluster recovery, a significant improvement in real estate market conditions is not expected until the latter half of 2010 at best and more likely into early 2011. The necessary prerequisites for a recovery in commercial real estate market conditions include a sustained improvement in employment growth and an improvement in credit availability for small businesses. In the interim, landlords will be competing for tenants that are intent upon reducing their space requirements and costs. Corporations are not expected to add substantially to their employment totals or space requirements until confidence about economic and business prospects improves materially.

While expectations for a recovery in the U.S. economy appear favorable, the strength of the recovery will vary by region. The table below summarizes the top five markets in which the Account had exposure as of December 31, 2009. The top five markets (by market value) represent 41% of the Account’s total real

33

estate portfolio in terms of value and, despite elevated vacancy rates across the nation, the Account’s properties in each of these markets remained well leased, as indicated in the table below.

Metropolitan Statistical Area (MSA)

 

Percent Leased
Market Value
Weighted

 

# of Property
Investments

 

MSA as a
% of Total Real
Estate Portfolio

 

MSA as a
% of Total
Investments

Washington-Arlington-Alexandria DC-VA-MD-WV

  

94.7%

   

9

   

12.9%

   

11.7%

 

Boston-Quincy MA

  

90.8%

   

5

   

7.5%

   

6.8%

 

Houston-Bay Town-Sugar Land TX

  

93.5%

   

3

   

7.1%

   

6.4%

 

Los Angeles-Long Beach-Glendale CA

  

94.1%

   

8

   

6.9%

   

6.2%

 

San Francisco-San Mateo-Redwood City CA

  

94.1%

   

4

   

6.4%

   

5.8%

 

^* Weighted by market value, which differs from the calculations provided for market comparisons to CBRE-EA data and are used here to reflect the fair value of the Account’s monetary investments in those markets.

Office

Demand for office space is closely correlated with growth in office-using employment sectors such as finance and professional and business services. During the fourth quarter 2009, both sectors improved. Financial services shed just 8,000 jobs as compared with an average decline of over 100,000 per quarter during the first three quarters of 2009; professional and business services added 172,000 jobs over the fourth quarter of 2009. Much of the increase in professional and business services employment was attributable to hiring by temporary employment agencies, which often leads to permanent hiring. However, preliminary data from CBRE-EA suggest that businesses continue to exercise caution with respect to their space needs. According to CBRE-EA, the national office vacancy rate increased to 16.3% in the fourth quarter as compared to 16.1% during the third quarter of 2009. In comparison, 10.5% of the space in the Account’s office portfolio was not leased as of the fourth quarter of 2009. Per CBRE-EA, metro area vacancy rates increased in most of the Account’s top office markets during the fourth quarter of 2009; the only exception was Washington, DC where modest employment growth resulted in a dip in the overall vacancy rate to 14.1%. Additionally, the metro area vacancy rates in each of the Account’s top office markets were below the national average, except Seattle where vacancy was roughly in-line with the national average. The vacancy rate in the Seattle metro area rose steadily over the course of 2009 due to the delivery of over four million square feet of new office space. Despite a fourth quarter increase in vacancy at one of the Account’s Seattle properties, overall, the Account’s properties there have a combined average vacancy rate below 10%. The table below compares the average vacancy rate of properties in the Account’s top office markets with their respective metropolitan area averages.

      

Account Vacancy

 

Metropolitan
Statistical Area
Vacancy*

Sector

 

Metropolitan Statistical Area (MSA)

 

Total Sector
by MSA ($M)

 

% of Total
Investments

 

2009Q3

 

2009Q4

 

2009Q3

 

2009Q4

Office

 

National

     

10.3%

  

10.5%

  

16.1%

  

16.3%

 

1

 

Washington-Arlington-Alexandria DC-VA-MD-WV

$

994.7

  

10.3%

  

6.9%

  

6.9%

  

14.4%

  

14.1%

 

2

 

Boston-Quincy MA

$

630.0

  

6.5%

  

8.8%

  

9.6%

  

12.8%

  

13.1%

 

3

 

San Francisco-San Mateo-Redwood City CA

$

510.3

  

5.3%

  

6.1%

  

6.3%

  

13.9%

  

14.4%

 

4

 

Seattle-Bellevue-Everett WA

$

430.3

  

4.4%

  

7.2%

  

9.7%

  

16.2%

  

16.7%

 

5

 

Houston-Bay Town-Sugar Land TX

$

409.0

  

4.2%

  

5.0%

  

6.0%

  

15.3%

  

15.8%

 

^* Source: CBRE-EA. Vacancy is defined as the percentage of space vacant. The Account’s vacancy is defined as the weighted percentage of unleased space.

Industrial

Industrial market conditions weakened further in the fourth quarter of 2009 in spite of the rebound in GDP that began in the third quarter of 2009. GDP has historically been a reliable predictor of industrial

34

space demand as key components of GDP such as industrial production, international trade flows, inventory growth, and employment growth in manufacturing and wholesale trade all drive warehouse demand. However, the recovery in this sector has thus far been anemic and excess production and storage capacity have yet to be absorbed. According to CBRE-EA, industrial availability rates increased to an average of 13.9% during the fourth quarter of 2009, up from 13.5% in the third quarter of 2009. By comparison, the vacancy rate for the Account’s industrial portfolio is in line with the national average at 13.6%. On the whole, availability rates in most of the Account’s top industrial markets increased during the fourth quarter of 2009 per CBRE-EA. A dip in the availability rate in Riverside, CA, the Account’s top market, was an encouraging sign. Per CBRE-EA, availability rates in Los Angeles remained relatively stable and were, once again, the lowest in the nation. The vacancy rate in the Account’s Los Angeles industrial properties declined but remained above-average. While metro area availability rates in the Atlanta, Dallas, and Chicago markets were each above average, the Account’s properties in these markets were well-leased. The table below compares the average vacancy rate of properties in the Account’s top industrial markets to their respective metropolitan area averages.

      

Account Vacancy

 

Metropolitan
Statistical Area
Vacancy*

Sector

 

Metropolitan Statistical Area (MSA)

 

Total Sector
by MSA ($M)

 

% of Total
Investments

 

2009Q3

 

2009Q4

 

2009Q3

 

2009Q4

Industrial

 

National

     

11.5%

  

13.6%

  

13.5%

  

13.9%

 

1

 

Riverside-San Bernardino- Ontario CA

$

290.3

  

3.0%

  

21.1%

  

21.1%

  

16.0%

  

15.7%

 

2

 

Dallas-Plano-Irving TX

$

159.4

  

1.6%

  

4.8%

  

6.4%

  

15.7%

  

16.1%

 

3

 

Chicago-Naperville-Joliet IL

$

109.2

  

1.1%

  

0.9%

  

0.9%

  

14.2%

  

14.9%

 

4

 

Los Angeles-Long Beach- Glendale CA

$

94.7

  

1.0%

  

13.0%

  

11.5%

  

8.0%

  

8.1%

 

5

 

Atlanta-Sandy Springs- Marietta GA

$

91.7

  

1.0%

  

2.1%

  

3.0%

  

17.5%

  

17.8%

 

^* Source: CBRE—EA. Availability is defined as the percentage of space available for rent. The Account’s vacancy is defined as the weighted percentage of unleased space.

Multi-Family

Apartment vacancies held relatively stable over the course of 2009, ending the year at 7.4% nationally compared to 7.0% in fourth quarter 2008 (year-over-year comparisons in this sector better reflect the seasonality inherent in apartment leasing). Nonetheless, the apartment sector still faces significant headwinds due to high unemployment and a glut of single-family homes and condominiums offered for rent. While market conditions remain challenging, the Account’s apartment properties are well-leased, with an average vacancy rate of 4.5% as of the fourth quarter of 2009. The table below shows that the average vacancy rate for the Account’s properties in each of its top markets is below both the national average and the average for its respective metropolitan market. The only exception was Houston, where the vacancy rate of the Account’s properties rose during the quarter to meet the national average, but nonetheless remained below the Houston market average. Of particular note, leasing activity at the Account’s New York City property has been healthy despite significant job cuts by the banks and investment banks that dominate the city’s financial services sector. Leasing activity at the property was aided in part by rent reductions as landlords throughout Manhattan have reduced rents in order to attract and retain tenants.

35

      

Account Vacancy

 

Metropolitan
Statistical Area
Vacancy*

Sector

 

Metropolitan Statistical Area (MSA)

 

Total Sector
by Metro ($M)

 

% of Total
Investments

 

2009Q3

 

2009Q4

 

2009Q3

 

2009Q4

Apartment

 

National

     

3.9%

  

4.5%

  

7.4%

  

7.4%

 

1

 

Houston-Bay Town-Sugar Land TX

$

211.9

  

2.2%

  

4.4%

  

7.4%

  

9.9%

  

10.3%

 

2

 

Denver-Aurora CO

$

175.5

  

1.8%

  

2.8%

  

3.8%

  

6.9%

  

7.2%

 

3

 

Atlanta-Sandy Springs- Marietta GA

$

116.3

  

1.2%

  

2.8%

  

2.8%

  

11.0%

  

10.8%

 

4

 

New York-Wayne-White Plains NY-NJ

$

110.1

  

1.1%

  

1.9%

  

1.2%

  

6.5%

  

6.4%

 

5

 

Phoenix-Mesa-Scottsdale AZ

$

99.8

  

1.0%

  

5.0%

  

4.8%

  

11.5%

  

11.6%

 

^* Source: CBRE-EA. Vacancy is defined as the percentage of units vacant. The Account’s vacancy is defined as the weighted percentage of unleased space.

Retail

The retail sector began to show signs of improvement during the latter half of 2009. While shoppers remained cautious, holiday spending in 2009 improved compared to 2008. Though 2008 was an exceptionally weak year, retailers have seen sales either stabilize or start to grow modestly. Retailers have also adjusted to consumers’ emphasis on thrift and value by streamlining inventories and new orders in order to limit discounting. Per CBRE-EA, availability rates in neighborhood and community centers increased to an average of 12.5% in the fourth quarter of 2009 as compared to 12.3% in the third quarter. However, the fourth quarter’s increase was more moderate than in prior quarters and a growing number of markets experienced a decline in local availability rates. In comparison, the Account’s retail portfolio has a 14.7% “availability rate,” which includes vacant space that is leased but not occupied (some retailers have closed stores but continue to pay rent). Tenant demand for retail space is dependent upon a rebound in consumer spending; minimal gains are expected given household debt burdens, job concerns, and the low level of consumer confidence. Until sales pick up, retail markets are expected to struggle as retailers put expansion plans on hold and look to close underperforming stores.

2009 Summary and 2010 Outlook

Commercial real estate market conditions continued to deteriorate over the course of 2009. While most economists agree the recession ended during the second half of the year, there has been little, if any, improvement in commercial real estate market conditions since these lag overall economic trends. While vacancy rates for all property types increased over the course of the year, the rate of increase moderated from quarter to quarter.

As shown in the table below, construction in 2009 is well below that of prior cycles and, in addition, is expected to drop further in 2010. This falloff in construction, coupled with an eventual pickup in employment growth, could ultimately establish the conditions necessary for a substantial improvement in commercial real estate market conditions.

Historic and Projected Construction*

 

Average

 

Forecasted

 

1989-1991
Cycle

 

1999-2001
Cycle

 

2006-2008
Cycle

 

2009**

 

2010

Office

  

85

   

93

   

67

   

56

   

26

 

Industrial

  

183

   

255

   

183

   

74

   

54

 

Apartment

  

257

   

212

   

224

   

177

   

60

 

Retail

  

46

   

32

   

29

   

14

   

4

 

*	in millions of sq. ft. except apartments, which are in thousands of units.
**	2009 numbers are still forecasts

Source: CBRE-EA

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Management of the Account has tailored portfolio initiatives to reflect current market conditions. A primary objective has been to maintain occupancy levels, even if a reduction in rental rates (with shorter lease terms when possible) or additional concessions are required to retain tenants. As of the fourth quarter of 2009, the Account’s properties were 85% leased. The drive to maintain occupancies helped sustain the Account’s income return component. Income return has historically been a significant portion of the Account’s total return and since the first quarter of 2008 has offset a portion of the declines in property values, as shown in the graph below. For 2009, the Account’s income return was 7.4%. Notably, the Account’s property value declines moderated somewhat in the fourth quarter of 2009.

Another key objective in 2009 was to rebalance the portfolio’s property type concentrations and reallocate its exposure towards selected major markets. Six properties were sold during the fourth quarter of 2009 and a total of seven properties were sold for the year. In addition, six partial sales were completed in the fourth quarter. Properties targeted for sale were either located in non-target or underperforming markets with uncertain prospects for foreseeable recovery, or were sold to reallocate the Account’s property type concentrations. These sales generated cash proceeds which management believes will serve to enhance liquidity and which can be available to meet participant redemption requests, repay debt and/or make new acquisitions of properties management believes may be undervalued in the Account’s target markets. Management believes that there could be opportunities to acquire high quality properties at significant discounts in 2010 and 2011 as properties encumbered by maturing debts and deteriorating values are now over-levered and their owners and/or lenders are forced to sell their equity positions.

In the course of addressing its debt obligations in 2010, the Account may inevitably own some underperforming properties that are subject to debt, where insufficient cash flow from the property may cause such a property to be in noncompliance with certain covenants imposed by the terms of such debt, and/or where cash flow may be inadequate to make required payment on such debt or to repay principal when due (each of which could result in a default on the loan). In such a case, management will evaluate the options available to the Account, consistent with the Account’s long-term investment strategy.

Management believes that rebalancing the portfolio, an initiative which began in 2009 and will continue into 2010, will better position the Account to achieve stronger returns once economic and real estate market conditions improve. As the industry moves into the recovery phase, management’s intent is that the Account’s portfolio will consist of properties within markets that best align with the overall investment strategy. Similarly, management believes that the Account’s returns stand to benefit from the conservative “core” investment strategy that focuses on institutional quality properties, markets and locations, and particularly stabilized assets with strong historical occupancy and favorable lease expiration schedules.

Investments as of December 31, 2009

As of December 31, 2009, the Account had total net assets of $7.9 billion, a 6.1% decrease from the end of the third quarter of 2009 and a 31.5% decrease from December 31, 2008. The decrease in the Account’s net assets from December 31, 2008 to December 31, 2009 was primarily caused by the depreciation in value

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of the Account’s wholly-owned real estate properties and those owned in joint venture investments (approximately 86% of the decrease), while net participant transfers out of the Account (taking into account purchases by TIAA under the liquidity guarantee) accounted for approximately 14% of the decrease. The depreciation in value during 2009 was partially offset by net investment income of $500.5 million, which declined approximately 8.3% from $545.8 million during 2008.

As of December 31, 2009, the Account owned a total of 101 real estate property investments (89 of which were wholly-owned, 12 of which were held in joint ventures). The real estate portfolio included 40 office property investments (5 of which were held in joint ventures and one located in London, England), 25 industrial property investments (including one held in a joint venture), 20 multi-family property investments, 15 retail property investments (including five held in joint ventures and one located in Paris, France), and a 75% joint venture interest in a portfolio of storage facilities.

Of the 101 real estate property investments, 26 are subject to debt (including seven joint venture property investments). Total principal outstanding on the Account’s wholly-owned real estate portfolio as of December 31, 2009 was approximately $1.9 billion. The Account’s joint venture values shown in the Statement of Investments are presented net of debt, but, when that debt is also considered, total principal outstanding on the Account’s portfolio as of December 31, 2009 was $3.9 billion. As of December 31, 2009, the loan to value ratio of the Account is 33.1%. As of December 31, 2009, the Account has no outstanding debt on which the Account itself is an obligor.

Management believes that the Account’s real estate portfolio is diversified by location and property type. The Account’s largest investment, 1001 Pennsylvania Avenue located in Washington, DC, represented 5.49% of total real estate investments and 4.96% of total investments. As discussed in the Account’s prospectus, the Account does not intend to buy and sell its real estate investments simply to make short-term profits. Rather, the Account’s general strategy in selling real estate investments is to dispose of those assets that management believes (i) have maximized in value, (ii) have underperformed or face deteriorating property-specific or market conditions, (iii) need significant capital infusions in the future, (iv) are appropriate to dispose of in order to remain consistent with the Account’s intent to diversify the Account by property type and geographic location, (including reallocating the Account’s exposure to or away from certain property types in certain geographic locations), or (v) otherwise do not satisfy the investment objectives of the Account. The Account could reinvest any sale proceeds that it does not need to pay operating expenses or to meet debt service or redemption requests (e.g., cash withdrawals or transfers, and any redemption of TIAA’s liquidity units in the future).

During 2009 there were no property investment acquisitions.

The Account sold seven property investments and eight partial property investments for an aggregate net sales price (less selling expenses) of approximately $404.4 million. The properties sold recognized an aggregate realized loss of approximately $281.8 million. In connection with the properties sold, a $23.5 million mortgage was assumed by the buyer which recognized a realized loss of $371 thousand. The properties are listed below (amounts in thousands):

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Property Investments Sold in 2009

Property Name	Property Type	City	State	Net Sales Price (less selling expense)
The Market at Southpark	Retail	Littleton	CO		$	21,721
New Jersey CalEast Industrial Portfolio	Industrial	Monroe and Brunswick	NJ			24,770
4200 West Cypress	Office	Tampa	FL			21,898
Park Place on Turtle Creek	Office	Dallas	TX			23,347
Preston Sherry Plaza(1)	Office	Dallas	TX			7,577
Capitol Place	Office	Sacramento	CA			39,475
980 9th street & 1010 8th Street	Office	Sacramento	CA			96,053
San Montego Apartments (Phoenix Apartment Portfolio)(2)	Apartment	Phoenix	AZ			19,880
Miramar Townhomes (Houston Apartment Portfolio)(2)	Apartment	Houston	TX			8,792
San Melia Apartments (Phoenix Apartment Portfolio)(2)	Apartment	Chandler	AZ			47,597
San Brisas (Phoenix Apartment Portfolio)(2)	Apartment	Phoenix	AZ			18,991
Paragon (Kierland Apartment Portfolio)(2)	Apartment	Phoenix	AZ			34,185
El Mundo (Houston Apartment Portfolio)(2)	Apartment	Houston	TX			11,102
Plaza Del Oro Townhomes (Houston Apartment Portfolio)(2)	Apartment	Houston	TX			7,937
San Marin Garden Homes (Houston Apartment Portfolio)(2)	Apartment	Houston	TX			21,038
Total					$	404,363

(1)	Net of $23.5 million of debt assumed by buyer on sale of investment
(2)	Partial sales of apartment portfolios which were part of existing portfolios

The following charts reflect the diversification of the Account’s real estate assets by region and property type and list its ten largest investments by gross market value. All information is based on the fair values of the investments at December 31, 2009.

Diversification by Fair Value⁽¹⁾

	East			West			South			Midwest			Foreign(2)			Total
Office		23.5	%		17.3	%		12.3	%		1.2	%		2.7	%		57.0	%
Apartment		2.4	%		5.5	%		5.3	%		0.0	%		0.0	%		13.2	%
Industrial		1.4	%		6.4	%		4.2	%		1.4	%		0.0	%		13.4	%
Retail		3.4	%		0.9	%		8.7	%		0.4	%		2.3	%		15.7	%
Storage Facilities		0.2	%		0.2	%		0.2	%		0.1	%		0.0	%		0.7	%
Total		30.9	%		30.3	%		30.7	%		3.1	%		5.0	%		100.0	%

(1)	Fair values for wholly-owned properties are reflected gross of any debt, whereas fair values for joint venture investments are reflected net of any debt.
(2)	Represents real estate investments in the United Kingdom and France.

Properties in the “East” region are located in: CT, DC, DE, KY, MA, MD, ME, NC, NH, NJ, NY, PA, RI, SC, VA, VT, WV

Properties in the “West” region are located in: AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY

Properties in the “South” region are located in: AL, AR, FL, GA, LA, MS, OK, TN, TX

Properties in the “Midwest” region are located in: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI

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Top Ten Largest Real Estate Investments

Property or Joint Venture Name	City	State	Type	Value ($M)(a)			Property as a % of Total Real Estate Portfolio(b)		Property as a % of Total Investments
1001 Pennsylvania Avenue	Washington	DC	Office		480.6(c	)		5.49		4.96
Four Oaks Place	Houston	TX	Office		409.0(d	)		4.67		4.22
DDR Joint Venture	Various	USA	Retail		312.2(e	)		3.57		3.22
Fourth and Madison	Seattle	WA	Office		295.0(f	)		3.37		3.04
50 Fremont	San Francisco	CA	Office		284.3(g	)		3.25		2.93
99 High Street	Boston	MA	Office		253.6(h	)		2.90		2.62
The Florida Mall	Orlando	FL	Retail		252.4(i	)		2.88		2.60
780 Third Avenue	New York City	NY	Office		240.1			2.74		2.48
Westferry Circus	London	UK	Office		239.0(j	)		2.73		2.47
The Newbry	Boston	MA	Office		230.4			2.63		2.38

(a)	Value as reported in the December, 31, 2009 Statement of Investments. Investments owned 100% by the Account are reported based on fair value. Investments in joint ventures are reported at fair value and are presented at the Account’s ownership interest.
(b)	Total Real Estate Portfolio excludes the mortgage loan receivable.
(c)	This property investment is presented gross of debt. The value of the Account’s interest less the fair value of leverage is $267.1M.
(d)	This property investment is presented gross of debt. The value of the Account’s interest less the fair value of leverage is $228.1M.
(e)	This property investment is an 85%/15% joint venture with Developers Diversified Realty Corporation (DDR), and consists of 65 retail properties located in 13 states and is presented net of debt of $1.3 billion.
(f)	This property investment is presented gross of debt. The value of the Account’s interest less the fair value of leverage is $148.3M.
(g)	This property investment is presented gross of debt. The value of the Account’s interest less the fair value of leverage is $147.0M.
(h)	This property investment is presented gross of debt. The value of the Account’s interest less the fair value of leverage is $68.7M.
(i)	This property investment is a 50%/50% joint venture with Simon Property Group, L.P., and is presented net of debt of $122.4M.
(j)	This property investment is presented gross of debt. The value of the Account’s interest less the fair value of leverage is $41.0M.

As of December 31, 2009, the Account’s net assets totaled $7.9 billion. At December 31, 2009, the Account held a total of 101 real estate property investments (including its interests in 12 real estate-related joint ventures). As of that date, the Account also held investments in a mortgage loan receivable representing 0.73% of total investments, real estate limited partnerships, representing 2.07% of Total Investments, U.S. Treasury Bills representing 2.13% of total investments, and government agency notes representing 4.80% of total investments.

40

Results of Operations

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Performance

The Account’s total return was -27.64% for the year ended December 31, 2009 as compared to -14.15% for the year ended 2008. The Account’s performance during the year ended December 31, 2009 reflects a decline in the aggregate net asset value of the Account’s real estate property investments, including investments owned in joint ventures and limited partnerships, lower income from marketable securities and unrealized losses from the mortgage loans payable. The twelve months of 2009 saw continued valuation declines resulting from the weakened economy and tightened financial and credit markets. Transaction activity continued to remain at historically low levels and capital depreciation occurred in most markets.

The Account’s annualized total returns (after expenses) over the past one, three, five, and ten year periods ended December 31, 2009 were -27.64%, -10.92%, -1.67% and 3.07% respectively. As of December 31, 2009, the Account’s annualized total return since inception was 4.65%.

The Account’s total net assets decreased from $11.5 billion at December 31, 2008 to $7.9 billion at December 31, 2009. The primary driver of this 31.5% decrease was depreciation in value of the Account’s wholly owned, joint venture, and limited partnership real estate investments (approximately 86% of the decrease), while net participant withdrawals and transfers out of the Account (net of the $1.1 billion of Liquidity Units purchased by TIAA) accounted for approximately 14% of the decrease.

Income and Expenses

The Account’s real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 99.7% and 88.3% of the Account’s total investment income (before deducting Account level expenses) during the years ended December 31, 2009 and 2008, respectively. The 14.7% decrease in the Account’s total investment income was primarily due to a 97.9% decrease in the Account’s dividend income and interest income and a 4.2% decrease in net real estate income.

Gross real estate rental income decreased by approximately $31.0 million or 3.2% for the year ended December 31, 2009, as compared to the same period in 2008. Approximately $19.2 million of the decrease is primarily due to the property investment sales that occurred during 2008 and 2009. In addition to the reduction in rental income due to property investment sales, the Account also experienced a decrease in revenue due to various property specific items such as rent concessions, lower rents, increased vacancies at certain properties and reductions in common charges for many properties as a result of lower overall property operating expenses.

Total real estate property level expenses and taxes for wholly-owned property investments for the year ended December 31, 2009 decreased to $468.7 million as compared to $478.9 million for the year ended December 31, 2008. The overall decline in expenses was primarily due to a 7.2% decrease in operating expenses, a 3.2% decrease in real estate taxes offset by a 14.3% increase in interest expense. Operating expenses decreased during 2009 primarily due to an overall reduction in repairs and maintenance, utility expense, insurance expense, bad debt expense, and various other miscellaneous operating expenses. In addition to the reduction of general expenses, the property investment sales during 2008 and 2009 eliminated some operating expense. Real estate taxes decreased due to lower tax assessments and reduced number of properties under management. The increase in interest expense is due to $557 million of new debt financing that was obtained during the third and fourth quarters of 2008.

Income from real estate joint ventures and limited partnerships was $114.6 million for the year ended December 31, 2009, as compared to $116.9 million for the year ended December 31, 2008. This 2.0% decrease was due to a decrease in gross rental income from joint venture properties as a result of increased vacancies and select rent reductions. More specifically, the DDR Joint Venture experienced an increase in vacancies in late 2008 which resulted in lower income in 2009.

Investment income on the Account’s investments in marketable securities decreased by 97.9%, from $81.5 million for the year ended December 31, 2008 to $1.7 million for the comparable period in 2009. The variance was due to the decrease in the rates of return on the marketable securities as well as a lower marketable security invested balance for 2009 compared to the year ended December 31, 2008.

41

The Account incurred overall Account level expenses of $95.5 million for the year ended December 31, 2009, which represents a 37.6% decrease from $153.0 million for the same period in 2008. The decreases in investment advisory and administrative and distribution charges are due to two factors. First, during the first quarter of 2008, increased costs were allocated to the Account associated with new technology investments in 2008 that have been reduced significantly during the year ended December 31, 2009. Finally, the general decline in the costs allocated to manage and distribute the Account is consistent with the reduction in the average net assets of the Account. In the future, investment advisory charges were not expected to decline at the same rate as net assets as certain portions of these costs are not directly associated to the net asset value of the Account. Mortality and expense risk charges and liquidity guarantee expenses declined during the year ended December 31, 2009 primarily due to lower net assets as compared to the same period in 2008. The decline of the liquidity guarantee expenses resulting from the decline in net assets was partially offset by the increase in the fees that TIAA charges to provide the liquidity guarantee from 10 basis points to 15 basis points which was effective as of May 1, 2009.

Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable

The Account had net realized and unrealized losses on investments and mortgage loans payable of $3.6 billion for the year ended December 31, 2009, a $1.1 billion increase when compared to a net realized and unrealized loss of $2.5 billion for the year ended December 31, 2008. The increase in net realized and unrealized losses on investments and mortgage loans payable was primarily driven by net realized and unrealized losses on the Account’s wholly-owned real estate property investments of $2.5 billion for the year ended December 31, 2009 compared to a loss of $1.9 billion during the same period in 2008. The Account’s interests in joint ventures and limited partnerships posted a net realized and unrealized loss of $909.3 million and $120.9 million, respectively, for a net total of over $1.0 billion for the year ended December 31, 2009. When compared to the year ended December 31, 2008, joint ventures and limited partnerships posted a net realized and unrealized loss of $652.4 million and $50.4 million, respectively, for a net total of $702.8 million.

The net realized and unrealized losses on wholly-owned real estate property investments and those held in joint ventures and limited partnerships were due to the decline in value of the Account’s existing real estate assets, which reflected the net effects of a weaker overall economy, a decline in value of the underlying property investments within the joint ventures and limited partnership funds and continued shortage of liquidity in the commercial real estate markets during the year ended December 31, 2009. Real estate market values have declined throughout 2009 primarily due to increasing actual and projected vacancy rates resulting in longer tenant replacement timeframes, lower market rents, and higher capitalization rates.

Mortgage loans payable experienced a net realized and unrealized loss of approximately $55.1 million during the year ended December 31, 2009 compared to a net realized and unrealized gain of $109.8 million in the same period in 2008. Valuation adjustments associated with mortgage loans payable are highly dependent upon interest rates, spreads, investment return demands, the performance of the underlying real estate investment, and where applicable, foreign exchange. Of the $55.1 million realized and unrealized loss, foreign exchange fluctuations (due to a weakening U.S. dollar during the year ended 2009) accounted for approximately $23.8 million of the total year-to-date loss. The remaining $30.9 million loss related to mortgage payable values is reflected in the fluctuations in the U.S. treasury rates and higher loan to value ratios on the Account’s underlying properties (as a result of the significant declines in property values) and a $0.4 million realized loss due to the debt that was assumed in connection with the sale of a property investment.

During the year ended December 31, 2009, the Account also sold one retail property investment, one industrial property investment, five office property investments and eight partial apartment property investments for net proceeds of approximately $394.8 million and realized a loss of $281.8 million.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Performance

The Account’s total return was -14.2% for the year ended December 31, 2008. This was a significant decline compared to the positive return of 13.8% for the year ended December 31, 2007. The Account’s performance during the year ended December 31, 2008 reflects a decline in the aggregate net asset value of the Account’s real estate property investments, including investments owned in joint ventures and limited partnerships, as well as lower income from marketable securities.

42

After several years of increasing investor demand for commercial real estate and historic capital appreciation, the weakened economy and faltering financial and credit markets have brought transaction activity to historically low levels, bringing a halt to capital appreciation in many markets. The number of individual property investments with valuation decreases has increased significantly as evidenced by the Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable. Management believes that real estate is an investment that should be considered from a long term perspective. The Account’s annualized total returns (after expenses) over the past one, three, five, and 10-year periods ended December 31, 2008 were -14.15%, 3.67%, 7.41%, and 7.29%, respectively. As of December 31, 2008, the Account’s annualized total return since inception was 7.60%.

The Account’s total net assets decreased from $17.7 billion at December 31, 2007 to $11.5 billion at December 31, 2008. The primary drivers of this 34.8% decrease were the net participant transfers out of the Account ($4.6 billion) and depreciation in value of the Account’s wholly owned, joint venture, and limited partnership real estate investments ($2.5 billion annualized depreciation on investments and mortgage loans payable).

Income and Expenses

The Account’s net investment income, after deduction of all expenses, was 12.6% lower for the year ended December 31, 2008, as compared to the same period in 2007.

The Account’s real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 88.3% and 81.5% of the Account’s total investment income (before deducting Account level expenses) during the years ended December 31, 2008 and 2007, respectively. The 12.6% decrease in the Account’s total investment income was due to a 59.2% decrease in the Account’s dividend income and a 41.0% decrease in interest income generated from fewer investments in marketable securities, including real estate equity securities, commercial paper, government notes, and an investment in a commercial mortgage loan receivable.

Gross real estate rental income decreased approximately 0.8% for the year ended December 31, 2008, as compared to the same period in 2007. This decrease is primarily due to a decrease in the number of wholly-owned real estate investment property investments held by the Account. The number of wholly- owned properties decreased from 99 as of December 31, 2007 to 96 as of December 31, 2008.

Total real estate property level expenses and taxes for wholly-owned property investments for the year ended December 31, 2008 increased to $478.9 million as compared to $458.0 million for the year ended December 31, 2007. The overall change in expenses was primarily due to a 4.0% increase in operating expenses, a 4.8% increase in real estate taxes and a 5.9% increase in interest expense. Operating expenses increased during 2008 primarily due to increased bad debts and insurance costs. Real estate taxes increased due to higher tax assessments in 2008 as compared to 2007. The increase in interest expense is due to $557 million of new debt financing that was obtained during the third and fourth quarters of 2008.

Income from real estate joint ventures and limited partnerships was $116.9 million for the year ended December 31, 2008, as compared to $93.7 million for the year ended December 31, 2007. This 24.7% increase was due to an increase in gross rental income from properties owned in joint ventures, which increased substantially with the acquisition of the joint venture interest in the DDR Retail Portfolio in the first quarter of 2007, but was somewhat offset by a decrease in income from the disposition of the 161 North Clark joint venture during 2007.

Investment income on the Account’s investments in marketable securities decreased by 42.6%, from $141.9 million for the year ended December 31, 2007 to $81.5 million for the comparable period in 2008. The variance was due to the decrease of the Account’s investments in marketable securities from $3.8 billion as of December 31, 2007 to $0.5 billion as of December 31, 2008, coupled with a decrease in the rates of return on the marketable securities.

The Account incurred overall Account level expenses of $153.0 million for the year ended December 31, 2008, which represents a 9.1% increase from $140.3 million for the same period in 2007. The increase is primarily due to an increase in actual administrative and distribution expenses associated with managing and distributing the Account. Total administrative and distribution expenses increased to $77.6 million for the year ended December 31, 2008, as compared to $63.6 million for the year ended December 31, 2007. This increase in expenses primarily resulted from larger allocated operational expenses including costs associated

43

with new technology investments. The increase in overall expenses (due primarily to increased administrative and distribution expenses) was somewhat offset by a $1.6 million decrease in investment advisory charges. This decline was due to a decrease of overall costs that are allocated to the Account.

Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable

The Account had net realized and unrealized losses on investments and mortgage loans payable of $2.5 billion for the year ended December 31, 2008, a 274.7% decrease compared to a net realized and unrealized gain of $1.4 billion for the year ended December 31, 2007. The overall variance was driven by two factors. First, the decrease in net realized and unrealized gains and losses on investments and mortgage loans payable was primarily driven by a net realized and unrealized loss on the Account’s wholly-owned real estate property investments of $1.9 billion for the year ended December 31, 2008 compared to a gain of $1.0 billion during the same period in 2007. Second, the Account’s interests in joint ventures and limited partnerships posted a net realized and unrealized loss of $702.8 million for the year ended December 31, 2008 as compared to a substantial net realized and unrealized gain of $462.1 million for the year ended December 31, 2007. The variance in the net realized and unrealized gains and losses on wholly-owned real estate property investments and those held in joint ventures was due to the decline in value of the Account’s existing real estate assets, which reflected the net effects of a weaker overall economy and continued shortage of liquidity in the commercial real estate markets during 2008. Approximately $1.9 billion or 76% of the 2008 net realized and unrealized loss on investments and mortgage loans payable occurred in the fourth quarter of 2008. This significant increase in the net realized and unrealized loss, in comparison to the 2007 net realized and unrealized gain, was the direct result of increases in rates which are used in appraisal valuations (discount rates, overall and implied capitalization rates and terminal rates) which are key components of the determination of the investments fair value. In general, weighted average appraisal rates increased between 65 and 89 basis points in 2008 when compared to 2007. This increase in weighted average appraisal rates was one of the key drivers causing the increase of net realized and unrealized loss in 2008. Additional factors causing the increase in the net realized and unrealized net loss in 2008 include decrease in rental growth estimates, decrease in rental rates, tenant bankruptcies and decreases in occupancy. During 2008, the Account’s property fundamentals such as occupancy and overall property net operating income remained stable when compared to 2007.

The Account also posted a net realized and unrealized gain on its marketable securities of $4.8 million for the year ended December 31, 2008, as compared to a net realized and unrealized loss of $101.5 million in the same period of 2007. The net gains on the Account’s marketable securities for the year ended December 31, 2008 were primarily due to the reversal of the unrealized loss as a result of the sale of the Account’s investments in publicly-traded marketable real estate equity securities (REIT stocks) in June 2008. The sale of these securities was executed over several days for total proceeds of $477.4 million, and the Account realized a loss of $11.2 million. The disposition of these REIT stocks was a decision by the Account’s management to reduce risk within its marketable securities investment portfolio. As circumstances warrant and in continued furtherance of its investment objective and strategy, the Account may invest in REIT stocks in the future. The losses in the Account’s marketable securities during the year ended December 31, 2007 were primarily due to unrealized losses due to the Account’s investments in REIT stocks. The U.S. REIT market struggled through a volatile 2007 and ended the year down by more than 17%.

The Account had unrealized gains on its mortgage loans payable in the amount of $109.8 million and unrealized losses on its mortgage loan receivable of approximately $0.8 million for the year ended December 31, 2008, as compared to net unrealized gains of $53.9 million and an unrealized loss of $2.1 million, respectively, for the same period in 2007. The net unrealized gain or loss on mortgage loans payable and mortgage loans receivable for the period reflected the fluctuations in the U.S. Treasury rates and commercial real estate mortgage loan spreads during the year ended December 31, 2008, which are used as a basis to value the commercial mortgage loans on the wholly-owned real estate property investments. For a mortgage loan payable, a negative fair value adjustment decreases the value of the payable and therefore results in an unrealized gain to the Account. Conversely, for a mortgage loan receivable, a negative fair value adjustment decreases the value of the receivable and results in an unrealized loss.

During 2008, the Account sold one apartment property investment, one office portfolio investment, two industrial property investments and one partial industrial portfolio investment for total net proceeds of $91.4 million and recognized a net loss of $18.4 million.

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Liquidity and Capital Resources

As of December 31, 2009 and 2008, the Account’s liquid assets (i.e., cash, marketable securities, and receivables for short-term securities sold) had a value of $696.1 million and $533.8 million, respectively (approximately 7.2% and 4.0% of the Account’s total investments at such dates, respectively). When compared to December 31, 2008, the Account’s liquid assets have increased by approximately $162.3 million, primarily as a result of proceeds from selective asset sales, many of which occurred in the fourth quarter of 2009.

During the year ended December 31, 2009, the Account received $703.5 million in premiums, had an outflow of $1.9 billion in net participant transfers to TIAA, the CREF accounts, and TIAA-CREF affiliated mutual funds (excluding the aggregate $1.1 billion of purchases of Liquidity Units by TIAA), and $365.3 million of annuity and other periodic payments, withdrawals, and death benefits. During the year ended December 31, 2008, the Account received $1.0 billion in premiums, had an outflow of $4.6 billion in net participant transfers to TIAA, the CREF accounts, and TIAA-CREF affiliated mutual funds (excluding the aggregate $155.6 million of purchases of Liquidity Units by TIAA), and $707.9 million of annuity and other periodic payments, withdrawals, and death benefits.

During the three months ended December 31, 2009, the Account received $168.7 million in premiums and had an outflow of $181.0 million in net participant transfers to TIAA, the CREF accounts, and TIAA-CREF affiliated mutual funds. In comparison, the Account received $215.2 million in premiums and had an outflow of $2.1 billion in net participant transfers to TIAA, the CREF accounts, and TIAA-CREF affiliated mutual funds during the three months ended December 31, 2008.

Primarily as a result of significant net participant transfers out of the Account, on December 24, 2008, pursuant to TIAA’s existing liquidity guarantee obligation, the TIAA general account purchased $155.6 million of Liquidity Units issued by the Account. Subsequent to December 24, 2008 and through June 1, 2009, the TIAA general account purchased an additional $1.059 billion in the aggregate of Liquidity Units in a number of separate transactions. During the period June 2, 2009 through March 18, 2010, the TIAA general account did not purchase any additional Liquidity Units. As disclosed under “Establishing and Managing the Account—the Role of TIAA—Liquidity Guarantee” in the Account’s prospectus, in accordance with this liquidity guarantee obligation, TIAA guarantees that all participants in the Account may redeem their accumulation units at their accumulation unit value next determined after their transfer or cash withdrawal request is received in good order. While net redemption activity has significantly slowed since the first quarter of 2009, management cannot predict the extent to which future TIAA Liquidity Unit purchases, if any, will be required under this liquidity guarantee, nor can management predict when such Liquidity Units will be redeemed by the Account in part, or in full. Management believes that TIAA has the ability to meet its obligations under this liquidity guarantee.

TIAA’s obligation to provide Account participants liquidity through purchases of Liquidity Units is not subject to an express regulatory or contractual limitation, although as described in the paragraph below, the independent fiduciary may (but is not obligated to) require the reduction of TIAA’s interest through sales of assets from the Account if TIAA’s interest exceeds the trigger point. Even if the independent fiduciary so requires, TIAA’s obligation to provide liquidity under the guarantee, which is required by the New York State Insurance Department, will continue.

Whenever TIAA owns Liquidity Units, the duties of the Account’s independent fiduciary, as part of its monitoring of the Account, include reviewing the purchase and redemption of Liquidity Units by TIAA to ensure the Account uses the correct accumulation unit values. In addition, the independent fiduciary’s responsibilities include:

• establishing the percentage of total accumulation units that TIAA’s ownership should not exceed (the “trigger point”) and creating a method for reviewing the trigger point;

• approving any adjustment of TIAA’s ownership interest in the Account and, in its discretion, requiring an adjustment if TIAA’s ownership of Liquidity Units reaches the trigger point; and

• once the trigger point has been reached, participating in any program to reduce TIAA’s ownership in the Account by utilizing cash flow or liquid investments in the Account, or by utilizing the proceeds from asset sales. If the independent fiduciary were to determine that TIAA’s ownership should be reduced following the trigger point, its role in participating in any asset sales program would include (i) participating in the selection of properties for sale, (ii) providing sales guidelines and (iii) approving

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those sales if, in the independent fiduciary’s opinion, such sales are desirable to reduce TIAA’s ownership of Liquidity Units.

As of the date of this annual report, the independent fiduciary, which has the right to adjust the trigger point, has established the trigger point at 45% of the outstanding accumulation units and it will continue to monitor TIAA’s ownership interest in the Account and provide further recommendations as necessary. As of December 31, 2009, TIAA owned approximately 12.0% of the outstanding accumulation units of the Account. In establishing the appropriate trigger point, including whether or not to require certain actions once the trigger point has been reached, the independent fiduciary will assess, among other things and to the extent consistent with the Prohibited Transaction Exemption (PTE 96-76) issued by the U.S. Department of Labor in 1996 with respect to the liquidity guarantee and the independent fiduciary’s duties under ERISA, the risk that a conflict of interest could arise due to the level of TIAA’s ownership interest in the Account.

Management continues to believe that the net negative outflow experienced during 2008 and most of 2009 may be a reflection of participant concerns with the downturn in the U.S. and global economy, the turmoil in the capital and credit markets, and their current and potential future net effect on commercial real estate in particular. While net outflow activity has decreased significantly over the past six months, management cannot predict whether the net outflows will continue at an increasingly higher rate, or at all in the future. If net outflows were to continue at the same or at a higher rate, it could have a negative impact on the Account’s operations and returns. Additionally, continued net outflow activity could require TIAA to purchase additional Liquidity Units, perhaps to a significant degree.

While the independent fiduciary is vested with oversight and approval over any redemption of TIAA’s liquidity units, it is expected that, unless the trigger point has been reached, redemptions would only occur: (i) once the Account has experienced net participant inflows for an extended period of time and (ii) if the Account is otherwise projected to maintain a level of liquid assets, taking into account any pending cash needs (including for debt service and outstanding principal balances at maturity), at or close to its long-term investment goal (currently at least 15% of the Account’s assets). The independent fiduciary may, however, authorize or direct the redemption of TIAA’s liquidity units (or a portion thereof) at any time and TIAA will request the approval of the independent fiduciary before liquidity units are redeemed. Upon termination and liquidation of the Account (wind-up), any liquidity units held by TIAA will be the last units redeemed, unless the independent fiduciary directs otherwise.

The Account’s net investment income continues to be an additional source of liquidity for the Account even though it has decreased from $545.8 million for the year ended December 31, 2008 to $500.5 million for the year ended December 31, 2009.

While the Account’s liquid investments have dropped below 15% of its total investments during this recent period of significant net participant outflows, the Account’s investment strategy remains to invest between 75% and 85% of its assets directly in real estate or real estate-related investments with the goal of producing favorable long-term returns primarily through rental income and appreciation. In the near term, the Account’s cash and marketable securities will likely comprise less than 10% of the Account’s investments, but management intends to increase the Account’s holdings in cash and short-term marketable securities to the extent practicable, consistent with its investment strategy and objective. As of December 31, 2009, cash and short-term marketable securities comprised approximately 7.2% of the Account’s investments.

The Account’s liquid assets continue to be available to purchase additional suitable real estate properties and to meet the Account’s debt obligations, expense needs, and participant redemption requests (i.e., cash withdrawals, benefit payments, or transfers). The Account has approximately $704.3 million in principal amount of debt obligations due during 2010 related to wholly-owned real estate investments and the Account’s share of debt associated with its investments in joint ventures.

Management believes that the Account, and the joint venture entities in which the Account invests, will have the ability to address these obligations in a number of ways, including among others, refinancing or extending such debt or repaying the principal due at maturity.

Leverage

The Account may borrow money and assume or obtain a mortgage on a property (i.e., to make leveraged real estate investments). Also, to meet any short-term cash needs, the Account may obtain a line of

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credit that may be unsecured and/or contain terms that may require the Account to secure the loan with one or more of its properties.

The Account is authorized to borrow money in accordance with its investment guidelines. Under the Account’s current investment guidelines, which were modified as to borrowing in mid-2009, the Account’s loan to value ratio (as defined below) is to be maintained at or below 30%. However, until December 31, 2011, the Account is authorized to incur and/or maintain indebtedness on its properties in an aggregate principal amount not to exceed the aggregate principal amount of debt outstanding as of the date of adoption of such guidelines (approximately $4.0 billion). Such incurrences of debt from time to time may include:

•

  

placing new debt on properties;

•

  

refinancing outstanding debt;

•

  

assuming debt on acquired properties or interests in the Account’s properties; and/or

•

  

extending the maturity date of outstanding debt.

In calculating this limit, only the Account’s actual percentage interest in any borrowings is included, and not that percentage interest held by 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. As of December 31, 2009 the Account did not have any construction loans. Also, at the time the Account (or a joint venture in which the Account is a partner) enters into a revolving line of credit, management deems the maximum amount which may be drawn under that line of credit as fully incurred, regardless of whether the maximum amount available has been drawn from time to time.

In addition, by December 31, 2011, management intends to reduce the Account’s ratio of outstanding principal amount of debt to total gross asset value (i.e., a “loan to value ratio”) to 30% or less and thereafter intends to maintain its loan to value ratio at or below 30% (measured at the time of incurrence and after giving effect thereto).

As of December 31, 2009, the Account’s loan to value ratio was approximately 33.1%.

Recent Transactions

The following describes property transactions by the Account in the fourth quarter of 2009. Except as noted, the expenses for operating the properties purchased are either borne or reimbursed, in whole or in part, by the property tenants, although the terms vary under each lease. The Account is responsible for operating expenses not reimbursed under the terms of a lease. All rental rates are quoted on an annual basis unless otherwise noted.

Purchases

None.

Sales

New Jersey CalEast Industrial Portfolio

On October 1, 2009, the Account sold an industrial investment portfolio in Monroe and Brunswick, New Jersey for a sales price of approximately $25.5 million and realized a loss of approximately $17.1 million. The Account purchased the property investment on December 22, 2003. The original investment in this portfolio was $39.9 million and costs to date were $42.6 million.

San Melia Apartments (Phoenix Apartment Portfolio)

On October 30, 2009, the Account completed a partial sale of the Phoenix apartment investment portfolio in Chandler, Arizona for a sales price of approximately $47.8 million and realized a loss of approximately $35.8 million. The Account purchased the property investment on June 23, 2006. The original investment in this apartment property was $82.5 million and costs to date were $83.7 million.

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San Brisas (Phoenix Apartment Portfolio)

On November 5, 2009, the Account completed a partial sale of the Phoenix apartment investment portfolio in Phoenix, Arizona for a sales price of approximately $19.0 million and realized a loss of approximately $11.4 million. The Account purchased the property investment on June 23, 2006. The original investment in this apartment property was $29.9 million and costs to date were $30.4 million.

Paragon (Kierland Apartment Portfolio)

On November 5, 2009, the Account completed a partial sale of the Kierland apartment investment portfolio in Phoenix, Arizona for a sales price of approximately $34.2 million and realized a loss of approximately $30.2 million. The Account purchased the property investment on June 23, 2006. The original investment in this apartment property was $63.9 million and costs to date were $64.4 million.

4200 West Cypress

On November 16, 2009, the Account sold an office property investment in Tampa, Florida for a sales price of approximately $22.3 million and realized a loss of approximately $13.3 million. The Account purchased the property investment on December 29, 2003. The original investment in this property was $32.9 million and costs to date were $35.6 million.

El Mundo (Houston Apartment Portfolio)

On November 24, 2009, the Account completed a partial sale of the Houston apartment investment portfolio in Houston, Texas for a sales price of approximately $11.2 million and realized a loss of approximately $8.1 million. The Account purchased the property investment on June 23, 2006. The original investment in this apartment property was $18.1 million and costs to date were $19.4 million.

Plaza Del Oro Townhomes (Houston Apartment Portfolio)

On November 24, 2009, the Account completed a partial sale of an apartment investment portfolio in Houston, Texas for a sales price of approximately $8.0 million and realized a loss of approximately $5.1 million. The Account purchased the property investment on June 23, 2006. The original investment in this apartment property was $12.6 million and costs to date were $13.1 million.

San Marin Garden Homes (Houston Apartment Portfolio)

On November 24, 2009, the Account completed a partial sale of an apartment investment portfolio in Houston, Texas for a sales price of approximately $21.3 million and realized a loss of approximately $12.2 million. The Account purchased the property investment on June 23, 2006. The original investment in this apartment property was $32.0 million and costs to date were $33.4 million.

Park Place on Turtle Creek

On December 16, 2009, the Account sold an office property investment in Dallas, Texas for a sales price of approximately $23.7 million and realized a loss of approximately $23.0 million. The Account purchased the property investment on June 29, 2006. The original investment in this office property was $44.4 million and costs to date were $46.7 million.

Preston Sherry Plaza

On December 16, 2009, the Account sold an office property investment in Dallas, Texas for a sales price of approximately $31.5 million and realized a loss of approximately $15.8 million. The Account purchased the property investment and assumed its debt of $23.5 million on June 1, 2007. The original investment in this office property was $21.6 million and costs to date (net of debt) were $23.8 million. The debt was assumed by the purchaser of this property at the time of sale.

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Capitol Place

On December 17, 2009, the Account sold an office property investment in Sacramento, California for a sales price of approximately $40.0 million and realized a loss of approximately $3.9 million. The Account purchased the property investment on August 28, 2003. The original investment in this office property was $38.8 million and costs to date were $43.9 million.

980 9th Street & 1010 8th Street

On December 18, 2009, the Account sold an office property investment in Sacramento, California for a sales price of approximately $97.0 million and realized a loss of approximately $76.5 million. The Account purchased the property investment on July 18, 2005. The original investment in this office property was $159.5 million and costs to date were $173.5 million.

Financings

None.

Contractual Obligations

The following table sets forth a summary regarding the Account’s known contractual obligations, including required interest payments for those items that are interest bearing, at December 31, 2009 (amounts in thousands):

	Amounts Due During Years Ending December 31,
	2010			2011			2012			2013			2014			Thereafter			Total
Mortgage Loans Payable:
Principal Payments		$	330,842		$	13,067		$	221,840		$	552,853		$	225,273		$	563,215		$	1,907,090
Interest Payments(1)			98,694			91,863			91,423			78,312			40,338			52,718			453,348
Total Mortgage Loans Payable			429,536			104,930			313,263			631,165			265,611			615,933			2,360,438
Joint Venture Funding Commitments			1,313			—			—			—			—			—			1,313
Other Commitments(2)			44,317			—			—			—			—			—			44,317
Tenant improvements(3)			44,869																		44,869
Total Contractual Obligations		$	520,035		$	104,930		$	313,263		$	631,165		$	265,611		$	615,933		$	2,450,937

(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, 2009.
(2)	This includes the Account’s commitment to purchase interests in four limited partnerships, which could be called by the partner at any time.
(3)	This amount represents tenant improvements committed to by the Account in tenant leases that have not been incurred as of the year ended December 31, 2009.

Note that the Contractual Obligations table above does not include payments on debt held in Investments in Joint Ventures which are the obligation of the individual joint venture entities. See Note 7 to the Account’s Financial Statements—Investments in Joint Ventures and Limited Partnerships.

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. Any such 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.

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In preparing the Account’s financial statements, management is required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Accounting for Investments at Fair Value

The Financial Accounting Standards Board (“FASB”) has provided authoritative guidance for fair value measurements and disclosures. Additionally, the guidance defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and requires certain disclosures about fair value measurements. This guidance indicates, among other things, that a fair value measurement under an exit price model assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.

This guidance also permits entities to elect to measure financial instruments and certain financial assets and liabilities at fair value and expanded the use of fair value measurements when warranted. The Account reports all investments and mortgage loans payable at fair value.

Valuation Hierarchy

The Account groups financial assets and certain financial liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, if any, and the observability of the assumptions used to determine fair value. These levels are:

Level 1—Valuations using unadjusted quoted prices for assets traded in active markets, such as stocks listed on the New York Stock Exchange. Active markets are defined as having the following characteristics for the measured asset or liability: (i) many transactions, (ii) current prices, (iii) price quotes not varying substantially among market makers, (iv) narrow bid/ask spreads and (v) most information regarding the issuer is publicly available. Level 1 assets, which may be held by the Account from time to time, include real estate related marketable securities (such as publicly traded REIT stocks).

Level 2—Valuations for assets and liabilities traded in less active, dealer or broker markets. Fair values are primarily obtained from third party pricing services for identical or comparable assets or liabilities. Level 2 inputs for fair value measurements are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include:

a.	Quoted prices for similar assets or liabilities in active markets;
b.	Quoted prices for identical or similar assets or liabilities in markets that are not active (that is, markets in which there are few transactions for the asset (or liability), the prices are not current, price quotations vary substantially either over time or among market makers (for example, some brokered markets), or in which little information is released publicly);
c.	Inputs other than quoted prices that are observable within the market for the asset (or liability) (for example, interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates that are observable at commonly quoted intervals); and
d.	Inputs that are derived principally from or corroborated by observable market data by correlation or other means (for example, market-corroborated inputs).

Examples of securities which may be held by the account and included in Level 2 include Certificate of Deposits, Commercial Paper, Government Agency Bonds and Variable Notes.

Level 3—Valuations for assets and liabilities that are derived from other valuation methodologies, including pricing models, discounted cash flow models and similar techniques, and are not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections that are not observable in the market, and require significant professional judgment in determining the fair value assigned to such assets or liabilities. Examples of Level 3 assets and liabilities which may be held by the Account from time to time include investments in real estate, investments in joint ventures and limited partnerships, mortgage loans receivable and mortgage loans payable.

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An investment’s categorization within the valuation hierarchy described above is based upon the lowest level of input that is significant to the fair value measurement.

The Account’s investments and mortgage loans payable are stated at fair value. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon vendor-provided, evaluated prices or internally-developed models that primarily use market-based or independently-sourced market data, including interest rate yield curves, market spreads, and currency rates. Valuation adjustments will be made to reflect changes in credit quality, counterparty’s creditworthiness, the Account’s creditworthiness, liquidity, and other observable and unobservable inputs that are applied consistently over time.

The methods described above are considered to produce fair values that represent a good faith estimate of what an unaffiliated buyer in the marketplace would pay to purchase the asset or would receive to transfer the liability. Since fair value calculations involve significant professional judgment in the application of both observable and unobservable attributes, actual realizable values or future fair values may differ from amounts reported. Furthermore, while the Account believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments, while reasonable, could result in different estimates of fair value at the reporting date.

The following is a description of the valuation methodologies used for investments measured at fair value.

Valuation of Real Estate Properties

Investments in real estate properties are stated at fair value, as determined in accordance with policies and procedures reviewed by the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. Accordingly, the Account does not record depreciation. The Account’s real estate properties are generally classified within Level 3 of the valuation hierarchy. Fair value for real estate properties is defined as the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date. 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. The Account’s primary objective when valuing its real estate investments will be to produce a valuation that represents a fair and accurate estimate of the fair value of its investments. Implicit in the Account’s definition of fair value is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

• Buyer and seller are typically motivated;

• Both parties are well informed or well advised, and acting in what they consider their best interests;

• A reasonable time is allowed for exposure in the open market;

• Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and

• The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Property and investment values are affected by, among other things, the availability of capital, occupancy rates, rental rates, and interest and inflation rates. As a result, determining real estate and investment values involves many assumptions. Key inputs and assumptions include rental income and expense amounts, related rental income and expense growth rates, discount rates and capitalization rates. Valuation techniques include discounted cash flow analysis, prevailing market capitalization rates or multiples applied to earnings from the property, analysis of recent comparable sales transactions, actual sale negotiations and bona fide purchase offers received from third parties. Amounts ultimately realized from each investment may vary significantly from the market value presented. Actual results could differ significantly from those estimates.

Real estate properties owned by the Account are initially valued based on an independent appraisal at the time of the closing of the purchase, which may result in a potential unrealized gain or loss reflecting the difference between an investment’s fair value (i.e., exit price) and its cost basis (which is inclusive of transaction costs).

Subsequently, each property is appraised each quarter by an independent external appraiser. In general, the Account obtains appraisals of its real estate properties spread out throughout the quarter, which is

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intended to result in appraisal adjustments, and thus, adjustments to the valuations of its holdings (to the extent such adjustments are made) that happen regularly throughout each quarter and not on one specific day in each period.

Further, management reserves the right to order an appraisal and/or conduct another valuation outside of the normal quarterly process when facts or circumstances at a specific property change. For example, under certain circumstances a valuation adjustment could be made when bids are obtained for properties held for sale by the Account. In addition, adjustments may be made for events or circumstances indicating an impairment of a tenant’s ability to pay amounts due to the Account under a lease (including due to a bankruptcy filing of that tenant). Also, adjustments may be made to reflect factors (such as sales values for comparable properties or local employment rate) bearing uniquely on a particular region in which the Account holds properties. TIAA’s internal appraisal staff oversees the entire appraisal process, in conjunction with the Account’s independent fiduciary (the independent fiduciary is more fully described in the paragraph below). Any differences in the conclusions of TIAA’s internal appraisal staff and the independent appraiser will be reviewed by the independent fiduciary, which will make a final determination on the matter (which may include ordering a subsequent independent appraisal).

An independent fiduciary, Real Estate Research Corporation, has been appointed by a special subcommittee of the Investment Committee of the Board to, among other things, oversee the appraisal process. The independent fiduciary must approve all independent appraisers used by the Account. All 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. Appraisals of properties held outside of the U.S. are performed in accordance with industry standards commonly applied in the applicable jurisdiction. These independent appraisers are always expected to be MAI-designated members of the Appraisal Institute (or its European equivalent, RICS) and state certified appraisers from national or regional firms with relevant property type experience and market knowledge.

Also, the independent fiduciary can require additional appraisals if factors or events have occurred that could materially change a property’s value and such change is not 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 of real estate related assets 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 calendar 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 all mortgage valuation adjustments 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

Real estate joint ventures are stated at the fair value of the Account’s ownership interests of the underlying entities. The Account’s ownership interests are valued based on the fair value of the underlying real estate, any related mortgage loans payable, and other factors, such as ownership percentage, ownership rights, buy/sell agreements, distribution provisions and capital call obligations. 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, which occurs prior to the dissolution of the investee entity. The Account’s real estate joint ventures are generally classified within level 3 of the valuation hierarchy.

Valuation of Real Estate Limited Partnerships

Limited partnership interests are stated at the fair value of the Account’s ownership in the partnership which is based on the most recent net asset value of the partnership as reported by the sponsor. Since market quotations are not readily available, the limited partnership interests are valued at fair value as determined in good faith under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. These investments are generally classified within level 3 of the valuation hierarchy.

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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 market or 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 market or exchange, exclusive of transaction costs. Such marketable securities are generally classified within level 1 of the valuation hierarchy.

Debt securities, other than money market instruments, are generally 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. Debt securities are generally classified within level 2 of the valuation hierarchy.

Equity and fixed income securities traded on a foreign exchange or in foreign markets are valued using their closing values under the valuation methods generally accepted in the country where traded, as of the valuation date. This value is converted to U.S. dollars at the exchange rate in effect on the valuation day. Under certain circumstances (for example, if there are significant movements in the United States markets and there is an expectation the securities traded on foreign markets will adjust based on such movements when the foreign markets open the next day), the Account may adjust the value of equity or fixed income securities that trade on a foreign exchange or market after the foreign exchange or market has closed. Equity securities traded on a foreign exchange or in foreign markets are generally classified within level 1 of the valuation hierarchy. Fixed income securities traded on a foreign exchange or in foreign markets are generally classified within level 2 of the valuation hierarchy. Equity and fixed income securities traded in foreign markets that are adjusted based upon significant movements in the United States markets are generally classified within level 2 of the valuation hierarchy.

Valuation of Mortgage Loan Receivable

Mortgage loans receivable are stated at fair value and are initially valued at the face amount of the mortgage loan funding. Subsequently, mortgage loans receivable are valued at least quarterly based on market factors, such as market interest rates and spreads for comparable loans, the liquidity for mortgage loans of similar characteristics, the performance of the underlying collateral and the credit quality of the counterparty. The Account’s mortgage loan receivable is classified within level 3 of the valuation hierarchy.

Valuation of Mortgage Loans Payable

Mortgage loans payable are stated at fair value. The estimated fair value of mortgage loans payable is based on the amount at which the liability could be transferred to a third party exclusive of transaction costs. Mortgage loans payable are valued at least quarterly based on market factors, such as market interest rates and spreads for comparable loans, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying collateral), the liquidity for mortgage loans of similar characteristics, the maturity date of the loan, the return demands of the market, and the credit quality of the Account. The Account’s mortgage loans payable are generally classified within level 3 of the valuation hierarchy. Interest expense for mortgage loans payable is recorded on the accrual basis taking into account the outstanding principal and contractual interest rates.

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 net realized and unrealized gains and losses on investments and mortgage loans payable. Net realized gains and losses on foreign currency transactions include 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 and, when applicable, include maturities of forward foreign currency contracts.

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Accumulation and Annuity Funds

The Accumulation Fund represents the net assets attributable to participants in the accumulation phase of their investment (“Accumulation Fund”). The Annuity Fund represents the net assets attributable to the participants currently receiving annuity payments (“Annuity Fund”). 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 pursuant to which the Account is offered are required to stipulate the maximum expense charge for all Account-level expenses 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 realized 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 realized 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 private real estate funds (limited partnerships and one limited liability corporation) and a private real estate investment trust (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 based upon the net asset value of the limited partnership and recorded when the financial statements of the limited partnerships are received by the Account; however as circumstances warrant, prior to the receipt of financial statements of the limited partnership, the Account will estimate the value of its interests in good faith and will from time to time seek input from the issuer or the sponsor of the investment vehicle. Changes in value based on such estimates are recorded by the Account as unrealized gains and losses.

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. 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 2007, the Accounting Standards Executive Committee (“AcSEC”) of the American Institute of Certified Public Accountants (“AICPA”) issued a Statement of Position (“SOP”) which 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. In February 2008, FASB indefinitely delayed the effective date of the SOP to allow time to consider significant issues related to the implementation of the SOP.

In February 2009, the Emerging Issues Task Force (“EITF”) added an issue to its agenda related to the application of the Guide, which will be discussed at a future meeting. The FASB staff created a working

54

group to assist the EITF in addressing this issue. Management of the Account will continue to monitor FASB and EITF developments and will evaluate the financial reporting implications to the Account, as necessary.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS No. 167”), which amends guidance related to the identification of a variable interest entity, variable interests, the primary beneficiary, and expands required note disclosures to provide greater transparency to the users of financial statements. In December 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities”, which amended Codification with the guidance contained in SFAS No. 167. In February 2010, the FASB issued ASU No. 2010-10, “Amendments for Certain Investment Funds”, which defers the applicability of ASU No. 2009-17 in certain instances. These standards are effective on January 1, 2010 and management of the Account has concluded that the adoption of these standards will not result in a significant impact to the Account’s financial position or results of operations.

In August 2009, the FASB issued ASU No. 2009-05, “Measuring Liabilities at Fair Value.” This ASU clarifies the application of certain valuation techniques in circumstances in which a quoted price in an active market for the identical liability is not available and clarifies that inputs to the valuation should not be adjusted when estimating the fair value of a liability in which contractual terms restrict transferability. This ASU became effective on October 1, 2009 and the adoption did not have a significant impact to the Account’s financial position or results of operations.

In September 2009, the FASB issued ASU No. 2009-12, “Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This ASU permits, as a practical expedient, an investor the ability to estimate the fair value of an investment in certain entities on the basis of the net asset value per share of the investment (or its equivalent) determined as of the reporting entity’s measurement date. The investee must satisfy specific requirements before the investor is permitted to utilize this practical expedient as a method of valuation. The amendments in this ASU are effective for interim and annual periods ending after December 15, 2009. The adoption of this ASU did not have a significant impact to the Account’s financial position or results of operations.

In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements” which requires new disclosures related to the transfer in and out of levels 1 and 2, and the separate disclosure of purchases, sales, issuances and settlements when reconciling activity in level 3. This ASU also amends prior disclosure requirements to call for the disaggregation of assets and liabilities into appropriate subsets, and the disclosure of valuation techniques and inputs for recurring and nonrecurring fair value measurements in levels 2 and 3. The new disclosure requirement for reconciling level 3 activity is effective January 1, 2011 and all other new or amended disclosure requirements are effective January 1, 2010 for the Account. These changes will not impact the Account’s financial position or results of operations.

In February 2010, the FASB issued ASU No. 2010-09, “Amendments to Certain Recognition and Disclosure Requirements”. This ASU amends Topic 855, “Subsequent Events” by not requiring a reporting entity that files financial statements with the Securities and Exchange Commission (“SEC filers”), or a conduit bond obligor to disclose the date through which subsequent events are evaluated. This ASU is effective for SEC filers upon issuance of the final ASU. The Account has adopted this revision as of December 31, 2009 and accordingly will not disclose the date through which subsequent events were evaluated.

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, 2009, represented 92.3% of the Account’s total investments, expose the Account to a variety of risks. These risks include, but are not limited to:

• General Real Estate Risk—The risk that the Account’s property values or rental and occupancy rates could go down due to general economic conditions, a weak market for real estate generally, disruptions in the credit and/or capital markets, or changing supply and demand for certain types of properties;

• 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;

55

• 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;

• Risks of Borrowing—The risk that interest rate changes may impact Account returns if the Account takes out a mortgage on a property, buys a property subject to a mortgage or holds a property subject to a mortgage; and

• 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.

Given the significant concentration (92.3% as of December 31, 2009) of the Account’s total investments in real estate and real estate related assets, the Account’s net asset value will experience a more pronounced impact from valuation adjustments to its real properties than it would during periods in which the Account held its target of between 75% and 85% of its investments in real estate and real estate related assets. The Account believes the diversification of its real estate portfolio, both geographically and by sector, along with its quarterly valuation procedure, helps manage the real estate and appraisal risks described above.

As of December 31, 2009, 7.7% of the Account’s total investments were comprised of marketable securities and an adjustable rate mortgage loan receivable. Marketable securities include high-quality short-term debt instruments (i.e., commercial paper and government agency notes). 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. The Account’s marketable securities other than its mortgage loan receivable are considered held for trading purposes. Currently, the Account does not invest in derivative financial investments, nor does the Account engage in any hedging activity other than the interest rate cap agreements contained in two mortgage loans payable the Account entered into during the third quarter of 2008. These interest rate cap agreements (which cap the interest rate on each mortgage loan payable at 6.50%) are discussed in Note 8 to the Account’s financial statements contained herein.

The Account’s investments in cash equivalents, marketable securities (whether debt or equity), and mortgage loans receivable are subject to the following general risks:

• Financial/Credit Risk—The risk, for debt securities, that the issuer will not be able to pay principal and interest when due (and/or declare bankruptcy or be subject to receivership) and, for equity securities such as 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.

• Market Volatility Risk—The risk that the Account’s investments will experience price volatility due to changing conditions in the financial markets regardless of the credit quality or financial condition of the underlying issuer. This risk is particularly acute to the extent the Account holds equity securities, which have experienced significant short-term price volatility over the past year. Also, to the extent the Account holds debt securities; changes in overall interest rates can cause price fluctuations.

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

• Deposit/Money Market Risk—The risk that, to the extent the Account’s cash held in bank deposit accounts exceeds federally insured limits as to that bank, the Account could experience losses if banks fail. The Account does not believe it has exposure to significant concentration of deposit risk. In addition, there is some risk that investments held in money market accounts can suffer losses.

In addition, to the extent the Account were to hold mortgage-backed securities (including commercial mortgage-backed securities (“CMBS”), these 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

56

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 (such as REIT stocks) and mortgage-backed securities would be 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 Item 1.A. “Risk Factors” in this Form 10-K.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS
TIAA REAL ESTATE ACCOUNT

	Page
Report of Management Responsibility		59
Report of the Audit Committee		60
Audited Financial Statements:
Statements of Assets and Liabilities		61
Statements of Operations		62
Statements of Changes in Net Assets		63
Statements of Cash Flows		64
Notes to the Financial Statements		65
Statement of Investments		80
Report of Independent Registered Public Accounting Firm		86

58

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, 2009, 2008 and 2007. 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.

March 18, 2010	/s/ Roger W. Ferguson, Jr.
	Roger W. Ferguson, Jr. President and Chief Executive Officer
	/s/ Georganne C. Proctor
	Georganne C. Proctor Executive Vice President and Chief Financial Officer

59

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
Jeffrey R. Brown, Audit Committee Member
Lawrence H. Linden, Audit Committee Member
Donald K. Peterson, Audit Committee Member
David L. Shedlarz, Audit Committee Member

March 18, 2010

60

TIAA REAL ESTATE ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
(In thousands, except per accumulation unit amounts)

	December 31, 2009			December 31, 2008
ASSETS
Investments, at fair value:
Real estate properties (cost: $9,408,978 and $10,031,744)		$	7,437,344		$	10,305,040
Real estate joint ventures and limited partnerships (cost: $2,437,795 and $2,329,850)			1,514,876			2,463,196
Marketable securities (cost: $671,235 and $511,703)			671,267			511,711
Mortgage loan receivable (cost: $75,000 and $75,000)			71,273			71,767
Total investments (cost: $12,593,008 and $12,948,297)			9,694,760			13,351,714
Cash and cash equivalents			24,859			22,127
Due from investment advisor			4,290			—
Other			188,794			203,113
TOTAL ASSETS			9,912,703			13,576,954
LIABILITIES
Mortgage loans payable—Note 8 (principal outstanding: $1,907,090 and $1,910,121)			1,858,110			1,830,040
Payable for securities transactions			49			108
Due to investment advisor			—			9,892
Accrued real estate property level expenses			151,808			203,874
Security deposits held			22,822			24,116
				��
TOTAL LIABILITIES			2,032,789			2,068,030
NET ASSETS
Accumulation Fund			7,636,115			11,106,246
Annuity Fund			243,799			402,678
TOTAL NET ASSETS		$	7,879,914		$	11,508,924
NUMBER OF ACCUMULATION UNITS OUTSTANDING— Notes 9 and 10			39,473			41,542
NET ASSET VALUE, PER ACCUMULATION UNIT—Note 9		$	193.45		$	267.35

See notes to the financial statements.

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TIAA REAL ESTATE ACCOUNT
STATEMENTS OF OPERATIONS
(In thousands)

	Years Ended December 31,
	2009				2008				2007
INVESTMENT INCOME
Real estate income, net:
Rental income		$	948,315			$	979,295			$	987,434
Real estate property level expenses and taxes:
Operating expenses			238,705				257,351				247,473
Real estate taxes			128,734				132,979				126,926
Interest expense			101,219				88,531				83,623
Total real estate property level expenses and taxes			468,658				478,861				458,022
Real estate income, net			479,657				500,434				529,412
Income from real estate joint ventures and limited partnerships			114,578				116,889				93,724
Interest			1,733				76,444				129,474
Dividends			—				5,079				12,440
TOTAL INVESTMENT INCOME			595,968				698,846				765,050
Expenses—Note 2:
Investment advisory charges			42,521				47,622				49,239
Administrative and distribution charges			35,805				77,577				63,593
Mortality and expense risk charges			4,736				8,116				8,052
Liquidity guarantee charges			12,411				19,725				19,410
TOTAL EXPENSES			95,473				153,040				140,294
INVESTMENT INCOME, NET			500,495				545,806				624,756
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
Net realized gain (loss) on investments:
Real estate properties			(281,798	)			(18,097	)			127,835
Real estate joint ventures and limited partnerships			—				(17	)			70,765
Marketable securities			1				(11,041	)			47,180
Mortgage loans payable			(371	)			—				—
Total realized (loss) gain on investments:			(282,168	)			(29,155	)			245,780
Net change in unrealized appreciation (depreciation) on:
Real estate properties			(2,244,931	)			(1,905,930	)			898,173
Real estate joint ventures and limited partnerships			(1,030,179	)			(702,797	)			391,333
Marketable securities			22				15,820				(148,659	)
Mortgage loans receivable			(494	)			(753	)			(2,141	)
Mortgage loans payable			(54,755	)			109,791				53,949
Net change in unrealized (depreciation) appreciation on investments and mortgage loans payable			(3,330,337	)			(2,483,869	)			1,192,655
NET REALIZED AND UNREALIZED (LOSS) GAIN ON INVESTMENTS AND MORTGAGE LOANS PAYABLE			(3,612,505	)			(2,513,024	)			1,438,435
NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		$	(3,112,010	)		$	(1,967,218	)		$	2,063,191

See notes to the financial statements.

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TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands)

	Years Ended December 31,
	2009				2008				2007
FROM OPERATIONS
Investment income, net		$	500,495			$	545,806			$	624,756
Net realized (loss) gain on investments			(282,168	)			(29,155	)			245,780
Net change in unrealized (depreciation) appreciation on investments and mortgage loans payable			(3,330,337	)			(2,483,869	)			1,192,655
NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS			(3,112,010	)			(1,967,218	)			2,063,191
FROM PARTICIPANT TRANSACTIONS
Premiums			703,493				1,008,233				1,186,870
Purchase of Liquidity Units by TIAA			1,058,700				155,600				—
Net transfers (to) from TIAA			(546,270	)			(1,912,937	)			153,137
Net transfers (to) from CREF Accounts			(1,207,394	)			(2,519,837	)			832,782
Net transfers (to) from TIAA-CREF Funds			(160,181	)			(207,547	)			(51,612	)
Annuity and other periodic payments			(43,805	)			(99,518	)			(95,776	)
Withdrawals and death benefits			(321,543	)			(608,389	)			(560,748	)
NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM PARTICIPANT TRANSACTIONS			(517,000	)			(4,184,395	)			1,464,653
NET (DECREASE) INCREASE IN NET ASSETS			(3,629,010	)			(6,151,613	)			3,527,844
NET ASSETS
Beginning of period			11,508,924				17,660,537				14,132,693
End of period		$	7,879,914			$	11,508,924			$	17,660,537

See notes to the financial statements.

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TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CASH FLOWS
(In thousands)

	Years Ended December 31,
	2009				2008				2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net (decrease) increase in net assets resulting from operations		$	(3,112,010	)		$	(1,967,218	)		$	2,063,191
Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchase of real estate properties			—				(164,104	)			(639,704	)
Amortization of discount on debt			—				—				531
Capital improvements on real estate properties			(141,493	)			(131,926	)			(136,861	)
Proceeds from sale of real estate properties			408,794				93,113				568,120
Purchases of long term investments			(81,308	)			(61,041	)			(1,136,799	)
Proceeds from sale of long term investments			—				480,952				468,512
Net purchases in other investments			(160,084	)			2,864,516				(1,236,572	)
Decrease in payable for securities transactions			(59	)			(758	)			(353	)
Change in due (from)/due to investment advisor			(14,182	)			21,088				(2,734	)
Decrease (increase) in other assets			14,319				(1,290	)			36,052
(Decrease) increase in accrued real estate property level expenses			(1,900	)			6,801				(11,871	)
(Decrease) increase in security deposits held			(1,294	)			(516	)			5,389
Net realized loss (gain) on investments and mortgage loans payable			282,168				29,155				(245,780	)
Net unrealized loss (gain) on investments and mortgage loans payable			3,330,337				2,483,869				(1,192,655	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			523,288				3,652,641				(1,461,534	)
CASH FLOWS FROM FINANCING ACTIVITIES
Mortgage loans proceeds received			—				548,567				—
Principal payments of mortgage loans payable			(3,556	)			(830	)			(560	)
Premiums			703,493				1,008,233				1,186,870
Purchase of Liquidity Units by TIAA			1,058,700				155,600				—
Net transfers (to) from TIAA			(546,270	)			(1,912,937	)			153,137
Net transfers to CREF Accounts			(1,207,394	)			(2,519,837	)			832,782
Net transfers to TIAA-CREF Funds			(160,181	)			(207,547	)			(51,612	)
Annuity and other periodic payments			(43,805	)			(99,518	)			(95,776	)
Withdrawals and death benefits			(321,543	)			(608,389	)			(560,748	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES			(520,556	)			(3,636,658	)			1,464,093
NET INCREASE IN CASH			2,732				15,983				2,559
CASH
Beginning of period			22,127				6,144				3,585
End of period		$	24,859			$	22,127			$	6,144
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	102,572			$	88,723			$	83,063
Debt assumed in acquisition of properties		$	—			$	—			$	8,922
Debt transferred in sale of property		$	(23,500	)		$	—			$	—

See notes to the financial statements.

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TIAA REAL ESTATE ACCOUNT
NOTES TO THE 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 (the “Board”) 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 Account offers individual and group accumulating annuity contracts (with contributions made on a pre-tax or after-tax basis), as well as individual lifetime and term-certain variable payout annuity contracts (including the payment of death benefits to beneficiaries). Investors are entitled to transfer funds to or from the Account, and make withdrawals from the Account on a daily basis under certain circumstances. Funds invested in the Account for each category of contract are expressed in terms of units, and unit values will fluctuate depending on the Account’s performance.

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 subsidiaries wholly-owned by TIAA for the benefit of the Account. 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, such interests 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 levels for operating expenses, capital expenditures and to fund benefit payments (withdrawals, transfers and related transactions).

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 and such differences may be material. 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 between the Account and such subsidiaries have been eliminated.

Accounting for Investments at Fair Value:The Financial Accounting Standards Board (“FASB”) has provided authoritative guidance for fair value measurements and disclosures. Additionally, the guidance defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and requires certain disclosures about fair value measurements. This guidance indicates, among other things, that a fair value measurement under an exit price model assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.

This guidance also permits entities to elect to measure financial instruments and certain financial assets and liabilities at fair value and expand the use of fair value measurements when warranted. The Account reports all investments and mortgage loans payable at fair value.

Valuation Hierarchy:The Account groups financial assets and certain financial liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, if any, and the observability of the assumptions used to determine fair value. These levels are:

Level 1—Valuations using unadjusted quoted prices for assets traded in active markets, such as stocks listed on the New York Stock Exchange. Active markets are defined as having the following characteristics for the measured asset or liability: (i) many transactions, (ii) current prices, (iii) price quotes not varying substantially among market makers, (iv) narrow bid/ask spreads and (v) most information regarding the issuer is publicly available. Level 1 assets, which may be held by the Account from time to time, include real estate related marketable securities (such as publicly traded REIT stocks).

Level 2—Valuations for assets and liabilities traded in less active, dealer or broker markets. Fair values are primarily obtained from third party pricing services for identical or comparable assets or liabilities. Level 2

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inputs for fair value measurements are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include:

a. Quoted prices for similar assets or liabilities in active markets;

b. Quoted prices for identical or similar assets or liabilities in markets that are not active (that is, markets in which there are few transactions for the asset (or liability), the prices are not current, price quotations vary substantially either over time or among market makers (for example, some brokered markets), or in which little information is released publicly);

c. Inputs other than quoted prices that are observable within the market for the asset (or liability) (for example, interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates that are observable at commonly quoted intervals); and

d. Inputs that are derived principally from or corroborated by observable market data by correlation or other means (for example, market-corroborated inputs).

Examples of securities which may be held by the Account and included in Level 2 include Certificates of Deposit, Commercial Paper, Government Agency Notes and Variable Notes.

Level 3—Valuations for assets and liabilities that are derived from other valuation methodologies, including pricing models, discounted cash flow models and similar techniques, and are not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections that are not observable in the market, and require significant professional judgment in determining the fair value assigned to such assets or liabilities. Examples of Level 3 assets and liabilities which may be held by the Account from time to time include investments in real estate, investments in joint ventures and limited partnerships, mortgage loans receivable and mortgage loans payable.

An investment’s categorization within the valuation hierarchy described above is based upon the lowest level of input that is significant to the fair value measurement.

The Account’s investments and mortgage loans payable are stated at fair value. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon vendor-provided, evaluated prices or internally-developed models that primarily use market-based or independently-sourced market data, including interest rate yield curves, market spreads, and currency rates. Valuation adjustments will be made to reflect changes in credit quality, counterparty’s creditworthiness, the Account’s creditworthiness, liquidity, and other observable and unobservable inputs that are applied consistently over time.

The methods described above are considered to produce fair values that represent a good faith estimate of what an unaffiliated buyer in the marketplace would pay to purchase the asset or would receive to transfer the liability. Since fair value calculations involve significant professional judgment in the application of both observable and unobservable attributes, actual realizable values or future fair values may differ from amounts reported. Furthermore, while the Account believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments, while reasonable, could result in different estimates of fair value at the reporting date. As discussed below in more detail, as the Account generally obtains independent external appraisals on a quarterly basis, there may be circumstances in the interim in which the true realizable value of a property is not reflected in the Account’s daily net asset value calculation or in the Account’s periodic financial statements. This disparity may be more apparent when the commercial and/or residential real estate markets experience an overall and possibly dramatic decline (or increase) in property values in a relatively short period of time between appraisals.

The following is a description of the valuation methodologies used for investments measured at fair value.

Valuation of Real Estate Properties:Investments in real estate properties are stated at fair value, as determined in accordance with policies and procedures reviewed by the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. Accordingly, the Account does not record depreciation. The Account’s real estate properties are generally classified within Level 3 of the valuation hierarchy. Fair value for real estate properties is defined as the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date. Determination of fair value involves judgment because the actual market value of real estate can be determined only by

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negotiation between the parties in a sales transaction. The Account’s primary objective when valuing its real estate investments will be to produce a valuation that represents a fair and accurate estimate of the fair value of its investments. Implicit in the Account’s definition of fair value is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

• Buyer and seller are typically motivated;

• Both parties are well informed or well advised, and acting in what they consider their best interests;

• A reasonable time is allowed for exposure in the open market;

• Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and

• The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Property and investment values are affected by, among other things, the availability of capital, occupancy rates, rental rates, and interest and inflation rates. As a result, determining real estate and investment values involves many assumptions. Key inputs and assumptions include rental income and expense amounts, related rental income and expense growth rates, discount rates and capitalization rates. Valuation techniques include discounted cash flow analysis, prevailing market capitalization rates or multiples applied to earnings from the property, analysis of recent comparable sales transactions, actual sale negotiations and bona fide purchase offers received from third parties. Amounts ultimately realized from each investment may vary significantly from the market value presented. Actual results could differ significantly from those estimates.

Real estate properties owned by the Account are initially valued based on an independent appraisal at the time of the closing of the purchase, which may result in a potential unrealized gain or loss reflecting the difference between an investment’s fair value (i.e., exit price) and its cost basis (which is inclusive of transaction costs).

Subsequently, each property is appraised each quarter by an independent external appraiser. In general, the Account obtains appraisals of its real estate properties spread out throughout the quarter, which is intended to result in appraisal adjustments, and thus, adjustments to the valuations of its holdings (to the extent such adjustments are made) that happen regularly throughout each quarter and not on one specific day in each period.

Further, management reserves the right to order an appraisal and/or conduct another valuation outside of the normal quarterly process when facts or circumstances at a specific property change. For example, under certain circumstances a valuation adjustment could be made when bids are obtained for properties held for sale by the Account. In addition, adjustments may be made for events or circumstances indicating an impairment of a tenant’s ability to pay amounts due to the Account under a lease (including due to a bankruptcy filing of that tenant). Also, adjustments may be made to reflect factors (such as sales values for comparable properties or local employment rate) bearing uniquely on a particular region in which the Account holds properties. TIAA’s internal appraisal staff oversees the entire appraisal process, in conjunction with the Account’s independent fiduciary (the independent fiduciary is more fully described in the paragraph below). Any differences in the conclusions of TIAA’s internal appraisal staff and the independent appraiser will be reviewed by the independent fiduciary, which will make a final determination on the matter (which may include ordering a subsequent independent appraisal).

An independent fiduciary, Real Estate Research Corporation, has been appointed by a special subcommittee of the Investment Committee of the Board to, among other things, oversee the appraisal process. The independent fiduciary must approve all independent appraisers used by the Account. All 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. Appraisals of properties held outside of the U.S. are performed in accordance with industry standards commonly applied in the applicable jurisdiction. These independent appraisers are always expected to be MAI-designated members of the Appraisal Institute (or its European equivalent, RICS) and state certified appraisers from national or regional firms with relevant property type experience and market knowledge.

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Also, the independent fiduciary can require additional appraisals if factors or events have occurred that could materially change a property’s value and such change is not 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 of real estate related assets 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 calendar month. When a real estate property is subject to a mortgage, the property is valued independently of the mortgage and the property and mortgage fair values are reported separately (see—“Valuation of Mortgage Loans Payable” below). The independent fiduciary reviews and approves all mortgage valuation adjustments 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:Real estate joint ventures are stated at the fair value of the Account’s ownership interests of the underlying entities. The Account’s ownership interests are valued based on the fair value of the underlying real estate, any related mortgage loans payable, and other factors, such as ownership percentage, ownership rights, buy/sell agreements, distribution provisions and capital call obligations. 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, which occurs prior to the dissolution of the investee entity. The Account’s real estate joint ventures are generally classified within level 3 of the valuation hierarchy.

Valuation of Real Estate Limited Partnerships:Limited partnership interests are stated at the fair value of the Account’s ownership in the partnership which is based on the most recent net asset value of the partnership, as reported by the sponsor. Since market quotations are not readily available, the limited partnership interests are valued at fair value as determined in good faith under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. These investments are generally classified within level 3 of the valuation hierarchy.

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 market or 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 market or exchange, exclusive of transaction costs. Such marketable securities are generally classified within level 1 of the valuation hierarchy.

Debt securities, other than money market instruments, are generally 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. Debt securities are generally classified within level 2 of the valuation hierarchy.

Equity and fixed income securities traded on a foreign exchange or in foreign markets are valued using their closing values under the valuation methods generally accepted in the country where traded, as of the valuation date. This value is converted to U.S. dollars at the exchange rate in effect on the valuation day. Under certain circumstances (for example, if there are significant movements in the United States markets and there is an expectation the securities traded on foreign markets will adjust based on such movements when the foreign markets open the next day), the Account may adjust the value of equity or fixed income securities that trade on a foreign exchange or market after the foreign exchange or market has closed. Equity securities traded on a foreign exchange or in foreign markets are generally classified within level 1 of the valuation hierarchy. Fixed income securities traded on a foreign exchange or in foreign markets are generally classified within level 2 of the valuation hierarchy. Equity and fixed income securities traded in foreign markets that are adjusted based upon significant movements in the United States markets are generally classified within level 2 of the valuation hierarchy.

Valuation of Mortgage Loan Receivable:Mortgage loans receivable are stated at fair value and are initially valued at the face amount of the mortgage loan funding. Subsequently, mortgage loans receivable are valued at least quarterly based on market factors, such as market interest rates and spreads for comparable loans, the liquidity for mortgage loans of similar characteristics, the performance of the underlying collateral and the credit quality of the counterparty. The Account’s mortgage loan receivable is classified within level 3 of the valuation hierarchy.

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Valuation of Mortgage Loans Payable:Mortgage loans payable are stated at fair value. The estimated fair value of mortgage loans payable is based on the amount at which the liability could be transferred to a third party exclusive of transaction costs. Mortgage loans payable are valued at least quarterly based on market factors, such as market interest rates and spreads for comparable loans, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying collateral), the liquidity for mortgage loans of similar characteristics, the maturity date of the loan, the return demands of the market, and the credit quality of the Account. The Account’s mortgage loans payable are generally classified within level 3 of the valuation hierarchy. Interest expense for mortgage loans payable is recorded on the accrual basis taking into account the outstanding principal and contractual interest rates.

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 net realized and unrealized gains and losses on investments and mortgage loans payable. Net realized gains and losses on foreign currency transactions include 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 and, when applicable, include maturities of forward foreign currency contracts.

Accumulation and Annuity Funds:The Accumulation Fund represents the net assets attributable to participants in the accumulation phase of their investment (“Accumulation Fund”). The Annuity Fund represents the net assets attributable to the participants currently receiving annuity payments (“Annuity Fund”). 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. The Account pays a fee to TIAA to assume these mortality and expense risks. In addition, the contracts pursuant to which the Account is offered are required to stipulate the maximum expense charge for all Account level expenses that can be assessed, which is equal to 2.50% of average net assets per year.

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 realized 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 realized 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 private real estate funds (limited partnerships and one limited liability corporation) and a private real estate investment trust (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 based upon the net asset value of the limited partnership and recorded when the financial statements of the limited partnerships are received by the Account; however as circumstances warrant, prior to the receipt of financial statements of the limited partnership, the Account will estimate the value of its interests in good faith and will from time to time seek input from the issuer or the sponsor of the investment vehicle. Changes in value based on such estimates are recorded by the Account as unrealized gains and losses.

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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. 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.

The Account’s net assets as of the close of each valuation day are valued by taking the sum of:

• the value of the Account’s cash, cash equivalents, and investments in short-term and other debt instruments;

• the value of the Account’s other securities and other non real estate assets;

• the value of the individual real properties (based on the most recent valuation of that property) and other real estate-related investments owned by the Account;

• an estimate of the net operating income accrued by the Account from its properties, other real estate-related investments and non real estate-related investments (including short-term marketable securities); and

• actual net operating income received from the Account’s properties, other real estate-related investments and non real estate-related investments (only to the extent any such item of income differs from the estimated income accrued for on such investments).

and then reducing the sum by the Account’s liabilities, including the daily investment management fee and certain other expenses attributable to operating the Account.

After the end of every quarter, the Account reconciles the amount of expenses deducted from the Account (which is established in order to approximate the costs that the Account will incur) with the expenses the Account actually incurred. If there is a difference, the Account adds it to or deducts it from the Account in equal daily installments over the remaining days of the following quarter. Material differences may be repaid in the current calendar quarter. The Account’s at-cost deductions are based on projections of Account assets and overall expenses, and the size of any adjusting payments will be directly affected by the difference between management’s projections and the Account’s actual assets or expenses.

Cash:The Account maintains cash balances in bank deposit accounts which, at times, exceed federally insured limits. The Account’s management monitors these balances to mitigate the exposure of risk due to concentration and has not experienced any losses from such concentration.

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. Management has concluded that the Account does not have any uncertain tax positions as of December 31, 2009.

Due to/from Investment Advisor:Due to/from investment advisor represents amounts that were paid or received by TIAA on behalf of the Account. Amounts generally are paid or received by the Account within one or two business days and no interest is charged on these amounts.

Reclassifications:Certain 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.

Note 2—Management Agreements and Arrangements

Investment advisory services for the Account are provided by TIAA employees, under the direction of the Board 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.

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Effective January 1, 2008, the Account entered into theDistribution Agreement for the Contracts Funded by the TIAA Real Estate Account(the “Distribution Agreement”), dated January 1, 2008, by and among TIAA, for itself and on behalf of the Account, and TIAA-CREF Individual and Institutional Services, LLC (“Services”), a wholly- owned subsidiary of TIAA, a registered broker-dealer and a member of the Financial Industry Regulatory Authority. Pursuant to the Distribution Agreement, Services performs 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) helping employers implement and manage retirement plans. The Distribution Agreement is terminable by either party upon 60 days written notice and terminates automatically upon any assignment thereof.

Also effective January 1, 2008, TIAA performs administrative functions for the Account, 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.

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 and adjusted periodically 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 ensures sufficient funds are available for such transfer and withdrawal requests by purchasing accumulation units of the Account. See Note 3—Related Party Transactions below. To the extent TIAA owns accumulation units issued pursuant to the liquidity guarantee, the independent fiduciary monitors and oversees, among other things, TIAA’s ownership interest in the Account and may require TIAA to eventually redeem some of its units, particularly when the Account has uninvested cash or liquid investments available.

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 Note 9—Condensed Financial Information.

Note 3—Related Party Transactions

Pursuant to its existing liquidity guarantee obligation, as of December 31, 2009, the TIAA General Account owned 4.7 million accumulation units (which are generally referred to as “Liquidity Units”) issued by the Account. Since December 2008 and through December 31, 2009, TIAA has paid an aggregate of $1.2 billion to purchase these Liquidity Units in multiple transactions (approximately $1.1 billion since the beginning of 2009).

In accordance with this liquidity guarantee obligation, TIAA guarantees that all participants in the Account may redeem their accumulation units at their accumulation unit value next determined after their transfer or cash withdrawal request is received in good order. Liquidity Units owned by TIAA are valued in the same manner as accumulation units owned by the Account’s participants. Management believes that TIAA has the ability to meet its obligations under the liquidity guarantee.

As discussed in the Account’s prospectus and in accordance with a prohibited transaction exemption from the U.S. Department of Labor (PTE 96-76), the Account’s independent fiduciary, Real Estate Research Corporation, has certain responsibilities with respect to the Account that it has undertaken or is currently undertaking with respect to TIAA’s purchase of Liquidity Units, including among other things, reviewing the purchase and redemption of Liquidity Units by TIAA to ensure the Account uses the correct unit values. In addition, as set forth in PTE 96-76, the independent fiduciary’s responsibilities include:

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• establishing the percentage of total accumulation units that TIAA’s ownership should not exceed (the “trigger point”) and creating a method for changing the trigger point;

• approving any adjustment of TIAA’s ownership interest in the Account and, in its discretion, requiring an adjustment if TIAA’s ownership of Liquidity Units reaches the trigger point; and

• once the trigger point has been reached, participating in any program to reduce TIAA’s ownership in the Account by utilizing cash flow or liquid investments in the Account, or by utilizing the proceeds from asset sales. The independent fiduciary’s role in participating in any such asset sales program would include (i) participating in the selection of properties for sale, (ii) providing sales guidelines and (iii) approving those sales if, in the independent fiduciary’s opinion, such sales are desirable to reduce TIAA’s ownership of Liquidity Units.

The independent fiduciary, which has the right to adjust the trigger point, has established the trigger point at 45% of the outstanding accumulation units and it will continue to monitor TIAA’s ownership interest in the Account and provide further recommendations as necessary. As of December 31, 2009, TIAA owned approximately 12.0% of the outstanding accumulation units of the Account.

Subsequent to December 31, 2009, pursuant to this liquidity guarantee obligation, TIAA has not made any additional purchases of Liquidity Units.

As discussed in Note 2—Management Agreements and Arrangements, TIAA and Services provide services to the Account on an at cost basis. See Note 9—Condensed Financial Information for details of the expense charge and expense ratio.

Note 4—Credit Risk Concentrations

Concentrations of credit risk arise when a number of properties or tenants are located in a similar geographic region such that the economic conditions of that region could impact tenants’ obligations to meet their contractual obligations or cause the values of individual properties to decline. The Account has no significant concentrations of tenants as no single tenant has annual contract rent that makes up more than 2% of the Rental Income of the Account.

The substantial majority of the Account’s wholly-owned real estate investments and investments in joint ventures are located in the United States. The following table represents the diversification of the Account’s portfolio by region and property type:

Diversification by Fair Value⁽¹⁾

	East			West			South			Midwest			Foreign(2)			Total
Office		23.5	%		17.3	%		12.3	%		1.2	%		2.7	%		57.0	%
Apartment		2.4	%		5.5	%		5.3	%		0.0	%		0.0	%		13.2	%
Industrial		1.4	%		6.4	%		4.2	%		1.4	%		0.0	%		13.4	%
Retail		3.4	%		0.9	%		8.7	%		0.4	%		2.3	%		15.7	%
Storage Facilities		0.2	%		0.2	%		0.2	%		0.1	%		0.0	%		0.7	%
Total		30.9	%		30.3	%		30.7	%		3.1	%		5.0	%		100.0	%

(1)	Fair values for wholly-owned properties are reflected gross of any debt, whereas fair values for joint venture investments are reflected net of any debt.
(2)	Represents real estate investments in the United Kingdom and France.
	Properties in the “East” region are located in: CT, DC, DE, KY, MA, MD, ME, NC, NH, NJ, NY, PA, RI, SC, VA, VT, WV
	Properties in the “West” region are located in: AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY
	Properties in the “South” region are located in: AL, AR, FL, GA, LA, MS, OK, TN, TX
	Properties in the “Midwest” region are located in: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI

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Note 5—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 (in thousands):

	Years Ending December 31,
2010		$	883,503
2011			769,113
2012			664,623
2013			547,659
2014			446,682
Thereafter			1,312,602
Total		$	4,624,182

Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts.

Note 6—Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables show the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2009 and December 31, 2008, using unadjusted quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3) (in thousands):

Description	Level 1: Quoted Prices in Active Markets for Identical Assets			Level 2: Significant Other Observable Inputs			Level 3: Significant Unobservable Inputs				Total at December 31, 2009
Real estate properties		$	—		$	—		$	7,437,344			$	7,437,344
Real estate joint ventures and limited partnerships			—			—			1,514,876				1,514,876
Marketable securities			—			671,267			—				671,267
Mortgage loan receivable			—			—			71,273				71,273
Total Investments at December 31, 2009		$	—		$	671,267		$	9,023,493			$	9,694,760
Mortgage loans payable		$	—		$	—		$	(1,858,110	)		$	(1,858,110	)

Description	Level 1: Quoted Prices in Active Markets for Identical Assets			Level 2: Significant Other Observable Inputs			Level 3: Significant Unobservable Inputs				Total at December 31, 2008
Real estate properties		$	—		$	—		$	10,305,040			$	10,305,040
Real estate joint ventures and limited partnerships			—			—			2,463,196				2,463,196
Marketable securities			—			511,711			—				511,711
Mortgage loan receivable			—			—			71,767				71,767
Total Investments at December 31, 2008		$	—		$	511,711		$	12,840,003			$	13,351,714
Mortgage loans payable		$	—		$	—		$	(1,830,040	)		$	(1,830,040	)

73

The following tables show the reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during years ended December 31, 2009 and December 31, 2008 (in thousands):

	Real Estate Properties				Real Estate Joint Ventures and Limited Partnerships				Mortgage Loan Receivable				Total Level 3 Investments				Mortgage Loans Payable
For the year ended December 31, 2009:
Beginning balance January 1, 2009		$	10,305,040			$	2,463,196			$	71,767			$	12,840,003			$	(1,830,040	)
Total realized and unrealized gains (losses) included in changes in net assets			(2,526,729	)			(1,030,179	)			(494	)			(3,557,402	)			(55,126	)
Purchases, issuances, and settlements(1)			(340,967	)			81,859				—				(259,108	)			27,056
Ending balance December 31, 2009		$	7,437,344			$	1,514,876			$	71,273			$	9,023,493			$	(1,858,110	)
For the year ended December 31, 2008:
Beginning balance January 1, 2008		$	11,983,715			$	3,158,870			$	72,520			$	15,215,105			$	(1,392,093	)
Total realized and unrealized gains (losses) included in changes in net assets			(1,924,026	)			(702,814	)			(753	)			(2,627,593	)			109,791
Purchases, issuances, and settlements(1)			245,351				7,140				—				252,491				(547,738	)
Ending balance December 31, 2008		$	10,305,040			$	2,463,196			$	71,767			$	12,840,003			$	(1,830,040	)

⁽¹⁾ This line includes the net of contributions, distributions, and accrued operating income for real estate joint ventures and limited partnerships as well as principal payments on mortgage loans payable.

The amount of total gains (losses) included in changes in net assets attributable to the change in unrealized gains (losses) relating to investments and mortgage loans payable using significant unobservable inputs still held as of the reporting date is as follows (in thousands):

 

Real Estate
Properties

 

Real Estate
Joint Ventures
and Limited
Partnerships

 

Mortgage
Loan
Receivable

 

Total
Level 3
Investments

 

Mortgage
Loans
Payable

For the year ended
December 31, 2009

 

$

(2,520,545

)

 

$

(1,030,179

)

 

$

(494

)

 

$

(3,551,218

)

 

$

(54,881

)

For the year ended
December 31, 2008

 

$

(1,921,932

)

 

$

(702,797

)

 

$

(753

)

 

$

(2,625,482

)

 

$

109,791

 

Note 7—Investments 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 loans payable on the properties owned. At December 31, 2009, the Account held 12 investments in joint ventures with non-controlling ownership interest percentages that ranged from 50% to 85%. Certain joint ventures and limited partnerships are subject to adjusted distribution percentages when earnings in the investment reach a pre-determined threshold. The Account’s equity in the joint ventures at December 31, 2009 and December 31, 2008 was $1.3 billion and $2.2 billion, respectively. The Account’s most significant joint venture investment is the DDR TC LLC joint venture, which is the third largest investment in the Account as of December 31, 2009.

The Account’s share of the mortgage loans payable within the joint venture investments at fair value was approximately $1.8 and $1.9 billion at December 31, 2009 and December 31, 2008, respectively. The

74

Account’s share in the outstanding principal of the mortgage loans payable on joint ventures was approximately $2.0 billion at December 31, 2009 and December 31, 2008.

A condensed summary of the financial position and results of operations of the joint ventures is shown below (in thousands).

	December 31, 2009			December 31, 2008
Assets
Real estate properties, at fair value		$	4,618,202		$	5,947,028
Other assets			89,569			95,411
Total assets		$	4,707,771		$	6,042,439
Liabilities and Equity
Mortgage loans payable, at fair value		$	2,526,666		$	2,571,843
Other liabilities			52,639			58,378
Total liabilities			2,579,305			2,630,221
Equity			2,128,466			3,412,218
Total liabilities and equity		$	4,707,771		$	6,042,439

	Years Ended December 31,
	2009			2008			2007
Operating Revenues and Expenses
Revenues		$	519,239		$	562,031		$	534,469
Expenses			317,428			333,700			315,077
Excess of revenues over expenses		$	201,811		$	228,331		$	219,392

Principal payment schedule on mortgage loans payable at joint ventures as of December 31, 2009 is as follows (in thousands):

	Amount
2010		$	540,054
2011			119,905
2012			721,565
2013			90,578
2014			2,280
Thereafter			1,225,217
Total maturities		$	2,699,599

In February 2010, a loan in the principal amount of $21.5 million with respect to one of the Account’s joint venture properties that was scheduled to mature in 2010 was paid off by the joint venture with proceeds from a line of credit. Also, in February 2010, the maturity date of a loan in the principal amount of $168.3 million with respect to one of the Account’s joint venture properties was extended from 2010 to 2011.

In March 2010, the DDR TC joint venture sold 16 properties for $424.3 million and $386.4 million of debt was assumed by the purchaser, resulting in a net purchase price of $37.9 million. The sale resulted in a realized loss of $179.7 million (resulting in a $152.7 million realized loss to the Account).

Management of the Account monitors the financial position of the Account’s joint venture partners. To the extent that management of the Account determines that a joint venture partner has financial or liquidity concerns, management will evaluate all actions and remedies available to the Account under the applicable joint venture agreement to minimize any potential adverse implications to the Account.

The Account invests in limited partnerships that own real estate properties and other real estate related assets and receives distributions from the limited partnerships based on the Account’s ownership interest percentages. At December 31, 2009, the Account held five limited partnership investments and one private real estate equity investment trust (all of which featured non-controlling ownership interests) with ownership interest percentages that ranged from 5.27% to 18.46%. The Account’s ownership interest in limited partnerships was $200.3 million and $286.5 million at December 31, 2009 and December 31, 2008, respectively.

75

Note 8—Mortgage Loans Payable

At December 31, 2009, the Account had outstanding mortgage loans payable secured by the following properties (in thousands):

Property	Interest Rate and Payment Frequency(5)	Principal Amounts as of December 31, 2009				Maturity
701 Brickell(1)	2.23% paid monthly(6)		$	126,000			October 1, 2010
Four Oaks Place(2)	2.23% paid monthly(6)			200,000			October 1, 2010
Ontario Industrial Portfolio(3)	7.42% paid monthly			8,469			May 1, 2011
1 & 7 Westferry Circus(4)	5.40% paid quarterly			216,754			November 15, 2012
Reserve at Sugarloaf(3)	5.49% paid monthly			25,145			June 1, 2013
South Frisco Village	5.85% paid monthly			26,251			June 1, 2013
Fourth & Madison	6.40% paid monthly			145,000			August 21, 2013
1001 Pennsylvania Avenue	6.40% paid monthly			210,000			August 21, 2013
50 Fremont	6.40% paid monthly			135,000			August 21, 2013
Pacific Plaza(3)	5.55% paid monthly			8,579			September 1, 2013
Wilshire Rodeo Plaza	5.28% paid monthly			112,700			April 11, 2014
1401 H Street	5.97% paid monthly			115,000			December 7, 2014
The Colorado(3)	5.65% paid monthly			86,719			November 1, 2015
99 High Street	5.52% paid monthly			185,000			November 11, 2015
The Legacy at Westwood(3)	5.95% paid monthly			41,515			December 1, 2015
Regents Court(3)	5.76% paid monthly			35,468			December 1, 2015
The Caruth(3)	5.71% paid monthly			41,490			December 1, 2015
Lincoln Centre	5.51% paid monthly			153,000			February 1, 2016
Publix at Weston Commons	5.08% paid monthly			35,000			January 1, 2036
Total Principal Outstanding				1,907,090
Fair Value Adjustment(7)				(48,980	)
Total mortgage loans payable			$	1,858,110

(1)	The Account entered into a debt agreement that included an interest rate cap with its lender to reduce its exposure to the variability of changes in interest rates until maturity of the underlying debt. The interest rate on the entire $126 million mortgage is capped at 6.50%.
(2)	The Account entered into a debt agreement that included an interest rate cap with its lender to reduce its exposure to the variability of changes in interest rates until maturity of the underlying debt. The interest rate on the entire $200 million mortgage is capped at 6.50%.
(3)	The mortgage is adjusted monthly for principal payments.
(4)	The mortgage is denominated in British pounds and the principal payment had been converted to U.S. dollars using the exchange rate as of December 31, 2009. The quarterly payments are interest only, with a balloon payment at maturity. The interest rate is fixed. The cumulative foreign currency translation adjustment (since inception) was an unrealized gain of $16 million.
(5)	Interest rates are fixed, unless stated otherwise.
(6)	The interest rate for these mortgages is a variable rate at the one month London Interbank Offered Rate (“LIBOR”) plus 200 basis points and is reset monthly.
(7)	The fair value adjustment appraises the difference (positive or negative) between the principal amount of outstanding debt and the fair value of outstanding debt. See Note 1 of these financial statements.

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Principal payment schedule on mortgage loans payable as of December 31, 2009 is due as follows (in thousands):

	Amount
2010		$	330,842
2011			13,067
2012			221,840
2013			552,853
2014			225,273
Thereafter			563,215
Total maturities		$	1,907,090

Note 9—Condensed Financial Information

Selected condensed financial information for an Accumulation Unit of the Account is presented below.

	Years Ended December 31,
	2009				2008				2007			2006			2005
Per Accumulation Unit data:
Rental income		$	22.649			$	18.794			$	17.975		$	16.717		$	15.604
Real estate property level expenses and taxes			11.193				9.190				8.338			7.807			7.026
Real estate income, net			11.456				9.604				9.637			8.910			8.578
Other income			2.778				3.808				4.289			3.931			3.602
Total income			14.234				13.412				13.926			12.841			12.180
Expense charges(1)			2.280				2.937				2.554			1.671			1.415
Investment income, net			11.954				10.475				11.372			11.170			10.765
Net realized and unrealized gain (loss) on investments and mortgage loans payable			(85.848	)			(54.541	)			26.389			22.530			18.744
Net (decrease) increase in Accumulation Unit Value			(73.894	)			(44.066	)			37.761			33.700			29.509
Accumulation Unit Value:
Beginning of period			267.348				311.414				273.653			239.953			210.444
End of period			193.454				267.348				311.414			273.653			239.953
Total return			(27.64	)%			(14.15	)%			13.80%			14.04%			14.02%
Ratios to Average net Assets:
Expenses(1)			1.01%				0.95%				0.87%			0.67%			0.63%
Investment income, net			5.29%				3.38%				3.88%			4.49%			4.82%
Portfolio turnover rate:
Real estate properties			0.75%				0.64%				5.59%			3.62%			6.72%
Marketable securities			—				25.67%				13.03%			51.05%			77.63%
Accumulation Units outstanding at end of period (in thousands):			39,473				41,542				55,106			50,146			42,623
Net assets end of period (in thousands)		$	7,879,914			$	11,508,924			$	17,660,537		$	14,132,693		$	10,548,711

⁽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 expense were included, the expense charge per Accumulation Unit for the twelve months ended December 31, 2009 would be $13.473 ($12.127, $10.892, $9.478, and $8.441, for the years ended December 31, 2008, 2007, 2006 and 2005, respectively), and the Ratio of Expenses to Average Net Assets for the twelve months ended December 31, 2009 would be 5.960% (3.91%, 3.71%, 3.81% and 3.78% for the years ended December 31, 2008, 2007, 2006, and 2005, respectively).

77

Note 10—Accumulation Units

Changes in the number of Accumulation Units outstanding were as follows (in thousands):

 

For The Years Ended,

 

2009

 

2008

 

2007

Outstanding:

Beginning of period

  

41,542

   

55,106

   

50,146

 

Credited for premiums

  

3,141

   

3,271

   

3,795

 

Credited for Purchase of units by TIAA (see Note 3)

  

4,139

   

577

   

—

 

Net units credited (cancelled) for transfers, net disbursements and amounts applied to the Annuity Fund

  

(9,349

)

  

(17,412

)

  

1,165

 

End of period

  

39,473

   

41,542

   

55,106

 

Note 11—Commitments and Subsequent Events

As of December 31, 2009, the Account had outstanding commitments to purchase interests in four limited partnerships. As of December 31, 2009, approximately $44.3 million remains to be funded under these commitments, which could be called in full or in part by the limited partnership at any time.

The Account is party to various 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.

During the normal course of business, the Account enters into discussions and agreements to purchase or sell real estate properties. Other than the sale of 16 properties within the DDR TC joint venture that are discussed in Note 7, no other properties were sold subsequent to December 31, 2009.

Pursuant to the liquidity guarantee obligation, TIAA has made no additional purchases of Liquidity Units subsequent to December 31, 2009. See Note 3—Related Party Transactions for further discussion of these transactions.

Note 12—New Accounting Pronouncements

In June 2007, the Accounting Standards Executive Committee (“AcSEC”) of the American Institute of Certified Public Accountants (“AICPA”) issued a Statement of Position (“SOP”) which 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. In February 2008, FASB indefinitely delayed the effective date of the SOP to allow time to consider significant issues related to the implementation of the SOP.

In February 2009, the Emerging Issues Task Force (“EITF”) added an issue to its agenda related to the application of the Guide, which will be discussed at a future meeting. The FASB staff created a working group to assist the EITF in addressing this issue. Management of the Account will continue to monitor FASB and EITF developments and will evaluate the financial reporting implications to the Account, as necessary.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS No. 167”), which amends guidance related to the identification of a variable interest entity, variable interests, the primary beneficiary, and expands required note disclosures to provide greater transparency to the users of financial statements. In December 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities”, which amended Codification with the guidance contained in SFAS No. 167. In February 2010, the FASB issued ASU No. 2010-10, “Amendments for Certain Investment Funds”, which defers the applicability of ASU No. 2009-17 in certain instances. These standards are effective on January 1, 2010 and management of the Account has concluded that the adoption of these standards will not result in a significant impact to the Account’s financial position or results of operations.

In August 2009, the FASB issued ASU No. 2009-05, “Measuring Liabilities at Fair Value.” This ASU clarifies the application of certain valuation techniques in circumstances in which a quoted price in an active

78

market for the identical liability is not available and clarifies that inputs to the valuation should not be adjusted when estimating the fair value of a liability in which contractual terms restrict transferability. This ASU became effective on October 1, 2009 and the adoption did not have a significant impact to the Account’s financial position or results of operations.

In September 2009, the FASB issued ASU No. 2009-12, “Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This ASU permits, as a practical expedient, an investor the ability to estimate the fair value of an investment in certain entities on the basis of the net asset value per share of the investment (or its equivalent) determined as of the reporting entity’s measurement date. The investee must satisfy specific requirements before the investor is permitted to utilize this practical expedient as a method of valuation. The amendments in this ASU are effective for interim and annual periods ending after December 15, 2009. The adoption of this ASU did not have a significant impact to the Account’s financial position or results of operations.

In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements” which requires new disclosures related to the transfer in and out of levels 1 and 2, and the separate disclosure of purchases, sales, issuances and settlements when reconciling activity in level 3. This ASU also amends prior disclosure requirements to call for the disaggregation of assets and liabilities into appropriate subsets, and the disclosure of valuation techniques and inputs for recurring and nonrecurring fair value measurements in levels 2 and 3. The new disclosure requirement for reconciling level 3 activity is effective January 1, 2011 and all other new or amended disclosure requirements are effective January 1, 2010 for the Account. These changes will not impact the Account’s financial position or results of operations.

In February 2010, the FASB issued ASU No. 2010-09, “Amendments to Certain Recognition and Disclosure Requirements”. This ASU amends Topic 855, “Subsequent Events” by not requiring a reporting entity that files financial statements with the Securities and Exchange Commission (“SEC filers”), or a conduit bond obligor to disclose the date through which subsequent events are evaluated. This ASU is effective for SEC filers upon issuance of the final ASU. The Account has adopted this revision as of December 31, 2009 and accordingly will not disclosure the date through which subsequent events were evaluated.

79

TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
December 31, 2009 and December 31, 2008
(Dollar values shown in thousands)

REAL ESTATE PROPERTIES—76.71% and 77.18%

Location/Description	Type	Fair Value
		2009				2008
Alabama:
Inverness Center	Office		$	90,315			$	102,891
Arizona:
Camelback Center	Office			37,774				58,000
Kierland Apartment Portfolio	Apartments			78,060				146,830
Phoenix Apartment Portfolio	Apartments			21,767				129,244
California:
3 Hutton Centre Drive	Office			28,752				45,710
50 Fremont Street	Office			284,283	(1)			386,600	(1)
88 Kearny Street	Office			61,600				99,815
275 Battery Street	Office			164,390				220,025
980 9th Street and 1010 8th Street	Office			—				151,600
Rancho Cucamonga Industrial Portfolio	Industrial			57,327				102,300
Capitol Place	Office			—				50,000
Centerside I	Office			27,012				46,400
Centre Pointe and Valley View	Industrial			18,929				29,000
Great West Industrial Portfolio	Industrial			65,000				93,600
Larkspur Courts	Apartments			50,111				71,500
Northern CA RA Industrial Portfolio	Industrial			42,437				63,456
Ontario Industrial Portfolio	Industrial			167,998	(1)			278,000	(1)
Pacific Plaza	Office			60,075	(1)			104,970	(1)
Regents Court	Apartments			50,505	(1)			59,000	(1)
Southern CA RA Industrial Portfolio	Industrial			75,817				107,218
The Legacy at Westwood	Apartments			77,836	(1)			89,224	(1)
Wellpoint	Office			37,400				46,000
Westcreek	Apartments			23,061				31,500
West Lake North Business Park	Office			32,407				54,425
Westwood Marketplace	Retail			77,077				95,100
Wilshire Rodeo Plaza	Office			151,209	(1)			213,783	(1)
Colorado:
Palomino Park	Apartments			143,907				173,000
The Lodge at Willow Creek	Apartments			31,624				40,000
The Market at Southpark	Retail			—				29,000
Connecticut:
Ten & Twenty Westport Road	Office			126,860				174,400
Florida:
701 Brickell Avenue	Office			198,630	(1)			255,000
4200 West Cypress Street	Office			—				41,568
North 40 Office Complex	Office			33,969				64,398
Plantation Grove	Retail			9,600				11,950
Pointe on Tampa Bay	Office			35,060				49,700
Publix at Weston Commons	Retail			38,100	(1)			50,987	(1)
Quiet Waters at Coquina Lakes	Apartments			19,918				21,810
Seneca Industrial Park	Industrial			62,341				101,296

See notes to the financial statements.

80

TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
December 31, 2009 and December 31, 2008
(Dollar values shown in thousands)

Location/Description	Type	Fair Value
		2009				2008
Florida: (continued)
South Florida Apartment Portfolio	Apartments		$	48,366			$	62,155
Suncrest Village Shopping Center	Retail			12,329				15,800
The Fairways of Carolina	Apartments			18,628				20,942
Urban Centre	Office			80,282				113,274
France:
Printemps de L’Homme	Retail			200,995				247,621
Georgia:
Atlanta Industrial Portfolio	Industrial			39,519				54,001
Glenridge Walk	Apartments			30,326				37,575
Reserve at Sugarloaf	Apartments			37,710	(1)			44,900	(1)
Shawnee Ridge Industrial Portfolio	Industrial			52,219				69,000
Windsor at Lenox Park	Apartments			48,223				57,550
Illinois:
Chicago Caleast Industrial Portfolio	Industrial			48,304				63,932
Chicago Industrial Portfolio	Industrial			60,908				78,022
Oak Brook Regency Towers	Office			64,265				75,937
Parkview Plaza	Office			44,360				65,846
Maryland:
Broadlands Business Park	Industrial			23,600				27,520
GE Appliance East Coast Distribution Facility	Industrial			28,900				40,500
Massachusetts:
99 High Street	Office			253,557	(1)			320,107	(1)
Needham Corporate Center	Office			16,196				32,494
Northeast RA Industrial Portfolio	Industrial			24,845				30,794
The Newbry	Office			230,375				315,600
Minnesota:
Champlin Marketplace	Retail			13,801				17,101
Nevada:
UPS Distribution Facility	Industrial			7,600				12,100
New Jersey:
Konica Photo Imaging Headquarters	Industrial			15,100				18,300
Marketfair	Retail			65,594				90,759
Morris Corporate Center III	Office			66,478				94,955
NJ Caleast Industrial Portfolio	Industrial			—				49,000
Plainsboro Plaza	Retail			26,962				33,500
South River Road Industrial	Industrial			28,656				43,872
New York:
780 Third Avenue	Office			240,077				341,000
The Colorado	Apartments			110,144	(1)			153,006	(1)
Pennsylvania:
Lincoln Woods	Apartments			28,728				32,025

See notes to the financial statements.

81

TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
December 31, 2009 and December 31, 2008
(Dollar values shown in thousands)

Location/Description	Type	Fair Value
		2009				2008
Tennessee:
Airways Distribution Center	Industrial		$	12,600			$	17,400
Summit Distribution Center	Industrial			12,300				22,700
Texas:
Dallas Industrial Portfolio	Industrial			125,275				141,328
Four Oaks Plac	Office			409,027	(1)			438,000	(1)
Houston Apartment Portfolio	Apartments			179,717				267,468
Lincoln Centre	Office			202,029	(1)			269,000	(1)
Park Place on Turtle Creek	Office			—				40,094
Pinnacle Industrial Portfolio	Industrial			34,148				38,733
Preston Sherry Plaza	Office			—				38,400	(1)
South Frisco Village	Retail			26,900	(1)			36,300	(1)
The Caruth	Apartments			49,641	(1)			61,349	(1)
The Maroneal	Apartments			32,179				38,456
United Kingdom:
1 & 7 Westferry Circus	Office			239,036	(1)			232,802	(1)
Virginia:
8270 Greensboro Drive	Office			34,200				57,000
Ashford Meadows Apartments	Apartments			71,105				79,319
One Virginia Square	Office			40,503				51,797
The Ellipse at Ballston	Office			65,505				84,018
Washington:
Creeksides at Centerpoint	Office			18,724				27,200
Fourth and Madison	Office			295,000	(1)			407,500	(1)
Millennium Corporate Park	Office			116,548				162,193
Northwest RA Industrial Portfolio	Industrial			17,800				24,100
Rainier Corporate Park	Industrial			65,277				81,035
Regal Logistics Campus	Industrial			47,955				67,000
Washington DC:
1001 Pennsylvania Avenue	Office			480,622	(1)			550,757	(1)
1401 H Street, NW	Office			143,555	(1)			194,600	(1)
1900 K Street, NW	Office			204,000				245,000
Mazza Gallerie	Retail			65,500				83,003
TOTAL REAL ESTATE PROPERTIES
(Cost $9,408,978 and $10,031,744)				7,437,344				10,305,040

See notes to the financial statements.

82

TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
December 31, 2009 and December 31, 2008
(Dollar values shown in thousands)

OTHER REAL ESTATE-RELATED INVESTMENTS—15.63% and 18.45%

REAL ESTATE JOINT VENTURES—13.56% and 16.30%

Location/Description	Fair Value
	2009				2008
California:
CA-Colorado Center LP
Yahoo Center (50% Account Interest)		$	133,227	(2)		$	239,748	(2)
CA-Treat Towers LP
Treat Towers (75% Account Interest)			66,435				105,074
Florida:
Florida Mall Associates, Ltd
The Florida Mall (50% Account Interest)			252,432	(2)			281,941	(2)
TREA Florida Retail, LLC
Florida Retail Portfolio (80% Account Interest)			162,204				196,202
West Dade Associates
Miami International Mall (50% Account Interest)			76,856	(2)			105,312	(2)
Georgia:
GA-Buckhead LLC
Prominence in Buckhead (75% Account Interest)			30,952				78,209
Massachusetts:
MA-One Boston Place REIT
One Boston Place (50.25% Account Interest)			129,922				212,083
Tennessee:
West Town Mall, LLC
West Town Mall (50% Account Interest)			37,262	(2)			73,969	(2)
Virginia:
Teachers REA IV, LLC
Tyson’s Executive Plaza II (50% Account Interest)			26,275				36,048
Various:
DDR TC LLC
DDR Joint Venture (85% Account Interest)			312,182	(2,3)			712,773	(2,3)
Storage Portfolio I, LLC
Storage Portfolio (75% Account Interest)			46,269	(2,3)			67,621	(2,3)
Strategic Ind Portfolio I, LLC
IDI Nationwide Industrial Portfolio (60% Account Interest)			40,587	(2,3)			67,731	(2,3)
TOTAL REAL ESTATE JOINT VENTURES
(Cost $2,142,016 and $2,068,714)			1,314,603				2,176,711
LIMITED PARTNERSHIPS - 2.07% and 2.15%
Cobalt Industrial REIT (10.998% Account Interest)			20,341				31,784
Colony Realty Partners LP (5.27% Account Interest)			12,123				29,000
Heitman Value Partners Fund (8.43% Account Interest)			13,736				16,334
Lion Gables Apartment Fund (18.46% Account Interest)			142,999				186,471
MONY/Transwestern Mezz RP II (16.67% Account Interest)			9,267				17,710
Transwestern Mezz Realty Partners III, LLC (11.708% Account Interest)			1,807				5,186
TOTAL LIMITED PARTNERSHIPS
(Cost $295,779 and $261,136)			200,273				286,485
TOTAL REAL ESTATE JOINT VENTURES AND LIMITED PARTNERSHIPS
(Cost $2,437,795 and $2,329,850)			1,514,876				2,463,196

See notes to the financial statements.

83

TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
December 31, 2009 and December 31, 2008
(Dollar values shown in thousands)

MARKETABLE SECURITIES—6.93% and 3.83%
COMMERCIAL PAPER—0.00% and 1.84%

Principal						Issuer	Yield(4)	Maturity Date		Fair Value
2009			2008							2009			2008
	$	—		$	40,000	Bank of Nova Scotia	0.193%		1/2/09		$	—		$	39,999
		—			50,000	Abbey National North America LLC	0.071%		1/5/09			—			49,998
		—			50,000	Rabobank USA Financial Corp	0.122%		1/5/09			—			49,999
		—			50,000	HSBC Finance Corporation	0.304%		1/7/09			—			49,997
		—			25,000	Societe Generale North America, Inc.	0.243%		1/13/09			—			24,997
		—			22,400	Toyota Motor Credit Corp.	0.406%		1/23/09			—			22,395
		—			8,200	Toyota Motor Credit Corp.	0.659%		2/4/09			—			8,196
TOTAL COMMERCIAL PAPER
(Cost $0 and $245,585)												—			245,581
GOVERNMENT AGENCY NOTES—4.80% and 1.99%
		—			25,000	Fannie Mae Discount Notes	0.030%		1/6/09			—			25,000
		—			14,200	Fannie Mae Discount Notes	0.081%		1/30/09			—			14,200
		—			33,400	Fannie Mae Discount Notes	0.152%		2/3/09			—			33,400
		4,700			—	Fannie Mae Discount Notes	0.041%		1/13/10			4,700			—
		25,000			—	Fannie Mae Discount Notes	0.091%		1/19/10			25,000			—
		49,300			—	Fannie Mae Discount Notes	0.020%		1/27/10			49,299			—
		25,000			—	Fannie Mae Discount Notes	0.051%		2/4/10			24,999			—
		20,000			—	Fannie Mae Discount Notes	0.091%		2/8/10			19,999			—
		18,873			—	Fannie Mae Discount Notes	0.071%		2/16/10			18,872			—
		10,000			—	Fannie Mae Discount Notes	0.101%		3/1/10			9,999			—
		17,470			—	Fannie Mae Discount Notes	0.167%		5/5/10			17,463			—
		—			18,100	Federal Home Loan Bank Discount Notes	0.071%		1/5/09			—			18,100
		—			50,000	Federal Home Loan Bank Discount Notes	0.041%		1/12/09			—			50,000
		—			11,330	Federal Home Loan Bank Discount Notes	0.051%		1/21/09			—			11,330
		—			100,000	Federal Home Loan Bank Discount Notes	0.081%		1/22/09			—			100,000
		10,990			—	Federal Home Loan Bank Discount Notes	0.001%		1/4/10			10,990			—
		4,419			—	Federal Home Loan Bank Discount Notes	0.041%		1/13/10			4,419			—
		44,000			—	Federal Home Loan Bank Discount Notes	0.081%		1/15/10			44,000			—
		25,300			—	Federal Home Loan Bank Discount Notes	0.071%		1/22/10			25,300			—
		41,200			—	Federal Home Loan Bank Discount Notes	0.051%		2/24/10			41,200			—
		15,770			—	Federal Home Loan Bank Discount Notes	0.081%		3/5/10			15,770			—
		—			14,100	Freddie Mac Discount Notes	0.203%		1/5/09			—			14,100
		10,000			—	Freddie Mac Discount Notes	0.091%		1/20/10			10,000			—
		50,541			—	Freddie Mac Discount Notes	0.041-0.076%		1/25/10			50,540			—
		11,800			—	Freddie Mac Discount Notes	0.051%		2/2/10			11,800			—
		47,000			—	Freddie Mac Discount Notes	0.030%		2/16/10			46,998			—
		19,010			—	Freddie Mac Discount Notes	0.132%		2/26/10			19,009			—
		5,736			—	Freddie Mac Discount Notes	0.081%		3/1/10			5,736			—
		9,000			—	Freddie Mac Discount Notes	0.071%		3/8/10			8,999			—
TOTAL GOVERNMENT AGENCY NOTES
(Cost $465,072 and $266,118)												465,092			266,130

See notes to the financial statements.

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TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
December 31, 2009 and December 31, 2008
(Dollar values shown in thousands)

UNITED STATES TREASURY BILLS—2.13% and 0.00%

Principal						Issuer	Yield(4)	Maturity Date		Fair Value
2009			2008							2009			2008
	$	24,515		$	—	United States Treasury Bills	0.066-0.152%		2/25/10		$	24,514		$	—
		47,200			—	United States Treasury Bills	0.137-0.162%		4/22/10			47,189			—
		52,530			—	United States Treasury Bills	0.122-0.147%		5/13/10			52,506			—
		62,015			—	United States Treasury Bills	0.127-0.147%		5/20/10			61,981			—
		20,000			—	United States Treasury Bills	0.137%		5/27/10			19,985			—
TOTAL UNITED STATES TREASURY BILLS
(Cost $206,163 and $0)												206,175			—
TOTAL MARKETABLE SECURITIES
(Cost $671,235 and $511,703)												671,267	��		511,711
MORTGAGE LOAN RECEIVABLE—0.73% and 0.54%
						Borrower	Current Rate(5)
		75,000			75,000	Klingle Corporation	1.040%		7/10/11			71,273			71,767
TOTAL MORTGAGE LOAN RECEIVABLE
(Cost $75,000 and $75,000)												71,273			71,767
TOTAL INVESTMENTS
(Cost $12,593,008 and $12,948,297)											$	9,694,760		$	13,351,714

(1)	The investment has a mortgage loan payable outstanding, as indicated in Note 8.
(2)	The market value reflects the Account’s interest in the joint venture and is net of debt.
(3)	Properties within this investment are located throughout the United States.
(4)	Yield represents the annualized yield at the date of purchase.
(5)	Current rate represents the interest rate on this investment at December 31, 2009. At December 31, 2008, the interest rate on this investment was 2.57%.

See notes to the financial statements.

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 statement of investments, and the related statements of operations, of changes in net assets and of cash flows, present fairly, in all material respects, the financial position of the TIAA Real Estate Account (the “Account”) at December 31, 2009 and 2008, the results of its operations, the changes in its net assets and its cash flows for each of the three years in the period ended December 31, 2009 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 financial 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

Charlotte, North Carolina
March 18, 2010

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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 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, 2009. Based upon management’s review, the CEO and the CFO concluded that the registrant’s disclosure controls and procedures were effective as of December 31, 2009.

(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, 2009. 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, 2009, the Account’s internal control over financial reporting is effective.

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 U.S. Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

(c) Changes in internal control over financial reporting. There have been no changes in the registrant’s internal control 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 control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

87

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, 2010, their dates of birth, and their principal occupations during the last five years, are as follows:

Trustees

Ronald L. Thompson,6/17/49
Former Chairman and Chief Executive Officer, Midwest Stamping and Manufacturing Company through 2005. Director, Chrysler Group, LLC and Washington University in St. Louis.

Jeffrey R. Brown,2/16/68
William G. Karnes Professor of Finance and Director of the Center for Business and Public Policy, University of Illinois at Urbana-Champaign. Research Associate of the National Bureau of Economic Research (NBER) and Associate Director of the NBER Retirement Research Center. Former member of the Social Security Advisory Board from 2006 to 2008, and Director of the Countryside School.

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, of the Hodson Trust, Time Warner, Inc. and Omnicom Group.

Lisa W. Hess,8/8/55
Former Chief Investment Officer of Loews Corporation. Founding partner of Zesiger Capital Group. Trustee of the WT Grant Foundation, the Chapin School, and the Pomfret School.

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.

Lawrence H. Linden,2/19/47
Retired Managing Director and former General Partner at Goldman Sachs, retiring in 2008. After joining Goldman Sachs in 1992, served at various times the Head of Technology, Head of Operations, and Co-Chairman of the Global Control and Compliance Committee. Founding Trustee of the Linden Trust for Conservation, Chairman of the Board of Trustees of Resources for the Future, Co-Chairman of the Board of Directors of the World Wildlife Fund and co-founder of, and senior advisor to, the Redstone Strategy Group.

Maureen O’Hara,6/13/53
R.W. Purcell Professor of Finance at Johnson Graduate School of Management, Cornell University, where she has taught since 1979. Former chair of the board of Investment Technology Group, Inc. since 2007, and member of the board since 2003. Director of New Star Financial, Inc. and Chair of the FINRA Economic Advisory Board.

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 from 1996 to 2000. Chairman, Board of Trustees, Worcester Polytechnic Institute and overseer of the Tuck School of Business Administration at Dartmouth College. Director, Sanford C. Bernstein Fund Inc. Knewco, Inc. and Emerj Inc.

Sidney A. Ribeau,12/3/47
President, Howard University since 2008. Formerly, President, Bowling Green State University, 1995-2008. Director, The Andersons, Inc., Convergys and Worthington Industries.

Dorothy K. Robinson,2/18/51
Vice President and General Counsel, Yale University since 2000. Trustee, Newark Public Radio Inc., Youth

88

Rights Media, Inc. Yale Southern Observatory, Inc., Fourth Century 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 of Pfizer from 1995 to 2005. Director, Pitney Bowes Inc., and the Hershey Corporation. Director, Multiple Sclerosis Society of New York City Chapter.

David F. Swensen,1/26/54
Chief Investment Officer, Yale University since 1985, and adjunct professor of investment strategy at Yale School of Management and lecturer in Yale’s Department of Economics. Member. Brookings Institution and President Obama’s Economic Recovery Advisory Board. Trustee of Yale New Haven Hospital and Director of the Courtauld Institute, Hopkins School and the Carnegie Institution.

Marta Tienda,8/10/50
Maurice P. During ‘22 Professor of Demographic Studies and Professor of Sociology in Public Affairs, Princeton University, since 1997. Director, Office of Population Research, Princeton University, 1998-2002. Director, Corporation of Brown University, Sloan Foundation, and Jacobs Foundation.

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, Director and former Chairman of The Sanford C. Bernstein Fund, Inc. Member of the Brock Capital Group, LLC.

Officer—Trustees

Roger W. Ferguson, Jr.,10/28/51
President and Chief Executive Officer of TIAA and CREF since April 2008. Formerly, Chairman of Swiss Re America Holding Corporation and Head of Financial Services and Member of the Executive Committee, Swiss Re from 2006 to 2008; Vice Chairman and member of the Board of the U.S. Federal Reserve from 1999 to 2006 and a member of its Board of Governors from 1997 to 1999; and Partner and Associate, McKinsey & Company from 1984 to 1997. Currently a member of the Board of Trustees of the Institute for Advance Study, a member of the Council on Foreign Relations, a member of the Group of Thirty and a member of President Obama’s Economic Recovery Advisory Board.

Other TIAA Executive Officers

Georganne C. Proctor,10/25/56
Executive Vice President and Chief Financial Officer, TIAA and CREF since 2006. Chief Integration Officer, TIAA and CREF since January 2010. 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.

Jorge Gutierrez,11/26/61
Treasurer, TIAA, since September 2008. Assistant Treasurer, TIAA from 2004 to 2008.

89

William J. Mostyn III, 1/18/48
Vice President and Corporate Secretary of TIAA and the TIAA-CREF Funds since April 2008; Deputy General Counsel and Corporate Secretary of Bank of America Corporation from 2005 to 2007; Deputy General Counsel, Secretary and Corporate Governance Officer of The Gillette Company from 1974 to 2005.

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.

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.

The TIAA 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, the TIAA general account has agreed to purchase liquidity units. TIAA thereby guarantees that a participant can redeem accumulation units at their net asset value next determined. For the year ended December 31, 2009, the Account expensed $12.4 million for this liquidity guarantee from TIAA through a daily deduction from the net assets of the Account. During 2009 and through the date of this annual report, the TIAA general account has purchased liquidity units in an aggregate amount equal to $1.1 billion in a number of separate transactions. These liquidity units are valued in the same manner as are accumulation units held by the Account’s participants. For more

90

information with respect to the significant features of this liquidity guarantee, including the oversight of the independent fiduciary, please see “Liquidity Guarantee” in Item 1 of this annual report.

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.

For the year ended December 31, 2009, the Account expensed $42.5 million for investment advisory services and $4.7 million for mortality and expense risks provided/borne by TIAA. For the same period, the Account expensed $35.8 million for administrative and distribution services provided by TIAA and Services, respectively.

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, 2009 and 2008 and review of financial statements included in the registrant’s quarterly reports were $862,650 and $849,024, respectively.

Audit-Related Fees. PwC audit-related fees for the year ended December 31, 2009 were $72,543. There were no audit-related fees for the year ended December 31,2008.

Tax Fees. PwC had no tax fees for the years ended December 31, 2009 and 2008.

All Other Fees. Other than as set forth above, there were no additional fees with respect to registrant.

Preapproval Policy. In June of 2003, the audit committee of TIAA’s Board of Trustees (“Audit Committee”) adopted a Preapproval Policy for External Audit Firm Services (the “Policy”), which applies to the registrant. 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.

91

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(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.(5)
(3)	(A)	Charter of TIAA.(8)
	(B)	Restated Bylaws of TIAA (as amended).(9)
(4)	(A)	Forms of RA, GRA, GSRA, SRA, IRA Real Estate Account Endorsements(2), Keogh Contract,(3) Retirement Select and Retirement Select Plus Contracts and Endorsements(1) and Retirement Choice and Retirement Choice Plus Contracts.(3)
	(B)	Forms of Income-Paying Contracts(2)
(10)	(A)	Independent Fiduciary Agreement, dated February 22, 2006, by and among TIAA, the Registrant, and Real Estate Research Corporation(4)
	(B)	Amendment to Independent Fiduciary Agreement, dated December 17, 2008, between TIAA, on behalf of the Registrant, and Real Estate Research Corporation(6)
	(C)	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.(7)
(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 April 29, 2004 (File No. 333-113602).
(2)	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).
(3)	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).
(4)	Previously filed and incorporated herein by reference to Exhibit 10.(a) to the Annual Report on Form 10-K of the Account for the period ended December 31, 2005, filed with the Commission on March 15, 2006 (File No. 33-92990).
(5)	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 (File No. 33-92990).
(6)	Previously filed and incorporated herein by reference to the Account’s Current Report on Form 8-K, filed with the Commission on December 22, 2008 (File No. 33-92990).
(7)	Previously filed and incorporated herein by reference to Exhibit 10.(b) to the Annual Report on Form 10-K of the Account for the fiscal year ended December 31, 2007 and filed with the Commission on March 20, 2008 (File No. 33-92990).
(8)	Previously filed and incorporated by reference to Exhibit 3(A) to the Account’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 and filed with the Commission on August 13, 2009 (File No. 33-92990).
(9)	Previously filed and incorporated by reference to Exhibit 3(B) to the Account’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 and filed with the Commission on August 13, 2009 (File No. 33-92990).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant, TIAA Real Estate Account, has duly caused this Annual Report on form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 18 day of March, 2010.

	TIAA REAL ESTATE ACCOUNT
	By:	TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
March 18, 2010	By:	/s/ Roger W. Ferguson, Jr.
		Roger W. Ferguson, Jr.
		President and Chief Executive
		Officer and Trustee

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/ ROGER W. FERGUSON, JR.	President and Chief Executive Officer (Principal Executive Officer) and Trustee	3/18/10
/S/ GEORGANNE C. PROCTOR	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	3/18/10
/S/ RONALD L. THOMPSON	Chairman of the Board of Trustees	3/18/10
/S/ JEFFREY R. BROWN	Trustee	3/18/10
/S/ ROBERT C. CLARK	Trustee	3/18/10
/S/ LISA W. HESS	Trustee	3/18/10
/S/ EDWARD M. HUNDERT, M.D.	Trustee	3/18/10
/S/ LAWRENCE H. LINDEN	Trustee	3/18/10
/S/ MAUREEN O’HARA	Trustee	3/18/10
/S/ DONALD K. PETERSON	Trustee	3/18/10
/S/ SIDNEY A. RIBEAU	Trustee	3/18/10
/S/ DOROTHY K. ROBINSON	Trustee	3/18/10
/S/ DAVID L. SHEDLARZ	Trustee	3/18/10
/S/ DAVID F. SWENSEN	Trustee	3/18/10
/S/ MARTA TIENDA	Trustee	3/18/10
/S/ ROSALIE J. WOLF	Trustee	3/18/10

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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 contract owners holding interests in the Account.

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