Tiaa Real Estate Account 10-Q 2012 Q3 Quarterly report

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

FORM 10-Q

(Mark One)

S QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2012

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; 333-180173

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-Q or any amendment to this Form 10-Q: 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).

YESS 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

PART I. FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
TIAA REAL ESTATE ACCOUNT
SEPTEMBER 30, 2012

	Page
Consolidated Statements of Assets and Liabilities		3
Consolidated Statements of Operations		4
Consolidated Statements of Changes in Net Assets		5
Consolidated Statements of Cash Flows		6
Notes to the Consolidated Financial Statements		7
Consolidated Statements of Investments		24

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

	September 30, 2012			December 31, 2011
	(Unaudited)
ASSETS
Investments, at fair value:
Real estate properties (cost: $10,875.3 and $10,358.3)		$	10,839.8		$	9,857.6
Real estate joint ventures and limited partnerships (cost: $2,187.3 and $2,193.3)			2,135.8			1,898.9
Marketable securities:
Real estate related (cost: $1,326.9 and $895.3)			1,496.5			927.9
Other (cost: $2,428.0 and $2,802.6)			2,428.3			2,802.8
Total investments (cost: $16,817.5 and $16,249.5)			16,900.4			15,487.2
Cash and cash equivalents			15.0			17.5
Due from investment advisor			—			6.8
Other			255.6			238.4
TOTAL ASSETS			17,171.0			15,749.9
LIABILITIES
Mortgage loans payable—Note 8 (principal outstanding: $2,191.8 and $2,008.6)			2,215.3			2,028.2
Due to investment advisor			9.9			—
Accrued real estate property level expenses			221.8			166.9
Other			28.1			27.6
TOTAL LIABILITIES			2,475.1			2,222.7
COMMITMENTS AND CONTINGENCIES—Note 11
NET ASSETS
Accumulation Fund			14,365.5			13,227.2
Annuity Fund			330.4			300.0
TOTAL NET ASSETS		$	14,695.9		$	13,527.2
NUMBER OF ACCUMULATION UNITS OUTSTANDING—Note 10			53.8			53.4
NET ASSET VALUE, PER ACCUMULATION UNIT—Note 9		$	267.140		$	247.654

See notes to the consolidated financial statements

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TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions)
(Unaudited)

	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2012				2011				2012				2011
INVESTMENT INCOME
Real estate income, net:
Rental income		$	217.5			$	223.9			$	648.4			$	657.9
Real estate property level expenses and taxes:
Operating expenses			53.7				53.0				162.7				164.8
Real estate taxes			31.0				27.9				90.0				82.4
Interest expense			29.2				27.4				87.4				81.2
Total real estate property level expenses and taxes			113.9				108.3				340.1				328.4
Real estate income, net			103.6				115.6				308.3				329.5
Income from real estate joint ventures and limited partnerships			23.1				19.8				56.1				72.9
Interest			0.8				0.7				2.1				2.8
Dividends			8.7				5.8				23.4				12.6
TOTAL INVESTMENT INCOME			136.2				141.9				389.9				417.8
Expenses—Note 2:
Investment advisory charges			14.2				13.2				42.4				39.4
Administrative charges			8.2				7.5				22.9				21.8
Distribution charges			3.7				2.3				10.6				6.3
Mortality and expense risk charges			0.2				1.6				2.6				4.5
Liquidity guarantee charges			8.1				6.8				23.1				16.8
TOTAL EXPENSES			34.4				31.4				101.6				88.8
INVESTMENT INCOME, NET			101.8				110.5				288.3				329.0
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
Net realized gain (loss) on investments:
Real estate properties			(26.8	)			(62.1	)			(32.0	)			(71.4	)
Real estate joint ventures and limited partnerships			(49.5	)			(2.1	)			(51.9	)			(10.6	)
Marketable securities			2.7				1.3				14.1				5.0
Net realized loss on investments			(73.6	)			(62.9	)			(69.8	)			(77.0	)
Net change in unrealized appreciation (depreciation) on:
Real estate properties			141.6				309.0				465.5				775.4
Real estate joint ventures and limited partnerships			130.5				83.6				313.0				236.5
Marketable securities			1.3				(142.4	)			137.5				(92.0	)
Mortgage loans payable			(25.8	)			(6.4	)			(54.5	)			(6.9	)
Net change in unrealized appreciation on investments and mortgage loans payable			247.6				243.8				861.5				913.0
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND MORTGAGE LOANS PAYABLE			174.0				180.9				791.7				836.0
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		$	275.8			$	291.4			$	1,080.0			$	1,165.0

See notes to the consolidated financial statements

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TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(In millions)
(Unaudited)

	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2012				2011				2012				2011
FROM OPERATIONS
Investment income, net		$	101.8			$	110.5			$	288.3			$	329.0
Net realized loss on investments			(73.6	)			(62.9	)			(69.8	)			(77.0	)
Net change in unrealized appreciation on investments and mortgage loans payable			247.6				243.8				861.5				913.0
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS			275.8				291.4				1,080.0				1,165.0
FROM PARTICIPANT TRANSACTIONS
Premiums			489.4				497.3				1,450.7				1,876.7
Liquidity units redeemed—Note 3			(314.2	)			—				(620.3	)			—
Annuity payments			(6.7	)			(5.5	)			(18.6	)			(17.3	)
Withdrawals and death benefits			(241.6	)			(433.0	)			(723.1	)			(854.0	)
NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM PARTICIPANT TRANSACTIONS			(73.1	)			58.8				88.7				1,005.4
NET INCREASE IN NET ASSETS			202.7				350.2				1,168.7				2,170.4
NET ASSETS
Beginning of period			14,493.2				12,623.3				13,527.2				10,803.1
End of period		$	14,695.9			$	12,973.5			$	14,695.9			$	12,973.5

See notes to the consolidated financial statements

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TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

	For the Nine Months Ended September 30,
	2012				2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations		$	1,080.0			$	1,165.0
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities:
Net realized loss on investments			69.8				77.0
Net change in unrealized appreciation on investments and mortgage loans payable			(861.5	)			(913.0	)
Purchase of real estate properties			(521.5	)			(1,108.9	)
Capital improvements on real estate properties			(129.9	)			(120.9	)
Proceeds from sale of real estate properties			97.8				228.3
Purchases of long term investments			(644.2	)			(458.1	)
Proceeds from sale of long term investments			251.3				34.4
Decrease in other investments			374.6				18.4
Change in due to (from) investment advisor			16.7				1.5
Increase in other assets			(17.3	)			(44.6	)
Increase in other liabilities			17.9				14.8
NET CASH USED IN OPERATING ACTIVITIES			(266.3	)			(1,106.1	)
CASH FLOWS FROM FINANCING ACTIVITIES
Mortgage loan proceeds received			182.6				105.0
Principal payments of mortgage loans payable			(7.5	)			(15.3	)
Premiums			1,450.7				1,876.7
Liquidity units redeemed			(620.3	)			—
Annuity payments			(18.6	)			(17.3	)
Withdrawals and death benefits			(723.1	)			(854.0	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			263.8				1,095.1
NET DECREASE IN CASH AND CASH EQUIVALENTS			(2.5	)			(11.0	)
CASH AND CASH EQUIVALENTS
Beginning of period			17.5				12.9
End of period		$	15.0			$	1.9
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	88.1			$	81.3

See notes to the consolidated financial statements

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TIAA REAL ESTATE ACCOUNT
NOTES TO THE CONSOLIDATED 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 to seek favorable long-term returns primarily through rental income and capital appreciation from real estate and real estate-related 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 into these consolidated financial statements. Additionally, the Account invests in real estate-related and non-real estate-related publicly-traded securities, cash and other instruments to maintain adequate liquidity levels for operating expenses, capital expenditures and to fund benefit payments (withdrawals, transfers and related transactions).

The consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which requires 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 consolidated 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. These consolidated financial statements reflect, in the opinion of management, all material adjustments necessary to fairly state the results of operations and financial position for the interim periods presented.

The Accumulation Unit Value (“AUV”) used for financial reporting purposes may differ from the AUV used for processing transactions. The AUV used for financial reporting purposes includes security and participant transactions effective through the date of the report.

Determination of Investments at Fair Value:The Account reports all investments at fair value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946,Financial Services—Investment Companies. Further, in accordance with the adoption of the fair value option allowed under ASC 825,Financial Instruments, and at the election of Account management, mortgage loans payable are reported at fair value. The FASB has defined fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The following is a description of the valuation methodologies used to determine the fair value of the Account’s investments and investment related mortgage loans payable.

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. Determination of fair value involves significant levels of judgment because the actual fair 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 reasonable estimate of the fair value of its investments. Implicit in the Account’s definition of fair value are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

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• 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 fair value presented.

Real estate properties owned by the Account are initially valued based on an independent third party appraisal, as reviewed by TIAA’s internal appraisal staff and as applicable the Account’s independent fiduciary 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 third party appraiser, reviewed by TIAA’s internal appraisal staff and as applicable the Account’s independent fiduciary. 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 or month 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 the account receives a bona fide bid for the sale of a property held within the Account or one of the Account’s joint ventures. 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). Alternatively, adjustments may be made to reflect the execution or renewal of a significant lease. 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).

The 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, 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, Royal Institute of Chartered Surveyors) and state certified appraisers from national or regional firms with relevant property type experience and market knowledge. Under the Account’s current procedures, each independent appraisal firm will be rotated off of a particular property at least every three

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years, although such appraisal firm may perform appraisals of other Account properties subsequent to such rotation.

Also, the independent fiduciary can require additional appraisals if factors or events have occurred that could materially change a property’s value (including those identified above) 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 (seeValuation 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.

Valuation of Real Estate Limited Partnerships—Limited partnership interests are stated at the fair value of the Account’s ownership in the partnership which are recorded based upon the changes in the net asset values of the limited partnerships as determined from the financial statements of the limited partnerships when received by the Account. Prior to the receipt of the financial statements from the limited partnerships, the Account estimates the value of its interest in good faith and will from time to time seek input from the issuer or the sponsor of the investments. Since market quotations are not readily available, the limited partnership interests are valued at fair value as determined in good faith by management under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole.

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.

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.

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.

Valuation of Mortgage Loans Payable—Mortgage loans payable are stated at fair value. The estimated fair values of mortgage loans payable are based on the amount at which the liability could be transferred to a third party exclusive of transaction costs. Mortgage loans payable are valued internally by TIAA’s internal valuation department, as reviewed by the Account’s independent fiduciary, 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, and the return demands of the market.

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SeeNote 5—Assets and Liabilities Measured at Fair Value on a Recurring Basis for further discussion and disclosure regarding the determination of the fair value of the Account’s investments.

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 are included in net realized and unrealized gains and losses on real estate properties 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.

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, payment levels cannot be reduced as a result of the Account’s actual 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 not to exceed 2.5% of average net assets per year. The Account pays a fee to TIAA to assume mortality and expense risks.

Accounting for Investments: The investments held by the Account are accounted for as follows:

Real Estate Properties—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.

Real Estate Joint Ventures—The Account has limited ownership interests in various real estate joint ventures (collectively, the “joint ventures”). The Account records its contributions as increases to its investments in the joint ventures, and distributions from the joint ventures are treated as income within income from real estate joint ventures and limited partnerships in the Account’s consolidated statements of operations. Distributions that are identified as returns of capital are recorded as reductions to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Income from the joint ventures is recorded based on the Account’s proportional interest of the income distributed by the joint ventures. Income earned but not yet distributed to the Account by the joint ventures is recorded as unrealized gains and losses.

Limited Partnerships—The Account has ownership interests in various private real estate funds (primarily limited partnerships) 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 income within income from real estate joint ventures and limited partnerships in the Account’s consolidated statements of operations. Distributions that are identified as returns of capital are recorded as reductions to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Unrealized gains and losses are recorded based upon the changes in the net asset values of the limited partnerships as determined from the financial statements of the limited partnerships when received by the Account. Prior to the receipt of the financial statements from the limited partnerships, the Account estimates the value of its interest in good faith and will from time to time seek input from the issuer or the sponsor of the investments. Changes in value based on such estimates are recorded by the Account as unrealized gains and losses.

Marketable Securities—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

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the ex-dividend date within dividend income. Dividends that are identified as returns of capital are recorded as reductions to the cost basis of the investment, whereas dividends identified as capital gains or losses are recorded as realized gains or losses. Realized gains and losses on securities transactions are accounted for on the specific identification method.

Realized and Unrealized Gains and Losses—Realized gains and losses are recorded at the time an investment is sold or a distribution is received in relation to an investment sale from a joint venture or limited partnership. 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.

Unrealized gains and losses are recorded as the fair values of the Account’s investments are adjusted, and as discussed within theReal Estate Joint Ventures andLimited Partnershipssections above.

Net Assets—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 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) since the end of the prior valuation day; and

• actual net operating income earned from the Account’s properties, other real estate-related investments and non-real estate-related investments (but 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 liabilities held within the Account, including the daily investment management fee, administration and distribution fees, mortality and expense fee, and liquidity guarantee fee, and certain other expenses attributable to operating the Account. Daily estimates of net operating income are adjusted to reflect actual net operating income on a monthly basis, at which time such adjustments (if any) are reflected in the Account’s unit value.

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 and Cash Equivalents: Cash and cash equivalents are balances held by the Account 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.

Restricted Cash:The Account held $58.6 million and $44.0 million as of September 30, 2012 and December 31, 2011, respectively, in escrow accounts for property taxes, insurance, and various other property related matters as required by certain creditors related to the Account’s outstanding mortgage loans payable. These amounts are recorded within other assets on the consolidated statements of assets and liabilities. SeeNote 8—Mortgage Loans Payable for additional information regarding the Account’s outstanding mortgage loans payable.

Due to/from Investment Advisor: Due to/from investment advisor represents amounts that are to be 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 contractually charged on these amounts.

11

Other Assets and Other Liabilities:Other assets and other liabilities are comprised of operating assets and liabilities utilized and held at each individual real estate property investment. Other assets consist of, amongst other items, tenant receivables and prepaid expenses; whereas other liabilities consist of security deposits.

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 incurs no material federal income tax attributable to the net investment activity of the Account. Management has analyzed the Account’s tax positions taken for all open federal income tax years (2007-2011) and has concluded no provisions for federal income tax are required as of September 30, 2012.

Changes in Net Assets:Premiums include premiums paid by existing accumulation unit holders in the Account and transfers into the Account. Withdrawals and death benefits include withdrawals out of the Account which include transfers out of the Account and required minimum distributions.

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 various portfolio accounting and related services for the Account.

The Account is a party to the Distribution 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. In addition, TIAA performs administrative functions for the Account, which include, among other things, (i) maintaining accounting records and performing accounting services, (ii) receiving and allocating premiums, (iii) calculating and making annuity payments, (iv) processing withdrawal requests, (v) providing regulatory compliance and reporting services, (vi) maintaining the Account’s records of contract ownership and (vii) otherwise assisting generally in all aspects of the Account’s operations. Both distribution services (pursuant to the Distribution Agreement) and administrative services are provided to the Account by Services and TIAA, as applicable, on a cost basis.

The Distribution Agreement is terminable by either party upon 60 days written notice and terminates automatically upon any assignment thereof.

TIAA and Services provide investment management, administrative and distribution 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 consolidated statements of operations and are reflected inNote 9—Financial Highlights.

12

Note 3—Related Party Transactions

Pursuant to its existing liquidity guarantee obligation, the TIAA General Account purchased in multiple transactions an aggregate of 4.7 million accumulation units (which are generally referred to as “liquidity units”) in the Account between December 2008 and June 2009 for an aggregate amount of $1.2 billion. TIAA has not purchased additional liquidity units since June 2009.

In accordance with the 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 obligation 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:

• 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.

The independent fiduciary currently intends to cause systematic redemptions of the liquidity units as follows. The independent fiduciary intends to cause a redemption of approximately one-quarter of the liquidity units held by TIAA on a daily basis throughout the third month of each fiscal quarter, beginning June 1, 2012, so long as (i) the Account holds and is projected to hold at least 17% of its net assets in cash, cash equivalents and publicly traded, liquid non-real estate related securities, after taking into account certain projected sources and uses of cash flow into the Account and (ii) recent historical net participant flows have been positive over the 20 business days prior to such redemption. In addition, at any time the Account holds cash, cash equivalents and publicly traded, liquid non real estate related securities in excess of 25% of its net assets, the independent fiduciary will cause redemption of liquidity units in an amount sufficient to reduce such level to 25% of net assets.

In accordance with this intent, the independent fiduciary caused redemption of approximately half of the liquidity units held by TIAA during the nine months ended September 30, 2012. These redemptions were executed evenly over the 21 and 19 business days in June and September 2012, respectively. Aggregate amounts of $306.1 million and $314.2 million in value of liquidity units were redeemed during the months of June and September, respectively. As of September 30, 2012, TIAA held 2.4 million liquidity units which had a value of $629.9 million. These units represented 4.4% of the outstanding accumulation units of the Account.

As discussed inNote 2—Management Agreements and Arrangements, TIAA and Services provide certain services to the Account on an at cost basis. SeeNote 9—Financial Highlights for details of the expense charge and expense ratio.

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Note 4–Credit Risk Concentrations

Concentrations of credit risk may 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 2.1% 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		20.8	%		15.1	%		8.5	%		0.3	%		1.8	%		46.5	%
Apartment		7.6	%		6.0	%		5.3	%		—			—			18.9	%
Industrial		1.4	%		7.7	%		4.2	%		1.1	%		—			14.4	%
Retail		4.2	%		2.7	%		8.3	%		0.2	%		1.6	%		17.0	%
Other(3)		2.9	%		0.2	%		0.1	%		—			—			3.2	%
Total		36.9	%		31.7	%		26.4	%		1.6	%		3.4	%		100.0	%

(1)	Wholly-owned properties are represented at fair value and gross of any debt, while joint venture properties are represented at the net equity value.
(2)	Represents real estate investments in the United Kingdom and France.
(3)	Represents interest in Storage Portfolio investment and fee interest encumbered by a ground lease real estate investment.

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

Note 5—Assets and Liabilities Measured at Fair Value on a Recurring Basis

Valuation Hierarchy:The Account’s fair value measurements are grouped categorically into three levels, as defined by the FASB. The levels are defined as follows:

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 held by the Account are generally marketable equity securities.

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

14

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, variable notes, United States Treasury securities, and debt securities.

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, and mortgage loans receivable and 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 determination of 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 inNote 1–Organization and Significant Accounting Policies in more detail, the Account generally obtains independent third party 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 consolidated 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.

15

The following tables show the major categories of assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 (unaudited) and December 31, 2011, 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 millions):

Description	Level 1: Quoted Prices in Active Markets for Identical Assets			Level 2: Significant Other Observable Inputs			Level 3: Significant Unobservable Inputs				Total at September 30, 2012
Real estate properties		$	—		$	—		$	10,839.8			$	10,839.8
Real Estate joint ventures			—			—			1,794.3				1,794.3
Limited partnerships			—			—			341.5				341.5
Marketable securities:
Real Estate Related			1,496.5			—			—				1,496.5
Government Agency Notes			—			925.4			—				925.4
United States Treasury securities			—			1,502.9			—				1,502.9
Total Investments at September 30, 2012		$	1,496.5		$	2,428.3		$	12,975.6			$	16,900.4
Mortgage loans payable		$	—		$	—		$	(2,215.3	)		$	(2,215.3	)

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, 2011
Real estate properties		$	—		$	—		$	9,857.6			$	9,857.6
Real Estate joint ventures			—			—			1,591.4				1,591.4
Limited partnerships			—			—			307.5				307.5
Marketable securities:
Real Estate Related			927.9			—			—				927.9
Government Agency Notes			—			1,551.6			—				1,551.6
United States Treasury securities			—			1,251.2			—				1,251.2
Total Investments at December 31, 2011		$	927.9		$	2,802.8		$	11,756.5			$	15,487.2
Mortgage loans payable		$	—		$	—		$	(2,028.2	)		$	(2,028.2	)

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 the three months and nine months ended September 30, 2012 and September 30, 2011 (in millions, unaudited):

	Real Estate Properties				Real Estate Joint Ventures				Limited Partnerships				Total Level 3 Investments				Mortgage Loans Payable
For the three months ended September 30, 2012
Beginning balance July 1, 2012		$	10,306.2			$	1,834.1			$	333.9			$	12,474.2			$	(2,133.4	)
Total realized and unrealized gains included in changes in net assets			114.8				68.0				13.0				195.8				8.2
Purchases(1)			470.4				50.1				7.1				527.6				(92.6	)
Sales			(51.6	)			—				—				(51.6	)			—
Settlements(2)			—				(157.9	)			(12.5	)			(170.4	)			2.5
Ending balance September 30, 2012		$	10,839.8			$	1,794.3			$	341.5			$	12,975.6			$	(2,215.3	)

16

	Real Estate Properties				Real Estate Joint Ventures				Limited Partnerships				Total Level 3 Investments				Mortgage Loans Payable
For the nine months ended September 30, 2012
Beginning balance January 1, 2012		$	9,857.6			$	1,591.4			$	307.5			$	11,756.5			$	(2,028.2	)
Total realized and unrealized gains (losses) included in changes in net assets			433.5				229.9				31.2				694.6				(12.1	)
Purchases(1)			646.5				131.1				18.8				796.4				(182.6	)
Sales			(97.8	)			—				—				(97.8	)			—
Settlements(2)			—				(158.1	)			(16.0	)			(174.1	)			7.6
Ending balance September 30, 2012		$	10,839.8			$	1,794.3			$	341.5			$	12,975.6			$	(2,215.3	)

	Real Estate Properties				Real Estate Joint Ventures				Limited Partnerships				Total Level 3 Investments				Mortgage Loans Payable
For the three months ended September 30, 2011
Beginning balance July 1, 2011		$	9,452.6			$	1,495.2			$	287.0			$	11,234.8			$	(1,952.6	)
Total realized and unrealized gains (losses) included in changes in net assets			246.9				71.2				10.3				328.4				(6.4	)
Purchases(1)			318.8				0.2				8.8				327.8				—
Sales			(189.4	)			—				—				(189.4	)			—
Settlements(2)			(1.0	)			(2.3	)			(3.8	)			(7.1	)			2.3
Ending balance September 30, 2011		$	9,827.9			$	1,564.3			$	302.3			$	11,694.5			$	(1,956.7	)

	Real Estate Properties				Real Estate Joint Ventures				Limited Partnerships				Total Level 3 Investments				Mortgage Loans Payable
For the nine months ended September 30, 2011
Beginning balance January 1, 2011		$	8,115.5			$	1,358.8			$	270.3			$	9,744.6			$	(1,860.2	)
Total realized and unrealized gains (losses) included in changes in net assets			704.0				193.9				32.0				929.9				(6.9	)
Purchases(1)			1,237.0				13.9				10.0				1,260.9				(105.0	)
Sales			(228.3	)			—				—				(228.3	)			—
Settlements(2)			(0.3	)			(2.3	)			(10.0	)			(12.6	)			15.4
Ending balance September 30, 2011		$	9,827.9			$	1,564.3			$	302.3			$	11,694.5			$	(1,956.7	)

(1)	Includes purchases, contributions for joint ventures and limited partnerships, and capital expenditures.
(2)	Includes operating income for real estate joint ventures and limited partnerships, net of distributions and principal payments on mortgage loans payable.

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The following table shows quantitative information about unobservable inputs related to the Level 3 fair value measurements as of September 30, 2012 (unaudited).

Type	Asset Class	Valuation Technique(s)	Unobservable Inputs	Range
Real Estate Properties and Real Estate Joint Ventures	Office	Income Approach— Discounted cash flow Income Approach— Direct Capitalization	Discount Rate Terminal Capitalization Rate Overall Capitalization Rate	6.5% - 10.5% 5.5% - 8.8% 4.5% - 9.5%
	Industrial	Income Approach— Discounted cash flow Income Approach— Direct Capitalization	Discount Rate Terminal Capitalization Rate Overall Capitalization Rate	6.5% - 9.8% 5.5% - 8.5% 5.0% - 9.0%
	Residential	Income Approach— Discounted cash flow Income Approach— Direct Capitalization	Discount Rate Terminal Capitalization Rate Overall Capitalization Rate	6.0% - 8.0% 4.5% - 6.3% 3.8% - 5.8%
	Retail	Income Approach— Discounted cash flow Income Approach— Direct Capitalization	Discount Rate Terminal Capitalization Rate Overall Capitalization Rate	6.5% - 11.3% 5.8% - 11.0% 4.5% - 10.8%
Mortgage Loans Payable	Office and Industrial	Discounted cash flow Net Present Value	Loan to Value Ratio Credit Spreads Loan to Value Ratio Weighted Average Cost of Capital Risk Premiums	36.0% - 67.0% 2.3% - 3.0% 36.0% - 67.0% 0.8% - 2.7%
	Residential	Discounted cash flow Net Present Value	Loan to Value Ratio Credit Spreads Loan to Value Ratio Weighted Average Cost of Capital Risk Premiums	38.0% - 59.0% 1.8% - 2.6% 38.0% - 59.0% 0.8% - 2.1%
	Retail	Discounted cash flow Net Present Value	Loan to Value Ratio Credit Spreads Loan to Value Ratio Weighted Average Cost of Capital Risk Premiums	33.0% - 153.0% 2.4% - 6.7% 33.0% - 153.0% 0.7% - 13.8%
Limited Partnerships		Relative Value	Estimated Net Asset Value (NAV)*	0% - 11.0%

* See Determination of Investments at Fair Value, Valuation of Real Estate Limited Partnerships withinNote 1—Organization of Significant Accounting Policies.

Real Estate Properties and Joint Ventures: The significant unobservable inputs used in the fair value measurement of the Account’s real estate properties and joint ventures are the selection of certain investment rates (Discount Rate, Terminal Capitalization Rate, and Overall Capitalization Rate). Significant increases (decreases) in any of those inputs in isolation would result in significantly lower (higher) fair value measurements, respectively.

Mortgage Loans Payable: The significant unobservable inputs used in the fair value measurement of the Account’s mortgage loans payable are the loan to value ratios and the selection of certain credit spreads and weighted average cost of capital risk premiums. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value, respectively.

Limited Partnerships: The significant unobservable input used in the fair value measurement of the Account’s limited partnerships is the financial information received by the Account from the limited partnership investments. Significant increases (decreases) in any of those inputs in isolation would result in a significantly higher (lower) fair value, respectively.

During the nine months ended September 30, 2012 and 2011 there were no transfers between Levels 1, 2, or 3.

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The amount of total net unrealized gains (losses) included in changes in net assets attributable to the change in net unrealized gains (losses) relating to Level 3 investments and mortgage loans payable using significant unobservable inputs still held as of the reporting date is as follows (in millions, unaudited):

 

Real Estate
Properties

 

Real Estate
Joint
Ventures

 

Limited
Partnerships

 

Total
Level 3
Investments

 

Mortgage
Loans
Payable

For the three months ended
September 30, 2012

$

116.0

 

$

70.0

 

$

42.8

 

$

228.8

 

$

8.2

 

For the nine months ended
September 30, 2012

$

436.3

 

$

231.9

 

$

60.3

 

$

728.5

 

$

(12.1

)

For the three months ended
September 30, 2011

$

362.5

 

$

75.1

 

$

10.3

 

$

447.9

 

$

(6.4

)

For the nine months ended
September 30, 2011

$

840.4

 

$

213.8

 

$

32.1

 

$

1,086.3

 

$

(6.9

)

Note 6—Investments in Joint Ventures

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 in those investments. Several of these joint ventures have mortgage loans payable collateralized by the properties owned by such joint ventures. At September 30, 2012, the Account held 12 investments in joint ventures with non-controlling ownership interest percentages that ranged from 33% to 85%. Certain joint ventures are subject to adjusted distribution percentages when earnings in the investment reach a pre- determined threshold. The Account’s equity in the joint ventures was $1.8 billion at September 30, 2012 and $1.6 billion at December 31, 2011. The Account’s most significant joint venture investment was the DDR TC LLC joint venture (“DDR joint venture”) which represented 3.2% of the Account’s net assets and 2.8% of the Account’s invested assets at September 30, 2012.

The Account’s proportionate share of the fair value of the mortgage loans payable within the joint venture investments was $1.5 billion at September 30, 2012 and $1.6 billion at December 31, 2011. The Account’s share in the outstanding principal of the mortgage loans payable within the joint ventures was $1.5 billion at September 30, 2012 and $1.6 billion at December 31, 2011.

A condensed summary of the financial position and results of operations of the joint ventures are shown below (in millions):

	September 30, 2012			December 31, 2011
	(Unaudited)
Assets
Real Estate properties, at fair value		$	5,077.7		$	4,844.3
Other assets			167.4			128.9
Total assets		$	5,245.1		$	4,973.2
Liabilities & Equity
Mortgage Notes Payable, at fair value		$	2,130.5		$	2,259.1
Other liabilities			112.8			83.6
Total liabilities			2,243.3			2,342.7
Equity			3,001.8			2,630.5
Total liabilities and equity		$	5,245.1		$	4,973.2

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	For the Nine Months Ended September 30,
	2012			2011
	(Unaudited)			(Unaudited)
Operating Revenue and Expenses
Revenues		$	351.7		$	338.7
Expenses			206.1			208.0
Excess of revenues over expenses		$	145.6		$	130.7

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.

Note 7—Investments in Limited Partnerships

The Account invests in limited partnerships, limited liability companies, and private real estate equity investment trusts that own real estate properties and real estate-related securities. The Account receives distributions from these investments based on the Account’s ownership interest percentages. At September 30, 2012, the Account held interests in three limited partnerships, two limited liability companies and one private real estate equity investment trust (all of which featured non-controlling ownership interests) with ownership interest percentages that ranged from 5.3% to 18.5%. Under the terms of the partnership agreements governing such investments, and based upon the expected term of each such partnership, the partnerships could engage in liquidation activities beginning in 2012 through 2015. During 2012, the Account’s investment in MONY/Transwestern Mezz RP II, LLC; is anticipated to liquidate. The Account’s ownership interest in these six investments was $341.5 million and $307.5 million at September 30, 2012 and December 31, 2011, respectively.

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Note 8—Mortgage Loans Payable

The Account had outstanding mortgage loans payable secured by the following properties (in millions):

Property	Interest Rate and Payment Frequency(3)	Principal Amounts as of						Maturity
		September 30, 2012			December 31, 2011
		(Unaudited)
1 & 7 Westferry Circus(1)(2)(5)	5.40% paid quarterly		$	208.3		$	203.9		November 15, 2012
Reserve at Sugarloaf(1)(5)	5.49% paid monthly			24.0			24.3		June 1, 2013
South Frisco Village	5.85% paid monthly			26.3			26.3		June 1, 2013
Fourth & Madison	6.40% paid monthly			145.0			145.0		August 21, 2013
1001 Pennsylvania Avenue	6.40% paid monthly			210.0			210.0		August 21, 2013
50 Fremont	6.40% paid monthly			135.0			135.0		August 21, 2013
Pacific Plaza(1)(5)	5.55% paid monthly			8.1			8.2		September 1, 2013
Wilshire Rodeo Plaza(5)	5.28% paid monthly			112.7			112.7		April 11, 2014
1401 H Street(1)(5)	5.97% paid monthly			111.2			112.3		December 7, 2014
Windsor at Lenox Park(5)	4.43% paid monthly			24.0			24.0		August 1, 2015
San Montego Apartments(5)(6)	4.47% paid monthly			21.8			21.8		August 1, 2015
Montecito Apartments(5)(6)	4.47% paid monthly			20.2			20.2		August 1, 2015
Phoenician Apartments(5)(6)	4.47% paid monthly			21.3			21.3		August 1, 2015
The Colorado(1)(5)	5.65% paid monthly			83.4			84.3		November 1, 2015
99 High Street	5.52% paid monthly			185.0			185.0		November 11, 2015
The Legacy at Westwood(1)(5)	5.95% paid monthly			40.0			40.5		December 1, 2015
Regents Court(1)(5)	5.76% paid monthly			34.1			34.5		December 1, 2015
The Caruth(1)(5)	5.71% paid monthly			39.9			40.4		December 1, 2015
Lincoln Centre	5.51% paid monthly			153.0			153.0		February 1, 2016
The Legend at Kierland(5)(7)	4.97% paid monthly			21.8			21.8		August 1, 2017
The Tradition at Kierland(5)(7)	4.97% paid monthly			25.8			25.8		August 1, 2017
Mass Court(5)	2.88% paid monthly			92.6			—		September 1, 2019
Red Canyon at Palomino Park(5)(8)	5.34% paid monthly			27.1			27.1		August 1, 2020
Green River at Palomino Park(5)(8)	5.34% paid monthly			33.2			33.2		August 1, 2020
Blue Ridge at Palomino Park(5)(8)	5.34% paid monthly			33.4			33.4		August 1, 2020
Ashford Meadows(5)	5.17% paid monthly			44.6			44.6		August 1, 2020
The Corner(5)	4.66% paid monthly			105.0			105.0		June 1, 2021
The Palatine(5)	4.25% paid monthly			80.0			80.0		January 10, 2022
The Forum at Carlsbad(5)	4.25% paid monthly			90.0			—		March 1, 2022
Publix at Weston Commons(5)	5.08% paid monthly			35.0			35.0		January 1, 2036
Total Principal Outstanding			$	2,191.8		$	2,008.6
Fair Value Adjustment(4)				23.5			19.6
Total mortgage loans payable			$	2,215.3		$	2,028.2

(1)	The mortgage is adjusted monthly for principal payments.
(2)	The mortgage is denominated in British pounds and the principal payment had been converted to U.S. dollars using the exchange rate as of September 30, 2012. The interest rate is fixed. The cumulative foreign currency translation adjustment (since inception) was an unrealized gain of $15.9 million.
(3)	Interest rates are fixed, unless stated otherwise.
(4)	The fair value adjustment consists of the difference (positive or negative) between the principal amount of the outstanding debt and the fair value of the outstanding debt. SeeNote 1—Organization and Significant Accounting Policies.
(5)	These properties are each owned by separate wholly owned subsidiaries of TIAA for benefit of the Account. The assets and credit of each of these borrowing entities are not available to satisfy the debts and other obligations of the Account or any other entity or person other than such borrowing entity.
(6)	Represents mortgage loans payable on these individual properties which are held within the Houston Apartment Portfolio.
(7)	Represents mortgage loans payable on these individual properties which are held within the Kierland Apartment Portfolio.
(8)	Represents mortgage loans payable on these individual properties which are held within Palomino Park.

21

Note 9—Financial Highlights

Selected condensed financial information for an Accumulation Unit of the Account is presented below. Per Accumulation Unit data is calculated on average units outstanding.

	For the Nine Months Ended September 30, 2012				Years Ended December 31,
					2011				2010				2009
	(Unaudited)
Per Accumulation Unit data:
Rental income		$	12.097			$	17.224			$	19.516			$	22.649
Real estate property level expenses and taxes			6.345				8.640				9.987				11.193
Real estate income, net			5.752				8.584				9.529				11.456
Other income			1.522				2.143				2.214				2.778
Total income			7.274				10.727				11.743				14.234
Expense charges(1)			1.893				2.390				2.167				2.280
Investment income, net			5.381				8.337				9.576				11.954
Net realized and unrealized gain (loss) on investments and mortgage loans payable			14.105				20.144				16.143				(85.848	)
Net (decrease) increase in Accumulation Unit Value			19.486				28.481				25.719				(73.894	)
Accumulation Unit Value:
Beginning of period			247.654				219.173				193.454				267.348
End of period		$	267.140			$	247.654			$	219.173			$	193.454
Total return			7.87	%			12.99	%			13.29	%			-27.64	%
Ratios to Average net Assets(2):
Expenses(1)			0.71	%			0.98	%			1.09	%			1.01	%
Investment income, net			2.01	%			3.42	%			4.84	%			5.29	%
Portfolio turnover rate(2):
Real estate properties(3)			1.98	%			3.01	%			1.01	%			0.75	%
Marketable securities(4)			5.27	%			3.43	%			19.18	%			0.00	%
Accumulation Units outstanding at end of period (in millions):			53.8				53.4				48.1				39.5
Net assets end of period (in millions)		$	14,695.9			$	13,527.2			$	10,803.1			$	7,879.9

(1)	Expense charges per Accumulation Unit and the Ratio of Expenses to average net assets reflect the year to date Account-level expenses and exclude real estate property level expenses which are included in real estate income, net. If the real estate property level expenses were included, the expense charge per Accumulation Unit for the nine months ended September 30, 2012 would be $8.239 ($11.026, $12.154, and $13.473 for the years ended December 31, 2011, 2010, and 2009, respectively), and the Ratio of Expenses to average net assets for the nine months ended September 30, 2012 would be 3.08% (4.52%, 6.14%, and 5.96% for the years ended December 31, 2011, 2010, and 2009, respectively).
(2)	Amounts for the nine month period ended September 30, 2012 are not annualized.
(3)	Real estate investment portfolio turnover rate is calculated by dividing the lesser of purchases or sales of real estate property investments (including contributions to, or return of capital distributions received from, existing joint venture and limited partnership investments) by the average value of the portfolio of real estate investments held during the period.
(4)	Marketable securities portfolio turnover rate is calculated by dividing the lesser of purchases or sales of securities, excluding securities having maturity dates at acquisition of one year or less, by the average value of the portfolio securities held during the period.

22

Note 10—Accumulation Units

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

	For the Nine Months Ended September 30, 2012			For the Year Ended December 31, 2011
	(Unaudited)
Outstanding:
Beginning of period		53.4			48.1
Credited for premiums		5.7			10.0
Liquidity units redeemed (see Note 3)		(2.4	)		—
Annuity, other periodic payments, withdrawals and death benefits		(2.9	)		(4.7	)
End of period		53.8			53.4

Note 11—Commitments and Contingencies

Commitments—The Account had $11.5 million and $26.1 million of outstanding immediately callable commitments to purchase additional interests in four of its limited partnership investments as of September 30, 2012 and December 31, 2011, respectively. During the three and nine months ended September 30, 2012 the Account funded $7.0 million and $18.8 million in commitments, respectively.

Contingencies—The Account is party to various claims and routine litigation arising in the ordinary course of business. Management of the Account does not believe 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.

Note 12—New Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”), with the intention to converge fair value standards between U.S. GAAP and International Financial Reporting Standards. This ASU is largely consistent with existing fair value measurement principles in U.S. GAAP, expands ASC 820’s existing disclosure requirements for fair value measurements and makes other amendments. The Account adopted ASU 2011-04 January 1, 2012. The adoption did not have an impact on the Account’s consolidated statements of assets and liabilities or consolidated statements of operations. SeeNote 5—Assets and Liabilities Measured at Fair Value on a Recurring Basis for additional disclosures as a result of the adoption of ASU 2011-04.

Note 13—Subsequent Events

Waterfront at Marketplace—Pittsburgh, PA

On October 1, 2012, a retail property located in Pittsburgh, Pennsylvania was sold by the Account’s DDR joint venture investment, in which the Account holds an 85% ownership interest. The Accounts portion of the net sales price was $93.8 million.

Broadlands Business Park—Elkton, MA

On October 16, 2012, the Account sold an industrial property located in Elkton, Maryland for a net sales price of $31.0 million.

GE Appliance East Coast Distribution Center—Perryville, MA

On October 16, 2012, the Account sold an industrial property located in Perryville, Maryland for a net sales price of $46.5 million.

Prescott Apartments—Seattle, WA

On October 26, 2012, the Account purchased a four story, 154-unit apartment complex located in Seattle, Washington for $54.3 million.

MiMA—New York, NY

On November 13, 2012 the Account purchased a 70% interest in a joint venture, RGM 42, LLC, the primary asset of which is a high-rise residential apartment tower located in New York, New York for $282.6 million, net of debt financing.

Financings

On October 9, 2012 the Account extinguished $197.5 million of mortgage loans associated with four real estate property investments. Concurrent with this extinguishment the Account entered into four new mortgage loans, having total principal of $223.1 million, with a fixed interest rate of 3.69%, maturing November 1, 2022 collateralized by the previously mentioned four real estate property investments.

Marketable Securities

During the month of November 2012, the Account sold $199.6 million of real estate-related securities.

23

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

REAL ESTATE PROPERTIES—64.1% and 63.6%

Location/Description	Type	Fair Value
		2012				2011
		(Unaudited)
Arizona:
Camelback Center	Office		$	32.4			$	34.4
Kierland Apartment Portfolio	Apartments			105.4	(1)			104.2	(1)
Phoenix Apartment Portfolio	Apartments			29.3				27.4
California:
3 Hutton Centre Drive	Office			38.0				37.7
50 Fremont Street	Office			421.9	(1)			332.3	(1)
88 Kearny Street	Office			96.6				81.9
275 Battery Street	Office			237.5				210.5
Centerside I	Office			—				40.7
Centre Pointe and Valley View	Industrial			29.3				22.6
Cerritos Industrial Park	Industrial			83.9				—
Great West Industrial Portfolio	Industrial			103.0				99.0
Larkspur Courts	Apartments			92.6				90.2
Northpark Village Square	Retail			41.4				40.6
Northern CA RA Industrial Portfolio	Industrial			45.0				44.2
Ontario Industrial Portfolio	Industrial			293.7				273.5	(1)
Pacific Plaza	Office			67.1	(1)			61.7	(1)
Rancho Cucamonga Industrial Portfolio	Industrial			104.6				99.5
Regents Court	Apartments			75.3	(1)			68.0	(1)
Southern CA RA Industrial Portfolio	Industrial			87.1				78.1
The Forum at Carlsbad	Retail			185.2	(1)			180.5
The Legacy at Westwood	Apartments			99.5	(1)			96.8	(1)
Westcreek	Apartments			34.6				31.6
West Lake North Business Park	Office			45.4				43.6
Westwood Marketplace	Retail			108.0				97.0
Wilshire Rodeo Plaza	Office			170.5	(1)			166.1	(1)
Colorado:
Palomino Park	Apartments			241.6	(1)			214.7	(1)
Connecticut:
Ten & Twenty Westport Road	Office			138.9				130.7
Florida:
701 Brickell Avenue	Office			227.8				219.5
North 40 Office Complex	Office			27.1				29.7
Plantation Grove	Retail			10.6				9.9
Pointe on Tampa Bay	Office			—				47.3
Publix at Weston Commons	Retail			51.3	(1)			46.6	(1)
Quiet Waters at Coquina Lakes	Apartments			26.1				26.5
Seneca Industrial Park	Industrial			74.3				71.3
South Florida Apartment Portfolio	Apartments			75.1				71.6
Suncrest Village Shopping Center	Retail			11.4				12.2
The Fairways of Carolina	Apartments			24.1				24.5
The Residences at the Village of Merrick Park	Apartments			52.4				—
Urban Centre	Office			100.5				97.9
Weston Business Center	Industrial			87.3				85.3

24

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

Location/Description	Type	Fair Value
		2012				2011
		(Unaudited)
France:
Printemps de L’Homme	Retail		$	204.0			$	209.9
Georgia:
Atlanta Industrial Portfolio	Industrial			43.7				43.7
Glenridge Walk	Apartments			37.7				35.2
Reserve at Sugarloaf	Apartments			42.2	(1)			45.9	(1)
Shawnee Ridge Industrial Portfolio	Industrial			57.6				51.8
Windsor at Lenox Park	Apartments			54.6	(1)			53.2	(1)
Illinois:
Chicago Caleast Industrial Portfolio	Industrial			57.5				56.7
Chicago Industrial Portfolio	Industrial			67.4				66.5
Parkview Plaza	Office			39.3				39.4
Maryland:
Broadlands Business Park	Industrial			31.4				27.9
GE Appliance East Coast Distribution Facility	Industrial			47.1				34.3
The Shops at Wisconsin Place	Retail			96.3				—
Massachusetts:
99 High Street	Office			386.6	(1)			326.3	(1)
Needham Corporate Center	Office			21.8				20.4
Northeast RA Industrial Portfolio	Industrial			28.0				27.0
Residence at Rivers Edge	Apartments			89.0				80.9
The Newbry	Office			289.1				293.8
Nevada:
Fernley Distribution Facility	Industrial			6.8				7.0
New Jersey:
Konica Photo Imaging Headquarters	Industrial			18.9				18.7
Marketfair	Retail			71.1				68.1
Plainsboro Plaza	Retail			30.2				25.5
South River Road Industrial	Industrial			47.2				45.9
New York:
425 Park Avenue	Ground Lease			330.0				320.0
780 Third Avenue	Office			340.0				340.2
The Colorado	Apartments			162.0	(1)			150.6	(1)
The Corner	Apartments			228.0	(1)			215.0	(1)
Pennsylvania:
Lincoln Woods	Apartments			31.7				30.9
The Pepper Building	Apartments			52.1				53.6
Tennessee:
Airways Distribution Center	Industrial			19.9				12.2
Summit Distribution Center	Industrial			19.8				15.4
Texas:
Dallas Industrial Portfolio	Industrial			159.8				159.9
Four Oaks Place	Office			483.8				447.5
Houston Apartment Portfolio	Apartments			228.5	(1)			206.7	(1)
Lincoln Centre	Office			228.7	(1)			213.3	(1)

25

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

Location/Description	Type	Fair Value
		2012				2011
		(Unaudited)
Pinnacle Industrial Portfolio	Industrial		$	40.3			$	41.2
South Frisco Village	Retail			31.0	(1)			29.0	(1)
The Caruth	Apartments			76.6	(1)			70.6	(1)
The Maroneal	Apartments			45.9				43.1
United Kingdom:
1 & 7 Westferry Circus	Office			222.0	(1)			261.6	(1)
Virginia:
8270 Greensboro Drive	Office			34.8				34.2
Ashford Meadows Apartments	Apartments			100.1	(1)			101.3	(1)
The Ellipse at Ballston	Office			77.2				82.9
The Palatine	Apartments			136.0	(1)			135.0	(1)
Washington:
Circa Green Lake	Apartments			84.0				—
Creeksides at Centerpoint	Office			20.0				17.5
Fourth and Madison	Office			409.2	(1)			385.4	(1)
Millennium Corporate Park	Office			138.9				127.9
Northwest RA Industrial Portfolio	Industrial			25.5				22.4
Pacific Corporate Park	Industrial			35.2				—
Rainier Corporate Park	Industrial			85.6				75.4
Regal Logistics Campus	Industrial			66.9				61.4
Washington DC:
1001 Pennsylvania Avenue	Office			676.4	(1)			656.1	(1)
1401 H Street, NW	Office			215.8	(1)			205.9	(1)
1900 K Street, NW	Office			252.0				244.4
Mass Court	Apartments			169.0	(1)			—
Mazza Gallerie	Retail			69.8				69.1
TOTAL REAL ESTATE PROPERTIES (Cost $10,875.3 and $10,358.3)			$	10,839.8			$	9,857.6

26

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

OTHER REAL ESTATE-RELATED INVESTMENTS—12.6% and 12.3%
REAL ESTATE JOINT VENTURES—10.6% and 10.3%

Location/Description	Fair Value
	2012				2011
	(Unaudited)
California:
CA—Colorado Center LP Yahoo Center (50% Account Interest)		$	226.8	(2)		$	199.8	(2)
CA—Treat Towers LP Treat Towers (75% Account Interest)			1.9	(5)			77.8
Florida:
Florida Mall Associates, Ltd The Florida Mall (50% Account Interest)			360.1	(2)			284.3	(2)
TREA Florida Retail, LLC Florida Retail Portfolio (80% Account Interest)			179.3				173.7
West Dade Associates Miami International Mall (50% Account Interest)			133.5	(2)			109.8	(2)
Georgia:
GA—Buckhead LLC Prominence in Buckhead (75% Account Interest)			2.5	(5)			50.9
Maryland:
WP Project Developer The Shops at Wisconsin Place (33.33% Account Interest)			14.4				—
Massachusetts:
MA—One Boston Place REIT One Boston Place (50.25% Account Interest)			199.7				195.9
Tennessee:
West Town Mall, LLC West Town Mall (50% Account Interest)			63.7	(2)			54.7	(2)
Various:
DDR TC LLC DDR Joint Venture (85% Account Interest)			472.1	(2,3)			338.4	(2,3)
Storage Portfolio I, LLC Storage Portfolio (75% Account Interest)			78.6	(2,3)			60.6	(2,3)
Strategic Ind Portfolio I, LLC IDI Nationwide Industrial Portfolio (60% Account Interest)			61.7	(2,3)			45.5	(2,3)
TOTAL REAL ESTATE JOINT VENTURES (Cost $1,884.3 and $1,895.8)		$	1,794.3			$	1,591.4
LIMITED PARTNERSHIPS—2.0% and 2.0%
Cobalt Industrial REIT (10.998% Account Interest)		$	25.4			$	25.7
Colony Realty Partners LP (5.27% Account Interest)			20.9				20.9
Heitman Value Partners Fund (8.43% Account Interest)			10.3				16.7
Lion Gables Apartment Fund (18.46% Account Interest)			252.2				225.4
MONY/Transwestern Mezz RP II (16.67% Account Interest)			1.2				2.8
Transwestern Mezz Realty Partners III, LLC (11.708% Account Interest)			31.5				16.0
TOTAL LIMITED PARTNERSHIPS (Cost $303.0 and $297.5)		$	341.5			$	307.5
TOTAL REAL ESTATE JOINT VENTURES AND LIMITED PARTNERSHIPS (Cost $2,187.3 and $2,193.3)		$	2,135.8			$	1,898.9

27

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

MARKETABLE SECURITIES—23.3% and 24.1%
REAL ESTATE-RELATED MARKETABLE SECURITIES—8.9% and 6.0%

Shares				Issuer	Fair Value
2012		2011			2012			2011
					(Unaudited)
	126,382		92,462	Acadia Realty Trust		$	3.1		$	1.9
	30,210		25,960	Agree Realty Corporation			0.8			0.6
	5,843		3,783	Alexander’s, Inc.			2.5			1.4
	177,507		133,337	Alexandria Real Estate Equities, Inc.			13.1			9.2
	113,043		88,603	American Assets Trust, Inc.			3.0			1.8
	252,609		155,209	American Campus Communities, Inc.			11.1			6.5
	456,030		—	American Realty Capital Trust			5.4			—
	1,126,926		—	American Tower Corp.			80.5			—
	413,463		264,043	Apartment Investment and Management Company			10.7			6.0
	184,243		149,993	Ashford Hospitality Trust, Inc.			1.5			1.2
	142,565		92,295	Associated Estates Realty Corporation			2.2			1.5
	273,190		204,720	Avalonbay Communities, Inc.			37.2			26.7
	442,067		307,597	BioMed Realty Trust, Inc.			8.3			5.6
	425,614		315,964	Boston Properties, Inc.			47.1			31.5
	411,069		294,369	Brandywine Realty Trust			5.0			2.8
	220,388		164,258	BRE Properties, Inc.			10.3			8.3
	230,622		154,216	Camden Property Trust			14.9			9.6
	110,978		66,398	Campus Crest Communities, Inc.			1.2			0.7
	179,289		150,899	CapLease, Inc.			0.9			0.6
	450,047		320,397	CBL & Associates Properties, Inc.			9.6			5.0
	183,285		152,815	Cedar Shopping Centers, Inc.			1.0			0.7
	39,517		39,517	Chatham Lodging Trust			0.5			0.4
	87,052		74,212	Chesapeake Lodging Trust			1.7			1.1
	—		116,477	Cogdell Spencer, Inc.			—			0.5
	251,344		188,864	Colonial Properties Trust			5.3			3.9
	60,473		48,303	CoreSite Realty Corporation			1.6			0.9
	206,593		157,193	Corporate Office Properties Trust			5.0			3.3
	298,296		239,606	Cousins Properties Incorporated			2.4			1.5
	353,150		256,060	Cubesmart			4.5			2.7
	715,540		533,880	DCT Industrial Trust, Inc.			4.6			2.7
	863,368		597,828	Developers Diversified Realty Corporation			13.3			7.3
	553,977		367,697	DiamondRock Hospitality Company			5.3			3.5
	349,602		228,152	Digital Realty Trust, Inc.			24.4			15.2
	300,784		205,213	Douglas Emmett, Inc.			6.9			3.7
	764,496		542,036	Duke Realty Corporation			11.2			6.5
	182,416		134,746	DuPont Fabros Technology, Inc.			4.6			3.3
	81,439		59,989	EastGroup Properties, Inc.			4.3			2.6
	321,721		158,681	Education Realty Trust, Inc.			3.5			1.6
	133,892		103,012	Entertainment Properties Trust			5.9			4.5
	119,038		87,088	Equity Lifestyle Properties, Inc.			8.1			5.8
	165,246		127,616	Equity One, Inc.			3.5			2.2
	854,180		633,670	Equity Residential			49.1			36.1
	101,109		72,619	Essex Property Trust, Inc.			15.0			10.2
	90,725		65,065	Excel Trust, Inc.			1.0			0.8
	296,132		207,842	Extra Space Storage, Inc.			9.8			5.0
	182,236		137,296	Federal Realty Investment Trust			19.2			12.5

28

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

Shares				Issuer	Fair Value
2012		2011			2012			2011
					(Unaudited)
	358,465		271,895	FelCor Lodging Trust Incorporated		$	1.7		$	0.8
	255,253		191,213	First Industrial Realty Trust, Inc.			3.4			2.0
	146,851		110,661	First Potomac Realty Trust			1.9			1.4
	238,609		181,429	Franklin Street Properties Corp.			2.6			1.8
	1,347,760		1,012,300	General Growth Properties, Inc.			26.3			15.2
	67,898		56,458	Getty Realty Corp.			1.2			0.8
	27,330		20,610	Gladstone Commercial Corporation			0.5			0.4
	401,792		220,762	Glimcher Realty Trust			4.3			2.0
	101,587		78,067	Government Properties Income Trust			2.4			1.8
	1,225,426		874,526	HCP, Inc.			54.5			36.2
	650,991		415,456	Health Care REIT, Inc.			37.6			22.7
	111,500		—	Healthcare Trust of America			1.1			—
	224,282		160,772	Healthcare Realty Trust Incorporated			5.2			3.0
	571,153		372,823	Hersha Hospitality Trust			2.8			1.8
	213,089		155,319	Highwoods Properties, Inc.			7.0			4.6
	138,930		103,500	Home Properties, Inc.			8.5			6.0
	355,200		265,630	Hospitality Properties Trust			8.4			6.1
	2,065,146		1,524,796	Host Hotels & Resorts, Inc.			33.1			22.5
	240,918		180,198	HRPT Properties Trust			3.5			3.0
	98,242		59,902	Hudson Pacific Properties, Inc.			1.8			0.8
	255,309		198,739	Inland Real Estate Corporation			2.1			1.5
	247,851		176,691	Investors Real Estate Trust			2.1			1.3
	1,500,000		1,500,000	iShares Dow Jones US Real Estate Index Fund			96.6			85.2
	209,853		129,963	Kilroy Realty Corporation			9.4			4.9
	1,165,034		879,374	Kimco Realty Corporation			23.6			14.3
	172,013		146,123	Kite Realty Group Trust			0.9			0.7
	245,992		181,102	LaSalle Hotel Properties			6.6			4.4
	444,615		345,585	Lexington Realty Trust			4.3			2.6
	336,930		251,650	Liberty Property Trust			12.2			7.8
	87,336		68,836	LTC Properties, Inc.			2.8			2.1
	253,013		189,553	Mack-Cali Realty Corporation			6.7			5.1
	141,919		114,299	Maguire Properties, Inc.			0.5			0.2
	387,167		247,227	Medical Properties Trust, Inc.			4.0			2.4
	117,154		81,264	Mid-America Apartment Communities, Inc.			7.7			5.1
	50,144		36,864	Mission West Properties, Inc.			0.4			0.3
	108,037		81,077	Monmouth Real Estate Investment Corporation			1.2			0.7
	79,884		63,644	National Health Investors, Inc.			4.1			2.8
	308,040		216,060	National Retail Properties, Inc.			9.4			5.7
	304,983		226,273	Omega Healthcare Investors, Inc.			6.9			4.4
	40,857		38,237	One Liberty Properties, Inc.			0.8			0.6
	59,279		52,329	Parkway Properties, Inc.			0.8			0.5
	151,167		113,497	Pebblebrook Hotel Trust			3.5			2.2
	161,205		122,245	Pennsylvania Real Estate Investment Trust			2.6			1.3
	497,082		379,392	Piedmont Office Realty Trust, Inc.			8.6			6.5
	467,697		351,127	Plum Creek Timber Company, Inc.			20.5			12.8
	153,383		106,883	Post Properties, Inc.			7.4			4.7
	115,468		88,608	Potlatch Corporation			4.3			2.8
	1,303,521		990,211	ProLogis			45.7			28.3

29

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

Shares				Issuer	Fair Value
2012		2011			2012			2011
					(Unaudited)
	52,110		41,980	PS Business Parks, Inc.		$	3.5		$	2.3
	362,584		275,476	Public Storage, Inc.			50.5			37.0
	134,670		87,600	Ramco-Gershenson Properties Trust			1.7			0.9
	351,889		261,199	Rayonier, Inc.			17.2			11.7
	382,253		279,343	Realty Income Corporation			15.6			9.8
	142,776		93,946	Retail Opportunity Investment			1.8			1.1
	91,220		—	Retail Properties of America			1.0			—
	257,998		197,908	Regency Centers Corporation			12.6			7.4
	305,630		177,170	RLJ Lodging Trust			5.8			3.0
	66,283		—	Rouse Properties, Inc.			1.0			—
	42,076		33,036	Saul Centers, Inc.			1.9			1.2
	25,230		—	Select Income Real Estate Investment Trust			0.6			—
	501,417		330,697	Senior Housing Properties Trust			10.9			7.4
	872,486		632,140	Simon Property Group, Inc.			132.5			81.6
	257,439		183,739	SL Green Realty Corp.			20.6			12.3
	83,409		61,829	Sovran Self Storage, Inc.			4.8			2.6
	98,940		20,050	Stag Industrial, Inc.			1.6			0.2
	588,309		385,489	Strategic Hotels & Resorts, Inc.			3.5			2.1
	79,688		59,168	Summit Hotel Properties, Inc.			0.7			0.6
	76,176		46,326	Sun Communities, Inc.			3.4			1.7
	106,113		60,363	Sun Healthcare Group, Inc.			2.1			0.7
	390,446		262,606	Sunstone Hotel Investors, L.L.C.			4.3			2.1
	266,464		178,864	Tanger Factory Outlet Centers, Inc.			8.6			5.2
	168,909		126,129	Taubman Centers, Inc.			13.0			7.8
	36,064		16,174	Terreno Realty Corporation			0.6			0.2
	378,792		286,812	The Macerich Company			21.7			14.5
	714,461		472,751	UDR, Inc.			17.7			11.9
	31,724		21,414	UMH Properties, Inc.			0.4			0.2
	34,258		27,258	Universal Health Realty Income Trust			1.6			1.1
	56,293		50,503	Urstadt Biddle Properties, Inc.			1.1			0.9
	835,764		619,340	Ventas, Inc.			52.0			34.1
	523,383		396,923	Vornado Realty Trust			42.4			30.5
	189,817		145,677	Washington Real Estate Investment Trust			5.1			4.0
	347,240		262,970	Weingarten Realty Investors			9.8			5.8
	1,539,828		1,164,958	Weyerhaeuser Company			40.3			21.8
	26,270		—	Whitestone Real Estate Investment Trust B			0.3			—
	66,697		53,117	Winthrop Realty Trust			0.7			0.7
TOTAL REAL ESTATE EQUITY SECURITIES (Cost $1,326.9 and $895.3)						$	1,496.5		$	927.9

30

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

OTHER MARKETABLE SECURITIES—14.4% and 18.1%
GOVERNMENT AGENCY NOTES—5.5% and 10.0%

Principal				Issuer	Yield (4)		Maturity Date		Fair Value
2012		2011							2012			2011
									(Unaudited)
	—		36.9	Fannie Mae Discount Notes		0.051%		1/3/12		$	—		$	36.9
	—		4.5	Fannie Mae Discount Notes		0.030%		1/4/12			—			4.5
	—		40.0	Fannie Mae Discount Notes		0.035%		1/25/12			—			40.0
	—		41.3	Fannie Mae Discount Notes		0.025%-0.051%		2/8/12			—			41.3
	—		18.1	Fannie Mae Discount Notes		0.030%		2/13/12			—			18.1
	—		25.3	Fannie Mae Discount Notes		0.015%		3/8/12			—			25.3
	—		12.0	Fannie Mae Discount Notes		0.061%		5/2/12			—			12.0
	—		50.0	Fannie Mae Discount Notes		0.152%		5/3/12			—			50.0
	—		56.2	Fannie Mae Discount Notes		0.061%-0.066%		5/21/12			—			56.2
	—		48.6	Fannie Mae Discount Notes		0.071%		5/30/12			—			48.6
	—		24.2	Fannie Mae Discount Notes		0.066%		6/6/12			—			24.2
	—		30.2	Fannie Mae Discount Notes		0.137%-0.142%		7/16/12			—			30.2
	25.0		—	Fannie Mae Discount Notes		0.107%		10/1/12			25.0			—
	50.0		—	Fannie Mae Discount Notes		0.136%		11/14/12			50.0			—
	23.8		—	Fannie Mae Discount Notes		0.127%-0.152%		11/21/12			23.8			—
	23.8		—	Fannie Mae Discount Notes		0.167%		12/12/12			23.8			—
	25.0		—	Fannie Mae Discount Notes		0.162%		12/19/12			25.0			—
	22.8		—	Fannie Mae Discount Notes		0.152%		12/26/12			22.8			—
	—		17.0	Federal Farm Credit Bank Discount Notes		0.010%		1/3/12			—			17.0
	19.4		—	Federal Home Loan Bank Construction Discount Notes		0.137%		2/20/13			19.4			—
	—		38.0	Federal Home Loan Bank Discount Notes		0.020%		1/6/12			—			38.0
	—		20.0	Federal Home Loan Bank Discount Notes		0.010%-0.154%		1/13/12			—			20.0
	—		50.0	Federal Home Loan Bank Discount Notes		0.046%		1/13/12			—			50.0
	—		48.0	Federal Home Loan Bank Discount Notes		0.051%		1/18/12			—			48.0
	—		25.2	Federal Home Loan Bank Discount Notes		0.015%-0.030%		1/20/12			—			25.2
	—		13.3	Federal Home Loan Bank Discount Notes		0.011%		1/27/12			—			13.3
	—		50.0	Federal Home Loan Bank Discount Notes		0.035%		2/1/12			—			50.0
	—		42.2	Federal Home Loan Bank Discount Notes		0.035%		2/3/12			—			42.2
	—		70.1	Federal Home Loan Bank Discount Notes		0.025%-0.030%		2/10/12			—			70.1
	—		19.4	Federal Home Loan Bank Discount Notes		0.025%		2/13/12			—			19.4
	—		60.0	Federal Home Loan Bank Discount Notes		0.030%-0.071%		2/17/12			—			60.0
	—		7.2	Federal Home Loan Bank Discount Notes		0.071%		2/24/12			—			7.2
	—		16.1	Federal Home Loan Bank Discount Notes		0.112%		3/7/12			—			16.1
	—		34.4	Federal Home Loan Bank Discount Notes		0.025%		3/21/12			—			34.4
	—		19.2	Federal Home Loan Bank Discount Notes		0.071%		3/28/12			—			19.2
	—		45.7	Federal Home Loan Bank Discount Notes		0.091%		4/4/12			—			45.7
	—		21.0	Federal Home Loan Bank Discount Notes		0.076%-0.081%		5/9/12			—			21.0
	—		47.6	Federal Home Loan Bank Discount Notes		0.056%-0.081%		5/18/12			—			47.6
	—		50.0	Federal Home Loan Bank Discount Notes		0.081%		5/23/12			—			50.0
	—		9.0	Federal Home Loan Bank Discount Notes		0.101%		7/11/12			—			9.0
	23.0		—	Federal Home Loan Bank Discount Notes		0.101%		10/9/12			23.0			—
	50.0		—	Federal Home Loan Bank Discount Notes		0.117%		10/17/12			50.0			—
	38.0		—	Federal Home Loan Bank Discount Notes		0.122%		10/24/12			38.0			—
	44.6		—	Federal Home Loan Bank Discount Notes		0.124%-0.132%		10/26/12			44.6			—
	50.0		—	Federal Home Loan Bank Discount Notes		0.122%		11/2/12			50.0			—
	17.5		—	Federal Home Loan Bank Discount Notes		0.117%		11/9/12			17.5			—
	37.0		—	Federal Home Loan Bank Discount Notes		0.127%		11/28/12			37.0			—

31

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

Principal				Issuer	Yield (4)		Maturity Date		Fair Value
2012		2011							2012			2011
									(Unaudited)
	31.0		—	Federal Home Loan Bank Discount Notes		0.132%		12/5/12		$	31.0		$	—
	15.0		—	Federal Home Loan Bank Discount Notes		0.147%		12/17/12			15.0			—
	41.9		—	Federal Home Loan Bank Discount Notes		0.157%		1/23/13			41.9			—
	—		50.0	Freddie Mac Discount Notes		0.041%		1/9/12			—			50.0
	—		37.0	Freddie Mac Discount Notes		0.046%		1/17/12			—			37.0
	—		29.5	Freddie Mac Discount Notes		0.035%		1/30/12			—			29.5
	—		20.0	Freddie Mac Discount Notes		0.051%		2/14/12			—			20.0
	—		42.9	Freddie Mac Discount Notes		0.061%-0.101%		2/21/12			—			42.9
	—		27.3	Freddie Mac Discount Notes		0.020%		3/5/12			—			27.3
	—		9.5	Freddie Mac Discount Notes		0.035%		3/9/12			—			9.5
	—		17.5	Freddie Mac Discount Notes		0.035%		3/13/12			—			17.5
	—		25.5	Freddie Mac Discount Notes		0.081%-0.091%		3/19/12			—			25.5
	—		21.2	Freddie Mac Discount Notes		0.086%		4/3/12			—			21.2
	—		35.2	Freddie Mac Discount Notes		0.096%		4/9/12			—			35.2
	—		21.3	Freddie Mac Discount Notes		0.094%		4/10/12			—			21.3
	—		20.2	Freddie Mac Discount Notes		0.066%		4/16/12			—			20.2
	—		23.2	Freddie Mac Discount Notes		0.076%-0.091%		5/7/12			—			23.2
	—		5.7	Freddie Mac Discount Notes		0.081%		5/14/12			—			5.7
	—		13.5	Freddie Mac Discount Notes		0.081%		5/29/12			—			13.5
	—		29.6	Freddie Mac Discount Notes		0.071%-0.101%		6/4/12			—			29.6
	—		11.0	Freddie Mac Discount Notes		0.076%-0.112%		6/11/12			—			11.0
	—		20.9	Freddie Mac Discount Notes		0.071%		6/18/12			—			20.8
	22.4		—	Freddie Mac Discount Notes		0.122%		10/2/12			22.4			—
	41.7		—	Freddie Mac Discount Notes		0.129%		10/22/12			41.7			—
	47.5		—	Freddie Mac Discount Notes		0.127%		10/29/12			47.5			—
	39.4		—	Freddie Mac Discount Notes		0.122%-0.152%		11/5/12			39.4			—
	25.0		—	Freddie Mac Discount Notes		0.142%		11/6/12			25.0			—
	12.7		—	Freddie Mac Discount Notes		0.152%		11/13/12			12.7			—
	42.9		—	Freddie Mac Discount Notes		0.127%-0.152%		11/26/12			42.9			—
	5.0		—	Freddie Mac Discount Notes		0.152%		12/31/12			5.0			—
	22.3		—	Freddie Mac Discount Notes		0.178%		1/3/13			22.3			—
	17.1		—	Freddie Mac Discount Notes		0.173%		1/7/13			17.1			—
	37.6		—	Freddie Mac Discount Notes		0.152%		1/14/13			37.6			—
	74.0		—	Freddie Mac Discount Notes		0.142%		1/22/13			74.0
TOTAL GOVERNMENT AGENCY NOTES (Cost $925.2 and $1,551.5)										$	925.4		$	1,551.6

32

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

UNITED STATES TREASURY SECURITIES—8.9% and 8.1%

Principal				Issuer	Yield(4)		Maturity Date		Fair Value
2012		2011							2012			2011
									(Unaudited)
	—		19.9	United States Treasury Bills		0.020%		3/1/12		$	—		$	19.9
	—		3.1	United States Treasury Bills		0.030%		3/8/12			—			3.1
	—		50.0	United States Treasury Bills		0.037%		3/22/12			—			50.0
	—		40.3	United States Treasury Bills		0.020%-0.032%		3/29/12			—			40.3
	—		60.8	United States Treasury Bills		0.020%-0.100%		4/19/12			—			60.8
	—		20.0	United States Treasury Bills		0.041%-0.042%		5/3/12			—			20.0
	—		50.0	United States Treasury Bills		0.020%-0.053%		5/10/12			—			50.0
	—		82.0	United States Treasury Bills		0.020%-0.035%		5/17/12			—			82.0
	—		23.4	United States Treasury Bills		0.025%-0.084%		5/24/12			—			23.4
	—		40.0	United States Treasury Bills		0.020%		5/31/12			—			40.0
	—		40.0	United States Treasury Bills		0.056%-0.114%		8/23/12			—			40.0
	43.4		—	United States Treasury Bills		0.075%-0.112%		10/4/12			43.4			—
	84.6		—	United States Treasury Bills		0.066%-0.106%		10/11/12			84.6			—
	84.5		—	United States Treasury Bills		0.071%-0.076%		10/18/12			84.5			—
	43.7		—	United States Treasury Bills		0.102%		10/25/12			43.7			—
	42.5		—	United States Treasury Bills		0.083%		11/1/12			42.5			—
	30.5		—	United States Treasury Bills		0.108%		11/8/12			30.5			—
	80.0		80.0	United States Treasury Bills		0.087%		11/15/12			80.0			79.9
	13.4		—	United States Treasury Bills		0.113%		11/23/12			13.4			—
	24.2		—	United States Treasury Bills		0.081%-0.125%		11/29/12			24.1			—
	50.0		—	United States Treasury Bills		0.099%		12/13/12			50.0			—
	30.0		—	United States Treasury Bills		0.106%		12/20/12			30.0			—
	20.0		—	United States Treasury Bills		0.109%		12/27/12			20.0			—
	47.0		—	United States Treasury Bills		0.132%		1/17/13			47.0			—
	1.5		—	United States Treasury Bills		0.135%		1/31/13			1.5			—
	200.0		—	United States Treasury Bills		0.122%-0.153%		2/7/13			199.9			—
	50.0		—	United States Treasury Bills		0.104%		2/21/13			50.0			—
	—		50.0	United States Treasury Notes		0.259%		1/15/12			—			50.0
	—		11.5	United States Treasury Notes		0.024%		1/31/12			—			11.5
	—		20.0	United States Treasury Notes		0.345%		2/15/12			—			20.0
	—		30.6	United States Treasury Notes		0.138%		2/29/12			—			30.6
	—		15.0	United States Treasury Notes		0.078%		3/15/12			—			15.0
	—		9.9	United States Treasury Notes		0.020%-0.264%		3/31/12			—			10.0
	—		50.0	United States Treasury Notes		0.095%		4/30/12			—			50.2
	—		47.5	United States Treasury Notes		0.108%		5/15/12			—			47.6
	—		100.0	United States Treasury Notes		0.030%-0.119%		5/31/12			—			100.3
	—		68.0	United States Treasury Notes		0.103%-0.107%		6/15/12			—			68.5
	—		80.7	United States Treasury Notes		0.114%-0.139%		7/31/12			—			81.0
	—		47.7	United States Treasury Notes		0.131%-0.175%		8/15/12			—			48.2
	—		46.6	United States Treasury Notes		0.097%-0.145%		8/31/12			—			46.6

33

TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF INVESTMENTS
September 30, 2012 and December 31, 2011
(Dollar values shown in millions)

Principal				Issuer	Yield(4)		Maturity Date		Fair Value
2012		2011							2012			2011
									(Unaudited)
	50.0		50.0	United States Treasury Notes		0.125%		10/15/12		$	50.0		$	50.5
	97.2		61.5	United States Treasury Notes		0.127%-0.161%		10/31/12			97.2			61.6
	64.3		50.0	United States Treasury Notes		0.149%-0.152%		11/30/12			64.4			50.2
	69.5		—	United States Treasury Notes		0.180%-0.181%		12/15/12			69.6			—
	20.0		—	United States Treasury Notes		0.203%		12/31/12			20.0			—
	50.0		—	United States Treasury Notes		0.162%		1/15/13			50.2			—
	58.4		—	United States Treasury Notes		0.172%-0.174%		1/31/13			58.5			—
	44.7		—	United States Treasury Notes		0.163%		2/15/13			44.9			—
	20.6		—	United States Treasury Notes		0.198%		2/28/13			20.6			—
	39.4		—	United States Treasury Notes		0.201%		3/31/13			39.5			—
	28.4		—	United States Treasury Notes		0.164%		4/30/13			28.4			—
	34.0		—	United States Treasury Notes		0.147%		5/15/13			34.3			—
	30.0		—	United States Treasury Notes		0.198%		5/31/13			30.1			—
	50.0		—	United States Treasury Notes		0.181%		7/31/13			50.1			—

TOTAL UNITED STATES TREASURY SECURITIES (Cost $1,502.8 and $1,251.1)	$	1,502.9	$	1,251.2
TOTAL OTHER MARKETABLE SECURITIES (Cost $2,428.0 and $2,802.6)	$	2,428.3	$	2,802.8
TOTAL MARKETABLE SECURITIES (Cost $3,754.9 and $3,697.9)	$	3,924.8	$	3,730.7
TOTAL INVESTMENTS (Cost $16,817.5 and $16,249.5)	$	16,900.4	$	15,487.2

(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)	The market value reflects the final settlement due to the Account. The property investment held within the joint venture was sold during the quarter ended September 30, 2012.

34

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated 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 of the Account’s Annual Report on Form 10-K for the year ended December 31, 2011 (the “Form 10-K”) 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-Q 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 and beliefs 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 sectors, and markets in which the Account invests and operates, and the transactions described in this Form 10-Q. 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:

• Acquiring and Owning Real Estate:The risks associated with acquiring and owning real property, including general economic and real estate market conditions, the availability of, and economic cost associated with, financing the Account’s properties, the risk that the Account’s properties become too concentrated (whether by geography, sector or by tenant mix), competition for acquiring real estate properties, leasing risk (including tenant defaults) and the risk of uninsured losses at properties (including due to terrorism and acts of violence);

• Selling Real Estate:The risk that the sales price of a property might differ, perhaps significantly, from its estimated or appraised value, leading to losses or reduced profits to the Account, the risk that 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, the risk of a lack of availability of financing (for potential purchasers of the Account’s properties), risks associated with disruptions in the credit and capital markets, and the risk that the Account may be required to make significant expenditures before the Account is able to market and/or sell a property;

• Valuation: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 during 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;

• Borrowing:Risks associated with financing the Account’s properties, including the risk of default on loans secured by the Account’s properties (which could lead to foreclosure), the risk associated with high loan to value ratios on the Account’s properties (including the fact that the Account may have limited, or no net value in such a property), the risk that significant sums of cash could be required to make principal and interest payments on the loans and the risk that the Account may not have the ability to obtain financing or refinancing on favorable terms (or at all), which may be aggravated by general disruptions in credit and capital markets;

• Participant Transactions and Cash Management:Investment risk associated with participant transactions, in particular that (i) significant net participant transfers out of the Account may impair our ability to pursue or consummate new investment opportunities that are otherwise attractive to the Account and/ or may result in sales of real estate-related assets to generate liquidity, (ii) significant net participant transfers into the Account may result, on a temporary basis, in our cash holdings and/or holdings in liquid real estate-related investments exceeding our long-term targeted holding levels

35

	and (iii) high levels of cash in the Account during times of appreciating real estate values can impair the Account’s overall return;
•	Joint Venture Investments: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;
•	Regulatory Matters:Uncertainties associated with environmental liability and regulations and other governmental regulatory matters such as zoning laws, rent control laws, and property taxes;
•	Foreign Investments:The risks associated with purchasing, owning and disposing foreign investments (primarily real estate properties), including political risk, the risk associated with currency fluctuations, regulatory and taxation risks and risks of enforcing judgments;
•	Conflict of Interests:Conflict of interest associated with TIAA serving as investment manager of the Account and provider of the liquidity guarantee at the same time as TIAA and its affiliates are serving as an investment manager to other real estate accounts or funds, including conflicts associated with satisfying its fiduciary duties to all such accounts and funds associated with purchasing, selling and leasing of properties;
•	Required Property Sales:The risk that, if TIAA were to own too large a percentage of the Account’s accumulation units through funding the liquidity guarantee (as determined by the independent fiduciary), the independent fiduciary could require the sales of properties to reduce TIAA’s ownership interest, which sales could occur at times and at prices that depress the sale proceeds to the Account;
•	Government and Government Agency Securities:Risks associated with investment securities issued by U.S. government agencies and U.S. government-sponsored entities, including the risk that the issuer may not have its securities backed by the full faith and credit of the U.S. government, and that transaction activity may fluctuate significantly from time to time, which could negatively impact the value of the securities and the Account’s ability to dispose of a security at a favorable time; and
•	Liquid Assets and Securities:Risks associated with investments in real estate-related liquid assets (which could include, from time to time, real estate investment trust (“REIT”) securities and commercial mortgage-backed securities (“CMBS”), and non-real estate-related liquid assets, including:

• Financial/credit risk—Risks that the issuer will not be able to pay principal and interest when due or that the issuer’s earnings will fall;

• Market volatility risk—Risk that the changing conditions in financial markets may cause the Account’s investments to experience price volatility;

• Interest rate volatility risk—Risk that interest rate volatility may affect the Account’s current income from an investment; and

• Deposit/money market risk—Risks that the Account could experience losses if banks fail.

More detailed discussions of certain of these risk factors are contained in the section of the Form 10-K entitled “Item 1A. Risk Factors” and also in the section entitled “Quantitative and Qualitative Disclosures About Market Risk,” that could cause actual results to differ materially from historical experience or management’s present expectations.

Caution should be taken not to place undue reliance on management’s forward-looking statements, which represent management’s views only as of the date 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 period ended September 30, 2012 and may be subsequently revised. Prior period data may have been adjusted to reflect updated

36

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.

ABOUT THE TIAA REAL ESTATE ACCOUNT

The TIAA Real Estate Account was established in February 1995 as a separate account of TIAA 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.

Investment Objective and Strategy

The 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 non-real estate-related 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 other expense needs.

Real Estate-Related Investments.The Account intends to have between 75% and 85% of its net 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. These investments may consist of:

• Direct ownership interests in real estate,

• Direct ownership of real estate through interests in joint ventures,

• Indirect interests in real estate through real estate-related securities, such as:

• real estate limited partnerships,

• REITs, which investments may consist of common or preferred stock interests,

• investments in equity or debt securities of companies whose operations involve real estate (i.e.,that primarily own or manage real estate) which may not be REITs, and

• conventional mortgage loans, participating mortgage loans, and collateralized mortgage obligations, including CMBS and other similar investments.

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 is targeted to hold between 65% and 80% of the Account’s net assets in such direct ownership interests at any time. Historically, over 70% of the Account’s net assets have been comprised of such direct ownership interests in real estate.

In addition, while the Account is authorized to hold up to 25% of its net assets in liquid real estate-related securities, such as REITs and CMBS, management intends that the Account will not hold more than 10% of its net assets in such securities on a long-term basis. Historically, less than 10% of the Account’s net assets have been comprised of interests in these securities. In particular, under the Account’s current investment guidelines, the Account is authorized to hold up to 10% of its net assets in CMBS.

Non-Real Estate-Related Investments.The Account will invest the remaining portion of its assets (targeted to be between 15% and 25% of its net assets) in publicly-traded, liquid investments; namely:

• U.S. treasury securities,

• securities issued by U.S. government agencies or U.S. government sponsored entities,

• corporate debt securities,

• money market instruments, and

• stock of companies that do not primarily own or manage real estate.

37

However, from time to time (and most recently between late 2008 and mid 2010), the Account’s non-real estate-related liquid investments may comprise less than 15% (and possibly less than 10%) of its assets (on a net basis and/or a gross basis), especially during and immediately following periods of significant net participant outflows, in particular due to significant participant transfer activity. In addition, the Account, from time to time and on a temporary basis, may hold in excess of 25% of its net assets in non-real estate-related liquid investments, particularly during times of significant inflows into the Account and/or when there is a lack of attractive real estate-related investments available in the market.

Liquid Securities.Primarily due to management’s need to manage fluctuations in cash flows, in particular during and immediately following periods of significant participant net transfer activity into or out of the Account, the Account may, on a temporary basis (i) exceed the upper end of its targeted holdings (currently 15% of the Account’s net assets) in liquid securities of all types, including both publicly-traded non-real estate-related liquid investments and liquid real estate-related securities, such as REITs and CMBS, or (ii) be below the low end of its targeted holdings in such liquid securities (currently 15% of the Account’s net assets).

• The portion of the Account’s net assets invested in liquid investments of all types may exceed the upper end of its target, for example, if (i) the Account receives a large inflow of money in a short period of time, in particular due to significant participant transfer activity into the Account, (ii) the Account receives significant proceeds from sales of direct real estate assets, (iii) there is a lack of attractive direct real estate investments available on the market, and/or (iv) the Account anticipates more near-term cash needs, including to apply to acquire direct real estate investments, pay expenses or repay indebtedness.

Foreign Investments.The Account from time to time will also make foreign real estate investments. Under the Account’s investment guidelines, investments in direct foreign real estate, together with foreign real estate-related securities and foreign non-real estate-related liquid investments may not comprise more than 25% of the Account’s net assets. However, through the date of this Form 10-Q, such foreign real estate-related investments have never represented more than 7.5% of the Account’s net assets and management does not intend such foreign investments to exceed 10% of the Account’s net assets.

THIRD QUARTER 2012 U.S. ECONOMIC AND COMMERCIAL REAL ESTATE OVERVIEW

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 single-family residential real estate, nor does it currently invest in residential mortgage-backed securities, although it may invest in such securities in the future.

Economic and Capital Markets Overview and Outlook

U.S. economic growth continued at a moderate pace in the third quarter of 2012. The Bureau of Economic Analysis’s initial estimate of growth of Gross Domestic Product (“GDP”) in the third quarter of 2012 was an increase of 2.0%, as compared with an increase of 1.3% in the second quarter of 2012. GDP growth grew at a stronger rate in the third quarter due to increases in consumer spending, federal government spending, and residential fixed investment. Offsetting these increases were declines in exports, non-residential fixed investment and business inventories. Of particular note in the third quarter report was the increase in consumer spending to 2.0% from 1.5% in the prior quarter and the 9.6% increase in federal government spending, which was the first such increase since 2010. The stronger than expected growth in the third quarter came despite reports that businesses were delaying hiring and spending decisions due to uncertainty about the impact of potential U.S. government spending cuts and the limited progress in resolving the European debt crisis.

Along with better than expected growth in GDP, payroll employment grew at a stronger rate in the third quarter, with a gain of 437,000 jobs as compared with only 200,000 in the second quarter. With job growth averaging 145,000 during both the third quarter and the first nine months of 2012, hiring was at a level that was sufficient to absorb new entrants into the labor force. Because of the uptick in employment growth, the unemployment rate fell to 7.8%, which is the first time the unemployment rate has been below 8.0% since

38

January 2009. Similarly, retail sales grew at a healthy rate in the third quarter, with retail sales excluding the more volatile motor vehicles and parts sector growing 3.9% compared with the third quarter of 2011. Moreover, retail sales during the first nine months of 2012 increased 5.0% compared with the first nine months of 2011. The healthy growth in retail sales during the first nine months of the year bodes well for the upcoming holiday season as well as GDP growth in the coming quarters as consumer spending accounts for upwards of 70% of GDP.

While economic data for the third quarter was stronger than for the second, businesses and consumers remained cautious given the so-called “fiscal cliff” and the uncertainty associated with the upcoming Presidential election. The fiscal cliff refers to a series of federal government tax increases and spending reductions that will automatically occur at the end of 2012 as mandated by the Budget Control Act of 2011. Presently, various Congressional working groups are seeking a solution that balances the need for near-term economic growth with long-term reduction for the federal budget deficit and a solution may ultimately be reached. However, U. S. consumers and businesses are likely to remain cautious in the interim. According to estimates from the Congressional Budget Office (“CBO”), GDP growth in 2012 will be reduced by upwards of 0.5% as businesses delay hiring and spending decisions until decisions about the federal government budget and budget deficit are made. Economic growth in 2013 is also at risk as the CBO projects that GDP growth would turn negative in 2013, and thereby put the economy back into recession, if the full range of tax increases and spending cuts were allowed to take effect. Most notable are the expiration of the previous administration’s income and payroll tax cuts as well as cuts in federal government spending that were mandated as part of 2011’s debt ceiling deal.

The European sovereign debt crisis continued to have a similar dampening effect on U.S. and global economic activity. During the third quarter of 2012, Greece announced further austerity measures to reduce budget deficits in order to receive bailout funds. Conditions in Spain deteriorated further with the recession deepening, the budget deficit widening, and unemployment rate rising to 25%. Standard & Poor’s recent downgrade of Spain’s sovereign debt rating to one step above junk bond status is indicative of the precarious position of the country’s financial condition. The difficulties of Greece, Spain, Portugal and Italy are also affecting growth in stalwarts like Germany and France where GDP grew 0.3% and 0.0%, respectively, in the second quarter. However, the recent announcement by Mario Draghi, the President of the European Central Bank (“ECB”), that the ECB will buy the sovereign bonds of Spain and Italy in unlimited quantities has been heralded by some as the likely turning point in the sovereign debt crisis. While there are conditions to the pledge—countries must commit to additional actions to meet budget deficit targets—such power will allow the ECB to act as a “lender of last resort” much like the U.S. Federal Reserve. Still, it addresses only a small part of the Euro-zone problem. In a September 2012 report, the Organization for Economic and Co-operative Development Chief Economist noted that “Resolving the euro area’s banking, fiscal and competitiveness problems is still the key to recovery.” Because these underlying structural problems will require significant time to be resolved, economic weakness in Europe is likely to be protracted.

In addition to fostering uncertainty, Europe’s fiscal crisis has slowed the global economy by, for example, reducing U.S. exports to Europe. Similarly, economic growth in China, Brazil, and India has also slowed. Prevailing downside risks to the global economy led the International Monetary Fund (“IMF”) to lower its forecast of global growth for the second time this year, noting that “The recovery has suffered new setbacks, and uncertainty weighs heavily on the outlook.” While the IMF expects the global economy to grow 3.6% on average in 2013, growth forecasts were lowered for virtually every country and region. Moreover, the IMF notes that its forecast is predicated on the assumption that U.S. and European policymakers deal proactively with existing economic challenges. Otherwise, global growth will once again fall short of projections.

Given the downside risks both domestically and abroad and the subdued inflation outlook, U.S. monetary policy remains highly accommodative, with the target rate for the fed funds rate remaining at zero to a quarter percent. Moreover, in a statement following its September 2012 meeting, the Federal Open Markets Committee (“FOMC”) stated that economic conditions were now expected to warrant keeping the fed funds rate at this level “at least through mid-2015.” Previously, the FOMC expected to keep the fed funds rate at zero to a quarter percent through mid-2014. The FOMC also announced that it had increased its purchases of longer-term securities to $40 billion per month in order to put downward pressure on long-term interest rates. Moreover, it was poised to purchase additional securities and employ other policy tools to further bolster economic conditions if labor market conditions did not improve materially. Though U.S.

39

macroeconomic conditions appear to be improving, the FOMC’s actions and statements are indicative of the considerable downside risks to U.S. economic growth that remain both from domestic and global forces.

Central banks across the globe have also adopted more accommodative monetary policies in order to support economic growth. Most recently, the Australian Central Bank reduced its benchmark rate by a quarter percent. Other central banks have already reduced interest rates several times to combat slowing economic growth, with many having little room for further cuts. Additional stimulus in many countries is expected to come in the form of nonconventional easing. Whether unconventional measures will be sufficient to satisfy financial markets or spur economic activity remains to be seen. Still, the coordinated actions of central banks are indicative of a resolve to use all available tools to foster global growth.

The uncertain outlook for the global economy fostered a defensive and cautious approach by investors who continued to put money in safe havens such as the U.S., Germany, and Japan as well as countries like Switzerland, Denmark and Finland. However, there are indications that safe haven bond yields cannot go much lower given that yields in a number of safe havens are negative in real terms, i.e., after accounting for inflation. This concern weighed on Treasuries, with the yield on the 10 Year Treasury both starting and ending the quarter at 1.65% but in the interim falling to an historic low of 1.40% in August and then rising to 1.88% in mid-September. By comparison, equity markets recorded solid gains in the quarter with the Dow Jones Industrial Average up 5% and the S&P 500 up 8.5%. Despite concerns about slowing global growth, gold prices hit a peak of $1,800 per ounce in early October; commodity prices showed similar resilience despite evidence of weaker demand.

Recent trends in key U.S. economic indicators are summarized in the table below. Evidence of the headwinds faced by the U.S. economy is shown by the subpar GDP growth thus far in 2012; however, the uptick in employment growth during the third quarter is noteworthy.

Economic Indicators*

 

2011Q4

 

2012Q1

 

2012Q2

 

2012Q3

 

Forecast

 

2012

 

2013

Economy⁽¹⁾

Gross Domestic Product (GDP)

 

4.1

%

 

2.0

%

 

1.3

%

 

2.0

%

 

2.1

%

 

2.0

%

Employment Growth (Thousands)

 

492

  

677

  

200

  

437

  

1,400

  

1,500

 

Interest Rates⁽²⁾

10 Year Treasury

 

2.05

%

 

2.04

%

 

1.82

%

 

1.64

%

 

1.80

%

 

2.10

%

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

%

Sources: BEA, BLS, Federal Reserve, Blue Chip Consensus Forecasts, and Moody’s Analytics

*	Data subject to revision
(1)	GDP growth rates are annual rates.
(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.

Other indicators of U.S. economic activity, including those summarized in the table below, show the uneven growth in various sectors of the economy. For example, retail sales showed weak growth on a month-to-month basis, but comparatively stronger trends compared with 2011. By comparison, evidence is accumulating that the housing market is recovering. Existing home sales increased the first two months of the quarter. Although sales slowed in September compared to August, the pace was 11% above the previous year. In addition, the national median home price increased for the seventh consecutive month in September. New home sales increased 5.7% in September and several of the nation’s largest home builders reported solid sales and order backlogs in the quarter. Housing starts jumped 11% in September, 2012 and are now running at the fastest annual rate in more than four years. Continued improvement in the housing market would likely provide a significant boost to economic activity in 2013.

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Broad Economic Indicators*

	Full Year						July 2012			August 2012			September 2012
	2010			2011
% Change from prior month or year
Inflation (Consumer Price Index)		1.6	%		3.2	%		0.0	%		0.6	%		0.6	%
Retail Sales (excl. auto, parts & gas)		3.2	%		5.2	%		0.9	%		0.3	%		0.9	%
Total Existing Home Sales		-3.5	%		1.7	%		2.3	%		8.1	%		-1.7	%
New Home Sales		-13.9	%		-5.3	%		3.6	%		-1.3	%		5.7	%
Single-Family Housing Starts		5.9	%		-8.6	%		-4.7	%		7.3	%		11.0	%
Annual or Monthly Average
Unemployment Rate		9.6	%		9.0	%		8.3	%		8.1	%		7.8	%

* Data subject to revision.

Full Year inflation is the year-over-year percentage change in the unadjusted annual average.

Sources: Census Bureau, Bureau of Labor Statistics, National Association of Realtors, Moody’s Analytics

The October 10, 2012 Beige Book, which detailed economic activity across the twelve Federal Reserve Districts (“Districts”), provided anecdotal reports of continued moderate growth in economic activity during the third quarter. Reports from ten of the twelve Districts indicated that economic activity continued at a modest pace since July, with only the New York and Kansas City districts reported some leveling off or slowing in the pace of growth, respectively. Similarly, retail sales increased modestly in most Districts, with New York, Chicago and Kansas City being the only exceptions. Activity in the manufacturing sector was mixed, though somewhat improved on balance since July’s report. All Districts reported stronger residential markets, with sales increasing in all Districts, and substantially in some, and prices generally either steady or rising. Residential rental markets continued to be characterized as strong, though rent increases dissipated in the New York and Atlanta Districts. Commercial real estate activity continued to be characterized as mixed with weakness in office market conditions and expected increases in supply anticipated in early 2013. Hiring occurred at a tepid pace in most Districts, with the upcoming presidential election, U.S. fiscal policy, and European debt issues cited by some as restraining hiring. Wage pressures remained modest except for highly skilled workers in information technology, health care, professional services and some skilled trades. Inflation pressures also remained modest, despite scattered reports of higher crop prices starting to be evident in consumer food prices. Overall, regional reports provided confirmation of continued moderate economic growth in the third quarter.

The general consensus of public and private sector economists is that economic activity will remain moderate in the fourth quarter of 2012 and into the early part of 2013 but be measurably stronger in the second half of 2013. Moderate growth is expected to continue into 2013 due to the looming fiscal cliff, the upcoming Presidential election, ongoing problems in Europe, and weaker growth in China, Brazil and India. However, growth is expected to accelerate after this uncertainty dissipates. The consensus of economists surveyed as part of the October 1, 2012 Blue Chip Financial Forecast publication was for U.S. GDP to grow at a 1.9% rate during the fourth quarter of 2012, at just under a 2.0% rate in the first half of 2013, and at a 2.5+% rate in the second half of 2013. While GDP growth of this magnitude would still be moderate, it would nonetheless provide support for further improvement in commercial real estate market conditions.

Real Estate Market Conditions and Outlook

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 period ended September 30, 2012 and may subsequently be revised. Prior period numbers may have been adjusted to reflect updated data. Industry sources such as CB Richard Ellis Econometric Advisors (“CBRE-EA”) calculate vacancy based on square footage. Except where otherwise noted, the Account’s vacancy data is calculated as a percentage of net rentable space leased, weighted by square footage, in keeping with industry standards. Investors should not rely exclusively on the data presented below in forming a judgment regarding the current or prospective performance of the real estate market generally.

Commercial real estate activity continued at a modest but still healthy pace during the third quarter of 2012, as companies exhibited caution given the uncertain outlook for the U.S. economy. Similarly, commercial real

41

estate fundamentals improved modestly, with the strongest gains in the apartment market and continued slow improvement in office, industrial and retail markets. Commercial property sales volumes totaled $67 billion in the third quarter of 2012, an increase of 19% compared to third quarter of 2011. Only multi- family saw a significant increase in sales; office, industrial and retail property sales were all either flat or up modestly compared to the same period of 2011. Apartment sales during the third quarter were boosted by a large portfolio purchase as Lehman purchased the outstanding portion of Archstone. Excluding this transaction, apartment sales experienced a modest increase. Institutional investors continued to be highly focused on top properties in major markets such as Washington DC, New York, Boston, San Francisco and Los Angeles. Nonetheless, there were indications of growing interest in secondary and tertiary markets as evidenced by recent large office sales in markets such as Charlotte, Denver, Philadelphia, Nashville, and Salt Lake City.

Reflective in part of real estate’s attractive return prospects relative to other asset classes, the Green Street Advisors’ Commercial Property Price Index (“CPPI”) increased 2.5% in the third quarter of 2012 as compared with a 1.7% increase in the second quarter of 2012. Commercial property values as estimated by the CPPI have increased 6% over the past year, and according to Green Street Advisors “. . . are now, on average, within a few percentage points of their 2007 highs. Property values continue to benefit from today’s low-return environment, and additional upside may exist.”

Preliminary NCREIF Open End Diversified Core Equity (“ODCE”) returns for the third quarter of 2012 were 2.8%, consisting of a 1.3% income return and 1.5% capital return. For the twelve month period ended September 30, 2012, ODCE returns were 11.6%, consisting of a 5.4% income return and a 5.9% capital return. By comparison, returns for the twelve month period ended June 30, 2012 were 12.4%.

Data for the Account’s top five markets in terms of market value as of September 30, 2012 are provided below. These markets represent 44.4% of the Account’s total real estate portfolio.

Metropolitan Area

 

Account % Leased
Market Value
Weighted*

 

# of Property
Investments

 

Metro Area as a
% of Total Real
Estate Portfolio

 

Metro Area as a
% of Total
Investments

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

 

90.4%

  

10

  

14.6%

  

10.9%

 

New York-White Plains-Wayne, NY-NJ

 

97.5%

  

5

  

8.5%

  

6.4%

 

Los Angeles-Long Beach-Glendale, CA

 

91.9%

  

10

  

7.3%

  

5.5%

 

Boston-Quincy, MA

 

87.9%

  

5

  

7.3%

  

5.5%

 

San Francisco-San Mateo-Redwood City, CA

 

91.6%

  

5

  

6.7%

  

5.0%

 

* 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 market value of the Account’s monetary investments in those markets.

Office

According to CBRE-EA, the national office vacancy rate was 15.5% in the third quarter of 2012 as compared to 15.7% in the second quarter of 2012. Nationally, the office vacancy rate has declined from its most recent peak of 16.9% experienced during the second quarter of 2010. Office market conditions continued to improve despite only moderate office employment growth along with tenant delays in making space decisions given the still uncertain economic outlook.

The vacancy rate for the Account’s office portfolio averaged 10.4% as of the end of the third quarter of 2012 as compared to 12.0% for the second quarter of 2012. As shown in the table below, the vacancy rate of properties owned by the Account in four of its top five office markets—Washington DC, San Francisco, Seattle and Houston—remained at or below their respective market averages, while the vacancy rate of the Account’s properties in Boston was only slightly above the market average. The vacancy rate of the Account’s properties in its top market, Washington, DC, was the highest of its top markets due to a large block of space that was vacated by a single large tenant in the third quarter of 2012. A portion of this space has been leased to a new tenant and the balance is being marketed. Nonetheless, the Washington DC market remains competitive with leasing slowing down as a result of expected federal government budget and spending cuts and companies seeking to reduce space requirements through more efficient space usage.

42

      

Account
Weighted
Average
Vacancy

 

Metropolitan
Area
Vacancy*

 

Sector

 

Metropolitan Area

 

Total Sector
by Metro Area
($M)

 

% of Total
Investments

 

2012Q3

 

2012Q2

 

2012Q3

 

2012Q2

Office

 

National

     

10.4%

  

12.0%

  

15.5%

  

15.7%

 

1

 

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

$

1,256.2

  

7.4%

  

13.1%

  

14.5%

  

14.8%

  

14.7%

 

2

 

Boston-Quincy, MA

$

897.2

  

5.3%

  

11.4%

  

12.2%

  

11.1%

  

11.7%

 

3

 

San Francisco-San Mateo-Redwood City, CA

$

757.9

  

4.5%

  

8.4%

  

9.1%

  

10.2%

  

9.9%

 

4

 

Seattle-Bellevue-Everett, WA

$

568.1

  

3.4%

  

9.9%

  

9.8%

  

14.2%

  

13.9%

 

5

 

Houston-Sugar Land-Baytown, TX

$

483.8

  

2.9%

  

2.1%

  

5.1%

  

13.8%

  

14.0%

 

* Source: CBRE-EA. Market vacancy is the percentage of space vacant. The Account’s vacancy is the value-weighted percentage of unleased space.

The Account’s results for the third quarter of 2012 were consistent with office market trends at the national level. Demand for office space is driven largely by job growth in the financial and professional and business services sectors. During the third quarter of 2012, the financial sector added 21,000 jobs after a gain of 20,000 jobs in the second quarter of 2012. While September 2012 marked the sector’s twelfth consecutive month of growth, banks and financial firms are still looking to reduce space usage and occupancy costs in order to improve profitability. The professional and business services sector added 73,000 jobs in the quarter, following a gain of 104,000 jobs in the second quarter of 2012. Growth in the technology sector has offset weak demand from financial services and professional and business services in a number of markets, and particularly in San Francisco, Seattle, Boston and New York. While prospects for continued gradual improvement in office market conditions are promising given ongoing office employment growth and minimal construction, progress is likely to remain sporadic until the Presidential election is completed and fiscal cliff issues are resolved.

Industrial

Conditions in the industrial market are influenced to a large degree by growth in GDP, industrial production and international trade flows. As a result of thirteen consecutive quarters of U.S. GDP growth, 2.8% growth in industrial production during the first nine months of 2012, and a rebound in global trade flows, U.S. industrial market conditions continued their gradual improvement. Gains were most evident in coastal port markets where global trade activity is centered. During the third quarter of 2012, the national industrial availability rate declined for the ninth consecutive quarter to 13.1% as compared to 13.2% in the second quarter of 2012. By comparison, the vacancy rate for the Account’s industrial property portfolio was well below the national average at 6.4%. As shown below, the vacancy rate of the Account’s properties in four of its top five industrial markets remained well below their respective market averages. The only exception was Los Angeles where the vacancy rate of the Account’s properties has remained elevated due to continued weakness in small tenant demand; however, negotiations are underway with several prospective tenants for some of the vacant space. The vacancy rate of the Account’s properties in the Riverside-San Bernardino metropolitan area remained below the market average but increased as a result of a large tenant vacating one of the properties; however, the space has already been shown to several prospective tenants.

43

      

Account
Weighted
Average
Vacancy

 

Metropolitan
Area
Availability*

 

Sector

 

Metropolitan Area

 

Total Sector
by Metro Area
($M)

 

% of Total
Investments

 

2012Q3

 

2012Q2

 

2012Q3

 

2012Q2

Industrial

 

National

     

6.4%

  

5.9%

  

13.1%

  

13.2%

 

1

 

Riverside-San Bernardino-Ontario, CA

$

501.3

  

3.0%

  

8.4%

  

4.3%

  

11.3%

  

11.9%

 

2

 

Fort Lauderdale-Pompano Beach-Deerfield Beach, FL

$

223.3

  

1.3%

  

7.4%

  

8.2%

  

14.8%

  

14.6%

 

3

 

Tacoma, WA

$

213.1

  

1.3%

  

5.8%

  

8.4%

  

10.5%

  

10.4%

 

4

 

Los Angeles-Long Beach-Glendale, CA

$

200.3

  

1.2%

  

12.0%

  

13.8%

  

6.4%

  

6.5%

 

5

 

Dallas-Plano-Irving, TX

$

200.1

  

1.2%

  

5.9%

  

2.8%

  

14.2%

  

14.2%

 

* Source: CBRE-EA. Market availability is the percentage of space available for rent. Account vacancy is the value-weighted percentage of unleased space.

Multi-Family

Apartment market conditions tightened further during the third quarter of 2012. The national vacancy rate declined to an average of 4.6% in the third quarter of 2012 as compared to 5.2% in the second quarter of 2012. Not only is the national vacancy rate approaching its pre-recession lows, but effective rents, which include concessions like free rent, have surpassed their previous cyclical peaks in virtually all markets. However, rent growth during the third quarter was more moderate than in prior quarters, and construction has ramped up, with new supply starting to be delivered in selected markets beginning in the fourth quarter of 2012. The vacancy rate of the Account’s multi-family portfolio remained below the national average at 4.4% in the third quarter of 2012. As shown in the table below, the average vacancy rate for the Account’s properties in three of its top five its top apartment markets remained either below or in-line with their respective market averages. The only exceptions were Washington DC and Denver where seasonal leasing upticks contributed to an increase in vacancy compared to the second quarter.

      

Account
Weighted
Average
Vacancy

 

Market
Vacancy*

 

Sector

 

Metropolitan Area

 

Total Sector
by Metro Area
($M)

 

% of Total
Investments

 

2012Q3

 

2012Q2

 

2012Q3

 

2012Q2

Apartment

 

National

     

4.4%

  

2.5%

  

4.6%

  

5.2%

 

1

 

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

$

405.1

  

2.4%

  

5.6%

  

2.6%

  

4.0%

  

3.8%

 

2

 

New York-White Plains-Wayne, NY-NJ

$

390.0

  

2.3%

  

1.7%

  

0.8%

  

4.8%

  

4.9%

 

3

 

Houston-Sugar Land-Baytown, TX

$

274.4

  

1.6%

  

5.0%

  

1.8%

  

6.7%

  

7.0%

 

4

 

Denver-Aurora, CO

$

241.6

  

1.4%

  

4.6%

  

4.1%

  

3.6%

  

4.4%

 

5

 

Phoenix-Mesa-Scottsdale, AZ

$

134.6

  

0.8%

  

4.4%

  

3.8%

  

6.7%

  

7.4%

 

* Source: CBRE-EA. Market vacancy is the percentage of units vacant. The Account’s vacancy is the value-weighted percentage of unleased units.

Retail

Retail market conditions remained soft as retailers limited new store openings. Preliminary data from the U.S. Census Bureau indicate that retail sales excluding motor vehicles and parts increased 1.3% in the third quarter of 2012 as compared with the second quarter of 2012. Availability rates in neighborhood and community centers decreased slightly to an average of 12.9% in the third quarter of 2012 as compared with 13.0% in the second quarter of 2012. National retailers remain highly selective about opening new stores, with a focus on top metropolitan markets and the best centers, whereas demand from local retailers has remained lackluster since the end of the recession. The vacancy rate for the Account’s retail portfolio

44

declined to 6.4% during the third quarter of 2012 as compared with 6.6% in the second quarter of 2012. The vacancy rate of the Account’s retail portfolio remains below average, largely because the Account’s portfolio includes several high quality regional malls and lifestyle centers which have minimal vacancy.

Outlook

During the third quarter of 2012, commercial real estate fundamentals continued their gradual improvement in tandem with the moderate improvement in U.S. macro-economic conditions. Most noteworthy was the increase in employment growth following the anemic growth of the second quarter. Support for the commercial real estate sector has also been provided by an active investment market and the availability of attractively priced mortgage debt. While institutional investors remain cautious and highly selective, commercial real estate is viewed as offering attractive returns over the short and long term as compared to other asset classes. Still, the tentative approach of many tenants and investors alike is likely to persist through the remainder of 2012 due to the upcoming Presidential election and concerns around the fiscal cliff. Investors are also cautious in light of the healthy increase in property values over the past two years. Global concerns, notably potential repercussions from the European debt crisis and slowing growth in China, will also give pause as companies wait for a clearer picture of their business prospects before making long-term space decisions. Nonetheless, if economic conditions fall generally in line with economists’ expectations of continued modest growth through the first half of 2013, real estate market conditions are likely to remain favorable. Historically, moderate employment growth coupled with minimal construction has provided a supportive backdrop for the commercial real estate sector.

Management continues to follow an investment strategy of increasing its allocation to prime apartment, retail and industrial properties in target markets. During the third quarter of 2012, the Account acquired a premier apartment complex in a top West Coast market and a high quality industrial property in a top West Coast port market. The Account also sold an industrial property in a non-prime location in a target market and one of its joint venture interests sold a large community center in a non-target Midwest market. Management also continued to bolster the Account’s income returns through aggressive property management and leasing in combination with expense management. Management believes that results for the third quarter of 2012 demonstrate the significant improvements in portfolio quality that have occurred as a result of its investment and leasing strategy. As of the third quarter of 2012, the Account’s holdings were 93.0% leased as compared with 92.9% as of the second quarter of 2012. During the third quarter of 2012, the Account’s real estate assets generated a 1.37% leveraged income return and a 1.44% leveraged capital return. Income returns were stable compared to the second quarter, but the rate of capital appreciation moderated. As shown in the graph below, returns for the third quarter of 2012 represented the tenth consecutive quarter of positive income and capital returns.

Participant inflows continued at a steady pace during the third quarter of 2012, with the Account holding a sizeable liquidity position (cash, cash equivalents and other marketable securities) equal to 16.6% of net assets as of the end of the quarter. Potential acquisitions will be evaluated in the context of overall Account objectives and projected availability of attractive opportunities and the Account’s liquidity position with an emphasis on industrial, retail, and multi-family properties in order to expand and diversify Account holdings

45

in these sectors and to further reduce the Account’s exposure to the office sector. In addition to repositioning activities, management has also taken advantage of historically low interest rates to place commercial mortgage debt on recent acquisitions and refinance existing debt at lower interest rates in order to lower the Account’s overall weighted cost of capital. As a result, management believes that the Account is solidly positioned to benefit from ongoing improvement in commercial real estate market conditions and investors’ focus on major metropolitan markets. Investment activities in the final quarter of 2012 will seek to further refine the Account’s geographic and property type mix in accordance with the Account’s overall objectives. Prices for top tier properties have increased measurably from their lows in the latter half of 2009, which has driven initial cash-on-cash returns to relatively low levels. Management will therefore carefully evaluate prospective acquisitions based on short and long-term growth potential, purchase price relative to replacement cost, and portfolio diversification benefits as well as initial cash-on-case returns. Emphasis will continue to be given to institutional quality properties that have strong occupancy history and favorable tenant rollover schedules.

Investments as of September 30, 2012

As of September 30, 2012, the Account had total net assets of $14.7 billion, an 8.6% increase from December 31, 2011, and a 13.3% increase from September 30, 2011. The increase in the Account’s net assets from December 31, 2011 to September 30, 2012 was primarily driven by appreciation in value of the Account’s investments.

As of September 30, 2012, the Account owned a total of 106 real estate property investments (94 of which were wholly owned, 12 of which were held in joint ventures). The real estate portfolio included 32 office property investments (one located in London, England), 28 industrial property investments (including one held in a joint venture), 26 apartment property investments, 18 retail property investments (five of which were held in joint ventures and one located in Paris, France), one 75% owned joint venture interest in a portfolio of storage facilities, and one fee interest encumbered by a ground lease. Of the 106 real estate property investments, 37 are subject to debt (including seven joint venture investments).

The outstanding principal on mortgage loans payable on the Account’s wholly owned real estate portfolio as of September 30, 2012 was $2.2 billion. The Account’s proportionate share of outstanding principal on mortgage loans payable within its joint venture investments was $1.5 billion, which is netted against the underlying properties when determining the joint venture investments fair value. When the mortgage loans payable within the joint venture investments are considered, total outstanding principal on the Account’s portfolio as of September 30, 2012 was $3.6 billion, which represented a loan to value ratio of 19.6%. The Account currently has no Account-level debt.

Management believes 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 5.4% of total real estate investments and 4.0% 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. Management from time to time will evaluate the need to manage liquidity in the Account as part of its analysis as to whether to undertake a particular asset sale. The Account could reinvest any sale proceeds 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).

46

The following charts reflect the diversification of the Account’s real estate assets by region and property type and list its ten largest investments. All information is based on the fair values of the investments at September 30, 2012.

Diversification by Fair Value⁽¹⁾

 

East

 

West

 

South

 

Midwest

 

Foreign⁽²⁾

 

Total

Office

 

20.8

%

 

15.1

%

 

8.5

%

 

0.3

%

 

1.8

%

 

46.5

%

Apartment

 

7.6

%

 

6.0

%

 

5.3

%

 

—

  

—

  

18.9

%

Industrial

 

1.4

%

 

7.7

%

 

4.2

%

 

1.1

%

 

—

  

14.4

%

Retail

 

4.2

%

 

2.7

%

 

8.3

%

 

0.2

%

 

1.6

%

 

17.0

%

Other⁽³⁾

 

2.9

%

 

0.2

%

 

0.1

%

 

—

  

—

  

3.2

%

Total

 

36.9

%

 

31.7

%

 

26.4

%

 

1.6

%

 

3.4

%

 

100.0

%

(1)	Wholly-owned properties are represented at fair value and gross of any debt, while joint venture properties are represented at the net equity value.
(2)	Represents real estate investments in the United Kingdom and France.
(3)	Represents interest in Storage Portfolio investment and fee interest encumbered by a ground lease real estate investment.

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

Top Ten Largest Real Estate Investments

Property Investment Name	City	State	Type	Value ($M)(a)			Property as a % of Total Real Estate Portfolio			Property as a % of Total Investments
1001 Pennsylvania Avenue	Washington	DC	Office		676.4	(b)		5.4	%		4.0	%
Four Oaks Place	Houston	TX	Office		483.8			3.8	%		2.9	%
DDR Joint Venture	Various	USA	Retail		472.1	(c)		3.7	%		2.8	%
50 Fremont Street	San Francisco	CA	Office		421.9	(d)		3.3	%		2.5	%
Fourth and Madison	Seattle	WA	Office		409.2	(e)		3.2	%		2.4	%
99 High Street	Boston	MA	Office		386.6	(f)		3.1	%		2.3	%
The Florida Mall	Orlando	FL	Retail		360.1	(g)		2.9	%		2.1	%
780 Third Avenue	New York	NY	Office		340.0			2.7	%		2.0	%
425 Park Avenue	New York	NY	Land		330.0			2.6	%		2.0	%
Ontario Industrial Portfolio	Ontario	CA	Industrial		293.7			2.3	%		1.7	%

(a)	Value as reported in the September 30, 2012 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)	This property investment is presented gross of debt. The value of the Account’s interest less the fair value of leverage is $466.4M.
(c)	This property is held in a 85% / 15% joint venture with DDR joint venture, and consists of 40 retail properties located in 13 states and is presented net of debt. As of September 30, 2012 this debt had a fair value of $862.4 million.
(d)	This property investment is presented gross of debt. The value of the Account’s interest less the fair value of leverage is $286.9M.
(e)	This property investment is presented gross of debt. The value of the Account’s interest less the fair value of leverage is $264.2M.
(f)	This property investment is presented gross of debt. The value of the Account’s interest less the fair value of leverage is $196.4M.
(g)	This property investment is a 50% / 50% joint venture with Simon Property Group, L.P. and is presented net of debt. As of September 30, 2012 this debt had a fair value of $191.1 million.

At September 30, 2012, the Account held 74.7% of its total investments in real estate and real estate joint ventures. The Account also held investments in government agency notes representing 5.5% of total investments, U.S. Treasury securities representing 8.9% of total investments, real estate-related equity securities representing 8.9% of total investments, and real estate limited partnerships, representing 2.0% of total investments.

47

Results of Operations

Nine months ended September 30, 2012 compared to nine months ended September 30, 2011

Performance

The Account’s total return was 7.9% for the nine months ended September 30, 2012 as compared to 10.2% for the nine months ended September 30, 2011. The Account’s performance thus far during 2012 reflects an increase in the aggregate value of the Account’s real estate property investments, including investments owned in joint ventures and limited partnerships primarily as a result of a continuation of the improving market conditions experienced throughout 2012.

The Account’s annualized total returns over the past one, three, five, and ten year periods ended September 30, 2012 were 10.6%, 9.5%, -2.6%, and 4.5%, respectively. As of September 30, 2012, the Account’s annualized total return since inception was 5.9%.

Net Investment Income

The table below shows the results of operations for the quarters ended September 30, 2012 and 2011 and the dollar and percentage changes for those periods (dollars in millions, unaudited).

	For the Nine Months Ended September 30,						Change
	2012			2011			$				%
INVESTMENT INCOME
Real estate income, net:
Rental income		$	648.4		$	657.9		$	(9.5	)		-1.4	%
Real estate property level expenses and taxes:
Operating expenses			162.7			164.8			(2.1	)		-1.3	%
Real estate taxes			90.0			82.4			7.6			9.2	%
Interest expense			87.4			81.2			6.2			7.6	%
Total real estate property level expenses and taxes			340.1			328.4			11.7			3.6	%
Real estate income, net			308.3			329.5			(21.2	)		-6.4	%
Income from real estate joint ventures and limited partnerships			56.1			72.9			(16.8	)		-23.0	%
Interest			2.1			2.8			(0.7	)		-25.0	%
Dividends			23.4			12.6			10.8			85.7	%
TOTAL INVESTMENT INCOME			389.9			417.8			(27.9	)		-6.7	%
Expenses:
Investment advisory charges			42.4			39.4			3.0			7.6	%
Administrative charges			22.9			21.8			1.1			5.0	%
Distribution charges			10.6			6.3			4.3			68.3	%
Mortality and expense risk charges			2.6			4.5			(1.9	)		-42.2	%
Liquidity guarantee charges			23.1			16.8			6.3			37.5	%
TOTAL EXPENSES			101.6			88.8			12.8			14.4	%
INVESTMENT INCOME, NET		$	288.3		$	329.0		$	(40.7	)		-12.4	%

Rental income decreased $9.5 million or 1.4% for the first nine months of 2012 as compared to the comparable period of 2011. The decrease is primarily attributed to an increase in revenues during the third quarter of 2011 which related to early termination fees recorded due to a large tenant vacancy during the third quarter of 2011. This decrease was offset by increased revenues from new acquisitions, offset by decreases in revenue from dispositions during 2012.

Operating Expenses:

Operating expenses decreased by $2.1 million or 1.3% for the first nine months of 2012 as compared to the comparable period of 2011. The decrease in operating expense during the year as compared to the comparable period of 2011 relates to decreases in bad debt expense and lower operating costs due to a lower occupancy rate at one of the Account’s larger office assets.

48

Real Estate Taxes:

Real estate taxes increased $7.6 million or 9.2% for the first nine months of 2012 as compared to the comparable period of 2011. The increase during the year to date when compared to the comparable period of 2011 related to acquisitions during 2012 and increased tax values primarily for the Account’s apartment and office asset classes.

Interest Expense:

Interest expense increased $6.2 million, or 7.6% for the first nine months of 2012 as compared to the comparable period of 2011. The increase was a result of new financings during 2011, specifically the financings of The Corner and The Palatine during 2011, and the financing of The Forum at Carlsbad and Mass Court during 2012.

Income from Real Estate Joint Ventures and Limited Partnerships:

Income from real estate joint ventures and limited partnerships decreased $16.8 million or 23.0% during the first nine months of 2012 as compared to the comparable period of 2011. The decrease was attributable to decreased distributions from the Account’s joint venture investments primarily due to one of the Account’s joint venture investments retaining operating cash flows to support new financings during 2012.

Interest and Dividend Income:

Interest and dividend income increased $10.1 million during the first nine months of 2012 as compared to the comparable period of 2011. The increase in dividend income was directly attributed to the Account’s increased investment in real estate related securities. The Account held $1.5 billion as of September 30, 2012 as compared to $813.0 million for the comparable period of 2011.

Expenses:

The Account’s expenses increased $12.8 million or 14.4% for the first nine months of 2012 as compared to the comparable period of 2011. The increase in the Account’s total expenses was primarily due to the $1.7 billion or 13.3% increase in the Account’s net assets from September 30, 2011. When comparing the expenses charged to the Account as a percentage of the average net assets of the Account for each respective nine month period, annualized expenses decreased 3 basis points. The decrease is a result of anticipated reductions in the overall costs to the Account, primarily related to anticipated reductions in investment advisory and mortality and expense risk charges. Investment advisory, administrative and distribution charges are costs charged to the Account associated with managing the Account. A portion of these costs are fixed, but generally correspond to the level of assets under management. Mortality and expense risks are charges to the Account from TIAA for TIAA’s assumption of these risks. The mortality and expense risk charges decreased during the nine month period primarily driven by decreasing participant annuitization into the Account as well as changes in participant mortality assumptions. SeeNote 2—Management Agreements and Arrangementsto the consolidated financial statements included herewith for further discussion related to these expenses.

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

The table below shows the net realized and unrealized gains and losses on investments and mortgage loans payable for the nine months ended September 30, 2012 and 2011 and the dollar and percentage changes for those periods (dollars in millions, unaudited).

49

	For the Nine Months Ended September 30,								Change
	2012				2011				$				%
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
Net realized gain (loss) on investments:
Real estate properties		$	(32.0	)		$	(71.4	)		$	39.4			-55.2	%
Real estate joint ventures and limited partnerships			(51.9	)			(10.6	)			(41.3	)		389.6	%
Marketable securities			14.1				5.0				9.1			182.0	%
Total realized loss on investments			(69.8	)			(77.0	)			7.2			-9.4	%
Net change in unrealized appreciation (depreciation) on:
Real estate properties			465.5				775.4				(309.9	)		-40.0	%
Real estate joint ventures and limited partnerships			313.0				236.5				76.5			32.3	%
Marketable securities			137.5				(92.0	)			229.5			-249.5	%
Mortgage loans payable			(54.5	)			(6.9	)			(47.6	)		689.9	%
Net change in unrealized appreciation on investments and mortgage loans payable			861.5				913.0				(51.5	)		-5.6	%
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND MORTGAGE LOANS PAYABLE		$	791.7			$	836.0			$	(44.3	)		-5.3	%

Real Estate Properties:

During the first nine months of 2012, the Account experienced net realized and unrealized gains on real estate properties of $433.5 million compared to $704.0 million for the comparable period of 2011.

Net realized losses in the Account are due to the sale of real estate property investments during the first nine months of 2012. See theRecent Transactionssection herein for additional discussions regarding the sale of real estate property investments.

The value of the Account’s real estate property investments continued to increase during the quarter which continue to be driven by declining capitalization rates, improved market rents and stabilizing occupancy rates. While the Account’s real estate property investments increased during the first nine months of the year, the velocity of appreciation has slowed from the unrealized returns experienced during the first nine months of 2011. The unrealized returns experienced thus far through 2012 are reflective of market stabilization as compared to the market recovery environment of 2011. Included within net unrealized gains of the Account, are unrealized foreign exchange losses of $7.4 million and unrealized foreign exchange gains of $4.8 million for each respective nine month period related to the Account’s two foreign real estate property investments.

Real Estate Joint Ventures and Limited Partnerships:

Real estate joint ventures and limited partnerships experienced net realized and unrealized gains of $261.1 million for the first nine months of 2012 as compared to $225.9 million for the comparable period of 2011.

Net realized losses in the Account are primarily due to the sale of real estate property underlying the Account’s investments in joint ventures. See theRecent Transactionssection herein for additional discussions regarding the sale of real estate property investments underlying the Account’s investments in joint ventures.

Net unrealized gains on the Account’s joint venture and limited partnership investments continue to be driven by declining capitalization rates, improved market rents and stabilizing occupancy rates experienced through 2011 and continued into the first nine months of 2012.

Marketable Securities:

The Account’s marketable securities positions experienced net realized and unrealized gains of $151.6 million during the first nine months of 2012 as compared to net realized and unrealized losses of $87.0 million for the comparable period of 2011. The Account’s portfolio of marketable securities was comprised of real

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estate related equity securities (primarily REIT securities) and other marketable securities (comprised of United State Treasury Securities and government agency notes).

During the nine months ended September 30, 2012 the markets for REITs in the United States increased approximately 13.2% as measured by the FTSE NAREIT All Equity REITs Index versus a decrease of approximately 8.5% for the comparable period of 2011. The Account’s real estate related equity securities appreciation and depreciation have performed in line with these market movements.

Additionally, as of September 30, 2012 the Account held $2.4 billion of short term marketable securities invested in government agency notes and United States Treasury Securities, which had nominal appreciation due to the short term nature of the investments.

Mortgage Loans Payable:

Mortgage loans payable experienced net unrealized losses of $54.5 million for the first nine months of 2012 compared to net unrealized loss of $6.9 million for the comparable period of 2011. Valuation adjustments to mortgage loans payable are highly dependent upon interest rates, investment return demands, the performance of the underlying real estate investment, and where applicable, foreign exchange rates. The increase in unrealized losses during the year was primarily due to accrued loan costs associated with anticipated loan extinguishments and refinancings as well as decreased credit spreads as a result of decreased loan to value ratios on the Account’s real estate property investments. Included in the net unrealized losses and gains of the Account’s mortgage loans payable was $8.0 million and $1.0 million of unrealized foreign exchange losses in each respective nine month period related to a mortgage loan payable on one of the Account’s foreign real estate property investments.

Three months ended September 30, 2012 compared to three months ended September 30, 2011

Performance

The Account’s total return was 1.9% for the quarter ended September 30, 2012 as compared to 2.3% for the quarter ended September 30, 2011. The Account’s performance thus far during 2012 reflects an increase in the aggregate value of the Account’s real estate property investments, including investments owned in joint ventures and limited partnerships primarily as a result of continued improving market.

Net Investment Income

The table below shows the results of operations for the third quarter ended September 30, 2012 and 2011 and the dollar and percentage changes for those periods (dollars in millions, unaudited).

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	For the Three Months Ended September 30,						Change
	2012			2011			$				%
INVESTMENT INCOME
Real estate income, net:
Rental income		$	217.5		$	223.9		$	(6.4	)		-2.9	%
Real estate property level expenses and taxes:
Operating expenses			53.7			53.0			0.7			1.3	%
Real estate taxes			31.0			27.9			3.1			11.1	%
Interest expense			29.2			27.4			1.8			6.6	%
Total real estate property level expenses and taxes			113.9			108.3			5.6			5.2	%
Real estate income, net			103.6			115.6			(12.0	)		-10.4	%
Income from real estate joint ventures and limited partnerships			23.1			19.8			3.3			16.7	%
Interest			0.8			0.7			0.1			14.3	%
Dividends			8.7			5.8			2.9			50.0	%
TOTAL INVESTMENT INCOME			136.2			141.9			(5.7	)		-4.0	%
Expenses:
Investment advisory charges			14.2			13.2			1.0			7.6	%
Administrative charges			8.2			7.5			0.7			9.3	%
Distribution charges			3.7			2.3			1.4			60.9	%
Mortality and expense risk charges			0.2			1.6			(1.4	)		-87.5	%
Liquidity guarantee charges			8.1			6.8			1.3			19.1	%
TOTAL EXPENSES			34.4			31.4			3.0			9.6	%
INVESTMENT INCOME, NET		$	101.8		$	110.5		$	(8.7	)		-7.9	%

Rental Income:

Rental income decreased $6.4 million or 2.9% during the quarter when compared to the comparable quarter of 2011. The decrease is attributable to an increase in revenues during the third quarter of 2011 related to an early termination fee related to a large tenant vacancy. This decrease was offset by increased revenues from new acquisitions, offset by decreases in revenues from dispositions during the quarter.

Operating Expenses:

Operating expenses increased by $0.7 million or 1.3% for the quarter as compared to the comparable period of 2011 primarily due to real estate investment acquisitions and increased occupancy during the quarter.

Real Estate Taxes:

Real estate taxes increased $3.1 million or 11.1% for the quarter as compared to the comparable period of 2011. The increase in real estate taxes for the quarter related to acquisitions during the quarter and increased tax values primarily for the Account’s apartment and office asset classes.

Interest Expense:

Interest expense increased $1.8 million, or 6.6% for the quarter as compared to the comparable period of 2011. The increase was a result of new financings, specifically the financings of The Palatine during 2011, and the financing of The Forum at Carlsbad and Mass Court during 2012.

Income from Real Estate Joint Ventures and Limited Partnerships:

Income from real estate joint ventures and limited partnerships increased $3.3 million or 16.7% during the quarter as compared to the comparable period of 2011. The increase was attributable to increased distributions from the Account’s joint venture investments primarily due to one of the Account’s joint venture investments relinquishing excess operating cash flows held during 2012.

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Interest and Dividend Income:

Interest and dividend income increased $3.0 million during the quarter as compared to the comparable period of 2011. The increase in dividend income was directly attributed to the Account’s increased investment in real estate related securities. The Account held $1.5 billion as of September 30, 2012 as compared to $813.0 million for the comparable period of 2011.

Expenses:

The Account’s expenses increased $3.0 million or 9.6% for the quarter as compared to the comparable period of 2011. The increase in the Account’s total expenses was primarily due to the $1.7 billion or 13.3% increase in the Account’s net assets from September 30, 2011. When comparing the expenses charged to the Account as a percentage of the average net assets of the Account for each respective period, annualized expenses decreased 4 basis points. The decrease is a result of anticipated reductions in the overall costs to the Account, primarily related to anticipated reductions in investment advisory and mortality and expense risk charges. Investment advisory, administrative and distribution charges are costs charged to the Account associated with managing the Account. A portion of these costs are fixed, but generally correspond to the level of assets under management. Mortality and expense risks are charges to the Account from TIAA for TIAA’s assumption of these risks. The decrease in the mortality and expense risk charges during the quarter was primarily driven by decreasing participant annuitization into the Account as well as changes in participant mortality assumptions. SeeNote 2—Management Agreements and Arrangementsto the consolidated financial statements included herewith for further discussion related to these expenses.

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

The table below shows the net realized and unrealized gains and losses on investments and mortgage loans payable for the quarters ended September 30, 2012 and 2011 and the dollar and percentage changes for those periods (dollars in millions, unaudited).

	For the Three Months Ended September 30,								Change
	2012				2011				$				%
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
Net realized gain (loss) on investments:
Real estate properties		$	(26.8	)			(62.1	) $		$	35.3			-56.8	%
Real estate joint ventures and limited partnerships			(49.5	)			(2.1	)			(47.4	)		2257.1	%
Marketable securities			2.7				1.3				1.4			107.7	%
Total realized loss on investments			(73.6	)			(62.9	)			(10.7	)		17.0	%
Net change in unrealized appreciation (depreciation) on:
Real estate properties			141.6				309.0				(167.4	)		-54.2	%
Real estate joint ventures and limited partnerships			130.5				83.6				46.9			56.1	%
Marketable securities			1.3				(142.4	)			143.7			-100.9	%
Mortgage loans payable			(25.8	)			(6.4	)			(19.4	)		303.1	%
Net change in unrealized appreciation on investments and mortgage loans payable			247.6				243.8				3.8			1.6	%
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND MORTGAGE LOANS PAYABLE		$	174.0			$	180.9			$	(6.9	)		-3.8	%

Real Estate Properties:

During the quarter the Account experienced net realized and unrealized gains on real estate properties of $114.8 million compared to a gain of $246.9 million for the comparable period of 2011.

The value of the Account’s real estate property investments continued to increase during the quarter, which continue to be driven by declining capitalization rates, improved market rents and stabilizing occupancy rates. While the Account’s real estate property investments increased during the quarter, the velocity of appreciation has slowed from the unrealized returns experienced during the third quarter of 2011.

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The unrealized returns experienced thus far during the third quarter of 2012 are reflective of market stabilization as compared to the market recovery environment of 2011. Included within net unrealized gains of the Account, are unrealized foreign exchange losses of $9.4 million and unrealized foreign exchange gains of $25.4 million for each respective quarter related to the Account’s foreign investment properties.

Real Estate Joint Ventures and Limited Partnerships:

Real estate joint ventures and limited partnerships experienced net realized and unrealized gains of $81.0 million for the quarter compared to $81.5 million for the comparable period of 2011.

Net unrealized gains on the Account’s joint venture and limited partnership investments continue to be driven by declining capitalization rates, improved market rents and stabilizing occupancy rates.

Marketable Securities:

The Account’s marketable securities positions experienced net realized and unrealized gains of $4.0 million during the quarter as compared to net realized and unrealized losses of $141.1 million for the comparable period of 2011. The Account’s portfolio of marketable securities was comprised of real estate related equity securities (primarily REIT securities) and other marketable securities (comprised of United State Treasury Securities and government agency notes).

During the quarter ended September 30, 2012 the markets for REITs in the United States increased approximately 0.2% as measured by the FTSE NAREIT All Equity REITs Index versus a decrease of approximately 15.9% for the comparable period of 2011. The Account’s real estate related equity securities appreciation and depreciation have performed in line with these market movements.

Additionally, as of September 30, 2012 the Account held $2.4 billion of short term marketable securities invested in government agency notes and United States Treasury Securities, which had nominal appreciation due to the short term nature of the investments.

Mortgage Loans Payable:

Mortgage loans payable experienced net unrealized losses of $25.8 million for the third quarter of 2012 compared to unrealized losses of $6.4 million during the comparable period of 2011. Valuation adjustments to mortgage loans payable are highly dependent upon interest rates, investment return demands, the performance of the underlying real estate investment, and where applicable, foreign exchange rates. The increase in unrealized losses during the quarter was primarily due to accrued loan costs associated with anticipated loan extinguishments and refinancings as well as decreased credit spreads as a result of decreased loan to value ratios on the Account’s real estate property investments. Included in the net unrealized gains for the Account’s mortgage loans payable was $6.0 million in unrealized foreign exchange gains and $6.4 million of unrealized foreign exchange losses in each respective period related to a mortgage loan payable on one of the Account’s foreign real estate property investments.

Liquidity and Capital Resources

As of September 30, 2012 and December 31, 2011, the Account’s cash, cash equivalents and non-real estate-related marketable securities had a value of $2.4 billion and $2.8 billion, respectively (16.6% and 20.8% of the Account’s net assets at such dates, respectively).

Participant Flows: First Nine Months of 2012 Compared to First Nine Months of 2011

During the nine months ended September 30, 2012, the Account received $1.5 billion in premiums, which included $859.9 million of participant transfers into the Account. The Account had outflows of $741.7 million in annuity payments, withdrawals (excluding liquidity unit redemptions) and death benefits, which included $345.0 million of participant transfers out of the Account. During the nine months ended September 30, 2011, the Account received $1.9 billion in premiums, which included $1.3 billion of participant transfers into the Account. Additionally, the Account had outflows of $871.3 million from annuity payments, withdrawals and death benefits, which included $542.9 million of participant transfers out of the Account. See Note 1—Organization and Significant Accounting Policies of the consolidated financial statements as included herein.

Effective March 31, 2011 (or such later date as indicated in the contract or contract endorsement) individual participants are limited from making “internal funding vehicle transfers” into their Account

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accumulation if, after giving effect to such transfer, the total value of such participant’s Account accumulation (under all contracts issued to such participant) would exceed $150,000. This limitation is subject to certain exceptions. Management believes that, compared to periods prior to the transfer limitation being in effect, participant transfer inflow activity will continue to be tempered. The majority of jurisdictions in which the Account is offered had approved the limitation effective March 31, 2011. As of the date of this Form 10-Q, all jurisdictions in which the Account is offered have approved this limitation, but the effective date of the limitation as applies to an individual participant will be reflected on his or her contract or endorsement form.

Liquidity Guarantee

Primarily as a result of significant net participant transfers out of the Account during late 2008 and mid-2009, pursuant to TIAA’s existing liquidity guarantee obligation, the TIAA General Account purchased $1.2 billion of liquidity units issued by the Account in a number of separate transactions between December 2008 and June 2009. Subsequent to June 2009, 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.

Net participant transfers out of the Account significantly slowed following the first quarter of 2009, and net participant transfer activity turned to net inflows in early 2010, which has continued through the date of this report. As a result, while management cannot predict whether any future TIAA liquidity unit purchases will be required under this liquidity guarantee, it is unlikely that additional purchases will be required in the near term. However, management cannot predict for how long net inflows will continue to occur. If net outflows were to occur (even if not at the same intensity as in 2008 and early 2009), it could have a negative impact on the Account’s operations and returns and could require TIAA to purchase additional liquidity units, perhaps to a significant degree, as was the case in late 2008 and early 2009.

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. Management also believes that TIAA has the ability to meet its obligations under this liquidity guarantee.

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 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-Q, 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. 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

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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.

The independent fiduciary is vested with oversight and approval over any redemption of TIAA’s liquidity units, acting in the best interests of Real Estate Account participants. The independent fiduciary has indicated to management that, as of the date of this prospectus, it intends to initiate systematic redemptions of the liquidity units held by the TIAA General Account at such times as it deems appropriate. The independent fiduciary currently intends to cause a redemption of approximately one-quarter of the liquidity units held by TIAA on a daily basis throughout the third month of each calendar quarter, beginning June 1, 2012, so long as (i) the Account holds and is projected to hold at least 17% of its net assets in cash, cash equivalents and publicly traded, liquid non-real estate related securities, after taking into account certain projected sources and uses of cash flow into the Account, and (ii) recent historical net participant flows have been positive over the 20 business days prior to such redemption. If these conditions (along with other conditions and factors which the independent fiduciary may apply) are met consistently following June 1, 2012, TIAA would be fully redeemed by the end of March 2013. In addition, at any time the Account holds cash, cash equivalents and publicly traded, liquid non-real estate related securities in excess of 25% of its net assets, the independent fiduciary intends to cause redemption of liquidity units in an amount sufficient to reduce such level to 25% of net assets.

In accordance with this intent, the independent fiduciary caused the redemption of approximately half of the liquidity units held by TIAA during the nine months ended September 30, 2012. These redemptions were executed evenly over the 21 and 19 business days in June and September 2012, respectively. Aggregate amounts of $306.1 million and $314.2 million in value of liquidity units were redeemed during the months of June and September, respectively. As of September 30, 2012, TIAA held 2.4 million liquidity units which had a value of $629.9 million. These units represented 4.4% of the outstanding accumulation units of the Account.

In administering any redemptions (including those intended as described above), the independent fiduciary has indicated to management that it intends to evaluate, among other things (i) projected acquisitions and dispositions of real estate and real estate-related investments, (ii) participant inflow and outflow trends, (iii) the Account’s net income and (iv) obligations to make debt service payments and pay principal balances of mortgages on Account properties. The independent fiduciary is vested with oversight and approval over any redemption of liquidity units owned by TIAA, acting in the best interests of Real Estate Account participants.

As a general matter, the independent fiduciary may authorize or direct the redemption of all or a portion of liquidity units at any time and TIAA will request the approval of the independent fiduciary before any liquidity units are redeemed. There is no guarantee that the independent fiduciary will cause redemptions and even if redemptions do commence, management cannot predict the time period over which such redemptions would continue. Further, neither management nor the independent fiduciary can predict when TIAA’s liquidity units may be redeemed in full. Any further redemption will have the effect of reducing the Account’s liquidity.

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 pays TIAA for the risk associated with providing the liquidity guarantee through a daily deduction from the Account’s net assets.

Net Income and Marketable Securities

The Account’s net investment income continues to be an additional source of liquidity for the Account. Net investment income was $288.3 million for the first nine months of 2012 as compared to $329.0 million for the comparable period of 2011. Total net investment income decreased as described more fully in theResults of Operations section above.

As of September 30, 2012, cash and cash equivalents, along with real estate-related and non-real estate-related marketable securities comprised 26.7% of the Account’s net assets. The Account’s real estate-related marketable securities consist of publicly traded REITS and real estate index funds. The Account’s liquid assets continue to be available to purchase additional suitable real estate properties, meet the Account’s debt obligations, expense needs, and participant redemption requests (i.e., cash withdrawals, benefit payments, or transfers).

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Leverage

The Account may borrow money and assume or obtain a mortgage on a property to make leveraged real estate investments. Also, to meet any 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 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, the Account’s loan to value ratio (as described below) is to be maintained at or below 30%. 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

• long term extensions of 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 September 30, 2012 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.

As of September 30, 2012, the Account’s ratio of outstanding principal amount of debt to total gross asset value (i.e., a “loan to value ratio”) was 19.6%. The Account intends to maintain its loan to value ratio at or below 30% (this ratio is measured at the time of incurrence and after giving effect thereto). The Account’s total gross asset value, for these purposes, is equal to the total fair value of the Account’s assets (including the fair value of the Account’s interest in joint ventures), with no reduction associated with any indebtedness on such assets.

In times of high net inflow activity, in particular during times of high net participant transfer inflows, management may determine to apply a portion of such cash flows to make prepayments of indebtedness prior to scheduled maturity, which would have the effect of reducing the Account’s loan to value ratio.

As of September 30, 2012, the Account’s foreign property investment, 1 & 7 Westferry Circus, secured $208.3 million in principal for a debt obligation maturing November 15, 2012. As of the date of this Form 10-Q, the lender has agreed to extend the maturity date of this non-recourse loan to December 31, 2012, during which time the Account will continue to market the property for sale and use the proceeds to repay the lender and satisfy its obligations thereto. However, there is no guarantee that an acceptable sale will occur before such time, in which case, the Account could default under the loan thus allowing the lender to exercise its remedies under the loan.

Recent Transactions

The following describes property transactions by the Account during the third quarter of 2012. 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.

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Purchases

Cerritos Industrial Park—Cerritos, CA

On July 17, 2012 the Account purchased a 27 building industrial property complex located in Cerritos, California for $83.8 million. Cerritos Industrial Park is a 934,213 square foot (“SF”) industrial park building, built in 1970-1977 which is comprised of 164,850 SF of office space of which 6,017 SF is finished mezzanine office space. The property complex was 90.0% leased at the time of purchase. The three largest tenants are Oleo Kiosks (45,768 SF), Cytek manufacturing (44,400 SF), and Vigor Sports (40,830 SF).

Residences at the Village of Merrick Park—Coral Gables, FL

On August 1, 2012 the Account purchased a 120-unit mid-rise multi-family apartment complex known as The Residences at the Village of Merrick Park located in Coral Gables, Florida for $52.4 million, along with a subleasehold interest in the underlying land. The Residences at the Village of Merrick Park is a seven story, 187,410 SF apartment complex built in 2003 which is comprised of 120 units in two separate buildings, 39,400 SF of ground floor retail space and a four level parking deck. The property was 97.0% leased at the time of purchase.

Mass Court—Washington, DC

On August 30, 2012 the Account purchased a 14 story multi-family high-rise apartment building with an attached parking garage, located in the Mount Vernon district in Washington, DC for $171.2 million. Mass Court is a 310,087 square foot apartment building, built in 2004 which is comprised of 371 individual apartment units, 4,350 square feet of retail space and 309 unit parking garage. The property was 94.5% leased at the time of purchase.

Pacific Coast Corporate Park—Fife, WA

On September 10, 2012 the Account purchased an industrial property located in Fife, Washington for $34.3 million. The property consists of two, institutional quality, class-A, industrial warehouse distribution buildings for a total of 386,336 square feet. The property was 100% leased at the time of purchase.

Circa at Green Lake—Seattle, WA

On September 14, 2012 the Account purchased a four story multi-family residential property prominently located on Green Lake in Seattle, Washington for $83.5 million. The property consists of two four story class-A apartment buildings with a total of 199 units and 19,745 square feet of ground floor retail space. The buildings were 97.0% and 65.0% leased, respectively, at the time of purchase.

Sales

Centerside I—San Diego, CA

On July 3, 2012 the Account sold a 13 story office building located in San Diego, California for a net sales price of $51.6 million and realized a loss from the sale of $26.8 million, the majority of which had been previously recognized as an unrealized loss in the Account’s consolidated statement of operations. The Account’s cost basis (excluding selling costs) in the property as of the date of sale was $78.4 million according to the records of the Account.

Prominence at Buckhead—Atlanta, GA

On August 2, 2012 an office property located in Atlanta, Georgia was sold by the Account’s GA Buckhead LLC joint venture investment, in which the Account holds a 75% ownership interest. The Account’s portion of the net sales price was $74.4 million in which the Account experienced a realized loss from sale of $11.9 million, the majority of which had been previously recognized as an unrealized loss in the Account’s consolidated statement of operations. The Account’s cost basis (excluding selling costs) in the property as of the date of sale was $86.3 million according to the records of the Account.

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Treat Towers—Walnut Creek, CA

On August 6, 2012 an office property located in Walnut Creek, California was sold by the Account’s CA Treat Towers LP joint venture investment, in which the Account holds a 75% ownership interest. The Account’s portion of the net sales price was $88.3 million in which the Account experienced a realized loss from sale of $8.1 million, the majority of which had been previously recognized as an unrealized loss in the Account’s consolidated statement of operations. The Account’s cost basis (excluding selling costs) in the property as of the date of the sale was $96.4 million according to the records of the Account.

Financings

Mass Court—Washington, DC

On August 30, 2012, the Account entered into a $92.6 million mortgage loan payable on a multi-family apartment building located in Washington, DC. The debt matures September 1, 2019 and is interest only through September 1, 2017 at which time both principal and interest payments are due through maturity. The interest rate is fixed at 2.88% over the life of the loan.

Critical Accounting Policies

The consolidated financial statements of the Account are prepared in conformity with accounting principles generally accepted in the United States of America.

In preparing the Account’s consolidated 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.

Determination of Investments at Fair Value:The Account reports all investments and investment related mortgage loans payable at fair value. The Financial Accounting Standards Board (“FASB”) has defined fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The following is a description of the valuation methodologies used to determine the fair value of the Account’s investments and investment related mortgage payables.

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. Determination of fair value involves judgment because the actual fair 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 reasonable estimate of the fair value of its investments. Implicit in the Account’s definition of fair value are 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 fair value presented.

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Real estate properties owned by the Account are initially valued based on an independent third party appraisal, as reviewed by TIAA’s internal appraisal staff and as applicable the Account’s independent fiduciary 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 third party appraiser, reviewed by TIAA’s internal appraisal staff and as applicable the Account’s independent fiduciary. 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 or month 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 the account receives a bona fide bid for the sale of a property held within the Account or one of the Account’s joint ventures. 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). Alternatively, adjustments may be made to reflect the execution or renewal of a significant lease. 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).

The 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, 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, Royal Institute of Chartered Surveyors) and state certified appraisers from national or regional firms with relevant property type experience and market knowledge. Under the Account’s current procedures, each independent appraisal firm will be rotated off of a particular property at least every three years, although such appraisal firm may perform appraisals of other Account properties subsequent to such rotation.

Also, the independent fiduciary can require additional appraisals if factors or events have occurred that could materially change a property’s value (including those identified above) 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 (seeValuation 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

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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.

Valuation of Real Estate Limited Partnerships—Limited partnership interests are stated at the fair value of the Account’s ownership in the partnership which are recorded based upon the changes in the net asset values of the limited partnerships as determined from the financial statements of the limited partnerships when received by the Account. Prior to the receipt of the financial statements from the limited partnerships, the Account estimates the value of its interest in good faith and will from time to time seek input from the issuer or the sponsor of the investments. Since market quotations are not readily available, the limited partnership interests are valued at fair value as determined in good faith by management under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole.

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.

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.

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.

Valuation of Mortgage Loans Payable—Mortgage loans payable are stated at fair value. The estimated fair value of mortgage loans payable are based on the amount at which the liability could be transferred to a third party exclusive of transaction costs. Mortgage loans payable are valued internally by TIAA’s internal appraisal department, as reviewed by the Account’s independent fiduciary, 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, and the return demands of the market.

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 are included in net realized and unrealized gains and losses on real estate properties 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.

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, payment levels cannot be reduced as a result of the Account’s adverse m ortality 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 not to exceed to 2.5% of average net assets per year. The Account pays a fee to TIAA to assume mortality and expense risks.

Accounting for Investments: The investments held by the Account are accounted for as follows:

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Real Estate Properties—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.

Real Estate Joint Ventures—The Account has limited ownership interests in various real estate joint ventures (collectively, the “joint ventures”). The Account records its contributions as increases to its investments in the joint ventures, and distributions from the joint ventures are treated as income within income from real estate joint ventures and limited partnerships in the Account’s consolidated statements of operations. Distributions that are identified as returns of capital are recorded as reductions to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Income from the joint ventures is recorded based on the Account’s proportional interest of the income distributed by the joint ventures. Income earned by the joint ventures, but not yet distributed to the Account by the joint ventures is recorded as unrealized gains and losses.

Limited Partnerships—The Account has limited ownership interests in various private real estate funds (primarily limited partnerships) 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 income within income from real estate joint ventures and limited partnerships in the Account’s consolidated statements of operations. Distributions that are identified as returns of capital are recorded as reductions to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Unrealized gains and losses are recorded based upon the changes in the net asset values of the limited partnerships as determined from the financial statements of the limited partnerships when received by the Account. Prior to the receipt of the financial statements from the limited partnerships, the Account estimates the value of its interest in good faith and will from time to time seek input from the issuer or the sponsor of the investment. Changes in value based on such estimates are recorded by the Account as unrealized gains and losses.

Marketable Securities—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 within dividend income. Dividends that are identified as returns of capital are recorded as reductions to the cost basis of the investment, whereas dividends identified as capital gains or losses are recorded as realized gains or losses. Realized gains and losses on securities transactions are accounted for on the specific identification method.

Realized and Unrealized Gains and Losses–Unrealized gains and losses are recorded as the fair values of the Account’s investments are adjusted, and as discussed within theReal Estate Joint Ventures andLimited Partnerships sections above. Realized gains and losses are recorded at the time an investment is sold or a distribution is received from the joint ventures or limited partnerships. 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.

Net Assets—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 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) since the end of the prior valuation day; and

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• actual net operating income earned from the Account’s properties, other real estate-related investments and non-real estate-related investments (but 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 liabilities held within the Account, including the daily investment management fee, administration and distribution fees 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.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Account’s real estate holdings, including real estate joint ventures and limited partnerships, which, as of September 30, 2012, represented 76.7% 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;

• 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.

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 September 30, 2012, 23.3% of the Account’s total investments were comprised of marketable securities. As of September 30, 2012, marketable securities include high-quality debt instruments (i.e., government agency notes) and REIT securities. 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 earlier in Critical Accounting Policies section above and inNote 1—Organization and Significant Accounting Policies to the Account’s consolidated financial statements included herewith. The Account’s marketable securities 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.

Risks associated with investments in real estate-related liquid assets (which could include, from time to time, REIT securities and CMBS), and non-real estate-related liquid assets, include financial/credit risk, market volatility risk, interest rate volatility risk and deposit/money market risk.

• 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

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	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 funds can suffer losses.

In addition, to the extent the Account were to hold mortgage-backed securities (including commercial mortgage-backed securities) 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 fair value of these securities is also highly sensitive to changes in interest rates. Note that the potential for appreciation, which could otherwise be expected to result from a decline in interest rates, may be limited by any increased prepayments. These securities may be harder to sell than other securities.

In addition to these risks, real estate equity securities (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 the Account’s most recent prospectus.

ITEM 4. 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 (“CEO”) and the Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and participation of the registrant’s management, including the registrant’s CEO and CFO, the registrant conducted an evaluation of the effectiveness of the registrant’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of September 30, 2012. Based upon management’s review, the CEO and the CFO concluded that the registrant’s disclosure controls and procedures were effective as of September 30, 2012.

(b) 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.

PART II. OTHER INFORMATION

ITEM 1. 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.

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ITEM 1A. RISK FACTORS.

There have been no material changes from our risk factors as previously reported in the Account’s Annual Report on Form 10-K for the year ended December 31, 2011.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable

ITEM 5. OTHER INFORMATION.

The Code of Ethics for TIAA’s senior financial officers, including its principal executive officer, principal financial officer, principal accounting officer, or controller, and persons performing similar functions, has been filed as an exhibit to the Account’s Annual Report on Form 10-K for the year ended December 31, 2011 and can also be found on the following two web sites, http://www.tiaa-cref.org/ public/prospectuses/index.html and http://www.tiaa-cref.org/public/about/governance/corporate/annual-reports/index.html.

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ITEM 6. EXHIBITS

(1)	(A)	Distribution Agreement for the Contracts Funded by the TIAA Real Estate Account, dated as of January 1, 2008, by and among Teachers Insurance and Annuity Association of America, for itself and on behalf of the Account, and TIAA-CREF Individual & Institutional Services, LLC.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 Endorsements2, Keogh Contract,3 Retirement Select and Retirement Select Plus Contracts and Endorsements1 and Retirement Choice and Retirement Choice Plus Contracts.3
	(B)	Forms of Income-Paying Contracts2
	(C)	Form of Contract Endorsement for Internal Transfer Limitation10
	(D)	Form of Accumulation Contract11
(10)	(A)	Independent Fiduciary Agreement, dated February 22, 2006, by and among TIAA, the Registrant, and Real Estate Research Corporation4
	(B)	Amendment to Independent Fiduciary Agreement, dated December 17, 2008, between TIAA, on behalf of the Registrant, and Real Estate Research Corporation6
	(C)	Amended and Restated Independent Fiduciary Letter Agreement, dated as of November 23, 2011, between TIAA, on behalf of the Registrant, and Real Estate Research Corporation.12
	(D)	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
*(31)		Rule 13(a)-15(e)/ Rule 13a-15(e)/15d-15(e) Certifications
*(32)		Section 1350 Certifications
**(101)		The following financial information from the Quarterly Report on Form 10-Q for the period ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the Statements of Assets and Liabilities, (ii) the Statements of Operations, (iii) the Statements of Changes in Net Assets, (iv) the Statements of Cash Flows, and (v) the Notes to the Financial Statements

*	Filed herewith.
**	Furnished electronically 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).
(10)	Previously filed and incorporated by reference to Exhibit 4(C) to the Account’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 and filed with the Commission on November 12, 2010 (File No. 33-92990).
(11)	Previously filed and incorporated by reference to Exhibit 4(D) to the Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed April 27, 2011 (File No. 333-172900).
(12)	Previously filed and incorporated by reference to Exhibit 10.1 to the Account’s Current Report on Form 8-K, filed with the Commission on November 29, 2011 (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 Report to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 13th day of November, 2012.

	TIAA REAL ESTATE ACCOUNT
	By:	TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
November 13, 2012	By:	/s/ Roger W. Ferguson, Jr.
		Roger W. Ferguson, Jr. President and Chief Executive Officer
November 13, 2012	By:	/s/ Virginia M. Wilson
		Virginia M. Wilson Executive Vice President and Chief Financial Officer

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