SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________________________ to__________________
Commission File Numbers 33-92990, 333-13477 and 333-22809
TIAA REAL ESTATE ACCOUNT
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of
incorporation or organization)
NOT APPLICABLE
(IRS Employer Identification No.)
C/O TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
730 THIRD AVENUE
NEW YORK, NEW YORK
(address of principal executive offices)
10017-3206
(Zip code)
(212) 490-9000
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
INDEX TO UNAUDITED FINANCIAL STATEMENTS
OF THE TIAA REAL ESTATE ACCOUNT
JUNE 30, 1999
<TABLE>
<CAPTION>
Page
<S> <C>
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 Consolidated Financial Statements.............................. 7
Consolidated Statement of Investments................................... 12
</TABLE>
2
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Investments, at value:
Real estate properties
(cost: $853,480,080 and $775,801,883)............................... $ 895,503,104 $ 820,211,240
Marketable securities
(cost: $592,321,460 and $402,041,089)............................... 585,568,454 391,033,557
Cash.................................................................. 572,343
-
Other................................................................. 25,362,095 17,786,291
------------- -------------
TOTAL ASSETS 1,506,433,653 1,229,603,431
------------- -------------
LIABILITIES
Payable for securities transactions.................................... 4,258,977 -
Accrued real estate property level expenses and taxes.................. 13,450,439 11,432,529
Security deposits held................................................. 1,926,209 1,890,423
------------- -------------
TOTAL LIABILITIES 19,635,625 13,322,952
------------- -------------
MINORITY INTEREST - 19,913,592
------------- -------------
NET ASSETS
Accumulation Fund...................................................... 1,447,063,148 1,167,591,317
Annuity Fund........................................................... 39,734,880 28,775,570
------------- -------------
TOTAL NET ASSETS $1,486,798,028 $1,196,366,887
============= =============
NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 6 and 7.................. 10,514,781 8,833,911
============= =============
NET ASSET VALUE, PER ACCUMULATION UNIT--Note 6........................... $137.62 $132.17
======= =======
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Real estate income, net:
Rental income.................................................. $27,997,860 $20,002,915 $54,196,751 $37,656,247
Real estate property level expenses and taxes: ----------- ----------- ----------- -----------
Operating expenses........................................... 5,965,445 4,052,127 11,546,070 8,128,245
Real estate taxes............................................ 3,205,340 2,128,003 5,878,391 4,346,105
----------- ----------- ----------- -----------
Total real estate property level expenses and taxes 9,170,785 6,180,130 17,424,461 12,474,350
----------- ----------- ----------- -----------
Real estate income, net 18,827,075 13,822,785 36,772,290 25,181,897
Interest.......................................................... 5,409,410 4,007,501 9,773,575 7,225,583
Dividends......................................................... 1,908,101 2,087,297 3,952,403 3,856,819
----------- ----------- ----------- -----------
TOTAL INCOME 26,144,586 19,917,583 50,498,268 36,264,299
----------- ----------- ----------- -----------
Expenses--Note 3:
Investment advisory charges..................................... 1,377,170 824,282 2,422,056 1,522,547
Administrative and distribution charges......................... 947,042 718,609 1,752,132 1,225,605
Mortality and expense risk charges.............................. 248,570 170,579 466,953 300,435
Liquidity guarantee charges..................................... 196,373 23,658 288,893 49,594
----------- ----------- ----------- -----------
TOTAL EXPENSES 2,769,155 1,737,128 4,930,034 3,098,181
----------- ----------- ----------- -----------
INVESTMENT INCOME, NET 23,375,431 18,180,455 45,568,234 33,166,118
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Real estate properties......................................... - - 6,205,560 -
Marketable securities.......................................... 213,035 71,326 (386,108) 331,209
----------- ----------- ----------- -----------
Net realized gain (loss) on investments 213,035 71,326 5,819,452 331,209
----------- ----------- ----------- -----------
Net change in unrealized appreciation (depreciation) on:
Real estate properties......................................... 2,496,507 9,181,292 (2,386,333) 12,823,405
Marketable securities.......................................... 7,041,473 (6,144,677) 4,254,526 (7,403,437)
----------- ----------- ----------- -----------
Net change in unrealized appreciation on investments 9,537,980 3,036,615 1,868,193 5,419,968
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 9,751,015 3,107,941 7,687,645 5,751,177
----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS BEFORE MINORITY INTEREST 33,126,446 21,288,396 53,255,879 38,917,295
Minority interest in net increase in net assets
resulting from operations...................................... 1,767,772 (1,052,659) 1,364,619 (1,576,355)
----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $34,894,218 $20,235,737 $54,620,498 $37,340,940
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
FROM OPERATIONS
Investment income, net.................................. $ 23,375,431 $ 18,180,455 $ 45,568,234 $ 33,166,118
Net realized gain on investments.......................... 213,035 71,326 5,819,452 331,209
Net change in unrealized appreciation on investments.... 9,537,980 3,036,615 1,868,193 5,419,968
Minority interest in net increase in net assets
resulting from operations.............................. 1,767,772 (1,052,659) 1,364,619 (1,576,355)
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 34,894,218 20,235,737 54,620,498 37,340,940
-------------- -------------- -------------- --------------
FROM PARTICIPANT TRANSACTIONS
Premiums................................................ 32,014,869 22,306,920 61,559,407 46,171,227
TIAA seed money withdrawn--Note 1....................... - (25,951,148) - (55,793,541)
Net transfers from TIAA................................. 9,747,102 7,461,971 18,735,361 22,583,844
Net transfers from CREF Accounts........................ 83,827,214 79,607,923 171,726,279 171,981,320
Annuity and other periodic payments..................... (982,998) (468,272) (2,060,852) (951,918)
Withdrawals............................................. (6,072,978) (2,773,722) (13,287,348) (5,658,092)
Death benefits.......................................... (281,555) (87,512) (862,204) (134,088)
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS RESULTING
FROM PARTICIPANT TRANSACTIONS 118,251,654 80,096,160 235,810,643 178,198,752
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS 153,145,872 100,331,897 290,431,141 215,539,692
NET ASSETS
Beginning of period..................................... 1,333,652,156 901,026,510 1,196,366,887 785,818,715
-------------- -------------- -------------- --------------
End of period........................................... $1,486,798,028 $1,001,358,407 $1,486,798,028 $1,001,358,407
============== ============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations........ $ 34,894,218 $ 20,235,737 $ 54,620,498 $ 37,340,940
Adjustments to reconcile net increase in net assets resulting
from operations to net cash used in operating activities:
Increase in investments.................................... (135,811,424) (105,182,662) (269,826,761) (220,297,294)
Decrease (increase) in other assets........................ (5,840,720) 353,323 (7,575,804) (236,657)
Decrease (decrease) in payable for securities transactions. 4,201,737 4,723,995 4,258,977 4,713,532
Increase (decrease) in other liabilities................... 1,179,940 (448,059) 2,053,696 178,590
Increase (decrease) in minority interest................... (16,933,387) 589,478 (19,913,592) 311,757
------------- ------------- ------------- -------------
NET CASH USED IN
OPERATING ACTIVITIES (118,309,636) (79,728,188) (236,382,986) (177,989,132)
------------- ------------- ------------- -------------
CASH FLOWS FROM PARTICIPANT TRANSACTIONS
Premiums.................................................... 32,014,869 22,306,920 61,559,407 46,171,227
TIAA seed money withdrawn--Note 1........................... - (25,951,148) - (55,793,541)
Net transfers from TIAA..................................... 9,747,102 7,461,971 18,735,361 22,583,844
Net transfers from CREF Accounts............................ 83,827,214 79,607,923 171,726,279 171,981,320
Annuity and other periodic payments......................... (982,998) (468,272) (2,060,852) (951,918)
Withdrawals................................................. (6,072,978) (2,773,722) (13,287,348) (5,658,092)
Death benefits.............................................. (281,555) (87,512) (862,204) (134,088)
------------- ------------- ------------- -------------
NET CASH PROVIDED BY
PARTICIPANT TRANSACTIONS 118,251,654 80,096,160 235,810,643 178,198,752
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (57,982) 367,972 (572,343) 209,620
CASH
Beginning of period......................................... 57,982 249,246 572,343 407,598
------------- ------------- ------------- -------------
End of period............................................... $ - $ 617,218 $ - $ 617,218
============= ============= ============= =============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
TIAA REAL ESTATE ACCOUNT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1--Organization
The TIAA Real Estate Account ("Account") is a segregated investment account of
Teachers Insurance and Annuity Association of America ("TIAA") and was
established by resolution of TIAA's Board of Trustees on February 22, 1995,
under the insurance laws of the State of New York, for the purpose of funding
variable annuity contracts issued by TIAA. Teachers REA, LLC, a wholly-owned
subsidiary of the Account, began operations in July 1996 and holds one property
in Virginia. Light Street Partners, L.P. ("Light Street"), a partnership in
which the Account holds a 100% interest, began operations in March 1997 and
holds seven office buildings throughout the United States. Prior to April 30,
1999, when the Account purchased the remaining 10% interest, the Account had a
90% interest in Light Street. Teachers REA II, LLC, a wholly-owned subsidiary of
the Account, began operations in October 1997 and holds one property in
Pennsylvania. Teachers REA III, LLC, a wholly-owned subsidiary of the Account,
began operations in July 1998 and holds one property in Florida.
The Account commenced operations on July 3, 1995 with a $100,000,000 seed money
investment by TIAA. TIAA purchased 1,000,000 Accumulation Units in the Account
and such Units shared in the prorata investment experience of the Account and
are subject to the same valuation procedures and expense deductions as all other
Accumulation Units of the Account. The initial registration statement of the
Account filed by TIAA with the Securities and Exchange Commission ("Commission")
under the Securities Act of 1933 became effective on October 2, 1995. The
Account began to offer Accumulation Units and Annuity Units to participants
other than TIAA on October 2, and November 1, 1995, respectively. In August
1996, the Account's net assets first reached $200 million and, as required under
a five year repayment schedule approved by the New York State Insurance
Department ("NYID"), TIAA began to redeem its seed money Accumulation Units in
monthly installments of 16,667 Units beginning in September 1996. Since the
Account's assets have been growing rapidly, TIAA in October 1997, with NYID
approval, modified the seed money redemption schedule by increasing the monthly
redemption of Units at a level equal to the value of 25% of the Account's net
asset growth for the prior month, with no fewer than 16,667 Units and no more
than 100,000 Units to be redeemed each month. These withdrawals were made at
prevailing daily net asset values and are reflected in the accompanying
consolidated financial statements. At December 31, 1998, all of TIAA's
Accumulation Units had been withdrawn.
The investment objective of the Account is a favorable long-term rate of return
primarily through rental income and capital appreciation from real estate
investments owned by the Account. The Account also invests in publicly-traded
securities and other instruments to maintain adequate liquidity for operating
expenses, capital expenditures and to make benefit payments.
TIAA employees, under the direction of TIAA's Board of Trustees and its
Investment Committee, manage the investment of the Account's assets pursuant to
investment management procedures adopted by TIAA for the Account. TIAA's
investment management decisions for the Account are also subject to review by
the Account's independent fiduciary, Institutional Property Consultants, Inc.
TIAA also provides all portfolio accounting and related services for the
Account. TIAA-CREF Individual & Institutional Services, Inc. ("Services"), a
subsidiary of TIAA, which is registered with the Commission as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc.,
provides administrative and distribution services pursuant to a Distribution and
Administrative Services Agreement with the Account.
Note 2--Significant Accounting Policies
The preparation of financial statements may require management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, income,
expenses and related disclosures. Actual results may differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Account, which are in conformity with generally accepted
accounting principles.
7
<PAGE>
TIAA REAL ESTATE ACCOUNT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 2--Significant Accounting Policies - (Concluded)
Basis of Presentation: The accompanying consolidated financial statements
include the Account and its wholly-owned subsidiaries, Teachers REA, LLC,
Teachers REA II, LLC, Teachers REA III, LLC, Inc. and Light Street. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Valuation of Real Estate Properties: Investments in real estate properties are
stated at fair value, as determined in accordance with procedures approved by
the Investment Committee of the Board of Trustees and in accordance with the
responsibilities of the Board as a whole; accordingly, the Account does not
record depreciation. Fair value for real estate properties is defined as the
most probable price for which a property will sell in a competitive market under
all conditions requisite to a fair sale. Determination of fair value involves
subjective judgement because the actual market value of real estate can be
determined only by negotiation between the parties in a sales transaction. Real
estate properties owned by the Account are initially valued at their respective
purchase prices (including acquisition costs). Subsequently, independent
appraisers value each real estate property at least once a year. The independent
fiduciary must approve all independent appraisers used by the Account. The
independent fiduciary can also require additional appraisals if it believes that
a property's value has changed materially or otherwise to assure that the
Account is valued correctly. TIAA's appraisal staff performs a valuation review
of each real estate property on a quarterly basis and updates the property value
if it believes that the value of the property has changed since the previous
valuation review or appraisal. The independent fiduciary reviews and approves
any such valuation adjustments which exceed certain prescribed limits. TIAA
continues to use the revised value to calculate the Account's net asset value
until the next valuation review or appraisal.
Valuation of Marketable Securities: Equity securities listed or traded on any
United States national securities exchange are valued at the last sales price as
of the close of the principal securities exchange on which such securities are
traded or, if there is no sale, at the mean of the last bid and asked prices on
such exchange. Short-term money market instruments are stated at market value.
Portfolio securities for which market quotations are not readily available are
valued at fair value as determined in good faith under the direction of the
Investment Committee of the Board of Trustees and in accordance with the
responsibilities of the Board as a whole.
Accounting for Investments: Real estate transactions are accounted for as of the
date on which the purchase or sale transactions for the real estate properties
close (settlement date). Rent from real estate properties consists of all
amounts earned under tenant operating leases, including base rent, recoveries of
real estate taxes and other expenses and charges for miscellaneous services
provided to tenants. Rental income is recognized in accordance with the billing
terms of the lease agreements. The Account bears the direct expenses of the real
estate properties owned. These expenses include, but are not limited to, fees to
local property management companies, property taxes, utilities, maintenance,
repairs, insurance and other operating and administrative costs. An estimate of
the net operating income earned from each real estate property is accrued by the
Account on a daily basis and such estimates are adjusted as soon as actual
operating results are determined. Realized gains and losses on real estate
transactions are accounted for under the specific identification method.
Securities transactions are accounted for as of the date the securities are
purchased or sold (trade date). Interest income is recorded as earned and, for
short-term money market instruments, includes accrual of discount and
amortization of premium. Dividend income is recorded on the ex-dividend date.
Realized gains and losses on securities transactions are accounted for on the
average cost basis.
Federal Income Taxes: Based on provisions of the Internal Revenue Code, the
Account is taxed as a segregated asset account of TIAA. The Account should incur
no material federal income tax attributable to the net investment experience of
the Account.
8
<PAGE>
TIAA REAL ESTATE ACCOUNT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 3--Management Agreements
Under established management agreements, various services necessary for the
operation of the Account are provided, at cost, by TIAA and Services. TIAA
provides investment management services for the Account while distribution and
administrative services are provided by Services in accordance with a
Distribution and Administrative Services Agreement between the Account and
Services. Prior to April 30, 1999, an affiliate of the minority partner in Light
Street provided certain management services for the properties owned by Light
Street. The charges for such services, for the six months ended June 30, 1999,
amounted to $345,928 for investment advisory expenses and $104,673 for
administrative expenses which are recorded accordingly in the accompanying
consolidated statements of operations. TIAA also provides a liquidity guarantee
to the Account, for a fee, to ensure that sufficient funds are available to meet
participant transfer and cash withdrawal requests in the event that the
Account's cash flows and liquid investments are insufficient to fund such
requests. TIAA also receives a fee for assuming certain mortality and expense
risks.
Fee payments are made from the Account on a daily basis to TIAA and Services
according to formulas established each year with the objective of keeping the
fees as close as possible to the Account's actual expenses. Any differences
between actual expenses and daily charges are adjusted quarterly.
Note 4--Real Estate Properties
Had the Account's real estate property which was purchased during the six months
ended June 30, 1999 been acquired at the beginning of the period (January 1,
1999), rental income and real estate property level expenses and taxes for the
six months ended June 30, 1999 would have increased by approximately $2,940,000
and $1,625,000, respectively. In addition, interest income for the six months
ended June 30, 1999 would have decreased by approximately $1,328,000.
Accordingly, the total proforma effect on the Account's net investment income
for the six months ended June 30, 1999 would have been a decrease of
approximately $13,000, if the real estate property acquired during the six
months ended June 30, 1999 had been acquired at the beginning of the period.
Several of these properties had little or no net rental activity prior to
purchase by the Account because they were recently constructed. In such cases,
there was little or no real estate income to offset the proforma decline in
interest income, resulting in a net decrease in net investment income from this
calculation. This decrease is not indicative of expected future results because
all of these properties were substantially rented at the time of purchase.
Note 5--Leases
The Account's real estate properties are leased to tenants under operating lease
agreements which expire on various dates through 2021. Aggregate minimum annual
rentals for the properties owned, excluding short-term residential leases, are
as follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
------------
<S> <C>
1999 $ 57,065,000
2000 58,569,000
2001 48,242,000
2002 41,117,000
2003 33,267,000
Thereafter 114,343,000
------------
Total $352,603,000
============
</TABLE>
Certain leases provide for additional rental amounts based upon the recovery of
actual operating expenses in excess of specified base amounts.
9
<PAGE>
TIAA REAL ESTATE ACCOUNT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6--Condensed Consolidated Financial Information
Selected condensed consolidated financial information for an Accumulation Unit
of the Account is presented below.
<TABLE>
<CAPTION>
July 3, 1995
For the (Commencement of
Six Months Ended For the Years Ended Operations) to
June 30, 1999 (1) December 31 December 31, 1995 (1)
----------------- ------------------- ---------------------
(Unaudited) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C> <C>
Per Accumulation Unit Data:
Rental income............................. $ 5.229 $ 10.425 $ 7.288 $ 6.012 $ 0.159
Real estate property
level expenses and taxes................ 1.681 3.403 2.218 1.850 0.042
-------- -------- -------- -------- --------
Real estate income, net 3.548 7.022 5.070 4.162 0.117
Dividends and interest.................... 1.324 3.082 2.709 3.309 2.716
-------- -------- -------- -------- --------
Total income 4.872 10.104 7.779 7.471 2.833
Expenses charges (2)...................... 0.476 0.808 0.580 0.635 0.298
-------- -------- -------- -------- --------
Investment income, net 4.396 9.296 7.199 6.836 2.535
Net realized and unrealized
gains on investments.................... 1.054 0.579 3.987 1.709 0.031
-------- -------- -------- -------- --------
Net increase in
Accumulation Unit Value................. 5.450 9.875 11.186 8.545 2.566
Accumulation Unit Value:
Beginning of period..................... 132.172 122.297 111.111 102.566 100.000
-------- -------- -------- -------- --------
End of period........................... $137.622 $132.172 $122.297 $111.111 $102.566
======== ======== ======== ======== ========
Total return................................ 4.12% 8.07% 10.07% 8.33% 2.57%
Ratios to Average Net Assets:
Expenses (2)............................ 0.37% 0.64% 0.58% 0.61% 0.30%
Investment income, net.................. 3.24% 7.34% 7.25% 6.57% 2.51%
Portfolio turnover rate:
Real estate properties.................. 3.32% 0% 0% 0% 0%
Securities.............................. 19.41% 24.54% 7.67% 15.04% 0%
Thousands of Accumulation Units
outstanding at end of period............ 10,515 8,834 6,313 3,296 1,172
</TABLE>
(1) The percentages shown for this period are not annualized.
(2) Expense charges per Accumulation Unit and the Ratio of Expenses to Average
Net Assets include the portion of expenses related to the 10% minority
interest in Light Street and exclude real estate property level expenses
and taxes. If the real estate property level expenses and taxes were
included, the expense charge per Accumulation Unit for the six months ended
June 30, 1999 would be $2.157 ($4.211, $2.798 and $2.485 for the years
ended December 31, 1998, 1997 and 1996, respectively, and $0.340 for the
period July 3, 1995 through December 31, 1995) and the Ratio of Expenses to
Average Net Assets for the six months ended June 30, 1999 would be 1.66%
(3.32%, 2.82% and 2.39% for the years ended December 31, 1998, 1997 and
1996, respectively, and 0.34% for the period July 3, 1995 through December
31, 1995).
10
<PAGE>
TIAA REAL ESTATE ACCOUNT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 7--Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 1999 December 31, 1998
------------- -----------------
(Unaudited)
<S> <C> <C>
Accumulation Units:
Credited for premiums............................. 456,466 511,462
Credited for transfers, net of disbursements and
amounts applied to the Annuity Fund............ 1,224,404 2,009,434
Outstanding:
Beginning of year.............................. 8,833,911 6,313,015
---------- ---------
End of period.................................. 10,514,781 8,833,911
========== =========
</TABLE>
Note 8--Commitments
During the normal course of business, the Account enters into discussions and
agreements to purchase or sell real estate properties. As of June 30, 1999, the
Account had five outstanding commitments to purchase real estate properties for
approximately $298.2 million. During July 1999, three of these commitments
resulted in purchases of real estate properties totaling $226.4 million. Also
during July the Account purchased an additional real estate property for $65.9
million.
11
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENT OF INVESTMENTS
June 30, 1999
<TABLE>
<CAPTION>
REAL ESTATE PROPERTIES--60.46%
Location / Description Value
- ---------------------- -----
<S> <C>
Arizona:
Biltmore Commerce Center - Office building............ $37,391,114
Southbank Building - Office building.................. 13,000,000
California:
Eastgate Distribution Center - Industrial building.... 13,200,000
IDI California Portfolio - Industrial building........ 36,500,000
Ontario Industrial Properties - Industrial building... 24,650,000
Westcreek - Apartments .............................. 15,100,000
Colorado:
Arapahoe Park East - Industrial building.............. 11,750,000
The Lodge at Willow Creek - Apartments................ 29,000,000
Monte Vista - Apartments............................ 20,000,000
Florida:
Corporate Center at Sawgrass - Office building........ 14,000,000
Golfview - Apartments................................ 27,510,000
The Greens at Metrowest - Apartments.................. 14,100,000
Plantation Grove - Shopping center.................... 7,300,000
Royal St. George - Apartments......................... 16,500,000
Sawgrass Portfolio - Office building.................. 9,608,160
Westinghouse Facility - Industrial building........... 6,200,000
Georgia:
Brixworth - Apartments................................ 16,800,000
Illinois:
Columbia Center III - Office building................. 41,000,000
Glenpointe Business Park - Industrial building........ 15,800,000
Parkview Plaza - Office building...................... 52,713,119
Rockrun Business Park - Industrial building........... 9,350,000
Rolling Meadows - Shopping center..................... 12,575,000
Woodcreek Business Park - Industrial building......... 6,700,000
Kentucky:
IDI Kentucky Portfolio - Industrial building.......... 24,972,000
Iowa:
Interstate Acres - Industrial Building................ 14,293,900
Maryland:
FedEx Distribution Facility - Industrial building..... 7,800,000
Longview Executive Park - Office building............. 27,800,000
Saks Distribution Center - Industrial building ....... 30,000,000
Massachusetts:
Two Newton Center - Office building................... 19,900,000
Michigan:
Indian Creek - Apartments............................. 17,100,000
Minnesota
Interstate Crossing - Industrial building............. 6,300,000
River Road Distribution Center - Industrial building.. 4,200,000
New Jersey:
371 Hoes Lane - Office building....................... 16,800,000
New York:
The Colorado - Apartments............................. 52,681,676
Nevada:
UPS Distribution Facility - Industrial building....... 11,000,000
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
North Carolina:
Lynwood Collection - Shopping center..................$ 7,509,450
Millbrook Collection - Shopping center................ 7,100,000
Ohio:
Bent Tree - Apartments ............................... 14,500,000
Northmark Business Center - Office building........... 12,700,686
Oregon:
Five Centerpointe - Office building................... 18,000,000
Pennsylvania:
Lincoln Woods - Apartments ........................... 22,755,160
Texas:
Butterfield Industrial Park - Industrial building..... 4,850,000(1)
The Crest at Shadow Mountain - Apartments............. 9,700,000
The Legends at Chase Oaks - Apartments................ 28,300,000
Utah:
USF&G Building - Office building...................... 8,700,000
Virginia:
Fairgate at Ballston - Office building................ 30,500,000
River Oaks - Shopping center.......................... 12,492,839
Washington:
The Bay Court at Harbour Pointe - Apartments.......... 34,800,000
-----------
TOTAL REAL ESTATE PROPERTIES (Cost $853,480,080)....... 895,503,104
-----------
</TABLE>
(1) Leasehold interest only.
MARKETABLE SECURITIES--39.54%
REAL ESTATE INVESTMENT TRUSTS--7.44%
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
89,900 AMB Property Corporation Series A.................. 2,174,456
30,000 Avalon Bay Communities, Inc. Pfd Series F.......... 755,625
50,000 Boston Properties, Inc............................. 1,793,750
120,000 Bradley Real Estate, Inc........................... 2,490,000
150,000 Brandywine Realty Trust............................ 2,971,875
80,000 Camden Property Trust.............................. 2,220,000
200,000 Carramerica Realty Corporation, Pfd Series B....... 4,725,000
110,000 Centerpoint Properties Corp........................ 4,028,750
95,000 Colonial Properties Trust.......................... 2,683,750
260,000 Cornerstone Properties, Inc........................ 4,127,500
113,100 Corporate Office Properties Trust, Inc............. 926,006
90,000 Developers Diversified Realty Corp................. 2,182,500
50,000 Duke Realty Investments, Inc....................... 1,128,125
217,500 Equity Office Properties Trust..................... 5,573,438
200,000 Equity Office Properties Trust Pfd Series A........ 5,150,000
130,000 Equity Residential Properties Trust................ 5,858,125
100,000 Equity Residential, Pfd Series G................... 2,381,250
100,000 Equity Residential Properties, Pfd Series L........ 2,231,250
25,000 Federal Realty Investment Trust Pfd................ 615,625
50,000 Felcor Lodging Trust Inc........................... 1,037,500
100,000 First Industrial Realty Trust, Inc. Pfd............ 2,506,250
98,300 Gables Residential Trust, Pfd Series A............. 2,377,631
80,000 Hospitality Properties Trust....................... 2,170,000
20,000 Host Marriot Corp.................................. 237,500
68,000 Lasalle Hotel Properties........................... 1,041,250
160,000 Macerich Company................................... 4,200,000
69,559 New Plan Excel Realty Trust........................ 1,252,062
19,900 Prologis Trust-Pfd Series A........................ 497,500
136,400 Public Storage, Inc................................ 3,819,200
78,900 Rouse Company...................................... 2,002,088
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
240,000 Simon Property Group, Inc......................... $6,090,000
100,000 Spieker Properties, Inc........................... 3,887,500
140,000 Starwood Hotels & Resorts Worldwide............... 4,278,750
70,000 Storage USA, Inc.................................. 2,231,250
150,000 Taubman Centers, Inc.............................. 1,978,125
35,000 Taubman Centers, Inc Pfd Series A................. 802,812
162,000 Trinet Corporation Realty Trust, Inc.............. 4,485,375
26,000 Trinet Corporate Realty Trust, Pfd Class B........ 580,125
96,600 United Dominion Realty Trust, Inc................. 2,415,000
130,400 Urban Shopping Centers, Inc....................... 4,107,600
135,000 Weeks Corp........................................ 4,117,500
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost $116,589,747)..... 110,132,043
-----------
</TABLE>
CORPORATE BONDS-- 0.67%
<TABLE>
<CAPTION>
Principal Issuer, Coupon and Maturity Date
- --------- --------------------------------
<S> <C> <C>
$ 5,000,000 Avco Financial Services, Inc.
5.75% 01/23/01............................... 4,954,350
5,000,000 Ford Motor Credit Co.
5.75% 01/25/01............................... 4,965,300
-----------
TOTAL CORPORATE BONDS (Cost $10,034,650).................. 9,919,650
-----------
</TABLE>
GOVERNMENT AGENCIES--14.67%
<TABLE>
<CAPTION>
Principal Issuer, Coupon and Maturity Date Value
- --------- -------------------------------- -----
<S> <C> <C>
5,800,000 Federal Farm Credit Banks
4.75% 07/06/99............................... 5,795,341
6,558,000 Federal Home Loan Banks
4.80% 08/13/99............................... 6,517,763
22,600,000 Federal Home Loan Banks
4.83% 07/09/99............................... 22,572,598
6,000,000 Federal Home Loan Banks
4.70% 07/02/99............................... 5,998,393
10,000,000 Federal Home Loan Mortgage Corporation
4.74% 11/04/99............................... 9,817,261
10,000,000 Federal Home Loan Mortgage Corporation
4.72% 11/02/99............................... 9,820,139
4,200,000 Federal Home Loan Mortgage Corporation
4.70% 10/13/99............................... 4,136,545
10,700,000 Federal Home Loan Mortgage Corporation
4.72% 09/07/99............................... 10,597,048
16,950,000 Federal Home Loan Mortgage Corporation
4.94% 09/03/99............................... 16,796,367
3,000,000 Federal Home Loan Mortgage Corporation
4.96% 09/01/99............................... 2,973,645
11,300,000 Federal Home Loan Mortgage Corporation
4.74% 08/26/99............................... 11,210,184
12,000,000 Federal Home Loan Mortgage Corporation
4.73% 08/19/99............................... 11,916,334
9,782,000 Federal Home Loan Mortgage Corporation
4.80% 07/09/99............................... 9,770,139
13,200,000 Federal Home Loan Mortgage Corporation
4.70% 07/09/99............................... 13,183,995
6,000,000 Federal Home Loan Mortgage Corporation
4.83% 07/02/99............................... 5,998,393
5,858,000 Federal National Mortgage Association
4.80% 08/17/99............................... 5,818,791
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Issuer, Coupon and Maturity Date Value
- --------- -------------------------------- -----
<S> <C> <C>
$ 6,600,000 Federal National Mortgage Association
4.74% 08/13/99............................... $6,559,505
722,000 Federal National Mortgage Association
4.64% 08/13/99............................... 717,570
57,065,000 Federal National Mortgage Association
4.76% 07/06/99............................... 57,019,160
TOTAL GOVERNMENT AGENCIES (Amortized cost $217,311,690)...217,219,171
-----------
</TABLE>
COMMERCIAL PAPER--16.76%
<TABLE>
<CAPTION>
Principal Issuer, Coupon and Maturity Date Value
- --------- -------------------------------- -----
<S> <C> <C>
5,850,000 American Home Products
4.78% 07/06/99................................. 5,844,423
8,700,000 American Telephone & Telegraph Co
4.83% 08/06/99................................. 8,653,325
15,000,000 Bellsouth Communications, Inc.
5.3% 07/02/99.................................. 14,995,233
13,300,000 DaimlerChrysler North America Holding
4.80% 07/14/99................................. 13,272,845
15,000,000 Delaware Funding Corporation
4.81% 07/20/99................................. 14,956,500
10,000,000 Detroit Edison Co.
5.45% 07/06/99................................. 9,990,217
9,350,000 Equilon Enterprises LLC
5.02% 08/10/99................................. 9,294,414
9,600,000 First National Bank of Chicago
4.89% 07/19/99................................. 9,598,032
15,000,000 General Mills
4.77% 07/12/99................................. 14,973,750
15,000,000 International Business Machines
4.79% 07/01/99................................. 14,997,551
15,000,000 Johnson & Johnson
4.76% 08/09/99................................. 14,913,000
3,800,000 McCormick & Co., Inc.
4.80% 09/14/99................................. 3,757,723
12,000,000 McGraw Hill, Inc.
4.76% 08/04/99................................. 11,939,100
2,775,000 Motiva Enterprises
5.01% 08/13/99................................. 2,757,295
3,500,000 National Rural Utilities Coop Finance
4.77% 07/21/99................................. 3,489,343
11,000,000 Northern Indiana Public Service
5.02% 07/08/99................................. 10,987,166
10,000,000 Park Avenue Receivables Corporation
5.05% 07/20/99................................. 9,971,000
11,825,000 Pfizer, Inc
4.85% 07/06/99................................. 11,813,727
14,500,000 Pitney Bowes, Inc.
5.25% 07/06/99................................. 14,486,177
2,500,000 Portland General Electric Co.
5.05% 07/20/99................................. 2,492,750
10,000,000 Raytheon Co
5.15% 07/01/99................................. 9,998,311
10,000,000 Raytheon Co
5.10% 07/01/99................................. 9,998,311
10,039,000 Receivables Capital Corp.
5.05% 08/12/99................................. 9,976,407
350,000 Receivable Capital Corp.
5.35% 07/06/99................................. 349,666
15
<PAGE>
$ 9,050,000 Saint Paul Companies
5.75% 07/01/99................................. 9,048,522
5,850,000 Walt Disney Co.
4.79% 11/01/99................................ 5,742,802
--------------
TOTAL COMMERCIAL PAPER (Amortized cost $248,385,373)..... 248,297,590
--------------
TOTAL MARKETABLE SECURITIES (Cost $592,321,460)............... 585,568,454
--------------
TOTAL INVESTMENTS--100.00% (Cost $1,445,801,540).............. $1,481,071,558
==============
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
At June 30, 1999, the TIAA Real Estate Account had acquired a total of
48 real estate properties, including thirteen office properties, sixteen
industrial properties, five neighborhood shopping centers and fourteen apartment
complexes, representing 60.5% of the Account's total investment portfolio. The
Account also held investments in commercial paper, representing 16.7% of the
portfolio, U.S. government agency securities, representing 14.7% of the
portfolio, real estate investment trusts (REITs), representing 7.4% of the
portfolio and corporate bonds, representing 0.7% of the portfolio.
The Account purchased one office property and one residential complex
during the second quarter of 1999. Since the end of the quarter, the Account
purchased four additional office properties for purchase prices totaling
approximately $292,314,000. The Account continues to pursue suitable property
acquisitions, and is currently in various stages of negotiations with a number
of prospective sellers. While attractive acquisition prospects are available in
the current market, significant competition exists for the most desirable
properties.
Through April 30, 1999, the Account owned a controlling 90% interest in
a partnership owning seven office buildings throughout the U.S. Consistent with
generally accepted accounting principles (GAAP), the Account's consolidated
financial statements to that date reflected 100% of the value of the
partnership's assets, with the 10% partner's interest reflected as a minority
interest. On April 30, 1999, the Account purchased the 10% minority interest of
the other partner in the partnership through a wholly-owned subsidiary.
Results of Operations
Six Months Ended June 30, 1999 Compared to
Six Months Ended June 30, 1998
The Account's total net return was 4.12% for the six months ended June
30, 1999 and 4.18% for the same period in 1998. This slight decrease was due in
part to the fact that short-term interest rates declined during the first six
months of 1999, and the Account's properties taken together had greater
appreciation in the first six months of 1998 compared with the same period of
1999. The Account's net investment income, after deduction of all expenses, was
$45,568,234 for the six months ended June 30, 1999 and $33,166,118 for the six
months ended June 30, 1998, a 37% increase. This increase was the result of a
48% increase in net assets and a 50% increase in the Account's real estate
holdings from June 30, 1998 to June 30, 1999.
The Account had net realized and unrealized gains on investments of
$7,687,645 and $5,751,177 for the six months ended June 30, 1999 and June 30,
1998, respectively. This increase was due to several factors. The increase in
market value of the Account's REIT holdings resulted in net unrealized
appreciation of $4,254,526 for first six months of 1999 as compared with an
unrealized loss of $7,403,437 on the Account's marketable securities for the
17
<PAGE>
same period of 1998. The Account's net unrealized appreciation on its real
estate investments went down by $2,386,333 during the first six months of 1999,
compared with an increase of $12,823,405 in the same period of 1998. This
difference was due in part to the fact that real estate owned by the Account at
June 30, 1998 had appreciated more during the first six months of 1998 than the
real estate owned by the Account at June 30, 1999 had appreciated during the
first six months of 1999. In addition, during the first quarter of 1999, the
Account sold the Metro Center office property and realized a gain of $6,205,560;
in realizing the gain, however, unrealized appreciation on the Account's
properties was reduced by $5,297,605. The Account's other properties appreciated
in value by $2,911,272 during the first six months of 1999.
The Account's real estate holdings generated approximately 73% and 69%
of the Account's total investment income (before deducting Account level
expenses) during the six months ended June 30, 1999 and June 30, 1998,
respectively. The remaining portion of the Account's total investment income was
generated by marketable securities investments.
Gross real estate rental income was $54,196,751 for the six months
ended June 30, 1999 and $37,656,247 for the same period in 1998. This increase
was primarily due to the increase in the number of properties owned by the
Account - from 37 properties as of June 30, 1998 to 48 properties as of June 30,
1999. Interest income on the Account's short- and intermediate- term investments
for the six months ended June 30, 1999 and June 30, 1998 totaled $9,773,575 and
$7,225,583, respectively. This increase was due primarily to the growth in the
Account's assets. Dividend income on the Account's investments in REITs totaled
$3,952,403 and $3,856,819, respectively, for the same periods. Shares of REITs
totaled 7.4% of the Account investments as of June 30, 1999 and 12.8% as of June
30, 1998.
Total property level expenses for the six months ended June 30, 1999
were $17,424,461 of which $5,878,391 was attributable to real estate taxes and
$11,546,070 represented operating expenses. Total property level expenses for
the six months ended June 30, 1998 were $12,474,350, of which $4,346,105 was
attributable to real estate taxes and $8,128,245 was attributable to operating
expenses. The increase in property level expenses during the first six months of
1999 reflected the increased number of properties in the Account.
The Account also incurred expenses for the six months ended June 30,
1999 and 1998 of $2,422,056 and $1,522,547, respectively, for investment
advisory services, $1,752,132 and $1,225,605, respectively, for administrative
and distribution services and $755,846 and $350,029, respectively, for the
mortality and expense risk charges and the liquidity guarantee charges. Such
expenses increased as a result of the larger net asset base in the Account.
Three Months Ended June 30, 1999 Compared to
Three Months Ended June 30, 1998
The Account's total net return was 2.51% for the three months ended
June 30, 1999 and 2.13% for the same period in 1998. This difference was due to
the increase in value of
18
<PAGE>
the Account's marketable securities during the three months ended June 30, 1999
compared to the same period of 1998. The Account's net investment income, after
deduction of all expenses, was $23,375,431 for the three months ended June 30,
1999 and $18,180,455 for the three months ended June 30, 1998, a 29% increase.
This increase was the result of a 48% increase in net assets and a 50% increase
in the Account's real estate holdings from June 30, 1998 to June 30, 1999.
The Account had net realized and unrealized gains on investments of
$9,751,015 and $3,107,941 for the three months ended June 30, 1999 and June 30,
1998, respectively. This increase was primarily the result of the net increase
in unrealized appreciation of the Account's marketable securities. The Account
posted net unrealized gains on its real estate investments of $2,496,507 and
$9,181,292 in the three months ended June 30, 1999 and June 30, 1998,
respectively. It also posted net unrealized gains on its marketable securities
of $7,041,473 during the second quarter of 1999, as compared with net unrealized
losses of $6,144,677 during the same period in 1998, resulting primarily from
fluctuations in the market value of the Account's REIT holdings.
The Account's real estate holdings generated approximately 72% and 69%
of the Account's total investment income (before deducting Account level
expenses) during the three months ended June 30, 1999 and June 30, 1998,
respectively. The remaining portion of the Account's total investment income was
generated by investments in marketable securities.
Gross real estate rental income was $27,997,860 for the three months
ended June 30, 1999 and $20,002,915 for the same period in 1998. The higher real
estate income for the three months ended June 30, 1999 was due primarily to the
increase in the number of properties owned by the Account. Interest income on
the Account's short- and intermediate- term investments for the three months
ended June 30, 1999 and June 30, 1998 totaled $5,409,410 and $4,007,501,
respectively. This increase was due primarily to the growth in the Account's
assets. Dividend income on the Account's investments in REITs totaled $1,908,101
and $2,087,297, respectively, for the same periods.
Total property level expenses for the three months ended June 30, 1999
were $9,170,785, of which $3,205,340 was attributable to real estate taxes and
$5,965,445 represented operating expenses. Total property level expenses for the
three months ended June 30, 1998 were $6,180,130, of which $2,128,003 was
attributable to real estate taxes and $4,052,127 was attributable to operating
expenses. The increase in property level expenses during the three month period
ended June 30, 1999 reflected the increased number of properties in the Account.
The Account also incurred expenses for the three months ended June 30,
1999 and 1998 of $1,377,170 and $824,282, respectively, for investment advisory
services, $947,042 and $718,609, respectively, for administrative and
distribution services and $444,943 and $194,237, respectively, for the mortality
and expense risks assumed and the liquidity guarantee. Such expenses increased
as a result of the larger net asset base of the Account for the three months
ended June 30, 1999 over the three months ended June 30, 1998.
19
<PAGE>
Liquidity and Capital Resources
Since September 16, 1996, TIAA had been redeeming the accumulation
units related to its $100 million seed money investment in the Account in
accordance with a repayment schedule approved by the New York Insurance
Department. At June 30, 1998, the Account had redeemed $101,002,865 of its seed
money investment. By the end of 1998, the Account had redeemed its entire seed
money investment.
For the six months ended June 30, 1999 and 1998, the Account received
$61,559,407 and $46,171,227, respectively, in premiums and $190,461,640 and
$194,565,164, respectively, in net participant transfers from other TIAA and
CREF accounts. The increase in premium income is primarily due to the growing
number of participants in the Account.
At June 30, 1999 and June 30, 1998, the Account's liquid assets (i.e.,
its REITs, short-and intermediate-term investments, government securities and
cash) had a value of $585,568,454 and $423,876,467, respectively. The REIT
holdings at June 30, 1999 and June 30, 1998 were $110,132,043 and $130,329,477,
respectively. We plan to use much of the Account's liquid assets, exclusive of
the REITs, to purchase additional suitable real estate properties. The remaining
liquid assets, exclusive of the REITs, will continue to be available to meet
expense needs and redemption requests (e.g., cash withdrawals or transfers).
If the Account's liquid assets and its cash flow from operating
activities and participant transactions are not sufficient to meet its cash
needs, including redemption requests, TIAA's general account will purchase
liquidity units in accordance with TIAA's liquidity guarantee to the Account.
Year 2000 Issues
TIAA and the Account depend on the smooth functioning of computer
systems to operate. The Account, the Account's properties, and participant
services could be affected if TIAA's computer systems, the Account's property
computer systems, or those of its external service providers fail or incorrectly
process or calculate date-related information on or after January 1, 2000.
TIAA is dedicated to providing uninterrupted, high-quality service
before, during, and after the Year 2000. To achieve this goal, we have developed
and have been actively carrying out an extensive Year 2000 plan to remediate,
test and certify all internal computer systems, and to verify, to the extent
possible, that external service providers will be ready for the Year 2000. To
date, we have completed testing and initial certification of our mission
critical internal corporate systems. We are in the process of testing the
critical interfaces we have with our major service providers, vendors, and
suppliers. In particular, TIAA has been actively working with all those
responsible for property computer systems, i.e., management companies and
certain tenants, to assure that they have developed and are implementing plans
to remediate and test property systems in a timely manner. In addition, we are
making contingency plans intended to lessen the effect unexpected systems
failures (internal and external) may have on operations.
20
<PAGE>
While we have taken steps we believe reasonably address the Year 2000
problem, we can't guarantee complete success or eliminate the possibility that
interaction with outside computer systems could affect Account operations. If
the systems the Account relies upon do fail or produce faulty data, there could
be delays in properly processing transactions, or we may be unable temporarily
to engage in normal business activities. Also, the Account's performance could
be affected if the properties, companies or government entities in which the
Account invests are negatively affected by the Year 2000.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
There are no material current or pending legal proceedings that the
Account is a party to, or to which the Account's assets are subject.
Item 2. CHANGES IN SECURITIES.
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not applicable.
Item 5. OTHER INFORMATION.
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
(3) (A) Charter of TIAA (as amended)*
(B) Bylaws of TIAA (as amended)**
(4) (A) Forms of RA, GRA, GSRA, SRA, and IRA Real Estate Account
Endorsements*
(B) Forms of Income-Paying Contracts *
(10) (A) Independent Fiduciary Agreement by and among TIAA, the
Registrant, and Institutional Property Consultants, Inc.***
(B) Custodial Services Agreement by and between TIAA and Morgan
Guaranty Trust Company of New York with respect to the Real
Estate Account*
21
<PAGE>
(C) Distribution and Administrative Services Agreement by and
between TIAA and TIAA-CREF Individual & Institutional Services,
Inc. (as amended) (filed previously as Exhibit (1))*
(27) Financial Data Schedule of the Account's Financial Statements for
the three months ended March 31, 1999
- --------------------
* - Previously filed and incorporated herein by reference to Post-Effective
Amendment No. 2 to the Account's Registration Statement on Form S-1 filed April
30, 1996 (File No. 33- 92990).
** - Previously filed and incorporated herein by reference to the Account's Form
10-Q Quarterly Report for the period ended September 30, 1997 filed November 13,
1997 (File No. 33-92990).
*** - Previously filed and incorporated herein by reference to Pre-Effective
Amendment No. 1 to the Account's Registration Statement on Form S-1 filed April
29, 1997 (File No. 333- 22809).
(b) REPORTS ON 8-K. The Account filed a report on Form 8-K on July 8, 1999 under
Item 5 of the form with respect to the acquisition of a property for its
portfolio.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
DATE: August 10, 1999
TIAA REAL ESTATE ACCOUNT
By: TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Peter C. Clapman
--------------------------------
Peter C. Clapman
Senior Vice President and
Chief Counsel, Investments
DATE: August 10, 1999
By: /s/ Richard L. Gibbs
--------------------------------
Richard L. Gibbs
Executive Vice President
(Principal Accounting Officer)
23
