UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1999
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 Not Applicable
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) 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 whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K: |X| -- Not Applicable
Aggregate market value of voting stock held by non-affiliates: Not Applicable
Documents Incorporated by Reference: None
<PAGE>
PART I
ITEM 1. BUSINESS.
General. The TIAA Real Estate Account (the "Real Estate Account" or the
"Account") was established on February 22, 1995, as a separate investment
account of Teachers Insurance and Annuity Association of America ("TIAA"), a
nonprofit New York insurance company, by resolution of TIAA's Board of Trustees.
The Account, which invests mainly in real estate and real estate-related
investments, is a variable annuity investment option offered through individual,
group and tax-deferred annuity contracts available to employees of educational
and research institutions. The Account commenced operations on July 3, 1995,
when TIAA contributed $100 million of seed money to the Account, and interests
in the Account were first offered to eligible participants on October 2, 1995.
Investment Objective. The Real Estate Account seeks favorable long term
returns primarily through rental income and appreciation of real estate
investments owned by the Account. The Account also will invest in
publicly-traded securities and other investments that are easily converted to
cash to make redemptions, purchase or improve properties or cover other
expenses.
Investment Strategy. The Account seeks to invest between 70 percent to 95
percent of its assets directly in real estate or real estate-related
investments. The Account's principal strategy is to purchase direct ownership
interests in income-producing real estate, such as office, industrial, retail,
and multi-family residential properties. The Account can also invest in other
real estate or real estate-related investments, through joint ventures, real
estate partnerships or real estate investment trusts (REITs). To a limited
extent, the Account can also invest in conventional mortgage loans,
participating mortgage loans, common or preferred stock of companies whose
operations involve real estate (i.e., that primarily own or manage real estate),
and collateralized mortgage obligations (CMOs).
The Account will invest the remaining portion of its assets in government
and corporate debt securities, money market instruments and other cash
equivalents, and, at times, stock of companies that don't primarily own or
manage real estate. In some circumstances, the Account can increase the portion
of its assets invested in debt securities or money market instruments. This
could happen if the Account receives a large inflow of money in a short period
of time, there is a lack of attractive real estate investments available on the
market, or the Account anticipates a need to have more cash available.
The amount the Account invests in real estate and real estate-related
investments at a given time will vary depending on market conditions and real
estate prospects, among other factors. Through December 31, 1999, the Account
had 82.5 percent of its net assets invested in real estate and real
estate-related investments (including REITs).
Net Assets and Portfolio Investments. As of December 31, 1999, the
Account's net assets totalled $1,695,482,428. Through December 31, 1999, the
Account had a total of 54 real estate
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properties, including 18 office properties, 17 industrial properties, 14
apartment complexes, and 5 neighborhood shopping centers. As of December 31,
1999, these properties represented 77.8% of the Account's total investment
portfolio. As of that date, the Account also held investments in commercial
paper, representing 16.3% of the portfolio, real estate investment trusts
(REITs), representing 4.7 % of the portfolio, U.S. government agencies,
representing 0.6% of the portfolio, and corporate bonds, representing 0.6% of
the portfolio.
Personnel and Management. The Real Estate Account does not directly employ
any persons nor does the Account have its own management or board of directors.
Rather, TIAA employees, under the direction and control of TIAA's Board of
Trustees and Investment Committee, manage the investment of the Account's assets
pursuant to investment management procedures adopted by TIAA for the Account.
TIAA and TIAA-CREF Individual & Institutional Services, Inc. ("Services"), a
subsidiary of TIAA, provide all portfolio accounting, custodial, distribution,
administrative and related services for the Account at cost.
ITEM 2. PROPERTIES.
In the table below you will find general information about each of the
Account's portfolio properties as of December 31, 1999.
<TABLE>
<CAPTION>
Annual Avg.
Rentable Base Rent
Year Year Area Percent per Leased Market
Property Location Built Purchased (sq. ft.) Leased Sq. Ft.(1) Value(2)
- -------- -------- ----- --------- --------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE PROPERTIES
780 Third Avenue New York, NY 1984 1999 487,501 90% $ 40.44 $162,500,000
88 Kearney Street San Francisco, CA 1986 1999 228,464 95% $ 28.37 $ 72,400,000
Parkview Plaza(3) Oakbrook, IL 1990 1997 266,020 99% $ 19.44 $ 52,436,321
Columbia Centre III Rosemont, IL 1989 1997 238,696 99% $ 23.20 $ 42,100,000
Biltmore Commerce Center Phoenix, AZ 1985 1999 262,875 98% $ 15.91 $ 38,500,000
One Monument Place Fairfax, VA 1990 1999 217,990 99% $ 19.30 $ 36,100,000
Columbus Office Portfolio $ 33,701,672
Metro South Building Dublin, OH 1997 1999 90,726 91% $ 11.47 --
BISYS Fund Services Building Eaton, OH 1995 1999 155,964 100% $ 11.29 --
Vision Service Plan Building Eaton, OH 1997 1999 50,000 100% $ 11.88 --
10 Waterview Boulevard Parsippany, NJ 1984 1999 209,553 92% $ 23.75 $ 31,200,000
Fairgate at Ballston(3) Arlington, VA 1988 1997 143,457 94% $ 27.63 $ 30,800,000
Longview Executive Park(3) Hunt Valley, MD 1988 1997 258,999 100% $ 10.77 $ 28,400,000
Sawgrass Portfolio Sunrise, FL 1998 1999 159,647 100% $ 14.05 $ 25,000,000
Two Newton Place(3) Newton, MA 1987 1997 108,819 100% $ 24.03 $ 20,300,000
Five Centerpointe(3) Lake Oswego, OR 1988 1997 113,910 98% $ 20.99 $ 18,000,948
371 Hoes Lane Piscataway, NJ 1986 1997 139,670 100% $ 17.02 $ 16,800,000
Corporate Center at Sawgrass Sunrise, FL 1997 1997 91,119 100% $ 15.01 $ 14,200,000
Southbank Building Phoenix, AZ 1995 1996 122,535 100% $ 9.36 $ 13,000,000
Northmark Business Center(3) Blue Ash, OH 1985 1997 108,341 100% $ 12.09 $ 13,000,000
USF&G Building(3) Salt Lake City, UT 1988 1997 67,081 87% $ 16.99 $ 8,722,167
--------- ------------
Subtotal--Office Properties 3,521,367 $657,161,108
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES
IDI California Portfolio $ 36,500,000
Timberland Building Ontario, CA 1998 1998 414,435 100% $ 3.52 --
Park Mira Loma West Mira Loma, CA 1998 1998 557,500 100% $ 3.18 --
Saks Distribution Facility Aberdeen, MD 1997 1997 470,707 100% $ 4.98 $ 30,325,000
Park West Int'l Industrial Pk $ 25,400,000
Building C Hebron, KY 1998 1998 520,000 100% $ 2.85 --
Buidling D Hebron, KY 1998 1998 184,800 100% $ 3.26 --
Ontario Portfolio $ 24,650,000
5200 Airport Drive Ontario, CA 1997 1998 404,500 100% $ 3.48 --
1200 S. Etiwanda Ave Ontario, CA 1998 1998 223,170 100% $ 3.16 --
Konica Photo Imaging Mahwah, NJ 1999 1999 168,000 100% NA $ 17,051,474
Headquarters
Glen Pointe Business Park $ 16,100,000
Building V Chicago, IL 1997 1998 117,600 100% $ 5.89 --
Building VII Chicago, IL 1997 1998 92,543 100% $ 7.24 --
Interstate Acres Urbandale, IA 1981-88 1997 440,000 97% $ 3.12 $ 14,100,000
Eastgate Distribution Center San Diego, CA 1996 1997 200,000 100% $ 5.51 $ 13,300,000
Arapahoe Park E Boulder, CO 1979-82 1996 129,425 100% $ 9.22 $ 11,850,000
UPS Distribution Facility Fernley, NV 1998 1998 256,000 100% $ 3.54 $ 11,000,000
Rockrun Business Park Chicago, IL 1998 1998 258,000 100% $ 2.92 $ 9,350,000
FedEx Distribution Facility Crofton, MD 1998 1998 111,191 100% $ 6.39 $ 7,800,000
Woodcreek Business Park Chicago, IL 1995 1998 149,907 100% $ 4.11 $ 6,976,343
Westinghouse Coral Springs, FL 1997 1997 75,630 100% $ 5.47 $ 6,200,000
Interstate Crossing Eagan, MN 1995 1996 131,380 100% $ 5.05 $ 6,400,000
Butterfield Industrial Park El Paso, TX 1980-81 1995 183,510 100% $ 2.89 $ 4,850,000
River Road Distribution Center Fridley, MN 1995 1995 100,456 100% $ 3.44 $ 4,300,000
--------- ------------
Subtotal--Industrial Properties 5,188,754 $246,152,817
RETAIL PROPERTIES
Rolling Meadows Rolling Meadows, IL 1957(4) 1997 130,910 91% $ 10.19 $ 12,110,000
River Oaks Woodbridge, VA 1995 1996 90,885 91% $ 14.41 $ 12,100,000
Lynnwood Collection Raleigh, NC 1988 1996 86,362 98% $ 8.66 $ 7,700,000
Millbrook Collection Raleigh, NC 1988 1996 102,221 93% $ 7.99 $ 7,100,000
Plantation Grove Ocoee, FL 1995 1995 73,655 100% $ 10.40 $ 7,350,000
--------- ------------
Subtotal--Retail Properties 484,033 $ 46,360,000
--------- ------------
Subtotal--Commercial Properties 9,194,154 $949,673,925
RESIDENTIAL PROPERTIES(5)
The Colorado New York, NY 1987 1999 NA 98% NA $ 56,547,289
Larkspur Courts Apartments Larkspur, CA 1991 1999 NA 99% NA $ 55,300,000
Bay Court at Harbour Pointe Mulkiteo, WA 1991 1998 NA 96% NA $ 34,800,000
Lodge at Willow Creek Douglas County, CO 1997 1997 NA 93% NA $ 30,000,000
The Legends at Chase Oaks Plano, TX 1997 1998 NA 96% NA $ 27,800,000
Golfview Apartments Lake Mary, FL 1998 1998 NA 92% NA $ 27,510,000
Lincoln Woods Lafayette Hill, PA 1991 1997 NA 99% NA $ 22,952,310
Monte Vista Littleton, CO 1995 1996 NA 94% NA $ 20,500,000
Indian Creek Apartments Farmington Hills, MI 1988 1998 NA 95% NA $ 17,108,785
Royal St. George W. Palm Beach, FL 1995 1996 NA 95% NA $ 16,500,000
Westcreek Westlake Village, CA 1988 1997 NA 98% NA $ 15,511,245
Bent Tree Apartments Columbus, OH 1987 1998 NA 99% NA $ 14,500,000
The Greens at Metrowest Orlando, FL 1990 1995 NA 92% NA $ 14,100,000
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
The Crest at Shadow Mt El Paso, TX 1992 1997 NA 95% NA $ 9,700,000
--------------
Subtotal--Residential Properties NA $ 362,829,629
--------- --------------
Total--All Properties 9,194,154 $1,312,503,554
</TABLE>
(1) Based on total rent (excluding tenant payments for real estate taxes and
operating expenses) on leases existing at December 31, 1999. For those
properties purchased in 1999, the number was derived by annualizing the rents
charged by the Account since acquiring the property.
(2) Market value reflects the value determined in accordance with the procedures
described in the Account's prospectus.
(3) Purchased through Light Street Partners, L.P. (now 100% owned by the
Account).
(4) Renovated in 1991 and 1995.
(5) For the average unit size and annual average rent per unit for each
residential property, see "Residential Properties" below.
Commercial (Non-Residential) Properties
In General. At December 31, 1999, the Account held 40 commercial
(non-residential) properties in its portfolio. None of these properties is
subject to a mortgage, and although the terms vary under each lease,
certain expenses, such as real estate taxes and other operating expenses,
are paid or reimbursed by the tenants.
At December 31, 1999, the Account's office property portfolio
consisted of 18 office properties located in metropolitan areas throughout
the United States. The office properties together are approximately 96
percent leased with 360 leases.
At December 31, 1999, the Account's industrial property portfolio
consisted of 17 properties used primarily for warehousing, distribution,
or light manufacturing activities. The Account's industrial properties
together are 98.5 percent leased with 66 leases.
At December 31, 1999, the Account's retail property portfolio
consisted of 5 neighborhood shopping centers, each of which is anchored by
a supermarket tenant. These retail properties together are approximately
93.4 percent leased with 78 leases.
Residential Properties
The Account's residential property portfolio currently consists of
13 first class or luxury multi-family garden apartment complexes and one
high rise apartment building. None of the properties in the portfolio is
subject to a mortgage. The complexes generally contain one- to
three-bedroom apartment units, with a range of amenities, such as patios
or balconies, washers and dryers, and central air conditioning. Many of
these apartment communities have use of on-site fitness facilities,
including some with swimming pools. Rents on each of the properties tend
to be comparable with competitive communities and are not subject to rent
regulation. The Account is responsible for the expenses of operating the
properties.
In the table below you will find more detailed information regarding
the apartment complexes in the Account's portfolio as of December 31,
1999.
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<TABLE>
<CAPTION>
=================================================================================================================================
Average Avg. Rent
Number Unit Size Per Unit/ Percent
Property Location of Units (Square Per Month Leased
Feet)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Colorado New York, NY 256 631 $1,338 98%
Larkspur Courts Apartments Larkspur, CA 248 1001 $1,935 99%
Bay Court at Harbour Pointe Mulkiteo, WA 420 970 $ 765 96%
The Legends at Chase Oaks Plano, TX 346 972 $ 904 93%
Lodge at Willow Creek Douglas County, CO 316 1001 $1,035 96%
Golfview Apartments Lake Mary, FLA 276 1089 $ 950 92%
Lincoln Woods Lafayette Hill, PA 216 773 $1,083 99%
Monte Vista Littleton, CO 219 888 $ 902 94%
Indian Creek Apartments Farmington Hills, MI 196 1139 $ 984 99%
Royal St. George West Palm Beach, FL 224 870 $ 849 95%
Westcreek Westlake Village, CA 126 948 $1,194 98%
Bent Tree Apartments Columbus, OH 256 928 $ 605 99%
The Greens at Metrowest Orlando, FL 200 920 $ 799 92%
The Crest at Shadow Mt. El Paso, TX 232 837 $ 649 95%
=================================================================================================================================
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S SECURITIES AND RELATED STOCKHOLDER MATTERS.
(a) Market Information. There is no established public trading market for
participating interests in the TIAA Real Estate Account. Accumulation units in
the Account are sold to eligible participants at the Account's current
accumulation unit value, which is based on the value of the Account's then
current net assets. For the period from January 1, 1999 to December 31, 1999,
the high and low accumulation unit values for the Account were $142.9682 and
$132.3652, respectively.
(b) Approximate Number of Holders. The number of contractowners at
February 29, 2000 was 149,246.
(c) Dividends. Not applicable.
6
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ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data should be considered in conjunction
with the Account's consolidated financial statements and notes provided in this
report.
<TABLE>
<CAPTION>
July 3, 1995
Year Ended Year Ended Year Ended Year Ended (commencement of
December 31, December 31, December 31, December 31, operations) to
1999 1998 1997 1996 December 31,1995
---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
Investment income:
Real estate income, net:
Rental income ..................... $ 132,316,878 $ 81,009,203 $ 44,342,342 $ 10,951,183 $ 165,762
-------------- -------------- -------------- -------------- --------------
Real estate property level
expenses and taxes:
Operating expenses .............. 27,334,060 17,339,706 9,024,240 2,116,334 29,173
Real estate taxes ............... 15,892,736 9,103,637 4,472,311 1,254,163 14,659
-------------- -------------- -------------- -------------- --------------
Total real estate property
level expenses and taxes ..... 43,226,796 26,443,343 13,496,551 3,370,497 43,832
-------------- -------------- -------------- -------------- --------------
Real estate income, net ...... 89,090,082 54,565,860 30,845,791 7,580,686 121,930
Dividends and interest .............. 24,932,733 23,943,728 16,486,279 6,027,486 2,828,900
-------------- -------------- -------------- -------------- --------------
Total investment income ......... $ 114,022,815 $ 78,509,588 $ 47,332,070 $ 13,608,172 $ 2,950,830
============== ============== ============== ============== ==============
Net realized and unrealized
gain on investments ................... $ 9,834,743 $ 7,864,659 $ 18,147,053 $ 3,330,539 $ 35,603
============== ============== ============== ============== ==============
Net increase in net assets
resulting from operations ............. $ 115,943,767 $ 76,611,662 $ 60,071,400 $ 15,782,915 $ 2,676,000
============== ============== ============== ============== ==============
Net increase in net assets
resulting from participant
transactions .......................... $ 383,171,774 $ 333,936,510 $ 356,052,262 $ 233,653,793 $ 117,582,345
============== ============== ============== ============== ==============
Net increase in net assets ............. $ 499,115,541 $ 410,548,172 $ 416,123,662 $ 249,436,708 $ 120,258,345
============== ============== ============== ============== ==============
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total assets ........................... $1,719,457,715 $1,229,603,431 $ 815,760,825 $ 426,372,007 $ 143,177,421
============== ============== ============== ============== ==============
Total liabilities and minority
interest ............................... $ 23,975,287 $ 33,236,544 $ 29,942,110 $ 56,676,954 $ 22,919,076
============== ============== ============== ============== ==============
Total net assets ....................... $1,695,482,428 $1,196,366,887 $ 785,818,715 $ 369,695,053 $ 120,258,345
============== ============== ============== ============== ==============
Accumulation units outstanding ......... 11,487,360 8,833,911 6,313,015 3,295,786 1,172,498
========== ========= ========= ========= =========
Accumulation unit value ................ $142.97 $132.17 $122.30 $111.11 $102.57
======= ======= ======= ======= =======
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF ACCOUNT'S
FINANCIAL CONDITION AND OPERATING RESULTS
The Real Estate Account continues to grow and passed the $1.6 billion mark
in net assets during 1999. Through December 31, 1999, the Account had a total of
54 real estate properties, including 18 office properties, 17 industrial
properties, 5 neighborhood shopping enters and 14 apartment complexes. At
December 31, 1999, these properties represented 77.8% of the Account's total
investment portfolio. This is in contrast to the end of 1998, when real estate
represented 67.7% of the Account's total investment portfolio.
In 1999, the Account purchased ten properties (seven office properties,
one industrial property and two apartment properties), sold two properties (one
office property and one apartment property), and purchased the remaining 10%
interest in a partnership owning a portfolio of office buildings, in which the
Account already owned the controlling 90% interest. Because the Account is now
at a size where it can absorb larger properties, this year the Account began to
pursue and make larger property purchases, including a $161 million purchase of
an office building. The Account continues to pursue suitable properties, and is
currently in various stages of negotiations with a number of prospective
sellers. While attractive acquisition prospects are available in the current
market, there is significant competition for the most desirable properties.
As of December 31, 1999, the Account also held investments in commercial
paper, representing 16.3% of the portfolio, real estate investment trusts
(REITs), representing 4.7% of the portfolio, U.S. government agencies,
representing 0.6% of the portfolio, and corporate bonds, representing 0.6% of
the portfolio.
Results of Operations
Year Ended December 31, 1999 Compared to
Year Ended December 31, 1998
The Account's total net return was 8.17% for the year ended December 31,
1999 and 8.07% for 1998. The Account's net investment income, after deducting
all expenses, was $104,744,405 for the year ended December 31, 1999 and
$72,234,994 for 1998, a 45% increase. This increase was the result of a 42%
increase in net assets and an increase in the Account's real estate holdings
from December 31, 1998 to December 31, 1999. The Account had net realized and
unrealized gains on investments of $9,834,743 and $7,864,659 for the year ended
December 31, 1999 and December 31, 1998, respectively. The gains on the
Account's real estate properties of $23,232,711 and $33,221,281 for 1999 and
1998, respectively, were offset by net realized and unrealized losses on the
Account's marketable securities of $13,397,968 and $25,356,622 for 1999 and 1998
respectively.
The Account's real estate holdings generated approximately 78% of the
Account's total investment income (before deducting Account level expenses)
during 1999 compared with 70% during 1998. The remaining portion of the
Account's total investment income was generated by investments in marketable
securities.
Gross real estate rental income was $132,316,878 for the year ended
December 31, 1999 and $81,009,203 for the same period in 1998. This increase was
primarily due to the increase in the number of properties owned by the Account
- -- from 46 properties at the end of 1998 to 54
8
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properties at the end of 1999. Interest and dividend income on the Account's
marketable securities investments increased from $23,943,728 for 1998 to
$24,932,733 in 1999.
Total property level expenses for the year ended December 31, 1999 were
$43,226,796, of which $27,334,060 represented operating expenses and $15,892,736
was attributable to real estate taxes. Total property level expenses for the
year ended December 31, 1998 were $26,443,343 of which $17,339,706 was
attributable to operating expenses and $9,103,637 was attributable to real
estate taxes. The increase in property level expenses during 1999 reflected the
increased number of properties in the Account.
The Account also incurred expenses for the years ended December 31, 1999
and 1998 of $4,246,911 and $2,999,113, respectively, for investment advisory
services, $3,442,282 and $2,498,376, respectively, for administrative and
distribution services, and $1,589,217 and $777,105, respectively, for mortality
and expense risk charges and liquidity guarantee charges. Such expenses
increased as a result of the larger net asset base of the Account for 1999 over
1998.
Year Ended December 31, 1998 Compared to
Year Ended December 31, 1997
The Account's total net return was 8.07% for the year ended December 31,
1998 and 10.07% for 1997. This decline was primarily due to the decline in value
of the Account's REIT holdings. The Account's net investment income, after
deduction of all expenses, was $72,234,994 for the year ended December 31, 1998
and $43,805,525 for the year ended December 31, 1997, a 65% increase. This
increase was the result of a 52% increase in net assets and also an increase in
the Account's real estate holdings from December 31, 1997 to December 31, 1998.
The Account had net realized and unrealized gains on investments of $7,864,659
and $18,147,053 for the year ended December 31, 1998 and December 31, 1997,
respectively. This decrease was primarily the result of the decline in price of
the Account's REITs and other marketable securities, as well as the losses
incurred from the sale of certain of those investments. These realized and
unrealized losses on marketable securities diminished the increase in unrealized
appreciation on the Account's real estate properties, which was $33,221,281 in
1998 compared with $10,234,316 in 1997. That increase was the result of the
increased values assigned to many of the properties after periodic revaluations
from internal or independent appraisals.
The Account's real estate holdings generated approximately 70% of the
Account's total investment income (before deducting Account level expenses)
during 1998 and 65% during 1997. The remaining portion of the Account's total
investment income was generated by investments in marketable securities.
Gross real estate rental income was $81,009,203 for the year ended
December 31, 1998 and $44,342,342 for the same period in 1997. This increase was
primarily due to the increase in the number of properties owned by the Account
- -- from 33 properties at the end of 1997 to 46 properties at the end of 1998.
Interest and dividend income on the Account's marketable securities investments
increased from $16,486,279 for 1997 to $23,943,728 for 1998. This increase was
due to the fact that the actual amount of money the Account had invested in
marketable securities went up as the Account's net asset base grew.
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<PAGE>
Total property level expenses for the year ended December 31, 1998 were
$26,443,343 of which $17,339,706 was attributable to operating expenses and
$9,103,637 was attributable to real estate taxes. Total property level expenses
for the year ended December 31, 1997 were $13,496,551, of which $9,024,240
represented operating expenses and $4,472,311 was attributable to real estate
taxes. The increase in property level expenses during 1998 reflected the
increased number of properties in the Account.
The Account also incurred expenses for the year ended December 31, 1998
and 1997 of $2,999,113 and $1,647,689, respectively, for investment advisory
services, $2,498,376 and $1,368,501, respectively, for administrative and
distribution services, and $777,105 and $510,355, respectively, for mortality
and expense risk charges and liquidity guarantee charges. Such expenses
increased as a result of the larger net asset base of the Account for 1998 over
1997.
Liquidity and Capital Resources
The Account earned $104,744,405 in 1999 and $72,234,994 in net investment
income in 1998. During 1999, the Account received $126,200,561 in premiums and
$293,354,604 in net participant transfers from other TIAA and CREF accounts,
while in 1998 the Account received $91,248,578 in premiums and $337,568,064 in
net participant transfers from other TIAA and CREF accounts. Real estate
properties costing $511,878,000 and $259,746,550 were purchased during 1999 and
1998, respectively. In 1999, the Account also received $45,927,000 in proceeds
from the sale of two properties. By year end 1999, the Account's liquid assets
(i.e., its cash, REITs, short- and intermediate-term investments, and government
securities) had a value of $374,896,400, while at the end of 1998 those assets
were valued at $391,605,900. We anticipate that much of the Account's liquid
assets as of December 31, 1999, exclusive of the REITs, will be used by the
Account 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.
The Account spent approximately $4,343,000 in 1999 for capital (long-term)
expenses, including ongoing tenant improvements and leasing commissions at the
commercial properties relating to the renewal of existing tenants or re-leasing
of space to new tenants during the normal course of business. For the apartment
complexes, in addition to the routine recurring costs, e.g., painting and carpet
cleaning and minor replacements to re-lease apartments that become vacant, the
Account will be expending capital to renovate the lobby and upgrade the
elevators of The Colorado in New York City and the kitchens in the Larkspur
apartments.
10
<PAGE>
Effects of Inflation
In recent years, inflation has been modest. To the extent that inflation
may increase property operating expenses in the future, we anticipate that
increases will generally be billed to tenants either through contractual lease
provisions in office, industrial, and retail properties or through rent
increases in apartment complexes. However, depending on how long any vacant
space in a property remains unleased, the Account may not be able to recover the
full amount of such increases in operating expenses.
Year 2000
In past reports, the Account discussed the nature and progress of TIAA's
plans to become ready for the Year 2000. In late 1999, TIAA completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, TIAA and the Account have made a successful transition
into the Year 2000, with its systems and those of its properties currently
functioning normally in the Year 2000 environment.
11
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TIAA REAL ESTATE ACCOUNT
- --------------------------------------------------------------------------------
Page
----
Report of Management Responsibility...............................13
Report of Independent Auditors....................................14
Audited Consolidated Financial Statements:
Consolidated Statements of Assets and Liabilities..............15
Consolidated Statements of Operations..........................16
Consolidated Statements of Changes in Net Assets...............17
Consolidated Statements of Cash Flows..........................18
Notes to Consolidated Financial Statements.....................19
Consolidated Statement of Investments..........................25
Schedule III - Real Estate Owned..................................29
All other schedules are omitted since the required information is not present in
amounts sufficient to require submission of the schedule or because the
information is included in the financial statements and notes thereto.
12
<PAGE>
[TIAA LOGO]
REPORT OF MANAGEMENT RESPONSIBILITY
To the Participants of the
TIAA Real Estate Account:
The accompanying financial statements of the TIAA Real Estate Account
("Account") of Teachers Insurance and Annuity Association of America ("TIAA")
are the responsibility of TIAA's management. They have been prepared in
accordance with accounting principles generally accepted in the United States
and have been presented fairly and objectively in accordance with such
principles.
TIAA has established and maintains a strong system of internal controls designed
to provide reasonable assurance that assets are properly safeguarded and
transactions are properly executed in accordance with management's
authorization, and to carry out the ongoing responsibilities of management for
reliable financial statements. In addition, TIAA's internal audit personnel
provide a continuing review of the internal controls and operations of TIAA,
including its separate account operations.
The accompanying financial statements have been audited by the independent
auditing firm of Ernst & Young LLP. The independent auditors' report, which
appears on the following page, expresses an independent opinion on the fairness
of presentation of these financial statements.
The Audit Committee of the TIAA Board of Trustees, consisting of trustees who
are not officers of TIAA, meets regularly with management, representatives of
Ernst & Young LLP and internal audit personnel to review matters relating to
financial reporting, internal controls and auditing.
/s/ John H. Biggs
---------------------------------
Chairman, President and
Chief Executive Officer
/s/ Richard L. Gibbs
---------------------------------
Executive Vice President and
Principal Accounting Officer
13
<PAGE>
[Ernst & Young Letterhead]
REPORT OF INDEPENDENT AUDITORS
To the Participants of the TIAA Real Estate Account and the Board of Trustees of
Teachers Insurance and Annuity Association of America:
We have audited the accompanying consolidated statements of assets and
liabilities, including the statement of investments as of December 31, 1999, of
the TIAA Real Estate Account ("Account") of Teachers Insurance and Annuity
Association of America ("TIAA") as of December 31, 1999 and 1998, and the
related consolidated statements of operations, changes in net assets and cash
flows for each of the three years in the period ended December 31, 1999. We have
also audited the financial statement schedule listed on the Index as item 8.
These consolidated financial statements and the financial statement schedule are
the responsibility of TIAA's management. Our responsibility is to express an
opinion on these consolidated financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. Our procedures included confirmation of securities owned
as of December 31, 1999, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Account at December 31, 1999 and 1998, and the consolidated results of their
operations and the changes in their net assets and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
New York, New York
February 4, 2000
14
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
ASSETS
Investments, at value:
Real estate properties
(cost: $1,253,650,281 and $775,801,883) ....................... $1,312,503,554 $ 820,211,240
Marketable securities
(cost: $395,662,203 and $402,041,089) ......................... 374,278,801 391,033,557
Cash .............................................................. 617,599 572,343
Other ............................................................. 32,057,761 17,786,291
-------------- --------------
TOTAL ASSETS 1,719,457,715 1,229,603,431
-------------- --------------
LIABILITIES
Accrued real estate property level expenses and taxes ............. 18,425,328 11,432,529
Security deposits held ............................................ 5,549,959 1,890,423
-------------- --------------
TOTAL LIABILITIES 23,975,287 13,322,952
-------------- --------------
MINORITY INTEREST .................................................. -- 19,913,592
-------------- --------------
NET ASSETS
Accumulation Fund ................................................. 1,642,327,173 1,167,591,317
Annuity Fund ...................................................... 53,155,255 28,775,570
-------------- --------------
TOTAL NET ASSETS $1,695,482,428 $1,196,366,887
============== ==============
NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 6 and 7 ............ 11,487,360 8,833,911
========== =========
NET ASSET VALUE, PER ACCUMULATION UNIT--Note 6 .................... $142.97 $132.17
======= =======
</TABLE>
See notes to consolidated financial statements.
15
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME Real estate income, net:
Rental income ................................................. $ 132,316,878 $ 81,009,203 $ 44,342,342
------------- ------------- -------------
Real estate property level expenses and taxes:
Operating expenses .......................................... 27,334,060 17,339,706 9,024,240
Real estate taxes ........................................... 15,892,736 9,103,637 4,472,311
------------- ------------- -------------
Total real estate property level expenses and taxes 43,226,796 26,443,343 13,496,551
------------- ------------- -------------
Real estate income, net 89,090,082 54,565,860 30,845,791
Interest ........................................................ 17,117,917 15,588,829 12,079,600
Dividends ....................................................... 7,814,816 8,354,899 4,406,679
------------- ------------- -------------
TOTAL INCOME 114,022,815 78,509,588 47,332,070
------------- ------------- -------------
Expenses -- Note 3:
Investment advisory charges ................................... 4,246,911 2,999,113 1,647,689
Administrative and distribution charges ....................... 3,442,282 2,498,376 1,368,501
Mortality and expense risk charges ............................ 1,027,707 675,450 400,925
Liquidity guarantee charges ................................... 561,510 101,655 109,430
------------- ------------- -------------
TOTAL EXPENSES 9,278,410 6,274,594 3,526,545
------------- ------------- -------------
INVESTMENT INCOME, NET 104,744,405 72,234,994 43,805,525
------------- ------------- -------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on:
Real estate properties ........................................ 8,788,795 -- --
Marketable securities ......................................... (3,022,098) (5,258,000) 1,076,725
------------- ------------- -------------
Net realized gain (loss) on investments 5,766,697 (5,258,000) 1,076,725
------------- ------------- -------------
Net change in unrealized appreciation (depreciation) on:
Real estate properties ........................................ 14,443,916 33,221,281 10,234,316
Marketable securities ......................................... (10,375,870) (20,098,622) 6,836,012
------------- ------------- -------------
Net change in unrealized appreciation on investments 4,068,046 13,122,659 17,070,328
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 9,834,743 7,864,659 18,147,053
------------- ------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS BEFORE MINORITY INTEREST 114,579,148 80,099,653 61,952,578
Minority interest in net increase in net assets
resulting from operations ..................................... 1,364,619 (3,487,991) (1,881,178)
------------- ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 115,943,767 $ 76,611,662 $ 60,071,400
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
FROM OPERATIONS
Investment income, net ...................................... $ 104,744,405 $ 72,234,994 $ 43,805,525
Net realized gain (loss) on marketable securities ........... 5,766,697 (5,258,000) 1,076,725
Net change in unrealized appreciation on investments ........ 4,068,046 13,122,659 17,070,328
Minority interest in net increase in net assets
resulting from operations ................................. 1,364,619 (3,487,991) (1,881,178)
--------------- --------------- ---------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 115,943,767 76,611,662 60,071,400
--------------- --------------- ---------------
FROM PARTICIPANT TRANSACTIONS
Premiums .................................................... 126,200,561 91,248,578 52,344,830
TIAA seed money withdrawn -- Note 1 ......................... -- (76,666,109) (37,915,190)
Net participant transfers from TIAA ......................... 24,155,178 26,568,616 43,681,385
Net participant transfers from CREF Accounts ................ 269,199,426 310,999,448 307,493,199
Annuity and other periodic payments ......................... (6,330,436) (3,209,761) (1,499,054)
Withdrawals and death benefits .............................. (30,052,955) (15,004,262) (8,052,908)
--------------- --------------- ---------------
NET INCREASE IN NET ASSETS RESULTING
FROM PARTICIPANT TRANSACTIONS 383,171,774 333,936,510 356,052,262
--------------- --------------- ---------------
NET INCREASE IN NET ASSETS 499,115,541 410,548,172 416,123,662
NET ASSETS
Beginning of year ........................................... 1,196,366,887 785,818,715 369,695,053
--------------- --------------- ---------------
End of year ................................................. $ 1,695,482,428 $ 1,196,366,887 $ 785,818,715
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations .......... $ 115,943,767 $ 76,611,662 $ 60,071,400
Adjustments to reconcile net increase in net assets resulting
from operations to net cash used in operating activities:
Increase in investments ..................................... (475,537,558) (409,958,664) (433,355,406)
Decrease in receivable from securities transactions ......... -- -- 47,480,000
Increase in other assets .................................... (14,271,470) (3,719,197) (7,087,554)
Decrease in payable for securities transactions ............. -- (10,463) (51,344,156)
Increase in accrued real estate property level expenses
and taxes ................................................. 6,992,799 1,088,936 5,021,258
Increase in security deposits held .......................... 3,659,536 584,465 1,305,958
Increase (decrease) in minority interest .................... (19,913,592) 1,631,496 18,282,096
------------- ------------- -------------
NET CASH USED IN
OPERATING ACTIVITIES (383,126,518) (333,771,765) (359,626,404)
------------- ------------- -------------
CASH FLOWS FROM PARTICIPANT TRANSACTIONS
Premiums ...................................................... 126,200,561 91,248,578 52,344,830
TIAA seed money withdrawn -- Note 1 ........................... -- (76,666,109) (37,915,190)
Net participant transfers from TIAA ........................... 24,155,178 26,568,616 43,681,385
Net participant transfers from CREF Accounts .................. 269,199,426 310,999,448 307,493,199
Annuity and other periodic payments ........................... (6,330,436) (3,209,761) (1,499,054)
Withdrawals and death benefits ................................ (30,052,955) (15,004,262) (8,052,908)
------------- ------------- -------------
NET CASH PROVIDED BY
PARTICIPANT TRANSACTIONS 383,171,774 333,936,510 356,052,262
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH 45,256 164,745 (3,574,142)
CASH
Beginning of year ............................................. 572,343 407,598 3,981,740
------------- ------------- -------------
End of year ................................................... $ 617,599 $ 572,343 $ 407,598
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
TIAA REAL ESTATE ACCOUNT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 two
properties 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
were 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 were growing rapidly, TIAA in October 1997, with NYID
approval, modified the seed money redemption schedule by increasing the monthly
redemption of Units to 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. By the end of 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.
19
<PAGE>
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
consistently followed by the Account, which are in conformity with accounting
principles generally accepted in the United States.
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 sale price as
of the close of the principal securities exchange on which such securities are
traded or, if there is no sale, at the mean of the last bid and asked prices on
such exchange. 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
20
<PAGE>
Note 2--Significant Accounting Policies - (Concluded)
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.
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 former minority partner
in Light Street provided certain management services for the properties owned by
Light Street. The charges for such services, for the year ended December 31,
1999 amounted to $345,928 ($855,810 in 1998 and 507,829 in 1997) for investment
advisory expenses and $104,673 ($102,953 in 1998 and $0 in 1997) 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 properties which were purchased during the year
ended December 31, 1999 been acquired at the beginning of the period (January 1,
1999), rental income and real estate property level expenses and taxes for the
year ended December 31, 1999 would have increased by approximately $30,886,000
and $11,806,000 respectively. In addition, interest income for the year ended
December 31, 1999 would have decreased by approximately $15,431,000.
Accordingly, the total proforma effect on the Account's net investment income
for the year ended December 31, 1999 would have been an increase of
approximately $3,649,000, if the real estate properties acquired during the year
ended December 31, 1999 had been acquired at the beginning of the period.
21
<PAGE>
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:
Years Ending
December 31,
------------
2000 $ 91,384,000
2001 81,019,000
2002 70,055,000
2003 59,368,000
2004 50,531,000
Thereafter 139,129,000
-------------
Total $ 491,486,000
=============
Certain leases provide for additional rental amounts based upon the recovery of
actual operating expenses in excess of specified base amounts.
22
<PAGE>
Note 6--Condensed Consolidated Financial Information
Selected condensed consolidated financial information for an Accumulation Unit
of the Account is presented below.
<TABLE>
<CAPTION>
For the Years Ended July 3, 1995
December 31, (Commencement
----------------------------------------------------- of Operations) to
1999 1998 1997 1996 December 31, 1995 (1)
-------- ----------- ----------- ----------- ---------------------
<S> <C> <C> <C> <C> <C>
Per Accumulation Unit Data:
Rental income .......................... $ 12.168 $ 10.425 $ 7.288 $ 6.012 $ 0.159
Real estate property
level expenses and taxes ............. 3.975 3.403 2.218 1.850 0.042
-------- ----------- ----------- ----------- -----------
Real estate income, net 8.193 7.022 5.070 4.162 0.117
Dividends and interest ................. 2.292 3.082 2.709 3.309 2.716
-------- ----------- ----------- ----------- -----------
Total income 10.485 10.104 7.779 7.471 2.833
Expense charges (2) .................... 0.853 0.808 0.580 0.635 0.298
-------- ----------- ----------- ----------- -----------
Investment income, net 9.632 9.296 7.199 6.836 2.535
Net realized and unrealized
gain on investments .................. 1.164 .579 3.987 1.709 0.031
-------- ----------- ----------- ----------- -----------
Net increase in
Accumulation Unit Value .............. 10.796 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 ........................ $142.968 $ 132.172 $ 122.297 $ 111.111 $ 102.566
======== =========== =========== =========== ===========
Total return ............................ 8.17% 8.07% 10.07% 8.33% 2.57%
Ratios to Average Net Assets:
Expenses (2) ......................... 0.63% 0.64% 0.58% 0.61% 0.30%
Investment income, net ............... 7.13% 7.34% 7.25% 6.57% 2.51%
Portfolio turnover rate:
Real estate properties ............... 4.46% 0% 0% 0% 0%
Securities ........................... 27.68% 24.54% 7.67% 15.04% 0%
Thousands of Accumulation Units
outstanding at end of period ......... 11,487 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 year ended
December 31, 1999 would be $4.828 ($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 year ended December 31, 1999 would be 3.58%
(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).
23
<PAGE>
Note 7--Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Accumulation Units:
Credited for premiums
Credited for transfers, net disbursements and .. 918,728 511,462 448,822
amounts applied to the Annuity Fund .......... 1,734,721 2,009,434 2,568,407
Outstanding:
Beginning of year ............................ 8,833,911 6,313,015 3,295,786
---------- ---------- ----------
End of year .................................. 11,487,360 8,833,911 6,313,015
========== ========== ==========
</TABLE>
24
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENT OF INVESTMENTS
December 31, 1999
REAL ESTATE PROPERTIES--77.81%
Location / Description Value
- ---------------------- -----
Arizona:
Biltmore Commerce Center - Office building ................. $38,500,000
Southbank Building - Office building ....................... 13,000,000
California:
88 Kearny Street - Office building ......................... 72,400,000
Eastgate Distribution Center - Industrial building ......... 13,300,000
IDI California Portfolio - Industrial building ............. 36,500,000
Larkspur Courts - Apartments ............................... 55,300,000
Ontario Industrial Properties - Industrial building ........ 24,650,000
Westcreek - Apartments ..................................... 15,511,245
Colorado:
Arapahoe Park East - Industrial building ................... 11,850,000
The Lodge at Willow Creek - Apartments ..................... 30,000,000
Monte Vista - Apartments ................................... 20,500,000
Florida:
Corporate Center at Sawgrass - Office building ............. 14,200,000
Golfview - Apartments ...................................... 27,510,000
The Greens at Metrowest - Apartments ....................... 14,100,000
Plantation Grove - Shopping center ......................... 7,350,000
Royal St. George - Apartments .............................. 16,500,000
Sawgrass Portfolio - Office building ....................... 25,000,000
Westinghouse Facility - Industrial building ................ 6,200,000
Illinois:
Columbia Center III - Office building ...................... 42,100,000
Glenpointe Business Park - Industrial building ............. 16,100,000
Parkview Plaza - Office building ........................... 52,436,321
Rockrun Business Park - Industrial building ................ 9,350,000
Rolling Meadows - Shopping center .......................... 12,110,000
Woodcreek Business Park - Industrial building .............. 6,976,343
Iowa:
Interstate Acres - Industrial building ..................... 14,100,000
Kentucky:
IDI Kentucky Portfolio - Industrial building ............... 25,400,000
Maryland:
FedEx Distribution Facility - Industrial building .......... 7,800,000
Longview Executive Park - Office building .................. 28,400,000
Saks Distribution Center - Industrial building ............. 30,325,000
Massachusetts:
Two Newton Center - Office building ........................ 20,300,000
Michigan:
Indian Creek - Apartments .................................. 17,108,785
Minnesota:
Interstate Crossing - Industrial building .................. 6,400,000
River Road Distribution Center - Industrial building ....... 4,300,000
Nevada:
UPS Distribution Facility - Industrial building ............ 11,000,000
New Jersey:
371 Hoes Lane - Office building ............................ 16,800,000
10 Waterview Boulevard - Office building ................... 31,200,000
Konica Photo Imaging Headquarters - Industrial building .... 17,051,474
25
<PAGE>
New York:
780 Third Avenue - Office building ................... $ 162,500,000
The Colorado - Apartments ............................ 56,547,289
North Carolina:
Lynnwood Collection - Shopping center ................ 7,700,000
Millbrook Collection - Shopping center ............... 7,100,000
Ohio:
Bent Tree - Apartments ............................... 14,500,000
Columbus Portfolio - Office building ................. 33,701,672
Northmark Business Center - Office building .......... 13,000,000
Oregon:
Five Centerpointe - Office building .................. 18,000,948
Pennsylvania:
Lincoln Woods - Apartments ........................... 22,952,310
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 ............... 27,800,000
Utah:
USF&G Building - Office building ..................... 8,722,167
Virginia:
Fairgate at Ballston - Office building ............... 30,800,000
Monument Place - Office building ..................... 36,100,000
River Oaks - Shopping center
12,100,000
Washington:
The Bay Court at Harbour Pointe - Apartments ......... 34,800,000
--------------
TOTAL REAL ESTATE PROPERTIES (Cost $1,253,650,281) ... 1,312,503,554
--------------
(1) Leasehold interest only.
MARKETABLE SECURITIES--22.19%
REAL ESTATE INVESTMENT TRUSTS--4.70%
Shares Issuer Value
- ------ ------ -----
89,900 AMB Property Corporation Series A................. 1,781,144
19,200 Avalon Bay Communities, Inc. Pfd Series F......... 386,400
46,800 Boston Properties, Inc............................ 1,456,650
102,400 Bradley Real Estate, Inc.......................... 1,785,600
130,400 Brandywine Realty Trust........................... 2,135,300
200,000 Carramerica Realty Corporation, Pfd Series B...... 3,225,000
58,000 Centerpoint Properties Corp....................... 2,080,750
42,500 Colonial Properties Trust......................... 985,469
158,400 Cornerstone Properties, Inc....................... 2,316,600
113,100 Corporate Office Properties Trust, Inc............ 862,387
90,000 Developers Diversified Realty Corp................ 1,541,250
221,300 Duke-Weeks Realty Corp............................ 4,315,350
214,100 Equity Office Properties Trust.................... 5,272,212
200,000 Equity Office Properties Trust Pfd Series A....... 4,200,000
121,700 Equity Residential Properties Trust............... 5,195,069
100,000 Equity Residential, Pfd Series G.................. 1,975,000
100,000 Equity Residential Properties, Pfd Series L....... 1,887,500
25,000 Federal Realty Investment Trust Pfd............... 432,812
100,000 First Industrial Realty Trust, Inc. Pfd........... 1,912,500
98,300 Gables Residential Trust, Pfd Series A............ 1,800,119
74,900 Hospitality Properties Trust...................... 1,427,781
26
<PAGE>
Shares Issuer Value
- ------ ------ -----
149,800 Macerich Company.................................. $ 3,117,713
25,159 New Plan Excel Realty Trust....................... 397,827
25,000 Prologis Trust.................................... 481,250
19,900 Prologis Trust-Pfd Series A....................... 398,000
127,700 Public Storage, Inc............................... 2,897,193
93,600 Rouse Company..................................... 1,989,000
280,900 Simon Property Group, Inc......................... 6,443,144
84,750 Spieker Properties, Inc........................... 3,088,078
174,455 Starwood Financial Trust.......................... 2,954,832
26,000 Starwood Financial, Inc Series C Pfd.............. 373,750
140,000 Starwood Hotels & Resorts Worldwide............... 3,290,000
35,500 Storage USA, Inc.................................. 1,073,875
100,400 Taubman Centers, Inc.............................. 1,079,300
35,000 Taubman Centers, Inc Pfd Series A................. 529,375
62,800 United Dominion Realty Trust, Inc................. 1,122,550
112,100 Urban Shopping Centers, Inc....................... 3,040,712
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost $100,498,293)....... 79,251,492
-----------
CORPORATE BONDS-- 0.59%
Principal Issuer, Coupon and Maturity Date Value
- --------- -------------------------------- -----
$ 5,000,000 Avco Financial Services, Inc.
5.75% 01/23/01.............................. 4,936,150
5,000,000 Ford Motor Credit Co.
5.75% 01/25/01.............................. 4,944,350
--------------
TOTAL CORPORATE BONDS (Cost $10,034,650)........................ 9,880,500
--------------
GOVERNMENT AGENCIES--.63%
Principal Issuer, Coupon and Maturity Date Value
- --------- -------------------------------- -----
10,640,000 Federal Home Loan Mortgage Corporation
5.59% 01/11/00.............................. 10,623,907
--------------
TOTAL GOVERNMENT AGENCIES (Amortized cost $10,623,478)........... 10,623,907
--------------
COMMERCIAL PAPER--16.27%
Principal Issuer, Coupon and Maturity Date Value
- --------- -------------------------------- -----
15,000,000 Asset Securitization Cooperative Corp
5.90% 01/31/00.............................. 14,927,667
10,000,000 Corporate Asset Funding Corp, Inc.
5.92% 02/01/00.............................. 9,950,222
14,000,000 Deutsche Bank
5.80% 03/31/00.............................. 13,991,218
17,725,000 Dupont (E.I.) De Nemours & Co.
5.76% 01/26/00.............................. 17,653,056
7,140,000 Equilon Enterprises LLC
6.25% 01/11/00.............................. 7,127,848
13,850,000 Equilon Enterprises LLC
6.55% 01/13/00.............................. 13,822,142
3,375,000 Equilon Enterprises LLC
5.87% 02/03/00.............................. 3,357,150
6,175,000 General Electric Capital Corp.
6.02% 01/24/00.............................. 6,151,864
20,000,000 Goldman Sachs Group, LP
6.07% 02/07/00.............................. 19,881,778
13,100,000 J.P. Morgan & Co.
6.15% 01/10/00.............................. 13,079,732
27
<PAGE>
Principal Issuer, Coupon and Maturity Date Value
- --------- -------------------------------- -----
12,675,000 Lucent Technologies Inc.
5.72% 02/15/00.............................. $ 12,583,980
12,150,000 McGraw Hill, Inc.
5.25% 01/28/00.............................. 12,096,891
15,275,000 Merck, Inc.
5.72% 02/03/00.............................. 15,194,212
10,000,000 Morgan Stanley Dean Witter
6.00% 01/07/00.............................. 9,992,514
15,000,000 National Fuel Gas Co.
6.20% 02/23/00.............................. 14,870,625
1,350,000 National Fuel Gas Co.
5.87% 03/01/00.............................. 1,336,584
20,000,000 National Rural Utilities Coop Finance
5.78% 02/14/00.............................. 19,860,000
15,000,000 National Rural Utilities Coop Finance
5.92% 03/07/00.............................. 14,841,991
10,000,000 Park Avenue Receivables Corp.
6.06% 01/27/00.............................. 9,957,850
17,006,000 Pfizer, Inc.
5.76% 02/29/00.............................. 16,846,710
14,000,000 Receivables Capital Corp.
6.40% 01/14/00.............................. 13,969,675
13,070,000 Salomon Smith Barney Holdings, Inc.
6.00% 01/20/00.............................. 13,029,193
--------------
TOTAL COMMERCIAL PAPER (Amortized cost $274,505,782)......... 274,522,902
--------------
TOTAL MARKETABLE SECURITIES (Cost $395,662,203)................. 374,278,801
--------------
TOTAL INVESTMENTS--100.00% (Cost $1,649,312,484)................ $1,686,782,355
==============
See notes to consolidated financial statements.
28
<PAGE>
TIAA REAL ESTATE ACCOUNT
Schedule III - Real Estate Owned
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to
Acquisition
Initial cost (Including Value at Year
Encum- to Acquire Unrealized Gains December 31, Construction Date
Description brances Property and Losses) 1999 Completed Acquired
- ------------------------------ ------- ------------ ----------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
River Road Distribution Center $-0- $ 4,166,787 $ 133,213 $ 4,300,000 1995 11/22/1995
Industrial Building
Fridley, Minnesota
The Greens At Metrowest -0- 12,490,895 1,609,105 14,100,000 1990 12/15/1995
Apartments
Orlando, Florida
Butterfield Industrial Park -0- 4,431,166 418,834 4,850,000 1981 12/22/1995
Industrial Building
El Paso, Texas(1)
Plantation Grove Shopping Center -0- 7,326,170 23,830 7,350,000 1995 12/28/1995
Shopping Center
Ocoee, Florida
Southbank Business Park -0- 10,069,898 2,930,102 13,000,000 1995 02/27/96
Office Building
Phoenix, Arizona
Millbrook Collection -0- 6,774,711 325,289 7,100,000 1988 03/29/96
Shopping Center
Raleigh, North Carolina
Lynnwood Collection -0- 6,708,120 991,880 7,700,000 1988 03/29/96
Shopping Center
Raleigh, North Carolina
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to
Acquisition
Initial cost (Including Value at Year
Encum- to Acquire Unrealized Gains December 31, Construction Date
Description brances Property and Losses) 1999 Completed Acquired
- ------------------------------ ------- ------------ ----------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Monte Vista Apartments $-0- 17,664,247 2,835,753 20,500,000 1995 06/21/96
Apartments
Littleton, Colorado
River Oaks Shopping Center -0- 13,036,153 (936,153) 12,100,000 1995 07/12/96
Shopping Center
Woodbridge, Virginia
Arapahoe Park East -0- 9,920,680 1,929,320 11,850,000 1982 10/31/1996
Industrial Building
Boulder, Colorado
Royal St. George Apartments -0- 16,072,275 427,725 16,500,000 1995 12/20/1996
Apartments
West Palm Beach, Florida
Interstate Crossing -0- 6,485,249 (85,249) 6,400,000 1995 12/31/1996
Industrial Building
Eagan, Minnesota
West Creek Apartments -0- 13,488,279 2,022,966 15,511,245 1988 01/02/97
Apartments
Westlake Village, California
Interstate Acres -0- 13,610,294 489,706 14,100,000 1988 01/24/97
Industrial Building
Urbandale, Iowa
The Crest at Shadow Mountain -0- 9,192,389 507,611 9,700,000 1992 01/31/97
Apartments
El Paso, Texas
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to
Acquisition
Initial cost (Including Value at Year
Encum- to Acquire Unrealized Gains December 31, Construction Date
Description brances Property and Losses) 1999 Completed Acquired
- ------------------------------ ------- ------------ ----------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Westinghouse Facility $-0- 6,089,473 110,527 6,200,000 1997 02/05/97
Industrial Building
Coral Springs, Florida
Rolling Meadows -0- 12,930,463 (820,463) 12,110,000 1957 05/28/97
Shopping Center
Rolling Meadows, Illinois
Saks Distribution Center -0- 26,908,401 3,416,599 30,325,000 1997 05/15/97
Industrial Building
Aberdeen, Maryland
Eastgate Distribution Center -0- 11,941,992 1,358,008 13,300,000 1996 05/29/97
Industrial Building
San Diego, California
Five Centerpointe -0- 15,429,103 2,571,845 18,000,948 1988 04/21/97
Office Building
Lake Oswego, Oregon
Longview Executive Park -0- 23,249,805 5,150,195 28,400,000 1988 04/21/97
Office Building
Longview, Maryland
Northmark Business Center III -0- 8,591,636 4,408,364 13,000,000 1985 04/21/97
Office Building
Blue Ash, Ohio
USF&G Building -0- 6,195,142 2,527,025 8,722,167 1988 04/21/97
Office Building
Salt Lake City, Utah
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to
Acquisition
Initial cost (Including Value at Year
Encum- to Acquire Unrealized Gains December 31, Construction Date
Description brances Property and Losses) 1999 Completed Acquired
- ------------------------------ ------- ------------ ----------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Two Newton Place $-0- $16,368,169 $ 3,931,831 $20,300,000 1987 04/21/97
Office Building
Newton, Massachusetts
Fairgate at Ballston -0- 26,790,792 4,009,208 30,800,000 1988 04/21/97
Office Building
Arlington, Virginia
Parkview Plaza -0- 49,139,012 3,297,309 52,436,321 1990 04/29/97
Office Building
Oakbrook Terrace, Illinois
Lincoln Woods Apartments -0- 21,476,050 1,476,260 22,952,310 1991 10/20/1997
Apartments
Lafayette Hill, Pennsylvania
Corporate Center at Sawgrass -0- 12,956,957 1,243,043 14,200,000 1997 12/02/97
Office Building
Sunrise, Florida
371 Hoes Lane -0- 15,499,306 1,300,694 16,800,000 1986 12/15/1997
Office Building
Piscataway, New Jersey
Columbia Centre III -0- 38,580,850 3,519,150 42,100,000 1989 12/23/1997
Office Building
Rosemont, Illinois
The Lodge at Willow Creek -0- 27,562,882 2,437,118 30,000,000 1997 12/24/1997
Apartments
Douglas County, Colorado
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to
Acquisition
Initial cost (Including Value at Year
Encum- to Acquire Unrealized Gains December 31, Construction Date
Description brances Property and Losses) 1999 Completed Acquired
- ------------------------------ ------- ------------ ----------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
The Legends at Chase Oaks $-0- $29,701,668 ($1,901,668) $27,800,000 1997 03/31/98
Apartments
Plano, Texas
Glen Pointe Business Park -0- 15,279,508 820,492 16,100,000 1997 06/30/98
Industrial Building
Glendale Heights, Illinois
Wood Creek Business Park -0- 7,222,421 (246,078) 6,976,343 1995 06/30/98
Industrial Building
Boilingbrook, Illinois
Rock Run Business Park -0- 9,325,421 24,579 9,350,000 1998 06/30/98
Industrial Building
Joliet, Illinois
Golfview Apartments -0- 28,066,591 (556,591) 27,510,000 1998 07/31/98
Apartments
Lake Mary, Florida
Indian Creek Apartments -0- 17,003,388 105,397 17,108,785 1988 10/08/98
Apartments
Farmington Hills, Michigan
Bent Tree Apartments -0- 14,412,235 87,765 14,500,000 1987 10/22/98
Apartments
Columbus, Ohio
UPS Distribution Center -0- 10,989,393 10,607 11,000,000 1998 11/13/98
Industrial Building
Fernly, Nevada
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to
Acquisition
Initial cost (Including Value at Year
Encum- to Acquire Unrealized Gains December 31, Construction Date
Description brances Property and Losses) 1999 Completed Acquired
- ------------------------------ ------- ------------ ----------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Ontario Industrial Properties $-0- $24,433,584 $ 216,416 $24,650,000 1997 12/17/98
Industrial Building
Ontario, California
IDI California Portfolio -0- 35,668,791 831,209 36,500,000 1998 12/17/98
Industrial Building
Ontario, California
IDI Kentucky Portfolio -0- 24,651,154 748,846 25,400,000 1998 12/17/98
Industrial Building
Hebron, Kentucky
Fedex Distribution Center -0- 7,828,025 (28,025) 7,800,000 1998 12/18/98
Industrial Building
Crofton, Maryland
The Bay Court at Harbor Pointe -0- 35,164,373 (364,373) 34,800,000 1991 12/18/98
Apartments
Mukilteo, Washington
Biltmore Commerce Center -0- 37,323,057 1,176,943 38,500,000 1985 02/23/99
Office Building
Phoenix, Arizona
The Colorado -0- 52,687,840 3,859,449 56,547,289 1987 04/14/99
Apartments
New York, New York
Sawgrass Portfolio -0- 24,916,713 83,287 25,000,000 1998 05/11/99
Office Building
Sunrise, Florida
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to
Acquisition
Initial cost (Including Value at Year
Encum- to Acquire Unrealized Gains December 31, Construction Date
Description brances Property and Losses) 1999 Completed Acquired
- ------------------------------ ------- ------------ ----------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
780 Third Avenue $-0- $ 161,511,019 $ 988,981 $ 162,500,000 1984 07/08/99
Office Building
New York, New York
Monument Place -0- 34,597,698 1,502,302 36,100,000 1990 07/15/99
Office Building
Fairfax, Virginia
88 Kearny Street -0- 65,995,171 6,404,829 72,400,000 1986 07/22/99
Office Building
San Francisco, California
10 Waterview Boulevard -0- 31,063,636 136,364 31,200,000 1984 07/27/99
Office Building
Parsippany, New Jersey
Larkspur Courts -0- 53,038,988 2,261,012 55,300,000 1991 08/17/99
Apartments
Larkspur, California
Columbus Portfolio -0- 33,701,672 0 33,701,672 1997 11/30/99
Office Building
Columbus, Ohio
Konica Photo Imaging Headquarters -0- 17,051,474 0 17,051,474 1999 12/21/99
Industrial Building
Mahwah, New Jersey
---- -------------- ------------ --------------
$-0- $1,242,781,166 $ 69,722,388 $1,312,503,554
==== ============== ============ ==============
</TABLE>
(1) Leasehold interest only
35
<PAGE>
Reconciliation of investment property owned:
Balance at beginning of period $ 820,211,242
Acquisitions 511,887,268
Dispositions
(Initial cost 36,659,857 costs capitalized 12,398,881) (49,058,738)
Capital improvements and carrying costs
(including unrealized gains and losses) 29,463,782
--------------
Balance at end of period $1,312,503,554
==============
36
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Account has no officers or directors. The Trustees and principal
executive officers of TIAA, and their principal occupations during the last five
years, are as follows:
Trustees
David Alexander, 67.
President Emeritus, Pomona College. Formerly, Trustees' Professor, Pomona
College and American Secretary, Rhodes Scholarship Trust.
Marcus Alexis, 68.
Board of Trustees Professor of Economics and Professor of Management and
Strategy, J.L. Kellogg Graduate School of Management, Northwestern University.
Willard T. Carleton, 65.
Donald R. Diamond Professor of Finance, College of Business and Public
Administration, University of Arizona.
Robert C. Clark, 56.
Dean and Royall Professor of Law, Harvard Law School, Harvard University.
Estelle A. Fishbein, 65.
Vice President and General Counsel, The Johns Hopkins University.
Frederick R. Ford, 63.
Executive Vice President and Treasurer Emeritus, Purdue University. Formerly,
Executive Vice President and Treasurer, Purdue University.
Martin J. Gruber, 62.
Nomura Professor of Finance, New York University Stern School of Business.
Formerly, Chairman, Department of Finance, New York University Stern School of
Business.
37
<PAGE>
Ruth Simms Hamilton, 62.
Professor, Department of Sociology, and Director, African Diaspora Research
Project, Michigan State University.
Robert M. O'Neil, 65.
Professor of Law, University of Virginia and Director, The Thomas Jefferson
Center for the Protection of Free Expression.
Leonard S. Simon, 63.
Vice Chairman, Charter One Financial Inc. Formerly, Chairman, President and
Chief Executive Officer, RCSB Financial, Inc. and Chairman and Chief Executive
Officer, The Rochester Community Savings Bank.
Ronald L. Thompson, 50.
Chairman and Chief Executive Officer, Midwest Stamping Co.
Paul R. Tregurtha, 64.
Chairman and Chief Executive Officer, Mormac Marine Group, Inc. and Moran
Transportation Company, Inc.; Chairman, Meridian Aggregates, L.P.; Vice
Chairman, The Interlake Steamship Company and Lakes Shipping Company.
William H. Waltrip, 62.
Chairman, Technology Solutions Company. Formerly, Chairman and Chief Executive
Officer, Bausch & Lomb Inc., and Chairman and Chief Executive Officer, Biggers
Brothers, Inc.
Rosalie J. Wolf, 58.
Treasurer and Chief Investment Officer, The Rockefeller Foundation. Formerly,
Executive Vice President, Sithe Energies, Inc., and Managing Director --
Merchant Banking, Bankers Trust Company.
Officer-Trustees
John H. Biggs, 63.
Chairman, President and Chief Executive Officer, TIAA and CREF.
Martin L. Leibowitz, 63.
Vice Chairman and Chief Investment Officer, TIAA and CREF, since November 1995.
Executive Vice President, TIAA and CREF, from June 1995 to November 1995.
Formerly, Managing Director -- Director of Research and member of the Executive
Committee, Salomon Brothers Inc.
38
<PAGE>
Other Officers
Richard J. Adamski, 57.
Vice President and Treasurer, TIAA and CREF.
Richard L. Gibbs, 52.
Executive Vice President, Finance and Planning, TIAA and CREF.
E. Laverne Jones, 50
Vice President and Corporate Secretary, TIAA and CREF.
ITEM 11. EXECUTIVE COMPENSATION.
Not applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Not applicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
TIAA's general account plays a significant role in operating the Real
Estate Account, including providing a liquidity guarantee, and investment
management and other services.
Liquidity Guarantee. If the Account's cash flow is insufficient to fund
redemption requests, TIAA's general account has agreed to fund them by
purchasing accumulation units. TIAA thereby guarantees that a participant can
redeem accumulation units at their then current daily net asset value. For the
year ended December 31, 1999, the Account paid TIAA $561,510 for this liquidity
guarantee through a daily deduction from the net assets of the Account.
Investment Management and Administrative Services/Certain Risks Borne by
TIAA. Deductions are made each valuation day from the net assets of the Account
for various services required to manage investments, administer the Account and
distribute the contracts, and to cover mortality and expense risks borne by
TIAA. These services are performed at cost by TIAA and Services.
For the year ended December 31, 1999, the Account paid TIAA $4,246,911 for
investment management services and $1,027,707 for mortality and expense risks.
For the same period, the Account paid Services $3,442,282 for its administrative
and distribution services.
39
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements. See Item 8 for required financial
statements.
(a) 2. Financial Statement Schedules. See Item 8 for required financial
statement schedules.
(a) 3. Exhibits.
(1) Distribution and Administrative Services Agreement by and between
TIAA and TIAA-CREF Individual & Institutional Services, Inc. (as
amended)*
(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
Contract Endorsements*
(B) Forms of Income-Paying Contracts*
(10) (A) Independent Fiduciary Agreement by and among TIAA, the
Registrant, and Institutional Property Consultants, Inc. (as
amended)***
(B) Custodial Services Agreement by and between TIAA and Morgan
Guaranty Trust Company of New York with respect to the Real
Estate Account*
(27) Financial Data Schedule of the Account's Financial Statements for
the year ended December 31, 1999
(b) Reports on 8-K. No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
- ----------
* - Previously filed and incorporated herein by reference to Post-Effective
Amendment No. 2 to the Account's previous 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).
40
<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.
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
March 13, 2000
------------------------------------
Date
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons, trustees and officers of
Teachers Insurance and Annuity Association of America, in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
/s/ John H. Biggs Chairman of the Board, President 3/13/00
- --------------------------- and Chief Executive Officer
John H. Biggs (Principal Executive Officer)
and Trustee
/s/ Martin L. Leibowitz Vice Chairman and Chief Investment 3/13/00
- --------------------------- Officer and Trustee
Martin L. Leibowitz
/s/ Richard L. Gibbs Executive Vice President 3/13/00
- --------------------------- (Principal Financial
Richard L. Gibbs and Accounting Officer)
41
<PAGE>
Signature of Trustee Date Signature of Trustee Date
- -------------------- ---- -------------------- ----
/s/ Marcus Alexis 3/13/00 /s/Robert M. O'Neil 3/13/00
- ------------------------- ----------------------
Marcus Alexis Robert M. O'Neil
/s/ Willard T. Carleton 3/13/00 /s/ Leonard S. Simon 3/13/00
- ------------------------- ----------------------
Willard T. Carleton Leonard S. Simon
/s/ Robert C. Clark 3/13/00 /s/ Ronald L. Thompson 3/13/00
- ------------------------- ----------------------
Robert C. Clark Ronald L. Thompson
/s/ Estelle A. Fishbein 3/13/00 /s/ Paul R. Tregurtha 3/13/00
- ------------------------- ----------------------
Estelle A. Fishbein Paul R. Tregurtha
/s/ Frederick R. Ford 3/13/00 /s/ William H. Waltrip 3/13/00
- ------------------------- ----------------------
Frederick R. Ford William H. Waltrip
/s/ Martin J. Gruber 3/13/00 /s/ Rosalie J. Wolf 3/13/00
- ------------------------- ----------------------
Martin J. Gruber Rosalie J. Wolf
/s/ Ruth Simms Hamilton 3/13/00
- ------------------------- ----------------------
Ruth Simms Hamilton David Alexander
42
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT
Because the Registrant has no voting securities, nor its own management or
board of directors, no annual report or proxy materials will be sent to
contractowners holding interests in the Account.
43
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
27 Financial Data Schedule of the Account's Financial Statements for
the period ended December 31, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000946155
<NAME> TIAA REAL ESTATE ACCOUNT
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 1,649,312,484
<INVESTMENTS-AT-VALUE> 1,686,782,355
<RECEIVABLES> 0
<ASSETS-OTHER> 32,057,761
<OTHER-ITEMS-ASSETS> 617,599
<TOTAL-ASSETS> 1,719,457,715
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,975,287
<TOTAL-LIABILITIES> 23,975,287
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 11,487,360
<SHARES-COMMON-PRIOR> 8,833,911
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,695,482,428
<DIVIDEND-INCOME> 7,814,816
<INTEREST-INCOME> 17,117,917
<OTHER-INCOME> 90,454,701
<EXPENSES-NET> (9,278,410)
<NET-INVESTMENT-INCOME> 106,109,024
<REALIZED-GAINS-CURRENT> 5,766,697
<APPREC-INCREASE-CURRENT> 4,068,046
<NET-CHANGE-FROM-OPS> 115,943,767
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,653,449
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 499,115,541
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,246,911
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,278,410
<AVERAGE-NET-ASSETS> 1,468,464,499
<PER-SHARE-NAV-BEGIN> 132.172
<PER-SHARE-NII> 9.632
<PER-SHARE-GAIN-APPREC> 1.164
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 142.968
<EXPENSE-RATIO> .630
</TABLE>
