<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________________________ to _____________________
Commission File Numbers 33-92990, 333-13477 and 333-22809
TIAA REAL ESTATE ACCOUNT
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of
incorporation or organization)
NOT APPLICABLE (IRS Employer
Identification No.)
C/O TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
730 THIRD AVENUE
NEW YORK, NEW YORK
(address of principal executive offices)
10017-3206
(Zip code)
(212) 490-9000
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INDEX TO UNAUDITED FINANCIAL STATEMENTS
OF THE TIAA REAL ESTATE ACCOUNT
MARCH 31, 2000
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Statements of Assets and Liabilities......................... 3
Consolidated Statements of Operations..................................... 4
Consolidated Statements of Changes in Net Assets.......................... 5
Consolidated Statements of Cash Flows..................................... 6
Notes to Consolidated Financial Statements................................ 7
Consolidated Statement of Investments..................................... 12
</TABLE>
2
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
-------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Investments, at value:
Real estate properties
(Cost: $1,255,567,548 and $1,253,650,281) .................................... $1,316,914,696 $1,312,503,554
Marketable securities
(Amortized cost: $523,601,687 and $395,662,203) .............................. 505,327,950 374,278,801
Cash ............................................................................. 1,065,120 617,599
Other ............................................................................ 23,983,074 32,057,761
-------------- --------------
TOTAL ASSETS 1,847,290,840 1,719,457,715
-------------- --------------
LIABILITIES
Accrued real estate property level expenses and taxes ............................ 16,879,172 18,425,328
Security deposits held ........................................................... 5,675,953 5,549,959
-------------- --------------
TOTAL LIABILITIES 22,555,125 23,975,287
-------------- --------------
NET ASSETS
Accumulation Fund ................................................................ 1,765,540,513 1,642,327,173
Annuity Fund ..................................................................... 59,195,202 53,155,255
-------------- --------------
TOTAL NET ASSETS $1,824,735,715 $1,695,482,428
============== ==============
NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 5 and 6 ........................... 12,089,729 11,487,360
============== ==============
NET ASSET VALUE, PER ACCUMULATION UNIT--Note 5 ................................... $146.04 $142.97
======= =======
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
------------ ------------
<S> <C> <C>
INVESTMENT INCOME
Real estate income net:
Rental income ................................................................. $41,821,067 $26,198,891
------------ ------------
Real estate property level expenses and taxes:
Operating expenses .......................................................... 8,971,080 5,580,625
Real estate taxes ........................................................... 4,892,240 2,673,051
------------ ------------
Total real estate property level expenses and taxes 13,863,320 8,253,676
------------ ------------
Real estate income, net 27,957,747 17,945,215
Interest ........................................................................ 5,240,939 4,364,165
Dividends ....................................................................... 1,631,830 2,044,302
------------ ------------
TOTAL INCOME 34,830,516 24,353,682
------------ ------------
Expenses--Note 3:
Investment advisory charges ................................................... 1,538,682 1,044,886
Administrative and distribution charges ....................................... 1,043,496 805,090
Mortality and expense risk charges ............................................ 305,589 218,383
Liquidity guarantee charges ................................................... 167,889 92,520
------------ ------------
TOTAL EXPENSES 3,055,656 2,160,879
------------ ------------
INVESTMENT INCOME, NET 31,774,860 22,192,803
------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Real estate properties ........................................................ -- 6,205,560
Marketable securities ......................................................... (147,448) (599,143)
------------ ------------
Net realized gain (loss) on investments (147,448) 5,606,417
------------ ------------
Net change in unrealized appreciation (depreciation) on:
Real estate properties ........................................................ 2,493,875 (4,882,840)
Marketable securities ......................................................... 3,109,665 (2,786,947)
------------ ------------
Net change in unrealized appreciation (depreciation) on investments 5,603,540 (7,669,787)
------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 5,456,092 (2,063,370)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS BEFORE MINORITY INTEREST 37,230,952 20,129,433
Minority interest in net increase in net assets
resulting from operations .................................................... -- (403,153)
------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $37,230,952 $19,726,280
============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Investment income net ............................................................ $ 31,774,860 $ 22,192,803
Net realized gain (loss) on marketable securities ................................ (147,448) 5,606,417
Net change in unrealized appreciation (depreciation) on investments .............. 5,603,540 (7,669,787)
Minority interest in net increase in net assets
resulting from operations ...................................................... -- (403,153)
-------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 37,230,952 19,726,280
-------------- --------------
FROM PARTICIPANT TRANSACTIONS
Premiums ......................................................................... 43,377,241 29,544,538
Net participant transfers from TIAA .............................................. 9,370,357 8,988,259
Net participant transfers from CREF Accounts ..................................... 55,246,632 87,899,065
Annuity and other periodic payments .............................................. (1,968,512) (1,077,854)
Withdrawals and death benefits ................................................... (14,003,383) (7,795,019)
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING
FROM PARTICIPANT TRANSACTIONS 92,022,335 117,558,989
-------------- --------------
NET INCREASE IN NET ASSETS 129,253,287 137,285,269
NET ASSETS
Beginning of year ................................................................ 1,695,482,428 1,196,366,887
-------------- --------------
End of period .................................................................... $1,824,735,715 $1,333,652,156
============== ==============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations ............................. $ 37,230,952 $ 19,726,280
Adjustments to reconcile net increase in net assets resulting from operations
to net cash used in operating activities:
Increase in investments ........................................................ (135,460,291) (134,015,337)
Decrease (increase) in other assets ............................................ 8,074,687 (1,735,084)
Increase in payable for securities transactions ................................ -- 57,240
Increase (decrease) in accrued real estate property level expenses and taxes ... (1,546,156) 1,018,315
Increase (decrease) in security deposits held .................................. 125,994 (144,559)
Decrease in minority interest .................................................. -- (2,980,205)
------------ ------------
NET CASH USED IN
OPERATING ACTIVITIES (91,574,814) (118,073,350)
------------ ------------
CASH FLOWS FROM PARTICIPANT TRANSACTIONS
Premiums ......................................................................... 43,377,241 29,544,538
Net participant transfers from TIAA .............................................. 9,370,357 8,988,259
Net participant transfers from CREF Accounts ..................................... 55,246,632 87,899,065
Annuity and other periodic payments .............................................. (1,968,512) (1,077,854)
Withdrawals and death benefits ................................................... (14,003,383) (7,795,019)
------------ ------------
NET CASH PROVIDED BY
PARTICIPANT TRANSACTIONS 92,022,335 117,558,989
------------ ------------
NET INCREASE (DECREASE) IN CASH 447,521 (514,361)
CASH
Beginning of year ................................................................ 617,599 572,343
------------ ------------
End of period .................................................................... $ 1,065,120 $ 57,982
============ ============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
TIAA REAL ESTATE ACCOUNT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--ORGANIZATION
The TIAA Real Estate Account ("Account") is a segregated investment account of
Teachers Insurance and Annuity Association of America ("TIAA") and was
established by resolution of TIAA's Board of Trustees on February 22, 1995,
under the insurance laws of the State of New York, for the purpose of funding
variable annuity contracts issued by TIAA. The Account commenced operations on
July 3, 1995. 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 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, The Townsend Group. Effective March 1,
2000, the former independent fiduciary, Institutional Property Consultants,
Inc., was replaced due to a change in its ownership. TIAA also provides all
portfolio accounting and related services for the Account. TIAA-CREF Individual
& Institutional Services, Inc. ("Services"), a subsidiary of TIAA, which is
registered with the Commission as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc., provides administrative and
distribution services pursuant to a Distribution and Administrative Services
Agreement with the Account.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements may require management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, income,
expenses and related disclosures. Actual results may differ from those
estimates. The following is a summary of the significant accounting policies
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.
7
<PAGE>
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES - (CONCLUDED)
VALUATION OF REAL ESTATE PROPERTIES: Investments in real estate properties are
stated at fair value, as determined in accordance with procedures approved by
the Investment Committee of the Board of Trustees and in accordance with the
responsibilities of the Board as a whole; accordingly, the Account does not
record depreciation. Fair value for real estate properties is defined as the
most probable price for which a property will sell in a competitive market under
all conditions requisite to a fair sale. Determination of fair value involves
subjective judgement because the actual market value of real estate can be
determined only by negotiation between the parties in a sales transaction. Real
estate properties owned by the Account are initially valued at their respective
purchase prices (including acquisition costs). Subsequently, independent
appraisers value each real estate property at least once a year. The independent
fiduciary must approve all independent appraisers used by the Account. The
independent fiduciary can also require additional appraisals if it believes that
a property's value has changed materially or otherwise to assure that the
Account is valued correctly. TIAA's appraisal staff performs a valuation review
of each real estate property on a quarterly basis and updates the property value
if it believes that the value of the property has changed since the previous
valuation review or appraisal. The independent fiduciary reviews and approves
any such valuation adjustments which exceed certain prescribed limits. TIAA
continues to use the revised value to calculate the Account's net asset value
until the next valuation review or appraisal.
VALUATION OF MARKETABLE SECURITIES: Equity securities listed or traded on any
United States national securities exchange are valued at the last sales price as
of the close of the principal securities exchange on which such securities are
traded or, if there is no sale, at the mean of the last bid and asked prices on
such exchange. Short-term money market instruments are stated at market value.
Portfolio securities for which market quotations are not readily available are
valued at fair value as determined in good faith under the direction of the
Investment Committee of the Board of Trustees and in accordance with the
responsibilities of the Board as a whole.
ACCOUNTING FOR INVESTMENTS: Real estate transactions are accounted for as of the
date on which the purchase or sale transactions for the real estate properties
close (settlement date). Rent from real estate properties consists of all
amounts earned under tenant operating leases, including base rent, recoveries of
real estate taxes and other expenses and charges for miscellaneous services
provided to tenants. Rental income is recognized in accordance with the billing
terms of the lease agreements. The Account bears the direct expenses of the real
estate properties owned. These expenses include, but are not limited to, fees to
local property management companies, property taxes, utilities, maintenance,
repairs, insurance and other operating and administrative costs. An estimate of
the net operating income earned from each real estate property is accrued by the
Account on a daily basis and such estimates are adjusted as soon as actual
operating results are determined. Realized gains and losses on real estate
transactions are accounted for under the specific identification method.
Securities transactions are accounted for as of the date the securities are
purchased or sold (trade date). Interest income is recorded as earned and, for
short-term money market instruments, includes accrual of discount and
amortization of premium. Dividend income is recorded on the ex-dividend date.
Realized gains and losses on securities transactions are accounted for on the
average cost basis.
FEDERAL INCOME TAXES: Based on provisions of the Internal Revenue Code, the
Account is taxed as a segregated asset account of TIAA. The Account should incur
no material federal income tax attributable to the net investment experience of
the Account.
8
<PAGE>
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 three months ended March
31, 1999 amounted to $186,808 for investment advisory 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--LEASES
The Account's real estate properties are leased to tenants under operating lease
agreements which expire on various dates through 2021. Aggregate minimum annual
rentals for the properties owned, excluding short-term residential leases, are
as follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
------------
<S> <C>
2000 $ 98,811,597
2001 88,314,162
2002 77,150,600
2003 66,532,834
2004 52,000,897
Thereafter 165,656,770
------------
Total $548,466,860
============
</TABLE>
Certain leases provide for additional rental amounts based upon the recovery of
actual operating expenses in excess of specified base amounts.
9
<PAGE>
NOTE 5--CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Selected condensed consolidated financial information for an Accumulation Unit
of the Account is presented below.
<TABLE>
<CAPTION>
FOR THE JULY 3, 1995
THREE MONTHS FOR THE YEARS ENDED (COMMENCEMENT
ENDED DECEMBER 31, OF OPERATIONS) TO
MARCH 31, ---------------------------------------------- DECEMBER 31,
2000 (1) 1999 1998 1997 1996 1995 (1)
-------- ---- ---- ---- ---- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Per Accumulation Unit Data:
Rental income................................. $ 3.402 $ 12.168 $ 10.425 $ 7.288 $ 6.012 $ 0.159
Real estate property
level expenses and taxes.................... 1.127 3.975 3.403 2.218 1.850 0.042
-------- -------- -------- -------- -------- --------
Real estate income, net 2.275 8.193 7.022 5.070 4.162 0.117
Dividends and interest........................ 0.559 2.292 3.082 2.709 3.309 2.716
-------- -------- -------- -------- -------- --------
Total income 2.834 10.485 10.104 7.779 7.471 2.833
Expense charges (2)........................... 0.249 0.853 0.808 0.580 0.635 0.298
-------- -------- -------- -------- -------- --------
Investment income, net 2.585 9.632 9.296 7.199 6.836 2.535
Net realized and unrealized
gain on investments......................... 0.483 1.164 0.579 3.987 1.709 0.031
-------- -------- -------- -------- -------- --------
Net increase in
Accumulation Unit Value..................... 3.068 10.796 9.875 11.186 8.545 2.566
Accumulation Unit Value:
Beginning of period......................... 142.968 132.172 122.297 111.111 102.566 100.000
-------- -------- -------- -------- -------- --------
End of period............................... $146.036 $142.968 $132.172 $122.297 $111.111 $102.566
======== ======== ======== ======== ======== ========
Total return................................... 2.15% 8.17% 8.07% 10.07% 8.33% 2.57%
Ratios to Average Net Assets:
Expenses (2)................................ 0.17% 0.63% 0.64% 0.58% 0.61% 0.30%
Investment income, net...................... 1.81% 7.13% 7.34% 7.25% 6.57% 2.51%
Portfolio turnover rate:
Real estate properties...................... 0% 4.46% 0% 0% 0% 0%
Securities.................................. 3.34% 27.68% 24.54% 7.67% 15.04% 0%
Thousands of Accumulation Units
outstanding at end of period................ 12,090 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 three months
ended March 31, 2000 would be $1.376 ($4.828, $4.211, $2.798 and $2.485 for
the years ended December 31, 1999, 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 three months ended March 31, 2000
would be 0.97% (3.58%, 3.32%, 2.82% and 2.39% for the years ended December
31, 1999, 1998, 1997 and 1996 respectively, and 0.34% for the period July
3, 1995 through December 31, 1995).
10
<PAGE>
NOTE 6--ACCUMULATION UNITS
Changes in the number of Accumulation Units outstanding were as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS YEAR
ENDED ENDED
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
(Unaudited)
<S> <C> <C>
Accumulation Units:
Credited for premiums.................................. 300,183 918,728
Credited for transfers, net disbursements and
Amounts applied to the Annuity Fund.................. 302,186 1,734,721
Outstanding:
Beginning of year.................................... 11,487,360 8,833,911
---------- ----------
End of period........................................ 12,089,729 11,487,360
========== ==========
</TABLE>
NOTE 7--COMMITMENTS
During the normal course of business, the Account enters into discussions and
agreements to purchase or sell real estate properties. As of March 31, 2000,
the Account had one outstanding commitment to purchase a real estate property
for approximately $144.5 million. In addition, during April of 2000 the
Account purchased one real estate property for approximately $19.6 million
and entered into a commitment to purchase another property for approximately
$15.6 million.
11
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENT OF INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
REAL ESTATE PROPERTIES--72.27%
LOCATION / DESCRIPTION VALUE
- ---------------------- -----
<S> <C>
ARIZONA:
Biltmore Commerce Center - Office building................................. $ 38,511,506
Southbank Building - Office building....................................... 13,000,000
CALIFORNIA:
88 Kearny Street - Office building ........................................ 72,847,558
Eastgate Distribution Center - Industrial building......................... 13,300,000
Larkspur Courts - Apartments............................................... 56,100,000
Ontario Industrial Properties - Industrial building........................ 63,000,000
Westcreek - Apartments ................................................... 15,700,000
COLORADO:
Arapahoe Park East - Industrial building................................... 11,850,000
The Lodge at Willow Creek - Apartments..................................... 30,500,000
Monte Vista - Apartments .................................................. 21,000,000
FLORIDA:
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....................................... 39,200,000
Westinghouse Facility - Industrial building................................ 6,200,000
ILLINOIS:
Columbia Center III - Office building...................................... 42,300,000
Glenpointe Business Park - Industrial building............................. 16,108,000
Parkview Plaza - Office building........................................... 52,100,000
Rockrun Business Park - Industrial building................................ 9,350,000
Rolling Meadows - Shopping center.......................................... 11,900,000
Woodcreek Business Park - Industrial building.............................. 7,000,000
IOWA:
Interstate Acres - Industrial building..................................... 13,706,417
KENTUCKY:
IDI Kentucky Portfolio - Industrial building............................... 25,400,000
MARYLAND:
FedEx Distribution Facility - Industrial building.......................... 7,700,000
Longview Executive Park - Office building.................................. 28,400,000
Saks Distribution Center - Industrial building............................. 30,600,000
MASSACHUSETTS:
Two Newton Center - Office building........................................ 20,300,000
MICHIGAN:
Indian Creek - Apartments.................................................. 17,100,000
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.................... 17,049,875
12
<PAGE>
NEW YORK:
780 Third Avenue - Office building.......................................... $ 163,000,000
The Colorado - Apartments................................................... 56,539,875
NORTH CAROLINA:
Lynnwood Collection - Shopping center...................................... 7,700,000
Millbrook Collection - Shopping center..................................... 7,300,000
OHIO:
Bent Tree - Apartments .................................................... 14,700,000
Columbus Portfolio - Office building....................................... 33,800,000
Northmark Business Center - Office building................................ 13,000,000
OREGON:
Five Centerpointe - Office building........................................ 18,197,727
PENNSYLVANIA:
Lincoln Woods - Apartments................................................. 22,950,000
TEXAS:
Butterfield Industrial Park - Industrial building.......................... 4,850,000(1)
The Crest at Shadow Mountain - Apartments.................................. 10,000,000
The Legends at Chase Oaks - Apartments..................................... 27,200,000
UTAH:
USF&G Building - Office building........................................... 8,700,000
VIRGINIA:
Fairgate at Ballston - Office building..................................... 30,500,000
Monument Place - Office building........................................... 36,100,000
River Oaks - Shopping center............................................... 11,900,000
WASHINGTON:
The Bay Court at Harbour Pointe - Apartments............................... 35,093,738
-------------
TOTAL REAL ESTATE PROPERTIES (Cost $1,255,567,548)........................ 1,316,914,696
-------------
</TABLE>
(1) Leasehold interest only.
MARKETABLE SECURITIES--27.73%
<TABLE>
<CAPTION>
REAL ESTATE INVESTMENT TRUSTS--4.60%
SHARES ISSUER VALUE
- ------ ------ -----
<S> <C> <C>
89,900 AMB Property Corporation Series A ................................ 1,983,419
100,000 Archstone Communities Trust ...................................... 1,993,750
19,200 Avalon Bay Communities, Inc. Pfd Series F......................... 424,800
46,800 Boston Properties, Inc............................................ 1,488,825
102,400 Bradley Real Estate, Inc.......................................... 1,747,200
130,400 Brandywine Realty Trust........................................... 2,233,100
200,000 Carramerica Realty Corporation, Pfd Series B...................... 3,800,000
58,000 Centerpoint Properties Corp....................................... 2,113,375
23,900 Colonial Properties Trust......................................... 567,625
133,400 Cornerstone Properties, Inc....................................... 2,326,163
108,100 Corporate Office Properties Trust, Inc............................ 885,069
90,000 Developers Diversified Realty Corp................................ 1,704,375
221,300 Duke-Weeks Realty Corp............................................ 4,232,363
214,100 Equity Office Properties Trust.................................... 5,379,262
150,000 Equity Office Properties Trust Pfd Series A....................... 3,384,375
121,700 Equity Residential Properties Trust............................... 4,890,819
100,000 Equity Residential, Pfd Series G.................................. 1,975,000
100,000 Equity Residential Properties, Pfd Series L....................... 1,825,000
25,000 Federal Realty Investment Trust Pfd............................... 431,250
100,000 First Industrial Realty Trust, Inc. Pfd........................... 1,943,750
98,300 Gables Residential Trust, Pfd Series A............................ 1,800,119
74,900 Hospitality Properties Trust...................................... 1,516,725
13
<PAGE>
149,800 Macerich Company.................................................. $ 3,089,625
50,000 Manufactured Home Communities, Inc. .............................. 1,156,250
25,159 New Plan Excel Realty Trust ...................................... 345,936
25,000 Prologis Trust ................................................... 481,250
19,900 Prologis Trust-Pfd Series A ...................................... 442,775
127,700 Public Storage, Inc. ............................................. 2,681,700
93,600 Rouse Company .................................................... 1,977,300
280,900 Simon Property Group, Inc. ....................................... 6,741,600
55,000 Spieker Properties, Inc. ......................................... 2,447,500
174,455 Starwood Financial Trust ......................................... 3,074,769
26,000 Starwood Financial, Inc Series C Pfd. ............................ 406,250
140,000 Starwood Hotels & Resorts Worldwide .............................. 3,675,000
35,500 Storage USA, Inc. ................................................ 1,087,187
50,000 Sun Communities, Inc. ............................................ 1,443,750
100,400 Taubman Centers, Inc. ............................................ 1,116,950
35,000 Taubman Centers, Inc Pfd Series A ................................ 595,000
62,800 United Dominion Realty Trust, Inc. ............................... 1,138,250
112,100 Urban Shopping Centers, Inc. ..................................... 3,257,906
--------------
TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost $101,828,537)........................ 83,805,362
--------------
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BONDS-- 0.54%
PRINCIPAL ISSUER, COUPON AND MATURITY DATE VALUE
- --------- -------------------------------- -----
<S> <C> <C>
$ 5,000,000 Avco Financial Services, Inc.
5.75% 01/23/01.................................................. 4,940,950
5,000,000 Ford Motor Credit Co.
5.75% 01/25/01.................................................. 4,940,250
--------------
TOTAL CORPORATE BONDS (Cost $10,034,650)....................................... 9,881,200
--------------
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT AGENCIES--1.07%
PRINCIPAL ISSUER, COUPON AND MATURITY DATE VALUE
- --------- -------------------------------- -----
<S> <C> <C>
18,340,000 Federal Home Loan Mortgage Corporation
5.77% 04/18/00.................................................. 18,285,530
1,160,000 Federal Home Loan Mortgage Corporation
5.90% 04/18/00.................................................. 1,156,555
--------------
TOTAL GOVERNMENT AGENCIES (Amortized cost $19,446,797)......................... 19,442,085
--------------
</TABLE>
<TABLE>
<CAPTION>
COMMERCIAL PAPER--21.52%
PRINCIPAL ISSUER, COUPON AND MATURITY DATE VALUE
- --------- -------------------------------- -----
<S> <C> <C>
20,000,000 American Express Credit Corp
5.82% 04/07/00.................................................. 19,976,356
13,125,000 American Telephone & Telegraph Co
5.94% 04/10/00.................................................. 13,102,833
14,200,000 Corporate Asset Funding Corp, Inc.
5.85% 04/19/00.................................................. 14,154,733
7,500,000 CVS Corp
6.22% 04/05/00.................................................. 7,493,438
1,230,000 Emerson Electric Co
5.87% 05/02/00................................................... 1,223,396
6,305,000 Enterprise Funding Corporation
6.07% 04/03/00................................................... 6,301,805
28,044,000 Enterprise Funding Corporation
6.37% 04/03/00................................................... 28,029,790
5,850,000 Equilon Enterprises LLC
5.82% 04/03/00.................................................. 5,847,036
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL ISSUER, COUPON AND MATURITY DATE VALUE
- --------- -------------------------------- -----
<S> <C> <C>
$34,200,000 Ford Motor Credit Corp
6.15% 04/04/00.................................................. $ 34,176,895
38,550,000 General Electric Capital Corp
6.04% 04/10/00.................................................. 38,484,893
24,300,000 General Mills
6.07% 04/07/00.................................................. 24,271,273
6,500,000 General Mills
6.05% 04/10/00.................................................. 6,489,022
10,000,000 GTE Corp
5.89% 04/06/00.................................................. 9,989,867
19,235,000 GTE Corp
5.91% 04/10/00.................................................. 19,202,514
4,800,000 GTE Funding Inc
6.05% 04/10/00.................................................. 4,791,893
22,110,000 Honeywell, Inc
5.9% 05/08/00................................................... 21,969,036
13,125,000 J.P. Morgan & Co
5.85% 04/14/00.................................................. 13,093,967
13,640,000 Motiva Enterprises LLC
6.07% 04/07/00.................................................. 13,623,875
24,500,000 National Fuel Gas Co
6.07% 04/17/00.................................................. 24,428,847
14,745,000 Park Avenue Receivables Corp
5.87% 04/10/00.................................................. 14,720,097
18,474,000 Province of Ontario
5.91% 07/07/00.................................................. 18,165,721
16,045,000 Receivable Capital Corp
5.87% 04/20/00.................................................. 15,991,159
23,000,000 Salomon Smith Barney Holdings Inc
5.85% 04/10/00.................................................. 22,961,155
13,800,000 The Stanley Works
5.88% 05/09/00.................................................. 13,709,702
TOTAL COMMERCIAL PAPER (Amortized cost $392,291,703)......................... 392,199,303
--------------
TOTAL MARKETABLE SECURITIES (Cost $523,601,687)................................ 505,327,950
--------------
TOTAL INVESTMENTS--100.00% (Cost $1,779,169,235)............................... $1,822,242,646
==============
</TABLE>
See notes to consolidated financial statements.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
At March 31, 2000, the TIAA Real Estate Account owned a total of 52 real
estate properties, including 17 office properties, 16 industrial properties, 14
apartment complexes, and 5 neighborhood shopping centers, representing 72.3% of
the Account's total investment portfolio. The Account also held investments in
commercial paper, representing 21.5% of the portfolio, real estate investment
trusts (REITs), representing 4.6% of the portfolio, U.S. government agencies,
representing 1.1% of the portfolio, and corporate bonds, representing 0.5% of
the portfolio.
The Account did not purchase or sell any properties during the first
quarter of 2000. However, since the end of that quarter, the Account purchased
an industrial property for approximately $19.6 million. The Account also has an
outstanding commitment to purchase an office building for approximately $144.5
million and an industrial property for approximately $15.6 million. The Account
continues to pursue suitable property acquisitions, and is currently in various
stages of negotiations with a number of prospective sellers. While attractive
acquisition prospects are available in the current market, significant
competition exists for the most desirable properties.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999:
The Account's total net return was 2.15% for the three months ended March
31, 2000 and 1.57% for the same quarter in 1999. The Account's net investment
income, after deduction of all expenses, was $31,774,860 for the three months
ended March 31, 2000 and $22,192,803 for the three months ended March 31, 1999,
a 43% increase. This increase was the result of a 37% increase in net assets and
a 59% increase in the Account's real estate holdings during the period from
March 31, 1999 to March 31, 2000.
The Account had net realized and unrealized gains on investments of
$5,456,092 for the three month period ended March 31, 2000 compared with net
realized and unrealized losses of $2,063,370 for the same period in 1999. This
difference was due, in part, to the fact that the Account's marketable
securities (primarily its REIT holdings) increased in value in the first quarter
of 2000, in contrast to the first quarter of 1999 where the Account had
substantial realized and unrealized losses on its marketable securities. Also,
the Account's real estate holdings appreciated more during the first quarter of
2000 than in the same period of 1999.
The Account's real estate holdings generated approximately 80% and 74% of
the Account's total investment income (before deducting Account level expenses)
during the three months ended March 31, 2000 and March 31, 1999, respectively.
The remaining portion of the Account's total investment income was generated by
investments in marketable securities.
16
<PAGE>
Gross real estate rental income was $41,821,067 for the three months ended
March 31, 2000 and $26,198,891 for the same period in 1999. This increase was
primarily due to the increase in the number of properties owned by the Account -
from 46 properties at the end of the first quarter of 1999 to 52 properties at
the end of the first quarter of 2000. Interest and dividend income on the
Account's marketable securities investments increased from $6,408,467 for the
first quarter of 1999 to $6,872,769 for the first quarter of 2000. This increase
was primarily due to the fact that the Account had more money invested in
marketable securities as the Account's net asset base grew.
Total property level expenses for the three months ended March 31, 2000
were $13,863,320, of which $8,971,080 represented operating expenses and
$4,892,240 were attributable to real estate taxes. Total property level expenses
for the three months ended March 31, 1999 were $8,253,676, of which $5,580,625
were attributable to operating expenses and $2,673,051 were attributable to real
estate taxes. The increase in property level expenses reflected the increased
number of properties in the Account.
The Account also incurred expenses for the three months ended March 31,
2000 and 1999 of $1,538,682 and $1,044,886, respectively, for investment
advisory services, $1,043,496 and $805,090, respectively, for administrative and
distribution services, and $473,478 and $310,903, 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.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000 and 1999, the Account's liquid assets (i.e., its cash,
REITs, short- and intermediate-term investments, and government securities) had
a value of $506,393,070 and $517,087,027, respectively. We plan to use much of
the Account's liquid assets, exclusive of the REITs, to purchase additional
suitable real estate properties. The remaining liquid assets, exclusive of the
REITs, will continue to be primarily invested in marketable securities 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.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material current or pending legal proceedings that the Account
is a party to, or to which the Account's assets are subject.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
(3) (A) Charter of TIAA (as amended) *
(B) Bylaws of TIAA (as amended) **
(4) (A) Forms of RA, GRA, GSRA, SRA, and IRA Real Estate Account
Endorsements* and Keogh Contract***
(B) Forms of Income-Paying Contracts *
(10) (A) Independent Fiduciary Agreement by and among TIAA, the Registrant,
and The Townsend Group***
(B) Custodial Services Agreement by and between TIAA and Morgan
Guaranty Trust Company of New York with respect to the Real
Estate Account *
(C) Distribution and Administrative Services Agreement by and between
TIAA and TIAA-CREF Individual & Institutional Services, Inc. (as
amended) (filed previously as Exhibit (1)) *
18
<PAGE>
(27) Financial Data Schedule of the Account's Financial Statements for the
three months ended March 31, 2000
- -------------------
* - Previously filed and incorporated herein by reference to Post-Effective
Amendment No. 2 to the Account's Registration Statement on Form S-1 filed April
30, 1996 (File No. 33-92990).
** - Previously filed and incorporated herein by reference to the Account's Form
10-Q Quarterly Report for the period ended September 30, 1997 filed November 13,
1997 (File No. 33-92990).
*** - Previously filed and incorporated herein by reference to Post-Effective
Amendment No. 6 to the Account's Registration Statement on Form S-1 filed April
26, 2000 (File No. 333-22809).
(b) REPORTS ON 8-K. The Account did not file any reports on Form 8-K during
the first quarter of 2000.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: May 12, 2000
TIAA REAL ESTATE ACCOUNT
By: TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Peter C. Clapman
------------------------------
Peter C. Clapman
Senior Vice President and
Chief Counsel, Investments
DATE: May 12, 2000
By: /s/ Richard L. Gibbs
------------------------------
Richard L. Gibbs
Executive Vice President
(Principal Accounting Officer)
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<INVESTMENTS-AT-COST> 1,779,169,235
<INVESTMENTS-AT-VALUE> 1,822,242,646
<RECEIVABLES> 0
<ASSETS-OTHER> 23,983,074
<OTHER-ITEMS-ASSETS> 1,065,120
<TOTAL-ASSETS> 1,847,290,840
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,555,125
<TOTAL-LIABILITIES> 22,555,125
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 12,089,729
<SHARES-COMMON-PRIOR> 11,487,360
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,824,735,715
<DIVIDEND-INCOME> 1,631,830
<INTEREST-INCOME> 5,240,939
<OTHER-INCOME> 27,957,747
<EXPENSES-NET> (3,055,656)
<NET-INVESTMENT-INCOME> 31,774,860
<REALIZED-GAINS-CURRENT> (147,448)
<APPREC-INCREASE-CURRENT> 5,603,540
<NET-CHANGE-FROM-OPS> 37,230,952
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 602,369
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 129,253,287
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,538,682
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,055,656
<AVERAGE-NET-ASSETS> 1,751,553,666
<PER-SHARE-NAV-BEGIN> 142.968
<PER-SHARE-NII> 2.585
<PER-SHARE-GAIN-APPREC> 0.483
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 146.036
<EXPENSE-RATIO> 0.170
</TABLE>
