10-K 1 c40613_10k.htm
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, 2005 
 
[ ]    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, 333-22809, 333-59778, 333-83964, 333-113602,
and 333-121493

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

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act)                   
Yes _____              No X

Aggregate market value of voting stock held by non-affiliates: Not Applicable

Documents Incorporated by Reference: None


PART I

ITEM 1. BUSINESS.

     General. The TIAA Real Estate Account (the “Real Estate Account”, the “Account” or the “Registrant”) was established on February 22, 1995, as a separate investment account of Teachers Insurance and Annuity Association of America (“TIAA”), a New York insurance company, by resolution of TIAA’s Board of Trustees. The Account, which invests mainly in real estate and real estate-related investments, is a variable annuity investment option offered through individual, group and tax-deferred annuity contracts available to employees of educational and research institutions. The Account commenced operations on July 3, 1995, 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 invests in publicly-traded securities and other investments that are easily converted to cash to make redemptions, purchase or improve properties or cover 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 equity securities. 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, including commercial mortgage backed securities and other similar instruments.

     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.

2


     Net Assets and Portfolio Investments. As of December 31, 2005, the Account’s net assets totaled $10,548,711,102. At December 31, 2005, the Account held a total of 109 real estate properties (including its interests in eleven real estate-related joint ventures), representing 80.10% of the Account’s total investment portfolio (“Total Investments”). As of that date, the Account also held investments in real estate equity securities, representing 3.72% of Total Investments, commercial mortgage backed securities (CMBSs), representing 0.19% of Total Investments, real estate limited partnerships, representing 1.71% of Total Investments, and commercial paper representing 11.67% of Total Investments and government bonds, representing 2.61% of the Total Investments.

     Risk Factors. The Account’s assets and income (particularly its real estate assets and rental income) can be affected by a variety of risk factors. These risks are more fully described under Item 7A of this report and in the Account’s prospectus.

     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, LLC (“Services”), a subsidiary of TIAA, provide all portfolio accounting, custodial, distribution, administrative and related services for the Account at cost.

     Available Information. The Account’s annual report on Form 10-K, any quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports, filed by the Account with the Securities and Exchange Commission on or after the date hereof, can be accessed free of charge at www.tiaa-cref.org.

ITEM 2. PROPERTIES.

THE PROPERTIES—IN GENERAL

     In the table below you will find general information about each of the Account’s portfolio properties as of December 31, 2005.

       
                Annual Avg.       
       
       
Rentable 
      Base Rent       
       
Year
    Year   
Area 
 
Percent
  Per Leased   
Market
Property     Location   
Built
    Purchased   
(Sq. ft.)(1) 
 
Leased
  Sq. Ft.(2)   
Value(3)

 

 







 
OFFICE PROPERTIES
       
                       
1001 Pennsylvania Ave
    Washington, DC   
1987
    2004    802,390    99 %    $32.69    $ 502,993,710 (4) 
1 & 7 Westferry Circus 
    London, UK   
1992, 1993
    2005    395,784    82 %    $25.73      373,116,817 (4)(5) 
50 Fremont Street     San Francisco, CA   
1983
    2004    817,412    90 %    $30.65      373,010,003 (4) 
IDX Tower     Seattle, WA   
2002
    2004    845,533    97 %    $27.39      370,000,000 (4) 
Four Oaks Place     Houston, TX   
1983
    2004    1,762,616    91 %    $18.63      295,239,109  
99 High Street     Boston, MA   
1971
    2005    731,204    90 %    $28.99      276,266,900 (4) 
Lincoln Centre     Dallas, TX   
1984
    2005    1,635,352    85 %    $16.32      255,311,299  
780 Third Avenue     New York, NY   
1984
    1999    487,501    88 %    $41.60      230,000,000  
1900 K Street     Washington, DC   
1996
    2004    342,884    100 %    $37.20      230,000,000  
Embarcadero Center West
    San Francisco, CA   
1988
    2005    472,261    87 %    $33.91      205,965,261  
701 Brickell     Miami, FL   
1986(6)
    2002    677,667    91 %    $27.59      201,173,724  
161 North Clark Street(7)
    Chicago, IL   
1992
    2003    1,010,520    94 %    $16.14      175,578,714  

3


       
                Annual Avg.       
       
       
Rentable 
      Base Rent       
       
Year
    Year   
Area 
 
Percent
  Per Leased   
Market
Property    Location   
Built
    Purchased   
(Sq. ft.)(1) 
 
Leased
  Sq. Ft.(2)   
Value(3)



 







U.S. Bank Plaza    Sacramento, CA   
1992
    2005    481,885    90 %    $22.96    $  159,000,000  
Ten & Twenty Westport Road    Wilton, CT   
1974(6); 2001
    2001    538,840    100 %    $27.84      157,000,000  
Mellon Financial Center       
                       
   at One Boston Place(8)    Boston, MA   
1970(6)
    2002    785,415    97 %    $38.79      149,723,498  
Yahoo! Center(9)    Santa Monica, CA   
1984
    2004    1,082,952    98 %    $30.59      138,531,366  
Urban Centre    Tampa, FL   
1984, 1987
    2005    549,375    90 %    $19.05      106,007,400  
Inverness Center    Birmingham, AL   
1980-1985
    2005    903,857    94 %    $10.87      98,090,987  
Morris Corporate Center III    Parsippany, NJ   
1990
    2000    525,154    64 %    $11.08      97,400,000  
Prominence in Buckhead(7)    Atlanta, GA   
1999
    2003    424,309    97 %    $27.01      97,142,406  
Treat Towers(7)    Walnut Creek, CA   
1999
    2003    367,313    96 %    $32.46      93,964,192  
88 Kearny Street    San Francisco, CA   
1986
    1999    228,470    84 %    $34.94      81,567,474  
Oak Brook Regency Towers    Oakbrook, IL   
1977(6)
    2002    402,318    77 %    $11.93      73,400,000  
1015 15th Street    Washington, DC   
1978(6)
    2001    184,825    99 %    $32.76      73,121,166  
Centerside I    San Diego, CA   
1982
    2004    205,137    77 %    $23.15      66,000,000  
8270 Greensboro Drive    McLean, VA   
2000
    2005    157,980    97 %    $32.17      60,200,000  
Sawgrass Office Portfolio    Sunrise, FL   
1997-2000
    1997,                   
       
    1999-2000    344,009    93 %    $13.35      59,700,000  
West Lake North Business Park    Westlake Village, CA   
2000
    2004    198,558    100 %    $26.26      57,600,000  
Parkview Plaza(10)    Oakbrook, IL   
1990
    1997    263,912    65 %    $10.43      54,500,000  
Monument Place    Fairfax, VA   
1990
    1999    221,538    97 %    $22.29      53,000,000  
3 Hutton Centre    Santa Ana, CA   
1985(6)
    2003    197,817    99 %    $24.74      48,349,580  
Capitol Place    Sacramento, CA   
1988(6)
    2003    151,803    95 %    $28.12      48,000,000  
One Virginia Square    Arlington, VA   
1999
    2004    117,967    100 %    $33.16      47,000,000  
The Pointe on Tampa Bay    Tampa, FL   
1982(6)
    2002    249,215    97 %    $22.12      44,711,876  
Maitland Promenade One    Maitland, FL   
1999
    2000    227,814    89 %    $13.55      37,817,891  
4200 West Cypress Street    Tampa, FL   
1989
    2003    220,579    91 %    $18.80      36,691,519  
Fairgate at Ballston(10)    Arlington, VA   
1988
    1997    137,117    64 %    $16.75      35,300,000  
Tysons Executive Plaza II(11)    McLean, VA   
1988
    2000    259,614    85 %    $18.73      34,032,806  
Columbia Centre III    Rosemont, IL   
1989
    1997    238,696    70 %    $  7.93      28,700,000  
10 Waterview Boulevard    Parsippany, NJ   
1984
    1999    209,553    64 %    $13.07      27,500,000  
9 Hutton Centre    Santa Ana, CA   
1990
    2001    148,265    84 %    $16.48      26,746,837  
Columbus Portfolio       
        259,626    89 %    $10.32      23,000,000  
   Metro South Building 
  Dublin, OH   
1997
    1999    90,726               
   Vision Service Plan Building 
  Eaton, OH   
1997
    1999    50,000               
   One Metro Place    Dublin, OH   
1998
    2001    118,900               
Needham Corporate Center    Needham, MA   
1987
    2001    138,684    50 %    $10.60      17,143,612  
371 Hoes Lane    Piscataway, NJ   
1986
    1997    136,084    86 %    $14.07      11,700,000  
Batterymarch Park II    Quincy, MA   
1986
    2001    104,718    46 %    $  8.32      11,472,283  




 
Subtotal—Office Properties       
                       
Average Percent Leased       
            87 %        $  5,642,770,430  




 

4


       
   
           
Annual Avg. 
     
       
   
   
Rentable
       
Base Rent 
     
       
Year
   
Year
   
Area
   
Percent
 
Per Leased 
 
Market
Property    Location   
Built
   
Purchased
   
(Sq. ft.)(1)
   
Leased
 
Sq. Ft.(2) 
 
Value(3)



 
 








 
INDUSTRIAL PROPERTIES 
     
   
           
       
Ontario Industrial Portfolio 
     
   
    3,584,769     100 %   
2.97    $  230,000,000 (4) 
   Timberland Building    Ontario, CA   
1998
   
1998
    414,435        
       
   5200 Airport Drive    Ontario, CA   
1997
   
1998
    404,500        
       
   1200 S. Etiwanda Ave.    Ontario, CA   
1998
   
1998
    223,170        
       
   Park Mira Loma West    Mira Loma, CA   
1998
   
1998
    557,500        
       
   Wineville Center Buildings    Mira Loma, CA   
1999
   
2000
    1,099,112        
       
   Harrell Street    Mira Loma, CA   
1998
   
2004
    886,052        
       
Dallas Industrial Portfolio    Dallas and   
1997-
   
2000-
    3,886,541     67 %   
1.96      146,000,000  
   (formerly Parkwest Center)    Coppell, TX   
2001
   
2002
           
       
Southern California RA       
   
           
       
   Industrial Portfolio    Los Angeles, CA   
1982
   
2004
    920,028     92 %   
4.97      89,017,793  
Cabot Industrial Portfolio    Rancho   
2000-2002
   
2000; 2001;
   
1,214,475 
    100 %   
$ 
3.54      77,000,000  
    Cucamonga, CA   
2000; 2001;
   
           
       
       
2004
   
           
       
Chicago CalEast       
   
           
       
   Industrial Portfolio    Chicago, IL   
1974-2005
   
2003
    1,493,706     90 %   
$ 
4.51      74,622,731  
Atlanta Industrial Portfolio 
  Lawrenceville, GA   
1996-1999
   
2000
    1,945,693     90 %   
$ 
2.26      73,825,000  
Chicago Industrial Portfolio 
  Chicago and   
1997-
   
1998;
    1,452,974     86 %   
$ 
3.28      72,000,000  
   (consolidation of Rockrun,    Joliet, IL   
2000
   
2000
           
       
   Glen Pointe and Woodcreek       
   
           
       
   Business Parks)       
   
           
       
IDI National Portfolio(12)    Various, U.S.   
1999-2004
   
2004
    3,655,671     95 %   
$ 
2.86      66,871,766  
Rainier Corporate Park    Fife, WA   
1991-1997
   
2003
    1,104,646     100 %   
$ 
3.77      64,273,372  
Regal Logistics Campus    Seattle, WA   
1999-2004
   
2005
    968,535     100 %   
$ 
4.15      63,103,879  
Northern California RA       
   
           
       
   Industrial Portfolio    Oakland, CA   
1981
   
2004
    741,456     89 %   
$ 
4.02      62,325,024  
IDI Kentucky Portfolio       
   
    1,437,022     99 %   
$ 
2.96      58,500,000  
   Building C    Hebron, KY   
1998
   
1998
    520,000        
       
   Building D    Hebron, KY   
1998
   
1998
    184,800        
       
   Building E    Hebron, KY   
2000
   
2000
    207,222        
       
   Building J    Hebron, KY   
2000
   
2000
    525,000        
       
South River Road Industrial 
  Cranbury, NJ   
1999
   
2001
    626,071     100 %   
$ 
4.14      55,000,000  
Memphis CalEast       
   
           
       
   Industrial Portfolio    Memphis, TN   
1996-1997
   
2003
    1,600,232     100 %   
$ 
2.61      54,000,000  
GE Appliance East Coast       
   
           
       
   Distribution Facility    Perryville, MD   
2003
   
2005
    1,004,000     100 %   
$ 
2.82      46,470,475  
Shawnee Ridge       
   
           
       
   Industrial Portfolio    Atlanta, GA   
2000-2005
   
2005
    775,694     100 %   
$ 
3.20      44,418,860  
New Jersey CalEast       
   
           
       
   Industrial Portfolio    Cranbury, NJ   
1982-1989
   
2003
    807,773     100 %   
$ 
3.67      42,000,000  
East North Central RA       
   
           
       
   Industrial Portfolio    Chicago, IL   
1978
   
2004
    541,266     90 %   
$ 
4.64      37,717,159  
Northeast RA       
   
           
       
   Industrial Portfolio    Boston, MA   
2000
   
2004
    384,000     100 %   
$ 
6.33      29,000,000  
Centre Pointe and Valley View 
  Los Angeles   
   
           
       
   
   County, CA 
 
1965-1989
   
2004
    307,685     88 %   
$ 
5.10      28,000,000  

5


       
               
Annual Avg. 
     
       
       
Rentable
     
Base Rent 
     
       
Year
    Year   
Area
 
Percent
 
Per Leased 
 
Market
Property    Location   
Built
    Purchased   
(Sq. ft.)(1)
 
Leased
 
Sq. Ft.(2) 
 
Value(3)



 









Summit Distribution Center    Memphis, TN   
2002
    2003    708,532     100 %   
$ 
2.52    $  25,900,000  
Konica Photo       
               
       
   Imaging Headquarters 
  Mahwah, NJ   
1999
    1999    168,000     100 %   
$ 
10.93      25,300,000  
Eastgate Distribution Center    San Diego, CA   
1996
    1997    200,000     100 %   
$ 
3.67      22,000,000  
Northwest RA       
               
       
   Industrial Portfolio    Seattle, WA   
1996
    2004    312,321     100 %   
$ 
3.58      19,700,000  
UPS Distribution Facility    Fernley, NV   
1998
    1998    256,000     100 %   
$ 
4.07      15,000,000  
Landmark at Salt Lake City       
               
       
   (Building #4)    Salt Lake City, UT   
2000
    2000    328,508     85 %   
$ 
2.70      14,700,000  
Mideast RA       
               
       
   Industrial Portfolio    Wilmington, DE   
1989
    2004    266,141     72 %   
$ 
3.35      14,258,555  
FEDEX Distribution Facility    Crofton, MD   
1998
    1998    110,842     100 %   
$ 
7.18      8,500,000  
Mountain RA       
               
       
   Industrial Portfolio    Phoenix, AZ   
1989
    2004    136,704     100 %   
$ 
2.82      5,754,652  
Butterfield Industrial Park    El Paso, TX   
1980-81
    1995    183,510     100 %   
$ 
2.35      4,618,955  




 
 
Subtotal—Industrial Properties       
            95 %   
    $  1,569,878,221  
Average Percent Leased




 
             
RETAIL PROPERTIES       
               
       
The Florida Mall(13)    Orlando, FL   
1986(6)
    2002    921,370 (14)    99 %   
$ 
37.29      208,013,192  
West Town Mall(13)    Knoxville, TN   
1972(6)
    2002    684,777 (14)    96 %   
$ 
17.20      112,650,844  
Mazza Gallerie    Washington, DC   
1975
    2004    293,935     97 %   
$ 
18.13      86,001,109  
Westwood Marketplace    Los Angeles, CA   
1950(15)
    2002    202,201     100 %   
$ 
27.55      86,000,000  
Miami International Mall(13)    Miami, FL   
1982(6)
    2002    290,299 (14)    94 %   
$ 
28.27      82,290,482  
Plainsboro Plaza    Plainsboro, NJ   
1987
    2005    218,653     92 %   
$ 
12.10      50,745,252  
The Market at Southpark    Littleton, CO   
1988
    2004    190,080     89 %   
$ 
10.74      34,001,746  
Suncrest Village    Orlando, FL   
1987
    2005    93,358     99 %   
$ 
10.93      16,400,000  
Plantation Grove    Ocoee, FL   
1995
    1995    73,655     100 %   
$ 
11.64      13,800,000  




 
Subtotal—Retail Properties       
            96 %   
      689,902,625  
Average Percent Leased 




 
       
               
       


 
Subtotal—Commercial Properties   
               
    $  7,902,551,276  


 
RESIDENTIAL PROPERTIES(16)   
               
       
Palomino Park Apartments    Denver, CO   
1996-2001
    2005    NA     92 %   
NA      176,232,394  
The Legacy at       
               
       
   Westwood Apartments 
  Los Angeles, CA   
2001
    2002    NA     98 %   
NA      100,000,000  
Larkspur Courts    Larkspur, CA   
1991
    1999    NA     95 %   
NA      86,000,000  
The Colorado    New York, NY   
1987
    1999    NA     99 %   
NA      85,048,163  
Ashford Meadows Apartments    Herndon, VA   
1998
    2000    NA     94 %   
NA      78,904,526  
1050 Lenox Park    Atlanta, GA   
2001
    2005    NA     97 %   
NA      71,000,000  
Regents Court Apartments    San Diego, CA   
2001
    2002    NA     100 %   
NA      62,500,000  
The Caruth    Dallas, TX   
1999
    2005    NA     93 %   
NA      61,200,000  
South Florida    Boca Raton and   
               
       
   Apartment Portfolio    Plantation, FL   
1986
    2001    NA     98 %   
NA      56,400,000  
Glenridge Walk    Atlanta, GA   
1996, 2001
    2005    NA     95 %   
NA      45,300,000  
The Reserve at Sugarloaf    Duluth, GA   
2000
    2005    NA     97 %   
NA      44,800,000 (4) 
Lincoln Woods Apartments    Lafayette Hill, PA   
1991
    1997    NA     99 %   
NA      35,528,316  

6


                       
Annual Avg. 
     
               
Rentable 
     
Base Rent 
     
        Year    Year   
Area 
 
Percent
 
Per Leased 
 
Market
Property    Location    Built    Purchased   
(Sq. ft.)(1) 
 
Leased
 
Sq. Ft.(2) 
 
Value(3)











The Maroneal    Houston, TX    1998    2005    NA    97 %    NA    $  35,000,000  
Alexan Buckhead    Atlanta, GA    2002    2002    NA    99 %    NA      34,800,000  
The Lodge at Willow Creek    Denver, CO    1997    1997    NA    96 %    NA      34,600,000  
Westcreek Apartments    Westlake Village, CA    1988    1997    NA    99 %    NA      30,939,671  
Golfview Apartments    Lake Mary, FL    1998    1998    NA    98 %    NA      30,835,506  
Kenwood Mews Apartments    Burbank, CA    1991    2001    NA    100 %    NA      30,000,000  
The Legends at Chase Oaks    Plano, TX    1997    1998    NA    97 %    NA      28,499,971  
Monte Vista    Littleton, CO    1995    1996    NA    93 %    NA      24,647,901  
Royal St. George    W. Palm Beach, FL    1995    1996    NA    98 %    NA      21,400,000  
The Fairways of Carolina    Margate, FL    1993    2001    NA    100 %    NA      21,100,000  
Quiet Water at Coquina Lakes   Deerfield Beach, FL    1995    2001    NA    100 %    NA      20,912,293  
The Greens at                               
   Metrowest Apartments 
  Orlando, FL    1990    1995    NA    95 %    NA      18,200,000  




 
Subtotal—Residential Properties                           
Average Percent Leased                    97 %          1,233,848,741  




 
OTHER COMMERCIAL PROPERTIES                           
Storage Portfolio I(17)    Various, U.S.    1972—1990    2003    2,225,234    80 %    $     9.77      63,237,298  


 
Total—All Properties                            $  9,199,637,315  


 

(1) The square footage is an approximate measure and is subject to periodic remeasurement.
 
(2) Based on total contractual rent on leases existing as of December 31, 2005. For those properties purchased in fourth quarter of 2005 the rent is based on the existing leases as of the date of purchase.
 
(3) Market value reflects the value determined in accordance with the procedures described in the Account’s prospectus and as stated in the Statement of Investments.
 
(4) Market value shown represents the Account’s interest gross of debt.
 
(5) This property is located in London, United Kingdom, and the market value is converted from Pound Sterling to U.S. Dollars at the exchange rate as of December 31, 2005.
 
(6) Undergone extensive renovations since original construction.
 
(7) Each property held in a 75%/25% joint venture with Equity Office Properties. Market value shown reflects the value of the Account’s interest in the joint venture.
 
(8) The Account purchased a 50.25% interest in a private REIT, which owns this property. A 49.70% interest is owned by Societe Immobiler Trans-Quebec, and .05% is owned by 100 individuals. Market value shown reflects the value of the Account’s interest in the joint venture.
 
(9) Formerly known as “Colorado Center”, this property held in 50%/50% joint venture with Equity Office Portfolio Trust.
 
(10) Purchased through Light Street Partners, L.P. (now 100% owned by the Account).
 
(11) Property held in 50%/50% joint venture with Tennessee Consolidated Retirement System. Market value shown reflects the value of the Account’s interest in the joint venture.
 
(12) Property held in 60%/40% joint venture with Industrial Development International. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.
 
(13) Each property is held in a 50%/50% joint venture with the Simon Property Group. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.
 
(14) Reflects the square footage owned by the joint venture.
 
(15) Total renovation completed in 2001.
 
(16) For the average unit size and annual average rent per unit for each residential property, see “Residential Properties” below.
 
(17)      Property held in 75%/25% joint venture with Storage USA. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.
 

7


Commercial (Non-Residential) Properties

     In General. At December 31, 2005, the Account held 85 commercial (non-residential) properties in its portfolio including a portfolio of storage facilities located throughout the United States. Eleven of these properties are held through joint ventures, and thirteen are subject to mortgages. Although the terms vary under each lease, certain expenses, such as real estate taxes and other operating expenses are paid or reimbursed in whole or in part by the tenants.

     The Account’s portfolio is well diversified by both property type, as well as geographic location. The portfolio consists of: 45 office properties containing approximately 21 million square feet located in 13 states, the District of Columbia and the United Kingdom; 30 industrial properties containing 31 million square feet located in 14 states, including a 60% interest in a portfolio of industrial properties located throughout the United States; and 9 retail properties containing approximately 3 million square feet located in 5 states and the District of Columbia. In addition, the Account has a 75% interest in a portfolio of storage facilities located throughout the United States containing approximately 2.2 million square feet.

     As of December 31, 2005, the overall occupancy rate of Account’s commercial real estate portfolio was 91% on a weighted average basis. Office properties were 87% leased with 1,843 leases, industrial properties were 95% leased with 340 leases, and retail properties were 96% leased with 587 leases. No single tenant accounts for more than 2.2% of the total rentable area of the Account’s commercial properties.

Residential Properties

     The Account’s residential property portfolio currently consists of 24 first class or luxury multi-family garden apartment complexes, mid-rise and high rise apartment buildings. The portfolio contains approximately 7502 units located in 8 states, and is 97% leased overall. None of the residential 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.

8


     The table below provides additional information regarding the residential properties in the Account’s portfolio as of December 31, 2005.



            Average   
Avg. Rent 
        Number    Unit Size   
Per Unit/ 
                       Property                         Location    of Units    (Square Feet)   
Per Month 
               











The Greens at Metrowest    Orlando, FL    200       920    $
930 
 
Monte Vista    Littleton, CO    219       888    $
1,029 
 
Royal St. George    West Palm Beach, FL    224       870    $
990 
 
Westcreek Apartments    Thousand Oaks, CA    126       951    $
1,798 
 
Lincoln Woods Apartments    Lafayette Hill, PA    216       774    $
1,235 
 
The Lodge at Willow Creek    Douglas County, CO    316       996    $
1,016 
 
Legends at Chase Oaks    Plano, TX    346       972    $
1,082 
 
Golfview Apartments    Lake Mary, FL    276    1,149    $
1,223 
 
The Colorado    New York, NY    256       622    $
2,492 
 
Larkspur Courts    Larkspur, CA    248    1,001    $
1,859 
 
Ashford Meadows    Herndon, VA    440    1,050    $
1,430 
 
South Florida Apartment Portfolio    Ft. Lauderdale, FL    550       889    $
1,036 
 
The Fairways of Carolina    Margate, FL    208    1,026    $
1,058 
 
Quiet Waters at Coquina Lakes    Deerfield Beach, FL    200    1,048    $
1,118 
 
Kenwood Mews Apartments    Burbank, CA    141       942    $
1,520 
 
The Legacy at Westwood    Los Angeles, CA    187    1,181    $
4,006 
 
Regents Court    San Diego, CA    251       886    $
1,613 
 
Alexan Buckhead    Atlanta, GA    231       990    $
1,200 
 
The Reserve at Sugarloaf    Atlanta, GA    333    1,220    $
1,144 
 
The Maroneal    Houston, TX    309    1,232    $
1,158 
 
Glenridge Walk    Atlanta, GA    296    1,143    $
1,340 
 
1050 Lenox Park    Atlanta, GA    407    1,007    $
1,154 
 
Palomino Park    Denver, CO    1,184       1,096    $
1,244 
 
The Caruth Apartments    Dallas, TX    338    1,168    $
1,534 
 



ITEM 3.      LEGAL PROCEEDINGS. Other than lawsuits in the ordinary course of business, which we believe will have no material impact on our business, there are no lawsuits in which the Account is a party.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable.

9


PART II

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

     (a) Market Information. There is no established public trading market for 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, 2005 to December 31, 2005, the high and low accumulation unit values for the Account were $239.9535 and $210.0714, respectively. For the period January 1, 2004 to December 31, 2004, the high and low accumulation unit values for the Account were $210.4446 and $186.9917, respectively.

     Approximate Number of Holders. The number of contract owners at December 31, 2005 was 909,501.

Dividends. Not applicable.

     (b) Use of Proceeds: Not applicable.

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

10


ITEM 6. SELECTED FINANCIAL DATA.

     The following selected financial data should be considered in conjunction with the Account’s financial statements and notes provided in this report.

   
Year Ended 
Year Ended 
Year Ended 
Year Ended
Year Ended
 
   
December 31, 
December 31, 
December 31, 
December 31,
December 31,
 
   
2005 
          
2004 
          
2003 
          
2002
          
2001
 
Investment income:   
   
   
   
   
 
Real estate income, net   
$
340,089,550   
$
239,429,500   
$
224,938,080   
$
198,998,685    
$
180,752,326  
Income from real estate   
   
   
   
   
 
 joint ventures   
63,580,501   
57,275,242   
31,989,569   
17,077,072    
1,580,805  
Dividends and interest   
79,245,154   
41,623,715   
19,461,931   
26,437,901    
33,687,343  








 

 
   Total investment income 
 
482,915,205   
338,328,457   
276,389,580   
242,513,658    
216,020,474  
Expenses   
56,100,197   
36,728,425   
31,654,065   
23,304,336    
17,191,929  








 

 
           Investment income, net 
 
426,815,008   
301,600,032   
244,735,515   
219,209,322    
198,828,545  
Net realized and unrealized   
   
   
   
   
 
   gain (loss) on investments 
 
765,970,272   
414,580,303   
58,837,371   
(102,967,284 )   
(29,609,560 ) 








 

 
Net increase in net assets   
   
   
   
   
 
 resulting from operations   
1,192,785,280   
716,180,335   
303,572,886   
116,242,038    
169,218,985  
Participant transactions   
2,110,375,836   
1,735,947,490   
813,860,715   
346,079,345    
657,326,121  








 

 
Net increase in net assets   
$
3,303,161,116   
$
2,452,127,825   
$
1,117,433,601   
$
462,321,383    
$
826,545,106  








 

 
 
   
December 31, 
 















 
   
2005 
2004 
2003 
2002
2001
 








 

 
Total assets   
$
11,685,426,413   
$
7,843,979,924   
$
4,867,089,727   
$
3,731,503,245    
$
3,262,648,457  
Total liabilities   
1,136,715,311   
598,429,938   
73,667,566   
55,514,685    
48,981,280  








 

 
Total net assets   
$
10,548,711,102   
$
7,245,549,986   
$
4,793,422,161   
$
3,675,988,560    
$
3,213,667,177  








 

 
Accumulation units outstanding   
42,623,491   
33,337,597   
24,724,183   
20,346,696    
18,456,445  








 

 
Accumulation unit value   
$
239.95   
$
210.44   
$
186.94   
$
173.90    
$
168.16  








 

 
Mortgage notes payable   
973,502,186   
$
499,479,256   
   
   
 








 

 

11

Quarterly Selected Financial Information

     The following selected unaudited financial data for each full quarter of 2005 and 2004 are derived from the financial statements of the Account for the years ended December 31, 2005 and 2004.

   
2005
 
       
   
For the Three Months Ended
 
   
March 31
June 30
September 30
December 31
 


 

 

 

 
Investment income, net   
$
93,301,077    
$
98,805,190    
$
114,048,282    
$
120,660,459  
Net realized gain on   
   
   
   
 
   investments   
4,937,265    
35,140,947    
24,667,629    
55,186,510  
Net unrealized gain on   
   
   
   
 
   investments   
16,273,314    
227,960,106    
243,216,887    
158,587,614  


 

 

 

 
Net increase in net assets   
   
   
   
 
   resulting from operations 
 
$
114,511,656    
$
361,906,243    
$
381,932,798    
$
334,434,583  


 

 

 

 
Total return   
1.52%    
4.38%    
4.13%    
3.33%  
 
   
   
   
 
 
 
   
2004
 
       
   
For the Three Months Ended
 
   
March 31
June 30
September 30
December 31
 


            

            

            

 
Investment income, net   
$
60,427,326    
$
69,917,576    
$
81,063,054    
$
90,192,076  
Net realized gain   
   
   
   
 
   on investments   
13,957,043    
6,937,958    
12,050,272    
28,258,158  
Net unrealized gain   
   
   
   
 
   on investments   
25,237,864    
41,478,561    
175,720,751    
110,939,696  


 

 

 

 
Net increase in net assets   
   
   
   
 
   resulting from operations 
 
$
99,622,233    
$
118,334,095    
$
268,834,077    
$
229,389,930  


 

 

 

 
Total return   
2.01%    
2.17%    
4.48%    
3.38%  
 
   
   
   
 

12


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

     The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and notes contained in this report.

2005 Overview

     As of December 31, 2005, the TIAA Real Estate Account had total net assets in the amount of $10,548,711,102, a 46% increase over the 2004 year end total net assets. The growth in net assets was primarily due to the increase in net new money into the Account. The remainder of the increase was due to income from investments and capital appreciation of the Account’s real estate assets. The Account closed on 42 transactions in 2005 for a total net investment, including acquisitions, dispositions, commitments to purchase interests in real estate limited partnerships and real estate investment trusts, of $1.6 billion. The Account purchased 24 properties for a total net equity investment of $1.9 billion. These purchases were diverse by both location (twelve states in the United States and the United Kingdom) and sector. The Account purchased eight office properties, including the Account’s first foreign investment, an office complex located in London, United Kingdom, which is subject to debt, eight industrial properties, six apartment properties and two retail properties. Additional transactions included three commitments to purchase limited partnership interests in two real estate related funds and one private real estate investment trust in the total amount of $227.5 million (of which $172 million has been funded) and the placement of $250 million in debt on an office building in which the Account owns a 50% joint venture interest. The Account also sold 14 properties (five industrial, five office, three apartment and one retail property), which had either maximized in value, under-performed or represented properties needing significant capital infusions in the future, which could have had a negative impact on the Account’s overall performance, for approximately $511.5 million.

     Subsequent to December 31, 2005, the Account closed on two transactions: the purchase of a bulk distribution warehouse for a total amount of approximately $34.7 million and the placement of approximately $153 million in debt on an office building which the Account already owns.

     As of December 31, 2005, the Account owned a total of 109 real estate properties, representing 80.11% of the Account’s Total Investments (eleven of which are held in joint ventures). The real estate portfolio includes 45 office properties (six of which are held in joint ventures), 30 industrial properties (including one joint venture), 24 apartment complexes, 9 retail properties (including three joint ventures), and a 75% joint venture partnership interest in a portfolio of storage facilities.

     The following charts reflect the diversification of the Account’s real estate assets by region and property type as well as its ten largest holdings. All information is based on the values of the properties as stated in the financial statements as of December 31, 2005.

13


   
Real Estate Assets Diversification by Market Value








    East   West   South   Midwest   Various *  
Foreign **
  TOTAL
    (30 )    (34 )    (34 )    (8 )    (2 )    (1 )    (109 ) 














Office (45)    21.9 %    18.1 %    13.4 %    3.9 %    0.0 %    4.1 %    61.4 % 
Apartment (24)    2.2 %    5.9 %    5.3 %    0.0 %    0.0 %    0.0 %    13.4 % 
Industrial (30)    3.0 %    7.5 %    3.8 %    2.0 %    0.7 %    0.0 %    17.0 % 
Retail (9)    1.5 %    1.3 %    4.7 %    0.0 %    0.0 %    0.0 %    7.5 % 
Other*** (1)    0.0 %    0.0 %    0.0 %    0.0 %    0.7 %    0.0 %    0.7 % 














TOTAL (109)    28.6 %    32.8 %    27.2 %    5.9 %    1.4 %    4.1 %    100.0 % 

( ) Number of properties in parentheses.
   
* Represents a portfolio of storage facilities and a portfolio of industrial properties located in various regions across the U.S.
 
** Represents a United Kingdom real estate investment.
 
***      Represents a portfolio of storage facilities located in various regions across the U.S.
 

Top Ten Real Estate Holdings

                   
% of Total
   
        State/   
Property 
 
Market
 
Real Estate
  % Total
Property Name     City    County    Type   
Value(a)
 
Portfolio
  Investments
1001 Pennsylvania Ave     Washington    DC    Office    $503.0 (b)    5.47 %    4.38 % 
1 & 7 Westferry Circus
    London    UK    Office    $373.1 (c)    4.06 %    3.25 % 
50 Fremont Street     San Francisco    CA    Office    $373.0 (d)    4.05 %    3.25 % 
IDX Tower     Seattle    WA    Office    $370.0 (e)    4.02 %    3.22 % 
Four Oaks Place     Houston    TX    Office    $295.2     3.21 %    2.57 % 
99 High Street     Boston    MA    Office    $276.3 (f)    3.00 %    2.41 % 
Lincoln Centre     Dallas    TX    Office    $255.3     2.78 %    2.22 % 
780 Third Avenue     New York City    NY    Office    $230.0     2.50 %    2.00 % 
1900 K Street     Washington    DC    Office    $230.0     2.50 %    2.00 % 
Ontario Industrial Portfolio
    Ontario    CA    Industrial    $230.0 (g)    2.50 %    2.00 % 

(a)      Value as reported in the 12/31/05 Statement of Investments. Investments owned 100% by TIAA are reported based on market value. Investments in joint ventures are reported based on the equity method of accounting.
 
(b) This property is shown gross of debt. The value of the Account's interest less leverage is $279.2, representing 3.03% of the Total Real Estate Portfolio and 2.43% of the Total Investments.
 
(c) This property is shown gross of debt. The value of the Account's interest less leverage is $142.7, representing 1.55% of the Total Real Estate Portfolio and 1.24% of the Total Investments. The market value has been converted to U.S. dollars from Pound Sterling at the exchange rate as of December 31, 2005.
 
(d) This property is shown gross of debt. The value of the Account's interest less leverage is $229.6, representing 2.50% of the Total Real Estate Portfolio and 2.00% of the Total Investments.
 
(e) This property is shown gross of debt. The value of the Account's interest less leverage is $215.7, representing 2.34% of the Total Real Estate Portfolio and 1.88% of the Total Investments.
 
(f) This property is shown gross of debt. The value of the Account's interest less leverage is $91.3, representing 0.99% of the Total Real Estate Portfolio and 0.79% of the Total Investments.
 
(g) This property is shown gross of debt. The value of the Account's interest less leverage is $219.9, representing 2.39% of the Total Real Estate Portfolio and 1.91% of the Total Investments.
 

Top Five Overall Market Exposure

   
# of 
% Total 
Metropolian Statistical Area   
Investments 
Investments 
Washington-Arlington-Alexandria    10    10.45 
San Francisco-San Mateo-Redwood City    4      6.50 
Los Angeles-Long Beach-Glendale    7      4.61 
Chicago-Naperville-Joliet    7      4.50 
Dallas-Plano-Irving    4      4.27 

14


     As of December 31, 2005, the Account also held investments in real estate limited partnerships, representing 1.71% of Total Investments, real estate equity securities, representing 3.71% of Total Investments, commercial mortgage-backed securities (CMBS), representing 0.19% of Total Investments, commercial paper representing 11.67% of Total Investments, and government bonds, representing 2.61% of Total Investments.

Real Estate Market Outlook—In General

     Real estate had another year of strong performance in 2005. Due to strong inflows of equity and debt capital from domestic and international sources, investment into the asset class grew substantially. The combination of strong inflows of capital, sustained economic growth, steady improvement in real estate market conditions and low interest rates pushed commercial real estate prices higher in 2005. As a result of higher prices and greater interest in commercial real estate, sales transactional volume in 2005 totaled approximately $250 billion, 35% higher than in 2004 according to Real Capital Analytics, a prime source for transactional information for commercial real estate.

     Economic activity expanded throughout the nation in 2005. The U.S. economy added a total of 2.0 million new jobs in 2005. Gains were broadly based as the Federal Reserve Board’s January 2006 “Beige Book” reported that “Economic expansion continued across the twelve Federal Reserve Districts through the last several weeks of 2005.” According to the Beige Book, economic activity was “expanding modestly” in six districts, “accelerating” or “increasing at a solid pace” in four more, and “continuing to expand” or “reasonably strong” in the remaining two districts.

     Employment growth in the Account’s primary metropolitan areas has strengthened over the course of 2005. Of the Account’s five top markets, growth was strongest in the Washington D.C. metropolitan area, where employment grew at 3.1% during 2005. San Francisco (+ 0.9%), Los Angeles (+ 0.7%), Chicago (+ 1.1%), and Dallas (+ 1.4%) follow. By comparison, employment grew 1.6% in the United States as a whole during 2005.

     Growth in payroll employment is highly correlated with tenant demand for commercial real estate, though demand for space often occurs following a lag due to the nature of the leasing cycle. Office space demand, in particular, is correlated with employment growth in the “financial activities” and “professional & business services” sectors. These two sectors added 188,000 and 486,000 jobs, respectively, over the course of 2005. With 24 consecutive months of employment growth in the United States, office space demand has responded in kind. Office absorption, which is the net change in occupied space and a key fundamental indicator, totaled 87 million square feet in 2005 and 76 million square feet in 2004. By comparison, net absorption in 2003 was only 23 million square feet and in 2002 it was a negative 14 million square feet, which indicates that companies vacated more space than they leased. Gains in net absorption, in turn, have lowered office vacancy rates. Torto Wheaton Research, a widely used source of real estate market data, reported that office market vacancies averaged 13.6% at year-end 2005, and 15.4% at year-end 2004. According to the Torto Wheaton, office vacancies on a national basis have now declined for ten consecutive quarters.

     Improvements in the Account’s office markets are evident. For example, office vacancies in the Washington D.C. metropolitan area, the Account’s top office market, are well below the

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national average and have fallen to 9.3% as of the year-end 2005 compared with 10.3% at year-end 2004. The office market in the Washington, D.C. metro area has undoubtedly benefited from 40 consecutive months of employment growth. Vacancies in the New York metro area averaged 7.7% as of year-end 2005 and have declined from 9.3% as of year-end 2004. In the Account’s other top office markets, vacancy rates remain high Chicago: (16.9%), Houston (16.4%), San Francisco (13.1%), and Boston (14.3%) . However, San Francisco, Boston and Houston have seen measurable declines in vacancy rates over the past year.

     Industrial space demand is related to a number of factors including the national business cycle, national industrial production, international trade volumes, changes in corporate logistics and distribution systems, and employment growth in the manufacturing, wholesale trade and transportation and warehousing industries. Most of these indicators have experienced sustained growth over the last several years. For example, U.S. gross domestic product (GDP), a basic indicator of the national business cycle, grew at a 3.5% pace in 2005, following a growth rate of 4.2% in 2004 and 2.7% in 2003. Similarly, national industrial production grew at a 2.8% rate in 2005, following a growth rate of 4.1% in 2004 and 0.6% in 2003. These gains are reflected in industrial space absorption. According to Torto Wheaton Research, industrial space absorption in major U.S. metropolitan areas totaled 281 million square feet in 2005, as compared with 183 million square feet in 2004 and a mere 31 million square feet in 2003. Healthy space demand, in turn, has lowered industrial vacancies. Torto Wheaton Research reports that industrial vacancies averaged 9.7% at year-end 2005, compared with 11.4% at the end of 2004. Industrial vacancies have now declined for six consecutive quarters.

     The improvement in the Account’s industrial markets is clear. Industrial vacancies in the Riverside-San Bernardino metropolitan area, the Account’s top industrial market, for example, are well below the national average (9.7%), and have fallen to 5.4% at year-end 2005 compared with 7.1% at year-end 2004. The industrial market in Riverside-San Bernardino has benefited from 20 million square feet of absorption in both 2004 and 2005, which is the most of any U.S. market. Vacancies in the Los Angeles metro area are also well below the national average at 4.5% at year-end 2005. In the Account’s other top industrial markets, vacancy rates are above the national average, Chicago: (10.8%), Dallas (12.6%), and Atlanta (12.6%) . Each of these markets has experienced a meaningful decline in vacancies over the past year.

     Key factors influencing demand in the apartment sector include employment growth, population and household growth, and housing affordability, each of which moved in ways favorable to apartment demand during 2005. For example, data from the National Association of Realtors show that housing affordability declined to its lowest level since 2001 due to home price increases of 15% nationwide during 2005 and modest increases in mortgage interest rates. In addition to healthy apartment demand, Real Capital Analytics reported that the supply of rental units was reduced in a number of markets as developers converted sizeable numbers of apartment units to condominiums over the course of 2005. Condo conversions were particularly prevalent in metropolitan areas like Miami, Las Vegas, San Diego and Washington D.C. As a result of these two trends—an increase in demand and a reduction in supply—Torto Wheaton Research reported in its year-end 2005 report that the U.S. apartment market “...tightened throughout 2005”. Nationally, vacancies averaged 5.1% at year-end 2005 compared with 6.2% at year-end 2004. In addition, many landlords were able to raise rents for the first time in several years. Other landlords eliminated rental concessions and incentives which are used for competitive purposes when demand is soft.

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     The market conditions in the Account’s apartment markets have clearly improved as well. For example, apartment vacancies in the Atlanta metropolitan area, the Account’s top apartment market, declined to 6.1% at year-end 2005 compared with 8.4% at year-end 2004. In the Account’s other top apartment markets, vacancy rates are well below the national average, Los Angeles (2.4%), Ft. Lauderdale (1.3%), and Washington D.C. (4.2%) . Vacancies in Dallas are above the national average at 7.4%, but declined from 9.9% at year-end 2004.

     Key factors influencing retail space demand include trends in consumer spending, growth in personal income and wages, and retailers’ growth and expansion plans. For example, the U.S. Census Bureau reported that U.S. retail sales excluding autos increased a solid 8.3% in 2005. This gain came despite headwinds from higher energy and gasoline prices. Healthy retail sales, in turn, sustained retail space demand. According to Torto Wheaton Research, vacancies in neighborhood and community centers averaged 7.7% at year-end 2005 as compared with 8.0% at year-end 2004. In its year-end 2005 report, Torto Wheaton Research noted that retail rents and occupancies have risen steadily in recent years, and “...there is nothing in the marketplace today to suggest that that trend is not going to continue… .”

     Real estate supply/demand conditions also appear favorable. Office construction nationally totaled 35 million square feet in 2005 compared with an average of 80 million square feet during the 1998-2002 cyclical peak period. Torto Wheaton Research expects office construction to increase marginally to 38 million square feet in 2006. Similarly, construction of industrial space in 2005 was roughly 35% below totals during the 1996-2001 peak construction period. Torto Wheaton Research does not expect a significant increase in industrial construction in 2006. Multi-family construction has slowed less sharply; however, a growing number of these units are being built for sale rather than rent. Torto Wheaton Research expects that construction of neighborhood and community shopping centers which totaled 26 million square feet in 2005, to decline roughly 25% in 2006 due in part to increased land and construction costs.

Economic Outlook for 2006

     On balance, prospects for U.S. commercial real estate markets appear promising given current economic and property market conditions. Nationally, employment is growing at a solid and sustainable pace. The combination of ongoing employment growth and moderate construction bode well for commercial real estate markets. However, continued strong inflows of capital to real estate markets are likely to put pressure on future pricing and returns. Given these trends, prudence and pricing discipline will be required with respect to the Account’s acquisition activities going forward.

Results of Operations

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Performance

     The Account’s total return was 14.02% for the year ended December 31, 2005, 145 basis points higher than the 2004 annual return of 12.57% . The substantial increase in the Account’s overall performance on a year-to-year basis reflects the strong performance of the Account’s real

17


estate properties. The market value of the Account’s real estate portfolio increased substantially in 2005 due to capital appreciation of these assets as a result of the sustained growth in capital investment into the real estate market from institutional investors as well as foreign investors.

Income and Expenses

     The Account’s net investment income, after deduction of all expenses, was 42% higher for the year ended December 31, 2005 compared to the same period in 2004. This increase is related to a 46% increase in total net assets, which included a 41% increase in the Account’s real estate holdings, including joint ventures and limited partnerships, over the same period.

     The Account’s real estate holdings, including joint venture investments, generated approximately 83% and 88% of the Account’s total investment income (before deducting Account level expenses) during 2005 and 2004, respectively. The decline is due to the effect of the increase in total net assets, a decline in the total percentage of the Account’s assets held in real estate and joint venture interests and the corresponding growth in the non-real estate assets owned by the Account. As of year end 2005, the Account held 80% of its assets in real estate and 14% short term holdings, as compared to 85% and 9%, respectively in 2004. The remaining portion of the Account’s total investment income was generated by marketable securities investments.

     Gross real estate rental income increased approximately 56% in the year ended December 31, 2005 as compared to the same period in 2004. This increase was primarily due to the increased number of properties owned by the Account. In 2005, the Account benefited from the full year’s income from the properties purchased in 2004 (21) and for a partial year’s income from those properties purchased throughout 2005 (24 in total). Income from the real estate joint ventures was $63,580,501 for the year ended December 31, 2005 as compared with $57,275,242 for the year ended December 31, 2004. This 11% increase in joint venture income was due to an increase in the number of joint venture owned by the Account purchased in 2004. Interest income on the Account’s marketable securities investments increased from $15,055,451 in 2004 to $54,114,448 in 2005 due to the increase in the amount of non-real estate assets held by the Account as well as an increase in short term rates from 2004 to 2005. Dividend income on the Account’s real estate equity securities and limited partnership investments decreased from $26,568,264 for the year ended December 31, 2004 to $25,130,706.

     Total property level expenses for the year ended December 31, 2005 and 2004 were $278,544,030, and $157,768,776, respectively. In 2005, operating expenses and real estate and other taxes represented 54% and 32% of the total expenses respectively, with the remaining 14% due to interest payments on mortgages. In comparison, operating expenses, real estate and other taxes, and interest expense represented 64%, 35% and 1%, respectively in 2004. Overall, property level expenses increased by 77% from 2004 to 2005, with approximately one-third of this increase attributable to interest payments made in 2005. The factors influencing this year to year variance were: an increase in the number of properties subject to debt, which increased from 4 in 2004, (all acquired in the fourth quarter of 2004) to 7 in 2005 (the interest expense incurred by the Account was $830,361 and $40,028,630, respectively in 2004 and 2005); and the purchase of additional properties in 2005.

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     The Account also incurred expenses for the years ended December 31, 2005 and 2004 of $19,603,225 and $14,393,388, respectively, for investment advisory services, $27,130,406 and $16,372,446, respectively, for administrative and distribution services and, $9,366,566 and $5,962,591 respectively, for mortality, expense risk and liquidity guarantee charges. The overall 53% increase in expenses is a result of the larger net asset base in the Account, and the increased costs associated with managing and administering the Account.

Net Realized and Unrealized Gains and Losses on Investments

     The Account had net realized and unrealized gains on investments of $765,970,272 for the year ended December 31, 2005, as compared with net realized and unrealized gains on investments of $414,580,303 for the year ended December 31, 2004. This positive variance is primarily due to a substantial increase in net realized and unrealized gain on the Account’s real estate properties of $590,179,625 for the year ended December 31, 2005 as compared to $184,531,410 for the year ended December 31, 2004. The increase in net realized and unrealized gains is due to the capital appreciation of real estate assets attributable to the continued inflow of capital into the real estate market from institutional and other investors, which had the effect of increasing the value of real estate. This trend, which began in 2004 and increased in 2005, is evidenced by the net realized gain of $90.3 million on the properties sold in 2005. The net proceeds of these sales was $511.5 milllion. The Account also had unrealized gains on its real estate joint ventures and limited partnership holdings of $168,723,129 for the year ended December 31, 2005, as compared to unrealized gains of $161,584,369 for the same period in 2004. This increase was due to the unrealized gains posted in 2005 on the properties in which the Account has an interest. The Account’s marketable securities for the year ended December 31, 2005 had net realized and unrealized gains totaling $7,067,518 as compared with net realized and unrealized gains of $68,464,524 for the year ended December 31, 2004. The primary factor in the decline is the net effect of the relatively weak performance of the REIT market on the Account’s real estate equity securities in 2005 as compared to the strong performance of this market in 2004.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Performance

     The Account’s total return was 12.57% for the year ended December 31, 2004 and 7.50% for 2003. The substantial increase in the Account’s overall performance on a year-to-year basis reflects the strong performance of the Account’s real estate properties and real estate-related (real estate equity securities, CMBS and limited partnerships) investments. The market value of the Account’s real estate portfolio increased substantially in 2004, as did the value of its real estate equity securities holdings. These increases in the real estate and real estate-related assets were due to the significant amount of capital which flowed into the real estate market from institutional investors as well as foreign investors, increasing the price of core real estate investments.

Income and Expenses

     The Account’s net investment income after deduction of all expenses was 23% higher for the year ended December 31, 2004 compared to the same period in 2003. This increase was primarily due to a 51% increase in total net assets, which included a 66% increase in the Account’s real estate holdings, including joint ventures and limited partnerships, over the same period.

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     The Account’s real estate holdings, including joint venture and fund investments, generated approximately 88% and 93% of the Account’s total investment income (before deducting Account level expenses) during 2004 and 2003, respectively. The remaining portion of the Account’s total investment income was generated by marketable securities investments.

     Gross real estate rental income increased approximately 10% in the year ended December 31, 2004 as compared to the same period in 2003. This increase was due to the increased number of properties owned by the Account. Income from the real estate joint ventures was $57,275,242 for the year ended December 31, 2004 as compared with $31,989,569 for the year ended December 31, 2003. This increase in joint venture income was due to positive leasing activity at several retail properties as well as the purchase of an additional joint venture interest in an existing office property, and the addition of two joint venture investments in 2004. Interest income on the Account’s marketable securities investments increased from $7,221,765 in 2003 to $15,055,451 in 2004 due to the increase in the amount of non-real estate assets held by the Account as well as a slight increase in short term rates from 2003 to 2004. Dividend income on the Account’s real estate equity securities and limited partnership investments increased from $12,240,166 for the year ended December 31, 2003 to $26,568,264 for the year ended December 31, 2004. This increase was due to the strong performance of the real estate market reflecting the increased inflow of capital into real estate-related investments.

     Total property level expenses for the years ended December 31, 2004 and 2003 were $157,768,776, and $136,678,570, respectively. This 15% increase in property level expenses reflected the increased number of real estate properties owned by the Account from 2003 to 2004. In addition, during 2004, the Account incurred interest expense of $830,361 related to the mortgages.

     The Account also incurred expenses for the years ended December 31, 2004 and 2003 of $14,393,388 and $12,751,191 respectively, for investment advisory services, $16,372,446 and $14,786,580 respectively, for administrative and distribution services and $5,962,591 and $4,116,294 respectively, for mortality, expense risk and liquidity guarantee charges. The overall 16% increase in expenses is a result of the larger net asset base in the Account, and the increased costs associated with managing and administering the Account.

Net Realized and Unrealized Gains and Losses on Investments

     The Account had net realized and unrealized gains on investments of $414,580,303 for the year ended December 31, 2004, as compared with net realized and unrealized gains on investments of $58,837,371 for the year ended December 31, 2003. The increase in net realized and unrealized gains is primarily due to the substantial net realized and unrealized gain on the Account’s real estate properties of $184,531,410 for the year ended December 31, 2004 as compared to net realized and unrealized losses for the year ended December 31, 2003 of $5,040,820. In addition, the Account had an unrealized gain on its joint venture holdings of $161,584,369 for the year ended December 31, 2004 as compared to unrealized gain of $23,914,271 for the year ended December 31, 2003. The substantial net gains in the year ending December 31, 2004 are due to the increase in market value of its real estate portfolio, particularly in the value of three regional malls in which the Account owns joint venture interests. The Account’s marketable securities for the year ended December 31, 2004 had net

20


realized and unrealized gains totaling $68,464,524 as compared with net realized and unrealized gains of $39,963,920 for the year ended December 31, 2003.

     During 2004, the Account sold five properties. Proceeds of sale were $113,765,000 and cost at the time of sale was $99,937,568, resulting in a realized gain of $13,827,432. During 2003, the Account sold two properties. Proceeds of sale were $187,225,000 and cost at the time of sale was $154,626,452, resulting in a realized gain of $32,598,548.

Liquidity and Capital Resources

     At year end 2005 and 2004, the Account’s liquid assets (i.e., its real estate equity securities, CMBSs, commercial paper and government securities) had a value of $2,089,557,113 and $1,045,733,841, respectively. The increase in the Account’s liquid assets was primarily due to the net positive inflow from transfers and premiums into the Account, which likely is in response to the strong relative performance of the Account.

     In 2005, the Account received $968,189,436 in premiums and $1,435,432,984 in net participant transfers from TIAA, CREF Accounts and affiliated mutual funds, while for 2004 the Account received $738,048,183 in premiums and $1,188,465,203 in net participants’ transfers. Real estate acquisitions totaling approximately $1.9 billion and $2.5 billion were made during 2005 and 2004, respectively. The Account’s liquid assets will continue to be available to purchase additional suitable real estate properties and to meet expense needs and redemption requests (i.e., cash withdrawals, benefits, or transfers). In the unlikely event that 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, under certain conditions more fully described in the Account’s prospectus, may borrow money and assume or obtain a mortgage on a property — i.e., make leveraged real estate investments. Note that the Account changed its borrowing policy in 2005 to expand the circumstances under which it could borrow. Also, to meet any short-term cash needs, the Account may obtain a line of credit whose terms may require that the Account secure the loan with one or more of its properties. The Account’s total borrowings may not exceed 20% of the Account’s total net asset value.

Effects of Inflation and Increasing Operating Expenses

     Inflation, along with increased insurance, utilities and security costs, may increase property operating expenses in the future. These increases in operating expenses are generally billed to tenants either through contractual lease provisions in office, industrial, and retail properties or through rent increases in apartment complexes. 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.

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Critical Accounting Policies

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

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

     Management believes that the following policies related to the valuation of the Account’s assets reflected in the Account’s financial statements affect the significant judgments, estimates and assumptions used in preparing its financial statements:

     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 TIAA Board of Trustees. 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 judgment because the actual market value of real estate can be determined only by negotiation between the parties in a sales transaction. The Account’s properties are initially valued at their respective purchase prices (including acquisition costs). Subsequently, independent appraisers value each real estate property at least once a year. TIAA’s appraisal staff performs a valuation 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 or appraisal. The appraisals are performed in accordance with Uniform Standards of Professional Appraisal Practices (USPAP), the real estate appraisal industry standards created by The Appraisal Foundation. Real estate appraisals are estimates of property values based on a professional’s opinion.

     Valuation of Real Estate Joint Ventures: Real estate joint ventures are stated at the Account’s equity in the net assets of the underlying joint venture entities, which value their real estate holdings and mortgage notes payable at fair value.

     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 and limited partnership interests 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.

     Accumulation and Annuity Fund: The Accumulation Fund represents the net assets attributable to participants in the accumulation phase of their investment. The Annuity Fund represents the net assets attributable to the participants currently receiving annuity payments. The net increase or decrease in net assets from investment operations is apportioned between

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the accounts based upon their relative daily net asset values. Once an Account participant begins receiving lifetime annuity income benefits, monthly payment levels cannot be reduced as a result of the Account’s adverse mortality experience. In addition, the contracts are required to stipulate the maximum expense charge that can be assessed, which is equal to 2.50% of average net assets per year. Accordingly, a small risk charge is paid by the Account to TIAA to assume these risks.

     Accounting for Investments: Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties close (settlement date). 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.

     The Account has limited partnerships interests in various real estate funds (limited partnerships). The Account records its contributions as increases to the investments and distributions from the investments are treated as either income or return of capital as determined by the management of the limited partnerships. Unrealized gains and losses are calculated and recorded quarterly when our accounting records are compared to the fund’s financial statements and we true up our equity value.

     Income from joint ventures is recorded based on the Account’s proportional interest in the income earned by the joint venture that has been distributed from the joint venture to the Account.

     Securities transactions are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned and includes accrual of discount and amortization of premium. Dividend income is recorded on the ex-dividend date or as soon as the Account is informed of the dividend. Realized gains and losses on securities transactions are accounted for on the specific identification method.

     Mortgage Notes Payable: Commencing in 2005, the Account separately reports mortgage notes payable at estimated market value. Estimated market values are based on the amount at which the liability could be settled (either transferred or paid back) in a current transaction exclusive of direct transaction costs. Different assumptions or changes in future market conditions could significantly affect estimated market value. At times, the Account may assume debt in connection with the purchase of real estate. For debt assumed, the Account allocates a portion of the purchases price to the below or above market debt and amortized the premium or discount over the remaining life of the debt.

     Foreign currency transactions and translation: Portfolio investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of securities, income receipts and

23


expense payments made in foreign currencies are translated into U.S. dollars at the exchange rates prevailing on the respective dates of the transactions. The effect of changes in foreign currency exchange rates on portfolio investments are included in the net realized and unrealized gains and losses on investments. Net realized gains and losses on foreign currency transactions include maturities of forward foreign currency contracts, disposition of foreign currencies, and currency gains and losses between the accrual and receipt dates of portfolio investment income and between the trade and settlement dates of portfolio investment transactions.

Forward-Looking Statements

     Some statements in this report which are not historical facts may be “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or management’s present expectations.

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

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Account’s real estate and real estate-related investments, which as of December 31, 2005 represented 81.82% of the Account’s investments (not including real estate equity securities), expose the Account to a variety of risks. These risks include, but are not limited to:

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

  • Appraisal Risk — The risk that the sale price of an Account property (i.e., the value that would be determined by negotiations between independent parties) might differ substantially from its estimated or appraised value, leading to losses or reduced profits to the Account upon sale;

  • Risk Relating to Property Sales — The risk that the Account might not be able to sell a property at a particular time for its full value, particularly in a poor market. This might make it difficult to raise cash quickly and also could lead to Account losses; and

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

     As of December 31, 2005, 18.19% of the Account’s investments were in market risk sensitive instruments, comprised entirely of marketable securities. These include real estate equity securities, commercial mortgage-backed securities (CMBSs), and high-quality short-term debt instruments (i.e., commercial paper and government agency instruments). The Statement of Investments for the Account sets forth the terms of these instruments, along with their fair value, as determined in accordance with procedures described in Note 1 to the Account’s financial statements. Note that the Account does not currently invest in derivative financial instruments.

     The Account’s investments in marketable securities are subject to the following general risks:

  • financial risk — for debt securities, the possibility that the issuer won’t be able to pay principal and interest when due, and for common or preferred stock, the possibility that the issuer’s current earnings will fall or that its overall financial soundness will decline, reducing the security’s value.

  • market risk — price volatility due to changing conditions in the financial markets and, particularly for debt securities, changes in overall interest rates.

  • interest rate volatility, which may affect current income from an investment.

     In addition, mortgage-backed securities are subject to prepayment risk — i.e., the risk that borrowers will repay the loans early. If the underlying mortgage assets experience greater than anticipated payments of principal, the Account could fail to recoup some or all of its initial investment in these securities. The market value of these securities is also highly sensitive to changes in interest rates. Note that the potential for appreciation, which could otherwise be expected to result from a decline in interest rates, may be limited by any increased prepayments.

     In addition to these risks, real estate equity securities and mortgage-backed securities are subject to many of the same general risks inherent in real estate investing, making mortgage loans and investing in debt securities. For more information on the risks associated with all of the Account’s investments, see the Account’s most recent prospectus.

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ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS
TIAA REAL ESTATE ACCOUNT


 

    Page 
Report of Management Responsibility    27 
Report of the Audit Committee    28 
 
Audited Financial Statements:     
     Statements of Assets and Liabilities    29 
     Statements of Operations    30 
     Statements of Changes in Net Assets    31 
     Statements of Cash Flows    32 
     Notes to Financial Statements    33 
     Statements of Investments    40 
     Report of Independent Registered Public Accounting Firm.    51 

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REPORT OF MANAGEMENT RESPONSIBILITY

To the Participants of the
   TIAA Real Estate Account:

The accompanying financial statements of the TIAA Real Estate Account (“Account”) of Teachers Insurance and Annuity Association of America (“TIAA”) are the responsibility of TIAA’s management. They have been prepared in accordance with accounting principles generally accepted in the United States of America and have been presented fairly and objectively in accordance with such principles.

TIAA has established and maintains a sound system of internal controls and disclosure 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 the Account, and the chief audit executive regularly reports to the TIAA Audit Committee.

The accompanying financial statements have been audited by an independent registered public accounting firm. To maintain auditor independence and avoid any conflict of interest, it continues to be the Account’s policy that any management advisory or consulting services be obtained from a firm other than the independent registered public accounting firm. The reports of the independent registered public accounting firms, which follow the statements of investments, express independent opinions on the fairness of presentation of these financial statements.

The Audit Committee of the TIAA Board of Trustees, consisting entirely of trustees who are not officers of TIAA, meets regularly with management, representatives of PricewaterhouseCoopers LLP and the internal audit group to review matters relating to financial reporting, internal controls and auditing. In addition to the annual audit of the Account’s financial statements by the independent registered public accounting firm, the New York State Insurance Department and other state insurance departments perform periodic examinations of the Account’s operations.

 

March 14, 2006
        /s/ Herbert M. Allison, Jr.
 
 
Herbert M. Allison, Jr.
Chairman, President and
Chief Executive Officer
 
 
 
         /s/ Russell Noles
 
 
Russell Noles
Vice President and Acting
Chief Financial Officer

 

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REPORT OF THE AUDIT COMMITTEE

To the Participants of the
   TIAA Real Estate Account:

The TIAA Audit Committee (“Committee”) oversees the financial reporting process of the TIAA Real Estate Account (“Account”) on behalf of TIAA’s Board of Trustees. The Committee operates in accordance with a formal written charter (copies of which are available upon request) which describes the Audit Committee’s responsibilities. All members of the Committee are independent, as defined under the listing standards of the New York Stock Exchange.

Management has the primary responsibility for the Account’s financial statements, development and maintenance of a strong system of internal controls and disclosure controls, and compliance with applicable laws and regulations. In fulfilling its oversight responsibilities, the Committee reviewed and approved the audit plans of the internal audit group and the independent registered public accounting firm in connection with their respective audits of the Account. The Committee also meets regularly with the internal audit group and the independent registered public accounting firm, both with and without management present, to discuss the results of their examinations, their evaluation of internal controls, and the overall quality of financial reporting. As required by its charter, the Committee will evaluate rotation of the independent registered public accounting firm whenever circumstances warrant, but in no event will the evaluation be later than between their fifth and tenth years of service.

The Committee reviewed and discussed the accompanying audited financial statements with management, including a discussion of the quality and appropriateness of the accounting principles and financial reporting practices followed, the reasonableness of significant judgments, and the clarity and completeness of disclosures in the financial statements. The Committee has also discussed the audited financial statements with PricewaterhouseCoopers LLP, the independent registered public accounting firm responsible for expressing an opinion on the conformity of these audited financial statements with accounting principles generally accepted in the United States of America.

The discussion with PricewaterhouseCoopers LLP focused on their judgments concerning the quality and appropriateness of the accounting principles and financial reporting practices followed by the Account, the clarity and completeness of the financial statements and related disclosures, and other significant matters, such as any significant changes in accounting policies, internal controls, management judgments and estimates, and the nature of any uncertainties or unusual transactions. In addition, the Committee discussed with PricewaterhouseCoopers LLP the auditors’ independence from management and the Account, and has received a written disclosure regarding such independence, as required by the Independence Standards Board.

Based on the review and discussions referred to above, the Committee has approved the release of the accompanying audited financial statements for publication and filing with appropriate regulatory authorities.

Rosalie J. Wolf, Audit Committee Chair
Donald K. Peterson, Audit Committee Member
Leonard S. Simon, Audit Committee Member
David F. Swensen, Audit Committee Member
Paul R. Tregurtha, Audit Committee Member

March 14, 2006

28


TIAA REAL ESTATE ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
     
   
December 31, 
December 31, 
   
2005 
2004 


       

ASSETS   
   
 
Investments, at value:   
   
 
 Real estate properties   
   
 
         (cost: $7,386,769,868 and $5,315,565,355)   
$
7,977,600,751   
$
5,391,469,250 
 Real estate joint ventures and limited partnerships   
   
 
   (cost: $1,086,041,287 and $1,085,720,476)   
1,418,583,542   
1,288,715,399 
 Marketable securities:   
   
 
   Real estate related   
   
 
       (cost: $433,482,015 and $326,109,979)   
448,662,598   
369,744,168 
   Other   
   
 
       (cost: $1,640,676,190 and $676,124,265)   
1,640,894,515   
675,989,673 




Total investments   
   
 
 (cost: $10,546,969,360 and $7,403,520,075)   
11,485,741,406   
7,725,918,490 




Cash   
1,211,370   
 
Due from investment advisor   
7,717,256   
4,185,034 
Other   
190,756,381   
113,876,400 




TOTAL ASSETS   
11,685,426,413   
7,843,979,924 




LIABILITIES   
   
 
Mortgage notes payable—Note 5   
973,502,186   
499,479,256 
Amounts due to bank   
   
231,476 
Payable for securities transactions   
993,809   
 
Accrued real estate property level expenses   
145,789,277   
84,959,882 
Security deposits held   
16,430,039   
13,759,324 




TOTAL LIABILITIES   
1,136,715,311   
598,429,938 




NET ASSETS   
   
 
 Accumulation Fund   
10,227,655,797   
7,015,717,162 
 Annuity Fund   
321,055,305   
229,832,824 




TOTAL NET ASSETS   
$
10,548,711,102   
$
7,245,549,986 




NUMBER OF ACCUMULATION UNITS   
   
 
   OUTSTANDING—Notes 6 and 7   
42,623,491   
33,337,597 




NET ASSET VALUE, PER ACCUMULATION UNIT—Note 6   
$
239.95   
$
210.44 





See notes to the financial statements.

29


TIAA REAL ESTATE ACCOUNT
STATEMENTS OF OPERATIONS

   
Years Ended December 31,
 


 
   
2005
2004 
2003
 


         

       

 
 
INVESTMENT INCOME   
   
   
 
 Real estate income, net:   
   
   
 
   Rental income   
$
618,633,580    
$
397,198,276   
$
361,616,650  


 



 
   Real estate property level expenses and taxes:   
   
   
 
     Operating expenses   
150,501,136    
100,991,997   
87,238,469  
     Real estate taxes   
88,014,264    
55,946,418   
49,440,101  
     Interest expense   
40,028,630    
830,361   
 


 



 
Total real estate property level expenses and taxes         
278,544,030    
157,768,776   
136,678,570  


 



 
Real estate income—net   
340,089,550    
239,429,500   
224,938,080  
Income from joint ventures   
63,580,501    
57,275,242   
31,989,569  
Dividends   
25,130,706    
26,568,264   
12,240,166  
Interest   
54,114,448    
15,055,451   
7,221,765  


 



 
TOTAL INCOME   
482,915,205    
338,328,457   
276,389,580  


 



 
Expenses—Note 2:   
   
   
 
 Investment advisory charges   
19,603,225    
14,393,388   
12,751,191  
 Administrative and distribution charges   
27,130,406    
16,372,446   
14,786,580  
 Mortality and expense risk charges   
6,196,549    
4,093,858   
2,916,880  
 Liquidity guarantee charges   
3,170,017    
1,868,733   
1,199,414  


 



 
TOTAL EXPENSES   
56,100,197    
36,728,425   
31,654,065  


 



 
INVESTMENT INCOME—NET   
426,815,008    
301,600,032   
244,735,515  


 



 
REALIZED AND UNREALIZED   
   
   
 
 GAIN (LOSS) ON INVESTMENTS   
   
   
 
   Net realized gain (loss) on:   
   
   
 
     Real estate properties   
84,764,142    
13,827,432   
32,598,548  
     Marketable securities   
35,168,209    
47,375,999   
7,692,266  


 



 
     Total realized gain (loss) on investments   
119,932,351    
61,203,431   
40,290,814  


 



 
 Net change in unrealized appreciation (depreciation) on:   
   
   
 
   Real estate properties and debt   
505,415,483    
170,703,978   
(37,639,368 ) 
   Real estate joint ventures and limited partnerships   
168,723,129    
161,584,369   
23,914,271  
   Marketable securities   
(28,100,691 )   
21,088,525   
32,271,654  


 



 
Net change in unrealized appreciation (depreciation) on investments   
646,037,921    
353,376,872   
18,546,557  


 



 
NET REALIZED AND UNREALIZED   
   
   
 
GAIN (LOSS) ON INVESTMENTS   
765,970,272    
414,580,303   
58,837,371  


 



 
NET INCREASE IN NET ASSETS   
   
   
 
RESULTING FROM OPERATIONS   
$
1,192,785,280    
$
716,180,335   
$
303,572,886  


 



 

See notes to the financial statements.

30


TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
   
   
   
Years Ended December 31,
 


 
   
2005
          
2004
          
2003
 


 

 

 
FROM OPERATIONS   
   
   
 
 Investment income, net   
$ 
426,815,008    
$
301,600,032    
$
244,735,515  
 Net realized gain on investments   
119,932,351    
61,203,431    
40,290,814  
 Net change in unrealized appreciation (depreciation)   
   
   
 
   on investments   
646,037,921    
353,376,872    
18,546,557  


 

 

 
NET INCREASE IN NET ASSETS    
   
   
 
RESULTING FROM OPERATIONS   
1,192,785,280    
716,180,335    
303,572,886  


 

 

 
 
FROM PARTICIPANT TRANSACTIONS   
   
   
 
 Premiums   
968,189,436    
738,048,183    
515,435,665  
 Net transfers from (to) TIAA   
197,272,397    
147,340,801    
30,198,200  
 Net transfers from CREF Accounts   
1,238,160,587    
1,041,124,402    
403,594,402  
 Annuity and other periodic payments   
(44,487,142 )   
(30,761,316 )   
(22,213,682 ) 
 Withdrawals and death benefits   
(248,759,442 )   
(159,804,580 )   
(113,153,870 ) 


 

 

 
NET INCREASE IN NET ASSETS RESULTING   
   
   
 
FROM PARTICIPANT TRANSACTIONS   
2,110,375,836    
1,735,947,490    
813,860,715  


 

 

 
NET INCREASE IN NET ASSETS   
3,303,161,116    
2,452,127,825    
1,117,433,601  
 
NET ASSETS   
   
   
 
 Beginning of year   
7,245,549,986    
4,793,422,161    
3,675,988,560  


 

 

 
 End of year   
$ 
10,548,711,102    
$
7,245,549,986    
$
4,793,422,161  


 

 

 

See notes to the financial statements.

31


TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CASH FLOWS
         
   
Years Ended December 31,
 


 
   
2005 
2004
2003
 


       


         

 
CASH FLOWS FROM OPERATING ACTIVITIES                 
 Net increase in net assets resulting from operations    $  1,192,785,280     $ 716,180,335    
$
303,572,886  
 Adjustments to reconcile net increase in net assets resulting                 
   from operations to net cash used in operating activities:                 
   Purchases of real estate properties     
(1,864,646,776
)     (1,690,454,136 )    (326,513,028 ) 
   Capital improvements on real estate properties     
(83,150,771
)     (37,811,864 )    (26,697,465 ) 
   Proceeds from sale of real estate properties      511,500,399     113,765,000     187,225,000  
   Decrease (increase) in other investments     
(1,313,788,390
)     (648,107,782 )    (958,290,679 ) 
   Increase in other assets     
(80,412,203
)     (30,270,749 )    (19,808,324 ) 
   Increase (decrease) in amounts due to bank     
(231,476
)     (783,869 )    1,015,345  
   Increase in accrued real estate property level expenses                 
         and taxes      60,829,395     25,445,331     18,678,441  
   Increase in security deposits held      2,670,715     621,654     1,419,425  
   Increase (decrease) in other liabilities     
(1,162,347
)          
   Net realized gain on investments     
(119,932,351
)     (13,827,432 )    (32,598,548 ) 
   Unrealized (gain) loss on investments     
(646,037,921
)     (170,703,978 )    37,639,368  


   

 

 
NET CASH USED IN                 
OPERATING ACTIVITIES     
(2,341,576,446
)     (1,735,947,490 )    (814,357,579 ) 


   

 

 
CASH FLOWS FROM FINANCING ACTIVITIES                 
 Premiums      968,189,436     738,048,183     515,435,665  
 Net transfers from (to) TIAA      197,272,397     147,340,801     30,198,200  
 Net transfers from CREF Accounts      1,238,160,587     1,041,124,402     403,594,402  
 Principal payments of mortgages     
(173,361
)          
 Proceeds from mortgage financing      232,585,341          
 Annuity and other periodic payments     
(44,487,142
)     (30,761,316 )    (22,213,682 ) 
 Withdrawals and death benefits     
(248,759,442
)     (159,804,580 )    (113,153,870 ) 


   

 

 
NET CASH PROVIDED BY                 
FINANCING ACTIVITIES      2,342,787,816     1,735,947,490     813,860,715  


 

 

 
 
NET INCREASE (DECREASE) IN CASH      1,211,370         (496,864 ) 
CASH                 
 Beginning of year              496,864  


 

 

 
 End of year    $  1,211,370    
$
    $  


 

 

 
Supplemental disclosure: Cash paid for interest    $  38,267,618    
$
121,408     $  


 

 

 
Non-cash activity: Debt assumed upon purchase of real estate 
  $  211,400,000    
$
499,479,256     $  


 

 

 

See notes to the financial statements.

32


TIAA REAL ESTATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS

Note 1—Significant Accounting Policies

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 investment objective of the Account is a favorable long-term rate of return primarily through rental income and capital appreciation from real estate investments owned by the Account. The Account holds real estate properties directly and through wholly-owned subsidiaries. The Account also holds interests in joint ventures and limited partnerships that own real estate. 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. The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which may require the use of estimates made by management. Actual results may vary from those estimates. The following is a summary of the significant accounting policies of the Account.

Basis of Presentation: The accompanying financial statements include the Account and those subsidiaries wholly-owned by TIAA for the benefit of the Account. All significant intercompany accounts and transactions 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 TIAA 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 and that such change is not reflected in the quarterly appraisal. The independent fiduciary must also approve an appraisal where a property’s value changed by 6% or more from the most recent annual appraisal. The independent fiduciary is appointed by a special subcommittee of TIAA’s Board of Trustees. 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. Real estate properties subject to a mortgage including debt assumed in connection with the purchase of real estate, are generally valued as described. However, beginning in 2005 the value of the mortgage is appraised independently of the property and its fair value is reported separately, whereas in 2004, any change in the fair value of the mortgage, including debt assumed in connection with the purchase of real estate, was shown as an adjustment to the real estate property value. The fair value of the outstanding mortgage could have a material affect on the equity investment value of the property. The independent fiduciary reviews and approves any such valuation adjustments which exceed certain prescribed limits before such adjustments are recorded by the Account. The Account continues to use the revised value to calculate the Account’s net asset value until the next valuation review or appraisal.

Valuation of Real Estate Joint Ventures: Real estate joint ventures are stated at the Account’s equity in the net assets of the underlying entities, which value their real estate holdings and mortgage notes payable at fair value.

33


Valuation of Marketable Securities: Equity securities listed or traded on any national market or exchange are valued at the last sale price as of the close of the principal securities 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. Debt securities, other than money market instruments, are valued at the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality and type). Money market instruments, with maturities of one year or less, are valued in the same manner as debt securities or derived from a pricing matrix that has various types of money market instruments along one axis and various maturities along the other. Portfolio securities and limited partnership interests 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 TIAA Board of Trustees and in accordance with the responsibilities of the Board as a whole.

Accumulation and Annuity Funds: The Accumulation Fund represents the net assts attributable to participants in the accumulation phase of their investment. The Annuity Fund represents the net assets attributable to the participants currently receiving annuity payments. The net increase or decrease in net assets from investment operations is apportioned between the accounts based upon their relative daily net asset values. Once an Account participant begins receiving lifetime annuity income benefits, monthly payment levels cannot be reduced as a result of the Account’s adverse mortality experience. In addition, the contracts are required to stipulate the maximum expense charge that can be assessed, which is equal to 2.50% of average net assets per year. Accordingly, a small risk charge is paid by the Account to TIAA to assume these risks.

Accounting for Investments: Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties close (settlement date). 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. The Account recognizes a gain to the extent that the contract sales price exceeds the cost-to-date of the property being sold. A loss occurs when the cost-to-date exceeds the sales price. As the Account is marked-to-market and all properties are appraised quarterly, any accumulated unrealized gains and losses are reversed in the same period in which the realized gains and losses are recognized.

The Account has limited partnership interests in various real estate funds (limited partnerships). The Account records its contributions as increases to the investments and distributions from the investments are treated as either income or return of capital as determined by the management of the limited partnerships. Unrealized gains and losses are calculated and recorded quarterly when the Account’s accounting records are compared to the financial statements of the limited partnerships.

Income from joint ventures is recorded based on the Account’s proportional interest in the income earned by the joint venture that has been distributed from the joint venture to the Account.

Securities transactions are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned and includes accrual of discount and amortization of premium. Dividend income is recorded on the ex-dividend date or as soon as the Account is informed of the dividend. Realized gains and losses on securities transactions are accounted for on the specific identification method.

34


Mortgage Notes Payable: Commencing in 2005, the Account separately reports mortgage notes payable at estimated market value. Estimated market values are based on the amount at which the liability could be settled (either transferred or paid back) in a current transaction exclusive of direct transaction costs. Different assumptions or changes in future market conditions could significantly affect estimated market value. At times, the Account may assume debt in connection with the purchase of real estate. For debt assumed, the Account allocates a portion of the purchase price to the below or above market rate debt and amortizes the premium or discount over the remaining life of the debt.

Foreign currency transactions and translation: Portfolio investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of securities, income receipts and expense payments made in foreign currencies are translated into U.S. dollars at the exchange rates prevailing on the respective dates of the transactions. The effect of changes in foreign currency exchange rates on portfolio investments are included in the net realized and unrealized gains and losses on investments. Net realized gains and losses on foreign currency transactions include disposition of foreign currencies and currency gains and losses between the accrual and receipt dates of portfolio investment income and between the trade and settlement dates of portfolio investment transactions.

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 2—Management Agreements

Investment advisory services for the Account are provided by TIAA employees, under the direction of TIAA’s Board of Trustees and its Investment Committee, 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. TIAA also provides all portfolio accounting and related services for the Account.

Distribution and administrative services for the Account are provided by TIAA-CREF Individual & Institutional Services, LLC (“Services”) pursuant to a Distribution and Administrative Services Agreement with the Account. Services, a wholly-owned subsidiary of TIAA, is a registered broker-dealer and member of the National Association of Securities Dealers, Inc.

The services performed by TIAA and Services are provided at cost. TIAA and Services receive payments from the Account on a daily basis according to formulas established each year with the objective of keeping the payments as close as possible to the Account’s actual expenses. Any differences between actual expenses and the amounts paid are adjusted quarterly.

TIAA also provides a liquidity guarantee to the Account, for an annual rate of .04% of net assets, 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 imposes a daily charge for bearing certain mortality and expense risks in connection with the contracts equivalent to an annual rate of .07% of net assets of the Account.

35


Note 3—Leases

The Account’s real estate properties are leased to tenants under operating lease agreements which expire on various dates through 2031. Aggregate minimum annual rentals for the properties owned, excluding short-term residential leases, are as follows:

Years Ending       
December 31,       

2006    $  653,416,605 
2007      611,538,186 
2008      549,973,188 
2009      491,561,855 
2010      396,090,166 
2011-2031      1,198,826,686 


 
Total    $  3,901,406,686 



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

Note 4—Investment in Joint Ventures

The Account owns several real estate properties through joint ventures and receives distributions and allocations of profits and losses from the joint ventures based on the Account’s ownership interest percentages. Several of these joint ventures have mortgage notes payable on the properties owned. The Account’s allocated portion of the mortgage notes payable is $468,664,313 and $345,136,785 at December 31, 2005 and 2004, respectively. The Accounts’ equity in the joint ventures at December 31, 2005 and 2004 was $1,222,036,564 and $1,257,893,004, respectively. A condensed summary of the financial position and results of operations of the joint ventures is shown below.

         
December 31, 2005 
December 31, 2004 
       

       

Assets               
 
 Real estates properties, at value          $  2,989,209,293   
$
2,760,426,300 
 Other assets            80,768,265   
55,021,655 




         Total assets          $  3,069,977,558   
$
2,815,447,955 




Liabilities and Equity               
 
 Mortgages notes payable          $  865,828,626   
$
618,773,569 
 Other liabilities            70,471,251   
47,389,201 




         Total liabilities            936,299,877   
666,162,770 
Equity            2,133,677,681   
2,149,285,185 




         Total liabilities and equity 
        $  3,069,977,558   
$
2,815,447,955 




 
   
Year Ended 
Year Ended 
Year Ended 
   
December 31, 2005 
December 31, 2004 
December 31, 2003 






Operating Revenues and Expenses               
 
 Revenues   
$ 
270,519,206    $  250,697,181   
$
145,432,123 
 Expenses   
142,782,169      122,017,640   
77,571,384 






   Excess of revenues over expenses 
 
$ 
127,737,037    $  128,679,541   
$
67,860,739 







36


Note 5—Mortgage Notes Payable

At December 31, 2005 and 2004, the Account had outstanding mortgage balances on the properties as follows:

    Interest   
Amount 
 
Amount 
     
Property    Rate Percentage   
2005 
 
2004 
   
Due







50 Fremont     6.40 paid monthly(d)   
$
135,000,000 
 
$
135,000,000      August 21, 2013 
Ontario Industrial Portfolio    7.24 paid monthly(a)   
9,305,895 
 
9,479,256      May 1, 2011 
IDX Tower     6.40 paid monthly(d)   
145,000,000 
 
145,000,000      August 21, 2013 
1001 Pennsylvania Ave     6.40 paid monthly(d)   
210,000,000 
 
210,000,000      August 21, 2013 
99 High Street    5.5245 paid monthly(b)   
185,000,000 
 
      November 11, 2015 
Reserve at Sugarloaf    5.49 paid monthly(c)   
26,400,000 
 
      June 1, 2013 
Westferry Circus    5.4003 paid quarterly(d)   
230,429,185 
 
      November 15, 2012 




   Total maturities       
$
941,135,080 
 
$
499,479,256       
   Net unrealized loss 
     
32,367,106 




   Total Mortgage Notes Payable 
   
$
973,502,186 
 
       



(a)      Principal payments due monthly with balloon payment of $8,127,115 due on May 1, 2011. The rate of 7.24% paid monthly is fixed. Debt was assumed at the time of acquisition.
 
(b) Debt assumed in conjunction with property acquired in 2005 the mortgage was refinanced on October 21, 2005 at a fixed rate of 5.5245%.
 
(c) Debt assumed in conjunction with property acquired in 2005 at a fixed rate of 5.49%.
 
(d) The mortgage is interest only with balloon payment at maturity. The interest rate is fixed.
 

Principal on mortgage notes payable is due as follows:

   
Amount 


2006    $  186,862 
2007      201,415 
2008      215,163 
2009      233,858 
2010      252,070 
Thereafter      940,045,712 


Total maturities    $  941,135,080 



37


Note 6—Condensed Financial Information

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

 
Years Ended December 31,
 







 
 
2005
 
2004
 
2003
 
2002
 
2001
 
 

 

 

 

 

 
Per Accumulation Unit data:           
 Rental income   
$
15.604  
$
13.422  
$
15.584  
$
14.225  
$
14.862  
Real estate property level expenses and taxes
7.026   5.331   5.890   4.819   4.754  
 

 

 

 

 

 
Real estate income, net  8.578   8.091   9.694   9.406   10.108  
 Income from real estate joint ventures  1.604   1.935   1.379   0.807   0.130  
 Dividends and interest  1.998   1.406   0.839   1.249   1.950  
 

 

 

 

 

 
Total income  12.180   11.432   11.912   11.462   12.188  
 Expense charges (1)  1.415   1.241   1.365   1.101   0.995  
 

 

 

 

 

 
Investment income, net  10.765   10.191   10.547   10.361   11.193  
 Net realized and unrealized           
   gain (loss) on investments  18.744   13.314   2.492   (4.621 )  (1.239 ) 
 

 

 

 

 

 
 Net increase in Accumulation Unit Value  29.509   23.505   13.039   5.740   9.954  
 Accumulation Unit Value:           
   Beginning of year  210.444   186.939   173.900   168.160   158.206  
 

 

 

 

 

 
   End of year   
$
239.953  
$
210.444  
$
186.939  
$
173.900  
$
168.160  
 

 

 

 

 

 
 Total return 
14.02 % 
12.57 % 
7.50 % 
3.41 % 
6.29 % 
 Ratios to Average Net Assets: 
 
 
 
 
 
   Expenses (1) 
0.63 % 
0.63 % 
0.76 % 
0.67 % 
0.61 % 
   Investment income, net 
4.82 % 
5.17 % 
5.87 % 
5.65 % 
6.81 % 
 Portfolio turnover rate: 
 
 
 
 
 
   Real estate properties 
6.72 % 
2.32 % 
5.12 % 
0.93 % 
4.61 % 
   Securities 
77.63 % 
143.47 % 
71.83 % 
52.08 % 
40.62 % 
 Thousands of Accumulation Units 
 
 
 
 
 
   outstanding at end of year 
42,623  
33,338  
24,724  
20,347  
18,456  
 Net assets end of year (in thousands)   
$
10,548,711  
$
7,245,550  
$
4,793,422  
$
3,675,989  
$
3,213,667  

(1) Expense charges per Accumulation Unit and the Ratio of Expenses to Average Net Assets exclude real estate property level expenses. If the real estate property level expenses were included, the expense charge per Accumulation Unit for the year ended December 31, 2005 would be $8.441 ($6.572, $7.255, $5.920 and $5.749 for the years ended December 31, 2004, 2003, 2002 and 2001, respectively), and the Ratio of Expenses to Average Net Assets for the year ended December 31, 2005 would be 3.78% (3.33%, 4.04%, 3.61% and 3.50% for the years ended December 31, 2004, 2003, 2002 and 2001, respectively).
 

38


Note 7—Accumulation Units

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

    For the Years Ended December 31, 

    2005      2004    2003 


   
Credited for premiums   
4,335,121
3,746,093
2,860,354
Credited (cancelled) for transfers, net disbursements   
 and amounts applied to the Annuity Fund   
4,950,773
4,867,321
1,517,133
Outstanding:   
 Beginning of year   
33,337,597
24,724,183
20,346,696



 End of year   
42,623,491
33,337,597
24,724,183




Note 8—Commitments

During the normal course of business, the Account enters into discussions and agreements to purchase or sell real estate properties. As of December 31, 2005, the Account had two outstanding commitments to purchase a bulk distribution warehouse property for approximately $34.7 million (which has closed subsequent to December 31, 2005) and a mixed use project comprised of an office building and a retail component for a total net amount of $85 million. This property will be subject to approximately $112.7 million in debt. Subsequent to December 31, 2005 the Account placed approximately $153 million in debt on Lincoln Centre which was purchased in the 4th quarter of 2005.

In addition, the Account has outstanding commitments to purchase interests in six limited partnerships and to purchase shares in a private real estate equity investment trusts, which total $366.7 million. As of December 31, 2005, $101.3 million remains to be funded under these commitments.

Other than lawsuits in the ordinary course of business, that are expected to have no material impact, there are no lawsuits in which the Account is a party.

39


TIAA REAL ESTATE ACCOUNT
STATEMENTS OF INVESTMENTS
December 31, 2005 and 2004

REAL ESTATE PROPERTIES —69.46% and 69.78%

 
Value 

 
Location / Description 
2005 
 
2004 
 





 
Alabama:             
             Inverness Center - Office building 
$ 
98,090,987  
$ 
 
Arizona:             
             Biltmore Commerce Center - Office building        34,104,182  
             Mountain RA Industrial Portfolio - Industrial building    5,754,652     5,513,947  
California:             
             3 Hutton Centre Drive - Office building    48,349,580     41,106,333  
             9 Hutton Centre - Office building    26,746,837     23,169,449  
             50 Fremont - Office building    373,010,003
(1) 
323,264,602
(1) 
             88 Kearny Street - Office building    81,567,474     69,026,718  
             Cabot Industrial Portfolio - Industrial building    77,000,000      
             Capitol Place - Office building    48,000,000     42,400,000  
             Centerside I - Office building    66,000,000     65,037,900  
             Centre Pointe and Valley View - Industrial building    28,000,000     25,329,023  
             Eastgate Distribution Center - Industrial building    22,000,000     18,800,000  
             Embarcadero Center West - Office building    205,965,261      
             Kenwood Mews - Apartments    30,000,000     27,700,000  
             Larkspur Courts - Apartments    86,000,000     66,000,000  
             The Legacy at Westwood - Apartments    100,000,000     90,750,000  
             Northern CA RA Industrial Portfolio - Industrial building    62,325,024     59,169,642  
             Northpoint Commerce Center - Industrial building        46,000,000  
             Ontario Industrial Portfolio - Industrial building    230,000,000 (1) 187,079,256 (1)
             Regents Court - Apartments    62,500,000     56,700,000  
             Southern CA RA Industrial Portfolio - Industrial building    89,017,793     89,097,299  
             U.S. Bank Plaza - Office building    159,000,000      
             Westcreek - Apartments    30,939,671     28,161,865  
             West Lake North Business Park - Office building    57,600,000     50,021,000  
             Westwood Marketplace - Shopping center    86,000,000     80,019,410  
Colorado:             
             The Lodge at Willow Creek - Apartments    34,600,000     32,201,274  
             The Market at Southpark - Shopping center    34,001,746     33,522,400  
             Monte Vista - Apartments    24,647,901     22,501,650  
             Palomino Park - Apartments    176,232,394      
Connecticut:             
             Ten & Twenty Westport Road - Office building    157,000,000     148,000,000  
Delaware:             
             Mideast RA Industrial Portfolio- Industrial building    14,258,555     16,543,121  
Florida:             
             701 Brickell - Office building    201,173,724     177,000,000  
             4200 West Cypress Street - Office building    36,691,519     33,900,000  
             The Fairways of Carolina - Apartments    21,100,000     18,100,000  
             Golfview - Apartments    30,835,506     28,543,437  
             The Greens at Metrowest - Apartments    18,200,000     14,623,330  
             Maitland Promenade One - Office building    37,817,891     36,053,639  
             Plantation Grove - Shopping center    13,800,000     11,200,000  
             Pointe on Tampa Bay - Office building    44,711,876     40,551,310  
             Quiet Waters at Coquina Lakes - Apartments    20,912,293     19,200,000  
             Royal St. George - Apartments    21,400,000     19,400,000  

40


   
Value 
 
Location / Description   
2005 
 
2004 




             Sawgrass Office Portfolio - Office building   
$ 
59,700,000  
$ 
52,000,000 
             South Florida Apartment Portfolio - Apartments      56,400,000     47,700,000 
             Suncrest Village - Shopping center      16,400,000      
             Urban Centre - Office building      106,007,400      
Georgia:             
             Alexan Buckhead - Apartments      34,800,000     37,500,000 
             Atlanta Industrial Portfolio - Industrial building      73,825,000     37,750,840 
             Reserve at Sugarloaf - Apartments      44,800,000 (1)   
             Glenridge Walk - Apartments      45,300,000      
             1050 Lenox Park - Apartments      71,000,000      
             Shawnee Ridge Industrial Portfolio - Industrial building      44,418,860      
Illinois:             
             Chicago CalEast Industrial Portfolio- Industrial building      74,622,731     42,000,000 
             Chicago Industrial Portfolio - Industrial building      72,000,000     70,002,239 
             Columbia Centre III - Office building      28,700,000     28,900,000 
             East North Central RA Industrial Portfolio- Industrial building      37,717,159     23,734,331 
             Oak Brook Regency Towers - Office building      73,400,000     68,400,000 
             Parkview Plaza - Office building      54,500,000     48,700,000 
             Rolling Meadows - Shopping center          15,750,000 
Kentucky:             
             IDI Kentucky Portfolio - Industrial building      58,500,000     49,000,000 
Maryland:             
             Corporate Boulevard - Office building          65,038,710 
             FEDEX Distribution Facility - Industrial building      8,500,000     8,200,000 
             GE Appliance East Coast Distribution Facility - Industrial building      46,470,475      
Massachusetts:             
             99 High Street - Office building      276,266,900 (1)   
             Batterymarch Park II - Office building      11,472,283     10,700,000 
             Longwood Towers - Apartments          82,500,000 
             Needham Corporate Center - Office building      17,143,612     15,030,046 
             Northeast RA Industrial Portfolio- Industrial building      29,000,000     33,110,903 
Michigan:             
             Indian Creek - Apartments          18,825,000 
Minnesota:             
             Interstate Crossing - Industrial building          7,300,000 
             River Road Distribution Center - Industrial building          4,600,000 
Nevada:             
             UPS Distribution Facility - Industrial building      15,000,000     12,900,000 
New Jersey:             
             10 Waterview Boulevard - Office building      27,500,000     26,400,000 
             371 Hoes Lane - Office building      11,700,000     10,666,570 
             Konica Photo Imaging Headquarters - Industrial building      25,300,000     21,200,000 
             Morris Corporate Center III - Office building      97,400,000     82,300,000 
             NJ CalEast Industrial Portfolio- Industrial building      42,000,000     39,300,000 
             Plainsboro Plaza - Shopping center      50,745,252      
             South River Road Industrial - Industrial building      55,000,000     34,900,000 
New York:             
             780 Third Avenue - Office building      230,000,000     197,000,000 
             The Colorado - Apartments      85,048,163     58,156,056 
Ohio:             
             Bent Tree - Apartments          13,600,000 
             Columbus Portfolio - Office building      23,000,000     21,500,000 

41


    Value 

 
Location / Description      2005      2004   



 
 
Oregon:               
             Five Centerpointe - Office building   
$ 
    $  14,500,000  
Pennsylvania:               
             Lincoln Woods - Apartments      35,528,316     31,472,870  
Tennessee:               
             Memphis CalEast Industrial Portfolio- Industrial building      54,000,000     47,400,000  
             Summit Distribution Center- Industrial building      25,900,000     23,800,000  
Texas:               
             Butterfield Industrial Park - Industrial building     
4,618,955
(2)  
4,600,000
(2)
             Dallas Industrial Portfolio - Industrial building      146,000,000     138,500,000  
             Four Oaks Place - Office building      295,239,109     255,357,238  
             The Caruth - Apartments      61,200,000      
             The Legends at Chase Oaks - Apartments      28,499,971     27,051,851  
             Lincoln Centre - Office building      255,311,299      
             The Maroneal - Apartments      35,000,000      
United Kingdom:               
             1& 7 Westferry Circus - Office building     
373,116,817
(1)     
Utah:               
             Landmark at Salt Lake City (Building #4) - Industrial building      14,700,000     12,500,000  
Virginia:               
             8270 Greensboro Drive - Office building      60,200,000      
             Ashford Meadows - Apartments      78,904,526     68,000,000  
             Fairgate at Ballston - Office building      35,300,000     28,500,017  
             Monument Place - Office building      53,000,000     37,000,000  
             One Virginia Square - Office building      47,000,000     42,500,000  
Washington:               
             IDX Tower - Office building     
370,000,000
(1)  
347,978,282 
(1)
             Northwest RA Industrial Portfolio- Industrial building      19,700,000     19,438,852  
             Rainier Corporate Park - Industrial building      64,273,372     56,035,878  
             Regal Logistics Campus - Industrial building      63,103,879      
Washington DC:               
             1001 Pennsylvania Avenue - Office building     
502,993,710
(1)  
466,424,940
(1)
             1015 15th Street - Office building      73,121,166     59,000,134  
             1900 K Street - Office building      230,000,000     219,453,706  
             The Farragut Building - Office building          46,500,000  
             Mazza Gallerie - Shopping center      86,001,109     81,000,000  


 
 
 
             TOTAL REAL ESTATE PROPERTIES               
                   (Cost $7,386,769,868 and $5,315,565,355)      7,977,600,751     5,391,469,250  


 
 
OTHER REAL ESTATE RELATED INVESTMENTS—12.35% and 16.68% 
             
REAL ESTATE JOINT VENTURE—10.64% and 16.28%               
             Teachers REA LLC, which owns               
                   Cabot Industrial Portfolio (100% Account Interest)          60,600,000  
             Bisys Crossings I, LLC               
                         BISYS Fund Services Building (96% Account Interest) 
        34,751,940  
             GA-Buckhead LLC               
                   Prominence in Buckhead (75% Account Interest)      97,142,406     80,618,771  
             IL-161 Clark Street LLC               
                   161 North Clark Street (75% Account Interest)      175,578,714     157,282,972  
             One Boston Place REIT               
                   One Boston Place (50.25% Account Interest)      149,723,498     139,382,942  
             Storage Portfolio I, LLC               
                   Storage Portfolio (3) (75% Account Interest)     
63,237,298
(4)
 
50,430,399
(4)

42


         
Value 

 
Location / Description 
      2005      2004   


 
 
             CA-Treat Towers LP             
                   Treat Towers (75% Account Interest)  $  93,964,192   $ 88,524,364  
             Strategic Ind Portfolio I, LLC   
   
 
                   IDI Nationwide Industrial Portfolio (3) (60% Account Interest)   
66,871,766
(4)
 
64,041,442
(4)
             CA-Colorado Center LP   
 
                   Yahoo! Center (50% Account Interest)   
138,531,366
(4)
 
222,702,820
             Florida Mall Associates, Ltd.   
 
                   The Florida Mall (50% Account Interest)   
208,013,192
(4)
 
162,632,565
(4)
             Teachers REA IV, LLC, which owns   
 
                   Tyson’s Executive Plaza II (50% Account Interest)   
34,032,806
 
27,894,742
             West Dade Associates   
 
                   Miami International Mall (50% Account Interest)   
82,290,482
(4)
 
61,577,257
(4)
             West Town Mall, LLC   
 
                   West Town Mall (50% Account Interest)   
112,650,844
(4)
 
107,452,790
(4)


 

 
 
             TOTAL REAL ESTATE JOINT VENTURE   
   
 
                   (Cost $888,034,873 and $1,060,788,631)   
1,222,036,564
   
1,257,893,004
 


 

 
 
LIMITED PARTNERSHIPS— 1.71% and 0.40%   
   
 
             Cobalt Industrial REIT (10.00% Account Interest)   
8,352,409
   
 
             Colony Realty Partners, LP (5.27% Account Interest)   
13,481,704
   
 
             Essex Apartment Value Fund, LP (10% Account Interest)   
487,306
   
11,434,495
 
             Heitman Value Partners, LP (8.43% Account Interest)   
8,106,810
   
3,766,214
 
             Lion Gables Apartment Fund, LP (18.45% Account Interest)   
150,000,000
   
 
             MONY/Transwestern Mezzanine Realty Partners II, LLC   
   
 
                   (16.67% Account Interest)   
14,142,822
   
3,134,952
 
             MONY/Transwestern Mezzanine Realty Partners, LP   
   
 
                   (19.75% Account Interest)   
1,975,927
   
12,486,734
 


 

 
 
             TOTAL LIMITED PARTNERSHIP   
   
 
                   (Cost $198,006,414 and $24,931,845)   
196,546,978
   
30,822,395
 


 

 
 
TOTAL OTHER REAL ESTATE RELATED INVESTMENTS   
   
 
   (Cost $1,086,041,287 and $1,085,720,476)   
1,418,583,542
   
1,288,715,399
 


 

 
 
     MARKETABLE SECURITIES—18.19% and 13.54%   
   
 
 
     REAL ESTATE RELATED—3.91% and 4.79%   
   
 
 
     REAL ESTATE EQUITY SECURITIES—3.72% and 4.25%   
   
 
Shares       
   
 

2005  
2004
  Issuer   
   
 



75,000 
      Aames Investment Corp   
484,500
   
 
 
  70,000    Acadia Realty Trust   
   
1,141,000
 
550,000 
  550,000    Affordable Residential Communities   
5,241,500
   
7,892,500
 
36,685 
  36,685    AMB Property Corp   
1,803,801
   
1,481,707
 
40,000 
  446,100    American Campus Communities   
992,000
   
10,032,789
 
919,000 
      American Financial Realty   
11,028,000
   
 
 
  140,000    Amli Residential Properties   
   
4,480,000
 
450,000 
  46,000    Archstone-Smith Trust   
18,850,500
   
1,761,800
 
150,000 
  232,900    Ashford Hospitality Trust   
1,573,500
   
2,531,623
 
40,000 
      Avalonbay Communities Inc   
3,570,000
   
 
150,000 
      Bimini Mortgage Management-A   
1,357,500
   
 

43


Shares 
      Value








2005  
2004
  Issuer      2005      2004 





    150,000    Boston Properties Inc.   
$ 
   
$ 
9,700,500 
    150,000    Brandywine Realty Trust            4,408,500 
30,000    35,000    BRE Properties      1,364,400      1,410,850 
270,000        Brookfield Properties      7,943,400       
    60,000    Capital Lease Funding Inc.            750,000 
194,000        Carramerica Realty Corp      6,718,220       
424,000        Cedar Shopping Centers Inc.      5,965,680       
50,000    60,000    Centerpoint Properties Trust      2,474,000      2,873,400 
280,000        Cogdell Spencer Inc.      4,729,200       
    143,000    Corporate Office Properties            4,197,050 
976,000        Deerfield Triarc Capital Cor      13,371,200       
380,000    434,000    Developers Diversified Realty      17,867,600      19,256,580 
    1,072,990    Digital Realty Trust Inc.            14,453,175 
193,400        Duke Realty Corp.      6,459,560       
1,087,000        ECC Capital Corp.      2,456,620       
600,000        Education Realty Trust Inc      7,734,000       
    31,875    Equity Lifestyle Properties            1,139,532 
    147,518    Equity Office Properties Trust            4,295,724 
180,000    180,000    Equity Residential      7,041,600      6,512,400 
580,577    594,500    Extra Space Storage Inc.      8,940,886      7,924,685 
    413,873    Falcon Financial Investment            2,897,111 
1,367,000    1,367,000    Feldman Mall Properties      16,417,670      17,784,670 
111,600        First Potomac Realty Trust      2,968,560       
110,000    110,000    General Growth Properties      5,168,900      3,977,600 
    75,000    Glenborough Realty Trust Inc.            1,596,000 
404,800    912,000    GMH Communities Trust      6,278,448      12,859,200 
348,700    38,818    Gramercy Capital Corp.      7,943,386      799,651 
300,000    72,550    Great Wolf Resorts Inc.      3,093,000      1,620,767 
    75,000    HealthCare Realty Trust Inc.            3,052,500 
562,000    350,000    Hersha Hospitality Trust      5,063,620      4,007,500 
150,000        Highland Hospitality Corp.      1,657,500       
60,000        Hilton Hotels Corp.      1,446,600       
80,000    168,000    Home Properties Inc.      3,264,000      7,224,000 
450,000    325,000    Homebanc Corp/Ga.      3,366,000      3,146,000 
300,000        Host Marriott Corp      5,685,000       
    74,257    Impac Mortgage Holdings Inc.            1,683,406 
300,000    300,000    Interstate Hotels & Resorts      1,311,000      1,608,000 
80,000        Istar Financial Inc      2,852,000       
1,958,000    1,908,000    Jameson Inns Inc      4,209,700      3,758,760 
100,000        JER Investors Trust Inc.      1,695,000       
108,000    54,000    Kimco Realty Corp      3,464,640      3,131,460 
426,000    324,443    Kite Realty Group Trust      6,590,220      4,957,489 
300,000        KKR Financial Corp      7,197,000       
200,000        Lasalle Hotel Properties      7,344,000       
120,000    215,078    Lexington Corporate Properties Trust      2,556,000      4,856,461 
1,266,660    1,266,660    Lodgian Inc      13,591,262      15,579,918 
200,000    162,000    LTC Properties Inc      4,206,000      3,225,420 
75,000    150,000    Macerich Company/The      5,035,500      9,420,000 
400,000    30,420    Mack-Cali Realty Corp.      17,280,000      1,400,233 
200,000        Medical Properties Trust Inc.      1,956,000       
40,000    40,000    Mills Corp/The      1,677,600      2,550,400 
100,000    150,000    Mission West Properties      974,000      1,596,000 
331,200        Monmouth REIT-CLA      2,656,224       
300,000        Mortgageit Holdings Inc      4,098,000       

44


    Shares    
Value 

 


    2005  
2004
  Issuer    2005     2004


 


    130,000        NewCastle Investment Corp  $ 3,230,500    $  
        270,000    New York Mortgage Trust Inc          3,024,000 
        100,000    Northstar Realty Finance Cor          1,145,000 
    100,000        Novastar Financial Inc.    2,811,000       
    525,000    525,000    Origen Financial Inc.    3,738,000      3,927,000 
    328,100    70,700    Parkway Properties    13,169,934      3,588,025 
        75,000    Prentiss Properties Trust          2,865,000 
    400,000    200,000    Prologis Trust    18,688,000      8,666,000 
    30,000        Public Storage, Inc.    2,031,600       
    100,000        RAIT Investment Trust    2,592,000       
        507,000    Reckson Associates Realty Corp          16,634,670 
    236,000    45,000    Regency Centers Corp.    13,912,200      2,493,000 
    384,000        Republic Property Trust    4,608,000       
    305,721    255,900    Simon Property Group Inc.    23,427,400      16,549,053 
    350,000        Starwood Hotels & Resorts    22,351,000       
    303,820    303,820    Sunset Financial Resources    2,576,394      3,162,766 
        315,000    Sunstone Hotel Investors Inc.          6,545,700 
    111,200    268,200    Thomas Properties Group    1,391,112      3,416,868 
    50,000    1,500,000    Trizec Properties Inc.    1,146,000      28,380,000 
    100,000    100,000    United Dominion Realty Trust    2,344,000      2,480,000 
    95,000    77,558    Ventas Inc.    3,041,900      2,125,865 
    200,000    50,000    Vornado Realty Trust    16,694,000      3,806,500 
    944        Windrose Medical Properties    14,028       




 
             TOTAL REAL ESTATE EQUITY SECURITIES           
   
                  (Cost $411,877,936 and $284,166,107 ) 
  426,781,565      327,785,808 




 
COMMERCIAL MORTGAGE BACKED SECURITIES—0.19% and 0.54%           
    Principal             

    2005   
2004 
  Issuer, Current Rate and Maturity Date           


 
$ 
     
$10,000,000 
  Bear Stearns CMS           
           
   3.436% 05/14/16 
        10,006,950 
        10,000,000   
COMM 2004 HTL1 A1 
         
           
   4.008% 07/15/16 
        10,013,820 
10,000,000 
  10,000,000   
GSMS 2001-Rock A2FL 
         
     
   4.680% 05/03/18 
  10,217,650      10,070,610 
10,000,000 
  10,000,000   
MSDWC 2001-280 A2F 
         
           
   4.710% 02/03/16 
  10,061,730      9,915,150 
    1,601,634    1,940,947   
Trize 2001 - TZHA A3FL 
         
           
   4.740% 03/15/13 
  1,601,653      1,951,830 




 
   
TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES 
         
   
       (Cost $21,604,079 and $41,943,872) 
  21,881,033      41,958,360 




 
    TOTAL REAL ESTATE RELATED           
   
       (Cost $433,482,015 and $326,109,979 ) 
  448,662,598      369,744,168 


  


45


OTHER—14.28% and 8.75% 
           
COMMERCIAL PAPER—11.67% and 4.51%           
Principal       
Value





2005   2004   Issuer, Current Rate and Maturity Date    2005      2004 





$25,000,000 
$
    Abbey National North America LLC           
     
    4.330% 01/05/06 
$ 
24,994,000    $  
25,000,000 
     
Abbey National PLC 
         
     
    4.280% 01/17/06 
  24,999,500       
10,000,000 
     
Alabama Power Co 
         
     
    4.250% 01/12/06 
  9,989,100       
25,000,000 
     
American Express Centurion Bank 
         
     
    4.310% 01/19/06 
  25,000,000       
2,430,000 
  25,000,000   
American Honda Finance, Corp 
         
     
    4.240% 01/09/06 
  2,428,250      24,981,667 
10,000,000 
     
Atlantis One Funding Corp 
         
     
    4.380% 02/24/06 
  9,936,500       
25,000,000 
     
Atlantis One Funding Corp 
         
     
    4.210% 02/08/06 
  24,890,750       
25,000,000 
     
Bank of Montreal 
         
     
    4.290% 01/26/06 
  24,999,500       
30,000,000 
     
Barclay’s Bank, PLC 
         
     
    4.420% 03/14/06 
  29,998,200       
15,000,000 
     
Barclay’s Bank, PLC 
         
     
    4.330% 08/30/06 
  14,999,400       
18,040,000 
     
Becton Dickinson & Co. 
         
     
    4.210% 01/24/06 
  17,994,719       
13,100,000 
  10,000,000   
Beta Finance, Inc      
         
     
    4.160% 01/12/06 
  13,085,590      9,991,445 
11,000,000 
  15,000,000   
Beta Finance, Inc 
         
     
    4.070% 01/17/06 
  10,981,190      14,980,050 
 
  18,100,000   
BMW US Capital Corp 
         
     
    3.550% 10/06/05 
        18,077,073 
20,000,000 
     
Calyon 
         
     
    4.100% 01/19/06 
  19,997,800       
10,000,000 
     
Canadian Wheat Board (The) 
         
     
    4.320% 02/06/06 
  9,959,500       
14,000,000 
  13,000,000   
CC (USA), Inc 
         
     
    4.000% 01/13/06 
  13,982,920      12,988,878 
40,000,000 
  3,100,000   
Ciesco LP 
         
     
    4.280% 01/23/06 
  39,903,200      3,097,537 
10,000,000 
     
Ciesco LP 
         
     
    4.370% 02/24/06 
  9,936,500       
37,000,000 
     
Citigroup Funding Inc. 
         
     
    4.220% 01/20/06 
  36,925,260       
13,000,000 
     
Citigroup Funding Inc. 
         
     
    4.350% 02/21/06 
  12,923,560       
24,150,000 
     
Colgate-Palmolive Co 
         
     
    4.250% 01/06/06 
  24,141,306       
15,000,000 
  25,000,000   
Corporate Asset Funding Corp, Inc 
         
     
    4.270% 01/13/06 
  14,981,700      24,949,625 

46


Principal       
Value





2005    2004    Issuer, Current Rate and Maturity Date    2005      2004 





$ 5,035,000 
$
    Corporate Asset Funding Corp, Inc           
       
    4.200% 01/23/06 
$ 5,022,815   
$ 
 
16,000,000        Corporate Asset Funding Corp, Inc           
       
    4.210% 01/25/06 
  15,957,440       
5,905,000        Corporate Asset Funding Corp, Inc           
       
    4.290% 01/31/06 
  5,884,982       
2,020,000        Corporate Asset Funding Corp, Inc           
       
    4.360% 02/17/06 
  2,008,930       
25,000,000        Deutsche Bank           
       
    4.270% 02/14/06 
  24,997,000       
50,000,000        Dexia Bank           
       
    4.280% 01/30/06 
  49,998,000       
8,000,000       
Dorada Finance Inc 
         
       
    3.900% 01/23/06 
  7,980,640       
20,000,000       
Dorada Finance Inc 
         
       
    4.350% 02/27/06 
  19,865,600       
21,500,000       
Dorada Finance Inc 
         
       
    4.250% 02/16/06 
  21,384,975       
13,000,000        Edison Asset Securitization, LLC           
       
    4.190% 01/17/06 
  12,977,770       
20,000,000        Edison Asset Securitization, LLC           
       
    4.360% 02/22/06 
  19,877,800       
7,248,000        Edison Asset Securitization, LLC           
       
    4.420% 04/07/06 
  7,162,981       
20,000,000       
FCAR Owner Trust I 
         
       
    4.340% 02/07/06 
  19,915,000       
17,000,000        First Tennessee National Bank           
       
    4.330% 02/06/06 
  16,999,660       
    2,670,000    Fortune Brands           
       
    2.060% 01/11/05 
        2,668,205 
21,590,000        General Electric Capital Corp           
       
    4.440% 04/28/06 
  21,282,342       
25,000,000        General Electric Capital Corp           
       
    4.520% 06/28/06 
  24,435,000       
35,000,000        Goldman Sachs Group, LP           
       
    4.280% 02/03/06 
  34,870,150       
10,000,000    15,000,000   
Govco Incorporated 
         
       
    4.080% 01/18/06 
  9,981,700      14,990,833 
9,000,000    10,000,000   
Govco Incorporated 
         
       
    4.390% 03/14/06 
  8,922,420      9,986,700 
29,140,000       
Govco Incorporated 
         
       
    4.040% 01/09/06 
  29,118,436       
5,015,000        Grampian Funding LLC           
       
    4.320% 01/23/06 
  5,002,814       
20,000,000        Grampian Funding LLC           
       
    4.040% 02/01/06 
  19,929,600       
10,000,000    25,000,000    Greyhawk Funding LLC           
       
    4.000% 01/06/06 
  9,996,300      24,948,000 
    10,750,000    Harley- Davidson Funding Corp           
       
    2.230% 02/14/05 
        10,718,556 

47


Principal       
Value





2005    2004      Issuer, Current Rate and Maturity Date    2005      2004 





$25,000,000        Harrier Finance Funding (US) LLC           
       
    3.930% 01/25/06 
$  24,933,500   
$ 
 
10,085,000        HBOS Treasury Srvcs Plc           
       
    4.200% 02/15/06 
  10,033,163       
31,740,000    15,000,000    Kitty Hawk Funding Corp           
       
    4.300% 01/12/06 
  31,705,086      14,975,300 
10,000,000    9,565,000    Kitty Hawk Funding Corp           
       
    3.890% 02/15/06 
  9,947,600      9,550,461 
25,000,000        Links Finance L.L.C.           
       
    4.300% 02/10/06 
  24,884,750       
25,000,000        Links Finance L.L.C.           
       
    4.380% 03/13/06 
  24,787,750       
10,000,000    10,000,000    Paccar Financial Corp           
       
    4.020% 01/12/06 
  9,989,200      9,984,800 
13,655,000        Paccar Financial Corp           
       
    4.360% 03/03/06 
  13,557,913       
20,080,000        Park Avenue Receivables Corp           
       
    4.270% 01/27/06 
  20,021,166       
10,000,000        Park Avenue Receivables Corp           
       
    4.290% 01/04/06 
  9,998,800       
10,000,000        Preferred Receivables Funding Corp           
       
    4.130% 01/06/06 
  9,996,300       
15,000,000    10,000,000    Private Export Funding Corporation           
       
    4.080% 02/13/06 
  14,926,500      9,992,667 
5,000,000        Private Export Funding Corporation           
       
    4.440% 04/04/06 
  4,944,250       
9,000,000        Private Export Funding Corporation           
       
    4.300% 03/09/06 
  8,929,260       
19,150,000        Private Export Funding Corporation           
       
    4.170% 02/07/06 
  19,070,145       
20,000,000       
Proctor & Gamble 
         
       
    4.030% 01/10/06 
  19,983,200       
3,500,000       
Proctor & Gamble 
         
       
    4.090% 01/26/06 
  3,490,445       
    25,000,000    Rabobank USA Financial Corp           
       
    3.640% 11/28/05 
        24,946,375 
50,000,000        Ranger Funding Company LLC           
       
    4.290% 01/17/06 
  49,914,500       
17,000,000        Regions Bank (Alabama)           
       
    4.180% 01/30/06 
  16,998,130       
    23,135,000    Royal Bank of Canada           
       
    3.660% 11/08/05 
        23,108,626 
    16,430,000    Royal Bank of Scotland PLC           
       
    3.680% 11/16/05 
        16,393,690 
540,000    2,000,000    Sherwin-Williams Co           
       
    4.070% 02/07/06 
  537,732      1,997,467 
14,390,000    15,000,000   
Sigma Finance Inc 
         
       
    4.030% 01/12/06 
  14,374,171      14,965,875 
8,000,000       
Sigma Finance Inc 
         
       
    4.390% 03/08/06 
  7,937,120       

48


  Principal       
Value






  2005      2004    Issuer, Current Rate and Maturity Date    2005        2004 





$ 
5,000,000 
 
$ 
    Sigma Finance Inc           
       
    3.940% 03/01/06 
$ 
4,965,150   
$ 
 
17,000,000 
       
Sigma Finance Inc 
         
           
    4.220% 01/31/06 
  16,942,370       
  5,575,000         
Sigma Finance Inc 
         
           
    4.340% 02/27/06 
  5,537,536       
  6,030,000          Societe Generale North America, Inc           
           
    4.400% 03/20/06 
  5,974,283       
27,600,000 
        Swedish Export Credit Corp           
       
    4.260% 01/18/06 
  27,550,596       
15,000,000 
        Toyota Motor Credit Corp           
       
    4.300% 10/10/06 
  15,000,900       
 
    25,000,000    Toronto Dominion Bank           
       
    3.160% 09/14/05 
        24,977,213 
24,000,000 
    25,000,000    UBS Finance, (Delaware) Inc           
       
    4.310% 02/10/06 
  23,891,280      24,990,500 
3,120,000 
        UBS Finance, (Delaware) Inc           
       
    4.440% 04/19/006 
  3,079,190       
25,000,000 
        Variable Funding Capital Corporation           
       
    4.000% 01/05/06 
  24,993,750       
5,010,000 
        Washington Gas Light Co           
       
    4.330% 01/09/06 
  5,006,393       
20,000,000 
        Wells Fargo           
       
    4.320% 02/09/06 
  19,999,600       
19,460,000 
        Yorktown Capital, LLC           
       
    4.19% 01/04/06 
  19,457,665       
2,625,000 
        Yorktown Capital, LLC           
       
    4.280% 02/10/06 
  2,611,893       
4,066,000 
        Yorktown Capital, LLC           
       
    4.350% 01/06/06 
  4,064,496       




 
           TOTAL COMMERCIAL PAPER           
                 (Cost $1,340,511,661 and $348,329,276 )    1,340,656,583    348,261,543 



 
GOVERNMENT AGENCY BONDS—2.61% and 4.24%           
  Principal       
Value






  2005      2004    Issuer, Current Rate and Maturity Date    2005      2004 





$ 
    $  9,380,000   Federal Farm Credit Banks           
           
    1.780% 03/15/05 
$ 
   
$ 
9,334,882 
        8,603,000    Federal Farm Credit Banks           
           
    1.220% 01/07/05 
        8,599,403 
  7,030,000      7,860,000    Federal Home Loan Banks           
           
    3.400% 01/03/06 
  7,027,383      7,798,928 
        18,000,000    Federal Home Loan Banks           
           
    3.380% 10/11/05 
        17,992,475 
        22,825,000    Federal Home Loan Banks           
           
    3.590% 10/12/05 
        22,795,841 
        20,700,000    Federal Home Loan Banks           
           
    3.640% 11/04/05 
        20,636,761 

49


  Principal         
Value




  2005    2004    Issuer, Current Rate and Maturity Date      2005      2004 





$      $11,245,000    Federal Home Loan Banks             
         
    3.230% 09/02/05 
  $      $ 11,227,214 
      8,510,000    Federal Home Loan Banks             
         
    2.950% 07/01/05 
          8,471,280 
30,000,000 
  20,000,000    Federal Home Loan Mortgage Corp             
 
     
    3.910% 01/03/06 
    30,000,000      19,995,222 
18,000,000 
  15,000,000    Federal Home Loan Mortgage Corp             
 
     
    4.210% 02/09/06 
    17,922,240      14,993,546 
50,000,000 
  15,540,000    Federal Home Loan Mortgage Corp             
 
     
    4.210% 01/31/06 
    49,839,500      15,516,366 
 
3,840,000 
      Federal Home Loan Mortgage Corp             
 
     
    3.740% 01/09/06 
    3,837,351       
37,615,000 
  22,280,000    Federal National Mortgage Association             
 
     
    4.150% 01/10/06 
    37,584,908      22,094,408 
23,940,000 
  50,000,000    Federal National Mortgage Association             
         
    4.240% 02/23/06 
    23,797,557      49,942,208 
46,555,000 
  25,000,000    Federal National Mortgage Association             
         
    4.100% 01/11/06 
    46,512,169      24,980,590 
29,320,000 
  31,925,000    Federal National Mortgage Association             
         
    4.200% 02/02/06 
    29,217,380      31,919,281 
  1,766,000    32,184,000    Federal National Mortgage Association             
         
    3.960% 02/15/06 
    1,757,135      32,174,390 
50,000,000 
  9,270,000    Federal National Mortgage Association                  
         
    4.240% 02/17/06 
    49,737,500      9,255,335 
  3,015,000        Federal National Mortgage Association             
         
    4.110% 02/01/06 
    3,004,809       



 
          TOTAL GOVERNMENT AGENCY BONDS             
 
            (Cost $300,164,529 and $327,794,989 ) 
    300,237,932      327,728,130 



 
 
        TOTAL OTHER (Cost $1,640,676,190 and $676,124,265 ) 
    1,640,894,515      675,989,673 



 
          TOTAL MARKETABLE SECURITIES             
              (Cost $2,074,158,205 and $1,002,234,244)      2,089,557,113      1,045,733,841 



 
   TOTAL INVESTMENTS—100.00%             
       (Cost $10,546,969,360 and $7,403,520,075)   
$11,485,741,406 
  $7,725,918,490 



(1)   
The investment has a mortgage payable outstanding, as indicated in Note 5.
 
(2)   
Leasehold interest only.
 
(3)   
Located throughout the U.S.
 
(4)   
The market value reflects the Account’s interest in the joint venture, net of any debt.
 
See notes to the financial statements.

50


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Participants of the TIAA Real Estate Account and the
    Board of Trustees of Teachers Insurance and Annuity Association of America:

In our opinion, the accompanying statements of assets and liabilities, including the statement of investments, and the related statements of operations, changes in net assets and cash flows, present fairly, in all material respects, the financial position of the TIAA Real Estate Account (the “Account”) at December 31, 2005, the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Account’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
New York, New York
March 14, 2006

51


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Participants of the TIAA Real Estate Account and the
    
Board of Trustees of Teachers Insurance and Annuity Association of America:

We have audited the accompanying statement of assets and liabilities of the TIAA Real Estate Account (“Account”) of Teachers Insurance and Annuity Association of America (“TIAA”), including the statement of investments, as of December 31, 2004, and the related statements of operations, changes in net assets and cash flows for each of the two years in the period ended December 31, 2004. These financial statements are the responsibility of TIAA’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 financial statements referred to above present fairly, in all material respects, the financial position of the Account at December 31, 2004, and the results of its operations, changes in its net assets and its cash flows for each of the two years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

New York, New York   
/s/ Ernst & Young LLP 
April 14, 2005     

52


ADDITIONAL INFORMATION

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

     On February 28, 2005, TIAA and Ernst & Young LLP (“Ernst & Young”) agreed that the relationship between Ernst & Young and TIAA would cease. TIAA has engaged PricewaterhouseCoopers LLP as the independent accountants.

ITEM 9A. CONTROLS AND PROCEDURES.

     (a) The registrant maintains a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in the registrant’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the registrant’s Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

     Under the supervision and participation of the registrant’s management, including the registrant’s CEO and CFO, the registrant conducted an evaluation of the effectiveness of the registrant’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based upon the management’s review, the CEO and the CFO concluded that the registrant’s disclosure controls and procedures were effective as of December 31, 2005.

     (b) Changes in internal controls over financial reporting. There have been no significant changes in the registrant’s internal controls over financial reporting that occurred during the registrant’s last fiscal quarter that materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting.

53


PART III

ITEMS 10 AND 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; EXECUTIVE COMPENSATION.

     The Real Estate Account has no officers or directors and no TIAA trustee or executive officer receives compensation from the Account. The Trustees and principal executive officers of TIAA, and their principal occupations during the last five years, are as follows:

Trustees

Elizabeth E. Bailey, 67

John C. Hower Professor of Public Policy and Management, Wharton School, University of Pennsylvania. Director, CSX Corporation, Altria Group, Inc. and National Bureau of Economic Research. Honorary Trustee, the Brookings Institute.

Robert C. Clark, 62

Harvard University Distinguished Service Professor and Austin Wakeman Scott Professor of Law, Harvard Law School, Harvard University, Formerly Dean and Royall Professor of Law, Harvard Law School. Director, Collins & Aikman Corporation, Time Warner, Inc. and Omnicom Group.

Edward M. Hundert, M.D., 49

President, Professor of Biomedical Ethics, Professor of Cognitive Science, Case Western Reserve University. Formerly, Dean, 2000-2002, University of Rochester School of Medicine and Dentistry, Professor of Medical Humanities and Psychiatry, 1997-2002. Member of BioEnterprise and the Cleveland Orchestra. Board Member, Rock and Roll of Fame, the Greater Cleveland Partnership and Nortech.

Marjorie Fine Knowles, 66

Professor of Law, Georgia State University College of Law.

Donald K. Peterson, 56

Chairman and Chief Executive Officer, Avaya Inc. Formerly, Executive Vice President and Chief Financial Officer, Lucent Technologies. Chairman, Board of Trustees, Worcester Polytechnic Institute.

Sidney A. Ribeau, 58

President, Bowling Green University. Director, The Andersons, Convergys and Worthington Industries.

Leonard S. Simon, 69

Former Vice Chairman, Charter One Financial, Inc. Formerly, Chairman, President and Chief Executive Officer, RCSB Financial, Inc. and Chairman and Chief Executive Officer, Rochester Community Savings Bank. Director, Landmark Technology Partners, Inc. and Integrated Nano-Technologies, LLC.

54


David F. Swensen, 52

Chief Investment Officer, Yale University. Trustee, Brookings Institute, Carnegie Institution of Washington, Carnegie Corporation, Yale New Haven Hospital, Howard Hughes Medical Institute, Courtauld Institute of Art, Wesleyan University, and Hopkins School.

Ronald L. Thompson, 56

Former Chairman and Chief Executive Officer, Midwest Stamping and Manufacturing Company. Director, Interstate Bakeries Corporation, Ralston Purina, Ryerson Tull Inc., and Washington University in St. Louis.

Marta Tienda, 55

Professor of Demographic Studies, Princeton University. Director, Office of Population Research, Princeton University, 1998-2002. Director, Corporation of Brown University, the Princeton Healthcare System, Federal Reserve Bank of New York, Sloan Foundation, Jacobs Foundation and Hispanic Business Incorporated.

Paul R. Tregurtha, 70

Chairman and Chief Executive Officer, Mormac Marine Group, Inc. and Moran Transportation Company, Inc.; Vice Chairman, Interlake Steamship Company and Lakes Shipping Company; Formerly, Chairman, Meridian Aggregates, L.P. Director, FPL Group, Inc.

Rosalie J. Wolf, 64

Managing Partner, Botanica Capital Partners LLC. Formerly, Managing Director, Offit Hall Capital Management LLC and its predecessor company, Laurel Management Company LLC; formerly, Treasurer and Chief Investment Officer, The Rockefeller Foundation. Director, North European Oil Royalty Trust and Sanford C. Bernstein Fund, Inc.

Officer—Trustees

Herbert M. Allison, Jr., 62

Chairman, President and Chief Executive Officer, TIAA. President and Chief Executive Officer, CREF. Formerly, President, Chief Operating Officer and Member of the Board of Directors of Merrill Lynch & Co., Inc., 1997-1999 and President and Chief Executive Officer of Alliance for LifeLong Learning, Inc., 1999-2002.

Other Officers

Gary Chinery, 56
Vice President and Treasurer, TIAA and CREF.

E. Laverne Jones, 57
Vice President and Corporate Secretary, TIAA and CREF.

Russell G. Noles, 47
Vice President and Acting Chief Financial Officer, TIAA and CREF.

John A. Somers, 62
Senior Managing Director, Fixed Income and Real Estate Investments.

55


Portfolio Management Team

Margaret A. Brandwein, 59
Managing Director—TIAA Real Estate Account.

Thomas Garbutt, 47
Managing Director—Real Estate Equities.

Philip J. McAndrews, 47
Managing Director—Portfolio Management.

     Effective February 1, 2006, the management of the Account’s REIT portfolio was changed. David Copp and Anne Sapp will be responsible for implementing the Account’s REIT investment strategy.

Audit Committee Financial Expert

On August 20, 2003, the Board of Trustees of TIAA determined that Rosalie J. Wolf was qualified and would serve as the audit committee financial expert on the TIAA’s audit committee. Ms. Wolf is independent (as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934) and has not accepted, directly or indirectly, any consulting, advisory or other compensatory fee from TIAA, other than in her capacity as Trustee.

Code of Ethics

The Board of Trustees of TIAA has a code of ethics for senior financial officers, including its principal executive officer, principal financial officer, principal accounting officer, or controller, and persons performing similar functions, in conformity with rules promulgated under the Sarbanes-Oxley Act of 2002. The code of ethics is filed as an exhibit to this annual report. During the reporting period, there were no implicit or explicit waivers granted by the Registrant from any provision of the code of ethics.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     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, 2005, the Account paid TIAA $3,170,017 for this liquidity guarantee through a daily deduction from the net assets of the Account.

56


     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. These services are performed at cost by TIAA and Services. Deductions are also made each valuation day to cover mortality and expense risks borne by TIAA.

     For the year ended December 31, 2005, the Account paid TIAA $19,603,225 for investment management services and $6,196,549 for mortality and expense risks. For the same period, the Account paid Services $27,130,406 for its administrative and distribution services.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

     PricewaterhouseCoopers LLP (“PwC”) performs independent audits of the Registrant’s financial statements. To maintain auditor independence and avoid even the appearance of conflicts of interest, the Registrant, as a policy, does not engage PwC for management advisory or consulting services.

     Audit Fees. PwC’s fees for professional services rendered for the audit of the registrant’s annual financial statements for the year ended December 31, 2005 and review of financial statements included in the registrant’s annual financial statements was $429,500. Ernst & Young’s fees for professional services rendered for the audit of the Registrant’s annual financial statements (including Sarbanes-Oxley-related activities) for the fiscal years ended December 31, 2004 and December 31, 2003 and review of financial statements included in Registrant’s quarterly reports were $1,804,200 and $151,700, respectively.

     Tax Fees. PwC had no tax fees for the fiscal year ended December 31, 2005. Ernst & Young had no tax fees for the fiscal years ended December 31, 2004 and 2003.

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

Preapproval Policy. In June of 2003, the Registrant’s audit committee (“Audit

Committee”) adopted a Preapproval Policy for External Audit Firm Services (the “Policy”). The Policy describes the types of services that may be provided by the independent auditor to the Registrant without impairing the auditor’s independence. Under the Policy, the Audit Committee is required to preapprove services to be performed by the Registrant’s independent auditor in order to ensure that such services do not impair the auditor’s independence.

     The Policy requires the Audit Committee to: (i) appoint the independent auditor to perform the financial statement audit for the Registrant and certain of its affiliates, including approving the terms of the engagement and (ii) preapprove the audit, audit-related and tax services to be provided by the independent auditor and the fees to be charged for provision of such services from year to year.

57


     Auditor Fees for Related Entities. The aggregate non-audit fees billed by PwC for services rendered to the Registrant and affiliates performing on-going services to the

Registrant, including TIAA for the year ended December 31, 2005 was $331,500. The aggregate non-audit fees billed by Ernst & Young for services rendered to the Registrant and affiliates performing on-going services to the Registrant, including TIAA, for the years ended December 31, 2004 and 2003 were $204,800 and $171,000, respectively.

     PwC’s aggregate fee for professional services rendered in connection with the audit of the financial statements for TIAA and the College Retirement Equities Fund (“CREF”) and their affiliated companies for the year ended December 31, 2005 was $5,709,300. PwC’s aggregate fees for audit related-services provided to TIAA and CREF and their affiliated entities for the year ended December 31, 2005 was $322,000. PwC’s aggregate fees for tax services provided to TIAA and CREF and their affiliated entities for the year ended December 31, 2005 was $166,000. PwC had no additional aggregate fees for other services provided to TIAA and CREF and their affiliated entities for the year ended December 31, 2005. Ernst & Young’s aggregate fees for professional services rendered in connection with the audit of financial statements for TIAA and the College Retirement Equities Fund (“CREF”) and their affiliated entities were $7,703,700 for the year ended December 31, 2004 and $3,955,300 for the year ended December 31, 2003. Ernst & Young’s aggregate fees for audit related-services provided to TIAA and CREF and their affiliated entities were $204,800 for the year ended December 31, 2004 and $171,000 for the year ended December 31, 2003. Ernst & Young’s aggregate fees for tax services provided to TIAA and CREF and their affiliated entities were $250,600 for the year ended December 31, 2004 and $229,900 for the year ended December 31, 2003. Ernst & Young had no additional aggregate fees for other services provided to TIAA and CREF and their affiliated entities for the years ended December 31, 2004 and 2003.

58


PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

  (a)    
1.
    Financial Statements. See Item 8 for required financial statements. 
 
   
2.
    Financial Statement Schedules. See Item 8 for required financial statements. 
 
  (b)         Exhibits. 
 
 
(1) 
    Distribution and Administrative Services Agreement by and between TIAA and 
    TIAA-CREF Individual & Institutional Services, Inc. (as amended)1 and the 
    Amendment thereto5 
 
(3) 
    (A)     Charter of TIAA (as amended)4 
    (B)     Bylaws of TIAA (as amended)4 
 
(4) 
    (A)     Forms of RA, GRA, GSRA, SRA, IRA Real Estate Account Contract 
        Endorsements2, Keogh Contract1, Retirement Select and Retirement Select Plus 
        Contracts and Endorsements3 and Retirement Choice and Retirement Choice 
        Plus Contracts6 
    (B)     Forms of Income-Paying Contracts2 
 
(10) 
    (A)     Independent Fiduciary Agreement by and among TIAA, the Registrant, and 
        Real Estate Research Corporation 
    (B)     Custodial Services Agreement by and between TIAA and Morgan Guaranty 
          Trust Company of New York with respect to the Real Estate Account
        (Agreement assigned to The Bank of New York, January, 1996)2 
 
(14) 
    Code of Ethics 
 
(31) 
    Rule 13a-15(e)/15d-15(e) Certifications 
 
(32) 
    Section 1350 Certifications 

_____________________________
1 - Previously filed and incorporated herein by reference to Post-Effective Amendment No. 6 to the Account’s previous Registration Statement on Form S-1, filed April 26, 2000 (File No. 333-22809).

2 - 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).

3 - 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, 2004 (File No. 333-113602).

4 - Previously filed and incorporated herein by reference to Pre-Effective Amendment No. 1 to the Account’s Registration Statement on Form S-1 filed December 21, 2004 (File No. 333-121493).

5 - 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, 2005 (File No. 333-121493).

59


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/ Herbert M. Allison, Jr. 

      Herbert M. Allison, Jr. 
      Chairman of the Board, President and Chief 
      Executive Officer 
 
      March 14, 2006 

                         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/    Herbert M. Allison, Jr.    Chairman of the Board, President, and Chief    3/14/06 



Herbert M. Allison, Jr.    Executive Officer (Principal Executive Officer)     
 
 
 
/s/    Russell Noles    Vice President    3/14/06 



Russell Noles    and Acting Chief Financial Officer     

60


Signature of Trustee    Date    Signature of Trustee    Date 
 
/s/  Herbert M. Allison, Jr.    3/14/06    /s/  Leonard S. Simon    3/14/06 




Herbert M. Allison, Jr.        Leonard S. Simon     
 
 
/s/  Elizabeth E. Bailey    3/14/06    /s/  David F. Swensen    3/14/06 




Elizabeth E. Bailey        David F. Swensen     
 
 
/s/  Robert C. Clark    3/14/06    /s/  Ronald L. Thompson    3/14/06 




Robert C. Clark        Ronald L. Thompson     
 
 
/s/  Edward M. Hundert    3/14/06    /s/  Marta Tienda    3/14/06 




Edward M. Hundert        Marta Tienda     
 
 
/s/  Marjorie Fine Knowles    3/14/06    /s/  Paul R. Tregurtha    3/14/06 




Marjorie Fine Knowles        Paul R. Tregurtha     
 
 
/s/ Donald K. Peterson    3/14/06    /s/  Rosalie J. Wolf    3/14/06 



Donald K. Peterson        Rosalie J. Wolf     
 
 
/s/  Sidney A. Ribeau    3/14/06           


Sidney A. Ribeau               

61


     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.

 

 

 

62