10-K405 1 c20349.txt ANNUAL REPORT TIAA Teachers Insurance and Annuity Association Abby L. Ingber CREF College Retirement Equities Fund Senior Counsel (logo) 730 Third Avenue (212) 916-5992 New York, NY 10017-3206 (212) 916-5760 FAX March 27, 2001 VIA EDGAR TRANSMISSION Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: TIAA Real Estate Account Form 10-K Annual Report (File No. 33-92990) Gentlemen: On behalf of the TIAA Real Estate Account (the "Account"), attached herewith for filing pursuant to the Securities Exchange Act of 1934 is an Annual Report on Form 10-K for the year ended December 31, 2000. The financial statements contained in the Annual Report do not reflect a change from the preceding year in any accounting principles or practices, or in the method of applying any such principles or practices. If you have any questions or comments concerning this filing, please call me at (212) 916-5992. Very truly yours, /s/ Abby L. Ingber Abby L. Ingber 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, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from __________ to __________ Commission file numbers 33-92990, 333-13477 and 333-22809 TIAA REAL ESTATE ACCOUNT (Exact name of registrant as specified in its charter) New York Not Applicable (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) c/o Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017-3206 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (212) 490-9000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: [X] -- Not Applicable Aggregate market value of voting stock held by non-affiliates: Not Applicable Documents Incorporated by Reference: None PART I ITEM 1. BUSINESS. GENERAL. The TIAA Real Estate Account (the "Real Estate Account" or the "Account") was established on February 22, 1995, as a separate investment account of Teachers Insurance and Annuity Association of America ("TIAA"), a nonprofit New York insurance company, by resolution of TIAA's Board of Trustees. The Account, which invests mainly in real estate and real estate-related investments, is a variable annuity investment option offered through individual, group and tax-deferred annuity contracts available to employees of educational and research institutions. The Account commenced operations on July 3, 1995, when TIAA contributed $100 million of seed money to the Account, and interests in the Account were first offered to eligible participants on October 2, 1995. INVESTMENT OBJECTIVE. The Real Estate Account seeks favorable long term returns primarily through rental income and appreciation of real estate investments owned by the Account. The Account also will invest in publicly- traded securities and other investments that are easily converted to cash to make redemptions, purchase or improve properties or cover other expenses. INVESTMENT STRATEGY. The Account seeks to invest between 70 percent to 95 percent of its assets directly in real estate or real estate-related investments. The Account's principal strategy is to purchase direct ownership interests in income-producing real estate, such as office, industrial, retail, and multi-family residential properties. The Account can also invest in other real estate or real estate-related investments, through joint ventures, real estate partnerships or real estate investment trusts (REITs). To a limited extent, the Account can also invest in conventional mortgage loans, participating mortgage loans, common or preferred stock of companies whose operations involve real estate (i.e., that primarily own or manage real estate), and collateralized mortgage obligations (CMOs). The Account will invest the remaining portion of its assets in government and corporate debt securities, money market instruments and other cash equivalents, and, at times, stock of companies that don't primarily own or manage real estate. In some circumstances, the Account can increase the portion of its assets invested in debt securities or money market instruments. This could happen if the Account receives a large inflow of money in a short period of time, there is a lack of attractive real estate investments available on the market, or the Account anticipates a need to have more cash available. The amount the Account invests in real estate and real estate-related investments at a given time will vary depending on market conditions and real estate prospects, among other factors. At December 31, 2000, the Account had 86.3% percent of its portfolio invested in real estate and real estate-related investments (including REITs). NET ASSETS AND PORTFOLIO INVESTMENTS. As of December 31, 2000, the Account's net assets totaled $2,387,122,071. Through December 31, 2000, the Account held a total of 60 real estate 2 properties, including 20 office properties (one of which is held in joint venture), 21 industrial properties (one of which is under development and held in joint venture), 14 apartment complexes, and five neighborhood shopping centers. As of December 31, 2000, these properties represented 80.58% of the Account's total investment portfolio. As of that date, the Account also held investments in commercial paper, representing 13.31% of the portfolio, real estate investment trusts (REITs), representing 5.69 % of the portfolio, and corporate bonds, representing 0.42 % of the portfolio. PERSONNEL AND MANAGEMENT. The Real Estate Account does not directly employ any persons nor does the Account have its own management or board of directors. Rather, TIAA employees, under the direction and control of TIAA's Board of Trustees and Investment Committee, manage the investment of the Account's assets pursuant to investment management procedures adopted by TIAA for the Account. TIAA and TIAA-CREF Individual & Institutional Services, Inc. ("Services"), a subsidiary of TIAA, provide all portfolio accounting, custodial, distribution, administrative and related services for the Account at cost. ITEM 2. PROPERTIES. In the table below you will find general information about each of the Account's portfolio properties as of December 31, 2000.

ANNUAL AVG. RENTABLE BASE RENT YEAR YEAR AREA PERCENT PER LEASED MARKET PROPERTY LOCATION BUILT PURCHASED (SQ. FT.) LEASED SQ. FT.(1) VALUE(2) -------- -------- ----- --------- --------- ------ ------------ ----------- OFFICE PROPERTIES 780 Third Avenue New York, NY 1984 1999 487,501 98% $39.93 $173,600,000 1801 K Street Washington, DC 1971(3) 2000 564,359 96% $35.93 $140,989,800 Morris Corporate Center III Parsippany, NJ 1990 2000 525,154 98% $12.42 $103,800,000 88 Kearney Street San Francisco, CA 1986 1999 228,470 100% $35.87 $ 84,172,241 Sawgrass Portfolio Sunrise, FL 1997- 1997, 344,009 100% $14.85 $ 54,300,000 2000 1999-2000 Parkview Plaza(4) Oakbrook, IL 1990 1997 266,020 99% $19.35 $ 52,500,000 Columbia Centre III Rosemont, IL 1989 1997 238,696 87% $24.73 $ 42,500,000 Biltmore Commerce Center Phoenix, AZ 1985 1999 262,875 81% $17.39 $ 38,603,637 Maitland Promenade One Maitland, FL 1999 2000 227,814 96% $23.29 $ 36,520,163 One Monument Place Fairfax, VA 1990 1999 219,837 99% $21.59 $ 36,500,000 Columbus Office Portfolio $ 34,200,000 Metro South Building Dublin, OH 1997 1999 90,726 91% $12.85 - BISYS Fund Services Building Eaton, OH 1995 1999 155,964 100% $11.69 - Vision Service Plan Building Eaton, OH 1997 1999 50,000 100% $11.88 - 10 Waterview Boulevard Parsippany, NJ 1984 1999 209,553 100% $21.36 $ 31,400,000 Fairgate at Ballston(4) Arlington, VA 1988 1997 143,457 94% $27.91 $ 30,800,000 Longview Executive Park(4) Hunt Valley, MD 1988 1997 258,999 100% $11.73 $ 28,020,861 Tysons Executive Plaza II(5) McLean, VA 1988 2000 252,552 100% $22.62 $ 26,035,867(5) (held in joint venture) Five Centerpointe(4) Lake Oswego, OR 1988 1997 113,971 98% $13.66 $ 18,331,911

3 371 Hoes Lane Piscataway, NJ 1986 1997 139,670 100% $13.36 $ 16,677,327 Southbank Building Phoenix, AZ 1995 1996 122,535 100% $ 9.40 $ 13,200,000 Northmark Business Center(4) Blue Ash, OH 1985 1997 108,561 95% $12.92 $ 13,100,000 USF&G Building(4) Salt Lake City, UT 1988 1997 67,322 93% $14.84 $ 8,677,033 --------- -------------- SUBTOTAL--OFFICE PROPERTIES 5,078,045 $ 983,928,840 INDUSTRIAL PROPERTIES Park West Int'l Industrial Pk $ 3.24 $ 53,931,995 Building C Hebron, KY 1998 1998 520,000 100% - Building D Hebron, KY 1998 1998 184,800 100% - Building E Hebron, KY 2000 2000 207,222 100% - Building J Hebron, KY 2000 2000 525,000 100% - Ontario Portfolio $ 3.40 $ 107,688,169 Timberland Building Ontario, CA 1998 1998 414,435 100% - 5200 Airport Drive Ontario, CA 1997 1998 404,500 100% - 1200 S. Etiwanda Ave. Ontario, CA 1998 1998 223,170 100% - Park Mira Loma West Mira Loma, CA 1998 1998 557,500 100% - Wineville Center Buildings Mira Loma, CA 1999 2000 1,099,112 100% Atlanta Industrial Portfolio Lawrenceville, GA 1996-99 2000 1,145,691 90% $ 2.38 $ 40,021,362 Northpointe Commerce Center Fullerton, CA 1990-94 2000 612,023 100% $ 5.90 $ 38,800,000 Saks Distribution Facility Aberdeen, MD 1997 1997 470,708 100% $ 5.32 $ 30,950,000 Parkwest Center I and II Coppell, TX 1997 2000 735,150 98% $ 3.64 $ 28,300,500 Rockrun Business Park $ 19,497,150 Building I Joliet, IL 1998 1998 258,000 100% $ 2.98 - Mack Truck Buildling Joliet, IL 2000 2000 248,014 100% $ 3.33 - Konica Photo Imaging Mahwah, NJ 1999 1999 168,000 100% $ 9.92 $ 17,300,000 Headquarters Glen Pointe Business Park $ 6.48 $ 16,100,000 Building V Chicago, IL 1997 1998 117,600 100% - Building VII Chicago, IL 1997 1998 92,543 100% - ABS and CDC Buildings Rancho Cucamonga, CA 2001(6) 2000 641,475 100% $ 3.45 $ 15,243,900(6) (under development and held in joint venture) Landmark at Salt Lake City Salt Lake City, UT 2000 2000 328,508 100% $ 3.98 $ 14,434,653 Building #4 Interstate Acres Urbandale, IA 1981-88 1997 440,000 81% $ 3.40 $ 13,200,000 Eastgate Distribution Center San Diego, CA 1996 1997 200,000 100% $ 5.59 $ 13,700,000 Arapahoe Park East Boulder, CO 1979-82 1996 129,425 100% $ 6.25 $ 12,478,003 UPS Distribution Facility Fernley, NV 1998 1998 256,000 100% $ 3.54 $ 11,000,000 FedEx Distribution Facility Crofton, MD 1998 1998 111,191 100% $ 6.39 $ 7,600,000 Woodcreek Business Park Chicago, IL 1995 1998 149,907 100% $ 2.11 $ 7,000,000 Westinghouse Facility Coral Springs, FL 1997 1997 75,630 100% $ 7.29 $ 6,200,000 Interstate Crossing Eagan, MN 1995 1996 131,380 86% $ 5.64 $ 6,150,000 Butterfield Industrial Park El Paso, TX 1980-81 1995 183,510 100% $ 2.89 $ 4,957,200 River Road Distribution Center Fridley, MN 1995 1995 100,456 100% $ 3.99 $ 4,300,000 ---------- -------------- SUBTOTAL--INDUSTRIAL PROPERTIES 10,730,950 $ 468,852,932 RETAIL PROPERTIES Rolling Meadows Rolling Meadows, IL 1957(3) 1997 130,910 80% $11.59 $ 11,986,500 River Oaks Woodbridge, VA 1995 1996 90,885 97% $14.57 $ 11,100,000 Lynnwood Collection Raleigh, NC 1988 1996 86,362 90% $ 8.37 $ 7,900,000 Millbrook Collection Raleigh, NC 1988 1996 102,221 94% $ 7.81 $ 7,000,000 Plantation Grove Ocoee, FL 1995 1995 73,655 97% $10.04 $ 7,450,000 ---------- -------------- SUBTOTAL--RETAIL PROPERTIES 484,033 $ 45,436,500 ---------- -------------- SUBTOTAL--COMMERCIAL PROPERTIES 16,293,028 $1,498,218,272 4 RESIDENTIAL PROPERTIES(7) Ashford Meadows Apartments Herndon, VA 1998 2000 NA 97% NA $ 64,174,878 The Colorado New York, NY 1987 1999 NA 99% NA $ 60,400,000 Larkspur Courts Apartments Larkspur, CA 1991 1999 NA 99% NA $ 58,600,000 Bay Court at Harbour Pointe Mulkiteo, WA 1991 1998 NA 100% NA $ 35,000,000 Lodge at Willow Creek Douglas County, CO 1997 1997 NA 99% NA $ 30,800,000 Golfview Apartments Lake Mary, FL 1998 1998 NA 100% NA $ 27,400,000 The Legends at Chase Oaks Plano, TX 1997 1998 NA 100% NA $ 26,289,264 Lincoln Woods Lafayette Hill, PA 1991 1997 NA 100% NA $ 23,507,797 Monte Vista Littleton, CO 1995 1996 NA 99% NA $ 21,000,000 Indian Creek Apartments Farmington Hills, MI 1988 1998 NA 100% NA $ 17,250,000 Westcreek Westlake Village, CA 1988 1997 NA 100% NA $ 17,200,000 Royal St. George W. Palm Beach, FL 1995 1996 NA 99% NA $ 16,650,000 Bent Tree Apartments Columbus, OH 1987 1998 NA 99% NA $ 14,700,000 The Greens at Metrowest Orlando, FL 1990 1995 NA 100% NA $ 14,100,000 -------------- SUBTOTAL--RESIDENTIAL NA $ 427,071,939 PROPERTIES ---------- -------------- TOTAL--ALL PROPERTIES 16,293,028 $1,925,290,211 (1) Based on total contractual rent on leases existing at December 31, 2000. For those properties purchased in 2000, the number was derived by annualizing the rents charged by the Account since acquiring the property. (2) Market value reflects the value determined in accordance with the procedures described in the Account's prospectus. (3) Undergone extensive renovations. (4) Purchased through Light Street Partners, L.P. (now 100% owned by the Account). The USF&G Building was sold in January 2001. (5) 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 property. (6) The property is held in a 80%/20% joint venture with Cabot Industrial Trust, and is under development. The property is currently valued at cost. It is anticipated that the buildings, which are 100% pre-leased, will be ready for occupancy in 2001. (7) For the average unit size and annual average rent per unit for each residential property, see "Residential Properties" below. COMMERCIAL (NON-RESIDENTIAL) PROPERTIES IN GENERAL. At December 31, 2000, the Account held 46 commercial (non-residential) properties in its portfolio. None of these properties is subject to a mortgage, and although the terms vary under each lease, certain expenses, such as real estate taxes and other operating expenses, are paid or reimbursed by the tenants. At December 31, 2000, the Account's office property portfolio consisted of 20 office properties located in metropolitan areas throughout the United States (including one property held in a 50%/50% joint venture). The office properties together are approximately 93 percent leased with 474 leases. At December 31, 2000, the Account's industrial property portfolio consisted of 21 properties (including one which is held in joint venture and is currently under development) used primarily for warehousing, distribution, or light manufacturing activities. The Account's industrial properties together are 97 percent leased with 96 leases. 5 At December 31, 2000, the Account's retail property portfolio consisted of five neighborhood shopping centers, each of which is anchored by a supermarket tenant. These retail properties together are approximately 92 percent leased with 75 leases. The Account's residential property portfolio currently consists of 14 first class or luxury multi-family garden apartment complexes and one high rise apartment building. None of the properties in the portfolio is subject to a mortgage. The complexes generally contain one- to three-bedroom apartment units, with a range of amenities, such as patios or balconies, washers and dryers, and central air conditioning. Many of these apartment communities have use of on-site fitness facilities, including some with swimming pools. Rents on each of the properties tend to be comparable with competitive communities and are not subject to rent regulation. The Account is responsible for the expenses of operating the properties. In the table below you will find more detailed information regarding the apartment complexes in the Account's portfolio as of December 31, 2000.

================================================================================================================= AVERAGE AVG. RENT NUMBER UNIT SIZE PER UNIT/ PERCENT PROPERTY LOCATION OF UNITS (SQUARE PER MONTH LEASED FEET) ----------------------------------------------------------------------------------------------------------------- Ashford Meadows Apartments Herndon, VA 440 1,050 $1,279 97% The Colorado New York, NY 256 632 $2,266 99% Larkspur Courts Apartments Larkspur, CA 248 1001 $2,265 99% Bay Court at Harbour Pointe Mulkiteo, WA 420 970 $ 855 100% Lodge at Willow Creek Douglas County, CO 316 1001 $1,002 99% Golfview Apartments Lake Mary, FLA 276 1139 $1,036 100% The Legends at Chase Oaks Plano, TX 346 972 $1,035 100% Lincoln Woods Lafayette Hill, PA 216 773 $1,144 100% Monte Vista Littleton, CO 219 888 $1,062 99% Indian Creek Apartments Farmington Hills, MI 196 1139 $ 986 100% Westcreek Apartments Westlake Village, CA 126 948 $1,387 100% Royal St. George West Palm Beach, FL 224 870 $ 851 99% Bent Tree Apartments Columbus, OH 256 928 $ 718 99% The Greens at Metrowest Orlando, FL 200 920 $ 841 100% =================================================================================================================

RECENT PROPERTY PURCHASES AND SALES On March 9, 2001, the Account purchased a portfolio of four industrial properties in Dallas, Texas for a purchase price of approximately $68.6 million. On January 12, 2001, the Account sold one office building located in Salt Lake City, Utah for approximately $8.7 million. ITEM 3. LEGAL PROCEEDINGS. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. 6 PART II ITEM 5. MARKET FOR THE REGISTRANT'S SECURITIES AND RELATED STOCKHOLDER MATTERS. (a) MARKET INFORMATION. There is no established public trading market for participating interests in the TIAA Real Estate Account. Accumulation units in the Account are sold to eligible participants at the Account's current accumulation unit value, which is based on the value of the Account's then current net assets. For the period from January 1, 2000 to December 31, 2000, the high and low accumulation unit values for the Account were $158.2527 and $142.9682, respectively. (b) APPROXIMATE NUMBER OF HOLDERS. The number of contractowners at February 28, 2001 was 235,513. (c) DIVIDENDS. Not applicable. ITEM 6. SELECTED FINANCIAL DATA. The following selected financial data should be considered in conjunction with the Account's consolidated financial statements and notes provided in this report.

JULY 3, 1995 (COMMENCEMENT YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OF OPERATIONS) TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2000 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- ---- Investment Income: Real estate income, net: Rental income ................. $ 195,537,993 $ 132,316,878 $ 81,009,203 $ 44,342,342 $ 10,951,183 $ 165,762 -------------- -------------- --------------- ------------- ------------ ------------ Real estate property level expenses and taxes: Operating expenses .......... 40,056,716 27,334,060 17,339,706 9,024,240 2,116,334 29,173 Real estate taxes ........... 22,851,890 15,892,736 9,103,637 4,472,311 1,254,163 14,659 -------------- -------------- --------------- ------------- ------------ ------------ Total real estate property level expenses and taxes . 62,908,606 43,226,796 26,443,343 13,496,551 3,370,497 43,832 -------------- -------------- --------------- ------------- ------------ ------------ Real estate income, net .. 132,629,387 89,090,082 54,565,860 30,845,791 7,580,686 121,930 Income from real estate joint venture ..................... 756,133 -- -- -- -- -- Dividends and interest ............. 31,334,291 24,932,733 23,943,728 16,486,279 6,027,486 2,828,900 -------------- -------------- --------------- ------------- ------------ ------------ Total investment income ..... 164,719,811 114,022,815 78,509,588 47,332,070 13,608,172 2,950,830 Expenses ........................... 13,424,566 9,278,410 6,274,594 3,526,545 1,155,796 310,433 -------------- -------------- --------------- ------------- ------------ ------------ Investment income, net ...... 151,295,245 104,744,405 72,234,994 43,805,525 12,452,376 2,640,397 Net realized and unrealized gain on investments ............... 54,147,449 9,834,743 7,864,659 18,147,053 3,330,539 35,603 -------------- -------------- --------------- ------------- ------------ ------------ Net increase in net assets resulting from operations ......... 205,442,694 114,579,148 80,099,653 61,952,578 15,782,915 2,676,000 Minority interest in net increase in net assets resulting from operations ........................ -- 1,364,619 (3,487,991) (1,881,178) -- -- Net increase in net assets resulting from participant transactions ...................... 486,196,949 383,171,774 333,936,510 356,052,262 233,653,793 117,582,345 -------------- -------------- --------------- ------------- ------------ ------------ Net increase in net assets ......... $ 691,639,643 $ 499,115,541 $ 410,548,172 $ 416,123,662 $249,436,708 $120,258,345 ============== ============== =============== ============= ============ ============

7

DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2000 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- ---- Total assets ....................... $2,423,100,402 $1,719,457,715 $ 1,229,603,431 $ 815,760,825 $426,372,007 $143,177,421 Total liabilities and minority interest ......................... 35,978,331 23,975,287 33,236,544 29,942,110 56,676,954 22,919,076 -------------- -------------- --------------- ------------- ------------ ------------ Total net assets ................... $2,387,122,071 $1,695,482,428 $ 1,196,366,887 $ 785,818,715 $369,695,053 $120,258,345 ============== ============== =============== ============= ============ ============ Accumulation units outstanding ..... 14,604,673 11,487,360 8,833,911 6,313,015 3,295,786 1,172,498 ============== ============== =============== ============= ============ ============ Accumulation unit value ............ $ 158.21 $ 142.97 $ 132.17 $ 122.30 $ 111.11 $ 102.57 ============== ============== =============== ============= ============ ============

QUARTERLY SELECTED FINANCIAL INFORMATION The following is selected financial information for the Account for each full quarter within the past two calendar years:

2000 FOR THE THREE MONTHS ENDED -------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- ------- ------------ ----------- Investment income, net $31,774,860 $36,145,064 $40,552,504 $42,822,817 Net realized gain (loss) on investments (147,448) 58,263 (241,717) 8,606,836 Net unrealized gain on investments 5,603,540 14,044,336 15,013,318 11,210,321 --------- ---------- ---------- ---------- Net increase in net assets resulting from operations $37,230,952 $50,247,663 $55,324,105 $62,639,974 =========== =========== =========== =========== Total return 2.15% 2.67% 2.67% 2.77% ===== ===== ===== =====

1999 FOR THE THREE MONTHS ENDED -------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- ------- ------------ ----------- Investment income, net $ 22,192,803 $23,375,431 $ 28,043,849 $31,132,322 Net realized gain (loss) on investments 5,606,417 213,035 (827,090) 774,335 Net unrealized gain (loss) on investments (7,669,787) 9,537,980 (6,030,366) 8,230,219 Minority interest in net increase in net assets resulting from operations (403,153) 1,767,772 -- -- ------------ ----------- ----------- ----------- Net increase in net assets resulting from operations $ 19,726,280 $34,894,218 $21,186,393 $40,136,876 ============ =========== =========== =========== Total return 1.57% 2.51% 1.38% 2.47% ===== ===== ===== =====

8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF ACCOUNT'S FINANCIAL CONDITION AND OPERATING RESULTS The Real Estate Account continued its positive growth in 2000, with approximately $2.4 billion in net assets as of year-end 2000. As of December 31, 2000, the Account owned a total of 60 real estate properties, including 20 office properties (one held in joint venture), 21 industrial properties (including one development project joint venture), 14 apartment complexes and five neighborhood shopping centers. At December 31, 2000, these properties represented 80.6% of the Account's total investment portfolio, an increase of 3% over year-end 1999. In 2000, the Account purchased 15 properties (five office properties, including one held in a 50%/50% joint venture, nine industrial properties and one apartment property), sold two properties (one office property and one apartment property), and entered into an 80%/20% partnership to develop an industrial property. The Account continues to pursue suitable properties, and is currently in various stages of negotiations with a number of prospective sellers. While attractive acquisition prospects are available in the current market, there is significant competition for the most desirable properties. As of December 31, 2000, the Account also held investments in commercial paper, representing 13.3% of the portfolio, real estate investment trusts (REITs), representing 5.7% of the portfolio, and corporate bonds, representing 0.4% of the portfolio. RESULTS OF OPERATIONS --------------------- YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 The Account's total net return was 10.66% for the year ended December 31, 2000 and 8.17% for 1999. The Account's net investment income, after deducting all expenses, was $151,295,245 for the year ended December 31, 2000 and $104,744,405 for 1999, a 44% increase. This increase was the result of a 41% increase in net assets and a 46.4% increase in the market value of the Account's real estate holdings from December 31, 1999 to December 31, 2000. The Account had net realized and unrealized gains on investments of $54,147,449 for the year ended December 31, 2000 compared with $9,834,743 for 1999. This difference was due in part to the increase in realized and unrealized gains on the Account's real estate properties from $23,232,711 in 1999 to $32,001,734 for 2000, and, significantly, to the Account's gain of $22,145,715 on its marketable securities in 2000, compared with its loss of $13,397,968 on its marketable securities in 1999. The Account's real estate holdings generated approximately 81% of the Account's total investment income (before deducting Account level expenses) during 2000 compared with 78% during 1999. The remaining portion of the Account's total investment income was generated by investments in marketable securities. Gross real estate rental income was $195,537,993 for the year ended December 31, 2000 and $132,316,878 for the same period in 1999. This increase was primarily due to the increase in the number of properties owned by the Account -- from 54 properties at the end of 1999 to 60 properties at the end of 2000. (The total number of properties in 2000 reflects the consolidation of 9 certain groups of properties into single portfolios.) Interest and dividend income on the Account's marketable securities investments increased from $24,932,733 for 1999 to $31,334,291 in 2000. Total property level expenses for the year ended December 31, 2000 were $62,908,606 of which $40,056,716 was attributable to operating expenses and $22,851,890 was attributable to real estate taxes. Total property level expenses for the year ended December 31, 1999 were $43,226,796, of which $27,334,060 represented operating expenses and $15,892,736 was attributable to real estate taxes. The increase in property level expenses during 2000 reflected the increased number of properties in the Account. The Account incurred expenses for the years ended December 31, 2000 and 1999 of $6,924,202 and $4,246,911, respectively, for investment advisory services, $4,392,882 and $3,442,282, respectively, for administrative and distribution services, and $2,107,482 and $1,589,217, respectively, for mortality and expense risk charges and liquidity guarantee charges. These expenses increased significantly as a result of the increased costs of managing a growing account, including the costs of acquiring and managing additional properties, and the increased staffing costs associated with administering a larger account. YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 The Account's total net return was 8.17% for the year ended December 31, 1999 and 8.07% for 1998. The Account's net investment income, after deducting all expenses, was $104,744,405 for the year ended December 31, 1999 and $72,234,994 for 1998, a 45% increase. This increase was the result of a 42% increase in net assets and an increase in the Account's real estate holdings from December 31, 1998 to December 31, 1999. The Account had net realized and unrealized gains on investments of $9,834,743 and $7,864,659 for the year ended December 31, 1999 and December 31, 1998, respectively. The gains on the Account's real estate properties of $23,232,711 and $33,221,281 for 1999 and 1998, respectively, were offset by net realized and unrealized losses on the Account's marketable securities of $13,397,968 and $25,356,622 for 1999 and 1998 respectively. The Account's real estate holdings generated approximately 78% of the Account's total investment income (before deducting Account level expenses) during 1999 compared with 70% during 1998. The remaining portion of the Account's total investment income was generated by investments in marketable securities. Gross real estate rental income was $132,316,878 for the year ended December 31, 1999 and $81,009,203 for the same period in 1998. This increase was primarily due to the increase in the number of properties owned by the Account -- from 46 properties at the end of 1998 to 54 properties at the end of 1999. Interest and dividend income on the Account's marketable securities investments increased from $23,943,728 for 1998 to $24,932,733 in 1999. Total property level expenses for the year ended December 31, 1999 were $43,226,796, of which $27,334,060 represented operating expenses and $15,892,736 was attributable to real estate 10 taxes. Total property level expenses for the year ended December 31, 1998 were $26,443,343 of which $17,339,706 was attributable to operating expenses and $9,103,637 was attributable to real estate taxes. The increase in property level expenses during 1999 reflected the increased number of properties in the Account. The Account also incurred expenses for the years ended December 31, 1999 and 1998 of $4,246,911 and $2,999,113, respectively, for investment advisory services, $3,442,282 and $2,498,376, respectively, for administrative and distribution services, and $1,589,217 and $777,105, respectively, for mortality and expense risk charges and liquidity guarantee charges. Such expenses increased as a result of the larger net asset base of the Account for 1999 over 1998. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Account earned $151,295,245 in 2000 and $104,744,405 in net investment income in 1999. During 2000, the Account received $161,668,073 in premiums and $379,610,411 in net participant transfers from other TIAA and CREF accounts, while in 1999 the Account received $126,200,561 in premiums and $293,354,604 in net participant transfers from other TIAA and CREF accounts. Real estate properties costing $625,800,000 and $511,878,000 were purchased during 2000 and 1999, respectively. In 2000, the Account also received $60,400,000 in proceeds from the sale of properties (including proceeds from the sale of a 50% interest in a recently- purchased property). By year end 2000, the Account's liquid assets (i.e., its cash, REITs, short- and intermediate-term investments, and government securities) had a value of $464,544,434, while at the end of 1999 those assets were valued at $374,896,400. We anticipate that much of the Account's liquid assets as of December 31, 2000, exclusive of the REITs, will be used by the Account to purchase additional suitable real estate properties. The remaining liquid assets, exclusive of the REITs, will continue to be available to meet expense needs and redemption requests (e.g., cash withdrawals or transfers). If the Account's liquid assets and its cash flow from operating activities and participant transactions are not sufficient to meet its cash needs, including redemption requests, TIAA's general account will purchase liquidity units in accordance with TIAA's liquidity guarantee to the Account. The Account spent approximately $7.6 million in 2000 for capital (long-term) expenses, including ongoing tenant improvements and leasing commissions at the commercial properties relating to the renewal of existing tenants or re-leasing of space to new tenants during the normal course of business. In 2001, it is estimated that the Account will expend approximately $27.5 million in capital expenses. The Account will be undertaking several major capital expenditures, including the renovation of the parking structures of three office buildings (1801 K Street, N.W. in Washington, D.C., Tysons Executive Plaza II in McLean, VA, and Morris Corporate Center in Parsippany, NJ), maintenance programs for the facades of 780 Third Avenue and The Colorado in New York, New York, and the renovation of the lobby of The Colorado. (These major expenditures had been contemplated at the time of each property purchase, and either the Account received a credit to the purchase price, or the cost was factored in to determine the original purchase price.) These major expenditures will be in addition to the costs routinely incurred by the Account for painting, re-carpeting and minor replacements to re-lease apartments as they become vacant and the costs associated with the renewal of existing tenants or releasing of space to new tenants in the commercial properties. 11 EFFECTS OF INFLATION - 2001 --------------------------- Although inflation has been modest in recent years, inflation is projected to increase in 2001. To the extent that inflation may increase property operating expenses in the future, we anticipate that increases will generally be billed to tenants either through contractual lease provisions in office, industrial, and retail properties or through rent increases in apartment complexes. However, depending on how long any vacant space in a property remains unleased, the Account may not be able to recover the full amount of such increases in operating expenses. 12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS TIAA REAL ESTATE ACCOUNT -------------------------------------------------------------------------------- Page ---- Report of Management Responsibility....................................... 14 Report of Audit Committee................................................. 15 Report of Independent Auditors............................................ 16 Audited Consolidated Financial Statements: Consolidated Statements of Assets and Liabilities...................... 17 Consolidated Statements of Operations.................................. 18 Consolidated Statements of Changes in Net Assets....................... 19 Consolidated Statements of Cash Flows.................................. 20 Notes to Consolidated Financial Statements............................. 21 Consolidated Statement of Investments.................................. 27 Schedule III - Real Estate Owned.......................................... 31 All other schedules are omitted since the required information is not present in amounts sufficient to require submission of the schedule or because the information is included in the financial statements and notes thereto. 13 [TIAA LOGO] -------------------------------------------------------------------------------- REPORT OF MANAGEMENT RESPONSIBILITY To the Participants of the TIAA Real Estate Account: The accompanying financial statements of the TIAA Real Estate Account ("Account") of Teachers Insurance and Annuity Association of America ("TIAA") are the responsibility of TIAA's management. They have been prepared in accordance with accounting principles generally accepted in the United States and have been presented fairly and objectively in accordance with such principles. TIAA has established and maintains a strong system of internal controls designed to provide reasonable assurance that assets are properly safeguarded and transactions are properly executed in accordance with management's authorization, and to carry out the ongoing responsibilities of management for reliable financial statements. In addition, TIAA's internal audit personnel provide a continuing review of the internal controls and operations of TIAA, including its separate account operations. The accompanying financial statements have been audited by the independent auditing firm of Ernst & Young LLP. For the periods covered by these financial statements, all services provided by Ernst & Young LLP were limited exclusively to auditing. It is the Account's policy that any non-audit services be obtained from a firm other then the external financial audit firm. The independent auditors' report, which appears on the second following page, expresses an independent opinion on the fairness of presentation of these financial statements. The Audit Committee of the TIAA Board of Trustees, consisting of trustees who are not officers of TIAA, meets regularly with management, representatives of Ernst & Young LLP and internal audit personnel to review matters relating to financial reporting, internal controls and auditing. /s/ John H. Biggs ----------------------- Chairman, President and Chief Executive Officer /s/ Richard L. Gibbs ---------------------------- Executive Vice President and Principal Accounting Officer 14 [TIAA LOGO] ------------------------------------------------------------------------------- REPORT OF THE AUDIT COMMITTEE To the Participants of the TIAA Real Estate Account: The TIAA Audit Committee oversees the financial reporting process of the TIAA Real Estate Account ("Account") on behalf of TIAA's Board of Trustees. The Audit Committee is a standing committee of the Board and operates in accordance with a formal written charter (copies are available upon request) which describes the Audit Committee's responsibilities. All members of the Audit Committee ("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 compliance with applicable laws and regulations. In fulfilling its oversight responsibilities, the Committee reviewed and approved the audit plan of the internal auditing group. The Committee also meets regularly with the internal and independent auditors, 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. 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 of disclosures in the financial statements. The Committee has also discussed the audited financial statements with Ernst & Young LLP, the independent auditing firm responsible for expressing an opinion on the conformity of these audited financial statements with generally accepted accounting principles. The discussion with Ernst & Young LLP focused on their judgments concerning the quality and appropriateness of the accounting principles and financial reporting practices followed by the Account, the clarity of the financial statements and related disclosures, and other significant matters, such as any significant changes in accounting policies, management judgments and estimates, and the nature of any uncertainties or unusual transactions. In addition, the Committee discussed with Ernst & Young 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. Willard T. Carleton, Audit Committee Chair Frederick R. Ford, Audit Committee Member Leonard S. Simon, Audit Committee Member Rosalie J. Wolf, Audit Committee Member February 12, 2001 15 [ERNST & YOUNG LETTERHEAD] REPORT OF INDEPENDENT AUDITORS To the Participants of the TIAA Real Estate Account and the Board of Trustees of Teachers Insurance and Annuity Association of America: We have audited the accompanying consolidated statements of assets and liabilities, including the statement of investments as of December 31, 2000, of the TIAA Real Estate Account ("Account") of Teachers Insurance and Annuity Association of America ("TIAA") as of December 31, 2000 and 1999, and the related consolidated statements of operations, changes in net assets and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of TIAA's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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. Our procedures included confirmation of securities owned as of December 31, 2000, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Account at December 31, 2000 and 1999, and the consolidated results of their operations and the changes in their net assets and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young New York, New York February 5, 2001 16 TIAA REAL ESTATE ACCOUNT CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

December 31, December 31, 2000 1999 -------------- -------------- ASSETS Investments, at value: Real estate properties (cost: $1,818,143,290 and $1,253,650,281) ............. $1,899,254,344 $1,312,503,554 Real estate joint venture (cost: $24,674,574 and $-) ............................ 26,035,867 -- Marketable securities (cost: $462,959,529 and $395,662,203) ................. 463,828,568 374,278,801 Cash ....................................................... 715,866 617,599 Other ...................................................... 33,265,757 32,057,761 -------------- -------------- TOTAL ASSETS 2,423,100,402 1,719,457,715 -------------- -------------- LIABILITIES Accrued real estate property level expenses and taxes ..... 24,396,036 18,425,328 Security deposits held .................................... 6,817,972 5,549,959 Other ..................................................... 1,736,106 -- -------------- -------------- TOTAL LIABILITIES 32,950,114 23,975,287 -------------- -------------- MINORITY INTEREST .......................................... 3,028,217 -- -------------- -------------- NET ASSETS Accumulation Fund ......................................... 2,310,540,978 1,642,327,173 Annuity Fund .............................................. 76,581,093 53,155,255 -------------- -------------- TOTAL NET ASSETS $2,387,122,071 $1,695,482,428 ============== ============== NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 6 and 7 .... 14,604,673 11,487,360 ============== ============== NET ASSET VALUE, PER ACCUMULATION UNIT--Note 6 ............ $ 158.21 $ 142.97 ============== ==============

See notes to consolidated financial statements. 17 TIAA REAL ESTATE ACCOUNT CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, -------------------------------------------- 2000 1999 1998 ------------ ------------ ----------- INVESTMENT INCOME Real estate income, net: Rental income............................................................... $195,537,993 $132,316,878 $81,009,203 ------------ ------------ ----------- Real estate property level expenses and taxes: Operating expenses........................................................ 40,056,716 27,334,060 17,339,706 Real estate taxes......................................................... 22,851,890 15,892,736 9,103,637 ------------ ------------ ----------- Total real estate property level expenses and taxes 62,908,606 43,226,796 26,443,343 ------------ ------------ ----------- Real estate income, net 132,629,387 89,090,082 54,565,860 Income from real estate joint venture......................................... 756,133 -- -- Interest...................................................................... 24,294,579 17,117,917 15,588,829 Dividends..................................................................... 7,039,712 7,814,816 8,354,899 ------------ ------------ ----------- TOTAL INCOME 164,719,811 114,022,815 78,509,588 ------------ ------------ ----------- Expenses -- Note 3: Investment advisory charges................................................ 6,924,202 4,246,911 2,999,113 Administrative and distribution charges.................................... 4,392,882 3,442,282 2,498,376 Mortality and expense risk charges......................................... 1,414,888 1,027,707 675,450 Liquidity guarantee charges................................................ 692,594 561,510 101,655 ------------ ------------ ----------- TOTAL EXPENSES 13,424,566 9,278,410 6,274,594 ------------ ------------ ----------- INVESTMENT INCOME, NET 151,295,245 104,744,405 72,234,994 ------------ ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on: Real estate properties.................................................... 8,382,660 8,788,795 -- Marketable securities..................................................... (106,726) (3,022,098) (5,258,000) ------------ ------------ ----------- Net realized gain (loss) on investments 8,275,934 5,766,697 (5,258,000) ------------ ------------ ----------- Net change in unrealized appreciation (depreciation) on: Real estate properties.................................................... 22,257,781 14,443,916 33,221,281 Real estate joint venture................................................. 1,361,293 -- -- Marketable securities..................................................... 22,252,441 (10,375,870) (20,098,622) ------------ ------------ ----------- Net change in unrealized appreciation on investments 45,871,515 4,068,046 13,122,659 ------------ ------------ ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 54,147,449 9,834,743 7,864,659 ------------ ------------ ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS BEFORE MINORITY INTEREST 205,442,694 114,579,148 80,099,653 Minority interest in net increase in net assets resulting from operations.................................................. -- 1,364,619 (3,487,991) ------------ ------------ ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $205,442,694 $115,943,767 $76,611,662 ============ ============ ===========

See notes to consolidated financial statements. 18 TIAA REAL ESTATE ACCOUNT CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31, -------------------------------------------------- 2000 1999 1998 -------------- -------------- -------------- FROM OPERATIONS Investment income, net ............................... $ 151,295,245 $ 104,744,405 $ 72,234,994 Net realized gain (loss) on investments .............. 8,275,934 5,766,697 (5,258,000) Net change in unrealized appreciation on investments 45,871,515 4,068,046 13,122,659 Minority interest in net increase in net assets resulting from operations ............................ -- 1,364,619 (3,487,991) -------------- -------------- -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 205,442,694 115,943,767 76,611,662 -------------- -------------- -------------- FROM PARTICIPANT TRANSACTIONS Premiums .............................................. 161,668,073 126,200,561 91,248,578 TIAA seed money withdrawn -- Note 1 ................... -- -- (76,666,109) Net participant transfers from TIAA ................... 36,271,547 24,155,178 26,568,616 Net participant transfers from CREF Accounts .......... 343,338,864 269,199,426 310,999,448 Annuity and other periodic payments ................... (9,924,802) (6,330,436) (3,209,761) Withdrawals and death benefits ........................ (45,156,733) (30,052,955) (15,004,262) -------------- -------------- -------------- NET INCREASE IN NET ASSETS RESULTING FROM PARTICIPANT TRANSACTIONS 486,196,949 383,171,774 333,936,510 -------------- -------------- -------------- NET INCREASE IN NET ASSETS 691,639,643 499,115,541 410,548,172 NET ASSETS Beginning of year ..................................... 1,695,482,428 1,196,366,887 785,818,715 -------------- -------------- -------------- End of year ........................................... $2,387,122,071 $1,695,482,428 $1,196,366,887 ============== ============== ==============

See notes to consolidated financial statements. 19 TIAA REAL ESTATE ACCOUNT CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31, ----------------------------------------------- 2000 1999 1998 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net increase in net assets resulting from operations .............. $ 205,442,694 $ 115,943,767 $ 76,611,662 Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: Increase in investments ......................................... (702,336,424) (475,537,558) (409,958,664) Increase in other assets ........................................ (1,207,996) (14,271,470) (3,719,197) Increase (decrease) in other liabilities ........................ 1,736,106 -- (10,463) Increase in accrued real estate property level expenses and taxes 5,970,708 6,992,799 1,088,936 Increase in security deposits held .............................. 1,268,013 3,659,536 584,465 Increase (decrease) in minority interest ........................ 3,028,217 (19,913,592) 1,631,496 ------------- ------------- ------------- NET CASH USED IN OPERATING ACTIVITIES (486,098,682) (383,126,518) (333,771,765) ------------- ------------- ------------- CASH FLOWS FROM PARTICIPANT TRANSACTIONS Premiums .......................................................... 161,668,073 126,200,561 91,248,578 TIAA seed money withdrawn Note 1 ................................. -- -- (76,666,109) Net participant transfers from TIAA ............................... 36,271,547 24,155,178 26,568,616 Net participant transfers from CREF Accounts ...................... 343,338,864 269,199,426 310,999,448 Annuity and other periodic payments ............................... (9,924,802) (6,330,436) (3,209,761) Withdrawals and death benefits .................................... (45,156,733) (30,052,955) (15,004,262) ------------- ------------- ------------- NET CASH PROVIDED BY PARTICIPANT TRANSACTIONS 486,196,949 383,171,774 333,936,510 ------------- ------------- ------------- NET INCREASE IN CASH 98,267 45,256 164,745 CASH Beginning of year ................................................. 617,599 572,343 407,598 ------------- ------------- ------------- End of year ....................................................... $ 715,866 $ 617,599 $ 572,343 ============= ============= =============

See notes to consolidated financial statements. 20 TIAA REAL ESTATE ACCOUNT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--ORGANIZATION The TIAA Real Estate Account ("Account") is a segregated investment account of Teachers Insurance and Annuity Association of America ("TIAA") and was established by resolution of TIAA's Board of Trustees on February 22, 1995, under the insurance laws of the State of New York, for the purpose of funding variable annuity contracts issued by TIAA. The Account holds various properties in wholly-owned and majority owned subsidiaries which are consolidated for financial statement purposes. The Account commenced operations on July 3, 1995 with a $100,000,000 seed money investment by TIAA. TIAA purchased 1,000,000 Accumulation Units in the Account and such Units shared in the prorata investment experience of the Account and were subject to the same valuation procedures and expense deductions as all other Accumulation Units of the Account. The initial registration statement of the Account filed by TIAA with the Securities and Exchange Commission ("Commission") under the Securities Act of 1933 became effective on October 2, 1995. The Account began to offer Accumulation Units and Annuity Units to participants other than TIAA on October 2, and November 1, 1995, respectively. In August 1996, the Account's net assets first reached $200 million and, as required under a five year repayment schedule approved by the New York State Insurance Department ("NYID"), TIAA began to redeem its seed money Accumulation Units in monthly installments of 16,667 Units beginning in September 1996. Since the Account's assets were growing rapidly, TIAA in October 1997, with NYID approval, modified the seed money redemption schedule by increasing the monthly redemption of Units to a level equal to the value of 25% of the Account's net asset growth for the prior month, with no fewer than 16,667 Units and no more than 100,000 Units to be redeemed each month. These withdrawals were made at prevailing daily net asset values and are reflected in the accompanying consolidated financial statements. By the end of 1998, all of TIAA's Accumulation Units had been withdrawn. The investment objective of the Account is a favorable long-term rate of return primarily through rental income and capital appreciation from real estate investments owned by the Account. The Account also invests in publicly-traded securities and other instruments to maintain adequate liquidity for operating expenses, capital expenditures and to make benefit payments. TIAA employees, under the direction of TIAA's Board of Trustees and its Investment Committee, manage the investment of the Account's assets pursuant to investment management procedures adopted by TIAA for the Account. TIAA's investment management decisions for the Account are also subject to review by the Account's independent fiduciary, The Townsend Group. TIAA also provides all portfolio accounting and related services for the Account. TIAA-CREF Individual & Institutional Services, Inc. ("Services"), a subsidiary of TIAA, which is registered with the Commission as a broker-dealer and is a member of the National Association of Securities Dealers, Inc., provides administrative and distribution services pursuant to a Distribution and Administrative Services Agreement with the Account. 21 NOTE 2--SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements may require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and related disclosures. Actual results may differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the Account, which are in conformity with accounting principles generally accepted in the United States. BASIS OF PRESENTATION: The accompanying consolidated financial statements include the Account and its wholly-owned and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. VALUATION OF REAL ESTATE PROPERTIES: Investments in real estate properties are stated at fair value, as determined in accordance with procedures approved by the Investment Committee of the Board of Trustees and in accordance with the responsibilities of the Board as a whole; accordingly, the Account does not record depreciation. Fair value for real estate properties is defined as the most probable price for which a property will sell in a competitive market under all conditions requisite to a fair sale. Determination of fair value involves subjective judgement because the actual market value of real estate can be determined only by negotiation between the parties in a sales transaction. Real estate properties owned by the Account are initially valued at their respective purchase prices (including acquisition costs). Subsequently, independent appraisers value each real estate property at least once a year. The independent fiduciary must approve all independent appraisers used by the Account. The independent fiduciary can also require additional appraisals if it believes that a property's value has changed materially or otherwise to assure that the Account is valued correctly. TIAA's appraisal staff performs a valuation review of each real estate property on a quarterly basis and updates the property value if it believes that the value of the property has changed since the previous valuation review or appraisal. The independent fiduciary reviews and approves any such valuation adjustments which exceed certain prescribed limits. TIAA continues to use the revised value to calculate the Account's net asset value until the next valuation review or appraisal. VALUATION OF REAL ESTATE JOINT VENTURES: Real estate joint venture is stated at the Account's equity in the net assets of the underlying entity, which values its real estate holdings 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 for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Investment Committee of the Board of Trustees and in accordance with the responsibilities of the Board as a whole. ACCOUNTING FOR INVESTMENTS: Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties close (settlement date). Rent from real estate properties consists of all amounts earned under tenant operating leases, including base rent, recoveries of real estate taxes and other expenses and charges for miscellaneous services provided to tenants. Rental income is recognized in accordance with the billing terms of the lease agreements. The Account bears the direct expenses of the real estate properties owned. These expenses include, but are not limited to, fees to local property management companies, property taxes, utilities, maintenance, repairs, insurance and other operating and administrative costs. An estimate of the net operating income earned from each real estate property is accrued by the Account on a daily 22 NOTE 2--SIGNIFICANT ACCOUNTING POLICIES - (CONCLUDED) basis and such estimates are adjusted as soon as actual operating results are determined. Realized gains and losses on real estate transactions are accounted for under the specific identification method. Securities transactions are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned and, for short-term money market instruments, includes accrual of discount and amortization of premium. Dividend income is recorded on the ex-dividend date. Realized gains and losses on securities transactions are accounted for on the average cost basis. FEDERAL INCOME TAXES: Based on provisions of the Internal Revenue Code, the Account is taxed as a segregated asset account of TIAA. The Account should incur no material federal income tax attributable to the net investment experience of the Account. NOTE 3--MANAGEMENT AGREEMENTS Under established management agreements, various services necessary for the operation of the Account are provided, at cost, by TIAA and Services. TIAA provides investment management services for the Account while distribution and administrative services are provided by Services in accordance with a Distribution and Administrative Services Agreement between the Account and Services. Prior to April 30, 1999, an affiliate of a former minority partner provided certain management services for the properties owned by this majority owned subsidiary. The charges for such services for the year ended December 31, 1999 amounted to $345,928 ($855,810 in 1998) for investment advisory expenses and $104,673 ($102,953 in 1998) for administrative expenses which are recorded accordingly in the accompanying consolidated statements of operations. TIAA also provides a liquidity guarantee to the Account, for a fee, to ensure that sufficient funds are available to meet participant transfer and cash withdrawal requests in the event that the Account's cash flows and liquid investments are insufficient to fund such requests. TIAA also receives a fee for assuming certain mortality and expense risks. Fee payments are made from the Account on a daily basis to TIAA and Services according to formulas established each year with the objective of keeping the fees as close as possible to the Account's actual expenses. Any differences between actual expenses and daily charges are adjusted quarterly. NOTE 4--REAL ESTATE PROPERTIES Had the Account's real estate properties which were purchased during the year ended December 31, 2000 been acquired at the beginning of the period (January 1, 2000), rental income and real estate property level expenses and taxes for the year ended December 31, 2000 would have increased by approximately $35,984,000 and $10,712,000 respectively. In addition, interest income for the year ended December 31, 2000 would have decreased by approximately $23,870,000. Accordingly, the total proforma effect on the Account's net investment income for the year ended December 31, 2000 would have been an increase of approximately $1,402,000, if the real estate properties acquired during the year ended December 31, 2000 had been acquired at the beginning of the year. 23 NOTE 5--LEASES The Account's real estate properties are leased to tenants under operating lease agreements which expire on various dates through 2021. Aggregate minimum annual rentals for the properties owned, excluding short-term residential leases, are as follows: Years Ending December 31, ------------ 2001 $155,631,000 2002 145,380,000 2003 133,089,000 2004 114,678,000 2005 98,391,000 Thereafter 270,247,000 ------------- Total $917,416,000 ============= Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts. 24 Note 6--Condensed Consolidated Financial Information Selected condensed consolidated financial information for an Accumulation Unit of the Account is presented below.

FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---------- ---------- ----------- ---------- ---------- Per Accumulation Unit data: Rental income........................................ $ 14.530 $ 12.168 $ 10.425 $ 7.288 $ 6.012 Real estate property level expenses and taxes........................... 4.674 3.975 3.403 2.218 1.850 -------- -------- -------- -------- -------- Real estate income, net 9.856 8.193 7.022 5.070 4.162 Income from real estate joint venture................ 0.056 -- -- -- -- Dividends and interest............................... 2.329 2.292 3.082 2.709 3.309 -------- -------- -------- -------- -------- Total income 12.241 10.485 10.104 7.779 7.471 Expense charges (a).................................. 0.998 0.853 0.808 0.580 0.635 -------- -------- -------- -------- -------- Investment income, net 11.243 9.632 9.296 7.199 6.836 Net realized and unrealized gain on investments................................ 3.995 1.164 .579 3.987 1.709 -------- -------- -------- -------- -------- Net increase in Accumulation Unit Value............................ 15.238 10.796 9.875 11.186 8.545 Accumulation Unit Value: Beginning of year.................................. 142.968 132.172 122.297 111.111 102.566 -------- -------- -------- -------- -------- End of year........................................ $158.206 $142.968 $132.172 $122.297 $111.111 ======== ======== ======== ======== ======== Total return.......................................... 10.66% 8.17% 8.07% 10.07% 8.33% Ratios to Average Net Assets: Expenses (a)....................................... 0.67% 0.63% 0.64% 0.58% 0.61% Investment income, net............................. 7.50% 7.13% 7.34% 7.25% 6.57% Portfolio turnover rate: Real estate properties............................. 3.87% 4.46% 0% 0% 0% Securities......................................... 32.86% 27.68% 24.54% 7.67% 15.04% Thousands of Accumulation Units outstanding at end of year......................... 14,605 11,487 8,834 6,313 3,296

(a) Expense charges per Accumulation Unit and the Ratio of Expenses to Average Net Assets include the portion of expenses related to the minority interests and exclude real estate property level expenses and taxes. If the real estate property level expenses and taxes were included, the expense charge per Accumulation Unit for the year ended December 31, 2000 would be $5.672 ($4.828, $4.211, $2.798 and $2.485 for the years ended December 31, 1999, 1998, 1997 and 1996 respectively), and the Ratio of Expenses to Average Net Assets for the year ended December 31, 2000 would be 3.79% (3.58%, 3.32%, 2.82% and 2.39% for the years ended December 31, 1999, 1998, 1997 and 1996 respectively). 25 NOTE 7--ACCUMULATION UNITS Changes in the number of Accumulation Units outstanding were as follows:

FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------- 2000 1999 1998 ---------- ---------- --------- Accumulation Units: Credited for premiums............................ 1,074,708 918,728 511,462 Credited for transfers, net disbursements and amounts applied to the Annuity Fund............ 2,042,605 1,734,721 2,009,434 Outstanding: Beginning of year.............................. 11,487,360 8,833,911 6,313,015 ---------- ---------- --------- End of year.................................... 14,604,673 11,487,360 8,833,911 ========== ========== =========

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, 2000, the Account had one outstanding commitment to purchase a real estate property for approximately $86.1 million and one outstanding commitment to sell a real estate property for approximately $8.7 million. The sale transaction was closed in January 2001. 26 TIAA REAL ESTATE ACCOUNT CONSOLIDATED STATEMENT OF INVESTMENTS DECEMBER 31, 2000 REAL ESTATE PROPERTIES -- 79.50% LOCATION / DESCRIPTION VALUE ---------------------- ----- ARIZONA: Biltmore Commerce Center -- Office building ............... $ 38,603,637 Southbank Building -- Office building ..................... 13,200,000 CALIFORNIA: ABS & CDC Building -- Industrial building ................. 15,243,900 88 Kearny Street -- Office building ....................... 84,172,241 Eastgate Distribution Center -- Industrial building ....... 13,700,000 Larkspur Courts -- Apartments ............................. 58,600,000 Northpoint Commerce Center -- Industrial building ......... 38,800,000 Ontario Industrial Properties -- Industrial building ...... 107,688,169 Westcreek -- Apartments ................................... 17,200,000 COLORADO: Arapahoe Park East -- Industrial building ................. 12,478,003 The Lodge at Willow Creek -- Apartments ................... 30,800,000 Monte Vista -- Apartments ................................. 21,000,000 FLORIDA: Golfview -- Apartments .................................... 27,400,000 The Greens at Metrowest -- Apartments ..................... 14,100,000 Maitland Promenade One -- Office building ................. 36,520,163 Plantation Grove -- Shopping center ....................... 7,450,000 Royal St. George -- Apartments ............................ 16,650,000 awgrass Portfolio -- Office building ...................... 54,300,000 Westinghouse Facility -- Industrial building .............. 6,200,000 GEORGIA: Atlanta Industrial Portfolio -- Industrial building ....... 40,021,362 ILLINOIS: Columbia Center III -- Office building .................... 42,500,000 Glenpointe Business Park -- Industrial building ........... 16,100,000 Parkview Plaza -- Office building ......................... 52,500,000 Rockrun Business Park -- Industrial building .............. 19,497,150 Rolling Meadows -- Shopping center ........................ 11,986,500 Woodcreek Business Park -- Industrial building ............ 7,000,000 IOWA: Interstate Acres -- Industrial building ................... 13,200,000 KENTUCKY: IDI Kentucky Portfolio -- Industrial building ............. 53,931,995 MARYLAND: FedEx Distribution Facility -- Industrial building ........ 7,600,000 Longview Executive Park -- Office building ................ 28,020,861 Saks Distribution Center -- Industrial building ........... 30,950,000 MICHIGAN: Indian Creek -- Apartments ................................ 17,250,000 MINNESOTA: Interstate Crossing -- Industrial building ................ 6,150,000 River Road Distribution Center --Industrial building ...... 4,300,000 NEVADA: UPS Distribution Facility Industrial building ............. 11,000,000 27 LOCATION / DESCRIPTION VALUE ---------------------- ----- NEW JERSEY: 371 Hoes Lane -- Office building .......................... $ 16,677,327 10 Waterview Boulevard -- Office building ................. 31,400,000 Konica Photo Imaging Headquarters -- Industrial building .. 17,300,000 Morris Corporate Center III -- Office building ............ 103,800,000 NEW YORK: 780 Third Avenue -- Office building ....................... 173,600,000 The Colorado -- Apartments ............................... 60,400,000 NORTH CAROLINA: Lynnwood Collection -- Shopping center .................... 7,900,000 Millbrook Collection -- Shopping center ................... 7,000,000 OHIO: Bent Tree -- Apartments ................................... 14,700,000 Columbus Portfolio -- Office building ..................... 34,200,000 Northmark Business Center -- Office building .............. 13,100,000 OREGON: Five Centerpointe -- Office building ...................... 18,331,911 PENNSYLVANIA: Lincoln Woods -- Apartments ............................... 23,507,797 TEXAS: Butterfield Industrial Park -- Industrial building ........ 4,957,200(1) The Legends at Chase Oaks -- Apartments ................... 26,289,264 Park West Center I and II -- Industrial building .......... 28,300,500 UTAH: Landmark at Salt Lake City -- Industrial building ......... 14,434,653 USF&G Building -- Office building ......................... 8,677,033 VIRGINIA: Ashford Meadows -- Apartments ............................. 64,174,878 Fairgate at Ballston -- Office building ................... 30,800,000 Monument Place -- Office building ......................... 36,500,000 River Oaks -- Shopping center ............................. 11,100,000 WASHINGTON: The Bay Court at Harbour Pointe -- Apartments ............. 35,000,000 WASHINGTON DC: 1801 K Street N W -- Office building ...................... 140,989,800 ------------- TOTAL REAL ESTATE PROPERTIES (Cost $1,818,143,290) ........ 1,899,254,344 ------------- (1) Leasehold interest only. REAL ESTATE JOINT VENTURE--1.08% Teachers REA IV, LLC, which owns Tyson's Executive Plaza II (50% Account Interest) ......... 26,035,867 ------------- TOTAL REAL ESTATE JOINT VENTURE (Cost $24,674,574) ........ 26,035,867 ------------- MARKETABLE SECURITIES--19.42% REAL ESTATE INVESTMENT TRUSTS -- 5.69% SHARES ISSUER ------ ------ 75,000 Alexandria Real Estate Equities, Inc. ........... 2,789,063 140,000 AMB Property Corporation ........................ 3,613,750 89,900 AMB Property Corporation Series A ............... 2,135,125 75,000 Apartment Investment & Management Co ............ 3,745,312 120,000 Archstone Communities Trust ..................... 3,090,000 28 SHARES ISSUER VALUE ------ ------ ----- 196,800 Boston Properties, Inc. ..................... $ 8,560,800 205,400 Brandywine Realty Trust ..................... 4,249,212 200,000 Carramerica Realty Series B ................. 4,112,500 93,000 Centerpoint Properties Corp. ................ 4,394,250 108,100 Corporate Office Properties Trust, Inc....... 1,074,244 176,900 Cousins Properties, Inc. .................... 4,942,144 90,000 Developers Diversified Realty Corp. ......... 1,833,750 271,300 Duke-Weeks Realty Corp ...................... 6,680,763 340,913 Equity Office Properties Trust .............. 11,122,287 166,700 Equity Residential Properties Trust ......... 9,220,594 25,000 Federal Realty Investment Trust Pfd. ........ 493,750 98,300 Gables Residential Trust, Pfd Series A ...... 2,101,163 225,000 Home Properties of New York, Inc. ........... 6,285,938 74,900 Hospitality Properties Trust ................ 1,694,612 26,000 Istar Financial, Pfd Series C ............... 477,750 80,000 Kimco Realty Corp. .......................... 3,535,000 196,050 Macerich Company ............................ 3,761,709 65,000 Mack-Cali Realty Co ......................... 1,856,562 82,100 Manufactured Home Communities, Inc. ......... 2,380,900 111,200 Mission West Properties Inc. ................ 1,542,900 240,000 Prologis Trust .............................. 5,340,000 19,900 Prologis Trust Pfd Series A ................. 462,675 237,700 Public Storage, Inc. ........................ 5,779,081 93,600 Rouse Company ............................... 2,386,800 280,900 Simon Property Group, Inc. .................. 6,741,600 170,000 Spieker Properties, Inc. .................... 8,521,250 140,000 Starwood Hotels & Resorts Worldwide ......... 4,935,000 35,500 Storage USA, Inc. ........................... 1,127,125 95,000 Sun Communities, Inc. ....................... 3,182,500 100,400 Taubman Centers, Inc. ....................... 1,098,125 35,000 Taubman Centers, Inc Pfd Series A ........... 586,250 ------------ TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost $134,898,725).... 135,854,484 ------------ CORPORATE BONDS--0.42% PRINCIPAL ISSUER, COUPON AND MATURITY DATE --------- -------------------------------- $ 5,000,000 Avco Financial Services, Inc 5.75% 01/23/01.............................. 4,998,600 5,000,000 Ford Motor Credit Co 5.75% 01/25/01.............................. 4,997,750 ---------- TOTAL CORPORATE BONDS (Cost $10,034,650)............... 9,996,350 ---------- COMMERCIAL PAPER--13.31% 10,000,000 Asset Securitization Cooperative Corp. 6.58% 01/03/01.............................. 9,994,517 8,550,000 Bank of America 6.63% 01/05/01.............................. 8,550,068 6,105,000 Bellsouth Capital Funding Corp 6.39% 02/15/01.............................. 6,055,397 10,000,000 Beta Finance Inc. 6.57% 01/11/01.............................. 9,979,817 10,000,000 Ciesco LP. 6.55% 01/12/01.............................. 9,978,139 19,600,000 Colgate-Palmolive Co 6.30% 02/28/01.............................. 19,397,630 29 PRINCIPAL ISSUER, COUPON AND MATURITY DATE VALUE --------- -------------------------------- ----- $11,250,000 Corporate Asset Funding Corp, Inc. 6.53% 01/17/01............................... $ 11,215,428 9,260,000 Delaware Funding Corp. 6.57% 01/16/01................................ 9,233,239 10,000,000 Delaware Funding Corp. 6.60% 01/22/01................................ 9,960,267 22,625,000 Govco Incorporated 6.53% 01/25/01................................ 22,522,741 4,060,000 Govco Incorporated 6.52% 03/09/01................................ 4,011,736 10,125,000 International Lease Finance Corp 6.50% 01/23/01................................ 10,082,883 5,530,000 Morgan Stanley Dean Witter 6.65% 01/04/01................................ 5,525,978 18,000,000 National Rural Utilities Coop Finance 6.51% 01/22/01................................ 17,928,390 10,000,000 Park Avenue Receivables Corp 6.67% 01/03/01................................ 9,994,566 4,135,000 Park Avenue Receivables Corp 6.67% 01/11/01................................ 4,126,677 1,543,000 Park Avenue Receivables Corp 6.58% 01/18/01................................ 1,537,983 1,291,000 Park Avenue Receivables Corp 6.57% 01/30/01................................ 1,284,104 20,000,000 Preferred Receivable Funding Corp 6.62% 01/23/01................................ 19,916,940 15,000,000 Receivables Capital Corp 6.62% 01/26/01................................ 14,929,567 20,000,000 Salomon Smith Barney Holdings Inc 6.55% 01/02/01................................ 19,992,656 20,933,000 SBC Communications Inc. 6.42% 02/05/01................................ 20,798,609 21,725,000 Toronto Dominion Holdings U.S. 6.60% 01/09/01................................ 21,689,153 34,554,000 Verizon Global Funding 6.60% 01/10/01................................ 34,490,651 14,860,000 Verizon Network Funding Corp 6.54% 01/30/01................................ 14,780,598 -------------- TOTAL COMMERCIAL PAPER (Amortized cost $318,026,154)......... 317,977,734 -------------- TOTAL MARKETABLE SECURITIES (Cost $462,959,529)................. 463,828,568 -------------- TOTAL INVESTMENTS--100.00% (Cost $2,305,777,393)...... ......... $2,389,118,779 ============== See notes to consolidated financial statements. 30 TIAA REAL ESTATE ACCOUNT Schedule III Real Estate Owned December 31, 2000

Costs Capitalized Subsequent to Acquisition Initial cost (Including Value at Year Encum- to Acquire Unrealized Gains December 31, Construction Date Description brances Property and Losses) 2000 Completed Acquired ------------------------------ ------- ------------- ---------------- -------------- ------------- ---------- River Road Distribution Center $ -0- $4,174,182 $125,818 $ 4,300,000 1995 11/22/95 Industrial Building Fridley, Minnesota The Greens At Metrowest -0- 12,522,047 1,577,953 14,100,000 1990 12/15/95 Apartments Orlando, Florida Butterfield Industrial Park -0- 4,450,535 506,665 4,957,200 1981 12/22/95 Industrial Building El Paso, Texas (1) Plantation Grove Shopping Center -0- 7,350,129 99,871 7,450,000 1995 12/28/95 Shopping Center Ocoee, Florida Southbank Business Park -0- 10,069,898 3,130,102 13,200,000 1995 02/27/96 Office Building Phoenix, Arizona Millbrook Collection -0- 6,774,711 225,289 7,000,000 1988 03/29/96 Shopping Center Raleigh, North Carolina Lynnwood Collection -0- 6,708,120 1,191,880 7,900,000 1988 03/29/96 Shopping Center Raleigh, North Carolina

31

Costs Capitalized Subsequent to Acquisition Initial cost (Including Value at Year Encum- to Acquire Unrealized Gains December 31, Construction Date Description brances Property and Losses) 2000 Completed Acquired ------------------------------ ------- ------------- ---------------- -------------- ------------- ---------- Monte Vista Apartments $-0- $17,663,849 $3,336,151 $21,000,000 1995 06/21/96 Apartments Littleton, Colorado River Oaks Shopping Center -0- 13,037,488 (1,937,488) 11,100,000 1995 07/12/96 Shopping Center Woodbridge, Virginia Arapahoe Park East -0- 9,924,089 2,553,914 12,478,003 1982 10/31/96 Industrial Building Boulder, Colorado Royal St. George Apartments -0- 16,072,612 577,388 16,650,000 1995 12/20/96 Apartments West Palm Beach, Florida Interstate Crossing -0- 6,454,888 (304,888) 6,150,000 1995 12/31/96 Industrial Building Eagan, Minnesota West Creek Apartments -0- 13,488,279 3,711,721 17,200,000 1988 01/02/97 Apartments Westlake Village, California Interstate Acres -0- 13,610,294 (410,294) 13,200,000 1988 01/24/97 Industrial Building Urbandale, Iowa Westinghouse Facility -0- 6,089,473 110,527 6,200,000 1997 02/05/97 Industrial Building Coral Springs, Florida

32

Costs Capitalized Subsequent to Acquisition Initial cost (Including Value at Year Encum- to Acquire Unrealized Gains December 31, Construction Date Description brances Property and Losses) 2000 Completed Acquired ------------------------------ ------- ------------- ---------------- -------------- ------------- ---------- Rolling Meadows $-0- $12,930,463 ($943,963) $11,986,500 1957 05/28/97 Shopping Center Rolling Meadows, Illinois Saks Distribution Center -0- $26,908,401 4,041,599 30,950,000 1997 05/15/97 Aberdeen, Maryland Eastgate Distribution Center -0- 11,941,992 1,758,008 13,700,000 1996 05/29/97 San Diego, California Five Centerpointe -0- 15,656,341 2,675,570 18,331,911 1988 04/21/97 Office Building Lake Oswego, Oregon Longview Executive Park -0- 23,628,567 4,392,293 28,020,860 1988 04/21/97 Office Building Longview, Maryland Northmark Business Center III -0- 8,812,644 4,287,356 13,100,000 1985 04/21/97 Office Building Blue Ash, Ohio USF&G Building -0- 6,399,677 2,277,356 8,677,033 1988 04/21/97 Office Building Salt Lake City, Utah Fairgate at Ballston -0- 26,977,436 3,822,564 30,800,000 1988 04/21/97 Office Building Arlington, Virginia

33

Costs Capitalized Subsequent to Acquisition Initial cost (Including Value at Year Encum- to Acquire Unrealized Gains December 31, Construction Date Description brances Property and Losses) 2000 Completed Acquired ------------------------------------ ------- ------------ ---------------- ----------- ------------ -------- Parkview Plaza $-0- $49,412,494 $ 3,087,506 $52,500,000 1990 04/29/97 Office Building Oakbrook Terrace, Illinois Lincoln Woods Apartments -0- 21,464,483 2,043,315 23,507,798 1991 10/20/97 Apartments Lafayette Hill, Pennsylvania 371 Hoes Lane -0- 15,499,306 1,178,021 16,677,327 1986 12/15/97 Office Building Piscataway, New Jersey Columbia Centre III -0- 38,580,069 3,919,931 42,500,000 1989 12/23/97 Office Building Rosemont, Illinois The Lodge at Willow Creek -0- 27,562,882 3,237,118 30,800,000 1997 12/24/97 Apartments Douglas County, Colorado The Legends at Chase Oaks -0- 29,701,668 (3,412,404) 26,289,264 1997 03/31/98 Apartments Plano, Texas Glen Pointe Business Park -0- 15,279,508 820,492 16,100,000 1997 06/30/98 Industrial Building Glendale Heights, Illinois Wood Creek Business Park -0- 7,222,421 (222,421) 7,000,000 1995 6/30/98 Industrial Building Boilingbrook, Illinois

34

Costs Capitalized Subsequent to Acquisition Initial cost (Including Value at Year Encum- to Acquire Unrealized Gains December 31, Construction Date Description brances Property and Losses) 2000 Completed Acquired ------------------------------------ ------- ------------ ---------------- ----------- ------------ -------- Rock Run Business Park $ -0- $19,472,571 $ 24,579 $19,497,150 1998 06/30/98 Industrial Building Joliet, Illinois Golfview Apartments -0- 28,066,591 (666,591) 27,400,000 1998 07/31/98 Apartments Lake Mary, Florida Indian Creek Apartments -0- 17,002,932 247,068 17,250,000 1988 10/08/98 Apartments Farmington Hills, Michigan Bent Tree Apartments -0- 14,420,590 279,410 14,700,000 1987 10/22/98 Apartments Columbus, Ohio UPS Distribution Center -0- 10,989,393 10,607 11,000,000 1998 11/13/98 Industrial Building Fernly, Nevada Ontario Industrial Properties -0- 105,382,403 2,305,766 107,688,169 1997 12/17/98 Industrial Building Ontario, California IDI Kentucky Portfolio -0- 53,083,000 848,996 53,931,996 1998 12/17/98 Industrial Building Hebron, Kentucky Fedex Distribution Center -0- 7,828,025 (228,025) 7,600,000 1998 12/18/98 Industrial Building Crofton, Maryland

35

Costs Capitalized Subsequent to Acquisition Initial cost (Including Value at Year Encum- to Acquire Unrealized Gains December 31, Construction Date Description brances Property and Losses) 2000 Completed Acquired ------------------------------------ ------- ------------ ---------------- ----------- ------------ -------- The Bay Court at Harbor Pointe $ -0- $35,164,371 ($ 164,371) $35,000,000 1991 12/18/98 Apartments Mukilteo, Washington Biltmore Commerce Center -0- 37,323,058 1,280,579 38,603,637 1985 02/23/99 Office Building Phoenix, Arizona The Colorado -0- 52,687,840 7,712,160 60,400,000 1987 04/14/99 Apartments New York, New York Sawgrass Portfolio -0- 52,963,168 1,336,832 54,300,000 1998 05/11/99 Office Building Sunrise, Florida 780 Third Avenue -0- 161,511,019 12,088,981 173,600,000 1984 07/08/99 Office Building New York, New York Monument Place -0- 34,597,698 1,902,302 36,500,000 1990 07/15/99 Office Building Fairfax, Virginia 88 Kearney Street -0- 65,995,171 18,177,070 84,172,241 1986 07/22/99 Office Building San Francisco, California 10 Waterview Boulevard -0- 31,063,636 336,364 31,400,000 1984 07/27/99 Office Building Parsippany, New Jersey

36

Costs Capitalized Subsequent to Acquisition Initial cost (Including Value at Year Encum- to Acquire Unrealized Gains December 31, Construction Date Description brances Property and Losses) 2000 Completed Acquired ------------------------------------ ------- ------------ ---------------- ----------- ------------ -------- Larkspur Courts $ -0- $53,038,988 $ 5,561,012 $58,600,000 1991 08/17/99 Apartments Larkspur, California Columbus Portfolio -0- 33,701,672 498,328 34,200,000 1997 11/30/99 Office Building Columbus , Ohio Konica Photo Imaging Headquarters -0- 17,049,875 250,125 17,300,000 1999 12/21/99 Industrial Building Mahwah, New Jersey Atlanta Industrial Portfolio -0- 39,852,562 168,800 40,021,362 1999 04/04/00 Industrial Building Atlanta , Georgia 1801 K Street -0- 140,719,040 270,760 140,989,800 1971 05/15/00 Office Building Washington, DC Northpoint Commerce Center -0- 38,818,013 (18,013) 38,800,000 1994 06/15/00 Industrial Building Fullerton, California Morris Corporate Center III -0- 103,119,739 680,261 103,800,000 1990 07/12/00 Office Building Parsippany, New Jersey Ashford Meadows Apartments -0- 64,174,878 -0- 64,174,878 1998 09/28/00 Apartments Herndon, Virginia

37

Costs Capitalized Subsequent to Acquisition Initial cost (Including Value at Year Encum- to Acquire Unrealized Gains December 31, Construction Date Description brances Property and Losses) 2000 Completed Acquired ------------------------------------ ------- ------------ ---------------- ----------- ------------ -------- Landmark at Salt Lake City $ -0- $14,434,653 $0 $14,434,653 2000 11/03/00 Industrial Building Salt Lake City, Utah ABS & CDC Building -0- 15,243,900 0 15,243,900 2000 11/17/00 Industrial Building Rancho Cucamonga, California Maitland Promenade One -0- 36,520,162 0 36,520,162 1999 12/14/00 Office Building Maitland, Florida Park West Center I and II -0- 28,300,500 0 28,300,500 1997 12/19/00 Industrial Building ----- -------------- ------------ -------------- Coppell, Texas $ -0- $1,798,894,394 $100,359,950 $1,899,254,344 ===== ============== ============ ==============

(1) Leasehold interest only Reconciliation of investment property owned: Balance at beginning of period $ 1,312,503,554 Acquisitions 586,113,228 Dispositions (Initial cost 25,560,558, costs capitalized 4,439,442) (30,000,000) Capital improvements and carrying costs (including unrealized gains and losses) 30,637,562 --------------- Balance at end of period $ 1,899,254,344 =============== 38 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The Account has no officers or directors. The Trustees and principal executive officers of TIAA, and their principal occupations during the last five years, are as follows: TRUSTEES -------- DAVID ALEXANDER, 68 President Emeritus, Pomona College. Formerly, Trustees' Professor, Pomona College and American Secretary, Rhodes Scholarship Trust. MARCUS ALEXIS, 69. Board of Trustees Professor of Economics and Professor of Management and Strategy, J.L. Kellogg Graduate School of Management, Northwestern University. WILLARD T. CARLETON, 66. Donald R. Diamond Professor of Finance, College of Business and Public Administration, University of Arizona. ROBERT C. CLARK, 57. Dean and Royall Professor of Law, Harvard Law School, Harvard University. ESTELLE A. FISHBEIN, 66. Vice President and General Counsel, The Johns Hopkins University. FREDERICK R. FORD, 64. Executive Vice President and Treasurer Emeritus, Purdue University. Formerly, Executive Vice President and Treasurer, Purdue University. RUTH SIMMS HAMILTON, 63. Professor, Department of Sociology, and Director, African Diaspora Research Project, Michigan State University. 39 ROCHELLE B. LAZARUS, 53. Chairman and Chief Executive Officer, Ogilvy & Mather Worldwide. Formerly, President and Chief Operating Officer, Ogilvy & Mather Worldwide. ROBERT M. O'NEIL, 66. Professor of Law, University of Virginia and Director, The Thomas Jefferson Center for the Protection of Free Expression. LEONARD S. SIMON, 64. Vice Chairman, Charter One Financial Inc. Formerly, Chairman, President and Chief Executive Officer, RCSB Financial, Inc. and Chairman and Chief Executive Officer, The Rochester Community Savings Bank. RONALD L. THOMPSON, 51. Chairman and Chief Executive Officer, Midwest Stamping Co. PAUL R. TREGURTHA, 65. Chairman and Chief Executive Officer, Mormac Marine Group, Inc. and Moran Transportation Company, Inc.; Chairman, Meridian Aggregates, L.P.; Vice Chairman, The Interlake Steamship Company and Lakes Shipping Company. WILLIAM H. WALTRIP, 63. Chairman, Technology Solutions Company. Formerly, Chairman and Chief Executive Officer, Bausch & Lomb Inc. ROSALIE J. WOLF, 59. Managing Director, Laurel Management, L.L.C. Formerly, Treasurer and Chief Investment Officer, The Rockefeller Foundation. OFFICER-TRUSTEES ---------------- JOHN H. BIGGS, 64. Chairman, President and Chief Executive Officer, TIAA and CREF. MARTIN L. LEIBOWITZ, 64. Vice Chairman and Chief Investment Officer, TIAA and CREF. OTHER OFFICERS -------------- RICHARD J. ADAMSKI, 58. Vice President and Treasurer, TIAA and CREF. 40 RICHARD L. GIBBS, 54. Executive Vice President, Finance and Planning, TIAA and CREF. E. LAVERNE JONES, 52 Vice President and Corporate Secretary, TIAA and CREF. ITEM 11. EXECUTIVE COMPENSATION. Not applicable. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Not applicable. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. TIAA's general account plays a significant role in operating the Real Estate Account, including providing a liquidity guarantee, and investment management and other services. LIQUIDITY GUARANTEE. If the Account's cash flow is insufficient to fund redemption requests, TIAA's general account has agreed to fund them by purchasing accumulation units. TIAA thereby guarantees that a participant can redeem accumulation units at their then current daily net asset value. For the year ended December 31, 2000, the Account paid TIAA $692,594 for this liquidity guarantee through a daily deduction from the net assets of the Account. INVESTMENT MANAGEMENT AND ADMINISTRATIVE SERVICES/CERTAIN RISKS BORNE BY TIAA. Deductions are made each valuation day from the net assets of the Account for various services required to manage investments, administer the Account and distribute the contracts, and to cover mortality and expense risks borne by TIAA. These services are performed at cost by TIAA and Services. For the year ended December 31, 2000, the Account paid TIAA $6,924,202 for investment management services and $1,414,888 for mortality and expense risks. For the same period, the Account paid Services $4,392,882 for its administrative and distribution services. 41 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. Financial Statements. See Item 8 for required financial statements. (a) 2. Financial Statement Schedules. See Item 8 for required financial statement schedules. (a) 3. Exhibits. (1) Distribution and Administrative Services Agreement by and between TIAA and TIAA-CREF Individual & Institutional Services, Inc. (as amended)* (3) (A) Charter of TIAA (as amended) (B) Bylaws of TIAA (as amended)** (4) (A) Forms of RA, GRA, GSRA, SRA, and IRA Real Estate Account Contract Endorsements* (B) Forms of Income-Paying Contracts* (10) (A) Independent Fiduciary Agreement by and among TIAA, the Registrant, and Institutional Property Consultants, Inc. (as amended)*** (B) Custodial Services Agreement by and between TIAA and Morgan Guaranty Trust Company of New York with respect to the Real Estate Account* (b) Reports on 8-K. No reports on Form 8-K have been filed during the last quarter of the period covered by this report. The Account filed a report on Form 8-K on January 9, 2001 under Item 5 of the form with respect to the acquisition of properties for its portfolio. ---------- * - Previously filed and incorporated herein by reference to Post-Effective Amendment No. 2 to the Account's previous Registration Statement on Form S-1 filed April 30, 1996 (File No. 33- 92990). ** - Previously filed and incorporated herein by reference to the Account's Form 10-Q Quarterly Report for the period ended September 30, 1997, filed November 13, 1997 (File No. 33-92990). *** - Previously filed and incorporated herein by reference to Pre-Effective Amendment No. 1 to the Account's Registration Statement on Form S-1 filed April 29, 1997 (File No. 333-22809). 42 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/ LISA SNOW ------------------------------- Lisa Snow Vice President and Chief Counsel, Corporate Law MARCH 27, 2001 ------------------------------- Date Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons, trustees and officers of Teachers Insurance and Annuity Association of America, in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ JOHN H. BIGGS Chairman of the Board, President, 3/27/01 ------------------------- and Chief Executive Officer John H. Biggs (Principal Executive and Financial Officer) /s/ MARTIN L. LEIBOWITZ Vice Chairman and Chief 3/27/01 ------------------------- Investment Officer Martin L. Leibowitz (Principal Investment Officer) /s/ RICHARD L. GIBBS Executive Vice President 3/27/01 ------------------------- (Principal Accounting Officer) Richard L. Gibbs 43 SIGNATURE OF TRUSTEE DATE SIGNATURE OF TRUSTEE DATE -------------------- ---- -------------------- ---- /s/ DAVID ALEXANDER 3/27/01 -------------------- ------------------- David Alexander Rochelle B. Lazarus /s/ MARCUS ALEXIS 3/27/01 /s/ ROBERT M. O'NEIL 3/27/01 ------------------ --------------------- Marcus Alexis Robert M. O'Neil /s/ WILLARD T. CARLETON 3/27/01 /s/ LEONARD S. SIMON 3/27/01 ------------------------- --------------------- Willard T. Carleton Leonard S. Simon /s/ ROBERT C. CLARK 3/27/01 ------------------------- ---------------------- Robert C. Clark Ronald L. Thompson /s/ ESTELLE A. FISHBEIN 3/27/01 /s/ PAUL R. TREGURTHA 3/27/01 ------------------------- ---------------------- Estelle A. Fishbein Paul R. Tregurtha /s/ FREDERICK R. FORD 3/27/01 /s/ WILLIAM H. WALTRIP 3/27/01 ------------------------ ----------------------- Frederick R. Ford William H. Waltrip /s/ RUTH SIMMS HAMILTON 3/27/01 /s/ ROSALIE J. WOLF 3/27/01 ------------------------ ----------------------- Ruth Simms Hamilton Rosalie J. Wolf 44 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. 45 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 3(A) Charter of TIAA (as amended)