S-1/A 1 c47030_s-1a.htm

As filed with the Securities and Exchange Commission on May 1, 2007

Registration No. 333-141513

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 1 to

FORM S-1
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933

TIAA REAL ESTATE ACCOUNT
(Exact name of registrant as specified in its charter)


New York	(Not applicable)	(Not applicable)
(State or jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification No.)

c/o Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017-3206
(212) 490-9000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Keith F. Atkinson, Esquire
Teachers Insurance and Annuity Association of America
8500 Andrew Carnegie Blvd.
Charlotte, North Carolina 28226
(704) 988-1000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Steven B. Boehm, Esquire
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of the registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

Pursuant to Rule 429 under the Securities Act, the prospectus contained herein also relates to and constitutes a post-effective amendment to Securities Act registration statements 33-92990, 333-13477, 333-22809, 333-59778, 333-83964, 333-113602, 333-121493 and 333-132580 (collectively, the “Prior Registration Statements”).

CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Unit	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee⁽¹⁾

Accumulation units in TIAA Real Estate Account	*	*	$4,000,000,000**	$122,800**



*	The securities are not issued in predetermined amounts or units, and the maximum aggregate offering price is estimated solely for purposes of determining the registration fee pursuant to Rule 457(o) under the Securities Act.

**	In addition to the $4,000,000,000 of accumulation units registered hereunder, the registrant is carrying forward securities which remain unsold but which were previously registered under the Prior Registration Statements for which filing fees were previously paid.


⁽¹⁾	Previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

SUBJECT TO COMPLETION, DATED MAY 1, 2007

PROSPECTUS

________________, 2007

TIAA REAL ESTATE ACCOUNT

A Tax-Deferred Variable Annuity Option Offered by Teachers Insurance and Annuity Association of America

This prospectus tells you about the TIAA Real Estate Account, an investment option offered through individual and group variable annuity contracts issued by TIAA. Please read it carefully before investing and keep it for future reference.

The Real Estate Account, which we refer to sometimes as “the Account” in this prospectus, invests primarily in real estate and real estate-related investments. TIAA, one of the largest and most experienced mortgage and real estate investors in the nation, manages the Account’s assets.

The value of your investment in the Real Estate Account will go up or down depending on how the Account performs and you could lose money. The Account’s performance depends mainly on the value of the Account’s real estate and other real estate-related investments, and the income generated by those investments. The Account’s returns could go down if, for example, real estate values or rental and occupancy rates decrease due to general economic conditions or a weak market for real estate generally. Property operating costs and government regulations, such as zoning or environmental laws, could also affect a property’s profitability. TIAA does not guarantee the investment performance of the Account, and you will bear the entire investment risk. For a detailed discussion of the specific risks of investing in the Account, see “Risks,” page 11.

We take deductions daily from the Account’s net assets for the Account’s operating and investment management expenses. The Account also pays TIAA for bearing mortality and expense risks and for providing a liquidity guarantee. The current estimated annual expense deductions from the Account’s net assets total 0.630%.

The Real Estate Account is designed as an option for retirement and tax-deferred savings plans for employees of nonprofit institutions. TIAA offers the Real Estate Account under the following annuity contracts:


n	RA and GRAs (Retirement Annuities and Group Retirement Annuities)

n	SRAs (Supplemental Retirement Annuities)

n	GSRAs (Group Supplemental Retirement Annuities)

n	Retirement Choice and Retirement Choice Plus Annuity

n	GAs (Group Annuities) and Institutionally-Owned GSRAs

n	Classic and Roth IRAs (Individual Retirement Annuities) including SEP IRAs (Simplified Employee Pension Plans)

n	Keoghs

n	ATRAs (After-Tax Retirement Annuities)

Note that state regulatory approval may be pending for certain of these contracts and they may not currently be available in your state.

The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of the information in this prospectus. Any representation to the contrary is a criminal offense.

An investment in the Real Estate Account is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

(TIAA CREF LOGO)

TABLE OF CONTENTS


About the Real Estate Account and TIAA		2
The Account’s Investment Objective and Strategy		3
Past Performance		4
Summary of Account’s Expense Deductions		4
About the Account’s Investments —In General		5
General Investment and Operating Policies		8
Risks		11
Establishing and Managing the Account — The Role of TIAA		17
Description of Properties		21
Selected Financial Data		34
Quarterly Selected Financial Information (Unaudited)		35
Management’s Discussion and Analysis of Financial Condition and Results of Operations		36


Quantitative and Qualitative Disclosures About Market Risk		52
Valuing the Account’s Assets		54
Expense Deductions		57
Certain Relationships With TIAA		58
The Contracts		59
How to Transfer and Withdraw Your Money		64
Receiving Annuity Income		68
Death Benefits		73
Taxes		74
General Matters		80
Distribution		82
State Regulation		82
Legal Matters		82
Experts		83
Additional Information		84
Financial Statements		85
Index to Financial Statements		86
Appendix A — Management of TIAA		212
Appendix B — Special Terms		214

Please see Appendix B for definitions of certain special terms used in this prospectus.

The Real Estate Account securities offered by this prospectus are only being offered in those jurisdictions where it is legal to do so. No person may make any representation to you or give you any information about the offering that is not in the prospectus. If anyone provides you with information about the offering that is not in the prospectus, you shouldn’t rely on it.

ABOUT THE REAL ESTATE ACCOUNT AND TIAA

The TIAA Real Estate Account was established in February 1995 as a separate account of Teachers Insurance and Annuity Association of America (TIAA). TIAA is a life insurance company founded in 1918 by the Carnegie Foundation for the Advancement of Teaching. Its home office is at 730 Third Avenue, New York, NY 10017-3206 and its telephone number is 212 490-9000. In addition to issuing variable annuities, whose returns depend upon the performance of certain specified investments, TIAA also offers traditional fixed annuities.

With its 60 years in the real estate business and interests in properties located across the U.S. and internationally, TIAA is one of the nation’s largest and most experienced investors in mortgages and real estate equity interests. As of December 31, 2006, TIAA’s general account had a mortgage and real property portfolio of approximately $25.2 billion.

TIAA is the companion organization of the College Retirement Equities Fund (CREF), the first company in the United States to issue a variable annuity. Together, TIAA and CREF form the principal retirement system for the nation’s education and research communities and one of the largest pension systems in the U.S., based on assets under management. TIAA-CREF serves approximately 3.2 million people and over 15,000 institutions. As of December 31, 2006, TIAA’s assets were approximately $184 billion; the combined assets for TIAA and CREF totaled approximately $392 billion.

The Account offers individual and group accumulating annuity contracts (with contributions made on a pre-tax or after-tax basis), as well as individual lifetime and term-certain variable payout annuity contracts (including the payment of death benefits to beneficiaries). Investors are entitled to transfer funds to or from the Account under certain circumstances. Funds invested in the Account for each category of contract are expressed in terms of units, and unit values will fluctuate depending on the Account’s performance.

More information about the Account may be obtained by writing us at 730 Third Avenue, New York, New York 10017-3206, calling us at 877 518-9161 or visiting our website at www.tiaa-cref.org.

THE ACCOUNT’S INVESTMENT OBJECTIVE AND STRATEGY

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 intends to invest between 75 percent and 90 percent of its assets directly in real estate or real estate-related investments. The Account’s principal strategy is to purchase direct ownership interests in income-producing real estate, such as office, industrial, retail, and multi-family residential properties. The Account can also invest in other real estate or real estate-related investments through joint ventures, real estate partnerships or real estate equity securities. To a limited extent, the Account can also invest in conventional mortgage loans, participating mortgage loans, common or preferred stock of companies whose operations involve real estate (i.e., that primarily own or manage real estate), and collateralized mortgage obligations, including commercial mortgage-backed securities and other similar investments. The Account may also make foreign investments, which are expected to comprise no more than 25 percent of the Account’s total assets.

The Account will invest the remaining portion of its assets in government and corporate debt securities, money market instruments and, at times, stock of companies that do not 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. As of December 31, 2006, the Account’s net assets totaled $14,132,692,512. At December 31, 2006, the Account held a total of 121 real estate properties (including its interests in 12 real estate-related joint ventures), representing 80.03% of the Account’s total investment portfolio (“Total Investments”).

TIAA Real Estate Account Prospectus | 3

As of that date, the Account also held investments in a mortgage loan receivable, representing 0.48% of Total Investments, real estate equity securities, representing 3.99% of Total Investments, commercial mortgage backed securities (CMBSs), representing 0.55% of Total Investments, real estate limited partnerships, representing 1.80% of Total Investments, commercial paper representing 10.79% of Total Investments, and government bonds representing 2.36% of Total Investments.

Risks: An investment in the Account is subject to the risks associated with real estate investing, including acquiring, owing and selling real property, interest rate risk, market risk, credit risk, and regulatory and environmental risks. Further risks include the risks associated with making mortgage loan investments and investing in mortgage-backed securities, liquid investments and foreign real estate investments. These risks, among others, are described in “Risks” beginning on page 11. You may lose money by investing in this Account.

PAST PERFORMANCE

The bar chart and performance table below helps illustrate some of the risks of investing in the Account, and how investment performance varies. The bar chart shows the Account’s total return over the last ten calendar years and the performance table shows the Account’s returns for the one-, three-, five- and ten-year periods through December 31, 2006. How the Account has performed in the past is not necessarily an indication of how it will perform in the future.

(PIE CHART)

AVERAGE ANNUAL TOTAL RETURN (AS OF DECEMBER 31, 2006)


1 Year	3 Year	5 Year	10 Year
14.04%	13.53%	10.22%	9.43%

SUMMARY OF ACCOUNT’S EXPENSE DEDUCTIONS

4 | Prospectus TIAA Real Estate Account


Type of Expense Deduction	Estimated Percent of Net Assets Annually	Services Performed

Investment Management	0.240%	For TIAA’s investment advice, portfolio accounting, custodial services, and similar services, including independent fiduciary and appraisal fees

Administration	0.255%	For administrative services performed by TIAA-CREF Individual & Institutional Services, LLC (“Services”), such as allocating premiums and paying annuity income


Distribution	0.080%	For Services’ expenses related to distributing the annuity contracts

Mortality and Expense Risk	0.050%	For TIAA’s bearing certain mortality and expense risks

Liquidity Guarantee	0.160%	For TIAA’s liquidity guarantee

Total Annual Expense Deduction^1,2	0.785%	For total services to the Account


¹	TIAA guarantees that the total annual expense deduction will not exceed an annual rate of 2.50% of average net assets.

²	TIAA currently does not impose a fee on transfers from the Account, but reserves the right to impose a fee on transfers from the Account in the future.

Please see “Selected Financial Data” on page 34 for additional information.

TIAA or subsidiaries of TIAA perform these services at cost. Since expenses are charged at cost, the expenses described are estimates for the year based on projected expense and asset levels. Any differences between actual and estimated expenses are adjusted quarterly. The expenses identified in the table above do not include any fees which may be imposed by your employer under a plan maintained by your employer. For more detailed information, see “Expense Deductions” on page 57.

The following table shows you an example of the expenses you would incur on a hypothetical investment of $1,000 in the TIAA Real Estate Account over several periods. The table assumes a 5% annual return on assets and an annual expense deduction equal to 0.785%. Remember that these figures do not represent actual expenses or investment performance, which may differ.


1 Year	$	8
3 Year	$	25
5 Years	$	43
10 Years	$	99

ABOUT THE ACCOUNT’S INVESTMENTS — IN GENERAL

DIRECT INVESTMENTS IN REAL ESTATE

Direct Purchase: The Account will generally buy direct ownership interests in existing or newly constructed income-producing properties, including office, industrial, retail, and multi-family residential properties. The Account will invest mainly in established properties with existing rent and expense schedules or in newly constructed properties with predictable cash flows or in which a seller agrees to provide certain minimum income levels. On occasion, the Account might invest in real estate development projects.

TIAA Real Estate Account Prospectus | 5

Purchase-Leaseback Transactions: Although it has not yet done so, the Account can enter into purchase-leaseback transactions (leasebacks) in which it typically will buy land and income-producing improvements on the land (such as buildings), and simultaneously lease the land and improvements to a third party (the lessee). Leasebacks are generally for very long terms. Usually, the lessee is responsible for operating the property and paying all operating costs, including taxes and mortgage debt. The Account can also give the lessee an option to buy the land and improvements.

In some leasebacks, the Account may purchase only the land under an income-producing building and lease the land to the building owner. In those cases, the Account will often seek to share (or “participate”) in any increase in property value from building improvements or in the lessee’s revenues from the building above a base amount. The Account can invest in leasebacks that are subordinated to other interests in the land, buildings, and improvements (e.g., first mortgages); in that case, the leaseback interest will be subject to greater risks.

INVESTMENTS IN MORTGAGES

General: The Account can originate or acquire interests in mortgage loans, generally on the same types of properties it might otherwise buy. These mortgage loans may pay fixed or variable interest rates or have “participating” features (as described below). Normally the Account’s mortgage loans will be secured by properties that have income-producing potential. They usually will not be insured or guaranteed by the U.S. government, its agencies or anyone else. They usually will be non-recourse, which means they won’t be the borrower’s personal obligations. Most will be first mortgage loans on existing income-producing property, with first-priority liens on the property. These loans may be amortized (i.e., principal is paid over the course of the loan), or may provide for interest-only payments, with a balloon payment at maturity.

Participating Mortgage Loans: The Account may make mortgage loans which permit the Account to share (have a “participation”) in the income from or appreciation of the underlying property. These participations let the Account receive additional interest, usually calculated as a percentage of the income the borrower receives from operating, selling or refinancing the property. The Account may also have an option to buy an interest in the property securing the participating loan.

Managing Mortgage Loan Investments: TIAA can manage the Account’s mortgage loans in a variety of ways, including:


	•	renegotiating and restructuring the terms of a mortgage loan

	•	extending the maturity of any mortgage loan made by the Account

	•	consenting to a sale of the property subject to a mortgage loan

	•	financing the purchase of a property by making a new mortgage loan in connection with the sale


	•	selling the mortgage loans, or portions of them, before maturity

6 | Prospectus TIAA Real Estate Account

OTHER REAL ESTATE-RELATED INVESTMENTS

Real Estate Investment Trusts: The Account may invest in real estate investment trusts (REITs), which are publicly owned entities that lease, manage, acquire, hold mortgages on, and develop real estate. Normally the Account will buy the common or preferred stock of a REIT, although at times it may purchase REIT debt securities. REITs seek to maximize share value and increase cash flows by acquiring and developing new real estate projects, upgrading existing properties or renegotiating existing arrangements to increase rental rates and occupancy levels. REITs must distribute at least 90% of their taxable income to shareholders in order to benefit from a special tax structure, which means they may pay high dividends. The value of a particular REIT can be affected by such factors as cash flow, the skill of its management team, and defaults by its lessees or borrowers.

Stock of Companies Involved in Real Estate Activities: The Account can invest in common or preferred stock of companies whose business involves real estate. These stocks may be listed on U.S. or foreign stock exchanges or traded over-the-counter in the U.S. or abroad.

Mortgage-Backed Securities: The Account can invest in mortgage-backed securities and other mortgage-related or asset-backed instruments, including commercial mortgage-backed securities (CMBSs), residential mortgage-backed securities, mortgage-backed securities issued or guaranteed by agencies or instrumentalities of the U.S. government, non-agency mortgage instruments, and collateralized mortgage obligations that are fully collateralized by a portfolio of mortgages or mortgage-related securities. Mortgage-backed securities are instruments that directly or indirectly represent a participation in, or are secured by and payable from, one or more mortgage loans secured by real estate. In most cases, mortgage-backed securities distribute principal and interest payments on the mortgages to investors. Interest rates on these instruments can be fixed or variable. Some classes of mortgage-backed securities may be entitled to receive mortgage prepayments before other classes do. Therefore, the prepayment risk for a particular instrument may be different than for other mortgage-related securities.

Investment Vehicles Involved in Real Estate Activities: The Account can hold interests in limited partnerships, funds, and other commingled investment vehicles involved in real estate-related activities, including owning, financing, managing, or developing real estate.

NON-REAL ESTATE-RELATED INVESTMENTS

The Account can also invest in:


	•	U.S. government or government agency securities

	•	Money market instruments and other cash equivalents. These will usually be high-quality short-term debt instruments, including U.S. government or government agency securities, commercial paper, certificates of deposit,

TIAA Real Estate Account Prospectus | 7


		bankers’ acceptances, repurchase agreements, interest-bearing time deposits, and corporate debt securities

	•	Corporate debt or asset-backed securities of U.S. or foreign entities, or debt securities of foreign governments or multi-national organizations, but only if they’re investment-grade and rated in the top four categories by a nationally recognized rating organization (or, if not rated, deemed by TIAA to be of equal quality)


	•	Common or preferred stock, or other ownership interests, of U.S. or foreign companies that aren’t involved in real estate, to a limited extent

FOREIGN REAL ESTATE AND OTHER FOREIGN INVESTMENTS

The Account may invest in foreign real estate or real estate-related investments. It might also invest in securities or other instruments of foreign government or private issuers. While the percentage will vary, we expect that foreign investments will comprise no more than 25 percent of the Account’s total assets.

Depending on investment opportunities, the Account’s foreign investments could at times be concentrated in one or two foreign countries. We will consider the special risks involved in foreign investing before investing in foreign real estate and won’t invest unless our standards are met.

GENERAL INVESTMENT AND OPERATING POLICIES

STANDARDS FOR REAL ESTATE INVESTMENTS

General Criteria for Buying Real Estate or Making Mortgage Loans: Before the Account purchases real estate or makes a mortgage loan, TIAA will consider such factors as:


	•	the location, condition, and use of the underlying property

	•	its operating history, and its future income-producing capacity

	•	the quality, operating experience, and creditworthiness of the borrower

TIAA will analyze the fair market value of the underlying real estate, taking into account the property’s operating cash flow (based on the historical and projected levels of rental and occupancy rates and expenses), as well as the general economic conditions in the area where the property is located.

Diversification: We haven’t placed percentage limitations on the type and location of properties that the Account can buy. However, the Account seeks to diversify its investments by type of property and geographic location. How much the Account diversifies will depend upon whether suitable investments are available and how much the Account has available to invest.

Special Criteria for Making Mortgage Loans: Ordinarily, the Account will only make a mortgage loan if the loan, when added to any existing debt, will not exceed 85 percent of the appraised value of the mortgaged property when the loan is made, unless the Account is compensated for taking additional risk.

8 | Prospectus TIAA Real Estate Account

Selling Real Estate Investments: The Account doesn’t intend to buy and sell its real estate investments simply to make short-term profits. Rather, the Account’s general strategy in selling real estate investments is to dispose of those assets which have either maximized in value, underperformed or represent properties needing significant capital infusions in the future. The Account will reinvest any sale proceeds that it doesn’t need to pay operating expenses or to meet redemption requests (e.g., cash withdrawals or transfers).

OTHER REAL ESTATE-RELATED POLICIES

Appraisals: The Account will rely on TIAA’s own analysis to appraise a property when it first buys it. After that, the Account’s properties and mortgage loans will be appraised or valued once a year by an independent state-certified appraiser who is a member of a professional appraisal organization. In addition, TIAA’s appraisal staff will perform a valuation of each real estate property on a quarterly basis and on occasion, the Account will obtain independent apraisals on a quarterly basis. While the Account usually won’t receive an independent appraisal before it buys real estate, it will get an independent appraisal when it makes mortgage loans. See “Valuing the Account’s Assets” on page 54.

Borrowing: The Account may borrow money and assume or obtain a mortgage on a property — i.e., make leveraged real estate investments. In addition, to meet short-term cash needs, the Account may obtain a line of credit with terms requiring that the Account secure a loan with one or more of its properties. The Account’s total borrowings may not exceed 30% of the Account’s total net asset value at the time of incurrence. (In calculating the 30% limit, we will include only the Account’s actual percentage interest in any borrowings and not that of any joint venture partner.) The Account may only borrow up to 70% of the then current value of a property, although construction loans may be for 100% of costs incurred in developing the property. Except for construction loans, any mortgage loans on a property will be non-recourse, meaning that if the Account defaults on its loan, the lender will have recourse only to the property encumbered or the joint venture owning the property, and not to any other assets of the Account. When possible, the Account will seek to have loans mature at different times to limit the risks of borrowing.

The Account will not obtain mortgage financing from TIAA or any of its affiliates. However, the Account may place an intra-company mortgage on an Account property held by a subsidiary for tax planning or other purposes. This type of mortgage will not be subject to the general limitations on borrowing described above.

When the Account assumes or obtains a mortgage on a property, it will bear the expense of mortgage payments. It will also be exposed to certain additional risks, which are described in “Risks of Borrowing” on page 12.

Joint Investments: The Account can hold property jointly through general or limited partnerships, joint ventures, leaseholds, tenancies-in-common, or other

TIAA Real Estate Account Prospectus | 9

legal arrangements. However, the Account will not hold real property jointly with TIAA or its affiliates.

Discretion to Evict or Foreclose: TIAA may, in its discretion, evict defaulting tenants or foreclose on defaulting borrowers to maintain the value of an investment, when it decides that it is in the Account’s best interests.

Property Management and Leasing Services: The Account usually will hire a local management company to perform the day-to-day management services for the Account’s properties, including supervising any on-site personnel, negotiating maintenance and service contracts, and providing advice on major repairs and capital improvements. The local manager will also recommend changes in rent schedules and create marketing and advertising programs to attain and maintain good occupancy rates by responsible tenants. The Account may also hire leasing companies to perform or coordinate leasing and marketing services to fill any vacancies. The fees paid to the local management company, along with any leasing commissions and expenses, will reduce the Account’s cash flow from a property.

Insurance: We will try to arrange for, or require proof of, comprehensive insurance, including liability, fire, and extended coverage, for the Account’s real property and properties securing mortgage loans or subject to purchase-leaseback transactions. The Account’s insurance policies on its properties currently include some coverage for earthquakes and terrorist acts, but we can’t assure you that it will be adequate to cover all losses. We also can’t assure you that we will be able to obtain coverage for earthquakes and terrorist acts at an acceptable cost, if at all, when the current policy expires.

OTHER POLICIES

Liquid Assets: At times, a significant percentage of the Account may be invested in liquid assets (which may or may not be real estate-related) while we look for suitable real property investments. The Account can temporarily increase the percentage of its liquid assets under some circumstances, including the rapid inflow of participants’ funds, lack of suitable real estate investments, or a need for greater liquidity.

Investment Company Act of 1940: We intend to operate the Account so that it will not have to register as an “investment company” under the Investment Company Act of 1940 (the 1940 Act). This will require monitoring the Account’s portfolio so that it won’t have more than 40 percent of total assets, other than U.S. government securities and cash items, in investment securities. As a result, the Account may be unable to make some potentially profitable investments, it may be unable to sell assets it would otherwise want to sell or it may be forced to sell investments in investment securities before it would otherwise want to do so.

Changing Operating Policies or Winding Down: Under the terms of the contracts and in accordance with applicable insurance law, TIAA can decide to change, in its sole discretion, the operating policies of the Account or wind it down. If the Account is wound down, you may need to transfer your accumulations or annuity income to TIAA’s traditional annuity or any CREF account available under

10 | Prospectus TIAA Real Estate Account

your employer’s plan. All investors in the Account will be notified in advance if we decide to change a significant policy or wind down the Account.

RISKS

The value of your investment in the Account will go up and down based on the value of the Account’s assets and the income the assets generate. The potential risk of investing in the Account is moderate. You can lose money by investing in the Account. The Account’s assets and income can be affected by many factors, and you should consider the specific risks presented below before investing in the Account. Please refer to the section entitled “Statements Regarding Forward-Looking Information,” which is contained in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

RISKS OF REAL ESTATE INVESTING

General Risks of Acquiring and Owning Real Property: The Account is subject to the risks inherent in acquiring and owning real property, including:


	•	Competition for real estate investments and any resulting delays in the acquisition of investments may increase the Account’s costs or otherwise adversely affect the Account’s investment results.

	•	The Account’s property values or rental and occupancy rates could go down due to general global economic conditions, a weak market for real estate generally or in specific locations, changing supply and demand for certain types of properties, natural disasters, terrorist attacks or other man-made events.

	•	A property may be unable to attract and retain tenants, which means that rental income would decline. This situation could be exacerbated if a concentration of lease expirations occurred during any one period.

	•	The Account could lose revenue if tenants do not pay rent, or if the Account is forced to terminate a lease for nonpayment. Any disputes with tenants could also involve costly litigation.

	•	A property’s profitability could go down if operating costs, such as property taxes, utilities, maintenance and insurance costs, not reimbursed by tenants, go up in relation to gross rental income, or if the property needs unanticipated repairs and renovations.

	•	The Account may experience periods in which its investments are geographically concentrated, either regionally or in certain markets with similar demographics. In this event, the Account’s income and performance may be adversely impacted disproportionately by economic conditions in those areas in which the Account’s investments are geographically concentrated.

General Risks of Selling Real Estate Investments: Among the risks of selling real estate investments are:

TIAA Real Estate Account Prospectus | 11


	•	The sale price of an Account property might differ from its estimated or appraised value, leading to losses or reduced profits to the Account.

	•	Because of the nature of real estate, the Account might not be able to sell a property at a particular time for its full value, particularly in a poor market. This might make it difficult to raise cash quickly and also could lead to Account losses.

	•	The Account may need to provide financing to a purchaser if no cash buyers are available.

Appraisal Risks: Real estate appraisals are only estimates of property values based on a professional’s opinion and may not be accurate predictors of the amount the Account would actually receive if it sold a property. If an appraisal is too high, the Account’s value could go down upon reappraisal or if the property is sold for a lower price than the appraisal. If appraisals are too low, those who redeem prior to an adjustment to the valuation or a property sale will have received less than their pro rata share of the value of the Account’s assets. Further, the Account generally obtains appraisals only on a quarterly basis, and there will be circumstances in the interim in which the true value of a property is not reflected in the Account’s daily net asset value calculation.

Risks of Borrowing: The Account may borrow, in the aggregate, either directly or through its joint venture investments, an amount up to 30% of the Account’s Total Net Assets, and the Account may borrow up to 70% of the then-current value of a particular property. Among the risks of borrowing money and investing in a property subject to a mortgage are:


	•	The Account may not be able to make its loan payments, which could result in a default on its loan. The lender then could foreclose on the underlying property and the Account would lose the value of its investment in the foreclosed property.

	•	If the Account obtains a mortgage loan that involves a balloon payment, there is a risk that the Account may not be able to make the lump sum principal payment due under the loan at the end of the loan term, or otherwise obtain adequate refinancing. The Account then may be forced to sell the property or other properties under unfavorable market conditions or default on its mortgage.

	•	If the Account takes out variable-rate loans, the Account’s returns may be volatile when interest rates are volatile. Further, to the extent that the Account takes out fixed-rate loans and interest rates subsequently decline, this may cause the Account to pay interest at above-market rates for a significant period of time.

	•	The market valuation of mortgage loans payable could have an adverse impact on the Account’s performance.

Regulatory Risks: Government regulation at the federal, state and local levels, including, without limitation, zoning laws, property taxes, and fiscal, accounting, environmental or other government policies, could operate or change in a way that hurts the Account and its properties. For example, these regulations could raise

12 | Prospectus TIAA Real Estate Account

the cost of owning, improving or maintaining properties, present barriers to otherwise desirable investment opportunities or make it harder to sell, rent, finance, or refinance properties either on economically desirable terms, or at all, due to the increased costs associated with regulatory compliance.

Environmental Risks: The Account may be liable for damage to the environment caused by hazardous substances used or found on its properties. Under various environmental regulations, the Account may also be liable, as a current or previous property owner or mortgagee, for the cost of removing or cleaning up hazardous substances found on a property, even if it didn’t know of and wasn’t responsible for the hazardous substances. If any hazardous substances are present or the Account doesn’t properly clean up any hazardous substances, or if the Account fails to comply with regulations requiring it to actively monitor the business activities on its premises, the Account may have difficulty selling or renting a property or be liable for monetary penalties. The cost of any required cleanup and the Account’s potential liability for environmental damage, including performance under indemnification obligations to third parties, to a single real estate investment could exceed the value of the Account’s investment in a property, the property’s value, or in an extreme case, a significant portion of the Account’s assets.

Uninsurable Losses: Certain catastrophic losses (e.g., from earthquakes, wars, terrorist acts, nuclear accidents, floods, or environmental or industrial hazards or accidents) may be uninsurable or so expensive to insure against that it is economically disadvantageous to buy insurance for them. If a disaster that we haven’t insured against occurs, or if the insurance contains a high deductible, the Account could lose both its original investment and any future profits from the property affected. In addition, some leases may permit a tenant to terminate its obligations in certain situations, regardless of whether those events are fully covered by insurance. In that case, the Account would not receive rental income from the property while that tenant’s space is vacant.

Risks of Developing Real Estate or Buying Recently Constructed Properties: If the Account chooses to develop a property or buys a recently constructed property, it may face the following risks:


	•	In developing real estate, there may be delays or unexpected increases in the cost of property development and construction due to strikes, bad weather, material shortages, increases in material and labor costs, or other events.

	•	Because external factors may have changed from when the project was originally conceived (e.g., slower growth in local economy, higher interest rates, or overbuilding in the area), the property, if purchased when unleased, may not operate at the income and expense levels first projected or may not be developed in the way originally planned.

Risks of Joint Ownership: Investing in joint venture partnerships or other forms of joint property ownership may involve special risks.


	•	The co-venturer may have interests or goals inconsistent with those of the Account.

TIAA Real Estate Account Prospectus | 13


	•	If a co-venturer doesn’t follow the Account’s instructions or adhere to the Account’s policies, the jointly-owned properties, and consequently the Account, might be exposed to greater liabilities than expected.

	•	The Account may have limited rights pursuant to the terms of the joint venture, including the right to operate, manage or dispose of a property.

	•	A co-venturer can make it harder for the Account to transfer its property interest, particularly if the co-venturer has the right to decide whether and when to sell the property.

	•	The co-venturer may become insolvent or bankrupt, which could expose the Account to greater liabilities than expected.

Risks with Purchase-Leaseback Transactions: The major risk of purchase leaseback transactions is that the third party lessee will not be able to make required payments to the Account. If the leaseback interest is subordinate to other interests in the real property, such as a first mortgage or other lien, the risk to the Account increases because the lessee may have to pay the senior lienholder to prevent foreclosure before it pays the Account. If the lessee defaults or the leaseback is terminated prematurely, the Account might not recover its investment unless the property is sold or leased on favorable terms.

RISKS OF MAKING MORTGAGE LOAN INVESTMENTS

General Risks of Mortgage Loans: The Account will be subject to the risks inherent in making mortgage loans, including:


	•	The borrower may default, requiring that the Account foreclose on the underlying property to protect the value of its mortgage loan. Since its mortgage loans are usually non-recourse, the Account must rely solely on the value of a property for its security.

	•	The larger the mortgage loan compared to the value of the property securing it, the greater the loan’s risk. Upon default, the Account may not be able to sell the property for its estimated or appraised value. Also, certain liens on the property, such as mechanic’s or tax liens, may have priority over the Account’s security interest.

	•	A deterioration in the financial condition of tenants, or the bankruptcy or insolvency of a major tenant, may adversely affect the income of a property, which could increase the likelihood that the borrower will default under its obligations.

	•	The borrower may not be able to make a lump sum principal payment due under a mortgage loan at the end of the loan term, unless it can refinance the mortgage loan with another lender.

	•	If interest rates are volatile during the loan period, the Account’s variable-rate mortgage loans could have volatile yields. Further, to the extent the Account makes mortgage loans with fixed interest rates, it may receive lower yields if interest rates rise generally.

14 | Prospectus TIAA Real Estate Account


•	Prepayment Risks: The Account’s mortgage loan investments will usually be subject to the risk that the borrower repays a loan early. Also, we may be unable to reinvest the proceeds at as high an interest rate as the original mortgage loan rate.

•	Interest Limitations: The interest rate we charge on mortgage loans may inadvertently violate state usury laws that limit rates, if, for example, state law changes during the loan term. If this happens, we could incur penalties or may not be able to enforce payment of the loan.

•	Risks of Participations: Participating mortgages are subject to the following additional risks:


	•	The participation feature, in tying the Account’s returns to the performance of the underlying asset, might generate insufficient returns to make up for the higher interest rate the loan would have obtained without the participation feature.

	•	In very limited circumstances, a court could possibly characterize the Account’s participation interest as a partnership or joint venture with the borrower and the Account could lose the priority of its security interest, or be liable for the borrower’s debts.

RISKS OF INVESTING IN REAL ESTATE INVESTMENT TRUST (“REIT”) SECURITIES

Investments in REIT securities are subject to many of the same general risks associated with direct real property ownership. In particular, equity REITs may be affected by changes in the value of the underlying property owned by the trust, while mortgage REITs may be affected by the quality of any credit extended. In addition to these risks, because REIT investments are securities, they may be exposed to market risk, price volatility due to changing conditions in the financial markets and, in particular, changes in overall interest rates.

In addition, REITs are tax regulated entities established to invest in real estate-related assets. REITs do not pay federal income taxes if they distribute most of their earnings to their shareholders and meet other tax requirements. As a result, REITs are subject to tax risk in continuing to qualify as a REIT.

RISKS OF MORTGAGE-BACKED SECURITIES

Mortgage-backed securities are subject to many of the same general risks inherent in real estate investing, making mortgage loans and investing in debt securities. In particular, these types of investments may be subject to prepayment risk or extension risk (i.e., the risk that borrowers will repay the loans earlier or later than anticipated). If the underlying mortgage assets experience faster than anticipated prepayments of principal, the Account could fail to recoup some or all of its initial investment in these securities, since the original price paid by the Account was based in part on assumptions regarding the receipt of interest payments. If the underlying mortgage assets are repaid later than anticipated, the Account could lose the opportunity to reinvest the anticipated cash flows at a time when interest rates might be rising. The rate of prepayments depends on a variety

TIAA Real Estate Account Prospectus | 15

of geographic, social and other functions, including prevailing market interest rates and general economic factors.

The market value of these securities is also highly sensitive to changes in interest rates. Note that the potential for appreciation, which could otherwise be expected to result from a decline in interest rates, may be limited by any increased prepayments. Further, these securities may be harder to sell than other securities.

RISKS OF LIQUID INVESTMENTS

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


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

	•	Market Risk — The risk that the Account’s investments will experience price volatility due to changing conditions in the financial markets and, particularly for debt securities, changes in overall interest rates.

	•	Interest Rate Volatility — The risk that interest rate volatility may affect the Account’s current income from an investment.

RISKS OF FOREIGN INVESTMENTS

In addition to other investment risks noted above, foreign investments present the following special risks:


	•	Foreign real estate markets may have different liquidity and volatility attributes than U.S. markets.

	•	The value of foreign investments or rental income can go up or down due to changes in currency rates, currency exchange control regulations, possible expropriation or confiscatory taxation, political, social, and economic developments, and foreign regulations.

	•	The Account may, but is not required to, seek to hedge its exposure to changes in currency rates, which could involve extra costs. Hedging might not be successful.

	•	It may be more difficult to obtain and collect a judgment on foreign investments than on domestic ones.

NO OPPORTUNITY FOR PRIOR REVIEW OF PURCHASE

Investors do not have the opportunity to evaluate the economic merit of the purchase of a property or other investment before the Account completes the purchase, so investors will need to rely solely on TIAA’s judgment and ability to select investments consistent with the Account’s investment objective and policies. Further, the Account may change its investment objective and pursue specific investments without the consent of the Account’s investors.

16 | Prospectus TIAA Real Estate Account

RISKS OF REGISTRATION UNDER THE INVESTMENT COMPANY ACT OF 1940

The Account has not registered, and management intends to continue to operate the Account so that it will not have to register, as an “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Generally, a company is an “investment company” and required to register under the Investment Company Act if, among other things, it holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, or it is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of such company’s total assets (exclusive of government securities and cash items) on an unconsolidated basis.

If the Account were obligated to register as an investment company, the Account would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things, limitations on capital structure, restrictions on certain investments, compliance with reporting, record keeping, voting and proxy disclosure requirements and other rules and regulations that could significantly increase its operating expenses and reduce its operating flexibility. To maintain compliance with the exemptions from the Investment Company Act, the Account may be unable to sell assets it would otherwise want to sell and may be unable to purchase securities it would otherwise want to purchase, which might materially adversely impact the Account’s performance.

ESTABLISHING AND MANAGING THE ACCOUNT — THE ROLE OF TIAA

ESTABLISHING THE ACCOUNT

TIAA’s Board of Trustees established the Real Estate Account as a separate account of TIAA under New York law on February 22, 1995. The Account is regulated by the State of New York Insurance Department (NYID) and the insurance departments of some other jurisdictions in which the annuity contracts are offered. Although TIAA owns the assets of the Real Estate Account, and the Account’s obligations are obligations of TIAA, the Account’s income, investment gains, and investment losses are credited to or charged against the assets of the Account without regard to TIAA’s other income, gains, or losses. Under New York insurance law, we can’t charge the Account with liabilities incurred by any other TIAA business activities or any other TIAA separate account.

MANAGING THE ACCOUNT

TIAA employees, under the direction and control of TIAA’s Board of Trustees and its Investment Committee, manage the investment of the Account’s assets,

TIAA Real Estate Account Prospectus | 17

following investment management procedures TIAA adopted for the Account. TIAA’s investment management responsibilities include:


	•	identifying, recommending and purchasing appropriate real estate-related and other investments

	•	providing all portfolio accounting, custodial, and related services for the Account

	•	arranging for others to provide certain advisory or other management services to the Account’s joint ventures or other investments

TIAA provides all services to the Account at cost. For more about the charge for investment management services, see “Expense Deductions” on page 57.

You don’t have the right to vote for TIAA Trustees directly. See “Voting Rights” on page 80. For information about the Trustees, principal executive officers of TIAA and the Account’s portfolio managment team, see Appendix A of this prospectus on page 212.

TIAA’s ERISA Fiduciary Status. To the extent that assets of a plan subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA) are allocated to the Account, TIAA will be acting as an “investment manager” and a fiduciary under ERISA with respect to those assets.

LIQUIDITY GUARANTEE

TIAA provides the Account with a liquidity guarantee — i.e., TIAA ensures that the Account has funds available to meet participant transfer or cash withdrawal requests. If the Account can’t fund participant requests from the Account, TIAA’s general account will fund them by purchasing Account accumulation units (liquidity units). TIAA guarantees that you can redeem your accumulation units at their accumulation unit value next determined. Importantly, however, this liquidity guarantee is not a guarantee of the investment performance of the Account or a guarantee of the value of your units. Of course, you can make a cash withdrawal only if allowed by the terms of your plan. The Account pays TIAA for the liquidity guarantee through a daily deduction from net assets. See “Expense Deductions” on page 57.

An independent fiduciary (described below) monitors the Account to ensure, among other things, that TIAA does not own too much of the Account and may require TIAA to redeem some of its liquidity units, particularly when the Account has uninvested cash or liquid investments available. The independent fiduciary may also propose properties for the Account to sell so that TIAA can redeem liquidity units. TIAA does not currently own liquidity units.

CONFLICTS OF INTEREST

TIAA does not accept acquisition or placement fees for the services it provides to the Account. Employees of TIAA may also provide investment advice with respect to investments managed by Teachers Advisors, Inc. (“Advisors”), an indirect, wholly owned subsidiary of TIAA. In addition, TIAA and its affiliates may

18 | Prospectus TIAA Real Estate Account

offer other investment products that are not managed under an “at cost” expense structure. Therefore, TIAA may at times face various conflicts of interest.

For example, TIAA’s general account and the TIAA-CREF Asset Management Core Property Fund L.P. (the “Core Property Fund”), which is managed by Advisors, may sometimes compete with the Real Estate Account in the purchase of investments. (Each of TIAA’s general accounts, the Real Estate Account and the Core Property Fund, together with any other real estate accounts or funds that may be established by TIAA in the future, are herein referred to as an “account.”) Generally, the portfiolio managers for each of the accounts will identify opportunities which conform to the investment strategy of the account. If more than one account expresses an interest and an informal resolution cannot be reached, a special TIAA Allocation Committee, consisting primarily of senior TIAA real estate professionals, will seek to resolve any conflict by considering a number of factors, including the investment strategy of the bidding account, the capital available for investment by each account, liquidity requirements, portfolio diversification, whether the property would be at a competitive disadvantage to properties owned by another account in the subject market and such other factors deemed relevant by the Allocation Committee. If this analysis does not determine, by a unanimous vote of the Allocation Committee, which account should participate in a transaction, a strict rotation system will be used whereby the interested account highest on the list will be allowed to participate in the transaction, and then such account will drop to the bottom of the list thereafter.

Conflicts could also arise because some properties in TIAA’s general account and the Core Property Fund may compete for tenants with the Real Estate Account’s properties. We will seek to resolve this conflict by determining the tenant’s preference between the two properties, how much the tenant is willing to pay for rent, and which property can best afford to pay any required costs associated with such leasing. Finally, conflicts could potentially arise when two TIAA accounts attempt to sell properties located in the same market or submarket, especially if there are a limited number of potential purchasers.

Many of the personnel of TIAA involved in performing services to the Real Estate Account will have competing demands on their time. The personnel will devote such time to the affairs of the Account as TIAA’s management determines, in its sole discretion exercising good faith, is necessary to properly service the Account. TIAA believes that it has sufficient personnel to discharge its responsibility to the Real Estate Account, the general account, and the Core Property Fund and to avoid conflicts of interest. TIAA or its affiliates may form other real estate investment vehicles in the future and we will take steps to assure that those vehicles are integrated into these conflict of interest policies.

INDEMNIFICATION

The Account has agreed to indemnify TIAA and its affiliates, including its officers and trustees, against certain liabilities to the extent permitted by law,

TIAA Real Estate Account Prospectus | 19

including liabilities under the Securities Act of 1933. The Account may make such indemnification out of its assets.

ROLE OF THE INDEPENDENT FIDUCIARY

Because TIAA’s ability to purchase and sell liquidity units raises certain technical issues under ERISA, TIAA applied for and received a prohibited transaction exemption from the U.S. Department of Labor (PTE 96-76). In connection with the exemption, TIAA has appointed an independent fiduciary for the Real Estate Account, with overall responsibility for reviewing Account transactions to determine whether they are in accordance with the Account’s investment guidelines.

Real Estate Research Corporation, a real estate consulting firm whose principal offices are located in Chicago, Illinois, currently serves as the Account’s independent fiduciary. The independent fiduciary’s responsibilities include:


	•	reviewing and approving the Account’s investment guidelines and monitoring whether the Account’s investments comply with those guidelines

	•	reviewing and approving valuation procedures for the Account’s properties

	•	approving adjustments to any property valuations that change the value of the property or the Account as a whole above or below certain prescribed levels, or that are made within three months of the annual independent appraisal

	•	reviewing and approving how the Account values accumulation and annuity units

	•	approving the appointment of all independent appraisers

	•	reviewing the purchase and sale of units by TIAA to ensure that the Account uses the correct unit values

	•	requiring appraisals besides those normally conducted, if the independent fiduciary believes that any of the properties have changed materially, or that an additional appraisal is necessary to assure the Account has correctly valued a property

The independent fiduciary also must monitor TIAA’s ownership in the Account and supervise any winding down of the Account’s operations. Its responsibilities include:


	•	calculating the percentage of total accumulation units that TIAA’s ownership shouldn’t exceed (the trigger point) and creating a method for changing the trigger point

	•	approving any adjustment of TIAA’s interest in the Account and requiring an adjustment if TIAA’s investment reaches the trigger point

	•	participating in any program to reduce TIAA’s ownership in the Account or to facilitate winding down the Account, including selecting properties for sale, providing sales guidelines, and approving those sales that, in the independent fiduciary’s opinion, are desirable

20 | Prospectus TIAA Real Estate Account

A special subcommittee of the Investment Committee of TIAA’s Board of Trustees appointed Real Estate Research Corporation as the independent fiduciary for a three-year term, starting March 1, 2006. This subcommittee may renew the independent fiduciary appointment, remove the independent fiduciary, or appoint its successor. The independent fiduciary can be removed for cause by the vote of a majority of subcommittee members and will not be reappointed if 40 percent of the subcommittee members disapprove the reappointment. It can resign after at least 180 days’ written notice.

TIAA pays the independent fiduciary directly. The investment management charge paid to TIAA includes TIAA’s costs for retaining the independent fiduciary. The independent fiduciary will receive less than 5 percent of its annual income (including payment for its services to the Account) from TIAA and its affiliates.

When you decide as a participant or plan fiduciary to invest in the Account, after TIAA has provided you with full and fair disclosure including the disclosure in this prospectus, you are also acknowledging that you approve and accept Real Estate Research Corporation or any successor to serve as the Account’s independent fiduciary.

DESCRIPTION OF PROPERTIES

THE PROPERTIES — IN GENERAL

In the table beginning on the next page you will find general information about each of the Account’s portfolio property investments as of December 31, 2006. The Account’s property investments includee both properties that are wholly owned by the Account and properties owned by the Account’s joint venture investments. Certain property investments are comprised of a portfolio of properties.

TIAA Real Estate Account Prospectus | 21

Properties


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

OFFICE PROPERTY INVESTMENTS
1001 Pennsylvania Ave	Washington, DC	1987		2004	802,390		100	%	$	34.11		$	552,502,209	⁽⁴⁾
1 & 7 Westferry Circus	London, UK	1992, 1993		2005	395,784		81	%	$	63.96		$	428,574,628	⁽⁴⁾⁽⁵⁾
50 Fremont Street	San Francisco, CA	1983		2004	817,412		94	%	$	30.05		$	421,000,000	⁽⁴⁾
IDX Tower	Seattle, WA	2002		2004	845,533		98	%	$	28.07		$	398,990,017	⁽⁴⁾
The Newbry	Boston, MA	1940-1961	⁽⁶⁾	2006	607,685		100	%	$	39.72		$	370,745,525
Four Oaks Place	Houston, TX	1983		2004	1,754,366		96	%	$	17.55		$	306,200,984
780 Third Avenue	New York, NY	1984		1999	487,501		91	%	$	40.89		$	298,000,000
99 High Street	Boston, MA	1971		2005	731,204		90	%	$	32.30		$	291,806,564	⁽⁴⁾
Lincoln Centre	Dallas, TX	1984		2005	1,635,352		90	%	$	16.80		$	270,000,000	⁽⁴⁾
1900 K Street	Washington, DC	1996		2004	342,884		100	%	$	40.72		$	255,002,226
701 Brickell	Miami, FL	1986	⁽⁷⁾	2002	677,667		96	%	$	30.44		$	231,239,379
Embarcadero Center West	San Francisco, CA	1988		2005	472,261		87	%	$	30.16		$	231,000,000
1401 H Street NW	Washington, D.C.	1992		2006	348,629		96	%	$	38.39		$	207,806,286	⁽⁴⁾
Wilshire Rodeo Plaza	Beverly Hills, CA	1935, 1984		2006	261,932		98	%	$	48.32		$	204,084,734	⁽⁴⁾
161 North Clark Street⁽⁸⁾	Chicago, IL	1992		2003	1,010,520		94	%	$	15.10		$	189,183,793
Yahoo! Center⁽⁹⁾	Santa Monica, CA	1984		2004	1,082,952		99	%	$	32.13		$	187,766,625
Mellon Financial Center at One Boston Place⁽¹⁰⁾	Boston, MA	1970	⁽⁷⁾	2002	802,716		94	%	$	38.17		$	177,900,327
Ten & Twenty Westport Road	Wilton, CT	1974	⁽⁷⁾, 2001	2001	538,840		100	%	$	30.03		$	175,000,000
980 9th Street and 1010 8th Street⁽¹¹⁾	Sacramento, CA	1992		2005	481,885		94	%	$	21.58		$	168,000,000
Millennium Corporate Park	Redmond, VA	1999, 2000		2006	536,884		100	%	$	14.83		$	139,107,181
Urban Centre	Tampa, FL	1984, 1987		2005	549,375		96	%	$	19.49		$	121,000,000
Morris Corporate Center III	Parsippany, NJ	1990		2000	525,154		78	%	$	17.12		$	114,857,104
Inverness Center	Birmingham, AL	1980-1985		2005	903,857		99	%	$	12.00		$	112,256,914
Prominence in Buckhead⁽⁸⁾	Atlanta, GA	1999		2003	424,309		95	%	$	27.17		$	107,256,320
Treat Towers⁽⁸⁾	Walnut Creek, CA	1999		2003	367,313		78	%	$	24.63		$	94,023,131
88 Kearny Street	San Francisco, CA	1986		1999	228,470		99	%	$	43.53		$	90,310,024
The Ellipse at Ballston	Arlington, VA	1989		2006	195,743		97	%	$	31.61		$	85,439,350
Oak Brook Regency Towers	Oakbrook, IL	1977	⁽⁷⁾	2002	402,318		83	%	$	13.64		$	83,200,000
Sawgrass Office Portfolio	Sunrise, FL	1997-2000		1997, 1999-2000	344,009		97	%	$	13.81		$	72,000,000
Centerside I	San Diego, CA	1982		2004	205,137		79	%	$	21.25		$	67,000,000

22 | Prospectus TIAA Real Estate Account


The North 40 Office Complex	Boca Raton, FL	1983, 1984		2006	350,004	100	%	$	10.91	$	63,500,000
8270 Greensboro Drive	McLean, VA	2000		2005	158,110	90	%	$	31.68	$	62,000,000
West Lake North Business Park	Westlake Village, CA	2000		2004	198,558	100	%	$	28.47	$	61,000,000
Parkview Plaza	Oakbrook, IL	1990		1997	263,912	86	%	$	11.77	$	59,400,000
3 Hutton Centre	Santa Ana, CA	1985	⁽⁷⁾	2003	197,817	100	%	$	25.38	$	59,011,323
Monument Place	Fairfax, VA	1990		1999	221,538	98	%	$	20.90	$	58,600,000
One Virginia Square	Arlington, VA	1999		2004	116,077	100	%	$	31.52	$	53,000,000
The Pointe on Tampa Bay	Tampa, FL	1982	⁽⁷⁾	2002	250,357	100	%	$	23.69	$	50,573,824
Capitol Place	Sacramento, CA	1988	⁽⁷⁾	2003	151,803	96	%	$	27.32	$	50,331,828
Wellpoint	Westlake Village, CA	1986, 1998		2006	208,000	100	%	$	13.23	$	49,000,000
Park Place on Turtle Creek	Dallas, TX	1986		2006	177,169	98	%	$	24.36	$	44,573,669
4200 West Cypress Street	Tampa, FL	1989		2003	220,579	99	%	$	21.61	$	43,100,425
Tysons Executive Plaza II⁽¹²⁾	McLean, VA	1988		2000	259,614	97	%	$	24.15	$	40,570,382
Creeksides at CenterPoint	Kent, WA	1985		2006	218,589	81	%	$	12.36	$	40,508,139
10 Waterview Boulevard	Parsippany, NJ	1984		1999	208,601	58	%	$	12.95	$	32,100,000
9 Hutton Centre	Santa Ana, CA	1990		2001	149,946	82	%	$	16.40	$	29,000,000
Columbus Portfolio	Various, OH	1997-1998		1999, 2001	259,694	89	%	$	10.00	$	24,600,000
Needham Corporate Center	Needham, MA	1987		2001	138,684	75	%	$	13.20	$	22,712,550
Batterymarch Park II	Quincy, MA	1986		2001	104,718	53	%	$	10.08	$	13,234,314

Office Property Investments						92	%			$	7,308,069,775

INDUSTRIAL PROPERTY INVESTMENTS
Ontario Industrial Portfolio⁽¹³⁾	Various, CA	1997-1998		1998, 2000, 2004	3,584,769	100	%	$	3.31	$	270,000,000	⁽⁴⁾
Dallas Industrial Portfolio⁽¹⁴⁾	Dallas and Coppell, TX	1997-2001		2000-2002	3,886,541	90	%	$	2.44	$	153,210,519
Southern California RA Industrial Portfolio	Los Angeles, CA	1982		2004	920,028	96	%	$	5.31	$	97,558,473
Cabot Industrial Portfolio	Rancho Cucamonga, CA	2000-2002		2000, 2001,
				2002, 2004	1,214,475	100	%	$	3.71	$	88,200,000
Chicago Industrial Portfolio⁽¹⁵⁾	Chicago and Joliet, IL	1997-2000		1998, 2000	1,577,606	90	%	$	3.83	$	89,104,640
Atlanta Industrial Portfolio	Lawrenceville, GA	1996-1999		2000	1,945,693	95	%	$	2.18	$	77,863,416
Shawnee Ridge Industrial Portfolio⁽¹⁶⁾	Atlanta, GA	2000-2005		2005	1,422,922	100	%	$	3.05	$	76,117,193
Chicago Caleast Industrial Portfolio	Chicago, IL	1974-2005		2003	1,493,706	93	%	$	2.52	$	74,999,590
Northern California RA Industrial Portfolio	Oakland, CA	1981		2004	741,456	93	%	$	4.06	$	71,317,741
IDI National Portfolio⁽¹⁷⁾	Various, U.S.	1999-2004		2004	3,655,671	98	%	$	3.30	$	70,348,753

TIAA Real Estate Account Prospectus | 23

Properties(continued)



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

INDUSTRIAL PROPERTY INVESTMENTS (continued)
Rainier Corporate Park	Fife, WA	1991-1997	2003	1,104,646		97	%	$	4.03		$	69,362,219
IDI Kentucky Portfolio	Various, KY	1998-2000	1998, 2000, 2005	1,437,022		100	%	$	3.24		$	66,552,034
Regal Logistics Campus	Seattle, WA	1999-2004	2005	968,535		100	%	$	4.15		$	66,000,000
South River Road Industrial	Cranbury, NJ	1999	2001	858,957		100	%	$	4.24		$	60,600,000
Memphis Caleast Industrial Portfolio	Memphis, TN	1996-1997	2003	1,600,232		100	%	$	2.01		$	52,500,000
GE Appliance East Coast Distribution Facility	Perryville, MD	2003	2005	1,004,000		100	%	$	2.82		$	48,000,000
Pinnacle Industrial/DFW Trade Center	Grapevine, TX	2003, 2004, 2006	2006	899,200		100	%	$	3.49		$	45,874,807
New Jersey Caleast Industrial Portfolio	Cranbury, NJ	1982-1989	2003	807,773		50	%	$	2.23		$	41,920,988
East North Central RA Industrial Portfolio	Chicago, IL	1978	2004	541,266		96	%	$	4.65		$	37,503,284
Broadlands Business Park	Elkton, MD	2006	2006	756,690		100	%	$	2.85		$	35,002,731
Centre Pointe and Valley View	Los Angeles County, CA	1965-1989	2004	307,685		100	%	$	4.10		$	32,385,980
Northeast RA Industrial Portfolio	Boston, MA	2000	2004	384,000		100	%	$	5.60		$	30,900,000
1900 South Burgundy Place	Ontario, CA	1988-1999	2006	397,125		100	%	$	3.69		$	28,045,226
Summit Distribution Center	Memphis, TN	2002	2003	708,532		100	%	$	2.52		$	26,300,000
Eastgate Distribution Center	San Diego, CA	1996	1997	200,000		100	%	$	7.02		$	25,558,962
Airways Distribution Center	Memphis, TN	2005	2006	556,600		100	%	$	3.20		$	24,857,278
Konica Photo Imaging Headquarters	Mahwah, NJ	1999	1999	168,000		100	%	$	11.25		$	23,100,000
Weber Distribution	Rancho Cucamonga, CA	1988	2006	275,760		100	%	$	4.04		$	20,800,000
Northwest RA Industrial Portfolio	Seattle, WA	1996	2004	312,321		100	%	$	3.51		$	20,684,499
Landmark at Salt Lake City (Building #4)	Salt Lake City, UT	2000	2000	328,508		85	%	$	2.77		$	16,509,871
Mideast RA Industrial Portfolio	Wilmington, DE	1989	2004	266,141		90	%	$	3.22		$	16,014,758
UPS Distribution Facility	Fernley, NV	1998	1998	256,000		100	%	$	4.07		$	15,000,000
FEDEX Distribution Facility	Crofton, MD	1998	1998	110,842		100	%	$	7.18		$	8,500,000
Mountain RA Industrial Portfolio	Phoenix, AZ	1989	2004	136,704		100	%	$	2.14		$	6,605,429
Butterfield Industrial Park⁽¹⁸⁾	El Paso, TX	1980-1981	1995	183,510		100	%	$	2.39		$	5,100,000

Industrial Property Investments						96	%				$	1,892,398,391

24 | Prospectus TIAA Real Estate Account


RETAIL PROPERTY INVESTMENTS
Florida Retail Portfolio⁽¹⁹⁾	Various, FL	1974-2005		2006	1,259,554		100	%	$15.94	$	265,396,677
The Florida Mall⁽²⁰⁾	Orlando, FL	1986	⁽⁷⁾	2002	921,370	⁽²¹⁾	99	%	$37.71	$	237,919,775
West Town Mall⁽²⁰⁾	Knoxville, TN	1972	⁽⁷⁾	2002	761,357	⁽²¹⁾	97	%	$19.18	$	126,214,963
Miami International Mall⁽²⁰⁾	Miami, FL	1982	⁽⁷⁾	2002	290,299	⁽²¹⁾	97	%	$37.03	$	97,300,131
Marketfair	West Windsor, NJ	1987		2006	235,144		99	%	$20.74	$	94,058,427
Westwood Marketplace	Los Angeles, CA	1950	⁽⁷⁾	2002	202,201		100	%	$29.95	$	91,467,954
Mazza Gallerie	Washington, DC	1975		2004	293,935		98	%	$18.46	$	86,350,179
Publix at Weston Commons	Weston, FL	2005		2006	126,922		97	%	$22.04	$	54,411,436	⁽⁴⁾
Plainsboro Plaza	Plainsboro, NJ	1987		2005	218,653		90	%	$11.55	$	50,900,000
South Frisco Village	Frisco, TX	2002		2006	227,175		99	%	$13.47	$	47,014,065	⁽⁴⁾
The Market at Southpark	Littleton, CO	1988		2004	190,080		96	%	$12.03	$	35,800,000
Suncrest Village	Orlando, FL	1987		2005	93,358		100	%	$ 9.48	$	17,009,378
Plantation Grove	Ocoee, FL	1995		1995	73,655		100	%	$12.31	$	15,010,406

Retail Property Investments							98	%		$	1,218,853,391

OTHER COMMERCIAL PROPERTY INVESTMENTS
Storage Portfolio I⁽²²⁾	Various, U.S.	1972-1990		2003	2,226,549		83	%	$ 9.64	$	74,864,074

Commercial Property Investments							94	%		$	10,494,185,631

RESIDENTIAL PROPERTY INVESTMENTS⁽²³⁾
Houston Apartment Portfolio⁽²⁴⁾	Houston, TX	1984-2004		2006	NA		93	%	NA	$	306,042,523
Kierland Apartment Portfolio⁽²⁵⁾	Scottsdale, AZ	1996-2000		2006	NA		96	%	NA	$	206,100,000
Palomino Park Apartments	Denver, CO	1996-2001		2005	NA		92	%	NA	$	184,000,000
Phoenix Apartment Portfolio⁽²⁶⁾	Greater Phoenix Area, AZ	1995-1998		2006	NA		94	%	NA	$	182,900,000
The Legacy at Westwood Apartments	Los Angeles, CA	2001		2002	NA		94	%	NA	$	110,231,593
The Colorado	New York, NY	1987		1999	NA		99	%	NA	$	100,000,000
Larkspur Courts	Larkspur, CA	1991		1999	NA		93	%	NA	$	93,043,346
Ashford Meadows Apartments	Herndon, VA	1998		2000	NA		92	%	NA	$	89,091,341
1050 Lenox Park	Atlanta, GA	2001		2005	NA		97	%	NA	$	79,470,836
Regents Court Apartments	San Diego, CA	2001		2002	NA		92	%	NA	$	67,800,000
South Florida Apartment Portfolio	Boca Raton and Plantation, FL	1986		2001	NA		96	%	NA	$	65,099,785
The Caruth	Dallas, TX	1999		2005	NA		96	%	NA	$	60,007,237
The Reserve at Sugarloaf	Duluth, GA	2000		2005	NA		99	%	NA	$	49,500,000	⁽⁴⁾
Glenridge Walk	Atlanta, GA	1996, 2001		2005	NA		97	%	NA	$	48,710,574
The Lodge at Willow Creek	Denver, CO	1997		1997	NA		96	%	NA	$	39,501,399
The Maroneal	Houston, TX	1998		2005	NA		95	%	NA	$	39,113,694

TIAA Real Estate Account Prospectus | 25

Properties (continued)


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

RESIDENTIAL PROPERTY INVESTMENTS⁽²³⁾(continued)
Lincoln Woods Apartments	Lafayette Hill, PA	1991	1997	NA		93	%	NA		$	37,781,555
Westcreek Apartments	Westlake Village, CA	1988	1997	NA		95	%	NA		$	35,300,000
The Legends at Chase Oaks	Plano, TX	1997	1998	NA		98	%	NA		$	29,025,236
The Fairways of Carolina	Margate, FL	1993	2001	NA		96	%	NA		$	25,309,965
Royal St. George	W. Palm Beach, FL	1995	1996	NA		97	%	NA		$	25,000,000
Quiet Water at Coquina Lakes	Deerfield Beach, FL	1995	2001	NA		95	%	NA		$	24,006,100
The Greens at Metrowest Apartments	Orlando, FL	1990	1995	NA		91	%	NA		$	21,011,825

Residential Property Investments						95	%			$	1,918,047,009

Total—All Property Investments										$	12,412,232,640


(1)	The square footage is an approximate measure and is subject to periodic remeasurement.

(2)	Based on total contractual rent on leases existing as of December 31, 2006. For those properties purchased in the fourth quarter of 2006, the rent is based on the existing leases as of the date of purchase. The contractual rent can either be on a gross or a net basis, depending on the terms of the individual leases.

(3)	Market value reflects the value determined in accordance with the procedures described in the Account’s prospectus and as stated in the Statement of Investments (contained in “Financial Statements”).

(4)	Market value shown represents the Account’s interest gross of debt.

(5)	This property is located in London, the United Kingdom, and the market value is converted from British pounds to U.S. dollars at the exchange rate as of December 31, 2006.

(6)	This property was renovated in 2004 and 2006.

(7)	Undergone extensive renovations since original construction.

(8)	The property is held in a 75%/25% joint venture with Equity Office Properties Trust. Market value shown reflects the value of the Account’s interest in the joint venture.

(9)	Formerly known as “Colorado Center”, this property is held in a 50%/50% joint venture with Equity Office Properties Trust. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.

(10)	The Account purchased a 50.25% interest in a private REIT, which owns this property. A 49.70% interest is owned by Societe Immobiler Trans-Quebec, and .05% is owned by 100 individuals. Market value shown reflects the value of the Account’s interest in the joint venture.

(11)	Formerly known as “U.S. Bank Plaza.”

(12)	The property is held in a 50%/50% joint venture with Tennessee Consolidated Retirement System. Market value shown reflects the value of the Account’s interest in the joint venture.

26 | Prospectus TIAA Real Estate Account


(13)	The Ontario Industrial Portfolio contains six investment properties, including one portfolio which consists of 1.1million square feet located in Mira Loma, California.

(14)	The Dallas Industrial Portfolio contains 11 warehouse distribution properties located in Dallas and Copell, Texas.

(15)	On October 5, 2006, the Account purchased Prairie Point Corporate Park, an industrial building in Bolingbrook, IL. This property was consolidated into the existing Chicago Industrial Portfolio.

(16)	On October 5, 2006, the Account purchased Hamilton Mill Business Center, an industrial building in Buford, GA. This property was consolidated into the existing Shawnee Ridge Industrial Portfolio.

(17)	The property is held in a 60%/40% joint venture with Industrial Development International. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.

(18)	Leasehold Interest Only.

(19)	This property investment is held in a 80%/20% joint venture with Weingarten Realty Investors. Market value shown reflects the value of the Account’s interest in the joint venture. This portfolio contains seven neighborhood and/or community shopping centers located in the Ft. Lauderdale, Miami, Orlando and Tampa, Florida areas.

(20)	Each property is held in a 50%/50% joint venture with the Simon Property Group. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.

(21)	Reflects the square footage owned by the joint venture.

(22)	The property is held in a 75%/25% joint venture with Storage USA. Market value shown reflects the value of the Account’s interest in the joint venture, net of debt.

(23)	For the average unit size and annual average rent per unit for each residential property, see “Residential Properties” below.

(24)	The Houston Apartment Portfolio contains 11 properties that are a mix of two and three-story luxury garden style apartments and are located in Houston, Texas.

(25)	The Kierland Apartment Portfolio contains three properties that are a mix of two and three-story luxury garden style apartments and are located in Scottsdale, Arizona.

(26)	The Phoenix Apartment Portfolio contains four properties that are a mix of two and three-story luxury garden style apartments and are located in the greater Phoenix area in Arizona.

TIAA Real Estate Account Prospectus | 27

COMMERCIAL (NON-RESIDENTIAL) PROPERTIES

At December 31, 2006, the Account held 98 commercial (non-residential) property investments in its portfolio, including a portfolio of storage facilities located throughout the United States. Twelve of these properties were held through joint ventures, and 18 were subject to mortgages. Although the terms vary under each lease, certain expenses, such as real estate taxes and other operating expenses, are paid or reimbursed in whole or in part by the tenants.

Management believes that the Account’s portfolio is well diversified by both property type and geographic location. The portfolio consists of: 49 office properties containing approximately 23 million square feet located in 13 states, the District of Columbia and the United Kingdom; 35 industrial properties containing 35 million square feet located in 14 states, including a 60% interest in a portfolio of industrial properties located throughout the United States; and 13 retail properties containing approximately five million square feet located in six states and the District of Columbia. In addition, the Account has a 75% interest in a portfolio of storage facilities located throughout the United States containing approximately 2.2 million square feet.

As of December 31, 2006, the average overall occupancy rate of the Account’s commercial real estate portfolio was 94%. On an average basis, the Account’s office properties were 92% leased, industrial properties were 96% leased, retail properties were 98% leased and the storage portfolio was 83% leased.

Major Tenants: The following table lists the Account’s major commercial tenants based on the total space they occupied as of December 31, 2006, in the Account’s properties.


	Occupied Square Feet		Percentage of Total Rentable Area of Account’s Industrial Properties			Percentage of Total Rentable Area of Account’s Non-Residential Properties

MAJOR INDUSTRIAL TENANTS
Walmart		1,099,112		3.1	%		1.8	%
Gap		1,045,000		3.0	%		1.7	%
General Electric		1,004,000		2.9	%		1.6	%
Priority Fulfillment Services		993,120		2.8	%		1.6	%
Regal West		968,535		2.8	%		1.5	%
Tyco Healthcare		800,000		2.3	%		1.3	%
TNT		756,600		2.2	%		1.2	%
Hewlett Packard		708,532		2.0	%		1.1	%
Kaz		700,000		2.0	%		1.1	%
Del Monte		689,660		2.0	%		1.1	%

28 | Prospectus TIAA Real Estate Account


	Occupied Square Feet		Percentage of Total Rentable Area of Account’s Office Properties			Percentage of Total Rentable Area of Account’s Non-Residential Properties

MAJOR OFFICE TENANTS
Deloitte & Touche		517,705		2.3	%		0.8	%
Yahoo!		476,740		2.1	%		0.8	%
Southern Company Services, Inc		448,004		2.0	%		0.7	%
Mellon (Boston Co)		361,623		1.6	%		0.6	%
Microsoft		361,528		1.6	%		0.6	%
Crowell & Moring		320,539		1.4	%		0.5	%
BHP Petroleum		316,638		1.4	%		0.5	%
Accenture		302,730		1.3	%		0.5	%
Met Life Insurance		289,433		1.3	%		0.5	%
IDX Systems		284,631		1.3	%		0.5	%


	Occupied Square Feet		Percentage of Total Rentable Area of Account’s Retail Properties			Percentage of Total Rentable Area of Account’s Non-Residential Properties

MAJOR RETAIL TENANTS
Publix		313,859		6.4	%		0.5	%
JC Penney		196,931		4.0	%		0.3	%
Belk		162,501		3.3	%		0.3	%
Parisian		143,278		2.9	%		0.2	%
Saks & Co.		127,727		2.6	%		0.2	%
Neiman Marcus		124,314		2.5	%		0.2	%
Bed Bath & Beyond		101,100		2.1	%		0.2	%
Expo Design		98,350		2.0	%		0.2	%
Old Navy		82,075		1.7	%		0.1	%
Regal Cinema		76,580		1.6	%		0.1	%

TIAA Real Estate Account Prospectus | 29

The following table lists the rentable area subject to expiring leases during the next five years, and an aggregate figure for expirations in 2012 and thereafter, in the Account’s properties.


Year of Lease Expiration	Rentable Area Subject to Expiring Leases (sq. ft.)		Percentage of Total Rentable Area of Account’s Office Properties Represented by Expiring Leases⁽¹⁾

OFFICE PROPERTIES
2007		2,229,661		9.9	%
2008		2,171,122		9.6	%
2009		1,913,318		8.5	%
2010		2,335,573		10.3	%
2011		2,945,731		13.0	%
2012 and thereafter		9,272,527		41.0	%

Total		20,867,932		92.2	%


Year of Lease Expiration	Rentable Area Subject to Expiring Leases (sq. ft.)		Percentage of Total Rentable Area of Account’s Industrial Properties Represented by Expiring Leases⁽¹⁾

INDUSTRIAL PROPERTIES
2007		3,915,050		11.2	%
2008		5,034,465		14.4	%
2009		6,078,823		17.4	%
2010		4,464,370		12.8	%
2011		3,780,235		10.8	%
2012 and thereafter		9,397,067		26.8	%

Total		32,670,010		93.3	%


Year of Lease Expiration	Rentable Area Subject to Expiring Leases (sq. ft.)		Percentage of Total Rentable Area of Account’s Retail Properties Represented by Expiring Leases⁽¹⁾

RETAIL PROPERTIES
2007		324,085		6.6	%
2008		283,346		5.8	%
2009		374,582		7.6	%
2010		534,841		10.9	%
2011		462,270		9.4	%
2012 and thereafter		2,770,806		56.3	%

Total		4,749,930		96.5	%


⁽¹⁾	The percentages indicated as expiring in a given year may not equal the total percentages due to rounding.

30 | Prospectus TIAA Real Estate Account

RESIDENTIAL PROPERTIES

The Account’s residential property portfolio currently consists of 23 property investments comprised of first class or luxury multi-family, garden, midrise, and high-rise apartment buildings. The portfolio contains approximately 11,106 units located in nine states and has a 95% average occupancy rate. One of the residential properties in the portfolio is subject to a mortgage. The complexes generally contain one- to three-bedroom apartment units with a range of amenities, such as patios or balconies, washers and dryers, and central air conditioning. Many of these apartment communities have 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 its residential properties.

The table below contains detailed information regarding the apartment complexes in the Account’s portfolio as of December 31, 2006.


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

The Greens at Metrowest	Orlando, FL	200	920	$	940
The Royal St. George Apts	West Palm Beach, FL	224	870	$	1,056
Westcreek Apartments	Westlake Village, CA	126	951	$	1,819
Lincoln Woods Apartments	Lafayette Hill, PA	216	774	$	1,272
Lodge at Willow Creek	Denver, CO	316	996	$	1,008
Legends at Chase Oaks	Plano, TX	346	972	$	1,082
The Colorado	New York, NY	256	622	$	2,703
Larkspur Courts	Larkspur, CA	248	1,001	$	2,086
Ashford Meadows	Herndon, VA	440	1,050	$	1,435
South Florida Apartment Portfolio	Boca Raton, Plantation, FL	550	889	$	1,105
Fairways of Carolina	Margate, FL	208	1,026	$	1,160
Quiet Waters Apartments	Deerfield Beach, FL	200	1,048	$	1,250
Legacy at Westwood	Los Angeles, CA	187	1,181	$	4,223
Regents Court	San Diego, CA	251	884	$	1,717
The Reserve at Sugarloaf	Duluth, GA	333	1,220	$	1,149
The Maroneal	Houston, TX	309	928	$	1,207
Glenridge Walk	Atlanta, GA	296	1,142	$	1,337
1050 Lenox Park	Atlanta, GA	407	1,023	$	1,386
Caruth at Lincoln Park	Dallas, TX	338	1,168	$	1,680
Palomino Park	Highlands Ranch, CO	1,184	1,095	$	1,520
Houston Apartment Portfolio	Houston, TX	2,295	1,062	$	1,332
Phoenix Apartment Portfolio	Greater Phoenix, AZ	1,176	996	$	1,084
Kierland Apartment Portfolio	Scottsdale, AZ	1,000	1,049	$	1,166

RECENT TRANSACTIONS

The following describes property transactions by the Account since February 1, 2007, the date of the last supplement to the Account prospectus describing property purchases. Except as noted, the expenses for operating the properties purchased are either borne or reimbursed, in whole or in part, by the property tenants, although the terms vary under each lease. The Account is responsible for operating expenses not reimbursed under the terms of a lease. All rental rates are quoted on an annual basis unless otherwise noted.

TIAA Real Estate Account Prospectus | 31

PURCHASES

Retail Properties

Joint Venture with Developers Diversified Realty Corporation

On February 27, 2007, DDR/TC Core Retail Fund, LLC, a Delaware limited liability company (Company) and a joint venture between a wholly owned subsidiary of TIAA, for the benefit of the Account, and a wholly owned subsidiary of Developers Diversified Realty Corporation (DDR), acquired an aggregate of 66 community center properties located predominantly the southeastern United States for approximately $3.0 billion of total asset value (collectively, the “Portfolio”). Prior to this acquisition, the Properties were owned by Inland Retail Real Estate Trust, Inc. The Account contributed 85% of the equity in the Company (approximately $1.04 billion) and DDR contributed 15% of the equity in the Company (approximately $170 million). The Portfolio consists of approximately 17.0 million square feet of owned gross leasable area (over 18 million square feet including “shadow” anchors) and has an average occupancy of approximately 96.0%. The properties are located in 13 states, with 42 properties, representing approximately 60.7% of the Portfolio’s valuation, located in Georgia, North Carolina and Florida. The largest asset accounts for 6.3% of the total value and the largest state concentration is in Georgia with 18 properties which account for 34.6% of the Portfolio’s total value. The majority of the Portfolio is anchored by well-known, high-quality retailers including Wal-Mart (6%), Kohl’s (5%), Ross Dress for Less (3%), Goody’s Family Clothing (3%), and Linens ‘N Things (2%).

The Portfolio is subject to an aggregate of approximately $1.8 billion in indebtedness and consists of assumed indebtedness and three separate pools of financing, each provided by a different lender. Solely for purposes of the financing, the lenders have divided the Portfolio into 70 individual properties. The material components of the three pools of financing are as follows:


	•	One lender has provided 25 individual non-recourse loans, to subsidiaries of Company, with customary recourse carve-outs, in the aggregate amount of $736,558,611. The loans bear interest at a fixed rate of 5.4475%. Each loan is a separate, individual loan secured by an individual community retail center and each loan is not cross-collateralized or cross-defaulted with any of the other loans or other community retail centers.

	•	One lender has provided a non-recourse loan, to subsidiaries of Company, with customary recourse carve-outs, in the aggregate amount of $559,533,762. The loan bears interest at a fixed rate of 5.48%. This loan is secured by 17 community retail centers. The loan is cross-defaulted and cross-collateralized on a Portfolio basis, but Company will be permitted to transfer any or all of the 17 individual properties upon compliance with certain conditions, including the requirement that either the transferee expressly assumes the loan or Company reduces the loan amount allocated to the transferred property by an amount in excess of the loan value.

	•	One lender has provided a $250,000,000 5-year (a base 3-year term with two 1-year options) revolving credit recourse loan to Company at an interest rate calculated as the London Interbank Offered Rate (LIBOR) plus 65 basis

32 | Prospectus TIAA Real Estate Account


	points (0.65%), calculated on a Actual/ 360-day year basis. The facility also provides for assets within the collateral to be released or substituted. This facility is initially secured by 13 community retail centers.

Finally, Company assumed indebtedness on a total of 15 properties with an aggregate loan balance amount of approximately $285 million. These individual loans mature between June 2009 and June 2018, and all but one loan matures on or before August 2012.

Printemps De L’Homme - Paris, France

On March 8, 2007, the Account purchased a retail center in Paris, France for approximately $263.7 million. The property consists of a nine-story retail building with three basement levels, was built in the 1930s, and underwent major renovations in 1999. The retail center contains 142,365 square feet and is 100% leased to France Printemps SA for their Printemps De L’Homme (Men’s Store). Rental rates average 637 Euros per square meter (at the time of underwriting, equivalent to $78.12 per square foot), which is below the current average market rent for comparable properties. The property is located in the Paris City Centre and Shopping Centre market, which consists of 4.2 million square meters (45.21 million square feet) and had a vacancy rate of 3% at the time of purchase.

SALES

Residential Properties

The Greens at MetroWest - Orlando, FL

On February 14, 2007, the Account sold an apartment complex in Orlando, Florida for net sales proceeds of approximately $21.7 million. The Account purchased the property on December 15, 1995 for an original investment of $12.5 million. At the time of sale, the property had a market value of $21.5 million and a cost to date of $15.0 million in the records of the Account.

TIAA Real Estate Account Prospectus | 33

SELECTED FINANCIAL DATA

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


	Year Ended Dec. 31, 2006		Year Ended Dec. 31, 2005		Year Ended Dec. 31, 2004		Year Ended Dec. 31, 2003		Year Ended Dec. 31, 2002

Investment income:
Real estate income, net	$	444,782,843	$	340,089,550	$	239,429,500	$	224,938,080	$	198,998,685
Income from real estate joint ventures and limited partnerships		84,671,528		71,826,443		71,390,397		31,989,569		17,077,072
Dividends and interest		135,407,210		70,999,212		27,508,560		19,461,931		26,437,901

Total investment income		664,861,581		482,915,205		338,328,457		276,389,580		242,513,658
Expenses		83,448,664		56,100,197		36,728,425		31,654,065		23,304,336

Investment income, net		581,412,917		426,815,008		301,600,032		244,735,515		219,209,322
Net realized and unrealized gain (loss) on investments and mortgage notes payable		1,032,787,765		765,970,272		414,580,303		58,837,371		(102,967,284	)

Net increase in net assets resulting from operations		1,614,200,682		1,192,785,280		716,180,335		303,572,886		116,242,038
Participant transactions		1,969,780,728		2,110,375,836		1,735,947,490		813,860,715		346,079,345

Net increase in net assets	$	3,583,981,410	$	3,303,161,116	$	2,452,127,825	$	1,117,433,601	$	462,321,383


	December 31,

	2006		2005		2004		2003		2002

Total assets	$	15,759,961,333	$	11,685,426,413	$	7,843,979,924	$	4,867,089,727	$	3,731,503,245
Total liabilities		1,627,268,821		1,136,715,311		598,429,938		73,667,566		55,514,685

Total net assets	$	14,132,692,512	$	10,548,711,102	$	7,245,549,986	$	4,793,422,161	$	3,675,988,560

Accumulation units outstanding		50,142,688		42,623,491		33,337,597		24,724,183		20,346,696

Accumulation unit value	$	273.65	$	239.95	$	210.44	$	186.94	$	173.90

Mortgage notes payable	$	1,437,149,148	$	973,502,186	$	499,479,256		—		—

34 | Prospectus TIAA Real Estate Account

QUARTERLY SELECTED FINANCIAL INFORMATION

The following selected unaudited financial data for each full quarter of 2006 and 2005 are derived from the financial statements of the Account for the years ended December 31, 2006 and 2005.


	2006 For the Three Months Ended

	March 31			June 30			September 30			December 31

Investment income, net	$	117,280,069		$	135,154,810		$	173,662,421		$	155,315,617

Net realized and unrealized gain on investments and mortgage loans payable		229,766,395			411,609,818			266,396,224			125,015,328

Net increase in net assets resulting from operations	$	347,046,464		$	546,764,628		$	440,058,645		$	280,330,945

Total return		3.21	%		4.69	%		3.43	%		2.04	%



	2005 For the Three Months Ended

	March 31			June 30			September 30			December 31

Investment income, net	$	93,301,077		$	98,805,190		$	114,048,282		$	120,660,459

Net realized and unrealized gain on investments and mortgage loans payable		21,210,579			263,101,053			267,884,516			213,774,124

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

Total return		1.52	%		4.38	%		4.13	%		3.33	%

TIAA Real Estate Account Prospectus | 35

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and notes contained in this prospectus and with consideration to the sub-section entitled “Forward-Looking Statements,” which begins on page 51, and the section entitled “Risks,” which begins on page 11. The past performance of the Account is not indicative of future results.

2006 OVERVIEW

The TIAA Real Estate Account (the “Account”) invests primarily in commercial real estate in order to meet its investment objective of obtaining favorable long-term returns through rental income and the appreciation of its real estate holdings. Commerical real estate enjoyed another strong year of performance in 2006. The continued positive performance of commercial real estate markets is a reflection of positive economic indicators and improved real estate market fundamentals, as discussed in the following section. While economic growth was relatively strong throughout the year, the Federal Reserve Board reported in its January 2007 “Beige Book,” which summarizes economic conditions in the 12 Federal Reserve Districts, that economic activity had moderated in several Districts since its November 2006 report. However, the Federal Reserve Board also stated that commercial real estate markets remained very active throughout the country: “…in contrast to the housing sector, commercial real estate markets continued to see strong activity in most Districts.”

Investor demand for commercial real estate in 2006 was fueled by the solid performance of the U.S. economy, healthy market fundamentals, a dip in interest rates in the second half of 2006, and relatively attractive returns when compared to other asset classes. Unlike the single family housing market, which experienced softening in demand and prices, commercial real estate prices and investment activity increased in 2006. According to Real Capital Analytics, one of the primary industry sources of commercial real estate transaction data, commercial real estate transactional volume in 2006 totaled approximately $307 billion, an 11% increase over 2005. A number of REIT privatization transactions and the $5 billion purchase price paid for a single property (Peter Cooper Village/Stuyvesant Town in New York City) were responsible for a sizeable share of the 2006 increase, which may make it difficult for the commercial real estate market to sustain this pace in 2007.

While management believes that economic and real estate market fundamentals should remain stable to positive in the near term, commercial real estate markets are cyclical over the longer term and, therefore, are subject to change. Geopolitical and economic risks, changes in interest rates or monetary policy, industry or sector slowdowns, the dynamics of supply and demand for commercial real estate and changing demographics are but a few of the factors which can affect commercial real estate values and, consequently, the

36 | Prospectus TIAA Real Estate Account

performance of the Account. While management cannot predict the exact nature or timing of such changes or the magnitude of their impact, our experience has demonstrated that market fluctuations can and will take place without advance notice, and any significant changes could have a direct and meaningful impact on the returns of the Account. Please refer to the section entitled “Risks,” which begins on page 11, for a more detailed description of the risks associated with an investment in the Account.

It is also important to note that, while the single family residential real estate market has slowed to varying degrees in particular markets throughout the country, the Account does not directly invest in single family residential real estate. Historically, there has not been a strong link between commercial real estate and single family housing because different market fundamentals drive the performance of each. The volatility in interest rates had an immediate negative impact on the affordability of single family housing while not affecting commercial real estate values in the short term. During this same period, the commercial real estate market has been experiencing improved market conditions (improving occupancies and increases in rental rates) and moderate levels of new construction.

INVESTMENTS AS OF DECEMBER 31, 2006

As of December 31, 2006, the Account had total net assets in the amount of $14,132,692,512, a 4% increase from the end of the third quarter of 2006 and a 34% increase from year-end 2005. The growth in net assets was due to the strong inflow of premiums and net transfers into the Account, combined with a healthy increase in net investment income and capital appreciation on the Account’s investment portfolio during the year ended December 31, 2006, as compared to 2005.

As of December 31, 2006, the Account owned a total of 121 real estate property investments (109 of which were wholly owned and 12 of which were held in joint ventures) representing 80.03% of the Account’s total investment portfolio. The real estate portfolio included 49 office properties (six of which were held in joint ventures and one located in London, England), 35 industrial properties (including one held in a joint venture), 23 apartment complexes, 13 retail properties (including four held in joint ventures), and a 75% joint venture interest in a portfolio of storage facilities. Of the 121 real estate property investments, only 18 were subject to debt. Total debt on the Account’s wholly owned real estate portfolio as of December 31, 2006 was $1,437,149,148, representing 10.17% of Total Net Assets. The Account’s share of joint venture debt is netted out in determining the joint venture values shown in the Statement of Investments, but, when that debt is also considered, total debt on the Account’s portfolio as of December 31, 2006 was $1,909,316,373, representing 13.51% of Total Net Assets.

Management believes the Account’s real estate and real estate-related transactional activity in the year ended December 31, 2006 was strong. The Account purchased 23 property investments, including a joint venture interest, for

TIAA Real Estate Account Prospectus | 37

a total net equity investment of $2.3 billion. These purchases were diversified by both location (12 states and Washington, D.C.) and sector. The Account purchased an 80% joint venture interest in four retail centers, and purchased nine office properties, seven industrial properties, three retail properties and three apartment properties. Two of the seven industrial properties were consolidated into existing portfolios. The Account also sold nine property investments (four apartment and five office properties), for approximately $381.9 million. These properties had either maximized in value, under-performed, or represented properties needing significant capital infusions in the future, which could have had a negative impact on the Account’s overall performance. The properties sold had a total net realized gain of $76.1 million. In addition, the Account made a $75 million mortgage loan receivable investment secured by an apartment complex in Washington, D.C.

Management believes that the Account’s real estate portfolio is diversified by location and property type and, at December 31, 2006, no single property investment represented more than 3.56% of its total investments or more than 4.45% of its total real estate investments, based on the values of such assets. The following charts reflect the diversification of the Account’s real estate assets by region and property type, list its ten largest holdings, and list its top five overall market exposures by metropolitan statistical area. All information is based on the values of the properties as stated in the financial statements as of December 31, 2006.

REAL ESTATE PROPERTY INVESTMENT DIVERSIFICATION BY MARKET VALUE


	East		West		South		Midwest		Other*		Foreign**		TOTAL
	(32)		(40)		(39)		(7)		(2)		(1)		(121)

Office (49)	22.6	%	18.4	%	11.5	%	2.9	%	0.0	%	3.5	%	58.9	%
Apartment (23)	1.9	%	7.4	%	6.2	%	0.0	%	0.0	%	0.0	%	15.5	%
Industrial (35)	2.6	%	6.6	%	3.8	%	1.6	%	0.6	%	0.0	%	15.2	%
Retail (13)	1.9	%	1.0	%	6.9	%	0.0	%	0.0	%	0.0	%	9.8	%
Other (1)	0.0	%	0.0	%	0.0	%	0.0	%	0.6	%	0.0	%	0.6	%

TOTAL (121)	29.0	%	33.4	%	28.4	%	4.5	%	1.2	%	3.5	%	100.0	%


( )		Number of property investments in parentheses.

	*	Represents a portfolio of storage facilities and a portfolio of industrial properties located in various regions across the U.S.

	**	Represents a United Kingdom real estate investment.

38 | Prospectus TIAA Real Estate Account

TOP TEN REAL ESTATE PROPERTY INVESTMENTS


Property Name	City	State/ County	Property Type		Market Value ($M)(a)				% of Total Real Estate Portfolio			% of Total Investments

1001 Pennsylvania Ave	Washington	DC		Office		$	552.5	(b)		4.45	%		3.56	%
1 & 7 Westferry Circus	London	UK		Office		$	428.6	(c)		3.45	%		2.76	%
50 Fremont Street	San Francisco	CA		Office		$	421.0	(d)		3.39	%		2.71	%
IDX Tower	Seattle	WA		Office		$	399.0	(e)		3.21	%		2.57	%
The Newbry	Boston	MA		Office		$	370.7			2.99	%		2.39	%
Four Oaks Place	Houston	TX		Office		$	306.2			2.47	%		1.97	%
Houston Apartment Portfolio	Houston	TX		Apartment		$	306.0			2.47	%		1.97	%
780 Third Avenue	New York City	NY		Office		$	298.0			2.40	%		1.92	%
99 High Street	Boston	MA		Office		$	291.8	(f)		2.35	%		1.88	%
Ontario Industrial Portfolio	Ontario	CA		Industrial		$	270.0	(g)		2.18	%		1.74	%


(a)	Value as reported in the 12/31/06 Statement of Investments, unless otherwise indicated. Investments owned 100% by TIAA are reported based on market value. Investments in joint ventures are reported based on the Account’s ownership percentage in the joint ventures.

(b)	This property is shown gross of debt. The value of the Account’s interest less leverage is $332.4M.

(c)	This property is shown gross of debt. The value of the Account’s interest less leverage is $168.3M. The market value has been converted to U.S dollars from British pounds at the exchange rate as of December 31, 2006.

(d)	This property is shown gross of debt. The value of the Account’s interest less leverage is $278.6M.

(e)	This property is shown gross of debt. The value of the Account’s interest less leverage is $246.0M.

(f)	This property is shown gross of debt. The value of the Account’s interest less leverage is $106.8M.

(g)	This property is shown gross of debt. The value of the Account’s interest less leverage is $260.1M.

TOP FIVE OVERALL MARKET EXPOSURE


Metropolitan Statistical Area	% Leased			# of Investments		% Total Investments

Washington-Arlington-Alexandria		96.8	%		10		9.61	%
Boston-Quincy		85.3	%		6		5.85	%
San Francisco-San Mateo-Redwood City		93.3	%		4		5.39	%
Los Angeles-Long Beach-Glendale		98.4	%		8		5.37	%
Seattle-Bellevue-Everett		95.8	%		5		4.29	%

As of December 31, 2006, the Account also held investments in real estate limited partnerships, representing 1.80% of Total Investments, real estate equity securities, representing 3.99% of Total Investments, commercial mortgage-backed securities (CMBSs), representing 0.55% of Total Investments, a mortgage loan receivable representing 0.48% of Total Investments, commercial paper representing 10.79% of Total Investments, and government bonds, representing 2.36% of Total Investments.

TIAA Real Estate Account Prospectus | 39

Real Estate Market Outlook—In General

(Commercial real estate market statistics discussed in this section are obtained by the Account from sources that management considers reliable, but the data is preliminary for the year ended December 31, 2006 and may be subsequently revised. Prior period data may have been adjusted to reflect updated calculations. Investors should not rely exclusively on the data presented below in forming a judgment regarding the current or prospective performance of the commercial real estate market generally.)

The United States commercial real estate markets and the national economy continued to experience improvements throughout 2006. Commercial real estate market fundamentals improved while the national economy moved ahead, albeit more slowly in the second half of 2006. Despite the slower economic growth, capital inflow from investors to commercial real estate assets remained strong in 2006, continuing to support commercial real estate values, while moderating investment returns. Management believes it is important to remember that real estate values can be affected by prospective changes in economic and capital market conditions, as well as by changes in supply and demand at the local level.

Economic activity expanded throughout the nation in 2006. The United States economy added a total of 2.24 million new jobs over the course of 2006 and 2.54 million new jobs in 2005. The unemployment rate dropped to 4.5% as of December 2006, from 4.9% in December 2005. Economic gains were broadly based, both geographically and across industries. While the economy did grow throughout 2006, the Federal Reserve Board reported in its January 2007 “Beige Book” that economic activity had moderated in several Districts during December. The Federal Reserve also noted, however, that “...in contrast to the housing sector, commercial real estate markets continued to see strong activity in most Districts.”

Payroll employment growth in the Account’s primary metropolitan areas remained positive in 2006. Of the Account’s five top markets (Washington, D.C., Boston, San Francisco, Los Angeles and Seattle), based on the net equity value of the Account’s property investments, employment growth was strongest in the Seattle metropolitan area, where payroll employment grew 3.9% in 2006.Employment growth was also strong in the Washington, D.C. metropolitan area, where payroll employment grew 2.5% over the course of 2006. Employment growth was more modest in the Boston (+0.9%), San Francisco (+1.5%) and Los Angeles (+1.2%) metropolitan areas. By comparison, payroll employment grew 1.4% in the United States as a whole in 2006.

Growth in payroll employment is highly correlated with tenant demand for commercial real estate; however, growth in employment may not immediately result in demand for space. Space demand can lag growth in employment due to the nature of the leasing cycle. Alternatively, absorption can be a leading indicator as companies lease space to accommodate anticipated hiring. The “financial activities” and “professional and business services” sectors are the primary office users, and growth in these sectors is correlated with office space demand over the long term. These two sectors added 179,000 and 442,000 jobs, respectively, over the course of 2006, and office space demand responded in kind. According to Torto Wheaton

40 | Prospectus TIAA Real Estate Account

Research, an independent subsidiary of CB Richard Ellis and a widely-used source of real estate market data, office absorption in the United States, which is the net change in occupied space and a fundamental indicator of demand, totaled a healthy 75 million square feet in 2006. Gains in net absorption during 2006 lowered office vacancy rates throughout much of the country. Torto Wheaton Research reported that office market vacancies averaged 12.5% at year-end 2006, as compared with 13.6% at the end of 2005. In comparison, at year-end 2006, the vacancy rate of the Account’s office portfolio was 8%, well below the national average.

Real estate conditions in the Account’s top office markets were solid in 2006. For example, in the Washington D.C. metropolitan area, where the largest concentration of the Account’s real estate investments are located, office vacancies were well below the national average at 9.1% as of year-end 2006, down from 9.3% at year-end 2005. In comparison, the average vacancy rate of the Account’s office portfolio in the Washington, D.C. metropolitan area was significantly better and stood at 3.0% at the end of 2006. Office vacancy rates in the Boston, Los Angeles, San Francisco, and Seattle metropolitan areas, which were the Account’s other top office markets, experienced steady declines over the past year, and the average office vacancy rates in those three markets at year-end 2006 were 11.9%, 10.0%, 10.8% and 9.4%, respectively. In comparison, the Account’s office portfolios in Los Angeles, San Francisco, Seattle and Boston had an average vacancy rate at year-end 2006 of 1%, 7%, 7% and 18%, respectively. It is important to note that three of the five property investments owned by the Account in the Boston metropolitan area are located within the city of Boston and had an average vacancy rate of 5%. The remaining two property investments are located in suburban areas and had an average vacancy rate of 36% due to a slower leasing pace.

Industrial space demand is related to a number of factors, including the national business cycle, national industrial production, international trade volumes, changes in corporate logistics and distribution systems, and employment growth in the manufacturing, wholesale trade and transportation & warehousing industries. Most of these factors have experienced sustained growth over the last several years. For example, U.S. gross domestic product (GDP), a basic indicator of the national business cycle, grew an estimated 3.3% in 2006, after growing 3.2% in 2005 and 3.9% in 2004. Similarly, national industrial production grew at a 4.4% rate in 2006, following growth of 3.2% in 2005 and 2.5% in 2004. While GDP growth and growth in industrial production slowed during the second half of the year due primarily to a slowdown in domestic auto production and weakness in the single-family housing market, those factors continued to grow at relatively healthy rates. According to Torto Wheaton Research, industrial space absorption in major U.S. metropolitan areas totaled 188 million square feet in 2006, which is a reflection of U.S. economic growth, and, as a result of the healthy absorption, industrial vacancies dipped lower in 2006. According to Torto Wheaton Research, industrial vacancies averaged 9.4% at year-end 2006 compared with 9.9% at the end of 2005. In comparison, at year-end 2006, the vacancy rate of the Account’s industrial portfolio was 4%, well below the national average.

TIAA Real Estate Account Prospectus | 41

Industrial market vacancies in the Riverside, California metropolitan area, where the largest concentration of the Account’s industrial properties are located, averaged 7.9% at year-end 2006, which was below the national average, but up from 6.1% at year-end 2005. Still, the Riverside industrial market remained the most active industrial market in the country with over 21 million square feet of absorption in 2006, which was 30% greater than that in the next most active market. In Los Angeles, another of the Account’s top industrial markets, vacancies were also well below the national average at 4.5% at year-end 2006. The industrial market vacancy rates in the Chicago (11.4%), Dallas (11.7%), and Atlanta (13.0%) metropolitan areas were above the national average, but vacancies in these markets declined over the course of 2006. In comparison, at December 31, 2006, the Account’s industrial portfolio in Riverside was 100% occupied, and, in Los Angeles and Dallas, the Account’s industrial market vacancy rates were 2% and 5%, respectively. In the Account’s remaining top two industrial markets, Chicago and Atlanta, average vacancy rates at year-end 2006 were 7% and 2%, respectively.

The apartment market remained healthy throughout 2006, with the slow-down in the single-family housing market producing mostly positive effects for the apartment market. While the growth of single-family housing prices slowed in 2006, past price increases had pushed housing affordability to its lowest level since 2001. The supply of rental units was significantly reduced in a number of markets by developers who removed units from the rental stock as they pursued condominium conversion plans. The pace of condo conversions and conversion-driven acquisitions slowed significantly in the second half of 2006, but the reduction in rental supply during 2005 and the first half of 2006 was sufficient to keep apartment vacancies relatively low. According to Torto Wheaton Research, apartment vacancies increased to 5.1% at year-end 2006, as compared with 5.0% at the end of 2005. In addition, apartment rents increased in a number of markets for the first time in several years, and rental concessions such as free rent were reduced or eliminated in many markets. The average vacancy rate for the Account’s apartment portfolio was 5% at the end of 2006.

Market vacancy rates in the Phoenix metropolitan area, the Account’s top apartment market, averaged 5.3% at year-end 2006. In the Account’s other top apartment markets, market vacancy rates were higher: Houston (7.6%), Denver (5.8%), Atlanta (5.9%), and Los Angeles (2.8%). In comparison, at December 31, 2006, the Account’s apartments located in Atlanta had an average vacancy rate of 2%, Phoenix had a vacancy rate of 5%, and in Denver, Houston and Los Angeles, average vacancy rates were 6%.

Retail markets remained healthy in 2006. Preliminary data from the U.S. Department of Commerce indicated that retail and food service sales (excluding autos and auto parts) increased 7.3% in 2006, a significant gain given the elevated prices of oil and gasoline during much of the year. According to Torto Wheaton Research, vacancies in neighborhood and community centers increased to 8.7% at the end of 2006, versus 7.7% at year-end 2005. In comparison, the average vacancy rate at the end of 2006 for the Account’s entire retail portfolio, as well as, for its neighborhood and community centers, was 3%.

42 | Prospectus TIAA Real Estate Account

Overall, Torto Wheaton Research believes that commercial real estate construction remains at appropriate levels to maintain the favorable real estate supply/demand conditions that existed in 2006 over the near term. Space demand is expected to track closely with construction for most property types over the next several years. According to Torto Wheaton Research, office construction nationally should total 87 million square feet over the 2007-2008 period and absorption should total 91 million square feet. Construction of industrial space is projected to total 340 million square feet over the 2007-2008 period, as compared with absorption of 304 million square feet. While industrial vacancies are expected to increase modestly to 9.8% at year-end 2008, rents are projected to grow 4.3% per year. Apartment construction is expected to total almost 425,000 units over the 2007-2008 period, and absorption is projected to total approximately 350,000 units. While apartment vacancies are expected to increase modestly in 2007-2008, they will remain low by historical standards. Further, apartment rents are projected to grow 3.2% in 2007 and 3.0% in 2008. Torto Wheaton Research expects construction of neighborhood and community centers to total 41.6 million square feet over the 2007-2008 period and absorption to total 40.8 million square feet. With construction and absorption closely aligned, retail rents are projected to grow 4.4% in 2007 and 3.3% in 2008.

Economic Outlook for 2007

On balance, management believes that prospects for U.S. commercial real estate markets remain promising given current economic and property market conditions. Several years into recovery, the national economy shows signs of a modest slowdown in economic activity primarily due to high energy prices and a weakened single-family housing market; however, many economists believe that the economy is in the midst of a “soft landing” and that economic activity should remain healthy throughout 2007. Nationally, employment is growing at a solid pace, as is employment in key office-using industries. In addition to promising fundamentals, domestic and foreign investor demand for commercial real estate shows little sign of abating. Strong inflows should provide support to current values but are also likely to continue to exert continued pressure on property prices and future returns. The Account will seek to balance the promising market fundamentals against pricing pressures when executing its investment strategy. However, market conditions affecting real estate investments at any given time cannot be predicted, and an unexpected, sudden economic downturn in one or a number of the markets in which the Account invests could significantly and adversely impact the Account’s returns.

RESULTS OF OPERATIONS

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Performance

The Account’s total return was 14.04% for the year ended December 31, 2006, two basis points higher than the 2005 annual return of 14.02%. The Account’s

TIAA Real Estate Account Prospectus | 43

overall performance on a year-to-year basis reflects the continued strong performance of the Account’s real estate property investments and an increase in interest rates on its marketable securities.

Commercial real estate has been experiencing historically high pricing for the past several years as capital has continued to flow into the asset class. While this increase in property pricing has positively impacted the Account’s net realized and unrealized gains on its real estate assets and joint venture holdings, the underlying property values are subject to decline prospectively, if capital or real estate market conditions experience adverse changes. Real estate as an investment should be considered from a long-term perspective. The Account’s total return (after expenses) over the past three, five and 10 years ended December 31, 2006 was 13.53%, 10.22% and 9.43%, respectively.

The Account’s total net assets grew 34.0% from December 31, 2005 to December 31, 2006. The primary drivers of this growth were significant net participant transactions, the Account’s net investment income from its investment portfolio and the Account’s realized and unrealized gains on its investments over the last twelve months. Management believes that the net participant transfers into the Account are due to its positive historical performance and its low return volatility relative to other available investment options.

Income and Expenses

The Account’s net investment income, after deduction of all expenses, was 36.2% higher for the year ended December 31, 2006, as compared to 2005. This increase was related to the increase in total net assets, which included a 35.1% increase in the Account’s real estate properties, joint venture holdings and limited partnerships.

The Account’s real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 79.6% and 85.3% of the Account’s total investment income (before deducting Account level expenses) during 2006 and 2005, respectively. The remaining portion of the Account’s total investment income was generated by investments in marketable securities, including real estate equity securities, commercial paper, government bonds, and an investment in a commercial mortgage loan receivable. The decline in the percentage of the Account’s total investment income derived from its real estate holdings was primarily due to an increase in the Account’s interest income from its marketable securities and mortgage loan receivable.

Gross real estate rental income increased approximately 34.9% in the year ended December 31, 2006, as compared to 2005. This increase was primarily due to the increased number and size of the Account’s wholly-owned property investments (98 at December 31, 2005 compared to 109 at December 31, 2006). Income from real estate joint ventures and limited partnerships was $84,671,528 for the year ended December 31, 2006, as compared with $71,826,443 for the year ended December 31, 2005. This 17.9% increase was due to an increase in gross rental income from the properties owned in joint ventures, as well as increased

44 | Prospectus TIAA Real Estate Account

income from limited partnerships. Investment income on the Account’s investments in marketable securities increased by 90.7%, from $70,999,212 in 2005 to $135,407,210 in 2006. This increase was due to an increase in the related investments and higher interest rates in 2006.

Total property level expenses for wholly-owned property investments for the years ended December 31, 2006 and 2005 were $389,672,945 and $278,544,030, respectively. In 2006, operating expenses and real estate taxes represented 53% and 28% of the total property level expenses, respectively, with the remaining 19% representing interest payments on mortgages. In comparison, operating expenses, real estate taxes, and interest expense represented 54%, 32% and 14% of total property level expenses, respectively, in 2005. Overall, property level expenses increased by 40% from 2005 to 2006. The majority of this increase (71%) was due to increases in operating expenses and real estate taxes associated with the Account’s larger portfolio of wholly-owned property investments. The increase in the interest expense paid on properties subject to a mortgage accounted for 29% of the overall increase. As of year-end 2006, there were 12 wholly-owned properties subject to debt, as compared to seven leveraged properties at year-end 2005.

The Account also incurred expenses for the years ended December 31, 2006 and 2005 for investment advisory services ($26,899,307 and $19,603,225, respectively), administrative and distribution services ($45,712,473 and $27,130,406, respectively), and mortality, expense risk and liquidity guarantee charges ($10,836,884 and $9,366,566 respectively). The total 49% increase in these expenses was a result of the larger net asset base in the Account, on which the fees are calculated, and the increased costs associated with managing and administering the Account.

Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable

The Account had net realized and unrealized gains on investments and mortgage loans payable of $1,032,787,765 for the year ended December 31, 2006, as compared with net realized and unrealized gains on investments and mortgage loans payable of $765,970,272 for the year ended December 31, 2005. The overall increase was partially driven by the increase in net realized and unrealized gains on the Account’s real estate properties to $735,507,509 for the year ended December 31, 2006 from $619,333,773 for 2005. The Account also posted substantial net realized and unrealized gains on its marketable securities of $130,710,746 for the year ended 2006, as compared to $8,770,726 in 2005. In addition, the Account had unrealized gains on its real estate joint ventures and limited partnership holdings of $193,477,741 for the year ended December 31, 2006, as compared to unrealized gains of $167,019,921 for 2005. The increase in net realized and unrealized gains on the Account’s property investments, including those held in joint ventures, was due to the positive effect of the strong inflow of capital into the real estate market from investors, combined with improved real estate market fundamentals, which had the effect of increasing the value of the

TIAA Real Estate Account Prospectus | 45

Account’s existing real estate assets. This trend, which has continued for several years, was also evidenced by the net realized gains on the properties sold in 2006. During the year ended December 31, 2006, the Account sold nine properties for total net proceeds, after selling expenses, of $381.9 million, for a cumulative net gain of $76.1 million, based on the properties’ capitalized costs. The unrealized gains on the Account’s marketable securities in 2006 were primarily associated with the Account’s investments in real estate equity securities.

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

Performance

The Account’s total return was 14.02% for the year ended December 31, 2005, 145 basis points higher than the 2004 total return of 12.57%. The substantial increase in the Account’s overall performance on a year-to-year basis reflected the strong performance of the Account’s real estate properties. The market value of the Account’s real estate portfolio increased substantially in 2005 due to capital appreciation of these assets as a result of the sustained growth in capital investment in the real estate market from institutional investors as well as foreign investors.

Income and Expenses

The Account’s net investment income, after deduction of all expenses, was 41.5% higher for the year ended December 31, 2005, as compared to 2004. This increase is related to a 45.6% growth in Total Net Assets from year-end 2004 to year-end 2005. The growth in Total Net Assets was driven by a year-to-year 84.8% increase in net realized and unrealized gains on its investments and a 24.8% increase in net transfers and premiums into the Account.

The Account’s real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 85.3% and 91.9% of the Account’s total investment income (before deducting Account level expenses) during 2005 and 2004, respectively. The remaining portion of the Account’s total investment income was generated by investments in marketable securities. The decline in the real estate component was due to the growth in the non-real estate assets owned by the Account as a percentage of Total Net Assets. As of year-end 2005, the Account held 89.1% of its Total Net Assets in real estate, joint ventures and limited partnership holdings, as compared to 92.2% in 2004.

Gross real estate rental income increased approximately 55.7% in the year ended December 31, 2005 as compared to 2004. This increase was primarily due to the increased number and size of properties owned by the Account. Income from the real estate joint ventures and limited partnerships was $71,826,443 for the year ended December 31, 2005 as compared with $71,390,397 for the year ended December 31, 2004. Interest and dividend income on the Account’s marketable securities increased from $27,508,560 in 2004 to $70,999,212 in 2005 due to the increase in the amount of non-real estate assets held by the Account, as well as an increase in short term rates from 2004 to 2005.

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Total property level expenses for the years ended December 31, 2005 and 2004 were $278,544,030 and $157,768,776, respectively. In 2005, operating expenses and real estate taxes represented 54.0% and 31.6% of the total property level expenses, respectively, with the remaining 14.4% due to interest payments on mortgages. In comparison, operating expenses, real estate taxes, and interest expense represented 64.0%, 35.5% and 0.5% of the total property level expenses, respectively in 2004. Overall, property level expenses increased by 76.6% from 2004 to 2005, with approximately one-third of this increase attributable to interest expense in 2005. The interest expense incurred by the Account was $830,361 and $40,028,630, respectively, in 2004 and 2005. The factors influencing these year-to-year increases were an increase in the number of wholly-owned properties subject to debt, which increased from four in 2004 (all acquired in the fourth quarter of 2004) to seven in 2005, and the purchase of additional properties in 2005.

The Account also incurred expenses for the years ended December 31, 2005 and 2004 for investment advisory services ($19,603,225 and $14,393,388, respectively), administrative and distribution services ($27,130,406 and $16,372,446, respectively) and mortality, expense risk and liquidity guarantee charges ($9,366,566 and $5,962,591, respectively). The overall 52.7% increase in expenses was a result of the larger net asset base in the Account and the increased costs associated with managing and administering the Account.

Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable

The Account had net realized and unrealized gains on investments and mortgage loans payable of $765,970,272 for the year ended December 31, 2005, as compared to $414,580,303 for the year ended December 31, 2004. This positive variance was primarily due to a substantial increase in net realized and unrealized gain on the Account’s real estate properties to $619,333,773 for the year ended December 31, 2005, as compared to $186,313,976 for the year ended December 31, 2004. The increase was due to the capital appreciation of real estate assets attributable to the continued inflow of capital into the real estate market from institutional and other investors, which had the effect of increasing the value of real estate. This trend, which began in 2004 and increased in 2005, is further evidenced by the net realized gain of $84.8 million on the properties sold in 2005. The net proceeds of these sales were $511.5 million. The Account also had unrealized gains on its real estate joint ventures and limited partnership holdings of $167,019,921 for the year ended December 31, 2005, as compared to $162,245,601 in 2004. The Account’s marketable securities had net realized and unrealized gains totaling $8,770,726 for the year ended December 31, 2005, as compared to $67,803,292 for the year ended December 31, 2004. The primary factor in the decline was the net effect on the Account’s real estate equity securities of the relatively weak performance of the REIT market in 2005, as compared to the strong performance of this market in 2004.

TIAA Real Estate Account Prospectus | 47

LIQUIDITY AND CAPITAL RESOURCES

At year-end 2006 and 2005, the Account’s liquid assets (i.e., cash and marketable securities) had a value of $2,747,445,678 and $2,090,768,483, respectively. The increase in the Account’s liquid assets was primarily due to an increase in its net investment income and the continued net positive inflow from participant transfers and premiums into the Account, which management believes was in response to the continued strong relative performance of the Account.

In 2006, the Account received $1,085,057,614 in premiums and $1,354,697,847 in net participant transfers from TIAA, CREF Accounts and affiliated mutual funds, while, for 2005, the Account received $968,189,436 in premiums and $1,435,432,984 in net participant transfers. The Account’s net investment income increased from $426,815,008 for the year ended December 31, 2005 to $581,412,917 for the year ended December 31, 2006.

The Account’s liquid assets continue to be available to purchase additional suitable real estate properties and to meet the Account’s expense needs and participant redemption requests (i.e., cash withdrawals, benefits, or transfers). In the unlikely event that the Account’s liquid assets and its cash flow from operating activities and participant transactions are not sufficient to meet participant transfer or cash withdrawal requests, TIAA’s general account will purchase liquidity units in accordance with TIAA’s liquidity guarantee to the Account.

The Account, under certain conditions more fully described in the Account’s prospectus (as supplemented from time to time), may borrow money and assume or obtain a mortgage on a property (i.e., to make leveraged real estate investments). Also, to meet any short-term cash needs, the Account may obtain a line of credit whose terms may require that the Account secure the loan with one or more of its properties. The Account’s total borrowings may not exceed 30% of the Account’s Total Net Assets. In calculating this limit, only the Account’s actual percentage interest in any borrowings is included, and not that of any joint venture partner. Further, the Account may only borrow up to 70% of the then-current value of a property, although construction loans may be for 100% of costs incurred in developing a property.

EFFECTS OF INFLATION AND INCREASING OPERATING EXPENSES

Inflation, along with increased insurance, taxes, utilities and security costs, may increase property operating expenses in the future. These increases in operating expenses are generally billed to tenants either through contractual lease provisions in office, industrial, and retail properties or through rent increases in apartment complexes. The Account remains responsible for the expenses for unleased space in a property as well as expenses which may not be reimbursed under the terms of an existing lease.

CRITICAL ACCOUNTING POLICIES

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

48 | Prospectus TIAA Real Estate Account

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

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

Valuation of Real Estate Properties: Investments in real estate properties are stated at fair value, as determined in accordance with procedures approved by the Investment Committee of the TIAA Board of Trustees 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 judgment 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, the properties are valued on a quarterly cycle, and independent appraisers value each real estate property at least once a year. TIAA’s appraisal staff performs the other quarterly valuations of each real estate property and updates the property value if it believes that the value of a property has changed since the previous valuation or appraisal. The appraisals are performed in accordance with Uniform Standards of Professional Appraisal Practices (USPAP), the real estate appraisal industry standards created by The Appraisal Foundation. Real estate appraisals are estimates of property values based on a professional’s opinion. Real estate properties subject to a mortgage are generally valued as described; the mortgage is valued independently of the property, and its fair value is reported separately.

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

Valuation of Marketable Securities: Equity securities listed or traded on any national market or exchange are valued at the last sale price as of the close of the principal securities exchange on which such securities are traded or, if there is no sale, at the mean of the last bid and asked prices on such exchange. Debt securities, other than money market instruments, are valued at the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality and type). Money market instruments, with maturities of one year or less, are valued in the same manner as debt securities or derived from a

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pricing matrix that has various types of money market instruments along one axis and various maturities along the other. Portfolio securities and limited partnership interests for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Investment Committee of the TIAA Board of Trustees and in accordance with the responsibilities of the Board as a whole.

Mortgage Loans Receivable: Mortgage loans receivable are stated at fair value and are initially valued at the face amount of the mortgage loan funding. Subsequently, mortgage loans receivable are valued quarterly based on market factors, such as market interest rates and spreads for comparable loans, and the performance of the underlying collateral.

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

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

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

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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). The Account recognizes a gain to the extent that the contract sales price exceeds the cost-to-date of the property being sold. A loss occurs when the cost-to-date exceeds the sales price. As the Account is fair valued and all properties are appraised quarterly, any accumulated unrealized gains and losses are reversed in the calculation of realized gains and losses. Rent from real estate properties consists of all amounts earned under tenant operating leases, including base rent, recoveries of real estate taxes and other expenses and charges for miscellaneous services provided to tenants. Rental income is recognized in accordance with the billing terms of the lease agreements. The Account bears the direct expenses of the real estate properties owned. These expenses include, but are not limited to, fees to local property management companies, property taxes, utilities, maintenance, repairs, insurance and other operating and administrative costs. An estimate of the net operating income earned from each real estate property is accrued by the Account on a daily basis and such estimates are adjusted as soon as actual operating results are determined.

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

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

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

FORWARD-LOOKING STATEMENTS

Some statements in this prospectus which are not historical facts may be “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our expectations, beliefs, intentions or strategies for the future, and include the assumptions underlying these forward-looking statements. Forward-looking statements appear in this prospectus, among other places, in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.” Forward-looking statements involve risks and uncertainties, some of which are referenced in the sections of

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this prospectus entitled “Risk Factors” and below in “Quantitative and Qualitative Disclosures About Market Risk,” that could cause actual results to differ materially from historical experience or management’s present expectations.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Account’s real estate holdings, including real estate joint ventures and limited partnerships, which, as of December 31, 2006 represented 81.8% of the Account’s total investments, expose the Account to a variety of risks. These risks include, but are not limited to:


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

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

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

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

	•	Foreign Currency Risk — The risk that the value of the Account’s foreign investments, related debt or rental income could increase or decrease due to changes in foreign currency exchange rates or foreign currency exchange control regulations, and hedging against such changes, if undertaken by the Account, may entail additional costs and be unsuccessful.

As of December 31, 2006, 18.2% of the Account’s total investments were in market risk sensitive instruments, comprised of marketable securities and an adjustable rate mortgage loan receivable. Marketable securities include real estate equity securities, commercial mortgage-backed securities (CMBS), and high-quality short-term debt instruments (i.e., commercial paper and government agency bonds). The Statement of Investments for the Account sets forth the general financial terms of these instruments, along with their fair values, as

52 | ProspectusTIAA Real Estate Account

determined in accordance with procedures described in Note 1 to the Account’s financial statements. Note that the Account does not currently invest in derivative financial instruments.

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


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

	•	Market Risk — The risk that the Account’s investments will experience price volatility due to changing conditions in the financial markets and, particularly for debt securities, changes in overall interest rates.

	•	Interest Rate Volatility — The risk that interest rate volatility may affect the Account’s current income from an investment.

In addition, mortgage-backed securities are subject to prepayment risk or extension risk (i.e., the risk that borrowers will repay the loans earlier or later than anticipated). If the underlying mortgage assets experience faster than anticipated repayments of principal, the Account could fail to recoup some or all of its initial investment in these securities, since the original price paid by the Account was based in part on assumptions regarding the receipt of interest payments. If the underlying mortgage assets are repaid later than anticipated, the Account could lose the opportunity to reinvest the anticipated cash flows at a time when interest rates might be rising. The rate of prepayment depends on a variety of geographic, social and other functions, including prevailing market interest rates and general economic factors. The market value of these securities is also highly sensitive to changes in interest rates. Note that the potential for appreciation, which could otherwise be expected to result from a decline in interest rates, may be limited by any increased prepayments. These securities may be harder to sell than other securities.

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

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VALUING THE ACCOUNT’S ASSETS

We value the Account’s assets as of the close of each valuation day by taking the sum of:


	•	the value of the Account’s cash, cash equivalents, and short-term and other debt instruments

	•	the value of the Account’s other securities investments and other assets

	•	the value of the individual real properties and other real estate-related investments owned by the Account


	•	an estimate of the net operating income accrued by the Account from its properties and other real estate-related investments and then reducing it by the Account’s liabilities, including the daily investment management fee and certain other expenses attributable to operating the Account. See “Expense Deductions” on page 57.

VALUING REAL ESTATE INVESTMENTS

Valuing Real Property: Individual real properties will be valued initially at their purchase prices. Prices include all expenses related to purchase, such as acquisition fees, legal fees and expenses, and other closing costs. We could use a different value in appropriate circumstances.

After this initial valuation, an independent appraiser, approved by the independent fiduciary, will value properties at least once a year. The independent fiduciary can require additional appraisals if it believes that a property has changed materially or otherwise to assure that the Account is valued correctly.

Quarterly, we will conduct an internal review of each of the Account’s properties. We’ll adjust a valuation if we believe that the value of the property has changed since the previous valuation. We’ll continue to use the revised value to calculate the Account’s net asset value until the next review or appraisal. However, we can adjust the value of a property in the interim to reflect what we believe are actual changes in property value.

The Account’s net asset value will include the current value of any note receivable (an amount that someone else owes the Account) from selling a real estate-related investment. We’ll estimate the value of the note by applying a discount rate appropriate to then-current market conditions.

Development properties initially will be valued at the Account’s cost, and the value will be adjusted as additional development costs are incurred. Once a property receives a certificate of occupancy, within one year from the initial funding by the Account, or the property is substantially leased, whichever is earlier, the property will be appraised by an independent appraiser, approved by the independent fiduciary. We may also have the properties independently appraised earlier if circumstances warrant.

The Account may, at times, value properties purchased together as a portfolio as a single asset, to the extent we believe that the property will likely be sold as

54 | Prospectus TIAA Real Estate Account

one portfolio. The value assigned to the portfolio as a whole may be more or less than the valuation of each property individually.

Because of the nature of real estate assets, the Account’s net asset value won’t necessarily reflect the true or realizable value of its real estate assets (i.e., what the Account would receive if it sold them).

Valuing Real Property Encumbered by Debt: In general, when we value an Account property subject to a mortgage, the Account’s net asset value will include the value of the Account’s interest in the property (with the property valued as described above). The value of the mortgage will be recorded as a liability based on a valuation performed independently of the property.

Valuing Conventional Mortgages: Individual mortgage loans made by the Account will be valued initially at their face amount. Thereafter, quarterly, we’ll value the Account’s fixed interest mortgage loans by discounting payments of principal and interest to their present value (using a rate at which commercial lenders would make similar mortgage loans). We’ll also use this method for foreign mortgages with conventional terms. We can adjust the mortgage value more frequently if circumstances require it. Floating variable rate mortgages will generally be valued at their face amount, although we may adjust these values as market conditions dictate.

Valuing Participating Mortgages: Individual mortgages will initially be valued at their face amount. Thereafter, quarterly, we’ll estimate the values of the participating mortgages by making various assumptions about occupancy rates, rental rates, expense levels, and other things. We’ll use these assumptions to project the cash flow and anticipated sale proceeds from each investment over the term of the loan, or sometimes over a shorter period. To calculate sale proceeds, we’ll assume that the real property underlying each investment will be sold at the end of the period used in the valuation at a price based on market assumptions for the time of the projected sale. We’ll then discount the estimated cash flows and sale proceeds to their present value (using rates appropriate to then-current market conditions).

Net Operating Income: The Account usually receives operating income from its investments intermittently, not daily. In fairness to participants, we estimate the Account’s net operating income rather than applying it when we actually receive it, and assume that the Account has earned (accrued) a proportionate amount of that estimated amount daily. You bear the risk that, until we adjust the estimates when we receive actual income reports, the Account could be under- or over-valued.

Every year, we prepare a month-by-month estimate of the revenues and expenses (estimated net operating income) for each of the Account’s properties. Each day, we add the appropriate fraction of the estimated net operating income for the month to the Account’s net asset value.

Every month, the Account receives a report of the actual operating results for the prior month for each property (actual net operating income). We then recognize the actual net operating income on the accounting records of the

TIAA Real Estate Account Prospectus | 55

Account and adjust the outstanding daily accrued receivable accordingly. As the Account actually receives cash from a property, we’ll adjust the daily accrued receivable and other accounts appropriately.

Adjustments: We can adjust the value of an investment if we believe events or market conditions (such as a borrower’s or tenant’s default) have affected how much the Account could receive if it sold the investment. We may not always be aware of each event that might require a valuation adjustment, and because our evaluation is based on subjective factors, we may not in all cases make adjustments where changing conditions could affect the value of an investment.

The independent fiduciary will need to approve adjustments to any valuation of one or more properties that


	•	is made within three months of the annual independent appraisal or

	•	results in an increase or decrease of:

	•	more than 6 percent of the value of any of the Account’s properties since the last independent annual appraisal

	•	more than 2 percent in the value of the Account since the prior month or

	•	more than 4 percent in the value of the Account within any quarter.

Right to Change Valuation Methods: If we decide that a different valuation method would reflect the value of a real estate-related investment more accurately, we may use that method if the independent fiduciary consents. Changes in TIAA’s valuation methods could change the Account’s net asset value and change the values at which participants purchase or redeem Account interests.

VALUING OTHER INVESTMENTS (INCLUDING CERTAIN REAL ESTATE-RELATED INVESTMENTS)

Debt Securities and Money Market Instruments: We value debt securities (excluding money market instruments) for which market quotations are readily available based on the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality and type). We derive these values utilizing an independent pricing service, except when we believe the prices do not accurately reflect the security’s fair value. We value money market instruments with maturities of one year or less in the same manner as debt securities, or derive them from a pricing matrix that has various types of money market instruments along one axis and various maturities along the other. All debt securities may also be valued at fair value as determined in good faith by the Investment Committee of the TIAA Board of Trustees.

Equity Securities: We value equity securities (including REITs) listed or traded on the New York Stock Exchange or the American Stock Exchange at their last sale price on the valuation day. If no sale is reported that day, we use the mean of the closing bid and asked prices. Equity securities listed or traded on any other exchange are valued in a comparable manner on the principal exchange where traded.

We value equity securities traded on the NASDAQ Stock Markets at the Nasdaq Official Closing Price on the valuation day. If no sale is reported that day,

56 | Prospectus TIAA Real Estate Account

we use the mean of the closing bid and asked prices. Other U.S. over-the-counter equity securities are valued at the mean of the closing bid and asked prices.

Mortgage-Backed Securities: We value mortgage-backed securities in the same manner in which we value debt securities, as described above.

Foreign Securities: To value investments traded on a foreign exchange or in foreign markets, we use their closing values under the generally accepted valuation method in the country where traded, as of the valuation date. We convert this to U.S. dollars at the exchange rate in effect on the valuation day.

Investments Lacking Current Market Quotations: We value securities or other assets for which current market quotations are not readily available at fair value as determined in good faith under the direction of the Investment Committee of TIAA’s Board of Trustees and in accordance with the responsibilities of TIAA’s Board as a whole. In evaluating fair value for the Account’s interest in certain commingled investment vehicles, the Account will generally look to the value periodically assigned to interests by the issuer. When possible, the Account will seek to have input in formulating the issuer’s valuation methodology.

EXPENSE DEDUCTIONS

Deductions are made each valuation day from the net assets of the Account for various services required to manage investments, administer the Account and the contracts, and to cover certain risks borne by TIAA. Services are performed at cost by TIAA and TIAA-CREF Individual & Institutional Services, LLC (“Services”), a wholly owned subsidiary of TIAA. Because services are provided at cost, we expect that expense deductions will be relatively low. TIAA guarantees that in the aggregate, the expense charges will never be more than 2.50% of average net assets per year.

The current annual estimated expense deductions are:



Type of Expense Deduction	Estimated Percent of Net Assets Annually		Services Performed

Investment Management	0.240	%	For TIAA’s investment advice, portfolio accounting, custodial services, and similar services, including independent fiduciary and appraisal fees

Administration	0.255	%	For Services’ administrative services, such as allocating premiums and paying annuity income

Distribution	0.080	%	For Services’ expenses related to distributing the annuity contracts

Mortality and Expense Risk	0.050	%	For TIAA’s bearing certain mortality and expense risks

Liquidity Guarantee	0.160	%	For TIAA’s liquidity guarantee

Total Annual Expense Deduction	0.785	%	For total services to the Account

TIAA Real Estate Account Prospectus | 57

After the end of every quarter, we reconcile how much we deducted as discussed above with the expenses the Account actually incurred. If there is a difference, we add it to or deduct it from the Account in equal daily installments over the remaining days in the following quarter. Since our at-cost deductions are based on projections of Account assets and overall expenses, the size of any adjusting payments will be directly affected by how different our projections are from the Account’s actual assets or expenses. While our projections of Account asset size (and resulting expense fees) are based on our best estimates, the size of the Account’s assets can be affected by many factors, including premium growth, participant transfers into or out of the Account, and any changes in the value of portfolio holdings. Historically, the adjusting payments have resulted in both upward and downward adjustments to the Account’s expense deductions for the following quarter.

TIAA’s Board of Trustees can revise the deduction rates from time to time to keep deductions as close as possible to actual expenses.

Currently there are no deductions from premiums or withdrawals, but we might change this in the future. Property expenses, brokers’ commissions, transfer taxes, and other portfolio expenses are charged directly to the Account.

EMPLOYER PLAN FEE WITHDRAWALS

Your employer may, in accordance with the terms of your plan, and with TIAA’s approval, withdraw amounts from your Real Estate Account accumulation under your Retirement Choice or Retirement Choice Plus contract, and, on a limited basis, under your GA, GSRA, GA or Keogh contract, to pay fees associated with the administration of the plan. These fees are separate from the expense deductions of the Account, and are not included for purposes of TIAA’s guarantee that the total annual expense deduction of the Account will not exceed the rate 2.50% of average net assets per year.

The amount and the effective date of an employer plan fee withdrawal will be in accordance with the terms of your plan. TIAA will determine all values as of the end of the effective date. An employer plan fee withdrawal cannot be revoked after its effective date. Each employer plan fee withdrawal will be made on a pro-rata basis from all your available TIAA and CREF accounts. An employer plan fee withdrawal reduces the accumulation from which it is paid by the amount withdrawn.

If allowed by your contract, your employer may also charge a fee on your account to pay fees associated with administering the plan.

CERTAIN RELATIONSHIPS WITH TIAA

As noted elsewhere in this prospectus, TIAA’s general account plays a significant role in operating the Real Estate Account, including providing a liquidity guarantee, and investment advisory and other services. In addition,

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Services, a wholly-owned subsidiary of TIAA, provides administration and distribution services for the Account.

Liquidity Guarantee. As noted above under “Establishing and Managing the Account — The Role of TIAA — Liquidity Guarantee,” if the Account’s liquid assets and its cash flow from operating activities and participant transactions are insufficient to fund redemption requests, TIAA’s general account has agreed to purchase liquidity units. TIAA thereby guarantees that a participant can redeem accumulation units at their then-current daily net asset value. For the years ended December 31, 2006, December 31, 2005 and December 31, 2004, the Account expensed $3,905,051, $3,170,017 and $1,868,733, respectively, for this liquidity guarantee from TIAA through a daily deduction from the net assets of the Account.

Investment Advisory and Administrative Services/Certain Risks Borne by TIAA. As noted above under “Expense Deductions,” deductions are made each valuation day from the net assets of the Account for various services required to manage investments, administer the Account and distribute the contracts. These services are performed at cost by TIAA and Services. Deductions are also made each valuation day to cover mortality and expense risks borne by TIAA.

For the years ended December 31, 2006, December 31, 2005 and December 31, 2004, the Account expensed $26,899,307, $19,603,225 and $14,393,388, respectively, for investment management services and $6,931,833, $6,196,549 and $4,093,858, respectively, for mortality and expense risks provided/borne by TIAA. For the same period, the Account expensed $45,712,473, $27,130,406 and $16,372,446, respectively, for administrative and distribution services provided by Services.

THE CONTRACTS

TIAA offers the Real Estate Account as a variable option for the annuity contracts described below. Some employer plans may not offer the Real Estate Account as an option for RA, GRA, GSRA, Retirement Choice, Retirement Choice Plus, or Keogh contracts. The College Retirement Equities Fund (CREF) is a companion organization to TIAA. A companion CREF contract may have been issued to you when you received the TIAA contract offering the Account. For more information about the CREF annuity contracts, the TIAA traditional annuity, the TIAA Access variable annuity accounts, other TIAA separate accounts offered from time to time and particular mutual funds and investment options offered under the terms of your plan, please see the applicable contracts and respective prospectuses for those investment options.

Importantly, neither TIAA nor CREF guarantee the investment performance of the Account nor do they guarantee the value of your units at any time.

RA (RETIREMENT ANNUITY) AND GRA (GROUP RETIREMENT ANNUITY)

RA and GRA contracts are used mainly for employee retirement plans. RA contracts are issued directly to you. GRA contracts, which are group contracts, are issued through an agreement between your employer and TIAA.

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Depending on the terms of your plan, RA and GRA premiums can be paid by your employer, you, or both. If you’re paying some of or the entire periodic premium, your contributions can be in either pre-tax dollars by salary reduction or after-tax dollars by payroll deduction. Your employer may offer you the option of making contributions in the form of after-tax Roth-style contributions, though you won’t be able to take tax deductions for these contributions. You can also transfer funds from another investment choice under your employer’s plan to your contract. Ask your employer for more information about these contracts.

SRA (SUPPLEMENTAL RETIREMENT ANNUITY) AND GSRA (GROUP SUPPLEMENTAL RETIREMENT ANNUITY)

These are for voluntary tax-deferred annuity (TDA) plans and 401(k) plans. SRA contracts are issued directly to you. GSRA contracts, which are group contracts, are issued through an agreement between your employer and TIAA. Generally, your employer pays premiums in pre-tax dollars through salary reduction. Your employer may offer you the option of making contributions in the form of after-tax Roth-style contributions, though you won’t be able to take tax deductions for these contributions. Although you can’t pay premiums directly, you can transfer amounts from other TDA plans.

RETIREMENT CHOICE/RETIREMENT CHOICE PLUS ANNUITIES

These are very similar in operation to the GRAs and GSRAs, respectively, except that they are issued directly to your employer or your plan’s trustee. Among other rights, the employer retains the right to transfer accumulations under these contracts to alternate funding vehicles.

CLASSIC IRA AND ROTH IRA

Classic IRAs are individual contracts issued directly to you. You and your spouse can each open a Classic IRA with an annual contribution of up to $4,000 or by rolling over funds from another IRA or retirement plan, if you meet our eligibility requirements. If you are age 50 or older, you may contribute up to $5,000. The combined limit for your contributions to a Classic IRA and a Roth IRA for a single year is $4,000, or $5,000 if you are age 50 or older, excluding rollovers. (The dollar limits listed are for 2007; different dollar limits may apply in future years.) We can’t issue you a joint contract.

Roth IRAs are also individual contracts issued directly to you. You or your spouse can each open a Roth IRA with an annual contribution up to $4,000 or with a rollover from another IRA or a Classic IRA issued by TIAA if you meet our eligibility requirements. If you are age 50 or older you may contribute up to $5,000. The combined limit for your contributions to a Classic IRA and a Roth IRA for a single year is $4,000, or $5,000 if you are age 50 or older, excluding rollovers. (The dollar limits listed are for 2007; different dollar limits may apply in future years.) We can’t issue you a joint contract.

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Your employer may offer SEP IRAs (Simplified Employee Retirement Plans), which are subject to different rules.

Classic and Roth IRAs may together be referred to as “IRAs” in this prospectus.

GA (GROUP ANNUITY) AND INSTITUTIONALLY OWNED GSRA

These are used exclusively for employee retirement plans and are issued directly to your employer or your plan’s trustee. Your employer pays premiums directly to TIAA (you can’t pay the premiums directly to TIAA) and your employer or the plan’s trustee may control the allocation of contributions and transfers to and from these contracts including withdrawing completely from the Account. If a GA or GSRA contract is issued pursuant to your plan, the rules relating to transferring and withdrawing your money, receiving any annuity income or death benefits, and the timing of payments may be different, and are determined by your plan. Ask your employer or plan administrator for more information.

KEOGHS

TIAA also offers contracts for Keogh plans. If you are a self-employed individual who owns an unincorporated business, you can use our Keogh contracts for a Keogh plan, and cover common law employees, subject to our eligibility requirements.

ATRA (AFTER-TAX RETIREMENT ANNUITY)

The after-tax retirement annuities (ATRA) are individual non-qualified deferred annuity contracts, issued to participants who are eligible and would like to remit personal premiums under the contractual provisions of their RA contract. To be eligible, you must have an active and premium-paying or paid up RA contract.

Note that the tax rules governing these non-qualified contracts differ significantly from the treatment of qualified contracts. See “Taxes,” on page 74 for more information.

IRA AND KEOGH ELIGIBILITY

You or your spouse can set up a TIAA Classic or Roth IRA or a Keogh if you’re a current or retired employee or trustee of an eligible institution, or if you own a TIAA or CREF annuity or a TIAA individual insurance contract. To be considered a retired employee for this purpose, an individual must be at least 55 years old and have completed at least three years of service at an eligible institution. In the case of partnerships, at least half the partners must be eligible individuals and the partnership itself must be primarily engaged in education or research. Eligibility may be restricted by certain income limits on opening Roth IRA contracts.

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STATE REGULATORY APPROVAL

State regulatory approval may be pending for certain of these contracts and they may not currently be available in your state.

STARTING OUT

Generally, we’ll issue you a TIAA contract when we receive your completed application or enrollment form. Your premiums will be credited to the Real Estate Account as of the business day we receive them.

If we receive premiums from your employer before your application or enrollment form, we’ll generally invest the money in the CREF Money Market Account until we receive your form. (Some employer plans may require that we send such premiums back to the employer or have a different default.) We’ll transfer the appropriate amount from the CREF Money Market Account and credit it to the Real Estate Account as of end of the business day we receive your completed form.

If the allocation instructions on your application or enrollment form are incomplete, violate plan restrictions, or total more than 100 percent, we’ll invest your premiums in the CREF Money Market Account (Some employer plans may have a different default). After we receive a complete and correct application, we’ll follow your allocation instructions for future premiums. However, any amounts that we credited to the CREF Money Market Account before we received correct instructions will be transferred to the Real Estate Account only on request, and will be credited as of the business day we receive that request.

TIAA generally doesn’t currently restrict the amount or frequency of premiums to your contract, although we may in the future. Your employer’s retirement plan may limit your premium amounts, while the Internal Revenue Code limits the total annual premiums you may invest in plans qualified for favorable tax treatment.

If you want to directly contribute personal premiums under the contractual provisions of your RA contract, you will be issued an ATRA contract. Premiums and any earnings on the ATRA contract will not subject to your employer’s retirement plan.

In most cases (subject to any restriction we may impose, as described in this prospectus), TIAA will accept premiums to a contract at any time during your accumulation period. Once your first premium has been paid, your TIAA contract can’t lapse or be forfeited for nonpayment of premiums. TIAA can stop accepting premiums to contracts at any time.

Note that we cannot accept money orders or travelers checks. In addition, we will not accept a third-party check where the relationship of the payor to the account owner cannot be identified from the face of the check.

We will not be deemed to have received any premiums sent to the addresses designated for remitting premiums until the third-party service that administers

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the receipt of mail through those addresses has processed the payment on our behalf.

Important Information About Procedures for Opening a New Account

To help the U.S. government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions, including us, to obtain, verify and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth, social security number and other information that will allow us to identify you, such as your home telephone number. Until you provide us with the information we need, we may not be able to open an account or effect any transactions for you.

CHOOSING AMONG INVESTMENT ACCOUNTS

You can allocate all or part of your premiums to the Real Estate Account, unless your employer’s plan precludes that choice. You can also allocate premiums to TIAA’s traditional annuity, the CREF variable investment accounts, the TIAA Access variable annuity accounts, other TIAA separate accounts offered from time to time (if available under the terms of your employer’s plan) and, in some cases, certain mutual funds if the account or fund is available under your employer’s plan.

You can change your allocation choices for future premiums


	•	by writing to our home office

	•	using the TIAA-CREF Web Center’s account access feature at www.tiaa-cref.org or

	•	calling our Automated Telephone Service (24 hours a day) at 800 842-2252

THE RIGHT TO CANCEL YOUR CONTRACT

You can generally cancel any RA, SRA or GSRA contract up to 30 days after you first receive it, unless we have begun making annuity payments from it. If you already had a TIAA contract prior to investing in the Real Estate Account, you have no 30-day right to cancel the contract. To cancel, mail or deliver the contract with a signed Notice of Cancellation (available by contacting TIAA) to our home office. We’ll cancel the contract, then send the entire current accumulation to whomever sent the premiums. You bear the investment risk during this period (although some states require us to send back your entire premium without accounting for investment results).

DETERMINING THE VALUE OF YOUR INTEREST IN THE ACCOUNT — ACCUMULATION UNITS

When you pay premiums or make transfers to the Real Estate Account, you buy accumulation units. When you take a cash withdrawal, transfer from the Account, or apply funds to begin annuity income, the number of your

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accumulation units decrease. We calculate how many accumulation units to credit your account with by dividing the amount you applied to the Account by its accumulation unit value at the end of the business day when we received your premium or transfer. To determine how many accumulation units to subtract for cash withdrawals and transfers, we use the accumulation unit value for the end of the business day when we receive your transaction request and all required information and documents (unless you ask for a later date). A business day ends at 4:00 p.m. Eastern time or when trading closes on the NYSE, if earlier.

The accumulation unit value reflects the Account’s investment experience (i.e., the real estate net operating income accrued, as well as dividends, interest and other income accrued), realized and unrealized capital gains and losses, as well as Account expense charges.

Calculating Accumulation Unit Values: We calculate the Account’s accumulation unit value at the end of each valuation day. To do that, we multiply the previous day’s value by the net investment factor for the Account. The net investment factor is calculated as A divided by B, where A and B are defined as:


	A.	The value of the Account’s net assets at the end of the current valuation period, less premiums received during the current valuation period.

	B.	The value of the Account’s net assets at the end of the previous valuation period, plus the net effect of transactions made at the start of the current valuation period.

HOW TO TRANSFER AND WITHDRAW YOUR MONEY

Generally, TIAA allows you to move your money to or from the Real Estate Account in the following ways:


	•	from the Real Estate Account to a CREF investment account, a TIAA Access variable account (if available) or TIAA’s traditional annuity

	•	to the Real Estate Account from a CREF investment account, a TIAA Access variable account (if available) or TIAA’s traditional annuity (transfers from TIAA’s traditional annuity under RA, GRA or Retirement Choice contracts are subject to restrictions)

	•	from the Real Estate Account to other companies

	•	to the Real Estate Account from other companies/plans

	•	by withdrawing cash

	•	by setting up a program of automatic withdrawals or transfers

For more information regarding the transfer policies of CREF, TIAA Access or another investment option listed above, please see the respective contract, prospectus or other governing instrument.

These transactions generally must be for at least $1,000 at a time (or your entire Account accumulation, if less). These options may be limited by the terms of your

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employer’s plan, by current tax law, or by the terms of your contract, as set forth below. Transfers and cash withdrawals are currently free. TIAA can place restrictions on transfers or charge fees for transfers and/or withdrawals in the future.

Transfers and cash withdrawals are effective at the end of the business day we receive your request and all required documentation. You can also choose to have transfers and withdrawals take effect at the close of any future business day. For any transfers to TIAA’s traditional annuity, the crediting rate will be the rate in effect at the close of business of the first day that you participate in TIAA’s traditional annuity, which is the next business day after the effective date of the transfer.

To request a transfer or to withdraw cash:


	•	write to TIAA’s home office at 730 Third Avenue, New York, NY 10017-3206

	•	call us at 800 842-2252 or

	•	for internal transfers, using the TIAA-CREF Web Center’s account access feature at www.tiaa-cref.org

You may be required to complete and return certain forms to effect these transactions. We can suspend or terminate your ability to transact by telephone, over the Internet, or by fax at any time, for any reason.

Before you transfer or withdraw cash, make sure you understand the possible federal and other income tax consequences. See “Taxes” on page 74.

TRANSFERS TO AND FROM OTHER TIAA-CREF ACCOUNTS

Once every calendar quarter you can transfer some or all of your accumulation in the Real Estate Account to TIAA’s traditional annuity, to another TIAA annuity offered by your employer’s plan, to one of the CREF accounts, to a TIAA Access variable annuity account or to mutual funds offered under the terms of your plan. Transfers to CREF accounts or to certain other options may be restricted by your employer’s plan.

You can also transfer some or all of your accumulation in TIAA’s traditional annuity, in your CREF accounts, TIAA Access variable annuity accounts or in the mutual funds or TIAA annuities offered under the terms of your plan to the Real Estate Account, if your employer’s plan offers the Account. Transfers from TIAA’s traditional annuity to the Real Estate Account under RA, GRA or Retirement Choice contracts can only be effected over a period of time (up to ten years) and may be subject to other limitations, as specified in your contract. Amounts held under an ATRA contract cannot be transferred to or from any retirement plan contract.

Because excessive transfer activity can hurt Account performance and other participants, we may further limit how often you transfer or otherwise modify the transfer privilege.

TRANSFERS TO OTHER COMPANIES

Generally you may transfer funds from the Real Estate Account to a company other than TIAA or CREF, subject to certain tax restrictions. This right may be limited by your employer’s plan. If your employer participates in our special

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transfer services program, we can make automatic monthly transfers from your RA or GRA contract to another company, and the $1,000 minimum will not apply to these transfers. Roth amounts in a 403(b) or 401(a) plan can only be rolled over to another Roth account under such plan or to a Roth IRA, as permitted by applicable law and the terms of the plans.

Under the Retirement Choice and Retirement Choice Plus contracts, your employer could transfer monies from an Account and apply it to another Account or investment option, subject to the terms of your plan, and without your consent.

TRANSFERS FROM OTHER COMPANIES/PLANS

Subject to your employer’s plan, you can usually transfer or rollover money from another 403(b), 401(a)/403(a) or governmental 457(b) retirement plan to your qualified TIAA contract. You may also rollover before-tax amounts in a Classic IRA to 403(b) plans, 401(a)/403(a) plans or eligible governmental 457(b) plans, provided such employer plans agree to accept the rollover. Similarly, you may be able to rollover funds from 401(a), 403(a), 403(b) and governmental 457(b) plans to a TIAA Classic IRA. Roth amounts in a 403(b) or 401(a) plan can only be rolled over to another Roth account under such plan or to a Roth IRA, as permitted by applicable law and the terms of the plans. Funds in a private 457(b) plan can be transferred to another private 457(b) plan only. Accumulations in private 457(b) plans may not be rolled over to a qualified plan (e.g., a 401(a) plan), a 403(b) plan, a governmental 457(b) plan or an IRA.

WITHDRAWING CASH

You may withdraw cash from your SRA, GSRA, IRA, or Keogh Real Estate Account accumulation at any time during the accumulation period, provided federal tax law permits it (see below). Real Estate Account cash withdrawals from your RA, GRA, Retirement Choice or Retirement Choice Plus accumulation may be limited by the terms of your employer’s plan and federal tax law. Normally, you can’t withdraw money from a contract if you’ve already applied that money to begin receiving lifetime annuity income. Current federal tax law restricts your ability to make cash withdrawals from your accumulation under most voluntary salary reduction agreements. Withdrawals are generally available only if you reach age 59½, leave your job, become disabled, or die, or if your employer terminates its retirement plan. If your employer’s plan permits, you may also be able to withdraw money if you encounter hardship, as defined by the IRS, but hardship withdrawals can be from contributions only, not investment earnings. You may be subject to a 10 percent penalty tax if you make a withdrawal before you reach age 59½, unless an exception applies to your situation.

Under current federal tax law, you are not permitted to withdraw from 457(b) plans earlier than the calendar year in which you reach age 70½ or leave your job or are faced with an unforeseeable emergency (as defined by law). There are generally no early withdrawal tax penalties if you withdraw under any of these circumstances (i.e., no 10% tax on distributions prior to age 59½).

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Special rules and restrictions apply to Classic and Roth IRAs.

SYSTEMATIC WITHDRAWALS AND TRANSFERS

If your employer’s plan allows, you can set up a program to make cash withdrawals or transfers automatically by specifying that we withdraw or transfer from your Real Estate Account accumulation any fixed number of accumulation units, dollar amount, or percentage of accumulation until you tell us to stop or until your accumulation is exhausted. Currently, the program must be set up so that at least $100 is automatically withdrawn or transferred at a time.

WITHDRAWALS TO PAY ADVISORY FEES

You can set up a program to have monies withdrawn directly from your retirement plan or IRA accumulations to pay your financial advisor, if your employer’s plan allows. You will be required to complete and return certain forms to effect these withdrawals, including how and from which accounts you want these monies to be withdrawn. Before you set up this program, make sure you understand the possible tax consequences of these withdrawals. See the discussion under “Taxes” below.

POSSIBLE RESTRICTIONS ON PREMIUMS AND TRANSFERS TO THE ACCOUNT

From time to time we may stop accepting premiums for and/or transfers into the Account. We might do so if, for example, we can’t find enough appropriate real estate-related investment opportunities at a particular time. Whenever reasonably possible, we will notify you before we decide to restrict premiums and/or transfers. However, because we may need to respond quickly to changing market conditions, we reserve the right to stop accepting premiums and/or transfers at any time without prior notice.

If we decide to stop accepting premiums into the Account, amounts that would otherwise be allocated to the Account will be allocated to the CREF Money Market Account (or to a different default account under the terms of your employer’s plan) instead, unless you give us other allocation instructions. We will not transfer these amounts out of the CREF Money Market Account (or such different default account) when the restriction period is over, unless you request that we do so. However, we will resume allocating premiums to the Account on the date we remove the restrictions.

ADDITIONAL LIMITATIONS

Federal law requires us to obtain, verify and record information that identifies each person who opens an account. Until we receive the information we need, we may not be able to effect transactions for you. Furthermore, if we are unable to verify your identity, or that of another person authorized to act on your behalf, or if we believe that we have identified potentially criminal activity, we reserve the right to take such action as we deem appropriate, which may include closing your account.

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MARKET TIMING POLICY

There are participants who may try to profit from transferring money back and forth among the CREF accounts, the Real Estate Account, the TIAA Access variable accounts and mutual funds available under the terms of your plan, in an effort to “time” the market. As money is shifted in and out of these accounts, the accounts or funds incur transaction costs, including, among other things, expenses for buying and selling securities. These costs are borne by all participants, including long-term investors who do not generate the costs. In addition, market timing can interfere with efficient portfolio management and cause dilution, if timers are able to take advantage of pricing inefficiencies. To discourage market-timing activity, transfers from the Account to a CREF or TIAA account are limited to once every calendar quarter. In addition, participants who make more than three transfers out of any TIAA or CREF account or any of the TIAA-CREF mutual funds available under your plan (other than the CREF Money Market Account) in a calendar month will be advised that if this transfer frequency continues, we will suspend their ability to make telephone, fax and Internet transfers. Systematic withdrawals and transfers which are established and effected in accordance with an employer’s plan will not be deemed to be multiple transfers for purposes of these market timing restrictions.

We have the right to modify our policy at any time without advance notice.

RECEIVING ANNUITY INCOME

THE ANNUITY PERIOD IN GENERAL

You can receive an income stream from all or part of your Real Estate Account accumulation. Unless you opt for a lifetime annuity, generally you must be at least age 59½ to begin receiving annuity income payments from your annuity contract free of a 10 percent early distribution penalty tax. Your employer’s plan may also restrict when you can begin income payments. Under the minimum distribution rules of the Internal Revenue Code, you generally must begin receiving some payments from your contract shortly after you reach the later of age 70½ or you retire. For more information, see “Minimum Distribution Requirements,” on page 76. Also, you can’t begin a one-life annuity after you reach age 90, nor may you begin a two-life annuity after either you or your annuity partner reach age 90.

Your income payments may be paid out from the Real Estate Account through a variety of income options. You can pick a different income option for different portions of your accumulation, but once you’ve started payments you usually can’t change your income option or annuity partner for that payment stream.

Usually income payments are monthly. You can choose quarterly, semi-annual, and annual payments as well. (TIAA has the right to not make payments at any interval that would cause the initial payment to be less than $100.) We’ll send your payments by mail to your home address or, on your request, by mail or electronic funds transfer to your bank.

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Your initial income payments are based on the value of your accumulation on the last valuation day before the annuity starting date. Your payments change after the initial payment based on the Account’s investment experience and the income change method you choose.

There are two income change methods for annuity payments: annual and monthly. Under the annual income change method, payments from the Account change each May 1, based on the net investment results during the prior year (April 1 through March 31). Under the monthly income change method, payments from the Account change every month, based on the net investment results during the previous month. For the formulas used to calculate the amount of annuity payments, see page 71. The total value of your annuity payments may be more or less than your total premiums.

ANNUITY STARTING DATE

Ordinarily, annuity payments begin on the date you designate as your annuity starting date, provided we have received all documentation necessary for the income option you’ve picked. If something’s missing, we’ll defer your annuity starting date until we receive it. Your first annuity check may be delayed while we process your choice of income options and calculate the amount of your initial payment. Any premiums received within 70 days after payments begin may be used to provide additional annuity income. Premiums received after 70 days will remain in your accumulating annuity contract until you give us further instructions. Ordinarily, your first annuity payment can be made on any business day between the first and twentieth of any month.

INCOME OPTIONS

Both the number of annuity units you purchase and the amount of your income payments will depend on which income option you pick. Your employer’s plan, tax law and ERISA may limit which income options you can use to receive income from an RA or GRA, GSRA, Retirement Choice, Retirement Choice Plus or Keogh contract. Ordinarily you’ll choose your income options shortly before you want payments to begin, but you can make or change your choice any time before your annuity starting date.

All Real Estate Account income options provide variable payments, and the amount of income you receive depends in part on the investment experience of the Account. The current options are:


	•	One-Life Annuity with or without Guaranteed Period: Pays income as long as you live. If you opt for a guaranteed period (10, 15 or 20 years) and you die before it’s over, income payments will continue to your beneficiary until the end of the period. If you don’t opt for a guaranteed period, all payments end at your death — so that it’s possible for you to receive only one payment if you die less than a month after payments start. (The 15-year guaranteed period is not available under all contracts.)

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	•	Annuity for a Fixed Period: Pays income for any period you choose from 5 to 30 years (2 to 30 years for RAs, SRAs and GRAs). (This option is not available under all contracts.)

	•	Two-Life Annuities: Pays income to you as long as you live, then continues at either the same or a reduced level for the life of your annuity partner. There are three types of two-life annuity options, all available with or without a guaranteed period — Full Benefit to Survivor, Two-Thirds Benefit to Survivor, and a Half-Benefit to Annuity Partner. Under the Two-Thirds Benefit to Survivor option, payments to you will be reduced upon the death of your annuity partner.

	•	Minimum Distribution Option (MDO) Annuity: Generally available only if you must begin annuity payments under the Internal Revenue Code minimum distribution requirements. (Some employer plans allow you to elect this option earlier — contact TIAA for more information.) The option pays an amount designed to fulfill the distribution requirements under federal tax law. (The option is not available under all contracts.)

You must apply your entire accumulation under a contract if you want to use the MDO annuity. It is possible that income under the MDO annuity will cease during your lifetime. Prior to age 90, and subject to applicable plan and legal restrictions, you can apply any remaining part of an accumulation applied to the MDO annuity to any other income option for which you’re eligible. Using an MDO won’t affect your right to take a cash withdrawal of any accumulation not yet distributed. This pay-out annuity is not available under the Retirement Choice or Retirement Choice Plus contracts. Instead, required minimum distributions will be paid directly from these contracts pursuant to the terms of your employer’s plan.

For any of the income options described above, current federal tax law says that your guaranteed period can’t exceed the joint life expectancy of you and your beneficiary or annuity partner. Other income options may become available in the future, subject to the terms of your retirement plan and relevant federal and state laws. For more information about any annuity option, please contact us.

Receiving Lump Sum Payments (Retirement Transition Benefit): If your employer’s plan allows, you may be able to receive a single sum payment of up to 10 percent of the value of any part of an accumulation being converted to annuity income on the annuity starting date. (This does not apply to IRAs.) Of course, if your employer’s plan allows cash withdrawals, you can take a larger amount (up to 100 percent) of your Real Estate Account accumulation as a cash payment. The retirement transition benefit will be subject to current federal income tax requirements and possible early distribution penalties. See “Taxes” on page 74.

If you haven’t picked an income option when the annuity starting date arrives for your contract, TIAA usually will assume you want the one-life annuity with 10-year guaranteed period if you’re unmarried, subject to the terms of your plan, paid from TIAA’s traditional annuity. If you’re married, we may assume for you a survivor annuity with half-benefit to annuity partner with a 10-Year guaranteed period, with your

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spouse as your annuity partner, paid from TIAA’s traditional annuity. If you haven’t picked an income option when the annuity starting date arrives for your IRA, we may assume you want the minimum distribution option annuity.

TRANSFERS DURING THE ANNUITY PERIOD

After you begin receiving annuity income, you can transfer all or part of the future annuity income payable once each calendar quarter (i) from the Real Estate Account into a “comparable annuity” payable from a CREF or TIAA account or TIAA’s traditional annuity, or (ii) from a CREF account into a comparable annuity payable from the Real Estate Account. Comparable annuities are those which are payable under the same income option, and have the same first and second annuitant, and remaining guaranteed period.

We’ll process your transfer on the business day we receive your request. You can also choose to have a transfer take effect at the close of any future business day. Transfers under the annual income payment method will affect your annuity payments beginning on the May 1 following the March 31 which is on or after the effective date of the transfer. Transfers under the monthly income payment method and all transfers into TIAA’s traditional annuity will affect your annuity payments beginning with the first payment due after the monthly payment valuation day that is on or after the transfer date. You can switch between the annual and monthly income change methods, and the switch will go into effect on the following March 31.

ANNUITY PAYMENTS

The amount of annuity payments we pay you or your beneficiary (annuitant) will depend upon the number and value of the annuity units payable. The number of annuity units is first determined on the day before the annuity starting date. The amount of the annuity payments will change according to the income change method chosen.

Under the annual income change method, the value of an annuity unit for payments is redetermined on March 31 of each year — the payment valuation day. Annuity payments change beginning May 1. The change reflects the net investment experience of the Real Estate Account. The net investment experience for the twelve months following each March 31 revaluation will be reflected in the following year’s value.

Under the monthly income change method, the value of an annuity unit for payments is determined on the payment valuation day, which is the 20th day of the month preceding the payment due date or, if the 20th is not a business day, the preceding business day. The monthly changes in the value of an annuity unit reflect the net investment experience of the Real Estate Account. The formulas for calculating the number and value of annuity units payable are described below.

Calculating the Number of Annuity Units Payable: When a participant or a beneficiary converts the value of all or a portion of his or her accumulation into an income-paying contract, the number of annuity units payable from the Real Estate

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Account under an income change method is determined by dividing the value of the Account accumulation to be applied to provide the annuity payments by the product of the annuity unit value for that income change method and an annuity factor. The annuity factor as of the annuity starting date is the value of an annuity in the amount of $1.00 per month beginning on the first day such annuity units are payable, and continuing for as long as such annuity units are payable.

The annuity factor will reflect interest assumed at the effective annual rate of 4 percent, and the mortality assumptions for the person(s) on whose life (lives) the annuity payments will be based. Mortality assumptions will be based on the then-current settlement mortality schedules for this Account. Annuitants bear no mortality risk under their contracts — actual mortality experience will not reduce annuity payments after they have started. TIAA may change the mortality assumptions used to determine the number of annuity units payable for any future accumulations converted to provide annuity payments.

The number of annuity units payable under an income change method under your contract will be reduced by the number of annuity units you transfer out of that income change method under your contract. The number of annuity units payable will be increased by any internal transfers you make to that income change method under your contract.

Value of Annuity Units: The Real Estate Account’s annuity unit value is calculated separately for each income change method for each business day and for the last calendar day of each month. The annuity unit value for each income change method is determined by updating the annuity unit value from the previous valuation day to reflect the net investment performance of the Account for the current valuation period relative to the 4 percent assumed investment return. In general, your payments will increase if the performance of the Account is greater than 4 percent and decrease if the value is less than 4 percent. The value is further adjusted to take into account any changes expected to occur in the future at revaluation either once a year or once a month, assuming the Account will earn the 4 percent assumed investment return in the future.

The initial value of the annuity unit for a new annuitant is the value determined as of the day before annuity payments start.

For participants under the annual income change method, the value of the annuity unit for payment remains level until the following May 1. For those who have already begun receiving annuity income as of March 31, the value of the annuity unit for payments due on and after the next succeeding May 1 is equal to the annuity unit value determined as of such March 31.

For participants under the monthly income change method, the value of the annuity unit for payments changes on the payment valuation day of each month for the payment due on the first of the following month.

TIAA reserves the right, subject to approval by the Board of Trustees, to modify the manner in which the number and/or value of annuity units is calculated in the future.

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DEATH BENEFITS

AVAILABILITY; CHOOSING BENEFICIARIES

TIAA may pay death benefits if you or your annuity partner dies, which may be subject to the terms of your employer’s plan. When you purchase your annuity contract, you name one or more beneficiaries to receive the death benefit if you die. You can change your beneficiaries anytime before you die, and, unless you instruct otherwise, your annuity partner can do the same after your death.

YOUR SPOUSE’S RIGHTS

Your choice of beneficiary for death benefits may, in some cases, be subject to the consent of your spouse. Similarly, if you are married at the time of your death, federal law may require a portion of the death benefit be paid to your spouse even if you have named someone else as beneficiary. If you die without having named any beneficiary, any portion of your death benefit not payable to your spouse will go to your estate.

AMOUNT OF DEATH BENEFIT

If you die during the accumulation period, the death benefit is the amount of your accumulation. If you and your annuity partner die during the annuity period while payments are still due under a fixed-period annuity or for the remainder of a guaranteed period, the death benefit is the value of the remaining guaranteed payments.

PAYMENT OF DEATH BENEFIT

To authorize payment and pay a death benefit, we must have received all necessary forms and documentation, including proof of death and the selection of the method of payment.

METHODS OF PAYMENT OF DEATH BENEFITS

Generally, you can choose for your beneficiary the method we’ll use to pay the death benefit, but few participants do this. If you choose a payment method, you can also block your beneficiaries from changing it. Most people leave the choice to their beneficiaries. We can block any choice if its initial payment is less than $25. If death occurs while your contract is in the accumulation stage, in most cases we can pay the death benefit using the TIAA-CREF Savings & Investment Plan. We won’t do this if you preselected another option or if the beneficiary elects another option. Some beneficiaries aren’t eligible for the TIAA-CREF Savings & Investment Plan. If your beneficiary isn’t eligible and doesn’t specifically tell us to start paying death benefits within a year of your death, we can start making payments to them over five years using the fixed-period annuity method of payment.

Payments During the Accumulation Period: Currently, the available methods of payment for death benefits from funds in the accumulation period are:

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	•	Single-Sum Payment, in which the entire death benefit is paid to your beneficiary at once;

	•	One-Life Annuity with or without Guaranteed Period, in which the death benefit is paid monthly for the life of the beneficiary or through the guaranteed period;

	•	Annuity for a Fixed Period of 5 to 30 years (not available under Retirement Choice or Retirement Choice Plus), in which the death benefit is paid for a fixed period;

	•	Accumulation-Unit Deposit Option, which pays a lump sum at the end of a fixed period, ordinarily two to five years, during which period the accumulation units deposited participate in the Account’s investment experience (generally the death benefit value must be at least $5,000); (This option is not available under all contracts) and

	•	Minimum Distribution Option, which automatically pays income according to the Internal Revenue Code’s minimum distribution requirements (not available under Retirement Choice or Retirement Choice Plus). It operates in much the same way as the MDO annuity income option. It’s possible, under this method, that your beneficiary won’t receive income for life.

Death benefits are usually paid monthly (unless you chose a single-sum method of payment), but your beneficiary can switch them to quarterly, semi-annual, or annual payments.

Payments During the Annuity Period: If you and your annuity partner die during the annuity period, your beneficiary can choose to receive any remaining guaranteed periodic payments due under your contract. Alternatively, your beneficiary can choose to receive the commuted value of those payments in a single sum unless you have indicated otherwise. The amount of the commuted value will be different than the total of the periodic payments that would otherwise be paid.

Ordinarily, death benefits are subject to federal estate tax. Generally, if taken as a lump sum, death benefits would be taxed like complete withdrawals. If taken as annuity benefits, death benefits would be taxed like annuity payments. For more information on death benefits, see the discussion under “Taxes” below, or for further detail, contact TIAA.

TAXES

This section offers general information concerning federal taxes. It doesn’t cover every situation. Tax treatment varies depending on the circumstances, and state and local taxes may also be involved. For complete information on your personal tax situation, check with a qualified tax advisor.

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HOW THE REAL ESTATE ACCOUNT IS TREATED FOR TAX PURPOSES

The Account is not a separate taxpayer for purposes of the Internal Revenue Code — its earnings are taxed as part of TIAA’s operations. Although TIAA is not expected to owe any federal income taxes on the Account’s earnings, if TIAA does incur taxes attributable to the Account, it may make a corresponding charge against the Account.

TAXES IN GENERAL

During the accumulation period, Real Estate Account premiums paid in before-tax dollars, employer contributions and earnings attributable to these amounts are not taxed until they’re withdrawn. Annuity payments, single-sum withdrawals, systematic withdrawals, and death benefits are usually taxed as ordinary income. Premiums paid in after-tax dollars aren’t taxable when withdrawn, but earnings attributable to these amounts are taxable unless those amounts are contributed as Roth contributions to a 401(a) or 403(b) plan and certain criteria are met before the amounts (and the income on the amounts) are withdrawn. Death benefits are usually also subject to federal estate and state estate or inheritance taxation. Generally, transfers between qualified retirement plans are not taxed. Generally, contributions you can make under an employer’s plan are limited by federal tax law. Employee voluntary salary reduction contributions and Roth after-tax contributions to 403(b) and 401(k) plans are limited in the aggregate to $15,500 per year ($20,500 per year if you are age 50 or older). Certain long-term employees may be able to defer up to $18,500 per year in a 403(b) plan ($23,500 per year if you are age 50 or older). Contributions to Classic and Roth IRAs, other than rollover contributions, cannot generally exceed $4,000 per year ($5,000 per year for taxpayers age 50 or older).

The maximum contribution limit to a 457(b) non-qualified deferred compensation plan for employees of state and local governments is $15,500 ($20,500 if you are age 50 or older). Special catch-up rules may permit a higher contribution in one or more of the last three years prior to an individual’s normal retirement age under the plan.

Note that the dollar limits listed above are for 2007; different dollar limits may apply in future years.

EARLY DISTRIBUTIONS

If you want to withdraw funds or begin receiving income from any 401(a), 403(a), or 403(b) retirement plan or an IRA before you reach age 59½, you may have to pay a 10 percent early distribution tax on the taxable amount. Distributions from a Roth IRA generally are not taxed, except that, once aggregate distributions exceed contributions to the Roth IRA, income tax and a 10% penalty tax may apply to distributions made (1) before age 59½ (subject to certain exceptions) or (2) during the five taxable years starting with the year in which the first contribution is made to any Roth IRA. A 10 percent penalty tax may apply to amounts attributable to a conversion from an IRA if they are

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distributed during the five taxable years beginning with the year in which the conversion was made. You won’t have to pay this tax in certain circumstances. Early distributions from 457(b) plans are not subject to a 10% penalty tax unless, in the case of a governmental 457(b) plan, the distribution includes amounts rolled over to the plan from an IRA, 401(a)/403(a), or 403(b) plan. Consult your tax advisor for more information.

MINIMUM DISTRIBUTION REQUIREMENTS

In most cases, payments from qualified contracts must begin by April 1 of the year after the year you reach age 70½, or if later, by retirement. For Classic IRAs, and with respect to 5 percent or more owners of the business covered by a Keogh plan, payments must begin by April 1 of the year after you reach age 70½. Under the terms of certain retirement plans, the plan administrator may direct us to make the minimum distributions required by law even if you do not elect to receive them. In addition, if you don’t begin distributions on time, you may be subject to a 50 percent excise tax on the amount you should have received but did not. Roth IRAs are generally not subject to these rules requiring minimum distributions during your lifetime. You are responsible for requesting distributions that comply with the minimum distribution rules.

WITHHOLDING ON DISTRIBUTIONS

If we pay an “eligible rollover” distribution directly to you, federal law requires us to withhold 20 percent from the taxable portion. On the other hand, if we roll over such a distribution directly to an IRA or employer plan, we do not withhold any federal income tax. The 20 percent withholding also does not apply to certain types of distributions that are not considered eligible rollovers such as payments from IRAs, hardship withdrawals, lifetime annuity payments, substantially equal periodic payments over your life expectancy or over 10 or more years, or minimum distribution payments.

For the taxable portion of non-eligible rollover distributions, we will usually withhold federal income taxes unless you tell us not to and you are eligible to avoid withholding. However, if you tell us not to withhold but we don’t have your taxpayer identification number on file, we still are required to deduct taxes. These rules also apply to distributions from governmental 457(b) plans. In general, all amounts received under a private 457(b) plan are taxable and are subject to federal income tax withholding as wages. Nonresident aliens who pay U.S. taxes are subject to different withholding rules.

SPECIAL RULES FOR AFTER-TAX RETIREMENT ANNUITIES

If you paid premiums directly to an RA and the premiums are not subject to your employer’s retirement plan, or if you have been issued an ATRA contract, the following general discussion describes our understanding of current federal income tax law that applies to these accumulations. This discussion does not apply to premiums paid on your

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behalf under the terms of your employer’s retirement plan. It also does not cover every situation and does not address all possible circumstances.

In General. These annuities are generally not taxed until distributions occur. When distributions occur, they are taxed as follows:


	•	Withdrawals, including withdrawals of the entire accumulation under the contract, are generally taxed as ordinary income to the extent that the contract’s value is more than your investment in the contract (i.e., what you have paid into it).

	•	Annuity payments are generally treated in part as taxable ordinary income and in part as non-taxable recovery of your investment in the contract until you recover all of your investment in the contract. After that, annuity payments are taxable in full as ordinary income.

Required Distributions. In general, if you die after you start your annuity payments but before the entire interest in the annuity contract has been distributed, the remaining portion must be distributed at least as quickly as under the method in effect on the date of your death. If you die before your annuity payments begin, the entire interest in your annuity contract generally must be distributed within five years after your death, or be used to provide payments that begin within one year of your death and that will be made for the life of your designated beneficiary or for a period not extending beyond the life expectancy of your designated beneficiary. The “designated beneficiary” refers to a natural person you designate and to whom ownership of the contract passes because of your death. However, if the designated beneficiary is your surviving spouse, your surviving spouse can continue the annuity contract as the new owner.

Death Benefit Proceeds. Death benefit proceeds are taxed like withdrawals of the entire accumulation in the contract if distributed in a single sum and are taxed like annuity payments if distributed as annuity payments. Your beneficiary may be required to take death benefit proceeds within a certain time period.

Penalty Tax on Certain Distributions. You may have to pay a penalty tax (10 percent of the amount treated as taxable income) on distributions you take prior to age 59¹/₂. There are some exceptions to this rule, however. You should consult a tax advisor for information about those exceptions.

Withholding. Annuity distributions are generally subject to federal income tax withholding but most recipients can usually choose not to have the tax withheld.

Certain Designations or Exchanges. Designating an annuitant, payee or other beneficiary, or exchanging a contract may have tax consequences that should be discussed with a tax advisor before you engage in any of these transactions.

Multiple Contracts. All non-qualified deferred annuity contracts issued by us and certain of our affiliates to the same owner during a calendar year must generally be treated as a single contract in determining when and how much income is taxable and how much income is subject to the 10 percent penalty tax (see above).

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Diversification Requirements. The investments of the Real Estate Account must be “adequately diversified” in order for the ATRA Contracts to be treated as annuity contracts for Federal income tax purposes. It is intended that Real Estate Account will satisfy these diversification requirements.

Owner Control. In certain circumstances, owners of non-qualified variable annuity contracts have been considered for Federal income tax purposes to be the owners of the assets of the separate account supporting their contracts due to their ability to exercise investment control over those assets. When this is the case, the contract owners have been currently taxed on income and gains attributable to the variable account assets. While we believe that the ATRA Contracts do not give you investment control over assets in the Real Estate Account or any other separate account underlying your ATRA Contract, we reserve the right to modify the ATRA Contracts as necessary to prevent you from being treated as an owner of the assets in the Real Estate Account.

FEDERAL ESTATE TAXES

While no attempt is being made to discuss the Federal estate tax implications of the Contract, you should keep in mind that the value of an annuity contract owned by a decedent and payable to a beneficiary by virtue of surviving the decedent is included in the decedent’s gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning advisor for more information.

GENERATION-SKIPPING TRANSFER TAX

Under certain circumstances, the Code may impose a “generation skipping transfer tax” when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner. Regulations issued under the Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS.

RESIDENTS OF PUERTO RICO

The IRS has announced that income received by residents of Puerto Rico is U.S.-source income that is generally subject to United States Federal income tax.

ANNUITY PURCHASES BY NONRESIDENT ALIENS

The discussion above provides general information regarding U.S. federal income tax consequences to annuity purchasers that are U.S. citizens or residents. Purchasers that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser’s

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country of citizenship or residence. Prospective purchasers who are nonresident aliens are advised to consult with a qualified tax adviser regarding U.S. state, and foreign taxation with respect to an annuity contract purchase.

SPECIAL RULES FOR WITHDRAWALS TO PAY ADVISORY FEES

If you have arranged for us to pay advisory fees to your financial advisor from your accumulations, those partial withdrawals generally will not be treated as taxable distributions as long as:


	•	the payment is for expenses that are ordinary and necessary;

	•	the payment is made from a Section 401 or 403 retirement plan or an IRA; • your financial advisor’s payment is only made from the accumulations in your retirement plan or IRA, as applicable, and not directly by you or anyone else, under the agreement with your financial advisor; and

	•	once advisory fees begin to be paid from your retirement plan or IRA, as applicable, you continue to pay those fees solely from your plan or IRA, as applicable, and not from any other source.

However, withdrawals to pay advisory fees to your financial advisor from your accumulations under an ATRA contract will be treated as taxable distributions.

FOREIGN TAX CREDIT

The Account may be subject to foreign taxes on investments in other countries, including capital gains tax on any appreciation in value when a real estate investment in a foreign jurisdiction is eventually sold. Any potential tax impact will not be reflected in the valuation of the foreign investment and may not be fully reflected in a tax accrual by the Account. Upon payment of any foreign tax by the Account, TIAA will receive a foreign tax credit, which may be available to reduce its U.S. tax burden. The Account is a segregated asset account of TIAA and incurs no material federal income tax attributable to the investment performance of the Account under the Internal Revenue Code. As a result, the Account will not realize any tax benefit from any foreign tax credit that may be available to TIAA; however, to the extent that TIAA can utilize the foreign tax credit in its consolidated tax return, TIAA will reimburse the Account for that benefit at that time. The extent to which TIAA is able to utilize the credits when the Account incurs a foreign tax will determine the amount and timing of reimbursement from TIAA to the Account for the resulting foreign tax credit. The Account’s unit values may be adversely impacted in the future if a foreign tax is paid, and TIAA is not able to utilize (and therefore does not reimburse the Account for), either immediately or in the future, the foreign tax credit earned as a result of the foreign tax paid by the Account.

POSSIBLE TAX LAW CHANGES

Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of your contract could change by legislation or

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otherwise. Consult a tax advisor with respect to legislative developments and their effect on your contract.

We have the right to modify the contract in response to legislative changes that could otherwise diminish the favorable tax treatment that annuity contract owners currently receive. We make no guarantee regarding the tax status of any contract and do not intend the above discussion as tax advice.

GENERAL MATTERS

MAKING CHOICES AND CHANGES

You may have to make certain choices or changes (e.g., changing your income option, making a cash withdrawal) by written notice satisfactory to us and received at our home office or at some other location that we have specifically designated for that purpose. When we receive a notice of a change in beneficiary or other person named to receive payments, we’ll execute the change as of the date it was signed, even if the signer has died in the meantime. We execute all other changes as of the date received.

TELEPHONE AND INTERNET TRANSACTIONS

You can use our Automated Telephone Service (ATS) or the TIAA-CREF Web Center’s account access feature to check your account balances, transfer to TIAA’s traditional annuity, TIAA Access variable annuity accounts or CREF, and/or allocate future premiums among the accounts and funds available to you through TIAA-CREF. You will be asked to enter your Personal Identification Number (PIN) and social security number for both systems. (You can establish a PIN by calling us.) Both will lead you through the transaction process and will use reasonable procedures to confirm that instructions given are genuine. If we use such procedures, we are not responsible for incorrect or fraudulent transactions. All transactions made over the ATS and Internet are electronically recorded.

To use the ATS, you need a touch-tone phone. The toll free number for the ATS is 800 842-2252. To use the Internet, go to the account access feature of the TIAA-CREF Web Center at http://www.tiaa-cref.org. We can suspend or terminate your ability to transact by telephone, over the Internet, or by fax at any time, for any reason.

VOTING RIGHTS

You don’t have the right to vote on the management and operation of the Account directly; however, you may send ballots to advise the TIAA Board of Overseers about voting for nominees for the TIAA Board of Trustees.

ELECTRONIC PROSPECTUS

If you received this prospectus electronically and would like a paper copy, please call 877 518-9161 and we will send it to you. Under certain circumstances

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where we are legally required to deliver a prospectus to you, we cannot send you a prospectus electronically unless you’ve consented.

HOUSEHOLDING

To lower costs and eliminate duplicate documents sent to your home, we may begin mailing only one copy of the Account’s prospectus, prospectus supplements or any other required documents to your household, even if more than one participant lives there. If you would prefer to continue receiving your own copy of any of these documents, you may call us toll-free at 877 518-9161, or write us.

MISCELLANEOUS POLICIES

Amending the Contracts: The contract may be amended by agreement of TIAA and the contractholder without the consent of any other person, provided that such change does not reduce any benefit purchased under the contract up to that time. Any endorsement or amendment of this contract, waiver of any of its provisions, or change in rate schedule will be valid only if in writing and signed by an executive officer of TIAA.

If You’re Married: If you’re married, you may be required by law or your employer’s plan to get advance written consent from your spouse before we make certain transactions for you. If you’re married at your annuity starting date, you may also be required by law or your employer’s plan to choose an income option that provides survivor annuity income to your spouse, unless he or she waives that right in writing. There are limited exceptions to the waiver requirement.

Texas Optional Retirement Program Restrictions: If you’re in the Texas Optional Retirement Program, you or your beneficiary can redeem some or all of your accumulation only if you retire, die, or leave your job in the state’s public institutions of higher education.

Assigning Your Contract: Generally, neither you nor your beneficiaries can assign your ownership of a TIAA retirement contract to anyone else.

Overpayment of Premiums: If your employer mistakenly sends more premiums on your behalf than you’re entitled to under your employer’s retirement plan or the Internal Revenue Code, we’ll refund them to your employer as long as we’re requested to do so (in writing) before you start receiving annuity income. Any time there’s a question about premium refunds, TIAA will rely on information from your employer. If you’ve withdrawn or transferred the amounts involved from your accumulation, we won’t refund them.

Errors or Omissions: We reserve the right to correct any errors or omissions on any form, report, or statement that we send you.

Payment to an Estate, Guardian, Trustee, etc.: We reserve the right to pay in one sum the commuted value of any benefits due an estate, corporation, partnership, trustee, or other entity not a natural person. Neither TIAA nor the Account will be responsible for the conduct of any executor, trustee, guardian, or other third party to whom payment is made.

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Benefits Based on Incorrect Information: If the amounts of benefits provided under a contract were based on information that is incorrect, benefits will be recalculated on the basis of the correct data. If the Account has overpaid or underpaid, appropriate adjustments will be made.

Proof of Survival: We reserve the right to require satisfactory proof that anyone named to receive benefits under a contract is living on the date payment is due. If we have not received this proof after we request it in writing, the Account will have the right to make reduced payments or to withhold payments entirely until such proof is received.

DISTRIBUTION

The annuity contracts are offered continuously by TIAA-CREF Individual & Institutional Services, LLC (Services), which is registered with the SEC as a broker-dealer and a registered investment adviser and is a member of the National Association of Securities Dealers, Inc. (NASD). Teachers Personal Investors Services, Inc. (TPIS), which is also registered with the SEC and is a member of the NASD, may participate in the distribution of the contracts on a limited basis. Services and TPIS are direct or indirect wholly owned subsidiaries of TIAA. Their addresses are at 730 Third Avenue, New York, NY 10017-3206. No commissions are paid for distributing the contracts.

STATE REGULATION

TIAA, the Real Estate Account, and the contracts are subject to regulation by the New York Insurance Department (NYID) as well as by the insurance regulatory authorities of certain other states and jurisdictions.

TIAA and the Real Estate Account must file with the NYID both quarterly and annual statements. The Account’s books and assets are subject to review and examination by the NYID at all times, and a full examination into the affairs of the Account is made at least every five years. In addition, a full examination of the Real Estate Account operations is usually conducted periodically by some other states.

LEGAL MATTERS

All matters involving state law and relating to the contracts, including TIAA’s right to issue the contracts, have been passed upon by George W. Madison, Executive Vice President and General Counsel of TIAA. Sutherland Asbill & Brennan LLP, Washington, D.C., have passed upon legal matters relating to the federal securities laws.

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EXPERTS

The financial statements as of December 31, 2006 and December 31, 2005 and for each of the two years in the period ended December 31, 2006 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP (“PWC”), an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

Ernst & Young LLP (“E&Y”), independent registered public accounting firm, has audited the Account’s financial statements at December 31, 2004, and for the year then ended, as set forth in their report.

With respect to TIAA, PWC has audited TIAA’s statutory-basis financial statements as of December 31, 2006 and December 31, 2005, and for each of the two years in the period ended December 31, 2006, as set forth in their report, given on the authority of said firm as experts in auditing and accounting.

E&Y has audited TIAA’s statutory-basis financial statements as of December 31, 2004 and December 31, 2003, and for each of the three years in the period ended December 31, 2004, as set forth in their report (which contains an explanatory paragraph describing that TIAA presents its financial statements in conformity with accounting practices prescribed or permitted by the New York State Insurance Department, which practices differ from U.S. generally accepted accounting principles and that the effects of the variances between such bases of accounting on TIAA’s financial statements are not reasonably determinable but are presumed to be material, as described in Note 2 to the TIAA statutory-basis financial statements).

Friedman LLP, independent registered public accounting firm, has audited the statement of revenues and certain expenses of the following properties:


(i)	The North 40 Office Complex for the year ended December 31, 2005;

(ii)	Publix at Weston Commons for the year ended December 31, 2005;

(iii)	City Center for the year ended December 31, 2005;

(iv)	WellPoint Office Campus for the year ended December 31, 2005;

(v)	DLF Multi Family Portfolio for the year ended December 31, 2005;

(vi)	The Creeksides at CenterPoint for the year ended December 31, 2005;

(vii)	Park Place on Turtle Creek for the year ended December 31, 2005;

(viii)	MarketFair for the year ended December 31, 2005;

(ix)	South Frisco Village for the year ended December 31, 2005;

(x)	IDI National Industrial Portfolio for the year ended December 31, 2005;

(xi)	Millennium Corporate Park for the year ended December 31, 2005;

(xii)	The following properties comprising the Florida Retail Portfolio, a joint venture with Weingarten Realty Investors (“WRI”), in which the Account owns an 80% equity interest in the Florida Retail JV and WRI owns the remaining 20% equity interest:

	(1)	East Lake Woodlands for the period August 5, 2005 to December 31, 2005;

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	(2)	Palm Lakes Plaza for the year ended December 31, 2005;

	(3)	The Marketplace at Dr. Phillips for the year ended December 31, 2005;

	(4)	International Drive Value Center for the period January 18, 2005 to December 31, 2005;

	(5)	Alfaya Square for the year ended December 31, 2005;

	(6)	Kendall Corners for the year ended December 31, 2005;

	(7)	South Dade Shopping Center for the year ended December 31, 2005;

(xiii)	The Ellipse at Ballston for the year ended December 31, 2005;

(xiv)	The properties comprising the Account’s joint venture with Developers Diversified Realty Corporation (“DDR”), in which the Account has an 85% equity intereast and DDR has a 15% equity interest, for the year ended December 31, 2005;

(xv)	Printemps de l’Homme for the year ended December 31, 2005;

(xvi)	1900 South Burgundy for the year ended December 31, 2005; and

(xvii)	Wilshire Rodeo Plaza for the nine months ended September 30, 2005.

Berdon LLP, independent registered public accounting firm, has audited the statement of revenues and certain expenses of the following properties: (i) 501 Boylston Street (The Newbry) for the year ended December 31, 2005 and (ii) 9345 Santa Anita Avenue (Weber Distribution) for the year ended December 31, 2005.

Aarons Grant & Habif, LLC, independent registered public accounting firm, has audited the statement of revenues and certain expenses for the Camelback Center property for the year ended December 31, 2005.

After reasonable inquiry, the Account is not aware of any material factors relating to the specific properties audited by any of Friedman LLP, Berdon LLP, or Aarons Grant & Habif, LLC, other than as specifically set forth elsewhere in this prospectus that would cause the reported financial information indicated in such financial statements not to be necessarily indicative of future operating results.

We have included these financial statements in the prospectus and elsewhere in the registration statement in reliance on the auditing firms’ respective reports, given on the authority of such firms as experts in accounting and auditing.

ADDITIONAL INFORMATION

INFORMATION AVAILABLE AT THE SEC

The Account has filed with the SEC a registration statement under the Securities Act of 1933, which contains this prospectus and additional information related to the offering described in this prospectus. The Account also files annual, quarterly, and current reports, along with other information, with the SEC, as required by the Securities Exchange Act of 1934. You may read and copy the full registration statement, and any reports and information filed with the SEC for the

84 | Prospectus TIAA Real Estate Account

Account, at the SEC’s public reference room at 100 F Street, N.E., Washington, DC 20549. This information can also be obtained through the SEC’s website on the Internet (http://www.sec.gov).

OTHER REPORTS TO PARTICIPANTS

TIAA will mail to each participant in the Real Estate Account periodic reports providing information relating to their accumulations in the Account, including premiums paid, number and value of accumulations, and withdrawals or transfers during the period, as well as such other information as may be required by applicable law or regulations. Further information may be obtained from TIAA at 730 Third Avenue, New York, New York 10017-3206.

CUSTOMER COMPLAINTS

Customer complaints may be directed to our Participant Relations Unit, P.O. Box 1259, Charlotte, North Carolina 28201-1259, telephone 800 842-2776.

FINANCIAL STATEMENTS

The financial statements of the TIAA Real Estate Account, financial statements of certain properties purchased by the Account and condensed unaudited statutory-basis financial statements of TIAA follow. The full audited statutory-basis financial statements of TIAA, which are incorporated into this prospectus by reference, are available upon request by calling 877 518-9161.

The financial statements of TIAA should be distinguished from the financial statements of the Account and should be considered only as bearing on the ability of TIAA to meet its obligations under the contracts. They should not be considered as bearing upon the assets held in the Account.

TIAA Real Estate Account Prospectus | 85

INDEX TO FINANCIAL STATEMENTS

TIAA REAL ESTATE ACCOUNT


Audited Financial Statements:
TIAA Real Estate Account
87	Report of Management Responsibility
88	Report of the Audit Committee

Audited Financial Statements:
90	Statements of Assets and Liabilities
91	Statements of Operations
92	Statements of Changes in Net Assets
93	Statements of Cash Flows
94	Notes to Financial Statements
103	Statements of Investments
119	Report of Independent Registered Public Accounting Firm
120	Report of Independent Registered Public Accounting Firm

Proforma Condensed Financial Statements:
121	Proforma Condensed Statement of Assets and Liabilities
122	Proforma Condensed Statement of Operations
123	Notes to Proforma Condensed Financial Statements

Property Financial Statements:
125	The North 40 Office Complex
129	Publix at Weston Commons
132	City Center
135	WellPoint Office Campus
138	DLF Multifamily Portfolio
141	The Creeksides at CenterPoint
144	Park Place on Turtle Creek
147	Marketfair
151	South Frisco Village
154	IDI National Industrial Portfolio
157	Millennium Corporate Park
161	Alafaya Square
164	East Lake Woodlands
167	Kendall Corners
170	International Drive Value Center
173	The Marketplace at Dr. Phillips
176	Palm Lakes Plaza
179	South Dade Shopping Center
182	The Ellipse at Ballston
185	Developers Diversified Realty Corporation Joint Venture Portfolio
189	Printemps de L’Homme
192	501 Boylston Street
195	Camelback Center
198	9345 Santa Anita Avenue
201	1900 South Burgundy
204	Wilshire Rodeo Plaza

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
207	Condensed Statutory-Basis Financial Statements Information
209	Basis of Presentation

86 | Prospectus TIAA Real Estate Account

Report of management responsibility

To the Participants of the TIAA Real Estate Account:

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

TIAA has established and maintains a sound system of internal controls and disclosure controls designed to provide reasonable assurance that assets are properly safeguarded and transactions are properly executed in accordance with management’s authorization, and to carry out the ongoing responsibilities of management for reliable financial statements. In addition, TIAA’s internal audit personnel provide a continuing review of the internal controls and operations of the Account, and the chief audit executive regularly reports to the TIAA Audit Committee.

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

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

March 15, 2007




Herbert M. Allison, Jr.	Georganne C. Proctor
Chairman, President and	Executive Vice President and
Chief Executive Officer	Chief Financial Officer

TIAA Real Estate Account Prospectus | 87

Report of the Audit committee

To the Participants of the TIAA Real Estate Account:

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

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

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

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

88 | Prospectus TIAA Real Estate Account


Report of the Audit committee	concluded

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

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

March 15, 2007

TIAA Real Estate Account Prospectus | 89


Statements of assets and liabilities	\|	TIAA Real Estate Account


December 31,	2006		2005

ASSETS
Investments, at value:
Real estate properties (cost: $9,462,471,032 and $7,355,833,152)	$	10,743,487,689	$	7,977,600,751
Real estate joint ventures and limited partnerships (cost: $1,413,322,924 and $1,086,041,287)		1,948,028,002		1,418,583,542
Marketable securities:
Real estate-related (cost: $569,326,795 and $433,482,015)		704,922,323		448,662,598
Other (cost: $2,038,681,194 and $1,640,676,190)		2,038,938,210		1,640,894,515
Mortgage loan receivable (cost: $75,000,000)		74,660,626		—

Total investments (cost: $13,558,801,945 and $10,516,032,644)		15,510,036,850		11,485,741,406

Cash		3,585,145		1,211,370
Due from investment advisor		8,461,793		7,717,256
Other		237,877,545		190,756,381

TOTAL ASSETS		15,759,961,333		11,685,426,413

LIABILITIES
Mortgage loans payable—Note 5 (principal outstanding:
$1,384,920,990 and $943,291,236)		1,437,149,148		973,502,186
Payable for securities transactions		1,219,323		993,809
Accrued real estate property level expenses		169,657,402		145,789,277
Security deposits held		19,242,948		16,430,039

TOTAL LIABILITIES		1,627,268,821		1,136,715,311

NET ASSETS
Accumulation Fund		13,722,700,176		10,227,655,797
Annuity Fund		409,992,336		321,055,305

TOTAL NET ASSETS	$	14,132,692,512	$	10,548,711,102

NUMBER OF ACCUMULATION UNITS OUTSTANDING—Notes 6 and 7		50,146,354		42,623,491

NET ASSET VALUE, PER ACCUMULATION UNIT—Note 6	$	273.65	$	239.95

90 | Prospectus TIAA Real Estate Account


Statements of operations	\|	TIAA Real Estate Account


Years Ended December 31,	2006			2005			2004

INVESTMENT INCOME
Real estate income, net:
Rental income	$	834,455,788		$	618,633,580		$	397,198,276

Real estate property level expenses and taxes:
Operating expenses		207,452,982			150,501,136			100,991,997
Real estate taxes		110,059,852			88,014,264			55,946,418
Interest expense		72,160,111			40,028,630			830,361

Total real estate property level expenses
and taxes		389,672,945			278,544,030			157,768,776

Real estate income, net		444,782,843			340,089,550			239,429,500
Income from real estate joint ventures
and limited partnerships		84,671,528			71,826,443			71,390,397
Interest		118,621,441			54,114,448			15,055,451
Dividends		16,785,769			16,884,764			12,453,109

TOTAL INCOME		664,861,581			482,915,205			338,328,457

EXPENSES—NOTE 2:
Investment advisory charges		26,899,307			19,603,225			14,393,388
Administrative and distribution charges		45,712,473			27,130,406			16,372,446
Mortality and expense risk charges		6,931,833			6,196,549			4,093,858
Liquidity guarantee charges		3,905,051			3,170,017			1,868,733

TOTAL EXPENSES		83,448,664			56,100,197			36,728,425

INVESTMENT INCOME—NET		581,412,917			426,815,008			301,600,032

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
Net realized gain (loss) on:
Real estate properties		76,137,064			84,764,142			13,827,432
Marketable securities		10,257,108			36,871,417			46,714,767

Total realized gain on investments		86,394,172			121,635,559			60,542,199

Net change in unrealized appreciation
(depreciation) on:
Real estate properties		659,370,445			534,569,631			172,486,544
Real estate joint ventures and
limited partnerships		193,477,741			167,019,921			162,245,601
Marketable securities		120,453,638			(28,100,691	)		21,088,525
Mortgage loan receivable.		(339,374	)		—			—
Mortgage loans payable		(26,568,857	)		(29,154,148	)		(1,782,566	)

Net change in unrealized appreciation on
investments and mortgage loans payable		946,393,593			644,334,713			354,038,104

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND MORTGAGE
LOANS PAYABLE		1,032,787,765			765,970,272			414,580,303

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS	$	1,614,200,682		$	1,192,785,280		$	716,180,335

TIAA Real Estate Account Prospectus | 91


Statements of changes in net assets	\|	TIAA Real Estate Account


Years Ended December 31,	2006			2005			2004

FROM OPERATIONS
Investment income, net	$	581,412,917		$	426,815,008		$	301,600,032
Net realized gain on investments		86,394,172			121,635,559			60,542,199
Net change in unrealized appreciation
on investments and mortgage loans payable		946,393,593			644,334,713			354,038,104

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS		1,614,200,682			1,192,785,280			716,180,335

FROM PARTICIPANT TRANSACTIONS
Premiums		1,085,057,614			968,189,436			738,048,183
Net transfers from TIAA		215,893,898			172,305,147			147,340,801
Net transfers from CREF Accounts		1,154,122,836			1,238,160,587			1,045,910,051
Net transfers from (to) TIAA-CREF Institutional
Mutual Funds		(15,318,887	)		24,967,250			(4,785,649	)
Annuity and other periodic payments		(65,192,000	)		(44,487,142	)		(30,761,316	)
Withdrawals and death benefits		(404,782,733	)		(248,759,442	)		(159,804,580	)

NET INCREASE IN NET ASSETS RESULTING
FROM PARTICIPANT TRANSACTIONS		1,969,780,728			2,110,375,836			1,735,947,490

NET INCREASE IN NET ASSETS		3,583,981,410			3,303,161,116			2,452,127,825
NET ASSETS
Beginning of year		10,548,711,102			7,245,549,986			4,793,422,161

End of year	$	14,132,692,512		$	10,548,711,102		$	7,245,549,986

92 | Prospectus TIAA Real Estate Account


Statements of cash flows	\|	TIAA Real Estate Account


Years Ended December 31,	2006			2005			2004

CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting
from operations	$	1,614,200,682		$	1,192,785,280		$	716,180,335
Adjustments to reconcile net increase in
net assets resulting from operations to
net cash used in operating activities:
Purchase of real estate properties		(2,016,229,061	)		(1,864,646,776	)		(1,690,454,136	)
Capital improvements on real
estate properties		(117,041,456	)		(83,150,771	)		(37,770,043	)
Proceeds from sale of real estate properties		387,290,000			511,500,399			113,765,000
Increase in other investments		(859,898,769	)		(1,313,788,390	)		(418,058,889	)
Increase in mortgage loan receivable		(74,660,626	)		—			—
Increase in other assets		(47,865,701	)		(80,412,203	)		(30,270,749	)
Decrease in amounts due to bank		—			(231,476	)		(783,869	)
Increase in accrued real estate property
level expenses and taxes		23,868,125			60,829,395			25,445,331
Increase in security deposits held		2,812,909			2,670,715			621,654
Increase (decrease) in other liabilities		225,514			(1,162,347	)		—
Net realized gain on investments		(86,394,172	)		(121,635,559	)		(60,542,199	)
Unrealized gain on investments and
mortgage loans payable		(946,393,593	)		(644,334,713	)		(354,038,104	)

NET CASH USED IN OPERATING ACTIVITIES		(2,120,086,148	)		(2,341,576,446	)		(1,735,905,669	)

CASH FLOWS FROM FINANCING ACTIVITIES
Mortgage loans payable acquired		153,000,000			232,585,341			—
Principal payments on mortgage loans payable		(320,805	)		(173,361	)		(41,821	)
Premiums		1,085,057,614			968,189,436			738,048,183
Net transfers from TIAA		215,893,898			172,305,147			147,340,801
Net transfers from CREF Accounts		1,154,122,836			1,238,160,587			1,045,910,051
Net transfers from (to) TIAA-CREF Institutional
Mutual Funds		(15,318,887	)		24,967,250			(4,785,649	)
Annuity and other periodic payments		(65,192,000	)		(44,487,142	)		(30,761,316	)
Withdrawals and death benefits		(404,782,733	)		(248,759,442	)		(159,804,580	)

NET CASH PROVIDED BY
FINANCING ACTIVITIES		2,122,459,923			2,342,787,816			1,735,905,669

NET INCREASE IN CASH		2,373,775			1,211,370			—
CASH
Beginning of year		1,211,370			—			—

End of year	$	3,585,145		$	1,211,370		$	—

Supplemental disclosure: Cash paid for interest	$	68,034,179		$	38,267,618		$	121,408

Debt assumed upon acquisition of properties	$	288,950,559		$	211,400,000		$	499,521,077

TIAA Real Estate Account Prospectus | 93

Notes to financial statements | TIAA Real Estate Account

Note 1–Organization and Significant Accounting Policies

The TIAA Real Estate Account (“Account”) is a segregated investment account of Teachers Insurance and Annuity Association of America (“TIAA”) and was established by resolution of TIAA’s Board of Trustees on February 22, 1995, under the insurance laws of the State of New York, for the purpose of funding variable annuity contracts issued by TIAA. The investment objective of the Account is a favorable long-term rate of return primarily through rental income and capital appreciation from real estate investments owned by the Account. The Account holds real estate properties directly and through wholly-owned subsidiaries. The Account also holds interests in limited partnerships and real estate joint ventures in which the Account does not hold a controlling interest. Such joint ventures are not consolidated for financial statement purposes. The Account also invests in publicly-traded securities and other instruments to maintain adequate liquidity for operating expenses, capital expenditures and to make benefit payments. The Account also invests in mortgage loans receivable collateralized by commercial real estate properties. The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America which may require the use of estimates made by management. Actual results may vary from those estimates. The following is a summary of the significant accounting policies of the Account.

Basis of Presentation: The accompanying financial statements include the Account and those subsidiaries wholly-owned by TIAA for the benefit of the Account. All significant intercompany accounts and transactions have been eliminated in consolidation.

Valuation of Real Estate Properties: Investments in real estate properties are stated at fair value, as determined in accordance with procedures approved by the Investment Committee of the TIAA Board of Trustees and in accordance with the responsibilities of the Board as a whole; accordingly, the Account does not record depreciation. Fair value for real estate properties is defined as the most probable price for which a property will sell in a competitive market under all conditions requisite to a fair sale. Determination of fair value involves subjective judgment 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, the properties are valued on a quarterly cycle, and independent appraisers value each real estate property at least once a year. An independent fiduciary, Real Estate Research Corporation, has been appointed by a special subcommittee of TIAA’s Board of Trustees. The independent fiduciary must approve all independent appraisers used by the Account. TIAA’s appraisal staff performs the other quarterly valuation reviews of each real estate property on a quarterly basis and updates the property value if it believes that the value of a property has changed since the previous valuation review or appraisal. The appraisals are performed in accordance with Uniform Standards of Professional Appraisal Practices (USPAP), the real estate appraisal industry standards created by The Appraisal Foundation. Real estate appraisals are estimates of property values based on a professional’s opinion. The independent fiduciary can also require additional appraisals if it believes that a

94 | Prospectus TIAA Real Estate Account


Notes to financial statements	continued

property’s value has changed materially and that such change is not reflected in the quarterly valuation review, or otherwise to ensure that the Account is valued correctly. The independent fiduciary must also approve an appraisal where a property’s value changed by 6% or more from the most recent annual appraisal. Real estate properties subject to a mortgage are generally valued as described; the mortgage is valued independently of the property, and its fair value is reported separately. The independent fiduciary reviews and approves any such mortgage valuation adjustments which exceed certain prescribed limits before such adjustments are recorded by the Account. The Account continues to use the revised value for each real estate property and mortgage loan payable to calculate the Account’s daily net asset value until the next valuation review or appraisal.

Debt securities, other than money market instruments, are valued at the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality and type). Money market instruments, with maturities of one year or less, are valued in the same manner as debt securities or derived from a pricing matrix that has various types of money market instruments along one axis and various maturities along the other. Portfolio securities and limited partnership interests for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Investment Committee of the TIAA Board of Trustees and in accordance with the responsibilities of the Board as a whole.

TIAA Real Estate Account Prospectus | 95


Notes to financial statements	continued

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

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

Accounting for Investments: Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties close (settlement date). The Account recognizes a gain to the extent that the contract sales price exceeds the cost-to-date of the property being sold. A loss occurs when the cost-to-date exceeds the sales price. As the Account is fair valued and all properties are appraised quarterly, any accumulated unrealized gains and losses are reversed in the calculation of realized gains and losses. Rent from real estate properties consists of all amounts earned under tenant operating leases, including base rent, recoveries of real estate taxes and other expenses and charges for miscellaneous services provided to tenants. Rental income is recognized in accordance with the billing terms of the lease agreements. The Account bears the direct expenses of the real estate properties owned. These expenses include, but are not limited to, fees to local property management companies, property taxes, utilities, maintenance, repairs, insurance, and other operating and administrative costs. An estimate of the net operating income earned from each real estate property is accrued by the Account on a daily basis and such estimates are adjusted as soon as actual operating results are determined.

96 | Prospectus TIAA Real Estate Account


Notes to financial statements	continued

Income from real estate joint ventures is recorded based on the Account’s proportional interest in the income earned by the joint venture.

Federal Income Taxes: Based on provisions of the Internal Revenue Code, Section 817, 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.

Reclassifications: Certain prior period amounts have been reclassified to conform to the current presentation. These reclassifications did not affect the total assets, total net assets or net increase in net assets previously reported.

Note 2–Management Agreements

Investment advisory services for the Account are provided by TIAA employees, under the direction of TIAA’s Board of Trustees and its Investment Committee, pursuant to investment management procedures adopted by TIAA for the Account. TIAA’s investment management decisions for the Account are also subject to review by the Account’s independent fiduciary, Real Estate Research Corporation. TIAA also provides all portfolio accounting and related services for the Account.

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

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

TIAA also provides a liquidity guarantee to the Account, for 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.

The expenses for the services noted above that are provided to the Account by TIAA and other related parties are identified in the accompanying Statements of Operations.

TIAA Real Estate Account Prospectus | 97


Notes to financial statements	continued

Note 3–Leases

The Account’s real estate properties are leased to tenants under operating lease agreements which expire on various dates through 2035. Aggregate minimum annual rentals for the properties owned, excluding short-term residential and storage facility leases, are as follows:


Years Ending December 31,

2007	$	795,495,322
2008		728,447,351
2009		654,178,920
2010		557,829,144
2011		443,396,596
2012–2035		1,527, 743,118

Total	$	4,707,090,451

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

Note 4–Investment in Joint Ventures and Limited Partnerships

The Account owns interests in several real estate properties through joint ventures and receives distributions and allocations of profits and losses from the joint ventures based on the Account’s ownership interest percentages. Several of these joint ventures have mortgage notes payable on the properties owned. At December 31, 2006, the Account held 12 joint venture investments with ownership interest percentages that ranged from 50% to 80%. The Account’s allocated portion of the mortgage notes payable was $472,167,225 and $468,664,313 at December 31, 2006 and December 31, 2005, respectively. The Account’s equity in the joint ventures at December 31, 2006 and December 31, 2005 was $1,668,744,951 and $1,222,036,564, respectively. A condensed summary of the financial position and results of operations of the joint ventures is shown below.


	December 31, 2006		December 31, 2005

Assets
Real estate properties, at value	$	3,650,902,513	$	2,989,209,293
Other assets		101,949,855		80,768,265

Total assets	$	3,752,852,368	$	3,069,977,558

Liabilities and Equity
Mortgage loans payable, at value	$	875,560,195	$	865,828,626
Other liabilities		74,287,727		70,471,251

Total liabilities		949,847,922		936,299,877
Equity		2,803,004,446		2,133,677,681

Total liabilities and equity	$	3,752,852,368	$	3,069,977,558

98 | Prospectus TIAA Real Estate Account


Notes to financial statements	continued


	Year Ended December 31, 2006		Year Ended December 31, 2005		Year Ended December 31, 2004

Operating Revenues and Expenses
Revenues	$	299,078,956	$	270,519,206	$	250,697,181
Expenses		157,686,944		142,782,169		122,017,640

Excess of revenues over expenses	$	141,392,012	$	127,737,037	$	128,679,541

The account invests in limited partnerships that own real estate properties and receives distributions from the limited partnerships based on the Account’s ownership interest percentages. At December 31, 2006, the Account held six limited partnership investments with ownership interest percentages that ranged from 5.27% to 19.75%. The Account’s investment in limited partnerships was $279,283,051 and $196,546,978 at December 31, 2006 and December 31, 2005, respectively.

Note 5–Mortgage Loans Payable

At December 31, 2006, the Account had outstanding mortgage loans payable on the following properties:


Property	Interest Rate Percentage		Amount December 31, 2006			Due

50 Fremont	6.40 paid monthly		$	135,000,000		August 21, 2013
Ontario Industrial Portfolio	7.42 paid monthly			9,119,033		May 1, 2011
IDX Tower	6.40 paid monthly			145,000,000		August 21, 2013
1001 Pennsylvania Ave	6.40 paid monthly			210,000,000		August 21, 2013
99 High Street	5.5245 paid monthly			185,000,000		November 11, 2015
Reserve at Sugarloaf	5.49 paid monthly			26,266,057		June 1, 2013
Westferry Circus	5.4003 paid quarterly	^(a)		232,585,341		November 15, 2012
Lincoln Centre	5.51 paid monthly			153,000,000		February 1, 2016
Wilshire Rodeo Plaza	5.28 paid monthly			112,700,000		April 11, 2014
1401 H Street	5.97 paid monthly			115,000,000		December 7, 2014
South Frisco Village	5.85 paid monthly			26,250,559		June 1, 2013
Publix at Weston Commons	5.08 paid monthly			35,000,000		January 1, 2036

Total principal outstanding			$	1,384,920,990
Unamortized discount				(5,277,414	)

Amortized cost				1,379,643,576
Fair value adjustment				57,505,572

Total mortgage loans payable			$	1,437,149,148


(a)	The mortgage is denominated in British pounds, converted to U.S. dollars at the exchange rate as of the funding date, and is interest only with a balloon payment at maturity. The interest rate is fixed.

Principal on mortgage loans payable is due as follows:


		Amount

2007	$	576,135
2008		575,921
2009		619,325
2010		659,550
2011		8,647,276
Thereafter		1,373,842,783

Total maturities		1,384,920,990

TIAA Real Estate Account Prospectus | 99


Notes to financial statements	continued

Note 6–Condensed Financial Information

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


	Years Ended December 31,

	2006			2005			2004			2003			2002

Per Accumulation Unit data:
Rental income	$	16.717		$	15.604		$	13.422		$	15.584		$	14.225
Real estate property level expenses and taxes		7.807			7.026			5.331			5.890			4.819

Real estate income, net		8.910			8.578			8.091			9.694			9.406
Other income		4.409			3.602			3.341			2.218			2.056

Total income		13.319			12.180			11.432			11.912			11.462
Expense charges⁽¹⁾		1.671			1.415			1.241			1.365			1.101

Investment income, net		11.648			10.765			10.191			10.547			10.361
Net realized and unrealized gain (loss) on investments and mortgage loans payable		22.052			18.744			13.314			2.492			(4.621	)

Net increase in Accumulation Unit Value		33.700			29.509			23.505			13.039			5.740
Accumulation Unit Value:
Beginning of year		239.953			210.444			186.939			173.900			168.160

End of year	$	273.653		$	239.953		$	210.444		$	186.939		$	173.900

Total return		14.04	%		14.02	%		12.57	%		7.50	%		3.41	%
Ratios to Average Net Assets:
Expenses⁽¹⁾		0.67	%		0.63	%		0.63	%		0.76	%		0.67	%
Investment income, net		4.68	%		4.82	%		5.17	%		5.87	%		5.65	%
Portfolio turnover rate:
Real estate properties		3.62	%		6.72	%		2.32	%		5.12	%		0.93	%
Marketable securities		51.05	%		77.63	%		143.47	%		71.83	%		52.08	%
Accumulation Units outstanding at end of year (in thousands)		50,146			42,623			33,338			24,724			20,347
Net assets end of year (in thousands)	$	14,132,693		$	10,548,711		$	7,245,550		$	4,793,422		$	3,675,989

(1)

Expense charges per Accumulation Unit and the Ratio of Expenses to Average Net Assets exclude real estate property level expenses. If the real estate property level expenses were included, the expense charge per Accumulation Unit for the year ended December 31, 2006 would be $9.478 ($8.441, $6.572, $7.255, and $5.920 for the years ended December 31, 2005, 2004, 2003, and 2002, respectively), and the Ratio of Expenses to Average Net Assets for the year ended December 31, 2006 would be 3.81% (3.78%, 3.33%, 4.04%, and 3.61% for the years ended December 31, 2005, 2004, 2003, and 2002, respectively).

100 | Prospectus TIAA Real Estate Account


Notes to financial statements	continued

Note 7 – Accumulation Units

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


	For the Years Ended December 31,

	2006		2005		2004

Credited for premiums		4,056,196		4,335,121		3,746,093
Net units credited for transfers, net disbursements and amounts applied to the Annuity Fund		3,466,667		4,950,773		4,867,321
Outstanding:
Beginning of year		42,623,491		33,337,597		24,724,183

End of year		50,146,354		42,623,491		33,337,597

Note 8–Commitments and Subsequent Events

During the normal course of business, the Account enters into discussions and agreements to purchase or sell real estate property investments. As of December 31, 2006, the Account had outstanding commitments in the total gross amount of approximately $2.8 billion to purchase two property investments: i) a portfolio of existing retail properties, which are located predominately in the Southeastern United States, for approximately $2.5 billion, subject to approximately $1.5 billion in debt, and ii) a retail property located in France for approximately $263.7 million. The retail portfolio will be acquired through the Account’s investment in a newly-formed joint venture. The amounts disclosed above represent the Account’s share of the retail portfolio and the related debt, and the Account’s share of the joint venture will be a non-controlling 85% interest. The acquisition of the retail portfolio and the French property closed in February and March of 2007, respectively.

In addition, the Account had outstanding commitments to purchase interests in six limited partnerships, which totaled approximately $366.7 million in the aggregate. As of December 31, 2006, approximately $43.9 million remains to be funded under these commitments.

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

Note 9–New Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) 48, an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and is effective for fiscal years beginning after December 31, 2006. The Account does not expect FIN 48 to have a significant impact on the Account’s financial position or results of operations.

In September 2006, FASB issued Statement No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires additional disclosures

TIAA Real Estate Account Prospectus | 101


Notes to consolidated financial statements	concluded

about fair value measurements. This Statement does not require any new fair value measurements, but the application of this Statement could change current practices in determining fair value. The Account plans to adopt this guidance effective January 1, 2008. The Account is currently assessing the impact of Statement No. 157 but does not expect it to have a significant impact on the Account’s financial position or results of operations when implemented.

In February 2007, FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This Statement permits entities to choose to measure many financial instruments and certain other items at fair value and is expected to expand the use of fair value measurement. The Statement is effective for fiscal years beginning after November 15, 2007. The Account is currently assessing the impact of Statement No. 159 on the Account’s financial position and results of operations.

102 | Prospectus TIAA Real Estate Account


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005


	VALUE

LOCATION/DESCRIPTION	2006			2005


REAL ESTATE PROPERTIES—69.27% AND 69.46%

ALABAMA:
Inverness Center—Office building	$	112,256,914		$	98,090,987
ARIZONA:
Kierland Apartment Portfolio—Apartments		206,100,000			—
Mountain RA Industrial Portfolio—Industrial building		6,605,429			5,754,652
Phoenix Apartment Portfolio—Apartments		182,900,000			—
CALIFORNIA:
3 Hutton Centre Drive—Office building		59,011,323			48,349,580
9 Hutton Centre—Office building		29,000,000			26,746,837
50 Fremont—Office building		421,000,000	⁽¹⁾		373,010,003	⁽¹⁾
88 Kearny Street—Office building		90,310,024			81,567,474
980 9th Street and 1010 8th Street—Office building		168,000,000			159,000,000
1900 South Burgundy Place —Industrial building		28,045,226			—
Cabot Industrial Portfolio—Industrial building		88,200,000			77,000,000
Capitol Place—Office building		50,331,828			48,000,000
Centerside I—Office building		67,000,000			66,000,000
Centre Pointe and Valley View—Industrial building		32,385,980			28,000,000
Eastgate Distribution Center —Industrial building		25,558,962			22,000,000
Embarcadero Center West—Office building		231,000,000			205,965,261
Kenwood Mews—Apartments		—			30,000,000
Larkspur Courts—Apartments		93,043,346			86,000,000
Northern CA RA Industrial Portfolio—Industrial building		71,317,741			62,325,024
Ontario Industrial Portfolio—Industrial building		270,000,000	⁽¹⁾		230,000,000	⁽¹⁾
Regents Court—Apartments		67,800,000			62,500,000
Southern CA RA Industrial Portfolio—Industrial building		97,558,473			89,017,793
The Legacy at Westwood—Apartments		110,231,593			100,000,000
Weber Distribution—Industrial building		20,800,000			—
Wellpoint—Office building		49,000,000			—
Westcreek—Apartments		35,300,000			30,939,671
West Lake North Business Park—Office building		61,000,000			57,600,000
Westwood Marketplace—Shopping center		91,467,954			86,000,000
Wilshire Rodeo Plaza—Office building		204,084,734	⁽¹⁾		—
COLORADO:
Monte Vista—Apartments		—			24,647,901
Palomino Park—Apartments		184,000,000			176,232,394
The Lodge at Willow Creek—Apartments		39,501,399			34,600,000
The Market at Southpark—Shopping center		35,800,000			34,001,746
CONNECTICUT:
Ten & Twenty Westport Road—Office building		175,000,000			157,000,000
DELAWARE:
Mideast RA Industrial Portfolio—Industrial building		16,014,758			14,258,555
FLORIDA:
701 Brickell—Office building		231,239,379			201,173,724
4200 West Cypress Street—Office building		43,100,425			36,691,519
Golfview—Apartments		—			30,835,506
Maitland Promenade One—Office building		—			37,817,891
Plantation Grove—Shopping center		15,010,406			13,800,000
Pointe on Tampa Bay—Office building		50,573,824			44,711,876

TIAA Real Estate Account Prospectus | 103


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


	VALUE

LOCATION/DESCRIPTION	2006			2005


Publix at Weston Commons—Shopping center	$	54,411,436	⁽¹⁾	$	—
Quiet Waters at Coquina Lakes—Apartments		24,006,100			20,912,293
Royal St. George—Apartments		25,000,000			21,400,000
Sawgrass Office Portfolio—Office building		72,000,000			59,700,000
South Florida Apartment Portfolio—Apartments		65,099,785			56,400,000
Suncrest Village—Shopping center		17,009,378			16,400,000
The Fairways of Carolina—Apartments		25,309,965			21,100,000
The Greens at Metrowest—Apartments		21,011,825			18,200,000
The North 40 Office Complex—Office building		63,500,000			—
Urban Centre—Office building		121,000,000			106,007,400
GEORGIA:
1050 Lenox Park—Apartments		79,470,836			71,000,000
Alexan Buckhead—Apartments		—			34,800,000
Atlanta Industrial Portfolio—Industrial building		77,863,416			73,825,000
Glenridge Walk—Apartments		48,710,574			45,300,000
Reserve at Sugarloaf—Apartments		49,500,000	⁽¹⁾		44,800,000	⁽¹⁾
Shawnee Ridge Industrial Portfolio—Industrial building		76,117,193			44,418,860
ILLINOIS:
Chicago Caleast Industrial Portfolio—Industrial building		74,999,590			74,622,731
Chicago Industrial Portfolio—Industrial building		89,104,640			72,000,000
Columbia Centre III—Office building		—			28,700,000
East North Central RA Industrial Portfolio—Industrial building		37,503,284			37,717,159
Oak Brook Regency Towers—Office building		83,200,000			73,400,000
Parkview Plaza—Office building		59,400,000			54,500,000
KENTUCKY:
IDI Kentucky Portfolio—Industrial building		66,552,034			58,500,000
MARYLAND:
Broadlands Business Park—Industrial building		35,002,731			—
FEDEX Distribution Facility—Industrial building		8,500,000			8,500,000
GE Appliance East Coast Distribution Facility—Industrial building		48,000,000			46,470,475
MASSACHUSETTS:
99 High Street—Office building		291,806,564	⁽¹⁾		276,266,900	⁽¹⁾
Batterymarch Park II—Office building		13,234,314			11,472,283
Needham Corporate Center—Office building		22,712,550			17,143,612
Northeast RA Industrial Portfolio—Industrial building		30,900,000			29,000,000
The Newbry—Office building		370,745,525			—
NEVADA:
UPS Distribution Facility—Industrial building		15,000,000			15,000,000
NEW JERSEY:
10 Waterview Boulevard—Office building		32,100,000			27,500,000
371 Hoes Lane—Office building		—			11,700,000
Konica Photo Imaging Headquarters—Industrial building		23,100,000			25,300,000
Marketfair—Shopping center		94,058,427			—
Morris Corporate Center III—Office building		114,857,104			97,400,000
NJ Caleast Industrial Portfolio—Industrial building		41,920,988			42,000,000
Plainsboro Plaza—Shopping center		50,900,000			50,745,252
South River Road Industrial—Industrial building		60,600,000			55,000,000

104 | Prospectus TIAA Real Estate Account


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


	VALUE

LOCATION/DESCRIPTION	2006			2005


NEW YORK:
780 Third Avenue—Office building	$	298,000,000		$	230,000,000
The Colorado—Apartments		100,000,000			85,048,163
OHIO:
Columbus Portfolio—Office building		24,600,000			23,000,000
PENNSYLVANIA:
Lincoln Woods—Apartments		37,781,555			35,528,316
TENNESSEE:
Airways Distribution Center—Industrial building		24,857,278			—
Memphis Caleast Industrial Portfolio—Industrial building		52,500,000			54,000,000
Summit Distribution Center—Industrial building		26,300,000			25,900,000
TEXAS:
Butterfield Industrial Park—Industrial building		5,100,000	⁽²⁾		4,618,955	⁽²⁾
Dallas Industrial Portfolio—Industrial building		153,210,519			146,000,000
Four Oaks Place—Office building		306,200,984			295,239,109
Houston Apartment Portfolio—Apartments		306,042,523			—
Lincoln Centre—Office building		270,000,000	⁽¹⁾		255,311,299
Park Place on Turtle Creek—Office building		44,573,669			—
Pinnacle Industrial /DFW Trade Center—Industrial building		45,874,807			—
South Frisco Village—Shopping center		47,014,065	⁽¹⁾		—
The Caruth—Apartments		60,007,237			61,200,000
The Legends at Chase Oaks—Apartments		29,025,236			28,499,971
The Maroneal—Apartments		39,113,694			35,000,000
UNITED KINGDOM:
1& 7 Westferry Circus—Office building		428,574,628	⁽¹⁾		373,116,817	⁽¹⁾
UTAH:
Landmark at Salt Lake City (Building #4)—Industrial building		16,509,871			14,700,000
VIRGINIA:
8270 Greensboro Drive—Office building		62,000,000			60,200,000
Ashford Meadows—Apartments		89,091,341			78,904,526
Fairgate at Ballston—Office building		—			35,300,000
Monument Place—Office building		58,600,000			53,000,000
One Virginia Square—Office building		53,000,000			47,000,000
The Ellipse at Ballston—Office building		85,439,350			—
WASHINGTON:
Creeksides at Centerpoint—Office building		40,508,139			—
IDX Tower—Office building		398,990,017	⁽¹⁾		370,000,000	⁽¹⁾
Millennium Corporate Park—Office building		139,107,181			—
Northwest RA Industrial Portfolio—Industrial building		20,684,499			19,700,000
Rainier Corporate Park—Industrial building		69,362,219			64,273,372
Regal Logistics Campus—Industrial building		66,000,000			63,103,879
WASHINGTON DC:
1001 Pennsylvania Avenue—Office building		552,502,209	⁽¹⁾		502,993,710	⁽¹⁾
1015 15th Street—Office building		—			73,121,166
1401 H Street, NW—Office building		207,806,286	⁽¹⁾		—
1900 K Street—Office building		255,002,226			230,000,000
Mazza Gallerie—Shopping center		86,350,179			86,001,109

TOTAL REAL ESTATE PROPERTIES
(Cost $9,462,471,032 and $7,355,833,152)		10,743,487,689			7,977,600,751

TIAA Real Estate Account Prospectus | 105


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


	VALUE

LOCATION/DESCRIPTION	2006			2005


REAL ESTATE JOINT VENTURES AND
LIMITED PARTNERSHIPS—12.56% AND 12.35%

REAL ESTATE JOINT VENTURES—10.76% AND 10.64%

CA—Colorado Center LP
Yahoo Center (50% Account Interest)	$	187,766,625	⁽⁴⁾	$	138,531,366	⁽⁴⁾
CA—Treat Towers LP
Treat Towers (75% Account Interest)		94,023,131			93,964,192
GA—Buckhead LLC
Prominence in Buckhead (75% Account Interest)		107,256,320			97,142,406
Florida Mall Associates, Ltd.
The Florida Mall (50% Account Interest)		237,919,775	⁽⁴⁾		208,013,192	⁽⁴⁾
IL—161 Clark Street LLC
161 North Clark Street (75% Account Interest)		189,183,793			175,578,714
One Boston Place REIT
One Boston Place (50.25% Account Interest)		177,900,327			149,723,498
Storage Portfolio I, LLC
Storage Portfolio(3) (75% Account Interest)		74,864,074	⁽⁴⁾		63,237,298	⁽⁴⁾
Strategic Ind Portfolio I, LLC
IDI Nationwide Industrial Portfolio(3) (60% Account Interest)		70,348,753	⁽⁴⁾		66,871,766	⁽⁴⁾
Teachers REA IV, LLC
Tyson’s Executive Plaza II (50% Account Interest)		40,570,382			34,032,806
TREA Florida Retail, LLC
Florida Retail Portfolio (80% Account Interest)		265,396,677			—
West Dade Associates
Miami International Mall (50% Account Interest)		97,300,131	⁽⁴⁾		82,290,482	⁽⁴⁾
West Town Mall, LLC
West Town Mall (50% Account Interest)		126,214,963	⁽⁴⁾		112,650,844	⁽⁴⁾

TOTAL REAL ESTATE JOINT VENTURES
(Cost $1,168,027,179 and $888,034,873)		1,668,744,951			1,222,036,564


LIMITED PARTNERSHIPS—1.80% AND 1.71%

Cobalt Industrial Reit (11.0131% Account Interest)		26,506,381			8,352,409
Colony Realty Partners Lp (5.27% Account Interest)		26,382,659			13,481,704
Essex Property Trust, Inc. (10% Account Interest)		—			487,306
Heitman Value Partners Fund (8.43% Account Interest)		24,578,388			8,106,810
Lion Gables Apartment Fund (18.45% Account Interest)		179,013,211			150,000,000
Mezz Fund (19.75% Account Interest)		454,319			1,975,927
Mony/Transwestern Mezz RP (16.67% Account Interest)		22,348,093			14,142,822

TOTAL LIMITED PARTNERSHIPS
(Cost $245,295,745 and $198,006,414)		279,283,051			196,546,978

TOTAL REAL ESTATE JOINT VENTURES AND LIMITED PARTNERSHIPS
(Cost $1,413,322,924 and $1,086,041,287)		1,948,028,002			1,418,583,542

106 | Prospectus TIAA Real Estate Account


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


SHARES						VALUE

2006		2005		ISSUER		2006		2005


MARKETABLE SECURITIES—17.69% AND 18.19%

REAL ESTATE-RELATED MARKETABLE SECURITIES—4.54% AND 3.91%

REAL ESTATE EQUITY SECURITIES—3.99% AND 3.72%

	—		75,000	Aames Investment Corp.	$	—	$	484,500
	53,300		—	Acadia Realty Trust		1,333,566		—
	68,700		550,000	Affordable Residential Communities LP		800,355		5,241,500
	68,700		—	Affordable Residential Communities LP
				share rights (expiring 1/23/07)		16,488		—
	—		303,820	Alesco Financial Inc.		—		2,576,394
	3,800		—	Alexander’s Inc.		1,594,670		—
	54,400		—	Alexandria Real Estate Equities Inc.		5,461,760		—
	166,985		36,685	AMB Property Corp.		9,786,991		1,803,801
	42,500		40,000	American Campus Communities Inc.		1,209,975		992,000
	244,900		919,000	American Financial Realty Trust		2,801,656		11,028,000
	181,500		—	Apartment Investment & Management Co.		10,167,630		—
	408,900		450,000	Archstone—Smith Trust		23,802,069		18,850,500
	118,500		150,000	Ashford Hospitality Trust Inc.		1,475,325		1,573,500
	33,300		—	Associated Estates Realty Corp.		457,542		—
	138,900		40,000	AvalonBay Communities Inc.		18,063,945		3,570,000
	—		150,000	Bimini Mortgage Management Inc.		—		1,357,500
	122,400		—	BioMed Realty Trust Inc.		3,500,640		—
	217,200		—	Boston Properties Inc.		24,300,336		—
	171,500		—	Brandywine Realty Trust		5,702,375		—
	94,200		30,000	BRE Properties Inc.		6,124,884		1,364,400
	220,300		270,000	Brookfield Properties Corp.		8,664,399		7,943,400
	105,200		—	Camden Property Trust		7,769,020		—
	—		194,000	Carramerica Realty Corp.		—		6,718,220
	121,500		—	CBL & Associates Properties Inc.		5,267,025		—
	74,900		424,000	Cedar Shopping Centers Inc.		1,191,659		5,965,680
	—		50,000	Centerpoint Properties Corp.		—		2,474,000
	—		280,000	Cogdell Spencer Inc.		—		4,729,200
	87,600		—	Colonial Properties Trust		4,106,688		—
	80,600		—	Corporate Office Properties Trust		4,067,882		—
	75,500		—	Cousins Properties Inc.		2,662,885		—
	179,000		—	Crescent Real Estate Equities Company		3,535,250		—
	—		976,000	Deerfield Triarc Capital Corp.		—		13,371,200
	204,000		380,000	Developers Diversified Realty Corp.		12,841,800		17,867,600
	125,500		—	DiamondRock Hospitality Co.		2,260,255		—
	84,100		—	Digital Realty Trust Inc.		2,878,743		—
	123,500		—	Douglas Emmett Inc.		3,283,865		—
	252,100		193,400	Duke Realty Corp.		10,310,890		6,459,560
	42,900		—	EastGroup Properties Inc.		2,297,724		—
	—		1,087,000	ECC Capital Corp.		—		2,456,620
	49,900		600,000	Education Realty Trust Inc.		737,023		7,734,000
	103,400		—	Equity Inns Inc.		1,650,264		—
	38,800		—	Equity Lifestyle Properties Inc.		2,111,884		—
	654,500		—	Equity Office Properties Trust		31,527,265		—

TIAA Real Estate Account Prospectus | 107


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


SHARES					VALUE

2006		2005		ISSUER	2006		2005


	69,900		—	Equity One Inc.	$	1,863,534	$	—
	544,300		180,000	Equity Residential		27,623,225		7,041,600
	43,600		—	Essex Property Trust Inc.		5,635,300		—
	120,200		580,577	Extra Space Storage Inc.		2,194,852		8,940,886
	103,200		—	Federal Realty Investment Trust		8,772,000		—
	115,300		—	FelCor Lodging Trust Inc.		2,518,152		—
	—		1,367,000	Feldman Mall Properties Inc.		—		16,417,670
	84,300		—	First Industrial Realty Trust Inc.		3,952,827		—
	41,600		111,600	First Potomac Realty Trust		1,210,976		2,968,560
	423,600		110,000	General Growth Properties Inc.		22,124,628		5,168,900
	69,600		—	Glimcher Realty Trust		1,859,016		—
	73,800		404,800	GMH Communities Trust		749,070		6,278,448
	—		348,700	Gramercy Capital Corp./New York		—		7,943,386
	—		300,000	Great Wolf Resorts Inc.		—		3,093,000
	59,500		562,000	Hersha Hospitality Trust		674,730		5,063,620
	107,500		150,000	Highland Hospitality Corp.		1,531,875		1,657,500
	101,700		—	Highwoods Properties Inc.		4,145,292		—
	—		60,000	Hilton Hotels Corp.		—		1,446,600
	64,000		80,000	Home Properties Inc.		3,793,280		3,264,000
	—		450,000	HomeBanc Corp./Atlanta GA		—		3,366,000
	147,900		—	Hospitality Properties Trust		7,029,687		—
	973,570		300,000	Host Hotels & Resorts Inc.		23,901,143		5,685,000
	396,700		—	HRPT Properties Trust		4,899,245		—
	116,700		—	Inland Real Estate Corp.		2,184,624		—
	84,800		—	Innkeepers USA Trust		1,314,400		—
	—		300,000	Interstate Hotels & Resorts Inc.		—		1,311,000
	—		80,000	Istar Financial Inc.		—		2,852,000
	—		1,958,000	Jameson Inns Inc.		—		4,209,700
	—		100,000	JER Investors Trust Inc.		—		1,695,000
	59,400		—	Kilroy Realty Corp.		4,633,200		—
	409,521		108,000	Kimco Realty Corp.		18,407,969		3,464,640
	55,300		426,000	Kite Realty Group Trust		1,029,686		6,590,220
	—		300,000	KKR Financial Corp.		—		7,197,000
	75,000		200,000	LaSalle Hotel Properties		3,438,750		7,344,000
	—		120,000	Lexington Realty Trust		—		2,556,000
	167,000		—	Liberty Property Trust		8,206,380		—
	—		1,266,660	Lodgian Inc.		—		13,591,262
	—		200,000	LTC Properties Inc.		—		4,206,000
	135,900		75,000	Macerich Co./The		11,764,863		5,035,500
	118,700		400,000	Mack—Cali Realty Corp.		6,053,700		17,280,000
	81,000		—	Maguire Properties Inc.		3,240,000		—
	—		200,000	Medical Properties Trust Inc.		—		1,956,000
	44,000		—	Mid—America Apartment Communities		2,518,560		—
	100,200		40,000	Mills Corp./The		2,004,000		1,677,600
	—		100,000	Mission West Properties		—		974,000
	—		331,200	Monmouth Reit		—		2,656,224
	—		300,000	Mortgage IT Holdings Inc.		—		4,098,000

108 | Prospectus TIAA Real Estate Account


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


SHARES					VALUE

2006		2005		ISSUER, CURRENT RATE AND MATURITY DATE	2006		2005


	198,000		—	New Plan Excel Realty Trust	$	5,441,040	$	—
	—		130,000	Newcastle Investment Corp.		—		3,230,500
	—		100,000	Novastar Financial Inc.		—		2,811,000
	—		525,000	Origen Financial Inc.		—		3,738,000
	25,100		328,100	Parkway Properties Inc./Md		1,280,351		13,169,934
	69,500		—	Pennsylvania Real Estate Investment Trust		2,736,910		—
	79,300		—	Post Properties Inc.		3,624,010		—
	462,500		400,000	Prologis		28,106,125		18,688,000
	30,200		—	PS Business Parks Inc.		2,135,442		—
	241,114		30,000	Public Storage Inc.		23,508,615		2,031,600
	—		100,000	RAIT Financial Trust		—		2,592,000
	28,500		—	Ramco—Gershenson Properties		1,086,990		—
	157,000		—	Reckson Associates Realty Corp.		7,159,200		—
	129,300		236,000	Regency Centers Corp.		10,107,381		13,912,200
	—		384,000	Republic Property Trust		—		4,608,000
	20,600		—	Saul Centers Inc.		1,136,914		—
	412,821		305,721	Simon Property Group Inc.		41,814,639		23,427,400
	86,300		—	SL Green Realty Corp.		11,458,914		—
	33,500		—	Sovran Self Storage Inc.		1,918,880		—
	—		350,000	Starwood Hotels & Resorts Worldwide		—		22,351,000
	134,700		—	Strategic Hotels & Resorts Inc.		2,935,113		—
	30,900		—	Sun Communities Inc.		999,924		—
	109,400		—	Sunstone Hotel Investors Inc.		2,924,262		—
	58,300		—	Tanger Factory Outlet Centers		2,278,364		—
	98,400		—	Taubman Centers Inc.		5,004,624		—
	—		111,200	Thomas Properties Group Inc.		—		1,391,112
	—		50,000	Trizec Properties Inc.		—		1,146,000
	250,400		100,000	United Dominion Realty Trust Inc.		7,960,216		2,344,000
	95,400		—	U-Store-It Trust		1,960,470		—
	—		95,000	Ventas Inc.		—		3,041,900
	245,800		200,000	Vornado Realty Trust		29,864,700		16,694,000
	85,500		—	Washington Real Estate Investment Trust		3,420,000		—
	148,500		—	Weingarten Realty Investors		6,847,335		—
	—		944	Windrose Medical Properties Trust		—		14,028
	44,700		—	Winston Hotels Inc.		592,275		—

TOTAL REAL ESTATE EQUITY SECURITIES
(Cost $484,071,757 and $411,877,936)						619,342,386		426,781,565

TIAA Real Estate Account Prospectus | 109


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


PRINCIPAL					VALUE

2006		2005		ISSUER, CURRENT RATE AND MATURITY DATE	2006		2005


COMMERCIAL MORTGAGE-BACKED SECURITIES—0.55% AND 0.19%

$	10,000,000	$	—	Commercial Mortgage Pass
				5.450% 12/15/20	$	10,000,000	$	—
	3,389,773		—	Credit Suisse Mortgage Company
				5.470% 4/15/21		3,390,255		—
	10,000,000		10,000,000	GS Mortgage Securities Co
				5.682% 5/3/18		10,186,930		10,217,650
	8,780,566		—	GS Mortgage Securities Co
				5.420% 6/6/20		8,782,059		—
	9,996,970		—	JP Morgan Chase Commercial
				5.440% 11/15/18		9,996,970		—
	9,298,609		—	Lehman Brothers Floating
				5.430% 9/15/21		9,298,971		—
	9,143,864		—	Morgan Stanley Capital
				5.440% 7/15/19		9,144,605		—
	10,000,000		10,000,000	Morgan Stanley Dean Witter
				5.712% 2/3/16		10,137,150		10,061,730
	—		1,601,634	TrizecHahn Office Property
				5.700% 3/15/13		—		1,601,653
	14,642,368		—	Wachovia Bank Commercial
				5.440% 9/15/21		14,642,997		—

TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (Cost $85,255,038 and $21,604,079)						85,579,937		21,881,033

TOTAL REAL ESTATE-RELATED MARKETABLE SECURITIES (Cost $569,326,795 and $433,482,015)						704,922,323		448,662,598


OTHER MARKETABLE SECURITIES—13.15% AND 14.28%

COMMERCIAL PAPER—10.79% AND 11.67%

	—		25,000,000	Abbey National North America LLC
				4.330% 1/5/06		—		24,994,000
	25,000,000		—	Abbey National North America LLC
				5.260% 1/17/07		24,945,207		—
	—		25,000,000	Abbey National Plc
				4.280% 1/17/06		—		24,999,500
	—		10,000,000	Alabama Power Co
				4.250% 1/12/06		—		9,989,100
	10,000,000		—	American Express Bank, FSB
				5.565% 1/8/07		10,000,235		—
	1,500,000		—	American Express Bank, FSB
				5.290% 1/12/07		1,499,996		—
	24,000,000		—	American Express Bank, FSB
				5.280% 1/18/07		23,999,578		—
	20,000,000		—	American Express Centurion Bank
				5.290% 1/9/07		19,999,954		—
	19,165,000		—	American Express Centurion Bank
				5.290% 1/8/07		19,164,962		—

110 | Prospectus TIAA Real Estate Account


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


PRINCIPAL					VALUE

2006		2005		ISSUER, CURRENT RATE AND MATURITY DATE	2006		2005


$	—	$	25,000,000	American Express Centurion Bank
				4.310% 1/19/06	$	—	$	25,000,000
	25,000,000		—	American Express Centurion Bank
				5.290% 1/3/07		24,999,988		—
	—		2,430,000	American Honda Finance, Corp
				4.240% 1/9/06		—		2,428,250
	50,000,000		—	American Honda Finance, Corp
				5.260% 1/22/07		49,853,055		—
	17,475,000		—	American Honda Finance, Corp
				5.210% 2/9/07		17,377,605		—
	10,000,000		—	Anheuser — Busch Co.
				5.240% 1/19/07		9,975,019		—
	—		25,000,000	Atlantis One Funding Corp.
				4.205% 2/8/06		—		24,890,750
	—		10,000,000	Atlantis One Funding Corp.
				4.380% 2/24/06		—		9,936,500
	—		25,000,000	Bank Of Montreal
				4.285% 1/26/06		—		24,999,500
	—		30,000,000	Barclays Bank, PLC
				4.420% 3/14/06		—		29,998,200
	—		15,000,000	Barclays Bank, PLC
				4.329% 8/30/06		—		14,999,400
	25,000,000		—	Barclay’s U.S. Funding Corp
				5.240% 1/26/07		24,912,383		—
	—		18,040,000	Becton Dickinson & Co
				4.210% 1/24/06		—		17,994,720
	—		13,100,000	Beta Finance, Inc
				4.140% 1/12/06		—		13,085,590
	—		11,000,000	Beta Finance, Inc
				4.070% 1/17/06		—		10,981,190
	20,000,000		—	BMW US Capital Corp
				5.250% 2/7/07		19,894,400		—
	23,050,000		—	BMW US Capital Corp
				5.210% 2/9/07		22,921,533		—
	—		20,000,000	Calyon
				4.100% 1/19/06		—		19,997,800
	—		10,000,000	Canadian Wheat Board (The)
				1.870% 2/6/06		—		9,959,500
	—		14,000,000	CC (USA), Inc
				3.830% 1/13/06		—		13,982,920
	—		40,000,000	Ciesco LP
				4.280% 1/23/06		—		39,903,200
	—		10,000,000	Ciesco LP
				4.370% 2/24/06		—		9,936,500
	25,000,000		—	Ciesco LP
				5.260% 1/9/07		24,973,942		—
	14,000,000		—	Ciesco LP
				5.260% 1/25/07		13,952,299		—

TIAA Real Estate Account Prospectus | 111


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


PRINCIPAL					VALUE

2006		2005		ISSUER, CURRENT RATE AND MATURITY DATE	2006		2005


$	—	$	37,000,000	Citigroup Funding Inc.
				4.220% 1/20/06	$	—	$	36,925,260
	—		13,000,000	Citigroup Funding Inc.
				4.350% 2/21/06		—		12,923,560
	50,000,000		—	Citigroup Funding Inc.
				5.250% 1/11/07		49,934,060		—
	35,825,000		—	Citigroup Funding Inc.
				5.250% 2/5/07		35,647,365		—
	—		24,150,000	Colgate-Palmolive Co
				4.250% 1/6/06		—		24,141,306
	—		15,000,000	Corporate Asset Funding Corp, Inc
				4.150% 1/13/06		—		14,981,700
	—		5,035,000	Corporate Asset Funding Corp, Inc
				4.200% 1/23/06		—		5,022,815
	—		16,000,000	Corporate Asset Funding Corp, Inc
				4.210% 1/25/06		—		15,957,440
	—		5,905,000	Corporate Asset Funding Corp, Inc
				4.290% 1/31/06		—		5,884,982
	—		2,020,000	Corporate Asset Funding Corp, Inc
				4.340% 2/17/06		—		2,008,930
	6,000,000		—	Corporate Asset Funding Corp, Inc
				5.240% 1/22/07		5,982,193		—
	8,760,000		—	Corporate Asset Funding Corp, Inc
				5.260% 1/29/07		8,725,048		—
	25,000,000		—	Corporate Asset Funding Corp, Inc
				5.250% 2/7/07		24,867,250		—
	54,000,000		—	Corporate Asset Funding Corp, Inc
				5.250% 2/8/07		53,705,295		—
	—		25,000,000	Deutsche Bank
				4.270% 2/14/06		—		24,997,000
	3,000,000		—	Deutsche Bank
				5.290% 1/9/07		2,999,962		—
	30,000,000		—	Deutsche Bank
				5.300% 1/22/07		29,999,154		—
	—		50,000,000	Dexia Bank
				4.280% 1/30/06		—		49,998,000
	—		8,000,000	Dorada Finance Inc.
				3.900% 1/23/06		—		7,980,640
	—		21,500,000	Dorada Finance Inc.
				4.250% 2/16/06		—		21,384,975
	—		20,000,000	Dorada Finance Inc.
				4.300% 2/27/06		—		19,865,600
	7,000,000		—	Dorada Finance Inc.
				5.250% 1/9/07		6,992,704		—
	—		13,000,000	Edison Asset Securitization, LLC
				4.190% 1/17/06		—		12,977,770

112 | Prospectus TIAA Real Estate Account


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


PRINCIPAL					VALUE

2006		2005		ISSUER, CURRENT RATE AND MATURITY DATE	2006		2005


$	—	$	20,000,000	Edison Asset Securitization, LLC
				1.720% 2/22/06	$	—	$	19,877,800
	—		7,248,000	Edison Asset Securitization, LLC
				4.390% 4/7/06		—		7,162,981
	24,000,000		—	Edison Asset Securitization, LLC
				5.230% 1/19/07		23,939,287		—
	10,000,000		—	Edison Asset Securitization, LLC
				5.240% 2/1/07		9,955,666		—
	32,900,000		—	Fairway Finance Company, LLC
				5.240% 1/17/07		32,826,521		—
	—		20,000,000	FCAR Owner Trust I
				4.340% 2/7/06		—		19,915,000
	—		17,000,000	First Tennessee National Bank
				4.330% 2/6/06		—		16,999,660
	—		21,590,000	General Electric Capital Corp
				4.440% 4/28/06		—		21,282,343
	—		25,000,000	General Electric Capital Corp
				4.520% 6/28/06		—		24,435,000
	23,760,000		—	General Electric Capital Corp
				5.250% 1/18/07		23,704,454		—
	13,155,000		—	General Electric Capital Corp
				5.240% 2/8/07		13,084,017		—
	30,000,000		—	General Electric Capital Corp
				5.250% 2/15/07		29,807,499		—
	—		35,000,000	Goldman Sachs Group, LP
				4.280% 2/3/06		—		34,870,150
	—		29,140,000	Govco Incorporated
				4.020% 1/9/06		—		29,118,436
	—		10,000,000	Govco Incorporated
				2.280% 1/18/06		—		9,981,700
	—		9,000,000	Govco Incorporated
				4.390% 3/14/06		—		8,922,420
	50,000,000		—	Govco Incorporated
				5.240% 1/5/07		49,977,665		—
	25,700,000		—	Govco Incorporated
				5.260% 3/8/07		25,454,668		—
	—		5,015,000	Grampian Funding LLC
				4.320% 1/23/06		—		5,002,814
	—		20,000,000	Grampian Funding LLC
				4.040% 2/1/06		—		19,929,600
	—		10,000,000	Greyhawk Funding LLC
				4.000% 1/6/06		—		9,996,300
	33,000,000		—	Greyhawk Funding LLC
				5.230% 2/6/07		32,829,314		—
	—		25,000,000	Harrier Finance Funding (US) LLC
				3.810% 1/25/06		—		24,933,500

TIAA Real Estate Account Prospectus | 113


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


PRINCIPAL					VALUE

2006		2005		ISSUER, CURRENT RATE AND MATURITY DATE	2006		2005


$	—	$	10,085,000	HBOS Treasury Srvcs Plc
				4.200% 2/15/06	$	—	$	10,033,163
	8,415,000		—	HBOS Treasury Srvcs Plc
				5.260% 3/21/07		8,319,680		—
	40,000,000		—	HSBC Finance Corporation
				5.250% 1/26/07		39,859,012		—
	19,000,000		—	IBM (International Business Machine Corp)
				5.240% 1/10/07		18,966,750		—
	22,200,000		—	IBM Capital Inc.
				5.250% 3/16/07		21,963,166		—
	25,000,000		—	ING (US) Finance
				5.230% 3/27/07		24,695,265		—
	24,000,000		—	Johnson & Johnson
				5.200% 1/2/07		24,000,000		—
	25,000,000		—	Johnson & Johnson
				5.250% 1/18/07		24,941,555		—
	20,259,000		—	Kimberly—Clark Worldwide, Inc.
				5.265% 1/29/07		20,179,184		—
	—		31,740,000	Kitty Hawk Funding Corp.
				4.295% 1/12/06		—		31,705,086
	—		10,000,000	Kitty Hawk Funding Corp.
				1.680% 2/15/06		—		9,947,600
	—		25,000,000	Links Finance L.L.C.
				4.270% 2/10/06		—		24,884,750
	—		25,000,000	Links Finance L.L.C.
				4.380% 3/13/06		—		24,787,750
	10,000,000		—	Links Finance L.L.C.
				5.230% 1/16/07		9,979,190		—
	30,000,000		—	Morgan Stanley Dean Witter
				5.255% 2/12/07		29,819,598		—
	—		10,000,000	Paccar Financial Corp
				4.020% 1/12/06		—		9,989,200
	—		13,655,000	Paccar Financial Corp
				4.360% 3/3/06		—		13,557,913
	—		10,000,000	Park Avenue Receivables Corp
				2.150% 1/4/06		—		9,998,800
	—		20,080,000	Park Avenue Receivables Corp
				4.270% 1/27/06		—		20,021,166
	11,601,000		—	Pitney Bowes Inc
				5.240% 1/4/07		11,597,578		—
	—		10,000,000	Preferred Receivables Funding Corp
				4.130% 1/6/06		—		9,996,300
	—		19,150,000	Private Export Funding Corporation
				4.170% 2/7/06		—		19,070,145
	—		15,000,000	Private Export Funding Corporation
				4.080% 2/13/06		—		14,926,500

114 | Prospectus TIAA Real Estate Account


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


PRINCIPAL					VALUE

2006		2005		ISSUER, CURRENT RATE AND MATURITY DATE	2006		2005


$	—	$	9,000,000	Private Export Funding Corporation
				4.300% 3/9/06	$	—	$	8,929,260
	—		5,000,000	Private Export Funding Corporation
				4.335% 4/4/06		—		4,944,250
	20,500,000		—	Private Export Funding Corporation
				5.220% 1/3/07		20,496,976		—
	1,845,000		—	Private Export Funding Corporation
				5.300% 1/11/07		1,842,553		—
	23,000,000		—	Private Export Funding Corporation
				5.260% 1/18/07		22,945,922		—
	6,000,000		—	Private Export Funding Corporation
				5.230% 1/23/07		5,981,485		—
	15,000,000		—	Private Export Funding Corporation
				5.220% 2/15/07		14,903,199		—
	14,120,000		—	Private Export Funding Corporation
				5.230% 3/6/07		13,989,828		—
	—		20,000,000	Procter & Gamble
				4.025% 1/10/06		—		19,983,200
	—		3,500,000	Procter & Gamble
				4.090% 1/26/06		—		3,490,445
	25,000,000		—	Procter & Gamble
				5.225% 1/12/07		24,963,380		—
	25,000,000		—	Procter & Gamble International S.C
				5.250% 2/1/07		24,890,625		—
	50,000,000		—	Procter & Gamble International S.C
				5.230% 2/14/07		49,686,455		—
	—		50,000,000	Ranger Funding Company LLC
				4.075% 1/17/06		—		49,914,500
	10,000,000		—	Ranger Funding Company LLC
				5.250% 1/24/07		9,967,385		—
	20,000,000		—	Ranger Funding Company LLC
				5.260% 1/25/07		19,931,856		—
	23,760,000		—	Ranger Funding Company LLC
				5.260% 2/12/07		23,616,311		—
	—		17,000,000	Regions Bank (Alabama)
				4.180% 1/30/06		—		16,998,130
	10,000,000		—	Scaldis Capital LLC
				5.300% 1/10/07		9,988,068		—
	25,000,000		—	Sheffield Receivables Corporation
				5.250% 1/12/07		24,962,735		—
	35,750,000		—	Sheffield Receivables Corporation
				5.240% 1/17/07		35,670,156		—
	—		540,000	Sherwin—Williams Co
				4.080% 2/7/06		—		537,732
	—		14,390,000	Sigma Finance Inc
				3.890% 1/12/06		—		14,374,171

TIAA Real Estate Account Prospectus | 115


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


PRINCIPAL					VALUE

2006		2005		ISSUER, CURRENT RATE AND MATURITY DATE	2006		2005


$	—	$	17,000,000	Sigma Finance Inc
				4.230% 1/31/06	$	—	$	16,942,370
	—		5,575,000	Sigma Finance Inc
				4.340% 2/27/06		—		5,537,536
	—		5,000,000	Sigma Finance Inc
				3.940% 3/1/06		—		4,965,150
	—		8,000,000	Sigma Finance Inc
				4.390% 3/8/06		—		7,937,120
	7,850,000		—	Societe Generale North America, Inc
				5.255% 1/10/07		7,836,262		—
	25,000,000		—	Societe Generale North America, Inc
				5.250% 1/19/07		24,937,902		—
	—		6,030,000	Societe Generale North America, Inc
				4.390% 3/20/06		—		5,974,281
	20,000,000		—	SunTrust Banks, Inc.
				5.245% 5/1/07		20,001,700		—
	—		27,600,000	Swedish Export Credit Corp
				4.260% 1/18/06		—		27,550,596
	14,675,000		—	Swedish Export Credit Corp
				5.319% 1/10/07		14,657,788		—
	33,895,000		—	Swedish Export Credit Corp
				5.250% 1/16/07		33,825,624		—
	30,000,000		—	Swedish Export Credit Corp
				5.240% 2/13/07		29,816,250		—
	5,800,000		—	The Concentrate Manufacturing Company of
				Ireland 5.260% 1/9/07		5,790,695		—
	50,000,000		—	Toyota Motor Credit Corp
				5.235% 1/23/07		49,846,580		—
	30,000,000		—	Toyota Motor Credit Corp
				5.230% 1/25/07		29,899,221		—
	—		15,000,000	Toyota Motor Credit Corp
				4.300% 10/10/06		—		15,000,900
	19,000,000		—	U.S. Bancorp
				5.245% 12/5/07		18,998,765		—
	—		24,000,000	UBS Finance, (Delaware) Inc
				4.310% 2/10/06		—		23,891,280
	—		3,120,000	UBS Finance, (Delaware) Inc
				1.760% 4/19/06		—		3,079,190
	17,500,000		—	UBS Finance, (Delaware) Inc
				5.230% 2/20/07		17,375,018		—

	34,530,000		—	Variable Funding Capital Corporation
				5.320% 2/2/07		34,371,217		—
	30,000,000		—	Variable Funding Capital Corporation
				5.250% 2/5/07		29,848,698		—
	25,000,000		—	Variable Funding Capital Corporation
				5.250% 2/6/07		24,870,208		—

116 | Prospectus TIAA Real Estate Account


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	continued


PRINCIPAL					VALUE

2006		2005		ISSUER, CURRENT RATE AND MATURITY DATE	2006		2005


$	—		$25,000,000	Variable Funding Capital Corporation
				4.000% 1/5/06	$	—	$	24,993,750
	—		5,010,000	Washington Gas Light Co
				4.330% 1/9/06		—		5,006,393
	—		20,000,000	Wells Fargo
				4.320% 2/9/06		—		19,999,600
	—		19,460,000	Yorktown Capital, LLC
				4.190% 1/4/06		—		19,457,665
	—		4,066,000	Yorktown Capital, LLC
				4.275% 1/6/06		—		4,064,496
	—		2,625,000	Yorktown Capital, LLC
				4.280% 2/10/06		—		2,611,893
	23,415,000		—	Yorktown Capital, LLC
				1.340% 1/4/07		23,408,027		—

TOTAL COMMERCIAL PAPER
(Cost $1,672,398,634 and $1,340,511,661)						1,672,544,145		1,340,656,583


GOVERNMENT AGENCY BONDS—2.36% AND 2.61%

	17,700,000		—	Federal Home Loan Banks
				5.135% 1/5/07		17,694,938		—
	19,745,000		—	Federal Home Loan Banks
				5.190% 1/12/07		19,719,628		—
	39,969,000		—	Federal Home Loan Banks
				5.130% 1/19/07		39,877,711		—
	23,753,000		—	Federal Home Loan Banks
				2.330% 2/28/07		23,563,451		—
	—		7,030,000	Federal Home Loan Banks
				1.750% 1/3/06		—		7,027,383
	—		50,000,000	Federal Home Loan Mortgage Corporation
				4.150% 1/31/06		—		49,839,500
	13,654,000		—	Federal Home Loan Mortgage Corporation
				2.190% 1/2/07		13,654,000		—
	22,250,000		—	Federal Home Loan Mortgage Corporation
				1.250% 1/16/07		22,208,704		—
	43,400,000		—	Federal Home Loan Mortgage Corporation
				5.151% 1/24/07		43,269,887		—
	50,000,000		—	Federal Home Loan Mortgage Corporation
				1.240% 1/30/07		49,807,250		—
	33,675,000		—	Federal Home Loan Mortgage Corporation
				5.150% 1/31/07		33,540,367		—
	—		30,000,000	Federal Home Loan Mortgage Corporation
				2.380% 1/3/06		—		30,000,000
	—		3,840,000	Federal Home Loan Mortgage Corporation
				1.780% 1/9/06		—		3,837,350
	—		18,000,000	Federal Home Loan Mortgage Corporation
				4.210% 2/9/06		—		17,922,240

TIAA Real Estate Account Prospectus | 117


Statement of investments \|	TIAA Real Estate Account December 31, 2006 and 2005	concluded


PRINCIPAL					VALUE

2006		2005		ISSUER, CURRENT RATE AND MATURITY DATE	2006		2005


$	—	$	46,555,000	Federal National Mortgage
				4.350% 1/11/06	$	—	$	46,512,169
	30,000,000		—	Federal National Mortgage Association
				1.260% 2/6/07		29,854,650		—
	23,768,000		—	Federal National Mortgage Association
				1.740% 1/8/07		23,751,029		—
	50,000,000		—	Federal National Mortgage Association
				1.240% 3/21/07		49,452,450		—
	—		37,615,000	Federal National Mortgage Association
				2.290% 1/10/06		—		37,584,908
	—		3,015,000	Federal National Mortgage Association
				1.830% 2/1/06		—		3,004,809
	—		29,320,000	Federal National Mortgage Association
				4.200% 2/2/06		—		29,217,380
	—		1,766,000	Federal National Mortgage Association
				1.740% 2/15/06		—		1,757,135
	—		50,000,000	Federal National Mortgage Association
				4.240% 2/17/06		—		49,737,500
	—		23,940,000	Federal National Mortgage Association
				4.240% 2/23/06		—		23,797,558

TOTAL GOVERNMENT AGENCY BONDS
(Cost $366,282,560 and $300,164,529)						366,394,065		300,237,932

TOTAL OTHER MARKETABLE SECURITIES
(Cost $2,038,681,194 and $1,640,676,190)						2,038,938,210		1,640,894,515

TOTAL MARKETABLE SECURITIES
(Cost $2,608,007,989 and $2,074,158,205)						2,743,860,533		2,089,557,113


MORTGAGE LOAN RECEIVABLE—0.48% AND 0.00%


PRINCIPAL					VALUE

2006		2005		BORROWER, CURRENT RATE AND MATURITY DATE	2006		2005

	75,000,000		—	Klingle Corporation
				6.17% 07/10/11		74,660,626		—

TOTAL MORTGAGE LOAN RECEIVABLE
(Cost $75,000,000)						74,660,626		—

TOTAL INVESTMENTS
(Cost $13,558,801,945 and $10,516,032,644)					$	15,510,036,850	$	11,485,741,406



(1)	The investment has a mortgage loan payable outstanding, as indicated in Note 5.

(2)	Leasehold interest only.

(3)	Located throughout the U.S.

(4)	The market value reflects the Account’s interest in the joint venture, net of any debt.

118 | Prospectus TIAA Real Estate Account

Report of Independent Registered Public Accounting Firm

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

In our opinion, the accompanying statements of assets and liabilities, including the statement of investments, and the related statements of operations, changes in net assets and cash flows, present fairly, in all material respects, the financial position of the TIAA Real Estate Account (the “Account”) at December 31, 2005 and 2006, the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Account’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
New York, New York
March 15, 2007

TIAA Real Estate Account Prospectus | 119

Report of Independent Registered Public Accounting Firm

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

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

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations, changes in net assets and cash flows of the Account for the year ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
April 14, 2005

120 | Prospectus TIAA Real Estate Account

Proforma Condensed Statement of Assets and Liabilities (Unaudited)

TIAA Real Estate Account


As of December 31, 2006
	Historical		Adjustments			Proforma

ASSETS
Real estate and other real estate-related investments	$	12,691,515,691	$	2,889,456,503	(a)	$	15,580,972,194
Marketable securities		2,743,860,533		—			2,743,860,533
Other		324,585,109		—			324,585,109

TOTAL ASSETS		15,759,961,333		2,889,456,503			18,649,417,836

Mortgage notes payable		1,437,149,148		2,889,456,503	(a)		4,326,605,651
Payable for securities transactions		1,219,323		—			1,219,323
Accrued real estate property level expenses and taxes		169,657,402		—			169,657,402
Security deposits held		19,242,948		—			19,242,948

TOTAL LIABILITIES		1,627,268,821		2,889,456,503			4,516,725,324

NET ASSETS	$	14,132,692,512	$	—		$	14,132,692,512

TIAA Real Estate Account Prospectus | 121

Proforma Condensed Statement of Operations (Unaudited)

TIAA Real Estate Account


For the Year Ended December 31, 2006
	Historical		Adjustments			Proforma

Rental income	$	834,455,788	$	110,540,084	(b)	$	944,995,872

Operating expenses		207,452,982		31,567,152	(b)		239,020,134
Real estate taxes		110,059,852		14,143,847	(b)		124,203,699
Interest expense		72,160,111		82,609,148	(b)		154,769,259

Total real estate property expenses and taxes		389,672,945		128,320,147			517,993,092

Real estate income, net		444,782,843		(17,780,063	)		427,002,780
Income from real estate joint ventures and limited partnerships		84,671,528		48,440,533	(c)		133,112,061
Interest and dividends		135,407,210		—			135,407,210

TOTAL INCOME, NET		664,861,581		30,660,470			695,522,051
EXPENSES		83,448,664		11,695,465	(d)		95,144,129

INVESTMENT INCOME, NET		581,412,917		18,965,005			600,377,922
REALIZED AND UNREALIZED GAINS		1,032,787,765		—			1,032,787,765

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	1,614,200,682	$	18,965,005		$	1,633,165,687

122 | Prospectus TIAA Real Estate Account

Notes to Proforma Condensed Financial Statements (Unaudited)

TIAA Real Estate Account

Note 1—Purpose and Assumptions

As required by the Securities and Exchange Commission under Regulation S-X Article 11-01(5), these proforma condensed financial statements of the TIAA Real Estate Account (“Account”) have been prepared because the Account has made significant purchases of real estate property investments during the period from January 1, 2006 through the date of this prospectus. During 2006, the Account purchased 23 property investments: nine office properties, seven industrial properties, three apartment properties, three retail properties and an 85% interest in a joint venture that owns four retail centers. During the period from January 1, 2007 through the date of this prospectus, the Account purchased one office property, one retail property in Paris, France and an 85% interest in a joint venture that owns 66 retail centers. Information regarding some of these properties is included under “Recent Transactions” on page 31.

Various assumptions have been made in order to prepare these proforma condensed financial statements. The proforma condensed statement of assets and liabilities has been prepared assuming the real estate property investments purchased during the period from January 1, 2007 through the date of this prospectus were purchased as of December 31, 2006. The proforma condensed statement of operations for the year ended December 31, 2006 has been prepared assuming real estate property investments purchased during the period from January 1, 2006 through the date of this prospectus were purchased as of January 1, 2006.

Note 2—Proforma Adjustments

The following proforma adjustments were made in preparing the proforma condensed financial statements to reflect the purpose described in Note 1.

Proforma Condensed Statement of Assets and Liabilities:


	(a)	To record the cost of the real estate property investments purchased during the period from January 1, 2007 through the date of this prospectus, assuming such investments were purchased with a short-term loan on December 31, 2006.

Proforma Condensed Statement of Operations:


	(b)	To record the rental income and real estate property level expenses of the real estate properties purchased during the period from January 1, 2006 through the date of this prospectus, assuming such properties were owned for the entire year ended December 31, 2006 and were purchased with a short-term loan.

TIAA Real Estate Account Prospectus | 123


	(c)	To record the real estate joint venture income of the joint ventures purchased during the period from January 1, 2006 through the date of this prospectus, assuming the joint venture interests were owned for the entire year ended December 31, 2006 and were purchased with a short-term loan.

	(d)	To record additional investment advisory expense charges which would have been incurred during the year ended December 31, 2006, based on the gross investment amounts involved and assuming the real estate property investments purchased during the period from January 1, 2006 through the date of this prospectus had been purchased as of January 1, 2006.

124 | Prospectus TIAA Real Estate Account

The North 40 Office Complex, Boca Raton, Florida

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property known as The North 40 Office Complex, located in Boca Raton, Florida (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with Rule 3-14 of Securities and Exchange Commission Regulation S-X and, as described in Note 1, is not intended to be a complete presentation of the Property’s revenues and expenses.

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

-s- Friedman LLP

April 28, 2006

TIAA Real Estate Account Prospectus | 125

The North 40 Office Complex, Boca Raton, Florida

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)			Three Months Ended March 31, 2006 (Unaudited)

REVENUES
Base rent		$	3,683,032		$	964,882
FASB Statement No. 13 accrual			181,557			33,404
Other income			2,743,829			736,252

			6,608,418			1,734,538

CERTAIN EXPENSES
Utilities			747,905			206,362
Real estate taxes			562,585			140,646
Management fees			260,519			68,944
Salaries			246,698			64,766
Insurance			240,030			47,342
Janitorial			231,922			57,572
Hurricane costs			199,040			74,316
Repairs and maintenance			175,998			26,056
Landscaping			128,192			29,817
Security			47,573			13,646
Professional fees			10,076			2,050
Administrative			7,767			3,708
Other			11,138			2,531

			2,869,443			737,756

Excess of revenues over certain expenses		$	3,738,975		$	996,782

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 — Organizaton and Basis of Presentation

The Property, located in Boca Raton, Florida, consists of two buildings, 5201 Congress Avenue and 901 Yamato Road. The buildings contain approximately 350,000 square feet of commercial space, 202,000 square feet at 5201 Congress Avenue and 148,000 square feet at 901 Yamato Road, which are currently 99.6% and 100% leased, respectively, to a total of 13 tenants. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

The accompanying financial statements are presented in conformity with Rule 3-14 of Securities and Exchange Commission Regulation S-X. Accordingly, the financial statements are not representative of actual operations for the periods presented, as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the Property, have been excluded.

126 | Prospectus TIAA Real Estate Account

Expenses excluded consist of interest, depreciation and amortization and certain other expenses not directly related to the future operations of the Property.

The statement of revenues and certain expenses for the three months ended March 31, 2006 is unaudited. However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of this statement of revenues and certain expenses for the interim period on the basis described above have been included. The results for such an interim period are not necessarily indicative of the results for the entire year.

2 — Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition

Rental income from leases with scheduled rent increases is recognized on a straight-line basis over the lease term, as required by the Financial Accounting Standards Board’s Statement No. 13, “Accounting for Leases” (FASB Statement No. 13). Recoveries, based on payments for real estate taxes and operating expenses, are estimated and accrued.

3 — Major Tenants

Three tenants lease approximately 60% of the Property’s square footage, and base rent income from these tenants represented approximately 60% of the total for the year ended December 31, 2005.

4 — Operating Leases

Space in the Property is leased to tenants under noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	3,959,000
2007		3,796,000
2008		3,609,000
2009		3,721,000
2010		3,787,000
Thereafter		7,020,000

	$	25,892,000

TIAA Real Estate Account Prospectus | 127

5 — Related Party Transaction

The Property is managed by Flagship Group, Inc., an affiliate of the Property’s owner. Management fees of approximately $261,000 were incurred for the year ended December 31, 2005. Management fees for the three months ended March 31, 2006 were approximately $69,000 (unaudited).

128 | Prospectus TIAA Real Estate Account

Publix at Weston Commons, Weston, Florida

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property known as Publix at Weston Commons, Weston, Florida (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

June 2, 2006

TIAA Real Estate Account Prospectus | 129

Publix at Weston Commons, Weston, Florida

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended		Four Months Ended
	December 31, 2005		April 30, 2006
	(Audited)		(Unaudited)

REVENUES
Rental income	$	2,019,171	$	932,153
Recoveries		543,423		249,603
Other income		480		30

		2,563,074		1,181,786

CERTAIN EXPENSES
Utilities		96,926		72,214
Administrative		8,763		6,367
Repairs and maintenance		11,718		8,817
Site maintenance		223,322		102,253
Real estate taxes		267,272		168,000
Insurance		98,049		44,340
Management fees		93,100		44,562
Nonreimbursed expenses		222,960		124,213

		1,022,110		570,766

Excess of revenues over certain expenses	$	1,540,964	$	611,020

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organizaton and Basis of Presentation

The Property, located in Weston, Florida, contains approximately 127,000 square feet of commercial space. At April 30, 2006, the Property was 96% leased. The tenant leases contain provisions for additional rent based on the pro-rata share of common area maintenance expenses and real estate taxes.

The statement of revenues and certain expenses for the four months ended April 30, 2006 is unaudited. However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of this statement of revenues and certain expenses for the interim period on the basis described above have been included. The results for such an interim period are not necessarily indicative of the results for the entire year.

130 | Prospectus TIAA Real Estate Account

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

Rental income from leases with scheduled rent increases is recognized on a straight-line basis over the lease term. Recoveries, based on payments for real estate taxes and common area maintenance expenses, are estimated and accrued.

3 – Major Tenant

One tenant leases approximately 35% of the Property’s square footage. Rent from this tenant represented approximately 36% of rental income for the year ended December 31, 2005 and 25% for the four months ended April 30, 2006.

4 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	1,896,000
2007		2,686,000
2008		2,699,000
2009		2,678,000
2010		2,445,000
Thereafter		19,574,000

	$	31,978,000

5 – Related Party Transaction

The current owner of the Property pays a monthly management fee to West City Partners, an affiliate, computed at 4% of billings. Management fees paid were approximately $93,100 for the year ended December 31, 2005 and $44,500 for the four months ended April 30, 2006.

TIAA Real Estate Account Prospectus | 131

City Center, Washington, DC

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property known as City Center, located in Washington, DC (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

June 5, 2006

132 | Prospectus TIAA Real Estate Account

City Center, Washington, DC

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended		Three Months Ended
	December 31, 2005		March 31, 2006
	(Audited)		(Unaudited)

REVENUES
Rental income	$	13,138,258	$	3,432,414
FASB Statement No. 13 accrual		485,767		14,155
Recoveries		1,127,357		167,333
Parking income		194,422		92,160
Storage		98,779		24,158
Other income		131,727		26,411

		15,176,310		3,756,631

CERTAIN EXPENSES
Operating expenses		2,972,614		726,925
Management fees		440,999		112,127
Insurance		97,717		27,003
Real estate taxes		2,042,959		798,888

		5,554,289		1,664,943

Excess of revenues over certain expenses	$	9,622,021	$	2,091,688

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organizaton and Basis of Presentation

The Property, located in Washington, DC, contains approximately 499,000 square feet of commercial space and is currently 90% leased to 16 tenants. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

The accompanying financial statement for 2005 is presented in conformity with Rule 3-14 of Securities and Exchange Commission Regulation S-X. Accordingly, the financial statement is not representative of actual operations for the periods presented, as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the Property, have been excluded. Expenses excluded consist of interest, depreciation and amortization and certain other expenses not directly related to the future operations of the Property.

TIAA Real Estate Account Prospectus | 133

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

Rental income from leases with scheduled rent increases is recognized on a straight-line basis over the lease term. Recoveries, based on payments for real estate taxes and operating expenses, are estimated and accrued.

3 – Major Tenants

Two tenants lease approximately 55% of the Property’s square footage. Rent from these tenants represented approximately 70% of total revenues for the year ended December 31, 2005.

4 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	13,350,000
2007		12,784,000
2008		11,539,000
2009		6,676,000
2010		6,107,000
Thereafter		16,991,000

	$	67,447,000

5 – Related Party Transaction

The Property is managed by George Comfort & Sons Inc., an affiliate of the Property’s owner. Management fees of approximately $441,000 were incurred for the year ended December 31, 2005. Management fees for the three months ended March 31, 2006 were approximately $112,000 (unaudited).

134 | Prospectus TIAA Real Estate Account

WellPoint Office Campus, Westlake, California

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers’ Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of WellPoint Office Campus, Westlake Village, California, located at 4553 La Tienda Drive and 120 Via Merida (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

June 9, 2006

TIAA Real Estate Account Prospectus | 135

WellPoint Office Campus, Westlake, California

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended		Four Months Ended
	December 31, 2005		April 30, 2006
	(Audited)		(Unaudited)

REVENUES
Rental income
La Tienda	$	1,223,411	$	432,370
Via Merida		1,469,135		477,250

		2,692,546		909,620

CERTAIN EXPENSES
Property management fees, general partner
La Tienda		41,463		13,428
Via Merida		40,228		13,409
Insurance		7,941		—
Professional services		15,832		21,921
Miscellaneous		2,102		1,796

		107,566		50,554

Excess of revenues over certain expenses	$	2,584,980	$	859,066

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organizaton and Basis of Presentation

The Property, located in Westlake Village, California, contains approximately 208,000 square feet of commercial space. At April 30, 2006, the Property was 100% “triple net leased” under two leases to WellPoint Health Networks, Inc. Under both leases, the lessee is responsible for utilities, taxes, insurance and other operating costs.

The accompanying financial statement for 2005 is presented in conformity with Rule 3-14 of Securities and Exchange Commission Regulation S-X. Accordingly, the financial statement is not representative of actual operations for the period presented, as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the Property, have been excluded. Expenses excluded consist of interest, depreciation and amortization and certain other expenses not directly related to the future operations of the Property.

136 | Prospectus TIAA Real Estate Account

period on the basis described above have been included. The results for such an interim period are not necessarily indicative of the results for the entire year.

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

Rental income is recognized as earned in accordance with lease agreements.

3 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	2,634,000
2007		2,673,000
2008		2,673,000
2009		2,739,000
2010		2,745,000
Thereafter		18,665,000

	$	32,129,000

TIAA Real Estate Account Prospectus | 137

DLF Multifamily Portfolio, Houston, Texas and Phoenix, Arizona

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the DLF Multi-family Portfolio - Houston, Texas and Phoenix, Arizona (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

June 12, 2006

138 | Prospectus TIAA Real Estate Account

DLF Multifamily Portfolio, Houston, Texas and Phoenix, Arizona

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Four Months Ended April 30, 2006 (Unaudited)

REVENUES
Rental income	$	49,956,301	$	17,439,303
Parking		104,963		39,226
Storage		21,083		8,672
Lease termination fees		385,169		75,389
Other income		1,321,579		470,960

		51,789,095		18,033,550

CERTAIN EXPENSES
Operating expenses		13,977,143		4,569,654
Management fees		1,798,251		629,253
Insurance		807,542		327,072
Real estate taxes		6,051,196		2,039,755
Other taxes and licenses		186,421		35,007

		22,820,553		7,600,741

Excess of revenues over certain expenses	$	28,968,542	$	10,432,809

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 — Organizaton and Basis of Presentation

The Properties, located in Houston, Texas and Phoenix, Arizona, consist of 18 multifamily properties with a total of 4,471 units. At April 30, 2006, the Properties were approximately 93% occupied.

TIAA Real Estate Account Prospectus | 139

2 — Summary of Significant Accounting Policies

Use of Estimates

Rental Income

Rental income is recognized as earned in accordance with lease agreements.

140 | Prospectus TIAA Real Estate Account

The Creeksides at CenterPoint, Kent, Washington

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of The Creeksides at CenterPoint, located in Kent, Washington (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

June 14, 2006

TIAA Real Estate Account Prospectus | 141

The Creeksides at CenterPoint, Kent, Washington

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Four Months Ended April 30, 2006 (Unaudited)

REVENUES
Rental income	$	3,506,542	$	988,093
Recoveries - operating		1,464,889		421,621
Recoveries - direct tenant		78,074		32,882
Other income		14,914		780

		5,064,419		1,443,376

CERTAIN EXPENSES
Repairs and maintenance		303,687		76,529
Utilities		498,774		153,692
Security		44,336		16,444
Cleaning		245,300		73,638
General and administrative		211,275		65,983
Management fees		64,139		18,747
Real estate taxes		333,709		119,967
Insurance		80,886		31,304
Other		6,789		4,371

		1,788,895		560,675

Excess of revenues over certain expenses	$	3,275,524	$	882,701

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 — Organizaton and Basis of Presentation

The Property, located in Kent, Washington, contains approximately 219,000 square feet of commercial space. At April 30, 2006, the Property was 90% leased to 15 tenants. Tenant leases contain provisions for operating expense recoveries and direct tenant expenses.

142 | Prospectus TIAA Real Estate Account

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 – Major Tenants

Two tenants lease approximately 30% of the Property’s square footage. Rent from these tenants represented approximately 35% of rental income for the year ended December 31, 2005 and the four months ended April 30, 2006.

4 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	2,949,000
2007		2,543,000
2008		2,411,000
2009		2,018,000
2010		887,000

	$	10,808,000

TIAA Real Estate Account Prospectus | 143

Park Place on Turtle Creek, Dallas, Texas

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of Park Place on Turtle Creek, Dallas, Texas (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the owner’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

-s- Friedman LLP

June 23, 2006

144 | Prospectus TIAA Real Estate Account

Park Place on Turtle Creek, Dallas, Texas

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Four Months Ended April 30, 2006 (Unaudited)

REVENUES
Rental income	$	3,894,240	$	1,377,382
FASB Statement No. 13 accrual		334,914		(8,544	)
Recoveries		550,947		137,181
Parking income		49,900		17,500
Other income		14,449		13,745

		4,844,450		1,537,264

CERTAIN EXPENSES
Operating expenses		1,169,448		358,913
Management fees		88,351		29,221
Insurance		57,049		28,258
Real estate taxes		761,940		253,980

		2,076,788		670,372

Excess of revenues over certain expenses	$	2,767,662	$	866,892

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 — Organizaton and Basis of Presentation

The Property, located in Dallas, Texas, contains approximately 177,000 square feet of commercial space. At April 30, 2006, the Property was 95% leased to 22 tenants. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

TIAA Real Estate Account Prospectus | 145

2 — Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 — Major Tenants

Four tenants lease approximately 52% of the Property’s square footage. Rent from these tenants represented approximately 55% of total revenues for the year ended December 31, 2005 and for the four months ended April 30, 2006.

4 — Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	4,247,000
2007		4,081,000
2008		2,859,000
2009		2,340,000
2010		2,170,000
Thereafter		4,559,000

	$	20,256,000

146 | Prospectus TIAA Real Estate Account

Marketfair, Princeton, New Jersey

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of Marketfair, located in Princeton, New Jersey (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

June 30, 2006

TIAA Real Estate Account Prospectus | 147

Marketfair, Princeton, New Jersey

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Four Months Ended April 30, 2006 (Unaudited)

REVENUES
Rental income	$	5,313,514	$	1,818,882
Percentage rent		297,784		161,939
Recoveries		3,414,532		1,251,486
Other income		172,748		51,885

		9,198,578		3,284,192

CERTAIN EXPENSES
Operating expenses		2,799,421		621,821
Management fees		231,752		78,993
Insurance		33,864		11,108
Real estate taxes		1,110,322		369,646

		4,175,359		1,081,568

Excess of revenues over certain expenses	$	5,023,219	$	2,202,624

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 — Organizaton and Basis of Presentation

The Property, located in Princeton, New Jersey, contains approximately 235,000 square feet of retail and restaurant space. Tenant leases include provisions for additional rent based on tenant sales and the pro-rata share of common area maintenance expenses and real estate taxes.

148 | Prospectus TIAA Real Estate Account

2 — Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 — Major Tenants

Two tenants lease approximately 29% of the Property’s square footage. Rent from these tenants represented approximately 21% of total revenues for the year ended December 31, 2005 and the four months ended April 30, 2006.

4 — Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at June 30, 2006 are as follows:


Year Ending December 31,

2006	$	5,114,000
2007		5,074,000
2008		4,946,000
2009		4,648,000
2010		3,541,000
Thereafter		9,119,000

	$	32,442,000

TIAA Real Estate Account Prospectus | 149

5 – Related Party Transaction

The current owner of the Property is affiliated, through common ownership, with Madison Marquette Realty Services, LP, Madison Marquette Retail Services, Inc. and Madison Marquette Development Company LLC (collectively referred to as “MMR”). MMR is paid a management fee of 2.5% of gross revenue and leasing commissions, as defined in the agreement, and is reimbursed for costs related to on-site management. Amounts incurred under this arrangement were as follows:


	Year Ended December 31, 2005		Four Months Ended April 30, 2006

Management fees	$	231,752	$	78,993
Leasing commissions		13,622		68,919
On-site reimbursement costs		274,780		103,389

	$	520,154	$	251,301

150 | Prospectus TIAA Real Estate Account

South Frisco Village, Frisco, Texas

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property located at South Frisco Village, Frisco, Texas (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

August 16, 2006

TIAA Real Estate Account Prospectus | 151

South Frisco Village, Frisco, Texas

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Five Months Ended May 31, 2006 (Unaudited)

REVENUES
Rental income	$	3,232,326	$	1,358,113
Recoveries		1,164,693		509,722
Other income		12,021		4,500

		4,409,040		1,872,335

CERTAIN EXPENSES
Operating expenses		253,692		110,403
Management fees		76,525		32,173
Administrative fees		9,000		3,750
Insurance		101,251		36,500
Real estate taxes		864,116		360,000

		1,304,584		542,826

Excess of revenues over certain expenses	$	3,104,456	$	1,329,509

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 — Organizaton and Basis of Presentation

The Property, located in South Frisco Village, Frisco, Texas, contains approximately 227,000 square feet of commercial space. At May 31, 2006, the Property was 99% leased to 27 tenants. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

The accompanying financial statement is presented in conformity with Rule 3-14 of Securities and Exchange Commission Regulation S-X. Accordingly, the financial statement is not representative of actual operations for the periods presented, as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the Property, have been excluded. Expenses excluded consist of interest, depreciation and amortization and certain other expenses not directly related to the future operations of the Property.

The statement of revenues and certain expenses for the five months ended May 31, 2006 is unaudited. However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of this statement of revenues and certain expenses for the interim period on the basis described above have been included. The results for such an interim period are not necessarily indicative of the results for the entire year.

152 | Prospectus TIAA Real Estate Account

2 — Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 — Major Tenants

Five tenants lease approximately 72% of the Property’s square footage. Rent from these tenants represented approximately 58% of total revenues for the year ended December 31, 2005 and for the five months ended May 31, 2006.

4 — Operating Leases

Space in the Property is rented to tenants under noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	3,144,000
2007		3,036,000
2008		2,792,000
2009		2,788,000
2010		2,643,000
Thereafter		14,623,000

	$	29,026,000

5 — Related Party Transactions

Amounts paid to an affiliated company for management fees and administrative fees were $76,525 and $9,000, respectively, for the year ended December 31, 2005.

Amounts paid to an affiliated company for management fees and administrative fees were $32,173 and $3,750, respectively, for the five months ended May 31, 2005.

TIAA Real Estate Account Prospectus | 153

IDI National Industrial Portfolio, Atlanta, Chicago, Dallas, Memphis

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the IDI National Industrial Portfolio (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

August 30, 2006

154 | Prospectus TIAA Real Estate Account

IDI National Industrial Portfolio, Atlanta, Chicago, Dallas, Memphis

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Six Months Ended June 30, 2006 (Unaudited)

REVENUES
Rental income	$	2,233,055	$	2,361,025
Recoveries		344,900		567,926

		2,577,955		2,928,951

CERTAIN EXPENSES
Operating expenses		377,130		258,651
Management fees		68,696		73,043
Insurance		64,170		64,418
Real estate taxes		521,548		576,482

		1,031,544		972,594

Excess of revenues over certain expenses	$	1,546,411	$	1,956,357

See notes to financial statements.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 — Organizaton and Basis of Presentation

The Property, a portfolio of industrial distribution buildings located in Atlanta, Chicago, Dallas and Memphis, contains approximately 2,228,000 square feet of commercial space. At June 30, 2006, the Property was 92% leased. The leases contain provisions for additional rent based on increases in operating expenses and real estate taxes.

The statement of revenues and certain expenses for the six months ended June 30, 2006 is unaudited. However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of this statement of revenues and certain expenses for the interim period on the basis described above have been included. The results for such an interim period are not necessarily indicative of the results for the entire year.

TIAA Real Estate Account Prospectus | 155

2 — Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 — Major Tenant

One tenant leases approximately 18% of the Property’s square footage. Rent from this tenant represented approximately 35% and 30% of total revenues for the year ended December 31, 2005 and the six months ended June 30, 2006, respectively.

4 — Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	4,378,000
2007		7,258,000
2008		7,420,000
2009		6,543,000
2010		5,273,000
Thereafter		31,121,000

	$	61,993,000

5 — Related Party Transaction

An affiliate of the owner of the Property manages the buildings. Management fees of $68,696 and $73,042 were incurred for the year ended December 31, 2005 and the six months ended June 30, 2006, respectively.

156 | Prospectus TIAA Real Estate Account

Millennium Corporate Park, Redmond, Washington

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of Millennium Corporate Park, Redmond, Washington (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

September 22, 2006

TIAA Real Estate Account Prospectus | 157

Millennium Corporate Park, Redmond, Washington

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Eight Months Ended August 31, 2006 (Unaudited)

REVENUES
Rent	$	7,900,666	$	5,161,202
Operating cost recovery		2,827,006		2,302,335
Other property revenue		13,442		935

		10,741,114		7,464,472

CERTAIN EXPENSES
Property recoverable
Janitorial		631,345		455,361
Security		37,001		35,619
Utilities		467,463		358,562
Mechanical and electrical		79,546		71,893
Parking lot/garage		132,436		37,826
Exterior grounds		344,980		249,679
Repairs and maintenance		32,312		24,741
Property general and administrative expenses		368,606		234,573
Insurance		116,602		87,835
Management fees		301,722		221,504
Taxes		832,379		534,848

		3,344,392		2,312,441

Property non-recoverable
Leasing and marketing		20,142		3,997
Legal and other professional fees		21,098		9,332
Other landlord costs		68,729		6,327

		109,969		19,656

		3,454,361		2,332,097

Excess of revenues over certain expenses	$	7,286,753	$	5,132,375

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 — Organizaton and Basis of Presentation

Millennium Corporate Park, Redmond, Washington, contains approximately 537,000 square feet of commercial space. At August 31, 2006, the Property was 100% leased to 8 tenants. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

158 | Prospectus TIAA Real Estate Account

The statement of revenues and certain expenses for the eight months ended August 31, 2006 is unaudited. However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of this statement of revenues and certain expenses for the interim period on the basis described above have been included. The results for such an interim period are not necessarily indicative of the results for the entire year.

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 – Major Tenant

One tenant leases approximately 67% of the Property’s square footage. Rent from this tenant represented approximately 75% of total revenues for the year ended December 31, 2005 and for the eight months ended August 31, 2006.

4 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	7,663,000
2007		7,962,000
2008		7,271,000
2009		5,230,000
2010		3,973,000
Thereafter		5,859,000

	$	37,958,000

TIAA Real Estate Account Prospectus | 159

5 – Related Party Transactions

Amounts paid to an affiliated company for management fees, leasing commissions and allocated payroll expenses were $301,720, $89,401 and $413,081, respectively, for the year ended December 31, 2005.

Amounts paid to an affiliated company for management fees, leasing commissions and allocated payroll expenses were $221,504, $85,223 and $264,912, respectively, for the eight months ended August 31, 2006.

160 | Prospectus TIAA Real Estate Account

Alafaya Square, Oviedo, Florida

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property located at Alafaya Square, Oviedo, Florida (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

October 17, 2006

TIAA Real Estate Account Prospectus | 161

Alafaya Square, Oviedo, Florida

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Eight Months Ended August 31, 2006 (Unaudited)

REVENUES
Rental income	$	1,482,821	$	1,296,530
Recoveries		451,350		434,537
Lease cancellation fee		—		45,000
Other income		3,670		3,331

		1,937,841		1,779,398

CERTAIN EXPENSES
Operating expenses		227,437		158,413
Management fees		113,791		110,124
Insurance		84,154		74,691
Real estate taxes		275,228		192,594
General and administrative expenses		36,162		46,990

		736,772		582,812

Excess of revenues over certain expenses	$	1,201,069	$	1,196,586

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organization and Basis of Presentation

The Property, located in Oviedo, Florida, contains approximately 177,000 square feet of commercial space. At August 31, 2006, the Property was 100% leased. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

162 | Prospectus TIAA Real Estate Account

2 — Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 — Major Tenant

One tenant leases approximately 32% of the Property’s square footage. Rent from this tenant represented approximately 24% of rental income for the year ended December 31, 2005 and 19% for the eight months ended August 31, 2006.

4 — Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	2,138,000
2007		2,177,000
2008		2,030,000
2009		1,823,000
2010		1,560,000
Thereafter		3,374,000

	$	13,102,000

5 — Related Party Transactions

An affiliate of the owner received management fees and certain salary and marketing cost reimbursements of $154,927 for the year ended December 31, 2005 and $135,837 for the eight months ended August 31, 2006.

TIAA Real Estate Account Prospectus | 163

East Lake Woodlands, Palm Harbor, Florida

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property located at East Lake Woodlands, Palm Harbor, Florida (the “Property”), as described in Note 1, for the period August 5, 2005 (commencement of operations) to December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property for the period August 5, 2005 (commencement of operations) to December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

-s- Friedman LLP

October 17, 2006

164 | Prospectus TIAA Real Estate Account

East Lake Woodlands, Palm Harbor, Florida

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	August 5, 2005 to December 31, 2005 (Audited)		Eight Months Ended August 31, 2006 (Unaudited)

REVENUES
Rental income	$	613,338	$	1,076,616
Recoveries		233,758		429,121
Other income		135		3,524

		847,231		1,509,261

CERTAIN EXPENSES
Operating expenses		133,296		249,001
Management fees		28,100		59,488
Insurance		56,205		63,306
Real estate taxes		123,483		219,437
General and administrative		23,798		31,000

		364,882		622,232

Excess of revenues over certain expenses	$	482,349	$	887,029

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 — Organization and Basis of Presentation

The Property, located in Palm Harbor, Florida, was acquired on August 5, 2005 and contains approximately 140,000 square feet of commercial space. At August 31, 2006, the Property was 91% leased. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

TIAA Real Estate Account Prospectus | 165

2 — Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 — Major Tenant

One tenant leases approximately 32% of the Property’s square footage. Rent from this tenant represented approximately 17% of rental income for the period August 5, 2005 to December 31, 2005 and 15% for the eight months ended August 31, 2006.

4 — Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	1,396,000
2007		1,289,000
2008		1,116,000
2009		878,000
2010		653,000
Thereafter		1,221,000

	$	6,553,000

5 — Related Party Transactions

An affiliate of the owner received management fees and certain salary and marketing cost reimbursements of $38,999 for the period August 5, 2005 to December 31, 2005 and $76,702 for the eight months ended August 31, 2006.

166 | Prospectus TIAA Real Estate Account

Kendall Corners, Miami, Florida

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property located at Kendall Corners, Miami, Florida (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

October 17, 2006

TIAA Real Estate Account Prospectus | 167

Kendall Corners, Miami, Florida

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Eight Months Ended August 31, 2006 (Unaudited)

REVENUES
Rental income	$	1,954,457	$	1,397,183
Recoveries		688,584		454,937
Lease cancellation fee		27,678		—
Other income		6,110		8,761

		2,676,829		1,860,881

CERTAIN EXPENSES
Operating expenses		249,015		189,425
Management fees		90,054		69,832
Insurance		65,043		58,475
Real estate taxes		397,220		275,400
General and administrative		27,279		18,701

		828,611		611,833

Excess of revenues over certain expenses	$	1,848,218	$	1,249,048

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organization and Basis of Presentation

The Property, located in Miami, Florida, contains approximately 97,000 square feet of commercial space. At August 31, 2006, the Property was 100% leased. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

168 | Prospectus TIAA Real Estate Account

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 – Major Tenant

One tenant leases approximately 34% of the Property’s square footage. Rent from this tenant represented approximately 30% of rental income for the year ended December 31, 2005 and the eight months ended August 31, 2006.

4 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	2,103,000
2007		1,884,000
2008		1,778,000
2009		1,595,000
2010		1,401,000
Thereafter		7,850,000

	$	16,611,000

5 – Related Party Transactions

An affiliate of the owner received management fees totaling $90,054 for the year ended December 31, 2005 and $69,832 for the eight months ended August 31, 2006.

TIAA Real Estate Account Prospectus | 169

International Drive Value Center, Orlando, Florida

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property located at International Drive Value Center, Orlando, Florida (the “Property”), as described in Note 1, for the period January 18, 2005 (commencement of operations) to December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property for the period January 18, 2005 (commencement of operations) to December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

-s- Friedman LLP

October 17, 2006

170 | Prospectus TIAA Real Estate Account

International Drive Value Center, Orlando, Florida

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	January 18, 2005 to December 31, 2005 (Audited)		Eight Months Ended August 31, 2006 (Unaudited)

REVENUES
Rental income	$	1,757,371	$	1,497,443
Recoveries		458,169		391,320
Other income		250		803

		2,215,790		1,889,566

CERTAIN EXPENSES
Operating		211,500		137,787
Management fees		74,495		84,781
Insurance		107,479		77,797
Real estate taxes		319,053		218,400
General and administrative		10,600		57,386

		723,127		576,151

Excess of revenues over certain expenses	$	1,492,663	$	1,313,415

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organization and Basis of Presentation

The Property, located in Orlando, Florida, was acquired on January 18, 2005 and contains approximately 186,000 square feet of commercial space. At August 31, 2006, the Property was 100% leased. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

TIAA Real Estate Account Prospectus | 171

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 – Major Tenants

Four tenants lease approximately 65% of the Property’s square footage. Rent from these tenants represented approximately 81% of rental income for the period January 18, 2005 to December 31, 2005 and 69% for the eight months ended August 31, 2006.

4 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	2,179,000
2007		2,319,000
2008		2,106,000
2009		1,917,000
2010		1,759,000
Thereafter		902,000

	$	11,182,000

5 – Related Party Transactions

An affiliate of the owner received management fees and certain salary and other cost reimbursements of $110,658 for the year ended December 31, 2005 and $116,025 for the eight months ended August 31, 2006.

172 | Prospectus TIAA Real Estate Account

The Marketplace at Dr. Phillips, Orlando, Florida

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property located at The Marketplace at Dr. Phillips, Orlando, Florida (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

October 17, 2006

TIAA Real Estate Account Prospectus | 173

The Marketplace at Dr. Phillips, Orlando, Florida

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Eight Months Ended August 31, 2006 (Unaudited)

REVENUES
Rental income	$	5,266,968	$	4,316,033
Recoveries		1,323,065		1,114,479
Lease cancellation fee		8,305		—
Other income		997		844

		6,599,335		5,431,356

CERTAIN EXPENSES
Operating expenses		657,888		466,954
Management fees		281,582		278,779
Insurance		201,500		121,218
Real estate taxes		862,628		605,616
General and administrative expenses		74,943		55,819

		2,078,541		1,528,386

Excess of revenues over certain expenses	$	4,520,794	$	3,902,970

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organization and Basis of Presentation

The Property, located in Orlando, Florida, contains approximately 328,000 square feet of commercial space. At August 31, 2006, the Property was 99% leased. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

174 | Prospectus TIAA Real Estate Account

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 – Major Tenants

Two tenants lease approximately 31% of the Property’s square footage. Rent from these tenants represented approximately 17% of rental income for the year ended December 31, 2005 and 14% for the eight months ended August 31, 2006.

4 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	5,754,000
2007		5,465,000
2008		5,166,000
2009		4,087,000
2010		3,308,000
Thereafter		7,236,000

	$	31,016,000

5 – Related Party Transactions

An affiliate of the owner received management fees and certain salary and other expense reimbursements of $325,878 for the year ended December 31, 2005 and $306,727 for the eight months ended August 31, 2006.

The affiliate occupies 3,455 square feet of space in the Property and was charged rents of $79,465 for the year ended December 31, 2005 and $59,598 for the eight months ended August 31, 2006.

TIAA Real Estate Account Prospectus | 175

Palm Lakes Plaza, Margate, Florida

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property located at Palm Lakes Plaza, Margate, Florida (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

October 17, 2006

176 | Prospectus TIAA Real Estate Account

Palm Lakes Plaza, Margate, Florida

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Eight Months Ended August 31, 2006 (Unaudited)

REVENUES
Rental income	$	771,477	$	872,076
Recoveries		323,125		264,859
Other income		3,115		19,901

		1,097,717		1,156,836

CERTAIN EXPENSES
Operating expenses		329,142		245,242
Management fees		39,793		46,679
Insurance		67,083		56,123
Real estate taxes		191,970		134,379
General and administrative expenses		50,653		25,531

		678,641		507,954

Excess of revenues over certain expenses	$	419,076	$	648,882

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organization and Basis of Presentation

The Property, located in Margate, Florida, contains approximately 114,000 square feet of commercial space. At August 31, 2006, the Property was 91% leased. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

TIAA Real Estate Account Prospectus | 177

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 – Major Tenants

Three tenants lease approximately 45% of the Property’s square footage. Rent from these tenants represented approximately 43% of rental income for the year ended December 31, 2005 and 25% for the eight months ended August 31, 2006.

4 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	1,346,000
2007		1,457,000
2008		1,475,000
2009		1,452,000
2010		1,199,000
Thereafter		5,404,000

	$	12,333,000

5 – Related Party Transactions

An affiliate of the owner received management fees totaling $39,793 for the year ended December 31, 2005 and $46,679 for the eight months ended August 31, 2006.

178 | Prospectus TIAA Real Estate Account

South Dade Shopping Center, Miami, Florida

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property located at South Dade Shopping Center, Miami, Florida (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

October 17, 2006

TIAA Real Estate Account Prospectus | 179

South Dade Shopping Center, Miami, Florida

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Eight Months Ended August 31, 2006 (Unaudited)

REVENUES
Rental income	$	2,004,440	$	2,139,392
Recoveries		912,206		570,656
Other income		2,364		623

		2,919,010		2,710,671

CERTAIN EXPENSES
Operating expenses		566,716		417,869
Management fees		139,973		115,103
Insurance		167,598		159,463
Real estate taxes		451,300		401,938
General and administrative expenses		50,483		46,735

		1,376,070		1,141,108

Excess of revenues over certain expenses	$	1,542,940	$	1,569,563

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organization and Basis of Presentation

The Property, located in Miami, Florida, contains approximately 219,000 square feet of commercial space. At August 31, 2006, the Property was 99% leased. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

180 | Prospectus TIAA Real Estate Account

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 – Major Tenants

Two tenants lease approximately 30% of the Property’s square footage. Rent from these tenants represented approximately 18% of rental income for the year ended December 31, 2005 and 14% for the eight months ended August 31, 2006.

4 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	3,010,000
2007		3,099,000
2008		3,034,000
2009		2,793,000
2010		2,057,000
Thereafter		6,510,000

	$	20,503,000

5 – Related Party Transactions

An affiliate of the owner received management fees and certain salary and marketing cost reimbursements of $186,898 for the year ended December 31, 2005 and $161,759 for the eight months ended August 31, 2006.

TIAA Real Estate Account Prospectus | 181

The Ellipse at Ballston, Arlington, Virginia

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property located at The Ellipse at Ballston, Arlington, Virginia (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

October 30, 2006

182 | Prospectus TIAA Real Estate Account

The Ellipse at Ballston, Arlington, Virginia

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Nine Months Ended September 30, 2006 (Unaudited)

REVENUES
Rental income	$	5,249,995	$	4,367,328
Parking garage income		269,243		202,455
Recoveries		243,335		244,189
Other income		3,093		6,763

		5,765,666		4,820,735

CERTAIN EXPENSES
Operating expenses		988,642		758,854
Insurance		56,926		45,348
Real estate taxes		421,335		354,104
General and administrative expenses		298,469		307,075

		1,765,372		1,465,381

Excess of revenues over certain expenses	$	4,000,294	$	3,355,354

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organization and Basis of Presentation

The Property, located in Arlington, Virginia, contains approximately 197,000 square feet of commercial space. At September 30, 2006, the Property was 97% leased. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

The statement of revenues and certain expenses for the nine months ended September 30, 2006 is unaudited. However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of this statement of revenues and certain expenses for the interim period on the basis described above have been included. The results for such an interim period are not necessarily indicative of the results for the entire year.

TIAA Real Estate Account Prospectus | 183

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

3 – Major Tenants

Three tenants currently lease approximately 31% of the Property’s square footage. Rent from these tenants represented approximately 42% of revenues for the year ended December 31, 2005 and 34% for the nine months ended September 30, 2006.

4 – Operating Leases

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents based on leases in effect at October 30, 2006 are as follows:


Year Ending December 31,

2006	$	5,465,000
2007		6,220,000
2008		6,335,000
2009		6,076,000
2010		5,164,000
Thereafter		9,497,000

	$	38,757,000

5 – Related Party Transaction

Amounts paid to an affiliated company for management fees were $161,451 and $136,019 for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively.

184 | Prospectus TIAA Real Estate Account

Developers Diversified Realty Corp., Joint Venture Portfolio

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the Teachers Insurance and Annuity Association/Developers Diversified Realty Corp. Joint Venture Portfolio (the “Portfolio”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Portfolio’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Portfolio for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

-s- Friedman LLP

December 6, 2006

TIAA Real Estate Account Prospectus | 185

Developers Diversified Realty Corp., Joint Venture Portfolio

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Nine Months Ended September 30, 2006 (Unaudited)

REVENUES
Rental income	$	201,195,384	$	151,177,708
Recoveries		46,774,911		36,116,240
Lease termination fees		387,706		4,775,876
Other income		229,847		452,315

		248,587,848		192,522,139

CERTAIN EXPENSES
Common area maintenance		21,220,085		16,338,417
Operating expenses		4,539,528		4,196,920
Real estate taxes		29,201,010		22,614,759
Management fees		11,065,183		8,415,742
Ground rent		1,330,669		998,002
Insurance		1,902,789		1,472,102
General and administrative		183,442		166,530

		69,442,706		54,202,472

Excess of revenues over certain expenses	$	179,145,142	$	138,319,667

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 – Organizaton and Basis of Presentation

The Portfolio consists of 67 community retail centers, comprised of 97 individual properties, predominately located in the Southeastern region of the United States. The Portfolio contains approximately 16.7 million square feet of commercial space, and was 97% leased at September 30, 2006. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes.

The statement of revenues and certain expenses for the nine months ended September 30, 2006 is unaudited. However, in the opinion of management, all

186 | Prospectus TIAA Real Estate Account

adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of this statement of revenues and certain expenses for the interim period on the basis described above have been included. The results for such an interim period are not necessarily indicative of the results for the entire year.

2 – Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

Rental income from leases with scheduled rent increases is recognized on a straight-line basis over the lease term. Included in rental income for the year ended December 31, 2005 and the nine months ended September 30, 2006 are accruals of $6,441,351 and $3,117,126, respectively, representing the revenue recognized in excess of rents due under the lease agreements. Recoveries, based on payments for real estate taxes and operating expenses, are estimated and accrued.

3 – Operating Leases

Space in the Portfolio is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	191,171,000
2007		189,242,000
2008		169,754,000
2009		158,037,000
2010		144,599,000
Thereafter		676,827,000

	$	1,529,630,000

4 – Related Party Transactions

The owner of the properties in the Portfolio also owns the companies which provide property management services. Management fees of $11,065,183 and $8,415,742 were incurred for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively.

Metropolitan Construction Services, an affiliate of a stockholder of the properties’ owner, provides construction services, including general contracting services and ongoing repairs and maintenance. Costs of $1,491,974 and $757,799

TIAA Real Estate Account Prospectus | 187

were incurred for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively.

5 – Ground Lease Commitments

The Portfolio holds ground leases for certain properties. Rent expense is recognized on a straight-line basis over the lease term. The lease terms expire through February 28, 2051. Total rent expense was $1,330,669 and $998,002 for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively. Included in rent expense are accruals of $685,669 and $514,252 for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively.

Minimum future annual payments required under the leases are approximately as follows:


Year Ending December 31,

2006	$	645,000
2007		645,000
2008		646,000
2009		647,000
2010		647,000
Thereafter		57,908,000

	$	61,138,000

188 | Prospectus TIAA Real Estate Account

Printemps de L’Homme, 110 Rue de Provence, Paris, France

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property known as Printemps de l’Homme, located at 110 Rue de Provence, Paris, France (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

December 22, 2006

TIAA Real Estate Account Prospectus | 189

Printemps de L’Homme, 110 Rue de Provence, Paris, France

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


(In thousands)	Year Ended December 31, 2005 (Audited)		Nine Months Ended September 30, 2006 (Unaudited)

REVENUES
Rental income	$	9,126	$	7,168
Property tax		253		198
Office tax		33		25
Cleaning tax		8		6

		9,420		7,397

CERTAIN EXPENSES
Property tax		253		198
Management fee		68		36
Office tax		33		25
Cleaning tax		8		6
Building insurance		7		5

		369		270

Excess of revenues over certain expenses	$	9,051	$	7,127

See notes to statements of revenues and certain expenses.

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

1 — Organizaton and Basis of Presentation

The Property consists of a building located at 110 Rue de Provence, Paris, France, which contains approximately 142,000 square feet of commercial space. The building is located in the “Grands Magasins” district, which was created at the end of the 19th century. The Property is leased to one tenant under a lease which expires on September 30, 2010, and which contains a provision for annual increases based on the increase in the National Institute for Statistics and Economic Studies (“INSEE”) index for the cost of construction. In addition, the tenant pays all property expenses, including property, office and cleaning taxes, but excluding management fees.

190 | Prospectus TIAA Real Estate Account

The accompanying financial statements have been converted from Euros to U.S. dollars using the Federal Reserve Board’s average exchange rates for the year ended December 31, 2005 and the nine months ended September 30, 2006 of 1.2400 and 1.2522, respectively. The conversion rate used for minimum future rents in Note 3 is 1.1842.

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Revenue Recognition

Rental income from the lease is recognized as earned over the lease term. Service charges for taxes and insurance are billed as incurred or on an estimated basis as set forth in the lease agreement.

3 — OPERATING LEASES

Space in the Property is rented to the tenant under a noncancelable operating lease. Approximate minimum future rents required as of December 31, 2005 are as follows:


Year Ending December 31,	(Amount in thousands)

2006		$	8,959
2007			8,959
2008			8,959
2009			8,959
2010			6,719

		$	42,555

TIAA Real Estate Account Prospectus | 191

501 Boylston Street

INDEPENDENT AUDITORS’ REPORT

To the Stockholders of Teachers Insurance and
Annuity Association of America for the Benefit of the Real Estate Account

We have audited the accompanying statement of revenues and certain expenses of 501 Boylston Street (the “Property”) for the year ended December 31, 2005. The financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenue and certain expenses is free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. 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 audit provides a reasonable basis for our opinion.

The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and is not intended to be a complete presentation of the Property’s revenues and certain expenses.

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property as described in Note 1, for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

-s- Berdon LLP

Certified Public Accountants

New York, New York
December 28, 2006

192 | Prospectus TIAA Real Estate Account

501 Boylston Street

STATEMENT OF REVENUES AND CERTAIN EXPENSES


	Nine Months Ended September 30, 2006 (Unaudited)		Year Ended December 31, 2005

REVENUES:
Office rent	$	7,568,822	$	9,008,100
Retail rent		2,255,347		979,688
Parking income		1,271,884		1,306,883
Tenant reimbursements		2,256,424		1,293,529
Tenant service charge income		74,239		160,652
Miscellaneous		—		10,648

TOTAL REVENUES		13,426,716		12,759,500

CERTAIN EXPENSES:
Operating expenses		5,755,057		6,286,779
Real estate taxes		1,767,184		2,231,549
General and administrative		387,995		534,664
Management fees		427,101		355,529
Insurance		116,550		131,420

TOTAL CERTAIN EXPENSES		8,453,887		9,539,941

REVENUES IN EXCESS OF CERTAIN EXPENSES	$	4,972,829	$	3,219,559

The accompanying notes to the statement of revenues and certain expenses are an integral part of this statement.

1 — Summary of Accounting Policies

(a) Basis of Presentation

Presented herein is the statement of revenues and certain expenses related to the operation of a commercial condominium building located at 501 Boylston Street (the “Property”) in Boston, Massachusetts.

Teachers Insurance and Annuity Association of America for the Benefit of the Real Estate Account (“Account”) purchased the Property on December 28, 2006.

The accompanying financial statement has been prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission for the acquisition of real estate properties. Accordingly, the financial statement excludes certain expenses that may not be comparable to those expected to be incurred by Account in the proposed future operations of the aforementioned property. Items excluded consist of depreciation and amortization, interest expense and other financing costs, and general and administrative expenses not directly related to the future operations.

TIAA Real Estate Account Prospectus | 193

(b) Use of Estimates

The preparation of the statement of revenues and certain expenses in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the statement of revenues and certain expenses and accompanying notes. Actual results could differ from those estimates.

(c) Revenue Recognition

Minimum rental income is recognized on a straight-line basis over the term of the lease. Tenant reimbursements and service charge income are recognized as the related expenses are incurred or as services are rendered, respectively.

2 — Significant Tenant and Future Minimum Rents Schedule

During 2005, one tenant accounted for approximately 70% of total revenues.

Future minimum lease payments to be received as of December 31, 2005 under noncancelable operating leases, after giving effect to leases executed through December 14, 2006, are as follows:


2006	$	15,617,000
2007		24,135,000
2008		24,957,000
2009		23,175,000
2010		23,736,000
Thereafter		162,295,000

	$	273,915,000

Some of these leases contain renewal options and increases in minimum rent based on increases in certain consumer price indexes or increases in sales over base amounts. The leases also provide for reimbursements of certain utility, real estate and operating expenses (“Tenant Reimbursements”).

3 — Related Party Transactions

(a) For the year ended December 31, 2005, management fees of approximately $153,000 were paid to an affiliate of the Property owner.

(b) For the year ended December 31, 2005, rental revenue received from an affiliate of the Property owner was approximately $1,867,000.

4 — Interim Unaudited Financial Information

The statement of revenues and certain expenses for the nine months ended September 30, 2006 is unaudited; however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the statement of revenues and certain expenses for the interim period have been included. The results of interim periods are not necessarily indicative of the results to be obtained for a full fiscal year.

194 | Prospectus TIAA Real Estate Account

Camelback Center, Phoenix, Arizona

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of Camelback Center – Phoenix, Arizona (the “Property”), as described in Note A, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with Rule 3-14 of Securities and Exchange Commission Regulation S-X and, as described in Note A, is not intended to be a complete presentation of the Property’s revenues and expenses.

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses of the Property for the year ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.

-s- Aarons Grant & Habif, LLP

Aarons Grant & Habif, LLC
December 28, 2006

TIAA Real Estate Account Prospectus | 195

Camelback Center, Phoenix, Arizona

STATEMENT OF REVENUES AND CERTAIN EXPENSES


	For the Year Ended December 31, 2005 (Audited)		For the Eleven Months Ended November 30, 2006 (Unaudited)

REVENUES
Rental income	$	2,556,012	$	3,367,516
Recoveries		3,323		105,779
Other income		40,905		171,921

Total Revenues		2,600,240		3,645,216

CERTAIN EXPENSES
Utilities		251,587		317,633
Repairs and maintenance		496,282		623,743
Management Fees		164,529		193,022
Real estate taxes		647,707		754,428
Insurance		34,978		37,121

Total certain expenses		1,595,083		1,925,947

Revenues in excess of certain expenses	$	1,005,157	$	1,719,269

See Independent Auditors’ Report

Note A — Basis of Presentation

The statement of revenue and certain expenses (the financial statement) for the year ended December 31, 2005 and the eleven months ended November 30, 2006 (unaudited) relate to the operations of Camelback Center (the Property), which will be acquired by Teachers Insurance and Annuity Association (the Company). The Property located in Phoenix, Arizona, contains 231,345 square feet of rentable commercial space.

The accompanying financial statement is presented in conformity with Rule 3-14 of Securities and Exchange Commission Regulation S-X. Accordingly, the financial statement is not representative of the actual operations for the periods presented, as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the Property, have been excluded. Expenses excluded consist of interest, depreciation and amortization and certain other expenses not directly related to the future operations of the Property.

Note B — Summary of Significant Accounting Policies

This summary of significant accounting policies of the Property is presented to assist in understanding the Property’s financial statement. The financial statement and notes are representations of the Property’s management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the consolidated financial statements.

196 | Prospectus TIAA Real Estate Account

Use of estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statement in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

Revenue recognition

Revenue from operating leases, which includes scheduled increases over the lease term, is recognized on a straight-line basis.

Unaudited interim statement

The statement of revenue and certain expenses for the eleven months ended November 30, 2006 is unaudited. However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of this statement of revenues and certain expenses for the interim period on the basis described above have been included. The results for such an interim period are not necessarily indicative of the results for the entire year.

Note C — Future Rent Payments

Space in the Property is rented to tenants under various noncancelable operating leases. Approximate minimum future rents required under these leases in effect at December 31, 2005 are as follows:


December 31,

2006	$	3,012,321
2007		3,699,562
2008		3,465,692
2009		2,850,714
2010		1,512,778
2011 and thereafter		2,275,662

	$	16,816,729

Note D — Concentrations

One tenant leases approximately 11% of the Property’s square footage. Income from this tenant represented approximately 18% of total revenue for the year ended December 31, 2005.

Note E — Property Management Fees

Property management expense has been included in the financial statement for the Property, with the property management fee on the property ranging from 5 – 6% of cash receipts.

TIAA Real Estate Account Prospectus | 197

9345 Santa Anita Avenue

INDEPENDENT AUDITORS’ REPORT

To the Stockholders of Teachers Insurance and
Annuity Association of America for the Benefit of the Real Estate Account

We have audited the accompanying statement of revenues and certain expenses of 9345 Santa Anita Avenue (the “Property”) for the year ended December 31, 2005. The financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Berdon LLP

Certified Public Accountants
New York, New York
September 26, 2006

198 | Prospectus TIAA Real Estate Account

9345 Santa Anita Avenue

STATEMENT OF REVENUES AND CERTAIN EXPENSES


	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, 2005

REVENUES:
Base rents	$	455,389	$	910,778
Tenant reimbursements (insurance)		26,885		52,326

TOTAL REVENUES		482,274		963,104

CERTAIN EXPENSES:
Insurance expense		26,885		52,326

TOTAL CERTAIN EXPENSES		26,885		52,326

REVENUES IN EXCESS OF CERTAIN EXPENSES	$	455,389	$	910,778

The accompanying notes to the statement of revenues and certain expenses are an integral part of this statement.

1 — Summary of Accounting Policies

(a) Basis of Presentation

Presented herein is the statement of revenues and certain expenses related to the operation of an industrial building located at 9345 Santa Anita Ave. (the “Property”) in Rancho Cucamonga, California.

Teachers Insurance and Annuity Association of America for the Benefit of the Real Estate Account (“Account”) purchased the Property on September 26, 2006.

The accompanying financial statement has been prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission for the acquisition of real estate properties. Accordingly, the financial statement excludes certain expenses that may not be comparable to those expected to be incurred by Account in the proposed future operations of the aforementioned property. Items excluded consist of depreciation and amortization, and general and administrative expenses not directly related to the future operations.

(b) Use of Estimates

(c) Revenue Recognition

Minimum rental income is recognized on a straight-line basis over the term of the lease. Accordingly, the amount of rent recognized in the accompanying financial statement for the (unaudited) six months ended June 30, 2006 and for

TIAA Real Estate Account Prospectus | 199

the year ended December 31, 2005 is $74,069 and $148,138, respectively, less than the amounts required to be paid under the terms of the lease.

2 — Significant Tenant and Future Minimum Rents Schedule

The entire Property is being leased to one tenant, a distributor, under a noncancelable triple net lease (the “Lease”). Under the terms of the Lease, the lessee will operate, manage and pay substantially all costs associated with operating the Property. Pursuant to the Lease, the landlord has the option of either paying for real estate taxes on the Property and obtaining reimbursement for the same from the tenant, or directing the tenant to make payments for real estate taxes directly to the taxing jurisdiction. Real estate taxes paid directly by the tenant to the taxing jurisdiction for the (unaudited) six months ended June 30, 2006 and for the year ended December 31, 2005 amounted to $69,180 and $137,813, respectively. Such amounts are not included in the accompanying financial statement.

Future minimum lease payments to be received as of December 31, 2005 under this noncancelable operating lease are as follows:


2006	$	1,058,916
2007		1,114,066
2008		1,125,096
2009		750,064

	$	4,048,142

The tenant has three options to extend the Lease with each such extension being for a term of five years. The first extended term would commence on the last day of the initial term of the lease.

3 — Interim Unaudited Financial Information

The statement of revenues and certain expenses for the six months ended June 30, 2006 is unaudited; however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the statement of revenues and certain expenses for the interim period has been included. The results of interim periods are not necessarily indicative of the results to be obtained for a full fiscal year.

200 | Prospectus TIAA Real Estate Account

1900 South Burgundy, Ontario, California

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of 1900 South Burgundy Place, Ontario, California (the “Property”), as described in Note 1, for the year ended December 31, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

-s- Friedman LLP

December 13, 2006

TIAA Real Estate Account Prospectus | 201

1900 South Burgundy, Ontario, California

STATEMENTS OF REVENUES AND CERTAIN EXPENSES


	Year Ended December 31, 2005 (Audited)		Nine Months Ended September 30, 2006 (Unaudited)

REVENUES
Rental income	$	1,550,326	$	1,156,326
Recoveries		287,443		216,084

		1,837,769		1,372,410

CERTAIN EXPENSES
Real estate taxes		254,660		190,127
Management fees		36,000		27,000
Insurance		33,269		32,798
Professional fees		3,363		—
Administrative		938		3,035
Miscellaneous		758		—

		328,988		252,960

Excess of revenues over certain expenses	$	1,508,781	$	1,119,450

See notes to statements of revenues and certain expenses.

1 – Organizaton and Basis of Presentation

The Property, located in Ontario, California, contains approximately 397,000 square feet of commercial space, and is 100% “triple net leased” to subsidiaries of, and guaranteed by, Test-Rite International Co., Ltd. The lessee is responsible for utilities, taxes, insurance and other operating costs.

The accompanying financial statements are presented in conformity with Rule 3-14 of Securities and Exchange Commission Regulation S-X. Accordingly, the financial statements are not representative of actual operations for the period presented, as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the Property, have been excluded. Expenses excluded consist of interest, depreciation and amortization and certain other expenses not directly related to the future operations of the Property.

202 | Prospectus TIAA Real Estate Account

2 — Summary of Significant Accounting Policies

Use of Estimates

Revenue Recognition

Rental income from the lease is recognized on a straight-line basis over the lease term. Included in rental income for the year ended December 31, 2005 and the nine months ended September 30, 2006 are accruals of $131,400 and $78,700, respectively, representing revenue recognized in excess of rents due under the lease agreement. Recoveries, based on payments for real estate taxes and certain operating expenses, are accrued.

3 — Operating Leases

Space in the Property is rented to the tenant under a noncancelable operating lease. Approximate minimum future rents required under the lease in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	1,437,000
2007		1,464,000
2008		1,547,000
2009		1,547,000
2010		1,636,000
Thereafter		2,916,000

	$	10,547,000

TIAA Real Estate Account Prospectus | 203

Wilshire Rodeo Plaza, Beverly Hills, California

INDEPENDENT AUDITORS’ REPORT

To the Management of Teachers Insurance and Annuity Association

We have audited the accompanying statement of revenues and certain expenses of the property known as Wilshire Rodeo Plaza, located in Beverly Hills, California (the “Property”), as described in Note 1, for the nine months ended September 30, 2005. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property for the nine months ended September 30, 2005, in conformity with accounting principles generally accepted in the United States of America.

-s- Friedman LLP

January 10, 2006

204 | Prospectus TIAA Real Estate Account

Wilshire Rodeo Plaza, Beverly Hills, California

STATEMENT OF REVENUES AND CERTAIN EXPENSES


	Nine Months Ended September 30, 2005

REVENUES
Rental income		$	7,304,909
FASB Statement No. 13 accrual			1,616,500
Recoveries			1,880,033
Parking income			696,860
Storage			466,423
Lease termination fees			750,000
Other income			102,350

			12,817,075

CERTAIN EXPENSES
Operating expenses			1,783,092
Management fees			306,779
Insurance			213,280
Real estate taxes			1,281,066
Garage expense			3,529
Other taxes and licenses			82,877

			3,670,623

Excess of revenues over certain expenses		$	9,146,452

The accompanying notes are an integral part of this financial statement.

1 — Organizaton and Basis of Presentation

The Property, located in Beverly Hills, California, contains approximately 262,000 square feet square feet comprised of office and retail space. At September 30, 2005, the Property was 100% leased to eleven tenants. The tenant leases contain provisions for additional rent based on increases in operating expenses and real estate taxes over base period amounts.

The accompanying financial statement is presented in conformity with Rule 3-14 of Securities and Exchange Commission Regulation S-X. Accordingly, the financial statement is not representative of actual operations for the period presented, as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the Property, have been excluded. Expenses excluded consist of interest, depreciation and amortization and certain other expenses not directly related to the future operations of the Property.

TIAA Real Estate Account Prospectus | 205

2 — Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

3 — Major Tenants

Four tenants lease approximately 13%, 14%, 27% and 28%, respectively, for an aggregate of 82% of the Property’s total square footage. Rental income derived from these tenants is approximately the same percentages of total rental income.

4 — Operating Leases

Space in the Property is leased to tenants under various operating leases. Approximate minimum future rents required under leases in effect at December 31, 2005 are as follows:


Year Ending December 31,

2006	$	12,283,000
2007		12,504,000
2008		12,676,000
2009		12,887,000
2010		13,438,000
Thereafter		62,828,000

	$	126,616,000

5 — Related Party Transactions

The Property is managed by Broadway Real Estate Services, LLC, an affiliate of the owner of the Property. Management fees of approximately $307,000 were incurred for the nine months ended September 30, 2005.

206 | Prospectus TIAA Real Estate Account

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

CONDENSED STATUTORY-BASIS FINANCIAL STATEMENTS INFORMATION

(The following condensed statutory-basis financial statements information has been derived from audited statutory-basis financial statements which are available upon request.)

TIAA CONDENSED STATUTORY-BASIS BALANCE SHEETS
(Dollars in millions, except share data)*


	December 31, 2006 (Unaudited)		December 31, 2005 (Unaudited)

ASSETS
Bonds	$	121,775	$	121,863
Mortgages		23,756		24,353
Real estate		1,455		1,618
Preferred stocks		4,554		1,295
Common stocks		4,050		3,813
Other long-term investments		7,372		6,700
Cash, cash equivalents and short-term investments		2,464		824
Investment income due and accrued		1,480		1,458
Separate account assets		15,384		11,651
Deferred federal income tax asset		964		963
Other assets		390		395

TOTAL ASSETS	$	183,644	$	174,933


LIABILITIES, CAPITAL AND CONTINGENCY RESERVES

LIABILITIES
Reserves for life and health insurance, annuities and deposit-type funds	$	141,990	$	137,038
Liability for deposit-type contracts		428		416
Contract claims		315		295
Dividends due to policyholders		2,229		2,180
Federal income taxes		682		1,215
Asset valuation reserve		3,738		3,049
Interest maintenance reserve		682		796
Separate account liabilities		15,384		11,651
Securities lending collateral		—		3,460
Other liabilities		1,846		1,641

TOTAL LIABILITIES	$	167,294	$	161,741

Capital (2,500 shares of $1,000 par value common stock issued and outstanding and $550,000 paid-in capital)		3		3
Contingency Reserves:
For investment losses, annuity and insurance mortality, and other risks		16,347		13,189

TOTAL CAPITAL AND CONTINGENCY RESERVES		16,350		13,192

TOTAL LIABILITIES, CAPITAL AND CONTINGENCY RESERVES	$	183,644	$	174,933

TIAA Real Estate Account Prospectus | 207

Teachers Insurance and Annuity Association of America (continued)

CONDENSED STATUTORY-BASIS FINANCIAL STATEMENTS INFORMATION

(The following condensed statutory-basis financial statements information has been derived from statutory-basis financial statements which are available upon request.)

TIAA CONDENSED STATUTORY-BASIS STATEMENTS OF OPERATIONS

(Dollars in millions)*


	December 31, 2006 (Unaudited)			December 31, 2005 (Unaudited)

REVENUES
Insurance and annuity premiums and other considerations	$	11,154		$	10,863
Annuity dividend additions		2,089			2,065
Net investment income		10,313			9,985

TOTAL REVENUES	$	23,556		$	22,913

EXPENSES
Policy and contract benefits	$	9,812		$	7,962
Dividends to policyholders		3,986			3,860
Increase in policy and contract reserves		4,949			6,243
Operating expenses		581			458
Transfers to separate accounts, net		1,903			2,072
Other, net		71			117

TOTAL EXPENSES	$	21,302		$	20,712

Income before federal income tax and net realized capital (losses)		2,254			2,201
Federal income tax (benefit) expense		(594	)		526
Net realized capital (losses) less capital gains taxes, after transfers to the interest maintanance reserve		608			297

NET INCOME	$	3,456		$	1,972

208 | Prospectus TIAA Real Estate Account

Teachers Insurance and Annuity Association of America (continued)

BASIS OF PRESENTATION:

The accompanying financial statements have been prepared on the basis of statutory accounting principles prescribed or permitted by the New York State Insurance Department, a comprehensive basis of accounting that differs from accounting principles generally accepted in the United States.

Valuation of Investments: Short-term investments (debt securities with maturities of one year or less at the time of acquisition) that are not in default are stated at amortized cost using the interest method. Short-term investments in default are stated at the lower of amortized cost or market value. Cash and cash equivalents include cash on hand, amounts due from banks, and short term highly liquid investments with original maturity of three months or less. Bonds not backed by loans and not in default are stated at amortized cost using the interest method. Bonds not backed by loans that are in default are valued at the lower of amortized cost or fair value determined by quoted market prices or an independent pricing service. For other-than-temporary impairments, the cost basis of bonds is written down to fair value, with the resulting change recognized as a realized loss. Loan-backed securities and structured securities not in default, are stated at amortized cost. The prospective approach is used in determining the carrying amount of interest-only securities, securities for which an other-than-temporary impairment has been recognized or securities whose expected future cash flows are lower than the expected cash flows estimated at the time of acquisition. The retrospective approach, which uses actual and expected future cash flows, is applied when determining amount of all other loan-backed and structured securities. Estimated future cash flows and expected repayment periods are used in calculating amortization/accretion of premium/discount for loan-backed and structured securities. Loan-backed and structured securities in default are valued at the lower of amortized cost or undiscounted estimated future cash flows. Unaffiliated common stocks are stated at fair value. Preferred stocks of relatively high quality in NAIC designations 1, 2 and 3 are stated at amortized cost. Lower quality preferred stocks in NAIC designations 4, 5 and 6 are carried at the lower of amortized cost or fair value. Mortgages are stated at amortized cost, net of valuation allowances, except that purchase money mortgages are stated at the lower of amortized cost or ninety percent of appraised value. A mortgage is evaluated for impairment when it is probable that the receipt of contractual payments of principal and interest may not occur when scheduled. If the impairment is considered to be temporary, a valuation reserve is established for the excess of the carrying value of the mortgage over its estimated fair value. Real estate occupied by the Company and real estate held for the production of income is carried at depreciated cost, less encumbrances. Real estate held for sale is carried at the lower of depreciated cost or fair value, less encumbrances and estimated costs to sell. Depreciation is generally computed over a forty-year period. A real estate property may be considered impaired when events or circumstances indicate that the carrying value may not be recoverable. When TIAA determines that an investment in real estate is impaired, a direct write-

TIAA Real Estate Account Prospectus | 209

Teachers Insurance and Annuity Association of America (continued)

down is made to reduce the carrying value of the property to its estimated fair value based on an external appraisal, net of encumbrances and a realized loss is recorded. Investments in wholly-owned subsidiaries are stated at the value of their underlying net assets as follows: (1) domestic insurance subsidiaries are stated at the value of their underlying statutory net assets; (2) non-insurance subsidiaries are stated at the value of their underlying audited GAAP equity. Investments in limited partnerships and limited liability companies are carried at the underlying GAAP equity of the respective entity’s audited financial statements. Separate Accounts are established in conformity with insurance laws and are segregated from the Company’s general account and are maintained for the benefit of separate account contract holders and are stated at fair value.

Reclassifications: These financial statements report asset classes and related income in the same categories as prescribed for the NAIC annual statement. Certain prior year amounts in the financial statements have been reclassified to conform to the 2006 presentation. These reclassifications did not affect the total assets, liabilities, net income or contingency reserves previously reported.

Additional Asset Information:

(The following condensed statutory-basis financial statements information has been derived from statutory-basis financial statements which are available upon request.)


	December 31, 2006		December 31, 2005

As a percentage of total bond investments:
Below investment grade bonds		5.5%		6.2%
As a percentage of total mortgage investments:
Total mortgage investments in California		22.0%		21.8%
Total mortgage investments in office buildings		33.8%		38.0%
Total mortgage investments in shopping centers		34.8%		32.0%
As a percentage of total real estate investments:
Total real estate investments in Florida		19.0%		19.1%
Total real estate investments in office buildings		60.5%		63.7%

Derivative Instruments: TIAA has filed a Derivatives Use Plan with the New York State Insurance Department (the “Department”). This plan details TIAA’s derivative policy objectives, strategies, controls, and restrictions. TIAA uses derivative instruments for hedging, income generation, and asset replication purposes. TIAA enters into derivatives directly with counterparties of high credit quality. At December 31, 2006 and 2005, TIAA held derivative contracts with a total notional value of approximately $6,182 and $5,894, respectively.

Policy and Contract Reserves: Policy and contract reserves are determined in accordance with standard valuation methods approved by the Department and are computed in accordance with standard actuarial formulae. The reserves are based on assumptions for interest, mortality and other risks insured and establish a sufficient provision for all benefits guaranteed under policy and contract provisions. For retained assets, an accumulation account issued from the proceeds of life insurance policies reserves held are equal to the total current account balances of all account holders.

210 | Prospectus TIAA Real Estate Account

Teachers Insurance and Annuity Association of America (concluded)

At December 31, TIAA’s general account annuity reserves had the following characteristics (in millions):


	Amount		2006 Percent		Amount		2005 Percent

Subject to discretionary withdrawal:
At book value without adjustment		25,194		17.8%		24,536		17.9%
At fair value		—		0%		—		0%
Not subject to discretionary withdrawal		116,660		82.2%		112,379		82.1%

Total annuity reserves and deposit liabilities		141,854		100.0%		136,915		100.0%

Reconciliation to total policy & contract reserves shown on the balance sheet:
Reserves on other life policies & contracts		548				527
Reserves on accident & health policies		16				12

Total policy and contract reserves		142,418				137,454

Federal income taxes: By charter, TIAA is a Stock Life Company that operates on a non-profit basis and was largely exempt from federal income taxation under the Internal Revenue Code until 1998 when federal legislation changed its taxable status.

TIAA’s 1998 and 1999 tax returns representing the first years for which TIAA’s entries business operations were subject to federal income taxation, have been audited by the Internal Revenue Service (“IRS”). In April 2004, the IRS completed its audit and presented TIAA with a Revenue Agent Report asserting certain adjustments to TIAA’s taxable income that would result in additional tax due of $1.1 billion for the 1998 and 1999 tax years. These adjustments would disallow the deductions for certain intangible assets and would adjust certain of TIAA’s tax-basis annuity reserves.

TIAA’s management has filed a protest to the IRS’ adjustments and believes that its tax positions are supported by substantial authority. Although the final resolution of the IRS’ asserted adjustments is uncertain, management’s current best estimate of the probable loss from this dispute with the IRS, given the current status of the tax claim, requires TIAA to hold a contingent tax provision of $659 million as of December 31, 2006, which is a reduction from the reserve of $1.2 billion established as of December 31, 2005. This reduction in the reserve resulted in a net benefit of $594 million, which is reflected in TIAA’s 2006 operations.

TIAA Real Estate Account Prospectus | 211

APPENDIX A — MANAGEMENT OF TIAA

The Real Estate Account has no officers or directors. The Trustees and principal executive officers of TIAA as of April 20, 2007, their ages, and their principal occupations, are as follows:

TRUSTEES



Name	Age	Principal Occupations During Past 5 Years

Elizabeth E. Bailey	68	John C. Hower Professor of Public Policy and Management, Wharton School, University of Pennsylvania. Director, CSX Corporation and Altria Group, Inc., Chair, National Bureau of Economic Research. Honorary Trustee, the Brookings Institution.

Robert C. Clark	63	Harvard University Distinguished Service Professor and Austin Wakeman Scott Professor of Law, Harvard Law School, Harvard University. Formerly Dean and Royall Professor of Law, Harvard Law School from 1989 to 2003. Director, Collins & Aikman Corporation, Time Warner, Inc. and Omnicom Group.

Edward M. Hundert, M.D.	50	Visiting lecturer in Medical Ethics, Harvard Medical School. President, Case Western Reserve University from 2002 to 2006. Formerly, Dean, 2000-2002, University of Rochester School of Medicine and Dentistry, Professor of Medical Humanities and Psychiatry, 1997-2002. Board Member, Rock and Roll Hall of Fame.

Marjorie Fine Knowles	67	Professor of Law, Georgia State University College of Law.

Donald K. Peterson	57	Former Chairman and Chief Executive Officer, Avaya Inc. from 2002 to 2006. Formerly, Executive Vice President and Chief Financial Officer, Lucent Technologies. Chairman, Board of Trustees, Worcester Polytechnic Institute. Director, Opti-Scrip.

Sidney A. Ribeau	59	President, Bowling Green University. Director, The Andersons, Convergys and Worthington Industries.

Dorothy K. Robinson	56	Vice President and General Counsel, Yale University since 1986. Director, Newark Public Radio Inc., Youth Rights Media and Friends of New Haven Legal Assistance.

David L. Shedlarz	59	Vice Chairman of Pfizer Inc. Executive Vice President of Pfizer Inc. from 1999 to 2005 and Chief Financial Officer from 1995 to 2005. Director, Pitney Bowes Inc. Trustee of the International Accounting Standards Committee Foundation and a member of the J. P. Morgan Chase & Co. National Advisory Board. Director of the Board of Overseers, Leonard N. Stern School of Business, New York University; Chairman of the Board of the Multiple Sclerosis Society of New York and Director of the National Multiple Sclerosis Society; Director of Junior Achievement of New York.

Leonard S. Simon	70	Former Vice Chairman, Charter One Financial, Inc. Formerly, Chairman, President and Chief Executive Officer, RCSB Financial, Inc. and Chairman and Chief Executive Officer, Rochester Community Savings Bank. Director, Landmark Technology Partners, Inc., Integrated Nano-Technologies, LLC and I3T Corporation.

David F. Swensen	53	Chief Investment Officer, Yale University. Trustee, Brookings Institution, Wesleyan University; Member, University of Cambridge Investment Board.

212 | Prospectus TIAA Real Estate Account

TRUSTEES



Name	Age	Principal Occupations During Past 5 Years

Ronald L. Thompson	57	Former Chairman and Chief Executive Officer, Midwest Stamping and Manufacturing Company through 2005. Director, Washington University in St. Louis.

Marta Tienda	56	Maurice P. During ‘22 Professor of Demographic Studies, Princeton University. Director, Office of Population Research, Princeton University, 1998-2002. Director, Corporation of Brown University, Sloan Foundation, Jacobs Foundation and RAND Corporation.

Paul R. Tregurtha	71	Chairman and Chief Executive Officer, Mormac Marine Group, Inc. and Moran Transportation Company, Inc.; Vice Chairman, Interlake Steamship Company and Lakes Shipping Company; Formerly, Chairman, Meridian Aggregates, L.P. Director, FPL Group, Inc.

Rosalie J. Wolf	65	Managing Partner, Botanica Capital Partners LLC. Formerly, Senior Advisor and Managing Director, Offit Hall Capital Management LLC and its predecessor company, Laurel Management Company LLC from 2001 to 2003; formerly, Treasurer and Chief Investment Officer, The Rockefeller Foundation. Director, North European Oil Royalty Trust; Chairman, Sanford C. Bernstein Fund, Inc.



OFFICER-TRUSTEES


Name	Age	Principal Occupations During Past 5 Years

Herbert M. Allison, Jr.	63	Chairman, President and Chief Executive Officer, TIAA. President and Chief Executive Officer, CREF. Formerly, President, Chief Operating Officer and Member of the Board of Directors of Merrill Lynch & Co., Inc., 1997-1999 and President and Chief Executive Officer of Alliance for LifeLong Learning, Inc., 2000-2002. Advisory Board, Stanford Business School and Yale School of Management; Chair, Business-Higher Education Forum; Director, The Conference Board; Member, Business Roundtable and Financial Services Roundtable.



OTHER OFFICERS

Name	Age	Principal Occupations During Past 5 Years

Georganne C. Proctor	50	Executive Vice President and Chief Financial Officer, TIAA and CREF.

Scott C. Evans	47	Executive Vice President and Head of Asset Management, TIAA and CREF.

Gary Chinery	57	Vice President and Treasurer, TIAA and CREF.

E. Laverne Jones	58	Vice President and Corporate Secretary, TIAA and CREF.


PORTFOLIO MANAGEMENT TEAM


Name	Age	Principal Occupations During Past 5 Years

Margaret A. Brandwein	60	Managing Director — Portfolio Manager, TIAA Real Estate Account since 2004. From 2001 to 2004, Head of Commercial Mortgages — West Coast for TIAA.

Thomas Garbutt	48	Managing Director — Head of Global Real Estate Equities, TIAA.

Philip J. McAndrews	48	Managing Director — Head of Real Estate Portfolio Management, TIAA since 2005. Between 2003 and 2005, portfolio manager for the Real Estate Account. Between 1997 and 2003, Head of the Real Estate Acquisitions and Joint Ventures group for TIAA.

TIAA Real Estate Account Prospectus | 213

APPENDIX B — SPECIAL TERMS

Accumulation: The total value of your accumulation units in the Real Estate Account.

Accumulation Period: The period that begins with your first premium and continues until the entire accumulation has been applied to purchase annuity income, transferred from the Account, or paid to you or a beneficiary.

Accumulation Unit: A share of participation in the Real Estate Account for someone in the accumulation period. The Account’s accumulation unit value changes daily.

Annuity Unit: A measure used to calculate the amount of annuity payments due a participant.

Beneficiary: Any person or institution named to receive benefits if you die during the accumulation period or if you (and your annuity partner, if you have one) die before the guaranteed period of your annuity ends.

Business Day: Any day the New York Stock Exchange (NYSE) is open for trading. A business day ends at 4 p.m. Eastern time, or when trading closes on the NYSE, if earlier.

Calendar Day: Any day of the year. Calendar days end at the same time as business days.

Commuted Value: The present value of annuity payments due under an income option or method of payment not based on life contingencies. Present value is adjusted for investment gains or losses since the annuity unit value was last calculated.

Eligible Institution: A nonprofit institution, including any governmental institution, organized in the United States.

ERISA: The Employee Retirement Income Security Act of 1974, as amended. General Account: All of TIAA’s assets other than those allocated to the Real Estate Account or to other existing or future TIAA separate accounts.

Income Change Method: The method under which you choose to have your annuity payments revalued. Under the annual income change method, your payments are revalued once each year. Under the monthly income change method, your payments are revalued every month.

Separate Account: An investment account legally separated from the general assets of TIAA, whose income and investment gains and losses are credited to or charged against its own assets, without regard to TIAA’s other income, gains or losses.

214 | Prospectus TIAA Real Estate Account

Valuation Day: Any day the NYSE is open for trading, as well as, for certain contracts, the last calendar day of each month. Valuation days end as of the close of all U.S. national exchanges where securities or other investments of the Account are principally traded. Valuation days that aren’t business days will end at 4 p.m. eastern time.

Valuation Period: The time from the end of one valuation day to the end of the next.

TIAA Real Estate Account Prospectus | 215

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TIAA Real Estate Account Prospectus | 217

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218 | Prospectus TIAA Real Estate Account

PART II

INFORMATION NOT REQUIRED IN A PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

SEC Registration Fees	$	122,800
Costs of printing and engraving		600,000	*
Legal fees		10,000	*
Accounting fees		10,000	*
Miscellaneous		7,200	*
Total	$	750,000	*

_______________
* Approximate

Item 14. Indemnification of Directors and Officers.

Trustees, officers, and employees of TIAA may be indemnified against liabilities and expenses incurred in such capacity pursuant to Article Six of TIAA’s bylaws (see Exhibit 3(B)). Article Six provides that, to the extent permitted by law, TIAA will indemnify any person made or threatened to be made a party to any action, suit or proceeding by reason of the fact that such person is or was a trustee, officer, or employee of TIAA or, while a trustee, officer, or employee of TIAA, served any other organization in any capacity at TIAA’s request. To the extent permitted by law, such indemnification could include judgments, fines, amounts paid in settlement, and expenses, including attorney’s fees. TIAA has in effect an insurance policy that will indemnify its trustees, officers, and employees for liabilities arising from certain forms of conduct.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers, or employees of TIAA, pursuant to the foregoing provision or otherwise, TIAA has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in that Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a trustee, officer, or employee in the successful defense of any action, suit or proceeding) is asserted by a trustee, officer, or employee in connection with the securities being registered, TIAA will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in that Act and will be governed by the final adjudication of such issue.

Item 15. Recent Sales of Unregistered Securities.

None.

II-1

Item 16. Exhibits and Financial Statement Schedules.

(a)	Exhibits

(1)	Distribution and Administrative Services Agreement, dated September 29, 1995, by and between TIAA and
	TIAA-CREF Individual & Institutional Services, Inc.,¹ as amended effective as of May 1, 2005²,
	effective April 28, 2006³ and effective as of May 1, 2007*

(3)	(A)	Restated Charter of TIAA⁴

	(B)	Bylaws of TIAA (as amended)⁵

(4)	(A)	Forms of RA, GRA, GSRA, SRA, IRA Real Estate Account Contract Endorsements¹, Keogh
		Contract², Retirement Select and Retirement Select Plus Contracts and Endorsements⁶and
		Retirement Choice and Retirement Choice Plus Contracts²

	(B)	Forms of Income-Paying Contracts¹

(5)	Opinion and Consent of George W. Madison, Esquire*

(10)	(A)	Independent Fiduciary Agreement, dated February 22, 2006, by and among TIAA, the Registrant, and
		The Real Estate Research Corporation⁷

	(B)	Custodial Services Agreement, dated as of June 1, 1995, by and between TIAA and Morgan Guaranty
		Trust Company of New York on behalf of the Registrant (Agreement assigned to The Bank of New
		York, January, 1996)¹

(23)	(A)	Consent of George W. Madison, Esquire (filed as Exhibit 5)*

	(B)	Consent of Sutherland Asbill & Brennan LLP***

	(C)	Consent of PricewaterhouseCoopers LLP*

	(D)	Consent of Ernst & Young LLP*

	(E)	Consent of Friedman LLP*

	(F)	Consent of Berdon LLP*

	(G)	Consent of Aarons Grant & Habif, LLC*

(24)	Powers of Attorney***

____________

1	Previously filed and incorporated herein by reference to the Account’s Post-Effective Amendment No. 2 to the Registration Statement on Form S-1, filed April 30, 1996 (File No. 33-92990).

2	Previously filed and incorporated herein by reference to the Account’s Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed May 2, 2005 (File No. 333-121493).

3	Previously filed and incorporated herein by reference to Exhibit 1 to the Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed May 1, 2006 (File No. 333-132580).

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

5	Previously filed and incorporated herein by reference to the Account’s Quarterly Report on Form 10-Q for the period ended September 30, 2006 and filed with the Commission on November 14, 2006 (File No. 033-92990).

6	Previously filed and incorporated herein by reference to the Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed April 29, 2004 (File No. 333-113602).

7	Previously filed and incorporated herein by reference to the Account’s Annual Report on Form 10-K for the period ended December 31, 2005, filed with the Commission on March 15, 2006 (File No. 033-92990).

*	Filed herewith.

**	To be filed by amendment

***	Previously filed.

(b) Financial Statement Schedules

All Schedules have been omitted because they are not required under the related instructions or are inapplicable.

II-2

Item 17. Undertakings.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

	(i)	To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

	(ii)	To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement;

	(iii)	To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) To provide the full financial statements of TIAA promptly upon written or oral request.

(5) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(6) That, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

	(i)	Any preliminary prospectus or prospectuses of the undersigned Registrant relating to the offer- ing required to be filed pursuant to Rule 424;

	(ii)	Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant;

	(iii)	The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and

	(iv)	Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.

Following are the full audited financial statements of TIAA:

II-3

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

INDEX OF AUDITED STATUTORY - BASIS FINANCIAL STATEMENTS

DECEMBER 31, 2006

		Page

Report of Management Responsibility		2
Report of the Audit Committee		3
Report of Independent Auditors		4
Statutory - Basis Financial Statements:
Statements of Admitted Assets, Liabilities and Capital and Contingency Reserves		6
Statements of Operations		7
Statements of Changes in Capital and Contingency Reserves		8
Statements of Cash Flow		9
Notes to Financial Statements		10

REPORT OF MANAGEMENT RESPONSIBILITY

April 18, 2007

To the Policyholders of
Teachers Insurance and Annuity
Association of America:

The accompanying statutory-basis financial statements of Teachers Insurance and Annuity Association of America (“TIAA”) are the responsibility of management. They have been prepared on the basis of statutory accounting principles, a comprehensive basis of accounting comprised of accounting principles prescribed or permitted by the New York State Insurance Department. The financial statements of TIAA have been presented fairly and objectively in accordance with such statutory accounting principles.

TIAA has established and maintains an effective system of internal controls over financial reporting designed to provide reasonable assurance that assets are properly safeguarded, that 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, and the Senior Vice President of Internal Audit regularly reports to the Audit Committee of the TIAA Board of Trustees.

The independent registered public accounting firm of PricewaterhouseCoopers LLP has audited the accompanying statutory-basis financial statements of TIAA for the years ended December 31, 2006 and 2005. Ernst & Young LLP had audited the Company’s financial statements for the year ended December 31, 2004. To maintain auditor independence and avoid even the appearance of a conflict of interest, it continues to be TIAA’s policy that any management advisory or consulting services are obtained from a firm other than the independent accounting firm. The independent auditors’ report expresses an independent opinion on the fairness of presentation of these statutory-basis financial statements.

The Audit Committee of the TIAA Board of Trustees, comprised entirely of independent, non-management trustees, meets regularly with management, representatives of the independent registered public accounting firm and internal audit personnel to review matters relating to financial reporting, internal controls and auditing. In addition to the annual independent audit of the TIAA statutory-basis financial statements, the New York State Insurance Department and other state insurance departments regularly examine the operations and financial statements of TIAA as part of their periodic corporate examinations.

Herbert M. Allison, Jr.

Chairman, President and
Chief Executive Officer

Georganne C. Proctor

Executive Vice President and
Chief Financial Officer

REPORT OF THE AUDIT COMMITTEE

To the Policyholders of
Teachers Insurance and Annuity
Association of America:

The Audit Committee (“Committee”) oversees the financial reporting process of Teachers Insurance and Annuity Association of America (“TIAA”) on behalf of TIAA’s Board of Trustees. The Committee is a standing committee of the Board of Trustees and operates in accordance with a formal written charter (copies are available upon request) that describes the Committee’s responsibilities.

Management has the primary responsibility for TIAA’s financial statements, the development and maintenance of an effective system of internal controls over financial reporting, operations, and compliance with applicable laws and regulations. In fulfilling its oversight responsibilities, the Committee reviewed and approved the audit plans of the internal audit group and the independent registered public accounting firm in connection with their respective audits. 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 has direct responsibility for the appointment, compensation and oversight of the external financial accounting firm. As required by its charter, the Committee will evaluate rotation of the external financial accounting firm whenever circumstances warrant, but in no event will the evaluation be later than the tenth year of service.

The Committee reviewed and discussed the accompanying audited statutory-basis 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 statutory-basis financial statements. The Committee has also discussed the audited statutory-basis financial statements with PricewaterhouseCoopers LLP, the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of the 2006 audited statutory-basis financial statements with statutory accounting principles.

The discussion with PricewaterhouseCoopers LLP focused on their judgments concerning the quality and acceptability of the accounting principles as applied in the financial reporting practices followed by TIAA, the clarity and completeness 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 PricewaterhouseCoopers LLP the auditors’ independence from management, and the Board 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 statutory-basis financial statements for publication and filing with appropriate regulatory authorities.

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

April 18, 2007

Report of Independent Auditors

To the Board of Trustees of
Teachers Insurance and Annuity
Association of America:

We have audited the accompanying statutory statements of admitted assets, liabilities and capital and contingency reserves of Teachers Insurance and Annuity Association of America (the "Company") as of December 31, 2006 and December 31, 2005, and the related statutory statements of operations, changes in capital and contingency reserves, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of the Company for the year ended December 31, 2004, which are prepared on the basis of accounting described in Note 2, were audited by other independent auditors whose report dated April 20, 2005, expressed an adverse opinion on the fair presentation of the financial statements in conformity with generally accepted accounting principles in the United States of America, and expressed an unqualified opinion on the fair presentation of the financial statements in conformity with the basis of accounting described in Note 2.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 2 to the financial statements, the Company prepared these financial statements using accounting practices prescribed or permitted by the Insurance Department of the State of New York, which practices differ from accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the statutory basis of accounting and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

In our opinion, because of the effects of the matter discussed in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the Company at December 31, 2006 and 2005, or the results of its operations or its cash flows for the years then ended.

In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities and capital and contingency reserves of the Company as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended, on the basis of accounting described in Note 2.

As discussed in Note 2 to the financial statements, on January 1, 2005, the Company adopted Statement of Statutory Accounting Principles No. 88, Investments in Subsidiary, Controlled, and Affiliated Entities.

/s/ PricewaterhouseCoopers LLP

April 18, 2007

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

STATUTORY - BASIS STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND CAPITAL AND
CONTINGENCY RESERVES
(Dollars in millions, except share data)

	December 31,
	2006		2005
ADMITTED ASSETS
Bonds	$	121,775	$	121,863
Mortgages		23,756		24,353
Real estate		1,455		1,618
Preferred stocks		4,554		1,295
Common stocks		4,050		3,813
Other long-term investments		7,372		6,700
Cash, cash equivalents and short-term investments		2,464		824
Investment income due and accrued		1,480		1,458
Separate account assets		15,384		11,651
Net deferred federal income tax asset		964		963
Other assets		390		395
TOTAL ADMITTED ASSETS	$	183,644	$	174,933

LIABILITIES, CAPITAL AND CONTINGENCY RESERVES
Liabilities
Reserves for life and health insurance, annuities and deposit-type contracts	$	142,733	$	137,749
Dividends due to policyholders		2,229		2,180
Federal income taxes		682		1,215
Asset valuation reserve		3,738		3,049
Interest maintenance reserve		682		796
Separate account liabilities		15,384		11,651
Securities lending collateral		—		3,460
Other liabilities		1,846		1,641

TOTAL LIABILITIES		167,294		161,741

Capital and Contingency Reserves
Capital (2,500 shares of $1,000 par value common stock issued and
outstanding and $550,000 paid-in capital)		3		3
Contingency Reserves:
For investment losses, annuity and insurance mortality, and other risks		16,347		13,189

TOTAL CAPITAL AND CONTINGENCY RESERVES		16,350		13,192

TOTAL LIABILITIES, CAPITAL AND CONTINGENCY RESERVES	$	183,644	$	174,933

See notes to statutory - basis financial statements.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

STATUTORY - BASIS STATEMENTS OF OPERATIONS
(Dollars in millions)

	For the Years Ended December 31,
	2006			2005		2004
REVENUES
Insurance and annuity premiums and other considerations	$	11,154		$	10,863	$	9,482
Annuity dividend additions		2,089			2,065		2,392
Net investment income		10,313			9,985		9,454

TOTAL REVENUES	$	23,556		$	22,913	$	21,328

BENEFITS AND EXPENSES
Policy and contract benefits	$	9,812		$	7,962	$	6,832
Dividends to policyholders		3,986			3,860		4,113
Increase in policy and contract reserves		4,949			6,243		6,431
Net operating expenses		581			458		433
Net transfers to separate accounts		1,903			2,072		1,732
Net, other		71			117		121

TOTAL BENEFITS AND EXPENSES	$	21,302		$	20,712	$	19,662

Income before federal income taxes and net realized capital gains
(losses)	$	2,254		$	2,201	$	1,666

Federal income tax (benefit) expense		(594	)		526		572

Net realized capital gains (losses) less capital gains taxes, after
transfers to interest maintenance reserve		608			297		(554	)

NET INCOME	$	3,456		$	1,972	$	540

See notes to statutory - basis financial statements.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

STATUTORY - BASIS STATEMENTS OF CHANGES IN CAPITAL AND CONTINGENCY RESERVES
(Dollars in millions)

	For the Years Ended December 31,
	2006			2005			2004

CHANGES IN CAPITAL AND CONTINGENCY RESERVES

Net income	$	3,456		$	1,972		$	540
Net unrealized capital gains on investments		398			497			751
Change in the asset valuation reserve		(689	)		(305	)		(455	)
Change in net deferred federal income tax asset		(1,154	)		110			267

Change in non-admitted assets:
Net deferred federal income tax asset		1,155			(171	)		(136	)
Other		(6	)		(107	)		6
Cumulative effect of change in accounting principle		—			55			—
Change in contingency reserves as a result of reinsurance		(13	)		(17	)		(17	)
Other, net		11			(19	)		(20	)

NET CHANGE IN CAPITAL AND CONTINGENCY RESERVES		3,158			2,015			936


CAPITAL AND CONTINGENCY RESERVES AT BEGINNING OF YEAR		13,192			11,177			10,241


CAPITAL AND CONTINGENCY RESERVES AT END OF YEAR	$	16,350		$	13,192		$	11,177

See notes to statutory - basis financial statements.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

STATUTORY - BASIS STATEMENTS OF CASH FLOW
(Dollars in millions)

		For the Years Ended December 31,
	2006			2005			2004
CASH FROM OPERATIONS
Insurance and annuity premiums and other considerations	$	11,153		$	10,860		$	9,493
Miscellaneous income		106			72			195
Net investment income		10,296			9,932			9,393
Total Receipts		21,555			20,864			19,081

Policy and contract benefits		9,788			7,954			6,830
Dividends paid to policyholders		1,849			1,830			1,844
Operating expenses		674			591			740
Federal income tax (benefit)		(62	)		(15	)		(68	)
Net transfers to separate accounts		1,904			2,068			1,727
Total Disbursements		14,153			12,428			11,073
Net cash from operations		7,402			8,436			8,008

CASH FROM INVESTMENTS
Proceeds from long-term investments sold, matured, or repaid:
Bonds		17,210			17,386			20,595
Stocks		2,269			1,307			1,148
Mortgages and real estate		4,388			4,840			4,056
Miscellaneous proceeds		2,112			1,980			1,230
Cost of investments acquired:
Bonds		20,425			24,832			28,550
Stocks		1,582			1,276			1,542
Mortgages and real estate		3,612			4,544			4,699
Miscellaneous applications		2,582			2,532			1,959
Net cash from investments		(2,222	)		(7,671	)		(9,721	)

CASH FROM FINANCING AND OTHER
Net deposits on deposit-type contracts funds		(3	)		(9	)		—
Net collateral for security lending disbursements		(3,460	)		(84	)		—
Other cash provided (applied)		(77	)		(295	)		1,077
Net cash from financing and other		(3,540	)		(388	)		1,077

NET CHANGE IN CASH, CASH EQUIVALENTS AND SHORT-TERM
INVESTMENTS		1,640			377			(636	)

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS,
BEGINNING OF YEAR		824			447			1,083

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS,
END OF YEAR	$	2,464		$	824		$	447

See notes to statutory - basis financial statements.

9

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS

DECEMBER 31, 2006

Note 1 – Organization

Teachers Insurance and Annuity Association of America (“TIAA” or the “Company”) was established as a legal reserve life insurance company under the insurance laws of the State of New York in 1918. Its primary purpose is to aid and strengthen nonprofit educational and research organizations, governmental entities and other nonprofit institutions by providing retirement and insurance benefits for their employees and their families and by counseling these organizations and their employees on benefit plans and other measures of economic security.

Note 2 – Significant Accounting Policies

Basis of Presentation:

The accompanying financial statements have been prepared on the basis of statutory accounting principles prescribed or permitted by the New York State Insurance Department (the “Department”), a comprehensive basis of accounting that differs from accounting principles generally accepted in the United States (“GAAP”). The Department requires insurance companies domiciled in the State of New York to prepare their statutory-basis financial statements in accordance with the National Association of Insurance Commissioners’ (“NAIC”) Accounting Practices and Procedures Manual (“NAIC SAP”), subject to any deviation prescribed or permitted by the Department (“NY SAP”).

The table below provides a reconciliation of the Company’s net income and contingency reserves between NAIC SAP and the NY SAP annual statement filed with the Department. The primary differences arise because the Company maintains more conservative reserves, as prescribed or permitted by NY SAP, under which annuity reserves are generally discounted on the basis of contractually guaranteed interest rates and mortality tables (in millions).

	2006		2005		2004
Net Income, NY SAP	$	2,334	$	2,001	$	540

NY SAP Prescribed or Permitted Practices:
Additional Reserves for:
Term Conversions		1		—		1
Deferred and Payout Annuities issued after 2000		374		395		413

Net Income, NAIC SAP	$	2,709	$	2,396	$	954

Contingency Reserves, NY SAP	$	15,279	$	13,220	$	11,174

NY SAP Prescribed or Permitted Practices:
Goodwill Limitation		34		—		—
Additional Reserves for:
Term Conversions		9		8		8
Deferred and Payout Annuities issued after 2000		2,895		2,521		2,126

Contingency Reserves, NAIC SAP	$	18,217	$	15,749	$	13,308

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 2 – Significant Accounting Policies – (continued)

Application of Accounting Pronouncements: In 2004, the Company adopted the statutory accounting guidance contained in SSAP No. 87, Capitalization Policy and INT 04-17: Impact of Medicare Modernization Act on Postretirement Benefits. These accounting changes were implemented as a change in accounting principle in order to conform to the provisions of the NAIC SAP, as adopted by the Department. These changes were effective as of January 1, 2004 and had no material effect on the Company’s financial statements. Note 11 contains additional information about the Medicare Modernization Act.

Beginning January 1, 2005, the Company implemented SSAP No. 88, Investments in Subsidiary, Controlled, and Affiliated Entities, A Replacement of SSAP No. 46. As a result of this new guidance, the Company now records its equity investment in its investment subsidiaries based on audited GAAP equity. Previous statutory accounting guidance required the insurer to make statutory adjustments to convert GAAP equity to a statutory equity basis. As a consequence of this change, prepaid expenses and leasing commissions recorded as assets under GAAP, for investment subsidiaries that contain real estate, are admitted and included on the balance sheets. The initial application of this standard resulted in a $55 million increase in the carrying value of the investment subsidiaries and to the Company’s net admitted assets and aggregate write-ins for special surplus funds at January 1, 2005.

Reconciliations of Net Income and Contingency Reserves: Subsequent to the filing of its 2006 NY SAP financial statements, the Company made the following adjustments to the Statutory-Basis financial statements. Reconciliations of TIAA’s net income and contingency reserves between the NY SAP as originally filed and these audited financial statements are shown below (in millions):

			Capital and
			Contingency
	Net Income		Reserves

NY SAP – as filed	$	2,334	$	15,282

Adjustment to Current Federal Income Taxes		1,122		1,122
Change to Deferred Income Taxes		—		(1,117	)
Change in Non-Admitted Deferred Income Taxes		—		1,063

Audited Financial Statements	$	3,456	$	16,350

Accounting Principles Generally Accepted in the United States: The Financial Accounting Standards Board ("FASB") dictates the requirements for financial statements that are prepared in conformity with GAAP with the applicable authoritative accounting pronouncements. As a result, the Company cannot refer to financial statements prepared in accordance with NAIC SAP as having been prepared in accordance with GAAP. The differences between GAAP and NAIC SAP would have a material effect on the Company’s financial statements and the primary differences can be summarized as follows:

Under GAAP:

The asset valuation reserve (“AVR”) is eliminated as a reserve and the credit-related realized gains and losses are reported in the statement of income on a pretax basis as incurred;
The interest maintenance reserve (“IMR”) is eliminated and the realized gains and losses resulting from changes in interest rates are reported as a component of net income rather than being accumulated in and subsequently amortized into investment income over the remaining life of the investment sold;
Dividends on insurance policies and annuity contracts are accrued as the related earnings emerge from operations rather than being accrued in the year when they are declared;
Certain assets designated as “non-admitted assets” are included in the GAAP balance sheet rather than excluded from assets in the statutory balance sheet;

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 2 – Significant Accounting Policies – (continued)

Policy acquisition costs are deferred and amortized over the lives of the policies issued rather than being charged to operations as incurred. Policy and contract reserves are based on estimates of expected mortality, morbidity, persistency and interest rather than being based on statutory mortality, morbidity and interest requirements;
Investments in wholly-owned subsidiaries, other entities under the control of the parent, and certain variable interest entities are consolidated in the parent’s financial statements rather than being carried at the parent’s share of the underlying audited GAAP equity or statutory surplus of a domestic insurance subsidiary;
Investments in bonds considered to be “available for sale” are carried at fair value rather than amortized cost;
State taxes are included in the computation of deferred taxes. A deferred tax asset is recorded for the amount of gross deferred tax assets expected to be realized in future years, and a valuation allowance is established for deferred tax assets not realizable, rather than not being included in the deferred income tax asset;
For purposes of calculating the defined benefit and the post-retirement benefit obligations, active participants not currently vested would also be included in determining the liability;
Annuities that do not incorporate significant insurance risk are classified as investment contracts and are not accounted for as insurance contracts;
Derivatives are generally valued at fair value rather than being accounted for in a manner consistent with the hedged item, even when the derivatives qualify for hedge accounting;
Loan-backed and structured securities that are determined to have an other-than-temporary impairment are written down to fair value and not to the sum of undiscounted estimated future cash flows;
Certain reinsurance transactions are accounted for as financing transactions under GAAP and as reinsurance for statutory purposes, and assets and liabilities are reported gross of reinsurance for GAAP and net of reinsurance for statutory purposes.

The effects of these differences, while not determined, are presumed to be material.

Accounting Policies:

The preparation of the Company's statutory-basis financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses at the date of the financial statements. Actual results may differ from those estimates. The following is a summary of the significant accounting policies followed by the Company:

Investments: Publicly traded securities are accounted for as of the date the investments are purchased or sold (trade date). Other investments are recorded on the settlement date. Realized capital gains and losses on investment transactions are accounted for under the specific identification method. A realized loss is recorded when an impairment is considered to be other-than-temporary. An impairment in an investment is considered to have occurred if an event or change in circumstance indicates that the carrying value of the asset may not be recoverable or the receipt of contractual payments of principal and interest may not occur when scheduled. When an impairment has been determined to have occurred, the investment is written down to fair value except for loan-backed and structured securities, which are written down to the sum of their undiscounted expected future cash flows. Management considers available evidence to evaluate the potential impairment of its investments. If the decline in the fair value of the investment is deemed to be other than temporary, a write-down is recognized as a realized loss.

Cash, Cash Equivalents and Short-Term Investments: Short-term investments (debt securities with maturities of one year or less at the time of acquisition) that are not in default are stated at amortized cost using the interest method. Short-term investments in default are stated at the lower of amortized cost or market value. Cash and cash equivalents include cash on hand, amounts due from banks, and short term highly liquid investments with original maturity of three months or less.

Bonds: Bonds not backed by loans and not in default are stated at amortized cost using the interest method. Bonds not backed by loans that are in default are valued at the lower of amortized cost or fair value determined by quoted market prices or an independent pricing service. For other-than-temporary impairments, the cost basis of bonds is written down to fair value, with the resulting change recognized as a realized loss.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 2 – Significant Accounting Policies – (continued)

Loan-Backed Securities and Structured Securities: Included within bonds are loan-backed securities. Loan-backed securities and structured securities not in default, are stated at amortized cost. The prospective approach is used in determining the carrying amount of interest-only securities, securities for which an other-than-temporary impairment has been recognized or securities whose expected future cash flows are lower than the expected cash flows estimated at the time of acquisition. The retrospective approach, which uses actual and expected future cash flows, is applied when determining amount of all other loan-backed and structured securities. Estimated future cash flows and expected repayment periods are used in calculating amortization/accretion of premium/discount for loan-backed and structured securities. Loan-backed and structured securities in default are valued at the lower of amortized cost or undiscounted estimated future cash flows. Prepayment assumptions for loaned backed securities and structured securities are obtained from external data services or internal estimates.

Common Stock: Unaffiliated common stocks are stated at fair value.

Preferred Stock: Preferred stocks of relatively high quality in NAIC designations 1, 2 and 3 are stated at amortized cost. Lower quality preferred stocks in NAIC designations 4, 5 and 6 are carried at the lower of amortized cost or fair value.

Mortgages: Mortgages are stated at amortized cost, net of valuation allowances, except that purchase money mortgages are stated at the lower of amortized cost or ninety percent of appraised value. A mortgage is evaluated for impairment when it is probable that the receipt of contractual payments of principal and interest may not occur when scheduled. If the impairment is considered to be temporary, a valuation reserve is established for the excess of the carrying value of the mortgage over its estimated fair value. Changes in valuation reserves for mortgages are included in net unrealized capital gains on investments. When an event occurs resulting in an impairment that is other-than-temporary, a direct write-down is recorded as a realized loss and a new cost basis is established.

Real Estate: Real estate occupied by the Company and real estate held for the production of income are carried at depreciated cost, less encumbrances. Real estate held for sale is carried at the lower of depreciated cost or fair value, less encumbrances and estimated costs to sell. The Company utilizes the straight-line method of depreciation on real estate. Depreciation is generally computed over a forty-year period. A real estate property may be considered impaired when events or circumstances indicate that the carrying value may not be recoverable. When TIAA determines that an investment in real estate is impaired, a direct write-down is made to reduce the carrying value of the property to its estimated fair value based on an external appraisal, net of encumbrances and a realized loss is recorded.

Wholly-Owned Subsidiaries: Investments in wholly-owned subsidiaries are stated at the value of their underlying net assets as follows: (1) domestic insurance subsidiaries are stated at the value of their underlying statutory net assets; (2) non-insurance subsidiaries are stated at the value of their underlying audited GAAP equity. Dividends and distributions from subsidiaries are recorded in investment income and changes in the equity of subsidiaries are recorded directly to surplus as unrealized gains or losses.

Limited Partnerships and Limited Liability Companies: Investments in limited partnerships and limited liability companies are carried at the underlying GAAP equity of the respective entity’s audited financial statements. An unrealized loss is deemed to be other-than-temporary when there is limited ability to recover the loss. A realized loss is recorded for other-than-temporary impairments.

Contract Loans: Contract loans are stated at outstanding principal balances.

Separate Accounts: Separate Accounts are established in conformity with insurance laws and are segregated from the Company’s general account and are maintained for the benefit of separate account contract holders. The Company’s investments in the TIAA-CREF Mutual Funds (“Retail Funds”), TIAA-CREF Institutional Mutual Funds (“Institutional Funds”), and TIAA-CREF Life Funds are stated at fair value.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 2 – Significant Accounting Policies – (continued)

Securities Lending: The Company had a securities lending program whereby it loaned securities to qualified brokers in exchange for cash collateral and required a minimum of 102 percent of the fair value of the loaned securities. When securities were loaned, the Company received additional income on the collateral and continues to receive income on the loaned securities. The Company' securities lending program was discontinued in 2006.

Foreign Currency Transactions and Translation: Investments denominated in foreign currencies and foreign currency contracts are valued in U.S. dollars, based on exchange rates at the end of the period. Investment transactions in foreign currencies are recorded at the exchange rates prevailing on the respective transaction dates. All other asset and liability accounts that are denominated in foreign currencies are adjusted to reflect exchange rates at the end of the period. Realized and unrealized gains and losses due to foreign exchange transactions and translation adjustments, are not separately reported but are collectively included in realized and unrealized capital gains and losses, respectively.

Derivative Instruments: The Company has filed a Derivatives Use Plan with the Department. This plan details TIAA’s derivative policy objectives, strategies, controls and any restrictions placed on various derivative types. The plan also specifies the procedures and systems that TIAA has established to evaluate, monitor and report on the derivative portfolio in terms of valuation, hedge effectiveness and counterparty credit quality. The Company uses derivative instruments for hedging, income generation, and asset replication purposes. Derivatives used by the Company include foreign currency, interest rate and credit default swaps, foreign currency forwards and interest rate cap contracts. See Note 7.

Non-Admitted Assets: Certain investment balances and corresponding investment income due and accrued are designated as non-admitted assets in accordance with NY SAP, based on delinquencies, defaults, and other statutory criteria, and cannot be included in life insurance company balance sheets filed with the Department. Such investment-related non-admitted assets totaled $90 million and $118 million at December 31, 2006 and 2005, respectively. Income on bonds in default is not accrued and, therefore, is not included in the non-admitted totals. Certain non-investment assets, such as the deferred federal income tax (“DFIT”) asset, furniture and fixtures, and various receivables, are also designated as non-admitted assets. The non-admitted portion of the DFIT asset was $2,022 million and $3,177 million at December 31, 2006 and 2005, respectively. The other non-admitted assets were $295 million and $261 million at 2006 and 2005, respectively. Changes in such non-admitted assets are charged or credited directly to contingency reserves.

Furniture and Fixtures, Equipment, Leasehold Improvements and Computer Software: Electronic data processing equipment (“EDP”), computer software, furniture and equipment that qualify for capitalization are depreciated using the straight-line method over 3 years. Office alterations and leasehold tenant improvements that qualify for capitalization are depreciated over 5 years and the remaining life of the lease, respectively.

Accumulated depreciation of EDP equipment and computer software was $297 million and $241 million at December 31, 2006 and 2005, respectively. Related depreciation expenses allocated to TIAA were $22 million, $16 million and $14 million in 2006, 2005 and 2004, respectively. Accumulated depreciation of all furniture and equipment and leasehold improvements, which is non-admitted, was $269 million and $228 million at December 31, 2006, and 2005, respectively. Related depreciation expenses allocated to TIAA was $20 million, $17 million and $5 million in 2006, 2005 and 2004, respectively. In 2004, the Company adopted higher capitalization thresholds, starting at $1 million, and more uniform amortization periods as a part of implementing statutory guidance effective in 2004.

Premium Revenue: Premiums are recognized as income over the premium-paying period of the related policies. Annuity considerations are recognized as revenue when received. Expenses incurred in connection with acquiring new insurance business are charged to operations as incurred.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 2 – Significant Accounting Policies – (concluded)

Policy and Contract Reserves: TIAA offers a range of group and individual retirement annuities and individual life and other insurance products. Policy and contract reserves for such products are determined in accordance with standard valuation methods approved by the Department and are computed in accordance with standard actuarial formulae. The reserves established utilize assumptions for interest mortality and other risks insured. Such reserves are designed to be sufficient for contractual benefits guaranteed under policy and contract provisions.

Reserves for deposit-type funds, which do not contain any life contingencies, are equal to deposits received and interest credited to the benefit of contract holders, less withdrawals that represent a return to the contract holder.

Dividends Declared for the Following Year: Dividends on insurance policies and pension annuity contracts in the payout phase are declared by the TIAA Board of Trustees ("Board") in the fourth quarter of each year, and such dividends are credited to policyholders in the following calendar year. Dividends on pension annuity contracts in the accumulation phase are declared by the Board in February of each year, and such dividends on the various existing vintages of pension annuity contracts in the accumulation phase are credited to policyholders during the ensuing twelve month period beginning March 1.

Asset Valuation Reserve: The AVR, which covers all invested asset classes, is a reserve required by NAIC SAP to provide for potential future credit and equity losses. Reserve components of the AVR are maintained for bonds, stocks, mortgages, real estate, other invested assets and derivatives. Realized and unrealized credit and equity capital gains and losses, net of capital gains taxes, are credited to or charged against the related components of the AVR. Statutory formulae determine the required reserve components primarily based on factors applied to asset classes, and insurance companies may also establish additional reserves for any component; however, the ultimate balance cannot exceed the statutory maximum reserve for that component. Contributions and adjustments to the AVR are reported as transfers to or from contingency reserves. No voluntary contributions were made in either 2006 or 2005.

Interest Maintenance Reserve: The IMR is a reserve required by NAIC SAP which accumulates realized interest rate-related capital gains and losses on sales of debt securities and mortgages, as defined by NAIC SAP. Such capital gains and losses are amortized out of the IMR, under the grouped method of amortization, as an adjustment to net investment income over the remaining lives of the assets sold.

Note 3 – Investments

The disclosures below provide information grouped within the following asset categories: A) bonds, preferred stocks and common stocks; B) mortgage investments; C) real estate investments; D) investment subsidiaries and affiliates; E) other long term investments; and F) commitments.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (continued)

A. Bonds, Preferred Stocks, and Common Stocks:

The amortized cost and estimated fair values, and unrealized gains and losses of long-term bonds, preferred stocks, and common stocks at December 31, are shown below (in millions):

				Gross Unrealized					Estimated
		Cost**		Gains		Losses			Fair Value
December 31, 2006
U.S. Government	$	1,393	$	31	$	(3	)	$	1,421
All Other Governments		922		113		(2	)		1,033
States, Territories & Possessions		942		164		(7	)		1,099
Political Subdivisions of States,
Territories & Possessions		19		3		—			22
Special Revenue & Special Assessment,
Non-guaranteed Agencies & Government		25,164		499		(359	)		25,304
Public Utilities		4,831		231		(90	)		4,972
Industrial & Miscellaneous		88,504		2,549		(1,273	)		89,780
Total Bonds		121,775		3,590		(1,734	)		123,631
Preferred Stocks		4,564		128		(62	)		4,630
Common Stocks Unaffiliated		1,129		166		(12	)		1,283
Common Stocks Affiliated***		2,768		2,510		—			5,278
Total Bonds and Stocks	$	130,236	$	6,394	$	(1,808	)	$	134,822

December 31, 2005
U.S. Government	$	966	$	33	$	(6	)	$	993
All Other Governments		1,011		128		(2	)		1,137
States, Territories & Possessions		964		201		(1	)		1,164
Political Subdivisions of States,
Territories & Possessions		19		4		—			23
Special Revenue & Special Assessment,
Non-guaranteed Agencies & Government		23,514		544		(306	)		23,752
Public Utilities		4,860		323		(38	)		5,145
Industrial & Miscellaneous		90,529		3,303		(1,051	)		92,781
Total Bonds		121,863		4,536		(1,404	)		124,995
Preferred Stocks		1,324		32		(50	)		1,306
Common Stocks Unaffiliated		245		87		(32	)		300
Common Stocks Affiliated***		3,513		—		—			3,513
Total Bonds and Stocks	$	126,945	$	4,655	$	(1,486	)	$	130,114

**Amortized cost for bonds and original cost for stocks net of cumulative recorded other-than-temporary impairments.

***Also reported in Note 3D Subsidiaries and Affiliates. For 2006, Common Stock Affiliated entities that contained real estate utilized new valuation methodologies based on the real estate assets held by the subsidiary. In 2005, the carrying values were considered reasonable estimates of fair value.

Impairment Review Process

All securities are subjected to TIAA’s process for identifying other-than-temporary impairments. The quarterly impairment identification process utilizes, but is not limited to, a screening process based on declines in fair value of more than 20%. The Company writes down securities that it deems to have an other-than-temporary impairment in value in the period the securities are deemed to be impaired, based on management's case-by-case evaluation of the decline in value and prospects for recovery. Management considers a wide range of factors in the impairment

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (continued)

evaluation process, including, but not limited to, the following: (a) the extent to which and the length of time the fair value has been below amortized cost; (b) the financial condition and near-term prospects of the issuer; (c) whether the debtor is current on contractually obligated interest and principal payments; (d) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value or repayment; (e) information obtained from regulators and rating agencies; (f) the potential for impairments in an entire industry sector or sub-sector; and (g) the potential for impairments in certain economically-depressed geographic locations. Where an impairment is considered to be other-than-temporary, the Company recognizes a write-down as an investment loss and adjusts the cost basis of the security accordingly. The Company does not change the revised cost basis for subsequent recoveries in value. Once an impairment write-down has been recorded, the Company continues to review the impaired security for appropriate valuation on an ongoing basis.

Unrealized Losses on Bonds, Preferred Stocks and Common Stocks

The gross unrealized losses and estimated fair values for securities by the length of time that individual securities had been in a continuous unrealized loss position are shown in the table below (in millions):

			Gross			Estimated
			Unrealized			Fair
	Cost**		Loss			Value
December 31, 2006
Less than twelve months:
Bonds	$	24,744	$	(380	)	$	24,364
Preferred Stocks		1,737		(43	)		1,694
Common Stocks		76		(12	)		64
Total less than twelve months		26,557		(435	)		26,122
Twelve months or more:
Bonds		35,790		(1,354	)		34,436
Preferred Stocks		273		(19	)		254
Common Stocks		10		—			10
Total twelve months or more		36,073		(1,373	)		34,700
Total – All bonds, preferred & common stocks	$	62,630	$	(1,808	)	$	60,822

**Amortized cost for bonds and original cost for stocks net of cumulative reported other-than-temporary impairments.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (continued)

			Gross			Estimated
			Unrealized			Fair
	Cost**		Loss			Value
December 31, 2005
Less than twelve months:
Bonds	$	41,291	$	(899	)	$	40,392
Preferred Stocks		464		(36	)		428
Common Stocks		28		(10	)		18
Total less than twelve months	$	41,783	$	(945	)	$	40,838
Twelve months or more:
Bonds	$	9,237	$	(505	)	$	8,732
Preferred Stocks		113		(14	)		99
Common Stocks		36		(22	)		14
Total twelve months or more		9,386		(541	)		8,845
Total – All bonds, preferred & common stocks	$	51,169	$	(1,486	)	$	49,683

**Amortized cost for bonds and original cost for stocks net of cumulative recorded other-than-temporary impairments.

For 2006, the categories of securities where the estimated fair value declined and remained below cost for twelve months or greater were concentrated in mortgage-backed securities (27%), asset-backed securities (19%), manufacturing (13%), finance (13%), public utilities (10%), oil and gas (4%), services (4%), and other securities (10%). The preceding percentages were calculated as a percentage of the gross unrealized loss. The Company held fifteen securities where each had a gross unrealized loss greater than $5 million at December 31, 2006. One of these securities remained below cost by 20% or more for twelve months or greater. The security was an asset-backed security and the estimated undiscounted future cash flows support the current carrying value.

For 2005, the categories of securities where the estimated fair value declined and remained below cost for twelve months or greater were concentrated in asset-backed securities (30%), mortgage-backed securities (20%), manufacturing (17%), finance (14%), services (4%), and other securities (15%). The preceding percentages were calculated as a percentage of the gross unrealized loss. The Company held twenty-four securities where each had a gross unrealized loss greater than $5 million at December 31, 2005. Eleven of these securities remained below cost by 20% or more for twelve months or greater. Seven of these securities were asset-backed securities and the estimated future cash flows supported the carrying value of each security.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (continued)

Scheduled Maturities for Bonds

The statutory carrying values and estimated fair values of long-term bond investments at December 31, 2006, by contractual maturity, are shown below (in millions):

	Carrying		Estimated
	Value		Fair Value
Due in one year or less	$	1,520	$	1,559
Due after one year through five years		10,831		11,161
Due after five years through ten years		24,504		24,683
Due after ten years		25,610		26,620
Subtotal		62,465		64,023
Residential mortgage-backed securities		31,777		31,793
Commercial mortgage-backed securities		19,020		19,240
Asset-backed securities		8,513		8,575
Total	$	121,775	$	123,631

Bonds not due at a single maturity date have been included in the preceding table based on the year of final maturity. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations, although prepayment premiums may be applicable.

Included in the preceding table under asset-backed securities is TIAA’s exposure to sub-prime mortgages totaling approximately $4 billion. Ninety-five percent (95%) of the sub-prime securities were rated single A or better.

Included in the preceding table are long-term bonds in or near default with an original par amount of $1,303 million that have been written down to a statutory carrying value of $217 million. The bonds are categorized based on contractual maturity as follows: $10 million due in one year or less, $42 million due after one year through five years, $27 million due after five years through ten years, $127 million due after ten years, $2 million of residential mortgage-backed securities, $8 million of commercial mortgage-backed securities and $1 million of asset-backed securities.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (continued)

Bond Credit Quality and Diversification

At December 31, 2006 and 2005, 94.5% and 93.8%, respectively, of the long-term bond portfolio was comprised of investment grade securities. The carrying values of long-term bond investments were diversified by industry classification at December 31 as follows:

	2006		2005

Residential mortgage-backed securities	26.1	%	23.9	%
Commercial mortgage-backed securities	15.6		14.1
Manufacturing	10.4		10.4
Finance and financial services	10.1		12.4
Asset-backed securities	7.0		9.7
Public utilities	6.9		6.4
Government	4.7		4.2
Communications	4.0		4.5
Oil and gas	3.9		3.4
Real estate investment trusts	3.1		2.7
Services	2.8		2.7
Revenue and special obligations	2.1		2.2
Retail and wholesale trade	2.0		2.1
Transportation	1.3		1.3
Total	100.0	%	100.0	%

Bond and Equity – Other Disclosures

During 2006 and 2005, the Company recorded bonds and stocks acquired through troubled debt restructurings with the book value aggregating $8 million and $68 million, respectively, of which $3 million and $57 million were acquired through non-monetary transactions, respectively. When restructuring troubled debt, TIAA generally accounts for assets at their fair value at the time of restructuring or at the carrying value of the assets given up if lower. If the fair value is less than the carrying value of the assets given up, the required write-down is recognized as realized capital loss. During 2006 and 2005, the Company also acquired bonds and stocks through exchanges aggregating $918 million and $2,134 million, of which $25 million and $1 million were acquired through non-monetary transactions, respectively. When exchanging securities, TIAA generally accounts for assets at fair value unless the exchange was as a result of restricted 144A’s exchanged for unrestricted securities, which are accounted for at book value. During 2006 and 2005, TIAA acquired common stocks from Other Invested Asset fund investment distributions totaling $35 million and $27 million, respectively.

Debt securities of $8 million at December 31, 2006 and 2005, respectively, were on deposit with governmental authorities or trustees, as required by law.

In second quarter 2006 the Company discontinued the securities lending program. At December 31, 2005 the Company had securities loaned with a carrying value of $3,250 million, fair value of $3,364 million and received cash collateral of $3,460 million. Income generated from securities lending was $3 million, $8 million and $9 million, for the years ended 2006, 2005 and 2004, respectively.

For the years ended December 31, 2006 and 2005, the carrying amount of bonds and stocks denominated in a foreign currency was $3,873 million and $3,195 million, respectively. Bonds that totaled $1,408 million and $1,024 million at December 31, 2006 and 2005, respectively, represent amounts due from related parties that are collateralized by real estate owned by TIAA’s investment subsidiaries and affiliates.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (continued)

The Company uses a third party proprietary system in determining the market value of its loan-backed securities. In 2006, the Company changed from the retrospective method to the prospective method due to negative yields on specific structured securities totaling $9 million. This change was in accordance with SSAP 43. The Company also changed its accounting to the prospective method for loan-backed securities whose expected cash flows fell substantially below those expected at the time of acquisition.

B. Mortgage Investments:

The Company issues mortgages that are principally collateralized by commercial real estate. The maximum percentage of any one loan to the value of the security at the time of the loan, exclusive of insured, guaranteed or purchase money mortgages, was 80% for commercial loans (includes mezzanine loans). The coupon rates for non mezzanine commercial mortgages acquired during 2006 ranged from 5.10% to 7.08% .

The Company also issues mezzanine real estate loans, which are secured by a pledge of direct or indirect equity interests in an entity that owns real estate. The coupon rate for mezzanine real estate loans issued during 2006 ranged from 5.58% to 6.40% .

For the years ended December 31, 2006 and 2005, the carrying value of mezzanine real estate loans was $867 million and $637 million, respectively.

Mortgage Impairment Review Process

The Company monitors the effects of current and expected market conditions and other factors on the collectibility of mortgages to identify and quantify any impairment in value. Any impairment is classified as either temporary, for which, a recovery is anticipated, or other-than-temporary. Mortgages with impaired values at December 31, 2006 and 2005 have been written down to net realizable values based upon independent appraisals of the collateral, as shown in the table below. For impaired mortgages where the impairments were deemed to be temporary, an allowance for credit losses has been established, as indicated below (in millions):

	2006			2005			2004
Investment in impaired mortgages, with temporary allowances for
credit losses (at net carried value plus accrued interest)	$	—		$	—		$	185
Related temporary allowances for credit losses		—			—			(30	)
Investment in impaired mortgages, net of other-than-temporary
impairment losses recognized		1,031			92			358
Related write-downs for other-than-temporary impairments		(26	)		(3	)		(142	)
Average investments in impaired mortgages		179			380			669
Interest income recognized on impaired mortgages during the period		5			21			57
Interest income recognized on a cash basis during the period		6			24			61

The activity affecting the allowance for credit losses on mortgages was as follows (in millions):

	2006			2005
Balance at the beginning of the year	$	—		$	30
Provisions for losses charged against contingency reserves		8			—
Write-downs for other-than-temporary impaired assets charged against the allowance		(2	)		(23	)
Recoveries of amounts previously charged off		(6	)		(7	)
Balance at the end of the year	$	—		$	—

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (continued)

There were no mortgages with restructured or modified terms at December 31, 2006. At December 31, 2005, the aggregate carrying value of mortgages with restructured or modified terms was $198 million. For the years ended December 31, 2006, 2005 and 2004, the investment income earned on such mortgages were $0, $11 million and $16 million, respectively, which would have been approximately $0, $17 million and $22 million, respectively, if they had performed in accordance with their original terms. When restructuring mortgages, TIAA generally requires participation features, yield maintenance stipulations, and/or the establishment of property-specific escrow accounts funded by the borrowers. With respect to impaired loans, the Company accrues interest income to the extent it is deemed collectible. Due and accrued income on any mortgage in default for more than eighteen months is non-admitted. Cash received on impaired mortgages that are performing according to their contractual terms is applied in accordance with those terms. For mortgages in the process of foreclosure, cash received is initially held in suspense and applied as return of principal at the time that the foreclosure process is completed, or the mortgage is otherwise disposed. At December 31, 2006 and 2005, the carrying values of mortgages held with interest more than 180 days past due, excluding accrued interest, were $0 and $0, respectively. Total interest due on mortgages with interest more than 180 days past due was $0 in both 2006 and 2005. During 2006, the Company did not reduce the interest rate of outstanding loans.

Mortgage Diversification

At December 31, the carrying values of mortgage investments were diversified by property type and geographic region as follows:

	2006		2005
Property Type
Shopping centers	34.8	%	32.0	%
Office buildings	33.8		38.0
Industrial buildings	14.3		13.0
Mixed-use projects	6.7		7.1
Apartments	6.2		6.0
Hotel	3.7		3.2
Other	0.5		0.7
Total	100.0	%	100.0	%

	2006		2005
Geographic Region
Pacific	28.9	%	28.6	%
South Atlantic	23.3		23.7
North Central	13.7		15.4
Middle Atlantic	11.5		10.8
South Central	10.2		9.0
Mountain	5.3		6.0
New England	4.5		4.4
Other	2.6		2.1
Total	100.0	%	100.0	%

At December 31, 2006 and 2005, approximately 22.0% and 21.8% of the mortgage portfolio, respectively, was invested in California and was included in the Pacific region shown above.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (continued)

Scheduled Mortgage Maturities

At December 31, 2006, contractual maturities for mortgages were as follows (in millions):

	Carrying Value
Due in one year or less	$	947
Due after one year through five years		9,833
Due after five years through ten years		11,836
Due after ten years		1,140
Total	$	23,756

Actual maturities may differ from contractual maturities because borrowers may have the right to prepay mortgages, although prepayment premiums may be applicable.

Mortgage – Other Disclosures

Mortgages that totaled $222 million and $240 million at December 31, 2006 and 2005, respectively, represent the carrying value of amounts due from related parties that are collateralized by real estate owned by TIAA investment subsidiaries and affiliates.

For the years ended December 31, 2006 and 2005, the carrying value of mortgages denominated in foreign currency was $577 million and $433 million, respectively.

The Company does not underwrite nor does it hold sub-prime mortgages in the commercial mortgage portfolio and does not have any material indirect exposure from sub-prime lenders who are tenants in buildings that are secured by commercial mortgages.

C. Real Estate Investments:

The Company makes investments in commercial real estate directly, through wholly owned subsidiaries and through real estate limited partnerships. The Company monitors the effects of current and expected market conditions and other factors on the realizability of real estate investments to identify and quantify any impairment in value. Other-than-temporary impairments on directly owned real estate investments for the years ended December 31, 2006 and 2005 were $2 million and $11 million, respectively, and these amounts are included in the impairment table in Note 4. The 2006 other-than-temporary impairments were recorded on properties that were not expected to be held until recovery. At December 31, 2006 and 2005, TIAA’s directly owned real estate investments of $1,455 million and $1,618 million, respectively, were carried net of third party mortgage encumbrances, which totaled approximately $166 million and $188 million, respectively.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (continued)

Real Estate Diversification

At December 31, the carrying values of real estate investments were diversified by property type and geographic region as follows:

	2006		2005
Property Type
Office buildings	60.5	%	63.7	%
Industrial buildings	17.9		17.1
Mixed-use projects	17.4		15.8
Apartments	1.8		1.7
Land held for future development	2.1		1.5
Income-producing land underlying improved real estate	0.3		0.2
Total	100.0	%	100.0	%

	2006		2005
Geographic Region
South Atlantic	47.2	%	45.0	%
North Central	16.0		14.2
Pacific	12.7		11.0
Mountain	2.3		9.1
South Central	9.1		9.0
Other	8.8		8.1
Middle Atlantic	3.9		3.6
Total	100.0	%	100.0	%

At December 31, 2006 and 2005, approximately 19.0% and 19.1% of the real estate portfolio, respectively, was invested in Florida and was included in the South Atlantic region shown above.

Real Estate – Other Disclosures

Depreciation expense on directly owned real estate investments for the years ended December 31, 2006, 2005 and 2004, was $50 million, $53 million and $52 million, respectively; the amount of accumulated depreciation at December 31, 2006 and 2005 was $275 million and $245 million, respectively.

For the years ended December 31, 2006 and 2005, the amount of real estate property acquired via the assumption of debt or in satisfaction of debt was $0 and $113 million, respectively.

The Company’s real estate portfolio does not have any material exposure from sub-prime lenders who are tenants in the buildings that are directly owned.

The Company does not engage in retail land sales operations.

D. Subsidiaries and Affiliates:

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (continued)

entities is reported as affiliated common stock or as other long-term investments. Other-than-temporary impairments of investment subsidiaries and affiliates for the years ended December 31, 2006 and 2005 were $11 million and $94 million, respectively. Most of the 2006 other-than-temporary impairments relate to real estate investments that were impaired and/or reclassified to Held for Sale, and that were written down $10 million based on external appraisal values or estimated net sales price. Included in TIAA’s net investment income is income distributed from investment subsidiaries and affiliates of $191 million, $286 million and $217 million for the years ended December 31, 2006, 2005 and 2004, respectively. As of December 31, 2006 and 2005, the net amount due from (to) investment subsidiaries and affiliates was $(19) million and $20 million, respectively. For the years ended December 31, 2006 and 2005, capital contributions were $231 million and $915 million, and return of capital was $992 million and $1,209 million, respectively.

TIAA’s only insurance subsidiary is TIAA-CREF Life Insurance Company (“TIAA-CREF Life”), which became a direct wholly-owned subsidiary of TIAA as of December 31, 2005. At December 31, 2006 and 2005, the carrying value of the Company’s equity in TIAA-CREF Life was approximately $341 million and $321 million, respectively. There was no impairment of the insurance subsidiary for the year ended December 31, 2006. No income from the insurance subsidiary was included in TIAA’s net investment income for the years ended December 31, 2006, 2005 and 2004, respectively. The Company had net amounts due from the insurance subsidiary of $33 million and $2 million as of December 31, 2006 and 2005, respectively.

TIAA’s operating subsidiaries primarily consist of TIAA-CREF Tuition Financing, Inc. (“TFI”), Teachers Personal Investors Services (“TPIS”) and Teachers Advisors, Inc. (“Advisors”) which are wholly-owned subsidiaries of TIAA-CREF Enterprises, Inc. (“Enterprises”) a wholly-owned subsidiary of TIAA, TIAA-CREF Trust Company, FSB (“Trust”), TIAA-CREF Institutional & Services LLC, TIAA-CREF Asset Management Commingled Funds Trust I (“TCAM”), and TIAA Global Markets, Inc. (“TGM”), TIAA-CREF Redwood, LLC, and TIAA Realty Capital Management, LLC (“TRCM”) which are wholly-owned subsidiaries of TIAA.

The Company’s share of net carrying values of unconsolidated operating subsidiaries at December 31, 2006 and 2005 was $871 million and $799 million, respectively. To conform to the NAIC Annual Statement presentation, the carrying value of these entities is reported as affiliated common stock or as other long-term investments. Other-than-temporary impairments of operating subsidiaries for the years ended December 31, 2006 and 2005 were $36 million and $53 million, respectively. The 2006 other-than-temporary impairments were a result of a decline in equity value of three subsidiaries for which the carrying value is not expected to be recovered. Included in net investment income is income distributed from operating subsidiaries of $3 million, $7 million and $5 million for the years ended December 31, 2006, 2005 and 2004, respectively. The Company had net amounts due from operating subsidiaries of $58 million and $84 million, as of the year ended at December 31, 2006 and 2005, respectively. For the years ended December 31, 2006 and 2005, the capital contributions were $82 million and $35 million and return of capital was $3 million and $0, respectively.

TIAA provides a $750 million uncommitted and unsecured 364-day revolving line of credit to TGM. No principal or interest was outstanding as of December 31, 2006 and 2005. As of December 31, 2006 there were no draw downs. During February, 2007, TGM utilized $400 million of the revolving line of credit.

In October 2004, TIAA extended a $100 million committed and unsecured 364-day revolving line of credit to TCAM. In 2006, there were three draw downs totaling $18 million. At December 31, 2006, outstanding principal plus accrued interest totaled $1 million.

The Company does not have any material exposure to sub-prime investments in its subsidiaries.

Mutual Funds: As of December 31, 2006 and 2005, TIAA’s investments in TIAA-CREF mutual funds totaled approximately $759 million and $468 million, respectively. These amounts are reported in the caption “Common Stocks” in the accompanying balance sheets.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 3 – Investments – (concluded)

E. Other Long-Term Investments:

The components of TIAA’s carrying value in other long-term investments at December 31, were (in millions):

	2006		2005
Unaffiliated Other Invested Assets	$	4,233	$	3,323
Affiliated Other Invested Assets		2,365		2,631
Other Assets		774		729
Total other long-term investments	$	7,372	$	6,683

Unaffiliated other invested assets are limited partnership investments in private equity funds and joint ventures. Affiliated other invested assets are subsidiaries and affiliates. Other assets consist primarily of contract loans. For the years ended December 31, 2006 and 2005, other-than-temporary impairments in other long-term investments for which the carrying value is not expected to be recovered were $45 million and $73 million, respectively.

For the years ended December 31, 2006 and 2005, other long-term investments denominated in foreign currency were $752 million and $661 million, respectively.

F. Commitments:

The outstanding obligation for future investments at December 31, 2006, is shown below by asset category (in millions):

							Total
	2007		2008		In later years		Commitments
Bonds	$	147	$	—	$	—	$	147
Mortgages		709		117		—		826
Real estate		17		—		—		17
Common stocks		265		54		35		354
Other long-term investments		2,429		1,097		1,584		5,110
Total	$	3,567	$	1,268	$	1,619	$	6,454

The funding of bond commitments is contingent upon the continued favorable financial performance of the potential borrowers, and the funding of mortgage and real estate commitments are generally contingent upon the underlying properties meeting specified requirements, including construction, leasing and occupancy. Due to TIAA’s due diligence in closing mortgage commitments, there is a lag between commitment and closing. For other long–term investments, primarily fund investments, there are scheduled capital calls that extend into future years.

In addition to the amounts in the above table, the Company is a limited partner in the Hines Development Fund Limited Partnership (the “Development Fund”) whose primary focus is the development and redevelopment of real estate projects in Western Europe. Each of the limited partners made a specified commitment to the fund; TIAA committed 130 million Euros which is approximately $99 million as of December 31, 2006. The limited partners’ commitments are pledged as collateral to facilitate the financing of the activities of the fund by third parties through equity lines of credit. The limited partners do not anticipate funding their commitments but remain committed to do so should it become necessary for the Development Fund to make cash capital calls.

G. Low Income Housing Tax Credits (LHITC):

TIAA has no investments in low income housing tax credit properties that are currently subject to regulatory review. The Company has no investments in low income housing tax credit companies that exceed 10% of admitted assets.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 4 – Investment Income and Capital Gains and Losses

Net Investment Income: The components of net investment income for the years ended December 31, were as follows (in millions):

	2006			2005			2004
Bonds	$	7,536		$	7,519		$	7,160
Mortgages		1,781			1,799			1,796
Real estate		244			278			293
Stocks		368			400			269
Other long-term investments		635			411			214
Cash, cash equivalents and short-term investments		46			23			35
Other		4			3			3
Total gross investment income		10,614			10,433			9,770

Less securities lending expenses		(13	)		(126	)		(48	)
Less investment expenses		(423	)		(455	)		(440	)
Net investment income before amortization of net IMR gains		10,178			9,852			9,282
Plus amortization of net IMR gains		135			133			172
Net investment income	$	10,313		$	9,985		$	9,454

Due and accrued income excluded from net investment income is as follows: Bonds in or near default or that are over 90 days past due; Preferred Stocks that are over 90 days past due and with a NAIC designation of 4, 5 or 6; Common Stocks Affiliated related to real estate with rents over 90 days past due; Mortgages with amounts greater than the excess of property value over the unpaid principal balance and on mortgages in default more than eighteen months; and Real Estate relating to rent in arrears for more than 90 days. The total due and accrued income excluded from net investment income was $2 million, $2 million and $14 million during 2006, 2005 and 2004, respectively.

Future rental income expected to be received during the next five years under existing real estate leases (including subsidiaries and affiliates) in effect as of December 31, 2006 (in millions).

		2007			2008			2009			2010			2011
Future rental income		$	416		$	378		$	337		$	294		$	239

Realized Capital Gains and Losses: The net realized capital gains (losses) on sales, redemptions and write-downs of investments for the years ended December 31, were as follows (in millions):

	2006			2005			2004
Bonds	$	125		$	64		$	198
Mortgages		(31	)		6			(74	)
Real estate		70			283			13
Stocks		407			112			159
Other long-term investments		50			(39	)		(485	)
Cash, cash equivalents and short-term investments		7			(5	)		2
Total before capital gains taxes and transfers to the IMR		628			421			(187	)
Transfers to IMR		(20	)		(124	)		(367	)
Net realized capital gains (losses) less capital gains taxes, after
transfers to the IMR	$	608		$	297		$	(554	)

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 4 – Investment Income and Capital Gains and Losses – (concluded)

Write-downs of investments resulting from other-than-temporary impairments, included in the preceding table, were as follows for the years ended December 31 (in millions):

	2006		2005		2004
Other-than-temporary impairments:
Bonds	$	109	$	214	$	277
Mortgages		27		20		105
Real estate		2		11		1
Stocks		33		121		46
Other long-term investments		45		93		428
Total	$	216	$	459	$	857

The Company did not have any restructured mortgages during 2006 and 2005, therefore there were no related losses recognized. During 2004, the Company recognized losses in the amount of $18 million on mortgages whose terms were restructured, which are included in the preceding table.

Proceeds from sales of long-term bond investments during 2006, 2005 and 2004 were $9,275 million, $5,547 million and $6,196 million respectively. Gross gains of $327 million, $262 million and $448 million and gross losses, excluding impairments considered to be other-than-temporary, of $172 million, $76 million and $41 million were realized on these sales during 2006, 2005 and 2004, respectively.

Unrealized Capital Gains and Losses: The net changes in unrealized capital gains (losses) on investments, resulting in a net increase (decrease) in the valuation of investments for the years ended December 31, were as follows (in millions):

	2006		2005			2004

Bonds	$	220	$	(317	)	$	170
Mortgages		3		12			78
Stocks		173		60			74
Other long-term investments		2		741			427
Cash, cash equivalents & short-term investments		—		1			2
Total	$	398	$	497		$	751

Note 5 – Securitizations

When TIAA sells bonds and mortgages in a securitization transaction, it may retain interest-only strips, one or more subordinated tranches, residual interest, or servicing rights, all of which are retained interests in the securitized receivables. The Company’s ownership of the related retained interests may be held directly by the Company or indirectly through an investment subsidiary. The retained interests are associated with Special Purpose Entities/Qualified Special Purpose Entities, (“SPEs/QSPEs”), that issue equity and debt which is non-recourse to the Company. Fair value used to determine gain or loss on a securitization transaction is based on quoted market prices, if available; however, quotes are generally not available for retained interests, so the Company either obtains an estimated fair value from an independent pricing service or estimates fair value internally based on the present value of future expected cash flows using management’s best estimates of future credit losses, forward yield curves, and discount rates that are commensurate with the risks involved.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 5 – Securitizations – (concluded)

The Company has not initiated any securitization transactions in which it sold assets held on its balance sheet into SPEs/QSPEs since 2002. Advisors, a downstream subsidiary of TIAA, provides investment advisory services for most assets securitized by the Company.

The following table summarizes the Company’s retained interests in securitized financial assets from transactions originated since 1999 (in millions):

							Sensitivity Analysis of Key
							Assumptions used for Fair Value
Issue		Carrying		Estimated			10%			20%
Year	Type of Collateral	Value		Fair Value			Adverse			Adverse
1999	Mortgages	$	240	$	237	(a)	$	(1	)	$	(2	)
2000	Bonds	$	74	$	75	(b)	$	(3	)	$	(6	)
2001	Bonds	$	247	$	278	(c)	$	(8	)	$	(15	)
2002	Bonds	$	27	$	23	(d)	$	(1	)	$	(2	)

The key assumptions applied to both the fair values and sensitivity analysis of the retained interests on December 31, 2006 was as follows:

a)	The retained interests securitized in 1999 are valued utilizing a discounted cash flow methodology. Cash flows are discounted at an interpolated Treasury rate of 5.05% based on projected remaining average life of 0.76 years plus credit spreads of 66 to 83 basis points. The fair values of the retained interests were recalculated using 10% and 20% adverse changes in the overall discount rate. The weighted average life of these retained interests is approximately nine months.

b)	The retained interests securitized in 2000 are valued utilizing a discounted cash flow methodology. Cash flows are discounted at rates ranging from 5.80% to 11.00% based upon assumptions of the credit quality of the underlying assets. The fair values of the retained interests were recalculated using 10% and 20% adverse changes in the overall discount rate. Weighted average lives for these interests range from two to seven years.

c)	The retained interests securitized in 2001 were valued using discounted cash flow analysis of anticipated cash flows, including assumptions of anticipated prepayment speeds. Cash flows are discounted at rates ranging from 5.26% to 22.00%. The fair values of the retained interests were recalculated using 10% and 20% adverse changes in the overall discount rates.

d)	The retained interests securitized in 2002 were valued utilizing a discounted cash flow methodology. Cash flows are discounted at 14% and a weighted average life for these retained interests of approximately 5.4 years.
	The fair values of the retained interests were recalculated using 10% and 20% adverse changes in the overall discount rates.

Note that the sensitivity analysis above does not give effect to any offsetting benefits of financial instruments which may hedge the risks inherent to these financial interests. Additionally, changes in particular assumption, such as discount rates, may in practice change other valuation assumptions which may magnify or counteract the effect of these disclosed sensitivities.

Note 6 – Disclosures About Fair Value of Financial Instruments

The estimated fair value amounts of financial instruments presented in the following tables were determined by the Company using market information available as of December 31, 2006 and 2005 and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data in developing the estimates of fair value for financial instruments for which there are no available market value quotations. The estimates presented are not necessarily indicative of the amounts the Company could have realized in a market exchange. The

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 6 – Disclosures About Fair Value of Financial Instruments – (continued)

use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

	Carrying	Estimated
December 31, 2006	Value	Fair Value
Assets	(In Millions)
Bonds	121,775	123,631
Mortgages	23,756	24,117
Common stocks	4,050	6,561
Preferred stocks	4,554	4,630
Cash, cash equivalents and short-term investments	2,464	2,464
Contract loans	732	732
Derivative financial instruments	29	35
Separate account assets	15,384	15,384

Liabilities
Liability for deposit-type contracts	428	428
Derivative financial instruments	581	650
Separate account liabilities	15,384	15,384


	Carrying	Estimated
December 31, 2005	Value	Fair Value
Assets	(In Millions)
Bonds	121,863	124,995
Mortgages	24,353	25,221
Common stocks	3,813	3,813
Preferred stocks	1,295	1,306
Cash, cash equivalents and short-term investments	824	824
Contract loans	638	638
Derivative financial instruments	82	77
Separate account assets	11,651	11,651

Liabilities
Liability for deposit-type contracts	416	416
Derivative financial instruments	374	549
Separate account liabilities	11,651	11,651

Bonds: The fair values for publicly traded long-term bond investments were determined using quoted market prices. For privately placed long-term bond investments without a readily ascertainable market value, such values were determined with the assistance of an independent pricing service utilizing a discounted cash flow methodology based on coupon rates, maturity provisions and credit assumptions.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 6 – Disclosures About Fair Value of Financial Instruments – (concluded)

The aggregate carrying values and estimated fair values of publicly traded and privately placed bonds at December 31, were as follows (in millions):

	2006				2005
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
Publicly traded bonds	$	87,509	$	88,649	$	92,179	$	94,216
Privately placed bonds		34,266		34,982		29,684		30,779
Total bonds	$	121,775	$	123,631	$	121,863	$	124,995

Mortgages: The fair values of mortgages were generally determined with the assistance of an independent pricing service utilizing a discounted cash flow methodology based on coupon rates, maturity provisions and credit assumptions.

Common Stocks, Cash, Cash Equivalents, Short-Term Investments and Contract Loans: The carrying values were considered reasonable estimates of fair value, except for Common Stock Affiliated. In 2006, the Company estimates the fair value of its common stock affiliated real estate entities by determining the fair value of the underlying real estate assets of the affiliated entities.

Preferred Stocks: The fair values of preferred stocks were determined using quoted market prices or valuations from the NAIC.

Insurance and Annuity Contracts: TIAA's insurance and annuity contracts entail mortality risks and are, therefore, exempt from the fair value disclosure requirements related to financial instruments.

Deposit-type contracts: For deposit-type contracts the fair value approximates the carrying value, which is reasonable because the carrying value is payable upon demand.

Derivative Financial Instruments: The fair values of interest rate cap contracts and credit default swap contracts are estimated by external parties and are reviewed internally for reasonableness based on anticipated interest rates, estimated future cash flows, and anticipated credit market conditions. The fair values of foreign currency swap and forward contracts and interest rate swap contracts are estimated internally based on estimated future cash flows, anticipated foreign exchange relationships and anticipated interest rates and such values are reviewed for reasonableness with estimates from TIAA's counterparties.

Note 7 – Derivative Financial Instruments

The Company uses derivative instruments for hedging, income generation, and asset replication purposes. The Company does not engage in derivative financial instrument transactions for speculative purposes. The Company enters into derivatives directly with counterparties of high credit quality (i.e., rated AA- or better at the date of a transaction) and monitors counter-party credit quality on an ongoing basis. The Company does not require cash collateral on derivative instruments. TIAA’s counterparty credit risk is limited to the net positive fair value of its derivative positions for each individual counter-party, unless otherwise described below. Effective January 1, 2003 TIAA adopted SSAP 86, “Accounting for Derivative Instruments and Hedging Activities,” and has applied this statement to all derivative transactions entered into or modified on or after that date.

Foreign Currency Swap Contracts: TIAA enters into foreign currency swap contracts to exchange fixed and variable amounts of foreign currency at specified future dates and at specified rates (in U.S. dollars) as a cash flow hedge to manage currency risks on investments denominated in foreign currencies. This type of derivative instrument is traded over-the-counter, and the Company is exposed to both market and counter-party risk. The changes in the carrying value of foreign currency exchange rates are recognized as unrealized gains or losses. Derivative instruments used in hedging transactions that do not meet or no longer meet the accounting criteria of an effective hedge are accounted for at fair value according to accounting guidance. The net unrealized losses for the year ended December 31, 2006, from a foreign currency swap contract that do not qualify for hedge accounting treatment was $252 million.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 7 – Derivative Financial Instruments – (continued)

Foreign Currency Forward Contracts: TIAA enters into foreign currency forward contracts to exchange foreign currency at specified future dates and at specified rates (in U.S. dollars) as a cash flow hedge to manage currency risks on investments denominated in foreign currencies. This type of derivative instrument is traded over-the-counter, and the Company is exposed to both market and counter-party risk. The changes in the value of the contracts related to foreign currency exchange rates are recognized as unrealized gains or losses. A foreign exchange premium/(discount) is recorded at the time a contract is opened, based on the difference between the forward exchange rate and the spot rate. The Company amortizes the foreign exchange premium/(discount) into investment income over the life of the forward contract or at the settlement date, if the forward contract is less than a year. The net unrealized loss for the year ended December 31, 2006, from foreign currency forward contracts that do not qualify for hedge accounting treatment was $20 million.

Interest Rate Swap Contracts: TIAA enters into interest rate swap contracts to hedge against the effect of interest rate fluctuations on certain variable interest rate bonds. These contracts are designated as cash flow hedges and allow TIAA to lock in a fixed interest rate and to transfer the risk of higher or lower interest rates. This type of derivative instrument is traded over-the-counter, and the Company is exposed to both market and counter-party risk. TIAA also enters into interest rate swap contracts to exchange the cash flows on certain fixed interest rate bonds into variable interest rate cash flows. These contracts are entered into as a fair value hedge in connection with certain interest sensitive products. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by one counter-party at each due date. Net payments received and net payments made or accrued under interest rate swap contracts are included in net investment income. Derivative instruments used in hedging transactions that do not meet or no longer meet the accounting criteria of an effective hedge are accounted for at fair value. The net unrealized loss for the year ended December 31.2006, from interest rate swap contracts that do not qualify for hedge accounting treatment was $5 million.

Interest Rate Cap Contracts: TIAA purchases interest rate cap contracts to hedge against the market risk of a rising interest rate environment as part of the Company’s asset and liability management program for certain interest sensitive products. This type of derivative instrument is traded over-the-counter, and the Company is exposed to both market and counter-party risk. Under the terms of the interest rate cap contracts, the selling entity makes payments to TIAA on a specified notional amount if an agreed-upon index exceeds a predetermined strike rate. Such payments received under interest rate cap contracts are recognized as investment income. Interest rate cap contracts are generally carried at fair value. There are no interest rate caps outstanding as of December 31, 2006.

Credit Default Swap Contracts: As part of a strategy to replicate desired credit exposure in conjunction with high-rated host securities, TIAA writes (sells) credit default swaps on single name credit and credit indices to earn a premium by essentially issuing “insurance” to the buyer of default protection. This type of derivative instrument is traded over-the-counter, and the Company is exposed to market, credit and counter-party risk. The carrying value of credit default swaps represents the unamortized premium received for selling the default protection. This premium is amortized into investment income over the life of the swap. The Company has negligible counterparty credit risk with the buyer. The Company also purchases credit default swaps to hedge against unexpected credit events on selective investments in the TIAA portfolio. These swap contracts qualify as fair value hedges and the premium payment to the counterparty is expensed. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value. The net unrealized loss for the year ended December 31, 2006, from credit default swap contracts that do not qualify for hedge accounting treatment was $3 million.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 7 – Derivative Financial Instruments – (concluded)

During 2006, the average fair value of derivatives used for other than hedging purposes, which are the credit default swaps used in replication synthetic asset transactions was $7 million in assets

		2006					2005

		(In Millions)
			Carrying		Estimated			Carrying		Estimated
		Notional	Value		FV		Notional	Value		FV

Foreign currency swap contracts	Assets	768	18		17		1,128	75		51
	Liabilities	2,554	(543	)	(620	)	1,979	(342	)	(507	)
	Subtotal	3,322	(525	)	(603	)	3,107	(267	)	(456	)

Foreign currency forward contracts	Assets	125	2		2		138	6		6
	Liabilities	244	(24	)	(24	)	156	(23	)	(26	)
	Subtotal	369	(22	)	(22	)	294	(17	)	(20	)

Interest rate swap contracts	Assets	164	9		9		357	—		13
	Liabilities	399	(6	)	(6	)	409	(2	)	(6	)
	Subtotal	563	3		3		766	(2	)	7

Credit default swap contracts (RSAT)	Assets	426	—		7		550	—		4
	Liabilities	1,174	(2	)	6		674	(2	)	(1	)
	Subtotal	1,600	(2	)	13		1,224	(2	)	3

Credit default swap contracts (other)	Assets	—	—		—		159	—		(2	)
	Liabilities	328	(6	)	(6	)	344	(4	)	(4	)
	Subtotal	328	(6	)	(6	)	503	(4	)	(6	)

Total Derivatives	Assets	1,532	29		35		2,021	82		77
	Liabilities	4,650	(581	)	(650	)	3,873	(374	)	(549	)
	Total	6,182	(552	)	(615	)	5,894	(292	)	(472	)

Note 8 – Separate Accounts

The TIAA Separate Account VA-1 ("VA-1") is a segregated investment account and was organized on February 16, 1994 under the insurance laws of the State of New York for the purpose of issuing and funding variable annuity contracts. VA-1 was registered with the Securities and Exchange Commission, (the “Commission”) effective November 1, 1994 as an open-end, diversified management investment company under the Investment Company Act of 1940. Currently, VA-1 consists of a single investment portfolio, the Stock Index Account (“SIA”). SIA was established on October 3, 1994 and invests in a diversified portfolio of equity securities selected to track the overall United States stock market.

The TIAA Real Estate Account ("REA") is a segregated investment account and was organized on February 22, 1995 under the insurance laws of the State of New York for the purpose of funding variable annuity contracts. REA was registered with the Commission under the Securities Act of 1933 effective October 2, 1995. REA's target is to invest between 75% and 90% of its assets directly in real estate or in real estate-related investments, with the remainder of its assets invested in publicly traded securities to maintain adequate liquidity.

Other than the guarantees disclosed in Note 16, the Company does not make any guarantees to policyholders on its separate accounts. Both accounts offer full or partial withdrawal at market value with no surrender charges. The assets and liabilities of these accounts (which represent participant account values) are carried at fair value (directly held real estate is carried at appraised value).

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 8 – Separate Accounts – (concluded)

Information regarding separate accounts of the Company for the years ended December 31 is as follows (in millions):

	Non-guaranteed Separate
	Accounts
	2006		2005
Premiums and considerations	$	3,356	$	2,946

Reserves:
For accounts with assets at:
Fair value		15,126		11,475
Amortized cost		—		—
Total reserves	$	15,126	$	11,475

By withdrawal characteristics:
At fair value		15,126		11,475
Total reserves	$	15,126	$	11,475

The following is a reconciliation of transfers to or (from) the Company to the Separate Accounts (in millions):

	2006			2005
Transfers as reported in the Summary of Operations of the Separate Accounts
Statement:
Transfers to Separate Accounts	$	3,647		$	3,089
Transfers from Separate Accounts		(1,741	)		(1,018	)
Net transfers to or (from) Separate Accounts	$	1,906		$	2,071

Reconciling Adjustments:
Fund transfer exchange gain/loss	$	(3	)	$	1

Transfers as reported in the Summary of Operations of the Life, Accident & Health
Annual Statement	$	1,903		$	2,072

Note 9 – Management Agreements

Under Cash Disbursement and Reimbursement Agreements, TIAA serves as the common pay-agent for its operating subsidiaries. The Company has allocated expenses of $1,113 million to its various subsidiaries and affiliates during 2006. In addition, under management agreements, TIAA provides investment advisory and administrative services for TIAA-CREF Life and administrative services to the TIAA-CREF Trust Company, FSB, and VA-1.

Services necessary for the operation of the College Retirement Equities Fund (“CREF”), a companion organization, are provided at cost by two subsidiaries of TIAA, TIAA-CREF Investment Management, LLC ("Investment Management") and TIAA-CREF Individual & Institutional Services, LLC ("Services"), which provide investment advisory, administrative and distribution services for CREF on an at-cost basis. Such services are provided in accordance with an Investment Management Services Agreement between CREF and Investment Management, and in accordance with a Principal

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 9 – Management Agreements (concluded)

Underwriting and Administrative Services Agreement between CREF and Services. The management fees collected under these agreements and the equivalent allocated expenses, which amounted to approximately $889 million, $729 million and $673 million in 2006, 2005 and 2004, respectively, are not included in the statements of operations and had no effect on TIAA's operations.

Advisors provides investment advisory services for VA-1, certain proprietary funds and other separately managed portfolios in accordance with investment management agreements. TPIS and Services distribute variable annuity contracts for VA-1 as well as registered securities for certain proprietary funds.

All services necessary for the operation of REA are provided at cost by TIAA and Services. TIAA provides investment management services for REA. Distribution and administrative services are provided in accordance with a Distribution and Administrative Services Agreement between REA and Services. TIAA and Services receive management fee payments from REA on a daily basis according to formulae established each year with the objective of keeping the management fees as close as possible to actual expenses attributable to operating REA. Any differences between actual expenses and daily charges are adjusted quarterly.

Note 10 – Federal Income Taxes

By charter, TIAA is a Stock Life Company that operates on a non-profit basis and through December 31, 1997, was exempt from federal income taxation under the Internal Revenue Code (the “Code”). Any non-pension income, however, was subject to federal income taxation as unrelated business income. Effective January 1, 1998, as a result of federal legislation, TIAA is no longer exempt from federal income taxation and is taxed as a stock life insurance company.

Beginning with 1998, TIAA has filed a consolidated federal income tax return with its subsidiary affiliates. The consolidated group has entered into a tax-sharing agreement that follows the current reimbursement method, whereby members of the group will generally be reimbursed for their losses on a pro-rata basis by other members of the group to the extent that they have taxable income, subject to limitations imposed under the Code. Amounts due to (receivable from) TIAA’s subsidiaries for federal income taxes were $23 million and $(16) million at December 31, 2006 and 2005, respectively. The affiliates that file a consolidated federal income tax return with TIAA are as follows:

TIAA-CREF Life Insurance Company		Teachers Pennsylvania Realty, Inc.
TIAA-CREF Enterprises, Inc.		Teachers Personal Investors Service,
Dan Properties, Inc.		T-Investment Properties Corp.
JV Georgia One, Inc.		T-Land Corp.
Teachers Michigan Properties, Inc.		WRC Properties, Inc.
JV Minnesota One, Inc.		TIAA-CREF Tuition Financing, Inc.
JWL Properties, Inc		TIAA-CREF Trust Company, FSB
Liberty Place Retail, Inc.		MOA Investors I, Inc.
MOA Enterprises, Inc.		730 Texas Forest Holdings, Inc.
ND Properties, Inc.		TIAA Global Markets, Inc.
Savannah Teachers Properties, Inc.		T-C Sports Co., Inc.
TCT Holdings, Inc.		TREA 10 Schalks Crossing Road, Inc.
Teachers Advisors, Inc.		TIAA Board of Overseers
Teachers Boca Properties II, Inc.

TIAA reported a loss on its 2005 federal tax return and expects to report a tax loss for 2006 as a result of net operating losses primarily due to deductions for intangible assets and increases in policy and contract reserves. These reserve increases will reverse over time, thereby increasing TIAA’s taxable income in future years.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 10 – Federal Income Taxes (continued)

A reconciliation of TIAA’s statutory tax rate to its actual federal income tax rate was as follows:

	For the Years Ended December 31,
	2006			2005			2004

Net gain from operations	$	2,254		$	2,201		$	1,666
Statutory rate		35	%		35	%		35	%
Tax at statutory rate	$	789		$	770		$	583
Investment items		(242	)		(139	)		(176	)
Consolidation and dividends from subsidiaries		(48	)		(121	)		(89	)
Amortization of interest maintenance reserve		(47	)		(47	)		(60	)
Adjustment to policyholder dividend liability		17			(12	)		(43	)
Accrual of contingent tax for current year		467			564			629
Settlement of contingent tax exposure		(1,033	)		—			—
Net operating loss carryforward utilized		(489	)		(482	)		(234	)
Other		(8	)		(7	)		(38	)
Federal income tax expense (benefit)	$	(594	)	$	526		$	572
Effective tax rate		(26.4	)%		23.9	%		34.3	%

The components of TIAA’s net deferred tax asset were as follows:

	2006			2005			Change

Gross deferred tax assets	$	3,025		$	4,141		$	(1,116	)
Gross deferred tax liabilities		(39	)		(1	)		(38	)
Deferred tax assets, non-admitted		(2,022	)		(3,177	)		1,155
Net deferred tax asset, admitted	$	964		$	963		$	1

TIAA’s gross deferred tax assets were primarily attributable to differences between tax basis and statutory basis reserves and the provision for policyholder dividends payable in the following year. Gross deferred tax liabilities were primarily due to investment income due and accrued and market discount deferred on bonds. TIAA has no deferred tax liabilities that have not been recognized.

At December 31, 2006, TIAA's gross deferred tax asset of $3,025 million did not include any benefit from Net Operating Loss (“NOL”) carryforwards. Consistent with prior years, however, TIAA's federal income tax return for 2006 will include a significant NOL carryforward as a result of tax deductions related to intangible assets. The NOL carryforward on TIAA’s 2006 federal income tax return is estimated to approximate $10.8 billion. These intangible asset tax deductions were not recognized as a benefit, because they were not eligible to be recorded for statutory financial statement purposes and, therefore, were not considered in TIAA’s gross deferred tax asset calculation. The Department concurred with this interpretation by TIAA. The NOL carryforward for tax purposes expires between 2013 and 2021. TIAA did not incur federal income taxes in the current or preceding years that would be available for recoupment in the event of future net losses.

TIAA’s 1998 and 1999 tax returns representing the first years for which TIAA’s entire business operations were subject to federal income taxation, have been audited by the Internal Revenue Service (“IRS”). In April 2004, the IRS completed its audit and presented TIAA with a Revenue Agent Report asserting certain adjustments to TIAA’s taxable income that would result in additional tax due of $1.1 billion for the 1998 and 1999 tax years. These adjustments would disallow the deductions for certain intangible assets and would adjust certain TIAA tax-basis annuity reserves.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 10 – Federal Income Taxes (concluded)

TIAA’s 2000, 2001, and 2002 tax returns have also been audited by the IRS. In April, 2006 the IRS completed its audit and presented TIAA with a Revenue Agent Report asserting certain adjustments to TIAA’s taxable income that would result in additional tax due of $391 million for the 2000, 2001, and 2002 tax years. These adjustments would disallow the deductions for certain intangible assets and would adjust certain TIAA tax-basis annuity reserves, which are the same issues raised in the 1998 and 1999 audit.

TIAA’s management filed protests to the IRS’ adjustments in 2004 and in 2006, and entered into discussions with the IRS Appeals Division during 2005. On April 5, 2007, TIAA executed a partial settlement with the IRS Appeals Division resolving the disputed adjustments to tax-basis annuity reserves for the tax years 1998-2002. TIAA agreed to a permanent adjustment of $273 million, reducing the tax-basis annuity reserves for TIAA contracts in force at the beginning of 1998, TIAA’s first year as a taxable entity. In addition, a temporary adjustment of $1.7 billion was applied to TIAA’s 1998 reserve deductions. This adjustment related to reserves established for new rights added to TIAA payout annuity contracts enabling contract-holders to transfer annuity balances into other investment vehicles in accordance with appropriate terms and conditions in the annuity contract. This $1.7 billion adjustment will be recovered by TIAA through future deductions over a 20 year period beginning on its 2006 tax return. With one exception that is not material, the IRS agreed to accept all deductions related to the annuity reserves as claimed by TIAA on its 1999-2002 tax returns. With respect to deductions for years subsequent to 2002, no binding agreement has been reached with the IRS for reserves associated with the annuity transferability option, since these years were not before IRS Appeals. Management believes, however, that it is reasonable to expect that deductions related to subsequent years will not be subject to adjustment by the IRS in future audits, and has not provided for any related contingency.

Disallowed deductions for certain intangible assets were set aside for future negotiations with the IRS. TIAA believes that its unresolved tax position is supported by substantial authority, and will continue to contest these adjustments through IRS appeals and judicial procedures, as needed. TIAA’s management believes that it will ultimately prevail to a significant degree. Nonetheless, TIAA’s management believes that the circumstances surrounding the tax claim by the IRS related to intangible deductions meet the conditions that require TIAA to establish a loss contingency for federal income taxes covering the years 1998-2006.

Although the final resolution of the IRS’ asserted adjustments is uncertain, management’s current best estimate of the probable loss from this dispute with the IRS, given the current status of the tax claim, requires TIAA to hold a contingent tax provision of $659 million as of December 31, 2006, which is a reduction from the reserve of $1.2 billion established as of December 31, 2005. This reduction in the reserve resulted in a net benefit of $594 million, which is reflected in TIAA’s 2006 operations.

Note 11 – Pension Plan and Postretirement Benefits

Retirement Plans, Deferred Compensation, Post Employment Benefits and other Post Retirement Benefit Plans

TIAA maintains a qualified, noncontributory defined contribution pension plan covering substantially all employees. All qualified employee pension plan liabilities are fully funded through retirement annuity contracts. Contributions are made semi-monthly to each participant's contract based on a percentage of salary, with the applicable percentage varying by attained age. All contributions are fully vested after three years of service. Forfeitures arising from terminations prior to vesting are used to reduce future employer contributions. The accompanying statements of operations include contributions to the pension plan of approximately $32 million, $28 million and $29 million in 2006, 2005 and 2004, respectively. This includes supplemental contributions made to company-owned annuity contracts under a non-qualified deferred compensation plan.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 11 – Pension Plan and Postretirement Benefits – (continued)

In addition to the pension plan, the Company provides certain other postretirement life and health insurance benefits to eligible retired employees who meet prescribed age and service requirements. As of December 31, 2006, the measurement date, the status of this plan for retirees and eligible active employees is summarized below (in millions):

		Postretirement Benefits
	12/31/2006			12/31/2005			12/31/2004
Change in benefit obligation
Benefit obligation at beginning of period	$	102		$	113		$	81
Eligibility cost		3			3			3
Interest cost		5			5			5
Actuarial (gains) and losses		(1	)		(14	)		14
Benefit paid		(4	)		(5	)		(5	)
Plan amendments		—			—			—
Special termination benefits		—			—			15
Benefit obligation at end of period	$	105		$	102		$	113

Fair value of assets		—			—			—
Funded status	$	(105	)	$	(102	)	$	(113	)

Unrecognized initial transition obligation		5			5			6
Unrecognized net (gain) or losses		12			13			27
Accrued postretirement benefit cost	$	(88	)	$	(84	)	$	(80	)

The Company is expecting to receive a 28% federal subsidy for plan prescription benefits arising from the Medicare Prescription Drug Act of 2003 (“The Act”). The obligation reported in the preceding table reflects the expected subsidy under the Act. The postretirement benefit obligation for non-vested employees was approximately $60 million at December 31, 2006 and approximately $55 million at December 31, 2005. The Company allocates benefit expenses to certain subsidiaries based upon salaries. The cost of postretirement benefits reflected in the accompanying statements of operations was approximately $4 million, $3 million and $4 million for 2006, 2005 and 2004, respectively. The cost of postretirement benefits included a reduction arising from The Act subsidy of $3 million and $2 million for 2006 and 2005, respectively.

The net periodic postretirement (benefit) cost for the years ended December 31 includes the following components (in millions):

	Postretirement Benefits
	2006		2005		2004
Components of net periodic cost
Eligibility cost	$	3	$	3	$	3
Interest cost		5		5		5
Amortization of transition obligation		1		1		1
Net periodic cost	$	9	$	9	$	9

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 11 – Pension Plan and Postretirement Benefits – (continued)

The assumptions used by the Company to calculate the benefit cost and obligations in the year are as follows:

	Postretirement Benefits
	2006		2005		2004
Weighted-average assumption
Discount rate for benefit costs	5.50	%	5.75	%	6.25	%
Discount rate for benefit obligations	5.75	%	5.50	%	5.75	%
Rate of increase in compensation levels	4.00	%	4.00	%	4.00	%
Medical cost trend rates	5.00-11.00	%	5.00-10.00	%	5.00-9.00	%
Immediate Rate	11.00	%	10.00	%	9.00	%
Ultimate Rate	5.00	%	5.00	%	5.00	%
Year Ultimate Rate Reached	2013		2011		2009
Ultimate medical care cost trend rate after a
three year gradual decrease	5.00	%	5.00	%	5.00	%
Dental cost trend rate	5.25	%	5.25	%	5.25	%

The assumed medical cost trend rates have a significant effect on the amounts reported. A one-percentage point increase and decrease in assumed medical cost trend rates would have the following effects (in millions):

	Postretirement Benefits
	2006			2005			2004
One percentage point increase
Increase in postretirement benefit obligation	$	11		$	10		$	12
Increase in eligibility and interest cost	$	1		$	1		$	1

One percentage point decrease
(Decrease) in postretirement benefit obligation	$	(9	)	$	(9	)	$	(9	)
(Decrease) in eligibility and interest cost	$	(1	)	$	(1	)	$	(1	)

Estimated Future Benefit Payments

The following benefit payments are expected to be paid (in millions):

Gross Cash Flows (Before Medicare Part D Subsidy Receipts)
2007		6
2008		7
2009		7
2010		7
2011		8
Total for 2011-2016		45

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 11 – Pension Plan and Postretirement Benefits – (continued)

Medicare Part D Subsidy Receipts
2007		0.4
2008		0.4
2009		0.5
2010		0.6
2011		0.6
Total for 2011-2016		5.5

The Company also maintains a non-qualified deferred compensation plan for non-employee trustees and members of the TIAA Board of Overseers. The plan provides an award equal to 50% of the annual stipend that is invested annually in company-owned annuity contracts. Payout of accumulations is normally made in a lump sum following the trustees’ or member’s separation from the Board.

The Company also provides an unfunded Supplemental Executive Retirement Plan (“SERP”) to certain select executives and any TIAA associate deemed eligible by the Board of Trustees.

The SERP provides an annual retirement benefit payable at normal retirement calculated as 3% of the participant’s 5-year average total compensation based on an average of the highest five of the last ten years multiplied by the number of years of service not in excess of 15 years. This amount is reduced by the benefit arising from the basic TIAA defined contribution annuity contracts. The measurement date of the SERP liability is December 31, 2006.

As of December 31, 2006, the accumulated benefit obligation totaled $49 million. The Company had an accrued pension cost of $35 million and an accrued additional minimum liability of $14 million. As of December 31, 2006, the projected benefit obligation for non-vested employees totaled $4 million.

The SERP obligations were determined based upon a discount rate of 5.50% and a rate of compensation increase of 5.0% . In accordance with NAIC SSAP No. 89, only vested obligations are reflected in the funded status.

The obligations of TIAA under the SERP are unfunded, unsecured promises to make future payments. As such, the plan has no assets. Contributions for a given period are equal to the benefit payments for that period. The expected rate of return on plan assets is not applicable. During 2006, the SERP expense totaled $7 million.

Future benefits expected to be paid by the SERP are as follows (in millions):

1-1-2007 to 12-31-2007	$	3
1-1-2008 to 12-31-2008	$	3
1-1-2009 to 12-31-2009	$	3
1-1-2010 to 12-31-2010	$	4
1-1-2011 to 12-31-2011	$	4
1-1-2012 to 12-31-2016	$	18

Note 12 – Policy and Contract Reserves

Policy and contract reserves are determined in accordance with standard valuation methods approved by the Department and are computed in accordance with standard actuarial formulae. The reserves are based on assumptions for interest, mortality and other risks insured and establish a sufficient provision for all benefits guaranteed under policy and contract provisions.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 12 – Policy and Contract Reserves – (continued)

balance. For the Personal Annuity (“PA”), deferred annuity reserves in the general account are equal to the account balance plus the present value, at the maximum statutory valuation rate on an issue year basis, of excess interest guaranteed beyond the valuation date. In addition, a reserve is maintained in the general account for the PA’s Guaranteed Minimum Death Benefit (“GMDB”) provision. The reserve for the GMDB is calculated in accordance with Actuarial Guideline 34, Variable Annuity Minimum Guaranteed Death Benefit Reserves and New York State Regulation 151 and was approximately $0.1 million and $0.3 million at December 31, 2006 and December 31, 2005, respectively.

For retained assets, an accumulation account issued from the proceeds of annuities and life insurance policies, reserves held are equal to the total current account balances of all account holders.

The Tabular Interest, Tabular Less Actual Reserve Released and Tabular Cost have all been determined by formulae as prescribed by the NAIC except for deferred annuities, for which tabular interest has been determined from the basic data.

In aggregate, the reserves established for all annuity and supplementary contracts utilize assumptions for interest at a weighted average rate of approximately 3%. Approximately 88% of annuity and supplementary contract reserves are based on the 1983 Table set back 9 or 10 years or the Annuity 2000 table set back 9, 10, or 12 years.

Withdrawal characteristics of annuity actuarial reserves and deposit-type contracts and other liabilities without life or disability contingencies at December 31, are as follows (in millions):

	2006				2005
	Amount		Percent		Amount		Percent
Subject to Discretionary Withdrawal
At fair value	$	15,126	9.6	%	$	11,475	7.7	%
At book value without adjustment		25,194	16.1	%		24,536	16.5	%
Not subject to discretionary withdrawal		116,660	74.3	%		112,379	75.8	%
Total (gross)		156,980	100.0	%		148,390	100.0	%
Reinsurance ceded		—				—
Total (net)	$	156,980			$	148,390

Annuity reserves and deposit-type contact funds and other liabilities without life or disability contingencies for the year ended December 31, are as follows (in millions):

	2006		2005
General Account:
Total annuities (excluding supplementary contracts) with life	$	141,184	$	136,250
Supplementary contracts with life contingencies		242		249
Deposit-type contracts		428		416
Subtotal		141,854		136,915
Separate Accounts:
Annuities		15,126		11,475
Total	$	156,980	$	148,390

For Ordinary and Collective Life Insurance, reserves for all policies are calculated in accordance with New York State Insurance Regulation 147. Reserves for regular life insurance policies are computed by the Net Level Premium method for issues prior to January 1, 1990, and by the Commissioner's Reserve Valuation Method for issues on and after such date. Annual renewable and five-year renewable term policies issued on or after January 1, 1994 use segmented reserves, where each segment is equal to the term period. The Cost of Living riders issued on and after January 1, 1994 also use segmented reserves, where each segment is equal to one year in length.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 12 – Policy and Contract Reserves – (concluded)

Reserves for the vast majority of permanent insurance policies, term insurance policies, and regular insurance policies use Commissioners' Standard Ordinary Mortality Tables with rates ranging from 2.25% to 6.0% . Term conversion reserves are based on TIAA term conversion mortality experience and 4.5% interest.

Liabilities for incurred but not reported life insurance claims and disability waiver of premium claims are based on historical experience and set equal to a percentage of paid claims. Reserves for amounts not yet due for incurred but not reported disability waiver of premium claims are a percentage of the total Active Lives Disability Waiver of Premium Reserve.

The Company waives deduction of deferred fractional premiums upon death of the insured and returns any portion of the final premium beyond the date of death. Surrender values of approximately $0.2 million in excess of the legally computed reserves were held as an additional reserve liability at December 31, 2006 and December 31, 2005, respectively. As of December 31, 2006 and December 31, 2005, TIAA had $1.4 billion and $2.7 billion, respectively, of insurance in force for which the gross premiums were less than the net premiums according to the standard of valuation set by the Department. Reserves to cover these insurance amounts totaled $25.3 million and $23.8 million at December 31, 2006 and December 31, 2005, respectively.

Note 13 – Reinsurance

For Immediate Annuities not involving life contingencies and Supplementary Contracts not involving life contingencies, for each valuation rate of interest, the tabular interest has been calculated as the product of the valuation rate times the mean liability for the year. For all other funds not involving life contingencies, tabular interest has been calculated as the total interest credited to such funds.

During 2006 and 2005, the Company entered into retrocession agreements with RGA Reinsurance Company. In accordance with these agreements, the Company assumed Credit Life, Credit A&H, Term Life and Whole Life liabilities through coinsurance funds withheld and a combination of coinsurance and modified coinsurance arrangements. At December 31, disclosures related to these assumed coinsurance agreements were (in millions):

	2006		2005		2004
Aggregated assumed premiums	$	52	$	164	$	32
Reinsurance payable on paid and unpaid losses	$	1	$	1	$	—
Modified coinsurance reserves	$	162	$	142	$	3
Increase in policy and contract reserves	$	9	$	57	$	28
Funds withheld under coinsurance	$	14	$	11	$	—

In 2004, TIAA and TIAA-CREF Life entered into a series of agreements with Metropolitan Life Insurance Company (“MetLife”) including an administrative agreement for MetLife to service the long-term care business of TIAA and TIAA-CREF Life, an indemnity reinsurance agreement where TIAA and TIAA-CREF Life ceded to MetLife 100% of the long-term care liability and an assumption reinsurance agreement where, after appropriate filings in each jurisdiction, MetLife has begun the process of offering the TIAA and TIAA-CREF Life policyholders the option of transferring their policies from TIAA and TIAA-CREF Life to MetLife.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 13 – Reinsurance - (concluded)

The Company remains liable for reinsurance ceded if the reinsurer fails to meet its obligation on the business assumed. All reinsurance is placed with unaffiliated reinsurers. The Company does not have reinsurance agreements in effect under which the reinsurer may unilaterally cancel the agreement. Amounts shown in the financial statements are reported net of the impact of reinsurance. The major lines in the accompanying financial statements that were reduced by these reinsurance agreements include (in millions):

	2006		2005			2004
Insurance and annuity premiums	$	36	$	38		$	337
Policy and contract benefits	$	101	$	109		$	120
Increase in policy and contract reserves	$	32	$	(19	)	$	194
Reserves for life and health insurance	$	923	$	890		$	909

Note 14 – Commercial Paper Program

TIAA began issuing commercial paper in May 1999 and currently has a maximum authorized program of $2 billion. As of December 31, 2006 and 2005, the Company had no outstanding obligations.

The Company maintains a committed and unsecured 5-year revolving credit facility of $1 billion with a group of banks to support the commercial paper program. This liquidity facility has not been utilized.

Note 15 – Capital and Contingency Reserves and Shareholders’ Dividends Restrictions

The portion of contingency reserves represented or reduced by each item below as of December 31, are as follows (in millions):

	2006			2005
Net unrealized capital gains	$	398		$	497
Asset valuation reserve	$	(689	)	$	(305	)
Deferred federal income tax	$	(1,155	)	$	110
Non-admitted asset value	$	1,149		$	(278	)
Effect of accounting principle	$	—		$	55
Provision of reinsurance	$	(13	)	$	(17	)
Other	$	11		$	(19	)

Capital: TIAA has 2,500 shares of class A common stock authorized, issued and outstanding. All outstanding shares of the Company are collectively held by the TIAA Board of Overseers, a nonprofit corporation created to hold the stock of TIAA. By charter, the Company operates without profit to its sole shareholder.

Dividend Restrictions: Under the New York Insurance Law, the Company is permitted without prior insurance regulatory clearance to pay a stockholder dividend as long as the aggregated amount of all such dividends in any calendar year does not exceed the lesser of (i) 10% of its surplus to policyholders as of the immediately preceding calendar year and (ii) its net gain from operations for the immediately preceding calendar year (excluding realized investment gains). TIAA generally has not paid dividends to its shareholder and has no plans to do so in the current year.

Restricted Common Stock and Preferred Stock: The Company does not have any restricted common stock or preferred stock.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 16 – Contingencies and Guarantees

Subsidiary and Affiliate Guarantees:

TGM, a wholly-owned subsidiary of TIAA, was formed for the purpose of issuing notes and other debt instruments and investing the proceeds in compliance with the investment guidelines approved by the Board of Directors of TGM. TGM is authorized to issue up to $5 billion in debt and TIAA’s Board of Trustees authorized TIAA to guarantee up to $5 billion of TGM’s debt. As of December 31, 2006, TGM had $2,259 million of outstanding debt and accrued interest.

The Company has a financial support agreement with TIAA-CREF Life. Under this agreement, the Company will provide support so that TIAA-CREF Life will have the greater of (a) capital and surplus of $250 million, (b) the amount of capital and surplus necessary to maintain TIAA-CREF Life’s capital and surplus at a level not less than 150% of the NAIC Risk Based Capital model or (c) such other amount as necessary to maintain TIAA-CREF Life's financial strength rating at least the same as TIAA’s rating at all times. This agreement is not an evidence of indebtedness or an obligation or liability of the Company and does not provide any creditor of TIAA-CREF Life with recourse to TIAA. The Company made no additional capital contributions to TIAA-CREF Life during 2006 under this agreement. TIAA-CREF Life maintains a $100 million unsecured 364-day revolving line of credit arrangement with TIAA. As of December 31, 2006, $30 million of this facility was maintained on a committed basis for which TIAA-CREF Life paid a commitment fee of 3 bps per annum on the undrawn amount. During 2006, there were 36 draw downs totaling $144 million that were repaid by December 31, 2006. As of December 31, 2006, outstanding principal plus accrued interest was $0.

The Company provides guarantees to the CREF accounts, for which it is compensated, for certain mortality and expense risks, pursuant to an Immediate Annuity Purchase Rate Guarantee Agreement. The Company also provides a $1 billion uncommitted line of credit to CREF, the Retail Funds and the Institutional Funds. Loans under this revolving credit facility are for a maximum of 60 days and are made solely at the discretion of TIAA to fund shareholder redemption requests or other temporary or emergency needs of CREF and the Funds. It is the intent of TIAA, CREF and the Funds to use this facility as a supplemental liquidity facility, which would only be used after CREF and the Funds have exhausted the availability of the current $1.5 billion committed credit facility that is maintained with a group of banks.

The Company has provided a letter of credit, not to exceed $1 million, for its subsidiary, TFI, in association with the State of California termination of their 529 Plan with the Company. The letter of credit is to be accessed only if TFI does not take all reasonable steps and render all assistance that may reasonably be required to facilitate a smooth transition of account data and information in its account management system.

In October 2006, the Company advanced Services $15 million to be held in Services operating account to cover the temporary cash overdrafts incurred was due to the conversion to the new operating platform. The new operating platform automatically transfers collected cash each day from the various cash accounts, even though, the funds are not always immediately available and is causing Services to experience a temporary overdraft in the operating account. Services expects to notify its primary regulator that it is reducing its segregated cash account and repay the advance to the Company in early 2007.

Separate Account Guarantees: The Company provides mortality and expense guarantees to VA-1, for which it is compensated. The Company guarantees that, at death, the total death benefit payable from the fixed and variable accounts will be at least a return of total premiums paid less any previous withdrawals. The Company also guarantees that expense charges to VA-1 participants will never rise above the maximum amount stipulated in the contract.

The Company provides mortality, expense and liquidity guarantees to REA and is compensated for these guarantees. The Company guarantees that once REA participants begin receiving lifetime annuity income benefits, monthly payments will never be reduced as a result of adverse mortality experience. The Company also guarantees that expense charges to REA participants will never rise above the maximum amount stipulated in the contract. The Company provides REA with a liquidity guarantee to ensure it has funds available to meet participant transfer or cash withdrawal requests. If REA cannot fund participant requests, the Company’s general account will fund them by purchasing Accumulation Units in REA. The Company guarantees that participants will be able to redeem their Accumulation Units at the then current daily Accumulation Unit Value. No amounts have been accrued under these guarantees at year-end.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Note 16 – Contingencies and Guarantees – (concluded)

Leases: The Company occupies leased office space in many locations under various long-term leases. At December 31, 2006, the future minimum lease payments are estimated as follows (in millions):

Year		2007			2008		2009		2010		2011		Thereafter		Total
Amount		$	34		34		24		22		13		40		$	167

Leased space expense is allocated among the Company and affiliated entities. Rental expense charged to the Company for the years ended December 31, 2006, 2005 and 2004 was approximately $35 million, $24 million and $9 million, respectively.

The Company transferred title to land and building located at 485 Lexington Avenue and 750 Third Avenue, New York, New York to 750-485 Fee Owner LLC, an entity formed by SL Green Corp, on July 28, 2004. The Company had leased and continued to operate the properties after closing pursuant to a Master Lease, which expired on December 31, 2005. The deposit method of accounting required that the Company defer recognition of the gains from disposition of these properties until expiration of the lease. At December 31, 2005 the Company recognized the gain of $237 million on the sale.

The Company’s lease obligation under the Master Lease was $30 million and $32 million for the year 2005 and 2004, respectively. Sublease rental income was $14 million and $13 million for the years 2005 and 2004, respectively.

Other Contingencies and Guarantees:

In the ordinary conduct of certain of its investment activities, the Company provides standard indemnities covering a variety of potential exposures. For instance, the Company provides indemnifications in connection with site access agreements relating to due diligence review for real estate acquisitions, and the Company provides indemnification to underwriters in connection with the issuance of securities by or on behalf of TIAA or its subsidiaries. It is the opinion of TIAA’s management that the fair value of such indemnifications are negligent and do not materially affect the Company's financial position, results of operations or liquidity.

Other contingent liabilities arising from litigation and other matters over and above amounts already provided for in the financial statements or disclosed elsewhere in these notes are not considered material in relation to the Company’s financial position or the results of its operations.

Note 17 – Subsequent Events

On April 5, 2007 TIAA executed a partial settlement agreement with the Internal Revenue Service which resolved disputed amounts deducted on its 1998 – 2002 federal tax returns. The effect of this agreement has been reflected in TIAA’s balance sheet, the statement of operations, and the change in capital and contingency reserves, and is discussed in more detail in Footnote 10.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

INDEX OF AUDITED STATUTORY - BASIS FINANCIAL STATEMENTS

DECEMBER 31, 2004


		Page

Report of Management Responsibility		2

Report of the Audit Committee		3

Report of Independent Registered Public Accounting Firm		4

Statutory - Basis Financial Statements:

Balance Sheets		5

Statements of Operations		6

Statements of Changes in Capital and Contingency Reserves		7

Statements of Cash Flow		8

Notes to Financial Statements		9

REPORT OF MANAGEMENT RESPONSIBILITY

March 31, 2005

To the Policyholders of
Teachers Insurance and Annuity
Association of America:

TIAA has established and maintains an effective system of internal controls over financial reporting designed to provide reasonable assurance that assets are properly safeguarded, that 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, and the Vice President of Internal Audit regularly reports to the Audit Committee of the TIAA Board of Trustees.

The independent registered public accounting firm of Ernst & Young LLP has audited the accompanying statutory-basis financial statements of TIAA. To maintain auditor independence and avoid even the appearance of a conflict of interest, it continues to be TIAA’s policy that any management advisory or consulting services are obtained from a firm other than the independent audit firm. The independent auditors’ report expresses an independent opinion on the fairness of presentation of these statutory-basis financial statements.

The Audit Committee of the TIAA Board of Trustees, comprised entirely of independent, non-management trustees, meets regularly with management, representatives of Ernst & Young LLP and internal auditing personnel to review matters relating to financial reporting, internal controls and auditing. In addition to the annual independent audit of the TIAA statutory-basis financial statements, the New York State Insurance Department and other state insurance departments regularly examine the operations and financial statements of TIAA as part of their periodic corporate examinations.

	Herbert M. Allison, Jr.


	/s/ Herbert M. Allison, Jr.

	Chairman, President and
	Chief Executive Officer


	Elizabeth A. Monrad


	/s/ Elizabeth A. Monrad

	Executive Vice President and
	Chief Financial Officer

REPORT OF THE AUDIT COMMITTEE

To the Policyholders of
Teachers Insurance and Annuity
Association of America:

The Audit Committee (“Committee”) oversees the financial reporting process of Teachers Insurance and Annuity Association of America (“TIAA”) on behalf of TIAA’s Board of Trustees. The Committee is a standing committee of the Board and operates in accordance with a formal written charter (copies are available upon request) that describes the Committee’s responsibilities.

Management has the primary responsibility for TIAA’s financial statements, the development and maintenance of an effective system of internal controls over financial reporting, operations, and compliance with applicable laws and regulations. In fulfilling its oversight responsibilities, the Committee reviewed and approved the audit plans of the internal auditing group and the independent audit firm in connection with their respective audits. 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 has direct responsibility for the appointment, compensation and oversight of the external financial audit firm. As required by its charter, the Committee will evaluate rotation of the external financial audit firm whenever circumstances warrant, but in no event will the evaluation be later than the tenth year of service.

The Committee reviewed and discussed the accompanying audited statutory-basis 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 statutory-basis financial statements. The Committee has also discussed the audited statutory-basis financial statements with Ernst & Young LLP, the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of these audited statutory-basis financial statements with statutory 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 TIAA, 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 TIAA has received a written disclosure regarding such independence, as required by the Independence Standards Board.

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

April 20, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of
Teachers Insurance and Annuity
Association of America:

We have audited the accompanying statutory-basis balance sheets of Teachers Insurance and Annuity Association of America (“TIAA”) as of December 31, 2004 and 2003, and the related statutory-basis statements of operations, changes in capital and contingency reserves, and cash flow for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of TIAA’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 2 to the financial statements, TIAA presents its financial statements in conformity with accounting practices prescribed or permitted by the New York State Insurance Department, which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles are described in Note 2. The effects of these variances on TIAA’s financial statements are not reasonably determinable but are presumed to be material.

In our opinion, because of the effects of the matter described in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the financial position of TIAA at December 31, 2004 and 2003, or the results of its operations or its cash flow for each of the three years in the period ended December 31, 2004.

However, in our opinion, the statutory-basis financial statements referred to above present fairly, in all material respects, the financial position of TIAA at December 31, 2004 and 2003, and the results of its operations and its cash flow for each of the three years in the period ended December 31, 2004 in conformity with accounting practices prescribed or permitted by the New York State Insurance Department.

As discussed in Note 2 to the financial statements, TIAA began to admit deferred federal income tax assets in 2002 in accordance with the Statement of Statutory Accounting Principles Number 10.

/s/ Ernst & Young LLP

New York, New York

April 20, 2005

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

STATUTORY - BASIS BALANCE SHEETS
(dollars in thousands)*


		December 31,

		2004		2003

ASSETS
Bonds	$	114,776,422	$	106,505,812
Mortgages		24,293,328		23,689,539
Real estate		1,707,127		1,702,300
Preferred stocks		1,287,644		924,754
Common stocks		3,722,171		3,474,524
Other long-term investments		5,647,871		4,862,515
Cash, cash equivalents and short-term investments		447,444		1,082,871
Investment income due and accrued		1,373,863		1,356,407
Separate account assets		8,309,676		5,849,058
Deferred federal income tax asset		1,024,409		893,245
Other assets		974,399		905,744

TOTAL ASSETS	$	163,564,354	$	151,246,769


LIABILITIES, CAPITAL AND CONTINGENCY RESERVES
Policy and contract reserves	$	131,211,568	$	124,777,130
Dividends declared for the following year		2,214,480		2,337,922
Asset valuation reserve		2,743,549		2,288,501
Interest maintenance reserve		805,961		610,882
Separate account liabilities		8,309,676		5,849,058
Securities lending collateral		3,544,223		2,985,776
Other liabilities		3,557,497		2,156,038


TOTAL LIABILITIES		152,386,954		141,005,307


Capital (2,500 shares of $1,000 par value common stock
issued and outstanding and $550,000 paid-in capital)		3,050		3,050
Contingency Reserves:
For investment losses, annuity and insurance mortality,
and other risks		11,174,350		10,238,412


TOTAL CAPITAL AND CONTINGENCY RESERVES		11,177,400		10,241,462


TOTAL LIABILITIES, CAPITAL AND CONTINGENCY RESERVES	$	163,564,354	$	151,246,769

* Except par value of common stock and paid-in capital

See notes to statutory - basis financial statements.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

STATUTORY - BASIS STATEMENTS OF OPERATIONS
(dollars in thousands)


		For the Years Ended December 31,

		2004			2003			2002

REVENUES
Insurance and annuity premiums
and other considerations	$	9,482,218		$	8,896,091		$	9,109,531
Annuity dividend additions		2,392,193			2,847,173			3,244,248
Net investment income		9,454,011			9,456,775			9,332,234


TOTAL REVENUES	$	21,328,422		$	21,200,039		$	21,686,013


EXPENSES
Policy and contract benefits	$	6,832,197		$	6,128,748		$	5,403,358
Dividends to policyholders		4,112,964			4,584,048			5,120,378
Increase in policy and contract reserves		6,431,002			7,848,807			9,495,679
Operating expenses		432,504			490,522			469,952
Transfers to separate accounts, net		1,732,422			839,172			309,186
Other, net		121,006			(8,446	)		64,142


TOTAL EXPENSES	$	19,662,095		$	19,882,851		$	20,862,695


Income before federal income taxes and net realized
capital (losses)	$	1,666,327		$	1,317,188		$	823,318

Federal income tax expense (benefit)	$	572,339		$	16,715		$	(20,855	)

Net realized capital (losses) less capital gains taxes,
after transfers to the interest maintenance reserve		(553,531	)		(786,139	)		(1,816,327	)


NET INCOME (LOSS)	$	540,457		$	514,334		$	(972,154	)

See notes to statutory - basis financial statements.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

STATUTORY - BASIS STATEMENTS OF CHANGES IN CAPITAL AND CONTINGENCY RESERVES
(dollars in thousands)


		For the Years Ended December 31,

		2004			2003			2002


CHANGES IN CAPITAL AND CONTINGENCY RESERVES

Net income (loss)	$	540,457		$	514,334		$	(972,154	)
Net unrealized capital gains on investments		750,519			412,433			350,449
Change in the asset valuation reserve		(455,048	)		(25,368	)		356,328
Change in net deferred federal income tax asset		267,090			(348,300	)		—
Cumulative effect of change in accounting principles:
Deferred federal income tax asset		—			—			4,111,351
Change in non-admitted assets:
Deferred federal income tax asset		(135,926	)		404,863			(3,274,669	)
Other		6,242			12,165			69,318
Change in contingency reserves as a result of reinsurance		(17,228	)		(15,356	)		62,739
Other, net		(20,168	)		—			(67,754	)


NET CHANGE IN CAPITAL AND CONTINGENCY RESERVES		935,938			954,771			635,608


CAPITAL AND CONTINGENCY RESERVES
AT BEGINNING OF YEAR		10,241,462			9,286,691			8,651,083



CAPITAL AND CONTINGENCY RESERVES
AT END OF YEAR	$	11,177,400		$	10,241,462		$	9,286,691

See notes to statutory - basis financial statements.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

STATUTORY - BASIS STATEMENTS OF CASH FLOW
(dollars in thousands)

		For the Years Ended December 31,
		2004			2003			2002

CASH FROM OPERATIONS

Insurance and annuity premiums and other considerations	$	8,951,100		$	8,356,531		$	8,713,965
Annuity dividend additions		3,130,135			3,608,161			3,911,369
Net investment income		10,168,402			9,301,083			9,072,530

Total Receipts		22,249,637			21,265,775			21,697,864

Policy and contract benefits		6,830,347			6,089,641			5,412,664
Dividends paid to policyholders		4,236,407			4,706,536			5,086,897
Operating expenses		1,515,207			616,180			727,736
Federal income tax (benefit) expense		(67,802	)		11,957			(6,556	)
Net transfers to separate accounts		1,727,260			841,985			304,993

Total Disbursements		14,241,419			12,266,299			11,525,734

Net cash provided by operations		8,008,218			8,999,476			10,172,130


CASH FROM INVESTMENTS
Proceeds from long-term investments sold, matured, or repaid:
Bonds		20,595,410			27,527,024			22,445,680
Stocks		1,147,555			2,760,608			2,843,494
Mortgage loans and real estate		4,056,032			3,831,679			2,226,724
Miscellaneous proceeds		1,230,379			1,046,513			342,711
Cost of investments acquired:
Bonds		28,549,575			37,010,555			32,728,434
Stocks		1,542,062			1,553,844			3,118,463
Mortgage loans and real estate		4,698,788			3,539,578			4,258,212
Miscellaneous applications		1,959,395			1,379,956			744,503

Net cash used in investments		(9,720,444	)		(8,318,109	)		(12,991,003	)


CASH FROM FINANCING AND OTHER
Net deposits on deposit-type contracts funds		(452	)		3,253			36,515
Other cash provided (applied)		1,077,251			(1,389,622	)		1,677,327

Net cash provided by (used in) financing and other		1,076,799			(1,386,369	)		1,713,842


NET CHANGE IN CASH, CASH EQUIVALENTS AND
SHORT-TERM INVESTMENTS		(635,427	)		(705,002	)		(1,105,031	)


CASH, CASH EQUIVALENTS AND SHORT-TERM
INVESTMENTS, BEGINNING OF YEAR		1,082,871			1,787,873			2,892,904


CASH, CASH EQUIVALENTS AND SHORT-TERM
INVESTMENTS, END OF YEAR	$	447,444		$	1,082,871		$	1,787,873

See notes to statutory - basis financial statements.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS
(dollars in thousands)

DECEMBER 31, 2004

Note 1 – Organization

Teachers Insurance and Annuity Association of America ("TIAA") was established as a legal reserve life insurance company under the insurance laws of the State of New York in 1918. Its primary purpose is to aid and strengthen nonprofit educational and research organizations, governmental entities and other nonprofit institutions by providing retirement and insurance benefits for their employees and their families and by counseling these organizations and their employees on benefit plans and other measures of economic security. TIAA has authorized and issued 2,500 shares of Class A common stock. All of the outstanding common stock of TIAA is collectively held by the TIAA Board of Overseers, a nonprofit corporation created to hold the stock of TIAA. By charter, TIAA operates without profit to its sole shareholder. As a result, all contingency reserves are held as special surplus funds solely to provide benefits in furtherance of TIAA’s charter. Unless approved by the New York State Insurance Department (the "Department"), dividends to the shareholder are limited by New York State Insurance Law to the lesser of ten percent of surplus as of the prior year end or the prior year’s net gain from operations, excluding realized gains. TIAA generally has not paid dividends to its shareholder and has no plans to do so in the current year.

Note 2 – Significant Accounting Policies

Basis of Presentation:

TIAA's statutory-basis financial statements have been prepared on the basis of statutory accounting principles prescribed or permitted by the Department, a comprehensive basis of accounting that differs from U.S. generally accepted accounting principles (“GAAP”). The Department requires insurance companies domiciled in the State of New York to prepare their statutory basis financial statements in accordance with the National Association of Insurance Commissioners’ (“NAIC”) Accounting Practices and Procedures Manual (“NAIC SAP”), subject to any deviation prescribed or permitted by the Department (“New York SAP”). The Department allowed New York domiciled insurance companies to admit deferred federal income tax (“DFIT”) assets for purposes of their statutory-basis financial statements for years ending on or after December 31, 2002, in accordance with Statement of Statutory Accounting Principles (“SSAP”) No. 10 – Income Taxes. The effect of the change in accounting principle for DFIT in 2002 increased capital and contingency reserves by $836,682.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 2 – Significant Accounting Policies – (continued)

The table below provides a reconciliation of TIAA’s net income (loss) and contingency reserves between NAIC SAP and the New York SAP annual statement filed with the Department. The primary differences arise because TIAA maintains more conservative reserves, as prescribed or permitted by New York SAP, under which annuity reserves are generally discounted on the basis of contractually guaranteed interest rates and mortality tables.

		2004		2003		2002

Net Income (Loss), New York SAP	$	540,457	$	514,334	$	(972,154	)

Difference in Reserves for:
Term Conversions		687		535		6,429
Deferred and Payout Annuities issued after 2000		412,682		476,333		614,093

Net Income (Loss), NAIC SAP	$	953,826	$	991,202	$	(351,632	)

Contingency Reserves, New York SAP	$	11,174,350	$	10,238,412	$	9,283,641

Difference in Reserves for:
Term Conversions		7,966		7,279		6,744
Deferred and Payout Annuities issued after 2000		2,125,553		1,712,871		1,236,537

Contingency Reserves, NAIC SAP	$	13,307,869	$	11,958,562	$	10,526,922

In 2004, TIAA adopted the statutory accounting guidance contained in SSAP No. 87, Capitalization Policy and INT 04-17: Impact of Medicare Modernization Act on Postretirement Benefits. These accounting changes were implemented as a change in accounting principle in order to conform to the provisions of the NAIC SAP, as adopted by the Department. These changes were effective as of 2004 and had no material effect on TIAA's financial statements. Note 11 contains additional information about the Medicare Modernization Act.

Subsequent to the filing of the 2002 New York SAP financial statements, TIAA made certain revisions, primarily relating to the estimates of other than temporary impairments for invested assets. Reconciliation of TIAA’s net income and contingency reserves between the New York SAP as originally filed and the corresponding amounts reported in the Audited Financial Statements for 2002 are shown below:

					Contingency
		Net Loss			Reserves

2002 New York SAP – as filed	$	(136,821	)	$	9,668,539

Adjustments to Invested Asset Valuations		(334,898	)		(334,898	)

Reclassification – Unrealized to Realized Capital Losses		(450,435	)		—

Adjustments to Policy Reserves and Other Liabilities		(50,000	)		(50,000	)

Audited Financial Statements	$	(972,154	)	$	9,283,641

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 2 – Significant Accounting Policies – (continued)

U.S. Generally Accepted Accounting Principles: The Financial Accounting Standards Board ("FASB") requires that financial statements that are intended to be in conformity with GAAP follow all applicable authoritative accounting pronouncements. As a result, TIAA cannot refer to financial statements prepared in accordance with NAIC SAP as having been prepared in accordance with GAAP. The differences between GAAP and NAIC SAP would have a material effect on TIAA’s financial statements and the primary differences can be summarized as follows:

Under GAAP:

The formula-based asset valuation reserve (“AVR”) is eliminated as a reserve;
The interest maintenance reserve (“IMR”) is eliminated and realized gains and losses resulting from interest rate fluctuations are reported as a component of net income rather than being accumulated in and subsequently amortized out of the IMR;
Dividends on insurance policies and annuity contracts are accrued as the related earnings emerge from operations rather than being accrued in the year when they are declared;
There are no non-admitted assets;
Policy acquisition costs are deferred and amortized over the lives of the policies issued rather than being charged to operations as incurred. Policy and contract reserves are based on estimates of expected mortality, morbidity, persistency and interest rather than being based on statutory mortality, morbidity and interest requirements;
Investments in wholly-owned subsidiaries, other entities under the control of the parent, and certain variable interest entities are consolidated in the parent’s financial statements rather than being carried at the parent’s equity in the net assets of the subsidiaries;
Long-term bond investments considered to be “available for sale” are carried at fair value rather than at amortized cost;
State taxes are included in the computation of deferred taxes, a deferred tax asset is recorded for the amount of gross deferred tax assets expected to be realized in future years, and a valuation allowance is established for deferred tax assets not realizable, rather than being limited by quantitative limitations;
For purposes of calculating postretirement benefit obligations, active participants not currently vested would also be included in determining the liability;
Annuities that do not incorporate significant insurance risk are classified as investment contracts and are not accounted for as insurance contracts;
Derivatives are generally valued at fair value rather than being accounted for in a manner consistent with the hedged item;
Loan-backed and structured securities that are determined to have an other-than-temporary impairment are written down to fair value and not to the sum of undiscounted estimated future cash flows.

Management believes that the effects of these differences, while not determined, would significantly increase TIAA’s total contingency reserves under GAAP as of December 31, 2004.

Accounting Policies:

The preparation of TIAA's statutory-basis financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by TIAA:

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 2 – Significant Accounting Policies – (continued)

Investments: Publicly traded securities are accounted for as of the date the investments are purchased or sold (trade date). Other investments are recorded on the settlement date. Realized capital gains and losses on investment transactions are accounted for under the specific identification method. A realized loss is recorded when an impairment is considered to be other than temporary. An impairment in an investment is considered to have occurred if an event or change in circumstance indicates that the carrying value of the asset may not be recoverable or the receipt of contractual payments of principal and interest may not occur when scheduled. When an impairment has been determined to have occurred, the investment is carried at fair value except for loan-backed and structured securities, which are valued at an amount equal to the sum of their undiscounted expected future cash flows. Management considers all available evidence to evaluate the potential impairment of its investments. Unless evidence exists indicating a decline in the fair value of an investment below carrying value is temporary, a writedown is recognized as a realized loss.

Short-Term Investments: Short-term investments (debt securities with maturities of one year or less at the time of acquisition) not in default are stated at amortized cost. The interest method is used for amortizing short-term investments. Short-term investments in default are stated at the lower of amortized cost or fair value. Cash and cash equivalents includes cash on hand, amounts due from banks, and short term highly liquid investments with original maturity of three months or less.

Bonds: Bonds not backed by loans and not in default are stated at amortized cost. The interest method is used for amortizing bonds that are not backed by loans. Bonds not backed by loans that are in default are valued at the lower of amortized cost or fair value. For an other-than-temporary impairment, the cost basis of the bond is written down to its fair value and the amount of the write down is recognized as a realized loss.

Loan-Backed Bonds and Structured Securities: Loan-backed bonds and structured securities not in default are stated at amortized cost. The prospective approach is used in determining the carrying amount of interest only securities, securities for which an other-than-temporary impairment has been recognized or securities whose expected future cash flows are lower than the expected cash flows estimated at the time of acquisition. The retrospective approach is used to determine the carrying amount of all other loan-backed and structured securities. Estimated future cash flows and expected repayment periods are used in calculating amortization for loan-backed and structured securities. Loan-backed and structured securities in default are valued at the lower of amortized cost or undiscounted estimated future cash flows.

Common Stock: Unaffiliated common stocks are stated at fair value.

Mortgages: Mortgages are stated at amortized cost except that purchase money mortgages are stated at the lower of amortized cost or ninety percent of appraised value. A mortgage is evaluated for impairment when it is probable that the receipt of contractual payments of principal and interest may not occur when scheduled. If the impairment is considered to be temporary, a valuation reserve is established for the excess of the carrying value of the mortgage loan over its estimated fair value. Changes in valuation reserves for mortgage loans are included in net unrealized capital gains or losses. When an event occurs resulting in an impairment that is other than temporary, a direct write-down is recorded as a realized loss and a new cost basis is established.

Real Estate: Real estate occupied by TIAA and real estate held for the production of income are carried at depreciated cost, less encumbrances. Real estate held for sale is carried at the lower of depreciated cost or fair value, less encumbrances and estimated costs to sell. TIAA utilizes the straight-line method of depreciation on real estate. Depreciation is generally computed over a forty-year period. A real estate property may be considered impaired when events or circumstances indicate that the carrying value may not be recoverable. When TIAA determines that an investment in real estate is impaired, a direct write-down is made to reduce the carrying value of the property to its estimated fair value, net of encumbrances. Write-downs are recorded as a realized loss.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 2 – Significant Accounting Policies – (continued)

Wholly-Owned Subsidiaries, Limited Partnerships and Limited Liability Companies: Investments in wholly-owned subsidiaries, limited partnerships and limited liability companies are stated at TIAA's equity in the net admitted assets of the underlying entities. An unrealized loss is deemed to be other than temporary when there is limited ability to recover the loss. A realized loss is recorded for other-than-temporary impairments.

Policy Loans and Separate Accounts: Policy loans are stated at outstanding principal amounts. Separate account assets and liabilities are stated at fair value.

Seed Money Investments: Seed money investments in the TIAA-CREF Mutual Funds (“Retail Funds”), TIAA-CREF Institutional Mutual Funds (“Institutional Funds”), and TIAA-CREF Life Funds, which are included in Common Stocks in the accompanying balance sheets, are stated at fair value.

Securities Lending: TIAA has a securities lending program whereby it loans securities to qualified brokers in exchange for cash collateral, generally at least equal to 102% of the fair value of the securities loaned. When securities are loaned, TIAA receives additional income on the collateral and continues to receive income on the securities loaned. TIAA may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower of securities fail to return the securities in a timely manner. In order to minimize this risk, TIAA monitors the credit quality of its counterparties.

Derivative Instruments: TIAA has filed a Derivatives Use Plan with the Department. This plan details TIAA’s derivative policy objectives, strategies, controls and any restrictions placed on various derivative types. The plan also specifies the procedures and systems that TIAA has established to evaluate, monitor and report on the derivative portfolio in terms of valuation, hedge effectiveness and counterparty credit quality. TIAA uses derivative instruments for hedging, income generation, and asset replication purposes. Derivatives used by TIAA include foreign currency, interest rate and credit default swaps, foreign currency forwards and interest rate cap contracts. See Note 7.

Non-Admitted Assets: Certain investment balances and corresponding investment income due and accrued are designated as non-admitted assets in accordance with New York SAP, based on delinquencies, defaults, and other statutory criteria, and cannot be included in life insurance company balance sheets filed with the Department. Such investment-related non-admitted assets totaled $110,376 and $90,615 at December 31, 2004 and 2003, respectively. Income on bonds in default is not accrued and, therefore, is not included in the non-admitted totals. Certain non-investment assets, such as the DFIT asset, furniture and fixtures, and various receivables, are also designated as non-admitted assets. The non-admitted portion of the DFIT asset was $3,005,732 and $2,869,806 at December 31, 2004 and 2003, respectively. The other non-admitted assets were $216,657 and $242,661 at 2004 and 2003, respectively. Changes in such non-admitted assets are charged or credited directly to contingency reserves.

Furniture and Equipment: Electronic data processing equipment, software, furniture and equipment that qualify for capitalization are depreciated using the straight-line method over 3 years. Office alterations and leasehold tenant improvements that qualify for capitalization are depreciated over 5 years and the remaining life of the lease, respectively. Depreciation expenses charged to operations in 2004, 2003, and 2002 were $14,424, $29,258, and 18,521, respectively and included approximately $8,700 of accelerated depreciation on electronic data processing equipment in 2003. TIAA adopted higher capitalization thresholds, starting at $1,000, and more uniform amortization periods as a part of implementing statutory guidance effective in 2004.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 2 – Significant Accounting Policies – (concluded)

Premium Revenue: Life premiums are recognized as income over the premium-paying period of the related policies. Annuity considerations are recognized as revenue when received. Expenses incurred in connection with acquiring new insurance business are charged to operations as incurred.

Policy and Contract Reserves: TIAA offers a range of group and individual retirement annuities and individual life and other insurance products. Policy and contract reserves for such products are determined in accordance with standard valuation methods approved by the Department and are computed in accordance with standard actuarial formulae. The reserves established utilize assumptions for interest (at rates ranging from 1.50% to 6.80% and averaging approximately 3%), mortality and other risks insured. Such reserves establish a sufficient provision for all contractual benefits guaranteed under policy and contract provisions.

Dividends Declared for the Following Year: Dividends on insurance policies and pension annuity contracts in the payout phase are generally declared by the TIAA Board of Trustees ("Board") in October of each year, and such dividends are credited to policyholders in the following calendar year. Dividends on pension annuity contracts in the accumulation phase are generally declared by the Board in February of each year, and such dividends on the various existing vintages of pension annuity contracts in the accumulation phase are credited to policyholders during the ensuing twelve month period beginning March 1. Policyholder dividends are recorded as a component of net income.

Asset Valuation Reserve: The AVR, which covers all invested asset classes, is a reserve required by NAIC SAP to provide for potential future credit and equity losses. Reserve components of the AVR are maintained for bonds, stocks, mortgages, real estate, other invested assets and derivatives. Realized and unrealized credit and equity capital gains and losses, net of capital gains taxes, are credited to or charged against the related components of the AVR. Statutory formulae determine the required reserve components primarily based on factors applied to asset classes, and insurance companies may also establish additional reserves for any component; however, the ultimate balance cannot exceed the statutory maximum reserve for that component. Contributions and adjustments to the AVR are reported as transfers to or from contingency reserves. In 2002, an additional reserve was established in the amount of $276,291. No voluntary contributions were made in either 2003 or 2004.

Interest Maintenance Reserve: The IMR is a reserve required by NAIC SAP which accumulates realized interest rate-related capital gains and losses on sales of debt securities and mortgage loans, as defined by NAIC SAP. Such capital gains and losses are amortized out of the IMR, under the grouped method of amortization, as an adjustment to net investment income over the remaining lives of the assets sold.

Reclassifications: These financial statements report asset classes and related income in the same categories as prescribed for the NAIC annual statement. Certain reclassifications have been made to prior year amounts in order to conform to this presentation. The principal reclassifications related to reporting net transfers and real estate. In prior years, transfers to and from the College Retirement Equities Fund (“CREF”) were reported net on the Statements of Operations and Statements of Cash Flow. CREF transfers have been reported as premiums and benefits on these statements to be more consistent with the Annual Statement presentation. In 2004, 2003 and 2002, CREF net transfers were $1,477,560, $894,344 and $2,168,251. In addition, this presentation reports real estate activities conducted through subsidiaries and other entities as affiliated equity, mortgages, or other long-term investments rather than as real estate.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 3 – Investments

The disclosures below provide information grouped within the following asset categories: A) bonds, preferred and common stocks; B) mortgage loan investments; C) real estate investments; D) investment subsidiaries and affiliates; and E) other long term investments.

A. Bonds, Preferred Stocks, and Common Stocks:

The amortized cost and estimated fair values, and unrealized gains and losses of long-term bonds, preferred stocks, and common stocks at December 31, 2004 and 2003, are shown below:

				Gross		Gross
				Unrealized		Unrealized			Estimated
		Cost**		Gains		Losses			Fair Value

December 31, 2004
U.S. Government	$	1,326,342	$	83,358	$	(1,268	)	$	1,408,432
All Other Governments		1,002,193		105,639		(1,001	)		1,106,831
States, Territories & Possessions		964,357		199,877		(5,082	)		1,159,152
Political Subdivisions of States,
Territories & Possessions		18,319		4,252		—			22,571
Special Rev. & Special Assessment,
Non-guaranteed Agencies & Govt		23,117,864		845,562		(164,457	)		23,798,969
Public Utilities		4,667,045		426,737		(17,476	)		5,076,306
Industrial & Miscellaneous		83,680,302		5,053,295		(627,095	)		88,106,502

Total Bonds		114,776,422		6,718,720		(816,379	)		120,678,763
Preferred Stocks		1,297,173		85,411		(24,681	)		1,357,903
Common Stocks Unaffiliated		301,777		110,757		(2,583	)		409,951
Common Stocks Affiliated***		3,312,220		—		—			3,312,220

Total Bonds and Stocks	$	119,687,592	$	6,914,888	$	(843,643	)	$	125,758,837


December 31, 2003
U.S. Government	$	2,086,153	$	54,121	$	(59,787	)	$	2,080,487
All Other Governments		885,568		88,294		(1,576	)		972,286
States, Territories & Possessions		966,942		168,938		(11,101	)		1,124,779
Political Subdivisions of States,
Territories & Possessions		18,292		4,174		—			22,466
Special Rev. & Special Assessment,
Non-guaranteed Agencies & Govt		21,156,415		869,013		(284,346	)		21,741,082
Public Utilities		4,663,739		410,987		(40,782	)		5,033,944
Industrial & Miscellaneous		76,728,703		4,945,216		(893,768	)		80,780,151

Total Bonds		106,505,812		6,540,743		(1,291,360	)		111,755,195
Preferred Stocks		928,302		61,717		(5,043	)		984,976
Common Stocks Unaffiliated		373,540		87,790		(28,270	)		433,060
Common Stocks Affiliated***		3,041,464		—		—			3,041,464

Total Bonds and Stocks	$	110,849,118	$	6,690,250	$	(1,324,673	)	$	116,214,695

**	Amortized cost for bonds and original cost for stocks net of cumulative recorded other-than-temporary impairments. At December 31, 2004 and 2003, preferred stock non-admitted assets were $9,529 and $3,548, respectively.

***	Also reported in Note 3D Subsidiaries and Affiliates.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 3 – Investments – (continued)

Impairment Review Process

All securities are subjected to TIAA’s process for identifying other-than-temporary impairments. The impairment identification process utilizes, but is not limited to, a screening process based on declines in fair value of more than 20% over a six-month period. TIAA writes down securities that it deems to have an other-than-temporary impairment to fair value in the period the securities are deemed to be impaired, based on management's case-by-case evaluation of the decline in fair value and prospects for recovery. Management considers a wide range of factors in the impairment evaluation process, including, but not limited to, the following: (a) the extent to which and the length of time the fair value has been below amortized cost; (b) the financial condition and near-term prospects of the issuer; (c) whether the debtor is current on contractually obligated interest and principal payments; (d) the intent and ability of TIAA to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value or repayment; (e) information obtained from regulators and rating agencies; (f) the potential for impairments in an entire industry sector or sub-sector; and (g) the potential for impairments in certain economically-depressed geographic locations. Where an impairment is considered to be other than temporary, TIAA recognizes a write-down as an investment loss and adjusts the cost basis of the security accordingly. TIAA does not change the revised cost basis for subsequent recoveries in value. Once an impairment write-down has been recorded, TIAA continues to review the impaired security for appropriate valuation on an ongoing basis.

Unrealized Losses on Bonds, Preferred Stocks and Common Stocks

The gross unrealized losses and estimated fair values for securities by the length of time that individual securities had been in a continuous unrealized loss position for 2004 and 2003 are shown in the table below:

				Gross			Estimated
December 31, 2004				Unrealized			Fair
		Cost**		Loss			Value

Less than twelve months:
Bonds	$	16,378,327	$	(349,835	)	$	16,028,492
Preferred Stocks		217,793		(24,182	)		193,611
Common Stocks		55,944		(1,614	)		54,330

Total less than twelve months		16,652,064		(375,631	)		16,276,433

Twelve months or more:
Bonds		8,555,534		(466,544	)		8,088,990
Preferred Stocks		20,261		(499	)		19,762
Common Stocks		30,530		(969	)		29,561

Total twelve months or more		8,606,325		(468,012	)		8,138,313

Total – All bonds, preferred & common stocks	$	25,258,389	$	(843,643	)	$	24,414,746

**Amortized cost for bonds and original cost for stocks net of cumulative reported other-than-temporary impairments.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 3 – Investments – (continued)

				Gross			Estimated
December 31, 2003				Unrealized			Fair
		Cost**		Loss			Value

Less than twelve months:
Bonds	$	22,859,121	$	(1,027,782	)	$	21,831,339
Preferred Stocks		20,918		(115	)		20,803
Common Stocks		12,757		(487	)		12,270

Total less than twelve months		22,892,796		(1,028,384	)		21,864,412

Twelve months or more:
Bonds		2,559,069		(263,578	)		2,295,491
Preferred Stocks		79,904		(4,928	)		74,976
Common Stocks		149,046		(27,783	)		121,263

Total twelve months or more		2,788,019		(296,289	)		2,491,730

Total – All bonds, preferred & common stocks	$	25,680,815	$	(1,324,673	)	$	24,356,142

**Amortized cost for bonds and original cost for stocks net of cumulative recorded other-than-temporary impairments.

For 2004, the categories of securities where the estimated fair value declined and remained below cost for twelve months or greater were concentrated in asset-backed securities (33%), mortgage-backed securities (25%), manufacturing (9%), finance (9%), government (9%), and other securities (15%). The preceding percentages were calculated as a percentage of the gross unrealized loss. TIAA held 17 securities where each had a gross unrealized loss greater than $5 million at December 31, 2004. Ten of these securities represented 100% of the gross unrealized loss on securities where the estimated fair value declined and remained below cost by 20% or more for twelve months or greater. All ten securities were asset-backed securities and the estimated future cash flows supported the carrying value of each security. TIAA believes that the estimated fair values of the asset-backed securities were temporarily depressed as a result of unusually strong negative market reaction to this sector.

For 2003, the categories of securities for which the estimated fair value declined and remained below cost for twelve months or greater were concentrated in asset-backed securities (64%), common stocks (9%), retail & wholesale trade (5%), government (5%), manufacturing (4%), public utilities (4%), and other securities (9%). The preceding percentages were calculated as a percentage of the gross unrealized loss. TIAA held 15 securities where each had a gross unrealized loss greater than $5 million at December 31, 2003. Twelve of these securities represented 100% of the gross unrealized loss on securities where the estimated fair value declined and remained below cost by 20% or more for twelve months or greater. Ten were asset-backed securities and the estimated future cash flows supported the carrying value of each security. The remaining two securities were common stock. TIAA believes that the estimated fair values of the asset-backed securities were temporarily depressed as a result of unusually strong negative market reaction to this sector.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 3 – Investments – (continued)

Scheduled Maturities for Bonds

The statutory carrying values and estimated fair values of long-term bond investments at December 31, 2004, by contractual maturity, are shown below:

		Carrying		Estimated
		Value		Fair Value


Due in one year or less	$	1,786,319	$	1,806,863
Due after one year through five years		10,325,695		11,030,064
Due after five years through ten years		20,899,038		22,326,930
Due after ten years		27,553,879		29,735,505

Subtotal		60,564,931		64,899,362
Residential mortgage-backed securities		27,796,371		28,498,284
Commercial mortgage-backed securities		15,006,573		15,798,517
Asset-backed securities		11,408,547		11,482,600


Total	$	114,776,422	$	120,678,763

Included in the preceding table are long-term bonds in or near default with an original par amount of $2,496,222 that have been written down to a statutory carrying value of $674,450. The bonds are categorized based on contractual maturity as follows: $1,707 due in one year or less, $80,302 due after one year through five years, $82,075 due after five years through ten years, $54,826 due after ten years, $2,088 of residential mortgage-backed securities, $451,619 of asset-backed securities and $1,833 of commercial mortgage-backed securities.

Bond Credit Quality and Diversification

At December 31, 2004 and 2003, 93.0% and 91.6%, respectively, of the long-term bond portfolio was comprised of investment grade securities. The carrying values of long-term bond investments were diversified by industry classification at December 31 as follows:

	2004		2003


Residential mortgage-backed securities	24.2	%	24.8	%
Commercial mortgage-backed securities	13.1		12.4
Finance and financial services	12.3		11.0
Manufacturing	11.2		11.3
Asset-backed securities	9.9		10.6
Public utilities	5.7		5.9
Communications	4.6		4.8
Government	4.1		3.4
Oil and gas	3.8		3.7
Retail and wholesale trade	2.2		2.6
Real estate investment trusts	2.3		2.4
Other	6.6		7.1

Total	100.0	%	100.0	%

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 3 – Investments – (continued)

Bond and Equity - Other Disclosures

During 2004 and 2003, TIAA acquired bonds and stocks through debt restructurings and other non-cash transactions aggregating $2,300,853 and $2,313,755, respectively. Debt securities of $7,049 and $6,661 at December 31, 2004 and 2003, respectively, were on deposit with governmental authorities or trustees, as required by law.

The carrying values and estimated fair values of securities loaned, and the associated cash collateral received were as follows:

		Carrying Value		Fair Value		Cash Collateral


December 31, 2004	$	3,275,396	$	3,441,284	$	3,544,223
December 31, 2003	$	2,729,251	$	2,833,478	$	2,985,776

For the years ended December 31, 2004, 2003, and 2002, the income generated from securities lending was $8,751, $8,893 and $10,035, respectively. For the years ended December 31, 2004 and 2003, the carrying amount of bonds and stocks denominated in foreign currency was $2,362,382 and $2,015,602, respectively. Bonds that totaled $568,969 and $701,886 at December 31, 2004 and 2003, respectively, represent amounts due from related parties that are collateralized by real estate owned by TIAA investment subsidiaries and affiliates.

B. Mortgage Loan Investments:

TIAA makes mortgage loans that are principally collateralized by commercial real estate. The maximum percentage of any one loan to the value of the security at the time of the loan, exclusive of insured, guaranteed or purchase money mortgages, was 80% for commercial loans. The coupon rates for commercial mortgage loans and mezzanine loans acquired during 2004 ranged from 4.06% to 8.78% and from 0.00% to 9.60%, respectively.

Mortgage Loan Impairment Review Process

TIAA monitors the effects of current and expected market conditions and other factors on the collectibility of mortgage loans to identify and quantify any impairment in value. Any impairment is classified as either temporary, for which a recovery is anticipated, or other than temporary. Mortgage loans with impaired values at December 31, 2004 and 2003 have been written down to net realizable values, as shown in the table below. For impaired mortgages where the impairments were deemed to be temporary, an allowance for credit losses has been established, as indicated below:

		2004			2003			2002

Investment in impaired mortgage loans, with temporary allowances
for credit losses (at net carried value plus accrued interest)	$	184,644		$	599,836		$	399,852
Related temporary allowances for credit losses		(30,130	)		(132,393	)		(116,737	)
Investment in impaired mortgage loans, net of other-than-temporary
impairment losses recognized		357,595			1,015,637			45,998
Related write-downs for other-than-temporary impairments		(142,289	)		(132,754	)		(90,329	)
Average investments in impaired mortgage loans		888,575			980,612			751,027
Interest income recognized on impaired mortgage loans during the
period		38,094			55,917			30,632
Interest income recognized on a cash basis during the period		38,400			74,052			31,509

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 3 – Investments – (continued)

The activity affecting the allowance for credit losses on mortgage loans was as follows:

		2004			2003

Balance at the beginning of the year	$	132,393		$	116,737
Provisions for losses charged against contingency reserves		54,508			93,394
Write-downs for other-than-temporary impaired assets charged against the allowance		(132,100	)		(30,639	)
Recoveries of amounts previously charged off		(24,671	)		(47,099	)

Balance at the end of the year	$	30,130		$	132,393

At December 31, 2004 and 2003, the aggregate carrying values of mortgages with restructured or modified terms were $237,319 and $137,699, respectively. For the years ended December 31, 2004, 2003 and 2002, the investment income earned on such mortgages was $15,974, $6,415 and $26,281, respectively, which would have been approximately $21,733, $9,699 and $36,560, respectively, if they had performed in accordance with their original terms. During 2004, TIAA reduced the interest rate on outstanding loans as follows: $8,000 loan by 4.00%, $56,375 loan by 2.95% and $85,000 loan by 2.00% . When restructuring mortgage loans, TIAA generally requires participation features, yield maintenance stipulations, and/or the establishment of property-specific escrow accounts funded by the borrowers. With respect to impaired loans, TIAA accrues interest income to the extent it is deemed collectible. Due and accrued income on any mortgage in default for more than eighteen months is non-admitted. At December 31, 2004 and 2003, the carrying values of mortgages held with interest more than 180 days past due, excluding accrued interest, were $33,730 and $32,785, respectively. Total interest due on mortgages with interest more than 180 days past due was $10,106 and $6,058, respectively.

Mortgage Loan Diversification

At December 31, the carrying values of mortgage loan investments were diversified by property type and geographic region as follows:

	2004		2003

Property Type
Office buildings	41.1	%	43.3	%
Shopping centers	29.2		26.4
Industrial buildings	11.7		11.5
Mixed-use projects	7.6		7.6
Apartments	5.9		6.1
Hotel	3.7		3.9
Other	0.8		1.2

Total	100.0	%	100.0	%


	2004		2003

Geographic Region
Pacific	27.4	%	25.6	%
South Atlantic	23.5		22.1
North Central	15.3		18.0
Middle Atlantic	11.7		11.4
South Central	8.5		8.1
Mountain	6.8		6.6
New England	4.5		6.7
Other	2.3		1.5

Total	100.0	%	100.0	%

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 3 – Investments – (continued)

At December 31, 2004 and 2003, approximately 20.8% and 19.0% of the mortgage portfolio, respectively, was invested in California and was included in the Pacific region shown above.

Scheduled Mortgage Loan Maturities

At December 31, 2004, contractual maturities for mortgage loans were as follows:

		Carrying Value

Due in one year or less	$	1,228,318
Due after one year through five years		9,971,461
Due after five years through ten years		11,251,889
Due after ten years		1,841,660

Total	$	24,293,328

Actual maturities may differ from contractual maturities because borrowers may have the right to prepay mortgage loans, although prepayment premiums may be applicable.

Mortgage Loan - Other Disclosures

Mortgages that totaled $570,812 and $515,480 at December 31, 2004 and 2003, respectively, represent the carrying value of amounts due from related parties that are collateralized by real estate owned by TIAA investment subsidiaries and affiliates.

For the years ended December 31, 2004 and 2003, the carrying value of mortgage loans denominated in foreign currency was $537,056 and $462,049 respectively.

C. Real Estate Investments:

TIAA makes investments in commercial real estate directly, through wholly-owned subsidiaries and through real estate limited partnerships. TIAA monitors the effects of current and expected market conditions and other factors on the realizability of real estate investments to identify and quantify any impairments in value. At December 31, 2004 and 2003, TIAA’s directly owned real estate investments of $1,707,127 and $1,702,300, respectively, were carried net of third party mortgage encumbrances, which totaled approximately $143,329 and $144,754, respectively.

Real Estate Diversification

At December 31, the carrying values of real estate investments were diversified by property type and geographic region as follows:

	2004		2003

Property Type
Office buildings	70.9	%	71.7	%
Mixed-use projects	15.3		14.3
Industrial buildings	8.9		8.8
Apartments	3.3		3.3
Land held for future development	1.5		1.4
Income-producing land underlying improved real estate	0.1		0.4
Other	0.0		0.1

Total	100.0	%	100.0	%

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 3 – Investments – (continued)


	2004		2003

Geographic Region
South Atlantic	44.7	%	44.3	%
North Central	19.0		19.7
Middle Atlantic	15.4		14.6
Pacific	10.6		11.2
South Central	8.3		8.3
Mountain	2.0		1.9

Total	100.0	%	100.0	%

At December 31, 2004 and 2003, approximately 20.0% and 20.4% of the real estate portfolio, respectively, was invested in Florida and was included in the South Atlantic region shown above.

Real Estate - Other Disclosures

Depreciation expense on directly owned real estate investments for the years ended December 31, 2004, 2003 and 2002, was $52,219, $62,151 and $42,085, respectively; the amount of accumulated depreciation at December 31, 2004 and 2003 was $274,925 and $256,396, respectively.

During 2004 and 2003, TIAA did not acquire directly owned real estate via the assumption of debt or in satisfaction of debt.

D. Subsidiaries and Affiliates:

TIAA’s investment subsidiaries and affiliates, which have been created for legal or other business reasons, are primarily involved in real estate and securities investment activities for TIAA. The larger investment subsidiaries and affiliates are ND Properties, Inc, TIAA Realty, Inc, WRC Properties, Inc, and 485 Properties, LLC. For the year-ended 2004, ND Properties, Inc. acquired and sold real estate properties with a net carrying value of $471,219 and recognized a gain of $22,000. TIAA’s share of net carrying values of investment subsidiaries and affiliates at December 31, 2004 and 2003 was $4,488,029 and $4,240,849, respectively. To conform to the NAIC Annual Statement presentation, the carrying value of these entities is also reported in Note 3A as affiliated common stock or in Note 3E as other long-term investments. Other-than-temporary impairments of investment subsidiaries and affiliates for the years ended December 31, 2004 and 2003 were $65,403 and $84,118, respectively, and these amounts are included in the impairment table in Note 4. Net income from investment subsidiaries and affiliates was $217,374, $206,227 and $303,881 for the years ended December 31, 2004, 2003 and 2002, respectively. As of December 31, 2004 and 2003, the net amount due from investment subsidiaries and affiliates was $99,108 and $26,104, respectively. For the years ended December 31, 2004 and 2003, TIAA’s net capital contributions to investment subsidiaries and affiliates were $150,577 and ($255,318), respectively.

TIAA’s operating subsidiaries primarily consist of TIAA-CREF Enterprises, Inc., (“Enterprises”), TIAA-CREF Individual and Institutional Services LLC, TCT Holdings, Inc, TIAA Financial Services, LLC, (“TFS”), and TIAA-CREF Asset Management Commingled Funds Trust I (“TCAM”), which are wholly-owned subsidiaries of TIAA. Enterprises wholly owns TIAA-CREF Life Insurance Company, Inc. (“TIAA-CREF Life”), Teachers Advisors, Inc., (“Advisors”) Teachers Personal Investors Services (“TPIS”), and TIAA-CREF Tuition Financing, Inc (“TFI”). TFS owns TIAA Global Markets, Inc. (“TGM”) TIAA Advisory Services, LLC, and TIAA Realty Capital Management, LLC.

TIAA’s share of net carrying values of unconsolidated operating subsidiaries at December 31, 2004 and 2003 was $1,014,185 and $450,022, respectively. To conform with the NAIC Annual Statement presentation, the carrying value of these entities is also reported in Note 3A as affiliated common stock or in Note 3E as other long-term investments. Other-than-temporary impairments of operating subsidiaries for the years ended December 31, 2004 and 2003 were $11,217 and $53,646, respectively, and such amounts are included in the impairment table in Note 4. Net loss from operating subsidiaries was ($23,602), ($13,246) and ($51,858) for the years ended December 31, 2004, 2003 and 2002, respectively. TIAA had net amounts due from operating subsidiaries of $13,227 and $41,775, as of December 31, 2004 and 2003,

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 3 – Investments – (continued)

respectively. For the years ended December 31, 2004 and 2003, TIAA’s net capital contributions to operating subsidiaries were $509,800 and $4,421, respectively.

TIAA provides a $750,000 uncommitted and unsecured 364-day revolving line of credit to TGM. No principal or interest was outstanding as of December 31, 2004 and 2003. For the year ended December 31, 2004, there were no borrowings under this credit facility. In October 2004, TIAA extended a $100,000 committed and unsecured 364-day revolving line of credit to TIAA-CREF Asset Management Core Property Fund. In 2004, there were two drawdowns totaling $27,000. For the year ended December 31, 2004, outstanding principal plus accrued interest was $27,076.

Mutual Funds: As of December 31, 2004 and 2003, TIAA’s investments in affiliated mutual funds totaled approximately $440,284 and $556,244, respectively. These amounts are reported in the caption “Common Stocks” in the accompanying balance sheets.

E. Other Long-Term Investments:

The components of TIAA’s carrying value in other long-term investments at December 31, 2004 and 2003 was:

		2004		2003

Unaffiliated Other Invested Assets	$	2,364,881	$	1,955,844
Affiliated Other Invested Assets		2,630,278		2,205,651
Other Assets		652,712		701,020

Total other long-term investments	$	5,647,871	$	4,862,515

Unaffiliated other invested assets are principally fund investments. Affiliated other invested assets are subsidiaries and affiliates reported in Note 3D. Other assets consist primarily of contract loans, securities receivables, and derivatives. Other-than-temporary impairments in other long-term investments for the years ended December 31, 2004 and 2003 were $427,726 and $117,767, and these amounts are included in the impairment table in Note 4. The increase in 2004’s other-than-temporary impairments resulted from refinements made to TIAA’s other-than-temporary impairment process.

For the years ended December 31, 2004 and 2003, other long-term investments denominated in foreign currency were $531,438 and $407,984, respectively.

F. Commitments:

The outstanding obligation for future investments at December 31, 2004, is shown below by asset category:

								Total
		2005		2006		In later years		Commitments

Bonds	$	392,617	$	3,959	$	20,000	$	416,576
Mortgages		1,152,232		291,127		—		1,443,359
Real estate		26,228		1,525		1,422		29,175
Preferred stocks		16,750		—		—		16,750
Common stocks		271,609		296		—		271,905
Other long-term investments		1,216,824		556,244		833,565		2,606,633

Total	$	3,076,260	$	853,151	$	854,987	$	4,784,398

The funding of bond commitments is contingent upon the continued favorable financial performance of the potential borrowers, and the funding of mortgage loan and real estate commitments are generally contingent upon the underlying properties meeting specified requirements, including construction, leasing and occupancy. Due to TIAA’s due diligence in closing mortgage commitments, there is a lag between commitment and closing. For other long–term investments, primarily fund investments, there are scheduled capital calls that extend into future years.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 3 – Investments – (concluded)

In addition to the amounts in the above table, TIAA is a limited partner in the Hines Development Fund Limited Partnership (the “Development Fund”) whose primary focus is the development and redevelopment of real estate projects in Western Europe. Each of the limited partners made a specified commitment to the fund; TIAA committed 130,000 Euros. The limited partners’ commitments are pledged as collateral to facilitate the financing of the activities of the fund by third parties through equity lines of credit. The limited partners do not anticipate funding their commitments but remain committed to do so should it become necessary for the Development Fund to make cash capital calls.

Note 4 – Investment Income and Capital Gains and Losses

Net Investment Income: The components of net investment income were as follows:

		2004			2003			2002


Bonds	$	7,160,478		$	7,203,936		$	6,966,602
Mortgages		1,795,660			1,845,018			1,776,484
Real estate		292,614			315,628			257,063
Stocks		269,400			278,116			371,266
Other long-term investments		214,280			159,192			183,074
Cash, cash equivalents and short-term investments		34,969			26,485			90,181
Other		2,692			2,062			12,551

Total gross investment income		9,770,093			9,830,437			9,657,221

Less securities lending payments		(47,949	)		(45,861	)		(68,081	)
Less investment expenses		(440,081	)		(426,282	)		(344,160	)

Net investment income before
amortization of net IMR gains		9,282,063			9,358,294			9,244,980
Plus amortization of net IMR gains		171,948			98,481			87,254

Net investment income	$	9,454,011		$	9,456,775		$	9,332,234

Future rental income expected to be received during the next five years under existing real estate leases (including subsidiaries and affiliates) in effect as of December 31, 2004 is $478,138 in 2005, $404,915 in 2006, $359,993 in 2007, $306,172 in 2008, and $283,930 in 2009.

Realized Capital Gains and Losses: The net realized capital gains (losses) on sales, redemptions and writedowns of investments were as follows:

		2004			2003			2002

Bonds	$	197,737		$	(427,953	)	$	(1,133,887	)
Mortgages		(74,036	)		(48,581	)		(108,486	)
Real estate		13,296			45,066			12,194
Stocks		159,305			28,623			(326,414	)
Other long-term investments		(484,890	)		(104,181	)		(70,755	)
Cash, cash equivalents and short-term investments		2,084			19,670			687

Total before capital gains taxes and transfers to the IMR		(186,504	)		(487,356	)		(1,626,661	)
Transfers to IMR		(367,027	)		(298,783	)		(189,666	)
Capital gains taxes		—			—			—

Net realized capital (losses) less capital gains taxes, after
transfers to the IMR	$	(553,531	)	$	(786,139	)	$	(1,816,327	)

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 4 – Investment Income and Capital Gains and Losses – (concluded)

Write-downs of investments resulting from impairments which were considered to be other than temporary and included in the preceding table as realized capital (losses) were as follows:

		2004			2003			2002

Other-than-temporary impairments:
Bonds	$	(276,646	)	$	(802,609	)	$	(1,196,548	)
Mortgages		(105,140	)		(76,072	)		(71,589	)
Real estate		(904	)		(13,507	)		—
Stocks		(46,014	)		(172,480	)		(478,816	)
Other long-term investments		(427,726	)		(117,767	)		(91,872	)

Total	$	(856,430	)	$	(1,182,435	)	$	(1,838,825	)

During 2004, 2003 and 2002, TIAA recognized losses in the amount of $36,457, $18,683 and $61,477, respectively, on debt securities and mortgage loans whose terms were restructured. These amounts were included in the preceding table.

Proceeds from sales of long-term bond investments during 2004, 2003 and 2002 were $6,196,415, $8,507,669 and $8,622,312, respectively. Gross gains of $447,774, $555,660 and $359,785 and gross losses, excluding impairments considered to be other than temporary, of $41,421, $228,025 and $197,478 were realized on these sales during 2004, 2003 and 2002, respectively.

Unrealized Capital Gains and Losses: The net changes in unrealized capital gains (losses) on investments, resulting in a net increase (decrease) in the valuation of investments, were as follows:

		2004		2003			2002


Bonds	$	170,362	$	328,184		$	473,622
Mortgages		78,243		34			79,656
Real estate		—		(1,910	)		(1,732	)
Stocks		73,633		354,184			149,938
Other long-term investments		428,281		(268,059	)		(351,035	)

Total	$	750,519	$	412,433		$	350,449

Note 5 – Securitizations

When TIAA sells bonds and mortgage loans in a securitization transaction, it may retain interest-only strips, one or more subordinated tranches, residual interest, or servicing rights, all of which are retained interests in the securitized receivables. TIAA’s ownership of the related retained interests may be held directly by TIAA or indirectly through an investment subsidiary. The retained interests are associated with Special Purpose Entities/Qualified Special Purpose Entities, (“SPEs/QSPEs”), that issue equity and debt which is non-recourse to TIAA. Fair value used to determine gain or loss on a securitization transaction is based on quoted market prices if available; however, quotes are generally not available for retained interests, so TIAA either obtains an estimated fair value from an independent pricing service or estimates fair value internally based on the present value of future expected cash flows using management’s best estimates of future credit losses, forward yield curves, and discount rates that are commensurate with the risks involved.

TIAA has not initiated any securitization transactions in which it sold assets held on its balance sheet into SPEs/QSPEs since 2002. Proceeds from the 2002 securitizations were $690,598. TIAA Advisory Services, LLC, a downstream subsidiary of TIAA, provides investment advisory services for most assets securitized by TIAA.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 5 – Securitizations – (concluded)

The following table summarizes TIAA’s retained interests in securitized financial assets from transactions originated since 1999:

						Sensitivity Analysis of Key
						Assumptions used for Fair Value

Issue		Carrying		Estimated			10%			20%
Year	Type of Collateral	Value		Fair Value			Adverse			Adverse

1999	Mortgages	$	320,856	$	338,885	$	(4,065	)	$	(8,053	)
2000	Bonds		60,708		74,423		(5,799	)		(11,410	)
2001	Bonds		340,588		385,968		(5,329	)		(9,074	)
2002	Bonds		27,602		25,000		(1,080	)		(2,075	)

The fair values of the retained interests on December 31, 2004 were determined either by independent pricing services or analysts employed by TIAA. The key assumptions applied discount rates based upon the current yield curve, spreads, and expected cash flows specific to the type of interest retained for each securitization. The sensitivity analysis includes an adverse change in each assumption used to determine fair value.

Note 6 – Disclosures About Fair Value of Financial Instruments

The estimated fair value amounts of financial instruments presented in the following tables were determined by TIAA using market information available as of December 31, 2004 and 2003 and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data in developing the estimates of fair value for financial instruments for which there are no available market value quotations. The estimates presented are not necessarily indicative of the amounts TIAA could have realized in a market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

		Carrying			Estimated
December 31, 2004		Value			Fair Value

Assets
Bonds	$	114,776,422		$	120,678,763
Mortgages		24,293,328			25,829,646
Common stocks		3,722,171			3,722,171
Preferred stocks		1,287,644			1,357,903
Cash, cash equivalents and short-term investments		447,444			447,444
Policy loans		565,586			565,586
Seed money investments in mutual funds		440,284			440,284
Liabilities
Teachers Personal Annuity-Fixed Account		2,159,578			2,159,578
Derivative Financial Instruments		(612,044	)		(752,512	)

December 31, 2003
Assets
Bonds	$	106,505,812		$	111,755,195
Mortgages		23,689,539			25,687,448
Common stocks		3,474,524			3,474,524
Preferred stocks		924,754			984,976
Cash, cash equivalents and short-term investments		1,082,871			1,082,871
Policy loans		504,369			504,369
Seed money investments in mutual funds		556,244			556,244
Liabilities
Teachers Personal Annuity-Fixed Account		2,124,746			2,124,746
Derivative Financial Instruments		(455,952	)		(464,411	)

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 6 – Disclosures About Fair Value of Financial Instruments – (concluded)

The aggregate carrying values and estimated fair values of publicly traded and privately placed bonds at December 31 were as follows:

	2004				2003

		Carrying		Estimated		Carrying		Estimated
		Value		Fair Value		Value		Fair Value

Publicly traded bonds	$	80,655,521	$	84,751,847	$	72,956,570	$	76,688,352
Privately placed bonds		34,120,901		35,926,916		33,549,242		35,066,843

Total bonds	$	114,776,422	$	120,678,763	$	106,505,812	$	111,755,195

Common Stocks, Cash, Cash Equivalents, Short-Term Investments, Policy Loans, and Seed Money Investments: The carrying values were considered reasonable estimates of their fair values.

Preferred Stocks: The fair values of preferred stocks were determined using quoted market prices or valuations from the NAIC.

Teachers Personal Annuity - Fixed Account: The carrying values of the liabilities were considered reasonable estimates of their fair values.

Commitments to Extend Credit or Purchase Investments: TIAA generally does not charge commitment fees on these agreements, and the related interest rates reflect market levels at the time of the commitments.

Insurance and Annuity Contracts: TIAA's insurance and annuity contracts, other than the Teachers Personal Annuity - Fixed Account disclosed above, entail mortality risks and are, therefore, exempt from the fair value disclosure requirements related to financial instruments.

Derivative Financial Instruments: The fair values of interest rate cap contracts and credit default swap contracts are estimated by external parties and are reviewed internally for reasonableness based on anticipated interest rates, estimated future cashflows, and anticipated credit market conditions. The fair values of foreign currency swap and forward contracts and interest rate swap contracts are estimated internally based on estimated future cashflows, anticipated foreign exchange relationships and anticipated interest rates and such values are reviewed for reasonableness with estimates from TIAA's counterparties.

Note 7 – Derivative Financial Instruments

TIAA uses derivative instruments for hedging, income generation, and asset replication purposes. TIAA does not engage in derivative financial instrument transactions for speculative purposes. TIAA enters into derivatives directly with counterparties of high credit quality (i.e., rated AA or better at the date of a transaction) and monitors counterparty credit quality on an ongoing basis. TIAA’s counterparty credit risk is limited to the net positive fair value of its derivative positions for each individual counterparty, unless otherwise described below.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 7 – Derivative Financial Instruments – (continued)

Foreign Currency Swap Contracts: TIAA enters into foreign currency swap contracts to exchange fixed and variable amounts of foreign currency at specified future dates and at specified rates (in U.S. dollars) to hedge against currency risks on investments denominated in foreign currencies. Foreign currency swap contracts are designated as cashflow hedges and changes in the value of the contracts related to foreign currency exchange rates are recognized at the end of the period as unrealized gains or losses. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value. At December 31, 2003, the net unrealized (loss) from a foreign currency swap contract that no longer qualified for hedge accounting treatment was ($6,715).

Foreign Currency Forward Contracts: TIAA enters into foreign currency forward contracts to exchange fixed amounts of foreign currency at specified future dates and at specified rates (in U.S. dollars) to hedge against currency risks on investments denominated in foreign currencies. Foreign currency forward contracts are designated as cashflow hedges and changes in the value of the contracts related to foreign currency exchange rates are recognized at the end of the period as unrealized gains or losses. A foreign exchange premium/(discount) is recorded at the time a contract is opened, based on the difference between the forward exchange rate and the spot rate. TIAA amortizes the foreign exchange premium/(discount) into investment income over the life of the forward contract or at the settlement date, if the forward contract is less than a year. At December 31, 2004, the net unrealized (loss) from foreign currency forward contracts that no longer qualified for hedge accounting treatment was ($28).

Interest Rate Swap Contracts: TIAA enters into interest rate swap contracts to hedge against the effect of interest rate fluctuations on certain variable interest rate bonds. These contracts are designated as cashflow hedges and allow TIAA to lock in a fixed interest rate and to transfer the risk of higher or lower interest rates. TIAA also enters into interest rate swap contracts to exchange the cash flows on certain fixed interest rate bonds into variable interest rate cash flows. These contracts qualify as fair value hedges and are entered into in connection with certain interest sensitive products. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by one counterparty at each due date. Net payments received and net payments made under interest rate swap contracts are included in net investment income. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value.

Interest Rate Cap Contracts: TIAA purchases interest rate cap contracts to hedge against the risk of a rising interest rate environment as part of TIAA's asset and liability management program for certain interest sensitive products. Under the terms of the interest rate cap contracts, the selling entity makes payments to TIAA on a specified notional amount if an agreed-upon index exceeds a predetermined strike rate. Interest rate cap contracts are carried at fair value. Payments received under interest rate cap contracts are included in net investment income.

Credit Default Swap Contracts: As part of a strategy to replicate investment grade corporate bonds in conjunction with high quality host bonds, TIAA writes (sells) credit default swaps to earn a premium by essentially issuing “insurance” to the buyer of default protection. The carrying value of credit default swaps represents the unamortized premium received for selling the default protection, and the premium received is amortized into investment income over the life of the swap. TIAA has negligible counterparty credit risk with the buyer. TIAA also purchases credit default swaps to hedge against unexpected credit events on selective investments in the TIAA portfolio. These swap contracts qualify as fair value hedges and the premium payment to the counterparty is expensed.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 7 – Derivative Financial Instruments – (concluded)

		Notional		Carrying			Estimated
December 31, 2004		Value		Value			Fair Value

Foreign currency swap contracts	$	2,566,616	$	(549,772	)	$	(696,871	)
Foreign currency forward contracts		243,249		(62,272	)		(65,534	)
Interest rate swap contracts		722,400		—			14,617
Interest rate cap contracts		73,800		—			—
Credit default swap contracts		660,694		—			(4,724	)

Total Derivatives	$	4,266,759	$	(612,044	)	$	(752,512	)




		Notional		Carrying			Estimated
December 31, 2003		Value		Value			Fair Value

Foreign currency swap contracts	$	2,415,672	$	(402,848	)	$	(420,866	)
Foreign currency forward contracts		309,676		(53,146	)		(51,579	)
Interest rate swap contracts		744,455		—			13,604
Interest rate cap contracts		90,300		42			42
Credit default swap contracts		472,417		—			(5,612	)

Total Derivatives	$	4,032,520	$	(455,952	)	$	(464,411	)

Note 8 – Separate Accounts

The TIAA Separate Account VA-1 ("VA-1") is a segregated investment account and was organized on February 16, 1994 under the insurance laws of the State of New York for the purpose of issuing and funding variable annuity contracts. VA-1 was registered with the Securities and Exchange Commission, (“the Commission”) effective November 1, 1994 as an open-end, diversified management investment company under the Investment Company Act of 1940. Currently, VA-1 consists of a single investment portfolio, the Stock Index Account (“SIA”). SIA was established on October 3, 1994 and invests in a diversified portfolio of equity securities selected to track the overall United States stock market.

The TIAA Real Estate Account ("REA") is a segregated investment account and was organized on February 22, 1995 under the insurance laws of the State of New York for the purpose of funding variable annuity contracts. REA was registered with the Commission under the Securities Act of 1933 effective October 2, 1995. REA's target is to invest between 70% and 95% of its assets directly in real estate or in real estate-related investments, with the remainder of its assets invested in publicly traded securities to maintain adequate liquidity.

Premiums, considerations or deposits received by TIAA’s separate accounts totaled $2,339,295, $1,401,307 and $1,167,011 for the years ending December 31, 2004, 2003 and 2002, respectively. Reserves for these separate accounts totaled $8,160,866 and $5,619,975 on December 31, 2004 and 2003, respectively.

Other than the guarantees disclosed in Note 15, TIAA does not make any guarantees to policyholders on its separate accounts. Both accounts offer full or partial withdrawal at market value with no surrender charges. The assets and liabilities of these accounts (which represent participant account values) are generally carried at fair value (directly held real estate is carried at appraised value).

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 9 – Management Agreements

Under Cash Disbursement and Reimbursement Agreements, TIAA serves as the common pay-agent for its operating subsidiaries. In addition, under management agreements, TIAA provides investment advisory and administrative services for TIAA-CREF Life and administrative services to the TIAA-CREF Trust Company, FSB, and VA-1.

Services necessary for the operation of the College Retirement Equities Fund (“CREF”), a companion organization, are provided, at cost, by two subsidiaries of TIAA, TIAA-CREF Investment Management, LLC ("Investment Management") and TIAA-CREF Individual & Institutional Services, LLC ("Services"), which provide investment advisory, administrative and distribution services for CREF at an at-cost basis. Such services are provided in accordance with an Investment Management Services Agreement between CREF and Investment Management, and in accordance with a Principal Underwriting and Administrative Services Agreement between CREF and Services. The management fees collected under these agreements and the equivalent allocated expenses, which amounted to approximately $672,659, $599,963 and $568,327 in 2004, 2003 and 2002, respectively, are not included in the statements of operations and had no effect on TIAA's operations.

Advisors provides investment advisory services for VA-1, the Retail Funds, the Institutional Funds, the Life Funds and other separately managed portfolios in accordance with investment management agreements. TPIS and Services distribute variable annuity contracts for VA-1 as well as registered securities for the Retail Funds, the Institutional Funds, the TIAA-CREF Life separate accounts and TFI.

All services necessary for the operation of REA are provided, at cost, by TIAA and Services. TIAA provides investment management services for REA. Distribution and administrative services are provided in accordance with a Distribution and Administrative Services Agreement between REA and Services. TIAA and Services receive management fee payments from REA on a daily basis according to formulae established each year with the objective of keeping the management fees as close as possible to REA’s actual expenses. Any differences between actual expenses and daily charges are adjusted quarterly.

Note 10 – Federal Income Taxes

By charter, TIAA is a Stock Life Company that operates on a non-profit basis and through December 31, 1997, was exempt from federal income taxation under the Internal Revenue Code. Any non-pension income, however, was subject to federal income taxation as unrelated business income. Effective January 1, 1998, as a result of federal legislation, TIAA is no longer exempt from federal income taxation and is taxed as a stock life insurance company.

Beginning with 1998, TIAA has filed a consolidated federal income tax return with its subsidiary affiliates. The consolidated group has entered into a tax-sharing agreement that follows the current reimbursement method, whereby members of the group will generally be reimbursed for their losses on a pro-rata basis by other members of the group to the extent that they have taxable income, subject to limitations imposed under the Code. Amounts due to (receivable from) TIAA’s subsidiaries for federal income taxes were $7,760 and ($2,529) at December 31, 2004 and 2003, respectively.

TIAA reported a loss on its 2003 federal tax return and expects to report a tax loss for 2004 as a result of net operating losses primarily due to deductions for intangible assets and increases in policy and contract reserves. These reserve increases will reverse over time, thereby increasing TIAA’s taxable income in future years.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 10 – Federal Income Taxes (continued)

A reconciliation of TIAA’s statutory tax rate to its actual federal income tax rate was as follows:

	For the Years Ended December 31,

		2004			2003			2002


Net gain from operations	$	1,666,327		$	1,317,188		$	823,318
Statutory rate		35	%		35	%		35	%
Tax at statutory rate	$	583,214		$	461,016		$	288,161
Investment items		(176,342	)		(179,433	)		(130,562	)
Consolidation and dividends from subsidiaries		(89,076	)		(39,888	)		(49,676	)
Amortization of interest maintenance reserve		(60,182	)		(34,468	)		(30,539	)
Adjustment to policyholder dividend liability		(42,939	)		(42,577	)		10,827
Accrual of contingent tax provision		629,376			—			—
Net operating loss carryforward utilized		(233,533	)		(148,952	)		(45,901	)
Other		(38,179	)		1,017			(63,165	)

Federal income tax expense (benefit)	$	572,339		$	16,715		$	(20,855	)

Effective tax rate		34.3	%		1.3	%		(2.5	)%

The components of TIAA’s net deferred tax asset were as follows:

		2004			2003			Change

Gross deferred tax assets	$	4,031,308		$	3,780,742		$	250,566
Gross deferred tax liabilities		(1,167	)		(17,691	)		16,524
Deferred tax assets, non-admitted		(3,005,732	)		(2,869,806	)		(135,926	)

Net deferred tax asset, admitted	$	1,024,409		$	893,245		$	131,164

TIAA’s gross deferred tax assets were primarily attributable to differences between tax basis and statutory basis reserves and the provision for policyholder dividends payable in the following year. Gross deferred tax liabilities were primarily due to investment income due and accrued. TIAA has no deferred tax liabilities that have not been recognized.

At December 31, 2004, TIAA's gross deferred tax asset of $4,031,308 did not include any benefit from Net Operating Loss (“NOL”) carryforwards. Consistent with prior years, however, TIAA's federal income tax return for 2004 will include a significant NOL carryforward as a result of tax deductions related to intangible assets. The NOL carryforward on TIAA’s 2004 federal income tax return is estimated to approximate $12.3 billion. These intangible asset tax deductions were not recognized as a benefit, because they were not eligible to be recorded for statutory financial statement purposes and, therefore, were not considered in TIAA’s gross deferred tax asset calculation. The Department concurred with this interpretation by TIAA. The NOL carryforward for tax purposes expires between 2013 and 2019. TIAA did not incur federal income taxes in the current or preceding years that would be available for recoupment in the event of future net losses.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 10 – Federal Income Taxes – (concluded)

Should the IRS fully prevail in connection with its proposed adjustments, and by applying the same rationale to tax years subsequent to 1999, additional tax and interest due for the tax years 1998-2004 would amount to approximately $2.6 billion, of which $668 million has already been accrued as of December 31, 2004. Of the $2.6 billion in potential taxes due, $2.3 billion would result from reserve deductions taken by TIAA in earlier years that the IRS would instead spread throughout the annuitants’ payout periods, resulting in timing differences. The remaining $300 million would cause a permanent adjustment to TIAA’s taxes. Should TIAA fully prevail, no tax will be due for 1998-2004, and TIAA’s NOL as of December 31, 2004 would be $2.9 billion, before consideration of intangible asset deductions, and $12.3 billion when intangible deductions are included.

TIAA’s management has filed a protest to the IRS’ adjustments and believes that its tax positions are supported by substantial authority. TIAA will continue to contest these adjustments through applicable IRS appeals and judicial procedures, as needed, and its management believes that it will ultimately prevail to a significant degree. Nonetheless, TIAA’s management believes that the circumstances surrounding the tax claim by the IRS meet the conditions that require TIAA to establish a loss contingency for federal income taxes covering the years 1998-2004.

Although the final resolution of the IRS’ asserted adjustments is uncertain, management’s current best estimate of the probable loss from this dispute with the IRS, given the current status of the tax claim, requires TIAA to establish a contingent tax provision of $629 million as of December 31, 2004. The establishment of this contingent tax provision resulted in a charge against TIAA’s 2004 operations and resulted in a total tax accrual as of December 31, 2004 of $668 million.

Note 11 – Pension Plan and Postretirement Benefits

TIAA maintains a qualified, noncontributory defined contribution pension plan covering substantially all employees. All employee pension plan liabilities are fully funded through retirement annuity contracts. Contributions are made semi-monthly to each participant's contract based on a percentage of salary, with the applicable percentage varying by attained age. All contributions are fully vested after five years of service. Forfeitures arising from terminations prior to vesting are used to reduce future employer contributions. The accompanying statements of operations include contributions to the pension plan of approximately $29,247, $36,061 and $35,063 in 2004, 2003 and 2002, respectively. This includes supplemental contributions made to company-owned annuity contracts under a non-qualified deferred compensation plan.

In addition to the pension plan, TIAA provides certain other postretirement life and health insurance benefits to eligible retired employees who meet prescribed age and service requirements. The status of this plan for retirees and eligible active employees is summarized below:

		Postretirement Benefits

		2004			2003

Benefit obligation at beginning of period	$	80,675		$	64,490
Service cost		3,348			4,221
Interest cost		4,910			4,273
Actuarial losses		13,743			1,570
Benefits paid		(4,866	)		(3,063	)
Special termination benefits		15,255			9,184

Benefit obligation at end of period	$	113,065		$	80,675

Fair value of assets		—			—
Funded status		(113,065	)		(80,675	)

Unrecognized initial transition obligation		6,256			7,037
Unrecognized net (gain) or loss		26,623			13,110

Accrued postretirement benefit cost	$	(80,186	)	$	(60,528	)

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 11 – Pension Plan and Postretirement Benefits (continued)

TIAA is expecting to receive a 28% federal subsidy for plan prescription benefits arising from the Medicare Prescription Drug Act of 2003 (“The Act”). For the current reporting period, TIAA adopted accounting guidance under which the postretirement benefit obligation as of December 31, 2003 was remeasured retroactively from $92,668 to $80,675 as reported in the preceding table. The postretirement benefit obligation for non-vested employees was $53,621 at December 31, 2004 and $47,289 at December 31, 2003. TIAA allocates benefit expenses to certain subsidiaries based upon salaries. The cost of postretirement benefits reflected in the accompanying TIAA statements of operations was $4,108, $5,600 and $3,300 for 2004, 2003 and 2002, respectively. The cost of postretirement benefits for 2004 includes a $970 reduction arising from The Act subsidy. In addition to these postretirement benefits, the statements of operations also include special termination benefits related to a reduction in workforce of approximately $6,748, $4,551, and $0 for 2004, 2003 and 2002.

The net periodic postretirement cost for the years ended December 31, includes the following components:

	Postretirement Benefits

	2004		2003		2002

Components of net periodic cost
Eligibility cost	$	3,349	$	4,221	$	4,231
Interest cost		4,910		4,273		4,002
Amortization of transition obligation		781		781		781
Amortization of net loss		229		268		215

Net periodic cost	$	9,269	$	9,543	$	9,229

The assumptions at December 31 used by TIAA to calculate the benefit obligations as of that date and to determine the benefit cost in the year are as follows:

	Postretirement Benefits

	2004		2003

Weighted-average assumptions
Discount rate	5.75	%	6.25	%
Rate of increase in compensation levels	4.00	%	4.00	%
Medical cost trend rates	5.00 - 9.00	%	5.00 - 10.00	%
Ultimate medical care cost trend rate after
a five year gradual decrease	5.00	%	5.00	%
Dental cost trend rate	5.25	%	5.25	%

		Postretirement
		Benefits

		2004

One percentage point increase
Increase in postretirement benefit obligation	$	12,324
Increase in eligibility and interest cost	$	1,028

One percentage point decrease
(Decrease) in postretirement benefit obligation	$	(9,204	)
(Decrease) in eligibility and interest cost	$	(769	)

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 11 – Pension Plan and Postretirement Benefits – (concluded)

TIAA also maintains a non-qualified deferred compensation plan for non-employee trustees and members of the TIAA Board of Overseers. The plan provides an award equal to 50% of the annual stipend that is invested annually in company-owned annuity contracts. Payout of accumulations is normally made in a lump sum following the trustee’s or member’s separation from the Board.

Note 12 – Policy and Contract Reserves

General account policy and contract reserves as of December 31, are summarized as follows:

		2004		2003


Life Insurance	$	419,154	$	377,098
Annuities		130,208,824		123,570,392
Active Life and Claim Reserves		363		243,301
Supplementary Contracts		378,170		387,963
Disability – Active and Disabled Lives		47,594		44,424
Other		157,463		153,952

Total Policy and Contract Reserves	$	131,211,568	$	124,777,130

For annuities and supplementary contracts, policy and contract reserves are generally equal to the present value of guaranteed benefits. For most annuities, the present value calculation uses the guaranteed interest and mortality table or a more conservative basis and for most accumulating annuities the reserve thus calculated is equal to the account balance. For the Personal Annuity (“PA”), deferred annuity reserves in the general account are equal to the account balance plus the present value, at the maximum statutory valuation rate on an issue year basis, of excess interest guaranteed beyond the valuation date. In addition, a reserve is maintained in the general account for the PA’s Guaranteed Minimum Death Benefit (“GMDB”) provision. The reserve for the GMDB is calculated in accordance with Actuarial Guideline 34, Variable Annuity Minimum Guaranteed Death Benefit Reserves and New York State Regulation 151 and was approximately $384 and $815 at December 31, 2004 and December 31, 2003, respectively.

For retained assets, an accumulation account issued from the proceeds of life insurance policies, reserves held are equal to the total current account balances of all account holders.

In aggregate, the reserves established for all annuity and supplementary contracts utilize assumptions for interest at a weighted average rate of approximately 3%. Approximately 87% of annuity and supplementary contract reserves are based on the 1983 Table set back 9 or 10 years or the Annuity 2000 table set back 9, 10, or 12 years.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 12 - Policy and Contract Reserves (concluded)

At December 31, TIAA’s general account annuity reserves had the following characteristics:

	2004				2003

		Amount	Percent			Amount	Percent

Subject to discretionary withdrawal:
At book value without adjustment	$	22,974,084	17.6	%	$	20,803,827	16.8	%
At market value		—	0.0			—	0.0
Not subject to discretionary withdrawal		107,770,373	82.4			103,308,481	83.2

Total annuity reserves and deposit liabilities		130,744,457	100.0	%		124,112,308	100.0	%
Reconciliation to total policy & contract
reserves shown on the balance sheet:
Reserves on other life policies & contracts		466,748				421,521
Reserves on accident & health policies		363				243,301

Total policy and contract reserves	$	131,211,568			$	124,777,130

For Ordinary and Collective Life Insurance, reserves for all policies are calculated in accordance with New York State Insurance Regulation 147. Reserves for regular life insurance policies are computed by the Net Level Premium method for issues prior to January 1, 1990, and by the Commissioner's Reserve Valuation method for issues on and after such date. Annual renewable and five-year renewable term policies issued on or after January 1, 1994 use segmented reserves, where each segment is equal to the term period. The Cost of Living riders issued on and after January 1, 1994 also use segmented reserves, where each segment is equal to one year in length.

Reserves for the vast majority of permanent insurance policies, term insurance policies, and regular insurance policies use Commissioners' Standard Ordinary Mortality Tables with rates ranging from 2.25% to 6%. Term conversion reserves are based on TIAA term conversion mortality experience and 4.50% interest.

TIAA waives deduction of deferred fractional premiums upon death of the insured and returns any portion of the final premium beyond the date of death. Surrender values of approximately $141 and $143 in excess of the legally computed reserves were held as an additional reserve liability at December 31, 2004 and December 31, 2003, respectively. As of December 31, 2004 and December 31, 2003, TIAA had $1.35 billion and $1.23 billion, respectively, of insurance in force for which the gross premiums were less than the net premiums according to the standard of valuation set by the Department. Reserves to cover these insurance amounts totaled $6,262 and $6,551 at December 31, 2004 and December 31, 2003, respectively.

The Tabular Interest, Tabular Less Actual Reserve Released and Tabular Cost have all been determined by formulae prescribed by the NAIC.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 13 – Reinsurance

TIAA entered into an indemnity reinsurance agreement dated October 1, 2002 with Standard Insurance Company, (“Standard”) to reinsure on a 100% coinsurance basis all the liabilities associated with its group life and group disability blocks of business. The agreement was approved by the Department on September 30, 2002. At closing, Standard paid TIAA $75,000 as a ceding commission, and TIAA transferred cash equal to the liabilities of $723,100 to Standard. The ceding commission was recorded as an increase in contingency reserves, net of direct expenses of $8,100 associated with the transaction, pursuant to Statement of Statutory Accounting Principles (“SSAP”) #61 – Life, Deposit-Type and Accident and Health Reinsurance, SSAP #24 – Discontinued Operations and Extraordinary Items, and Appendix 791 – Life and Health Reinsurance Agreements. The net ceding commission of $66,900 will be amortized into income in subsequent periods.

In 2004, TIAA and TIAA-CREF Life entered into a series of agreements with Metropolitan Life Insurance Company (“MetLife”) including an administrative agreement for MetLife to service the long-term care business of TIAA and TIAA-CREF Life, an indemnity reinsurance agreement where TIAA and TIAA-CREF Life ceded to MetLife 100% of the long-term care liability and an assumption reinsurance agreement where, after appropriate filings in each jurisdiction, MetLife will begin, in 2005, the process of offering the TIAA and TIAA-CREF Life policyholders the option of transferring their policies from TIAA and TIAA-CREF Life to MetLife.

The company remains liable for reinsurance ceded if the reinsurer fails to meet its obligation on the business assumed. All reinsurance is placed with unaffiliated reinsurers. TIAA does not have reinsurance agreements in effect under which the reinsurer may unilaterally cancel the agreement. Amounts shown in the financial statements are reported net of the impact of reinsurance. The major lines in the accompanying financial statements that were reduced by the effect of these reinsurance agreements include:

	For the Years Ended December 31,

		2004		2003		2002

Insurance and annuity premiums	$	336,910	$	160,688	$	768,180
Policy and contract benefits		119,724		140,151		54,697
Increase in policy and contract reserves		194,030		11,246		633,025
Policy and contract reserves		909,488		715,458		700,132

Note 14 – Commercial Paper/Liquidity Facility

TIAA began issuing commercial paper in May 1999 and currently has a maximum authorized program of $2,000,000. As of December 31, 2004 and 2003, TIAA had no outstanding obligations. TIAA maintains a $1,000,000 committed and unsecured 364-day revolving line of credit with a group of banks to support the commercial paper program. This liquidity facility has not been utilized.

Note 15 – Contingencies and Guarantees

Subsidiary and Affiliate Guarantees: TIAA guarantees the debt obligations of TGM. TGM’s aggregate debt obligations to third parties, including accrued interest, at December 31, 2004 were $2,288,034. The carrying value of TGM’s total assets at December 31, 2004 that can be used to satisfy TGM's obligations was $2,447,185.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 15 – Contingencies and Guarantees (continued)

TIAA has a financial support agreement with TIAA-CREF Life. Under this agreement, TIAA will provide support so that TIAA-CREF Life will have the greater of (a) capital and surplus of $250,000, (b) the amount of capital and surplus necessary to maintain TIAA-CREF Life’s capital and surplus at a level not less than 150% of the NAIC Risk Based Capital model or (c) such other amount as necessary to maintain TIAA-CREF Life's financial strength rating at least the same as TIAA’s rating at all times. This agreement is not an evidence of indebtedness or an obligation or liability of TIAA and does not provide any creditor of TIAA-CREF Life with recourse to TIAA. TIAA made no additional capital contributions to TIAA-CREF Life during 2004 under this agreement. TIAA-CREF Life maintains a $100,000 unsecured 364-day revolving line of credit arrangement with TIAA. As of December 31, 2004, $30,000 of this facility was maintained on a committed basis for which TIAA-CREF Life paid a commitment fee of 3 bps to TIAA on the undrawn amount. During 2004, there were eighteen drawdowns totaling $79,300 that were repaid by December 31, 2004. As of December 31, 2004, outstanding principal plus accrued interest was $0.

TIAA provides guarantees to the CREF accounts, for which it is compensated, for certain mortality and expense risks, pursuant to an Immediate Annuity Purchase Rate Guarantee Agreement. TIAA also provides a $1,000,000 uncommitted line of credit to CREF, the Retail Funds and the Institutional Funds. Loans under this revolving credit facility are for a maximum of 60 days and are made solely at the discretion of TIAA to fund shareholder redemption requests or other temporary or emergency needs of CREF and the Funds. It is the intent of TIAA, CREF and the Funds to use this facility as a supplemental liquidity facility, which would only be used after CREF and the Funds have exhausted the availability of the current $2,250,000 committed credit facility that is maintained with a group of banks.

Separate Account Guarantees: TIAA provides mortality and expense guarantees to VA-1, for which it is compensated. TIAA guarantees that, at death, the total death benefit payable from the fixed and variable accounts will be at least a return of total premiums paid less any previous withdrawals. TIAA also guarantees that expense charges to VA-1 participants will never rise above the maximum amount stipulated in the contract.

TIAA provides mortality, expense and liquidity guarantees to REA and is compensated for these guarantees. TIAA guarantees that once REA participants begin receiving lifetime annuity income benefits, monthly payments will never be reduced as a result of adverse mortality experience. TIAA also guarantees that expense charges to REA participants will never rise above the maximum amount stipulated in the contract. TIAA provides REA with a liquidity guarantee to ensure it has funds available to meet participant transfer or cash withdrawal requests. If REA cannot fund participant requests, TIAA’s general account will fund them by purchasing Accumulation Units in REA. TIAA guarantees that participants will be able to redeem their Accumulation Units at the then current daily Accumulation Unit Value.

Leases: The Company occupies leased office space in many locations under various long-term leases. At December 31, 2004, the future minimum lease payments are estimated as follows:

Year		Amount


2005	$	55,021
2006		23,142
2007		22,869
2008		22,948
2009		12,876
Thereafter		27,363

	$	164,219

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

NOTES TO STATUTORY - BASIS FINANCIAL STATEMENTS – (continued)
(dollars in thousands)

Note 15 – Contingencies and Guarantees – (concluded)

The total amount of sublease rental income to be received in the future is $24,876. Leased space expense is allocated among TIAA and affiliated entities. Rental expense charged to TIAA for the years ended December 31, 2004, 2003 and 2002 was approximately $9,164, $10,272 and $10,199, respectively.

TIAA transferred title to land and building located at 485 Lexington Avenue and 750 Third Avenue, New York, New York on July 28, 2004. TIAA has leased and continues to operate the properties after closing pursuant to a Master Lease scheduled to expire on December 31, 2005. Due to TIAA’s continuing involvement in the operations of the buildings under the lease terms, TIAA deferred the recognition of gains from disposition of these properties until expiration of the lease under the deposit method of accounting. Net proceeds at the time of transfer were $468,765. As of December 31, 2004, the unrecognized gain for this transaction was $276,071. TIAA's lease obligation under the Master Lease and sublease rental income for the year ending December 31, 2005 is $32,462 and $13,452, respectively.

Other Contingencies and Guarantees:

Under a risk sharing agreement with Deutsche Bank, in connection with a future securitization transaction, TIAA is obligated to bear the pricing risk of the underlying warehoused securities and associated hedges entered into by Deutsche Bank in the event that the proposed securitization transaction is not consummated. TIAA is entitled to earn the difference between the interest accrued on the warehoused securities during the warehousing period and the financing rate plus the carrying cost in connection with hedging transactions, known as the “portfolio carry.” At December 31, 2004, the potential net gain on the related securities was $517. TIAA was also entitled to a portfolio net carry amount of $1,087 as of December 31, 2004.

In the ordinary conduct of certain of its investment activities, TIAA provides standard indemnities covering a variety of potential exposures. For instance, TIAA provides indemnifications in connection with site access agreements relating to due diligence review for real estate acquisitions, and TIAA provides indemnification to underwriters in connection with the issuance of securities by or on behalf of TIAA or its subsidiaries. It is the opinion of TIAA’s management that such indemnities do not materially affect TIAA's financial position, results of operations or liquidity.

Other contingent liabilities arising from litigation and other matters over and above amounts already provided for in the financial statements or disclosed elsewhere in these notes are not considered material in relation to TIAA’s financial position or the results of its operations.

Note 16 – Subsequent Events

On April 20, 2005, the TIAA $1,000,000 committed and unsecured 364-day revolving line of credit expired and was replaced by a 5 year committed and unsecured revolving line of credit that matures on April 20, 2010. This line of credit is arranged with a group of banks and will support the commercial paper program.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant, TIAA Real Estate Account, has duly caused this Amendment to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 1st day of May, 2007.

	TIAA REAL ESTATE ACCOUNT

	By:	TEACHERS INSURANCE AND
		ANNUITY ASSOCIATION OF AMERICA

	By:	/s/ Herbert M. Allison, Jr.
		Herbert M. Allison, Jr.
		Chairman, President and
		Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment to this Registration Statement has been signed by the following trustees and officers of Teachers Insurance and Annuity Association of America, in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Herbert M. Allison, Jr.	Chairman, President and	May 1, 2007
Herbert M. Allison, Jr.	Chief Executive Officer
	(Principal Executive Officer) and Trustee

/s/ Georganne C. Proctor	Executive Vice President and	May 1, 2007
Georganne C. Proctor	Chief Financial Officer
	(Principal Financial and
	Accounting Officer)

*	Trustee	May 1, 2007
Elizabeth E. Bailey

*	Trustee	May 1, 2007
Robert C. Clark

*	Trustee	May 1, 2007
Edward M. Hundert M.D.

*	Trustee	May 1, 2007
Marjorie Fine Knowles

*	Trustee	May 1, 2007
Donald K. Peterson

*	Trustee	May 1 , 2007
Sidney A. Ribeau

*	Trustee	May 1 , 2007
Dorothy K. Robinson

	Trustee
David L. Shedlarz

*	Trustee	May 1, 2007
Leonard S. Simon

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*	Trustee	May 1, 2007
David F. Swensen

*	Trustee	May 1, 2007
Ronald L. Thompson

*	Trustee	May 1, 2007
Marta Tienda

*	Trustee	May 1, 2007
Paul R. Tregurtha

*	Trustee	May 1, 2007
Rosalie J. Wolf


/s/ Stewart P. Greene
Stewart P. Greene

* Signed by Stewart P. Greene as attorney-in-fact pursuant to powers of attorney filed herewith.

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