UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from  __________ to  _________
Commission file number: 33-92990; 333-223713
TIAA REAL ESTATE ACCOUNT
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation or organization)
NOT APPLICABLE
(I.R.S. Employer Identification No.)
C/O TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
730 THIRD AVENUE
NEW YORK, NEW YORK 10017-3206
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (212) 490-9000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES o  NO ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act:
YES o  NO ý
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES ý  NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 or regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: Not Applicable
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES ý  NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” or "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o
 
Accelerated filer o
Non-accelerated filer x
 
Smaller Reporting Company o
(Do not check if a smaller reporting company)
 
Emerging Growth Company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o  NO ý
Aggregate market value of voting stock held by non-affiliates: Not Applicable
Documents Incorporated by Reference: None



TABLE OF CONTENTS
 
Item
 
Page
 
 
 
 
 
 
 
 
 
Market for the Registrant's Securities, Related Stockholder Matters, and Issuer Purchases of Equity Securities
 
 
Management's Discussion and Analysis of the Account's Financial Condition and Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Form 10-K Summary


2


PART I
ITEM 1. BUSINESS.
General . The TIAA Real Estate Account (the “Real Estate Account”, the “Account” or the “Registrant”) was established on February 22, 1995, as an insurance company separate account of Teachers Insurance and Annuity Association of America (“TIAA”), a New York insurance company, by resolution of TIAA’s Board of Trustees (the “Board”). The Account, which invests mainly in real estate and real estate-related investments, is a variable annuity investment option offered through individual, group and tax-deferred annuity contracts available to employees in the academic, medical, cultural and research fields. The Account commenced operations on July 3, 1995, and interests in the Account were first offered to eligible participants on October 2, 1995.
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.
The Account is regulated by the New York Department of Financial Services (“NYDFS”), and the insurance departments of certain 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, the Account cannot be charged with liabilities incurred by any other TIAA business activities or any other TIAA separate account.
The Real Estate Account is designed as an option for retirement and tax-deferred savings plans for employees of non-profit and governmental institutions. TIAA currently offers the Real Estate Account under the following annuity contracts:
•
RAs and GRAs (Retirement Annuities and Group Retirement Annuities)
•
SRAs (Supplemental Retirement Annuities)
•
GSRAs (Group Supplemental Retirement Annuities)
•
Retirement Choice and Retirement Choice Plus Annuities
•
GAs (Group Annuities) and Institutionally Owned GSRAs
•
Traditional and Roth IRAs (Individual Retirement Annuities) including SEP IRAs (Simplified Employee Pension Plans)
•
Keoghs
•
ATRAs (After-Tax Retirement Annuities)
•
Real Estate Account Accumulation Contract
Note that state regulatory approval may be pending for certain of these contracts and these contracts may not currently be available in every state. TIAA may also offer the Real Estate Account as an investment option under additional contracts, both at the individual and plan sponsor level, in the future.
Investment Objective . The Real Estate Account seeks to generate favorable total returns primarily through the rental income and appreciation of a diversified portfolio of directly held, private real estate investments and real estate-related investments, while offering investors guaranteed, daily liquidity.
Investment Strategy
Real Estate-Related Investments. The Account intends to have between 75% and 85% of its net assets invested directly in real estate or real estate-related investments with the goal of producing favorable long-term returns primarily through rental income and appreciation. These investments may consist of:
•
Direct ownership interests in real estate;
•
Direct ownership of real estate through interests in joint ventures;

3


•
Indirect interests in real estate through real estate-related securities, such as:
•
public and/or privately placed registered and unregistered equity investments in real estate investment trusts (“REITs”), which investments may consist of registered or unregistered common or preferred stock interests;
•
real estate limited partnerships and limited liability companies;
•
investments in equity or debt securities of companies whose operations involve real estate (i.e., that primarily own or manage real estate) which may not be REITs; and
•
conventional commercial mortgage loans, participating mortgage loans, secured domestic and foreign (including U.K.) mezzanine loans, subordinated loans and collateralized mortgage obligations, including commercial mortgage-backed securities (“CMBS”) and other similar investments.
The Account’s principal strategy is to purchase direct ownership interests in income-producing real estate, primarily office, industrial, retail and multi-family properties. The Account is targeted to hold between 65% and 85% of the Account’s net assets in such direct ownership interests.
The Account is authorized to hold up to 25% of its net assets in liquid real estate-related securities, such as publicly traded REITs and CMBS. Management intends that the Account will not hold more than 10% of its net assets in such securities on a long-term basis. While historically less than 10% of the Account’s net assets have comprised interests in these securities, the Account has held approximately 10% of its net assets in equity REIT securities at times. Additionally, under the Account’s current investment guidelines, the Account is authorized to hold up to 10% of its net assets in CMBS. As of December 31, 2018 , REIT securities comprised approximately 5.5% of the Account’s net assets, and the Account held no CMBS as of such date.
Non-Real Estate-Related Investments . The Account will invest the remaining portion of its assets (targeted to be between 15% and 25% of its net assets) in publicly traded, liquid investments; namely:
•
Short-term government related instruments, including U.S. Treasury bills;
•
Intermediate-term or long-term government related instruments, such as securities issued by U.S. Government agencies, U.S. States or municipalities or U.S. Government-sponsored entities;
•
Short-term non-government related instruments, such as money market instruments and commercial paper;
•
Intermediate-term or long-term non-government related instruments, such as corporate debt securities or asset-backed securities (“ABS”); and
•
Stock of companies that do not primarily own or manage real estate.
The Account’s non-real estate-related liquid investments may comprise less than 15% (and possibly less than 10%) of its assets (on a net basis and/or a gross basis), especially during and immediately following periods of significant net participant outflows. In addition, the Account, from time to time and on a temporary basis, may hold in excess of 25% of its net assets in non-real estate-related liquid investments, particularly during times of significant inflows into the Account and/or a lack of attractive real estate-related investments available in the market.
Liquid Securities Generally . Primarily due to management’s need to manage fluctuations in cash flows, in particular during and immediately following periods of significant participant net transfer activity into or out of the Account, the Account may, on a temporary basis (i) exceed the upper end of its targeted holdings (currently 35% of the Account’s net assets) in liquid securities of all types, including both publicly traded non-real estate-related liquid investments and liquid real estate-related securities, such as REITs and CMBS, or (ii) be below the low end of its targeted holdings in such liquid securities (currently 15% of the Account’s net assets).
The portion of the Account’s net assets invested in liquid investments of all types may exceed the upper end of its target, for example, if (i) the Account receives a large inflow of money in a short period of time, in particular due to significant participant transfer activity into the Account, (ii) the Account receives significant proceeds from sales or financings of direct real estate assets, (iii) there is a lack of attractive direct real estate investments available on the market, and/or (iv) the Account anticipates more near-term cash needs, including to apply to acquire direct real estate investments, pay expenses or repay indebtedness.

4


Foreign Investments . The Account may also make foreign real estate and real estate-related investments. Under the Account’s investment guidelines, investments in direct foreign real estate and real estate loans, together with foreign real estate-related securities and foreign non-real estate-related liquid investments may not comprise more than 25% of the Account’s net assets. However, management doesn't intend such foreign investments to exceed 10% of the Account's net assets. As of December 31, 2018 , the Account did not hold any foreign real estate investments.
Investments Summary . At December 31, 2018 , the Account’s net assets totaled $ 25.8 billion . As of that date, the Account’s investments in real estate properties, real estate joint ventures, limited partnerships and limited liability companies, loans receivable and real estate-related marketable securities, net of the fair value of mortgage loans payable on real estate, represented 84.3% of the Account’s net assets. The remaining 15.7% of net assets is primarily comprised of short-term marketable securities such as U.S. Treasury securities and government agency notes.
Borrowing . The Account is authorized to borrow money and assume or obtain a mortgage on a property (i.e., make leveraged real estate investments). Under the Account’s current investment guidelines, management intends to maintain the Account’s loan-to-value ratio (as defined below) at or below 30% (measured at the time of incurrence and after giving effect thereto). Forms of borrowing may include:
•
placing new debt on properties;
•
refinancing outstanding debt;
•
assuming debt on the Account’s properties;
•
extending the maturity date of outstanding debt; or
•
an unsecured line of credit or credit facility.
The Account’s loan-to-value ratio at any time is based on the ratio of the outstanding principal amount of the Account’s debt to the Account’s total gross asset value. The Account’s total gross asset value, for these purposes, is equal to the total fair value of the Account’s assets (including the fair value of the Account’s interest in joint ventures), with no reduction associated with any indebtedness on such assets. In calculating outstanding indebtedness, we include only the Account’s actual percentage interest in any borrowings on a joint venture investment and not that of any joint venture partner. Also, at the time the Account (or a joint venture in which the Account is a partner) enters into a revolving or other line of credit, management includes only amounts outstanding when calculating outstanding indebtedness.
As of December 31, 2018 , the principal amount of mortgages secured by the Account's wholly-owned properties was $2.7 billion. When combined with the Account’s equity share of the $3.2 billion in mortgages held within and serviced by the Account’s joint venture investments, the total outstanding debt is $5.9 billion, which is used to derive the Account’s loan-to-value ratio of 18.5% .
In times of high net inflow activity, in particular during times of high net participant transfer inflows, management may determine to apply a portion of such cash flows to make prepayments of indebtedness prior to scheduled maturity, which would have the effect of reducing the Account’s loan-to-value ratio. Such prepayments may require the Account to pay fees or "yield maintenance" amounts to lenders.
In addition, the Account may utilize it's Line of Credit to meet short-term cash needs, if needed. Management expects the proceeds from any such short-term borrowing would be used to meet the cash flow needs of the Account’s properties and real estate-related investments. No draws against the Line of Credit have occurred to date.
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 to the Account, meaning that if there is a default on a loan in respect to a specific property, the lender will have recourse to (i.e., be able to foreclose on) only the property encumbered (or the joint venture owning the property), or to other specific Account properties that may have been pledged as security for the defaulted loan, but not to any other assets of the Account. When possible, the Account will seek to have loans mature at varying times to limit the risks of borrowing.
Risk Factors . The Account’s assets and income can be affected by a variety of risk factors. These risks are more fully described under Item 1A of this report.

5


Personnel and Management . The Account has no officers, directors or employees. TIAA employees, under the direction and control of the Board, manage the investment of the Account’s assets, following investment management procedures TIAA has adopted for the Account. References to “Management” herein refer to the employees and officers of TIAA responsible for management of the Account. In addition, TIAA performs administration functions for the Account (which includes receiving and allocating premiums, calculating and making annuity payments and providing recordkeeping and other services). Distribution services for the Account (which include, without limitation, distribution of the annuity contracts, advising existing annuity contract owners in connection with their accumulations and helping employers implement and manage retirement plans) are performed by TIAA-CREF Individual & Institutional Services, LLC (“Services”), a wholly-owned subsidiary of TIAA and registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”). TIAA and Services provide investment management, administration, and distribution services, as applicable, to the Account on an “at-cost” basis.
Contracts . TIAA offers the Account as a variable option for the annuity contracts listed earlier in this Item 1, although some employer plans may not offer the Account as an option for certain contracts. Each payment to the Account buys a number of accumulation units. Similarly, any transfer or withdrawal from the Account results in the redemption of a number of accumulation units. The price paid for an accumulation unit, and the price received for an accumulation unit when redeemed, is the accumulation unit value (“AUV”) calculated for the business day on which the participant’s purchase, redemption or transfer request is received in good order (unless a participant asks for a later date for a redemption or transfer).
Subject to the terms of the contracts and a participant’s employer’s plan, a participant can move money to and from the Account in the following ways, among others:
•
from the Account to a College Retirement Equities Fund ("CREF") investment account, a TIAA Access variable account (if available), TIAA’s Traditional Annuity or a mutual fund (including TIAA-CREF affiliated mutual funds) or other options available under the plan;
•
to the Account from a CREF investment account, a TIAA Access variable account (if available), TIAA’s Traditional Annuity (transfers from TIAA’s Traditional Annuity under RA, GRA or Retirement Choice contracts are subject to restrictions), a TIAA-CREF affiliated mutual fund or from other companies/ plans;
•
by withdrawing cash; and/or
•
by setting up a program of automatic withdrawals or transfers.
Importantly, transfers out of the Account to a TIAA or CREF account or into another investment option can be executed on any business day, but are limited to once per calendar quarter, although some plans may allow systematic transfers that result in more than one transfer per calendar quarter. TIAA reserves the right to stop accepting transfers into the Account at any time. Other limited exceptions may apply. Also, transfers to CREF accounts or to certain other options may be restricted by an employer’s plan, current tax law or by the terms of a participant’s contract. In addition, with most contracts, individual participants are subject to certain limitations on making internal transfers into their Account accumulation if, after giving effect to such transfer, the total value of such participant’s Account accumulation (under all contracts issued to such participant) would exceed $150,000. Categories of transactions that TIAA deems “internal funding vehicle transfers” for purposes of this limitation are described in the applicable contract or endorsement form in the Account’s prospectus. The effective date of the limitation as it applies to an individual participant will be reflected on his or her applicable contract or endorsement form.
Appraisals and Valuations . With respect to the Account’s real property investments or associated interest in the underlying property held by a joint venture investment (collectively "real properties"), following the initial purchase of a property or the making of a mortgage loan on a property by the Account (at which time the Account normally receives an independent appraisal on such property), each of the Account’s real properties are appraised, and mortgage loans are valued, at least once every calendar quarter or sooner as circumstances arise. Each of the Account’s real estate properties are appraised each quarter by an independent third-party state-certified (or its foreign equivalent) appraiser (which we refer to in this report as an “independent appraiser”) who is a member of a professional appraisal organization. In addition, TIAA’s internal appraisal staff performs a review of each of these quarterly appraisals, in conjunction with the Account’s independent fiduciary, and TIAA’s internal appraisal staff or the independent fiduciary may request an additional appraisal or valuation outside of this quarterly cycle. Any differences in the conclusions of TIAA’s internal

6


appraisal staff and the independent appraiser will be reviewed by the independent fiduciary, which will make a final determination on the matter (which may include ordering a subsequent independent appraisal).
In general, the Account records appraisals of its real estate properties spread out throughout the quarter, which is intended to result in appraisal adjustments and thus adjustments to the valuations of its holdings (to the extent adjustments are made) happen regularly throughout each quarter and not on one specific day in each period. In addition, an estimated daily equivalent of net operating income is taken into consideration and is adjusted for actual transactional activity. The remaining assets in the Account are primarily marketable securities that are priced on a daily basis. See “Management’s Discussion and Analysis of the Account’s Financial Condition and Results of Operations—Critical Accounting Policies” in this Form 10-K for more information on how each class of the Account’s investments are valued.
Liquidity Guarantee . The TIAA General Account provides the Account with a liquidity guarantee enabling the Account to have funds available to meet participant redemption, transfer or cash withdrawal requests. The Account pays TIAA for the risk associated with providing the liquidity guarantee through a daily deduction from the Account’s net assets. If the Account cannot fund participant requests from the Account’s own cash flow and liquid investments, the TIAA General Account will fund them by purchasing accumulation units issued by the Account (accumulation units that are purchased by TIAA are generally referred to as “liquidity units”). This liquidity guarantee is required by the NYDFS. TIAA guarantees that participants can redeem their accumulation units at the accumulation unit value next determined after their transfer or cash withdrawal request is received in good order. Liquidity units owned by TIAA are valued in the same manner as accumulation units owned by the Account’s participants.
This liquidity guarantee is not a guarantee of the investment performance of the Account or a guarantee of the value of a participant’s units.
Redemption of Liquidity Units . The independent fiduciary is vested with oversight and approval over any redemption of TIAA’s liquidity units, acting in the best interests of Real Estate Account participants.
To the extent liquidity units are held by the TIAA General Account, the independent fiduciary reserves the right to authorize or direct the redemption of all or a portion of liquidity units at any time. Upon termination and liquidation of the Account (wind-up), any liquidity units held by TIAA will be the last units redeemed, unless the independent fiduciary directs otherwise.
Independent Fiduciary . Because TIAA’s ability to purchase and sell liquidity units raises certain technical issues under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), TIAA applied for and received a prohibited transaction exemption from the U.S. Department of Labor in 1996 (PTE 96-76). In connection with the exemption, TIAA has appointed an independent fiduciary for the Account, with overall responsibility for reviewing the Account’s transactions to determine whether they are in accordance with the Account’s investment guidelines. RERC, LLC, a real estate consulting firm whose principal offices are located in West Des Moines, IA (“RERC”), was appointed as independent fiduciary effective March 1, 2006 and currently serves as the Account’s independent fiduciary, pursuant to an amended and restated letter agreement effective March 1, 2018, whose term expires on February 28, 2021. 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; and
•
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 ensure the Account has correctly valued a property.

7


In addition, the independent fiduciary has certain responsibilities with respect to the Account that it had historically undertaken or is currently undertaking with respect to TIAA’s purchase and ownership of liquidity units, including among other things, reviewing the purchases and redemption of liquidity units by TIAA to ensure the Account uses the correct unit values. In connection therewith, as set forth in PTE 96-76, the independent fiduciary’s responsibilities include:
•
establishing the percentage of total accumulation units that TIAA’s ownership should not exceed (the “trigger point”) and creating a method for changing the trigger point;
•
approving any adjustment of TIAA’s ownership interest in the Account and, in its discretion, requiring an adjustment if TIAA’s ownership of liquidity units reaches the trigger point; and
•
once the trigger point has been reached, participating in any program to reduce TIAA’s ownership in the Account by utilizing cash flow or liquid investments in the Account, or by utilizing the proceeds from asset sales. If the independent fiduciary were to determine that TIAA’s ownership should be reduced following the trigger point, its role in participating in any asset sales program would include (i) participating in the selection of properties for sale, (ii) providing sales guidelines, and (iii) approving those sales if, in the independent fiduciary’s opinion, such sales are desirable to reduce TIAA’s ownership of liquidity units.
Available Information . The Account’s annual report on Form 10-K, quarterly reports on Form 10-Q, and any amendments to those reports, filed by the Account with the Securities and Exchange Commission on or after the date hereof, can be accessed free of charge at www.tiaa.org. Information contained on this website is expressly not incorporated by reference into this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS.
The value of your investment in the Account will fluctuate based on the value of the Account’s assets, the income the assets generate and the Account’s expenses. Participants can lose money by investing in the Account. The past performance of the Account is not indicative of future results. There is risk associated with an investor attempting to “time” an investment in the Account’s units, or effecting a redemption of an investor’s units. 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. In particular, for a discussion of how forward-looking statements contained in this annual report on Form 10-K are subject to uncertainties that are difficult to predict, which may be beyond management’s control and which could cause actual results to differ materially from historical experience or management’s present expectations, please refer to the subsection entitled “Forward-Looking Statements ,” which is contained in the section entitled “Management’s Discussion and Analysis of the Account’s Financial Condition and Results of Operations.”
RISKS ASSOCIATED WITH REAL ESTATE INVESTING
General Risks of Acquiring and Owning Real Property . As referenced elsewhere in this report, the substantial majority of the Account’s net assets consist of direct ownership interests in real estate. As such, the Account is particularly subject to the risks inherent in acquiring and owning real property, including in particular the following:
•
Adverse Global and Domestic Economic Conditions. The economic conditions in the markets where the Account’s properties are located may be adversely impacted by factors which include:
•
adverse domestic or global economic conditions, particularly in the event of a deep recession which results in significant employment losses across many sectors of the economy and reduced levels of consumer spending;
•
a weak market for real estate generally and/or in specific locations where the Account may own property;
•
business closings, industry or sector slowdowns, employment losses and related factors;
•
the availability of financing (both for the Account and potential purchasers of the Account’s properties);
•
an oversupply of, or a reduced demand for, certain types of real estate properties;
•
natural disasters (including hurricanes and tsunamis), rising sea levels due to global climate warming or otherwise, flooding and other significant and severe weather-related events;
•
terrorist attacks and/or other man-made events; and
•
decline in population or shifting demographics.

8


The incidence of some or all of these factors could reduce occupancy, rental rates and the fair value of the Account’s real properties or interests in investment vehicles (such as limited partnerships) which directly hold real properties.
Concentration Risk. The Account may experience periods in which its investments are geographically concentrated, either regionally or in certain markets with similar demographics. Further, while the Account seeks diversification across its four primary property types (i.e., office, industrial, retail and multi-family), the Account may experience periods where it has concentration in one property type, increasing the potential exposure if there were to be an oversupply of, or a reduced demand for, certain types of real estate properties in the markets in which the Account operates. Also, the Account may experience periods in which its tenant base is concentrated within a particular industry sector. (e.g., retail mall shopping centers, industrial properties or office space). If any or all of these events occur, the Account’s income and performance may be adversely impacted disproportionately by deteriorating economic conditions in those areas or industry sectors in which the Account’s investments are concentrated. Also, the Account could experience a more rapid negative change in the value of its real estate investments than would be the case if its real estate investments were more diversified.
Leasing Risk. A number of factors could cause the Account’s rental income, a key source of the Account’s revenue and investment return, to decline, which would adversely impact the Account’s results and investment returns. These factors include the following:
•
A property may be unable to attract new tenants or retain existing tenants. This situation could be exacerbated if a concentration of lease expirations occurred during any one time period or multiple tenants exercise early termination at the same time.
•
The financial condition of our tenants may be adversely impacted, particularly in a prolonged economic downturn. The Account could lose revenue if tenants do not pay rent when contractually obligated, request some form of rent relief and/or default under a lease at one of the Account’s properties. Such a default could occur if a tenant declared bankruptcy, suffered from a lack of liquidity, failed to continue to operate its business or for other reasons. In the event of any such default, we may experience a delay in, or an inability to effect, the enforcement of our rights against that tenant, particularly if that tenant filed for bankruptcy protection. Further, any disputes with tenants could involve costly and time consuming litigation.
•
In the event a tenant vacates its space in one of the Account’s properties, whether as a result of a default, the expiration of the lease term, rejection of the lease in bankruptcy or otherwise, given current market conditions, we may not be able to re-lease the vacant space either (i) for as much as the rent payable under the previous lease or (ii) at all. Also, we may not be able to re-lease such space without incurring substantial expenditures for tenant improvements and other lease-up related costs, while still being obligated for any mortgage payments, real estate taxes and other expenditures related to the property. In some instances, the Account’s properties may be specifically suited to and/or outfitted for the particular needs of a certain tenant based on the type of business the tenant operates. The Account may have difficulty obtaining a new tenant for any vacant space in its properties, particularly if the current structure of the developed property (e.g., floor plan or otherwise) limits the types of businesses that can use the space without major renovation, which may require the Account to incur substantial expense in re-planning the space. Also, upon expiration of a lease, the space preferences of the Account’s major tenants may no longer align with the space they previously rented, which could cause those tenants to not renew their lease, or may require the Account to expend significant sums to reconfigure the space to their needs.
•
The Account owns and operates retail properties, which, in addition to the risks listed above, are subject to specific risks, including the insolvency and/or closing of an anchor tenant for certain properties. Many times, anchor tenants will be “big box” stores and other large retailers that can be particularly adversely impacted by a global recession, competition from online retailers and reduced consumer spending generally. Factors that can impact the level of consumer spending include increases in fuel and energy costs, residential and commercial real estate and mortgage conditions, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors. Under certain circumstances, co-tenancy clauses in tenants’ leases may allow certain tenants in a retail property to terminate their leases or reduce or withhold rental payments when overall occupancy at the property falls below certain minimum levels. The insolvency and/or closing of an anchor tenant may also cause such tenants to terminate their leases, or to fail to renew their leases at expiration.

9


Competition. The Account may face competition for real estate investments from multiple sources, including individuals, corporations, insurance companies or other insurance company separate accounts, as well as real estate limited partnerships, real estate investment funds, commercial developers, pension plans, other institutional and foreign investors and other entities engaged in real estate investment activities. Some of these competitors may have similar financial and other resources as the Account, and/or they may have investment strategies and policies (including the ability to incur significantly more leverage than the Account) that allow them to compete more aggressively for real estate investment opportunities, which could result in the Account paying higher prices for investments, experiencing delays in acquiring investments or failing to consummate such purchases. Any resulting delays in the acquisition of investments, or the failure to consummate acquisitions the Account deems desirable, may increase the Account’s costs or otherwise adversely affect the Account’s investment results. In addition, the Account’s properties may be located close to properties that are owned by other real estate investors and that compete with the Account for tenants. These competing properties may be better located, more suitable for tenants than our properties, or have owners who may compete more aggressively for tenants, resulting in a competitive advantage for these other properties. The Account may also face similar competition from other properties that may be developed in the future. This competition may limit the Account’s ability to lease space, increase its costs of securing tenants, and limit the Account’s ability to maximize our rents and/or require the Account to make capital improvements it otherwise would not, in order to make its properties more attractive to prospective tenants.
Operating Costs. A property’s cash flow could decrease if operating costs, such as property taxes, utilities, litigation expenses associated with a property, maintenance and insurance costs that are not reimbursed by tenants, increase in relation to gross rental income, or if the property needs unanticipated repairs and renovations. In addition, the Account’s expenses of owning and operating a property are not necessarily reduced when the Account’s income from a property is reduced.
Condemnation. A governmental agency may condemn and convert for a public use (i.e., through eminent domain) all or a portion of a property owned by the Account. While the Account would receive compensation in connection with any such condemnation, such compensation may not be in an amount the Account believes represents equivalent value for the condemned property. Further, a partial condemnation could impair the ability of the Account to maximize the value of the property during its operation, including making it more difficult to find new tenants or retain existing tenants. Finally, a property which has been subject to a partial condemnation may be more difficult to sell at a price the Account believes is appropriate.
Terrorism and Acts of War and Violence. Terrorist attacks may harm our property investments. The Account can provide no assurance that there will not be further terrorist attacks against the United States or U.S. businesses or elsewhere in the world. These attacks or armed conflicts may directly or indirectly impact the value of the property the Account owns or that secure our loans. Losses resulting from these types of events may be uninsurable or not insurable to the full extent of the loss suffered. Moreover, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States, worldwide financial markets, and the global economy. Such events could also result in economic uncertainty in the United States or abroad. Adverse economic conditions resulting from terrorist activities could reduce demand for space in the Account’s properties and thereby reduce the value of the Account’s properties and therefore your investment return.
Risk of Limited Warranty. Purchasing a property “as is” or with limited warranties, which limit the Account’s recourse if due diligence fails to identify all material risks, can negatively impact the Account by reducing the value of such properties and increasing the Account’s cost to hold or sell properties.

General Risks of Selling Real Estate Investments . Among the risks of selling real estate investments are:
•
The sale price of an Account property might differ, perhaps significantly, from its estimated or appraised value, leading to losses or reduced profits to the Account.
•
The Account might not be able to sell a property at a particular time for a price which management believes represents its fair or full value. This illiquidity may result from the cyclical nature of real estate, general economic conditions impacting the location of the property, disruption in the credit markets or the availability of financing on favorable terms or at all, and the supply of and demand for available tenant space, among other reasons. This might make it difficult to raise cash quickly which could impair the Account’s liquidity position (particularly

10


during any period of sustained significant net participant outflows) and also could lead to Account losses. Further, the liquidity guarantee does not serve as a working capital facility or credit line to enhance the Account’s liquidity levels generally, as its purpose is tied to participants having the ability to redeem their accumulation units upon demand (thus alleviating the Account’s need to dispose of properties solely to increase liquidity levels in what management deems a suboptimal sales environment).
•
The Account may need to provide financing to a purchaser if no cash buyers are available, or if buyers are unable to receive financing on terms enabling them to consummate the purchase. Such seller financing introduces a risk that the counterparty may not perform its obligations to repay the amounts borrowed from the Account to complete the purchase.
•
For any particular property, the Account may be required to make expenditures for improvements to, or to correct defects in, the property before the Account is able to market and/or sell the property.
•
Interests in real estate limited partnerships tend to be, in particular, illiquid and the Account may be unable to dispose of such investments at opportune times.
•
Seller Indemnities. When the Account sells property, it is often required to provide some amount of indemnity for loss to the buyer. While the Account takes steps to try to mitigate the impact of the indemnities, such indemnities could negatively impact the sale price or result in claims by the buyer for indemnity in the future, which could increase the Account’s expenses and thereby reduce the return on investment.
Valuation and Appraisal Risks . Investments in the Account’s assets are stated at fair value, which is defined as the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date. Determination of fair value, particularly for real estate assets, involves significant judgment. Valuation of the Account’s real estate properties (which comprise a substantial majority of the Account’s net assets) are based on real estate appraisals, which are estimates of property values based on a professionals opinion and may not be accurate predictors of the amount the Account would actually receive if it sold a property. Appraisals can be subjective in certain respects and rely on a variety of assumptions and conditions at that property or in the market in which the property is located, which may change materially after the appraisal is conducted. Among other things, market prices for comparable real estate may be volatile, in particular if there has been a lack of recent transaction activity in such market. Any future disruptions in the macro-economy, real estate markets and the credit markets, such as those that occurred from 2008-2011, could lead to a significant decline in real estate transaction activity in most markets and sectors in which the Account is invested. The resulting lack of observable transaction data may make it more difficult for a property appraisal to determine the fair value of the Account’s investment in one or more real estate assets. In addition, a portion of the data used by appraisers is based on historical information at the time the appraisal is conducted, and subsequent changes to such data, after an appraiser has used such data in connection with the appraisal, may not be adequately captured in the appraised value. Also, to the extent that the Account uses a relatively small number of independent appraisers to value a significant portion of its properties, valuations may be subject to any institutional biases of such appraisers and their valuation procedures.
Further, as the Account generally obtains appraisals on a quarterly basis, there may be circumstances in the period between appraisals or interim valuation adjustments in which the true realizable value of a property is not reflected in the Account’s daily net asset value calculation or in the Account’s periodic consolidated financial statements. This disparity may be more apparent when the commercial and/or residential real estate markets experience an overall and possibly dramatic decline (or increase) in property values in a relatively short period of time between appraisals.
If the appraised values of the Account’s properties as a whole are too high, those participants who purchased accumulation units prior to (i) a downward valuation adjustment of a property or multiple properties or (ii) a property or properties being sold for a lower price than the appraised value will be credited with less of an interest than if the value had previously been adjusted downward. Also, those participants who redeem during any such period will have received more than their pro rata share of the value of the Account’s assets, to the detriment of other non-redeeming participants. In particular, appraised property values may prove to be too high (as a whole) in a rapidly declining commercial real estate market. Further, implicit in the Account’s definition of fair value is a principal assumption that there will be a reasonable time to market a given property and that the property will be exchanged between a willing buyer and willing seller in a non-distressed scenario. However, an appraised value may not reflect the actual realizable value that would be obtained in a rush sale where time was of the essence. Also, appraised values may lag actual

11


realizable values to the extent there is significant and rapid economic deterioration in a particular geographic market or a particular sector within a geographic market.
If the appraised values of the Account’s properties as a whole are too low, those participants who redeem prior to (i) an upward valuation adjustment of a property or multiple properties or (ii) a property or properties being sold for a higher price than the appraised value will have received less than their pro rata share of the value of the Account’s assets, and those participants who purchase units during any such period will be credited with more than their pro rata share of the value of the Account’s assets.
Finally, the Account recognizes items of income (such as net operating income from real estate investments, distributions from real estate limited partnerships or joint ventures, or dividends from REIT stocks) and expense in many cases on an intermittent basis, where the Account cannot predict with certainty the magnitude or the timing of such items. As such, even as the Account estimates items of net operating income on a daily basis, the AUV for the Account may fluctuate, perhaps significantly, from day to day, as a result of adjusting these estimates for the actual recognized item of income or expense.
Investment Risk Associated with Participant Transactions . The amount the Account has available to invest in new properties and other real estate-related assets will depend, in large part, on the level of net participant transfers into or
out of the Account as well as participant premiums into the Account. As noted elsewhere in this prospectus, the Account intends to hold between 15% and 25% of its net assets in publicly traded, liquid investments (other than real estate and real estate-related investments), consisting of publicly traded, liquid investments. These liquid assets are intended to be available to purchase real estate-related investments in accordance with the Account’s investment objective and strategy and are also available to meet participant redemption requests and the Account’s expense needs (including, from time to time, obligations on debt). Significant participant transaction activity into or out of the Account’s units is generally not predictable, and wide fluctuations can occur as a result of macroeconomic, geopolitical or market conditions (including market disruptions, volatility or downturns), the performance of equities or fixed income securities or general investor sentiment, regardless of the historical performance of the Account or of the performance of the real estate asset class generally. In the event that the Account were to experience significant net participant transfers out of the Account, such transfers could eventually cause the Account’s liquid assets to comprise less than 10% of the Account’s assets (on a net and total basis). Such situations could require the need to execute the TIAA liquidity guarantee. Among other things, this continued shortfall in the amount of liquid assets impaired management’s ability to consummate new transactions. If a significant amount of net participant transfers out of the Account were to recur, particularly in high volumes, the Account may not have enough available liquid assets to pursue, or consummate, new investment opportunities presented to us that are otherwise attractive to the Account. This, in turn, could harm the Account’s returns. Even though net transfers out of the Account ceased in early 2010, the Account experienced net participant outflows in 2018 and there is no guarantee that redemption activity will not increase, perhaps in a significant and rapid manner.
Alternatively, periods of significant net transfer activity into the Account can result in the Account holding a higher percentage of its net assets in publicly traded liquid non-real estate-related investments than the Account’s managers would target to hold under the Account’s long-term strategy. As of December 31, 2018 , the Account’s non-real estate-related liquid assets comprised 15.8% of its net assets. At times, the portion of the Account’s net assets invested in these types of liquid instruments may exceed 25%, particularly if the Account receives a large inflow of money in a short period of time, coupled with a lack of attractive real estate-related investments on the market. Also, large inflows from participant transactions often occur in times of appreciating real estate values and pricing, which can render it challenging to execute on some transactions at ideal prices.
In an appreciating real estate market generally, this large percentage of assets held in liquid investments and not in real estate and real estate-related investments may impair the Account’s overall returns. This scenario may be exacerbated in a low interest rate environment for U.S. Treasury and Agency securities and other liquid, non-real estate related securities. In addition, to manage cash flow, the Account may temporarily hold a higher percentage of its net assets in liquid real estate-related securities, such as REIT and CMBS securities, than its long-term targeted holdings in such securities, particularly during and immediately following times of significant net transfer activity into the Account. Such holdings could increase the volatility of the Account’s returns.

12



Risks of Borrowing . The Account acquires some of its properties subject to existing financing and from time to time borrows new funds at the time of purchase. The Account may borrow pursuant to mortgages placed on individual properties, under the Account’s Line of Credit or under another unsecured line of credit or credit facility into which the Account enters in the future. Also, the Account may from time to time place new leverage on, increase the leverage
already placed on, or refinance maturing debt on, existing properties the Account owns. Under the Account's current investment guidelines, the Account intends to maintain its loan-to-value ratio at or below 30% (measured at the time of incurrence and after giving effect thereto).
As of December 31, 2018 , the Account’s loan-to-value ratio was 18.5% . Also, the Account may borrow up to 70% of the then-current value of a particular property. Non-construction mortgage loans on a property will be non-recourse to the Account. Among the risks of borrowing money, including borrowing under the Line of Credit or under another line of credit or credit facility, or otherwise investing in a property subject to a mortgage are:
•
General Economic Conditions. General economic conditions, dislocations in the capital or credit markets generally or the market conditions then in effect in the real estate finance industry, may hinder the Account’s ability to obtain financing or refinancing for its property investments on favorable terms or at all, regardless of the quality of the Account’s property for which financing or refinancing is sought. Such unfavorable terms might include high interest rates, increased fees and costs and restrictive covenants applicable to the Account’s operation of the property. Longer term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives, rising interest rates or failures of significant financial institutions could adversely affect our access to financing necessary to make profitable real estate investments. Our failure to obtain financing or refinancing on favorable terms due to the current state of the credit markets or otherwise could have an adverse impact on the returns of the Account. Also, the Account’s ability to continue to secure financing may be impaired if negative marketplace effects, such as those which followed from the worldwide economic slowdown following the 2008-2011 financial crisis or the subsequent sovereign debt and banking difficulties experienced in parts of the Eurozone, were to occur. Such marketplace effects could result in tighter lending standards instituted by banks and financial institutions, the reduced availability of credit facilities and project finance facilities from banks and the fall of consumer and/or business confidence.
•
Default Risk. The property or group of encumbered properties may not generate sufficient cash flow to support the debt service on the mortgage loan. The property may also fail to meet certain financial or operating covenants contained in the loan documents and/or the property may have negative equity (i.e., the loan balance exceeds the value of the property) or inadequate equity. In addition, income from properties or investments or any other source of income for the Account may not generate sufficient cash flow to support the debt service on a line of credit or credit facility. In any of these circumstances, we (or a joint venture in which we invest) may default on the loan, including due to the failure to make required debt service payments when due. If a loan is in default, the Account or the venture may determine that it is not economically desirable and/or in the best interests of the Account to continue to make payments on the loan (including accessing other sources of funds to support debt service on the loan), and/or the Account or venture may not be able to otherwise remedy such default on commercially reasonable terms or at all. In either case, the lender then could accelerate the outstanding amount due on the loan and/or foreclose on the underlying property, in which case the Account could lose the value of its investment in the foreclosed property. Further, any such default or acceleration could trigger a default under loan agreements in respect of other Account properties pledged as security for the defaulted loan or other loans. Finally, any such default could subject the Account to the costs of litigation, increase the Account’s borrowing costs, or result in less favorable terms, with respect to financing future properties or entering into future lines of credit or credit facilities.
•
Balloon Maturities. If the Account obtains a mortgage loan that involves a balloon payment, there is a risk that the Account will 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 on terms commercially acceptable to the Account or at all. The Account then may be forced to sell the property or other properties under unfavorable market conditions, restructure the loan on terms not advantageous to the Account, or default on its mortgage, resulting in the lender exercising its remedies, which may include repossession of the property, and the Account could lose the value of its investment in that property.

13


•
Variable Interest Rate Risk. If the Account obtains 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 abovemarket rates for a significant period of time. Any interest rate hedging activities the Account engages in to mitigate this risk may not fully protect the Account from the impact of interest rate volatility.
•
Variable Rate Demand Obligation (“VRDO”) Risk. To the extent the Account obtains financing pursuant to a variable rate demand obligation subject to periodic remarketing or similar mechanisms, the Account or the joint ventures in which it invests could face higher borrowing costs if the remarketing results in a higher prevailing interest rate. In addition, the terms of such variable rate obligations may allow the remarketing agent to cause the Account or venture to repay the loan on demand in the event insufficient market demand for such loans is present.
•
Valuation Risk. The market valuation of mortgage loans payable could have an adverse impact on the Account’s performance. Valuations of mortgage loans payable are generally based on the amount at which the liability could be transferred in a current transaction, exclusive of transaction costs, and such valuations are subject to a number of assumptions and factors with respect to the loan and the underlying property, a change in any of which could cause the value of a mortgage loan to fluctuate.
A general disruption in the credit markets, such as the disruption experienced in 2008 and 2009, may aggravate some or all of these risks.
Risks of Joint Ownership . Investing in joint ventures or other forms of joint property ownership may involve special risks, many of which are exacerbated when the consent of parties other than the Account is required to take action.
•
The co-venturer may have interests or goals inconsistent with those of the Account, including during times when a co-venturer may be experiencing financial difficulty. For example:
•
a co-venturer may desire a higher current income return on a particular investment than does the Account (which may be motivated by a longer-term investment horizon or exit strategy), or vice versa, which could cause difficulty in managing a particular asset;
•
a co-venturer may desire to maximize or minimize leverage in the venture, which may be at odds with the Account’s strategy;
•
a co-venturer may be more or less likely than the Account to agree to modify the terms of significant agreements (including loan agreements) binding the venture, or may significantly delay in reaching a determination whether to do so, each of which may frustrate the business objectives of the Account and/or lead to a default under a loan secured by a property owned by the venture; or
•
for reasons related to its own business strategy, a co-venturer may have different concentration standards as to its investments (geographically, by sector, or by tenant), which might frustrate the execution of the business plan for the joint venture.
•
The co-venturer may be unable to fulfill its obligations (such as to fund its pro rata share of committed capital, expenditures or guarantee obligations of the venture) during the term of such agreement or may become insolvent or bankrupt, any of which could expose the Account to greater liabilities than expected and frustrate the investment objective of the venture.
•
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 with respect to the underlying property pursuant to the terms of the joint venture, including the right to operate, manage or dispose of a property, and a co-venturer could have approval rights over the marketing or the ultimate sale of the underlying property.
•
The terms of the Account’s ventures often provide for complicated agreements which can impede our ability to direct the sale of the property owned by the venture at times the Account views most favorable. One such agreement is a buy-sell right, which may force us to make a decision (either to buy our co-venturer’s interest or sell our interest to our co-venturer) at inopportune times.
•
A co-venturer can make it harder for the Account to transfer its equity interest in the venture to a third party, which could adversely impact the valuation of the Account’s interest in the venture.

14


•
To the extent the Account serves as the general partner or managing member in a venture, it may owe certain contractual or other duties to the co-venturer, including fiduciary duties, which may present perceived or actual conflicts of interest in the management of the underlying assets. Such an arrangement could also subject the Account to liability to third parties in the performance of its duties as a general partner or managing member.
Risks of Developing or Redeveloping Real Estate or Buying Recently Constructed Properties . If the Account chooses to develop or redevelop a property or buys a recently constructed property, it may face the following risks:
•
There may be delays or unexpected increases in the cost of property development, redevelopment and construction due to strikes, bad weather, material shortages, increases in material and labor costs or other events.
•
There are risks associated with potential underperformance or non-performance by, and/or solvency of a contractor we select or other third party vendors involved in developing or redeveloping the property.
•
If the Account were viewed as developing or redeveloping underperforming properties, suffering losses on our investments, or defaulting on any loans on our properties, our reputation could be damaged. Damage to our reputation could make it more difficult to successfully develop or acquire properties in the future and to continue to grow and expand our relationships with our lenders, venture partners and tenants.
•
Because external factors may have changed from when the project was originally conceived (e.g., slower growth in the local economy, higher interest rates, overbuilding in the area, or changes in the regulatory and permitting environment), the property may not attract tenants on the schedule we originally planned and/or may not operate at the income and expense levels first projected.
Real Estate Regulatory Risks . Government regulation at the federal, state and local levels, including, without limitation, zoning laws, rent control or rent stabilization laws, laws regulating housing on the Account’s multi-family
properties, the Americans with Disabilities Act, property taxes and fiscal, accounting, environmental or other government policies, could operate or change in a way that adversely affects the Account and its properties. For example, these regulations could raise the cost of acquiring, 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 or injury to individuals 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 did not know of and wasn’t responsible for the hazardous substances. If any hazardous substances are present or the Account does not 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. Further, environmental laws may impose restrictions on the manner in which a property may be used, the tenants which may be allowed, or the manner in which businesses may be operated, which may require the Account to expend funds in order to comply with these laws. These laws may also cause the most ideal use of the property to differ from that originally contemplated and as a result could impair the Account’s returns. The cost of any required clean-up relating to a single real estate investment (including remediating contaminated property) and the Account’s potential liability for environmental damage, including paying personal injury claims and performing under indemnification obligations to third parties, 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. Finally, while the Account may from time to time acquire third-party insurance related to environmental risks, such insurance coverage may be inadequate to cover the full cost of any loss and would cause the Account to be reliant on the financial health of our third-party insurer at the time any such claim is submitted.
Uninsurable Losses . Certain catastrophic losses (e.g., from earthquakes, wars, terrorist acts, nuclear accidents, hurricanes, tsunamis, wind, 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. Further, the terms and conditions of the insurance coverage the Account has on its properties, in conjunction with the type of loss actually suffered at a property, may subject the property, or the Account as a whole, to a cap on insurance proceeds that is less than the loss or losses suffered. If a disaster that we have not insured against occurs, if the insurance contains a high
deductible, and/or if the aggregate insurance proceeds for a particular type of casualty are capped, the Account could lose some of its original investment and any future profits from the property. Also, the Account may not have sufficient

15


access to internal or external sources of funding to repair or reconstruct a damaged property to the extent insurance proceeds do not cover the full loss. 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, and any such vacancy might impact the value of that property. Finally, as with respect to all third-party insurance, the Account is reliant on the continued financial health of such insurers and their ability to pay on valid claims. If the financial health of an insurer were to deteriorate quickly, the Account may not be able to find adequate coverage from another carrier on favorable terms, which could adversely impact the Account’s returns.
RISKS OF INVESTING IN REAL ESTATE INVESTMENT TRUST SECURITIES
The Account invests in registered and unregistered REIT securities for diversification, liquidity management and other purposes. The Account’s investment in REITs may also increase, as a percentage of net assets, during periods in which the Account is experiencing large net inflow activity, in particular due to net participant transfers into the Account. As of December 31, 2018 , REIT securities comprised approximately 5.5% of the Account’s net assets. Investments in REIT securities are part of the Account’s real estate-related investment strategy and 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 properties owned by the entity, while mortgage REITs may be affected by the quality of any credit extended. In addition to these risks, because REIT investments are securities and generally publicly traded, they may be exposed to market risk and potentially significant price volatility due to changing conditions in the financial markets and, in particular, changes in overall interest rates, regardless of the value of the underlying real estate such REIT may own. Also, sales of REIT securities by the Account for liquidity management purposes may occur at times when values of such securities have declined and it is otherwise an inopportune time to sell the security. Volatility in REITs can cause significant fluctuations in the Account’s AUV on a daily basis, as they are correlated to equity markets which have experienced significant day to day fluctuations over the past few years.
REITs do not pay federal income taxes if they distribute most of their earnings to their shareholders and meet other tax requirements. Many of the requirements to qualify as a REIT, however, are highly technical and complex. Failure to qualify as a REIT results in tax consequences, as well as disqualification from operating as a REIT for a period of time. Consequently, if the Account invests in securities of a REIT that later fails to qualify as a REIT, this may adversely affect the performance of our investment. Certain provisions of recently “Enacted Tax Legislation,” as described under such heading below and related guidance that may be issued by the Treasury and Internal Revenue Service may impact REIT qualification in an unforeseen manner. The Account will continue to monitor such developments.
RISKS OF MORTGAGE-BACKED SECURITIES
The Account from time to time has invested in mortgage-backed securities and may in the future invest in such securities. Mortgage-backed securities, such as CMBS, are subject to many of the same general risks inherent in real estate investing, making mortgage loans and investing in debt securities. The underlying mortgage loans may experience defaults with greater frequency than projected when such mortgages were underwritten, which would impact the values of these securities, and could hamper our ability to sell such 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 of geographic, social and other functions, including prevailing market interest rates and general economic factors. Further, it is possible that the U.S. Government may change its support of, and policies regarding, Fannie Mae and Freddie Mac and, thus, the Account may be unable to acquire agency mortgage-backed securities in the future. Even if the Account acquired such securities, such changes may result in a negative effect on the pricing of such securities. Other policy changes impacting Fannie Mae and Freddie Mac and/or U.S. Government programs related to mortgages that may be implemented in the future could create market uncertainty and affect the actual or perceived credit quality of issued securities, adversely affecting mortgage-backed securities through an increased risk of loss.

16


Importantly, the fair market value of these securities is also highly sensitive to changes in interest rates, liquidity of the secondary market and economic conditions impacting financial institutions and the credit markets generally. 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, volatility and disruption in the mortgage market and credit markets generally may cause there to be a very limited or even no secondary market for these securities and they therefore may be harder to sell than other securities.
RISKS OF U.S. GOVERNMENT AGENCY SECURITIES AND CORPORATE OBLIGATIONS
The Account invests in securities issued by U.S. Government agencies and U.S. Government-sponsored entities. Some of these issuers may not have their securities backed by the full faith and credit of the U.S. Government, which could
adversely affect the pricing and value of such securities. U.S. Government securities that are supported by the full faith and credit of the United States present limited credit risk compared to other types of debt securities but are not free of risk. Other U.S. Government securities are supported by the right of the agency or instrumentality to borrow an amount limited to a specific line of credit from the U.S. Treasury or by the discretionary authority of the U.S. Government to purchase financial obligations of the agency or instrumentality, which are thus subject to a greater amount of credit risk than those supported by the full faith and credit of the United States. Still other U.S. Government securities are only supported by the credit of the issuing agency or instrumentality which are subject to greater credit risk as compared to other U.S. Government securities. The maximum potential liability of the issues of some U.S. Government securities may exceed then current resources, including any legal right to support from the U.S. Treasury. Because the U.S. Government is not obligated by law to support an agency or instrumentality that it sponsors, or such agency’s or instrumentality’s securities, the Account only invests in U.S. Government securities when TIAA determines that the credit risk associated with the obligation is suitable for the Account. It is possible that issuers of U.S. Government securities will not have the funds to meet their payment obligations in the future. Uncertainty regarding the status of negotiations in the U.S. Congress to increase the statutory debt ceiling may increase the risk that the U.S. Government may default on payments on certain U.S. Government securities, including those held by the Account.
Also, the Account may invest in corporate obligations (such as commercial paper) and while the Account seeks out such holdings in short-term or intermediate-term, higher-quality liquid instruments, the ability of the Account to sell these securities may be uncertain, particularly when there are general dislocations in the finance or credit markets. Any such volatility could have a negative impact on the value of these securities. Further, transaction activity may fluctuate significantly from time to time, which could impair the Account’s ability to dispose of a security at a favorable time, regardless of the credit quality of the underlying issuer. Also, inherent with investing in any corporate obligation is the risk that the credit quality of the issuer will deteriorate, which could cause the obligations to be downgraded and hamper the value or the liquidity of these securities. Finally, any further downgrades or threatened downgrades of the credit rating for U.S. Government obligations generally could impact the pricing and liquidity of agency securities or corporate obligations in a manner which could impact the value of the Account’s units. On one occasion, the long-term credit rating of the United States has been downgraded by at least one leading rating agency as a result of disagreements within the U.S. Government over raising the debt ceiling to repay outstanding obligations. Similar situations in the future could result in higher interest rates, lower prices of U.S. Treasury securities and increase the costs of various kinds of debt, which may adversely affect the Account.
RISKS OF LIQUID INVESTMENTS
The Account’s investments in liquid investments, whether real estate-related securities (such as REITs, CMBS or some loans receivable) or non-real estate-related securities (such as ABS, cash equivalents and municipal bond securities and other government securities), and whether debt or equity, are subject to the following general risks:
Issuer Risk (often called Financial Risk). The risk that an issuer’s earnings or revenue prospects and overall financial position will deteriorate, causing a decline in the value of the issuer’s financial instruments over short or extended periods of time.
Credit Risk (a type of Issuer Risk). The risk that the issuer of fixed-income investments may not be able or willing to meet interest or principal payments when the payments become due.

17


Market Volatility, Liquidity and Valuation Risk (types of Market Risk). The risk that volatile or dramatic reductions in trading activity in securities make it difficult for the Account to properly value its investments and that the
Account may not be able to purchase or sell a securities investment at an attractive price, if at all. This risk is particularly acute to the extent the Account holds equity securities, which have experienced significant short-term price volatility in recent years.
Interest Rate Risk (a type of Market Risk). The risk that increases or volatility in interest rates can cause the prices of certain fixed-income investments to decline. This risk is heightened to the extent the Account invests in fixed-income investments and during periods when prevailing interest rates are low. As of the date of this Prospectus, interest rates in the United States and in certain foreign markets are at or near historic lows, which may increase the Account’s exposure to risks associated with rising interest rates. In general, changing interest rates could have unpredictable effects on the markets and may expose fixed-income and related markets to heightened volatility.
Active Management Risk. The risk that the Account’s strategy, investment selection or trading execution for securities, including REIT stocks and other equity securities, may cause the Account to underperform relative to a stated benchmark index or funds or accounts with similar investment objectives.
Prepayment Risk. The risk that, during periods of falling interest rates, borrowers may pay off their mortgage, auto or other loans sooner than expected, forcing the Account to reinvest the unanticipated proceeds at lower interest rates and resulting in a decline in income.
U.S. Government Securities Risk. Securities issued by the U.S. Government or one of its agencies or instrumentalities may receive varying levels of support from the U.S. Government, which could affect the Account’s ability to recover should they default. To the extent the Account invests significantly in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, any market movements, regulatory changes or changes in political or economic conditions that affect the securities of the U.S. Government or its agencies or instrumentalities in which the Account invests may have a significant impact on the Account’s performance.
State and Municipal Investment Risk. Events affecting states and municipalities may adversely affect the Account’s investments and its performance. These events may include severe financial difficulties and continued budget deficits, economic or political policy changes, tax base erosion, state constitutional limits on tax increases, and changes in the credit ratings assigned to state and municipal issuers of debt instruments.
Deposit/Money Market Risk. The risk that, to the extent the Account’s cash held in bank deposit accounts exceeds federally insured limits as to that bank, the Account could experience losses if banks fail. In addition, there is some risk that investments held in money market accounts or funds can suffer losses.
Further, to the extent that a significant portion of the Account’s net assets at any particular time consist of cash, cash equivalents and non-real estate-related liquid securities, the Account’s returns may suffer as compared to the return that could have been generated by more profitable real estate-related investments. Such a potential negative impact on returns may be exacerbated in times of low prevailing interest rates payable on many classes of liquid securities, such as is the case as of the date hereof and which may persist in the future.
RISKS OF FOREIGN INVESTMENTS
In addition to other investment risks noted above, foreign investments present the following special risks:
•
The value of foreign investments or rental income can increase or decrease due to changes or fluctuations in foreign currency exchange rates, imposition of currency exchange control or market control regulations, possible expropriation or confiscatory taxation, political, social, diplomatic and economic developments and foreign regulations. The Account translates into U.S. dollars purchases and sales of securities, income receipts and expense payments made in foreign currencies at the exchange rates prevailing on the respective dates of the transactions. The effect of any changes in currency exchange rates on foreign debt investments and mortgage loans payable is included in the Account’s net realized and unrealized gains and losses. As such, fluctuations in currency exchange rates, even if hedged, may impair or reduce the Account’s returns and result in poorer

18


overall performance of the Account than if it had not acquired such foreign investments or entered into any foreign currency hedging transactions.
•
The Account may, but is not required to, hedge its exposure to changes in currency rates, which could involve extra costs. Further, any hedging activities might not be successful. Such hedges may also be subject to valuation changes. In addition, a lender to a foreign property owned by the Account could require the Account to compensate it for its loss associated with such lender’s hedging activities.
•
Non-U.S. jurisdictions may impose withholding taxes on the Account as a result of its investment activity in that jurisdiction. TIAA may be eligible for a foreign tax credit in respect of such tax paid by the Account and such credit (if available to TIAA) would be reimbursed to the Account. However, there may be circumstances where TIAA is unable to receive some or all of the benefit of a foreign tax credit and the Account would thus not receive reimbursement, which could harm the value of the Account’s units.
•
Foreign real estate markets may have different liquidity and volatility attributes than U.S. markets.
•
The regulatory environment in non-U.S. jurisdictions may disfavor owners and operators of real estate investment properties, resulting in less predictable and/or economically harmful outcomes if the Account were to face a significant dispute with a tenant or with a regulator itself.
•
The Account may be subject to increased risk of regulatory scrutiny pursuant to U.S. federal statutes, such as the Foreign Corrupt Practices Act, which, among other things, requires robust compliance and oversight programs to help prevent violations. The costs associated with maintaining such programs, in addition to costs associated with a potential regulatory inquiry, could impair the Account’s returns and divert management’s attention from other Account activities.
•
It may be more difficult to obtain and collect a judgment on foreign investments than on domestic investments, and the costs associated with contesting claims relating to foreign investments may exceed those costs associated with a similar claim on domestic investments.
•
We may invest from time to time in securities issued by (i) entities domiciled in foreign countries, (ii) domestic affiliates of such entities and/or (iii) foreign domiciled affiliates of domestic entities. Such investments could be subject to the risks associated with investments subject to foreign regulation, including political unrest or the seizure, expropriation, repatriation or nationalization of the issuer’s assets. These events could depress the value of such securities and/or make such securities harder to sell on favorable terms, if at all.
RISKS OF INVESTING IN MORTGAGE LOANS AND RELATED INVESTMENTS
The Account’s investment strategy includes, to a limited extent, investments in mortgage loans (i.e . , the Account serving as lender).
General Risks of Mortgage Loans . The Account will be subject to the risks inherent in making mortgage loans, including:
•
The borrower may default on the loan, 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. In addition, there is a risk of delay in exercising any contractual remedies due to actions of the borrower, including, without limitation, bankruptcy or insolvency of the borrower.
•
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, which could be caused by general or local economic conditions or other factors beyond the control of the Account, 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 be unable 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 than that which is then available in the market if interest rates rise generally.

19


Interest Rate Risk. The risk that the value or yield of fixed-income investments may decline if interest rates change. In general, when prevailing interest rates decline, the market values of outstanding fixed-income investments (particularly those paying a fixed rate of interest) tend to increase while yields on similar newly issued fixed-income investments tend to decrease, which could adversely affect the Account’s income. Conversely, when prevailing interest rates increase, the market values of outstanding fixed-income investments (particularly those paying a fixed rate of interest) tend to decline while yields on similar newly issued fixed income investments tend to increase. If a fixed-income investment pays a floating or variable rate of interest, changes in prevailing interest rates may increase or decrease the investment’s yield. Fixed-income investments with longer durations tend to be more sensitive to interest rate changes than shorter-term investments. Interest rate risk is generally heightened during periods when prevailing interest rates are low or negative. During periods of very low or negative interest rates, a fixed-income investment may not be able to maintain positive returns. In general, changing interest rates could have unpredictable effects on the markets and may expose fixed-income and related markets to heightened volatility.
Extension Risk. The risk that during periods of rising interest rates, borrowers pay off their mortgage loans later than expected, preventing the Account from reinvesting principal proceeds at higher interest rates, resulting in less income than potentially available. These risks are normally present in mortgage-backed securities and other ABS. For example, homeowners have the option to prepay their mortgages. Therefore, the duration of a security backed by home mortgages can lengthen depending on homeowner prepayment activity. A decline in the prepayment rate and the resulting increase in duration of fixed-income securities held by the Account can result in losses to the Account.
Prepayment Risks. The Account’s mortgage loan investments will usually be subject to the risk that the borrower repays a loan early. Also, the Account may be unable to reinvest the proceeds at as high an interest rate as the original mortgage loan rate, resulting in a decline in income.
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, the Account could incur penalties or may be unable to enforce payment of the loan.
Risks of Investing in Domestic and Foreign Debt or Loans. The Account may invest from time to time in domestic and foreign mezzanine loans to entities which own real estate assets. Generally these loans will be secured by a pledge of the equity securities of the entity, but not by a first lien security interest in the property itself. As such, the Account’s recovery in the event of an adverse circumstance at the property (such as a default under a mortgage loan on the property) will be subordinated to the recovery available to the first lien mortgage lender(s) to the property. The Account’s remedy may solely consist of foreclosing on the equity interest in the entity owning the property, and that equity interest will be junior in right of recovery to a loan secured by the property owned by the entity. Also, as a subordinated lender, the Account may have limited rights to exercise control over the process by which the mortgage loan is restructured or the property is liquidated following a default. Any of these circumstances may result in the Account being unable to recover some or all of its original investment.
Risks of Currency Hedging Strategies for Foreign Debt or Loans. In managing any foreign debt or loans, the Account may use or enter into forward currency contracts, currency swaps and may buy or sell put and call options and futures contracts on foreign currencies as well as other derivatives transactions in order to hedge against the risks of exchange rate uncertainties and currency fluctuations impacting the Account’s foreign portfolio investments. Changes in exchange rates and exchange control regulations may increase or reduce the value of foreign mezzanine or other debt. Currency hedging and similar transactions involve special risks and may limit potential gains due to increases in a currency’s value. Unanticipated changes in interest rates, domestic or foreign securities prices or currency exchange rates may result in poorer overall performance of the Account than if it had not entered into any such currency-related transactions. In addition, the Account could incur additional costs of paying hedge unwind fees if it has to terminate cross-currency swaps prematurely due to early repayment of foreign mezzanine or other foreign debt. The Account does not intend to speculate in foreign currency exchange transactions or forward currency contracts.

20


Risks of Participations. To the extent the Account invested in a participating mortgage, the following additional risks would apply:
•
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 may 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 become liable for the borrower’s debts.
RISKS OF SECURITIES LENDING
In lending its securities, the Account bears the market risk with respect to the investment of collateral and the risk the borrower or securities lending agent (the “Agent”) may default on its contractual obligations to the Account. Each Agent bears the risk that the borrower may default on its obligation to return the loaned securities as the Agent is contractually obligated to indemnify the Account if at the time of a default by a borrower some or all of the loaned securities have not been returned.
CONFLICTS OF INTEREST WITHIN TIAA
General. TIAA and its affiliates (including Nuveen Alternatives Advisors, LLC (“NAA”) and Teachers Advisors, LLC (“TAL”), its wholly owned subsidiaries and registered investment advisers, and Nuveen Real Estate, LLC (“NRE”), its wholly owned subsidiary) have interests in other real estate programs and accounts and also engage in other business activities. As such, they will have conflicts of interest in allocating their time between the Account’s business and these other activities. Also, the Account may be buying properties at the same time as TIAA affiliates that may have similar investment objectives to those of the Account. There is also a risk that TIAA will choose a property that provides lower returns to the Account than a property purchased by TIAA and its affiliates. Further, the Account will likely acquire properties in geographic areas where TIAA and its affiliates own or manage properties. In addition, the Account may desire to sell a property at the same time another TIAA affiliate is selling a property in an overlapping market. Conflicts could also arise because some properties owned or managed by TIAA and its affiliates may compete with the Account’s properties for tenants. Among other things, if one of the TIAA entities attracts a tenant that the Account is competing for, the Account could suffer a loss of revenue due to delays in locating another suitable tenant. TIAA has adopted allocation policies and procedures applicable to the purchasing conflicts scenario, but the resolution of such conflicts may be economically disadvantageous to the Account. As a result of TIAA’s and its affiliates’ obligations to TIAA itself and to other current and potential investment vehicles sponsored by TIAA affiliates with similar objectives to those of the Account, there is no assurance that the Account will be able to take advantage of every attractive investment opportunity that otherwise is in accordance with the Account’s investment objectives.
Liquidity Guarantee. In addition, as discussed elsewhere in this prospectus, the TIAA General Account provides a liquidity guarantee to the Account. While an independent fiduciary is responsible for establishing a “trigger point” (a percentage of TIAA’s ownership of liquidity units beyond which TIAA’s ownership may be reduced at the fiduciary’s direction), there is no express cap on the amount TIAA may be obligated to fund under this guarantee. Further, the Account’s independent fiduciary oversees any redemption of TIAA liquidity units. TIAA’s ownership of liquidity units (including the potential for changes in its levels of ownership in the future) from time to time could result in the perception that TIAA is taking into account its own economic interests while serving as investment manager for the Account. In particular, the value of TIAA’s liquidity units fluctuates in the same manner as the value of accumulation units held by all participants. Any perception of a conflict of interest could cause participants to transfer accumulations out of the Account to another investment option, which could have an adverse impact on the Account’s ability to act most optimally upon its investment strategy.
NO OPPORTUNITY FOR PRIOR REVIEW OF TRANSACTIONS
Investors do not have the opportunity to evaluate the economic or financial merit of the purchase, sale or financing of a property or other investment before the Account completes the transaction, 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.

21


Further, the Account may change its investment objective and pursue specific investments in accordance with any such amended investment objective without the consent of the Account’s investors.
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.
CYBERSECURITY RISKS
With the increased use of technologies such as the Internet to conduct business, the Account and its service providers (including, but not limited to, TIAA, Services, the independent fiduciary and the Account’s custodian and financial intermediaries) are susceptible to cybersecurity risks. In general, cybersecurity attacks can result from infection by computer viruses or other malicious software or from deliberate actions or unintentional events, including gaining unauthorized access through “hacking” or other means to digital systems, networks, or devices that are used to service the Account’s operations in order to misappropriate assets or sensitive information, corrupt data, or cause operational disruption. Cybersecurity attacks can also be carried out in a manner that does not require gaining unauthorized access, including by carrying out a “denial-of-service” attack on the Account or its service providers’ websites. In addition, authorized persons could inadvertently or intentionally release and possibly destroy confidential or proprietary information stored on the Account’s systems or the systems of its service providers.
Cybersecurity failures by the Account or any of its service providers, or the issuers of any portfolio securities in which the Account invests (e.g., issuers of REIT stocks or debt securities), have the ability to result in disruptions to and impacts on business operations and may adversely affect the Account and the value of your accumulation units. Such disruptions or impacts may result in: financial losses; interference with the processing of contract transactions, including the processing of orders from TIAA’s website; interfere with the Account’s ability to calculate AUVs; barriers to trading and order processing; Account participants’ inability to transact business with the Account; violations of applicable federal and state privacy or other laws; regulatory fines, penalties, reputational damage, reimbursement or other compensation costs; or additional compliance costs. The Account may incur additional, incremental costs to prevent and mitigate the risks of cybersecurity attacks or incidents in the future. The Account and its participants could be negatively impacted by such cyber-attacks or incidents. Although the Account has established business continuity plans and risk-based processes and controls to address such cybersecurity risks, there are inherent limitations in such plans and systems in part due to the evolving nature of technology and cybersecurity attack tactics. As a result, it is possible that the Account or the Account’s service providers will not be able to adequately identify or prepare for all cybersecurity attacks. In addition, the Account cannot directly control the cybersecurity plans or systems implemented by its service providers.
ENACTED TAX LEGISLATION
On December 22, 2017, H.R. 1 was enacted into law as P.L. 115-77, popularly known as the “Tax Cuts and Jobs Act” (the “Act”), permanently cutting the corporate tax rate from 35% to 21%, temporarily reducing individual tax rates and providing a partial deduction for certain income earned by pass-through entities until 2026, while making

22


fundamental changes to the taxation of foreign persons and income. To broaden the income tax base to pay for the rate cuts and pass-through income deduction, many corporate deductions have been eliminated or modified and many individual deductions suspended until 2026. While the Act is expected to have effects on the economy that will impact the performance of real estate and credit markets, those effects cannot be predicted.
Certain provisions of the Act should have more direct impacts on real estate and credit markets. A limitation on the aggregate deduction for state and local income taxes and property taxes to $10,000 and certain limitations on the deduction for qualified residence interest could impact the housing market in certain areas, affecting the performance of certain real estate investments. Limitations on deductibility of business interest and increased expensing provisions could impact the market for commercial real estate. Other provisions of the Act may also impact real estate or credit markets, and ultimately the Account, in certain circumstances and in ways that cannot be predicted. Future guidance to be issued by the Treasury Department and Internal Revenue Service may alter these effects.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
THE PROPERTIES—GENERAL
In the table below, participants will find general information about each of the Account’s investments as of December 31, 2018 . The Account’s investments include both properties that are wholly-owned by the Account and properties owned by the Account’s joint venture investments. Certain investments include a portfolio of properties.
Property
Location
Ownership Percentage
Year
Built
Year
Purchased
Rentable
Area
(Sq. ft.) (1)
Percent
Leased
Annual Avg.
Base Rent
Per Leased
Sq. Ft. (2)
Fair
Value (3)
(millions)
 
OFFICE PROPERTIES
1001 Pennsylvania Ave 
Washington, D.C. 
100.00%
1987
2004
780,294
78.7%
$
47.75

$
782.8

(4)  
Fourth & Madison
Seattle, WA 
100.00%
2002
2004
845,533
88.0%
30.38

580.0

(4)   
99 High Street
Boston, MA
100.00%
1971
2005
730,168
92.0%
41.92

506.4

(4)  
780 Third Avenue 
New York, NY 
100.00%
1984
1999
492,210
81.4%
56.68

418.7

(4)   
701 Brickell Avenue
Miami, FL 
100.00%
1986
2002
677,667
92.8%
29.80

394.3

(4)  
Colorado Center
Santa Monica, CA 
50.00%
1984
2004
1,117,647
95.7%
63.53

376.2

(5)  
Lincoln Centre
Dallas, TX
100.00%
1984
2005
1,625,465
83.1%
24.08

372.6

 
55 Second Street
San Francisco, CA 
100.00%
2002
2014
379,328
92.4%
45.66

368.2

(4)   
Four Oaks Place
Houston, TX 
51.00%
1983, 2016
2012
2,343,196
82.1%
25.78

344.6

(5)  
1900 K Street, NW
Washington, D.C.
100.00%
1996
2004
345,781
94.4%
52.17

342.1

(4)  
21 Penn Plaza
New York, NY 
100.00%
1931, 2012-2014
2014
374,153
91.5%
54.36

317.8

 
Wilshire Rodeo Plaza
Beverly Hills, CA
100.00%
1935, 1984
2006
255,537
81.6%
69.01

312.4

 
Foundry Square II
San Francisco, CA 
50.10%
2002
2014
508,527
100.0%
68.10

290.1

 
Fort Point Portfolio
Boston, MA
100.00%
1890-1920, 1986-2010
2016
406,857
90.9%
43.73

247.1

 
One Boston Place
Boston, MA 
50.25%
1970
2002
805,589
80.6%
47.97

239.1

 
409 & 499 Illinois Street
San Francisco, CA
40.00%
2008, 2010
2015
463,985
99.0%
52.34

223.9

 
837 Washington Street
New York, NY 
100.00%
1938, 2012-2014
2015
55,497
100.0%
175.17

222.0

 
225 Binney Street
Cambridge, MA
70.00%
2013
2015
305,212
100.0%
42.93

220.2

 
1401 H Street, NW
Washington, D.C.
100.00%
1992
2006
350,515
66.5%
52.50

209.5

(4)  
501 Boylston
Boston, MA
50.10%
1940, 1961
2018
610,075
99.3%
50.99

195.6

(5)  
88 Kearny Street 
San Francisco, CA 
100.00%
1986
1999
227,882
89.3%
63.55

189.1

 
Campus Pointe 1 
San Diego, CA 
45.00%
1980, 2012
2016
449,759
91.9%
40.30

153.7

 

23


Property
Location
Ownership Percentage
Year
Built
Year
Purchased
Rentable
Area
(Sq. ft.) (1)
Percent
Leased
Annual Avg.
Base Rent
Per Leased
Sq. Ft. (2)
Fair
Value (3)
(millions)
 
Campus Pointe 2 & 3 
San Diego, CA 
45.00%
1997, 2016
2016, 2017
305,006
100.0%
$
37.75

$
132.8

 
440 Ninth Avenue
New York, NY 
88.52%
1927, 1999, 2016
2018
410,815
99.6%
40.30

121.4

(5)  
Wilton Woods Corporate Campus
Wilton, CT 
100.00%
1974, 2001
2001
531,606
79.1%
24.78

121.0

 
Pacific Plaza
San Diego, CA 
100.00%
2000, 2002
2007
217,715
54.2%
36.92

116.5

 
The Ellipse at Ballston
Arlington, VA
100.00%
1989
2006
196,848
84.0%
39.86

82.4

 
1500 Owens
San Francisco, CA
49.90%
2009
2015
158,267
100.0%
52.11

78.8

 
Camelback Center
Phoenix, AZ
100.00%
2001
2007
232,550
84.2%
20.78

63.4

 
West Lake North Business Park 
Westlake Village, CA 
100.00%
2000
2004
197,366
96.8%
30.07

62.6

 
200 Middlefield Road
Menlo Park, CA
100.00%
1967, 2012-2013
2014
41,933
100.0%
75.40

61.8

 
The Hub 
Long Island City, NY
95.00%
1924
2016
304,821
39.2%
14.46

59.2

(5)  
3131 McKinney
Dallas, TX
100.00%
1984
2018
145,641
76.5%
25.53

49.7

 
8270 Greensboro Drive
McLean, VA
100.00%
2000
2005
158,341
84.2%
29.55

47.5

 
30700 Russell Ranch
Westlake Village, CA 
100.00%
2000
2018
136,262
84.9%
31.12

34.6

 
817 Broadway
New York, NY 
61.46%
1900
2016
139,410
22.9%
16.05

28.0

(5)  
Campus Pointe 4 
San Diego, CA 
45.00%
1991, 2015
2017
44,034
—%
—

9.2

 
Subtotal—Office Properties
 
 
 
 
86.1%
 
$
8,375.3

 
INDUSTRIAL PROPERTIES
 
 
 
 
Ontario Industrial Portfolio
Various, CA
100.00%
1997-1998
1998, 2000, 2004
3,361,599
100.0%
$
4.89

$
421.8

 
Dallas Industrial Portfolio
Dallas and Coppell, TX 
100.00%
1997-2001 
2000-2002
3,684,941
96.7%
3.46

222.3

 
Great West Industrial Portfolio
Rancho Cucamonga and Fontana, CA 
100.00%
2004-2005
2008
1,358,925
100.0%
5.59

178.5

 
Cerritos Industrial Park
Cerritos, CA
100.00%
1970-1977
2012
934,213
98.4%
7.27

153.1

 
Pinto Business Park
Houston, TX
100.00%
2014, 2015, 2016
2015, 2016
1,641,141
68.5%
5.29

144.9

 
Southern CA RA Industrial Portfolio 
Los Angeles, CA 
100.00%
1982
2004
920,078
90.7%
6.97

143.4

 
Rainier Corporate Park 
Fife, WA 
100.00%
1991-1997 
2003
1,104,399
94.9%
5.49

141.6

 
Seneca Industrial Park
Pembroke Park, FL
100.00%
1999-2001
2007
882,182
99.9%
7.16

117.5

 
Regal Logistics Campus
Seattle, WA 
100.00%
1999-2004
2005
968,535
100.0%
3.48

109.1

 
Oakmont IE West Portfolio
Fontana, CA
100.00%
2014-2015
2015
709,941
100.0%
5.30

103.5

 
South River Road Industrial 
Cranbury, NJ 
100.00%
1999
2001
858,957
100.0%
5.52

102.5

 
Weston Business Center
Weston, FL
100.00%
1998-1999
2011
679,918
67.0%
8.96

97.8

 
Northern CA RA Industrial Portfolio 
Oakland, CA 
100.00%
1981
2004
657,602
93.6%
6.85

93.3

 
Shawnee Ridge Industrial Portfolio
Atlanta, GA
100.00%
2000-2005
2005
1,422,922
100.0%
3.70

89.2

 
Chicago Caleast Industrial Portfolio
Chicago, IL 
100.00%
1974, 2005
2003
1,145,152
100.0%
4.32

82.8

 
Rancho Cucamonga Industrial Portfolio
Rancho Cucamonga, CA 
100.00%
2000-2002 
2000, 2001, 2002, 2004
573,000
100.0%
12.69

76.2

 
Northwest Houston Industrial Portfolio
Houston, TX
100.00%
1981
2014
1,010,912
85.4%
4.53

75.6

 
Frontera Industrial Business Park
San Diego, CA
100.00%
1989, 2015
2017
517,207
90.2%
6.92

74.0

 
Ontario Mills Industrial Portfolio
Ontario, CA
100.00%
2014
2014
435,733
100.0%
5.39

61.8

 
Stevenson Point
Newark, CA
100.00%
2000
2015
312,885
100.0%
11.14

61.3

 
Broward Industrial Portfolio
Various, FL
100.00%
Various
2017
401,368
80.6%
9.17

59.1

 

24


Property
Location
Ownership Percentage
Year
Built
Year
Purchased
Rentable
Area
(Sq. ft.) (1)
Percent
Leased
Annual Avg.
Base Rent
Per Leased
Sq. Ft. (2)
Fair
Value (3)
(millions)
 
200 Milik Street
Carteret, NJ
100.00%
2013
2015
232,134
100.0%
$
11.16

$
54.0

 
Pacific Corporate Park
Fife, WA 
100.00%
2006
2012
388,783
100.0%
5.08

52.8

 
Pinnacle Industrial Portfolio
Grapevine, TX
100.00%
2003, 2004, 2006
2006
899,200
49.0%
3.87

51.2

 
Centre Pointe and Valley View
Los Angeles County, CA
100.00%
1965, 1989 
2004
307,685
68.4%
8.80

51.2

 
Landover Logistics
Landover, MD
100.00%
2013
2014
360,550
46.4%
8.44

44.3

 
Northwest RA Industrial Portfolio
Seattle, WA 
100.00%
1996
2004
312,321
100.0%
6.03

43.0

 
Northeast RA Industrial Portfolio
Boston, MA 
100.00%
2000
2004
384,126
100.0%
6.44

42.0

 
Atlanta Industrial Portfolio
Lawrenceville, GA 
100.00%
1996-1999 
2000
495,440
97.4%
8.43

35.5

 
One Beeman Road
Northborough, MA
100.00%
1985
2017
342,900
100.0%
7.08

34.0

 
Otay Mesa Industrial Portfolio
San Diego, CA
100.00%
1989, 1999
2018
264,679
100.0%
4.46

29.4

 
Chicago Industrial Portfolio
Chicago, IL 
100.00%
1997-2000
1998, 2000
334,824
94.7%
6.17

28.7

 
Beltway North Commerce Center
Houston, TX
100.00%
2014
2015
352,680
66.5%
4.66

26.3

 
12910 Mulberry Drive
Whittier, CA
100.00%
1961, 1972
2018
149,010
100.0%
7.89

21.7

 
10 New Maple Avenue
Pine Brook, NJ
100.00%
1973
2018
266,338
95.0%
5.72

18.0

 
Park 10 Distribution
Houston, TX
100.00%
1980
2014
152,638
44.2%
5.25

10.0

 
Subtotal—Industrial Properties
 
 
 
 
92.5%
 
$
3,151.4

 
RETAIL PROPERTIES
 
 
 
Fashion Show
Las Vegas, NV
50.00%
1981
2016
1,899,675
98.7%
$
70.50

$
819.1

(5)  
The Florida Mall
Orlando, FL 
50.00%
1986
2002
1,071,832
94.9%
55.20

769.7

(5)  
DDR Joint Venture
Various, U.S.A.
85.00%
Various
2007
8,080,144
92.8%
15.47

655.8

(5)  
The Forum at Carlsbad
Carlsbad, CA
100.00%
2003
2011
265,719
97.7%
39.83

225.0

(4)  
Miami International Mall
Miami, FL 
50.00%
1982
2002
304,269
99.0%
66.40

170.3

(5)  
Florida Retail Portfolio
Various, FL
80.00%
1974, 2005
2006
441,044
100.0%
25.24

156.0

 
West Town Mall
Knoxville, TN 
50.00%
1972
2002
926,341
94.6%
24.70

154.3

(5)  
Westwood Marketplace 
Los Angeles, CA 
100.00%
1950
2002
202,202
100.0%
30.25

142.0

 
Valencia Town Center
Valencia, CA
50.00%
1991
2012
1,077,109
86.1%
20.48

140.5

(5)  
Bridgepointe Shopping Center
San Mateo, CA
100.00%
1998
2017
229,769
79.9%
24.39

125.0

 
Plaza America
Reston, VA
100.00%
1995
2014
164,398
92.7%
35.51

116.3

 
Marketfair
West Windsor, NJ
100.00%
1987
2006
242,730
97.2%
27.79

104.3

 
Charleston Plaza
Mountain View, CA
100.00%
2006
2012
132,590
100.0%
36.85

100.0

 
The Shops at Wisconsin Place  
Chevy Chase, MD
100.00%
2007-2010
2012
117,202
96.5%
46.07

97.3

(6)  
Publix at Weston Commons
Weston, FL
100.00%
2005
2006
126,922
94.3%
27.83

74.6

 
South Denver Marketplace
Denver, CO
100.00%
1996-1998
2013
261,135
100.0%
16.95

72.7

 
Pacific City
Huntington Beach, CA
70.00%
2015
2016
189,945
90.0%
36.00

59.5

(5)  
32 South State Street
Chicago, IL
100.00%
1925
2016
96,354
100.0%
28.34

50.4

(4)  
Southside at McEwen
Franklin, TN
100.00%
2012
2014
92,470
92.9%
25.20

48.6

 
401 West 14th Street
New York, NY
42.19%
1923, 2007
2014
62,200
92.1%
128.75

48.4

(5)  
Riverchase Village
Hoover, AL
100.00%
1980, 2016
2018
175,673
94.4%
22.00

40.0

 
1619 Walnut Street
Philadelphia, PA
100.00%
1937, 2013
2013
34,047
100.0%
42.52

24.1

 
Subtotal—Retail Properties
 
 
 
 
94.1%
 
$
4,193.9

 

25


Property
Location
Ownership Percentage
Year
Built
Year
Purchased
Rentable
Area
(Sq. ft.) (1)
Percent
Leased
Annual Avg.
Base Rent
Per Leased
Sq. Ft. (2)
Fair
Value (3)
(millions)
 
OTHER COMMERCIAL PROPERTIES
 
 

 
425 Park Avenue
New York, NY
100.00%
N/A
2011
N/A
N/A
N/A
$
461.0

 
Storage Portfolio II
Various, U.S.A. 
90.00%
Various
2017
2,668,499
94.4%
11.82
120.4

(5)  
Storage Portfolio I
Various, U.S.A. 
66.02%
1972, 1990 
2003
1,681,524
93.5%
18.65
92.4

(5)  
9625 Towne Centre Drive
San Diego, CA
49.90%
N/A
2017
N/A
N/A
N/A
45.5

 
Subtotal—Other Commercial Properties
 
 
 
 
94.0%
 
$
719.3

 
Subtotal—Commercial Properties
 
 
 
 
91.5%
 
$
16,439.9

 
RESIDENTIAL PROPERTIES
 
 

 
 
Simpson Housing Portfolio
Various, U.S.A.
80.00%
1998-2016
2018
N/A
97.2%
N/A
$
400.1

(5)  
Palomino Park
Highlands Ranch, CO
100.00%
1996-2001
2005
N/A
91.2%
N/A
348.0

(4)  
The Colorado 
New York, NY 
100.00%
1987
1999
N/A
94.3%
N/A
254.9

(4)  
The Woodley
Washington, D.C.
100.00%
2014
2014
N/A
95.3%
N/A
196.0

 
Stella
Marina Del Rey, CA
100.00%
2013
2013
N/A
94.7%
N/A
183.7

 
Mass Court
Washington, D.C.
100.00%
2004
2012
N/A
93.8%
N/A
166.1

(4)  
Houston Apartment Portfolio
Houston, TX
100.00%
1984-2004
2006
N/A
91.8%
N/A
164.4

 
BLVD63
San Diego, CA 
100.00%
2014
2016
N/A
99.7%
N/A
164.0

 
The Louis at 14th
Washington, D.C.
100.00%
2013-2014
2014
N/A
94.4%
N/A
162.0

 
Holly Street Village
Pasadena, CA
100.00%
1997
2013
N/A
95.2%
N/A
152.1

(4)  
250 North 10th Street
Brooklyn, NY
100.00%
2014
2015
N/A
91.5%
N/A
151.0

 
Larkspur Courts 
Larkspur, CA 
100.00%
1991
1999
N/A
89.1%
N/A
146.0

 
The Legacy at Westwood
Los Angeles, CA 
100.00%
2001
2002
N/A
93.0%
N/A
144.0

(4)  
The Manor at Flagler Village
Fort Lauderdale, FL
100.00%
2014
2015
N/A
92.1%
N/A
137.1

 
The Palatine
Arlington, VA
100.00%
2008
2011
N/A
95.0%
N/A
122.0

(4)  
MiMA
New York, NY 
70.00%
2010
2012
N/A
99.6%
N/A
118.4

(5)  
Union - South Lake Union
Seattle, WA
100.00%
2012
2015
N/A
92.6%
N/A
114.0

(4)  
South Florida Apartment Portfolio
Boca Raton and Plantation, FL
100.00%
1986
2001
N/A
93.3%
N/A
108.7

 
Ashford Meadows Apartments
Herndon, VA 
100.00%
1998
2000
N/A
93.0%
N/A
107.1

(4)  
Regents Court
San Diego, CA 
100.00%
2001
2002
N/A
90.8%
N/A
104.0

(4)   
Casa Palma
Coconut Creek, FL
100.00%
2014
2015
N/A
90.3%
N/A
102.0

 
Circa Green Lake
Seattle, WA
100.00%
2009
2012
N/A
87.4%
N/A
98.2

(4)  
803 Corday
Naperville, IL
100.00%
1999
2017
N/A
90.0%
N/A
94.2

 
Rancho Del Mar
San Clemente, CA
100.00%
1986
2018
N/A
90.0%
N/A
92.5

 
Township Apartments
Redwood City, CA
100.00%
2014
2014
N/A
96.2%
N/A
90.5

(4)   
Oceano at Warner Center
Woodland Hills, CA
100.00%
2012
2013
N/A
92.6%
N/A
89.3

 
Fusion 1560
St. Petersburg, FL
100.00%
2011
2018
N/A
92.9%
N/A
82.0

(4)  
Greene Crossing
Columbia, SC
100.00%
2015
2016
N/A
99.4%
N/A
75.1

 
The Residences at the Village of Merrick Park
Coral Gables, FL
100.00%
2003
2012
N/A
92.5%
N/A
72.7

 
Churchill on the Park
Dallas, TX
100.00%
1999
2018
N/A
86.6%
N/A
71.3

 
Biltmore at Midtown
Atlanta, GA
100.00%
2001
2018
N/A
86.6%
N/A
70.4

(4)  
Centric Gateway
Charlotte, NC
100.00%
2017
2018
N/A
70.0%
N/A
70.0

 
Ascent at Windward
Alpharetta, GA
100.00%
1998
2018
N/A
91.2%
N/A
68.4

(4)  
Lofts at SoDo
Orlando, FL
100.00%
2009
2018
N/A
93.2%
N/A
66.7

(4)  

26


Property
Location
Ownership Percentage
Year
Built
Year
Purchased
Rentable
Area
(Sq. ft.) (1)
Percent
Leased
Annual Avg.
Base Rent
Per Leased
Sq. Ft. (2)
Fair
Value (3)
(millions)
 
Prescott Wallingford Apartments
Seattle, WA
100.00%
2012
2012
N/A
95.5%
N/A
$
66.5

 
Carrington Park
Plano, TX
100.00%
1994
2018
N/A
93.1%
N/A
65.1

 
The Bridges
Minneapolis, MN
100.00%
2014
2017
N/A
99.7%
N/A
64.9

 
5 West
Tampa, FL
100.00%
2009
2018
N/A
89.6%
N/A
62.2

 
Allure at Camarillo
Camarillo, CA
100.00%
2003
2017
N/A
71.5%
N/A
61.8

 
Cherry Knoll
Germantown, MD
100.00%
1985
2018
N/A
98.3%
N/A
59.2

(4)  
The Maroneal
Houston, TX
100.00%
1998
2005
N/A
92.6%
N/A
56.1

 
Westcreek
Westlake Village, CA 
100.00%
1988
1997
N/A
96.0%
N/A
55.0

 
The Manor Apartments
Plantation, FL
100.00%
2013
2014
N/A
93.9%
N/A
52.9

 
Orion on Orpington
Orlando, FL
100.00%
2007
2017
N/A
99.7%
N/A
49.2

 
Cliffs at Barton Creek
Austin, TX
100.00%
1994
2013
N/A
91.9%
N/A
46.7

 
Aspen Heights
Austin, TX
97.00%
2018
2018
N/A
100.0%
N/A
42.3

(5)  
The Cordelia
Portland, OR
100.00%
2014
2015
N/A
86.7%
N/A
41.7

 
The Knoll
Minneapolis, MN
100.00%
2013
2017
N/A
99.6%
N/A
36.1

(4)  
The Ashton
Washington, D.C.
100.00%
2009
2015
N/A
91.8%
N/A
30.5

 
Park on Morton
Bloomington, IN
97.00%
2013
2018
N/A
100.0%
N/A
29.5

(5)  
Cabana Beach San Marcos
San Marcos, TX
97.00%
2006, 2016-2017
2018
N/A
100.0%
N/A
23.0

(5)  
The Forum - Sam Houston
Huntsville, TX
97.00%
2011
2018
N/A
100.0%
N/A
17.6

(5)  
Subtotal—Residential Properties
 
93.8%
 
$
5,447.2

 
Total—All Properties
92.1%
 
$
21,887.1

 
(1)  
The square footage is an approximate measure and is subject to periodic remeasurement.
(2)  
Based on total contractual rent for leases existing as of December 31, 2018. The contractual rent can be either on a gross or net basis, depending on the terms of the leases.
(3)  
Wholly owned properties are represented at fair value and gross of any debt, while joint venture properties are represented at the net equity value.
(4)  
Property is subject to a mortgage. The fair value shown represents the Account's interest gross of debt.
(5)  
The fair value reflects the Account's interest in the joint venture and is net of debt.
(6)  
Fair value shown reflects a retail property wholly-owned by the Account, as well as the Account's 33.33% interest in a joint venture investment.

27


Commercial (Non-Residential) Investments
Major Tenants: The following tables list the Account’s ten most significant tenants based on the total space they occupied as of December 31, 2018 in each of the Account’s commercial property types.
Major Office Tenants
 
Occupied Sq. Ft.
 
% of Total Rentable Area of Account’s Office Properties  
 
% of Total Rentable Area of Non-Residential Properties
BHP Petroleum (Americas), Inc. (1)
 
1,132,561

 
6.5
%
 
1.7
%
Crowell & Moring LLP (2)
 
399,471

 
2.3
%
 
0.6
%
Atmos Energy Corporation (2)
 
312,238

 
1.8
%
 
0.5
%
Biogen MA Inc (1)
 
305,212

 
1.8
%
 
0.5
%
Eli Lilly and Company (1)
 
305,006

 
1.8
%
 
0.5
%
Hulu LLC (1)
 
261,823

 
1.5
%
 
0.4
%
Fibrogen Inc (1)
 
238,707

 
1.4
%
 
0.4
%
Bank of New York Mellon (1)
 
226,165

 
1.3
%
 
0.3
%
McKenna Long and Aldridge LLP (2)
 
199,268

 
1.1
%
 
0.3
%
Edmunds (1)
 
195,594

 
1.1
%
 
0.3
%
Major Industrial Tenants
 
Occupied Sq. Ft.
 
% of Total Rentable Area of Account’s Industrial Properties  
 
% of Total Rentable Area of Non-Residential Properties
Wal-Mart Stores, Inc. (2)
 
1,099,112

 
3.4
%
 
1.6
%
Regal West Corporation (2)
 
968,535

 
3.0
%
 
1.4
%
Restoration Hardware, Inc. (2)
 
886,052

 
2.7
%
 
1.3
%
Kumho Tire U.S.A. Inc. (2)
 
830,485

 
2.6
%
 
1.2
%
Del Monte Fresh Product, N.A., Inc. (2)
 
689,660

 
2.1
%
 
1.0
%
R.R Donnelley & Sons Company (2)
 
659,157

 
2.0
%
 
1.0
%
Rheem Sales Company, Inc. (2)
 
656,600

 
2.0
%
 
1.0
%
Global Equipment Company, Inc. (2)
 
647,228

 
2.0
%
 
1.0
%
Campbell Soup Supply Company (2)
 
573,000

 
1.8
%
 
0.8
%
Meiko America, Inc. (2)
 
557,500

 
1.7
%
 
0.8
%
Major Retail Tenants
 
Occupied Sq. Ft.
 
% of Total Rentable Area of Account’s Retail Properties  
 
% of Total Rentable Area of Non-Residential Properties
Dick's Sporting Goods, Inc. (1)
 
614,282

 
3.4
%
 
0.9
%
Macy's Inc. (1)
 
496,603

 
2.8
%
 
0.7
%
Belk, Inc. (1)
 
372,812

 
2.1
%
 
0.6
%
Kohl's Corporation (1)
 
349,777

 
1.9
%
 
0.5
%
PetSmart, Inc. (3)
 
332,794

 
1.9
%
 
0.5
%
J.C. Penney Corporation, Inc (1)
 
330,096

 
1.8
%
 
0.5
%
Best Buy Co., Inc . (3)
 
313,219

 
1.7
%
 
0.5
%
Nordstrom Inc. (3)
 
304,610

 
1.7
%
 
0.5
%
Ross Stores, Inc. (1)
 
298,776

 
1.7
%
 
0.4
%
Bed Bath and Beyond Inc. (3)
 
274,897

 
1.5
%
 
0.4
%
(1)  
Tenant occupied space within joint venture investments.
(2)  
Tenant occupied space within wholly-owned investments.
(3)  
Tenant occupied space within wholly-owned and joint venture investments.

28


The following tables list the rentable area for long term leases subject to expiring leases during the next ten years and an aggregate figure for expirations in 2029 and after, in the Account’s commercial (non-residential) properties that are both wholly-owned by the Account and held within the Account’s joint venture investments. While many of the leases contain renewal options with varying terms, these charts assume that none of the tenants exercise their renewal options, including those with terms that expired on December 31, 2018 or are month to month leases.
Office Properties
Year of
Lease Expiration
 
Number of
Tenants with
Expiring Leases
 
Base Rent
Associated with Such
Leases (millions) (1)
 
Expiring Rent as
a % of
Rental Income (1)
 
Rentable Area
Subject to Expiring
Leases (sq. ft.)
 
% of
Total Rentable
Area of Account’s
Office Properties
Represented by
Expiring Leases
2019
 
123

 
$
28.7

 
1.7
%
 
1,289,301

 
7.4
%
2020
 
137

 
41.3

 
2.5
%
 
1,539,330

 
8.9
%
2021
 
121

 
45.9

 
2.8
%
 
1,995,188

 
11.5
%
2022
 
113

 
81.6

 
4.9
%
 
1,416,807

 
8.2
%
2023
 
84

 
45.5

 
2.8
%
 
1,292,511

 
7.4
%
2024
 
69

 
45.9

 
2.8
%
 
1,506,181

 
8.7
%
2025
 
55

 
53.6

 
3.2
%
 
1,050,046

 
6.0
%
2026
 
32

 
37.0

 
2.2
%
 
1,223,712

 
7.0
%
2027
 
18

 
27.4

 
1.7
%
 
376,768

 
2.2
%
2028
 
33

 
29.1

 
1.8
%
 
1,123,860

 
6.5
%
Thereafter
 
43

 
80.2

 
4.9
%
 
1,843,661

 
10.6
%
Total
 
828

 
$
516.2

 
31.3
%
 
14,657,365

 
84.4
%
Industrial Properties
Year of
Lease Expiration
 
Number of
Tenants with
Expiring Leases
 
Base Rent
Associated with Such
Leases (millions) (1)
 
Expiring Rent as
a % of
Rental Income (1)
 
Rentable Area
Subject to Expiring
Leases (sq. ft.)
 
% of
Total Rentable
Area of Account’s
Industrial Properties
Represented by
Expiring Leases
2019
 
93

 
$
7.2

 
0.4
%
 
2,668,080

 
8.3
%
2020
 
87

 
15.2

 
0.9
%
 
6,243,867

 
19.4
%
2021
 
89

 
18.4

 
1.1
%
 
5,936,024

 
18.4
%
2022
 
75

 
16.7

 
1.0
%
 
6,352,736

 
19.7
%
2023
 
54

 
14.9

 
0.9
%
 
4,312,580

 
13.4
%
2024
 
25

 
5.3

 
0.3
%
 
1,495,055

 
4.6
%
2025
 
10

 
4.4

 
0.3
%
 
567,408

 
1.8
%
2026
 
5

 
1.6

 
0.1
%
 
739,076

 
2.3
%
2027
 
7

 
1.9

 
0.1
%
 
279,668

 
0.9
%
2028
 
4

 
1.5

 
0.1
%
 
292,297

 
0.9
%
Thereafter
 
3

 
2.0

 
0.1
%
 
25,476

 
0.1
%
Total
 
452

 
$
89.1

 
5.3
%
 
28,912,267

 
89.8
%

29


Retail Properties
Year of
Lease Expiration
 
Number of
Tenants with
Expiring Leases
 
Base Rent
Associated with Such
Leases (millions) (1)
 
Expiring Rent as
a % of
Rental Income (1)
 
Rentable Area
Subject to Expiring
Leases (sq. ft.)
 
% of
Total Rentable
Area of Account’s
Retail Properties
Represented by
Expiring Leases
2019
 
251

 
$
15.9

 
1.0
%
 
1,379,435

 
8.5
%
2020
 
287

 
20.1

 
1.2
%
 
1,920,561

 
11.9
%
2021
 
281

 
19.4

 
1.2
%
 
2,050,012

 
12.7
%
2022
 
238

 
15.9

 
1.0
%
 
2,265,522

 
14.0
%
2023
 
266

 
20.6

 
1.2
%
 
1,757,342

 
10.9
%
2024
 
158

 
15.9

 
1.0
%
 
1,221,979

 
7.5
%
2025
 
139

 
18.9

 
1.1
%
 
943,230

 
5.8
%
2026
 
102

 
10.1

 
0.6
%
 
954,474

 
5.9
%
2027
 
82

 
7.3

 
0.4
%
 
601,993

 
3.7
%
2028
 
62

 
4.8

 
0.3
%
 
492,399

 
3.0
%
Thereafter
 
37

 
12.5

 
0.8
%
 
1,461,244

 
9.0
%
Total
 
1,903

 
$
161.4

 
9.8
%
 
15,048,191

 
92.9
%
(1)  
Includes base rent from wholly-owned properties and properties held through joint ventures.
Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts, sales volume or contractual increases as defined in the lease agreement. These contractual contingent rentals are not included in the table above.
The following table details the leasing activity during the year ended December 31, 2018 .
 
Leasing Activity
(sq. ft.)
 
Vacant space beginning of year
5,685,814

 
Vacant space acquired during the year
79,874

 
Vacant space disposed of during the year
(176,247
)
 
Vacant space placed into service during the year
(8,116,911
)
 
Expiring leases during the year
8,415,556

 
Vacant space end of year
5,888,086

 
Average remaining lease term*
46 months

 
* Includes office, industrial and retail properties.
Based on leases in place at December 31, 2018 , leases representing approximately 7.9% of net rentable area are scheduled to expire throughout 2019. Rents associated with such lease expirations are generally at or below prevailing market rents in the Account’s primary metropolitan markets.
Residential Properties
The Account’s residential property investment portfolio consisted of 52 properties as of December 31, 2018 , comprised of first class or luxury multi-family, garden, mid-rise, and high-rise apartment buildings, including six investments held in joint ventures. The portfolio contains approximately 20,976 units located in 17 states and the District of Columbia. The portfolio was 93.8% leased as of December 31, 2018 . Twenty-three of the residential properties in the portfolio are subject to mortgages, including six joint venture investments. 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

30


regulation. The Account is responsible for the expenses of operating its residential properties. As of December 31, 2018 , the Account’s residential properties had an aggregate fair value of approximately $5.4 billion.
The following table contains detailed information regarding the apartment complexes in the Account’s portfolio as of December 31, 2018 .
Property
 
Location
 
Number
Of Units
 
Average
Unit Size
(Sq. Ft.)
 
Avg. Rent
Per Unit/
Per Month
The Colorado
 
New York, NY
 
175

 
876

 
$
6,313

The Legacy at Westwood
 
Los Angeles, CA
 
187

 
1,181

 
5,265

The Woodley
 
Washington, D.C.
 
212

 
1,117

 
4,631

MiMA
 
New York, NY
 
500

 
739

 
4,547

The Ashton
 
Washington, D.C.
 
49

 
1,600

 
4,515

250 North 10th Street
 
Brooklyn, NY
 
234

 
676

 
3,644

Township Apartments
 
Redwood City, CA
 
132

 
914

 
3,632

Stella
 
Marina Del Rey, CA
 
244

 
970

 
3,527

The Residences at the Village of Merrick Park
 
Coral Gables, FL
 
120

 
1,231

 
3,492

Larkspur Courts
 
Larkspur, CA
 
248

 
1,001

 
3,289

The Louis at 14th
 
Washington, D.C.
 
268

 
665

 
3,074

Mass Court
 
Washington, D.C.
 
371

 
834

 
2,792

The Palatine
 
Arlington, VA
 
262

 
1,055

 
2,691

Westcreek
 
Westlake Village, CA
 
126

 
951

 
2,673

The Manor at Flagler Village
 
Fort Lauderdale, FL
 
382

 
964

 
2,382

Regents Court
 
San Diego, CA
 
251

 
886

 
2,368

Holly Street Village
 
Pasadena, CA
 
374

 
879

 
2,358

The Manor Apartments
 
Plantation, FL
 
197

 
977

 
2,333

Circa Green Lake
 
Seattle, WA
 
199

 
765

 
2,319

Oceano at Warner Center
 
Woodland Hills, CA
 
244

 
935

 
2,266

Allure at Camarillo
 
Camarillo, CA
 
165

 
880

 
2,227

Union - South Lake Union
 
Seattle, WA
 
284

 
696

 
2,109

Casa Palma
 
Coconut Creek, FL
 
350

 
1,123

 
2,022

Simpson Housing Portfolio (1)
 
Various, U.S.A.
 
3,827

 
1,004

 
1,998

Rancho Del Mar
 
San Clemente, CA
 
250

 
841

 
1,947

Prescott Wallingford Apartments
 
Seattle, WA
 
154

 
665

 
1,928

The Cordelia
 
Portland, OR
 
135

 
667

 
1,838

Palomino Park (1)
 
Highlands Ranch, CO
 
1,184

 
1,100

 
1,804

Houston Apartment Porfolio (1)
 
Houston, TX
 
877

 
1,158

 
1,735

Ashford Meadows Apartments
 
Herndon, VA
 
440

 
1,050

 
1,713

Biltmore at Midtown
 
Atlanta, GA
 
276

 
766

 
1,651

Centric Gateway
 
Charlotte, NC
 
297

 
890

 
1,640

Lofts at SoDo
 
Orlando, FL
 
308

 
961

 
1,630

803 Corday
 
Naperville, IL
 
440

 
937

 
1,622

Cliffs at Barton Creek
 
Austin, TX
 
210

 
952

 
1,610

Fusion 1560
 
St. Petersburg, FL
 
325

 
833

 
1,606

The Maroneal
 
Houston, TX
 
309

 
928

 
1,590

Cherry Knoll
 
Germantown, MD
 
300

 
968

 
1,518

South Florida Apartment Portfolio (1)
 
Boca Raton and Plantation, FL
 
550

 
888

 
1,492

Ascent at Windward
 
Alpharetta, GA
 
328

 
1,075

 
1,413

5 West
 
Tampa, FL
 
318

 
978

 
1,380

BLVD 63 (2)
 
San Diego, CA
 
330

 
428

 
1,335


31


Property
 
Location
 
Number
Of Units
 
Average
Unit Size
(Sq. Ft.)
 
Avg. Rent
Per Unit/
Per Month
Carrington Park
 
Plano, TX
 
364

 
936

 
$
1,326

Churchill on the Park
 
Dallas, TX
 
448

 
868

 
1,277

Aspen Heights (2)
 
Austin, TX
 
166

 
357

 
1,113

Greene Crossing (2)
 
Columbia, SC
 
727

 
369

 
857

Park on Morton (2)
 
Bloomington, IN
 
473

 
1,412

 
812

The Forum - Sam Houston (2)
 
Huntsville, TX
 
294

 
522

 
716

Orion on Orpington (2)
 
Orlando, FL
 
624

 
324

 
639

Cabana Beach San Marcos (2)
 
San Marcos, TX
 
276

 
406

 
560

The Bridges (2)
 
Minneapolis, MN
 
720

 
262

 
514

The Knoll (2)
 
Minneapolis, MN
 
452

 
230

 
442

(1)  
Represents a portfolio containing multiple properties.
(2)  
Investment is a student housing asset. Units are rented per bedroom, and multiple bedrooms can exist in one apartment.  Average rent per month in the table above is reflective of average rent per bedroom.
ITEM 3. LEGAL PROCEEDINGS.
In the normal course of business, the Account may be named, from time to time, as a defendant or may be involved in various legal actions, including arbitrations, class actions and other litigation.
The Account establishes an accrual for all litigation and regulatory matters when it believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted, as appropriate, in light of additional information. The amount of loss ultimately incurred in relation to those matters may be higher or lower than the amounts accrued for those matters.
As of the date of this annual report, management of the Account does not believe that the results of any such claims or litigation, individually or in the aggregate, will have a material effect on the Account’s business, financial position or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.


32


PART II

ITEM 5. MARKET FOR THE REGISTRANT’S SECURITIES, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information . There is no established public trading market for securities issued by the Account. Accumulation units in the Account are sold to eligible participants at the Account’s current accumulation unit value, which is based on the value of the Account’s then current net assets, and are redeemable in accordance with the terms of the participant’s contract. For the period from January 1, 2018 to December 31, 2018 , the high and low accumulation unit values for the Account were $ 418.185 and $ 397.520 , respectively. For the period January 1, 2017 to December 31, 2017 , the high and low accumulation unit values for the Account were $ 398.329 and $ 381.785 , respectively.
Holders . The approximate number of Account contract owners at December 31, 2018 was 1,040,845 .
Securities Authorized for Issuance under Equity Compensation Plans . Not applicable.
Use of Proceeds . Not applicable.
Purchases of Equity Securities by Issuer . Not applicable.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data should be considered in conjunction with the Account’s Consolidated Financial Statements and notes provided in this Form 10-K (amounts in millions except for per accumulation unit amounts).
 
 
Years Ended December 31,
2018
 
2017
 
2016
 
2015
 
2014
Investment income:
 
 
 
 
 
 
 
 
 
 
Real estate income, net
 
$
561.8

 
$
582.0

 
$
546.4

 
$
486.2

 
$
457.0

Income from real estate joint ventures and limited partnerships
 
204.7

 
214.1

 
161.8

 
140.1

 
148.1

Dividends and interest
 
171.2

 
80.4

 
58.9

 
57.6

 
47.7

Total investment income
 
937.7

 
876.5

 
767.1

 
683.9

 
652.8

Expenses
 
192.8

 
205.2

 
202.0

 
182.9

 
163.0

Investment income, net
 
744.9

 
671.3

 
565.1

 
501.0

 
489.8

Net realized and unrealized gains on investments and mortgage loans payable
 
436.7

 
387.1

 
619.8

 
1,145.4

 
1,628.4

Net increase in net assets resulting from operations
 
1,181.6

 
1,058.4

 
1,184.9

 
1,646.4

 
2,118.2

Participant transactions, net
 
(281.6
)
 
(420.5
)
 
759.8

 
884.6

 
802.9

Net increase in net assets
 
$
900.0

 
$
637.9

 
$
1,944.7

 
$
2,531.0

 
$
2,921.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Years Ended December 31,
2018
 
2017
 
2016
 
2015
 
2014
Total assets
 
$
28,818.2

 
$
27,453.6

 
$
26,985.2

 
$
24,399.4

 
$
22,408.7

Total liabilities
 
2,975.6

 
2,511.0

 
2,680.5

 
2,039.4

 
2,579.7

Total net assets
 
$
25,842.6

 
$
24,942.6

 
$
24,304.7

 
$
22,360.0

 
$
19,829.0

Number of per accumulation unit amounts
 
60.7

 
61.3

 
62.4

 
60.4

 
57.9

Net asset value, per accumulation unit
 
$
417.416

 
$
398.329

 
$
381.636

 
$
362.773

 
$
335.393

Mortgage loans payable
 
$
2,608.0

 
$
2,238.3

 
$
2,332.1

 
$
1,794.4

 
$
2,373.8


33


Quarterly Selected Financial Data
The following quarterly selected unaudited financial data for each full quarter of 2018 and 2017 are derived from the Consolidated Financial Statements of the Account for the years ended December 31, 2018 and 2017 (millions).
 
 
2018
 
Year Ended December 31, 2018
For the Three Months Ended
 
March 31
 
June 30
 
September 30
 
December 31
 
Investment income, net
 
$
179.9

 
$
200.6

 
$
178.0

 
$
186.4

 
$
744.9

Net realized and unrealized gain on investments and mortgage loans payable
 
55.0

 
204.8

 
119.2

 
57.7

 
436.7

Net increase in net assets resulting from operations
 
$
234.9

 
$
405.4

 
$
297.2

 
$
244.1

 
$
1,181.6

Total return
 
0.95
%
 
1.63
%
 
1.17
%
 
0.95
%
 
4.79
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
Year Ended December 31, 2017
For the Three Months Ended
 
March 31
 
June 30
 
September 30
 
December 31
 
Investment income, net
 
$
139.2

 
$
166.0

 
$
180.6

 
$
185.5

 
$
671.3

Net realized and unrealized gain on investments and mortgage loans payable
 
135.1

 
32.3

 
86.2

 
133.5

 
387.1

Net increase in net assets resulting from operations
 
$
274.3

 
$
198.3

 
$
266.8

 
$
319.0

 
$
1,058.4

Total return
 
1.13
%
 
0.81
%
 
1.08
%
 
1.29
%
 
4.37
%
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE ACCOUNT’S FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of the Account's financial condition and results of operations should be read together with the Consolidated Financial Statements and notes contained in this report and with consideration to the sub-section entitled “Forward-looking Statements,” which begins below, and the section entitled “Item 1A. Risk Factors.” The past performance of the Account is not indicative of future results.
Forward-looking Statements
Some statements in this Form 10-K which are not historical facts may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about management’s expectations, beliefs, intentions or strategies for the future, include the assumptions and beliefs underlying these forward-looking statements, and are based on current expectations, estimates and projections about the real estate industry, domestic and global economic conditions, including conditions in the credit and capital markets, the sectors, and markets in which the Account invests and operates, and the transactions described in this Form 10-K. While management believes the assumptions underlying its forward-looking statements and information to be reasonable, such information may be subject to uncertainties and may involve certain risks which may be difficult to predict and are beyond management’s control. These risks and uncertainties could cause actual results to differ materially from those contained in any forward-looking statement. These risks and uncertainties include, but are not limited to, the following:
•
Acquiring and Owning Real Estate. The risks associated with acquiring and owning real property, including general economic and real estate market conditions, the availability of, and economic cost associated with, financing the Account’s properties, the risk that the Account’s properties become too concentrated (whether by geography, sector or by tenant mix), competition for acquiring real estate properties, leasing risk (including

34


tenant defaults) and the risk of uninsured losses at properties (including due to terrorism, natural disasters, and acts of violence);
•
Selling Real Estate. The risk that the sales price of a property might differ, perhaps significantly, from its estimated or appraised value, leading to losses or reduced profits to the Account, the risk that the Account might not be able to sell a property at a particular time for a price which management believes represents its fair or full value, the risk of a lack of availability of financing (for potential purchasers of the Account’s properties), risks associated with disruptions in the credit and capital markets, and the risk that the Account may be required to make significant expenditures before the Account is able to market and/or sell a property;
•
Valuation. The risks associated with property valuations, including the fact that appraisals can be subjective in a number of respects and the fact that the Account’s appraisals are generally obtained on a quarterly basis and there may be periods in between appraisals of a property during which the value attributed to the property for purposes of the Account’s daily accumulation unit value may be more or less than the actual realizable value of the property;
•
Borrowing. Risks associated with financing the Account’s properties, including the risk of default on loans secured by the Account’s properties (which could lead to foreclosure), the risk of default under unsecured line of credit or credit facilities underwritten by third-party lenders, the risk associated with high loan-to-value ratios on the Account’s properties (including the fact that the Account may have limited, or no net value in such a property), the risk that significant sums of cash could be required to make principal and interest payments on the loans and the risk that the Account may not have the ability to obtain financing or refinancing on favorable terms (or at all), which may be aggravated by general disruptions in credit and capital markets;
•
Participant Transactions and Cash Management. Investment risk associated with participant transactions, in particular that (i) significant net participant transfers out of the Account may impair our ability to pursue or consummate new investment opportunities that are otherwise attractive to the Account and/ or may result in sales of real estate-related assets to generate liquidity, (ii) significant net participant transfers into the Account may result, on a temporary basis, in our cash holdings and/or holdings in liquid non-real estate-related investments exceeding our long-term targeted holding levels and (iii) high levels of cash and liquid non-real estate-related investments in the Account during times of appreciating real estate values can impair the Account’s overall return;
•
Joint Venture Investments. The risks associated with joint ventures organized as limited partnerships or limited liability companies, as applicable, including the risk that a co-venturer may have interests or goals inconsistent with that of the Account, that a co-venturer may have financial difficulties, and the risk that the Account may have limited rights with respect to operation of the property and transfer of the Account’s interest;
•
Regulatory Matters. Uncertainties associated with environmental liability and regulations and other governmental regulatory matters such as zoning laws, rent control laws, and property taxes;
•
Foreign Investments. The risks associated with purchasing, owning and disposing foreign investments (primarily foreign real estate properties, foreign real estate loans, and foreign mezzanine and other debt), including political risk, the risk associated with foreign currency fluctuations (whether hedged or not), regulatory and taxation risks and risks of enforcing judgments;
•
Conflicts of Interest. Conflicts of interest associated with TIAA serving as investment manager of the Account and provider of the liquidity guarantee at the same time as TIAA and its affiliates are serving as an investment manager to other real estate accounts or funds, including conflicts associated with satisfying its fiduciary duties to all such accounts and funds associated with purchasing, selling and leasing of properties;
•
Required Property Sales. The risk that, if TIAA were to own too large a percentage of the Account’s accumulation units through funding the liquidity guarantee (as determined by the independent fiduciary), the independent fiduciary could require the sales of properties to reduce TIAA’s ownership interest, which sales could occur at times and at prices that depress the sale proceeds to the Account;
•
Government and Government Agency Securities. Risks associated with investment securities issued by U.S. government agencies and U.S. government-sponsored entities, including the risk that the issuer may not have their securities backed by the full faith and credit of the U.S. government, and that transaction activity may fluctuate significantly from time to time, which could negatively impact the value of the securities and the Account’s ability to dispose of a security at a favorable time; and

35


•
Liquid Assets and Securities. Risks associated with investments in real estate-related liquid assets (which could include, from time to time, registered or unregistered REIT securities and CMBS), and non-real estate-related liquid assets, including:
•
Financial/credit risk—Risks that the issuer will not be able to pay principal and interest when due or that the issuer’s earnings will fall;
•
Market volatility risk—Risk that the changing conditions in financial markets may cause the Account’s investments to experience price volatility;
•
Interest rate volatility risk—Risk that interest rate volatility may affect the Account’s current income from an investment or the pricing of that investment. In general, changing interest rates could have unpredictable effects on the markets and may expose markets to heightened volatility; and
•
Deposit/money market risk—Risks that the Account could experience losses if banks fail.
More detailed discussions of certain of these risk factors are contained in the section of this Form 10-K entitled “Item 1A. Risk Factors” and also in the section entitled “Item 7A. 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 that this report is filed. Neither management nor the Account undertake any obligation to update publicly or revise any forward-looking statement, whether as a result of new information, changed assumptions, future events or otherwise.
Commercial real estate market statistics discussed in this section are obtained by the Account from sources that management considers reliable, but some of the data are preliminary for the year or quarter ended December 31, 2018 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.
2018 U.S. ECONOMIC AND COMMERCIAL REAL ESTATE OVERVIEW
Economic Overview and Outlook
Key Macro Economic Indicators*
 
 
 
 
Actuals
 
Forecast
2018
 
1Q 2018
 
2Q 2018
 
3Q 2018
 
4Q 2018
2019
 
2020
Economy (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Domestic Product ("GDP")
 
3.2%
 
2.2%
 
4.2%
 
3.4%
 
1.9%
 
2.5%
 
1.9%
Employment Growth (Thousands)
 
2,638
 
655
 
651
 
568
 
695
 
2,590
 
1,800
Unemployment Rate
 
3.9%
 
4.1%
 
4.0%
 
3.7%
 
3.9%
 
4.4%
 
4.1%
Interest Rates (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10 Year Treasury
 
3.0%
 
2.8%
 
2.9%
 
2.9%
 
3.0%
 
3.0%
 
3.1%
Sources: Blue Chip Economic Indicators, Blue Chip Financial Forecasts, BEA, Bureau of Labor Statistics, Federal Reserve and Moody's Analytics
*
Data subject to revision
(1)  
GDP growth rates are annual rates. Quarterly unemployment rates are the reported value for the final month of the quarter while average annual values represent a twelve-month average.
(2)  
The Treasury rates are an average over the stated period.
The Federal Open Market Committee ("Committee") voted in December to raise the target range for the federal funds rate to 2.25% - 2.50%, an increase from 1.25% - 1.50% on January 1, 2018, due to strength in the labor market and a continued rise in economic activity as indicated in the December meeting minutes. Moving forward, the Committee will continue to assess realized and expected economic conditions relative to employment and 2.0% inflation objectives.

36


Consumer spending increased in the fourth quarter after rising at a similar pace in the third quarter and has grown every month in 2018. In the near term, gains in employment, real disposable income, and households’ net worth continue to be supportive of solid personal consumption expenditures growth. Consumer and business confidence remains high, and unemployment rates have fallen to the lowest rates over the last ten years. These favorable factors are expected to favorably impact GDP in 2019, although the rate of growth in the near term is expected to slow due to the lack of tax-related fiscal stimulus that existed in 2018 and the continued rise of interest rates. GDP is expected to slow to a 2.5% rate in 2019 and a 1.9% rate in 2020.
Real Estate Market Conditions and Outlook
Commercial real estate conditions remained steady throughout 2018. Tenant demand increased and was strong enough to support year-over-year vacancy rate improvements across the office, industrial, retail and multi-family sectors. Real Capital Analytics (“RCA”) reported that sales of office, industrial, retail, and multi-family properties totaled $136.8 billion during fourth quarter 2018, a 2.5% decrease quarter-over-quarter and a 13.9% increase year-over-year. Property pricing as calculated by the Green Street Advisor Commercial Property Price Index (“CPPI”) increased 0.3% during the fourth quarter and 1.9% on a year-over-year basis. Property pricing has remained relatively flat throughout 2018.
Expected GDP growth of 2.5% and 1.9% during 2019 and 2020, respectively, is a sign the economy is anticipated to slow. Geopolitical uncertainties along with rising interest rates remain key economic headwinds. However, these risks have been largely mitigated by a healthy labor market and strong consumer confidence, which thus far have shown no signs of moderating in the near term. Moreover, real estate’s sensitivity to interest rate movements should be tempered by net operating income growth from stronger tenant demand and favorable supply/demand fundamentals. Consequently, real estate market conditions should remain relatively stable throughout 2019.
For the quarter ending December 31, 2018, the NCREIF Fund Index Open-End Diversified Core Equity (“NFI-ODCE”) Equal Weight total return, net of fees decreased from 1.88% in the third quarter to 1.39% in the fourth quarter. For the year, the NFI-ODCE Equal Weight total return, net of fees was 7.30%. The Account’s directly held real estate property assets generated a 1.68% total return during the fourth quarter. Total returns were positive for the 35 th consecutive quarter.
CHART-D1A4C5629F895C018A9.JPG

37


Data for the Account’s top five markets in terms of market value as of December 31, 2018 are provided below. The five markets presented below represent 43.8% of the Account’s total real estate portfolio. Across all markets, the Account’s properties are 92.1% leased.
Top 5 Metro Areas by Fair Value
 
Account %
Leased Fair
Value
Weighted*
 
Number of
Property
Investments
 
Metro Area
Fair Value
as a % of Total
RE Portfolio**
 
Metro Area
Fair Value
as a % of Total
Investments**
Washington-Arlington-Alexandria, DC-VA-MD-WV
 
85.3%
 
13
 
11.0%
 
8.5%
New York-Jersey City-White Plains, NY-NJ
 
91.8%
 
14
 
10.9%
 
8.3%
Los Angeles-Long Beach-Glendale, CA
 
91.8%
 
15
 
9.5%
 
7.3%
San Francisco-Redwood City-South San Francisco, CA
 
94.5%
 
8
 
6.5%
 
5.0%
Boston, MA
 
91.2%
 
6
 
5.9%
 
4.5%
*Weighted by fair value, which differs from the calculations provided for market comparisons to CBRE-EA data and are used here to reflect the fair value of the Account’s monetary investments in those markets.
**Wholly-owned properties are represented at fair value and gross of any debt, while joint venture properties are represented at the net equity value.
Office
Leasing in the office sector is historically driven by companies involved in the professional and business services sector, with technology-related companies included within this classification. The sector added 87,000 jobs during the fourth quarter, including 7,000 from the financial services sector. Consistent with the impact of jobs added during the fourth quarter, nationwide office vacancy decreased to 12.6% in the fourth quarter as compared to 12.8% in the previous quarter, as reported by CB Richard Ellis Econometric Advisors ("CBRE-EA"). The lowest vacancy rates nationwide continue to be present in markets with a strong technology and research presence (e.g., San Francisco, Seattle). The vacancy rate for the Account declined to 13.9% in the fourth quarter from 14.2% in the previous quarter, driven by the addition of an office property located in the New York metro in the fourth quarter that was almost fully leased at acquisition. The vacancy rate in Washington, D.C. is above the market average, driven by elevated vacancy rates at the Account's two largest properties in the metro area due to recently expired leases. Signed leases scheduled to begin in the first and second quarters of 2019 are expected to bring the Account's vacancy in this metro area back to the market average in the latter half of 2019. The office vacancy rate in the New York metro improved in the fourth quarter of 2018 due to property acquisitions in New York, but the overall vacancy rate in the market remains elevated due to two properties undergoing redevelopment which is expected to continue through 2019 and into 2020. The Account's overall vacancy rate for the office portfolio, excluding the two New York properties under redevelopment, is in line with the overall office sector market average of 12.6%.
 
 
 
 
 
 
Account Square Foot Weighted Average Vacancy
 
Market Vacancy*
Top 5 Office Metropolitan Areas
 
Total Sector by Metro Area ($M)
 
% of Total
Investments
 
2018 Q4
 
2018 Q3
 
2018 Q4
 
2018 Q3
Account / Nation
 
 
 
 
 
13.9%
 
14.2%
 
12.6%
 
12.8%
Washington-Arlington-Alexandria, DC-VA-MD-WV
 
$
1,464.3

 
5.1%
 
19.7%
 
18.1%
 
14.9%
 
14.9%
San Francisco-Redwood City-South San Francisco, CA
 
1,211.7

 
4.3%
 
3.2%
 
3.7%
 
5.5%
 
6.0%
Boston, MA
 
1,188.3

 
4.2%
 
10.0%
 
11.7%
 
9.4%
 
9.2%
New York-Jersey City-White Plains, NY-NJ
 
1,167.0

 
4.1%
 
23.5%
 
30.0%
 
9.3%
 
9.1%
Los Angeles-Long Beach-Glendale, CA
 
751.2

 
2.6%
 
6.5%
 
8.3%
 
12.9%
 
13.6%
*Source: CBRE-EA. Market vacancy is defined as the percentage of space vacant. The Account’s vacancy is defined as the square foot-weighted percentage of unleased space.

38


Industrial
Industrial market conditions are primarily influenced by GDP growth, international trade, and consumer spending, especially e-commerce sales. Tariffs enacted in 2018 on goods exchanged with the United States' largest trading partner, China, has been a notable headwind to international trade. Despite the protectionist measures, demand for industrial space has remained resilient as the national industrial availability rate decreased for the 34 th consecutive quarter to 7.0% in the fourth quarter from 7.1% in the third quarter, as reported by CBRE-EA. American consumers continue to shift retail purchases to e-commerce platforms, a trend which generally has a favorable impact on the industrial sector. E-commerce in 2018 was the highest year on record as a percent of total retail sales, as measured by the U.S. Department of Commerce, and this trend is expected to continue over the long term. A strong pipeline of new industrial construction is expected to close much of the demand-supply gap in the sector over the coming months, but rising wages, a strong US dollar, and steady consumer spending are expected to support continued growth for the sector in 2019. The Account's average industrial vacancy rate declined to 7.5% in the fourth quarter from 7.7% in the previous quarter, driven by the purchase of two industrial properties fully leased at acquisition. Vacancy in the Los Angeles metro increased from the third quarter due to a lease expiration. Demand for the vacated space has been strong and the space is expected to be leased in early 2019. Elevated vacancy in the Dallas metro area is reflective of several short-term leases expiring at one of the Account's properties in the market. The vacant space is expected to be redeployed in the near-term with tenant leases of a longer duration. Elevated vacancy in the Fort Lauderdale metro area will continue until at least the second quarter of 2019, when a significant lease is set to commence at one of the Account's properties.
 
 
 
 
 
 
Account Square Foot Weighted Average Vacancy
 
Market Vacancy*
Top 5 Industrial Metropolitan Areas
 
Total Sector by Metro Area ($M)
 
% of Total
Investments
 
2018 Q4
 
2018 Q3
 
2018 Q4
 
2018 Q3
Account / Nation
 
 
 
 
 
7.5%
 
7.7%
 
7.0%
 
7.1%
Riverside-San Bernardino-Ontario, CA
 
$
841.8

 
3.0%
 
0.0%
 
0.0%
 
6.0%
 
5.9%
Los Angeles-Long Beach-Glendale, CA
 
369.4

 
1.3%
 
8.5%
 
5.2%
 
4.5%
 
4.5%
Tacoma-Lakewood, WA
 
346.6

 
1.2%
 
2.0%
 
2.0%
 
4.6%
 
4.8%
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL
 
274.4

 
1.0%
 
15.4%
 
15.4%
 
5.6%
 
5.4%
Dallas-Plano-Irving, TX
 
273.5

 
1.0%
 
12.7%
 
12.7%
 
9.3%
 
9.1%
*Source: CBRE-EA. CBRE-EA considers Tacoma part of the Seattle industrial market. Market availability rates reflect the Seattle total. Market availability is the percentage of space available for rent. The Account's vacancy is the square foot-weighted percentage of unleased space.
Multi-Family
Apartment demand is generated by a combination of economic, demographic and socio-economic factors including job growth, household formations, and trends in the U.S. homeownership rate. The national apartment vacancy rate fell to the lowest level since 2001 to 4.0% in the fourth quarter, down from 4.2% in the third quarter, as reported by CBRE-EA. Despite a significant amount of new construction absorbing into many markets in 2018, demand for apartment space has remained strong, supported by continued job and wage growth. The vacancy rate of the Account’s apartment properties decreased to 6.2% in the fourth quarter of 2018 as compared with 6.8% in the third quarter, primarily driven by the lease up of a newly constructed apartment property. The Account's overall vacancy among apartments has trended above the market average over the last few quarters, primarily due to renovation efforts at multiple properties across the portfolio to improve the long term value of the properties. Renovations will continue in 2019 as units become available from expiring leases, which will likely keep overall apartment vacancy higher than the market average in the near term.

39


 
 
 
 
 
 
Account Units Weighted Average Vacancy
 
Market Vacancy*
Top 5 Apartment Metropolitan Areas
 
Total Sector by
Metro Area ($M)
 
% of Total
Investments
 
2018 Q4
 
2018 Q3
 
2018 Q4
 
2018 Q3
Account / Nation
 
 
 
 
 
6.2%
 
6.8%
 
4.0%
 
4.2%
Washington-Arlington-Alexandria, DC-VA-MD-WV
 
$
783.8

 
2.8%
 
6.0%
 
8.1%
 
4.3%
 
4.7%
Los Angeles-Long Beach-Glendale, CA
 
685.3

 
2.4%
 
6.7%
 
7.6%
 
3.1%
 
3.6%
New York-Jersey City-White Plains, NY-NJ
 
524.3

 
1.8%
 
3.5%
 
6.2%
 
2.6%
 
3.1%
Denver-Aurora-Lakewood, CO
 
404.4

 
1.4%
 
7.4%
 
4.9%
 
4.5%
 
4.9%
San Diego-Carlsbad, CA
 
320.9

 
1.1%
 
5.6%
 
4.3%
 
3.6%
 
3.7%
*Source: CBRE-EA. Market vacancy is the percentage of units vacant. The Account’s vacancy is the percentage of unleased units.
Retail
Retail demand in the Account's portfolio is driven by US consumers, whose willingness to spend directly correlates with retailers' need for domestic rental space. Preliminary data from the U.S. Census Bureau indicate that retail sales excluding motor vehicles and parts increased 5.5% in 2018 as compared to 2017. Disruption from e-commerce continues to challenge the overall retail market. Retail properties in suboptimal locations or with a poor tenant mix are especially compromised as the market evolves, but well-positioned properties continue to show strength due to continued demand for premier retail space. The Account's retail portfolio is composed primarily of high-end lifestyle shopping centers and regional malls in large metropolitan or tourist centers. Moreover, the retail portfolio is managed proactively to minimize significant exposure to financially compromised retailers. The vacancy rate for the Account's retail portfolio increased to 5.9% in the fourth quarter from 5.4% in the third quarter due, primarily due to the departure of a junior anchor tenant at one of the Account's properties at the expiration of the lease. Active negotiations for a replacement tenant are in the final stages and the space is expected to be redeployed in the latter half of 2019. Despite the increase in vacancy, the Account's retail portfolio maintains a vacancy rate below the market average across all retail types. This trend is expected to continue over the long term due to the healthy underlying characteristics of the Account's portfolio, such as a diverse mix of high quality tenants in favorable geographic locations.
 
 
 
 
 
 
Account Square Foot Weighted Average Vacancy
 
Market Vacancy*
 
 
Total by
Retail Type ($M)
 
% of Total
Investments
 
2018 Q4
 
2018 Q3
 
2018 Q4
 
2018 Q3
National Retail
 
 
 
 
 
5.9%
 
5.4%
 
6.3%
 
6.4%
  Lifestyle & Mall
 
$
2,540.1

 
60.6%
 
4.8%
 
5.0%
 
5.3%
 
5.8%
  Neighborhood, Community & Strip**
 
1,061.3

 
25.3%
 
7.1%
 
6.3%
 
9.0%
 
9.1%
  Power Center**
 
592.6

 
14.1%
 
4.2%
 
2.1%
 
6.9%
 
6.8%
*Source: CBRE-EA. Market vacancy is the percentage of space available for rent. The Account's vacancy is the square foot-weighted percentage of unleased space.
**The Power Center designation is reserved for properties with three or more anchor units. Anchor units are leased to large retailers such as department stores, home improvement stores, and warehouse clubs. Properties with the Neighborhood, Community and Strip designation consist of two or less anchor units.

40


INVESTMENTS
As of December 31, 2018 , the Account had total net assets of $25.8 billion , a 3.6% increase from December 31, 2017 .
As of December 31, 2018 , the Account held 76.8% of its total investments in real estate and real estate joint ventures. The Account also held investments in government agency notes representing 7.2% of total investments, U.S. Treasury securities representing 7.2% of total investments, real estate-related equity securities representing 5.0% of total investments, loans receivable representing 3.2% of total investments, and real estate limited partnerships representing 0.6% of total investments.
The outstanding principal on mortgage loans payable on the Account’s wholly-owned real estate portfolio as of December 31, 2018 was $2.7 billion . The Account’s proportionate share of outstanding principal on mortgage loans payable within its joint venture investments was $3.2 billion , which is netted against the underlying properties when determining the joint venture investments fair value presented on the Consolidated Schedules of Investments. When the mortgage loans payable within the joint venture investments are considered, total outstanding principal on the Account’s portfolio as of December 31, 2018 was $5.9 billion , which represented a loan-to-value ratio of 18.5% . As of December 31, 2018 , the Account has no active loans outstanding on the unsecured line of credit.
Management believes that the Account’s real estate portfolio is diversified by location and property type. The Account’s largest investment, Fashion Show , located in Las Vegas , NV , represented 4.9% of total real estate investments and 3.9% of total investments. The Account does not 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 that management believes (i) have maximized in value, (ii) have underperformed or face deteriorating property-specific or market conditions, (iii) need significant capital infusions in the future, (iv) are appropriate to dispose of in order to remain consistent with the Account’s intent to diversify the Account by property type and geographic location (including reallocating the Account’s exposure to or away from certain property types in certain geographic locations), or (v) otherwise do not satisfy the investment objectives of the Account. Management, from time to time, will evaluate the need to manage liquidity in the Account as part of its analysis as to whether to undertake a particular asset sale. The Account may reinvest any sale proceeds that it does not need to pay operating expenses or to meet debt service or redemption requests (e.g . , participant withdrawals or benefit payments).
The following charts reflect the diversification of the Account's real estate assets by region and property type and the Account's ten largest investments based on fair value at December 31, 2018 .
Diversification by Fair Value (1)
 
 
West
 
East
 
South
 
Midwest
 
Total
Office
 
13.9
%
 
19.0
%
 
5.3
%
 
—
%
 
38.2
%
Apartment
 
9.6
%
 
7.5
%
 
6.6
%
 
1.0
%
 
24.7
%
Retail
 
7.7
%
 
3.1
%
 
7.9
%
 
0.8
%
 
19.5
%
Industrial
 
8.3
%
 
1.3
%
 
4.2
%
 
0.5
%
 
14.3
%
Other (2)
 
0.6
%
 
2.5
%
 
0.1
%
 
0.1
%
 
3.3
%
Total
 
40.1
%
 
33.4
%
 
24.1
%
 
2.4
%
 
100.0
%
(1)  
Wholly-owned properties are represented at fair value and gross of any debt, while joint venture properties are represented at the net equity value.
(2)  
Represents interests in Storage Portfolio investments, a fee interest encumbered by a ground lease real estate investment and land.
Properties in the “West” region are located in: AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY
Properties in the “East” region are located in: CT, DC, DE, KY, MA, MD, ME, NC, NH, NJ, NY, PA, RI, SC, VA, VT, WV
Properties in the “South” region are located in: AL, AR, FL, GA, LA, MS, OK, TN, TX
Properties in the “Midwest” region are located in: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI

41


Ten Largest Real Estate Investments
Property Investment Name
 
Ownership Percentage
 
City
 
State
 
Type
 
Gross Real Estate Fair Value (1)
 
Debt Fair Value (2)
 
Net Real Estate Fair Value (3)
 
Property as a
% of Total
Real Estate
Portfolio (4)
 
Property as a
% of Total
Investments (5)
Fashion Show
 
50%
 
Las Vegas
 
NV
 
Retail
 
$
1,218.1

 
$
412.2

 
$
805.9

 
4.9%
 
3.9%
DDR
 
85%
 
Various
 
U.S.A.
 
Retail
 
1,179.1

 
537.8

 
641.3

 
4.7%
 
3.7%
The Florida Mall
 
50%
 
Orlando
 
FL
 
Retail
 
925.8

 
160.9

 
764.9

 
3.7%
 
2.9%
Simpson Housing Portfolio
 
80%
 
Various
 
U.S.A.
 
Apartment
 
786.8

 
391.9

 
394.9

 
3.1%
 
2.5%
1001 Pennsylvania Avenue
 
100%
 
Washington
 
D.C.
 
Office
 
782.8

 
317.8

 
465.0

 
3.1%
 
2.5%
Colorado Center
 
50%
 
Santa Monica
 
CA
 
Office
 
609.9

 
258.3

 
351.6

 
2.4%
 
1.9%
Fourth and Madison
 
100%
 
Seattle
 
WA
 
Office
 
580.0

 
280.9

 
299.1

 
2.3%
 
1.8%
99 High Street
 
100%
 
Boston
 
MA
 
Office
 
506.4

 
265.1

 
241.3

 
2.0%
 
1.6%
425 Park Avenue
 
100%
 
New York
 
NY
 
Ground Lease
 
461.0

 
—

 
461.0

 
1.8%
 
1.5%
Ontario Industrial Portfolio
 
100%
 
Ontario
 
CA
 
Industrial
 
421.8

 
—

 
421.8

 
1.7%
 
1.3%
(1)  
The Account's share of the fair value of the property investment, gross of debt.
(2)  
Debt fair values are presented at the Account's ownership interest.
(3)  
The Account's share of the fair value of the property investment, net of debt.
(4)  
Total real estate portfolio is the aggregate fair value of the Account's wholly-owned properties and the properties held within a joint venture, gross of debt.
(5)  
Total investments are the aggregate fair value of all investments held by the Account, gross of debt. Total investments, as calculated within this table, will vary from total investments, as calculated in the Account's Schedule of Investments, as joint venture investments are presented in the Schedule of Investments at their net equity position in accordance with U.S. Generally Accepted Accounting Principals ("GAAP").
Property Investments Acquired in 2018   (millions)
Property Name
 
Ownership Percentage
 
Property Type
 
City
 
State
 
Net Purchase Price (less closing costs)
Mortgage Debt
 
Wholly-Owned
 
 
 
 
 
 
 
 
 
 
 
 
30700 Russell Ranch
 
100.00%
 
Office
 
Westlake Village
 
CA
 
$
32.8

$
—

 
Carrington Park
 
100.00%
 
Apartments
 
Plano
 
TX
 
64.2

—

 
Churchill on the Park
 
100.00%
 
Apartments
 
Dallas
 
TX
 
71.2

—

 
Lofts at SoDo
 
100.00%
 
Apartments
 
Orlando
 
FL
 
66.7

35.1

 
Biltmore at Midtown
 
100.00%
 
Apartments
 
Atlanta
 
GA
 
69.5

36.4

 
3131 McKinney
 
100.00%
 
Office
 
Dallas
 
TX
 
47.8

—

 
Cherry Knoll
 
100.00%
 
Apartments
 
Germantown
 
MD
 
58.8

35.3

 
Centric Gateway
 
100.00%
 
Apartments
 
Charlotte
 
NC
 
68.9

—

 
Ascent at Windward
 
100.00%
 
Apartments
 
Alpharetta
 
GA
 
67.8

34.6

 
Fusion 1560
 
100.00%
 
Apartments
 
St. Petersburg
 
FL
 
81.3

37.4

 
10 New Maple Avenue
 
100.00%
 
Industrial
 
Pine Brook
 
NJ
 
18.2

—

 
Otay Mesa Industrial Portfolio
 
100.00%
 
Industrial
 
San Diego
 
CA
 
28.7

—

 
Rancho Del Mar
 
100.00%
 
Apartments
 
San Clemente
 
CA
 
92.6

—

 
Riverchase Village
 
100.00%
 
Retail
 
Hoover
 
AL
 
39.1

—

 

42


Property Investments Acquired in 2018   (millions)
Property Name
 
Ownership Percentage
 
Property Type
 
City
 
State
 
Net Purchase Price (less closing costs)
Mortgage Debt
 
12910 Mulberry Drive
 
100.00%
 
Industrial
 
Whittier
 
CA
 
$
21.6

$
—

 
5 West
 
100.00%
 
Apartments
 
Tampa
 
FL
 
62.0

—

 
Total Wholly-Owned
 
 
 
 
 
 
 
 
 
$
891.2

$
178.8

 
Joint Ventures
 
 
 
 
 
 
 
 
 
 
 
 
West Town Mall (1)
 
50.00%
 
Retail
 
Knoxville
 
TN
 
$
5.0

$
—

 
Park on Morton
 
97.00%
 
Apartments
 
Bloomington
 
IN
 
54.3

26.9

 
The Forum - Sam Houston
 
97.00%
 
Apartments
 
Huntsville
 
TX
 
32.2

15.9

 
T-C 501 Boylston Street Member, LLC (2)
 
50.10%
 
Office
 
Boston
 
MA
 
284.2

108.5

(3)  
Aspen Heights
 
97.00%
 
Apartments
 
Austin
 
TX
 
80.6

40.0

 
Cabana Beach San Marcos
 
97.00%
 
Apartments
 
San Marcos
 
TX
 
45.9

22.8

 
Simpson Housing Portfolio
 
80.00%
 
Apartments
 
Various
 
U.S.A.
 
781.1

392.0

 
440 Ninth Avenue
 
88.52%
 
Office
 
New York
 
NY
 
239.3

121.3

 
Total Joint Ventures
 
 
 
 
 
 
 
 
 
$
1,522.6

$
727.4

 
Total
 
 
 
 
 
 
 
 
 
$
2,413.8

$
906.2

 
Property Investments Sold in 2018 (millions)
Property Name
 
Ownership Percentage
 
Property
Type
 
City
 
State
 
Net Sales Price
(less selling expense) (5)
 
Mortgage Loan Payoff
 
Wholly-Owned
 
 
 
 
 
 
 
 
 
 
 
 
 
Urban Centre
 
100.00%
 
Office
 
Tampa
 
FL
 
$
141.1

 
$
—

 
Chicago Industrial Portfolio (4)
 
100.00%
 
Industrial
 
Joliet
 
IL
 
72.1

 
—

 
430 West 15th Street
 
100.00%
 
Office
 
New York
 
NY
 
152.4

 
—

 
Millennium Corporate Park
 
100.00%
 
Office
 
Redmond
 
WA
 
149.8

 
—

 
Amazon Distribution Center
 
100.00%
 
Industrial
 
Teterboro
 
NJ
 
147.1

 
—

 
Castro Station
 
100.00%
 
Office
 
Mountain View
 
CA
 
178.2

 
—

 
501 Boylston Street (2)
 
100.00%
 
Office
 
Boston
 
MA
 
582.6

 
216.5

(3)  
The Corner
 
100.00%
 
Apartments
 
New York
 
NY
 
218.4

 
105.0

 
Total Wholly-Owned
 
 
 
 
 
 
 
 
 
$
1,641.7

 
$
321.5

 
Joint Ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
400 Fairview
 
90.00%
 
Office
 
Seattle
 
WA
 
$
298.0

 
$
—

 
Miami International Mall (4)
 
50.00%
 
Retail
 
Miami
 
FL
 
4.1

 
—

 
Commerce LIC
 
97.50%
 
Industrial
 
Long Island City
 
NY
 
67.6

 
—

 
Total Joint Ventures
 
 
 
 
 
 
 
 
 
$
369.7

 
$
—

 
Total
 
 
 
 
 
 
 
 
 
$
2,011.4

 
$
321.5

 
(1)  
The Account purchased a 50.0% interest in a building through it's West Town Mall, LLC joint venture investment.
(2)  
On August 21, 2018, the Account sold off 49.9% of its ownership in 501 Boylston Street to Norges Bank ("Norges"), with the Account retaining ownership of the remaining 50.1%. Concurrent with this sale, Norges and the Account formed the joint venture T-C 501 Boylston Street Member, to hold their joint ownership of the property, with Norges contributing 49.9% interest and the Account contributing the remaining 50.1% interest.
(3)  
Represents the transfer of the debt on 501 Boylston Street to the new joint venture with Norges, T-C 501 Boylston Street Member, LLC, of which the Account owns 50.1%.
(4)  
Partial sale of properties or land held within this investment.
(5)  
The net sales price represents the Account's interest.

43


Results of Operations
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
Net Investment Income
The following table shows the results of operations for the years ended December 31, 2018 and 2017 and the dollar and percentage changes for those periods (millions).
 
 
Years Ended
December 31,
 
Change
2018
 
2017
 
$
 
%
INVESTMENT INCOME
 
 
 
 
 
 
 
 
Real estate income, net
 
 
 
 
 
 
 
 
Rental income
 
$
1,083.2

 
$
1,059.6

 
$
23.6

 
2.2
 %
Real estate property level expenses:
 
 
 
 
 
 
 
 
Operating expenses
 
228.6

 
221.2

 
7.4

 
3.3
 %
Real estate taxes
 
178.9

 
166.7

 
12.2

 
7.3
 %
Interest expense
 
113.9

 
89.7

 
24.2

 
27.0
 %
Total real estate property level expenses
 
521.4

 
477.6

 
43.8

 
9.2
 %
Real estate income, net
 
561.8

 
582.0

 
(20.2
)
 
(3.5
)%
Income from real estate joint ventures and limited partnerships
 
204.7

 
214.1

 
(9.4
)
 
(4.4
)%
Interest
 
120.4

 
54.1

 
66.3

 
122.6
 %
Dividends
 
50.8

 
26.3

 
24.5

 
93.2
 %
TOTAL INVESTMENT INCOME
 
937.7

 
876.5

 
61.2

 
7.0
 %
Expenses
 
 
 
 
 

 

Investment management charges
 
62.1

 
72.0

 
(9.9
)
 
(13.8
)%
Administrative charges
 
50.9

 
59.3

 
(8.4
)
 
(14.2
)%
Distribution charges
 
28.0

 
25.7

 
2.3

 
8.9
 %
Mortality and expense risk charges
 
1.3

 
1.2

 
0.1

 
8.3
 %
Liquidity guarantee charges
 
50.5

 
47.0

 
3.5

 
7.4
 %
TOTAL EXPENSES
 
192.8

 
205.2

 
(12.4
)
 
(6.0
)%
INVESTMENT INCOME, NET
 
$
744.9

 
$
671.3

 
$
73.6

 
11.0
 %
N/M—Not meaningful
The table below illustrates and compares rental income, operating expenses and real estate taxes for properties held by the Account for the entirety of each respective year, "same property," as compared to the comparative increases or decreases associated with the acquisition and disposition of properties throughout each respective year.
 
 
Rental Income
 
Operating Expenses
 
Real Estate Taxes
 
 
Change
 
 
 
Change
 
 
 
Change
2018
2017
$
%
 
2018
2017
$
%
 
2018
2017
$
%
Same Property
 
$
922.7

$
912.0

$
10.7

1.2
%
 
$
197.9

$
191.6

$
6.3

3.3
%
 
$
154.7

$
145.9

$
8.8

6.0
%
Properties Acquired
 
81.7

13.4

68.3

 N/M

 
17.2

1.8

15.4

 N/M

 
14.0

2.0

12.0

 N/M

Properties Sold
 
78.8

134.2

(55.4
)
 N/M

 
13.5

27.8

(14.3
)
 N/M

 
10.2

18.8

(8.6
)
 N/M

Impact of Properties Acquired/Sold
 
160.5

147.6

12.9

 N/M

 
30.7

29.6

1.1

 N/M

 
24.2

20.8

3.4

 N/M

Total Property Portfolio
 
$
1,083.2

$
1,059.6

$
23.6

2.2
%
 
$
228.6

$
221.2

$
7.4

3.3
%
 
$
178.9

$
166.7

$
12.2

7.3
%
N/M—Not meaningful


44


Rental Income:
Rental income increased $23.6 million , or 2.2% , as a result of net acquisition activity and an increase in income generated by the Account's properties. The increase in income was driven by rising market rents, expiring rent concessions and improved occupancy. The largest increases were concentrated in the apartment and industrial sectors of the Western region, most notably in California.
Operating Expenses:
Operating expenses increased $7.4 million , or 3.3% , as a result of increases in operating expenses paired with the impact of net acquisition activity. Increases in operating expenses among the Account's largest office properties were a key driver, as well as modest increases across the Account's apartment portfolio. Operating expenses as a percentage of rental income remained relatively flat year-over-year.
Real Estate Taxes:
Real estate taxes increased $12.2 million , or 7.3% , as a result of rising property tax assessments across the Account's portfolio, most notably within the office and apartment sectors coupled with net acquisition activity.
Interest Expense:
Interest expense increased $24.2 million , or 27.0% , primarily due to higher average outstanding principal balances on mortgage loans outstanding.
Income from Real Estate Joint Ventures and Limited Partnerships:
Income from real estate joint ventures and limited partnerships decreased $9.4 million , or 4.4% , due to lower distributions received in 2018, primarily from a large office joint venture in Texas. Although distributed income declined year-over-year from the venture, overall income from the venture was flat. Undistributed income will be released to the Account in future quarters.
Interest and Dividend Income:
Interest income increased significantly as a result of growth in the Account’s loans receivable portfolio during 2018, which added eleven new loans in 2018. The increase was also attributed to higher yields on the Account's investments in short term securities such as U.S. Treasuries, due to rising interest rates throughout the year. Dividend income increased due to a larger REIT portfolio and an increase in dividend yields in 2018.
Expenses:
Investment management, administrative and distribution charges are costs charged to the Account associated with managing the Account. Investment advisory charges are comprised primarily of fixed components, but fluctuate based on the size of the Account’s portfolio of investments, whereas administrative and distribution charges are comprised of more variable components that generally correspond with movements in net assets. These expenses decreased $16.0 million, or 10.2%, from the prior year primarily as result of cost reduction efforts by TIAA.
Mortality and expense risk and liquidity guarantee expenses are contractual charges to the Account from TIAA for TIAA’s assumption of these risks and provision of the liquidity guarantee. The rate for these charges is established annually; the current rates are effective May 1, 2018 through April 30, 2019, and are charged at a fixed rate based on the Account’s net assets. These expenses increased $3.6 million or 7.5% as a result of the increase in overall net assets of the Account, in addition to an increase in the fixed rate for the liquidity guarantee from the previous year.

45


Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable
The following table shows the net realized and unrealized gains (losses) on investments and mortgage loans payable for the years ended December 31, 2018 and 2017 and the dollar and percentage changes for those periods (millions).
 
 
Years Ended
December 31,
 
Change
2018
 
2017
 
$
 
%
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
 
 
 
 
 
 
 
 
Net realized gain (loss) on investments:
 
 
 
 
 
 
 
 
Real estate properties
 
$
242.7

 
$
42.0

 
$
200.7

 
N/M

Real estate joint ventures and limited partnerships
 
75.9

 
(21.9
)
 
97.8

 
N/M

Marketable securities
 
12.8

 
17.6

 
(4.8
)
 
(27.3
)%
Mortgage loans payable
 
(0.4
)
 
—

 
(0.4
)
 
N/M

Total realized gain on investments:
 
331.0

 
37.7

 
293.3

 
N/M

Net change in unrealized appreciation (depreciation) on:
 
 
 
 
 

 

Real estate properties
 
73.1

 
135.5

 
(62.4
)
 
(46.1
)%
Real estate joint ventures and limited partnerships
 
55.5

 
146.8

 
(91.3
)
 
(62.2
)%
Marketable securities
 
(103.0
)
 
50.0

 
(153.0
)
 
N/M

Loans receivable
 
0.3

 
1.2

 
(0.9
)
 
(75.0
)%
Mortgage loans payable
 
79.8

 
15.9

 
63.9

 
N/M

Net change in unrealized appreciation on investments and mortgage loans payable
 
105.7

 
349.4

 
(243.7
)
 
(69.7
)%
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
 
$
436.7

 
$
387.1

 
$
49.6

 
12.8
 %
N/M—Not meaningful
Real Estate Properties:
Wholly-owned real estate investments experienced net realized and unrealized gains of $315.8 million during 2018, compared to $177.5 million during 2017 . Appreciation was strongest among industrial and office investments in the Western region of the country, most notably in California, due to rising market rents driven by strong tenant demand.
Real Estate Joint Ventures and Limited Partnerships:
Real estate joint ventures and limited partnerships experienced net realized and unrealized gains of $131.4 million during 2018, compared to $124.9 million during 2017 . Appreciation was strongest among office investments, most notably in California due to rising market rents driven by strong tenant demand.
Marketable Securities:
The Account’s marketable securities positions experienced net realized and unrealized losses of $90.2 million for the year ended December 31, 2018, compared to net realized and unrealized gains of $67.6 million for 2017. The performance of the Account’s REIT portfolio was in line with the FTSE NAREIT All Equity REITs Index during the year. Additionally, as of December 31, 2018, the Account held $4.1 billion of investments in government agency notes and U.S. Treasury securities, which had nominal changes due to the short-term nature of these investments.
Mortgage Loans Payable:
Mortgage loans payable experienced net realized and unrealized gains of $79.4 million during 2018 compared to unrealized gains of $ 15.9 million during 2017 . The unrealized gains in both periods were consistent with the directional movement of U.S. Treasury rates.

46


Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
Net Investment Income
The following table shows the results of operations for the years ended December 31, 2017 and 2016 and the dollar and percentage changes for those periods (millions).
 
 
Years Ended
December 31,
 
Change
2017
 
2016
 
$
 
%
INVESTMENT INCOME
 
 
 
 
 
 
 
 
Real estate income, net
 
 
 
 
 
 
 
 
Rental income
 
$
1,059.6

 
$
1,009.0

 
$
50.6

 
5.0
 %
Real estate property level expenses:
 
 
 
 
 
 
 
 
Operating expenses
 
221.2

 
218.1

 
3.1

 
1.4
 %
Real estate taxes
 
166.7

 
158.7

 
8.0

 
5.0
 %
Interest expense
 
89.7

 
85.8

 
3.9

 
4.5
 %
Total real estate property level expenses
 
477.6

 
462.6

 
15.0

 
3.2
 %
Real estate income, net
 
582.0

 
546.4

 
35.6

 
6.5
 %
Income from real estate joint ventures and limited partnerships
 
214.1

 
161.8

 
52.3

 
32.3
 %
Interest
 
54.1

 
26.4

 
27.7

 
104.9
 %
Dividends
 
26.3

 
32.5

 
(6.2
)
 
(19.1
)%
TOTAL INVESTMENT INCOME
 
876.5

 
767.1

 
109.4

 
14.3
 %
Expenses
 
 
 
 
 
 
 
 
Investment management charges
 
72.0

 
72.6

 
(0.6
)
 
(0.8
)%
Administrative charges
 
59.3

 
62.1

 
(2.8
)
 
(4.5
)%
Distribution charges
 
25.7

 
27.7

 
(2.0
)
 
(7.2
)%
Mortality and expense risk charges
 
1.2

 
1.2

 
—

 
—
 %
Liquidity guarantee charges
 
47.0

 
38.4

 
8.6

 
22.4
 %
TOTAL EXPENSES
 
205.2

 
202.0

 
3.2

 
1.6
 %
INVESTMENT INCOME, NET
 
$
671.3

 
$
565.1

 
$
106.2

 
18.8
 %
N/M—Not meaningful
The table below illustrates and compares rental income, operating expenses and real estate taxes for properties held by the Account for the entirety of each respective year, "same property," as compared to the comparative increases or decreases associated with the acquisition and disposition of properties throughout each respective year.
 
 
Rental Income
 
Operating Expenses
 
Real Estate Taxes
 
 
Change
 
 
 
Change
 
 
 
Change
2017
2016
$
%
 
2017
2016
$
%
 
2017
2016
$
%
Same Property
 
$
971.1

$
947.1

$
24.0

2.5
%
 
$
201.1

$
199.5

$
1.6

0.8
%
 
$
151.7

$
147.3

$
4.4

3.0
%
Properties Acquired
 
70.3

21.6

48.7

 N/M

 
15.0

5.4

9.6

 N/M

 
12.5

6.0

6.5

 N/M

Properties Sold
 
18.2

40.3

(22.1
)
 N/M

 
5.1

13.2

(8.1
)
 N/M

 
2.5

5.4

(2.9
)
 N/M

Impact of Properties Acquired/Sold
 
88.5

61.9

26.6

 N/M

 
20.1

18.6

1.5

 N/M

 
15.0

11.4

3.6

 N/M

Total Property Portfolio
 
$
1,059.6

$
1,009.0

$
50.6

5.0
%
 
$
221.2

$
218.1

$
3.1

1.4
%
 
$
166.7

$
158.7

$
8.0

5.0
%
N/M—Not meaningful
Rental Income:
Rental income increased $50.6 million, or 5.0%, as a result of net acquisition activity and an increase in income generated by wholly-owned properties held for the duration of the last two years. The rise in same property income was driven by rising market rents and improving occupancy across most properties within the Account. The strongest increases were concentrated along the West Coast, within the apartment and industrial sectors.

47


Operating Expenses:
Operating expenses increased $3.1 million, or 1.4%, as a result of a modest increase in same property operating expenses paired with the impact of net acquisition activity. Of the $1.6 million same property increase, no single property type had a significant impact to the increase.
Real Estate Taxes:
Real estate taxes increased $8.0 million, or 5.0%, as a result of rising property tax assessments for properties held throughout 2017 and 2016, combined with the impact of net acquisition activity. The most significant property tax increases have been concentrated in the Boston and New York metro areas, primarily within the office sector.
Interest Expense:
Interest expense increased $3.9 million, or 4.5%, primarily due to higher average outstanding principal balances on mortgage loans payable.
Income from Real Estate Joint Ventures and Limited Partnerships:
Income from real estate joint ventures and limited partnerships increased $52.3 million, or 32.3%, related to net acquisition activity, primarily the acquisition of Fashion Show, which was acquired during the third quarter of 2016.
Interest and Dividend Income:
Interest income increased as a result of the Account’s higher average investment in loans receivable held throughout each respective year, while dividend income decreased proportionately with the Account's average REIT holdings.
Expenses:
Investment management, administrative and distribution charges are costs charged to the Account associated with managing the Account. Investment advisory charges are comprised primarily of fixed components, but fluctuate based on the size of the Account’s portfolio of investments, whereas administrative and distribution charges are comprised of more variable components that generally correspond with movements in net assets. These expenses decreased $5.4 million, or 3.3%, from the prior year primarily as result of general cost measures.
Mortality and expense risk and liquidity guarantee expenses are contractual charges to the Account from TIAA for TIAA’s assumption of these risks and provision of the liquidity guarantee. The rate for these charges is established annually; the current rates are effective May 1, 2017 through April 30, 2018, and are charged at a fixed rate based on the Account’s net assets. These expenses increased $8.6 million or 22.4% as a direct result of the increase in overall net assets of the Account from the previous year.

48


Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable
The following table shows the net realized and unrealized gains (losses) on investments and mortgage loans payable for the years ended December 31, 2017 and 2016 and the dollar and percentage changes for those periods (millions).
 
 
Years Ended
December 31,
 
Change
2017
 
2016
 
$
 
%
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
 
 
 
 
 
 
 
 
Net realized gain (loss) on investments:
 
 
 
 
 
 
 
 
Real estate properties
 
$
42.0

 
$
(6.2
)
 
$
48.2

 
N/M

Real estate joint ventures and limited partnerships
 
(21.9
)
 
0.6

 
(22.5
)
 
N/M

Marketable securities
 
17.6

 
25.6

 
(8.0
)
 
(31.3
)%
Total realized gain on investments:
 
37.7

 
20.0

 
17.7

 
88.5
 %
Net change in unrealized appreciation on:
 
 
 
 
 
 
 
 
Real estate properties
 
135.5

 
317.5

 
(182.0
)
 
(57.3
)%
Real estate joint ventures and limited partnerships
 
146.8

 
236.9

 
(90.1
)
 
(38.0
)%
Marketable securities
 
50.0

 
30.0

 
20.0

 
66.7
 %
Loans receivable
 
1.2

 
0.3

 
0.9

 
N/M

Mortgage loans payable
 
15.9

 
15.1

 
0.8

 
5.3
 %
Net change in unrealized appreciation on investments and mortgage loans payable
 
349.4

 
599.8

 
(250.4
)
 
(41.7
)%
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
 
$
387.1

 
$
619.8

 
$
(232.7
)
 
(37.5
)%
N/M—Not meaningful
Real Estate Properties:
Wholly-owned real estate investments experienced net realized and unrealized gains of $177.5 million during 2017, compared to $311.3 million of net realized and unrealized gains during 2016. Appreciation slowed during 2017 but appreciation continued across most asset sectors held by the Account, primarily in the Industrial sector. Appreciation was most significant in the Western region of the country, primarily due to strong tenant demand for industrial space in California.
Real Estate Joint Ventures and Limited Partnerships:
Real estate joint ventures and limited partnerships experienced net realized and unrealized gains of $124.9 million during 2017, compared to net realized and unrealized gains of $237.5 million during 2016. While the rate of appreciation slowed during 2017, the Account continues to see continued appreciation across most asset sectors of the Account's joint venture portfolio. The strongest appreciation during 2017 was among the Account's office investments in the Western region. Conversely, appreciation from joint venture regional malls in the Southern region was especially strong in 2016, flattening during 2017, due to moderating market conditions.
Marketable Securities:
The Account’s marketable securities positions experienced net realized and unrealized gains of $67.6 million for the year ended December 31, 2017, compared to $55.6 million for 2016. The performance of the Account’s REIT portfolio was in line with the FTSE NAREIT All Equity REITs Index during the year-long period. The Account's real estate-related equity securities appreciated in line with the index. Additionally, as of December 31, 2017, the Account held $3.9 billion of investments in government agency notes and U.S. Treasury securities, which had nominal changes due to the short-term nature of these investments.
Mortgage Loans Payable:
Mortgage loans payable experienced unrealized gains of $15.9 million during 2017 compared to unrealized gains of $15.1 million during 2016. The unrealized gains in both periods were consistent with the directional movement of U.S. Treasury rates.

49


Liquidity and Capital Resources
As of December 31, 2018 and 2017 , the Account’s cash and cash equivalents and non-real estate-related marketable securities had a value of $4.1 billion and $3.9 billion, respectively ( 15.8% and 15.6% of the Account’s net assets at such dates, respectively).
Liquidity Guarantee
In accordance with the liquidity guarantee obligation, TIAA guarantees that all participants in the Account may redeem their accumulation units at their accumulation unit value next determined after their transfer or cash withdrawal request is received in good order. The Account pays TIAA for the risk associated with providing the liquidity guarantee through a daily deduction from the Account’s net assets.
Management cannot predict whether any future TIAA liquidity unit purchases will be required under this liquidity guarantee. If net outflows were to occur, it could have a negative impact on the Account’s operations and returns and could require TIAA to purchase additional liquidity units, perhaps to a significant degree, as was the case in late 2008 and early 2009.
TIAA’s obligation to provide Account participants liquidity through purchases of liquidity units is not subject to an express regulatory or contractual limitation, although as described in the following paragraph, the independent fiduciary may (but is not obligated to) require the reduction of TIAA’s interest through sales of assets from the Account if TIAA’s interest exceeds the trigger point. Even if the independent fiduciary so requires TIAA’s obligation to provide liquidity under the guarantee, which is required by the New York State Department of Financial Services, will continue. Management believes that TIAA has the ability to meet its obligations under this liquidity guarantee.
Whenever TIAA owns liquidity units, the duties of the Account’s independent fiduciary, as part of its monitoring of the Account, include reviewing the purchase and redemption of liquidity units by TIAA to ensure the Account uses the correct accumulation unit values. In addition, the independent fiduciary’s responsibilities include:
•
establishing the percentage of total accumulation units that TIAA’s ownership should not exceed (the “trigger point”) and creating a method for reviewing the trigger point;
•
approving any adjustment of TIAA’s ownership interest in the Account and, in its discretion, requiring an adjustment if TIAA’s ownership of liquidity units reaches the trigger point; and
•
once the trigger point has been reached, participating in any program to reduce TIAA’s ownership in the Account by utilizing cash flow or liquid investments in the Account, or by utilizing the proceeds from asset sales. If the independent fiduciary were to determine that TIAA’s ownership should be reduced following the trigger point, its role in participating in any asset sales program would include (i) participating in the selection of properties for sale, (ii) providing sales guidelines and (iii) approving those sales if, in the independent fiduciary’s opinion, such sales are desirable to reduce TIAA’s ownership of liquidity units.
In establishing the appropriate trigger point, including whether or not to require certain actions once the trigger point has been reached, the independent fiduciary will assess, among other things and to the extent consistent with the Prohibited Transaction Exemption (PTE 96-76) issued by the U.S. Department of Labor in 1996 with respect to the liquidity guarantee and the independent fiduciary’s duties under ERISA, the risk that a conflict of interest could arise due to the level of TIAA’s ownership interest in the Account.
Redemption of Liquidity Units. The independent fiduciary is vested with oversight and approval over any redemption of TIAA’s liquidity units, acting in the best interests of Real Estate Account participants.
As a general matter, the independent fiduciary may authorize or direct the redemption of all or a portion of liquidity units at any time and TIAA will request the approval of the independent fiduciary before any liquidity units are redeemed. Upon termination and liquidation of the Account (wind-up), any liquidity units held by TIAA will be the last units redeemed, unless the independent fiduciary directs otherwise.

50


Net Income and Marketable Securities
Net investment income continues to be an additional source of liquidity for the Account. Net investment income was $744.9 million for the year ended December 31, 2018 as compared to $671.3 million in the prior year. Total net investment income increased as described more fully in the Results of Operations section.
As of December 31, 2018 , cash and cash equivalents, along with real estate-related and non-real estate-related marketable securities comprised 21.3% of the Account’s net assets. The Account’s real estate-related marketable securities primarily consist of publicly traded REITs. The Account’s liquid assets continue to be available to purchase suitable real estate properties, meet the Account’s debt obligations, expense needs, and participant redemption requests (i.e., participant withdrawals or benefit payments).
Leverage
As of December 31, 2018 , the Account’s ratio of outstanding principal amount of debt (inclusive of the Account’s proportionate share of debt held within its joint venture investments) to total gross asset value (i.e., a “loan-to-value ratio”) was 18.5% . The Account intends to maintain its loan-to-value ratio at or below 30% (this ratio is measured at the time of incurrence and after giving effect thereto). The Account’s total gross asset value, for these purposes, is equal to the total fair value of the Account’s assets (including the fair value of the Account’s net equity interest in joint ventures), with no reduction associated with any indebtedness on such assets.
As of December 31, 2018 , principal and interest payments due in the next twelve months for mortgages on properties held directly by the Account are $107.2 million and $102.4 million, respectively. The Account currently has sufficient liquidity in the form of cash and cash equivalents and short term securities to meet its current mortgage obligations.
The Account has a $500.0 million unsecured revolving credit agreement to facilitate short-term cash needs. No draws against the line have occurred to date.
In times of high net inflow activity, in particular during times of high net participant transfer inflows, management may determine to apply a portion of such cash flows to make prepayments of indebtedness prior to scheduled maturity, which would have the effect of reducing the Account’s loan-to-value ratio.
Recent Transactions
The following describes property transactions by the Account during the fourth quarter of 2018. 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.
Purchases
Property Name
 
Purchase Date
 
Ownership Percentage
 
Sector
 
Location
 
Net Purchase Price (1)
Otay Mesa Industrial Portfolio
 
10/01/2018
 
100.00%
 
Industrial
 
San Diego, CA
 
$
28.7

Rancho Del Mar
 
10/22/2018
 
100.00%
 
Apartments
 
San Clemente, CA
 
92.6

Riverchase Village
 
10/26/2018
 
100.00%
 
Retail
 
Hoover, AL
 
39.1

Cabana Beach San Marcos
 
10/26/2018
 
97.00%
 
Apartments
 
San Marcos, TX
 
45.9

12910 Mulberry Drive
 
11/15/2018
 
100.00%
 
Industrial
 
Whittier, CA
 
21.6

Simpson Housing Portfolio
 
11/29/2018
 
80.00%
 
Apartments
 
Various, U.S.A.
 
781.1

440 Ninth Avenue
 
12/06/2018
 
88.52%
 
Office
 
New York, NY
 
239.3

5 West
 
12/19/2018
 
100.00%
 
Apartments
 
Tampa, FL
 
62.0

(1)  
The net purchase price represents the purchase price and closing costs.

51


Sales
Property Name
 
Sales Date
 
Ownership Percentage
 
Sector
 
Location
 
Net Sales Price (1)
Realized Gain on Sale (2)
Miami International Mall (3)
 
11/09/2018
 
50.00%
 
Retail
 
Miami, FL
 
$
4.1

$
2.6

The Corner
 
12/20/2018
 
100.00%
 
Apartments
 
New York, NY
 
218.4

8.8

Commerce LIC
 
12/20/2018
 
97.50%
 
Industrial
 
Long Island City, NY
 
67.6

12.0

(1)  
The net sales price represents the sales price, less selling expenses.
(2)  
Majority of the realized gain has been previously recognized as unrealized gains in the Account's Consolidated Statements of Operations.
(3)
Partial sale of land associated with the joint venture investment.
Loans Receivable
Borrower Name
 
Financing Date
 
Interest Rate
 
Sector
 
Maturity Date
Location
 
Loan Amount (1)
Project Glacier Mezzanine
 
11/07/2018
 
4.40% + LIBOR
 
Industrial
 
11/09/2020
Various U.S.A.
 
$
176.4

1330 Broadway Mezzanine (2)
 
11/08/2018
 
2.40% + LIBOR
 
Office
 
08/10/2023
Oakland, CA
 
(100.0
)
Rosemont Towson Mezzanine (3)
 
11/20/2018
 
2.15% + LIBOR
 
Apartments
 
09/09/2022
Towson, MD
 
(78.5
)
Great Value Storage Portfolio Mezzanine
 
12/03/2018
 
7.875%
 
Storage
 
12/06/2023
Various U.S.A.
 
63.0

(1)  
Amount represents the Account's principal balance of the loan receivable position.
(2)  
On November 8, 2018, the Account sold off its interest in the senior mortgage.
(3)  
On November 20, 2018, the Account sold off its interest in the senior mortgage.
Financings
Property Name
 
Financing Date
 
Ownership Percentage
 
Interest Rate
 
Sector
 
Maturity Date
 
Location
 
Financing Amount (1)
Cabana Beach San Marcos
 
10/26/2018
 
97.00%
 
4.43%
 
Apartments
 
11/01/2025
 
San Marcos, TX
 
$
22.8

Simpson Housing Portfolio (2)
 
11/29/2018
 
80.00%
 
4.11%
 
Apartments
 
12/01/2025
 
Various, U.S.A.
 
196.0

Simpson Housing Portfolio (2)
 
11/29/2018
 
80.00%
 
3.37% + LIBOR
 
Apartments
 
12/01/2025
 
Various, U.S.A.
 
196.0

440 Ninth Avenue
 
12/06/2018
 
88.52%
 
4.02%
 
Office
 
01/01/2026
 
New York, NY
 
121.3

Four Oaks Place (3)
 
12/20/2018
 
51.00%
 
1.45% + LIBOR
 
Office
 
12/20/2018
 
Houston, TX
 
(81.6
)
Four Oaks Place (3)
 
12/20/2018
 
51.00%
 
4.43%
 
Office
 
01/01/2026
 
Houston, TX
 
81.6

The Corner
 
12/20/2018
 
100.00%
 
3.51%
 
Apartments
 
06/01/2021
 
New York, NY
 
(105.0
)
(1)  
Values represent new mortgage loans and any loans assumed, transferred, refinanced or paid off during the fourth quarter of 2018.
(2)  
Two senior mortgages were placed on the Simpson Housing Portfolio at acquisition, one at a fixed rate of interest at 4.11% and the other at a floating rate of interest at 3.37% + LIBOR. The mortgages are cross-collateralized by 12 apartment properties held within the portfolio.
(3)  
Four Oaks Place LP, a joint venture investment in which the Account holds a 51% interest, refinanced mortgage debt with a new lender. The principal outstanding remained unchanged, but the interest rate and maturity date were modified.

52


Contractual Obligations (1)  
The following table sets forth a summary regarding the Account’s known contractual obligations, including required interest payments for those items that are interest bearing, as of December 31, 2018 (millions):
 
 
Amounts Due During Years Ending December 31,
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
Mortgage Loans Payable:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal Payments
 
$
107.2

 
$
171.7

 
$
20.0

 
$
407.7

 
$
686.4

 
$
1,295.1

 
$
2,688.1

Interest Payments (2)
 
102.4

 
97.3

 
91.0

 
82.4

 
62.0

 
149.4

 
584.5

Total Mortgage Loans Payable
 
$
209.6

 
$
269.0

 
$
111.0

 
$
490.1

 
$
748.4

 
$
1,444.5

 
$
3,272.6

Other Commitments (3)
 
101.0

 
—

 
—

 
—

 
—

 
—

 
101.0

Tenant improvements (4)
 
83.3

 
—

 
—

 
—

 
—

 
—

 
83.3

Total Contractual Obligations
 
$
393.9

 
$
269.0

 
$
111.0

 
$
490.1

 
$
748.4

 
$
1,444.5

 
$
3,456.9

(1)  
The contractual obligations do not include payments on debt held in joint ventures, which are the obligation of the individual joint venture entities.
(2)  
These amounts represent interest payments due on mortgage loans payable based on the stated rates at December 31, 2018 .
(3)  
This includes the Account’s commitment to purchase interest in its limited partnerships, which could be called by the partner at any time.
(4)  
This amount represents tenant improvements and leasing inducements committed by the Account as of December 31, 2018 .
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. Any such 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
Management’s discussion and analysis of the Account’s financial condition and results of operations is based on the Account’s Consolidated Financial Statements, which have been prepared by management in accordance with GAAP. The preparation of the Account’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgments about the effect of matters that are inherently uncertain and that may change in subsequent periods. Management evaluates its estimates and assumptions on an ongoing basis. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities of the Account that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Determination of Investments at Fair Value: The Account reports all investments at fair value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies. Further in accordance with the adoption of the fair value option allowed under ASC 825, Financial Instruments , and at the election of Account management, mortgage loans payable are reported at fair value. The FASB has defined fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
The following is a description of the valuation methodologies used to determine the fair value of the Account’s investments and investment related mortgage loans payable.
Valuation of Real Estate Properties —Investments in real estate properties are stated at fair value, as determined in accordance with policies and procedures reviewed by the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. Accordingly, the Account does not record depreciation. Determination of

53


fair value involves significant levels of judgment because the actual fair value of real estate can be determined only by negotiation between the parties in a sales transaction. The Account’s primary objective when valuing its real estate investments will be to produce a valuation that represents a reasonable estimate of the fair value of its investments. Implicit in the Account’s definition of fair value are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
•
Buyer and seller are typically motivated;
•
Both parties are well informed or well advised, and acting in what they consider their best interests;
•
A reasonable time is allowed for exposure in the open market;
•
Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and
•
The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Property and investment values are affected by, among other things, the availability of capital, occupancy rates, rental rates, and interest and inflation rates. As a result, determining real estate and investment values involves many assumptions. Key inputs and assumptions include rental income and expense amounts, related rental income and expense growth rates, capital expenditures, discount rates and capitalization rates. Valuation techniques include discounted cash flow analysis, prevailing market capitalization rates or multiples applied to earnings from the property, analysis of recent comparable sales transactions, actual sale negotiations and bona fide purchase offers received from third parties. Amounts ultimately realized from each investment may vary significantly from the fair value presented.
Real estate properties owned by the Account are initially valued based on an independent third party appraisal, as reviewed by TIAA’s internal appraisal staff and as applicable by the Account’s independent fiduciary at the time of the closing of the purchase. Such initial valuation may result in a potential unrealized gain or loss reflecting the difference between an investment’s fair value (i.e., exit price) and its cost basis (which is inclusive of transaction costs).
Subsequently, each property is appraised each quarter by an independent third party appraiser, reviewed by TIAA’s internal appraisal staff and as applicable the Account’s independent fiduciary. In general, the Account obtains appraisals of its real estate properties spread out throughout the quarter, which is intended to result in appraisal adjustments, and thus, adjustments to the valuations of its holdings (to the extent such adjustments are made) that happen regularly throughout each quarter and not on one specific day or month in each period.
Further, management reserves the right to order an appraisal and/or conduct another valuation outside of the normal quarterly process when facts or circumstances at a specific property change. For example, under certain circumstances a valuation adjustment could be made when the account receives a bona fide bid for the sale of a property held within the Account or one of the Account’s joint ventures. Adjustments may be made for events or circumstances indicating an impairment of a tenant’s ability to pay amounts due to the Account under a lease (including due to a bankruptcy filing of that tenant). Alternatively, adjustments may be made to reflect the execution or renewal of a significant lease. Also, adjustments may be made to reflect factors (such as sales values for comparable properties or local employment rate) bearing uniquely on a particular region in which the Account holds properties. TIAA’s internal appraisal staff oversees the entire appraisal process, in conjunction with the Account’s independent fiduciary (the independent fiduciary is more fully described in the following paragraph). Any differences in the conclusions of TIAA’s internal appraisal staff and the independent appraiser will be reviewed by the independent fiduciary, which will make a final determination on the matter (which may include ordering a subsequent independent appraisal).
The independent fiduciary, RERC, LLC, has been appointed by a special subcommittee of the Investment Committee of the Board to, among other things, oversee the appraisal process. The independent fiduciary must approve all independent appraisers used by the Account. All appraisals are performed in accordance with Uniform Standards of Professional Appraisal Practices, 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. Appraisals of properties held outside of the U.S. are performed in accordance with industry standards commonly applied in the applicable jurisdiction. These independent appraisers are always expected to be MAI-designated members of the Appraisal Institute (or its European equivalent, Royal Institute of Chartered Surveyors) and state certified appraisers from national or regional firms with relevant property type experience and market knowledge. Under the Account’s current procedures, each

54


independent appraisal firm will be rotated off of a particular property at least every three years, although such appraisal firm may perform appraisals of other Account properties subsequent to such rotation.
Also, the independent fiduciary can require additional appraisals if factors or events have occurred that could materially change a property’s value (including those identified above) and such change is not reflected in the quarterly valuation review, or otherwise to ensure that the Account is valued appropriately. The independent fiduciary must also approve any valuation change of real estate-related assets where a property’s value changed by more than 6% from the most recent independent annual appraisal, or if the value of the Account would change by more than 4% within any calendar quarter or more than 2% since the prior calendar month. When a real estate property is subject to a mortgage, the property is valued independently of the mortgage and the property and mortgage fair values are reported separately (see Valuation of Loans Payable ). The independent fiduciary reviews and approves all mortgage valuation adjustments 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.
Valuation of Real Estate Joint Ventures —Real estate joint ventures are stated at the fair value of the Account’s ownership interests of the underlying entities. The Account’s ownership interests are valued based on the fair value of the underlying real estate, any related mortgage loans payable, and other factors, such as ownership percentage, ownership rights, buy/sell agreements, distribution provisions and capital call obligations. Upon the disposition of all real estate investments by an investee entity, the Account will continue to state its equity in the remaining net assets of the investee entity during the wind down period, if any, which occurs prior to the dissolution of the investee entity.
Valuation of Real Estate Limited Partnerships —Limited partnership interests are stated at the fair value of the Account’s ownership in the partnership. Management uses net asset value information provided by limited partners as a practical expedient to estimate fair value. The Account receives estimates from limited partners on a quarterly basis, and audited information is provided annually. Upon receipt of the information, management reviews and concludes on whether the net asset values provided are an appropriate representation of the fair value of the Account's interests in the limited partnerships and makes valuation adjustments as necessary. Valuation of limited partnerships proceeds under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole.
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 market or 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 market or exchange, exclusive of transaction costs.
Valuation of Debt Securities —Debt securities with readily available market quotations, other than money market instruments, are generally valued at the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality and type). Debt securities for which market quotations are not readily available, are valued at fair value as determined by management and the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole.
Short-term investments are valued in the same manner as debt securities, as described above.
Money market instruments are valued at amortized cost, which approximates fair value.
Valuation of Loans Receivable (i.e. the Account as a creditor) —Loans receivable are stated at fair value and are initially valued at the face amount of the loan funding. Subsequently, loans receivable are valued at least quarterly by TIAA’s internal valuation department based on market factors, such as market interest rates and spreads for comparable loans, the liquidity for loans of similar characteristics, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying collateral) and the credit quality of the counterparty. The independent fiduciary reviews and approves all loan receivable valuation adjustments before such adjustments are recorded by the Account. The Account continues to use the revised value for each loan receivable to calculate the Account’s daily net asset value until the next valuation review.
Valuation of Loans Payable (i.e. the Account as a debtor) —Mortgage or other loans payable are stated at fair value. The estimated fair value of mortgage loans payable is generally based on the amount at which the liability could be

55


transferred in a current transaction, exclusive of transaction costs. Fair values are estimated based on market factors, such as market interest rates and spreads on comparable loans, the liquidity for mortgage loans of similar characteristics, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying collateral), the maturity date of the loan, the return demands of the market, and the credit quality of the Account. Different assumptions or changes in future market conditions could significantly affect estimated fair values. At times, the Account may assume debt in connection with the purchase of real estate (including under the Account's Line of Credit or additional credit facilities).
Foreign currency transactions and translation: Portfolio investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of securities, income receipts and expense payments made in foreign currencies are translated into U.S. dollars at the exchange rates prevailing on the respective dates of the transactions. The effect of any changes in foreign currency exchange rates on portfolio investments and mortgage loans payable are included in net realized and unrealized gains and losses on real estate properties and mortgage loans payable. Net realized gains and losses on foreign currency transactions include disposition of foreign currencies, and currency gains and losses between the accrual and receipt dates of portfolio investment income and between the trade and settlement dates of portfolio investment transactions.
Accumulation and Annuity Funds: The accumulation fund represents the net assets attributable to participants in the accumulation phase of their investment (“Accumulation Fund”). The annuity fund represents the net assets attributable to the participants currently receiving annuity payments (“Annuity Fund”). 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, payment levels cannot be reduced as a result of the Account’s adverse mortality experience. In addition, the contracts pursuant to which the Account is offered are required to stipulate the maximum expense charge for all Account level expenses that can be assessed, which is not to exceed 2.5% of average net assets per year. The Account pays a fee to TIAA to assume mortality and expense risks.
Accounting for Investments: The investments held by the Account are accounted for as follows:
Real Estate Properties —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 when actual operating results are determined.
Real Estate Joint Ventures —The Account has limited ownership interests in various real estate joint ventures (collectively, the “joint ventures”). The Account records its contributions as increases to its investments in the joint ventures, and distributions from the joint ventures are treated as income within income from real estate joint ventures and limited partnerships in the Account’s Consolidated Statements of Operations. Distributions that are identified as returns of capital are recorded as a reduction to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Income distributions from the joint ventures are recorded based on the Account’s proportional interest of the income distributed by the joint ventures. Income earned but not yet distributed to the Account by the joint ventures is recorded as unrealized gains and losses.
Limited Partnerships —The Account has limited ownership interests in various private real estate funds (primarily limited partnerships) and a private real estate investment trust (collectively, the “limited partnerships”). The Account records its contributions as increases to the investments, and distributions from the investments are treated as income within income from real estate joint ventures and limited partnerships in the Account’s Consolidated Statements of Operations. Distributions that are identified as returns of capital are recorded as a reduction to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Unrealized gains and losses are recorded based upon the changes in the net asset values of the limited partnerships as determined from the financial statements of the limited partnerships when received by the Account. Prior to the receipt of the financial statements from the limited partnerships, the Account estimates the value of its interest using information

56


provided by the limited partners. Changes in value based on such estimates are recorded by the Account as unrealized gains and losses.
Marketable Securities —Transactions in marketable securities are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned. Dividend income is recorded on the ex-dividend date within dividend income. Dividends that are identified as returns of capital are recorded as a reduction to the cost basis of the investment, whereas dividends identified as capital gains or losses are recorded as realized gains or losses. Realized gains and losses on securities transactions are accounted for on the specific identification method.
Loans Receivable —The Account may originate, purchase or sell loans collateralized by real estate. The cost basis of originated loans is comprised of the principal balance and direct costs incurred that represent a component of loan’s reported fair value. The cost basis of purchased loans consists of the purchase price of the loan and additional direct costs incurred that represent a component of the loan’s reported fair value. Additional costs incurred by the Account to originate or purchase loans that do not represent a component of a loan’s fair value are recorded as expenses in the period incurred. Nonrefundable origination fees paid by borrowers are recognized as interest income once all activities required to execute the loan are completed. Prepayment fees received from the payoff of loans in advance of their maturity date are recognized as interest income on the date the payoff occurs.
Interest income from loans in accrual status is recognized based on the current coupon rate of the loans. Interest income accruals are suspended when a loan becomes a non-performing loan, defined as a loan more than ninety days in arrears or at any point when management believes the full collection of principal is doubtful. Interest income on non-performing loans is recognized only as cash payments are received. Loans can be rehabilitated to normal accrual status once all past due interest has been collected and management believes the full collection of principal is likely.
Realized and Unrealized Gains and Losses —Realized gains and losses are recorded at the time an investment is sold or a distribution is received in relation to an investment sale from a joint venture or limited partnership. Real estate and loan receivable transactions are accounted for as of the date on which the purchase or sale transactions close (settlement date). The Account recognizes a realized gain on the sale of an investment to the extent that the contract sales price exceeds the cost-to-date of the investment being sold. A realized loss occurs when the cost-to-date exceeds the sales price. Realized gains and losses from partial sales of non-financial assets are recognized in accordance with ASC 610-20 - Gains and Losses from the Derecognition of Nonfinancial Assets . Realized gains and losses from the sale of financial assets are recognized in accordance with ASC 860 - Transfers and Servicing . Unrealized gains and losses are recorded as the fair values of the Account’s investments are adjusted, and as discussed within the Real Estate Joint Ventures, Limited Partnerships and Loans Receivable sections above.
Net Assets —The Account’s net assets as of the close of each valuation day are valued 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 and other non-real estate assets;
•
the value of the individual real properties (based on the most recent valuation of that property) and other real estate-related investments owned by the Account;
•
an estimate of the net operating income accrued by the Account from its properties, other real estate-related investments and non-real estate-related investments (including short-term marketable securities) since the end of the prior valuation day; and
•
actual net operating income earned from the Account’s properties, other real estate-related investments and non-real estate-related investments (but only to the extent any such item of income differs from the estimated income accrued for on such investments),
and then reducing the sum by liabilities held within the Account, including the daily investment management fee, administration and distribution fees, mortality and expense fee, liquidity guarantee fee, and certain other expenses attributable to operating the Account. Daily estimates of net operating income are adjusted to reflect actual net operating income on a monthly basis, at which time such adjustments (if any) are reflected in the Account’s unit value.
After the end of every quarter, the Account reconciles the amount of expenses deducted from the Account (which is established in order to approximate the costs that the Account will incur) with the expenses the Account actually incurred. If there is a difference, the Account adds it to or deducts it from the Account in equal daily installments over

57


the remaining days of the following quarter. Material differences may be repaid in the current calendar quarter. The Account’s at-cost deductions are based on projections of Account assets and overall expenses, and the size of any adjusting payments will be directly affected by the difference between management’s projections and the Account’s actual assets or expenses.
Federal Income Taxes: Based on provisions of the Internal Revenue Code, Section 817, the Account is taxed as a segregated asset account of TIAA and as such, the Account incurs no material federal income tax attributable to the net investment activity of the Account. The Account’s federal income tax return is generally subject to examination for a period of three years after filed. State and local tax returns may be subject to examination for an additional period of time depending on the jurisdiction. Management has analyzed the Account’s tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Account’s Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Account’s real estate holdings, including real estate joint ventures, limited partnerships and loans receivable, which, as of December 31, 2018 , represented 80.6% 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, disruptions in the credit and/or capital markets, 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, buys a property subject to a mortgage or holds a property subject to a mortgage, and hedging against such interest rate changes, if undertaken by the Account, may entail additional costs and be unsuccessful; 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 currency changes, if undertaken by the Account, may entail additional costs and be unsuccessful.
The Account believes the diversification of its real estate portfolio, both geographically and by sector, along with its quarterly valuation procedure, helps manage the real estate and appraisal risks described above.
As of December 31, 2018 , 19.4% of the Account’s total investments were comprised of marketable securities. Marketable securities include high-quality debt instruments (i.e . , government agency notes) and REIT securities. The Account's Consolidated Statements of Investments sets forth the general financial terms of these instruments, along with their fair values, as determined in accordance with procedures described earlier in Critical Accounting Policies section above and in Note 1–Organization and Significant Accounting Policies to the Account’s Consolidated Financial Statements included herewith. As of the date of this report, the Account does not invest in derivative financial investments, nor does the Account engage in any hedging activity, although it may do so in selected circumstances in the future.
Risks associated with investments in real estate-related liquid assets (which could include, from time to time, REIT securities and CMBS), and non-real estate-related liquid assets, including financial/credit risk, market volatility risk, interest rate volatility risk and deposit/money market risk.
•
Financial/Credit Risk—The risk, for debt securities, that the issuer will not be able to pay principal and interest when due (and/or declare bankruptcy or be subject to receivership) and, for equity securities such as common

58


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 Volatility Risk—The risk that the Account’s investments will experience price volatility due to changing conditions in the financial markets regardless of the credit quality or financial condition of the underlying issuer. This risk is particularly acute to the extent the Account holds equity securities, which have experienced significant short-term price volatility over the past year. Also, to the extent the Account holds debt securities, changes in overall interest rates can cause price fluctuations.
•
Interest Rate Volatility—The risk that interest rate volatility may affect the Account’s current income from an investment.
•
Deposit/Money Market Risk—The risk that, to the extent the Account’s cash held in bank deposit accounts exceeds federally insured limits as to that bank, the Account could experience losses if banks fail. The Account does not believe it has exposure to significant concentration of deposit risk. In addition, there is some risk that investments held in money market accounts can suffer losses.
In addition, to the extent the Account were to hold mortgage-backed securities (including commercial mortgage-backed securities) these 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 fair 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 (such as REIT stocks and mortgage-backed securities) would be 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 "Item 1A. Risk Factors" in this Form 10-K.


59


ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TIAA REAL ESTATE ACCOUNT
 
Page


60


REPORT OF MANAGEMENT RESPONSIBILITY
To the Participants of the TIAA Real Estate Account:
The accompanying consolidated 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 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 consolidated financial statements. In addition, TIAA’s internal audit personnel provide regular reviews and assessments of the internal controls and operations of the Account, and the Senior Managing Director, Chief Auditor 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 consolidated financial statements for the years ended December 31, 2018 , 2017 and 2016 . The report of the independent registered public accounting firm expresses an independent opinion on the fairness of presentation of the Account’s consolidated 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 group personnel to review matters relating to financial reporting, internal controls and auditing. In addition to the annual independent audit of the Account’s consolidated financial statements, the New York State Insurance Department and other state insurance departments regularly examine the operations and consolidated financial statements of the Account as part of their periodic corporate examinations.
March 14, 2019
/s/ Carol W. Deckbar
 
Executive Vice President, Teachers Insurance and Annuity Association of America and Chief Product Officer of TIAA Financial Solutions Product Group
 
(Principal Executive Officer)
 
 
 
/s/ Oluseun S. Salami
 
Senior Vice President, Chief Accounting Officer and Corporate Controller of Teachers Insurance and Annuity Association of America
 
(Principal Financial and Accounting Officer)


61


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 Consolidated 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 formally evaluate rotation of the independent registered public accounting firm whenever circumstances warrant, but in no event will the evaluation be less frequent than every ten years of the engagement.
The Committee reviewed and discussed the accompanying audited Consolidated 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 consolidated financial statements. The Committee has also discussed the audited Consolidated Financial Statements with PricewaterhouseCoopers LLP, the independent registered public accounting firm responsible for expressing an opinion on the conformity of these audited Consolidated 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 audited Consolidated 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.
Based on the review and discussions referred to above, the Committee has approved the release of the accompanying audited Consolidated Financial Statements for publication and filing with appropriate regulatory authorities.

James R. Chambers, Audit Committee Chair
Jeffrey R. Brown, Audit Committee Member
Tamara Simpkins Franklin, Audit Committee Member
Lisa W. Hess, Audit Committee Member
Maureen O’Hara, Audit Committee Member
Donald K. Peterson, Audit Committee Member
Dorothy K. Robinson, Audit Committee Member

March 14, 2019


62


TIAA REAL ESTATE ACCOUNT
AUDITED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In millions, except per accumulation unit amounts)
 
 
December 31,
2018
 
2017
ASSETS
 
 
 
 
 
 
Investments, at fair value:
 
 
 
 
 
 
Real estate properties
(cost: $12,687.8 and $12,972.5)
 
$
15,531.1

 
 
$
15,742.7

 
Real estate joint ventures and limited partnerships
(cost: $5,207.8 and $4,675.3)
 
6,532.5

 
 
6,003.0

 
Marketable securities:
 
 
 
 
 
 
Real estate related
(cost: $1,274.7 and $991.0)
 
1,415.1

(1)  
 
1,238.0

(1)  
Other
(cost: $4,088.9 and $3,888.1)
 
4,088.7

 
 
3,887.5

 
Loans receivable
(cost: $910.6 and $296.7)
 
913.0

 
 
298.8

 
Total investments
(cost: $24,169.8 and $22,823.6)
 
28,480.4

 
 
27,170.0

 
Cash and cash equivalents
 
3.8

 
 
11.7

 
Due from investment manager
 
2.2

 
 
1.0

 
Other
 
331.8

(2)  
 
270.9

(2)  
TOTAL ASSETS
 
28,818.2

 
 
27,453.6

 
LIABILITIES
 
 
 
 
 
 
Mortgage loans payable, at fair value
 
 
 
 
 
 
(principal outstanding: $2,688.1 and $2,238.6)
 
2,608.0

 
 
2,238.3

 
Accrued real estate property expenses
 
222.4

 
 
199.1

 
Payable for collateral for securities loaned
 
68.8

 
 
18.5

 
Other
 
76.4

 
 
55.1

 
TOTAL LIABILITIES
 
2,975.6

 
 
2,511.0

 
COMMITMENTS AND CONTINGENCIES
 

 
 

 
NET ASSETS
 
 
 
 
 
 
Accumulation Fund
 
25,320.1

 
 
24,430.8

 
Annuity Fund
 
522.5

 
 
511.8

 
TOTAL NET ASSETS
 
$
25,842.6

 
 
$
24,942.6

 
NUMBER OF ACCUMULATION UNITS OUTSTANDING
 
60.7

 
 
61.3

 
NET ASSET VALUE, PER ACCUMULATION UNIT
 
$
417.416

 
 
$
398.329

 
(1) Includes securities loaned of $67.4 million at December 31, 2018 and $18.1 million at December 31, 2017 .
(2) Includes cash collateral for securities loaned of $68.8 million at December 31, 2018 and $18.5 million at December 31, 2017 .









See notes to the consolidated financial statements

63


TIAA REAL ESTATE ACCOUNT
AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(millions)
 
 
Years Ended December 31,
2018
 
2017
 
2016
INVESTMENT INCOME
 
 
 
 
 
 
Real estate income, net
 
 
 
 
 
 
Rental income
 
$
1,083.2

 
$
1,059.6

 
$
1,009.0

Real estate property level expenses and taxes:
 
 
 
 
 
 
Operating expenses
 
228.6

 
221.2

 
218.1

Real estate taxes
 
178.9

 
166.7

 
158.7

Interest expense
 
113.9

 
89.7

 
85.8

Total real estate property level expenses and taxes
 
521.4

 
477.6

 
462.6

Real estate income, net
 
561.8

 
582.0

 
546.4

Income from real estate joint ventures and limited partnerships
 
204.7

 
214.1

 
161.8

Interest
 
120.4

 
54.1

 
26.4

Dividends
 
50.8

 
26.3

 
32.5

TOTAL INVESTMENT INCOME
 
937.7

 
876.5

 
767.1

Expenses
 
 
 
 
 
 
Investment management charges
 
62.1

 
72.0

 
72.6

Administrative charges
 
50.9

 
59.3

 
62.1

Distribution charges
 
28.0

 
25.7

 
27.7

Mortality and expense risk charges
 
1.3

 
1.2

 
1.2

Liquidity guarantee charges
 
50.5

 
47.0

 
38.4

TOTAL EXPENSES
 
192.8

 
205.2

 
202.0

INVESTMENT INCOME, NET
 
744.9

 
671.3

 
565.1

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND MORTGAGE LOANS PAYABLE
 
 
 
 
 
 
Net realized gain (loss) on investments
 
 
 
 
 
 
Real estate properties
 
242.7

 
42.0

 
(6.2
)
Real estate joint ventures and limited partnerships
 
75.9

 
(21.9
)
 
0.6

Marketable securities
 
12.8

 
17.6

 
25.6

Mortgage loans payable
 
(0.4
)
 
—

 
—

Net realized gain on investments
 
331.0

 
37.7

 
20.0

Net change in unrealized appreciation (depreciation) on
 
 
 
 
 
 
Real estate properties
 
73.1

 
135.5

 
317.5

Real estate joint ventures and limited partnerships
 
55.5

 
146.8

 
236.9

Marketable securities
 
(103.0
)
 
50.0

 
30.0

Loans receivable
 
0.3

 
1.2

 
0.3

Mortgage loans payable
 
79.8

 
15.9

 
15.1

Net change in unrealized appreciation on
investments and mortgage loans payable
 
105.7

 
349.4

 
599.8

NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS AND
MORTGAGE LOANS PAYABLE
 
436.7

 
387.1

 
619.8

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
 
$
1,181.6

 
$
1,058.4

 
$
1,184.9




See notes to the consolidated financial statements

64


TIAA REAL ESTATE ACCOUNT
AUDITED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(millions)
 
 
Years Ended December 31,
2018
 
2017
 
2016
FROM OPERATIONS
 
 
 
 
 
 
Investment income, net
 
$
744.9

 
$
671.3

 
$
565.1

Net realized gain on investments
 
331.0

 
37.7

 
20.0

Net change in unrealized appreciation on investments and mortgage loans payable
 
105.7

 
349.4

 
599.8

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
 
1,181.6

 
1,058.4

 
1,184.9

FROM PARTICIPANT TRANSACTIONS
 
 
 
 
 
 
Premiums
 
2,637.4

 
2,561.7

 
3,064.2

Annuity payments
 
(45.0
)
 
(43.4
)
 
(41.0
)
Withdrawals and death benefits
 
(2,874.0
)
 
(2,938.8
)
 
(2,263.4
)
NET (DECREASE) INCREASE IN NET ASSETS
RESULTING FROM PARTICIPANT TRANSACTIONS
 
(281.6
)
 
(420.5
)
 
759.8

NET INCREASE IN NET ASSETS
 
900.0

 
637.9

 
1,944.7

NET ASSETS
 
 
 
 
 
 
Beginning of period
 
24,942.6

 
24,304.7

 
22,360.0

End of period
 
$
25,842.6

 
$
24,942.6

 
$
24,304.7






























See notes to the consolidated financial statements

65


TIAA REAL ESTATE ACCOUNT
AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
 
 
Years Ended December 31,
2018
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net increase in net assets resulting from operations
 
$
1,181.6

 
$
1,058.4

 
$
1,184.9

Adjustments to reconcile net changes in net assets resulting from operations to net cash provided by (used in) operating activities:
 
 
 
 
 
 
Net realized gain on investments
 
(331.0
)
 
(37.7
)
 
(20.0
)
Net change in unrealized appreciation on investments and mortgage loans payable
 
(105.7
)
 
(349.4
)
 
(599.8
)
Purchase of real estate properties
 
(786.3
)
 
(538.2
)
 
(623.9
)
Capital improvements on real estate properties
 
(228.6
)
 
(130.1
)
 
(157.2
)
Proceeds from sale of real estate properties
 
1,462.7

 
525.5

 
251.1

Purchases of long term investments
 
(1,422.2
)
 
(592.0
)
 
(1,379.4
)
Proceeds from long term investments
 
756.4

 
385.3

 
68.3

Purchases and originations of loans receivable
 
(939.2
)
 
(1.9
)
 
(194.8
)
Proceeds from sales of loans receivable
 
257.3

 
—

 
—

Proceeds from payoffs of loans receivable
 
68.0

 
—

 
—

(Increase) decrease in other investments
 
(200.8
)
 
165.9

 
153.6

Change in due (from) to investment manager
 
(1.2
)
 
4.9

 
(0.2
)
(Increase) decrease in other assets
 
(59.7
)
 
58.2

 
(107.5
)
Increase (decrease) in other liabilities
 
63.0

 
(72.6
)
 
122.3

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
 
(285.7
)
 
476.3

 
(1,302.6
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
 
Mortgage loan proceeds received
 
712.8

 
—

 
563.5

Payments of mortgage loans
 
(152.2
)
 
(50.6
)
 
(34.7
)
Premiums
 
2,637.4

 
2,561.7

 
3,064.2

Annuity payments
 
(45.0
)
 
(43.4
)
 
(41.0
)
Withdrawals and death benefits
 
(2,874.0
)
 
(2,938.8
)
 
(2,263.4
)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
279.0

 
(471.1
)
 
1,288.6

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
(6.7
)
 
5.2

 
(14.0
)
 CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
 
 
 
 
 
 Beginning of period cash, cash equivalents and restricted cash
 
54.0

 
48.8

 
62.8

 Net (decrease) increase in cash, cash equivalents and restricted cash
 
(6.7
)
 
5.2

 
(14.0
)
 End of period cash, cash equivalents and restricted cash
 
$
47.3

 
$
54.0

 
$
48.8

SUPPLEMENTAL DISCLOSURES
 
 
 
 
 
 
Cash paid for interest
 
$
108.7

 
$
89.9

 
$
84.2

Debt assumed as part of a real estate acquisition
 
$
105.1

 
$
17.7

 
$
24.0

Loan assignment as part of a real estate disposition
 
$
216.5

 
$
45.0

 
$
—

Stock consideration received from the merger of marketable securities
 
$
6.1

 
$
—

 
$
—

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statements of Assets and Liabilities that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows (millions):
 
As of December 31,
 
2018
 
2017
 
2016
Cash and cash equivalents
$
3.8

 
$
11.7

 
$
3.0

Restricted cash (1)
43.5

 
42.3

 
45.8

TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH
$
47.3

 
$
54.0

 
$
48.8

(1) Restricted cash is included within other assets on the Account's Consolidated Statements of Assets and Liabilities.
See notes to the consolidated financial statements

66


TIAA REAL ESTATE ACCOUNT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Organization and Significant Accounting Policies
Business: The TIAA Real Estate Account (“Account”) is an insurance separate account of Teachers Insurance and Annuity Association of America (“TIAA”) and was established by resolution of TIAA’s Board of Trustees (the “Board”) on February 22, 1995, under the insurance laws of the State of New York, for the purpose of funding variable annuity contracts issued by TIAA. The Account 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, and make withdrawals from the Account on a daily basis, 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.
The investment objective of the Account is to seek favorable long-term returns primarily through rental income and appreciation of a diversified portfolio of directly held, private real estate investments and real estate-related investments while offering investors guaranteed, daily liquidity. The Account holds real estate properties directly and through subsidiaries wholly-owned by TIAA for the sole benefit of the Account. The Account also holds limited interests in real estate joint ventures and limited partnerships, as well as investments in loans receivable with commercial real estate properties as underlying collateral. Additionally, the Account invests in real estate-related and non-real estate-related publicly traded securities, cash and other instruments to maintain adequate liquidity levels for operating expenses, capital expenditures and to fund benefit payments (withdrawals, transfers and related transactions).
The Consolidated Financial Statements were prepared in accordance with accounting principles generally accepted in the United States of America, which requires the use of estimates made by management. Actual results may vary from those estimates and such differences may be material. The following is a summary of the significant accounting policies of the Account.
Basis of Presentation: The accompanying Consolidated Financial Statements include the Account and those subsidiaries wholly-owned by TIAA for the benefit of the Account. All significant intercompany accounts and transactions between the Account and such subsidiaries have been eliminated.
The Accumulation Unit Value (“AUV”) used for financial reporting purposes may differ from the AUV used for processing transactions. The AUV used for financial reporting purposes includes security and participant transactions effective through the period end date to which this report relates. Total return is computed based on the AUV used for processing transactions.
Determination of Investments at Fair Value: The Account reports all investments at fair value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies. Further in accordance with the adoption of the fair value option allowed under ASC 825, Financial Instruments , and at the election of Account management, mortgage loans payable are reported at fair value. The FASB has defined fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
The following is a description of the valuation methodologies used to determine the fair value of the Account’s investments and investment related mortgage loans payable.
Valuation of Real Estate Properties —Investments in real estate properties are stated at fair value, as determined in accordance with policies and procedures reviewed by the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. Accordingly, the Account does not record depreciation. Determination of fair value involves significant levels of judgment because the actual fair value of real estate can be determined only by negotiation between the parties in a sales transaction. The Account’s primary objective when valuing its real estate investments will be to produce a valuation that represents a reasonable estimate of the fair value of its investments.

67


Implicit in the Account’s definition of fair value are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
•
Buyer and seller are typically motivated;
•
Both parties are well informed or well advised, and acting in what they consider their best interests;
•
A reasonable time is allowed for exposure in the open market;
•
Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and
•
The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Property and investment values are affected by, among other things, the availability of capital, occupancy rates, rental rates, and interest and inflation rates. As a result, determining real estate and investment values involves many assumptions. Key inputs and assumptions include rental income and expense amounts, related rental income and expense growth rates, capital expenditures, discount rates and capitalization rates. Valuation techniques include discounted cash flow analysis, prevailing market capitalization rates or multiples applied to earnings from the property, analysis of recent comparable sales transactions, actual sale negotiations and bona fide purchase offers received from third parties. Amounts ultimately realized from each investment may vary significantly from the fair value presented.
Real estate properties owned by the Account are initially valued based on an independent third party appraisal, as reviewed by TIAA’s internal appraisal staff and as applicable by the Account’s independent fiduciary at the time of the closing of the purchase. Such initial valuation may result in a potential unrealized gain or loss reflecting the difference between an investment’s fair value (i.e., exit price) and its cost basis (which is inclusive of transaction costs).
Subsequently, each property is appraised each quarter by an independent third party appraiser, reviewed by TIAA’s internal appraisal staff and as applicable the Account’s independent fiduciary. In general, the Account obtains appraisals of its real estate properties spread out throughout the quarter, which is intended to result in appraisal adjustments, and thus, adjustments to the valuations of its holdings (to the extent such adjustments are made) that happen regularly throughout each quarter and not on one specific day or month in each period.
Further, management reserves the right to order an appraisal and/or conduct another valuation outside of the normal quarterly process when facts or circumstances at a specific property change. For example, under certain circumstances a valuation adjustment could be made when the account receives a bona fide bid for the sale of a property held within the Account or one of the Account’s joint ventures. Adjustments may be made for events or circumstances indicating an impairment of a tenant’s ability to pay amounts due to the Account under a lease (including due to a bankruptcy filing of that tenant). Alternatively, adjustments may be made to reflect the execution or renewal of a significant lease. Also, adjustments may be made to reflect factors (such as sales values for comparable properties or local employment rate) bearing uniquely on a particular region in which the Account holds properties. TIAA’s internal appraisal staff oversees the entire appraisal process, in conjunction with the Account’s independent fiduciary (the independent fiduciary is more fully described in the following paragraph). Any differences in the conclusions of TIAA’s internal appraisal staff and the independent appraiser will be reviewed by the independent fiduciary, which will make a final determination on the matter (which may include ordering a subsequent independent appraisal).
The independent fiduciary, RERC, LLC, has been appointed by a special subcommittee of the Investment Committee of the Board to, among other things, oversee the appraisal process. The independent fiduciary must approve all independent appraisers used by the Account. All appraisals are performed in accordance with Uniform Standards of Professional Appraisal Practices, 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. Appraisals of properties held outside of the U.S. are performed in accordance with industry standards commonly applied in the applicable jurisdiction. These independent appraisers are always expected to be MAI-designated members of the Appraisal Institute (or its European equivalent, Royal Institute of Chartered Surveyors) and state certified appraisers from national or regional firms with relevant property type experience and market knowledge. Under the Account’s current procedures, each independent appraisal firm will be rotated off of a particular property at least every three years, although such appraisal firm may perform appraisals of other Account properties subsequent to such rotation.

68


Also, the independent fiduciary can require additional appraisals if factors or events have occurred that could materially change a property’s value (including those identified above) and such change is not reflected in the quarterly valuation review, or otherwise to ensure that the Account is valued appropriately. The independent fiduciary must also approve any valuation change of real estate-related assets where a property’s value changed by more than 6% from the most recent independent annual appraisal, or if the value of the Account would change by more than 4% within any calendar quarter or more than 2% since the prior calendar month. When a real estate property is subject to a mortgage, the property is valued independently of the mortgage and the property and mortgage fair values are reported separately (see Valuation of Loans Payable ). The independent fiduciary reviews and approves all mortgage valuation adjustments 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.
Valuation of Real Estate Joint Ventures —Real estate joint ventures are stated at the fair value of the Account’s ownership interests of the underlying entities. The Account’s ownership interests are valued based on the fair value of the underlying real estate, any related mortgage loans payable, and other factors, such as ownership percentage, ownership rights, buy/sell agreements, distribution provisions and capital call obligations. Upon the disposition of all real estate investments by an investee entity, the Account will continue to state its equity in the remaining net assets of the investee entity during the wind down period, if any, which occurs prior to the dissolution of the investee entity.
Valuation of Real Estate Limited Partnerships —Limited partnership interests are stated at the fair value of the Account’s ownership in the partnership. Management uses net asset value information provided by limited partners as a practical expedient to estimate fair value. The Account receives estimates from limited partners on a quarterly basis, and audited information is provided annually. Upon receipt of the information, management reviews and concludes on whether the net asset values provided are an appropriate representation of the fair value of the Account's interests in the limited partnerships and makes valuation adjustments as necessary. Valuation of limited partnerships proceeds under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole.
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 market or 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 market or exchange, exclusive of transaction costs.
Valuation of Debt Securities —Debt securities with readily available market quotations, other than money market instruments, are generally valued at the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality and type). Debt securities for which market quotations are not readily available, are valued at fair value as determined by management and the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole.
Short-term investments are valued in the same manner as debt securities, as described above.
Money market instruments are valued at amortized cost, which approximates fair value.
Valuation of Loans Receivable (i.e. the Account as a creditor) —Loans receivable are stated at fair value and are initially valued at the face amount of the loan funding. Subsequently, loans receivable are valued at least quarterly by TIAA’s internal valuation department based on market factors, such as market interest rates and spreads for comparable loans, the liquidity for loans of similar characteristics, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying collateral) and the credit quality of the counterparty. The independent fiduciary reviews and approves all loan receivable valuation adjustments before such adjustments are recorded by the Account. The Account continues to use the revised value for each loan receivable to calculate the Account’s daily net asset value until the next valuation review.
Valuation of Loans Payable (i.e. the Account as a debtor) —Mortgage or other loans payable are stated at fair value. The estimated fair value of mortgage loans payable is generally based on the amount at which the liability could be transferred in a current transaction, exclusive of transaction costs. Fair values are estimated based on market factors, such as market interest rates and spreads on comparable loans, the liquidity for mortgage loans of similar characteristics, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying

69


collateral), the maturity date of the loan, the return demands of the market, and the credit quality of the Account. Different assumptions or changes in future market conditions could significantly affect estimated fair values. At times, the Account may assume debt in connection with the purchase of real estate (including under the Account's Line of Credit or additional credit facilities).
See Note 5 — Assets and Liabilities Measured at Fair Value on a Recurring Basis for further discussion and disclosure regarding the determination of the fair value of the Account’s investments.
Accumulation and Annuity Funds: The accumulation fund represents the net assets attributable to participants in the accumulation phase of their investment (“Accumulation Fund”). The annuity fund represents the net assets attributable to the participants currently receiving annuity payments (“Annuity Fund”). 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, payment levels cannot be reduced as a result of the Account’s actual mortality experience. In addition, the contracts pursuant to which the Account is offered are required to stipulate the maximum expense charge for all Account level expenses that can be assessed, which is not to exceed 2.5% of average net assets per year. The Account pays a fee to TIAA to assume mortality and expense risks.
Accounting for Investments: The investments held by the Account are accounted for as follows:
Real Estate Properties —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 when actual operating results are determined.
Real Estate Joint Ventures —The Account has limited ownership interests in various real estate joint ventures (collectively, the “joint ventures”). The Account records its contributions as increases to its investments in the joint ventures, and distributions from the joint ventures are treated as income within income from real estate joint ventures and limited partnerships in the Account’s Consolidated Statements of Operations. Distributions that are identified as returns of capital are recorded as a reduction to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Income distributions from the joint ventures are recorded based on the Account’s proportional interest of the income distributed by the joint ventures. Income earned but not yet distributed to the Account by the joint ventures is recorded as unrealized gains and losses.
Limited Partnerships —The Account has limited ownership interests in various private real estate funds (primarily limited partnerships) and a private real estate investment trust (collectively, the “limited partnerships”). The Account records its contributions as increases to the investments, and distributions from the investments are treated as income within income from real estate joint ventures and limited partnerships in the Account’s Consolidated Statements of Operations. Distributions that are identified as returns of capital are recorded as a reduction to the cost basis of the investment, whereas distributions identified as capital gains or losses are recorded as realized gains or losses. Unrealized gains and losses are recorded based upon the changes in the net asset values of the limited partnerships as determined from the financial statements of the limited partnerships when received by the Account. Prior to the receipt of the financial statements from the limited partnerships, the Account estimates the value of its interest using information provided by the limited partners. Changes in value based on such estimates are recorded by the Account as unrealized gains and losses.
Marketable Securities —Transactions in marketable securities are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned. Dividend income is recorded on the ex-dividend date within dividend income. Dividends that are identified as returns of capital are recorded as a reduction to the cost basis of the investment, whereas dividends identified as capital gains or losses are recorded as realized gains or losses. Realized gains and losses on securities transactions are accounted for on the specific identification method.

70


Loans Receivable —The Account may originate, purchase or sell loans collateralized by real estate. The cost basis of originated loans is comprised of the principal balance and direct costs incurred that represent a component of loan’s reported fair value. The cost basis of purchased loans consists of the purchase price of the loan and additional direct costs incurred that represent a component of the loan’s reported fair value. Additional costs incurred by the Account to originate or purchase loans that do not represent a component of a loan’s fair value are recorded as expenses in the period incurred. Nonrefundable origination fees paid by borrowers are recognized as interest income once all activities required to execute the loan are completed. Prepayment fees received from the payoff of loans in advance of their maturity date are recognized as interest income on the date the payoff occurs.
Interest income from loans in accrual status is recognized based on the current coupon rate of the loans. Interest income accruals are suspended when a loan becomes a non-performing loan, defined as a loan more than ninety days in arrears or at any point when management believes the full collection of principal is doubtful. Interest income on non-performing loans is recognized only as cash payments are received. Loans can be rehabilitated to normal accrual status once all past due interest has been collected and management believes the full collection of principal is likely.
Realized and Unrealized Gains and Losses —Realized gains and losses are recorded at the time an investment is sold or a distribution is received in relation to an investment sale from a joint venture or limited partnership. Real estate and loan receivable transactions are accounted for as of the date on which the purchase or sale transactions close (settlement date). The Account recognizes a realized gain on the sale of an investment to the extent that the contract sales price exceeds the cost-to-date of the investment being sold. A realized loss occurs when the cost-to-date exceeds the sales price. Realized gains and losses from partial sales of non-financial assets are recognized in accordance with ASC 610-20 - Gains and Losses from the Derecognition of Nonfinancial Assets . Realized gains and losses from the sale of financial assets are recognized in accordance with ASC 860 - Transfers and Servicing . Unrealized gains and losses are recorded as the fair values of the Account’s investments are adjusted, and as discussed within the Real Estate Joint Ventures, Limited Partnerships and Loans Receivable sections above.
Net Assets —The Account’s net assets as of the close of each valuation day are valued 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 and other non-real estate assets;
•
the value of the individual real properties (based on the most recent valuation of that property) and other real estate-related investments owned by the Account;
•
an estimate of the net operating income accrued by the Account from its properties, other real estate-related investments and non-real estate-related investments (including short-term marketable securities) since the end of the prior valuation day; and
•
actual net operating income earned from the Account’s properties, other real estate-related investments and non-real estate-related investments (but only to the extent any such item of income differs from the estimated income accrued for on such investments),
and then reducing the sum by liabilities held within the Account, including the daily investment management fee, administration and distribution fees, mortality and expense fee, liquidity guarantee fee, and certain other expenses attributable to operating the Account. Daily estimates of net operating income are adjusted to reflect actual net operating income on a monthly basis, at which time such adjustments (if any) are reflected in the Account’s unit value.
After the end of every quarter, the Account reconciles the amount of expenses deducted from the Account (which is established in order to approximate the costs that the Account will incur) with the expenses the Account actually incurred. If there is a difference, the Account adds it to or deducts it from the Account in equal daily installments over the remaining days of the following quarter. Material differences may be repaid in the current calendar quarter. The Account’s at-cost deductions are based on projections of Account assets and overall expenses, and the size of any adjusting payments will be directly affected by the difference between management’s projections and the Account’s actual assets or expenses.
Cash and Cash Equivalents: Cash and cash equivalents are balances held by the Account in bank deposit accounts which, at times, exceed federally insured limits. The Account’s management monitors these balances to mitigate the exposure of risk due to concentration and has not experienced any losses from such concentration.

71


Other Assets and Other Liabilities: Other assets and other liabilities consist of operating assets and liabilities utilized and held at each individual real estate property investment. Other assets consist of, amongst other items, cash, tenant receivables and prepaid expenses; whereas other liabilities primarily consist of security deposits. Other assets also include cash collateral held for securities on loan.
Federal Income Taxes: Based on provisions of the Internal Revenue Code, Section 817, the Account is taxed as a segregated asset account of TIAA and as such, the Account incurs no material federal income tax attributable to the net investment activity of the Account. The Account’s federal income tax return is generally subject to examination for a period of three years after filed. State and local tax returns may be subject to examination for an additional period of time depending on the jurisdiction. Management has analyzed the Account’s tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Account’s Consolidated Financial Statements.
Restricted Cash: The Account held restricted cash in escrow accounts for security deposits, as required by certain states, as well as property taxes, insurance, and various other property related matters as required by certain creditors related to outstanding mortgage loans payable collateralized by certain real estate investments. These amounts are recorded within other assets on the Consolidated Statements of Assets and Liabilities. See Note 9—Mortgage Loans Payable for additional information regarding the Account’s outstanding mortgage loans payable.
Changes in Net Assets: Premiums include premiums paid by existing accumulation unit holders in the Account and transfers into the Account. Withdrawals and death benefits include withdrawals out of the Account which include transfers out of the Account and required minimum distributions.
Due to/from Investment Manager: Due to/from investment manager represents amounts that are to be paid or received by TIAA on behalf of the Account. Amounts generally are paid or received by the Account within one or two business days and no interest is contractually charged on these amounts.
Securities Lending: The Account may lend securities to qualified borrowers to earn additional income. The Account receives cash collateral against the loaned securities and maintains cash collateral in an amount not less than 100% of the market value of loaned securities during the period of the loan; any additional collateral required due to changes in security values is delivered to the Account the next business day. Cash collateral received by the Account is invested exclusively in an interest-bearing deposit account. The value of the loaned securities and the liability to return the cash collateral received are reflected in the Consolidated Statements of Assets and Liabilities. When loaning securities, the Account retains the benefits of owning the securities, including the economic equivalent of dividends or interest generated by the securities. All income generated by the securities lending program is reflected within interest income on the Consolidated Statements of Operations.
As of December 31, 2018 and 2017, securities lending transactions are for real-estate related equity securities, and the resulting loans are continuous, can be recalled at any time, and have no set maturity. Securities lending income recognized by the Account consists of interest earned on cash collateral and lending fees, net of any rebates to the borrower and compensation to the agent. Such income is reflected within interest income on the Consolidated Statements of Operations. In lending its securities, the Account bears the market risk with respect to the investment of collateral and the risk that the agent may default on its contractual obligations to the Account. The agent bears the risk that the borrower may default on its obligation to return the loaned securities as the agent is contractually obligated to indemnify the Account if at the time of a default by a borrower some or all of the loan securities have not been returned.
New Accounting Pronouncements
In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 supersedes all existing revenue recognition guidance and establishes a five-step model to measure and recognize revenue. ASU 2014-09 was effective for fiscal years beginning after December 15, 2017 and the Account adopted this guidance as of January 1, 2018 utilizing the modified retrospective adoption approach. Under this approach, ASU 2014-09 was applied to all contracts that were not completed as of the date of adoption. Based on the Accounts implementation procedures, the adoption of ASU 2014-09 had an immaterial impact to the Account.

72


In February 2016, the FASB issued Accounting Standards Update 2016-02 Leases (Topic 842) (“ASU 2016-02”) which will supersede Topic 840, Leases. This ASU applies to all entities that enter into a lease. Lessees will be required to report assets and liabilities that arise from leases. Lessor accounting is expected to remain unchanged; however, certain refinements were made to conform with the recently issued revenue recognition guidance in ASU 2014-09, specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components. The ASU contains certain practical expedients, which the Account plans to elect.
The Account is electing the transition package of practical expedients permitted within the new standard. This practical expedient permits the Account to carryforward the historical lease classification and not to reassess initial direct costs for any existing leases. Further, the Account will initially apply the new lease requirements at the effective date of January 1, 2019, and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.
In addition, the Account plans to elect the practical expedient that allows lessors to avoid separating lease and non-lease components within a contract if certain criteria are met. The lessor’s practical expedient election would be limited to circumstances in which (i) the timing and pattern of revenue recognition are the same for the non-lease component and the related lease component and (ii) the combined single lease component would be classified as an operating lease. This practical expedient would allow the Account the ability to combine the lease and non-lease components if the underlying asset meets the two criteria above.
This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, including all interim periods within those fiscal years. Management has completed its initial scoping for the adoption of the ASU 2016-02 and does not expect the adoption of such guidance to materially impact the Account.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements. ASU 2018-13 modifies the disclosures required for fair value measurements. This guidance is effective for fiscal years beginning after December 15, 2019. Management is currently evaluating the impact of this guidance but does not expect it to materially impact the Account's Notes to the Consolidated Financial Statements.
Note 2—Related Party Transactions
Investment management, administrative and distribution services are provided to the Account at cost by TIAA. Services provided at cost are paid by the Account on a daily basis based upon projected expenses to be provided to the Account. Payments are adjusted periodically to ensure daily payments are as close as possible to the Account’s actual expenses incurred. Differences between actual expenses and the amounts paid by the Account are reconciled and adjusted quarterly.
Investment management services for the Account are provided by TIAA officers, under the direction and control of the Board, pursuant to investment management procedures adopted by TIAA for the Account. TIAA’s investment management decisions for the Account are subject to review by the Account’s independent fiduciary. TIAA also provides various portfolio accounting and related services for the Account.
The Account is a party to the Distribution Agreement for the Contracts Funded by the TIAA Real Estate Account (the “Distribution Agreement”), dated January 1, 2008, by and among TIAA, for itself and on behalf of the Account, and TIAA-CREF Individual and Institutional Services, LLC (“Services”), a wholly-owned subsidiary of TIAA, a registered broker-dealer and a member of the Financial Industry Regulatory Authority. Pursuant to the Distribution Agreement, Services performs distribution services for the Account which include, among other things, (i) distribution of annuity contracts issued by TIAA and funded by the Account, (ii) advising existing annuity contract owners in connection with their accumulations and (iii) helping employers implement and manage retirement plans. In addition, TIAA performs administrative functions for the Account, which include, among other things, (i) maintaining accounting records and performing accounting services, (ii) receiving and allocating premiums, (iii) calculating and making annuity payments, (iv) processing withdrawal requests, (v) providing regulatory compliance and reporting services, (vi) maintaining the Account’s records of contract ownership and (vii) otherwise assisting generally in all aspects of the Account’s operations. Both distribution services (pursuant to the Distribution Agreement) and administrative services are provided

73


to the Account by Services and TIAA, as applicable, on an at cost basis.The Distribution Agreement is terminable by either party upon 60 days written notice and terminates automatically upon any assignment thereof.
In addition to providing the services described above, TIAA charges the Account fees to bear certain mortality and expense risks, and risks with providing the liquidity guarantee. These fees are charged as a percentage of the net assets of the Account. Rates for these fees are established annually.
Once an Account participant begins receiving lifetime annuity income benefits, payment levels cannot be reduced as a result of the Account’s actual mortality experience. As such, mortality and expense risk expenses are contractual charges for TIAA’s assumption of this risk.
The liquidity guarantee ensures 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.
Expenses for the services and fees described above are identified as such in the accompanying Consolidated Statements of Operations and are further identified as "Expenses" in Note 11—Financial Highlights.
The independent fiduciary, which has the right to adjust the trigger point, has established the trigger point at 45% of the outstanding accumulation units and it will continue to monitor TIAA’s ownership interest in the Account and provide further recommendations as necessary.
Note 3—Concentration Risk
Concentration risk may arise when a number of properties are located in a similar geographic region such that the economic conditions of that region could impact tenants’ obligations to meet their contractual obligations or cause the values of individual properties to decline. Additionally, concentrations of risk may arise if any one tenant comprises a significant amount of the Account's rent, or if tenants are concentrated in a particular industry.
As of December 31, 2018 , the Account had no significant concentrations of tenants as no single tenant had annual contract rent that made up more than 3% of the rental income of the Account. Moreover, the Account's tenants have no notable concentration present in any one industry. There are no significant lease expirations scheduled to occur over the next twelve months.
The Account’s wholly-owned real estate investments and investments in joint ventures are located in the United States. The following table represents the diversification of the Account’s portfolio by region and property type as of December 31, 2018 :
Diversification by Fair Value (1)
 
 
West
 
East
 
South
 
Midwest
 
Total
Office
 
13.9
%
 
19.0
%
 
5.3
%
 
—
%
 
38.2
%
Apartment
 
9.6
%
 
7.5
%
 
6.6
%
 
1.0
%
 
24.7
%
Retail
 
7.7
%
 
3.1
%
 
7.9
%
 
0.8
%
 
19.5
%
Industrial
 
8.3
%
 
1.3
%
 
4.2
%
 
0.5
%
 
14.3
%
Other (2)
 
0.6
%
 
2.5
%
 
0.1
%
 
0.1
%
 
3.3
%
Total
 
40.1
%
 
33.4
%
 
24.1
%
 
2.4
%
 
100.0
%
(1)  
Wholly-owned properties are represented at fair value and gross of any debt, while joint venture properties are represented at the net equity value.
(2)  
Represents interests in Storage Portfolio investments, a fee interest encumbered by a ground lease real estate investment and land.
Properties in the “West” region are located in: AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY
Properties in the “East” region are located in: CT, DC, DE, KY, MA, MD, ME, NC, NH, NJ, NY, PA, RI, SC, VA, VT, WV
Properties in the “South” region are located in: AL, AR, FL, GA, LA, MS, OK, TN, TX
Properties in the “Midwest” region are located in: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI

74


Note 4—Leases
The Account’s wholly-owned real estate properties are leased to tenants under operating lease agreements which expire on various dates through 2090. Aggregate minimum annual rentals for wholly-owned real estate investments owned by the Account through the non-cancelable lease term, excluding short-term residential leases, are as follows (millions):
 
Years Ending December 31,
2019
$
535.2

2020
497.7

2021
431.5

2022
366.9

2023
307.8

Thereafter
2,701.8

Total
$
4,840.9

Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts, sales volume or contractual increases as defined in the lease agreement. These contractual contingent rentals are not included in the table above.
Note 5—Assets and Liabilities Measured at Fair Value on a Recurring Basis
Valuation Hierarchy: The Account’s fair value measurements are grouped categorically into three levels, as defined by the FASB. The levels are defined as follows:
•
Level 1 fair value inputs are quoted prices for identical items in active, liquid and visible markets such as stock exchanges.
•
Level 2 fair value inputs are observable information for similar items in active or inactive markets, and appropriately consider counterparty creditworthiness in the valuations.
•
Level 3 fair value inputs reflect our best estimate of inputs and assumptions market participants would use in pricing an asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation estimate.
An investment’s categorization within the valuation hierarchy described above is based upon the lowest level of input that is significant to the fair value measurement. Limited partnership investments are excluded from the valuation hierarchy, as these investments are fair valued using their net asset value as a practical expedient since market quotations or values from independent pricing services are not readily available. See Note 1 - Organization and Significant Accounting Policies for further discussion regarding the use of a practical expedient for the valuation of limited partnerships.
The Account’s determination of fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon vendor-provided, evaluated prices or internally developed models that primarily use market-based or independently sourced market data, including interest rate yield curves, market spreads, and currency rates. Valuation adjustments will be made to reflect changes in credit quality, counterparty’s creditworthiness, the Account’s creditworthiness, liquidity, and other observable and unobservable inputs that are applied consistently over time.
The methods described above are considered to produce fair values that represent an estimate by management of what an unaffiliated buyer in the marketplace would pay to purchase the asset or would receive to transfer the liability. Since fair value calculations involve significant professional judgment in the application of both observable and unobservable attributes, actual realizable values or future fair values may differ from amounts reported. Furthermore, while the Account believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments, while reasonable, could result in different estimates of fair value at the reporting date. As discussed in Note 1 — Organization and Significant Accounting Policies in more detail, the Account generally obtains independent third party appraisals on a quarterly

75


basis; there may be circumstances in the interim in which the true realizable value of a property is not reflected in the Account’s daily net asset value calculation or in the Account’s periodic Consolidated Financial Statements. This disparity may be more apparent when the commercial and/or residential real estate markets experience an overall and possibly dramatic decline (or increase) in property values in a relatively short period of time between appraisals.
The following tables show the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017 , using unadjusted quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); significant unobservable inputs (Level 3); and Practical Expedient (millions):
Description
 
Level 1:
Quoted
Prices in
Active Markets
for Identical
Assets
 
Level 2:
Significant
Other
Observable
Inputs
 
Level 3:
Significant
Unobservable
Inputs
 
Fair Value
Using
Practical
Expedient
 
Total at
December 31,
2018
Real estate properties
 
$
—

 
$
—

 
$
15,531.1

 
$
—

 
$
15,531.1

Real estate joint ventures
 
—

 
—

 
6,356.6

 
—

 
6,356.6

Limited partnerships
 
—

 
—

 
—

 
175.9

 
175.9

Marketable securities:
 
 
 
 
 
 
 
 
 
 
Real estate-related
 
1,415.1

 
—

 
—

 
—

 
1,415.1

Government agency notes
 
—

 
2,050.7

 
—

 
—

 
2,050.7

United States Treasury securities
 
—

 
2,038.0

 
—

 
—

 
2,038.0

Loans receivable
 
—

 
—

 
913.0

 
—

 
913.0

Total Investments at
December 31, 2018
 
$
1,415.1

 
$
4,088.7

 
$
22,800.7

 
$
175.9

 
$
28,480.4

Mortgage loans payable
 
$
—

 
$
—

 
$
(2,608.0
)
 
$
—

 
$
(2,608.0
)

Description
 
Level 1:
Quoted
Prices in
Active Markets
for Identical
Assets
 
Level 2:
Significant
Other
Observable
Inputs
 
Level 3:
Significant
Unobservable
Inputs
 
Fair Value
Using
Practical
Expedient
 
Total at
December 31,
2017
Real estate properties
 
$
—

 
$
—

 
$
15,742.7

 
$
—

 
$
15,742.7

Real estate joint ventures
 
—

 
—

 
5,860.6

 
—

 
5,860.6

Limited partnerships
 
—

 
—

 
—

 
142.4

 
142.4

Marketable securities:
 
 
 
 
 
 
 
 
 
 
Real estate-related
 
1,238.0

 
—

 
—

 
—

 
1,238.0

Government agency notes
 
—

 
2,872.3

 
—

 
—

 
2,872.3

United States Treasury securities
 
—

 
1,015.2

 
—

 
—

 
1,015.2

Loans receivable
 
—

 
—

 
298.8

 
—

 
298.8

Total Investments at
December 31, 2017
 
$
1,238.0

 
$
3,887.5

 
$
21,902.1

 
$
142.4

 
$
27,170.0

Mortgage loans payable
 
$
—

 
$
—

 
$
(2,238.3
)
 
$
—

 
$
(2,238.3
)

76


The following tables show the reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2018 and 2017 (millions):
 
 
Real Estate
Properties
 
Real Estate
Joint
Ventures
 
Loans
Receivable
 
Total
Level 3
Investments
 
Mortgage
Loans
Payable
For the year ended December 31, 2018
 
 
 
 
 
 
 
 
 
 
Beginning balance January 1, 2018
 
$
15,742.7

 
$
5,860.6

 
$
298.8

 
$
21,902.1

 
$
(2,238.3
)
Total realized and unrealized gains included in changes in net assets
 
315.8

 
116.3

 
0.3

 
432.4

 
79.4

Purchases (1)
 
1,151.8

 
941.5

 
939.2

 
3,032.5

 
(817.9
)
Sales
 
(1,679.2
)
 
—

 
(257.3
)
 
(1,936.5
)
 
—

Settlements (2)
 
—

 
(561.8
)
 
(68.0
)
 
(629.8
)
 
368.8

Ending balance December 31, 2018
 
$
15,531.1

 
$
6,356.6

 
$
913.0

 
$
22,800.7

 
$
(2,608.0
)
 
 
Real Estate
Properties
 
Real Estate
Joint
Ventures
 
Loans Receivable
 
Total
Level 3
Investments
 
Mortgage
Loans
Payable
For the year ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
Beginning balance January 1, 2017
 
$
15,452.8

 
$
5,622.4

 
$
295.7

 
$
21,370.9

 
$
(2,332.1
)
Total realized and unrealized gains included in changes in net assets
 
177.5

 
123.5

 
1.2

 
302.2

 
15.9

Purchases (1)
 
682.9

 
419.0

 
1.9

 
1,103.8

 
(17.7
)
Sales
 
(570.5
)
 
—

 
—

 
(570.5
)
 
—

Settlements (2)
 
—

 
(304.3
)
 
—

 
(304.3
)
 
95.6

Ending balance December 31, 2017
 
$
15,742.7

 
$
5,860.6

 
$
298.8

 
$
21,902.1

 
$
(2,238.3
)
(1)  
Includes purchases, contributions for joint ventures, capital expenditures, lending for loans receivable and assumption of mortgage loans payable.
(2)  
Includes operating income for real estate joint ventures net of distributions, principal payments and payoffs of loans receivable, and principal payments and extinguishment of mortgage loans payable.

77


The following table shows quantitative information about unobservable inputs related to the Level 3 fair value measurements as of December 31, 2018 .
 
 
 
 
 
Type
Asset Class
Valuation Technique(s)
Unobservable Inputs
Range (Weighted Average)
 
Real Estate Properties and Joint Ventures
Office
Income Approach—Discounted Cash Flow
Discount Rate
5.5%–8.6% (6.5%)
 
 
 
Terminal Capitalization Rate
4.0%–7.5% (5.4%)
 
 
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
4.0%–7.0% (4.8%)
 
 
 
Industrial
Income Approach—Discounted Cash Flow
Discount Rate
5.3%–8.9% (6.8%)
 
 
 
Terminal Capitalization Rate
4.4%–7.3% (5.5%)
 
 
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
4.0%–7.0% (4.9%)
 
 
 
Residential
Income Approach—Discounted Cash Flow
Discount Rate
5.5%–7.8% (6.5%)
 
 
 
Terminal Capitalization Rate
3.8%–6.8% (5.0%)
 
 
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
3.3%–6.0% (4.5%)
 
 
 
Retail
Income Approach—Discounted Cash Flow
Discount Rate
5.0%–10.7% (6.4%)
 
 
 
Terminal Capitalization Rate
4.3%–9.0% (5.3%)
 
 
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
3.3%–8.5% (4.7%)
 
Mortgage Loans Payable
Office and Industrial
Discounted Cash Flow
Loan-to-Value Ratio
36.4%–67.8% (47.6%)
 
 
 
Equivalency Rate
3.9%–6.2% (4.6%)
 
 
 
 
Net Present Value
Loan-to-Value Ratio
36.4%–67.8% (47.6%)
 
 
 
Weighted Average Cost of Capital Risk Premium Multiple
1.2–1.4 (1.3)
 
 
 
Residential
Discounted Cash Flow
Loan-to-Value Ratio
31.9%–63.6% (48.1%)
 
 
 
Equivalency Rate
3.4%–4.6% (4.1%)
 
 
 
 
Net Present Value
Loan-to-Value Ratio
31.9%–63.6% (48.1%)
 
 
 
Weighted Average Cost of Capital Risk Premium Multiple
1.1–1.4 (1.2)
 
 
 
Retail
Discounted Cash Flow
Loan-to-Value Ratio
31.9%–55.3% (39.3%)
 
 
 
Equivalency Rate
4.3%–5.3% (4.5%)
 
 
 
 
Net Present Value
Loan-to-Value Ratio
31.9%–55.3% (39.3%)
 
 
 
Weighted Average Cost of Capital Risk Premium Multiple
1.1–1.3 (1.2)
 
Loans Receivable
Residential, Industrial, Office, Retail and Storage
Discounted Cash Flow
Loan-to-Value Ratio
70.8%-79.2% (75.6%)
 
 
 
Equivalency Rate
6.0%-8.3% (6.9%)
 







78


The following table shows quantitative information about unobservable inputs related to the Level 3 fair value measurements as of December 31, 2017.
 
 
 
 
 
Type
Asset Class
Valuation Technique(s)
Unobservable Inputs
Range (Weighted Average)
 
Real Estate Properties and Joint Ventures
Office
Income Approach—Discounted Cash Flow
Discount Rate
5.5%–8.0% (6.5%)
 
 
 
Terminal Capitalization Rate
4.5%–7.0% (5.5%)
 
 
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
3.8%–7.0% (4.8%)
 
 
 
Industrial
Income Approach—Discounted Cash Flow
Discount Rate
5.5%–8.9% (6.8%)
 
 
 
Terminal Capitalization Rate
4.5%–8.3% (5.5%)
 
 
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
4.0%–7.5% (5.0%)
 
 
 
Residential
Income Approach—Discounted Cash Flow
Discount Rate
5.0%–8.0% (6.1%)
 
 
 
Terminal Capitalization Rate
3.5%–6.5% (4.8%)
 
 
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
3.3%–6.0% (4.3%)
 
 
 
Retail
Income Approach—Discounted Cash Flow
Discount Rate
5.0%–10.5% (6.4%)
 
 
 
Terminal Capitalization Rate
4.3%–8.8% (5.2%)
 
 
 
 
Income Approach—Direct Capitalization
Overall Capitalization Rate
3.8%–8.8% (4.7%)
 
Mortgage Loans Payable
Office and Industrial
Discounted Cash Flow
Loan-to-Value Ratio
37.7%–69.5% (45.6%)
 
 
 
Equivalency Rate
3.7%–5.2% (3.9%)
 
 
 
 
Net Present Value
Loan-to-Value Ratio
37.7%–69.5% (45.6%)
 
 
 
Weighted Average Cost of Capital Risk Premium Multiple
1.2–1.5 (1.3)
 
 
 
Residential
Discounted Cash Flow
Loan-to-Value Ratio
28.1%–64.2% (38.6%)
 
 
 
Equivalency Rate
3.3%–3.6% (3.4%)
 
 
 
 
Net Present Value
Loan-to-Value Ratio
28.1%–64.2% (38.6%)
 
 
 
Weighted Average Cost of Capital Risk Premium Multiple
1.1–1.5 (1.3)
 
 
 
Retail
Discounted Cash Flow
Loan-to-Value Ratio
17.9%–56.0% (32.7%)
 
 
 
Equivalency Rate
3.1%–4.4% (3.8%)
 
 
 
 
Net Present Value
Loan-to-Value Ratio
17.9%–56.0% (32.7%)
 
 
 
Weighted Average Cost of Capital Risk Premium Multiple
1.1–1.4 (1.2)
 
Loans Receivable
Office, Retail and Storage
Discounted Cash Flow
Loan-to-Value Ratio
59.4%-77.3% (75.1%)
 
 
 
Equivalency Rate
4.2%-8.3% (6.2%)
 
Real Estate Properties and Joint Ventures: The significant unobservable inputs used in the fair value measurement of the Account’s real estate property and joint venture investments are the selection of certain investment rates (Discount Rate, Terminal Capitalization Rate, and Overall Capitalization Rate). Significant increases (decreases) in any of those inputs in isolation would result in significantly lower (higher) fair value measurements, respectively.
Mortgage Loans Payable: The significant unobservable inputs used in the fair value measurement of the Account’s mortgage loans payable are the loan-to-value ratios and the selection of certain credit spreads and weighted average cost of capital risk premiums. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value, respectively.

79


Loans Receivable: The significant unobservable inputs used in the fair value measurement of the Account’s loans receivable are the loan-to-value ratios and the selection of certain credit spreads. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value, respectively.
During the years ended December 31, 2018 and 2017 there were no transfers between Levels 1, 2 or 3.
The amount of total net unrealized gains included in changes in net assets attributable to the change in net unrealized gains relating to Level 3 investments and mortgage loans payable using significant unobservable inputs still held as of the reporting date is as follows (millions):
 
 
Real Estate
Properties
 
Real Estate
Joint Ventures
 
Loans
Receivable
 
Total
Level 3
Investments
 
Mortgage
Loans
Payable
For the year ended December 31, 2018
 
$
282.6

 
$
80.8

 
$
0.3

 
$
363.7

 
$
86.2

For the year ended December 31, 2017
 
$
185.1

 
$
125.2

 
$
1.2

 
$
311.5

 
$
15.9

Note 6—Investments in Joint Ventures
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 in those investments. Several of these joint ventures have mortgage loans payable collateralized by the properties owned by the aforementioned joint ventures. At December 31, 2018 , the Account held investments in joint ventures with ownership interest percentages that ranged from 33.3% to 97.0% . Certain joint ventures are subject to adjusted distribution percentages when earnings in the investment reach a pre-determined threshold.
A condensed summary of the financial position and results of operations of the combined joint ventures is shown below (millions):
 
 
December 31,
2018
 
2017
Assets
 
 
 
 
Real estate properties, at fair value
 
$
16,134.1

 
$
14,240.8

Other assets
 
460.3

 
337.1

Total assets
 
$
16,594.4

 
$
14,577.9

Liabilities & Equity
 
 
 
 
Mortgage notes payable and other obligations, at fair value
 
$
5,035.3

 
$
3,995.7

Other liabilities
 
262.5

 
150.7

Total liabilities
 
5,297.8

 
4,146.4

Total equity
 
11,296.6

 
10,431.5

Total liabilities and equity
 
$
16,594.4

 
$
14,577.9

 
 
Years ended December 31,
2018
 
2017
 
2016
Operating Revenue and Expenses
 
 
 
 
 
 
Revenues
 
$
950.6

 
$
869.2

 
$
714.6

Expenses
 
487.1

 
426.9

 
365.0

Excess of revenues over expenses
 
$
463.5

 
$
442.3

 
$
349.6



80


Note 7—Investments in Limited Partnerships
The Account invests in limited partnerships and limited liability companies that own real estate properties. The Account receives distributions from these investments based on the Account’s ownership interest percentage. At December 31, 2018 , the Account held ownership interest percentages that ranged from 1.7% to 90.0% . As of December 31, 2018 and 2017 , the fair value of the Account’s ownership interest in limited partnerships was $175.9 million and $142.4 million , respectively.
Clarion Gables Multi-Family Trust LP allows redemptions with an advanced notice of three months or more. Redemptions are funded using the partnership’s available cash, which may not immediately be in excess of the redemption amount, and may not be sufficient to fund the redemption amount for several months. The general partner has sole discretion in identifying how much cash is available to process redemptions. The partnership allows the Account to sell its interest in the partnership, subject to the consent and approval of the general partner.
Taconic New York City GP Fund, LP prohibits redemptions in the partnership prior to liquidation. Liquidation of the partnership is estimated to begin no earlier than 2024. The partnership allows the Account to sell its interest in the partnership, subject to the consent and approval of the general partner.
LCS SHIP Venture I, LLC prohibits redemptions prior to liquidation. The Account is generally not permitted to sell or transfer its interest in the company without consent of the manager.
Note 8—Loans Receivable
The Account’s loan receivable portfolio is comprised of mezzanine loans secured by the borrower’s direct and indirect interest in commercial real estate. Mezzanine loans are subordinate to first mortgages on the underlying real estate collateral. The following property types represent the underlying real estate collateral for the Account's mezzanine loans:
 
 
December 31,
 
 
2018
 
2017
 
 
Fair Value
 
%
 
Fair Value
 
%
Office
 
$
512.1

 
56.2
%
 
$
227.0

 
76.0
%
Industrial
 
176.4

 
19.3
%
 
—

 
—
%
Retail
 
101.6

 
11.1
%
 
34.2

 
11.4
%
Storage
 
63.2

 
6.9
%
 
37.6

 
12.6
%
Apartments
 
59.7

 
6.5
%
 
—

 
—
%
 
 
$
913.0

 
100.0
%
 
$
298.8

 
100.0
%
The Account monitors the risk profile of the loan receivable portfolio with the assistance of a third-party rating service that models the loans and assigns risk ratings based on inputs such as loan-to-value ratios, yields, credit quality of the borrowers, property types of the collateral, geographic and local market dynamics, physical condition of the collateral, and the underlying structure of the loans. Ratings for the loans are updated monthly. Ratings range from AAA to C, with a AAA designation representing debt with the lowest level of credit risk and C representing a high likelihood of default or principal loss. Mezzanine debt in good health is typically reflective of a risk rating in the B range (e.g., BBB, BB, B), as these ratings reflect borrowers having adequate financial resources to service their financial commitments, but also acknowledging that adverse economic conditions, should they occur, would likely impede on a borrowers' ability to pay.

81


The following table presents the fair values of the Account's loan portfolio based on the risk ratings as of December 31, 2018, listed in order of the strength of the risk rating (from strongest to weakest):
 
 
Number of Loans
 
Fair Value
 
%
BBB
 
3
 
$
175.0

 
19.2
%
BB
 
5
 
561.5

 
61.5
%
B
 
5
 
170.2

 
18.6
%
NR 1
 
1
 
6.3

 
0.7
%
 
 
14
 
$
913.0

 
100.0
%
(1) " NR" designates loans not assigned an internal credit rating. As of December 31, 2018, this is representative of one loan collateralized by an interest in a joint venture invested in real estate. The loan is scheduled to mature on July 12, 2019. Management expects all principal and interest owed to the Account for this loan to be collected in full.
The Account has zero loans in non-performing status as of December, 31, 2018.
Note 9—Mortgage Loans Payable
At December 31, 2018 and 2017, the Account had outstanding mortgage loans payable secured by the following properties (millions):
Property
 
Interest Rate
and
Payment Frequency (2)
 
Principal Amounts Outstanding as of
December 31,
 
Maturity
2018
 
2017
 
Mass Court (1)
 
2.88% paid monthly
 
$
90.2

 
$
92.1

 
September 1, 2019
Red Canyon at Palomino Park (4)
 
5.34% paid monthly
 
27.1

 
27.1

 
August 1, 2020
Green River at Palomino Park (4)
 
5.34% paid monthly
 
33.2

 
33.2

 
August 1, 2020
Blue Ridge at Palomino Park (4)
 
5.34% paid monthly
 
33.4

 
33.4

 
August 1, 2020
Ashford Meadows Apartments
 
5.17% paid monthly
 
44.6

 
44.6

 
August 1, 2020
The Knoll (1)
 
3.98% paid monthly
 
16.9

 
17.5

 
December 5, 2020
The Corner
 
4.66% paid monthly
 
—

 
105.0

 
June 1, 2021
Ascent at Windward
 
3.51% paid monthly
 
34.6

 
—

 
January 1, 2022
The Palatine (1)
 
4.25% paid monthly
 
77.4

 
78.8

 
January 10, 2022
The Forum at Carlsbad (1)
 
4.25% paid monthly
 
87.3

 
88.9

 
March 1, 2022
Fusion 1560
 
3.42% paid monthly
 
37.4

 
—

 
June 10, 2022
The Colorado (1)
 
3.69% paid monthly
 
89.9

 
91.7

 
November 1, 2022
The Legacy at Westwood (1)
 
3.69% paid monthly
 
45.8

 
46.7

 
November 1, 2022
Regents Court (1)
 
3.69% paid monthly
 
38.8

 
39.6

 
November 1, 2022
Fourth & Madison (1)
 
3.75% paid monthly
 
198.2

 
200.0

 
June 1, 2023
Fourth & Madison
 
4.17% paid monthly
 
90.0

 
—

 
June 1, 2023
1001 Pennsylvania Avenue (1)
 
3.70% paid monthly
 
327.0

 
330.0

 
June 1, 2023
Biltmore at Midtown
 
3.94% paid monthly
 
36.4

 
—

 
July 5, 2023
Cherry Knoll
 
3.78% paid monthly
 
35.3

 
—

 
July 5, 2023
Lofts at SoDo
 
3.94% paid monthly
 
35.1

 
—

 
July 5, 2023
1401 H Street, NW
 
3.65% paid monthly
 
115.0

 
115.0

 
November 5, 2024
Circa Green Lake
 
3.71% paid monthly
 
52.0

 
—

 
March 5, 2025
Union - South Lake Union
 
3.66% paid monthly
 
57.0

 
—

 
March 5, 2025
Holly Street Village
 
3.65% paid monthly
 
81.0

 
—

 
May 1, 2025
Township Apartments
 
3.65% paid monthly
 
49.0

 
—

 
May 1, 2025
32 South State Street
 
4.48% paid monthly
 
24.0

 
24.0

 
June 6, 2025
780 Third Avenue
 
3.55% paid monthly
 
150.0

 
150.0

 
August 1, 2025

82


Property
 
Interest Rate
and
Payment Frequency (2)
 
Principal Amounts Outstanding as of
December 31,
 
Maturity
2018
 
2017
 
780 Third Avenue
 
3.55% paid monthly
 
$
20.0

 
$
20.0

 
August 1, 2025
701 Brickell Avenue
 
3.66% paid monthly
 
184.0

 
184.0

 
April 1, 2026
55 Second Street (5)
 
3.74% paid monthly
 
137.5

 
137.5

 
October 1, 2026
1900 K Street, NW
 
3.93% paid monthly
 
163.0

 
163.0

 
April 1, 2028
501 Boylston Street (6)
 
3.70% paid monthly
 
—

 
216.5

 
April 1, 2028
99 High Street
 
3.90% paid monthly
 
277.0

 
—

 
March 1, 2030
Total Principal Outstanding
 
 
 
$
2,688.1

 
$
2,238.6

 
 
  Fair Value Adjustment (3)
 
 
 
(80.1
)
 
(0.3
)
 
 
Total Mortgage Loans Payable
 
 
 
$
2,608.0

 
$
2,238.3

 
 
(1)  
The mortgage is adjusted monthly for principal payments.
(2)  
Interest rates are fixed. Some mortgages held by the Account are structured to begin principal and interest payments after an initial interest only period.
(3)  
The fair value adjustment consists of the difference (positive or negative) between the principal amount of the outstanding debt and the fair value of the outstanding debt. See Note 1—Organization and Significant Accounting Policies.
(4)  
Represents mortgage loans on these individual properties which are held within the Palomino Park portfolio.
(5)  
This mortgage is comprised of three individual loans, all with equal recourse, interest and maturity. The principal balances by loan are $79.0 million , $45.0 million , and $13.5 million .
(6)  
On August 21, 2018, the Account sold a 49.9% interest in the property and transferred the remaining 50.1% to a joint venture investment. The debt was assumed by the buyer and new joint venture, respectively.
Principal payment schedule on mortgage loans payable as of December 31, 2018 was as follows (millions):
 
Amount
2019
$
107.2

2020
171.7

2021
20.0

2022
407.7

2023
686.4

Thereafter
1,295.1

Total maturities
$
2,688.1


83


Note 10—Line of Credit
On September 20, 2018, the Account entered into a $500.0 million unsecured revolving credit agreement (“Line of Credit”) syndicated across four national banks (“Lenders”), with each Lender providing a $125.0 million commitment. Access to the Line of Credit expires on September 20, 2021, with an option to extend the Line of Credit for two consecutive twelve terms at the Account’s election. The Account may request an additional $250.0 million in commitments from the Lenders at any time; however, this request is subject to approval at the sole discretion of the Lenders and is not a guarantee that an expansion beyond the original $500.0 million commitment will be granted. Draws against the Line of Credit can take the form of Eurodollar Loans or Alternate Base Rate Loans (“ABR Loans”). Eurodollar Loans and ABR Loans both require a minimum funding of $5.0 million . The Account is charged a fee of 0.20% per annum on any unused portion of the Line of Credit.
Eurodollar Loans are issued for a term of twelve months or less and bear interest during the period (“Interest Period”) at a rate equal to the Adjusted London Interbank Offer Rate (“Adjusted LIBOR”) plus a spread ranging between 0.85% - 1.05% per annum (the “Applicable Rate”), with the spread dependent upon the leverage ratio of the Account. The Adjusted LIBOR Rate is calculated by multiplying the Statutory Reserve Rate, as determined by the Federal Reserve Board for Eurodollar liabilities, by the LIBOR rate, as determined by the Intercontinental Exchange on the date of issuance that corresponds to the length of the Interest Period of the Eurodollar Loan. The Account may prepay Eurodollar Loans at any time during the life of the loan without penalty. The Account is limited to five active Eurodollar Loans through the Line of Credit; however, the Account may retire and initiate new Eurodollar Loans without restriction so long as the total number of loans in active status never exceeds the limit.
ABR Loans are issued for a specific length of time and bear interest at a rate equal to the highest rate among the following calculations plus the Applicable Rate: a) the Prime Rate on the date of issuance, with the Prime Rate being defined as the rate of interest last quoted by the Wall Street Journal as the Prime Rate; b) the Federal Reserve Bank of New York (“NYFRB”) Rate as provided by the NYFRB on the date of issuance plus 0.5% ; or c) the Adjusted LIBOR Rate plus 1.0% . The Account may prepay ABR Loans at any time during the life of the loan without penalty.
As of December 31, 2018, the Account had zero active loans outstanding on the Line of Credit. The Account is in compliance with all covenants required by the Line of Credit.

84


Note 11—Financial Highlights
Selected condensed financial information for an Accumulation Unit of the Account is presented below. Per Accumulation Unit data is calculated on average units outstanding.
 
 
Years ended December 31,
2018
 
2017
 
2016
 
2015
 
2014
Per Accumulation Unit Data:
 
 
 
 
 
 
 
 
 
 
Rental income
 
$
17.757

 
$
17.132

 
$
16.433

 
$
15.538

 
$
15.862

Real estate property level expenses and taxes
 
8.548

 
7.722

 
7.534

 
7.319

 
7.788

Real estate income, net
 
9.209

 
9.410

 
8.899

 
8.219

 
8.074

Other income
 
6.162

 
4.762

 
3.594

 
3.342

 
3.459

Total income
 
15.371

 
14.172

 
12.493

 
11.561

 
11.533

Expense charges (1)
 
3.161

 
3.318

 
3.290

 
3.092

 
2.880

Investment income, net
 
12.210

 
10.854

 
9.203

 
8.469

 
8.653

Net realized and unrealized gain on investments and mortgage loans payable
 
6.877

 
5.839

 
9.660

 
18.911

 
27.868

Net increase in Accumulation Unit Value
 
19.087

 
16.693

 
18.863

 
27.380

 
36.521

Accumulation Unit Value:
 
 
 
 
 
 
 
 
 
 
Beginning of period
 
398.329

 
381.636

 
362.773

 
335.393

 
298.872

End of period
 
$
417.416

 
$
398.329

 
$
381.636

 
$
362.773

 
$
335.393

Total return
 
4.79
%
 
4.37
%
 
5.20
%
 
8.16
%
 
12.22
%
Ratios to Average net Assets:
 
 
 
 
 
 
 
 
 
 
Expenses (1)
 
0.76
%
 
0.83
%
 
0.86
%
 
0.86
%
 
0.89
%
Investment income, net
 
2.95
%
 
2.72
%
 
2.41
%
 
2.37
%
 
2.68
%
Portfolio turnover rate:
 
 
 
 
 
 
 
 
 
 
Real estate properties (2)
 
11.8
%
 
2.7
%
 
1.3
%
 
5.7
%
 
6.5
%
Marketable securities (3)
 
5.1
%
 
5.7
%
 
3.5
%
 
10.0
%
 
15.9
%
Accumulation Units outstanding at end of period (millions):
 
60.7

 
61.3

 
62.4

 
60.4

 
57.9

Net assets end of period (millions)
 
$
25,842.6

 
$
24,942.6

 
$
24,304.7

 
$
22,360.0

 
$
19,829.0

(1)  
Expense charges per Accumulation Unit and the Ratio of Expenses to average net assets reflect the year to date Account level expenses and exclude real estate property level expenses which are included in real estate income, net.
(2)  
Real estate investment portfolio turnover rate is calculated by dividing the lesser of purchases or sales of real estate property investments (including contributions to, or return of capital distributions received from, existing joint venture and limited partnership investments) by the average value of the portfolio of real estate investments held during the period.
(3)  
Marketable securities portfolio turnover rate is calculated by dividing the lesser of purchases or sales of securities, excluding securities having maturity dates at acquisition of one year or less, by the average value of the portfolio securities held during the period.
Note 12—Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows (millions):
 
 
Years ended December 31,
 
 
2018
 
2017
 
2016
Outstanding:
 
 
 
 
 
 
Beginning of period
 
61.3

 
62.4

 
60.4

Credited for premiums
 
6.5

 
6.6

 
8.2

Annuity, other periodic payments, withdrawals and death benefits
 
(7.1
)
 
(7.7
)
 
(6.2
)
End of period
 
60.7

 
61.3

 
62.4


85


Note 13—Commitments and Contingencies
Commitments —As of December 31, 2018 and 2017 , the Account had the following immediately callable commitments to purchase additional interests in its limited partnership investments:
 
December 31,
 
2018
 
2017
Taconic New York City GP Fund
$
26.0

 
$
32.0

LCS SHIP Venture I, LLC
75.0

 
—

 
$
101.0

 
$
32.0

Taconic New York City GP Fund—The general partner can call capital during the commitment period at any time. The commitment period ends on the fifth anniversary from closing (November 2020). The commitment period may be closed earlier at the joint election of TIAA and the general partner if 90% of the commitment has been satisfied.
LCS SHIP Venture I, LLC—The general partner can call capital at any time during the commitment period, which ends one year from closing (June 2019).
The Account has committed a total of $ 83.3 million and $47.6 million as of December 2018 and 2017, respectively, to various tenants for tenant improvements and leasing inducements.
Contingencies —In the normal course of business, the Account may be named, from time to time, as a defendant or may be involved in various legal actions, including arbitrations, class actions and other litigation.
The Account establishes an accrual for all litigation and regulatory matters when it believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted, as appropriate, in light of additional information. The amount of loss ultimately incurred in relation to those matters may be higher or lower than the amounts accrued for those matters.
As of the date of this report, management of the Account does not believe that the results of any such claims or litigation, individually or in the aggregate, will have a material effect on the Account’s business, financial position or results of operations.
Note 14—Subsequent Events
Purchases
Property Name
 
Purchase Date
 
Ownership Percentage
 
Sector
 
Location
 
Net Purchase Price (1)
Glen Lake
 
01/09/2019
 
100.00%
 
Apartments
 
Atlanta, GA
 
$
54.8

1600 Broadway
 
01/10/2019
 
100.00%
 
Office
 
Denver, CO
 
109.1

The Theory
 
01/15/2019
 
97.00%
 
Apartments
 
Raleigh, NC
 
63.0

Colony Industrial Portfolio
 
02/20/2019
 
100.00%
 
Industrial
 
Various, U.S.A.
 
137.0

Storage Portfolio III (2)
 
02/22/2019
 
90.00%
 
Storage
 
Various, U.S.A.
 
17.9

(1)  
The net purchase price represents the purchase price and closing costs.
(2)  
The Account entered into a 90% interest in a joint venture designed for future investment in storage properties. The Account's maximum potential investment is $100.0 million and on February 22, 2019, the first storage property in Glen Burnie, MD, was acquired for $17.9 million (the Account's Share).
Sales
Property Name
 
Sales Date
 
Ownership Percentage
 
Sector
 
Location
 
Net Sales Price (1)
Realized Gain/Loss on Sale (3)
1858 Meca Way (2)
 
03/01/2019
 
100.00%
 
Industrial
 
Norcross, GA
 
$
2.9

$
—

(1)  
The net sales price represents the sales price, less selling expenses.
(2)  
Property held within Colony Industrial Portfolio.
(3)  
No realized gain or loss was realized from the sale.

86


Loans Receivable
Borrower Name
 
Financing Date
 
Interest Rate
 
Sector
 
Maturity Date
Location
 
Loan Amount (1)
SCG Oakland Portfolio
 
03/01/2019
 
4.25% + LIBOR
 
Office
 
03/01/2024
Oakland, CA
 
$
53.5

(1)  
Loan Amount represents the Account's mezzanine loan receivable position.
Financings
Property Name
 
Financing Date
 
Ownership Percentage
 
Interest Rate
 
Sector
 
Maturity Date
 
Location
 
Financing Amount (1)
The Theory
 
01/15/2019
 
97.00%
 
3.94%
 
Apartments
 
01/15/2024
 
Raleigh, NC
 
$
31.3

Marketable Securities
In the first two months of 2019, the Account sold approximately $400 million in real estate-related securities.

87
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


REAL ESTATE PROPERTIES—54.5% and 57.9%
Location/Description
 
Type
 
Fair Value at December 31,
2018
 
2017
 
 
 
 
 
 
 
 
Alabama:
 
 
 
 
 
 
 
 
Riverchase Village
 
Retail
 
$
40.0

 
 
$
—

 
Arizona:
 
 
 
 
 
 
 
 
Camelback Center
 
Office
 
63.4

 
 
59.8

 
California:
 
 
 
 
 
 
 
 
55 Second Street
 
Office
 
368.2

(1)  
 
355.5

(1)  
88 Kearny Street
 
Office
 
189.1

 
 
174.2

 
200 Middlefield Road
 
Office
 
61.8

 
 
61.4

 
12910 Mulberry Drive
 
Industrial
 
21.7

 
 
—

 
30700 Russell Ranch
 
Office
 
34.6

 
 
—

 
Allure at Camarillo
 
Apartments
 
61.8

 
 
59.6

 
BLVD63
 
Apartments
 
164.0

 
 
162.1

 
Bridgepointe Shopping Center
 
Retail
 
125.0

 
 
124.5

 
Castro Station
 
Office
 
—

 
 
169.0

 
Centre Pointe and Valley View
 
Industrial
 
51.2

 
 
47.8

 
Cerritos Industrial Park
 
Industrial
 
153.1

 
 
142.0

 
Charleston Plaza
 
Retail
 
100.0

 
 
93.0

 
Frontera Industrial Business Park
 
Industrial
 
74.0

 
 
56.4

 
Great West Industrial Portfolio
 
Industrial
 
178.5

 
 
167.0

 
Holly Street Village
 
Apartments
 
152.1

(1)  
 
148.0

 
Larkspur Courts
 
Apartments
 
146.0

 
 
143.7

 
Northern CA RA Industrial Portfolio
 
Industrial
 
93.3

 
 
87.4

 
Oakmont IE West Portfolio
 
Industrial
 
103.5

 
 
87.6

 
Oceano at Warner Center
 
Apartments
 
89.3

 
 
89.0

 
Ontario Industrial Portfolio
 
Industrial
 
421.8

 
 
398.6

 
Ontario Mills Industrial Portfolio
 
Industrial
 
61.8

 
 
58.5

 
Otay Mesa Industrial Portfolio
 
Industrial
 
29.4

 
 
—

 
Pacific Plaza
 
Office
 
116.5

 
 
115.2

 
Rancho Cucamonga Industrial Portfolio
 
Industrial
 
76.2

 
 
71.9

 
Rancho Del Mar
 
Apartments
 
92.5

 
 
—

 
Regents Court
 
Apartments
 
104.0

(1)  
 
99.1

(1)  
Southern CA RA Industrial Portfolio
 
Industrial
 
143.4

 
 
138.0

 
Stella
 
Apartments
 
183.7

 
 
179.7

 
Stevenson Point
 
Industrial
 
61.3

 
 
50.9

 
The Forum at Carlsbad
 
Retail
 
225.0

(1)  
 
221.0

(1)  
The Legacy at Westwood
 
Apartments
 
144.0

(1)  
 
143.0

(1)  
Township Apartments
 
Apartments
 
90.5

(1)  
 
89.8

 
West Lake North Business Park
 
Office
 
62.6

 
 
60.3

 
Westcreek
 
Apartments
 
55.0

 
 
51.4

 
Westwood Marketplace
 
Retail
 
142.0

 
 
131.9

 

88
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Location/Description
 
Type
 
Fair Value at December 31,
2018
 
2017
Wilshire Rodeo Plaza
 
Office
 
$
312.4

 
 
$
327.8

 
Colorado:
 
 
 
 
 
 
 
 
Palomino Park
 
Apartments
 
348.0

(1)  
 
329.7

(1)  
South Denver Marketplace
 
Retail
 
72.7

 
 
72.7

 
Connecticut:
 
 
 
 
 
 
 
 
Wilton Woods Corporate Campus
 
Office
 
121.0

 
 
133.0

 
Florida:
 
 
 
 
 
 
 
 
5 West
 
Apartments
 
62.2

 
 
—

 
701 Brickell Avenue
 
Office
 
394.3

(1)  
 
368.5

(1)  
Broward Industrial Portfolio
 
Industrial
 
59.1

 
 
54.2

 
Casa Palma
 
Apartments
 
102.0

 
 
95.0

 
Fusion 1560
 
Apartments
 
82.0

(1)  
 
—

 
Lofts at SoDo
 
Apartments
 
66.7

(1)  
 
—

 
Orion on Orpington
 
Apartments
 
49.2

 
 
44.4

 
Publix at Weston Commons
 
Retail
 
74.6

 
 
74.8

 
Seneca Industrial Park
 
Industrial
 
117.5

 
 
108.8

 
South Florida Apartment Portfolio
 
Apartments
 
108.7

 
 
105.1

 
The Manor Apartments
 
Apartments
 
52.9

 
 
52.6

 
The Manor at Flagler Village
 
Apartments
 
137.1

 
 
148.1

 
The Residences at the Village of Merrick Park
 
Apartments
 
72.7

 
 
76.0

 
Urban Centre
 
Office
 
—

 
 
143.3

 
Weston Business Center
 
Industrial
 
97.8

 
 
92.8

 
Georgia:
 
 
 
 
 
 
 
 
Ascent at Windward
 
Apartments
 
68.4

(1)  
 
—

 
Atlanta Industrial Portfolio
 
Industrial
 
35.5

 
 
32.4

 
Biltmore at Midtown
 
Apartments
 
70.4

(1)  
 
—

 
Shawnee Ridge Industrial Portfolio
 
Industrial
 
89.2

 
 
91.1

 
Illinois:
 
 
 
 
 
 
 
 
32 South State Street
 
Retail
 
50.4

(1)  
 
48.3

(1)  
803 Corday
 
Apartments
 
94.2

 
 
94.5

 
Chicago Caleast Industrial Portfolio
 
Industrial
 
82.8

 
 
80.5

 
Chicago Industrial Portfolio
 
Industrial
 
28.7

(9)  
 
100.3

 
Maryland:
 
 
 
 
 
 
 
 
Cherry Knoll
 
Apartments
 
59.2

(1)  
 
—

 
Landover Logistics Center
 
Industrial
 
44.3

 
 
43.4

 
The Shops at Wisconsin Place
 
Retail
 
76.9

 
 
90.0

 
Massachusetts:
 
 
 
 
 
 
 
 
99 High Street
 
Office
 
506.4

(1)  
 
502.1

 
501 Boylston Street
 
Office
 
—

(10)  
 
505.2

(1)  
Fort Point Creative Exchange Portfolio
 
Office
 
247.1

 
 
223.1

 
Northeast RA Industrial Portfolio
 
Industrial
 
42.0

 
 
40.9

 
One Beeman Road
 
Industrial
 
34.0

 
 
33.8

 

89
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Location/Description
 
Type
 
Fair Value at December 31,
2018
 
2017
Minnesota:
 
 
 
 
 
 
 
 
The Bridges
 
Apartments
 
$
64.9

 
 
$
62.4

 
The Knoll
 
Apartments
 
36.1

(1)  
 
34.0

(1)  
New Jersey:
 
 
 
 
 
 
 
 
10 New Maple Avenue
 
Industrial
 
18.0

 
 
—

 
200 Milik Street
 
Industrial
 
54.0

 
 
53.1

 
Amazon Distribution Center
 
Industrial
 
—

 
 
110.0

 
Marketfair
 
Retail
 
104.3

 
 
102.9

 
South River Road Industrial
 
Industrial
 
102.5

 
 
87.8

 
New York:
 
 
 
 
 
 
 
 
21 Penn Plaza
 
Office
 
317.8

 
 
261.2

 
250 North 10th Street
 
Apartments
 
151.0

 
 
163.1

 
425 Park Avenue
 
Ground Lease
 
461.0

 
 
457.0

 
430 West 15th Street
 
Office
 
—

 
 
145.8

 
780 Third Avenue
 
Office
 
418.7

(1)  
 
427.0

(1)  
837 Washington Street
 
Office
 
222.0

 
 
210.0

 
The Colorado
 
Apartments
 
254.9

(1)  
 
256.2

(1)  
The Corner
 
Apartments
 
—

 
 
251.0

(1)  
North Carolina:
 
 
 
 
 
 
 
 
Centric Gateway
 
Apartments
 
70.0

 
 
—

 
Oregon:
 
 
 
 
 
 
 
 
The Cordelia
 
Apartments
 
41.7

 
 
49.0

 
Pennsylvania:
 
 
 
 
 
 
 
 
1619 Walnut Street
 
Retail
 
24.1

 
 
24.1

 
South Carolina:
 
 
 
 
 
 
 
 
Greene Crossing
 
Apartments
 
75.1

 
 
67.2

 
Tennessee:
 
 
 
 
 
 
 
 
Southside at McEwen
 
Retail
 
48.6

 
 
48.2

 
Texas:
 
 
 
 
 
 
 
 
3131 McKinney
 
Office
 
49.7

 
 
—

 
Beltway North Commerce Center
 
Industrial
 
26.3

 
 
19.3

 
Carrington Park
 
Apartments
 
65.1

 
 
—

 
Churchill on the Park
 
Apartments
 
71.3

 
 
—

 
Cliffs at Barton Creek
 
Apartments
 
46.7

 
 
45.9

 
Dallas Industrial Portfolio
 
Industrial
 
222.3

 
 
213.2

 
Houston Apartment Portfolio
 
Apartments
 
164.4

 
 
158.7

 
Lincoln Centre
 
Office
 
372.6

 
 
358.0

 
Northwest Houston Industrial Portfolio
 
Industrial
 
75.6

 
 
70.7

 
Park 10 Distribution
 
Industrial
 
10.0

 
 
10.3

 
Pinnacle Industrial Portfolio
 
Industrial
 
51.2

 
 
53.3

 
Pinto Business Park
 
Industrial
 
144.9

 
 
131.6

 
The Maroneal
 
Apartments
 
56.1

 
 
56.6

 

90
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Location/Description
 
Type
 
Fair Value at December 31,
2018
 
2017
Virginia:
 
 
 
 
 
 
 
 
8270 Greensboro Drive
 
Office
 
$
47.5

 
 
$
50.3

 
Ashford Meadows Apartments
 
Apartments
 
107.1

(1)  
 
107.3

(1)  
Plaza America
 
Retail
 
116.3

 
 
117.0

 
The Ellipse at Ballston
 
Office
 
82.4

 
 
83.7

 
The Palatine
 
Apartments
 
122.0

(1)  
 
123.2

(1)  
Washington:
 
 
 
 
 
 
Circa Green Lake
 
Apartments
 
98.2

(1)  
 
97.5

 
Fourth and Madison
 
Office
 
580.0

(1)  
 
530.0

(1)  
Millennium Corporate Park
 
Office
 
—

 
 
184.1

 
Northwest RA Industrial Portfolio
 
Industrial
 
43.0

 
 
38.5

 
Pacific Corporate Park
 
Industrial
 
52.8

 
 
45.5

 
Prescott Wallingford Apartments
 
Apartments
 
66.5

 
 
62.0

 
Rainier Corporate Park
 
Industrial
 
141.6

 
 
123.7

 
Regal Logistics Campus
 
Industrial
 
109.1

 
 
100.0

 
Union - South Lake Union
 
Apartments
 
114.0

(1)  
 
111.0

 
Washington D.C.:
 
 
 
 
 
 
1001 Pennsylvania Avenue
 
Office
 
782.8

(1)  
 
785.0

(1)  
1401 H Street, NW
 
Office
 
209.5

(1)  
 
201.1

(1)  
1900 K Street, NW
 
Office
 
342.1

(1)  
 
330.0

(1)  
Mass Court
 
Apartments
 
166.1

(1)  
 
171.0

(1)  
The Ashton
 
Apartments
 
30.5

 
 
37.5

 
The Louis at 14th
 
Apartments
 
162.0

 
 
176.0

 
The Woodley
 
Apartments
 
196.0

 
 
191.0

 
TOTAL REAL ESTATE PROPERTIES
 
 
 
 
 
 
 
 
(Cost $12,687.8 and $12,972.5)
 
 
 
$
15,531.1

 
 
$
15,742.7

 
REAL ESTATE JOINT VENTURES AND LIMITED PARTNERSHIPS—22.9% and 22.1%
REAL ESTATE JOINT VENTURES—22.3% and 21.6%
Location/Description
 
Type
 
Fair Value at December 31,
2018
 
2017
California:
 
 
 
 
 
 
CA—Colorado Center LP
Colorado Center (50% Account Interest)
 
Office
 
$
376.2

(2)  
 
$
351.0

(2)  
PC Borrower, LLC
Pacific City (70% Account Interest)
 
Retail
 
59.5

(2)  
 
134.9

 
TREA 9625 Towne Center, LLC
9625 Towne Centre Drive (49.9% Account Interest)
 
Land
 
45.5

 
 
15.1

 
TREA Campus Pointe 1, LLC
Campus Pointe 1 (45% Account Interest)
 
Office
 
153.7

 
 
143.0

 
TREA Campus Pointe 2 & 3, LLC
Campus Pointe 2 & 3 (45% Account Interest)
 
Office (5)
 
132.8

 
 
127.1

 
TREA Campus Pointe 4, LLC
Campus Pointe 4 (45% Account Interest)
 
Office
 
9.2

 
 
8.8

 

91
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Location/Description
 
Type
 
Fair Value at December 31,
2018
 
2017
T-C 1500 Owens, LLC
1500 Owens Street (49.9% Account Interest)
 
Office
 
$
78.8

 
 
$
77.5

 
T-C Foundry Square II Venture LLC
Foundry Square II (50.1% Account Interest)
 
Office
 
290.1

 
 
262.7

 
T-C Illinois Street, LLC
409-499 Illinois Street (40% Account Interest)
 
Office
 
223.9

 
 
209.3

 
Valencia Town Center Associates LP
Valencia Town Center (50% Account Interest)
 
Retail
 
140.5

(2)  
 
138.8

(2)  
Florida:
 
 
 
 
 
 
Florida Mall Associates, Ltd
The Florida Mall (50% Account Interest)
 
Retail
 
769.7

(2)  
 
758.4

(2)  
TREA Florida Retail, LLC
Florida Retail Portfolio (80% Account Interest)
 
Retail
 
156.0

 
 
150.6

 
West Dade County Associates
Miami International Mall (50% Account Interest)
 
Retail
 
170.3

(2)  
 
166.0

(2)  
Indiana:
 
 
 
 
 
 
THP Park on Morton, LLC
Park on Morton (97% Account Interest)
 
Apartments
 
29.5

(2)  
 
—

 
Maryland:
 
 
 
 
 
 
WP Project Developer
The Shops at Wisconsin Place (33.33% Account Interest)
 
Retail
 
20.4

 
 
20.0

 
Massachusetts:
 
 
 
 
 
 
One Boston Place REIT
One Boston Place (50.25% Account Interest)
 
Office
 
239.1

 
 
229.1

 
T-C 225 Binney, LLC
225 Binney Street (70% Account Interest)
 
Office
 
220.2

 
 
201.9

 
T-C 501 Boylston Street Member, LLC
501 Boylston (50.1% Account Interest)
 
Office
 
195.6

(2)  
 
—

 
Nevada
 
 
 
 
 
 
 
 
Fashion Show Holding I, LLC
Fashion Show (50% Account Interest)
 
Retail
 
819.1

(2)  
 
844.4

(2)  
New York:
 
 
 
 
 
 
401 West 14th Street, LLC
401 West 14th Street (42.19% Account Interest)
 
Retail
 
48.4

(2)  
 
46.4

(2)  
440 Ninth Avenue Owner, LLC
440 Ninth Avenue (88.52% Account Interest)
 
Office
 
121.4

(2)  
 
—

 
817 Broadway Owner, LLC
817 Broadway (61.46% Account Interest)
 
Office
 
28.0

(2)  
 
23.0

(2)  
MRA Hub 34 Holding, LLC
The Hub (95% Account Interest)
 
Office
 
59.2

(2)  
 
56.9

(2)  
RGM 42, LLC
MiMA (70% Account Interest)
 
Apartments
 
118.4

(2)  
 
189.2

(2)  
TREA 35th Street LIC Investor Member, LLC
Commerce LIC (97.5% Account Interest)
 
Industrial
 
0.6

(11)  
 
58.2

 
Tennessee:
 
 
 
 
 
 
West Town Mall, LLC
West Town Mall (50% Account Interest)
 
Retail
 
154.3

(2)  
 
140.4

(2)  
Texas:
 
 
 
 
 
 
Four Oaks Venture LP
Four Oaks Place LP (51% Account Interest)
 
Office
 
344.6

(2)  
 
338.7

(2)  

92
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Location/Description
 
Type
 
Fair Value at December 31,
2018
 
2017
THP Cabana Beach San Marcos, LLC
Cabana Beach San Marcos (97% Account Interest)
 
Apartments
 
$
23.0

(2)  
 
$
—

 
THP The Forum at Sam Houston, LLC
The Forum - Sam Houston (97% Account Interest)
 
Apartments
 
17.6

(2)  
 
—

 
THP West Campus, LLC
Aspen Heights (97% Account Interest)
 
Apartments
 
42.3

(2)  
 
—

 
Washington:
 
 
 
 
 
 
T-C REA 400 Fairview Investor, LLC
400 Fairview (90% Account Interest)
 
Office
 
—

 
 
263.7

 
Various:
 
 
 
 
 
 
DDRTC Core Retail Fund, LLC
DDR Joint Venture (85% Account Interest)
 
Retail
 
655.8

(2,3)  
 
636.2

(2,3)  
Simpson Housing LLP
Simpson Housing Portfolio (80% Account Interest)
 
Apartments
 
400.1

(2,3)  
 
—

 
Storage Portfolio I, LLC
Storage Portfolio (66.02% Account Interest) (8)
 
Storage
 
92.4

(2,3)  
 
177.5

(2,3)  
Storage Portfolio II, LLC
Storage Portfolio II (90% Account Interest)
 
Storage
 
120.4

(2,3)  
 
91.8

(2,3)  
TOTAL REAL ESTATE JOINT VENTURES
(Cost $5,030.9 and $4,534.5)
 
 
 
$
6,356.6

 
 
$
5,860.6

 
 
 
 
 
 
 
 
 
 
LIMITED PARTNERSHIPS—0.6% and 0.5%
 
 
 
 
Clarion Gables Multi-Family Trust LP (1.681% Account Interest)
 
$
30.1

 
 
$
126.7

 
LCS SHIP Venture I LLC (90% Account Interest)
 
129.7

 
 
—

 
Taconic New York City GP Fund, LP (60% Account Interest)
 
15.7

 
 
10.8

 
Transwestern Mezz Realty Partners III, LLC (11.715% Account Interest)
 
0.4

(13)  
 
4.9

 
TOTAL LIMITED PARTNERSHIPS
(Cost $176.9 and $140.8)
 
 
 
$
175.9

 
 
$
142.4

 
TOTAL REAL ESTATE JOINT VENTURES AND LIMITED PARTNERSHIPS
(Cost $5,207.8 and $4,675.3)
 
$
6,532.5

 
 
$
6,003.0

 
MARKETABLE SECURITIES—19.4% and 18.9%
REAL ESTATE-RELATED MARKETABLE SECURITIES—5.0% and 4.6%
Shares
 
Issuer
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
 
110,762

 
90,769

 
Acadia Realty Trust
 
$
2.6

 
$
2.5

 
46,535

 
31,513

 
Agree Realty Corporation
 
2.8

 
1.6

 
94,479

 
—

 
Alexander & Baldwin, Inc.
 
1.7

 
—

 
2,986

 
2,309

 
Alexander's, Inc.
 
0.9

 
0.9

 
146,953

 
103,464

 
Alexandria Real Estate Equities, Inc.
 
16.9

 
13.5

 
—

 
53,951

 
Altisource Residential Corp.
 
—

 
0.6

 
52,670

 
43,804

 
American Assets Trust, Inc.
 
2.1

 
1.7

 
188,889

 
148,817

 
American Campus Communities, Inc.
 
7.8

 
6.1

 
75,276

 
—

 
American Financial Trust, Inc.
 
1.0

(7  
)  
—

 
357,614

 
263,720

 
American Homes 4 Rent
 
7.1

 
5.8

 
606,653

 
462,615

 
American Tower Corp.
 
96.0

 
66.0

 

93
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Shares
 
Issuer
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
 
118,616

 
—

 
Americold Realty Trust
 
$
3.0

 
$
—

 
213,704

 
171,065

 
Apartment Investment and Management Company
 
9.4

 
7.5

 
301,399

 
231,041

 
Apple Hospitality Inc.
 
4.3

 
4.5

 
69,576

 
47,395

 
Armada Hoffler Properties Inc.
 
1.0

 
0.7

 
—

 
27,462

 
Ashford Hospitality Prime Inc.
 
—

 
0.3

 
108,956

 
88,009

 
Ashford Hospitality Trust, Inc.
 
0.4

 
0.6

 
190,742

 
150,694

 
Avalonbay Communities, Inc.
 
33.2

 
26.9

 
30,596

 
24,509

 
Bluerock Residential Growth, Inc.
 
0.3

 
0.2

 
213,492

 
168,560

 
Boston Properties, Inc.
 
24.0

 
21.9

 
39,766

 
—

 
Braemar Hotels & Resorts, Inc.
 
0.4

 
—

 
243,776

 
189,208

 
Brandywine Realty Trust
 
3.1

 
3.4

 
418,058

 
336,302

 
Brixmore Property Group Inc
 
6.1

 
6.3

 
173,572

 
—

 
Brookfield Property REIT
 
2.8

 
—

 
12,485

 
—

 
BRT Apartments Corporation
 
0.1

 
—

 
123,044

 
99,633

 
Camden Property Trust
 
10.8

 
9.2

 
115,194

 
85,789

 
CareTrust REIT Inc.
 
2.1

 
1.4

 
64,018

 
48,438

 
Catchmark Timber Trust, Inc.
 
0.5

 
0.6

 
239,329

 
185,540

 
CBL & Associates Properties, Inc.
 
0.5

 
1.1

(7  
)  
112,105

 
92,124

 
Cedar Shopping Centers, Inc.
 
0.4

 
0.6

 
65,187

 
49,866

 
Chatham Lodging Trust
 
1.2

 
1.1

 
80,952

 
64,702

 
Chesapeake Lodging Trust
 
2.0

 
1.8

 
47,817

 
32,933

 
City Office REIT Inc.
 
0.5

 
0.4

 
21,288

 
15,330

 
Clipper Realty, Inc.
 
0.3

 
0.2

 
661,676

 
—

 
Colony Capital, Inc.
 
3.1

 
—

 
—

 
583,920

 
Colony Northstar, Inc.
 
—

 
6.7

 
163,866

 
131,158

 
Columbia Property Trust Inc.
 
3.2

 
3.0

 
23,436

 
17,855

 
Community Healthcare Trust, Inc.
 
0.7

 
0.5

 
162,853

 
130,237

 
CoreCivic, Inc.
 
2.9

 
2.9

 
16,269

 
12,695

 
Corenergy Infrastructure Trust, Inc.
 
0.5

 
0.5

 
57,463

 
—

 
Corepoint Lodging, Inc.
 
0.7

 
—

 
50,118

 
37,213

 
CoreSite Realty Corporation
 
4.4

 
4.2

 
142,696

 
109,361

 
Corporate Office Properties Trust
 
3.0

 
3.2

 
580,413

 
458,712

 
Cousins Properties Incorporated
 
4.6

 
4.2

 
572,594

 
440,146

 
Crown Castle International Corporation
 
62.2

 
48.9

 
255,847

 
197,633

 
Cubesmart
 
7.3

 
5.7

 
144,491

 
98,521

 
CyrusOne Inc.
 
7.6

 
5.9

 
—

 
101,202

 
DCT Industrial Trust, Inc.
 
—

 
5.9

 
—

 
340,952

 
DDR Corp
 
—

 
3.1

 
284,793

 
219,132

 
DiamondRock Hospitality Company
 
2.6

 
2.5

 
284,543

 
223,448

 
Digital Realty Trust, Inc.
 
30.3

 
25.5

 
222,742

 
174,051

 
Douglas Emmett, Inc.
 
7.6

 
7.1

 
493,225

 
388,940

 
Duke Realty Corporation
 
12.8

 
10.6

 
86,054

 
46,776

 
Easterly Government Properties, Inc.
 
1.3

 
1.0

 

94
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Shares
 
Issuer
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
 
48,463

 
36,626

 
EastGroup Properties, Inc.
 
$
4.4

 
$
3.2

 
—

 
82,652

 
Education Realty Trust, Inc.
 
—

 
2.9

 
196,612

 
139,642

 
Empire State Realty Trust
 
2.8

 
2.9

 
102,222

 
68,867

 
EPR Properties
 
6.5

 
4.5

 
110,827

 
85,048

 
Equinix Inc.
 
39.1

 
38.5

 
—

 
132,344

 
Equity Commonwealth
 
—

 
4.0

 
118,255

 
89,456

 
Equity Lifestyle Properties, Inc.
 
11.5

 
8.0

 
495,921

 
390,235

 
Equity Residential
 
32.7

 
24.9

 
—

 
39,142

 
Escrow Winthrop Realty Trust
 
—

 
0.3

 
47,818

 
—

 
Essential Properties Realty
 
0.7

 
—

 
90,861

 
71,499

 
Essex Property Trust, Inc.
 
22.3

 
17.3

 
168,808

 
133,620

 
Extra Space Storage, Inc.
 
15.3

 
11.7

 
39,335

 
33,146

 
Farmland Partners, Inc.
 
0.2

 
0.3

(7  
)  
100,845

 
78,850

 
Federal Realty Investment Trust
 
11.9

 
10.5

 
171,124

 
130,114

 
First Industrial Realty Trust, Inc.
 
4.9

 
4.1

 
—

 
266,222

 
Forest City Realty Trust A
 
—

 
6.4

 
95,288

 
68,809

 
Four Corners Property Trust
 
2.5

 
1.8

 
148,193

 
119,538

 
Franklin Street Properties Corp.
 
0.9

 
1.3

 
66,846

 
—

 
Front Yard Residential Corp.
 
0.6

 
—

 
279,615

 
221,037

 
Gaming and Leisure Properties, Inc.
 
9.0

 
8.2

 
—

 
674,285

 
General Growth Properties, Inc.
 
—

 
15.8

 
164,774

 
134,715

 
GEO Group Inc./The
 
3.2

 
3.2

 
45,390

 
36,337

 
Getty Realty Corp.
 
1.3

 
1.0

 
40,600

 
30,560

 
Gladstone Commercial Corporation
 
0.7

 
0.6

 
17,897

 
11,775

 
Gladstone Land Corporation
 
0.2

 
0.2

 
27,913

 
14,323

 
Global Medical REIT, Inc.
 
0.2

 
0.1

(7  
)  
97,753

 
73,715

 
Global Net Lease, Inc.
 
1.7

 
1.5

 
134,722

 
102,459

 
Government Properties Income Trust
 
0.9

 
1.9

 
—

 
173,959

 
Gramercy Property Trust Inc.
 
—

 
4.6

 
651,177

 
513,801

 
HCP, Inc.
 
18.2

 
13.4

 
170,298

 
133,528

 
Healthcare Realty Trust Inc.
 
4.8

 
4.3

 
285,255

 
221,345

 
Healthcare Trust of America
 
7.2

 
6.6

 
50,946

 
45,394

 
Hersha Hospitality Trust
 
0.9

 
0.8

 
140,879

 
111,471

 
Highwoods Properties, Inc.
 
5.5

 
5.7

 
225,198

 
179,103

 
Hospitality Properties Trust
 
5.4

 
5.3

 
1,014,135

 
799,202

 
Host Hotels & Resorts, Inc.
 
16.9

 
15.9

 
213,134

 
171,423

 
Hudson Pacific Properties, Inc.
 
6.2

 
5.9

 
123,683

 
93,383

 
Independence Realty Trust, Inc.
 
1.1

 
0.9

 
88,878

 
—

 
Industrial Logics Properties
 
1.7

 
—

 
16,729

 
130,841

 
Investors Real Estate Trust
 
0.8

 
0.7

 
414,132

 
320,427

 
Invitation Homes, Inc.
 
8.3

 
7.6

 
393,221

 
302,923

 
Iron Mountain Inc.
 
12.7

 
11.4

 
1,500,000

 
1,500,000

 
iShares Dow Jones US Real Estate Index Fund
 
112.4

(7  
)  
121.5

(7  
)  
144,518

 
94,915

 
JBG Smith Properties
 
5.0

 
3.3

 
136,455

 
106,012

 
Kilroy Realty Corporation
 
8.6

 
7.9

 

95
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Shares
 
Issuer
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
 
563,416

 
451,921

 
Kimco Realty Corporation
 
$
8.3

 
$
8.2

 
113,467

 
90,119

 
Kite Realty Group Trust
 
1.6

 
1.8

 
116,496

 
91,259

 
Lamar Advertising Corporation
 
8.1

 
6.8

 
—

 
124,427

 
LaSalle Hotel Properties
 
—

 
3.5

 
293,991

 
257,171

 
Lexington Realty Trust
 
2.4

 
2.5

 
204,392

 
161,972

 
Liberty Property Trust
 
8.6

 
7.0

 
63,299

 
50,130

 
Life Storage, Inc.
 
5.9

 
4.5

 
54,350

 
42,489

 
LTC Properties, Inc.
 
2.3

 
1.9

 
123,992

 
99,130

 
Mack-Cali Realty Corporation
 
2.4

 
2.1

 
44,471

 
29,800

 
Medequities Realty Trust, Inc.
 
0.3

 
0.3

 
503,539

 
399,374

 
Medical Properties Trust, Inc.
 
8.1

 
5.5

 
157,147

 
123,965

 
Mid-America Apartment Communities, Inc.
 
15.0

 
12.5

 
121,059

 
80,492

 
Monmouth Real Estate Investment Corporation
 
1.5

 
1.4

 
56,533

 
43,294

 
National Health Investors, Inc.
 
4.3

 
3.3

 
219,159

 
165,743

 
National Retail Properties, Inc.
 
10.6

 
7.1

 
78,758

 
49,957

 
National Storage Affiliates Trust
 
2.1

 
1.4

 
97,013

 
90,062

 
New Senior Investment Group
 
0.4

 
0.7

 
25,395

 
19,294

 
Nexpoint Residential Trust, Inc.
 
0.9

 
0.5

 
60,527

 
61,800

 
NorthStar Realty Europe Corp.
 
0.9

 
0.8

 
273,749

 
214,048

 
Omega Healthcare Investors, Inc.
 
9.6

 
5.9

(7  
)  
21,786

 
16,324

 
One Liberty Properties, Inc.
 
0.5

 
0.4

 
192,190

 
152,483

 
Outfront Media Inc.
 
3.5

 
3.5

 
289,253

 
225,256

 
Paramount Group Inc.
 
3.6

 
3.6

 
276,143

 
159,738

 
Park Hotels & Resorts, Inc.
 
7.2

 
4.6

 
186,399

 
75,337

 
Pebblebrook Hotel Trust
 
5.3

 
2.8

 
96,360

 
69,866

 
Pennsylvania Real Estate Investment Trust
 
0.6

 
0.8

 
250,372

 
195,747

 
Physicians Realty Trust
 
4.0

 
3.5

 
177,784

 
159,189

 
Piedmont Office Realty Trust, Inc.
 
3.0

 
3.1

 
91,285

 
44,326

 
Potlatch Corporation
 
2.9

 
2.2

 
54,653

 
39,774

 
Preferred Apartment Communities, Inc.
 
0.8

 
0.8

 
865,465

 
577,161

 
ProLogis
 
50.8

 
37.2

 
27,314

 
21,348

 
PS Business Parks, Inc.
 
3.6

 
2.7

 
205,162

 
161,952

 
Public Storage, Inc.
 
41.5

 
33.8

 
69,517

 
53,551

 
QTS Realty Trust, Inc.
 
2.6

 
2.9

 
—

 
104,106

 
Quality Care Properties
 
—

 
1.4

 
—

 
84,467

 
Ramco-Gershenson Properties Trust
 
—

 
1.2

 
178,720

 
140,926

 
Rayonier, Inc.
 
4.9

 
4.5

 
408,129

 
308,355

 
Realty Income Corporation
 
25.7

 
17.6

 
210,244

 
163,631

 
Regency Centers Corporation
 
12.3

 
11.3

 
155,276

 
118,002

 
Retail Opportunity Investment
 
2.5

 
2.4

 
298,353

 
248,555

 
Retail Properties of America
 
3.2

 
3.3

 
21,416

 
—

 
Retail Value, Inc.
 
0.6

 
—

 
126,860

 
83,912

 
Rexford Industrial Realty Inc.
 
3.7

 
2.4

 
239,679

 
185,465

 
RLJ Lodging Trust
 
3.9

 
4.1

 
113,496

 
—

 
RPT Realty
 
1.4

 
—

 

96
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Shares
 
Issuer
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
 
61,126

 
48,519

 
Ryman Hospitality Properties
 
$
4.1

 
$
3.3

 
244,568

 
191,602

 
Sabra Health Care REIT Inc.
 
4.0

 
3.6

 
10,996

 
11,006

 
Safety Income and Growth, Inc
 
0.2

 
0.2

 
16,999

 
12,343

 
Saul Centers, Inc.
 
0.9

 
0.8

 
154,833

 
131,401

 
SBA Communications Corporation
 
25.1

 
21.5

 
121,549

 
69,474

 
Select Income Real Estate Investment Trust
 
0.9

 
1.7

 
326,164

 
259,176

 
Senior Housing Properties Trust
 
3.8

 
5.0

 
426,117

 
340,430

 
Simon Property Group, Inc.
 
71.6

 
58.5

 
209,816

 
—

 
Site Centers Corporation
 
2.3

 
—

 
113,961

 
105,521

 
SL Green Realty Corp.
 
9.0

 
10.7

 
59,766

 
—

 
Spirit MTA REIT
 
0.4

 
—

 
117,972

 
498,344

 
Spirit Realty Capital Inc.
 
4.3

 
4.3

 
135,097

 
102,712

 
Stag Industrial, Inc.
 
3.4

 
2.8

 
264,895

 
187,343

 
STORE Capital Corporation
 
7.5

 
4.9

 
141,848

 
113,544

 
Summit Hotel Properties, Inc.
 
1.4

 
1.7

 
116,162

 
83,430

 
Sun Communities, Inc.
 
11.8

 
7.7

 
313,714

 
247,441

 
Sunstone Hotel Investors, L.L.C.
 
4.1

 
4.1

 
126,963

 
101,087

 
Tanger Factory Outlet Centers, Inc.
 
2.6

 
2.7

(7  
)  
81,759

 
64,816

 
Taubman Centers, Inc.
 
3.8

 
4.2

 
80,363

 
58,066

 
Terreno Realty Corporation
 
2.8

 
2.0

 
188,118

 
149,606

 
The Macerich Company
 
8.1

 
9.8

 
73,743

 
54,543

 
Tier Inc.
 
1.5

 
1.1

 
366,433

 
289,926

 
UDR, Inc.
 
14.5

 
11.2

 
46,595

 
34,876

 
UMH Properties, Inc.
 
0.6

 
0.5

 
231,999

 
182,231

 
UNITI Group, Inc.
 
3.6

 
3.2

(7  
)  
18,151

 
14,449

 
Universal Health Realty Income Trust
 
1.1

 
1.1

 
150,757

 
112,531

 
Urban Edge Properties
 
2.5

 
2.9

 
42,533

 
31,959

 
Urstadt Biddle Properties, Inc.
 
0.9

 
0.7

 
491,993

 
388,195

 
Ventas, Inc.
 
28.8

 
23.3

 
1,342,240

 
1,065,264

 
VEREIT, Inc.
 
9.6

 
8.3

 
554,541

 
—

 
Vici Properties, Inc.
 
10.4

 
—

 
238,674

 
188,214

 
Vornado Realty Trust
 
14.8

 
14.7

 
257,311

 
203,651

 
Washington Prime Group, Inc.
 
1.3

 
1.4

 
110,436

 
85,659

 
Washington Real Estate Investment Trust
 
2.5

 
2.7

 
165,849

 
132,066

 
Weingarten Realty Investors
 
4.1

 
4.3

 
514,421

 
401,236

 
Welltower Inc.
 
35.7

 
25.6

 
1,035,575

 
816,991

 
Weyerhaeuser Company
 
22.6

 
28.8

 
54,425

 
38,883

 
Whitestone Real Estate Investment Trust B
 
0.7

 
0.6

 
219,891

 
116,079

 
WP Carey Inc.
 
14.4

 
8.0

 
154,344

 
118,158

 
Xenia Hotels & Resorts Inc.
 
2.7

 
2.6

 
TOTAL REAL ESTATE-RELATED MARKETABLE SECURITIES
(Cost $1,274.7 and $991.0)
 
$
1,415.1

 
$
1,238.0

 

97
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


OTHER MARKETABLE SECURITIES—14.4% and 14.3%
GOVERNMENT AGENCY NOTES—7.2% and 10.6%
Principal
 
Issuer
 
Yield (4)
 
Maturity
Date
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
$
—

 
$
10.0

 
Fannie Mae Discount Notes
 
1.077%
 
1/9/2018
 
$
—

 
$
10.0

—

 
14.2

 
Fannie Mae Discount Notes
 
1.093%
 
1/10/2018
 
—

 
14.2

—

 
40.0

 
Fannie Mae Discount Notes
 
1.115%
 
1/11/2018
 
—

 
40.0

—

 
19.0

 
Fannie Mae Discount Notes
 
1.118%
 
1/19/2018
 
—

 
19.0

—

 
30.0

 
Fannie Mae Discount Notes
 
1.038%
 
1/22/2018
 
—

 
30.0

—

 
46.2

 
Fannie Mae Discount Notes
 
1.038%
 
1/23/2018
 
—

 
46.1

—

 
35.1

 
Fannie Mae Discount Notes
 
1.038%
 
1/24/2018
 
—

 
35.1

—

 
14.6

 
Fannie Mae Discount Notes
 
1.088%
 
1/29/2018
 
—

 
14.5

—

 
35.1

 
Fannie Mae Discount Notes
 
1.079%
 
1/30/2018
 
—

 
35.1

—

 
26.2

 
Fannie Mae Discount Notes
 
1.109% - 1.225%
 
2/7/2018
 
—

 
26.2

—

 
25.0

 
Fannie Mae Discount Notes
 
1.145%
 
2/16/2018
 
—

 
25.0

—

 
50.0

 
Fannie Mae Discount Notes
 
1.140% - 1.150%
 
2/20/2018
 
—

 
49.9

—

 
30.2

 
Fannie Mae Discount Notes
 
1.140%
 
2/21/2018
 
—

 
30.2

—

 
40.0

 
Fannie Mae Discount Notes
 
1.221%
 
3/7/2018
 
—

 
39.9

—

 
40.0

 
Fannie Mae Discount Notes
 
1.221%
 
3/8/2018
 
—

 
39.9

—

 
34.1

 
Fannie Mae Discount Notes
 
1.221%
 
3/9/2018
 
—

 
34.0

—

 
20.0

 
Fannie Mae Discount Notes
 
1.303%
 
3/13/2018
 
—

 
19.9

—

 
37.2

 
Fannie Mae Discount Notes
 
1.313%
 
3/19/2018
 
—

 
37.0

—

 
15.0

 
Fannie Mae Discount Notes
 
1.303%
 
3/20/2018
 
—

 
15.0

—

 
10.0

 
Fannie Mae Discount Notes
 
1.308%
 
3/22/2018
 
—

 
10.0

—

 
39.3

 
Fannie Mae Discount Notes
 
1.318%
 
3/29/2018
 
—

 
39.1

—

 
30.0

 
Fannie Mae Discount Notes
 
1.323%
 
4/2/2018
 
—

 
29.9

—

 
35.2

 
Fannie Mae Discount Notes
 
1.313% - 1.323%
 
4/3/2018
 
—

 
35.1

—

 
40.0

 
Fannie Mae Discount Notes
 
1.334%
 
4/9/2018
 
—

 
39.9

20.0

 
—

 
Fannie Mae Discount Notes
 
2.270%
 
1/9/2019
 
20.0

 
—

3.6

 
—

 
Fannie Mae Discount Notes
 
2.350%
 
2/6/2019
 
3.5

 
—

22.6

 
—

 
Fannie Mae Discount Notes
 
2.390%
 
2/13/2019
 
22.5

 
—

17.6

 
—

 
Fannie Mae Discount Notes
 
2.350%
 
3/1/2019
 
17.5

 
—

—

 
14.0

 
Farmer Mac Discount Notes
 
1.169%
 
2/1/2018
 
—

 
14.0

6.0

 
—

 
Farmer Mac Discount Notes
 
2.440%
 
3/15/2019
 
6.0

 
—

9.1

 
—

 
Federal Farm Credit Bank Discount Notes
 
2.380%
 
3/18/2019
 
9.0

 
—

18.0

 
—

 
Federal Farm Credit Bank Discount Notes
 
2.480%
 
5/2/2019
 
17.9

 
—

20.0

 
—

 
Federal Farm Credit Bank Discount Notes
 
2.530%
 
5/23/2019
 
19.8

 
—

—

 
20.2

 
Federal Home Loan Bank Discount Notes
 
1.069%
 
1/2/2018
 
—

 
20.2

—

 
40.0

 
Federal Home Loan Bank Discount Notes
 
1.079%
 
1/3/2018
 
—

 
40.0

—

 
40.0

 
Federal Home Loan Bank Discount Notes
 
1.068%
 
1/5/2018
 
—

 
40.0

—

 
40.0

 
Federal Home Loan Bank Discount Notes
 
1.068%
 
1/8/2018
 
—

 
40.0

—

 
33.0

 
Federal Home Loan Bank Discount Notes
 
1.058%
 
1/9/2018
 
—

 
33.0

—

 
50.0

 
Federal Home Loan Bank Discount Notes
 
1.068% - 1.118%
 
1/10/2018
 
—

 
50.0

—

 
30.0

 
Federal Home Loan Bank Discount Notes
 
1.089% - 1.108%
 
1/12/2018
 
—

 
30.0

—

 
38.1

 
Federal Home Loan Bank Discount Notes
 
1.068%
 
1/16/2018
 
—

 
38.1

—

 
50.0

 
Federal Home Loan Bank Discount Notes
 
1.094% - 1.118%
 
1/17/2018
 
—

 
50.0


98
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Principal
 
Issuer
 
Yield (4)
 
Maturity
Date
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
$
—

 
$
30.2

 
Federal Home Loan Bank Discount Notes
 
1.063%
 
1/19/2018
 
$
—

 
$
30.1

—

 
20.0

 
Federal Home Loan Bank Discount Notes
 
1.134%
 
1/22/2018
 
—

 
20.0

—

 
38.0

 
Federal Home Loan Bank Discount Notes
 
1.063%
 
1/25/2018
 
—

 
37.9

—

 
36.1

 
Federal Home Loan Bank Discount Notes
 
1.063%
 
1/26/2018
 
—

 
36.1

—

 
29.2

 
Federal Home Loan Bank Discount Notes
 
1.069% - 1.290%
 
1/29/2018
 
—

 
29.1

—

 
24.3

 
Federal Home Loan Bank Discount Notes
 
1.225%
 
2/6/2018
 
—

 
24.2

—

 
47.1

 
Federal Home Loan Bank Discount Notes
 
1.069% - 1.220%
 
2/9/2018
 
—

 
47.1

—

 
11.8

 
Federal Home Loan Bank Discount Notes
 
1.140%
 
2/14/2018
 
—

 
11.8

—

 
25.0

 
Federal Home Loan Bank Discount Notes
 
1.130%
 
2/16/2018
 
—

 
25.0

—

 
10.0

 
Federal Home Loan Bank Discount Notes
 
1.306%
 
2/21/2018
 
—

 
10.0

—

 
40.0

 
Federal Home Loan Bank Discount Notes
 
1.120%
 
2/26/2018
 
—

 
39.9

—

 
39.4

 
Federal Home Loan Bank Discount Notes
 
1.120% - 1.186%
 
2/27/2018
 
—

 
39.3

—

 
22.2

 
Federal Home Loan Bank Discount Notes
 
1.161% - 1.232%
 
3/2/2018
 
—

 
22.1

—

 
45.0

 
Federal Home Loan Bank Discount Notes
 
1.212% - 1.313%
 
3/12/2018
 
—

 
44.9

—

 
28.0

 
Federal Home Loan Bank Discount Notes
 
1.176%
 
3/13/2018
 
—

 
27.9

—

 
5.0

 
Federal Home Loan Bank Discount Notes
 
1.318%
 
3/16/2018
 
—

 
5.0

—

 
40.0

 
Federal Home Loan Bank Discount Notes
 
1.304%
 
3/27/2018
 
—

 
39.9

—

 
47.4

 
Federal Home Loan Bank Discount Notes
 
1.304%
 
3/28/2018
 
—

 
47.2

—

 
40.2

 
Federal Home Loan Bank Discount Notes
 
1.324%
 
4/11/2018
 
—

 
40.0

—

 
15.2

 
Federal Home Loan Bank Discount Notes
 
1.359%
 
4/12/2018
 
—

 
15.2

—

 
29.1

 
Federal Home Loan Bank Discount Notes
 
1.354%
 
4/16/2018
 
—

 
29.0

—

 
39.2

 
Federal Home Loan Bank Discount Notes
 
1.365%
 
4/19/2018
 
—

 
39.0

—

 
40.2

 
Federal Home Loan Bank Discount Notes
 
1.365%
 
4/20/2018
 
—

 
40.0

—

 
33.2

 
Federal Home Loan Bank Discount Notes
 
1.365%
 
4/23/2018
 
—

 
33.0

—

 
34.2

 
Federal Home Loan Bank Discount Notes
 
1.375%
 
4/24/2018
 
—

 
34.1

—

 
15.2

 
Federal Home Loan Bank Discount Notes
 
1.371%
 
4/25/2018
 
—

 
15.2

—

 
28.4

 
Federal Home Loan Bank Discount Notes
 
1.403%
 
5/4/2018
 
—

 
28.2

33.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.167% - 2.195%
 
1/11/2019
 
33.0

 
—

37.6

 
—

 
Federal Home Loan Bank Discount Notes
 
2.220%
 
1/14/2019
 
37.6

 
—

36.2

 
—

 
Federal Home Loan Bank Discount Notes
 
2.220%
 
1/15/2019
 
36.2

 
—

35.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.220%
 
1/16/2019
 
35.0

 
—

40.9

 
—

 
Federal Home Loan Bank Discount Notes
 
2.189% - 2.197%
 
1/18/2019
 
40.9

 
—

29.5

 
—

 
Federal Home Loan Bank Discount Notes
 
2.190%
 
1/23/2019
 
29.5

 
—

25.6

 
—

 
Federal Home Loan Bank Discount Notes
 
2.330%
 
1/28/2019
 
25.6

 
—

12.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.250%
 
1/29/2019
 
12.0

 
—

40.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.260% - 2.265%
 
1/30/2019
 
39.9

 
—

14.3

 
—

 
Federal Home Loan Bank Discount Notes
 
2.290%
 
2/8/2019
 
14.3

 
—

30.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.300% - 2.319%
 
2/11/2019
 
29.9

 
—

24.7

 
—

 
Federal Home Loan Bank Discount Notes
 
2.340%
 
2/15/2019
 
24.6

 
—

35.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.331%- 2.353%
 
2/19/2019
 
34.9

 
—

36.8

 
—

 
Federal Home Loan Bank Discount Notes
 
2.235% - 2.353%
 
2/20/2019
 
36.6

 
—

45.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.294% - 2.314%
 
2/22/2019
 
44.8

 
—

14.1

 
—

 
Federal Home Loan Bank Discount Notes
 
2.330%
 
2/25/2019
 
14.0

 
—

40.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.330%
 
2/26/2019
 
39.9

 
—

21.5

 
—

 
Federal Home Loan Bank Discount Notes
 
2.330%
 
2/27/2019
 
21.4

 
—


99
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Principal
 
Issuer
 
Yield (4)
 
Maturity
Date
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
$
26.4

 
$
—

 
Federal Home Loan Bank Discount Notes
 
2.310%
 
3/1/2019
 
$
26.3

 
$
—

31.5

 
—

 
Federal Home Loan Bank Discount Notes
 
2.316% - 2.355%
 
3/6/2019
 
31.4

 
—

40.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.370%
 
3/8/2019
 
39.8

 
—

37.3

 
—

 
Federal Home Loan Bank Discount Notes
 
2.432% - 2.437%
 
3/11/2019
 
37.2

 
—

40.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.420%
 
3/12/2019
 
39.8

 
—

40.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.400%
 
3/13/2019
 
39.8

 
—

10.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.360%
 
3/15/2019
 
10.0

 
—

30.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.360%
 
3/19/2019
 
29.8

 
—

12.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.430%
 
3/21/2019
 
11.9

 
—

22.4

 
—

 
Federal Home Loan Bank Discount Notes
 
2.410%
 
3/26/2019
 
22.2

 
—

25.3

 
—

 
Federal Home Loan Bank Discount Notes
 
2.370%
 
3/27/2019
 
25.1

 
—

40.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.460%
 
4/5/2019
 
39.7

 
—

40.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.470%
 
4/8/2019
 
39.7

 
—

50.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.440%
 
4/10/2019
 
49.7

 
—

24.1

 
—

 
Federal Home Loan Bank Discount Notes
 
2.430%
 
4/12/2019
 
23.9

 
—

14.1

 
—

 
Federal Home Loan Bank Discount Notes
 
2.480%
 
4/24/2019
 
14.0

 
—

10.6

 
—

 
Federal Home Loan Bank Discount Notes
 
2.470%
 
4/26/2019
 
10.5

 
—

87.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.473% - 2.511%
 
4/29/2019
 
86.3

 
—

24.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.480%
 
5/3/2019
 
23.8

 
—

18.5

 
—

 
Federal Home Loan Bank Discount Notes
 
2.510%
 
5/15/2019
 
18.3

 
—

40.5

 
—

 
Federal Home Loan Bank Discount Notes
 
2.510%
 
5/17/2019
 
40.1

 
—

30.0

 
—

 
Federal Home Loan Bank Discount Notes
 
2.520%
 
5/22/2019
 
29.7

 
—

—

 
41.2

 
Freddie Mac Discount Notes
 
1.101% - 1.149%
 
2/2/2018
 
—

 
41.2

—

 
50.0

 
Freddie Mac Discount Notes
 
1.101% - 1.139%
 
2/5/2018
 
—

 
49.9

—

 
25.0

 
Freddie Mac Discount Notes
 
1.090%
 
2/6/2018
 
—

 
25.0

—

 
20.1

 
Freddie Mac Discount Notes
 
1.100%
 
2/7/2018
 
—

 
20.0

—

 
42.2

 
Freddie Mac Discount Notes
 
1.099%
 
2/12/2018
 
—

 
42.1

—

 
40.0

 
Freddie Mac Discount Notes
 
1.099%
 
2/13/2018
 
—

 
39.9

—

 
30.0

 
Freddie Mac Discount Notes
 
1.109%
 
2/14/2018
 
—

 
30.0

—

 
39.5

 
Freddie Mac Discount Notes
 
1.120% - 1.130%
 
2/23/2018
 
—

 
39.4

—

 
50.0

 
Freddie Mac Discount Notes
 
1.151%
 
3/5/2018
 
—

 
49.9

—

 
50.0

 
Freddie Mac Discount Notes
 
1.151%
 
3/6/2018
 
—

 
49.9

—

 
49.8

 
Freddie Mac Discount Notes
 
1.182% - 1.202%
 
3/14/2018
 
—

 
49.6

—

 
34.2

 
Freddie Mac Discount Notes
 
1.182%
 
3/16/2018
 
—

 
34.1

—

 
10.8

 
Freddie Mac Discount Notes
 
1.192%
 
3/19/2018
 
—

 
10.7

—

 
32.8

 
Freddie Mac Discount Notes
 
1.202%
 
3/20/2018
 
—

 
32.7

—

 
40.0

 
Freddie Mac Discount Notes
 
1.202%
 
3/21/2018
 
—

 
39.9

—

 
30.0

 
Freddie Mac Discount Notes
 
1.182%
 
3/22/2018
 
—

 
29.9

—

 
40.0

 
Freddie Mac Discount Notes
 
1.212%
 
3/23/2018
 
—

 
39.9

—

 
40.0

 
Freddie Mac Discount Notes
 
1.223%
 
3/26/2018
 
—

 
39.9

—

 
24.1

 
Freddie Mac Discount Notes
 
1.228%
 
4/4/2018
 
—

 
24.0

—

 
57.7

 
Freddie Mac Discount Notes
 
1.228% - 1.269%
 
4/5/2018
 
—

 
57.5

—

 
35.2

 
Freddie Mac Discount Notes
 
1.289%
 
4/6/2018
 
—

 
35.0

—

 
34.9

 
Freddie Mac Discount Notes
 
1.325% - 1.330%
 
4/10/2018
 
—

 
34.7

—

 
40.0

 
Freddie Mac Discount Notes
 
1.325%
 
4/11/2018
 
—

 
39.8


100
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Principal
 
Issuer
 
Yield (4)
 
Maturity
Date
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
$
—

 
$
27.2

 
Freddie Mac Discount Notes
 
1.324%
 
4/12/2018
 
$
—

 
$
27.0

—

 
40.0

 
Freddie Mac Discount Notes
 
1.334%
 
4/13/2018
 
—

 
39.8

—

 
30.1

 
Freddie Mac Discount Notes
 
1.365%
 
4/17/2018
 
—

 
30.0

—

 
35.2

 
Freddie Mac Discount Notes
 
1.365%
 
4/18/2018
 
—

 
35.0

—

 
4.0

 
Freddie Mac Discount Notes
 
1.366%
 
5/4/2018
 
—

 
4.0

25.0

 
—

 
Freddie Mac Discount Notes
 
2.130%
 
1/2/2019
 
25.0

 
—

32.4

 
—

 
Freddie Mac Discount Notes
 
2.146% - 2.174%
 
1/4/2019
 
32.4

 
—

35.1

 
—

 
Freddie Mac Discount Notes
 
2.146% - 2.175%
 
1/7/2019
 
35.1

 
—

35.0

 
—

 
Freddie Mac Discount Notes
 
2.130%
 
1/8/2019
 
35.0

 
—

40.0

 
—

 
Freddie Mac Discount Notes
 
2.130%
 
1/9/2019
 
40.0

 
—

36.1

 
—

 
Freddie Mac Discount Notes
 
2.179% - 2.217%
 
1/22/2019
 
36.1

 
—

40.0

 
—

 
Freddie Mac Discount Notes
 
2.190%
 
1/25/2019
 
39.9

 
—

16.0

 
—

 
Freddie Mac Discount Notes
 
2.200%
 
1/28/2019
 
15.9

 
—

15.0

 
—

 
Freddie Mac Discount Notes
 
2.200%
 
1/29/2019
 
15.0

 
—

39.9

 
—

 
Freddie Mac Discount Notes
 
2.190%
 
2/1/2019
 
39.8

 
—

25.9

 
—

 
Freddie Mac Discount Notes
 
2.240%
 
2/4/2019
 
25.8

 
—

35.0

 
—

 
Freddie Mac Discount Notes
 
2.240%
 
2/5/2019
 
34.9

 
—

30.0

 
—

 
Freddie Mac Discount Notes
 
2.240%
 
2/6/2019
 
29.9

 
—

39.3

 
—

 
Freddie Mac Discount Notes
 
2.300%
 
2/12/2019
 
39.1

 
—

15.0

 
—

 
Freddie Mac Discount Notes
 
2.250%
 
2/20/2019
 
15.0

 
—

21.3

 
—

 
Freddie Mac Discount Notes
 
2.290%
 
3/4/2019
 
21.3

 
—

17.1

 
—

 
Freddie Mac Discount Notes
 
2.330%
 
3/5/2019
 
17.1

 
—

23.8

 
—

 
Freddie Mac Discount Notes
 
2.380%
 
3/20/2019
 
23.6

 
—

19.5

 
—

 
Freddie Mac Discount Notes
 
2.390%
 
3/22/2019
 
19.4

 
—

25.9

 
—

 
Freddie Mac Discount Notes
 
2.380%
 
3/25/2019
 
25.8

 
—

30.0

 
—

 
Freddie Mac Discount Notes
 
2.410%
 
4/1/2019
 
29.8

 
—

16.1

 
—

 
Freddie Mac Discount Notes
 
2.400%
 
4/2/2019
 
16.0

 
—

20.1

 
—

 
Freddie Mac Discount Notes
 
2.430%
 
4/3/2019
 
20.0

 
—

40.0

 
—

 
Freddie Mac Discount Notes
 
2.460%
 
4/17/2019
 
39.7

 
—

24.1

 
—

 
Freddie Mac Discount Notes
 
2.510%
 
5/20/2019
 
23.8

 
—

TOTAL GOVERNMENT AGENCY NOTES
(Cost $2,050.8 and $2,872.8)
 
$
2,050.7

 
$
2,872.3

UNITED STATES TREASURY SECURITIES—7.2% and 3.7%
Principal
 
Issuer
 
Yield (4)
 
Maturity
Date
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
$
—

 
$
17.8

 
United States Treasury Bills
 
1.036% - 1.177%
 
 
1/2/2018
 
$
—

 
$
17.8

—

 
75.0

 
United States Treasury Bills
 
1.063% - 1.084%
 
 
1/4/2018
 
—

 
75.0

—

 
21.2

 
United States Treasury Bills
 
1.128% - 1.236%
 
 
1/11/2018
 
—

 
21.2

—

 
40.0

 
United States Treasury Bills
 
1.114%
 
 
1/18/2018
 
—

 
40.0

—

 
71.0

 
United States Treasury Bills
 
1.132%
 
 
1/25/2018
 
—

 
70.9

—

 
36.0

 
United States Treasury Bills
 
1.106%
 
 
2/1/2018
 
—

 
36.0

—

 
93.0

 
United States Treasury Bills
 
1.075% - 1.077%
 
 
2/8/2018
 
—

 
92.9

—

 
98.0

 
United States Treasury Bills
 
1.106% - 1.122%
 
 
2/22/2018
 
—

 
97.8

—

 
81.0

 
United States Treasury Bills
 
1.060% - 1.117%
 
 
3/1/2018
 
—

 
80.8


101
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


Principal
 
Issuer
 
Yield (4)
 
Maturity
Date
 
Fair Value at December 31,
2018
 
2017
 
2018
 
2017
$
—

 
$
154.0

 
United States Treasury Bills
 
1.374% - 1.433%
 
 
3/29/2018
 
$
—

 
$
153.5

—

 
24.0

 
United States Treasury Bills
 
1.440% - 1.636%
 
 
5/24/2018
 
—

 
23.9

—

 
85.0

 
United States Treasury Bills
 
1.432%
 
 
6/7/2018
 
—

 
84.5

33.8

 
—

 
United States Treasury Bills
 
2.147% - 2.334%
 
 
1/3/2019
 
33.8

 
—

50.0

 
—

 
United States Treasury Bills
 
2.330%
 
 
1/8/2019
 
50.0

 
—

189.9

 
—

 
United States Treasury Bills
 
2.162% - 2.321%
 
 
1/10/2019
 
189.8

 
—

82.1

 
—

 
United States Treasury Bills
 
2.279% - 2.316%
 
 
1/15/2019
 
82.0

 
—

150.1

 
—

 
United States Treasury Bills
 
2.204% - 2.315%
 
 
1/17/2019
 
149.9

 
—

153.0

 
—

 
United States Treasury Bills
 
2.226% - 2.332%
 
 
1/24/2019
 
152.8

 
—

50.0

 
—

 
United States Treasury Bills
 
2.370%
 
 
1/29/2019
 
49.9

 
—

67.3

 
—

 
United States Treasury Bills
 
2.235% - 2.405%
 
 
1/31/2019
 
67.2

 
—

100.0

 
—

 
United States Treasury Bills
 
2.254%
 
 
2/7/2019
 
99.8

 
—

61.9

 
—

 
United States Treasury Bills
 
2.391% - 2.401%
 
 
2/12/2019
 
61.7

 
—

108.0

 
—

 
United States Treasury Bills
 
2.253% - 2.334%
 
 
2/14/2019
 
107.7

 
—

20.0

 
—

 
United States Treasury Bills
 
2.410%
 
 
2/19/2019
 
19.9

 
—

84.4

 
—

 
United States Treasury Bills
 
2.276% - 2.277%
 
 
2/21/2019
 
84.1

 
—

18.0

 
—

 
United States Treasury Bills
 
2.440%
 
 
2/26/2019
 
17.9

 
—

31.8

 
—

 
United States Treasury Bills
 
2.298% - 2.331%
 
 
2/28/2019
 
31.7

 
—

73.7

 
—

 
United States Treasury Bills
 
2.309% - 2.379%
 
 
3/7/2019
 
73.4

 
—

130.0

 
—

 
United States Treasury Bills
 
2.339% - 2.372%
 
 
3/14/2019
 
129.4

 
—

50.0

 
—

 
United States Treasury Bills
 
2.340%
 
 
3/21/2019
 
49.7

 
—

100.0

 
—

 
United States Treasury Bills
 
2.415%
 
 
3/28/2019
 
99.4

 
—

89.9

 
—

 
United States Treasury Bills
 
2.412% - 2.451%
 
 
4/4/2019
 
89.3

 
—

99.5

 
—

 
United States Treasury Bills
 
2.422% - 2.461%
 
 
4/11/2019
 
98.8

 
—

110.3

 
—

 
United States Treasury Bills
 
2.461% - 2.469%
 
 
4/18/2019
 
109.5

 
—

57.1

 
—

 
United States Treasury Bills
 
2.446% - 2.487%
 
 
4/25/2019
 
56.7

 
—

33.7

 
—

 
United States Treasury Bills
 
2.470%
 
 
5/2/2019
 
33.4

 
—

38.4

 
—

 
United States Treasury Bills
 
2.470%
 
 
5/9/2019
 
38.1

 
—

62.7

 
—

 
United States Treasury Bills
 
2.508%
 
 
5/16/2019
 
62.1

 
—

—

 
50.0

 
United States Treasury Notes
 
1.148% - 1.180%
 
 
1/31/2018
 
—

 
50.0

—

 
40.0

 
United States Treasury Notes
 
1.175% - 1.184%
 
 
2/15/2018
 
—

 
40.0

—

 
48.0

 
United States Treasury Notes
 
1.200%
 
 
2/28/2018
 
—

 
47.9

—

 
40.0

 
United States Treasury Notes
 
1.179%
 
 
3/15/2018
 
—

 
40.0

—

 
43.1

 
United States Treasury Notes
 
1.333% - 1.378%
 
 
6/15/2018
 
—

 
43.0

TOTAL UNITED STATES TREASURY SECURITIES
(Cost $2,038.1 and $1,015.3)
 
$
2,038.0

 
$
1,015.2

TOTAL OTHER MARKETABLE SECURITIES
(Cost $4,088.9 and $3,888.1)
 
$
4,088.7

 
$
3,887.5

TOTAL MARKETABLE SECURITIES
(Cost $5,363.6 and $4,879.1)
 
 
 
$
5,503.8

 
$
5,125.5


102
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED SCHEDULES OF INVESTMENTS
(Dollar values shown in millions)


LOANS RECEIVABLE—3.2% and 1.1%
 
 
 
 
 
 
Maturity Date
 
Fair Value at December 31,
Principal
 
Borrower
 
Interest Rate (6)
 
 
2018
 
2017
$
6.3

 
DJM Capital Partners Mezzanine (12)
 
5.000%
 
7/12/2019
 
$
6.3

 
$
34.2

83.2

 
311 South Wacker Mezzanine
 
4.70% + LIBOR
 
6/7/2020
 
83.2

 
—

95.2

 
Blackstone RioCan Retail Portfolio Mezzanine
 
4.65% + LIBOR
 
6/9/2020
 
95.3

 
—

60.0

 
River North Point Mezzanine
 
4.30% + LIBOR
 
7/9/2020
 
60.0

 
—

20.0

 
Crest at Las Colinas Station Mezzanine
 
5.11% + LIBOR
 
5/10/2021
 
20.0

 
—

—

 
Simply Self Storage Portfolio Mezzanine
 
8.250%
 
9/6/2021
 
—

 
37.6

125.0

 
State Street Financial Center Mezzanine
 
6.500%
 
11/10/2021
 
125.3

 
125.1

20.0

 
Modera Observatory Park Mezzanine
 
4.34% + LIBOR
 
6/10/2022
 
20.0

 
—

19.7

 
Rosemont Towson Mezzanine
 
4.15% + LIBOR
 
9/9/2022
 
19.7

 
—

26.7

 
1330 Broadway Mezzanine
 
5.01% + LIBOR
 
8/10/2023
 
26.8

 
—

20.0

 
Aspen Lake Office Portfolio Mezzanine
 
8.250%
 
3/10/2028
 
20.2

 
—

95.0

 
Merritt on the River Office Portfolio Mezzanine
 
8.000%
 
8/1/2028
 
95.7

 
—

100.0

 
Charles River Plaza North Mezzanine
 
6.080%
 
4/6/2029
 
100.9

 
101.9

176.4

 
Project Glacier Mezzanine
 
4.40% + LIBOR
 
11/9/2020
 
176.4

 
—

63.0

 
Great Value Storage Portfolio Mezzanine
 
7.875%
 
12/6/2023
 
63.2

 
—

TOTAL LOANS RECEIVABLE
(Cost $910.6 and $296.7)
$
913.0

 
$
298.8

TOTAL INVESTMENTS
(Cost $24,169.8 and $22,823.6)
$
28,480.4

 
$
27,170.0

(1)  
The investment has a mortgage loan payable outstanding, as indicated in Note 9.
(2)  
The fair value reflects the Account's interest in the joint venture and is net of debt.
(3)  
Properties within this investment are located throughout the United States.
(4)  
Yield represents the annualized yield.
(5)  
A portion of this investment consists of land for development.
(6)  
Fixed interest rate loans are represented with a single rate. Variable interest rate loans are presented with their base spread and the corresponding index rate. All variable interest loans currently held by the Account use the one month London Interbank Offered Rate ("LIBOR") rate on U.S. dollar deposits as the index rate, as published by ICE Benchmark Administration Limited.
(7)  
All or a portion of these securities are out on loan. The aggregate value of securities on loan is $67.4 million.
(8)  
This investment was restructured on February 2, 2018, reducing the Account's interest in the joint venture from 75% to 66.02%.
(9)  
A partial disposition of assets held by the portfolio was completed on May 1, 2018.
(10)  
On August 21, 2018 the Account sold 49.9% of the property and transferred 50.1% into a joint venture investment.
(11)  
The property investment held within the joint venture was sold on December 20, 2018. As of December 31, 2018, the joint venture remained in dissolution.
(12)  
On September 4, 2018, concurrent with the payoff of a portion of the outstanding principal, the borrower elected a one year extension option as provided by the original loan. The maturity date and interest rate established by the extension option are July 12, 2019 and 5.0%, respectively.
(13)  
All investments of the limited partnership have been previously disposed. As of December 31, 2018, the limited partnership remained in dissolution.

103


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Teachers Insurance and Annuity Association of America and Participants of TIAA Real Estate Account
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of the TIAA Real Estate Account and its subsidiaries (the “Account”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, changes in net assets and cash flows for each of the three years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Account as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Account’s management. Our responsibility is to express an opinion on the Account’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Account in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Account is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Account's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 14, 2019
We have served as the Account's auditor since 2005.

104


ADDITIONAL INFORMATION

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES.
(a) The registrant maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the registrant’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the registrant’s Principal Executive Officer (“PEO”) and the Principal Financial Officer (“PFO”), as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and participation of the registrant’s management, including the registrant’s PEO and PFO, the registrant conducted an evaluation (as required under Rules 13a-15(b) and 15d-15(b) under the Exchange Act, under the supervision and with the participation of our PEO and PFO, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon management’s review, the PEO and the PFO concluded with reasonable assurance that the registrant’s disclosure controls and procedures were effective as of December 31, 2018 .
(b) Management’s Report on Internal Control over Financial Reporting . Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), is a process designed by, or under the supervision of the Account’s PEO and PFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Account’s Consolidated Financial Statements for external purposes in accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has made a comprehensive review, evaluation, and assessment of the Account’s internal control over financial reporting as of December 31, 2018 . In making its assessment of internal control over financial reporting, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, management has concluded that as of December 31, 2018 , the Account’s internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
This annual report does not include an attestation report of the registrant’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Registrant’s independent registered public accounting firm pursuant to the rules of the U.S. Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
(c) Changes in internal control over financial reporting . There have been no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal quarter that materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.


105


PART III

ITEMS 10 AND 11. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE OF THE REGISTRANT; EXECUTIVE COMPENSATION.
The TIAA Real Estate Account has no officers or directors. Rather, TIAA officers, under the direction and control of the Board, manage the investment of the Account's assets, following investment management procedures that TIAA has adopted for the Account. No TIAA Trustee or executive officer receives compensation from the Account. The Trustees and certain executive officers of TIAA as of March 1, 2019, their years of birth and their principal occupations during at least the past five years, are as follows:
Trustees
Ronald L. Thompson (Chairman of the TIAA Board of Trustees), YOB: 1949
Senior Non-Executive Director, Fiat Chrysler Automobiles (2014 to present). Director, Chrysler Group LLC (2009 to 2014). Member, Plymouth Ventures Partnership II Advisory Board (2010 to present). Director, Medical University of South Carolina Foundation (2013 to present). Trustee, Washington University in St. Louis (1987 to 2013 and 2014 to present).
Jeffrey R. Brown, YOB: 1968
Josef and Margot Lakonishok Professor of Business and Dean of the Gies College of Business at the University of Illinois at Urbana-Champaign (2015 to present). Professor of Finance and Director of the Center for Business and Public Policy, University of Illinois at Urbana-Champaign (2007 to 2015). Board Member, Center for Audit Quality (2016 to present).
Priscilla Sims Brown, YOB: 1957
Chief Executive Officer, Emerge.me (2017 to present). Senior Executive Vice President and Chief Marketing Officer, AXA Financial, Inc. (2014 to 2016). Senior Vice President, Chief Marketing & Development Officer, Amerihealth Caritas (2013 to 2014).
James R. Chambers, YOB: 1957
Director, President and Chief Executive Officer (2013 to 2016), and Special Advisor, Board (2016), Weight Watchers International, Inc. Chairman (2018 to present), Director (2012 to present), Big Lots, Inc.
Tamara Simpkins Franklin, YOB: 1966
Vice President, Media & Entertainment Industry Solutions for North America (2018 to present), International Business Machines (IBM). Vice President, Chief Digital Officer for North America (2017 to 2018), IBM. Executive Vice President, Digital, Scripps Network Interactive (2009 to 2016). Director, Dream Academy (2017 to present).
Lisa W. Hess, YOB: 1955
President and Managing Partner, SkyTop Capital (2010 to present). Director, Radian Group, Inc. (2011 to present). Director, TIAA, FSB (a wholly-owned subsidiary of TIAA) (2015 to present).
Edward M. Hundert, M.D., YOB: 1956
Dean for Medical Education, Associate Director of the Center for Bioethics and Daniel D. Federman, M.D. Professor in Residence of Global Health and Social Medicine and Medical Education, Harvard Medical School (2014 to present). Faculty member, Massachusetts General Hospital Center for Law, Brain and Behavior (2011 to present). Senior lecturer in Medical Ethics (2007 to 2014), Director of the Center for Teaching and Learning (2011 to 2014), Harvard Medical School.
Maureen O’Hara, YOB: 1953
R.W. Purcell Professor of Finance, Johnson Graduate School of Management, Cornell University (1992 to present), where she has taught since 1979. Professor of Finance, University of Technology Sydney (2016 to present).

106


Donald K. Peterson, YOB: 1949
Director, Bernstein Fund Inc. (2015 to present). Director, Sanford C. Bernstein Fund Inc. (2007 to present). Trustee Emeritus, Worcester Polytechnic Institute (2015 to present). Director, TIAA, FSB (a wholly-owned subsidiary of TIAA) (2015 to present).
Sidney A. Ribeau, YOB: 1947
Professor of Communications, Howard University (2014 to present). President, Howard University (2008 to 2013). Senior Consultant, Academic Search (2018 to present). Co-founder, TM2 Education Search (2016 to 2018). Director, Worthington Industries (2000 to present).
Dorothy K. Robinson, YOB: 1951
Of Counsel, K&L Gates (2016 to present). Senior Counselor to the President, Yale University (2014 to 2015). Vice President and General Counsel, Yale University (1995 to 2014). Trustee, Yale University Press, London (2015 to present). Director, Oak Spring Garden Foundation (2018 to present). Director, TIAA, FSB (a wholly-owned subsidiary of TIAA) (2015 to present).
Kim M. Sharan, YOB: 1957
Founder and CEO, Kim M. Sharan, LLC (2014 to present). President of Financial Planning and Wealth Strategies and Chief Marketing Officer, Ameriprise Financial (2002 to 2014). Board Member, Partner Here (2014 to present). Director, Girls Inc. (2014 to present). Executive Advisor, Own the Room (2016 to present).
David L. Shedlarz, YOB: 1948
Director, Teladoc, Inc. (2016 to present). Director, The Hershey Company (2008 to present). Director, Pitney Bowes Inc. (2001 to present). Director, TIAA, FSB (a wholly-owned subsidiary of TIAA) (2015 to present).
Marta Tienda, YOB: 1950
Maurice P. During ’22 Professor in Demographic Studies and Professor of Sociology and Public Affairs, Princeton University (1999 to present). Board member, Robin Hood Foundation (2017 to present). Trustee (2004 to present), Board Chair (2017 to present) Alfred P. Sloan Foundation. Trustee, Jacobs Foundation of Switzerland (1998 to present).
Officer—Trustees
Roger W. Ferguson, Jr., YOB: 1951
President and Chief Executive Officer of TIAA and CREF (since 2008).
Other TIAA Executive Officers
Carol W. Deckbar, YOB: 1962
Executive Vice President, Chief Product Officer of TIAA Financial Solutions Product Group, TIAA. Executive Vice President, CREF. Prior positions: Executive Vice President, Chief Executive Officer, TIAA-CREF Asset Management, TIAA; Executive Vice President, Chief Operating Officer of Asset Management, TIAA.
Lori Fouché, YOB: 1969
Senior Executive Vice President, Chief Executive Officer of TIAA Financial Solutions, TIAA. Prior positions: Senior Vice President, Individual Solutions, Prudential Financial, Inc.; President, Prudential Annuities, Prudential Financial, Inc.; Chief Executive Officer, Prudential Group Insurance, Prudential Financial, Inc.
Glenn Richter, YOB: 1962
Senior Executive Vice President, Chief Financial Officer, TIAA. Prior positions: Senior Executive Vice President, Chief Administrative Officer, TIAA; Executive Vice President, Chief Operating Officer, TIAA Global Asset Management; Chief Operating Officer, Nuveen Investments.
Oluseun S. Salami, YOB: 1977
Senior Vice President, Chief Accounting Officer and Corporate Controller, TIAA. Prior positions: Executive Vice President, Global Controller - Corporate Solutions, Jones Lang LaSalle; Senior Manager, Deloitte & Touche LLP.

107


Portfolio Management Team
Randy Giraldo, YOB: 1975
Managing Director, Portfolio Manager, Head of TIAA Real Estate Account, TIAA. Head of Portfolio Management, Nuveen Real Estate. Prior position: Managing Director, TIAA.
Gordon (Chris) McGibbon, YOB: 1972
Senior Managing Director, Head of Americas, Nuveen Real Estate. Prior positions: Managing Director, Head of U.S. Real Estate; Managing Director, Portfolio Manager of General Account Mortgage and Real Estate Portfolios, TIAA.
Audit Committee Financial Expert
On February 14, 2019, the Board of Trustees of TIAA determined that Jeffrey R. Brown, James R. Chambers, Lisa W. Hess, Maureen O’Hara and Donald K. Peterson qualify as Audit Committee Financial Experts. Each such Trustee is independent (as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934) and has not accepted, directly or indirectly, any consulting, advisory or other compensatory fee from TIAA, other than in his or her capacity as Trustee.
Code of Ethics
The Board of Trustees of TIAA has adopted a code of ethics for senior financial officers, including its principal executive officer, principal financial officer, principal accounting officer, or controller, and persons performing similar functions, in conformity with rules promulgated under the Sarbanes-Oxley Act of 2002.
The code of ethics is filed as an exhibit to this annual report.
During the reporting period, there were no implicit or explicit waivers granted by the Registrant from any provision of the code of ethics.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Not applicable.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The TIAA General Account plays a significant role in operating the Account, including providing a liquidity guarantee, and investment advisory, administrative, and other services. In addition, Services, a wholly-owned subsidiary of TIAA, provides distribution services for the Account.
Liquidity Guarantee . If the Account’s liquid assets and its cash flow from operating activities and participant transactions are insufficient to fund redemption requests, the TIAA general account has agreed to purchase liquidity units. TIAA thereby guarantees that a participant can redeem accumulation units at their net asset value next determined. For the year ended December 31, 2018 , the Account expensed $50.5 million for this liquidity guarantee from TIAA through a daily deduction from the net assets of the Account.
Investment Advisory and Administration Services/Mortality and Expense Risks Borne by TIAA . Deductions are made each valuation day from the net assets of the Account for various services required to manage investments, administer the Account and distribute the contracts. These services are performed at cost by TIAA and Services. Deductions are also made each valuation day to cover mortality and expense risks borne by TIAA.
For the year ended December 31, 2018 , the Account expensed $62.1 million for investment management services and $1.3 million for mortality and expense risks provided/borne by TIAA. For the same period, the Account expensed $ 78.9 million for administrative and distribution services provided by TIAA and Services.


108


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
PricewaterhouseCoopers LLP (“PwC”) performs independent audits of the registrant’s consolidated financial statements. To maintain auditor independence and avoid even the appearance of conflicts of interest, the registrant, as a policy, does not engage PwC for management advisory or consulting services.
Audit Fees . PwC’s fees for professional services rendered for the audits of the registrant’s annual consolidated financial statements for the years ended December 31, 2018 and 2017 and review of consolidated financial statements included in the registrant’s quarterly reports were $ 1,149,969 and $ 1,198,800 respectively.
Audit-Related Fees . The registrant had no audit-related services for the years ended December 31, 2018 and 2017 .
Tax Fees . PwC had no tax fees with respect to registrant for the years ended December 31, 2018 and 2017 .
All Other Fees . Other than as set forth above, there were no additional fees with respect to registrant.
Preapproval Policy . The audit committee of the Board (“Audit Committee”) has adopted a Preapproval Policy for External Audit Firm Services (the “Policy”), which applies to the registrant. The Policy describes the types of services that may be provided by the independent auditor to the registrant without impairing the auditor’s independence. Under the Policy, the Audit Committee is required to preapprove services to be performed by the registrant’s independent auditor in order to ensure that such services do not impair the auditor’s independence.
The Policy requires the Audit Committee to: (i) appoint the independent auditor to perform the financial statement audit for the registrant and certain of its affiliates, including approving the terms of the engagement and (ii) preapprove the audit, audit-related and tax services to be provided by the independent auditor and the fees to be charged for provision of such services from year to year.


109


PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(1)
(A)
Distribution Agreement for the Contracts Funded by the TIAA Real Estate Account, dated as of January 1, 2008, by and among Teachers Insurance and Annuity Association of America, for itself and on behalf of the Account, and TIAA-CREF Individual & Institutional Services, LLC 4
 
 

(3)
(A)
Restated Charter of TIAA (as amended) 5
 
 
 
(B)
Amended Bylaws of TIAA 6
 
 
(4)
(A)
Forms of RA, GRA, GSRA, SRA, IRA Real Estate Account Endorsements, 2  Keogh Contract, 3  Retirement Select and Retirement Select Plus Contracts and Endorsements 1  and Retirement Choice and Retirement Choice Plus Contracts 3
 
 
 
 
 
 
 
(B)
Forms of Income-Paying Contracts 2
 
 
 
(C)
Form of Contract Endorsement for Internal Transfer Limitation 7
 
 
 
(D)
Form of Non-ERISA Retirement Choice Plus Contract 9
 
 
 
 
 
(E)
Form of Trust Company Retirement Choice Contract 10
 
 
 
 
 
(F)
Form of Trust Company Retirement Choice Plus Contract 11
 
 
 
 
 
(G)
 
(H)
 
(I)
 
(J)
 
(K)
(10)
(A)
Amended and Restated Independent Fiduciary Letter Agreement, dated as of February 21, 2018, between TIAA, on behalf of the Registrant, and RERC, LLC 12
 
 
 
(B)
Custodian Agreement, dated as of March 3, 2008, by and between TIAA, on behalf of the Registrant, and State Street Bank and Trust Company, N.A. 8
 
 
(14)
 
(31)
 
(32)
 

110


(101)
 
The following financial information from the annual report on Form 10-K for the year ended December 31, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Statements of Assets and Liabilities, (ii) the Statements of Operations, (iii) the Statements of Changes in Net Assets, (iv) the Statements of Cash Flows, and (v) the Notes to the Financial Statements. Any other required schedule has been omitted because the schedule is not applicable to the registrant.**
*
Filed herewith.
**
Furnished electronically herewith.
(1)
Previously filed and incorporated herein by reference to Exhibit 4(A) 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).
(2)
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).
(3)
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).
(4)
Previously filed and incorporated herein by reference to Exhibit 1(A) to the Account’s Registration Statement on Form S-1, filed with the Commission on March 15, 2013 (File No. 333-187309).
(5)
Previously filed and incorporated herein by reference to Exhibit 3(A) to the Account’s Registration Statement On Form S-1, filed with the Commission on April 22, 2015 (File No. 333-202583).
(6)
Previously filed and incorporated herein by reference to Exhibit 3(B) to the Account’s Registration Statement on Form S-1, filed with the Commission on April 22, 2015 (File No. 333-202583).
(7)
Previously filed and incorporated by reference to Exhibit 4(C) to the Account’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 and filed with the Commission on November 12, 2010 (File No. 33-92990).
(8)
Previously filed and incorporated herein by reference to Exhibit 10(B) to the Annual Report on Form 10-K of the Account for the fiscal year ended December 31, 2012 and filed with the Commission on March 14, 2013 (File No. 33-92990).
(9)
Previously filed and incorporated by reference to Exhibit 4(D)(1) and 4(D)(2) to the Account's Registration Statement on Form S-1, filed with the Commission on March 21, 2017 (File No. 333-216849).
(10)
Previously filed and incorporated by reference to Exhibit 4(E)(1) and 4(E)(2) to the Account's Registration Statement on Form S-1, filed with the Commission on March 21, 2017 (File No. 333-216849).
(11)
Previously filed and incorporated by reference to Exhibit 4(F)(1) and 4(F)(2) to the Account's Registration Statement on Form S-1, filed with the Commission on March 21, 2017 (File No. 333-216849).
(12)
Previously filed and incorporated by reference to Exhibit 10.1 to the Account's Current Report on Form 8-K, filed with the Commission on March 1, 2018 (File No. 33-92990).
(13)
Previously filed and incorporated by reference to Exhibit 4(G) to the Account’s Annual Report on Form 10-K, filed with the Commission on March 15, 2018 (File No. 33-92990).
(14)
Previously filed and incorporated by reference to Exhibit 4(H) to the Account’s Annual Report on Form 10-K, filed with the Commission on March 15, 2018 (File No. 33-92990).
(15)
Previously filed and incorporated by reference to Exhibit 4(I) to the Account’s Annual Report on Form 10-K, filed with the Commission on March 15, 2018 (File No. 33-92990).
ITEM 16. FORM 10-K SUMMARY.
Not applicable.


111


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant, TIAA Real Estate Account, has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 14th day of March, 2019.
 
TIAA REAL ESTATE ACCOUNT
 
 
 
 
By:
TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
 
 
 
March 14, 2019
 
/s/ Carol W. Deckbar
 
 
Carol W. Deckbar
 
 
Executive Vice President, Teachers Insurance and Annuity Association of America and Chief Product Officer of TIAA Financial Solutions Product Group
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report 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/ R OGER   W. F ERGUSON , J R .
 
President and Chief Executive Officer of Teachers Insurance and Annuity Association of America and Trustee
 
March 14, 2019
/s/ C AROL   W . D ECKBAR
 
Executive Vice President, Teachers Insurance and Annuity Association of America and Chief Product Officer of TIAA Financial Solutions Product Group (Principal Executive Officer)
 
March 14, 2019
/s/ O LUSEUN  S. S ALAMI
 
Senior Vice President, Chief Accounting Officer and Corporate Controller of Teachers Insurance and Annuity Association of America (Principal Financial and Accounting Officer)

 
March 14, 2019
/s/ R ONALD   L. T HOMPSON
 
Chairman of the TIAA Board of Trustees
 
March 14, 2019
/s/ J EFFREY   R. B ROWN
 
Trustee
 
March 14, 2019
/s/ P RISCILLA  S IMS  B ROWN
 
Trustee
 
March 14, 2019
/s/ J AMES   R. C HAMBERS
 
Trustee
 
March 14, 2019
/s/ T AMARA S IMPKINS  F RANKLIN
 
Trustee
 
March 14, 2019
/s/ L ISA   W. H ESS
 
Trustee
 
March 14, 2019
/s/ E DWARD   M. H UNDERT , M.D.
 
Trustee
 
March 14, 2019
/s/ M AUREEN   O’H ARA
 
Trustee
 
March 14, 2019
/s/ D ONALD   K. P ETERSON
 
Trustee
 
March 14, 2019
/s/ S IDNEY   A. R IBEAU
 
Trustee
 
March 14, 2019
/s/ D OROTHY   K. R OBINSON
 
Trustee
 
March 14, 2019
/s/ K IM   M. S HARAN
 
Trustee
 
March 14, 2019
/s/ D AVID   L. S HEDLARZ
 
Trustee
 
March 14, 2019
/s/ M ARTA   T IENDA
 
Trustee
 
March 14, 2019

112


SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
Because the Registrant has no voting securities, nor its own management or board of directors, no annual report or proxy materials will be sent to contract owners holding interests in the Account.


113
EXHIBIT 4(J)(1)


TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
(TIAA)
730 Third Avenue, New York, N.Y. 10017-3206
Telephone: [800-842-2733]
Endorsement to Your TIAA Retirement Choice Annuity Contract
or Your Retirement Choice Plus Annuity Contract
[Effective Date: Upon receipt/Specific date/Attached at issue]
This endorsement is part of your contract with TIAA. It modifies provisions of your TIAA Retirement Choice Annuity Contract (RC) or your TIAA Retirement Choice Plus Annuity Contract (RCP) as follows.
The following definitions are added:
A Custom Portfolios Model Service (CPMS) Program is an asset allocation program whereby contributions under the plan are allocated to model portfolios comprised of funding options in accordance with prescribed target allocation percentages. Some or all of the funding options under this contract may be administered as part of a CPMS. As provided below, for employees subscribed in a model within the CPMS, TIAA will periodically execute contractholder payments from Investment Account accumulations to track the target allocation percentages of the models created for the CPMS. However, except as specified below in connection with contractholder payments, there will be no movement of Traditional Annuity accumulations out of the Traditional Annuity in connection with the administration of a CPMS. The terms of the CPMS and the particular funding options that may be administered as part of a CPMS will be as agreed upon by TIAA and the contractholder. More than one model in a CPMS may be administered under the contract. However, any specific employee’s accumulation can only be managed under one model within the CPMS program at any time.
If the contract is being used in connection with an employer plan in which both an RC and RCP contract are simultaneously being used as funding vehicles and record-kept as a single plan in TIAA-CREF’s recordkeeping systems for the purposes of making CPMSs available to employees, then
•
the only amounts that may be applied to the RCP would be those associated with administering a model(s) in a CPMS.
•
TIAA may transfer an employee’s Investment Account accumulations between the RCP and the corresponding accounts in the RC in accordance with the terms of the CPMS as agreed upon by TIAA and the contractholder under circumstances in which an employee begins or ceases participation in a model in a CPMS.
The contractholder understands and acknowledges that, in connection with any CPMS, and notwithstanding any other provisions in the contract to the contrary, each employee retains, with respect to his or her accumulation in the CPMS, the following rights to the full extent an employee may be granted these rights under the contract: the right to (i) withdraw accumulations subject to all otherwise applicable restrictions on an employee’s right to withdraw or transfer such accumulations; (ii) vote securities, or delegate the authority to vote securities to another person; (iii) be provided in a timely manner with a written confirmation or other notification of each transaction, and all other documents required by law to be provided to a security holder; and (iv) proceed directly as a security holder against the issuer of any security in the employee’s account.

IGRS-CPMS-E2
 
Page E 1


EXHIBIT 4(J)(1)

A custom portfolios model service accumulation (CPMS accumulation) is the portion of the contract accumulation equal to the sum of all employees’ custom portfolio model service accumulations in a given CPMS under the contract.
An employee’s custom portfolios model service accumulation (employee’s CPMS accumulation) is the portion of the employee’s accumulation maintained for the sole purpose of providing a record of amounts accumulated in the Traditional Annuity in a model in a CPMS or an Investment Account in a model in a CPMS.
The definition of Contractholder payments is modified by adding the following:
Contractholder payments from the Traditional Annuity accumulation can include payments made as a series of payments of the contract’s entire Traditional Annuity accumulation in a specific model in a CPMS under the contract, less any applicable surrender charges. A contractholder payment from an Investment Account accumulation can include a lump-sum payment of that Account’s entire accumulation in a specific model in a CPMS under the contract.
The provision entitled Amount and effective date of contractholder payments from the Traditional Annuity is modified by adding the following:
Contractholder payments from the Traditional Annuity accumulation can include payments made as a series of payments, to be paid over the period of time described in the contract, for the purpose of paying out the contract’s entire Traditional Annuity accumulation in a specific model in a CPMS under the contract including payments made to effect a transfer to an Investment Account accumulation or to the companion CREF contract, if any. Contractholder payments executed for this purpose will be referred to as Custom Portfolios Model Service Contractholder Payments (CPMSCPs). Any contractholder payment, including CPMSCPs, will be reduced by any surrender charge in accordance with the applicable rate schedule or schedules.
The availability of CPMSCPs is subject to the following:
1. CPMSCPs may only be paid from Traditional Annuity accumulations held within a model in a CPMS.
2. Any portion of the contract’s accumulation being paid as CPMSCPs may not be included in the calculation of any request for or calculation of any other series of contractholder payments.
3. The request for CPMSCPs is irrevocable once we receive the contractholder’s written request in good order. The first payment will be effective as of the end of a business day that is not more than [90] days after the business day that we receive the contractholder’s written request for such CPMSCPs. TIAA will determine all values as of such effective date.

IGRS-CPMS-E2
 
Page E 2


EXHIBIT 4(J)(1)

The provision entitled Amount and effective date of contractholder payments from an Investment Account is modified by replacing the first sentence with the following:
A contractholder payment from an Investment Account accumulation can include a lump-sum payment of some or all of the contract’s accumulation in that Account in a specific model in a CPMS under the contract, including payments made to effect a transfer to the Traditional Annuity accumulation or to the companion CREF contract, if any. A contractholder payment from an Investment Account accumulation also includes lump-sum payments and transfers of any part of an employee’s CPMS accumulation in that Investment Account effected to achieve the rebalancing objectives associated with the target allocations of the model in a CPMS.

RFSIGNATURE.JPG



IGRS-CPMS-E2
 
Page E 3


EXHIBIT 4(J)(2)

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
(TIAA)
730 Third Avenue, New York, N.Y. 10017-3206
Telephone: [800-842-2733]
Endorsement to Your TIAA Retirement Choice Annuity Certificate or
TIAA Retirement Choice Plus Annuity Certificate
[Effective Date: Upon receipt/Specific date/Attached at issue]
This endorsement is part of your certificate with TIAA. It describes a change to your employer’s rights as the contractholder, and is provided for your information. It modifies provisions of your TIAA Retirement Choice Annuity Certificate (RC) or TIAA Retirement Choice Plus Annuity Certificate (RCP) as follows.
The following definitions are added to your certificate:
A Custom Portfolios Model Service (CPMS) Program is an asset allocation program whereby contributions under the plan are allocated to model portfolios comprised of funding options in accordance with prescribed target allocation percentages. Some or all of the funding options under the contract may be administered as part of a CPMS. As provided below, if and while you are subscribed in a model within the CPMS, TIAA will periodically execute contractholder payments from Investment Account accumulations to track the target allocation percentages of the models created for the CPMS. However, except as specified below in connection with contractholder payments, there will be no movement of Traditional Annuity accumulations out of the Traditional Annuity in connection with the administration of a CPMS.The terms of the CPMS and the particular funding options that may be administered as part of a CPMS will be as agreed upon by TIAA and the contractholder. More than one model in a CPMS may be administered under the contract. However, your accumulation can only be managed under one model within the CPMS program at any time.
If the contract is being used in connection with an employer plan in which both an RC and RCP contract are simultaneously being used as funding vehicles and record-kept as a single plan in TIAA-CREF’s recordkeeping systems for the purposes of making CPMSs available to employees, then
•
the the only amounts that may be applied to the RCP would be those associated with administering a model(s) in a CPMS.
•
TIAA may transfer your Investment Account accumulations between the RCP and the corresponding accounts in the RC in accordance with the terms of the CPMS as agreed upon by TIAA and the contractholder under circumstances in which you begin or cease participation in a model in a CPMS.
The contractholder understands and acknowledges that, in connection with any CPMS, and notwithstanding any other provisions in the contract to the contrary, you retain, with respect to your accumulation in the CPMS, the following rights to the full extent you may be granted these rights under the contract: the right to (i) withdraw accumulations subject to all otherwise applicable restrictions on an employee’s right to withdraw or transfer such accumulations; (ii) vote securities, or delegate the authority to vote securities to another person; (iii) be provided in a timely manner with a written confirmation or other notification of each transaction, and all other documents required by law to be provided to a security holder; and (iv) proceed directly as a security holder against the issuer of any security in your account.

IGRS-CRT-CPMS-E2
 
Page E 1

EXHIBIT 4(J)(2)

The Contractholder Payments provision of the Retirement Choice Annuity Certificate and the Contractholder Rights provision of the Retirement Choice Plus Annuity Certificate are modified by adding the following:
Contractholder payments from the Traditional Annuity accumulation can include payments made as a series of payments, to be paid over the period of time described in the contract, of the contract’s entire Traditional Annuity accumulation in a specific model in a CPMS under the contract, less any applicable surrender charges. Contractholder payment from an Investment Account accumulation can include a lump-sum payment of some or all of that Account’s accumulation in a specific model in a CPMS under the contract. A contractholder payment from an Investment Account accumulation also includes lump-sum payments and transfers of any part of an employee’s CPMS accumulation in that Investment Account effected to achieve the rebalancing objectives associated with the target allocations of the model in a CPMS.




RFSIGNATURE.JPG


IGRS-CRT-CPMS-E2
 
Page E 2

EXHIBIT 4(K)

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
(TIAA)
730 Third Avenue, New York, NY 10017-3206
Telephone: [800-842-2733]
Endorsement to Your TIAA Group Supplemental Retirement Annuity Certificate
[ Effective Date: Attached at issue / Upon receipt / Specific date / Date of Issue, and as part of
endorsement END-G1250.1-ACC, if such endorsement applies / Upon receipt, and as part of
END-G1250.1-ACC, if such endorsement applies ]
This endorsement modifies the provisions of your TIAA Group Supplemental Retirement Annuity Certificate and becomes part of it. Please read this endorsement and attach it to your certificate.
The following provisions are added to your certificate:
The term Investment Account refers to the Real Estate Account or to any subaccount of any other Separate Account available under the certificate.
Retirement Plan Loans
In addition to the loan provisions already described in your certificate, to the extent your employer’s plan so provides and in accordance with section 72(p) of the IRC, as amended, and ERISA, to the extent applicable, you may request a Retirement Plan Loan from your available Traditional Annuity accumulation or your Investment Account accumulations, at any time prior to the annuity starting date. The amount of a Retirement Plan Loan may generally not exceed the least of:
i)     the total of your available Traditional Annuity accumulation and your Investment
Account accumulations;
ii)     [50%] of the present value of your vested accrued benefit under any of your employer's
plans; and
iii)     [$50,000]
In determining the amount available for a Retirement Plan Loan, all plans of your employer, including 403(b), 401(a), 403(a) and 457(b) plans, to the extent loans are available, and all such plans of any related employers under IRC Section 414(b), (c) or (m) shall be considered employer plans for this purpose.
A request for a Retirement Plan Loan must be made on or before the annuity starting date in accordance with the terms of your certificate. A Retirement Plan Loan will be effective as of the business day on which we receive your request, in a form acceptable to TIAA as well as any spousal waiver that may be required under ERISA or the terms of your employer’s plan. TIAA will determine all values as of the end of the effective date. You can't revoke a request for a Retirement Plan Loan after its effective date. TIAA may defer the payment of a Retirement Plan Loan from the available Traditional Annuity accumulation for up to six months. If you request a Retirement Plan Loan from your available Traditional Annuity accumulation, we will disburse the portion of your Traditional Annuity accumulation you choose, less any charges.
If you request a Retirement Plan Loan from your available Traditional Annuity accumulation, we will disburse the portion of your Traditional Annuity accumulation you choose, less any charges.

T-GSRA-PAL-E1
 
Page E 1

EXHIBIT 4(K)

A Retirement Plan Loan reduces the accumulations from which it is paid by the amount of the loan chosen. The loan will be issued in accordance with the terms of a loan agreement. The loan agreement will describe the terms, conditions and any fees or charges for the loan.
Any loan repayments applied to the certificate will be applied as new premiums. If you choose a Retirement Plan Loan from your available Traditional Annuity accumulation and different rate schedules apply to different parts of your accumulation, the reduction in your accumulation will be allocated among the parts on a pro-rata basis in accordance with procedures established by TIAA.
The provision defining the components of the Traditional Annuity accumulation is modified such that the Traditional Annuity accumulation is reduced by the amount of any Retirement Plan Loan paid from the available Traditional Annuity accumulation.


RFSIGNATURE.JPG

T-GSRA-PAL-E1
 
Page E 2



EXHIBIT 14
TEACHERS INSURANCE AND ANNUITY ASSOCIATION (“TIAA”),
COLLEGE RETIREMENT EQUITIES FUND, TIAA-CREF FUNDS,
TIAA-CREF LIFE FUNDS, TIAA SEPARATE ACCOUNT VA-1, TIAA REAL ESTATE ACCOUNT, AND TIAA SEPARATE ACCOUNT VA-3
(COLLECTIVELY, THE “FUNDS”)
CODE OF ETHICS
FOR
SENIOR FINANCIAL OFFICERS
Introduction
The honesty, integrity and sound judgment of the principal executive officers, principal financial officers, principal accounting officers and controllers of TIAA and the Funds (such officers and controllers are collectively referred to herein as the Senior Financial Officers) is fundamental to our reputation and success. Thus, in addition to complying with any other applicable corporate code of conduct, each Senior Financial Officer is subject to this Code.
Specific Provisions
Conflicts of Interest. Each Senior Financial Officer should avoid actual or apparent conflicts of interest between personal and professional relationships.
A “conflict of interest” occurs when a Senior Financial Officer’s personal interest interferes with the interests of TIAA and the Funds. For example, the Senior Financial Officer should not cause TIAA and the Funds to take action, or fail to take action, for the personal benefit of the Senior Financial Officer rather than the benefit of TIAA and the Funds. Other conflicts could occur from outside business activities that detract from an individual’s ability to devote appropriate time and attention to TIAA and the Funds. Any questions relating to potential conflict of interest situations should be discussed with the Executive Vice President, Chief Legal Officer.
Complete and Accurate Disclosures. Each Senior Financial Officer is required to be familiar, and comply, with the TIAA and the Funds disclosure controls and procedures so that the TIAA and the Funds documents filed with the SEC comply in all material respects with applicable federal securities laws. In addition, each Senior Financial Officer having direct or supervisory authority regarding SEC filings for TIAA and the Funds and other public communications should, to the extent appropriate within his or her area of responsibility, consult with other TIAA and the Funds officers and employees, or individuals contracted to perform such tasks, and take appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure.
Each Senior Financial Officer must:
•
    Familiarize himself or herself with the disclosure requirements applicable to TIAA and the Funds as well as the business and financial operations of TIAA and the Funds;
•
    Not knowingly misrepresent, or cause others to misrepresent, facts about TIAA and the Funds to others, whether within or outside TIAA and the Funds, including to the TIAA and the Funds’ internal auditors, independent Trustees, independent auditors, and to governmental regulators and self-regulatory organizations; and
•
    Adhere to the standards and restrictions imposed by applicable laws, rules and regulations, including those relating to affiliated transactions, accounting and auditing matters.
Reporting and Accountability. Each Senior Financial Officer must:
•
    Upon receipt of this Code, sign and submit to the Corporate Controller’s Area an acknowledgment stating that the Senior Financial Officer has received, read, and understands the Code;
•
    Annually thereafter submit a form to the Corporate Controller’s Area confirming that the Senior Financial Officer has received, read and understands the Code and has complied with its requirements; and




•
    Notify the Executive Vice President, Chief Legal Officer promptly if the Senior Financial Officer becomes aware of any existing or potential violation of the Code. Failure to do so is a violation of the Code.
Except as described otherwise below, the Executive Vice President, Chief Legal Officer is responsible for applying this Code to specific situations and has the authority to interpret and apply this Code to any particular situation. The Executive Vice President, Chief Legal Officer shall take all action he or she considers appropriate to investigate any actual or potential violations reported to him or her.
The Audit Committee of the TIAA Board of Trustees (the ‘TIAA Audit Committee”) and the Audit and Compliance Committees of the Boards of Trustees and Management Committee, as applicable, of the Funds (collectively, the “Funds Audit and Compliance Committees”) shall have the sole discretionary authority to approve any deviation or waiver from this Code for their respective Senior Financial Officers. Any waiver, including an implicit waiver, shall be promptly disclosed as required through either an SEC filing or a posting on the TIAA and the Funds’ Internet website. Such disclosure shall include a brief description of the nature of the waiver, the name of the person to whom the waiver was granted, and the date of the waiver. For purposes of such disclosure, (i) the term “waiver” means the approval by the TIAA Audit Committee or the Funds Audit and Compliance Committees of a material departure from a provision of this Code of Ethics, and (ii) the term “implicit waiver” means the TIAA Audit Committee or the Funds Audit and Compliance Committees’ failure to take action within a reasonable period of time regarding a material departure from a provision of this Code.
TIAA and the Funds will promptly disclose any amendment to this Code in accordance with the SEC’s rules.





EXHIBIT 31
CERTIFICATIONS
I, Carol W. Deckbar, certify that:
1. I have reviewed this annual report on Form 10-K of the TIAA Real Estate Account;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 14, 2019
/s/ Carol W. Deckbar
 
Carol W. Deckbar
 
Executive Vice President, Teachers Insurance and Annuity Association of America and Chief Product Officer of TIAA Financial Solutions Product Group
 
 
 
(Principal Executive Officer)






I, Oluseun S. Salami, certify that:
1. I have reviewed this annual report on Form 10-K of the TIAA Real Estate Account;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 14, 2019
/s/ Oluseun S. Salami
 
Oluseun S. Salami
 
Senior Vice President, Chief Accounting Officer and Corporate Controller of Teachers Insurance and Annuity Association of America

 
 
 
(Principal Financial and Accounting Officer)






EXHIBIT 32
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Teachers Insurance and Annuity Association of America, do hereby certify, to such officer’s knowledge, that:
The annual report on Form 10-K of the TIAA Real Estate Account (the “Account”) for the year ended December 31, 2018 (the “Form 10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Account.

March 14, 2019
/s/ Carol W. Deckbar
 
Carol W. Deckbar
 
Executive Vice President, Teachers Insurance and Annuity Association of America and Chief Product Officer of TIAA Financial Solutions Product Group
 
 
(Principal Executive Officer)
 
 
 
 
March 14, 2019
/s/ Oluseun S. Salami
 
Oluseun S. Salami
 
Senior Vice President, Chief Accounting Officer and Corporate Controller of Teachers Insurance and Annuity Association of America
 
 
(Principal Financial and Accounting Officer)
A signed original of this written statement required by Section 906 has been provided to the TIAA Real Estate Account and will be retained by the Account and furnished to the Securities and Exchange Commission or its staff upon request.