Exhibit 10.1

 

[x1_c80156a001.jpg] Teachers Insurance and Annuity Association
of America
730 Third Avenue
New York, NY 10017-3206

 

February 2, 2015

 

RERC, LLC

6600 Westown Parkway

Suite 260

West Des Moines, IA 50266

Attention: Mr. Kenneth P. Riggs, Jr.

 

Re:TIAA Real Estate Account - ERISA Independent Fiduciary

 

Dear Mr. Riggs:

 

This amended and restated letter agreement (the “Agreement”) sets forth the
terms and conditions under which Teachers Insurance and Annuity Association of
America (the “Company”) offers to appoint RERC, LLC, a Situs Company, (“RERC”)
to serve as the Independent Fiduciary, as defined below, under the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”) for the Company’s
real estate pooled separate account, called the TIAA Real Estate Account (the
“Account”). The Account is designed primarily for investment by participants in
retirement plans qualified under §401(a) and §403(a) of the Internal Revenue
Code of 1986, as amended (“Code”), Code §403(b) plans, and certain individual
retirement annuities under §408 of the Code. As used hereunder, each of Company
and Independent Fiduciary shall also be referred to as a “Party” and
collectively, the “Parties.”

 

This Agreement hereby amends and restates in its entirety the prior letter
agreement between the Parties hereto dated November 23, 2011.

 

1.Background

 

On October 17, 1996 the Company was granted a prohibited transaction exemption
(“PTE”) from the Department of Labor (“DOL”), PTE 96-76, Exemption Application
No.D-09915, 61 Fed. Reg. 54229 (1996). PTE 96-76 provides an exemption from
certain potential prohibited transactions under § 406 of ERISA and § 4975 of the
Code with respect to certain transactions or classes of transactions involving
the Account. Among other features, the Account offers a stand-by liquidity
mechanism under which units of interest in the Account (“Units”) may be
purchased or sold by the Company. PTE 96-76 contemplates that various aspects of
the Account’s operation will be subject to the oversight of an Independent
Fiduciary (“Independent Fiduciary”) which will be a business organization with
substantial real estate investment experience and which will be familiar with
the responsibilities of a fiduciary with respect to benefit plans under ERISA.
The Independent Fiduciary will act for the exclusive benefit of the plans and
plan participants who elect to participate in the Account. As used hereunder,
the term “Independent Fiduciary” shall refer to RERC.

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Included in PTE 96-76, Section III (e), 61 Fed. Reg. 54230-54231, are
descriptions of the responsibilities of the Independent Fiduciary. The valuation
procedures and rules for the Account are described in Exhibit A to this
Agreement and in the proposed PTE, 61 Fed. Reg. 15128, pages 15134-15136 (1996).

 

2.         Compensation

 

Compensation for services rendered by RERC pursuant to this Agreement shall be
paid from the Account in the amounts and in accordance with the terms and
conditions set forth in Schedule 1 attached hereto.

 

3.         Duties and Responsibilities of the Company

 

The Company is an investment manager, as defined in Section 3(38) of ERISA, with
respect to the Account, and shall be primarily responsible, as a fiduciary under
ERISA, for all aspects of the establishment and administration of the Account.
The Company alone shall be responsible for making determinations with respect to
the acquisition and disposition of properties by the Account and for all other
aspects of the investment of Account assets, subject to the duties and
responsibilities of specifically set forth in PTE 96-76 and paragraph 4 hereof.

 

4.         Duties and Responsibilities of Independent Fiduciary

 

A.        The Independent Fiduciary’s duties and responsibilities under this
Agreement shall be those set forth in PTE 96-76 and as described below:

 

(1)        The Independent Fiduciary will review and approve the valuation of
the Account and of the properties held in the Account as outlined in the
proposed PTE, 61 Fed. Reg. 15128, pgs. 15134-15136 and as more specifically
described in the valuation procedures and rules which have been adopted for the
Account by the Company (the “Valuation Procedures and Rules”) and which shall be
subject to the approval of the Independent Fiduciary. A current copy of the
Valuation Procedures and Rules for the Account is attached hereto as Exhibit A.

 

(2)        The Independent Fiduciary will approve the appointment of all
independent appraisers retained by the Company to perform periodic valuations of
Account properties. For this purpose, the Company will forward to the
Independent Fiduciary information provided to the Company with respect to the
background, education and experience of each such independent appraiser.

 

(3)        The Independent Fiduciary may require an appraisal in addition to
those conducted by an independent appraiser appointed as provided in clause (2)
above, when it believes that the characteristics of a particular property have
changed materially or with respect to any property where it deems an additional
appraisal to be necessary or appropriate in order to assure a correct Account
valuation. The Independent Fiduciary will perform such reviews of Account
properties as it may determine to be necessary or desirable in establishing the
necessity of such additional appraisals. The Independent Fiduciary shall have
the authority to designate independent appraisers to be hired by the Company to
perform any such additional appraisals, but the Company hereby reserves the
right to disapprove any such selection. Accordingly, the Independent Fiduciary
shall notify the Company at least fourteen (14) days prior to the anticipated
hiring of any appraiser not previously approved by the Company. Any such
appraiser

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will be deemed approved by the Company if the Company fails to object within
fourteen (14) days of receipt of the aforesaid notice and the Company will,
thereupon, hire such appraiser. The Company may in its sole discretion withdraw
its approval of an appraiser at any time prior to hiring such appraiser for
future appraisals by giving a notice of withdrawal of its approval.

 

(4)        The Independent Fiduciary shall review purchases and sales of Units
(as defined in PTE 96-76, Section IV(P), 61 Fed. Reg. 54233) by Account
participants and the Company to assure that correct Account values are applied.
With respect to the foregoing, the Independent Fiduciary may rely upon the
truth, completeness and correctness of information provided to it by the Company
or by the independent auditor designated by the Company with respect to the
Account.

 

(5)        If required under PTE 96-76, the Independent Fiduciary will determine
with the Company the appropriate “Trigger Point” (as defined in PTE 96- 76,
Section IV(o), 61 Fed. Reg. 54233) relating to the level of the Company’s
ongoing ownership of Liquidity Units (as defined in PTE 9676, Section IV(g), 61
Fed. Reg. 54232) in the Account and the manner in which any reduction of the
Company’s participation in excess of such Trigger Point is to be effected as
contemplated under the PTE. If the Independent Fiduciary believes that asset
sales are desirable in order to reduce the Company’s ownership of Units in the
Account, then the Independent Fiduciary will participate in the planning of any
such program of sales, including the selection of the properties to be sold and
the guidelines to be followed in making such sales.

 

(6)        In the event of the termination of the Account as described in PTE
96-76, Section III(e)(10) and (11), 61 Fed. Reg. 54231, the Independent
Fiduciary will approve the sale of Account properties and supervise Account
operation during the “Wind Down” period (as defined in PTE 96-76, Section IV(q),
61 Fed. Reg. 54233). Such period will commence with the Company’s notice to
Account participants of its termination of the Account and will end on the date
that no Units are held by any Participant and, if applicable, Participating
Plans (as such terms are defined in PTE 96-76, Section IIII, 61 Fed. Reg. 54229
and Section IV(h), 61 Fed. Reg. 54232, respectively).

 

(7)        The Independent Fiduciary will review and approve the investment
guidelines established by the Company for the Account and will monitor the
conformity of all property acquisitions and sales with the requirements of such
guidelines.

 

(8)        With respect to any other transaction or matter involving the Account
that is submitted to the Independent Fiduciary by the Company, the Independent
Fiduciary will review said transaction or matter in order to determine whether
it is fair to the Account and in the Account’s best interests.

 

(9)        The Independent Fiduciary and management of the Company, acting on
behalf of the Account, may agree to have more frequent communications than
required under PTE 96-76 and under this Agreement to discuss the affairs of the
Account, including but not limited to the economic conditions impacting the
commercial real estate markets and valuations of the assets and liabilities in
the Account and oversight with respect to the Account’s liquidity position from
time to time.

 

B.        In the event that the Company or the DOL or any other governmental
agency requires or requests the Independent Fiduciary to perform additional
functions reasonably related

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to the type of review described herein, or to undertake duties with respect to
the Account beyond those specifically enumerated herein, these additional duties
and functions shall be deemed to be included among the duties of under this
Agreement, provided that:

 

(1)        The Company requests the Independent Fiduciary to perform such
activity in writing; and

 

(2)        The Independent Fiduciary and the Company determine the nature and
amount of any additional compensation that may be appropriate with respect to
such additional duties. If the Independent Fiduciary and the Company are not
able to agree upon the nature and amount of any additional compensation, the
Independent Fiduciary and the Company hereby agree to submit any disputed issues
to arbitration conducted in accordance with the rules (“Rules”) of the American
Arbitration Association (“AAA”) then in effect and to be bound by the results
thereof; provided, however, that the Independent Fiduciary shall nevertheless
perform the additional duties described above during the time required for a
final determination to be made with respect to the nature and/or amount of any
additional compensation that it may receive. Any such arbitration will be
conducted before a panel of three arbitrators selected using the screening
process provided in the Rules. The arbitration panel, and not any federal, state
or local court or agency, shall have exclusive authority to resolve any dispute
relating to payment of such additional compensation to the Independent Fiduciary
as referenced in this paragraph 4.B.(2). The arbitration panel shall have no
power to award non-monetary or equitable relief of any sort and such panel shall
also have no power to award damages inconsistent with the terms of this
Agreement. Judgment on any arbitration award may be entered in any court having
jurisdiction over this Agreement.

 

C.        The Independent Fiduciary will meet with the Company on no less than a
quarterly basis to review the activities of the Account and the actions that the
Independent Fiduciary has taken under this Agreement. The Independent Fiduciary
will submit to the Company a summary report from time to time as it may deem
necessary or appropriate, but no less frequently than annually. Such report
shall be a written report that summarizes and explains all actions and
activities that the Independent Fiduciary has undertaken since the submission of
the last such report or the commencement of its terms, except those actions and
activities that the Independent Fiduciary in its judgment deems to be not
material. All or any part of any such report may, after consultation with the
Independent Fiduciary, be provided by the Company to any Account participant or
to the DOL or any other governmental agency. The Independent Fiduciary shall
maintain appropriate records of its actions and activities under this Agreement
and will allow the Company to review such records during normal business hours
upon reasonable prior request by the Company, and the Company, after
consultation with, may provide the results of any such review to the DOL or to
any other governmental agency.

 

D.        The Independent Fiduciary may make all reasonable inquiries, consult
with whomever it reasonably deems necessary, do all acts that are reasonably
necessary to the performance of its duties, and review such Company documents as
are reasonably appropriate for carrying out its responsibilities under this
Agreement. All work to be performed, pursuant to this paragraph 4, may be
performed during normal business hours at the Company’s Home Office, 730 Third
Avenue, New York, New York 10017-3206 or such other place as may be reasonably
designated by the Independent Fiduciary, including its offices.

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5.     Representations, Warranties and Covenants

 

The Independent Fiduciary represents and agrees that:

 

A.        The Independent Fiduciary has at least five years of experience with
respect to commercial real estate investments.

 

B.        The gross income which is received by the Independent Fiduciary (or
any partnership or corporation of which is a 10 percent or more partner or
shareholder) from the Company and its affiliates (as defined in PTE 96-76,
Section IV(b), 61 Fed. Reg. 54231-54232) for any fiscal year ending during the
term of this Agreement shall not exceed 5 percent of its annual gross income
from all sources for the preceding fiscal year. Such income limitation will
include services rendered to the Account as the Independent Fiduciary under any
PTE granted by the DOL. The Independent Fiduciary will provide, on or before
February 15, of each year, a written report to the Company of the gross income
it received from the Company in the prior fiscal year as a percentage of the
gross income received during the preceding fiscal year.

 

C.        The Independent Fiduciary shall not (i) acquire any property from,
sell any property to or borrow any funds from, the Company or any of its
affiliates during the period for which it serves as an Independent Fiduciary
under this Agreement and for a period of six months thereafter, or (ii)
negotiate any such transaction described in (i) during the period that serves as
the Independent Fiduciary.

 

D.        In the event that the DOL requires additional representations by the
Independent Fiduciary, it is agreed that the Independent Fiduciary will make any
such reasonably required representations that are true in fact.

 

6.         Independent Status

 

As the Independent Fiduciary, the Independent Fiduciary shall not be an agent of
the Company. In keeping with this status, the Independent Fiduciary shall be
free to control its method of fulfilling its responsibilities within the
framework of its obligations to the Participants (and their beneficiaries) and,
if applicable, Participating Plans (as such terms are defined in PTE 96-76,
Section IIII, 61 Fed. Reg. 54229 and Section IV(h), 61 Fed. Reg. 54232,
respectively) and to the Company.

 

7.         Fiduciary Standards and Confidentiality

 

A.        Fiduciary Standards

 

(1)        Notwithstanding any other provision of this Agreement, it is
understood that the Independent Fiduciary will act as a fiduciary, as defined in
ERISA, with respect to the Participants and their beneficiaries (and, if
applicable, Participating Plans) that invest in the Account, and that the
Independent Fiduciary will perform its duties under this Agreement for the
exclusive benefit of such Participants, their beneficiaries and Participating
Plans and in conformity with the legal requirements imposed upon it by ERISA.

 

(2)        It is understood that the Independent Fiduciary will not
unnecessarily engage in any activity in connection with this appointment that is
adverse to the interest of the

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Company. The Independent Fiduciary may provide similar independent fiduciary
services with respect to other benefit plans subject to ERISA; provided,
however, that the Independent Fiduciary does not use or disclose in such
relationships Confidential Information (as defined below) obtained by the
Independent Fiduciary in the course of providing services under this Agreement.

 

(3)        Upon termination of this Agreement, the Independent Fiduciary will
disclose to the Company all material in its possession that has been released to
it by the Company or produced pursuant to this Agreement. Such material may be
retained by the Independent Fiduciary if it deems such retention to be necessary
to protect its interests or the interests of the Participants and their
beneficiaries (and, if applicable, Participating Plans) that have invested in
the Account. If the Independent Fiduciary retains any such material, it shall
promptly notify the Company in writing of such action. The aforesaid notice
shall include an itemized list of all retained documents and other materials.
Upon receipt of the aforesaid notice, or at any time thereafter, the Company may
at its option, require that the Independent Fiduciary deliver all such retained
material to the person who succeeds to its position as Independent Fiduciary.
However, the Independent Fiduciary may retain any materials that it deems
necessary to protect its interests, provided that copies of said materials are
furnished to either the Company or the Independent Fiduciary’s successor as
Independent Fiduciary, upon request.

 

B.        Confidentiality. In connection with this Agreement, certain
Confidential Information (as defined below) regarding each Party (such party a
“Disclosing Party”) may be disclosed to the other Party (such party a “Recipient
Party”) in order for each Party to perform their respective obligations
hereunder.

 

(1)        Definitions. For purposes hereof, the definitions of Company and
Independent Fiduciary shall be deemed to include any parent, subsidiary,
affiliate of, or entity under common control with any entity constituting the
Company or Independent Fiduciary. “Affiliates” shall mean a business entity now
or hereafter controlled by, controlling or under common control with either
Company or Independent Fiduciary. “Control” exists when an entity owns or
controls directly or indirectly 50% or more of the outstanding equity
representing the right to vote for the election of directors or other managing
authority of another entity. “Representatives” shall mean any of TIAA’s or
Independent Fiduciary’s directors, officers, employees, agents or advisors
(including, without limitation, attorneys, accountants and contractors or
consultants retained by either Party).

 

(2)        Confidential Information. As used herein, Confidential Information
shall mean any of the following information regarding either TIAA or Independent
Fiduciary disclosed before or after the date hereof (“Confidential
Information”):

 

a.          any data or information that is competitively sensitive and not
generally known to the public, including but not limited to, products, business
and marketing plans, marketing strategies or techniques, financial information,
pricing, operations, vendor relationships, customers or customer relationships,
customer profiles, sales estimates, trade secrets and internal performance
results relating to the past, present or future business activities of
Independent Fiduciary or TIAA or any of their customers, subsidiaries, or third
party vendors;

 

b.          any scientific or technical information, concepts, design, process,
procedure, formula, or improvement that is commercially valuable, not generally
known to the

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public and secret in the sense that its confidentiality affords TIAA or
Independent Fiduciary a competitive advantage over its competitors; and

 

c.          all documentation, media, reports, data, specifications, computer
hardware or software, computer programs, source code, object code, flow charts,
mappings, interfaces, databases, inventions, engineering and laboratory
notebooks, drawings, diagrams, schema, prototypes and models, know-how,
show-how, trade secrets and any other tangible manifestation (including data in
computer or other digital format) of any of the foregoing, whether or not
patentable or copyrightable; and

 

(3)        Confidentiality Obligations. Except as expressly authorized by prior
written consent of the Disclosing Party, the Recipient Party shall:

a.          limit access to and use of any Confidential Information received by
it to its Representatives who have a need-to-know in connection with evaluating
the Opportunity, and only for use in connection therewith;

b.          advise its Representatives having access to the Confidential
Information of the proprietary nature thereof and of the obligations set forth
in this Agreement;

c.           take appropriate action by agreement with its Representatives
having access to the Confidential Information to fulfill its obligations under
this Agreement;

d.          safeguard all Confidential Information received by it using a
reasonable degree of care, but not less than that degree of care used by it in
safeguarding its own similar information or material; and

e.          not disclose or disseminate any Confidential Information received by
it to third parties not authorized hereunder without the prior written consent
of the Disclosing Party.

 

(4)        Return of Confidential Information. Upon the request of the
Disclosing Party, the Recipient Party shall collect and surrender (or confirm
the destruction or non-recoverable data erasure of) all Confidential Information
and all memoranda, notes, records, drawings, manuals, records, and other
documents or materials (and all copies of same, including “copies” that have
been converted to computerized media in the form of image, data or word
processing files either manually or by image capture) based on or including any
Confidential Information, and such destruction shall be certified in writing to
the Disclosing Party by an authorized officer of the Recipient Party supervising
such destruction; provided, however, that RERC may retain such limited media and
materials containing Confidential Information of the Company for customary
archival and audit purposes (including with respect to regulatory compliance).

 

(5)        Exceptions. Notwithstanding anything herein to the contrary, no
obligation or liability shall accrue hereunder with respect to any Confidential
Information that:

a.          was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no act of the Recipient Party;

b.          was lawfully received by the Recipient Party from a third party free
of any obligation of confidentiality to such third party;

c.          was already in the lawful possession of the Recipient Party prior to
receipt thereof from the Disclosing Party;

d.          is required to be disclosed in a judicial or administrative
proceeding, or as otherwise required to be disclosed by law; provided, however,
the Recipient

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Party shall give as much advance notice (unless prohibited by law) of the
possibility of such disclosure as practicable so the Disclosing Party may
attempt to stop such disclosure or obtain a protective order concerning such
disclosure with Recipient Party’s reasonable assistance, at Disclosing Party’s
expense;

e.          was independently developed by the Recipient Party without using or
referring to the Disclosing Party’s Confidential Information; or

f.           is disclosed by the Recipient Party in accordance with prior
written approval of the Disclosing Party.

 

(6)        No Rights in Confidential Information. This Agreement does not confer
any right, license, interest or title in, to or under the Confidential
Information to the Recipient Party and no license is hereby granted to the
Recipient Party, by estoppel or otherwise, under any patent, trademark,
copyright, trade secret or other proprietary rights of the Disclosing Party.
Title to the Confidential Information shall remain solely in the Disclosing
Party.

 

8.         Personnel with Primary Responsibility; Successor

 

The Independent Fiduciary agrees that, without limiting its responsibilities
under this Agreement or under ERISA, primary responsibility for the performance
of the services contemplated under this Agreement shall be assigned to Kenneth
P. Riggs, Jr., and that the Independent Fiduciary will use its best efforts to
assure that Kenneth P. Riggs, Jr. continues to act in such capacity during the
term of this Agreement. In the event that Kenneth P. Riggs, Jr. does not, for
any reason, continue to serve in such capacity, the Independent Fiduciary agrees
that it will assign primary responsibility for the duties contemplated under
this Agreement to a senior employee of the Independent Fiduciary of similar
experience and ability (the “Successor”). Any Successor shall be subject to the
written approval or rejection by the Company (which approval or rejection shall
be made by the Company in its sole discretion) within 45 days of the Company’s
receipt of written notice from the Independent Fiduciary of the Successor. Any
such Successor will be deemed approved by the Company if the Company fails to
reject the Successor within such 45 day period.

 

9.         Effective Date/Termination Notice

 

A.        The term of the Agreement shall become effective on March 1, 2015.

 

B.        The Independent Fiduciary’s appointment shall commence on the date
this Agreement becomes effective for a term extending through February 28, 2018,
and shall be renewable by the Company, from time to time, and without limitation
on the number of renewals, for additional three (3) year terms. The Company
shall delegate to a special subcommittee of the Company’s Investment Committee
(the “Subcommittee”) the sole power to renew any such appointment and the
Subcommittee shall not renew the appointment if forty percent (40%) of the
Subcommittee members disapprove of such renewal. Upon expiration of the
Independent Fiduciary’s appointment without renewal this Agreement shall
terminate.

 

C.         The Independent Fiduciary may terminate this Agreement at any time
but must give at least 180 days prior written notice to the Company. The Company
must terminate this Agreement and the Independent Fiduciary’s appointment prior
to the expiration of the term of its appointment if a majority of the
Subcommittee members determines that: (1) the

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Independent Fiduciary has breached any representation set forth in paragraph 5
above; (2) that the Independent Fiduciary has failed to carry out its
responsibilities under this Agreement in an effective manner, or is unable to do
so; or (3) that a merger or restructuring of the Independent Fiduciary with or
into another entity may cause a conflict of interest that shall impair the
Independent Fiduciary’s ability to carry out its responsibilities under this
Agreement in an effective manner. In addition, this Agreement shall be
terminable, at the Company’s sole option, if (i) the Independent Fiduciary ever
ceases to be a legal entity, whether through merger, acquisition or otherwise,
or (ii) the Independent Fiduciary shall ever be owned directly by an ‘Affiliate’
(as such term is defined in PTE 96-76) of TIAA. In the event that the
Independent Fiduciary’s term shall terminate as described in this paragraph 9C.,
the Independent Fiduciary shall be compensated only for services performed by it
prior to the date of such termination.

 

D.        Unless otherwise expressly provided herein, any notice, demand or
request under this Agreement shall be deemed to have been properly given and
served by depositing the same in First Class U.S. Mail, addressed as provided
herein, postpaid and registered or certified with return receipt requested. Any
such notice, demand or request shall be effective upon being deposited in such
certified First Class U.S. Mail. However, the time period in which a response or
action to any such notice, demand or request must be given or taken shall
commence to run from the date of receipt on the return receipt of the notice,
demand or request by the addressee thereof. Rejection or other refusal to accept
or the inability to deliver because of changed address of which no notice was
given shall be deemed to be receipt of the notice, demand or request.

 

E.         Notice to the Company shall be addressed to Ms. Margaret Brandwein,
Managing Director, Teachers Insurance and Annuity Association of America, 730
Third Avenue, New York, New York 10017-3206, with copies to Mr. Keith F.
Atkinson, Senior Director and Associate General Counsel, and Mr. F. Scott
Thomas, Director and Associate General Counsel, Teachers Insurance and Annuity
Association of America, 8500 Andrew Carnegie Blvd., Mail Stop C2-04, Charlotte,
North Carolina 28262 (or such other person or persons as the Company may
designate). Notice to the Independent Fiduciary shall be addressed to Mr.
Kenneth P. Riggs, Jr., President and CEO, Real Estate Research Corporation, 6600
Westown Parkway, Suite 260, West Des Moines, IA 50266 (or such other person or
persons as the Independent Fiduciary may designate).

 

10.       Indemnification and Insurance

 

A.        Subject to the limitations below in clause C of this paragraph 10, the
Independent Fiduciary shall be indemnified and saved harmless by the Account
from and against any and all claims of liability arising in connection with the
exercise of its duties and responsibilities to the Account by reason of any act
or omission, including all expenses reasonably incurred in the defense of such
act or omission, unless (1) it shall be established by final judgment of a court
of competent jurisdiction that such act or omission involved a violation of the
duties imposed by Part 4 of Title I of ERISA on the part of the Independent
Fiduciary, or (2) in the event of a settlement or other disposition of such
claim involving the Account, it is determined by written opinion of independent
counsel acceptable to both Parties, that such act or omission involved a
violation of the duties imposed by Part 4 of Title I of ERISA on the part of the
Independent Fiduciary.

 

B.        Subject to the limitations below in clause C of this paragraph 10, the
Account shall pay expenses (including reasonable attorneys’ fees and
disbursements), judgments, fines and

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amounts paid in settlement incurred by the Independent Fiduciary in connection
with any of the proceedings described above, in advance of the final disposition
of such proceedings, provided that (1) the Independent Fiduciary shall repay
such advances to the Account, plus reasonable interest, if it is established by
a final judgment of a court of competent jurisdiction, or by written opinion of
independent counsel under the circumstances described above in clause A of this
paragraph 10, that the Independent Fiduciary violated its duties under Part 4 of
Title I of ERISA, and (2) the Independent Fiduciary shall, in the discretion and
upon the request of the Company, provide a bond or make other appropriate
arrangements for repayment of advances. Notwithstanding the foregoing, no such
advances shall be made in connection with any claim against the Independent
Fiduciary that is made by the Account or the Company, provided that upon the
final disposition of such claim, the expenses (including reasonable attorneys’
fees and disbursements), judgments, fines and amounts paid in settlement
incurred by the Independent Fiduciary shall be reimbursed by the Account to the
extent provided above.

 

C.        The indemnification provided under clauses A and B of this paragraph
10 shall apply only to claims and expenses not actually covered by insurance.
The Independent Fiduciary agrees to maintain professional liability coverage
that includes coverage for its responsibilities under this Agreement, with
limits of at least $5 million for errors and omissions, $2 million for general
business liability, and a $1 million fidelity bond, throughout the term of this
Agreement.

 

11.       Consent to and Acknowledgment of Merger

 

Notwithstanding anything to the contrary contained herein (i) the Company
acknowledges that (x) pursuant to that certain Agreement and Plan of Merger,
dated as of December 24, 2014 (the “Merger Agreement”), among Situs Group LLC,
the direct parent owning 100% of RERC (“Situs”), Situs Group Holdings
Corporation (“Purchaser”) and the other parties thereto, Purchaser, an affiliate
of Stone Point Capital LLC (“Stone Point Capital”), has agreed to acquire Situs
and its subsidiaries (including RERC) (the “Sale”) and (y) for regulatory
purposes, the Sale would likely be considered an “assignment” of this Agreement,
requiring the Company’s consent to allow RERC to continue to provide Independent
Fiduciary services to the Company after Stone Point Capital acquires Situs and
(ii) accordingly, the Company hereby consents, subject to RERC’s covenant below,
to the assignment of this Agreement in connection with the Sale, waives any
breach of, or default under, this Agreement as a result of such assignment and
acknowledges and agrees that this Agreement will continue in full force and
effect following the consummation of the Sale. The parties acknowledge that the
services provided by RERC pursuant to this Agreement shall not change as a
result of the Sale. In addition, RERC covenants and agrees that it shall remain
a separate and independent legal entity, whether from Stone Point Capital or any
other direct or indirect owner, at all times during the term of this Agreement
and any modifications, amendments, extensions or renewals thereof. RERC
acknowledges that Company’s continuing consent to the assignment of this
Agreement is conditioned on this covenant.

 

12.       Entire Agreement

 

This Agreement contains the entire agreement between the Parties with respect to
the subject matter hereof and supersedes any and all prior written, oral or
other understandings with respect to the subject matter hereof. However, where
the text of this Agreement contains express reference to PTE 96-76, or specific
paragraphs of PTE 96-76 and the proposed PTE, 61 Fed. Reg. 15128 (1996), and the
representations made therein, it is the intention of the Parties that

10

PTE 96-76 and the proposed exemption be incorporated in this Agreement for the
purpose of construing the meaning of such express references. This Agreement may
not be changed orally or by conduct but only by an agreement in writing signed
by both Parties.

 

13.       No Waiver

 

Failure to insist upon strict compliance with any of the terms, covenants, or
conditions of this Agreement shall not be deemed a waiver of such term,
covenant, or condition, nor shall any waiver or relinquishment of any right or
power hereunder at any one or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.

 

14.       Severability

 

The invalidity or unenforceability any provision of this Agreement shall in no
way affect the validity or enforceability of any other provision.

 

15.       Choice of Law

 

This Agreement and performance hereunder is subject to ERISA. However, to the
extent that this Agreement and performance hereunder is not governed by ERISA or
other applicable federal law, the laws of the State of New York shall apply
without giving effect to any provisions relating to conflict of laws that would
require the laws of another jurisdiction to apply. The choice of law embodied in
this paragraph 15 shall be effective irrespective of the jurisdiction in which
any suit, action or proceeding may be instituted.

 

Please signify your acceptance by signing below and returning a copy of this
Agreement to the Company.

 

Sincerely,

 

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

 

By:  /s/ Helen Armbrust   Name: Helen Armbrust   Title: Senior Managing Director

 

Accepted:

 

RERC, LLC

 

By:  /s/ Kenneth P. Riggs, Jr.   Name: Kenneth P. Riggs, Jr.   Title: President

11

SCHEDULE 1

 

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

INDEPENDENT FIDUCIARY COMPENSATION

SCHEDULE FOR THE TIAA REAL ESTATE ACCOUNT

 

The fee payable to RERC during the term of this Agreement shall be a fixed
annual fee of Seven Hundred and Fifty Thousand Dollars ($750,000) for each 12
month period between March 1, 2015 and February 28, 2018, plus its reasonable
out-of-pocket expenses. One quarter of the fee for each such 12 month period set
forth above shall be paid in arrears on the last business day of each calendar
quarter, with the first pro rated payment due as of March 31, 2015 and the final
pro rated payment due on February 28, 2018.

 

In addition, the fee will be adjusted to reflect changes in the number of
individual properties owned by the Account as compared to the number of
individual properties owned as of February 28, 2015 (the “Baseline Level”),
which Baseline Level shall be mutually agreed to between the Parties prior to
such date. Thereafter the Baseline Level shall be reset annually on February 1
of each succeeding year during the term of this Agreement to a level mutually
agreed to between the Parties prior to such date.

 

For purposes hereof, an “individual property” shall mean a property that is
appraised on a quarterly basis, regardless of whether the Account reports, for
financial statement purposes, such property as an individual investment. For
every increase (decrease) of twenty-five (25) properties from the Baseline
Level, the fee will increase (decrease) by twenty-five thousand dollars
($25,000) on an annualized basis as follows. The fee increase (decrease), if
any, will be assessed as of the first day of each calendar quarter and will be
adjusted up (down) by Six Thousand Two Hundred and Fifty Dollars ($6,250) for
every increase (decrease) of twenty-five (25) properties from the Baseline Level
through the term of this Agreement. As an example only, if the Baseline Level
was 150 individual properties and as of July 1, 2015, the Account owned 176
individual properties, the fee would increase by $6,250 for the calendar quarter
ending September 30, 2015. If then, as of October 1, 2015, the Account owned 174
individual properties, the fee would decrease by $6,250 for the calendar quarter
ending December 31, 2015 and overall be the same as the fee for the quarter
ended June 30, 2015.

 

Notwithstanding the foregoing, no further payment during any fiscal year shall
be paid to RERC by the Company, the Account or any affiliates thereof if such
payment, when aggregated with all other payments from the Company, the Account
or its affiliates to RERC and its affiliates during such fiscal year, would
exceed five percent (5%) of RERC’s annual gross income from all sources during
RERC’s preceding fiscal year (the “5% Limit”). In addition to the covenants set
forth in Section 5.B. of the Agreement, the Parties hereto agree to work in good
faith and cooperate reasonably in advance of any payment under this Agreement to
ascertain whether the 5% Limit may be reached, including but not limited to RERC
making its independent auditors available for consultation with the Company,
upon reasonable request and with reasonable notice.

 

Direct out-of-pocket documented expenses shall be reimbursed as incurred and
shall be limited to reasonable travel-related expenses, including
transportation, hotels, and meals incurred in the performance of RERC’s duties.
RERC shall, however, bear the cost of all operating and administrative expenses
relating to the performance of its obligations and duties under this Agreement.

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EXHIBIT A

 

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

 

VALUATION PROCEDURES AND RULES

FOR REAL ESTATE ACCOUNT

 

This outline summarizes the basic elements of the valuation procedures and rules
for the Account.

 

Basic Principles

 

1.        The valuation of equity real estate holdings is not an exact science;
it requires appraisals which are independent estimates of market value.

 

A. Sales are the best measure of the value of equity real estate holdings, but
since they don’t occur frequently, appraisals are generally believed to be the
best estimate of value at a given point in time.

 

B. External appraisals are expensive, and a balance is required between the
accuracy of the estimate of value and the cost to the Account of additional
appraisals.

 

2.        The Account’s valuation procedures and rules are under the direct
supervision of an Independent Fiduciary and operate within guidelines and limits
established by the Independent Fiduciary.

 

Valuation Procedures for the Account

 

1.        Independent Fiduciary. The valuation of Account properties is
conducted under the supervision of the Independent Fiduciary.

 

A. The valuation procedures and rules will be approved by the Independent
Fiduciary. They cannot be changed without the consent of the Independent
Fiduciary.

 

B. The rules will limit the extent to which a property’s value can change
without the prior approval of the Independent Fiduciary.

 

C. The Independent Fiduciary may require a new independent appraisal of any
property at any time.

 

2.        Initial Valuation. The initial value of each property will be based on
an independent appraisal at the time of closing of the purchase (or the contract
price relating to the purchase, if there is no independent appraisal at the time
of closing), which may result in a potential unrealized gain or loss reflecting
the difference between the investment’s fair value and its cost basis (which is
inclusive of all expenses relating to purchase, such as acquisition fees, legal
fees and expenses, and other closing costs).

 

3.        Scheduled Valuations.

 

A. Independent Appraisals. Each property will be valued by an independent
appraiser at least once per calendar quarter.

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(i) The appraisal cycle will be set up so that properties will be independently
appraised in as spread out a pattern as practical over the course of a calendar
quarter, which is intended to result in appraisal adjustments, if any, that
happen regularly throughout each quarter and not on one specific day in each
quarter. This will be done by assigning to each property, at the time it is
purchased, the month in which its independent appraisal will occur each year.

 

(ii) The independent appraisers selected by TIAA must be approved by the
Independent Fiduciary.

 

(iii) The following would be among the factors generally considered in the
independent appraisals:

 

Ÿdescription and condition of the property

Ÿregional and local market conditions

Ÿcurrent and projected occupancy levels

Ÿhighest and best use of the property

Ÿcost approach sales comparison approach

Ÿincome approach including discounted cash flow analysis

 

B. Quarterly Reviews. TIAA’s staff will review each quarterly independent
appraisal, in conjunction with the Independent Fiduciary, prior to the value
reflected in that appraisal being recorded in the Account.

 

(i) Appraisal assumptions (e.g. discount rates and rates of inflation) will be
reviewed and revised as necessary.

 

(ii) Occupancy levels, cash flow, etc. will be reviewed as well as regional and
local market conditions.

 

C. Accruals. The Accumulation and Liquidity Unit Values of the Account may
change by a daily accrual of projected income and expenses during a given month.
The Annuity Unit values of the Account may change on the last calendar day of
each month by the accrual of projected income and expenses for that month.

 

4.        Special Adjustments. The value of a given property could be adjusted
at any time to reflect any immediate or significant changes in value.

 

5.        Limits and Supervision.

 

A. The Independent Fiduciary receives quarterly valuation reports from TIAA
which detail Account activity. The format of these reports will be developed
with the Independent Fiduciary. The Fiduciary will, therefore, be familiar with
Account properties.

 

B. Daily accruals of income and expenses, as well as incremental adjustments in
property value (from quarterly updates), will be reported to the Independent
Fiduciary as they are included in the Unit value calculation.

 

C. Material changes in value (as described in D. below) will be approved by the
Independent Fiduciary prior to inclusion in a Unit Value calculation

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D. TIAA cannot, without the prior approval of the Independent Fiduciary, change
the values of one or more properties if such changes would exceed the following
limits:

 

(i) The adjustment would result in a 6 percent increase or decrease in the value
of a given property since the last external appraisal of that property;

 

(ii) The adjustments would result in a greater than 2 percent change in the
value of the Account since the prior monthly valuation date; or

 

(iii) The adjustments would result in a greater than 4 percent change in the
value of the Account within any calendar quarter.

15