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[LOGO] TEACHERS INSURANCE AND ANNUITY ASSOCIATION     JOAN H. FALLON
       COLLEGE RETIREMENT EQUITIES FUND               MANAGING DIRECTOR
       730 Third Avenue                               Telephone:  (212) 916-4412
       New York, NY  10017                            Fax:  (212) 916-4527


UPS AIR


                                                 February 16, 2000


The Townsend Group
1500 West Third Street
Suite 410
Cleveland, Ohio   44113

Attention: MR. TERRANCE R. AHERN


                             Re:     Teachers Insurance and Annuity
                                     Association of America
                                     Real Estate Separate Account;
                                     ERISA INDEPENDENT FIDUCIARY

Dear Mr. Ahern:

     This letter sets forth the terms and conditions under which Teachers
Insurance and Annuity Association of America (the "Company") offers to
appoint The Townsend Group ("Townsend") to serve as the Independent
Fiduciary, as defined below, under the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") for its real estate pooled separate account
(the "Account"). The Account is designed primarily for investment by
participants in retirement plans qualified under Section 401(a) and Section
403(a) of the Internal Revenue Code of 1986, as amended, ("Code"), Code
Section 403(b) plans, and certain individual retirement annuities under
Section 408 of the Code.

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
     Section 406 of ERISA and Section 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



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     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.

          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, pgs.
     15134-15136 (1996).


2.   COMPENSATION

          Compensation for services rendered by Townsend 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 Townsend
     specifically set forth in PTE 96-76 and paragraph 4 hereof.


4.   DUTIES AND RESPONSIBILITIES OF TOWNSEND

     A.   Townsend's duties and responsibilities under this Agreement shall be
          those set forth in PTE 96-76 and as described below:

          (1)  Townsend 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 Valuation Procedures and Rules which
               have been adopted for the Account by the Company and which shall
               be subject to the approval of


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               Townsend. (A copy of the current draft of the valuation
               procedures and rules for the Account is attached as Exhibit A.)

          (2)  Townsend 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 Townsend information provided to the Company with respect to
               the background, education and experience of each such independent
               appraiser.

          (3)  Townsend 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.
               Townsend will perform such reviews of Account properties as it
               may determine to be necessary or desirable in establishing the
               necessity of such additional appraisals. Townsend 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, Townsend 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 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)  Townsend 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, Townsend 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, Townsend 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 in the Account, as
               defined in PTE 96-76, Section IV(g), 61 Fed. Reg. 54232, and the
               manner in which any reduction of the Company's participation in
               excess of such Trigger Point


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               is to be effected as contemplated under the PTE. If Townsend
               believes that asset sales are desirable in order to reduce the
               Company's ownership of Units in the Account, Townsend 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,
               Townsend 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 defined in PTE 96-76 (SEE
               Section III(c), 61 Fed. Reg. 54229 and IV(h), 61 fed. Reg. 54232,
               respectively).

          (7)  Townsend 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 Townsend by the Company, Townsend
               will review said transaction or matter in order to determine
               whether it is fair to the Account and in the Account's best
               interests.

     B.   In the event that the Company or the DOL or any other governmental
          agency requires or requests Townsend to perform additional functions
          reasonably related 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 Townsend under this
          Agreement, provided that:

          (1)  The Company requests Townsend to perform such activity in
               writing; and

          (2)  Townsend and the Company determine the nature and amount of any
               additional compensation that may be appropriate with respect to
               such additional duties. If Townsend and the Company are not able
               to agree upon the nature and amount of any additional
               compensation, Townsend and the Company hereby agree to submit any
               disputed issues to arbitration and to be bound by the results
               thereof; provided, however, that Townsend 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.


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     C.   Townsend will meet with the Company on a quarterly basis to review the
          activities of the Account and the actions that Townsend has taken
          under this Agreement. Townsend 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
          Townsend has undertaken since the submission of the last such report
          or the commencement of its terms, except those actions and activities
          that Townsend in its judgment deems to be not material. All or any
          part of any such report may, after consultation with Townsend, be
          provided by the Company to any Account participant or to the DOL or
          any other governmental agency. Townsend 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 Townsend, may provide the results of any such review
          to the DOL or to any other governmental agency.

     D.   Townsend 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 or such other place
          as may be reasonably designated by Townsend, including Townsend's
          offices.

5.   REPRESENTATIONS

     Townsend represents and agrees that:

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

     B.   The gross income which is received by Townsend (or any partnership or
          corporation of which Townsend 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 prohibited transaction
          exemption granted by the DOL. Townsend will provide, on or before
          February 15, of each year, a written report to the Company of the
          gross income


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          it received from the Company in the prior fiscal year as a percentage
          of the gross income received during the preceding fiscal year.

     C.   Townsend 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 Townsend
          serves as the Independent Fiduciary.

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


6.   INDEPENDENT STATUS

          As the Independent Fiduciary, Townsend shall not be an agent of the
     Company. In keeping with this status, Townsend 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 defined in PTE 96-76, Section III(c),
     61 Fed. Reg. 54229 and IV(h), 61 Fed. Reg. 54232, respectively, and to the
     Company.


7.   FIDUCIARY STANDARDS/CONFIDENTIALITY

          Notwithstanding any other provision of this Agreement, it is
     understood that Townsend 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 Townsend 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.

          It is understood that Townsend will not unnecessarily engage in any
     activity in connection with this appointment that is adverse to the
     interest of the Company. Townsend may provide similar independent fiduciary
     services with respect to other benefit plans subject to ERISA; provided
     that Townsend does not use or disclose in such relationships confidential
     information obtained by it in the course of providing services under this
     Agreement.

          Upon termination of this Agreement, Townsend 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 Townsend if it deems such


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     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 Townsend 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 Townsend
     deliver all such retained material to the person who succeeds to its
     position as Independent Fiduciary. However, Townsend 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 Townsend's
     successor as Independent Fiduciary, upon request. Townsend will not at any
     time during the term of this Agreement or thereafter disclose any of the
     Company's trade secrets, confidential business methods, or any other
     confidential information which it may have acquired during its service as
     Independent fiduciary under this Agreement.


8.   PERSONNEL

          Townsend 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 Mr.
     Terrence R. Ahern and that it will use its best efforts to assure that Mr.
     Terrence R. Ahern continues to act in such capacity during the term of this
     Agreement. In the event that Mr. Terrence R. Ahern does not, for any
     reason, continue to serve in such capacity, Townsend agrees that it will
     assign primary responsibility for the duties contemplated under this
     Agreement to a senior employee of similar experience and ability.


9.   EFFECTIVE DATE/TERMINATION/NOTICE

     A.   This Agreement shall become effective on March 1, 2000, or if later,
          the date of receipt by the Company of a copy of this Agreement that
          has been executed by Townsend and by an authorized officer of the
          Company.

     B.   Townsend's appointment shall commence on the date this Agreement
          becomes effective for a three (3) year term, 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 Townsend's appointment without renewal
          this Agreement shall terminate. Townsend may terminate this Agreement
          at any time but must give at


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          least 180 days prior written notice to the Company. The Company must
          terminate this Agreement and Townsend's appointment prior to the
          expiration of the term of its appointment if a majority of the Special
          Subcommittee members determines that: (1) Townsend has breached any
          representation set forth in paragraph 5; (2) that Townsend 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 Townsend with or into another entity may cause a conflict of
          interest that shall impair Townsend's ability to carry out its
          responsibilities under this Agreement in an effective manner. In the
          event that Townsend's term shall terminate as described in this
          paragraph 9B., Townsend shall be compensated only for services
          performed by it prior to the date of such termination.

     C.   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 the United States 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 the United States 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. Notice to the Company shall be addressed to Ms.
          Joan H. Fallon, Managing Director, Teachers Insurance and Annuity
          Association of America, 730 Third Avenue, New York, New York
          10017-3206, with a copy to Ms. Monica Dodd Calhoun, Vice President and
          Chief Counsel, Teachers Insurance and Annuity Association of America,
          730 Third Avenue, New York, New York 10017-3206, (or such other person
          or persons as the Company may designate). Notice to Townsend shall be
          addressed to Mr. Terrance R. Ahern, Principal, The Townsend Group,
          1500 West Third Street, Suite 410, Cleveland, Ohio 44113.


10.  INDEMNIFICATION AND INSURANCE

     A.   Subject to the limitations in clause C of this paragraph 10, Townsend
          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 judgement 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 Townsend, or (2) in the
          event of a settlement or other


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          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 Townsend.

     B.   Subject to the limitation in clause C of this paragraph 10, the
          Account shall pay expenses (including reasonable attorneys' fees and
          disbursements), judgments, fines and amounts paid in settlement
          incurred by Townsend in connection with any of the proceedings
          described above, in advance of the final disposition of such
          proceedings, provided that (1) Townsend 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 in section A
          above, that Townsend violated its duties under Part 4 of Title I of
          ERISA, and (2) Townsend 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 Townsend
          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 Townsend 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. Townsend 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.  ENTIRE AGREEMENT

          This letter contains the entire agreement between the parties.
     However, where the text of this Agreement contains express reference to PTE
     96-76, or specific paragraphs of 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 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 agreement in writing signed by both parties.


12.  NO WAIVER

          Failure to insist upon strict compliance with any of the terms,
     covenants, or


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     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.


13.  SEVERABILITY

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

14.  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. The choice of law embodied in this paragraph 14 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 letter to the Company.

                                 Sincerely,


                                 TEACHERS INSURANCE AND ANNUITY
                                    ASSOCIATION OF AMERICA


                                  By:________________________
                                          Joan H. Fallon


Accepted:

THE TOWNSEND GROUP


By:______________________            Date:   _______________
     Terrance R. Ahern





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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.     Independent 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.


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       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 the price
       at which it is acquired (including 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 year.

              (i)    The appraisal cycle will be set up so that properties will
                     be independently appraised in as even a pattern as
                     practical over the course of a calendar year. 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 annual appraisal:

                     -      description and condition of the property

                     -      regional and local market conditions

                     -      current and projected occupancy levels

                     -      highest and best use of the property

                     -      cost approach

                     -      sales comparison approach


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                     -      income approach including discounted cash flow
                            analysis

       B.     QUARTERLY UPDATES. TIAA's staff will update the independent
              appraisals on a quarterly basis.

                     (i)    Appraisal assumption (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, in addition to their involvement, 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.

       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
                    independent 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


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

       In addition, the Independent Fiduciary will approve any adjustments made
within the first three months after the receipt of the annual appraisal
performed by an independent qualified appraiser.
























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