UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)

SANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008

OR

£TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from   to

Commission file number: 33-92990; 333-149862

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 ANDANNUITY ASSOCIATION OF AMERICA730 THIRD AVENUENEW 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£NOS

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£NOS

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.

YESSNO£

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:SNot Applicable

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 and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

|                         |  |                           
|------------------------ |  | --------------------------
|Large accelerated filer£ |  | Accelerated filer£        
|Non-accelerated filerS   |  | Smaller Reporting Company£

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES£NOS

Aggregate market value of voting stock held by non-affiliates: Not ApplicableDocuments Incorporated by Reference: None



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TABLE OF CONTENTS
Item
    
    
    
    PagePart IItem 1.
    
    Business
    
    
    
    3Item 1A.
    
    Risk Factors
    
    
    
    6Item 1B.
    
    Unresolved Staff Comments
    
    
    
    15Item 2.
    
    Properties
    
    
    
    15Item 3.
    
    Legal Proceedings
    
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    
    23Part IIItem 5.
    
    Market for Registrants Common Stock, Related Stockholder Matters, and Issuer Purchases of Equity Securities
    
    
    
    24Item 6.
    
    Selected Financial Data
    
    
    
    25Item 7.
    
    Managements Discussion and Analysis of the Accounts Financial Condition and Results of Operations
    
    
    
    27Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    
    50Item 8.
    
    Financial Statements and Supplementary Data
    
    
    
    52Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    
    86Item 9A.
    
    Controls and Procedures
    
    
    
    86Part IIIItems 10 and 11.
    
    Directors, Executive Officers, and Corporate Governance of the Registrant; Executive Compensation
    
    
    
    87Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    
    89Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    
    89Item 14.
    
    Principal Accountant Fees and Services
    
    
    
    90Part IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    
    91Signatures
    
    
    
    922

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 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 designed as an option for retirement and tax-deferred savings plans for employees of nonprofit institutions. TIAA offers the Account under the following annuity contracts:

    
    
    
    RA and GRAs (Retirement Annuities and Group Retirement Annuities)
    
    
    
    SRAs (Supplemental Retirement Annuities)
    
    
    
    GSRAs (Group Supplemental Retirement Annuities)
    
    
    
    Retirement Choice and Retirement Choice Plus Annuity
    
    
    
    GAs (Group Annuities) and Institutionally-Owned GSRAs
    
    
    
    Classic and Roth IRAs (Individual Retirement Annuities) including SEP IRAs (Simplified Employee Pension Plans)
    
    
    
    Keoghs
    
    
    
    ATRAs (After-Tax Retirement Annuities)Investors should note that state regulatory approval may be pending for certain of these contracts and they may not currently be available in every state.
The Account is regulated by the State of New York Insurance Department (NYID) and the insurance departments of some other jurisdictions in which the annuity contracts are offered. Although TIAA owns the assets of the Real Estate Account, and the Accounts obligations are obligations of TIAA, the
  Accounts income, investment gains, and investment losses are credited to or charged against the assets of the Account without regard to TIAAs other income, gains, or losses. Under New York insurance law, the Account cannot be charged with liabilities incurred by any other TIAA business activities or any other
  TIAA separate account.
Investment Objective. The Real Estate Account seeks favorable long-term returns primarily through rental income and appreciation of real estate investments owned by the Account. The Account will also invest in publicly-traded securities and short-term higher quality liquid investments that are easily
  converted to cash to enable the Account to meet participant redemption requests, purchase or improve properties, or cover expense needs.
Investment Strategy. The Account intends to have between 75% and 85% of its 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. The Accounts principal strategy is to purchase
  direct ownership interests in income-producing real estate, such as office, industrial, retail, and multi-family residential properties. The Account from time to time will also make foreign investments, which, together with foreign real estate related and foreign liquid investments, are expected to comprise no more
  than 25% of the Accounts total assets.
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The Account can also invest in other real estate or real estate-related investments through joint ventures, real estate partnerships or real estate equity securities. To a limited extent, the Account can also invest in conventional mortgage loans, participating mortgage loans, common or preferred stock of
  companies whose operations involve real estate (i.e., that primarily own or manage real estate), and collateralized mortgage obligations, including commercial mortgage-backed securities and other similar instruments.
The Account will invest the remaining portion of its assets in liquid investments; namely, securities issued by U.S. government agencies or U.S. government sponsored entities and corporate debt securities, money market instruments, and, at times, stock of companies that do not primarily own or manage real
  estate. The amount the Account has invested in real estate and real estate-related investments at a given time will vary depending on its liquidity position (including the Accounts obligations to meet participant redemption requests) as well as market conditions and real estate prospects, among other factors.
There will be periods of time (such as in the fourth quarter of 2008 and in early 2009) during which the Accounts liquid investments will comprise less than 15% of its total assets, especially during and immediately following periods of significant net participant outflows. As discussed in more detail under
  Liquidity Guarantee below, and pursuant to its existing liquidity guarantee obligation, TIAA has agreed to purchase accumulation units issued by the Account in the event the Account has insufficient cash and liquid investments to ensure the ability, on its own, to fund participant transfer, redemption or
  withdrawal requests. This liquidity guarantee was first exercised in December 2008.
In some circumstances, the Account can increase the portion of its assets invested in debt securities or money market instruments above 25%. This could happen, for example, if the Account receives a large inflow of money in a short period of time, there is a lack of attractive real estate investments available
  on the market, or the Account anticipates a need to have more cash available.
The amount the Account invests in real estate and real estate-related investments at a given time will vary depending on its liquidity position (including the Accounts obligation to meet participant redemption requests) as well as market conditions and real estate prospects, among other factors.
More detailed information concerning the composition of the Accounts properties, including the Accounts foreign investments and information regarding significant tenants in the Accounts properties, is contained below under the heading Item 2. Properties.
Net Assets and Portfolio Investments. As of December 31, 2008, the Accounts net assets totaled approximately $11.5 billion. At December 31, 2008, the Account held a total of 108 real estate property investments (including its interests in 12 real estate-related joint ventures). As of that date, the
  Account also held investments in a mortgage loan receivable, representing 0.54% of Total Investments, real estate limited partnerships, representing 2.15% of Total Investments, commercial paper representing 1.84% of Total Investments, and government agency notes, representing 1.99% of Total Investments.
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 and in the Accounts prospectus (as supplemented from time to time).
Personnel and Management. The Real Estate Account does not directly employ any persons nor does the Account have its own management or board of directors. Rather, TIAA employees, under the direction and control of TIAAs Board of Trustees and Investment Committee thereof, manage the
  investment of the Accounts assets pursuant to investment management procedures adopted by TIAA for the Account. TIAA and TIAA-CREF Individual & Institutional Services, LLC (Services), a wholly-owned subsidiary of TIAA, provide all portfolio accounting, custodial, distribution, administrative and
  related services for the Account at cost.
Appraisals and Valuations. The Account will rely on TIAAs own analysis, normally along with an independent external appraisal, in connection with the purchase of a property by the Account. The Account will normally receive an independent external appraisal performed by a third party appraisal firm
  at or before the time it buys a real estate asset, and the Account also generally obtains an independent appraisal when it makes mortgage loans.
Subsequently, each of the Accounts real properties are appraised, and mortgage loans are valued, at least once every calendar quarter. Effective with the second quarter of 2009, each of the Accounts real estate
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properties are appraised each quarter by an independent external state-certified (or its foreign equivalent) appraiser (which we refer to in this Form 10-K 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
  quarterly appraisal of each real estate property, 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. 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. 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 (any accumulation units that are purchased by TIAA are generally referred to as liquidity units). 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.
Importantly, however, 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. The Account pays TIAA for the liquidity guarantee through a daily deduction from the Accounts net assets. As a result of significant net
  participant transfers throughout 2008 (in particular, in the second half of 2008), and pursuant to this liquidity guarantee obligation, the TIAA general account purchased an aggregate of $155.6 million of accumulation units issued by the Account on December 24, 2008. Subsequent to December 24, 2008, and through
  March 18, 2009, the TIAA general account has purchased an additional $787.0 million in the aggregate of accumulation units in a number of separate transactions. As of the date of filing this Form 10-K, no accumulation units have been redeemed by TIAA. As of the date of this Form 10-K, management cannot
  predict the extent to which future accumulation unit purchases will be required under this liquidity guarantee, nor can management predict when such liquidity units will be redeemed in part, or in full. Please refer to the Liquidity and Capital Resources section in Managements Discussion and Analysis of the
  Accounts Financial Condition and Results of Operations for full disclosure surrounding the liquidity guarantee.
Independent Fiduciary. Because TIAAs ability to purchase and sell liquidity units raises certain technical issues under 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. Real Estate Research Corporation, a real
  estate consulting firm whose principal offices are located in Chicago, Illinois, was appointed as independent fiduciary effective March 1, 2006 (which appointment was renewed in December 2008) and currently serves as the Accounts independent fiduciary. The independent fiduciarys responsibilities include:

    
    
    
    reviewing and approving the Accounts investment guidelines and monitoring whether the Accounts investments comply with those guidelines;
    
    
    
    reviewing and approving valuation procedures for the Accounts properties;
    
    
    
    approving adjustments to any property valuations that change the value of the property or the Account as a whole above or below certain prescribed levels, or that are made within three months of the annual independent appraisal;
    
    
    
    reviewing and approving how the Account values accumulation and annuity units;
    
    
    
    approving the appointment of all independent appraisers;
    
    
    
    reviewing the purchase and sale of units by TIAA to ensure that the Account uses the correct unit values; 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.5

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 addition, 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 a program, if any, 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.As of the date of this Form 10-K, 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. As of December 31, 2008, TIAA owned 1.4% of the outstanding accumulation units of the Account and as of March 18, 2009, TIAA owned 8.7% of the outstanding accumulation units of the Account.
Available Information. The Accounts annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, 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-cref.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 an investment in the Account will fluctuate based on the value of the Accounts assets and the income the assets generate.Participants may lose money by investing in the Account. The value of an 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. 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 participants should consider the specific risks
  presented below before investing in the Account. Please refer to the section entitled Statements Regarding Forward-Looking Information, which is contained in the section entitled Managements Discussion and Analysis of 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 annual report, the substantial majority of the Accounts net assets are comprised 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;6


    
    
    
    the availability of financing;
    
    
    
    an oversupply of, or a reduced demand for, certain types of real estate properties;
    
    
    
    business closings, industry or sector slowdowns, employment losses and related factors;
    
    
    
    natural disasters, terrorist attacks and/or other man-made events; and
    
    
    
    decline in population or shifting demographics.The incidence of some or all of these factors could reduce occupancy, rental rates and the market 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: office, industrial, retail and multi-family
      residential properties, the Account may experience periods where it has a 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. 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:
    
    
    
    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 at 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) not 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, our 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. For example, many companies desire space with an open floor plan. We may have difficulty obtaining a new tenant for any vacant space
      in our properties, particularly if the floor plan limits the types of businesses that can use the space without major renovation, which may require us to incur substantial expense in re-planning the space.
    
    
    
    The Account owns and operates retail properties, which, in addition to the risks listed above, are subject to specific risks, including variations in rental revenues due to customary percentage rent clauses which may be in place for retail tenants and the insolvency and/or closing of an anchor tenant.7

Many times, anchor tenants will be big box stores and other large retailers that can be particularly adversely impacted by a global recession 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, the leases may allow other tenants in a retail property to terminate their leases, reduce or withhold rental payments. The insolvency and/or
      closing of an anchor tenant may also cause such tenants to fail to renew their leases at expiration.
    
    
    
    Competition. The Account may face competition for real estate investments from multiple sources, including individuals, corporations, insurance companies or other insurance company separate accounts, 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. We 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, limit our 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, 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.
    
    
    
    Terrorism and Acts of War and Violence.Terrorist attacks may harm our property investments. The Account cannot assure participants that there will not be further terrorist attacks against the United States, U.S. businesses or elsewhere in the world. These attacks or armed conflicts may directly or indirectly
      impact the value of the property we own 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 and worldwide financial markets and 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.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.
    
    
    
    Due to the cyclical nature of real estate, general economic conditions impacting the location of the property, disruption in the credit markets and the availability of financing on favorable terms or at all, and the supply of and demand for available tenant space, among other reasons, 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 might make it difficult to raise cash quickly which could impair the Accounts liquidity position (particularly during any period of sustained significant net participant outflows) and also could
      lead to Account losses.
    
    
    
    The Account may need to provide financing to a purchaser if no cash buyers are available.8


    
    
    
    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.Valuation and Appraisal Risks:Investments in the Accounts assets are stated at fair value which is defined as the most probable price for which a property will sell in a competitive market under all conditions requisite to a fair sale. Determination of fair value, 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 professionals 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. Recent disruptions in the macroeconomy, real estate markets and the credit markets have led to a significant decline in transaction activity in a number of markets and sectors and the lack of
  observable transaction data may have made it more difficult for an appraisal to determine the fair value of the Accounts real estate.
Further, as the Account generally obtains appraisals on a quarterly basis, there may be circumstances in the interim period between the appraisals 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 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 receive more than their pro rata share of the value of the Accounts assets, to the detriment of other non-redeeming participants. 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 receive 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 have purchased more than their pro rata share of the value of the Accounts assets.
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 annual report, the Account intends to hold between 15 and 25 percent of its assets in investments other than real estate, primarily comprised of liquid investments. These liquid assets are intended to be available to purchase real estate properties in accordance with the Accounts investment
  objective and strategy and to meet the Accounts expense needs and participant redemption requests. During 2008 (and in particular, the second half of 2008), the Account experienced significant net participant transfers out of the Account. Due in large part to this activity, the Accounts liquid assets as of
  December 31, 2008 declined to approximately 4.0% of the Accounts total investments and the TIAA general accounts liquidity guarantee was initially executed in December 2008. See Liquidity Guarantee in Item 1 of this Annual Report above.
If the amount of net participant transfers out of the Account were to continue, particularly at a rate similar to 2008, the Account may not have enough available liquid assets to pursue, or consummate, new investment opportunities presented that are otherwise attractive to the Account. This, in turn, could harm
  the Accounts returns. Management cannot predict with precision whether the level of net participant transfers will stabilize in the near term. Additionally, even if net transfers out of the Account ceased for a period of time, there is no guarantee that redemption activity would not increase again, in a significant and
  rapid manner.
Risks of Borrowing:The Account acquires some of its properties subject to existing financing or by borrowing new funds at the time of purchase, and may from time to time place new leverage on, increase the
9

leverage already placed on, or refinance maturing debt on, existing properties the Account owns. The Account may incur indebtedness, in the aggregate, either directly or through its joint venture investments, an amount up to 30% of the Accounts total net assets (measured at the time of incurrence), and the
  Account may borrow up to 70% of the then-current value of a particular property. Among the risks of borrowing money and investing in a property subject to a mortgage are:

    
    
    
    Regardless of the quality of the Accounts property for which financing or refinancing is sought, 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. 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 or failures of significant financial institutions could adversely affect the Accounts access to financing necessary to make profitable real estate investments. The Accounts 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.
    
    
    
    The Account may be unable to make its loan payments, which could result in a default on its loan. The lender then could foreclose on the underlying property and the Account would lose the value of its investment in the foreclosed property.
    
    
    
    If the Account obtains a mortgage loan that involves a balloon payment, there is a risk that the Account may not be able to make the lump sum principal payment due under the loan at the end of the loan term, or otherwise obtain adequate refinancing 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 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.
    
    
    
    If the Account takes out variable-rate loans, the Accounts returns may be volatile when interest rates are volatile. Further, to the extent that the Account takes out fixed-rate loans and interest rates subsequently decline, this may cause the Account to pay interest at above-market rates for a significant period
      of time. Any hedging activities the Account engages in to mitigate this risk may not fully protect the Account from the impact of interest rate volatility.
    
    
    
    The market valuation of mortgage loans payable could have an adverse impact on the Accounts performance.A general disruption in the credit markets, such as the credit markets have been recently experiencing, may aggravate some or all of these risks.
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 multifamily residential 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 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 was not 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
10

businesses may be operated, which may require the Account to expend funds. 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 cleanup 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.
Uninsurable Losses:Certain catastrophic losses (e.g., from earthquakes, wars, terrorist acts, nuclear accidents, floods or environmental or industrial hazards or accidents) may be uninsurable or so expensive to insure against that it is economically disadvantageous to buy insurance for them, and, depending on
  the insurance which the Account has on its properties, may be subject to aggregate caps on proceeds. If a disaster that we have not insured against occurs, if the insurance contains a high deductible, 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. Further, the Account may not have sufficient access to 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.
Risks of Developing Real Estate or Buying Recently Constructed Properties:If the Account chooses to develop a property or buys a recently constructed property, it may face the following risks:

    
    
    
    In developing real estate, there may be delays or unexpected increases in the cost of property development and construction due to strikes, bad weather, material shortages, increases in material and labor costs or other events.
    
    
    
    Because external factors may have changed from when the project was originally conceived (e.g., slower growth in the local economy, higher interest rates, or overbuilding in the area), the property may not operate at the income and expense levels first projected or may not be developed in the way originally
      planned or at all.Risks of Joint Ownership:Investing in joint venture partnerships or other forms of joint property ownership may involve special risks.

    
    
    
    The co-venturer may have interests or goals inconsistent with those of the Account, including during times when a co-venturer may be experiencing financial difficulty.
    
    
    
    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 does not 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 sale of the underlying property.
    
    
    
    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.Risks with Purchase-Leaseback Transactions:To the extent the Account invested in a purchase leaseback transaction, the major risk is that the third party lessee will be unable to make required payments to the Account. If the leaseback interest is subordinate to other interests in the real property, such as a
  first mortgage or other lien, the risk to the Account increases because the lessee may have to pay the senior lienholder to prevent foreclosure before it pays the Account. If the lessee defaults or the leaseback is terminated prematurely, the Account might not recover its investment unless the property is sold or
  leased on favorable terms.
11

RISKS OF MAKING MORTGAGE LOAN 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.
    
    
    
    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.
    
    
    
    Prepayment Risks:The Accounts mortgage loan investments will usually be subject to the risk that the borrower repays a loan early. Also, we may be unable to reinvest the proceeds at as high an interest rate as the original mortgage loan rate.
    
    
    
    Interest Limitations:The interest rate we charge on mortgage loans may inadvertently violate state usury laws that limit rates, if, for example, state law changes during the loan term. If this happens, we could incur penalties or may be unable to enforce payment of the loan.
    
    
    
    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 INVESTING IN REAL ESTATE INVESTMENT TRUST (REIT) SECURITIES
Investments in REIT securities are subject to many of the same general risks associated with direct real property ownership. In particular, equity REITs may be affected by changes in the value of the underlying 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, 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.
In addition, REITs are tax regulated entities established to invest in real estate-related assets. REITs do not pay federal income taxes if they distribute most of their earnings to their shareholders and meet other tax requirements. As a result, REITs are subject to tax risk in continuing to qualify as a REIT.
12

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 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 the Accounts 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.
Importantly, the 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 (such as has recently been the case) 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.
CONFLICTS OF INTEREST WITHIN TIAA
TIAA and its affiliates (including Teachers Advisors, Inc., its wholly owned subsidiary and a registered investment adviser) have interests in other real estate programs and accounts and also engage in other business activities and 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 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 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 other current and potential TIAA-sponsored investment
  vehicles 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.
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. Also, the Account
  invests in corporate obligations (such as commercial paper) and while the Account seeks out such holdings in short-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, such as has
  recently been the case. Any such volatility could have a negative impact on the value of these securities. Further, transaction activity generally 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. Further, inherent with investing in any corporate obligation is the risk that the credit quality of the issuer will
13

deteriorate, which could cause the obligations to be downgraded, and hamper the value or the liquidity of these securities.
RISKS OF LIQUID INVESTMENTS
The Accounts investments in marketable securities and mortgage loans receivable are subject to the following general risks:

    
    
    
    Financial RiskThe risk, for debt securities, that the issuer will not be able to pay principal and interest when due (and/or declare bankruptcy or be subject to receivership) and, for common or preferred stock, that the issuers current earnings will fall or that its overall financial soundness will decline, reducing
      the securitys value.
    
    
    
    Market RiskThe risk that the Accounts investments will experience price volatility due to changing conditions in the financial markets and, particularly for debt securities, changes in overall interest rates.
    
    
    
    Interest Rate VolatilityThe risk that interest rate volatility may affect the Accounts current income from an investment.
    
    
    
    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 can suffer losses.Further, to the extent that a significant portion of the Accounts net assets at any particular time are comprised of cash, cash equivalents and marketable securities, the Accounts returns may suffer as compared to the return that could have been generated by more profitable real estate related investments.
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 in currency rates, currency exchange control regulations, possible expropriation or confiscatory taxation, political, social, and economic developments and foreign regulations.
    
    
    
    Foreign real estate markets may have different liquidity and volatility attributes than U.S. markets.
    
    
    
    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.
    
    
    
    The Account may invest from time to time in securities issued by (1) entities domiciled in foreign countries, (2) domestic affiliates of such entities and/or (3) 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 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.
    
    
    
    The Account may, but is not required to, seek to hedge its exposure to changes in currency rates, which could involve extra costs. Further, any hedging activities might not be successful.NO OPPORTUNITY FOR PRIOR REVIEW OF PURCHASE
Investors do not have the opportunity to evaluate the economic or financial merit of the purchase of a property or other investment before the Account completes the purchase, so investors will need to rely solely on TIAAs judgment and ability to select investments consistent with the Accounts investment
  objective and policies. Further, the Account may change its investment objective and pursue specific investments in accordance with any such amended investment objective without the consent of the Accounts investors.
14

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.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
THE PROPERTIESIN GENERAL
In the table below, participants will find general information about each of the Accounts property investments as of December 31, 2008. The Accounts property investments include both properties that are wholly-owned by the Account and properties owned by the Accounts joint venture investments. Certain
  property investments are comprised of a portfolio of properties.
Property
    
    Location
    
    YearBuilt(1)
    
    YearPurchased(2)
    
    RentableArea(Sq. ft.)(3)
    
    PercentLeased
    
    AnnualAverageBase RentPer LeasedSq. Ft.(4)
    
    MarketValue(5)OFFICE PROPERTIES1001 Pennsylvania Ave
    
    Washington, DC
    
    1987
    
    2004
    
    
    
    756,603
    
    
    
    
    100
    %
    
    
    
    $
    
    38.81
    
    
    
    $
    
    550,756,966
    (6)Four Oaks Place
    
    Houston, TX
    
    1983
    
    2004
    
    
    
    1,754,334
    
    
    
    
    97
    %
    
    
    
    
    18.96
    
    
    
    
    438,000,000
    (6)Fourth & Madison(7)
    
    Seattle, WA
    
    2002
    
    2004
    
    
    
    845,533
    
    
    
    
    98
    %
    
    
    
    
    29.59
    
    
    
    
    407,500,000
    (6)50 Fremont Street
    
    San Francisco,
      CA
    
    1983
    
    2004
    
    
    
    817,412
    
    
    
    
    99
    %
    
    
    
    
    32.50
    
    
    
    
    386,600,000
    (6)780 Third Avenue
    
    New York, NY
    
    1984
    
    1999
    
    
    
    487,566
    
    
    
    
    90
    %
    
    
    
    
    51.70
    
    
    
    
    341,000,00099 High Street
    
    Boston, MA
    
    1971
    
    2005
    
    
    
    731,204
    
    
    
    
    91
    %
    
    
    
    
    30.40
    
    
    
    
    320,107,068
    (6)The Newbry
    
    Boston, MA
    
    1940-
      1961(9)
    
    2006
    
    
    
    607,424
    
    
    
    
    90
    %
    
    
    
    
    38.35
    
    
    
    
    315,600,000Lincoln Centre
    
    Dallas, TX
    
    1984
    
    2005
    
    
    
    1,638,132
    
    
    
    
    86
    %
    
    
    
    
    17.21
    
    
    
    
    269,000,000
    (6)701 Brickell
    
    Miami, FL
    
    1986(11)
    
    2002
    
    
    
    675,424
    
    
    
    
    98
    %
    
    
    
    
    32.85
    
    
    
    
    255,000,000
    (6)1900 K Street
    
    Washington, DC
    
    1996
    
    2004
    
    
    
    339,060
    
    
    
    
    100
    %
    
    
    
    
    44.44
    
    
    
    
    245,000,000Yahoo! Center(10)
    
    Santa Monica,
      CA
    
    1984
    
    2004
    
    
    
    1,087,954
    
    
    
    
    86
    %
    
    
    
    
    39.18
    
    
    
    
    239,747,9531 & 7 Westferry Circus
    
    London, UK
    
    1992, 1993
    
    2005
    
    
    
    391,442
    
    
    
    
    100
    %
    
    
    
    
    47.29
    
    
    
    
    232,801,862
    (6)(8)275 Battery(12)
    
    San Francisco,
      CA
    
    1988
    
    2005
    
    
    
    472,261
    
    
    
    
    92
    %
    
    
    
    
    36.69
    
    
    
    
    220,025,35815

Property
    
    Location
    
    YearBuilt(1)
    
    YearPurchased(2)
    
    RentableArea(Sq. ft.)(3)
    
    PercentLeased
    
    AnnualAverageBase RentPer LeasedSq. Ft.(4)
    
    MarketValue(5)Wilshire Rodeo Plaza
    
    Beverly Hills, CA
    
    1935, 1984
    
    2006
    
    
    
    264,287
    
    
    
    
    98
    %
    
    
    
    
    44.69
    
    
    
    
    213,783,319
    (6)Mellon Financial Center at
      One Boston Place(13)
    
    Boston, MA
    
    1970(11)
    
    2002
    
    
    
    788,364
    
    
    
    
    98
    %
    
    
    
    
    45.99
    
    
    
    
    212,083,2641401 H Street NW
    
    Washington, D.C.
    
    1992
    
    2006
    
    
    
    350,635
    
    
    
    
    100
    %
    
    
    
    
    33.42
    
    
    
    
    194,600,000
    (6)Ten & Twenty Westport
      Road
    
    Wilton, CT
    
    1974(11);
      2001
    
    2001
    
    
    
    538,840
    
    
    
    
    100
    %
    
    
    
    
    29.93
    
    
    
    
    174,400,000Millennium Corporate Park
    
    Redmond, WA
    
    1999, 2000
    
    2006
    
    
    
    536,884
    
    
    
    
    97
    %
    
    
    
    
    14.81
    
    
    
    
    162,192,911980 9th Street and 1010
      8th Street(14)
    
    Sacramento, CA
    
    1992
    
    2005
    
    
    
    455,606
    
    
    
    
    92
    %
    
    
    
    
    26.37
    
    
    
    
    151,600,000Urban Centre
    
    Tampa, FL
    
    1984, 1987
    
    2005
    
    
    
    547,979
    
    
    
    
    89
    %
    
    
    
    
    22.40
    
    
    
    
    113,274,489Treat Towers(15)
    
    Walnut Creek,
      CA
    
    1999
    
    2003
    
    
    
    367,313
    
    
    
    
    83
    %
    
    
    
    
    23.78
    
    
    
    
    105,074,348Pacific Plaza
    
    San Diego, CA
    
    2000, 2002
    
    2007
    
    
    
    215,758
    
    
    
    
    63
    %
    
    
    
    
    22.23
    
    
    
    
    104,969,706
    (6)Inverness Center
    
    Birmingham, AL
    
    1980-1985
    
    2005
    
    
    
    903,857
    
    
    
    
    99
    %
    
    
    
    
    12.09
    
    
    
    
    102,891,25688 Kearny Street
    
    San Francisco,
      CA
    
    1986
    
    1999
    
    
    
    228,358
    
    
    
    
    83
    %
    
    
    
    
    40.40
    
    
    
    
    99,815,000Morris Corporate Center III
    
    Parsippany, NJ
    
    1990
    
    2000
    
    
    
    526,052
    
    
    
    
    81
    %
    
    
    
    
    20.51
    
    
    
    
    94,955,176The Ellipse at Ballston
    
    Arlington, VA
    
    1989
    
    2006
    
    
    
    194,914
    
    
    
    
    98
    %
    
    
    
    
    32.75
    
    
    
    
    84,018,202Prominence in Buckhead(15)
    
    Atlanta, GA
    
    1999
    
    2003
    
    
    
    423,916
    
    
    
    
    95
    %
    
    
    
    
    28.69
    
    
    
    
    78,209,416Oak Brook Regency
      Towers
    
    Oakbrook, IL
    
    1977(11)
    
    2002
    
    
    
    402,318
    
    
    
    
    83
    %
    
    
    
    
    13.44
    
    
    
    
    75,936,788Parkview Plaza
    
    Oakbrook, IL
    
    1990
    
    1997
    
    
    
    264,461
    
    
    
    
    100
    %
    
    
    
    
    16.63
    
    
    
    
    65,846,414The North 40 Office
      Complex
    
    Boca Raton, FL
    
    1983, 1984
    
    2006
    
    
    
    350,000
    
    
    
    
    89
    %
    
    
    
    
    11.01
    
    
    
    
    64,397,949Camelback Center
    
    Phoenix, AZ
    
    2001
    
    2007
    
    
    
    231,345
    
    
    
    
    94
    %
    
    
    
    
    22.94
    
    
    
    
    58,000,0008270 Greensboro Drive
    
    McLean, VA
    
    2000
    
    2005
    
    
    
    158,110
    
    
    
    
    100
    %
    
    
    
    
    36.86
    
    
    
    
    57,000,000West Lake North Business
      Park
    
    Westlake Village,
      CA
    
    2000
    
    2004
    
    
    
    198,558
    
    
    
    
    88
    %
    
    
    
    
    22.55
    
    
    
    
    54,424,547One Virginia Square
    
    Arlington, VA
    
    1999
    
    2004
    
    
    
    116,077
    
    
    
    
    100
    %
    
    
    
    
    38.43
    
    
    
    
    51,796,610Capitol Place
    
    Sacramento, CA
    
    1988(11)
    
    2003
    
    
    
    161,051
    
    
    
    
    97
    %
    
    
    
    
    28.87
    
    
    
    
    50,000,000The Pointe on Tampa Bay
    
    Tampa, FL
    
    1982(11)
    
    2002
    
    
    
    250,357
    
    
    
    
    97
    %
    
    
    
    
    23.08
    
    
    
    
    49,700,000Centerside I
    
    San Diego, CA
    
    1982
    
    2004
    
    
    
    202,913
    
    
    
    
    60
    %
    
    
    
    
    18.31
    
    
    
    
    46,400,000Wellpoint
    
    Westlake Village,
      CA
    
    1986 1998
    
    2006
    
    
    
    181,000
    
    
    
    
    100
    %
    
    
    
    
    16.04
    
    
    
    
    46,000,0003 Hutton Centre
    
    Santa Ana, CA
    
    1985(11)
    
    2003
    
    
    
    197,819
    
    
    
    
    52
    %
    
    
    
    
    13.89
    
    
    
    
    45,709,7644200 West Cypress Street
    
    Tampa, FL
    
    1989
    
    2003
    
    
    
    219,815
    
    
    
    
    100
    %
    
    
    
    
    23.61
    
    
    
    
    41,568,436Park Place on Turtle Creek
    
    Dallas, TX
    
    1986
    
    2006
    
    
    
    177,169
    
    
    
    
    87
    %
    
    
    
    
    21.06
    
    
    
    
    40,094,406Preston Sherry Plaza
    
    Dallas, TX
    
    1986
    
    2007
    
    
    
    147,008
    
    
    
    
    89
    %
    
    
    
    
    22.43
    
    
    
    
    38,400,000
    (6)Tysons Executive Plaza II(16)
    
    McLean, VA
    
    1988
    
    2000
    
    
    
    257,740
    
    
    
    
    86
    %
    
    
    
    
    25.93
    
    
    
    
    36,047,976Needham Corporate Center
    
    Needham, MA
    
    1987
    
    2001
    
    
    
    138,259
    
    
    
    
    89
    %
    
    
    
    
    21.04
    
    
    
    
    32,493,814Creeksides at Centerpoint
    
    Kent, WA
    
    1985
    
    2006
    
    
    
    218,712
    
    
    
    
    67
    %
    
    
    
    
    10.41
    
    
    
    
    27,200,000SubtotalOffice Properties
    
    
    
    
    
    
    
    
    
    
    
    92
    %
    
    
    
    
    
    $
    
    6,994,022,998INDUSTRIAL
      PROPERTIESOntario Industrial
      Portfolio(16)
    
    Various, CA
    
    1997-1998
    
    1998, 2000,
      2004
    
    
    
    3,981,894
    
    
    
    
    78
    %
    
    
    
    $
    
    3.29
    
    
    
    $
    
    278,000,000
    (6)16

Property
    
    Location
    
    YearBuilt(1)
    
    YearPurchased(2)
    
    RentableArea(Sq. ft.)(3)
    
    PercentLeased
    
    AnnualAverageBase RentPer LeasedSq. Ft.(4)
    
    MarketValue(5)Dallas Industrial
      Portfolio(18) (19)
    
    Dallas andCoppell, TX
    
    1997-2001
    
    2000-2002
    
    
    
    3,684,941
    
    
    
    
    91
    %
    
    
    
    
    2.68
    
    
    
    
    141,328,444Southern California RA
      Industrial Portfolio
    
    Los Angeles, CA
    
    1982
    
    2004
    
    
    
    920,078
    
    
    
    
    91
    %
    
    
    
    
    5.67
    
    
    
    
    107,218,320Rancho Cucamonga
      Industrial Portfolio(20)
    
    RanchoCucamonga, CA
    
    2000-2002
    
    2000; 2001;2002; 2004
    
    
    
    1,490,235
    
    
    
    
    62
    %
    
    
    
    
    2.13
    
    
    
    
    102,300,000Seneca Industrial Park
    
    Pembroke Park,
      FL
    
    1999-2001
    
    2007
    
    
    
    882,182
    
    
    
    
    83
    %
    
    
    
    
    5.66
    
    
    
    
    101,296,137Great West Industrial
      Portfolio
    
    RanchoCucamongaand Fontana, CA
    
    2004-2005
    
    2008
    
    
    
    1,369,645
    
    
    
    
    100
    %
    
    
    
    
    2.63
    
    
    
    
    93,600,000Rainier Corporate Park
    
    Fife, WA
    
    1991-1997
    
    2003
    
    
    
    1,104,646
    
    
    
    
    99
    %
    
    
    
    
    3.90
    
    
    
    
    81,034,580Chicago Industrial
      Portfolio(19)
    
    Chicago and
      Joliet, IL
    
    1997-2000
    
    1998;2000
    
    
    
    1,427,699
    
    
    
    
    97
    %
    
    
    
    
    4.07
    
    
    
    
    78,022,333Shawnee Ridge Industrial
      Portfolio
    
    Atlanta, GA
    
    2000-2005
    
    2005
    
    
    
    1,422,922
    
    
    
    
    100
    %
    
    
    
    
    3.32
    
    
    
    
    69,000,000IDI National Portfolio(21)
    
    Various, U.S.
    
    1999-2004
    
    2004
    
    
    
    3,655,671
    
    
    
    
    95
    %
    
    
    
    
    3.08
    
    
    
    
    67,730,752Regal Logistics Campus
    
    Seattle, WA
    
    1999-2004
    
    2005
    
    
    
    968,535
    
    
    
    
    100
    %
    
    
    
    
    4.15
    
    
    
    
    67,000,000Chicago CALEast
      Industrial Portfolio(22)
    
    Chicago, IL
    
    1974-2005
    
    2003
    
    
    
    1,145,152
    
    
    
    
    100
    %
    
    
    
    
    3.75
    
    
    
    
    63,931,502Northern California RA
      Industrial Portfolio(19)
    
    Oakland, CA
    
    1981
    
    2004
    
    
    
    657,602
    
    
    
    
    78
    %
    
    
    
    
    3.70
    
    
    
    
    63,456,497Atlanta Industrial
      Portfolio(19)
    
    Lawrenceville,
      GA
    
    1996-1999
    
    2000
    
    
    
    1,295,440
    
    
    
    
    97
    %
    
    
    
    
    2.73
    
    
    
    
    54,001,468New Jersey CALEast
      Industrial Portfolio
    
    Cranbury, NJ
    
    1982-1989
    
    2003
    
    
    
    807,773
    
    
    
    
    100
    %
    
    
    
    
    4.05
    
    
    
    
    49,000,000South River Road
      Industrial
    
    Cranbury, NJ
    
    1999
    
    2001
    
    
    
    858,957
    
    
    
    
    53
    %
    
    
    
    
    1.58
    
    
    
    
    43,872,143GE Appliance East Coast
      Distribution Facility
    
    Perryville, MD
    
    2003
    
    2005
    
    
    
    1,004,000
    
    
    
    
    100
    %
    
    
    
    
    2.82
    
    
    
    
    40,500,000Pinnacle Industrial/DFW
      Trade Center
    
    Grapevine. TX
    
    2003, 2004,2006
    
    2006
    
    
    
    899,200
    
    
    
    
    100
    %
    
    
    
    
    3.04
    
    
    
    
    38,732,826Northeast RA Industrial
      Portfolio
    
    Boston, MA
    
    2000
    
    2004
    
    
    
    384,000
    
    
    
    
    75
    %
    
    
    
    
    4.42
    
    
    
    
    30,793,863Centre Pointe and Valley
      View
    
    Los Angeles
      County, CA
    
    1965-1989
    
    2004
    
    
    
    307,685
    
    
    
    
    88
    %
    
    
    
    
    5.08
    
    
    
    
    29,000,000Broadlands Business Park
    
    Elkton, MD
    
    2006
    
    2006
    
    
    
    756,600
    
    
    
    
    100
    %
    
    
    
    
    2.85
    
    
    
    
    27,519,795Northwest RA Industrial
      Portfolio
    
    Seattle, WA
    
    1996
    
    2004
    
    
    
    312,321
    
    
    
    
    100
    %
    
    
    
    
    4.65
    
    
    
    
    24,100,000Summit Distribution Center
    
    Memphis, TN
    
    2002
    
    2003
    
    
    
    708,532
    
    
    
    
    100
    %
    
    
    
    
    2.60
    
    
    
    
    22,700,000Konica Photo Imaging
      Headquarters
    
    Mahwah, NJ
    
    1999
    
    1999
    
    
    
    168,000
    
    
    
    
    0
    %
    
    
    
    
    
    
    
    
    
    18,300,000Airways Distribution
      Center
    
    Memphis, TN
    
    2005
    
    2006
    
    
    
    556,600
    
    
    
    
    100
    %
    
    
    
    
    2.42
    
    
    
    
    17,400,000UPS Distribution Facility
    
    Fernley, NV
    
    1998
    
    1998
    
    
    
    256,000
    
    
    
    
    100
    %
    
    
    
    
    3.90
    
    
    
    
    12,100,000SubtotalIndustrial
      Properties
    
    
    
    
    
    
    
    
    
    
    
    89
    %
    
    
    
    
    
    $
    
    1,721,938,660RETAIL PROPERTIESDDR Joint Venture(23)
    
    Various
    
    Various
    
    2007
    
    
    
    16,183,158
    
    
    
    
    92
    %
    
    
    
    $
    
    10.99
    
    
    
    $
    
    712,773,185The Florida Mall(25)
    
    Orlando, FL
    
    1986(11)
    
    2002
    
    
    
    919,826(25
    )
    
    
    
    
    99
    %
    
    
    
    
    42.57
    
    
    
    
    281,940,801Printemps de lHomme
    
    Paris, FR
    
    1930
    
    2007
    
    
    
    142,363
    
    
    
    
    100
    %
    
    
    
    
    87.19
    
    
    
    
    247,620,812
    (8)17

Property
    
    Location
    
    YearBuilt(1)
    
    YearPurchased(2)
    
    RentableArea(Sq. ft.)(3)
    
    PercentLeased
    
    AnnualAverageBase RentPer LeasedSq. Ft.(4)
    
    MarketValue(5)Florida Retail Portfolio(26)
    
    Various, FL
    
    1974-2005
    
    2006
    
    
    
    1,289,825
    
    
    
    
    91
    %
    
    
    
    
    14.43
    
    
    
    
    196,201,961Miami International Mall(24)
    
    Miami, FL
    
    1982(11)
    
    2002
    
    
    
    296,746(25
    )
    
    
    
    
    97
    %
    
    
    
    
    37.59
    
    
    
    
    105,311,660Westwood Marketplace
    
    Los Angeles, CA
    
    1950(11)
    
    2002
    
    
    
    202,201
    
    
    
    
    100
    %
    
    
    
    
    29.93
    
    
    
    
    95,100,000Marketfair
    
    West Windsor, NJ
    
    1987
    
    2006
    
    
    
    233,000
    
    
    
    
    96
    %
    
    
    
    
    22.09
    
    
    
    
    90,759,463Mazza Gallerie
    
    Washington, DC
    
    1975
    
    2004
    
    
    
    293,935
    
    
    
    
    99
    %
    
    
    
    
    16.90
    
    
    
    
    83,000,375West Town Mall(24)
    
    Knoxville, TN
    
    1972(11)
    
    2002
    
    
    
    759,447(25
    )
    
    
    
    
    96
    %
    
    
    
    
    22.30
    
    
    
    
    73,968,649Publix at Weston Commons
    
    Weston, FL
    
    2005
    
    2006
    
    
    
    126,922
    
    
    
    
    100
    %
    
    
    
    
    24.88
    
    
    
    
    50,987,272
    (6)South Frisco Village
    
    Frisco, TX
    
    2002
    
    2006
    
    
    
    227,175
    
    
    
    
    97
    %
    
    
    
    
    11.42
    
    
    
    
    36,300,000
    (6)Plainsboro Plaza
    
    Plainsboro, NJ
    
    1987
    
    2005
    
    
    
    206,503
    
    
    
    
    77
    %
    
    
    
    
    10.87
    
    
    
    
    33,500,000The Market at Southpark
    
    Littleton, CO
    
    1988
    
    2004
    
    
    
    190,104
    
    
    
    
    93
    %
    
    
    
    
    10.93
    
    
    
    
    29,000,000Champlin Marketplace
    
    Champlin, MN
    
    1998-99,
      2005
    
    2007
    
    
    
    88,577
    
    
    
    
    98
    %
    
    
    
    
    12.87
    
    
    
    
    17,100,540Suncrest Village
    
    Orlando, FL
    
    1987
    
    2005
    
    
    
    93,358
    
    
    
    
    88
    %
    
    
    
    
    10.54
    
    
    
    
    15,800,000Plantation Grove
    
    Ocoee, FL
    
    1995
    
    1995
    
    
    
    73,655
    
    
    
    
    91
    %
    
    
    
    
    10.15
    
    
    
    
    11,950,000SubtotalRetail Properties
    
    
    
    
    
    
    
    
    
    
    
    90
    %
    
    
    
    
    
    $
    
    2,081,314,718RESIDENTIAL
      PROPERTIES(27)Houston Apartment
      Portfolio(28)
    
    Houston, TX
    
    1984-2004
    
    2006
    
    
    
    NA
    
    
    
    
    97
    %
    
    
    
    
    NA
    
    
    
    $
    
    267,468,206Palomino Park Apartments
    
    Denver, CO
    
    1996-2001
    
    2005
    
    
    
    NA
    
    
    
    
    91
    %
    
    
    
    
    NA
    
    
    
    
    173,000,000The Colorado
    
    New York, NY
    
    1987
    
    1999
    
    
    
    NA
    
    
    
    
    98
    %
    
    
    
    
    NA
    
    
    
    
    153,005,837
    (6)Kierland Apartment
      Portfolio(29)
    
    Scottsdale, AZ
    
    1996-2000
    
    2006
    
    
    
    NA
    
    
    
    
    95
    %
    
    
    
    
    NA
    
    
    
    
    146,829,953Phoenix Apartment
      Portfolio(30)
    
    Greater Phoenix
      Area, AZ
    
    1995-1998
    
    2006
    
    
    
    NA
    
    
    
    
    94
    %
    
    
    
    
    NA
    
    
    
    
    129,244,134The Legacy at Westwood
      Apartments
    
    Los Angeles, CA
    
    2001
    
    2002
    
    
    
    NA
    
    
    
    
    91
    %
    
    
    
    
    NA
    
    
    
    
    89,224,157
    (6)Ashford Meadows
      Apartments
    
    Herndon, VA
    
    1998
    
    2000
    
    
    
    NA
    
    
    
    
    93
    %
    
    
    
    
    NA
    
    
    
    
    79,318,923Larkspur Courts
    
    Larkspur, CA
    
    1991
    
    1999
    
    
    
    NA
    
    
    
    
    97
    %
    
    
    
    
    NA
    
    
    
    
    71,500,000South Florida Apartment
      Portfolio
    
    Boca Raton and
      Plantation, FL
    
    1986
    
    2001
    
    
    
    NA
    
    
    
    
    96
    %
    
    
    
    
    NA
    
    
    
    
    62,155,159The Caruth
    
    Dallas, TX
    
    1999
    
    2005
    
    
    
    NA
    
    
    
    
    93
    %
    
    
    
    
    NA
    
    
    
    
    61,348,871
    (6)Regents Court Apartments
    
    San Diego, CA
    
    2001
    
    2002
    
    
    
    NA
    
    
    
    
    94
    %
    
    
    
    
    NA
    
    
    
    
    59,000,000
    (6)1050 Lenox Park
    
    Atlanta, GA
    
    2001
    
    2005
    
    
    
    NA
    
    
    
    
    95
    %
    
    
    
    
    NA
    
    
    
    
    57,550,000The Reserve at Sugarloaf
    
    Duluth, GA
    
    2000
    
    2005
    
    
    
    NA
    
    
    
    
    93
    %
    
    
    
    
    NA
    
    
    
    
    44,900,000
    (6)The Lodge at Willow
      Creek
    
    Denver, CO
    
    1997
    
    1997
    
    
    
    NA
    
    
    
    
    92
    %
    
    
    
    
    NA
    
    
    
    
    40,000,000The Maroneal
    
    Houston, TX
    
    1998
    
    2005
    
    
    
    NA
    
    
    
    
    95
    %
    
    
    
    
    NA
    
    
    
    
    38,455,941Glenridge Walk
    
    Atlanta, GA
    
    1996, 2001
    
    2005
    
    
    
    NA
    
    
    
    
    97
    %
    
    
    
    
    NA
    
    
    
    
    37,575,000Lincoln Woods Apartments
    
    Lafayette Hill,
      PA
    
    1991
    
    1997
    
    
    
    NA
    
    
    
    
    94
    %
    
    
    
    
    NA
    
    
    
    
    32,025,201Westcreek Apartments
    
    Westlake Village,
      CA
    
    1988
    
    1997
    
    
    
    NA
    
    
    
    
    92
    %
    
    
    
    
    NA
    
    
    
    
    31,500,000Quiet Water at Coquina
      Lakes
    
    Deerfield Beach,
      FL
    
    1995
    
    2001
    
    
    
    NA
    
    
    
    
    98
    %
    
    
    
    
    NA
    
    
    
    
    21,810,474The Fairways of Carolina
    
    Margate, FL
    
    1993
    
    2001
    
    
    
    NA
    
    
    
    
    96
    %
    
    
    
    
    NA
    
    
    
    
    20,941,940SubtotalResidential
      Properties
    
    
    
    
    
    
    
    
    
    
    
    95
    %
    
    
    
    
    
    $
    
    1,616,853,79618

Property
    
    Location
    
    YearBuilt(1)
    
    YearPurchased(2)
    
    RentableArea(Sq. ft.)(3)
    
    PercentLeased
    
    AnnualAverageBase RentPer LeasedSq. Ft.(4)
    
    MarketValue(5)OTHER COMMERCIAL
      PROPERTIESStorage Portfolio I(31)
    
    Various, U.S.
    
    1972-1990
    
    2003
    
    
    
    2,295,410
    
    
    
    
    83
    %
    
    
    
    $
    
    12.82
    
    
    
    $
    
    67,620,954SubtotalCommercial
      Properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    10,864,897,330TotalAll Properties
    
    
    
    
    
    
    
    
    
    
    
    93
    %
    
    
    
    
    
    $
    
    12,481,751,126(1)
    
    
    
    Properties with multiple years built include multiple buildings that opened on different dates.(2)
    
    
    
    Properties with multiple years purchased include multiple buildings that were purchased on various dates.(3)
    
    
    
    The square footage is an approximate measure and is subject to periodic remeasurement.(4)
    
    
    
    Based on total contractual rent for leases existing as of December 31, 2008. The contractual rent can be either on a gross or net basis, depending on the terms of the leases.(5)
    
    
    
    Market value reflects the value determined in accordance with the procedures described in the Accounts prospectus and as stated in the Statement of Investments.(6)
    
    
    
    Market value shown represents the Accounts interest gross of debt.(7)
    
    
    
    Formerly known as IDX Tower.(8)
    
    
    
    1 & 7 Westferry Circus is located in the United Kingdom, and the market value reflects the Accounts interest gross of debt. Printemps de lHomme is located in France. The market value of each property is converted from local currency to U.S. Dollars at the exchange rate as of December 31, 2008.(9)
    
    
    
    This property was renovated in 2004 and 2006.(10)
    
    
    
    Formerly known as Colorado Center this property held in 50%/50% joint venture with Equity Office Properties Trust. Market value shown reflects the value of the Accounts interest in the joint venture, net of debt.(11)
    
    
    
    Undergone extensive renovations since original construction.(12)
    
    
    
    Formerly known as Embarcadero Center West(13)
    
    
    
    The Account purchased a 50.25% interest in a private REIT, which owns this property. A 49.70% interest is owned by Societe Immobiler Trans-Quebec, and .05% is owned by 100 individuals. Market value shown reflects the value of the Accounts interest in joint venture.(14)
    
    
    
    Formerly known as U.S. Bank Plaza.(15)
    
    
    
    This investment property is held in a 75%/25% joint venture with Equity Office Properties Trust. Market value shown reflects the value of the Accounts interest in the joint venture.(16)
    
    
    
    This investment property is held in a 50%/50% joint venture with Tennessee Consolidated Retirement System. Market value shown reflects the value of the Accounts interest in the joint venture.(17)
    
    
    
    The Ontario Industrial Portfolio contains six investment properties, including one portfolio which consists of 1.1 million square feet located in Mira Loma, California. As of 1/30/07, 1900 South Burgandy Place was added to the Ontario Industrial Portfolio.(18)
    
    
    
    The Dallas Industrial Portfolio contains ten warehouse distribution properties located in Dallas and Coppell, Texas.(19)
    
    
    
    A portion of this portfolio was sold on 6/27/07.19

(20)
    
    
    
    Formerly known as Cabot Industrial Portfolio. As of 1/31/07 the Weber Distribution property was consolidated into the existing Rancho Cucamonga Industrial Portfolio.(21)
    
    
    
    Property held in 60%/40% joint venture with Industrial Development International. Market value shown reflects the value of the Accounts interest in the joint venture, net of debt.(22)
    
    
    
    A portion of this portfolio was sold on 6/27/07 and 11/7/08.(23)
    
    
    
    This investment property consists of 65 properties located in 13 states are held in a 85%/15% joint venture with Developers Diversified Realty Corporation. Market Value shown reflects the value of the Accounts interest in the joint venture, net of debt.(24)
    
    
    
    This investment property is held in a 50%/50% joint venture with the Simon Property Group. Market value shown reflects the value of the Accounts interest in the joint venture, net of debt.(25)
    
    
    
    Reflects the square footage owned by the joint venture.(26)
    
    
    
    This investment property is held in a 80%/20% joint venture with Weingarten Realty Investors. Market value shown reflects the value of the Accounts interest in the joint venture. This portfolio contains seven neighborhood and/or community shopping centers located in Ft. Lauderdale, Miami, Orlando and
      Tampa, Florida areas.(27)
    
    
    
    For the average unit size and annual average rent per unit for each residential property, see Residential Properties below.(28)
    
    
    
    The Houston Apartment Portfolio contains 11 properties that are a mix of two and three-story luxury garden style apartments and are located in Houston, Texas.(29)
    
    
    
    The Kierland Apartment Portfolio contains three properties that are a mix of two and three-story luxury garden style apartments and are located in Scottsdale, Arizona.(30)
    
    
    
    The Phoenix Apartment Portfolio contains four properties that are a mix of two and three-story luxury garden style apartments and are located in the greater Phoenix area in Arizona.(31)
    
    
    
    Property held in 75%/25% joint venture with Storage USA. Market value shown reflects the value of the Accounts interest in the joint venture, net of debt.Commercial (Non-Residential) Properties
At December 31, 2008, the Account held 87 commercial (non-residential) property investments in its portfolio, including a portfolio of storage facilities located throughout the United States. Twelve of these property investments were held through joint ventures, and 27 were subject to mortgages (including
  seven joint venture property investments). Although the terms vary under each lease, certain expenses, such as real estate taxes and other operating expenses are paid or reimbursed in whole or in part by the tenants.
Management believes that the Accounts portfolio is diversified by both property type and geographic location. The portfolio consists of: 45 office properties containing approximately 21 million square feet located in 14 states, the District of Columbia and the United Kingdom; 26 industrial properties
  containing approximately 31 million square feet located in 11 states, including a 60% interest in a portfolio of industrial properties located throughout the United States; and 16 retail properties containing approximately 21 million square feet located in eight states, the District of Columbia, and Paris, France. One of
  the retail property investments is an 85% interest in a portfolio containing 65 individual retail shopping centers located throughout the East and Southeast states. In addition, the Account has a 75% interest in a portfolio of storage facilities located throughout the United States containing approximately 2.3 million
  square feet.
As of December 31, 2008, the weighted average overall occupancy rate of the Accounts commercial real estate portfolio was 91%. On a weighted average basis, the Accounts office properties were 92% leased, industrial properties were 89% leased, retail properties were 90% leased, and the storage portfolio
  was 83% leased.
Major Tenants: The following tables list the Accounts major commercial tenants based on the total space they occupied as of December 31, 2008, in the Accounts properties.
20

Major Office Tenants
    
    Occupied Square Feet
    
    Percentage ofTotal RentableArea ofAccountsOffice Properties
    
    Percentage ofTotal RentableArea OfAcccountsNon-ResidentialPropertiesDeloitte & Touche
    
    
    
    515,969
    
    
    
    
    2.5
    %
    
    
    
    
    0.7
    %Mellon (Boston Co)
    
    
    
    476,078
    
    
    
    
    2.3
    %
    
    
    
    
    0.7
    %BHP Petroleum
    
    
    
    463,734
    
    
    
    
    2.2
    %
    
    
    
    
    0.6
    %Southern Company Services, Inc
    
    
    
    456,235
    
    
    
    
    2.2
    %
    
    
    
    
    0.6
    %Yahoo!
    
    
    
    448,147
    
    
    
    
    2.2
    %
    
    
    
    
    0.6
    %Microsoft
    
    
    
    361,528
    
    
    
    
    1.7
    %
    
    
    
    
    0.5
    %Crowell & Moring
    
    
    
    320,539
    
    
    
    
    1.5
    %
    
    
    
    
    0.4
    %ATMOS Energy
    
    
    
    312,238
    
    
    
    
    1.5
    %
    
    
    
    
    0.4
    %IDX Systems
    
    
    
    309,278
    
    
    
    
    1.5
    %
    
    
    
    
    0.4
    %Pearson
    
    
    
    225,299
    
    
    
    
    1.1
    %
    
    
    
    
    0.3
    %Major Industrial Tenants
    
    OccupiedSquare Feet
    
    Percentage ofTotal RentableArea ofAccountsIndustrial Properties
    
    Percentage ofTotal RentableArea OfAcccountsNon-ResidentialPropertiesWalmart
    
    
    
    1,099,112
    
    
    
    
    3.5%
    
    
    
    
    1.5%General Electric
    
    
    
    1,004,000
    
    
    
    
    3.2%
    
    
    
    
    1.4%Priority Fulfillment
    
    
    
    993,120
    
    
    
    
    3.2%
    
    
    
    
    1.4%Regal West
    
    
    
    968,535
    
    
    
    
    3.1%
    
    
    
    
    1.3%Kumho Tire
    
    
    
    841,325
    
    
    
    
    2.7%
    
    
    
    
    1.1%First Quality
    
    
    
    800,000
    
    
    
    
    2.6%
    
    
    
    
    1.1%Michelin (TNT)
    
    
    
    756,600
    
    
    
    
    2.4%
    
    
    
    
    1.0%Hewlett-Packard
    
    
    
    708,532
    
    
    
    
    2.3%
    
    
    
    
    1.0%Del Monte
    
    
    
    689,660
    
    
    
    
    2.2%
    
    
    
    
    0.9%RR Donnelley
    
    
    
    659,157
    
    
    
    
    2.1%
    
    
    
    
    0.9%Major Retail Tenants
    
    OccupiedSquare Feet
    
    Percentage ofTotal RentableArea ofAccountsRetail Properties
    
    Percentage ofTotal RentableArea OfAcccountsNon-ResidentialPropertiesWalmart
    
    
    
    944,437
    
    
    
    
    4.4%
    
    
    
    
    1.3%Kohls
    
    
    
    609,529
    
    
    
    
    2.9%
    
    
    
    
    0.8%Ross
    
    
    
    565,509
    
    
    
    
    2.7%
    
    
    
    
    0.8%Publix Super Markets
    
    
    
    565,187
    
    
    
    
    2.7%
    
    
    
    
    0.8%Dicks Sporting Goods
    
    
    
    522,486
    
    
    
    
    2.4%
    
    
    
    
    0.7%PetSmart
    
    
    
    496,595
    
    
    
    
    2.3%
    
    
    
    
    0.7%Michaels
    
    
    
    474,759
    
    
    
    
    2.2%
    
    
    
    
    0.6%Bed, Bath & Beyond
    
    
    
    455,510
    
    
    
    
    2.1%
    
    
    
    
    0.6%Old Navy
    
    
    
    371,780
    
    
    
    
    1.7%
    
    
    
    
    0.5%Best Buy
    
    
    
    305,995
    
    
    
    
    1.4%
    
    
    
    
    0.4%21

The following charts provide lease expiration information for the Accounts commercial properties, categorized by property type as of December 31, 2008. While many of the leases contain renewal options with varying terms, these charts assume that none of the tenants exercise their renewal options.
Office Properties
Year ofLease Expiration
    
    Rentable AreaSubject toExpiring Leases (sq. ft.)
    
    Percentage ofTotal OfficeSquare FeetRepresented byExpiring Leases2009
    
    
    
    1,839,941
    
    
    
    
    8.8%2010
    
    
    
    2,486,945
    
    
    
    
    11.9%2011
    
    
    
    2,650,295
    
    
    
    
    12.7%2012
    
    
    
    1,696,029
    
    
    
    
    8.1%2013
    
    
    
    2,107,345
    
    
    
    
    10.1%2014 and thereafter
    
    
    
    8,320,137
    
    
    
    
    40.0%Total
    
    
    
    19,100,692
    
    
    
    
    91.6%Industrial Properties
Year ofLease Expiration
    
    Rentable AreaSubject toExpiring Leases (sq. ft.)
    
    Percentage ofTotal IndustrialSquare FeetRepresentedby Expiring Leases2009
    
    
    
    4,143,234
    
    
    
    
    13.4%2010
    
    
    
    4,458,557
    
    
    
    
    14.4%2011
    
    
    
    4,333,139
    
    
    
    
    14.0%2012
    
    
    
    1,755,195
    
    
    
    
    5.7%2013
    
    
    
    4,744,226
    
    
    
    
    15.3%2014 and thereafter
    
    
    
    8,164,865
    
    
    
    
    26.3%Total
    
    
    
    27,599,216
    
    
    
    
    89.1%Retail Properties
Year ofLease Expiration
    
    Rentable AreaSubject toExpiring Leases (sq. ft.)
    
    Percentage ofTotal RetailSquare FeetRepresentedby Expiring Leases2009
    
    
    
    1,174,989
    
    
    
    
    5.5%2010
    
    
    
    1,828,509
    
    
    
    
    8.6%2011
    
    
    
    2,191,075
    
    
    
    
    10.3%2012
    
    
    
    2,361,586
    
    
    
    
    11.1%2013
    
    
    
    2,335,086
    
    
    
    
    10.9%2014 and thereafter
    
    
    
    9,304,020
    
    
    
    
    43.6%Total
    
    
    
    19,195,265
    
    
    
    
    90.0%22

Residential Properties
The Accounts residential property portfolio currently consists of 20 property investments comprised of first class or luxury multi-family, garden, mid-rise, and high-rise apartment buildings. The portfolio contains approximately 10,300 units located in nine states and has a 95% average occupancy rate as of December 31, 2008. One of
  the residential properties in the portfolio is subject to a mortgage. The complexes generally contain one- to three-bedroom apartment units with a range of amenities, such as patios or balconies, washers and dryers, and central air conditioning. Many of these apartment communities have on-site fitness facilities,
  including some with swimming pools. Rents on each of the properties tend to be comparable with competitive communities and are not subject to rent regulation. The Account is responsible for the expenses of operating its residential properties.
The table below contains detailed information regarding the apartment complexes in the Accounts portfolio as of December 31, 2008.
Property
    
    Location
    
    NumberOf Units
    
    AverageUnit Size(Square Feet)
    
    Avg. RentPer Unit/Per MonthHouston Apartment Portfolio(1)
    
    Houston, TX
    
    
    
    2,295
    
    
    
    
    1,063
    
    
    
    $
    
    1,304Palomino Park
    
    Highlands Ranch, CO
    
    
    
    1,184
    
    
    
    
    1,095
    
    
    
    
    1,180Phoenix Apartment Portfolio(1)
    
    Greater Phoenix Area, AZ
    
    
    
    1,176
    
    
    
    
    995
    
    
    
    
    1,101Kierland Apartment Portfolio(1)
    
    Scottsdale, AZ
    
    
    
    1,000
    
    
    
    
    1,047
    
    
    
    
    1,272South Florida Apartment Portfolio(1)
    
    Boca Raton and Plantation, FL
    
    
    
    550
    
    
    
    
    906
    
    
    
    
    1,147Ashford Meadows
    
    Herndon, VA
    
    
    
    440
    
    
    
    
    1,057
    
    
    
    
    1,5121050 Lenox Park
    
    Atlanta, GA
    
    
    
    407
    
    
    
    
    1,030
    
    
    
    
    1,355The Caruth Apartments
    
    Dallas, TX
    
    
    
    338
    
    
    
    
    1,168
    
    
    
    
    1,715The Reserve at Sugarloaf
    
    Duluth, GA
    
    
    
    333
    
    
    
    
    1,220
    
    
    
    
    1,182The Lodge at Willow Creek
    
    Denver, CO
    
    
    
    316
    
    
    
    
    996
    
    
    
    
    1,067Maroneal
    
    Houston, TX
    
    
    
    309
    
    
    
    
    928
    
    
    
    
    1,312Glenridge Walk
    
    Sandy Springs, GA
    
    
    
    296
    
    
    
    
    1,146
    
    
    
    
    1,375The Colorado
    
    New York, NY
    
    
    
    256
    
    
    
    
    617
    
    
    
    
    3,051Regents Court
    
    San Diego, CA
    
    
    
    251
    
    
    
    
    884
    
    
    
    
    1,747Larkspur Courts Apartments
    
    Larkspur, CA
    
    
    
    248
    
    
    
    
    1,001
    
    
    
    
    2,262Lincoln Woods Apartments
    
    Lafayette Hill, PA
    
    
    
    216
    
    
    
    
    774
    
    
    
    
    1,272The Fairways at Carolina
    
    Margate, FL
    
    
    
    208
    
    
    
    
    1,026
    
    
    
    
    1,124Quiet Waters at Coquina
    
    Deerfield Beach, FL
    
    
    
    200
    
    
    
    
    1,048
    
    
    
    
    1,173Legacy at Westwood
    
    Los Angeles, CA
    
    
    
    187
    
    
    
    
    1,181
    
    
    
    
    3,727Westcreek Apartments
    
    Westlake Village, CA
    
    
    
    126
    
    
    
    
    951
    
    
    
    
    1,882

(1)
    
    
    
    Represents a portfolio containing multiple properties.ITEM 3. LEGAL PROCEEDINGS.
The Account is party to various claims and routine litigation arising in the ordinary course of business. 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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
23

PART II
ITEM 5. MARKET FOR THE REGISTRANTS SECURITIES, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a) 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, 2008 to December 31, 2008, the high and low accumulation unit values for the Account were $314.978 and $267.348, respectively. For the period January 1, 2007 to December 31, 2007, the high and low
  accumulation unit values for the Account were $311.414 and $273.586, respectively.
Approximate Number of Holders. The approximate number of Account contract owners at December 31, 2008 was 1,060,000.
Dividends. Not applicable.
(b) Use of Proceeds: Not applicable.
(c) Purchases of Equity Securities by Issuer: Not applicable.
24

ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data should be considered in conjunction with the Accounts financial statements and notes provided in this Form 10-K (amounts in thousands).
Years Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004Investment income:Real estate income, net
    
    
    $
    
    500,434
    
    
    
    $
    
    529,412
    
    
    
    $
    
    444,783
    
    
    
    $
    
    340,090
    
    
    
    
    239,430Income from real estate joint ventures and limited partnerships
    
    
    
    116,889
    
    
    
    
    93,724
    
    
    
    
    60,789
    
    
    
    
    71,826
    
    
    
    
    71,390Dividends and interest
    
    
    
    81,523
    
    
    
    
    141,914
    
    
    
    
    135,407
    
    
    
    
    70,999
    
    
    
    
    27,509Total investment income
    
    
    
    698,846
    
    
    
    
    765,050
    
    
    
    
    640,979
    
    
    
    
    482,915
    
    
    
    
    338,329Expenses
    
    
    
    153,040
    
    
    
    
    140,294
    
    
    
    
    83,449
    
    
    
    
    56,100
    
    
    
    
    36,728Investment income, net
    
    
    
    545,806
    
    
    
    
    624,756
    
    
    
    
    557,530
    
    
    
    
    426,815
    
    
    
    
    301,601Net realized and unrealized (loss) gain on investments and mortgage loans payable
    
    
    
    (2,513,024
    )
    
    
    
    
    1,438,435
    
    
    
    
    1,056,671
    
    
    
    
    765,970
    
    
    
    
    414,580Net (decrease) increase in net assets resulting from operations
    
    
    
    (1,967,218
    )
    
    
    
    
    2,063,191
    
    
    
    
    1,614,201
    
    
    
    
    1,192,785
    
    
    
    
    716,181Participant transactions
    
    
    
    (4,184,395
    )
    
    
    
    
    1,464,653
    
    
    
    
    1,969,781
    
    
    
    
    2,110,376
    
    
    
    
    1,735,947Net (decrease) increase in net assets
    
    
    $
    
    (6,151,613
    )
    
    
    
    $
    
    3,527,844
    
    
    
    $
    
    3,583,982
    
    
    
    $
    
    3,303,161
    
    
    
    $
    
    2,452,128Years Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004Total assets
    
    
    $
    
    13,576,954
    
    
    
    $
    
    19,232,767
    
    
    
    $
    
    15,759,961
    
    
    
    $
    
    11,685,426
    
    
    
    $
    
    7,843,980Total liabilities
    
    
    
    2,068,030
    
    
    
    
    1,572,230
    
    
    
    
    1,627,268
    
    
    
    
    1,136,715
    
    
    
    
    598,430Total net assets
    
    
    $
    
    11,508,924
    
    
    
    $
    
    17,660,537
    
    
    
    $
    
    14,132,693
    
    
    
    $
    
    10,548,711
    
    
    
    $
    
    7,245,550Number of accumulation units outstanding
    
    
    
    41,542
    
    
    
    
    55,106
    
    
    
    
    50,146
    
    
    
    
    42,623
    
    
    
    
    33,338Net asset value, per accumulation unit
    
    
    $
    
    267.35
    
    
    
    $
    
    311.41
    
    
    
    $
    
    273.65
    
    
    
    $
    
    239.95
    
    
    
    $
    
    210.44Mortgage loans payable
    
    
    $
    
    1,830,040
    
    
    
    $
    
    1,392,093
    
    
    
    $
    
    1,437,149
    
    
    
    $
    
    973,502
    
    
    
    $
    
    499,47925

Quarterly Selected Financial Information
The following selected unaudited financial data for each full quarter of 2008 and 2007 are derived from the financial statements of the Account for the years ended December 31, 2008 and 2007. Certain amounts below have been reclassified in accordance with the reclassifications discussed in Note 1 of the
  Notes to the Financial Statements (amounts in thousands).
2008
    
    Year EndedDecember 31For the Three Months EndedMarch 31
    
    June 30
    
    September 30
    
    December 31Investment income, net
    
    
    $
    
    150,587
    
    
    
    
    147,564
    
    
    
    
    129,345
    
    
    
    
    118,310
    
    
    
    
    545,806Net realized and unrealized loss on investments and mortgage loans payable
    
    
    
    (28,912
    )
    
    
    
    
    (101,069
    )
    
    
    
    
    (462,819
    )
    
    
    
    
    (1,920,224
    )
    
    
    
    
    (2,513,024
    )Net increase (decrease) in net assets resulting from operations
    
    
    $
    
    121,675
    
    
    
    
    46,495
    
    
    
    
    (333,474
    )
    
    
    
    
    (1,801,914
    )
    
    
    
    
    (1,967,218
    )Total return
    
    
    
    0.69
    %
    
    
    
    
    0.27
    %
    
    
    
    
    -2.07
    %
    
    
    
    
    -13.18
    %
    
    
    
    
    -14.15
    %2007
    
    Year EndedDecember 31For the Three Months EndedMarch 31
    
    June 30
    
    September 30
    
    December 31Investment income, net
    
    
    $
    
    142,721
    
    
    
    
    158,635
    
    
    
    
    155,766
    
    
    
    
    167,634
    
    
    
    
    624,756Net realized and unrealized gain on investments and mortgage loans payable
    
    
    
    436,764
    
    
    
    
    355,603
    
    
    
    
    442,916
    
    
    
    
    203,152
    
    
    
    
    1,438,435Net increase in net assets resulting from operations
    
    
    $
    
    579,485
    
    
    
    
    514,238
    
    
    
    
    598,682
    
    
    
    
    370,786
    
    
    
    
    2,063,191Total return
    
    
    
    4.02
    %
    
    
    
    
    3.31
    %
    
    
    
    
    3.66
    %
    
    
    
    
    2.15
    %
    
    
    
    
    13.8
    %26

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF THE ACCOUNTS FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and notes contained in this report and with consideration to the sub-section entitled Forward-Looking Statements, which begins below, and the section entitled Item 1A.
  Risk Factors, which begins on page 6. 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 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 markets, the markets in which the Account operates, managements beliefs, assumptions made by management and the transactions described in this Form 10-K. While management believes the assumptions underlying any of 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. Forward-looking statements involve risks and uncertainties, some of which are referenced in the section of the Form 10-K entitled Item 1A. Risk Factors and in this report below 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, 2008 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.
2008 U.S. ECONOMIC AND COMMERCIAL REAL ESTATE OVERVIEW
The TIAA Real Estate Account (the Account) invests primarily in high-quality, core commercial real estate in order to meet its investment objective of obtaining favorable long-term returns through rental income and the appreciation of its real estate holdings. The Account does not directly invest in single-
  family residential real estate, nor does it currently invest in residential mortgage-backed securities (although it may invest in such securities in the future).
Economic and Capital Markets Overview and Outlook
Global economic and financial market conditions, which weakened in the first half of 2008, deteriorated significantly during the second half of the year as events such as the failure or takeover of a number of major financial institutions and investment banks subsequently escalated into a global recession and
  credit crisis. Credit markets became so constrained that the Federal Reserve took several unprecedented steps to stimulate commercial bank lending, including reducing the federal funds rate to zero, and the U.S. Treasury established a $700 billion Troubled Asset Relief Program (TARP) initially to assist
  institutions holding significant illiquid securitized assets. By year-end, over $350 billion of the TARP had been funded, with the bulk going to large financial institutions like Citigroup, Wells Fargo and Bank of America, as well as a number of smaller U.S. banks. In addition to the large financial institutions,
  companies such as AIG, General Motors and Chrysler also received TARP funding. These actions were intended to loosen credit markets and bolster investor confidence, but were only marginally successful as credit markets remained largely constrained through the end of 2008. During the fourth quarter, the
  Federal Reserve also authorized the
27

Open Market Desk of the Federal Reserve Bank of New York to purchase debt from Fannie Mae and Freddie Mac and to buy agency-backed mortgage-related securities in an effort to stimulate the U.S. housing market. While mortgage interest rates fell and helped stimulate a small increase in mortgage
  refinancings, home sales remain depressed and home values continued to decline. Events of the third and fourth quarters, coupled with growing concern about economic conditions, unsettled investors who fled the stock markets for the safety of U.S. government securities. As a result, interest rates on 10-year
  Treasuries dropped below 3.0% and settled at 2.25% as of year end, a level not seen since the early 1950s. Equity markets also declined sharply. The Dow Jones Industrial Average fell 4.7% during the third quarter and another 19.1% during the fourth quarter. The broader S&P 500 Index retreated even further,
  dropping 9.4% during the third quarter and 22.6% during the fourth quarter.
Other indicators of the deterioration in economic conditions include U.S. Gross Domestic Product (GDP), a basic indicator of economic activity, which grew modestly in the first half of the year but fell 0.5% in the third quarter and declined 6.2% in the fourth quarter. The 6.2% decline in fourth quarter
  GDP was the largest drop in quarterly GDP since 1982. Like GDP, U.S. payroll employment declined in 2008 with job cuts accelerating over the course of the year. Late in 2008, the National Bureau of Economic Research (NBER) announced that economic activity had peaked in December 2007, and that the
  U.S. economy had entered a recession in December 2007. (Because of data revisions and lags in data availability, recessions are often announced retroactively by the NBER.) At the time of the NBER announcement, the recession was already a year old and already one of the longest recessions since World War II.
  Economic conditions, which are summarized in the table below, are generally expected to deteriorate further through the first half of 2009 and remain weak at best during the second half of the year. Most economists expect job losses to continue through the first half of 2009 as businesses seek to cut costs in
  response to weak consumer demand and the contraction of the global economy. Nearly three million jobs were lost in 2008, a total which has already surpassed the number of jobs lost during each of the last two recessions.
Economic Indicators*
2007
    
    2008
    
    2008Q1
    
    2008Q2
    
    2008Q3
    
    2008Q4
    
    Forecasted2009Economy (% Growth)(1)Gross Domestic Product (GDP)
    
    
    
    2.0
    %
    
    
    
    
    1.1
    %
    
    
    
    
    0.9
    %
    
    
    
    
    2.8
    %
    
    
    
    
    -0.5
    %
    
    
    
    
    -6.2
    %
    
    
    
    
    -1.6
    %Inflation (Consumer Price Index)
    
    
    
    4.1
    %
    
    
    
    
    0.1
    %
    
    
    
    
    3.1
    %
    
    
    
    
    7.9
    %
    
    
    
    
    2.6
    %
    
    
    
    
    -12.7
    %
    
    
    
    
    -0.4
    %Employment Growth (Thousands)
    
    
    
    1,152
    
    
    
    
    -2,974
    
    
    
    
    -338
    
    
    
    
    -458
    
    
    
    
    -624
    
    
    
    
    -1,554
    
    
    
    
    N/AInterest Rates(2)10 Year Treasury
    
    
    
    4.63
    %
    
    
    
    
    3.66
    %
    
    
    
    
    3.66
    %
    
    
    
    
    3.89
    %
    
    
    
    
    3.86
    %
    
    
    
    
    3.25
    %
    
    
    
    
    2.70
    %Federal Funds Rate
    
    
    
    4.25
    %
    
    
    
    
    0.0-0.25
    %
    
    
    
    
    2.25
    %
    
    
    
    
    2.00
    %
    
    
    
    
    2.00
    %
    
    
    
    
    0.0-0.25
    %
    
    
    
    
    N/ASources: BEA, BLS, Federal Reserve, Blue Chip Consensus Forecasts


*
    
    
    
    Data subject to revision(1)
    
    
    
    GDP growth rates are annual rates; inflation rates are annualized rates; employment growth is a quarterly change.(2)
    
    
    
    The Treasury rates are an average over the stated time period. The Federal Funds rates are as of the end of the stated time period.N/A indicates data not available.
One of the few bright spots is that inflation concerns have dissipated rapidly as oil prices declined from a peak of approximately $150 per barrel in mid-2008 to $50 per barrel at year end 2008. While the price decline has eased the burden on U.S. households, the magnitude of the decline indicates how
  significantly the global economy has deteriorated. Other broad economic indicators, which are summarized in the table below, suggest that a particularly deep recession is underway. The 2008 holiday season was one of the weakest on record with retail sales falling by 1.5% in December. Households significantly
  curtailed spending due to concerns about job security and the declines in household wealth resulting from the downturn in the equity markets. Similarly, as seen in the table below, consumer confidence plummeted in December to a new record low of 38, underscoring the uncertainty felt by consumers in the face of
  rapidly deteriorating economic conditions. At the same time, the housing market showed no signs of improvement despite favorable mortgage interest rates.
28

Broad Economic Indicators*
Index 1985=100
    
    2007
    
    2008
    
    October2008
    
    November2008
    
    December2008Consumer Confidence
    
    
    
    103.4
    
    
    
    
    57.9
    
    
    
    
    38.8
    
    
    
    
    44.7
    
    
    
    
    38.0% ChangeRetail Sales(1)
    
    
    
    5.2
    %
    
    
    
    
    1.8
    %
    
    
    
    
    -1.2
    %
    
    
    
    
    -0.2
    %
    
    
    
    
    -1.5
    %Housing Starts(2)
    
    
    
    -25
    %
    
    
    
    
    -33
    %
    
    
    
    
    -40
    %
    
    
    
    
    -45
    %
    
    
    
    
    -45
    %New Home Sales
    
    
    
    -26
    %
    
    
    
    
    -38
    %
    
    
    
    
    -44
    %
    
    
    
    
    -38
    %
    
    
    
    
    -45
    %Unemployment Rate
    
    
    
    4.6
    %
    
    
    
    
    5.8
    %
    
    
    
    
    6.6
    %
    
    
    
    
    6.8
    %
    
    
    
    
    7.2
    %

*
    
    
    
    Data subject to revision(1)
    
    
    
    Retail sales are exclusive of autos, auto parts and gas, and indicate the monthly change from the preceding month.(2)
    
    
    
    Housing data represent the percentage change from the same month in the previous year.Sources: Conference Board, Census Bureau, Bureau of Labor Statistics
The Federal Reserves January 2009 Beige Book, which reports on regional economic activity to the end of November 2008, provides a synopsis of the difficulties experienced by consumers and businesses throughout the U.S. According to the report, retail sales were generally characterized as weak across all
  twelve Federal Reserve Districts (Districts) despite deep discounting by retailers that started much earlier than usual. Housing markets also remained weak, with most Districts experiencing further reductions in home sales, prices and/or homebuilding. Residential, commercial and industrial lending was reported
  to be constrained in most Districts due to tightening lending standards. Commercial real estate activity was affected by limited credit availability and had deteriorated in most Districts in conjunction with weakening labor market conditions. Layoffs continued in most Districts, across virtually all industries.
The rapid deterioration of the U.S. economy during the fourth quarter suggests that the economy will remain in recession through the first half of 2009 and probably into the second half of the year. Losses by financial institutions have continued and institutions which received sizeable amounts of the initial
  disbursements from the TARP, including Citigroup and Bank of America, are slated to receive additional funds during the first quarter of 2009. Further, other industries and sectors are now in need of aid. These include the U.S. auto industry, which received $17 billion in December 2008, but which has already
  indicated that these funds will not carry them through the necessary redesign of their product lines. Other industries that have been said to be seeking assistance include the steel industry and commercial real estate, as property owners face difficulties in refinancing maturing loans. Businesses are likely to remain
  under pressure during 2009 as economic conditions continue to deteriorate.
Consequently, prospects for 2009 depend in large part on the success of unprecedented monetary and fiscal policy actions along with the $787 billion fiscal stimulus package that was recently signed into law by President Obama. The plan is designed to both shore up U.S. capital and financial markets and to
  create jobs through consumer spending and business investment. The extensive plan calls for approximately $500 billion of government spending and roughly $280 billion of tax cuts for individuals and businesses with funds targeting investment and job creation in health care, energy, education and highway
  construction. Financial aid to state governments under pressure from a shrinking revenue base is also included. Plans to bolster the U.S. housing market have also been announced with a proposal to provide $75 billion to assist homeowners facing foreclosure and another $200 billion for mortgage giants Fannie Mae
  and Freddie Mac. Finally, the remaining $350 billion of TARP funds will be disbursed to enhance the liquidity of the banking industry and assist various industries. However bold and aggressive, federal programs and monetary policy actions will require time to achieve their desired impact. Consequently, economic
  activity is likely to remain extremely weak at best during most of 2009, but it is hoped that the necessary preconditions for a recovery will be established.
As economic data have indicated that the recession is becoming increasingly severe, members of the Federal Reserve Open Market Committee (FOMC) have repeatedly lowered expectations for GDP growth in 2009, and particularly for the first half of the year. While members caution that considerable
  downside risks to economic activity remain, most still expect the economy to start to expand modestly during the third or fourth quarter of 2009. Similarly, prominent private sector economists surveyed as part of the January 2009 Blue Chip Financial Forecasts (Blue Chip) publication have repeatedly lowered
  growth expectations but still expect a modest recovery in economic activity to start in the second half of 2009. On the whole, the Blue Chip consensus forecast calls for GDP to decline by 1.6% in 2009. However, the benefits of monetary
29

and fiscal policy actions coupled with dramatically reduced energy costs should become fully evident in 2010 when GDP growth on the order of 2.4% is expected. FOMC members expect a GDP decline in the range of -0.5% to -1.3% in 2009 but which will be followed by GDP growth of 2.5% to 3.3% in 2010.
  While the longer term outlook of both FOMC members and many private sector economists is positive, both caution that considerable uncertainty about the prospects for U.S. and global economic growth remain.
Real Estate Market Conditions and Outlook
With credit markets constrained and access to financing limited, commercial property sales activity fell sharply in 2008. Preliminary data from Real Capital Analytics (RCA), a frequently cited industry source of commercial real estate transactions data, indicate that commercial property sales totaled $130
  billion in 2008, a decline of nearly 70% compared with 2007 totals. Transaction activity, which had been depressed all year, fell sharply during the fourth quarter when just $17 billion of property traded hands compared to $33 billion during the third quarter of 2008. Both buyers and sellers struggled with property
  pricing in an environment where few properties have sold. In addition, transactions are taking much longer to complete, as buyers undertake extensive due diligence and then press for price reductions prior to closing. RCA notes that bid-ask spreads between buyers and sellers appeared to have narrowed largely
  because sellers were forced to become more realistic with their asking prices in order to consummate a sale. Distressed sellers were under particular pressure to lower prices, and though the number of distressed sales was limited, those sales are expected to increase in 2009 as economic conditions are expected to
  weaken further.
As with other types of lending, commercial mortgage lending was limited throughout the year and fell precipitously in the second half of 2008. Traditional whole-loan lenders such as life insurance companies tightened standards, and the activity in the commercial mortgage-backed securities (CMBS) market
  decelerated sharply and was virtually shut down as of year-end 2008. With limited capital available, buyers who relied on mortgage funds to purchase properties dropped out of the market leaving only a handful of all-cash buyers who could use their newfound negotiating leverage to drive down prices. As a result,
  commercial property prices declined in the third quarter and even more sharply in the fourth quarter. According to Moodys Investors Services, commercial property prices declined 14.9% on average in 2008. Data in the table below indicate that price declines in top markets have been relatively less severe but still
  significant.
2008 Sales Price ChangeNational
    
    Top 10 MSAs*Apartments
    
    
    
    -13.6
    %
    
    
    
    
    -12.3
    %Office
    
    
    
    -13.5
    %
    
    
    
    
    -7.8
    %Retail
    
    
    
    - 8.5
    %
    
    
    
    
    -4.1
    %Industrial
    
    
    
    -13.9
    %
    
    
    
    
    -7.1
    %

*
    
    
    
    Based on total value of property sold in Metropolitan Statistical Area (MSA).Source: Moodys/REAL CPPI and Real Capital Analytics.
The lack of property sales has made real property valuations difficult. Appraisers rely in large part on sales of comparablesbuildings of similar quality and characteristicsas a part of the valuation process, but with few sales and frequently no truly comparable sales, real time indicators of market pricing are not
  available. The recession and weakening property market fundamentals have also forced appraisers to dramatically adjust the assumptions that are used in property valuations. As noted by the Accounts independent fiduciary in its annual report to the trustees, virtually all previous investor assumptions regarding
  net absorption, tenant retention, rent growth, credit loss, and exit cap rates that were utilized to develop peak property valuations have been revised, as the credit crisis, uncertainty regarding the severity of the U.S. recession, and growing fears of a major global recession have intensified. As a result, valuation
  write-downs have occurred throughout the industry. As reported by the National Council of Real Estate Investment Fiduciaries (NCREIF), the appreciation component of the NCREIF Property Index (NPI) declined 9.5% in the fourth quarter of 2008. Looking ahead, additional declines in commercial property
  values appear likely to occur given the ongoing deterioration of the U.S. economy.
The national recession contributed to rising vacancy rates across commercial real estate property markets during the fourth quarter of 2008. The table below summarizes the top five markets in which the Account had exposure as of December 31, 2008. The top five markets account for more than one-third of
  the
30

Accounts total real estate portfolio in terms of value. Despite rising vacancy rates nationally, occupancy in each of the top five markets has held up well.
Metropolitan Statistical Area (MSA)
    
    PercentLeased(Weighted)
    
    # of PropertyInvestments
    
    MSA as a% of Total RealEstate Portfolio
    
    MSA as a% of TotalInvestmentsWashington-Arlington-AlexandriaDC-VA-MD-WV
    
    
    
    99.1%
    
    
    
    
    9
    
    
    
    
    11.07%
    
    
    
    
    10.35%Boston-Quincy MA
    
    
    
    91.7%
    
    
    
    
    5
    
    
    
    
    7.30%
    
    
    
    
    6.82%Los Angeles-Long Beach-Glendale CA
    
    
    
    92.5%
    
    
    
    
    8
    
    
    
    
    7.01%
    
    
    
    
    6.55%San Francisco-San Mateo-Redwood City CA
    
    
    
    94.8%
    
    
    
    
    4
    
    
    
    
    6.23%
    
    
    
    
    5.83%Houston-Bay Town-Sugar Land TX
    
    
    
    96.9%
    
    
    
    
    3
    
    
    
    
    5.96%
    
    
    
    
    5.57%Office
In the office sector, employment growth in key office-users such as finance, professional and business services tends to drive the demand for office space, though typically with a lag due to the longer term nature of leasing cycles. Persistent labor market weakness, particularly in the finance and professional
  fields, caused the national office vacancy rate to rise to 13.9% in the fourth quarter of 2008 from 13.5% in the third quarter of 2008 as both finance and professional and business services job losses intensified in the fourth quarter. By comparison, the vacancy rate of the Accounts office portfolio was 6.4% in the
  fourth quarter of 2008. Though metropolitan area vacancies in the Accounts top office markets drifted up or remained steady, vacancies in each remained below the national average. The only significant change was in the Accounts Boston properties where the average vacancy increased to 7.8% as a result of two
  large lease expirations. While vacancy data for the Accounts properties in top markets were in balance as of year-end 2008, both market conditions and occupancies in the Accounts portfolio will be challenged in 2009 as job losses, slumping demand for office space, and corporate cost cutting are likely to push
  vacancies higher in most metropolitan markets. The table below compares the average vacancy rate of properties in the Accounts top office markets with their respective metropolitan area averages.
AccountWeighted AverageVacancy
    
    MetropolitanStatistical AreaVacancy*Sector
    
    Metropolitan Statistical Area (MSA)
    
    Total Sectorby MSA ($M)
    
    % of TotalInvestments
    
    2008Q3
    
    2008Q4
    
    2008Q3
    
    2008Q4Office
    
    National
    
    
    
    
    
    
    
    5.5%
    
    
    
    
    6.4%
    
    
    
    
    13.5%
    
    
    
    
    13.9%1
    
    Washington-Arlington-AlexandriaDC-VA-MD-WV
    
    
    $
    
    1,219.2
    
    
    
    
    9.1%
    
    
    
    
    0.7%
    
    
    
    
    0.6%
    
    
    
    
    11.7%
    
    
    
    
    12.0%2
    
    Boston-Quincy MA
    
    
    $
    
    880.3
    
    
    
    
    6.6%
    
    
    
    
    2.0%
    
    
    
    
    7.8%
    
    
    
    
    11.0%
    
    
    
    
    11.0%3
    
    San Francisco-San Mateo-Redwood City CA
    
    
    $
    
    706.4
    
    
    
    
    5.3%
    
    
    
    
    6.0%
    
    
    
    
    5.4%
    
    
    
    
    9.7%
    
    
    
    
    10.6%4
    
    Seattle-Bellevue-Everett WA
    
    
    $
    
    596.9
    
    
    
    
    4.5%
    
    
    
    
    3.2%
    
    
    
    
    3.7%
    
    
    
    
    9.9%
    
    
    
    
    11.5%5
    
    Los Angeles-Long Beach-Glendale CA
    
    
    $
    
    554.0
    
    
    
    
    4.2%
    
    
    
    
    8.4%
    
    
    
    
    8.0%
    
    
    
    
    11.7%
    
    
    
    
    12.8%* Source: Torto Wheaton Research
Industrial
Industrial market fundamentals are influenced by macroeconomic factors such as industrial production, international trade flows and employment growth in the manufacturing, wholesale trade, transportation and warehousing industries. Weakened global consumer demand caused a drop in both import and
  export activity, which in turn contributed to weaker industrial market conditions as indicated in the table below. The national vacancy rate increased to 11.3% in the fourth quarter from 10.7% in the third quarter of 2008. In comparison, the vacancy rate for the Accounts industrial portfolio was higher at 12.3%.
  This differential is attributable to an above-average vacancy rate in the Accounts investments in the Riverside-San Bernardino metropolitan area, and specifically to the loss of two large tenants. The Riverside-San Bernardino market was also affected by the downturn in global trade as cargo volumes at the ports of
  Los Angeles and Long Beach,
31

which are the nations two largest ports, declined by 15% and 10%, respectively, in 2008. Though the vacancy rate in the Los Angeles industrial market was little changed and remained the lowest in the nation at 5.5%, vacancies in the Riverside-San Bernardino market jumped sharply as new supply hit the market
  at a time of weakening demand. New construction has since ceased in all practical respects, but a rebound in trade flows will be necessary to revive tenant demand. The table below compares the average vacancy rate of properties in the Accounts top industrial markets to their respective metropolitan area averages.
AccountWeighted AverageVacancy
    
    MetropolitanStatistical AreaVacancy*Sector
    
    Metropolitan Statistical Area (MSA)
    
    Total Sectorby MSA ($M)
    
    % of TotalInvestments
    
    2008Q3
    
    2008Q4
    
    2008Q3
    
    2008Q4Industrial
    
    National
    
    
    
    
    
    
    
    12.3%
    
    
    
    
    12.3%
    
    
    
    
    10.7%
    
    
    
    
    11.3%1
    
    Riverside-San Bernardino-Ontario CA
    
    
    $
    
    473.9
    
    
    
    
    3.6%
    
    
    
    
    21.1%
    
    
    
    
    21.1%
    
    
    
    
    13.6%
    
    
    
    
    14.7%2
    
    Dallas-Plano-Irving TX
    
    
    $
    
    180.1
    
    
    
    
    1.4%
    
    
    
    
    5.5%
    
    
    
    
    7.1%
    
    
    
    
    12.9%
    
    
    
    
    13.6%3
    
    Chicago-Naperville-Joliet IL
    
    
    $
    
    142.0
    
    
    
    
    1.1%
    
    
    
    
    2.9%
    
    
    
    
    1.7%
    
    
    
    
    12.0%
    
    
    
    
    12.6%4
    
    Los Angeles-Long Beach-Glendale CA
    
    
    $
    
    136.2
    
    
    
    
    1.0%
    
    
    
    
    9.7%
    
    
    
    
    9.6%
    
    
    
    
    5.4%
    
    
    
    
    5.5%5
    
    Atlanta-Sandy Springs-Marietta GA
    
    
    $
    
    123.0
    
    
    
    
    0.9%
    
    
    
    
    1.3%
    
    
    
    
    1.3%
    
    
    
    
    13.5%
    
    
    
    
    14.6%* Source: Torto Wheaton Research
Multi-Family
Apartment market conditions weakened considerably during the fourth quarter of 2008, as the apartment vacancy rate jumped to 6.9%, as compared to 5.8% in the third quarter. A year-over-year comparison, which accounts for the seasonality inherent in apartment leasing, shows an even bigger jump as
  vacancy rates increased from 4.8% during the fourth quarter of 2007 to 6.9% at the end of 2008. Vacancies rose due to a combination of weak demand and increased supply, often in the form of unsold single-family homes and condominiums being offered for rent. Competition from unsold single-family homes and
  condominiums has increased as housing market conditions have continued to weaken, and pressure has been most intense in markets like Phoenix and South Florida where the housing market bust has been most severe. The average vacancy rate for the Accounts apartment portfolio was 5.3% during the fourth
  quarter of 2008, considerably below the national average. The table below compares the average vacancy rate of properties in the Accounts top apartment markets with their respective metropolitan area averages.
32

AccountWeighted AverageVacancy
    
    MetropolitanStatistical AreaVacancy*Sector
    
    Metropolitan Statistical Area (MSA)
    
    Total Sectorby MSA ($M)
    
    % of TotalInvestments
    
    2008Q3
    
    2008Q4
    
    2008Q3
    
    2008Q4Apartment
    
    National
    
    
    
    
    
    
    
    4.3%
    
    
    
    
    5.3%
    
    
    
    
    5.8%
    
    
    
    
    6.9%1
    
    Houston-Bay Town-Sugar Land TX
    
    
    $
    
    305.9
    
    
    
    
    2.3%
    
    
    
    
    3.4%
    
    
    
    
    3.3%
    
    
    
    
    7.5%
    
    
    
    
    7.1%2
    
    Phoenix-Mesa-Scottsdale AZ
    
    
    $
    
    276.1
    
    
    
    
    2.1%
    
    
    
    
    5.5%
    
    
    
    
    5.5%
    
    
    
    
    9.8%
    
    
    
    
    10.2%3
    
    Denver-Aurora CO
    
    
    $
    
    213.0
    
    
    
    
    1.6%
    
    
    
    
    6.8%
    
    
    
    
    8.8%
    
    
    
    
    5.2%
    
    
    
    
    7.2%4
    
    New York-Wayne-White Plains NY-NJ
    
    
    $
    
    153.0
    
    
    
    
    1.2%
    
    
    
    
    2.0%
    
    
    
    
    2.0%
    
    
    
    
    6.0%
    
    
    
    
    6.2%5
    
    Atlanta-Sandy Springs-Marietta GA
    
    
    $
    
    140.0
    
    
    
    
    1.1%
    
    
    
    
    3.0%
    
    
    
    
    5.1%
    
    
    
    
    8.5%
    
    
    
    
    10.0%* Source: Torto Wheaton Research
Retail
Vacancies in neighborhood and community centers throughout the U.S. increased to 10.7% during the fourth quarter of 2008, up from 10.1% during the third quarter. In comparison, the average vacancy rate for the Accounts retail portfolio stood at 5.3% as of the end of 2008. Retail market conditions are
  dictated by trends in consumer spending. The 2008 holiday season was one of the worst on record for retailers as households drastically reduced their spending. Even with the significant decline in energy costs, household spending is expected to remain low until the job market and consumer confidence improves.
  The fourth quarter of 2008 saw several retailers file for bankruptcy protection, and the trend continued into the first month of 2009, with retailers such as Mervyns, Circuit City, KB Toys and Boscovs filing for bankruptcy protection. Not only are more bankruptcy filings expected in the coming months, but store
  closings are also likely to increase as retailers close unproductive or less productive stores. As a result, retail vacancies are generally expected to increase further during 2009. In addition, retailers that remain could seek rent relief or terminate leases if a centers occupancy falls below a specified level or if co-tenancy
  clauses are triggered by the loss of an anchor tenant or several major tenants.
2008 Summary and 2009 Outlook
Real estate market conditions have been adversely affected by the economic slowdown, which has reduced the tenant demand for all types of space. Going forward, there is little evidence that market conditions will improve in the near term as economic and capital markets conditions remain unsettled, and the
  monetary and fiscal policy actions that have been implemented will require time to have an effect. Economic conditions are likely to remain weak well into 2009. Fortunately, as the table below indicates, supply resulting from new construction will be relatively modest in comparison to the economic and real estate
  downturns in 1989 through 1991 and 1999 through 2001. While construction will be modest, space will also be returned to the market due to corporate bankruptcies, consolidation and cost-cutting. Competition for available tenants is likely to intensify as vacancies rise and put downward pressure on rents.
Historic and Projected Construction *Forecasted
    
    Average2008**
    
    2009
    
    1989-1991
    
    1999-2001Office
    
    
    
    68
    
    
    
    
    74
    
    
    
    
    84
    
    
    
    
    92Industrial
    
    
    
    180
    
    
    
    
    98
    
    
    
    
    181
    
    
    
    
    253Apartment
    
    
    
    220
    
    
    
    
    205
    
    
    
    
    257
    
    
    
    
    212Retail
    
    
    
    30
    
    
    
    
    11
    
    
    
    
    45
    
    
    
    
    32

*
    
    
    
    In millions of sq. ft. except for apartments which are in thousands of units.**
    
    
    
    Apartment and Retail 2008 figures represent estimates.Source: Torto Wheaton Research
33

Notwithstanding the challenges facing the commercial real estate industry, management believes that the Accounts roster of credit-worthy tenants and high quality assets in historically sound markets may provide a buffer against economic and capital markets conditions. The Account has a tradition of
  conservative management, utilizing a core investment strategy, which includes stabilized assets with high occupancy, minimal near term lease rollover, institutional quality properties, markets and locations. With 108 real estate property investments and a mix of office, industrial, retail and apartment properties
  located across the U.S. and Europe (two properties), the Accounts property portfolio is highly diversified and not overly exposed to a particular region of the country or property type. In combination, these attributes are expected to provide a measure of stability in the face of extremely challenging conditions.
Despite significant economic challenges, the Accounts properties are approximately 93% leased, with existing leases in place to generate cash flow for debt service payments and income returns. As shown below, the income return has historically been a major component of the Accounts total return, and
  management believes that it is likely to offset a portion of the negative capital return that is expected to occur as a result of property valuation adjustments in 2009. Nonetheless, maintaining historic income returns will be challenging as rising market vacancies, declining rents and slumping space demand are likely
  to affect the performance of the Accounts markets and properties in 2009. During market downturns, property cash flow typically declines as landlords are required to offer more generous rental packages in order attract new tenants and retain existing tenants. Concessions to tenants could be required until
  economic and real estate market conditions improve markedly.

Investments as of December 31, 2008
As of December 31, 2008, the Account had total net assets of $11.5 billion, a 25% decrease from the end of the third quarter of 2008 and a 35% decrease from December 31, 2007. The decrease in net assets was due to net participant transfers out of the Account, combined with capital depreciation on the
  Accounts investment portfolio and a 13% decrease in net investment income during the year ended December 31, 2008 as compared to the year ended December 31, 2007.
As of December 31, 2008, the Account owned a total of 108 real estate property investments (96 of which were wholly-owned, 12 of which were held in joint ventures). The real estate portfolio included 45 office properties (5 of which were held in joint ventures and one located in London, England), 26
  industrial properties (including one held in a joint venture), 20 apartment complexes, 16 retail properties (including five held in joint ventures and one located in Paris, France), and a 75% joint venture interest in a portfolio of storage facilities. Of the 108 real estate property investments, 27 are subject to debt
  (including seven joint venture property investments). Total debt on the Accounts wholly-owned real estate portfolio as of December 31, 2008 was $1.8 billion representing 15.9% of Total Net Assets. The Accounts share of joint venture debt is netted out in determining the joint venture values shown in the
  Statement of Investments, but, when that debt is also considered, total debt on the Accounts portfolio as of December 31, 2008 was $3.7 billion, representing 32.3% of Total Net Assets. The Account currently has no account-level debt.
34

During 2008, the Account purchased one property investment and one tenants leasehold interest at an existing property investment for a combined total net equity investment of $163.1 million as displayed in the chart below (amounts in thousands):
Property Investments Acquired in 2008
Property Name
    
    PropertyType
    
    City
    
    State
    
    NetAcquisitionCost
    
    JointVenture/%Interest
    
    ThirdPartyDebt
    
    GrossAcquisitionCostThe Colorado(1)
    
    Apartments
    
    New York
    
    
    
    NY
    
    
    
    $
    
    45,228
    
    
    
    
    No
    
    
    
    
    
    
    
    
    $
    
    45,228Great West IndustrialPortfolio
    
    Industrial
    
    Rancho Cucamonga
    
    
    
    CA
    
    
    
    
    117,854
    
    
    
    
    No
    
    
    
    
    
    
    
    
    
    117,864Total
    
    
    
    
    
    
    
    
    $
    
    163,082
    
    
    
    
    
    $
    
    
    
    
    
    $
    
    163,092

(1)
    
    
    
    The Account purchased a leasehold interest at The Colorado in February of 2008, which is an addition to the existing investment.The Account also sold four property investments and one partial property investment for a net sales price (less selling expenses) of approximately $91.4 million. The properties sold recognized a realized loss of approximately $18.1 million. The properties are listed below (amounts in thousands):
Property Investments Sold in 2008
Property Name
    
    Property Type
    
    City
    
    State
    
    Net Sales Price(less selling expense)Royal St. George
    
    Apartment
    
    West Palm Beach
    
    FL
    
    
    $
    
    22,783Columbus Office Portfolio
    
    Office
    
    Columbus
    
    OH
    
    
    
    21,643FedEx Industrial Portfolio
    
    Industrial
    
    Crofton
    
    MD
    
    
    
    10,153Chicago CalEast Industrial Portfolio(1)
    
    Industrial
    
    Bolingbrook
    
    IL
    
    
    
    5,393Eastern Northern Central RA
    
    Industrial
    
    Chicago
    
    IL
    
    
    
    31,426Total
    
    
    
    
    
    
    
    
    $
    
    91,398

(1)
    
    
    
    Partial sale of an industrial portfolio which was part of an existing portfolio35

The following charts reflect the diversification of the Accounts real estate investments by region and property type and list its ten largest holdings. All information is based on the values of the Accounts properties at December 31, 2008.
Diversification by Market Value(1)
East
    
    West
    
    South
    
    Midwest
    
    Foreign(2)
    
    TotalOffice
    
    
    
    21.7
    %
    
    
    
    
    19.4
    %
    
    
    
    
    11.9
    %
    
    
    
    
    1.2
    %
    
    
    
    
    1.9
    %
    
    
    
    
    56.1
    %Apartment
    
    
    
    2.1
    %
    
    
    
    
    5.9
    %
    
    
    
    
    4.9
    %
    
    
    
    
    0.0
    %
    
    
    
    
    0.0
    %
    
    
    
    
    12.9
    %Industrial
    
    
    
    1.7
    %
    
    
    
    
    6.9
    %
    
    
    
    
    3.9
    %
    
    
    
    
    1.3
    %
    
    
    
    
    0.0
    %
    
    
    
    
    13.8
    %Retail
    
    
    
    4.2
    %
    
    
    
    
    1.0
    %
    
    
    
    
    9.0
    %
    
    
    
    
    0.5
    %
    
    
    
    
    2.0
    %
    
    
    
    
    16.7
    %Storage(3)
    
    
    
    0.2
    %
    
    
    
    
    0.2
    %
    
    
    
    
    0.1
    %
    
    
    
    
    0.0
    %
    
    
    
    
    0.0
    %
    
    
    
    
    0.5
    %Total
    
    
    
    29.9
    %
    
    
    
    
    33.4
    %
    
    
    
    
    29.8
    %
    
    
    
    
    3.0
    %
    
    
    
    
    3.9
    %
    
    
    
    
    100
    %(1)
    
    
    
    Market values for properties held in joint venture investments are net of debt.(2)
    
    
    
    Represents real estate investments in the United Kingdom and France.(3)
    
    
    
    Represents a portfolio of storage facilities.Properties in the East region are located in: ME, NH, VT, MA, RI, CT, NY, NJ, PA, DE, MD, DC, WV, VA, NC, SC, KY
Properties in the Midwest region are located in: WI, MI, OH, IN, IL, MN, IA, MO, KS, NE, ND, SD
Properties in the South region are located in: TN, MS, AL, GA, FL, OK, AR, LA, TX
Properties in the West region are located in: MT, ID, WY, CO, NM, AZ, UT, NV, WA, OR, CA, AK, HI
Top Ten Largest Real Estate Property Investments
Property or Joint Venture
      Name
    
    City
    
    State
    
    Type
    
    Value ($M)(a)
    
    Property as a% of TotalReal EstatePortfolio(b)
    
    Property as a% of TotalInvestmentsDDR Joint Venture
    
    Various
    
    USA
    
    Retail
    
    
    $
    
    712.8(c
    )
    
    
    
    
    5.71
    %
    
    
    
    
    5.34%1001 Pennsylvania Avenue
    
    Washington
    
    DC
    
    Office
    
    
    $
    
    550.8(d
    )
    
    
    
    
    4.41
    %
    
    
    
    
    4.12%Four Oaks Place
    
    Houston
    
    TX
    
    Office
    
    
    $
    
    438.0(e
    )
    
    
    
    
    3.51
    %
    
    
    
    
    3.28%Fourth and Madison
    
    Seattle
    
    WA
    
    Office
    
    
    $
    
    407.5(f
    )
    
    
    
    
    3.26
    %
    
    
    
    
    3.05%50 Fremont
    
    San Francisco
    
    CA
    
    Office
    
    
    $
    
    386.6(g
    )
    
    
    
    
    3.10
    %
    
    
    
    
    2.90%780 Third Avenue
    
    New York City
    
    NY
    
    Office
    
    
    $
    
    341.0
    
    
    
    
    2.73
    %
    
    
    
    
    2.55%99 High Street
    
    Boston
    
    MA
    
    Office
    
    
    $
    
    320.1(h
    )
    
    
    
    
    2.56
    %
    
    
    
    
    2.40%The Newbry
    
    Boston
    
    MA
    
    Office
    
    
    $
    
    315.6
    
    
    
    
    2.53
    %
    
    
    
    
    2.36%The Florida Mall
    
    Orlando
    
    FL
    
    Retail
    
    
    $
    
    281.9
    
    
    
    
    2.26
    %
    
    
    
    
    2.11%Ontario Industrial Portfolio
    
    Ontario
    
    CA
    
    Industrial
    
    
    $
    
    278.0(i
    )
    
    
    
    
    2.23
    %
    
    
    
    
    2.08%

(a)
    
    
    
    Value as reported in the December 31, 2008 Statement of Investments. Investments owned 100% by TIAA are reported based on fair value. Investments in joint ventures are reported at fair value and are based on the equity method of accounting and are presented at the Accounts ownership interest.(b)
    
    
    
    Total Real Estate Portfolio excludes the mortgage loan receivable.(c)
    
    
    
    This property is held in a 85%/15% joint venture with Developers Diversified Realty Corporation (DDR), and consists of 65 retail properties located in 13 states and is shown net of debt.(d)
    
    
    
    This property is shown gross of debt. The value of the Accounts interest less leverage is $348.1 Million.(e)
    
    
    
    This property is shown gross of debt. The value of the Accounts interest less leverage is $239.7 Million.(f)
    
    
    
    This property is shown gross of debt. The value of the Accounts interest less leverage is $264.7 Million.(g)
    
    
    
    This property is shown gross of debt. The value of the Accounts interest less leverage is $253.6 Million.(h)
    
    
    
    This property is shown gross of debt. The value of the Accounts interest less leverage is $152.4 Million.(i)
    
    
    
    This property is shown gross of debt. The value of the Accounts interest less leverage is $269.0 Million.As of December 31, 2008, the Accounts net assets totaled $11.5 billion. At December 31, 2008, the Account held a total of 108 real estate property investments (including its interests in 12 real estate-related joint ventures). As of that date, the Account also held investments in real estate limited partnerships,
  representing 2.15% of Total Investments, government agency notes, representing 1.99% of Total Investments, commercial paper, representing 1.84% of Total Investments, and a mortgage loan receivable, representing 0.54% of Total Investments.
36

Results of Operations
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
Performance
The Accounts total return was negative 14.2% for the year ended December 31, 2008. This was a significant decline compared to the positive return of 13.8% for the year ended December 31, 2007. The Accounts performance during the year ended December 31, 2008 reflects a decline in the aggregate net
  asset value of the Accounts real estate property investments, including investments owned in joint ventures and limited partnerships, as well as lower income from marketable securities.
After several years of increasing investor demand for commercial real estate and historic capital appreciation, the weakened economy and faltering financial and credit markets have brought transaction activity to historically low levels, bringing a halt to capital appreciation in many markets. The number of
  individual property investments with valuation decreases has increased significantly as evidenced by the Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable. Management believes that real estate is an investment that should be considered from a long term perspective. The
  Accounts annualized total returns (after expenses) over the past one, three, five, and 10-year periods ended December 31, 2008 were -14.15%, 3.67%, 7.41%, and 7.29%, respectively. As of December 31, 2008, the Accounts annualized total return since inception was 7.60%.
The Accounts total net assets decreased from $17.7 billion at December 31, 2007 to $11.5 billion at December 31, 2008. The primary drivers of this 34.8% decrease were the net participant transfers out of the Account ($4.6 billion) and depreciation in value of the Accounts wholly owned, joint venture, and
  limited partnership real estate investments ($2.5 billion in unrealized depreciation on investments and mortgage loans payable).
Income and Expenses
The Accounts net investment income, after deduction of all expenses, was 12.6% lower for the year ended December 31, 2008, as compared to the same period in 2007.
The Accounts real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 88.3% and 81.5% of the Accounts total investment income (before deducting Account level expenses) during the years ended December 31, 2008 and 2007, respectively. The 12.6%
  decrease in the Accounts total investment income was due to a 59.2% decrease in the Accounts dividend income and a 41.0% decrease in interest income generated from fewer investments in marketable securities, including real estate equity securities, commercial paper, government notes, and an investment in a
  commercial mortgage loan receivable.
Gross real estate rental income decreased approximately 0.8% for the year ended December 31, 2008, as compared to the same period in 2007. This decrease is primarily due to a decrease in the number of wholly-owned real estate investment property investments held by the Account. The number of wholly-
  owned properties decreased from 99 as of December 31, 2007 to 96 as of December 31, 2008.
Income from real estate joint ventures and limited partnerships was $116.9 million for the year ended December 31, 2008, as compared to $93.7 million for the year ended December 31, 2007. This 24.7% increase was due to an increase in gross rental income from properties owned in joint ventures, which
  increased substantially with the acquisition of the joint venture interest in the DDR Retail Portfolio in the first quarter of 2007, but was somewhat offset by a decrease in income from the disposition of the 161 North Clark joint venture during 2007.
Investment income on the Accounts investments in marketable securities decreased by 42.6%, from $141.9 million for the year ended December 31, 2007 to $81.5 million for the comparable period in 2008. The variance was due to the decrease of the Accounts investments in marketable securities from $3.8
  billion as of December 31, 2007 to $0.5 billion as of December 31, 2008, coupled with a decrease in the rates of return on the marketable securities.
Total real estate property level expenses and taxes for wholly-owned property investments for the year ended December 31, 2008 increased to $478.9 million as compared to $458.0 million for the year ended December 31, 2007. The overall change in expenses was primarily due to a 4.0% increase in operating
37

expenses, a 4.8% increase in real estate taxes and a 5.9% increase in interest expense. Operating expenses increased during 2008 primarily due to increased bad debts and insurance costs. Real estate taxes increased due to higher tax assessments in 2008 as compared to 2007. The increase in interest expense is due to
  $557 million of new debt financing that was obtained during the third and fourth quarters of 2008.
The Account incurred overall Account level expenses of $153.0 million for the year ended December 31, 2008, which represents a 9.1% increase from $140.3 million for the same period in 2007. The increase is primarily due to an increase in actual administrative and distribution expenses associated with
  managing and distributing the Account. Total administrative and distribution expenses increased to $77.6 million for the year ended December 31, 2008, as compared to $63.6 million for the year ended December 31, 2007. This increase in expenses primarily resulted from larger allocated operational expenses
  including costs associated with new technology investments. The increase in overall expenses (due primarily to increased administrative and distribution expenses) was somewhat offset by a $1.6 million decrease in investment advisory charges. This decline was due to a decrease of overall costs that are allocated to
  the Account.
Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable
The Account had net realized and unrealized losses on investments and mortgage loans payable of $2.5 billion for the year ended December 31, 2008, a 274.7% decrease compared to a net realized and unrealized gain of $1.4 billion for the year ended December 31, 2007. The overall variance was driven by two
  factors. First, the decrease in net realized and unrealized gains and losses on investments and mortgage loans payable was primarily driven by a net realized and unrealized loss on the Accounts wholly-owned real estate property investments of $1.9 billion for the year ended December 31, 2008 compared to a gain
  of $1.0 billion during the same period in 2007. Second, the Accounts interests in joint ventures and limited partnerships posted a net realized and unrealized loss of $702.8 million for the year ended December 31, 2008 as compared to a substantial net realized and unrealized gain of $462.1 million for the year ended
  December 31, 2007. The variance in the net realized and unrealized gains and losses on wholly-owned real estate property investments and those held in joint ventures was due to the decline in value of the Accounts existing real estate assets, which reflected the net effects of a weaker overall economy and
  continued shortage of liquidity in the commercial real estate markets during 2008. Approximately $1.9 billion or 76% of the 2008 net realized and unrealized loss on investments and mortgage loans payable occurred in the fourth quarter of 2008. This significant increase in the net realized and unrealized loss, in
  comparison to the 2007 net realized and unrealized gain, was the direct result of increases in rates which are used in appraisal valuations (discount rates, overall and implied capitalization rates and terminal rates) which are key components of the determination of the investments fair value. In general, weighted
  average appraisal rates increased between 65 and 89 basis points in 2008 when compared to 2007. This increase in weighted average appraisal rates was one of the key drivers causing the increase of net realized and unrealized loss in 2008. Additional factors causing the increase in the net realized and unrealized net
  loss in 2008 include decreases in rental growth estimates, decreases in rental rates, tenant bankruptcies and decreases in occupancy. During 2008, the Accounts property fundamentals such as occupancy and overall property net operating income remained stable when compared to 2007.
The Account also posted a net realized and unrealized gain on its marketable securities of $4.8 million for the year ended December 31, 2008, as compared to a net realized and unrealized loss of $101.5 million in the same period of 2007. The net gains on the Accounts marketable securities for the year ended
  December 31, 2008 were primarily due to the reversal of the unrealized loss as a result of the sale of the Accounts investments in publicly-traded marketable real estate equity securities (REIT stocks) in June 2008. The sale of these securities was executed over several days for total proceeds of $477.4 million, and
  the Account realized a loss of $11.2 million. The disposition of these REIT stocks was a decision by the Accounts management to reduce risk within its marketable securities investment portfolio. As circumstances warrant and in continued furtherance of its investment objective and strategy, the Account may invest
  in REIT stocks in the future. The losses in the Accounts marketable securities during the year ended December 31, 2007 were primarily due to unrealized losses due to the Accounts investments in REIT stocks. The U.S. REIT market struggled through a volatile 2007 and ended the year down by more than 17%.
The Account had unrealized gains on its mortgage loans payable in the amount of $109.8 million and unrealized losses on its mortgage loan receivable of approximately $0.8 million for the year ended December 31, 2008, as compared to net unrealized gains of $53.9 million and an unrealized loss of $2.1 million,
  respectively, for the same period in 2007. The net unrealized gain or loss on mortgage loans payable and
38

mortgage loans receivable for the period reflected the fluctuations in the U.S. Treasury rates and commercial real estate mortgage loan spreads during the year ended December 31, 2008, which are used as a basis to value the commercial mortgage loans on the wholly-owned real estate property investments. For a
  mortgage loan payable, a negative fair value adjustment decreases the value of the payable and therefore results in an unrealized gain to the Account. Conversely, for a mortgage loan receivable, a negative fair value adjustment decreases the value of the receivable and results in an unrealized loss.
During 2008, the Account sold one apartment property investment, one office portfolio investment, two industrial property investments and one partial industrial portfolio investment for total net proceeds of $91.4 million and recognized a net loss of $18.4 million.
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
Performance
The Accounts total return was 13.80% for the year ended December 31, 2007, 24 basis points lower than the 2006 annual return of 14.04%. The Accounts overall performance on a year-to-year basis reflected the strong performance of the Accounts real estate property investments, including investments
  owned in joint ventures. This strong performance was offset by the substantial decrease in performance of its marketable securities (described in Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable).
Commercial real estate experienced historically high pricing in 2007 as capital flowed into the asset class. While this increase in property pricing positively impacted the Accounts net realized and unrealized gains on its real estate assets and joint venture holdings, the underlying property values are subject to
  decline prospectively, if capital or real estate market conditions experience adverse changes. Real estate as an investment should be considered from a long-term perspective. As of December 31, 2007 the Accounts total return (after expenses) over the prior three, five and 10 years was 13.96%, 12.35% and 9.79%.
  The respective returns for the year ended December 31, 2006 were 13.53%, 10.22% and 9.43%.
The Accounts total net assets grew 25.0% from December 31, 2006 to December 31, 2007. The primary drivers of the growth were significant increases in the Accounts net realized and unrealized gains on its real estate investments including joint ventures and limited partnerships, net positive participant
  transactions, and an increase in the Accounts net investment income from its investment portfolio over the prior twelve months ended December 31, 2007.
Income and Expenses
The Accounts net investment income, after deduction of all expenses, was 12% higher for the year ended December 31, 2007, as compared to 2006. This increase was due to a 23% increase in net income from the Accounts real estate properties, including joint venture holdings and limited partnerships,
  augmented by a 5% increase in income from marketable securities, all of which was partially offset by a 68% increase in Account level expenses for the year ended 2007 as compared to 2006.
The Accounts real estate holdings, including real estate joint ventures and limited partnerships, generated approximately 81% and 79% of the Accounts total investment income (before deducting Account level expenses) during 2007 and 2006, respectively. The 23% increase in the Accounts total investment
  income was derived from its investment in real estate, joint ventures, and limited partnerships. The remaining portion of the Accounts total investment income was generated by investments in marketable securities, including real estate equity securities, commercial paper, government notes, and an investment in a
  commercial mortgage loan receivable.
Gross real estate rental income increased approximately 18% during the year ended December 31, 2007, as compared to the same period in 2006. This increase was primarily due to income derived from properties acquired in 2006 and 2007, which included properties with larger income streams due to their
  relative size. Income from real estate joint ventures and limited partnerships was $93.7 million for the year ended December 31, 2007, as compared with $60.8 million for the year ended December 31, 2006. This 54% increase was primarily due to an increase in gross rental income from the properties owned in joint
  ventures, which increased substantially with the acquisition of a joint venture interest in 65 retail properties in the first quarter of 2007. Total investment income on the Accounts investments in all marketable securities increased by 5%, from $135.4 million for the year ended December 31, 2006 to $141.8 million for
  the comparable
39

period in 2007. This change was due to an increase in the Accounts investment income from other marketable securities, which was partially offset by a decrease in the Accounts investment income from REIT securities due to their poor performance in 2007.
Total real estate property level expenses and taxes for wholly-owned property investments for the years ended December 31, 2007 and 2006 were $458.0 million and $389.7 million respectively. In 2007, operating expenses and real estate taxes represented 54% and 28% of the total real estate property level
  expenses and taxes, respectively, with the remaining 18% representing interest payments on mortgages. In comparison, operating expenses, real estate taxes, and interest expenses similarly represented 53%, 28% and 19% of total property level expenses, respectively, in 2006. Overall, property level expenses
  increased by only 18% from 2006 to 2007. The majority of this increase (83%) was due to increases in operating expenses and real estate taxes associated with the Accounts larger portfolio of wholly-owned property investments. The increase in the interest expense paid on properties subject to a mortgage
  accounted for 17% of the overall increase. As of year-end 2007, there were 13 wholly-owned properties subject to debt, as compared to 12 properties at year-end 2006. Three of the thirteen properties with debt as of December 31, 2007 were added to the Accounts real estate portfolio in the second half of 2006; and
  one was added in fourth quarter 2007.
The Account incurred overall Account level expenses for the year ended December 31, 2007 of $140.3 million, which was a 68% increase from expenses of $83.4 million for the year ended December 31, 2006. The overall change in expenses was primarily due to the growth of the Accounts total net assets
  (which increased by approximately 25% from December 31, 2006 to December 31, 2007), increased actual expenses associated with managing the Account, due in part to adjustments made to the allocation methodology, and increases in certain of the Accounts expense deduction rates effective May 1, 2007.
  Investment advisory charges grew to $49.2 million for the year ended December 31, 2007 as compared to $26.9 million for the year ended December 31, 2006. This increase was primarily the result of higher operational costs (including personnel and other infrastructure costs) due to the Accounts increasing
  diversity of assets and associated costs due to increased property asset management activities. Further, a component of this increase (approximately $5.2 million) was the result of reconciliation, during the twelve month period ended December 31, 2007 and in accordance with the Accounts procedures, of the
  difference between actual and estimated expenses of the Account. In addition, the direct investment advisory charges associated with the Account increased with the continued growth of the Accounts total net assets. Total administrative and distribution expenses increased to $63.6 million for the year ended
  December 31, 2007 as compared to $45.7 million for the year ended December 31, 2006. Administrative and distribution expenses increased due to adjustments made to the Accounts expense base, in accordance with the Accounts procedures, for any difference between actual and estimated expenses. This increase
  in expenses primarily resulted from larger allocated operational expenses including costs associated with new technology investments. In addition, the direct administrative and distribution charges associated with the Account increased with the continued growth of the Accounts total net assets. Finally, liquidity
  guarantee expenses increased to $19.4 million for the year ended December 31, 2007 as compared to $3.9 million for the year ended December 31, 2006, due to an increase in the liquidity guarantee expense deduction rate, which increased from 0.035% of annual net assets to 0.160% of annual net assets as of May 1,
  2007.
Net Realized and Unrealized Gains and Losses on Investments and Mortgage Loans Payable
The Account had net realized and unrealized gains on investments and mortgage loans payable of $1.4 billion for the year ended December 31, 2007, as compared to net realized and unrealized gains on investments and mortgage loans payable of $1.1 billion for the year ended December 31, 2006, a 36% year
  over year increase. The overall increase was primarily driven by the increase in net realized and unrealized gains on the Accounts real estate joint ventures and limited partnerships to $462.1 million for 2007 from $217.4 million for the year ended December 31, 2006. In addition, the Account had a strong increase in
  net realized and unrealized gains on the real estate properties to $1.0 billion for the year ended December 31, 2007 from $735.5 million for 2006. The increase in net realized and unrealized gains on the Accounts property investments, including those held in joint ventures, was due to the solid real estate market
  fundamentals and continued liquidity in the commercial real estate markets. The effect of these positive conditions was to increase the value of the Accounts existing real estate assets, as reflected in the unrealized gains on the real estate properties of $898.2 million and the realized gains on the sales of real estate
  properties of $127.8 million. During the year ended December 31, 2007, the Account sold nineteen wholly-owned properties, which included two apartments, five office buildings, and a portfolio of several industrial
40

properties for total net proceeds of $562.3 million, and recognized a cumulative net gain of $127.8 million. The Account also sold one joint venture, a 75% equity interest in the 161 N. Clark Street joint venture for total net proceeds of $239.5 million, and recognized a net gain of $69.9 million. The Account posted a
  net realized and unrealized loss on its marketable securities of $101.5 million for the year ended December 31, 2007, as compared to a net realized and unrealized gain of $130.7 million in the same period of 2006. The losses on the Accounts marketable securities in the year ended December 31, 2007 were primarily
  due to the Accounts investments in real estate equity securities. The U.S. REIT market struggled through a volatile 2007 and ended the year down by more than 17%, as compared to the strong 2006 performance where the market increased by 35%.
Liquidity and Capital Resources
As of December 31, 2008 and 2007, the Accounts liquid assets (i.e., cash, marketable securities, and receivables for short-term securities sold) had a value of $534 million and $3.8 billion, respectively (approximately 4.0% and 20.0% of the Accounts total investments at such dates, respectively). As of
  September 30, 2008, the Accounts liquid assets had a value of $1.9 billion (approximately 11.7% of the Accounts total investments). The decrease in the Accounts liquid assets as of December 31, 2008 compared to both December 31, 2007 and September 30, 2008 was due primarily to sustained significant net
  participant transfers out of the Account and in particular, during the three months ended December 31, 2008. As of March 18, 2009, the Accounts liquid assets had a value of $0.5 billion (approximately 4.2% of the Accounts total investments).
During the year ended December 31, 2008, the Account received $1.0 billion in premiums and had outflows of $4.6 billion in net participant transfers to TIAA, the CREF accounts, and TIAA-CREF affiliated mutual funds, while, during the year ended December 31, 2007, the Account received $1.2 billion in
  premiums and had inflows of $934 million in net participant transfers from TIAA, the CREF accounts and TIAA-CREF affiliated mutual funds. In the three months ended December 31, 2008, the Account received $215.2 million in premiums and had an outflow of $2.1 billion in net participant transfers to TIAA,
  the CREF accounts and TIAA-CREF affiliated mutual funds.
Primarily as a result of these significant net participant transfers, on December 24, 2008, pursuant to TIAAs existing liquidity guarantee obligation, the TIAA general account purchased $155.6 million of accumulation units (accumulation units purchased by TIAA are generally referred to as liquidity units)
  issued by the Account. Subsequent to December 24, 2008 and through March 18, 2009, the TIAA general account has purchased an additional $787.0 million in the aggregate of accumulation units in a number of separate transactions. As disclosed under Establishing and Managing the AccountThe Role of
  TIAALiquidity Guarantee in the Accounts prospectus, in accordance with this 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. Management cannot predict the extent to which future TIAA liquidity unit purchases, if any, will be required under this liquidity guarantee, nor can management predict when such liquidity units will be redeemed by the Account in part, or in full. As of December 31, 2008, the TIAA general account
  had assets equal to approximately $195.2 billion. Management believes that TIAA has the ability to meet its obligations under this liquidity guarantee.
In addition, for so long as TIAA owns liquidity units, the Accounts independent fiduciary will monitor the Account, including 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 a program, if any, 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)41

approving those sales if, in the independent fiduciarys opinion, such sales are desirable to reduce TIAAs ownership of liquidity units.As of the date of this Form 10-K 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.
The Accounts liquid assets continue to be available to purchase additional suitable real estate properties and to meet the Accounts expense needs and participant redemption requests (i.e., cash withdrawals, benefit payments, or transfers). While the Accounts liquid investments have dropped below 15% of its
  total investments during this recent period of significant net participant outflows, the Accounts investment strategy remains to invest between 75% and 85% of its assets directly in real estate or real estate-related investments with the goal of producing favorable long-term returns primarily through rental income
  and appreciation. In the near term, the Accounts cash and marketable securities will likely comprise less than 10% of the Accounts investments, but management intends to increase the Accounts holdings in cash and short-term marketable securities to the extent practicable, consistent with its investment strategy
  and objective.
Management continues to believe that the significant recent net negative outflow may be a reflection of participant concerns with the downturn in the U.S. and global economy, the turmoil in the capital and credit markets and their current and potential future net effect on commercial real estate in particular.
  Management cannot predict whether the net outflows will continue at the same rate, a higher rate, or at all in the future. If net outflows were to continue at the same or at a higher rate, it could have a negative impact on the Accounts operations and returns. Additionally, continued net outflow activity could
  require TIAA to purchase additional liquidity units, perhaps to a significant degree. See Item 1A. Risk Factors in Part I of this Form 10-K.
The Accounts net investment income continues to be an additional source of liquidity for the Account and it decreased from $167.6 million for the three months ended December 31, 2007 to $118.3 million for the three months ended December 31, 2008. It also decreased from $624.8 million for the year ended
  December 31, 2007 to $545.8 million for the year ended December 31, 2008.
As discussed above in the Results of Operations subsection, the Account liquidated its publicly-traded REIT stock portfolio during 2008, which represented 2.28% of the Accounts investments as of March 31, 2008, for approximately $477.4 million and the Account recognized a cumulative net loss of $11.2
  million. The disposition of these REIT stocks was a decision by the Accounts management to reduce risk within its marketable securities investment portfolio. The sale of these REIT stocks resulted in an increased position in less volatile, high quality marketable securities, which can be readily converted to cash to
  honor redemptions and transfers, purchase or improve properties or cover other Account expenses. As circumstances warrant and in continued furtherance of its investment objective and strategy, the Account may invest in REIT stocks in the future.
Under the Accounts investment guidelines, the Accounts total borrowings may not exceed 30% of the Accounts Total Net Assets at the time of incurrence. At the time the Account (or a joint venture in which the Account is a partner) enters into a revolving line of credit, management deems the maximum
  amount which may be drawn under that line of credit as fully incurred, regardless of whether the maximum amount available has been drawn from time to time. As the Accounts Total Net Assets fluctuate from time to time (whether due to valuation adjustments on the underlying assets or otherwise), the
  Accounts total borrowings may exceed 30% of Total Net Assets, even without the incurrence of additional leverage at such time. At any time when the Account has total borrowings in excess of 30% of Total Net Assets, it may not incur additional debt. In calculating this limit, only the Accounts actual percentage
  interest in any borrowings is included, and not that of any joint venture partner. Further, the Account may only borrow up to 70% of the then-current value of a property, although construction loans may be for 100% of the costs incurred in developing a property. As of December 31, 2008 the Account did not have
  any construction loans.
The Account, under certain conditions more fully described on page 11 of the Accounts prospectus dated May 1, 2008 under Borrowing (as supplemented from time to time), may borrow money and assume or obtain a mortgage on a property (i.e., to make leveraged real estate investments). Also, to meet
  any short-term cash needs, the Account may obtain a line of credit that may be unsecured and/or contain terms that may require the Account to secure the loan with one or more of its properties. As of December 31, 2008, the Accounts total borrowings, including the debt on investments in joint ventures,
  represented 32.3% of the
42

Accounts Total Net Assets. As referenced in Note 8 to the Accounts financial statements, the Account obtained mortgages on three office properties and four apartment buildings (Preston Sherry Plaza in Texas, Four Oaks Place in Texas, 701 Brickell Avenue in Florida, Regents Court in California, The Legacy at
  Westwood in California, The Colorado in New York, and The Caruth in Texas) during the third and fourth quarters of 2008 in the aggregate principal amount of $557.3 million. The new debt that was obtained in the third and fourth quarters of 2008 described above was incurred prior to the Account exceeding the
  30% limit. As of March 18, 2009, the Accounts total borrowings, including the debt on investments in joint ventures, represented 33.6% of the Accounts Total Net Assets.
Recent Transactions
The following describes property transactions by the Account in the fourth quarter of 2008. Except as noted, the expenses for operating the properties purchased are either borne or reimbursed, in whole or in part, by the property tenants, although the terms vary under each lease. The Account is responsible for
  operating expenses not reimbursed under the terms of a lease. All rental rates are quoted on an annual basis unless otherwise noted.
Purchases
None.
Sales
FedEx Industrial Portfolio  Crofton, MD
On November 7, 2008, the Account sold an industrial portfolio investment located in Crofton, Maryland for sales proceeds of approximately $10.4 million and realized a gain of approximately $1.9 million. The Account purchased the portfolio investment on December 18, 1998. The original investment in this
  property was $7.8 million. At the time of sale, the property had a market value of $10.4 million and a cost of $8.4 million.
East North Central RA Industrial Portfolio  Chicago, IL
On November 7, 2008, the Account sold an industrial portfolio investment located in Chicago, Illinois for sales proceeds of approximately $31.7 million and realized a loss of approximately $8.5 million. The Account purchased the portfolio investment on September 30, 2004. The original investment in this
  property was $38.6 million. At the time of sale, the property had a market value of $31.7 million and a cost of $40.3 million.
Chicago CalEast Industrial Portfolio  Chicago, IL
On November 7, 2008, the Account sold a portion of an industrial portfolio investment comprised of 2 properties (1055 Kingsland and 3950 Swenson) located in Chicago, Illinois for sales proceeds of approximately $5.4 million and a realized loss of approximately $1.9 million. The Account purchased the
  portfolio investment on December 22, 2003. At the time of sale, the properties had a market value of $5.4 million and a cost of $7.4 million.
Financings
The Colorado  New York, NY
On October 16, 2008, the Account entered into a mortgage agreement in the principal amount of $87.9 million with a fixed interest rate of 5.65% for a period of 7 years.
The Caruth  Dallas, TX
On November 13, 2008, the Account entered into a mortgage agreement in the principal amount of $42 million with a fixed interest rate of 5.71% for a period of 7 years.
43

Regents Court  San Diego, CA
On November 18, 2008, the Account entered into a mortgage agreement in the principal amount of $35.9 million with a fixed interest rate of 5.76% for a period of 7 years.
The Legacy at Westwood  Los Angeles, CA
On November 18, 2008, the Account entered into a mortgage agreement in the principal amount of $42 million with a fixed interest rate of 5.95% for a period of 7 years.
Contractual Obligations
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, at December 31, 2008 (amounts in thousands):
Amounts Due During Years Ending December 31,2009
    
    2010
    
    2011
    
    2012
    
    2013
    
    Thereafter
    
    TotalMortgage Loans Payable:Principal Payments
    
    
    $
    
    3,303
    
    
    
    $
    
    330,827
    
    
    
    $
    
    13,139
    
    
    
    $
    
    198,368
    
    
    
    $
    
    553,189
    
    
    
    $
    
    811,295
    
    
    
    $
    
    1,910,121Interest Payments(1)
    
    
    
    109,605
    
    
    
    
    106,565
    
    
    
    
    91,946
    
    
    
    
    90,038
    
    
    
    
    69,131
    
    
    
    
    95,346
    
    
    
    
    562,631Total Mortgage Loans Payable
    
    
    
    112,908
    
    
    
    
    437,392
    
    
    
    
    105,085
    
    
    
    
    288,406
    
    
    
    
    622,320
    
    
    
    
    906,641
    
    
    
    
    2,472,752Joint Venture Funding Commitment
    
    
    
    6,598
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,598Other Commitments(2)
    
    
    
    79,260
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,260Total Contractual Obligations
    
    
    $
    
    198,766
    
    
    
    $
    
    437,392
    
    
    
    $
    
    105,085
    
    
    
    $
    
    288,406
    
    
    
    $
    
    622,320
    
    
    
    $
    
    906,641
    
    
    
    $
    
    2,558,610

(1)
    
    
    
    These amounts represent interest payments due on mortgage loans payable based on the stated rates and, where applicable, the foreign currency exchange rates at December 31, 2008. See Note 8 of the Accounts consolidated financial statements.(2)
    
    
    
    This amount represents the Accounts aggregate commitment to purchase interests in five limited partnerships and to purchase shares in a private real estate equity investment trust. The timing of contributions made pursuant to these commitments will depend on when the sponsor of the investment vehicle calls for such contribution.Note that the Contractual Obligations table above does not include payments on debt held in Investments in Joint Ventures as it is the obligation of the individual joint venture entities. See Note 7Investments in Joint Ventures and Limited Partnerships.
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
The financial statements of the Account are prepared in conformity with accounting principles generally accepted in the United States of America.
In preparing the Accounts financial statements, management is required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the
  circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Accounting For Investments at Fair Value
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and requires additional
  disclosures
44

about fair value measurements. This Statement does not require any new fair value measurements. This Statement was effective as of January 1, 2008 for the Account. The adoption of Statement No. 157 did not have a material impact on the Accounts financial position or results of operations.
In February 2007, FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This Statement permits entities to choose to measure financial instruments and certain other items at fair value and is expected to expand the use of fair value measurement when
  warranted. The Account adopted Statement 159 on January 1, 2008 and reports all existing and plans to report all future mortgage loans payable at fair value. Historically, the Account recorded mortgage loans payable at fair value. The adoption of Statement No. 159 did not have a material impact on the Accounts
  financial position or results of operations.
Valuation Hierarchy
In accordance with FASB Statement No.157, Fair Value Measurements, the Account groups financial assets and certain financial liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, if any, and the observability of the assumptions used to
  determine fair value. These levels are:
Level 1Valuations using unadjusted quoted prices for assets traded in active markets, such as stocks listed on the New York Stock Exchange. Active markets are defined as having the following characteristics for the measured asset or liability: (i) many transactions, (ii) current prices, (iii) price quotes not
  varying substantially among market makers, (iv) narrow bid/ask spreads and (v) most information regarding the issuer is publicly available. Level 1 assets and liabilities include real estate related marketable securities.
Level 2Valuations for assets and liabilities traded in less active, dealer or broker markets. Fair values are primarily obtained from third party pricing services for identical or comparable assets or liabilities. Level 2 inputs for fair value measurements are inputs, other than quoted prices included within Level 1,
  that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include:
a.
    
    
    
    Quoted prices for similar assets or liabilities in active markets;b.
    
    
    
    Quoted prices for identical or similar assets or liabilities in markets that are not active (that is, markets in which there are few transactions for the asset (or liability), the prices are not current, price quotations vary substantially either over time or among market makers (for example, some brokered
      markets), or in which little information is released publicly);c.
    
    
    
    Inputs other than quoted prices that are observable within the market for the asset (or liability) (for example, interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates that are observable at commonly quoted intervals); andd.
    
    
    
    Inputs that are derived principally from or corroborated by observable market data by correlation or other means (for example, market-corroborated inputs).Examples of securities which may be held by the Account and included in Level 2 include Certificates of Deposit, Commercial Paper, Government Agency Notes and Variable Notes.
Level 3Valuations for assets and liabilities that are derived from other valuation methodologies, including pricing models, discounted cash flow models and similar techniques, and are not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and
  projections that are not observable in the market, and require significant professional judgment in determining the fair value assigned to such assets or liabilities. Level 3 assets and liabilities include investments in real estate, investments in joint ventures and limited partnerships, mortgage loan receivable, and
  mortgage loans payable.
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.
The Accounts investments and mortgage loans payable are stated at fair value. 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, the Accounts creditworthiness, liquidity, and other observable and unobservable data that are applied consistently over time.
45

The methods described above are considered to produce fair values that represent a good faith estimate 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 below in more detail, as the Account generally obtains appraisals on a quarterly 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 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 is a description of the valuation methodologies used for investments measured at fair value.
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 TIAA Board of Trustees (Board) and in accordance with the responsibilities of the Board as a whole. Accordingly, the Account does not
  record depreciation. The Accounts real estate properties are generally classified within Level 3 of the valuation hierarchy. Fair value for real estate properties is defined as the most probable price for which a property will sell in a competitive market under all conditions requisite to a fair sale. Determination of fair
  value involves significant judgment because the actual market 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 fair and accurate estimate of
  the fair value of its investments. Implicit in the Accounts definition of fair value is 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. Amounts ultimately realized from each investment may vary
  significantly from the market value presented. Actual results could differ from those estimates.
Real estate properties owned by the Account are initially valued based on an independent appraisal at the time of the closing of the purchase, which 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 valued each quarter with an independent external appraisal completed for each real estate property at least once a year. In general, the Account obtains appraisals for each real estate property throughout the quarter, which is intended to result in appraisal adjustments (to the
  extent such adjustments are made) that happen regularly throughout each quarter and not on one specific day in each period.
Starting with the second quarter of 2009, Account management intends to have each real property owned by the Account appraised by independent appraisers once per calendar quarter. TIAAs internal appraisal staff will continue to oversee the entire appraisal process, in conjunction with the Accounts
  independent fiduciary. 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 bids are
  obtained for
46

properties held for sale by the Account. In addition, 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).
An independent fiduciary, Real Estate Research Corporation, 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 (USPAP), the real estate appraisal industry standards created by The Appraisal Foundation. Real estate appraisals are estimates of property values based on a professionals opinion. 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, RICS) and state certified appraisers from national or regional
  firms with relevant property type experience and market knowledge.
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. Also, the independent fiduciary can require additional appraisals if a propertys value has changed materially 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 mortgage is valued independently of the property and its fair value is reported separately. The independent
  fiduciary reviews and approves mortgage valuation adjustments which exceed the prescribed limits discussed above 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 and Limited Partnerships
Real estate joint ventures and certain limited partnerships 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,
  that occurs prior to the dissolution of the investee entity. The Accounts real estate joint ventures and limited partnerships are generally classified within level 3 of the valuation hierarchy.
Certain limited partnership interests for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. These investments are generally
  classified within level 3 of the valuation hierarchy.
Valuation of Marketable Securities
Equity securities listed or traded on any national market or exchange are valued at the last sale price as of the close of the principal securities exchange on which such securities are traded or, if there is no sale, at the mean of the last bid and asked prices on such exchange, exclusive of transaction costs. Such
  marketable securities are classified within level 1 of the valuation hierarchy.
Debt securities, 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). Money market instruments, with maturities of one year or less, are valued in the same manner as debt
  securities or derived from a pricing matrix. Debt securities are generally classified within level 2 of the valuation hierarchy.
47

Valuation of Mortgage Loan Receivable
The mortgage loan receivable is stated at fair value. The mortgage loan receivable is valued quarterly based on market factors, such as market interest rates and spreads for comparable loans, the performance of the underlying collateral and the credit quality of the counterparty. The Accounts mortgage loan
  receivable is classified within level 3 of the valuation hierarchy.
Valuation of Mortgage Loans Payable
Mortgage loans payable are stated at fair value. The estimated fair value of mortgage loans payable is based on the amount at which the liability could be transferred exclusive of transaction costs. Mortgage loans payable are valued quarterly based on market factors, such as market interest rates and spreads for
  comparable loans, 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. The Accounts mortgage loans payable are generally classified within
  level 3 of the valuation hierarchy. Interest expense for mortgage loans payable is recorded on the accrual basis taking into account the outstanding principal and contractual interest rates.
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 is included in net realized and unrealized gains and losses on investments and mortgage loans payable. Net realized gains and
  losses on foreign currency transactions include maturities of forward foreign currency contracts, 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, monthly payment levels cannot be reduced as a result of the Accounts adverse mortality experience. In
  addition, the contracts are required to stipulate the maximum expense charge for all Account level expenses that can be assessed, which is equal to 2.50% of average net assets per year. The Account pays a fee to TIAA to assume these mortality and expense risks.
Accounting for Investments
Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties close (settlement date). The Account recognizes a realized gain on the sale of a real estate property to the extent that the contract sales price exceeds the cost-to-date of the property
  being sold. A realized loss occurs when the cost-to-date exceeds the sales price. Any accumulated unrealized gains and losses are reversed in the calculation of realized gains and losses.
Rent from real estate properties consists of all amounts earned under tenant operating leases, including base rent, recoveries of real estate taxes and other expenses and charges for miscellaneous services provided to tenants. Rental income is recognized in accordance with the billing terms of the lease
  agreements. The Account bears the direct expenses of the real estate properties owned. These expenses include, but are not limited to, fees to local property management companies, property taxes, utilities, maintenance, repairs, insurance, and other operating and administrative costs. An estimate of the net
  operating income earned from each real estate property is accrued by the Account on a daily basis and such estimates are adjusted when actual operating results are determined.
The Account has limited ownership interests in various real estate funds (limited partnerships and one limited liability corporation) and a private real estate investment trust (collectively, the limited
48

partnerships). The Account records its contributions as increases to the investments, and distributions from the investments are treated as either income or return of capital, as determined by the management of the limited partnerships. Unrealized gains and losses are calculated and recorded when the financial
  statements of the limited partnerships are received by the Account. As circumstances warrant, prior to the receipt of financial statements of the limited partnership, the Account will estimate the value of its interests in good faith and will from time to time seek input from the issuer or the sponsor of the investment
  vehicle.
Income from real estate joint ventures is recorded based on the Accounts proportional interest of the income distributed by the joint venture. Income earned by the joint venture, but not yet distributed to the Account by the joint venture investment, is recorded as unrealized gains and losses on real estate joint
  ventures.
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 or as soon as the Account is informed of the dividend. Realized gains and losses on securities
  transactions are accounted for on the specific identification method.
The Accounts 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 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); and
    
    
    
    actual net operating income received from the Accounts properties, other real estate-related investments and non real estate-related investments (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 the Accounts liabilities, including the daily investment management fee and certain other expenses attributable to operating the Account.
After
    the end of every quarter, the Account reconciles the amount 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 quarter, provided
    that material differences may be repaid in the current calendar quarter,
    in accordance with generally accepted accounting principles (GAAP). 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
    the difference between managements
    projections and the Accounts actual assets or expenses.
New Accounting Pronouncements
In June 2007, the Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 07-1, Clarification of the Scope of the Audit and Accounting Guide, Investment Companies, and Accounting by Parent
  Companies and Equity Method Investors for Investments in Investment Companies. The SOP clarifies which entities are required to apply the provisions of the Investment Companies Audit and Accounting Guide (Guide) and provides guidance on accounting by parent companies and equity method investors for
  investments in investment companies. In February 2008, FASB issued Staff Position (FSP) SOP 07-1 indefinitely delaying the effective date of SOP 07-1 to allow FASB time to consider significant issues related to the implementation of SOP 07-1. Management of the Account will continue to monitor FASB
  developments and will evaluate the financial reporting implications to the Account, as necessary.
In December 2007, FASB issued Statement No. 141(R), Business Combinations, which establishes principles and requirements for how the acquirer shall recognize and measure in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree and
  goodwill acquired in a business combination or a gain from a bargain purchase. It is expected that more transactions will constitute a business under FASB Statement No. 141(R). This Statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual
  reporting period
49

beginning on or after December 15, 2008. The Account reports all investments in real estate at fair value and therefore does not account for the acquisition of real estate investments as a business combination under this statement.
In December 2007, FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statementsan Amendment of ARB No. 51, which establishes and expands accounting and reporting standards for minority interests, which will be recharacterized as noncontrolling interests, in a subsidiary
  and the deconsolidation of a subsidiary. This Statement is effective for fiscal years beginning on or after December 15, 2008. The adoption of Statement No. 160 will not impact on the financial position or results of operations of the Account.
In May 2008, the FASB issued Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles (GAAP Hierarchy), which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental
  entities that are presented in conformity with generally accepted accounting principles in the United States. This statement is effective 60 days following the Securities and Exchange Commissions approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of
  Presented Fairly in Conformity with Generally Accepted Accounting Principles(the approval occurred on September 16, 2008). This amendment removes the GAAP Hierarchy from auditing literature and places it in the accounting literature and appropriately directs the requirement to comply with the GAAP
  Hierarchy to the reporting entity. The application of the GAAP Hierarchy did not impact the Account.
In October 2008, FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active. This FSP clarifies the application of Statement No. 157 in a market that is not active and applies to financial assets within the scope of accounting pronouncements
  that require or permit fair value measurements in accordance with Statement No. 157. The FSP is effective upon issuance, including prior periods for which financial statements have not been issued. Accordingly, the Account adopted this guidance effective September 30, 2008. The adoption of this guidance did not
  have a material effect on the financial position or results of operations of the Account.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Accounts real estate holdings, including real estate joint ventures and limited partnerships, which, as of December 31, 2008, represented 95.63% 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
    
    
    
    Foreign Currency RiskThe risk that the value of the Accounts foreign investments, related debt, or rental income could increase or decrease due to changes in foreign currency exchange rates or foreign currency exchange control regulations, and hedging against such changes, if undertaken by the Account,
      may entail additional costs and be unsuccessful.Given the significant concentration (over 95% as of December 31, 2008) of the Accounts total investments being held in real estate and real estate related assets, the Accounts net asset value will experience a more pronounced impact from valuation adjustments to its real properties than it would during
  periods in which the Account held between 75% and 85% of its investments in real estate and real estate related assets.
50

Other risks inherent to, and associated with, the acquisition, ownership and sale of real estate related investments are detailed elsewhere in this Form 10-K, including in Item 7. Managements Discussion and Analysis of the Accounts Financial Condition and Results of Operations and the risk factors discussed in Item 1A.
  Risk Factors.
As of December 31, 2008, 4.37% of the Accounts total investments were in market risk sensitive instruments, comprised of marketable securities and an adjustable rate mortgage loan receivable. As of December 31, 2008, marketable securities include high-quality short-term debt instruments (i.e., commercial
  paper and government agency notes). The Statement of Investments for the Account sets forth the general financial terms of these instruments, along with their fair values, as determined in accordance with procedures described in Note 1 to the Accounts financial statements. 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. Currently, the Account does not invest in derivative financial instruments, nor does the Account engage in any hedging activity
  other than the interest rate cap agreements contained in two mortgage loans payable the Account entered into during the third quarter of 2008. These interest rate cap agreements (which cap the interest rate on each mortgage loan payable at 6.50%) are discussed in more detail in Note 8 to the Accounts financial
  statements contained herein.
The Accounts investments in cash equivalents, marketable securities, and mortgage loans receivable are subject to the following general risks:

    
    
    
    Financial RiskThe risk, for debt securities, that the issuer will not be able to pay principal and interest when due (and/or declare bankruptcy or be subject to receivership) and, for common or preferred stock, that the issuers current earnings will fall or that its overall financial soundness will decline, reducing
      the securitys value.
    
    
    
    Market RiskThe risk that the Accounts investments will experience price volatility due to changing conditions in the financial markets and, particularly for debt securities, changes in overall interest rates.
    
    
    
    Interest Rate VolatilityThe risk that interest rate volatility may affect the Accounts current income from an investment.
    
    
    
    Deposit/Money Market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 (CMBS)), 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 market value of these securities is also highly sensitive to changes in interest rates. Note that the potential for appreciation, which could otherwise be expected to result from a decline in interest rates, may be limited by any increased prepayments. These securities may be harder to sell than other
  securities.
In addition to these risks, real estate equity securities (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 the Accounts most recent prospectus.
51

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTSTIAA REAL ESTATE ACCOUNT
PageReport of Management Responsibility
    
    
    
    53Report of the Audit Committee
    
    
    
    54Audited Financial Statements:Statements of Assets and Liabilities
    
    
    
    55Statements of Operations
    
    
    
    56Statements of Changes in Net Assets
    
    
    
    57Statements of Cash Flows
    
    
    
    58Notes to Financial Statements
    
    
    
    59Statements of Investments
    
    
    
    74Report of Independent Registered Public Accounting Firm
    
    
    
    8552

REPORT OF MANAGEMENT RESPONSIBILITY
To the Participants of theTIAA Real Estate Account:
The accompanying financial statements of the TIAA Real Estate Account (Account) of Teachers Insurance and Annuity Association of America (TIAA) are the responsibility of TIAAs management. They have been prepared in accordance with accounting principles generally accepted in the United States of
  America and have been presented fairly and objectively in accordance with such principles.
TIAA has established and maintains an effective system of internal controls over financial reporting designed to provide reasonable assurance that assets are properly safeguarded, that transactions are properly executed in accordance with managements authorization, and to carry out the ongoing responsibilities of
  management for reliable financial statements. In addition, TIAAs internal audit personnel provide regular reviews and assessments of the internal controls and operations of the Account, and the Vice President of Internal Audit regularly reports to the Audit Committee of the TIAA Board of Trustees.
The independent registered public accounting firm of PricewaterhouseCoopers LLP has audited the accompanying financial statements for the years ended December 31, 2008, 2007 and 2006. To maintain auditor independence and avoid even the appearance of a conflict of interest, it continues to be the Accounts
  policy (consistent with TIAAs specific auditor independence policies, which are designed to avoid such conflicts) that any management advisory or consulting services would be obtained from a firm other than the independent accounting firm. The independent auditors report expresses an independent opinion on
  the fairness of presentation of the Accounts 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 financial statements, the New York State Insurance Department and other state insurance departments regularly examine the operations and financial statements of the Account as part of their periodic corporate examinations.
March 20, 2009
    
    /s/ Roger W. Ferguson, Jr.Roger W. Ferguson, Jr. President andChief Executive Officer/s/ Georganne C. ProctorGeorganne C. ProctorExecutive Vice President andChief Financial Officer53

REPORT OF THE AUDIT COMMITTEE
To the Participants of theTIAA Real Estate Account:
The TIAA Audit Committee (Committee) oversees the financial reporting process of the TIAA Real Estate Account (Account) on behalf of TIAAs Board of Trustees. The Committee operates in accordance with a formal written charter (copies of which are available upon request) which describes the Audit
  Committees responsibilities. All members of the Committee are independent, as defined under the listing standards of the New York Stock Exchange.
Management has the primary responsibility for the Accounts financial statements, development and maintenance of a strong system of internal controls and disclosure controls, and compliance with applicable laws and regulations. In fulfilling its oversight responsibilities, the Committee reviewed and approved the
  audit plans of the internal audit group and the independent registered public accounting firm in connection with their respective audits of the Account. The Committee also meets regularly with the internal audit group and the independent registered public accounting firm, both with and without management
  present, to discuss the results of their examinations, their evaluation of internal controls, and the overall quality of financial reporting. As required by its charter, the Committee will evaluate rotation of the independent registered public accounting firm whenever circumstances warrant, but in no event will the
  evaluation be later than between their fifth and tenth years of service.
The Committee reviewed and discussed the accompanying audited financial statements with management, including a discussion of the quality and appropriateness of the accounting principles and financial reporting practices followed, the reasonableness of significant judgments, and the clarity and completeness of
  disclosures in the financial statements. The Committee has also discussed the audited financial statements with PricewaterhouseCoopers LLP, the independent registered public accounting firm responsible for expressing an opinion on the conformity of these audited financial statements with accounting principles
  generally accepted in the United States of America.
The discussion with PricewaterhouseCoopers LLP focused on their judgments concerning the quality and appropriateness of the accounting principles and financial reporting practices followed by the Account, the clarity and completeness of the financial statements and related disclosures, and other significant
  matters, such as any significant changes in accounting policies, internal controls, management judgments and estimates, and the nature of any uncertainties or unusual transactions. In addition, the Committee discussed with PricewaterhouseCoopers LLP the auditors independence from management and the
  Account, and has received a written disclosure regarding such independence, as required by the Securities and Exchange Commission.
Based on the review and discussions referred to above, the Committee has approved the release of the accompanying audited financial statements for publication and filing with appropriate regulatory authorities.
Rosalie J. Wolf, Audit Committee ChairGlenn A. Britt, Audit Committee MemberDonald K. Peterson, Audit Committee MemberDavid L. Shedlarz, Audit Committee Member
March
    20, 2009
54

TIAA REAL ESTATE ACCOUNTSTATEMENTS OF ASSETS AND LIABILITIES(In thousands, except per accumulation unit amounts)
December 31,2008
    
    December 31,2007ASSETSInvestments, at fair value:Real estate properties(cost: $10,031,744 and $9,804,489)
    
    
    $
    
    10,305,040
    
    
    
    $
    
    11,983,715Real estate joint ventures and limited partnerships(cost: $2,329,850 and $2,260,919)
    
    
    
    2,463,196
    
    
    
    
    3,158,870Marketable securities:Real estate related(cost: $0 and $439,154)
    
    
    
    
    
    
    
    
    426,630Other(cost: $511,703 and $3,371,896)
    
    
    
    511,711
    
    
    
    
    3,371,866Mortgage loan receivable(cost: $75,000 and $75,000)
    
    
    
    71,767
    
    
    
    
    72,520Total investments(cost: $12,948,297 and $15,951,458)
    
    
    
    13,351,714
    
    
    
    
    19,013,601Cash
    
    
    
    22,127
    
    
    
    
    6,144Due from investment advisor
    
    
    
    
    
    
    
    
    11,196Other
    
    
    
    203,113
    
    
    
    
    201,826TOTAL ASSETS
    
    
    
    13,576,954
    
    
    
    
    19,232,767LIABILITIESMortgage loans payableNote 8(principal outstanding: $1,910,121 and $1,427,857)
    
    
    
    1,830,040
    
    
    
    
    1,392,093Payable for securities transactions
    
    
    
    108
    
    
    
    
    866Due to investment advisor
    
    
    
    9,892
    
    
    
    
    Accrued real estate property level expenses
    
    
    
    203,874
    
    
    
    
    154,639Security deposits held
    
    
    
    24,116
    
    
    
    
    24,632TOTAL LIABILITIES
    
    
    
    2,068,030
    
    
    
    
    1,572,230NET ASSETSAccumulation Fund
    
    
    
    11,106,246
    
    
    
    
    17,160,703Annuity Fund
    
    
    
    402,678
    
    
    
    
    499,834TOTAL NET ASSETS
    
    
    $
    
    11,508,924
    
    
    
    $
    
    17,660,537NUMBER OF ACCUMULATION UNITS OUTSTANDINGNotes 9 and 10
    
    
    
    41,542
    
    
    
    
    55,106NET ASSET VALUE, PER ACCUMULATION UNITNote 9
    
    
    $
    
    267.35
    
    
    
    $
    
    311.41See notes to the financial statements.
55

TIAA REAL ESTATE ACCOUNTSTATEMENTS OF OPERATIONS(In thousands)
Years Ended December 31,2008
    
    2007
    
    2006INVESTMENT INCOMEReal estate income, net:Rental income
    
    
    $
    
    979,295
    
    
    
    $
    
    987,434
    
    
    
    $
    
    834,456Real estate property level expenses and taxes:Operating expenses
    
    
    
    257,351
    
    
    
    
    247,473
    
    
    
    
    207,453Real estate taxes
    
    
    
    132,979
    
    
    
    
    126,926
    
    
    
    
    110,060Interest expense
    
    
    
    88,531
    
    
    
    
    83,623
    
    
    
    
    72,160Total real estate property level expenses and taxes
    
    
    
    478,861
    
    
    
    
    458,022
    
    
    
    
    389,673Real estate income, net
    
    
    
    500,434
    
    
    
    
    529,412
    
    
    
    
    444,783Income from real estate joint ventures and limited partnerships
    
    
    
    116,889
    
    
    
    
    93,724
    
    
    
    
    60,789Interest
    
    
    
    76,444
    
    
    
    
    129,474
    
    
    
    
    118,621Dividends
    
    
    
    5,079
    
    
    
    
    12,440
    
    
    
    
    16,786TOTAL INVESTMENT INCOME
    
    
    
    698,846
    
    
    
    
    765,050
    
    
    
    
    640,979ExpensesNote 2:Investment advisory charges
    
    
    
    47,622
    
    
    
    
    49,239
    
    
    
    
    26,899Administrative and distribution charges
    
    
    
    77,577
    
    
    
    
    63,593
    
    
    
    
    45,713Mortality and expense risk charges
    
    
    
    8,116
    
    
    
    
    8,052
    
    
    
    
    6,932Liquidity guarantee charges
    
    
    
    19,725
    
    
    
    
    19,410
    
    
    
    
    3,905TOTAL EXPENSES
    
    
    
    153,040
    
    
    
    
    140,294
    
    
    
    
    83,449INVESTMENT INCOME, NET
    
    
    
    545,806
    
    
    
    
    624,756
    
    
    
    
    557,530REALIZED AND UNREALIZED (LOSS) GAIN ON INVESTMENTS AND MORTGAGE LOANS PAYABLENet realized (loss) gain on investments:Real estate properties
    
    
    
    (18,097
    )
    
    
    
    
    127,835
    
    
    
    
    76,137Real estate joint ventures and limited partnerships
    
    
    
    (17
    )
    
    
    
    
    70,765
    
    
    
    
    Marketable securities
    
    
    
    (11,041
    )
    
    
    
    
    47,180
    
    
    
    
    10,257Total realized (loss) gain on investments
    
    
    
    (29,155
    )
    
    
    
    
    245,780
    
    
    
    
    86,394Net change in unrealized (depreciation) appreciation on:Real estate properties
    
    
    
    (1,905,930
    )
    
    
    
    
    898,173
    
    
    
    
    659,371Real estate joint ventures and limited partnerships
    
    
    
    (702,797
    )
    
    
    
    
    391,333
    
    
    
    
    217,360Marketable securities
    
    
    
    15,820
    
    
    
    
    (148,659
    )
    
    
    
    
    120,454Mortgage loan receivable
    
    
    
    (753
    )
    
    
    
    
    (2,141
    )
    
    
    
    
    (339
    )Mortgage loans payable
    
    
    
    109,791
    
    
    
    
    53,949
    
    
    
    
    (26,569
    )Net change in unrealized (depreciation) appreciationon investments and mortgage loans payable
    
    
    
    (2,483,869
    )
    
    
    
    
    1,192,655
    
    
    
    
    970,277NET REALIZED AND UNREALIZED(LOSS) GAIN ON INVESTMENTS ANDMORTGAGE LOANS PAYABLE
    
    
    
    (2,513,024
    )
    
    
    
    
    1,438,435
    
    
    
    
    1,056,671NET (DECREASE) INCREASE IN NET ASSETSRESULTING FROM OPERATIONS
    
    
    $
    
    (1,967,218
    )
    
    
    
    $
    
    2,063,191
    
    
    
    $
    
    1,614,201See notes to the financial statements.
56

TIAA REAL ESTATE ACCOUNTSTATEMENTS OF CHANGES IN NET ASSETS(In thousands)
Years Ended December 31,2008
    
    2007
    
    2006FROM OPERATIONSInvestment income, net
    
    
    $
    
    545,806
    
    
    
    $
    
    624,756
    
    
    
    $
    
    557,530Net realized (loss) gain on investments
    
    
    
    (29,155
    )
    
    
    
    
    245,780
    
    
    
    
    86,394Net change in unrealized (depreciation) appreciation on investments and mortgage loans payable
    
    
    
    (2,483,869
    )
    
    
    
    
    1,192,655
    
    
    
    
    970,277NET (DECREASE) INCREASE IN NETASSETS RESULTING FROM OPERATIONS
    
    
    
    (1,967,218
    )
    
    
    
    
    2,063,191
    
    
    
    
    1,614,201FROM PARTICIPANT TRANSACTIONSPremiums
    
    
    
    1,008,233
    
    
    
    
    1,186,870
    
    
    
    
    1,085,058Purchase of Liquidity Units by TIAA
    
    
    
    155,600
    
    
    
    
    
    
    
    
    
    Net transfers (to) from TIAA
    
    
    
    (1,912,937
    )
    
    
    
    
    153,137
    
    
    
    
    215,894Net transfers (to) from CREF Accounts
    
    
    
    (2,519,837
    )
    
    
    
    
    832,782
    
    
    
    
    1,154,123Net transfers to TIAA-CREF Institutional Mutual Funds
    
    
    
    (207,547
    )
    
    
    
    
    (51,612
    )
    
    
    
    
    (15,319
    )Annuity and other periodic payments
    
    
    
    (99,518
    )
    
    
    
    
    (95,776
    )
    
    
    
    
    (65,192
    )Withdrawals and death benefits
    
    
    
    (608,389
    )
    
    
    
    
    (560,748
    )
    
    
    
    
    (404,783
    )NET (DECREASE) INCREASE IN NETASSETS RESULTING FROMPARTICIPANT TRANSACTIONS
    
    
    
    (4,184,395
    )
    
    
    
    
    1,464,653
    
    
    
    
    1,969,781NET (DECREASE) INCREASE IN NET ASSETS
    
    
    
    (6,151,613
    )
    
    
    
    
    3,527,844
    
    
    
    
    3,583,982NET ASSETSBeginning of period
    
    
    
    17,660,537
    
    
    
    
    14,132,693
    
    
    
    
    10,548,711End of period
    
    
    $
    
    11,508,924
    
    
    
    $
    
    17,660,537
    
    
    
    $
    
    14,132,693See notes to the financial statements.
57

TIAA REAL ESTATE ACCOUNTSTATEMENTS OF CASH FLOWS(In thousands)
Years Ended December 31,2008
    
    2007
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESNet (decrease) increase in net assets resulting from operations
    
    
    $
    
    (1,967,218
    )
    
    
    
    $
    
    2,063,191
    
    
    
    $
    
    1,614,201Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:Purchase of real estate properties
    
    
    
    (164,104
    )
    
    
    
    
    (639,704
    )
    
    
    
    
    (2,016,229
    )Amortization of discount on debt
    
    
    
    
    
    
    
    
    531
    
    
    
    
    462Capital improvements on real estate properties
    
    
    
    (174,360
    )
    
    
    
    
    (133,714
    )
    
    
    
    
    (117,041
    )Proceeds from sale of real estate properties
    
    
    
    93,113
    
    
    
    
    568,120
    
    
    
    
    387,290Decrease (increase) in other investments
    
    
    
    3,284,427
    
    
    
    
    (1,904,859
    )
    
    
    
    
    (836,478
    )Funding of mortgage loan receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74,661
    )(Increase) decrease in other assets
    
    
    
    (1,290
    )
    
    
    
    
    36,052
    
    
    
    
    (47,121
    )(Decrease) increase in payable for securities transactions
    
    
    
    (758
    )
    
    
    
    
    (353
    )
    
    
    
    
    226Change in due to (from) investment advisor
    
    
    
    21,088
    
    
    
    
    (2,734
    )
    
    
    
    
    (745
    )Increase (decrease) in accrued real estate property level expenses and taxes
    
    
    
    49,235
    
    
    
    
    (15,018
    )
    
    
    
    
    23,868(Decrease) increase in security deposits held
    
    
    
    (516
    )
    
    
    
    
    5,389
    
    
    
    
    2,813Net realized loss (gain) on total investments
    
    
    
    29,155
    
    
    
    
    (245,780
    )
    
    
    
    
    (86,394
    )Unrealized loss (gain) on total investments and mortgage loans payable
    
    
    
    2,483,869
    
    
    
    
    (1,192,655
    )
    
    
    
    
    (970,277
    )NET CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES
    
    
    
    3,652,641
    
    
    
    
    (1,461,534
    )
    
    
    
    
    (2,120,086
    )CASH FLOWS FROM FINANCING ACTIVITIESMortgage loans proceeds received
    
    
    
    548,567
    
    
    
    
    
    
    
    
    
    153,000Principal payments of mortgage loans payable
    
    
    
    (830
    )
    
    
    
    
    (560
    )
    
    
    
    
    (321
    )Premiums
    
    
    
    1,008,233
    
    
    
    
    1,186,870
    
    
    
    
    1,085,058Purchase of Liquidity Units by TIAA
    
    
    
    155,600
    
    
    
    
    
    
    
    
    
    Net transfers (to) from TIAA
    
    
    
    (1,912,937
    )
    
    
    
    
    153,137
    
    
    
    
    215,894Net transfers (to) from CREF Accounts
    
    
    
    (2,519,837
    )
    
    
    
    
    832,782
    
    
    
    
    1,154,123Net transfers to TIAA-CREF Institutional Mutual Funds
    
    
    
    (207,547
    )
    
    
    
    
    (51,612
    )
    
    
    
    
    (15,319
    )Annuity and other periodic payments
    
    
    
    (99,518
    )
    
    
    
    
    (95,776
    )
    
    
    
    
    (65,192
    )Withdrawals and death benefits
    
    
    
    (608,389
    )
    
    
    
    
    (560,748
    )
    
    
    
    
    (404,783
    )NET CASH (USED IN) PROVIDED BYFINANCING ACTIVITIES
    
    
    
    (3,636,658
    )
    
    
    
    
    1,464,093
    
    
    
    
    2,122,460NET INCREASE IN CASH
    
    
    
    15,983
    
    
    
    
    2,559
    
    
    
    
    2,374CASHBeginning of period
    
    
    
    6,144
    
    
    
    
    3,585
    
    
    
    
    1,211End of period
    
    
    $
    
    22,127
    
    
    
    $
    
    6,144
    
    
    
    $
    
    3,585SUPPLEMENTAL DISCLOSURES:Cash paid for interest
    
    
    $
    
    88,723
    
    
    
    $
    
    83,063
    
    
    
    $
    
    68,034Debt assumed in acquisition of properties
    
    
    $
    
    
    
    
    
    $
    
    8,922
    
    
    
    $
    
    288,951See notes to the financial statements.
58

TIAA REAL ESTATE ACCOUNTNOTES TO THE FINANCIAL STATEMENTS
Note 1Organization and Significant Accounting Policies
Business: The TIAA Real Estate Account (Account) is a segregated investment account of Teachers Insurance and Annuity Association of America (TIAA) and was established by resolution of TIAAs Board of Trustees (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 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 a favorable long-term rate of return primarily through rental income and capital appreciation from real estate investments owned by the Account. The Account holds real estate properties directly and through wholly-owned subsidiaries. The Account also holds interests in
  real estate joint ventures and limited partnerships in which the Account does not hold a controlling interest; as such, such interests are not consolidated for financial statement purposes. The Account also invests in mortgage loans receivable collateralized by commercial real estate properties. The Account also
  invests in publicly-traded securities and other instruments to maintain adequate liquidity levels for operating expenses, capital expenditures and to fund benefit payments (withdrawals, transfers and related transactions).
The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America which may require the use of estimates made by management. Actual results may vary from those estimates. The following is a summary of the significant accounting policies of the
  Account.
Basis of Presentation:The accompanying financial statements include the Account and those subsidiaries wholly-owned by TIAA for the benefit of the Account. All significant intercompany accounts and transactions have been eliminated in consolidation.
Accounting For Investments at Fair Value:In September 2006, FASB issued Statement No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and requires additional disclosures
  about fair value measurements. This Statement does not require any new fair value measurements. This Statement was effective as of January 1, 2008 for the Account. The adoption of Statement No. 157 did not have a material impact on the Accounts financial position or results of operations.
In February 2007, FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities.This Statement permits entities to choose to measure financial instruments and certain other items at fair value and is expected to expand the use of fair value measurement when warranted.
  The Account adopted Statement No. 159 on January 1, 2008 and reports all existing and plans to report all future mortgage loans payable at fair value. Historically, the Account recorded mortgage loans payable at fair value. The adoption of Statement No. 159 did not have a material impact on the Accounts
  financial position or results of operations.
Valuation Hierarchy:In accordance with FASB Statement No. 157, Fair Value Measurements,the Account groups financial assets and certain financial liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, if any, and the observability of the
  assumptions used to determine fair value. These levels are:
Level 1Valuations using unadjusted quoted prices for assets traded in active markets, such as stocks listed on the New York Stock Exchange. Active markets are defined as having the following characteristics for the measured asset or liability: (i) many transactions, (ii) current prices, (iii) price quotes not varying
  substantially among market makers, (iv) narrow bid/ask spreads and (v) most information regarding the issuer is publicly available. Level 1 assets and liabilities include real estate related marketable securities.
Level 2Valuations for assets and liabilities traded in less active, dealer or broker markets. Fair values are primarily obtained from third party pricing services for identical or comparable assets or liabilities. Level 2
59

inputs for fair value measurements are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include:
a. Quoted prices for similar assets or liabilities in active markets;
b. Quoted prices for identical or similar assets or liabilities in markets that are not active (that is, markets in which there are few transactions for the asset (or liability), the prices are not current, price quotations vary substantially either over time or among market makers (for example, some brokered
  markets), or in which little information is released publicly);
c. Inputs other than quoted prices that are observable within the market for the asset (or liability) (for example, interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates that are observable at commonly quoted intervals); and
d. Inputs that are derived principally from or corroborated by observable market data by correlation or other means (for example, market-corroborated inputs).
Examples of securities which may be held by the Account and included in Level 2 include Certificates of Deposit, Commercial Paper, Government Agency Notes and Variable Notes.
Level 3Valuations for assets and liabilities that are derived from other valuation methodologies, including pricing models, discounted cash flow models and similar techniques, and are not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and
  projections that are not observable in the market, and require significant professional judgment in determining the fair value assigned to such assets or liabilities. Level 3 assets and liabilities include investments in real estate, investments in joint ventures and limited partnerships, mortgage loan receivable, and
  mortgage loans payable.
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.
The Accounts investments and mortgage loans payable are stated at fair value. 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, the Accounts creditworthiness, liquidity, and other observable and unobservable data that are applied consistently over time.
The methods described above are considered to produce fair values that represent a good faith estimate 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 below in more detail, as the Account generally obtains appraisals on a quarterly 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 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 is a description of the valuation methodologies used for investments measured at fair value.
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. The Accounts real estate properties are generally classified within Level 3 of the valuation hierarchy. Fair value for real estate properties is defined as the most probable price for which a property will sell in a competitive market under all conditions requisite to a fair sale. Determination of fair
  value involves judgment because the actual market 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
60

estate investments will be to produce a valuation that represents a fair and accurate estimate of the fair value of its investments. Implicit in the Accounts definition of fair value is 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. Amounts ultimately realized from each investment may vary
  significantly from the market value presented. Actual results could differ from those estimates.
Real estate properties owned by the Account are initially valued based on an independent appraisal at the time of the closing of the purchase, which 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 valued each quarter with an independent external appraisal completed for each real estate property at least once a year. In general, the Account obtains appraisals for each real estate property throughout the quarter, which is intended to result in appraisal adjustments (to the extent
  such adjustments are made) that happen regularly throughout each quarter and not on one specific day in each period.
Starting with the second quarter of 2009, Account management intends to have each real property owned by the Account appraised by independent appraisers once per calendar quarter. TIAAs internal appraisal staff will continue to oversee the entire appraisal process, in conjunction with the Accounts
  independent fiduciary. 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 bids are
  obtained for properties held for sale by the Account. In addition, 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).
An independent fiduciary, Real Estate Research Corporation, 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 (USPAP), the real estate appraisal industry standards created by The Appraisal Foundation. Real estate appraisals are estimates of property values based on a professionals opinion. 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, RICS) and state certified appraisers from national or regional firms
  with relevant property type experience and market knowledge.
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. Also, the independent fiduciary can require additional appraisals if a propertys value has changed materially 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 mortgage is valued independently of the property and its fair value is reported separately. The independent fiduciary
  reviews and approves
61

mortgage valuation adjustments which exceed the prescribed limits discussed above 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 and Limited Partnerships:Real estate joint ventures and certain limited partnerships 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, that occurs prior to the dissolution of the investee entity. The Accounts real estate joint ventures and limited partnerships are generally classified within level 3 of the valuation hierarchy.
Certain limited partnership interests for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Investment Committee of the Board and in accordance with the responsibilities of the Board as a whole. These investments are generally classified
  within level 3 of the valuation hierarchy.
Valuation of Marketable Securities:Equity securities listed or traded on any national market or exchange are valued at the last sale price as of the close of the principal securities exchange on which such securities are traded or, if there is no sale, at the mean of the last bid and asked prices on such exchange,
  exclusive of transaction costs. Such marketable securities are classified within level 1 of the valuation hierarchy.
Debt securities, 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). Money market instruments, with maturities of one year or less, are valued in the same manner as debt
  securities or derived from a pricing matrix. Debt securities are generally classified within level 2 of the valuation hierarchy.
Valuation of Mortgage Loan Receivable:The mortgage loan receivable is stated at fair value. The mortgage loan receivable is valued quarterly based on market factors, such as market interest rates and spreads for comparable loans, the performance of the underlying collateral and the credit quality of the
  counterparty. The Accounts mortgage loan receivable is classified within level 3 of the valuation hierarchy.
Valuation of Mortgage Loans Payable:Mortgage loans payable are stated at fair value. The estimated fair value of mortgage loans payable is based on the amount at which the liability could be transferred exclusive of transaction costs. Mortgage loans payable are valued quarterly based on market factors, such as
  market interest rates and spreads for comparable loans, 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. The Accounts mortgage loans
  payable are generally classified within level 3 of the valuation hierarchy. Interest expense for mortgage loans payable is recorded on the accrual basis taking into account the outstanding principal and contractual interest rates.
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 is included in net realized and unrealized gains and losses on investments and
  mortgage loans payable. Net realized gains and losses on foreign currency transactions include maturities of forward foreign currency contracts, 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
62

lifetime annuity income benefits, monthly payment levels cannot be reduced as a result of the Accounts adverse mortality experience. In addition, the contracts are required to stipulate the maximum expense charge for all Account level expenses that can be assessed, which is equal to 2.50% of average net assets
  per year. The Account pays a fee to TIAA to assume these mortality and expense risks.
Accounting for Investments:Real estate transactions are accounted for as of the date on which the purchase or sale transactions for the real estate properties close (settlement date). The Account recognizes a realized gain on the sale of a real estate property to the extent that the contract sales price exceeds the
  cost-to-date of the property being sold. A realized loss occurs when the cost-to-date exceeds the sales price. Any accumulated unrealized gains and losses are reversed in the calculation of realized gains and losses.
Rent from real estate properties consists of all amounts earned under tenant operating leases, including base rent, recoveries of real estate taxes and other expenses and charges for miscellaneous services provided to tenants. Rental income is recognized in accordance with the billing terms of the lease
  agreements. The Account bears the direct expenses of the real estate properties owned. These expenses include, but are not limited to, fees to local property management companies, property taxes, utilities, maintenance, repairs, insurance, and other operating and administrative costs. An estimate of the net
  operating income earned from each real estate property is accrued by the Account on a daily basis and such estimates are adjusted when actual operating results are determined.
The Account has limited ownership interests in various real estate funds (limited partnerships and one limited liability corporation) and a private 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 either income or return of capital, as determined by the management of the limited partnerships. Unrealized gains and losses are calculated and recorded when the financial statements of the limited partnerships are received by the Account. As circumstances warrant, prior to the
  receipt of financial statements of the limited partnership, the Account will estimate the value of its interests in good faith and will from time to time seek input from the issuer or the sponsor of the investment vehicle.
Income from real estate joint ventures is recorded based on the Accounts proportional interest of the income distributed by the joint venture. Income earned by the joint venture, but not yet distributed to the Account by the joint venture investment, is recorded as unrealized gains and losses on real estate joint
  ventures.
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 or as soon as the Account is informed of the dividend. Realized gains and losses on securities
  transactions are accounted for on the specific identification method.
The Accounts 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 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; and
    
    
    
    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); and
    
    
    
    actual net operating income received from the Accounts properties, other real estate-related investments and non real estate-related investments (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 the Accounts liabilities, including the daily investment management fee and certain other expenses attributable to operating the Account.
After the end of every quarter, the Account reconciles the amount 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 quarter, provided that material differences may be repaid in the
63

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 the difference between managements projections and the Accounts actual assets or expenses.
Cash:The Account maintains cash in bank deposit accounts which, at times, exceeds 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.
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 should incur no material federal income tax attributable to the net investment activity of the Account.
Due to/from Related Party:Due to/from investment advisor represents amounts that were 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 charged on these amounts.
Reclassifications:During 2007, the Account determined that its pro rata share of 2006 undistributed earnings from joint venture investments totaling approximately $24 million was reported as income from real estate joint ventures and limited partnerships for the year ended December 31, 2006 when the Account
  should have reported this amount as unrealized appreciation on real estate joint ventures and limited partnerships. Accordingly, the Statement of Operations for the year ended December 31, 2006 and certain quarters of 2007 have been adjusted to reflect a reclassification of these undistributed earnings to
  unrealized appreciation on real estate joint ventures and limited partnerships equal to this amount. There is no impact to the Accounts total assets, total net assets or net asset value per accumulation unit for the periods presented as a result of this reclassification.
Certain other prior period amounts have been reclassified to conform to the current presentation. These reclassifications did not affect the total assets, total net assets or net increase in net assets previously reported.
Note 2Management Agreements and Arrangements
Investment advisory services for the Account are provided by TIAA employees, under the direction of the Board and its Investment Committee, 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 all portfolio accounting and related services for the Account.
Through December 31, 2007, administrative and distribution services for the Account were provided by TIAA-CREF Individual & Institutional Services, LLC (Services) pursuant to a combined Distribution and Administrative Services Agreement with the Account. Services, a wholly-owned subsidiary of TIAA, is
  a registered broker-dealer and a member of the Financial Industry Regulatory Authority. Effective January 1, 2008, the Account entered into the Distribution Agreement for the Contracts Funded by the TIAA Real Estate Account(the New Distribution Agreement), dated January 1, 2008, by and among TIAA, for
  itself and on behalf of the Account, and Services. Pursuant to the New 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. Also effective January 1, 2008, TIAA performs administrative functions previously performed for the Account by Services, which include, among other things, (i) computing the Accounts daily unit value, (ii)
  maintaining accounting records and performing accounting services, (iii) receiving and allocating premiums, (iv) calculating and making annuity payments, (v) processing withdrawal requests, (vi) providing regulatory compliance and reporting services, (vii) maintaining the Accounts records of contract ownership
  and (viii) otherwise assisting generally in all aspects of the Accounts operations. Both distribution services (pursuant to the New Distribution Agreement) and administrative services continue to be provided to the Account by Services and TIAA, as applicable, on an at cost basis.
The New Distribution Agreement is terminable by either party upon 60 days written notice and terminates automatically upon any assignment thereof.
64

TIAA and Services provide their services at cost. TIAA and Services receive payments from the Account on a daily basis according to formulas established each year and adjusted periodically, and with the objective of keeping the payments as close as possible to the Accounts expenses actually incurred. Any
  differences between actual expenses and the amounts paid by the Account are adjusted quarterly.
TIAA also provides a liquidity guarantee to the Account, for a fee, to ensure that sufficient funds are available to meet participant transfer and cash withdrawal requests in the event that the Accounts cash flows and liquid investments are insufficient to fund such requests. TIAA funds any such transfer and
  withdrawal requests by purchasing accumulation units of the Account. See Note 3 below.
To the extent TIAA has purchased and owns accumulation units issued pursuant to the liquidity guarantee, the independent fiduciary would monitor and oversee, among other things, TIAAs ownership interest in the Account and may require TIAA to eventually redeem some of its liquidity units, particularly when
  the Account has uninvested cash or liquid investments available. TIAA also receives a fee for assuming certain mortality and expense risks.
The expenses for the services noted above that are provided to the Account by TIAA and Services are identified in the accompanying Statements of Operations and are reflected in the Condensed Financial Information disclosed in Note 9.
Note 3Related Party Transactions
Pursuant to its existing liquidity guarantee obligation, as of December 31, 2008, the TIAA General Account owned 576,868 accumulation units (which are generally referred to as Liquidity Units) issued by the Account. TIAA purchased an aggregate of $155.6 million of Liquidity Units on December 24, 2008.
In accordance with this 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. Liquidity units owned by TIAA are valued in
  the same manner as accumulation units owned by the Accounts participants. As of December 31, 2008, the TIAA General Account had assets equal to approximately $195.2 billion. Management believes that TIAA has the ability to meet its obligations under the liquidity guarantee.
As discussed in the Accounts prospectus and in accordance with a prohibited transaction exemption from the U.S. Department of Labor (PTE 96-76), the Accounts independent fiduciary, Real Estate Research Corporation, has certain responsibilities with respect to the Account that it has undertaken or is
  currently undertaking with respect to TIAAs purchase of Liquidity Units, including among other things, reviewing the purchase and redemption of Liquidity Units by TIAA to ensure the Account uses the correct unit values. In addition, 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. The independent fiduciarys 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.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. As of December 31, 2008, TIAA
  owned 1.4% of the outstanding accumulation units of the Account.
During 2009, pursuant to this liquidity guarantee obligation, TIAA has made additional purchases of Liquidity Units in multiple transactions. As of March 18, 2009, TIAA owned an aggregate of 3.6 million
65

Liquidity Units (representing a total investment of $942.6 million). As of such date, TIAA owned 8.7% of the outstanding accumulation units of the Account.
As discussed in more detail in Note 7, TIAA and Services provide services to the Account on an at cost basis. See Note 9 for details of the expense charge and expense ratio.
Note 4Credit Risk Concentrations
Concentrations of credit risk arise when a number of properties or tenants 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 the values of individual properties to decline. The Account has no
  significant concentrations of tenants as no single tenant has annual contract rent that makes up more than 2% of the Rental Income of the Account.
The majority of our 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:
Diversification by Market Value(1)
East
    
    West
    
    South
    
    Midwest
    
    Foreign(2)
    
    TotalOffice
    
    
    
    21.7
    %
    
    
    
    
    19.4
    %
    
    
    
    
    11.9
    %
    
    
    
    
    1.2
    %
    
    
    
    
    1.9
    %
    
    
    
    
    56.1
    %Apartment
    
    
    
    2.1
    %
    
    
    
    
    5.9
    %
    
    
    
    
    4.9
    %
    
    
    
    
    0.0
    %
    
    
    
    
    0.0
    %
    
    
    
    
    12.9
    %Industrial
    
    
    
    1.7
    %
    
    
    
    
    6.9
    %
    
    
    
    
    3.9
    %
    
    
    
    
    1.3
    %
    
    
    
    
    0.0
    %
    
    
    
    
    13.8
    %Retail
    
    
    
    4.2
    %
    
    
    
    
    1.0
    %
    
    
    
    
    9.0
    %
    
    
    
    
    0.5
    %
    
    
    
    
    2.0
    %
    
    
    
    
    16.7
    %Storage(3)
    
    
    
    0.2
    %
    
    
    
    
    0.2
    %
    
    
    
    
    0.1
    %
    
    
    
    
    0.0
    %
    
    
    
    
    0.0
    %
    
    
    
    
    0.5
    %Total
    
    
    
    29.9
    %
    
    
    
    
    33.4
    %
    
    
    
    
    29.8
    %
    
    
    
    
    3.0
    %
    
    
    
    
    3.9
    %
    
    
    
    
    100
    %

(1)
    
    
    
    Market values for properties held in joint venture investments are net of debt.(2)
    
    
    
    Represents real estate investments in the United Kingdom and France.(3)
    
    
    
    Represents a portfolio of storage facilities.Properties in the East region are located in: ME, NH, VT, MA, RI, CT, NY, NJ, PA, DE, MD, DC, WV, VA, NC, SC, KYProperties in the Midwest region are located in: WI, MI, OH, IN, IL, MN, IA, MO, KS, NE, ND, SDProperties in the South region are located in: TN, MS, AL, GA, FL, OK, AR, LA, TXProperties in the West region are located in: MT, ID, WY, CO, NM, AZ, UT, NV, WA, OR, CA, AK, HINote 5Leases
The Accounts real estate properties are leased to tenants under operating lease agreements which expire on various dates through 2058. Contractual minimum annual rental income for the properties owned by the Account, excluding short-term residential and storage facility leases, are as follows (in thousands):
Years EndingDecember 31,2009
    
    
    $
    
    1,009,2912010
    
    
    
    906,1982011
    
    
    
    765,2522012
    
    
    
    655,9902013
    
    
    
    541,18020142058
    
    
    
    1,672,107Total
    
    
    $
    
    5,550,018Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts.
66

Note 6Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2008, using unadjusted quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3) (in
  thousands):
Description
    
    Level 1:QuotedPrices inActive Marketsfor IdenticalAssets
    
    Level 2:SignificantOtherObservableInputs
    
    Level 3:SignificantUnobservableInputs
    
    Total atDecember 31,2008Real estate properties
    
    
    $
    
    
    
    
    
    $
    
    
    
    
    
    $
    
    10,305,040
    
    
    
    $
    
    10,305,040Real Estate joint ventures and limited partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,463,196
    
    
    
    
    2,463,196Marketable securities-other
    
    
    
    
    
    
    
    
    511,711
    
    
    
    
    
    
    
    
    
    511,711Mortgage loan receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,767
    
    
    
    
    71,767Total Investments
    
    
    $
    
    
    
    
    
    $
    
    511,711
    
    
    
    $
    
    12,840,003
    
    
    
    $
    
    13,351,714Mortgage loans payable
    
    
    $
    
    
    
    
    
    $
    
    
    
    
    
    $
    
    1,830,040
    
    
    
    $
    
    1,830,040The following is a reconciliation of the beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months and year ended December 31, 2008 (in thousands):
Real EstateProperties
    
    Real EstateJoint Venturesand LimitedPartnerships
    
    MortgageLoanReceivable
    
    TotalLevel 3Investments
    
    MortgageLoansPayableFor the three months ended December 31, 2008:Beginning balance October 1, 2008
    
    
    $
    
    11,783,941
    
    
    
    $
    
    2,960,646
    
    
    
    $
    
    71,428
    
    
    
    $
    
    14,816,015
    
    
    
    $
    
    (1,697,506
    )Total realized and unrealized (loss) gain included in changes in net assets
    
    
    
    (1,483,673
    )
    
    
    
    
    (509,417
    )
    
    
    
    
    339
    
    
    
    
    (1,992,751
    )
    
    
    
    
    71,167Purchases, issuances, and settlements(1)
    
    
    
    4,772
    
    
    
    
    11,967
    
    
    
    
    
    
    
    
    
    16,739
    
    
    
    
    (203,701
    )Ending balance December 31, 2008
    
    
    $
    
    10,305,040
    
    
    
    $
    
    2,463,196
    
    
    
    $
    
    71,767
    
    
    
    $
    
    12,840,003
    
    
    
    $
    
    (1,830,040
    )For the year ended December 31, 2008:Beginning balance January 1, 2008
    
    
    $
    
    11,983,715
    
    
    
    $
    
    3,158,870
    
    
    
    $
    
    72,520
    
    
    
    $
    
    15,215,105
    
    
    
    $
    
    (1,392,093
    )Total realized and unrealized (loss) gain included in changes in net assets
    
    
    
    (1,924,027
    )
    
    
    
    
    (702,814
    )
    
    
    
    
    (753
    )
    
    
    
    
    (2,627,594
    )
    
    
    
    
    109,791Purchases, issuances, and settlements(1)
    
    
    
    245,352
    
    
    
    
    7,140
    
    
    
    
    
    
    
    
    
    252,492
    
    
    
    
    (547,738
    )Ending balance December 31, 2008
    
    
    $
    
    10,305,040
    
    
    
    $
    
    2,463,196
    
    
    
    $
    
    71,767
    
    
    
    $
    
    12,840,003
    
    
    
    $
    
    (1,830,040
    )(1)
    
    
    
    This line includes the net of contributions, distributions and accrued operating income for real estate joint ventures and limited partnerships as well as principal payments on mortgage loans payable.67

The amount of total gains (losses) included in changes in net assets attributable to the change in unrealized gains (losses) relating to investments and mortgage loans payable using significant unobservable inputs still held as of the reporting date is as follows (in thousands):
Real EstateProperties
    
    Real EstateJoint Venturesand LimitedPartnership
    
    MortgageLoanReceivable
    
    TotalLevel 3Investments
    
    MortgageLoansPayableFor the three months ended December 31, 2008
    
    
    $
    
    (1,483,045
    )
    
    
    
    $
    
    (509,417
    )
    
    
    
    $
    
    339
    
    
    
    $
    
    (1,992,123
    )
    
    
    
    $
    
    (71,167
    )The amount of total gains or losses for the year ended December 31, 2008 included in earnings (or changes in net assets) attributable to the change in unrealized gain or (loss) relating to assets still held at the reporting date
    
    
    $
    
    (1,921,932
    )
    
    
    
    $
    
    (702,797
    )
    
    
    
    $
    
    (753
    )
    
    
    
    $
    
    (2,625,482
    )
    
    
    
    $
    
    (109,791
    )Note 7Investments in Joint Ventures and Limited Partnerships
The Account owns interests in several real estate properties through joint ventures and receives distributions and allocations of profits and losses from the joint ventures based on the Accounts ownership interest percentages. Several of these joint ventures have mortgage loans payable on the properties owned. At December 31, 2008, the Account held 12 investments in joint ventures with non-controlling ownership interest percentages that ranged from 50% to 85%. Certain joint ventures and limited partnerships are subject to
  adjusted distribution percentages when earnings in the investment reach a pre-determined threshold. The Accounts allocated portion of the mortgage loans payable was $1.9 billion and $2.0 billion at December 31, 2008 and December 31, 2007, respectively. The Accounts equity in the joint ventures at December
  31, 2008 and December 31, 2007 was $2.2 billion and $2.8 billion, respectively. A condensed summary of the financial position and results of operations of the joint ventures is shown below (in thousands).
December 31, 2008
    
    December 31, 2007AssetsReal estate properties, at value
    
    
    $
    
    5,947,028
    
    
    
    $
    
    7,001,687Other assets
    
    
    
    95,411
    
    
    
    
    99,799Total assets
    
    
    $
    
    6,042,439
    
    
    
    $
    
    7,101,486Liabilities and EquityMortgage loans payable, at value
    
    
    $
    
    2,571,843
    
    
    
    $
    
    2,707,161Other liabilities
    
    
    
    58,378
    
    
    
    
    64,738Total liabilities
    
    
    
    2,630,221
    
    
    
    
    2,771,899Equity
    
    
    
    3,412,218
    
    
    
    
    4,329,587Total liabilities and equity
    
    
    $
    
    6,042,439
    
    
    
    $
    
    7,101,486Years Ended December 31,2008
    
    2007
    
    2006Operating Revenues and ExpensesRevenues
    
    
    $
    
    562,031
    
    
    
    $
    
    534,469
    
    
    
    $
    
    299,079Expenses
    
    
    
    333,700
    
    
    
    
    315,077
    
    
    
    
    157,807Excess of revenues over expenses
    
    
    $
    
    228,331
    
    
    
    $
    
    219,392
    
    
    
    $
    
    141,27268

Principal on mortgage loans payable on joint ventures is as follows (in thousands):
Amount2009
    
    
    $
    
    54,6602010
    
    
    
    511,5252011
    
    
    
    119,9052012
    
    
    
    721,5652013
    
    
    
    90,578Thereafter
    
    
    
    1,227,497Total maturities
    
    
    $
    
    2,725,730Management of the Account monitors the financial position of the Accounts joint venture
  partners. To the extent that Management of the Account determines that a joint venture partner has financial or liquidity concerns, Management will evaluate all actions and remedies available to the Account under the applicable joint venture agreement to minimize any potential adverse implications to the
  Account.
The Account invests in limited partnerships that own real estate properties and other real estate related assets and receives distributions from the limited partnerships based on the Accounts ownership interest percentages. At December 31, 2008, the Account held five limited partnership investments and one
  private real estate equity investment trust (all of which featured non-controlling ownership interests) with ownership interest percentages that ranged from 5.27% to 18.46%. The Accounts investment in limited partnerships was $286.5 million and $331.4 million at December 31, 2008 and December 31, 2007,
  respectively.
69

Note 8Mortgage Loans Payable
At December 31, 2008, the Account had outstanding mortgage loans payable secured by the following properties (in thousands):
Property
    
    Interest Rate andPayment Frequency(e)
    
    Amounts as ofDecember 31, 2008
    
    Maturity701 Brickell(a)
    
    3.91% paid monthly(f)
    
    
    $
    
    126,000
    
    
    
    
    October 1, 2010Four Oaks Place(b)
    
    3.91% paid monthly(f)
    
    
    
    200,000
    
    
    
    
    October 1, 2010Ontario Industrial Portfolio(c)
    
    7.42% paid monthly
    
    
    
    8,702
    
    
    
    
    May 1, 20111 & 7 Westferry Circus(d)
    
    5.40% paid quarterly
    
    
    
    192,982
    
    
    
    
    November 15, 2012Reserve at Sugarloaf(c)
    
    5.49% paid monthly
    
    
    
    25,531
    
    
    
    
    June 1, 2013South Frisco Village
    
    5.85% paid monthly
    
    
    
    26,251
    
    
    
    
    June 1, 2013Fourth & Madison
    
    6.40% paid monthly
    
    
    
    145,000
    
    
    
    
    August 21, 20131001 Pennsylvania Avenue
    
    6.40% paid monthly
    
    
    
    210,000
    
    
    
    
    August 21, 201350 Fremont
    
    6.40% paid monthly
    
    
    
    135,000
    
    
    
    
    August 21, 2013Pacific Plaza(c)
    
    5.55% paid monthly
    
    
    
    8,749
    
    
    
    
    September 1, 2013Wilshire Rodeo Plaza
    
    5.28% paid monthly
    
    
    
    112,700
    
    
    
    
    April 11, 20141401 H Street
    
    5.97% paid monthly
    
    
    
    115,000
    
    
    
    
    December 7, 2014Preston Sherry Plaza
    
    5.85% paid monthly
    
    
    
    23,500
    
    
    
    
    September 1, 2015The Colorado(c)
    
    5.65% paid monthly
    
    
    
    87,806
    
    
    
    
    November 1, 201599 High Street
    
    5.52% paid monthly
    
    
    
    185,000
    
    
    
    
    November 11, 2015The Legacy at Westwood
    
    5.95% paid monthly
    
    
    
    42,000
    
    
    
    
    December 1, 2015Regents Court
    
    5.76% paid monthly
    
    
    
    35,900
    
    
    
    
    December 1, 2015The Caruth
    
    5.71% paid monthly
    
    
    
    42,000
    
    
    
    
    December 1, 2015Lincoln Centre
    
    5.51% paid monthly
    
    
    
    153,000
    
    
    
    
    February 1, 2016Publix at Weston Commons
    
    5.08% paid monthly
    
    
    
    35,000
    
    
    
    
    January 1, 2036Total Principal Outstanding
    
    
    
    
    
    1,910,121Fair value adjustment
    
    
    
    
    
    (80,081
    )Total mortgage loans payable at fair value
    
    
    
    
    $
    
    1,830,040(a)
    
    
    
    The Account entered into a debt agreement that included an interest rate cap with its lender to reduce its exposure to the variability of changes in interest rates until maturity of the underlying debt. The interest rate on the entire $126 million mortgage is capped at 6.50%.(b)
    
    
    
    The Account entered into a debt agreement that included an interest rate cap with its lender to reduce its exposure to the variability of changes in interest rates until maturity of the underlying debt. The interest rate on the entire $200 million mortgage is capped at 6.50%.(c)
    
    
    
    The mortgage is adjusted monthly for principal payments.(d)
    
    
    
    The mortgage is denominated in British pounds and the principal has been converted to U.S. dollars using the exchange rate as of December 31, 2008. The quarterly payments are interest only, with a balloon payment at maturity. The interest rate is fixed. The cumulative foreign currency translation adjustment was an unrealized gain of $39.6 million.(e)
    
    
    
    Interest rates are taxed, unless stated otherwise.(f)
    
    
    
    The interest rate for these mortgages is a variable rate at the one month London Interbank Offered Rate (LIBOR) plus 200 basis points and is reset monthly.Principal on mortgage loans payable is due as follows (in thousands):
Amount2009
    
    
    $
    
    3,3032010
    
    
    
    330,8272011
    
    
    
    13,1392012
    
    
    
    198,3682013
    
    
    
    553,189Thereafter
    
    
    
    811,295Total maturities
    
    
    $
    
    1,910,12170

Note 9Condensed Financial Information
Selected condensed financial information for an Accumulation Unit of the Account is presented below.
Years Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004Per Accumulation Unit data:Rental income
    
    
    $
    
    18.794
    
    
    
    $
    
    17.975
    
    
    
    $
    
    16.717
    
    
    
    $
    
    15.604
    
    
    
    $
    
    13.422Real estate property level expenses and taxes
    
    
    
    9.190
    
    
    
    
    8.338
    
    
    
    
    7.807
    
    
    
    
    7.026
    
    
    
    
    5.331Real estate income, net
    
    
    
    9.604
    
    
    
    
    9.637
    
    
    
    
    8.910
    
    
    
    
    8.578
    
    
    
    
    8.091Other income
    
    
    
    3.808
    
    
    
    
    4.289
    
    
    
    
    3.931
    
    
    
    
    3.602
    
    
    
    
    3.341Total income
    
    
    
    13.412
    
    
    
    
    13.926
    
    
    
    
    12.841
    
    
    
    
    12.180
    
    
    
    
    11.432Expense charges(1)
    
    
    
    2.937
    
    
    
    
    2.554
    
    
    
    
    1.671
    
    
    
    
    1.415
    
    
    
    
    1.241Investment income, net
    
    
    
    10.475
    
    
    
    
    11.372
    
    
    
    
    11.170
    
    
    
    
    10.765
    
    
    
    
    10.191Net realized and unrealized gain (loss) on investments and mortgage loans payable
    
    
    
    (54.541
    )
    
    
    
    
    26.389
    
    
    
    
    22.530
    
    
    
    
    18.744
    
    
    
    
    13.314Net (decrease) increase in Accumulation Unit Value
    
    
    
    (44.066
    )
    
    
    
    
    37.761
    
    
    
    
    33.700
    
    
    
    
    29.509
    
    
    
    
    23.505Accumulation Unit Value:Beginning of period
    
    
    
    311.414
    
    
    
    
    273.653
    
    
    
    
    239.953
    
    
    
    
    210.444
    
    
    
    
    186.939End of period
    
    
    
    267.348
    
    
    
    
    311.414
    
    
    
    
    273.653
    
    
    
    
    239.953
    
    
    
    
    210.444Total return
    
    (14.15)%
    
    13.8%
    
    14.04%
    
    14.02%
    
    12.57%Ratios to Average net Assets:Expenses(1)
    
    
    
    0.95%
    
    
    
    
    0.87%
    
    
    
    
    0.67%
    
    
    
    
    0.63%
    
    
    
    
    0.63%Investment income, net
    
    
    
    3.38%
    
    
    
    
    3.88%
    
    
    
    
    4.49%
    
    
    
    
    4.82%
    
    
    
    
    5.17%Portfolio turnover rate:Real estate properties
    
    
    
    0.64%
    
    
    
    
    5.59%
    
    
    
    
    3.62%
    
    
    
    
    6.72%
    
    
    
    
    2.32%Marketable securities
    
    
    
    25.67%
    
    
    
    
    13.03%
    
    
    
    
    51.05%
    
    
    
    
    77.63%
    
    
    
    
    143.47%Accumulation Units outstanding at end of period (in thousands):
    
    
    
    41,542
    
    
    
    
    55,106
    
    
    
    
    50,146
    
    
    
    
    42,623
    
    
    
    
    33,338Net assets end of period (in thousands)
    
    
    $
    
    11,508,924
    
    
    
    $
    
    17,660,537
    
    
    
    $
    
    14,132,693
    
    
    
    $
    
    10,548,711
    
    
    
    $
    
    7,245,550(1)
    
    
    
    Expense charges per Accumulation Unit and the Ratio of Expenses to Average net Assets reflect Account-level expenses and exclude real estate property level expenses which are included in net real estate income. If the real estate property level expenses were included, the expense charge per Accumulation
      Unit for the year ended December 31, 2008 would be $12.127 ($10.892, $9.478, $8.441, and $6.572, for the years ended December 31, 2007, 2006, 2005 and 2004, respectively), and the Ratio of Expenses to Average Net Assets for the Year ended December 31, 2008 would be 3.91% (3.71%, 3.81%, 3.78% and
      3.33% for the years ended December 31, 2007, 2006, 2005, and 2004, respectively).Note 10Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows (in thousands):
For The Years Ended,2008
    
    2007
    
    2006Outstanding:Beginning of period
    
    
    
    55,106
    
    
    
    
    50,146
    
    
    
    
    42,623Credited for premiums
    
    
    
    3,271
    
    
    
    
    3,795
    
    
    
    
    4,056Credited for purchase of liquidity units by TIAA (see Note 3)
    
    
    
    577
    
    
    
    
    
    
    
    
    
    Net units (cancelled) credited for transfers, net disbursements, and amounts applied to the Annuity Fund
    
    
    
    (17,412
    )
    
    
    
    
    1,165
    
    
    
    
    3,467End of period
    
    
    
    41,542
    
    
    
    
    55,106
    
    
    
    
    50,14671

Note 11Commitments and Subsequent Events
During the normal course of business, the Account enters into discussions and agreements to purchase or sell real estate properties. On January 13, 2009, the Account sold a residential apartment complex in Phoenix, Arizona for sales proceeds of approximately $20.0 million and realized a loss of approximately
  $11.7 million. On February 19, 2009, the Account sold a residential apartment complex in Houston, TX for sales proceeds of approximately $8.9 million and realized a loss of approximately $5.2 million.
As of December 31, 2008, the Account had outstanding commitments to purchase interests in five limited partnerships and shares in a private real estate equity investment trust. Approximately $79.3 million remains to be funded under these commitments.
The Account is party to various claims and routine litigation arising in the ordinary course of business. 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.
During 2009, pursuant to the liquidity guarantee obligation, TIAA has made additional purchases of Liquidity Units in multiple transactions. As of March 18, 2009, TIAA owned an aggregate of 3.6 million accumulation units (representing a total investment of $942.6 million). As of such date, TIAA owned
  8.7% of the outstanding accumulation units of the Account.
Note 12New Accounting Pronouncements
In June 2007, the Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 07-1, Clarification of the Scope of the Audit and Accounting Guide, Investment Companies, and Accounting by Parent
  Companies and Equity Method Investors for Investments in Investment Companies. The SOP clarifies which entities are required to apply the provisions of the Investment Companies Audit and Accounting Guide (Guide) and provides guidance on accounting by parent companies and equity method investors for
  investments in investment companies. In February 2008, FASB issued Staff Position (FSP) SOP 07-1-1 indefinitely delaying the effective date of SOP 07-1 to allow FASB time to consider significant issues related to the implementation of SOP 07-1. Management of the Account will continue to monitor FASB
  developments and will evaluate the financial reporting implications to the Account, as necessary.
In December 2007, FASB issued Statement No. 141(R), Business Combinations, which establishes principles and requirements for how the acquirer shall recognize and measure in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree and
  goodwill acquired in a business combination or a gain from a bargain purchase. It is expected that more transactions will constitute a business under FASB Statement No. 141(R). This Statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual
  reporting period beginning on or after December 15, 2008. The Account reports all investments in real estate at fair value and therefore does not account for the acquisition of real estate investments as a business combination under this statement.
In December 2007, FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statementsan Amendment of ARB No. 51, which establishes and expands accounting and reporting standards for minority interests, which will be recharacterized as noncontrolling interests, in a subsidiary
  and the deconsolidation of a subsidiary. This Statement is effective for fiscal years beginning on or after December 15, 2008. The adoption of Statement No. 160 will not impact the financial position or results of operations of the Account.
In May 2008, FASB issued Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles(GAAP Hierarchy), which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental
  entities that are presented in conformity with generally accepted accounting principles in the United States. This statement is effective 60 days following the Securities and Exchange Commissions approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of
  Presented Fairly in Conformity with Generally Accepted Accounting Principles (the approval occurred on September 16, 2008). This amendment removes the GAAP Hierarchy from auditing literature and places it in the accounting literature and appropriately directs the requirement to comply with the GAAP
  Hierarchy to the reporting entity. The application of the GAAP Hierarchy did not impact the Account.
72

In October 2008, FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active.This FSP clarifies the application of Statement No. 157 in a market that is not active and applies to financial assets within the scope of accounting pronouncements
  that require or permit fair value measurements in accordance with Statement No. 157. The FSP is effective upon issuance, including prior periods for which financial statements have not been issued. Accordingly, the Account adopted this guidance effective September 30, 2008. The adoption of this guidance did not
  have a material effect on the financial position or results of operations of the Account.
73

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)
REAL ESTATE PROPERTIES77.18% and 63.04%
Location/Description
    
    Type
    
    Value2008
    
    2007Alabama:Inverness Center
    
    Office
    
    
    $
    
    102,891
    
    
    
    $
    
    125,522Arizona:Camelback Center
    
    Office
    
    
    
    58,000
    
    
    
    
    80,000Kierland Apartment Portfolio
    
    Apartments
    
    
    
    146,830
    
    
    
    
    170,084Phoenix Apartment Portfolio
    
    Apartments
    
    
    
    129,244
    
    
    
    
    156,110California:3 Hutton Centre Drive
    
    Office
    
    
    
    45,710
    
    
    
    
    64,20050 Fremont
    
    Office
    
    
    
    386,600
    (1)
    
    
    
    
    478,000
    (1)88 Kearny Street
    
    Office
    
    
    
    99,815
    
    
    
    
    123,822275 Battery
    
    Office
    
    
    
    220,025
    
    
    
    
    271,917980 9th Street and 1010 8th Street
    
    Office
    
    
    
    151,600
    
    
    
    
    178,000Rancho Cucamonga Industrial Portfolio
    
    Industrial
    
    
    
    102,300
    
    
    
    
    133,000Capitol Place
    
    Office
    
    
    
    50,000
    
    
    
    
    53,539Centerside I
    
    Office
    
    
    
    46,400
    
    
    
    
    67,500Centre Pointe and Valley View
    
    Industrial
    
    
    
    29,000
    
    
    
    
    34,143Great West Industrial Portfolio
    
    Industrial
    
    
    
    93,600
    
    
    
    
    Larkspur Courts
    
    Apartments
    
    
    
    71,500
    
    
    
    
    97,000Northern CA RA Industrial Portfolio
    
    Industrial
    
    
    
    63,456
    
    
    
    
    69,602Ontario Industrial Portfolio
    
    Industrial
    
    
    
    278,000
    (1)
    
    
    
    
    355,399
    (1)Pacific Plaza
    
    Office
    
    
    
    104,970
    (1)
    
    
    
    
    127,130
    (1)Regents Court
    
    Apartments
    
    
    
    59,000
    (1)
    
    
    
    
    69,000Southern CA RA Industrial Portfolio
    
    Industrial
    
    
    
    107,218
    
    
    
    
    110,718The Legacy at Westwood
    
    Apartments
    
    
    
    89,224
    (1)
    
    
    
    
    126,580Wellpoint
    
    Office
    
    
    
    46,000
    
    
    
    
    51,000Westcreek
    
    Apartments
    
    
    
    31,500
    
    
    
    
    39,190West Lake North Business Park
    
    Office
    
    
    
    54,425
    
    
    
    
    68,622Westwood Marketplace
    
    Retail
    
    
    
    95,100
    
    
    
    
    96,562Wilshire Rodeo Plaza
    
    Office
    
    
    
    213,783
    (1)
    
    
    
    
    230,439
    (1)Colorado:Palomino Park
    
    Apartments
    
    
    
    173,000
    
    
    
    
    194,001The Lodge at Willow Creek
    
    Apartments
    
    
    
    40,000
    
    
    
    
    43,500The Market at Southpark
    
    Retail
    
    
    
    29,000
    
    
    
    
    35,800Connecticut:Ten & Twenty Westport Road
    
    Office
    
    
    
    174,400
    
    
    
    
    183,006Florida:701 Brickell
    
    Office
    
    
    
    255,000
    (1)
    
    
    
    
    275,9424200 West Cypress Street
    
    Office
    
    
    
    41,568
    
    
    
    
    48,044Plantation Grove
    
    Retail
    
    
    
    11,950
    
    
    
    
    15,400Pointe on Tampa Bay
    
    Office
    
    
    
    49,700
    
    
    
    
    60,972Publix at Weston Commons
    
    Retail
    
    
    
    50,987
    (1)
    
    
    
    
    55,200
    (1)Quiet Waters at Coquina Lakes
    
    Apartments
    
    
    
    21,810
    
    
    
    
    26,205Royal St. George
    
    Apartments
    
    
    
    
    
    
    
    
    27,000Seneca Industrial Park
    
    Industrial
    
    
    
    101,296
    
    
    
    
    122,334See notes to the financial statements.
74

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)

Location/Description
    
    Type
    
    Value2008
    
    2007Florida: (continued)South Florida Apartment Portfolio
    
    Apartments
    
    
    $
    
    62,155
    
    
    
    $
    
    68,249Suncrest Village
    
    Retail
    
    
    
    15,800
    
    
    
    
    19,500The Fairways of Carolina
    
    Apartments
    
    
    
    20,942
    
    
    
    
    27,208The North 40 Office Complex
    
    Office
    
    
    
    64,398
    
    
    
    
    67,004Urban Centre
    
    Office
    
    
    
    113,274
    
    
    
    
    135,577France:Printemps de LHomme
    
    Retail
    
    
    
    247,621
    
    
    
    
    279,078Georgia:1050 Lenox Park
    
    Apartments
    
    
    
    57,550
    
    
    
    
    85,500Atlanta Industrial Portfolio
    
    Industrial
    
    
    
    54,001
    
    
    
    
    58,300Glenridge Walk
    
    Apartments
    
    
    
    37,575
    
    
    
    
    52,900Reserve at Sugarloaf
    
    Apartments
    
    
    
    44,900
    (1)
    
    
    
    
    52,000
    (1)Shawnee Ridge Industrial Portfolio
    
    Industrial
    
    
    
    69,000
    
    
    
    
    76,742Illinois:Chicago Caleast Industrial Portfolio
    
    Industrial
    
    
    
    63,932
    
    
    
    
    77,643Chicago Industrial Portfolio
    
    Industrial
    
    
    
    78,022
    
    
    
    
    86,421East North Central RA Industrial Portfolio
    
    Industrial
    
    
    
    
    
    
    
    
    38,016Oak Brook Regency Towers
    
    Office
    
    
    
    75,937
    
    
    
    
    86,892Parkview Plaza
    
    Office
    
    
    
    65,846
    
    
    
    
    66,067Maryland:Broadlands Business Park
    
    Industrial
    
    
    
    27,520
    
    
    
    
    35,500FEDEX Distribution Facility
    
    Industrial
    
    
    
    
    
    
    
    
    9,900GE Appliance East Coast Distribution Facility
    
    Industrial
    
    
    
    40,500
    
    
    
    
    48,000Massachusetts:99 High Street
    
    Office
    
    
    
    320,107
    (1)
    
    
    
    
    344,688
    (1)Needham Corporate Center
    
    Office
    
    
    
    32,494
    
    
    
    
    33,275Northeast RA Industrial Portfolio
    
    Industrial
    
    
    
    30,794
    
    
    
    
    33,300The Newbry
    
    Office
    
    
    
    315,600
    
    
    
    
    389,880Minnesota:Champlin Marketplace
    
    Retail
    
    
    
    17,101
    
    
    
    
    18,375Nevada:UPS Distribution Facility
    
    Industrial
    
    
    
    12,100
    
    
    
    
    15,900New Jersey:Konica Photo Imaging Headquarters
    
    Industrial
    
    
    
    18,300
    
    
    
    
    23,500Marketfair
    
    Retail
    
    
    
    90,759
    
    
    
    
    95,500Morris Corporate Center III
    
    Office
    
    
    
    94,955
    
    
    
    
    119,600NJ Caleast Industrial Portfolio
    
    Industrial
    
    
    
    49,000
    
    
    
    
    42,225Plainsboro Plaza
    
    Retail
    
    
    
    33,500
    
    
    
    
    51,000South River Road Industrial
    
    Industrial
    
    
    
    43,872
    
    
    
    
    53,400New York:780 Third Avenue
    
    Office
    
    
    
    341,000
    
    
    
    
    375,000The Colorado
    
    Apartments
    
    
    
    153,006
    (1)
    
    
    
    
    113,033See notes to the financial statements.
75

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)

Location/Description
    
    Type
    
    Value2008
    
    2007Ohio:Columbus Portfolio
    
    Office
    
    
    $
    
    
    
    
    
    $
    
    26,315Pennsylvania:Lincoln Woods
    
    Apartments
    
    
    
    32,025
    
    
    
    
    37,917Tennessee:Airways Distribution Center
    
    Industrial
    
    
    
    17,400
    
    
    
    
    24,300Summit Distribution Center
    
    Industrial
    
    
    
    22,700
    
    
    
    
    27,500Texas:Dallas Industrial Portfolio
    
    Industrial
    
    
    
    141,328
    
    
    
    
    154,056Four Oaks Place
    
    Office
    
    
    
    438,000
    (1)
    
    
    
    
    419,270Houston Apartment Portfolio
    
    Apartments
    
    
    
    267,468
    
    
    
    
    296,241Lincoln Centre
    
    Office
    
    
    
    269,000
    (1)
    
    
    
    
    305,000
    (1)Park Place on Turtle Creek
    
    Office
    
    
    
    40,094
    
    
    
    
    48,283Pinnacle Industrial /DFW Trade Center
    
    Industrial
    
    
    
    38,733
    
    
    
    
    46,700Preston Sherry Plaza
    
    Office
    
    
    
    38,400
    (1)
    
    
    
    
    45,500South Frisco Village
    
    Retail
    
    
    
    36,300
    (1)
    
    
    
    
    48,500
    (1)The Caruth
    
    Apartments
    
    
    
    61,349
    (1)
    
    
    
    
    65,427The Maroneal
    
    Apartments
    
    
    
    38,456
    
    
    
    
    40,034United Kingdom:1 & 7 Westferry Circus
    
    Office
    
    
    
    232,802
    (1)
    
    
    
    
    436,127
    (1)Virginia:8270 Greensboro Drive
    
    Office
    
    
    
    57,000
    
    
    
    
    63,500Ashford Meadows
    
    Apartments
    
    
    
    79,319
    
    
    
    
    94,060One Virginia Square
    
    Office
    
    
    
    51,797
    
    
    
    
    59,539The Ellipse at Ballston
    
    Office
    
    
    
    84,018
    
    
    
    
    92,504Washington:Creeksides at Centerpoint
    
    Office
    
    
    
    27,200
    
    
    
    
    42,000Fourth & Madison
    
    Office
    
    
    
    407,500
    (1)
    
    
    
    
    487,000
    (1)Millennium Corporate Park
    
    Office
    
    
    
    162,193
    
    
    
    
    158,000Northwest RA Industrial Portfolio
    
    Industrial
    
    
    
    24,100
    
    
    
    
    23,402Rainier Corporate Park
    
    Industrial
    
    
    
    81,035
    
    
    
    
    81,161Regal Logistics Campus
    
    Industrial
    
    
    
    67,000
    
    
    
    
    71,000Washington DC:1001 Pennsylvania Avenue
    
    Office
    
    
    
    550,757
    (1)
    
    
    
    
    640,150
    (1)1401 H Street, NW
    
    Office
    
    
    
    194,600
    (1)
    
    
    
    
    224,573
    (1)1900 K Street
    
    Office
    
    
    
    245,000
    
    
    
    
    285,000Mazza Gallerie
    
    Retail
    
    
    
    83,003
    
    
    
    
    97,000TOTAL REAL ESTATE PROPERTIES(Cost $10,031,744 and $9,804,489)
    
    
    
    
    
    10,305,040
    
    
    
    
    11,983,715See notes to the financial statements.
76

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)
OTHER REAL ESTATE-RELATED INVESTMENTS18.45% and 16.61%
REAL ESTATE JOINT VENTURES16.30% and 14.87%
Location/Description
    
    Value2008
    
    2007California:CA-Colorado Center LPYahoo Center (50% Account Interest)
    
    
    $
    
    239,748
    (2)
    
    
    
    $
    
    369,402
    (2)CA-Treat Towers LPTreat Towers (75% Account Interest)
    
    
    
    105,074
    
    
    
    
    118,997Florida:Florida Mall Associates, LtdThe Florida Mall (50% Account Interest)
    
    
    
    281,941
    (2)
    
    
    
    
    296,486
    (2)TREA Florida Retail, LLCFlorida Retail Portfolio (80% Account Interest)
    
    
    
    196,202
    
    
    
    
    260,879West Dade AssociatesMiami International Mall (50% Account Interest)
    
    
    
    105,312
    (2)
    
    
    
    
    109,945
    (2)Georgia:GA-Buckhead LLCProminence in Buckhead (75% Account Interest)
    
    
    
    78,209
    
    
    
    
    115,427Illinois:IL-161 Clark Street LLC161 North Clark Street (75% Account Interest)
    
    
    
    
    
    
    
    
    3,151
    (3)Massachusetts:MA-One Boston Place REITOne Boston Place (50.25% Account Interest)
    
    
    
    212,083
    
    
    
    
    246,440Tennessee:West Town Mall, LLCWest Town Mall (50% Account Interest)
    
    
    
    73,969
    (2)
    
    
    
    
    75,827
    (2)Virginia:Teachers REA IV, LLCTysons Executive Plaza II (50% Account Interest)
    
    
    
    36,048
    
    
    
    
    44,178Various:DDR TC LLCDDR Joint VentureVarious (85% Account Interest)
    
    
    
    712,773
    (2,4)
    
    
    
    
    1,028,297
    (2,4)Storage Portfolio I, LLCStorage Portfolio (75% Account Interest)
    
    
    
    67,621
    (2,4)
    
    
    
    
    81,943
    (2,4)Strategic Ind Portfolio I, LLCIDI Nationwide Industrial Portfolio (60% Account Interest)
    
    
    
    67,731
    (2,4)
    
    
    
    
    76,536
    (2,4)TOTAL REAL ESTATE JOINT VENTURES(Cost $2,068,714 and $2,005,340)
    
    
    
    2,176,711
    
    
    
    
    2,827,508LIMITED PARTNERSHIPS2.15% and 1.74%Cobalt Industrial REIT (10.998% Account Interest)
    
    
    
    31,784
    
    
    
    
    32,840Colony Realty Partners LP (5.27% Account Interest)
    
    
    
    29,000
    
    
    
    
    32,505Heitman Value Partners Fund (8.43% Account Interest)
    
    
    
    16,334
    
    
    
    
    24,489Lion Gables Apartment Fund (18.46% Account Interest)
    
    
    
    186,471
    
    
    
    
    205,162MONY/Transwestern Mezz RP II (16.67% Account Interest)
    
    
    
    17,710
    
    
    
    
    36,366Transwestern Mezz Realty Partners III, LLC (11.70% Account Interest)
    
    
    
    5,186
    
    
    
    
    TOTAL LIMITED PARTNERSHIPS(Cost $261,136 and $255,579)
    
    
    
    286,485
    
    
    
    
    331,362TOTAL REAL ESTATE JOINT VENTURES AND LIMITED PARTNERSHIPS(Cost $2,329,850 and $2,260,919)
    
    
    
    2,463,196
    
    
    
    
    3,158,870See notes to the financial statements.
77

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)
MARKETABLE SECURITIES3.83% and 19.97%REAL ESTATE-RELATED MARKETABLE SECURITIES0.00% and 2.24%
Shares
    
    Issuer
    
    Value2008
    
    2007
    
    2008
    
    2007
    
    
    
    
    51,200
    
    
    Acadia Realty Trust
    
    
    $
    
    
    
    
    
    $
    
    1,311
    
    
    
    
    3,300
    
    
    Alexanders Inc.
    
    
    
    
    
    
    
    
    1,166
    
    
    
    
    53,100
    
    
    Alexandria Real Estate Equities Inc.
    
    
    
    
    
    
    
    
    5,399
    
    
    
    
    164,585
    
    
    AMB Property Corp.
    
    
    
    
    
    
    
    
    9,474
    
    
    
    
    45,100
    
    
    American Campus Communities Inc.
    
    
    
    
    
    
    
    
    1,211
    
    
    
    
    214,600
    
    
    American Financial Realty Trust
    
    
    
    
    
    
    
    
    1,721
    
    
    
    
    159,700
    
    
    Apartment Investment & Management Co.
    
    
    
    
    
    
    
    
    5,546
    
    
    
    
    200,000
    
    
    Ashford Hospitality Trust Inc.
    
    
    
    
    
    
    
    
    1,438
    
    
    
    
    27,500
    
    
    Associated Estates Realty Corp.
    
    
    
    
    
    
    
    
    260
    
    
    
    
    132,200
    
    
    AvalonBay Communities Inc.
    
    
    
    
    
    
    
    
    12,445
    
    
    
    
    109,100
    
    
    BioMed Realty Trust Inc.
    
    
    
    
    
    
    
    
    2,528
    
    
    
    
    198,600
    
    
    Boston Properties Inc.
    
    
    
    
    
    
    
    
    18,233
    
    
    
    
    148,100
    
    
    Brandywine Realty Trust
    
    
    
    
    
    
    
    
    2,655
    
    
    
    
    86,500
    
    
    BRE Properties Inc.
    
    
    
    
    
    
    
    
    3,506
    
    
    
    
    341,650
    
    
    Brookfield Properties Corp.
    
    
    
    
    
    
    
    
    6,577
    
    
    
    
    93,500
    
    
    Camden Property Trust
    
    
    
    
    
    
    
    
    4,502
    
    
    
    
    110,900
    
    
    CBL & Associates Properties Inc.
    
    
    
    
    
    
    
    
    2,652
    
    
    
    
    74,900
    
    
    Cedar Shopping Centers Inc.
    
    
    
    
    
    
    
    
    766
    
    
    
    
    75,400
    
    
    Colonial Properties Trust
    
    
    
    
    
    
    
    
    1,706
    
    
    
    
    79,500
    
    
    Corporate Office Properties Trust
    
    
    
    
    
    
    
    
    2,504
    
    
    
    
    71,100
    
    
    Cousins Properties Inc.
    
    
    
    
    
    
    
    
    1,571
    
    
    
    
    281,100
    
    
    DCT Industrial Trust Inc.
    
    
    
    
    
    
    
    
    2,617
    
    
    
    
    205,000
    
    
    Developers Diversified Realty Corp.
    
    
    
    
    
    
    
    
    7,849
    
    
    
    
    157,000
    
    
    DiamondRock Hospitality Co.
    
    
    
    
    
    
    
    
    2,352
    
    
    
    
    99,000
    
    
    Digital Realty Trust Inc.
    
    
    
    
    
    
    
    
    3,799
    
    
    
    
    164,400
    
    
    Douglas Emmett Inc.
    
    
    
    
    
    
    
    
    3,717
    
    
    
    
    243,000
    
    
    Duke Realty Corp.
    
    
    
    
    
    
    
    
    6,337
    
    
    
    
    51,700
    
    
    Dupont Fabros Technology
    
    
    
    
    
    
    
    
    1,013
    
    
    
    
    39,400
    
    
    EastGroup Properties Inc.
    
    
    
    
    
    
    
    
    1,649
    
    
    
    
    49,900
    
    
    Education Realty Trust Inc.
    
    
    
    
    
    
    
    
    561
    
    
    
    
    37,300
    
    
    Equity Lifestyle Properties Inc.
    
    
    
    
    
    
    
    
    1,703
    
    
    
    
    60,800
    
    
    Equity One Inc.
    
    
    
    
    
    
    
    
    1,400
    
    
    
    
    452,300
    
    
    Equity Residential
    
    
    
    
    
    
    
    
    16,495
    
    
    
    
    42,000
    
    
    Essex Property Trust Inc.
    
    
    
    
    
    
    
    
    4,095
    
    
    
    
    108,700
    
    
    Extra Space Storage Inc.
    
    
    
    
    
    
    
    
    1,553
    
    
    
    
    93,700
    
    
    Federal Realty Investment Trust
    
    
    
    
    
    
    
    
    7,697
    
    
    
    
    101,300
    
    
    FelCor Lodging Trust Inc.
    
    
    
    
    
    
    
    
    1,579
    
    
    
    
    74,700
    
    
    First Industrial Realty Trust Inc.
    
    
    
    
    
    
    
    
    2,585
    
    
    
    
    41,600
    
    
    First Potomac Realty Trust
    
    
    
    
    
    
    
    
    719
    
    
    
    
    384,500
    
    
    General Growth Properties Inc.
    
    
    
    
    
    
    
    
    15,834
    
    
    
    
    62,700
    
    
    Glimcher Realty Trust
    
    
    
    
    
    
    
    
    896
    
    
    
    
    64,200
    
    
    GMH Communities Trust
    
    
    
    
    
    
    
    
    354
    
    
    
    
    360,900
    
    
    HCP Inc
    
    
    
    
    
    
    
    
    12,552
    
    
    
    
    141,700
    
    
    Health Care REIT Inc
    
    
    
    
    
    
    
    
    6,333
    
    
    
    
    84,600
    
    
    Healthcare Realty Trust Inc
    
    
    
    
    
    
    
    
    2,148
    
    
    
    
    70,900
    
    
    Hersha Hospitality Trust
    
    
    
    
    
    
    
    
    674
    
    
    
    
    96,300
    
    
    Highwoods Properties Inc.
    
    
    
    
    
    
    
    
    2,829
    
    
    
    
    55,500
    
    
    Home Properties Inc.
    
    
    
    
    
    
    
    
    2,489
    
    
    
    
    155,800
    
    
    Hospitality Properties Trust
    
    
    
    
    
    
    
    
    5,020See notes to the financial statements.
78

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)

Shares
    
    Issuer
    
    Value2008
    
    2007
    
    2008
    
    2007
    
    
    
    
    869,070
    
    
    Host Hotels & Resorts Inc.
    
    
    $
    
    
    
    
    
    $
    
    14,809
    
    
    
    
    375,400
    
    
    HRPT Properties Trust
    
    
    
    
    
    
    
    
    2,902
    
    
    
    
    95,300
    
    
    Inland Real Estate Corp.
    
    
    
    
    
    
    
    
    1,349
    
    
    
    
    54,100
    
    
    Kilroy Realty Corp.
    
    
    
    
    
    
    
    
    2,973
    
    
    
    
    365,921
    
    
    Kimco Realty Corp.
    
    
    
    
    
    
    
    
    13,320
    
    
    
    
    47,600
    
    
    Kite Realty Group Trust
    
    
    
    
    
    
    
    
    727
    
    
    
    
    66,600
    
    
    LaSalle Hotel Properties
    
    
    
    
    
    
    
    
    2,125
    
    
    
    
    151,900
    
    
    Liberty Property Trust
    
    
    
    
    
    
    
    
    4,376
    
    
    
    
    121,000
    
    
    Macerich Co./The
    
    
    
    
    
    
    
    
    8,598
    
    
    
    
    111,900
    
    
    Mack-Cali Realty Corp.
    
    
    
    
    
    
    
    
    3,805
    
    
    
    
    59,900
    
    
    Maguire Properties Inc.
    
    
    
    
    
    
    
    
    1,765
    
    
    
    
    42,300
    
    
    Mid-America Apartment Communities
    
    
    
    
    
    
    
    
    1,808
    
    
    
    
    155,200
    
    
    Nationwide Health Properties Inc.
    
    
    
    
    
    
    
    
    4,869
    
    
    
    
    25,400
    
    
    Parkway Properties Inc./Md
    
    
    
    
    
    
    
    
    939
    
    
    
    
    65,900
    
    
    Pennsylvania Real Estate Investment Trust
    
    
    
    
    
    
    
    
    1,956
    
    
    
    
    72,200
    
    
    Post Properties Inc.
    
    
    
    
    
    
    
    
    2,536
    
    
    
    
    427,900
    
    
    Prologis
    
    
    
    
    
    
    
    
    27,120
    
    
    
    
    26,900
    
    
    PS Business Parks Inc.
    
    
    
    
    
    
    
    
    1,414
    
    
    
    
    214,614
    
    
    Public Storage Inc.
    
    
    
    
    
    
    
    
    15,755
    
    
    
    
    31,500
    
    
    Ramco-Gershenson Properties
    
    
    
    
    
    
    
    
    673
    
    
    
    
    115,100
    
    
    Regency Centers Corp.
    
    
    
    
    
    
    
    
    7,423
    
    
    
    
    19,300
    
    
    Saul Centers Inc.
    
    
    
    
    
    
    
    
    1,031
    
    
    
    
    139,600
    
    
    Senior Housing Properties Trust
    
    
    
    
    
    
    
    
    3,166
    
    
    
    
    373,221
    
    
    Simon Property Group Inc.
    
    
    
    
    
    
    
    
    32,418
    
    
    
    
    98,507
    
    
    SL Green Realty Corp.
    
    
    
    
    
    
    
    
    9,207
    
    
    
    
    36,500
    
    
    Sovran Self Storage Inc.
    
    
    
    
    
    
    
    
    1,464
    
    
    
    
    124,300
    
    
    Strategic Hotels & Resorts Inc.
    
    
    
    
    
    
    
    
    2,080
    
    
    
    
    27,800
    
    
    Sun Communities Inc.
    
    
    
    
    
    
    
    
    586
    
    
    
    
    98,200
    
    
    Sunstone Hotel Investors Inc.
    
    
    
    
    
    
    
    
    1,796
    
    
    
    
    52,300
    
    
    Tanger Factory Outlet Centers
    
    
    
    
    
    
    
    
    1,972
    
    
    
    
    88,800
    
    
    Taubman Centers Inc.
    
    
    
    
    
    
    
    
    4,368
    
    
    
    
    224,000
    
    
    UDR, Inc.
    
    
    
    
    
    
    
    
    4,446
    
    
    
    
    17,000
    
    
    Universal Health Realty Income Trust
    
    
    
    
    
    
    
    
    602
    
    
    
    
    78,500
    
    
    U-Store-It Trust
    
    
    
    
    
    
    
    
    719
    
    
    
    
    221,800
    
    
    Ventas Inc.
    
    
    
    
    
    
    
    
    10,037
    
    
    
    
    237,100
    
    
    Vornado Realty Trust
    
    
    
    
    
    
    
    
    20,853
    
    
    
    
    77,700
    
    
    Washington Real Estate Investment
    
    
    
    
    
    
    
    
    2,441
    
    
    
    
    133,000
    
    
    Weingarten Realty Investors
    
    
    
    
    
    
    
    
    4,182TOTAL REAL ESTATE EQUITY SECURITIES(Cost $0 and $439,154)
    
    
    
    
    
    
    
    
    426,630TOTAL REAL ESTATE-RELATED MARKETABLE SECURITIES(Cost $0 and $439,154)
    
    
    
    
    
    
    
    
    426,630See notes to the financial statements.
79

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)
OTHER MARKETABLE SECURITIES3.83% and 17.73%BANKERS ACCEPTANCE0.00% and 0.20%
Principal
    
    Issuer
    
    MaturityDate
    
    Yield(5)
    
    Value2008
    
    2007
    
    2008
    
    2007$
    
    
    
    
    
    $
    
    4,359
    
    
    JPMorgan Chase Bank
    
    
    
    1/18/08
    
    
    
    
    4.400
    %
    
    
    
    $
    
    
    
    
    
    $
    
    4,349
    
    
    
    
    10,000
    
    
    Wachovia Bank
    
    
    
    4/21/08
    
    
    
    
    4.441
    %
    
    
    
    
    
    
    
    
    
    9,851
    
    
    
    
    25,000
    
    
    Wachovia Bank
    
    
    
    5/7/08
    
    
    
    
    4.360
    %
    
    
    
    
    
    
    
    
    
    24,570TOTAL BANKERS ACCEPTANCE(Cost $0 and $38,836)
    
    
    
    
    
    
    
    
    
    
    
    
    38,770CERTIFICATES OF DEPOSIT0.00% and 2.22%
    
    
    
    
    20,000
    
    
    American Express Centurion Bank
    
    
    
    2/5/08
    
    
    
    
    4.750
    %
    
    
    
    
    
    
    
    
    
    20,002
    
    
    
    
    25,000
    
    
    American Express Centurion Bank
    
    
    
    2/4/08
    
    
    
    
    4.750
    %
    
    
    
    
    
    
    
    
    
    25,002
    
    
    
    
    10,000
    
    
    Bank of Montreal
    
    
    
    2/14/08
    
    
    
    
    5.030
    %
    
    
    
    
    
    
    
    
    
    10,004
    
    
    
    
    45,000
    
    
    Bank of Montreal
    
    
    
    3/7/08
    
    
    
    
    5.100
    %
    
    
    
    
    
    
    
    
    
    45,031
    
    
    
    
    25,000
    
    
    Bank of Nova Scotia
    
    
    
    1/16/08
    
    
    
    
    5.060
    %
    
    
    
    
    
    
    
    
    
    25,004
    
    
    
    
    25,000
    
    
    Barclays Bank
    
    
    
    2/27/08
    
    
    
    
    4.990
    %
    
    
    
    
    
    
    
    
    
    25,013
    
    
    
    
    10,000
    
    
    Calyon
    
    
    
    1/31/08
    
    
    
    
    4.820
    %
    
    
    
    
    
    
    
    
    
    10,001
    
    
    
    
    50,000
    
    
    Calyon
    
    
    
    3/12/08
    
    
    
    
    5.050
    %
    
    
    
    
    
    
    
    
    
    50,033
    
    
    
    
    25,000
    
    
    Deutsche Bank
    
    
    
    1/24/08
    
    
    
    
    4.950
    %
    
    
    
    
    
    
    
    
    
    25,004
    
    
    
    
    20,000
    
    
    Dexia Banque SA
    
    
    
    3/25/08
    
    
    
    
    4.880
    %
    
    
    
    
    
    
    
    
    
    20,008
    
    
    
    
    32,000
    
    
    Dexia Banque SA
    
    
    
    3/10/08
    
    
    
    
    4.990
    %
    
    
    
    
    
    
    
    
    
    32,017
    
    
    
    
    30,000
    
    
    Rabobank Nederland
    
    
    
    3/5/08
    
    
    
    
    5.020
    %
    
    
    
    
    
    
    
    
    
    30,016
    
    
    
    
    30,000
    
    
    Royal Bank of Canada
    
    
    
    1/25/08
    
    
    
    
    5.060
    %
    
    
    
    
    
    
    
    
    
    30,007
    
    
    
    
    20,000
    
    
    SunTrust Banks, Inc.
    
    
    
    1/28/08
    
    
    
    
    4.845
    %
    
    
    
    
    
    
    
    
    
    19,999
    
    
    
    
    15,000
    
    
    Toronto Dominion Bank
    
    
    
    2/26/08
    
    
    
    
    5.040
    %
    
    
    
    
    
    
    
    
    
    15,009
    
    
    
    
    40,000
    
    
    Toronto Dominion Bank
    
    
    
    1/22/08
    
    
    
    
    5.300
    %
    
    
    
    
    
    
    
    
    
    40,014TOTAL CERTIFICATES OF DEPOSIT(Cost $0 and $422,007)
    
    
    
    
    
    
    
    
    
    
    
    
    422,164COMMERCIAL PAPER1.84% and 9.23%
    
    
    
    
    20,000
    
    
    Abbey National North America LLC
    
    
    
    1/9/08
    
    
    
    
    4.930
    %
    
    
    
    
    
    
    
    
    
    19,977
    
    
    
    
    10,000
    
    
    Abbey National North America LLC
    
    
    
    1/8/08
    
    
    
    
    4.670
    %
    
    
    
    
    
    
    
    
    
    9,99050,000
    
    
    
    
    
    
    
    Abbey National North America LLC
    
    
    
    1/5/09
    
    
    
    
    0.071
    %
    
    
    
    
    49,998
    
    
    
    
    
    
    
    
    
    50,000
    
    
    American Express Credit Corp.
    
    
    
    1/14/08
    
    
    
    
    4.510
    %
    
    
    
    
    
    
    
    
    
    49,908
    
    
    
    
    32,490
    
    
    American Honda Finance Corp.
    
    
    
    1/29/08
    
    
    
    
    4.500-4.510
    %
    
    
    
    
    
    
    
    
    
    32,370
    
    
    
    
    15,438
    
    
    American Honda Finance Corp.
    
    
    
    2/11/08
    
    
    
    
    4.310
    %
    
    
    
    
    
    
    
    
    
    15,356
    
    
    
    
    7,050
    
    
    American Honda Finance Corp.
    
    
    
    2/28/08
    
    
    
    
    4.250
    %
    
    
    
    
    
    
    
    
    
    6,997
    
    
    
    
    2,137
    
    
    American Honda Finance Corp.
    
    
    
    1/4/08
    
    
    
    
    4.380
    %
    
    
    
    
    
    
    
    
    
    2,136
    
    
    
    
    13,200
    
    
    Bank of America Corp
    
    
    
    3/6/08
    
    
    
    
    4.780
    %
    
    
    
    
    
    
    
    
    
    13,088
    
    
    
    
    30,000
    
    
    Bank of America Corp
    
    
    
    4/8/08
    
    
    
    
    4.800
    %
    
    
    
    
    
    
    
    
    
    29,604
    
    
    
    
    20,000
    
    
    Bank of America Corp
    
    
    
    1/15/08
    
    
    
    
    4.970
    %
    
    
    
    
    
    
    
    
    
    19,96140,000
    
    
    
    
    
    
    
    Bank of Nova Scotia
    
    
    
    1/2/09
    
    
    
    
    0.193
    %
    
    
    
    
    39,999
    
    
    
    
    
    
    
    
    
    34,525
    
    
    Bank of Scotland
    
    
    
    2/29/08
    
    
    
    
    4.720
    %
    
    
    
    
    
    
    
    
    
    34,260
    
    
    
    
    27,400
    
    
    Bank of Scotland
    
    
    
    2/26/08
    
    
    
    
    4.710
    %
    
    
    
    
    
    
    
    
    
    27,201
    
    
    
    
    20,000
    
    
    Canadian Imperial Holdings, Inc.
    
    
    
    1/29/08
    
    
    
    
    4.703
    %
    
    
    
    
    
    
    
    
    
    19,926
    
    
    
    
    40,000
    
    
    Citigroup Funding Inc.
    
    
    
    1/23/08
    
    
    
    
    4.850
    %
    
    
    
    
    
    
    
    
    
    39,881
    
    
    
    
    25,000
    
    
    Citigroup Funding Inc.
    
    
    
    2/7/08
    
    
    
    
    4.650
    %
    
    
    
    
    
    
    
    
    
    24,880
    
    
    
    
    25,000
    
    
    Citigroup Funding Inc.
    
    
    
    2/12/08
    
    
    
    
    4.650
    %
    
    
    
    
    
    
    
    
    
    24,865
    
    
    
    
    20,000
    
    
    Coca Cola Co.
    
    
    
    2/19/08
    
    
    
    
    4.430
    %
    
    
    
    
    
    
    
    
    
    19,873
    
    
    
    
    13,000
    
    
    Coca Cola Co.
    
    
    
    2/25/08
    
    
    
    
    4.390
    %
    
    
    
    
    
    
    
    
    
    12,907
    
    
    
    
    5,255
    
    
    Coca Cola Co.
    
    
    
    2/15/08
    
    
    
    
    4.200
    %
    
    
    
    
    
    
    
    
    
    5,224
    
    
    
    
    30,000
    
    
    Danske Corp.
    
    
    
    3/6/08
    
    
    
    
    4.920
    %
    
    
    
    
    
    
    
    
    
    29,746See notes to the financial statements.
80

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)

Principal
    
    Issuer
    
    MaturityDate
    
    Yield(5)
    
    Value2008
    
    2007
    
    2008
    
    2007$
    
    
    
    
    
    $
    
    20,000
    
    
    Edison Asset Securitization, LLC
    
    
    
    3/11/08
    
    
    
    
    4.740
    %
    
    
    
    $
    
    
    
    
    
    $
    
    19,790
    
    
    
    
    30,000
    
    
    General Electric Capital Corp.
    
    
    
    4/8/08
    
    
    
    
    4.580
    %
    
    
    
    
    
    
    
    
    
    29,607
    
    
    
    
    20,460
    
    
    General Electric Capital Corp.
    
    
    
    2/19/08
    
    
    
    
    4.510
    %
    
    
    
    
    
    
    
    
    
    20,331
    
    
    
    
    15,340
    
    
    General Electric Capital Corp.
    
    
    
    2/20/08
    
    
    
    
    4.550
    %
    
    
    
    
    
    
    
    
    
    15,241
    
    
    
    
    30,540
    
    
    General Electric Co.
    
    
    
    3/4/08
    
    
    
    
    4.540
    %
    
    
    
    
    
    
    
    
    
    30,290
    
    
    
    
    13,200
    
    
    Goldman Sachs Group Inc
    
    
    
    1/8/08
    
    
    
    
    5.200
    %
    
    
    
    
    
    
    
    
    
    13,186
    
    
    
    
    37,860
    
    
    Govco Incorporated
    
    
    
    2/20/08
    
    
    
    
    5.100
    %
    
    
    
    
    
    
    
    
    
    37,571
    
    
    
    
    29,000
    
    
    Govco Incorporated
    
    
    
    3/13/08
    
    
    
    
    4.850
    %
    
    
    
    
    
    
    
    
    
    28,688
    
    
    
    
    20,000
    
    
    Govco Incorporated
    
    
    
    2/12/08
    
    
    
    
    5.400
    %
    
    
    
    
    
    
    
    
    
    19,870
    
    
    
    
    12,000
    
    
    Govco Incorporated
    
    
    
    1/28/08
    
    
    
    
    4.680
    %
    
    
    
    
    
    
    
    
    
    11,948
    
    
    
    
    35,140
    
    
    Greenwich Capital Holdings
    
    
    
    4/14/08
    
    
    
    
    4.850
    %
    
    
    
    
    
    
    
    
    
    34,650
    
    
    
    
    6,990
    
    
    Harley-Davidson Funding
    
    
    
    2/21/08
    
    
    
    
    4.480
    %
    
    
    
    
    
    
    
    
    
    6,94450,000
    
    
    
    
    
    
    
    HSBC Finance Corporation
    
    
    
    1/7/09
    
    
    
    
    0.304
    %
    
    
    
    
    49,997
    
    
    
    
    
    
    
    
    
    30,000
    
    
    HSBC Finance Corporation
    
    
    
    2/21/08
    
    
    
    
    4.700
    %
    
    
    
    
    
    
    
    
    
    29,757
    
    
    
    
    5,420
    
    
    IBM (International Business Machine Corp.)
    
    
    
    1/3/08
    
    
    
    
    4.230
    %
    
    
    
    
    
    
    
    
    
    5,418
    
    
    
    
    25,000
    
    
    IBM Capital Inc
    
    
    
    3/10/08
    
    
    
    
    4.250
    %
    
    
    
    
    
    
    
    
    
    24,773
    
    
    
    
    20,000
    
    
    IBM International Group
    
    
    
    2/27/08
    
    
    
    
    4.220
    %
    
    
    
    
    
    
    
    
    
    19,852
    
    
    
    
    18,900
    
    
    IBM International Group
    
    
    
    1/15/08
    
    
    
    
    4.725
    %
    
    
    
    
    
    
    
    
    
    18,863
    
    
    
    
    10,000
    
    
    IBM International Group
    
    
    
    1/14/08
    
    
    
    
    4.725
    %
    
    
    
    
    
    
    
    
    
    9,982
    
    
    
    
    25,000
    
    
    ING (US) Finance
    
    
    
    2/22/08
    
    
    
    
    4.820
    %
    
    
    
    
    
    
    
    
    
    24,832
    
    
    
    
    20,000
    
    
    ING (US) Finance
    
    
    
    1/30/08
    
    
    
    
    4.730
    %
    
    
    
    
    
    
    
    
    
    19,924
    
    
    
    
    22,904
    
    
    Kitty Hawk Funding Corp
    
    
    
    3/14/08
    
    
    
    
    5.030
    %
    
    
    
    
    
    
    
    
    
    22,653
    
    
    
    
    20,000
    
    
    Nestle Capital Corp
    
    
    
    2/6/08
    
    
    
    
    4.740
    %
    
    
    
    
    
    
    
    
    
    19,907
    
    
    
    
    20,000
    
    
    Nestle Capital Corp
    
    
    
    3/5/08
    
    
    
    
    5.210
    %
    
    
    
    
    
    
    
    
    
    19,834
    
    
    
    
    14,500
    
    
    Nestle Capital Corp
    
    
    
    3/11/08
    
    
    
    
    5.090
    %
    
    
    
    
    
    
    
    
    
    14,367
    
    
    
    
    15,300
    
    
    Paccar Financial Corp
    
    
    
    2/28/08
    
    
    
    
    4.500
    %
    
    
    
    
    
    
    
    
    
    15,185
    
    
    
    
    10,000
    
    
    Paccar Financial Corp
    
    
    
    2/11/08
    
    
    
    
    4.490
    %
    
    
    
    
    
    
    
    
    
    9,947
    
    
    
    
    9,300
    
    
    Paccar Financial Corp
    
    
    
    1/14/08
    
    
    
    
    4.730
    %
    
    
    
    
    
    
    
    
    
    9,283
    
    
    
    
    10,000
    
    
    Park Avenue Receivables Corp
    
    
    
    3/18/08
    
    
    
    
    4.650
    %
    
    
    
    
    
    
    
    
    
    9,884
    
    
    
    
    19,645
    
    
    Pfizer Inc
    
    
    
    5/15/08
    
    
    
    
    4.410
    %
    
    
    
    
    
    
    
    
    
    19,286
    
    
    
    
    28,000
    
    
    Private Export Funding Corporation
    
    
    
    1/30/08
    
    
    
    
    4.640-4.750
    %
    
    
    
    
    
    
    
    
    
    27,893
    
    
    
    
    20,000
    
    
    Private Export Funding Corporation
    
    
    
    2/5/08
    
    
    
    
    4.740
    %
    
    
    
    
    
    
    
    
    
    19,909
    
    
    
    
    10,000
    
    
    Private Export Funding Corporation
    
    
    
    2/11/08
    
    
    
    
    4.680
    %
    
    
    
    
    
    
    
    
    
    9,947
    
    
    
    
    10,000
    
    
    Private Export Funding Corporation
    
    
    
    3/3/08
    
    
    
    
    4.680
    %
    
    
    
    
    
    
    
    
    
    9,919
    
    
    
    
    1,500
    
    
    Private Export Funding Corporation
    
    
    
    1/31/08
    
    
    
    
    4.530
    %
    
    
    
    
    
    
    
    
    
    1,494
    
    
    
    
    30,000
    
    
    Procter & Gamble International S.C.
    
    
    
    2/14/08
    
    
    
    
    4.740
    %
    
    
    
    
    
    
    
    
    
    29,831
    
    
    
    
    17,000
    
    
    Procter & Gamble International S.C.
    
    
    
    2/1/08
    
    
    
    
    4.600
    %
    
    
    
    
    
    
    
    
    
    16,931
    
    
    
    
    10,000
    
    
    Procter & Gamble International S.C.
    
    
    
    1/16/08
    
    
    
    
    4.740
    %
    
    
    
    
    
    
    
    
    
    9,979
    
    
    
    
    10,000
    
    
    Procter & Gamble International S.C.
    
    
    
    1/18/08
    
    
    
    
    4.750
    %
    
    
    
    
    
    
    
    
    
    9,977
    
    
    
    
    10,000
    
    
    Procter & Gamble International S.C.
    
    
    
    1/31/08
    
    
    
    
    4.200
    %
    
    
    
    
    
    
    
    
    
    9,961
    
    
    
    
    9,000
    
    
    Procter & Gamble International S.C.
    
    
    
    3/14/08
    
    
    
    
    4.190
    %
    
    
    
    
    
    
    
    
    
    8,914
    
    
    
    
    8,000
    
    
    Procter & Gamble International S.C.
    
    
    
    3/12/08
    
    
    
    
    4.350
    %
    
    
    
    
    
    
    
    
    
    7,926
    
    
    
    
    4,665
    
    
    Procter & Gamble International S.C.
    
    
    
    1/4/08
    
    
    
    
    4.750
    %
    
    
    
    
    
    
    
    
    
    4,66350,000
    
    
    
    
    
    
    
    Rabobank USA Financial Corp
    
    
    
    1/5/09
    
    
    
    
    0.122
    %
    
    
    
    
    49,999
    
    
    
    
    
    
    
    
    
    31,573
    
    
    Ranger Funding Company LLC
    
    
    
    1/18/08
    
    
    
    
    5.080-5.580
    %
    
    
    
    
    
    
    
    
    
    31,486
    
    
    
    
    12,000
    
    
    Ranger Funding Company LLC
    
    
    
    1/10/08
    
    
    
    
    5.110
    %
    
    
    
    
    
    
    
    
    
    11,982
    
    
    
    
    25,000
    
    
    Royal Bank of Scotland
    
    
    
    2/8/08
    
    
    
    
    4.740
    %
    
    
    
    
    
    
    
    
    
    24,877
    
    
    
    
    10,000
    
    
    Shell International Financial
    
    
    
    3/28/08
    
    
    
    
    4.470
    %
    
    
    
    
    
    
    
    
    
    9,884
    
    
    
    
    25,000
    
    
    Societe Generale North America, Inc.
    
    
    
    3/26/08
    
    
    
    
    4.830
    %
    
    
    
    
    
    
    
    
    
    24,718
    
    
    
    
    20,000
    
    
    Societe Generale North America, Inc.
    
    
    
    1/10/08
    
    
    
    
    5.155
    %
    
    
    
    
    
    
    
    
    
    19,974See notes to the financial statements.
81

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)

Principal
    
    Issuer
    
    MaturityDate
    
    Yield(5)
    
    Value2008
    
    2007
    
    2008
    
    2007$
    
    
    
    
    
    $
    
    17,420
    
    
    Societe Generale North America, Inc.
    
    
    
    4/4/08
    
    
    
    
    4.640
    %
    
    
    
    $
    
    
    
    
    
    $
    
    17,201
    
    
    
    
    15,000
    
    
    Societe Generale North America, Inc.
    
    
    
    2/1/08
    
    
    
    
    4.780
    %
    
    
    
    
    
    
    
    
    
    14,94025,000
    
    
    
    
    
    
    
    Societe Generale North America, Inc.
    
    
    
    1/13/09
    
    
    
    
    0.243
    %
    
    
    
    
    24,997
    
    
    
    
    
    
    
    
    
    36,000
    
    
    Swedish Export Credit
    
    
    
    1/17/08
    
    
    
    
    4.740
    %
    
    
    
    
    
    
    
    
    
    35,920
    
    
    
    
    18,505
    
    
    Swedish Export Credit
    
    
    
    1/14/08
    
    
    
    
    4.720-4.820
    %
    
    
    
    
    
    
    
    
    
    18,471
    
    
    
    
    17,800
    
    
    Swedish Export Credit
    
    
    
    1/15/08
    
    
    
    
    4.860
    %
    
    
    
    
    
    
    
    
    
    17,765
    
    
    
    
    16,000
    
    
    Swedish Export Credit
    
    
    
    3/12/08
    
    
    
    
    4.370
    %
    
    
    
    
    
    
    
    
    
    15,851
    
    
    
    
    10,000
    
    
    Swedish Export Credit
    
    
    
    4/9/08
    
    
    
    
    4.720
    %
    
    
    
    
    
    
    
    
    
    9,868
    
    
    
    
    25,000
    
    
    Toronto-Dominion Holdings USA Inc.
    
    
    
    2/11/08
    
    
    
    
    4.710
    %
    
    
    
    
    
    
    
    
    
    24,868
    
    
    
    
    10,000
    
    
    Toronto-Dominion Holdings USA Inc.
    
    
    
    1/31/08
    
    
    
    
    5.060
    %
    
    
    
    
    
    
    
    
    
    9,961
    
    
    
    
    30,000
    
    
    Toyota Motor Credit Corp.
    
    
    
    2/15/08
    
    
    
    
    4.880
    %
    
    
    
    
    
    
    
    
    
    29,827
    
    
    
    
    30,000
    
    
    Toyota Motor Credit Corp.
    
    
    
    2/25/08
    
    
    
    
    4.740
    %
    
    
    
    
    
    
    
    
    
    29,787
    
    
    
    
    20,000
    
    
    Toyota Motor Credit Corp.
    
    
    
    2/28/08
    
    
    
    
    4.530
    %
    
    
    
    
    
    
    
    
    
    19,850
    
    
    
    
    19,000
    
    
    Toyota Motor Credit Corp.
    
    
    
    1/8/08
    
    
    
    
    4.520
    %
    
    
    
    
    
    
    
    
    
    18,9808,200
    
    
    
    
    
    
    
    Toyota Motor Credit Corp.
    
    
    
    2/4/09
    
    
    
    
    0.659
    %
    
    
    
    
    8,196
    
    
    
    
    22,400
    
    
    
    
    
    
    
    Toyota Motor Credit Corp.
    
    
    
    1/23/09
    
    
    
    
    0.406
    %
    
    
    
    
    22,395
    
    
    
    
    
    
    
    
    
    25,000
    
    
    UBS Finance, (Delaware) Inc.
    
    
    
    4/7/08
    
    
    
    
    4.910
    %
    
    
    
    
    
    
    
    
    
    24,676
    
    
    
    
    20,000
    
    
    UBS Finance, (Delaware) Inc.
    
    
    
    2/13/08
    
    
    
    
    5.030
    %
    
    
    
    
    
    
    
    
    
    19,889
    
    
    
    
    17,215
    
    
    UBS Finance, (Delaware) Inc.
    
    
    
    2/21/08
    
    
    
    
    5.000
    %
    
    
    
    
    
    
    
    
    
    17,102
    
    
    
    
    3,970
    
    
    Unilever Capital Corp
    
    
    
    1/11/08
    
    
    
    
    4.230
    %
    
    
    
    
    
    
    
    
    
    3,964
    
    
    
    
    20,000
    
    
    United Parcel Service Inc
    
    
    
    4/1/08
    
    
    
    
    4.380
    %
    
    
    
    
    
    
    
    
    
    19,758
    
    
    
    
    20,000
    
    
    United Parcel Service Inc
    
    
    
    4/28/08
    
    
    
    
    4.340
    %
    
    
    
    
    
    
    
    
    
    19,681
    
    
    
    
    20,000
    
    
    United Parcel Service Inc
    
    
    
    4/29/08
    
    
    
    
    4.340
    %
    
    
    
    
    
    
    
    
    
    19,678
    
    
    
    
    30,000
    
    
    United Parcel Service Inc
    
    
    
    3/31/08
    
    
    
    
    4.400
    %
    
    
    
    
    
    
    
    
    
    29,640
    
    
    
    
    10,000
    
    
    United Parcel Service Inc
    
    
    
    3/18/08
    
    
    
    
    4.300
    %
    
    
    
    
    
    
    
    
    
    9,899
    
    
    
    
    7,831
    
    
    Variable Funding Capital Corporation
    
    
    
    4/25/08
    
    
    
    
    4.640
    %
    
    
    
    
    
    
    
    
    
    7,694
    
    
    
    
    30,000
    
    
    Yorktown Capital, LLC
    
    
    
    4/15/08
    
    
    
    
    4.875
    %
    
    
    
    
    
    
    
    
    
    29,528TOTAL COMMERCIAL PAPER(Cost $245,585 and $1,755,528)
    
    
    
    
    
    
    
    245,581
    
    
    
    
    1,755,076See notes to the financial statements.
82

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)
GOVERNMENT AGENCY NOTES1.99% and 5.82%
Principal
    
    Issuer
    
    MaturityDate
    
    Yield(5)
    
    Value2008
    
    2007
    
    2008
    
    2007$
    
    
    
    
    
    $
    
    12,840
    
    
    Fannie Mae Discount Notes
    
    
    
    3/26/08
    
    
    
    
    4.285
    %
    
    
    
    $
    
    
    
    
    
    $
    
    12,717
    
    
    
    
    16,600
    
    
    Fannie Mae Discount Notes
    
    
    
    2/21/08
    
    
    
    
    4.280
    %
    
    
    
    
    
    
    
    
    
    16,505
    
    
    
    
    17,890
    
    
    Fannie Mae Discount Notes
    
    
    
    3/28/08
    
    
    
    
    4.270
    %
    
    
    
    
    
    
    
    
    
    17,714
    
    
    
    
    18,990
    
    
    Fannie Mae Discount Notes
    
    
    
    2/15/08
    
    
    
    
    4.230
    %
    
    
    
    
    
    
    
    
    
    18,894
    
    
    
    
    20,000
    
    
    Fannie Mae Discount Notes
    
    
    
    2/19/08
    
    
    
    
    4.200
    %
    
    
    
    
    
    
    
    
    
    19,890
    
    
    
    
    22,518
    
    
    Fannie Mae Discount Notes
    
    
    
    3/27/08
    
    
    
    
    4.190-4.240
    %
    
    
    
    
    
    
    
    
    
    22,299
    
    
    
    
    23,725
    
    
    Fannie Mae Discount Notes
    
    
    
    3/5/08
    
    
    
    
    4.170
    %
    
    
    
    
    
    
    
    
    
    23,554
    
    
    
    
    25,000
    
    
    Fannie Mae Discount Notes
    
    
    
    2/22/08
    
    
    
    
    4.270
    %
    
    
    
    
    
    
    
    
    
    24,854
    
    
    
    
    29,045
    
    
    Fannie Mae Discount Notes
    
    
    
    3/20/08
    
    
    
    
    4.190-4.280
    %
    
    
    
    
    
    
    
    
    
    28,786
    
    
    
    
    30,000
    
    
    Fannie Mae Discount Notes
    
    
    
    4/24/08
    
    
    
    
    4.220
    %
    
    
    
    
    
    
    
    
    
    29,614
    
    
    
    
    30,000
    
    
    Fannie Mae Discount Notes
    
    
    
    3/21/08
    
    
    
    
    4.280
    %
    
    
    
    
    
    
    
    
    
    29,729
    
    
    
    
    31,901
    
    
    Fannie Mae Discount Notes
    
    
    
    5/28/08
    
    
    
    
    4.100
    %
    
    
    
    
    
    
    
    
    
    31,360
    
    
    
    
    32,465
    
    
    Fannie Mae Discount Notes
    
    
    
    1/4/08
    
    
    
    
    4.330
    %
    
    
    
    
    
    
    
    
    
    32,458
    
    
    
    
    41,650
    
    
    Fannie Mae Discount Notes
    
    
    
    4/30/08
    
    
    
    
    4.150-4.180
    %
    
    
    
    
    
    
    
    
    
    41,086
    
    
    
    
    44,000
    
    
    Fannie Mae Discount Notes
    
    
    
    3/6/08
    
    
    
    
    4.260
    %
    
    
    
    
    
    
    
    
    
    43,67814,200
    
    
    
    
    
    
    
    Fannie Mae Discount Notes
    
    
    
    1/30/09
    
    
    
    
    0.081
    %
    
    
    
    
    14,200
    
    
    
    
    25,000
    
    
    
    
    
    
    
    Fannie Mae Discount Notes
    
    
    
    1/6/09
    
    
    
    
    0.030
    %
    
    
    
    
    25,000
    
    
    
    
    33,400
    
    
    
    
    
    
    
    Fannie Mae Discount Notes
    
    
    
    2/3/09
    
    
    
    
    0.152
    %
    
    
    
    
    33,400
    
    
    
    
    11,330
    
    
    
    
    
    
    
    Federal Home Loan Bank
      Discount Notes
    
    
    
    1/21/09
    
    
    
    
    0.051
    %
    
    
    
    
    11,330
    
    
    
    
    18,100
    
    
    
    
    
    
    
    Federal Home Loan Bank
      Discount Notes
    
    
    
    1/5/09
    
    
    
    
    0.071
    %
    
    
    
    
    18,100
    
    
    
    
    50,000
    
    
    
    
    
    
    
    Federal Home Loan Bank
      Discount Notes
    
    
    
    1/12/09
    
    
    
    
    0.041
    %
    
    
    
    
    50,000
    
    
    
    
    100,000
    
    
    
    
    
    
    
    Federal Home Loan Bank
      Discount Notes
    
    
    
    1/22/09
    
    
    
    
    0.081
    %
    
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    2,000
    
    
    Federal Home Loan Banks
    
    
    
    2/1/08
    
    
    
    
    4.480
    %
    
    
    
    
    
    
    
    
    
    1,993
    
    
    
    
    15,000
    
    
    Federal Home Loan Banks
    
    
    
    11/20/08
    
    
    
    
    4.700
    %
    
    
    
    
    
    
    
    
    
    14,992
    
    
    
    
    20,000
    
    
    Federal Home Loan Banks
    
    
    
    3/19/08
    
    
    
    
    4.270
    %
    
    
    
    
    
    
    
    
    
    19,824
    
    
    
    
    23,694
    
    
    Federal Home Loan Banks
    
    
    
    3/12/08
    
    
    
    
    4.250
    %
    
    
    
    
    
    
    
    
    
    23,505
    
    
    
    
    25,000
    
    
    Federal Home Loan Banks
    
    
    
    1/2/08
    
    
    
    
    4.450
    %
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    
    25,000
    
    
    Federal Home Loan Banks
    
    
    
    1/3/08
    
    
    
    
    4.450
    %
    
    
    
    
    
    
    
    
    
    24,997
    
    
    
    
    25,000
    
    
    Federal Home Loan Banks
    
    
    
    2/13/08
    
    
    
    
    4.200
    %
    
    
    
    
    
    
    
    
    
    24,880
    
    
    
    
    28,850
    
    
    Federal Home Loan Banks
    
    
    
    1/4/08
    
    
    
    
    4.661
    %
    
    
    
    
    
    
    
    
    
    28,844
    
    
    
    
    30,000
    
    
    Federal Home Loan Banks
    
    
    
    3/17/08
    
    
    
    
    4.270
    %
    
    
    
    
    
    
    
    
    
    29,743
    
    
    
    
    32,500
    
    
    Federal Home Loan Banks
    
    
    
    1/25/08
    
    
    
    
    4.260
    %
    
    
    
    
    
    
    
    
    
    32,419
    
    
    
    
    34,945
    
    
    Federal Home Loan Banks
    
    
    
    1/7/08
    
    
    
    
    4.450
    %
    
    
    
    
    
    
    
    
    
    34,926
    
    
    
    
    41,450
    
    
    Federal Home Loan Banks
    
    
    
    1/11/08
    
    
    
    
    4.260-4.900
    %
    
    
    
    
    
    
    
    
    
    41,409
    
    
    
    
    43,830
    
    
    Federal Home Loan Banks
    
    
    
    1/28/08
    
    
    
    
    4.300
    %
    
    
    
    
    
    
    
    
    
    43,706
    
    
    
    
    77,800
    
    
    Federal Home Loan Banks
    
    
    
    1/16/08
    
    
    
    
    4.280-4.290
    %
    
    
    
    
    
    
    
    
    
    77,681
    
    
    
    
    85,900
    
    
    Federal Home Loan Banks
    
    
    
    3/24/08
    
    
    
    
    4.260
    %
    
    
    
    
    
    
    
    
    
    85,096
    
    
    
    
    8,500
    
    
    Freddie Mac Discount Note
    
    
    
    3/3/08
    
    
    
    
    4.240
    %
    
    
    
    
    
    
    
    
    
    8,441
    
    
    
    
    10,000
    
    
    Freddie Mac Discount Note
    
    
    
    2/21/08
    
    
    
    
    4.320
    %
    
    
    
    
    
    
    
    
    
    9,943
    
    
    
    
    10,795
    
    
    Freddie Mac Discount Note
    
    
    
    4/25/08
    
    
    
    
    4.180
    %
    
    
    
    
    
    
    
    
    
    10,657
    
    
    
    
    17,925
    
    
    Freddie Mac Discount Note
    
    
    
    3/31/08
    
    
    
    
    4.120
    %
    
    
    
    
    
    
    
    
    
    17,738
    
    
    
    
    20,817
    
    
    Freddie Mac Discount Note
    
    
    
    4/18/08
    
    
    
    
    4.175
    %
    
    
    
    
    
    
    
    
    
    20,563
    
    
    
    
    22,400
    
    
    Freddie Mac Discount Note
    
    
    
    2/14/08
    
    
    
    
    4.220
    %
    
    
    
    
    
    
    
    
    
    22,290
    
    
    
    
    25,487
    
    
    Freddie Mac Discount Note
    
    
    
    2/20/08
    
    
    
    
    4.210
    %
    
    
    
    
    
    
    
    
    
    25,344
    
    
    
    
    26,735
    
    
    Freddie Mac Discount Note
    
    
    
    4/10/08
    
    
    
    
    4.145
    %
    
    
    
    
    
    
    
    
    
    26,434
    
    
    
    
    30,000
    
    
    Freddie Mac Discount Note
    
    
    
    1/24/08
    
    
    
    
    4.330
    %
    
    
    
    
    
    
    
    
    
    29,928See notes to the financial statements.
83

TIAA REAL ESTATE ACCOUNTSTATEMENT OF INVESTMENTSDecember 31, 2008 and December 31, 2007(Dollar values shown in thousands)

Principal
    
    Issuer
    
    MaturityDate
    
    Yield(5)
    
    Value2008
    
    2007
    
    2008
    
    2007$
    
    
    
    
    
    $
    
    32,470
    
    
    Freddie Mac Discount Note
    
    
    
    1/31/08
    
    
    
    
    4.320
    %
    
    
    
    $
    
    
    
    
    
    $
    
    32,36714,100
    
    
    
    
    
    
    
    Freddie Mac Discount Note
    
    
    
    1/5/09
    
    
    
    
    0.203
    %
    
    
    
    
    14,100
    
    
    
    
    TOTAL GOVERNMENT AGENCY NOTES(Cost $266,118 and $1,105,525)
    
    
    
    
    
    
    
    266,130
    
    
    
    
    1,105,858VARIABLE NOTES - 0.00% and 0.26%
    
    
    
    
    25,000
    
    
    Wells Fargo Bank
    
    
    
    1/7/08
    
    
    
    
    4.600
    %
    
    
    
    
    
    
    
    
    
    24,999
    
    
    
    
    25,000
    
    
    Wells Fargo Bank
    
    
    
    1/8/08
    
    
    
    
    4.600
    %
    
    
    
    
    
    
    
    
    
    24,999TOTAL VARIABLE NOTES(Cost $0 and $50,000)
    
    
    
    
    
    
    
    
    
    
    
    
    49,998TOTAL OTHER MARKETABLE SECURITIES(Cost $511,703 and $3,371,896)
    
    
    
    
    
    
    
    511,711
    
    
    
    
    3,371,866TOTAL MARKETABLE SECURITIES(Cost $511,703 and $3,811,050)
    
    
    
    
    
    
    
    511,711
    
    
    
    
    3,798,496MORTGAGE LOAN RECEIVABLE - 0.54% and 0.38%Borrower75,000
    
    
    
    
    75,000
    
    
    Klingle Corporation
    
    
    
    7/10/11
    
    
    
    
    2.570
    %(6)
    
    
    
    
    71,767
    
    
    
    
    72,520TOTAL MORTGAGE LOAN RECEIVABLE(Cost $75,000 and $75,000)
    
    
    
    
    
    
    
    71,767
    
    
    
    
    72,520TOTAL INVESTMENTS(Cost $12,948,297 and $15,951,458)
    
    
    
    
    
    
    $
    
    13,351,714
    
    
    
    $
    
    19,013,601(1)
    
    
    
    The investment has a mortgage loan payable outstanding, as indicated in Note 8.(2)
    
    
    
    The market value reflects the Accounts interest in the joint venture, net of any debt.(3)
    
    
    
    The market value reflects the final settlement due to the Account. The investment was sold on August 24, 2007.(4)
    
    
    
    Located throughout the US.(5)
    
    
    
    Yield represents the annualized yield at the date of purchase.(6)
    
    
    
    Current rate represents the interest rate on this investment at December 31, 2008. At December 31, 2007, the interest rate on this investment was 5.46%.See notes to the financial statements.
84

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants of the TIAA Real Estate Account and the Board of Trustees of Teachers Insurance and Annuity Association of America:
In
    our opinion, the accompanying statements of assets and liabilities, including
    the statements of investments, and the related statements of operations,
    changes in net assets and cash flows, present fairly, in all material respects,
    the financial position of the TIAA Real Estate Account (the Account)
    at December 31, 2008 and December 31, 2007, and the results of its operations
    and  its cash flows for each of the three years in the period ended December
    31, 2008 in conformity with accounting principles generally accepted in the
    United States of America. These financial statements are the responsibility
    of the Accounts management. Our responsibility is to express an opinion
    on these financial statements based on our audits. We conducted our audits
    of these statements in accordance with the standards of the Public Company
    Accounting Oversight Board (United States). Those standards require that
    we plan and perform the audit to obtain reasonable assurance about whether
    the financial statements are free of material misstatement. An audit includes
    examining, on a test basis, evidence supporting the amounts and disclosures
    in the financial statements, assessing the accounting principles used and
    significant estimates made by management, and evaluating the overall financial
    statement presentation. We believe that our audits provide a reasonable basis
    for our opinion.
/s/ PricewaterhouseCoopers LLP

New York, New YorkMarch 19, 2009
85

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 Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and participation of the registrants management, including the registrants CEO and CFO, the registrant conducted an evaluation of the effectiveness of the registrants disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of December 31, 2008.
  Based upon managements review, the CEO and the CFO concluded that the registrants disclosure controls and procedures were effective as of December 31, 2008.
(b)  Managements Report on Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Account. The Accounts internal control over financial reporting is a process designed under the supervision of the
  Accounts Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Accounts 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, 2008. 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. Based on that assessment, management concluded that, as of December 31, 2008, the Accounts internal control over financial reporting is effective.
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
  temporary 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.
86

PART III
ITEMS 10 AND 11. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE OF THE REGISTRANT; EXECUTIVE COMPENSATION.
The Real Estate Account has no officers or directors and no TIAA trustee or executive officer receives compensation from the Account. The Trustees and certain principal executive officers of TIAA as of March 1, 2009, their dates of birth, and their principal occupations during the last five years, are as
  follows:
Trustees
Ronald L. Thompson,6/17/49Chairman
of the TIAA Board of TrusteesFormer Chairman and Chief Executive Officer, Midwest Stamping and Manufacturing Company through 2005. Director, Washington University in St. Louis.
Elizabeth E. Bailey,11/26/38John C. Hower Professor of Public Policy and Management, Wharton School, University of Pennsylvania. Director, Altria Group, Inc. Chair, National Bureau of Economic Research. Honorary Trustee, The Brookings Institution.
Glenn A. Britt,3/6/49Chief Executive Officer, Time Warner Cable, since 2001, where he has held several positions since 1972. Executive Committee of National Cable & Telecommunications Association, Director of Walter Kaitz Foundation and Xerox Corporation.
Robert C. Clark,2/26/44Harvard University Distinguished Service Professor and Austin Wakeman Scott Professor of Law, Harvard Law School, Harvard University; Formerly Dean and Royall Professor of Law, Harvard Law School from 1989 to 2003. Director, Collins & Aikman Corporation, Time Warner, Inc. and Omnicom Group.
Edward M. Hundert, M.D.,10/1/56Senior lecturer in Medical Ethics, Harvard Medical School. Vice President for University Initiatives, King Abdullah University of Science and Technology. President, Case Western Reserve University from 2002 to 2006. Formerly, Dean, 2000-2002, University of Rochester School of Medicine and Dentistry,
  Professor of Medical Humanities and Psychiatry, 1997-2002. Board Member, Rock and Roll Hall of Fame.
Marjorie Fine Knowles,7/4/39Professor of Law, Georgia State University College of Law.
Donald K. Peterson,8/13/49Former Chairman and Chief Executive Officer, Avaya Inc. from 2002 to 2006 and President and Chief Executive Officer from 2000-01 Formerly, Executive Vice President and Chief Financial Officer, Lucent Technologies. Chairman, Board of Trustees, Worcester Polytechnic Institute. Director, Sanford C.
  Bernstein Fund Inc., Emerj Inc. and Knewco, Inc.
Sidney A. Ribeau,12/3/47President, Howard University. Formerly, President, Bowling Green State University, 1995-2008. Director, The Andersons, Convergys and Worthington Industries.
Dorothy K. Robinson,2/18/51Vice President and General Counsel, Yale University since 1986. Trustee, Newark Public Radio Inc., Youth Rights Media, Inc. and Friends of New Haven Legal Assistance.
David L. Shedlarz,4/17/48Retired Vice Chairman of Pfizer Inc. from 2006 to 2007, Executive Vice President from 1999 to 2005 and Chief Financial Officer from 1995 to 2005. Director, Pitney Bowes Inc. and the Hershey Corporation. Chairman of the Board, Multiple Sclerosis Society of New York.
David F. Swensen,1/26/54Chief Investment Officer, Yale University, and adjunct professor of investment strategy. Trustee, The Brookings Institution, Wesleyan University; Member, University of Cambridge Investment Board.
87

Marta Tienda,8/10/50Maurice P. During 22 Professor of Demographic Studies, Princeton University. Director, Office of Population Research, Princeton University, 1998-2002. Trustee, Corporation of Brown University, Sloan Foundation and Jacobs Foundation. Member of Visiting Committee, Harvard University Kennedy
  School of Government.
Rosalie J. Wolf,5/8/41Managing Partner, Botanica Capital Partners LLC. Formerly, Senior Advisor and Managing Director, Offit Hall Capital Management LLC and its predecessor company, Laurel Management Company LLC from 2001 to 2003; formerly, Treasurer and Chief Investment Officer, The Rockefeller Foundation.
  Director, North European Oil Royalty Trust; Chairman, Sanford C. Bernstein Fund, Inc.
OfficerTrustees
Roger W. Ferguson, Jr.,10/28/51President and Chief Executive Officer of TIAA since April 2008, and President and Chief Executive Officer of CREF since April 2008. Formerly, Chairman of Swiss Re America Holding Corporation and Head of Financial Services and Member of the Executive Committee, Swiss Re from 2006 to 2008;
  Vice Chairman and member of the Board of the U.S. Federal Reserve from 1999 to 2006 and a member of its Board of Governors from 1997 to 1999; and Partner and Associate, McKinsey & Company from 1984 to 1997. Currently a member of the Board of Overseers of Harvard University, a member of the Board
  of Trustees of the Institute for Advance Study, a member of the Council on Foreign Relations and the Group of Thirty.
Other TIAA Executive Officers
Georganne C. Proctor,10/25/56Executive Vice President and Chief Financial Officer, TIAA and CREF since 2006. Executive Vice President of Finance for Golden West Financial Corporation, the holding company of World Savings Bank, from 2003 through 2005. From 1994 through 2002, served as Senior Vice President, Chief
  Financial Officer and a member of the board of directors of Bechtel Group, Inc. Director of Redwood Trust, Inc. and Kaiser Aluminum Corporation.
Scott C. Evans,5/11/59Executive Vice President of TIAA since 1999 and Head of Asset Management since 2006 of TIAA and CREF, the TIAA-CREF Mutual Funds, the TIAA-CREF Institutional Mutual Funds, the TIAA-CREF Life Funds and TIAA Separate Account VA-1 (collectively, the TIAA-CREF Funds). Also
  served as Chief Investment Officer of TIAA between 2004 and 2006 and the TIAA-CREF Funds between 2003 and 2006.
Mary (Maliz) E. Beams,3/29/56Executive Vice President of TIAA and the TIAA-CREF Funds since 2007. President and Chief Executive Officer, TIAA-CREF Individual & Institutional Services, LLC since 2007. Senior Managing Director and Head of Wealth Management Group of TIAA since 2004. Partner, Spyglass Investments from
  2002 to 2003.
Jorge Gutierrez,11/26/61
Treasurer, TIAA since September 2008. Assistant Treasurer, TIAA from 2004 to 2008.
William J. Mostyn III, 1/18/48
Vice President and Corporate Secretary of TIAA and the TIAA-CREF Funds since April 2008; Deputy General Counsel and Corporate Secretary of Bank of America Corporation from 2005 to 2007; Deputy General Counsel, Secretary and Corporate Governance Officer of The Gillette Company from 1974 to
  2005.
Portfolio Management Team
Margaret A. Brandwein,11/26/46Managing Director and Portfolio Manager, TIAA Real Estate Account since 2004. From 2001 to 2004, Head of Commercial MortgagesWest Coast for TIAA.
88

Thomas C. Garbutt,10/12/58Managing Director and Head of Global Real Estate Equity Division, TIAA.
Philip J. McAndrews,12/13/58Managing Director and Head of Real Estate Portfolio Management, TIAA-CREF Global Real Estate since 2005. Between 2003 and 2005, portfolio manager for the Real Estate Account. Between 1997 and 2003, Head of the Real Estate Acquisitions and Joint Ventures group for TIAA.
Audit Committee Financial Expert
On August 20, 2003, the Board of Trustees of TIAA determined that Rosalie J. Wolf was qualified and would serve as the audit committee financial expert on TIAAs audit committee. Ms. Wolf 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 her capacity as Trustee.
Code of Ethics
The Board of Trustees of TIAA has 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 Real Estate Account, including providing a liquidity guarantee, and investment advisory and other services. In addition, Services, a wholly-owned subsidiary of TIAA, provides administration and 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, 2008, the Account expensed $19.7 million for this liquidity guarantee from TIAA through a daily deduction from the net assets of the Account and also purchased liquidity units in an amount equal to $155.6 million. During 2008 and
  through March 18, 2009, the TIAA general account has purchased liquidity units in an aggregate amount equal to $942.6 million in a number of separate transactions. These liquidity units are valued in the same manner as are accumulation units held by the Accounts participants. For more information with respect
  to the significant features of this liquidity guarantee, including the oversight of the independent fiduciary, please see Liquidity Guarantee in Item 1 of this annual report.
Investment Advisory and Administrative Services/Certain Risks Borne by TIAA. Deductions are made each valuation day from the net assets of the Account for various services required to manage investments, administer the Account and distribute the contracts. 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, 2008, the Account expensed $47.6 million for investment advisory services and $8.1 million for mortality and expense risks provided/borne by TIAA. For the same period, the Account expensed $77.6 million for administrative and distribution services provided by TIAA and
  Services, respectively.
89

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
PricewaterhouseCoopers LLP (PwC) performs independent audits of the registrants 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 financial statements for the years ended
      December 31, 2008, 2007, and 2006 and review of financial statements included
      in the registrants quarterly reports were $889,000, $654,000, and
      $665,000, respectively.
Tax Fees. PwC had no tax fees for the years ended December 31, 2008, 2007 and 2006.
All Other Fees. Other than as set forth above, there were no additional fees with respect to registrant.
Preapproval Policy. In June of 2003, the audit committee of TIAAs Board of Trustees (Audit Committee) 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.
90

PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)
    
    1.
    
    Financial Statements. See Item 8 for required financial statements.2.
    
    Financial Statement Schedules. See Item 8 for required financial statements.(b)
    
    
    
    Exhibits.(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.7(3)
    
    (A)
    
    Charter of TIAA (as amended)1(B)
    
    Bylaws of TIAA (as amended)6(4)
    
    (A)
    
    Forms of RA, GRA, GSRA, SRA, IRA Real Estate Account Endorsements3, Keogh Contract,4Retirement Select and Retirement Select Plus Contracts and Endorsements2and Retirement Choice and Retirement Choice Plus Contracts.4(B)
    
    Forms of Income-Paying Contracts3(10)
    
    (A)
    
    Independent Fiduciary Agreement, dated February 22, 2006, by and among TIAA, the Registrant, and Real Estate Research Corporation5(B)
    
    Amendment to Independent Fiduciary Agreement, dated December 17, 2008, between TIAA, on behalf of the Registrant, and Real Estate Research Corporation8(C)
    
    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.9(14)*
    
    Code of Ethics of TIAA(31)*
    
    Rule 13a-15(e)/15d-15(e) Certifications(32)*
    
    Section 1350 Certifications

*
    
    
    
    Filed herewith.1
    
    
    
    Previously filed and incorporated herein by reference to Exhibit 3(A) to the Accounts Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed December 21, 2004 (File No. 333-121493).2
    
    
    
    Previously filed and incorporated herein by reference to the Accounts Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed April 29, 2004 (File No. 333-113602).3
    
    
    
    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).4
    
    
    
    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).5
    
    
    
    Previously filed and incorporated herein by reference to Exhibit 10.(a) to the Annual Report on Form 10-K of the Account for the period ended December 31, 2005, filed with the commission on March 15, 2006 (File No. 33-92990).6
    
    
    
    Previously filed and incorporated herein by reference to Exhibit 3(B) to the Accounts Quarterly Report on Form 10-Q for the period ended September 30, 2006 and filed with the Commission on November 14, 2006 (File No. 33-92990).7
    
    
    
    Previously filed and incorporated herein by reference to the Accounts Current Report on Form 8-K, filed with the Commission on January 7, 2008 (File No. 33-92990).8
    
    
    
    Previously filed and incorporated herein by reference to the Accounts Current Report on Form 8-K, filed with the Commission on December 22, 2008 (File No. 33-92990).9
    
    
    
    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, 2007 and filed with the Commission on March 20, 2008 (File No. 33-92990).91

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 20th day of March, 2009.
TIAA REAL ESTATE ACCOUNTBy:
    TEACHERS INSURANCE ANDANNUITY ASSOCIATION OF AMERICABy:
    /s/ Roger W. Ferguson, Jr.Roger
      W.
      Ferguson, Jr.President
      and
      Chief
      ExecutiveOfficer
      and
      TrusteePursuant 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/ ROGERW. FERGUSON, JR.
    
    Roger W. Ferguson, Jr.
    
    President and Chief Executive Officer(Principal Executive Officer) and Trustee
    
    3/20/09/S/ GEORGANNEC. PROCTOR
    
    Georganne C. Proctor
    
    Executive Vice President and Chief FinancialOfficer (Principal Financial and Accounting Officer)
    
    3/20/09/S/ RONALDL. THOMPSON
    
    Ronald L. Thompson
    
    Chairman of the Board of Trustees
    
    3/20/09/S/ ELIZABETHE. BAILEY
    
    Elizabeth E. Bailey
    
    Trustee
    
    3/20/09/S/ GLENNA. BRITT
    
    Glenn A. Britt
    
    Trustee
    
    3/20/09/S/ ROBERTC. CLARK
    
    Robert C. Clark
    
    Trustee
    
    3/20/09/S/ EDWARDM. HUNDERT, M.D.
    
    Edward M. Hundert, M.D.
    
    Trustee
    
    3/20/09/S/ MARJORIEFINEKNOWLES
    
    Marjorie Fine Knowles
    
    Trustee
    
    3/20/09/S/ DONALDK. PETERSON
    
    Donald K. Peterson
    
    Trustee
    
    3/20/09/S/ SIDNEYA. RIBEAU
    
    Sidney A. Ribeau
    
    Trustee
    
    3/20/09/S/ DOROTHYK. ROBINSON
    
    Dorothy K. Robinson
    
    Trustee
    
    3/20/09/S/ DAVIDL. SHEDLARZ
    
    David L. Shedlarz
    
    Trustee
    
    3/20/09/S/ DAVIDF. SWENSEN
    
    David F. Swensen
    
    Trustee
    
    3/20/09/S/ MARTATIENDA
    
    Marta Tienda
    
    Trustee
    
    3/20/09/S/ ROSALIEJ. WOLF
    
    Rosalie J. Wolf
    
    Trustee
    
    3/20/0992

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.
93