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

                                    FORM 10-K

(Mark One)
[x]   ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
      ACT OF 1934 

      For the fiscal year ended December 31, 1996

[ ]   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
      EXCHANGE  ACT OF 1934 [NO FEE  REQUIRED]  

      For the transition period from __________ to __________

                 Commission file numbers 33-92990 and 333-13477

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

               New York                                        Not Applicable
   (State or other jurisdiction                               (I.R.S. Employer
 of incorporation or organization)                           Identification No.)

            c/o Teachers Insurance and Annuity Association of America
                                730 Third Avenue
                          New York, New York 10017-3206
          (Address of principal executive offices, including zip code)

       Registrant's telephone number, including area code: (212) 490-9000

        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                  YES X      NO ____

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of 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: [X] -- Not Applicable

Aggregate market value of voting stock held by non-affiliates:
Not Applicable

Documents Incorporated by Reference: None

<PAGE>


                                     PART I
ITEM 1. BUSINESS.

         General. The TIAA Real Estate Account (the "Real Estate Account" or the
"Account")  was  established  on February  22,  1995,  as a separate  investment
account of Teachers  Insurance and Annuity  Association of America  ("TIAA"),  a
nonprofit 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 of educational
and research  institutions.  The Account  commenced  operations on July 3, 1995,
when TIAA contributed  $100 million of seed money to the Account.  Participating
interests in the Account were first offered to eligible  participants on October
2, 1995.

         Investment  Practices.  The  investment  objective  of the Account is a
favorable rate of return over the long term, primarily through rental income and
capital  appreciation  from real estate  investments  owned by the Account.  The
Account will also invest in publicly-traded  securities and other instruments to
maintain  liquidity  needed for capital  expenditures  and  expenses and to make
distributions.

         The  Account's  target is to invest  between  70% and 80% of its assets
directly in real  estate or in real  estate-related  investments.  We expect the
majority  of the  Account's  real  estate  investments  to be  direct  ownership
interests in income-producing real estate, such as office,  industrial,  retail,
and multi-family  residential  properties.  The Account can also invest in other
real estate or real  estate-related  investments,  through joint ventures,  real
estate  partnerships or real estate investment  trusts. 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 own or manage real estate  primarily),  and  collateralized
mortgage obligations.

         Between 20% and 30% of the Account's assets are targeted to be invested
in government and corporate debt securities, short-term money market instruments
or cash equivalents, and, to some extent, common or preferred stock of companies
that don't  primarily  own or manage real  estate.  In some  circumstances,  the
Account can increase the portion of its assets  invested in debt  securities  or
money market  instruments  for a period of time.  This could happen because of a
rapid influx of participants'  funds, lack of suitable real estate  investments,
or a need for more liquidity.

                                       2

<PAGE>


         In  order  not to be  considered  an  "investment  company"  under  the
Investment  Company Act of 1940 (the "1940  Act"),  the  Account  will limit its
holdings of investment  securities  (as defined under the 1940 Act) to less than
40% of its total  assets (not  including  U.S.  Government  securities  and cash
items).

         Net Assets and  Portfolio  Investments.  As of December 31,  1996,  the
Account's  net assets  totaled  $369,695,053.  Through  December 31,  1996,  the
Account had acquired a total of thirteen real estate properties,  including four
industrial  properties,  four  neighborhood  shopping  centers,  four  apartment
complexes  and  one  office  building,   for  an  aggregate  purchase  price  of
approximately  $131  million.  Since that date,  the Account has  purchased  two
apartment  complexes for a purchase price of approximately $22 million,  and two
industrial properties for a purchase price of approximately of $20 million. Most
of the  remainder  of the  Account's  assets have been  invested  in  short-term
instruments  or are  being  held as cash.  The  Account  is  continuing  to seek
suitable real estate-related investments for its portfolio.

         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 Mortgage  Committee  (which  effective  January 24, 1997,
merged with the Finance  Committee to become the Investment  Committee),  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,  Inc.  ("Services"),  a non-profit  subsidiary of TIAA,
provide  all  portfolio  accounting,  custodial,  and related  services  for the
Account at cost.

ITEM 2. PROPERTIES.

         The properties the Account has purchased since it commenced  operations
are described below.


MULTI-FAMILY RESIDENTIAL COMPLEXES

The Crest At Shadow Mountain Apartments - El Paso, Texas

         On January 31, 1997,  the Account  purchased  the fee  interest  (i.e.,
ownership of underlying  land and all buildings  and other  improvements  on the
land) in The Crest at Shadow Mountain Apartments, a first class garden apartment
complex  located  in El Paso,  Texas,  for a  purchase  price  of  approximately
$9,150,000. The property is not subject to a mortgage.

                                       3

<PAGE>


         The  Crest  at  Shadow  Mountain  Apartments  was  built in 1992 and is
located  on 9.5  acres of land.  The  complex  contains  232 one,  two and three
bedroom units in 17 two-story apartment  buildings.  Buildings are of wood frame
construction  with stucco and brick  exteriors and pitched  composition  shingle
roofs. The project includes a community  clubhouse/leasing office with a fitness
center,  outdoor pool, sports court and sand volleyball  court.  Apartment units
offer fully equipped kitchens, cable, walk-in closets, ceiling fans, thermo-pane
windows  and are wired for  contract  security  systems.  There are 332  parking
spaces plus 91 covered  carports.  The complex is currently  92%  occupied  with
monthly rents  averaging $590 per unit.  Rents are comparable  with  competitive
complexes and are not subject to rent regulation. The Account is responsible for
the expenses of operating the property.

         The Crest at Shadow Mountain Apartments is located  approximately seven
miles west of the El Paso central business  district.  The El Paso  metropolitan
area,  with a current  population of almost seven hundred  thousand  persons has
experienced  population  growth over the past five years that is more than twice
the national rate. This growth is expected to continue.

Westcreek Apartments - Westlake Village, California

         On January 2, 1997, the Account purchased the fee interest in Westcreek
Apartments,  a luxury  garden  apartment  complex  located in Westlake  Village,
California, for a purchase price of approximately $13.0 million. The property is
not subject to a mortgage.

         Westcreek  Apartments was built in 1988 and is located on approximately
10.4 acres of land.  The complex  contains 126 one-and  two-bedroom  units in 11
two-story  buildings,  with each unit  containing  such amenities as a microwave
oven, fireplace, washer and dryer and nine foot ceilings. Building exteriors are
stucco with tile roofs.  There are 128 covered  parking spaces plus 76 uncovered
parking spaces. Residents have use of an on-site clubhouse with a fully equipped
weight room and a swimming  pool.  The complex is currently  94%  occupied  with
monthly rents averaging  $1,090 per unit.  Rents are comparable with competitive
complexes and are not subject to rent regulation. The Account is responsible for
the expenses of operating the property.

         Westlake  Village  is  located  approximately  38  miles  northwest  of
downtown Los Angeles in Ventura County. Ventura County has enjoyed above-average
population  growth  during the last five years and this  growth is  expected  to
continue into the foreseeable future.

                                       4

<PAGE>


Royal St. George Apartments - West Palm Beach, Florida

         On December 20,  1996,  the Account  purchased  the fee interest in the
Royal St. George  Apartments,  a first class garden apartment complex located in
West Palm Beach,  Florida,  for a purchase price of approximately $15.9 million.
The property is not subject to a mortgage.

         Royal St.  George  Apartments  was built in 1995 and is located on 10.4
acres of land. The complex contains 224 one-, two- and three-bedroom  units in 8
two- and  three-story  buildings,  with each unit containing such amenities as a
washer and dryer,  patio or solarium,  and a security system.  Upper level units
contain vaulted ceilings.  Building  exteriors are stucco with tile roofs. There
are 388  parking  spaces  plus 64  detached  garages.  Residents  have use of an
on-site  clubhouse,  a fully  equipped  exercise  center,  swimming pool and two
lighted tennis courts.  The complex is currently 94% occupied with monthly rents
averaging $834 per unit. Rents are comparable with competitive complexes and are
not subject to rent  regulation.  The Account is responsible for the expenses of
operating the property.

         Royal St.  George  Apartments  is located three miles south of the West
Palm Beach central business  district.  The West Palm Beach  metropolitan  area,
with a current  population  of  almost  one  million  persons,  has  experienced
population  growth over the past five years that is more than twice the national
rate. This growth is expected to continue.

Monte Vista Apartments -- Littleton, Colorado

         On June 21, 1996, the Account purchased the fee interest in Monte Vista
Apartments,  a luxury garden apartment  complex located in Littleton,  Colorado,
for a purchase price of approximately $17.6 million. The property is not subject
to a mortgage.

         Monte  Vista   Apartments   was  built  in  1995,  and  is  located  on
approximately  15.1  acres  of  land.  The  complex  consists  of 219  one-  and
two-bedroom  units  in  22  two-story  buildings,  with  units  containing  such
amenities as 9 foot ceilings,  a gas fireplace and an attached garage.  Building
exteriors  are  brick and  siding.  There are 221  uncovered  parking  spaces in
addition to the garages.  Residents  have use of an on-site  clubhouse,  a fully
equipped  exercise  center and  swimming  pool.  The  complex is  currently  90%
occupied with monthly rents  averaging  $923.00 per unit.  Rents are  comparable
with  competitive  complexes  in the  locality  and  are  not  subject  to  rent
regulation.  The  Account is  responsible  for the  expenses  of  operating  the
property.

         Littleton is located 10 miles southwest of downtown Denver. Denver, the
capital of  Colorado,  is the largest  city in the  seven-state  Rocky  Mountain
region. The population of the Denver

                                       5

<PAGE>


metropolitan area, which includes Littleton,  has grown steadily during the past
ten years and is expected to continue to expand into the near future.

Brixworth Apartments -- Atlanta, Georgia

         On  December  28,  1995,  the  Account  purchased  the fee  interest in
Brixworth Apartments, a first class garden apartment complex located in Atlanta,
Georgia,  for a purchase price of approximately  $15.6 million.  The property is
not subject to a mortgage.

         Brixworth  Apartments was built in 1989 and is located on approximately
10.8 acres of land.  The complex  contains 271 one-and  two-  bedroom  apartment
units in 11 three story buildings, with each unit containing such amenities as a
washer and dryer and a patio or balcony.  Building exteriors are brick and wood.
There are 420 parking  spaces in the complex.  Residents  have use of an on-site
clubhouse,  which  includes  a  fitness  center  and  swimming  pool.  Brixworth
Apartments is currently 88% occupied.  Average  monthly rents are $785 per unit.
Rents are comparable  with  competitive  communities and are not subject to rent
regulation.  The  Account is  responsible  for the  expenses  of  operating  the
property.

         Brixworth  Apartments is located in northeast Atlanta in DeKalb County,
near several shopping facilities and employment centers. Atlanta has experienced
positive  population and employment  growth over the last 15 years and serves as
the financial and administrative center for the southeastern United States.

The Greens at Metrowest Apartments -- Orlando, Florida

         On December 15,  1995,  the Account  purchased  the fee interest in The
Greens at  Metrowest,  a luxury  garden  apartment  complex  located in Orlando,
Florida,  for a purchase price of approximately  $12.5 million.  The property is
not subject to a mortgage.

         The Greens at Metrowest Apartments was built in 1990, and is located on
approximately  16.7  acres  of  land.  The  complex  consists  of 200  one-  and
two-bedroom  units in 27 two story  buildings,  with each unit  containing  such
amenities as a washer and dryer, a screened porch,  and, in many of the units, a
fireplace  and vaulted  ceilings.  Building  exteriors  are stucco with concrete
tiled roofs. There are 402 parking spaces in the complex.  Residents have use of
an on-site clubhouse, which includes an exercise facility and swimming pool. The
complex is currently 92% occupied, with monthly rents averaging $815 per unit.
Rents are comparable with competitive complexes and are

                                       6

<PAGE>


not  subject to rent  regulation.  The Account is  responsible  for the expenses
of operating the property.

         The complex is located in the 1,800 acre master planned  development of
Metrowest which contains an 18 hole golf course.  Its proximity to several major
highways gives  residents  easy access to Orlando's  major  employment  centers.
Orlando has experienced  strong population and employment growth during the last
decade.  While  tourism and  entertainment  account  for 40% of local jobs,  the
region's  economy is  diversifying by attracting  "high-tech"  industries and is
growing in importance as a warehouse and distribution location.

OFFICE BUILDINGS

Southbank Business Park - Phoenix, Arizona

         On February  27,  1996,  the Account  purchased  the fee  interest in a
122,535 square foot office/service building in Phoenix,  Arizona, for a purchase
price  of  approximately  $10.05  million.  The  property  is not  subject  to a
mortgage.

         The building,  completed in 1995, is located on approximately 9.9 acres
of land with 645 parking spaces.  It is currently 100% leased by four tenants in
the service  industry,  with rents  averaging $9.01 per square foot. None of the
leases  expire  until the year 2000 and  2001,  when  leases on 65% of the space
expire;   those  leases  together   represent  total  annual  rent  payments  of
approximately  $727,300.  Although the terms vary under each lease,  most of the
expenses  for  operating  the property  are either  borne or  reimbursed  by the
tenants.

         The building is located within the Southbank  Business Park adjacent to
the Phoenix  Airport  and is easily  accessible  from all areas of  metropolitan
Phoenix area. Phoenix has experienced  positive population and employment growth
over  the  last 15  years.  Over  29% of its  employment  base is  comprised  of
employees in the service industry.

NEIGHBORHOOD SHOPPING CENTERS

River Oaks Shopping Center - Woodbridge, Virginia

         On July  12,  1996,  the  Account  purchased,  through  a  wholly-owned
subsidiary, the fee interest in River Oaks Shopping Center, a 90,885 square foot
neighborhood  shopping  center located in Woodbridge,  Virginia,  for a purchase
price of approximately $13.0 million. The property is not subject to a mortgage.

         The center,  built in 1995, is located on approximately  10.42 acres of
land with space for 402 cars.  It is currently 94% occupied and is anchored by a
64,885 square foot Giant

                                       7

<PAGE>


supermarket,  a regional  supermarket chain.  Rents,  including a rent guarantee
from the  seller for the 6% of vacant  space,  average  $14.19 per square  foot.
Although the terms vary under each lease, most of the expenses for operating the
property  are either  borne or  reimbursed  by the  tenants.  Over the next five
years,  leases  on 19% of the  center's  space  expire;  those  leases  together
represent  total  annual  rent  payments  of  $352,695  in  the  year  of  their
expiration. The Giant lease expires in the year 2021.

         The center is  located 25 miles  south of  Washington,  D.C.  in Prince
William County. The Washington,  D.C.  metropolitan area has grown significantly
since 1980,  with a current  population  of  approximately  4.5 million  people.
Woodbridge has been developing as a bedroom  community for workers  commuting to
Washington, D.C. and to neighboring Fairfax County.

The Lynnwood Collection -- Raleigh, North Carolina

         On March 29,  1996,  the  Account  purchased  the fee  interest  in The
Lynnwood Collection,  an 86,362 square foot neighborhood shopping center located
in Raleigh, North Carolina, for a purchase price of approximately $6.5 million.
The property is not subject to a mortgage.

         The center,  which was built in 1988, is located on approximately  10.3
acres of land and has space for 426 cars. It is currently 100% occupied,  and is
anchored  by a 52,337  square foot Kroger  supermarket,  a national  supermarket
chain.  Rents average $8.26 per square foot.  Although the terms vary under each
lease,  most of the  expenses  for  operating  the  property are either borne or
reimbursed  by the  tenants.  Over the next  five  years,  leases  on 39% of the
center's  space  expire;  those  leases  together  represent  total  annual rent
payments of $426,810 in the year of their  expiration.  The Kroger lease expires
in the year 2015.

         The center is  located in north  Raleigh,  the  city's  primary  growth
corridor.  Raleigh is the capital of North Carolina and has  experienced  strong
population growth. As part of what is referred to as the "Research Triangle," it
has  attracted  major  business  and  industries  and has a large pool of highly
educated workers.

The Millbrook Collection -- Raleigh, North Carolina

         On March 29,  1996,  the  Account  purchased  the fee  interest  in The
Millbrook Collection, a 102,221 square foot neighborhood shopping center located
in Raleigh, North Carolina, for a purchase price of approximately $6.7 million.
The property is not subject to a mortgage.

                                       8

<PAGE>


         The center,  which was built in 1988, is located on approximately  11.9
acres of land with space for 670 cars.  The center is currently 83% occupied and
is anchored by a 52,337 square foot Kroger supermarket.  Rents average $7.55 per
square foot.  Although the terms vary under each lease, most of the expenses for
operating the property are either borne or  reimbursed by the tenants.  Over the
next five  years,  leases on 29% of the  center's  space  expire;  those  leases
together  represent  total annual rent payments of $327,066 in the year of their
expiration. The Kroger lease expires in the year 2015.

         The center is located within the city limits of Raleigh, North Carolina
in a  well-established  neighborhood.  The  Raleigh  area  is  discussed  in the
description of the Lynnwood Collection set forth above.

Plantation Grove Shopping Center -- Ocoee, Florida

         On  December  28,  1995,  the  Account  purchased  the fee  interest in
Plantation  Grove Shopping Center,  a 73,655 square foot  neighborhood  shopping
center located near Orlando, Florida, for a purchase price of approximately $7.3
million. The property is not subject to a mortgage.

         The center,  built in 1995, is located on  approximately  10.2 acres of
land with space for 401 cars.  It is currently 95% occupied and is anchored by a
47,955  square foot Publix  supermarket,  a regional  supermarket  chain.  Rents
average $9.86 per square foot. Although the terms vary under each lease, most of
the expenses for  operating  the property are either borne or  reimbursed by the
tenants.  Over the next five years,  leases on 30% of the center's space expire;
those leases  together  represent  total annual rent payments of $335,600 in the
year of their expiration. The Publix lease expires in the year 2015.

         The Orlando, Florida area is discussed in the description of The Greens
at Metrowest Apartments set forth above.



                                       9

<PAGE>



INDUSTRIAL PROPERTIES

Interstate Acres - Urbandale, Iowa

         On January 24,  1997,  the Account  purchased  the fee interest in four
warehouse  distribution  buildings  located in Urbandale,  Iowa,  for a purchase
price of approximately $13,565,000.  Rents on the buildings, which together have
440,000 square feet of rentable space,  average $3.19 per square foot. Operating
expenses  for the  properties  are  borne  or  reimbursed  by the  tenants.  The
buildings are not subject to a mortgage.

         The   buildings,   built   between  1981  and  1988,   are  located  on
approximately  29.6 acres of land with  space for 388 cars.  The  buildings  are
presently 97% leased to 15 tenants under leases which expire over the eight year
period from 1998-2005.

         Urbandale lies approximately 10 miles northwest of downtown Des Moines.
All buildings are located within the Interstate  Acres  Industrial Park which is
approximately  1/2 mile east of a full  interchange  with Interstates 35 and 80.
The population of the Des Moines  metropolitan  area, which includes  Urbandale,
has grown  steadily  during the past five years and is  expected  to continue to
expand consistent with the national average into the near future.

Westinghouse Facility - Coral Springs, Florida

         On  February  5, 1997,  the  Account  purchased  the fee  interest in a
single-story  industrial  building  located  in  Coral  Springs,  Florida  for a
purchase price of approximately  $6,069,000.  The  improvements  which have been
recently  completed for the  Westinghouse  Corporation  have 75,630 square foot.
Westinghouse  Corporation  occupies  100% of the building  area under a ten year
lease. The initial rent is $7.29 per square foot for the first five years of the
lease term  increasing  to $8.02 per  square  foot for the  second  five  years.
Operating expenses for the property are borne or reimbursed by the tenant.

         The subject property is located in northwest  Broward County within the
municipality  of Coral Springs and is in Corporate Park of Coral Springs,  a 600
acre  master-planned  commercial  industrial  park.  Corporate  Park has enjoyed
significant  success  and  development  in  recent  years  primarily  due to the
completion of the Sawgrass  Expressway,  which provides a link to I-95, I-75 and
I-595.

Arapahoe Park East - Boulder, Colorado

         On October 31,  1996,  the Account  purchased  the fee interest in five
research and development buildings located in Boulder,

                                       10

<PAGE>


Colorado,  for a purchase  price of  approximately  $9.9  million.  Rents on the
buildings,  which together have 129,425 square feet of rentable  space,  average
$8.83 per square foot. The buildings are not subject to a mortgage.

         The   buildings,   built   between  1979  and  1982,   are  located  on
approximately  6.46 acres of land with space for 332 cars. Ball Aerospace Corp.,
a leading aerospace and telecommunications  equipment manufacturer,  leases 100%
of the five buildings  under leases which expire over the three year period from
1998 to 2000.

         Boulder is located 25 miles  northwest  of Denver,  the largest city in
the  seven-state  Rocky  Mountain  region  and  the  capital  of  Colorado.  The
population of the Denver  metropolitan  area, which includes Boulder,  has grown
steadily  during the past ten years and is  expected  to continue to expand into
the near future.  Boulder's economy has been strengthened in recent years by the
establishment  of several  high tech firms in the area,  which have  attracted a
highly-educated and skilled labor force.

Interstate Crossing - Eagan, Minnesota

         On December 31,  1996,  the Account  purchased  the fee interest in two
industrial  buildings  located  in Eagan,  Minnesota,  for a  purchase  price of
approximately $6.4 million. Rents on the buildings,  which together have 131,380
square feet of rentable space, average $5.10 per square foot. Operating expenses
for the properties are borne or reimbursed by the tenants. The buildings are not
subject to a mortgage.

         The buildings,  built in 1995, are located on approximately  10.6 acres
of land with 288 parking  spaces.  The buildings are presently 100% leased to 10
tenants, with the majority of leases expiring in 2000 and 2001.

         The  subject  property  is  located  10  miles  southeast  of  downtown
Minneapolis  and 7 miles  south  of  downtown  St.  Paul.  The  twin  cities  of
Minneapolis  -- St. Paul  currently  have a population of 2.7 million people and
enjoy a strong and diverse economy.

Other Warehouse Properties

         On November  22,  1995,  the Account  purchased  the fee  interest in a
warehouse  property located near Minneapolis,  Minnesota for a purchase price of
approximately $4.1 million. Rents on the property average $3.77 per square foot.
On December 22, 1995, the Account purchased leasehold interests (i.e., interests
in the leases on the  underlying  land and  ownership of the buildings and other
improvements on the land) in two warehouse  properties located in El Paso, Texas
for an aggregate purchase price of approximately $4.4 million dollars.  Rents on
the properties

                                       11

<PAGE>


average $2.71 per square foot,  after  payment of the ground rent.  Although the
terms vary under each lease,  most of the  expenses  for  operating  each of the
properties are either borne or reimbursed by the tenants. None of the properties
are subject to a mortgage.

         Set forth below are further details relating to each facility:

                                                                      Lease
                        Building     Year    Current      Major       Expira-
Property                Size         Built   Occupancy    Tenants     tion Date
                        (sq. ft.)

Fridley,
Minnesota
 River Road             100,456      1995    100%        Packaging    2005
 Distribution Center                                     Materials,
                                                         Inc.

El Paso, Texas
 Butterfield warehouse   80,000      1980    100%        Rockwell     2000
 Zane Gray warehouse    103,510      1981    100%        D.J. Inc.    2003




                                       12

<PAGE>


ITEM 3. LEGAL PROCEEDINGS.

     None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Not applicable.

                                     PART II

ITEM 5.      MARKET FOR THE REGISTRANT'S SECURITIES AND RELATED
             STOCKHOLDER MATTERS.

         (a) Market  Information.  There is no established public trading market
for participating interests in the TIAA Real Estate Account.  Accumulation units
in the  Account  are sold to  eligible  participants  at the  Account's  current
accumulation unit value,  which is based on the Account's then current net asset
value.  For the period from January 1, 1996 to December  31, 1996,  the high and
low  accumulation  unit  values  for  the  Account  were  $111.11  and  $102.57,
respectively.

         (b) Approximate Number of  Holders.  The number  of  contractowners  at
February 28, 1997 was 19,202.

         (c) Dividends.  Not applicable.



                                       13


<PAGE>




ITEM 6.           SELECTED FINANCIAL DATA.

         The  following   selected   financial  data  should  be  considered  in
conjunction with the consolidated financial statements and notes thereto for the
Account provided herein.


<TABLE>
<CAPTION>

                                                                                        July 3, 1995
                                                                 Year Ended           (commencement of
                                                                December 31,           operations) to
                                                                   1996               December 31, 1995
                                                                ------------          -----------------
<S>                                                             <C>                     <C>
Investment income:
   Real estate income, net:
     Rental income ...................................          $ 10,951,183            $    165,762
                                                                ------------            ------------
     Real estate property level expenses and taxes:
       Operating expenses ............................             2,116,334                  29,173
       Real estate taxes .............................             1,254,163                  14,659
                                                                ------------            ------------
                            Total real estate property 
                              level expenses and taxes             3,370,497                  43,832
                                                                ------------            ------------
                               Real estate income, net             7,580,686                 121,930
   Dividends and interest ............................             6,027,486               2,828,900
                                                                -------------           ------------
                               Total investment income          $ 13,608,172            $  2,950,830
                                                                ============            ============

Net realized and unrealized
 gain on investments .................................          $  3,330,539            $     35,603
                                                                ============            ============
Net increase in net assets
 resulting from operations ...........................          $ 15,782,915            $  2,676,000
                                                                ============            ============
Net increase in net assets
 resulting from participant
 transactions ........................................          $233,653,793            $117,582,345
                                                                ============            ============
Net increase in net assets ...........................          $249,436,708            $120,258,345
                                                                ============            ============

                                                                December 31,            December 31,
                                                                   1996                    1995
                                                                ------------            ------------
Total assets .........................................          $426,372,007            $143,177,421
                                                                ============            ============
Total liabilities ....................................          $ 56,676,954            $ 22,919,076
                                                                ============            ============
Total net assets .....................................          $369,695,053            $120,258,345
                                                                ============            ============
Accumulation units outstanding .......................             3,295,786               1,172,498
                                                                   =========               =========
Accumulation unit value ..............................             $  111.11                 $102.57
                                                                   =========               =========
</TABLE>


                                       14

<PAGE>


ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS.

         The TIAA Real Estate Account (the "Account")  began  operations on July
3, 1995 and  interests in the Account  began being  offered to  participants  on
October 2, 1995.

         Through December 31, 1996, the Account had acquired a total of thirteen
real estate properties,  including four industrial properties, four neighborhood
shopping  centers,  one office  property  and four  apartment  complexes.  As of
December 31, 1996,  these properties  represented  35.82% of the Account's total
investment portfolio. 64% of the net transfers into the Account during 1996 were
received  during the fourth  quarter  and 43% of the  Account's  total  premiums
during  1996 were  received  during the same time  frame.  Such a high volume of
premiums and transfers into the Account so late in the year negatively  impacted
the level of real estate properties held as a percentage of total investments at
December 31, 1996.

         The Account  purchased three additional  properties in January 1997 and
one property in February 1997. The Account continues to pursue suitable property
acquisitions,  and is currently in various stages of negotiations  with a number
of prospective sellers.  While attractive acquisition prospects are available in
the  current  market,  significant  competition  exists  for the most  desirable
properties.

         As of December 31, 1996,  the Account also held  investments in sixteen
real estate  investment  trusts  (REITs),  representing  4.95% of the portfolio,
commercial  paper and corporate bonds,  representing  5.12% of the portfolio and
short-term  obligations of U.S. government agencies,  representing 54.11% of the
portfolio.

Results of Operations
---------------------

Year Ended December 31, 1996 Compared to Period Ended December 31, 1995
-----------------------------------------------------------------------

         The  Account's  total net return was 8.33% for the year ended  December
31,  1996 and  2.57% for the six month  period  ended  December  31,  1995.  The
Account's  performance in 1995 was lower for two reasons,  first the Account was
operational  for less than a full year in 1995 and its real  estate  investments
were made late in the period.

         The Account's net investment  income,  after deduction of all expenses,
was  $12,452,376 for the year ended December 31, 1996 and $2,640,397 for the six
month period ended  December 31, 1995, a 372%  increase.  This  increase was the
result of a full year of  operations  coupled  with a growing base of net assets
from

                                       15

<PAGE>


December 31, 1995 to December 31, 1996.  Total assets increased 198% during that
period.  In addition,  the Account had net realized and unrealized  gains (gross
unrealized gains less gross unrealized  losses) on investments of $3,330,539 and
$35,603 for the year ended December 31, 1996 and six month period ended December
31, 1995, respectively.  Net unrealized gains on real estate properties occurred
for the  first  time  during  1996 and  accounted  for 30% of the net  change in
unrealized appreciation for that period. Such gains and losses resulted from the
periodic  revaluations  of the Account's  properties.  The gains were based,  in
part, on the fact that our experience  operating the properties provided us with
better  estimates of future  income and  expenses,  and, in part,  on increasing
prices for certain property types held by the Account. The losses were based, in
part, on slower re-leasing of space at certain properties owned by the Account.

         Net unrealized gains on marketable  securities accounted for 70% of the
net change in unrealized  appreciation  for the year ended December 31, 1996 and
100% during the six month period ended  December  31, 1995.  The net  unrealized
gains during both periods  resulted  primarily  from price  appreciation  of the
shares of REIT stock owned by the Account.

         The Account's real estate holdings  generated  approximately 56% and 4%
of the Account's total investment  income (before  deducting  Account  expenses)
during the year ended  December 31, 1996 and the six month period ended December
31,  1995,  respectively.  The  remaining  44%  and  96%,  respectively,  of the
Account's  total  investment  income  was  generated  by  marketable  securities
investments.  The Account's  first real estate purchase was made on November 22,
1995,  which  explains the low  percentage of real estate income in 1995. As the
Account  approaches its goal of being  approximately 70% to 80% invested in real
estate,  future investment income is expected to be affected to a greater degree
by its real  estate  holdings.  While the future  performance  of the  Account's
investments  cannot be predicted,  assuming  little  change in current  economic
conditions,  this  anticipated  increase in real estate  holdings is expected to
have a positive impact on the Account's total return.

         Gross real  estate  rental  income was  $10,951,183  for the year ended
December 31, 1996 and $165,762 for the six month period ended December 31, 1995.
As of December 31, 1995, the Account owned five properties,  and, as of December
31, 1996, the Account owned thirteen properties.  This increase in the number of
properties  owned by the  Account  was a major  factor in the higher real estate
income for 1996.  Interest income on the Account's short and intermediate-  term
investments  for the year ended December 31, 1996 and the six month period ended
December 31, 1995 totaled $5,570,907 and $2,820,229, respectively. This increase
results from the threefold increase in the size of the

                                       16

<PAGE>


Account  during 1996 coupled with a full year of  investing  activity.  Dividend
income on the  Account's  investments  in REITs  totaled  $456,579  and  $8,671,
respectively, for the same periods. Shares of REITs totaled 4.95% of the Account
investments  as of year end 1996 and 0.37% as of year end 1995.  This  increased
percentage and the longer investing period accounted for the increased  dividend
income for 1996.

         Total property level expenses for the year ended December 31, 1996 were
$3,370,497,  of which  $1,254,163  was  attributable  to real  estate  taxes and
$2,116,334 represented operating expenses. Total property level expenses for the
six month  period  ended  December  31, 1995 were  $43,832 of which  $14,659 was
attributable  to real estate  taxes and $29,173 was  attributable  to  operating
expenses. Property level expenses increased in 1996 as a result of the increased
number of  properties  in the  Account  during 1996 and due to the fact that the
1995 amounts  represent a six month period while 1996  represents a full year of
activity.

         The Account also incurred expenses for the year ended December 31, 1996
and six  month  period  ended  December  31,  1995  of  $642,042  and  $227,531,
respectively,  for investment  advisory services provided by TIAA,  $437,894 and
$66,320,  respectively, for administrative and distribution services provided by
TIAA-CREF Individual and Institutional  Services,  Inc. and $75,860 and $16,582,
respectively,  for the  mortality  and expense  risks  assumed and the liquidity
guarantee  provided by TIAA. Such expenses  increased in 1996 as a result of the
larger net asset base in the Account  during 1996 and because the 1995  expenses
were incurred for a six month period while the 1996  expenses  represents a full
year of activity.

Liquidity and Capital Resources
-------------------------------

         On  September  16,  1996,  in  accordance  with a  five-year  repayment
schedule approved by the New York Insurance Department, TIAA began to redeem its
seed money  accumulation  units  related to its initial  $100 million seed money
investment.  TIAA will continue to redeem a pro rata portion of the accumulation
units it holds  over a 60 month  period  (16,666.667  units  per  month).  As of
December  31,  1996,  the  Account had  redeemed  66,667  accumulation  units at
prevailing  daily unit  values,  amounting  to  $7,294,134  in total  redemption
payments to TIAA, leaving it holding 933,333 units at year end 1996 with a value
of $103,703,507.

         For the year and six month period ended December 31, 1996 and 1995, the
Account  earned  $12,452,376  and  $2,640,397,  respectively,  in net investment
income and received  $242,175,188  and $17,606,693,  respectively,  for the same
periods  in  premiums  and net  participant  transfers  from other TIAA and CREF
accounts. Real estate properties costing $86,731,333 and $43,989,665 were

                                       17

<PAGE>


purchased during 1996 and 1995, respectively. At December 31, 1996 and 1995, the
Account's liquid assets (i.e.,  its cash,  REITs,  short- and  intermediate-term
investments,  and  government  securities)  had  a  value  of  $240,109,263  and
$74,389,356,  respectively.  It is anticipated that much of these liquid assets,
exclusive  of the  REITs,  will be used by the  Account to  purchase  additional
suitable real estate properties.  The remaining liquid assets,  exclusive of the
REITs, will continue to be primarily  invested in marketable  securities to meet
expense needs and redemption requests (e.g., cash withdrawals or transfers).

         If the  Account's  liquid  assets  and its  cash  flow  from  operating
activities  and  participant  transactions  are not  sufficient to meet its cash
needs,  including  redemption  requests,  TIAA's  general  account will purchase
liquidity units in accordance with TIAA's liquidity guarantee to the Account.

         No major  capital  expenditures  were made  during  1996 for any of the
properties  purchased through December 31, 1996. There is a small portion of the
leased  space in the  industrial  and  office  properties  and the  neighborhood
shopping centers due to expire during 1997. The Account does not expect to incur
any extraordinary construction costs or leasing commissions in order to re-lease
that space.  For the  apartment  complexes,  the  Account  expects to incur only
routine  recurring  costs,   e.g.,   painting  and  carpet  cleaning  and  minor
replacements to re-lease apartments that become vacant.


Effects of Inflation
--------------------

         In  recent  years,  inflation  has  been  modest.  To the  extent  that
inflation  may  increase  property  operating  expenses  in  the  future,  it is
anticipated  such  increases  will generally be billed to tenants either through
contractual  lease provisions in office,  industrial,  and retail  properties or
through rent increases in apartment  complexes.  However, to the extent there is
unrented  space in a  property,  the Account may not be able to recover the full
amount of such increases in operating expenses.




                                       18

<PAGE>




ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                            TIAA REAL ESTATE ACCOUNT


                                                                          Page
                                                                          ----
Report of Management Responsibility ....................................   20
Report of Independent Auditors .........................................   21

Audited Consolidated Financial Statements:

   Consolidated Statements of Assets and Liabilities ...................   22
   Consolidated Statements of Operations ...............................   23
   Consolidated Statements of Changes in Net Assets ....................   24
   Consolidated Statements of Cash Flows ...............................   25
   Notes to Consolidated Financial Statements ..........................   26
   Consolidated Statement of Investments ...............................   32

Schedule III - Real Estate Owned .......................................   34



                                       19

<PAGE>





                       REPORT OF MANAGEMENT RESPONSIBILITY



To the Participants of the
  TIAA Real Estate Account:


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

TIAA has established and maintains a strong system of internal controls designed
to provide  reasonable  assurance  that  assets  are  properly  safeguarded  and
transactions   are   properly   executed   in   accordance   with   management's
authorization,  and to carry out the ongoing  responsibilities of management for
reliable  financial  statements.  In addition,  TIAA's  internal audit personnel
provide a continuing  review of the internal  controls and  operations  of TIAA,
including  its  separate  account  operations.  The internal  Auditor  regularly
reports to the Audit Committee of the TIAA Board of Trustees.

The  accompanying  consolidated  financial  statements  have been audited by the
independent  auditing firm of Deloitte & Touche LLP. The  independent  auditors'
report, which appears on the following page, expresses an independent opinion on
the fairness of presentation of these financial statements.

The Audit  Committee of the TIAA Board of Trustees,  consisting  of trustees who
are not officers of TIAA,  meets regularly with management,  representatives  of
Deloitte & Touche LLP and internal auditing personnel to review matters relating
to financial reporting, internal controls and auditing.



                                             /s/ John H. Biggs
                                             ----------------------------------
                                                        Chairman and
                                                   Chief Executive Officer



                                             /s/ Thomas W. Jones
                                             ----------------------------------
                                                Vice Chairman, President and
                                                  Chief Operating Officer



                                             /s/ Richard L. Gibbs
                                             ----------------------------------
                                                Executive Vice President and
                                                Principal Accounting Officer




                                       20


<PAGE>


(Letterhead)
Deloitte & Touche LLP                                Two World Financial Center
                                                  New York, New York 10281-1414

                                                       Telephone (212) 436-2000
                                                       Facsmilie (212) 436-5000






                         REPORT OF INDEPENDENT AUDITORS



To the  Participants of the TIAA Real Estate Account and the
  Board of Trustees of Teachers Insurance and Annuity Association of America:

We  have  audited  the  accompanying   consolidated  statements  of  assets  and
liabilities of the TIAA Real Estate  Account and its  Subsidiary  ("Account") of
Teachers  Insurance and Annuity  Association of America  ("TIAA") as of December
31, 1996 and 1995, the consolidated  statement of investments as of December 31,
1996,  and the related  consolidated  statements of  operations,  changes in net
assets and cash flows for the year ended  December  31,  1996 and for the period
July 3, 1995  (commencement of operations) to December 31, 1995. Our audits also
included the financial statement schedule Schedule III, Real Estate Owned. These
consolidated  financial  statements  and  financial  statement  schedule are the
responsibility of TIAA's management. Our responsibility is to express an opinion
on these  consolidated  financial  statements and financial  statement  schedule
based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  Our  procedures  included  confirmation  of securities  owned as of
December 31, 1996 and 1995, by correspondence with the custodian and brokers. An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  such consolidated  financial  statements  present fairly in all
material respects, the financial position of the Account as of December 31, 1996
and 1995, the results of its  operations,  the changes in its net assets and its
cash flows for the above-stated  periods,  in conformity with generally accepted
accounting principles.  Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole,  presents fairly in all material  respects the information set forth
therein.

Investments  in real estate  properties are stated at fair value at December 31,
1996 and 1995, as discussed in Note 2 to the consolidated  financial statements.
Determination  of fair value  involves  subjective  judgment  because the actual
market value of real estate can be determined  only by  negotiation  between the
parties in a sales transaction.

/s/ Deloitte & Touche LLP

February 6, 1997


---------------
Deloitte & Touche
Tohmatsu
International


                                       21

<PAGE>




                            TIAA REAL ESTATE ACCOUNT
                CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES


<TABLE>
<CAPTION>
                                                               December 31,          December 31,
                                                                  1996                  1995
                                                              -------------         --------------
<S>                                                           <C>                   <C>
ASSETS
 Investments, at value:
  Real estate properties
   (Cost: $130,849,444 and $43,989,665) ................      $131,803,204          $ 43,989,665
  Marketable securities
   (Amortized cost: $233,872,445 and $73,972,831) ......       236,127,523            73,992,569
 Cash ..................................................         3,981,740               396,787
 Receivable from securities transactions ...............        47,480,000            23,150,000
 Other .................................................         6,979,540             1,648,400
                                                              ------------          ------------
                                            TOTAL ASSETS       426,372,007           143,177,421
                                                              ------------          ------------

LIABILITIES
 Payable for securities transactions ...................        51,354,619            22,788,035
 Other .................................................         5,322,335               131,041
                                                              ------------          ------------
                                       TOTAL LIABILITIES        56,676,954            22,919,076
                                                              ------------          ------------
NET ASSETS
 Accumulation Fund .....................................       366,197,755           120,258,345
 Annuity Fund ..........................................         3,497,298                -
                                                              ------------          ------------
                                        TOTAL NET ASSETS      $369,695,053          $120,258,345
                                                              ============          ============

NUMBER OF ACCUMULATION UNITS
 OUTSTANDING--Notes 6 and 7 ............................         3,295,786             1,172,498
                                                                 =========             =========
NET ASSET VALUE,
  PER ACCUMULATION UNIT--Note 6 ........................           $111.11               $102.57
                                                                   =======               =======

</TABLE>
                 See notes to consolidated financial statements.


                                       22


<PAGE>




                            TIAA REAL ESTATE ACCOUNT
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                           For the period
                                                                         For the             July 3, 1995
                                                                           Year              (Commencement
                                                                          Ended            of Operations) to
                                                                        December 31,          December 31,
                                                                           1996                  1995
                                                                       ------------         ---------------
<S>                                                                     <C>                   <C>
INVESTMENT INCOME

  Real estate income, net:
   Rental income...............................................         $10,951,183           $  165,762
                                                                        -----------           ----------
   Real estate property level expenses and taxes:
     Operating expenses........................................           2,116,334               29,173
     Real estate taxes.........................................           1,254,163               14,659
                                                                        -----------           ----------
            Total real estate property level expenses and taxes           3,370,497               43,832
                                                                        -----------           ----------
                                        Real estate income, net           7,580,686              121,930

  Interest.....................................................           5,570,907            2,820,229
  Dividends....................................................             456,579                8,671
                                                                        -----------           ----------
                                                   TOTAL INCOME          13,608,172            2,950,830
                                                                        -----------           ----------
Expenses--Note 3:
 Investment advisory...........................................             642,042              227,531
 Administrative and distribution...............................             437,894               66,320
 Mortality and expense risk charges............................              70,535                8,291
 Liquidity guarantee charges...................................               5,325                8,291
                                                                       ------------           ----------
                                                 TOTAL EXPENSES           1,155,796              310,433
                                                                       ------------           ----------

                                         INVESTMENT INCOME, NET          12,452,376            2,640,397
                                                                       ------------           ----------

REALIZED AND UNREALIZED
 GAIN ON INVESTMENTS
  Net realized gain on marketable securities...................             141,439               15,865
                                                                        -----------           ----------
  Net change in unrealized appreciation on:
    Real estate properties.....................................             953,760               -
    Marketable securities......................................           2,235,340               19,738
                                                                        -----------           ----------

                          Net change in unrealized appreciation           3,189,100               19,738
                                                                       ------------           ----------
                                    NET REALIZED AND UNREALIZED
                                            GAIN ON INVESTMENTS           3,330,539               35,603
                                                                       ------------           ----------
                                     NET INCREASE IN NET ASSETS
                                      RESULTING FROM OPERATIONS         $15,782,915           $2,676,000
                                                                       ============           ==========
</TABLE>

                 See notes to consolidated financial statements.


                                       23

<PAGE>




                            TIAA REAL ESTATE ACCOUNT
                CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
                                                                                            For the period
                                                                           For the           July 3, 1995
                                                                            Year            (Commencement
                                                                            Ended          of Operations) to
                                                                         December 31,         December 31,
                                                                            1996                 1995
                                                                       ---------------     -----------------
<S>                                                                       <C>                <C>
FROM OPERATIONS
  Investment income, net..........................................        $ 12,452,376        $  2,640,397
  Net realized gain on marketable securities......................             141,439              15,865
  Net change in unrealized appreciation on investments............           3,189,100              19,738
                                                                          ------------        ------------
                                                                     

                                        NET INCREASE IN NET ASSETS    
                                         RESULTING FROM OPERATIONS          15,782,915           2,676,000
                                                                          ------------        ------------

FROM PARTICIPANT TRANSACTIONS
 Premiums.........................................................           9,665,306             500,421
 TIAA seed money contributed (withdrawn) -- Note 1................          (7,294,134)        100,000,000
 Disbursements and transfers:
  Net transfers from TIAA.........................................          19,203,309           2,901,675
  Net transfers from CREF Accounts................................         213,306,573          14,204,597
  Annuity and other periodic payments.............................            (336,103)               (718)
  Withdrawals.....................................................            (864,480)            (23,630)
  Death benefits..................................................             (26,678)              -
                                                                          ------------        ------------

                              NET INCREASE IN NET ASSETS RESULTING
                                     FROM PARTICIPANT TRANSACTIONS         233,653,793         117,582,345
                                                                          ------------        ------------

                                        NET INCREASE IN NET ASSETS         249,436,708         120,258,345

NET ASSETS
 Beginning of period..............................................         120,258,345              -
                                                                          ------------        ------------
 End of period....................................................        $369,695,053        $120,258,345
                                                                          ============        ============

</TABLE>
                 See notes to consolidated financial statements.

                                       24

<PAGE>




                            TIAA REAL ESTATE ACCOUNT
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         For the period
                                                                        For the            July 3, 1995
                                                                          Year            (Commencement
                                                                         Ended          of Operations) to
                                                                      December 31,         December 31,
                                                                          1996                1995
                                                                     ----------------     -------------
<S>                                                                   <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net increase in net assets resulting from operations...........       $ 15,782,915         $  2,676,000
 Adjustments to reconcile net increase in net assets resulting
  from operations to net cash used in operating activities:
   Increase in investments......................................       (249,948,493)        (117,982,234)
   Increase in receivable from securities transactions..........        (24,330,000)         (23,150,000)
   Increase in other assets.....................................         (5,331,140)          (1,648,400)
   Increase in payable for securities transactions..............         28,566,584           22,788,035
   Increase in other liabilities................................          5,191,294              131,041
                                                                      -------------        -------------
                                                NET CASH USED IN
                                            OPERATING ACTIVITIES       (230,068,840)        (117,185,558)
                                                                      -------------        -------------

CASH FLOWS FROM PARTICIPANT TRANSACTIONS
 Premiums........................................................         9,665,306              500,421
 TIAA seed money contributed  (withdrawn) -- Note 1..............        (7,294,134)         100,000,000
 Disbursements and transfers:
  Net transfers from TIAA........................................        19,203,309            2,901,675
  Net transfers from CREF Accounts...............................       213,306,573           14,204,597
  Annuity and other periodic payments............................          (336,103)                (718)
  Withdrawals....................................................          (864,480)             (23,630)
  Death benefits.................................................           (26,678)               -
                                                                      -------------        -------------
                                             NET CASH PROVIDED BY
                                         PARTICIPANT TRANSACTIONS       233,653,793          117,582,345
                                                                      -------------        -------------

                                             NET INCREASE IN CASH         3,584,953              396,787
CASH
 Beginning of period.............................................           396,787               -
                                                                      -------------        -------------
 End of period...................................................     $   3,981,740        $     396,787
                                                                      =============        =============
</TABLE>

                 See notes to consolidated financial statements.


                                       25

<PAGE>




                            TIAA REAL ESTATE ACCOUNT
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1--Organization

The TIAA Real Estate Account  ("Account") is a segregated  investment account of
Teachers  Insurance  and  Annuity   Association  of  America  ("TIAA")  and  was
established by resolution of TIAA's Board of Trustees on February 22, 1995 under
the insurance laws of the State of New York for the purpose of funding  variable
annuity contracts issued by TIAA. Teachers REA, Inc., a wholly-owned  subsidiary
of the  Account,  began  operations  in July  1996 and  holds  one  property  in
Virginia.

The Account commenced  operations on July 3, 1995 with a $100,000,000 seed money
investment by TIAA. TIAA purchased  1,000,000  Accumulation Units in the Account
and such Units share in the prorata investment experience of the Account and are
subject to the same  valuation  procedures  and expense  deductions as all other
Accumulation  Units of the Account.  The initial  registration  statement of the
Account filed by TIAA with the Securities and Exchange Commission ("Commission")
under the  Securities  Act of 1933  became  effective  on October  2, 1995.  The
Account  began to offer  Accumulation  Units and Annuity  Units to  participants
other than TIAA  starting  October 2, and  November  1, 1995,  respectively.  In
August,  1996 the  Account's  net assets  first  reached  $200  million  and, as
required  under a five year  repayment  schedule  approved by the New York State
Insurance Department,  TIAA began to redeem its seed money Accumulation Units in
monthly installments beginning in September, 1996. These withdrawals,  amounting
to  $7,294,134 in 1996,  are made at  prevailing  daily net asset values and are
reflected in the accompanying consolidated financial statements. At December 31,
1996,  TIAA  retained  933,333   Accumulation  Units,  with  a  total  value  of
$103,703,507.

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 also invests in  publicly-traded
securities and other  instruments to maintain  adequate  liquidity for operating
expenses and capital expenditures and to make benefit payments.

TIAA employees, under the direction of TIAA's Board of Trustees and its Mortgage
Committee (which effective January 24, 1997 merged with the Finance Committee to
become the Investment Committee),  manage the investment of the Account's assets
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,  Institutional  Property Consultants,  Inc.
TIAA also  provides  all  portfolio  accounting  and  related  services  for the
Account. TIAA-CREF Individual & Institutional Services, Inc. ("Services"), a


                                       26
<PAGE>

subsidiary of TIAA which is registered  with the  Commission as a  broker-dealer
and is a  member  of the  National  Association  of  Securities  Dealers,  Inc.,
provides administrative and distribution services pursuant to a Distribution and
Administrative Services Agreement with the Account.

Note 2--Significant Accounting Policies

The following is a summary of the significant  accounting  policies  followed by
the  Account,  which  are  in  conformity  with  generally  accepted  accounting
principles.

Basis  of  Presentation:  The  accompanying  consolidated  financial  statements
include the Account and its  wholly-owned  subsidiary,  Teachers  REA,  Inc. All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

Valuation of Real Estate  Properties:  Investments in real estate properties are
stated at fair value, as determined in accordance  with  procedures  approved by
the Mortgage Committee (the Investment  Committee effective January 24, 1997) of
the Board of Trustees and in accordance with the  responsibilities  of the Board
as a whole;  accordingly,  the Account does not record depreciation.  Fair value
for real estate  properties  is defined as the most  probable  price for which a
property will sell in a competitive  market under all conditions  requisite to a
fair sale. Determination of fair value involves subjective judgement because the
actual market value of real estate can be determined only by negotiation between
the parties in a sales transaction.  Real estate properties owned by the Account
are initially valued at their respective purchase prices (including  acquisition
costs). Subsequently,  independent appraisers value each real estate property at
least once a year.  The  independent  fiduciary  must  approve  all  independent
appraisers  that the Account uses.  The  independent  fiduciary can also require
additional  appraisals  if it  believes  that a  property's  value  has  changed
materially  or  otherwise to assure that the Account is valued  correctly.  TIAA
performs a valuation  review of each real estate  property on a quarterly  basis
and updates the property value if it believes that the value of the property has
changed  since the  previous  valuation  review or  appraisal.  The  independent
fiduciary  reviews and  approves  any such  valuation  adjustments  which exceed
certain prescribed limits.  TIAA continues to use the revised value to calculate
the Account's net asset value until the next valuation review or appraisal.

Valuation of Marketable  Securities:  Equity  securities listed or traded on any
United States national securities exchange are valued at the last sales 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.
Short-term  money  market  instruments  are  stated at market  value.  Portfolio
securities for which market quotations are not readily available


                                       27
<PAGE>

are valued at fair value as  determined in good faith under the direction of the
Mortgage Committee (the Investment  Committee effective January 24, 1997) of the
Board of Trustees and in accordance with the  responsibilities of the Board as a
whole.

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).  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
paid  to  local  property  management  companies,   property  taxes,  utilities,
maintenance, repairs, insurance and other operating and administrative costs. An
estimate of the net operating  income  earned from each real estate  property is
accrued by the Account on a daily basis and such  estimates are adjusted as soon
as actual  operating  results are determined.  Realized gains and losses on real
estate transactions are accounted for under the specific identification method.

Securities  transactions  are  accounted for as of the date the  securities  are
purchased or sold (trade date).  Interest  income is recorded as earned and, for
short-term   money  market   instruments,   includes  accrual  of  discount  and
amortization of premium.  Dividend  income is recorded on the ex-dividend  date.
Realized  gains and losses on securities  transactions  are accounted for on the
average cost basis.

Federal  Income  Taxes:  Based on  provisions  of the Internal  Revenue Code, no
federal income taxes are  attributable  to the net investment  experience of the
Account.

Reclassifications: Certain 1995 amounts in the statement of operations have been
reclassified to conform to the 1996 presentation.

Note 3--Management Agreements

All services  necessary for the operation of the Account are provided,  at cost,
by TIAA and  Services.  TIAA  provides  investment  management  services for the
Account, while distribution and administrative services are provided by Services
in accordance with a Distribution and Administrative  Services Agreement between
the Account  and  Services.  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


                                       28
<PAGE>

are  insufficient  to fund such requests.  TIAA also receives a fee for assuming
certain mortality and expense risks.

Fee  payments  are made from the Account on a daily  basis to TIAA and  Services
according to formulas  established  each year with the  objective of keeping the
fees as close as possible to the  Account's  actual  expenses.  Any  differences
between actual expenses and daily charges are adjusted quarterly.

Note 4--Real Estate Properties

Had the Account's real estate  properties  which were purchased during 1996 been
acquired at the beginning of the year (January 1, 1996),  rental income and real
estate  property  level  expenses and taxes for the year ended December 31, 1996
would have increased by approximately  $5,395,000 and $2,109,000,  respectively.
In  addition,  interest  income for the year ended  December 31, 1996 would have
decreased by approximately $2,517,000.  Accordingly,  the total pro forma effect
on the  Account's  net  investment  income for the year ended  December 31, 1996
would  have been an  increase  of  approximately  $769,000,  if the real  estate
properties acquired during 1996 had been acquired at the beginning of the year.

Note 5--Leases

The Account's real estate properties are leased to tenants under operating lease
agreements which expire on various dates through 2021.  Aggregate minimum annual
rentals for the properties owned,  excluding short-term  residential leases, are
as follows:

                     Years Ending
                     December 31,
                     ------------
                     1997                      $ 7,489,000
                     1998                        7,129,000
                     1999                        6,615,000
                     2000                        6,197,000
                     2001                        4,167,000
                     Thereafter                 29,237,000
                                               -----------

                     Total                     $60,834,000
                                               ===========

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


                                       29
<PAGE>

Note 6--Condensed Consolidated Financial Information

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

<TABLE>
<CAPTION>
                                                                                   For the Period
                                                                                    July 3, 1995
                                                                   For the         (Commencement
                                                                 Year Ended      of Operations) to
                                                             December 31, 1996   December 31, 1995
                                                             -----------------   -----------------
<S>                                                             <C>                   <C>     
Per Accumulation Unit Data:                                                  
  Rental income .............................................   $  6.012              $  0.159
  Real estate property                                                              
    level expenses and taxes ................................      1.850                 0.042
                                                                --------              --------
                                     Real estate income, net       4.162                 0.117
  Dividends and interest ....................................      3.309                 2.716
                                                                --------              --------
                                                 Total income      7.471                 2.833
  Expense charges (1) .......................................      0.635                 0.298
                                                                --------              --------
                                       Investment income, net      6.836                 2.535
  Net realized and unrealized                                                       
    gain on investments .....................................      1.709                 0.031
                                                                --------              --------
Net increase in                                                                     
  Accumulation Unit Value ...................................      8.545                 2.566
                                                                                    
Accumulation Unit Value:                                                            
  Beginning of period .......................................    102.566               100.000
                                                                --------              --------
  End of period .............................................   $111.111              $102.566
                                                                ========              ========
                                                                                    
                                                                                    
Total return ................................................       8.33%                 2.57%
Ratios to Average Net Assets:                                                       
  Expenses (1) ..............................................       0.61%                 0.30%
  Investment income, net ....................................       6.57%                 2.51%
Portfolio turnover rate:                                                            
    Real estate properties ..................................          0%                    0%
    Securities ..............................................      15.04%                    0%
Thousands of Accumulation Units                                                     
  outstanding at end of period ..............................      3,296                 1,172
</TABLE>

(1)Expense  charges per  Accumulation  Unit and the Ratio of Expenses to Average
   Net Assets exclude real estate property level  operating  expenses and taxes.
   If  included,  the expense  charge per  Accumulation  Unit for the year ended
   December 31, 1996 would be $2.485 ($0.340 for the period July 3, 1995 through
   December  31,  1995) and the Ratio of  Expenses to Average Net Assets for the
   year ended  December  31,  1996 would be 2.39%  (0.34% for the period July 3,
   1995 through December 31, 1995).


                                       30
<PAGE>

Note 7--Accumulation Units

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

                                                                For the Period
                                                                 July 3, 1995
                                                 For the        (Commencement
                                                Year Ended     of Operations) to
                                            December 31, 1996  December 31, 1995
                                            -----------------  -----------------
                                         
Accumulation Units:

  Credited for premiums and
    TIAA seed money investment .............      89,841           1,004,905
  Credited for transfers, net of                                   
    disbursements and amounts                                      
    applied to the Annuity Fund ............   2,033,447             167,593
                                                                 
  Outstanding:                                                     
    Beginning of period ....................   1,172,498                  --
                                               ---------           ---------
    End of period ..........................   3,295,786           1,172,498
                                               =========           =========

Note 8--Commitments

During the normal course of business,  the Account enters into  discussions  and
agreements to purchase or sell real estate properties.  As of December 31, 1996,
the Account had outstanding  commitments to purchase five real estate properties
(subject to various closing conditions) totaling approximately $68.8 million. Of
that amount,  three  purchases of real estate property  totalling  approximately
$36.3 million were closed in January 1997.


                                       31
<PAGE>

                            TIAA REAL ESTATE ACCOUNT
                      CONSOLIDATED STATEMENT OF INVESTMENTS
                                DECEMBER 31, 1996

REAL ESTATE PROPERTIES--35.82%
    Location                        Description                         Value
    --------                        -----------                         -----
Arizona:
  Phoenix                       Office building.................... $ 10,500,000
Colorado:
  Boulder                       Industrial building................    9,920,680
  Littleton                     Apartments.........................   17,750,000
Florida:
  Ocoee                         Shopping center....................    7,400,000
  Orlando                       Apartments.........................   12,800,000
  West Palm Beach               Apartments.........................   16,072,275
Georgia:
  Atlanta                       Apartments.........................   16,000,000
Minnesota:
  Eagan                         Industrial building................    6,485,249
  Fridley                       Industrial building................    4,175,000
North Carolina:
  Raleigh                       Shopping center....................    6,400,000
  Raleigh                       Shopping center....................    6,600,000
Texas:
  El Paso(1)                    Industrial building................    4,600,000
Virginia:
  Woodbridge                    Shopping center....................   13,100,000
                                                                     -----------
         TOTAL REAL ESTATE PROPERTIES
          (Cost $130,849,444)......................................  131,803,204
                                                                     -----------
(1) Leasehold interest only


MARKETABLE SECURITIES--64.18%

  Shares                      Issuer
  ------                      ------
REAL ESTATE INVESTMENT TRUSTS--4.95%

    45,000               Associated Estates Realty Corporation.....    1,068,750
    45,000               Avalon Properties,Inc.....................    1,293,750
    80,000               BrandyWine Realty Trust...................    1,560,000
    29,000               Cali Realty Corporation...................      895,375
    45,000               Camden Property Trust.....................    1,288,125
    55,000               CBL & Associates Properties, Inc..........    1,423,125
    40,000               Colonial Properties Trust Co. ............    1,215,000
     4,434               Homestead Village, Inc. ..................       79,812
     2,975               Homestead Village, Inc. - Wts.............       24,172
    40,000               Hospitality Properties Trust..............    1,160,000
    85,000               Innkeepers USA Trust. ....................    1,179,375
    45,000               Security Capital Atlantic, Inc............    1,102,500
    19,900               Security Capital Industrial Trust.........      507,450
    15,000               Starwood Lodging..........................      826,875
    40,000               Storage USA, Inc..........................    1,505,000
    40,000               Trinet Corporate Realty Trust, Inc........    1,420,000
    50,000               Weeks Corporation.........................    1,662,500
                                                                      ----------
         TOTAL REAL ESTATE INVESTMENT TRUSTS
         (Cost $15,886,587)........................................   18,211,809
                                                                      ----------


                 See notes to consolidated financial statements.


                                       32
<PAGE>

Principal                    Issuer, Coupon and Maturity Date          Value
---------                    --------------------------------          -----
COMMERCIAL PAPER--4.05%
$15,000,000           Morgan Stanley Group
                       5.37% 02/14/97.............................. $ 14,887,875
                                                                    ------------
         TOTAL COMMERCIAL PAPER
          (Amortized cost $14,901,550).............................   14,887,875
                                                                    ------------

CORPORATE BONDS--1.07%
  4,000,000           Associates Corporation of North America
                       5.25% 09/01/98..............................    3,941,560
                                                                    ------------
         TOTAL CORPORATE BONDS
          (Amortized cost $3,950,280)..............................    3,941,560
                                                                    ------------

GOVERNMENT AGENCIES--54.11%
  2,000,000           Federal Home Loan Bank
                       5.22% 01/16/97..............................    1,995,200
  2,000,000           Federal Home Loan Bank
                       5.20% 02/04/97..............................    1,989,500
 18,500,000           Federal Home Loan Mortgage Corporation
                       5.40% 01/02/97..............................   18,494,369
  2,100,000           Federal Home Loan Mortgage Corporation
                       5.45% 01/10/97..............................    2,096,850
 10,120,000           Federal Home Loan Mortgage Corporation
                       5.45% 01/21/97..............................   10,088,122
 30,000,000           Federal Home Loan Mortgage Corporation
                       5.27% 01/30/97..............................   29,865,000
  8,000,000           Federal Home Loan Mortgage Corporation
                       5.22% 02/06/97..............................    7,955,600
 26,000,000           Federal Home Loan Mortgage Corporation
                       5.25% 02/13/97..............................   25,828,400
 23,200,000           Federal Home Loan Mortgage Corporation
                       5.26% 02/28/97..............................   22,997,341
 11,000,000           Federal National Mortgage Association
                       5.26% 01/09/97..............................   10,985,150
 17,000,000           Federal National Mortgage Association
                       5.33% 02/03/97..............................   16,913,300
  9,500,000           Federal National Mortgage Association
                       5.33% 02/04/97..............................    9,450,125
 10,000,000           Federal National Mortgage Association
                       5.22% 02/10/97..............................    9,938,500
 10,000,000           Federal National Mortgage Association
                       5.33% 02/10/97..............................    9,938,500
  2,000,000           Federal National Mortgage Association
                       5.20% 03/04/97..............................    1,981,380
 15,700,000           Federal National Mortgage Association
                       5.23% 03/13/97..............................   15,532,952
  2,000,000           Federal National Mortgage Association
                       5.19% 04/03/97..............................    1,972,513
  1,100,000           United States Treasury Bill
                       5.56% 08/21/97..............................    1,063,477
                                                                    ------------
         TOTAL GOVERNMENT AGENCIES
          (Amortized cost $199,134,028)............................  199,086,279
                                                                    ------------
TOTAL MARKETABLE SECURITIES
 (Amortized cost $233,872,445).....................................  236,127,523
                                                                    ------------
TOTAL INVESTMENTS--100.00%
 (Cost $364,721,889)............................................... $367,930,727
                                                                    ============

                 See notes to consolidated financial statements.


                                       33
<PAGE>

                                             TIAA REAL ESTATE ACCOUNT
                                         Schedule III - Real Estate Owned
                                                 December 31, 1996

<TABLE>
<CAPTION>

                                                                    Costs Capitalized
                                                                      Subsequent to
                                                                       Acquisition
                                                    Initial Cost       (Including          Value at         Year
                                         Encum-      to Acquire     Unrealized Gains     December 31,   Construction       Date
          Description                   brances       Property         and Losses)           1996        Completed       Acquired
--------------------------------        -------     ------------    -----------------    -----------    ------------     --------
<S>                                       <C>       <C>               <C>                <C>                 <C>         <C>
River Road Distribution Center            $-0-      $ 4,166,787       $  8,213           $ 4,175,000         1995        11/22/95
Industrial Building                                                                                                    
Fridley, Minnesota                                                                                                     
                                                                                                                       
The Greens At Metrowest                    -0-       12,490,895        309,105            12,800,000         1990        12/15/95
Apartments                                                                                                             
Orlando, Florida                                                                                                       
                                                                                                                       
Butterfield Industrial Park                -0-        4,431,166        168,834             4,600,000         1980        12/22/95
Industrial Building                                                                                                    
El Paso, Texas (1)                                                                                                     
                                                                                                                       
Brixworth Apartments                       -0-       15,574,647        425,353            16,000,000         1989        12/28/95
Apartments                                                                                                             
Atlanta, Georgia                                                                                                       
                                                                                                                       
Plantation Grove Shopping Center           -0-        7,326,170         73,830             7,400,000         1995        12/28/95
Shopping Center                                                                                                        
Ocoee, Florida                                                                                                         
                                                                                                                       
Southbank Business Park                    -0-       10,069,898        430,102            10,500,000         1995        02/27/96
Office Building                                                                                                       
Phoenix, Arizona

Millbrook Collection                       -0-        6,774,711       (374,711)            6,400,000         1988        03/29/96
Shopping Center                                                                                                         
Raleigh, North Carolina                                                                                                 
                                                                                                                        
Lynnwood Collection                        -0-        6,708,120       (108,120)            6,600,000         1988        03/29/96
Shopping Center                                                                                                        
Raleigh, North Carolina
</TABLE>


                                       34
<PAGE>
<TABLE>
<CAPTION>
                                                                    Costs Capitalized
                                                                      Subsequent to
                                                                       Acquisition
                                                    Initial Cost       (Including         Value at          Year
                                         Encum-      to Acquire     Unrealized Gains    December 31,    Construction       Date
          Description                   brances       Property         and Losses)          1996         Completed       Acquired
---------------------------             -------     ------------    -----------------    -----------    ------------     --------
<S>                                      <C>       <C>              <C>                 <C>                  <C>         <C>      
Monte Vista Apartments                     -0-       17,664,247         85,753            17,750,000         1995        06/21/96
Apartments
Littleton, Colorado                                                                                                     
                                                                                                                        
River Oaks Shopping Center                 -0-       13,036,153         63,847            13,100,000         1995        07/12/96
Shopping Center
Woodbridge, Virginia                                                                                                    
                                                                                                                        
Arapahoe Park East                         -0-        9,920,680            -0-             9,920,680         1979        10/31/96
Industrial Building                                                                                                     
Boulder, Colorado                                                                                                       
                                                                                                                        
Royal St. George Apartments                -0-       16,072,275            -0-            16,072,275         1995        12/20/96
Apartments
West Palm Beach, Florida                                                                                               

Interstate Crossing                        -0-        6,485,249            -0-             6,485,249         1995        12/31/96
Industrial Building
Eagan, Minnesota


                                         -----     ------------     ----------          ------------
                                         $ -0-     $130,720,998     $1,082,206          $131,803,204
                                         =====     ============     ==========          ============
(1)  Leasehold interest only                                                      
</TABLE>


Reconciliation of investment property owned:
Balance at beginning of period                     $ 43,989,665 
  Acquisitions                                       86,731,333 
  Capital improvements and carrying costs             1,082,206 
  (including unrealized gains and losses)
                                                   ------------ 
Balance at end of period                           $131,803,204 
                                                   ============ 


                                       35
<PAGE>

ITEM 9.    CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
           FINANCIAL DISCLOSURE.

     Not applicable.


                                       36
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The Account  has no  officers or  directors.  The  Trustees  and  principal
executive officers of TIAA, and their principal occupations during the last five
years, are as follows:

Trustees
--------

David Alexander, 64.
American Secretary,  Rhodes Scholarship Trust, and Trustees'  Professor,  Pomona
College. Formerly, President, Pomona College, until 1991.

Marcus Alexis, 65.
Board of Trustees,  Professor  of Economics  and  Professor  of  Management  and
Strategy, Northwestern University.

Willard T. Carleton, 62.
Karl  L.  Eller   Professor   of  Finance,   College  of  Business   and  Public
Administration, University of Arizona.

Robert C. Clark, 53.
Dean and Royall Professor of Law, Harvard Law School, Harvard University.

Flora Mancuso Edwards, 52.
Of Counsel to the law firm of  Dublirer,  Haydon,  Straci & Victor,  since 1996.
Professor  of English as a Second  Language,  Middlesex  County  College,  since
October 1995. Formerly, President, Middlesex County College until October 1995.

Estelle A. Fishbein, 62.
General  Counsel  of The Johns  Hopkins  University  since  1975.  Elected  Vice
President and General Counsel of the University, April 1991.

Frederick R. Ford, 61.
Executive Vice President and Treasurer, Purdue University.

Martin J. Gruber, 59.
Chairman of the Department of Finance and Nomura Professor of Finance,  New York
University Stern School of Business.

Ruth Simms Hamilton, 59.
Professor,  Department of Sociology and Urban  Affairs  Programs,  and Director,
African Diaspora Research Project, Michigan State University.


                                       37
<PAGE>

Dorothy Ann Kelly, O.S.U., 67.
President, College of New Rochelle.

Robert M. O'Neil, 62.
Professor of Law,  University  of Virginia and  Director,  The Thomas  Jefferson
Center for the Protection of Free Expression.

Leonard S. Simon, 60.
Chairman,  President and Chief Executive  Officer,  RCSB Financial,  Inc., since
September 1995.  Formerly,  Chairman and Chief Executive Officer,  The Rochester
Community Savings Bank, from 1984 until September 1995.

Ronald L. Thompson, 47.
Chairman  of the  Board  and  Chief  Executive  Officer,  Midwest  Stamping  Co.
Formerly, Chairman of the Board and President, The GR Group, until 1993.

Paul R. Tregurtha, 61.
Chairman,  Chief  Executive,  and  Director,  Mormac Marine  Group,  Inc.;  Vice
Chairman and Director,  The Interlake Steamship Company;  Chairman and Director,
Moran Transportation Company; and Chairman, MAC Acquisitions, Inc.

Charles J. Urstadt, 68.
Chairman and Chief Executive  Officer,  HRE Properties (a real estate investment
trust) and Trustee Emeritus, Pace University.

William H. Waltrip, 59.
Chairman and Chief Executive  Officer,  Bausch & Lomb Inc.,  since January 1996.
Chairman and Chief Executive Officer,  Technology Solutions Company, since 1993.
Formerly, Chairman and Chief Executive Officer, Biggers Brothers, Inc., and Vice
Chairman, Unifax, from 1991 until 1993.

Rosalie J. Wolf, 55.
Treasurer and Chief Investment Officer,  The Rockefeller  Foundation since 1994.
Formerly,  Executive Vice President,  Sithe Energies,  Inc. from January 1994 to
June 1994, and Managing Director, Bankers Trust Company, from 1989 to 1993.

Officer-Trustees
----------------
John H. Biggs, 60.
Chairman  and Chief  Executive  Officer,  TIAA and CREF,  since 1993.  Formerly,
President and Chief Operating Officer, TIAA and CREF.


                                       38
<PAGE>

Thomas W. Jones,  47.
Vice Chairman, TIAA and CREF, since 1995. President and Chief Operating Officer,
TIAA and CREF,  since 1993.  Formerly,  Executive  Vice  President,  Finance and
Planning, TIAA and CREF.

Martin L. Leibowitz, 60.
Vice Chairman and Chief Investment Officer,  TIAA and CREF, since November 1995.
Executive  Vice  President,  TIAA and CREF,  from June  1995 to  November  1995.
Formerly,  Managing Director -- Director of Research and member of the Executive
Committee, Salomon Brothers, Inc.

Other Officers
--------------

Richard L. Gibbs, 49.
Executive  Vice  President,  TIAA and  CREF,  since  1993,  and Vice  President,
TIAA-CREF Investment  Management,  Inc. ("Investment  Management") and TIAA-CREF
Individual & Institutional  Services,  Inc. ("Services"),  since 1992; Executive
Vice President,  Teachers  Advisors,  ("Advisors")  since 1995.  Formerly,  Vice
President, Finance, TIAA and CREF.

Albert J. Wilson, 64.
Vice  President and Chief Counsel,  Corporate  Secretary,  TIAA and CREF,  since
1991.

Richard J. Adamski, 54.
Vice President and Treasurer,  TIAA and CREF,  since March 1991;  Vice President
and Treasurer,  Investment  Management and Services,  since 1992; Vice President
and Treasurer,  Teachers Personal Investors Services,  Inc. and Advisors,  since
1994.

ITEM 11.  EXECUTIVE COMPENSATION.

     Not applicable.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.

     On July 3, 1995, the Account issued 1,000,000  accumulation  units to TIAA,
at $100 per unit, in consideration of TIAA's $100 million seed money investment.
TIAA began to redeem  these  units  pursuant  to a fixed  repayment  schedule on
September  16, 1996.  As of December 31,  1996,  TIAA held 933,333  accumulation
units with a value of $103,703,507,  representing 28% of the Account's total net
assets.


                                       39
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     TIAA's  general  account  plays a  significant  role in operating  the Real
Estate  Account,  including  providing  seed money, a liquidity  guarantee,  and
investment management and other services.

     Seed Money.  On July 3, 1995,  TIAA  supplied  the  Account's  initial $100
million seed money investment in exchange for one million accumulation units, at
$100 per unit. On September 16, 1996, in accordance  with a five-year  repayment
schedule  approved  by the New York State  Insurance  Department,  TIAA began to
redeem the  accumulation  units  related to its seed money  investment.  TIAA is
redeeming a pro rata portion of the  accumulation  units monthly over a 60-month
period  (16,666.667  units  per  month).  TIAA's  accumulation  units  are being
redeemed at net asset value at the time of redemption.

     Liquidity  Guarantee.  If the Account's cash flow is  insufficient  to fund
redemption  requests,  TIAA's  general  account  has  agreed  to  fund  them  by
purchasing  accumulation  units. TIAA thereby  guarantees that a participant can
redeem  accumulation  units at their then current daily net asset value. For the
year ended  December 31, 1996,  the Account paid TIAA $5,325 for this  liquidity
guarantee through a daily deduction from the net assets of the Account.

     Investment  Management 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,  and to cover  mortality  and expense risks borne by
TIAA. These services are performed at cost by TIAA and Services.

     For the year ended  December 31, 1996,  the Account paid TIAA  $642,042 for
investment  management services and $70,535 for mortality and expense risks. For
the same period,  the Account paid Services $437,894 for its  administrative and
distribution services.


                                       40
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

     (a)  1. Financial Statements. See Item 8 for required financial statements.

     (a)  2. Financial  Statement  Schedules.  See Item 8 for required financial
          statement schedules.

     (a)  3. Exhibits.

     (1)  Distribution and Administrative Services Agreement by and between TIAA
          and TIAA-CREF Individual & Institutional Services, Inc. (as amended)*

     (3)  (A) Charter of TIAA (as amended)*
          (B) Bylaws of TIAA (as amended)

     (4)  (A) Forms of RA, GRA, GSRA, SRA, and IRA Real Estate Account  Contract
              Endorsements* 
          (B) Forms of Income-Paying Contracts*

     (10) (A) Independent Fiduciary Agreement by and among TIAA, the Registrant,
              and Institutional  Property Consultants,  Inc. (as amended)** 
          (B) Custodial  Services  Agreement  by  and  between  TIAA and  Morgan
              Guaranty  Trust  Company  of  New York  with  respect  to the Real
              Estate Account*

     (27) Financial Data Schedule of the Account's Financial  Statements for the
            year ended December 31, 1996

     (b) Reports on 8-K. No reports on Form 8-K have been filed  during the last
quarter of the period covered by this report. The Account filed a report on Form
8-K on January 15, 1997 under Item 5 of the form with respect to the acquisition
of properties for its portfolio.

-------------------------------

* - Previously  filed and  incorporated  herein by  reference to  Post-Effective
Amendment No. 2 to the  Account's  previous  Registration  Statement on Form S-1
filed April 30, 1996 (File No. 33-92990).

** - Previously  filed and  incorporated  herein by  reference to the  Account's
previous  Registration  Statement  on Form S-1 filed  October  4, 1996 (File No.
333-13477).


                                       41
<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  Report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                            TIAA REAL ESTATE ACCOUNT

                                            By: TEACHERS INSURANCE AND ANNUITY
                                            ASSOCIATION OF AMERICA

                                            By:   /s/ Peter C. Clapman
                                                ------------------------------
                                                Peter C. Clapman
                                                Senior Vice President and
                                                Chief Counsel, Investments

                                                       March 14, 1997
                                                ------------------------------
                                                            Date

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report has been  signed by the  following  persons,  trustees  and  officers  of
Teachers Insurance and Annuity  Association of America, in the capacities and on
the dates indicated.

SIGNATURE                        TITLE                           DATE



/s/ John H. Biggs                Chairman of the Board           March 14, 1997
-----------------------          and Chief Executive               
John H. Biggs                    Officer (Principal                 
                                 Executive Officer)                 
                                 and Trustee                        
                                 
                                 

/s/ Thomas W. Jones              Vice Chairman,                  March 14, 1997 
----------------------           President and Chief                            
Thomas W. Jones                  Operating Officer                              
                                 (Principal Financial                           
                                 Officer) and Trustee                           
                                                                                
                                 

/s/ Martin L. Leibowitz          Vice Chairman,                  March 14, 1997
-----------------------          and Chief Investment                
Martin L. Leibowitz              Officer and Trustee               
                                 
                                 

/s/ Richard L. Gibbs             Executive Vice                  March 14, 1997 
-----------------------          President                                      
Richard L. Gibbs                 (Principal Accounting                          
                                 Officer)                                       
                                 
                                 
<PAGE>

Signature of Trustee        Date        Signature of Trustee            Date
--------------------        ----        --------------------            ----
                           
                           
/s/ David Alexander         3/14/97
-----------------------                 ------------------------
David Alexander                         Dorothy Ann Kelly, O.S.U.
                           
                           
/s/ Marcus Alexis           3/14/97     /s/ Robert M. O'Neil            3/14/97
-----------------------                 ------------------------
Marcus Alexis                           Robert M. O'Neil
                           
                           
/s/ Willard T. Carleton     3/14/97     /s/ Leonard S. Simon            3/14/97
-----------------------                 ------------------------
Willard T. Carleton                     Leonard S. Simon
                           
                           
/s/ Robert C. Clark         3/14/97     /s/ Ronald L. Thompson          3/14/97
-----------------------                 ------------------------
Robert C. Clark                         Ronald L. Thompson
                           
                           
-----------------------                 ------------------------
Flora Mancuso Edwards                   Paul R. Tregurtha
                           
                           
                                        /s/ Charles J. Urstadt          3/14/97
-----------------------                 ------------------------
Estelle A. Fishbein                     Charles J. Urstadt
                           
                           
/s/ Frederick R. Ford       3/14/97     /s/ William H. Waltrip          3/14/97
-----------------------                 ------------------------
Frederick R. Ford                       William H. Waltrip
                           
                           
/s/ Martin J. Gruber        3/14/97     /s/ Rosalie J. Wolf             3/14/97
-----------------------                 ------------------------
Martin J. Gruber                        Rosalie J. Wolf
                           
                           
/s/ Ruth Simms Hamilton     3/14/97
-----------------------                 
Ruth Simms Hamilton        
<PAGE>                     
                        
     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
contractowners holding interests in the Account.

<PAGE>

                                  EXHIBIT INDEX

Exhibit
Number      Description of Exhibit
-------     ----------------------

3B          Bylaws of TIAA (as amended)

27          Financial  Data  Schedule  of the Account's Financial Statements for
            the period ended December 31, 1996