Returns from commercial real estate have dipped during the last year, and you may have questions about the TIAA Real Estate Account. It is important to note that the account's return for the 12-month period that ended on September 30, 2008 was positive. The Real Estate Account had a total return of 1.00%, while U.S. stocks returned -21.52%, as measured by the Russell 3000® Index. The account has also outperformed U.S. stocks during the 3-, 5- and 10-year periods ended on that date.
The following information will help answer other questions you may have about the TIAA Real Estate Account and about commercial real estate as an asset class.
KEY POINTS
The TIAA Real Estate Account has produced strong long-term returns, with less volatility than many other asset classes.1 Standardized returns are available on the account's performance page on the TIAA-CREF public website.
Please bear in mind that TIAA's liquidity guarantee ensures that the Real Estate Account has funds available to meet participant requests for withdrawal or transfer out of the account. However, the frequency of those transfers or withdrawals is limited. (For details about the liquidity guarantee, please see p. 24 of the prospectus for the TIAA Real Estate Account.)
Commercial Real Estate in the Current Economy
Like other investments, the TIAA Real Estate Account is affected by conditions in the overall economy and in the financial markets. The difficult U.S. job market in 2008 has reduced the overall demand in the office, industrial, apartment and retail sectors of the commercial real estate market. In addition, real estate values have been affected by tightening credit conditions.
Effect of Market Conditions on the TIAA Real Estate Account
In light of the current conditions mentioned above, it is not surprising to see some moderation in the performance of the commercial real estate asset class as a whole, and recent returns for the TIAA Real Estate Account reflect that trend. The account's properties are valued at least quarterly, and many of those valuations have declined because of the two factors mentioned above. Fortunately, to date those lower valuations have been partly offset by rental income. Please refer to these account-specific materials for more details:
ADDITIONAL INFORMATION
For more information on reviewing investment portfolios in light of market movements, please refer to the June 9, 2008, edition of Market Monitor, titled "Checking Your Asset Allocation in Volatile Markets (PDF)," available on the TIAA-CREF website. For a perspective on TIAA-CREF's key advantages in current market conditions, please see Statement on Market Volatility and Recent Events in the Financial Services Sector, also available on the TIAA-CREF public website.
1 These returns are due in part to the unique risk and return nature of the account, which also carries some restrictions on withdrawals due to its investment profile.
The account is subject to a number of risks including real estate investing risks, valuation and appraisal risks, financial risk, market risk, income volatility risk and foreign investment risks. You should read the prospectus for a more complete discussion of these and other risks and investment considerations.
The TIAA Real Estate Account is a variable annuity account option available only to eligible participants, and available through contracts issued by TIAA. These contracts are designed for retirement or other long-term goals, and offer a variety of income options, including lifetime income. Payments from the variable annuity accounts are not guaranteed and will rise or fall based on investment performance.
Annuity products are issued by TIAA (Teachers Insurance and Annuity Association),
New York, NY.
© 2009 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017
