TIAA Real Estate Account

11/05/2025 | Press release | Distributed by Public on 11/05/2025 12:31

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE ACCOUNT'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Account's financial condition and results of operations should be read together with the Consolidated Financial Statements and notes contained in this report, the audited Consolidated Financial Statements and accompanying notes contained in the Account's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 6, 2025 (the "Form 10-K"), and with consideration to the sub-section entitled "Forward-Looking Statements," which begins below, the section entitled "Item 1A. Risk Factors" of the Account's 2024 Form 10-K and the section entitled "Item 1.A Risk Factors" of this Quarterly Report on Form 10-Q and the Account's previous Quarterly Reports on Form 10-Q, as such risk factors may be updated in subsequent reports. The past performance of the Account is not indicative of future results.
Forward-looking Statements
Some statements in this Form 10-Q which are not historical facts may be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about management's expectations, beliefs, intentions or strategies for the future, include the assumptions and beliefs underlying these forward-looking statements, and are based on current expectations, estimates and projections about the real estate industry, domestic and global economic conditions, including conditions in the credit and capital markets, employment rates, the sectors, markets and businesses in which the Account invests and operates, and the transactions described in this Form 10-Q. While management believes the assumptions underlying any of its forward-looking statements and information to be reasonable, such information may be subject to uncertainties and may involve certain risks which may be difficult to predict and are beyond management's control. These risks and uncertainties could cause actual results to differ materially from those contained in any forward-looking statement. These risks and uncertainties include, but are not limited to, the risks associated with the following:
•Acquiring, owning and selling real property and real estate investments, including risks related to general economic and real estate market conditions, the risk that the Account's properties become too concentrated (whether by geography, sector or by tenant mix) and the risk that the sales price of a property might differ from its estimated or appraised value;
•Property valuations, including the fact that the Account's appraisals are generally obtained on a quarterly basis and there may be periods in between appraisals of a property during which the value attributed to the property for purposes of the Account's daily accumulation unit value may be more or less than the actual realizable value of the property;
•Financing the Account's properties, including the risk of default on loans secured by the Account's properties (which could lead to foreclosure);
•Contract owner transactions, in particular that (i) significant net contract owner transfers out of the Account may impair our ability to pursue or consummate new investment opportunities, (ii) significant net contract owner transfers into the Account may result, on a temporary basis, in our cash holdings and/or holdings in liquid non-real estate-related investments exceeding our long-term targeted holding levels and (iii) high levels of cash and liquid non-real estate-related investments in the Account during times of appreciating real estate values can impair the Account's overall return;
•Joint ventures and real estate funds, including the risk that the Account may have limited rights with respect to the joint venture or that a co-venturer or fund manager may have financial difficulties;
•Governmental regulatory matters such as zoning laws, rent control laws, and property and other taxes;
•Potential liability for damage to the environment or injury to individuals caused by hazardous substances used or found on its properties, as well as risks associated with federal and state environmental laws, that may impose restrictions on the manner in which a property may be used;
•Certain catastrophic losses that may be uninsurable, as well as risks related to climate-related changes and hazards, which could adversely impact the Account's investment returns;
•ESG criteria used to assess economic risk or financial opportunity projections in the evaluation of commercial real estate investments may not materialize in the way we have anticipated, resulting in the Account
subsequently underperforming relative to other investment vehicles that did not utilize such ESG criteria in selecting and managing portfolio properties;
•Countries with emerging market, foreign commercial real properties, foreign real estate loans, foreign debt investments and foreign securities investments that may experience unique risks such as changes in currency exchange rates, imposition of market controls or currency exchange controls, seizure, expropriation or nationalization of assets, political, social or diplomatic events or unrest (for example, the wars in Ukraine and Gaza), regulatory and taxation risks and risks associated with enforcing judgments in foreign countries that could cause the Account to lose money;
•Investments in REITs, including changes in the value of the underlying properties or by the quality of any credit extended, as well as exposure to market risk due to changing conditions in the financial markets;
•Investments in mortgage-backed securities, which are subject to the same risks inherent in real estate investing, making mortgage loans and investing in debt securities. For example, the underlying mortgage loans may experience defaults, are subject to prepayment risks and are sensitive to economic conditions impacting the credit markets generally;
•Risks associated with the Account's investments in mortgage or mezzanine loans, including (i) borrower default that results in the Account being unable to recover its original investment, (ii) liens that may have priority over the Account's security interest, (iii) a deterioration in the financial condition of tenants, and (iv) changes in interest rates for the Account's variable-rate mortgage loans and other debt instruments;
•Risks associated with the Account's investments in, and leasing of, single-family real estate include risks relating to the condition of the properties, the credit quality and employment stability of the tenants, and compliance with applicable local laws regarding the acquisition and leasing of single family real estate (which may include manufactured housing);
•Investment securities issued by U.S. Government agencies and U.S. Government-sponsored entities, including the risk that the issuer may not have their securities backed by the full faith and credit of the U.S. Government, which could adversely affect the pricing and value of such securities;
•Risks associated with investments in liquid, fixed-income investments and real estate-related liquid assets (which could include, from time to time, registered or unregistered REIT securities and CMBS), and non-real estate-related liquid assets,
•Conflicts of interests associated with TIAA serving as investment manager of the Account and provider of the liquidity guarantee while also serving as an investment manager to other real estate accounts or funds;
•Lending securities, which has the Account bear the market risk with respect to the investment of collateral or a portion of the income generated by interest paid by the securities lending agent on the cash collateral balance;
•The Account's requirement to sell property in the event that TIAA owns too large of a percentage of the Account's accumulation units, which sales could occur at a time or price that is not optimal for the Account's returns; and
•The tax rules applicable to the contracts vary and your rights under a contract may be subject to the terms of your employer's retirement plan itself, regardless of the terms of the contract. We cannot provide detailed information on all tax aspects of owning the contracts. Tax rules may change without notice, and we cannot predict whether, when, or how tax rules could change or what, if any, tax legislation will actually be proposed or enacted;
•Continued liquidity risks within the Account's portfolio. Additional detail regarding the recent triggering of the Account's Liquidity Guarantee is included below in the sub-section entitled "Liquidity and Capital Resources."
More detailed discussions of certain of these risk factors are contained in the section of the Form 10-K entitled "Item 1A. Risk Factors" and "Part II, Item 1A, Risk Factors" in this Report and also in the section below entitled "Quantitative and Qualitative Disclosures About Market Risk." These risks could cause actual results to differ materially from historical experience or management's present expectations.
Caution should be taken not to place undue reliance on management's forward-looking statements, which represent management's views only as of the date that this report is filed. Neither management nor the Account undertake any obligation to update publicly or revise any forward-looking statement, whether as a result of new information, changed assumptions, future events or otherwise.
Commercial real estate market statistics discussed in this section are obtained by the Account from sources that management considers reliable, but some of the data are preliminary for the period ended September 30, 2025 and may be subsequently revised. Prior period data may have been adjusted to reflect updated calculations. Investors should not rely exclusively on the data presented below in forming a judgment regarding the current or prospective performance of the commercial real estate market generally.
ABOUT THE TIAA REAL ESTATE ACCOUNT
The Account was established, under the laws of New York, in February 1995 as a separate account of TIAA and interests in the Account were first offered to eligible contract owners on October 2, 1995. The Account offers individual and group accumulating annuity contracts (with contributions made on a pre-tax or after-tax basis), as well as individual lifetime and term-certain variable payout annuity contracts (including the payment of death benefits to beneficiaries). Investors are entitled to transfer funds to or from the Account under certain circumstances. Funds invested in the Account for each category of contract are expressed in terms of units, and unit values will fluctuate depending on the Account's performance.
Investment Objective and Strategy
The Real Estate Account seeks to generate favorable total returns primarily through the rental income and appreciation of a diversified portfolio of directly held, private real estate investments and real estate-related investments, while offering investors guaranteed, daily liquidity.
Real Estate-Related Investments.The Account intends to have between 75% and 85% of its net assets invested directly in real estate or real estate-related investments with the goal of producing favorable long-term returns primarily through rental income and appreciation. These investments may consist of:
•Direct ownership interests in domestic and foreign real estate;
•Direct ownership of real estate through interests in joint ventures;
•Indirect interests in real estate through real estate-related securities: such as
◦private real estate limited partnerships and limited liability companies (collectively, "real estate funds");
◦real estate operating businesses;
◦investments in equity or debt securities of domestic and foreign companies whose operations involve real estate (i.e., that primarily own, develop or manage real estate) which may not be real estate investment trusts ("REITs");
◦domestic or foreign loans, including conventional commercial mortgage loans, participating mortgage loans, secured domestic and foreign mezzanine loans, subordinated loans and collateralized mortgage obligations, including commercial mortgage-backed securities ("CMBS"), collateralized mortgage obligations ("CMOs"),and other similar investments; and
◦public and/or privately placed, domestic and foreign, registered and unregistered equity investments in REITs, which investments may consist of registered or unregistered common or preferred stock interests.
The Account's principal strategy is to purchase direct ownership interests in income-producing real estate, including the four primary sectors of industrial, multi-family, office, and retail, as well as alternative real estate sectors (defined as real estate outside of the four primary sectors noted above). The Account targets holding between 65% and 85% of the Account's net assets in such direct ownership interests.
In addition, the Account is authorized to hold up to 25% of its net assets in liquid real estate-related securities, including publicly traded REITs and CMBS. Management intends that the Account will not hold more than 10% of net assets in such securities on a long-term basis. As of September 30, 2025, the Account did not hold any publicly traded REITs or CMBS.
In making commercial real estate investments within the Account, TIAA seeks to make investments that are suitable from a financial perspective, taking into account the potential financial impacts associated with industry recognized environmental, social and governance ("ESG") criteria to the extent that such criteria are reasonably expected to impact the financial performance of the investment and not to achieve a desired outcome or as an investment
qualification or screen. TIAA believes awareness, and, as appropriate, implementation of ESG criteria in commercial real estate holdings is beneficial to total long-term returns for the Account Ultimately, the Account will make an investment decision that incorporates ESG criteria only to the extent that the criteria are reasonably expected to enhance our understanding of the investment's ability to achieve desired returns for the Account.
Liquid, Fixed-Income Investments. The Account will invest the remaining portion of its assets (targeted to be between 15% and 25% of its net assets) in the following types of liquid, fixed income investments;
•U.S. Treasury or U.S. Government agency securities;
•Intermediate-term or long-term government related instruments, such as bond or other fixed-income securities issued by U.S. Government agencies, U.S. states or municipalities or U.S. Government-sponsored entities as well as foreign governments and their agencies (including those in emerging markets) and supranational or multinational organizations (e.g., European Union);
•Intermediate-term or long-term non-government related instruments, such as corporate debt securities, domestic- or foreign mezzanine or other debt, and structured securities, (e.g. unsecured debt obligations with a return linked to the performance of an underlying asset). Such structured securities may include asset-backed securities ("ABS") issued by domestic or foreign entities, mortgage backed securities ("MBS"), residential mortgage backed securities ("RMBS"), debt securities of foreign governments, and collateralized debt ("CDO"), collateralized bond ("CBO") and collateralized loan ("CLO") obligations, but only if such non-government related instruments are investment-grade securities;
•Money market instruments and other cash equivalents. These will usually be high-quality, short-term debt instruments, including U.S. Government or government agency securities, commercial paper, certificates of deposit, bankers' acceptances, repurchase agreements, interest-bearing time deposits, and corporate debt securities; and
•To a limited extent, privately issued (or non-publicly traded) debt securities, including Rule 144A securities, issued by domestic and foreign companies that do not primarily own or manage real estate, but only if such domestic and foreign privately issued debt securities are investment-grade securities.
However, the Account's liquid, fixed-income investments may comprise less than 15% of its net assets especially during and following periods of significant net contract owner outflows. In addition, the Account, on a temporary basis, may hold in excess of 25% of its net assets in liquid, fixed-income investments, particularly during times of significant inflows into the Account and/or a lack of attractive real estate-related investments available in the market.
Liquid Securities Generally. Primarily due to management's need to manage fluctuations in cash flows, in particular during and following periods of significant contract owner net transfer activity into or out of the Account, the Account may, on a temporary or long term basis (i) exceed the upper end of its targeted holdings (currently 35% of the Account's net assets) in liquid securities of all types including both publicly traded non-real estate-related liquid investments and liquid real estate-related securities, such as REITs and structured securities (including ABS, RMBS, CMBS and MBS), or (ii) be below the low end of its targeted holdings in such liquid securities (currently 15% of the Account's net assets).
The portion of the Account's net assets invested in liquid investments of all types may exceed the upper end of its target, for example, if (i) the Account receives a large inflow of money in a short period of time, in particular due to significant contract owner transfer activity into the Account, (ii) the Account receives significant proceeds from sales or financings of direct real estate assets, (iii) there is a lack of attractive direct real estate investments available on the market, and/or (iv) the Account anticipates more near-term cash needs, including to acquire or improve direct real estate investments, pay expenses or repay indebtedness. Conversely, the portion of the Account's net assets invested in liquid investments of all types may exceed the lower end of its target, for example, during and immediately following periods of significant net contract owner outflows.
Foreign Investments. The Account may also make foreign real estate, foreign real estate-related investments and foreign liquid, fixed-income investments. Under the Account's investment guidelines, investments in direct foreign real estate and real estate loans, together with foreign real estate-related securities and foreign liquid, fixed-income
investments may not comprise more than 25% of the Account's net assets. However, management does not intend such foreign investments, in the aggregate, to exceed 10% of the Account's net assets. As of September 30, 2025, the fair value of the Account's foreign real estate investments was $146.0 million, or 0.6%of net assets.
In managing any domestic or foreign mezzanine debt or other domestic or foreign loans or securities, the Account may enter into certain derivatives transactions (including forward currency contracts and swaps, futures contracts, put and call options and other hedging transactions) in order to hedge against the risks of exchange rate uncertainties, interest rate uncertainties and foreign currency or market fluctuations impacting the Account's domestic or foreign investments. The Account does not intend to speculate in such transactions.
THIRD QUARTER 2025 U.S. ECONOMIC AND COMMERCIAL REAL ESTATE OVERVIEW
The Account invests primarily in high-quality, core real estate in order to meet its investment objective of obtaining favorable long-term returns through rental income and the appreciation of its real estate holdings.
Economic Overview and Outlook
Key Macro Economic Indicators*
Actuals Forecast
2024 3Q 2025 2025 2026
Economy(1)
Gross Domestic Product ("GDP")
2.4% 2.8% 1.8% 1.5%
Employment Growth (2)
168 61 76 30
Unemployment Rate 4.1% 4.3% 4.4% 4.8%
Interest Rates(3)
10 Year Treasury 4.6% 4.2% 4.1% 4.3%
Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, Federal Reserve and Moody's Analytics
*Data subject to revision
(1)GDP growth rates are annual rates. Quarterly unemployment rates are the reported value for the final month of the quarter while annual values represent a twelve-month average.
(2)Values presented in thousands. Forecast values represent average monthly employment growth in the respective periods.
(3)Treasury rates are an average over the stated period.
Global economic activity proved resilient in the third quarter of 2025, as several major economies experienced stronger growth than expected despite concerns surrounding the U.S.' shift in trade policy. Global growth forecasts for 2025 have increased over the past few months, though the global impact of higher U.S. trade barriers has yet to be fully realized. Economic activity and global trade are likely to slow at the end of 2025, and signs point to weakening growth in the global economy in 2026.
In the U.S., policy uncertainty and a rapidly changing trade environment continue to dominate the economic landscape through the first three quarters of 2025. A new round of broad-based reciprocal tariffs went into effect in early-August, and the Trump administration has implemented or threatened additional tariffs on China as well as on goods from specific industries like furniture and pharmaceuticals. The U.S. effective tariff rate is expected to top 15% by year's end according to Moody's Analytics, increasing costs for U.S. importers. In addition, funding for the U.S. government expired on September 30th, leading to a shutdown of many government functions. The reduction in government employment and spending will have growth implications at the end of 2025 and will add another layer of uncertainty into the outlook, as many key data releases are delayed.
Despite the volatility from trade policy, the U.S. economy continued to expand at a solid pace in the third quarter, climbing at an estimated 2.8% annualized pace after rebounding in the second quarter. Consumer spending has picked up after stalling at the start of the year but much of the improvement in GDP growth over the past two quarters has been driven by business spending, fueled by companies' investments in expanding AI capabilities. The labor market has struggled in recent months, however, as the economy added fewer than 100,000 jobs in each of the last four months. This raises some questions about the strength of consumer spending in coming months, and the economy is expected to slow at the end of the year. The passage of the One Big Beautiful Bill Act contains several new tax cuts, tax cut extensions, and boosts to government spending, which should help to offset some of the headwinds facing the economy and sustain growth in 2026.
The U.S. Federal Reserve responded to weakened labor market conditions by cutting interest rates for the first time this year, lowering the target federal funds rate by 25 basis points in September. Federal officials have signaled that future rate cuts are likely in coming quarters, and markets now expect additional rate cuts in the Federal Reserve's last two meetings in 2025. Yields on 10-year Treasuries drifted upward at the start of the quarter but declined following weaker jobs data and the Federal Reserve's cut, finishing the third quarter of 2025 slightly lower at 4.16%.
Outside of the U.S., policymakers in Europe are more cautious about further cuts in interest rates. The European Central Bank (ECB) held interest rates steady throughout the third quarter and is expected to continue to hold at 2.0% throughout the remainder of the year. Economic growth surprised on the upside during the quarter and the ECB raised its growth forecast for 2025 for the region, though weakness in export-intensive economies like Germany remain a concern. In the United Kingdom, fiscal challenges remain a hindrance to growth, but rising food and energy prices led the Bank of England to hold policy interest rates steady. Further cuts in the United Kingdom are likely to be gradual, as the central bank assesses weakening economic conditions against concerns over inflation.
In Asia, China's economy grew 4.8% year-over-year in the third quarter of 2025, down from the 5.2% pace in the previous quarter. China's export sector continued its strong performance despite higher tariffs on goods headed to the U.S. However, consumer spending and manufacturing activity slowed considerably during the quarter, weighing on overall growth Policymakers in China have signaled that increased focus on domestic consumer spending will be necessary in upcoming quarters as the effects from a higher tariff regime in the U.S. begin to take hold in China's export sector.
Real Estate Market Conditions and Outlook
Like other asset classes, commercial real estate faces some uncertainty given the outlook for slower growth and continued policy volatility. However, commercial real estate values already underwent a period of correction from late 2022 through early-2024, driven by rapidly increasing long-term yields in 2022. Management believes that this decreases the risk of further large declines in values, and may make the current market cycle an attractive entry point for investors as the sector begins another growth cycle. The recovery in the U.S. commercial real estate sector continued to gain momentum in the third quarter, helped by stabilizing lending standards and improved access to capital. In addition, construction activity is slowing across all major property types, which should translate to slower supply growth and provide some protection for real estate fundamentals.
The Account returned 1.11% in the third quarter of 2025 and 3.64% since September 30, 2024. The Account had slight appreciation in property values in the third quarter and Management believes that, overall, property fundamentals remain strong. Future transaction activity is expected to be consistent with the Account's multi-year strategy of reducing exposure to anticipated underperforming sectors such as traditional office and regional malls and increasing allocations to anticipated outperforming sectors such as housing, industrial, necessity retail and alternatives while addressing areas of strategic, material weighting divergence from the benchmark.
Data for the Account's top five markets in terms of market value as of September 30, 2025 are provided below. The five markets presented below represent 40.9% of the Account's total real estate portfolio. Across all markets, the Account's properties are 91.3% leased.
Top 5 Metro Areas by Fair Market Value Account % Leased Number of Property Investments Metro Area Fair Value as a % of Total RE Portfolio* Metro Area Fair Value as a % of Total Investments*
Los Angeles-Long Beach-Anaheim, CA 90.0% 20 9.0% 7.7%
Washington-Arlington-Alexandria, DC-VA-MD-WV 90.7% 17 8.7% 7.4%
Riverside-San Bernardino-Ontario, CA 91.3% 6 8.7% 7.4%
Dallas-Fort Worth-Arlington, TX 95.5% 12 8.5% 7.2%
Atlanta-Sandy Springs-Roswell, GA 94.8% 8 6.0% 5.1%
*Wholly-owned properties are represented at fair value and gross of any debt, while joint venture properties are represented at the net equity value.
Office
The traditional office sector remains challenged but appears to be stabilizing. Net absorption was positive for the first time in three years, and vacancy fell by 8 basis points over the quarter. Additionally, we see attractive opportunities emerging for high-quality assets. Newer properties have collectively seen improving occupancy since early 2024. Starts are at record lows, leading to virtually no new supply over the mid-term that should result in a shortage of high-quality space. Prices bottomed earlier in 2025, falling 40% from the peak and have increased by just 2.5% since. Management believes that a supply shortage combined with comparatively high going-in yields are starting to drive a relative value opportunity.
Vacancy nationwide decreased from 14.1% in the second quarter of 2025 to 14.0% in the third quarter of 2025, as reported by CoStar. Leasing activity increased to 83.5% in the third quarter of 2025, a 1.3% improvement from the second quarter of 2025. Management believes that this increase reflects modest improvement in business confidence and the continued normalization of return to office trends, which supported higher leasing volume despite lingering economic uncertainty driven by political pressures. The vacancy rate within the Account's office portfolio declined from 17.7% in the second quarter of 2025 to 16.5% in the third quarter of 2025. The decrease in the San Diego metro area was primarily due to the demolition of certain buildings, which reduced total rentable area. In the Houston and New York metro areas, vacancy declined due to tenant relocation driven by improved economic conditions, sustained demand for high quality office space and recent property dispositions.
Account Vacancy Market
Vacancy*
Top 5 Office Metropolitan Areas Total Sector
by Metro Area
($M) 		% of Total
Investments 		Q3 2025 Q2 2025 Q3 2025 Q2 2025
All Office
16.5 % 17.7 % 14.0 % 14.1 %
Washington-Arlington-Alexandria, DC-VA-MD-WV $ 765.1 3.1 % 19.7 % 19.9 % 17.5 % 17.5 %
Dallas-Fort Worth-Arlington, TX 600.7 2.4 % 7.4 % 9.2 % 17.8 % 18.0 %
San Diego-Carlsbad, CA 583.3 2.3 % 2.6 % 23.5 % 13.1 % 12.9 %
Houston-The Woodlands-Sugar Land, TX 301.8 1.2 % 11.7 % 15.2 % 19.6 % 19.7 %
New York-Newark-Jersey City, NY-NJ-PA 291.6 1.2 % 18.0 % 21.4 % 13.4 % 13.6 %
*Source: CoStar. Market vacancy is defined as the percentage of space available for rent. The Account's vacancy is defined as the percentage of unleased square footage.
Industrial
Industrial fundamentals continue to deteriorate in 2025, with vacancy in the sector hitting the highest point in over a decade. This deterioration stems in part from cyclical softness in the manufacturing and housing sectors, combined with policy uncertainty surrounding tariff and trade rule changes. However, management believes that this weakness represents a temporary disruption rather than a long-term challenge to the sector's investment prospects. Management believes the policy-driven pullback in leasing should create pent-up demand that materializes once policy parameters are clarified. Meanwhile, supply growth, which drove much of the vacancy increase in 2023-2024, has normalized as new industrial project groundbreakings are at decade lows. Long-term secular trends including e-commerce expansion and supply chain modernization should continue supporting tenant demand and improving fundamentals as supply risks diminish. Consequently, management believes well-located functional industrial space remains an attractive investment target, well-positioned to outperform when these headwinds subside and underlying demand drivers reassert themselves.
The national industrial vacancy rate increased to 7.5% in the third quarter of 2025, compared to 7.4% in the previous quarter, as reported by CoStar. The average vacancy rate of the industrial properties held by the Account decreased from 9.1% in the second quarter of 2025 to 8.6% in the third quarter of 2025. This decline was driven by
multiple new lease signings, acquisitions of properties with strong occupancy percentages and successful tenant retention. In contrast, vacancy in the Seattle metro area continues to increase due to slower leasing activity.
Account Vacancy Market
Vacancy*
Top 5 Industrial Metropolitan Areas Total Sector
by Metro Area
($M) 		% of Total
Investments 		Q3 2025 Q2 2025 Q3 2025 Q2 2025
All Industrial
8.6 % 9.1 % 7.5 % 7.4 %
Riverside-San Bernardino-Ontario, CA $ 1,850.7 7.4 % 8.7 % 8.7 % 8.6 % 7.8 %
Dallas-Fort Worth-Arlington, TX 739.7 3.0 % 1.9 % 1.9 % 9.1 % 9.2 %
Seattle-Tacoma-Bellevue, WA 600.4 2.4 % 17.3 % 14.3 % 8.8 % 8.7 %
Los Angeles-Long Beach-Anaheim, CA 593.8 2.4 % 14.2 % 18.5 % 6.4 % 6.2 %
Miami-Fort Lauderdale-West Palm Beach, FL 571.5 2.3 % 3.5 % 3.4 % 6.2 % 6.1 %
*Source: CoStar. Market vacancy is defined as the percentage of space available for rent. The Account's vacancy is defined as the percentage of unleased square footage.
Multi-Family
The multifamily sector has experienced exceptional demand in recent quarters as the sector continues to demonstrate its ability to absorb the record amount of new supply delivered. However, demand softened in the third quarter in response to broader economic headwinds. Still, renter household formation has been boosted in recent quarters by elevated home prices and stubbornly high mortgage rates in the U.S. economy. Domestic migration and natural population growth are expected to play an increased role in apartment demand performance among markets in upcoming quarters, as tighter immigration policy is likely to reduce household formation in several markets.
The national apartment vacancy rate increased to 6.6% in the third quarter of 2025 compared to 6.4% in the previous quarter, as reported by CoStar. The vacancy rate of the Account's apartment properties decreased from 3.9% in the second quarter of 2025 to 3.7% in the third quarter of 2025. This modest decline was driven by strong tenant demand, new leases secured in key submarkets such as Washington, D.C., Los Angeles and Miami metro areas, plus the acquisitions of properties with strong occupancy levels.
Account Vacancy Market
Vacancy*
Top 5 Apartment Metropolitan Areas Total Sector
by Metro Area
($M) 		% of Total
Investments 		Q3 2025 Q2 2025 Q3 2025 Q2 2025
All Apartment
3.7 % 3.9 % 6.6 % 6.4 %
Washington-Arlington-Alexandria, DC-VA-MD-WV $ 763.5 3.1 % 0.9 % 1.1 % 6.4 % 6.1 %
Los Angeles-Long Beach-Anaheim, CA 747.1 3.0 % 1.1 % 1.5 % 4.8 % 4.7 %
Miami-Fort Lauderdale-West Palm Beach, FL 495.1 2.0 % 0.1 % 0.3 % 5.6 % 5.3 %
Charlotte-Concord-Gastonia, NC-SC 355.6 1.4 % 3.3 % 3.0 % 8.2 % 7.7 %
Atlanta-Sandy Springs-Roswell, GA 375.2 1.5 % 0.2 % 0.3 % 9.6 % 9.6 %
*Source: Costar vacancy is defined as stabilized vacancy rates as the vacancy rate for properties are no longer in their initial lease up phase which provides a true market metric. The Account's vacancy is defined as the percentage of unleased square footage.
Retail
Retail fundamentals have shown resilience despite uncertainty pertaining to changing US policy, a slowing economy, and impacts on consumer spending. During the first nine months of 2025, vacancy rates modestly increased from historic lows due to retail bankruptcies announced in the fourth quarter of 2024 and resulting store
closures. Construction activity remains at historic lows, which provides a buffer for occupancy rates even if demand softens. Leasing continues to be dominated by smaller format, freestanding, or in-line spaces with service-based tenants leading growth. The sector continues to see a performance gap determined by quality and relevance with consumers with Class A and higher-rated malls maintaining strong performance while lower-rated properties struggle. Meanwhile, necessity-based and grocery-anchored retail properties demonstrate defensive characteristics, as grocery spending typically remains relatively inelastic during periods of economic uncertainty.
The Account's retail portfolio is composed primarily of high-end lifestyle shopping centers and regional malls in large metropolitan or tourist centers, which tend to have higher vacancy rates than the overall national retail market. The Account has over 1,100 retailers across its portfolio, with its largest retail exposure comprising less than 5.0% of total retail rentable area. The retail portfolio is managed to minimize significant exposure to any single retailer. The national vacancy rate for retail remained stable at 4.3% in both the second and third quarter of 2025. The average vacancy rate of the retail properties held by the Account increased from 7.6% to 8.9% over the period. Vacancy in the neighborhood, community and strip center sector declined due to the acquisition of a property with strong occupancy. In contrast, vacancy in the lifestyle and mall segment increased as a result of shifting consumer spending patterns and persistent inflation, which has driven up labor and operating costs. The rise in power center vacancy was driven by slower leasing activity, higher financing costs and limited availability of replacement tenants.
Account Vacancy
Market
Vacancy*
Total Exposure
($M) 		% of Total Investments Q3 2025 Q2 2025 Q3 2025 Q2 2025
All Retail 8.9 % 7.6 % 4.3 % 4.3 %
Lifestyle & Mall $ 1,166.0 4.7 % 8.8 % 6.1 % 8.8 % 8.6 %
Neighborhood, Community & Strip 1,109.8 4.4 % 8.7 % 8.9 % 6.1 % 6.1 %
Power Center** 332.0 1.3 % 12.2 % 11.3 % 4.6 % 4.7 %
*Source: CoStar. Market vacancy is the percentage of space available for rent. The Account's vacancy is defined as the percentage of unreleased square footage.
**The Power Center designation is reserved for properties with three or more anchor units. Anchor units are leased to large retailers such as department stores, home improvement stores, and warehouse clubs. Properties with the Neighborhood, Community and Strip designation consist of two or less anchor units.
Hotel
Similar to the second quarter, the third quarter of 2025 was affected by rising economic uncertainty and inflationary pressures. Leisure demand continued to soften and companies further reduced travel spending. Looking ahead, hotel occupancy is expected to continue declining through the remainder of the year. This slowdown is largely driven by consumer cost pressures, weak domestic and international business travel and diminishing seasonal events.
The Account's exposure to the hospitality sector is limited to one hotel in the Dallas metro area. The hotel is located in a business park in the Dallas metro area and caters largely to business travelers. Key metrics to track hotel performance include occupancy, the average daily rate ("ADR") and revenue per available room ("RevPAR"). For the quarter ended September 30, 2025, occupancy of the property decreased to 47.6%, as compared to 61.6% in the previous quarter. ADR and RevPAR were $146.90 and $121.59, respectively, for the third quarter of 2025, as compared to $150.59 and $159.21, respectively, in the prior quarter.
INVESTMENTS
As of September 30, 2025, the Account had total net assets of $22.7 billion, a 1.1% increase from December 31, 2024.
As of September 30, 2025, the Account held 84.9% of its total investments in real estate and real estate joint ventures. The Account also held a real estate operating business representing 4.3% of total investments, real estate funds representing 3.3% of total investments, investments in loans receivable, including those with related parties, representing 2.8% of total investments, U.S treasury securities representing 2.0% of total investments. U.S.
government agency notes representing 1.5% of total investments and U.S. short term repos representing 1.2% of total investments.
The outstanding principal on loans payable on the Account's wholly-owned real estate portfolio as of September 30, 2025 was $0.6 billion. The Account's proportionate share of outstanding principal on loans payable within its joint venture investments was $2.6 billion, which is netted against the underlying properties when determining the joint venture investment's fair value presented on the Consolidated Schedules of Investments. As of September 30, 2025, the total outstanding principal on the Account's portfolio was $4.9 billion, inclusive of loans payable within the joint venture investments, $256.2 million in loans collateralized by a loan receivable, $576.0 million outstanding on the Account's line of credit and $900.0 million in senior notes payable. This amount represented a loan-to-value ratio of 17.7%.
Management believes that the Account's real estate portfolio is diversified by location and property type. The Account does not intend to buy and sell its real estate investments simply to make short-term profits. Rather, the Account's general strategy in selling real estate investments is to dispose of those assets that management believes (i) have maximized in value, (ii) have underperformed or face deteriorating property-specific or market conditions, (iii) need significant capital infusions in the future, (iv) are appropriate to dispose of in order to remain consistent with the Account's intent to diversify the Account by property type and geographic location (including reallocating the Account's exposure to or away from certain property types in certain geographic locations), or (v) otherwise do not satisfy the investment objectives of the Account. Management, from time to time, will evaluate the need to manage liquidity in the Account as part of its analysis as to whether to undertake a particular asset sale. The Account may reinvest any sale proceeds that it does not need to pay operating expenses or to meet debt service or redemption requests (e.g., contract owner withdrawals or benefit payments).
The following table lists the Account's ten largest investments as of September 30, 2025. For information regarding the Account's diversification of real estate assets by region and property type, see Note 3-Concentrations of Risk.
Ten Largest Real Estate Investments
Property Investment Name Ownership Percentage City State Type
Gross Real Estate Fair Value(1)
Debt Fair Value(2)
Net Real Estate Fair Value(3)
Property as a
% of Total
Real Estate
Portfolio(4)
Property as a
% of Total
Investments(5)
Simpson Housing Portfolio 80.00% Various U.S.A Apartment $ 1,018.8 $ 392.0 $ 626.8 4.3% 3.7%
Ontario Industrial Portfolio 100.00% Ontario CA Industrial 950.2 - 950.2 4.0% 3.5%
Fashion Show 50.00% Las Vegas NV Retail 825.6 414.5 411.1 3.5% 3.0%
Campus Pointe Consolidation 44.06% San Diego CA Office 605.9 - 605.9 2.5% 2.2%
Storage Portfolio II 90.00% Various U.S.A Storage 579.4 169.0 410.4 2.4% 2.1%
Lincoln Centre 100.00% Dallas TX Office 563.1 - 563.1 2.4% 2.1%
The Florida Mall 50.00% Orlando FL Retail 535.1 299.5 235.6 2.3% 1.9%
Dallas Industrial Portfolio 100.00% Dallas TX Industrial 502.6 - 502.6 2.1% 1.8%
1001 Pennsylvania Avenue 100.00% Washington DC Office 457.3 - 457.3 1.9% 1.7%
Seavest MOB 98.72% Various U.S.A Office 393.3 154.3 239.0 1.7% 1.4%
(1)The Account's share of the fair value of the property investment, gross of debt.
(2)Debt fair values are presented at the Account's ownership interest.
(3)The Account's share of the fair value of the property investment, net of debt.
(4)Total real estate portfolio is the aggregate fair value of the Account's wholly-owned properties and the properties held within a joint venture, gross of debt.
(5)Total investments are the aggregate fair value of all investments held by the Account, gross of debt. Total investments, as calculated within this table, will vary from total investments, as calculated in the Account's Schedule of Investments, as joint venture investments are presented in the Schedule of Investments at their net equity position in accordance with accounting principles generally accepted in the United States (U.S. GAAP").
Results of Operations
Three months ended September 30, 2025 compared to Three months ended September 30, 2024
Net Investment Income
The following table shows the results of operations for the three months ended September 30, 2025 and 2024 and the dollar and percentage changes for those periods (dollars in millions).
For the Three Months Ended September 30, Change
2025 2024 $ %
2
Real estate income, net:
Rental income $ 305.7 $ 352.7 $ (47.0) (13.3) %
Real estate property level expenses:
Operating expenses 75.3 81.7 (6.4) (7.8) %
Real estate taxes 47.6 52.3 (4.7) (9.0) %
Interest expense 13.6 19.9 (6.3) (31.7) %
Total real estate property level expenses 136.5 153.9 (17.4) (11.3) %
Real estate income, net 169.2 198.8 (29.6) (14.9) %
Income from real estate joint ventures 29.1 42.3 (13.2) (31.2) %
Income from real estate funds 5.1 2.7 2.4 88.9 %
Interest income
29.6 30.3 (0.7) (2.3) %
TOTAL INVESTMENT INCOME 233.0 274.1 (41.1) (15.0) %
Expenses:
Investment management charges 17.1 17.6 (0.5) (2.8) %
Administrative charges 13.4 17.2 (3.8) (22.1) %
Distribution charges 2.0 3.7 (1.7) (45.9) %
Liquidity guarantee charges 16.0 15.8 0.2 1.3 %
Interest expense 17.0 9.7 7.3 75.3 %
TOTAL EXPENSES 65.5 64.0 1.5 2.3 %
INVESTMENT INCOME, NET $ 167.5 $ 210.1 $ (42.6) (20.3) %
The table below illustrates and compares rental income, operating expenses and real estate taxes for properties held by the Account for the three months ended September 30, 2025 and 2024, "same property", as compared to the comparative increases or decreases associated with the acquisition and disposition of properties made in either period.
Rental Income Operating Expenses Real Estate Taxes
Change Change Change
2025 2024 $ % 2025 2024 $ % 2025 2024 $ %
Same Property $ 280.9 $ 301.0 $ (20.1) (6.7) % $ 70.0 $ 67.4 $ 2.6 3.9 % $ 43.7 $ 42.1 $ 1.6 3.8 %
Properties Acquired 17.0 - 17.0 N/M 3.1 - 3.1 N/M 2.2 - 2.2 N/M
Properties Sold 7.8 51.7 (43.9) (84.9) % 2.2 14.3 (12.1) (84.6) % 1.7 10.2 (8.5) (83.3) %
Impact of Properties Acquired/Sold 24.8 51.7 (26.9) (52.0) % 5.3 14.3 (9.0) (62.9) % 3.9 10.2 (6.3) (61.8) %
Total Property Portfolio $ 305.7 $ 352.7 $ (47.0) (13.3) % $ 75.3 $ 81.7 $ (6.4) (7.8) % $ 47.6 $ 52.3 $ (4.7) (9.0) %
N/M-Not meaningful
Rental Income:
Rental income decreased by $47.0 million, or 13.3%, when compared to the third quarter of 2024, primarily due to property dispositions, as indicated in the table above, slower job growth, a significant recovery of bad debt in the
retail sector recorded in the same quarter of the prior year and lower events and catering activity at the Account's only hotel property. These declines were partially offset by rental rate increases and reductions in bad debt reserves.
Operating Expenses:
Operating expenses decreased $6.4 million, or 7.8%, compared to the third quarter of 2024, primarily due to property dispositions, as reflected in the table above.
Real Estate Taxes:
Real estate taxes decreased $4.7 million, or 9.0%, when compared to the same quarter in 2024, primarily due to property dispositions, as reflected in the table above, accompanied with lower tax assessments across all sectors, offset by the prior period tax refund in the multifamily sector.
Interest Expense:
Interest expense decreased $6.3 million, or 31.7%, primarily due to lower average outstanding principal balance on loans payable, as compared to the same quarter in 2024.
Income from Real Estate Joint Ventures:
Income from real estate joint ventures decreased $13.2 million, or 31.2%, when compared to the same quarter in 2024, as a result of lower distributed income from an office property located in San Francisco, California, a retail mall in Orlando, FL and an office property located in Houston, Texas. Lower distributed income is the result of higher expenses incurred by the Account's joint ventures.
Income from Real Estate Funds:
Income from real estate funds increased $2.4 million, or 88.9%, when compared to the same quarter in 2024, primarily as a result of higher dividends received from two of the Account's real estate fund investments. Higher dividends are attributable to lower expenses incurred by the Account's real estate funds.
Interest Income:
Interest income decreased $0.7 million, or 2.3%, in comparison to the same quarter of 2024, due to a modest decrease in the Account's loan receivable portfolio.
Expenses:
Investment management, administrative and distribution expenses charged to the Account by TIAA and one of its affiliates are charged on an at-cost basis and are associated with managing the Account. Investment management charges are comprised primarily of fixed components, but fluctuate based on the size of the Account's portfolio of investments, whereas administrative and distribution charges are comprised of more variable components that generally correspond with movements in net assets. Both distribution services (pursuant to the Distribution Agreement) and administrative services are provided to the Account by Services and TIAA, respectively, on an at cost basis. Investment management expenses decreased by $0.5 million when compared to the prior year third quarter due to a reduction in the Account's total investments. Administrative expenses decreased $3.8 million due to lower personnel costs. Distribution charges decreased $1.7 million when compared to the prior year third quarter due to lower average net assets and decrease in the charge rates.
Mortality and expense risk and liquidity guarantee expenses are contractual charges to the Account from TIAA for TIAA's assumption of these risks and provision of the liquidity guarantee. The rate for these charges is established annually and are charged at a fixed rate based on the Account's net assets. There were no mortality and expense risk expenses charged by TIAA in the comparative periods. Liquidity guarantee expenses were $0.2 million higher than the comparable period of 2024 as a result of higher average net assets.
Interest expense on the Account's unsecured debt increased $7.3 million when compared to the same quarter of 2024, due to a higher average outstanding principal balance on the Account's Credit Agreement.
Net Realized and Unrealized Gains and Losses on Investments and Debt
The following table shows the net realized and unrealized losses on investments and debt for the three months ended September 30, 2025 and 2024 and the dollar and percentage changes for those periods (millions).
For the Three Months Ended September 30, Change
2025 2024 $ %
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND DEBT
Net realized gain (loss) on investments:
Real estate properties $ (11.5) $ (64.8) $ 53.3 82.3 %
Real estate joint ventures (126.2) - (126.2) N/M
Real estate funds 8.4 (4.1) 12.5 304.9 %
Foreign currency translation 0.1 - 0.1 N/M
Marketable securities - 0.1 (0.1) (100.0) %
Loans receivable (20.1) (14.4) (5.7) (39.6) %
Total realized gain (loss) on investments (149.3) (83.2) (66.1) (79.4) %
Net change in unrealized gain (loss) on:
Real estate properties 29.1 (105.4) 134.5 127.6 %
Real estate joint ventures 168.4 (154.5) 322.9 209.0 %
Real estate funds (12.4) (2.7) (9.7) (359.3) %
Real estate operating business 53.0 97.2 (44.2) (45.5) %
Marketable securities - 0.1 (0.1) (100.0) %
Loans receivable (9.5) (32.3) 22.8 70.6 %
Loans receivable with related parties - 0.6 (0.6) (100.0) %
Loans payable 7.3 3.7 3.6 97.3 %
Other unsecured debt (3.8) (27.7) 23.9 86.3 %
Net change in unrealized gain (loss) on investments and debt
232.1 (221.0) 453.1 205.0 %
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND DEBT $ 82.8 $ (304.2) $ 387.0 127.2 %
N/M-Not meaningful
Real Estate Properties:
Wholly-owned real estate investments experienced net realized and unrealized gains of $17.6 million during the third quarter of 2025, compared to $170.2 million of net realized and unrealized losses during the comparable quarter of 2024. Current period realized losses in the third quarter of 2025 were attributable to the dispositions of multi-family property in Texas. Unrealized gains were largely attributable to office and multi-family properties, due to sustained tenant and leasing demand, positive rent growth and stabilized interest rates. Prior period net realized and unrealized losses were driven by office and retail properties due to economic trends and stagnant occupancy rate. The realized loss from the prior period was primarily driven by the sale of two office properties in Utah and California, as well as a retail property in Florida.
Real Estate Joint Ventures:
Real estate joint ventures experienced net realized and unrealized gains of $42.2 million during the third quarter of 2025, compared to $154.5 million of unrealized losses during the third quarter of 2024. Unrealized gains for the current quarter were primarily driven by the Account's joint venture investments in the office and multifamily sectors, reflecting increased market demand and offset by the consolidation of a group of office properties. Realized loss was attributable to the sale of an office property in New York. Prior period net realized and unrealized losses were driven by decreased market demand caused by economic conditions.
Real Estate Funds:
Real estate funds experienced net realized and unrealized losses of $4.0 million during the third quarter of 2025, compared to $6.8 million of net realized and unrealized losses during the comparable period of 2024. Realized gain in the third quarter of 2025 is due to profit generated from the sale of a partnership's asset. Unrealized losses in the third quarter of 2025 were driven by unfavorable changes in capitalization rates and lowered investor demand, resulting in unfavorable valuations for the Account's real estate fund investments. Prior period net realized and unrealized losses were due to unfavorable valuations resulting from higher capitalization rates.
Real Estate Operating Business:
The Account's real estate operating business experienced unrealized gains of $53.0 million during the third quarter of 2025, compared to $97.2 million of unrealized gains in the third quarter of 2024. Unrealized gains in the third quarter of 2025 were the result of an favorable valuation during the quarter due to a significant lease that will add substantial value to the overall operating business. Prior period unrealized gains were the results of favorable valuations supported by increased capital commitments and forecasted future growth.
Marketable Securities:
The Account's marketable securities did not experience any impactful realized gains or losses during the third quarter of 2025 due to the short hold period of the securities in the portfolio, compared to net realized and unrealized gains of $0.2 million in the third quarter of 2024. Unrealized gains in the prior year quarter are due to favorable U.S Treasury rates during the quarter.
Loans Receivable, including those with related parties:
Loans receivable, including those with related parties, experienced net realized and unrealized losses of $29.6 million during the third quarter of 2025, compared to $46.1 million of net realized and unrealized losses during the comparable quarter of 2024. The current period net realized and unrealized losses are primarily attributed to the foreclosure of a loan collateralized by an office portfolio and payoff of a loan collateralized by an office property. Additionally, unfavorable valuations on two loans during the period also contributed to the losses recognized during the quarter. The appraised values of the collateral asset properties were lower than the principal value of the loans, which resulted in the unfavorable valuation of the loans receivable. The comparable period net losses were attributable to two loans collateralized by office properties with appraised values less than the principal value of the loans.
Loans Payable:
Loans payable experienced unrealized gains of $7.3 million in the third quarter of 2025, compared to $3.7 million of unrealized gains during the comparable quarter of 2024. The unrealized gains in the third quarter of 2025 were attributable to market interest rate reductions and strengthened market conditions. The prior period unrealized gains were primarily attributable to the decrease in U.S Treasury yields driven by favorable market conditions and interest rate changes.
Other Unsecured Debt:
The Account's other unsecured debt experienced unrealized losses of $3.8 million in the third quarter of 2025, compared to $27.7 million of unrealized losses during the comparable quarter of 2024. The current period loss is attributable to unfavorable changes in the risk-free yield curve and changes in market assumptions due to political pressures. Prior period unrealized losses was attributable to adverse shifts in the risk-free yield curve.
Nine months ended September 30, 2025 compared to Nine months ended September 30, 2024
Net Investment Income
The following table shows the results of operations for the nine months ended September 30, 2025 and 2024 and the dollar and percentage changes for those periods (dollars in millions).
For the Nine Months Ended September 30, Change
2025 2024 $ %
INVESTMENT INCOME
Real estate income, net:
Rental income $ 942.4 $ 1,037.6 $ (95.2) (9.2) %
Real estate property level expenses:
Operating expenses 232.1 257.5 (25.4) (9.9) %
Real estate taxes 139.0 155.3 (16.3) (10.5) %
Interest expense 46.9 64.3 (17.4) (27.1) %
Total real estate property level expenses 418.0 477.1 (59.1) (12.4) %
Real estate income, net 524.4 560.5 (36.1) (6.4) %
Income from real estate joint ventures 125.8 126.1 (0.3) (0.2) %
Income from real estate funds 20.0 11.8 8.2 69.5 %
Interest 94.4 88.2 6.2 7.0 %
TOTAL INVESTMENT INCOME 764.6 786.6 (22.0) (2.8) %
Expenses:
Investment management charges 51.5 64.4 (12.9) (20.0) %
Administrative charges 41.9 51.9 (10.0) (19.3) %
Distribution charges 7.1 11.5 (4.4) (38.3) %
Liquidity guarantee charges 47.4 47.9 (0.5) (1.0) %
Interest expense 37.1 41.9 (4.8) (11.5) %
TOTAL EXPENSES 185.0 217.6 (32.6) (15.0) %
INVESTMENT INCOME, NET $ 579.6 $ 569.0 $ 10.6 1.9 %
The following table illustrates and compares rental income, operating expenses and real estate taxes for properties held by the Account for the ninemonths ended September 30, 2025 and 2024. The comparative increases or decreases associated with the acquisition and disposition of properties made in either period is compared to "same property" (dollars in millions).
Rental Income Operating Expenses Real Estate Taxes
Change Change Change
2025 2024 $ % 2025 2024 $ % 2025 2024 $ %
Same Property $ 852.8 $ 846.7 $ 6.1 0.7 % $ 208.0 $ 202.2 $ 5.8 2.9 % $ 126.4 $ 119.9 $ 6.5 5.4 %
Properties Acquired 34.1 5.0 29.1 582.0 % 8.2 1.8 6.4 355.6 % 3.9 0.7 3.2 457.1 %
Properties Sold 55.5 185.9 (130.4) (70.1) % 15.9 53.5 (37.6) (70.3) % 8.7 34.7 (26.0) (74.9) %
Impact of Properties Acquired/Sold 89.6 190.9 (101.3) (53.1) % 24.1 55.3 (31.2) (56.4) % 12.6 35.4 (22.8) (64.4) %
Total Property Portfolio $ 942.4 $ 1,037.6 $ (95.2) (9.2) % $ 232.1 $ 257.5 $ (25.4) (9.9) % $ 139.0 $ 155.3 $ (16.3) (10.5) %
N/M-Not meaningful
Rental Income:
Rental income decreased by $95.2 million, or 9.2%, when compared to the first nine months of 2024, primarily due to property dispositions, as indicated in the table above, offset by rent escalations, bad debt recovery, lease
termination income, decline in rent concessions and stronger leasing demand in the industrial, multi-family and retail sectors.
Operating Expenses:
Operating expenses decreased $25.4 million, or 9.9%, when compared to the same period of 2024, primarily due to property dispositions, as indicated in the table above. The decrease was partially offset by higher repair and maintenance costs, with the largest increases occurring in the retail and office sectors.
Real Estate Taxes:
Real estate taxes decreased $16.3 million, or 10.5%, when compared to the same period in 2024, primarily due to property dispositions noted in the table above. The decline was partially offset in the office and industrial sectors by higher assessed property values.
Interest Expense:
Interest expense decreased by $17.4 million when compared to the same period in 2024, primarily due to a lower average outstanding principal balance on the Account's loans payable.
Income from Real Estate Joint Ventures:
Income from real estate joint ventures decreased $0.3 million, when compared to the same period in 2024, as a result of lower distributed income from five of the Account's retail joint venture investments, due to higher operating expenses.
Income from Real Estate Funds:
Income from real estate funds increased $8.2 million, when compared to the same period in 2024, as a result of increased distributed income from four of the Account's real estate fund investments.
Interest Income:
Interest income increased $6.2 million in comparison to the same period in 2024, due to continual increases in the Account's short term marketable securities portfolio offset by the decline in the Account's loan receivable portfolio. The decrease in the prior period was attributable to the continued decline in the Account's short term marketable securities portfolio.
Expenses:
Investment management, administrative and distribution expenses charged to the Account by TIAA and one of its affiliates are charged on an at-cost basis and are associated with managing the Account. Investment management charges are comprised primarily of fixed components, but fluctuate based on the size of the Account's portfolio of investments, whereas administrative and distribution charges are comprised of more variable components that generally correspond with movements in net assets. Both distribution services (pursuant to the Distribution Agreement) and administrative services are provided to the Account by Services and TIAA, respectively, on an at cost basis. Investment management expenses decreased by $12.9 million when compared to the prior year due to a reduction in the Account's total investments. Administrative expenses decreased $10.0 million due to lower personnel costs and technology efficiencies. Distribution charges decreased $4.4 million when compared to the prior year due to lower average net assets and decrease in charge rate.
Mortality and expense risk and liquidity guarantee expenses are contractual charges to the Account from TIAA for TIAA's assumption of these risks and provision of the liquidity guarantee. The rate for these charges is established annually and charged at a fixed rate based on the Account's net assets. There were no mortality and expense risk expenses charged by TIAA in the comparative periods. Liquidity guarantee expenses were $0.5 million lower than the comparable period of 2024 as a result of lower average net assets.
Interest expense from the Account's other unsecured debt and line of credit decreased $4.8 million when compared to the same period of 2024, due to a slightly lower average outstanding principal balance and interest rates on the Account's Credit Agreement.
Net Realized and Unrealized Gains and Losses on Investments and Debt
The following table shows the net realized and unrealized gains and losses on investments and debt for the nine months ended September 30, 2025 and 2024 and the dollar and percentage changes for those periods (dollars in millions).
For the Nine Months Ended September 30, Change
2025 2024 $ %
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND DEBT
Net realized gain (loss) on investments:
Real estate properties $ (681.5) $ (176.3) $ (505.2) (286.6) %
Real estate joint ventures (129.7) (17.9) (111.8) (624.6) %
Real estate funds 8.4 0.5 7.9 1,580.0 %
Foreign currency translation
0.2 - 0.2 N/M
Loans receivable (113.0) (153.3) 40.3 26.3 %
Loans payable 61.7 - 61.7 N/M
Total realized gain (loss) on investments: (853.9) (347.0) (506.9) (146.1) %
Net change in unrealized gain (loss)on:
Real estate properties 641.5 (978.5) 1,620.0 165.6 %
Real estate joint ventures 203.4 (439.0) 642.4 146.3 %
Real estate funds (10.7) (35.0) 24.3 69.4 %
Real estate operating business 25.0 140.4 (115.4) (82.2) %
Loans receivable 76.8 (7.3) 84.1 1,152.1 %
Loans receivable with related parties - 0.7 (0.7) (100.0) %
Loans payable 10.6 (14.2) 24.8 174.6 %
Other unsecured debt (18.1) (14.2) (3.9) (27.5) %
Net change in unrealized gain (loss) on investments and debt 928.5 (1,347.1) 2,275.6 168.9 %
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND DEBT $ 74.6 $ (1,694.1) $ 1,768.7 104.4 %
N/M-Not meaningful
Real Estate Properties:
Wholly-owned real estate investments experienced net realized and unrealized loss of $40.0 million during the first three quarters of 2025, compared to $1,154.8 million of net realized and unrealized losses during the comparable period of 2024. While the Account saw appreciation across various real estate sectors during the period, unrealized gains were primarily driven by office and multi-family properties due to resilient demand, positive rent growth and stabilized capitalization rates. The realized losses in the first nine months of 2025 were attributable to the sale of five multi-family properties in Texas, California and Minnesota; and six office properties in Washington, D.C, Virginia, Massachusetts and California. While the Account saw depreciation across various real estate sectors during the prior year period, unrealized losses were primarily driven by office and industrial properties in the Western and Eastern region due to higher concessions and current economic conditions. The realized loss from the prior period is attributable to the sale of three office properties located in New York, California, and Utah.
Real Estate Joint Ventures:
Real estate joint ventures experienced net realized and unrealized gains of $73.7 million during the first nine months of 2025, compared to net realized and unrealized losses of $456.9 million during the comparable period of 2024. Realized loss was primarily driven by the disposition of an office property in New York. Unrealized gains were driven by the Account's joint venture investments in the office and retail sectors due to increased regional market demand, reduced leasing concessions and macroeconomic conditions producing mixed cap rates across the real
estate sectors. The realized losses in the first three quarters of 2024 were due to the disposition of an office property in New York, five student housing properties in Texas, North Carolina, Indiana and Florida and continued decline in market demand for investments in the office and retail sectors.
Real Estate Funds:
Real estate funds experienced net realized and unrealized losses of $2.3 million during the first nine months of 2025, compared to net realized and unrealized losses of $34.5 million during the first nine months of 2024. Current period unrealized losses were due to unfavorable valuations of four of the Account's real estate funds, due to higher capitalization rates. Current period realized gains were primarily due to profit generated from the sale of a partnership's assets.
Real Estate Operating Business:
The Account's real estate operating business experienced unrealized gains of $25.0 million during the first nine months of 2025, compared to $140.4 million unrealized gains in the comparable period of 2024. Unrealized gains were primarily attributable to favorable valuations, largely resulting from a significant lease that is expected to add substantial value to the overall operating business. Unrealized gains in the prior period were primarily attributable to favorable valuations, largely based on market pricing and expected growth.
Marketable Securities:
The Account's marketable securities investments experienced neither a gain or loss during the first nine months of 2025 and 2024 due to the short hold period of the securities.
Loans Receivable, including those with related parties:
Loans receivable, including those with related parties, experienced net realized and unrealized losses of $36.2 million during the first nine months of 2025, compared to $159.9 million of net realized and unrealized losses during the comparable period of 2024. Unrealized gains recognized during the first nine months of 2025 are primarily attributable to favorable valuations of four loans during the period. The appraised values of the collateral asset properties exceeded the principal balances of the loans, resulting in the favorable valuation adjustments. These unrealized gains were offset by realized losses associated with three loans paid off by the borrower and one foreclosure. Prior period net realized and unrealized losses are primarily attributableto unfavorable valuations of four loans during the period, compounded by defaults on receivables and loan payoffs on two properties.
Loans Payable:
Loans payable experienced net realized and unrealized gains of $72.3 million in the first nine months of 2025, compared to $14.2 million of unrealized losses during the comparable period of 2024. The realized gains in the first nine months of 2025 were attributable to the interest and debt forgiven associated with a disposed office property in Massachusetts. The unrealized gains were mainly attributable to narrowing credit spreads and lower market interest rates. The prior period unrealized losses were primarily attributable to the extinguishment of debt associated with the disposition of a collateral property, as well as incremental changes in the U.S Treasury yields driven by inflation risk and widening credit spreads.
Other Unsecured Debt:
Other unsecured debt experienced unrealized losses of $18.1 million in the first nine months of 2025, attributable to unfavorable changes in credit spreads and changes in market assumptions due to political pressures. Prior year unrealized losses of $14.2 million were attributable to unfavorable changes in credit spreads and fluctuations in the risk-free yield curve.
Liquidity and Capital Resources
As of September 30, 2025 and December 31, 2024, the Account's cash and cash equivalents had a value of $1.2 billion and $1.4 billion, respectively (5.5% and 6.0% of the Account's net assets at such dates, respectively). The Account's liquid assets continue to be available to purchase suitable real estate properties, meet the Account's debt obligations, expense needs, and contract owner redemption requests (i.e., contract owner transfers, withdrawals or benefit payments). In addition, as disclosed in the Account's 2024 Form 10-K, the Account is able to meet its short-
term and long-term liquidity needs through cash provided by operating activities, the available borrowing capacity under its Credit Agreement and the liquidity guarantee provided by TIAA as described below.
Liquidity Guarantee
The liquidity guarantee ensures that the account will be able to meet its cash requirements with respect to redeeming accumulation unit contract owners, both in the short- and long-term. In accordance with the liquidity guarantee obligation, TIAA guarantees that all contract owners in the Account may redeem their accumulation units at their accumulation unit value next determined after their transfer or cash withdrawal request is received in good order. The Account pays TIAA a fee for the risks associated with providing the liquidity guarantee through a daily deduction from the Account's net assets.
Although the Account experienced mixed net contract owner outflows and inflows during the third quarter of 2025, the TIAA General Account was not required to purchase any liquidity units this period. TIAA's ownership is approximately 3.95% of the outstanding accumulation units of the Account as of September 30, 2025. The independent fiduciary, which has the right to adjust the percentage of total accumulation units that TIAA's ownership should not exceed (the "trigger point"), has established the trigger point at 45% of the outstanding accumulation units.
Net Investment Income
Net investment income continues to be an additional source of liquidity for the Account. Net investment income was $579.6 million for the nine months ended September 30, 2025, as compared to $569.0 million for the comparable period of 2024. The increase in total net investment income is described more fully in the Results of Operationssection.
Leverage
As of September 30, 2025, the Account's ratio of outstanding principal amount of debt (inclusive of the Account's proportionate share of debt held within its joint venture investments, senior notes payable and any loans outstanding on the Account's Credit Agreement) to total gross asset value (i.e., a "loan -to-value ratio") was 17.7%. The Account intends to maintain its loan-to-value ratio at or below 30% (this ratio is measured at the time of incurrence and after giving effect thereto). The Account's total gross asset value, for these purposes, is equal to the total fair value of the Account's assets (including the fair value of the Account's net equity interest in joint ventures), with no reduction associated with any indebtedness on such assets.
The Account's Credit Agreement, which is a $1.4 billion unsecured line of credit or credit facility, is used to facilitate near-term investment objectives, as further described in Note 12-Credit Agreement. As of September 30, 2025, the Account had $576.0 million outstanding on the line of credit. The Account exercised the second of its three extension options to extend the facility's termination date to September 20, 2026. The Account plans to exercise its remaining extension option before the facility's scheduled maturity in 2026, which extension is subject to customary representations, warranties and closing conditions.
As of September 30, 2025, the total principal outstanding for mortgages on properties held directly by the Account (four of which are collateralized by a loan receivable), the Credit Agreement and senior notes payable were $2.4 billion. There are four mortgage obligations secured by real estate investments wholly-owned by the Account, totaling $239.4 million, that are scheduled to mature within the next twelve months. The Account currently has sufficient liquidity in the form of cash and cash equivalents, short-term securities, and available capacity on the Account's line of credit under the Credit Agreement that can be drawn to meet its current mortgage obligations.
In times of high net inflow activity, in particular during times of high net contract owner transfer inflows, management may determine to apply a portion of such cash flows to make prepayments of indebtedness prior to scheduled maturity, which would have the effect of reducing the Account's loan-to-value ratio.
Statements of Cash Flows
The following table sets forth the Account's sources and uses of cash flows for the nine months ended September 30, 2025 and 2024 (in millions):
As of Nine Months Ended September 30,
2025 2024
Cash flows provided by (used in):
Operating activities $ 225.2 $ 531.0
Financing activities $ (302.6) $ (523.0)
The following provides information regarding the Account's cash flows from operating and financing activities for the nine months ended September 30, 2025.
Operating Activities: The Account's operating cash flows are primarily impacted by net investment income and the purchase or sale of investments and debt. Cash provided by operating activities for the nine months ended September 30, 2025, as compared to the prior year period, decreased by approximately $305.8 million, primarily driven by:
•$817.9 million of higher purchases of real estate properties;
•$216.9 million of lower proceeds from sales of real estate properties; and
•$67.0 million in higher purchases of other real estate properties.
Offsetting the decrease in cash provided by operating activities above was the following;
•$794.3 million in net decrease from dispositions of other investments, higher proceeds from the sales of other real estate investments, and an increase in the proceeds from payoffs of loans receivable and loans receivable form related parties.
Financing Activities: The Account's financing cash flows are primarily impacted by contract owner transactions and repayments of debt. For the period ended September 30, 2025, cash used in financing activities decreased $220.4 million compared to the comparable period in 2024, primarily driven by:
•A decrease in net debt repayments of $512.5 million which included the Account borrowing $576.0 million on the line of credit in the current period; and
•Partially offset by prior period purchase of liquidity units by the TIAA General Account of $293.7 million compared to no liquidity units purchased by the TIAA General Account in the current period.
Long-Term Financing and Capital Needs
The Account expects to meet its long-term liquidity requirements, such as debt maturities, property acquisitions and financing of development activities, through the use of unsecured debt and credit facilities, proceeds received from the disposition of certain properties and joint ventures, along with cash generated from operations after all distributions. The Account has a significant number of unencumbered properties available to secure additional mortgage borrowings should unsecured capital be unavailable or the cost of alternative sources of capital be too high. The value of and cash flow from these unencumbered properties are in excess of the requirements the Account must maintain in order to comply with covenants under its unsecured notes and Credit Agreement.
A summary of the Account's outstanding debt is as follows (in millions):
September 30, 2025 December 31, 2024
Principal Balance % of Total Principal Balance % of Total
Secured $ 893.5 37.7 % $ 1,634.3 64.5 %
Unsecured 1,476.0 62.3 % 900.0 35.5 %
Total $ 2,369.5 100.0 % $ 2,534.3 100.0 %
Fixed Rate Debt:
Secured $ 533.0 22.5 % $ 1,182.9 46.7 %
Unsecured 1,476.0 62.3 % 900.0 35.5 %
Fixed Rate Debt $ 2,009.0 84.8 % $ 2,082.9 82.2 %
Floating Rate Debt:
Secured $ 360.5 15.2 % $ 451.4 17.8 %
Floating Rate Debt $ 360.5 15.2 % $ 451.4 17.8 %
Total $ 2,369.5 100.0 % $ 2,534.3 100.0 %
Recent Transactions
The following describes property and property-related transactions by the Account during the third quarter of 2025. Except as noted, the expenses for operating the properties purchased are either borne or reimbursed, in whole or in part, by the property tenants, although the terms vary under each lease.
Real Estate Properties and Joint Ventures
Purchases
Property Name
Purchase Date
Ownership Percentage Sector Location
Net Purchase Price(1)
Uptown La Grange 07/15/2025 100.00% Multi-family Lagrange, IL $ 87.9
Salt Lake Light Industrial Portfolio 08/07/2025 100.00% Industrial Salt Lake City, UT 36.4
The 266 Framingham 08/15/2025 100.00% Multi-family Framingham, MA 112.2
Somerset Logistics Center 08/19/2025 100.00% Land Somerset, NJ 27.0
Bulls Bay Highway 09/05/2025 100.00% Industrial Jacksonville, FL 20.4
Algonquin Commons 09/18/2025 100.00% Retail Algonquin, IL 98.6
(1) Represents the purchase price net of closing costs.
Sales
Property Name Transaction Date Ownership Percentage Sector Location
Net Sales Price(1)
Realized Gain (Loss) on Disposition(2)
440 Ninth Avenue 08/20/2025 88.52% Office New York, NY $ 92.2 $ (159.9)
Montecito Apartments 09/23/2025 100.00% Multi-family Houston, TX 46.6 (10.5)
(1)Represents the sales price, less selling expenses.
(2)Majority of the realized gain (loss) was previously recognized as unrealized gains (losses) in the Account's Consolidated Statements of Operations.
Financings
Debt Payoff
Property Name
Transaction Date Interest Rate Sector Maturity Date
Principal Amount
The Forum - Sam Houston 08/01/2025 4.25% Multi-family 08/01/2025 $ 15.9
440 Ninth Avenue(1)
08/20/2025 SOFR + 1.56% Office 01/01/2026 135.0
Spring House Innovation Park 09/19/2025 SOFR + 1.36% Office 07/09/2026 71.2
(1) A portion of the outstanding debt was forgiven by the lender during sale of property.
Loan Receivable
Payoff
Description Transaction Date Interest Rate Sector Maturity Date
Principal Amount
Aspen Lake Office Portfolio(1)
08/06/2025 8.25% Office 03/11/2028 $ 20.0
Spring House Innovation Park 09/19/2025 SOFR + 3.26% Office 07/09/2026 $ 116.8
(1) Debt asset was foreclosed by lender and extinguished.
Critical Accounting Estimates
Management's discussion and analysis of the Account's financial condition and results of operations is based on the
Account's Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of the Account's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Management considers the valuation of real estate properties and valuation of real estate joint ventures to be critical accounting estimates because they involve a significant level of estimation uncertainty and have a material impact on the Account's financial condition and results of operations.
There have been no material changes to the Account's critical accounting policies described in the Account's Annual Report on Form 10-K for the year ended December 31, 2024.
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