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TIAA-Real Estate 06.30.2021-10Q

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TIAA-Real Estate 06.30.2021-10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________to __________ Commission file number: 33-92990; 333-254314 TIAA REAL ESTATE ACCOUNT (Exact name of registrant as specified in its charter) New York (State or other jurisdiction of incorporation or organization) NOT APPLICABLE (I.R.S. Employer Identification No.) C/O TEACHERS INSURANCE 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 (Former name, former address and former fiscal year, if changed since last report) 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 ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer (Do not check if a smaller reporting company) ☒ Smaller Reporting Company ☐ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ TABLE OF CONTENTS Page Part I Financial Information Item 1. Unaudited Consolidated Financial Statements Consolidated Statements of Assets and Liabilities 3 Consolidated Statements of Operations 4 Consolidated Statements of Changes in Net Assets 5 Consolidated Statements of Cash Flows 6 Notes to the Consolidated Financial Statements 7 Condensed Consolidated Schedules of Investments 30 Item 2. Management's Discussion and Analysis of the Account's Financial Condition and Results of Operations 34 Item 3. Quantitative and Qualitative Disclosures about Market Risk 55 Item 4. Controls and Procedures 56 Part II Other Information Item 1. Legal Proceedings 58 Item 1A. Risk Factors 58 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 58 Item 3. Defaults Upon Senior Securities 58 Item 4. Mine Safety Disclosures 58 Item 5. Other Information 58 Item 6. Exhibits 59 Signatures 61 PART I. FINANCIAL INFORMATION ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS TIAA REAL ESTATE ACCOUNT CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) (In millions, except per accumulation unit amounts) June 30, December 31, 2021 2020 ASSETS Investments, at fair value: Real estate properties (cost: $13,847.4 and $13,986.3) $ 17,029.8 $ 16,476.7 Real estate joint ventures (cost: $5,254.3 and $5,021.9) 6,482.6 6,128.9 Real estate funds (cost: $496.8 and $373.3) 520.8 393.2 Real estate operating business (cost: $251.6 and $250.2) 273.5 250.0 Marketable Securities (cost: $1,699.3 and $739.3) 1,699.1 739.3 Loans receivable (principal: $1,338.2 and $1,527.6) 1,322.5 1,493.2 Loans receivable with related parties (principal: $69.3 and $69.3) 69.4 69.4 Total investments (cost: $22,956.9 and $21,967.9) $ 27,397.7 $ 25,550.7 Cash and cash equivalents 1.0 37.8 Due from investment manager 12.6 17.9 Receivable for securities sold 58.8 — Other 312.5 331.4 TOTAL ASSETS $ 27,782.6 $ 25,937.8 LIABILITIES Loans payable, at fair value (principal outstanding: $2,372.1 and $2,381.3) 2,388.2 2,411.4 Accrued real estate property expenses 233.0 246.5 Payable for securities purchased 127.4 — Other 118.7 36.0 TOTAL LIABILITIES $ 2,867.3 $ 2,693.9 COMMITMENTS AND CONTINGENCIES NET ASSETS Accumulation Fund 24,378.0 22,729.0 Annuity Fund 537.3 514.9 TOTAL NET ASSETS $ 24,915.3 $ 23,243.9 NUMBER OF ACCUMULATION UNITS OUTSTANDING 52.6 52.0 NET ASSET VALUE, PER ACCUMULATION UNIT $ 463.632 $ 436.722 See notes to the consolidated financial statements 3 TIAA REAL ESTATE ACCOUNT CONSOLIDATED STATEMENTS OF OPERATIONS (In millions) (Unaudited) For the Three Months Ended For the Six Months Ended June 30, June 30, 2021 2020 2021 2020 INVESTMENT INCOME Real estate income, net: Rental income $ 305.3 $ 311.3 $ 594.1 $ 611.0 Real estate property level expenses and taxes: Operating expenses 63.6 60.9 132.6 130.1 Real estate taxes 51.9 53.9 106.7 104.0 Interest expense 23.6 25.6 46.5 49.9 Total real estate property level expenses and taxes 139.1 140.4 285.8 284.0 Real estate income, net 166.2 170.9 308.3 327.0 Income from real estate joint ventures 49.3 22.0 92.2 74.7 Income from real estate funds 2.5 0.2 4.7 2.7 Interest 20.8 21.8 40.7 64.3 Dividends — 6.6 — 11.1 TOTAL INVESTMENT INCOME 238.8 221.5 445.9 479.8 Expenses: Investment management charges 16.3 13.0 33.5 30.2 Administrative charges 11.7 11.6 26.5 23.3 Distribution charges 5.6 4.7 13.9 12.3 Mortality and expense risk charges 0.3 0.3 0.6 0.6 Liquidity guarantee charges 14.5 14.9 28.4 31.1 TOTAL EXPENSES 48.4 44.5 102.9 97.5 INVESTMENT INCOME, NET 190.4 177.0 343.0 382.3 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND LOANS PAYABLE Net realized gain (loss) on investments: Real estate properties 199.8 1.2 202.8 (58.0) Real estate joint ventures (0.1) (0.2) (0.1) (454.9) Real estate funds — — — (5.6) Marketable securities — (13.9) — 21.3 Loans receivable (13.4) — (14.1) (1.6) Net realized gain (loss) on investments 186.3 (12.9) 188.6 (498.8) Net change in unrealized appreciation (depreciation) on: Real estate properties 404.2 (380.6) 692.0 (183.9) Real estate joint ventures 99.8 (219.9) 154.2 78.4 Real estate funds 0.3 (21.3) 4.2 (19.1) Real estate operating business 22.1 — 22.1 — Marketable securities (0.3) 108.8 (0.3) (122.0) Loans receivable 5.4 (11.6) 18.7 (22.2) Loans receivable with related parties — 0.5 — — Loans payable 10.5 (9.4) 14.0 36.3 Net change in unrealized appreciation (depreciation) on investments and loans payable 542.0 (533.5) 904.9 (232.5) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND LOANS PAYABLE 728.3 (546.4) 1,093.5 (731.3) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 918.7 $ (369.4) $ 1,436.5 $ (349.0) See notes to the consolidated financial statements 4 TIAA REAL ESTATE ACCOUNT CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (In millions) (Unaudited) For the Three Months For the Six Months Ended June 30, Ended June 30, 2021 2020 2021 2020 FROM OPERATIONS Investment income, net $ 190.4 $ 177.0 $ 343.0 $ 382.3 Net realized gain (loss) on investments 186.3 (12.9) 188.6 (498.8) Net change in unrealized appreciation (depreciation) on investments and loans payable 542.0 (533.5) 904.9 (232.5) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 918.7 (369.4) 1,436.5 (349.0) FROM PARTICIPANT TRANSACTIONS Premiums 777.0 429.3 1,465.1 1,131.9 Annuity payments (11.7) (11.8) (23.7) (24.1) Withdrawals and death benefits (540.8) (1,850.4) (1,206.5) (3,853.9) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM PARTICIPANT TRANSACTIONS 224.5 (1,432.9) 234.9 (2,746.1) NET INCREASE (DECREASE) IN NET ASSETS 1,143.2 (1,802.3) 1,671.4 (3,095.1) NET ASSETS Beginning of period 23,772.1 26,015.1 23,243.9 27,307.9 End of period $ 24,915.3 $ 24,212.8 $ 24,915.3 $ 24,212.8 See notes to the consolidated financial statements 5 TIAA REAL ESTATE ACCOUNT CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions, Unaudited) For the Six Months Ended June 30, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net increase (decrease) in net assets resulting from operations $ 1,436.5 $ (349.0) Adjustments to reconcile net changes in net assets resulting from operations to net cash (used in) provided by operating activities: Net realized (gain) loss on investments (188.6) 498.8 Net change in unrealized (appreciation) depreciation on investments and loans payable (904.9) 232.5 Purchase of real estate properties (115.0) (1,092.7) Capital improvements on real estate properties (112.1) (118.1) Proceeds from sale of real estate properties 561.5 353.4 Purchases of long term investments (324.4) (798.2) Proceeds from long term investments — 1,446.5 Purchases and originations of loans receivable (163.7) (111.3) Proceeds from sales of loans receivable 294.5 63.0 Proceeds from payoffs of loans receivable 44.4 16.7 (Increase) decrease in other investments (960.0) 2,748.2 Net change in due to/from investment manager 5.3 7.1 Increase in receivable for securities sold (58.8) — Increase in payable for securities purchased 127.4 — Decrease (increase) in other assets 19.4 (24.3) Increase (decrease)
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