1544609_6 Included in PTE 96-76, Section III (e), 61 Fed. Reg. 54230-54231, are descriptions of the responsibilities of the Independent Fiduciary. The valuation procedures and rules for the Account are described in Exhibit A to this Agreement and in...
1544609_6
February 21, 2018
RERC, LLC
0000 Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxx Xxx Xxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxx, Xx.
Re: TIAA Real Estate Account - ERISA Independent Fiduciary
Dear Xx. Xxxxx:
This amended and restated letter agreement (the “Agreement”) sets forth the terms and
conditions under which Teachers Insurance and Annuity Association of America (the
“Company” or “TIAA”) offers to appoint RERC, LLC, a Situs Company, (“RERC”) to serve as
the Independent Fiduciary, as defined below, under the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”) for the Company’s real estate pooled separate account,
called the TIAA Real Estate Account (the “Account”). The Account is designed primarily for
investment by participants in retirement plans qualified under §401(a) and §403(a) of the Internal
Revenue Code of 1986, as amended (“Code”), Code §403(b) plans, and certain individual
retirement annuities under §408 of the Code. As used hereunder, each of Company and
Independent Fiduciary shall also be referred to as a “Party” and collectively, the “Parties.”
This Agreement hereby amends and restates in its entirety the prior letter agreement
between the Parties hereto dated February 2, 2015.
1. Background
On October 17, 1996 the Company was granted a prohibited transaction exemption
(“PTE”) from the Department of Labor (“DOL”), PTE 96-76, Exemption Application No.D-
09915, 61 Fed. Reg. 54229 (1996). PTE 96-76 provides an exemption from certain potential
prohibited transactions under § 406 of ERISA and § 4975 of the Code with respect to certain
transactions or classes of transactions involving the Account. Among other features, the Account
offers a stand-by liquidity mechanism under which units of interest in the Account (“Units”)
may be purchased or sold by the Company. PTE 96-76 contemplates that various aspects of the
Account’s operation will be subject to the oversight of an Independent Fiduciary (“Independent
Fiduciary”) which will be a business organization with substantial real estate investment
experience and which will be familiar with the responsibilities of a fiduciary with respect to
benefit plans under ERISA. The Independent Fiduciary will act for the exclusive benefit of the
plans and plan participants who elect to participate in the Account. As used hereunder, the term
“Independent Fiduciary” shall refer to RERC.
Exhibit 10.1
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will be deemed approved by the Company if the Company fails to object within fourteen (14)
days of receipt of the aforesaid notice and the Company will, thereupon, hire such appraiser. The
Company may in its sole discretion withdraw its approval of an appraiser at any time prior to
hiring such appraiser for future appraisals by giving a notice of withdrawal of its approval.
(4) The Independent Fiduciary shall review purchases and sales of Units (as
defined in PTE 96-76, Section IV(P), 61 Fed. Reg. 54233) by Account participants and the
Company to assure that correct Account values are applied. With respect to the foregoing, the
Independent Fiduciary may rely upon the truth, completeness and correctness of information
provided to it by the Company or by the independent auditor designated by the Company with
respect to the Account.
(5) If required under PTE 96-76, the Independent Fiduciary will determine
with the Company the appropriate “Trigger Point” (as defined in PTE 96- 76, Section IV(o), 61
Fed. Reg. 54233) relating to the level of the Company’s ongoing ownership of Liquidity Units
(as defined in PTE 9676, Section IV(g), 61 Fed. Reg. 54232) in the Account and the manner in
which any reduction of the Company’s participation in excess of such Trigger Point is to be
effected as contemplated under the PTE. If the Independent Fiduciary believes that asset sales
are desirable in order to reduce the Company’s ownership of Units in the Account, then the
Independent Fiduciary will participate in the planning of any such program of sales, including
the selection of the properties to be sold and the guidelines to be followed in making such sales.
(6) In the event of the termination of the Account as described in PTE 96-76,
Section III(e)(10) and (11), 61 Fed. Reg. 54231, the Independent Fiduciary will approve the sale
of Account properties and supervise Account operation during the “Wind Down” period (as
defined in PTE 96-76, Section IV(q), 61 Fed. Reg. 54233). Such period will commence with the
Company’s notice to Account participants of its termination of the Account and will end on the
date that no Units are held by any Participant and, if applicable, Participating Plans (as such
terms are defined in PTE 96-76, Section IIII, 61 Fed. Reg. 54229 and Section IV(h), 61 Fed.
Reg. 54232, respectively).
(7) The Independent Fiduciary will review and approve the investment
guidelines established by the Company for the Account and will monitor the conformity of all
property acquisitions and sales with the requirements of such guidelines.
(8) With respect to any other transaction or matter involving the Account that
is submitted to the Independent Fiduciary by the Company, the Independent Fiduciary will
review said transaction or matter in order to determine whether it is fair to the Account and in the
Account’s best interests.
(9) The Independent Fiduciary and management of the Company, acting on
behalf of the Account, may agree to have more frequent communications than required under
PTE 96-76 and under this Agreement to discuss the affairs of the Account, including but not
limited to the economic conditions impacting the commercial real estate markets and valuations
of the assets and liabilities in the Account and oversight with respect to the Account’s liquidity
position from time to time.
B. In the event that the Company or the DOL or any other governmental agency
requires or requests the Independent Fiduciary to perform additional functions reasonably related
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to renew any such appointment and the Subcommittee shall not renew the appointment if forty
percent (40%) of the Subcommittee members disapprove of such renewal. Upon expiration of
the Independent Fiduciary’s appointment without renewal this Agreement shall terminate.
C. The Independent Fiduciary may terminate this Agreement at any time but must
give at least one hundred eighty (180) days prior written notice to the Company. The Company
must terminate this Agreement and the Independent Fiduciary’s appointment prior to the
expiration of the term of its appointment if a majority of the Subcommittee members determines
that: (1) the Independent Fiduciary has breached any representation set forth in paragraph 5
above; (2) that the Independent Fiduciary has failed to carry out its responsibilities under this
Agreement in an effective manner, or is unable to do so; or (3) that a merger or restructuring of
the Independent Fiduciary with or into another entity may cause a conflict of interest that shall
impair the Independent Fiduciary’s ability to carry out its responsibilities under this Agreement
in an effective manner. In addition, this Agreement shall be terminable, at the Company’s sole
option, if (i) the Independent Fiduciary ever ceases to be a legal entity, whether through merger,
acquisition or otherwise, or (ii) the Independent Fiduciary shall ever be owned directly by an
‘Affiliate’ (as such term is defined in PTE 96-76) of TIAA. In the event that the Independent
Fiduciary’s term shall terminate as described in this paragraph 9C., the Independent Fiduciary
shall be compensated only for services performed by it prior to the date of such termination.
D. Unless otherwise expressly provided herein, any notice, demand or request under
this Agreement shall be deemed to have been properly given and served by depositing the same
in First Class U.S. Mail, addressed as provided herein, postpaid and registered or certified with
return receipt requested. Any such notice, demand or request shall be effective upon being
deposited in such certified First Class U.S. Mail. However, the time period in which a response
or action to any such notice, demand or request must be given or taken shall commence to run
from the date of receipt on the return receipt of the notice, demand or request by the addressee
thereof. Rejection or other refusal to accept or the inability to deliver because of changed address
of which no notice was given shall be deemed to be receipt of the notice, demand or request.
E. Any notice given under this Agreement shall be in writing and addressed as
follows:
If to the Company (or such other person or persons as the Company may designate in
writing to RERC):
Chief Legal Officer
Teachers Insurance and Annuity Association of America
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
If to RERC (or such other person or persons as the RERC may designate in writing to the
Company):
Xx. Xxxxxxx X. Xxxxx, Xx.
President
RERC
0000 Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxx Xxxxxx, XX 00000
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Accepted:
RERC, LLC
By: ____________________________________
Name: ______________________________
Title: _______________________________
Xxxxxxx X. Xxxxx, Xx.
President
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SCHEDULE 1
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
INDEPENDENT FIDUCIARY COMPENSATION
SCHEDULE FOR THE TIAA REAL ESTATE ACCOUNT
The fee payable to RERC during the term of this Agreement shall be a fixed annual fee of Eight
Hundred and Fifty Thousand Dollars ($850,000) for each 12 month period between March 1, 2018
and February 28, 2021, plus its reasonable out-of-pocket expenses. One quarter of the fee for each
such 12 month period set forth above shall be paid in arrears on the last business day of each calendar
quarter, with the first pro rated payment due as of March 31, 2018 and the final pro rated payment
due on February 28, 2021.
In addition, the fee will be adjusted to reflect changes in the number of individual properties owned
by the Account as compared to the number of individual properties owned as of February 28, 2018
(the “Baseline Level”), which Baseline Level shall be mutually agreed to between the Parties prior to
such date. Thereafter the Baseline Level shall be reset annually on February 1 of each succeeding
year during the term of this Agreement to a level mutually agreed to between the Parties prior to such
date.
For purposes hereof, an “individual property” shall mean a property that is appraised on a quarterly
basis, regardless of whether the Account reports, for financial statement purposes, such property as
an individual investment. For every increase (decrease) of twenty-five (25) properties from the
Baseline Level, the fee will increase (decrease) by twenty-five thousand dollars ($25,000) on an
annualized basis as follows. The fee increase (decrease), if any, will be assessed as of the first day of
each calendar quarter and will be adjusted up (down) by Six Thousand Two Hundred and Fifty
Dollars ($6,250) for every increase (decrease) of twenty-five (25) properties from the Baseline Level
through the term of this Agreement. As an example only, if the Baseline Level was 150 individual
properties and as of July 1, 2018, the Account owned 176 individual properties, the fee would
increase by $6,250 for the calendar quarter ending September 30, 2018. If then, as of October 1,
2018, the Account owned 174 individual properties, the fee would decrease by $6,250 for the
calendar quarter ending December 31, 2018 and overall be the same as the fee for the quarter ended
June 30, 2018.
Notwithstanding the foregoing, no further payment during any fiscal year shall be paid to RERC by
the Company, the Account or any affiliates thereof if such payment, when aggregated with all other
payments from the Company, the Account or its affiliates to RERC and its affiliates during such
fiscal year, would exceed five percent (5%) of RERC’s annual gross income from all sources during
RERC’s preceding fiscal year (the “5% Limit”). In addition to the covenants set forth in Section 5.B.
of the Agreement, the Parties hereto agree to work in good faith and cooperate reasonably in advance
of any payment under this Agreement to ascertain whether the 5% Limit may be reached, including
but not limited to RERC making its independent auditors available for consultation with the
Company, upon reasonable request and with reasonable notice.
Direct out-of-pocket documented expenses shall be reimbursed as incurred and shall be limited to
reasonable travel-related expenses, including transportation, hotels, and meals incurred in the
performance of RERC’s duties. RERC shall, however, bear the cost of all operating and
administrative expenses relating to the performance of its obligations and duties under this
Agreement.
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D. TIAA cannot, without the prior approval of the Independent Fiduciary, change the
values of one or more properties if such changes would exceed the following limits:
(i) The adjustment would result in a 6 percent increase or decrease in the value of a
given property since the last external appraisal of that property;
(ii) The adjustments would result in a greater than 2 percent change in the value of
the Account since the prior monthly valuation date; or
(iii) The adjustments would result in a greater than 4 percent change in the value of
the Account within any calendar quarter.