Products April 10, 2008

TIAA-CREF Launches New Real Estate Fund

TIAA-CREF Asset Management has announced the launch of TIAA-CREF U.S. Real Estate Fund I, L.P.
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The fund is a closed-end fund that will invest in a diversified portfolio of primarily high-quality core real estate assets in the office, retail, industrial and multifamily sectors. It offers primarily high net worth investors represented by registered investment advisors access to the institutional real estate experience of TIAA-CREF, and the company’s sixty years of experience with that asset class, according to a press release.
The offering of the Fund’s limited partnership interests has been registered with the SEC and state securities administrators.
“We look forward to working with financial advisors offering suitable investors, with a long-term investment horizon, the opportunity to invest in direct ownership of real estate properties through TIAA-CREF,’ said Shawn Paulk, head of TIAA-CREF Asset Management’s Advisor Services group. “This opportunity was formerly only available to institutions and eligible TIAA-CREF plan participants.’ TIAA-CREF U.S. Real Estate Fund I, L.P. is directed at investors with a net worth (as defined in the prospectus) of at least $3 million, who wish to diversify their personal portfolio and participate in the direct ownership of real estate properties.
The fund has an initial minimum investment requirement of $150,000. A subsidiary that will elect to be taxed as a real estate investment trust (REIT) is expected to make substantially all real estate asset transactions. The term of the fund is seven years after the end of the offering period, which the general partner may extend to a maximum of 10 years. For this reason, participation is suitable only for investors with a long-term outlook.
“At least 80% of our investments are expected to be in high-quality core properties in the 50 largest U.S. markets,’ said Suman Gera, managing director of TIAA-CREF Global Real Estate and the portfolio manager for the Fund. Ms. Gera continued, “We intend to use a top-down and bottom-up research approach to select commercial properties, primarily in the office, retail, industrial and multifamily sectors, which are expected to provide a stable, predictable income stream, have high occupancy levels, credit-worthy, financially sound and reputable tenants, and a low or modest level of projected near-term tenant turnover.’
The remainder of the Fund’s assets will be invested in value-add assets, which include properties that feature generally higher vacancy rates, present more varied leasing opportunities and near-term lease expiration exposure and may require capital infusions to enhance the leasing profile of such properties.
With very limited exceptions, each investor wishing to purchase units must be represented by a registered investment advisor or a chartered trust company. TIAA-CREF charges no performance fee or sales charge at the fund level, according to a press release.
Compliance April 9, 2008

Architect of IRS 403(b) Regs Says Limited Formal Guidance Coming

Those waiting for additional guidance from the IRS dealing with 403(b) model plan language or information sharing agreements shouldn’t hold their breath.
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So explained Robert Architect, of Tax Exempt and Government Entities (TEGE) at the Internal Revenue Service (IRS), while opening the PLANSPONSOR 403(b) Summit today in Amelia Island.

Architect discussed what has been going on since the final 403(b) regulations were issued in 2007 (See Final 403(b) Regulations Released). The IRS has put out one piece of post-regulatory guidance: Revenue Procedure 2007-71 in December 2007 (See IRS Offers Model 403(b) Plan Language for Public Schools).

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Despite the release of only one piece of post-regulatory guidance, Architect noted that there is much more going on in Washington around these rules. Currently, he said, his IRS division is working on a preapproved program for 403(b) plans, which will be similar to the 401(k) program. However, Architect advised those in the audience that they should not expect the program to be open on January 1, 2009 (the general effective date of the regulations), and plan sponsors will still need to have their written plan requirement on that date. They cannot wait for the preapproved program to be in place to comply (See SPARK Asks IRS for 403(b) Prototype Plan Program).

The IRS has received a number of comments about model plan language, Architect said, many of which ask for additional language, addressing things such as Roth contributions or matching contributions. Unfortunately, Architect said the IRS will not be issuing more guidance during this regulatory year in that area.

Revenue Procedure 2007-71 contained model plan language for public school use. Architect noted that if a public school plan uses the model language, the IRS guarantees that the plan complies with the form requirements. Plans should know that they do not have to use the whole model language if it is not all relevant to that particular plan; “use what is applicable to your organization,’ he said. Architect also noted that plans can add language as well, if necessary, and the model language protection “does not blow up.’

The model language can also be used by other organizations. If a non-public school uses it, he noted, it becomes sample language. Although legally it does not meet the reliance standard it has for the public school use, “get real,’ Architect told the audience, “it is language that we wrote’ and examiners will not be penalizing organizations that use this language if not a public school.

Another area of concern is that of information sharing agreements. Architect said that the IRS will not publish a model information sharing agreement. However, he noted, the IRS did say what should be in such an agreement in Section 6.4(d) of the model language, so plan sponsors can look to that for guidance.

Architect also noted that, in order to better serve 403(b) plans, TEGE is working to expand the 403(b) provisions of the Employee Plans Compliance Resolution System (EPCRS). There has been limited 403(b) business in that area, something Architect expects to change, he said. Therefore, there will soon be new provisions that include types of common defects applicable to 403(b) plans.

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