<PAGE>

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                      FORM 10-K

(Mark One)

x    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-    ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1997

                                          OR

_    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

Commission file number 33-20083



                     THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

                                    in respect of

                THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
                (Exact name of Registrant as specified in its charter)



          New Jersey                              22-1211670
-------------------------------         ---------------------------------
(State or other jurisdiction of         (IRS Employer Identification No.)
incorporation or organization)




                    751 Broad Street, Newark New Jersey 07102-2992
                 ---------------------------------------------------
                 (Address of principal executive offices) (Zip Code)

                                  (800) 445-4571
                 ----------------------------------------------------
                 (Registrant's Telephone Number, including area code)



     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  X   NO
                                                                ----    ----
<PAGE>
               THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
                                    (Registrant)

                                        INDEX

Item No.                                                              Page No.
--------                                                              --------

     Cover Page

     Index                                                                    2

PART I

   1.  Business                                                               3

   2.  Properties                                                             4

   3.  Legal Proceedings                                                      5

   4.  Submission of Matters to a Vote of Security Holder                     5

PART II

   5.  Market for the Registrant's Interests and Related Security
       Holder Matters                                                         6

   6.  Selected Financial Data                                                6

   7.  Management's Discussion and Analysis of Financial Condition
       and Results of Operations                                              7

   8.  Financial Statements and Supplementary Data                            15

   9.  Changes in and Disagreements with Accountants on Accounting
       and Financial Disclosure                                               15

PART III

   10. Directors and Executive Officers of Prudential                         16

   11. Executive Compensation                                                 20

   12. Security Ownership of Certain Beneficial Owners and Management         20

   13. Certain Relationships and Related Transactions                         21

PART IV

   14. Exhibits, Financial Statement Schedules and Reports on Form 8-K        22

       Exhibit Index                                                          22

       Signatures                                                             25

                                          2
<PAGE>

                                        PART I

ITEM 1. BUSINESS

The Prudential Variable Contract Real Property Account (the "Real Property
Account"), the Registrant, was established on November 20, 1986 by The
Prudential Insurance Company of America ("The Prudential"), as a separate
investment account, pursuant to New Jersey law. The Real Property Account was
established to provide a real estate investment option offered in connection
with the funding of benefits under certain variable life insurance and variable
annuity contracts (the "Contracts") issued by The Prudential.

The assets of the Real Property Account are invested in The Prudential Variable
Contract Real Property Partnership (the "Partnership").  The Partnership, a
general partnership organized under New Jersey law on April 29, 1988, was formed
through agreement among The Prudential, Pruco Life Insurance Company, and Pruco
Life Insurance Company of New Jersey, to provide a means for assets allocated to
the real property option under certain variable life insurance and variable
annuity contracts issued by the respective companies to be invested in a
commingled pool.

The Partnership has an investment policy of investing at least 65% of its assets
in direct ownership interests in income-producing real estate and participating
mortgage loans.  The largest portion of these real estate investments will be
direct ownership interests in income-producing real estate, such as office
buildings, agricultural land, shopping centers, hotels, apartments, or
industrial properties.  From 10% to 15% of the Partnership's assets generally
will be invested in short-term or intermediate-term marketable debt instruments.
The remainder of the Partnership's assets may be invested in other types of real
estate-related investments, including conventional, non-participating mortgage
loans, and real estate investment trusts.

The Partnership's investments will be maintained so as to meet the
diversification requirements set forth in Treasury Regulations issued pursuant
to Section 817(h) of the Internal Revenue Code relating to the investments of
variable life insurance and variable annuity separate accounts.

For information regarding the Partnership's investments, operations, and other
significant events, see Item 2, Properties, Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, and Item 8, Financial
Statements and Supplementary Data.


                                          3
<PAGE>

ITEM 2.  PROPERTIES

The Partnership owns the following properties as of December 31, 1997.

OFFICE FACILITY IN LISLE, ILLINOIS
The property is a four-story office building on 5.6 acres of land.  It was
constructed in 1985 and contains approximately 102,000 square feet of leasable
space. The facility is located at 750 Warrenville Road in the Corporetum Office
Park in Lisle, Illinois, 25 miles west of downtown Chicago.  At December 31,
1997 the property was 37% leased.

APARTMENT COMPLEX IN ATLANTA, GEORGIA
Brookwood Valley Apartments is a garden apartment complex located approximately
3 miles north of downtown Atlanta.  It consists of eight three-story buildings
containing a total of 240 units.  Construction of the 7.1 acre site was
completed in 1987.  At December 31, 1997 the property was 99% leased.

WAREHOUSE FACILITY IN POMONA, CALIFORNIA
The Partnership owns six industrial buildings on approximately 28 acres in
Pomona, California.  The site is approximately 30 miles east of downtown Los
Angeles.  The buildings were constructed between 1982 and 1984 and contain
approximately 531,000 square feet of leasable space.  The property was 100%
leased at December 31, 1997.   The land, previously a ground lease, was
purchased in 1997.

SHOPPING CENTER IN ROSWELL, GEORGIA
King's Market shopping center was constructed in 1988.  It is located
approximately 22 miles north of downtown Atlanta on a 30 acre site.  It contains
approximately 300,000 square feet of rentable space.  At December 31, 1997 it
was 96% leased.

OFFICE FACILITY IN MORRISTOWN, NEW JERSEY
This four-story suburban office building was constructed in 1981 and contains
83,000 rentable square feet.  It is located on a 5.1 acre site, approximately 30
miles west of New York City.  At December 31, 1997 it was 99% leased.

WAREHOUSE FACILITY IN BOLINGBROOK, ILLINOIS
This single-story warehouse was completed in 1989.  It contains 224,640 rentable
square feet.  It is located approximately 20 miles southwest of downtown
Chicago.  The entire facility is leased to the Gillette Company under a lease
expiring in October, 2000.

APARTMENT COMPLEX IN FARMINGTON HILLS, MICHIGAN
Indian Creek Apartments consists of fifteen two-story buildings containing 156
two-bedroom and 40 one- bedroom units.  It was constructed in 1988 and is
located approximately 20 miles northwest of Detroit.  At December 31, 1997, the
property was 93% leased.

APARTMENT COMPLEX IN RALEIGH, NC
Dunhill Trace  consists of fourteen two and three story apartment buildings.  It
was constructed and acquired in June, 1995 and  located on a 16.2 acre site in
Northwest  Raleigh, NC. At December 31, 1997 it was 91% leased.

OFFICE FACILITY IN NASHVILLE, TN
Westpark is a 97,000 square foot office center located in suburban Nashville,
Tennessee.  The property was constructed in 1982.  At December 31, 1997 the
building was 100% leased.


                                          4

<PAGE>

OFFICE FACILITY IN OAKBROOK TERRACE, ILLINOIS
Oakbrook Terrace Corporate Center is a 123,000 square foot building located in a
western suburb of Oakbrook Terrace, Illinois.   At December 31, 1997 the
property is 100% leased.

OFFICE FACILITY IN BEAVERTON, OREGON
This three story office building was completed in 1995.  It contains
approximately 72,000 square feet of rentable space.  The building is located on
a 3.89 acre land parcel in Beaverton, Oregon.  At December 31, 1997 the building
was 100% leased.

WAREHOUSE CENTER IN SALT LAKE CITY, UTAH
This one story warehouse-distribution facility was completed in 1997.  It
contains approximately 182,500 square feet of rentable space.  The building is
located on a 9.605 acre land parcel in Salt Lake City, Utah.  At December 31,
1997 the building was vacant.

DISTRIBUTION CENTER IN AURORA, COLORADO
This industrial complex consists of two separate buildings completed in 1997.
It contains approximately 278,000 square feet of rentable space.  The building
is located on an approximate 16 acre land parcel in Aurora, Colorado.  At
December 31, 1997 the building was vacant.

OFFICE FACILITY IN BRENTWOOD, TENNESSEE
This two story office facility was completed in 1987.  It contains approximately
97,000 square feet of rentable space.  The building is located on a 6.96 acre
land parcel in Brentwood, Tennessee.  At December 31, 1997 the building was 100%
leased.


ITEM 3.  LEGAL PROCEEDINGS

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

Contract owners participating in the Real Property Account have no voting rights
with respect to the Real Property Account.


                                         5
<PAGE>
                                      PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

Owners of the Contracts may participate by allocating all or part of the net
premiums or purchase payments to the Real Property Account.  Contract values
will vary with the performance of the Real Property Account's investments
through the Partnership.  Participating interests in the Real Property Account
are not traded in any public market, thus a discussion of market information is
not relevant.

As of March 6, 1998, there were approximately 55,519 Contract Owners of record
investing in the Real Property Account.


ITEM 6.  SELECTED FINANCIAL DATA

Information about contract unit values may be found in Note 4 to the
Financial Statment on page F-7.



<TABLE>
<CAPTION>

                                                              Year Ended December 31,
                                      ------------------------------------------------------------------------


                                           1997          1996            1995           1994           1993
                                           ----          ----            ----           ----           ----

RESULTS OF OPERATIONS:
<S>                                     <C>           <C>             <C>            <C>            <C>
Net Investment Income                   $5,880,481    $ 6,615,307     $6,200,851     $5,252,476     $4,906,836
Net Gain/(Loss) on Investment
   in Partnership                       $3,914,170    $(2,197,584)    $  314,267     $  634,661     $ (935,754)
                                        ----------    -----------     ----------     ----------     ----------
Net Increase/(Decrease) in Net Assets
   Resulting From Operations            $9,794,650    $ 4,417,723     $6,515,118     $5,887,137     $3,971,082
                                        ----------    -----------     ----------     ----------     ----------
                                        ----------    -----------     ----------     ----------     ----------

<CAPTION>

Financial Position:


                                                               Year Ended December 31,
                                      ------------------------------------------------------------------------


                                          1997            1996          1995           1994           1993
                                          ----            ----          ----           ----           ----

<S>                                   <C>             <C>            <C>            <C>            <C>
Total Assets                          $101,268,264    $90,992,994    $86,101,883    $79,136,103    $75,841,656
                                      ------------    -----------    -----------    -----------    -----------
                                      ------------    -----------    -----------    -----------    -----------

</TABLE>

                                         6

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

All of the assets of Prudential Variable Contract Real Property Account ("the
Account") are invested in the The Prudential Variable Contract Real Property
Partnership ("the Partnership"). Correspondingly, the liquidity, capital
resources and results of operations for the Real Property Account are contingent
upon the Partnership.  Therefore, all of management's discussion of these items
is at the Partnership level.  The partners in the Partnership are the Prudential
Insurance Company of America, Pruco Life Insurance Company, and Pruco Life
Insurance Company of New Jersey (collectively, "the Partners").

(a) LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1997, the Partnership's liquid assets consisting of cash,
cash equivalents and marketable securities (excluding the Partnership's shares
in Meridian Industrial Trust REIT) were $26,851,981.  This is  a decrease of
$18,312,867 from $45,164,848 at December 31, 1996.  The decrease is due
primarily to the acquisition of five real estate investments in 1997 totaling
$37,417,479.  This decrease was partially offset by: (1) the sale of the
Partnership's interest in a portfolio of industrial properties located in
Jacksonville, FL for net proceeds of $6,272,330, (2) operations of the
Partnership's properties, and (3) interest income received from the
Partnership's short term investments.  Sources of liquidity include net cash
flow from property operations, interest from  short term investments, and
dividends on REIT shares.

Prudential has committed to fund up to $100 million to enable the Partnership to
acquire real estate investments.  Contributions to the Partnership under this
commitment are utilized for property acquisitions, and returned  to Prudential
on an ongoing basis from Contract owners' net contributions.  The amount of the
commitment is reduced by $10 million for every $100 million in current value net
assets of the Partnership.  The amount available for future investment is
approximately $47 million as of December 31, 1997.

The Partnership will generally invest 10-15% of its assets in cash and
short-term obligations to maintain liquidity; however, its investment policy
allows up to 30% investment in cash and short term obligations.  At December 31,
1997, 12.06% of the Partnership's assets consisted of cash, cash equivalents and
marketable securities (excluding REIT shares).

The Partners made no withdrawals in 1997.  Withdrawals may be made during 1998
based upon the percentage of assets invested in short term obligations.  The
withdrawals should also take into consideration anticipated cash  needs of the
Partnership including potential property acquisitions, property dispositions and
capital expenditures.    Management anticipates that current liquid assets and
ongoing cash flows from operations will satisfy the Partnership's needs over the
next twelve months and the foreseeable future.

In 1997, the Partnership made acquisitions aggregating $37,417,479 consisting of
the following: an industrial building in Salt Lake City, UT for $5,388,134; an
industrial complex in Aurora, CO for $8,540,585; land under an existing
industrial complex already owned by the Partnership in Pomona, CA for
$4,000,000; an office building in Brentwood, TN for $9,488,755; and 506,894
shares of Meridian Industrial REIT for $10,000,005.  These acquisitions were
funded entirely by the Partnership's cash reserves.

During 1997, the Partnership made $1,311,864 in capital expenditures for
tenant alterations, leasing commissions, land improvements and building
improvements. The most significant transaction was $378,959 for tenant
alterations and leasing commissions at the office property located in Lisle,
IL, which related to a new lease signed with Pitney Bowes.  Other significant
capital expenditures


                                          7
<PAGE>

included tenant alterations and leasing commissions throughout the properties
owned by the Partnership.  The office property located in Brentwood, TN
accounted for $212,983 of the total tenant alterations and leasing commissions.
Approximately $104,000 was for tenant alterations and leasing commissions
related to a new lease with Service Experts.

Budgeted capital expenditures for 1998 are approximately $8.5 million.  Of this
amount, $7.3 million is budgeted for tenant improvements and leasing
commissions.  Four of the Partnership's properties account for the majority of
these leasing related capital expenditures.  The Lisle, IL office property is
budgeted to expend $3.2 million in leasing related capital expenditures.  This
property, which was previously leased in its entirety to a single tenant, is
expected to require $2.8 million in tenant improvements, and $0.5 million in
leasing commissions to re-establish 100% occupancy.  At the Salt Lake City, UT
industrial property, management anticipates $1.0 million of capital to be
expended in its effort to lease the currently vacant property.  Of the total
capital to be expended at this property,  $0.8 million is projected for tenant
improvements and $0.2 million is anticipated for leasing commissions.  At the
Aurora, CO industrial property, management anticipates spending $1.7 million in
its effort to lease this vacant property.  Of the total capital to be expended
$1.4 million is projected for tenant improvements and $0.3 million is
anticipated for leasing commissions.  Management anticipates expending $0.9
million for leasing related capital expenditures at the Morristown, NJ office
building.  It is anticipated that Smith Barney, a major tenant in the building,
will vacate their offices.  To secure a new tenant, $0.5 million in tenant
improvements, and $0.4 million in leasing commissions will be necessary.  All of
these projected expenditures relate to prospective leases and are based upon
reasonable costs.  The actual amount of such expenditures will depend upon the
number of new leases signed, the actual needs of the particular construction or
repair, and the timing of lease executions.

Other major capital projects planned for 1998 include the following:
reconstruction of the lobby and common areas at the Lisle, IL office building
($0.6 million); refurbishment and upgrading the heating ventilation and air
conditioning system at this same property ($0.2 million); residing and painting
the exterior on the Atlanta, GA residential community ($0.1 million); and
reconfiguration of the traffic flow in and around the Atlanta, GA retail
property ($0.1 million).

(b) RESULTS OF OPERATIONS

The following is a brief comparison of the Partnership's results of operations
for the years ended December 31, 1997, 1996 and 1995.

1997 VS. 1996

The Partnership's net investment income for 1997 was $13,789,747, a decrease of
$1,629,771 from net investment income of $15,419,518 in 1996.   This decrease is
the result of the factors discussed below.

Income from property operations, including income from interest in properties,
was $14,651,366 in 1997, a decrease of  $1,410,043  from $16,061,406 in 1996.
This decrease, in income, was primarily due to the results of sales of  two
portfolio properties, and an increased vacancy in a third property.  Decrease in
income for $1,646,337 resulted from the sales of the Flint, MI office park, and
the Azusa, CA industrial center; while an increased vacancy in the Lisle, IL
office property accounted for another $673,119.  The effects of the decrease in
income from these properties were partially offset by $342,829 due to the
acquisitions of a new office property in Brentwood, TN and 506,894 REIT shares.

Rent from properties was $21,582,968 in 1997, a decrease of $1,216,726  from
$22,799,694 in 1996.



                                          8
<PAGE>

The majority of this decrease is attributable to properties held for a full year
in 1996 and sold during 1997.  Also contributing to the decrease was a decrease
in rent collected at the Lisle, IL office property which became 100% vacant in
the fourth quarter.

Income from interest in properties relates to the Partnership's 50%
co-investment in several warehouse properties (the Unit warehouses).  Income
from this source decreased from $606,558 in 1996 to $435,296 in 1997, for a
total decrease of $171,262.  The primary reason for the decrease was due to the
sale of the Partnership's interest in these properties on September 30, 1997.

Dividend income from real estate investment trusts totaled $158,154.  The
506,894 shares of Meridian Industrial REIT were acquired on September 24, 1997.

Administrative expenses on the Statement of Operations includes property
operations and the administration of the Partnership.  Property administrative
expenses  in 1997 were $2,009,449, an increase of $355,564 from $1,653,885 in
1996.  This increase was primarily due to the acquisition of three new
properties, plus a full year of administrative expenses for a property acquired
at the end of 1996.

Property operating expenses for 1997 were $3,296,350, an increase of  $391,730
from $2,904,620 in 1996.  In 1997, this increase was primarily due to a full
year ownership of the office property in Beaverton, OR and expenses incurred for
new acquisitions, including the industrial buildings in Salt Lake City, UT and
Aurora, CO. These three properties contributed $274,530 to the increased
operating expenses.  The acquisition of the office building in Brentwood, TN
contributed $103,234.

Real estate taxes for 1997 were $2,208,972, a decrease of $158,432 from
$2,367,404 in 1996.  This decrease was primarily due to the sale of the office
building located in Flint, MI in December 1996,  which resulted in a decrease of
$162,701; and the sale of the industrial property in Asuza, CA in April 1996,
which resulted in a decrease of $51,149.  These decreases were partially offset
by increased real estate taxes at the office property in Oakbrook Terrace, IL of
$50,513, and an increase of $40,908 at the industrial property in Bolingbrook,
IL.

Administrative expense related to the Partnership was $316,705 in 1997, an
increase of $105,157 from $211,548 in 1996.

The investment management fee for 1997 was $2,640,470, an increase of $146,241
from the 1996 management fee of $2,494,229.  This fee is computed at 1.25% of
gross assets which were significantly higher in 1997 than 1996.

The following is a comparison of the Partnership's property results of
operations and realized and unrealized gains or losses, by investment type, for
the twelve months ended December 31, 1997 and December 31, 1996.

OFFICE PROPERTIES

Net investment income from property operations for the office properties in 1997
was $5,329,310. This was a decrease of $488,187 (8.4%) from $5,817,497 in 1996.
The decrease was primarily due to the sale of an office building in Flint, MI
which accounts for $1,001,711 of the decrease; and lowered rental income at the
Lisle, IL office property which accounts for $673,119 of the decrease.  These
factors are offset by owning an office building in Beaverton, OR for a full year
($833,643), and the acquisition of the second office property in Brentwood, TN
($194,851).  For office properties held for the comparable period, net
investment income increased by $318,674 (6.5%) from $4,877,349 in
1996, to $5,196,023 in 1997.



                                          9
<PAGE>

The office properties owned by the Partnership experienced a net unrealized gain
of $1,897,749 in 1997.  The largest net unrealized gain was attributable to the
office property in Oakbrook Terrace, IL and was due to the improving office
market conditions in suburban Chicago.  The Morristown, NJ and the Brentwood, TN
office properties also experienced net unrealized gains of $557,241 and
$576,381, respectively.   Unrealized losses of $28,285 at the Summit Building in
Beaverton, OR , and  $13,602 at the Lisle, IL office property offset these
gains.

The Partnership acquired a second office property in Brentwood, TN.  The 97,378
square foot suburban office building was acquired on September 15, 1997 for
$9,488,755.  This property was 100% occupied at the time of acquisition.

Occupancy at the Beaverton, OR, Oakbrook Terrace, IL and Brentwood, TN
properties remained unchanged from December 31, 1996 at 100% .  Occupancy at the
Morristown, NJ property increased from 93% to 100%, while occupancy dropped from
100% at the Lisle, IL office property at December 31, 1996 to 37% at year end
1997.  As of December 31, 1997, all vacant spaces are being marketed.

APARTMENT COMPLEXES

Net investment income from apartment property operations was $3,888,263 in 1997,
a decrease of $37,487 from $3,925,750 in 1996.

The three apartment communities owned by the Partnership experienced a net
unrealized gain of $1,053,061 during 1997.  The Atlanta, GA property was the
largest contributor to the gain as it appreciated $1,392,186.  This gain was
attributable to increased rental rates and occupancy.  The Farmington Hills, MI
property also had a net unrealized gain of $80,839 due to increased rental
rates.  The Raleigh, NC community had a net unrealized loss of $328,481 due to
the appraisal assumptions concerning above market rentals expiring and
subsequently renewing at lower market rates.

Weighted average occupancy at the Partnership's residential communities
increased from 93.1%, as of December 31, 1996, to 94.3% as of December 31, 1997.
The occupancy at the Atlanta, GA and Farmington Hills, MI communities improved
from 93% and 89%, respectively, as of  December 31, 1996 to 99% and 93%,
respectively,  at year end 1997.  The occupancy at the Raleigh, NC community
slipped from 97%  at the end of 1996 to 91% as of December 31, 1997.

RETAIL PROPERTIES

Net investment income for the Partnership's retail properties decreased to
$2,758,995 in 1997, from $3,129,390 in 1996.  This decrease was primarily due to
decreased occupancy at the shopping center earlier in the year.  Revenues
decreased by $299,474 and expenses increased by $70,920 from the prior year.

The retail center had an unrealized gain of $1,109,099.  This was a result of
changes in the assumed capital needs of the property, and the leasing of vacant
spaces in the third and fourth quarters which stabilized future cash flows and
brought occupancy back up to 96%.

The shopping center was 96% occupied as of December 31, 1997, unchanged from the
prior year.    Currently, there are three vacant suites.  All vacant spaces are
being marketed.


                                          10
<PAGE>

INDUSTRIAL PROPERTIES

Net investment income from industrial property operations was $2,526,820 in
1997, a decrease of $661,949  from $3,188,769 in 1996.  The primary reason for
the decline was the sale of the industrial complex in Azusa, CA, in April 1996,
which accounted for $644,625 of the decrease.  The sale of the Partnership's
investment in the Jacksonville, FL industrial properties, in September 1997,
also contributed to the decline in net investment income. For properties held
for comparable periods in 1996 and 1997, net investment income increased from
$1,941,812 to $2,042,184, respectively.

The Partnership acquired three industrial properties in 1997.  The first
acquisition was a 182,500 square foot building in Salt Lake City, UT for
$5,388,134.  The second acquisition was a two building 277,500 square foot
facility in Aurora, CO for $8,540,585.  As of December 31, 1997, both properties
were vacant.  The third acquisition was land under the Partnership's existing
Pomona CA, industrial complex.  The Partnership acquired the land under a
purchase option for $4,000,000.

The industrial properties (including the recently purchased land) had $1,901,523
of net unrealized appreciation in 1997.  The largest single gain of $1,740,917
was attributable to the purchase of the land under the Pomona, CA property.  The
Salt Lake City, UT and Aurora, CO properties experienced $38,133 and $140,585
negative net appreciation as a result of softer market conditions.

As of December 31, 1997, occupancy at the Partnership's Pomona, CA and
Bolingbrook, IL, industrial properties remained unchanged from December 31, 1996
at 100%.  As of December 31, 1997, both the Salt Lake City, UT and Aurora, CO
properties were 100% vacant.  As of December 31, 1997, all vacant spaces were
being marketed.

The partnership sold its interest in the Jacksonville, FL warehouses for net
sales proceeds of $6.3 million, resulting in a gain of $284,581.

The Partnership also acquired 506,894 shares of Meridian Industrial Trust for
$10,000,005 on September 24, 1997.  Meridian is a self administered and
self-managed equity real estate investment trust engaged in owning, operating,
and leasing high quality, modern industrial properties nationwide.  As of
December 31, 1997, these shares experienced a $2,523,800 net unrealized gain and
generated $147,978 in net investment income. These shares were purchased in a
private transaction at a favorable, below-market price.


1996 VS. 1995

The Partnership's net investment income for 1996 was $15,419,518, an increase of
$699,247 (4.8%) from net investment income of $14,720,271 in 1995.  The increase
was primarily due to higher net income from property operations ($1,455,941),
offset by a higher management fee ($152,351) and lower interest income from
short-term investments ($526,479).

Income from property operations, including income from interest in properties,
was $16,061,409 for 1996.  This was an increase of $980,119 (6.5%) from
$15,081,290, in 1995. This was primarily due to increased rent from properties
(approximately $2,973,000). The increase was offset by increased operating
expenses (approximately $1,034,000) and real estate  taxes (approximately
$429,000).

Rent from properties for 1996 increased by $2,972,650 (15.0%) to $22,799,694
from $19,827,044 for 1995.  A large portion of this was the result of properties
that were acquired during 1995 and held for the full year of 1996.  This
increase in revenue totaled approximately $4,367,000.


                                          11
<PAGE>

These additional revenues were primarily offset by the sale of the Azusa
industrial building which resulted in approximately $1,092,000 reduction in
revenues from last year and the Roswell, GA shopping center which accounted for
a decrease of approximately $214,000 due to lower percentage rents in 1996 and
decreased occupancy.

Income from interest in properties relates to the Partnership's 50%
co-investment in several warehouses (the Unit warehouses).  Income from this
source decreased approximately $31,624 (4.9%) from $638,183 in 1995 to $606,558
in 1996. The reduction is the result of GATX vacating a portion of its space in
October and the space not being re-leased.

Administrative expenses on the Statement of Operations includes property
operations and the administration of the Partnership.  Property administrative
expenses for 1996 were $1,653,934. This was $78,271 (5.0%) higher than the
$1,575,663 for 1995.  The increase was primarily due to a full year of
administrative expenses of approximately $234,000 from the Nashville, TN office
building, Oakbrook Terrace, IL office facility and the Raleigh, NC apartment
complex.  The increase was partially offset by the sale of  two 1996 properties
totaling approximately $130,000.

Property operating expenses for 1996 were $2,904,620 compared to $1,870,183 for
1995, an increase of $1,034,437 (55%).  This increase was primarily due to a
full year of operating expenses totaling approximately $943,000 related to the
Raleigh, Oakbrook Terrace and Nashville properties, all of which were acquired
in 1995. Increases were also due to the Morristown office property incurring
window repairs of approximately $21,000, and an increase to its grounds contract
for approximately $59,000 offset by lower repairs and maintenance expenses
totaling $23,000.  The Atlanta and the Farmington Hills apartments had increases
totaling approximately $57,000 for 1996 apartment make-ready due to higher
turnover as compared to 1995.

Real estate taxes for 1996 were $2,367,404, an increase of $429,314 (22.2%) from
$1,938,090 for 1995. The increase was primarily due to a full year of real
estate tax expenses totaling approximately $572,000 related to the Raleigh,
Oakbrook Terrace and Nashville properties.  At the Morristown office building,
real estate taxes increased by approximately $32,000. These increases were
offset by decreases of approximately $106,000, as a result of the Azusa and
Flint properties being sold in 1996.  Real estate taxes at the Farmington Hills
apartments decreased approximately $26,000 due to last year's tax appeal.

Administrative expenses related to the Partnership totaled $211,499 for 1996.
This is an increase of $7,930 (3.6%) from $219,429 for 1995.

The investment management fee for 1996 was $2,494,229.  This was  $152,351
(6.5%) higher than the 1995 fee of $2,341,878.  The fee is computed at 1.25% of
gross assets.  During 1996, gross assets were slightly higher than the prior
year due to cash flows retained by the Partnership and increased market values
of the  real estate investments.


The following is a brief comparison of the Partnership's property results of
operations and realized and unrealized gains or losses, by investment type, for
the twelve months ended December 31, 1996 and December 31, 1995.

During 1996, the Partnership recognized an unrealized loss of $3,211,436 on its
real estate investments. This represents 1.9% of the value of the investments at
December  31, 1995. The retail center experienced the largest unrealized loss,
of approximately $3,787,000. The offices had a net unrealized loss of
approximately $560,000. The industrial properties had a net unrealized loss of


                                          12
<PAGE>

approximately $75,000 offset by the apartments' net unrealized gains of
approximately $1,210,000.

Occupancy at the Partnership's properties at December 31, 1996 was generally
lower than at December 31, 1995. During 1996, the Partnership acquired a 72,109
square feet office building in Beaverton, Oregon.  At December 31, 1996, the
Beaverton office building was 100% occupied by five tenants and there are no
expirations in 1997.

OFFICE PROPERTIES

The Lisle, IL office had an unrealized loss of approximately $1,700,000 (14.7%
of its year-end 1995 value). This was caused by R.R. Donnelley (sole-tenant) not
renewing its lease, which expired September 1997, and the anticipated expenses
that would be incurred in order to re-lease the building in 1997. The Morristown
property experienced an unrealized gain of approximately $409,000 (4.3% of its
December 31, 1995 value), due to improved market conditions in the Northern NJ
market. The Nashville office experienced an unrealized gain of approximately
$166,000. The increase represented 1.9% of its year-end 1995 value.  The rise in
value reflects the expectations of continued high occupancy and the potential
for higher rental rates in the future.  The Oakbrook Terrace office building had
an increase of $565,000 (4.5% of its December 31, 1995 value).  This was the
result of two tenant rent increases that occurred in 1996.

Occupancy at the Lisle, IL office building remained at 100% during 1996.  R.R.
Donnelley had given notice they will be vacating their space in 1997.  The
Oakbrook Terrace office building continued its 99% occupancy.  The Nashville
office building occupancy remained at 99%.  During 1996, a total of 25,394
square feet was re-leased, leaving a vacant space of 1,350 square feet.  During
1997, at the Nashville office building, 11,966 square feet expired.  Occupancy
at the Morristown office decreased from 98% to 93% as of December 31, 1996.
There are four vacant suites totaling 9,583 square feet. During 1996, Mutual of
Omaha renewed their lease of 5,479 square feet and Sprint Spectrum signed a two
month temporary agreement for 4,010 square feet, while Chase Home Mortgage
vacated their suite of 4,010 square feet.  During 1997, at the Morristown office
building, a total of 15,753 square feet was up for renewal.  All vacant spaces
are currently being marketed.

APARTMENT COMPLEXES

The Partnership's Atlanta apartment complex had an unrealized gain of
approximately $1,083,000 (8.6% of its year-end 1995 value), and the Farmington
Hills apartment complex had an unrealized gain of approximately $477,000 (3.4%
of its year-end 1995 value).  These increases were primarily the result of
higher rental rates and occupancy than were previously projected for these
properties. The luxury garden apartment complex in Raleigh had an unrealized
loss of approximately $350,000 (2.0% of its year-end 1995 value). The property
had experienced lowered loss of occupancy but recovered to a December 31, 1996
occupancy of 97%.

Occupancy at the Atlanta and the Farmington Hills apartments decreased from 97%
and 98% at December 31, 1995 to 93% and 88%, in 1996. Occupancy at the Raleigh
apartments increased from 95% at December 31, 1995 to 97% at the end of 1996.
All vacant apartments were being marketed as of December 31, 1996.

RETAIL PROPERTIES

The Partnership's sole retail property in Roswell, GA, had an unrealized loss of
$3,786,554 (11.8% of its December 31, 1995 value).  This was due to increased
competition in the local market resulting in downward pressure on rental rates
and occupancy.


                                          13
<PAGE>

Occupancy at the Roswell center decreased from 99% at December 31, 1995 to 96%
at December 31, 1996, a loss of 3%. During 1996, a total of 10,464 square feet
expired and 4,127 square feet was renewed.  Shepherd's Staff Christian Book
Store leased 6,100 square feet.  Two tenants leasing a total of 6,100 square
feet have vacated prior to their lease expiration.  At December 31, 1996 a total
of 10,464 square feet remained vacant. Several lease proposals were in
negotiation, while all other vacant spaces were being marketed.

INDUSTRIAL PROPERTIES

The Bolingbrook warehouse had the largest unrealized loss of this property type,
approximately $300,000 (4.1% of its year-end 1995 value).  Gillette, a tenant of
the entire property, indicated that they needed additional space and will
relocate at the expiration of their lease in 2000. The Pomona property had an
unrealized gain of approximately $175,000 (1.0% of its year-end 1995 value), as
a result of signing leases that maintained the property occupancy at 100%.  The
market values of the four Unit warehouses, in which the Partnership owns a 50%
interest at the end of 1996, had an unrealized gain of approximately $50,000
(0.9% of their December 31, 1995 value).

Occupancy at the Pomona warehouse remained at 100%.  During 1996, a total of
234,292 square feet expired and was re-leased. The most significant renewal was
SCI signing an amendment to their lease to extend the term for five years.
During 1997, JB Engineering's 49,697 square feet lease expired.  Occupancy at
the Bolingbrook warehouse also remained at 100%.  Gillette's lease of this
entire facility will expire in the year 2000, at which time they will relocate.
At the Unit warehouses, occupancy decreased from 100% in 1995 to 85% in 1996.
GATX  vacated its space in October and the space has not been leased. All vacant
spaces are being marketed as of December 31, 1996.

During 1996, the Partnership sold its Azusa, CA industrial property and its
Flint, MI office building.  The sale of these two properties resulted in a
realized loss of $1,573,147.  The Flint, MI property had the largest loss of
$1,094,521 (16.7% of its year-end 1995 value).  This was the result of both the
uncertain economic outlook and leasing demand in Flint, MI, as well as the
physical condition of the property.  The Azusa property had a realized loss of
$478,627 (3.2% of its year-end 1995 value).  The gross sales price of the
property was $15,250,000 and the net proceeds were $14,697,789.


                                          14
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Statements and Financial Statement Schedules on pages F-1
and F-2.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.


                                          15
<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF PRUDENTIAL

                              DIRECTORS OF PRUDENTIAL

FRANKLIN E. AGNEW, Director since 1994 (current term expires April, 2000).
Member, Finance Committee; Member, Committee on Dividends; Member, Corporate
Governance Committee.  Business Consultant since 1987.  Senior Vice President,
H.J. Heinz from 1971 to 1986.  Mr. Agnew is also a director of Bausch & Lomb
Inc.; John Wiley & Sons, Inc.; and Erie Plastics Corporation. Age 63.

FREDERIC K. BECKER, Director since 1994 (current term expires April, 1999).
Member, Auditing Committee; Member, Committee on Business Ethics; Member,
Corporate Governance Committee.  President, Wilentz Goldman and Spitzer, P.A.
(law firm) since 1989, with firm since 1960.  Age 62.

JAMES G. CULLEN, Director since 1994 (current term expires April, 2001).
Member, Compensation Committee;  Member, Committee on Business Ethics.
President and CEO, Telcom Group, Bell Atlantic Corporation since 1997.  Vice-
Chairman, Bell Atlantic Corporation from 1995-1997.   Mr. Cullen is also a
director of Bell Atlantic Corporation and Johnson & Johnson.  Age 55.

CAROLYNE K. DAVIS, Director since 1989 (current term expires April, 2001).
Member, Compensation Committee; Member, Finance Committee; Member, Committee on
Business Ethics. Independent Health Care Advisor.  National and International
Health Care Advisor, Ernst and Young, LLP from 1985 to 1997. Dr. Davis is also a
director of Merck & Co.  Inc., Beckman Instruments, Inc. , Minimed Inc.,
Beverley Enterprises, and Science Applications International Corporation. Age
66.

ROGER A. ENRICO, Director since 1994 (current term expires April, 2002). Member,
Committees on Nominations & Corporate Governance; Member, Compensation
Committee. Chairman and CEO, PepsiCo, Inc. since 1996. Originally with PepsiCo,
Inc. since 1971. Mr. Enrico is also a director of PepsiCo. Inc., A. M. Belo
Corporation and Dayton Hudson Corporation. Age 53.

ALLAN D. GILMOUR, Director since 1995 (current term expires April, 1999).
Member, Finance Committee; Member, Committee on Dividends. Retired since 1995.
Vice Chairman, Ford Motor Company, from 1993 to 1995. Mr. Gilmour originally
joined Ford in 1960.  Mr. Gilmour is also a director of Whirlpool Corporation,
USWest Inc., DTE Energy Company and The Dow Chemical Company. Age 63.

WILLIAM H. GRAY III, Director since 1991 (current term expires April, 2000).
Member, Executive Committee; Member, Finance Committee; Chairman, Committees on
Nominations & Corporate Governance.  President and Chief Executive Officer,
United Negro College Fund/UNCF, since 1991. Mr. Gray is also a director of
Warner-Lambert Co., Chase Manhattan Corp., The Chase Manhattan Bank, Municipal
Bond Investors Assurance Corp., Westinghouse Electric Corp., Union Pacific
Corp., Lotus Development Corp., Electronic Data Systems, and Rockwell
International Corp. Age 56.

JON F. HANSON, Director since 1991 (current term expires April, 2003). Member,
Committee on Dividends; Member, Finance Committee. Chairman, Hampshire
Management Company since 1976. Mr. Hanson is also a director of Orange &
Rockland Utilities, Inc., Consolidated Delivery and Logistics,  and United Water
Resources. Age 61.


                                       16
<PAGE>


GLEN H. HINER, JR., Director since 1997 (current term expires April, 2001).
Member, Compensation Committee.  Chairman and Chief Executive Officer, Owens
Corning since 1991.  Mr. Hiner is also a director of Dana Corporation. Age 64.

CONSTANCE J. HORNER, Director since 1994 (current term expires April, 2002).
Member, Committees on Nominations & Corporate Governance; Member, Auditing
Committee. Guest Scholar, The Brookings Institution since 1993. Ms. Horner is
also a director of Pfizer, Inc., Foster Wheeler Corporation, and Ingersoll-Rand
Corporation. Age 56.

GAYNOR N. KELLEY, Director since 1997 (current term expires April, 2001).
Member, Auditing Committee.  Retired since 1996.  Former Chairman and Chief
Executive Officer, The Perkins Elmer Corporation from 1990 to 1996.  Mr. Kelley
is also a director of Hercules Incorporated, Arrow Electronics, Inc., and
Alliant Techsystems.  Age 66.

BURTON G. MALKIEL, Director since 1978 (current term expires April, 2002).
Chairman, Finance Committee; Member, Committee on Dividends; Member, Executive
Committee. Professor of Economics, Princeton University, since 1988.  Dr.
Malkiel is also a director of The Jeffrey Company, Vanguard Group, Inc., Banco
Bilbao Vizcaya, Baker Fentress & Company and The Southern New England
Telecommunications Company. Age 65.

ARTHUR F. RYAN, Chairman of the Board, President and Chief Executive Officer of
Prudential since 1994. President and Chief Operating Officer, Chase Manhattan
Corp. from 1990 to 1994, with Chase since 1972. Age 55.

IDA F.S. SCHMERTZ, Director since 1997 (current term expires April, 2004).
Member, Finance Committee. Principal, Investment Strategies International since
1994.  Age 62.

CHARLES R. SITTER, Director since 1995 (current term expires April, 1999).
Member, Finance Committee; Member, Committee on Dividends. Retired since 1996.
President, Exxon Corporation from 1993 to 1996. Age 67.

DONALD L. STAHELI, Director since 1995 (current term expires April, 1999).
Member, Compensation Committee; Member, Auditing Committee.  Retired since 1997.
Chairman and CEO, Continental Grain Company from 1994 to 1997.  President and
CEO, Continental Grain Company form 1988 to 1994.  Mr. Staheli is also a
director of  Bankers Trust Company and Bankers Trust New York Corporation . Age
66.

RICHARD M. THOMSON, Director since 1976 (current term expires April, 2000).
Chairman, Executive Committee; Chairman, Compensation Committee; Member,
Committee on Nominations & Corporate Governance. Chairman of the Board, The
Toronto-Dominion Bank 1997. Mr. Thomson is also a director of The Toronto-
Dominion Bank, CGC, Inc., INCO, Limited.,  The Thomson Corp., S.C. Johnson and
Son, Inc., and Canadian Occidental Petroleum , Ltd. Age 64.

JAMES A. UNRUH, Director since 1996 (current term expires April, 2000). Member,
Compensation Committee. Retired since 1997.  Chairman and CEO, Unisys
Corporation from 1990 to 1997. Mr. Unruh is also the director of  Ameritech
Corporation. Age 56.

P. ROY VAGELOS, M.D., Director since 1989 (current term expires April, 2001).
Chairman, Auditing Committee; Member, Committee on Nominations & Corporate
Governance; Member, Executive Committee.  Chairman, Regeneron Pharmaceuticals
since 1995.  Chairman and CEO, Merck & Co., Inc. from 1986 to 1994.  Dr. Vagelos
is also a director of The Estee Lauder Companies Inc. and PepsiCo., Inc.   Age
68.

                                       17
<PAGE>


STANLEY C. VAN NESS, Director since 1990 (current term expires April, 2002).
Chairman, Committee on Business Ethics; Member, Auditing Committee; Chairman,
Executive Committee. Counselor at Law, Picco Herbert Kennedy (law firm) since
1990. Mr. Van Ness is also a director of Jersey Central Power and Light Company.
Age 64.

PAUL A. VOLCKER, Director since 1988  (current term expires April, 2000).
Chairman, Committee on Dividends; Member, Executive Committee; Member, Committee
on Nominations & Corporate Governance.  Consultant since 1996. Chairman, James
D. Wolfensohn, Inc. from 1988 to 1996.   Chief Executive Officer, James D.
Wolfensohn, Inc. from 1995 to 1996. Mr. Volcker is also a public member of the
Board of Governors of the American Stock Exchange, a member of the Board of
Overseers of TIAA-CREF, and a director of UAL Corporation, Bankers Trust New
York Corporation, and Nestle, S.A.; a public member of the Board of Governors,
American Stock Exchange; and a Board of Overseers of TIAA-CREF. Age 70.

JOSEPH H. WILLIAMS, Director since 1994  (current term expires April, 2002).
Member, Committee on Dividends; Member, Auditing Committee. Director, The
Williams Companies since 1971.  Chairman and Chief Executive Officer, The
Williams Companies from 1979 to 1993.  Mr. Williams is also director of Flint
Industries, The Orvis Company, and MTC Investors, LLC.  Age 64.

                                       18
<PAGE>


                      EXECUTIVE OFFICERS OF THE PRUDENTIAL


ARTHUR F. RYAN, Chairman, Chief Executive Officer, and President since 1994;
prior to 1994, President and Chief Operating Officer, Chase Manhattan Corp.  Age
55.

E. MICHAEL CAULFIELD, Chief Executive Officer, Prudential Investments since
1996;  Chief Executive Officer, Money Management Group from 1995-1996;
President, Prudential Preferred Financial Services.  Age 51.

MICHELE S. DARLING, Executive Vice President, Human Resources since 1997;  prior
to 1997, Executive Vice President, Canadian Imperial Bank of Commerce, Toronto,
Canada.  Age 44.

ROBERT GOLDEN, Executive Vice President, Corporate Operations and Systems since
1997;  prior to 1997,  Executive Vice President, Prudential Securities, Inc. Age
51.

MARK B. GRIER, Executive Vice President, Financial Management since 1997; Chief
Financial Officer from 1995 to 1997; prior to 1995,  Executive Vice President,
Chase Manhattan Corp.  Age 45.

RODGER A. LAWSON, Executive Vice President, Marketing and Planning since 1996;
President and CEO, Van Eck Global  from 1994 to 1996.  Age 51.

JOHN V. SCICUTELLA,  Chief Executive Officer, Individual Insurance Group since
1997; Executive Vice President Operations and Systems from 1995 to 1997; prior
to 1995, Executive Vice President, Chase Manhattan Corp.  Age 48.

R. BROCK ARMSTRONG, Senior Vice President, Individual Insurance Development
since 1997; prior to 1997, Executive Vice President, London Insurance Group.
Age 50.

JAMES J. AVERY, JR., Senior Vice President and Chief Actuary since 1997;
President Prudential Select from 1995 to 1997; prior to 1995, Chief Financial
Officer, Prudential Select.  Age 46.

MARTIN A. BERKOWITZ, Senior Vice President and Comptroller since 1995; prior to
1995,  Senior Vice President and Chief Financial Officer, Prudential Investment
Corporation.  Age 49.

WILLIAM M. BETHKE, Chief Investment Officer since 1997; prior to 1997, Senior
Vice President.  Age 50.

RICHARD CARBONE,  Senior Vice President and CFO since 1997; 1995-1997,
Controller, Salomon Brothers, from 1995 to 1997; prior to 1995, Controller,
Bankers Trust.  Age 50.

LEO J. CORBETT, Senior Vice President, Individual Insurance Marketing since
1997; prior to 1997, Managing Director, Lehman Brothers. Age 49.

MARK R. FETTING, President, Prudential Retirement Services since 1996; prior to
1996, President, Prudential Defined Contribution Services.  Age 43.

WILLIAM D. FRIEL, Senior Vice President and Chief Information Officer since
1993.  Age 58.

BRUCE J. GOODMAN,  Chief Executive Officer, Prudential Service Company since
1995; 1993-1995, Senior Vice President.  Age 56.

                                       19
<PAGE>


JONATHAN M. GREENE,  President, Investment Management since 1996; prior to 1996,
Vice President, T. Rowe Price Associates, Inc. Age 54.

JEAN D. HAMILTON,  President, Diversified Group since 1995; prior to 1995,
President, Prudential Capital Group.  Age 51.

RONALD P. JOELSON, Senior Vice President, Guaranteed Products since 1997;
President, Prudential Investments Guaranteed Products from 1996 to 1998; prior
to 1996, Managing Director, Enterprise Planning Unit.  Age 40.

IRA J. KLEINMAN, Executive Vice President, International Insurance Group since
1997; prior to 1997, Senior Vice President.  Age 50.

NEIL A. McGUINNESS, Senior Vice President, Marketing, Prudential Investments
since 1996; prior to 1996, Managing Director, Putnam Investments.  Age 51.

PRISCILLA A. MYERS, Senior Vice President, Audit, Compliance and Investigation
since 1995; 1989-1995, Vice President and Auditor, Prudential.  Age 48.

RICHARD O. PAINTER, President, Prudential Insurance & Financial Services since
1995; prior to 1995, Senior Vice President, New York Life Insurance Company.
Age 49.

I. EDWARD PRICE, Senior Vice President and Actuary since 1995; prior to 1995,
Chief Executive Officer, Prudential International Insurance.  Age 55.

KIYOFUMI SAKAGUCHI, President, International Insurance Group since 1995; prior
to 1995, Chairman and CEO, The Prudential Life Insurance Co., Ltd., Japan.  Age
54.

BRIAN M. STORMS, President, Mutual Funds and Annuities, Prudential Investments
since 1996; prior to 1996, Managing Director, Fidelity Investments.  Age 43.

ROBERT J. SULLIVAN, Senior Vice President, Sales, Prudential Investments since
1997; prior to 1997,  Managing Director, Fidelity Investments.  Age 59.

SUSAN L. BLOUNT, Vice President and Secretary since 1995; prior to 1996,
Assistant General Counsel.  Age 40.

C. EDWARD CHAPLIN, Vice President and Treasurer since 1995; prior to 1995,
Managing Director and Assistant Treasurer.  Age 41.


ITEM 11.  EXECUTIVE COMPENSATION

The Real Property Account does not pay any fees, compensation or reimbursement
to any Director or Officer of the Registrant.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Not applicable.


                                       20
<PAGE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to an investment management agreement, Prudential charges the
Partnership a daily investment management fee at an annual rate of 1.25% of the
average daily gross asset valuation of the Partnership.  For the years ended
December 31, 1997, 1996 and 1995 management fees incurred by the Partnership
were $2,640,470; $2,494,229;  and $2,341,878, respectively.

The Partnership also reimburses Prudential for certain administrative services
rendered by Prudential.  The amounts incurred for the years ended December 31,
1997, 1996 and 1995 were $115,346; $116,818; and $123,919,  respectively, and
are classified as administrative expenses in the Statements of Operations.

The Partnership owns a 50% interest in four warehouse/distribution buildings in
Jacksonville, Florida (the Unit warehouses).  The remaining 50% interest is
owned by Prudential and one of its subsidiaries. In September 1997, the Unit
warehouses were sold as part of an industrial package for cash of $12,544,659.
The partnership's share of the proceeds was $6,272,329.

The Partnership has contracted with PREMISYS Real Estate Services, Inc.
(PREMISYS), an affiliate of Prudential, sold by Prudential in 1997, to provide
property management services at the Unit warehouses.  The property management
fee earned by PREMISYS, incurred by the Partnership and Prudential for the years
ended December 31, 1997, 1996 and 1995 was $32,175; $36,000; and $31,360,
respectively.



                                21

<PAGE>

                                      PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this report:

     1.   Financial Statements

          See the Index to Financial Statement on pages F-1 and F-2.

     2.   Financial Statement Schedules

          The following financial statement schedules of The Prudential Variable
          Contract Real Property Partnership should be read in conjunction with
          the financial statements in Item 8 of this Annual Report on Form 10-K:

          III.  Real Estate Owned:  Properties
          III.  Real Estate Owned:  Interest in Properties

          See the Index to Financial Statement on pages F-1 and F-2.

     3.   Documents Incorporated by Reference

          See the following list of exhibits.

     4.   Exhibits

          See the following list of exhibits.

(b)  Reports on Form 8-K.

     See Form 8-K as filed May 17, 1996.

(c)  The following is a list of Exhibits to the Registrant's Annual Report on
     Form 10-K for the fiscal year ended December 31, 1997.  The Registrant
     will furnish a copy of any Exhibit listed below to any security holder
     of the Registrant who requests it upon payment of a fee of 15 cents per
     page.  All Exhibits are either contained in this Annual Report on Form 10-K
     or are incorporated by reference as indicated below.

     3.1  Amended Charter of The Prudential Insurance Company of America, filed
          as Exhibit 1.A.(6)(a) to Post-Effective Amendment No. 2 to Form S-6,
          Registration Statement No. 33-19999, filed March 2, 1989, and
          incorporated herein by reference.

     3.2  Amended By-Laws of The Prudential Insurance Company of America, filed
          as Exhibit 1.A.(6)(b) to Post-Effective Amendment No. 4 to Form S-6,
          Registration Statement No. 33-19999, filed March 2, 1990, and
          incorporated herein by reference.

     3.3  Resolution of the Board of Directors establishing The Prudential
          Insurance Variable Contract Real Property Account, filed as Exhibit
          (3C) to Form S-1, Registration


                                          22
<PAGE>

          Statement No. 33-20083, filed February 10, 1988, and incorporated
          herein by reference.

     4.1  Revised Individual Variable Annuity Contract filed as Exhibit A(4)(w)
          to Post-Effective Amendment No. 8 to Form N-4, Registration Statement
          No. 2-80897, filed October 23, 1986, and incorporated herein by
          reference.

     4.2  Discovery Plus Contract, filed as Exhibit (4)(a) to Form N-4,
          Registration Statement No. 33-25434, filed November 8, 1988, and
          incorporated herein by reference.

     4.3  Custom VAL (previously named Adjustable Premium VAL)  Life Insurance
          Contracts with fixed death benefit, filed as Exhibit 1.A.(5) to Form
          S-6, Registration Statement No.  33-25372, filed November 4, 1988, and
          incorporated herein by reference.

     4.4  Custom VAL (previously named Adjustable Premium VAL)  Life Insurance
          Contracts with variable death benefit, filed as Exhibit 1.A.(5) to
          Form S-6, Registration Statement No. 33-25372, filed November 4, 1988,
          and incorporated herein by reference.

     4.5  Variable Appreciable Life Insurance Contracts with fixed death
          benefit, filed as Exhibit 1.A.(5) to Pre-Effective Amendment No. 1 to
          Form S-6, Registration Statement No. 33-20000, filed June 15, 1988,
          and incorporated herein by reference.

     4.6  Variable Appreciable Life Insurance Contracts with variable death
          benefit, filed as Exhibit 1.A.(5) to Pre-Effective Amendment No. 1 to
          Form S-6, Registration Statement No. 33-20000, filed June 15, 1988,
          and incorporated herein by reference.

     9.   None.

     10.1 Investment Management Agreement between The Prudential Insurance
          Company of America and The Prudential Variable Contract Real Property
          Partnership filed as Exhibit (10A) to Pre-Effective Amendment No. 1 to
          Form S-1, Registration Statement No. 33-20083, filed May 2, 1988, and
          incorporated herein by reference.

     10.2 Service Agreement between The Prudential Insurance Company of America
          and The Prudential Investment Corporation, filed as Exhibit (10B) to
          Form S-1 , Registration Statement No.  33-8698, filed September 12,
          1986, and incorporated herein by reference.

     10.3 Partnership Agreement of The Prudential Variable Contract Real
          Property Partnership filed as Exhibit (10C) to Pre-Effective Amendment
          No. 1 to Form S-1, Registration Statement No. 33-20083, filed May 2,
          1988, and incorporated herein by reference.

     11.  Not applicable.

     12.  Not applicable.

     13.  None.


                                          23
<PAGE>

     18.  None.

     21.  Not applicable.

     22.  Not applicable.

     23.  None.

     24.  Powers of Attorney:  James Cullen, Glen Hiner, Jr., Gaynor Kelley, Ida
          Schmertz, Michele Darling, Robert Golden, R. Brock Armstrong, James
          Avery, Richard Carbone,  Leo Corbett, Mark Fetting, Jean Hamilton,
          Ronald Joelson, Robert Sullivan.

     27.  Not applicable.

     28.  None.


                                          24
<PAGE>

                                      SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                     THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
                                    in respect of
                The Prudential Variable Contract Real Property Account
                ------------------------------------------------------
                                     (Registrant)





Date:   March 31, 1998                            By: /s/
     --------------------------                      ---------------------------
                                                       Esther H. Milnes
                                                       Vice President


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

Signature                                  Title                      Date
---------                                  -----                      ----
<S>                                <C>                           <C>

*                                  Chairman of the Board and     March 31, 1998
 ------------------------------    Chief Executive Officer
Arthur F. Ryan

*                                  Chief Financial Officer       March 31, 1998
 ------------------------------
Richard Carbone



                                   By:  */s/
                                         ---------------------
                                   Thomas C. Castano
                                   (Attorney-in-Fact)


                                          25
<PAGE>

<CAPTION>

Signature                                  Title                      Date
---------                                  -----                      ----
<S>                                <C>                           <C>

*                                  Director                      March 31, 1998
 ------------------------------
Franklin E. Agnew

*                                  Director                      March 31, 1998
 ------------------------------
Frederic K. Becker

*                                  Director                      March 31, 1998
 ------------------------------
James G. Cullen

*                                  Director                      March 31, 1998
 ------------------------------
Carolyne K. Davis

*                                  Director                      March 31, 1998
 ------------------------------
Roger A. Enrico

*                                  Director                      March 31, 1998
 ------------------------------
Allan D. Gilmour

*                                  Director                      March 31, 1998
 ------------------------------
William H. Gray, III

*                                  Director                      March 31, 1998
 ------------------------------
Jon F. Hanson

*                                  Director                      March 31, 1998
 ------------------------------
Glen H. Hiner, JR.

*                                  Director                      March 31, 1998
 ------------------------------
Constance J. Horner

*                                  Director                      March 31, 1998
 ------------------------------
Gaynor N. Kelley

*                                  Director                      March 31, 1998
 ------------------------------
Burton J. Malkiel

*                                  Director                      March 31, 1998
 ------------------------------
Ida F.S. Schmertz



                                   By:  */s/
                                         ---------------------
                                   Thomas C. Castano
                                   (Attorney-in-Fact)


                                          26
<PAGE>

<CAPTION>

Signature                                  Title                      Date
---------                                  -----                      ----
<S>                                <C>                           <C>

*                                  Director                      March 31, 1998
 ------------------------------
Charles R. Sitter

*                                  Director                      March 31, 1998
 ------------------------------
Donald L. Staheli

*                                  Director                      March 31, 1998
 ------------------------------
Richard M. Thomson

*                                  Director                      March 31, 1998
 ------------------------------
James A. Unruh

*                                  Director                      March 31, 1998
 ------------------------------
P. Roy Vagelos, M.D.

*                                  Director                      March 31, 1998
 ------------------------------
Stanley C. Van Ness

*                                  Director                      March 31, 1998
 ------------------------------
Paul A. Volcker

*                                  Director                      March 31, 1998
 ------------------------------
Joseph H. Williams
</TABLE>




                                   By:  */s/
                                         ---------------------
                                   Thomas C. Castano
                                   (Attorney-in-Fact)


                                          27
<PAGE>


             THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
                                  (Registrant)

                                      INDEX

                                                                         Page
                                                                         ----
A.   THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

      Report of Independent Accountants                                   F-3

      Financial Statements:

          Statements of Net Assets - December 31, 1997 and 1996           F-5

          Statements of Operations and Changes In Net Assets -
          Years Ended December 31, 1997, 1996 and 1995                    F-5

          Notes to the Financial Statements                               F-6

B.   THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

     Report of Independent Accountants                                    F-9

     1.   Financial Statements:

          Statements of Assets and Liabilities - December 31, 1997
          and 1996                                                       F-11

          Statements of Operations -Years Ended December 31, 1997, 1996
          and 1995                                                       F-12

          Statements of Changes in Net Assets - Years Ended
          December 31, 1997, 1996 and 1995                               F-13

          Statements of Cash Flows - Years Ended December 31, 1997,
          1996 and 1995                                                  F-14

          Schedule of Investments - December 31, 1997 and 1996           F-15

          Notes to the Financial Statements                              F-18





                                       F-1
<PAGE>

              THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
                                  (Registrant)

                                      INDEX

                                                                         Page
                                                                         ----
B.   THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP (continued)


          2.   Financial Statement Schedules:

                Real Estate Owned:  Properties                           F-23

                Real Estate Owned:   Interest in Properties              F-24

     All other schedules are omitted because they are not applicable, or because
the required information is included in the financial statements or notes
thereto.


                                       F-2
<PAGE>


REPORT OF INDEPENDENT ACCOUNTANTS


To the Contract Owners of the
Prudential Variable Contract Real Property Account
and the Board of Directors of
The Prudential Insurance Company of America


In our opinion, the accompanying statements of net assets and the related
statements of operations and changes in net assets present fairly, in all
material respects, the financial position of Prudential Variable Contract Real
Property Account at December 31, 1997 and 1996, and the results of its
operations and the changes in its net assets for the years then ended in
conformity with generally accepted accounting principles.  These financial
statements are the responsibility of The Prudential Insurance Company of
America's management; our responsibility is to express an opinion on these
financial statements based on our audits.  We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation.  We believe that our audits, which included
confirmation of shares owned in The Prudential Variable Contract Real Property
Partnership at December 31, 1997 and 1996, provide a reasonable basis for the
opinion expressed above.


PRICE WATERHOUSE LLP
New York, New York
March 20, 1998


                                       F-3

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Partners of
The Prudential Variable Contract Real Property Account
Newark, New Jersey

We have audited the accompanying statements of operations and changes in net
assets of the Prudential Variable Contract Real Property Account ("Real Property
Account") for the year ended December 31, 1995.  These financial statements are
the responsibility of the Real Property Account's management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the results of operations and changes in net assets of The Prudential
Variable Contract Real Property Account for the year ended December 31, 1995 in
conformity with generally accepted accounting principles.


Deloitte & Touche LLP
Parsippany, New Jersey
March 1, 1996


                                         F-4

<PAGE>

                             FINANCIAL STATEMENTS OF
               PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

                            STATEMENTS OF NET ASSETS
<TABLE>
<CAPTION>

                                                                                        DECEMBER 31, 1997   DECEMBER 31, 1996
                                                                                        -----------------   -----------------
<S>                                                                                     <C>                 <C>
Investment in shares of The Prudential Variable Contract
  Real Property Partnership (Note 3)                                                       $  101,268,264       $  90,992,994
                                                                                        -----------------   -----------------
                                                                                        -----------------   -----------------

NET ASSETS, representing:
Equity of Contract Owners (Note 4)                                                         $   59,242,776       $  56,878,802
Equity of Prudential Insurance Company of America                                              42,025,488          34,114,192
                                                                                        -----------------   -----------------
                                                                                           $  101,268,264       $  90,992,994
                                                                                        -----------------   -----------------
                                                                                        -----------------   -----------------
</TABLE>


                 STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS


<TABLE>
<CAPTION>
                                                                                      YEAR ENDED DECEMBER 31,
                                                                        -----------------------------------------------------
                                                                              1997                1996               1995
                                                                        --------------  -----------------   -----------------
<S>                                                                     <C>             <C>                 <C>
INVESTMENT INCOME:

Net Investment Income from Partnership Operations                       $   6,361,101   $       7,088,695   $       6,651,513

EXPENSES:

Charges to Contract Owners for Assuming Mortality Risk and
     Expense Risk and for Administration (Note 5)                             480,620             473,388             450,662
                                                                        --------------  -----------------   -----------------

NET INVESTMENT INCOME                                                       5,880,481           6,615,307           6,200,851
                                                                        --------------  -----------------   -----------------

Net Change in Unrealized Gain (Loss) on Investments in Partnership          3,772,996          (1,474,373)            314,267
Net Realized Gain (Loss) on Sale of Investments in Partnership                141,173            (723,211)                  0
                                                                        --------------  -----------------   -----------------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                        9,794,650           4,417,723           6,515,118
                                                                        --------------  -----------------   -----------------

CAPITAL TRANSACTIONS:

Net Contributions (Withdrawals) by Contract Owners (Note 7)                (3,343,849)         (2,022,824)            588,074

Net Contributions (Withdrawals) by Prudential Insurance Company
  of America                                                                3,824,469           2,496,212            (137,412)
                                                                        --------------  -----------------   -----------------

NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS                                           480,620             473,388             450,662
                                                                        --------------  -----------------   -----------------

TOTAL INCREASE IN NET ASSETS                                               10,275,270           4,891,111           6,965,780

NET ASSETS:
Beginning of year                                                          90,992,994          86,101,883          79,136,103
                                                                        --------------  -----------------   -----------------
End of year                                                             $ 101,268,264   $      90,992,994   $      86,101,883
                                                                        --------------  -----------------   -----------------
                                                                        --------------  -----------------   -----------------
</TABLE>

       SEE NOTES TO FINANCIAL STATEMENTS ON PAGES F-6 THROUGH F-8.

                                       F-5


<PAGE>
                       NOTES TO THE FINANCIAL STATEMENTS OF
               THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
                        FOR THE YEAR ENDED DECEMBER 31, 1997

NOTE 1:  GENERAL

The Prudential Variable Contract Real Property Account (the "Real Property
Account") was established on November 20, 1986 by resolution of the Board of
Directors of The Prudential Insurance Company of America ("Prudential"), as a
separate investment account pursuant to New Jersey law.  The assets of the Real
Property Account are segregated from Prudential's other assets.  The Real
Property Account is used to fund benefits under certain variable life insurance
and variable annuity contracts issued by Prudential.  These products are
Variable Appreciable Life Insurance ("PVAL60"/"PVAL90"), Discovery Plus
("PDISC+"), and Variable Investment Plan ("VIP").

The assets of the Real Property Account are invested in The Prudential Variable
Contract Real Property Partnership (the "Partnership").  The Partnership is
organized under New Jersey law and is registered under the Securities Act of
1933.  The Partnership is the investment vehicle for assets allocated to the
real property option under certain variable life insurance and variable annuity
contracts.  The Real Property Account, along with the Pruco Life Variable
Contract Real Property Account and Pruco Life of New Jersey Variable Contract
Real Property Account, are the sole investors in the Partnership.

The Partnership has a policy of investing at least 65% of its assets in direct
ownership interests in income-producing real estate and participating mortgage
loans.

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.     BASIS OF ACCOUNTING

The financial statements are prepared in conformity with generally accepted
accounting principles (GAAP).  The preparation of the financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts and disclosures.  Actual results could differ from
those estimates.

B.     INVESTMENT IN PARTNERSHIP INTEREST

The investment in the Partnership is based on the Real Property Account's
proportionate interest of the Partnership's market value.  At December 31, 1997
and 1996 the Real Property Account's interest in the Partnership was 46.1% or
5,465,515 shares.

C.     INCOME RECOGNITION

Net investment income and realized and unrealized gains and losses are
recognized daily.  Amounts are based upon the Real Property Account's
proportionate interest in the Partnership.

D. EQUITY OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

Prudential maintains a position in the Real Property Account for
property acquisitions and capital expenditure funding needs.  The position is
also utilized for liquidity purposes including unit purchases and redemptions,
Partnership share transactions, and expense processing.  The position does not
have an effect on the Contract owner's account or the related unit value.


                                         F-6
<PAGE>

NOTE 3:  INVESTMENT INFORMATION FOR THE PRUDENTIAL VARIABLE CONTRACT REAL
PROPERTY PARTNERSHIP

The investment in the Partnership, the number of shares held by the Account in
the Partnership, the Partnership share value and the aggregate cost of
investments in the Accounts' shares held at December 31, 1997 and 1996 were as
follows:

<TABLE>
<CAPTION>
                                          1997           1996
                                          ----           ----
<S>                                   <C>             <C>
INVESTMENT:                           $101,268,264    $90,992,994
SHARE VALUE:                             $18.52861      $16.64859
SHARES OUTSTANDING:                      5,465,515      5,465,516
COST:                                  $63,790,895    $63,790,895
</TABLE>

NOTE 4:  CONTRACT OWNER UNIT INFORMATION

Outstanding Contract owner units, unit values and total value of Contract owner
equity at December 31, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>

1997:
-----

                                        PDISC+/VIP       PVAL60         PVAL90          Total
                                        ----------       ------         ------          -----
<S>                                     <C>           <C>            <C>            <C>
CONTRACT OWNER
  UNITS OUTSTANDING:                     5,706,175     13,838,774     19,469,599     39,014,548
UNIT VALUE:                             $  1.48380    $   1.54807    $   1.50761
CONTRACT OWNER EQUITY:                  $8,466,823    $21,423,391    $29,352,562    $59,242,776

<CAPTION>

1996:
-----

                                        PDISC+/VIP       PVAL60         PVAL90          Total
                                        ----------       ------         ------          -----
<S>                                     <C>           <C>            <C>            <C>
CONTRACT OWNER
UNITS OUTSTANDING:                       6,307,919     14,481,635     20,561,123     41,350,677
UNIT VALUE:                             $  1.34933    $   1.39926    $   1.36684
CONTRACT OWNER EQUITY:                  $8,511,464    $20,263,573    $28,103,765    $56,878,802
</TABLE>


NOTE 5:   CHARGES AND EXPENSES

A.     MORTALITY RISK AND EXPENSE RISK CHARGES

Mortality risk and expense charges are determined daily using an effective
annual rate of  1.0%, 0.6%, 0.9%, and 1.2% for PDISC+, PVAL60, PVAL90, and
VIP respectively.  Mortality risk is that life insurance contract owners may
not live as long as estimated or annuitants may live longer than estimated
and expense risk is that the cost of issuing and administering the policies
may exceed the estimated expenses. For the years ended December 31, 1997 and
1996, the amount of these charges paid to Prudential was $471,674 and
$464,909, respectively.


B.     ADMINISTRATIVE CHARGES

Administrative charges are determined daily using an effective annual rate of
0.2% for PDISC+.  Administrative charges include costs associated with
issuing the Contract, establishing and maintaining

                                         F-7
<PAGE>

records, and providing reports to Contract owners.  For the years ended December
31, 1997 and 1996, the amount of these charges paid to Prudential was $8,946 and
$8,479, respectively.

NOTE 6:  TAXES

Prudential is taxed as a "life insurance company" as defined by the Internal
Revenue Code and the results of  operations of the Real Property Account form
a part of Prudential's consolidated federal tax return.  Under current
federal law, no federal income taxes are payable by the Real Property
Account.  As such, no provision for tax liability has been recorded in these
financial statements.

NOTE 7:  NET WITHDRAWALS BY CONTRACT OWNERS

Contract owner activity for the Prudential products for the year ended
December 31, 1997 was as follows:

<TABLE>
<CAPTION>

                                        PDISC+/VIP       PVAL60/PVAL90            Total
                                        ----------       -------------            -----
<S>                                     <C>              <C>                   <C>
CONTRACT OWNER NET PAYMENTS:           $   698,756        $  8,463,594         $9,162,350
POLICY LOANS:                                    0          (1,932,364)         (1,932,364)
POLICY LOAN REPAYMENTS AND INTEREST:             0             975,817             975,817
SURRENDERS, WITHDRAWALS, AND DEATH
  BENEFITS:                             (1,441,179)         (3,808,846)         (5,250,025)
ADMINISTRATIVE AND OTHER CHARGES:           (3,867)         (4,372,490)         (4,376,357)
NET TRANSFERS FROM/TO OTHER
  SUBACCOUNTS OR FIXED RATE OPTIONS:      (107,204)         (1,816,066)         (1,923,270)
                                         ---------         -----------         ------------
NET WITHDRAWALS                          $(853,494)        $(2,490,355)        $(3,343,849)
                                         ---------         -----------         ------------
                                         ---------         -----------         ------------
</TABLE>

NOTE 8:  UNIT ACTIVITY

Transactions in units for the years ended December 31, 1997 and 1996 were as
follows:

<TABLE>
<CAPTION>

1997:
-----
                                      PDISC+/VIP        PVAL60/PVAL90
                                      ----------        -------------
<S>                                 <C>                <C>

CONTRACT OWNER CONTRIBUTIONS:        1,018,212.099       6,933,479.372
CONTRACT OWNER REDEMPTIONS:         (1,619,955.766)     (8,658,259.658)

<CAPTION>

1996:
-----
                                      PDISC+/VIP        PVAL60/PVAL90
                                      ----------        -------------
<S>                                 <C>                <C>
CONTRACT OWNER CONTRIBUTIONS:        1,090,424.904       8,934,265.218
CONTRACT OWNER REDEMPTIONS:         (1,399,897.340)    (10,137,311.602)
</TABLE>

NOTE 9:  PURCHASES AND SALES OF INVESTMENTS

There were no purchases or sales of investments in the Partnership during the
years ended December 31, 1997 and 1996.


                                         F-8

<PAGE>

                          REPORT OF INDEPENDENT ACCOUNTANTS

February 20, 1998

To the Partners of Prudential
Variable Contract Real Property Partnership

In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Prudential
Variable Contract Real Property Partnership (the "Partnership") at December 31,
1997 and 1996, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the management of the
Prudential Insurance Company of America; our responsibility is to express an
opinion on these financial statements based on our audits.  We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.




Price Waterhouse LLP
New York, New York


                                         F-9

<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Partners of
The Prudential Variable Contract Real Property Partnership
Newark, New Jersey

We have audited the accompanying statements of operations, changes in net assets
and cash flows of the Prudential Variable Contract Real Property Partnership
(the "Partnership") for the year ended December 31, 1995 and the per share data
and ratios for each of the three years in the period ended December 31, 1995.
These financial statements and the per share data and ratios are the
responsibility of the Partnership's management.  Our responsibility is to
express an opinion on these financial statements and the per share data and
ratios based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and per share data and ratios present
fairly, in all material respects, the results of operations, changes in net
assets and cash flows of The Prudential Variable Contract Real Property
Partnership for the year ended December 31, 1995 and the per share data and
ratios for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.




Deloitte & Touche LLP
Parsippany, New Jersey
March 1, 1996




                                         F-10

<PAGE>

              THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                         STATEMENTS OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>

                                                                         DECEMBER 31, 1997  DECEMBER 31, 1996
                                                                         -----------------  -----------------
ASSETS
<S>                                                                      <C>                <C>
REAL ESTATE INVESTMENTS - At estimated market value:
  Real estate and improvements
  (cost:  12/31/97 -- $201,670,248; 12/31/96 -- $177,082,291)                 $181,317,624       $151,074,276
  Interest in properties at estimated market value
  (cost:12/31/97--$0; 12/31/96--$6,133,157)                                              0          5,850,000
  Real estate investment trust (cost:  12/31/97 -- $10,000,005;
   12/31/96 -- $0)                                                              12,523,805                  0
                                                                         -----------------  -----------------

         Total real estate investments                                         193,841,429        156,924,276

MARKETABLE SECURITIES - At estimated market value
   (cost:  12/31/97 -- $13,939,000; 12/31/96 -- $24,345,000)                    13,971,421         24,426,644

CASH AND CASH EQUIVALENTS                                                       12,880,560         20,738,204

DIVIDEND RECEIVABLE                                                                146,999                  0

ACCRUED INVESTMENT INCOME AND OTHER ASSETS
   (net of allowance for uncollectible accounts:  12/31/97 --
   $68,000; 12/31/96 -- $56,000)                                                 1,904,726          2,066,916
                                                                         -----------------  -----------------

         Total assets                                                         $222,745,135       $204,156,040
                                                                         -----------------  -----------------
                                                                         -----------------  -----------------

LIABILITIES AND PARTNERS' EQUITY

OBLIGATION UNDER CAPITAL LEASE                                                           0         $4,072,677

ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                           $1,842,027          1,640,360

DUE TO AFFILIATES                                                                  832,922            719,200

OTHER LIABILITIES                                                                  538,413            467,009
                                                                         -----------------  -----------------

         Total liabilities                                                       3,213,362          6,899,246
                                                                         -----------------  -----------------

PARTNERS' EQUITY                                                               219,531,773        197,256,794
                                                                         -----------------  -----------------

TOTAL LIABILITIES AND PARTNERS' EQUITY                                        $222,745,135       $204,156,040
                                                                         -----------------  -----------------
                                                                         -----------------  -----------------

NUMBER OF SHARES OUTSTANDING AT END OF PERIOD                                   11,848,275         11,848,275
                                                                         -----------------  -----------------
                                                                         -----------------  -----------------

SHARE VALUE AT END OF PERIOD                                                        $18.53             $16.65
                                                                         -----------------  -----------------
                                                                         -----------------  -----------------
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                        F-11

<PAGE>

            THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                             STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                            YEAR ENDED DECEMBER 31,
                                                                             ---------------------------------------------------
                                                                                    1997            1996               1995
                                                                             -------------      -------------      -------------
<S>                                                                          <C>                <C>                <C>
INVESTMENT INCOME:
 Revenues from real estate and improvements                                    $21,582,968        $22,799,694        $19,827,044
 Income from interest in properties                                                435,296            606,558            638,183
 Dividend income from real estate investment trusts                                158,184                  0                  0
 Interest on short-term investments                                              2,305,364          2,134,386          2,660,865
                                                                             -------------      -------------      -------------

         Total investment income                                                24,481,812         25,540,638         23,126,092
                                                                             -------------      -------------      -------------
EXPENSES:
 Investment management fee                                                       2,640,470          2,494,229          2,341,878
 Real estate taxes                                                               2,208,972          2,367,404          1,938,090
 Administrative expense                                                          2,326,155          1,865,433          1,795,092
 Operating expense                                                               3,296,350          2,904,620          1,870,183
 Interest expense                                                                  220,118            489,434            460,578
                                                                             -------------      -------------      -------------

         Total investment expenses                                              10,692,065         10,121,120          8,405,821
                                                                             -------------      -------------      -------------

NET INVESTMENT INCOME                                                           13,789,747         15,419,518         14,720,271
                                                                             -------------      -------------      -------------

REALIZED AND UNREALIZED GAIN (LOSS) ON
  INVESTMENTS:
 Net proceeds from real estate investments
   sold                                                                          6,297,422         20,497,789                  0
 Less:  Cost of real estate investments sold                                     6,274,539         26,610,932                  0
        Realization of prior years' unrealized
        gain on real estate investments sold                                      (283,157)        (4,539,996)                 0
                                                                             -------------      -------------      -------------
 Net gain (loss) realized on real estate
             investments sold                                                      306,040         (1,573,147)                 0
                                                                             -------------      -------------      -------------

 Change in unrealized gain (loss) on real estate
  investments                                                                    8,179,192         (3,211,436)           661,623
                                                                             -------------      -------------      -------------

NET REALIZED AND UNREALIZED GAIN
 (LOSS) ON INVESTMENTS                                                           8,485,232         (4,784,583)           661,623
                                                                             -------------      -------------      -------------

NET INCREASE IN NET ASSETS RESULTING
 FROM OPERATIONS                                                               $22,274,979        $10,634,935        $15,381,894
                                                                             -------------      -------------      -------------
                                                                             -------------      -------------      -------------
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                      F-12
<PAGE>

          THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                      STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                             ---------------------------------------------------
                                                                                   1997              1996                1995
                                                                             -------------      -------------      -------------
<S>                                                                          <C>                <C>                <C>
NET INCREASE IN NET ASSETS RESULTING
 FROM OPERATIONS:
 Net investment income                                                         $13,789,747        $15,419,518        $14,720,271
 Net gain (loss) realized on real estate
   investments sold                                                                306,040         (1,573,147)                 0
 Net unrealized gain (loss)  from real estate
   investments                                                                   8,179,192         (3,211,436)           661,623
                                                                             -------------      -------------      -------------

         Net increase in net assets resulting from
           operations                                                           22,274,979         10,634,935         15,381,894
                                                                             -------------      -------------      -------------

NET DECREASE IN NET ASSETS RESULTING
 FROM CAPITAL TRANSACTIONS:
Withdrawals by partners
    (Shares: 1997 -- 0;  1996 -- 188,409;
     1995 -- 204,350)                                                                    0         (3,000,000)        (3,000,000)
                                                                             -------------      -------------      -------------
         Net decrease in net assets resulting from
          capital transactions                                                           0         (3,000,000)        (3,000,000)
                                                                             -------------      -------------      -------------

NET INCREASE IN NET ASSETS                                                      22,274,979          7,634,935         12,381,894

NET ASSETS -  Beginning of year                                                197,256,794        189,621,859        177,239,965
                                                                             -------------      -------------      -------------

NET ASSETS -  End of year                                                     $219,531,773       $197,256,794       $189,621,859
                                                                             -------------      -------------      -------------
                                                                             -------------      -------------      -------------
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                     F-13
<PAGE>

         THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                          STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                           YEAR ENDED DECEMBER 31,
                                                                             ---------------------------------------------------
                                                                                  1997                1996               1995
                                                                             -------------      -------------      -------------
<S>                                                                          <C>                <C>                <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations                           $22,274,979        $10,634,935        $15,381,894
Adjustments to reconcile net increase in net assets
   resulting from operations to net cash provided by
   operating activities:
     Net realized and unrealized (gain) loss on
        investments                                                             (8,485,232)         4,784,583           (661,623)
      (Increase) decrease in:
         Dividend receivable                                                      (146,999)                 0                  0
         Accrued investment income and other assets                                162,190           (323,611)           474,790
      (Decrease) increase in:
         Obligation under capital lease                                            (72,677)           190,256             77,585
         Accounts payable and accrued expenses                                     201,667           (502,254)         1,337,548
         Due to affiliates                                                         113,722             36,405             58,589
         Other liabilities                                                          71,404           (197,060)            18,156
                                                                             -------------      -------------      -------------

  Net cash flows from operating activities                                      14,119,054         14,623,254         16,686,939
                                                                             -------------      -------------      -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net proceeds from real estate investments
    sold                                                                         6,297,422         20,497,789                  0
  Acquisition of real estate property                                          (23,417,474)       (10,713,722)       (36,774,343)
  Acquisition of real estate investment trust                                  (10,000,005)                 0                  0
  Improvements and additional costs on prior purchases:
    Additions to real estate owned                                              (1,311,864)          (997,893)        (1,050,197)
    Additions to real estate partnerships                                                0                  0            (24,415)
  Sale (purchase) of marketable securities                                      10,455,223        (13,894,489)         5,292,044
                                                                             -------------      -------------      -------------

  Net cash flows from investing activities                                     (17,976,698)        (5,108,315)       (32,556,911)
                                                                             -------------      -------------      -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Withdrawals by partners                                                                 0         (3,000,000)        (3,000,000)
 Principal payments on capital lease obligation                                 (4,000,000)                 0                  0
                                                                             -------------      -------------      -------------

  Net cash flows from financing activities                                      (4,000,000)        (3,000,000)        (3,000,000)
                                                                             -------------      -------------      -------------
NET CHANGE IN CASH AND CASH
  EQUIVALENTS                                                                   (7,857,644)         6,514,939        (18,869,972)

CASH AND CASH EQUIVALENTS - Beginning of year                                   20,738,204         14,223,265         33,093,237
                                                                             -------------      -------------      -------------

CASH AND CASH EQUIVALENTS - End of year                                        $12,880,560        $20,738,204        $14,223,265
                                                                             -------------      -------------      -------------
                                                                             -------------      -------------      -------------

SUPPLEMENTAL INFORMATION:
  Cash paid during the year for interest                                          $220,118           $376,450           $376,450
                                                                             -------------      -------------      -------------
                                                                             -------------      -------------      -------------
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                     F-14
<PAGE>


           THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                             SCHEDULE OF INVESTMENTS

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,1997                     DECEMBER 31, 1996
                                                          --------------------------------      --------------------------------
                                                                                ESTIMATED                             ESTIMATED
                                                                                  MARKET                                MARKET
                                                               COST                VALUE              COST               VALUE
                                                          ----------------------------------------------------------------------
REAL ESTATE AND IMPROVEMENTS (PERCENT OF NET ASSETS)                                82.6%                                 76.6%
Location                 Description
--------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>                              <C>                <C>                <C>                <C>
Lisle, IL                Office Building                    $17,916,983        $10,278,959        $17,524,421         $9,900,000
Atlanta, GA              Garden Apartments                   15,446,293         15,100,000         15,396,738         13,707,814
Pomona, CA               Warehouse                           23,637,049         19,504,612         23,456,751         17,553,849
Roswell, GA              Retail Shopping Center              31,858,198         29,547,042         31,754,073         28,333,818
Morristown, NJ           Office Building                     18,931,914         10,805,918         18,797,224         10,113,986
Bolingbrook, IL          Warehouse                            8,948,028          7,100,000          8,948,028          7,100,000
Farmington Hills, MI     Garden Apartments                   13,641,971         14,805,258         13,623,952         14,706,400
Raleigh, NC              Garden Apartments                   15,804,860         16,525,751         15,762,951         16,854,252
Nashville, TN            Office Building                      8,613,828          9,611,329          8,379,326          8,800,436
Oakbrook Terrace, IL     Office Complex                      12,725,366         14,100,000         12,725,105         13,290,000
Beaverton, OR            Office Complex                      10,728,285         10,700,000         10,713,722         10,713,721
Salt Lake City, UT       Industrial Building                  5,388,134          5,350,000                  0                  0
Aurora, CO               Industrial Building                  8,540,585          8,400,000                  0                  0
Brentwood, TN            Office Complex                       9,488,755          9,488,755                  0                  0
                                                          ----------------------------------------------------------------------
                                                           $201,670,248       $181,317,624       $177,082,291       $151,074,276
                                                          ----------------------------------------------------------------------
                                                          ----------------------------------------------------------------------
<CAPTION>

INTEREST IN PROPERTIES (PERCENT OF NET ASSETS)                                        0.0%                                  3.0%
Location                 Description
--------------------------------------------------------------------------------------------------------------------------------
Jacksonville, FL         Warehouse/Distribution                      $0                 $0         $1,317,453         $1,225,000
Jacksonville, FL         Warehouse/Distribution                       0                  0          1,002,448          1,000,000
Jacksonville, FL         Warehouse/Distribution                       0                  0          1,442,894          1,325,000
Jacksonville, FL         Warehouse/Distribution                       0                  0          2,370,362          2,300,000
                                                          -------------       ------------       ------------       ------------
                                                                     $0                 $0         $6,133,157         $5,850,000
                                                          -------------       ------------       ------------       ------------
                                                          -------------       ------------       ------------       ------------

REAL ESTATE TRUST (PERCENT OF NET ASSETS)                                             5.7%                                  0.0%


--------------------------------------------------------------------------------------------------------------------------------
Meridian REIT Shares (506,894 shares)                       $10,000,005        $12,523,805                 $0                 $0
                                                          -------------       ------------       ------------       ------------
                                                          -------------       ------------       ------------       ------------

<CAPTION>
                                                                 DECEMBER 31,1997                     DECEMBER 31, 1996
                                                          --------------------------------      --------------------------------
                                                                                ESTIMATED                             ESTIMATED
                                                                FACE              MARKET               FACE             MARKET
                                                               AMOUNT              VALUE              AMOUNT             VALUE
                                                          ----------------------------------------------------------------------
<S>                                                       <C>                 <C>               <C>                 <C>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS)                                         6.4%                                 12.4%
(See pages F-14 to F-15 for details)
Description
--------------------------------------------------------------------------------------------------------------------------------
Marketable Securities                                       $13,939,000        $13,971,421        $24,345,000        $24,426,644
                                                          -------------       ------------       ------------       ------------
                                                          -------------       ------------       ------------       ------------

CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS)                                     5.9%                                 10.5%
(See pages F-14 to F-15 for details)
Description
--------------------------------------------------------------------------------------------------------------------------------
Commercial Paper and Cash                                   $12,918,158        $12,880,560        $20,804,826        $20,738,204
                                                          -------------       ------------       ------------       ------------
                                                          -------------       ------------       ------------       ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                          F-15
<PAGE>

               THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                                 SCHEDULE OF INVESTMENTS

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31, 1997
                                                                              -------------------------------
                                                                                  FACE             ESTIMATED
                                                                                 AMOUNT          MARKET VALUE
                                                                              ------------       ------------
<S>                                                                           <C>                <C>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS)                                                            6.4%

International Lease Finance Corp., 5.92%, January 15, 1998                        $500,000           $499,083
Smith Barney Holding Inc., 5.70%, January 28, 1998                               1,304,000          1,285,475
Suntrust Banks, 8.875%, February 1, 1998                                         1,500,000          1,517,880
Chase Manhattan Bank, 5.75%, February 10, 1998                                   2,000,000          2,000,000
Beneficial Corp., 9.125%, February 15, 1998                                        700,000            705,948
Citicorp, 10.15%, February 15, 1998                                                200,000            207,324
General Motors Acceptance Corp., 5.9%, February 19, 1998                           985,000            994,545
General Motors Acceptance Corp., 5.9875%, February 23, 1998                      1,300,000          1,299,363
American General Finance Corp., 7.25%, March 1, 1998                               500,000            507,880
Commercial Credit Co., 5.7%, March 1, 1998                                         375,000            375,199
Associates Corp. of North America, 7.3%, March 15, 1998                            400,000            406,635
International Lease Finance Corp., 5.75%, March 15, 1998                           400,000            399,940
Morgan Guaranty Trust Co., 5.85%, March 16, 1998                                   500,000            499,855
Royal Bank of Canada, 5.91%, June 17, 1998                                       2,000,000          1,998,853
FCC National Bank, 5.75281%, July 2, 1998                                        1,025,000          1,024,202
General Mills Inc., 5.38%, July 8, 1998                                            250,000            249,238
                                                                              ------------       ------------

TOTAL MARKETABLE SECURITIES                                                    $13,939,000        $13,971,421
                                                                              ------------       ------------
                                                                              ------------       ------------

CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS)                                                        5.9%

Barnett Bank, Inc., 6.70%, January 2, 1998                                      $1,235,000         $1,234,540
American Greetings Corp., 6.26%, January 5, 1998                                 1,250,000          1,247,179
Xerox Capital, 5.85%, January 6, 1998                                            1,000,000            995,775
Nike Inc., 6.10%, January 8, 1998                                                1,215,000          1,213,353
Paccar Financial Corp., 5.85%, January 9, 1998                                   1,000,000            996,100
Pitney Bowes Credit Corp., 6.00%, January 13, 1998                                 750,000            747,375
Merrill Lynch & Co., Inc. 5.85%, January 15, 1998                                1,000,000            994,313
Bank of Montreal, 5.90%, January 16, 1998                                        1,000,000          1,000,000
Countrywide Home Loan, Inc., 5.85%, January 22, 1998                             1,000,000            993,175
General Electric Capital Corp., 5.74%, February 9, 1998                          1,000,000            990,593
                                                                              ------------       ------------

TOTAL CASH EQUIVALENTS                                                          10,450,000         10,412,402

CASH                                                                             2,468,158          2,468,158
                                                                              ------------       ------------

TOTAL CASH AND CASH EQUIVALENTS                                                $12,918,158        $12,880,560
                                                                              ------------       ------------
                                                                              ------------       ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       F-16
<PAGE>

              THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                             SCHEDULE OF INVESTMENTS

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31, 1996
                                                                           ----------------------------------
                                                                                FACE              ESTIMATED
                                                                               AMOUNT           MARKET VALUE
                                                                           ---------------     --------------
<S>                                                                        <C>                 <C>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS)                                                           12.4%

PNC Bank, 5.48%, January 6, 1997                                                $2,200,000         $2,199,643
Wells Fargo, 5.54%, January 28, 1997                                             2,300,000          2,300,446
Sears Roebuck Acceptance Corp, 7.48%, February 19, 1997                            100,000            102,187
General Motors Acceptance Corp, 5.88%, February 27, 1997                           105,000            107,143
Sears Roebuck Acceptance Corp,7.72%, February 27, 1997                             800,000            812,000
Dean Witter Discover & Co., 5.75%, March 6,1997                                    500,000            500,387
General Motors Acceptance Corp, 5.74%, March 18, 1997                            1,200,000          1,201,344
Sears Discover Credit Corp, 7.81%, March 18, 1997                                1,150,000          1,164,548
American Home Products, 6.88%, April 15, 1997                                    2,000,000          2,019,323
Ford Motor Credit, 5.90%, May 5, 1997                                            1,400,000          1,405,337
Ford Motor Credit, 5.90%, May 5, 1997                                              350,000            350,875
Ford Motor Credit, 9.15%, May 7, 1997                                              500,000            515,010
Key Bank NA, 5.58%, May 14, 1997                                                   900,000            899,130
American Express Centurion Bank, 5.58%, June 10, 1997                            2,300,000          2,299,862
Associates Corp of North America, 7.05%, June 30, 1997                             600,000            604,766
Bank One Columbus, 5.58%, July 1, 1997                                           1,110,000          1,108,812
Associates Corp of North America, 5.88%, August 15, 1997                         1,230,000          1,230,744
Key Bank of New York, 4.82%, September 4, 1997                                   1,300,000          1,298,740
Bank One Milwaukee, NA, 5.26%, October 8, 1997                                   1,000,000          1,002,870
Morgan Guaranty Trust Co., 5.38%, November 14, 1997                              1,000,000            999,271
Norwest Financial Inc., 6.50%, November 15, 1997                                   300,000            302,286
Norwest Corp., 5.55%, November 21, 1997                                          2,000,000          2,001,922
                                                                           ---------------     --------------

TOTAL MARKETABLE SECURITIES                                                    $24,345,000        $24,426,644
                                                                           ---------------     --------------
                                                                           ---------------     --------------


CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS)                                                       10.5%

Gateway Fuel Corp, 7.15%, January 2, 1997                                       $2,177,000         $2,176,135
Bell Atlantic Financial Services, 5.50%, January 14, 1997                        2,650,000          2,638,664
Pioneer Hi-Bred Intl, 5.47%, January 15, 1997                                    1,200,000          1,194,712
Bank of Montreal, 5.43%, January 27, 1997                                        2,300,000          2,300,000
Canadian Imperial Bank, 5.39%, January 27, 1997                                  2,400,000          2,400,000
HJ Heinz Co., 5.46%, January 29, 1997                                            2,370,000          2,354,184
General Electric Capital Corp, 5.34%, February 3, 1997                           2,300,000          2,279,871
Bankers Trust Co., 5.35%, February 20, 1997                                      2,000,000          2,007,723
Colonial PL Co Note, 5.60%, February 21, 1997                                      800,000            792,658
Colonial PL Co Note, 5.35%, March 4, 1997                                          783,000            773,109
General Electric Capital Corp., 5.45%, March 14, 1997                              300,000            296,321
                                                                           ---------------     --------------
TOTAL CASH EQUIVALENTS                                                          19,280,000         19,213,378

CASH                                                                             1,524,826          1,524,826
                                                                           ---------------     --------------

TOTAL CASH AND CASH EQUIVALENTS                                                $20,804,826        $20,738,204
                                                                           ---------------     --------------
                                                                           ---------------     --------------
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                  F-17

<PAGE>

                           NOTES TO FINANCIAL STATEMENTS OF
                PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                   FOR YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

GENERAL

On April 29, 1988, Prudential Variable Contract Real Property Partnership (the
"Partnership"), a general partnership organized under New Jersey law, was formed
through an agreement among Prudential Insurance Company of America
("Prudential"), Pruco Life Insurance Company ("Pruco Life"), and Pruco Life
Insurance Company of New Jersey ("Pruco Life of New Jersey").  The Partnership
was established as a means by which assets allocated to the real estate
investment option under certain variable life insurance and variable annuity
contracts issued by the respective companies could be invested in a commingled
pool.  The partners in the Partnership are Prudential,  Pruco Life and Pruco
Life of New Jersey.

The Partnership has a policy of investing at least 65% of its assets in direct
ownership interests in income-producing real estate and participating mortgage
loans.

The Partnership's investments are valued on a daily basis, consistent with the
Partnership Agreement.  On each day during which the New York Stock Exchange is
open for business, the net assets of the Partnership are valued using the
estimated market value of its investments as described in Notes 1A and 1B below,
plus an estimate of net investment income from operations reduced by any
liabilities of the Partnership.

The periodic adjustments to property values described in Notes 1A and 1B below
and the corrections of previous estimates of net investment income are made on a
prospective basis. There can be no assurance that all such adjustments and
estimates will be made timely.

Shares of the Partnership are sold to Prudential Variable Contract Real Property
Account, Pruco Life Variable Contract Real Property Account and Pruco Life of
New Jersey Variable Contract Real Property Account (the "Real Property
Accounts") at the current share value of the Partnership's net assets.  Share
value is calculated by dividing the estimated market value of net assets of the
Partnership as determined below by the number of shares outstanding.  A Contract
owner participates in the Partnership through interests in the Real Property
Accounts.

NOTE 1:   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A:   Real Estate Owned and Interest in Properties - The Partnership's
          investments in real estate owned and interests in properties are
          initially valued at their purchase price.  Thereafter, real estate
          investments are reported at their estimated market values based upon
          appraisal reports prepared by independent real estate appraisers
          (members of the Appraisal Institute) which are ordinarily obtained on
          an annual basis.  The property valuations are reviewed internally at
          least every three months and adjusted if there has been a change in
          the value of the property since the last valuation.

          The Chief Appraiser of Prudential Insurance Company Comptroller's
          Department Valuation Unit (Valuation Unit) is responsible to assure
          that the valuation process provides independent and accurate market
          value estimates.  In the interest of maintaining and monitoring the
          independence and accuracy of the appraisal process, the Comptroller of
          Prudential has appointed a third party firm to act as the Appraisal
          Management Firm. The Appraisal Management Firm, among other
          responsibilities, approves the selection and scheduling of external
          appraisals; reviews and provides comments on a sample of external


                                         F-18

<PAGE>

          and internal appraisals; assists in developing policies and procedures
          and assists in the evaluation of the performance and competency of
          external appraisers.  The real estate valuations are reviewed
          quarterly by the Valuation Unit and adjusted if there has been any
          significant changes in circumstances related to the real estate  since
          the most recent independent appraisal.

          The purpose of an appraisal is to estimate the market value of real
          estate as of a specific date. Market value has been defined as the
          most probable price for which the appraised real estate will sell in a
          competitive market under all conditions requisite to fair sale, with
          the buyer and seller each acting prudently, knowledgeably, and for
          self interest, and assuming that neither is under undue duress.  The
          estimate of market value generally is a correlation of three
          approaches, all of which require the exercise of subjective judgment.
          The three approaches are: (1) current cost of reproducing the real
          estate less deterioration and functional and economic obsolescence;
          (2) discounting of a series of income streams and reversion at a
          specified yield or by directly capitalizing a single year income
          estimate by an appropriate factor;  and (3) value indicated by recent
          sales of comparable properties in the market space.  In the
          reconciliation of these three approaches, the one most heavily relied
          upon is the one then recognized as the most appropriate by the
          independent appraiser for the type of real estate in the market.

          As described above, the estimated market value of real estate and real
          estate related assets are determined through an appraisal process.
          These estimated market values may vary significantly from the prices
          at which the real estate investments would sell since market prices of
          real estate investments can only be determined by negotiation between
          a willing buyer and seller.  Although the estimated market values
          represent subjective estimates, management believes these estimated
          market values are reasonable approximations of market prices and the
          aggregate value of investments in real estate is fairly presented as
          of  December 31, 1997 and 1996.

     B:   Investments in Real Estate Investment Trusts - Shares of real estate
          investment trusts (REITs) are generally valued at their quoted market
          price at December 31, 1997.  These values may be discounted for
          restrictions, if any, on the future sale of these shares, such as
          lockout periods or limitations on the number of shares which may be
          sold in a given time period.  Any such discounts are determined by the
          Valuations Unit.

     C:   Revenue Recognition - Rent from real estate is recognized when billed.
          Revenue from certain real estate investments is net of all or a
          portion of related real estate expenses and taxes, as lease
          arrangements vary as to responsibility for payment of these expenses
          between tenants and the Partnership.  Since real estate is stated at
          estimated market value, net income is not reduced by depreciation
          expense.  Dividend income is accrued at the ex-dividend date.

     D:   Cash and Cash Equivalents - For purposes of the statement of cash
          flows, all short-term investments with a maximum maturity of three
          months and investments in money market funds with a maximum weighted
          average maturity of three months are considered to be cash


                                         F-19

<PAGE>


          equivalents.  Cash equivalents are carried at market value.  Cash of
          $128,089 and $144,314 at December 31, 1997 and 1996, respectively, was
          maintained by the properties for tenant security deposits and is
          included in Other Assets on the Statements of Assets and Liabilities.

     E:   Marketable Securities - Marketable securities are highly liquid
          investments with maturities of more than three months when purchased
          and are carried at market value.

     F:   Federal Income Taxes - The Partnership is not a taxable entity under
          the provisions of the Internal Revenue Code.  The income and capital
          gains and losses of the Partnership are attributed,  for federal
          income tax purposes, to the Partners in the Partnership.  The
          Partnership may be subject to state and local taxes in jurisdictions
          in which it operates.

     G:   Management's Use of Estimates in the Financial Statements - The
          preparation of financial statements in conformity with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the reported amounts of assets and
          liabilities at the date of the financial statements and the reported
          amounts of revenues and expenses during the reporting period.  Actual
          results could differ from those estimates.


NOTE 2:  OBLIGATION UNDER CAPITAL LEASE

The Partnership maintained an interest in a leasehold estate consisting of six
one-story industrial warehouse buildings located in Pomona, California.  In
conjunction with this interest, the Partnership assumed assignment of a ground
lease agreement expiring in November 2078 with no renewal options.  The annual
ground lease payments after November 1994, and for each 10 year increment
thereafter, were subject to increase 50% of the increase in the Consumer Price
Index during the previous period.  In 1995, the annual ground lease payment
increased by $126,450 to $376,450.  The ground lease contained a purchase option
that exercisable from November 1994 to November 1997 at a fixed price of
$4,000,000.  In August 1997, the Partnership exercised this purchase option.

NOTE 3:  LEASING ACTIVITY

The Partnership leases space to tenants under various operating lease
agreements.  These agreements, without giving effect to renewal options, have
expiration dates ranging from 1997 to 2010.  At December 31, 1997, the aggregate
future minimum base rental payments under non-cancelable operating lease by year
are:

<TABLE>
<CAPTION>
          Year Ending
          December 31,                               (000's)
          ------------                            ------------
          <S>                                     <C>
               1998                                 $ 12,877
               1999                                   11,857
               2000                                   10,221
               2001                                    8,669
               2002                                    6,834
               Thereafter                             11,916
                                                    --------
               Total                                $ 62,374
                                                    --------
                                                    --------
</TABLE>


                                         F-20

<PAGE>

NOTE 4:  COMMITMENT FROM PARTNER

On January 9, 1990, Prudential committed to fund up to $100 million to enable
the Partnership to take advantage of opportunities to acquire attractive real
property investments whose cost is greater than the Partnership's then available
cash.  Contributions to the Partnership under this commitment are utilized for
property acquisitions and returned to Prudential on an ongoing basis from
Contract owners' net contributions. Also, the amount of the commitment  is
reduced by $10 million for every $100 million in estimated market value net
assets of the Partnership.  The amount available under this commitment for
property purchases as of December 31, 1997 is approximately $47 million.

NOTE 5:  RELATED PARTY TRANSACTIONS

Pursuant to an investment management agreement, Prudential charges the
Partnership a daily investment management fee at an annual rate of 1.25% of the
average daily gross asset valuation of the Partnership.  For the years ended
December 31, 1997, 1996 and 1995 management fees incurred by the Partnership
were $2,640,470; $2,494,229;  and $2,341,878, respectively.

The Partnership also reimburses Prudential for certain administrative services
rendered by Prudential.  The amounts incurred for the years ended December 31,
1997, 1996 and 1995 were $115,346; $116,818; and $123,919, respectively, and are
classified as administrative expenses in the statements of operations.

The Partnership owned a 50% interest in four warehouse/distribution buildings in
Jacksonville, Florida (the Unit warehouses).  The remaining 50% interest was
owned by Prudential and one of its subsidiaries.  In September 1997, the Unit
warehouses were sold as part of an industrial package for cash of $12,544,659.
The partnership's share of the proceeds was $6,272,329.

The Partnership has contracted with PREMISYS Real Estate Services, Inc.
(PREMISYS), an affiliate of Prudential, sold by Prudential in 1997, to provide
property management services at the Unit warehouses.  The property management
fee earned by PREMISYS, incurred by the Partnership and Prudential for the years
ended December 31, 1997, 1996 and 1995 was $32,175; $36,000; and  $31,360,
respectively.


                                         F-21
<PAGE>

Per Share Information (For a share outstanding throughout the period)

<TABLE>
<CAPTION>

                                                                   01/01/97           01/01/96           01/01/95
                                                                      to                 to                 to
                                                                   12/31/97           12/31/96           12/31/95
                                                                   --------           --------           --------
<S>                                                                <C>                <C>                <C>
Rent from properties                                               $  1.8216          $  1.9173          $  1.6387
Income from interest in properties                                 $  0.0367          $  0.0510          $  0.0527
Dividend income from real estate investment trusts                 $  0.0134          $  0.0000          $  0.0000
Interest from short-term investments                               $  0.1946          $  0.1795          $  0.2199
                                                                   ---------          ---------          ---------

INVESTMENT INCOME                                                  $  2.0663          $  2.1478          $  1.9113
                                                                   ---------          ---------          ---------
                                                                   ---------          ---------          ---------

Investment management fee                                          $  0.2229          $  0.2097          $  0.1936
Real estate tax expense                                            $  0.1864          $  0.1991          $  0.1602
Administrative expenses                                            $  0.1963          $  0.1569          $  0.1484
Operating expenses                                                 $  0.2782          $  0.2442          $  0.1546
Interest expense                                                   $  0.0186          $  0.0412          $  0.0381
                                                                   ---------          ---------          ---------
EXPENSES                                                           $  0.9024          $  0.8511          $  0.6949
                                                                   ---------          ---------          ---------
                                                                   ---------          ---------          ---------

NET INVESTMENT INCOME                                              $  1.1639          $  1.2967          $  1.2164
                                                                   ---------          ---------          ---------
                                                                   ---------          ---------          ---------


Net realized gain/(loss) on investments sold                       $  0.0258         ($  0.1323)         $  0.0000
Net unrealized gain/(loss) on investments                          $  0.6903         ($  0.2695)         $  0.0581
                                                                   ---------          ---------          ---------

NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS                                         $  0.7162         ($  0.4018)         $  0.0581
                                                                   ---------          ---------          ---------

Net increase/(decrease) in share value                             $  1.8800          $  0.8949          $  1.2745

Share Value at beginning of period                                 $ 16.6486          $ 15.7537          $ 14.4792
                                                                   ---------          ---------          ---------
Share Value at end of period                                       $ 18.5286          $ 16.6486          $ 15.7537
                                                                   ---------          ---------          ---------
                                                                   ---------          ---------          ---------

Ratio of expenses to average net assets                               5.16%              5.26%              4.62%

Ratio of net investment income to
 average net assets                                                   6.66%              8.01%              8.08%

Number of shares outstanding at
 end of period (000's)                                               11,848             11,848             12,037

</TABLE>

ALL CALCULATIONS ARE BASED ON AVERAGE MONTH-END SHARES OUTSTANDING WHERE
APPLICABLE. PER SHARE INFORMATION PRESENTED HEREIN IS SHOWN ON A BASIS
CONSISTENT WITH THE FINANCIAL STATEMENTS AS DISCUSSED IN NOTE 1G.



                                     F-22

<PAGE>

         THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
               SCHEDULE III - REAL ESTATE OWNED:  PROPERTIES
                             DECEMBER 31, 1997

<TABLE>
<CAPTION>

                           Initial Costs to the Partnership          Costs
                    ------------------------------------------    Capitalized
                                                   Building &    Subsequent to
   Description      Encumbrances       Land       Improvements    Acquisition       Land
   -----------      ------------      --------    ------------   -------------    ----------
<S>                 <C>               <C>         <C>            <C>               <C>
Properties:

Office Building
Lisle, IL               None          1,780,000     15,743,881        393,102      1,780,000

Garden Apartments
Atlanta, GA             None          3,631,212     11,168,904        646,177 (b)  3,631,212

Warehouse
Pomona, CA              None          3,412,636     19,091,210      1,133,203      3,463,515

Retail Shopping Center
Roswell, GA             None          9,454,622     21,513,677        889,899      9,462,951

Office Building
Morristown, NJ          None          2,868,660     12,958,451      3,104,803      2,868,660

Office/Warehouse
Bolingbrook, IL         None          1,373,199      7,302,518        272,311      1,373,199

Garden Apartments
Farmington Hills, MI    None          1,550,000     11,744,571        347,400      1,583,320

Garden Apartments
Raleigh, NC             None          1,623,146     14,135,553         46,160      1,623,146

Office Building
Nashville, TN           None          1,797,000      6,588,451        228,377      1,797,327

Office Park
Oakbrook Terrace, IL    None          1,313,310     11,316,883         95,173      1,313,821

Office Building
Beaverton, OR           None            816,415      9,897,307         14,563        816,415

Industrial Building
Salt Lake City, UT      None            582,457      4,805,676              0        582,457

Industrial Building
Aurora, CO              None          1,338,175      7,202,411              0      1,338,175

Office Complex
Brentwood, TN           None          2,425,000      7,063,755              0      2,425,000
                                   ------------    -----------     ----------    -----------
                                     33,965,832    160,533,248      7,171,168     34,059,198
                                   ------------    -----------     ----------    -----------
                                   ------------    -----------     ----------    -----------

<CAPTION>

                                       Gross Amount at Which
                                       Carried at Close of Year
                        ---------------------------------------------------------
                         Building &                      Year of         Date
 Description            Improvements  Total(a)(b)(c)  Construction     Acquired
 -----------            ------------  --------------  ------------    ---------
<S>                     <C>            <C>            <C>             <C>
Properties:

Office Building
Lisle, IL                 16,136,983     17,916,983       1985        Apr., 1988

Garden Apartments
Atlanta, GA               11,815,081     15,446,293       1987        Apr., 1988

Warehouse
Pomona, CA                20,173,534     23,637,049       1984        Apr., 1988

Retail Shopping Center
Roswell, GA               22,395,247     31,858,198       1988        Jan., 1989

Office Building
Morristown, NJ            16,063,254     18,931,914       1981        Aug., 1988

Office/Warehouse
Bolingbrook, IL            7,574,829      8,948,028       1989        Feb., 1990

Garden Apartments
Farmington Hills, MI      12,058,651     13,641,971       1988        Jan., 1990

Garden Apartments
Raleigh, NC               14,181,713     15,804,859       1995        Jun., 1995

Office Building
Nashville, TN              6,816,501      8,613,828       1982        Oct., 1995

Office Park
Oakbrook Terrace, IL      11,411,545     12,725,366       1988        Dec., 1995

Office Building
Beaverton, OR              9,911,870     10,728,285       1995        Dec., 1996

Industrial Building
Salt Lake City, UT         4,805,676      5,388,133       1997        Jul., 1997

Industrial Building
Aurora, CO                 7,202,411      8,540,586       1997       Sept., 1997

Office Complex
Brentwood, TN              7,063,755      9,488,755       1987        Oct., 1997
                        ------------   ------------
                         167,611,050    201,670,248
                        ------------   ------------
                        ------------   ------------
</TABLE>
<TABLE>
<CAPTION>
                                       1997           1996           1995
                                    ------------    -----------    -----------
<S>                                 <C>             <C>            <C>
(a)   Balance at beginning of year   177,082,291    191,981,608    154,157,068
       Additions:
        Acquisitions                  23,417,474     10,713,722     36,774,343
        Improvements, etc.             1,170,483        550,050      1,050,197
       Deletions:
        Sale                                        (26,163,089)             0
                                    ------------    -----------    -----------
       Balance at end of year        201,670,248    177,082,291    191,981,608
                                    ------------    -----------    -----------
                                    ------------    -----------    -----------
</TABLE>

(b)  Net of $1,000,000 settlement received from lawsuit.


                                   F-23

<PAGE>

        THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
        SCHEDULE III - REAL ESTATE OWNED:  INTEREST IN PROPERTIES
                            DECEMBER 31, 1997

<TABLE>
<CAPTION>

                          Initial Costs to the Partnership          Costs
                        --------------------------------------   Capitalized
                                                   Building &    Subsequent to
   Description          Encumbrances    Land      Improvements    Acquisition         Land
   -----------          ------------    ----      ------------   -------------      ---------
<S>                     <C>           <C>         <C>            <C>              <C>
Interest in properties:

Warehouse/Distribution
Jacksonville, FL            None       $231,119     $1,073,849        $12,485       $231,119

Warehouse/Distribution
Jacksonville, FL            None        176,256        818,935          7,257        176,256

Warehouse/Distribution
Jacksonville, FL            None        255,545      1,187,335             14        255,545

Warehouse/Distribution
Jacksonville, FL            None        415,548      1,930,761         24,053        415,548
                                     ----------     ----------     ----------     ----------
                                     $1,078,468     $5,010,880        $43,809     $1,078,468
                                     ----------     ----------     ----------     ----------
                                     ----------     ----------     ----------     ----------
<CAPTION>

                                         Gross Amount at Which
                                         Carried at Close of Year
                         ----------------------------------------------------------------------
                           Building &        1997                         Year of     Date
  Description             Improvements      Sales         Total (a)    Construction Acquired
  -----------            -------------    ------------    ---------    ------------ -----------
<S>                      <C>              <C>             <C>          <C>          <C>
Interest in properties:

Warehouse/Distribution
Jacksonville, FL            $1,086,334     (1,317,453)            $0       1988     Jan., 1990

Warehouse/Distribution
Jacksonville, FL               826,192     (1,002,448)             0       1986     Jan., 1990

Warehouse/Distribution
Jacksonville, FL             1,187,349     (1,442,894)             0       1982     Jan., 1990

Warehouse/Distribution
Jacksonville, FL             1,954,814     (2,370,362)             0       1979     Jan., 1990
                         -------------    ------------    ---------
                            $5,054,689    ($6,133,157)            $0
                         -------------    ------------    ---------
                         -------------    ------------    ---------
</TABLE>
<TABLE>
<CAPTION>
                                                        1997           1996           1995
                                                     ----------     ----------     ----------
                      <S>                            <C>            <C>            <C>
                      Balance at beginning of year   $6,133,157     $6,133,157     $6,108,742
                       Additions:
                        Acquisitions                          0              0         24,415
                        Improvements, etc.                    0              0              0
                       Deletions:
                        Sale                         (6,133,157)             0              0
                                                     ----------     ----------     ----------
                      Balance at end of year                 $0     $6,133,157     $6,133,157
                                                     ----------     ----------     ----------
                                                     ----------     ----------     ----------
</TABLE>
(a) All of these industrial properties were sold at 9/30/97


                                   F-24