<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, 1998

                                       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)

<TABLE>
<CAPTION>

                                                   INDEX
ITEM                                               -----                                                  PAGE
 NO.                                                                                                       NO.
----                                                                                                      ----
<S>    <C>                                                                                              <C>
         COVER PAGE

         INDEX                                                                                             2

PART I

   1.    BUSINESS                                                                                          3

   2.    PROPERTIES                                                                                        4

   3.    LEGAL PROCEEDINGS                                                                                 4

   4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                               4

PART II

   5.    MARKET FOR THE REGISTRANT'S INTERESTS AND RELATED SECURITY HOLDER MATTERS                         5

   6.    SELECTED FINANCIAL DATA                                                                           5

   7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS                                                                       6

   7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                       15

   8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                      16

   9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
              AND FINANCIAL DISCLOSURE                                                                       16

PART III

   10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                               17

   11.   EXECUTIVE COMPENSATION                                                                           22

   12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                   22

   13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                   22

PART IV

   14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                                 23

         EXHIBIT INDEX                                                                                    23

         SIGNATURES                                                                                       26


</TABLE>


                                                     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 Insurance Company of America, Pruco Life
Insurance Company, and Pruco Life Insurance Company of New Jersey, to provide a
means for assets allocated to the real estate investment 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 are direct
ownership interests in income-producing real estate, such as office buildings,
agricultural land, shopping centers, hotels, apartments, or industrial
properties. Approximately 10% of the Partnership's assets are generally held in
cash or invested in liquid instruments and securities, although the Partners
reserve discretion to increase this amount to meet partnership liquidity
requirements. The remainder of the Partnership's assets are invested in other
types of real estate-related investments, including conventional, non
participating mortgage loans or real estate investment trusts.

         Office Properties - The Partnership owns office properties in Lisle and
         Oakbrook Terrace, IL; Morristown, NJ; Nashville and Brentwood, TN; and
         Beaverton, OR. Total square footage owned is approximately 567,000 of
         which 97% or 549,000 square feet are leased between 1 and 10 years.

         Apartment Complexes - The Partnership owns apartment complexes in
         Atlanta, GA and Raleigh, NC. There are a total of 490 apartment units
         available of which 95% or 463 units are leased. Lease agreements range
         from month to month to one year.

         Retail Property - The Partnership owns a shopping center in Roswell,
         GA. The property is located approximately 22 miles north of downtown
         Atlanta on a 30 acre site. The square footage is approximately 297,000
         of which 98% or 289,000 square feet is leased between 1 and 11 years.

         Industrial Properties - The Partnership owns warehouses and
         distribution centers in Bolingbrook, IL; Aurora, CO; and Salt Lake
         City, UT. Total square footage owned is approximately 685,000 of which
         60% or 413,719 square feet are leased between 2 and 6 years.

         Investment in Real Estate Trust - The Partnership owns 506,894 shares
         of Meridian Industrial Trust, Inc. Meridian is a self-administered and
         self-managed equity real estate investment trust (REIT) engaged in
         owning, operating, and leasing high quality, modern industrial
         properties nationwide.

The Partnership's investments are 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. Section 817(h), requires among
other things that the partnership will have no more than 55% of the assets
invested in any one investment, no more than 70% of the assets will be invested
in any two investments, no more than 80% of the assets will be invested in any
three investments, and no more than 90% of the assets will be invested in any
four investments. To comply with requirements of the State of Arizona, the
Partnership will limit additional investments in any one parcel or related
parcels to an amount not exceeding 10% of the Partnership gross assets as of
the prior fiscal year.

For information regarding the Partnership's investments, operations, and other
significant events, see 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

Not Applicable.

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.

                                        4

<PAGE>



                                     PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S INTERESTS AND RELATED SECURITY
         HOLDER 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 9, 1999, there were approximately 50,445 contract owners of 
record investing in the Real Property Account.

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                                        Year Ended December 31,

                                --------------------------------------------------------------------------------------------

                                      1998              1997               1996               1995               1994
                                -----------------  ----------------   ----------------   ----------------   ----------------
<S>                                <C>                <C>              <C>                  <C>               <C>        
RESULTS OF OPERATIONS:       

Net investment income                $ 15,833,513      $ 13,789,747       $ 15,419,518       $ 14,720,271       $ 12,848,199
                                                         
Net realized and unrealized
  gain (loss) on investment
  in Partnership                        4,795,111         8,485,232         (4,784,583)           661,623          1,339,443
                                 -----------------  ----------------   ----------------   ----------------   ----------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
                                     $ 20,628,624      $ 22,274,979       $ 10,634,935       $ 15,381,894       $ 14,187,642
                                 -----------------  ----------------   ----------------   ----------------   ----------------
                                 -----------------  ----------------   ----------------   ----------------   ----------------


FINANCIAL POSITION:

                                                                       December 31,
                                 --------------------------------------------------------------------------------------------
                                       1998              1997               1996               1995               1994
                                 -----------------  ----------------   ----------------   ----------------   ----------------
Total Assets                         $244,249,272      $222,745,135       $204,156,040       $196,993,758       $183,119,986
                                 -----------------  ----------------   ----------------   ----------------   ----------------
                                 -----------------  ----------------   ----------------   ----------------   ----------------
Long-Term Lease Obligation           $          0      $          0       $  4,072,677       $  3,882,421       $  3,804,836
                                 -----------------  ----------------   ----------------   ----------------   ----------------
                                 -----------------  ----------------   ----------------   ----------------   ----------------

</TABLE>


                                     5


<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 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").

The following analysis of the liquidity and capital resources and results of
operations of the Partnership should be read in conjunction with the audited
financial statements and the accompanying footnotes and other financial
information included elsewhere herein.


(a)      LIQUIDITY AND CAPITAL RESOURCES


As of December 31, 1998, the Partnership's liquid assets consisting of cash,
cash equivalents and marketable securities were $73.5 million, an increase of
$46.7 million from December 31, 1997. This increase was due to net proceeds from
the sales of the Partnership's industrial property located in Pomona, CA and an
apartment complex located in Farmington Hills, MI. In addition, continuing
operations from the Partnership's investment properties contributed $20.6
million to cash during 1998. Sources of liquidity include net cash flow from
property operations, interest from short-term investments, and dividends from
REIT shares.

The Partnership generally holds approximately 10% of its assets in cash or
invested in liquid instruments and securities, however, its investment policy
allows up to 30% investment in cash and short-term obligations. At December 31,
1998, 30% of the Partnership's assets consisted of cash, cash equivalents and
marketable securities.

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 and other available
cash. The amount of the commitment is reduced by $10 million for every $100
million in current value net assets of the Partnership. As of December 31, 1998,
Prudential's equity interest in the Partnership under this commitment was $51
million. At the present time, Prudential does not intend to make further
contributions during the 1999 fiscal year.

The Partners made no withdrawals during 1998; however, on February 1, 1999, the
Partners made a $30 million withdrawal from excess cash. Additional withdrawals
may be made by the Partners during 1999 based upon the percentage of assets
invested in short-term obligations, and taking into consideration anticipated
cash needs of the Partnership including potential property acquisitions,
property dispositions and capital expenditures. Management anticipates that its
current liquid assets and ongoing cash flow from operations will satisfy the
Partnership's needs over the next twelve months and the foreseeable future.

During 1998, the Partnership spent $5.7 million in capital expenditures for
tenant alterations, and improvements in land and buildings. The majority of the
capital expenditures were made to reconfigure the Lisle, IL office building for
multi-tenant capability as it was previously occupied by a single tenant.


                                6

<PAGE>



(b)      RESULTS OF OPERATIONS


The following is a brief discussion  of the Partnership's results of 
operations for the years ended December 31, 1998, 1997 and 1996.

1998 VS. 1997


The following table presents 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, 1998 and December 31, 1997.

<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                               1998                 1997
                                         ------------------   -----------------
<S>                                          <C>                 <C>
NET INVESTMENT INCOME:

Office properties                              $ 7,269,613         $ 5,499,107
Apartment complexes                              4,493,384           3,891,465
Retail property                                  2,702,234           2,856,357
Industrial properties                            1,325,320           2,138,111
Income from interest in properties                  33,462             435,296
Dividend income from real
  estate investment trust                          669,100             158,184
Other (including interest income,
  investment management fee, etc.)                (659,600)         (1,188,773)

                                         ------------------   -----------------
TOTAL NET INVESTMENT INCOME                   $ 15,833,513        $ 13,789,747
                                         ------------------   -----------------

</TABLE>

<TABLE>
<CAPTION>

                                                YEAR ENDED DECEMBER 31,
                                               1998                 1997
                                         ------------------   -----------------
<S>                                          <C>                 <C>

REALIZED AND UNREALIZED GAIN(LOSS)
  ON INVESTMENTS:


Office properties                               $3,034,542          $1,897,749
Apartment                                        2,387,054           1,053,061
complexes
Retail property                                 (1,312,296)          1,109,099
Industrial properties                            1,563,429           1,616,942
Interest in properties                              91,538             284,581
Real estate investment trust                      (969,156)          2,523,800
                                         ------------------   -----------------
TOTAL NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS                                  $4,795,111          $8,485,232
                                         ------------------   -----------------
</TABLE>

The Partnership's net investment income for 1998 was $15.8 million, an increase
of $2.0 million from the prior year. This increase was primarily the result of
increased revenues from real estate and improvements partially offset by
increased operating expenses.

                                         7

<PAGE>


Revenue from real estate and improvements was $24.6 million in 1998, an 
increase of $3.0 million, or 13.9%, from 1997. This increase was primarily 
due to higher occupancy at the Lisle, IL office building and the Aurora, CO 
distribution center coupled with increased rental rates on other properties. 
Interest on short-term investments decreased $0.4 million from 1997. This was 
primarily due to lower average cash and cash equivalent balances during 1998 
compared to the prior year. Cash and cash equivalents through the third 
quarter of 1998 averaged approximately $30.0 million, but increased 
significantly in the last quarter of 1998 due to the sale of two properties 
in Pomona, CA and Farmington Hills, MI.

Property operating expenses increased $0.8 million, or 23.5%, from 1997. This 
increase was due primarily to a full year's operating costs (i.e. 
electricity, repair and maintenance, water, etc.) for one of the Brentwood, 
TN properties which was acquired in late 1997, in addition to operating 
expenses incurred by the Partnership on vacant properties.

Administrative expenses decreased $0.3 million or 16.1%. This decrease was 
due primarily to a reduction in legal expenses.

There was no interest expense during 1998 due to the Partnership's exercise 
of its purchase option under the capital lease obligation.

OFFICE PROPERTIES

In 1998, net investment income from property operations for the office 
properties increased $1.8 million, or 32.2%, from prior year. This increase 
was primarily due to a full year's net investment income for one of the 
Brentwood, TN properties which was acquired in late 1997, as well as the 
leasing of vacant space in the Lisle, IL office property.

Office properties experienced a net unrealized gain of $3.0 million in 1998 
due to improving office market conditions in most of the geographical areas 
where the Partnership has office properties, particularly, the Oakbrook 
Terrace, IL office property in suburban Chicago.

Occupancy at the Beaverton, OR; Oakbrook Terrace, IL; and Brentwood, TN 
properties remained at 100% as of December 31, 1997 while occupancy at the 
Lisle, IL office property increased from 37% to 96% at December 31, 1998. 
Occupancy at the Morristown, NJ property decreased from 99% to 86%.

APARTMENT COMPLEXES

Net investment income from property operations for the apartment complexes 
increased $0.6 million, or 15.5%, from 1997. The majority of this increase 
was due to increased rental rates at the Atlanta, GA apartment complex.

Holdings in the Partnership's two apartment complexes experienced a net 
unrealized gain of $0.6 million during 1998. The Atlanta, GA property was the 
largest contributor to the gain as it appreciated $0.4 million. The gain was 
attributable to increased rental rates at the property. The Raleigh, NC 
property experienced a net unrealized gain of $0.2 million due to increased 
occupancy rates. The Farmington Hills, MI property was sold on October 7, 
1998 for a price of $16.9 million, which resulted in a realized gain of $1.7 
million.

At the end of December 31, 1998, occupancy at the Atlanta, GA and Raleigh, NC 
apartment complex was 96% and 93%, respectively.

RETAIL PROPERTIES

In 1998, the retail center experienced a net unrealized loss of $1.3 million, 
which is a reflection of lower rents. Occupancy at the shopping center was 
98% at December 31, 1998, which was an increase of 2% from the prior year.

INDUSTRIAL PROPERTIES

Net investment income from property operations for the industrial properties 
decreased $0.8 million, or 38.0%, from 1997. The decrease was attributable to 
the sale of Pomona Industrial Park, which accounted for 82% of the decrease.


                                    8

<PAGE>


The three industrial properties experienced a net unrealized gain of $0.3 
million during 1998. The Pomona, CA property was sold on December 17, 1998 
for $21.4 million, which resulted in a realized gain of $1.2 million.

Occupancy at the Bolingbrook, IL property remained unchanged at 100%.  
Occupancy at the Salt Lake City, UT and Aurora, CO property increased to 
33.6% and 46%, respectively from  prior year.

REAL ESTATE INVESTMENT TRUST

On September 24, 1997 the Partnership acquired 506,894 shares of Meridian  
Industrial REIT. Dividend income from the REIT increased $0.5 million from 
1997.


The Partnership held 506,894 shares of Meridian Industrial REIT throughout 1998.
As of December 31, 1998, the REIT shares experienced an unrealized loss of $1.0
million. The Valuation Unit of Prudential applies a 3% discount to the market
value of the REIT shares. This discount is applied because of the restriction
which limits the number of shares that can be publicly traded during any six
month period to 30% of the total shares originally acquired.


OTHER

Other net investment loss, which includes interest income from short-term
investments, investment management fees, and expenses not related to property
activities, narrowed by $0.5 million. The improved result was due to increased
investment management fee in addition to a reduction in administrative expenses.


1997 VS. 1996

The following table presents 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.

<TABLE>
<CAPTION>

                                                YEAR ENDED DECEMBER 31,
                                              1997                  1996
                                        ------------------    ------------------
<S>                                         <C>                  <C>
NET INVESTMENT INCOME:

Office properties                             $ 5,499,107           $ 5,817,497
Apartment complexes                             3,891,465             3,925,750
Retail property                                 2,856,357             3,129,390
Industrial properties                           2,138,111             3,188,769
Income from interest in properties                435,296               606,558
Dividend income from real
  estate investment trust                         158,184                     -
Other (including interest income,
  investment management fee, etc.)             (1,188,773)           (1,248,446)

                                        ------------------    ------------------
TOTAL NET INVESTMENT INCOME                  $ 13,789,747          $ 15,419,518
                                        ------------------    ------------------





                                         9


<PAGE>



<S>                                          <C>                 <C>
REALIZED AND UNREALIZED GAIN
  ON INVESTMENTS:
Office properties                              $1,897,749           ($1,654,344)              
Apartment complexes                             1,053,061             1,209,970
Retail property                                 1,109,099            (3,786,554)
Industrial properties                           1,616,942              (553,655)
Interest in properties                            284,581                     -
Real estate investment trust                    2,523,800                     -
                                        ------------------    ------------------
TOTAL NET REALIZED AND UNREALIZED                              
GAIN ON INVESTMENTS                           $ 8,485,232           ($4,784,583)
                                        ------------------    ------------------

</TABLE>

The Partnership's net investment income for 1997 was $13.8 million,  a 
decrease of $1.6 million from 1996. This decrease was primarily the result 
of market conditions in the industrial properties.

Income from interest in properties relates to the Partnership's 50%
co-investment in several warehouse properties (the unit warehouses). Income from
this source was $0.4 million in 1997, a decrease of 28.2% from 1996. This
decrease was attributable to the sale of the Partnership's interest in these
properties on September 30, 1997.

Administrative expenses on the Statement of Operations include both those
related to property operations and the administration of the Partnership.
Property administrative expenses in 1997 were $2.0 million, an increase of $0.4
million, or 21.5%, from 1996. This increase was primarily due to the acquisition
of three new properties as well as a full year of administrative expenses for a
property acquired at the end of 1996. Administrative expenses related to the
Partnership were $0.3 million in 1997, an increase of $0.1 million, or 49.7%,
from 1996. Increased legal reserves relating to potential litigation contributed
to the majority of the variance.

Property operating expenses for 1997 were $3.3 million, an increase of $0.4
million, or 13.5%, from 1996. This increase was primarily due to a full year of
ownership in 1997 of the office property in Beaverton, OR, and expenses incurred
in 1997 for new acquisitions, such as, the industrial buildings in Salt Lake
City, UT and Aurora, CO. Together these three properties contributed $0.3
million to the increased operating expenses. The acquisition of the office
building in Brentwood, TN contributed $0.1 million to the increase.


OFFICE PROPERTIES

Net investment income from property  operations for the office  properties in 
1997 was $5.5 million.  This was a decrease of $0.3 million or 5.5% from 1996.

The office properties experienced a net unrealized gain of $1.9 million in 1997.
The office property in Oakbrook Terrace, IL experienced the largest unrealized
gain that was attributable to the improving office market conditions in suburban
Chicago. In addition, the Morristown, NJ and Brentwood, TN office properties
also experienced net unrealized gains of $0.5 million and $0.6 million,
respectively.

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 $9.5
million. Occupancy at the time of acquisition, was at maximum capacity.

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 at the Lisle,
IL office property dropped from 100% to 37% in 1997.


APARTMENT COMPLEXES

In 1997, net investment income from apartment property operations was $3.9
million which was unchanged from the prior year.


                                 10

<PAGE>



The three apartment communities experienced a net unrealized gain of $1.0 
million during 1997. The Atlanta, GA property was the largest contributor to 
the gain as it appreciated $1.3 million. This gain was attributable to 
increased rental rates and occupancy at the property. The Raleigh, NC 
community had a net unrealized loss of $0.4 million 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% to 94.3% from December 31, 1996. 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. Occupancy at the Raleigh, NC community decreased from 97% to 91% in 
1997.

RETAIL PROPERTIES

Net investment income for the Partnership's retail property decreased by $0.3 
million, or 8.7%, to $2.9 million in 1997. This decrease was primarily the 
result of decreased occupancy at the shopping center earlier in the year. The 
shopping center was 96% occupied as of December 31, 1997, unchanged from the 
prior year.

The retail center experienced an unrealized gain of $1.1 million. 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%.

INDUSTRIAL PROPERTIES

In 1997, net investment income from industrial property operations was $2.1 
million, a decrease of $1.0 million, or 32.9%, in 1996. The decline was 
attributable to the sale of the industrial complex in Azusa, CA, in April 
1996, which accounted for $0.6 million 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 1997 and 1996, net investment 
income was $2.0 million and $1.9 million, 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 $5.4 
million. The second acquisition was a two building 277,500 square foot 
facility in Aurora, CO for $8.5 million. As of December 31, 1997, both 
properties were vacant. The third acquisition was the land under the 
Partnership's existing Pomona CA, industrial complex. The Partnership 
acquired the land under a purchase option for $3.5 million.

The industrial properties (including the recently purchased land) had $1.9 
million of net unrealized appreciation in 1997. The largest single gain of 
$1.7 million was attributable to the purchase of the land under the Pomona, 
CA property. The Salt Lake City, UT and Aurora, CO properties experienced 
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.

The partnership sold its interest in the Jacksonville, FL warehouses for net 
sales proceeds of $6.3 million, resulting in a gain of $0.3 million.

REAL ESTATE INVESTMENT TRUST

Dividend income from REITs totaled $0.1 million in 1997. The Partnership 
acquired 506,894 shares Meridian for $10.0 million 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 $2.5 million net unrealized gain.


                             11

<PAGE>


(c)      PER SHARE INFORMATION

Following is an analysis of the Partnership's net investment income and net
realized and unrealized gain (loss) on investments, presented on a per share
basis:

<TABLE>
<CAPTION>



                                                       01/01/98             01/01/97         01/01/96
                                                          TO                   TO               TO
                                                       12/31/98             12/31/97         12/31/96
                                                       --------             --------         --------
<S>                                                  <C>                  <C>              <C>
Revenue from real estate and improvements              $ 2.0739             $ 1.8216         $ 1.9173
Income from interest in properties                     $ 0.0028             $ 0.0367         $ 0.0510
Dividend income from real estate investment
  trusts                                               $ 0.0565             $ 0.0134         $ 0.0000
Interest on short-term investments                     $ 0.1594             $ 0.1946         $ 0.1795
                                                       --------             --------         --------

TOTAL INVESTMENT INCOME                                $ 2.2926             $ 2.0663         $ 2.1478
                                                       --------             --------         --------

Investment management fee                              $ 0.2448             $ 0.2229         $ 0.2097
Real estate taxes                                      $ 0.2031             $ 0.1864         $ 0.1991
Administrative expense                                 $ 0.1647             $ 0.1963         $ 0.1569
Operating expense                                      $ 0.3437             $ 0.2782         $ 0.2442
Interest expense                                       $ 0.0000             $ 0.0186         $ 0.0412
                                                       --------             --------         --------
TOTAL INVESTMENT EXPENSES                              $ 0.9563             $ 0.9024         $ 0.8511
                                                       --------             --------         --------

NET INVESTMENT INCOME                                  $ 1.3363             $ 1.1639         $ 1.2967
                                                       --------             --------         --------


Net gain (loss) realized on real estate
  investments sold                                     $ 0.2575             $ 0.0258        $ (0.1323)
Change in unrealized gain (loss) on real               $ 0.1472             $ 0.6903        $ (0.2695)
  estate investments sold                              --------             --------        ----------

NET REALIZED AND UNREALIZED
  GAIN (LOSS) ON INVESTMENTS                           $ 0.4047             $ 0.7162        $ (0.4018)
                                                       --------             --------        ----------
                                                       --------             --------        ----------

Net change in share value                              $ 1.7410             $ 1.8800         $ 0.8949

Share value at beginning of period                     $ 18.5286           $ 16.6486        $ 15.7537
                                                       ---------           ---------        ---------
Share value at end of period                           $ 20.2696           $ 18.5286        $ 16.6486
                                                       --------             --------        ----------
                                                       --------             --------        ----------

Ratio of expenses to average net assets                     4.99%               5.16%            5.26%

Ratio of net investment income to
 average net assets                                         6.97%               6.66%            8.01%

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

</TABLE>

ALL CALCULATIONS ARE BASED ON AVERAGE MONTH-END SHARES OUTSTANDING WHERE
APPLICABLE.

                                       12

<PAGE>

(d)      THE YEAR 2000 ISSUE


The Partnership utilizes many of the same business applications, 
infrastructure and business partners as Prudential. Prudential has addressed 
the Year 2000 issue on an enterprise-wide basis. Therefore, it is not 
possible to differentiate the Partnership's Year 2000 issue from that of 
Prudential. The accompanying discussion of the Year 2000 issue reflects steps 
taken by Prudential to mitigate the Year 2000 risks.

Many computer systems are programmed to recognize only the last two digits in 
a date. As a result, any computer system that has date-sensitive programming 
may recognize a date using "00" as the year 1900 rather than the year 2000. 
This problem can affect non-information technology systems that include 
embedded technology, such as microprocessors included in "infrastructure" 
equipment used for telecommunications and other services as well as computer 
systems. If this anomaly is not corrected, the year "00" could cause systems 
to perform date comparisons and calculations incorrectly, which could in turn 
affect the accuracy and compromise the integrity of business records. 
Business operations could be interrupted when companies are unable to process 
transactions, send invoices, or engage in similar normal business activities.

Prudential established a Company-wide Program Office (CPO) to develop and 
coordinate an operating framework for the Year 2000 compliance activities. 
Prudential's CPO structured the Year 2000 program into three major 
components: Business Applications, Infrastructure and Business Partners. The 
CPO also established quality assurance procedures including a certification 
process to monitor and evaluate enterprise-wide progress of each component of 
Prudential's program for conversion and upgrading of systems for Year 2000 
compliance.

BUSINESS APPLICATIONS


The scope of the Business Applications component includes a wide range of 
computer systems that directly support Prudential's business operations and 
accounting systems. The entire application portfolio was analyzed in 1996 to 
determine appropriate Year 2000 readiness strategies (i.e., renovate, replace 
or retire). Rigorous testing standards have been employed for all 
applications that will not be retired, including those that are newly 
developed or purchased. Application replacement and renovation projects 
follow a similar path toward Year 2000 compliance. The key project phases 
include Year 2000 analysis and design, programming activities, testing, and 
implementation. Replacement projects are also tracked until the existing 
applications are removed from production.

Of Prudential's total application portfolio, approximately 70% of the 
applications are being renovated, 13% are being replaced by Year 2000 
compliant systems, and the remaining 17% are being retired from production. 
At December 31, 1998, the percentage of business applications (based on 
application count) in the implementation phase for Year 2000 compliance for 
renovation, replacement and retirement are 99%, 96% and 99%, respectively. 
The overall completion date for Business Applications is June 1999.

INFRASTRUCTURE

The scope of Prudential's Year 2000 Infrastructure initiatives include 
mainframe computer system hardware and operating system software, mid-range 
systems and servers, telecommunications equipment, buildings and facilities 
systems, personal computers, and vendor hardware and software.

Although there are minor differences among these various components, the 
approach to Year 2000 readiness for Infrastructure generally involves phases 
identified as inventory, assessment, remediation activities (e.g., upgrading 
hardware or software), testing and implementation. The overall completion 
date for Infrastructure is June 1999.

BUSINESS PARTNERS

Prudential's approach to business partner readiness includes classification 
of each partner's status as "highly critical" or "less critical" and the 
development of contingency plans to address the potential that a business 
partner could experience a Year 2000 failure. Approximately 30% of our 
business partners have been identified as highly critical and the remaining 
70% as less critical. Project phases include inventory, risk assessment, and 
contingency planning

                              13

<PAGE>


activities. All project phases for highly critical business partner readiness 
were achieved in December 1998; we have an overall completion date for less 
critical business partner readiness is June 1999.

THE COST OF YEAR 2000 READINESS


Prudential is funding the Year 2000 program from operating cash flows. Some of
the expenses of Prudential's Year 2000 readiness are allocated across its
various businesses and subsidiaries, including the Partnership. Expenses related
to the Year 2000 initiatives allocated to the Partnership are part of systems
overhead costs and are included in the Partnership's general and administrative
expenses. The Year 2000 costs allocated to the Partnership to date are not
material to its operations and financial conditions. Moreover, the forecasted
allocated Year 2000 costs are not expected to have a material impact on the
Partnership's ability to meet its contractual commitments.


YEAR 2000 RISKS AND CONTINGENCY PLANNING


The major portion of Prudential's transactions are of such volume that they can
only be effectively processed through the use of automated systems. Therefore,
substantially all of Prudential's contingency plans include the ultimate
resolution of any causative technology failures that may be encountered.

Prudential believes that the Business Application, Infrastructure and Business
Partners components of the Year 2000 project are substantially on schedule.
While management expects a small number of the projects may not meet their
targeted completion date, it is anticipated that these projects will be
completed by September 1999 so that any delays, if experienced, would not have a
significant impact on the timing of the project as a whole. During the course of
the Year 2000 program, some discretionary technology projects have been delayed
in favor of the completion of Year 2000 projects. However, this impact has been
minimized by Prudential's strategic decision to outsource most of the Year 2000
renovation work.

While Prudential and its subsidiaries believe that they are well positioned to
mitigate its Year 2000 issue, this issue, by its nature contains inherent
uncertainties, including the uncertainty of Year 2000 readiness of third
parties. Consequently, the Partnership is unable to determine at this time
whether the consequences of Year 2000 failures will have a material adverse
effect on the Partnership's results of operations, liquidity or financial
condition. In the worst case, it is possible that any technology failure,
including an internal or external Year 2000 failure, could have a material
impact on the Partnership results of operations, liquidity, or financial
position.

Prudential is enhancing existing business contingency plans to mitigate Year
2000 risk. Current contingency plans include planned responses to the failure of
specific business applications or infrastructure components. These responses are
being reviewed and expected to be finalized by June 1999 to ensure that they are
workable under the special conditions of a Year 2000 failure. The plans are also
being updated to reduce the level of uncertainty about the Year 2000 problem
including readiness of Prudential's Business Partners.

The discussion of the Year 2000 Issue herein, and in particular Prudential's
plans to remediate this issue and the estimated costs thereof, are
forward-looking in nature. See cautionary statement below relating to
forward-looking statements.



(e)      INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS


Certain of the statements contained in Management's Discussion and Analysis may
be considered forward-looking statements. Words such as "expects," "believes,"
"anticipates," "intends," "plans," or variations of such words are generally
part of forward-looking statements. Forward-looking statements are made based
upon management's current expectations and beliefs concerning future
developments and their potential effects upon the Company. There can be no
assurance that future developments affecting the Company will be those
anticipated by management. There are certain important factors that could cause
actual results to differ materially from estimates or expectations reflected in
such forward-looking statements including without limitation, changes in general
economic conditions, including the performance of financial markets and interest
rates; market acceptance of new products and distribution channels;

                            14


<PAGE>

competitive, regulatory or tax changes that affect the cost or demand for the 
Company's products; and adverse litigation results. While the Company 
reassesses material trends and uncertainties affecting its financial 
condition and results of operations, it does not intend to review or revise 
any particular forward-looking statement referenced in this Management's 
Discussion and Analysis in light of future events. The information referred 
to above should be considered by readers when reviewing any forward-looking 
statements contained in this Management's Discussion and Analysis.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Account and the Partnership are not subject to significant exposure to
market rate risk for changes in interest rates because the Partnership's
financial instruments consist primarily of short-term fixed rate commercial
paper and neither the Account nor the Partnership use derivative financial
instruments. Further, by policy, the Partnership places its investments with
high quality debt security issuers, limits the amount of credit exposure to any
one issuer, limits duration by restricting the term, and holds investments to
maturity except under rare circumstances.


                               15


<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data are listed in the 
accompanying Index to the Financial Statements and Supplementary Data on F-1 
and F-2.

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

None.


                              16

<PAGE>



                                   PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 



                            DIRECTORS OF PRUDENTIAL


FRANKLIN E. AGNEW--Director since 1994 (current term expires April, 2000). 
Member,  Committee on Finance & Dividends;  Member Corporate  Governance 
Committee.  Business  consultant since 1986. Senior Vice President,  H.J. 
Heinz from 1971 to 1986. Mr. Agnew is also a director of Bausch & Lomb, Inc. 
and Erie Plastics Corporation. Age 64.

FREDERICK K. BECKER--Director since 1994 (current term expires April, 
1999). Member, Auditing Committee; Member, Corporate  Governance  
Committee. President, Wilentz Goldman and Spitzer, P.A. (law firm) since 
1989, with firm since 1960. Age 63.

GILBERT F. CASELLAS--Director since 1998 (current term expires April, 
1999). President, The Swarthmore Group, Inc. since 1999.  Partner,  
McConnell Valdes, LLP in 1998. Chairman, U.S. Equal Employment Opportunity 
Commission from 1994 to 1998. General Counsel, Department of Air Force from 
1993 to 1994. Age 46.

JAMES G. CULLEN--Director since 1994 (current term expires April, 2001).  
Member,  Compensation  Committee;  Member,  Committee on Business  Ethics. 
President & Chief Operating  Officer,  Bell Atlantic  Corporation,  since 
1998.  President & Chief  Executive  Officer, Telecom Group,  Bell Atlantic 
Corporation,  from 1997 to 1998. Vice Chairman, Bell Atlantic Corporation 
from 1995 to 1997. President, Bell Atlantic Corporation from 1993 to 1995. 
Mr. Cullen is also a director of Bell Atlantic Corporation and Johnson & 
Johnson. Age 56.

CAROLYNE K. DAVIS--Director since 1989 (current term expires April, 2001).  
Member,  Committee on Business Ethics;  Member,  Compensation  Committee. 
Independent Health Care Advisor since 1997.  National and International  
Health Care Advisor,  Ernst & Young, LLP from 1985 to 1997. Dr. Davis is also 
a director of Beckman Coulter Instruments, Inc., Merck & Co. Inc., Minimed 
Incorporated, and Beverley Enterprises. Age 67.

ROGER A. ENRICO--Director since 1994 (current  term  expires  April,  
2002).  Member,  Committee  on  Nominations  & Corporate  Governance;  
Member, Compensation  Committee.  Chairman and Chief  Executive  Officer,  
PepsiCo,  Inc.  since 1996. Mr. Enrico  originally  joined  PepsiCo, Inc. in 
1971. Mr. Enrico is also a director of A.H. Belo Corporation and Dayton 
Hudson Corporation. Age 54.

ALLAN D. GILMOUR--Director since 1995 (current term expires April, 1999). 
Member, Investment  Committee;  Member,  Committee on Finance & 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, MeidiaOne Group, Inc., AP Automotive Systems, Inc., 
The Dow Chemical Company and DTE Energy Company. Age 64.

WILLIAM H. GRAY, III--Director since 1991 (current term expires April,  
2000).  Member,  Executive  Committee;  Member,  Committee on Business 
Ethics; Chairman,  Committee on Nominations & Corporate  Governance.  
President and Chief Executive Officer, The College Fund/UNCF since 1991. Mr. 
Gray served in Congress from 1979 to 1991. Mr. Gray is also a director of 
Chase Manhattan Corporation;  Municipal Bond Investors Assurance  
Corporation;  Rockwell International Corporation; Union-Pacific Corporation; 
Warner-Lambert Company; CBS Corporation; and Electronic Data Systems. Age 57.

JON F. HANSON--Director since 1991 (current term expires April, 2003). 
Member,  Investment Committee;  Member,  Committee on Business Ethics. 
Chairman, Hampshire  Management  Company since 1976. Mr. Hanson is also a 
director of James E. Hanson  Management  Company;  Neumann  Distributors,  
Inc.; Fleet Trust and Investment  Services Company,  N.A.; United Water 
Resources;  Orange & Rockland  Utilities,  Inc.; and Consolidated  Delivery 
and Logistics. Age 62.

GLEN H. HINER, JR.--Director since 1997 (current term expires April, 2001).  
Member,  Compensation  Committee.  Chairman and Chief Executive Officer, 
Owens Corning since 1991. Senior Vice President and Group Executive,  
Plastics Group,  General Electric Company from 1983 to 1991. Mr. Hiner is 
also a director of Dana Corporation and Owens Corning. Age 64.

                                    17


<PAGE>

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

GAYNOR N. KELLEY--Director since 1997 (current  term expires  April,  2001). 
Member,  Auditing  Committee.  Retired  since 1996.  Chairman and Chief 
Executive Officer,  The Perkin Elmer Corporation from 1990 to 1996. Mr. 
Kelley is also a director of Hercules  Incorporated,  and Alliant 
Techsystems. Age 67.

BURTON G. MALKIEL--Director since 1978 (current term expires April, 2002).  
Chairman,  Investment  Committee;  Member,  Executive Committee;  Member, 
Committee on Finance & Dividends.  Professor of Economics,  Princeton 
University,  since 1988. Dr. Malkiel is also a director of Banco Bilbao 
Vizcaya; Baker Fentress & Company; The Jeffrey Company; The Southern New 
England Telecommunications Company; and Vanguard Group, Inc. Age 66.

ARTHUR F. RYAN--Chairman of the Board, President and Chief Executive Officer 
of Prudential since 1994. President and Chief Operating Officer, Chase 
Manhattan Bank from 1990 to 1994, with Chase since 1972. Age 56.

IDA F.S. SCHMERTZ--Director since 1997 (current term expires April, 2004). 
Member, Audit Committee.  Principal, Investment Strategies  International 
since 1994. Age 64.

CHARLES R. SITTER--Director since 1995 (current term expires April, 1999). 
Member,  Committee on Finance & Dividend;  Member,  Investment  Committee. 
Retired since 1996. President, Exxon Corporation from 1993 to 1996. Mr. 
Sitter began his career with Exxon in 1957. Age 68.

DONALD L. STAHELI--Director since 1995 (current term expires April, 1999). 
Member,  Compensation Committee;  Member, Auditing Committee.  Retired since 
1996.  Chairman and Chief Executive Officer,  Continental Grain Company from 
1994 to 1997.  President and Chief Executive  Officer,  Continental Grain 
Company from 1988 to 1994.  Mr.  Staheli is also director of Bankers Trust  
Company;  Conti-Financial  Corporation;  and  Continental  Grain  Company. 
Age 67.

RICHARD M. THOMSON--Director since 1976 (current term expires April, 2000). 
Chairman,  Executive Committee;  Chairman,  Compensation Committee. Retired 
since 1998.  Chairman of the Board, The  Toronto-Dominion  Bank from 1997 to 
1998. Chairman and Chief Executive Officer from 1978 to 1997. Mr. Thomson is 
also a director of CGC,  Inc.;  INCO;  Limited;  S.C.  Johnson & Son, Inc.;  
The Thomson  Corporation;  Canadian  Occidental  Petroleum,  Ltd.; The 
Toronto-Dominion Bank; and Ontario Hydro.  Age 64.

JAMES A. UNRUH--Director since 1996 (current term expires April, 2000). 
Member,  Committee on Nominations & Corporate  Governance;  Member,  
Investment Committee.  Retired  since 1997.  Chairman  and Chief  Executive  
Officer,  Unisys  Corporation, from 1990 to 1997.  Mr. Unruh is also a 
director of Ameritech Corporation and Moss Micro. Age 57.

P. ROY VAGELOS, M.D.--Director since 1989 (current term expires April, 2001). 
Chairman,  Auditing Committee;  Member,  Executive  Committee;  Member, 
Committee on Nominations & Corporate  Governance.  Chairman,  Regeneron  
Pharmaceuticals  since 1995. Chairman,  Advanced Medicines,  Inc. since 1997. 
Chairman,  Chief Executive  Officer and President,  Merck & Co., Inc. from 
1986 to 1995. Dr. Vagelos is also a director of The Estee Lauder Companies, 
Inc. and PepsiCo., Inc. Age 69.

STANLEY C. VAN NESS--Director since 1990 (current term expires April, 2002). 
Chairman,  Committee on Business Ethics;  Member,  Executive  Committee; 
Member,  Auditing Committee.  Partner,  Herbert,  Van Ness, Cayci & Goodell 
(law firm) since 1998.  Counselor at Law, Picco Herbert Kennedy (law firm) 
from 1990 to 1998. Mr. Van Ness is also a director of Jersey Central Power & 
Light Company. Age 64.

PAUL A. VOLCKER--Director since 1988 (current term expires April, 2000).  
Chairman,  Committee on Finance & Dividends;  Member,  Executive Committee; 
Member,  Committee on Nominations & Corporate Governance.  Consultant since 
1997. Chairman,  Wolfensohn & Co., Inc. from 1988 to 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 director of 
Nestle, S.A., and Bankers Trust New York Corporation as well as a Director 
of the Board of Overseers of TIAA-CREF. Age 71.

                                18

<PAGE>


JOSEPH H. WILLIAMS--Director since 1994 (current term expires April, 2002). 
Member,  Committee on Finance & Dividends;  Member,  Investment Committee. 
Director,  The Williams  Companies since 1979.  Chairman & Chief Executive 
Officer,  The Williams Companies from 1979 to 1993.  Mr. Williams is also a 
director of The Orvis Company; MTC Investors, LLC.; and AEA Investors, Inc. 
Age 65.

                                19


<PAGE>




                      PRINCIPAL OFFICERS OF THE PRUDENTIAL



ARTHUR F. RYAN--Chairman of the Board,  President and Chief Executive Officer 
since 1994; prior to 1994,  President and Chief Operating Officer,  Chase 
Manhattan Corporation, New York, NY. Age 56.

E. MICHAEL CAULFIELD--Executive Vice President, Financial Management since 
1998; Chief Executive Officer, Prudential Investments from 1995 to 1998; 
Chief Executive Officer, Money Management Group in 1995; prior to 1995, 
President, Prudential Preferred Financial Services. Age 52.

MICHELE S. DARLING--Executive  Vice President Human Resources since 1997; 
prior to 1997, Executive Vice President,  Canadian Imperial Bank of Commerce, 
Toronto, Canada. Age 45.

ROBERT C. GOLDEN--Executive  Vice President Operations and Systems since 
1997; prior to 1997,  Executive Vice President,  Prudential  Securities,  New 
York, NY. Age 53.

MARK B. GRIER--Executive Vice President, Corporate Governance since 1998; 
Executive Vice President, Financial Management from 1997 to 1998; Chief 
Financial Officer from 1995 to 1997; prior to 1995, Executive Vice President, 
Chase Manhattan Corporation, New York, NY. Age 46.

JEAN D. HAMILTON--Executive  Vice President,  Prudential  Institutional  
since 1998;  President,  Diversified Group since 1995 to 1998; prior to 1995, 
President, Prudential Capital Group. Age 52.

RODGER A. LAWSON--Executive Vice President, International Investments & 
Global Marketing Communications since 1998; Executive Vice President, 
Marketing and Planning from 1996 to 1998; President and CEO, Van Eck Global, 
New York, NY, from 1994 to 1996; prior to 1994, President and CEO, Global 
Private Banking, Bankers Trust Company, New York, NY. Age 52.

KIYOFUMI SAKAGUCHI--Executive Vice President, International Insurance since 
1998; President, International Insurance Group from 1995 to 1998; prior to 
1995, Chairman and CEO, The Prudential Life Insurance Co., Ltd., Japan. Age 
56.

JOHN V. SCICUTELLA--Executive Vice President, Individual Financial Services 
since 1998; Chief Executive Officer, Individual Insurance Group from 1997 to 
1998; Executive Vice President Operations and Systems from 1995 to 1997; 
prior to 1995, Executive Vice President, Chase Manhattan Corporation. Age 49.

JOHN R. STRANGFELD--Executive Vice President, Global Asset Management since 
1998; Chief Executive Officer, Private Asset Management Group (PAMG) from 
1996 to 1998; President, PAMG, from 1994 to 1996; prior to 1994, Senior 
Managing Director. Age 45.

JAMES J. AVERY, JR.--Senior Vice President & Chief Actuary, Individual 
Insurance Group since 1997; President Prudential Select from 1996 to 1997; 
prior to 1995, Executive Vice President and Chief Operating Officer, 
Prudential Select. Age 47.

MARTIN A. BERKOWITZ--Senior  Vice President,  Financial Management since 
1998; Senior Vice President and Comptroller from 1995 to 1998; prior to 1995, 
Senior Vice President and CFO, Prudential Investment Corporation. Age 50.

WILLIAM M. BETHKE--Senior Vice President and Chief Investment Officer since 
1997; prior to 1997,  President, Capital Management Group. Age 51.

ANNE E. BOSSI--Senior Vice President,  Institutional since 1998; President,  
Group Life & Disability 1997 to 1998; President, Group Life Insurance 1995 to 
1997; prior to 1995, President, Northeastern Group Operations. Age 47.

RICHARD J. CARBONE--Senior  Vice President and Chief Financial  Officer since 
1997.  Controller,  Salomon  Brothers,  New York, NY, from 1995 to 1997; 
prior to 1995, Controller, Bankers Trust, New York, NY. Age 51.

THOMAS J. CARROLL--  Senior Vice President and Chief Auditor since 1998.  
Managing  Director,  Bankers Trust Company from 1996 to 1998;  prior to 1996, 
Global Chief Auditor and Managing Director, Credit Suisse First Boston. Age 
57.

                              20

<PAGE>

THOMAS W. CRAWFORD--Senior Vice President, Individual Financial Services since
1998; President and Chief Executive Officer, Prudential Property & Casualty
Company from 1996 to 1998; Vice President, Prudential Property & Casualty
Company in 1996; prior to 1996, President & CEO, Southern Heritage Insurance
Company. Age 55.

MARK R. FETTING--Senior Vice President,  Retirement Services,  Institutional 
since 1996;  President,  Prudential Retirement Services from 1992 to 1996; 
prior to 1992, Partner, Greenwich Associates. Age 44.

WILLIAM D. FRIEL--Senior Vice President and Chief Information  Officer since 
1996; prior to 1996, Chief Executive Officer,  Prudential Service Company. 
Age 60.

MICHAEL J. HINES--Senior Vice President, Marketing and Communications since 
1999; 1996 to 1998 Vice President, Marketing and Communications.  Age 47.

RONALD P. JOELSON--Senior Vice President, Guaranteed Products, Global Asset 
Management since 1997; Senior Vice President, Guaranteed Products, Guaranteed 
Investments from 1996 to 1997; Vice President, Guaranteed Investments, 
Guaranteed Products from 1996 to 1996; prior to 1996, Managing Director, 
Retirement Services. Age 40.

IRA J. KLEINMAN--Senior  Vice President,  International  Insurance Group,  
since 1997; prior to 1997, Chief Marketing & Product  Development  Officer. 
Age 51.

KATHLEEN KRALL--Senior Vice President, Individual Financial Services since 
1999; Vice President, Individual Financial Services from 1996 to 1999; Vice 
President, Operations and Systems from 1995 to 1996; prior to 1995 Vice 
President, Chase Manhattan Bank. Age 41.

JOYCE R. LEIBOWITZ--Senior  Vice President,  Management Internal Controls 
since 1999; Vice President,  Management Internal Controls from 1995 to 1999; 
prior to 1995 Integrated Control Officer.  Age 51.

JOHN M. LIFTIN--Senior  Vice  President  and General  Counsel since 1998;  
Self-employed  from 1997 to 1998;  prior to 1997 Senior Vice  President and 
General Counsel, Kidder & Peabody Group, Inc.  Age 55.

NEIL A. MCGUINNESS--Senior  Vice President,  Marketing,  Prudential  
Investments,  since 1996; Director,  Putnam Investments,  in 1996; prior to 
1996, President, Fidelity Investment Employer Services Company. Age 52.

PRISCILLA A. MYERS--Senior  Vice  President,  Demutualization  since 1998;  
Senior Vice President and Auditor from 1995 to 1998;  prior to 1995,  Vice 
President and Auditor. Age 48.

I. EDWARD PRICE--Senior  Vice President  since 1996;  Senior Vice President 
and Actuary from 1995 to 1996;  prior to 1995,  Chief  Executive  Officer, 
Prudential International Insurance.  Age 56.

ROBERT J. SULLIVAN--Senior  Vice President,  Mutual Funds Sales,  Individual 
Financial Services since 1997; prior to 1997, Managing Director,  Fidelity 
Investments, Boston. Age 60.

SUSAN J. BLOUNT--Vice President and Secretary since 1995; prior to 1995, 
Assistant General Counsel. Age 41.

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

ANTHONY S. PISZEL--Vice  President and Controller since 1998; Vice President, 
Enterprise  Financial Management from 1997 to 1998; prior to 1997, Chief 
Financial Officer, Individual Insurance Group.  Age 44.

                                 21

<PAGE>


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.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Related Party Transactions in note 5 of Notes to Financial Statements on
page F - 18.

                           22



<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 Statements and Supplementary Data on
               page F-1.

        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:

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

               See the Index to Financial Statements and Supplementary Data on
               page F-1.

        3.     Documents Incorporated by Reference

               See the following list of exhibits.

        4.     Exhibits

               See the following list of exhibits.

(b)     None.

(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, 1998. 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.

                        23

<PAGE>



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

        18.    None.

        21.    Not applicable.

        22.    Not applicable.

        23.    None.



                            24


<PAGE>



        24.    Power of Attorney: F. Agnew, F. Becker, J. Cullen, C. Davis, R.
               Enrico, A. Gilmour, W. Gray III, J. Hanson, G. Hiner, C. Horner,
               G. Kelley, B. Malkiel, A. Ryan, I. Schmertz, C. Sitter, D.
               Staheli, R. Thomson, J. Unruh, P. Vagelos, S. Van Ness, P.
               Volcker, J. Williams, incorporated by reference to Post-Effective
               Amendment No. 10 to Form S-1, Registration No. 33-20083, filed
               April 9, 1998 on behalf of The Prudential Variable Contract Real
               Property Account. G. Casellas incorporate by reference to Form
               S-6, Registration No. 333-64957, filed September 30, 1998 on
               behalf of The Prudential Variable Appreciable Account. R. Carbone
               incorporated by reference to Post-Effective Amendment No. 3 to
               Form N-4, Registration No. 333-23271, filed October 16, 1998 on
               behalf of The Prudential Discovery Select Group Variable Contract
               Account.

        27.    Not applicable.



                           25

<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 29, 1999                 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.


SIGNATURE                    TITLE                             DATE
---------                    -----                             ----


*                            Chairman of the Board and         March 29, 1999
 -----------------------     Chief Executive Officer
Arthur F. Ryan

*                            Chief Financial Officer           March 29, 1999
 -----------------------
Richard Carbone





                                BY:  */s/
                                   --------------------
                                THOMAS C. CASTANO
                                (ATTORNEY-IN-FACT)



                               26

<PAGE>



SIGNATURE                         TITLE             DATE
---------                         -----             ----


*                                 Director          March 29, 1999
 ---------------------------
Franklin E. Agnew

*                                 Director          March 29, 1999
 ---------------------------
Frederic K. Becker

*                                 Director          March 29, 1999
 ---------------------------
Gilbert F. Casellas

*                                 Director          March 29, 1999
 ---------------------------
James G. Cullen

*                                 Director          March 29, 1999
 ---------------------------
Carolyne K. Davis

*                                 Director          March 29, 1999
 ---------------------------
Roger A. Enrico

*                                 Director          March 29, 1999
 ---------------------------
Allan D. Gilmour

*                                 Director          March 29, 1999
 ---------------------------
William H. Gray, III

*                                 Director          March 29, 1999
 ---------------------------
Jon F. Hanson

*                                 Director          March 29, 1999
 ---------------------------
Glen H. Hiner, Jr.

*                                 Director          March 29, 1999
 ---------------------------
Constance J. Horner

*                                 Director          March 29, 1999
 ---------------------------
Gaynor N. Kelley

*                                 Director          March 29, 1999
 ---------------------------
Burton G. Malkiel





                                 BY:  */s/
                                    ---------------------
                                 THOMAS C. CASTANO
                                 (ATTORNEY-IN-FACT)



                                   27


<PAGE>




SIGNATURE                            TITLE            DATE
---------                            -----            ----


*                                    Director         March 29, 1999
 ------------------------------
Ida F. S. Schmertz

*                                    Director         March 29, 1999
 ------------------------------
Charles R. Sitter

*                                    Director         March 29, 1999
 ------------------------------
Donald L. Staheli

*                                    Director         March 29, 1999
 ------------------------------
Richard M. Thomson

*                                    Director         March 29, 1999
 ------------------------------
James A. Unruh

*                                    Director         March 29, 1999
 ------------------------------
P. Roy Vagelos, M.D.

*                                    Director         March 29, 1999
 ------------------------------
Stanley C. Van Ness

*                                    Director         March 29, 1999
 ------------------------------
Paul A. Volcker

*                                    Director         March 29, 1999
 ------------------------------
Joseph H. Williams



                               BY:  */s/
                                  -----------------------
                               THOMAS C. CASTANO
                               (ATTORNEY-IN-FACT)




                              28


<PAGE>




                                         
                           THE PRUDENTIAL VARIABLE  CONTRACT
                                 REAL PROPERTY ACCOUNT
                                     (REGISTRANT)

                                         INDEX


<TABLE>
<CAPTION>
                                                                                                                      PAGE
                                                                                                                      ----
<C>         <S>                                                                                                       <C>
A.            THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

              Financial Statements:

                   Report of Independent Accountants                                                                    F-2

                   Statements of Net Assets - December 31, 1998 and 1997                                                F-3

                   Statements of Operations and Changes in Net Assets -
                   Years Ended December 31, 1998, 1997 and 1996                                                         F-3

                   Notes to Financial Stateme
nts                                                                        F-4

B.            THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

              Financial Statements:

                   Report of Independent Accountants                                                                    F-8

                   Statements of Assets and Liabilities - December 31, 1998 and 1997                                    F-9

                   Statements of Operations - Years Ended December 31, 1998, 1997 and 1996                             F-10

                   Statements of Changes in Net Assets - Years Ended December 31, 1998, 1997 and 1996                  F-11

                   Statements of Cash Flows - Years Ended December 31, 1998, 1997 and 1996                             F-12

                   Schedule of Investments - December 31, 1998 and 1997                                                F-13

                   Notes to Financial Statements                                                                       F-16

                   Financial Statement Schedules:

                   For the period ended December 31, 1998

                   Schedule III - Real Estate Owned: Properties                                                        F-19

                   Schedule III - Real Estate Owned: Interest in Properties                                            F-20

</TABLE>


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-1


<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, 1998 and 1997, and the results of its
operations and the changes in its net assets for the three years in the period
ended December 31, 1998, 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, 1998 and 1997, provide a
reasonable basis for the opinion expressed above.


PricewaterhouseCoopers LLP
New York, New York
March 19, 1999



                           F-2
<PAGE>

                             FINANCIAL STATEMENTS OF
               PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

                            STATEMENTS OF NET ASSETS


<TABLE>
<CAPTION>
                                                                                               DECEMBER 31,
                                                                        -----------------------------------------------------------
                                                                                    1998                           1997
                                                                        ---------------------------    ----------------------------
<S>                                                                     <C>                            <C>                        
Investment in The Prudential Variable Contract
  Real Property Partnership (Note 3)                                    $              111,115,968     $               101,268,264
                                                                        ---------------------------    ----------------------------
                                                                        ---------------------------    ----------------------------

NET ASSETS, representing:
Equity of Contract Owners (Note 4)                                      $               60,232,750     $                59,242,776
Equity of Prudential Insurance Company of America (Note 2D)                             50,883,218                      42,025,488
                                                                        ---------------------------    ----------------------------
                                                                        $              111,115,968     $               101,268,264
                                                                        ---------------------------    ----------------------------
                                                                        ---------------------------    ----------------------------

</TABLE>



                         STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS


<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                    --------------------------------------------------
                                                                          1998            1997               1996
                                                                    --------------------------------------------------
<S>                                                                 <C>              <C>              <C>
INVESTMENT INCOME:

Net Investment Income from Partnership Operations                    $   7,324,915    $   6,361,101    $     7,088,695

EXPENSES:

Charges to Contract Owners for Assuming Mortality Risk and
   Expense Risk and for Administration (Note 5)                            492,841          480,620           473,388
                                                                     --------------   --------------   ---------------
NET INVESTMENT INCOME                                                    6,832,074        5,880,481         6,615,307
                                                                     --------------   --------------   ---------------
Net Change in Unrealized Gain (Loss) on Investments in Partnership         806,156        3,772,996        (1,474,373)
Net Realized Gain (Loss) on Sale of Investments in Partnership           1,411,632          141,173          (723,211)
                                                                     --------------    --------------   --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                     9,049,862        9,794,650         4,417,723
                                                                     --------------   --------------    --------------
CAPITAL TRANSACTIONS:

Net Withdrawals by Contract Owners (Note 7)                             (3,853,980)      (3,343,849)       (2,022,824)

Net Contributions by Prudential Insurance Company of America             4,651,822        3,824,469         2,496,212
                                                                     --------------   --------------    --------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS                                        797,842          480,620           473,388
                                                                     --------------   --------------    --------------

TOTAL INCREASE IN NET ASSETS                                             9,847,704       10,275,270         4,891,111


NET ASSETS:
Beginning of period                                                    101,268,264       90,992,994        86,101,883
                                                                     --------------   --------------    --------------
End of period                                                        $ 111,115,968    $ 101,268,264     $  90,992,994
                                                                     --------------   --------------    --------------
                                                                     --------------   --------------    --------------

</TABLE>

                    SEE NOTES TO FINANCIAL STATEMENTS ON PAGES F-4 THROUGH F-7

                                                F-3

<PAGE>



                    NOTES TO THE FINANCIAL STATEMENTS OF
           THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
                             DECEMBER 31, 1998


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 ("PVAL and PVAL $100,000 + face value"), Discovery Plus
("PDISCO+"), 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
estate investment 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 accompanying 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, 1998
and 1997 the Real Property Account's interest in the Partnership was 46.2% or
5,481,889 shares and 46.1% or 5,465,515 shares, respectively.

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-4

<PAGE>


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

The number of shares held by the Real Property Account in the Partnership, the
Partnership share value and the aggregate cost of investments in the Real
Property Accounts' shares held at December 31, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                                   1998                1997
                                   ------              -----
<S>                             <C>                 <C>

SHARES OUTSTANDING:              5,481,889           5,465,515
SHARE VALUE:                      $20.27              $18.53
COST:                           $64,095,895         $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, 1998 and 1997, by product, were as follows:

1998:
<TABLE>
<CAPTION>
                                                                                       PVAL $100,000+
                                          PDISCO+          VIP           PVAL            FACE VALUE             TOTAL
                                       -------------   ------------  --------------   ------------------    --------------
<S>                                    <C>             <C>           <C>              <C>                   <C>           
 CONTRACT OWNER UNITS OUTSTANDING:         2,873,789     2,011,903      13,216,595           18,444,838
 UNIT VALUE:                             $   1.60383   $   1.60383    $    1.68343         $  1.63448
                                       --------------  ------------  --------------   ------------------
 TOTAL CONTRACT OWNER EQUITY:            $ 4,609,069   $ 3,226,750    $ 22,249,213         $ 30,147,718      $ 60,232,750
                                       -------------   ------------  --------------   ------------------    --------------
                                       -------------   ------------  --------------   ------------------    --------------

</TABLE>

 1997:
<TABLE>
<CAPTION>
                                                                                       PVAL $100,000+
                                          PDISCO+          VIP           PVAL            FACE VALUE             TOTAL
                                       --------------  ------------  --------------   -----------------     --------------
<S>                                    <C>             <C>           <C>              <C>                   <C>
 CONTRACT OWNER UNITS OUTSTANDING:         3,063,257     2,642,918      13,838,774           19,469,599
 UNIT VALUE:                             $   1.48380   $   1.48380   $     1.54807         $    1.50761
                                       --------------  ------------  --------------   ------------------
 TOTAL CONTRACT OWNER EQUITY:            $ 4,545,261   $ 3,921,562   $  21,423,391         $ 29,352,562     $ 59,242,776
                                       -------------   ------------  --------------   ------------------    --------------
                                       -------------   ------------  --------------   ------------------    --------------

</TABLE>


NOTE 5:    CHARGES AND EXPENSES

A.         MORTALITY RISK AND EXPENSE RISK CHARGES

Mortality risk and expense risk charges are determined daily using an effective
annual rate of 1.0%, 0.6%, 0.9%, and 1.2% for PDISCO+, PVAL, PVAL $100,000 +
face value, and VIP respectively. Mortality risk is that life insurance and
annuity 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 related charges by Prudential.

B.         ADMINISTRATIVE CHARGES

Administrative charges are determined daily using an effective annual rate of
0.2% applied daily against the net assets representing equity of PDISCO+
contract owners held in each subaccount. Administrative charges include costs
associated with issuing the contract, establishing and maintaining records, and
providing reports to contract owners.

C.       COST OF INSURANCE CHARGES

Contract owner contributions are subject to certain deductions prior to being
invested in the Real Property Account. The deductions for PVAL and PVAL $100,000
+ face value are (1) state premium taxes; (2) sales charges which are deducted
in order to compensate Prudential for the cost of selling the contract and (3)
transaction costs which are deducted from each premium payment to cover premium
collection and processing costs. Contracts are also subject to monthly charges
for the costs of administering the contract and to compensate Prudential for the
guaranteed minimum death benefit risk.

                                    F-5

<PAGE>

D.       DEFERRED SALES CHARGE

A deferred sales charge, applicable to PVAL and PVAL $100,000 + face value, is
imposed upon the surrenders of certain variable life insurance to compensate
Prudential for sales and other marketing expenses. The amount of any sales
charge will depend on the number of contract years that have elapsed since the
contract was issued. No sales charge will be imposed after the tenth year of the
contract. No sales charge will be imposed on death benefits.

Also a deferred sales charge is imposed upon the withdrawals of certain purchase
payments to compensate Prudential for sales and other marketing expenses for
PDISCO+ and VIP. The amount of any sales charge will depend on the amount
withdrawn and the number of contract years that have elapsed since the contract
owner or annuitant made the purchase payments deemed to be withdrawn. No sales
charge is made against the withdrawal of investment income. A reduced sales
charge is imposed in connection with the withdrawal of a purchase payment to
effect an annuity if three or more contract years have elapsed since the
contract date, unless the annuity effected is an annuity certain. No sales
charge is imposed upon death benefit payments or upon transfers made between
subaccounts.

E.       PARTIAL WITHDRAWAL CHARGE

A charge is imposed by Prudential on partial withdrawals of the cash surrender
value for PVAL and PVAL $100,000 + face value. A charge equal to the lesser of
$15 or 2% will be made in connection with each partial withdrawal of the cash
surrender value of a contract.

F.       ANNUAL MAINTENANCE CHARGE

An annual maintenance charge, applicable to PDISCO+ and VIP, of $30 will be
deducted if and only if the contract fund is less than $10,000 on a contract
anniversary or at the time a full withdrawal is effected, including a withdrawal
to effect an annuity. The charge is made by reducing accumulation units credited
to a contract owner's account.


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 the tax liability has been recorded in these financial statements.


NOTE 7:    NET WITHDRAWALS BY CONTRACT OWNERS

Contract owner activity for the real estate investment option in Prudential's
variable insurance and variable annuity products for the years ended December
31, 1998 and 1997 were as follows:

 1998:
<TABLE>
<CAPTION>
                                                                                       PVAL & PVAL
                                                    PDISCO+            VIP        $100,000+ FACE VALUE        TOTAL
                                                 -----------      ---------       --------------------       -------
<S>                                              <C>              <C>             <C>                     <C>       

CONTRACT OWNER NET PAYMENTS:                        $   34,192     $    64,722           $   7,093,241    $   7,192,155
POLICY LOANS:                                                0               0              (1,904,723)      (1,904,723)
POLICY LOAN REPAYMENTS AND INTEREST:                         0               0               1,227,793        1,227,793
SURRENDERS, WITHDRAWALS, AND DEATH BENEFITS:          (488,508)     (1,009,902)             (3,536,617)      (5,035,027)
NET TRANSFERS FROM (TO) OTHER SUBACCOUNTS
     OR FIXED RATE OPTIONS:                            159,601         (12,601)             (1,618,529)      (1,471,529)
ADMINISTRATIVE AND OTHER CHARGES:                          (16)         (3,869)             (3,858,764)      (3,862,649)
                                                 ---------------  --------------  ----------------------  ---------------
NET WITHDRAWALS BY CONTRACT OWNER                   $ (294,731)    $  (961,650)          $  (2,597,599)   $  (3,853,980)
                                                 ---------------  --------------  ----------------------  ---------------
                                                 ---------------  --------------  ----------------------  ---------------

</TABLE>

                                    F-6

<PAGE>

 1997:
<TABLE>
<CAPTION>
                                                                                       PVAL & PVAL
                                                    PDISCO+            VIP        $100,000+ FACE VALUE        TOTAL
                                                 -----------      ------------    ---------------------      -------
<S>                                              <C>              <C>             <C>                        <C>
CONTRACT OWNER NET PAYMENTS:                        $  351,456      $  347,300            $  8,463,594     $  9,162,350
POLICY LOANS:                                                0               0              (1,932,364)      (1,932,364)
POLICY LOAN REPAYMENTS AND INTEREST:                         0               0                 975,817          975,817
SURRENDERS, WITHDRAWALS, AND DEATH BENEFITS:          (726,927)       (714,252)             (3,808,846)      (5,250,025)
NET TRANSFERS FROM (TO) OTHER SUBACCOUNTS
      OR FIXED RATE OPTIONS:                            87,144        (194,348)             (1,816,066)      (1,923,270)
ADMINISTRATIVE AND OTHER CHARGES:                          (20)         (3,847)             (4,372,490)      (4,376,357)
                                                 ---------------  --------------  ----------------------  ---------------
NET WITHDRAWALS BY CONTRACT OWNER                   $ (288,347)     $ (565,147)           $ (2,490,355)    $ (3,343,849)
                                                 ---------------  --------------  ----------------------  ---------------
                                                 ---------------  --------------  ----------------------  ---------------

</TABLE>


NOTE 8:    UNIT ACTIVITY

Transactions in units for the years ended December 31, 1998, 1997 and 1996 were
as follows:

 1998:
<TABLE>
<CAPTION>
                                                                                         PVAL $100,000+
                                       PDISCO+            VIP             PVAL             FACE VALUE
                                     -----------       ---------       -----------         ----------
<S>                                  <C>               <C>             <C>                 <C>
 CONTRACT OWNER CONTRIBUTIONS:         613,206          186,504         2,480,913           3,131,058
 CONTRACT OWNER REDEMPTIONS:          (802,674)        (817,519)       (3,103,092)         (4,155,819)

</TABLE>

 1997:
<TABLE>
<CAPTION>
                                                                                         PVAL $100,000+
                                       PDISCO+            VIP             PVAL             FACE VALUE
                                     ----------        ---------       -----------         ----------
<S>                                  <C>               <C>             <C>                 <C>
 CONTRACT OWNER CONTRIBUTIONS:         644,374          373,838         3,039,579           3,893,900
 CONTRACT OWNER REDEMPTIONS:          (846,753)        (773,203)       (3,692,270)         (4,965,990)

</TABLE>

 1996:
<TABLE>
<CAPTION>
                                                                                         PVAL $100,000+
                                       PDISCO+            VIP             PVAL             FACE VALUE
                                     ----------        ---------       -----------         ----------
<S>                                  <C>               <C>             <C>                 <C>
 CONTRACT OWNER CONTRIBUTIONS:         708,743          381,682         4,061,972           4,872,293
 CONTRACT OWNER REDEMPTIONS:          (745,783)        (654,114)       (4,350,882)         (5,786,430)

</TABLE>

NOTE 9:    PURCHASES AND SALES OF INVESTMENTS

The aggregate costs of purchases and proceeds from sales of investments in the
Partnership for the year ended December 31, 1998 were as follows:

                  Purchases:        $341,000
                  Sales:            $(36,000)

                                    F-7

<PAGE>

                          REPORT OF INDEPENDENT ACCOUNTANTS
                          ---------------------------------




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,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the management of 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.




PricewaterhouseCoopers LLP
New York, New York
February 22, 1999


                                    F-8

<PAGE>


                  THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                             STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
                                                                                    DECEMBER 31, 1998        DECEMBER 31, 1997
                                                                                  ---------------------     -------------------
<S>                                                                               <C>                       <C>                   
ASSETS

REAL ESTATE INVESTMENTS - At estimated market value:
  Real estate and improvements
   (cost:  12/31/98 -- $170,045,055; 12/31/97 -- $201,670,248)                        $    155,374,462          $  181,317,624
  Real estate investment trust (cost:  12/31/98 -- $10,000,005;
   12/31/97 -- $10,000,005)                                                                 11,554,649              12,523,805
                                                                                  ---------------------     -------------------

         Total real estate investments                                                     166,929,111             193,841,429

MARKETABLE SECURITIES - At estimated market value
   (cost: 12/31/98 -- $14,967,236; 12/31/97 -- $13,971,421)                                 14,950,525              13,929,296

CASH AND CASH EQUIVALENTS                                                                   58,578,848              12,880,560

DIVIDEND RECEIVABLE                                                                            167,275                 146,999

OTHER ASSETS (net of allowance for uncollectible
  accounts:  12/31/98 -- $66,000; 12/31/97 --                                                3,623,513               1,946,851
$68,000)
                                                                                  ---------------------     -------------------

         Total assets                                                                  $   244,249,272          $  222,745,135
                                                                                  ---------------------     -------------------
                                                                                  ---------------------     -------------------

LIABILITIES AND PARTNERS' EQUITY

ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                                  $     1,985,400          $    1,842,027

DUE TO AFFILIATES                                                                            1,598,535                 832,922

OTHER LIABILITIES                                                                              504,940                 538,413
                                                                                  ---------------------     -------------------

         Total liabilities                                                                   4,088,875               3,213,362

COMMITMENTS

PARTNERS' EQUITY                                                                                             
                                                                                           240,160,397             219,531,773
                                                                                  ---------------------     -------------------

TOTAL LIABILITIES AND PARTNERS' EQUITY                                                 $   244,249,272          $  222,745,135
                                                                                  ---------------------     -------------------
                                                                                  ---------------------     -------------------

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

SHARE VALUE AT END OF PERIOD                                                           $         20.27          $        18.53
                                                                                  ---------------------     -------------------
                                                                                  ---------------------     -------------------
</TABLE>

                                 SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16
                                                     F-9

<PAGE>





                   THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                                   STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                YEAR ENDED DECEMBER 31,
                                                          --------------------------------------------------------------------
                                                                  1998                    1997                   1996
                                                          ---------------------   ---------------------  ---------------------
<S>                                                       <C>                     <C>                    <C>
INVESTMENT INCOME:
 Revenue from real estate and improvements                     $    24,572,642         $    21,582,968        $    22,799,694
 Income from interest in properties                                     33,462                 435,296                606,558
 Dividend income from real estate investment trust                     669,100                 158,184                      0
 Interest on short-term investments                                  1,888,348               2,305,364              2,134,386
                                                          ---------------------   ---------------------  ---------------------

         Total investment income                                    27,163,552              24,481,812             25,540,638
                                                          ---------------------   ---------------------  ---------------------

EXPENSES:
 Investment management fee                                           2,900,445               2,640,470              2,494,229
 Real estate taxes                                                   2,406,624               2,208,972              2,367,404
 Administrative expense                                              1,951,235               2,326,155              1,865,433
 Operating expense                                                   4,071,735               3,296,350              2,904,620
 Interest expense                                                            0                 220,118                489,434
                                                          ---------------------   ---------------------  ---------------------

         Total investment expenses                                  11,330,039              10,692,065             10,121,120
                                                          ---------------------   ---------------------  ---------------------

NET INVESTMENT INCOME                                               15,833,513              13,789,747             15,419,518
                                                          ---------------------   ---------------------  ---------------------

REALIZED AND UNREALIZED GAIN (LOSS) ON
  INVESTMENTS
 Net proceeds from real estate investments
   sold                                                             37,443,762               6,297,422             20,497,789
 Less:  Cost of real estate investments sold                        37,361,533               6,274,539             26,610,932
           Realization of prior years' unrealized
            gain on real estate investments sold                   (2,969,150)               (283,157)            (4,539,996)
                                                          ---------------------   ---------------------  ---------------------

 Net gain (loss) realized on real estate
   investments sold                                                  3,051,379                 306,040            (1,573,147)
                                                          ---------------------   ---------------------  ---------------------


 Change in unrealized gain (loss) on real estate
   investments                                                       1,743,732               8,179,192            (3,211,436)
                                                          ---------------------   ---------------------  ---------------------

NET REALIZED AND UNREALIZED GAIN
 (LOSS) ON INVESTMENTS                                               4,795,111               8,485,232            (4,784,583)
                                                          ---------------------   ---------------------  ---------------------

NET INCREASE IN NET ASSETS RESULTING
  FROM OPERATIONS                                              $    20,628,624         $    22,274,979        $    10,634,935
                                                          ---------------------   ---------------------  ---------------------
                                                          ---------------------   ---------------------  ---------------------

</TABLE>
                                 SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16
                                                     F-10

<PAGE>







                THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                              STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>

                                                                                YEAR ENDED DECEMBER 31,
                                                        -----------------------------------------------------------------------
                                                               1998                     1997                     1996
                                                        ---------------------    ---------------------    ---------------------
<S>                                                     <C>                      <C>                      <C>
NET INCREASE IN NET ASSETS RESULTING
  FROM OPERATIONS:
Net investment income                                         $    15,833,513          $    13,789,747          $    15,419,518
Net gain (loss) realized on real estate
  investments sold                                                  3,051,379                  306,040              (1,573,147)
Net unrealized gain (loss)  from real estate
  investments                                                       1,743,732                8,179,192              (3,211,436)
                                                        ---------------------    ---------------------    ---------------------

         Net increase in net assets resulting from
           operations                                              20,628,624               22,274,979               10,634,935
                                                        ---------------------    ---------------------    ---------------------

NET DECREASE IN NET ASSETS RESULTING
  FROM CAPITAL TRANSACTIONS:
Withdrawals by partners
(Shares: 1998 -- 0; 1997 -- 0; 1996 -- 188,409
 shares, respectively)                                                      0                        0              (3,000,000)
                                                        ---------------------    ---------------------    ---------------------

         Net decrease in net assets resulting from
           capital transactions                                             0                        0              (3,000,000)
                                                        ---------------------    ---------------------    ---------------------

NET INCREASE IN NET ASSETS                                         20,628,624               22,274,979                7,634,935

NET ASSETS -  Beginning of year                                   219,531,773              197,256,794              189,621,859
                                                        ---------------------    ---------------------    ---------------------

NET ASSETS -  End of year                                     $   240,160,397          $   219,531,773          $   197,256,794
                                                        ---------------------    ---------------------    ---------------------
                                                        ---------------------    ---------------------    ---------------------

</TABLE>










                                 SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16
                                                     F-11

<PAGE>





                  THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                                   STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                       YEAR ENDED DECEMBER 31,
                                                                 ----------------------------------------------------------------
                                                                        1998                  1997                   1996
                                                                 -------------------   -------------------    -------------------
<S>                                                              <C>                   <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations                  $  20,628,624         $  22,274,979          $  10,634,935
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                                                     (4,795,111)           (8,485,232)              4,784,583
     Bad Debt Expense                                                        28,264                99,929                 14,201
      (Increase) decrease in:
         Dividend receivable                                               (20,276)             (146,999)                      0
         Other assets                                                   (1,704,926)                20,136              (337,812)
      (Decrease) increase in:
         Obligation under capital lease                                           0              (72,677)                190,256
         Accounts payable and accrued expenses                              143,373               201,667              (502,254)
         Due to affiliates                                                  765,613               113,722                 36,405
         Other liabilities                                                 (33,473)                71,404              (197,060)
                                                                 -------------------   -------------------    -------------------

  Net cash flows from operating activities                               15,012,088            14,076,929             14,623,254
                                                                 -------------------   -------------------    -------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net proceeds from real estate investments
    sold                                                                 37,443,762             6,297,422             20,497,789
  Acquisition of real estate property                                             0          (23,417,474)           (10,713,722)
  Acquisition of real estate investment trust                                     0          (10,000,005)                      0
  Improvements and additional costs on prior purchases:
    Additions to real estate owned                                      (5,736,333)           (1,311,864)              (997,893)
    Additions to real estate partnerships                                         0                     0                      0
  Sale (purchase) of marketable securities, net                         (1,021,229)            10,497,348           (13,894,489)
                                                                 -------------------   -------------------    -------------------

  Net cash flows from investing activities                               30,686,200          (17,934,573)            (5,108,315)
                                                                 -------------------   -------------------    -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Withdrawals by partners                                                          0                     0            (3,000,000)
 Principal payments on capital lease obligation                                   0           (4,000,000)                      0
                                                                 -------------------   -------------------    -------------------

  Net cash flows from financing activities                                        0           (4,000,000)            (3,000,000)
                                                                 -------------------   -------------------    -------------------

NET CHANGE IN CASH AND CASH
  EQUIVALENTS                                                            45,698,288           (7,857,644)              6,514,939

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

CASH AND CASH EQUIVALENTS - End of year                               $  58,578,848         $  12,880,560          $  20,738,204
                                                                 -------------------   -------------------    -------------------
                                                                 -------------------   -------------------    -------------------

SUPPLEMENTAL INFORMATION:
  Cash paid during the year for interest                              $           0          $    220,118           $    376,450
                                                                 -------------------   -------------------    -------------------
                                                                 -------------------   -------------------    -------------------
</TABLE>
                                 SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16
                                                     F-12
<PAGE>


                    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                                       SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
                                                                    DECEMBER 31, 1998                    DECEMBER 31, 1997
                                                             ---------------------------------   ---------------------------------
                                                                                    ESTIMATED                         ESTIMATED
                                                                                      MARKET                            MARKET
                                                                COST                  VALUE          COST               VALUE
                                                             --------------------------------------------------------------------

REAL ESTATE AND IMPROVEMENTS (PERCENT OF NET ASSETS)                                      64.7%                            82.6%
Location                    Description
----------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>                               <C>               <C>             <C>              <C>
Lisle, IL                   Office Building                   $  21,634,707      $  14,123,742   $  17,916,983    $  10,278,959
Atlanta, GA                 Garden Apartments                    15,601,495         15,651,216      15,446,293       15,100,000
Roswell, GA                 Retail Shopping Center               32,272,627         28,649,176      31,858,198       29,547,042
Pomona, CA                  Warehouse                                     0                  0      23,637,049       19,504,612
Morristown, NJ              Office Building                      19,409,490         11,596,138      18,931,914       10,805,918
Bolingbrook, IL             Warehouse                             8,948,028          7,000,000       8,948,028        7,100,000
Farmington Hills, MI        Garden Apartments                             0                  0      13,641,971       14,805,258
Raleigh, NC                 Garden Apartments                    15,822,682         16,804,570      15,804,860       16,525,751
Nashville, TN               Office Building                       8,448,026         10,152,399       8,613,828        9,611,329
Oakbrook Terrace, IL        Office Complex                       12,945,366         15,750,000      12,725,366       14,100,000
Beaverton, OR               Office Complex                       10,728,618         11,200,000      10,728,285       10,700,000
Salt Lake City, UT          Industrial Building                   5,388,134          5,450,000       5,388,134        5,350,000
Aurora, CO                  Industrial Building                   9,304,171          9,497,221       8,540,585        8,400,000
Brentwood, TN               Office Complex                        9,541,711          9,500,000       9,488,754        9,488,755
                                                             ---------------------------------------------------------------------
                                                              $ 170,045,055      $ 155,374,462   $ 201,670,248     $181,317,624
                                                             ---------------------------------------------------------------------
                                                             ---------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
REAL ESTATE INVESTMENT TRUST (PERCENT OF NET ASSETS)                                       4.8%                             5.7%
----------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>                               <C>               <C>             <C>              <C>
Meridian REIT Shares (506,894 shares)                         $  10,000,005      $  11,554,649    $  10,000,005    $ 12,523,805
                                                             ---------------------------------------------------------------------
                                                             ---------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                                                    DECEMBER 31, 1998                    DECEMBER 31, 1997
                                                             ---------------------------------   ---------------------------------
                                                                                    ESTIMATED                         ESTIMATED
                                                                                      MARKET                            MARKET
                                                                COST                  VALUE          COST               VALUE
                                                             --------------------------------------------------------------------
MARKETABLE SECURITIES (PERCENT OF NET ASSETS)                                              6.2%                             6.3%
(See pages F-14 to F-15 for details)
Description
----------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>                               <C>               <C>             <C>              <C>
Marketable Securities                                         $  14,967,236      $  14,950,525    $  13,971,421    $  13,929,296
                                                             ---------------------------------------------------------------------
                                                             ---------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS)                                         24.4%                             5.9%
(See pages F-14 to F-15 for details)
Description
----------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>                               <C>               <C>             <C>              <C>
Commercial Paper and Cash                                     $  58,578,848      $  58,578,848    $  12,880,560   $   12,880,560
                                                             ---------------------------------------------------------------------
                                                             ---------------------------------------------------------------------


</TABLE>


                                 SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16
                                                     F-13

<PAGE>








                   THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                                      SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
                                                                                               DECEMBER 31, 1998
                                                                       -----------------------------------------------------------
                                                                                                                     NET ESTIMATED
                                                                          FACE AMOUNT               COST             MARKET VALUE
                                                                       -------------------    ------------------    --------------
MARKETABLE SECURITIES (PERCENT OF NET ASSETS)                                                                                 6.2%
<S>                                                                    <C>                    <C>                   <C>
General Motors Acceptance Corp., 5.26%, January 26, 1999                     $   830,000          $    817,556       $   817,556
American Express Credit Corp., 7.375%, February 1, 1999                          325,000               329,342           325,418
Canadian Imperial Bank of Commerce, 5.55%, February 10, 1999                   1,000,000               999,520           999,947
Federal National Mortgage Assoc., 5.33%, February 12, 1999                       100,000                99,703            99,703
Salomon Smith Barney Holdings, Inc., 5.38%, February 16, 1999                  1,720,000             1,695,137         1,695,397
General Motors Acceptance Corp., 5.29 %,  February 17, 1999                      650,000               641,501           641,501
Chrysler Financial Company LLC, 5.26%, February 22, 1999                       2,400,000             2,365,700         2,365,700
International Lease Finance Corp., 7.50% March 1, 1999                           500,000               508,250           501,367
Federal Home Loan Mortgage Corp., 5.505%, March 12, 1999                       1,000,000             1,000,856         1,000,630
General Motors Acceptance Corp., 6.04%, March 19, 1999                         1,000,000             1,003,480         1,000,707
Merrill Lynch & Co. Inc., 5.23%, March 19, 1999                                1,790,000             1,758,820         1,758,820
Canadian Wheat Board, 5.14%, April 1, 1999                                     2,000,000             1,962,406         1,962,406
International Lease Finance Corp., 6.625%,  April 1, 1999                        375,000               377,419           375,721
CIT Group Holdings, Inc., 6.375%, May 21, 1999                                   400,000               402,120           400,873
Federal National Mortgage Assoc., 6.07%, July 1, 1999                          1,000,000             1,005,426         1,004,779
                                                                       -------------------    ------------------    --------------
TOTAL MARKETABLE SECURITIES                                                  $15,090,000           $14,967,236       $14,950,525
                                                                       -------------------    ------------------    --------------
                                                                       -------------------    ------------------    --------------
</TABLE>

<TABLE>
<CAPTION>

CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS)                                                                            24.4%
<S>                                                                    <C>                    <C>                   <C>
Countrywide Home Loans, 5.403%, January 4, 1999                              $ 1,000,000           $   999,400        $   999,400
Fortune Brands Inc., 5.05%, January 4, 1999                                    3,463,000             3,461,057          3,461,057
Xerox Capital (Europe) PLC,  5.303%, January 4, 1999                           3,483,000             3,480,949          3,480,949
Federal National Mortgage Assoc., 5.77%, January 5, 1999                      10,401,000            10,000,000         10,000,000
Ford Motor Credit Co., 5.454%, January 5, 1999                                   500,000               499,622            499,622
Pioneer Hi-BRED International, 5.665%, January 7, 1999                         1,000,000               997,332            997,332
Ford Motor Credit Co., 6.11%, January 8, 1999                                    167,000               166,717            166,717
Deere & Co., 5.372 %,  January 13, 1999                                        2,520,000             2,509,514          2,509,514
E.I. Du Pont De Nemours & Co. Inc., 5.277%, January 13, 1999                     648,000               644,598            644,598
Household Finance Corp., 5.356%, January 13, 1999                                175,000               174,119            174,119
Household Finance Corp., 5.355% , January 15, 1999                             2,343,000             2,331,899          2,331,899
Potomac Electric Power Co., 5.569%, January 15, 1999                           3,122,000             3,110,930          3,110,930
Chrysler Financial Corp., 5.537%, January 25, 1999                             1,164,000             1,158,121          1,158,121
Eastman Kodak Co., 5.232%, January 26, 1999                                    2,518,000             2,502,360          2,502,360
Cigna Corp., 5.559%, January 27, 1999                                          1,819,000             1,809,220          1,809,220
Cigna Group Holdings, Inc.  5.334%, January 27, 1999                           1,851,000             1,835,496          1,835,496
Countrywide Home Loan, Inc. 5.506%, January 27, 1999                           1,342,000             1,333,028          1,333,028
Countrywide Home Loan, Inc. 5.587%, January 27, 1999                           1,177,000             1,169,197          1,169,197
General RE Corp., 5.187% , January 29, 1999                                      542,000               538,046            538,046
PNC Funding Corp., 5.728%, January 29, 1999                                    2,500,000             2,487,729          2,487,729
GTE Funding, Inc.,  5.211%, February 1, 1999                                   2,526,000             2,506,048          2,506,048
Norwest Financial, Inc., 5.536%, February 3, 1999                              3,563,000             3,539,593          3,539,593
CIGNA Corp., 5.233%, February 4, 1999                                          1,745,000             1,730,660          1,730,660
General Electric Capital Corp., 5.537%, February 4, 1999                       3,563,000             3,539,049          3,539,049
Associates First Capital Corp., 5.241%, February 8, 1999                       2,519,000             2,498,988          2,498,988
GTE Funding, Inc., 5.304%, February 11, 1999                                   1,000,000               993,413            993,413
                                                                       -------------------    ------------------    --------------

TOTAL CASH EQUIVALENTS                                                        56,651,000            56,017,085         56,017,085

CASH
                                                                               2,561,762             2,561,762          2,561,762
                                                                       -------------------    ------------------    --------------
TOTAL CASH AND CASH EQUIVALENTS                                              $59,212,762           $58,578,847        $58,578,847
                                                                       -------------------    ------------------    --------------
                                                                       -------------------    ------------------    --------------
</TABLE>


                                 SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16
                                                     F-14

<PAGE>


                    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                                     SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
                                                                                               DECEMBER 31, 1997
                                                                       -----------------------------------------------------------
                                                                                                                     NET ESTIMATED
                                                                          FACE AMOUNT               COST             MARKET VALUE
                                                                       -------------------    ------------------    --------------

MARKETABLE SECURITIES (PERCENT OF NET ASSETS)                                                                                 6.3%
<S>                                                                    <C>                    <C>                   <C>
International Lease Finance Corp., 5.92%, January 15, 1998                  $    500,000          $    499,083       $    499,956
Smith Barney Holding Inc., 5.70%, January 28, 1998                             1,304,000             1,285,475          1,285,475
Suntrust Banks, 8.875%, February 1, 1998                                       1,500,000             1,517,880          1,503,553
Chase Manhattan Bank, 5.75%, February 10, 1998                                 2,000,000             2,000,000          2,000,000
Beneficial Corp., 9.125%, February 15, 1998                                      700,000               705,948            702,456
Citicorp, 10.15%, February 15, 1998                                              200,000               207,324            200,969
General Motors Acceptance Corp., 5.9%, February 19, 1998                         985,000               994,545            986,218
General Motors Acceptance Corp., 5.9875%, February 23, 1998                    1,300,000             1,299,363          1,299,894
American General Finance Corp., 7.25%, March 1, 1998                             500,000               507,880            501,217
Commercial Credit Co., 5.7%, March 1, 1998                                       375,000               375,199            375,031
Associates Corp. of North America, 7.3%, March 15, 1998                          400,000               406,635            401,242
International Lease Finance Corp., 5.75%, March 15, 1998                         400,000               399,940            399,988
Morgan Guaranty Trust Co., 5.85%, March 16, 1998                                 500,000               499,855            499,971
Royal Bank of Canada, 5.91%, June 17, 1998                                     2,000,000             1,998,853          1,999,475
FCC National Bank, 5.75281%, July 2, 1998                                      1,025,000             1,024,202          1,024,602
General Mills Inc., 5.38%, July 8, 1998                                          250,000               249,238            249,249
                                                                       -------------------    ------------------    --------------

TOTAL MARKETABLE SECURITIES                                                $  13,939,000         $  13,971,421      $  13,929,296
                                                                       -------------------    ------------------    --------------
                                                                       -------------------    ------------------    --------------
</TABLE>

<TABLE>
<CAPTION>

CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS)                                                                             5.9%
<S>                                                                    <C>                    <C>                   <C>
Barnett Bank, Inc., 6.70%, January 2, 1998                                 $   1,235,000         $   1,234,540      $   1,234,540
American Greetings Corp., 6.26%, January 5, 1998                               1,250,000             1,247,179          1,247,179
Xerox Capital, 5.85%, January 6, 1998                                          1,000,000               995,775            995,775
Nike Inc., 6.10%, January 8, 1998                                              1,215,000             1,213,353          1,213,353
Paccar Financial Corp., 5.85%, January 9, 1998                                 1,000,000               996,100            996,100
Pitney Bowes Credit Corp., 6.00%, January 13, 1998                               750,000               747,375            747,375
Merrill Lynch & Co., Inc. 5.85%, January 15, 1998                              1,000,000               994,313            994,313
Bank of Montreal, 5.90%, January 16, 1998                                      1,000,000             1,000,000          1,000,000
Countrywide Home Loan, Inc., 5.85%, January 22, 1998                           1,000,000               993,175            993,175
General Electric Capital Corp., 5.74%, February 9, 1998                        1,000,000               990,593            990,593
                                                                       -------------------    ------------------    --------------

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

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

TOTAL CASH AND CASH EQUIVALENTS                                            $  12,918,158         $  12,880,560       $ 12,880,560
                                                                       -------------------    ------------------    --------------
                                                                       -------------------    ------------------    --------------

</TABLE>


                                 SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16
                                                     F-15

<PAGE>

                                  NOTES TO FINANCIAL STATEMENTS OF
                    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                          FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


NOTE 1:  ORGANIZATION

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 The 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's policy is to invest at least 65% of its assets in direct 
ownership interests in income-producing real estate and participating 
mortgage loans. Although it is the Partnership's policy to adhere to the 
aforementioned percentage, at December 31, 1998, the Partnership's direct 
investment in real estate, as described above, temporarily fell to 64.7%. On 
February 1, 1999, a distribution of cash brought the Partnership back into 
compliance with the 65% policy by increasing the Partnership's direct 
investment in real estate to 79.2%. (See Note 6: Subsequent Events). The 
estimated market value of the Partnership's shares is determined daily, 
consistent with the Partnership Agreement. On each day during which the New 
York Stock Exchange is open for business, the net asset value of the 
Partnership is estimated using the estimated market value of its assets, as 
described in Notes 2A and 2B, reduced by any liabilities of the Partnership. 
The periodic adjustments to property values described in Notes 2A and 2B and 
other adjustments to previous estimates are made on a prospective basis. 
There can be no assurance that all such adjustments to estimates will be made 
timely.

Shares of the Partnership are held by 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") and may be purchased and sold at the then 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 
above by the number of shares outstanding. A contract owner participates in 
the Partnership through interests in the Real Property Accounts.

NOTE 2:    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. 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 or an equivalent organization), within a 
           reasonable amount of time following acquisition of the real estate 
           and no less frequently than annually thereafter. The Chief 
           Appraiser of Prudential 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; 
           engages all external appraisers; reviews and provides comments on 
           all external appraisals; prepares all quarterly update appraisals; 
           assists in developing policies and procedures and assists in the 
           evaluation of the performance and competency of external appraisers.

           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

                                                     F-16

<PAGE>

                                  NOTES TO FINANCIAL STATEMENTS OF
                    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                          FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


           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 place. 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 is 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, 1998 and 1997.
           
     B:    INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS (REITs) - Shares of REITs
           are generally valued at their quoted market price. These values may
           be adjusted for discounts resulting from 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 Valuation 
           Unit. The Valuation Unit of Prudential applied a 3% discount to the
           market value of the REIT shares at December 31, 1998. This discount
           is being applied because of the restriction which limits the number
           of shares that can be publicly traded during any six month period to
           30% of the total shares originally acquired.
           
     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. Since real
           estate is stated at estimated market value, net income is not 
           reduced by depreciation and amortization 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 an original maturity of 
           three months or less are considered to be cash equivalents.
           
           Cash of $114,745 and $128,089 at December 31, 1998 and 1997,
           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 estimated 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.
           
     H:    RECLASSIFICATIONS - Certain 1997 amounts in the financial
           statements have been reclassified to conform with the 1998
           presentation.
                                                     F-17
<PAGE>

                                  NOTES TO FINANCIAL STATEMENTS OF
                    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                          FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


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 1999 to 2009.  At December 31, 1998, the 
aggregate future minimum base rental payments under non-cancelable operating 
leases by year are:

<TABLE>
<CAPTION>
               Year Ending
               December 31,                     (000's)
               -----------                      --------
<S>                                             <C>
                      1999                      $ 11,037
                      2000                         9,907
                      2001                         9,104
                      2002                         7,576
                      2003                         4,573
                      Thereafter                  10,753
                                                --------
                      Total                     $ 52,950
                                                --------
                                                --------
</TABLE>


NOTE 4:  COMMITMENT FROM PARTNER

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 and 
other available cash. The amount of the commitment is reduced by $10 million 
for every $100 million in current value net assets of the Partnership. As of 
December 31, 1998, Prudential's equity interest in the Partnership under this 
commitment was $51 million. At the present time, Prudential does not intend 
to make further contributions during the 1999 fiscal year.

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, 1998, 1997 and 1996 management fees incurred by the 
Partnership were $2.9 million; $2.6 million; and $2.5 million, respectively.

The Partnership also reimburses Prudential for certain administrative 
services rendered by Prudential. The amounts incurred for the years ended 
December 31, 1998, 1997 and 1996 were $116,128; $115,346; and $116,818, 
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, FL (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 $12.5 
million. The Partnership's share of the proceeds was $6.3 million.

NOTE 6:  SUBSEQUENT EVENTS

On February 1, 1999, $30 million was distributed to the Real Property 
Accounts.

                                                     F-18




<PAGE>


<TABLE>
<CAPTION>


                                              THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY
                                                                PARTNERSHIP
                                               SCHEDULE III - REAL ESTATE OWNED: PROPERTIES
                                                DECEMBER 31, 1998
                            ------------------------------------------------------------------------


                                           INTIAL COSTS TO THE PARTNERSHIP    
                            -------------------------------------------------------     COSTS
                                                                                      CAPITALIZED
                                                                  BUILDING &          SUBSEQUENT TO
         DESCRIPTION        ENCUMBRANCES           LAND           IMPROVEMENTS        ACQUISITION
         -----------        ------------           ----           ------------        -----------
<S>                         <C>                <C>               <C>                 <C>
Properties:

Office Building
Lisle, IL                     None               1,780,000          15,743,881          4,110,826

Garden Apartments
Atlanta, GA                   None               3,631,212          11,168,904            801,379 (b)

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

Retail Shopping Center
Roswell, GA                   None               9,454,622          21,513,677          1,304,328

Office Building
Morristown, NJ                None               2,868,660          12,958,451          3,582,379

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

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

Garden Apartments
Raleigh, NC                   None               1,623,146          14,135,553             63,983

Office Building
Nashville, TN                 None               1,797,000           6,588,451             62,575

Office Park
Oakbrook Terrace, IL          None               1,313,310          11,316,883            315,173

Office Building
Beaverton, OR                 None                 816,415           9,897,307             14,896

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

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

Office Complex
Brentwood, TN                 None               2,425,000           7,063,755                  0

                                               -----------        -----------         -----------
                                               -----------        -----------         -----------
                                                33,965,832         160,533,248         12,008,454
                                               -----------        -----------         -----------
                                               -----------        -----------         -----------




                                                   1998              1997                1996   
                                               -----------        -----------         -----------
                                                                                                
(a)       Balance at beginning of year         201,670,248        177,082,291         191,981,608
            Additions:                                                                          
             Acquistions                                 0         23,417,474          10,713,722
             Improvements,                       5,827,888          1,170,483             550,050
          etc.                                                                                   
            Deletions:                                                                           
             Sale                              (37,453,081)                 0         (26,163,089)

                                               -----------        -----------         -----------
                                               -----------        -----------         ----------- 
          Balance at end of year               170,045,055        201,670,248         177,082,291  
                                               -----------        -----------         -----------
                                               -----------        -----------         ----------- 

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






<CAPTION>


                                              THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY
                                                                PARTNERSHIP
                                               SCHEDULE III - REAL ESTATE OWNED: PROPERTIES
                                                DECEMBER 31, 1998
                                   -----------------------------------------------------------





                                                      GROSS AMOUNT AT WHICH
                                                    CARRIED AT CLOSE OF YEAR
                                   ------------------------------------------------------------------------------------

                                                  BUILDING &        1998                        YEAR OF          DATE
         DESCRIPTION                  LAND        IMPROVEMENTS      SALES          TOTAL        CONSTRUCTION   ACQUIRED
         -----------                  ----        ------------      -----     ---------------   ------------   --------
<S>                              <C>             <C>            <C>            <C>             <C>           <C>
Properties:               

Office Building
Lisle, IL                          1,780,000       19,854,707                     21,634,707      1985         Apr., 1988

Garden Apartments
Atlanta, GA                        3,631,212       11,970,283                     15,601,495      1987         Apr., 1988

Warehouse
Pomona, CA                         4,545,839       19,248,659    (23,794,498)              0      1987         Apr., 1988

Retail Shopping Center
Roswell, GA                        9,479,089       22,793,538                     32,272,627      1988         Jan., 1989

Office Building
Morristown, NJ                     2,868,660       16,540,830                     19,409,490      1981         Aug., 1988

Office/Warehouse
Bolingbrook, IL                    1,373,199        7,574,829                      8,948,028      1989         Feb., 1990

Garden Apartments
Farmington Hills, MI               1,897,400       11,761,183    (13,658,583)              0      1989         Feb., 1990

Garden Apartments
Raleigh, NC                        1,623,146       14,199,536                     15,822,682      1995         Jun., 1995

Office Building
Nashville, TN                      1,797,327        6,650,699                      8,448,026      1982         Oct., 1995

Office Park
Oakbrook Terrace, IL               1,313,821       11,631,545                     12,945,366      1988         Dec., 1995

Office Building
Beaverton, OR                        816,415        9,912,203                     10,728,618      1995         Dec., 1996

Industrial Building
Salt Lake City, UT                   582,457        4,805,676                      5,388,133      1997         Jul., 1997

Industrial Building
Aurora, CO                         1,338,175        7,965,996                      9,304,171      1997         Sep., 1997

Office Complex
Brentwood, TN                      2,425,000        7,116,711                      9,541,711      1987         Oct., 1997

                                  ----------      -----------    ------------    -----------
                                  ----------      -----------    ------------    -----------
                                  35,471,740      172,026,396    (37,453,081)    170,045,055
                                  ----------      -----------    ------------    -----------
                                  ----------      -----------    ------------    -----------


</TABLE>

                                                  F-19

<PAGE>


<TABLE>
<CAPTION>

                                                                              
                                           THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                                            SCHEDULE III - REAL ESTATE OWNED: INTEREST IN PROPERTIES
                                                           DECEMBER 31, 1998
                                   -------------------------------------------------------------------------
<S>                                <C>                          <C>                           <C>

                                        1998                         1997                         1996
                                   ---------------              ---------------               --------------

Balance at beginning of year                   $0                   $6,133,157                   $6,133,157
  Additions:
   Acquistions                                  0                            0                            0
   Improvements, etc.                           0                            0                            0
  Deletions:
   Sale                                         0                  (6,133,157)                            0

                                   ===============              ===============               ==============
Balance at end of year                         $0                           $0                   $6,133,157
                                   ===============              ===============               ==============


</TABLE>
                                      F-20