##### 



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 WASHINGTON, D.C.
    20549
  FORM 10-K
  (Mark One)þANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORoTRANSITION
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934   Commission file Number
    033-20083-01
  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
    incorporation or organization)

(IRS Employer Identification
    No.)   751 Broad Street, Newark, New Jersey
    07102-2992
 (Address of principal executive
    offices) (Zip Code)
  (973) 802-6000
 (Registrants telephone
    number, including area code)
  SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
    ACT: NONE
  SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
    ACT: NONE
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o o þ
   Rule 12b-2 o þ
  DOCUMENTS
    INCORPORATED BY REFERENCE
  FORM 10-K




---



##### 



THE
    PRUDENTIAL VARIABLE CONTRACT
    REAL PROPERTY ACCOUNT
    (Registrant)
 INDEX
  Item



PageNo.



No.Cover PageIndex


2Forward-Looking
    Statement Disclosure


3PART I1.

Business


41A.

Risk
    Factors


61B.

Unresolved Staff
    Comments


62.

Properties


63.

Legal
    Proceedings


64.

Submission of
    Matters to a Vote of Security Holders


7PART II5.

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


76.

Selected Financial
    Data


77.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


77A.

Quantitative and
    Qualitative Disclosures About Market Risk


148.

Financial
    Statements and Supplementary Data


159.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


159A.

Controls and
    Procedures


159B.

Other
    Information


15PART III10.

Directors,
    Executive Officers and Corporate Governance


1611.

Executive
    Compensation


1712.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


1813.

Certain
    Relationships and Related Transactions, and Director
    Independence


1814.

Principal
    Accounting Fees and Services


18PART IV15.

Exhibits, Financial
    Statement Schedules


19Exhibit Index


19Signatures


21  2




---



##### 



Forward-Looking
    Statement Disclosure  Form 10-K,
 3




---



##### 



PART I  Item 1.
    Business                     4




---



##### 



MARKET
    CONDITIONS
    Debt
    Market
  year-to-date
  Public
    Real Estate Securities
    Property
    Markets
  Office
  Industrial
 5




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##### 



Residential
  Retail
  Hotel
  Item 1A.
    Risk
    Factors  Form 10-K.
      Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   6




---



##### 



PART II Item 5. Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities      Item 6.
    Selected
    Financial Data  RESULTS
    OF OPERATIONS:
  Year Ended December 31,2006


2005


2004


2003


2002


2001


2000Total Investment Income

$
28,623,487


$
28,644,271


$
29,076,163


$
27,060,494


$
27,077,048


$
27,480,593


$
26,387,938Net Investment Income

$
11,161,728


$
9,219,171


$
7,799,606


$
10,613,409


$
10,864,043


$
12,350,306


$
13,638,117Net Realized and Unrealized Gain
    (Loss) on Real Estate Investments


18,352,005



15,460,619



3,280,394



(6,467,364
)


(8,517,663
)


(2,547,749
)


4,487,022Net Increase in Net Assets
    Resulting From Operations

$
29,513,733


$
24,679,790


$
11,080,000


$
4,146,045


$
2,346,380


$
9,802,557


$
18,125,139   FINANCIAL
    POSITION:
  Year Ended December 31,2006


2005


2004


2003


2002


2001


2000Total Assets

$
272,136,819


$
246,015,115


$
240,575,611


$
235,627,852


$
229,720,113


$
234,594,652


$
221,512,296Long Term Lease Obligation

$
0


$
0


$
0


$
0


$
0


$
0


$
0Investment Level Debt

$
32,710,488


$
33,195,607


$
43,773,767


$
43,934,494


$
35,699,108


$
28,994,521


$
10,092,355   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations     7




---



##### 



(a)
    Liquidity
    and Capital Resources              (b)
    Results
    of Operations    Net
    Investment Income Overview
    Valuation
    Overview
  and/or
 8




---



##### 



Twelve Months Ended December 31,2006


2005Net Investment
    Income:Office properties

$
3,407,082


$
3,100,955Apartment complexes


1,059,134



1,952,155Retail properties


6,128,671



4,402,792Industrial property


773,668



574,977Hotel property


1,288,716



1,086,783Land


(36,582
)


Other (including interest income,
    investment mgt fee, portfolio level expenses,etc.)


(1,458,961
)


(1,898,491
)Total Net Investment
    Income

$
11,161,728


$
9,219,171Net Realized Gain (Loss) on
    Real Estate Investments:Apartment Complex


70,689



4,446,010Office Building






1,174,380Land


(2,919
)


598,432Total Net Realized Gain (Loss)
    on Real Estate Investments


67,770



6,218,822Net Unrealized Gain (Loss)
    on Real Estate Investments:Office properties


2,514,348



3,298,783Apartment complexes


3,588,692



516,658Retail properties


6,265,806



3,011,793Industrial property


2,132,560



1,369,434Hotel property


3,782,829



1,045,129Total Net Unrealized Gain
    (Loss) on Real Estate Investments


18,284,235



9,241,797Net Realized and Unrealized
    Gain (Loss) on Real Estate Investments

$
18,352,005


$
15,460,619  9




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##### 



OFFICE
    PROPERTIES
  Realized/Net Investment


Net Investment


Unrealized


UnrealizedIncome/(Loss)


Income/(Loss)


Gain/(Loss)


Gain/(Loss)


Occupancy


OccupancyYear Ended December 31,

2006


2005


2006


2005


2006


2005PropertyLisle, IL

$
376,939


$
313,356


$
(644,356
)

$
(98,837
)


38%



38%Brentwood, TN


1,084,255



984,017



69,832



1,254,008



100%



93%Oakbrook Terrace, IL (1)


1,323



203,313







1,174,380



N/A



N/ABeaverton, OR


940,713



851,182



1,888,872



809,842



79%



78%Brentwood, TN (2)


1,003,852



749,087



1,200,000



1,333,767



100%



100%$
3,407,082


$
3,100,955


$
2,514,348


$
4,473,160     (1)
    
    The Oakbrook Terrace, Illinois office property was sold on
    June 8, 2005 but certain post-closing adjustments were
    recognized in the year ended December 31, 2006.(2)
    
    Net Investment Income for the year ended December 31, 2005
    reflects a partial period rent abatement that was provided to
    the tenant as part of the lease.  Net
    Investment Income
    Total
    Realized and Unrealized Gain/(Loss)
    APARTMENT
    COMPLEXES
  Realized/


Realized/Net Investment


Net Investment


Unrealized


UnrealizedIncome/(Loss)


Income/(Loss)


Gain/(Loss)


Gain/(Loss)


Occupancy


OccupancyYear Ended December 31,

2006


2005


2006


2005


2006


2005PropertyAtlanta, GA

$
505,136


$
123,570


$
2,507,734


$
(597,672
)


90%



91%Raleigh, NC


589,289



678,498



1,080,958



1,114,329



92%



93%Jacksonville, FL (1)


(25,126
)


902,707



70,520



4,283,549



N/A



N/AGresham/Salem, OR (1)


(10,165
)


247,380



169



162,462



N/A



N/A$
1,059,134


$
1,952,155


$
3,659,381


$
4,962,668     (1)
    
    The Salem, Oregon, Gresham, Oregon and Jacksonville, Florida
    apartment properties were sold on March 10, 2005,
    August 10, 2005 and November 30, 2005, respectively,
    but certain post-closing adjustments were recognized in the year
    ended December 31, 2006.  Net
    Investment Income
   10




---



##### 



Total
    Realized and Unrealized Gain/(Loss)
    RETAIL
    PROPERTIES
  Net Investment


Net Investment


Unrealized


UnrealizedIncome/(Loss)


Income/(Loss)


Gain/(Loss)


Gain/(Loss)


Occupancy


OccupancyYear Ended December 31,

2006


2005


2006


2005


2006


2005PropertyRoswell, GA

$
2,096,974


$
1,767,394


$
1,071,439


$
1,652,340



93%



94%Kansas City, KS; MO (1)


(34,810
)


195,927



(164,205
)


(5,069,318
)


90%



81%Hampton, VA


1,307,686



1,272,509



(107,277
)


5,096,161



100%



100%Ocean City, MD


746,520



871,644



79,619



1,332,610



92%



85%Westminster, MD (2)


908,788







5,386,230







98%



N/AWestminster, MD (3)


124,362



278,799











N/A



N/AWestminster, MD (4)






(5,704
)










N/A



N/ACARS Preferred Equity (5)


979,151



22,223











N/A



N/A$
6,128,671


$
4,402,792


$
6,265,806


$
3,011,793     (1)
    
    Net investment income (loss) for the year ended
    December 31, 2006 reflects partial period results for the
    three out of four Kansas City, Kansas and Kansas City, Missouri
    retail properties that were sold on May 15, 2006. Occupancy
    for the year ended December 31, 2006 reflects remaining
    retail property in Kansas City, Kansas.(2)
    
    Net investment income for the year ended December 31, 2006
    reflects partial period results for the Westminster, Maryland
    retail property that was acquired on June 13, 2006.(3)
    
    Mortgage Loan Receivable (mortgage paid in full on March 3,
    2006).(4)
    
    Classified as Other Real Estate Investment (mortgage paid in
    full September 13, 2004).(5)
    
    Net investment income for the year ended December 31, 2006
    reflects partial period results for the second funding of the
    Partnerships preferred equity investment, which occurred
    on February 14, 2006.  Net
    Investment Income
   11




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##### 



Unrealized
    Gain/(Loss)
    INDUSTRIAL
    PROPERTY
  Net Investment


Net Investment


Unrealized


UnrealizedIncome/(Loss)


Income/(Loss)


Gain/(Loss)


Gain/(Loss)


Occupancy


OccupancyYear Ended December 31,

2006


2005


2006


2005


2006


2005PropertyAurora, CO

$
773,668


$
574,977


$
2,132,560


$
1,369,434



85%



78%   Net
    Investment Income
    Unrealized
    Gain/(Loss)
    HOTEL
    PROPERTY
  Net Investment


Net Investment


Unrealized


UnrealizedIncome/(Loss)


Income/(Loss)


Gain/(Loss)


Gain/(Loss)


Occupancy


OccupancyYear Ended December 31,

2006


2005


2006


2005


2006


2005PropertyLake Oswego, OR

$
1,288,716


$
1,086,783


$
3,782,829


$
1,045,129



80%



80%   Net
    Investment Income
    Unrealized
    Gain/(Loss)
   12




---



##### 



Land
    Other
    (c)
    Inflation  and/or
  Critical
    Accounting Policies
      Valuation
    of Investments
  Real Estate Investments
 13




---



##### 



Other
    Estimates
    ITEM 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest Rate Risk
    Estimated Market Value

AverageMaturity

(in $ millions)

Interest RateCash and Cash equivalents


0-3 months


$
33.4



5.57%    14




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##### 



Debt (in $ thousands),






















EstimatedIncluding Current Portion

2007


2008


2009


2010


2011


Thereafter


Total


Fair ValueAverage Fixed Interest Rate


5.35%



5.74%



6.75%



6.75%



6.75%



6.75%



6.50%Fixed Rate

$
588


$
16,090


$
9,277


$
565


$
604


$
5,586


$
32,710


$
32,876Variable Rate






























Total Mortgage Loans Payable

$
588


$
16,090


$
9,277


$
565


$
604


$
5,586


$
32,710


$
32,876   and/or
  Item 8.
    Financial
    Statements and Supplementary Data    Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e), Rules 13a-15(e) 15d-15(e),
  Item 9B.
    Other
    Information   15




---



##### 



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  THE
    PRUDENTIAL INSURANCE COMPANY OF AMERICA
  DIRECTORS
  FREDERIC K. BECKER
  GORDON M. BETHUNE
  W. GASTON CAPERTON, III
  GILBERT F. CASELLAS
  JAMES G. CULLEN
  WILLIAM H. GRAY, III
  JON F. HANSON
  CONSTANCE J. HORNER
  KARL J. KRAPEK
  CHRISTINE A. POON
  ARTHUR F. RYAN
  JAMES A. UNRUH
 16




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##### 



THE
    PRUDENTIAL INSURANCE COMPANY OF AMERICA
  PRINCIPAL
    OFFICERS **
  VIVIAN L. BANTA
  SUSAN L. BLOUNT
  RICHARD J. CARBONE
  BERNARD J. JACOB
  KATHLEEN M. GIBSON
  ROBERT C. GOLDEN
  MARK B. GRIER
  ARTHUR F. RYAN
  PETER B. SAYRE
  SHARON C. TAYLOR
  **
  Code of
    Ethics
  www.investor.prudential.com www.investor.prudential.com
      Item 11.
    Executive
    Compensation   17




---



##### 



Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  page F-23.
    Item 14.
    Principal
    Accounting Fees and Services   18




---



##### 



PART IV  Item 15.
    Exhibits,
    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: PropertiesSchedule IV  Mortgage Loans on Real EstateSee the Index to Financial Statements and Supplementary Data on
    page F-1.    See the following list of exhibits.    See the following list of exhibits.    (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, 2006. 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 (3A) in Post-Effective Amendment
    No. 18 to
    Form S-1,
    Registration Statement
    No. 33-20083-01,
    filed April 14, 2005, and incorporated herein by reference.3.2
    Amended By-Laws of The Prudential Insurance Company of America,
    filed as Exhibit (3B) in Post-Effective Amendment
    No. 29 to
    Form N-6,
    Registration Statement
    No. 33-20000,
    filed April 21, 2006, and incorporated herein by reference.3.3
    Resolution of the Board of Directors establishing The Prudential
    Variable Contract Real Property Account, filed as
    Exhibit (3C) in Post-Effective Amendment No. 9 to
    Form S-1,
    Registration Statement No.
    33-20083-01,
    filed April 9, 1997, and incorporated herein by reference.4.1
    Revised Individual Variable Annuity Contract filed as Exhibit
    (4A)( i) in Post-Effective Amendment No. 9 to
    Form S-1,
    Registration Statement
    No. 33-20083-01,
    filed April 9, 1997, and incorporated herein by reference.4.2
    Discovery Plus Contract, filed as Exhibit (4A)(ii) in
    Post-Effective Amendment No. 9 to
    Form S-1,
    Registration Statement No.
    33-20083-01,
    filed April 9, 1997, and incorporated herein by reference.4.3
    Custom VAL (previously named Adjustable Premium VAL) Life
    Insurance Contracts with fixed death benefit, filed as
    Exhibit (4C)(i) in Post-Effective Amendment No. 19 to
    Form S-6,
    Registration Statement
    No. 33-20000,
    filed April 19, 1997,, and incorporated herein by reference. 19




---



##### 



4.4
    Custom VAL (previously named Adjustable Premium VAL) Life
    Insurance Contracts with variable death benefit, filed as
    Exhibit (4C)(ii) in Post-Effective Amendment No. 19 to
    Form S-6,
    Registration Statement
    No. 33-20000,
    filed April 19, 1997, and incorporated herein by reference.4.5
    Variable Appreciable Life Insurance Contracts with fixed death
    benefit, filed as Exhibit (4B)(i) in Post Effective
    Amendment No. 19 to
    Form S-6,
    Registration Statement
    No. 33-20000,
    filed April 19, 1997, and incorporated herein by reference.4.6
    Variable Appreciable Life Insurance Contracts with variable
    death benefit, filed as (4B)(ii) in Post Effective Amendment
    No. 19 to Form
    S-6,
    Registration Statement
    No. 33-20000,
    filed April 19, 1997, and incorporated herein by reference.9.
    None.10.1
    Investment Management Agreement between Prudential Investment
    Management, Inc. and The Prudential Variable Contract Real
    Property Partnership, filed in Post-Effective Amendment
    No. 16 to
    Form S-1,
    Registration Statement
    No. 33-20083-01,
    filed April 10, 2003, and incorporated herein by reference.10.2
    Administrative Service Agreement among PIM, Prudential Insurance
    Company of America, Pruco Life Insurance Company, and Pruco Life
    Insurance Company of New Jersey, filed as Exhibit (10B) in
    Post-Effective Amendment No. 17 to
    Form S-1,
    Registration Statement
    No. 33-20083-01,
    filed April 12, 2004, and incorporated herein by reference.10.3
    Partnership Agreement of The Prudential Variable Contract Real
    Property Partnership filed as Exhibit (10C) in
    Post-Effective Amendment No. 9 to
    Form S-1,
    Registration Statement
    No. 33-20018,
    filed April 9, 1997, and incorporated herein by reference.11.
    Not applicable.12.
    Not applicable.16.
    None.18.
    None.  22.
    Not applicable.23.
    None.24.
    Powers of Attorney are filed herewith.  31.1
    Section 302 Certification of the Chief Executive Officer.31.2
    Section 302 Certification of the Chief Financial Officer.32.1
    Section 906 Certification of the Chief Executive Officer.32.2
    Section 906 Certification of the Chief Financial Officer. 20




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##### 



SIGNATURES    THE
    PRUDENTIAL INSURANCE COMPANY OF AMERICA
    in respect ofThe Prudential Variable Contract Real Property Account(Registrant)
  Date: March 23,
    2007

By:

/s/ Richard J. CarboneRichard J. Carbone
    Senior Vice President     Signature

Title

Date/s/  Arthur
    F. RyanArthur
    F. Ryan

Chairman of the Board, Chief
    Executive Officer, President and Director

March 23, 2007/s/  Richard
    J. CarboneRichard
    J. Carbone

Chief Financial Officer

March 23, 2007/s/  Peter
    SayrePeter
    Sayre

Senior Vice President and
    Controller (Principal Accounting Officer)

March 23, 2007 21




---



##### 



Signature

Title

Date*Frederic
    K. BeckerFrederic
    K. Becker

Director

March 23, 2007*Gordon
    M. BethuneGordon
    M. Bethune

Director

March 23, 2007*W.
    Gaston
    Caperton, IIIW.
    Gaston Caperton, III

Director

March 23, 2007*Gilbert
    F. CasellasGilbert
    F. Casellas

Director

March 23, 2007*James
    G. CullenJames
    G. Cullen

Director

March 23, 2007*William
    H. Gray, IIIWilliam
    H. Gray, III

Director

March 23, 2007*Jon
    F. HansonJon
    F. Hanson

Director

March 23, 2007*Constance
    J. HornerConstance
    J. Horner

Director

March 23, 2007*Karl
    J. KrapekKarl
    J. Krapek

Director

March 23, 2007*Christine
    A. PoonChristine
    A. Poon

Director

March 23, 2007*James
    A. UnruhJames
    A. Unruh

Director

March 23, 2007    By:*
    /s/  Thomas
    C. Castano   Thomas C. Castano
 (Attorney-in-fact)
 22




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##### 



THE PRUDENTIAL
    VARIABLE CONTRACT REAL PROPERTY ACCOUNT
    (Registrant)
  INDEX
  PageA.


THE PRUDENTIAL VARIABLE
    CONTRACT REAL PROPERTY ACCOUNTFinancial Statements:Report
    of Independent Registered Public Accounting Firm


F-2Statements
    of Net Assets  December 31, 2006 and
    2005


F-3Statements
    of Operations  Years Ended December 31, 2006,
    2005, 2004


F-3Statements
    of Changes in Net Assets  Years Ended
    December 31, 2006, 2005, 2004


F-3Notes
    to Financial Statements


F-4B.


THE PRUDENTIAL VARIABLE
    CONTRACT REAL PROPERTY PARTNERSHIPFinancial Statements:Report
    of Independent Registered Public Accounting Firm


F-9Report
    of Independent Registered Public Accounting Firm on Financial
    Statement Schedules


F-10Consolidated
    Statements of Assets and Liabilities 
    December 31, 2006 and 2005


F-11Consolidated
    Statements of Operations  Years Ended
    December 31, 2006, 2005 and 2004


F-12Consolidated
    Statements of Changes in Net Assets  Years Ended
    December 31, 2006, 2005 and 2004


F-13Consolidated
    Statements of Cash Flows  Years Ended
    December 31, 2006, 2005 and 2004


F-14Consolidated
    Schedule of Investments  December 31, 2006 and
    2005


F-15Notes
    to Financial Statements


F-17Financial Statement Schedules:For
    the period ended December 31, 2006Schedule III 
    Real Estate Owned: Properties


F-27Schedule
    IV  Mortgage Loans on Real Estate


F-28   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




---



##### 



Report of
    Independent Registered Public Accounting Firm  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 of changes in net assets present fairly, in
    all material respects, the financial position of The Prudential
    Variable Contract Real Property Account at December 31,
    2006 and 2005, and the results of its operations and the changes
    in its net assets for each of the three years in the period
    ended December 31, 2006, in conformity with accounting
    principles generally accepted in the United States of America.
    These financial statements are the responsibility of the
    management of The Prudential Insurance Company of America; our
    responsibility is to express an opinion on these financial
    statements based on our audits. We conducted our audits of these
    financial statements in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. An audit includes examining, on a
    test basis, evidence supporting the amounts and disclosures in
    the financial statements, 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
    at December 31, 2006 with The Prudential Variable Contract
    Real Property Partnership, provide a reasonable basis for our
    opinion.
  PricewaterhouseCoopers
    LLP
 New York, New York
 March 20, 2007
 F-2




---



##### 



FINANCIAL
    STATEMENTS OF
    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
  STATEMENTS OF NET
    ASSETSDecember 31,
    2006 and 2005  2006


2005ASSETSInvestment in The Prudential
    Variable Contract Real Property Partnership

$
92,863,117


$
83,277,385Net Assets

$
92,863,117


$
83,277,385NET ASSETS,
    representing:Equity of contract owners

$
68,090,994


$
60,796,985Equity of The Prudential Insurance
    Company of America


24,772,123



22,480,400$
92,863,117


$
83,277,385Units outstanding


36,089,056



36,749,552Portfolio shares held


2,741,864



2,814,362Portfolio net asset value per share

$
33.87


$
29.59   STATEMENTS OF
    OPERATIONSFor the
    years ended December 31, 2006, 2005 and 2004  2006


2005


2004INVESTMENT INCOMENet investment income from
    Partnership operations

$
4,526,160


$
3,737,105


$
3,162,352EXPENSESCharges to contract owners for
    assuming mortality risk and expense risk and for administration


509,687



460,468



435,006NET INVESTMENT INCOME


4,016,473



3,276,637



2,727,346NET REALIZED AND UNREALIZED GAIN
    (LOSS) ON INVESTMENTSNet change in unrealized gain
    (loss) on investments in Partnership


7,413,826



3,745,793



628,942Net realized gain (loss) on sale of
    investments in Partnership


27,482



2,520,876



701,429NET GAIN (LOSS) ON
    INVESTMENTS


7,441,308



6,266,669



1,330,371NET INCREASE (DECREASE) IN NET
    ASSETS RESULTING FROM OPERATIONS

$
11,457,781


$
9,543,306


$
4,057,717   STATEMENTS OF
    CHANGES IN NET ASSETSFor the
    years ended December 31, 2006, 2005 and 2004  2006


2005


2004OPERATIONSNet investment income

$
4,016,473


$
3,276,637


$
2,727,346Net change in unrealized gain
    (loss) on investments in Partnership


7,413,826



3,745,793



628,942Net realized gain (loss) on sale of
    investments in Partnership


27,482



2,520,876



701,429NET INCREASE (DECREASE) IN NET
    ASSETS RESULTING FROM OPERATIONS


11,457,781



9,543,306



4,057,717CAPITAL TRANSACTIONSNet contributions (withdrawals) by
    contract owners


(865,224
)


(841,882
)


(1,350,431
)Net contributions (withdrawals) by
    The Prudential Insurance Company of America


(1,006,825
)


(1,113,369
)


(666,590
)NET INCREASE (DECREASE) IN NET
    ASSETS RESULTING FROM CAPITAL TRANSACTIONS


(1,872,049
)


(1,955,251
)


(2,017,021
)TOTAL INCREASE (DECREASE) IN NET
    ASSETS


9,585,732



7,588,055



2,040,696NET ASSETSBeginning of period


83,277,385



75,689,330



73,648,634End of period

$
92,863,117


$
83,277,385


$
75,689,330   The
    accompanying notes are an integral part of these financial
    statements.
 F-3




---



##### 



NOTES TO THE
    FINANCIAL STATEMENTS OF
    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
    December 31, 2006
  Note 1:
    General  The Prudential
    Variable Contract Real Property Account (the
    Account) was established on November 20, 1986
    by resolution of the Board of Directors of The Prudential
    Insurance Company of America (Prudential), which is
    an indirect wholly-owned subsidiary of Prudential Financial,
    Inc. (PFI) as a separate investment account pursuant
    to New Jersey law and is registered under the Securities Act of
    1933, as amended. The assets of the Account are segregated from
    Prudentials other assets. The 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
    Account are invested in The Prudential Variable Contract Real
    Property Partnership (the Partnership). 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 Account, along
    with the Pruco Life Variable Contract Real Property Account and
    the Pruco Life of New Jersey Variable Contract Real Property
    Account, are the sole investors in the Partnership. These
    financial statements should be read in conjunction with the
    financial statements of 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 and Pronouncements  A.
    Basis of
    Accounting  The accompanying
    financial statements are prepared in conformity with
    U.S. GAAP. The preparation of the financial statements in
    conformity with U.S. GAAP requires management to make
    estimates and assumptions that affect the reported amounts and
    disclosures. Actual results could differ from those estimates.
  In September 2006,
    the staff of the U.S. Securities and Exchange Commission,
    or SEC, issued Staff Accounting Bulletin, or
    SAB, No. 108, Considering the Effects of
    Prior Year Misstatements when Quantifying Misstatements in
    Current Year Financial Statements. The interpretations in
    this SAB express the staffs views regarding the process of
    quantifying financial statement misstatements. Specifically, the
    SEC staff believes that registrants must quantify the impact on
    current period financial statements of correcting all
    misstatements, including both those occurring in the current
    period and the effect of reversing those that have accumulated
    from prior periods. This SAB should be applied beginning with
    the first fiscal year ending after November 15, 2006, with
    early adoption encouraged. Since the Accounts method for
    quantifying financial statement misstatements already considers
    those occurring in the current period and the effect of
    reversing those that have accumulated from prior periods, the
    adoption of SAB No. 108 should have no effect to the
    financial position and result of operations of the Account.
  B.
    Investment in
    Partnership Interest  The investment in
    the Partnership is based on the Accounts proportionate
    interest of the Partnerships market value. At
    December 31, 2006 and 2005 the Accounts interest in
    the Partnership was 40.6% or 2,741,864 shares and 40.6% or
    2,814,362 shares respectively.
  C.
    Income
    Recognition  Net investment
    income and realized and unrealized gains and losses are
    recognized daily. Amounts are based upon the Accounts
    proportionate interest in the Partnership.
  D.
    Equity of The
    Prudential Insurance Company of America  Prudential maintains
    a position in the Account for liquidity purposes, including unit
    purchases and redemptions, Partnership share transactions, and
    expense processing. The position does not affect contract
    owners accounts or the related unit values.
 F-4




---



##### 



NOTES TO
    THE FINANCIAL STATEMENTS 
    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
    December 31, 2006
   Note 3:
    Taxes  Prudential is taxed
    as a life insurance company, as defined by the
    Internal Revenue Code. The results of operations of the Account
    form a part of PFIs consolidated federal tax return. Under
    current federal law, no federal income taxes are payable by the
    Account. As such, no provision for the tax liability has been
    recorded in these financial statements.
  Note 4:
    Net Withdrawals
    by Contract Owners  Net contract owner
    withdrawals for the real estate investment option in The
    Prudential Insurance Company of Americas variable
    insurance and variable annuity products for the years ended
    December 31, 2006, 2005 and 2004 were as follows:
  PVAL &PVAL$100,000+VIP &


Face2006:

PDISCO+


Value


TotalContract Owner Net Payments:

$
7,765


$
3,832,194


$
3,839,959Policy Loans:


0



(1,337,252
)


(1,337,252
)Policy Loan Repayments and Interest:


0



1,216,739



1,216,739Surrenders, Withdrawals, and Death
    Benefits:


(611,189
)


(2,485,769
)


(3,096,958
)Net Transfers To Other Subaccounts
    or Fixed Rate Option:


134,505



1,152,025



1,286,530Administrative and Other Charges:


(1,390
)


(2,772,852
)


(2,774,242
)Net Withdrawals by Contract
    Owners

$
(470,309
)

$
(394,915
)

$
(865,224
)   PVAL &PVAL$100,000+VIP &


Face2005:

PDISCO+


Value


TotalContract Owner Net Payments:

$
12,796


$
3,991,805


$
4,004,601Policy Loans:


0



(1,160,988
)


(1,160,988
)Policy Loan Repayments and Interest:


0



1,194,065



1,194,065Surrenders, Withdrawals, and Death
    Benefits:


(554,301
)


(2,603,294
)


(3,157,595
)Net Transfers To Other Subaccounts
    or Fixed Rate Option:


22,921



1,033,843



1,056,764Administrative and Other Charges:


(1,695
)


(2,777,034
)


(2,778,729
)Net Withdrawals by Contract
    Owners

$
(520,279
)

$
(321,603
)

$
(841,882
)   PVAL &
    PVALVIP &


$100,000+ face2004:

PDISCO+


value


TotalContract Owner Net Payments:

$
33,557


$
4,168,816


$
4,202,373Policy Loans:


0



(1,144,139
)


(1,144,139
)Policy Loan Repayments and Interest:


0



1,219,695



1,219,695Surrenders, Withdrawals, and Death
    Benefits:


(476,794
)


(2,385,471
)


(2,862,265
)Net Transfers To Other Subaccounts
    or Fixed Rate Option:


263,856



(166,388
)


97,468Administrative and Other Charges:


(1,927
)


(2,861,636
)


(2,863,563
)Net Withdrawals by Contract
    Owners

$
(181,308
)

$
(1,169,123
)

$
(1,350,431
) F-5




---



##### 



NOTES TO
    THE FINANCIAL STATEMENTS 
    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
    December 31, 2006
     Note 5:
    Unit
    Activity  Transactions in
    units for the years ended December 31, 2006, 2005 and 2004
    were as follows:
  PVAL$100,000+2006:






PDISCO+


VIP


PVAL


face
    valueCompany Contributions:


1,289,694


Contract Owner
    Contributions:


61,105



42,871



1,371,500



1,814,985Company Redemptions:


(1,567,945
)

Contract Owner
    Redemptions:


(208,442
)


(97,978
)


(1,589,371
)


(1,776,915
)   PVAL$100,000+2005:






PDISCO+


VIP


PVAL


face
    valueCompany Contributions:


1,373,623


Contract Owner
    Contributions:


51,235



66,652



1,592,159



1,430,019Company Redemptions:


(1,709,303
)

Contract Owner
    Redemptions:


(224,793
)


(145,446
)


(1,756,695
)


(1,422,819
)   PVAL$100,000+2004:






PDISCO+


VIP


PVAL


face
    valueCompany Contributions:


1,721,406


Contract Owner
    Contributions:


251,872



74,919



1,684,883



1,762,982Company Redemptions:


(1,918,713
)

Contract Owner
    Redemptions:


(256,989
)


(169,082
)


(1,934,487
)


(2,106,617
)   Note 6:
    Purchases and
    Sales of Investments  The aggregate costs
    of purchases and proceeds from sales of investments in the
    Partnership for the years ended December 31, 2006, 2005 and
    2004 were as follows:
  December 31,
    2006


December 31,
    2005


December 31,
    2004Purchases:

$
0


$
0


$
0Sales:

$
(2,381,736
)

$
(2,415,719
)

$
(2,452,028
)  F-6




---



##### 



NOTES TO
    THE FINANCIAL STATEMENTS 
    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
    December 31, 2006
  Note 7:
    Financial
    Highlights  Prudential Insurance
    Company of America (the Company or
    Prudential) sells a number of variable annuity and
    variable life insurance products. These products have unique
    combinations of features and fees that are charged against the
    contract owners account balance. Differences in the fee
    structures result in a variety of unit values, expense ratios
    and total returns.
  The following table
    was developed by determining which products offered by
    Prudential Insurance Company of America have the lowest and
    highest total expense ratio. The summary may not reflect the
    minimum and maximum contract charges offered by the Company as
    contract owners may not have selected all available and
    applicable contract options as discussed in Note 1. The
    table reflects contract owner units only.
  At year
    ended


For year
    endedUnits


Unit Value


Net Assets


Investment


Expense Ratio
    **


Total Return
    ***(000s)


Lowest-
    Highest


(000s)


Income Ratio
    *


Lowest-Highest


Lowest-HighestDecember 31, 2006


26,281


$
2.43678 to $2.68168


$
68,091



5.10
%


0.60
% to 1.20%


13.11% to 13.78%December 31, 2005


26,664


$
2.15433 to $2.35694


$
60,797



4.64
%


0.60
% to 1.20%


11.82% to 12.48%December 31, 2004


27,073


$
1.92668 to $2.09540


$
54,956



4.15
%


0.60
% to 1.20%


4.81% to 5.43%December 31, 2003


27,766


$
1.83832 to $1.98753


$
53,574



5.77
%


0.60
% to 1.20%


1.03% to 1.63%December 31, 2002


28,139


$
1.81952 to $1.95560


$
53,487



5.59
%


0.60
% to 1.20%


0.02% to 0.62%   The table above
    reflects information for units held by contract owners.
    Prudential also maintains a position in the Real Property
    Account, to provide for property acquisitions and capital
    expenditure funding needs. Prudential held 9,807,865,
    10,086,116, 10,421,720, 10,619,027 and 11,217,512 units
    representing $24,772,123, $22,480,400, $20,733,052, $20,075,011
    and $20,962,590 of net assets as of December 31, 2006,
    2005, 2004, 2003 and 2002, respectively. Charges for mortality
    risk, expense risk and administrative expenses are used by
    Prudential to purchase additional units in its account resulting
    in no impact to its net assets.
    *
    
    This
    amount represents the proportionate share of the net investment
    income from the underlying Partnership divided by the total
    average assets of the Account. This ratio excludes those
    expenses, such as mortality and expense charges, that result in
    direct reductions in the unit values.**
    
    These
    ratios represent the annualized contract expenses of the
    separate account, consisting primarily of mortality and expense
    charges, for each period indicated. The ratios include only
    those expenses that result in a direct reduction to unit values.
    Charges made directly to contract owner accounts through the
    redemption of units and expenses of the underlying Partnership
    are excluded.***
    
    These
    amounts represent the total return for the periods indicated,
    including changes in the value of the underlying Partnership,
    and reflect deductions for all items included in the expense
    ratio. The total return does not include any expense assessed
    through the redemption of units; inclusion of these expenses in
    the calculation would result in a reduction in the total return
    presented.  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 1.2%, 0.9%, 0.6% and 1.2% for PDISCO+, PVAL, PVAL
    $100,000 + face value and VIP, respectively. Mortality risk is
    the risk that life insurance contract owners may not live as
    long as estimated or annuitants may live longer than estimated
    and expense risk is the risk that the cost of issuing and
    administering the policies may exceed related charges by
    Prudential. The mortality risk and expense risk charges are
    assessed through reduction in unit values.
  B.
    Cost of Insurance
    and Other Related Charges  Contract owner
    contributions are subject to certain deductions prior to being
    invested in the Account. The deductions for PVAL and PVAL
    $100,000 + face value are (1) state premium
 F-7




---



##### 



NOTES TO
    THE FINANCIAL STATEMENTS 
    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
    December 31, 2006
  taxes;
    (2) sales charges, up to 0.50%, 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 subject to charges on each basic premium
    for assuming a guaranteed minimum death benefit risk. This
    charge compensates Prudential for the risk that an insured may
    die at a time when the death benefit exceeds the benefit that
    would have been payable in the absence of a minimum guarantee.
    These charges are assessed through the redemption of units.
  C.
    Deferred Sales
    Charge  A deferred sales
    charge, applicable to PVAL and PVAL $100,000 + face value and
    not to exceed 50% of the first years primary annual
    premium for PVAL contracts, is imposed upon surrenders of
    certain variable life insurance contracts to compensate
    Prudential for sales and other marketing expenses. The amount of
    any sales charge will depend on the number of 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. This deferred sales charge is assessed
    through the redemption of units.
  D.
    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. This
    charge is assessed through the redemption of units.
  E.
    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 8:
    Related
    Party  Prudential and its
    affiliates perform various services on behalf of the Partnership
    in which the Account invests and may receive fees for the
    services performed. These services include, among other things,
    shareholder communications, preparation, postage, fund transfer
    agency and various other record keeping and customer service
    functions.
 F-8




---



##### 



Report of
    Independent Registered Public Accounting Firm  To the Partners of
 The Prudential
    Variable Contract Real Property Partnership:
  In our opinion, the
    accompanying consolidated statements of assets and liabilities,
    including the consolidated schedule of real estate investments,
    and the related consolidated statements of operations, of
    changes in net assets and of cash flows present fairly, in all
    material respects, the financial position of The Prudential
    Variable Contract Real Property Partnership (the
    Partnership) at December 31, 2006 and 2005, and
    the results of its operations and its cash flows for each of the
    three years in the period ended December 31, 2006 in
    conformity with accounting principles generally accepted in the
    United States of America. These financial statements are the
    responsibility of the management of The Prudential Insurance
    Company of America. Our responsibility is to express an opinion
    on these financial statements based on our audits. We conducted
    our audits of these statements in accordance with the standards
    of the Public Company Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. An audit includes examining, on a
    test basis, evidence supporting the amounts and disclosures in
    the financial statements, 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 our
    opinion.
  PricewaterhouseCoopers
    LLP
 New York, New York
 February 15,
    2007
 F-9




---



##### 



Report of
    Independent Registered Public Accounting Firm on
    Financial Statement Schedules  To the Partners of
 The Prudential
    Variable Contract Real Property Partnership:
  Our audits of the
    consolidated financial statements referred to in our report
    dated February 15, 2007 appearing in this Annual Report on
    Form 10-K
    also included an audit of the financial statement schedules
    listed in Item 15(a)(2) of this
    Form 10-K.
    In our opinion, these financial statement schedules present
    fairly, in all material respects, the information set forth
    therein when read in conjunction with the related consolidated
    financial statements.
  PricewaterhouseCoopers
    LLP
 New York, New York
 February 15,
    2007
 F-10




---



##### 



THE PRUDENTIAL
    VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 CONSOLIDATED
    STATEMENTS OF ASSETS AND LIABILITIES
  December 31,
    2006


December 31,
    2005ASSETSREAL ESTATE INVESTMENTS 
    At estimated market value:Real estate and improvements
    (cost:12/31/2006 
    $199,124,056;
    12/31/2005 
    $183,767,148)

$
214,444,568


$
178,628,645Real estate partnerships and
    preferred equity investments (cost:
    12/31/2006 
    $22,334,823;
    12/31/2005 
    $18,578,394)


17,941,039



14,348,816Mortgage and other loans receivable
    (cost:12/31/2006 
    $0;
    12/31/2005 
    $4,277,769)






4,277,769Other real estate investments
    (cost:12/31/2006 
    $2,857,851;
    12/31/2005 
    $0)


2,857,851



Total real estate investments


235,243,458



197,255,230CASH AND CASH EQUIVALENTS


33,399,532



45,467,485OTHER ASSETS, NET


3,493,829



3,292,400Total assets

$
272,136,819


$
246,015,115LIABILITIES &
    PARTNERS EQUITYINVESTMENT LEVEL DEBT

$
32,710,488


$
33,195,607ACCOUNTS PAYABLE AND ACCRUED
    EXPENSES


3,091,930



2,545,052DUE TO AFFILIATES


789,889



760,926OTHER LIABILITIES


876,487



472,336MINORITY INTEREST


5,751,441



3,638,343Total liabilities


43,220,235



40,612,264COMMITMENTS AND CONTINGENCIESPARTNERS EQUITY


228,916,584



205,402,851Total liabilities and
    partners equity

$
272,136,819


$
246,015,115NUMBER OF SHARES OUTSTANDING
    AT END OF PERIOD


6,758,960



6,941,631SHARE VALUE AT END OF PERIOD

$
33.87


$
29.59   The
    accompanying notes are an integral part of these consolidated
    financial statements.
 F-11




---



##### 



THE PRUDENTIAL
    VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended
    December 31,2006


2005


2004INVESTMENT INCOME:Revenue from real estate and
    improvements

$
25,460,860


$
27,087,813


$
27,810,539Equity in income of real estate
    partnerships


962,208



252,618



629,190Interest and equity income on
    mortgage and other loans receivable


125,510



281,134



138,296Income from other real estate
    investments


219,564







246,764Interest on short-term investments


1,855,345



1,022,706



251,374Total investment income


28,623,487



28,644,271



29,076,163INVESTMENT EXPENSES:Operating


6,355,543



7,420,509



7,545,335Investment management fee


3,075,176



2,845,519



2,666,103Real estate taxes


2,069,169



2,382,626



2,687,018Administrative


3,923,413



4,438,482



5,243,944Interest expense


1,814,686



2,173,789



2,910,841Minority interest


223,772



164,175



223,316Total investment expenses


17,461,759



19,425,100



21,276,557NET INVESTMENT INCOME


11,161,728



9,219,171



7,799,606REALIZED AND UNREALIZED GAIN (LOSS)
    ON REAL ESTATE INVESTMENTS:Net proceeds from real estate
    investments sold


67,770



55,054,217



7,105,000Less: Cost of real estate
    investments sold






47,015,948



7,307,410Realization of prior years
    unrealized gain (loss) on real estate investments sold






(655,341
)


(1,932,410
)Minority interest in realized gain
    (loss) on real estate investments sold






2,474,788



NET GAIN (LOSS) REALIZED ON REAL
    ESTATE INVESTMENTS SOLD


67,770



6,218,822



1,730,000Change in unrealized gain (loss) on
    real estate investments


20,294,808



10,475,654



2,457,887Less: Minority interest in
    unrealized gain (loss) on real estate investments


2,010,573



1,233,857



907,493Net unrealized gain (loss) on real
    estate investments


18,284,235



9,241,797



1,550,394NET REALIZED AND UNREALIZED GAIN
    (LOSS) ON REAL ESTATE INVESTMENTS


18,352,005



15,460,619



3,280,394INCREASE (DECREASE) IN NET ASSETS
    RESULTING FROM OPERATIONS

$
29,513,733


$
24,679,790


$
11,080,000   The
    accompanying notes are an integral part of these consolidated
    financial statements.
 F-12




---



##### 



THE PRUDENTIAL
    VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 CONSOLIDATED
    STATEMENTS OF CHANGES IN NET ASSETS
  Year Ended
    December 31,2006


2005


2004INCREASE (DECREASE) IN NET ASSETS
    RESULTING FROM OPERATIONS:Net investment income

$
11,161,728


$
9,219,171


$
7,799,606Net gain (loss) realized on real
    estate investments sold


67,770



6,218,822



1,730,000Net unrealized gain (loss) from
    real estate investments


18,284,235



9,241,797



1,550,394Increase (decrease) in net assets
    resulting from operations


29,513,733



24,679,790



11,080,000INCREASE (DECREASE) IN NET ASSETS
    RESULTING FROM CAPITAL TRANSACTIONS:Withdrawals(2006-182,671;
    2005-198,677;
    and
    2004-226,527 shares,
    respectively)


(6,000,000
)


(6,000,000
)


(6,000,000
)Increase (decrease) in net assets
    resulting from capital transactions


(6,000,000
)


(6,000,000
)


(6,000,000
)INCREASE (DECREASE) IN NET ASSETS


23,513,733



18,679,790



5,080,000NET ASSETS  Beginning of
    period


205,402,851



186,723,061



181,643,061NET ASSETS  End of period

$
228,916,584


$
205,402,851


$
186,723,061   The
    accompanying notes are an integral part of these consolidated
    financial statements.
 F-13




---



##### 



THE PRUDENTIAL
    VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended
    December 31,2006


2005


2004CASH FLOWS FROM OPERATING
    ACTIVITIES:Net increase in net assets from
    operations

$
29,513,733


$
24,679,790


$
11,080,000Adjustments to reconcile net
    increase in net assets to net cash from operating activitiesNet realized and unrealized loss
    (gain)


(18,352,005
)


(15,460,619
)


(3,280,394
)Amortization of deferred financing
    costs






(34,620
)


(108,232
)Distributions in excess of (less
    than) equity in income of real estate partnership operations


(87,396
)


(148,668
)


(209,678
)Minority interest in consolidated
    partnerships


223,772



164,175



223,316Bad debt expense


(239,380
)


240,176



459,103(Increase) Decrease in accrued
    interest included in other real estate investments


(219,564
)






(Increase) decrease in:Other assets


37,951



2,815,778



(304,747
)Increase (decrease) in:Accounts payable and accrued
    expenses


546,878



(550,954
)


97,254Due to affiliates


28,963



39,507



(296,513
)Other liabilities


404,151



(150,564
)


(324,210
)Net cash flows from (used in)
    operating activities


11,857,103



11,594,001



7,335,899CASH FLOWS FROM INVESTING
    ACTIVITIES:Net proceeds from real estate
    investments sold


67,770



41,676,816



7,105,000Acquisition of real estate and
    improvements


(12,159,443
)






Additions to real estate and
    improvements


(3,197,470
)


(6,198,211
)


(7,746,015
)Contributions to real estate
    partnerships


(7,289,487
)


(7,142,900
)


(467,875
)Return of investment in real estate
    partnerships


3,620,455







Origination of mortgage loan
    receivable






(2,945,709
)


(1,332,060
)Collection of mortgage loan
    receivable


4,277,769







4,975,000Origination of other real estate
    investments


(2,638,287
)






(4,475,000
)Net cash flows from (used in)
    investing activities


(17,318,693
)


25,389,996



(1,940,950
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Withdrawals


(6,000,000
)


(6,000,000
)


(6,000,000
)Proceeds from investment level debt










8,750,000Principal payments on investment
    level debt


(485,119
)


(853,525
)


(8,910,727
)Distributions to minority interest
    partners


(121,244
)


(2,220,169
)


(578,854
)Net cash flows from (used in)
    financing activities


(6,606,363
)


(9,073,694
)


(6,739,581
)NET CHANGE IN CASH AND CASH
    EQUIVALENTS


(12,067,953
)


27,910,303



(1,344,632
)CASH AND CASH
    EQUIVALENTS  Beginning of period


45,467,485



17,557,182



18,901,814CASH AND CASH
    EQUIVALENTS  End of period

$
33,399,532


$
45,467,485


$
17,557,182Cash paid for interest

$
1,806,320


$
2,324,397


$
2,595,651   The
    accompanying notes are an integral part of these consolidated
    financial statements.
 F-14




---



##### 



THE PRUDENTIAL
    VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 CONSOLIDATED
    SCHEDULE OF INVESTMENTS
  2006 Total
    RentableSquare Feet


December 31,Unless
    Otherwise


2006


2005December 31,
    2006



Indicated





Estimated





EstimatedProperty
    Name

Ownership

City,
    State

(Unaudited)


Cost


Market
    Value


Cost


Market
    ValueREAL ESTATE
    INVESTMENTSOFFICES750 Warrenville

WO

Lisle, IL


103,193


$
24,517,391


$
10,700,000


$
23,173,035


$
10,000,000Summit @ Cornell Oaks

WO

Beaverton , OR


72,109



12,091,490



12,500,000



12,046,574



10,566,213Westpark

WO

Nashville, TN


97,199



11,033,804



12,800,000



10,903,925



12,600,290Financial Plaza

WO

Brentwood, TN


98,049



12,333,152



13,500,000



12,333,151



12,300,000Offices % as of
    12/31/06


22
%


59,975,837



49,500,000



58,456,685



45,466,503APARTMENTSBrookwood Apartments

WO

Atlanta, GA


240 Units



18,918,016



20,100,000



18,481,376



17,155,625Dunhill Trace Apartments

WO

Raleigh, NC


250 Units



16,287,767



20,400,000



16,170,782



19,202,057Apartments % as of
    12/31/06


18
%


35,205,783



40,500,000



34,652,158



36,357,682RETAILKings Market

WO

Rosewell, GA


314,358



37,775,326



28,400,000



37,646,731



27,199,960Hampton Towne Center

WO

Hampton, VA


174,540



18,042,611



26,000,000



18,035,334



26,100,000White Marlin Mall

CJV

Ocean City, MD


186,016



15,538,779



22,900,000



15,328,836



21,500,000Westminster Crossing East, LLC

CJV

Westminster, MD


89,890



12,358,340



17,744,568Kansas City Portfolio

EJV

Kansas City, KS; MO


487,660



7,816,531



3,422,747



11,413,171



7,183,593CARS Preferred Equity

PE

Various


N/A



14,518,292



14,518,292



7,165,223



7,165,223Retail % as of12/31/06


49
%


106,049,879



112,985,607



89,589,295



89,148,776INDUSTRIALSmith Road

WO

Aurora, CO


277,930



11,286,560



14,300,000



10,823,619



11,704,500Industrial % as  of
    12/31/06


6
%


11,286,560



14,300,000



10,823,619



11,704,500HOTELPortland Crown Plaza

CJV

Portland, OR


161 Rooms



8,940,820



15,100,000



8,823,785



10,300,000Hotel % as of 12/31/06


7
%


8,940,820



15,100,000



8,823,785



10,300,000MORTGAGE AND OTHERLOANS
    RECEIVABLEWestminster
    West

Eloan

Westminster, MD














4,277,769



4,277,769Mortgage and Other Loans Receivable
    % as of 12/31/06


0
%










4,277,769



4,277,769OTHER REAL ESTATE
    INVESTMENTSWestminster East

Eloan

Westminster, MD






2,857,851



2,857,851







Other Real Estate Investments %as
    of 12/31/06


1
%


2,857,851



2,857,851







Total Real Estate Investments as
    a Percentage of Net Assets as of
    12/31/06






103
%


224,316,730



235,243,458



206,623,311



197,255,230   WO 
    Wholly Owned Investment
 CJV 
    Consolidated Joint Venture
 EJV 
    Joint Venture Investment accounted for under the equity method
 PE 
    Preferred equity investments accounted for under the equity
    method
 Eloan 
    Mezzanine loan accounted for under the equity method
  The
    accompanying notes are an integral part of these consolidated
    financial statements.
 F-15




---



##### 



THE PRUDENTIAL
    VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    CONSOLIDATED SCHEDULE OF INVESTMENTS
  December 31,
    2006


December 31,
    2005Estimated





EstimatedFace
    Amount


Cost


Market
    Value


Cost


Market
    ValueCASH AND CASH
    EQUIVALENTS  Percentage of Net Assets










14.6
%






22.1
%Federal Home Loan Bank, 1.75%,
    January 3, 2006

$
488,000


$



$



$
487,908


$
487,908Federal Home Loan Bank, 0
    coupon bond, January 02, 2007


7,246,000



7,245,028



7,245,028



44,033,621



44,033,621Federal Home Loan Bank, 0
    coupon bond, January 25, 2007


25,000,000



24,914,167



24,914,167







Total Cash Equivalents






32,159,195



32,159,195



44,521,529



44,521,529Cash






1,240,337



1,240,337



945,956



945,956Total Cash and Cash
    Equivalents





$
33,399,532


$
33,399,532


$
45,467,485


$
45,467,485   The
    accompanying notes are an integral part of these consolidated
    financial statements.
 F-16




---



##### 



NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS OF
    THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    For Year Ended December 31, 2006, 2005, and 2004  Note 1:
    Organization  On April 29,
    1988, The 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.
  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, principally as described in
    Notes 2A, 2B and 2C below, reduced by any liabilities of
    the Partnership. The periodic adjustments to property values
    described in Notes 2A, 2B and 2C below 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 The 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.
  PREI
    tm is the real estate advisory unit of Prudential Investment
    Management, Inc. (PIM), which is an indirectly owned
    subsidiary of Prudential Financial Inc. (PFI). PREI
    tm provides investment advisory services to the Partnerships
    partners pursuant to the terms of the Advisory Agreement as
    described in Note 10.
  Note 2:    Summary
    of Significant Accounting Policies
  A:
    Basis of
    Presentation
    The accompanying consolidated financial statements of the
    Partnership have been presented on the market value basis of
    accounting in conformity with accounting principles generally
    accepted in the United States of America. The consolidated
    financial statements of Partnership include wholly owned
    entities, and those real estate partnerships in which the
    Partnership has a controlling interest. All significant
    inter-company balances and transactions have been eliminated in
    consolidation.B:
    Managements
    Use of Estimates in the Financial
    Statements
    The preparation of financial statements in conformity with
    accounting principles generally accepted in the United States of
    America requires management to make estimates and assumptions
    that affect the amounts reported in the consolidated financial
    statements and accompanying notes. Actual results could differ
    from those estimates.  C:
    Real Estate
    Investments
    Real estate investments are shown at estimated market value in
    accordance with the terms of the Partnerships contracts.
    Properties owned are F-17




---



##### 



NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS OF THE
    PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    For Year Ended December 31, 2006, 2005, and 2004
  Note 2:
    Summary of Significant Accounting Policies (continued)  initially recorded
    at the purchase price plus closing costs. Development costs and
    major renovations are capitalized as a component of cost, and
    routine maintenance and repairs are charged to expense as
    incurred. Real estate costs include the cost of acquired
    property, including all the tangible and intangible assets.
    Tangible assets include the value of all land, building and
    tenant improvements at the time of acquisition. Intangible
    assets include the value of any above and below market leases,
    in-place leases, and tenant relationships at the time of
    acquisition. Market value estimates are based upon property
    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 Real Estate Appraiser of PIM is
    responsible to assure that the valuation process provides
    independent and reasonable property market value estimates.
    American Appraisal Associates (the Appraisal Management
    Firm), an entity not affiliated with PIM, has been
    appointed by PIM to assist the Chief Real Estate Appraiser in
    maintaining and monitoring the independence and the accuracy of
    the appraisal process. Unless a property is currently held for
    sale, the market value of real estate investments does not
    reflect the transaction sale costs, which may be incurred upon
    disposition of the real estate investments.
  Unconsolidated real
    estate partnerships are valued at the Partnerships equity
    in net assets as reflected in the partnerships financial
    statements with properties valued as described above. Under the
    equity method, the investment is initially recorded at the
    original investment amount, plus or minus additional amounts
    invested or distributed, and is subsequently adjusted for the
    Partnerships share of undistributed earnings or losses,
    including unrealized appreciation and depreciation, from the
    underlying entity.
  Land and development
    properties held for future development is carried at acquisition
    cost including soft costs incurred prior to development.
  The Partnership
    periodically enters into forward contracts to acquire, for a
    fixed price, real estate investments to be constructed in
    accordance with predetermined plans and specifications or those
    achieve a certain level of leasing. Where conditions precedent
    to funding have been met by its development partners, and the
    Partnerships commitment to fund is firm, the amount of any
    unrealized gain or loss is recognized based upon the difference
    between the estimated investments market value as
    described above and the Partnerships funding obligation.
    The funding obligation and related assets are recorded in the
    consolidated financial statements. As of December 31, 2006
    and 2005, no such funding obligation existed.
  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 and could be
    material to the consolidated financial statements. Although the
    estimated market values represent subjective estimates,
    management believes these estimated market values are reasonable
    approximations of market prices and the aggregate estimated
    value of investments in real estate is fairly presented as of
    December 31, 2006 and 2005.
 F-18




---



##### 



NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS OF THE
    PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    For Year Ended December 31, 2006, 2005, and 2004
  Note 2:    Summary
    of Significant Accounting Policies (continued)
   D:
    Other Real Estate
    Investments
    Other real estate investments include short term notes
    receivable, which are valued at the amount due and approximate
    market value.  E:
    Cash and Cash
    Equivalents
    Cash and cash equivalent are comprised of all short-term
    investments and investments in money market funds with a maximum
    maturity of three months. Cash equivalents consist of
    investments in the Prudential Investment Liquidity Pool offered
    and managed by an affiliate of PFI and are accounted for at
    market value.F:
    Other
    Assets
    Cash of $167,311 and $156,268 was maintained by the wholly owned
    and consolidated properties at December 31, 2006 and 2005,
    respectively, for tenant security deposits and is included in
    Other Assets on the Consolidated Statements of Assets and
    Liabilities. Other assets also include tenant receivables and
    are net of allowance for uncollectible accounts of $211,058 and
    $51,162 at December 31, 2006 and 2005, respectively.  G:
    Investment
    Level Debt
    Investment level debt is stated at the principal amount of the
    obligations outstanding. At times the Partnership may assume
    debt in connection with the purchase of real estate. For debt
    assumed, the Partnership allocates a portion of the purchase
    price to the below/above market debt and amortizes the
    premium/discount over the remaining life of the debt.  H:
    Deferred
    Financing
    Costs
    Included in Other Assets are deferred financing costs amounting
    to $309,894 and $246,495 which are net of accumulated
    amortization of $80,227 and $80,227 as of December 31, 2006
    and 2005, respectively, and which are being amortized over the
    term of the related obligation.  I:
    Revenue
    Recognition
    Revenue from real estate is recognized when earned in accordance
    with the terms of the respective leases. Revenue from certain
    real estate investments is net of all or a portion of related
    real estate expenses, as lease arrangements vary as to
    responsibility for payment of these expenses between tenants and
    the Partnership. Since real estate is stated at estimated market
    value, net income is not reduced by depreciation or amortization
    expense.  J:
    Equity in Income
    of Real Estate
    Partnership
    Equity in income from real estate partnership operations
    represents the Partnerships share of the current
    years partnership income as provided for under the terms
    of the partnership agreements. As is the case with wholly owned
    real estate, partnership net income is not reduced by
    depreciation or amortization expense. Frequency of distribution
    of income is determined by formal agreements or by the executive
    committee of the partnership.  K:
    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.  L:
    New Accounting
    Pronouncements
    FASB Interpretation No. 46, Consolidation of Variable
    Interest Entities, (FIN 46) was issued in
    January 2003. In December 2003, FASB issued a revised
    interpretation of FIN 46
    (FIN 46-R),
    which supersedes FIN 46.  FIN 46-R
    defers the effective date for applying the provisions of FIN-46
    for those companies currently accounting for their investments
    in accordance with the AICPA
 F-19




---



##### 



NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS OF THE
    PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    For Year Ended December 31, 2006, 2005, and 2004
  Note 2:    Summary
    of Significant Accounting Policies (continued)
  Audit and Accounting
    Guide, Audits of Investment Companies (the
    Audit Guide). The effective date is delayed while
    the AICPA finalizes the proposed Statement of Position
    (SOP) on the clarification of the scope of the Audit
    Guide. Following the issuance of the final SOP, the FASB will
    consider modifying
    FIN 46-R
    to provide an exception for companies that apply the Audit
    Guide. The Partnership is awaiting the final determination from
    the FASB in order to evaluate the extent in which, if any, its
    equity investments may need to be consolidated as a result of
    this
    FIN 46-R.
  In September 2006,
    the staff of the U.S. Securities and Exchange Commission,
    or SEC, issued Staff Accounting Bulletin, or
    SAB, No. 108, Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements. The interpretations in this SAB
    express the staffs views regarding the process of
    quantifying financial statement misstatements. Specifically, the
    SEC staff believes that registrants must quantify the impact on
    current period financial statements of correcting all
    misstatements, including both those occurring in the current
    period and the effect of reversing those that have accumulated
    from prior periods. This SAB should be applied beginning with
    the first fiscal year ending after November 15, 2006, with
    early adoption encouraged. Since the Partnerships method
    for quantifying financial statement misstatements already
    considers those occurring in the current period and the effect
    of reversing those that have accumulated from prior periods, the
    adoption of SAB No. 108 should have no effect to the
    financial position and result of operations of the Partnership.
  Note 3:    Disclosure
    of Supplemental Cash Flow Information and Non-Cash Investing and
    Financing Activity
  Cash paid for
    interest during the years ended December 31, 2006, 2005,
    and 2004, was $1,806,320, $2,324,397, and $2,595,651,
    respectively.
  During the fourth
    quarter of 2005, a minority interest partner bought out the
    Accounts investment in a consolidated real estate
    partnership resulting in net proceeds of $15.9 million.
    This transaction resulted in the assumption of a mortgage loan
    by the partner of approximately $10.0 million and a
    reduction of the partners minority interest of
    $3.7 million.
 F-20




---



##### 



NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS OF THE
    PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    For Year Ended December 31, 2006, 2005, and 2004
  Note 4:
    Real Estate
    Partnership and Preferred Equity Investments  Real estate
    partnerships and preferred equity investments are valued at the
    Partnerships equity in net assets as reflected by the
    partnerships financial statements with properties valued
    as indicated in Note 2C above. The Partnerships
    combined financial position and results of operations are
    summarized as follows (in 000s):
  December 31,2006


2005Partnership Assets and LiabilitiesReal estate at estimated market
    value

$
22,018


$
34,365Other assets


453



1,384Total assets


22,471



35,749Investment level debt


2,978



18,272Other liabilities


253



551Total liabilities


3,231



18,823Net assets

$
19,240


$
16,926Partnerships share of net
    assets

$
17,941


$
14,349   Year Ended
    December 31,2006


2005


2004Partnership OperationsRental revenue

$
3,364


$
4,115


$
3,125Other revenue










1,710Total revenue


3,364



4,115



4,835Real estate expenses and taxes


1,017



2,326



2,481Interest Expense


1,396



1,477



1,500Total Expenses


2,413



3,803



3,981Net Investment Income

$
951


$
312


$
854Partnerships equity in income
    of real estate partnerships

$
962


$
253


$
629   F-21




---



##### 



NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS OF THE
    PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    For Year Ended December 31, 2006, 2005, and 2004
  Note 5:
    Investment
    Level Debt  Debt includes
    mortgage loans payable as summarized below (in 000s):
  As of
    12/31/06


As of
    12/31/05


As of
    12/31/06Partnerships100% Principal


Share of


100% PrincipalBalance


Principal
    Balance


Balance


Interest


MaturityOutstanding


Outstanding(1)


Outstanding


Rate(2)


Date


Terms(3)(Unaudited)Mortgages of Wholly Owned
    Properties & Consolidated PartnershipsHampton, VA

$
8,239


$
8,239


$
8,671



6.75
%


2018



PP, P&IOcean City, MD


6,973



5,181



7,026



7.24
%


2008



PP, P&IRaleigh, NC


8,750



8,750



8,750



3.09
%


2008



PP, IAtlanta, GA


8,748



8,748



8,749



4.90
%


2009



PP, P&ITotal

$
32,710


$
30,918


$
33,196Mortgages on Equity
    PartnershipsKansas City, MO 
    Cherokee Hill

$
2,978


$
2,156


$
3,032



7.79
%


2007



PP, P&IKansas City, MO  Ten
    Quivira










6,575Kansas City, MO- Ten Quivira Parcel










946Kansas City, KS 
    Devonshire










2,108Kansas City, MO  Brywood
    Center










5,611Total

$
2,978


$
2,156


$
18,272    (1)
    
    Represents
    the Partnerships interest in the loan based upon the
    estimated percentage of net assets which would be distributed to
    the Partnership if the partnership were liquidated at
    December 31, 2006. It does not represent the
    Partnerships legal obligation.(2)
    
    The
    Partnerships weighted average interest rate was 6.14% at
    December 31, 2006 and 2005. The weighted average interest
    rates were calculated using the Partnerships annualized
    interest expense for each loan (derived using the same
    percentage as that in (1) above) divided by the
    Partnerships share of total debt.(3)
    
    Loan
    Terms PP=Prepayment penalties applicable to loan, I=Interest
    only, P&I=Principal and Interest  As of
    December 31, 2006, mortgage loans payable on wholly owned
    properties and consolidated partnerships are payable as follows:
  Year Ending
    December 31,

(in
    000s)2007

$
5882008


16,0902009


9,2772010


5652011


604Thereafter


5,586Total

$
32,710   The mortgage loans
    payable of wholly owned properties and consolidated partnerships
    are secured by real estate investments with an estimated market
    value of $89.4 million.
 F-22




---



##### 



NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS OF THE
    PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    For Year Ended December 31, 2006, 2005, and 2004
  Note 5:
    Investment
    Level Debt (continued)  As of
    December 31, 2006, principal amounts of mortgage loans
    payable on the equity partnerships are payable as follows:
  (Unaudited)100% Loan
    Balance


Partnerships
    ShareYear Ending
    December 31,

(in
    000s)


(in
    000s)2007

$
2,978


$
2,156Total

$
2,978


$
2,156   Based on borrowing
    rates available to the Partnership at December 31, 2006 for
    loans with similar terms and average maturities, the
    Partnerships mortgages on wholly owned properties and
    consolidated partnerships have an estimated fair value of
    approximately $33 million, and a carrying value of
    $33 million. The Partnerships mortgage loan payable
    on the equity partnership has an estimated fair value of
    approximately $3 million and a carrying value of
    $3 million. Different assumptions or changes in future
    market conditions could significantly affect estimated fair
    value.
  Note 6:
    Purchase
    Commitment Obligations  Purchase commitments
    includes forward commitments without conditions waived,
    commitments to purchase real estate
    and/or fund
    additional expenditures on previously acquired properties and
    loan take out agreements. Certain purchases of real estate are
    contingent on a developer building the real estate according to
    plans and specifications outlined in the pre-sale agreement or
    the property achieving a certain level of leasing. It is
    anticipated that funding will be provided by operating cash
    flow, real estate investment sales and deposits from the
    Partnership.
  As of
    December 31, 2006, the Partnership had the following
    outstanding purchase commitments:
  CommitmentsProperty
    Type

(000s)Apartments

$
20,805Total

$
20,805   F-23




---



##### 



NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS OF THE
    PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    For Year Ended December 31, 2006, 2005, and 2004
  Note 7:
    Concentration of
    Risk on Real Estate Investments  At December 31,
    2006, the Partnership had real estate investments located
    throughout the United States. The diversification of the
    Partnerships holdings based on the estimated market values
    and established NCREIF regions is as follows:
  EstimatedRegion

Market
    Value


Region
    %(in
    000s)East North Central

$
13,093



5.57
%Mideast


92,987



39.53
%Mountain


16,036



6.82
%Northeast


299



0.13
%Pacific


28,801



12.24
%Southeast


77,200



32.82
%Southwest


3,365



1.43
%West North Central


3,462



1.47
%Total

$
235,243



100.00
%   The allocations on
    the previous page are based on (1) 100% of the estimated
    market value of wholly-owned properties and consolidated joint
    ventures and mortgage and other loans receivable, and
    (2) the estimated market value of the Partnerships
    net equity in non-consolidated ventures.
  Note 8:
    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 2007 to 2025. At
    December 31, 2006, the aggregate future minimum base rental
    payments under non-cancelable operating leases for wholly owned
    and consolidated joint venture properties by year are as follows:
  Year Ending
    December 31,(in
    000s)2007

$
14,1592008


13,1322009


10,2252010


8,7502011


6,479Thereafter


26,014Total

$
78,759   F-24




---



##### 



NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS OF THE
    PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    For Year Ended December 31, 2006, 2005, and 2004
  Note 9:
    Commitments and
    Contingencies  In 1986, Prudential
    committed to fund up to $100 million to enable the
    Partnership to acquire real estate investments. Contributions to
    the Partnership under this commitment have been utilized for
    property acquisitions, and were to be returned to Prudential on
    an ongoing basis from contract owners net contributions
    and other available cash. The amount of the commitment has been
    reduced by $10 million for every $100 million in
    current value net assets of the Partnership. As of
    December 31, 2006, the cost basis of Prudentials
    equity interest in the Partnership under this commitment (held
    through the Real Property Accounts) was $44.2 million.
    Prudential terminated this commitment on December 31, 2002.
  The Partnership is
    subject to various legal proceedings and claims arising in the
    ordinary course of business. These matters are generally covered
    by insurance. In the opinion of Prudentials management,
    the outcome of such matters will not have a significant effect
    on the financial position of the Partnership.
  Note 10:
    Other Related
    Party Transactions  Pursuant to an
    investment management agreement, PIM 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, 2006, 2005 and 2004 management
    fees incurred by the Partnership were $3.1 million,
    $2.8 million, and $2.7 million, for each of the years,
    respectively.
  The Partnership also
    reimburses PIM for certain administrative services rendered by
    PIM. The amounts incurred for the years ended December 31,
    2006, 2005 and 2004 were $146,930; $123,630; and $141,130,
    respectively, and are classified as administrative expenses in
    the Consolidated Statements of Operations.
  During the years
    ended December 31, 2006, 2005 and 2004, the Partnership
    made the following distributions to the Partners:
  Year Ended
    December 31,

(000s)2006

$
6,0002005

$
6,0002004

$
6,000    F-25




---



##### 



NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS OF THE
    PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
    For Year Ended December 31, 2006, 2005, and 2004
   Note 11:
    Financial
    Highlights  For the Year
    Ended December 31,2006


2005


2004


2003


2002Per Share(Unit) Operating
    Performance:Net Asset Value, beginning of period

$
29.59


$
26.15


$
24.66


$
24.11


$
23.82Income From Investment
    Operations:Investment income, before
    management fee


2.07



1.67



1.44



1.71



1.63Investment Management fee


(0.45
)


(0.40
)


(0.36
)


(0.33
)


(0.30
)Net realized and unrealized gain
    (loss) on investments


2.66



2.17



0.41



(0.83
)


(1.04
)Net Increase in Net Assets
    Resulting from Operations


4.28



3.44



1.49



0.55



0.29Net Asset Value, end of
    period

$
33.87


$
29.59


$
26.15


$
24.66


$
24.11Total Return, before Management
    Fee(a):


16.03
%


14.76
%


7.61
%


3.63
%


2.52
%Ratios/Supplemental
    Data:Net Assets, end of period (in
    millions)

$
229


$
205


$
187


$
182


$
184Ratios to average net
    assets(b):Total Portfolio Level Expenses


1.51
%


1.46
%


1.43
%


1.35
%


1.28
%Investment Income before Management
    Fee


6.58
%


4.89
%


5.76
%


7.12
%


6.85
%   (a)
    
    Total
    Return, before management fee is calculated by geometrically
    linking quarterly returns which are calculated using the formula
    below:Net
    Investment Income + Net Realized and Unrealized
Gains/(Losses)   Beg.
    Net Asset Value + Time Weighted Contributions −Time
    Weighted Distributions(b)
    
    Average
    net assets are based on beginning of quarter net assets.  Note 12:
    Subsequent
    Events  On February 7,
    2007, the Partnership sold Smith Road, a wholly owned property,
    to an unrelated party for a cash selling price of $15,000,000
    and realized net proceeds of $14,649,241 after selling costs.
    The sale resulted in a gain of $349,110.
 F-26




---



##### 



THE PRUDENTIAL
    VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 SCHEDULE III 
    REAL ESTATE OWNED: PROPERTIES
    DECEMBER 31, 2006
  Costs


Gross Amount at
    WhichInitial Costs to
    the Partnership


Capitalized


Carried at Close
    of YearEncumbrances





Building &


Subsequent to





Building &





Year of


DateDescription

at
    12/31/06


Land


Improvements


Acquisition


Land


Improvements


Total


Construction


AcquiredProperties:Office Building
    Lisle, IL


None



1,780,000



15,743,881



6,993,510



1,949,206



22,568,185



24,517,391



1985



Apr., 1988Garden Apartments
    Atlanta, GA


8,748,000



3,631,212



11,168,904



4,117,900
(b)


4,902,385



14,015,631



18,918,016



1987



Apr., 1988Retail Shopping Center
    Roswell, GA


None



9,454,622



21,513,677



6,807,027



11,135,593



26,639,733



37,775,326



1988



Jan., 1989Garden Apartments Raleigh, NC


8,750,000



1,623,146



14,135,553



529,068



1,715,699



14,572,068



16,287,767



1995



Jun., 1995Hotel Portland, OR






1,500,000



6,508,729



932,091



1,500,000



7,440,820



8,940,820



1989



Dec., 2003Office Building Nashville, TN


None



1,797,000



6,588,451



2,648,353



1,855,339



9,178,465



11,033,804



1982



Oct., 1995Office Building
    Beaverton, OR


None



816,415



9,897,307



1,377,768



845,887



11,245,603



12,091,490



1995



Dec., 1996Industrial Building 
    Aurora, CO


None



1,338,175



7,202,411



2,745,974



1,415,159



9,871,401



11,286,560



1997



Sep., 1997Office Complex
    Brentwood, TN


None



2,425,000



7,063,755



2,844,397



2,463,601



9,869,551



12,333,152



1987



Oct., 1997Retail Shopping Center
    Hampton, VA


8,239,566



2,339,100



12,767,956



2,935,555



4,839,418



13,203,193



18,042,611



1998



May, 2001Retail Shopping Center
Westminster, MD






3,031,735



9,326,605



(0
)


3,031,735



9,326,605



12,358,340



2005



June, 2006Retail Shopping Center
Ocean City, MD


6,972,922



1,517,099



8,495,039



5,526,641



1,517,099



14,021,680



15,538,779



1986



Nov., 200232,710,488



31,253,504



130,412,268



37,458,284



37,171,121



161,952,935



199,124,056   2006


2005


2004(a)

Balance at beginning of year


183,767,148



224,584,885



223,943,870Additions:Acquistions


12,358,340







Improvements,
    etc.


2,998,568



6,187,973



7,502,358Conversions
    from JV to WO










Deletions:Sale






(47,005,710
)


(6,861,343
)Balance at end of year


199,124,056



183,767,148



224,584,885(b)

Net of $1,000,000 settlement
    received
    from lawsuit.  F-27




---



##### 



MORTGAGE LOAN
    RECEIVABLE
 THE PRUDENTIAL
    VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 SCHEDULE IV 
    MORTGAGE LOANS ON REAL ESTATE
    DECEMBER 31, 2006
  Principal
    amountof LoansFace


Carrying


Subject toPeriodic





Amount


Amount


DelinquentInterest


Final Maturity


payment


Prior


of


of


Principal orDescription

Rate


Date


Terms


Liens


Mortgages


Mortgages


InterestLoans Receivables:Westminster, MD


10.00
%


3/3/2006
*


I only















   2006


2005Balance at beginning of year


4,277,769



1,332,060Additions during the period:New Mortgage loansOther  drawdown on loan






2,752,035Other  accrued interest






493,674Deductions during the period:Cost of real estate soldForeclosuresCost of mortgages sold


(4,277,769
)Amortization of premiumOther  accrued interest
    payment






(300,000
)Balance at end of year






4,277,769     *
    
    I is
    Interest only F-28