UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 OR
 o
    
    TRANSITION 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
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. YES o NO þ
 Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. YES o NO þ
 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 þ NO o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
part III of this Form 10-K or any amendment to this Form 10-K . o
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (Check one)
 Large accelerated filero
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of this
Act) Yes o No þ
 DOCUMENTS INCORPORATED BY REFERENCE
 INFORMATION REQUIRED TO BE FURNISHED PURSUANT TO PART III OF THIS FORM 10-K IS SET FORTH IN, AND IS
HEREBY INCORPORATED BY REFERENCE HEREIN FROM, THE DEFINITIVE PROXY STATEMENT OF PRUDENTIAL
FINANCIAL, INC., FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 12, 2009, TO BE FILED BY
PRUDENTIAL FINANCIAL, INC. WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO REGULATION 14A
NOT LATER THAN 120 DAYS AFTER DECEMBER 31, 2008.




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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
    
    
    92.
    
    Properties
    
    
    93.
    
    Legal Proceedings
    
    
    94.
    
    Submission of Matters to a Vote of Security Holders
    
    
    9PART II5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    106.
    
    Selected Financial Data
    
    
    107.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    117A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    208.
    
    Financial Statements and Supplementary Data
    
    
    219.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    219A.
    
    Controls and Procedures
    
    
    219B.
    
    Other Information
    
    
    21PART III10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    2211.
    
    Executive Compensation
    
    
    2412.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    2413.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    2414.
    
    Principal Accountant Fees and Services
    
    
    24PART IV15.
    
    Exhibits and Financial Statement Schedules
    
    
    25Exhibit Index
    
    
    25Signatures
    
    
    27
 2




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Forward-Looking Statement Disclosure
  3




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PART I
 
 Item 1. Business
            4




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Market Conditions
  Debt Markets
  REIT Market
   Property Markets
 Office:
 Industrial/warehouse:
 Hotel:
 5




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Retail:
 Multi-family:
 
 Item 1A. Risk Factors
  Current difficult conditions in the global financial markets and the economy generally may
materially adversely affect our business and results of operations.
     6




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Continuing adverse financial market conditions may significantly affect our ability to meet
liquidity needs, our access to capital and our cost of capital, including capital that may be
required by our subsidiaries.
     7




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Market fluctuations and general economic, market and political conditions may adversely affect our
business and profitability.
  
    
    All real estate investments are subject to varying degrees of risk. The yields available
from investments depend on the amounts of income generated and expenses incurred. If
investment properties do not generate revenues sufficient to meet operating expenses,
including debt service and capital expenditures, cash flow will be adversely affected.
    
    The revenues and value of a particular real estate investment may be adversely affected
by a number of factors, including, but not limited to: the cyclical nature of the real
estate market, availability of credit and debt, general national economic conditions, local
economic conditions, local real estate conditions, and fluctuations in operating costs,
including real estate taxes and utilities. Certain significant expenditures associated with
each equity investment, such as mortgage payments, real estate taxes, insurance and
maintenance costs, are generally not reduced when circumstances cause a reduction in income
from the investment. If a property is mortgaged to secure payment of indebtedness, and if
the mortgaged property is unable to produce enough revenue to cover its mortgage or other
debt payments, a loss could be sustained as a result of foreclosure on the property or the
exercise of other remedies by the lender. In addition, a propertys revenues and real
estate value may also be affected by such factors as potential liability under applicable
federal, state and local laws and regulations, which may vary widely depending upon
location, including tax laws, environmental laws, Americans with Disabilities Act
accessibility requirements, and rent stabilization laws.The dramatic deterioration in the capital markets and increasing weakness in the overall
economy may adversely affect all sectors of the real estate market and may lead to declines
in property values. Adverse capital market conditions could impact the liquidity of our
investments, affecting their value and potentially resulting in higher realized and/or
unrealized losses. These events may have an adverse affect on our investment results.
    
    The estimated fair value of real estate and real estate related assets is determined
through an appraisal process. There continues to be significant disruptions in the global
capital, credit and real estate markets. These disruptions have led to, among other
things, a significant decline in the volume of transaction activity, in the fair value of
many real estate and real estate related investments, and a significant contraction in
short-term and long-term debt and equity funding sources. The decline in liquidity and
prices of real estate and real estate related investments, as well as the availability of
observable transaction data and inputs, may have made it more difficult to determine the
fair value of such investments. As a result, these estimated fair 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 Financial Statements.Regardless of market conditions, certain investments we hold, including the properties in
the Account, are relatively illiquid. If we needed to sell these investments, we may have
difficulty in selling them for acceptable prices.
    
    Disruptions, uncertainty or volatility in the financial markets may limit our access to
capital required to operate our business. These market conditions may limit our ability to
replace, in a timely manner, maturing obligations and access the capital necessary to
replace assets withdrawn by customers.
    
    Market conditions could also impact our ability to fund foreseen and unforeseen cash and
collateral requirements, potentially inhibiting our ability to perform under our
counterparty obligations, support business initiatives and increasing realized losses.A change in market conditions, including prolonged periods of high inflation, could cause a
change in consumer sentiment adversely affecting persistency of our life insurance and
annuity products, including those offering the Account as an investment option.
 The occurrence of natural or man-made disasters could adversely affect our results of operations
and financial condition.
 The occurrence of natural disasters, including hurricanes, floods, earthquakes, tornadoes,
fires, explosions, pandemic disease and man-made disasters, including acts of terrorism and
military actions, could adversely affect our results of operations or financial condition,
including in the following respects:
    
    A natural or man-made disaster could result in losses in our
investment portfolio or the failure of our counterparties to perform,
or cause significant volatility in global financial markets.
 8




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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  9




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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 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Total Investment Income
    
    $
    32,124,390
    
    
    $
    31,700,063
    
    
    $
    28,623,487
    
    
    $
    28,644,271
    
    
    $
    29,076,163Net Investment Income
    
    $
    11,138,184
    
    
    $
    12,663,580
    
    
    $
    11,161,728
    
    
    $
    9,219,171
    
    
    $
    7,799,606Net Realized and Unrealized Gain
(Loss) on
Real Estate Investments
    
    
    (44,233,635
    )
    
    
    5,453,595
    
    
    
    18,352,005
    
    
    
    15,460,619
    
    
    
    3,280,394Net Increase (Decrease) in Net Assets
Resulting From Operations
    
    $
    (33,095,451
    )
    
    $
    18,117,175
    
    
    $
    29,513,733
    
    
    $
    24,679,790
    
    
    $
    11,080,000
 FINANCIAL POSITION:
 Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Total Assets
    
    $
    263,665,273
    
    
    $
    290,166,898
    
    
    $
    272,136,819
    
    
    $
    246,015,115
    
    
    $
    240,575,611Long Term Lease Obligation
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Investment Level Debt
    
    $
    40,047,827
    
    
    $
    32,121,712
    
    
    $
    32,710,488
    
    
    $
    33,195,607
    
    
    $
    43,773,767
 10




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
   (a) Liquidity and Capital Resources
     11




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(b) Results of Operations
  Net Investment Income Overview
  Valuation Overview
  12




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##### 



Twelve Months Ended December 31,2008
    
    
    2007Net Investment Income:Office properties
    
    $
    3,893,422
    
    
    $
    3,945,096Apartment properties
    
    
    3,129,457
    
    
    
    2,119,681Retail properties
    
    
    6,062,399
    
    
    
    6,998,954Industrial property
    
    
    
    
    
    
    49,279Hotel property
    
    
    1,213,328
    
    
    
    1,343,200Other (including interest income,
investment mgt fee, etc.)
    
    
    (3,160,422
    )
    
    
    (1,792,630
    )Total Net Investment Income
    
    $
    11,138,184
    
    
    $
    12,663,580Net Realized Gain (Loss) on Real
Estate Investments:Retail properties
    
    
    
    
    
    
    323,649Industrial property
    
    
    
    
    
    
    345,832Net Realized Gain (Loss) on Real
Estate Investments
    
    
    
    
    
    
    669,481Net Unrealized Gain (Loss) on Real
Estate Investments:Office properties
    
    
    (6,677,199
    )
    
    
    1,967,086Apartment properties
    
    
    (12,344,133
    )
    
    
    3,123,154Retail properties
    
    
    (23,864,965
    )
    
    
    (2,716,050
    )Hotel property
    
    
    (1,347,338
    )
    
    
    2,409,924Net Unrealized Gain (Loss) on Real
Estate Investments
    
    
    (44,233,635
    )
    
    
    4,784,114Net Realized and Unrealized Gain
(Loss) on Real Estate Investments
    
    
    ($44,233,635
    )
    
    $
    5,453,595
 13




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##### 



OFFICE PROPERTIES
 Year Ended
    
    Net Investment
    
    Net Investment
    
    Unrealized
    
    UnrealizedDecember 31, 2008
    
    Income/(Loss) 2008
    
    Income/(Loss) 2007
    
    Gain/(Loss) 2008
    
    Gain/(Loss) 2007
    
    Occupancy 2008
    
    Occupancy 2007PropertyLisle, IL
    
    $
    767,766
    
    
    $
    650,916
    
    
    $
    (2,664,209
    )
    
    $
    804,870
    
    
    
    70
    %
    
    
    67
    %Brentwood, TN
    
    
    972,063
    
    
    
    1,153,443
    
    
    
    (83,142
    )
    
    
    9,918
    
    
    
    83
    %
    
    
    100
    %Beaverton, OR
    
    
    1,090,039
    
    
    
    1,093,305
    
    
    
    (2,911,733
    )
    
    
    990,238
    
    
    
    88
    %
    
    
    88
    %Brentwood, TN
    
    
    1,063,554
    
    
    
    1,047,432
    
    
    
    (1,018,115
    )
    
    
    162,060
    
    
    
    100
    %
    
    
    100
    %$
    3,893,422
    
    
    $
    3,945,096
    
    
    $
    (6,677,199
    )
    
    $
    1,967,086
 Net Investment Income
  Unrealized Gain/(Loss)
  14




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##### 



APARTMENT PROPERTIES
 Year Ended
    
    Net Investment
    
    Net Investment
    
    Unrealized
    
    UnrealizedDecember 31, 2008
    
    Income/(Loss) 2008
    
    Income/(Loss) 2007
    
    Gain/(Loss) 2008
    
    Gain/(Loss) 2007
    
    Occupancy 2008
    
    Occupancy 2007PropertyAtlanta, GA
    
    $
    480,064
    
    
    $
    447,290
    
    
    $
    (4,362,625
    )
    
    $
    (530,277
    )
    
    
    91
    %
    
    
    92
    %Raleigh, NC
    
    
    608,481
    
    
    
    613,122
    
    
    
    (3,258,506
    )
    
    
    (687,270
    )
    
    
    87
    %
    
    
    94
    %Jacksonville, FL(1)
    
    
    
    
    
    
    17,342
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AAustin, TX(2)
    
    
    1,440,973
    
    
    
    860,746
    
    
    
    (2,108,514
    )
    
    
    4,376,151
    
    
    
    92
    %
    
    
    92
    %Charlotte, NC(3)
    
    
    599,939
    
    
    
    181,181
    
    
    
    (2,614,488
    )
    
    
    (35,450
    )
    
    
    90
    %
    
    
    87
    %$
    3,129,457
    
    
    $
    2,119,681
    
    
    $
    (12,344,133
    )
    
    $
    3,123,154
 
 (1)
    
    The Jacksonville, Florida apartment property was sold on November 30, 2005 but certain post-closing
adjustments were recognized during the year ended December 31, 2007.(2)
    
    Net investment income for the year ended December 31, 2007 reflects partial period results for the Austin, Texas apartment
property acquired on May 8, 2007.(3)
    
    Net investment income for the year ended December 31, 2007 reflects partial period results for the Charlotte, North Carolina
apartment property acquired on September 6, 2007. Net Investment Income
  Unrealized Gain/(Loss)
  15




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##### 



RETAIL PROPERTIES
 Realized/Year Ended
    
    Net Investment
    
    Net Investment
    
    Unrealized
    
    UnrealizedDecember 31, 2008
    
    Income/(Loss) 2008
    
    Income/(Loss) 2007
    
    Gain/(Loss) 2008
    
    Gain/(Loss) 2007
    
    Occupancy 2008
    
    Occupancy 2007PropertyRoswell, GA
    
    $
    1,674,996
    
    
    $
    2,072,194
    
    
    $
    (10,610,373
    )
    
    $
    (3,807,895
    )
    
    
    38
    %
    
    
    82
    %Kansas City, KS (1)
    
    
    (15,941
    )
    
    
    158,664
    
    
    
    
    
    
    
    323,649
    
    
    
    N/A
    
    
    
    N/AHampton, VA
    
    
    1,318,984
    
    
    
    1,299,715
    
    
    
    (3,160,726
    )
    
    
    492,521
    
    
    
    98
    %
    
    
    100
    %Ocean City, MD
    
    
    820,593
    
    
    
    702,556
    
    
    
    (686,899
    )
    
    
    (122,583
    )
    
    
    95
    %
    
    
    67
    %Westminster, MD
    
    
    1,181,465
    
    
    
    1,576,148
    
    
    
    (3,394,988
    )
    
    
    69,981
    
    
    
    100
    %
    
    
    100
    %Dunn, NC (2)
    
    
    81,363
    
    
    
    215,118
    
    
    
    (3,484,491
    )
    
    
    651,926
    
    
    
    34
    %
    
    
    90
    %CARS Preferred Equity
    
    
    1,000,939
    
    
    
    974,559
    
    
    
    (2,527,488
    )
    
    
    
    
    
    
    N/A
    
    
    
    N/A$
    6,062,399
    
    
    $
    6,998,954
    
    
    $
    (23,864,965
    )
    
    $
    (2,392,401
    )
 
 (1)
    
    The Kansas City, Kansas retail property was sold on June 29, 2007 but certain post-closing
adjustments were recognized during the year ended December 31, 2008. Net investment income for the
year ended 2007 reflectspartial period results to the June 29, 2007 sale.(2)
    
    Net investment income for the year ended December 31, 2007 reflects partial period results for Dunn,
North Carolina retail property acquired on August 17, 2007. Net Investment Income
  Realized and Unrealized Gain/(Loss)
  16




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INDUSTRIAL PROPERTY
 Net Investment
    
    Net Investment
    
    Realized
    
    RealizedYear Ended December 31, 2008
    
    Income/(Loss) 2008
    
    Income/(Loss) 2007
    
    Gain/(Loss) 2008
    
    Gain/(Loss) 2007
    
    Occupancy 2008
    
    Occupancy 2007PropertyAurora, CO (1)
    
    $
    
    
    
    $
    49,279
    
    
    $
    
    
    
    $
    345,832
    
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    The Partnership sold the property on February 7, 2007. Net Investment Income
  Realized Gain/(Loss)
  HOTEL PROPERTY
 Year Ended
    
    Net Investment
    
    Net Investment
    
    Unrealized
    
    UnrealizedDecember 31, 2008
    
    Income/(Loss) 2008
    
    Income/(Loss) 2007
    
    Gain/(Loss) 2008
    
    Gain/(Loss) 2007
    
    Occupancy 2008
    
    Occupancy 2007PropertyLake Oswego, OR
    
    $
    1,213,328
    
    
    $
    1,343,200
    
    
    $
    (1,347,338
    )
    
    $
    2,409,924
    
    
    
    71
    %
    
    
    76
    %
 Net Investment Income
  Unrealized Gain/(Loss)
  17




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Other
  (c) Inflation
  Critical Accounting Policies
   Accounting Pronouncements Adopted
     18




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New Accounting Pronouncements
    Valuation of Investments
 Real Estate Investments
     19




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Other Estimates
  
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Risk 
  Estimated MarketValue
    
    AverageMaturity
    
    (in $ millions)
    
    Interest RateCash and cash equivalents
    
    0-3 months
    
    $
    27.7
    
    
    
    1.96
    %
  Investment level debt (in $ thousands),
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Estimatedincluding current portion
    
    2009
    
    2010
    
    2011
    
    2012
    
    2013
    
    Thereafter
    
    Total
    
    Fair ValueAverage Fixed Interest Rate
    
    
    6.75
    %
    
    
    6.75
    %
    
    
    6.75
    %
    
    
    6.75
    %
    
    
    6.75
    %
    
    
    6.75
    %
    
    
    6.75
    %Fixed Rate
    
    $
    9,277
    
    
    $
    566
    
    
    $
    604
    
    
    $
    646
    
    
    $
    463
    
    
    $
    4,475
    
    
    $
    16,031
    
    
    $
    16,332Variable Rate
    
    
    
    
    
    $
    15,043
    
    
    
    
    
    
    
    
    
    
    $
    9,000
    
    
    $
    0
    
    
    $
    24,043
    
    
    $
    24,053Premium/(Discount) on Mortgage Loans Payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ($26
    )
    
    
    ($26
    )
    
    
    Total Mortgage Loans Payable
    
    $
    9,277
    
    
    $
    15,609
    
    
    $
    604
    
    
    $
    646
    
    
    $
    9,463
    
    
    $
    4,449
    
    
    $
    40,048
    
    
    $
    40,384
  20




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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
  
 Item 9B. Other Information
  21




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PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
 DIRECTORS
 THOMAS J. BALTIMORE, JR.
 FREDERIC K. BECKER
 GORDON M. BETHUNE 
 W. GASTON CAPERTON, III 
 GILBERT F. CASELLAS
 JAMES G. CULLEN
 WILLIAM H. GRAY, III
 MARK B. GRIER
 JON F. HANSON
 CONSTANCE J. HORNER
 KARL J. KRAPEK
 CHRISTINE A. POON
 JOHN R. STRANGFELD
 JAMES A. UNRUH
 22




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THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
 PRINCIPAL OFFICERS **
 EDWARD P. BAIRD
 SUSAN L. BLOUNT
 RICHARD J. CARBONE
 BERNARD J. JACOB
 KATHLEEN M. GIBSON
 ROBERT C. GOLDEN
 MARK B. GRIER
 JOHN R. STRANGFELD
 PETER B. SAYRE
 SHARON C. TAYLOR
 BERNARD B. WINOGRAD
 
 **
    
    Principal officers of The Prudential Insurance Company of America hold comparable positions with
Prudential Financial, Inc. 23




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Code of Ethics
 www.investor.prudential.com www.investor.prudential.com
    
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
   
 Item 14. Principal Accountant Fees and Services
  24




---



##### 



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    The following documents are filed as part of this report:
 1.
    
    Financial StatementsSee the Index to Financial Statements and Supplementary Data on page F-1.2.
    
    Financial Statement SchedulesThe 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-1.3.
    
    Documents Incorporated by ReferenceSee the following list of exhibits.4.
    
    ExhibitsSee 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, 2007. 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 28, 1997, and incorporated herein
by reference.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 28, 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 28, 1997, and incorporated herein by reference.
 25




---



##### 



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 28, 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 14, 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. 33-20083-01, 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 herewith31.1
    
    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.
 26




---



##### 



SIGNATURES
  THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
in respect of
The Prudential Variable Contract Real Property Account
(Registrant)
 Date: March 20, 2009
    By:
    /s/ Richard J. CarboneRichard J. CarboneExecutive Vice President and Chief Financial Officer
(Authorized Signatory and Principal Financial Officer)  Signature
    
    Title
    
    Date/s/ John R. Strangfeld

John R. Strangfeld
    
    Chief Executive Officer, President and Director
    
    March 20, 2009/s/ Richard J. Carbone

Richard J. Carbone
    
    Chief Financial Officer
    
    March 20, 2009/s/ Peter Sayre
Peter Sayre
    
    Senior Vice President and Controller
(Principal Accounting Officer)
    
    March 20, 2009
 27




---



##### 



Signature
    
    Title
    
    Date/s/ Thomas J. Baltimore, Jr.

Thomas J. Baltimore, Jr.
    
    Director
    
    March 20, 2009/s/ Frederic K. Becker

Frederic K. Becker
    
    Director
    
    March 20, 2009/s/ Gordon M. Bethune

Gordon M. Bethune
    
    Director
    
    March 20, 2009/s/ W. Gaston Caperton, III

W. Gaston Caperton, III
    
    Director
    
    March 20, 2009/s/ Gilbert F. Casellas

Gilbert F. Casellas
    
    Director
    
    March 20, 2009/s/ James G. Cullen

James G. Cullen
    
    Director
    
    March 20, 2009/s/ William H. Gray, III

William H. Gray, III
    
    Director
    
    March 20, 2009/s/ Mark B. Grier

Mark B. Grier
    
    Director
    
    March 20, 2009/s/ Jon F. Hanson

Jon F. Hanson
    
    Director
    
    March 20, 2009/s/ Constance J. Horner

Constance J. Horner
    
    Director
    
    March 20, 2009/s/ Karl J. Krapek

Karl J. Krapek
    
    Director
    
    March 20, 2009/s/ Christine A. Poon

Christine A. Poon
    
    Director
    
    March 20, 2009/s/ John R. Strangfeld

John R. Strangfeld
    
    Director
    
    March 20, 2009/s/ James A. Unruh

James A. Unruh
    
    Director
    
    March 20, 2009
 By:*Thomas C. Castano(Attorney-in-Fact) 28




---



##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
(Registrant)
 INDEX
 PageA. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNTFinancial Statements:Managements Annual Report on Internal Control Over Financial Reporting
    
    
    F-2Report of Independent Registered Public Accounting Firm
    
    
    F-3Statements of Net Assets  December 31, 2008 and 2007
    
    
    F-4Statements of Operations  Years Ended December 31, 2008, 2007 and 2006
    
    
    F-4Statements of Changes in Net Assets  Years Ended December 31, 2008, 2007 and 2006
    
    
    F-4Notes to Financial Statements
    
    
    F-5B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIPFinancial Statements:Report of Independent Registered Public Accounting Firm
    
    
    F-13Report of Independent Registered Public Accounting Firm on Financial Statement Schedules
    
    
    F-14Consolidated Statements of Assets and Liabilities  December 31, 20078 and 2007
    
    
    F-15Consolidated Statements of Operations  Years Ended December 31, 2008, 2007 and 2006
    
    
    F-16Consolidated Statements of Changes in Net Assets  Years Ended December 31, 2008, 2007 and 2006
    
    
    F-17Consolidated Statements of Cash Flows  Years Ended December 31, 2008, 2007 and 2006
    
    
    F-18Consolidated Schedule of Investments  December 31, 2008 and 2007
    
    
    F-19Notes to Financial Statements
    
    
    F-21Financial Statement Schedules:For the period ended December 31, 2008Schedule III  Real Estate Owned: Properties
    
    
    F-33
  F-1




---



##### 



Managements Annual Report on Internal Control Over Financial Reporting
 Internal Control
 Integrated Framework
     F-2




---



##### 



Report of Independent Registered Public Accounting Firm
 
  
 F-3




---



##### 



FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
 
 STATEMENTS OF NET ASSETS
 2008
    
    
    2007ASSETSInvestment in The Prudential Variable Contract Real Property Partnership
    
    $
    86,786,975
    
    
    $
    100,212,593Net Assets
    
    $
    86,786,975
    
    
    $
    100,212,593NET ASSETS,representing:Equity of contract owners
    
    $
    59,902,956
    
    
    $
    72,012,128Equity of The Prudential Insurance Company of America
    
    
    26,884,019
    
    
    
    28,200,465$
    86,786,975
    
    
    $
    100,212,593Units outstanding
    
    
    36,703,680
    
    
    
    36,396,005Portfolio shares held
    
    
    2,741,864
    
    
    
    2,741,864Portfolio net asset value per share
    
    $
    31.65
    
    
    $
    36.55
 
 STATEMENTS OF OPERATIONS
 2008
    
    
    2007
    
    
    2006INVESTMENT INCOMENet investment income from Partnership operations
    
    $
    4,518,355
    
    
    $
    5,137,153
    
    
    $
    4,526,160EXPENSESCharges to contract owners for assuming mortality risk and expense risk and for administration
    
    
    556,142
    
    
    
    563,608
    
    
    
    509,687NET INVESTMENT INCOME
    
    
    3,962,213
    
    
    
    4,573,545
    
    
    
    4,016,473NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTSNet change in unrealized gain (loss) on investments in Partnership
    
    
    (17,943,973
    )
    
    
    1,940,739
    
    
    
    7,413,826Net realized gain on sale of investments in Partnership
    
    
    0
    
    
    
    271,584
    
    
    
    27,482NET GAIN (LOSS) ON INVESTMENTS
    
    
    (17,943,973
    )
    
    
    2,212,323
    
    
    
    7,441,308NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
    
    $
    (13,981,760
    )
    
    $
    6,785,868
    
    
    $
    11,457,781
 
 STATEMENTS OF CHANGES IN NET ASSETS
 2008
    
    
    2007
    
    
    2006OPERATIONSNet investment income
    
    $
    3,962,213
    
    
    $
    4,573,545
    
    
    $
    4,016,473Net change in unrealized gain (loss) on investments in Partnership
    
    
    (17,943,973
    )
    
    
    1,940,739
    
    
    
    7,413,826Net realized gain on sale of investments in Partnership
    
    
    0
    
    
    
    271,584
    
    
    
    27,482NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
    
    
    (13,981,760
    )
    
    
    6,785,868
    
    
    
    11,457,781CAPITAL TRANSACTIONSNet withdrawals by contract owners
    
    
    (2,238,147
    )
    
    
    (904,047
    )
    
    
    (865,224
    )Net contributions by The Prudential Insurance Company of America
    
    
    2,794,289
    
    
    
    1,467,655
    
    
    
    (1,006,825
    )NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL
TRANSACTIONS
    
    
    556,142
    
    
    
    563,608
    
    
    
    (1,872,049
    )TOTAL INCREASE (DECREASE) IN NET ASSETS
    
    
    (13,425,618
    )
    
    
    7,349,476
    
    
    
    9,585,732NET ASSETSBeginning of period
    
    
    100,212,593
    
    
    
    92,863,117
    
    
    
    83,277,385End of period
    
    $
    86,786,975
    
    
    $
    100,212,593
    
    
    $
    92,863,117
  F-4




---



##### 



NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
December 31, 2008
 Note 1: General
    Note 2: Summary of Significant Accounting Policies and Pronouncements
 A. Basis of Accounting
      F-5




---



##### 



NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
December 31, 2008
 B. Investment in Partnership Interest
  C. Income Recognition
  D. Equity of The Prudential Insurance Company of America
  Note 3: Taxes
  F-6




---



##### 



NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
December 31, 2008
 Note 4: Net Withdrawals by Contract Owners
  2008:
 PVAL & PVALVIP &
    
    
    $100,000+ facePDISCO+
    
    
    value
    
    
    TOTALContract Owner Net Payments:
    
    $
    6,963
    
    
    $
    4,528,338
    
    
    $
    4,535,301Policy Loans:
    
    
    0
    
    
    
    (1,868,168
    )
    
    
    (1,868,168
    )Policy Loan Repayments and Interest:
    
    
    0
    
    
    
    1,370,568
    
    
    
    1,370,568Surrenders, Withdrawals, and Death Benefits:
    
    
    (492,456
    )
    
    
    (3,690,570
    )
    
    
    (4,183,026
    )Net Transfers From/To Other Subaccounts or Fixed Rate Option:
    
    
    34,626
    
    
    
    665,582
    
    
    
    700,208Administrative and Other Charges:
    
    
    (1,282
    )
    
    
    (2,791,748
    )
    
    
    (2,793,030
    )Net Withdrawals by Contract Owners
    
    $
    (452,149
    )
    
    $
    (1,785,998
    )
    
    $
    (2,238,147
    )
 2007:
 PVAL & PVALVIP &
    
    
    $100,000+ facePDISCO+
    
    
    value
    
    
    TOTALContract Owner Net Payments:
    
    $
    8,130
    
    
    $
    3,775,341
    
    
    $
    3,783,471Policy Loans:
    
    
    0
    
    
    
    (1,455,672
    )
    
    
    (1,455,672
    )Policy Loan Repayments and Interest:
    
    
    0
    
    
    
    1,242,605
    
    
    
    1,242,605Surrenders, Withdrawals, and Death Benefits:
    
    
    (357,459
    )
    
    
    (2,555,663
    )
    
    
    (2,913,122
    )Net Transfers From/To Other Subaccounts or Fixed Rate Option:
    
    
    65,033
    
    
    
    1,060,820
    
    
    
    1,125,853Administrative and Other Charges:
    
    
    (1,274
    )
    
    
    (2,685,908
    )
    
    
    (2,687,182
    )Net Withdrawals by Contract Owners
    
    $
    (285,570
    )
    
    $
    (618,477
    )
    
    $
    (904,047
    )
 2006:
 PVAL & PVALVIP &
    
    
    $100,000+ facePDISCO+
    
    
    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 From/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
    )
 F-7




---



##### 



NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
December 31, 2008
 Note 5: Unit Activity
  2008:
 PVAL$100,000+PDISCO+
    
    VIP
    
    PVAL
    
    face valueCompany Contributions:
    
    
    1,542,396
    
    
    Contract Owner Contributions:
    
    
    16,953
    
    
    
    40,638
    
    
    
    1,259,052
    
    
    
    1,220,472Company Redemptions:
    
    
    (395,329
    )
    
    Contract Owner Redemptions:
    
    
    (134,494
    )
    
    
    (99,015
    )
    
    
    (1,694,232
    )
    
    
    (1,448,853
    )
 2007:
 $100,000+PDISCO+
    
    VIP
    
    PVAL
    
    face valueCompany Contributions:
    
    
    1,339,992
    
    
    Contract Owner Contributions:
    
    
    34,347
    
    
    
    40,647
    
    
    
    1,174,449
    
    
    
    1,549,695Company Redemptions:
    
    
    (695,138
    )
    
    Contract Owner Redemptions:
    
    
    (81,964
    )
    
    
    (104,016
    )
    
    
    (1,536,359
    )
    
    
    (1,414,704
    )
 2006:
 PVAL$100,000+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
    )
 Note 6: Purchases and Sales of Investments
  December 31, 2008
    
    December 31, 2007
    
    December 31, 2006Purchases:
    
    
    $0
    
    
    
    $0
    
    
    $
    0Sales:
    
    
    $0
    
    
    
    $0
    
    
    $
    (2,381,736
    )
 F-8




---



##### 



NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
December 31, 2008
 Note 7: Financial Highlights
   At year ended
    
    For year endedInvestmentUnit Value
    
    
    
    
    
    Income
    
    Expense Ratio **
    
    Total Return ***Units (000s)
    
    Lowest- Highest
    
    Net Assets (000s)
    
    Ratio*
    
    Lowest-Highest
    
    Lowest-HighestDecember 31, 2008
    
    
    25,104
    
    
    $
    2.22351 to 2.47629
    
    
    $
    59,903
    
    
    
    4.55
    %
    
    0.60% to 1.20%
    
    -14.43% to -13.92%December 31, 2007
    
    
    25,943
    
    
    $
    2.59836 to 2.87660
    
    
    $
    72,012
    
    
    
    5.28
    %
    
    0.60% to 1.20%
    
    6.63% to 7.27%December 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%
  
 *
    
    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 risk, expense risk and administrative 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
  F-9




---



##### 



NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
December 31, 2008
 B. Cost of Insurance and Other Related Charges
  C. Deferred Sales Charge
   D. Partial Withdrawal Charge
  E. Annual Maintenance Charge
  Note 8: Related Party
  F-10




---



##### 



NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
December 31, 2008
 Note 9: Fair Value Disclosure
         F-11




---



##### 



Table 1:
 ($ in 000s)Quoted Prices inAmounts
    
    Active Markets for
    
    Significant Other
    
    SignificantMeasured at Fair
    
    Identical Assets
    
    Observable
    
    Unobservable InputsAssets:
    
    12/31/2008
    
    (Level 1)
    
    Inputs (Level 2)
    
    (Level 3)Investment in The
Prudential Variable
Contract Real
Property
Partnership
    
    $
    86,787
    
    
    $
    
    
    
    $
    
    
    
    $
    86,787Total Assets
    
    $
    86,787
    
    
    $
    
    
    
    $
    
    
    
    $
    86,787
 Table 2:
 ($ in 000s)Fair Value MeasurementsUsing SignificantUnobservable Inputs(Level 3)Beginning balance @ 12/31/07
    
    $
    100,213Total gains or losses (realized/unrealized)
included in earnings (or changes in net assets) from Partnership operations
    
    $
    (17,944
    )Net Investment Income from Partnership operations
    
    $
    4,518Acquisition/Additions
    
    
    Equity Income
    
    
    Contributions
    
    
    Disposition/Settlements
    
    
    Equity losses
    
    
    Distributions
    
    
    Ending balance @ 12/31/08
    
    $
    86,787The amount of total gains or losses for the period included in earnings
(or changes in net assets) attributable to the change in unrealized gains
or losses relating to assets still held at the reporting date relating to assets
still held at the reporting date
    
    $
    (17,944
    )
 F-12




---



##### 



Report of Independent Registered Public Accounting Firm
 
  
 F-13




---



##### 



Report of Independent Registered Public Accounting Firm on
Financial Statement Schedules
 
   
 F-14




---



##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
 December 31, 2008
    
    
    December 31, 2007ASSETSREAL ESTATE INVESTMENTS  At estimated fair value:Real estate and improvements
(cost: 12/31/2008  $245,808,214; 12/31/2007  $236,466,116)
    
    $
    221,196,000
    
    
    $
    254,394,053Real estate partnerships and preferred equity investments (cost: 12/31/2008  $14,324,204; 12/31/2007  $14,523,934)
    
    
    11,796,716
    
    
    
    14,523,934Total real estate investments
    
    $
    232,992,716
    
    
    $
    268,917,987CASH AND CASH EQUIVALENTS
    
    
    27,736,520
    
    
    
    18,215,871OTHER ASSETS, NET
    
    
    2,936,037
    
    
    
    3,033,040Total assets
    
    $
    263,665,273
    
    
    $
    290,166,898LIABILITIES & PARTNERS EQUITYINVESTMENT LEVEL DEBT (net of unamortized
discount: 12/31/08 $26,480; 12/31/07 $ )
    
    $
    40,047,827
    
    
    $
    32,121,712ACCOUNTS PAYABLE AND ACCRUED EXPENSES
    
    
    2,924,938
    
    
    
    2,184,812DUE TO AFFILIATES
    
    
    851,595
    
    
    
    901,371OTHER LIABILITIES
    
    
    978,342
    
    
    
    920,454MINORITY INTEREST
    
    
    4,924,263
    
    
    
    7,004,790Total liabilities
    
    
    49,726,965
    
    
    
    43,133,139COMMITMENTS AND CONTINGENCIES
PARTNERS EQUITY
    
    
    213,938,308
    
    
    
    247,033,759Total liabilities and partners equity
    
    $
    263,665,273
    
    
    $
    290,166,898NUMBER OF SHARES OUTSTANDING AT END OF PERIOD
    
    
    6,758,960
    
    
    
    6,758,960PER SHARE NET ASSET VALUE AT END OF PERIOD
    
    $
    31.65
    
    
    $
    36.55
 The accompanying notes are an integral part of these consolidated financial statements.
 F-15




---



##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2008
    
    
    2007
    
    
    2006INVESTMENT INCOME:Revenue from real estate and improvements
    
    $
    30,723,626
    
    
    $
    29,094,968
    
    
    $
    25,460,860Equity in income of real estate partnerships
    
    
    994,333
    
    
    
    1,136,936
    
    
    
    1,181,772Interest and equity income on mortgage
and other loans receivable
    
    
    
    
    
    
    
    
    
    
    125,510Interest on short-term investments
    
    
    406,431
    
    
    
    1,468,159
    
    
    
    1,855,345Total investment income
    
    
    32,124,390
    
    
    
    31,700,063
    
    
    
    28,623,487INVESTMENT EXPENSES:Operating
    
    
    7,193,577
    
    
    
    6,954,999
    
    
    
    6,355,543Investment management fee
    
    
    3,447,030
    
    
    
    3,380,090
    
    
    
    3,075,176Real estate taxes
    
    
    2,957,947
    
    
    
    2,466,704
    
    
    
    2,069,169Administrative
    
    
    5,927,773
    
    
    
    4,056,557
    
    
    
    3,923,413Interest expense
    
    
    1,970,462
    
    
    
    2,019,937
    
    
    
    1,814,686Minority interest
    
    
    (510,583
    )
    
    
    158,196
    
    
    
    223,772Total investment expenses
    
    
    20,986,206
    
    
    
    19,036,483
    
    
    
    17,461,759NET INVESTMENT INCOME
    
    
    11,138,184
    
    
    
    12,663,580
    
    
    
    11,161,728REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:Net proceeds from real estate investments sold
    
    
    
    
    
    
    18,353,122
    
    
    
    67,770Less: Cost of real estate investments sold
    
    
    
    
    
    
    19,063,985
    
    
    
    Gain (loss) realized from real estate investments sold
    
    
    
    
    
    
    (710,863
    )
    
    
    67,770Less: Reversal of prior periods unrealized
gain (loss) on real estate investments sold
    
    
    
    
    
    
    (1,380,344
    )
    
    
    Net gain (loss) recognized on real estate investments sold
    
    
    
    
    
    
    669,481
    
    
    
    67,770Unrealized gain (loss) on investments:Change in unrealized gain (loss) on real estate investments
    
    
    (45,661,694
    )
    
    
    5,620,864
    
    
    
    20,294,808Less: Minority interest in unrealized gain (loss)
    
    
    (1,428,059
    )
    
    
    836,750
    
    
    
    2,010,573Net unrealized gain (loss) on real estate investments
    
    
    (44,233,635
    )
    
    
    4,784,114
    
    
    
    18,284,235NET REALIZED AND UNREALIZED GAIN (LOSS)
ON REAL ESTATE INVESTMENTS
    
    
    (44,233,635
    )
    
    
    5,453,595
    
    
    
    18,352,005INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS
    
    
    ($33,095,451
    )
    
    $
    18,117,175
    
    
    $
    29,513,733
 The accompanying notes are an integral part of these consolidated financial statements.
 F-16




---



##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
 Year Ended December 31,2008
    
    
    2007
    
    
    2006INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:Net investment income
    
    $
    11,138,184
    
    
    $
    12,663,580
    
    
    $
    11,161,728Net gain (loss) realized and unrealized from real estate
investments
    
    
    (44,233,635
    )
    
    
    5,453,595
    
    
    
    18,352,005Increase (decrease) in net assets
resulting from operations
    
    
    (33,095,451
    )
    
    
    18,117,175
    
    
    
    29,513,733INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS:Withdrawals
(2008- 0; 2007 -0; and
2006 -182,671 shares, respectively)
    
    
    
    
    
    
    
    
    
    
    (6,000,000
    )Increase (decrease) in net assets
resulting from capital transactions
    
    
    
    
    
    
    
    
    
    
    (6,000,000
    )INCREASE (DECREASE) IN NET ASSETS
    
    
    (33,095,451
    )
    
    
    18,117,175
    
    
    
    23,513,733NET ASSETS   Beginning of period
    
    
    247,033,759
    
    
    
    228,916,584
    
    
    
    205,402,851NET ASSETS   End of period
    
    $
    213,938,308
    
    
    $
    247,033,759
    
    
    $
    228,916,584
 The accompanying notes are an integral part of these consolidated financial statements.
 F-17




---



##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net increase (decrease) in net assets from operations
    
    
    ($33,095,451
    )
    
    $
    18,117,175
    
    
    $
    29,513,733Adjustments to reconcile net increase (decrease) in net assets
to net cash from operating activitiesNet realized and unrealized loss (gain)
    
    
    44,233,635
    
    
    
    (5,453,595
    )
    
    
    (18,352,005
    )Amortization of deferred financing costs
    
    
    94,554
    
    
    
    193,594
    
    
    
    Distributions in excess of (less than) equity in income
of real estate partnerships operations
    
    
    199,730
    
    
    
    35,287
    
    
    
    (87,396
    )Minority interest in consolidated partnerships
    
    
    (510,583
    )
    
    
    158,196
    
    
    
    223,772Bad debt expense
    
    
    1,139,238
    
    
    
    101,185
    
    
    
    (239,380
    )(Increase) decrease in:Other assets
    
    
    (1,136,791
    )
    
    
    166,010
    
    
    
    37,951Increase (decrease) in:Accounts payable and accrued expenses
    
    
    740,126
    
    
    
    (907,118
    )
    
    
    546,878Due to affiliates
    
    
    (49,776
    )
    
    
    111,482
    
    
    
    28,963Other liabilities
    
    
    57,888
    
    
    
    43,967
    
    
    
    404,151Net cash flows from (used in) operating activities
    
    
    11,672,570
    
    
    
    12,566,183
    
    
    
    12,076,667CASH FLOWS FROM INVESTING ACTIVITIES:Net proceeds from real estate investments sold
    
    
    
    
    
    
    18,353,122
    
    
    
    67,770Acquisition of real estate and improvements
    
    
    
    
    
    
    (42,218,143
    )
    
    
    (14,797,730
    )Additions to real estate and improvements
    
    
    (9,936,151
    )
    
    
    (3,554,451
    )
    
    
    (3,417,034
    )Contributions to real estate partnerships
    
    
    
    
    
    
    
    
    
    
    (7,289,487
    )Return of investment in real estate partnerships
    
    
    
    
    
    
    
    
    
    
    3,620,455Collection of mortgage loan receivable
    
    
    
    
    
    
    
    
    
    
    4,277,769Net cash flows from (used in) investing activities
    
    
    (9,936,151
    )
    
    
    (27,419,472
    )
    
    
    (17,538,257
    )CASH FLOWS FROM FINANCING ACTIVITIES:Withdrawals
    
    
    
    
    
    
    
    
    
    
    (6,000,000
    )Proceeds from investment level debt
    
    
    24,016,161
    
    
    
    
    
    
    
    Principal payments on investment level debt
    
    
    (16,090,046
    )
    
    
    (588,776
    )
    
    
    (485,119
    )Contributions to minority interest partners
    
    
    80,000
    
    
    
    294,143
    
    
    
    Distributions to minority interest partners
    
    
    (221,885
    )
    
    
    (35,739
    )
    
    
    (121,244
    )Net cash flows from (used in) financing activities
    
    
    7,784,230
    
    
    
    (330,372
    )
    
    
    (6,606,363
    )NET CHANGE IN CASH AND CASH
EQUIVALENTS
    
    
    9,520,649
    
    
    
    (15,183,661
    )
    
    
    (12,067,953
    )CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    18,215,871
    
    
    
    33,399,532
    
    
    
    45,467,485CASH AND CASH EQUIVALENTS  End of period
    
    $
    27,736,520
    
    
    $
    18,215,871
    
    
    $
    33,399,532
 The accompanying notes are an integral part of these consolidated financial statements.
 F-18




---



##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 
 CONSOLIDATED SCHEDULE OF INVESTMENTS
 2008 TotalRentableSquare Feet
    
    December 31,Unless Otherwise
    
    2008
    
    2007December 31, 2008
    
    
    
    Indicated
    
    
    
    
    
    Estimated Fair
    
    
    
    
    
    Estimated FairProperty Name
    
    Ownership
    
    City, State
    
    (Unaudited)
    
    Cost
    
    Value
    
    Cost
    
    ValueOFFICES750 Warrenville
    
    WO
    
    Lisle, IL
    
    103,193
    
    $
    25,218,777
    
    
    $
    9,542,046
    
    
    $
    24,512,521
    
    
    $
    11,500,000Summit @ Cornell Oaks
    
    WO
    
    Beaverton , OR
    
    72,109
    
    
    12,512,985
    
    
    
    11,000,000
    
    
    
    12,401,252
    
    
    
    13,800,000Westpark
    
    WO
    
    Nashville, TN
    
    97,199
    
    
    12,060,981
    
    
    
    13,753,954
    
    
    
    11,323,885
    
    
    
    13,100,000Financial Plaza
    
    WO
    
    Brentwood, TN
    
    98,049
    
    
    12,389,207
    
    
    
    12,700,000
    
    
    
    12,371,092
    
    
    
    13,700,000Offices % as of 12/31/08
    
    22%
    
    
    62,181,950
    
    
    
    46,996,000
    
    
    
    60,608,750
    
    
    
    52,100,000APARTMENTSBrookwood Apartments
    
    WO
    
    Atlanta, GA
    
    240 Units
    
    
    19,810,918
    
    
    
    16,100,000
    
    
    
    19,548,293
    
    
    
    20,200,000Dunhill Trace Apartments
    
    WO
    
    Raleigh, NC
    
    250 Units
    
    
    16,433,544
    
    
    
    16,600,000
    
    
    
    16,375,037
    
    
    
    19,800,000Broadstone Crossing
    
    WO
    
    Austin, TX
    
    225 Units
    
    
    22,732,363
    
    
    
    25,000,000
    
    
    
    22,723,849
    
    
    
    27,100,000The Reserve At Waterford Lakes
    
    WO
    
    Charlotte, NC
    
    140 Units
    
    
    13,649,938
    
    
    
    11,000,000
    
    
    
    13,535,450
    
    
    
    13,500,000Apartments % as of 12/31/08
    
    32%
    
    
    72,626,763
    
    
    
    68,700,000
    
    
    
    72,182,629
    
    
    
    80,600,000RETAILKings Market
    
    WO
    
    Rosewell, GA
    
    314,358
    
    
    37,893,595
    
    
    
    14,100,000
    
    
    
    37,883,222
    
    
    
    24,700,000Hampton Towne Center
    
    WO
    
    Hampton, VA
    
    174,540
    
    
    18,110,816
    
    
    
    23,400,000
    
    
    
    18,050,090
    
    
    
    26,500,000White Marlin Mall
    
    CJV
    
    Ocean City, MD
    
    186,016
    
    
    23,271,014
    
    
    
    28,600,000
    
    
    
    17,016,325
    
    
    
    23,900,000Westminster Crossing East, LLC
    
    CJV
    
    Westminster, MD
    
    89,890
    
    
    15,044,721
    
    
    
    17,700,000
    
    
    
    15,637,841
    
    
    
    21,094,053Kansas City Portfolio
    
    EJV
    
    Kansas City, KS;MO
    
    487,660
    
    
    13,595
    
    
    
    13,595
    
    
    
    140,911
    
    
    
    140,911CARS Preferred Equity
    
    PE
    
    Various
    
    N/A
    
    
    14,310,609
    
    
    
    11,783,121
    
    
    
    14,383,023
    
    
    
    14,383,023Harnett Crossing
    
    CJV
    
    Dunn, NC
    
    193,235
    
    
    6,366,767
    
    
    
    3,900,000
    
    
    
    5,958,844
    
    
    
    7,200,000Retail % as of 12/31/08
    
    47%
    
    
    115,011,117
    
    
    
    99,496,716
    
    
    
    109,070,256
    
    
    
    117,917,987HOTELPortland Crown Plaza
    
    CJV
    
    Portland, OR
    
    161 Rooms
    
    
    10,312,588
    
    
    
    17,800,000
    
    
    
    9,128,415
    
    
    
    18,300,000Hotel % as of 12/31/08
    
    8%
    
    
    10,312,588
    
    
    
    17,800,000
    
    
    
    9,128,415
    
    
    
    18,300,000Total Real Estate Investments as a Percentage of Net Assets as of 12/31/08
    
    109%
    
    $
    260,132,418
    
    
    $
    232,992,716
    
    
    $
    250,990,050
    
    
    $
    268,917,987
 
 WO 
    
    Wholly Owned InvestmentCJV 
    
    Consolidated Joint VentureEJV 
    
    Joint Venture Investment accounted for under the equity methodPE 
    
    Preferred equity investments accounted for under the equity method The accompanying notes are an integral part of these consolidated financial statements.
 F-19




---



##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 CONSOLIDATED SCHEDULE OF INVESTMENTS
 December 31, 2008
    
    
    December 31, 2007Estimated
    
    
    
    
    
    
    EstimatedFace Amount
    
    
    Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair ValueCASH AND CASH EQUIVALENTS  Percentage of Net Assets
    
    
    
    
    
    
    
    
    
    
    13.0
    %
    
    
    
    
    
    
    7.4
    %Federal Home Loan Bank, 0 coupon bond, January, 2009
    
    $
    1,000,000
    
    
    $
    1,000,000
    
    
    $
    1,000,000
    
    
    $
    2,065,813
    
    
    $
    2,065,813Federal Home Loan Bank, 0 coupon bond, January, 2009
    
    
    4,446,932
    
    
    
    4,446,932
    
    
    
    4,446,932
    
    
    
    4,998,313
    
    
    
    4,998,313Federal Home Loan Bank, 0 coupon bond, January, 2009
    
    
    1,999,985
    
    
    
    1,999,985
    
    
    
    1,999,985
    
    
    
    9,997,633
    
    
    
    9,997,633Federal Home Loan Bank, 0 coupon bond, February, 2009
    
    
    18,831,977
    
    
    
    18,831,977
    
    
    
    18,831,977
    
    
    
    
    
    
    
    Total Cash Equivalents
    
    
    
    
    
    
    26,278,894
    
    
    
    26,278,894
    
    
    
    17,061,759
    
    
    
    17,061,759Cash
    
    
    
    
    
    
    1,457,626
    
    
    
    1,457,626
    
    
    
    1,154,112
    
    
    
    1,154,112Total Cash and Cash Equivalents
    
    
    
    
    
    $
    27,736,520
    
    
    $
    27,736,520
    
    
    $
    18,215,871
    
    
    $
    18,215,871
 The accompanying notes are an integral part of these consolidated financial statements.
 F-20




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 1: Organization
      Note 2: Summary of Significant Accounting Policies
 A.
    
    Basis of Presentation The accompanying consolidated financial
statements of the Partnership have been presented on the fair 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.
 F-21




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 2: Summary of Significant Accounting Policies (continued)
 C.
    
    Accounting Pronouncements Adopted-The Partnership adopted FASB
Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109 as of January 1, 2007. This interpretation
prescribes a comprehensive model for how a Partnership should recognize, measure,
present, and disclose in its financial statements uncertain tax positions that the
Partnership has taken or expects to take on a tax return. The adoption of FIN 48
had no effect to the financial position and result of operations of the
Partnership.In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This
statement defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and requires additional disclosures about
fair value measurements. This statement does not require any new fair value
measurements, but the application of this statement could change current practices
in determining fair value.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment of FASB Statement No. 115.
This statement provides partnerships with an option to report selected financial
assets and liabilities at fair value.SFAS No. 157 and SFAS No. 159 are effective for fiscal years beginning after
November 15, 2007 with early adoption permitted. The Partnership adopted SFAS No.
157 and SFAS No. 159 effective January 1, 2008, however, the Partnership did not
make a fair value option election for its existing debt. The adoption of SFAS No.
157 and SFAS No. 159 did not have any effect on the Partnerships consolidated
financial position and results of operations. Please refer to Notes 2D and 5 for
details.D.
    
    Real Estate Investments Real estate investments are carried at fair
value. Properties owned are 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.In general fair 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, which is an indirectly owned subsidiary of PFI, is
responsible to assure that the valuation process provides independent and reasonable
property fair value estimates. An unaffiliated third party been appointed by PIM to
assist the Chief Real Estate Appraiser in maintaining and monitoring the
independence and the accuracy of the appraisal process. The fair value of real
estate investments does not reflect the transaction sale costs, which may be
incurred upon disposition of the real estate investments.
 F-22




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 2: Summary of Significant Accounting Policies (continued)
 D.
    
    Real Estate Investments (continued)The purpose of an appraisal is to estimate the fair value of real estate as of a
specific date. In accordance with SFAS 157, fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The estimate of fair value is
based on the conventional approaches to value, all of which require the exercise of
subjective judgment. The three approaches are: (1) current cost of reproducing the
real estate less deterioration and functional and economic obsolescence; (2)
discounting a series of income streams and reversion at a specific yield or by
directly capitalizing a single year income estimate by an appropriate factor; and
(3) value indicated by recent sales of comparable real estate in the market. In the
reconciliation of these three approaches, the independent appraiser uses one or a
combination of them, to come up with the approximated value for the type of real
estate in the market.In general, the input values used in the appraisal process are unobservable,
therefore unless indicated otherwise; real estate investments are classified as
Level 3 (see Note 5 for detail) under SFAS 157 fair value hierarchy.Unconsolidated real estate partnerships and preferred equity investments are carried
at fair value and are generally 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 partnership.As described above, the estimated fair value of real estate and real estate related
assets is determined through an appraisal process. There continues to be significant
disruptions in the global capital, credit and real estate markets. These disruptions
have led to, among other things, a significant decline in the volume of transaction
activity, in the fair value of many real estate and real estate related investments,
and a significant contraction in short-term and long-term debt and equity funding
sources. The decline in liquidity and prices of real estate and real estate related
investments, as well as the availability of observable transaction data and inputs,
may have made it more difficult to determine the fair value of such investments. As
a result, these estimated fair 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. These differences could be material to the financial statements. Although
the estimated fair values represent subjective estimates, management believes these
estimated fair values are reasonable approximations of market prices and the
aggregate estimated value of investments in real estate is fairly presented as of
December 31, 2008 and December 31, 2007.
 F-23




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 2: Summary of Significant Accounting Policies (continued)
 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 fair value.F.
    
    Other Assets Restricted cash of $207,343 and $186,736 was maintained
by the wholly owned and consolidated properties at December 31, 2008 and 2007,
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 $1,028,539 and
$39,764 at December 31, 2008 and 2007, respectively.G.
    
    Investment Level Debt Investment level debt is generally stated at
the principal amount of the obligations outstanding, except for debt assumed. 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. Deferred financing costs related to debt were
capitalized and amortized over the terms of the related obligations.H.
    
    Revenue and Expense Recognition Revenue from real estate is
recognized when earned in accordance with the terms of the respective leases.
Operating expenses are recognized as incurred. 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 investments are stated at estimated
fair value, net income is not reduced by depreciation or amortization expense.
Interest expenses are accrued periodically based on the contractual interest rate
and terms of the loans, which approximates the effective interest method. Interest
expenses are included in Net Investment Income in the Statement of Operations.I.
    
    Equity in Income of Real Estate Partnerships- Equity in income of real
estate partnerships 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 real estate investments, partnerships net income are 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. Any cash in excess of the amount of income generated from the
underlying joint venture is treated as a return of the Partnerships equity
investment.J.
    
    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.
 F-24




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 2: Summary of Significant Accounting Policies (continued)
 K.
    
    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)
that 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 Audit and Accounting Guide, Audits of Investment
Companies (the Audit Guide). The FASB is currently considering modifying FIN
46-R to provide an exception for companies that apply the Audit Guide. The
Partnership is awaiting further guidance from the FASB in order to evaluate the
extent in which, if any, its investments may need to be consolidated as a result of
this FIN 46-R.In June 2007, the Accounting Standards Executive Committee issued Statement of
Position 07-1, Clarification of the Scope of the Audit and Accounting Guide
Investment Companies and Accounting by Parent Companies and Equity Method Investors
for Investments in Investment Companies (SOP 07-1). SOP 07-1 provides guidance
for determining whether an entity is within the scope of the Audit Guide. SOP 07-1
was originally determined to be effective for fiscal years beginning on or after
December 15, 2007, however, on February 6, 2008, FASB issued a Staff Position
indefinitely deferring the effective date.In December 2007, FASB issued SFAS No. 141 (revised 2007) (SFAS 141R), Business
Combinations, and SFAS No. 160, Non-controlling interests in Consolidated
Financial Statements, an Amendment to ARB No. 51 (SFAS 160). SFAS 141R expands
the definition of a business and redefines the acquisition date in a merger and
acquisition transaction. It significantly modifies the existing SFAS 141, including
changes to acquisition related contingent consideration, pre-acquisition
contingencies, non-controlling interest, restructuring costs, in-process R&D,
goodwill and partial acquisition. SFAS 160 requires the non-controlling interest to
be reported as a separate component of equity. It also changes the allocation of
losses and accounting in step acquisitions. The provisions in SFAS 160 should be
applied prospectively except for the presentation and disclosure requirements, which
are required retrospectively for all periods presented. SFAS 141R and SFAS 160 are
effective for the acquisitions closing after the first annual reporting period
beginning after December 15, 2008. The Partnership is currently reviewing the
provisions in SFAS 141R and SFAS 160, and no significant impact is expected from the
adoption.
 Note 3: Reclassification
  Note 4: Disclosure of Supplemental Cash Flow Information and Non-Cash Investing and Financing
Activity
  F-25




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 5: Fair Value Measurements
 Fair Value Measurements:
       F-26




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 5: Fair Value Measurements (continued)
  Table 1
 (in
000s)  Fair value measurements at December 31, 2008 using
 Amounts
    
    Quoted prices inmeasured at
    
    active markets for
    
    Significant other
    
    Significantfair value
    
    identical assets
    
    observable
    
    unobservable inputsAssets:
    
    12/31/2008
    
    (level 1)
    
    inputs (level 2)
    
    (level 3)Real estate and improvements
    
    $
    221,196
    
    
    $
    
    
    
    $
    
    
    
    $
    221,196Real estate partnerships and
preferred equity investments
    
    
    11,797
    
    
    
    
    
    
    
    
    
    
    
    11,797Total
    
    $
    232,993
    
    
    $
    
    
    
    $
    
    
    
    $
    232,993
  Table 2
 (in
000s)  Fair value measurements using significant unobservable
inputs (Level 3)
 Real estate andpartnerships andReal estate and
    
    preferred equityimprovements
    
    investments
    
    TotalBeginning balance @ 1/1/08
    
    $
    254,394
    
    
    $
    14,524
    
    
    $
    268,918Net gains (losses) realized/unrealized
included in earnings (or changes in net assets)
    
    
    (43,134
    )
    
    
    (2,527
    )
    
    
    (45,661
    )Equity income (losses)/interest income
    
    
    
    
    
    
    994
    
    
    
    994Acquisitions/issuances/contributions
    
    
    9,936
    
    
    
    
    
    
    
    9,936Dispositions/settlements/distributions
    
    
    
    
    
    
    (1,194
    )
    
    
    (1,194
    )Ending balance @ 12/31/08
    
    $
    221,196
    
    
    $
    11,797
    
    
    $
    232,993Unrealized gains (losses) for the period relating
to level 3 assets still held at the reporting date
    
    $
    (43,134
    )
    
    $
    (2,527
    )
    
    $
    (45,661
    )
 F-27




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 6: Investment Level Debt
  As of 12/31/08
    
    
    As of 12/31/07
    
    
    As of 12/31/08(Unaudited)Partnerships100% Principal
    
    
    Share of
    
    
    100% PrincipalBalance
    
    
    Principal Balance
    
    
    Balance
    
    
    Interest
    
    
    MaturityOutstanding
    
    
    Outstanding1
    
    
    Outstanding
    
    
    Rate2, 3
    
    
    Date
    
    
    Terms4Mortgages of Wholly Owned
Properties & Consolidated PartnershipsHampton, VA
    
    $
    7,284
    
    
    $
    7,284
    
    
    $
    7,778
    
    
    
    6.75
    %
    
    
    2018
    
    
    PP, P&IOcean City, MD
    
    
    15,044
    
    
    
    12,105
    
    
    
    6,847
    
    
    Libor +225
    
    
    2010
    
    
    
    IRaleigh, NC
    
    
    9,000
    
    
    
    9,000
    
    
    
    8,750
    
    
    DMBS +142
    
    
    2013
    
    
    
    IAtlanta, GA
    
    
    8,746
    
    
    
    8,746
    
    
    
    8,747
    
    
    
    4.90
    %
    
    
    2009
    
    
    PP, P&IUnamortized Premium (Discount)
    
    
    (26
    )
    
    
    
    
    
    
    Total
    
    $
    40,048
    
    
    $
    37,135
    
    
    $
    32,122
 
 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, 2008. It does not represent the Partnerships legal obligation.2.
    
    The Partnerships weighted average interest rate was 5.78% and 6.14% at December 31, 2008 and 2007, respectively.
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.
    
    At December 31, 2008, the 30 day LIBOR is .43625% and the DMBS is 3.28%.4.
    
    Loan Terms PP=Prepayment penalties applicable to loan, I=Interest only, P&I=Principal and Interest F-28




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 6: Investment Level Debt (continued)
  Year Ending December 31,
    
    (in 000s)2009
    
    $
    9,2772010
    
    
    15,6092011
    
    
    6042012
    
    
    6462013
    
    
    9,463Thereafter
    
    
    4,475Total Principal Balance Outstanding
    
    $
    40,074Premium (Discount)
    
    
    (26
    )Principal Balance Outstanding, net of premium (discount)
    
    $
    40,048
   Note 7: Financing, Covenant, and Repayment Risks:
    F-29




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 8: Significant Transactions
  Note 9: Concentration of Risk on Real Estate Investments
   EstimatedFair ValueRegion
    
    (in 000s)
    
    
    Region %East North Central
    
    $
    11,485
    
    
    
    4.93
    %Mideast
    
    
    103,704
    
    
    
    44.51
    %Mountain
    
    
    1,408
    
    
    
    0.60
    %Northeast
    
    
    243
    
    
    
    0.10
    %Pacific
    
    
    29,774
    
    
    
    12.78
    %Southeast
    
    
    58,602
    
    
    
    25.15
    %Southwest
    
    
    27,731
    
    
    
    11.90
    %West North Central
    
    
    46
    
    
    
    0.02
    %Total
    
    $
    232,993
    
    
    
    100.00
    %
  F-30




---



##### 



Note 10: Leasing Activity
  Year Ending December 31,
    
    (in 000s)2009
    
    $
    12,9902010
    
    
    11,7742011
    
    
    9,2392012
    
    
    6,8332013
    
    
    5,387Thereafter
    
    
    21,735Total
    
    $
    67,958
 Note 11: Commitments and Contingencies
   Note 12: Related Party Transactions
   Year Ended December 31,
    
    (000s)2008
    
    $
    2007
    
    $
    2006
    
    $
    6,000
 F-31




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
For Years Ended December 31, 2008, 2007, and 2006
 Note 13: Financial Highlights
 For The Twelve Months Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Per Share(Unit) Operating Performance:Net Asset Value, beginning of period
    
    $
    36.55
    
    
    $
    33.87
    
    
    $
    29.59
    
    
    $
    26.15
    
    
    $
    24.66Income From Investment Operations:Net investment income, before management fee
    
    
    2.15
    
    
    
    2.37
    
    
    
    2.07
    
    
    
    1.67
    
    
    
    1.44Investment Management fee
    
    
    (0.51
    )
    
    
    (0.50
    )
    
    
    (0.45
    )
    
    
    (0.40
    )
    
    
    (0.36
    )Net realized and unrealized gain (loss) on investments
    
    
    (6.54
    )
    
    
    0.81
    
    
    
    2.66
    
    
    
    2.17
    
    
    
    0.41Net Increase in Net Assets Resulting from Operations
    
    
    (4.90
    )
    
    
    2.68
    
    
    
    4.28
    
    
    
    3.44
    
    
    
    1.49Net Asset Value, end of period
    
    $
    31.65
    
    
    $
    36.55
    
    
    $
    33.87
    
    
    $
    29.59
    
    
    $
    26.15Total Return, before Management Fee:
    
    
    -12.14
    %
    
    
    9.44
    %
    
    
    16.03
    %
    
    
    14.76
    %
    
    
    7.61
    %Total Return, after Management Fee (a):
    
    
    -13.40
    %
    
    
    7.91
    %
    
    
    14.46
    %
    
    
    13.15
    %
    
    
    6.06
    %Ratios/Supplemental Data:Net Assets, end of period (in millions)
    
    $
    214
    
    
    $
    247
    
    
    $
    229
    
    
    $
    205
    
    
    $
    187Ratios to average net assets for the year ended (b):Total Portfolio Level Expenses
    
    
    1.44
    %
    
    
    1.55
    %
    
    
    1.51
    %
    
    
    1.46
    %
    
    
    1.43
    %Net Investment Income, before Management Fee
    
    
    5.87
    %
    
    
    6.76
    %
    
    
    6.58
    %
    
    
    4.89
    %
    
    
    5.76
    %
 
 (a)
    
    Total Return, after 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.
 F-32




---



##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIPSCHEDULE III  REAL ESTATE OWNED: PROPERTIESDECEMBER 31, 2008Gross Amount at WhichInitial Costs to the Partnership
    
    Costs
    
    Carried at Close of YearCapitalizedEncumbrances
    
    
    
    
    
    Building &
    
    Subsequent to
    
    
    
    
    
    Building &
    
    2008
    
    
    
    
    
    Year of
    
    DateDescription
    
    at 12/31/08
    
    Land
    
    Improvements
    
    Acquisition
    
    Land
    
    Improvements
    
    Sales
    
    Total
    
    Construction
    
    AcquiredProperties:Office BuildingLisle, IL
    
    None
    

    
    1,780,000
    
    
    
    15,743,881
    
    
    
    7,694,896
    
    
    
    1,949,206
    
    
    
    23,269,571
    
    
    
    
    
    
    
    25,218,777
    
    
    
    1985
    
    
    Apr., 1988Garden ApartmentsAtlanta, GA
    
    
    8,746,000
    
    
    
    3,631,212
    
    
    
    11,168,904
    
    
    
    5,010,802
    (b)
    
    
    4,937,369
    
    
    
    14,873,549
    
    
    
    
    
    
    
    19,810,918
    
    
    
    1987
    
    
    Apr., 1988Retail Shopping CenterRoswell, GA
    
    None
    

    
    9,454,622
    
    
    
    21,513,677
    
    
    
    6,925,296
    
    
    
    11,135,593
    
    
    
    26,758,002
    
    
    
    
    
    
    
    37,893,595
    
    
    
    1988
    
    
    Jan., 1989Garden ApartmentsRaleigh, NC
    
    
    8,973,520
    (c)
    
    
    1,623,146
    
    
    
    14,135,553
    
    
    
    674,845
    
    
    
    1,785,544
    
    
    
    14,648,000
    
    
    
    
    
    
    
    16,433,544
    
    
    
    1995
    
    
    Jun., 1995HotelPortland, OR
    
    
    
    
    
    
    1,500,000
    
    
    
    6,508,729
    
    
    
    2,303,859
    
    
    
    1,500,000
    
    
    
    8,812,588
    
    
    
    
    
    
    
    10,312,588
    
    
    
    1989
    
    
    Dec., 2003Office BuildingNashville, TN
    
    None
    

    
    1,797,000
    
    
    
    6,588,451
    
    
    
    3,675,530
    
    
    
    1,855,339
    
    
    
    10,205,642
    
    
    
    
    
    
    
    12,060,981
    
    
    
    1982
    
    
    Oct., 1995Office BuildingBeaverton, OR
    
    None
    

    
    816,415
    
    
    
    9,897,307
    
    
    
    1,799,263
    
    
    
    845,887
    
    
    
    11,667,098
    
    
    
    
    
    
    
    12,512,985
    
    
    
    1995
    
    
    Dec., 1996Office ComplexBrentwood, TN
    
    None
    

    
    2,425,000
    
    
    
    7,063,755
    
    
    
    2,900,452
    
    
    
    2,463,601
    
    
    
    9,925,606
    
    
    
    
    
    
    
    12,389,207
    
    
    
    1987
    
    
    Oct., 1997Retail Shopping CenterHampton, VA
    
    
    7,284,195
    
    
    
    2,339,100
    
    
    
    12,767,956
    
    
    
    3,003,760
    
    
    
    4,839,418
    
    
    
    13,271,398
    
    
    
    
    
    
    
    18,110,816
    
    
    
    1998
    
    
    May, 2001Retail Shopping CenterWestminster, MD
    
    
    
    
    
    
    3,031,735
    
    
    
    9,326,605
    
    
    
    2,686,381
    
    
    
    3,031,735
    
    
    
    12,012,986
    
    
    
    
    
    
    
    15,044,721
    
    
    
    2005
    
    
    June, 2006Retail Shopping CenterOcean City, MD
    
    
    15,044,112
    
    
    
    1,517,099
    
    
    
    8,495,039
    
    
    
    13,258,876
    
    
    
    1,517,099
    
    
    
    21,753,915
    
    
    
    
    
    
    
    23,271,014
    
    
    
    1986
    
    
    Nov., 2002Garden ApartmentsAustin, TX
    
    
    
    
    
    
    2,577,097
    
    
    
    20,125,169
    
    
    
    30,097
    
    
    
    2,577,097
    
    
    
    20,155,266
    
    
    
    
    
    
    
    22,732,363
    
    
    
    2007
    
    
    May, 2007Retail Shopping CenterDunn, NC
    
    None
    

    
    586,500
    
    
    
    5,372,344
    
    
    
    407,923
    
    
    
    586,500
    
    
    
    5,780,267
    
    
    
    
    
    
    
    6,366,767
    
    
    
    1984
    
    
    Aug., 2007Garden ApartmentsCharlotte, NC
    
    
    
    
    
    
    1,350,000
    
    
    
    12,184,750
    
    
    
    115,188
    
    
    
    1,350,000
    
    
    
    12,299,938
    
    
    
    
    
    
    
    13,649,938
    
    
    
    1998
    
    
    Sep., 200740,047,827
    
    
    
    34,428,926
    
    
    
    160,892,120
    
    
    
    50,487,168
    
    
    
    40,374,388
    
    
    
    205,433,826
    
    
    
    
    
    
    
    245,808,214
 
 2008
    
    
    2007
    
    
    2006(a
    )
    
    Balance at beginning of year
    
    
    236,466,116
    
    
    
    199,124,056
    
    
    
    183,767,148Additions:Acquistions
    
    
    
    
    
    
    42,218,143
    
    
    
    12,358,340Improvements, etc.
    
    
    9,936,151
    
    
    
    3,179,960
    
    
    
    2,998,568Reclass of other real estate investments
    
    
    
    
    
    
    3,232,337
    
    
    
    Deletions:Sale
    
    
    
    
    
    
    (11,288,380
    )
    
    
    Write off of uncollectible interest receivable
    
    
    (594,053
    )
    
    
    
    
    
    
    Balance at end of year
    
    
    245,808,214
    
    
    
    236,466,116
    
    
    
    199,124,056(b
    )
    
    Net of $1,000,000 settlement received from lawsuit.(c
    )
    
    Net of an unamortized discount of $26,480
 F-33