UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2010

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number 033-20018





PRUCO LIFE
INSURANCE COMPANY OF NEW JERSEY

in respect of

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

(Exact name of registrant as specified in its charter)







|                                                              |  |                                 
|------------------------------------------------------------- |  | --------------------------------
|New Jersey                                                    |  | 22-2426091                      
|(State or other jurisdiction ofincorporation or organization) |  | (IRS EmployerIdentification No.)

213 Washington Street, Newark, New Jersey 07102-2992

(Address of principal executive offices) (Zip Code)

(973) 802-6000

(Registrants telephone number, including area code)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    YES  x    NO   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files).    Yes   ̈    No   ̈

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 definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.

(Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  | x  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    YES   ̈    NO  x









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PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

(Registrant)

INDEX



|                                                                                                 |  |     
|------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                 |  | Page
|Forward Looking Statement Disclosure                                                             |  | 3   
|                                                                                                 | 
|Part I - Financial Information                                                                   |  |     
|                                                                                                 | 
|Item 1. Financial Statements (Unaudited)                                                         |  |     
|                                                                                                 | 
|A. PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT                              |  |     
|                                                                                                 | 
|Statements of Net Assets  June 30, 2010 and December 31, 2009                                   |  | 4   
|                                                                                                 | 
|Statements of Operations  Three Months and Six Months Ended June 30, 2010 and
2009              |  | 4   
|                                                                                                 | 
|Statements of Changes in Net Assets  Three Months and Six Months Ended June 30, 2010 and 2009   |  | 4   
|                                                                                                 | 
|Notes to the Financial Statements of the Real Property Account                                   |  | 5   
|                                                                                                 | 
|B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP                                    |  |     
|                                                                                                 | 
|Consolidated Statements of Assets and Liabilities  June 30, 2010 and December 31, 2009          |  | 14  
|                                                                                                 | 
|Consolidated Statements of Operations  Three Months and Six Months Ended June 30, 2010 and
2009 |  | 15  
|                                                                                                 | 
|Consolidated Statements of Changes in Net Assets  Six Months Ended June 30, 2010 and 2009       |  | 16  
|                                                                                                 | 
|Consolidated Statements of Cash Flows  Six Months Ended June 30, 2010 and
2009                  |  | 17  
|                                                                                                 | 
|Consolidated Schedules of Investments  June 30, 2010 and December 31,
2009                      |  | 18  
|                                                                                                 | 
|Notes to Consolidated Financial Statements of the Partnership                                    |  | 20  
|                                                                                                 | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations    |  | 30  
|                                                                                                 | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                               |  | 38  
|                                                                                                 | 
|Item 4. Controls and Procedures                                                                  |  | 38  
|                                                                                                 | 
|Part II - Other Information                                                                      |  |     
|                                                                                                 | 
|Item 1A. Risk Factors                                                                            |  | 39  
|                                                                                                 | 
|Item 6. Exhibits                                                                                 |  | 41  
|                                                                                                 | 
|Signatures                                                                                       |  | 42  



2



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Forward-Looking Statement Disclosure

Certain of the statements included in this Quarterly Report on Form 10-Q, including but not limited to those in Managements
Discussion and Analysis of Financial Condition and Results of Operations, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as expects, believes,
anticipates, includes, plans, assumes, estimates, projects, intends, should, will, shall or variations of such words are
generally part of forward-looking statements. Forward-looking statements are made based on managements current expectations and beliefs concerning future developments and their potential effects upon Pruco Life Insurance Company of New Jersey,
or the Company, or the Pruco Life of New Jersey Variable Contract Real Property Account, or the Real Property Account. There can be no assurance that future developments affecting the Company and the Real Property Account
will be those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly
materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (1) general economic, market and political conditions, including the performance and fluctuations of fixed income, equity, real
estate and other financial markets; (2) interest rate fluctuations; (3) reestimates of our reserves for future policy benefits and claims; (4) differences between actual experience regarding mortality, morbidity, persistency,
surrender experience, interest rates, or market returns and the assumptions we use in pricing our products, establishing liabilities and reserves or for other purposes; (5) changes in our assumptions related to deferred policy acquisition costs
and valuation of business acquired; (6) changes in our claims-paying or credit ratings; (7) investment losses and defaults; (8) competition in our product lines and for personnel; (9) changes in tax law; (10) regulatory or
legislative changes, including the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act; (11) adverse determinations in litigation or regulatory matters and our exposure to contingent liabilities; (12) domestic or
international military actions, natural or man-made disasters including terrorist activities or pandemic disease, or other events resulting in catastrophic loss of life; (13) ineffectiveness of risk management policies and procedures in
identifying, monitoring and managing risks; (14) changes in statutory or U.S. GAAP accounting principles, practices or policies. The foregoing risks are even more pronounced in severe adverse market and economic conditions such as
those that began in the second half of 2007 and continued into 2009. The Company and the Real Property Account do not intend, and are under no obligation, to update any particular forward-looking statement included in this document. See Risk
Factors included in the Annual Report on Form 10-K for the year ended December 31, 2009 and in this Quarterly Report on form 10-Q for discussion of certain risks relating to the operation of the Partnership and investment in our
securities.



3



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FINANCIAL STATEMENTS OF

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

STATEMENTS OF NET ASSETS

June 30, 2010 and December 31, 2009



|                                                                         |  |                          |           |                   |   |          
|------------------------------------------------------------------------ |  | ------------------------ | --------- | ----------------- | - | ---------
|                                                                         |  | June 30, 2010(unaudited) |           | December 31, 2009
|ASSETS                                                                   |  |                          |           |                   |   |          
|Investment in The Prudential Variable Contract Real Property Partnership |  | $                        | 7,207,637 |                   | $ | 7,317,018
|                                                                         |  |                          |           |                   |   |          
|Net Assets                                                               |  | $                        | 7,207,637 |                   | $ | 7,317,018
|                                                                         |  |                          |           |                   |   |          
|                                                                         |  |                         
|NET ASSETS,representing:                                                 |  |                          |           |                   |   |          
|Equity of contract owners                                                |  | $                        | 5,151,590 |                   | $ | 5,103,774
|Equity of Pruco Life Insurance Company of New Jersey                     |  |                          | 2,056,047 |                   |   | 2,213,244
|                                                                         |  |                          |           |                   |   |          
|                                                                         |  | $                        | 7,207,637 |                   | $ | 7,317,018
|                                                                         |  |                          |           |                   |   |          
|                                                                         |  |                         
|Units outstanding                                                        |  |                          | 3,114,635 |                   |   | 3,237,668
|                                                                         |  |                          |           |                   |   |          
|                                                                         |  |                         
|Portfolio shares held                                                    |  |                          | 271,295   |                   |   | 282,778  
|Portfolio net asset value per share                                      |  | $                        | 26.57     |                   | $ | 25.88    



|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|---------------------------------------------------------------------------------------------- |  | ------------------ | --------- | - | ------------------ | - | ---------- | ------------------ |  | - | ------------------ | - |  | - | --------- | -
|STATEMENTS OF OPERATIONS                                                                       | 
|For the three and six month periods ended June 30, 2010 and 2009                               | 
|                                                                                               |  |                    |           |  
|                                                                                               |  | 1/1/2010-6/30/2010 |           |   | 1/1/2009-6/30/2009 |   |            | 4/1/2010-6/30/2010 |  |   | 4/1/2009-6/30/2009 |  
|                                                                                               |  | (unaudited)        |           |   | (unaudited)        |   |            | (unaudited)        |  |   | (unaudited)        |  
|INVESTMENT INCOME                                                                              |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|Net investment income from Partnership operations                                              |  | $                  | 172,978   |   |                    | $ | 153,052    |                    |  | $ | 92,661             |   |  | $ | 62,161    |  
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|                                                                                               |  |                    |           |  
|EXPENSES                                                                                       |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|Charges to contract owners for assuming mortality risk and expense risk and for administration |  |                    | 14,481    |   |                    |   | 16,895     |                    |  |   | 7,253              |   |  |   | 8,013     |  
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|NET INVESTMENT INCOME                                                                          |  |                    | 158,497   |   |                    |   | 136,157    |                    |  |   | 85,408             |   |  |   | 54,148    |  
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|                                                                                               |  |                    |           |  
|NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS                                         |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|Net change in unrealized gain (loss) on investments in Partnership                             |  |                    | 16,798    |   |                    |   | (1,348,333 | )                  |  |   | 143,184            |   |  |   | (426,023  | )
|Net realized gain (loss) on sale of investments in Partnership                                 |  |                    | 0         |   |                    |   | (194,109   | )                  |  |   | 0                  |   |  |   | (15,112   | )
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|NET GAIN (LOSS) ON INVESTMENTS                                                                 |  |                    | 16,798    |   |                    |   | (1,542,442 | )                  |  |   | 143,184            |   |  |   | (441,135  | )
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|                                                                                               |  |                    |           |  
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS                                |  | $                  | 175,295   |   |                    | $ | (1,406,285 | )                  |  | $ | 228,592            |   |  | $ | (386,987  | )
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|                                                                                              
|STATEMENTS OF CHANGES IN NET ASSETS                                                            | 
|For the three and six month periods ended June 30, 2010 and 2009                               | 
|                                                                                               |  |                    |           |  
|                                                                                               |  | 1/1/2010-6/30/2010 |           |   | 1/1/2009-6/30/2009 |   |            | 4/1/2010-6/30/2010 |  |   | 4/1/2009-6/30/2009 |  
|                                                                                               |  | (unaudited)        |           |   | (unaudited)        |   |            | (unaudited)        |  |   | (unaudited)        |  
|OPERATIONS                                                                                     |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|Net investment income                                                                          |  | $                  | 158,497   |   |                    | $ | 136,157    |                    |  | $ | 85,408             |   |  | $ | 54,148    |  
|Net change in unrealized gain (loss) on investments in Partnership                             |  |                    | 16,798    |   |                    |   | (1,348,333 | )                  |  |   | 143,184            |   |  |   | (426,023  | )
|Net realized gain (loss) on sale of investments in Partnership                                 |  |                    | 0         |   |                    |   | (194,109   | )                  |  |   | 0                  |   |  |   | (15,112   | )
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|                                                                                               |  |                    |           |  
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS                                |  |                    | 175,295   |   |                    |   | (1,406,285 | )                  |  |   | 228,592            |   |  |   | (386,987  | )
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|                                                                                               |  |                    |           |  
|CAPITAL TRANSACTIONS                                                                           |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|Net (withdrawals) by contract owners                                                           |  |                    | (72,281   | ) |                    |   | (84,106    | )                  |  |   | (44,394            | ) |  |   | (45,965   | )
|Net contributions (withdrawals) by Pruco Life Insurance Company of New Jersey                  |  |                    | (212,395  | ) |                    |   | (215,375   | )                  |  |   | (247,510           | ) |  |   | (262,398  | )
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|                                                                                               |  |                    |           |  
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS                      |  |                    | (284,676  | ) |                    |   | (299,481   | )                  |  |   | (291,904           | ) |  |   | (308,363  | )
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|                                                                                               |  |                    |           |  
|TOTAL INCREASE (DECREASE) IN NET ASSETS                                                        |  |                    | (109,381  | ) |                    |   | (1,705,766 | )                  |  |   | (63,312            | ) |  |   | (695,350  | )
|                                                                                               |  |                    |           |  
|NET ASSETS                                                                                     |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|Beginning of period                                                                            |  |                    | 7,317,018 |   |                    |   | 9,322,498  |                    |  |   | 7,270,949          |   |  |   | 8,312,082 |  
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  
|End of period                                                                                  |  | $                  | 7,207,637 |   |                    | $ | 7,616,732  |                    |  | $ | 7,207,637          |   |  | $ | 7,616,732 |  
|                                                                                               |  |                    |           |   |                    |   |            |                    |  |   |                    |   |  |   |           |  

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



4



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NOTES TO THE FINANCIAL STATEMENTS OF

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

June 30, 2010

(Unaudited)

Note 1:
General

Pruco Life of New Jersey Variable Contract Real Property Account (the Account) was established on
October 30, 1987 by resolution of the Board of Directors of Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey or the Company), a wholly-owned subsidiary of The Prudential Insurance Company of America
(Prudential), an indirect wholly-owned subsidiary of Prudential Financial, Inc. (PFI) as a separate investment account pursuant to New Jersey law and is registered under the Securities Act of 1933, as amended. The assets of
the Account are segregated from Pruco Life of New Jerseys other assets. The Account is used to fund benefits under certain variable life insurance and variable annuity contracts issued by Pruco Life of New Jersey. These products are Variable
Appreciable Life (VAL), Variable Life (VLI), Discovery Plus (SPVA), and Discovery Life Plus (SPVL).

The assets of the Account are invested in The Prudential Variable Contract Real Property Partnership (the Partnership). The
Partnership is the investment vehicle for assets allocated to the real estate investment option under certain variable life insurance and annuity contracts. The Account, along with the Pruco Life Variable Contract Real Property Account and The
Prudential Variable Contract Real Property Account, are the sole investors in the Partnership. These financial statements should be read in conjunction with the unaudited interim financial statements of the Partnership.

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

Note 2: Summary of Significant Accounting Policies and Pronouncements

A. Basis of Accounting

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

The interim financial data as of June 30, 2010 and for the three and six month periods ended June 30,
2010 and 2009 is unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods.

In December 2007, the Financial Accounting Standards Board (FASB) revised authoritative guidance for business combinations,
which expands the definition of a business and redefines the acquisition date in a merger and acquisition transaction. It significantly modifies the existing guidance for business combinations, including changes to acquisition related contingent
consideration, preacquisition contingencies, non controlling interest, restructuring costs, in-process R&D, goodwill and partial acquisition. This guidance is effective for acquisitions closing after the first annual reporting period beginning
after December 15, 2008. The Account adopted this guidance effective January 1, 2009. The Accounts adoption has no effect on the Accounts financial position and results of operations, but may have an effect on the accounting
for future business combinations.

In December 2007, FASB revised the accounting, presentation and disclosure for
noncontrolling interests in consolidated financial statements. This revised guidance will change the accounting for minority interests, which will be recharacterized as noncontrolling interests and classified by the parent company as a component of
equity. This guidance is effective for fiscal years beginning on or after December 15, 2008, with early adoption prohibited. Upon adoption, the guidance requires retroactive adoption of the presentation and disclosure requirements for existing
minority interests and prospective adoption for all other requirements. The adoption of this guidance has no effect on the Accounts financial position and results of operations.

In April 2009, the FASB revised authoritative guidance for the recognition and presentation of other-than-temporary impairments. This
revision amends the other-than-temporary impairment guidance for debt securities and expands the presentation and disclosure requirements of other-than-temporary impairments on debt and equity securities in the financial statements. This revision
also requires that the required annual disclosures for debt and equity securities be made for interim reporting periods. This revision does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity
securities. This revision is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. The Accounts early
adoption of this guidance effective January 1, 2009 did not have a material effect on the Accounts financial position or results of operations.



5



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In April 2009, the FASB issued authoritative guidance on determining fair value when the
volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. This guidance also amends the disclosure requirements in interim and annual periods. This guidance is effective
for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. The Accounts early adoption of this guidance effective
January 1, 2009 did not have a material effect on the Accounts financial position or results of operations.

In
April 2009, the FASB issued additional guidance for accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies. This guidance requires an asset acquired or liability assumed in a business
combination that arises from a contingency to be recognized at fair value at the acquisition date, if the acquisition date fair value of that asset or liability can be determined during the measurement period. If the acquisition date fair value of
an asset acquired or liability assumed in a business combination that arises from a contingency cannot be determined during the measurement period, the asset or liability shall be recognized at the acquisition date using the guidance in accounting
for contingencies. This guidance also amends disclosure requirements. This guidance is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The
Accounts adoption of this guidance effective January 1, 2009 did not have a material effect on the Accounts financial position or results of operations.

In April 2009, the FASB issued additional guidance for interim disclosures about fair value of financial instruments requiring for
interim reporting periods of publicly traded companies disclosures similar to those already required in annual financial statements. This guidance is effective for interim reporting periods ending after June 15, 2009, with early adoption
permitted. The Account adopted this guidance within the interim period ending June 30, 2009.

In June 2009, the FASB
launched its Accounting Standards Codification (the Codification), as the sole source of authoritative U.S. GAAP to be applied by nongovernmental entities. The Codification generally does not change the existing rules of U.S. GAAP but rather
makes it easier to find and research U.S. GAAP applicable to a particular transaction or specific accounting issue. The Codification is a new structure which takes accounting pronouncements and organizes them by approximately ninety accounting
topics and aggregates them in four common accounting areas. Topics within each category are further broken down into subtopics, sections and paragraphs. Accounting standards that are included in the Codification will be considered authoritative
whereas those that are not included will be deemed non-authoritative. As a result, there are two levels of U.S. GAAP, authoritative and non-authoritative. The Codification is effective for financial statements that cover the interim and annual
periods ending after September 15, 2009 and has impacted the way the Account references U.S. GAAP accounting standards in the financial statements.

In August 2009, the FASB issued updated guidance for the fair value measurement of liabilities. This guidance includes techniques for
measuring fair value when a quoted price in an active market for the identical liability is not available and clarifies that restrictions preventing the transfer of a liability should not be considered as a separate input or adjustment in the
measurement of its fair value. This guidance is effective for the first reporting period (including interim periods) beginning after issuance. The Accounts adoption of this guidance effective December 31, 2009 did not have a material
effect on the Accounts consolidated financial position, results of operations or financial statement disclosures.

In
September 2009, the FASB issued updated guidance for the fair value measurement of investments in certain entities that calculate net asset value per share including certain alternative investments such as hedge funds, private equity funds, and
venture capital funds. This guidance allows companies to determine the fair value of such investments using net asset value (NAV) as a practical expedient if the fair value of the investment is not readily determinable and the investee
entity issues financial statements in accordance with measurement principles for investment companies. Use of this practical expedient is prohibited if it is probable the investment will be sold at something other than NAV. This guidance also
requires new disclosures for each major category of alternative investments. It is effective for the first annual or interim reporting period ending after December 15, 2009, with early application permitted. The Accounts adoption of this
guidance effective December 31, 2009 did not have a material effect on the Accounts financial position or results of operations.

In January 2010, the FASB issued updated guidance that clarifies existing guidance on accounting and reporting by an entity that
experiences a decrease in ownership of a subsidiary that is a business. The updated guidance states that a decrease in ownership applies to a subsidiary or group of assets that is a business, but does not apply to a sale of in-substance real estate
even if it involves a business, such as an ownership interest in a partnership whose only asset is operating real estate. This guidance also affects accounting and reporting by an entity that exchanges a group of assets that constitutes a business
for an equity interest in another entity. The updated guidance also expands disclosures about fair value measurements relating to retained investments in a deconsolidated subsidiary or a preexisting interest held by an acquirer in a business
combination. The updated guidance is effective in the first interim or annual reporting period ending on or after December 15, 2009, and is applied on a retrospective basis to the first period that the Account adopted the existing guidance,
which was as of January 1, 2009. The Accounts adoption of this updated guidance effective December 31, 2009 did not have a material effect on the Accounts financial position, results of operations, or financial statement
disclosures.

In January 2010, the FASB issued updated guidance that requires new fair value disclosures significant transfers
between Level 1 and 2 measurement categories and separate presentation of purchases, issuances, and settlements within the roll forward of Level 3 activity. Also, this updated fair value guidance clarifies the disclosure requirements about level of
disaggregation and valuation techniques and inputs. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except disclosures about purchases, sales, issuances, and settlements in the roll forward of
Level 3 activity, which effective for interim and annual reporting periods beginning after December 15, 2010. The Account adopted effective portions of this guidance on January 1, 2010. The required disclosures are provided in Note 9.



6



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B. Investment in Partnership Interest

The investment in the Partnership is based on the Accounts proportionate interest of the Partnerships fair value. At
June 30, 2010 and December 31, 2009 the Accounts interest in the Partnership was 4.4% or 271,295 shares and 4.4% or 282,778 shares respectively. Properties owned by the Partnership are illiquid and based on estimated fair value as
discussed in the notes to the Partnerships unaudited financial statements.

C. Income Recognition

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

D. Equity of Pruco Life Insurance Company of New Jersey

Pruco Life of New Jersey maintains a position in the Account for liquidity purposes, including unit purchases and redemptions, Partnership
share transactions and expense processing. The position does not affect contract owners accounts or the related unit values.

Note 3:
Charges and Expenses

A. Mortality Risk and Expense Risk Charges

Mortality risk and expense risk charges are determined daily using an effective annual rate of 0.6%, 0.35%, 0.9% and 0.9% for VAL, VLI,
SPVA and SPVL, respectively. Mortality risk is the risk that life insurance contract owners may not live as long as estimated or annuitants may live longer than estimated and expense risk is the risk that the cost of issuing and administering the
policies may exceed related charges by Pruco Life of New Jersey. The mortality risk and expense risk charges are assessed through reduction in unit values.

B. Administrative Charges

Administrative charges are determined daily using an effective annual rate of 0.35% applied daily against the net assets representing
equity of contract owners held in each subaccount for SPVA and SPVL. Administrative charges include costs associated with issuing the contract, establishing and maintaining records, and providing reports to contract owners. The administrative charge
is assessed through reduction in unit values.

C. Cost of Insurance and Other Related Charges

Contract owner contributions are subject to certain deductions prior to being invested in the Account. The deductions for VAL and VLI are
(1) state premium taxes; (2) sales charges, not to exceed 5% for VAL and 9% for VLI, which are deducted in order to compensate Pruco Life of New Jersey for the cost of selling the contract and (3) transaction costs, applicable to VAL,
which are deducted from each premium payment to cover premium collection and processing costs. Contracts are subject to charges on each basic premium for assuming a guaranteed minimum death benefit risk. This charge compensates Pruco Life of New
Jersey for the risk that an insured may die at a time when the death benefit exceeds the benefit that would have been payable in the absence of a minimum guarantee. These charges are assessed through the redemption of units.

D. Deferred Sales Charge

A deferred sales charge is imposed upon surrenders of certain variable life insurance contracts to compensate Pruco Life of New Jersey for
sales and other marketing expenses. The amount of any sales charge will depend on the number of years that have elapsed since the contract was issued, but will not exceed 45% of one scheduled annual premium for VAL and 9% of the initial premium
payment for SPVL. No sales charge will be imposed after the sixth and tenth year of the contract for SPVL and VAL, respectively. No sales charge will be imposed on death benefits. This deferred sales charge is assessed through the redemption of
units.

Also a deferred sales charge is imposed upon the withdrawals of certain purchase payments to compensate Pruco Life of
New Jersey for sales and other marketing expenses for SPVA and SPVL. The amount of any sales charge will depend on the amount withdrawn and the number of contract years that have elapsed since the contract owner or annuitant made the purchase
payments deemed to be withdrawn. In general, a reduced sales charge may be imposed in connection with the withdrawal of a purchase payment to effect an annuity if less than six contract years have elapsed since the contract date. This deferred sales
charge is assessed through the redemption of units.

E. Partial Withdrawal Charge

A charge is imposed by Pruco Life of New Jersey on partial withdrawals of the cash surrender value for VAL. A charge equal to the lesser
of $15 or 2% will be made in connection with each partial withdrawal of the cash surrender value of a contract. This charge is assessed through the redemption of units.



7



---

F. Annual Maintenance Charge

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

Note 4: Taxes

Pruco
Life of New Jersey is taxed as a life insurance company, as defined by the Internal Revenue Code. The results of operations of the Account form a part of PFIs consolidated federal tax return. Under current federal law, no federal
income taxes are payable by the Account. As such, no provision for the tax liability has been recorded in these financial statements.

Note
5: Net Withdrawals by Contract Owners

Net contract owner withdrawals for the real estate investment option in Pruco Life
of New Jerseys variable insurance and variable annuity products for the three and six month periods ended June 30, 2010 and 2009, were as follows:

Three Months Ended June 30,

(Unaudited)



|      |  |      |         |   |      |   |         |  
|----- |  | ---- | ------- | - | ---- | - | ------- | -
|      |  | 2010 |         |   | 2009 |  
|      |  |     
|VAL   |  | $    | (44,555 | ) |      | $ | (20,198 | )
|VLI   |  |      | 283     |   |      |   | (7,281  | )
|SPVA  |  |      | 0       |   |      |   | (18,456 | )
|SPVL  |  |      | (122    | ) |      |   | (30     | )
|      |  |      |         |   |      |   |         |  
|TOTAL |  | $    | (44,394 | ) |      | $ | (45,965 | )
|      |  |      |         |   |      |   |         |  

Six Months Ended June 30,

(Unaudited)



|      |  |      |         |   |      |   |         |  
|----- |  | ---- | ------- | - | ---- | - | ------- | -
|      |  | 2010 |         |   | 2009 |  
|      |  |     
|VAL   |  | $    | (63,762 | ) |      | $ | (27,384 | )
|VLI   |  |      | (8,277  | ) |      |   | (37,948 | )
|SPVA  |  |      | (0      | ) |      |   | (18,456 | )
|SPVL  |  |      | (242    | ) |      |   | (318    | )
|      |  |      |         |   |      |   |         |  
|TOTAL |  | $    | (72,281 | ) |      | $ | (84,106 | )
|      |  |      |         |   |      |   |         |  



8



---

Note 6: Partnership Distributions

For the six months ended June 30, 2010, the Partnership made a distribution of $7.5 million. The Pruco Life of New Jersey
Accounts share of this distribution was $0.3 million. For the year ended December 31, 2009, the Partnership made a distribution of $8 million. The Pruco Life of New Jersey Accounts share of this distribution was $0.3 million.

Note 7: Unit Information

Outstanding units and unit values at June 30, 2010 and December 31, 2009 were as follows:



|                   |  |                    |  |                   
|------------------ |  | ------------------ |  | ------------------
|                   |  | June 30, 2010      |  | December 31, 2009 
|                   |  | (Unaudited)        |  |                   
|                   |  |                   
|Units Outstanding: |  | 3,114,635          |  | 3,237,668         
|Unit Value:        |  | 1.97973 to 2.44650 |  | 1.94013 to 2.38693

Note 8:
Financial Highlights

The range of total return for the three and six month periods ended June 30, 2010 and 2009, were as follows:



|             |  |                                       |   |  |                |  
|------------ |  | ------------------------------------- | - |  | -------------- | -
|             |  | Three Months EndedJune
30,(Unaudited) |  
|             |  | 2010                                  |   |  | 2009           |  
|Total Return |  | 3.00% to 3.23                         | % |  | -4.86% to -4.6 | %



|             |  |                                     |   |  |                    |  
|------------ |  | ----------------------------------- | - |  | ------------------ | -
|             |  | Six Months EndedJune 30,(Unaudited) |  
|             |  | 2010                                |   |  | 2009               |  
|Total Return |  | 2.04% to 2.50                       | % |  | -15.43% to - 15.05 | %



9



---

Note 9: Fair Value Disclosure

FASB guidance on fair value measurements and disclosures establishes a framework for measuring fair value that includes a hierarchy used
to classify the inputs used in fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined
based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1  Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets
or liabilities. These generally provide the most reliable evidence and should be used to measure fair value whenever available.

Level 2  Fair value is based on inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly
or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data.

Level 3  Fair value is based on significant unobservable inputs for the asset or liability. These inputs reflect the Companys
own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The investment in
the Partnership is based on the Accounts proportionate interest of the Partnerships fair value which approximates the Partnerships net asset value. Properties owned by the Partnership are illiquid generally based on estimated fair
value from property appraisal reports prepared by independent real estate appraisers within a reasonable amount of time following acquisition of the real estate and no less frequently than annually thereafter as discussed in the notes to the
Partnerships unaudited financial statements.

The purpose of an appraisal is to estimate the fair value of real estate
as of a specific date. 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 determine 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; underlying assets in the Partnership are classified as Level 3 under the fair value hierarchy. During the three and six months ended June 30, 2010, there were no transfers
between Level 1 and Level 2.



10



---

Table 1 below summarizes the assets measured at fair value on a recurring basis and their
respective position in the fair value hierarchy.

Table 1:



|                                                                         |  |                                              |       |                                                             |   |                                            |  |                                         |   |  |   |      
|------------------------------------------------------------------------ |  | -------------------------------------------- | ----- | ----------------------------------------------------------- | - | ------------------------------------------ |  | --------------------------------------- | - |  | - | -----
|                                                                         |  | ($ in 000s)                                
|                                                                         |  | Fair Value Measurements at June 30, 2010    
|Assets:                                                                  |  | AmountsMeasured at FairValue 06/30/10        |       | Quoted Prices inActive Marketsfor IdenticalAssets (Level 1) |   | SignificantOtherObservableInputs (Level 2) |  | SignificantUnobservable Inputs(Level 3)
|                                                                         |  |                                              |       |                                                            
|Investment in The Prudential Variable Contract Real Property Partnership |  | $                                            | 7,208 |                                                             | $ |                                           |  | $                                       |  |  | $ | 7,208
|                                                                         |  |                                              |       |                                                             |   |                                            |  |                                         |   |  |   |      
|                                                                         |  |                                              |       |                                                            
|Total Assets                                                             |  | $                                            | 7,208 |                                                             | $ |                                           |  | $                                       |  |  | $ | 7,208
|                                                                         |  |                                              |       |                                                             |   |                                            |  |                                         |   |  |   |      
|                                                                         | 
|                                                                         |  | ($ in 000s)                                
|                                                                         |  | Fair Value Measurements at December 31, 2009
|                                                                         |  |                                              |       |                                                            
|Assets:                                                                  |  | AmountsMeasured at FairValue 12/31/2009      |       | Quoted Prices inActive Marketsfor IdenticalAssets (Level 1) |   | SignificantOtherObservableInputs (Level 2) |  | SignificantUnobservable Inputs(Level 3)
|                                                                         |  |                                              |       |                                                            
|Investment in The Prudential Variable Contract Real Property Partnership |  | $                                            | 7,317 |                                                             | $ |                                           |  | $                                       |  |  | $ | 7,317
|                                                                         |  |                                              |       |                                                             |   |                                            |  |                                         |   |  |   |      
|                                                                         |  |                                              |       |                                                            
|Total Assets                                                             |  | $                                            | 7,317 |                                                             | $ |                                           |  | $                                       |  |  | $ | 7,317
|                                                                         |  |                                              |       |                                                             |   |                                            |  |                                         |   |  |   |      



11



---

Table 2 below provides a reconciliation of the beginning and ending balances for all assets
measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six month periods ended June 30, 2010 and June 30, 2009.

Table 2:



|                                                                                                                                                                                                                           |  |                                                                                                            |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------- | ------ | -
|                                                                                                                                                                                                                           |  | ($ in 000s)                                                                                               |       
|                                                                                                                                                                                                                           |  | Fair ValueMeasurements UsingSignificantUnobservable Inputs forthe 
six months endingJune 30, 2010(Level 3) |       
|                                                                                                                                                                                                                           | 
|Beginning balance @ 01/01/10                                                                                                                                                                                               |  | $                                                                                                          | 7,317  |  
|                                                                                                                                                                                                                           | 
|Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership
operations                                                                                                    |  | $                                                                                                          | 17     |  
|Net Investment Income from Partnership operations                                                                                                                                                                          |  | $                                                                                                          | 173    |  
|Acquisition/Additions                                                                                                                                                                                                      |  |                                                                                                            |       |  
|Equity Income                                                                                                                                                                                                              |  |                                                                                                            |       |  
|Contributions                                                                                                                                                                                                              |  |                                                                                                            |       |  
|Disposition/Settlements                                                                                                                                                                                                    |  | $                                                                                                          | (299   | )
|Equity losses                                                                                                                                                                                                              |  |                                                                                                            |       |  
|Distributions                                                                                                                                                                                                              |  |                                                                                                            |       |  
|                                                                                                                                                                                                                           |  |                                                                                                            |        |  
|Ending balance @ 06/30/10                                                                                                                                                                                                  |  | $                                                                                                          | 7,208  |  
|                                                                                                                                                                                                                           |  |                                                                                                            |        |  
|                                                                                                                                                                                                                           | 
|The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in
(realized\unrealized) gains or losses relating to assets still held at the reporting date |  | $                                                                                                          | 17     |  
|                                                                                                                                                                                                                           |  |                                                                                                            |        |  
|                                                                                                                                                                                                                           | 
|                                                                                                                                                                                                                           |  | ($ in 000s)                                                                                               |       
|                                                                                                                                                                                                                           |  | Fair ValueMeasurements UsingSignificantUnobservable Inputs forthe six
months endingJune 30, 2009(Level 3)  |       
|                                                                                                                                                                                                                           | 
|Beginning balance @ 01/01/09                                                                                                                                                                                               |  | $                                                                                                          | 9,322  |  
|Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership
operations                                                                                                    |  | $                                                                                                          | (1,542 | )
|Net Investment Income from Partnership operations                                                                                                                                                                          |  | $                                                                                                          | 153    |  
|Acquisition/Additions                                                                                                                                                                                                      |  |                                                                                                            |       |  
|Equity Income                                                                                                                                                                                                              |  |                                                                                                            |       |  
|Contributions                                                                                                                                                                                                              |  |                                                                                                            |       |  
|Disposition/Settlements                                                                                                                                                                                                    |  | $                                                                                                          | (316   | )
|Equity losses                                                                                                                                                                                                              |  |                                                                                                            |       |  
|Distributions                                                                                                                                                                                                              |  |                                                                                                            |       |  
|                                                                                                                                                                                                                           |  |                                                                                                            |        |  
|Ending balance @ 06/30/09                                                                                                                                                                                                  |  | $                                                                                                          | 7,617  |  
|                                                                                                                                                                                                                           |  |                                                                                                            |        |  
|                                                                                                                                                                                                                           | 
|The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in
(realized\unrealized) gains or losses relating to assets still held at the reporting date |  | $                                                                                                          | (1,542 | )
|                                                                                                                                                                                                                           |  |                                                                                                            |        |  



12



---

Table 2:



|                                                                                                                                                                                                                           |  |                                                                                                             |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- | ----- | -
|                                                                                                                                                                                                                           |  | ($ in 000s)                                                                                                |      
|                                                                                                                                                                                                                           |  | Fair ValueMeasurements UsingSignificantUnobservable Inputs forthe
three months endingJune 30, 2010(Level 3) |      
|                                                                                                                                                                                                                           | 
|Beginning balance @ 04/01/10                                                                                                                                                                                               |  | $                                                                                                           | 7,271 |  
|                                                                                                                                                                                                                           | 
|Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership
operations                                                                                                    |  | $                                                                                                           | 143   |  
|Net Investment Income from Partnership operations                                                                                                                                                                          |  | $                                                                                                           | 93    |  
|Acquisition/Additions                                                                                                                                                                                                      |  |                                                                                                             |      |  
|Equity Income                                                                                                                                                                                                              |  |                                                                                                             |      |  
|Contributions                                                                                                                                                                                                              |  |                                                                                                             |      |  
|Disposition/Settlements                                                                                                                                                                                                    |  | $                                                                                                           | (299  | )
|Equity losses                                                                                                                                                                                                              |  |                                                                                                             |      |  
|Distributions                                                                                                                                                                                                              |  |                                                                                                             |      |  
|                                                                                                                                                                                                                           |  |                                                                                                             |       |  
|Ending balance @ 06/30/10                                                                                                                                                                                                  |  | $                                                                                                           | 7,208 |  
|                                                                                                                                                                                                                           |  |                                                                                                             |       |  
|                                                                                                                                                                                                                           | 
|The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in
(realized\unrealized) gains or losses relating to assets still held at the reporting date |  | $                                                                                                           | 143   |  
|                                                                                                                                                                                                                           |  |                                                                                                             |       |  
|                                                                                                                                                                                                                           | 
|                                                                                                                                                                                                                           |  | ($ in 000s)                                                                                                |      
|                                                                                                                                                                                                                           |  | Fair ValueMeasurements UsingSignificantUnobservable Inputs forthe six months
endingJune 30, 2009(Level 3)   |      
|                                                                                                                                                                                                                           | 
|Beginning balance @ 04/01/09                                                                                                                                                                                               |  | $                                                                                                           | 8,312 |  
|                                                                                                                                                                                                                           | 
|Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership
operations                                                                                                    |  | $                                                                                                           | (441  | )
|Net Investment Income from Partnership operations                                                                                                                                                                          |  | $                                                                                                           | 62    |  
|Acquisition/Additions                                                                                                                                                                                                      |  |                                                                                                             |      |  
|Equity Income                                                                                                                                                                                                              |  |                                                                                                             |      |  
|Contributions                                                                                                                                                                                                              |  |                                                                                                             |      |  
|Disposition/Settlements                                                                                                                                                                                                    |  | $                                                                                                           | (316  | )
|Equity losses                                                                                                                                                                                                              |  |                                                                                                             |      |  
|Distributions                                                                                                                                                                                                              |  |                                                                                                             |      |  
|                                                                                                                                                                                                                           |  |                                                                                                             |       |  
|Ending balance @ 06/30/09                                                                                                                                                                                                  |  | $                                                                                                           | 7,617 |  
|                                                                                                                                                                                                                           |  |                                                                                                             |       |  
|                                                                                                                                                                                                                           | 
|The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in
(realized\unrealized) gains or losses relating to assets still held at the reporting date |  | $                                                                                                           | (441  | )
|                                                                                                                                                                                                                           |  |                                                                                                             |       |  



13



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES



|                                                                                                                    |  |                          |             |                   |   |            
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | ----------------- | - | -----------
|                                                                                                                    |  | June 30, 2010(Unaudited) |             | December 31, 2009
|ASSETS                                                                                                              |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|REAL ESTATE INVESTMENTS - At estimated fair value:                                                                  |  |                          |             |                   |   |            
|Real estate and improvements (cost: 06/30/2010 - $213,210,544; 12/31/2009 -$211,091,543)                            |  | $                        | 168,017,634 |                   | $ | 167,100,000
|Real estate partnerships and preferred equity investment (cost: 06/30/2010 - $14,199,948; 12/31/2009 -
$14,238,698) |  |                          | 11,862,940  |                   |   | 10,044,510 
|                                                                                                                    |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|Total real estate investments                                                                                       |  | $                        | 179,880,574 |                   | $ | 177,144,510
|                                                                                                                    |  |                         
|CASH AND CASH EQUIVALENTS                                                                                           |  |                          | 19,477,071  |                   |   | 24,522,159 
|                                                                                                                    |  |                         
|OTHER ASSETS, NET                                                                                                   |  |                          | 3,204,197   |                   |   | 2,629,989  
|                                                                                                                    |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|Total assets                                                                                                        |  | $                        | 202,561,842 |                   | $ | 204,296,658
|                                                                                                                    |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|LIABILITIES & PARTNERS EQUITY                                                                                      |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|INVESTMENT LEVEL DEBT (net of unamortized discount: 6/30/10 $4,293; 12/31/09 $1,830)                                |  | $                        | 30,930,548  |                   | $ | 30,824,899 
|                                                                                                                    |  |                         
|ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                                                               |  |                          | 3,745,695   |                   |   | 2,541,198  
|                                                                                                                    |  |                         
|DUE TO AFFILIATES                                                                                                   |  |                          | 583,699     |                   |   | 603,101    
|                                                                                                                    |  |                         
|OTHER LIABILITIES                                                                                                   |  |                          | 885,706     |                   |   | 1,025,279  
|                                                                                                                    |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|Total liabilities                                                                                                   |  |                          | 36,145,648  |                   |   | 34,994,477 
|                                                                                                                    |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|COMMITMENTS AND CONTINGENCIES                                                                                       |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|NET ASSETS, REPRESENTING PARTNERS EQUITY:                                                                          |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|GENERAL PARTNERS CONTROLLING INTEREST                                                                              |  |                          | 164,027,789 |                   |   | 167,204,272
|                                                                                                                    |  |                         
|NONCONTROLLING INTEREST                                                                                             |  |                          | 2,388,405   |                   |   | 2,097,909  
|                                                                                                                    |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|                                                                                                                    |  |                          | 166,416,194 |                   |   | 169,302,181
|                                                                                                                    |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|Total liabilities and partners equity                                                                              |  | $                        | 202,561,842 |                   | $ | 204,296,658
|                                                                                                                    |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|NUMBER OF SHARES OUTSTANDING AT END OF PERIOD                                                                       |  |                          | 6,173,987   |                   |   | 6,461,874  
|                                                                                                                    |  |                          |             |                   |   |            
|                                                                                                                    |  |                         
|SHARE VALUE AT END OF PERIOD                                                                                        |  | $                        | 26.57       |                   | $ | 25.88      
|                                                                                                                    |  |                          |             |                   |   |            

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



14



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|---------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ---------- | ---- | ----------------------------------- | ----------- | ---- |  | ---- | --------- |  | - | ----------- | -
|                                                                                                                       |  | For the Six Months Ended June 30, |            |      | For the Three Months Ended June 30, |            
|                                                                                                                       |  | 2010                              |            | 2009 |                                     |             | 2010 |  | 2009 |          
|INVESTMENT INCOME:                                                                                                     |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|Revenue from real estate and improvements                                                                              |  | $                                 | 11,975,084 |      | $                                   | 13,312,107  |      |  | $    | 6,157,118 |  | $ | 6,459,211   |  
|Equity in income of real estate partnerships                                                                           |  |                                   | 500,985    |      |                                     | 521,717     |      |  |      | 251,876   |  |   | 250,274     |  
|Interest on short-term investments                                                                                     |  |                                   | 12,103     |      |                                     | 20,689      |      |  |      | 6,250     |  |   | 9,942       |  
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|Total investment income                                                                                                |  |                                   | 12,488,172 |      |                                     | 13,854,513  |      |  |      | 6,415,244 |  |   | 6,719,427   |  
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|INVESTMENT EXPENSES:                                                                                                   |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|Operating                                                                                                              |  |                                   | 3,087,757  |      |                                     | 3,443,652   |      |  |      | 1,527,985 |  |   | 1,679,901   |  
|Investment management fee                                                                                              |  |                                   | 1,145,971  |      |                                     | 1,392,753   |      |  |      | 570,294   |  |   | 666,816     |  
|Real estate taxes                                                                                                      |  |                                   | 1,298,122  |      |                                     | 1,469,026   |      |  |      | 647,419   |  |   | 713,321     |  
|Administrative                                                                                                         |  |                                   | 2,347,207  |      |                                     | 2,610,603   |      |  |      | 1,182,337 |  |   | 1,379,919   |  
|Interest expense                                                                                                       |  |                                   | 504,050    |      |                                     | 892,857     |      |  |      | 250,375   |  |   | 432,123     |  
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|Total investment expenses                                                                                              |  |                                   | 8,383,107  |      |                                     | 9,808,891   |      |  |      | 4,178,410 |  |   | 4,872,080   |  
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|NET INVESTMENT INCOME                                                                                                  |  |                                   | 4,105,065  |      |                                     | 4,045,622   |      |  |      | 2,236,834 |  |   | 1,847,347   |  
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:                                                                    |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|Net proceeds from real estate investments sold                                                                         |  |                                   |           |      |                                     | 9,655,626   |      |  |      |          |  |   | 9,655,626   |  
|Less: Cost of real estate investments sold                                                                             |  |                                   |           |      |                                     | 37,901,326  |      |  |      |          |  |   | 37,901,326  |  
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|Gain (loss) realized from real estate investments sold                                                                 |  |                                   |           |      |                                     | (28,245,700 | )    |  |      |          |  |   | (28,245,700 | )
|                                                                                                                       |  |                                   |            |     
|Less: Reversal of prior periods unrealized gain (loss) on real estate investments sold                                |  |                                   |           |      |                                     | (23,793,594 | )    |  |      |          |  |   | (27,901,326 | )
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|Net gain (loss) recognized on real estate investments sold                                                             |  |                                   |           |      |                                     | (4,452,106  | )    |  |      |          |  |   | (344,374    | )
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|Unrealized gain (loss) on investments held:                                                                            |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|Change in unrealized gain (loss) on real estate investments held                                                       |  |                                   | 655,813    |      |                                     | (33,297,850 | )    |  |      | 3,399,611 |  |   | (11,077,508 | )
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|Net unrealized gain (loss) on real estate investments held                                                             |  |                                   | 655,813    |      |                                     | (33,297,850 | )    |  |      | 3,399,611 |  |   | (11,077,508 | )
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|NET REALIZED AND UNREALIZED GAIN (LOSS) ON REAL ESTATE INVESTMENTS                                                     |  |                                   | 655,813    |      |                                     | (37,749,956 | )    |  |      | 3,399,611 |  |   | (11,421,882 | )
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|Increase (decrease) in net assets resulting from operations                                                            |  | $                                 | 4,760,878  |      | $                                   | (33,704,334 | )    |  | $    | 5,636,445 |  | $ | (9,574,535  | )
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|Amounts attributable to noncontrolling interest:                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|Net investment income attributable to noncontrolling interest                                                          |  |                                   | 156,831    |      |                                     | 535,189     |      |  |      | 123,964   |  |   | 422,735     |  
|Net unrealized gain (loss) attributable to noncontrolling interest                                                     |  |                                   | 280,530    |      |                                     | (2,354,395  | )    |  |      | 136,227   |  |   | (1,299,779  | )
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|Net increase (decrease) in net assets resulting from operations attributable to the noncontrolling interest            |  | $                                 | 437,361    |      | $                                   | (1,819,206  | )    |  | $    | 260,191   |  | $ | (877,044    | )
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|                                                                                                                       |  |                                   |            |     
|Amounts attributable to general partners controlling interest:                                                        |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|Net investment income attributable to general partners controlling interest                                           |  |                                   | 3,948,234  |      |                                     | 3,510,433   |      |  |      | 2,112,870 |  |   | 1,424,612   |  
|Net realized gain (loss) attributable to general partners controlling interest                                        |  |                                   |           |      |                                     | (4,452,106  | )    |  |      |          |  |   | (344,374    | )
|Net unrealized gain (loss) attributable to general partners controlling interest                                      |  |                                   | 375,283    |      |                                     | (30,943,455 | )    |  |      | 3,263,384 |  |   | (9,777,729  | )
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  
|Net increase (decrease) in net assets resulting from operations attributable to general partners controlling
interest |  | $                                 | 4,323,517  |      | $                                   | (31,885,128 | )    |  | $    | 5,376,254 |  | $ | (8,697,491  | )
|                                                                                                                       |  |                                   |            |      |                                     |             |      |  |      |           |  |   |             |  

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



15



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)



|                                                                       |  |                                       |             |   |                        |   |           |       |  |   |                                       |   |  |                        |             |   |       |   |            |   |  |   |             |  
|---------------------------------------------------------------------- |  | ------------------------------------- | ----------- | - | ---------------------- | - | --------- | ----- |  | - | ------------------------------------- | - |  | ---------------------- | ----------- | - | ----- | - | ---------- | - |  | - | ----------- | -
|                                                                       |  | For the Six Months Ended June 30,     |            
|                                                                       |  | 2010                                  |             |   | 2009                   |  
|                                                                       |  | General PartnersControlling Interest |             |   | NoncontrollingInterest |   |           | Total |  |   | General PartnersControlling Interest |   |  | NoncontrollingInterest |             |   | Total |  
|INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:           |  |                                       |             |   |                        |   |           |       |  |   |                                       |   |  |                        |             |   |       |   |            |   |  |   |             |  
|Net investment income                                                  |  | $                                     | 3,948,234   |   |                        | $ | 156,831   |       |  | $ | 4,105,065                             |   |  | $                      | 3,510,433   |   |       | $ | 535,189    |   |  | $ | 4,045,622   |  
|Net realized and unrealized gain (loss) from real estate investments   |  |                                       | 375,283     |   |                        |   | 280,530   |       |  |   | 655,813                               |   |  |                        | (35,395,561 | ) |       |   | (2,354,395 | ) |  |   | (37,749,956 | )
|                                                                       |  |                                       |             |   |                        |   |           |       |  |   |                                       |   |  |                        |             |   |       |   |            |   |  |   |             |  
|                                                                       |  |                                       |             |   |                        |  
|Increase (decrease) in net assets resulting from operations            |  |                                       | 4,323,517   |   |                        |   | 437,361   |       |  |   | 4,760,878                             |   |  |                        | (31,885,128 | ) |       |   | (1,819,206 | ) |  |   | (33,704,334 | )
|                                                                       |  |                                       |             |   |                        |   |           |       |  |   |                                       |   |  |                        |             |   |       |   |            |   |  |   |             |  
|                                                                       |  |                                       |             |   |                        |  
|INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS: |  |                                       |             |   |                        |   |           |       |  |   |                                       |   |  |                        |             |   |       |   |            |   |  |   |             |  
|Withdrawals                                                            |  |                                       | (7,500,000  | ) |                        |   |          |       |  |   | (7,500,000                            | ) |  |                        | (8,000,000  | ) |       |   |           |   |  |   | (8,000,000  | )
|Contributions from noncontrolling interest                             |  |                                       |            |   |                        |   |          |       |  |   |                                      |   |  |                        |            |   |       |   | 15,000     |   |  |   | 15,000      |  
|Distributions to noncontrolling interest                               |  |                                       |            |   |                        |   | (146,865  | )     |  |   | (146,865                              | ) |  |                        |            |   |       |   | (191,506   | ) |  |   | (191,506    | )
|                                                                       |  |                                       |             |   |                        |   |           |       |  |   |                                       |   |  |                        |             |   |       |   |            |   |  |   |             |  
|                                                                       |  |                                       |             |   |                        |  
|Increase (decrease) in net assets resulting from capital transactions  |  |                                       | (7,500,000  | ) |                        |   | (146,865  | )     |  |   | (7,646,865                            | ) |  |                        | (8,000,000  | ) |       |   | (176,506   | ) |  |   | (8,176,506  | )
|                                                                       |  |                                       |             |   |                        |   |           |       |  |   |                                       |   |  |                        |             |   |       |   |            |   |  |   |             |  
|                                                                       |  |                                       |             |   |                        |  
|INCREASE (DECREASE) IN NET ASSETS                                      |  |                                       | (3,176,483  | ) |                        |   | 290,496   |       |  |   | (2,885,987                            | ) |  |                        | (39,885,128 | ) |       |   | (1,995,712 | ) |  |   | (41,880,840 | )
|                                                                       |  |                                       |             |   |                        |  
|NET ASSETS - Beginning of period                                       |  |                                       | 167,204,272 |   |                        |   | 2,097,909 |       |  |   | 169,302,181                           |   |  |                        | 213,938,308 |   |       |   | 4,924,263  |   |  |   | 218,862,571 |  
|                                                                       |  |                                       |             |   |                        |   |           |       |  |   |                                       |   |  |                        |             |   |       |   |            |   |  |   |             |  
|                                                                       |  |                                       |             |   |                        |  
|NET ASSETS - End of period                                             |  | $                                     | 164,027,789 |   |                        | $ | 2,388,405 |       |  | $ | 166,416,194                           |   |  | $                      | 174,053,180 |   |       | $ | 2,928,551  |   |  | $ | 176,981,731 |  
|                                                                       |  |                                       |             |   |                        |   |           |       |  |   |                                       |   |  |                        |             |   |       |   |            |   |  |   |             |  

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



16



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                                      |  |                                   |            |   |      |   |             |  
|--------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ---------- | - | ---- | - | ----------- | -
|                                                                                                                      |  | For the Six Months Ended June 30, |           
|                                                                                                                      |  | 2010                              |            |   | 2009 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                 |  |                                   |            |   |      |   |             |  
|Net increase (decrease) in net assets from operations                                                                 |  | $                                 | 4,760,878  |   |      | $ | (33,704,334 | )
|Adjustments to reconcile net increase (decrease) in net assets to net cash provided by (used in) operating
activities |  |                                   |            |   |      |   |             |  
|Net realized and unrealized loss (gain)                                                                               |  |                                   | (655,813   | ) |      |   | 37,749,956  |  
|Amortization of discount on investment level debt                                                                     |  |                                   | (2,463     | ) |      |   | 2,944       |  
|Amortization of deferred financing costs                                                                              |  |                                   | 26,378     |   |      |   | 28,427      |  
|Distributions in excess of (less than) equity in income of real estate partnerships operations                       |  |                                   | 38,750     |   |      |   | 17,766      |  
|Bad debt expense                                                                                                      |  |                                   | 23,728     |   |      |   | 44,809      |  
|(Increase) decrease in:                                                                                               |  |                                   |            |   |      |   |             |  
|Other assets                                                                                                          |  |                                   | (624,313   | ) |      |   | 215,448     |  
|Increase (decrease) in:                                                                                               |  |                                   |            |   |      |   |             |  
|Accounts payable and accrued expenses                                                                                 |  |                                   | 435,314    |   |      |   | (622,218    | )
|Due to affiliates                                                                                                     |  |                                   | (19,402    | ) |      |   | (171,372    | )
|Other liabilities                                                                                                     |  |                                   | (139,573   | ) |      |   | (133,468    | )
|                                                                                                                      |  |                                   |            |   |      |   |             |  
|                                                                                                                      |  |                                  
|Net cash flows provided by (used in) operating activities                                                             |  |                                   | 3,843,484  |   |      |   | 3,427,958   |  
|                                                                                                                      |  |                                   |            |   |      |   |             |  
|                                                                                                                      |  |                                  
|CASH FLOWS PROVIDED FOR INVESTING ACTIVITIES:                                                                         |  |                                   |            |   |      |   |             |  
|Net proceeds from real estate investments sold                                                                        |  |                                   |           |   |      |   | 9,655,626   |  
|Additions to real estate and improvements                                                                             |  |                                   | (1,349,818 | ) |      |   | (669,578    | )
|                                                                                                                      |  |                                   |            |   |      |   |             |  
|                                                                                                                      |  |                                  
|Net cash flows provided by (used in) investing activities                                                             |  |                                   | (1,349,818 | ) |      |   | 8,986,048   |  
|                                                                                                                      |  |                                   |            |   |      |   |             |  
|                                                                                                                      |  |                                  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                 |  |                                   |            |   |      |   |             |  
|Withdrawals                                                                                                           |  |                                   | (7,500,000 | ) |      |   | (8,000,000  | )
|Proceeds from investment level debt                                                                                   |  |                                   | 429,328    |   |      |   |            |  
|Principal payments on investment level debt                                                                           |  |                                   | (321,216   | ) |      |   | (233,065    | )
|Contributions from noncontrolling interest                                                                            |  |                                   |           |   |      |   | 15,000      |  
|Distributions to noncontrolling interest                                                                              |  |                                   | (146,866   | ) |      |   | (191,506    | )
|                                                                                                                      |  |                                   |            |   |      |   |             |  
|                                                                                                                      |  |                                  
|Net cash flows provided by (used in) financing activities                                                             |  |                                   | (7,538,754 | ) |      |   | (8,409,571  | )
|                                                                                                                      |  |                                   |            |   |      |   |             |  
|                                                                                                                      |  |                                  
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                               |  |                                   | (5,045,088 | ) |      |   | 4,004,435   |  
|                                                                                                                      |  |                                  
|CASH AND CASH EQUIVALENTS - Beginning of period                                                                       |  |                                   | 24,522,159 |   |      |   | 27,736,520  |  
|                                                                                                                      |  |                                   |            |   |      |   |             |  
|                                                                                                                      |  |                                  
|CASH AND CASH EQUIVALENTS - End of period                                                                             |  | $                                 | 19,477,071 |   |      | $ | 31,740,955  |  
|                                                                                                                      |  |                                   |            |   |      |   |             |  

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



17



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULE OF INVESTMENTS



|                                                                                                      |  |                        |  |                            |             |                                                 |   |                          |            |                     |             |            |   |                     |            |  |   |           
|----------------------------------------------------------------------------------------------------- |  | ---------------------- |  | -------------------------- | ----------- | ----------------------------------------------- | - | ------------------------ | ---------- | ------------------- | ----------- | ---------- | - | ------------------- | ---------- |  | - | ----------
|                                                                                                      |  |                        |  |                            |             | 2010 Total RentableSquare Feet
Unless Otherwise |   | June 30,
2010(unaudited) |            | December 31, 2009  
|Property Name                                                                                         |  | June 30, 2010Ownership |  | City, State                |             | Indicated(Unaudited)                            |   | Cost                     |            | Estimated FairValue |             | Cost       |   | Estimated FairValue
|                                                                                                      |  |                        |  |                            |             |                                                 |  
|OFFICES                                                                                               |  |                        |  |                            |             |                                                 |   |                          |            |                     |             |            |   |                     |            |  |   |           
|750 Warrenville                                                                                       |  | WO                     |  | Lisle, IL                  |             | 103,193                                         |   | $                        | 26,241,721 |                     | $           | 7,100,000  |   | $                   | 26,186,415 |  | $ | 6,700,000 
|Summit @ Cornell Oaks                                                                                 |  | WO                     |  | Beaverton , OR             |             | 72,109                                          |   |                          | 12,771,908 |                     |             | 6,900,000  |   |                     | 12,625,626 |  |   | 8,500,000 
|Westpark                                                                                              |  | WO                     |  | Nashville, TN              |             | 97,199                                          |   |                          | 14,386,519 |                     |             | 10,367,633 |   |                     | 13,019,181 |  |   | 8,700,000 
|Financial Plaza                                                                                       |  | WO                     |  | Brentwood, TN              |             | 98,049                                          |   |                          | 12,567,735 |                     |             | 9,700,000  |   |                     | 12,564,614 |  |   | 9,700,000 
|                                                                                                      |  |                        |  |                            |             |                                                 |   |                          |            |                     |             |            |   |                     |            |  |   |           
|                                                                                                      |  |                        |  | Offices % as of 6/30/10    |             | 21%                                             |   |                          | 65,967,883 |                     |             | 34,067,633 |   |                     | 64,395,836 |  |   | 33,600,000
|                                                                                                      |  |                        |  |                            |             |                                                 |  
|APARTMENTS                                                                                            |  |                        |  |                            |             |                                                 |   |                          |            |                     |             |            |   |                     |            |  |   |           
|                                                                                                      |  |                        |  |                            |             |                                                 |  
|Brookwood Apartments                                                                                  |  | WO                     |  | Atlanta, GA                |             | 240 Units                                       |   |                          | 20,314,384 |                     |             | 16,750,000 |   |                     | 20,210,830 |  |   | 14,500,000
|Dunhill Trace Apartments                                                                              |  | WO                     |  | Raleigh, NC                |             | 250 Units                                       |   |                          | 16,630,095 |                     |             | 15,000,000 |   |                     | 16,512,970 |  |   | 15,000,000
|Broadstone Crossing                                                                                   |  | WO                     |  | Austin, TX                 |             | 225 Units                                       |   |                          | 22,818,724 |                     |             | 21,500,000 |   |                     | 22,815,992 |  |   | 21,000,000
|The Reserve At Waterford Lakes                                                                        |  | WO                     |  | Charlotte, NC              |             | 140 Units                                       |   |                          | 13,806,171 |                     |             | 9,200,000  |   |                     | 13,746,940 |  |   | 9,200,000 
|                                                                                                      |  |                        |  |                            |             |                                                 |   |                          |            |                     |             |            |   |                     |            |  |   |           
|                                                                                                      |  |                        |  | Apartments % as of 6/30/10 |             | 38%                                             |   |                          | 73,569,374 |                     |             | 62,450,000 |   |                     | 73,286,732 |  |   | 59,700,000
|                                                                                                      |  |                        |  |                            |             |                                                 |  
|RETAIL                                                                                                |  |                        |  |                            |             |                                                 |   |                          |            |                     |             |            |   |                     |            |  |   |           
|Hampton Towne Center                                                                                  |  | WO                     |  | Hampton, VA                |             | 174,540                                         |   |                          | 18,147,368 |                     |             | 16,300,000 |   |                     | 18,136,399 |  |   | 18,600,000
|White Marlin Mall                                                                                     |  | CJV                    |  | Ocean City, MD             |             | 197,098                                         |   |                          | 23,533,520 |                     |             | 25,300,000 |   |                     | 23,311,878 |  |   | 24,600,000
|Westminster Crossing East, LLC                                                                        |  | CJV                    |  | Westminster, MD            |             | 89,890                                          |   |                          | 15,065,068 |                     |             | 13,200,000 |   |                     | 15,044,877 |  |   | 13,900,000
|CARS Preferred Equity                                                                                 |  | PE                     |  | Various                    |             | N/A                                             |   |                          | 14,199,948 |                     |             | 11,862,941 |   |                     | 14,238,698 |  |   | 10,044,510
|Harnett Crossing                                                                                      |  | CJV                    |  | Dunn, NC                   |             | 193,235                                         |   |                          | 6,239,524  |                     |             | 3,200,000  |   |                     | 6,237,926  |  |   | 3,200,000 
|                                                                                                      |  |                        |  |                            |             |                                                 |   |                          |            |                     |             |            |   |                     |            |  |   |           
|                                                                                                      |  |                        |  | Retail % as of 6/30/10     |             | 43%                                             |   |                          | 77,185,428 |                     |             | 69,862,941 |   |                     | 76,969,778 |  |   | 70,344,510
|                                                                                                      |  |                        |  |                            |             |                                                 |  
|HOTEL                                                                                                 |  |                        |  |                            |             |                                                 |   |                          |            |                     |             |            |   |                     |            |  |   |           
|Portland Crown Plaza                                                                                  |  | CJV                    |  | Portland, OR               |             | 161 Rooms                                       |   |                          | 10,687,807 |                     |             | 13,500,000 |   |                     | 10,677,895 |  |   | 13,500,000
|                                                                                                      |  |                        |  |                            |             |                                                 |   |                          |            |                     |             |            |   |                     |            |  |   |           
|                                                                                                      |  |                        |  | Hotel % as of 6/30/10      |             | 8%                                              |   |                          | 10,687,807 |                     |             | 13,500,000 |   |                     | 10,677,895 |  |   | 13,500,000
|                                                                                                      |  |                        |  |                            |            
|Total Real Estate Investments as a Percentage of General Partners Controlling Interest as of 6/30/10 |  | 110%                   |  | $                          | 227,410,492 |                                                 | $ | 179,880,574              |            | $                   | 225,330,241 |            | $ | 177,144,510        
|                                                                                                      |  |                        |  |                            |             |                                                 |   |                          |            |                     |             |            |   |                     |            |  |   |           

WO - Wholly Owned Investment

CJV - Consolidated Joint Venture

PE - Preferred equity investment

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



18



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULE OF INVESTMENTS



|                                                                                 |  |             |           |                          |   |                     |                   |   |            |   |                     |   |            |  |   |            |  
|-------------------------------------------------------------------------------- |  | ----------- | --------- | ------------------------ | - | ------------------- | ----------------- | - | ---------- | - | ------------------- | - | ---------- |  | - | ---------- | -
|                                                                                 |  |             |           | June 30,
2010(unaudited) |   |                     | December 31, 2009 |  
|                                                                                 |  | Face Amount |           | Cost                     |   | EstimatedFair Value |                   |   | Cost       |   | EstimatedFair Value |  
|CASH AND CASH EQUIVALENTS - Percentage of General Partners Controlling Interest |  |             |           |                          |   |                     |                   |   | 11.9       | % |                     |   |            |  |   | 14.7       | %
|                                                                                 |  |             |           |                          |  
|Federal Home Loan Bank, 0 coupon bond, July 1, 2010                              |  | $           | 7,343,000 |                          | $ | 7,343,000           |                   | $ | 7,343,000  |   |                     | $ | 2,999,184  |  | $ | 2,999,184  |  
|Federal Home Loan Bank, 0 coupon bond, September 8, 2010                         |  |             | 9,503,000 |                          |   | 9,500,177           |                   |   | 9,500,177  |   |                     |   | 9,997,769  |  |   | 9,997,769  |  
|Federal Home Loan Bank, 0 coupon bond, April 23, 2010                            |  |             |          |                          |   |                    |                   |   |           |   |                     |   | 2,999,267  |  |   | 2,999,267  |  
|Federal Home Loan Bank, 0 coupon bond, March, 2010                               |  |             |          |                          |   |                    |                   |   |           |   |                     |   | 1,999,660  |  |   | 1,999,660  |  
|                                                                                 |  |             |           |                          |   |                     |                   |   |            |   |                     |   |            |  |   |            |  
|                                                                                 |  |             |           |                          |  
|Total Cash Equivalents                                                           |  |             |           |                          |   | 16,843,177          |                   |   | 16,843,177 |   |                     |   | 17,995,880 |  |   | 17,995,880 |  
|                                                                                 |  |             |           |                          |  
|Cash                                                                             |  |             |           |                          |   | 2,633,894           |                   |   | 2,633,894  |   |                     |   | 6,526,279  |  |   | 6,526,279  |  
|                                                                                 |  |             |           |                          |   |                     |                   |   |            |   |                     |   |            |  |   |            |  
|                                                                                 |  |             |           |                          |  
|Total Cash and Cash Equivalents                                                  |  |             |           |                          | $ | 19,477,071          |                   | $ | 19,477,071 |   |                     | $ | 24,522,159 |  | $ | 24,522,159 |  
|                                                                                 |  |             |           |                          |   |                     |                   |   |            |   |                     |   |            |  |   |            |  

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



19



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2010 and December 31, 2009

Note 1: Summary of Significant Accounting Policies



| | A. | Basis of Presentation - The accompanying consolidated financial statements of The Prudential Variable Contract Real Property Partnership (the
Partnership) included herein have been prepared in accordance with the requirements of Form 10-Q and accounting principles generally accepted in the United States of America that are applicable to real estate investment companies. In the
opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Operating results for the six months ended June 30, 2010 are not necessarily indicative of
the results that may be expected for the year ended December 31, 2010. For further information, refer to the audited consolidated financial statements and notes of the partnership for the year ended December 31, 2009. The Partnership has
evaluated subsequent events through August 13, 2010, the date these financial statements were available to be issued.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | Accounting Pronouncements Adopted -In December 2007, FASB revised authoritative guidance for business combinations, which expands the
definition of a business and redefines the acquisition date in a merger and acquisition transaction. It significantly modifies the existing guidance for business combinations, including changes to acquisition related contingent consideration,
preacquisition contingencies, noncontrolling interest, restructuring costs, in-process R&D, goodwill and partial acquisition. This guidance is effective for acquisitions closing after the first annual reporting period beginning after
December 15, 2008. The Partnerships adoption of this guidance effective January 1, 2009 did not have a material effect on the Partnerships consolidated financial position or results of operations, but may have an effect on the
accounting for future business combinations.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In December 2007, FASB revised the accounting,
presentation and disclosure for noncontrolling interests in consolidated financial statements. This revised guidance requires noncontrolling interests to be reported as a separate component of equity. It also changes the allocation of losses and
accounting in step acquisitions. The provisions in this revision should be applied prospectively except for the presentation and disclosure requirements, which are required retrospectively for all periods presented. After the initial adoption, any
retained noncontrolling equity investment as a result of a deconsolidation must be measured at fair value at the date of the deconsolidation. This guidance is effective for the annual periods beginning after December 15, 2008. Pursuant to the
Partnerships adoption on January 1, 2009 of the revised guidance, the Partnership is presenting its noncontrolling interests as equity for all periods presented in the financial statements. Noncontrolling interests, previously reported as
a liability, are now required to be reported as a separate component of equity on the balance sheet. In addition, net income (loss) attributable to the noncontrolling interest, which was previously reported as an expense and reflected within Net
Investment Income is now reported as a separate amount below Increase (decrease) in Net Assets Resulting from Operations.

In April 2009, the FASB revised authoritative guidance for the recognition and presentation of other-than-temporary
impairments. This revision amends the other-than-temporary impairment guidance for debt securities and expands the presentation and disclosure requirements of other-than-temporary impairments on debt and equity securities in the financial
statements. This revision also requires that the required annual disclosures for debt and equity securities be made for interim reporting periods. This revision does not amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. This revision is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The
Partnerships early adoption of this guidance effective January 1, 2009 did not have a material effect on the Partnerships consolidated financial position or results of operations.

In April 2009, the FASB issued authoritative guidance on determining fair value when the volume and level of activity for
the asset or liability have significantly decreased and identifying transactions that are not orderly. This guidance also amends the disclosure requirements in interim and annual periods. This guidance is effective for interim and annual reporting
periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. The Partnerships early adoption of this guidance effective January 1, 2009 did not have
a material effect on the Partnerships consolidated financial position or results of operations.



20



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2010 and December 31, 2009



Note 1: Summary of Significant Accounting Policies (continued)



| | B. | Accounting Pronouncements Adopted (continued)
| | -- | ---------------------------------------------



In April 2009, the FASB issued additional guidance for accounting for assets acquired and liabilities assumed
in a business combination that arise from contingencies. This guidance requires an asset acquired or liability assumed in a business combination that arises from a contingency to be recognized at fair value at the acquisition date, if the
acquisition date fair value of that asset or liability can be determined during the measurement period. If the acquisition date fair value of an asset acquired or liability assumed in a business combination that arises from a contingency cannot be
determined during the measurement period, the asset or liability shall be recognized at the acquisition date using the guidance in accounting for contingencies. This guidance also amends disclosure requirements. This guidance is effective for assets
or liabilities arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The Partnerships adoption of this guidance effective January 1, 2009 did not have a material effect on
the Partnerships consolidated financial position or results of operations.

In April 2009, the FASB
issued additional guidance for interim disclosures about fair value of financial instruments requiring for interim reporting periods of publicly traded companies disclosures similar to those already required in annual financial statements. This
guidance is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted. The Partnership adopted this guidance within the interim period ending June 30, 2009.

In May 2009, the FASB issued authoritative guidance for subsequent events. Subsequent events are events that occur after
balance sheet date but before financial statements are issued or are available to be issued. This guidance addresses the accounting for and disclosure of subsequent events not addressed in other applicable Generally Accepted Accounting Principles
(U.S. GAAP), including disclosure of the date through which subsequent events have been evaluated. This guidance is effective for interim or annual periods ending after June 15, 2009. The Partnerships adoption of this guidance
effective with the interim period ending June 30, 2009 did not have a material effect on the Partnerships consolidated financial position or results of operations. The required disclosure of the date through which subsequent events have
been evaluated is provided in Note 1A.

In July 2009, the FASB launched its Accounting Standards Codification
(the Codification), as the sole source of authoritative U.S. GAAP to be applied by nongovernmental entities. The Codification generally does not change the existing rules of U.S. GAAP but rather makes it easier to find and research U.S.
GAAP applicable to a particular transaction or specific accounting issue. The Codification is a new structure which takes accounting pronouncements and organizes them by approximately ninety accounting topics and aggregates them in four common
accounting areas. Topics within each category are further broken down into subtopics, sections and paragraphs. Accounting standards that are included in the Codification will be considered authoritative whereas those that are not included will be
deemed non-authoritative. As a result, there are two levels of U.S. GAAP, authoritative and non-authoritative. The Codification is effective for financial statements that cover the interim and annual periods ending after September 15, 2009 and
has impacted the way the Partnership references U.S. GAAP accounting standards in the financial statements.

In September 2009, the FASB issued updated guidance for the fair value measurement of investments in certain entities
that calculate net asset value per share including certain alternative investments such as hedge funds, private equity funds, and venture capital funds. This guidance allows companies to determine the fair value of such investments using net asset
value (NAV) as a practical expedient if the fair value of the investment is not readily determinable and the investee entity issues financial statements in accordance with measurement principles for investment companies. Use of this
practical expedient is prohibited if it is probable the investment will be sold at something other than NAV. This guidance also requires new disclosures for each major category of alternative investments. It is effective for the first annual or
interim reporting period ending after December 15, 2009, with early application permitted. The Partnerships adoption of this guidance effective December 31, 2009 did not have a material effect on the Partnerships consolidated
financial position or results of operations.



21



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2010 and December 31, 2009



Note 1: Summary of Significant Accounting Policies (continued)



| | B. | Accounting Pronouncements Adopted (continued)
| | -- | ---------------------------------------------



In January 2010, the FASB issued updated guidance that clarifies existing guidance on accounting and
reporting by an entity that experiences a decrease in ownership of a subsidiary that is a business. The updated guidance states that a decrease in ownership applies to a subsidiary or group of assets that is a business, but does not apply to a sale
of in-substance real estate even if it involves a business, such as an ownership interest in a partnership whose only asset is operating real estate. This guidance also affects accounting and reporting by an entity that exchanges a group of assets
that constitutes a business for an equity interest in another entity. The updated guidance also expands disclosures about fair value measurements relating to retained investments in a deconsolidated subsidiary or a preexisting interest held by an
acquirer in a business combination. The updated guidance is effective in the first interim or annual reporting period ending on or after December 15, 2009, and is applied on a retrospective basis to the first period that the Partnership adopted
the existing guidance, which was as of January 1, 2009. The Partnerships adoption of this updated guidance effective December 31, 2009 did not have a material effect on the Partnerships consolidated financial position, results
of operations, or financial statement disclosures.

In January 2010, the FASB issued updated guidance that
requires new fair value disclosures significant transfers between Level 1 and 2 measurement categories and separate presentation of purchases, issuances, and settlements within the roll forward of Level 3 activity. Also, this updated fair value
guidance clarifies the disclosure requirements about level of disaggregation and valuation techniques and inputs. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except disclosures about
purchases, sales, issuances, and settlements in the roll forward of Level 3 activity, which effective for interim and annual reporting periods beginning after December 15, 2010. The Partnership adopted effective portions of this guidance on
January 1, 2010. The required disclosures are provided in Note 3.

Note 2: Disclosure of Supplemental Cash Flow Information and
Non-Cash Investing and Financing Activity

Cash paid for interest during the six months ended June 30, 2010 and
June 30, 2009, was $477,673, and $864,429, respectively.

Note 3: Fair Value Measurements

Valuation Methods:

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 Prudential Investment Management, Inc.
(PIM), which is an indirectly owned subsidiary of Prudential Financial, Inc. (PFI), is responsible to assure that the valuation process provides independent and reasonable property fair value estimates. An unaffiliated third
party has been appointed by PIM to assist the Chief Real Estate Appraiser in maintaining and monitoring the independence and the accuracy of the appraisal process. 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.

The purpose of an appraisal is to estimate the
fair value of real estate as of a specific date. In accordance with FASB authoritative guidance on fair value measurements and disclosures, 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.

Fair Value Measurements:

FASB authoritative guidance on fair value measurements and disclosures establishes a fair value measurement framework, provides a single
definition of fair value and requires expanded disclosure summarizing fair value measurements. This guidance provides a three-level hierarchy based on the inputs used in the valuation process. The level in the fair values hierarchy within which the
fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows;



22



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2010 and December 31, 2009



Note 3: Fair Value Measurements (continued)



Level 1  Fair value is based on unadjusted quoted prices in active markets that
are accessible to the entity for identical assets or liabilities. These generally provide the most reliable evidence and should be used to measure fair value whenever available.

Level 2  Fair value is based on inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly
or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data.

Level 3  Fair value is based on significant unobservable inputs for the asset or liability. These inputs reflect the entitys
own assumptions about how market participants would price the asset or liability.

For items classified as Level 3, a
reconciliation of the beginning and ending balances, as shown in table 2 below, is also required.

During the three and six
months ended June 30, 2010, there were no transfers between Level 1 and Level 2.



23



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2010 and December 31, 2009



Note 3: Fair Value Measurements (continued)



Table 1 below summarizes the assets measured at fair value on a recurring basis and
their respective position in the fair value hierarchy.

Table 1



|                                                         |  |                 |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        
|-------------------------------------------------------- |  | --------------- | ------- | -------------------------------------------------- | - | ---------------------------------------------------------- |  | ------------------------------------------ | - | --------------------------------------- | - | - |  | - | -------
|                                                         |  |                 |         | (in 000s)                                        
|                                                         |  |                 |         | Fair value measurements at June 30, 2010 using    
|Assets:                                                  |  | Cost at6/30/10  |         | Amountsmeasured atfair value6/30/10                |   | Quoted pricesin activemarkets foridentical assets(level 1) |  | Significantotherobservableinputs (level 2) |   | Significantunobservableinputs (level 3)
|Real estate and improvements                             |  | $               | 213,211 |                                                    | $ | 168,018                                                    |  | $                                          |  |                                         | $ |  |  | $ | 168,018
|Real estate partnerships and preferred equity investment |  |                 | 14,200  |                                                    |   | 11,863                                                     |  |                                            |  |                                         |   |  |  |   | 11,863 
|                                                         |  |                 |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        
|Total                                                    |  | $               | 227,411 |                                                    | $ | 179,881                                                    |  | $                                          |  |                                         | $ |  |  | $ | 179,881
|                                                         |  |                 |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        
|                                                         |  |                
|                                                         |  |                 |         | (in 000s)                                        
|                                                         |  |                 |         | Fair value measurements at December 31, 2009 using
|Assets:                                                  |  | Cost at12/31/09 |         | Amountsmeasured atfair value12/31/2009             |   | Quoted pricesin activemarkets foridentical assets(level 1) |  | Significantotherobservableinputs (level 2) |   | Significantunobservableinputs (level 3)
|Real estate and improvements                             |  | $               | 211,092 |                                                    | $ | 167,100                                                    |  | $                                          |  |                                         | $ |  |  | $ | 167,100
|Real estate partnerships and preferred equity investment |  |                 | 14,239  |                                                    |   | 10,045                                                     |  |                                            |  |                                         |   |  |  |   | 10,045 
|                                                         |  |                 |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        
|Total                                                    |  | $               | 225,331 |                                                    | $ | 177,145                                                    |  | $                                          |  |                                         | $ |  |  | $ | 177,145
|                                                         |  |                 |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        



24



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2010 and December 31, 2009



Note 3: Fair Value Measurements (continued)



Table 2 below provides a reconciliation of the beginning and ending balances for all
assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six month periods ended June 30, 2010 and June 30, 2009.

Table 2

(in 000s)

Fair value measurements using significant unobservable inputs

for the six months ending June 30, 2010

(Level 3)



|                                                                                                     |  |                             |         |   |                                                             |   |        |       |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ----------------------------------------------------------- | - | ------ | ----- |  | - | ------- | -
|                                                                                                     |  | Real estate andimprovements |         |   | Real estate 
andpartnerships andpreferred equityinvestments |   |        | Total | 
|                                                                                                     |  |                             |        
|Beginning balance @ 1/1/10                                                                           |  | $                           | 167,100 |   |                                                             | $ | 10,045 |       |  | $ | 177,145 |  
|                                                                                                     |  |                             |        
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)               |  |                             | (1,201  | ) |                                                             |   | 1,857  |       |  |   | 656     |  
|Equity income (losses)/interest income                                                               |  |                             |        |   |                                                             |   | 501    |       |  |   | 501     |  
|Acquisitions, issuances and contributions                                                            |  |                             | 2,119   |   |                                                             |   |       |       |  |   | 2,119   |  
|Dispositions, settlements and distributions                                                          |  |                             |        |   |                                                             |   | (540   | )     |  |   | (540    | )
|                                                                                                     |  |                             |         |   |                                                             |   |        |       |  |   |         |  
|Ending balance @ 6/30/10                                                                             |  | $                           | 168,018 |   |                                                             | $ | 11,863 |       |  | $ | 179,881 |  
|                                                                                                     |  |                             |         |   |                                                             |   |        |       |  |   |         |  
|                                                                                                     |  |                             |        
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date |  | $                           | (1,201  | ) |                                                             | $ | 1,857  |       |  | $ | 656     |  
|                                                                                                     |  |                             |         |   |                                                             |   |        |       |  |   |         |  

(in 000s)

Fair value measurements using significant unobservable inputs

for the six months ending June 30, 2009

(Level 3)



|                                                                                                     |  |                             |         |   |                                                             |   |        |       |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ----------------------------------------------------------- | - | ------ | ----- |  | - | ------- | -
|                                                                                                     |  | Real estate andimprovements |         |   | Real estate 
andpartnerships andpreferred equityinvestments |   |        | Total | 
|                                                                                                     |  |                             |        
|Beginning balance @ 1/1/09                                                                           |  | $                           | 221,196 |   |                                                             | $ | 11,797 |       |  | $ | 232,993 |  
|                                                                                                     |  |                             |        
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)               |  |                             | (36,460 | ) |                                                             |   | (1,290 | )     |  |   | (37,750 | )
|                                                                                                     |  |                             |        
|Equity income (losses)/interest income                                                               |  |                             |        |   |                                                             |   | 522    |       |  |   | 522     |  
|Acquisitions, issuances and contributions                                                            |  |                             | 1,119   |   |                                                             |   |       |       |  |   | 1,119   |  
|Dispositions, settlements and distributions                                                          |  |                             | (9,655  | ) |                                                             |   | (540   | )     |  |   | (10,195 | )
|                                                                                                     |  |                             |         |   |                                                             |   |        |       |  |   |         |  
|Ending balance @ 6/30/09                                                                             |  | $                           | 176,200 |   |                                                             | $ | 10,489 |       |  | $ | 186,689 |  
|                                                                                                     |  |                             |         |   |                                                             |   |        |       |  |   |         |  
|                                                                                                     |  |                             |        
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date |  | $                           | (36,460 | ) |                                                             | $ | (1,290 | )     |  | $ | (37,750 | )
|                                                                                                     |  |                             |         |   |                                                             |   |        |       |  |   |         |  



25



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2010 and December 31, 2009



Note 3: Fair Value Measurements (continued)



Table 2

(in 000s )

Fair value measurements using significant unobservable inputs

for the three months ending June 30, 2010

(Level 3)



|                                                                                                     |  |                             |         |                                                         |   |        |       |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | ------------------------------------------------------- | - | ------ | ----- |  | - | ------- | -
|                                                                                                     |  | Real estate andimprovements |         | Real estatepartnerships 
andpreferred equityinvestments |   |        | Total | 
|                                                                                                     |  |                             |        
|Beginning balance @ 4/1/10                                                                           |  | $                           | 165,400 |                                                         | $ | 10,312 |       |  | $ | 175,712 |  
|                                                                                                     |  |                             |        
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)               |  |                             | 1,828   |                                                         |   | 1,571  |       |  |   | 3,399   |  
|                                                                                                     |  |                             |        
|Equity income (losses)/interest income                                                               |  |                             |        |                                                         |   | 252    |       |  |   | 252     |  
|Acquisitions, issuances and contributions                                                            |  |                             | 790     |                                                         |   |       |       |  |   | 790     |  
|Dispositions, settlements and distributions                                                          |  |                             |        |                                                         |   | (272   | )     |  |   | (272    | )
|                                                                                                     |  |                             |         |                                                         |   |        |       |  |   |         |  
|Ending balance @ 6/30/10                                                                             |  | $                           | 168,018 |                                                         | $ | 11,863 |       |  | $ | 179,881 |  
|                                                                                                     |  |                             |         |                                                         |   |        |       |  |   |         |  
|                                                                                                     |  |                             |        
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date |  | $                           | 1,828   |                                                         | $ | 1,571  |       |  | $ | 3,399   |  
|                                                                                                     |  |                             |         |                                                         |   |        |       |  |   |         |  

(in 000s )

Fair value measurements using significant unobservable inputs

for the three months ending June 30, 2009

(Level 3)



|                                                                                                     |  |                             |         |   |                                                         |   |        |       |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ------------------------------------------------------- | - | ------ | ----- |  | - | ------- | -
|                                                                                                     |  | Real estate andimprovements |         |   | Real estatepartnerships 
andpreferred equityinvestments |   |        | Total | 
|                                                                                                     |  |                             |        
|Beginning balance @ 4/1/09                                                                           |  | $                           | 196,500 |   |                                                         | $ | 10,611 |       |  | $ | 207,111 |  
|                                                                                                     |  |                             |        
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)               |  |                             | (11,322 | ) |                                                         |   | (100   | )     |  |   | (11,422 | )
|                                                                                                     |  |                             |        
|Equity income (losses)/interest income                                                               |  |                             |        |   |                                                         |   | 251    |       |  |   | 251     |  
|Acquisitions, issuances and contributions                                                            |  |                             | 677     |   |                                                         |   |       |       |  |   | 677     |  
|Dispositions, settlements and distributions                                                          |  |                             | (9,655  | ) |                                                         |   | (273   | )     |  |   | (9,928  | )
|                                                                                                     |  |                             |         |   |                                                         |   |        |       |  |   |         |  
|Ending balance @ 6/30/09                                                                             |  | $                           | 176,200 |   |                                                         | $ | 10,489 |       |  | $ | 186,689 |  
|                                                                                                     |  |                             |         |   |                                                         |   |        |       |  |   |         |  
|                                                                                                     |  |                             |        
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date |  | $                           | (10,978 | ) |                                                         | $ | (100   | )     |  | $ | (11,078 | )
|                                                                                                     |  |                             |         |   |                                                         |   |        |       |  |   |         |  



26



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2010 and December 31, 2009



Note 4: Investment Level Debt

Investment level debt includes mortgage loans payable on wholly owned properties and consolidated partnerships and is stated at the
principal amount of the obligations outstanding. At times the Partnership may assume debt in connection with the purchase of real estate. For debt assumed, the Partnership allocates a portion of the purchase price to the below/above market debt and
amortizes the premium/discount over the remaining life of the debt.

Based on borrowing rates available to the Partnership at
June 30, 2010 for loans with similar terms and average maturities, the Partnerships mortgages on wholly owned properties and consolidated partnerships have an estimated fair value of approximately $31 million, and a carrying value of $31
million. Different assumptions or changes in future market conditions could significantly affect estimated fair value.

Note 5: Risk

A. Valuation Risk

Recent disruptions in the global capital, credit and real estate markets have led to, among other things, decline in the volume of
transaction activity, in the fair value of many real estate and real estate related investments, and a 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 that these estimated fair values are reasonable approximations of market prices and the aggregate estimated value of investments in real estate are fairly
presented as of June 30, 2010 and December 31, 2009.

B. Financing, Covenant, and Repayment Risks

In the normal course of business, the Partnership enters into loan agreements with certain lenders to finance its real
estate investment transactions. Unfavorable economic conditions could increase related borrowing costs, limit access to the capital markets or result in a decision by lenders not to extend credit to the Partnership. There is no guarantee that the
Partnerships borrowing arrangements or ability to obtain leverage will continue to be available, or if available, will be available on terms and conditions acceptable to the Partnership. Further, these loan agreements contain, among other
conditions, events of default and various covenants and representations. In the normal course of business, the Partnership may be in the process of renegotiating terms for loans outstanding that have passed their maturity dates. At June 30,
2010 the Partnership had no outstanding matured loans.

A decline in market value of the Partnerships assets may also
have particular adverse consequences in instances where the Partnership borrowed money based on the fair value of specific assets. A decrease in market value of these assets may result in the lender requiring the Partnership to post additional
collateral or otherwise repay these loans.

In the event the Partnerships current portfolio and investment obligations
are not refinanced or extended when they become due and/or the Partnership is required to repay such borrowings and obligations, management anticipates that the repayment of these obligations, will be provided by operating cash flow, new debt
refinancing, and real estate investment sales.



27



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2010 and December 31, 2009



Note 6: Commitments and Contingencies

The Partnership is subject to various legal proceedings and claims arising in the ordinary course of business. These matters are generally
covered by insurance. In the opinion of Partnerships management, the outcome of such matters will not have a significant effect on the financial position of the Partnership.

Note 7: Related Party Transactions

Pursuant to an investment management agreement, Prudential Investment Management, Inc. (PIM), which is an indirectly owned
subsidiary of Prudential Financial Inc., charges the Partnership a daily investment management fee at an annual rate of 1.25% of the average daily gross asset valuation of the Partnership. For the periods ended June 30, 2010 and June 30,
2009, management fees incurred by the Partnership were $1,145,971 and $1,392,753, respectively. The Partnership also reimburses PIM for certain administrative services rendered by PIM. The amounts incurred for the six months ended June 30, 2010
and June 30, 2009, were $26,814 and $26,814, respectively, and are classified as administrative expenses in the Consolidated Statements of Operations.



28



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2010 and December 31, 2009



Note 8: Financial Highlights



|                                                                                                              |  |                                   |       |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | - |  | ---- | ----- | - |  | - | ----- | -
|                                                                                                              |  | For The Six Months Ended June 30, |      
|                                                                                                              |  | 2010                              |       |   | 2009 |   |        | 2008 |  |   | 2007  |   |  | 2006 |      
|Per Share(Unit) Operating Performance:                                                                        |  |                                   |       |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Net Asset Value attributable to general partners controlling interest, beginning of period                   |  | $                                 | 25.88 |   |      | $ | 31.65  |      |  | $ | 36.55 |   |  | $    | 33.87 |   |  | $ | 29.59 |  
|Income From Investment Operations:                                                                            |  |                                   |       |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Net investment income attributable to general partners controlling interest, before management fee           |  |                                   | 0.80  |   |      |   | 0.73   |      |  |   | 1.15  |   |  |      | 1.08  |   |  |   | 0.94  |  
|Investment Management fee attributable to general partners controlling interest                              |  |                                   | (0.17 | ) |      |   | (0.20  | )    |  |   | (0.26 | ) |  |      | (0.24 | ) |  |   | (0.22 | )
|Net realized and unrealized gain (loss) on investments attributable to general partners controlling
interest |  |                                   | 0.06  |   |      |   | (5.24  | )    |  |   | (0.19 | ) |  |      | 0.96  |   |  |   | 1.86  |  
|                                                                                                              |  |                                   |       |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Net Increase in Net Assets Resulting from Operations attributable to general partners controlling interest   |  |                                   | 0.69  |   |      |   | (4.71  | )    |  |   | 0.70  |   |  |      | 1.80  |   |  |   | 2.58  |  
|                                                                                                              |  |                                   |       |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|                                                                                                              |  |                                   |       |   |     
|Net Asset Value attributable to general partners controlling interest, end of period                         |  | $                                 | 26.57 |   |      | $ | 26.94  |      |  | $ | 37.25 |   |  | $    | 35.67 |   |  | $ | 32.17 |  
|                                                                                                              |  |                                   |       |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|                                                                                                              |  |                                   |       |   |     
|Total Return attributable to general partners controlling interest, before Management Fee:                   |  |                                   | 3.28  | % |      |   | -14.27 | %    |  |   | 2.63  | % |  |      | 6.05  | % |  |   | 9.49  | %
|Total Return attributable to general partners controlling interest, after Management Fee (a):                |  |                                   | 2.66  | % |      |   | -14.89 | %    |  |   | 1.92  | % |  |      | 5.32  | % |  |   | 8.73  | %
|Ratios/Supplemental Data:                                                                                     |  |                                   |       |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Net Assets attributable to general partners controlling interest, end of period (in millions)                |  | $                                 | 164   |   |      | $ | 174    |      |  | $ | 252   |   |  | $    | 241   |   |  | $ | 223   |  
|Ratios to average net assets for the period ended (b):                                                        |  |                                   |       |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Total Portfolio Level Expenses                                                                                |  |                                   | 0.82  | % |      |   | 0.69   | %    |  |   | 0.72  | % |  |      | 0.77  | % |  |   | 0.73  | %
|Net Investment Income, before Management Fee                                                                  |  |                                   | 3.06  | % |      |   | 2.42   | %    |  |   | 3.14  | % |  |      | 3.19  | % |  |   | 3.13  | %



|(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.
|--- | ----------------------------------------------------------------



29



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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

All of the assets of the Real Property Account, or the Account, are invested in the
Partnership. Accordingly, the liquidity and capital resources and results of operations for the Account are contingent upon those of the Partnership. Therefore, this managements discussion and analysis addresses these items at the Partnership
level. The partners in the Partnership are Prudential, Pruco Life Insurance Company, and Pruco Life Insurance Company of New Jersey, or collectively, the Partners.

The following discussion and analysis of the liquidity and capital resources and results of operations of the Partnership should be read
in conjunction with the unaudited Consolidated Financial Statements of the Account and the Partnership and the related Notes included in this filing.

(a) Liquidity and Capital Resources

As of June 30, 2010, the Partnerships liquid assets, consisting of cash and cash equivalents, were approximately $19.5 million,
a decrease of approximately $5.0 million from $24.5 million at December 31, 2009. The decrease was primarily due to distributions made to the Partners and capital expenditures to existing properties. Partially offsetting this decrease was cash
flow from operating activities. Sources of liquidity included net cash flow from property operations and interest from short-term investments. The Partnership uses cash for its real estate investment activities and for its distributions to its
partners. As of June 30, 2010, approximately 9.6% of the Partnerships total assets consisted of cash and cash equivalents.

The Partnership has signed a Letter of Intent for the sale of an apartment property in Atlanta, Georgia for gross proceeds of
approximately $17.3 million. The sale is expected to close during the third quarter. During the three months ended June 30, 2010, the Partnership made distributions to its Partners totaling $7.5 million.

During the six months ended June 30, 2010, the Partnership spent approximately $2.1 million on capital improvements to various
existing properties. Approximately $1.4 million was associated with tenant improvements and capital upgrades at the office property in Nashville, Tennessee; approximately $0.1 million funded interior upgrades at the office property in Beaverton,
Oregon; and approximately $0.2 million contributed to tenant improvements and exterior upgrades at the retail property in Ocean City, Maryland. Finally, $0.4 million was associated with minor capital improvements and transaction costs associated
with leasing expenses of various other properties.



30



---

(b) Results of Operations

The following is a comparison of the Partnerships results of operations for the six and three-month periods ended June 30, 2010
and 2009.

Net Investment Income Overview

The Partnerships net investment income attributable to the general partners controlling interest for the six months ended
June 30, 2010 was approximately $3.9 million, an increase of approximately $0.4 million from the prior year period. The increase in net investment income attributable to the general partners controlling interest was primarily attributable
to a $0.4 million increase in the apartment sector investments net investment income from the prior year period. Additionally the retail and hotel sector investments net investment incomes each increased approximately $0.1 million from
the prior year period, while other net investment loss attributable to the general partners controlling interest decreased approximately $0.3 million over the same period. Partially offsetting these increases was a decrease in the office
sectors investments net investment income attributable to the general partners controlling interest of approximately $0.5 million from the prior year period. The components of this net investment income and/or loss attributable to the
general partners controlling interest are discussed below by investment type.

The Partnerships net investment
income attributable to the general partners controlling interest for the quarter ended June 30, 2010 was approximately $2.1 million, an increase of approximately $0.7 million from the prior year period. The increase in net investment
income attributable to the general partners controlling interest was primarily attributable to the $0.4 million, $0.2 million, and $0.1 million increases in the retail, apartment, and hotel sector investments net investment income from
the prior year period, respectively. Additionally other net investment loss attributable to the general partners controlling interest declined approximately $0.2 million from the prior year period. Partially offsetting this increase was a
decrease in the office sector investments net investment income attributable to the general partners controlling interest of approximately $0.2 million from the prior year period. The components of this net investment income and/or loss
attributable to the general partners controlling interest are discussed below by investment type.

Valuation Overview

The Partnership recorded a net unrealized gain attributable to the general partners controlling interest of
approximately $0.4 million for the six months ended June 30, 2010, compared with a net unrealized loss attributable to the general partners controlling interest of approximately $30.9 million for the prior year period. The net unrealized
gain attributable to the general partners controlling interest for the six months ended June 30, 2010 was due to a $2.5 million valuation increase in the apartment sector investments. This increase was partially offset by property
valuation declines of $1.1 million and $1.0 million in the office and retail sector investments, respectively.

The
Partnership recorded a net unrealized gain attributable to the general partners controlling interest of approximately $3.3 million for the quarter ended June 30, 2010, compared with a net unrealized loss attributable to the general
partners controlling interest of approximately $9.8 million for the prior year period. The net unrealized gain attributable to the general partners controlling interest for the quarter ended June 30, 2010 was attributable to
property valuation increases in the apartment and retail sector investments of approximately $2.6 million and $0.6 million, respectively. The components of these valuation changes are discussed below by investment type. The components of these
valuation gains and/or losses attributable to the general partners controlling interest are discussed below by property type.



31



---

The following table presents a comparison of the Partnerships sources of net
investment income attributable to the general partners controlling interest, and recognized and unrealized gains or losses attributable to the general partners controlling interest by investment type for the six and three-month periods
ended June 30, 2010 and 2009.



|                                                                     |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  
|-------------------------------------------------------------------- |  | ------------------------- | ---------- | - | --------------------------- | -- | ----------- | ---- |  | - | --------- | - |  | -- | ---------- | -
|                                                                     |  | Six Months Ended June 30, |            |   | Three Months Ended June 30, |   
|                                                                     |  | 2010                      |            |   | 2009                        |    |             | 2010 |  |   | 2009      |  
|Net Investment Income:                                               |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  
|                                                                     |  |                           |            |  
|Office properties                                                    |  | $                         | 1,060,795  |   |                             | $  | 1,555,381   |      |  | $ | 494,339   |   |  | $  | 729,130    |  
|Apartment properties                                                 |  |                           | 1,705,532  |   |                             |    | 1,290,928   |      |  |   | 872,228   |   |  |    | 691,006    |  
|Retail properties                                                    |  |                           | 2,301,443  |   |                             |    | 2,162,411   |      |  |   | 1,225,691 |   |  |    | 815,584    |  
|Hotel property                                                       |  |                           | 230,911    |   |                             |    | 155,789     |      |  |   | 201,181   |   |  |    | 92,084     |  
|Other (including interest income, investment mgt fee, etc.)          |  |                           | (1,350,447 | ) |                             |    | (1,654,076  | )    |  |   | (680,569  | ) |  |    | (903,192   | )
|                                                                     |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  
|Total Net Investment Income                                          |  | $                         | 3,948,234  |   |                             | $  | 3,510,433   |      |  | $ | 2,112,870 |   |  | $  | 1,424,612  |  
|                                                                     |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  
|                                                                     |  |                           |            |  
|Net Recognized Gain (Loss) on Real Estate Investments:               |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  
|                                                                     |  |                           |            |  
|Retail properties                                                    |  |                           |           |   |                             |    | (4,452,106  | )    |  |   |          |   |  |    | (344,374   | )
|                                                                     |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  
|Net Recognized Gain (Loss) on Real Estate Investments                |  |                           |           |   |                             |    | (4,452,106  | )    |  |   |          |   |  |    | (344,374   | )
|                                                                     |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  
|                                                                     |  |                           |            |  
|Net Unrealized Gain (Loss) on Real Estate Investments:               |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  
|                                                                     |  |                           |            |  
|Office properties                                                    |  |                           | (1,104,412 | ) |                             |    | (11,540,712 | )    |  |   | 25,825    |   |  |    | (5,344,863 | )
|Apartment properties                                                 |  |                           | 2,467,358  |   |                             |    | (9,524,636  | )    |  |   | 2,599,163 |   |  |    | (1,102,203 | )
|Retail properties                                                    |  |                           | (979,734   | ) |                             |    | (7,407,778  | )    |  |   | 643,810   |   |  |    | (2,355,885 | )
|Hotel property                                                       |  |                           | (7,929     | ) |                             |    | (2,470,329  | )    |  |   | (5,414    | ) |  |    | (974,778   | )
|                                                                     |  |                           |            |  
|                                                                     |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  
|                                                                     |  |                           |            |  
|Net Unrealized Gain (Loss) on Real Estate Investments                |  |                           | 375,283    |   |                             |    | (30,943,455 | )    |  |   | 3,263,384 |   |  |    | (9,777,729 | )
|                                                                     |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  
|                                                                     |  |                           |            |  
|Net Recognized and Unrealized Gain (Loss) on Real Estate Investments |  | $                         | 375,283    |   |                             | ($ | 35,395,561  | )    |  | $ | 3,263,384 |   |  | ($ | 10,122,103 | )
|                                                                     |  |                           |            |   |                             |    |             |      |  |   |           |   |  |    |            |  



32



---

OFFICE PROPERTIES



|                            |  |                                 |           |   |                                 |   |           |                           |  |   |                           |   |  |               |             |   |               |     |   |  |     |  
|--------------------------- |  | ------------------------------- | --------- | - | ------------------------------- | - | --------- | ------------------------- |  | - | ------------------------- | - |  | ------------- | ----------- | - | ------------- | --- | - |  | --- | -
|Six Months Ended
June 30,   |  | Net InvestmentIncome/(Loss)2010 |           |   | Net InvestmentIncome/(Loss)2009 |   |           | UnrealizedGain/(Loss)2010 |  |   | UnrealizedGain/(Loss)2009 |   |  | Occupancy2010 |             |   | Occupancy2009 |    
|Property                    |  |                                 |           |   |                                 |   |           |                           |  |   |                           |   |  |               |             |   |               |     |   |  |     |  
|Lisle, IL                   |  | $                               | 149,368   |   |                                 | $ | 45,775    |                           |  | $ | 344,694                   |   |  | $             | (2,296,931  | ) |               | 48  | % |  | 32  | %
|Brentwood, TN               |  |                                 | (224,119  | ) |                                 |   | 352,985   |                           |  |   | 300,296                   |   |  |               | (4,492,174  | ) |               | 68  | % |  | 70  | %
|Beaverton, OR               |  |                                 | 547,969   |   |                                 |   | 604,307   |                           |  |   | (1,746,281                | ) |  |               | (2,030,265  | ) |               | 88  | % |  | 88  | %
|Brentwood, TN               |  |                                 | 587,577   |   |                                 |   | 552,314   |                           |  |   | (3,121                    | ) |  |               | (2,721,342  | ) |               | 100 | % |  | 100 | %
|                            |  |                                 |           |   |                                 |   |           |                           |  |   |                           |   |  |               |             |   |               |     |   |  |     |  
|                            |  | $                               | 1,060,795 |   |                                 | $ | 1,555,381 |                           |  | $ | (1,104,412                | ) |  | $             | (11,540,712 | ) |               |     |   |  |     |  
|                            |  |                                 |           |   |                                 |   |           |                           |  |   |                           |   |  |               |             |   |               |     |   |  |     |  
|                            |  |                                 |           |   |                                
|Three Months Ended
June 30, |  |                                 |           |   |                                 |   |           |                           |  |   |                           |   |  |               |            
|Property                    |  |                                 |           |   |                                 |   |           |                           |  |   |                           |   |  |               |             |   |              
|Lisle, IL                   |  | $                               | 96,342    |   |                                 | $ | (23,610   | )                         |  | $ | (4,865                    | ) |  | $             | (1,243,316  | ) |              
|Brentwood, TN               |  |                                 | (106,485  | ) |                                 |   | 175,550   |                           |  |   | 789,871                   |   |  |               | (1,850,863  | ) |              
|Beaverton, OR               |  |                                 | 230,536   |   |                                 |   | 306,822   |                           |  |   | (759,181                  | ) |  |               | (630,265    | ) |              
|Brentwood, TN               |  |                                 | 273,946   |   |                                 |   | 270,368   |                           |  |   |                          |   |  |               | (1,620,419  | ) |              
|                            |  |                                 |           |   |                                 |   |           |                           |  |   |                           |   |  |               |             |   |              
|                            |  | $                               | 494,339   |   |                                 | $ | 729,130   |                           |  | $ | 25,825                    |   |  | $             | (5,344,863  | ) |              
|                            |  |                                 |           |   |                                 |   |           |                           |  |   |                           |   |  |               |             |   |              

Net Investment Income

Net investment income attributable to the general partners controlling interest for the Partnerships office properties was
approximately $1.1 million for the six months ended June 30, 2010, a decrease of approximately $0.5 million from the prior year period. Net investment income attributable to the general partners controlling interest for the
Partnerships office properties was approximately $0.5 million for the quarter ended June 30, 2010, a decrease of approximately $0.2 million from the prior year period. The decreases for the six and three-month periods ended June 30,
2010 were primarily caused by (a) decreased rental income at one of the properties in Brentwood, Tennessee due to free rent given to the buildings largest tenant as part of a renewal of the tenants lease; and (b) decreased
rental income at the property in Beaverton, Oregon caused by free rent given to a new full-floor tenant. Partially offsetting this decrease was an increase in rental income at the property in Lisle, Illinois due to the completion of the free rent
period for one of the buildings larger tenants.

Unrealized Gain/(Loss)

The office properties owned by the Partnership recorded a net unrealized loss attributable to the general partners controlling
interest of approximately $1.1 million during the six months ended June 30, 2010, compared with a net unrealized loss attributable to the general partners controlling interest of approximately $11.5 million for the prior year period. The
net unrealized loss attributable to the general partners controlling interest for the six months ended June 30, 2010 was primarily due to a $1.7 million valuation decline at the property in Beaverton, Oregon based on decreased market and
contract rent because of a new full-floor tenant paying a lower rent than the previous tenant.

The office properties owned by
the Partnership recorded approximately no net unrealized gain or loss attributable to the general partners controlling interest during the quarter ended June 30, 2010, compared with a net unrealized loss attributable to the general
partners controlling interest of approximately $5.3 million for the prior year period.



33



---

APARTMENT PROPERTIES



|                            |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |            |   |               |    |   |  |    |  
|--------------------------- |  | ------------------------------- | --------- | ------------------------------- | - | ------------------------- |  | - | ------------------------- | - |  | ------------- | ---------- | - | ------------- | -- | - |  | -- | -
|Six Months Ended
June 30,   |  | Net InvestmentIncome/(Loss)2010 |           | Net InvestmentIncome/(Loss)2009 |   | UnrealizedGain/(Loss)2010 |  |   | UnrealizedGain/(Loss)2009 |   |  | Occupancy2010 |            |   | Occupancy2009 |   
|Property                    |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |            |   |               |    |   |  |    |  
|Atlanta, GA                 |  | $                               | 411,036   |                                 | $ | 239,987                   |  | $ | 2,146,446                 |   |  | $             | (1,942,370 | ) |               | 94 | % |  | 95 | %
|Raleigh, NC                 |  |                                 | 390,092   |                                 |   | 107,122                   |  |   | (117,126                  | ) |  |               | (1,630,774 | ) |               | 97 | % |  | 94 | %
|Austin, TX                  |  |                                 | 607,011   |                                 |   | 670,958                   |  |   | 497,268                   |   |  |               | (5,083,628 | ) |               | 92 | % |  | 94 | %
|Charlotte, NC               |  |                                 | 297,393   |                                 |   | 272,861                   |  |   | (59,230                   | ) |  |               | (867,864   | ) |               | 95 | % |  | 89 | %
|                            |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |            |   |               |    |   |  |    |  
|                            |  | $                               | 1,705,532 |                                 | $ | 1,290,928                 |  | $ | 2,467,358                 |   |  | $             | (9,524,636 | ) |               |    |   |  |    |  
|                            |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |            |   |               |    |   |  |    |  
|                            |  |                                 |           |                                 |  
|Three Months Ended
June 30, |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |           
|Property                    |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |            |   |              
|Atlanta, GA                 |  | $                               | 208,526   |                                 | $ | 123,970                   |  | $ | 2,034,184                 |   |  | $             | (173,793   | ) |              
|Raleigh, NC                 |  |                                 | 200,082   |                                 |   | 106,134                   |  |   | 97,262                    |   |  |               | (9,676     | ) |              
|Austin, TX                  |  |                                 | 296,033   |                                 |   | 328,970                   |  |   | 497,908                   |   |  |               | (880,000   | ) |              
|Charlotte, NC               |  |                                 | 167,587   |                                 |   | 131,932                   |  |   | (30,191                   | ) |  |               | (38,734    | ) |              
|                            |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |            |   |              
|                            |  | $                               | 872,228   |                                 | $ | 691,006                   |  | $ | 2,599,163                 |   |  | $             | (1,102,203 | ) |              
|                            |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |            |   |              

Net Investment Income

Net investment income attributable to the general partners controlling interest for the Partnerships apartment properties was
approximately $1.7 million for the six months ended June 30, 2010, an increase of approximately $0.4 million from the prior year period. Net investment income attributable to the general partners controlling interest for the
Partnerships apartment properties was approximately $0.9 million for the quarter ended June 30, 2010, an increase of approximately $0.2 million from the prior year period. The increases in net investment income attributable to the general
partners controlling interest for the six and three month periods ended June 30, 2010 were primarily due to the write-off of accrued receivables at the property in Raleigh, North Carolina in the prior year period and decreased concessions
and average vacancy at the property in Atlanta, Georgia caused by increased demand.

Unrealized Gain/(Loss)

The apartment properties owned by the Partnership recorded a net unrealized gain attributable to the general partners controlling
interest of approximately $2.5 million for the six months ended June 30, 2010, compared with a net unrealized loss attributable to the general partners controlling interest of approximately $9.5 million for the prior year period. The net
unrealized gain attributable to the general partners controlling interest for the six month period ended June 30, 2010 was primarily due to a valuation increase at the property in Atlanta, Georgia attributable to a signed Letter of Intent
to sell the property to a qualified buyer in the third quarter. Additionally, the property in Austin, Texas experienced a net unrealized gain attributable to the general partners controlling interest due to decreased investment rates and more
favorable market leasing assumptions. Investment rates include direct and terminal capitalization rates, and discount rates, which reflect investors yield requirements on investments.

The apartment properties owned by the Partnership recorded a net unrealized gain attributable to the general partners controlling
interest of approximately $2.6 million for the quarter ended June 30, 2010, compared with a net unrealized loss attributable to the general partners controlling interest of approximately $1.1 million for the prior year period. The net
unrealized gain attributable to the general partners controlling interest for the quarter ended June 30, 2010 was primarily due to a valuation increase at the property in Atlanta, Georgia attributable to a signed Letter of Intent to sell
the property to a qualified buyer in the third quarter. Additionally, the properties in Raleigh, North Carolina and Austin, Texas experienced net unrealized gains attributable to the general partners controlling interest due to decreased
investment rates and more favorable market leasing assumptions.



34



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RETAIL PROPERTIES



|                            |  |                                 |           |                                 |   |           |                                       |  |   |                           |   |  |               |             |   |               |     |   |  |     |  
|--------------------------- |  | ------------------------------- | --------- | ------------------------------- | - | --------- | ------------------------------------- |  | - | ------------------------- | - |  | ------------- | ----------- | - | ------------- | --- | - |  | --- | -
|Six Months Ended
June 30,   |  | Net InvestmentIncome/(Loss)2010 |           | Net InvestmentIncome/(Loss)2009 |   |           | Recognized& UnrealizedGain/(Loss)2010 |  |   | UnrealizedGain/(Loss)2009 |   |  | Occupancy2010 |             |   | Occupancy2009 |    
|Property                    |  |                                 |           |                                 |   |           |                                       |  |   |                           |   |  |               |             |   |               |     |   |  |     |  
|Roswell, GA (1)             |  | $                               |          |                                 | $ | 233,759   |                                       |  | $ |                          |   |  | $             | (4,452,106  | ) |               | N/A |   |  | N/A | %
|Kansas City, KS (2)         |  |                                 |          |                                 |   | 20,732    |                                       |  |   |                          |   |  |               |            |   |               | N/A |   |  | N/A |  
|Hampton, VA                 |  |                                 | 504,283   |                                 |   | 502,705   |                                       |  |   | (2,310,969                | ) |  |               | (1,813,256  | ) |               | 94  | % |  | 89  | %
|Ocean City, MD              |  |                                 | 564,567   |                                 |   | 566,769   |                                       |  |   | 210,442                   |   |  |               | (1,506,885  | ) |               | 96  | % |  | 95  | %
|Westminster, MD             |  |                                 | 593,106   |                                 |   | 609,053   |                                       |  |   | (720,192                  | ) |  |               | (2,800,120  | ) |               | 100 | % |  | 100 | %
|Dunn, NC (3)                |  |                                 | 142,523   |                                 |   | (267,016  | )                                     |  |   | (16,194                   | ) |  |               | 2,683       |   |               | 36  | % |  | 34  | %
|CARS Preferred Equity       |  |                                 | 496,964   |                                 |   | 496,409   |                                       |  |   | 1,857,179                 |   |  |               | (1,290,200  | ) |               | N/A |   |  | N/A |  
|                            |  |                                 |           |                                 |   |           |                                       |  |   |                           |   |  |               |             |   |               |     |   |  |     |  
|                            |  | $                               | 2,301,443 |                                 | $ | 2,162,411 |                                       |  | $ | (979,734                  | ) |  | $             | (11,859,884 | ) |               |     |   |  |     |  
|                            |  |                                 |           |                                 |   |           |                                       |  |   |                           |   |  |               |             |   |               |     |   |  |     |  
|                            |  |                                 |           |                                 |  
|Three Months Ended
June 30, |  |                                 |           |                                 |   |           |                                       |  |   |                           |   |  |               |            
|Property                    |  |                                 |           |                                 |   |           |                                       |  |   |                           |   |  |               |             |   |              
|Roswell, GA (1)             |  | $                               |          |                                 | $ | 24,499    |                                       |  | $ |                          |   |  | $             | (344,374    | ) |              
|Kansas City, KS (2)         |  |                                 |          |                                 |   | (1,602    | )                                     |  |   |                          |   |  |               |            |   |              
|Hampton, VA                 |  |                                 | 271,704   |                                 |   | 239,955   |                                       |  |   | (400,169                  | ) |  |               | (408,513    | ) |              
|Ocean City, MD              |  |                                 | 321,393   |                                 |   | 285,788   |                                       |  |   | 99,487                    |   |  |               | (768,138    | ) |              
|Westminster, MD             |  |                                 | 311,335   |                                 |   | 315,238   |                                       |  |   | (619,558                  | ) |  |               | (1,100,120  | ) |              
|Dunn, NC(3)                 |  |                                 | 71,404    |                                 |   | (298,005  | )                                     |  |   | (7,410                    | ) |  |               | 20,586      |   |              
|CARS Preferred Equity       |  |                                 | 249,855   |                                 |   | 249,711   |                                       |  |   | 1,571,460                 |   |  |               | (99,700     | ) |              
|                            |  |                                 |           |                                 |   |           |                                       |  |   |                           |   |  |               |             |   |              
|                            |  | $                               | 1,225,691 |                                 | $ | 815,584   |                                       |  | $ | 643,810                   |   |  | $             | (2,700,259  | ) |              
|                            |  |                                 |           |                                 |   |           |                                       |  |   |                           |   |  |               |             |   |              



|(1) | The Roswell, Georgia retail property was sold on May 1, 2009.
|--- | -------------------------------------------------------------

|(2) | The Kansas City, Kansas retail property was sold on June 29, 2007 but certain post-closing adjustments were recognized during the six months
ended June 30, 2009.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | A portion of the Dunn, North Carolina retail property was sold on November 12, 2009.
|--- | ------------------------------------------------------------------------------------

Net Investment Income

Net investment income attributable to the general partners controlling interest for the Partnerships retail properties was
approximately $2.3 million for the six months ended June 30, 2010, an increase of approximately $0.1 million from the prior year period. Net investment income attributable to the general partners controlling interest for the
Partnerships retail properties was approximately $1.2 million for the quarter ended June 30, 2010, an increase of approximately $0.4 million from the prior year period. The increases in net investment income attributable to the general
partners controlling interest for the six and three-month periods ended June 30, 2010 were largely due to an approximately $0.2 million reconciliation of a loss previously misallocated to the partner at the retail property in Dunn, North
Carolina during the prior year period. This increase was partially offset by the loss of income related to the disposition of the Roswell, Georgia retail property in the prior year period.

Recognized and Unrealized Gain/(Loss)

The retail properties owned by the Partnership recorded a net unrealized loss attributable to the general partners controlling
interest of approximately $1.0 million for the six months ended June 30, 2010, compared with a net recognized and unrealized loss attributable to the general partners controlling interest of approximately $11.9 million for the prior year
period. The unrealized loss attributable to the general partners controlling interest for the six month period ended June 30, 2010 was primarily due to net unrealized losses attributable to the general partners controlling interest
of $2.3 million and $0.7 million at the properties in Hampton, Virginia and Westminster, Maryland, respectively, caused by the near-term potential of large tenants vacating. This loss was partially offset by a net unrealized gain attributable to the
general partners controlling interest of approximately $1.9 million in the Capital Automotive Real Estate Services, or CARS, preferred equity investment due to a reduction in the expected remaining term of the investment,
effectively increasing the probability of repayment.

The retail properties owned by the Partnership recorded a net unrealized
gain attributable to the general partners controlling interest of approximately $0.6 million for the quarter ended June 30, 2010, compared with a net recognized and unrealized loss attributable to the general partners controlling
interest of approximately $2.7 million for the prior year period. The net unrealized gain attributable to the general partners controlling interest for the quarter ended June 30, 2010 was primarily due to a net unrealized gain
attributable to the general partners controlling interest of approximately $1.6 million in the Capital Automotive Real Estate Services, or CARS, preferred equity investment due to a reduction in the expected remaining term of the
investment, effectively increasing the probability of repayment. This gain was partially offset by net unrealized losses attributable to the general partners controlling interest of $0.4 million and $0.6 million at the properties in Hampton,
Virginia and Westminster, Maryland, respectively, caused by the near-term potential of large tenants vacating.



35



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HOTEL PROPERTY



|                            |  |                                 |         |                                 |   |                           |  |   |                           |   |  |               |            |   |               |    |   |  |    |  
|--------------------------- |  | ------------------------------- | ------- | ------------------------------- | - | ------------------------- |  | - | ------------------------- | - |  | ------------- | ---------- | - | ------------- | -- | - |  | -- | -
|Six Months Ended
June 30,   |  | Net InvestmentIncome/(Loss)2010 |         | Net InvestmentIncome/(Loss)2009 |   | UnrealizedGain/(Loss)2010 |  |   | UnrealizedGain/(Loss)2009 |   |  | Occupancy2010 |            |   | Occupancy2009 |   
|Property                    |  |                                 |         |                                 |   |                           |  |   |                           |   |  |               |            |   |               |    |   |  |    |  
|Lake Oswego, OR             |  | $                               | 230,911 |                                 | $ | 155,789                   |  | $ | (7,929                    | ) |  | $             | (2,470,329 | ) |               | 67 | % |  | 64 | %
|                            |  |                                 |         |                                 |  
|Three Months Ended
June 30, |  |                                 |         |                                 |   |                           |  |   |                           |   |  |               |           
|Property                    |  |                                 |         |                                 |   |                           |  |   |                           |   |  |               |            |   |              
|Lake Oswego, OR             |  | $                               | 201,181 |                                 | $ | 92,084                    |  | $ | (5,414                    | ) |  | $             | (974,778   | ) |              

Net Investment Income

Net investment income attributable to the general partners controlling interest for the Partnerships hotel property was
approximately $0.2 million for the six months ended June 30, 2010, relatively unchanged from the prior year period.

Net
investment income attributable to the general partners controlling interest for the Partnerships hotel property was approximately $0.2 million for the quarter ended June 30, 2010, an increase of approximately $0.1 million from the
prior year period. The increase in net investment income attributable to the general partners controlling interest for the Partnerships hotel property for the three month period ended June 30, 2010 was largely due to improved cost
savings in operations and increased average daily room rate and occupancy as a result of the strengthening hospitality market driven by increased business and vacation travel.

Unrealized Gain/(Loss)

The Partnerships hotel propertys had no unrealized gain (loss) attributable to the general partners controlling
interest for the six and three month periods ended June 30, 2010, compared with unrealized losses attributable to the general partners controlling interest of approximately $2.5 million and $1.0 for the prior year periods, respectively.

Other

Other
net investment loss attributable to the general partners controlling interest decreased approximately $0.3 million over the prior year period for the six month period ended June 30, 2010. Other net investment loss attributable to the
general partners controlling interest decreased approximately $0.2 million for the quarter ended June 30, 2010 over the prior year period. Other net investment includes interest income from short-term investments, investment management
fees, and portfolio level expenses.



36



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(c) Inflation

A majority of the Partnerships leases with its commercial tenants provide for recoveries of expenses based upon the tenants
proportionate share of, and/or increases in, real estate taxes and certain operating costs, which may partially reduce the Partnerships exposure to increases in operating costs resulting from inflation.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or
U.S. GAAP, requires the application of accounting policies that often involve a significant degree of judgment. Management reviews critical estimates and assumptions on an ongoing basis. If management determines, as a result of its
consideration of facts and circumstances, that modifications in assumptions and estimates are appropriate, results of operations and financial position as reported in the unaudited Consolidated Financial Statements of the Account and the Partnership
may change significantly.

The following sections discuss those critical accounting policies applied in preparing the
unaudited Consolidated Financial Statements of the Account and the Partnership that are most dependent on the application of estimates and assumptions.

Accounting Pronouncements Adopted

See
Note 1B to our Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements.

Valuation of Investments

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 Prudential Investment Management, Inc. (PIM), which is an indirectly owned subsidiary of Prudential Financial, Inc. (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.

The purpose of an appraisal is to estimate the fair value of real estate as of a specific date. In accordance with FASB authoritative
guidance on fair value measurements and disclosures, 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.

Other Estimates

The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Consolidated Financial Statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



37



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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk  The general partners controlling interest exposure to market rate risk for changes in
interest rates relates to approximately 30.73% of its investment portfolio as of June 30, 2010, which consists primarily of short-term commercial paper and fixed and variable interest rate debt. The Partnership does not use derivative financial
instruments. As a matter of policy, the Partnership places its investments with high quality debt security issuers, limits the amount of credit exposure to any one issuer, limits duration by restricting the term, and holds investments to maturity
except under unusual circumstances.

The table below presents the amounts and related weighted interest rates of the
Partnerships cash and cash equivalents at June 30, 2010:



|                          |  |            |  |                                   |       |                      |      |  
|------------------------- |  | ---------- |  | --------------------------------- | ----- | -------------------- | ---- | -
|                          |  | Maturity   |  | Estimated Market 
Value(millions) |       | AverageInterest Rate |     
|Cash and Cash equivalents |  | 0-3 months |  | $                                 | 19.47 |                      | 1.43 | %

The table
below discloses the Partnerships debt as of June 30, 2010. The fair value of the Partnerships long-term debt is affected by changes in market interest rates. The following table presents principal cash flows based upon maturity
dates of the debt obligations and the related weighted-average interest rates by expected maturity dates for the debt.



|                                                                  |  |      |      |   |      |   |        |      |  |   |      |   |  |      |       |   |            |   |      |       |  |   |                     |   |  |    |        |   |  |   |       
|----------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ------ | ---- |  | - | ---- | - |  | ---- | ----- | - | ---------- | - | ---- | ----- |  | - | ------------------- | - |  | -- | ------ | - |  | - | ------
|Investment level debt (in $ thousands),
including current portion |  | 2010 |      |   | 2011 |   |        | 2012 |  |   | 2013 |   |  | 2014 |       |   | Thereafter |   |      | Total |  |   | EstimatedFair Value
|                                                                  |  |      |      |   |      |   |        |     
|Weighted Average Fixed Interest Rate                              |  |      | 6.75 | % |      |   | 6.75   | %    |  |   | 6.75 | % |  |      | 6.75  | % |            |   | 6.75 | %     |  |   | 6.75                | % |  |    | 6.75   | % |  |   |       
|Fixed Rate                                                        |  | $    | 287  |   |      | $ | 604    |      |  | $ | 646  |   |  | $    | 691   |   |            | $ | 739  |       |  | $ | 3,511               |   |  | $  | 6,478  |   |  | $ | 6,698 
|Variable Rate                                                     |  |      |     |   |      | $ | 15,457 |      |  |   |     |   |  | $    | 9,000 |   |            |   |     |       |  |   |                    |   |  | $  | 24,457 |   |  | $ | 24,017
|Premium/(Discount) on Investment Level Debt                       |  | ($   | 4    | ) |      |   |       |      |  |   |     |   |  |      |      |   |            |   |     |       |  |   |                    |   |  | ($ | 4      | ) |  |   |      
|                                                                  |  |      |      |   |      |   |        |      |  |   |      |   |  |      |       |   |            |   |      |       |  |   |                     |   |  |    |        |   |  |   |       
|Total Investment Level Debt                                       |  | $    | 283  |   |      | $ | 16,061 |      |  | $ | 646  |   |  | $    | 9,691 |   |            | $ | 739  |       |  | $ | 3,511               |   |  | $  | 30,931 |   |  | $ | 30,715
|                                                                  |  |      |      |   |      |   |        |      |  |   |      |   |  |      |       |   |            |   |      |       |  |   |                     |   |  |    |        |   |  |   |       

The Partnership is exposed to market risk from
tenants. While the Partnership has not experienced any significant credit losses, in the event of significant increases in interest rates and/or an economic downturn, delinquencies could increase and result in losses to the Partnership and the
Account that could adversely affect its operating results and liquidity.

Item 4. Controls and Procedures

In order to ensure that the information we must disclose in our filings with the Securities and Exchange Commission, or
SEC, is recorded, processed, summarized, and reported on a timely basis, the Companys management, including our Chief Executive Officer and Chief Financial Officer, have reviewed and evaluated the effectiveness of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e), under the Securities Exchange Act of 1934, as amended, as of June 30, 2010. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded
that, as of June 30, 2010, our disclosure controls and procedures were effective. No change in our internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(e), occurred during the quarter ended
June 30, 2010, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



38



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PART II  OTHER INFORMATION

Item 1A. Risk Factors

The following should be read in conjunction with and supplements and amends the section titled Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2009. These risks could materially affect our business, results of operations or financial condition or cause our actual results to differ materially from those expected or those expressed in
any forward looking statements made by or on behalf of the Company. These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under Forward-Looking Statements above
and the risks of our businesses described elsewhere in this Quarterly Report on Form 10-Q.

The enactment of the Dodd-Frank
Wall Street Reform and Consumer Protection Act will subject the Company, our parent and our affiliates to substantial additional federal regulation and we cannot predict the effect on our business, results of operations, cash flows or financial
condition.

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection
Act (Dodd-Frank), which effects comprehensive changes to the regulation of financial services in the United States and will subject the Company, our parent and our affiliates to substantial additional federal regulation. Dodd-Frank
directs existing and newly-created government agencies and bodies to promulgate regulations implementing the law, a process anticipated to occur over the next few years. We cannot predict with any certainty the requirements of the regulations
ultimately adopted or how Dodd-Frank and such regulations will affect the financial markets generally or impact our business, financial strength ratings, results of operations, cash flows or financial condition.

Key aspects we have identified to date of Dodd-Franks potential impact on the Company, our parent and our affiliates include:



| |  | Prudential Financial, Inc. will become subject, as a savings and loan holding company, to the examination, enforcement and supervisory authority of
the Board of Governors of the Federal Reserve System (FRB) after the transfer to the FRB of the existing authority of the Office of Thrift Supervision (expected to occur within a year of Dodd-Franks enactment). The FRB will have
authority to impose capital requirements on Prudential Financial and its subsidiaries (including the Company) after the transfer date. Pursuant to the Collins Amendment included in Dodd-Frank, the FRB must establish minimum leverage and
risk-based capital requirements for savings and loan holding companies (including Prudential Financial, Inc.) and other institutions that are not less than those applicable to insured depository institutions. These requirements will become generally
applicable to Prudential Financial, Inc. five years after Dodd-Franks enactment except, for purposes of calculating Tier 1 capital, new issuances of debt and equity capital will be immediately subject to the requirements. We cannot
predict what capital regulations the FRB will promulgate under these authorizations, either generally or as applicable to insurance-based organizations. We cannot predict how the FRB will exercise general supervisory authority over Prudential
Financial and its subsidiaries (including the Company) as to business practices.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Dodd-Frank establishes a Financial Stability Oversight Council (Council) which is authorized to subject non-bank financial companies
such as Prudential Financial, Inc. to stricter prudential standards (a Designated Financial Company) if the Council determines that material financial distress at the company or the scope of the companys activities could pose a
threat to financial stability of the U.S. If so designated, Prudential Financial, Inc. and/or its subsidiaries (including the Company) would become subject to unspecified stricter prudential standards, including stricter requirements and limitations
relating to risk-based capital, leverage, liquidity and credit exposure, as well as overall risk management requirements, management interlock prohibitions and a requirement to maintain a plan for rapid and orderly dissolution in the event of severe
financial distress. The Collins Amendment capital requirements referred to above would apply when adopted by the FRB (i.e., the 5-year grandfathering would no longer be available). The FRB could also require the issuance of capital
securities automatically convertible to equity in the event of financial distress, require enhanced public disclosures to support market evaluation of risk profile and impose short-term debt limits. If Prudential Financial, Inc. or a subsidiary
(such as the Company) were so designated, failure to meet defined measures of financial condition could result in: limits on capital distributions, acquisitions and/or asset growth; requirements for a capital restoration plan and capital raising,
limitations or transactions with affiliates, management changes and asset sales; and, if the FRB and the Council determined Prudential Financial, Inc. (or the designated subsidiary) posed a grave threat to the financial stability of the U.S.,
further limits on acquisitions or combinations, restrictions on product offerings and/or requirements to sell assets. We cannot predict whether Prudential Financial, Inc. or a subsidiary will be designated as a Designated Financial Company.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Prudential Financial, Inc. will become, as a savings and loan holding company (and if designated, as a Designated Financial Company), subject to
stress tests to be promulgated by the FRB in consultation with the newly-created Federal Insurance Office (discussed below) to determine whether, on a consolidated basis, Prudential Financial, Inc. has the capital necessary to absorb losses as a
result of adverse economic conditions. We cannot predict how the stress tests will be designed or conducted or whether the results thereof will cause Prudential Financial, Inc. or a subsidiary (such as the Company) to alter business practices or
affect the perceptions of regulators, rating agencies, customers, counterparties or investors of our financial strength.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



39



---

| |  | The Council may recommend that state insurance regulators or other regulators apply new or heightened standards and safeguards for activities or
practices we and other insurers or other financial services companies engage in that could create or increase the risk that significant liquidity, credit or other problems spread among financial companies. We cannot predict whether any such
recommendations will be made or their effect on our business, results of operations, cash flows or financial condition.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | As a savings and loan holding company, Prudential Financial, Inc. and its subsidiaries will become subject to the Volcker Rule
provisions of Dodd-Frank prohibiting, subject to the rules exceptions, proprietary trading and the sponsorship of, and investment in, funds (referred to in Dodd-Frank as hedge funds or private equity funds) that rely on certain
exemptions from the Investment Company Act of 1940, as amended. The Council is to provide recommendations on the implementation of the Volcker Rule within six months of Dodd-Franks enactment, and the FRB is to promulgate regulations thereunder
within nine months thereafter, and substantial uncertainty as to the rules application to our business may exist over this period. The rule becomes effective on the earlier of one year after adoption of regulations or two years after
Dodd-Franks enactment, and activities and investments must be brought into compliance within two years thereafter, subject to exceptions. We presently believe that the permitted activities exceptions to the rule should be
interpreted in a manner that does not require us to materially alter our securities trading or investing practices, but there can be no assurance that the regulations promulgated will so provide.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Dodd-Frank creates a new framework for regulation of the over-the-counter (OTC) derivatives markets which could impact various
activities of our affiliate Prudential Global Funding, LLC (PGF), Prudential Financial, Inc. and its insurance subsidiaries (including the Company), which use derivatives for various purposes (including hedging interest rate, foreign
currency and equity market exposures). Dodd-Frank generally requires swaps, subject to a determination by the CFTC or SEC as to which swaps are covered, with all counterparties except non-financial end users to be executed through a centralized
exchange or regulated facility and to be cleared through a regulated clearinghouse. Swap dealers and major swap participants (MSPs) are subject to capital and margin (i.e., collateral) requirements that will be imposed by the applicable
prudential regulator or the CFTC or SEC, as well as business conduct rules and reporting requirements. While we believe Prudential Financial, Inc. and PGF should not be considered dealers or MSPs subject to the capital and margin requirements, the
final regulations adopted could provide otherwise, which could substantially increase the cost of hedging and the related operations. A determination by the Secretary of the Treasury not to exclude foreign currency swaps and forwards from the
foregoing requirements also could have that result. PGF intermediates swaps between Prudential entities and third parties, and it is possible that PGFs standardized intra-Company transactions might be required to be executed through an
exchange, clear centrally and post margin, potentially defeating PGFs key function; if so, Prudential entities, including the Company, might directly enter into swaps with third parties, potentially increasing the economic costs of hedging.
The SEC and CFTC are required to determine whether and how stable value contracts should be treated as swaps and, although we believe otherwise, various other insurance products might be treated as swaps; if regulated as swaps, we cannot
predict how the rules would be applied to such products or the effect on their profitability or attractiveness to our clients. Finally, the new regulatory scheme imposed on all market participants may increase the costs of hedging generally and
banking institutions (with which we enter into a substantial portion of our derivatives) may be required to conduct at least a portion of their OTC derivatives businesses outside their depositary institutions. The affiliates through which these
institutions will conduct their OTC derivatives businesses might be less creditworthy than the depository institutions themselves, and netting of counterparty exposures with non-banks will not be allowed, potentially affecting the credit
risk these counterparties pose to us and the degree to which we are able to enter into transactions with these counterparties. We cannot predict the effect of the foregoing on our hedging costs, our hedging strategy or implementation thereof or
whether we will need or choose to increase and/or change the composition of the risks we do not hedge.
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Dodd-Frank establishes a Federal Insurance Office within the Department of the Treasury to be headed by a director appointed by the
Secretary of the Treasury. While not having a general supervisory or regulatory authority over the business of insurance, the director of this office will perform various functions with respect to insurance (other than health insurance), including
serving as a non-voting member of the Council and making recommendations to the Council regarding insurers to be designated for stricter regulation. The director is also required to conduct a study on how to modernize and improve the system of
insurance regulation in the United States, including by increased national uniformity through either a federal charter or effective action by the states.



| |  | Title II of Dodd-Frank provides that a financial company may be subject to a special orderly liquidation process outside the federal bankruptcy
code, administered by the FDIC as receiver, upon a determination (with the approval of the director of the Federal Insurance Office if  as is true with respect to Prudential Financial, Inc.  the largest United States subsidiary is an
insurer) that the company is in default or in danger of default and presents a systemic risk to U.S. financial stability. Were Prudential Financial, Inc. subject to such a proceeding, the Company would remain subject to rehabilitation and
liquidation proceedings under state law, although the FDIC has discretion and authority to initiate resolution of an insurer under state law if its state insurance regulator has not filed the appropriate judicial action within 60 days of a
systemic risk determination. We cannot predict how our creditors or creditors of Prudential Financial, Inc. or its other insurance and non-insurance subsidiaries, including the holders of Prudential Financial debt, will evaluate this potential or
whether it will impact the Companys or its affiliates financing or hedging costs.
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| |  | Dodd-Frank establishes the Bureau of Consumer Financial Protection (BCFP) as an independent agency within the FRB to regulate consumer
financial products and services offered primarily for personal, family or household purposes, with rule-making and enforcement authority over unfair, deceptive or abusive practices. Insurance products and services are not within the BCFPs
general jurisdiction, and broker-dealers and investment advisers are not subject to the BCFPs jurisdiction when acting in their registered capacity. Retirement service providers (which may include certain of our affiliates) could become
subject to the BCFPs jurisdiction, but only if the Department of Labor and the Department of the Treasury agree. Otherwise, we believe that the Company and its affiliates offer a very limited number of products subject to BCFP regulation and
the impact of Dodd-Frank on their operations in this regard should not be material; however, it is possible that the regulations promulgated by the BCFP will assert jurisdiction more expansively than we anticipate.
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| |  | Dodd-Frank includes various securities law reforms that may affect business practices of the Company and its affiliates and the liabilities and/or
exposures associated therewith, including:
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| |  |  | The SEC is to conduct a study and may impose on registered broker-dealers that provide retail investors personalized investment advice about
securities a new standard of conduct the same or similar as the overall standard for investment advisers (i.e., a fiduciary standard). The SEC may also require broker-dealers selling proprietary or a limited range of products to make certain
disclosures and obtain customer consents or acknowledgements.
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Dodd-Frank imposes various assessments on
financial companies, including (as applicable to Prudential Financial, Inc. and its subsidiaries) ex-post assessments to provide funds necessary to repay any borrowing and to cover the costs of any special resolution of a financial company conducted
under Title II (although the FDIC is to take into account assessments otherwise imposed under state insurance guaranty funds); if Prudential Financial, Inc. and/or one of its subsidiaries (such as the Company) were to become a Designated
Financial Company, assessments to fund a newly-created Office of Financial Research which, among other things, assists the Council; and the costs of the new regulation by the FRB. We are unable to estimate these costs at this time.



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Item 6. Exhibits



|     |  |                                                          
|---- |  | ---------------------------------------------------------
|31.1 |  | Section 302 Certification of the Chief Executive Officer.
|     | 
|31.2 |  | Section 302 Certification of the Chief Financial Officer.
|     | 
|32.1 |  | Section 906 Certification of the Chief Executive Officer.
|     | 
|32.2 |  | Section 906 Certification of the Chief Financial Officer.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

in respect of

Pruco Life of New Jersey Variable

Contract Real Property Account

(Registrant)





Date:
August 13, 2010



By:

/s/ Scott D. KaplanScott D. KaplanPresident and Director(Principal Executive Officer)




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