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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2006

OR

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

Commission
file number 33-20018

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 Employer Identification 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. YESNO



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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (check one).

|Large
        accelerated filer | Accelerated
        filer | Non-accelerated
        filer
|------------------------------- | ------------------------- | -----------------------------



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Indicate
  by check mark whether the registrant is a shell company (as defined in Rule
  12b-2 of this Act).YESNO



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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
|                                                                                                              |                                                                         
|                                                                                                              |                                                                         
|                                                                                                              |                                                                         
|                                                                                                              |                                                                         
|B.                                                                                                            | THE
        PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP      
|                                                                                                              |                                                                         
|                                                                                                              |                                                                         
|                                                                                                              |                                                                         
|                                                                                                              |                                                                         
|                                                                                                              |                                                                         
|                                                                                                              |                                                                         
|Item
        2. Managements Discussion and Analysis of Financial Condition and
        Results of Operations | 16                                                                      
|Item
        3. Quantitative and Qualitative Disclosures About Market Risk                                    | 26                                                                      
|Item
        4. Controls and Procedures                                                                       | 27                                                                      
|Part
        II  Other Information                                                                           |                                                                         
|Item
        1A. Risk Factors                                                                                 | 27                                                                      
|Item
        4. Submission of Matters to a Vote of Security Holders                                           | 27                                                                      
|Item
        6. Exhibits                                                                                      | 27                                                                      
|Signatures                                                                                                    | 28                                                                      

2

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Forward-Looking Statements

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 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 stock, real estate and other financial markets;
  (2) interest rate fluctuations; (3) re-estimates 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 assumption we use in pricing our products, establishing
  liabilities and reserves or for other purposes or goodwill; (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) economic, political, currency and other risks relating
  to our international operations; (11) regulatory or legislative changes;
  (12) adverse determinations in litigation or regulatory matters and our exposure
  to contingent liabilities, including in connection with our divestiture or winding
  down of businesses; (13) 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; (14) ineffectiveness of
  risk management policies and procedures in identifying, monitoring and managing
  risks; (15) effects of acquisitions, divestitures and restructurings, including
  possible difficulties in integrating and realizing the projected results of
  acquisitions; (16) changes in statutory or U.S. GAAP accounting principles,
  practices or policies.  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, 2005
  for discussion of certain risks relating to the operation of the Partnership.

3

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FINANCIAL STATEMENTS OF

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT



|STATEMENTS
        OF NET ASSETSJune 30, 2006 and December 31, 2005                                            |  |                                 |           |                                 |   |                                 |  |                                 |          
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | --------- | ------------------------------- | - | ------------------------------- |  | ------------------------------- | ---------
|                                                                                                               |  | June30,2006(unaudited)          |           | December31,2005                 |   |                                 |  |                                 |          
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|ASSETS                                                                                                         |  |                                 |           |                                 |   |                                 |  |                                 |          
|Investment
        in The Prudential Variable Contract Real Property Partnership                               |  | $                               | 9,703,888 |                                 | $ | 8,924,959                       |  |                                 |          
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|Net
        Assets                                                                                             |  | $                               | 9,703,888 |                                 | $ | 8,924,959                       |  |                                 |          
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|NET
        ASSETS,representing:                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|Equity
        of contract owners                                                                              |  | $                               | 7,234,054 |                                 | $ | 6,812,311                       |  |                                 |          
|Equity
        of Pruco Life Insurance Company of New Jersey                                                   |  |                                 | 2,469,834 |                                 |   | 2,112,648                       |  |                                 |          
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|                                                                                                               |  | $                               | 9,703,888 |                                 | $ | 8,924,959                       |  |                                 |          
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|Units
        outstanding                                                                                      |  |                                 | 3,384,303 |                                 |   | 3,374,357                       |  |                                 |          
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|Portfolio
        shares held                                                                                  |  |                                 | 301,619   |                                 |   | 301,619                         |  |                                 |          
|Portfolio
        net asset value per share                                                                    |  | $                               | 32.17     |                                 | $ | 29.59                           |  |                                 |          
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|STATEMENTS
        OF OPERATIONS                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|For
        the six and three months ended June 30, 2006 and 2005                                              |  | 1/1/2006  6/30/2006(unaudited) |           | 1/1/2005  6/30/2005(unaudited) |   | 4/1/2006  6/30/2006(unaudited) |  | 4/1/2005  6/30/2005(unaudited) |          
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|INVESTMENT
        INCOME                                                                                      |  |                                 |           |                                 |   |                                 |  |                                 |          
|Net
        investment income from Partnership operations                                                      |  | $                               | 218,337   |                                 | $ | 183,117                         |  | $                               | 100,957  
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|EXPENSES                                                                                                       |  |                                 |           |                                 |   |                                 |  |                                 |          
|Charges
        to contract owners for assuming mortality risk and expense risk and for
        administration |  |                                 | 19,912    |                                 |   | 17,540                          |  |                                 | 10,098   
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|NET
        INVESTMENT INCOME                                                                                  |  |                                 | 198,425   |                                 |   | 165,577                         |  |                                 | 90,859   
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|NET
        REALIZED AND UNREALIZEDGAIN (LOSS) ON INVESTMENTS                                                  |  |                                 |           |                                 |   |                                 |  |                                 |          
|Net
        change in unrealized gain (loss) on investments in Partnership                                     |  |                                 | 557,647   |                                 |   | 196,995                         |  |                                 | 270,282  
|Net
        realized gain (loss) on sale of investments in Partnership                                         |  |                                 | 2,945     |                                 |   | 36,908                          |  |                                 | 3,072    
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|NET
        GAIN (LOSS) ON INVESTMENTS                                                                         |  |                                 | 560,592   |                                 |   | 233,903                         |  |                                 | 273,354  
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|NET
        INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS                                        |  | $                               | 759,017   |                                 | $ | 399,480                         |  | $                               | 364,213  
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|STATEMENTS
        OF CHANGES IN NET ASSETS                                                                    |  |                                 |           |                                 |   |                                 |  |                                 |          
|For
        the six and three months ended June 30, 2006 and 2005                                              |  | 1/1/2006  6/30/2006(unaudited) |           | 1/1/2005  6/30/2005(unaudited) |   | 4/1/2006  6/30/2006(unaudited) |  | 4/1/2005  6/30/2005(unaudited) |          
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|OPERATIONS                                                                                                     |  |                                 |           |                                 |   |                                 |  |                                 |          
|Net
        investment income                                                                                  |  | $                               | 198,425   |                                 | $ | 165,577                         |  | $                               | 90,859   
|Net
        change in unrealized gain (loss) on investments in Partnership                                     |  |                                 | 557,647   |                                 |   | 196,995                         |  |                                 | 270,282  
|Net
        realized gain (loss) on sale of investments in Partnership                                         |  |                                 | 2,945     |                                 |   | 36,908                          |  |                                 | 3,072    
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|NET
        INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS                                        |  |                                 | 759,017   |                                 |   | 399,480                         |  |                                 | 364,213  
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|CAPITAL
        TRANSACTIONS                                                                                   |  |                                 |           |                                 |   |                                 |  |                                 |          
|Net
        withdrawals by contract owners                                                                     |  |                                 | (145,464  | )                               |   | 12,291                          |  |                                 | (74,181  
|Net
        contributions (withdrawals) by Pruco Life Insurance Company of New Jersey                          |  |                                 | 165,376   |                                 |   | 5,248                           |  |                                 | 84,279   
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|NET
        INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS                              |  |                                 | 19,912    |                                 |   | 17,539                          |  |                                 | 10,098   
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|TOTAL
        INCREASE (DECREASE) IN NET ASSETS                                                                |  |                                 | 778,929   |                                 |   | 417,019                         |  |                                 | 374,311  
|NET
        ASSETS                                                                                             |  |                                 |           |                                 |   |                                 |  |                                 |          
|Beginning
        of period                                                                                    |  |                                 | 8,924,959 |                                 |   | 8,082,948                       |  |                                 | 9,329,577
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          
|End
        of period                                                                                          |  | $                               | 9,703,888 |                                 | $ | 8,499,967                       |  | $                               | 9,703,888
|                                                                                                               |  |                                 |           |                                 |   |                                 |  |                                 |          

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

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NOTES TO THE FINANCIAL STATEMENTS OF

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

June 30, 2006

(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),
  an indirect wholly-owned subsidiary of The Prudential Insurance Company of America
  (Prudential), a 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 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 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

|A. | Basis of Accounting
|-- | -------------------

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

The interim financial data as of June 30, 2006 and for the six and three months ended June 30, 2006 and 2005 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.

|B. | Investment in Partnership Interest
|-- | ----------------------------------

The investment in the Partnership is based on the Accounts proportionate interest of the Partnerships market value. At June 30, 2006 and December 31, 2005 the Accounts interest in the Partnership was 4.3% or 301,619 shares.

|C. | Income Recognition
|-- | ------------------

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

|D. | Equity of 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.

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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, SPVL, respectively. Mortality risk is that life insurance contract owners may not live as long as estimated or annuitants may live longer than estimated and expense risk is that the cost of issuing and administering the policies may exceed 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 also subject to monthly charges for the costs of administering the contract to compensate Pruco Life of New Jersey for the guaranteed minimum death benefit risk. 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. A 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. A charge is assessed through the redemption of units.

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.

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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 six months ended June 30, 2006 and 2005, were as follows:



|      |  | Six Months EndedJune 30, |            
|----- |  | ------------------------ | -----------
|      |  |                          |            
|      |  | 2006                     |            
|      |  |                          |            
|      |  |                          | (Unaudited)
|VAL   |  | $                        | 104,301    
|VLI   |  |                          | 17,540     
|SPVA  |  |                          | 23,223     
|SPVL  |  |                          | 400        
|      |  |                          |            
|TOTAL |  | $                        | 145,464    
|      |  |                          |            

Note 6: Partnership Distributions

As of June 30, 2006, the Partnership had made no current year distributions. For the year ended December 31, 2005, the Partnership made distributions of $6 million. The Pruco Life of New Jersey Real Property Accounts share of these distributions was $0.2 million.

Note 7: Unit Information

Outstanding units and unit values at June 30, 2006 and December 31, 2005 were as follows:



|                           |  | June
        30, 2006      |  | December
        31, 2005  | 
|-------------------------- |  | -------------------------- |  | -------------------------- | 
|                           |  |                            |  |                            | 
|                           |  | (Unaudited)                |  |                            | 
|                           |  |                            |  |                            | 
|Units
        Outstanding: |  | 3,384,303                  |  | 3,374,357                  | 
|Unit
        Value:        |  | 2.51966
        to 3.00453 |  | 2.33181
        to 2.76817 | 

Note 8:  Financial Highlights

The range of total return for the six months ended June 30, 2006 and 2005 was as follows:



|                     |  | Six
        months endedJune 30, | 
|-------------------- |  | -------------------------------- | 
|                     |  |                                  | 
|                     |  | 2006                             | 
|                     |  |                                  | 
|                     |  | (Unaudited)                      | 
|                     |  |                                  | 
|Total
        Return |  | 8.06%
        to 8.54%           | 

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES



|                                                                                                                                      |  | June
        30, 2006(Unaudited) |             | December
        31, 2005 |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----------- | ------------------------- | -
|                                                                                                                                      |  |                                  |             |                           |  
|ASSETS                                                                                                                                |  |                                  |             |                           |  
|REAL
        ESTATE INVESTMENTS - At estimated market value:                                                                          |  |                                  |             |                           |  
|Real
        estate and improvements 
        (cost: 06/30/2006 - $196,095,121; 12/31/2005 - $183,767,148)                            |  | $                                | 206,391,075 |                           | $
|Real
        estate partnerships and preferred equity investments 
        (cost: 06/30/2006 - $22,247,424; 12/31/2005 - $18,578,394) |  |                                  | 17,554,221  |                           |  
|Mortgage
        and other loans receivable
        (cost: 06/30/2006 - $0; 12/31/2005 - $4,277,769)                                  |  |                                  |            |                           |  
|Other
        real estate investments
        (cost: 06/30/06 - $2,669,067; 12/31/2005 - $0)                                          |  |                                  | 2,669,067   |                           |  
|                                                                                                                                      |  |                                  |             |                           |  
|Total
        real estate investments                                                                                                 |  |                                  | 226,614,363 |                           |  
|CASH
        AND CASH EQUIVALENTS                                                                                                     |  |                                  | 35,791,719  |                           |  
|OTHER
        ASSETS (net of allowance for uncollectible accounts: 
        06/30/2006$113,973; 12/31/2005  $51,161)                |  |                                  | 3,773,824   |                           |  
|                                                                                                                                      |  |                                  |             |                           |  
|Total
        assets                                                                                                                  |  |                                  | 266,179,906 |                           |  
|                                                                                                                                      |  |                                  |             |                           |  
|LIABILITIES
        & PARTNERS EQUITY                                                                                                |  |                                  |             |                           |  
|INVESTMENT
        LEVEL DEBT                                                                                                         |  | $                                | 32,925,191  |                           | $
|ACCOUNTS
        PAYABLE AND ACCRUED EXPENSES                                                                                         |  |                                  | 2,682,836   |                           |  
|DUE
        TO AFFILIATES                                                                                                             |  |                                  | 778,679     |                           |  
|OTHER
        LIABILITIES                                                                                                             |  |                                  | 596,789     |                           |  
|MINORITY
        INTEREST                                                                                                             |  |                                  | 5,866,944   |                           |  
|                                                                                                                                      |  |                                  |             |                           |  
|Total
        liabilities                                                                                                             |  |                                  | 42,850,439  |                           |  
|                                                                                                                                      |  |                                  |             |                           |  
|COMMITMENTS
        AND CONTINGENCIES                                                                                                 |  |                                  |             |                           |  
|                                                                                                                                      |  |                                  |             |                           |  
|PARTNERS
        EQUITY                                                                                                              |  |                                  | 223,329,467 |                           |  
|                                                                                                                                      |  |                                  |             |                           |  
|Total
        liabilities and partners equity                                                                                        |  | $                                | 266,179,906 |                           | $
|                                                                                                                                      |  |                                  |             |                           |  
|NUMBER
        OF SHARES OUTSTANDING AT END OF PERIOD                                                                                 |  |                                  | 6,941,631   |                           |  
|                                                                                                                                      |  |                                  |             |                           |  
|SHARE
        VALUE AT END OF PERIOD                                                                                                  |  | $                                | 32.17       |                           | $
|                                                                                                                                      |  |                                  |             |                           |  

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

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                   |  | For the Six Months Ending June 30, |            | For the Three Months Ended June 30, |  
|---------------------------------------------------------------------------------- |  | ---------------------------------- | ---------- | ----------------------------------- | -
|                                                                                   |  |                                    |            |                                     |  
|                                                                                   |  | 2006                               |            | 2005                                |  
|                                                                                   |  |                                    |            |                                     |  
|INVESTMENT INCOME:                                                                 |  |                                    |            |                                     |  
|Revenue from real estate and improvements                                          |  | $                                  | 12,045,917 |                                     | $
|Equity in income of real estate partnerships                                       |  |                                    | 332,579    |                                     |  
|Interest and equity income on mortgage and other loans receivable                  |  |                                    | 125,510    |                                     |  
|Income from other real estate investments                                          |  |                                    | 30,780     |                                     |  
|Interest on short-term investments                                                 |  |                                    | 994,626    |                                     |  
|                                                                                   |  |                                    |            |                                     |  
|Total investment income                                                            |  |                                    | 13,529,412 |                                     |  
|                                                                                   |  |                                    |            |                                     |  
|INVESTMENT EXPENSES:                                                               |  |                                    |            |                                     |  
|Operating                                                                          |  |                                    | 3,020,289  |                                     |  
|Investment management fee                                                          |  |                                    | 1,505,088  |                                     |  
|Real estate taxes                                                                  |  |                                    | 1,063,409  |                                     |  
|Administrative                                                                     |  |                                    | 1,898,730  |                                     |  
|Interest expense                                                                   |  |                                    | 925,269    |                                     |  
|Minority interest                                                                  |  |                                    | 91,726     |                                     |  
|                                                                                   |  |                                    |            |                                     |  
|Total investment expenses                                                          |  |                                    | 8,504,511  |                                     |  
|                                                                                   |  |                                    |            |                                     |  
|NET INVESTMENT INCOME                                                              |  |                                    | 5,024,901  |                                     |  
|                                                                                   |  |                                    |            |                                     |  
|REALIZED AND UNREALIZED GAIN (LOSS) ON REAL ESTATE INVESTMENTS:                    |  |                                    |            |                                     |  
|Net proceeds from real estate investments sold                                     |  |                                    | 67,770     |                                     |  
|Less: 
        Cost of real estate investments sold                                |  |                                    |           |                                     |  
|Realization of prior years unrealized gain (loss) on real estate investments sold |  |                                    |           |                                     |  
|                                                                                   |  |                                    |            |                                     |  
|NET GAIN (LOSS) REALIZED ON REAL ESTATE INVESTMENTS SOLD                           |  |                                    | 67,770     |                                     |  
|                                                                                   |  |                                    |            |                                     |  
|Change in unrealized gain (loss) on real estate investments                        |  |                                    | 14,970,820 |                                     |  
|Less: Minority interest in unrealized gain (loss) on real estate investments       |  |                                    | 2,136,875  |                                     |  
|                                                                                   |  |                                    |            |                                     |  
|Net unrealized gain (loss) on real estate investments                              |  |                                    | 12,833,945 |                                     |  
|                                                                                   |  |                                    |            |                                     |  
|NET REALIZED AND UNREALIZED GAIN (LOSS) 
            ON REAL ESTATE INVESTMENTS    |  |                                    | 12,901,715 |                                     |  
|                                                                                   |  |                                    |            |                                     |  
|INCREASE (DECREASE) IN NET ASSETS RESULTING
            FROM OPERATIONS            |  | $                                  | 17,926,616 |                                     | $
|                                                                                   |  |                                    |            |                                     |  

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

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)



|                                                            |  | For the Six Months Ended June 30, |            
|----------------------------------------------------------- |  | --------------------------------- | -----------
|                                                            |  |                                   |            
|                                                            |  | 2006                              |            
|                                                            |  |                                   |            
|INCREASE (DECREASE) IN NET ASSETS                           |  |                                   |            
|RESULTING FROM OPERATIONS:                                  |  |                                   |            
|Net investment income                                       |  | $                                 | 5,024,901  
|Net gain (loss) realized on real estate investments sold    |  |                                   | 67,770     
|Net unrealized gain (loss) from real estate investments     |  |                                   | 12,833,945 
|                                                            |  |                                   |            
|Increase (decrease) in net assets resulting from operations |  |                                   | 17,926,616 
|                                                            |  |                                   |            
|NET ASSETS - Beginning of period                            |  |                                   | 205,402,851
|                                                            |  |                                   |            
|NET ASSETS - End of period                                  |  | $                                 | 223,329,467
|                                                            |  |                                   |            

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

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                                |  | For
        the Six Months Ended June 30, |            
|--------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------- | -----------
|                                                                                                                |  |                                           |            
|                                                                                                                |  | 2006                                      |            
|                                                                                                                |  |                                           |            
|CASH
        FLOWS FROM OPERATING ACTIVITIES:                                                                   |  |                                           |            
|Net
        increase in net assets from operations                                                              |  | $                                         | 17,926,616 
|Adjustments
        to reconcile net increase in net assets to net cash from operating activities               |  |                                           |            
|Net
        realized and unrealized loss (gain)                                                                 |  |                                           | (12,901,715
|Distributions
        in excess of (less than) equity in income of real estate partnerships
        operations |  |                                           |           
|Minority
        interest in consolidated partnerships                                                          |  |                                           | 91,726     
|Bad
        debt expense                                                                                        |  |                                           | 109,288    
|(Increase)
        Decrease in accrued interest included in mortgage and other loans receivable                 |  |                                           |           
|(Increase)
        Decrease in accrued interest included in other real estate investments                       |  |                                           | (30,780    
|(Increase)
        decrease in:                                                                                 |  |                                           |            
|Other
        assets                                                                                            |  |                                           | (590,722   
|Increase
        (decrease) in:                                                                                 |  |                                           |            
|Accounts
        payable and accrued expenses                                                                   |  |                                           | 137,784    
|Due
        to affiliates                                                                                       |  |                                           | 17,753     
|Other
        liabilities                                                                                       |  |                                           | 124,453    
|                                                                                                                |  |                                           |            
|Net
        cash flows from (used in) operating activities                                                      |  |                                           | 4,884,403  
|                                                                                                                |  |                                           |            
|CASH
        FLOWS FROM INVESTING ACTIVITIES:                                                                   |  |                                           |            
|Net
        proceeds from real estate investments sold                                                          |  |                                           | 67,770     
|Acquisition
        of real estate and improvements                                                             |  |                                           | (11,868,343
|Additions
        to real estate and improvements                                                               |  |                                           | (459,630   
|Contributions
        to real estate partnerships                                                               |  |                                           | (7,289,487 
|Return
        of investment in real estate partnerships                                                        |  |                                           | 3,620,455  
|Origination
        of mortgage loan receivable                                                                 |  |                                           |           
|Collection
        of mortgage loan receivable                                                                  |  |                                           | 4,277,769  
|Origination
        of other real estate investments                                                            |  |                                           | (2,638,287 
|                                                                                                                |  |                                           |            
|Net
        cash flows from (used in) investing activities                                                      |  |                                           | (14,289,753
|                                                                                                                |  |                                           |            
|CASH
        FLOWS FROM FINANCING ACTIVITIES:                                                                   |  |                                           |            
|Principal
        payments on investment level debt                                                             |  |                                           | (270,416   
|Contributions
        from minority interest partners                                                           |  |                                           |           
|Distributions
        to minority interest partners                                                             |  |                                           |           
|                                                                                                                |  |                                           |            
|Net
        cash flows from (used in) financing activities                                                      |  |                                           | (270,416   
|                                                                                                                |  |                                           |            
|NET
        CHANGE IN CASH AND CASH EQUIVALENTS                                                                 |  |                                           | (9,675,766 
|                                                                                                                |  |                                           |            
|CASH
        AND CASH EQUIVALENTS - Beginning of period                                                         |  |                                           | 45,467,485 
|                                                                                                                |  |                                           |            
|CASH
        AND CASH EQUIVALENTS - End of period                                                               |  | $                                         | 35,791,719 
|                                                                                                                |  |                                           |            
|DISCLOSURE
        OF SUPPLEMENTAL CASH FLOW INFORMATION                                                        |  |                                           |            
|                                                                                                                |  |                                           |            
|Cash
        paid for interest                                                                                  |  | $                                         | 865,536    
|                                                                                                                |  |                                           |            

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

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULE OF INVESTMENTS



|                                                                                     |  |                                |   |                                                               |             | June
        30, 
        2006Total 
        RentableSquare FeetUnless
        OtherwiseIndicated(Unaudited) |      | June
        30, 2006(Unaudited) |                      | December
        31, 2005
|------------------------------------------------------------------------------------ |  | ------------------------------ | - | ------------------------------------------------------------- | ----------- | ------------------------------------------------------------------------------------------------------------ | ---- | -------------------------------- | -------------------- | -------------------------
|                                                                                     |  |                                |   |                                                               |             |                                                                                                              |     
|                                                                                     |  |                                |   |                                                               |             |                                                                                                              |     
|                                                                                     |  |                                |   |                                                               |             |                                                                                                              |      |                                  |                     
|Property
        Name                                                                |  | June
        30, 2006Ownership |   | City,
        State                                           |             |                                                                                                              | Cost |                                  | EstimatedMarketValue |                          
|                                                                                     |  |                                |   |                                                               |             |                                                                                                              |      |                                  |                      |                          
|OFFICES                                                                             
|750
        Warrenville                                                              |  | WO                             |   | Lisle,
        IL                                             |             | 103,193                                                                                                      |      | $                                | 23,179,547           |                          
|Summit
        @ Cornell Oaks                                                        |  | WO                             |   | Beaverton
        , OR                                        |             | 72,109                                                                                                       |      |                                  | 12,060,261           |                          
|Westpark                                                                             |  | WO                             |   | Nashville,
        TN                                         |             | 97,199                                                                                                       |      |                                  | 10,962,261           |                          
|Financial
        Plaza                                                              |  | WO                             |   | Brentwood,
        TN                                         |             | 98,049                                                                                                       |      |                                  | 12,333,151           |                          
|                                                                                    
|                                                                                     |  |                                |   | Offices
        % as of 06/30/2006                            |             | 21                                                                                                           | %    |                                  | 58,535,220           |                          
|APARTMENTS                                                                          
|Brookwood
        Apartments                                                         |  | WO                             |   | Atlanta,
        GA                                           |             | 240
        Units                                                                                            |      |                                  | 18,518,030           |                          
|Dunhill
        Trace Apartments                                                     |  | WO                             |   | Raleigh,
        NC                                           |             | 250
        Units                                                                                            |      |                                  | 16,170,782           |                          
|                                                                                    
|                                                                                     |  |                                |   | Apartments
        % as of 06/30/2006                         |             | 17                                                                                                           | %    |                                  | 34,688,812           |                          
|RETAIL                                                                              
|Kings
        Market                                                                |  | WO                             |   | Rosewell,
        GA                                          |             | 314,358                                                                                                      |      |                                  | 37,732,219           |                          
|Hampton
        Towne Center                                                         |  | WO                             |   | Hampton,
        VA                                           |             | 174,540                                                                                                      |      |                                  | 18,040,466           |                          
|White
        Marlin Mall                                                            |  | CJV                            |   | Ocean
        City, MD                                        |             | 186,016                                                                                                      |      |                                  | 15,364,505           |                          
|Kansas
        City Portfolio                                                        |  | EJV                            |   | Kansas
        City, KS;MO                                    |             | 487,660                                                                                                      |      |                                  | 7,731,901            |                          
|Westminster
        Crossing East, LLC                                               |  | CJV                            |   | Westminster,
        MD                                       |             | 89,890                                                                                                       |      |                                  | 11,868,343           |                          
|CARS
        Preferred Equity                                                        |  | PE                             |   | Various                                                       |             | N/A                                                                                                          |      |                                  | 14,515,523           |                          
|                                                                                    
|                                                                                     |  |                                |   | Retail
        % as of 06/30/2006                             |             | 50                                                                                                           | %    |                                  | 105,252,957          |                          
|INDUSTRIAL                                                                          
|Smith
        Road                                                                   |  | WO                             |   | Aurora,
        CO                                            |             | 277,930                                                                                                      |      |                                  | 10,996,322           |                          
|                                                                                    
|                                                                                     |  |                                |   | Industrial
        % as of 06/30/2006                         |             | 6                                                                                                            | %    |                                  | 10,996,322           |                          
|HOTEL                                                                                |  |                                |   |                                                               |             |                                                                                                              |      |                                  |                      |                          
|Portland
        Crown Plaza                                                         |  | CJV                            |   | Portland,
        OR                                          |             | 161
        Rooms                                                                                            |      |                                  | 8,869,234            |                          
|                                                                                    
|                                                                                     |  |                                |   | Hotel
        % as of 06/30/2006                              |             | 7                                                                                                            | %    |                                  | 8,869,234            |                          
|MORTGAGE
        AND OTHER LOANS RECEIVABLE                                         
|Westminster
        West                                                             |  | Eloan                          |   | Westminster,
        MD                                       |             |                                                                                                              |      |                                  |                     |                          
|                                                                                    
|                                                                                     |  |                                |   | Mortgage
        and Other Loans Receivable% as of 06/30/2006 |             | 0                                                                                                            | %    |                                  |                     |                          
|OTHER
        REAL ESTATE INVESTMENTS                                               
|Westminster
        East                                                             |  | Eloan                          |   | Westminster,
        MD                                       |             |                                                                                                              |      |                                  | 2,669,067            |                          
|                                                                                    
|                                                                                     |  |                                |   | Other
        Real Estate Investments % as of 06/30/2006      |             | 1                                                                                                            | %    |                                  | 2,669,067            |                          
|                                                                                    
|Total
        Real Estate Investments as a Percentage of Net Assets as of 06/30/2006 |  | 102                            | % | $                                                             | 221,011,612 |                                                                                                              | $    | 226,614,362                      |                      | $                        
|                                                                                    



|WO  Wholly Owned Investment                                           
|-----------------------------------------------------------------------
|CJV  Consolidated Joint Venture                                       
|EJV  Joint Venture Investment accounted for under the equity method   
|PE  Preferred equity investments accounted for under the equity method
|Eloan  Mezzanine loan accounted for under the equity method           

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

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULE OF INVESTMENTS



|                                                                |  |                     |            | June
        30, 2006(Unaudited) |   | December
        31, 2005 | 
|--------------------------------------------------------------- |  | ------------------- | ---------- | -------------------------------- | - | ------------------------- | 
|                                                                |  |                     |            |                                  |   |                           | 
|                                                                |  | Face
        Amount |            | Cost                             |   | EstimatedMarket Value     | 
|                                                                |  |                     |            |                                  |   |                           | 
|CASH
        AND CASH EQUIVALENTS  Percentage of Net Assets    |  |                     |            |                                  |   |                           | 
|Federal
        Home Loan Bank, 1.75%, January 3, 2006          |  | $                   | 488,000    |                                  |   |                          | 
|Federal
        Home Loan Bank, 0 coupon bond, January 30, 2006 |  |                     | 44,184,000 |                                  |   |                          | 
|Federal
        Home Loan Bank, 0 coupon bond, July 5, 2006     |  |                     | 30,926,000 |                                  |   | 30,908,819                | 
|Federal
        Home Loan Bank, 0 coupon bond, July 3, 2006     |  |                     | 4,000,000  |                                  |   | 3,998,900                 | 
|                                                                |  |                     |            |                                  |   |                           | 
|Total
        Cash Equivalents                                  |  |                     |            |                                  |   | 34,907,719                | 
|                                                                |  |                     |            |                                  |   |                           | 
|Cash                                                            |  |                     |            |                                  |   | 884,000                   | 
|                                                                |  |                     |            |                                  |   |                           | 
|Total
        Cash and Cash Equivalents                         |  |                     |            |                                  | $ | 35,791,719                | 
|                                                                |  |                     |            |                                  |   |                           | 

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June
  30, 2006 and 2005

(Unaudited)

Note 1: Summary Of Significant Accounting Policies

The
  accompanying unaudited consolidated financial statements 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 for interim financial
  information. 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, 2006 are
  not necessarily indicative of the results that may be expected for the year
  ended December 31, 2006. For further information, refer to the consolidated
  financial statements and notes thereto included in each partners Annual
  Report on Form 10-K for the Year Ended December 31, 2005.

|Real estate investments are reported at their estimated fair market values.
|---------------------------------------------------------------------------

The
  Prudential Variable Contract Real Property Partnership (the Partnership)
  periodically enters into forward contracts to acquire, for a fixed price, real
  estate investments to be constructed in accordance with predetermined plans
  and specifications or that achieve a certain level of leasing. Where conditions
  precedent to funding have been met by its development partner, and the Partnerships
  commitment to fund is firm, the amount of any unrealized gain or loss is recognized
  based upon the difference between the estimated investments market value
  and the Partnerships funding obligation. The funding obligation and related
  assets are recorded in the consolidated financial statements. As of June 30,
  2006 and June 30, 2005 no such funding obligation existed.

FASB
  Interpretation No. 46, Consolidation of Variable Interest Entities
  (FIN 46), was issued in January 2003. In December 2003, FASB issued
  a revised interpretation of FIN 46 (FIN 46-R), that supersedes FIN
  46. FIN 46-R defers the effective date for applying the provisions of FIN 46
  for those companies currently accounting for their investments in accordance
  with the AICPA Audit and Accounting Guide, Audits of Investment Companies
  (the Audit Guide). The FASB is currently considering modifying FIN
  46-R to provide an exception for companies that apply the Audit Guide. The Partnership
  is awaiting the final determination from the FASB in order to evaluate the extent
  in which, if any, its equity investments may need to be consolidated as a result
  of this FIN 46-R.

Note 2: 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 six months ended June 30, 2006 and 2005 investment management fees incurred
  by the Partnership were $1,505,088 and $1,370,266, respectively.

The Partnership also reimburses PIM for certain administrative services rendered by PIM. The amounts incurred for the six months ended June 30, 2006 and 2005 were $73,465 and $53,907, respectively, and are classified as administrative expense in the Consolidated Statements of Operations.

Note 3: 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 Prudentials management, the outcome of such matters will not have a material effect on the Partnership.

Purchase commitments include forward commitments without conditions waived, commitments to purchase real estate and/or fund additional expenditures on previously acquired properties and loan take out agreements. Certain purchases of real estate are contingent on a developer building the real estate according to plans and specifications outlined in the pre-sale agreement or the property achieving a certain level of leasing. It is anticipated that funding will be provided by operating cash flow, real estate investment sales and deposits from the Partnership.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June
  30, 2006 and 2005

(Unaudited)

Note 3: Commitments and Contingencies, (continued)

As of June 30, 2006, the Partnership had the following outstanding purchase commitments:



Property
          Type
      
      Commitments(000s)Other
      
      $
      20,805


Note 4: Financial Highlights



|                                                               |  | For
        The Six Months Ended June 30, |      
|-------------------------------------------------------------- |  | ----------------------------------------- | -----
|                                                               |  |                                           |      
|                                                               |  | 2006                                      |      
|                                                               |  |                                           |      
|Per
        Share(Unit) Operating Performance:                 |  |                                           |      
|Net
        Asset Value, beginning of period                   |  | $                                         | 29.59
|Income
        From Investment Operations:                     |  |                                           |      
|Investment
        income, before management fee               |  |                                           | 0.94 
|Management
        fee                                         |  |                                           | (0.22
|Net
        realized and unrealized gain (loss) on investments |  |                                           | 1.86 
|                                                               |  |                                           |      
|Net
        Increase in Net Assets Resulting from Operations   |  |                                           | 2.58 
|                                                               |  |                                           |      
|Net
        Asset Value, end of period                         |  | $                                         | 32.17
|                                                               |  |                                           |      
|Total
        Return, before Management Fee (a):               |  |                                           | 9.49 
|Ratios/Supplemental
        Data:                              |  |                                           |      
|Net
        Assets, end of period (in millions)                |  | $                                         | 223  
|Ratios
        to average net assets (b):                      |  |                                           |      
|Total
        Portfolio Level Expenses                         |  |                                           | 0.73 
|Net
        Investment Income                                  |  |                                           | 3.13 

|(a) | Total
        Return, before management fee is calculated by geometrically linking quarterly
        returns which are calculated using the formula below:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

Net
  Investment Income + Net Realized and Unrealized Gains/(Losses)

Beg.
  Net Asset Value + Time Weighted Contributions - Time Weighted Distributions



|(b) | Average
        net assets are based on beginning of quarter net assets.
|--- | ------------------------------------------------------------------------

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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, 2006, the Partnerships liquid assets, consisting of cash and
  cash equivalents, were approximately $35.8 million, a decrease of approximately
  $9.7 million from $45.5 million at December 31, 2005. The decrease was primarily
  due to an additional funding for a preferred equity investment in a private
  real estate investment trust, or REIT and the acquisition of a retail
  property, as discussed below. Partially offsetting the decrease were proceeds
  received in connection with the sale of three retail properties and loan payoff,
  as described below, and the cash flows from the Accounts operating activities.
  Sources of liquidity included net cash flow from property operations, sales,
  financings and interest from short-term investments. The Partnership uses cash
  for its real estate investment activities and for distribution to its partners.
  As of June 30, 2006, approximately 13.4% of the Partnerships total assets
  consisted of cash and cash equivalents.

During the six months ended June 30, 2006, the Partnership completed the second funding of its preferred equity investment in its existing Capital Automotive, or CARS, REIT for $7.3 million. CARS owns approximately 364 properties, which are leased to sixty automobile dealership operators throughout the United States. This investment pays to investors an annual preferred return of 7.5% for years one through five, 8.75% during years six and seven, and 12% for all subsequent years. In addition, the Partnership invested $14.8 million in June to acquire an 89,849 square-foot retail property located in Westminster, Maryland, from the pipeline.

Dispositions for the six months ended June 30, 2006 included the sale of a portfolio of three retail properties located in Kansas City, Kansas and Kansas City, Missouri resulting in net proceeds of$3.6 million after the repayment of debt.

The Partnerships Leasehold Mortgage Loan that was originated in January 2004 for a borrowers redevelopment of a retail center in Westminster, Maryland was paid in full by the borrower in March 2006, resulting in proceeds of approximately $4.3 million.

During the six months ended June 30, 2006, the Partnership spent approximately $0.5 million on capital improvements to various existing properties.

(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, 2006 and 2005.

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Net Investment Income Overview

The
  Partnerships net investment income for the six months ended June 30, 2006
  was approximately $5.0 million, an increase of $0.8 million from $4.2 million
  for the prior year period. The retail, industrial and hotel sector investments
  posted increases of approximately $0.4 million, $0.1 million and $0.2 million,
  respectively, from the prior year period. Partially offsetting this increase
  was a decrease in net investment income in the apartment sector of approximately
  $0.5 million. In addition, the land sector posted a slight decrease in net investment
  income during the six months ended June 30, 2006.Other net investment income increased $0.6 million
  during the six months ended June 30, 2006 from the prior year period. Detail
  on the components of this net investment income are discussed below by property
  type sector.

The Partnerships net investment income for the quarter ended June 30, 2006 was $2.3 million, an increase of $0.1 million from $2.2 million for the prior year period. The industrial sector investment posted an increase of approximately $0.1 million from the prior year period. Partially offsetting this increase was a decrease in net investment income in the office and apartment sectors of approximately $0.2 million.Other net investment income increased $0.2 million for the quarter ended June 30, 2006 from the prior year period. Detail on the components of this net investment income are discussed below by property type sector.

Valuation Overview

The Partnership recorded an aggregate net realized gain of approximately $0.1 million for the six months ended June 30, 2006, compared to an aggregate net realized gain of $0.9 million for the prior year period. The Partnership recorded an aggregate net unrealized gain of approximately $12.8 million for the six months ended June 30, 2006, compared to an aggregate net unrealized gain of $4.6 million for the prior year period. The aggregate net realized and unrealized gain of $12.9 million for the six months ended June 30, 2006 was attributable to valuation gains in all property type sectors. Partially offsetting these gains for the six months ended June 30, 2006 was a slight realized loss recorded in the land sector. Details of the components of these valuation gains and/or losses are discussed below by property type sector.

The Partnership recorded an aggregate net realized gain of approximately $0.1 million for the quarter ended June 30, 2006, compared to an aggregate net realized gain of $1.1 million for the prior year period. The Partnership recorded an aggregate net unrealized gain of approximately $6.2 million for the quarter ended June 30, 2006, compared to an aggregate net unrealized gain of $1.8 million for the prior year period. The aggregate net realized and unrealized gain of $6.3 million for the quarter ended June 30, 2006 was attributable to valuation gains in the office, apartment, retail and hotel property sectors. Partially offsetting these gains were unrealized losses recorded in the industrial sector. Details of the components of these valuation gains and/or losses are discussed below by property type sector.

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The following table presents a comparison of the Partnerships sources of net investment income, and realized and unrealized gains or losses by investment type for the six and three month periods ended June 30, 2006 and 2005.



|                                                                    |  | Six Months Ended June 30, |            | Three Months Ended June 30, |  
|------------------------------------------------------------------- |  | ------------------------- | ---------- | --------------------------- | -
|                                                                    |  |                           |            |                             |  
|                                                                    |  | 2006                      |            | 2005                        |  
|                                                                    |  |                           |            |                             |  
|Net Investment Income:                                              |  |                           |            |                             |  
|Office properties                                                   |  |                           | 1,651,536  |                             |  
|Apartment complexes                                                 |  |                           | 542,468    |                             |  
|Retail properties                                                   |  |                           | 2,647,330  |                             |  
|Industrial properties                                               |  |                           | 378,960    |                             |  
|Hotel property                                                      |  |                           | 533,403    |                             |  
|Land                                                                |  |                           | (43,508    | )                           |  
|Other (including interest income, investment management fees, etc.) |  |                           | (685,288   | )                           |  
|                                                                    |  |                           |            |                             |  
|Total Net Investment Income                                         |  | $                         | 5,024,901  |                             | $
|                                                                    |  |                           |            |                             |  
|Net Realized Gain (Loss) on Real Estate Investments:                |  |                           |            |                             |  
|Apartment Complex                                                   |  |                           | 70,689     |                             |  
|Office Building                                                     |  |                           |           |                             |  
|Land                                                                |  |                           | (2,919     | )                           |  
|                                                                    |  |                           |            |                             |  
|Total Net Realized Gain (Loss) on Real Estate Investments           |  |                           | 67,770     |                             |  
|                                                                    |  |                           |            |                             |  
|Net Unrealized Gain (Loss) on Real Estate Investments:              |  |                           |            |                             |  
|Office properties                                                   |  |                           | 2,187,729  |                             |  
|Apartment complexes                                                 |  |                           | 1,005,664  |                             |  
|Retail properties                                                   |  |                           | 5,186,762  |                             |  
|Industrial properties                                               |  |                           | 622,797    |                             |  
|Hotel property                                                      |  |                           | 3,830,993  |                             |  
|                                                                    |  |                           |            |                             |  
|Total Net Unrealized Gain (Loss) on Real Estate Investments         |  |                           | 12,833,945 |                             |  
|                                                                    |  |                           |            |                             |  
|Net Realized and Unrealized Gain (Loss) on Real Estate Investments  |  | $                         | 12,901,715 |                             | $
|                                                                    |  |                           |            |                             |  

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OFFICE
  PORTFOLIO



|Six
        Months EndedJune 30,   |  | NetInvestmentIncome/(Loss)2006 |           | NetInvestmentIncome/(Loss)2005 |   | UnrealizedGain/(Loss)2006 |  | Realized /UnrealizedGain/(Loss)2005 |           | Occupancy2006 |   | Occupancy2005 |  
|---------------------------------- |  | ------------------------------ | --------- | ------------------------------ | - | ------------------------- |  | ----------------------------------- | --------- | ------------- | - | ------------- | -
|                                   |  |                                |           |                                |   |                           |  |                                     |           |               |   |               |  
|Property                           |  |                                |           |                                |   |                           |  |                                     |           |               |   |               |  
|Lisle, IL                          |  | $                              | 186,570   |                                | $ | 238,290                   |  | $                                   | 600,000   |               | $ | (398,854      | )
|Brentwood, TN                      |  |                                | 489,855   |                                |   | 496,983                   |  |                                     | (132,371  | )             |   | 107,333       |  
|Oakbrook Terrace, IL(1)            |  |                                | 1,323     |                                |   | 253,544                   |  |                                     |          |               |   | 1,173,295     |  
|Beaverton, OR                      |  |                                | 466,066   |                                |   | 398,695                   |  |                                     | 1,120,100 |               |   | (54,196       | )
|Brentwood, TN(2)                   |  |                                | 507,722   |                                |   | 249,713                   |  |                                     | 600,000   |               |   | 133,809       |  
|                                   |  |                                |           |                                |   |                           |  |                                     |           |               |   |               |  
|                                   |  | $                              | 1,651,536 |                                | $ | 1,637,225                 |  | $                                   | 2,187,729 |               | $ | 961,387       |  
|                                   |  |                                |           |                                |   |                           |  |                                     |           |               |   |               |  
|Three
        Months EndedJune 30, |  |                                |           |                                |   |                           |  |                                     |           |               |   |               |  
|                                   |  |                                |           |                                |   |                           |  |                                     |           |               |   |               |  
|Property                           |  |                                |           |                                |   |                           |  |                                     |           |               |   |               |  
|Lisle, IL                          |  | $                              | 88,167    |                                | $ | 136,858                   |  | $                                   |          |               | $ |              |  
|Brentwood, TN                      |  |                                | 261,856   |                                |   | 271,298                   |  |                                     | (21,464   | )             |   | (41,340       | )
|Oakbrook Terrace, IL               |  |                                |          |                                |   | 187,324                   |  |                                     |          |               |   | 1,072,029     |  
|Beaverton, OR                      |  |                                | 236,998   |                                |   | 180,688                   |  |                                     | (12,943   | )             |   | (7,996        | )
|Brentwood, TN                      |  |                                | 240,668   |                                |   | 190,895                   |  |                                     | 100,000   |               |   |              |  
|                                   |  |                                |           |                                |   |                           |  |                                     |           |               |   |               |  
|                                   |  | $                              | 827,689   |                                | $ | 967,063                   |  | $                                   | 65,593    |               | $ | 1,022,693     |  
|                                   |  |                                |           |                                |   |                           |  |                                     |           |               |   |               |  

|(1) | The Oakbrook Terrace, Illinois office property was sold on June 8, 2005 but certain post-closing adjustments were recognized for the six months ended June 30, 2006.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Net Investment Income for the six months ended June 30, 2005 reflects partial period rent abatement, which was provided to tenant as part of the lease.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

Net Investment Income

Net investment income for the Partnerships office properties was approximately $1.6 million for the six months ended June 30, 2006, unchanged from the prior year period. Net investment income for the Partnerships office properties was approximately $0.8 million for the quarter ended June 30, 2006, a decrease of $0.2 million from the prior year period. The decrease for the quarter ended June 30, 2006 was primarily due to the loss of income from the Oakbrook Terrace, Illinois office property that was sold on June 8, 2005.

Total Realized and Unrealized Gain/(Loss)

The office properties owned by the Partnership recorded an aggregate net unrealized gain of approximately $2.2 million during the six months ended June 30, 2006, compared to an aggregate net realized and unrealized gain of $1.0 million for the prior year period. The net unrealized gain of $2.2 million for the six months ended June 30, 2006 was primarily due to strengthening market fundamentals and investor demand in the office sector in Beavorton, Oregon as well as improving market conditions at the office properties in Lisle, Illinois and Brentwood, Tennessee. Partially offsetting these unrealized gains was a net unrealized loss at the office property in Brentwood, Tennessee due to capital expenses including tenant improvements and leasing commissions expended in connection with recent leasing efforts.

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The
  office properties owned by the Partnership recorded an aggregate net unrealized
  gain of approximately $0.1 million during the quarter ended June 30, 2006, compared
  to an aggregate net realized and unrealized gain of $1.0 million for the prior
  year period. The net unrealized gain of $0.1 million for the quarter ended June
  30, 2006 was due to continued improving market conditions at the office property
  in Brentwood, Tennessee, including a decrease in the market vacancy rate and
  increase in market rental rates.

APARTMENT COMPLEXES



|Six
        Months Ended June 30,   |  | NetInvestmentIncome/(Loss)2006 |         | NetInvestmentIncome/(Loss)2005 |   | Realized
        /UnrealizedGain/(Loss)2006 |   | Realized
        /UnrealizedGain/(Loss)2005 |           | Occupancy2006 |   | Occupancy2005 |  
|----------------------------------- |  | ------------------------------ | ------- | ------------------------------ | - | ------------------------------------------- | - | ------------------------------------------- | --------- | ------------- | - | ------------- | -
|                                    |  |                                |         |                                |   |                                             |   |                                             |           |               |   |               |  
|Property                            |  |                                |         |                                |   |                                             |   |                                             |           |               |   |               |  
|Atlanta,
        GA                 |  | $                              | 236,936 |                                | $ | 42,837                                      |   | $                                           | 307,721   |               | $ | 92,560        |  
|Raleigh,
        NC                 |  |                                | 315,532 |                                |   | 264,595                                     |   |                                             | 697,943   |               |   | 990,152       |  
|Jacksonville,
        FL(1)         |  |                                |        |                                |   | 400,916                                     |   |                                             | 70,520    |               |   | 304,269       |  
|Gresham/Salem,
        OR(1)        |  |                                | (10,000 | )                              |   | 314,641                                     |   |                                             | 169       |               |   | 357,266       |  
|                                    |  |                                |         |                                |   |                                             |   |                                             |           |               |   |               |  
|                                    |  | $                              | 542,468 |                                | $ | 1,022,989                                   |   | $                                           | 1,076,353 |               | $ | 1,744,247     |  
|                                    |  |                                |         |                                |   |                                             |   |                                             |           |               |   |               |  
|Three
        Months Ended June 30, |  |                                |         |                                |   |                                             |   |                                             |           |               |   |               |  
|                                    |  |                                |         |                                |   |                                             |   |                                             |           |               |   |               |  
|Property                            |  |                                |         |                                |   |                                             |   |                                             |           |               |   |               |  
|Atlanta,
        GA                 |  | $                              | 122,598 |                                | $ | (28,369                                     | ) | $                                           | 377,910   |               | $ | 298,258       |  
|Raleigh,
        NC                 |  |                                | 168,374 |                                |   | 119,679                                     |   |                                             | 700,000   |               |   | 990,813       |  
|Jacksonville,
        FL(1)         |  |                                |        |                                |   | 182,036                                     |   |                                             | 70,520    |               |   | (12,722       | )
|Gresham/Salem,
        OR(1)        |  |                                | (10,000 | )                              |   | 110,413                                     |   |                                             | 169       |               |   | 502,436       |  
|                                    |  |                                |         |                                |   |                                             |   |                                             |           |               |   |               |  
|                                    |  | $                              | 280,972 |                                | $ | 383,759                                     |   | $                                           | 1,148,599 |               | $ | 1,778,785     |  
|                                    |  |                                |         |                                |   |                                             |   |                                             |           |               |   |               |  

|(1) | The
        Salem, Oregon, Gresham, Oregon and Jacksonville, Florida apartment properties
        were sold on March 10, 2005, August 10, 2005 and November 30, 2005, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Investment Income

Net
  investment income for the Partnerships apartment properties was $0.5 million
  for the six months ended June 30, 2006, a decrease of approximately $0.5 million
  from the prior year period. Net investment income for the Partnerships
  apartment properties was approximately $0.3 million for the quarter ended June
  30, 2006, a decrease of approximately $0.1 million from the prior year period.
  The decrease for the six and three month periods ended June 30, 2006 was primarily
  due to the loss of income on the Salem, Oregon, Gresham, Oregon and Jacksonville,
  Florida apartment properties that were sold on March 10, 2005, August 10, 2005
  and November 30, 2005, respectively. Partially offsetting the decrease was an
  increase in net investment income for the apartment properties in Atlanta, Georgia
  and Raleigh, North Carolina due to reduced operating expenses and lowered rental
  concessions, or reduced rent.

Total Realized and Unrealized Gain/(Loss)

The
  apartment properties owned by the Partnership recorded an aggregate net realized
  and unrealized gain of $1.1 million for the six months ended June 30,2006, compared to an aggregate net realized and unrealized
  gain of $1.7 million for the prior year period. The apartment properties owned
  by the Partnership recorded an aggregate net realized and unrealized gain of
  $1.1 million for the quarter ended June 30,2006,
  compared to an aggregate net realized and unrealized gain of $1.8 million for
  the prior year period. The aggregate net realized and unrealized gain for both
  the six and three month periods ended June 30, 2006 was primarily due to valuation
  gains resulting from the strengthening of both market and property fundamentals,
  which included reduced rental concessions and increased rental rates, at the
  apartment properties in Atlanta, Georgia and Raleigh, North Carolina. In addition, the Jacksonville,
  Florida apartment property that was sold in November 2005 recognized realized
  gains of approximately $0.1 million due to the disbursement of reserved funds
  that were escrowed at closing for any post-closing operating adjustments.

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RETAIL PROPERTIES



|Six
        Months Ended June 30,   |  | NetInvestmentIncome/(Loss)2006 |           | NetInvestmentIncome/(Loss)2005 |   | UnrealizedGain/(Loss)2006 |  | UnrealizedGain/(Loss)2005 |           | Occupancy2006 |   | Occupancy2005 |  
|----------------------------------- |  | ------------------------------ | --------- | ------------------------------ | - | ------------------------- |  | ------------------------- | --------- | ------------- | - | ------------- | -
|                                    |  |                                |           |                                |   |                           |  |                           |           |               |   |               |  
|Property                            |  |                                |           |                                |   |                           |  |                           |           |               |   |               |  
|Roswell,
        GA                 |  | $                              | 1,039,049 |                                | $ | 814,280                   |  | $                         | 614,547   |               | $ | (83,107       | )
|Kansas
        City, KS; MO(1)      |  |                                | (113,990  | )                              |   | 206,952                   |  |                           | (463,628  | )             |   | (962,104      | )
|Hampton,
        VA                 |  |                                | 651,700   |                                |   | 615,350                   |  |                           | (105,132  | )             |   | 1,200,000     |  
|Ocean
        City, MD              |  |                                | 401,899   |                                |   | 472,735                   |  |                           | 151,010   |               |   | 873,327       |  
|Westminster,
        MD(2)          |  |                                | 105,140   |                                |   |                          |  |                           | 4,989,965 |               |   |              |  
|Westminster,
        MD(3)          |  |                                | 124,362   |                                |   | 120,438                   |  |                           |          |               |   |              |  
|CARS
        Preferred Equity(4)    |  |                                | 439,170   |                                |   |                          |  |                           |          |               |   |              |  
|                                    |  |                                |           |                                |   |                           |  |                           |           |               |   |               |  
|                                    |  | $                              | 2,647,330 |                                | $ | 2,229,755                 |  | $                         | 5,186,762 |               | $ | 1,028,116     |  
|                                    |  |                                |           |                                |   |                           |  |                           |           |               |   |               |  
|Three
        Months Ended June 30, |  |                                |           |                                |   |                           |  |                           |           |               |   |               |  
|                                    |  |                                |           |                                |   |                           |  |                           |           |               |   |               |  
|Property                            |  |                                |           |                                |   |                           |  |                           |           |               |   |               |  
|Roswell,
        GA                 |  | $                              | 507,500   |                                | $ | 366,158                   |  | $                         | (59,867   | )             | $ | 339,538       |  
|Kansas
        City, KS; MO(1)      |  |                                | (310,551  | )                              |   | 84,202                    |  |                           | (407,968  | )             |   | (1,048,782    | )
|Hampton,
        VA                 |  |                                | 332,977   |                                |   | 307,642                   |  |                           | (5,132    | )             |   |              |  
|Ocean
        City, MD              |  |                                | 275,398   |                                |   | 354,754                   |  |                           | 650,768   |               |   | 545,523       |  
|Westminster,
        MD(2)          |  |                                | 105,140   |                                |   |                          |  |                           | 4,989,965 |               |   |              |  
|Westminster,
        MD(3)          |  |                                |          |                                |   | 61,596                    |  |                           |          |               |   |              |  
|CARS
        Preferred Equity       |  |                                | 251,877   |                                |   |                          |  |                           |          |               |   |              |  
|                                    |  |                                |           |                                |   |                           |  |                           |           |               |   |               |  
|                                    |  | $                              | 1,162,341 |                                | $ | 1,174,352                 |  | $                         | 5,167,766 |               | $ | (163,721      | )
|                                    |  |                                |           |                                |   |                           |  |                           |           |               |   |               |  

|(1) | Net investment income for the six and three month periods ended June 30, 2006 reflects partial period results for the three Kansas City, Kansas and Kansas City, Missouri retail properties that were sold on May 15, 2006. Occupancy for the six and three month periods ended June 30, 2006 reflects remaining retail property in Kansas City, Kansas.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Net investment income for the six and three month periods ended June 30, 2006 reflects partial period results for the Westminster, Maryland retail property that was acquired on June 13, 2006.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Mortgage Loan Receivable (mortgage paid in full on March 3, 2006).
|--- | ------------------------------------------------------------------

|(4) | Net investment income for the six months ended June 30, 2006 reflects partial period results for second funding, which occurred on February 14, 2006.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

Net Investment Income

Net investment income for the Partnerships retail properties was $2.6 million for the six months ended June 30, 2006, an increase of approximately $0.4 million from the prior year period.  The increase in net investment income for the six months ended June 30, 2006 was primarily due to (a) increased occupancy at the retail center in Roswell, Georgia; (b) income received from the preferred equity investments made by the Partnership on December 16, 2005 and February 14, 2006, respectively; and (c) the acquisition of a retail property in Westminster, Maryland in June 2006.
  Partially offsetting the increase was higher expenses at the retail properties
  in Kansas City, Kansas and Kansas City, Missouri due to the prepayment of the
  existing mortgage on the three properties upon their respective sales in May
  2006. Additionally, the Ocean City, Maryland retail property recorded a decrease
  of $0.1 million in net investment income for the six months ended June 30, 2006
  due to a decrease in occupancy.

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Net
  investment income for the Partnerships retail properties was approximately
  $1.2 million for the quarter ended June 30, 2006, unchanged from the prior year
  period. The Roswell, Georgia retail property recorded an increase of approximately
  $0.1 million for the quarter ended June 30, 2006 from the prior year period
  due to an increase in occupancy, as discussed above. In addition, the Westminster,
  Maryland retail property and CARS Preferred Equity investment contributed approximately
  $0.1 million and $0.3 million, respectively, of net investment income for the
  quarter ended June 30, 2006 for the reasons discussed above. Offsetting these
  increases in net investment income for the quarter ended June 30, 2006 were
  decreases of approximately $0.4 million at the retail property in Kansas City,
  Kansas and Kansas, City Missouri and $0.1 million at the retail property in
  Ocean City, Maryland, as previously discussed.

Unrealized Gain/(Loss)

The retail properties owned by the Partnership recorded an aggregate net unrealized gain of $5.2 million for the six months ended June 30, 2006, compared to an aggregate net unrealized gain of $1.0 million for the prior year period. The unrealized gain for the six months ended June 30, 2006 was primarily due to the acquisition of the retail property in Westminster, Maryland at cost, which resulted in $5.0 million in valuation gains. In addition, unrealized gains of approximately $0.6 million and $0.2 million were recorded at the retail properties in Roswell, Georgia due to higher occupancy and continued investor demand and in Ocean City, Maryland due to strengthening market fundamentals, respectively. Partially offsetting these gains for the six months ended June 30, 2006 were unrealized losses of approximately $0.5 million recorded at the retail properties in Kansas City, Kansas and Kansas City, Missouri due
to the three properties being sold below their aggregate market value as a result of the lack of investor demand and $0.1 million recorded at the retail property in Hampton, Virginia due to a market valuation adjustment as a result of an overstatement of the propertys market value.

The retail properties owned by the Partnership recorded an aggregate net unrealized gain of $5.2 million for the quarter ended June 30, 2006, compared to an aggregate net unrealized loss of $0.2 million for the prior year period. The unrealized gain for quarter ended June 30, 2006 was primarily due to the acquisition of the retail property in Westminster, Maryland as discussed above. In addition, an unrealized gain of approximately $0.7 was recorded at the retail property in Ocean City, Maryland due to strengthening market fundamentals. These unrealized gains were partially offset by unrealized losses of approximately $0.4 million recorded at the three retail centers in Kansas City, Kansas and Kansas City, Missouri as previously discussed and $0.1 million recorded at the retail property in Roswell, Georgia due to capital expenses including tenant improvements and leasing commissions expended in connection with
recent leasing efforts.

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INDUSTRIAL
  PROPERTY



|Six
        Months Ended June 30,   |  | NetInvestmentIncome/(Loss)2006 |         | NetInvestmentIncome/(Loss)2005 |   | UnrealizedGain/(Loss)2006 |  | UnrealizedGain/(Loss)2005 |          | Occupancy2006 |   | Occupancy2005 |  
|----------------------------------- |  | ------------------------------ | ------- | ------------------------------ | - | ------------------------- |  | ------------------------- | -------- | ------------- | - | ------------- | -
|                                    |  |                                |         |                                |   |                           |  |                           |          |               |   |               |  
|Property                            |  |                                |         |                                |   |                           |  |                           |          |               |   |               |  
|Aurora,
        CO                  |  | $                              | 378,960 |                                | $ | 248,360                   |  | $                         | 622,797  |               | $ | 995,760       |  
|Three
        Months Ended June 30, |  |                                |         |                                |   |                           |  |                           |          |               |   |               |  
|                                    |  |                                |         |                                |   |                           |  |                           |          |               |   |               |  
|Property                            |  |                                |         |                                |   |                           |  |                           |          |               |   |               |  
|Aurora,
        CO                  |  | $                              | 183,027 |                                | $ | 128,395                   |  | $                         | (121,036 | )             | $ | (172          | )

Net Investment Income

Net investment income for the Partnerships industrial property was $0.4 million for the six months ended June 30, 2006, an increase of approximately $0.2 million from the prior year period. Net investment income for the Partnerships industrial property was $0.2 million for the quarter ended June 30, 2006, an increase of approximately $0.1 million from the prior year period. The increase for both the six and three month periods ended June 30, 2006 were primarily due to higher occupancy, increased rents and reduced operating expenses, compared to the prior year periods.

Unrealized Gain/(Loss)

The industrial property owned by the Partnership recorded a net unrealized gain of approximately $0.6 million for the six months ended June 30, 2006, compared to a net unrealized gain of $1.0 million for the prior year period. The industrial property owned by the Partnership recorded a net unrealized loss of approximately $0.1 million for the quarter ended June 30, 2006, compared to no change in value for the prior year period. The net unrealized gain for the six months ended June 30, 2006 was primarily due to higher occupancy and increased rents. The net unrealized loss for the quarter ended June 30, 2006 reflects capital expended in connection with leasing efforts.

HOTEL PROPERTY



|Six
        Months Ended June 30,   |  | NetInvestmentIncome/(Loss)2006 |         | NetInvestmentIncome/(Loss)2005 |   | UnrealizedGain/(Loss)2006 |  | UnrealizedGain/(Loss)2005 |           | Occupancy2006 |   | Occupancy2005 | 
|----------------------------------- |  | ------------------------------ | ------- | ------------------------------ | - | ------------------------- |  | ------------------------- | --------- | ------------- | - | ------------- | 
|                                    |  |                                |         |                                |   |                           |  |                           |           |               |   |               | 
|Property                            |  |                                |         |                                |   |                           |  |                           |           |               |   |               | 
|Lake
        Oswego, OR             |  | $                              | 533,403 |                                | $ | 386,454                   |  | $                         | 3,830,993 |               | $ | 673,812       | 
|Three
        Months Ended June 30, |  |                                |         |                                |   |                           |  |                           |           |               |   |               | 
|                                    |  |                                |         |                                |   |                           |  |                           |           |               |   |               | 
|Property                            |  |                                |         |                                |   |                           |  |                           |           |               |   |               | 
|Lake
        Oswego, OR             |  | $                              | 255,102 |                                | $ | 216,918                   |  | $                         | 30,162    |               | $ | 224,895       | 

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Net Investment Income

Net investment income for the Partnerships hotel property was $0.5 million for the six months ended June 30, 2006, an increase of approximately $0.1 million from the prior year period. Net investment income for the Partnerships hotel property was $0.3 million for the quarter ended June 30, 2006, an increase of approximately $0.1 million from the prior year period. The increase for both the six and three month periods ended June 30, 2006 was primarily due to increased occupancy and higher average daily rates generated at the hotel compared to the prior year periods.

Unrealized Gain/(Loss)

The hotel property owned by the Partnership recorded a net unrealized gain of $3.8 million for the six months ended June 30, 2006, compared to a net unrealized gain of $0.7 million for the prior year period. The hotel property owned by the Partnership recorded a slight net unrealized gain for the quarter ended June 30, 2006, compared to a net unrealized gain of $0.2 million for the prior year period. The net unrealized gain for both the six and three month periods ended June 30, 2006 reflected both the strengthening of market and property fundamentals and the completion of a renovation program.

LAND PROPERTY

The Blue Springs, Missouri land property was sold on November 28, 2005, but certain post-closing adjustments were recognized during the six months ended June 30, 2006, which resulted in slight a decrease in net investment income. The same land property also recorded a slight realized loss during the six months ended June 30, 2006, as discussed above.

Other

Other net investment income increased $0.6 million for the six months ended June 30, 2006 from the prior year period and also increased $0.2 million during the quarter ended June 30, 2006 from the prior year period. Other net investment income includes interest income from short-term investments, investment management fees, and portfolio level expenses.

(c) Inflation

The Partnerships leases with a majority of 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.

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Valuation
  of Investments

Real
  Estate Investments Real estate investments are
  shown at estimated market value in accordance with the terms of the Partnerships
  contracts. Properties owned are initially recorded at the purchase price plus
  closing costs. Development costs and major renovations are capitalized as a
  component of cost, and routine maintenance and repairs are charged to expense
  as incurred. Real estate costs include the cost of acquired property, including
  all the tangible and intangible assets. Tangible assets include the value of
  all land, building and tenant improvements at the time of acquisition. Intangible
  assets include the value of any above and below market leases, in-place leases,
  and tenant relationships at the time of acquisition. Market value estimates
  are based upon property appraisal reports prepared by independent real estate
  appraisers (members of the Appraisal Institute or an equivalent organization)
  within a reasonable amount of time following acquisition of the real estate
  and no less frequently than annually thereafter. The Chief Real Estate Appraiser
  of Prudential Investment Management, Inc., or PIM, which is an indirectly
  owned subsidiary of Prudential Financial Inc., is responsible for assuring that
  the valuation process provides independent and reasonable property market value
  estimates. American Appraisal Associates, or the Appraisal Management
  Firm, an entity not affiliated with PIM, has been appointed by PIM to
  assist the Chief Real Estate Appraiser in maintaining and monitoring the independence
  and the accuracy of the appraisal process. Unless a property is currently held
  for sale, the market value of real estate investments does not reflect the transaction
  sale costs, which may be incurred upon disposition of the real estate investments.

Unconsolidated
  real estate partnerships are valued at the Partnerships equity in net
  assets as reflected in the partnerships financial statements with properties
  valued as described above. Under the equity method, the investment is initially
  recorded at the original investment amount, plus or minus additional amounts
  invested or distributed, and is subsequently adjusted for the Partnerships
  share of undistributed earnings or losses, including unrealized appreciation
  and depreciation, from the underlying entity.

The
  Partnership periodically enters into forward contracts to acquire, for a fixed
  price, real estate investments to be constructed in accordance with predetermined
  plans and specifications or that achieve a certain level of leasing. Where conditions
  precedent to funding have been met by its development partner, and the Partnerships
  commitment to fund is firm, the amount of any unrealized gain or loss is recognized
  based upon the difference between the estimated investments market value
  as described above and the Partnerships funding obligation. The funding
  obligation and related assets are recorded in the consolidated financial statements.
  However, land while held for development, is carried at acquisition cost plus
  the cost incurred to hold the land, according to take out provisions in the
  developer/partner contract.

As
  described above, the estimated market value of real estate and real estate related
  assets is determined through an appraisal process. These estimated market values
  may vary significantly from the prices at which the real estate investments
  would sell, because market prices of real estate investments can only be determined
  by negotiation between a willing buyer and seller and could be material to the
  consolidated financial statements. Although the estimated market values represent
  subjective estimates, management believes that these estimated market values
  are reasonable approximations of market prices and that the aggregate estimated
  value of investments in real estate is fairly presented as of June 30, 2006
  and 2005.

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.

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ITEM
  3. Quantitative and Qualitative Disclosures About Market Risk

Interest
  Rate Risk The Partnerships exposure to
  market rate risk for changes in interest rates relates to approximately 30.77%
  of its investment portfolio as of June 30, 2006, which consists primarily of
  short-term fixed rate commercial paper and fixed and variable interest rate
  debt. The Partnership does not use derivative financial instruments. By policy,
  the Partnership places its investments with high quality debt security issuers,
  limits the amount of credit exposure to any one issuer, limits duration by restricting
  the term, and holds investments to maturity except under unusual circumstances.

The
  table below presents the amounts and related weighted interest rates of the
  Partnerships cash equivalents and short-term investments at June 30, 2006:



|                                  |  | Maturity           |  | Estimated
        Market Value(millions) |      | AverageInterest Rate |     
|--------------------------------- |  | ------------------ |  | ---------------------------------------- | ---- | -------------------- | ----
|                                  |  |                    |  |                                          |      |                      |     
|Cash
        and Cash equivalents |  | 0-3
        months |  | $                                        | 35.8 |                      | 4.01
|                                  |  |                    |  |                                          |      |                      |     

The
  table below discloses the Partnerships debt as of June 30, 2006. All of
  the Partnerships long-term debt bears interest at fixed rates and therefore
  the fair value of these instruments 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 fixed rate debt.

|Debt
        (in $ thousands), including current portion |  | 2006 |      | 2007 |   | 2008 |   | 2009 |        | 2010 |   | Thereafter |   | Total |      | EstimatedFair Value |  
|-------------------------------------------------------- |  | ---- | ---- | ---- | - | ---- | - | ---- | ------ | ---- | - | ---------- | - | ----- | ---- | ------------------- | -
|                                                         |  |      |      |      |   |      |   |      |        |      |   |            |   |       |      |                     |  
|Average
        Fixed Interest Rate                      |  |      | 5.39 | %    |   | 5.35 | % |      | 5.74   | %    |   | 6.75       | % |       | 6.75 | %                   |  
|Fixed
        Rate                                       |  | $    | 280  |      | $ | 589  |   | $    | 16,026 |      | $ | 9,275      |   | $     | 565  |                     | $
|Variable
        Rate                                    |  |      |     |      |   |     |   |      |       |      |   |           |   |       |     |                     |  
|                                                         |  |      |      |      |   |      |   |      |        |      |   |            |   |       |      |                     |  
|Total
        Mortgage Loans Payable                     |  | $    | 280  |      | $ | 589  |   | $    | 16,026 |      | $ | 9,275      |   | $     | 565  |                     | $
|                                                         |  |      |      |      |   |      |   |      |        |      |   |            |   |       |      |                     |  

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.

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Item 4. Controls and Procedures

In order to ensure that the information we must disclose in our filings with the U.S. Securities and Exchange Commission (the
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 Exchange Act Rules 13a-15(e) and 15d-15(e), under the Securities Exchange Act of 1934, as amended, as of June 30, 2006. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2006, our disclosure controls and procedures were effective in timely alerting them to material information relating to us required to be included in our periodic SEC filings. There has been no change in our internal control over financial reporting during the quarter ended June 30, 2006, that has m
aterially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

PART II  OTHER INFORMATION

Item 1A. Risk Factors

You should carefully consider the risks described under Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2005. 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 our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q.

Item 4. Submission of Matters to a Vote of Security Holders

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

Item 6. Exhibits



|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 11, 2006
        
        By:
        /s/ Bernard J. JacobBernard J. JacobChief Executive Officer


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