UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended June 30, 2009

OR



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

Commission file number 033-20018





PRUCO LIFE INSURANCE COMPANY
OF NEW JERSEY

in respect of

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

(Exact name of registrant as specified in its charter)







|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|New Jersey                                                     |  | 22-2426091                       
|(State or other jurisdiction of incorporation 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.    YES  x    NO   ̈

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

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule
12b-2 of the Exchange Act.

(Check one):



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

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









---

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

(Registrant)

INDEX



|                                                                                              |  |     
|--------------------------------------------------------------------------------------------- |  | ----
|                                                                                              |  | Page
|Forward Looking Statement Disclosure                                                          |  | 3   
|                                                                                              | 
|Part I - Financial Information                                                                |  |     
|                                                                                              | 
|Item 1. Financial Statements (Unaudited)                                                      |  |     
|                                                                                              | 
|A. PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT                           |  |     
|                                                                                              | 
|Statements of Net Assets  June 30, 2009 and December 31, 2008                                |  | 4   
|                                                                                              | 
|Statements of Operations  Six and Three Months Ended June 30, 2009 and 2008                  |  | 4   
|                                                                                              | 
|Statements of Changes in Net Assets  Six and Three Months Ended June 30, 2009 and 2008       |  | 4   
|                                                                                              | 
|Notes to the Financial Statements of the Real Property Account                                |  | 5   
|                                                                                              | 
|B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP                                 |  |     
|                                                                                              | 
|Consolidated Statements of Assets and Liabilities  June 30, 2009 and December 31,
2008       |  | 11  
|                                                                                              | 
|Consolidated Statements of Operations  Six and Three Months Ended June 30, 2009 and 2008     |  | 12  
|                                                                                              | 
|Consolidated Statements of Changes in Net AssetsSix Months Ended June 30, 2009 and 2008      |  | 13  
|                                                                                              | 
|Consolidated Statements of Cash Flows  Six Months Ended June 30, 2009 and 2008               |  | 14  
|                                                                                              | 
|Consolidated Schedules of Investments  June 30, 2009 and December 31, 2008                   |  | 15  
|                                                                                              | 
|Notes to Consolidated Financial Statements of the Partnership                                 |  | 17  
|                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations |  | 25  
|                                                                                              | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |  | 34  
|                                                                                              | 
|Item 4. Controls and Procedures                                                               |  | 34  
|                                                                                              | 
|Part II - Other Information                                                                   |  |     
|                                                                                              | 
|Item 1A. Risk Factors                                                                         |  | 35  
|                                                                                              | 
|Item 4. Submission of Matters to a Vote of Security Holders                                   |  | 38  
|                                                                                              | 
|Item 6. Exhibits                                                                              |  | 37  
|                                                                                              | 
|Signatures                                                                                    |  | 39  



---

Forward-Looking Statement Disclosure

Certain of the statements included in this Quarterly Report on Form 10-Q, including but not limited to those in Managements Discussion and Analysis
of Financial Condition and Results of Operations, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as expects, believes,
anticipates, includes, plans, assumes, estimates, projects, intends, should, will, shall or variations of such words are
generally part of forward-looking statements. Forward-looking statements are made based on managements current expectations and beliefs concerning future developments and their potential effects upon Pruco Life Insurance Company of New Jersey,
or the Company, or the Pruco Life of New Jersey Variable Contract Real Property Account, or the Real Property Account. There can be no assurance that future developments affecting the Company and the Real Property Account
will be those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly
materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (1) general economic, market and political conditions, including the performance and fluctuations of fixed income, equity, real
estate and other financial markets, particularly in light of ongoing severe economic conditions and the severe stress experienced by the financial markets since the second half of 2007 (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 assumptions we use in pricing our
products, establishing liabilities and reserves or for other purposes; (5) changes in our assumptions related to deferred policy acquisition costs and valuation of business acquired; (6) changes in our claims-paying ratings;
(7) investment losses and defaults; (8) competition in our product lines and for personnel; (9) changes in tax law; (10) regulatory or legislative changes, including government actions in response to the stress experienced by the
financial markets; (11) adverse determinations in litigation or regulatory matters and our exposure to contingent liabilities; (12) domestic or international military actions, natural or man-made disasters including terrorist activities or
pandemic disease, or other events resulting in catastrophic loss of life; (13) ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; and (14) changes in statutory or U.S. GAAP
accounting principles, practices or policies. As noted above, the period since the second half of 2007 has been characterized by extreme adverse market and economic conditions. The forgoing risks are even more pronounced in these unprecedented
market and economic conditions. 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 this
Quarterly Report on Form 10-Q for discussion of certain risks relating to the operation of the Partnership and investment in our securities.



3



---

FINANCIAL STATEMENTS OF

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

STATEMENTS OF NET ASSETS

June 30, 2009 and December 31, 2008



|                                                                         |  |                          |           |                   |   |          
|------------------------------------------------------------------------ |  | ------------------------ | --------- | ----------------- | - | ---------
|                                                                         |  | June 30, 2009(unaudited) |           | December 31, 2008
|ASSETS                                                                   |  |                          |           |                   |   |          
|Investment in The Prudential Variable Contract Real Property Partnership |  | $                        | 7,616,732 |                   | $ | 9,322,498
|                                                                         |  |                          |           |                   |   |          
|Net Assets                                                               |  | $                        | 7,616,732 |                   | $ | 9,322,498
|                                                                         |  |                          |           |                   |   |          
|                                                                         |  |                         
|NET ASSETS, representing:                                                |  |                          |           |                   |   |          
|Equity of contract owners                                                |  | $                        | 5,431,270 |                   | $ | 6,493,703
|Equity of Pruco Life Insurance Company of New Jersey                     |  |                          | 2,185,462 |                   |   | 2,828,795
|                                                                         |  |                          |           |                   |   |          
|                                                                         |  | $                        | 7,616,732 |                   | $ | 9,322,498
|                                                                         |  |                          |           |                   |   |          
|                                                                         |  |                         
|Units outstanding                                                        |  |                          | 3,228,086 |                   |   | 3,353,044
|                                                                         |  |                          |           |                   |   |          
|                                                                         |  |                         
|Portfolio shares held                                                    |  |                          | 282,778   |                   |   | 294,526  
|Portfolio net asset value per share                                      |  | $                        | 26.94     |                   | $ | 31.65    

STATEMENTS OF OPERATIONS

For the six and three months ended June 30, 2009 and 2008



|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|---------------------------------------------------------------------------------------------- |  | ----------------------------- | ---------- | - | ----------------------------- | - | ---------- | ----------------------------- |  | - | ----------------------------- | - |  | - | ---------- | -
|                                                                                               |  | 1/1/2009-6/30/2009(unaudited) |            |   | 1/1/2008-6/30/2008(unaudited) |   |            | 4/1/2009-6/30/2009(unaudited) |  |   | 4/1/2008-6/30/2008(unaudited) |  
|INVESTMENT INCOME                                                                              |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|Net investment income from Partnership operations                                              |  | $                             | 153,052    |   |                               | $ | 262,997    |                               |  | $ | 62,161                        |   |  | $ | 121,826    |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|                                                                                               |  |                               |            |  
|EXPENSES                                                                                       |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|Charges to contract owners for assuming mortality risk and expense risk and for administration |  |                               | 16,895     |   |                               |   | 22,001     |                               |  |   | 8,013                         |   |  |   | 11,011     |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|NET INVESTMENT INCOME                                                                          |  |                               | 136,157    |   |                               |   | 240,996    |                               |  |   | 54,148                        |   |  |   | 110,815    |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|                                                                                               |  |                               |            |  
|NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS                                         |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|Net change in unrealized gain (loss) on investments in Partnership                             |  |                               | (1,348,333 | ) |                               |   | (55,865    | )                             |  |   | (426,023                      | ) |  |   | (25,768    | )
|Net realized gain (loss) on sale of investments in Partnership                                 |  |                               | (194,109   | ) |                               |   | 0          |                               |  |   | (15,112                       | ) |  |   | 0          |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|NET GAIN (LOSS) ON INVESTMENTS                                                                 |  |                               | (1,542,442 | ) |                               |   | (55,865    | )                             |  |   | (441,135                      | ) |  |   | (25,768    | )
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|                                                                                               |  |                               |            |  
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS                                |  | $                             | (1,406,285 | ) |                               | $ | 185,131    |                               |  | $ | (386,987                      | ) |  | $ | 85,047     |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|                                                                                               |  |                               |           
|STATEMENTS OF CHANGES IN NET ASSETS For the six and three months ended June 30, 2009 and 2008  |  |                               |            |   |                               |   |            |                               |  |   |                               |   | 
|                                                                                               |  | 1/1/2009-6/30/2009(unaudited) |            |   | 1/1/2008-6/30/2008(unaudited) |   |            | 4/1/2009-6/30/2009(unaudited) |  |   | 4/1/2008-6/30/2008(unaudited) |  
|OPERATIONS                                                                                     |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|Net investment income                                                                          |  | $                             | 136,157    |   |                               | $ | 240,996    |                               |  | $ | 54,148                        |   |  | $ | 110,815    |  
|Net change in unrealized gain (loss) on investments in Partnership                             |  |                               | (1,348,333 | ) |                               |   | (55,865    | )                             |  |   | (426,023                      | ) |  |   | (25,768    | )
|Net realized gain (loss) on sale of investments in Partnership                                 |  |                               | (194,109   | ) |                               |   | 0          |                               |  |   | (15,112                       | ) |  |   | 0          |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|                                                                                               |  |                               |            |  
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS                                |  |                               | (1,406,285 | ) |                               |   | 185,131    |                               |  |   | (386,987                      | ) |  |   | 85,047     |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|                                                                                               |  |                               |            |  
|CAPITAL TRANSACTIONS                                                                           |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|Net withdrawals by contract owners                                                             |  |                               | (84,106    | ) |                               |   | (54,175    | )                             |  |   | (45,965                       | ) |  |   | (1,841     | )
|Net contributions (withdrawals) by Pruco Life Insurance Company of New Jersey                  |  |                               | (215,375   | ) |                               |   | 76,176     |                               |  |   | (262,398                      | ) |  |   | 12,852     |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|                                                                                               |  |                               |            |  
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS                      |  |                               | (299,481   | ) |                               |   | 22,001     |                               |  |   | (308,363                      | ) |  |   | 11,011     |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|                                                                                               |  |                               |            |  
|TOTAL INCREASE (DECREASE) IN NET ASSETS                                                        |  |                               | (1,705,766 | ) |                               |   | 207,132    |                               |  |   | (695,350                      | ) |  |   | 96,058     |  
|                                                                                               |  |                               |            |  
|NET ASSETS                                                                                     |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|Beginning of period                                                                            |  |                               | 9,322,498  |   |                               |   | 10,764,653 |                               |  |   | 8,312,082                     |   |  |   | 10,875,727 |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  
|End of period                                                                                  |  | $                             | 7,616,732  |   |                               | $ | 10,971,785 |                               |  | $ | 7,616,732                     |   |  | $ | 10,971,785 |  
|                                                                                               |  |                               |            |   |                               |   |            |                               |  |   |                               |   |  |   |            |  

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



4



---

NOTES TO THE FINANCIAL STATEMENTS OF

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

June 30, 2009

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

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

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

Note
2: Summary of Significant Accounting Policies and Pronouncements



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

The accompanying financial
statements are prepared in conformity with U.S. 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, 2009 and for the six and three months ended June 30, 2009
and 2008 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. The Account has
evaluated subsequent events through August 14, 2009, the date these financial statements were issued as part of this Quarterly Report on Form 10-Q.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting
principles, and requires additional disclosures about fair value measurements. This Statement does not require any new fair value measurements, but the application of this Statement could change current practices in determining fair value. The
Account adopted this guidance effective January 1, 2008. The adoption of SFAS No. 157 has no effect on the Accounts financial position and results of operations. See Note 9 for more information on SFAS No. 157.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an
amendment of FASB Statement No. 115. This statement provides companies with an option to report selected financial assets and liabilities at fair value. This statement is effective for fiscal years beginning after November 15, 2007 with
early adoption permitted. The Account adopted this guidance effective January 1, 2008. The adoption of SFAS No. 159 has no effect on the Accounts financial position and results of operations.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations. This statement, which addresses the accounting for business
acquisitions, is effective for fiscal years beginning on or after December 15, 2008, with early adoption prohibited, and generally applies to business acquisitions completed after December 31, 2008. Among other things, the new standard
requires that all acquisition-related costs be expensed as incurred, and that all restructuring costs related to acquired operations be expensed as incurred. This new standard also addresses the current and subsequent accounting for assets and
liabilities arising from contingencies acquired or assumed and, for acquisitions both prior and subsequent to December 31, 2008, requires the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because
of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. The Account adopted this guidance effective January 1, 2009. The adoption
of SFAS No. 141R has no effect on the Accounts financial position and results of operations, but may have an effect on the accounting for future business combinations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 160 will change the accounting for minority
interests, which will be recharacterized as noncontrolling interests and classified by the parent company as a component of equity. This statement is effective for fiscal years beginning on or after December 15, 2008, with early adoption
prohibited. Upon adoption, SFAS No. 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests and prospective adoption for all other requirements. The adoption of SFAS No. 160 has no
effect on the Accounts financial position and results of operations.



5



---

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance for debt securities and expands the presentation and disclosure requirements of other-than-temporary impairments on debt and equity securities in
the financial statements. This FSP also requires that the required annual disclosures for debt and equity securities be made for interim reporting periods. This FSP does not amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Accounts
early adoption of this guidance effective January 1, 2009 did not have a material effect on the Accounts financial position or results of operations.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly. This FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly
decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP also amends the disclosure requirements in interim and annual periods. This FSP is effective for interim and annual
reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. The Accounts early adoption of this guidance effective January 1, 2009 did
not have a material effect on the Accounts financial position or results of operations.

In April 2009, the FASB issued FSP FAS
141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. This FSP requires an asset acquired or liability assumed in a business combination that arises from a contingency
to be recognized at fair value at the acquisition date, if the acquisition date fair value of that asset or liability can be determined during the measurement period. If the acquisition date fair value of an asset acquired or liability assumed in a
business combination that arises from a contingency cannot be determined during the measurement period, the asset or liability shall be recognized at the acquisition date using the guidance in SFAS No. 5, Accounting for
Contingencies. This FSP also amends disclosure requirements. This FSP is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The
Accounts adoption of this guidance effective January 1, 2009 did not have a material effect on the Accounts financial position or results of operations.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP requires disclosures about fair value of financial instruments for interim
reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends the disclosure requirements. This FSP is effective for interim reporting periods ending after June 15, 2009, with early adoption
permitted. The Account adopted this guidance within the interim period ending June 30, 2009. The Accounts adoption of this guidance did not have a material effect on the Accounts financial position or results of operations.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events. This statement addresses the accounting for and disclosure
of subsequent events not addressed in other applicable Generally Accepted Accounting Principles, including disclosure of the date through which subsequent events have been evaluated. This guidance is effective for interim or annual periods ending
after June 15, 2009. The Accounts adoption of this guidance effective with the interim period ending June 30, 2009 did not have a material effect on the Accounts financial position or results of operations. The required
disclosure of the date through which subsequent events have been evaluated is provided in Note 2A.

In June 2009, the FASB issued SFAS No.
168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162. The FASBs Codification was launched on July 1, 2009 as the source of
authoritative U.S. GAAP to be applied by nongovernmental entities. The Codification is not intended to change U.S. GAAP but is a new structure which takes accounting pronouncements and organizes them by accounting topic. This statement is effective
for financial statements issued for interim and annual periods ending after September 15, 2009. This statement will become effective for the Partnership beginning with the interim reporting period ending September 30, 2009 and will impact the way
the Partnerships references U.S. GAAP accounting standards in the financial statements.



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

The investment
in the Partnership is based on the Accounts proportionate interest of the Partnerships fair value. At June 30, 2009 and December 31, 2008 the Accounts interest in the Partnership was 4.4% or 282,778 shares and 4.3% or
294,526 shares respectively. Properties owned by the Partnership are illiquid and based on estimated fair value as discussed in the notes to the Partnerships audited financial statements.



|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.



6



---

Note 3: Charges and Expenses



|A. | Mortality Risk and Expense Risk Charges
|-- | ---------------------------------------

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



|B. | Administrative Charges
|-- | ----------------------

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



|C. | Cost of Insurance and Other Related Charges
|-- | -------------------------------------------

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



|D. | Deferred Sales Charge
|-- | ---------------------

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



|E. | Partial Withdrawal Charge
|-- | -------------------------

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

Note 4: Taxes

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

Note 5: Net Contributions (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, 2009 and 2008, were as follows:



|      |  |                                      |         |   |      |   |         |  
|----- |  | ------------------------------------ | ------- | - | ---- | - | ------- | -
|      |  | Six Months Ended June 30,(Unaudited) |        
|      |  | 2009                                 |         |   | 2008 |  
|VAL   |  | $                                    | (27,384 | ) |      | $ | (85,725 | )
|VLI   |  |                                      | (37,948 | ) |      |   | (229    | )
|SPVA  |  |                                      | (18,456 | ) |      |   | 32,000  |  
|SPVL  |  |                                      | (318    | ) |      |   | (221    | )
|      |  |                                      |         |   |      |   |         |  
|TOTAL |  | $                                    | (84,106 | ) |      | $ | (54,175 | )
|      |  |                                      |         |   |      |   |         |  



7



---

Note 6: Partnership Distributions

As of June 30, 2009, the Partnership made a distribution of $8 million. The Pruco Life of New Jersey Accounts share of this distribution was $0.3 million. For the year ended December 31, 2008, the
Partnership made no distributions.

Note 7: Unit Information

Outstanding units and unit values at June 30, 2009 and December 31, 2008 were as follows:



|                   |  |                    |  |                   
|------------------ |  | ------------------ |  | ------------------
|                   |  | June 30, 2009      |  | December 31, 2008 
|                   |  | (Unaudited)        |  |                   
|Units Outstanding: |  | 3,228,086          |  | 3,353,044         
|Unit Value:        |  | 2.03227 to 2.48915 |  | 2.40304 to 2.93018

Note 8: Financial Highlights

The range of total return for the six months ended June 30, 2009 and 2008 was as follows:



|             |  |                                     |   |  |               |  
|------------ |  | ----------------------------------- | - |  | ------------- | -
|             |  | Six Months EndedJune 30,(Unaudited) |  
|             |  | 2009                                |   |  | 2008          |  
|Total Return |  | -15.43% to -15.05                   | % |  | 1.29% to 1.75 | %



8



---

Note 9: Fair Value Disclosure

SFAS No. 157 establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure
fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy
are as follows:

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

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

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

The
investment in the Partnership is based on the Accounts proportionate interest of the Partnerships fair value which approximates the Partnerships net asset value. Properties owned by the Partnership are illiquid and based on
estimated fair value from property appraisal reports prepared by independent real estate appraisers as discussed in the notes to the Partnerships audited financial statements.

The purpose of an appraisal is to estimate the fair value of real estate as of a specific date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date.

The estimate of fair value is based on the conventional
approaches to value, all of which require the exercise of subjective judgment. The three approaches are: (1) current cost of reproducing the real estate less deterioration and functional and economic obsolescence; (2) discounting a series
of income streams and reversion at a specific yield or by directly capitalizing a single year income estimate by an appropriate factor; and (3) value indicated by recent sales of comparable real estate in the market. In the reconciliation of
these three approaches, the one most heavily relied upon is the one then recognized as the most appropriate by the independent appraiser for the type of real estate in the market.

In general, the input values used in the appraisal process are unobservable, therefore unless indicated otherwise; real estate investments and debt are classified as Level 3 under SFAS157 fair
value hierarchy. The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

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

Table 1:



|                                                                         |  |                                         |       |                                                             |   |                                             |  |                                         |   |  |   |      
|------------------------------------------------------------------------ |  | --------------------------------------- | ----- | ----------------------------------------------------------- | - | ------------------------------------------- |  | --------------------------------------- | - |  | - | -----
|                                                                         |  | ($ in 000s)                           
|Assets:                                                                  |  | Amounts Measuredat Fair Value06/30/2009 |       | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | Significant OtherObservable Inputs(Level 2) |  | SignificantUnobservable Inputs(Level 3)
|Investment in The Prudential Variable Contract Real Property Partnership |  | $                                       | 7,617 |                                                             | $ |                                            |  | $                                       |  |  | $ | 7,617
|                                                                         |  |                                         |       |                                                             |   |                                             |  |                                         |   |  |   |      
|Total Assets                                                             |  | $                                       | 7,617 |                                                             | $ |                                            |  | $                                       |  |  | $ | 7,617
|                                                                         |  |                                         |       |                                                             |   |                                             |  |                                         |   |  |   |      



9



---

As required under SFAS 157, table 2 below provides a reconciliation of the beginning and ending balances
for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period ended June 30, 2009 and December 31, 2008.

Table 2:



|                                                                                                                                                                                                                |  |                                                                                                           |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | ------ | -
|                                                                                                                                                                                                                |  | ($ in 000s)                                                                                              |       
|                                                                                                                                                                                                                |  | Fair Value MeasurementsUsing SignificantUnobservable Inputs for thesix months ended
June 30,2009(Level 3) |       
|Beginning balance @ 12/31/08                                                                                                                                                                                    |  | $                                                                                                         | 9,322  |  
|                                                                                                                                                                                                                | 
|Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership operations                                                                                         |  | $                                                                                                         | (1,542 | )
|Net Investment Income from Partnership operations                                                                                                                                                               |  | $                                                                                                         | 153    |  
|Acquisition/Additions                                                                                                                                                                                           |  |                                                                                                           |       |  
|Equity Income                                                                                                                                                                                                   |  |                                                                                                           |       |  
|Contributions                                                                                                                                                                                                   |  |                                                                                                           |       |  
|Disposition/Settlements                                                                                                                                                                                         |  | $                                                                                                         | (316   | )
|Equity losses                                                                                                                                                                                                   |  |                                                                                                           |       |  
|Distributions                                                                                                                                                                                                   |  |                                                                                                           |       |  
|                                                                                                                                                                                                                |  |                                                                                                           |        |  
|Ending balance @ 06/30/09                                                                                                                                                                                       |  | $                                                                                                         | 7,617  |  
|                                                                                                                                                                                                                |  |                                                                                                           |        |  
|                                                                                                                                                                                                                | 
|The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized
gains or losses relating to assets still held at the reporting date |  | $                                                                                                         | (1,542 | )
|                                                                                                                                                                                                                |  |                                                                                                           |        |  

Table 2:



|                                                                                                                                                                                                                |  |                                                                                                             |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- | ----- | -
|                                                                                                                                                                                                                |  | ($ in 000s)                                                                                                |      
|                                                                                                                                                                                                                |  | Fair Value MeasurementsUsing
SignificantUnobservable Inputs for thethree months ended June 30,2009(Level 3) |      
|Beginning balance @ 03/31/09                                                                                                                                                                                    |  | $                                                                                                           | 8,312 |  
|                                                                                                                                                                                                                | 
|Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership operations                                                                                         |  | $                                                                                                           | (441  | )
|Net Investment Income from Partnership operations                                                                                                                                                               |  | $                                                                                                           | 62    |  
|Acquisition/Additions                                                                                                                                                                                           |  |                                                                                                             |      |  
|Equity Income                                                                                                                                                                                                   |  |                                                                                                             |      |  
|Contributions                                                                                                                                                                                                   |  |                                                                                                             |      |  
|Disposition/Settlements                                                                                                                                                                                         |  | $                                                                                                           | (316  | )
|Equity losses                                                                                                                                                                                                   |  |                                                                                                             |      |  
|Distributions                                                                                                                                                                                                   |  |                                                                                                             |      |  
|                                                                                                                                                                                                                |  |                                                                                                             |       |  
|Ending balance @ 06/30/09                                                                                                                                                                                       |  | $                                                                                                           | 7,617 |  
|                                                                                                                                                                                                                |  |                                                                                                             |       |  
|                                                                                                                                                                                                                | 
|The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized
gains or losses relating to assets still held at the reporting date |  | $                                                                                                           | (441  | )
|                                                                                                                                                                                                                |  |                                                                                                             |       |  



10



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES



|                                                                                                                     |  |                          |             |                   |   |            
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | ----------------- | - | -----------
|                                                                                                                     |  | June 30, 2009(Unaudited) |             | December 31, 2008
|ASSETS                                                                                                               |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|REAL ESTATE INVESTMENTS - At estimated fair value:                                                                   |  |                          |             |                   |   |            
|Real estate and improvements (cost: 06/30/2009 - $209,026,270; 12/31/2008 - $245,808,214)                            |  | $                        | 176,200,000 |                   | $ | 221,196,000
|Real estate partnerships and preferred equity investments (cost: 06/30/2009 - $14,306,440; 12/31/2008 - $14,324,204) |  |                          | 10,488,750  |                   |   | 11,796,716 
|                                                                                                                     |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|Total real estate investments                                                                                        |  | $                        | 186,688,750 |                   | $ | 232,992,716
|                                                                                                                     |  |                         
|CASH AND CASH EQUIVALENTS                                                                                            |  |                          | 31,740,955  |                   |   | 27,736,520 
|                                                                                                                     |  |                         
|OTHER ASSETS, NET                                                                                                    |  |                          | 2,647,353   |                   |   | 2,936,037  
|                                                                                                                     |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|Total assets                                                                                                         |  | $                        | 221,077,058 |                   | $ | 263,665,273
|                                                                                                                     |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|LIABILITIES & PARTNERS EQUITY                                                                                       |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|INVESTMENT LEVEL DEBT (net of unamortized discount: 6/30/09 $23,536; 12/31/08 $26,480)                               |  | $                        | 39,817,706  |                   | $ | 40,047,827 
|                                                                                                                     |  |                         
|ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                                                                |  |                          | 2,752,524   |                   |   | 2,924,938  
|                                                                                                                     |  |                         
|DUE TO AFFILIATES                                                                                                    |  |                          | 680,223     |                   |   | 851,595    
|                                                                                                                     |  |                         
|OTHER LIABILITIES                                                                                                    |  |                          | 844,874     |                   |   | 978,342    
|                                                                                                                     |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|Total liabilities                                                                                                    |  |                          | 44,095,327  |                   |   | 44,802,702 
|                                                                                                                     |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|COMMITMENTS AND CONTINGENCIES                                                                                        |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|NET ASSETS, REPRESENTING PARTNERS EQUITY:                                                                           |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|GENERAL PARTNERS CONTROLLING INTEREST                                                                               |  |                          | 174,053,180 |                   |   | 213,938,308
|                                                                                                                     |  |                         
|NONCONTROLLING INTEREST                                                                                              |  |                          | 2,928,551   |                   |   | 4,924,263  
|                                                                                                                     |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|                                                                                                                     |  |                          | 176,981,731 |                   |   | 218,862,571
|                                                                                                                     |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|Total liabilities and partners equity                                                                               |  |                          | 221,077,058 |                   |   | 263,665,273
|                                                                                                                     |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|NUMBER OF SHARES OUTSTANDING AT END OF PERIOD                                                                        |  |                          | 6,461,874   |                   |   | 6,758,960  
|                                                                                                                     |  |                          |             |                   |   |            
|                                                                                                                     |  |                         
|SHARE VALUE AT END OF PERIOD                                                                                         |  | $                        | 26.94       |                   | $ | 31.65      
|                                                                                                                     |  |                          |             |                   |   |            

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



11



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|---------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ----------- | - | ----------------------------------- | - | ---------- | ---- |  | - | ----------- | - |  | - | --------- | -
|                                                                                                                       |  | For the Six Months Ended June 30, |             |   | For the Three Months Ended June 30, |  
|                                                                                                                       |  | 2009                              |             |   | 2008                                |   |            | 2009 |  |   | 2008        |  
|INVESTMENT INCOME:                                                                                                     |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|Revenue from real estate and improvements                                                                              |  | $                                 | 13,312,107  |   |                                     | $ | 15,396,172 |      |  | $ | 6,459,211   |   |  | $ | 7,688,146 |  
|Equity in income of real estate partnerships                                                                           |  |                                   | 521,717     |   |                                     |   | 509,865    |      |  |   | 250,274     |   |  |   | 209,416   |  
|Interest on short-term investments                                                                                     |  |                                   | 20,689      |   |                                     |   | 231,379    |      |  |   | 9,942       |   |  |   | 107,136   |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|Total investment income                                                                                                |  |                                   | 13,854,513  |   |                                     |   | 16,137,416 |      |  |   | 6,719,427   |   |  |   | 8,004,698 |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|INVESTMENT EXPENSES:                                                                                                   |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|Operating                                                                                                              |  |                                   | 3,443,652   |   |                                     |   | 3,477,527  |      |  |   | 1,679,901   |   |  |   | 1,753,917 |  
|Investment management fee                                                                                              |  |                                   | 1,392,753   |   |                                     |   | 1,731,170  |      |  |   | 666,816     |   |  |   | 869,648   |  
|Real estate taxes                                                                                                      |  |                                   | 1,469,026   |   |                                     |   | 1,481,620  |      |  |   | 713,321     |   |  |   | 746,774   |  
|Administrative                                                                                                         |  |                                   | 2,610,603   |   |                                     |   | 2,527,907  |      |  |   | 1,379,919   |   |  |   | 1,416,779 |  
|Interest expense                                                                                                       |  |                                   | 892,857     |   |                                     |   | 958,671    |      |  |   | 432,123     |   |  |   | 516,518   |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|Total investment expenses                                                                                              |  |                                   | 9,808,891   |   |                                     |   | 10,176,895 |      |  |   | 4,872,080   |   |  |   | 5,303,636 |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|NET INVESTMENT INCOME                                                                                                  |  |                                   | 4,045,622   |   |                                     |   | 5,960,521  |      |  |   | 1,847,347   |   |  |   | 2,701,062 |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:                                                                    |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|Net proceeds from real estate investments sold                                                                         |  |                                   | 9,655,626   |   |                                     |   |           |      |  |   | 9,655,626   |   |  |   |          |  
|Less: Cost of real estate investments sold                                                                             |  |                                   | 37,901,326  |   |                                     |   |           |      |  |   | 37,901,326  |   |  |   |          |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|Gain (loss) realized from real estate investments sold                                                                 |  |                                   | (28,245,700 | ) |                                     |   |           |      |  |   | (28,245,700 | ) |  |   |          |  
|                                                                                                                       |  |                                   |             |  
|Less: Reversal of prior periods unrealized gain (loss) on real estate investments sold                                |  |                                   | (23,793,594 | ) |                                     |   |           |      |  |   | (27,901,326 | ) |  |   |          |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|Net gain (loss) recognized on real estate investments sold                                                             |  |                                   | (4,452,106  | ) |                                     |   |           |      |  |   | (344,374    | ) |  |   |          |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|Unrealized gain (loss) on investments:                                                                                 |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|Change in unrealized gain (loss) on real estate investments                                                            |  |                                   | (33,297,850 | ) |                                     |   | (926,021   | )    |  |   | (11,077,508 | ) |  |   | (309,944  | )
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|Net unrealized gain (loss) on real estate investments                                                                  |  |                                   | (33,297,850 | ) |                                     |   | (926,021   | )    |  |   | (11,077,508 | ) |  |   | (309,944  | )
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|NET REALIZED AND UNREALIZED GAIN (LOSS) ON REAL ESTATE INVESTMENTS                                                     |  |                                   | (37,749,956 | ) |                                     |   | (926,021   | )    |  |   | (11,421,882 | ) |  |   | (309,944  | )
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|Increase (decrease) in net assets resulting from operations                                                            |  | $                                 | (33,704,334 | ) |                                     | $ | 5,034,500  |      |  | $ | (9,574,535  | ) |  | $ | 2,391,118 |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|Amounts attributable to noncontrolling interest:                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|Net investment income attributable to noncontrolling interest                                                          |  |                                   | 535,189     |   |                                     |   | (74,900    | )    |  |   | 422,735     |   |  |   | (94,691   | )
|Net unrealized gain (loss) attributable to noncontrolling interest                                                     |  |                                   | (2,354,395  | ) |                                     |   | 355,997    |      |  |   | (1,299,779  | ) |  |   | 281,416   |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|Net increase (decrease) in net assets resulting from operations attributable to the noncontrolling interest            |  | $                                 | (1,819,206  | ) |                                     | $ | 281,097    |      |  | $ | (877,044    | ) |  | $ | 186,725   |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|                                                                                                                       |  |                                   |             |  
|Amounts attributable to general partners controlling interest:                                                        |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|Net investment income attributable to general partners controlling interest                                           |  |                                   | 3,510,433   |   |                                     |   | 6,035,421  |      |  |   | 1,424,612   |   |  |   | 2,795,753 |  
|Net realized gain (loss) attributable to general partners controlling interest                                        |  |                                   | (4,452,106  | ) |                                     |   |           |      |  |   | (344,374    | ) |  |   |          |  
|Net unrealized gain (loss) attributable to general partners controlling interest                                      |  |                                   | (30,943,455 | ) |                                     |   | (1,282,018 | )    |  |   | (9,777,729  | ) |  |   | (591,360  | )
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  
|Net increase (decrease) in net assets resulting from operations attributable to general partners controlling interest |  | $                                 | (31,885,128 | ) |                                     | $ | 4,753,403  |      |  | $ | (8,697,491  | ) |  | $ | 2,204,393 |  
|                                                                                                                       |  |                                   |             |   |                                     |   |            |      |  |   |             |   |  |   |           |  

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



12



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)



|                                                                       |  |                                       |             |   |                        |   |            |       |  |   |                                       |   |  |                        |             |   |       |   |           |   |  |   |             |  
|---------------------------------------------------------------------- |  | ------------------------------------- | ----------- | - | ---------------------- | - | ---------- | ----- |  | - | ------------------------------------- | - |  | ---------------------- | ----------- | - | ----- | - | --------- | - |  | - | ----------- | -
|                                                                       |  | For the Six Months Ended June 30,     |            
|                                                                       |  | 2009                                  |             |   | 2008                   |  
|                                                                       |  | General PartnersControlling Interest |             |   | NoncontrollingInterest |   |            | Total |  |   | General PartnersControlling Interest |   |  | NoncontrollingInterest |             |   | Total |  
|INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:           |  |                                       |             |   |                        |   |            |       |  |   |                                       |   |  |                        |             |   |       |   |           |   |  |   |             |  
|Net investment income                                                  |  | $                                     | 3,510,433   |   |                        | $ | 535,189    |       |  | $ | 4,045,622                             |   |  | $                      | 6,035,421   |   |       | $ | (74,900   | ) |  | $ | 5,960,521   |  
|Net gain (loss) realized and unrealized from real estate investments   |  |                                       | (35,395,561 | ) |                        |   | (2,354,395 | )     |  |   | (37,749,956                           | ) |  |                        | (1,282,018  | ) |       |   | 355,997   |   |  |   | (926,021    | )
|                                                                       |  |                                       |             |   |                        |   |            |       |  |   |                                       |   |  |                        |             |   |       |   |           |   |  |   |             |  
|                                                                       |  |                                       |             |   |                        |  
|Increase (decrease) in net assets resulting from operations            |  |                                       | (31,885,128 | ) |                        |   | (1,819,206 | )     |  |   | (33,704,334                           | ) |  |                        | 4,753,403   |   |       |   | 281,097   |   |  |   | 5,034,500   |  
|                                                                       |  |                                       |             |   |                        |   |            |       |  |   |                                       |   |  |                        |             |   |       |   |           |   |  |   |             |  
|                                                                       |  |                                       |             |   |                        |  
|INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS: |  |                                       |             |   |                        |   |            |       |  |   |                                       |   |  |                        |             |   |       |   |           |   |  |   |             |  
|Withdrawals                                                            |  |                                       | (8,000,000  | ) |                        |   |           |       |  |   | (8,000,000                            | ) |  |                        |            |   |       |   |          |   |  |   |            |  
|Contributions from noncontrolling interest                             |  |                                       |            |   |                        |   | 15,000     |       |  |   | 15,000                                |   |  |                        |            |   |       |   | 80,000    |   |  |   | 80,000      |  
|Distributions to noncontrolling interest                               |  |                                       |            |   |                        |   | (191,506   | )     |  |   | (191,506                              | ) |  |                        |            |   |       |   | (8,138    | ) |  |   | (8,138      | )
|                                                                       |  |                                       |             |   |                        |   |            |       |  |   |                                       |   |  |                        |             |   |       |   |           |   |  |   |             |  
|                                                                       |  |                                       |             |   |                        |  
|Increase (decrease) in net assets resulting from capital transactions  |  |                                       | (8,000,000  | ) |                        |   | (176,506   | )     |  |   | (8,176,506                            | ) |  |                        |            |   |       |   | 71,862    |   |  |   | 71,862      |  
|                                                                       |  |                                       |             |   |                        |   |            |       |  |   |                                       |   |  |                        |             |   |       |   |           |   |  |   |             |  
|                                                                       |  |                                       |             |   |                        |  
|INCREASE (DECREASE) IN NET ASSETS                                      |  |                                       | (39,885,128 | ) |                        |   | (1,995,712 | )     |  |   | (41,880,840                           | ) |  |                        | 4,753,403   |   |       |   | 352,959   |   |  |   | 5,106,362   |  
|                                                                       |  |                                       |             |   |                        |  
|NET ASSETS - Beginning of period                                       |  |                                       | 213,938,308 |   |                        |   | 4,924,263  |       |  |   | 218,862,571                           |   |  |                        | 247,033,759 |   |       |   | 7,004,790 |   |  |   | 254,038,549 |  
|                                                                       |  |                                       |             |   |                        |   |            |       |  |   |                                       |   |  |                        |             |   |       |   |           |   |  |   |             |  
|                                                                       |  |                                       |             |   |                        |  
|NET ASSETS - End of period                                             |  | $                                     | 174,053,180 |   |                        | $ | 2,928,551  |       |  | $ | 176,981,731                           |   |  | $                      | 251,787,162 |   |       | $ | 7,357,749 |   |  | $ | 259,144,911 |  
|                                                                       |  |                                       |             |   |                        |   |            |       |  |   |                                       |   |  |                        |             |   |       |   |           |   |  |   |             |  

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



13



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                |  |                                   |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------- |  | --------------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                                |  | For the Six Months Ended June 30, |            
|                                                                                                |  | 2009                              |             |   | 2008 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                           |  |                                   |             |   |      |   |             |  
|Net increase in net assets from operations                                                      |  | $                                 | (33,704,334 | ) |      | $ | 5,034,500   |  
|Adjustments to reconcile net increase in net assets to net cash from operating activities       |  |                                   |             |   |      |   |             |  
|Net realized and unrealized loss (gain)                                                         |  |                                   | 37,749,956  |   |      |   | 926,021     |  
|Amortization of discount on investment level debt                                               |  |                                   | 2,944       |   |      |   |            |  
|Amortization of deferred financing costs                                                        |  |                                   | 28,427      |   |      |   | 36,283      |  
|Distributions in excess of (less than) equity in income of real estate partnerships operations |  |                                   | 17,766      |   |      |   | 31,609      |  
|Bad debt expense                                                                                |  |                                   | 44,809      |   |      |   | 33,044      |  
|(Increase) decrease in:                                                                         |  |                                   |             |   |      |   |             |  
|Other assets                                                                                    |  |                                   | 215,448     |   |      |   | (975,772    | )
|Increase (decrease) in:                                                                         |  |                                   |             |   |      |   |             |  
|Accounts payable and accrued expenses                                                           |  |                                   | (172,414    | ) |      |   | 446,270     |  
|Due to affiliates                                                                               |  |                                   | (171,372    | ) |      |   | (18,318     | )
|Other liabilities                                                                               |  |                                   | (133,468    | ) |      |   | (94,649     | )
|                                                                                                |  |                                   |             |   |      |   |             |  
|                                                                                                |  |                                  
|Net cash flows provided for (used in) operating activities                                      |  |                                   | 3,877,762   |   |      |   | 5,418,988   |  
|                                                                                                |  |                                   |             |   |      |   |             |  
|                                                                                                |  |                                  
|CASH FLOWS PROVIDED FOR INVESTING ACTIVITIES:                                                   |  |                                   |             |   |      |   |             |  
|Net proceeds from real estate investments sold                                                  |  |                                   | 9,655,626   |   |      |   |            |  
|Additions to real estate and improvements                                                       |  |                                   | (1,119,382  | ) |      |   | (6,328,162  | )
|                                                                                                |  |                                   |             |   |      |   |             |  
|                                                                                                |  |                                  
|Net cash flows provided for (used in) investing activities                                      |  |                                   | 8,536,244   |   |      |   | (6,328,162  | )
|                                                                                                |  |                                   |             |   |      |   |             |  
|                                                                                                |  |                                  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                           |  |                                   |             |   |      |   |             |  
|Withdrawals                                                                                     |  |                                   | (8,000,000  | ) |      |   |            |  
|Proceeds from investment level debt                                                             |  |                                   |            |   |      |   | 22,005,985  |  
|Principal payments on investment level debt                                                     |  |                                   | (233,065    | ) |      |   | (15,839,484 | )
|Contributions from noncontrolling interest partners                                             |  |                                   | 15,000      |   |      |   | 80,000      |  
|Distributions to noncontrolling interest                                                        |  |                                   | (191,506    | ) |      |   | (8,138      | )
|                                                                                                |  |                                   |             |   |      |   |             |  
|                                                                                                |  |                                  
|Net cash flows provided for (used in) financing activities                                      |  |                                   | (8,409,571  | ) |      |   | 6,238,363   |  
|                                                                                                |  |                                   |             |   |      |   |             |  
|                                                                                                |  |                                  
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                                         |  |                                   | 4,004,435   |   |      |   | 5,329,189   |  
|                                                                                                |  |                                  
|CASH AND CASH EQUIVALENTS - Beginning of period                                                 |  |                                   | 27,736,520  |   |      |   | 18,215,871  |  
|                                                                                                |  |                                   |             |   |      |   |             |  
|                                                                                                |  |                                  
|CASH AND CASH EQUIVALENTS - End of period                                                       |  | $                                 | 31,740,955  |   |      | $ | 23,545,060  |  
|                                                                                                |  |                                   |             |   |      |   |             |  

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



14



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULE OF INVESTMENTS



|                                                                                                      |  |                        |  |                         |             |                                                 |   |                          |            |                     |             |            |   |                     |             |  |   |           
|----------------------------------------------------------------------------------------------------- |  | ---------------------- |  | ----------------------- | ----------- | ----------------------------------------------- | - | ------------------------ | ---------- | ------------------- | ----------- | ---------- | - | ------------------- | ----------- |  | - | ----------
|                                                                                                      |  |                        |  |                         |             | 2009 Total RentableSquare Feet Unless Otherwise |   | June 30, 2009(unaudited) |            | December 31, 2008  
|Property Name                                                                                         |  | June 30, 2009Ownership |  | City, State             |             | Indicated(Unaudited)                            |   | Cost                     |            | Estimated FairValue |             | Cost       |   | Estimated FairValue
|                                                                                                      |  |                        |  |                         |             |                                                 |  
|OFFICES                                                                                               |  |                        |  |                         |             |                                                 |   |                          |            |                     |             |            |   |                     |             |  |   |           
|750 Warrenville                                                                                       |  | WO                     |  | Lisle, IL               |             | 103,193                                         |   | $                        | 25,273,662 |                     | $           | 7,300,000  |   | $                   | 25,218,777  |  | $ | 9,542,046 
|Summit @ Cornell Oaks                                                                                 |  | WO                     |  | Beaverton , OR          |             | 72,109                                          |   |                          | 12,543,250 |                     |             | 9,000,000  |   |                     | 12,512,985  |  |   | 11,000,000
|Westpark                                                                                              |  | WO                     |  | Nashville, TN           |             | 97,199                                          |   |                          | 12,399,201 |                     |             | 9,600,000  |   |                     | 12,060,981  |  |   | 13,753,954
|Financial Plaza                                                                                       |  | WO                     |  | Brentwood, TN           |             | 98,049                                          |   |                          | 12,410,549 |                     |             | 10,000,000 |   |                     | 12,389,207  |  |   | 12,700,000
|                                                                                                      |  |                        |  |                         |             |                                                 |   |                          |            |                     |             |            |   |                     |             |  |   |           
|                                                                                                      |  |                        |  | Offices % as of 6/30/09 |             | 21%                                             |   |                          | 62,626,662 |                     |             | 35,900,000 |   |                     | 62,181,950  |  |   | 46,996,000
|                                                                                                      |  |                        |  |                         |             |                                                 |  
|APARTMENTS                                                                                            |  |                        |  |                         |             |                                                 |   |                          |            |                     |             |            |   |                     |             |  |   |           
|                                                                                                      |  |                        |  |                         |             |                                                 |  
|Brookwood Apartments                                                                                  |  | WO                     |  | Atlanta, GA             |             | 240 Units                                       |   |                          | 20,053,288 |                     |             | 14,400,000 |   |                     | 19,810,918  |  |   | 16,100,000
|Dunhill Trace Apartments                                                                              |  | WO                     |  | Raleigh, NC             |             | 250 Units                                       |   |                          | 16,464,318 |                     |             | 15,000,000 |   |                     | 16,433,544  |  |   | 16,600,000
|Broadstone Crossing                                                                                   |  | WO                     |  | Austin, TX              |             | 225 Units                                       |   |                          | 22,815,992 |                     |             | 20,000,000 |   |                     | 22,732,363  |  |   | 25,000,000
|The Reserve At Waterford Lakes                                                                        |  | WO                     |  | Charlotte, NC           |             | 140 Units                                       |   |                          | 13,717,802 |                     |             | 10,200,000 |   |                     | 13,649,938  |  |   | 11,000,000
|                                                                                                      |  |                        |  |                         |             |                                                 |   |                          |            |                     |             |            |   |                     |             |  |   |           
|Apartments % as of 6/30/09                                                                            |  |                        |  |                         |             | 34%                                             |   |                          | 73,051,400 |                     |             | 59,600,000 |   |                     | 72,626,763  |  |   | 68,700,000
|                                                                                                      |  |                        |  |                         |             |                                                 |  
|RETAIL                                                                                                |  |                        |  |                         |             |                                                 |   |                          |            |                     |             |            |   |                     |             |  |   |           
|Kings Market                                                                                         |  | WO                     |  | Rosewell, GA            |             | Sold                                            |   |                          |           |                     |             |           |   |                     | 37,893,595  |  |   | 14,100,000
|Hampton Towne Center                                                                                  |  | WO                     |  | Hampton, VA             |             | 174,540                                         |   |                          | 18,124,072 |                     |             | 21,600,000 |   |                     | 18,110,816  |  |   | 23,400,000
|White Marlin Mall                                                                                     |  | CJV                    |  | Ocean City, MD          |             | 186,016                                         |   |                          | 23,297,550 |                     |             | 25,700,000 |   |                     | 23,271,014  |  |   | 28,600,000
|Westminster Crossing East, LLC                                                                        |  | CJV                    |  | Westminster, MD         |             | 89,890                                          |   |                          | 15,044,841 |                     |             | 14,900,000 |   |                     | 15,044,721  |  |   | 17,700,000
|Kansas City Portfolio                                                                                 |  | EJV                    |  | Kansas City, KS;MO      |             | Sold                                            |   |                          | 34,329     |                     |             | 34,329     |   |                     | 13,595      |  |   | 13,595    
|CARS Preferred Equity                                                                                 |  | PE                     |  | Various                 |             | N/A                                             |   |                          | 14,272,111 |                     |             | 10,454,421 |   |                     | 14,310,609  |  |   | 11,783,121
|Harnett Crossing                                                                                      |  | CJV                    |  | Dunn, NC                |             | 193,235                                         |   |                          | 6,381,245  |                     |             | 3,600,000  |   |                     | 6,366,767   |  |   | 3,900,000 
|                                                                                                      |  |                        |  |                         |             |                                                 |   |                          |            |                     |             |            |   |                     |             |  |   |           
|                                                                                                      |  |                        |  | Retail % as of 6/30/09  |             | 44%                                             |   |                          | 77,154,148 |                     |             | 76,288,750 |   |                     | 115,011,117 |  |   | 99,496,716
|                                                                                                      |  |                        |  |                         |             |                                                 |  
|HOTEL                                                                                                 |  |                        |  |                         |             |                                                 |   |                          |            |                     |             |            |   |                     |             |  |   |           
|Portland Crown Plaza                                                                                  |  | CJV                    |  | Portland, OR            |             | 161 Rooms                                       |   |                          | 10,500,500 |                     |             | 14,900,000 |   |                     | 10,312,588  |  |   | 17,800,000
|                                                                                                      |  |                        |  |                         |             |                                                 |   |                          |            |                     |             |            |   |                     |             |  |   |           
|                                                                                                      |  |                        |  | Hotel % as of 6/30/09   |             | 9%                                              |   |                          | 10,500,500 |                     |             | 14,900,000 |   |                     | 10,312,588  |  |   | 17,800,000
|                                                                                                      |  |                        |  |                         |            
|Total Real Estate Investments as a Percentage of General Partners Controlling Interest as of 6/30/09 |  | 107%                   |  | $                       | 223,332,710 |                                                 | $ | 186,688,750              |            | $                   | 260,132,418 |            | $ | 232,992,716        
|                                                                                                      |  |                        |  |                         |             |                                                 |   |                          |            |                     |             |            |   |                     |             |  |   |           



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

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



15



---

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULE OF INVESTMENTS



|                                                                               |  |             |            |                          |   |                     |                   |   |            |   |                     |   |            |  |   |            |  
|------------------------------------------------------------------------------ |  | ----------- | ---------- | ------------------------ | - | ------------------- | ----------------- | - | ---------- | - | ------------------- | - | ---------- |  | - | ---------- | -
|                                                                               |  |             |            | June 30, 2009(unaudited) |   |                     | December 31, 2008 |  
|                                                                               |  | Face Amount |            | Cost                     |   | EstimatedFair Value |                   |   | Cost       |   | EstimatedFair Value |  
|CASH AND CASH EQUIVALENTSPercentage of General Partners Controlling Interest |  |             |            |                          |   |                     |                   |   | 18.2       | % |                     |   |            |  |   | 13.0       | %
|                                                                               |  |             |            |                          |  
|Federal Home Loan Bank, 0 coupon bond, July 1, 2009                            |  | $           | 16,818,000 |                          | $ | 226,000             |                   | $ | 226,000    |   |                     | $ | 1,000,000  |  | $ | 1,000,000  |  
|Federal Home Loan Bank, 0 coupon bond, August 24, 2009                         |  |             | 4,998,875  |                          |   | 4,998,875           |                   |   | 4,998,875  |   |                     |   | 4,446,932  |  |   | 4,446,932  |  
|Federal Home Loan Bank, 0 coupon bond July 22, 2009                            |  |             | 24,997,521 |                          |   | 24,997,521          |                   |   | 24,997,521 |   |                     |   | 1,999,985  |  |   | 1,999,985  |  
|Federal Home Loan Bank, 0 coupon bond                                          |  |             |           |                          |   |                    |                   |   |           |   |                     |   | 18,831,977 |  |   | 18,831,977 |  
|                                                                               |  |             |            |                          |   |                     |                   |   |            |   |                     |   |            |  |   |            |  
|                                                                               |  |             |            |                          |  
|Total Cash Equivalents                                                         |  |             |            |                          |   | 30,222,396          |                   |   | 30,222,396 |   |                     |   | 26,278,894 |  |   | 26,278,894 |  
|                                                                               |  |             |            |                          |  
|Cash                                                                           |  |             |            |                          |   | 1,518,559           |                   |   | 1,518,559  |   |                     |   | 1,457,626  |  |   | 1,457,626  |  
|                                                                               |  |             |            |                          |   |                     |                   |   |            |   |                     |   |            |  |   |            |  
|                                                                               |  |             |            |                          |  
|Total Cash and Cash Equivalents                                                |  |             |            |                          | $ | 31,740,955          |                   | $ | 31,740,955 |   |                     | $ | 27,736,520 |  | $ | 27,736,520 |  
|                                                                               |  |             |            |                          |   |                     |                   |   |            |   |                     |   |            |  |   |            |  

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



16



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2009 and December 31, 2008

Note 1: Summary of Significant Accounting Policies



| | A. | Basis of Presentation -The accompanying unaudited consolidated financial statements of The Prudential Variable Contract Real Property Partnership (the
Partnership) included herein have been prepared in accordance with the requirements of Form 10-Q and accounting principles generally accepted in the United States of America 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, 2009 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2009. For further information, refer to the audited consolidated financial statements and notes thereto included in each partners Annual Report on Form 10-K for the Year Ended
December 31, 2008. The Partnership has evaluated subsequent events through August 14, 2009, the date these financial statements were issued as part of this Quarterly Report on Form 10-Q.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | Accounting Pronouncements Adopted -The Partnership adopted FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in
Income Taxes, an Interpretation of FASB Statement No. 109 as of January 1, 2007. This interpretation prescribes a comprehensive model for how a Partnership should recognize, measure, present, and disclose in its financial statements
uncertain tax positions that the Partnership has taken or expects to take on a tax return. The adoption of FIN 48 had no effect to the financial position and result of operations of the Partnership.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement defines fair value, establishes
a framework for measuring fair value in generally accepted accounting principles, and requires additional disclosures about fair value measurements. This statement does not require any new fair value measurements, but the application of this
statement could change current practices in determining fair value. This adoption did not change the methodology used to fair value our real estate investments.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115. This
statement provides partnerships with an option to report selected financial assets and liabilities at fair value.

SFAS
No. 157 and SFAS No. 159 are effective for fiscal years beginning after November 15, 2007 with early adoption permitted. The Partnership adopted SFAS No. 157 and SFAS No. 159 effective January 1, 2008, however, the
Partnership did not make a fair value option election for its existing debt. The adoption does not have any effect on the Partnerships consolidated financial position and results of operations. Please refer to Notes 4 for details.

In December 2007, FASB issued SFAS No. 141 (revised 2007) (SFAS 141R), Business Combinations. SFAS 141R
expands the definition of a business and redefines the acquisition date in a merger and acquisition transaction. It significantly modifies the existing SFAS 141, including changes to acquisition related contingent consideration, preacquisition
contingencies, non controlling interest, restructuring costs, in-process R&D, goodwill and partial acquisition. SFAS 141R is effective for acquisitions closing after the first annual reporting period beginning after December 15, 2008. The
Partnerships adoption of this guidance effective January 1, 2009 did not have a material effect on the Partnerships consolidated financial position or results of operations, but may have an effect on the accounting for future
business combinations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements. SFAS No. 160 changes the accounting for minority interests, which will be recharacterized as noncontrolling interests and classified by the parent company as a component of equity. Upon adoption, SFAS No. 160
requires retrospectively adoption of the presentation and disclosure requirements for existing minority interests and prospective adoption for all other requirements. The Partnerships adoption of this guidance effective January 1, 2009
did not have a material effect on the Partnerships consolidated financial position or results of operations, but did affect financial statement presentation and disclosure. Noncontrolling interests, previously reported as a liability, are now
required to be reported as a separate component of equity on the balance sheet, and totaled $4.9 million December 31, 2008. In addition, net income (loss) attributable to the noncontrolling interest, which was previously reported as an expense
and reflected within Net Investment Income is now reported as a separate amount below Increase (decrease) in Net Assets Resulting from Operations, and totaled ($0.1) and ($0.1) million for the three and six months ended June 30,
2008, respectively.



17



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2009 and December 31, 2008



Note 1: Summary of Significant Accounting Policies (continued)



B. Accounting Pronouncements Adopted (continued)



In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance for debt securities and expands the presentation and disclosure requirements of other-than-temporary impairments on debt and equity
securities in the financial statements. This FSP also requires that the required annual disclosures for debt and equity securities be made for interim reporting periods. This FSP does not amend existing recognition and measurement guidance related
to other-than-temporary impairments of equity securities. This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The
Partnerships early adoption of this guidance effective January 1, 2009 did not have a material effect on the Partnerships consolidated financial position or results of operations.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements, when
the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP also amends the disclosure requirements in
interim and annual periods. This FSP is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. The
Partnerships early adoption of this guidance effective January 1, 2009 did not have a material effect on the Partnerships consolidated financial position or results of operations.

In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination
That Arise from Contingencies. This FSP requires an asset acquired or liability assumed in a business combination that arises from a contingency to be recognized at fair value at the acquisition date, if the acquisition date fair value of that
asset or liability can be determined during the measurement period. If the acquisition date fair value of an asset acquired or liability assumed in a business combination that arises from a contingency cannot be determined during the measurement
period, the asset or liability shall be recognized at the acquisition date using the guidance in SFAS No. 5, Accounting for Contingencies. This FSP also amends disclosure requirements. This FSP is effective for assets or liabilities
arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The Partnerships adoption of this guidance effective January 1, 2009 did not have a material effect on the
Partnerships consolidated financial position or results of operations.

In April 2009, the FASB issued FSP FAS 107-1
and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual
financial statements. This FSP also amends the disclosure requirements. This FSP is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted. The Partnership adopted this guidance within the interim
period ending June 30, 2009. The Partnerships adoption of this guidance did not have a material effect on the Partnerships consolidated financial position or results of operations.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events. This statement addresses the accounting for and disclosure
of subsequent events not addressed in other applicable Generally Accepted Accounting Principles, including disclosure of the date through which subsequent events have been evaluated. This guidance is effective for interim or annual periods ending
after June 15, 2009. The Partnerships adoption of this guidance effective with the interim period ending June 30, 2009 did not have a material effect on the Partnerships consolidated financial position or results of operations.
The required disclosure of the date through which subsequent events have been evaluated is provided in Note 1A.



| | C. | New Accounting Pronouncements
| | -- | -----------------------------

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162. The
FASBs Codification was launched on July 1, 2009 as the source of authoritative U.S. GAAP to be applied by nongovernmental entities. The Codification is not intended to change U.S. GAAP but is a new structure which takes accounting
pronouncements and organizes them by accounting topic. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. This statement will become effective for the Partnership beginning
with the interim reporting period ending September 30, 2009 and will impact the way the Partnerships references U.S. GAAP accounting standards in the financial statements.

Note 2: Reclassification

Certain prior period balances have been reclassified to
conform with current period presentation. Such reclassifications had no effect on previously reported net assets.

Note 3: Disclosure of Supplemental
Cash Flow Information and Non-Cash Investing and Financing Activity

Cash paid for interest during the six months ended
June 30, 2009, and 2008, was $864,429 and $813,368, respectively.



18



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2009 and December 31, 2008

Note 4: Fair Value Measurements

Valuation Methods

Real estate investments are carried at fair value. Properties owned are initially recorded at the purchase price plus closing costs. Development costs and major renovations are capitalized as a component of cost, and
routine maintenance and repairs are charged to expense as incurred. Real estate costs include the cost of acquired property, including all the tangible and intangible assets. Tangible assets include the value of all land, building and tenant
improvements at the time of acquisition. Intangible assets include the value of any above and below market leases, in-place leases, and tenant relationships at the time of acquisition.

The purpose of an appraisal is to estimate the fair value of real estate as of a specific date. In accordance with SFAS 157, fair value is
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The estimate of fair value is based on the conventional approaches to value, all of
which require the exercise of subjective judgment. The three approaches are: (1) current cost of reproducing the real estate less deterioration and functional and economic obsolescence; (2) discounting a series of income streams and reversion
at a specific yield or by directly capitalizing a single year income estimate by an appropriate factor; and (3) value indicated by recent sales of comparable real estate in the market. In the reconciliation of these three approaches, the
independent appraiser uses one or a combination of them, to come up with the approximated value for the type of real estate in the market.

Fair Value Measurements:

SFAS 157 establishes a fair value measurement framework,
provides a single definition of fair value and requires expanded disclosure summarizing fair value measurements. This statement provides a three-level hierarchy based on the inputs used in the valuation process. The level in the fair values
hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows;

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

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

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

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



19



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2009 and December 31, 2008



Note 4: Fair Value Measurements (continued)



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

Table 1



|                                                          |  |                           |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        
|--------------------------------------------------------- |  | ------------------------- | ------- | -------------------------------------------------- | - | ---------------------------------------------------------- |  | ------------------------------------------ | - | --------------------------------------- | - | - |  | - | -------
|                                                          |  |                           |         | (in 000s)                                        
|                                                          |  |                           |         | Fair value measurements at June 30, 2009 using    
|                                                          |  | Carryingamount at6/30/09  |         | Amountsmeasured atfair value6/30/09                |   | Quoted pricesin activemarkets foridentical assets(level 1) |  | Significantotherobservableinputs (level 2) |   | Significantunobservableinputs (level 3)
|Assets:                                                   |  |                           |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        
|Real estate and improvements                              |  | $                         | 209,026 |                                                    | $ | 176,200                                                    |  | $                                          |  |                                         | $ |  |  | $ | 176,200
|Real estate partnerships and preferred equity investments |  |                           | 14,306  |                                                    |   | 10,489                                                     |  |                                            |  |                                         |   |  |  |   | 10,489 
|                                                          |  |                           |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        
|Total                                                     |  | $                         | 223,332 |                                                    | $ | 186,689                                                    |  | $                                          |  |                                         | $ |  |  | $ | 186,689
|                                                          |  |                           |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        
|                                                          |  |                          
|                                                          |  |                           |         | (in 000s)                                        
|                                                          |  |                           |         | Fair value measurements at December 31, 2008 using
|                                                          |  | Carryingamount at12/31/09 |         | Amountsmeasured atfair value12/31/2008             |   | Quoted pricesin activemarkets foridentical assets(level 1) |  | Significantotherobservableinputs (level 2) |   | Significantunobservableinputs (level 3)
|Assets:                                                   |  |                           |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        
|Real estate and improvements                              |  | $                         | 245,808 |                                                    | $ | 221,196                                                    |  | $                                          |  |                                         | $ |  |  | $ | 221,196
|Real estate partnerships and preferred equity investments |  |                           | 14,324  |                                                    |   | 11,797                                                     |  |                                            |  |                                         |   |  |  |   | 11,797 
|                                                          |  |                           |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        
|Total                                                     |  | $                         | 260,132 |                                                    | $ | 232,993                                                    |  | $                                          |  |                                         | $ |  |  | $ | 232,993
|                                                          |  |                           |         |                                                    |   |                                                            |  |                                            |   |                                         |   |   |  |   |        



20



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2009 and December 31, 2008



Note 4: Fair Value Measurements (continued)



As required under SFAS 157, table 2 below provides a reconciliation of the beginning
and ending balances for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period ended June 30, 2009 and December 31, 2008.

Table 2

(in 000s)

Fair value measurements using significant unobservable inputs

for the six months ended June 30, 2009

(Level 3)



|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---------------------------------------------------------- | - | ------ | ----- |  | - | ------- | -
|                                                                                                     |  | Real estate andimprovements |         |   | Real estate andpartnerships andpreferred equityinvestments |   |        | Total | 
|Beginning balance @ 1/1/09                                                                           |  | $                           | 221,196 |   |                                                            | $ | 11,797 |       |  | $ | 232,993 |  
|                                                                                                     |  |                             |        
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)               |  |                             | (36,460 | ) |                                                            |   | (1,290 | )     |  |   | (37,750 | )
|Equity income (losses)/interest income                                                               |  |                             |        |   |                                                            |   | 522    |       |  |   | 522     |  
|Purchases, issuances and settlements                                                                 |  |                             | (8,536  | ) |                                                            |   | (540   | )     |  |   | (9,076  | )
|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  
|Ending balance @ 6/30/09                                                                             |  | $                           | 176,200 |   |                                                            | $ | 10,489 |       |  | $ | 186,689 |  
|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  
|                                                                                                     |  |                             |        
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date |  | $                           | (36,460 | ) |                                                            | $ | (1,290 | )     |  | $ | (37,750 | )
|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  

(in 000s)

Fair value measurements using significant unobservable inputs

for
the six months ended June 30, 2008

(Level 3)



|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---------------------------------------------------------- | - | ------ | ----- |  | - | ------- | -
|                                                                                                     |  | Real estate andimprovements |         |   | Real estate andpartnerships andpreferred equityinvestments |   |        | Total | 
|Beginning balance @ 1/1/08                                                                           |  | $                           | 254,394 |   |                                                            | $ | 14,524 |       |  | $ | 268,918 |  
|                                                                                                     |  |                             |        
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)               |  |                             | (43,134 | ) |                                                            |   | (2,527 | )     |  |   | (45,661 | )
|Equity income (losses)/interest income                                                               |  |                             |        |   |                                                            |   | 994    |       |  |   | 994     |  
|Purchases, issuances and settlements                                                                 |  |                             | 9,936   |   |                                                            |   | (1,194 | )     |  |   | 8,742   |  
|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  
|Ending balance @ 12/31/08                                                                            |  | $                           | 221,196 |   |                                                            | $ | 11,797 |       |  | $ | 232,993 |  
|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  
|                                                                                                     |  |                             |        
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date |  | $                           | (43,134 | ) |                                                            | $ | (2,527 | )     |  | $ | (45,661 | )
|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  



21



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2009 and December 31, 2008



Note 4: Fair Value Measurements (continued)



(in 000s)

Fair value measurements using significant unobservable inputs

for
the three months ending June 30, 2009

(Level 3)



|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---------------------------------------------------------- | - | ------ | ----- |  | - | ------- | -
|                                                                                                     |  | Real estate andimprovements |         |   | Real estate andpartnerships andpreferred equityinvestments |   |        | Total | 
|Beginning balance @ 4/1/09                                                                           |  | $                           | 196,500 |   |                                                            | $ | 10,611 |       |  | $ | 207,111 |  
|                                                                                                     |  |                             |        
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)               |  |                             | (11,322 | ) |                                                            |   | (100   | )     |  |   | (11,422 | )
|Equity income (losses)/interest income                                                               |  |                             |        |   |                                                            |   | 251    |       |  |   | 251     |  
|Purchases, issuances and settlements                                                                 |  |                             | (8,978  | ) |                                                            |   | (273   | )     |  |   | (9,251  | )
|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  
|Ending balance @ 6/30/09                                                                             |  | $                           | 176,200 |   |                                                            | $ | 10,489 |       |  | $ | 186,689 |  
|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  
|                                                                                                     |  |                             |        
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date |  | $                           | (10,978 | ) |                                                            | $ | (100   | )     |  | $ | (11,078 | )
|                                                                                                     |  |                             |         |   |                                                            |   |        |       |  |   |         |  

(in 000s)

Fair value measurements using significant unobservable inputs

for
the three months ending June 30, 2008

(Level 3)



|                                                                                                     |  |                             |         |                                                            |   |        |       |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | ---------------------------------------------------------- | - | ------ | ----- |  | - | ------- | -
|                                                                                                     |  | Real estate andimprovements |         | Real estate andpartnerships andpreferred equityinvestments |   |        | Total | 
|Beginning balance @ 4/1/08                                                                           |  | $                           | 256,988 |                                                            | $ | 14,555 |       |  | $ | 271,543 |  
|                                                                                                     |  |                             |        
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)               |  |                             | 275     |                                                            |   | (585   | )     |  |   | (310    | )
|Equity income (losses)/interest income                                                               |  |                             |        |                                                            |   | 209    |       |  |   | 209     |  
|Purchases, issuances and settlements                                                                 |  |                             | 3,118   |                                                            |   | (272   | )     |  |   | 2,846   |  
|                                                                                                     |  |                             |         |                                                            |   |        |       |  |   |         |  
|Ending balance @ 6/30/08                                                                             |  | $                           | 260,381 |                                                            | $ | 13,907 |       |  | $ | 274,288 |  
|                                                                                                     |  |                             |         |                                                            |   |        |       |  |   |         |  
|                                                                                                     |  |                             |        
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date |  | $                           | 275     |                                                            | $ | (585   | )     |  | $ | (310    | )
|                                                                                                     |  |                             |         |                                                            |   |        |       |  |   |         |  



22



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2009 and December 31, 2008



Note 5: Investment Level Debt

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

Based on borrowing rates available to the Partnership at June 30, 2009 for loans with similar terms and average
maturities, the Partnerships mortgages on wholly owned properties and consolidated partnerships have an estimated fair value of approximately $39 million, and a carrying value of $40 million. Different assumptions or changes in future market
conditions could significantly affect estimated fair value.

Note 6: Risk



| | A. | Valuation Risk
| | -- | --------------

There continues to be significant disruptions in the global capital, credit and real estate markets. These disruptions have led to, among other things, a significant decline in the volume of transaction activity, in the fair value of many
real estate and real estate related investments, and a significant contraction in short-term and long-term debt and equity funding sources. The decline in liquidity and prices of real estate and real estate related investments, as well as the
availability of observable transaction data and inputs, may have made it more difficult to determine the fair value of such investments. As a result, these estimated fair values may vary significantly from the prices at which the real estate
investments would sell, since market prices of real estate investments can only be determined by negotiation between a willing buyer and seller and these differences could be material to the financial statements. Although the estimated fair values
represent subjective estimates, management believes that these estimated fair values are reasonable approximations of market prices and the aggregate estimated value of investments in real estate are fairly presented as of June 30, 2009 and
December 31, 2008.



| | B. | Financing, Covenant, and Repayment Risks
| | -- | ----------------------------------------

In the normal course of business, the Partnership enters into loan agreements with certain lenders to finance its real estate investment transactions. Unfavorable economic conditions could increase related borrowing
costs, limit access to the capital markets or result in a decision by lenders not to extend credit to the Partnership. There is no guarantee that the Partnerships borrowing arrangements or ability to obtain leverage will continue to be
available, or if available, will be available on terms and conditions acceptable to the Partnership. Further, these loan agreements contain, among other conditions, events of default and various covenants and representations. In the normal course of
business, the Partnership may be in the process of renegotiating terms for loans outstanding that have passed their maturity dates. At June 30, 2009 the Partnership had no outstanding matured loans.

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

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

Note 7: 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 the Partnerships management, the outcome of such
matters will not have a significant effect on the financial position of the Partnership.



23



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2009 and December 31, 2008



Note 8: Related Party Transactions

Pursuant to an investment management agreement, Prudential Investment Management, Inc. (PIM) charges the Partnership a daily investment management fee at an annual rate of 1.25% of
the average daily gross asset valuation of the Partnership. For the six months ended June 30, 2009 and 2008, management fees incurred by the Partnership were $1,392,753 and $1,731,170, respectively.

The Partnership also reimburses PIM for certain administrative services rendered by PIM. The amounts incurred for each of the six months
ended June 30, 2009 and 2008 were $26,814 and $26,814, and are classified as administrative expenses in the Consolidated Statements of Operations.

Note 9: Financial Highlights



|                                                                                                              |  |                                   |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - |  | - | ----- | -
|                                                                                                              |  | For The Six Months Ended June 30, |       
|                                                                                                              |  | 2009                              |        |   | 2008 |   |       | 2007 |  |   | 2006  |   |  | 2005 |      
|Per Share(Unit) Operating Performance:                                                                        |  |                                   |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Net Asset Value attributable to general partners controlling interest, beginning of period                   |  | $                                 | 31.65  |   |      | $ | 36.55 |      |  | $ | 33.87 |   |  | $    | 29.59 |   |  | $ | 26.15 |  
|Income From Investment Operations:                                                                            |  |                                   |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Net investment income attributable to general partners controlling interest, before management fee           |  |                                   | 0.73   |   |      |   | 1.15  |      |  |   | 1.08  |   |  |      | 0.94  |   |  |   | 0.78  |  
|Investment Management fee attributable to general partners controlling interest                              |  |                                   | (0.20  | ) |      |   | (0.26 | )    |  |   | (0.24 | ) |  |      | (0.22 | ) |  |   | (0.19 | )
|Net realized and unrealized gain (loss) on investments attributable to general partners controlling interest |  |                                   | (5.24  | ) |      |   | (0.19 | )    |  |   | 0.96  |   |  |      | 1.86  |   |  |   | 0.76  |  
|                                                                                                              |  |                                   |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Net Increase in Net Assets Resulting from Operations attributable to general partners controlling interest   |  |                                   | (4.71  | ) |      |   | 0.70  |      |  |   | 1.80  |   |  |      | 2.58  |   |  |   | 1.35  |  
|                                                                                                              |  |                                   |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|                                                                                                              |  |                                   |        |   |     
|Net Asset Value attributable to general partners controlling interest, end of period                         |  | $                                 | 26.94  |   |      | $ | 37.25 |      |  | $ | 35.67 |   |  | $    | 32.17 |   |  | $ | 27.50 |  
|                                                                                                              |  |                                   |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|                                                                                                              |  |                                   |        |   |     
|Total Return attributable to general partners controlling interest, before Management Fee:                   |  |                                   | -14.27 | % |      |   | 2.63  | %    |  |   | 6.05  | % |  |      | 9.49  | % |  |   | 5.90  | %
|Total Return attributable to general partners controlling interest, after Management Fee (a):                |  |                                   | -14.89 | % |      |   | 1.92  | %    |  |   | 5.32  | % |  |      | 8.73  | % |  |   | 5.16  | %
|Ratios/Supplemental Data:                                                                                     |  |                                   |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Net Assets attributable to general partners controlling interest, end of period (in millions)                |  | $                                 | 174    |   |      | $ | 252   |      |  | $ | 241   |   |  | $    | 223   |   |  | $ | 196   |  
|Ratios to average net assets for the period ended (b):                                                        |  |                                   |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Total Portfolio Level Expenses                                                                                |  |                                   | 0.69   | % |      |   | 0.72  | %    |  |   | 0.77  | % |  |      | 0.73  | % |  |   | 0.73  | %
|Net Investment Income, before Management Fee                                                                  |  |                                   | 2.42   | % |      |   | 3.14  | %    |  |   | 3.19  | % |  |      | 3.13  | % |  |   | 2.96  | %



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

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

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



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



24



---

|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, 2009, the Partnerships liquid assets, consisting of cash and cash equivalents, were approximately $31.7 million, an increase of approximately $4.0 million from $27.7 million at December 31, 2008. The increase was primarily
due to cash flows received from the Partnerships operating activities and the disposition of a retail asset, as discussed below. Partially offsetting this increase were capital expenditures to existing properties and a distribution to the
Partners, as detailed below. Sources of liquidity included net cash flow from property operations, financings, dispositions, and interest from short-term investments. The Partnership uses cash for its real estate investment activities and for its
distributions to its partners. As of June 30, 2009, approximately 14.4% of the Partnerships total assets consisted of cash and cash equivalents.

The Partnership disposed of a retail center in Roswell, Georgia during the six months ended June 30, 2009. The property sold for net proceeds of approximately $9.7 million. Also during the period, the Partnership
made distributions to its Partners totaling $8.0 million.

During the six months ended June 30, 2009, the Partnership spent
approximately $1.1 million on capital improvements to various existing properties. Approximately $0.3 million was associated with capital upgrades at the office property in Brentwood, Tennessee; approximately $0.2 million funded renovations at the
apartment property in Atlanta, Georgia; and approximately $0.2 million contributed to renovations and exterior upgrades at the hotel property in Lake Oswego, Oregon. The remaining $0.4 million was associated with minor capital improvements and
transaction costs associated with leasing expenses of various other properties.



25



---

(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, 2009, and 2008.

Net Investment Income Overview

The Partnerships net investment income
attributable to the general partners controlling interest for the six months ended June 30, 2009 was approximately $3.5 million, a decrease of approximately $2.5 million from the prior year period. The decrease in net investment income
attributable to the general partners controlling interest was primarily attributable to a $1.4 million decline in the retail sector investments net investment income from the prior year period. Additionally the office, apartment, and
hotel sector investments net investment incomes each declined approximately $0.4 million from the prior year period. Partially offsetting these decreases was less of a loss in other net investment losses attributable to the general
partners controlling interest of approximately $0.1 million from the prior year period. The components of this net investment income and/or loss attributable to the general partners controlling interest are discussed below by investment
type.

The Partnerships net investment income attributable to the general partners controlling interest for the quarter ended
June 30, 2009 was approximately $1.4 million, a decrease of approximately $1.4 million from the prior year period. The decrease in net investment income attributable to the general partners controlling interest was primarily attributable
to the $0.9 million and $0.3 million declines in the retail and office sector investments net investment income from the prior year period, respectively. Additionally the apartment and hotel sector investments net investment incomes
attributable to the general partners controlling interest each declined approximately $0.2 million from the prior year period. Partially offsetting this decline was a decrease in other net investment losses attributable to the general
partners controlling interest of approximately $0.1 million from the prior year period. The components of this net investment income and/or loss attributable to the general partners controlling interest are discussed below by investment
type.

Valuation Overview

The Partnership realized losses attributable to the general partners controlling interest of $4.5 million and $0.3 million for the six and three-month periods ended June 30, 2009, respectively, compared with no realized gains or
losses attributable to the general partners controlling interest for the prior year periods. The losses were the result of the below-market value disposition of the Partnerships retail property in Roswell, Georgia.

The Partnership recorded a net unrealized loss attributable to the general partners controlling interest of approximately $30.9 million for the six
months ended June 30, 2009, compared with a net unrealized loss attributable to the general partners controlling interest of approximately $1.3 million for the prior year period. The net unrealized loss attributable to the general
partners controlling interest for the six months ended June 30, 2009 was due to property valuation declines across all property sector investments.

The Partnership recorded a net unrealized loss attributable to the general partners controlling interest of approximately $9.8 million for the quarter ended June 30, 2009, compared with a net unrealized
loss attributable to the general partners controlling interest of approximately $0.6 million for the prior year period. The net unrealized loss attributable to the general partners controlling interest for the quarter ended June 30,
2009 was attributable to property valuation declines in the office, apartment, retail, and hotel sector investments of approximately $5.3 million, $1.1 million, $2.4 million and $1.0 million, respectively. The net unrealized losses attributable to
the general partners controlling interest for the six and three-month periods ended June 30, 2009, respectively, were attributable to valuation declines in all property sectors primarily due to increased investment rates suggesting an
industry-wide repricing. Investment rates include direct and terminal capitalization rates (average increases for the Partnership of 68 and 40 basis points, respectively, from the period ended December 31, 2008), and discount rates (average
increase for the Partnership of 54 basis points from the period ended December 31, 2008), which reflect investors yield requirements on investments. The increase in investment rates was caused by the national economic downturn, frozen
credit markets, weakening market fundamentals, and deteriorated demand for commercial real estate. The components of these valuation losses are discussed below by investment type. The components of these valuation gains and/or losses attributable to
the general partners controlling interest are discussed below by property type.



26



---

The following table presents a comparison of the Partnerships sources of net investment income
attributable to the general partners controlling interest and realized and unrealized gains or losses attributable to the general partners controlling interest by investment type for the six and three-month periods ended June 30,
2009 and 2008.



|                                                                   |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|------------------------------------------------------------------ |  | ------------------------- | ----------- | - | --------------------------- | - | ---------- | ---- |  | - | ----------- | - |  | - | --------- | -
|                                                                   |  | Six Months Ended June 30, |             |   | Three Months Ended June 30, |  
|                                                                   |  | 2009                      |             |   | 2008                        |   |            | 2009 |  |   | 2008        |  
|Net Investment Income:                                             |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|                                                                   |  |                           |             |  
|Office properties                                                  |  | $                         | 1,555,381   |   |                             | $ | 1,943,568  |      |  | $ | 729,130     |   |  | $ | 972,153   |  
|Apartment properties                                               |  |                           | 1,290,928   |   |                             |   | 1,700,126  |      |  |   | 691,006     |   |  |   | 850,881   |  
|Retail properties                                                  |  |                           | 2,162,411   |   |                             |   | 3,577,898  |      |  |   | 815,584     |   |  |   | 1,677,769 |  
|Hotel property                                                     |  |                           | 155,789     |   |                             |   | 529,259    |      |  |   | 92,084      |   |  |   | 280,402   |  
|Other (including interest income, investment mgt fee, etc.)        |  |                           | (1,654,076  | ) |                             |   | (1,715,430 | )    |  |   | (903,192    | ) |  |   | (985,452  | )
|                                                                   |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|Total Net Investment Income                                        |  | $                         | 3,510,433   |   |                             | $ | 6,035,421  |      |  | $ | 1,424,612   |   |  | $ | 2,795,753 |  
|                                                                   |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|                                                                   |  |                           |             |  
|Net Realized Gain (Loss) on Real Estate Investments:               |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|                                                                   |  |                           |             |  
|Retail properties                                                  |  |                           | (4,452,106  | ) |                             |   |           |      |  |   | (344,374    | ) |  |   |          |  
|                                                                   |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|Net Realized Gain (Loss) on Real Estate Investments                |  |                           | (4,452,106  | ) |                             |   |           |      |  |   | (344,374    | ) |  |   |          |  
|                                                                   |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|                                                                   |  |                           |             |  
|Net Unrealized Gain (Loss) on Real Estate Investments:             |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|                                                                   |  |                           |             |  
|Office properties                                                  |  |                           | (11,540,712 | ) |                             |   | (2,362,601 | )    |  |   | (5,344,863  | ) |  |   | (230,486  | )
|Apartment properties                                               |  |                           | (9,524,636  | ) |                             |   | 610,313    |      |  |   | (1,102,203  | ) |  |   | (189,835  | )
|Retail properties                                                  |  |                           | (7,407,778  | ) |                             |   | 571,028    |      |  |   | (2,355,885  | ) |  |   | (402,342  | )
|Industrial property                                                |  |                           |            |   |                             |   |           |      |  |   |            |   |  |   |          |  
|Hotel property                                                     |  |                           | (2,470,329  | ) |                             |   | (100,758   | )    |  |   | (974,778    | ) |  |   | 231,303   |  
|                                                                   |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|                                                                   |  |                           |             |  
|Net Unrealized Gain (Loss) on Real Estate Investments              |  |                           | (30,943,455 | ) |                             |   | (1,282,018 | )    |  |   | (9,777,729  | ) |  |   | (591,360  | )
|                                                                   |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|                                                                   |  |                           |             |  
|Net Realized and Unrealized Gain (Loss) on Real Estate Investments |  | $                         | (35,395,561 | ) |                             | $ | (1,282,018 | )    |  | $ | (10,122,103 | ) |  | $ | (591,360  | )
|                                                                   |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  
|                                                                   |  |                           |             |  
|Increase/(Decrease) in Net Assets                                  |  | $                         | (31,885,128 | ) |                             | $ | 4,753,403  |      |  | $ | (8,697,491  | ) |  | $ | 2,204,393 |  
|                                                                   |  |                           |             |   |                             |   |            |      |  |   |             |   |  |   |           |  



27



---

OFFICE PROPERTIES



|                            |  |                                 |           |   |                                 |   |                           |  |   |                           |   |  |               |            |   |               |     |   |  |     |  
|--------------------------- |  | ------------------------------- | --------- | - | ------------------------------- | - | ------------------------- |  | - | ------------------------- | - |  | ------------- | ---------- | - | ------------- | --- | - |  | --- | -
|Six Months Ended June 30,   |  | Net InvestmentIncome/(Loss)2009 |           |   | Net InvestmentIncome/(Loss)2008 |   | UnrealizedGain/(Loss)2009 |  |   | UnrealizedGain/(Loss)2008 |   |  | Occupancy2009 |            |   | Occupancy2008 |    
|Property                    |  |                                 |           |   |                                 |   |                           |  |   |                           |   |  |               |            |   |               |     |   |  |     |  
|Lisle, IL                   |  | $                               | 45,775    |   |                                 | $ | 294,029                   |  | $ | (2,296,931                | ) |  | $             | (1,137,059 | ) |               | 32  | % |  | 61  | %
|Brentwood, TN               |  |                                 | 352,985   |   |                                 |   | 524,261                   |  |   | (4,492,174                | ) |  |               | (23,737    | ) |               | 70  | % |  | 89  | %
|Beaverton, OR               |  |                                 | 604,307   |   |                                 |   | 561,460                   |  |   | (2,030,265                | ) |  |               | (1,201,805 | ) |               | 88  | % |  | 85  | %
|Brentwood, TN               |  |                                 | 552,314   |   |                                 |   | 563,818                   |  |   | (2,721,342                | ) |  |               |           |   |               | 100 | % |  | 100 | %
|                            |  |                                 |           |   |                                 |   |                           |  |   |                           |   |  |               |            |   |               |     |   |  |     |  
|                            |  | $                               | 1,555,381 |   |                                 | $ | 1,943,568                 |  | $ | (11,540,712               | ) |  | $             | (2,362,601 | ) |               |     |   |  |     |  
|                            |  |                                 |           |   |                                 |   |                           |  |   |                           |   |  |               |            |   |               |     |   |  |     |  
|                            |  |                                 |           |   |                                
|Three Months Ended June 30, |  |                                 |           |   |                                 |   |                           |  |   |                           |   |  |               |           
|Property                    |  |                                 |           |   |                                 |   |                           |  |   |                           |   |  |               |            |   |              
|Lisle, IL                   |  | $                               | (23,610   | ) |                                 | $ | 170,639                   |  | $ | (1,243,316                | ) |  | $             | (102,786   | ) |              
|Brentwood, TN               |  |                                 | 175,550   |   |                                 |   | 260,132                   |  |   | (1,850,863                | ) |  |               | (23,737    | ) |              
|Beaverton, OR               |  |                                 | 306,822   |   |                                 |   | 277,788                   |  |   | (630,265                  | ) |  |               | (103,963   | ) |              
|Brentwood, TN               |  |                                 | 270,368   |   |                                 |   | 263,594                   |  |   | (1,620,419                | ) |  |               |           |   |              
|                            |  |                                 |           |   |                                 |   |                           |  |   |                           |   |  |               |            |   |              
|                            |  | $                               | 729,130   |   |                                 | $ | 972,153                   |  | $ | (5,344,863                | ) |  | $             | (230,486   | ) |              
|                            |  |                                 |           |   |                                 |   |                           |  |   |                           |   |  |               |            |   |              

Net Investment Income

Net investment income attributable to the general partners controlling interest for the Partnerships office properties was approximately $1.6 million for the six months ended
June 30, 2009, a decrease of approximately $0.4 million from the prior year period. Net investment income attributable to the general partners controlling interest for the Partnerships office properties was approximately $0.7
million for the quarter ended June 30, 2009, a decrease of approximately $0.3 million from the prior year period. The decreases for the six and three-month periods ended June 30, 2009 were primarily due to decreased occupancy at the
properties in Lisle, Illinois and Brentwood, Tennessee. Partially offsetting this decrease was an increase in net investment income attributable to the general partners controlling interest at the property in Beaverton, Oregon due to increased
rents.

Unrealized Gain/(Loss)

The office properties owned by the Partnership recorded a net unrealized loss attributable to the general partners controlling interest of approximately $11.5 million during the six months ended June 30, 2009, compared with a net
unrealized loss attributable to the general partners controlling interest of approximately $2.4 million for the prior year period. The office properties owned by the Partnership recorded a net unrealized loss attributable to the general
partners controlling interest of approximately $5.3 million during the quarter ended June 30, 2009, compared with a net unrealized loss attributable to the general partners controlling interest of approximately $0.2 million for the
prior year period. The net unrealized losses attributable to the general partners controlling interest for the six and three-month periods ended June 30, 2009 were primarily due to valuation declines caused by increased investment rates
(average direct capitalization rate increases for the Partnerships office investments of 63 and 25 basis points, respectively, for the six and three-month periods ended June 30, 2009) and implementation of more conservative growth and
market leasing projections reflecting the market downturn across the office sector.



28



---

APARTMENT PROPERTIES



|                            |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |          |   |               |    |   |  |    |  
|--------------------------- |  | ------------------------------- | --------- | ------------------------------- | - | ------------------------- |  | - | ------------------------- | - |  | ------------- | -------- | - | ------------- | -- | - |  | -- | -
|Six Months Ended June 30,   |  | Net InvestmentIncome/(Loss)2009 |           | Net InvestmentIncome/(Loss)2008 |   | UnrealizedGain/(Loss)2009 |  |   | UnrealizedGain/(Loss)2008 |   |  | Occupancy2009 |          |   | Occupancy2008 |   
|Property                    |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |          |   |               |    |   |  |    |  
|Atlanta, GA                 |  | $                               | 239,987   |                                 | $ | 330,315                   |  | $ | (1,942,370                | ) |  | $             | 100,443  |   |               | 95 | % |  | 93 | %
|Raleigh, NC                 |  |                                 | 107,122   |                                 |   | 332,444                   |  |   | (1,630,774                | ) |  |               | 380,937  |   |               | 94 | % |  | 88 | %
|Austin, TX                  |  |                                 | 670,958   |                                 |   | 761,263                   |  |   | (5,083,628                | ) |  |               | 198,422  |   |               | 94 | % |  | 94 | %
|Charlotte, NC               |  |                                 | 272,861   |                                 |   | 276,104                   |  |   | (867,864                  | ) |  |               | (69,489  | ) |               | 89 | % |  | 89 | %
|                            |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |          |   |               |    |   |  |    |  
|                            |  | $                               | 1,290,928 |                                 | $ | 1,700,126                 |  | $ | (9,524,636                | ) |  | $             | 610,313  |   |               |    |   |  |    |  
|                            |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |          |   |               |    |   |  |    |  
|                            |  |                                 |           |                                 |  
|Three Months Ended June 30, |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |         
|Property                    |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |          |   |              
|Atlanta, GA                 |  | $                               | 123,970   |                                 | $ | 167,179                   |  | $ | (173,793                  | ) |  | $             | 57,966   |   |              
|Raleigh, NC                 |  |                                 | 106,134   |                                 |   | 169,068                   |  |   | (9,676                    | ) |  |               | 100,672  |   |              
|Austin, TX                  |  |                                 | 328,970   |                                 |   | 369,812                   |  |   | (880,000                  | ) |  |               | (301,578 | ) |              
|Charlotte, NC               |  |                                 | 131,932   |                                 |   | 144,822                   |  |   | (38,734                   | ) |  |               | (46,895  | ) |              
|                            |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |          |   |              
|                            |  | $                               | 691,006   |                                 | $ | 850,881                   |  | $ | (1,102,203                | ) |  | $             | (189,835 | ) |              
|                            |  |                                 |           |                                 |   |                           |  |   |                           |   |  |               |          |   |              

Net Investment Income

Net investment income attributable to the general partners controlling interest for the Partnerships apartment properties was approximately $1.3 million for the six months ended
June 30, 2009, a decrease of approximately $0.4 million from the prior year period. The decrease in net investment income attributable to the general partners controlling interest for the six month period ended June 30, 2009 was
primarily due to the write-off of previous years accrued receivables at the property in Raleigh, North Carolina, and increased concessions at each apartment property caused by soft market conditions and weakened demand.

Net investment income attributable to the general partners controlling interest for the Partnerships apartment properties was approximately
$0.7 million for the quarter ended June 30, 2009, a decrease of approximately $0.2 million from the prior year period. The decrease in net investment income attributable to the general partners controlling interest for the quarter ended
June 30, 2009 was primarily due to increased concessions at each apartment property caused by soft market conditions and weakened demand.

Unrealized Gain/(Loss)

The apartment properties owned by the Partnership recorded a net unrealized loss attributable to
the general partners controlling interest of approximately $9.5 million for the six months ended June 30, 2009, compared with a net unrealized gain attributable to the general partners controlling interest of approximately $0.6
million for the prior year period. The apartment properties owned by the Partnership recorded a net unrealized loss attributable to the general partners controlling interest of approximately $1.1 million for the quarter ended June 30,
2009, compared with a net unrealized loss attributable to the general partners controlling interest of approximately $0.2 million for the prior year period. The net unrealized losses attributable to the general partners controlling
interest for the six and three-month periods ended June 30, 2009 were primarily due to valuation declines caused by increased investment rates (average direct capitalization rate increases for the Partnerships apartment investments of 59
and 0 basis points, respectively, for the six and three-month periods ended June 30, 2009) and implementation of more conservative growth and market leasing projections reflecting the market downturn across the apartment sector.



29



---

RETAIL PROPERTIES



|                            |  |                                 |           |   |                                 |   |           |                                     |  |   |                           |   |  |               |           |   |               |     |   |  |     |  
|--------------------------- |  | ------------------------------- | --------- | - | ------------------------------- | - | --------- | ----------------------------------- |  | - | ------------------------- | - |  | ------------- | --------- | - | ------------- | --- | - |  | --- | -
|Six Months Ended June 30,   |  | Net InvestmentIncome/(Loss)2009 |           |   | Net InvestmentIncome/(Loss)2008 |   |           | Realized &UnrealizedGain/(Loss)2009 |  |   | UnrealizedGain/(Loss)2008 |   |  | Occupancy2009 |           |   | Occupancy2008 |    
|Property                    |  |                                 |           |   |                                 |   |           |                                     |  |   |                           |   |  |               |           |   |               |     |   |  |     |  
|Roswell, GA(1)              |  | $                               | 233,759   |   |                                 | $ | 915,047   |                                     |  | $ | (4,452,106                | ) |  | $             | (708,950  | ) |               | N/A |   |  | 82  | %
|Kansas City, KS(2)          |  |                                 | 20,732    |   |                                 |   | 7,487     |                                     |  |   |                          |   |  |               |          |   |               | N/A |   |  | N/A |  
|Hampton, VA                 |  |                                 | 502,705   |   |                                 |   | 669,087   |                                     |  |   | (1,813,256                | ) |  |               | 1,295,069 |   |               | 89  | % |  | 99  | %
|Ocean City, MD              |  |                                 | 566,769   |   |                                 |   | 322,381   |                                     |  |   | (1,506,885                | ) |  |               | 481,057   |   |               | 95  | % |  | 85  | %
|Westminster, MD             |  |                                 | 609,053   |   |                                 |   | 764,734   |                                     |  |   | (2,800,120                | ) |  |               | (933      | ) |               | 100 | % |  | 100 | %
|Dunn, NC                    |  |                                 | (267,016  | ) |                                 |   | 398,733   |                                     |  |   | 2,683                     |   |  |               | 89,377    |   |               | 34  | % |  | 65  | %
|CARS Preferred Equity       |  |                                 | 496,409   |   |                                 |   | 500,429   |                                     |  |   | (1,290,200                | ) |  |               | (584,592  | ) |               | N/A |   |  | N/A |  
|                            |  |                                 |           |   |                                 |   |           |                                     |  |   |                           |   |  |               |           |   |               |     |   |  |     |  
|                            |  | $                               | 2,162,411 |   |                                 | $ | 3,577,898 |                                     |  | $ | (11,859,884               | ) |  | $             | 571,028   |   |               |     |   |  |     |  
|                            |  |                                 |           |   |                                 |   |           |                                     |  |   |                           |   |  |               |           |   |               |     |   |  |     |  
|                            |  |                                 |           |   |                                
|Three Months Ended June 30, |  |                                 |           |   |                                 |   |           |                                     |  |   |                           |   |  |               |          
|Property                    |  |                                 |           |   |                                 |   |           |                                     |  |   |                           |   |  |               |           |   |               |     |  
|Roswell, GA(1)              |  | $                               | 24,499    |   |                                 | $ | 461,716   |                                     |  | $ | (344,374                  | ) |  | $             | (708,250  | ) |              
|Kansas City, KS(2)          |  |                                 | (1,602    | ) |                                 |   | (41,084   | )                                   |  |   |                          |   |  |               |          |   |              
|Hampton, VA                 |  |                                 | 239,955   |   |                                 |   | 333,683   |                                     |  |   | (408,513                  | ) |  |               | 598,405   |   |              
|Ocean City, MD              |  |                                 | 285,788   |   |                                 |   | 182,135   |                                     |  |   | (768,138                  | ) |  |               | 237,823   |   |              
|Westminster, MD             |  |                                 | 315,238   |   |                                 |   | 381,172   |                                     |  |   | (1,100,120                | ) |  |               | (100,933  | ) |              
|Dunn, NC                    |  |                                 | (298,005  | ) |                                 |   | 111,497   |                                     |  |   | 20,586                    |   |  |               | 155,205   |   |              
|CARS Preferred Equity       |  |                                 | 249,711   |   |                                 |   | 248,650   |                                     |  |   | (99,700                   | ) |  |               | (584,592  | ) |              
|                            |  |                                 |           |   |                                 |   |           |                                     |  |   |                           |   |  |               |           |   |              
|                            |  | $                               | 815,584   |   |                                 | $ | 1,677,769 |                                     |  | $ | (2,700,259                | ) |  | $             | (402,342  | ) |              
|                            |  |                                 |           |   |                                 |   |           |                                     |  |   |                           |   |  |               |           |   |              



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

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

Net Investment Income

Net investment income attributable to the general partners controlling
interest for the Partnerships retail properties was approximately $2.2 million for the six months ended June 30, 2009, a decrease of approximately $1.4 million from the prior year period. Net investment income attributable to the general
partners controlling interest for the Partnerships retail properties was approximately $0.8 million for the quarter ended June 30, 2009, a decrease of approximately $0.9 million from the prior year period. The decrease in net
investment income attributable to the general partners controlling interest for the six and three-month periods ended June 30, 2009 was largely due to (a) the loss of income related to the disposition of the Roswell, Georgia retail
property; (b) increased vacancy at the retail property in Hampton, Virginia; (c) an approximately $0.2 million reconciliation of a loss previously misallocated to the partner at the retail property in Dunn, North Carolina; and
(d) increased rent relief across each retail property. This decrease was partially offset by an increase in net investment income at the retail property in Ocean City, Maryland due to increased occupancy resulting from the completion of
redevelopment.

Realized and Unrealized Gain/(Loss)

The retail properties owned by the Partnership recorded a net realized and unrealized loss attributable to the general partners controlling interest of approximately $11.9 million for the six months ended
June 30, 2009, compared with a net unrealized gain attributable to the general partners controlling interest of approximately $0.6 million for the prior year period. The retail properties owned by the Partnership recorded a net realized
and unrealized loss attributable to the general partners controlling interest of approximately $2.7 million for the quarter ended June 30, 2009, compared with a net unrealized loss attributable to the general partners controlling
interest of approximately $0.4 million for the prior year period. The unrealized losses attributable to the general partners controlling interest for the six and three-month periods ended June 30, 2009 were primarily due to (a) a net
realized loss attributable to the general partners controlling interest of approximately $4.5 million at the retail property in Roswell, Georgia due to the disposition of the asset at a price below the appraised gross market value; (b) a
net unrealized loss attributable to the general partners controlling interest of approximately $1.3 million from the Capital Automotive Real Estate Services, or CARS, preferred equity investment due to increased market yield
expectations for similar financial investments and an increasingly high position in the capital stack; (c) deteriorating retail fundamentals resulting in increased vacancy and rent relief across the retail sector investments; and
(d) increased investment rates (average direct capitalization rate increases for the Partnerships retail investments excluding CARS of 80 and 57 basis points, respectively, for the six and three-month periods ended
June 30, 2009) and implementation of more conservative growth and market leasing projections reflecting the market downturn across the retail sector.



30



---

HOTEL PROPERTY



|                            |  |                                 |         |                                 |   |                           |  |   |                           |   |  |               |          |   |               |    |   |  |    |  
|--------------------------- |  | ------------------------------- | ------- | ------------------------------- | - | ------------------------- |  | - | ------------------------- | - |  | ------------- | -------- | - | ------------- | -- | - |  | -- | -
|Six Months Ended June 30,   |  | Net InvestmentIncome/(Loss)2009 |         | Net InvestmentIncome/(Loss)2008 |   | UnrealizedGain/(Loss)2009 |  |   | UnrealizedGain/(Loss)2008 |   |  | Occupancy2009 |          |   | Occupancy2008 |   
|Property                    |  |                                 |         |                                 |   |                           |  |   |                           |   |  |               |          |   |               |    |   |  |    |  
|Lake Oswego, OR             |  | $                               | 155,789 |                                 | $ | 529,259                   |  | $ | (2,470,329                | ) |  | $             | (100,758 | ) |               | 64 | % |  | 70 | %
|                            |  |                                 |         |                                 |  
|Three Months Ended June 30, |  |                                 |         |                                 |   |                           |  |   |                           |   |  |               |         
|Property                    |  |                                 |         |                                 |   |                           |  |   |                           |   |  |               |          |   |               |    |  
|Lake Oswego, OR             |  | $                               | 92,084  |                                 | $ | 280,402                   |  | $ | (974,778                  | ) |  | $             | 231,303  |   |              

Net Investment Income

Net investment income attributable to the general partners controlling interest for the Partnerships hotel property was approximately $0.2 million for the six months ended
June 30, 2009, a decrease of approximately $0.3 million from the prior year period. Net investment income attributable to the general partners controlling interest for the Partnerships hotel property was approximately $0.1 million
for the quarter ended June 30, 2009, a decrease of approximately $0.2 million from the prior year period. The decrease in net investment income attributable to the general partners controlling interest for the Partnerships hotel
property for the six and three-month periods ended June 30, 2009 was largely due to decreased occupancy and average daily room rate at the property as a result of the weakening hospitality market driven by decreased business and vacation
travel.

Unrealized Gain/(Loss)

The Partnerships hotel property recorded an unrealized loss attributable to the general partners controlling interest of approximately $2.5 million for the six months ended June 30, 2009, compared with an unrealized loss
attributable to the general partners controlling interest of approximately $0.1 million for the prior year period. The Partnerships hotel property recorded an unrealized loss attributable to the general partners controlling
interest of approximately $1.0 million for the quarter ended June 30, 2009, compared with an unrealized gain attributable to the general partners controlling interest of $0.2 million for the prior year period. The unrealized losses
attributable to the general partners controlling interest for the Partnerships hotel property for both the six and three-month periods ended June 30, 2009 were due to valuation declines caused by decreased occupancy and average
daily rate, increased investment rates (average direct capitalization rate increases for the Partnerships hotel investment of 100 and 75 basis points, respectively, for the six and three-month periods ended June 30, 2009), and
implementation of more conservative growth and market leasing projections reflecting the market downturn across the hotel sector.

Other

Other net investment loss attributable to the general partners controlling interest remained relatively unchanged from the prior year period for
the six month period ended June 30, 2009. Other net investment loss attributable to the general partners controlling interest decreased $0.1 million for the quarter ended June 30, 2009 over the prior year period. Other net investment
includes interest income from short-term investments, investment management fees, and portfolio level expenses.



31



---

(c) Inflation

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

Critical Accounting Policies

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

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

Accounting Pronouncements Adopted

The Partnership adopted FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 as of January 1, 2007. This interpretation prescribes a comprehensive model for how a Partnership should recognize, measure, present, and
disclose in its financial statements uncertain tax positions that the Partnership has taken or expects to take on a tax return. The adoption of FIN 48 had no effect to the financial position and result of operations of the Partnership.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and requires additional disclosures about fair value measurements. This statement does not require any new fair value measurements, but the application of this statement could
change current practices in determining fair value. This adoption did not change the methodology used to fair value our real estate investments.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115. This statement provides partnerships with an
option to report selected financial assets and liabilities at fair value.

SFAS No. 157 and SFAS No. 159 are effective for fiscal
years beginning after November 15, 2007 with early adoption permitted. The Partnership adopted SFAS No. 157 and SFAS No. 159 effective January 1, 2008, however, the Partnership did not make a fair value option election for its
existing debt. The adoption does not have any effect on the Partnerships consolidated financial position and results of operations.

In December 2007, FASB issued SFAS No. 141 (revised 2007) (SFAS 141R), Business Combinations. SFAS 141R expands the definition of a business and redefines the acquisition date in a merger and acquisition
transaction. It significantly modifies the existing SFAS 141, including changes to acquisition related contingent consideration, preacquisition contingencies, non controlling interest, restructuring costs, in-process R&D, goodwill and partial
acquisition. SFAS 141R is effective for acquisitions closing after the first annual reporting period beginning after December 15, 2008. The Partnerships adoption of this guidance effective January 1, 2009 did not have a material
effect on the Partnerships consolidated financial position or results of operations, but may have an effect on the accounting for future business combinations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 160 changes the accounting for minority interests, which will be
recharacterized as noncontrolling interests and classified by the parent company as a component of equity. Upon adoption, SFAS No. 160 requires retrospectively adoption of the presentation and disclosure requirements for existing minority
interests and prospective adoption for all other requirements. The Partnerships adoption of this guidance effective January 1, 2009 did not have a material effect on the Partnerships consolidated financial position or results of
operations, but did affect financial statement presentation and disclosure. Noncontrolling interests, previously reported as a liability, are now required to be reported as a separate component of equity on the balance sheet, and totaled $4.9
million December 31, 2008. In addition, net income (loss) attributable to the noncontrolling interest, which was previously reported as an expense and reflected within Net Investment Income is now reported as a separate amount below
Increase (decrease) in Net Assets Resulting from Operations, and totaled ($0.1) and ($0.1) million for the three and six months ended June 30, 2008, respectively.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment
guidance for debt securities and expands the presentation and disclosure requirements of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP also requires that the required annual disclosures for debt
and equity securities be made for interim reporting periods. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. This FSP is effective for interim and annual
reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Partnerships early adoption of this guidance effective January 1, 2009 did not have a material effect on
the Partnerships consolidated financial position or results of operations.



32



---

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, Fair
Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP also amends
the disclosure requirements in interim and annual periods. This FSP is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after
March 15, 2009. The Partnerships early adoption of this guidance effective January 1, 2009 did not have a material effect on the Partnerships consolidated financial position or results of operations.

In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies. This FSP requires an asset acquired or liability assumed in a business combination that arises from a contingency to be recognized at fair value at the acquisition date, if the acquisition date fair value of that asset or
liability can be determined during the measurement period. If the acquisition date fair value of an asset acquired or liability assumed in a business combination that arises from a contingency cannot be determined during the measurement period, the
asset or liability shall be recognized at the acquisition date using the guidance in SFAS No. 5, Accounting for Contingencies. This FSP also amends disclosure requirements. This FSP is effective for assets or liabilities arising
from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The Partnerships adoption of this guidance effective January 1, 2009 did not have a material effect on the Partnerships
consolidated financial position or results of operations.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments. This FSP requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also
amends the disclosure requirements. This FSP is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted. The Partnership adopted this guidance within the interim period ending June 30, 2009. The
Partnerships adoption of this guidance did not have a material effect on the Partnerships consolidated financial position or results of operations.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events. This statement addresses the accounting for and disclosure of subsequent events not addressed in other applicable Generally Accepted
Accounting Principles, including disclosure of the date through which subsequent events have been evaluated. This guidance is effective for interim or annual periods ending after June 15, 2009. The Partnerships adoption of this guidance
effective with the interim period ending June 30, 2009 did not have a material effect on the Partnerships consolidated financial position or results of operations.

New Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting
Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162. The FASBs Codification was launched on July 1, 2009 as the source of authoritative U.S. GAAP to be
applied by nongovernmental entities. The Codification is not intended to change U.S. GAAP but is a new structure which takes accounting pronouncements and organizes them by accounting topic. This statement is effective for financial statements
issued for interim and annual periods ending after September 15, 2009. This statement will become effective for the Partnership beginning with the interim reporting period ending September 30, 2009 and will impact the way the Partnerships
references U.S. GAAP accounting standards in the financial statements.

Valuation of Investments

Real Estate Investments - Real estate investments are carried at fair value. Properties owned are initially recorded at the purchase price plus
closing costs. Development costs and major renovations are capitalized as a component of cost, and routine maintenance and repairs are charged to expense as incurred. Real estate costs include the cost of acquired property, including all the
tangible and intangible assets. Tangible assets include the value of all land, building and tenant improvements at the time of acquisition. Intangible assets include the value of any above and below market leases, in-place leases, and tenant
relationships at the time of acquisition.

The purpose of an appraisal is to estimate the fair value of real estate as of a specific date.
In accordance with SFAS 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The estimate of fair value is based on the
conventional approaches to value, all of which require the exercise of subjective judgment. The three approaches are: (1) current cost of reproducing the real estate less deterioration and functional and economic obsolescence;
(2) discounting a series of income streams and reversion at a specific yield or by directly capitalizing a single year income estimate by an appropriate factor; and (3) value indicated by recent sales of comparable real estate in the
market. In the reconciliation of these three approaches, the independent appraiser uses one or a combination of them, to come up with the approximated value for the type of real estate in the market.

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.



33



---

|ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

Interest Rate Risk  The general partners controlling interest exposure to market rate risk for changes in interest rates relates to approximately 41.11% of its investment portfolio as of June 30, 2009, which consists
primarily of short-term commercial paper and fixed and variable interest rate debt. The Partnership does not use derivative financial instruments. As a matter of policy, the Partnership places its investments with high quality debt security issuers,
limits the amount of credit exposure to any one issuer, limits duration by restricting the term, and holds investments to maturity except under unusual circumstances.

The table below presents the amounts and related weighted interest rates of the Partnerships cash equivalents and short-term investments at June 30, 2009:



|                          |  |            |  |                                  |      |                      |      |  
|------------------------- |  | ---------- |  | -------------------------------- | ---- | -------------------- | ---- | -
|                          |  | Maturity   |  | Estimated Market Value(millions) |      | AverageInterest Rate |     
|Cash and Cash equivalents |  | 0-3 months |  | $                                | 31.7 |                      | 1.85 | %

The table below discloses the Partnerships debt as of June 30, 2009. The fair value of
the Partnerships long-term debt is affected by changes in market interest rates. The following table presents principal cash flows based upon maturity dates of the debt obligations and the related weighted-average interest rates by expected
maturity dates for the debt.



|                                                                  |  |      |       |   |      |   |        |      |  |   |      |   |  |      |      |   |            |   |       |       |  |   |                     |   |  |   |        |   |  |   |       
|----------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ------ | ---- |  | - | ---- | - |  | ---- | ---- | - | ---------- | - | ----- | ----- |  | - | ------------------- | - |  | - | ------ | - |  | - | ------
|Investment level debt (in $ thousands), including current portion |  | 2009 |       |   | 2010 |   |        | 2011 |  |   | 2012 |   |  | 2013 |      |   | Thereafter |   |       | Total |  |   | EstimatedFair Value
|Average Fixed Interest Rate                                       |  |      | 6.75  | % |      |   | 6.75   | %    |  |   | 6.75 | % |  |      | 6.75 | % |            |   | 6.75  | %     |  |   | 6.75                | % |  |   | 6.75   | % |  |   |       
|Fixed Rate                                                        |  | $    | 9,017 |   |      | $ | 566    |      |  | $ | 604  |   |  | $    | 646  |   |            | $ | 463   |       |  | $ | 4,475               |   |  | $ | 15,771 |   |  | $ | 15,479
|Variable Rate                                                     |  |      |      |   |      | $ | 15,071 |      |  |   |     |   |  |      |     |   |            | $ | 9,000 |       |  |   |                    |   |  | $ | 24,071 |   |  | $ | 23,251
|Premium/(Discount) on Investment Level Debt                       |  |      |      |   |      |   |       |      |  |   |     |   |  |      |     |   |            |   |       |       |  | $ | (24                 | ) |  | $ | (24    | ) |  |   |      
|                                                                  |  |      |       |   |      |   |        |      |  |   |      |   |  |      |      |   |            |   |       |       |  |   |                     |   |  |   |        |   |  |   |       
|Total Investment Level Debt                                       |  | $    | 9,017 |   |      | $ | 15,637 |      |  | $ | 604  |   |  | $    | 646  |   |            | $ | 9,463 |       |  | $ | 4,451               |   |  | $ | 39,818 |   |  | $ | 38,731
|                                                                  |  |      |       |   |      |   |        |      |  |   |      |   |  |      |      |   |            |   |       |       |  |   |                     |   |  |   |        |   |  |   |       

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



|Item 4. | Controls and Procedures
|------- | -----------------------

In order to ensure that
the information we must disclose in our filings with the Securities and Exchange Commission, or SEC, is recorded, processed, summarized, and reported on a timely basis, the Companys management, including our Chief Executive Officer
and Chief Financial Officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), under the Securities Exchange Act of 1934, as amended as of June 30,
2009. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2009, 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, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), during the quarter ended June 30, 2009, that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



34



---

PART II  OTHER INFORMATION



|Item 1A. | Risk Factors
|-------- | ------------

You should carefully consider the
following risks. These risks could materially affect our business, results of operations or financial condition, or cause our actual results to differ materially from those expected or those expressed in any forward looking statements made by or on
behalf of the Company. These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under Forward-Looking Statements above and the risks of our businesses described
elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2008.

Our
business and results of operations have been materially adversely affected by the adverse conditions in the global financial markets and economic conditions generally.

Our results of operations have been materially adversely affected by conditions in the global financial markets and the economy generally, both in the U.S. and elsewhere around the world.
Global financial markets have experienced stress that began in the second half of 2007. Volatility and disruption in the global financial markets reached unprecedented levels in the Post World War II period. The availability and cost of credit has
been materially affected. These factors, combined with economic conditions in the U.S. including depressed home and commercial real estate prices and increasing foreclosures, falling equity market values, declining business and consumer confidence
and rising unemployment, have precipitated a severe economic recession and fears of even more severe and prolonged adverse economic conditions.

The global fixed-income markets are experiencing a period of both extreme volatility and limited market liquidity, which has affected a broad range of asset classes and sectors. As a result, the market for fixed income instruments has
experienced decreased liquidity, increased price volatility, credit downgrade events, and increased probability of default. Global equity markets have also been experiencing heightened volatility. These events have had and may continue to have an
adverse effect on our business. Our revenues are likely to decline in such circumstances, the cost of meeting our obligations to our customers may increase, and our profit margins could erode. In addition, in the event of a prolonged or severe
economic downturn, we could incur significant losses in our investment portfolio.

The demand for our products could be adversely affected
in an economic downturn characterized by higher unemployment, lower family income, lower consumer spending, lower corporate earnings and lower business investment. We also may experience a higher incidence of claims and lapses or surrenders of
policies. Our policyholders may choose to defer or stop paying insurance premiums. We cannot predict definitively whether or when such actions, which could impact our business, results of operations, cash flows and financial condition, may occur.

Governmental actions in response to the current financial crisis may not be effective and could subject us to additional regulation.
Participation by Prudential Financial in certain of these governmental programs could also result in limitations or restrictions on our businesses or otherwise restrict our flexibility.

In response to the market dislocation affecting the banking system and financial markets, on October 3, 2008, President Bush signed the Emergency Economic Stabilization Act of 2008, or EESA,
into law. Pursuant to the EESA, the U.S. Treasury has the authority to, among other things, purchase up to $700 billion of mortgage-backed and other securities from financial institutions for the purpose of stabilizing the financial
markets. On October 14, 2008, the U.S. Treasury announced that it would use EESA authority to invest an aggregate of $250 billion (of the first $350 billion released under EESA) in capital issued by qualifying U.S. financial institutions under
the U.S. Treasurys Capital Purchase Program, which is part of the Troubled Asset Relief Program, or TARP. The TARP Capital Purchase Program involves the issuance by qualifying institutions of preferred stock and warrants to purchase common
stock to the U.S. Treasury. On June 1, 2009, Prudential Financial, our ultimate parent, announced that, after conducting a thorough review, we would not participate in the TARP Capital Purchase Program. Concurrently, with the announcement of
the TARP Capital Purchase Program in coordination with the U.S. Treasury, the FDIC announced the Temporary Liquidity Guarantee Program, through which it guarantees certain newly issued senior unsecured debt issued by FDIC insured institutions and
their qualifying holding companies, as well as funds over $250,000 in non-interest-bearing transaction deposit accounts. In addition, since March 2008, the Federal Reserve has created several lending facilities to stabilize financial markets
including the Term Asset-Backed Securities Loan Facility, or TALF. The TALF is designed to provide secured financing for newly issued asset-backed securities, including (as of July 2009) certain high-quality commercial mortgage-backed securities
issued before January 1, 2009.

On February 10, 2009, the U.S. Treasury announced a Financial Stability Plan to build upon
existing programs and earmark the second $350 billion of funds that were authorized under the EESA and released in January 2009. The elements of the Financial Stability Plan, as described by the U.S. Treasury, are a Capital Assistance Program and
Financial Stability Trust to make capital available to financial institutions through additional purchases of preferred stock, a Public-Private Investment Program, or PPIP, to buy legacy loans and assets from financial institutions, a Consumer and
Business Lending Initiative to restart securitization markets for loans to consumers and businesses by expanding upon TALF, and a comprehensive housing program to, among other things, help reduce mortgage payments and interest rates. The U.S.
Treasury has stated that the Financial Stability Plan will require high levels of transparency and accountability standards and dividend, acquisition and executive compensation restrictions for financial institutions that receive government
assistance going forward.



35



---

In the first and second quarters of 2009, the U.S. Treasury, in conjunction with the FDIC and the Federal
Reserve, announced details regarding the PPIP. The PPIP has two separate parts to address the problem of legacy assets  real estate loans held directly on the books of banks (legacy loans) and securities backed by loan
portfolios (legacy securities). Under the Legacy Loans Program portion of the PPIP, the U.S. Treasury will invest alongside private investors in individual investment funds referred to as Public-Private Investment Funds, which will
purchase eligible asset pools from depository institutions and the FDIC on a discrete basis. The FDIC will provide a guarantee for the debt financing issued by the Public-Private Investment Funds to fund the asset purchases. The FDIC has stated that
it plans to test the funding mechanism contemplated by the Legacy Loan Program during the summer of 2009, but an official commencement date for the program has not been announced. Under the Legacy Securities Program, the U.S. Treasury will co-invest
with, and provide leverage to pre-approved asset managers to support the market for certain legacy securities. Legacy securities eligible for the program include commercial mortgage backed and residential mortgage backed securities originated prior
to 2009 with a rating of AAA at the time of origination. In July 2009, the U.S. Treasury selected nine firms to participate as fund managers in the initial round of the Legacy Securities Program and announced that it will invest up to $30 billion in
the debt and equity of the corresponding Public-Private Investment Funds.

Pruco Life of New Jersey Insurance Companys ultimate
parent, Prudential Financial, applied in October 2008 to participate in the TARP Capital Purchase Program, and in May 2009 it received preliminary approval from the U.S. Treasury to participate in the Program. However, on June 1, 2009 the
Company announced that it would not participate in the Capital Purchase Program.

In the second half of 2009, Prudential Financial
participated in TALF as an eligible borrower. As of June 30, 2009, it had $1,250 million of asset-backed securities purchased under TALF and received secured financing from the Federal Reserve of $1,167 million related to the purchase of these
securities.Prudential Financial also continues to evaluate other government sponsored programs for which it may be eligible

The
U.S. federal government has taken or is considering taking other actions to address the financial crisis that could further impact our business. We cannot predict with any certainty whether these actions will be effective or the effect they may have
on the financial markets or on our business, results of operations, cash flows and financial condition.

On June 17, 2009, the Obama
Administration announced proposals to reform the national regulation of various financial institutions. Depending on the manner of adoption of these or other proposals, Prudential Financial could become subject to increased federal regulation,
either as a bank holding company or a Tier 1 financial holding company. Such regulation could involve higher capital requirements, limits on business activities, limits on leverage and other regulatory supervision, including by the Board
of Governors of the Federal Reserve System. We cannot predict the form in which such proposals will be adopted (if at all) or their applicability to or effect on our business, financial condition or results of operations.

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

Adverse capital market conditions have affected and may continue
to affect the availability and cost of borrowed funds and could impact our ability to refinance existing borrowings, thereby ultimately impacting our profitability and ability to support or grow our businesses. We need liquidity to pay our operating
expenses, interest on our debt and replace certain maturing debt obligations. Without sufficient liquidity, we could be forced to curtail certain of our operations, and our business could suffer. The principal sources of our liquidity are insurance
premiums, annuity considerations, deposit funds and cash flow from our investment portfolio and assets, consisting mainly of cash or assets that are readily convertible into cash.

In the normal course of business, the Partnership enters into loan agreements with certain lenders to finance its real estate investment transactions. Unfavorable economic conditions could
increase related borrowing costs, limit access to the capital markets or result in a decision by lenders not to extend credit to the Partnership. There is no guarantee that the Partnerships borrowing arrangements or ability to obtain leverage
will continue to be available, or if available, will be available on terms and conditions acceptable to the Partnership. Further, these loan agreements contain, among other conditions, events of default and various covenants and representations. In
the normal course of business, the Partnership may be in the process of renegotiating terms for loans outstanding that have passed their maturity dates. At June 30, 2009, the Partnership had no outstanding matured loans.

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

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



36



---

Market fluctuations and general economic, market and political conditions may adversely affect our
business and profitability.

Even under relatively more favorable market conditions (such as those prevailing before the second half of
2007), our insurance products and certain of our investment products, as well as our investment returns and our access to and cost of financing, are sensitive to fixed income, equity, real estate and other market fluctuations and general economic,
market and political conditions. These fluctuations and conditions could adversely affect our results of operations, financial position and liquidity, including in the following respects:



| |  | All real estate investments are subject to varying degrees of risk. The yields available from investments depend on the amounts of income generated and expenses
incurred. If investment properties do not generate revenues sufficient to meet operating expenses, including debt service and capital expenditures, cash flow will be adversely affected.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The revenues and value of a particular real estate investment may be adversely affected by a number of factors, including, but not limited to: the cyclical
nature of the real estate market, availability of credit and debt, general national economic conditions, local economic conditions, local real estate conditions, and fluctuations in operating costs, including real estate taxes and utilities. Certain
significant expenditures associated with each equity investment, such as mortgage payments, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investment. If a
property is mortgaged to secure payment of indebtedness, and if the mortgaged property is unable to produce enough revenue to cover its mortgage or other debt payments, a loss could be sustained as a result of foreclosure on the property or the
exercise of other remedies by the lender. In addition, a propertys revenues and real estate value may also be affected by such factors as potential liability under applicable federal, state and local laws and regulations, which may vary widely
depending upon location, including tax laws, environmental laws, Americans with Disabilities Act accessibility requirements, and rent stabilization laws.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The dramatic deterioration in the capital markets and increasing weakness in the overall economy may adversely affect all sectors of the real estate market and may lead to declines in property
values. Adverse capital market conditions could impact the liquidity of our investments, affecting their value and potentially resulting in higher realized and/or unrealized losses. These events may have an adverse affect on our investment results.



| |  | The estimated fair value of real estate and real estate related assets is determined through an appraisal process. There continues to be significant disruptions
in the global capital, credit and real estate markets. These disruptions have led to, among other things, a significant decline in the volume of transaction activity, in the fair value of many real estate and real estate related investments, and a
significant contraction in short-term and long-term debt and equity funding sources. The decline in liquidity and prices of real estate and real estate related investments, as well as the availability of observable transaction data and inputs, may
have made it more difficult to determine the fair value of such investments. As a result, these estimated fair values may vary significantly from the prices at which the real estate investments would sell, since market prices of real estate
investments can only be determined by negotiation between a willing buyer and seller and could be material to the financial statements.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Regardless of market conditions, certain investments we hold, including the properties in the Account, are relatively illiquid. If we needed to sell these investments, we may have difficulty in selling them for
acceptable prices.



| |  | Disruptions, uncertainty or volatility in the financial markets may limit our access to capital required to operate our business. These market conditions may
limit our ability to replace, in a timely manner, maturing obligations and access the capital necessary to replace assets withdrawn by customers.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Market conditions could also impact our ability to fund foreseen and unforeseen cash and collateral requirements, potentially inhibiting our ability to perform
under our counterparty obligations, support business initiatives and increasing realized losses.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | A change in market conditions, including prolonged periods of high inflation, could cause a change in consumer sentiment adversely affecting persistency of our
life insurance and annuity products, including those offering the Account as an investment option.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



37



---

The occurrence of natural or man-made disasters could adversely affect our results of operations and
financial condition.

The occurrence of natural disasters, including hurricanes, floods, earthquakes, tornadoes, fires, explosions,
pandemic disease and man-made disasters, including acts of terrorism and military actions, could adversely affect our results of operations or financial condition, including in the following respects:



| |  |  | A natural or man-made disaster could result in losses in our investment portfolio or the failure of our counterparties to perform, or cause significant
volatility in global financial markets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Catastrophic loss of life due to natural or man-made disasters could cause us to pay benefits at higher levels and/or materially earlier than anticipated
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pandemic disease, caused by a virus such as H5N1, the avian flu virus, or the swine flu virus, could have a severe adverse effect on
Prudential Financials business. The potential impact of such a pandemic on Prudential Financials results of operations and financial position is highly speculative, and would depend on numerous factors, including: in the case of the
avian flu virus, the probability of the virus mutating to a form that can be passed from human to human; the rate of contagion if and when that occurs; the regions of the world most affected; the effectiveness of treatment for the infected
population; the rates of mortality and morbidity among various segments of the population that are insured under the products that offered the Account versus the population not so insured; the possible macroeconomic effects of a pandemic on the
Partnerships asset portfolio; the effect of lapses and surrenders of existing products, and many other variables.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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
|------- | --------



|     |  |                                                          
|---- |  | ---------------------------------------------------------
|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.



38



---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

in respect of

Pruco Life of New Jersey Variable

Contract Real Property Account

(Registrant)





Date: August 13, 2009



By:

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




39