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 September 30, 2010

OR



| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
| | --------------------------------------------------------

| | SECURITIES EXCHANGE ACT OF 1934
| | -------------------------------

Commission file number 033-20018

PRUCO LIFE INSURANCE COMPANY OF NEW
JERSEY

in respect of

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

(Exact name of registrant as specified in its charter)



|                                                               |  |  |  |                                  
|-------------------------------------------------------------- |  |  |  | ---------------------------------
|New
Jersey                                                     |  |  |  | 22-2426091                       
|(State or other jurisdiction 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



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PRUCO LIFE OF NEW
JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

(Registrant)

INDEX



|                                                                                               |  |      |    | 
|---------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                               |  | Page |   
|Forward Looking Statement Disclosure                                                           |  |      | 3  | 
|Part I - Financial Information                                                                 |  |      |    | 
|Item 1. Financial Statements (Unaudited)                                                       |  |      |    | 
|A. PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT                            |  |      |    | 
|Statements of Net Assets September 30, 2010andDecember 31, 2009                               |  |      | 4  | 
|Statements of Operations Nine Months Ended September 30,
2010 and 2009                        |  |      | 4  | 
|Statements of Changes in Net Assets Nine Months Ended
September 30, 2010 and 2009             |  |      | 4  | 
|Notes to the Financial Statements of the Real Property Account                                 |  |      | 5  | 
|B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP                                  |  |      |    | 
|Consolidated Statements of Assets and Liabilities September 30, 2010andDecember 31, 2009      |  |      | 15 | 
|Consolidated Statements of Operations Nine Months Ended
September 30, 2010 and 2009           |  |      | 16 | 
|Consolidated Statements of Changes in Net AssetsNine Months
Ended September 30, 2010 and 2009 |  |      | 17 | 
|Consolidated Statements of Cash Flows Nine Months Ended
September 30, 2010 and 2009           |  |      | 18 | 
|Consolidated Schedules of Investments September 30,
2010andDecember 31, 2009                  |  |      | 19 | 
|Notes to Consolidated Financial Statements of the Partnership                                  |  |      | 21 | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  |  |      | 31 | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                             |  |      | 39 | 
|Item 4. Controls and Procedures                                                                |  |      | 39 | 
|Part II - Other Information                                                                    |  |      |    | 
|Item 1A. Risk Factors                                                                          |  |      | 40 | 
|Item 6.    Exhibits                                                                            |  |      | 41 | 
|Signatures                                                                                     |  |      | 42 | 



2



---



Forward-Looking Statement Disclosure

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



3



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FINANCIAL STATEMENTS OF

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

STATEMENTS OF NET ASSETS

September 30, 2010 and December 31, 2009



|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|---------------------------------------------------------------------------------------------- |  | ------------------------------- | --------- |  | ------------------ | - | ----------- | -------------------- |  | - | ------------------ |  |  | - | --------- | 
|                                                                                               |  | September 30, 2010  (unaudited) |           |  | December 31, 2009  |   |             |                      | 
|ASSETS                                                                                         |  |                                 |           |  |                    |   |             |                      | 
|Investment in The Prudential Variable Contract Real Property Partnership                       |  | $                               | 7,518,428 |  |                    | $ | 7,317,018   |                      | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      | 
|Net Assets                                                                                     |  | $                               | 7,518,428 |  |                    | $ | 7,317,018   |                      | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      | 
|NET ASSETS, representing:                                                                      |  |                                 |           |  |                    |   |             |                      | 
|Equity of contract owners                                                                      |  | $                               | 5,297,903 |  |                    | $ | 5,103,774   |                      | 
|Equity of Pruco Life Insurance Company of New Jersey                                           |  |                                 | 2,220,525 |  |                    |   | 2,213,244   |                      | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      | 
|                                                                                               |  | $                               | 7,518,428 |  |                    | $ | 7,317,018   |                      | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      | 
|Units
outstanding                                                                              |  |                                 | 3,119,241 |  |                    |   | 3,237,668   |                      | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      | 
|Portfolio shares
held                                                                          |  |                                 | 271,295   |  |                    |   | 282,778     |                      | 
|Portfolio net asset value per share                                                            |  | $                               | 27.71     |  |                    | $ | 25.88       |                      | 
|                                                                                               |  |                                 |           | 
|STATEMENTS OF OPERATIONS                                                                       |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|For the three and nine month periods ended September 30, 2010 and 2009                         |  | 1/1/2010-9/30/2010              |           |  | 1/1/2009-9/30/2009 |   |             | 7/1/2010-9/30/2010   |  |   | 7/1/2009-9/30/2009 | 
|                                                                                               |  | (unaudited)                     |           |  | (unaudited)        |   |             | (unaudited)          |  |   | (unaudited)        | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    | 
|INVESTMENT INCOME                                                                              |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|Net investment income from Partnership operations                                              |  | $                               | 268,216   |  |                    | $ | 228,647     |                      |  | $ | 95,238             |  |  | $ | 75,415    | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|                                                                                               |  |                                 |           | 
|EXPENSES                                                                                       |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|Charges to contract owners for assuming mortality risk and expense risk and for administration |  |                                 | 21,962    |  |                    |   | 24,520      |                      |  |   | 7,481              |  |  |   | 7,625     | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|NET INVESTMENT INCOME                                                                          |  |                                 | 246,254   |  |                    |   | 203,947     |                      |  |   | 87,757             |  |  |   | 67,970    | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|                                                                                               |  |                                 |           | 
|NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS                                         |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|Net change in unrealized gain (loss) on investments in Partnership                             |  |                                 | 129,767   |  |                    |   | (1,769,224) |                      |  |   | 207,092            |  |  |   | (420,891) | 
|Net realized gain (loss) on sale of investments in Partnership                                 |  |                                 | 102,584   |  |                    |   | (194,303)   |                      |  |   | 8,461              |  |  |   | (194)     | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|NET GAIN (LOSS) ON INVESTMENTS                                                                 |  |                                 | 232,351   |  |                    |   | (1,963,527) |                      |  |   | 215,553            |  |  |   | (421,085) | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|                                                                                               |  |                                 |           | 
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS                                |  | $                               | 478,605   |  |                    | $ | (1,759,580) |                      |  | $ | 303,310            |  |  | $ | (353,295) | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|                                                                                               |  |                                 |           | 
|STATEMENTS OF CHANGES IN NET ASSETS                                                            |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|For the three and nine month periods ended September 30, 2010 and 2009                         |  | 1/1/2010-9/30/2010              |           |  | 1/1/2009-9/30/2009 |   |             | 7/1/2010 - 9/30/2010 |  |   | 7/1/2009-9/30/2009 | 
|                                                                                               |  | (unaudited)                     |           |  | (unaudited)        |   |             | (unaudited)          |  |   | (unaudited)        | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    | 
|OPERATIONS                                                                                     |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|Net investment income                                                                          |  | $                               | 246,254   |  |                    | $ | 203,947     |                      |  | $ | 87,757             |  |  | $ | 67,790    | 
|Net change in unrealized gain (loss) on investments in Partnership                             |  |                                 | 129,767   |  |                    |   | (1,769,224) |                      |  |   | 207,092            |  |  |   | (420,891) | 
|Net realized gain (loss) on sale of investments in Partnership                                 |  |                                 | 102,584   |  |                    |   | (194,303)   |                      |  |   | 8,461              |  |  |   | (194)     | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|                                                                                               |  |                                 |           | 
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS                                |  |                                 | 478,605   |  |                    |   | (1,759,580) |                      |  |   | 303,310            |  |  |   | (353,295) | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|                                                                                               |  |                                 |           | 
|CAPITAL TRANSACTIONS                                                                           |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|Net (withdrawals) by contract owners                                                           |  |                                 | (137,720) |  |                    |   | (127,532)   |                      |  |   | (65,439)           |  |  |   | (43,426)  | 
|Net contributions (withdrawals) by Pruco Life Insurance Company of New Jersey                  |  |                                 | (139,475) |  |                    |   | (164,324)   |                      |  |   | 72,920             |  |  |   | 51,051    | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|                                                                                               |  |                                 |           | 
|NET INCREASE (DECREASE) IN NET ASSETS                                                          |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|RESULTING FROM CAPITAL TRANSACTIONS                                                            |  |                                 | (277,195) |  |                    |   | (291,856)   |                      |  |   | 7,481              |  |  |   | 7,625     | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|                                                                                               |  |                                 |           | 
|TOTAL INCREASE (DECREASE) IN NET ASSETS                                                        |  |                                 | 201,410   |  |                    |   | (2,051,436) |                      |  |   | 310,791            |  |  |   | (345,670) | 
|                                                                                               |  |                                 |           | 
|NET ASSETS                                                                                     |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|Beginning of period                                                                            |  |                                 | 7,317,018 |  |                    |   | 9,322,498   |                      |  |   | 7,207,637          |  |  |   | 7,616,732 | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 
|End of period                                                                                  |  | $                               | 7,518,428 |  |                    | $ | 7,271,062   |                      |  | $ | 7,518,428          |  |  | $ | 7,271,062 | 
|                                                                                               |  |                                 |           |  |                    |   |             |                      |  |   |                    |  |  |   |           | 

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



4



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NOTES TO THE FINANCIAL STATEMENTS
OF

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

September 30, 2010

(Unaudited)

Note 1: General

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

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

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

Note 2: Summary of Significant Accounting Policies and Pronouncements



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

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

The interim financial data as ofSeptember 30, 2010and for thethree and nine month periods ended September 30, 2010and2009is unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim periods.

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

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

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



5



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

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

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

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

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

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

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

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



6



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

The investment in the Partnership is based on the Accounts proportionate interest of the Partnerships fair value. AtSeptember 30, 2010 and December 31, 2009the Accounts interest in the Partnership was4.4% or 271,295shares and4.4% or 282,778shares respectively. Properties owned by the Partnership are illiquid and based on estimated fair value as discussed in the notes to the Partnerships unaudited financial statements.



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

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



|D. | Equity of Pruco Life Insurance Company of New Jersey
|-- | ----------------------------------------------------

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

Note 3:  Charges and Expenses



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

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



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

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



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

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



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

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



7



---



Also a deferred sales
charge is imposed upon the withdrawals of certain purchase payments to compensate Pruco Life of New Jersey for sales and other marketing expenses for SPVA and SPVL. The amount of any sales charge will depend on the amount withdrawn and the number of
contract years that have elapsed since the contract owner or annuitant made the purchase payments deemed to be withdrawn. 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.



|F. | Annual Maintenance Charge
|-- | -------------------------

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

Note 4:  Taxes

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

Note 5:  Net Withdrawals by Contract Owners

Net contract owner withdrawals for the real estate investment option in Pruco Life of New Jerseys variable insurance and variable
annuity products for thethree and nine month periods ended September 30, 2010and2009,were as follows:



|                                             |  |      |           |  |      |  |           |  |  | 
|-------------------------------------------- |  | ---- | --------- |  | ---- |  | --------- |  |  | 
|Three Months Ended September 30, (Unaudited) |  |      |          
|                                             |  | 2010 |           |  | 2009 |  |          
|VAL                                          |  |      | $(54,793) |  |      |  | $(34,042) |  | 
|VLI                                          |  |      | (10,520)  |  |      |  | (2,801)   |  | 
|SPVA                                         |  |      | 0         |  |      |  | (0)       |  | 
|SPVL                                         |  |      | (127)     |  |      |  | (6,584)   |  | 
|TOTAL                                        |  |      | $(65,440) |  |      |  | $(43,427) |  | 
|                                             |  |      |           |  |      |  |           |  | 



8



---



|                                            |  |      |            |  |      |  |            |  |  | 
|------------------------------------------- |  | ---- | ---------- |  | ---- |  | ---------- |  |  | 
|Nine Months Ended September 30, (Unaudited) |  |      |           
|                                            |  | 2010 |            |  | 2009 |  |            | 
|VAL                                         |  |      | $(118,555) |  |      |  | $(61,426)  |  | 
|VLI                                         |  |      | (18,796)   |  |      |  | (40,748)   |  | 
|SPVA                                        |  |      | (0)        |  |      |  | (18,456)   |  | 
|SPVL                                        |  |      | (369)      |  |      |  | (6,902)    |  | 
|TOTAL                                       |  |      | $(137,720) |  |      |  | $(127,532) |  | 
|                                            |  |      |            |  |      |  |            |  | 



9



---



Note 6:  Partnership
Distributions

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

Note 7:  Unit Information

Outstanding units and unit values atSeptember 30, 2010andDecember 31, 2009were as follows:



|                                                                                                                 |  |                      |  |                    |  |  |  | 
|---------------------------------------------------------------------------------------------------------------- |  | -------------------- |  | ------------------ |  |  |  | 
|                                                                                                                 |  | September 30, 2010   |  | December 31, 2009  |  |  |  | 
|                                                                                                                 |  | (Unaudited)          |  | (Unaudited)        |  |  | 
|Units
Outstanding:                                                                                               |  | 3,119,241            |  | 3,237,668          |  |  | 
|Unit
Value:                                                                                                      |  | 2.058607 to 2.549735 |  | 1.94013 to 2.38693 |  |  | 
|                                                                                                                 |  |                      | 
|Note 8:  Financial Highlights                                                                                    |  |                      |  |                    |  | 
|                                                                                                                
|The range of total return for thethree and nine month periods ended September 30,
2010 and 2009,were as follows:

|             |  |                                               |                |  |  |  |      |                    |  | 
|------------ |  | --------------------------------------------- | -------------- |  |  |  | ---- | ------------------ |  | 
|             |  |                                              
|             |  | Three Months Ended
September 
30, (Unaudited) |                | 
|             |  | 2010                                          |                |  |  |  | 2009 |                   
|Total Return |  |                                               | 3.98% to 4.22% |  |  |  |      | -4.84% to -4.62%   | 
|             |  | Nine Months Ended September 30,
(Unaudited)   |               
|             |  | 2010                                          |                |  |  |  | 2009 |                   
|Total Return |  |                                               | 6.11% to 6.82% |  |  |  |      | -19.52% to -18.98% | 



10



---



Note 9:  Fair Value
Disclosure

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

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

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

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

The investment in
the Partnership is based on the Accounts proportionate interest of the Partnerships fair value which approximates the Partnerships net asset value. Properties owned by the Partnership are illiquid 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 unaudited financial statements.

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

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

In general, the input values used in the appraisal process are unobservable, therefore unless indicated otherwise; underlying assets in
the Partnership are classified as Level 3 under the fair value hierarchy. During the three and nine months ended September, 30, 2010, there were no transfers between Level 1 and Level 2.



11



---



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 September 30, 2010 |      
|                                                                         |  |                                               |       | 
|Assets:                                                                  |  | AmountsMeasured at FairValue 09/30/10         |       |  | Quoted Prices in
Active Markets for Identical Assets (Level 1) |   |   | SignificantOtherObservableInputs (Level 2) |  |   | SignificantUnobservable Inputs    (Level 3) | 
|                                                                         |  |                                               |       | 
|Investment in The Prudential Variable Contract Real Property Partnership |  | $                                             | 7,518 |  |                                                                | $ | - |                                            |  | $ | -                                           |  |  | $ | 7,518 | 
|                                                                         |  |                                               |       |  |                                                                |   |   |                                            |  |   |                                             |  |  |   |       | 
|                                                                         |  |                                               |       | 
|Total Assets                                                             |  | $                                             | 7,518 |  |                                                                | $ | - |                                            |  | $ | -                                           |  |  | $ | 7,518 | 
|                                                                         |  |                                               |       | 
|                                                                         | 
|                                                                         |  | ($ in 000s)                                  |      
|                                                                         |  | Fair Value Measurements at December 31, 2009  |      
|                                                                         |  |                                               |       | 
|Assets:                                                                  |  | AmountsMeasured at
Fair Value12/31/2009       |       |  | Quoted Prices inActive Marketsfor IdenticalAssets (Level 1)    |   |   | SignificantOtherObservableInputs (Level 2) |  |   | SignificantUnobservable Inputs    (Level 3) | 
|                                                                         |  |                                               |       | 
|Investment in The Prudential Variable Contract Real Property Partnership |  | $                                             | 7,317 |  |                                                                | $ | - |                                            |  | $ | -                                           |  |  | $ | 7,317 | 
|                                                                         |  |                                               |       |  |                                                                |   |   |                                            |  |   |                                             |  |  |   |       | 
|                                                                         |  |                                               |       | 
|Total Assets                                                             |  | $                                             | 7,317 |  |                                                                | $ | - |                                            |  | $ | -                                           |  |  | $ | 7,317 | 
|                                                                         |  |                                               |       | 



12



---



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 thethree and nine
monthperiods endedSeptember 30, 2010 and September 30, 2009.

Table 2:

|                                                                                                                        |  |                                                                                                                      |         | 
|----------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- | ------- | 
|                                                                                                                        |  | ($ in 000s)                                                                                                         |        
|                                                                                                                        | 
|                                                                                                                        |  | Fair Value MeasurementsUsing SignificantUnobservable Inputs for the  nine months ending September 30,  2010(Level 3) |        
|                                                                                                                        | 
|Beginning balance @ 01/01/10                                                                                            |  | $                                                                                                                    | 7,317   | 
|                                                                                                                        | 
|Total gains or losses (realized/unrealized)
included in earnings (or changes in net assets) from Partnership operations |  | $                                                                                                                    | 232     | 
|Net Investment Income from Partnership operations                                                                       |  | $                                                                                                                    | 268     | 
|Acquisition/Additions                                                                                                   |  |                                                                                                                      | -       | 
|Equity Income                                                                                                           |  |                                                                                                                      | -       | 
|Contributions                                                                                                           |  |                                                                                                                      | -       | 
|Disposition/Settlements                                                                                                 |  | $                                                                                                                    | (299)   | 
|Equity losses                                                                                                           |  |                                                                                                                      | -       | 
|Distributions                                                                                                           |  |                                                                                                                      | -       | 
|                                                                                                                        |  |                                                                                                                      |         | 
|Ending balance @ 09/30/10                                                                                               |  | $                                                                                                                    | 7,518   | 
|                                                                                                                        |  |                                                                                                                      |         | 
|                                                                                                                        | 
|The amount of total gains or losses for the period included in earnings                                                 |  |                                                                                                                      |         | 
|(or changes in net assets) attributable to the change in (realized\unrealized) gains                                    |  |                                                                                                                      |         | 
|                                                                                                                        |  |                                                                                                                      |         | 
|or losses relating to assets still held at the reporting date                                                           |  | $                                                                                                                    | 232     | 
|                                                                                                                        |  |                                                                                                                      |         | 
|                                                                                                                        | 
|                                                                                                                        |  | ($ in 000s)                                                                                                         |        
|                                                                                                                        |  | Fair Value MeasurementsUsing
SignificantUnobservable Inputs for thenine months ending September 30,2009(Level 3)     |        
|                                                                                                                        | 
|Beginning balance @ 01/01/09                                                                                            |  | $                                                                                                                    | 9,322   | 
|                                                                                                                        | 
|Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership operations |  | $                                                                                                                    | (1,963) | 
|Net Investment Income from Partnership operations                                                                       |  | $                                                                                                                    | 228     | 
|Acquisition/Additions                                                                                                   |  |                                                                                                                      | -       | 
|Equity Income                                                                                                           |  |                                                                                                                      | -       | 
|Contributions                                                                                                           |  |                                                                                                                      | -       | 
|Disposition/Settlements                                                                                                 |  | $                                                                                                                    | (316)   | 
|Equity losses                                                                                                           |  |                                                                                                                      | -       | 
|Distributions                                                                                                           |  |                                                                                                                      | -       | 
|                                                                                                                        |  |                                                                                                                      |         | 
|Ending balance @ 09/30/09                                                                                               |  | $                                                                                                                    | 7,271   | 
|                                                                                                                        |  |                                                                                                                      |         | 
|                                                                                                                        | 
|The amount of total gains or losses for the period included in earnings                                                 |  |                                                                                                                      |         | 
|(or changes in net assets) attributable to the change in (realized\unrealized) gains                                    |  |                                                                                                                      |         | 
|                                                                                                                        |  |                                                                                                                      |         | 
|or losses relating to assets still held at the reporting date                                                           |  | $                                                                                                                    | (1,963) | 
|                                                                                                                        |  |                                                                                                                      |         | 



13



---



|                                                                                                                        |  |                                                                                                          |       | 
|----------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------- | ----- | 
|Table 2:                                                                                                                |  | ($ in 000s)                                                                                             |      
|                                                                                                                        | 
|                                                                                                                        |  | Fair Value MeasurementsUsing SignificantUnobservable Inputs for thethree months endingSeptember 30,
2010 |      
|                                                                                                                        |  | (Level 3)                                                                                                |      
|                                                                                                                        |  |                                                                                                          |      
|                                                                                                                        | 
|Beginning balance @ 07/01/10                                                                                            |  | $                                                                                                        | 7,208 | 
|                                                                                                                        | 
|Total gains or losses (realized/unrealized)
included in earnings (or changes in net assets) from Partnership operations |  | $                                                                                                        | 215   | 
|Net Investment Income from Partnership operations                                                                       |  | $                                                                                                        | 95    | 
|Acquisition/Additions                                                                                                   |  |                                                                                                          | -     | 
|Equity Income                                                                                                           |  |                                                                                                          | -     | 
|Contributions                                                                                                           |  |                                                                                                          | -     | 
|Disposition/Settlements                                                                                                 |  |                                                                                                          |       | 
|Equity losses                                                                                                           |  |                                                                                                          | -     | 
|Distributions                                                                                                           |  |                                                                                                          | -     | 
|                                                                                                                        |  |                                                                                                          |       | 
|Ending balance @ 09/30/10                                                                                               |  | $                                                                                                        | 7,518 | 
|                                                                                                                        |  |                                                                                                          |       | 
|                                                                                                                        | 
|The amount of total gains or losses for the period included in earnings                                                 |  |                                                                                                          |       | 
|(or changes in net assets) attributable to the change in (realized\unrealized) gains                                    |  |                                                                                                          |       | 
|                                                                                                                        |  |                                                                                                          |       | 
|or losses relating to assets still held at the reporting date                                                           |  | $                                                                                                        | 215   | 
|                                                                                                                        |  |                                                                                                          |       | 
|                                                                                                                        | 
|                                                                                                                        |  | ($ in 000s)                                                                                             |      
|                                                                                                                        |  | Fair Value MeasurementsUsing SignificantUnobservable Inputs for thethree months endingSeptember 30, 2009 |      
|                                                                                                                        |  | (Level 3)                                                                                                |      
|                                                                                                                        |  |                                                                                                          |      
|Beginning balance @ 07/01/09                                                                                            |  | $                                                                                                        | 7,617 | 
|                                                                                                                        | 
|Total gains or losses (realized/unrealized)
included in earnings (or changes in net assets) from Partnership operations |  | $                                                                                                        | (421) | 
|Net Investment Income from Partnership operations                                                                       |  | $                                                                                                        | 75    | 
|Acquisition/Additions                                                                                                   |  |                                                                                                          | -     | 
|Equity Income                                                                                                           |  |                                                                                                          | -     | 
|Contributions                                                                                                           |  |                                                                                                          | -     | 
|Disposition/Settlements                                                                                                 |  |                                                                                                          |       | 
|Equity losses                                                                                                           |  |                                                                                                          | -     | 
|Distributions                                                                                                           |  |                                                                                                          | -     | 
|                                                                                                                        |  |                                                                                                          |       | 
|Ending balance @ 09/30/09                                                                                               |  | $                                                                                                        | 7,271 | 
|                                                                                                                        |  |                                                                                                          |       | 
|                                                                                                                        | 
|The amount of total gains or losses for the period included in earnings                                                 |  |                                                                                                          |       | 
|(or changes in net assets) attributable to the change in (realized\unrealized) gains                                    |  |                                                                                                          |       | 
|                                                                                                                        |  |                                                                                                          |       | 
|or losses relating to assets still held at the reporting date                                                           |  | $                                                                                                        | (421) | 
|                                                                                                                        |  |                                                                                                          |       | 



14



---



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES



|                                                                                                                    |  |                               |              |  |                   |   |              | 
|------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------------ |  | ----------------- | - | ------------ | 
|                                                                                                                    |  | September 30, 2010(Unaudited) |              |  | December 31, 2009 |  
|ASSETS                                                                                                              |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|REAL ESTATE INVESTMENTS - At estimated fair value:                                                                  |  |                               |              |  |                   |   |              | 
|Real estate and improvements
(cost: 09/30/2010 - $193,241,427; 12/31/2009 -$211,091,543)                            |  | $                             | 155,800,000  |  |                   | $ | 167,100,000  | 
|Real estate partnerships and preferred equity investment (cost:
09/30/2010 - $14,181,759; 12/31/2009 - $14,238,698) |  |                               | 12,368,572   |  |                   |   | 10,044,510   | 
|                                                                                                                    |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|Total real estate investments                                                                                       |  |                               | $168,168,572 |  |                   |   | $177,144,510 | 
|                                                                                                                    |  |                              
|CASH AND CASH EQUIVALENTS                                                                                           |  |                               | 37,905,123   |  |                   |   | 24,522,159   | 
|                                                                                                                    |  |                              
|OTHER ASSETS, NET                                                                                                   |  |                               | 2,770,610    |  |                   |   | 2,629,989    | 
|                                                                                                                    |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|Total assets                                                                                                        |  | $                             | 208,844,305  |  |                   | $ | 204,296,658  | 
|                                                                                                                    |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|LIABILITIES & PARTNERS EQUITY                                                                                      |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|INVESTMENT LEVEL DEBT (net of unamortized
discount: 9/30/10 $3,185; 12/31/09 $1,830)                                |  |                               | $30,753,371  |  |                   |   | $30,824,899  | 
|                                                                                                                    |  |                              
|ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                                                               |  |                               | 2,920,307    |  |                   |   | 2,541,198    | 
|                                                                                                                    |  |                              
|DUE TO AFFILIATES                                                                                                   |  |                               | 599,082      |  |                   |   | 603,101      | 
|                                                                                                                    |  |                              
|OTHER LIABILITIES                                                                                                   |  |                               | 1,068,562    |  |                   |   | 1,025,279    | 
|                                                                                                                    |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|Total liabilities                                                                                                   |  |                               | 35,341,322   |  |                   |   | 34,994,477   | 
|                                                                                                                    |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|COMMITMENTS AND CONTINGENCIES                                                                                       |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|NET ASSETS, REPRESENTING PARTNERS EQUITY:                                                                          |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|GENERAL PARTNERS CONTROLLING INTEREST                                                                              |  |                               | 171,100,610  |  |                   |   | 167,204,272  | 
|                                                                                                                    |  |                              
|NONCONTROLLING INTEREST                                                                                             |  |                               | 2,402,373    |  |                   |   | 2,097,909    | 
|                                                                                                                    |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|                                                                                                                    |  |                               | 173,502,983  |  |                   |   | 169,302,181  | 
|                                                                                                                    |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|Total liabilities and partners equity                                                                              |  | $                             | 208,844,305  |  |                   | $ | 204,296,658  | 
|                                                                                                                    |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|NUMBER OF SHARES OUTSTANDING AT END OF PERIOD                                                                       |  |                               | 6,173,987    |  |                   |   | 6,461,874    | 
|                                                                                                                    |  |                               |              |  |                   |   |              | 
|                                                                                                                    |  |                              
|SHARE VALUE AT END OF PERIOD                                                                                        |  | $                             | 27.71        |  |                   | $ | 25.88        | 
|                                                                                                                    |  |                               |              |  |                   |   |              | 

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



15



---



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|---------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ----------- |  | ---------------------------------------- | - | ------------ | ---- |  | - | ----------- |  |  | - | ------------ | 
|                                                                                                                       |  | For the Nine Months Ended September 30, |             |  | For the Three Months Ended September 30, |  
|                                                                                                                       |  | 2010                                    |             |  | 2009                                     |   |              | 2010 |  |   | 2009        | 
|INVESTMENT INCOME:                                                                                                     |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|Revenue from real estate and improvements                                                                              |  | $                                       | 18,269,329  |  |                                          | $ | 19,469,511   |      |  | $ | 6,294,246   |  |  | $ | 6,157,406    | 
|Equity in income of real estate partnerships                                                                           |  |                                         | 755,630     |  |                                          |   | 776,724      |      |  |   | 254,645     |  |  |   | 255,006      | 
|Interest on short-term investments                                                                                     |  |                                         | 19,258      |  |                                          |   | 32,551       |      |  |   | 7,155       |  |  |   | 11,862       | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|Total investment income                                                                                                |  |                                         | 19,044,217  |  |                                          |   | 20,278,786   |      |  |   | 6,556,046   |  |  |   | 6,424,274    | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|INVESTMENT EXPENSES:                                                                                                   |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|Operating                                                                                                              |  |                                         | 4,685,582   |  |                                          |   | 5,109,382    |      |  |   | 1,597,825   |  |  |   | 1,665,730    | 
|Investment management fee                                                                                              |  |                                         | 1,731,647   |  |                                          |   | 2,017,562    |      |  |   | 585,676     |  |  |   | 624,809      | 
|Real estate taxes                                                                                                      |  |                                         | 1,873,401   |  |                                          |   | 2,109,217    |      |  |   | 575,279     |  |  |   | 640,192      | 
|Administrative                                                                                                         |  |                                         | 3,566,912   |  |                                          |   | 3,811,445    |      |  |   | 1,219,705   |  |  |   | 1,200,843    | 
|Interest expense                                                                                                       |  |                                         | 753,613     |  |                                          |   | 1,359,700    |      |  |   | 249,563     |  |  |   | 466,843      | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|Total investment expenses                                                                                              |  |                                         | 12,611,155  |  |                                          |   | 14,407,306   |      |  |   | 4,228,048   |  |  |   | 4,598,417    | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|NET INVESTMENT INCOME                                                                                                  |  |                                         | 6,433,062   |  |                                          |   | 5,871,480    |      |  |   | 2,327,998   |  |  |   | 1,825,857    | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:                                                                    |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|Net proceeds from real estate investments sold                                                                         |  |                                         | 16,981,750  |  |                                          |   | 9,655,626    |      |  |   | 16,981,750  |  |  |   | -            | 
|Less:   Cost of real estate investments sold                                                                           |  |                                         | 20,353,204  |  |                                          |   | 37,901,326   |      |  |   | 20,353,204  |  |  |   | -            | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|Gain (loss) realized from real estate investments sold                                                                 |  |                                         | (3,371,454) |  |                                          |   | (28,245,700) |      |  |   | (3,371,454) |  |  |   | -            | 
|                                                                                                                       |  |                                         |             | 
|Less:    Reversal of prior periods unrealized gain (loss) on real estate investments
sold                             |  |                                         | (5,710,830) |  |                                          |   | (23,793,594) |      |  |   | (3,564,384) |  |  |   | -            | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|Net gain (loss) recognized on real estate investments sold                                                             |  |                                         | 2,339,376   |  |                                          |   | (4,452,106)  |      |  |   | 192,930     |  |  |   | -            | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|Change in unrealized gain (loss) on real estate investments held                                                       |  |                                         | 3,268,807   |  |                                          |   | (43,513,970) |      |  |   | 4,759,439   |  |  |   | (10,216,120) | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|NET REALIZED AND UNREALIZED GAIN (LOSS) ON REAL ESTATE INVESTMENTS                                                     |  |                                         | 5,608,183   |  |                                          |   | (47,966,076) |      |  |   | 4,952,369   |  |  |   | (10,216,120) | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|Increase (decrease) in net assets resulting from operations                                                            |  | $                                       | 12,041,245  |  |                                          | $ | (42,094,596) |      |  | $ | 7,280,367   |  |  | $ | (8,390,263)  | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|Amounts attributable to noncontrolling interest:                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|Net investment income attributable to noncontrolling interest                                                          |  |                                         | 316,497     |  |                                          |   | 636,552      |      |  |   | 159,665     |  |  |   | 101,363      | 
|Net unrealized gain (loss) attributable to noncontrolling interest                                                     |  |                                         | 328,410     |  |                                          |   | (2,946,944)  |      |  |   | 47,879      |  |  |   | (592,549)    | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|Net increase (decrease) in net assets resulting from operations attributable to the noncontrolling interest            |  | $                                       | 644,907     |  |                                          | $ | (2,310,392)  |      |  | $ | 207,544     |  |  | $ | (491,186)    | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|                                                                                                                       |  |                                         |             | 
|Amounts attributable to general partners controlling interest:                                                        |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|Net investment income attributable to general partners controlling interest                                           |  |                                         | 6,116,565   |  |                                          |   | 5,234,928    |      |  |   | 2,168,333   |  |  |   | 1,724,494    | 
|Net realized gain (loss) attributable to general partners controlling interest                                        |  |                                         | 2,339,376   |  |                                          |   | (4,452,106)  |      |  |   | 192,930     |  |  |   | -            | 
|Net unrealized gain (loss) attributable to general partners controlling interest                                      |  |                                         | 2,940,397   |  |                                          |   | (40,567,026) |      |  |   | 4,711,560   |  |  |   | (9,623,571)  | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 
|Net increase (decrease) in net assets resulting from operations attributable to general partners controlling
interest |  | $                                       | 11,396,338  |  |                                          | $ | (39,784,204) |      |  | $ | 7,072,823   |  |  | $ | (7,899,077)  | 
|                                                                                                                       |  |                                         |             |  |                                          |   |              |      |  |   |             |  |  |   |              | 

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



16



---



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)



|                                                                       |  |                                         |             |  |                        |   |           |       |  |   |                                       |  |  |                        |              |  |       |   |             |  |  |   |              | 
|---------------------------------------------------------------------- |  | --------------------------------------- | ----------- |  | ---------------------- | - | --------- | ----- |  | - | ------------------------------------- |  |  | ---------------------- | ------------ |  | ----- | - | ----------- |  |  | - | ------------ | 
|                                                                       |  | For the Nine Months Ended September 30, |            
|                                                                       |  | 2010                                    |             |  | 2009                   |  
|                                                                       |  | General Partners'Controlling Interest   |             |  | NoncontrollingInterest |   |           | Total |  |   | General Partners'Controlling Interest |  |  | NoncontrollingInterest |              |  | Total |  
|INCREASE (DECREASE) IN NET ASSETS                                      |  |                                         |             |  |                        |   |           |       |  |   |                                       |  |  |                        |              |  |       |   |             |  |  |   |              | 
|RESULTING FROM OPERATIONS:                                             |  |                                         |             |  |                        |   |           |       |  |   |                                       |  |  |                        |              |  |       |   |             |  |  |   |              | 
|Net investment income                                                  |  | $                                       | 6,116,565   |  |                        | $ | 316,497   |       |  | $ | 6,433,062                             |  |  | $                      | 5,234,928    |  |       | $ | 636,552     |  |  | $ | 5,871,480    | 
|Net realized and unrealized gain (loss) from real estate
investments   |  |                                         | 5,279,773   |  |                        |   | 328,410   |       |  |   | 5,608,183                             |  |  |                        | (45,019,132) |  |       |   | (2,946,944) |  |  |   | (47,966,076) | 
|                                                                       |  |                                         |             |  |                        |   |           |       |  |   |                                       |  |  |                        |              |  |       |   |             |  |  |   |              | 
|                                                                       |  |                                         |             |  |                        |  
|Increase (decrease) in net assets
resulting from operations            |  |                                         | 11,396,338  |  |                        |   | 644,907   |       |  |   | 12,041,245                            |  |  |                        | (39,784,204) |  |       |   | (2,310,392) |  |  |   | (42,094,596) | 
|                                                                       |  |                                         |             |  |                        |   |           |       |  |   |                                       |  |  |                        |              |  |       |   |             |  |  |   |              | 
|                                                                       |  |                                         |             |  |                        |  
|INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS: |  |                                         |             |  |                        |   |           |       |  |   |                                       |  |  |                        |              |  |       |   |             |  |  |   |              | 
|Withdrawals                                                            |  |                                         | (7,500,000) |  |                        |   | -         |       |  |   | (7,500,000)                           |  |  |                        | (8,000,000)  |  |       |   | -           |  |  |   | (8,000,000)  | 
|Contributions from noncontrolling interest                             |  |                                         | -           |  |                        |   | -         |       |  |   | -                                     |  |  |                        | -            |  |       |   | 15,000      |  |  |   | 15,000       | 
|Distributions to noncontrolling interest                               |  |                                         | -           |  |                        |   | (340,443) |       |  |   | (340,443)                             |  |  |                        | -            |  |       |   | (279,309)   |  |  |   | (279,309)    | 
|                                                                       |  |                                         |             |  |                        |   |           |       |  |   |                                       |  |  |                        |              |  |       |   |             |  |  |   |              | 
|                                                                       |  |                                         |             |  |                        |  
|Increase (decrease) in net assets
resulting from capital transactions  |  |                                         | (7,500,000) |  |                        |   | (340,443) |       |  |   | (7,840,443)                           |  |  |                        | (8,000,000)  |  |       |   | (264,309)   |  |  |   | (8,264,309)  | 
|                                                                       |  |                                         |             |  |                        |   |           |       |  |   |                                       |  |  |                        |              |  |       |   |             |  |  |   |              | 
|                                                                       |  |                                         |             |  |                        |  
|INCREASE (DECREASE) IN NET ASSETS                                      |  |                                         | 3,896,338   |  |                        |   | 304,464   |       |  |   | 4,200,802                             |  |  |                        | (47,784,204) |  |       |   | (2,574,701) |  |  |   | (50,358,905) | 
|                                                                       |  |                                         |             |  |                        |  
|NET ASSETS - Beginning of period                                       |  |                                         | 167,204,272 |  |                        |   | 2,097,909 |       |  |   | 169,302,181                           |  |  |                        | 213,938,308  |  |       |   | 4,924,263   |  |  |   | 218,862,571  | 
|                                                                       |  |                                         |             |  |                        |   |           |       |  |   |                                       |  |  |                        |              |  |       |   |             |  |  |   |              | 
|                                                                       |  |                                         |             |  |                        |  
|NET ASSETS - End of period                                             |  | $                                       | 171,100,610 |  |                        | $ | 2,402,373 |       |  | $ | 173,502,983                           |  |  | $                      | 166,154,104  |  |       | $ | 2,349,562   |  |  | $ | 168,503,666  | 
|                                                                       |  |                                         |             |  |                        |   |           |      

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



17



---



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                                      |  |                                          |             |  |      |   |              | 
|--------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ----------- |  | ---- | - | ------------ | 
|                                                                                                                      |  | For the Nine Months Ended 
September 30, |            
|                                                                                                                      |  | 2010                                     |             |  | 2009 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                 |  |                                          |             |  |      |   |              | 
|Net increase (decrease) in net assets from operations                                                                 |  | $                                        | 12,041,245  |  |      | $ | (42,094,596) | 
|Adjustments to reconcile net increase (decrease) in net assets to net cash provided by (used in) operating
activities |  |                                          |             |  |      |   |              | 
|Net realized and unrealized loss (gain)                                                                               |  |                                          | (5,608,183) |  |      |   | 47,966,076   | 
|Amortization of discount on investment level debt                                                                     |  |                                          | (1,355)     |  |      |   | 23,295       | 
|Amortization of deferred financing costs                                                                              |  |                                          | 35,173      |  |      |   | 46,010       | 
|Distributions in excess of (less than) equity in income of real estate partnerships operations                       |  |                                          | 56,938      |  |      |   | 70,282       | 
|Bad debt expense                                                                                                      |  |                                          | 133,156     |  |      |   | 69,047       | 
|(Increase) decrease in:                                                                                               |  |                                          |             |  |      |   |              | 
|Other assets                                                                                                          |  |                                          | (308,950)   |  |      |   | 64,406       | 
|Increase (decrease) in:                                                                                               |  |                                          |             |  |      |   |              | 
|Accounts payable and accrued expenses                                                                                 |  |                                          | (39,619)    |  |      |   | 894,149      | 
|Due to affiliates                                                                                                     |  |                                          | (4,019)     |  |      |   | (213,378)    | 
|Other liabilities                                                                                                     |  |                                          | 43,283      |  |      |   | 93,474       | 
|                                                                                                                      |  |                                          |             |  |      |   |              | 
|                                                                                                                      |  |                                         
|Net cash flows provided by (used in) operating activities                                                             |  |                                          | 6,347,669   |  |      |   | 6,918,765    | 
|                                                                                                                      |  |                                          |             |  |      |   |              | 
|                                                                                                                      |  |                                         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                 |  |                                          |             |  |      |   |              | 
|Net proceeds from real estate investments sold                                                                        |  |                                          | 16,981,750  |  |      |   | 9,655,626    | 
|Additions to real estate and improvements                                                                             |  |                                          | (2,035,839) |  |      |   | (2,497,087)  | 
|                                                                                                                      |  |                                          |             |  |      |   |              | 
|                                                                                                                      |  |                                         
|Net cash flows provided by (used in) investing activities                                                             |  |                                          | 14,945,911  |  |      |   | 7,158,539    | 
|                                                                                                                      |  |                                          |             |  |      |   |              | 
|                                                                                                                      |  |                                         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                 |  |                                          |             |  |      |   |              | 
|Withdrawals                                                                                                           |  |                                          | (7,500,000) |  |      |   | (8,000,000)  | 
|Proceeds from investment level debt                                                                                   |  |                                          | 429,328     |  |      |   | -            | 
|Principal payments on investment level debt                                                                           |  |                                          | (499,501)   |  |      |   | (366,192)    | 
|Contributions from noncontrolling interest                                                                            |  |                                          | -           |  |      |   | 15,000       | 
|Distributions to noncontrolling interest                                                                              |  |                                          | (340,443)   |  |      |   | (279,309)    | 
|                                                                                                                      |  |                                          |             |  |      |   |              | 
|                                                                                                                      |  |                                         
|Net cash flows provided by (used in) financing activities                                                             |  |                                          | (7,910,616) |  |      |   | (8,630,501)  | 
|                                                                                                                      |  |                                          |             |  |      |   |              | 
|                                                                                                                      |  |                                         
|NET CHANGE IN CASH AND CASH
EQUIVALENTS                                                                               |  |                                          | 13,382,964  |  |      |   | 5,446,803    | 
|                                                                                                                      |  |                                         
|CASH AND CASH EQUIVALENTS - Beginning of period                                                                       |  |                                          | 24,522,159  |  |      |   | 27,736,520   | 
|                                                                                                                      |  |                                          |             |  |      |   |              | 
|                                                                                                                      |  |                                         
|CASH AND CASH EQUIVALENTS - End of period                                                                             |  | $                                        | 37,905,123  |  |      | $ | 33,183,323   | 
|                                                                                                                      |  |                                          |             |  |      |   |              | 

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



18



---



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULE OF INVESTMENTS



|                                                                                                      |  |                            |      |  |             |                            |                                                  |  |           |                               |             |   |                     |   |             |      |            |   |                     |   |            |  |  |   |            | 
|----------------------------------------------------------------------------------------------------- |  | -------------------------- | ---- |  | ----------- | -------------------------- | ------------------------------------------------ |  | --------- | ----------------------------- | ----------- | - | ------------------- | - | ----------- | ---- | ---------- | - | ------------------- | - | ---------- |  |  | - | ---------- | 
|                                                                                                      |  |                            |      |  |             |                            | 2010 Total Rentable
Square Feet
Unless Otherwise |  |           | September 30, 2010(unaudited) |             |   | December 31, 2009   |  
|Property Name                                                                                         |  | September 30,2010Ownership |      |  | City, State |                            | Indicated(Unaudited)                             |  |           | Cost                          |             |   | Estimated FairValue |   |             | Cost |            |   | Estimated FairValue |  
|                                                                                                      |  |                            |      |  |             |                            |                                                 
|OFFICES                                                                                               |  |                            |      |  |             |                            |                                                  |  |           |                               |             |   |                     |   |             |      |            |   |                     |   |            |  |  |   |            | 
|750 Warrenville                                                                                       |  |                            | WO   |  |             | Lisle, IL                  |                                                  |  | 103,193   |                               |             | $ | 26,272,208          |   |             | $    | 7,100,000  |   |                     | $ | 26,186,415 |  |  | $ | 6,700,000  | 
|Summit @ Cornell Oaks                                                                                 |  |                            | WO   |  |             | Beaverton, OR              |                                                  |  | 72,109    |                               |             |   | 12,794,716          |   |             |      | 6,900,000  |   |                     |   | 12,625,626 |  |  |   | 8,500,000  | 
|Westpark                                                                                              |  |                            | WO   |  |             | Nashville, TN              |                                                  |  | 97,199    |                               |             |   | 14,409,581          |   |             |      | 9,900,000  |   |                     |   | 13,019,181 |  |  |   | 8,700,000  | 
|Financial Plaza                                                                                       |  |                            | WO   |  |             | Brentwood, TN              |                                                  |  | 98,049    |                               |             |   | 12,556,189          |   |             |      | 9,500,000  |   |                     |   | 12,564,614 |  |  |   | 9,700,000  | 
|                                                                                                      |  |                            |      |  |             | Offices % as of 9/30/10    |                                                  |  | 20%       |                               |             |   | 66,032,694          |   |             |      | 33,400,000 |   |                     |   | 64,395,836 |  |  |   | 33,600,000 | 
|                                                                                                      |  |                            |      |  |             |                            |                                                 
|APARTMENTS                                                                                            |  |                            |      |  |             |                            |                                                  |  |           |                               |             |   |                     |   |             |      |            |   |                     |   |            |  |  |   |            | 
|                                                                                                      |  |                            |      |  |             |                            |                                                 
|Brookwood Apartments                                                                                  |  |                            | WO   |  |             | Atlanta, GA                |                                                  |  | 240 Units |                               |             |   | -                   |   |             |      | -          |   |                     |   | 20,210,830 |  |  |   | 14,500,000 | 
|Dunhill Trace Apartments                                                                              |  |                            | WO   |  |             | Raleigh, NC                |                                                  |  | 250 Units |                               |             |   | 16,643,496          |   |             |      | 15,700,000 |   |                     |   | 16,512,970 |  |  |   | 15,000,000 | 
|Broadstone Crossing                                                                                   |  |                            | WO   |  |             | Austin, TX                 |                                                  |  | 225 Units |                               |             |   | 22,818,724          |   |             |      | 23,300,000 |   |                     |   | 22,815,992 |  |  |   | 21,000,000 | 
|The Reserve At Waterford Lakes                                                                        |  |                            | WO   |  |             | Charlotte, NC              |                                                  |  | 140 Units |                               |             |   | 13,827,007          |   |             |      | 10,200,000 |   |                     |   | 13,746,940 |  |  |   | 9,200,000  | 
|                                                                                                      |  |                            |      |  |             | Apartments % as of 9/30/10 |                                                  |  | 29%       |                               |             |   | 53,289,227          |   |             |      | 49,200,000 |   |                     |   | 73,286,732 |  |  |   | 59,700,000 | 
|                                                                                                      |  |                            |      |  |             |                            |                                                 
|RETAIL                                                                                                |  |                            |      |  |             |                            |                                                  |  |           |                               |             |   |                     |   |             |      |            |   |                     |   |            |  |  |   |            | 
|Hampton Towne Center                                                                                  |  |                            | WO   |  |             | Hampton, VA                |                                                  |  | 174,540   |                               |             |   | 18,193,118          |   |             |      | 16,900,000 |   |                     |   | 18,136,399 |  |  |   | 18,600,000 | 
|White Marlin Mall                                                                                     |  |                            | CJV  |  |             | Ocean City, MD             |                                                  |  | 197,098   |                               |             |   | 23,693,383          |   |             |      | 25,500,000 |   |                     |   | 23,311,878 |  |  |   | 24,600,000 | 
|Westminster Crossing East, LLC                                                                        |  |                            | CJV  |  |             | Westminster, MD            |                                                  |  | 89,890    |                               |             |   | 15,067,129          |   |             |      | 14,100,000 |   |                     |   | 15,044,877 |  |  |   | 13,900,000 | 
|CARS Preferred Equity                                                                                 |  |                            | PE   |  |             | Various                    |                                                  |  | N/A       |                               |             |   | 14,181,759          |   |             |      | 12,368,572 |   |                     |   | 14,238,698 |  |  |   | 10,044,510 | 
|Harnett Crossing                                                                                      |  |                            | WO   |  |             | Dunn, NC                   |                                                  |  | 193,235   |                               |             |   | 6,239,696           |   |             |      | 3,200,000  |   |                     |   | -          |  |  |   | -          | 
|Harnett Crossing                                                                                      |  |                            | CJV  |  |             | Dunn, NC                   |                                                  |  | N/A       |                               |             |   | -                   |   |             |      | -          |   |                     |   | 6,237,926  |  |  |   | 3,200,000  | 
|                                                                                                      |  |                            |      |  |             | Retail % as of 9/30/10     |                                                  |  | 43%       |                               |             |   | 77,375,085          |   |             |      | 72,068,572 |   |                     |   | 76,969,778 |  |  |   | 70,344,510 | 
|HOTEL                                                                                                 |  |                            |      |  |             |                            |                                                  |  |           |                               |             |   |                     |   |             |      |            |   |                     |   |            |  |  |   |            | 
|Portland Crown Plaza                                                                                  |  |                            | CJV  |  |             | Portland, OR               |                                                  |  | 161 Rooms |                               |             |   | 10,726,180          |   |             |      | 13,500,000 |   |                     |   | 10,677,895 |  |  |   | 13,500,000 | 
|                                                                                                      |  |                            |      |  |             | Hotel % as of 9/30/10      |                                                  |  | 8%        |                               |             |   | 10,726,180          |   |             |      | 13,500,000 |   |                     |   | 10,677,895 |  |  |   | 13,500,000 | 
|                                                                                                      |  |                            |      |  |            
|Total Real Estate Investments as a Percentage of General Partners' Controlling Interest as of
9/30/10 |  |                            | 100% |  |             | $                          | 207,423,186                                      |  |           | $                             | 168,168,572 |   |                     | $ | 225,330,241 |      |            | $ | 177,144,510         |  
|                                                                                                      |  |                            |      |  |             |                            |                                                  |  |           |                               |             |   |                     |   |             |      |            |   |                     |   |            |  |  |   |            | 

WO - Wholly Owned Investment

CJV - Consolidated Joint Venture

EJV - Joint Venture Investment accounted for under the equity method

PE - Preferred equity investment

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



19



---



THE PRUDENTIAL VARIABLE
CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULE OF INVESTMENTS



|                                                                                 |  |             |            |       |                               |   |            |                       |  |   |            |       |  |                       |            |  |  |   |            | 
|-------------------------------------------------------------------------------- |  | ----------- | ---------- | ----- | ----------------------------- | - | ---------- | --------------------- |  | - | ---------- | ----- |  | --------------------- | ---------- |  |  | - | ---------- | 
|                                                                                 |  |             |            |       | September 30,
2010(unaudited) |   |            | December 31, 2009     | 
|                                                                                 |  | Face Amount |            |       | Cost                          |   |            | Estimated  Fair Value |  |   | Cost       |       |  | Estimated  Fair Value |           
|CASH AND CASH EQUIVALENTS - Percentage of General Partner's Controlling Interest |  |             |            | 22.2% |                               |   |            |                       |  |   |            | 14.7% | 
|                                                                                 |  |             |            |       |                              
|Federal Home Loan Bank, 0 coupon bond, October 1, 2010                           |  | $           | 21,213,000 |       |                               | $ | 21,213,000 |                       |  | $ | 21,213,000 |       |  | $                     | 2,999,184  |  |  | $ | 2,999,184  | 
|Federal Home Loan Bank, 0 coupon bond, October 20, 2010                          |  |             | 5,000,000  |       |                               |   | 4,999,499  |                       |  |   | 4,999,499  |       |  |                       | 9,997,769  |  |  |   | 9,997,769  | 
|Federal Home Loan Bank, 0 coupon bond, November 29, 2010                         |  |             | 10,000,000 |       |                               |   | 9,997,050  |                       |  |   | 9,997,050  |       |  |                       | 2,999,267  |  |  |   | 2,999,267  | 
|Federal Home Loan Bank, 0 coupon bond, March, 2010                               |  |             |            |       |                               |   | -          |                       |  |   | -          |       |  |                       | 1,999,660  |  |  |   | 1,999,660  | 
|                                                                                 |  |             |            |       |                               |   |            |                       |  |   |            |       |  |                       |            |  |  |   |            | 
|                                                                                 |  |             |            |       |                               |   |            |                       |  |   |            |       |  |                       |            |  |  |   |            | 
|                                                                                 |  |             |            |       |                              
|Total Cash Equivalents                                                           |  |             |            |       |                               |   | 36,209,549 |                       |  |   | 36,209,549 |       |  |                       | 17,995,880 |  |  |   | 17,995,880 | 
|                                                                                 |  |             |            |       |                              
|Cash                                                                             |  |             |            |       |                               |   | 1,695,574  |                       |  |   | 1,695,574  |       |  |                       | 6,526,279  |  |  |   | 6,526,279  | 
|                                                                                 |  |             |            |       |                               |   |            |                       |  |   |            |       |  |                       |            |  |  |   |            | 
|                                                                                 |  |             |            |       |                              
|Total Cash and Cash Equivalents                                                  |  |             |            |       |                               | $ | 37,905,123 |                       |  | $ | 37,905,123 |       |  | $                     | 24,522,159 |  |  | $ | 24,522,159 | 
|                                                                                 |  |             |            |       |                               |   |            |                       |  |   |            |       |  |                       |            |  |  |   |            | 

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



20



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2010 and December 31, 2009

Note 1:    Summary of
Significant Accounting Policies



| | A. | Basis of Presentation - The accompanying consolidated financial statements of The Prudential Variable Contract Real Property Partnership (the
Partnership) included herein have been prepared in accordance with the requirements of Form 10-Q and accounting principles generally accepted in the United States of America that are applicable to real estate investment companies. In the
opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Operating results for the nine months ended September 30, 2010 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2010. For further information, refer to the audited consolidated financial statements and notes of the Partnership for the year ended December 31, 2009. The Partnership
has evaluated subsequent events throughNovember 11, 2010, the date these financial statements were
available to be issued.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

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

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

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

In April 2009, the FASB issued additional guidance for accounting for assets acquired and liabilities assumed in a
business combination that arise from contingencies. This guidance requires an asset acquired or liability assumed in a business combination that arises from a contingency to be recognized at fair value at the acquisition date, if the acquisition
date fair value of that asset or liability can be determined during the measurement period. If the acquisition date fair value of an asset acquired or liability assumed in a business combination that arises from a contingency cannot be determined
during the measurement period, the asset or liability shall be recognized at the acquisition date using the guidance in accounting for contingencies.



21



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2010 and December 31, 2009



Note 1:  Summary of Significant Accounting Policies (continued)



B.  Accounting Pronouncements
Adopted (continued)

This guidance also amends disclosure requirements. This guidance is effective for
assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The Partnerships adoption of this guidance effective January 1, 2009 did not have a material
effect on the Partnerships consolidated financial position or results of operations.

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

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

In June 2009, the FASB issued authoritative guidance for the FASBs Accounting Standards Codification as the source
of authoritative U.S. GAAP. The Codification is not intended to change U.S. GAAP but is a new structure which organizes accounting pronouncements by accounting topic. This guidance is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. The Partnerships adoption of this guidance, effective with the interim reporting period ending September 30, 2009, impacts the way the Partnership references U.S. GAAP standards in the
financial statements.

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

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



22



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2010 and December 31, 2009



Note 1:  Summary of Significant Accounting Policies (continued)



B.  Accounting
Pronouncements Adopted (continued)

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

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

Cash paid for interest during the nine months ended September 30, 2010
and September 30, 2009, was $718,440, and $1,313,693 respectively.

Note 3:  Fair Value Measurements

Valuation Methods:

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

In general fair value estimates are based upon property appraisal reports prepared by independent real estate appraisers (members of the Appraisal Institute or an equivalent organization) within a
reasonable amount of time following acquisition of the real estate and no less frequently than annually thereafter. The Chief Real Estate Appraiser of Prudential Investment Management, Inc. (PIM), which is an indirectly owned subsidiary
of Prudential Financial, Inc. (PFI), is responsible to assure that the valuation process provides independent and reasonable property fair value estimates. An unaffiliated third party has been appointed by PIM to assist the Chief Real
Estate Appraiser in maintaining and monitoring the independence and the accuracy of the appraisal process. The fair value of real estate investments does not reflect the transaction sale costs, which may be incurred upon disposition of the real
estate investments.

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



23



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2010 and December 31, 2009



Note 3:  Fair Value Measurements (continued)



Fair Value Measurements:

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

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

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

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

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

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



24



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2010 and December 31, 2009



Note 3:  Fair Value Measurements (continued)



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



|                                                         |  |                         |         |  |                                                     |   |         |                                                            |  |   |                                            |  |  |                                          |   |  |  |   |         | 
|-------------------------------------------------------- |  | ----------------------- | ------- |  | --------------------------------------------------- | - | ------- | ---------------------------------------------------------- |  | - | ------------------------------------------ |  |  | ---------------------------------------- | - |  |  | - | ------- | 
|Table 1                                                  |  |                         |         |  |                                                     |   |         |                                                            |  |   |                                            |  |  |                                          |   |  |  |   |         | 
|                                                         |  |                         |         |  |                                                     |   |         | (in 000s)                                                 |  |   |                                            | 
|                                                         |  |                        
|                                                         |  |                         |         |  | Fair value measurements at September 30, 2010 using |  
|                                                         |  |                         |         |  |                                                    
|Assets:                                                  |  | Cost at        9/30/10  |         |  | Amountsmeasured atfair value
9/30/10                |   |         | Quoted pricesin activemarkets foridentical assets(level 1) |  |   | Significantotherobservableinputs (level 2) |  |  | Significantunobservable
inputs (level 3) |  
|                                                         |  |                         |         | 
|                                                         |  |                         |         |  |                                                    
|Real estate and improvements                             |  | $                       | 193,241 |  |                                                     | $ | 155,800 |                                                            |  | $ | -                                          |  |  | $                                        | - |  |  | $ | 155,800 | 
|Real estate partnerships and
preferred equity investment |  |                         | 14,182  |  |                                                     |   | 12,369  |                                                            |  |   | -                                          |  |  |                                          | - |  |  |   | 12,369  | 
|                                                         |  |                         |         |  |                                                     |   |         |                                                            |  |   |                                            |  |  |                                          |   |  |  |   |         | 
|                                                         |  |                         |         | 
|Total                                                    |  | $                       | 207,423 |  |                                                     | $ | 168,169 |                                                            |  | $ | -                                          |  |  | $                                        | - |  |  | $ | 168,169 | 
|                                                         |  |                         |         | 
|                                                         |  |                         |         | 
|                                                         |  |                         |         |  |                                                     |   |         | (in 000s)                                                 |  |   |                                            | 
|                                                         |  |                         |         |  | Fair value measurements at December 31,
2009 using  |  
|Assets:                                                  |  | Cost at        12/31/09 |         |  | Amountsmeasured atfair value12/31/2009              |   |         | Quoted pricesin activemarkets foridentical assets(level 1) |  |   | Significantotherobservableinputs (level 2) |  |  | Significantunobservable
inputs (level 3) |  
|                                                         |  |                         |         | 
|                                                         |  |                         |         |  |                                                    
|Real estate and improvements                             |  | $                       | 211,092 |  |                                                     | $ | 167,100 |                                                            |  | $ | -                                          |  |  | $                                        | - |  |  | $ | 167,100 | 
|Real estate partnerships and
preferred equity investment |  |                         | 14,239  |  |                                                     |   | 10,045  |                                                            |  |   | -                                          |  |  |                                          | - |  |  |   | 10,045  | 
|                                                         |  |                         |         |  |                                                     |   |         |                                                            |  |   |                                            |  |  |                                          |   |  |  |   |         | 
|                                                         |  |                         |         | 
|Total                                                    |  | $                       | 225,331 |  |                                                     | $ | 177,145 |                                                            |  | $ | -                                          |  |  | $                                        | - |  |  | $ | 177,145 | 
|                                                         |  |                         |         | 



25



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2010 and December 31, 2009



Note 3:  Fair Value Measurements (continued)



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



|                                                                                                                                 |  |                             |          |  |                                                        |   |         |       |  |   |          | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | -------- |  | ------------------------------------------------------ | - | ------- | ----- |  | - | -------- | 
|Table 2                                                                                                                          |  |                             |          |  |                                                        |   |         |       |  |   |          | 
|(in 000s) Fair value measurements using significant unobservable inputs
for the nine months ending September 30, 2010 (Level 3) | 
|                                                                                                                                 |  | Real estate andimprovements |          |  | Real estate partnerships andpreferred equityinvestment |   |         | Total | 
|                                                                                                                                 |  |                             |          | 
|                                                                                                                                 |  |                             |         
|Beginning balance @ 1/1/10                                                                                                       |  | $                           | 167,100  |  |                                                        | $ | 10,045  |       |  | $ | 177,145  | 
|                                                                                                                                 |  |                             |         
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)                                           |  |                             | 3,227    |  |                                                        |   | 2,381   |       |  |   | 5,608    | 
|Equity income (losses)/interest income                                                                                           |  |                             | -        |  |                                                        |   | 756     |       |  |   | 756      | 
|Acquisitions, issuances, contributions                                                                                           |  |                             | 2,455    |  |                                                        |   | -       |       |  |   | 2,455    | 
|Dispositions, settlements and distributions                                                                                      |  |                             | (16,982) |  |                                                        |   | (813)   |       |  |   | (17,795) | 
|                                                                                                                                 |  |                             |          | 
|Ending balance @ 9/30/10                                                                                                         |  | $                           | 155,800  |  |                                                        | $ | 12,369  |       |  | $ | 168,169  | 
|                                                                                                                                 |  |                             |          | 
|                                                                                                                                 |  |                             |         
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date                             |  | $                           | 887      |  |                                                        | $ | 2,381   |       |  | $ | 3,268    | 
|                                                                                                                                 |  |                             |          | 
|                                                                                                                                
|(in 000s)
Fair value measurements using significant unobservable inputs
for the nine months ending September 30, 2009 (Level 3) | 
|                                                                                                                                 |  | Real estate andimprovements |          |  | Real estatepartnerships andpreferred equityinvestment  |   |         | 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)                                           |  |                             | (46,537) |  |                                                        |   | (1,429) |       |  |   | (47,966) | 
|Equity income (losses)/interest income                                                                                           |  |                             | -        |  |                                                        |   | 777     |       |  |   | 777      | 
|Acquisitions, issuances, contributions                                                                                           |  |                             | 2,496    |  |                                                        |   | -       |       |  |   | 2,496    | 
|Dispositions, settlements and distributions                                                                                      |  |                             | (9,655)  |  |                                                        |   | (847)   |       |  |   | (10,502) | 
|                                                                                                                                 |  |                             |          | 
|Ending balance @ 9/30/09                                                                                                         |  | $                           | 167,500  |  |                                                        | $ | 10,298  |       |  | $ | 177,798  | 
|                                                                                                                                 |  |                             |          | 
|                                                                                                                                 |  |                             |         
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date                             |  | $                           | (42,085) |  |                                                        | $ | (1,429) |       |  | $ | (43,514) | 
|                                                                                                                                 |  |                             |          | 



26



---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2010 and December 31, 2009



Note 3:  Fair Value Measurements (continued)



Table 2

|                                                                                                                                  |  |                             |          |  |                                                        |   |        |       |  |   |          | 
|--------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | -------- |  | ------------------------------------------------------ | - | ------ | ----- |  | - | -------- | 
|(in 000s) Fair value measurements using significant unobservable inputs
for the three months ending September 30, 2010 (Level 3) | 
|                                                                                                                                  |  | Real estate andimprovements |          |  | Real estate partnerships andpreferred equityinvestment |   |        | Total | 
|                                                                                                                                  |  |                             |          | 
|                                                                                                                                  |  |                             |         
|Beginning balance @ 7/1/10                                                                                                        |  | $                           | 168,018  |  |                                                        | $ | 11,863 |       |  | $ | 179,881  | 
|                                                                                                                                  |  |                             |         
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)                                            |  |                             | 4,429    |  |                                                        |   | 524    |       |  |   | 4,953    | 
|Equity income (losses)/interest income                                                                                            |  |                             | -        |  |                                                        |   | 255    |       |  |   | 255      | 
|Acquisitions, issuances, contributions                                                                                            |  |                             | 335      |  |                                                        |   | -      |       |  |   | 335      | 
|Dispositions, settlements and distributions                                                                                       |  |                             | (16,982) |  |                                                        |   | (273)  |       |  |   | (17,255) | 
|                                                                                                                                  |  |                             |          | 
|Ending balance @ 9/30/10                                                                                                          |  | $                           | 155,800  |  |                                                        | $ | 12,369 |       |  | $ | 168,169  | 
|                                                                                                                                  |  |                             |          | 
|                                                                                                                                  |  |                             |         
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date                              |  | $                           | 4,235    |  |                                                        | $ | 524    |       |  | $ | 4,759    | 
|                                                                                                                                  |  |                             |          | 
|                                                                                                                                 
|(in 000s)
Fair value measurements using significant unobservable inputs
for the three months ending September 30, 2009 (Level 3) | 
|                                                                                                                                  |  | Real estate andimprovements |          |  | Real estatepartnerships andpreferred equityinvestment  |   |        | Total | 
|                                                                                                                                  |  |                             |          | 
|                                                                                                                                  |  |                             |         
|Beginning balance @ 7/1/09                                                                                                        |  | $                           | 176,200  |  |                                                        | $ | 10,489 |       |  | $ | 186,689  | 
|                                                                                                                                  |  |                             |         
|Net gains (losses) realized/unrealized included in earnings (or changes in net assets)                                            |  |                             | (10,078) |  |                                                        |   | (138)  |       |  |   | (10,216) | 
|Equity income (losses)/interest income                                                                                            |  |                             | -        |  |                                                        |   | 255    |       |  |   | 255      | 
|Acquisitions, issuances, contributions                                                                                            |  |                             | 1,378    |  |                                                        |   | -      |       |  |   | 1,378    | 
|Dispositions, settlements and distributions                                                                                       |  |                             | -        |  |                                                        |   | (308)  |       |  |   | (308)    | 
|                                                                                                                                  |  |                             |          | 
|Ending balance @ 9/30/09                                                                                                          |  | $                           | 167,500  |  |                                                        | $ | 10,298 |       |  | $ | 177,798  | 
|                                                                                                                                  |  |                             |          | 
|                                                                                                                                  |  |                             |         
|Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date                              |  | $                           | (10,078) |  |                                                        | $ | (138)  |       |  | $ | (10,216) | 
|                                                                                                                                  |  |                             |          | 



27



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2010 and December 31, 2009



Note 4:  Investment Level Debt

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

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

Note
5:  Risk

A.  Valuation Risk

Recent disruptions in the global capital, credit and real estate markets have led to, among other things, decline in the volume of
transaction activity, in the fair value of many real estate and real estate related investments, and a contraction in short-term and long-term debt and equity funding sources. The decline in liquidity and prices of real estate and real estate
related investments, as well as the availability of observable transaction data and inputs, may have made it more difficult to determine the fair value of such investments. As a result, these estimated fair values may vary significantly from the
prices at which the real estate investments would sell, since market prices of real estate investments can only be determined by negotiation between a willing buyer and seller. These differences could be material to the financial statements.
Although the estimated fair values represent subjective estimates, management believes that these estimated fair values are reasonable approximations of market prices and the aggregate estimated value of investments in real estate are fairly
presented as of September 30, 2010 and December 31, 2009.

B.  Financing,
Covenant, and Repayment Risks

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

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

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



28



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2010 and December 31, 2009



Note 6:  Commitments and Contingencies

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

Note 7:  Related Party Transactions

Pursuant to an investment
management agreement, 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 periods ended September 30, 2010 and September 30, 2009,
management fees incurred by the Partnership were $1,731,647 and $2,017,562, respectively. The Partnership also reimburses PIM for certain administrative services rendered by PIM. The amounts incurred for the nine months ended September 30, 2010
and September 30, 2009, were $40,222 and $40,222, respectively, and are classified as administrative expenses in the Consolidated Statements of Operations.



29



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2010 and December 31, 2009



Note 8:  Financial Highlights







|                                                                                                              |  |                                         |        |  |      |  |          |      |  |  |         |  |  |      |        |  |  |  |             | 
|------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ------ |  | ---- |  | -------- | ---- |  |  | ------- |  |  | ---- | ------ |  |  |  | ----------- | 
|                                                                                                              |  | For The Nine Months Ended September 30, |       
|                                                                                                              |  | 2010                                    |        |  | 2009 |  |          | 2008 |  |  | 2007    |  |  | 2006 |       
|Per Share(Unit) Operating Performance:                                                                        |  |                                         |        |  |      |  |          |      |  |  |         |  |  |      |        |  |  |  |             | 
|Net Asset Value attributable to general partners controlling interest, beginning of period                   |  | $                                       | 25.88  |  |      |  | $ 31.65  |      |  |  | $36.55  |  |  | $    | 33.87  |  |  |  | $    29.59  | 
|Income From Investment Operations:                                                                            |  |                                         |        |  |      |  |          |      |  |  |         |  |  |      |        |  |  |  |             | 
|Net investment income attributable to general partners controlling interest, before management fee           |  |                                         | 1.24   |  |      |  | 1.09     |      |  |  | 1.55    |  |  |      | 1.71   |  |  |  | 1.50        | 
|Investment Management fee attributable to general partners controlling interest                              |  |                                         | (0.26) |  |      |  | (0.30)   |      |  |  | (0.39)  |  |  |      | (0.37) |  |  |  | (0.33)      | 
|Net realized and unrealized gain (loss) on investments attributable to general partners controlling interest |  |                                         | 0.85   |  |      |  | (6.73)   |      |  |  | (1.31)  |  |  |      | 0.89   |  |  |  | 2.07        | 
|                                                                                                              |  |                                         |        |  |      |  |          |      |  |  |         |  |  |      |        |  |  |  |             | 
|Net Increase in Net Assets Resulting from Operations attributable to general partners controlling interest   |  |                                         | 1.83   |  |      |  | (5.94)   |      |  |  | (0.15)  |  |  |      | 2.23   |  |  |  | 3.24        | 
|                                                                                                              |  |                                         |        |  |      |  |          |      |  |  |         |  |  |      |        |  |  |  |             | 
|                                                                                                              |  |                                         |        |  |     
|Net Asset Value attributable to general partners controlling interest, end of period                         |  | $                                       | 27.71  |  |      |  | $ 25.71  |      |  |  | $36.40  |  |  | $    | 36.10  |  |  |  | $    32.83  | 
|                                                                                                              |  |                                         |        |  |      |  |          |      |  |  |         |  |  |      |        |  |  |  |             | 
|                                                                                                              |  |                                         |        |  |     
|Total Return attributable to general partners controlling interest, before Management Fee:                   |  |                                         | 8.11%  |  |      |  | -17.85%  |      |  |  | 0.64%   |  |  |      | 7.70%  |  |  |  | 12.14%      | 
|Total Return attributable to general partners controlling interest, after Management Fee (a):                |  |                                         | 7.09%  |  |      |  | -18.75%  |      |  |  | -0.41%  |  |  |      | 6.58%  |  |  |  | 10.96%      | 
|Ratios/Supplemental Data:                                                                                     |  |                                         |        |  |      |  |          |      |  |  |         |  |  |      |        |  |  |  |             | 
|Net Assets attributable to general partners controlling interest, end of period (in millions)                |  | $                                       | 171    |  |      |  | $    166 |      |  |  | $   246 |  |  | $    | 244    |  |  |  | $       222 | 
|Ratios to average net assets for the period ended (b):                                                        |  |                                         |        |  |      |  |          |      |  |  |         |  |  |      |        |  |  |  |             | 
|Total Portfolio Level Expenses                                                                                |  |                                         | 1.22%  |  |      |  | 1.23%    |      |  |  | 1.08%   |  |  |      | 1.15%  |  |  |  | 1.15%       | 
|Net Investment Income, before Management Fee                                                                  |  |                                         | 4.73%  |  |      |  | 3.76%    |      |  |  | 4.20%   |  |  |      | 5.02%  |  |  |  | 4.87%       | 

(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.

Note 9:  Subsequent Event

On October 28, 2010, the
Partnership distributed $10.0 million to its Partners as a result of the successful sale of Brookwood Apartments.



30



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

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

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

(a) Liquidity and Capital Resources

As of September 30, 2010, the Partnerships liquid assets, consisting of cash and cash equivalents, were approximately $37.9
million, an increase of approximately $13.4 million from $24.5 million at December 31, 2009. The increase was primarily due to the sale of an apartment property in Atlanta, Georgia. Partially offsetting this increase is the funding of capital
expenditures to existing properties and a $7.5 million distribution to the Partners. Sources of liquidity included net cash flow from property operations, sales proceeds, 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 September 30, 2010, approximately 18.2% of the Partnerships total assets consisted of cash and cash equivalents.

The Partnership disposed of an apartment property in Atlanta, Georgia during the nine months ended September 30, 2010. The property
sold for net proceeds of approximately $17.0 million. During the nine months ended September 30, 2010, the Partnership made distributions to its Partners totaling $7.5 million. During the nine months ended September 30, 2010, the
Partnership attained sole ownership of the retail property in Dunn, North Carolina as the operating partner was removed from the venture.

During the nine months ended September 30, 2010, the Partnership spent approximately $2.0 million and accrued approximately $0.4 million on capital improvements to various existing properties.
Approximately $1.4 million was associated with tenant improvements and capital upgrades at the office property in Brentwood, Tennessee; approximately $0.4 million contributed to tenant improvements and exterior upgrades at the retail property in
Ocean City, Maryland; and approximately $0.2 million funded interior upgrades at the office property in Beaverton, Oregon. Finally, $0.4 million was associated with minor capital improvements and transaction costs associated with leasing expenses of
various other properties.

On October 28, 2010, the Partnership distributed $10.0 million to its Partners as a result of
the successful sale of the property in Atlanta, Georgia.



31



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(b) Results of Operations

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

Net Investment Income Overview

The Partnerships net investment income attributable to the general partners controlling interest for the nine months ended
September 30, 2010 was approximately $6.1 million, an increase of approximately $0.9 million from the prior year period. The increase in net investment income attributable to the general partners controlling interest was primarily
attributable to a $0.6 million increase in the apartment sector investments net investment income from the prior year period. Additionally the hotel and retail sector investments net investment incomes increased approximately $0.1
million and $0.3 million respectively, from the prior year period, while other net investment loss attributable to the general partners controlling interest decreased approximately $0.3 million over the same period. Partially offsetting these
increases was a decrease in the office sectors investments net investment income attributable to the general partners controlling interest of approximately $0.5 million from the prior year period. The components of this net investment
income and/or loss attributable to the general partners controlling interest are discussed below by investment type.

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

Valuation Overview

The Partnership recorded net recognized and unrealized
gains attributable to the general partners controlling interest of approximately $5.3 million and $4.9 million for the nine and three-month periods ended September 30, 2010, respectively. This is compared with net recognized and
unrealized losses attributable to the general partners controlling interest of approximately $45.0 million and $9.6 million for the prior year periods, respectively. The net unrealized gains attributable to the general partners
controlling interest for the nine and three-month periods ended September 30, 2010 were due to valuation increases in the apartment and retail sectors investments. The components of these valuation changes are discussed below by
investment type. The components of these valuation gains and/or losses attributable to the general partners controlling interest are discussed below by property type.



32



---



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



|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  |  | 
|-------------------------------------------------------------------- |  | ------------------------------- | ----------- |  | -------------------------------- | - | ------------- | ---- |  | - | ---------- |  |  | - | ------------ |  |  | 
|                                                                     |  | Nine Months Ended September 30, |             |  | Three Months Ended September 30, |   |               |     
|                                                                     |  | 2010                            |             |  | 2009                             |   |               | 2010 |  |   | 2009       |  | 
|Net Investment Income:                                               |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|Office properties                                                    |  | $                               | 1,613,076   |  |                                  | $ | 2,063,323     |      |  | $ | 552,283    |  |  | $ | 507,941      |  | 
|Apartment properties                                                 |  |                                 | 2,501,323   |  |                                  |   | 1,883,182     |      |  |   | 795,792    |  |  |   | 592,254      |  | 
|Retail properties                                                    |  |                                 | 3,463,010   |  |                                  |   | 3,194,788     |      |  |   | 1,161,568  |  |  |   | 1,032,375    |  | 
|Hotel property                                                       |  |                                 | 550,247     |  |                                  |   | 416,843       |      |  |   | 319,334    |  |  |   | 261,054      |  | 
|Other (including interest income, investment mgt fee, etc.)          |  |                                 | (2,011,091) |  |                                  |   | (2,323,208)   |      |  |   | (660,644)  |  |  |   | (669,130)    |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|Total Net Investment Income                                          |  | $                               | 6,116,565   |  |                                  | $ | 5,234,928     |      |  | $ | 2,168,333  |  |  | $ | 1,724,494    |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|Net Recognized Gain (Loss) on Real Estate Investments:               |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|Apartment Properties                                                 |  |                                 | 2,339,376   |  |                                  |   | -             |      |  |   | 192,930    |  |  |   | -            |  | 
|Retail properties                                                    |  |                                 | -           |  |                                  |   | (4,452,106)   |      |  |   | -          |  |  |   | -            |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|Net Recognized Gain (Loss) on Real Estate Investments                |  |                                 | 2,339,376   |  |                                  |   | (4,452,106)   |      |  |   | 192,930    |  |  |   | -            |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|Net Unrealized Gain (Loss) on Real Estate Investments:               |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  | 
|Office properties                                                    |  |                                 | (1,836,857) |  |                                  |   | (15,033,244)  |      |  |   | (732,444)  |  |  |   | (3,492,532)  |  | 
|Apartment properties                                                 |  |                                 | 3,786,674   |  |                                  |   | (10,167,354)  |      |  |   | 3,465,762  |  |  |   | (642,718)    |  | 
|Retail properties                                                    |  |                                 | 1,029,209   |  |                                  |   | (12,136,729)  |      |  |   | 2,008,941  |  |  |   | (4,728,952)  |  | 
|Hotel property                                                       |  |                                 | (38,629)    |  |                                  |   | (3,229,699)   |      |  |   | (30,699)   |  |  |   | (759,369)    |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  |  | 
|Net Unrealized Gain (Loss) on Real Estate Investments                |  |                                 | 2,940,397   |  |                                  |   | (40,567,026)  |      |  |   | 4,711,560  |  |  |   | (9,623,571)  |  |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  |  | 
|                                                                     |  |                                 |             |  |                                 
|Net Recognized and Unrealized Gain (Loss) on Real Estate Investments |  |                                 | $5,279,773  |  |                                  |   | ($45,019,132) |      |  |   | $4,904,490 |  |  |   | ($9,623,571) |  |  | 
|                                                                     |  |                                 |             |  |                                  |   |               |      |  |   |            |  |  |   |              |  |  | 



33



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OFFICE PROPERTIES



|                                 |  |                                 |           |  |                                 |   |           |                           |  |   |                           |  |  |               |              |  |               |  |      |  |  |  |      |  |  | 
|-------------------------------- |  | ------------------------------- | --------- |  | ------------------------------- | - | --------- | ------------------------- |  | - | ------------------------- |  |  | ------------- | ------------ |  | ------------- |  | ---- |  |  |  | ---- |  |  | 
|Nine Months Ended
September 30,  |  | Net InvestmentIncome/(Loss)2010 |           |  | Net InvestmentIncome/(Loss)2009 |   |           | UnrealizedGain/(Loss)2010 |  |   | UnrealizedGain/(Loss)2009 |  |  | Occupancy2010 |              |  | Occupancy2009 |  |      | 
|                                 |  |                                
|Property                         |  |                                 |           |  |                                 |   |           |                           |  |   |                           |  |  |               |              |  |               |  |      |  |  |  |      |  | 
|Lisle, IL                        |  | $                               | 294,699   |  |                                 | $ | 51,479    |                           |  | $ | 314,207                   |  |  | $             | (3,191,325)  |  |               |  | 48%  |  |  |  | 36%  |  | 
|Brentwood, TN                    |  |                                 | (219,304) |  |                                 |   | 319,676   |                           |  |   | (190,400)                 |  |  |               | (6,495,216)  |  |               |  | 68%  |  |  |  | 70%  |  | 
|Beaverton, OR                    |  |                                 | 691,108   |  |                                 |   | 899,962   |                           |  |   | (1,769,089)               |  |  |               | (2,272,417)  |  |               |  | 88%  |  |  |  | 88%  |  | 
|Brentwood, TN                    |  |                                 | 846,573   |  |                                 |   | 792,206   |                           |  |   | (191,575)                 |  |  |               | (3,074,286)  |  |               |  | 100% |  |  |  | 100% |  | 
|                                 |  |                                 |           |  |                                 |   |          
|                                 |  | $                               | 1,613,076 |  |                                 | $ | 2,063,323 |                           |  | $ | (1,836,857)               |  |  | $             | (15,033,244) |  |              
|                                 |  |                                 |           |  |                                
|                                 |  |                                 |           |  |                                 |   |           |                           |  |   |                           |  | 
|                                 |  |                                 |           |  |                                 |   |           |                           |  |   |                           |  | 
|Three Months Ended
September 30, |  |                                 |           |  |                                 |   |           |                           |  |   |                           |  | 
|Property                         |  |                                 |           |  |                                 |   |           |                           |  |   |                           |  |  |               |              |  |              
|Lisle, IL                        |  | $                               | 145,334   |  |                                 | $ | 5,704     |                           |  | $ | (30,487)                  |  |  | $             | (894,393)    |  |              
|Brentwood, TN                    |  |                                 | 4,814     |  |                                 |   | (33,309)  |                           |  |   | (490,696)                 |  |  |               | (2,003,042)  |  |              
|Beaverton, OR                    |  |                                 | 143,139   |  |                                 |   | 295,655   |                           |  |   | (22,808)                  |  |  |               | (242,152)    |  |              
|Brentwood, TN                    |  |                                 | 258,996   |  |                                 |   | 239,891   |                           |  |   | (188,453)                 |  |  |               | (352,945)    |  |              
|                                 |  |                                 |           |  |                                
|                                 |  | $                               | 552,283   |  |                                 | $ | 507,941   |                           |  | $ | (732,444)                 |  |  | $             | (3,492,532)  |  |              
|                                 |  |                                 |           |  |                                

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 nine months ended September 30, 2010, a decrease of approximately $0.5 million from the prior year period. The decrease for the nine month period ended September 30, 2010 was primarily caused by
(a) decreased rental income at one of the properties in Brentwood, Tennessee due to free rent given to the buildings largest tenant as part of a renewal of the tenants lease; and (b) decreased rental income at the property in
Beaverton, Oregon caused by free rent given to a new full-floor tenant. Partially offsetting this decrease was an increase in rental income at the property in Lisle, Illinois due to the completion of the free rent period for one of the
buildings larger tenants.

Net investment income attributable to the general partners controlling interest for the
Partnerships office properties were relatively unchanged for the quarter ended September 30, 2010 compared with the prior year period.

Unrealized Gain/(Loss)

The office properties owned by the Partnership
recorded a net unrealized loss attributable to the general partners controlling interest of approximately $1.8 million during the nine months ended September 30, 2010, compared with a net unrealized loss attributable to the general
partners controlling interest of approximately $15.0 million for the prior year period. The net unrealized loss attributable to the general partners controlling interest for the nine months ended September 30, 2010 was primarily due
to a $1.7 million valuation decline at the property in Beaverton, Oregon based on decreased market and contract rent because of a new full-floor tenant paying a lower rent than the previous tenant.

The office properties owned by the Partnership recorded a net unrealized loss attributable to the general partners controlling
interest of approximately $0.7 million during the quarter ended September 30, 2010, compared with a net unrealized loss attributable to the general partners controlling interest of approximately $3.5 million for the prior year period. The
net unrealized loss attributable to the general partners controlling interest for the quarter ended September 30, 2010 was primarily due to decreased market leasing assumptions at the properties in Brentwood, Tennessee.



34



---



APARTMENT PROPERTIES



|                                 |  |                                 |           |  |                                 |   |           |                                        |  |   |                           |  |  |               |              |  |               |  |     |  |  |  |     |  |  | 
|-------------------------------- |  | ------------------------------- | --------- |  | ------------------------------- | - | --------- | -------------------------------------- |  | - | ------------------------- |  |  | ------------- | ------------ |  | ------------- |  | --- |  |  |  | --- |  |  | 
|Nine Months Ended September
30,  |  | Net InvestmentIncome/(Loss)2010 |           |  | Net InvestmentIncome/(Loss)2009 |   |           | Recognized & UnrealizedGain/(Loss)2010 |  |   | UnrealizedGain/(Loss)2009 |  |  | Occupancy2010 |              |  | Occupancy2009 |  |     | 
|                                 |  |                                
|Property                         |  |                                 |           |  |                                 |   |           |                                        |  |   |                           |  |  |               |              |  |               |  |     |  |  |  |     |  | 
|Atlanta,
GA(1)                   |  | $                               | 610,210   |  |                                 | $ | 332,593   |                                        |  | $ | 2,339,376                 |  |  | $             | (2,538,635)  |  |               |  | N/A |  |  |  | 95% |  | 
|Raleigh, NC                      |  |                                 | 601,243   |  |                                 |   | 186,989   |                                        |  |   | 569,473                   |  |  |               | (1,660,188)  |  |               |  | 96% |  |  |  | 96% |  | 
|Austin, TX                       |  |                                 | 874,775   |  |                                 |   | 941,126   |                                        |  |   | 2,297,268                 |  |  |               | (4,083,628)  |  |               |  | 97% |  |  |  | 94% |  | 
|Charlotte, NC                    |  |                                 | 415,095   |  |                                 |   | 422,474   |                                        |  |   | 919,933                   |  |  |               | (1,884,903)  |  |               |  | 94% |  |  |  | 96% |  |  | 
|                                 |  |                                 |           |  |                                 |   |          
|                                 |  | $                               | 2,501,323 |  |                                 | $ | 1,883,182 |                                        |  | $ | 6,126,050                 |  |  | $             | (10,167,354) |  |              
|                                 |  |                                 |           |  |                                
|                                 |  |                                 |           |  |                                 |   |           |                                        |  |   |                           |  | 
|                                 |  |                                 |           |  |                                 |   |           |                                        |  |   |                           |  | 
|Three Months Ended
September 30, |  |                                 |           |  |                                 |   |           |                                        |  |   |                           |  | 
|Property                         |  |                                 |           |  |                                 |   |           |                                        |  |   |                           |  |  |               |              |  |              
|Atlanta, GA                      |  | $                               | 199,176   |  |                                 | $ | 92,606    |                                        |  | $ | 192,930                   |  |  | $             | (596,264)    |  |              
|Raleigh, NC                      |  |                                 | 211,151   |  |                                 |   | 79,867    |                                        |  |   | 686,599                   |  |  |               | (29,414)     |  |              
|Austin, TX                       |  |                                 | 267,763   |  |                                 |   | 270,168   |                                        |  |   | 1,800,000                 |  |  |               | 1,000,000    |  |              
|Charlotte, NC                    |  |                                 | 117,702   |  |                                 |   | 149,613   |                                        |  |   | 979,163                   |  |  |               | (1,017,040)  |  |              
|                                 |  |                                 |           |  |                                
|                                 |  | $                               | 795,792   |  |                                 | $ | 592,254   |                                        |  | $ | 3,658,692                 |  |  | $             | (642,718)    |  |              
|                                 |  |                                 |           |  |                                



|(1) | The Atlanta, Georgia apartment property was sold on September 29, 2010.
|--- | -----------------------------------------------------------------------

Net Investment Income

Net investment income attributable to the general partners controlling interest for the Partnerships apartment properties was approximately $2.5 million for the nine months ended
September 30, 2010, an increase of approximately $0.6 million from the prior year period. Net investment income attributable to the general partners controlling interest for the Partnerships apartment properties was approximately
$0.8 million for the quarter ended September 30, 2010, an increase of approximately $0.2 million from the prior year period. The increases in net investment income attributable to the general partners controlling interest for the nine and
three month periods ended September 30, 2010 were primarily due to the write-off of accrued receivables at the property in Raleigh, North Carolina in the prior year period and decreased concessions and average vacancy at the property in
Atlanta, Georgia caused by increased demand.

Recognized and Unrealized Gain/(Loss)

The apartment properties owned by the Partnership recorded a net recognized and unrealized gain attributable to the general
partners controlling interest of approximately $6.1 million for the nine months ended September 30, 2010, compared with a net unrealized loss attributable to the general partners controlling interest of approximately $10.2 million
for the prior year period. The net recognized and unrealized gain attributable to the general partners controlling interest for the nine month period ended September 30, 2010 was primarily due (a) to a recognized gain at the property
in Atlanta, Georgia due to the sale of property; and (b) a net unrealized gain attributable to the general partners controlling interest at the property in Austin, Texas due to decreased investment rates and more favorable market leasing
assumptions. Investment rates include direct and terminal capitalization rates, and discount rates, which reflect investors yield requirements on investments.

The apartment properties owned by the Partnership recorded a recognized and net unrealized gain attributable to the general partners controlling interest of approximately $3.7 million for the
quarter ended September 30, 2010, 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 gain attributable to the general
partners controlling interest for the quarter ended September 30, 2010 was due (a) to a valuation increase at each apartment property due to decreased investment rates and more favorable market leasing assumptions: and (b) a
recognized gain from the sale of the property in Atlanta, Georgia.



35



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RETAIL PROPERTIES



|                                |  |                                   |           |  |                                 |   |           |                           |  |   |                                        |   |  |               |              |  |               |  |      |  |  |  |      |  |  | 
|------------------------------- |  | --------------------------------- | --------- |  | ------------------------------- | - | --------- | ------------------------- |  | - | -------------------------------------- | - |  | ------------- | ------------ |  | ------------- |  | ---- |  |  |  | ---- |  |  | 
|Nine Months Ended
September 30, |  | Net Investment  Income/(Loss)2010 |           |  | Net InvestmentIncome/(Loss)2009 |   |           | UnrealizedGain/(Loss)2010 |  |   | Recognized & UnrealizedGain/(Loss)2009 |   |  | Occupancy2010 |              |  | Occupancy2009 |  |      | 
|                                |  |                                  
|Property                        |  |                                   |           |  |                                 |   |           |                           |  |   |                                        |   |  |               |              |  |               |  |      |  |  |  |      |  | 
|Roswell,
GA(1)                  |  | $                                 | -         |  |                                 | $ | 137,068   |                           |  | $ | -                                      |   |  | $             | (4,452,106)  |  |               |  | N/A  |  |  |  | N/A  |  | 
|Kansas City, KS(2)              |  |                                   | -         |  |                                 |   | 21,094    |                           |  |   | -                                      |   |  |               | -            |  |               |  | N/A  |  |  |  | N/A  |  | 
|Hampton, VA                     |  |                                   | 736,320   |  |                                 |   | 753,204   |                           |  |   | (1,756,719                             | ) |  |               | (4,314,384)  |  |               |  | 94%  |  |  |  | 89%  |  | 
|Ocean City, MD                  |  |                                   | 893,049   |  |                                 |   | 845,623   |                           |  |   | 197,525                                |   |  |               | (1,877,704)  |  |               |  | 99%  |  |  |  | 95%  |  | 
|Westminster, MD                 |  |                                   | 933,402   |  |                                 |   | 888,835   |                           |  |   | 177,748                                |   |  |               | (4,100,156)  |  |               |  | 100% |  |  |  | 100% |  | 
|Dunn, NC(3)                     |  |                                   | 150,631   |  |                                 |   | (200,090  | )                         |  |   | 29,655                                 |   |  |               | (415,885)    |  |               |  | 35%  |  |  |  | 34%  |  | 
|CARS Preferred Equity           |  |                                   | 749,608   |  |                                 |   | 749,054   |                           |  |   | 2,381,000                              |   |  |               | (1,428,600)  |  |               |  | N/A  |  |  |  | N/A  |  | 
|                                |  |                                   |           |  |                                 |   |          
|                                |  | $                                 | 3,463,010 |  |                                 | $ | 3,194,788 |                           |  | $ | 1,029,209                              |   |  | $             | (16,588,835) |  |              
|                                |  |                                   |           |  |                                
|                                |  |                                   |           |  |                                 |   |           |                           |  |   |                                        |   |  |               |              |  |              
|                                |  |                                   |           |  |                                 |   |           |                           |  |   |                                        |   |  |               |              |  |              
|                                |  |                                   |           |  |                                 |   |           |                           |  |   |                                        |   |  |               |              |  |              
|Three Months Ended              |  |                                   |           |  |                                 |   |           |                           |  |   |                                        |   | 
|September 30,                   |  |                                   |           |  |                                 |   |           |                           |  |   |                                        |   | 
|Property                        |  |                                   |           |  |                                 |   |           |                           |  |   |                                        |   |  |               |              |  |              
|Roswell,
GA(1)                  |  | $                                 | -         |  |                                 | $ | (96,692   | )                         |  | $ | -                                      |   |  | $             | -            |  |              
|Kansas City, KS(2)              |  |                                   | -         |  |                                 |   | 362       |                           |  |   | -                                      |   |  |               | -            |  |              
|Hampton, VA                     |  |                                   | 232,037   |  |                                 |   | 250,499   |                           |  |   | 554,250                                |   |  |               | (2,501,128)  |  |              
|Ocean City, MD                  |  |                                   | 328,482   |  |                                 |   | 278,854   |                           |  |   | (12,917                                | ) |  |               | (370,820)    |  |              
|Westminster, MD                 |  |                                   | 340,296   |  |                                 |   | 279,782   |                           |  |   | 897,940                                |   |  |               | (1,300,036)  |  |              
|Dunn,
NC(3)                     |  |                                   | 8,109     |  |                                 |   | 66,926    |                           |  |   | 45,848                                 |   |  |               | (418,568)    |  |              
|CARS Preferred Equity           |  |                                   | 252,644   |  |                                 |   | 252,644   |                           |  |   | 523,820                                |   |  |               | (138,400)    |  |              
|                                |  |                                   |           |  |                                
|                                |  | $                                 | 1,161,568 |  |                                 | $ | 1,032,375 |                           |  | $ | 2,008,941                              |   |  | $             | (4,728,952)  |  |              
|                                |  |                                   |           |  |                                



|(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 nine months ended September 30, 2009.
|----------- | ----------------------------------------------------------------

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

Net Investment Income

Net investment income attributable to the general partners controlling interest for the Partnerships retail properties was approximately $3.5 million for the nine months ended
September 30, 2010, an increase of approximately $0.3 million from the prior year period. The increase in net investment income attributable to the general partners controlling interest for the nine month period ended September 30,
2010 was largely due to the reconciliation of a loss previously misallocated to the partner at the retail property in Dunn, North Carolina during the prior year period. This increase was partially offset by the loss of income related to the
disposition of the Roswell, Georgia retail property in the prior year period.

Net investment income attributable to the
general partners controlling interest for the Partnerships retail properties was approximately $1.2 million for the quarter ended September 30, 2010, an increase of approximately $0.1 million from the prior year period. The increase
in net investment income attributable to the general partners controlling interest for the quarter ended September 30, 2010 was largely attributable to (a) an increase in income at the property in Westminster, Maryland due to the
refusal of a tenant to pay rent in the prior year period; and (b) a loss of income during the prior year period at the property in Roswell, Georgia due to post-closing costs as a result of its sale.

Recognized and Unrealized Gain/(Loss)

The retail properties owned by the Partnership recorded a net unrealized gain attributable to the general partners controlling interest of approximately $1.0 million for the nine months ended
September 30, 2010, compared with a net recognized and unrealized loss attributable to the general partners controlling interest of approximately $16.6 million for the prior year period. The unrealized gain attributable to the general
partners controlling interest for the nine month period ended September 30, 2010 was primarily due to a valuation gain of approximately $2.4 million in the Capital Automotive Real Estate Services, or CARS, preferred equity
investment due to a reduction in the expected remaining term of the investment, effectively increasing the probability of repayment. This gain was partially offset by a net unrealized loss attributable to the general partners controlling
interest of approximately $1.7 million at the property in Hampton, Virginia caused by the near-term potential of large tenants vacating and decreasing market rents.

The retail properties owned by the Partnership recorded a net unrealized gain attributable to the general partners controlling interest of approximately $2.0 million for the quarter ended
September 30, 2010, compared with a net recognized and unrealized loss attributable to the general partners controlling interest of approximately $4.7 million for the prior year period. The net



36



---

unrealized gain attributable to the general partners controlling interest for the quarter ended September 30, 2010 was primarily due to (a) valuation gains of $0.6 million and
$0.9 million at the properties in Hampton, Virginia and Westminster, Maryland, respectively, as a result of the early renewal of large tenants initially expected to vacate and (b) a net unrealized gain attributable to the general partners
controlling interest of approximately $0.5 million in the Capital Automotive Real Estate Services, or CARS, preferred equity investment due to a reduction in the expected remaining term of the investment, effectively increasing the
probability of repayment.

HOTEL PROPERTY



|                                |  |                                 |         |  |                                 |   |         |                           |  |   |                           |   |  |               |            |   |               |  |     |  |  |  |     |  |  | 
|------------------------------- |  | ------------------------------- | ------- |  | ------------------------------- | - | ------- | ------------------------- |  | - | ------------------------- | - |  | ------------- | ---------- | - | ------------- |  | --- |  |  |  | --- |  |  | 
|Nine Months Ended
September 30, |  | Net InvestmentIncome/(Loss)2010 |         |  | Net InvestmentIncome/(Loss)2009 |   |         | UnrealizedGain/(Loss)2010 |  |   | UnrealizedGain/(Loss)2009 |   |  | Occupancy2010 |            |   | Occupancy2009 |  |     | 
|                                |  |                                
|Property                        |  |                                 |         |  |                                 |   |         |                           |  |   |                           |   |  |               |            |   |               |  |     |  |  |  |     |  | 
|Lake Oswego, OR                 |  | $                               | 550,247 |  |                                 | $ | 416,843 |                           |  | $ | (38,629                   | ) |  | $             | (3,229,699 | ) |               |  | 77% |  |  |  | 61% |  | 
|                                |  |                                 |         |  |                                 |   |         |                           |  |   |                           |   |  |               |            |   |               |  |    
|                                |  |                                 |         |  |                                 |   |         |                           |  |   |                           |   |  |               |            |   |              
|                                |  |                                 |         |  |                                 |   |         |                           |  |   |                           |   |  |               |            |   |              
|Three Months Ended              |  |                                 |         |  |                                 |   |         |                           |  |   |                           |   | 
|September 30,                   |  |                                 |         |  |                                 |   |         |                           |  |   |                           |   | 
|Property                        |  |                                 |         |  |                                 |   |         |                           |  |   |                           |   |  |               |            |   |              
|Lake Oswego, OR                 |  | $                               | 319,334 |  |                                 | $ | 261,054 |                           |  | $ | (30,699                   | ) |  | $             | (759,369   | ) |              

Net Investment Income

Net investment income attributable to the general partners controlling interest for the Partnerships hotel property was
approximately $0.6 million for the nine months ended September 30, 2010, an increase of approximately $0.1 million from the prior year period. Net investment income attributable to the general partners controlling interest for the
Partnerships hotel property was approximately $0.3 million for the quarter ended September 30, 2010, an increase of approximately $0.1 million from the prior year period. The increases in net investment income attributable to the general
partners controlling interest for the Partnerships hotel property for the nine and three-month periods ended September 30, 2010 were largely due to improved cost savings in operations and increased average daily room rate and
occupancy as a result of the strengthening hospitality market driven by increased business and vacation travel.

Unrealized
Gain/(Loss)

The Partnerships hotel propertys unrealized returns attributable to the general partners
controlling interest were relatively unchanged for the nine and three-month periods ended September 30, 2010, compared with unrealized losses attributable to the general partners controlling interest of approximately $3.2 million and $0.8
million for the prior year periods, respectively.

Other

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



37



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(c) Inflation

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

Critical Accounting Policies

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

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

Accounting Pronouncements Adopted

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

Valuation of Investments

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

In general fair value estimates are based upon property appraisal reports prepared by independent real estate appraisers (members of the
Appraisal Institute or an equivalent organization) within a reasonable amount of time following acquisition of the real estate and no less frequently than annually thereafter. The Chief Real Estate Appraiser of Prudential Investment Management, Inc.
(PIM), which is an indirectly owned subsidiary of Prudential Financial, Inc. (PFI), is responsible to assure that the valuation process provides independent and reasonable property fair value estimates. An unaffiliated third
party has been appointed by PIM to assist the Chief Real Estate Appraiser in maintaining and monitoring the independence and the accuracy of the appraisal process. The fair value of real estate investments does not reflect the transaction sale
costs, which may be incurred upon disposition of the real estate investments.

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

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.



38



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ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk  The general partners controlling interest exposure to market rate risk as of September 30,
2010, 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 September 30, 2010:



|                          |  |            |  |                                   |  |                       |  | 
|------------------------- |  | ---------- |  | --------------------------------- |  | --------------------- |  | 
|                          |  | Maturity   |  | Estimated Market Value (millions) |  | Average
Interest Rate |  | 
|                          |  |            | 
|Cash and Cash equivalents |  | 0-3 months |  | $37.9                             |  | 1.49%                 | 

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



|                                                                  |  |      |       |   |      |  |         |      |  |  |       |  |  |      |        |  |            |  |       |       |  |  |                     |  |  |  |         |   |  |  |         |  |  | 
|----------------------------------------------------------------- |  | ---- | ----- | - | ---- |  | ------- | ---- |  |  | ----- |  |  | ---- | ------ |  | ---------- |  | ----- | ----- |  |  | ------------------- |  |  |  | ------- | - |  |  | ------- |  |  | 
|Investment level debt (in $ thousands), including current portion |  | 2010 |       |   | 2011 |  |         | 2012 |  |  | 2013  |  |  | 2014 |        |  | Thereafter |  |       | Total |  |  | EstimatedFair Value |  |  | 
|Weighted Average Fixed Interest
Rate                              |  |      | 6.75% |   |      |  | 6.75%   |      |  |  | 6.75% |  |  |      | 6.75%  |  |            |  | 6.75% |       |  |  | 6.75%               |  |  |  | 6.75%   |   |  |  |         |  | 
|Fixed Rate                                                        |  |      | $145  |   |      |  | $604    |      |  |  | $646  |  |  |      | $691   |  |            |  | $739  |       |  |  | $3,510              |  |  |  | $6,335  |   |  |  | $6,612  |  | 
|Variable Rate                                                     |  |      | -     |   |      |  | $15,421 |      |  |  | -     |  |  |      | $9,000 |  |            |  | -     |       |  |  | -                   |  |  |  | $24,421 |   |  |  | $24,360 |  | 
|Premium/(Discount) on Investment Level Debt                       |  |      | ($3   | ) |      |  | -       |      |  |  | -     |  |  |      | -      |  |            |  | -     |       |  |  | -                   |  |  |  | ($3     | ) |  |  | -       |  | 
|                                                                  |  |      |       |   |     
|Total Investment Level Debt                                       |  |      | $142  |   |      |  | $16,025 |      |  |  | $646  |  |  |      | $9,691 |  |            |  | $739  |       |  |  | $3,510              |  |  |  | $30,753 |   |  |  | $30,972 |  | 
|                                                                  |  |      |       |   |     

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

Item 4.  Controls and Procedures

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



39



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PART II  OTHER INFORMATION

Item 1A. Risk Factors

You should carefully
consider the risks described under Risk Factors in our Annual Report on form 10-K for the year ended December 31, 2009 and in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010. 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 business described elsewhere in this Quarterly Report on Form
10-Q.



40



---



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.



41



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SIGNATURES

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



PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

in respect of

Pruco Life of New Jersey Variable

Contract Real Property Account

(Registrant)





Date:November 12, 2010



By:

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




42