UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    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 þ NO o
 Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of
large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
 Large accelerated filer
o
    
    Accelerated filer
o
    
    Non-accelerated filer  
þ(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). YES o NO þ




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##### 



PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
(Registrant)
INDEX
 PageForward Looking Statement Disclosure
    
    
    3Part I  Financial InformationItem 1. Financial Statements (Unaudited)A. PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNTStatements of Net Assets  September 30, 2008 and December 31, 2007
    
    
    4Statements of Operations  Nine and Three Months Ended September 30, 2008 and 2007
    
    
    4Statements of Changes in Net Assets  Nine and Three Months Ended September 30, 2008 and 2007
    
    
    4Notes to the Financial Statements of the Real Property Account
    
    
    5B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIPConsolidated Statements of Assets and Liabilities  September 30, 2008 and December 31, 2007
    
    
    11Consolidated Statements of Operations  Nine and Three Months Ended September 30, 2008 and 2007
    
    
    12Consolidated Statements of Changes in Net AssetsNine Months Ended September 30, 2008 and 2007
    
    
    13Consolidated Statements of Cash Flows  Nine Months Ended September 30, 2008 and 2007
    
    
    14Consolidated Schedules of Investments  September 30, 2008 and December 31, 2007
    
    
    15Notes to Consolidated Financial Statements of the Partnership
    
    
    17Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    37Part II  Other InformationItem
1A. Risk Factors
    
    
    37Item
4. Submission of Matters to a Vote of Security Holders
    
    
    41Item 6. Exhibits
    
    
    41Signatures
    
    
    42
 2




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Forward-Looking Statement Disclosure
  3




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##### 



FINANCIAL STATEMENTS OF
 
 PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
 
 STATEMENTS OF NET ASSETS
 September 30, 2008(unaudited)
    
    
    December 31, 2007ASSETSInvestment in The Prudential Variable Contract
Real Property Partnership
    
    $
    10,720,949
    
    
    $
    10,764,653Net Assets
    
    $
    10,720,949
    
    
    $
    10,764,653NET ASSETS,representing:Equity of contract owners
    
    $
    7,550,168
    
    
    $
    7,715,262Equity of Pruco Life Insurance Company of New Jersey
    
    
    3,170,781
    
    
    
    3,049,391$
    10,720,949
    
    
    $
    10,764,653Units outstanding
    
    
    3,348,019
    
    
    
    3,333,399Portfolio shares held
    
    
    294,526
    
    
    
    294,526Portfolio net asset value per share
    
    $
    36.40
    
    
    $
    36.55
 
 STATEMENTS OF OPERATIONS
 1/1/2008-9/30/2008
    
    
    1/1/2007-9/30/2007
    
    
    7/1/2008-9/30/2008
    
    
    7/1/2007-9/30/2007(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)INVESTMENT INCOMENet investment income from Partnership operations
    
    $
    367,686
    
    
    $
    394,082
    
    
    $
    104,689
    
    
    $
    145,830EXPENSESCharges to contract owners for assuming mortality risk and
expense risk and for administration
    
    
    33,124
    
    
    
    32,964
    
    
    
    11,123
    
    
    
    11,133NET INVESTMENT INCOME
    
    
    334,562
    
    
    
    361,118
    
    
    
    93,566
    
    
    
    134,697NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTSNet change in unrealized gain (loss) on investments in
Partnership
    
    
    (411,390
    )
    
    
    231,385
    
    
    
    (355,525
    )
    
    
    (17,530
    )Net realized gain (loss) on sale of investments in Partnership
    
    
    0
    
    
    
    30,820
    
    
    
    0
    
    
    
    (2,283
    )NET GAIN (LOSS) ON INVESTMENTS
    
    
    (411,390
    )
    
    
    262,205
    
    
    
    (355,525
    )
    
    
    (19,813
    )NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
    
    $
    (76,828
    )
    
    $
    623,323
    
    
    $
    (261,959
    )
    
    $
    114,884
 
 STATEMENTS OF CHANGES IN NET ASSETS
 1/1/2008-9/30/2008
    
    
    1/1/2007-9/30/2007
    
    
    7/1/2008-9/30/2008
    
    
    7/1/2007-9/30/2007(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)OPERATIONSNet investment income
    
    $
    334,562
    
    
    $
    361,118
    
    
    $
    93,566
    
    
    $
    134,697Net change in unrealized gain (loss) on investments in
Partnership
    
    
    (411,390
    )
    
    
    231,385
    
    
    
    (355,525
    )
    
    
    (17,530
    )Net realized gain (loss) on sale of investments in Partnership
    
    
    0
    
    
    
    30,820
    
    
    
    0
    
    
    
    (2,283
    )NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
    
    
    (76,828
    )
    
    
    623,323
    
    
    
    (261,959
    )
    
    
    114,884CAPITAL TRANSACTIONSNet withdrawals by contract owners
    
    
    (102,804
    )
    
    
    (225,395
    )
    
    
    (48,629
    )
    
    
    (179,735
    )Net contributions by Pruco Life Insurance Company of New
Jersey
    
    
    135,928
    
    
    
    258,359
    
    
    
    59,752
    
    
    
    190,868NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS
    
    
    33,124
    
    
    
    32,964
    
    
    
    11,123
    
    
    
    11,133TOTAL INCREASE (DECREASE) IN NET ASSETS
    
    
    (43,704
    )
    
    
    656,287
    
    
    
    (250,836
    )
    
    
    126,017NET ASSETSBeginning of period
    
    
    10,764,653
    
    
    
    9,975,186
    
    
    
    10,971,785
    
    
    
    10,505,456End of period
    
    $
    10,720,949
    
    
    $
    10,631,473
    
    
    $
    10,720,949
    
    
    $
    10,631,473
  4




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##### 



NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
September 30, 2008
(Unaudited)
 Note 1: General
    Note 2: Summary of Significant Accounting Policies and Pronouncements
 A. Basis of Accounting
     5




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##### 



B. Investment in Partnership Interest
  C. Income Recognition
  D. Equity of Pruco Life Insurance Company of New Jersey
  6




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##### 



Note 3: Charges and Expenses
 A. Mortality Risk and Expense Risk Charges
  B. Administrative Charges
  C. Cost of Insurance and Other Related Charges
  D. Deferred Sales Charge
  E. Partial Withdrawal Charge
  7




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##### 



Note 4: Taxes
  Note 5: Net Withdrawals by Contract Owners
  Nine Months Ended September 30,(Unaudited)2008
    
    
    2007VAL
    
    $
    (114,134
    )
    
    $
    (170,790
    )VLI
    
    
    (20,018
    )
    
    
    (51,628
    )SPVA
    
    
    32,000
    
    
    
    0SPVL
    
    
    (652
    )
    
    
    (2,977
    )TOTAL
    
    $
    (102,804
    )
    
    $
    (225,395
    )
 Note 6: Partnership Distributions
  Note 7: Unit Information
  September 30, 2008
    
    December 31, 2007(Unaudited)Units Outstanding:
    
    
    3,348,019
    
    
    
    3,333,399Unit Value:
    
    
    2.77218 to 3.37268
    
    
    
    2.80966 to 3.39532
 Note 8: Financial Highlights
  Nine Months EndedSeptember 30,(Unaudited)2008
    
    2007Total Return
    
    -1.33% to -0.67%
    
    5.60% to 6.30%
 8




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##### 



Note 9: Fair Value Disclosure
         9




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##### 



Table 1:
 ($ in 000s)Quoted Prices inActive Markets
    
    Significant Other
    
    SignificantAmounts Measured
    
    for Identical
    
    Observable Inputs
    
    Unobservableat Fair 9/30/2008
    
    Assets (Level 1)
    
    (Level 2)
    
    Inputs (Level 3)Assets:Investment in The
Prudential Variable
Contract Real
Property
Partnership
    
    $
    10,721
    
    
    $
    
    
    
    $
    
    
    
    $
    10,721Total Assets
    
    $
    10,721
    
    
    $
    
    
    
    $
    
    
    
    $
    10,721
 Table 2:
 ($ in 000s)Fair Value MeasurementsUsing SignificantUnobservable Inputs(Level 3)Beginning balance @ 12/31/07
    
    $
    10,765Total gains or losses (realized/unrealized)

included in earnings (or changes in net assets) from Partnership operations
    
    $
    (411
    )Net Investment Income from Partnership operations
    
    $
    367Acquisition/Additions
    
    
    Equity Income
    
    
    Contributions
    
    
    Disposition/Settlements
    
    
    Equity losses
    
    
    Distributions
    
    
    Ending balance @ 9/30/08
    
    $
    10,721The amount of total gains or losses for the period included in earnings
(or changes in net assets) attributable to the change in unrealized gains
or losses relating to assets still held at the reporting date relating to assets
still held at the reporting date
    
    $
    (411
    )
 10




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##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
 September 30, 2008(Unaudited)
    
    
    December 31, 2007ASSETSREAL ESTATE INVESTMENTS  At estimated fair value:Real estate and improvements

(cost: 09/30/2008 - $243,622,010; 12/31/2007 -$236,466,116)
    
    $
    253,212,890
    
    
    $
    254,394,053Real estate partnerships and preferred equity investments

(cost: 09/30/2008 - $14,431,965; 12/31/2007 - $14,523,934)
    
    
    13,618,795
    
    
    
    14,523,934Total real estate investments
    
    $
    266,831,685
    
    
    $
    268,917,987CASH AND CASH EQUIVALENTS
    
    
    26,144,873
    
    
    
    18,215,871OTHER ASSETS, NET
    
    
    3,812,033
    
    
    
    3,033,040Total assets
    
    $
    296,788,591
    
    
    $
    290,166,898LIABILITIES & PARTNERS EQUITYINVESTMENT LEVEL DEBT
    
    $
    39,716,338
    
    
    $
    32,121,712ACCOUNTS PAYABLE AND ACCRUED EXPENSES
    
    
    3,010,547
    
    
    
    2,184,812DUE TO AFFILIATES
    
    
    891,080
    
    
    
    901,371OTHER LIABILITIES
    
    
    1,071,598
    
    
    
    920,454MINORITY INTEREST
    
    
    6,068,207
    
    
    
    7,004,790Total liabilities
    
    
    50,757,770
    
    
    
    43,133,139COMMITMENTS AND CONTINGENCIESPARTNERS EQUITY
    
    
    246,030,821
    
    
    
    247,033,759Total liabilities and partners equity
    
    $
    296,788,591
    
    
    $
    290,166,898NUMBER OF SHARES OUTSTANDING AT END OF PERIOD
    
    
    6,758,960
    
    
    
    6,758,960SHARE VALUE AT END OF PERIOD
    
    $
    36.40
    
    
    $
    36.55
 The accompanying notes are an integral part of these consolidated financial statements.
 11




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##### 



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 30,2008
    
    
    2007
    
    
    2008
    
    
    2007INVESTMENT INCOME:Revenue from real estate and improvements
    
    $
    23,205,896
    
    
    $
    21,032,860
    
    
    $
    7,809,725
    
    
    $
    7,639,678Equity in income of real estate partnerships
    
    
    721,587
    
    
    
    882,293
    
    
    
    211,724
    
    
    
    254,645Interest on short-term investments
    
    
    344,807
    
    
    
    1,293,428
    
    
    
    113,428
    
    
    
    340,171Total investment income
    
    
    24,272,290
    
    
    
    23,208,581
    
    
    
    8,134,877
    
    
    
    8,234,494INVESTMENT EXPENSES:Operating
    
    
    5,401,923
    
    
    
    5,137,964
    
    
    
    1,924,396
    
    
    
    1,755,099Investment management fee
    
    
    2,608,842
    
    
    
    2,492,126
    
    
    
    877,672
    
    
    
    851,683Real estate taxes
    
    
    2,173,562
    
    
    
    1,656,843
    
    
    
    691,942
    
    
    
    602,234Administrative
    
    
    4,739,796
    
    
    
    3,218,654
    
    
    
    2,211,888
    
    
    
    1,181,123Interest expense
    
    
    1,477,183
    
    
    
    1,575,492
    
    
    
    518,514
    
    
    
    446,379Minority interest
    
    
    (566,900
    )
    
    
    83,878
    
    
    
    (491,998
    )
    
    
    51,391Total investment expenses
    
    
    15,834,406
    
    
    
    14,164,957
    
    
    
    5,732,414
    
    
    
    4,887,909NET INVESTMENT INCOME
    
    
    8,437,884
    
    
    
    9,043,624
    
    
    
    2,402,463
    
    
    
    3,346,585REALIZED AND UNREALIZED GAIN (LOSS) ON REAL ESTATE
INVESTMENTS:Net proceeds from real estate investments sold
    
    
    
    
    
    
    18,353,122
    
    
    
    
    
    
    
    Less: Cost of real estate investments sold
    
    
    
    
    
    
    19,026,181
    
    
    
    
    
    
    
    52,381Realization of prior years unrealized
gain (loss) on real estate investments sold
    
    
    
    
    
    
    (1,380,344
    )
    
    
    
    
    
    
    NET GAIN (LOSS) REALIZED ON REAL ESTATE INVESTMENTS SOLD
    
    
    
    
    
    
    707,285
    
    
    
    
    
    
    
    (52,381
    )Change in unrealized gain (loss) on real estate investments
    
    
    (9,744,277
    )
    
    
    5,064,340
    
    
    
    (8,818,256
    )
    
    
    (1,004,324
    )Less: Minority interest in unrealized gain (loss) on real estate investments
    
    
    (303,455
    )
    
    
    (245,642
    )
    
    
    (659,452
    )
    
    
    (602,027
    )Net unrealized gain (loss) on real estate investments
    
    
    (9,440,822
    )
    
    
    5,309,982
    
    
    
    (8,158,804
    )
    
    
    (402,297
    )NET REALIZED AND UNREALIZED GAIN (LOSS)
ON REAL ESTATE INVESTMENTS
    
    
    (9,440,822
    )
    
    
    6,017,267
    
    
    
    (8,158,804
    )
    
    
    (454,678
    )INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS
    
    $
    (1,002,938
    )
    
    $
    15,060,891
    
    
    
    ($5,756,341
    )
    
    $
    2,891,907
 The accompanying notes are an integral part of these consolidated financial statements.
 12




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##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
 For the Nine Months Ended September 30,2008
    
    
    2007INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:Net investment income
    
    $
    8,437,884
    
    
    $
    9,043,624Net gain (loss) realized on real estate
investments sold
    
    
    
    
    
    
    707,285Net unrealized gain (loss) from real estate
investments
    
    
    (9,440,822
    )
    
    
    5,309,982INCREASE (DECREASE) IN NET ASSETS
    
    
    (1,002,938
    )
    
    
    15,060,891NET ASSETS   Beginning of period
    
    
    247,033,759
    
    
    
    228,916,584NET ASSETS   End of period
    
    $
    246,030,821
    
    
    $
    243,977,475
 The accompanying notes are an integral part of these consolidated financial statements.
 13




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##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the Nine Months Ended September 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net increase (decrease) in net assets from operations
    
    $
    (1,002,938
    )
    
    $
    15,060,891Adjustments to reconcile net increase (decrease) in net
assets
to net cash from operating activitiesNet realized and unrealized loss (gain)
    
    
    9,440,822
    
    
    
    (6,017,267
    )Amortization of deferred financing costs
    
    
    63,913
    
    
    
    258,751Distributions in excess of (less than) equity in income
of real estate partnerships operations
    
    
    91,969
    
    
    
    20,063Minority interest in consolidated partnerships
    
    
    (566,900
    )
    
    
    83,878Bad debt expense
    
    
    1,104,707
    
    
    
    67,818(Increase) decrease in:Other assets
    
    
    (1,947,610
    )
    
    
    66,618Increase (decrease) in:Accounts payable and accrued expenses
    
    
    825,735
    
    
    
    591,558Due to affiliates
    
    
    (10,291
    )
    
    
    75,201Other liabilities
    
    
    151,144
    
    
    
    114,731Net cash flows from (used in) operating activities
    
    
    8,150,551
    
    
    
    10,322,242CASH FLOWS FROM INVESTING ACTIVITIES:Net proceeds from real estate investments sold
    
    
    
    
    
    
    18,353,122Acquisition of real estate and improvements
    
    
    
    
    
    
    (42,209,760
    )Additions to real estate and improvements
    
    
    (7,749,947
    )
    
    
    (2,418,560
    )Net cash flows from (used in) investing activities
    
    
    (7,749,947
    )
    
    
    (26,275,198
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from investment level debt
    
    
    23,557,099
    
    
    
    Principal payments on investment level debt
    
    
    (15,962,473
    )
    
    
    (436,698
    )Contributions from minority interest partners
    
    
    80,000
    
    
    
    294,143Distributions to minority interest partners
    
    
    (146,228
    )
    
    
    Net cash flows from (used in) financing activities
    
    
    7,528,398
    
    
    
    (142,555
    )NET CHANGE IN CASH AND CASH
EQUIVALENTS
    
    
    7,929,002
    
    
    
    (16,095,511
    )CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    18,215,871
    
    
    
    33,399,532CASH AND CASH EQUIVALENTS  End of period
    
    
    26,144,873
    
    
    $
    17,304,021DISCLOSURE OF SUPPLEMENTAL CASH FLOW
INFORMATIONCash paid for interest
    
    $
    1,413,270
    
    
    $
    1,317,281
 The accompanying notes are an integral part of these consolidated financial statements.
 14




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##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 
 CONSOLIDATED SCHEDULE OF INVESTMENTS
 2008 Total RentableSquare Feet
    
    
    September 30, 2008Unless Otherwise
    
    
    (unaudited)
    
    
    December 31, 2007September 30, 2008
    
    
    
    
    
    
    Indicated
    
    
    
    
    
    
    Estimated Fair
    
    
    
    
    
    
    Estimated FairProperty Name
    
    Ownership
    
    
    City, State
    
    
    (Unaudited)
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueOFFICES750 Warrenville
    
    WO
    
    Lisle, IL
    
    
    103,193
    
    
    $
    25,018,250
    
    
    $
    9,861,536
    
    
    $
    24,512,521
    
    
    $
    11,500,000Summit @ Cornell Oaks
    
    WO
    
    Beaverton , OR
    
    
    72,109
    
    
    
    12,416,714
    
    
    
    12,600,000
    
    
    
    12,401,252
    
    
    
    13,800,000Westpark
    
    WO
    
    Nashville, TN
    
    
    97,199
    
    
    
    11,374,428
    
    
    
    13,400,000
    
    
    
    11,323,885
    
    
    
    13,100,000Financial Plaza
    
    WO
    
    Brentwood, TN
    
    
    98,049
    
    
    
    12,371,092
    
    
    
    13,000,000
    
    
    
    12,371,092
    
    
    
    13,700,000Offices % as of 9/30/08
    
    
    20
    %
    
    
    61,180,484
    
    
    
    48,861,536
    
    
    
    60,608,750
    
    
    
    52,100,000APARTMENTSBrookwood Apartments
    
    WO
    
    Atlanta, GA
    
    
    240 Units
    
    
    
    19,730,035
    
    
    
    20,651,354
    
    
    
    19,548,293
    
    
    
    20,200,000Dunhill Trace Apartments
    
    WO
    
    Raleigh, NC
    
    
    250 Units
    
    
    
    16,409,349
    
    
    
    20,700,000
    
    
    
    16,375,037
    
    
    
    19,800,000Broadstone Crossing
    
    WO
    
    Austin, TX
    
    
    225 Units
    
    
    
    22,725,427
    
    
    
    27,600,000
    
    
    
    22,723,849
    
    
    
    27,100,000The Reserve At Waterford Lakes
    
    WO
    
    Charlotte, NC
    
    
    140 Units
    
    
    
    13,618,447
    
    
    
    13,500,000
    
    
    
    13,535,450
    
    
    
    13,500,000Apartments % as of 9/30/08
    
    
    34
    %
    
    
    72,483,258
    
    
    
    82,451,354
    
    
    
    72,182,629
    
    
    
    80,600,000RETAILKings Market
    
    WO
    
    Rosewell, GA
    
    
    314,358
    
    
    
    37,893,595
    
    
    
    18,500,000
    
    
    
    37,883,222
    
    
    
    24,700,000Hampton Towne Center
    
    WO
    
    Hampton, VA
    
    
    174,540
    
    
    
    18,110,120
    
    
    
    27,600,000
    
    
    
    18,050,090
    
    
    
    26,500,000White Marlin Mall
    
    CJV
    
    Ocean City, MD
    
    
    186,016
    
    
    
    22,682,512
    
    
    
    29,100,000
    
    
    
    17,016,325
    
    
    
    23,900,000Westminster Crossing East, LLC
    
    CJV
    
    Westminster, MD
    
    
    89,890
    
    
    
    15,044,721
    
    
    
    20,500,000
    
    
    
    15,637,841
    
    
    
    21,094,053Kansas City Portfolio
    
    EJV
    
    Kansas City, KS;MO
    
    
    487,660
    
    
    
    106,173
    
    
    
    106,173
    
    
    
    140,911
    
    
    
    140,911CARS Preferred Equity
    
    PE
    
    Various
    
    
    N/A
    
    
    
    14,325,792
    
    
    
    13,512,622
    
    
    
    14,383,023
    
    
    
    14,383,023Harnett Crossing
    
    CJV
    
    Dunn, NC
    
    
    193,235
    
    
    
    6,023,625
    
    
    
    7,400,000
    
    
    
    5,958,844
    
    
    
    7,200,000Retail % as of 9/30/08
    
    
    47
    %
    
    
    114,186,538
    
    
    
    116,718,795
    
    
    
    109,070,256
    
    
    
    117,917,987HOTELPortland Crown Plaza
    
    CJV
    
    Portland, OR
    
    
    161 Rooms
    
    
    
    10,203,696
    
    
    
    18,800,000
    
    
    
    9,128,415
    
    
    
    18,300,000Hotel % as of 9/30/08
    
    
    8
    %
    
    
    10,203,696
    
    
    
    18,800,000
    
    
    
    9,128,415
    
    
    
    18,300,000Total Real Estate Investments as a
Percentage of Net Assets as of
9/30/08
    
    
    
    
    
    
    
    
    
    
    109
    %
    
    $
    258,053,976
    
    
    $
    266,831,685
    
    
    $
    250,990,050
    
    
    $
    268,917,987
 
 WO  Wholly Owned InvestmentCJV  Consolidated Joint VentureEJV  Joint Venture Investment accounted for under the equity methodPE  Preferred equity investments accounted for under the equity method The accompanying notes are an integral part of these consolidated financial statements.
 15




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##### 



THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
 CONSOLIDATED SCHEDULE OF INVESTMENTS
 September 30, 2008(unaudited)
    
    
    December 31, 2007Estimated
    
    
    
    
    
    
    EstimatedFace Amount
    
    
    Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair ValueCASH AND CASH EQUIVALENTS -
Percentage of Net Assets
    
    
    
    
    
    
    
    
    
    
    10.6
    %
    
    
    
    
    
    
    7.4
    %Federal Home Loan Bank, 0 coupon bond, October  , 2008
    
    $
    980,000
    
    
    $
    980,000
    
    
    $
    980,000
    
    
    $
    2,065,813
    
    
    $
    2,065,813Federal Home Loan Bank, 0 coupon bond, October  , 2008
    
    
    7,550,804
    
    
    
    7,550,804
    
    
    
    7,550,804
    
    
    
    4,998,313
    
    
    
    4,998,313Federal Home Loan Bank, 0 coupon bond, November  , 2008
    
    
    15,500,304
    
    
    
    15,500,304
    
    
    
    15,500,304
    
    
    
    9,997,633
    
    
    
    9,997,633Total Cash Equivalents
    
    
    
    
    
    
    24,031,108
    
    
    
    24,031,108
    
    
    
    17,061,759
    
    
    
    17,061,759Cash
    
    
    
    
    
    
    2,113,765
    
    
    
    2,113,765
    
    
    
    1,154,112
    
    
    
    1,154,112Total Cash and Cash Equivalents
    
    
    
    
    
    $
    26,144,873
    
    
    $
    26,144,873
    
    
    $
    18,215,871
    
    
    $
    18,215,871
 The accompanying notes are an integral part of these consolidated financial statements.
 16




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
(Unaudited)
 Note 1: Summary of Significant Accounting Policies and Pronouncements
 A.
    
    Basis of Presentation- The accompanying unaudited consolidated financial
statements of The Prudential Variable Contract Real Property Partnership (the
Partnership) included herein have been prepared in accordance with the requirements
of Form 10-Q and accounting principles generally accepted in the United States of
America for interim financial information. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered necessary for
a fair statement have been included. Operating results for the nine months ended
September 30, 2008 are not necessarily indicative of the results that may be expected
for the year ended December 31, 2008. For further information, refer to the audited
consolidated financial statements and notes thereto included in each partners Annual
Report on Form 10-K for the Year Ended December 31, 2007.B.
    
    Managements Use of Estimates in the Financial Statements The
preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements
and accompanying notes. Actual results could differ from those estimates.C.
    
    New Accounting Pronouncements- FASB Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN 46), was issued in January 2003.
In December 2003, FASB issued a revised interpretation of FIN 46 (FIN 46-R) that
supersedes FIN 46. FIN 46-R defers the effective date for applying the provisions of
FIN 46 for those companies currently accounting for their investments in accordance
with the AICPA Audit and Accounting Guide, Audits of Investment Companies (the
Audit Guide). The FASB is currently considering modifying FIN 46-R to provide an
exception for companies that apply the Audit Guide. The Partnership is awaiting the
final determination from the FASB in order to evaluate the extent in which, if any,
its equity investments may need to be consolidated as a result of this FIN 46-R.The Partnership adopted FASB Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 as of January
1, 2007. This interpretation prescribes a comprehensive model for how a Partnership
should recognize, measure, present, and disclose in its financial statements uncertain
tax positions that the Partnership has taken or expects to take on a tax return. The
adoption of FIN 48 had no effect to the financial position and result of operations of
the Partnership.In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This
statement defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and requires additional disclosures about
fair value measurements. This statement does not require any new fair value
measurements, but the application of this statement could change current practices in
determining fair value. This adoption did not change the methodology used to fair
value our real estate investments.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB Statement
No. 115. This statement provides partnerships with an option to report selected
financial assets and liabilities at fair value.SFAS No. 157 and SFAS No. 159 are effective for fiscal years beginning after
November 15, 2007 with early adoption permitted. The Partnership adopted SFAS No. 157
and SFAS No. 159 effective January 1, 2008, however, the Partnership did not make a
fair value option election for its existing debt. The adoption does not have any effect
on the Partnerships consolidated financial position and results of operations. Please
refer to Notes 1D and 2 for details.
 17




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
(Unaudited)
 Note 1: Summary of Significant Accounting Policies and Pronouncements (continued)
 C.
    
    New Accounting Pronouncements (continued)In June 2007, the Accounting Standards Executive Committee issued Statement of
Position 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment
Companies and Accounting by Parent Companies and Equity Method Investors for
Investments in Investment Companies (SOP 07-1). SOP 07-1 provides guidance for
determining whether an entity is within the scope of the AICPA Audit and Accounting
Guide Investment Companies (the Audit Guide). SOP 07-1 was originally determined to
be effective for fiscal years beginning on or after December 15, 2007, however, on
February 6, 2008, FASB issued a final Staff Position indefinitely deferring the
effective date and prohibiting early adoption of SOP 07-1 while addressing
implementation issues.In December 2007, FASB issued SFAS No. 141 (revised 2007) (SFAS 141R), Business
Combinations, and SFAS No. 160, Non-controlling interests in Consolidated Financial Statements,
an Amendment to ARB No. 51 (SFAS 160).  SFAS 141R expands the definition of a business and
redefines the acquisition date in a merger and acquisition transaction. It significantly modifies
the existing SFAS 141, including changes to acquisition related contingent consideration,
pre-acquisition contingencies, non controlling interest, restructuring costs, in-process R&D,
goodwill and partial acquisition.  SFAS 160 requires the non-controlling interest to be reported
as a separate component of equity.  It also changes the allocation of losses and accounting in
step acquisitions.  The provisions in SFAS 160 should be applied prospectively except for the
presentation and disclosure requirements, which are required retrospectively for all periods
presented.  SFAS 141R and SFAS 160 are effective for the acquisition closing after the first
annual reporting period beginning after December 15, 2008.  The Partnership is currently reviewing
the provisions in SFAS 141R and SFAS 160, and assessing whether the changes would be material to
its financial statements upon adoption.D.
    
    Real Estate Investments Real estate investments are shown at estimated
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.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 fair value measurement
objective is to determine the exit price at which the Partnership would receive to sell
an asset based on the highest and best use valuation premise or pay to transfer a
liability taking into consideration the perspectives of market participant and the
assumptions they may use. 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
appraisal firm 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. Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the
measurement date. The estimate of fair value is based on the conventional approaches to
value, all of which require the exercise of subjective judgment. The three approaches
are: (1) current cost of reproducing the real estate less deterioration and functional
and economic obsolescence; (2) discounting a series of income streams and reversion at
a specific yield or by directly capitalizing a single year income estimate by an
appropriate factor; and (3) value indicated by recent sales of comparable real estate
in the market. In the reconciliation of these three approaches, the one most heavily
relied upon is the one then recognized as the most appropriate by the independent
appraiser for the type of real estate in the market.
 18




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
(Unaudited)
 Note 1: Summary of Significant Accounting Policies and Pronouncements (continued)
 D.
    
    Real Estate Investments (continued)In general, the input values used in the appraisal process are unobservable,
therefore unless indicated otherwise; real estate investments are classified as Level 3
under SFAS 157 fair value hierarchy.Unconsolidated real estate partnerships are valued at the Partnerships equity in
net assets as reflected in the partnerships financial statements with properties
valued as described above. Under the equity method, the investment is initially
recorded at the original investment amount, plus or minus additional amounts invested
or distributed, and is subsequently adjusted for the Partnerships share of
undistributed earnings or losses, including unrealized appreciation and depreciation,
from the underlying entity.Land held for development is reported at estimated fair value, which approximates
the acquisition cost plus soft costs incurred prior to development. The estimated fair
value is determined based on the amount at which the Partnership would receive if the
land were sold at the reporting date taking into consideration the assumptions that
market participants may use.The Partnership periodically enters into forward contracts to acquire, for a fixed
price, real estate investments to be constructed in accordance with predetermined plans
and specifications. The funding obligation/forward contract obligation and related
asset are recorded in the consolidated financial statements in the period in which the
project is waived or deemed to have reached substantial completion, equal to or over
90% complete, and the Partnerships commitment to fund is firm. The amount of
any unrealized gain or loss recognized is based upon the difference between the
estimated investments fair value as described above and the Partnerships funding
obligation. The funding obligation and related assets are recorded in the consolidated
financial statements. As of September 30, 2008 and December 31, 2007, no such funding
obligation existed.As described above, the estimated fair value of real estate and real estate related
assets is determined through an appraisal process. These estimated fair values may
vary significantly from the prices at which the real estate investments would sell,
since market prices of real estate investments can only be determined by negotiation
between a willing buyer and seller and could be material to the consolidated financial
statements. Although the estimated fair values represent subjective estimates,
management believes these estimated fair values are reasonable approximations of market
prices and the aggregate estimated value of investments in real estate is fairly
presented as of September 30, 2008 and December 31, 2007.E.
    
    Cash and Cash Equivalents- Cash and cash equivalent are comprised of all
short-term investments and investments in money market funds with a maximum maturity
of three months. Cash equivalents consist of investments in the Prudential Investment
Liquidity Pool offered and managed by an affiliate of PFI and are accounted for at
fair value.
 19




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
(Unaudited)
 Note 1: Summary of Significant Accounting Policies and Pronouncements (continued)
 F.
    
    Other Assets Restricted cash of $115,000 and $186,736 was maintained by
the wholly owned and consolidated properties at September 30, 2008 and December 31,
2007, respectively. Tenant security deposits are included in Other Assets on the
Consolidated Statements of Assets and Liabilities. Other assets also include tenant
receivables and are net of allowance for uncollectible accounts of $1,028,269 and
$39,764 at September 30, 2008 and December 31, 2007, respectively.G.
    
    Investment Level Debt- Investment level debt 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. 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.H.
    
    Deferred Financing Costs Deferred financing costs related to debt were
capitalized and amortized over the terms of the related obligations.I.
    
    Revenue Recognition- Revenue from real estate is recognized when earned
in accordance with the terms of the respective leases. Revenue from certain real
estate investments is net of all or a portion of related real estate expenses, as
lease arrangements vary as to responsibility for payment of these expenses between
tenants and the Partnership. Since real estate is stated at estimated fair value, net
income is not reduced by depreciation or amortization expense.J.
    
    Equity in Income of Real Estate Partnerships- Equity in income from real
estate partnership operations represents the Partnerships share of the current years
partnership income as provided for under the terms of the partnership agreements. As
is the case with wholly owned real estate, partnership net income is not reduced by
depreciation or amortization expense. Frequency of distribution of income is
determined by formal agreements or by the executive committee of the partnership.K.
    
    Federal Income Taxes The Partnership is not a taxable entity under the
provisions of the Internal Revenue Code. The income and capital gains and losses of
the Partnership are attributed, for federal income tax purposes, to the Partners in
the Partnership. The Partnership may be subject to state and local taxes in
jurisdictions in which it operates.
 20




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
(Unaudited)
 Note 2: Fair Value Disclosure
 Fair Value Measurements:SFAS 157 establishes a fair value measurement framework, provides a single definition of
fair value and requires expanded disclosure summarizing fair value measurements. This
statement provides a three-level hierarchy based on the input values used in the valuation
process; level 1quoted price, level 2indirect observable inputs and level
3unobservable inputs. For items classified as Level 3, a reconciliation of the beginning
and ending balances, as shown in table 2 below, is also required.Table 1 below summarizes the assets measured at fair value on a recurring basis.Table 1:
 (in 000s)Amounts
    
    Quoted prices in
    
    Significantmeasured at
    
    active markets
    
    other
    
    Significantfair value
    
    for identical
    
    observable
    
    unobservable9/30/2008
    
    assets (level 1)
    
    inputs (level 2)
    
    inputs (level 3)Assets:Real estate and
improvements
    
    $
    253,213
    
    
    $
    
    
    
    $
    
    
    
    $
    253,213Real estate
partnerships and
preferred equity
investments
    
    
    13,619
    
    
    
    
    
    
    
    
    
    
    
    13,619Total
    
    $
    266,832
    
    
    $
    
    
    
    $
    
    
    
    $
    266,832
 21




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
(Unaudited)
 NOTE 2: Fair Value Disclosure (continued)
 Table 2:
 (in 000s)  Fair value measurements using significant unobservable inputs  (Level 3)
 Real estate andpartnerships andReal estate and
    
    
    preferred equityimprovements
    
    
    investments
    
    
    TotalBeginning balance @ 1/1/08
    
    $
    254,394
    
    
    $
    14,524
    
    
    $
    268,918Net gains (losses) realized/unrealized
included in earnings (or changes in net assets)
    
    
    (8,931
    )
    
    
    (813
    )
    
    
    (9,744
    )Equity income (losses)/interest income
    
    
    
    
    
    
    722
    
    
    
    722Acquisition/issuances/contributions
    
    
    7,750
    
    
    
    
    
    
    
    7,750Dispositions/settlements/distributions
    
    
    
    
    
    
    (814
    )
    
    
    (814
    )Ending balance @ 9/30/08
    
    $
    253,213
    
    
    $
    13,619
    
    
    $
    266,832Unrealized gains (losses) for the period relating
to level 3 assets still held at the reporting date
    
    $
    (8,931
    )
    
    $
    (813
    )
    
    $
    (9,744
    )
 22




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
(Unaudited)
 Note 3: Reclassification
  Note 4: Related Party Transactions
   Note 5: Investment Level Debt
   Note 6: Commitments and Contingencies
  23




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
(Unaudited)
 Note 7: Financial Highlights
 For The Nine Months Ended September 30,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Per Share(Unit) Operating Performance:Net Asset Value, beginning of period
    
    $
    36.55
    
    
    $
    33.87
    
    
    $
    29.59
    
    
    $
    26.15
    
    
    $
    24.66Income From Investment Operations:Investment income, before management fee
    
    
    1.55
    
    
    
    1.71
    
    
    
    1.50
    
    
    
    1.22
    
    
    
    1.04Investment Management fee
    
    
    (0.39
    )
    
    
    (0.37
    )
    
    
    (0.33
    )
    
    
    (0.29
    )
    
    
    (0.27
    )Net realized and unrealized gain (loss) on
investments
    
    
    (1.31
    )
    
    
    0.89
    
    
    
    2.07
    
    
    
    2.05
    
    
    
    0.82Net Increase in Net Assets Resulting from
Operations
    
    
    (0.15
    )
    
    
    2.23
    
    
    
    3.24
    
    
    
    2.98
    
    
    
    1.59Net Asset Value, end of period
    
    $
    36.40
    
    
    $
    36.10
    
    
    $
    32.83
    
    
    $
    29.13
    
    
    $
    26.25Total Return, before Management Fee:
    
    
    0.64
    %
    
    
    7.70
    %
    
    
    12.14
    %
    
    
    12.58
    %
    
    
    7.58
    %Total Return, after Management Fee (a):
    
    
    -0.41
    %
    
    
    6.58
    %
    
    
    10.96
    %
    
    
    11.39
    %
    
    
    6.46
    %Ratios/Supplemental Data:Net Assets, end of period (in millions)
    
    $
    246
    
    
    $
    244
    
    
    $
    222
    
    
    $
    208
    
    
    $
    193Ratios to average net assets for the year
ended (b):Total Portfolio Level Expenses
    
    
    1.08
    %
    
    
    1.15
    %
    
    
    1.15
    %
    
    
    1.10
    %
    
    
    1.06
    %Investment Income before Management Fee
    
    
    4.20
    %
    
    
    5.02
    %
    
    
    4.87
    %
    
    
    3.04
    %
    
    
    4.13
    %
 
 (a)
    
    Total Return, after management fee is calculated by geometrically linking
quarterly returns whichare calculated using the formula below:Net Investment Income + Net Realized and Unrealized Gains/(Losses)Beg. Net Asset Value + Time Weighted Contributions - Time Weighted
Distributions(b)
    
    Average net assets are based on beginning of quarter net assets. 24




---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   (a) Liquidity and Capital Resources
     25




---



##### 



(b) Results of Operations
  Net Investment Income Overview
   Valuation Overview
    26




---



##### 



Nine Months Ended September 30,
    
    
    Three Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net Investment Income:Office properties
    
    $
    2,946,458
    
    
    $
    2,850,757
    
    
    $
    1,002,889
    
    
    $
    1,004,205Apartment properties
    
    
    2,403,477
    
    
    
    1,278,936
    
    
    
    703,351
    
    
    
    640,578Retail properties
    
    
    4,464,769
    
    
    
    5,276,342
    
    
    
    1,060,885
    
    
    
    1,824,046Industrial property
    
    
    
    
    
    
    14,363
    
    
    
    
    
    
    
    (1,595
    )Hotel property
    
    
    961,822
    
    
    
    979,791
    
    
    
    432,562
    
    
    
    453,390Other (including interest income,
investment management fee, etc.)
    
    
    (2,338,642
    )
    
    
    (1,356,565
    )
    
    
    (797,223
    )
    
    
    (574,039
    )Total Net Investment Income
    
    $
    8,437,884
    
    
    $
    9,043,624
    
    
    $
    2,402,464
    
    
    $
    3,346,585Net Realized Gain (Loss) on Real Estate Investments:Retail properties
    
    
    
    
    
    
    361,453
    
    
    
    
    
    
    
    (52,381
    )Industrial property
    
    
    
    
    
    
    345,832
    
    
    
    
    
    
    
    Net Realized Gain (Loss) on Real
Estate Investments
    
    
    
    
    
    
    707,285
    
    
    
    
    
    
    
    (52,381
    )Net Unrealized Gain (Loss) on Real Estate Investments:Office properties
    
    
    (3,810,194
    )
    
    
    1,692,160
    
    
    
    (1,447,594
    )
    
    
    1,153,887Apartment properties
    
    
    1,550,725
    
    
    
    2,972,253
    
    
    
    940,413
    
    
    
    542,403Retail properties
    
    
    (6,721,128
    )
    
    
    (53,704
    )
    
    
    (7,292,156
    )
    
    
    (1,766,903
    )Hotel property
    
    
    (460,225
    )
    
    
    699,273
    
    
    
    (359,467
    )
    
    
    (331,684
    )Net Unrealized Gain (Loss) on
Real Estate Investments
    
    
    (9,440,822
    )
    
    
    5,309,982
    
    
    
    (8,158,804
    )
    
    
    (402,297
    )Net Realized and Unrealized Gain
(Loss) on Real Estate
Investments
    
    
    ($9,440,822
    )
    
    $
    6,017,267
    
    
    
    ($8,158,804
    )
    
    
    ($454,678
    )
 27




---



##### 



OFFICE PROPERTIES
 Net Investment
    
    Net Investment
    
    Unrealized
    
    UnrealizedIncome/(Loss)
    
    Income/(Loss)
    
    Gain/(Loss)
    
    Gain/(Loss)
    
    Occupancy
    
    OccupancyNine Months Ended September 30,
    
    2008
    
    2007
    
    2008
    
    2007
    
    2008
    
    2007PropertyLisle, IL
    
    $
    523,139
    
    
    $
    420,962
    
    
    $
    (2,144,192
    )
    
    $
    755,813
    
    
    
    70
    %
    
    
    61
    %Brentwood, TN
    
    
    780,310
    
    
    
    842,377
    
    
    
    249,458
    
    
    
    (274,078
    )
    
    
    89
    %
    
    
    100
    %Beaverton, OR
    
    
    840,781
    
    
    
    782,795
    
    
    
    (1,215,460
    )
    
    
    1,035,463
    
    
    
    88
    %
    
    
    91
    %Brentwood, TN
    
    
    802,228
    
    
    
    804,623
    
    
    
    (700,000
    )
    
    
    174,962
    
    
    
    100
    %
    
    
    100
    %$
    2,946,458
    
    
    $
    2,850,757
    
    
    $
    (3,810,194
    )
    
    $
    1,692,160Three
Months Ended September 30,PropertyLisle, IL
    
    $
    229,109
    
    
    $
    202,520
    
    
    $
    (1,007,132
    )
    
    $
    (32,613
    )Brentwood, TN
    
    
    256,049
    
    
    
    287,843
    
    
    
    273,195
    
    
    
    (104,620
    )Beaverton, OR
    
    
    279,321
    
    
    
    268,880
    
    
    
    (13,657
    )
    
    
    792,313Brentwood, TN
    
    
    238,410
    
    
    
    244,962
    
    
    
    (700,000
    )
    
    
    498,807$
    1,002,889
    
    
    $
    1,004,205
    
    
    $
    (1,447,594
    )
    
    $
    1,153,887
 Net Investment Income
  Unrealized Gain/(Loss)
   28




---



##### 



APARTMENT PROPERTIES
 Net Investment
    
    Net Investment
    
    Unrealized
    
    UnrealizedIncome/(Loss)
    
    Income/(Loss)
    
    Gain/(Loss)
    
    Gain/(Loss)
    
    Occupancy
    
    OccupancyNine Months
Ended September 30,
    
    2008
    
    2007
    
    2008
    
    2007
    
    2008
    
    2007PropertyAtlanta, GA
    
    $
    417,093
    
    
    $
    250,388
    
    
    $
    269,612
    
    
    $
    228,077
    
    
    
    92
    %
    
    
    92
    %Raleigh, NC
    
    
    476,502
    
    
    
    445,473
    
    
    
    865,688
    
    
    
    (639,658
    )
    
    
    94
    %
    
    
    96
    %Jacksonville, FL (1)
    
    
    
    
    
    
    17,342
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AAustin, TX (2)
    
    
    1,063,838
    
    
    
    508,926
    
    
    
    498,422
    
    
    
    3,383,834
    
    
    
    94
    %
    
    
    94
    %Charlotte, NC(3)
    
    
    446,044
    
    
    
    56,807
    
    
    
    (82,997
    )
    
    
    
    
    
    
    94
    %
    
    
    95
    %$
    2,403,477
    
    
    $
    1,278,936
    
    
    $
    1,550,725
    
    
    $
    2,972,253Three Months
Ended  September 30,PropertyAtlanta, GA
    
    $
    86,778
    
    
    $
    96,019
    
    
    $
    169,169
    
    
    $
    384,959Raleigh, NC
    
    
    144,058
    
    
    
    194,479
    
    
    
    484,751
    
    
    
    167,444Austin, TX (2)
    
    
    302,575
    
    
    
    293,273
    
    
    
    300,000
    
    
    
    (10,000
    )Charlotte, NC(3)
    
    
    169,940
    
    
    
    56,807
    
    
    
    (13,507
    )
    
    
    $
    703,351
    
    
    $
    640,578
    
    
    $
    940,413
    
    
    $
    542,403
 
 (1)
    
    The Jacksonville, Florida apartment property was sold on November 30, 2005 but certain post-closing
adjustments were recognized during the nine months ended September 30, 2007.(2)
    
    The Austin, Texas apartment property was acquired on May 8, 2007.(3)
    
    The Charlotte, North Carolina apartment property was acquired on September 6, 2007. Net Investment Income
  Unrealized Gain/(Loss)
    29




---



##### 



RETAIL PROPERTIES
 Realized/Net Investment
    
    Net Investment
    
    Unrealized
    
    UnrealizedIncome/(Loss)
    
    Income/(Loss)
    
    Gain/(Loss)
    
    Gain/(Loss)
    
    Occupancy
    
    OccupancyNine Months Ended September 30,
    
    2008
    
    2007
    
    2008
    
    2007
    
    2008
    
    2007PropertyRoswell, GA
    
    $
    1,307,896
    
    
    $
    1,584,095
    
    
    $
    (6,210,373
    )
    
    $
    (190,435
    )
    
    
    79
    %
    
    
    94
    %Kansas City, KS (1)
    
    
    (34,738
    )
    
    
    158,663
    
    
    
    
    
    
    
    361,453
    
    
    
    N/A
    
    
    
    N/AHampton, VA
    
    
    990,925
    
    
    
    973,673
    
    
    
    1,039,970
    
    
    
    196,255
    
    
    
    99
    %
    
    
    100
    %Ocean City, MD
    
    
    588,363
    
    
    
    605,871
    
    
    
    (135,750
    )
    
    
    (336,204
    )
    
    
    89
    %
    
    
    89
    %Westminster, MD
    
    
    875,779
    
    
    
    1,171,141
    
    
    
    (594,987
    )
    
    
    272,262
    
    
    
    100
    %
    
    
    100
    %Dunn, NC (2)
    
    
    (13,500
    )
    
    
    62,983
    
    
    
    (6,820
    )
    
    
    4,418
    
    
    
    34
    %
    
    
    90
    %CARS Preferred Equity
    
    
    750,044
    
    
    
    719,916
    
    
    
    (813,168
    )
    
    
    
    
    
    
    N/A
    
    
    
    N/A$
    4,464,769
    
    
    $
    5,276,342
    
    
    $
    (6,721,128
    )
    
    $
    307,749Three
Months Ended September 30,PropertyRoswell, GA
    
    $
    392,849
    
    
    $
    532,486
    
    
    $
    (5,501,424
    )
    
    $
    (1,727,833
    )Kansas City, KS(1)
    
    
    (42,225
    )
    
    
    (3,250
    )
    
    
    
    
    
    
    (52,381
    )Hampton, VA
    
    
    321,838
    
    
    
    322,134
    
    
    
    (255,099
    )
    
    
    99,975Ocean City, MD
    
    
    265,982
    
    
    
    223,546
    
    
    
    (616,807
    )
    
    
    (133,826
    )Westminster, MD
    
    
    111,047
    
    
    
    431,502
    
    
    
    (594,054
    )
    
    
    (9,637
    )Dunn, NC (2)
    
    
    (238,221
    )
    
    
    62,984
    
    
    
    (96,196
    )
    
    
    4,418CARS Preferred Equity
    
    
    249,615
    
    
    
    254,644
    
    
    
    (228,576
    )
    
    
    $
    1,060,885
    
    
    $
    1,824,046
    
    
    $
    (7,292,156
    )
    
    $
    (1,819,284
    )
 
 (1)
    
    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, 2008.(2)
    
    The Dunn, North Carolina retail property was acquired on August 17, 2007. Net Investment Income
   30




---



##### 



Realized and Unrealized Gain/(Loss)
   INDUSTRIAL PROPERTY
 Net Investment
    
    Net Investment
    
    Realized
    
    RealizedIncome/(Loss)
    
    Income/(Loss)
    
    Gain/(Loss)
    
    Gain/(Loss)
    
    Occupancy
    
    OccupancyNine Months Ended September 30,
    
    2008
    
    2007
    
    2008
    
    2007
    
    2008
    
    2007PropertyAurora, CO
(1)
    
    $
    
    
    
    $
    14,363
    
    
    $
    
    
    
    $
    345,832
    
    
    
    N/A
    
    
    
    N/AThree Months Ended September 30,PropertyAurora, CO (1)
    
    $
    
    
    
    $
    (1,595
    )
    
    $
    
    
    
    $
    
 
 (1)
    
    The
Partnership sold the property
on February 7, 2007. Net Investment Income
   Total Realized and Unrealized Gain/(Loss)
  31




---



##### 



HOTEL PROPERTY
 Net Investment
    
    Net Investment
    
    Unrealized
    
    UnrealizedIncome/(Loss)
    
    Income/(Loss)
    
    Gain/(Loss)
    
    Gain/(Loss)
    
    Occupancy
    
    OccupancyNine Months Ended September 30,
    
    2008
    
    2007
    
    2008
    
    2007
    
    2008
    
    2007PropertyLake Oswego, OR
    
    $
    961,822
    
    
    $
    979,791
    
    
    $
    (460,225
    )
    
    $
    699,273
    
    
    
    76
    %
    
    
    77
    %Three Months Ended September 30,PropertyLake Oswego, OR
    
    $
    432,562
    
    
    $
    453,390
    
    
    $
    (359,467
    )
    
    $
    (331,684
    )
 Net Investment Income
  Unrealized Gain/(Loss)
  32




---



##### 



Other
  (c) Inflation
  Critical Accounting Policies
   New Accounting Pronouncements
     33




---



##### 



Valuation of Investments
 Real Estate Investments 
       34




---



##### 



Other Estimates
  35




---



##### 



ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk 
  Estimated Market Value
    
    AverageMaturity
    
    (millions)
    
    Interest RateCash and Cash equivalents
    
    0-3 months
    
    $
    26.1
    
    
    
    2.77
    %
  Debt (in $ thousands),
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Estimatedincluding current portion
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueWeighted Average Fixed Interest Rate
    
    
    5.77
    %
    
    
    5.75
    %
    
    
    5.11
    %
    
    
    5.04
    %
    
    
    5.04
    %
    
    
    5.04
    %
    
    
    5.29
    %Fixed Rate
    
    $
    126
    
    
    $
    9,277
    
    
    $
    565
    
    
    $
    604
    
    
    $
    646
    
    
    $
    4,940
    
    
    $
    16,158
    
    
    $
    16,423Variable Rate
    
    
    
    
    
    
    
    
    
    
    14,587
    
    
    
    
    
    
    
    
    
    
    
    9,000
    
    
    
    23,587
    
    
    
    23,129Premium/(Discount)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29
    )
    
    
    (29
    )
    
    
    Total Mortgage Loans Payable
    
    $
    126
    
    
    $
    9,277
    
    
    $
    15,152
    
    
    $
    604
    
    
    $
    646
    
    
    $
    13,911
    
    
    $
    39,716
    
    
    $
    39,552
  36




---



##### 



Item 4. Controls and Procedures
  
 PART II  OTHER INFORMATION
 Item 1A. Risk Factors
  37




---



##### 



Current difficult conditions in the global financial markets and the economy generally may
materially adversely affect our business and results of operations.
     38




---



##### 



Continuing adverse financial market conditions may significantly affect our ability to meet
liquidity needs, our access to capital and our cost of capital, including capital that may be
required by our subsidiaries.
     39




---



##### 



Market fluctuations and general economic, market and political conditions may adversely affect our
business and profitability.
  
    
    All real estate investments are subject to varying degrees of risk. The yields
available from investments depend on the amounts of income generated and expenses
incurred. If investment properties do not generate revenues sufficient to meet operating
expenses, including debt service and capital expenditures, cash flow will be adversely
affected.
    
    The revenues and value of a particular real estate investment may be adversely affected
by a number of factors, including, but not limited to: the cyclical nature of the real
estate market, availability of credit and debt, general national economic conditions,
local economic conditions, local real estate conditions, and fluctuations in operating
costs, including real estate taxes and utilities. Certain significant expenditures
associated with each equity investment, such as mortgage payments, real estate taxes,
insurance and maintenance costs, are generally not reduced when circumstances cause a
reduction in income from the investment. If a property is mortgaged to secure payment of
indebtedness, and if the mortgaged property is unable to produce enough revenue to cover
its mortgage or other debt payments, a loss could be sustained as a result of foreclosure
on the property or the exercise of other remedies by the lender. In addition, a propertys
revenues and real estate value may also be affected by such factors as potential liability
under applicable federal, state and local laws and regulations, which may vary widely
depending upon location, including tax laws, environmental laws, Americans with
Disabilities Act accessibility requirements, and rent stabilization laws.The dramatic deterioration in the capital markets and increasing weakness in the overall
economy may adversely affect all sectors of the real estate market and may lead to declines
in property values. Adverse capital market conditions could impact the liquidity of our
investments, affecting their value and potentially resulting in higher realized and/or
unrealized losses. These events may have an adverse affect on our investment results.High volatility in the real estate market could adversely affect our valuation of
individual real properties and other real estate-related investments and result in a
material difference between our appraisals and the realizable value of the investments.Regardless of market conditions, certain investments we hold, including the properties in
the Account, are relatively illiquid. If we needed to sell these investments, we may have
difficulty doing so in a timely manner at a price that we could otherwise realize.
 40




---



##### 




    
    Disruptions, uncertainty or volatility in the financial markets may limit our access to
capital required to operate our business. These market conditions may limit our ability to
replace, in a timely manner, maturing obligations and access the capital necessary to
replace assets withdrawn by customers.
    
    Market conditions could also impact our ability to fund foreseen and unforeseen cash
and collateral requirements, potentially inhibiting our ability to perform under our
counterparty obligations, support business initiatives and increasing realized losses.A change in market conditions, including prolonged periods of high inflation, could cause a
change in consumer sentiment adversely affecting persistency of our life insurance and
annuity products, including those offering the Account as an investment option.
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 6. Exhibits
     41




---



##### 



SIGNATURES
  PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
  By:
    /s/ Scott D. KaplanScott D. KaplanPresident and Director
(Principal Executive Officer) 42