-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KQrePB3dArJM4P6/RH7li/59oGvtP8ZutOe/v1SqVxSRy0ESvDsxMqcU1L0vt5CE b+mUXfGzVFz+ucD/VAnFag== 0001047469-99-012094.txt : 19990330 0001047469-99-012094.hdr.sgml : 19990330 ACCESSION NUMBER: 0001047469-99-012094 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACC CENTRAL INDEX KEY: 0000829114 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 222426091 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 033-20018 FILM NUMBER: 99576535 BUSINESS ADDRESS: STREET 1: 213 WASHINGTON STREET CITY: NEWARK STATE: NJ ZIP: 07102-2992 BUSINESS PHONE: 9738026196 MAIL ADDRESS: STREET 1: PRUCO LIFE INSURANCE CO OF NEW JERSEY STREET 2: 213 WASHINGTON STREET CITY: NEWARK STATE: NJ ZIP: 07102 10-K 1 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] COMMISSION FILE NUMBER 33-20018 PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY IN RESPECT OF PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT ------------------------------------------ REAL PROPERTY ACCOUNT --------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW JERSEY 22-2426091 - ----------------------------- ------------------------------- (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 213 WASHINGTON STREET, NEWARK, NEW JERSEY 07102-2992 ---------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (800) 445-4571 ---------------------------------------------------- (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 ----- PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT (REGISTRANT) INDEX ---------
ITEM PAGE NO. NO. - ---- ---- COVER PAGE INDEX 2 PART I 1. BUSINESS 3 2. PROPERTIES 4 3. LEGAL PROCEEDINGS 4 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 4 PART II 5. MARKET FOR THE REGISTRANT'S INTERESTS AND RELATED SECURITY HOLDER MATTERS 5 6. SELECTED FINANCIAL DATA 5 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 16 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 16 PART III 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 17 11. EXECUTIVE COMPENSATION 18 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 18 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 18 PART IV 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 19 EXHIBIT INDEX 19 SIGNATURES 21
2 PART I ITEM 1. BUSINESS Pruco Life of New Jersey Variable Contract Real Property Account (the "Real Property Account"), the Registrant, was established on October 30, 1987 by Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey"), as a separate investment account, pursuant to New Jersey law. The Real Property Account was established to provide a real estate investment option offered in connection with the funding of benefits under certain variable life insurance and variable annuity contracts (the "Contracts") issued by Pruco Life of New Jersey. The assets of the Real Property Account are invested in The Prudential Variable Contract Real Property Partnership (the "Partnership"). The Partnership, a general partnership organized under New Jersey law on April 29, 1988, was formed through agreement among The Prudential Insurance Company of America, Pruco Life Insurance Company, and Pruco Life Insurance Company of New Jersey, to provide a means for assets allocated to the real estate investment option under certain variable life insurance and variable annuity contracts issued by the respective companies to be invested in a commingled pool. The Partnership has an investment policy of investing at least 65% of its assets in direct ownership interests in income-producing real estate and participating mortgage loans. The largest portion of these real estate investments are direct ownership interests in income-producing real estate, such as office buildings, agricultural land, shopping centers, hotels, apartments, or industrial properties. Approximately 10% of the Partnership's assets are generally held in cash or invested in liquid instruments and securities, although the Partners reserve discretion to increase this amount to meet partnership liquidity requirements. The remainder of the Partnership's assets are invested in other types of real estate-related investments, including conventional, non participating mortgage loans or real estate investment trusts. Office Properties - The Partnership owns office properties in Lisle and Oakbrook Terrace, IL; Morristown, NJ; Nashville and Brentwood, TN; and Beaverton, OR. Total square footage owned is approximately 567,000 of which 97% or 549,000 square feet are leased between 1 and 10 years. Apartment Complexes - The Partnership owns apartment complexes in Atlanta, GA and Raleigh, NC. There are a total of 490 apartment units available of which 95% or 463 units are leased. Lease agreements range from month to month to one year. Retail Property - The Partnership owns a shopping center in Roswell, GA. The property is located approximately 22 miles north of downtown Atlanta on a 30 acre site. The square footage is approximately 297,000 of which 98% or 289,000 square feet is leased between 1 and 11 years. Industrial Properties - The Partnership owns warehouses and distri- bution centers in Bolingbrook, IL; Aurora, CO; and Salt Lake City, UT. Total square footage owned is approximately 685,000 of which 60% or 413,719 square feet are leased between 2 and 6 years. Investment in Real Estate Trust - The Partnership owns 506,894 shares of Meridian Industrial Trust, Inc. Meridian is a self-administered and self-managed equity real estate investment trust (REIT) engaged in owning, operating, and leasing high quality, modern industrial properties nationwide. The Partnership's investments are maintained so as to meet the diversification requirements set forth in Treasury Regulations issued pursuant to Section 817(h) of the Internal Revenue Code relating to the investments of variable life insurance and variable annuity separate accounts. Section 817(h), requires among other things that the partnership will have no more than 55% of the assets invested in any one investment, no more than 70% of the assets will be invested in any two investments, no more than 80% of the assets will be invested in any three investments, and no more than 90% of the assets will be invested in any four investments. To comply with requirements of the State of Arizona, the Partnership will limit additional investments in any one parcel or related parcels to an amount not exceeding 10% of the Partnership gross assets as of the prior fiscal year. For information regarding the Partnership's investments, operations, and other significant events, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 8, Financial Statements and Supplementary Data. 3 ITEM 2. PROPERTIES Not Applicable. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS Contract owners participating in the Real Property Account have no voting rights with respect to the Real Property Account. 4 PART II ITEM 5. MARKET FOR THE REGISTRANT'S INTERESTS AND RELATED SECURITY HOLDER MATTERS Owners of the Contracts may participate by allocating all or part of the net premiums or purchase payments to the Real Property Account. Contract values will vary with the performance of the Real Property Account's investments through the Partnership. Participating interests in the Real Property Account are not traded in any public market, thus a discussion of market information is not relevant. As of March 9, 1999, there were approximately 3,458 contract owners of record investing in the Real Property Account. ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31, ------------------------------------------------------------------------- 1998 1997 1996 1995 1994 -------------- ------------- ------------- ------------- ------------- RESULTS OF OPERATIONS: Net investment income $ 15,833,513 $ 13,789,747 $ 15,419,518 $ 14,720,271 $ 12,848,199 Net realized and unrealized gain (loss) on investment in Partnership 4,795,111 8,485,232 (4,784,583) 661,623 1,339,443 -------------- ------------- ------------- ------------- ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 20,628,624 $ 22,274,979 $ 10,634,935 $ 15,381,894 $ 14,187,642 -------------- ------------- ------------- ------------- ------------- -------------- ------------- ------------- ------------- -------------
FINANCIAL POSITION:
December 31, ------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------- Total Assets $244,249,272 $222,745,135 $204,156,040 $196,993,758 $183,119,986 ------------ ------------ ------------ ------------ ------------- ------------ ------------ ------------ ------------ ------------- Long-Term Lease Obligation $ 0 $ 0 $ 4,072,677 $ 3,882,421 $ 3,804,836 ------------ ------------ ------------ ------------ ------------- ------------ ------------ ------------ ------------ -------------
5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All of the assets of Pruco Life of New Jersey Variable Contract Real Property Account (the "Account") are invested in the Prudential Variable Contract Real Property Partnership (the "Partnership"). Correspondingly, the liquidity, capital resources and results of operations for the Real Property Account are contingent upon the Partnership. Therefore, all of management's discussion of these items is at the Partnership level. The partners in the Partnership are The Prudential Insurance Company of America, Pruco Life Insurance Company, and Pruco Life Insurance Company of New Jersey (collectively, the "Partners"). The following analysis of the liquidity and capital resources and results of operations of the Partnership should be read in conjunction with the audited financial statements and the accompanying footnotes and other financial information included elsewhere herein. (a) LIQUIDITY AND CAPITAL RESOURCES As of December 31, 1998, the Partnership's liquid assets consisting of cash, cash equivalents and marketable securities were $73.5 million, an increase of $46.7 million from December 31, 1997. This increase was due to net proceeds from the sales of the Partnership's industrial property located in Pomona, CA and an apartment complex located in Farmington Hills, MI. In addition, continuing operations from the Partnership's investment properties contributed $20.6 million to cash during 1998. Sources of liquidity include net cash flow from property operations, interest from short-term investments, and dividends from REIT shares. The Partnership generally holds approximately 10% of its assets in cash or invested in liquid instruments and securities, however, its investment policy allows up to 30% investment in cash and short-term obligations. At December 31, 1998, 30% of the Partnership's assets consisted of cash, cash equivalents and marketable securities. Prudential has committed to fund up to $100 million to enable the Partnership to acquire real estate investments. Contributions to the Partnership under this commitment are utilized for property acquisitions, and returned to Prudential on an ongoing basis from contract owners' net contributions and other available cash. The amount of the commitment is reduced by $10 million for every $100 million in current value net assets of the Partnership. As of December 31, 1998, Prudential's equity interest in the Partnership under this commitment was $51 million. At the present time, Prudential does not intend to make further contributions during the 1999 fiscal year. The Partners made no withdrawals during 1998; however, on February 1, 1999, the Partners made a $30 million withdrawal from excess cash. Additional withdrawals may be made by the Partners during 1999 based upon the percentage of assets invested in short-term obligations, and taking into consideration anticipated cash needs of the Partnership including potential property acquisitions, property dispositions and capital expenditures. Management anticipates that its current liquid assets and ongoing cash flow from operations will satisfy the Partnership's needs over the next twelve months and the foreseeable future. During 1998, the Partnership spent $5.7 million in capital expenditures for tenant alterations, and improvements in land and buildings. The majority of the capital expenditures were made to reconfigure the Lisle, IL office building for multi-tenant capability as it was previously occupied by a single tenant. 6 (b) RESULTS OF OPERATIONS The following is a brief discussion of the Partnership's results of operations for the years ended December 31, 1998, 1997 and 1996. 1998 VS. 1997 The following table presents a comparison of the Partnership's property results of operations, and realized and unrealized gains or losses by investment type, for the twelve months ended December 31, 1998 and December 31, 1997.
YEAR ENDED DECEMBER 31, 1998 1997 ------------------ ----------------- NET INVESTMENT INCOME: Office properties $ 7,269,613 $ 5,499,107 Apartment complexes 4,493,384 3,891,465 Retail property 2,702,234 2,856,357 Industrial properties 1,325,320 2,138,111 Income from interest in properties 33,462 435,296 Dividend income from real estate investment trust 669,100 158,184 Other (including interest income, investment management fee, etc.) (659,600) (1,188,773) ------------------ ----------------- TOTAL NET INVESTMENT INCOME $ 15,833,513 $ 13,789,747 ------------------ -----------------
YEAR ENDED DECEMBER 31, 1998 1997 ------------------ ----------------- REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS: Office properties $3,034,542 $1,897,749 Apartment complexes 2,387,054 1,053,061 Retail property (1,312,296) 1,109,099 Industrial properties 1,563,429 1,616,942 Interest in properties 91,538 284,581 Real estate investment trust (969,156) 2,523,800 ------------------ ----------------- TOTAL NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $4,795,111 $8,485,232 ------------------ -----------------
The Partnership's net investment income for 1998 was $15.8 million, an increase of $2.0 million from the prior year. This increase was primarily the result of increased revenues from real estate and improvements partially offset by increased operating expenses. 7 Revenue from real estate and improvements was $24.6 million in 1998, an increase of $3.0 million, or 13.9%, from 1997. This increase was primarily due to higher occupancy at the Lisle, IL office building and the Aurora, CO distribution center coupled with increased rental rates on other properties. Interest on short-term investments decreased $0.4 million from 1997. This was primarily due to lower average cash and cash equivalent balances during 1998 compared to the prior year. Cash and cash equivalents through the third quarter of 1998 averaged approximately $30.0 million, but increased significantly in the last quarter of 1998 due to the sale of two properties in Pomona, CA and Farmington Hills, MI. Property operating expenses increased $0.8 million, or 23.5%, from 1997. This increase was due primarily to a full year's operating costs (i.e. electricity, repair and maintenance, water, etc.) for one of the Brentwood, TN properties which was acquired in late 1997, in addition to operating expenses incurred by the Partnership on vacant properties. Administrative expenses decreased $0.3 million or 16.1%. This decrease was due primarily to a reduction in legal expenses. There was no interest expense during 1998 due to the Partnership's exercise of its purchase option under the capital lease obligation. OFFICE PROPERTIES In 1998, net investment income from property operations for the office properties increased $1.8 million, or 32.2%, from prior year. This increase was primarily due to a full year's net investment income for one of the Brentwood, TN properties which was acquired in late 1997, as well as the leasing of vacant space in the Lisle, IL office property. Office properties experienced a net unrealized gain of $3.0 million in 1998 due to improving office market conditions in most of the geographical areas where the Partnership has office properties, particularly, the Oakbrook Terrace, IL office property in suburban Chicago. Occupancy at the Beaverton, OR; Oakbrook Terrace, IL; and Brentwood, TN properties remained at 100% as of December 31, 1997 while occupancy at the Lisle, IL office property increased from 37% to 96% at December 31, 1998. Occupancy at the Morristown, NJ property decreased from 99% to 86%. APARTMENT COMPLEXES Net investment income from property operations for the apartment complexes increased $0.6 million, or 15.5%, from 1997. The majority of this increase was due to increased rental rates at the Atlanta, GA apartment complex. Holdings in the Partnership's two apartment complexes experienced a net unrealized gain of $0.6 million during 1998. The Atlanta, GA property was the largest contributor to the gain as it appreciated $0.4 million. The gain was attributable to increased rental rates at the property. The Raleigh, NC property experienced a net unrealized gain of $0.2 million due to increased occupancy rates. The Farmington Hills, MI property was sold on October 7, 1998 for a price of $16.9 million, which resulted in a realized gain of $1.7 million. At the end of December 31, 1998, occupancy at the Atlanta, GA and Raleigh, NC apartment complex was 96% and 93%, respectively. RETAIL PROPERTIES In 1998, the retail center experienced a net unrealized loss of $1.3 million, which is a reflection of lower rents. Occupancy at the shopping center was 98% at December 31, 1998, which was an increase of 2% from the prior year. INDUSTRIAL PROPERTIES Net investment income from property operations for the industrial properties decreased $0.8 million, or 38.0%, from 1997. The decrease was attributable to the sale of Pomona Industrial Park, which accounted for 82% of the decrease. 8 The three industrial properties experienced a net unrealized gain of $0.3 million during 1998. The Pomona, CA property was sold on December 17, 1998 for $21.4 million, which resulted in a realized gain of $1.2 million. Occupancy at the Bolingbrook, IL property remained unchanged at 100%. Occupancy at the Salt Lake City, UT and Aurora, CO property increased to 33.6% and 46%, respectively from prior year. REAL ESTATE INVESTMENT TRUST On September 24, 1997 the Partnership acquired 506,894 shares of Meridian Industrial REIT. Dividend income from the REIT increased $0.5 million from 1997. The Partnership held 506,894 shares of Meridian Industrial REIT throughout 1998. As of December 31, 1998, the REIT shares experienced an unrealized loss of $1.0 million. The Valuation Unit of Prudential applies a 3% discount to the market value of the REIT shares. This discount is applied because of the restriction which limits the number of shares that can be publicly traded during any six month period to 30% of the total shares originally acquired. OTHER Other net investment loss, which includes interest income from short-term investments, investment management fees, and expenses not related to property activities, narrowed by $0.5 million. The improved result was due to increased investment management fee in addition to a reduction in administrative expenses. 1997 VS. 1996 The following table presents a comparison of the Partnership's property results of operations, and realized and unrealized gains or losses by investment type, for the twelve months ended December 31, 1997 and December 31, 1996.
YEAR ENDED DECEMBER 31, 1997 1996 ------------------ ------------------ NET INVESTMENT INCOME: Office properties $ 5,499,107 $ 5,817,497 Apartment complexes 3,891,465 3,925,750 Retail property 2,856,357 3,129,390 Industrial properties 2,138,111 3,188,769 Income from interest in properties 435,296 606,558 Dividend income from real estate investment trust 158,184 - Other (including interest income, investment management fee, etc.) (1,188,773) (1,248,446) ------------------ ------------------ TOTAL NET INVESTMENT INCOME $ 13,789,747 $ 15,419,518 ------------------ ------------------
9
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Office properties $1,897,749 ($1,654,344) Apartment complexes 1,053,061 1,209,970 Retail property 1,109,099 (3,786,554) Industrial properties 1,616,942 (553,655) Interest in properties 284,581 - Real estate investment trust 2,523,800 - ------------------ ------------------ TOTAL NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $ 8,485,232 ($4,784,583) ------------------ ------------------
The Partnership's net investment income for 1997 was $13.8 million, a decrease of $1.6 million from 1996. This decrease was primarily the result of market conditions in the industrial properties. Income from interest in properties relates to the Partnership's 50% co-investment in several warehouse properties (the unit warehouses). Income from this source was $0.4 million in 1997, a decrease of 28.2% from 1996. This decrease was attributable to the sale of the Partnership's interest in these properties on September 30, 1997. Administrative expenses on the Statement of Operations include both those related to property operations and the administration of the Partnership. Property administrative expenses in 1997 were $2.0 million, an increase of $0.4 million, or 21.5%, from 1996. This increase was primarily due to the acquisition of three new properties as well as a full year of administrative expenses for a property acquired at the end of 1996. Administrative expenses related to the Partnership were $0.3 million in 1997, an increase of $0.1 million, or 49.7%, from 1996. Increased legal reserves relating to potential litigation contributed to the majority of the variance. Property operating expenses for 1997 were $3.3 million, an increase of $0.4 million, or 13.5%, from 1996. This increase was primarily due to a full year of ownership in 1997 of the office property in Beaverton, OR, and expenses incurred in 1997 for new acquisitions, such as, the industrial buildings in Salt Lake City, UT and Aurora, CO. Together these three properties contributed $0.3 million to the increased operating expenses. The acquisition of the office building in Brentwood, TN contributed $0.1 million to the increase. OFFICE PROPERTIES Net investment income from property operations for the office properties in 1997 was $5.5 million. This was a decrease of $0.3 million or 5.5% from 1996. The office properties experienced a net unrealized gain of $1.9 million in 1997. The office property in Oakbrook Terrace, IL experienced the largest unrealized gain that was attributable to the improving office market conditions in suburban Chicago. In addition, the Morristown, NJ and Brentwood, TN office properties also experienced net unrealized gains of $0.5 million and $0.6 million, respectively. The Partnership acquired a second office property in Brentwood, TN. The 97,378 square foot suburban office building was acquired on September 15, 1997 for $9.5 million. Occupancy at the time of acquisition, was at maximum capacity. Occupancy at the Beaverton, OR; Oakbrook Terrace, IL; and Brentwood, TN properties remained unchanged from December 31, 1996 at 100% . Occupancy at the Morristown, NJ property increased from 93% to 100% while occupancy at the Lisle, IL office property dropped from 100% to 37% in 1997. APARTMENT COMPLEXES In 1997, net investment income from apartment property operations was $3.9 million which was unchanged from the prior year. 10 The three apartment communities experienced a net unrealized gain of $1.0 million during 1997. The Atlanta, GA property was the largest contributor to the gain as it appreciated $1.3 million. This gain was attributable to increased rental rates and occupancy at the property. The Raleigh, NC community had a net unrealized loss of $0.4 million due to the appraisal assumptions concerning above market rentals expiring and subsequently renewing at lower market rates. Weighted average occupancy at the Partnership's residential communities increased from 93.1% to 94.3% from December 31, 1996. Occupancy at the Atlanta, GA and Farmington Hills, MI communities improved from 93% and 89%, respectively, as of December 31, 1996 to 99% and 93%, respectively, at year end 1997. Occupancy at the Raleigh, NC community decreased from 97% to 91% in 1997. RETAIL PROPERTIES Net investment income for the Partnership's retail property decreased by $0.3 million, or 8.7%, to $2.9 million in 1997. This decrease was primarily the result of decreased occupancy at the shopping center earlier in the year. The shopping center was 96% occupied as of December 31, 1997, unchanged from the prior year. The retail center experienced an unrealized gain of $1.1 million. This was a result of changes in the assumed capital needs of the property and the leasing of vacant spaces in the third and fourth quarters which stabilized future cash flows and brought occupancy back up to 96%. INDUSTRIAL PROPERTIES In 1997, net investment income from industrial property operations was $2.1 million, a decrease of $1.0 million, or 32.9%, in 1996. The decline was attributable to the sale of the industrial complex in Azusa, CA, in April 1996, which accounted for $0.6 million of the decrease. The sale of the Partnership's investment in the Jacksonville, FL industrial properties, in September 1997, also contributed to the decline in net investment income. For properties held for comparable periods in 1997 and 1996, net investment income was $2.0 million and $1.9 million, respectively. The Partnership acquired three industrial properties in 1997. The first acquisition was a 182,500 square foot building in Salt Lake City, UT for $5.4 million. The second acquisition was a two building 277,500 square foot facility in Aurora, CO for $8.5 million. As of December 31, 1997, both properties were vacant. The third acquisition was the land under the Partnership's existing Pomona CA, industrial complex. The Partnership acquired the land under a purchase option for $3.5 million. The industrial properties (including the recently purchased land) had $1.9 million of net unrealized appreciation in 1997. The largest single gain of $1.7 million was attributable to the purchase of the land under the Pomona, CA property. The Salt Lake City, UT and Aurora, CO properties experienced negative net appreciation as a result of softer market conditions. As of December 31, 1997 occupancy at the Partnership's Pomona, CA and Bolingbrook, IL industrial properties remained unchanged from December 31,1996 at 100%. As of December 31, 1997, both the Salt Lake City, UT and Aurora, CO properties were 100% vacant. The partnership sold its interest in the Jacksonville, FL warehouses for net sales proceeds of $6.3 million, resulting in a gain of $0.3 million. REAL ESTATE INVESTMENT TRUST Dividend income from REITs totaled $0.1 million in 1997. The Partnership acquired 506,894 shares Meridian for $10.0 million on September 24, 1997. Meridian is a self-administered and self-managed equity real estate investment trust engaged in owning, operating, and leasing high quality, modern industrial properties nationwide. As of December 31, 1997, these shares experienced a $2.5 million net unrealized gain. 11 (c) PER SHARE INFORMATION Following is an analysis of the Partnership's net investment income and net realized and unrealized gain (loss) on investments, presented on a per share basis:
01/01/98 01/01/97 01/01/96 to to to 12/31/98 12/31/97 12/31/96 -------- -------- -------- Revenue from real estate and improvements $ 2.0739 $ 1.8216 $ 1.9173 Income from interest in properties $ 0.0028 $ 0.0367 $ 0.0510 Dividend income from real estate investment trusts $ 0.0565 $ 0.0134 $ 0.0000 Interest on short-term investments $ 0.1594 $ 0.1946 $ 0.1795 -------- -------- -------- TOTAL INVESTMENT INCOME $ 2.2926 $ 2.0663 $ 2.1478 -------- -------- -------- Investment management fee $ 0.2448 $ 0.2229 $ 0.2097 Real estate taxes $ 0.2031 $ 0.1864 $ 0.1991 Administrative expense $ 0.1647 $ 0.1963 $ 0.1569 Operating expense $ 0.3437 $ 0.2782 $ 0.2442 Interest expense $ 0.0000 $ 0.0186 $ 0.0412 -------- -------- -------- TOTAL INVESTMENT EXPENSES $ 0.9563 $ 0.9024 $ 0.8511 -------- -------- -------- NET INVESTMENT INCOME $ 1.3363 $ 1.1639 $ 1.2967 -------- -------- -------- Net gain (loss) realized on real estate investments sold $ 0.2575 $ 0.0258 $ (0.1323) Change in unrealized gain (loss) on real estate investments sold $ 0.1472 $ 0.6903 $ (0.2695) -------- -------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS $ 0.4047 $ 0.7162 $ (0.4018) -------- -------- -------- -------- -------- -------- Net change in share value $ 1.7410 $ 1.8800 $ 0.8949 Share value at beginning of period $ 18.5286 $ 16.6486 $ 15.7537 --------- --------- --------- Share value at end of period $ 20.2696 $ 18.5286 $ 16.6486 -------- -------- -------- -------- -------- -------- Ratio of expenses to average net assets 4.99% 5.16% 5.26% Ratio of net investment income to average net assets 6.97% 6.66% 8.01% Number of shares outstanding at end of period (000's) 11,848 11,848 11,848
ALL CALCULATIONS ARE BASED ON AVERAGE MONTH-END SHARES OUTSTANDING WHERE APPLICABLE. 12 (d) THE YEAR 2000 ISSUE The Partnership utilizes many of the same business applications, infrastructure and business partners as Prudential. Prudential has addressed the Year 2000 issue on an enterprise-wide basis. Therefore, it is not possible to differentiate the Partnership's Year 2000 issue from that of Prudential. The accompanying discussion of the Year 2000 issue reflects steps taken by Prudential to mitigate the Year 2000 risks. Many computer systems are programmed to recognize only the last two digits in a date. As a result, any computer system that has date-sensitive programming may recognize a date using "00" as the year 1900 rather than the year 2000. This problem can affect non-information technology systems that include embedded technology, such as microprocessors included in "infrastructure" equipment used for telecommunications and other services as well as computer systems. If this anomaly is not corrected, the year "00" could cause systems to perform date comparisons and calculations incorrectly, which could in turn affect the accuracy and compromise the integrity of business records. Business operations could be interrupted when companies are unable to process transactions, send invoices, or engage in similar normal business activities. Prudential established a Company-wide Program Office (CPO) to develop and coordinate an operating framework for the Year 2000 compliance activities. Prudential's CPO structured the Year 2000 program into three major components: Business Applications, Infrastructure and Business Partners. The CPO also established quality assurance procedures including a certification process to monitor and evaluate enterprise-wide progress of each component of Prudential's program for conversion and upgrading of systems for Year 2000 compliance. BUSINESS APPLICATIONS The scope of the Business Applications component includes a wide range of computer systems that directly support Prudential's business operations and accounting systems. The entire application portfolio was analyzed in 1996 to determine appropriate Year 2000 readiness strategies (i.e., renovate, replace or retire). Rigorous testing standards have been employed for all applications that will not be retired, including those that are newly developed or purchased. Application replacement and renovation projects follow a similar path toward Year 2000 compliance. The key project phases include Year 2000 analysis and design, programming activities, testing, and implementation. Replacement projects are also tracked until the existing applications are removed from production. Of Prudential's total application portfolio, approximately 70% of the applications are being renovated, 13% are being replaced by Year 2000 compliant systems, and the remaining 17% are being retired from production. At December 31, 1998, the percentage of business applications (based on application count) in the implementation phase for Year 2000 compliance for renovation, replacement and retirement are 99%, 96% and 99%, respectively. The overall completion date for Business Applications is June 1999. INFRASTRUCTURE The scope of Prudential's Year 2000 Infrastructure initiatives include mainframe computer system hardware and operating system software, mid-range systems and servers, telecommunications equipment, buildings and facilities systems, personal computers, and vendor hardware and software. Although there are minor differences among these various components, the approach to Year 2000 readiness for Infrastructure generally involves phases identified as inventory, assessment, remediation activities (e.g., upgrading hardware or software), testing and implementation. The overall completion date for Infrastructure is June 1999. BUSINESS PARTNERS Prudential's approach to business partner readiness includes classification of each partner's status as "highly critical" or "less critical" and the development of contingency plans to address the potential that a business partner could experience a Year 2000 failure. Approximately 30% of our business partners have been identified as highly critical and the remaining 70% as less critical. Project phases include inventory, risk assessment, and contingency planning 13 activities. All project phases for highly critical business partner readiness were achieved in December 1998; we have an overall completion date for less critical business partner readiness of June 1999. THE COST OF YEAR 2000 READINESS Prudential is funding the Year 2000 program from operating cash flows. Some of the expenses of Prudential's Year 2000 readiness are allocated across its various businesses and subsidiaries, including the Partnership. Expenses related to the Year 2000 initiatives allocated to the Partnership are part of systems overhead costs and are included in the Partnership's general and administrative expenses. The Year 2000 costs allocated to the Partnership to date are not material to its operations and financial conditions. Moreover, the forecasted allocated Year 2000 costs are not expected to have a material impact on the Partnership's ability to meet its contractual commitments. YEAR 2000 RISKS AND CONTINGENCY PLANNING The major portion of Prudential's transactions are of such volume that they can only be effectively processed through the use of automated systems. Therefore, substantially all of Prudential's contingency plans include the ultimate resolution of any causative technology failures that may be encountered. Prudential believes that the Business Application, Infrastructure and Business Partners components of the Year 2000 project are substantially on schedule. While management expects a small number of the projects may not meet their targeted completion date, it is anticipated that these projects will be completed by September 1999 so that any delays, if experienced, would not have a significant impact on the timing of the project as a whole. During the course of the Year 2000 program, some discretionary technology projects have been delayed in favor of the completion of Year 2000 projects. However, this impact has been minimized by Prudential's strategic decision to outsource most of the Year 2000 renovation work. While Prudential and its subsidiaries believe that they are well positioned to mitigate its Year 2000 issue, this issue, by its nature contains inherent uncertainties, including the uncertainty of Year 2000 readiness of third parties. Consequently, the Partnership is unable to determine at this time whether the consequences of Year 2000 failures will have a material adverse effect on the Partnership's results of operations, liquidity or financial condition. In the worst case, it is possible that any technology failure, including an internal or external Year 2000 failure, could have a material impact on the Partnership results of operations, liquidity, or financial position. Prudential is enhancing existing business contingency plans to mitigate Year 2000 risk. Current contingency plans include planned responses to the failure of specific business applications or infrastructure components. These responses are being reviewed and expected to be finalized by June 1999 to ensure that they are workable under the special conditions of a Year 2000 failure. The plans are also being updated to reduce the level of uncertainty about the Year 2000 problem including readiness of Prudential's Business Partners. The discussion of the Year 2000 Issue herein, and in particular Prudential's plans to remediate this issue and the estimated costs thereof, are forward-looking in nature. See cautionary statement below relating to forward-looking statements. (e) INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS Certain of the statements contained in Management's Discussion and Analysis may be considered forward-looking statements. Words such as "expects," "believes," "anticipates," "intends," "plans," or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based upon management's current expectations and beliefs concerning future developments and their potential effects upon the Company. There can be no assurance that future developments affecting the Company will be those anticipated by management. There are certain important factors that could cause actual results to differ materially from estimates or expectations reflected in such forward-looking statements including without limitation, changes in general economic conditions, including the performance of financial markets and interest rates; market acceptance of new products and distribution channels; 14 competitive, regulatory or tax changes that affect the cost or demand for the Company's products; and adverse litigation results. While the Company reassesses material trends and uncertainties affecting its financial condition and results of operations, it does not intend to review or revise any particular forward-looking statement referenced in this Management's Discussion and Analysis in light of future events. The information referred to above should be considered by readers when reviewing any forward-looking statements contained in this Management's Discussion and Analysis. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Account and the Partnership are not subject to significant exposure to market rate risk for changes in interest rates because the Partnership's financial instruments consist primarily of short-term fixed rate commercial paper and neither the Account nor the Partnership use derivative financial instruments. Further, by policy, the Partnership places its investments with high quality debt security issuers, limits the amount of credit exposure to any one issuer, limits duration by restricting the term, and holds investments to maturity except under rare circumstances. 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data are listed in the accompanying Index to the Financial Statements and Supplementary Data on F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 16 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Name Position Age - ---- -------- --- James J. Avery, Jr. Chairman of the Board and Director 47 I. Edward Price Vice Chairman of the Board and Director 56 Esther H. Milnes President and Director 48 James C. Drozanowski Senior Vice President 56 Frank P. Marino Senior Vice President 54 Edward A. Minogue Senior Vice President 56 Hwei-Chung Shao Senior Vice President and Chief Actuary 44 Dennis G. Sullivan Principal Financial Officer and Chief Accounting Officer 43 David A. Nachman Vice President and Comptroller 51 Imants Saksons Vice President 48 William M. Bethke Director 51 Ira J. Kleinman Director 51 Mendel A. Melzer Director 38 - -----------------------------------------------------------------------------
James J. Avery, Jr., age 47 was elected Chairman of the Board of Directors of the Company on June 27, 1997. Mr. Avery joined The Prudential Insurance Company of America in 1988 and has served as the Senior Vice President, CFO and Chief Actuary for The Prudential Individual Insurance Group since 1997. I. Edward Price, age 56, has been Senior Vice President and Actuary of Prudential Individual Insurance since 1995. From 1994 to 1995, he was Chief Executive Officer of Prudential International Insurance. From 1993 to 1994, he was President of Prudential International Insurance. Prior to 1993, he was Senior Vice President and Company Actuary of Prudential. Esther H. Milnes, age 48, has been Vice President and Actuary of Prudential Individual Insurance Group since 1996. From 1993 to 1995, she was Senior Vice President and Chief Actuary of Prudential Insurance and Financial Services. Prior to 1993, she was Vice President and Associate Actuary of Prudential. James C. Drozanowski, age 56, has been Vice President and Operations Executive, Prudential Individual Insurance Group since 1996. From 1995 to 1996, he was President and Chief Executive Officer of Chase Manhattan Bank. From 1993 to 1995, he was Vice President of North America Customer Services, Chase Manhattan Bank. Prior to 1993, he was Operations Executive of Global Securities Services, Chase Manhattan Bank. 17 Frank P. Marino, age 54, has been Vice President of Policyowner Relations Department, Prudential Individual Insurance Group since 1996. Prior to 1996, he was Senior Vice President of Prudential Mutual Fund Services. Edward A. Minogue, age 56, was elected a Senior Vice President of the Company on September 1, 1997. Mr. Minogue has been a Vice President of The Prudential Insurance Company of America since July, 1997. Prior to 1997, Mr. Minogue was a director of Merrill Lynch, Pierce & Smith, Inc. Hwei-Chung Shao, age 44, is Vice President and Associate Actuary, Prudential. Dennis G. Sullivan, age 43, was elected Vice President and Chief Accounting Officer of the Company in March, 1999. Mr. Sullivan has been Vice President and Deputy Controller of Prudential since November, 1998. Prior thereto, from January 1998, Mr. Sullivan was Vice President and Controller of ContiFinancial Corporation. From 1997 to 1998, Mr. Sullivan was Deputy Corporate Controller of Salomon Brothers, Inc. Prior to 1997, he was a director at Salomon Brothers, Inc. David A. Nachman, age 51, was elected Vice President and Comptroller of the Company in March, 1999. Mr. Nachman joined The Prudential Insurance Company of America in 1973, and has served as Vice President, Accounting of Prudential since 1992. Imants Saksons, age 48, was elected a Vice President of the Company in January 1, 1999. Mr. Saksons has been a Vice President, Compliance of Prudential Individual Financial Services since 1998. Prior to 1998, he was Vice President of Market Conduct, U.S. Operations of Manulife Financial. William M. Bethke, age 51, has been President, Prudential Capital Markets Group since 1992. Ira J. Kleinman, age 51, has been Chief Marketing and Product Development Officer of Prudential Individual Insurance Group since 1995. From 1993 to 1995, he was President of Prudential Select. From 1992 to 1993, he was Senior Vice President of Prudential. Prior to 1992, he was Vice President of Prudential. Mendel A. Melzer, age 38, has been Chief Investment Officer of Mutual Funds and Annuities, Prudential Investments since 1996. From 1995 to 1996, he was Chief Financial Officer of the Money Management Group of Prudential. From 1993 to 1995, he was Senior Vice President and Chief Financial Officer of Prudential Preferred Financial Services. Prior to 1993, he was Managing Director, Prudential Investment Corporation. ITEM 11. EXECUTIVE COMPENSATION The Real Property Account does not pay any fees, compensation or reimbursement to any Director or Officer of the Registrant. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Not applicable. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See Related Party Transactions in Note 5 of Notes to Financial Statements on page F - 18. 18 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1. Financial Statements See the Index to Financial Statements and Supplementary Data on page F-1. 2. Financial Statement Schedules The following financial statement schedules of The Prudential Variable Contract Real Property Partnership should be read in conjunction with the financial statements in Item 8 of this Annual Report on Form 10-K: Schedule III. Real Estate Owned: Properties Schedule III. Real Estate Owned: Interest in Properties See the Index to Financial Statements and Supplementary Data on page F-1. 3. Documents Incorporated by Reference See the following list of exhibits. 4. Exhibits See the following list of exhibits. (b) None. (c) The following is a list of Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. The Registrant will furnish a copy of any Exhibit listed below to any security holder of the Registrant who requests it upon payment of a fee of 15 cents per page. All Exhibits are either contained in this Annual Report on Form 10-K or are incorporated by reference as indicated below. 3.1 Amended Articles of Incorporation of Pruco Life Insurance Company of New Jersey filed as Exhibit 1.A.(6)(a) to Post-Effective Amendment No. 17 to Form S-6, Registration Statement No. 2-89780, filed March 1, 1991, and incorporated herein by reference. 3.2 Amended By-Laws of Pruco Life Insurance Company of New Jersey, filed as Exhibit 1.A.(6)(b) to Post-Effective Amendment No. 17 to Form S-6, Registration Statement No. 2-89780, filed March 1, 1991, and incorporated herein by reference. 3.3 Resolution of the Board of Directors establishing the Pruco Life of New Jersey Variable Contract Real Property Account, filed as Exhibit (3C) to Form S-1, Registration Statement No. 33-20018, filed February 5, 1988, and incorporated herein by reference. 4.1 Variable Life Insurance Contract filed as Exhibit A(5) to Form N-8B-2, Registration Statement No. 2-81243, filed January 10, 1983, and incorporated herein by reference. 4.2 Revised Variable Appreciable Life Insurance Contract with fixed death benefit, filed as Exhibit 1.A.(5)(c) to Post-Effective Amendment No. 5 to Form S-6, Registration Statement No. 2-89780, filed July 11, 1986, and incorporated herein by reference. 4.3 Revised Variable Appreciable Life Insurance Contract with variable death benefit, filed as Exhibit 1.A.(5)(d) to 19 Post-Effective Amendment No. 5 to Form S-6, Registration Statement No. 2-89780, filed July 11, 1986, and incorporated herein by reference. 4.4 Single Premium Variable Annuity Contract, filed as Exhibit 4(i) to Form N-4, Registration Statement No. 2-99916, filed August 28, 1985, and incorporated herein by reference. 4.5 Flexible Premium Variable Life Insurance Contract, filed as Exhibit 1.A.(5) to Form S-6, Registration Statement No. 2-99537, filed August 8, 1985, and incorporated herein by reference. 9. None. 10.1 Investment Management Agreement between The Prudential Insurance Company of America and The Prudential Variable Contract Real Property Partnership filed as Exhibit (10A) to Post-Effective Amendment No. 2 to Form S-1, Registration Statement No. 33-20018, filed April 6, 1990, and incorporated herein by reference. 10.2 Service Agreement between The Prudential Insurance Company of America and The Prudential Investment Corporation, filed as Exhibit (10B) to Form S-1, Registration Statement No. 33-8698, filed September 12, 1986, and incorporated herein by reference. 10.3 Partnership Agreement of The Prudential Variable Contract Real Property Partnership filed as Exhibit (10C) to Post-Effective Amendment No. 2 to Form S-1, Registration Statement No. 33-20018, filed April 6, 1990, and incorporated herein by reference. 11. Not applicable. 12. Not applicable. 13. None. 18. None. 21. Not applicable. 22. Not applicable. 23. None. 24. Powers of Attorney: W. Bethke, I. Kleinman, M. Melzer and I. Price incorporated by reference to Form N-4, Registration No. 333-18117, filed December 18, 1996 on behalf of the Pruco Life of New Jersey Flexible Premium Variable Annuity Account. James Avery incorporated by reference to Form S-1, Registration No. 33-20018, filed April 9, 1998 on behalf of the Pruco Life of New Jersey Variable Contract Real Property Account. 27. Not applicable. 20 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY IN RESPECT OF PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT (REGISTRANT) Date: March 29, 1999 By: /s/ ESTHER H. MILNES ----------------------- -------------------- Esther H. Milnes President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ---------- -------------------------- --------------- * - --------------------- Chairman of the Board March 29, 1999 James J. Avery, Jr. and Director * - --------------------- Vice Chairman of the Board March 29, 1999 I. Edward Price and Director /s/ESTHER H. MILNES - --------------------- President and Director March 29, 1999 Esther H. Milnes /s/DENNIS G. SULLIVAN - --------------------- Principal Financial Officer March 29, 1999 Dennis G. Sullivan and Chief Accounting Officer * - --------------------- Director March 29, 1999 William Bethke * - --------------------- Director March 29, 1999 Mendel A. Melzer * - --------------------- Director March 29, 1999 Ira J. Kleinman
By: * /s/THOMAS C. CASTANO --------------------------- Thomas C. Castano (Attorney-in-Fact) 21 PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT (REGISTRANT) INDEX
Page ---- A. PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT Financial Statements: Reports of Independent Accountants F-2 Statement of Net Assets - December 31, 1998 and 1997 F-3 Statement of Operations and Changes in Net Assets - Years Ended December 31, 1998, 1997 and 1996 F-3 Notes to Financial Statements F-4 B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP Financial Statements: Reports of Independent Accountants F-8 Statements of Assets and Liabilities - December 31, 1998 and 1997 F-9 Statements of Operations - Years Ended December 31, 1998, 1997 and 1996 F-10 Statements of Changes in Net Assets - Years Ended December 31, 1998, 1997 and 1996 F-11 Statements of Cash Flows - Years Ended December 31, 1998, 1997 and 1996 F-12 Schedule of Investments - December 31, 1998 and 1997 F-13 Notes to Financial Statements F-16 Financial Statement Schedules: For the period ended December 31, 1998 Schedule III - Real Estate Owned: Properties F-19 Schedule III - Real Estate Owned: Interest in Properties F-20
All other schedules are omitted because they are not applicable, or because the required information is included in the financial statements or notes thereto. F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Contract Owners of the Pruco Life of New Jersey Variable Contract Real Property Account and the Board of Directors of Pruco Life Insurance Company of New Jersey In our opinion, the accompanying statements of net assets and the related statements of operations and changes in net assets present fairly, in all material respects, the financial position of Pruco Life of New Jersey Variable Contract Real Property Account at December 31, 1998 and 1997, and the results of its operations and the changes in its net assets for the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Pruco Life Insurance Company of New Jersey's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of shares owned in The Prudential Variable Contract Real Property Partnership at December 31, 1998 and 1997, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP New York, New York March 19, 1999 F-2 FINANCIAL STATEMENTS OF PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT STATEMENTS OF NET ASSETS
DECEMBER 31, ----------------------------- 1998 1997 ------------- ------------- Investment in The Prudential Variable Contract Real Property Partnership (Note 3) $ 9,260,250 $ 8,768,215 ------------- ------------- ------------- ------------- NET ASSETS, representing: Equity of Contract Owners (Note 4) $ 6,428,170 $ 6,643,068 Equity of Pruco Life Insurance Company of New Jersey (Note 2D) 2,832,080 2,125,147 ------------- ------------- $ 9,260,250 $ 8,768,215 ------------- ------------- ------------- -------------
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, ------------------------------------ INVESTMENT INCOME: 1998 1997 1996 ----------- ---------- ----------- Net Investment Income from Partnership Operations $ 611,358 $ 550,770 $ 613,768 EXPENSES: Charges to Contract Owners for Assuming Mortality Risk and Expense Risk and for Administration (Note 5) 38,644 38,614 39,120 ----------- ----------- ----------- NET INVESTMENT INCOME 572,714 512,156 574,648 ----------- ----------- ----------- Net Change in Unrealized Gain (Loss) on Investments in Partnership 67,858 326,681 (127,658) Net Realized Gain (Loss) on Sale of Investments in Partnership 117,819 12,223 (62,618) ----------- ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 758,391 851,060 384,372 ----------- ----------- ----------- CAPITAL TRANSACTIONS: Net Withdrawals by Contract Owners (Note 7) (759,469) (524,157) (380,371) Net Contributions by Pruco Life Insurance Company of New Jersey 493,113 562,771 419,492 ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS (266,356) 38,614 39,121 ----------- ----------- ----------- TOTAL INCREASE IN NET ASSETS 492,035 889,674 423,493 NET ASSETS: Beginning of period 8,768,215 7,878,541 7,455,048 ----------- ----------- ----------- End of period $9,260,250 $8,768,215 $7,878,541 ----------- ----------- ----------- ----------- ----------- -----------
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES F-4 THROUGH F-7 F-3 NOTES TO THE FINANCIAL STATEMENTS OF PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT DECEMBER 31, 1998 NOTE 1: GENERAL Pruco Life of New Jersey Variable Contract Real Property Account (the "Real Property Account") was established on October 30, 1987 by resolution of the Board of Directors of Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey"), an indirect wholly-owned subsidiary of The Prudential Insurance Company of America ("Prudential"), as a separate investment account pursuant to New Jersey law. The assets of the Real Property Account are segregated from Pruco Life of New Jersey's other assets. The Real Property Account is used to fund benefits under certain variable life insurance and variable annuity contracts issued by Pruco Life of New Jersey. These products are Appreciable Life ("VAL"), Variable Life ("VLI"), Discovery Plus ("SPVA"), and Discovery Life Plus ("SPVL"). The assets of the Real Property Account are invested in The Prudential Variable Contract Real Property Partnership (the "Partnership"). The Partnership is organized under New Jersey law and is registered under the Securities Act of 1933. The Partnership is the investment vehicle for assets allocated to the real estate investment option under certain variable life insurance and annuity contracts. The Real Property 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. 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. New sales of the VAL, VLI and SPVA products have been discontinued. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. BASIS OF ACCOUNTING The accompanying financial statements are prepared in conformity with generally accepted accounting principles ("GAAP"). The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. B. INVESTMENT IN PARTNERSHIP INTEREST The investment in the Partnership is based on the Real Property Account's proportionate interest of the Partnership's market value. At December 31, 1998 and 1997 the Real Property Account's interest in the Partnership was 3.9% or 456,853 shares and 4.0% or 473,226 shares, respectively. C. INCOME RECOGNITION Net investment income and realized and unrealized gains and losses are recognized daily. Amounts are based upon the Real Property 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 Real Property Account for property acquisitions and capital expenditure funding needs. The position is also utilized for liquidity purposes including unit purchases and redemptions, Partnership share transactions, and expense processing. The position does not have an effect on the contract owner's account or the related unit value. F-4 NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP The number of shares held by the Real Property Account in the Partnership, the Partnership share value and the aggregate cost of investments in the Real Property Accounts' shares held at December 31, 1998 and 1997 were as follows:
1998 1997 ---------- ---------- SHARES OUTSTANDING: 456,853 473,226 SHARE VALUE: $20.27 $18.53 COST: $5,311,507 $5,503,605
NOTE 4: CONTRACT OWNER UNIT INFORMATION Outstanding contract owner units, unit values and total value of contract owner equity at December 31, 1998 and 1997, by product, were as follows: 1998:
VAL VLI SPVA SPVL TOTAL ---------- -------- -------- -------- ---------- CONTRACT OWNER UNITS OUTSTANDING: 2,800,465 475,689 62,086 66,824 UNIT VALUE: $ 1.88513 $1.94314 $1.74229 $1.74229 ---------- -------- -------- -------- TOTAL CONTRACT OWNER EQUITY: $5,279,240 $924,330 $108,172 $116,428 $6,428,170 ---------- -------- -------- -------- ---------- ---------- -------- -------- -------- ----------
1997:
VAL VLI SPVA SPVL TOTAL ---------- -------- -------- -------- ---------- CONTRACT OWNER UNITS OUTSTANDING: 3,180,962 485,517 81,395 81,807 UNIT VALUE: $ 1.73358 $1.78248 $1.61267 $1.61267 ---------- -------- -------- -------- TOTAL CONTRACT OWNER EQUITY: $5,514,452 $865,424 $131,263 $131,928 $6,643,068 ---------- -------- -------- -------- ---------- ---------- -------- -------- -------- ----------
NOTE 5: 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 that life insurance and annuity contract owners may not live as long as estimated or annuitants may live longer than estimated and expense risk is that the cost of issuing and administering the policies may exceed related charges by Pruco Life of New Jersey. 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. C. COST OF INSURANCE CHARGES Contract owner contributions are subject to certain deductions prior to being invested in the Real Property Account. The deductions for VAL and VLI are (1) state premium taxes; (2) sales charges 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, are deducted from each premium payment to cover premium collection and processing costs. Contracts are also subject to monthly charges for the costs of administering the contract and to compensate Pruco Life of New Jersey for the guaranteed minimum death benefit risk. F-5 D. DEFERRED SALES CHARGE Subsequent to a contract owner redemption, 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. 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. 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. Note 6: TAXES Pruco Life of New Jersey is taxed as a "life insurance company" as defined by the Internal Revenue Code and the results of operations of the Real Property Account form a part of Prudential's consolidated federal tax return. Under current federal law, no federal income taxes are payable by the Real Property Account. As such, no provision for the tax liability has been recorded in these financial statements. Note 7: NET WITHDRAWALS BY CONTRACT OWNERS Contract owner activity for the real estate investment option in Pruco Life of New Jersey's variable insurance and variable annuity products for the years ended December 31, 1998 and 1997 were as follows: 1998:
VAL VLI SPVA SPVL TOTAL ---------- --------- --------- --------- ---------- CONTRACT OWNER NET PAYMENTS: $ 457,528 $ 83,120 $ 0 $ 70 $ 540,718 POLICY LOANS: (415,907) (12,329) 0 (26,073) (454,309) POLICY LOAN REPAYMENTS AND INTEREST: 147,539 21,940 0 2,028 171,507 SURRENDERS, WITHDRAWALS, AND DEATH BENEFITS: (289,995) (60,417) (32,020) (11) (382,443) NET TRANSFERS FROM (TO) OTHER SUBACCOUNTS OR FIXED RATE OPTIONS: (319,287) (17,694) 0 0 (336,981) ADMINISTRATIVE AND OTHER CHARGES: (264,212) (32,789) (36) (924) (297,961) ---------- --------- --------- --------- ---------- NET WITHDRAWALS BY CONTRACT OWNERS $(684,334) $(18,169) $(32,056) $(24,910) $(759,469) ---------- --------- --------- --------- ---------- ---------- --------- --------- --------- ----------
1997:
VAL VLI SPVA SPVL TOTAL ---------- --------- --------- --------- ---------- CONTRACT OWNER NET PAYMENTS: $ 533,340 $ 88,026 $ (5) $ 37 $ 621,398 POLICY LOANS: (171,484) (14,313) 0 (2,456) (188,253) POLICY LOAN REPAYMENTS AND INTEREST: 136,212 14,124 0 1,104 151,440 SURRENDERS, WITHDRAWALS, AND DEATH BENEFITS: (336,616) (74,935) (5,395) 0 (416,946) NET TRANSFERS FROM (TO) OTHER SUBACCOUNTS OR FIXED RATE OPTIONS: (304,993) (20,526) 0 (17,463) (342,982) ADMINISTRATIVE AND OTHER CHARGES: (315,155) (32,755) 0 (904) (348,814) ---------- --------- --------- --------- ---------- NET WITHDRAWALS BY CONTRACT OWNERS $(458,696) $ (40,379) $ (5,400) $(19,682) $ (524,157) ---------- --------- --------- --------- ---------- ---------- --------- --------- --------- ----------
F-6 NOTE 8: UNIT ACTIVITY Transactions in units for the years ended December 31, 1998, 1997 and 1996 were as follows: 1998:
VAL VLI SPVA SPVL --------- -------- -------- -------- CONTRACT OWNER CONTRIBUTIONS: 428,040 59,733 3 1,240 CONTRACT OWNER REDEMPTIONS: (808,537) (69,561) (19,312) (16,223)
1997:
VAL VLI SPVA SPVL --------- -------- -------- -------- CONTRACT OWNER CONTRIBUTIONS: 477,493 4,305 0 758 CONTRACT OWNER REDEMPTIONS: (757,408) (88,132) (3,635) (13,874)
1996:
VAL VLI SPVA SPVL --------- -------- -------- -------- CONTRACT OWNER CONTRIBUTIONS: 535,549 78,896 35 1,686 CONTRACT OWNER REDEMPTIONS: (744,916) (96,270) (17,943) (6,531)
NOTE 9: PURCHASES AND SALES OF INVESTMENTS The aggregate costs of purchases and proceeds from sales of investments in the Partnership for the year ended December 31,1998 were as follows: Purchases: $ 0 Sales: $(305,000) F-7 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Prudential Variable Contract Real Property Partnership In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Prudential Variable Contract Real Property Partnership (the "Partnership") at December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the management of Prudential Insurance Company of America; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP New York, New York February 22, 1999 F-8 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 DECEMBER 31, 1997 ----------------- ------------------ ASSETS REAL ESTATE INVESTMENTS - At estimated market value: Real estate and improvements (cost: 12/31/98 -- $170,045,055; 12/31/97 -- $201,670,248) $155,374,462 $181,317,624 Real estate investment trust (cost: 12/31/98 -- $10,000,005; 12/31/97 -- $10,000,005) 11,554,649 12,523,805 -------------- -------------- Total real estate investments 166,929,111 193,841,429 MARKETABLE SECURITIES - At estimated market value (cost: 12/31/98 -- $14,967,236; 12/31/97 -- $13,971,421) 14,950,525 13,929,296 CASH AND CASH EQUIVALENTS 58,578,848 12,880,560 DIVIDEND RECEIVABLE 167,275 146,999 OTHER ASSETS (net of allowance for uncollectible accounts: 12/31/98 -- $66,000; 12/31/97 -- $68,000) 3,623,513 1,946,851 -------------- -------------- Total assets $244,249,272 $222,745,135 -------------- -------------- -------------- -------------- LIABILITIES AND PARTNERS' EQUITY ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 1,985,400 $ 1,842,027 DUE TO AFFILIATES 1,598,535 832,922 OTHER LIABILITIES 504,940 538,413 -------------- -------------- Total liabilities 4,088,875 3,213,362 COMMITMENTS PARTNERS' EQUITY 240,160,397 219,531,773 -------------- -------------- TOTAL LIABILITIES AND PARTNERS' EQUITY $244,249,272 $222,745,135 -------------- -------------- -------------- -------------- NUMBER OF SHARES OUTSTANDING AT END OF PERIOD 11,848,275 11,848,275 -------------- -------------- -------------- -------------- SHARE VALUE AT END OF PERIOD $ 20.27 $ 18.53 -------------- -------------- -------------- --------------
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16 F-9 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- 1998 1997 1996 ----------------- ------------------ ----------------- INVESTMENT INCOME: Revenue from real estate and improvements $ 24,572,642 $ 21,582,968 $ 22,799,694 Income from interest in properties 33,462 435,296 606,558 Dividend income from real estate investment trust 669,100 158,184 0 Interest on short-term investments 1,888,348 2,305,364 2,134,386 ----------------- ------------------ ----------------- Total investment income 27,163,552 24,481,812 25,540,638 ----------------- ------------------ ----------------- EXPENSES: Investment management fee 2,900,445 2,640,470 2,494,229 Real estate taxes 2,406,624 2,208,972 2,367,404 Administrative expense 1,951,235 2,326,155 1,865,433 Operating expense 4,071,735 3,296,350 2,904,620 Interest expense 0 220,118 489,434 ----------------- ------------------ ----------------- Total investment expenses 11,330,039 10,692,065 10,121,120 ----------------- ------------------ ----------------- NET INVESTMENT INCOME 15,833,513 13,789,747 15,419,518 ----------------- ------------------ ----------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net proceeds from real estate investments sold 37,443,762 6,297,422 20,497,789 Less: Cost of real estate investments sold 37,361,533 6,274,539 26,610,932 Realization of prior years' unrealized gain on real estate investments sold (2,969,150) (283,157) (4,539,996) ----------------- ------------------ ----------------- Net gain (loss) realized on real estate investments sold 3,051,379 306,040 (1,573,147) ----------------- ------------------ ----------------- Change in unrealized gain (loss) on real estate investments 1,743,732 8,179,192 (3,211,436) ----------------- ------------------ ----------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 4,795,111 8,485,232 (4,784,583) ----------------- ------------------ ----------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 20,628,624 $ 22,274,979 $ 10,634,935 ----------------- ------------------ ----------------- ----------------- ------------------ -----------------
SEE NOTES TO FINANCIAL STATEMENTS OF F-16 F-10 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ 1998 1997 1996 ----------------- ------------------ ----------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS: Net investment income $ 15,833,513 $ 13,789,747 $ 15,419,518 Net gain (loss) realized on real estate investments sold 3,051,379 306,040 (1,573,147) Net unrealized gain (loss) from real estate investments 1,743,732 8,179,192 (3,211,436) ----------------- ------------------ ----------------- Net increase in net assets resulting from operations 20,628,624 22,274,979 10,634,935 ----------------- ------------------ ----------------- NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS: Withdrawals by partners (Shares: 1998 -- 0; 1997 -- 0; 1996 -- 188,409 0 0 (3,000,000) shares, respectively) ----------------- ------------------ ----------------- Net decrease in net assets resulting from capital transactions 0 0 (3,000,000) ----------------- ------------------ ----------------- NET INCREASE IN NET ASSETS 20,628,624 22,274,979 7,634,935 NET ASSETS - Beginning of year 219,531,773 197,256,794 189,621,859 ----------------- ------------------ ----------------- NET ASSETS - End of year $ 240,160,397 $ 219,531,773 $ 197,256,794 ----------------- ------------------ ----------------- ----------------- ------------------ -----------------
SEE NOTES TO FINANCIAL STATEMENTS OF F-16 F-11 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 1998 1997 1996 --------------- --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets resulting from operations $ 20,628,624 $ 22,274,979 $ 10,634,935 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Net realized and unrealized (gain) loss on investments (4,795,111) (8,485,232) 4,784,583 Bad Debt Expense 28,264 99,929 14,201 (Increase) decrease in: Dividend receivable (20,276) (146,999) 0 Other assets (1,704,926) 20,136 (337,812) (Decrease) increase in: Obligation under capital lease 0 (72,677) 190,256 Accounts payable and accrued expenses 143,373 201,667 (502,254) Due to affiliates 765,613 113,722 36,405 Other liabilities (33,473) 71,404 (197,060) --------------- --------------- --------------- Net cash flows from operating activities 15,012,088 14,076,929 14,623,254 --------------- --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from real estate investments sold 37,443,762 6,297,422 20,497,789 Acquisition of real estate property 0 (23,417,474) (10,713,722) Acquisition of real estate investment trust 0 (10,000,005) 0 Improvements and additional costs on prior purchases: Additions to real estate owned (5,736,333) (1,311,864) (997,893) Additions to real estate partnerships 0 0 0 Sale (purchase) of marketable securities, net (1,021,229) 10,497,348 (13,894,489) --------------- --------------- --------------- Net cash flows from investing activities 30,686,200 (17,934,573) (5,108,315) --------------- --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Withdrawals by partners 0 0 (3,000,000) Principal payments on capital lease obligation 0 (4,000,000) 0 --------------- --------------- --------------- Net cash flows from financing activities 0 (4,000,000) (3,000,000) --------------- --------------- --------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 45,698,288 (7,857,644) 6,514,939 CASH AND CASH EQUIVALENTS - Beginning of year 12,880,560 20,738,204 14,223,265 --------------- --------------- --------------- CASH AND CASH EQUIVALENTS - End of year $ 58,578,848 $ 12,880,560 $ 20,738,204 --------------- --------------- --------------- --------------- --------------- --------------- SUPPLEMENTAL INFORMATION: Cash paid during the year for interest 0 $ 220,118 $ 376,450 --------------- --------------- --------------- --------------- --------------- ---------------
SEE NOTES TO FINANCIAL STATEMENTS OF F-16 F-12 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP SCHEDULE OF INVESTMENTS
December 31, 1998 December 31, 1997 ------------------------------- ----------------------------- Estimated Estimated Market Market Cost Value Cost Value -------------- -------------- ------------- -------------- REAL ESTATE AND IMPROVEMENTS (Percent of Net Assets) 64.7% 82.6% Location Description - --------------------- --------------------------- -------------- -------------- ------------- -------------- Lisle, IL Office Building $ 21,634,707 $ 14,123,742 $ 17,916,983 $ 10,278,959 Atlanta, GA Garden Apartments 15,601,495 15,651,216 15,446,293 15,100,000 Roswell, GA Retail Shopping Center 32,272,627 28,649,176 31,858,198 29,547,042 Pomona, CA Warehouse 0 0 23,637,049 19,504,612 Morristown, NJ Office Building 19,409,490 11,596,138 18,931,914 10,805,918 Bolingbrook, IL Warehouse 8,948,028 7,000,000 8,948,028 7,100,000 Farmington Hills, MI Garden Apartments 0 0 13,641,971 14,805,258 Raleigh, NC Garden Apartments 15,822,682 16,804,570 15,804,860 16,525,751 Nashville, TN Office Building 8,448,026 10,152,399 8,613,828 9,611,329 Oakbrook Terrace, IL Office Complex 12,945,366 15,750,000 12,725,366 14,100,000 Beaverton, OR Office Complex 10,728,618 11,200,000 10,728,285 10,700,000 Salt Lake City, UT Industrial Building 5,388,134 5,450,000 5,388,134 5,350,000 Aurora, CO Industrial Building 9,304,171 9,497,221 8,540,585 8,400,000 Brentwood, TN Office Complex 9,541,711 9,500,000 9,488,754 9,488,755 -------------- --------------- -------------- --------------- $ 170,045,055 $ 155,374,462 $ 201,670,248 $ 181,317,624 -------------- --------------- -------------- --------------- REAL ESTATE INVESTMENT TRUST (Percent of Net Assets) 4.8% 5.7% - ------------------------------------------------------------------------------------------------------------------------------ Meridian REIT Shares (506,894 shares) $ 10,000,005 $ 11,554,649 $ 10,000,005 $ 12,523,805 -------------- -------------- ------------- ------------- -------------- -------------- ------------- ------------- December 31, 1998 December 31, 1997 ------------------------------- ----------------------------- Estimated Estimated Market Market Cost Value Cost Value -------------- -------------- ------------- ------------- MARKETABLE SECURITIES (Percent of Net Assets) 6.2% 6.3% (See pages F-14 to F-15 for details) Description - ----------------------------------------------------------------------------------------------------------------------------- Marketable Securities $ 14,967,236 $ 14,950,525 $ 13,971,421 $ 13,929,296 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- CASH AND CASH EQUIVALENTS (Percent of Net Assets) 24.4% 5.9% (See pages F-14 to F-15 for details) Description - ------------------------------------------------------------------------------------------------------------------------------ Commercial Paper and Cash $ 58,578,848 $ 58,578,848 $ 12,880,560 $ 12,880,560 -------------- -------------- ------------- ------------- -------------- -------------- ------------- -------------
SEE NOTES TO FINANCIAL STATEMENTS OF F-16 F-13 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP SCHEDULE OF INVESTMENTS
December 31, 1998 -------------------------------------------------------------- Net Estimated Face Amount Cost Market Value ------------------- ------------------ ------------------- MARKETABLE SECURITIES (Percent of Net Assets) 6.2% General Motors Acceptance Corp., 5.26%, January 26, 1999 $ 830,000 $ 817,556 $ 817,556 American Express Credit Corp., 7.375%, February 1, 1999 325,000 329,342 325,418 Canadian Imperial Bank of Commerce, 5.55%, February 10, 1999 1,000,000 999,520 999,947 Federal National Mortgage Assoc., 5.33%, February 12, 1999 100,000 99,703 99,703 Salomon Smith Barney Holdings, Inc., 5.38%, February 16, 1999 1,720,000 1,695,137 1,695,397 General Motors Acceptance Corp., 5.29 %, February 17, 1999 650,000 641,501 641,501 Chrysler Financial Company LLC , 5.26%, February 22, 1999 2,400,000 2,365,700 2,365,700 International Lease Finance Corp., 7.50% March 1, 1999 500,000 508,250 501,367 Federal Home Loan Mortgage Corp., 5.505%, March 12, 1999 1,000,000 1,000,856 1,000,630 General Motors Acceptance Corp., 6.04%, March 19, 1999 1,000,000 1,003,480 1,000,707 Merrill Lynch & Co. Inc., 5.23%, March 19, 1999 1,790,000 1,758,820 1,758,820 Canadian Wheat Board, 5.14%, April 1, 1999 2,000,000 1,962,406 1,962,406 International Lease Finance Corp., 6.625%, April 1, 1999 375,000 377,419 375,721 CIT Group Holdings, Inc., 6.375%, May 21, 1999 400,000 402,120 400,873 Federal National Mortgage Assoc., 6.07%, July 1, 1999 1,000,000 1,005,426 1,004,779 ------------------- ------------------ ------------------- Total Marketable Securities $ 15,090,000 $ 14,967,236 $ 14,950,525 ------------------- ------------------ ------------------- ------------------- ------------------ ------------------- CASH AND CASH EQUIVALENTS (Percent of Net Assets) 24.4% Countrywide Home Loans, 5.403%, January 4, 1999 $ 1,000,000 $ 999,400 $ 999,400 Fortune Brands Inc., 5.05%, January 4, 1999 3,463,000 3,461,057 3,461,057 Xerox Capital (Europe) PLC, 5.303%, January 4, 1999 3,483,000 3,480,949 3,480,949 Federal National Mortgage Assoc., 5.77%, January 5, 1999 10,401,000 10,000,000 10,000,000 Ford Motor Credit Co., 5.454%, January 5, 1999 500,000 499,622 499,622 Pioneer Hi-BRED International, 5.665%, January 7, 1999 1,000,000 997,332 997,332 Ford Motor Credit Co., 6.11%, January 8, 1999 167,000 166,717 166,717 Deere & Co., 5.372 %, January 13, 1999 2,520,000 2,509,514 2,509,514 E.I. Du Pont De Nemours & Co. Inc., 5.277%, January 13, 1999 648,000 644,598 644,598 Household Finance Corp., 5.356 %, January 13, 1999 175,000 174,119 174,119 Household Finance Corp., 5.355% , January 15, 1999 2,343,000 2,331,899 2,331,899 Potomac Electric Power Co., 5.569%, January 15, 1999 3,122,000 3,110,930 3,110,930 Chrysler Financial Corp., 5.537%, January 25, 1999 1,164,000 1,158,121 1,158,121 Eastman Kodak Co., 5.232%, January 26, 1999 2,518,000 2,502,360 2,502,360 Cigna Corp., 5.559%, January 27, 1999 1,819,000 1,809,220 1,809,220 Cigna Group Holdings, Inc. 5.334%, January 27, 1999 1,851,000 1,835,496 1,835,496 Countrywide Home Loan, Inc. 5.506%, January 27, 1999 1,342,000 1,333,028 1,333,028 Countrywide Home Loan, Inc. 5.587%, January 27, 1999 1,177,000 1,169,197 1,169,197 General RE Corp., 5.187% , January 29, 1999 542,000 538,046 538,046 PNC Funding Corp., 5.728%, January 29, 1999 2,500,000 2,487,729 2,487,729 GTE Funding, Inc., 5.211%, February 1, 1999 2,526,000 2,506,048 2,506,048 Norwest Financial, Inc., 5.536%, February 3, 1999 3,563,000 3,539,593 3,539,593 CIGNA Corp., 5.233%, February 4, 1999 1,745,000 1,730,660 1,730,660 General Electric Capital Corp., 5.537%, February 4, 1999 3,563,000 3,539,049 3,539,049 Associates First Capital Corp., 5.241%, February 8, 1999 2,519,000 2,498,988 2,498,988 GTE Funding, Inc., 5.304%, February 11, 1999 1,000,000 993,413 993,413 ------------------- ------------------ ------------------- Total Cash Equivalents 56,651,000 56,017,086 56,017,086 Cash 2,561,762 2,561,762 2,561,762 ------------------- ------------------ ------------------- Total Cash and Cash Equivalents $ 59,212,762 $ 58,578,848 $ 58,578,848 ------------------- ------------------ ------------------- ------------------- ------------------ -------------------
SEE NOTES TO FINANCIAL STATEMENTS OF F-16 F-14 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997 ---------------------------------------------------- FACE NET ESTIMATED AMOUNT COST MARKET VALUE ------------ ------------ ------------ MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 6.3% International Lease Finance Corp., 5.92%, January 15, 1998 $ 500,000 $ 499,083 $ 499,956 Smith Barney Holding Inc., 5.70%, January 28, 1998 1,304,000 1,285,475 1,285,475 Suntrust Banks, 8.875%, February 1, 1998 1,500,000 1,517,880 1,503,553 Chase Manhattan Bank, 5.75%, February 10, 1998 2,000,000 2,000,000 2,000,000 Beneficial Corp., 9.125%, February 15, 1998 700,000 705,948 702,456 Citicorp, 10.15%, February 15, 1998 200,000 207,324 200,969 General Motors Acceptance Corp., 5.9%, February 19, 1998 985,000 994,545 986,218 General Motors Acceptance Corp., 5.9875%, February 23, 1998 1,300,000 1,299,363 1,299,894 American General Finance Corp., 7.25%, March 1, 1998 500,000 507,880 501,217 Commercial Credit Co., 5.7%, March 1, 1998 375,000 375,199 375,031 Associates Corp. of North America, 7.3%, March 15, 1998 400,000 406,635 401,242 International Lease Finance Corp., 5.75%, March 15, 1998 400,000 399,940 399,988 Morgan Guaranty Trust Co., 5.85%, March 16, 1998 500,000 499,855 499,971 Royal Bank of Canada, 5.91%, June 17, 1998 2,000,000 1,998,853 1,999,475 FCC National Bank, 5.75281%, July 2, 1998 1,025,000 1,024,202 1,024,602 General Mills Inc., 5.38%, July 8, 1998 250,000 249,238 249,249 ------------ ------------ ------------ TOTAL MARKETABLE SECURITIES $ 13,939,000 $ 13,971,421 $ 13,929,296 ------------ ------------ ------------ ------------ ------------ ------------ CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 5.9% Barnett Bank, Inc., 6.70%, January 2, 1998 $ 1,235,000 $ 1,234,540 $ 1,234,540 American Greetings Corp., 6.26%, January 5, 1998 1,250,000 1,247,179 1,247,179 Xerox Capital, 5.85%, January 6, 1998 1,000,000 995,775 995,775 Nike Inc., 6.10%, January 8, 1998 1,215,000 1,213,353 1,213,353 Paccar Financial Corp., 5.85%, January 9, 1998 1,000,000 996,100 996,100 Pitney Bowes Credit Corp., 6.00%, January 13, 1998 750,000 747,375 747,375 Merrill Lynch & Co., Inc. 5.85%, January 15, 1998 1,000,000 994,313 994,313 Bank of Montreal, 5.90%, January 16, 1998 1,000,000 1,000,000 1,000,000 Countrywide Home Loan, Inc., 5.85%, January 22, 1998 1,000,000 993,175 993,175 General Electric Capital Corp., 5.74%, February 9, 1998 1,000,000 990,593 990,593 ------------ ------------ ------------ TOTAL CASH EQUIVALENTS 10,450,000 10,412,402 10,412,402 CASH 2,468,158 2,468,158 2,468,158 ------------ ------------ ------------ TOTAL CASH AND CASH EQUIVALENTS $ 12,918,158 $ 12,880,560 $ 12,880,560 ------------ ------------ ------------ ------------ ------------ ------------
SEE NOTES TO FINANCIAL STATEMENTS ON F-16 F-15 NOTES TO FINANCIAL STATEMENTS OF PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 NOTE 1: ORGANIZATION On April 29, 1988, Prudential Variable Contract Real Property Partnership (the "Partnership"), a general partnership organized under New Jersey law, was formed through an agreement among The Prudential Insurance Company of America ("Prudential"), Pruco Life Insurance Company ("Pruco Life"), and Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey"). The Partnership was established as a means by which assets allocated to the real estate investment option under certain variable life insurance and variable annuity contracts issued by the respective companies could be invested in a commingled pool. The partners in the Partnership are Prudential, Pruco Life and Pruco Life of New Jersey. The Partnership's policy is to invest at least 65% of its assets in direct ownership interests in income-producing real estate and participating mortgage loans. Although it is the Partnership's policy to adhere to the aforementioned percentage, at December 31, 1998, the Partnership's direct investment in real estate, as described above, temporarily fell to 64.7%. On February 1, 1999, a distribution of cash brought the Partnership back into compliance with the 65% policy by increasing the Partnership's direct investment in real estate to 79.2%. (See Note 6: Subsequent Events). The estimated market value of the Partnership's shares is determined daily, consistent with the Partnership Agreement. On each day during which the New York Stock Exchange is open for business, the net asset value of the Partnership is estimated using the estimated market value of its assets, as described in Notes 2A and 2B, reduced by any liabilities of the Partnership. The periodic adjustments to property values described in Notes 2A and 2B and other adjustments to previous estimates are made on a prospective basis. There can be no assurance that all such adjustments to estimates will be made timely. Shares of the Partnership are held by Prudential Variable Contract Real Property Account, Pruco Life Variable Contract Real Property Account and Pruco Life of New Jersey Variable Contract Real Property Account (the "Real Property Accounts") and may be purchased and sold at the then current share value of the Partnership's net assets. Share value is calculated by dividing the estimated market value of net assets of the Partnership as determined above by the number of shares outstanding. A contract owner participates in the Partnership through interests in the Real Property Accounts. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A: REAL ESTATE OWNED AND INTEREST IN PROPERTIES - The Partnership's investments in real estate owned and interests in properties are initially valued at their purchase price. Real estate investments are reported at their estimated market values based upon 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 Appraiser of Prudential Comptroller's Department Valuation Unit (Valuation Unit) is responsible to assure that the valuation process provides independent and accurate market value estimates. In the interest of maintaining and monitoring the independence and accuracy of the appraisal process, the Comptroller of Prudential has appointed a third party firm to act as the Appraisal Management Firm. The Appraisal Management Firm, among other responsibilities, approves the selection and scheduling of external appraisals; engages all external appraisers; reviews and provides comments on all external appraisals; prepares all quarterly update appraisals; assists in developing policies and procedures and assists in the evaluation of the performance and competency of external appraisers. The purpose of an appraisal is to estimate the market value of real estate as of a specific date. Market value has been defined as the most probable price for which the appraised real estate will sell in a competitive market under all conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self interest, and assuming that neither is under undue duress. The estimate of market value generally is a correlation of three approaches, all of which require the exercise of subjective judgment. The three approaches are: (1) current cost of reproducing the real estate less F-16 NOTES TO FINANCIAL STATEMENTS OF PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 deterioration and functional and economic obsolescence; (2) discounting of a series of income streams and reversion at a specified yield or by directly capitalizing a single year income estimate by an appropriate factor; and (3) value indicated by recent sales of comparable properties in the market place. 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. As described above, the estimated market value of real estate and real estate related assets is determined through an appraisal process. These estimated market values may vary significantly from the prices at which the real estate investments would sell since market prices of real estate investments can only be determined by negotiation between a willing buyer and seller. Although the estimated market values represent subjective estimates, management believes these estimated market values are reasonable approximations of market prices and the aggregate value of investments in real estate is fairly presented as of December 31, 1998 and 1997. B: INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS (REITS) - Shares of REITs are generally valued at their quoted market price. These values may be adjusted for discounts resulting from restrictions, if any, on the future sale of these shares, such as lockout periods or limitations on the number of shares which may be sold in a given time period. Any such discounts are determined by the Valuation Unit. The Valuation Unit of Prudential applied a 3% discount to the market value of the REIT shares at December 31, 1998. This discount is being applied because of the restriction which limits the number of shares that can be publicly traded during any six month period to 30% of the total shares originally acquired. C: REVENUE RECOGNITION - Rent from real estate is recognized when billed. Revenue from certain real estate investments is net of all or a portion of related real estate expenses and taxes. Since real estate is stated at estimated market value, net income is not reduced by depreciation and amortization expense. Dividend income is accrued at the ex-dividend date. D: CASH AND CASH EQUIVALENTS - For purposes of the Statement of Cash Flows, all short-term investments with an original maturity of three months or less are considered to be cash equivalents. Cash of $114,745 and $128,089 at December 31, 1998 and 1997, respectively, was maintained by the properties for tenant security deposits and is included in Other Assets on the Statements of Assets and Liabilities. E: MARKETABLE SECURITIES - Marketable securities are highly liquid investments with maturities of more than three months when purchased and are carried at estimated market value. F: 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. G: MANAGEMENT'S USE OF ESTIMATES IN THE FINANCIAL STATEMENTS - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. H: RECLASSIFICATIONS - Certain 1997 amounts in the financial statements have been reclassified to conform with the 1998 presentation. F-17 NOTES TO FINANCIAL STATEMENTS OF PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 NOTE 3: LEASING ACTIVITY The Partnership leases space to tenants under various operating lease agreements. These agreements, without giving effect to renewal options, have expiration dates ranging from 1999 to 2009. At December 31, 1998, the aggregate future minimum base rental payments under non-cancelable operating leases by year are:
Year Ending December 31, (000's) ----------- ------- 1999 $11,037 2000 9,907 2001 9,104 2002 7,576 2003 4,573 Thereafter 10,753 ------- Total $52,950 ------- -------
NOTE 4: COMMITMENT FROM PARTNER Prudential has committed to fund up to $100 million to enable the Partnership to acquire real estate investments. Contributions to the Partnership under this commitment are utilized for property acquisitions, and returned to Prudential on an ongoing basis from contract owners' net contributions and other available cash. The amount of the commitment is reduced by $10 million for every $100 million in current value net assets of the Partnership. As of December 31, 1998, Prudential's equity interest in the Partnership under this commitment was $51 million. At the present time, Prudential does not intend to make further contributions during the 1999 fiscal year. NOTE 5: RELATED PARTY TRANSACTIONS Pursuant to an investment management agreement, Prudential 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 years ended December 31, 1998, 1997 and 1996 management fees incurred by the Partnership were $2.9 million; $2.6 million; and $2.5 million, respectively. The Partnership also reimburses Prudential for certain administrative services rendered by Prudential. The amounts incurred for the years ended December 31, 1998, 1997 and 1996 were $116,128; $115,346; and $116,818, respectively, and are classified as administrative expenses in the Statements of Operations. The Partnership owned a 50% interest in four warehouse/distribution buildings in Jacksonville, FL (the unit warehouses). The remaining 50% interest was owned by Prudential and one of its subsidiaries. In September 1997, the unit warehouses were sold as part of an industrial package for cash of $12.5 million. The Partnership's share of the proceeds was $6.3 million. NOTE 6: SUBSEQUENT EVENTS On February 1, 1999, $30 million was distributed to the Real Property Accounts. F-18 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP SCHEDULE III - REAL ESTATE OWNED: PROPERTIES DECEMBER 31, 1998
INTIAL COSTS TO THE PARTNERSHIP --------------------------------------- COSTS CAPITALIZED BUILDING & SUBSEQUENT TO DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - ---------------------------------------- ------------ ---------- ------------ ------------- Properties: Office Building Lisle, IL None 1,780,000 15,743,881 4,110,826 Garden Apartments Atlanta, GA None 3,631,212 11,168,904 801,379(b) Warehouse Pomono, CA None 3,412,636 19,091,210 1,133,203 Retail Shopping Center Roswell, GA None 9,454,622 21,513,677 1,304,328 Office Building Morristown, NJ None 2,868,660 12,958,451 3,582,379 Office/Warehouse Bolingbrook, IL None 1,373,199 7,302,518 272,311 Garden Apartments Farmington Hills, MI None 1,550,000 11,744,571 347,400 Garden Apartments Raleigh, NC None 1,623,146 14,135,553 63,983 Office Building Nashville, TN None 1,797,000 6,588,451 62,575 Office Park Oakbrook Terrace, IL None 1,313,310 11,316,883 315,173 Office Building Beaverton, OR None 816,415 9,897,307 14,896 Industrial Building Salt Lake City, UT None 582,457 4,805,676 0 Industrial Building Aurora, CO None 1,338,175 7,202,411 0 Office Complex Brentwood, TN None 2,425,000 7,063,755 0 ---------- ------------ ------------ 33,965,832 160,533,248 12,008,454 ---------- ------------ ------------ ---------- ------------ ------------ GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF YEAR ------------------------------------------------------------------------------------ BUILDING & 1998 YEAR OF DATE DESCRIPTION LAND IMPROVEMENTS SALES TOTAL CONSTRUCTION ACQUIRED - ---------------------------------------- ---------- ------------ ------------ --------------- ------------ ---------- Properties: Office Building Lisle, IL 1,780,000 19,854,707 21,634,707 1985 Apr., 1988 Garden Apartments Atlanta, GA 3,631,212 11,970,283 15,601,495 1987 Apr., 1988 Warehouse Pomono, CA 4,545,839 19,248,659 (23,794,498) 0 1987 Apr., 1988 Retail Shopping Center Roswell, GA 9,479,089 22,793,538 32,272,627 1988 Jan., 1989 Office Building Morristown, NJ 2,868,660 16,540,830 19,409,490 1981 Aug., 1988 Office/Warehouse Bolingbrook, IL 1,373,199 7,574,829 8,948,028 1989 Feb., 1990 Garden Apartments Farmington Hills, MI 1,897,400 11,761,183 (13,658,583) 0 1989 Feb., 1990 Garden Apartments Raleigh, NC 1,623,146 14,199,536 15,822,682 1995 Jun., 1995 Office Building Nashville, TN 1,797,327 6,650,699 8,448,026 1982 Oct., 1995 Office Park Oakbrook Terrace, IL 1,313,821 11,631,545 12,945,366 1988 Dec., 1995 Office Building Beaverton, OR 816,415 9,912,203 10,728,618 1995 Dec., 1996 Industrial Building Salt Lake City, UT 582,457 4,805,676 5,388,133 1997 Jul., 1997 Industrial Building Aurora, CO 1,338,175 7,965,996 9,304,171 1997 Sep., 1997 Office Complex Brentwood, TN 2,425,000 7,116,711 9,541,711 1987 Oct., 1997 ---------- ------------ ------------ --------------- 35,471,740 172,026,396 (37,453,081) 170,045,055 ---------- ------------ ------------ --------------- ---------- ------------ ------------ ---------------
1998 1997 1996 ----------- ----------- ----------- (a) Balance at beginning of year 201,670,248 177,082,291 191,981,608 Additions: Acquistions 0 23,417,474 10,713,722 Improvements, etc. 5,827,888 1,170,483 550,050 Deletions: Sale (37,453,081) 0 (26,163,089) ----------- ----------- ----------- Balance at end of year 170,045,055 201,670,248 177,082,291 ----------- ----------- ----------- ----------- ----------- ----------- (b) Net of $1,000,000 settlement received from lawsuit.
F-19 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP SCHEDULE III - REAL ESTATE OWNED: INTEREST IN PROPERTIES DECEMBER 31, 1998
1998 1997 1996 -------- ----------- ----------- Balance at beginning of year $0 $ 6,133,157 $6,133,157 Additions: Acquistions 0 0 0 Improvements, etc. 0 0 0 Deletions: Sale 0 (6,133,157) 0 -------- ----------- ----------- Balance at end of year $0 $ 0 $6,133,157 -------- ----------- ----------- -------- ----------- -----------
F-20 EX-27.1 2 EXHIBIT 27.1 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS OF NET ASSETS; STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000829114 PRUCO LIFE OF NJ VARIABLE CONTRACT REAL PROPERTY ACCOUNT 12-MOS DEC-31-1998 DEC-31-1998 0 0 0 0 0 0 0 0 9,260,250 0 0 0 0 0 0 0 0 611,358 0 38,644 0 0 0 0 0 0 0 0 0 572,714 0 0
EX-27.2 3 EXHIBIT 27.2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS OF ASSETS & LIABILITIES; STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000829114 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP 12-MOS DEC-31-1998 DEC-31-1998 58,578,848 14,950,525 167,275 66,000 0 170,552,624 0 0 244,249,272 4,088,875 0 0 0 0 240,160,397 244,249,272 0 27,163,552 0 11,330,039 0 0 0 0 0 0 0 0 0 15,833,513 0 0
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