-----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, L7dGwQ4lOKcD8qiruZTQimhk67+evQCgdSPppMMi8VS1BVekGMb33K9gAETYKioE vs5Vf6Hn3l5nW6nWFKDGOg== 0000912057-97-011209.txt : 19970401 0000912057-97-011209.hdr.sgml : 19970401 ACCESSION NUMBER: 0000912057-97-011209 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 033-20018 FILM NUMBER: 97569611 BUSINESS ADDRESS: STREET 1: 213 WASHINGTON STREET STREET 2: 111 DURHAM AVENUE CITY: NEWARK STATE: NJ ZIP: 07102-2992 BUSINESS PHONE: 8004454571 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, 1996 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) (201) 802-6000 ---------------------------------------------------- (Registrant's Telephone Number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- 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 5 4. Submission of Matters to a Vote of Security Holders 5 PART II 5. Market for the Registrant's Interests and Related Security Holder Matters 6 6. Selected Financial Data 6 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 8. Financial Statements and Supplementary Data 15 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 15 PART III 10. Directors and Executive Officers of Pruco Life of New Jersey 16 11. Executive Compensation 17 12. Security Ownership of Certain Beneficial Owners and Management 17 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 of New Jersey, to provide a means for assets allocated to the real property 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 will be direct ownership interests in income-producing real estate, such as office buildings, agricultural land, shopping centers, hotels, apartments, or industrial properties. From 10% to 15% of the Partnership's assets generally will be invested in short-term or intermediate-term marketable debt instruments. The remainder of the Partnership's assets may be invested in other types of real estate-related investments, including conventional, non-participating mortgage loans. The Partnership's investments will be 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. For information regarding the Partnership's investments, operations, and other significant events, see Item 2, Properties, 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 The Partnership owns the following properties as of December 31, 1996. OFFICE FACILITY IN LISLE, ILLINOIS The property is a four-story office building on 5.6 acres of land. It was constructed in 1985 and contains approximately 102,000 square feet of leasable space. R.R. Donnelley & Sons Company currently leases the entire building under a renewable lease expiring in 1997. The facility is located at 750 Warrenville Road in the Corporetum Office Park in Lisle, Illinois. Corporetum Office Park is a 75 acre planned office development located 25 miles west of downtown Chicago. APARTMENT COMPLEX IN ATLANTA, GEORGIA Brookwood Valley Apartments is a garden apartment complex located approximately 3 miles north of downtown Atlanta. It consists of eight three-story buildings containing a total of 240 units. Construction of the 7.1 acre site was completed in 1987. At December 31, 1996 the property was 93% leased. WAREHOUSE FACILITY IN POMONA, CALIFORNIA The Partnership owns a leasehold estate in six industrial buildings on approximately 28 acres in Pomona, California. The site is approximately 30 miles east of downtown Los Angeles. The buildings were constructed between 1982 and 1984 and contain approximately 531,000 square feet of leasable space. The property was 100% leased at December 31, 1996. Land under the leasehold estate was capitalized upon the assignment of a ground lease from the previous owner. The lease term extends until November 2078 with no renewal options. The annual ground lease payments are $250,000 through November 1994, and, for each ten year increment thereafter, are subject to increase by 50% of the increase in the Consumer Price Index during the previous period. For 1995, the annual ground lease payment increased by $126,450 to $376,450. The ground lease agreement contains a purchase option from November 1994 to November 1997 at a fixed price of $4,000,000, which management intends to exercise. SHOPPING CENTER IN ROSWELL, GEORGIA King's Market shopping center was constructed in 1988. It is located approximately 22 miles north of downtown Atlanta on a 30 acre site. It contains approximately 300,000 square feet of rentable space. At December 31, 1996 it was 96% leased. OFFICE FACILITY IN MORRISTOWN, NEW JERSEY This four-story suburban office building was constructed in 1981 and contains 83,000 rentable square feet. It is located on a 5.1 acre site, approximately 30 miles west of New York City. At December 31, 1996 it was 93% leased. WAREHOUSE FACILITY IN BOLINGBROOK, ILLINOIS This single-story warehouse was completed in 1989. It contains 224,640 rentable square feet. It is located approximately 20 miles southwest of downtown Chicago. The entire facility is leased to the Gillette Company under a lease expiring in October, 2000. APARTMENT COMPLEX IN FARMINGTON HILLS, MICHIGAN Indian Creek Apartments consists of fifteen two-story buildings containing 156 two-bedroom and 40 one- bedroom units. It was constructed in 1988 and is located approximately 20 miles northwest of Detroit. At December 31, 1996, the property was 88% leased. 4 WAREHOUSE FACILITIES IN JACKSONVILLE, FLORIDA The Partnership owns a 50% interest in four single-story warehouse/distribution buildings located in Jacksonville, Fl. The remaining 50% is owned by The Prudential and one of its subsidiaries. The buildings contain approximately 502,000 rentable square feet and were 85% leased at December 31, 1996 APARTMENT COMPLEX IN RALEIGH, N.C Dunhill Trace consists of fourteen two and three story apartment buildings. It was constructed and acquired in June, 1995 and located on a 16.2 acre site in Northwest Raleigh, N.C. At December 31, 1996 the property was 97% leased. OFFICE FACILITY IN NASHVILLE, TN Westpark is a 97,000 square foot office center located in suburban Nashville, Tennessee. The property was constructed in 1982, at December 31, 1996 the building was 99% leased. OFFICE FACILITY IN OAKBROOK TERRACE, ILLINOIS Oakbrook Terrace Corporate Center is a 123,000 square foot building located in a western suburb of Chicago, Illinois. At December 31, 1996 the property is 99% leased. OFFICE FACILITY IN BEAVERTON, OREGON This three story office building was completed in 1995. It contains approximately 72,000 square feet of rentable space. The building is located on a 3.89 acre land parcel in Beaverton, Oregon. At December 31, 1996 the building was 100% leased. 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. 5 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 14, 1997, there were approximately 4,181 Contract owners of record investing in the Real Property Account. ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31, --------------------------------------------------------- 1996 1995 1994 1993 1992 --------- --------- --------- --------- ---------- RESULTS OF OPERATIONS: Net Investment Income $ 574,648 $ 538,224 $ 438,732 $ 404,853 $ 374,839 Net Gain/(Loss) on Investment in Partnership $(190,276) $ 27,210 $ 57,089 $ (77,985) $ (559,697) --------- --------- --------- --------- ---------- Net Increase/(Decrease) in Net Assets Resulting From Operations $ 384,372 $ 565,434 $ 495,821 $ 326,868 $ (184,858) --------- --------- --------- --------- ---------- --------- --------- --------- --------- ---------- Financial Position: YEAR ENDED DECEMBER 31, --------------------------------------------------------- 1996 1995 1994 1993 1992 ----------- ----------- ----------- ----------- ----------- Total Assets $ 7,878,541 $ 7,455,048 $ 6,851,923 $ 6,320,579 $ 5,957,741
6 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 "Real Property 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 those of 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. (A) LIQUIDITY AND CAPITAL RESOURCES At December 31, 1996, the Partnership's liquid assets consisted of cash and cash equivalents and marketable securities totaling $45,164,848. This is an increase of $20,409,428 from liquid assets at December 31, 1995 of $24,755,420. The increase is due primarily to (1) $5,509,976 in cash received from the sale of Oak Creek Office Park in Flint, Michigan, (2) $14,697,789 in cash received from the sale of the Azusa, California warehouse, (3) operations of the Partnership's properties, and (4) interest income received from short-term investments. This was partially offset by (1) the purchase of an office building in Beaverton, Oregon for $10,713,722, and (2) withdrawals by the partners of $3 million. Sources of liquidity include net cash flow from property operations and interest from short-term investments. 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. The amount of the commitment is reduced by $10 million for every $100 million in current value net assets of the Partnership. The amount available for future investments is approximately $50.2 million as of December 31, 1996. The Partnership will ordinarily invest 10-15% of its assets in cash and short- term obligations to maintain liquidity; however, its investment policy allows up to 30% investment in cash and short-term obligations. At December 31, 1996, 22.1% of the Partnership's assets consisted of cash and cash equivalents and marketable securities. This is in excess of the target range because proceeds from the sales, noted earlier are being retained in the Partnership in anticipation of potential acquisitions. Two industrial projects are scheduled to close in mid 1997, one in Aurora, CO for an estimated purchase price of $10.4 million, and the other in Salt Lake City, UT for an estimated price of $7 million. Also during 1997, the Partnership expects to exercise an option to acquire the land under the Pomona, CA warehouse, already owned by the Partnership, for a cost of $4 million. During 1996, the partners withdrew $3.0 million. Withdrawals may be made during 1997 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 and dispositions and capital expenditures. At December 31, 1996, and currently, the Partnership has adequate liquidity. Management anticipates that ongoing cashflow from operations will satisfy the Partnership's needs over the next twelve months and the foreseeable future. The Partnership acquired an office building in Beaverton, Oregon on December 20, 1996 for $10,713,721. The acquisition was funded entirely by cash held by the Partnership. During 1996 the Partnership made $550,056 in capital expenditures for tenant alterations, leasing commissions, and land and building improvements. The most significant of these expenses was approximately $244,000 for tenant alterations and leasing commissions at the industrial property in Pomona, CA, of which approximately $166,000 related to a renewal for the Treasure Chest, 7 approximately $46,000 related to a lease signed by Prestige Auto, a new tenant and approximately $30,000 related to a renewal for SCI. Other significant capital expenditures included approximately $122,000 in tenant alterations and leasing commissions, of which approximately $100,000 related to the lease signed by Spectrum Financial at the Morristown, NJ office building, garage repairs of approximately $81,000 at the Oakbrook Terrace office facility in Oakbrook Terrace, IL, and tenant improvements and leasing commissions of approximately $65,000, of which approximately $36,000 related to Shepherd's Staff Christian Book Store, a new tenant at the Roswell, GA retail center. Other major capital expenditures in 1996 included approximately $29,000 for access gates at the Atlanta, GA apartments. At the Farmington Hills apartments, approximately $25,000 was spent for repairs to brick facade, landscaping and replacement of fitness equipment. Projected capital expenditures for 1997 total approximately $5,291,000. Of this, approximately $4,581,000 consists of leasing commission and tenant alterations. The largest of these is $3,108,000 planned for the Lisle, IL office center. The property expects to pay approximately $2,298,000 in tenant improvements and $810,000 in leasing commissions to acquire a new tenant, as R.R. Donnelley will be leaving at the expiration of their lease in September. At the Morristown Office Center, approximately $914,000 has been budgeted in tenant improvements and leasing commissions, of which approximately $878,000 relates to efforts to renew the Smith Barney lease prior to the October, 1997 expiration. Tenant improvements and leasing commissions have been budgeted for approximately $254,000 at the Roswell, GA retail center, approximately $186,000 at the Nashville office center and approximately $119,000 at the Pomona warehouse. All of these projected expenditures relate to prospective leases and are based on reasonable cost. The actual amount of such expenditures will depend on the number of new leases signed, the actual needs of the particular construction or repair, and the timing of lease executions. Other major capital projects planned for 1997 include, at the Lisle office building $200,000 for upgrading of the heating and air conditioning system and $35,000 for repairs to the roof; at the Roswell retail center, $140,000 for a new traffic layout to ease traffic in and around the center; at the Atlanta apartments $132,000 for exterior wood replacement and building painting; at the Raleigh apartments $37,000 for regrading the land; at the Oakbrook Terrace office building $15,000 for pressure washing of the exterior. Approximately $151,000 is budgeted for smaller projects among the various properties. (B) RESULTS OF OPERATIONS The following is a brief discussion of a comparison of the results of operations for the three years ended December 31, 1996, 1995 and 1994. 1996 VS 1995 The Partnership's net investment income for 1996 was $15,419,518, an increase of $699,247 (4.8%) from net investment income for 1995 of $14,720,271. The increase was primarily the result of higher net income from property operations ($1,455,941) offset primarily by a higher management fee ($152,351) and lower interest income from short-term investments ($526,479). Income from property operations, including income from interest in properties, was $16,061,409 for 1996. This is an increase of $980,119 (6.5%) from $15,081,290 for 1995. This was due primarily to increased rent from properties (approximately $2,973,000). The increase was offset by increased operating expense (approximately $1,034,000) and real estate taxes (approximately $429,000). 8 Rent from properties for 1996 increased by $2,972,650 (15.0%) to $22,799,694 from $19,827,044 for 1995. A large portion of this was the result of properties that were acquired during 1995 and held for the full year of 1996. This increase in revenue totaled approximately $4,367,000. These additional revenues were primarily offset by the sale of the Azusa industrial building which resulted in approximately $1,092,000 reduction in revenues from last year and the Roswell, GA shopping center which accounted for a decrease of approximately $214,000 due to lower percentage rents in 1996 and decreased occupancy. Income from interest in properties relates to the Partnership's 50% co- investment in several warehouses (the Unit warehouses). Income from this source decreased approximately $31,624 (4.9%) from $638,183 for 1995 to $606,558. The reduction is the result of GATX vacating a portion of its space in October and the space not being leased. Administrative expenses on the statement of operations includes both those related to property operations and the administration of the Partnership. Property administrative expenses for 1996 were $1,653,934. This is $78,271 (5.0%) higher than the $1,575,663 for 1995. The increase was primarily the result of full year administrative expenses of approximately $234,000 at the Nashville, TN office building, Oakbrook Terrace, IL office facility and the Raleigh, NC apartment complex, partially offset by decreases due to the partial year of two 1996 sold properties totaling approximately $130,000. Property operating expenses for 1996 were $2,904,620 compared to $1,870,183 for 1995, an increase of $1,034,437 (55%). The increase was primarily due to a full year of operating expenses totaling approximately $943,000 related to the Raleigh, Oakbrook Terrace and Nashville properties, all which were acquired in 1995. Increases were also due to the Morristown office property incurring window repairs of approximately $21,000 and an increase to its grounds contract for approximately $59,000 offset by lower repairs and maintenance expenses totaling $23,000. The Atlanta and the Farmington Hills apartments had increases totaling approximately $57,000 for 1996 apartment make-ready due to higher turnover as compared to 1995. Real estate taxes for 1996 were $2,367,404, an increase of $429,314 (22.2%) from $1,938,090 for 1995. The increase was primarily due to a full year of real estate tax expense totaling approximately $572,000 related to the Raleigh, Oakbrook Terrace and Nashville properties. At the Morristown office building, real estate taxes increased by approximately $32,000. These increases were offset by decreases of approximately $106,000, the result of the Azusa and Flint properties being sold in 1996. Real estate taxes at the Farmington Hills apartments reduced by approximately $26,000 due to last year's tax appeal. Administrative expenses related to the Partnership totaled $211,499 for 1996. This is an increase of $7,930 (3.6%) from $219,429 for 1995. The investment management fee for 1996 was $2,494,229. This is $152,351 (6.5%) higher than the fee for 1995 of $2,341,878. The fee is computed as 1.25% of gross assets. During 1995, gross assets were slightly higher than the prior year due to cash flow retained by the Partnership and increased market values of the real estate investments. 9 MARKET VALUES OF INVESTED ASSETS AND PROPERTY LEASING ACTIVITY: 1996 VS 1995 During 1996, the Partnership recognized an unrealized loss of $3,211,436 on its real estate investments. This represents 1.9% of the value of the investments at December 31, 1995. The retail center experienced the largest unrealized loss, approximately $3,787,000. The offices experienced a net unrealized loss of approximately $560,000. The industrial properties experienced a net unrealized loss of approximately $75,000 offset by the apartments experiencing net unrealized gains of approximately $1,210,000. Occupancy at the Partnership's properties at December 31, 1996 were generally lower than at December 31,1995. During 1996, the Partnership acquired a 72,109 square feet office building in Beaverton, Oregon. At December 31, 1996 the Beaverton office building was 100% occupied to five tenants and there are no expirations in 1997. The Partnership's Atlanta apartment complex experienced an unrealized gain of approximately $1,083,000 (8.6% of its year-end 1995 value) and the Farmington Hills apartment complex experienced an unrealized gain of approximately $477,000 (3.4% of its year-end 1995 value). These increases were primarily the result of higher rental rates and occupancy than were previously projected for these properties. The luxury garden apartment complex in Raleigh experienced an unrealized loss of approximately $350,000 (2.0% of its year-end 1995 value). The property had experienced lowered loss of occupancy but has currently recovered to a December 31, 1996 occupancy of 97%. Occupancy at the Atlanta and the Farmington Hills apartments decreased from 97% and 98% at December 31, 1995 to 93% and 88%, respectively. Occupancy at the Raleigh apartments increased from 95% at December 31, 1995 to 97% at the end of 1996. All vacant apartments are being marketed as of December 31, 1996. The Bolingbrook warehouse experienced the largest unrealized loss of this property type, approximately $300,000 (4.1% of its year-end 1995 value). Gillette, a tenant of the entire property, has indicated they need additional space and will relocate at the expiration of their lease in 2000. The Pomona property experienced an unrealized gain of approximately $175,000 (1.0% of its year-end 1995 value), this was the result of signing leases that maintained the property occupancy at 100%. The market values of the four Unit warehouses in which the Partnership owns a 50% interest at the end of 1996 experienced an unrealized gain of approximately $50,000 (.9% of their December 31, 1995 value). Occupancy at the Pomona warehouse remained at 100%. During 1996, a total of 234,292 square feet expired and was leased at the property. The most significant renewal included SCI signing an amendment to their lease to extend the term for five years. During 1997, JB Engineering's 49,697 square feet lease is expiring. Occupancy at the Bolingbrook warehouse also remained at 100%. Gillette's lease of this entire facility will expire in the year 2000, at which time they will relocate. At the Unit warehouses, occupancy decreased from 100% at 1995 to 85% at 1996. GATX vacated its space in October and the space has not been leased. All vacant space is being marketed as of December 31,1996. The Lisle office, experienced an unrealized loss of approximately $1,700,000 (14.7% of its year-end 1995 value). This was caused by R.R. Donnelley (sole- tenant) not renewing its lease, which expires September 1997, and the anticipated expenses that will be incurred in order to release the building in 1997. The Morristown property experienced an unrealized gain of approximately $409,000 (4.3% of its December 31, 1995 value), due to improved market conditions in the Northern, NJ market. The Nashville office experienced an unrealized gain of approximately $166,000. The increase represented 1.9% of its year-end 1995 value. The rise in value reflects the expectations of continued high 10 occupancy and the potential for higher rental rates in the future. The Oakbrook Terrace office building experienced an increase of $565,000 (4.5% of its December 31, 1995 value). This was the result of two tenant rent increases that occurred in 1996. Occupancy at the Lisle office building remained at 100% during 1996. R.R. Donnelley has given notice they will be vacating their space in 1997. The Oakbrook Terrace office building continued its 99% occupancy. The Nashville office building occupancy remained at 99%. During 1996, a total of 25,394 square feet was re-leased, leaving a vacant space of 1,350 square feet. During 1997, at the Nashville office building, 11,966 square feet will expire. Occupancy at the Morristown office decreased from 98% to 93% as of December 31, 1996. There are four vacant suites totaling 9,583 square feet. During 1996, Mutual of Omaha renewed their lease of 5,479 square feet and Sprint Spectrum signed a two month temporary agreement for 4,010 square feet, while Chase Home Mortgage vacated their suite of 4,010 square feet. During 1997, at the Morristown office building, a total of 15,753 square feet will be up for renewal. All vacant space is currently being marketed. The Partnership's sole retail property in Roswell, GA, experienced an unrealized loss of $3,786,554 (11.8% of its December 31, 1995 value). This was due to increased competition in the local market resulting in downward pressure on rental rates and occupancy. Occupancy at the Roswell center decreased from 99% at December 31, 1995 to 96% at December 31, 1996, a loss of 3%. During 1996 a total of 10,464 square feet expired and 4,127 square feet was renewed. Shepherd's Staff Christian Book Store leased 6,100 square feet. Two tenants leasing a total of 6,100 square feet have vacated prior to their lease expiration. At December 31, 1996 a total of 10,464 square feet remained vacant. Several lease proposals are in negotiation, while all other vacant space is currently being marketed. During 1996, the Partnership sold its Azusa, CA industrial property and its Flint, MI office building. The sale of these two properties resulted in a realized loss of $1,573,147. The Flint, MI property experienced the largest loss of $1,094,521 (16.7% of its year-end 1995 value). This was the result of both the uncertain economic outlook and leasing demand for Flint, MI, as well as the physical condition of the property. The Azusa property experienced a realized loss of $478,627 (3.2% of its year-end 1995 value). The gross sales price of the property was $15,250,000 and the net proceeds were $14,697,789. 1995 VS 1994 Income from property operations, including income from interest in properties, was $15,081,290 for 1995. This is an increase of $1,058,039 (7.5%) from $14,023,251 for 1994. This was due primarily to increased rent from properties (approximately $3,482,785). The increase was offset by lower income from interest in properties due to the sale for the seven Unit warehouses in October, 1994 (approximately $1,717,000), higher real estate taxes (approximately $145,000), property administrative expenses (approximately $399,000). and property operating expenses (approximately $163,000). Rent from properties for 1995 increased by $3,482,785 (21.3%) to $19,827,044 from $16,344,259 for 1994. A large portion of this was the result of properties that were acquired during 1995. This revenue totaled approximately $1,466,000. Revenue at the apartments in Raleigh were $1,111,744, the office building in Nashville,$331,165 and the office building in Oakbrook Terrace $23,587. Rental income at the Flint office park increased by approximately $662,600 in 1995. This was primarily due to the acquisition of this property through foreclosure in July, 1994. As a result, only six months of operating results are included in 1994 as compared to a full year in 1995. Increased occupancy in 1995 resulted in an additional $906,000 in rental revenue for the Azusa and Morristown buildings as well as the Partnership's two other apartment properties. Rental income at the Bolingbrook 11 warehouse increased about $82,000 in 1995 as a result of the expiration of a free rent period granted to the tenant in the first quarter of 1994. Revenue at the Pomona warehouse was almost $221,000 higher due to increased occupancy and higher expense recoveries. These additional revenues were partially offset by lower rental income from the Roswell, GA shopping center (approximately $15,000) due to lower percentage rent in 1995, offset by higher rental income and expense recoveries. Income from interest in properties relates to the Partnership's 50% co- investment in several warehouses (the Unit warehouses). Income from this source decreased $1,717,021 (72.9%) from $2,355,204 for 1994 to $638,183 for 1995. The Partnership sold its investments in seven of these warehouses in 1994. This resulted in a reduction of income of approximately $1,800,000 in 1995. Of the four remaining warehouses income increased by approximately $83,000 due to higher occupancy at one of the warehouses. Administrative expenses on the statement of operations includes both those related to property operations and the administration of the Partnership. Property administrative expenses for 1995 were $1,575,663. This is $399,265 (33.9%) higher than the $1,176,398 for 1994. Most of the increase was the result of the inclusion of the Flint, Raleigh and Nashville properties, (almost $270,000), higher insurance premiums ($72,000) primarily at the two California properties and in increase in bad debt expense ($63,000). The increase in bad debt expense arose from the 1994 application of a security deposit to amounts owed by that tenant which reduced 1994 bad debt expense by approximately $33,000. Professional fees also increased approximately $45,000 in 1995 due to the utilization of real estate tax consultants to assist with the appeal of assessed values at several of the properties. The appeal generated significant tax savings as noted below. Advertising and promotional expenses were lower at several of the properties which offset the increased administrative expenses by about $40,000. Property operating expenses for 1995 were $1,870,183 compared to $1,707,039 for 1994, an increase of $163,144 (9.6%). The increase was primarily due to the inclusion of approximately $217,336 in operating expenses related to the Raleigh and Nashville properties. The Flint property had an increase of $73,600 for 1995 compared to the last six months of 1994. In addition there were higher repairs and maintenance at the Farmington Hills apartments of approximately $18,500. These increases were reduced by lower expenses at the Azusa warehouse related to the painting of building exteriors in 1994 ($88,500), at Pomona, ($24,500) due to lower repairs and maintenance, and lower repairs and maintenance, security and utilities at Roswell ($35,000). Real estate taxes for 1995 were $1,938,090, an increase of $145,315 (8.1%) from $1,792,775 for 1994. Approximately $244,000 of this increase was due to the inclusion of the Flint office buildings, the Raleigh apartments and the Nashville office center. This includes $101,000 of 1994 taxes at the Flint property. At the Roswell shopping center, real estate taxes increased by $31,500. Approximately $153,000 of the decreases were achieved as the result of appealing the assessed values at the Azusa, Pomona, Morristown and Farmington Hills properties. Real estate taxes at the net lease properties in Bolingbrook and Lisle also increased nearly $22,000. There was no interest income from mortgage loans in 1995. This was due to the maturing of the Lincoln, NE loan in May 1994 and the default of the mortgagor on the Flint loan. Interest income from short-term investments increased $1,089,471 (69.3%) from $1,571,394 for 1994 to $2,660,865 for 1995. This was the result of increased amounts invested and higher interest rates in 1995. The Partnership had retained increased cash balances in anticipation of acquiring properties in 1995. Administrative expenses related to the Partnership totaled $219,429 for 1995. This is a reduction of $17,895 (7.5%) from $237,324 for 1994. The decrease resulted primarily from lower professional fees for 1995. 12 The investment management fee for 1995 was $2,341,878. This is $54,062 (2.4%) higher than the fee for 1994 of $2,287,816. The fee is computed as 1.25% of gross assets. During 1995, gross assets were slightly higher than the prior year due to cash flow retained by the Partnership and increased market values of the real estate investments. MARKET VALUES OF INVESTED ASSETS: 1995 VS 1994 During 1995, the Partnership recognized an unrealized gain of $661,623 on its real estate investments. This represents 0.5% of the investments' December 31, 1994 value. The apartments experienced the largest increase, approximately $2,700,000. The warehouses increased by about $421,000. The office building properties experienced an unrealized loss of approximately $1,933,000 and the retail property, an unrealized loss of about $528,000. The Partnership's luxury garden apartments in Raleigh had an unrealized gain of nearly $1,441,300. The property has benefited from very strong leasing demand (occupancy at December 31, 1995 was 95%) and is performing at a higher level than anticipated. The Farmington Hills apartments experienced an unrealized gain of $626,143 (4.6% of its year-end 1994 value) and Atlanta $634,165 (5.3% of its year-end 1994 value). These increases were primarily the result of higher rental rates, occupancy and tenant retention than previously projected for these properties. The warehouses experienced an unrealized gain of about $421,000 during 1995. The Pomona property had the largest unrealized gain, $684,153 (4.2% of its year- end 1994 value). This was the result of two leases that were signed which brought the occupancy to 100%. The market values of the four Unit warehouses in which the Partnership owns a 50% interest at the end of 1995 increased $49,134 (.9% of their December 31, 1994 value). The warehouse in Bolingbrook experienced an unrealized gain of $357,563 (5.1% of the property's December 31, 1994 value). This was due to lower estimates of operating expenditures and a scheduled step-up in the rental rate. The increases in the market values of these warehouses were partially offset by a decrease of $669,928 (4.3% of the property's December 31, 1994 value) in the market value of the Azusa warehouse. The decrease in market value was partially attributable to less optimistic assumptions of expense growth, future rental rates and leasing activity as current leases expire, based on the property's competitive position in the local market. The office buildings experienced an unrealized loss approximately $1,933,000. The Flint, property value decreased $1,314,060 (17.1% of its December 31, 1994 value). This was caused by reduced expectations of future rental rate increases and tenant renewals due to increased competition from new construction in the Flint market. The Lisle office building decreased in value by $400,000 (3.3% of the property's December 31, 1994 value) and the Morristown property also decreased in value by $473,993 (4.8% of its December 31, 1994 value). The Lisle property's decrease in value reflects the possibility that the current tenant, R.R. Donnelley, may not remain in the building when their current lease expires in 1997. This would result in downtime while a new tenant was found and necessitate incurring additional tenant improvements and leasing commissions. It is also likely that the rental rate on any new lease would be lower than that currently paid by Donnelley. The decline in the value of the Morristown property was the result of increases in the discount rates, reflecting the soft market conditions in the local areas and the expectations potential buyers are requiring higher returns on such investments. The decreases in value at the office buildings were partially offset by an increase of $254,871 at the Nashville building. The increase represented 3% of its acquisition cost. The rise in value reflects the expectations of continued high occupancy and the potential for higher rental rates in the future. 13 The Partnership's sole retail property, King's Market Shopping Center in Roswell, GA, experienced an unrealized loss of $527,726 (1.6% of its December 31, 1994 value). This was due to increased competition in the local market due to the construction of a competing shopping center which is expected to exert downward pressure on rental rates. 14 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Index to Financial Statements and Financial Statement Schedules on pages F-1 and F-2. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Registrant engaged Price Waterhouse LLP as its new independent accountants as of May 14, 1996. During the two most recent fiscal years and through May 14, 1996, the Registrant has not consulted with Price Waterhouse LLP on items which 1)were or should have been subject to SAS 50 or 2) concerned the subject matter of a disagreement or reportable event with the former auditor (as described in Regulation S-K Item 304(a)(2)). The Board of Directors of The Prudential Insurance Company of America approved the recommendation by its auditing committee to engage Price Waterhouse LLP as independent accountants. The auditing committee of The Prudential Insurance Company of America supervises the audit activities in respect of affiliates, including the Registrant. 15 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PRUCO LIFE OF NEW JERSEY NAME POSITION AGE - ---- -------- --- William F. Yelverton Chairman of the Board and Director 55 I. Edward Price Vice Chairman of the Board and Director 54 Esther H. Milnes President and Director 46 James Drozanowski Senior Vice President 54 Frank Marino Senior Vice President 51 Hwei-Chung Shao Senior Vice President and Chief Actuary 42 Mario A. Mosse Senior Vice President 44 Karen Shapiro Senior Vice President 40 Linda S. Dougherty Vice President, Comptroller and Chief Accounting Officer 47 William Bethke Director 49 Mendel Melzer Director 36 Ira J. Kleinman Director 49 - -------------------------------------------------------------------------------- William F. Yelverton, age 55, has been Chief Executive Officer of Prudential Individual Insurance Group since 1995. Prior to 1995, he was Chief Executive Officer of New York Life Worldwide. I. Edward Price, age 54, has been Senior Vice President and Actuary of Prudential Individual Insurance Group 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 46, 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 Drozanowski, age 54, has been Vice President of Prudential since 1996. From 1981 to 1996 he held various positions with Chase Manhattan Bank. Frank Marino, age 51, has been Vice President of the Policyholder Relations Department of Prudential Individual Insurance Group since 1996. Prior to 1996, he was Senior Vice President of Prudential Mutual Fund Services. 16 Hwei-Chung Shao, age 42 , has been Vice President and Assistant Actuary of Prudential and Executive Vice President and Chief Financial Officer of Prudential of Taiwan since 1989. Mario A. Mosse, age 44, has been Vice President of Prudential since 1996. From 1977 to 1996 he was Vice President of Chase Manhattan Bank. Karen Shapiro, age 40, has been Vice President, Compliance of Prudential since 1996. From 1993 to 1996 she was First Vice President and Associate General Counsel of Prudential Securities, Inc. Linda S. Dougherty, age 47, has been Vice President, Accounting for Prudential since 1988. From 1986 to 1988 she was Vice President and Controller of Empire Blue Cross and Blue Shield. William Bethke, age 49, has been Senior Vice President of Prudential since 1986. Mendel Melzer, age 36, has been Chief Investment Officer of Prudential Mutual Funds since 1996. From 1995 to 1996, he was Chief Financial Officer for 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 of Prudential Investment Corporation. Ira J. Kleinman, age 49, 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. 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. 17 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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, 1996, 1995 and 1994 management fees incurred by the Partnership were $2,494,229, $2,341,878 and $2,287,816, respectively. The Partnership also reimburses Prudential for certain administrative services rendered by Prudential. The amounts incurred for the years ended December 31, 1996, 1995 and 1994 were $116,818; $219,429; and $95,015, respectively, and are classified as administrative expenses in the statements of operations. The Partnership owns a 50% interest in four warehouse/distribution buildings in Jacksonville, Florida (the Unit warehouses). The remaining 50% interest is owned by Prudential and one of its subsidiaries. At December 31, 1996, these properties had total assets of $17,668,652 and liabilities of $60,987. For the year ended December 31, 1996, the Unit warehouses had revenues of $1,516,876 and expenses of $303,754. The Partnership has contracted with PREMISYS Real Estate Services, Inc. (PREMISYS), an affiliate of Prudential, to provide property management services at the Unit warehouses, and through 1994 at the Bolingbrook, IL warehouse. The property management fee earned by PREMISYS, incurred by the Parnership and Prudential for the years ended December 31, 1996, 1995 and 1994 was $36,000; $31,360 and; $92,382, respectively. On January 9, 1990, Prudential committed to fund up to $100 million to enable the Partnership to take advantage of opportunities to acquire attractive real property investments whose cost is greater than the Partnership's then available cash. 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. Also, the amount of the commitment is reduced by $10 million for every $100 million in estimated market value net assets of the Partnership. The amount available under this commitment for property purchases as of December 31, 1996 is approximately $50.2 million. 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 on pages F-1 and F-2. 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: III. Real Estate Owned: Properties III. Real Estate Owned: Interest in Properties See the Index to Financial Statement Schedules on pages F-1 and F-2. 3. Documents Incorporated by Reference See the following list of exhibits. 4. Exhibits See the following list of exhibits. (b) Reports on Form 8-K. See Form 8-K as filed May 17, 1996. (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, 1996. 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. 19 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 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: Incorporated by reference to Form N-4, Registration No. 333-18117 filed 12/18/96, on behalf of Pruco Life Insurance Company of New Jersey Flexible Premium Variable Annuity Account. 27. Not applicable. 28. None. 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 25, 1997 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 25, 1997 William F. Yelverton and Director * Vice Chairman of the Board March 25, 1997 ---------------------------- and Director I. Edward Price /s/ Esther H. Milnes ---------------------------- President and Director March 25, 1997 Esther H. Milnes /s/ Linda S. Dougherty ---------------------------- Vice President, Comptroller March 25, 1997 Linda S. Dougherty and Chief Accounting Officer * ---------------------------- Director March 25, 1997 William Bethke * ---------------------------- Director March 25, 1997 Mendel Melzer * ---------------------------- Director March 25, 1997 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 Reports of Independent Accountants F-3 Financial Statements: Statement of Net Assets - December 31, 1996 and 1995 F-5 Statement of Operations and Changes in Net Assets - Years Ended December 31, 1996, 1995 and 1994 F-5 Notes to Financial Statements F-6 B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP Reports of Independent Accountants F-9 1. Financial Statements: Statements of Assets and Liabilities - December 31, 1996 and 1995 F-11 Statements of Operations - Years Ended December 31, 1996, 1995 and 1994 F-12 Statements of Changes in Net Assets - Years Ended December 31, 1996, 1995 and 1994 F-13 Statements of Cash Flows - Years Ended December 31, 1996, 1995 and 1994 F-14 Schedule of Investments - December 31, 1996 and 1995 F-15 Notes to Financial Statements F-18 F-1 PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT (Registrant) INDEX PAGE ---- B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP (continued) 2. Financial Statement Schedules: Real Estate Owned: Properties F-23 Real Estate Owned: Interest in Properties F-24 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-2 REPORT OF INDEPENDENT ACCOUNTANTS To the Contract Owners of 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 statement of net assets and the related statement 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 (the "Account") at December 31, 1996, and the results of its operations and the changes in its net assets for the year then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Account's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit, which included confirmation of shares owned in The Prudential Variable Contract Real Property Partnership at December 31, 1996 by correspondence with the transfer agent, provides a reasonable basis for the opinion expressed above. Price Waterhouse LLP New York, New York March 25, 1997 F-3 INDEPENDENT AUDITORS' REPORT To the Partners of Pruco Life of New Jersey Variable Contract Real Property Account Newark, New Jersey We have audited the accompanying statement of assets of Pruco Life of New Jersey Variable Contract Real Property Account ("Real Property Account") as of December 31, 1995, and the related statements of operations and changes in net assets for each of the two years in the period ended December 31, 1995. These financial statements are the responsibility of the Real Property Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Pruco Life of New Jersey Variable Contract Real Property Account as of December 31, 1995, and the results of its operations and changes in net assets for each of the two years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Investments in shares of The Prudential Variable Contract Real Property Partnership are stated at current value at December 31, 1995, as discussed in Note 1 to the financial statements. Determination of current value involves subjective judgment because the actual market value of real estate can be determined only by negotiation between the parties in a sales transaction. Deloitte & Touche LLP Parsippany, New Jersey March 1, 1996 F-4 FINANCIAL STATEMENTS OF PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT STATEMENT OF NET ASSETS
DECEMBER 31, --------------------------- 1996 1995 ------------ ------------ Investment in shares of The Prudential Variable Contract Real Property Partnership (Note 3) $ 7,878,541 $ 7,455,048 ------------ ------------ ------------ ------------ NET ASSETS, representing: Equity of Contract Owners $ 6,505,842 $ 6,563,711 Equity of Pruco Life Insurance Company of New Jersey 1,372,699 891,337 ------------ ------------ $ 7,878,541 $ 7,455,048 ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, ------------------------------------------ 1996 1995 1994 ---------- ---------- ----------- INVESTMENT INCOME: Net Investment Income from Partnership Operations $ 613,768 $ 575,915 $ 474,255 EXPENSES: Asset Based Charges to Contract Owners (Note 5) 39,120 37,691 35,523 ---------- ---------- ----------- NET INVESTMENT INCOME 574,648 538,224 438,732 ---------- ---------- ----------- Net Unrealized (Loss)/Gain on Investments in Partnership (127,658) 27,210 102,764 Net Realized Loss on Sale of Investments in Partnership (62,618) 0 (45,675) ---------- ---------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 384,372 565,434 495,821 ---------- ---------- ----------- CAPITAL TRANSACTIONS: Net (Withdrawals)/Contributions by Contract Owners (Note 7) (380,371) 45,403 (337,574) Net Contributions/(Withdrawals) by Pruco Life Insurance Company of New Jersey 419,492 (7,712) 373,097 ---------- ---------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS 39,121 37,691 35,523 ---------- ---------- ----------- TOTAL INCREASE IN NET ASSETS $ 423,493 $ 603,125 $ 531,344 NET ASSETS: Beginning of period $7,455,048 $6,851,923 $6,320,579 ---------- ---------- ----------- End of period $7,878,541 $7,455,048 $6,851,923 ---------- ---------- ----------- ---------- ---------- -----------
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES F-6 THROUGH F-8 F-5 NOTES TO THE FINANCIAL STATEMENTS OF PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT For the Year Ended December 31, 1996 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 Variable Appreciable Life Insurance ("VAL"), Variable Life Insurance ("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 and Exchange Act of 1933. The Partnership is the investment vehicle for assets allocated to the real property 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. 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, 1996 and 1995 the Real Property Account's interest in the Partnership, based on market value equity was 4.0% or 473,226 shares and 3.9% or 473,226 shares, respectively. C. INCOME RECOGNITION Net investment income, realized and unrealized gains and losses are recognized daily. Amounts are based upon the Real Property Account's proportionate interest in the Partnership. F-6 D. EQUITY OF PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY Pruco Life of New Jersey maintains a position in the Account representing anticipated property acquisition and capital expenditure funding needs. The position is also utilized for the purpose of administering activity in the Account. The activity includes unit transactions, Partnership share transactions, and expense processing. The position does not have an effect on the Contract owner's account or the related unit value. NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP As of December 31, 1996, the investment in the Real Property Account of $7,878,541 was derived from the share value of $16.64859 and 473,226 shares outstanding. The related historical cost of the investment in the Real Property Account was $5,503,605 as of December 31, 1996. NOTE 4: CONTRACT OWNER UNIT INFORMATION Outstanding Contract owner units, unit values and total value of Contract owner equity for the year ended December 31, 1996 were as follows:
VAL VLI SPVA SPVL TOTAL --- --- ---- ---- ----- Contract Owner Units Outstanding: 3,460,872 509,344 85,030 94,923 4,150,169 Unit Value: $1.56700 $1.60720 $1.46726 $1.46726 n/a Contract Owner Equity: $5,423,186 $818,618 $124,762 $139,276 $6,505,842
NOTE 5: CHARGES AND EXPENSES A. MORTALITY RISK AND EXPENSE RISK CHARGES Mortality risk and expense 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 contract holders 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 the estimated expenses. For 1996, the amount of these charges paid to Pruco Life Insurance Company of New Jersey was $38,126. B. ADMINISTRATIVE CHARGES Administrative charges are determined daily using an effective annual rate of 0.35% for SPVA and SPVL. Administrative charges include costs associated with issuing the Contract, establishing and maintaining records, and providing reports to Contract owners. For 1996, the amount of these charges paid to Pruco Life Insurance Company of New Jersey was $994. NOTE 6: TAXES Pruco Life Insurance Company of New Jersey is taxed as a "life insurance company" under the Internal Revenue Code and the operations of the Real Property Account form a part of and are taxed with those of Pruco Life Insurance Company of New Jersey. Under current federal law, no federal income taxes are payable by the Real Property Account. As such, no provision for tax liability has been recorded. F-7 NOTE 7: NET WITHDRAWALS BY CONTRACT OWNERS Contract owner activity for the Pruco Life of New Jersey products, for the year ended December 31, 1996, was as follows:
VAL VLI SPVA SPVL TOTAL ---------- ---------- --------- -------- ----------- Contract Owner Contributions: $ 817,922 $ 123,259 $ 50 $ 2,434 $ 943,665 Contract Owner Redemptions: (923,872) (123,027) (26,168) (9,380) (1,082,447) Net Transfers from (to) other subaccounts or fixed rate option: (213,924) (27,667) 0 0 (241,591) ---------- ---------- --------- -------- ----------- Net Decrease $(319,874) $ (27,435) $(26,118) $(6,946) $ (380,373) ---------- ---------- --------- -------- ----------- ---------- ---------- --------- -------- -----------
NOTE 8: UNIT ACTIVITY Transactions in units for the year ended December 31, 1996 were as follows: VAL VLI SPV SPVL --- --- --- ---- Contract Owner Contributions: 535,548.596 78,896.065 34.722 1,685.627 Contract Owner Redemptions: (744,916.258) (96,270.303) (17,943.310) (6,531.170) F-8 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of The 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 The Prudential Variable Contract Real Property Partnership (the "Partnership") at December 31, 1996, the results of its operations and its cash flows for the year ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these 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 audit provides a reasonable basis for the opinion expressed above. Price Waterhouse LLP New York, New York March 25, 1997 F-9 INDEPENDENT AUDITORS' REPORT To the Partners of The Prudential Variable Contract Real Property Partnership Newark, New Jersey We have audited the accompanying statement of assets and liabilities including the schedule of investments, of the Prudential Variable Contract Real Property Partnership as of December 31, 1995, and the related statements of operations, changes in net assets, and cash flows for each of the two years in the period ended December 31, 1995 (collectively referred to as the financial statements). Our audit also included the financial statement schedules listed in the index at Item 14 for each of the two years in the period ended December 31, 1995. These financial statements and financial statement schedules are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of The Prudential Variable Contract Real Property Partnership as of December 31, 1995, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules when considered in relation to the basic financial statments taken as a whole, present fairly in all material respects the information set forth therein. Investments in properties and interest in properties are stated at current value at December 31, 1995, as discussed in Note 1 to the financial statements. Determination of current value involves subjective judgment because the actual market value of real estate can be determined only by negotiation between the parties in a sales transaction. Deloitte & Touche LLP Parsippany, New Jersey March 1, 1996 F-10 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, --------------------------------------------- 1996 1995 --------------- ---------------- ASSETS: Properties at estimated market value (cost $177,082,291 and $191,981,608, respectively) $ 151,074,276 $ 164,695,033 Interest in properties at estimated market value (cost $6,133,157 and $6,133,157, respectively) 5,850,000 5,800,000 Marketable securities at estimated market value (cost $24,345,000 and $10,480,000, respectively) 24,426,644 10,532,155 Cash and cash equivalents 20,738,204 14,223,265 Other assets and accounts receivable (net of allowance for uncollectible accounts of $55,823 and $18,896, respectively) 2,066,916 1,743,305 --------------- ---------------- Total Assets $ 204,156,040 $ 196,993,758 --------------- ---------------- --------------- ---------------- LIABILITIES AND PARTNERS' EQUITY: Obligation under capital lease $ 4,072,677 $ 3,882,421 Accounts payable and accrued expenses 1,640,360 2,142,614 Due to affiliates 719,200 682,795 Other liabilities 467,009 664,069 --------------- ---------------- Total liabilities 6,899,246 7,371,899 --------------- ---------------- Commitments and contingencies Partners' Equity 197,256,794 189,621,859 --------------- ---------------- Total Liabilities and Partners' Equity $ 204,156,040 $ 196,993,758 --------------- ---------------- --------------- ---------------- Number of shares outstanding at end of period 11,848,275 12,036,684 --------------- ---------------- --------------- ---------------- Share Value at end of period $16.65 $15.75 --------------- ---------------- --------------- ----------------
SEE NOTES TO FINANCIAL STATEMENTS F-11 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, -------------------------------------------- 1996 1995 1994 ------------- ------------- ------------- INVESTMENT INCOME: Rent from properties $ 22,799,694 $ 19,827,044 $ 16,344,259 Income from interest in properties 606,558 638,183 2,355,204 Interest on mortgage loans 0 0 105,694 Interest from short-term investments 2,134,386 2,660,865 1,571,394 ------------- ------------- ------------- 25,540,638 23,126,092 20,376,551 ------------- ------------- ------------- INVESTMENT EXPENSES: Investment management fee 2,494,229 2,341,878 2,287,816 Real estate taxes 2,367,404 1,938,090 1,792,775 Administrative 1,865,433 1,795,092 1,413,722 Operating 2,904,620 1,870,183 1,707,039 Interest 489,434 460,578 327,000 ------------- ------------- ------------ 10,121,120 8,405,821 7,528,352 ------------- ------------- ------------ NET INVESTMENT INCOME 15,419,518 14,720,271 12,848,199 ------------- ------------- ------------ REALIZED AND UNREALIZED LOSS ON INVESTMENTS: Net proceeds from real estate investments sold 20,497,789 0 19,014,872 Less: Cost of real estate investments sold 26,610,932 0 18,337,052 Realization of prior years' unrealized (loss)/gain on real estate investments sold (4,539,996) 0 1,915,205 ------------- ------------- ------------ NET LOSS REALIZED ON REAL ESTATE INVESTMENTS SOLD (1,573,147) 0 (1,237,385) ------------- ------------- ------------ NET UNREALIZED (LOSS)/GAIN ON INVESTMENTS (3,211,436) 661,623 2,576,828 ------------- ------------- ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,634,935 $ 15,381,894 $ 14,187,642 ------------- ------------- ------------ ------------- ------------- ------------
SEE NOTES TO FINANCIAL STATEMENTS F-12 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, ------------------------------------------- 1996 1995 1994 ------------- ------------- ------------- OPERATIONS: Net Investment Income $ 15,419,518 $ 14,720,271 $ 12,848,199 Net Realized and Unrealized Gain/(Loss) on Investments (4,784,583) 661,623 1,339,443 ------------- ------------- ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 10,634,935 15,381,894 14,187,642 ------------- ------------- ------------- CAPITAL TRANSACTIONS: Withdrawals by partners (188,409, 204,350 and 790,390 shares, respectively) (3,000,000) (3,000,000) (11,000,000) ------------- ------------- ------------- NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS (3,000,000) (3,000,000) (11,000,000) ------------- ------------- ------------- TOTAL INCREASE IN NET ASSETS 7,634,935 12,381,894 3,187,642 NET ASSETS: Beginning of year 189,621,859 177,239,965 174,052,323 ------------- ------------- ------------- End of year $ 197,256,794 $ 189,621,859 $ 177,239,965 ------------- ------------- ------------- ------------- ------------- -------------
SEE NOTES TO FINANCIAL STATEMENTS F-13 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------------------- 1996 1995 1994 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets resulting from operations $ 10,634,935 $ 15,381,894 $ 14,187,642 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Net realized and unrealized loss (gain) on investments 4,784,583 (661,623) (1,339,443) Changes in assets and liabilities: (Increase) Decrease in other assets and accounts receivable (323,611) 474,790 (727,821) Decrease in obligation under capital lease 190,256 77,585 6,271 (Decrease) Increase in accounts payable and accrued expenses (502,254) 1,337,548 75,876 Increase (Decrease) in due to affiliates 36,405 58,589 (70,438) (Decrease) Increase in other liabilities (197,060) 18,156 165,049 ------------- ------------- ------------ Net cash provided by operating activities 14,623,254 16,686,939 12,297,136 ------------- ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from real estate investments sold 20,497,789 0 19,014,842 Acquisition of property (10,713,722) (36,774,343) 0 Capital improvements on real estate owned (997,893) (1,050,197) (1,161,224) Capital improvements on interest in properties 0 (24,415) (12,087) Principal repayments recieved on mortgage loans 0 0 3,947,528 (Purchase) Sale of marketable securities (13,894,489) 5,292,044 (13,845,191) ------------- ------------- ------------ Net cash provided by (used in) investing activities (5,108,315) (32,556,911) 7,943,868 ------------- ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Withdrawals (3,000,000) (3,000,000) (11,000,000) ------------- ------------- ------------ Net cash (used in)provided by financing activities (3,000,000) (3,000,000) (11,000,000) ------------- ------------- ------------ Net increase (decrease) in cash and cash equivalents 6,514,939 (18,869,972) 9,241,004 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 14,223,265 33,093,237 23,852,233 ------------- ------------- ------------ CASH AND CASH EQUIVALENTS - END OF YEAR $ 20,738,204 $ 14,223,265 $ 33,093,237 ------------- ------------- ------------ ------------- ------------- ------------ SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES Foreclosure on mortgage loan $ 0 $ 0 $ 5,276,262 ------------- ------------- ------------ ------------- ------------- ------------ SUPPLEMENTAL INFORMATION: Interest paid $ 376,450 $ 376,450 $ 250,000 ------------- ------------- ------------ ------------- ------------- ------------
SEE NOTES TO FINANCIAL STATEMENTS F-14 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996 DECEMBER 31, 1995 - ---------------------------------------------------------------------------------------------------------------- INVESTMENT IN PROPERTIES (PERCENT OF NET ASSETS) 76.6% 86.8% Estimated Estimated Market Market Location Description Cost Value Cost Value - ---------------------------------------------------------------------------------------------------------------- Azusa, CA Warehouse $ 0 $ 0 $ 18,546,247 $ 15,083,725 Lisle, IL Office Building 17,524,421 9,900,000 17,524,421 11,600,000 Atlanta, GA Garden Apartments 15,396,738 13,707,814 15,371,495 12,600,000 Pomona, CA (a) Warehouse 23,456,751 17,553,849 23,205,172 17,127,292 Roswell, GA Retail Shopping Center 31,754,073 28,333,818 31,688,912 32,055,216 Morristown, NJ Office Building 18,797,224 10,113,986 18,664,969 9,572,688 Bolingbrook, IL Warehouse 8,948,028 7,100,000 8,948,028 7,400,000 Farmington Hills, MI Garden Apartments 13,623,952 14,706,400 13,594,950 14,200,000 Flint, MI Office Building 0 0 7,616,842 6,539,368 Raleigh, NC Garden Apartments 15,762,951 16,854,252 15,758,699 17,200,000 Nashville, TN Office Building 8,379,326 8,800,436 8,431,680 8,686,551 Oakbrook Terrace, IL Office Complex 12,725,105 13,289,999 12,630,193 12,630,193 Beaverton, OR Office Complex 10,713,722 10,713,722 0 0 ------------- -------------- ------------- ------------- $ 177,082,291 $ 151,074,276 $ 191,981,608 $ 164,695,033 ------------- -------------- ------------- ------------- ------------- -------------- ------------- -------------
(a) Cost and estimated market value include land under capital lease of $3,412,636 representing the present value of minimum future lease payments at the inception of the lease.
INVESTMENT IN INTEREST IN PROPERTIES (PERCENT OF NET ASSETS) 3.0% 3.1% Estimated Estimated Market Market Location Description Cost Value Cost Value - ---------------------------------------------------------------------------------------------------------------- Jacksonville, FL Warehouse/Distribution 1,317,453 1,225,000 1,317,453 1,225,000 Jacksonville, FL Warehouse/Distribution 1,002,448 1,000,000 1,002,448 975,000 Jacksonville, FL Warehouse/Distribution 1,442,894 1,325,000 1,442,894 1,300,000 Jacksonville, FL Warehouse/Distribution 2,370,362 2,300,000 2,370,362 2,300,000 ------------- -------------- ------------- ------------- $ 6,133,157 $ 5,850,000 $ 6,133,157 $ 5,800,000 ------------- -------------- ------------- ------------- ------------- -------------- ------------- -------------
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 12.4% 5.6% Estimated Estimated Face Market Face Market Description Amount Value Amount Value - ---------------------------------------------------------------------------------------------------------------- Marketable Securities $ 23,345,000 $ 24,426,644 $ 10,480,000 $ 10,532,155 ------------- -------------- ------------- ------------- ------------- -------------- ------------- -------------
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 10.5% 7.5% Estimated Estimated Face Market Face Market Description Amount Value Amount Value - ---------------------------------------------------------------------------------------------------------------- Commercial Paper and Cash $ 20,804,826 $ 20,738,204 $ 14,282,697 $ 14,223,265 ------------- -------------- ------------- ------------- ------------- -------------- ------------- ------------- OTHER ASSETS -2.5% -3.0% (net of liabilities) $ (4,832,330) $ (5,628,594) -------------- ------------- TOTAL NET ASSETS $ 197,256,794 $ 189,621,859 -------------- ------------- -------------- -------------
SEE NOTES TO FINANCIAL STATEMENTS F-15 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996 ------------------------------ MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 12.4% Estimated Face Market DESCRIPTION Amount Value - ----------------------------------------------------- ------------------------------ Commercial Paper (with stated rate and maturity date) PNC Bank, 5.48%, January 6, 1997 $ 2,200,000 $ 2,199,643 Wells Fargo, 5.54%, January 28, 1997 2,300,000 2,300,446 Sears Roebuck Acceptance Corp, 7.48%, February 19, 1997 100,000 102,187 General Motors Acceptance Corp, 5.88%, February 27, 1997 105,000 107,143 Sears Roebuck Acceptance Corp,7.72%, February 27, 1997 800,000 812,000 Dean Wiitter Discover & Co., 5.75%, March 6,1997 500,000 500,387 General Motors Acceptance Corp, 5.74%, March 18, 1997 1,200,000 1,201,344 Sears Discover Credit Corp, 7.81%, March 18, 1997 1,150,000 1,164,548 American Home Products, 6.88%, April 15, 1997 2,000,000 2,019,323 Ford Motor Credit, 5.90%, May 5, 1997 1,400,000 1,405,337 Ford Motor Credit, 5.90%, May 5, 1997 350,000 350,875 Ford Motor Credit, 9.15%, May 7, 1997 500,000 515,010 Key Bank NA, 5.58%, May 14, 1997 900,000 899,130 American Express Centurion Bank, 5.58%, June 10, 1997 2,300,000 2,299,862 Associates Corp of North America, 7.05%, June 30, 1997 600,000 604,766 Bank One Columbus, 5.58%, July 1, 1997 1,110,000 1,108,812 Associates Corp of North America, 5.88%, August 15, 1997 1,230,000 1,230,744 Key Bank of New York, 4.82%, September 4, 1997 1,300,000 1,298,740 Bank One Milwaukee, NA, 5.26%, October 8, 1997 1,000,000 1,002,870 Morgan Guaranty TRust Co., 5.38%, November 14, 1997 1,000,000 999,271 Norwest Financial Inc., 6.50%, November 15, 1997 300,000 302,286 Norwest Corp., 5.55%, November 21, 1997 2,000,000 2,001,922 ------------- ------------- TOTAL MARKETABLE SECURITIES $ 24,345,000 $ 24,426,644 ------------- ------------- ------------- ------------- CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 10.5% Estimated Face Market DESCRIPTION Amount Value - ----------------------------------------------------- -------------- -------------- Commercial Paper (with stated rate and maturity date) Gateway Fuel Corp, 7.15%, January 2, 1997 $ 2,177,000 $ 2,176,135 Bell Atlantic Financial Services, 5.50%, January 14, 1997 2,650,000 2,638,664 Pioneer Hi-Bred Intl, 5.47%, January 15, 1997 1,200,000 1,194,712 Bank of Montreal, 5.43%, January 27, 1997 2,300,000 2,300,000 Canadian Imperial Bank, 5.39%, January 27, 1997 2,400,000 2,400,000 HJ Heinz Co., 5.46%, January 29, 1997 2,370,000 2,354,184 General Electric Capital Corp, 5.34%, February 3, 1997 2,300,000 2,279,871 Bankers Trust Co., 5.35%, February 20, 1997 2,000,000 2,007,723 Colonial PL Co Note, 5.60%, February 21, 1997 800,000 792,658 Colonial PL Co Note, 5.35%, March 4, 1997 783,000 773,109 General Electric Capital Corp., 5.45%, March 14, 1997 300,000 296,321 ------------- ------------- TOTAL COMMERCIAL PAPER 19,280,000 19,213,378 TOTAL CASH 1,524,826 1,524,826 ------------- ------------- TOTAL CASH AND CASH EQUIVALENTS $ 20,804,826 $ 20,738,204 ------------- ------------- ------------- -------------
SEE NOTES TO FINANCIAL STATEMENTS F-16 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995 -------------------------------- MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 5.6% Estimated Face Market DESCRIPTION Amount Value - ---------------------------------------------------------- ------------- ------------- Commercial Paper (with stated rate and maturity date) Associates Corp. of North America, 8.75%, February 1, 1996 $ 410,000 $ 416,810 General Motors Acceptance Corp., 8.75%, February 1, 1996 650,000 658,860 General Motors Acceptance Corp., 8.95%, February 5, 1996 350,000 356,370 General Motors Acceptance Corp., 4.75%, February 14, 1996 430,000 426,212 General Motors Acceptance Corp., 6.01%, February 22, 1996 240,000 240,057 Household Finance Corp., 5.75%, April 19, 1996 2,000,000 1,996,520 Ford Motor Credit Corp., 6.24%, April 22, 1996 500,000 500,658 Society National Bank Cleveland, 6.00%, April 25, 1996 150,000 149,295 International Lease Finance Corp., 5.00%, May 28, 1996 1,000,000 992,120 Transamerica Financial Corp., 8.55%, June 15, 1996 400,000 409,284 John Deere Capital Corp., 6.16%, July 22, 1996 1,000,000 1,002,267 Sears Roebuck Acceptance Corp., 8.55%, August 1, 1996 1,000,000 1,039,335 Key Bank of New York, N.A., 5.43%, September 6, 1996 1,000,000 999,210 Bank One Columbus, 5.56%, September 12, 1996 1,000,000 999,297 Associates Corp. of North America, 4.48%, October 15, 1996 350,000 345,860 ------------- ------------- TOTAL MARKETABLE SECURITIES $ 10,480,000 $ 10,532,155 ------------- ------------- ------------- ------------- CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 7.5% Estimated Face Market DESCRIPTION Amount Value - ---------------------------------------------------------- ------------- ------------- Commercial Paper (with stated rate and maturity date) Morgan Stanley Group, Inc., 6.10%, January 2, 1996 $ 1,146,000 $ 1,146,000 Engelhard Corp., 6.25%, January 3, 1996 1,038,000 1,038,000 Finova Capital Corp., 5.95%, January 4, 1996 800,000 792,198 Philip Morris Companies Inc., 5.80%, January 5, 1996 505,000 504,430 Gannett Co. Inc., 5.85%, January 9, 1996 1,700,000 1,696,409 Hanson Finance, 5.80%, January 12, 1996 354,000 352,175 Riverwoods Funding Corp., 5.78%, January 12, 1996 1,189,000 1,183,273 Finova Capital Corp., 5.97%, January 16, 1996 780,000 771,980 Smith Barney Inc., 5.79%, January 18, 1996 1,628,000 1,618,836 Fleet Financial Group, 5.75%, January 30, 1996 1,700,000 1,689,139 Countrywide Funding Corp., 5.82%, February 14, 1996 1,500,000 1,488,128 ------------ ------------ TOTAL COMMERCIAL PAPER 12,340,000 12,280,568 TOTAL CASH 1,942,697 1,942,697 ------------ ------------ TOTAL CASH AND CASH EQUIVALENTS $ 14,282,697 $ 14,223,265 ------------ ------------ ------------ ------------
SEE NOTES TO FINANCIAL STATEMENTS F-17 NOTES TO FINANCIAL STATEMENTS OF PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP FOR YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 GENERAL 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 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 HAS A POLICY OF INVESTING AT LEAST 65% OF ITS ASSETS IN DIRECT OWNERSHIP INTERESTS IN INCOME-PRODUCING REAL ESTATE AND PARTICIPATING MORTGAGE LOANS. THE PARTNERSHIP'S INVESTMENTS ARE VALUED ON A DAILY BASIS, CONSISTENT WITH THE PARTNERSHIP AGREEMENT. ON EACH DAY DURING WHICH THE NEW YORK STOCK EXCHANGE IS OPEN FOR BUSINESS, THE NET ASSETS OF THE PARTNERSHIP ARE VALUED USING THE ESTIMATED MARKET VALUE OF ITS INVESTMENTS AS DESCRIBED IN NOTES 1A AND 1B BELOW, PLUS AN ESTIMATE OF NET INCOME FROM OPERATIONS REDUCED BY ANY LIABILITIES OF THE PARTNERSHIP. THE PERIODIC ADJUSTMENTS TO PROPERTY AND MORTGAGE LOAN VALUES DESCRIBED IN NOTES 1A AND 1B BELOW AND THE CORRECTIONS OF PREVIOUS ESTIMATES OF NET INCOME ARE MADE ON A PROSPECTIVE BASIS. THERE CAN BE NO ASSURANCE THAT ALL SUCH ADJUSTMENTS AND ESTIMATES WILL BE MADE TIMELY. SHARES OF THE PARTNERSHIP ARE SOLD TO 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") AT THE 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 BELOW BY THE NUMBER OF SHARES OUTSTANDING. A CONTRACT OWNER PARTICIPATES IN THE PARTNERSHIP THROUGH INTERESTS IN THE REAL PROPERTY ACCOUNTS. NOTE 1: 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. THEREAFTER, 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) WHICH ARE ORDINARILY OBTAINED ON AN ANNUAL BASIS. THE PROPERTY VALUATIONS ARE REVIEWED INTERNALLY AT LEAST EVERY THREE MONTHS AND ADJUSTED IF THERE HAS BEEN A CHANGE IN THE VALUE OF THE PROPERTY SINCE THE LAST VALUATION. THE CHIEF APPRAISER OF PRUDENTIAL COMPTROLLER'S DEPARTMENT VALUATION UNIT IS RESPONSIBLE TO ASSURE THAT THE VALUATION PROCESS PROVIDES INDEPENDENT AND ACCURATE ESTIMATED MARKET VALUE ESTIMATES. IN THE INTEREST OF MAINTAINING AND MONITORING THE INDEPENDENCE AND THE 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 F-18 NOTES TO FINANCIAL STATEMENTS OF PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP FOR YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 OTHER RESPONSIBILITIES, APPROVES THE SELECTION AND SCHEDULING OF EXTERNAL APPRAISALS; DEVELOPS A STANDARD PACKAGE OF INFORMATION TO BE SUPPLIED TO THE APPRAISERS; REVIEWS AND PROVIDES COMMENTS ON ALL EXTERNAL APPRAISALS AND A SAMPLE OF INTERNAL APPRAISALS; ASSISTS IN DEVELOPING POLICY AND PROCEDURES AND ASSISTS IN THE EVALUATION OF THE PERFORMANCE AND COMPETENCY OF EXTERNAL APPRAISERS. THE PROPERTY VALUATIONS ARE REVIEWED QUARTERLY BY PRUDENTIAL COMPTROLLER'S DEPARTMENT VALUATION UNIT AND THE CHIEF APPRAISER AND ADJUSTED IF THERE HAS BEEN ANY SIGNIFICANT CHANGES RELATED TO THE PROPERTY SINCE THE MOST RECENT INDEPENDENT APPRAISAL. THE PURPOSE OF AN APPRAISAL IS TO ESTIMATE THE MARKET VALUE OF A PROPERTY AS OF A SPECIFIC DATE. ESTIMATED MARKET VALUE HAS BEEN DEFINED AS THE MOST PROBABLE PRICE FOR WHICH THE APPRAISED PROPERTY 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. THIS 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 A PROPERTY LESS 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. IN THE RECONCILIATION OF THESE THREE APPROACHES, THE ONE MOST HEAVILY RELIED UPON IS THE ONE GENERALLY RECOGNIZED FOR THE TYPE OF PROPERTY IN THE MARKET. AS DESCRIBED ABOVE, THE ESTIMATED MARKET VALUE OF REAL ESTATE 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 THAT ESTIMATED MARKET VALUES ARE REASONABLE APPROXIMATIONS OF MARKET PRICES AND THE AGGREGATE VALUE OF INVESTMENTS IN REAL ESTATE FAIRLY REPRESENT THEIR ESTIMATED MARKET VALUES AS OF DECEMBER 31, 1996 AND 1995. B: REVENUE RECOGNITION - RENT FROM PROPERTIES CONSISTS OF ALL AMOUNTS EARNED UNDER TENANT OPERATING LEASES INCLUDING BASE RENT, RECOVERIES OF REAL ESTATE TAXES AND OTHER EXPENSES AND CHARGES FOR MISCELLANEOUS SERVICES PROVIDED TO TENANTS. REVENUE FROM LEASES WHICH PROVIDE FOR SCHEDULED RENT INCREASES IS RECOGNIZED AS BILLED. C: CASH EQUIVALENTS - THE PARTNERSHIP CONSIDERS ALL HIGHLY LIQUID INVESTMENTS WITH AN ORIGINAL MATURITY OF THREE MONTHS OR LESS WHEN PURCHASED TO BE CASH EQUIVALENTS. CASH EQUIVALENTS ARE CARRIED AT MARKET VALUE. D: MARKETABLE SECURITIES - MARKETABLE SECURITIES ARE HIGHLY LIQUID INVESTMENTS WITH MATURITIES OF MORE THAN THREE MONTHS WHEN PURCHASED AND ARE CARRIED AT MARKET VALUE. E: 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. F-19 NOTES TO FINANCIAL STATEMENTS OF PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP FOR YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 F: RECLASSIFICATIONS - CERTAIN RECLASSIFICATIONS WERE MADE TO THE 1995 AND 1994 BALANCES TO CONFORM WITH THE 1996 PRESENTATION. G: 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. NOTE 2: OBLIGATION UNDER CAPITAL LEASE THE PARTNERSHIP MAINTAINS AN INTEREST IN A LEASEHOLD ESTATE CONSISTING OF SIX ONE-STORY INDUSTRIAL WAREHOUSE BUILDINGS LOCATED IN POMONA, CALIFORNIA. IN CONJUNCTION WITH THIS INTEREST, THE PARTNERSHIP ASSUMED ASSIGNMENT OF A GROUND LEASE AGREEMENT WHICH EXPIRES IN NOVEMBER 2078, WITH NO RENEWAL OPTIONS. THE ANNUAL GROUND LEASE PAYMENTS AFTER NOVEMBER 1994, AND FOR EACH 10 YEAR INCREMENT THEREAFTER, ARE SUBJECT TO INCREASE 50% OF THE INCREASE IN THE CONSUMER PRICE INDEX DURING THE PREVIOUS PERIOD . IN 1995, THE ANNUAL GROUND LEASE PAYMENT INCREASED $126,450 TO $376,450. THE GROUND LEASE CONTAINS A PURCHASE OPTION EXERCISABLE AT A FIXED PRICE OF $4,000,000 FROM NOVEMBER 1994 TO NOVEMBER 1997, WHICH THE PARTNERSHIP INTENDS TO EXERCISE IN 1997. FUTURE MINIMUM GROUND LEASE PAYMENTS UNDER CAPITAL LEASE AT DECEMBER 31, 1996 THRU THE EXERCISE DATE OF NOVEMBER 1997 IS $4,349,158. 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 1997 TO 2010. AT DECEMBER 31, 1996, FUTURE MINIMUM BASE RENTAL INCOME UNDER NON-CANCELABLE OPERATING LEASES BY YEAR, AND IN THE AGGREGATE ARE SHOWN BELOW. ALTHOUGH THESE ARE NON-CANCELABLE LEASES, THERE IS NO ASSURANCE THAT ALL AMOUNTS WILL BE RECEIVED. YEAR ENDING DECEMBER 31, (000'S) ------------ --------- 1997 $ 12,294 1998 10,365 1999 9,563 2000 8,089 2001 6,818 THEREAFTER 17,125 -------- TOTAL $ 64,253 -------- -------- F-20 NOTES TO FINANCIAL STATEMENTS OF PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP FOR YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE 4: COMMITMENT FROM PARTNER ON JANUARY 9, 1990, PRUDENTIAL COMMITTED TO FUND UP TO $100 MILLION TO ENABLE THE PARTNERSHIP TO TAKE ADVANTAGE OF OPPORTUNITIES TO ACQUIRE ATTRACTIVE REAL PROPERTY INVESTMENTS WHOSE COST IS GREATER THAN THE PARTNERSHIP'S THEN AVAILABLE CASH. 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. ALSO, THE AMOUNT OF THE COMMITMENT IS REDUCED BY $10 MILLION FOR EVERY $100 MILLION IN ESTIMATED MARKET VALUE NET ASSETS OF THE PARTNERSHIP. THE AMOUNT AVAILABLE UNDER THIS COMMITMENT FOR PROPERTY PURCHASES AS OF DECEMBER 31, 1996 IS APPROXIMATELY $50.2 MILLION. NOTE 5: OTHER TRANSACTIONS WITH AFFILIATES 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, 1996, 1995 AND 1994 MANAGEMENT FEES INCURRED BY THE PARTNERSHIP WERE $2,494,229, $2,341,878 AND $2,287,816, RESPECTIVELY. THE PARTNERSHIP ALSO REIMBURSES PRUDENTIAL FOR CERTAIN ADMINISTRATIVE SERVICES RENDERED BY PRUDENTIAL. THE AMOUNTS INCURRED FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 WERE $116,818; $123,919; AND $95,015, RESPECTIVELY, AND ARE CLASSIFIED AS ADMINISTRATIVE EXPENSES IN THE STATEMENTS OF OPERATIONS. THE PARTNERSHIP OWNS A 50% INTEREST IN FOUR WAREHOUSE/DISTRIBUTION BUILDINGS IN JACKSONVILLE, FLORIDA (THE UNIT WAREHOUSES). THE REMAINING 50% INTEREST IS OWNED BY PRUDENTIAL AND ONE OF ITS SUBSIDIARIES. AT DECEMBER 31, 1996, THESE PROPERTIES HAD TOTAL ASSETS OF $17,668,652 AND LIABILITIES OF $60,987. FOR THE YEAR ENDED DECEMBER 31, 1996, THE UNIT WAREHOUSES HAD REVENUES OF $1,516,876 AND EXPENSES OF $303,754. THE PARTNERSHIP HAS CONTRACTED WITH PREMISYS REAL ESTATE SERVICES, INC. (PREMISYS), AN AFFILIATE OF PRUDENTIAL, TO PROVIDE PROPERTY MANAGEMENT SERVICES AT THE UNIT WAREHOUSES, AND THROUGH 1994 AT THE BOLINGBROOK, IL WAREHOUSE. THE PROPERTY MANAGEMENT FEE EARNED BY PREMISYS, INCURRED BY THE PARNERSHIP AND PRUDENTIAL FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 WAS $36,000; $31,360 AND; $92,382, RESPECTIVELY. F-21 NOTE 6: PER SHARE INFORMATION (FOR A SHARE OUTSTANDING THOUGHOUT THE PERIOD)
01/01/96 01/01/95 01/01/94 TO TO TO 12/31/96 12/31/95 12/31/94 --------- --------- --------- Rent from properties $ 1.9173 $ 1.6387 $ 1.2754 Income from interest in properties $ 0.0510 $ 0.0527 $ 0.1838 Interest on mortgage loans $ 0.0000 $ 0.0000 $ 0.0082 Interest from short-term investments $ 0.1795 $ 0.2199 $ 0.1226 --------- --------- --------- INVESTMENT INCOME $ 2.1478 $ 1.9113 $ 1.5900 --------- --------- --------- --------- --------- --------- Investment management fee $ 0.2097 $ 0.1936 $ 0.1786 Real estate tax expense $ 0.1991 $ 0.1602 $ 0.1399 Administrative expenses $ 0.1569 $ 0.1484 $ 0.1103 Operating expenses $ 0.2442 $ 0.1546 $ 0.1332 Interest expense $ 0.0412 $ 0.0381 $ 0.0255 --------- --------- --------- EXPENSES $ 0.8511 $ 0.6949 $ 0.5875 --------- --------- --------- --------- --------- --------- NET INVESTMENT INCOME $ 1.2967 $ 1.2164 $ 1.0025 --------- --------- --------- --------- --------- --------- Net realized loss on investments sold ($ 0.1323) $ 0.0000 $ (0.0966) Net unrealized gain/(loss) on investments ($ 0.2695) $ 0.0581 $ 0.2169 --------- --------- --------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS ($ 0.4018) $ 0.0581 $ 0.1203 --------- --------- --------- Net increase/(decrease) in share value $ 0.8949 $ 1.2745 $ 1.1228 Share Value at beginning of period $ 15.7537 $ 14.4792 $ 13.3564 --------- --------- --------- Share Value at end of period $ 16.6486 $ 15.7537 $ 14.4792 --------- --------- --------- --------- --------- --------- Ratio of expenses to average net assets 5.26% 4.62% 4.27% Ratio of net investment income to average net assets 8.01% 8.08% 7.29% Number of shares outstanding at end of period (000's) 11,848 12,037 12,241
ALL CALCULATIONS ARE BASED ON AVERAGE MONTH-END SHARES OUTSTANDING WHERE APPLICABLE. PER SHARE INFORMATION PRESENTED HEREIN IS SHOWN ON A BASIS CONSISTENT WITH THE FINANCIAL STATEMENTS AS DISCUSSED IN NOTE 1G. F-22 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP SCHEDULE III - REAL ESTATE OWNED: PROPERTIES DECEMBER 31, 1996
GROSS AMOUNT AT WHICH INTIAL COSTS TO THE PARTNERSHIP CARRIED AT CLOSE OF YEAR ------------------------------------------ COSTS -------------------------------------- CAPITALIZED BUILDING & SUBSEQUENT TO BUILDING & DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL (A)(B)(C) ----------- ------------ ---- ------------ ----------- ---- ------------ --------------- Properties: Office Building Lisle, IL None 1,780,000 15,743,881 540 1,780,000 15,744,421 17,524,421 Garden Apartments Atlanta, GA None 3,631,212 11,168,904 596,622(c) 3,631,212 11,765,526 15,396,738 Warehouse Pomona, CA None 3,412,636(b) 19,091,210 952,905 3,412,636 20,044,115 23,456,751 Retail Shopping Center Roswell, GA None 9,454,622 21,513,677 785,774 9,462,951 22,291,122 31,754,073 Office Building Morristown, NJ None 2,868,660 12,958,451 2,970,113 2,868,660 15,928,564 18,797,224 Office/Warehouse Bolingbrook, IL None 1,373,199 7,302,518 272,311 1,373,199 7,574,829 8,948,028 Garden Apartments Farmington Hills, MI None 1,550,000 11,744,571 329,381 1,583,320 12,040,632 13,623,952 Garden Apartments Raleigh, NC None 1,623,146 14,135,553 4,252 1,623,146 14,139,805 15,762,951 Office Building Nashville, TN None 1,797,000 6,588,451 (6,125) 1,797,327 6,581,999 8,379,326 Office Park Oakbrook Terrace, IL None 1,313,310 11,316,883 94,912 1,313,821 11,411,284 12,725,105 Office Building Beaverton, OR None 816,415 9,897,307 0 816,415 9,897,307 10,713,722 ---------- ----------- --------- ---------- ----------- ----------- 29,620,200 141,461,406 6,000,685 29,662,687 147,419,604 177,082,291 ---------- ----------- --------- ---------- ----------- ----------- ---------- ----------- --------- ---------- ----------- ----------- DESCRIPTION YEAR OF DATE ----------- CONSTRUCTION ACQUIRED ------------ ---------- Properties: Office Building Lisle, IL 1985 Sept., 1987 Garden Apartments Atlanta, GA 1987 Oct., 1987 Warehouse Pomona, CA 1984 Apr., 1988 Retail Shopping Center Roswell, GA 1988 Jan., 1989 Office Building Morristown, NJ 1981 Aug., 1988 Office/Warehouse Bolingbrook, IL 1989 Feb., 1990 Garden Apartments Farmington Hills, MI 1988 Jan., 1990 Garden Apartments Raleigh, NC 1995 Jun., 1995 Office Building Nashville, TN 1982 Oct., 1995 Office Park Oakbrook Terrace, IL 1988 Dec., 1995 Office Building Beaverton, OR 1995 Dec., 1996
1996 1995 1994 ---- ---- ---- (a) Balance at beginning of year 191,981,608 154,157,068 145,532,430 Additions: Acquistions 10,713,722 36,774,343 7,463,414 Improvements, etc. 550,050 1,050,197 1,161,224 Deletions: Sale (26,163,089) 0 0 ----------- ----------- ----------- Balance at end of year 177,082,291 191,981,608 154,157,068 ----------- ----------- ----------- ----------- ----------- ----------- (b) Represents land under capital lease. (c) Net of $1,000,000 settlement received from lawsuit. F-23 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP SCHEDULE III - REAL ESTATE OWNED: INTEREST IN PROERTIES DECEMBER 31, 1996
GROSS AMOUNT AT WHICH INTIAL COSTS TO THE PARTNERSHIP CARRIED AT CLOSE OF YEAR ------------------------------------------ COSTS --------------------------------------- CAPITALIZED BUILDING & SUBSEQUENT TO BUILDING & DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL (A)(B)(C) ----------- ------------ ---- ------------ ----------- ---- ------------ --------------- Interest in properties: Warehouse/Distribution Jacksonville, FL None $231,119 $1,073,849 $12,485 $231,119 $1,086,334 $1,317,453 Warehouse/Distribution Jacksonville, FL None 176,256 818,935 7,257 176,256 826,192 1,002,448 Warehouse/Distribution Jacksonville, FL None 255,545 1,187,335 14 255,545 1,187,349 1,442,894 Warehouse/Distribution Jacksonville, FL None 415,548 1,930,761 24,053 415,548 1,954,814 2,370,362 ---------- ---------- ------- ---------- ---------- ---------- $1,078,468 $5,010,880 $43,809 $1,078,468 $5,054,689 $6,133,157 ---------- ---------- ------- ---------- ---------- ---------- ---------- ---------- ------- ---------- ---------- ---------- YEAR OF DATE DESCRIPTION CONSTRUCTION ACQUIRED ----------- ------------ -------- Interest in properties: Warehouse/Distribution Jacksonville, FL 1988 Jan., 1990 Warehouse/Distribution Jacksonville, FL 1986 Jan., 1990 Warehouse/Distribution Jacksonville, FL 1982 Jan., 1990 Warehouse/Distribution Jacksonville, FL 1979 Jan., 1990
1996 1995 1994 ---- ---- ---- (a) Balance at beginning of year $6,133,157 $6,108,742 $26,348,882 Additions: Acquistions 0 24,415 0 Improvements, etc. 0 0 12,087 Deletions: Sale 0 0 (20,252,227) ---------- ---------- ------------ Balance at end of year $6,133,157 $6,133,157 $ 6,108,742 ---------- ---------- ------------ ---------- ---------- ------------ F-24 EX-27.1 2 EX-27.1
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENT OF NET ASSETS; STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000829114 PRUCO LIFE OF NEW JERSEY 001 VARIABLE CONTRACT REAL PROPERTY ACCOUNT 12-MOS DEC-31-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 473,226 473,226 0 0 0 0 0 7,878,541 0 0 0 39,120 574,648 (62,618) (127,658) 384,372 0 0 0 0 0 0 0 423,493 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.2 3 EX-27.2
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS OF ASSETS AND LIABILITIES; STATEMENTS OF OPERATIONS; STATEMENTS OF CHANGES IN NET ASSETS; STATEMENTS OF CASH FLOWS; PER SHARE TABLE; SCHEDULE OF INVESTMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000829114 PRUCO LIFE OF NEW JERSEY 002 THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP 12-MOS DEC-31-1996 DEC-31-1996 183,215,448 156,924,276 2,066,916 45,164,848 0 204,156,040 0 0 0 6,899,246 0 0 11,848,275 12,036,684 0 0 0 0 0 204,156,040 0 2,134,386 23,406,252 10,121,120 15,419,518 (1,573,147) (3,211,436) 10,634,935 0 0 0 0 188,409 0 0 7,634,935 0 0 0 0 2,494,229 489,434 10,121,120 0 15.754 1.297 (.402) 0 0 0 16.649 5.26 0 0
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