10-Q 1 ten-q.htm FORM 10-Q Prepared and filed by St Ives Burrups

Proceed to Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

     FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2005

OR

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

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
(973) 802-6000
(Address and Telephone Number of Registrant's Principal Executive Offices)

     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    NO 

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
                                                                                                         YES    NO 

 

TABLE OF CONTENTS

      Page  
Part I Financial Information        
         
Item 1. Financial Statements (Unaudited)        
               
A. PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT        
               
      Statement of Net Assets – September 30, 2005 and December 31, 2004     4  
               
      Statement of Operations – Nine and Three Months Ended September 30, 2005 and 2004     4  
               
      Statement of Changes in Net Assets – Nine and Three Months Ended September 30, 2005 and 2004     4  
             
      Notes to the Financial Statements of the Real Property Account     5  
               
B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP        
               
      Consolidated Statements of Assets and Liabilities – September 30, 2005 and December 31, 2004     8  
               
      Consolidated Statements of Operations – Nine and Three Months Ended September 30, 2005 and 2004     9  
               
      Consolidated Statements of Changes in Net Assets –        
      Nine and Three Months Ended September 30, 2005 and 2004     10  
               
    Consolidated Statements of Cash Flows – Nine and Three Months Ended September 30, 2005 and 2004     11  
               
      Consolidated Schedules of Investments – September 30, 2005 and December 31, 2004     12  
               
      Notes to the Financial Statements of the Partnership     14  
               
 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations     16  
               
 Item 3. Quantitative and Qualitative Disclosures About Market Risks     24  
               
 Item 4. Controls and Procedures     26  
               
Part II Other Information        
               
Item 4. Submission of Matters to a Vote of Security Holders     26  
               
Item 6. Exhibits     26  
               
SIGNATURES     27  

2

Back to Contents

FORWARD-LOOKING STATEMENTS

Some of the statements included in this Quarterly Report on Form 10-Q, including but not limited to those in Management’s Discussion and Analysis of Financial Condition and Results of Operations, may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “includes,” “plans,” “assumes,” “estimates,” “projects,” “intends,” “should,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Pruco Life Insurance Company of New Jersey (the “Company”) or the Prudential Variable Contract Real Property Account (the “Real Property Account”). There can be no assurance that future developments affecting the Company and the Real Property Account will be those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (1) general economic, market and political conditions, including the performance of financial markets and interest rate fluctuations and economic conditions in local markets in which the properties in the Real Property Account are located; (2) domestic or international military or terrorist activities or conflicts; (3) volatility in the securities markets; (4) fluctuations in foreign currency exchange rates and foreign securities markets; (5) regulatory or legislative changes, including changes in tax law; (6) changes in statutory or U.S. GAAP accounting principles, practices or policies; (7) differences between actual experience regarding mortality, morbidity, persistency, surrender experience, interest rates, or market returns and the assumptions we use in pricing our products, establishing liabilities and reserves or for other purposes; (8) reestimates of our reserves for future policy benefits and claims; (9) changes in our assumptions related to deferred policy acquisition costs; (10) events resulting in catastrophic loss of life; (11) investment losses and defaults; (12) changes in our claims-paying or credit ratings; (13) competition in our product lines and for personnel; (14) adverse determinations in litigation or regulatory matters and our exposure to contingent liabilities; and (15) the effects of acquisitions, divestitures and restructurings, including possible difficulties in integrating and realizing the projected results of acquisitions. The Company and the Real Property Account do not intend, and are under no obligation, to update any particular forward-looking statement included in this document.

3

Back to Contents

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT

                         
STATEMENTS OF NET ASSETS                        
September 30, 2005 and December 31, 2004                        
    September 30, 2005
(unaudited)		      December 31, 2004              
                     
 
 
             
ASSETS                        
Investment in The Prudential Variable Contract                        
   Real Property Partnership $ 9,004,181   $ 8,082,948              
 
 
             
Net Assets $ 9,004,181   $ 8,082,948              
 
 
             
                         
NET ASSETS, representing:                        
Equity of contract owners $ 6,726,378   $ 6,042,260              
Equity of Pruco Life Insurance Company of New Jersey    2,277,803      2,040,688              
 
 
             
  $ 9,004,181   $ 8,082,948              
 
 
             
                         
Units outstanding    3,453,460      3,438,311              
 
 
             
                         
Portfolio shares held   309,093     309,093              
Portfolio net asset value per share $ 29.13   $ 26.15              
                         
STATEMENTS OF OPERATIONS                        
For the nine and three months ended September 30, 2005 and 2004   1/1/2005-9/30/2005
 (unaudited)		     1/1/2004-9/30/2004
(unaudited)		     7/1/2005-9/30/2005
(unaudited)		     7/1/2004-9/30/2004
(unaudited)		  
                 
 
 
 
 
 
INVESTMENT INCOME                        
Net investment income from Partnership operations $ 286,842   $ 244,391   $ 103,725   $ 86,033  
 
 
 
 
 
                         
EXPENSES                        
Charges to contract owners for assuming mortality risk and                        
     expense risk and for administration    26,932      25,434      9,392      8,674  
 
 
 
 
 
NET INVESTMENT INCOME    259,910     218,957      94,333      77,359  
 
 
 
 
 
                         
NET REALIZED AND UNREALIZED GAIN                        
   (LOSS) ON INVESTMENTS                        
Net change in unrealized gain (loss) on investments in Partnership   579,832     262,065     412,104     134,813  
Net realized gain (loss) on sale of investments in Partnership    54,559      0     (11,696 )   0  
 
 
 
 
 
NET GAIN (LOSS) ON INVESTMENTS   634,391     262,065      400,488      134,813  
 
 
 
 
 
                         
NET INCREASE (DECREASE) IN NET ASSETS                        
   RESULTING FROM OPERATIONS $ 894,301   $ 481,022   $ 494,821   $ 212,172  
 
 
 
 
 
                         
STATEMENTS OF CHANGES IN NET ASSETS                        
For the nine and three months ended September 30, 2005 and 2004   1/1/2005-9/30/2005
(unaudited)		     1/1/2004-9/30/2004
(unaudited)		     7/1/2005-9/30/2005
(unaudited)		     7/1/2004-9/30/2004
(unaudited)		  
                 
 
 
 
 
 
OPERATIONS                        
Net investment income $ 259,910   $ 218,957   $ 94,333   $ 77,359  
Net change in unrealized gain (loss) on investments in Partnership   579,832     262,065     382,837     134,813  
Net realized gain (loss) on sale of investments in Partnership    54,559      0      17,651      0  
 
 
 
 
 
                         
NET INCREASE (DECREASE) IN NET ASSETS                        
   RESULTING FROM OPERATIONS    894,301      481,022      494,821      212,172  
 
 
 
 
 
                         
CAPITAL TRANSACTIONS                        
Net contributions (withdrawals) by contract owners   23,435     (94,749 )   11,144     (49,067 )
Net contributions (withdrawals) by Pruco Life Insurance Company
   of New Jersey		    3,497      120,183      (1,751 )    57,741  
 
 
 
 
 
                         
NET INCREASE (DECREASE) IN NET ASSETS                        
   RESULTING FROM CAPITAL TRANSACTIONS    26,932      25,434      9,393      8,674  
 
 
 
 
 
                         
TOTAL INCREASE (DECREASE) IN NET ASSETS   921,233     506,456     504,214     220,846  
                         
NET ASSETS                        
Beginning of period    8,082,948      7,846,237      8,499,967      8,131,847  
 
 
 
 
 
End of period $ 9,004,181   $ 8,352,693   $ 9,004,181   $ 8,352,693  
 
 
 
 
 

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

4

Back to Contents

PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
Notes to Financial Statements

Note 1: General

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

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

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

Note 2: Summary of Significant Accounting Policies

A. Basis of Accounting

The accompanying financial statements are prepared in accordance with the requirements of Form 10-Q and in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.

The interim financial data as of September 30, 2005 and for the nine and three months ended September 30, 2005 and 2004 is unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods.

B. Investment in Partnership Interest

The investment in the Partnership is based on the Account’s proportionate interest of the Partnership’s market value. At September 30, 2005 and December 31, 2004 the Account’s interest in the Partnership was 4.3% or 309,093 shares.

C. Income Recognition

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

D. Equity of Pruco Life Insurance Company of New Jersey

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

5

Back to Contents

Note 3: Charges and Expenses

A. Mortality Risk and Expense Risk Charges

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

B. Administrative Charges

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

C. Cost of Insurance and Other Related Charges

Contract owner contributions are subject to certain deductions prior to being invested in the Account. The deductions for VAL and VLI are (1) state premium taxes; (2) sales charges, not to exceed 5% for VAL and 9% for VLI, which are deducted in order to compensate Pruco Life of New Jersey for the cost of selling the contract, and (3) transaction costs, applicable to VAL, which are deducted from each premium payment to cover premium collection and processing costs. Contracts are also subject to monthly charges for the costs of administering the contract to compensate Pruco Life of New Jersey for the guaranteed minimum death benefit risk. These charges are assessed through the redemption of units.

D. Deferred Sales Charge

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

E. Partial Withdrawal Charge

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

Note 4: Taxes

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

6

Back to Contents

Note 5: Net Contributions (Withdrawals) by Contract Owners

Net contract owner contributions (withdrawals) for the real estate investment option in Pruco Life of New Jersey’s variable insurance and variable annuity products for the nine and three months ended September 30, 2005 and 2004, were as follows:

      Nine months ended
September 30,		     Three months ended
September 30,		  
      (Unaudited)     (Unaudited)  
      2005     2004     2005     2004  
                           
VAL   $ 23,322   $ (71,475 ) $ 1,885   $ (48,298 )
VLI     (26,288 )   (16,836 )   (2,509 )   (503 )
SPVA     27,050     0   $ 12,050     0  
SPVL     (649 )   (6,438 )   (282 )   (266 )
TOTAL   $ 23,435   $ (94,749 ) $ 11,144   $ (49,067 )

Note 6: Partnership Distributions

As of September 30, 2005, the Partnership had made no current year distributions. For the year ended December 31, 2004, the Partnership made distributions of $6 million. The Pruco Life of New Jersey Real Property Account’s share of these distributions was $0.2 million.

Note 7: Unit Information

Outstanding units and unit values at September 30, 2005 and December 31, 2004 were as follows:

      September 30, 2005     December 31, 2004  
      (Unaudited)        
Units Outstanding:     3,453,460     3,438,311  
Unit Value:     2.30274 to 2.72760     2.08645 to 2.45484  

Note 8: Financial Highlights

The ranges of total return for the nine months ended September 30, 2005 and 2004 were as follows:

      Nine months ended
September 30,		  
      (Unaudited)  
      2005     2004  
Total Return     10.37% to 11.11%     5.46% to 6.17%  

7

Back to Contents

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

  September 30, 2005
(Unaudited)		   December 31, 2004  
ASSETS
 
 
             
REAL ESTATE INVESTMENTS – At estimated market value:            
      Real estate and improvements            
            (cost: 9/30/2005 – $203,173,438; 12/31/2004 – $224,584,885) $      200,335,056   $      203,246,069  
      Real estate partnership (cost: 9/30/2005 – $11,351,348;            
            12/31/2004 – $11,286,826)   11,451,023     12,126,566  
      Mortgage and other loans receivable (cost: 9/30/2005 – $3,439,317;            
            12/31/2004 – $1,332,060)   3,439,317     1,332,060  
 
 
 
                  Total real estate investments   215,225,396     216,704,695  
             
CASH AND CASH EQUIVALENTS   41,612,649     17,557,182  
             
OTHER ASSETS (net of allowance for uncollectible            
      (accounts: 09/30/2005 – $55,369; 12/31/2004 – $46,690)   3,619,668     6,313,734  
 
 
 
                  Total assets $      260,457,713   $      240,575,611  
 
 
 
LIABILITIES            
             
MORTGAGE LOANS PAYABLE   43,328,380     43,773,767  
             
ACCOUNTS PAYABLE AND ACCRUED EXPENSES   2,982,149     3,096,006  
             
DUE TO AFFILIATES   741,142     721,419  
             
OTHER LIABILITIES   511,465     622,900  
             
MINORITY INTEREST   4,890,254     5,638,458  
 
 
 
                  Total liabilities   52,453,390     53,852,550  
 
 
 
COMMITMENTS AND CONTINGENCIES            
             
PARTNERS' EQUITY   208,004,323     186,723,061  
 
 
 
                  Total liabilities and partners' equity $      260,457,713   $      240,575,611  
 
 
 
NUMBER OF SHARES OUTSTANDING AT END OF PERIOD   7,140,308     7,140,308  
 
 
 
SHARE VALUE AT END OF PERIOD $      29.13   $      26.15  
 
 
 
             

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

8

Back to Contents

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

   Nine Months Ended
September 30, 		     Three Months Ended
September 30,		  
 
 
 
    2005     2004     2005     2004  
INVESTMENT INCOME:
 
 
 
 
   Revenue from real estate and improvements $ 20,598,665   $ 20,533,816   $ 6,856,684   $ 7,229,681  
   Equity in income of real estate partnership   168,504     350,210     (57,979 )   83,529  
   Interest and equity income on mortgage loans                        
      receivable and other loans receivable   196,221     106,485     75,455     27,266  
   Income from other real estate investments   —     246,765     —     103,863  
   Interest on short-term investments   580,537     143,062     313,513     79,484  
 
 
 
 
 
                         
            Total investment income   21,543,927     21,380,338     7,187,673     7,523,823  
 
 
 
 
 
INVESTMENT EXPENSES:                        
   Operating   5,863,044     5,564,742     1,908,487     2,039,619  
   Investment management fee   2,098,000     1,958,091     727,734     674,159  
   Real estate taxes   1,797,951     2,140,949     632,851     679,894  
   Administrative   3,350,266     3,980,106     899,320     1,396,616  
   Interest expense   1,652,343     1,888,133     491,946     644,843  
   Minority interest   156,017     190,592     131,197     97,016  
 
 
 
 
 
            Total investment expenses   14,917,621     15,722,613     4,791,535     5,532,147  
 
 
 
 
 
NET INVESTMENT INCOME   6,626,306     5,657,725     2,396,138     1,991,676  
 
 
 
 
 
REALIZED AND UNREALIZED GAIN (LOSS) ON REAL ESTATE                        
      INVESTMENTS:                        
   Net proceeds from real estate investments sold   25,122,589     —     9,713,238     —  
   Less:    Cost of real estate investments sold   26,856,771     —     7,912,781     —  
                Realization of prior periods’ unrealized                        
                   gain (loss) on real estate investments sold   (3,239,094 )   —     1,881,224     —  
                Minority interest in realized gain (loss) on investments sold   244,547         189,426      
 
 
 
 
 
   Net gain (loss) realized on real estate                        
      investments sold   1,260,364     —     (270,193 )   —  
 
 
 
 
 
                         
   Change in unrealized gain (loss) on real estate investments   14,521,276     6,728,401     9,481,610     3,195,318  
   Less: Minority interest in unrealized gain (loss) on real estate
      investments		   1,126,684     661,491     (40,218 )   74,345  
 
 
 
 
 
   Net unrealized gain (loss) on real estate investments   13,394,592     6,066,910     9,521,828     3,120,973  
 
 
 
 
 
NET REALIZED AND UNREALIZED GAIN (LOSS)                        
      ON REAL ESTATE INVESTMENTS   14,654,956     6,066,910     9,251,635     3,120,973  
 
 
 
 
 
INCREASE (DECREASE) IN NET ASSETS RESULTING                        
      FROM OPERATIONS $ 21,281,262   $ 11,724,635   $ 11,647,773   $ 5,112,649  
 
 
 
 
 

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

9

Back to Contents

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)

  Nine Months Ended September 30,  
  2005   2004  
 
 
 
INCREASE (DECREASE) IN NET ASSETS            
   RESULTING FROM OPERATIONS:            
   Net investment income $ 6,626,306   $ 5,657,725  
   Net gain (loss) realized on real estate            
        investments sold   1,260,364     —  
   Net unrealized gain (loss) from real estate            
        investments   13,394,592     6,066,910  
 
 
 
          Increase (decrease) in net assets            
               resulting from operations   21,281,262     11,724,635  
 
 
 
NET ASSETS – Beginning of period   186,723,061     181,643,061  
 
 
 
NET ASSETS – End of period $ 208,004,323   $ 193,367,696  
 
 
 

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

10

Back to Contents

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 Nine Months
Ended
September 30, 2005		    Nine Months
Ended
September 30, 2004		  
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:          
  Net increase (decrease) in net assets resulting from operations $ 21,281,262   $ 11,724,635  
  Adjustments to reconcile net increase (decrease) in net assets          
    to net cash flows from operating activities:          
      Net realized and unrealized gain (loss) on investments   (14,654,956 )   (6,066,910 )
      Equity in income of real estate partnership in excess          
      of distributions   (64,522 )   (146,022 )
      Minority interest from operating activities   156,017     190,592  
      Bad debt expense   60,813     328,102  
      (Increase) Decrease in accrued interest included in other real          
      estate investments   —     —  
      (Increase) Decrease in accrued interest included in mortgage          
      and other loans receivable   (283,517 )   (55,485 )
      (Increase) Decrease in:          
      Other assets   2,633,252     (1,251,622 )
      Increase (Decrease) in:          
        Accounts payable and accrued expenses   (113,857 )   1,127,791  
        Due to affiliates   19,723     (214,865 )
        Other liabilities   (111,435 )   (62,312 )
 
 
            Net cash flows from operating activities   8,922,780     5,573,904  
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:          
  Net proceeds from real estate investments sold   25,122,589     —  
  Additions to real estate and improvements   (5,445,323 )   (6,213,890 )
  Contribution to real estate partnership   —     (245,126 )
  Origination of mortgage and other loans receivable   (1,823,740 )   (1,244,765 )
  Repayment of other real estate investments   —     4,975,000  
  Origination of other real estate investments   —     (4,475,000 )
 
 
            Net cash flows from (used in) investing activities   17,853,526     (7,203,781 )
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:          
  Principal payments on mortgage loan payable   (445,387 )   (533,578 )
  Proceeds from mortgage loan payable   —     8,750,000  
  Distributions to minority interest partners   (2,275,452 )   (68,400 )
 
 
            Net cash flows used in financing activities   (2,720,839 )   8,148,022  
 
 
         
NET CHANGE IN CASH AND CASH EQUIVALENTS   24,055,467     6,518,145  
         
CASH AND CASH EQUIVALENTS – Beginning of period   17,557,182     18,901,814  
 
 
CASH AND CASH EQUIVALENTS – End of period $ 41,612,649   $ 25,419,959  
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW          
INFORMATION:          
Cash paid during the six months for interest $ 1,818,269   $ 1,901,338  
 
 

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

11

Back to Contents

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULES OF INVESTMENTS

      Total Rentable
Square Feet		    September 30, 2005
(Unaudited)   		   December 31, 2004   
      Unless Otherwise  
 
Property Name Ownership City, State Indicated (Unaudited)   Cost   Estimated Market Value   Cost   Estimated Market Value
REAL ESTATE INVESTMENTS                   
                       
OFFICES                   
750 Warrenville WO Lisle, IL 103,193 $ 23,173,335 $ 10,000,300 $ 23,173,036 $ 10,098,838
Oakbrook Terrace WO Oakbrook, IL 123,734   —   —   14,833,796   9,698,734
Summit at Cornell Oaks WO Beaverton , OR 72,109   11,976,098   10,518,341   11,934,209   9,644,005
Westpark WO Brentwood, TN 97,199   10,798,599   12,541,739   10,708,970   11,151,327
Financial Plaza WO Brentwood, TN 95,768   12,333,116   12,299,959   12,333,151   10,966,233
    Offices % as of 9/30/05 22%   58,281,148   45,360,339   72,983,162   51,559,137
APARTMENTS                   
Brookwood Apartments WO Atlanta, GA 240 Units   18,378,717   17,865,859   17,344,994   16,616,914
Dunhill Trace Apartments WO Raleigh, NC 250 Units   16,168,699   19,024,362   16,083,715   18,000,660
Riverbend Apartments CJV Jacksonville, FL 458 Units   20,141,655   23,100,000   20,015,959   22,600,000
SIMA Apartments CJV Gresham/Salem, OR 201 Units   —   —   12,004,323   13,900,000
    Apartments % as of 9/30/05 29%   54,689,072   59,990,221   65,448,991   71,117,574
RETAIL                   
King's Market WO Rosewell, GA 314,358   37,331,411   27,936,970   33,864,392   21,765,286
Hampton Towne Center WO Hampton, VA 174,540   18,031,494   25,100,000   18,031,495   21,000,000
White Marlin Mall CJV Ocean City, MD 186,016   15,271,049   20,900,000   15,229,878   19,300,000
Kansas City Portfolio EJV Kansas City, KS;MO 487,660   11,351,248   11,450,923   11,286,726   12,126,466
    Retail % as of 9/30/05 41%   81,985,202   85,387,893   78,412,491   74,191,752
INDUSTRIAL                   
Smith Road WO Aurora, CO 277,930   10,813,584   11,247,526   10,692,625   10,204,072
    Industrial % as of 9/30/05 5%   10,813,584   11,247,526   10,692,625   10,204,072
HOTEL                   
Portland Crown Plaza CJV Lake Oswego, OR 161 Rooms   8,755,681   9,800,000   8,334,342   8,300,000
    Hotel % as of 9/30/05 5%   8,755,681   9,800,000   8,334,342   8,300,000
LAND                   
Gateway Village EJV Blue Springs, MO     100   100   100   100
    Land % as of 9/30/05 0%   100   100   100   100
MORTGAGE AND OTHER LOANS RECEIVABLE                  
Englar K-Mart MD Westminster, MD     3,439,317   3,439,317   1,332,060   1,332,060
  Mortgage and Other Loans Receivable% as of 9/30/05 2%   3,439,317   3,439,317   1,332,060   1,332,060
                       
                       
Total Real Estate Investments as a Percentage of Net Assets as of 9/30/05 104% $ 217,964,103 $ 215,225,396 $ 237,203,771 $ 216,704,695
 
 
 
 
 

WO – Wholly Owned Investment
CJV – Consolidated Joint Venture
EJV – Joint Venture Investment accounted for under the equity method
MD – Mezzanine Debt

12

Back to Contents

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULES OF INVESTMENTS

      September 30, 2005
(Unaudited)  		     December 31, 2004    
   
 
 
 Face Amount   Cost    Estimated
Market Value		   Cost    Estimated
Market Value		  
 
 
 
 
 
CASH AND CASH EQUIVALENTS – Percentage of Net Assets           20.0 %       9.4 %
Federal Home Loan Bank, 6.4500%, Jan. 3, 2005 $ 19,475,000     —     —   $ 19,455,135   $ 19,455,135  
Federal Home Loan Banks, 3.1950%, October 3, 2005   39,751,000     39,740,565     39,740,565     —     —  
 
 
 
 
 
Total Cash Equivalents   59,226,000     39,740,565     39,740,565     19,455,135     19,455,135  
                   
Cash   1,861,649     1,872,084     1,872,084     (1,897,953 )   (1,897,953 )
 
 
 
 
 
Total Cash and Cash Equivalents $ 61,087,649   $ 41,612,649   $ 41,612,649   $ 17,557,182   $ 17,557,182  
 
 
 
 
 

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

13

Back to Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2005 and 2004
(Unaudited)

Note 1: Summary Of Significant Accounting Policies

The accompanying unaudited financial statements included herein have been prepared in accordance with the requirements of Form 10-Q and accounting principles generally accepted in the United States of America for interim financial information. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. For further information, refer to the financial statements and notes thereto included in each partner’s Annual Report on Form 10-K for the Year Ended December 31, 2004.

Real estate investments are reported at their estimated fair market values.

FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), was issued in January 2003. In December 2003, FASB issued a revised interpretation of FIN 46 (“FIN 46-R”), that supersedes FIN 46. FIN 46-R defers the effective date for applying the provisions of FIN 46 for those companies currently accounting for their investments in accordance with the AICPA Audit and Accounting Guide, “Audits of Investment Companies” (the “Audit Guide”). The FASB is currently considering modifying FIN 46-R to provide an exception for companies that apply the Audit Guide. The Prudential Variable Contract Real Property Partnership (the “Partnership”) is awaiting the final determination from the FASB in order to evaluate the extent in which, if any, its investments may need to be consolidated as a result of this FIN 46-R.

Note 2: Related Party Transactions

Pursuant to an investment management agreement, Prudential Investment Management (“PIM”) charges the Partnership a daily investment management fee at an annual rate of 1.25% of the average daily gross asset valuation of the Partnership. For the nine months ended September 30, 2005 and 2004 investment management fees incurred by the Partnership were $2,098,000 and $1,958,091, respectively.

The Partnership also reimburses PIM for certain administrative services rendered by PIM. The amounts incurred for the nine months ended September 30, 2005 and 2004 were $40,222 and $92,722, respectively, and are classified as part of administrative expense in the Consolidated Statements of Operations.

Note 3: Commitments and Contingencies

The Partnership is subject to various legal proceedings and claims arising in the ordinary course of business. These matters are generally covered by insurance. In the opinion of Prudential Insurance Company of America’s (“Prudential”) management, the outcome of such matters will not have a material effect on the Partnership.

As of September 30, 2005, the Partnership had the following outstanding commitments to purchase real estate or fund additional expenditures on previously acquired properties and loan take-out agreements:

Property Type   Commitments
(000's)		  
 
 
   Apartments   $ 20,405  
Retail     15,187  
Other     1,550  
   
 
Total   $ 37,142  
   
 

14

Back to Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2005 and 2004
(Unaudited)

Note 3: Commitments and Contingencies (continued)

Certain purchases of real estate are contingent on a developer building the real estate according to plans and specifications outlined in the pre-sale agreement or the property achieving a certain level of leasing. Once those conditions have been met, it is anticipated that funding will be provided by operating cash flow, real estate investment sales, existing portfolio-level cash and financings or third party debt.

Note 4: Financial Highlights

  For the Nine Months Ended September 30,  
 
 
  2005   2004   2003   2002   2001  
 
 
 
 
 
 
Per Share(Unit) Operating Performance:                              
Net Asset Value, beginning of period $ 26.15   $ 24.66   $ 24.11   $ 23.82   $ 22.74  
Income From Investment Operations:                              
Investment income, before management fee   1.22     1.04     1.12     1.20     1.25  
Management fee   (0.29 )   (0.27 )   (0.24 )   (0.23 )   (0.22 )
Net realized and unrealized gain (loss) on investments   2.05     0.82     (0.84 )   (0.85 )   (0.00 )
 
 
 
 
 
 
Net Increase in Net Assets Resulting from Operations   2.98     1.59     0.04     0.12     1.03  
 
 
 
 
 
 
                               
Net Asset Value, end of period $ 29.13   $ 26.25   $ 24.15   $ 23.94   $ 23.77  
 
 
 
 
 
 
                               
Total Return, before Management Fee (a):   12.58 %   7.58 %   1.15 %   1.44 %   5.56 %
Ratios/Supplemental Data:                              
Net Assets, end of period (in millions) $ 208   $ 193   $ 185   $ 188   $ 216  
Ratios to average net assets (b):                              
   Total Portfolio Level Expenses   1.10 %   1.06 %   1.00 %   0.95 %   0.97 %
   Net Investment Income   3.04 %   4.13 %   4.62 %   5.15 %   5.56 %
 
 
(a)  Total Return, before management fee is calculated by geometrically linking quarterly returns which are calculated using the formula below:
 
                          Net Investment Income + Net Realized and Unrealized Gains/(Losses)
              Beg. Net Asset Value + Time Weighted Contributions - Time Weighted Distributions
 
(b)  Average net assets are based on beginning of quarter net assets.

15

Back to Contents

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

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

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

(a) Liquidity and Capital Resources

As of September 30, 2005, the Partnership’s liquid assets, consisting of cash and cash equivalents, were approximately $41.6 million, an increase of approximately $24.0 million from $17.6 million at December 31, 2004. The increase was primarily due to net sales proceeds received in connection with three sales totaling approximately $25.0 million cash. Sources of liquidity include net cash flow from property operations, sales, financings and interest from short-term investments. The Partnership uses cash for its real estate investment activities and for distribution to its partners. As of September 30, 2005, 16.0% of the Partnership’s total assets consisted of cash and cash equivalents.

Dispositions for the nine months ended September 30, 2005 included the sale of one apartment complex located in Salem, Oregon, an office property located in Oakbrook Terrace, Illinois, and one apartment complex located in Gresham, Oregon. The three investments sold for combined gross proceeds of $26.0 million.

During the first nine months of 2005, the Partnership spent approximately $5.4 million on capital improvements to existing properties. Approximately $1.0 million was associated with the renovation of an apartment complex in Atlanta, Georgia, approximately $3.5 million was associated with the renovation and redevelopment of a retail center in Roswell, Georgia, and approximately $0.4 million was associated with the renovation of a hotel property in Lake Oswego, Oregon. The remaining $0.5 million was associated with minor capital improvements at various other properties.

(b) Results of Operations

The following is a comparison of the Partnership’s results of operations for the nine and three month periods ended September 30, 2005 and 2004.

Net Investment Income Overview

The Partnership’s net investment income for the nine months ended September 30, 2005 was approximately $6.6 million, an increase of $0.9 million from $5.7 million for the prior year period. The Partnership’s net investment income for the quarter ended September 30, 2005 was $2.4 million, an increase of $0.4 million from $2.0 million for the prior year period. The increase for both the nine-month and three-month periods was attributed to the office and hotel sectors, due to (a) increased rents and stabilized occupancy at both office properties in Brentwood, Tennessee and (b) increased occupancy and higher average daily rates at the hotel property in Lake Oswego, Oregon. Partially offsetting these increases were decreases in net investment income in the apartment sector for the nine-month period and decreases in net investment income in the retail and industrial sectors for both the nine-month and three-month periods ended

16

Back to Contents

September 30, 2005. The decrease in the apartment sector was a result of rental concessions and mortgage interest incurred for the apartment property in Atlanta, Georgia that was not incurred during the first nine months of 2004. The decrease in net investment income in the retail sector was a result of (a) increased expenses at the retail centers in Kansas City, Kansas and Kansas City, Missouri and (b) increased vacancy at the retail center in Ocean City, Maryland. The decrease in net investment income in the industrial sector was a result of lower occupancy at the industrial property in Aurora, Colorado as a result of a lease termination in 2004.

Valuation Overview

The Partnership recorded an aggregate unrealized gain of $13.4 million for the nine months ended September 30, 2005, compared to an unrealized gain of $6.1 million during the prior year period. The unrealized gain during the first nine months of 2005 was attributed to valuation gains in all property type sectors, primarily due to strengthening market fundamentals and continued investor demand.

The Partnership recorded an aggregate unrealized gain of $9.5 million for the three months ended September 30, 2005, compared to an unrealized gain of $3.1 million during the prior year period. The unrealized gain for the three months ended September 30, 2005 was primarily recorded in the office and retail sectors. The gains in the office sector were due to strengthening market fundamentals as noted above. The retail sector recorded value gains, mainly due to the completion of the redevelopment and opening of an anchor retailer, Publix, at the retail center in Roswell, Georgia and continued investor demand at the retail center in Hampton, Virginia.

The Partnership recorded a net realized gain of $1.3 million for the nine months ended September 30, 2005. The realized gain for the nine-month period was recorded in the office and apartment sectors in connection with the sales of the office property located in Oakbrook Terrace, Illinois and one apartment complex located in Salem, Oregon.

The Partnership recorded a realized loss of $0.3 million for the three months ended September 30, 2005. The realized loss for the three-month period was recorded in the apartment sector in connection with the sale of one apartment complex in Gresham, Oregon.

Net Gain (Loss) on Real Estate Investments Sold Overview

On August 10, 2005, the Partnership sold one apartment complex in Gresham, Oregon for $9.9 million, resulting in a realized loss of approximately $0.3 million.

17

Back to Contents

The following table presents a comparison of the Partnership’s sources of net investment income, and realized and unrealized gains or losses by investment type for the nine and three month periods ended September 30, 2005 and 2004.

  Nine Months Ended September 30,   Three Months Ended September 30,  
  2005   2004   2005   2004  
   
 
 
 
 
Net Investment Income:                            
                             
Office properties     $2,340,225       $1,400,615     $703,000     $418,915  
Apartment complexes   1,718,278   1,982,985     695,288     630,205  
Retail properties   3,158,106   3,469,560     928,351   1,178,799  
Industrial properties     397,619       511,840     149,259     191,139  
Hotel property     771,163       402,509     384,709     226,826  
Equity in income of real estate partnership     —       —     —     —  
Other (including interest income,                          
   investment mgt fee, etc.)   (1,759,085 ) (2,109,784 ) (464,469 ) (654,208 )
   
 
 
 
 
Total Net Investment Income     $6,626,306     $5,657,725     $2,396,138     $1,991,676  
   
 
 
 
 
Net Realized Gain (Loss) on Real Estate                            
Investments:                            
                             
Apartment Complex     209,531       —   (271,277 )   —  
Office Building   1,050,833       —     1,084     —  
   
 
 
 
 
Total Net Realized Gain (Loss) on Real                            
Estate Investments   1,260,364       —   (270,193 )   —  
   
 
 
 
 
Net Unrealized Gain (Loss) on Real Estate                            
Investments:                            
                             
Office properties   3,491,704       ($403,401 ) 3,580,066     $790,896  
Apartment complexes   1,219,842   2,957,522     (43,597 ) 1,957,062  
Retail properties   7,038,712   3,472,078   6,010,599     229,617  
Industrial properties     922,495       12,745     (73,265 )   (696 )
Hotel property     721,839       27,966     48,025     144,094  
   
 
 
 
 
Total Net Unrealized Gain (Loss) on Real                            
Estate Investments   13,394,592   6,066,910   9,521,828   3,120,973  
   
 
 
 
 
                             
Net Realized and Unrealized Gain (Loss) on                            
Real Estate Investments   $14,654,956   $6,066,910     $9,251,635     $3,120,973  
   
 
 
 
 

18

Back to Contents

OFFICE PORTFOLIO

Property   Net
Investment
Income/Loss
2005		     Net
Investment
Income/Loss
2004		     Realized /
Unrealized
Gain/(Loss)
2005		     Unrealized
Gain/(Loss)
2004		   Occupancy
2005		   Occupancy
2004		  
Nine Months Ended                                
September 30,                                
                               
Lisle, IL $ 304,006   $ 298,887   $ (98,838 ) $ (2,106,789 ) 43 % 43 %
Brentwood, TN   745,503     606,990     1,300,782     1,389,806   92 % 82 %
Oakbrook Terrace, IL*   202,894     214,345     1,174,380     (539,499 ) N/A   41 %
Beaverton, OR   620,283     666,350     832,446     (400,000 ) 75 % 72 %
Brentwood, TN   467,539     (385,957 )   1,333,767     1,253,081   100 % 100 %
 
         
  $ 2,340,225   $ 1,400,615   $ 4,542,537   $ (403,401 )        
 
         
                               
Three Months Ended                                
September 30,                                
                               
Lisle, IL $ 65,716   $ 114,847   $ 300,016   $ (2,048 )        
Brentwood, TN   248,520     207,389     1,193,449     1,129,066          
Oakbrook Terrace, IL*   (50,650 )   91,718     1,085     (28,335 )        
Beaverton, OR   221,588     212,959     886,642     (400,000 )        
Brentwood, TN   217,826     (207,998 )   1,199,958     92,213          
 
         
  $ 703,000   $ 418,915   $ 3,581,150   $ 790,896          
 
         

*Net Investment Income for the nine months ended September 30, 2005 reflects partial period results for office property located in Oakbrook Terrace, Illinois that was sold on June 8, 2005. Net investment income the three months ended September 30, 2005 reflects post closing operating and administrative expenses

Net Investment Income

Net investment income for the Partnership’s office properties was approximately $2.3 million for the nine months ended September 30, 2005, an increase of $0.9 million from the prior year period. Net investment income for the Partnership’s office properties was approximately $0.7 million for the three months ended September 30, 2005, an increase of $0.3 million from the prior year period. The increase for both periods was primarily due to stabilized occupancy and increased market rents at both of the Partnership’s office assets in Brentwood, Tennessee. Partially offsetting these increases were post closing operating and administrative expenses at the Oakbrook Terrace, Illinois office property, which was sold during the three month period ended June 30, 2005.

Total Realized and Unrealized Gain/(Loss)

The office properties owned by the Partnership recorded an aggregate net realized and unrealized gain of approximately $4.5 million during the first nine months of 2005, compared to a net unrealized loss of $0.4 million for the prior year period. The office properties owned by the Partnership recorded an aggregate net realized and unrealized gain of approximately $3.6 million for the three months ended September 30, 2005, compared to a net unrealized gain of $0.8 million for the prior year period. The gains for both the nine and three month periods were primarily due to (a) the sale of the office property in Oakbrook Terrace, Illinois and (b) strengthening market fundamentals and increases in occupancy at the office properties located in Brentwood, Tennessee and Beaverton, Oregon.

19

Back to Contents

APARTMENT COMPLEXES

Property   Net
Investment
Income/Loss
2005		     Net
Investment
Income/Loss
2004		     Realized /
Unrealized
Gain/(Loss)
2005		     Unrealized
Gain/(Loss)
2004		   Occupancy
2005		   Occupancy
2004		  
Nine Months Ended                                
September 30,                                
                               
Atlanta, GA $ 68,002   $ 626,795   $ 215,223   $ 585,008   91 % 95 %
Raleigh, NC   503,143     415,751     938,718     577,633   93 % 94 %
Jacksonville, FL   792,840     794,333     189,443     304,325   92 % 91 %
Gresham/Salem, OR*   354,293     146,106     85,989     1,490,556   N/A   92 %
 
         
  $ 1,718,278   $ 1,982,985   $ 1,429,373   $ 2,957,522          
 
         
                               
Three Months Ended                                
September 30,                                
                               
Atlanta, GA $ 25,165   $ 206,259   $ 122,663   $ 309,999          
Raleigh, NC   238,548     120,848     (51,434 )   (30,352 )        
Jacksonville, FL   391,924     275,022     (114,826 )   369,154          
Gresham/Salem, OR*   39,651     28,076     (271,277 )   1,308,261          
 
         
  $ 695,288   $ 630,205   $ (314,874 ) $ 1,957,062          
 
         

* Net investment income for the nine months ended September 30, 2005 reflects partial period results for the apartment properties in Salem, Oregon and Gresham, Oregon that were sold on March 10, 2005 and August 10, 2005, respectively. Net investment income for the three months ended September 30, 2005 reflects partial period results for the apartment property located in Gresham, Oregon. Net investment income for the nine months ended September 30, 2004 and three months ended September 30, 2004 reflects results for four apartment properties located in Salem and Gresham, Oregon, two of which were sold on December 14, 2004.

Net Investment Income

Net investment income for the Partnership’s apartment properties was $1.7 million for the nine months ended September 30, 2005, a decrease of $0.3 million from the prior year period. The decrease was primarily due to (a) rental concessions and mortgage interest incurred for the apartment property in Atlanta, Georgia that was not incurred during the first nine months of 2004. Partially offsetting the decrease was an increase in net investment income for the apartment properties in Gresham/Salem, Oregon due to a diminution of mortgage interest expense resulting from the prepayment of debt on the properties.

Net investment income for the Partnership’s apartment properties was $0.7 million for the three months ended September 30, 2005, an increase of $0.1 million from the prior year period. The increase was primarily due to (a) reduced expenses at the apartment property in Raleigh, North Carolina and (b) higher occupancy and reduced operating expenses at the apartment property in Jacksonville, Florida. Partially offsetting the increase was a decrease in net investment income for the apartment property in Atlanta, Georgia for the reasons discussed above.

Total Realized and Unrealized Gain/(Loss)

The Partnership recorded an aggregate net unrealized and realized gain of $1.4 million for the nine months ended September 30, 2005, compared to a net unrealized gain of $3.0 million for the

20

Back to Contents

prior year period. The net unrealized gain was primarily due to continued investor demand, which has caused an increase in valuations.

The apartment properties owned by the Partnership recorded an aggregate net unrealized and realized loss of $0.3 million for the three months ended September 30, 2005, compared to an aggregate net unrealized gain of $2.0 million for the prior year period. The aggregate net unrealized and realized loss was primarily due to the sale of one apartment property located in Gresham, Oregon, as previously discussed.

RETAIL PROPERTIES

Property     Net
Investment
Income/Loss
2005		     Net
Investment
Income/Loss
2004		     Unrealized
Gain/(Loss)
2005		     Unrealized
Gain/(Loss)
2004		   Occupancy
2005		   Occupancy
2004		  
Nine Months Ended                                  
September 30,                                  
                                 
Roswell, GA   $ 1,224,536   $ 1,154,113   $ 2,704,664   $ (109,515 ) 94 % 78 %
Kansas City, KS; MO     141,470     344,936     (740,065 )   1,758,986   86 % 85 %
Hampton, VA     947,392     916,802     4,100,000     981,574   100 % 100 %
Ocean City, MD     654,659     700,459     974,113     841,033   87 % 99 %
Westminster, MD*     (469 )   246,765     —     —   N/A   N/A  
Westminster, MD **     190,518     106,485     —     —   N/A   N/A  
   
         
    $ 3,158,106   $ 3,469,560   $ 7,038,712   $ 3,472,078          
   
         
                                 
Three Months Ended                                  
September 30,                                  
                                 
Roswell, GA   $ 410,255   $ 369,753   $ 2,787,772   $ (35,300 )        
Kansas City, KS; MO     (65,481 )   83,528     222,040     (68,253 )        
Hampton, VA     332,042     305,542     2,900,000     394,424          
Ocean City, MD     181,924     288,846     100,787     (61,254 )        
Westminster, MD*     (469 )   103,864     —     —          
Westminster, MD **     70,080     27,266     —     —          
   
         
    $ 928,351   $ 1,178,799   $ 6,010,599   $ 229,617          
   
         

* Classified as Other Real Estate Investment (mortgage paid in full September 13, 2004).
**Mortgage Loan Receivable (Acquired January 2004).

Net Investment Income

Net investment income for the Partnership’s retail properties was $3.2 million for the nine months ended September 30, 2005, a decrease of $0.3 million from the prior year period. Net investment income for the Partnership’s retail properties was $0.9 million for the three months ended September 30, 2005, a decrease of $0.3 million from the prior year period. The decrease in net investment income for both the nine and three month periods was primarily due to (a) increased expenses at the retail centers in Kansas City, Kansas and Kansas City, Missouri, (b) increased vacancy at the retail center in Ocean City, Maryland and (c) interest income received the prior year in connection with the loan made by the Partnership to the retail center in Westminster, Maryland that was paid in full on September 13, 2004. Partially offsetting the decrease for both the nine and three month periods was (a) an increase in net investment income at the retail center in Roswell, Georgia due to higher occupancy resulting from the opening of an anchor retailer, Publix and (b) interest income received in connection with the mortgage loan receivable made by the Partnership to the retail center in Westminster, Maryland in January 2004.

21

Back to Contents

Unrealized Gain/(Loss)

The retail properties recorded an aggregate net unrealized gain of $7.0 million for the nine months ended September 30, 2005, compared to a net unrealized gain of $3.5 million for the prior year period. The net unrealized gain was primarily due to (a) continued investor demand at the retail centers in Hampton, Virginia and Ocean City, Maryland that recorded a combined unrealized gain of $5.1 million and (b) completion of the redevelopment and opening of an anchor retailer, Publix, at the retail center in Roswell, Georgia that recorded a net unrealized gain of approximately $2.7 million. Partially offsetting these gains was a net unrealized loss of $0.7 million recorded at the retail centers located in Kansas City, Kansas and Kansas City, Missouri due to increases in expenses.

The retail properties recorded an aggregate net unrealized gain of $6.0 million for the three months ended September 30, 2005, compared to a net unrealized gain of $0.2 million for the prior year period. The net unrealized gain was primarily attributed to the retail centers located in Roswell, Georgia and Hampton, Virginia, as previously discussed.

INDUSTRIAL PROPERTIES

Property     Net
Investment
Income/Loss
2005		     Net
Investment
Income/Loss
2004		     Unrealized
Gain/(Loss)
2005		     Unrealized
Gain/(Loss)
2004		   Occupancy
2005		   Occupancy
2004		  
Nine Months Ended                                  
September 30,                                  
                                 
Aurora, CO   $ 397,619   $ 510,737   $ 922,495   $ 12,745   78 % 88 %
Bolingbrook, IL     -     2,603     —     —   Sold September 2002
Salt Lake City, UT     -     (1,500 )   —     —   Sold January 2003
   
         
    $ 397,619   $ 511,840   $ 922,495   $ 12,745          
   
         
                                 
Three Months Ended                                  
September 30,                                  
                                 
Aurora, CO   $ 149,259   $ 191,299   $ (73,265 ) $ (696 )        
Bolingbrook, IL     —     —     —     —          
Salt Lake City, UT     —     (160 )   —     —          
   
         
    $ 149,259   $ 191,139   $ (73,265 ) $ (696 )        
   
         

Net Investment Income

Net investment income for the Partnership’s industrial property was $0.4 million for the nine months ended September 30, 2005, a decrease of $0.1 million from the prior year period. Net investment income for the Partnership’s industrial property was $0.1 million for the three months ended September 30, 2005, unchanged from the prior year period. The decrease for the nine month period was primarily due to lower occupancy, as a result of a lease termination in 2004.

Unrealized Gain/(Loss)

The Aurora, Colorado industrial property owned by the Partnership recorded a net unrealized gain of approximately $0.9 million for the nine months ended September 30, 2005. The net unrealized gain was primarily due to continuing investor demand for this product type.

22

Back to Contents

HOTEL PROPERTY

Property     Net
Investment
Income/Loss
2005		     Net
Investment
Income/Loss
2004		     Unrealized
Gain/(Loss)
2005		     Unrealized
Gain/(Loss)
2004		   Occupancy
2005		   Occupancy
2004		  
Nine Months Ended                                  
September 30,                                  
                                 
Lake Oswego, OR   $ 771,163   $ 402,509   $ 721,839   $ 27,966   88 % 76 %
                                   
                                 
Three Months Ended                                  
September 30,                                  
                                 
Lake Oswego, OR   $ 384,709   $ 226,826   $ 48,025   $ 144,094          

Net Investment Income

Net investment income for the Partnership’s hotel property was $0.8 million for the nine months ended September 30, 2005, an increase of $0.4 million from the prior year period. Net investment income for the Partnership’s hotel property was $0.4 million for the three months ended September 30, 2005, an increase of $0.2 million from the prior year period. The increase for both the nine and three month periods was primarily due to increased occupancy and higher average daily rates generated at the hotel compared to the prior year periods.

Unrealized Gain/(Loss)

The Lake Oswego, Oregon hotel property owned by the Partnership recorded a net unrealized gain of $0.7 million for the nine months ended September 30, 2005. The net unrealized gain was primarily due to strengthening market fundamentals and the benefits associated with completion of the renovation.

Other

Other net investment income increased $0.4 million during the nine months ended September 30, 2005 from the prior year period. Other net investment income includes interest income from short-term investments, investment management fees, and portfolio level expenses.

(c) Inflation

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

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires the application of accounting policies that often involve a significant degree of judgment. Management reviews critical estimates and assumptions on an ongoing basis. If management determines, as a result of its consideration of facts and circumstances, that modifications in assumptions and estimates are appropriate, results of operations and financial position as reported in the unaudited Financial

23

Back to Contents

Statements of the Account and the Partnership may change significantly.
The following sections discuss critical accounting policies applied in preparing the unaudited financial statements of the Account and the Partnership that are most dependent on the application of estimates and assumptions.

Valuation of Investments

Real Estate Investments – The Partnership's investments in real estate are initially carried at their purchase price. Subsequently, real estate investments are reported at their estimated market values based upon appraisal reports prepared by independent real estate appraisers (members of the Appraisal Institute or an equivalent organization) within a reasonable amount of time following acquisition of the real estate and no less frequently than annually thereafter, with independent updates quarterly. The Chief Real Estate Appraiser of PIM is responsible to assure that the valuation process provides objective and reasonable market value estimates. The market value of real estate investments does not reflect transaction sale costs, which may be incurred upon disposition of real estate investments.

The purpose of an appraisal is to estimate the market value of real estate as of a specific date. Market value has been defined as the most probable price for which the appraised real estate will sell in a competitive market under all conditions requisite for a fair sale, with the buyer and seller each acting prudently, knowledgeably, and in their self interest, and assuming that neither is acting under duress.

Unconsolidated real estate partnerships are valued at the Partnership’s equity in net assets, as reflected in the partnership’s financial statements, with properties valued as described above.

Mortgage and other loans receivable, which are accounted for as loans, are independently valued according to the same appraisal process as other investments in real estate.

As described above, the estimated market value of real estate and real estate related assets is determined through an appraisal process, except for other real estate investments, which are determined as stated above. These estimated market values may vary significantly from the prices at which the real estate investments would sell because 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 these estimated market values are reasonable approximations of market prices and that the aggregate value of investments in real estate is fairly presented as of September 30, 2005 and September 30, 2004.

Other Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk – The Partnership's exposure to market rate risk for changes in interest rates relates to approximately 40.84% (as of September 30, 2005) of its investment portfolio consisting primarily of short-term fixed rate commercial paper and fixed and variable interest rate debt. The Partnership does not use derivative financial instruments. By policy, the Partnership places its investments with high quality debt security issuers, limits the amount of credit exposure to any

24

Back to Contents

one issuer, limits duration by restricting the term, and holds investments to maturity except under unusual circumstances.

The table below presents the amounts and related weighted interest rates of the Partnership's cash equivalents and short-term investments at September 30, 2005:

    Estimated Market  
    Value Average
  Maturity (in $ millions) Interest Rate
 
Cash and Cash equivalents 0-3 months $41.6 3.03%

The table below discloses the Partnership’s debt as of September 30, 2005. All of the Partnership’s long-term debt bears interest at fixed rates and therefore the fair value of these instruments is affected by changes in market interest rates. The following table presents principal cash flows (in thousands) based upon maturity dates of the debt obligations and the related weighted-average interest rates by expected maturity dates for the fixed rate debt.

Debt (in $ thousands),
including current portion		    10/1/2005-
12/31/2005		        2006        2007        2008        2009        Thereafter        Total       Estimated Fair Value
 
   
   
   
   
   
   
   
Average Fixed Interest Rate   5.21 %   5.20 %   5.18 %   4.99 %   5.37 %   6.75 %   6.17 %    
Fixed Rate $ 67   $ 550   $ 589   $ 26,092   $ 8,746   $ 7,284   $ 43,328   $ 42,505
Variable Rate   —     —     —     —     —     —     —     —
 
Total Mortgage Loans Payable $ 67   $ 550   $ 589   $ 26,092   $ 8,746   $ 7,284   $ 43,328   $ 42,505
 

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

25

Back to Contents

Item 4. Controls and Procedures

In order to ensure that the information we must disclose in our filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis, the Company’s management, including our Chief Executive Officer and Chief Financial Officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of September 30, 2005. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2005, our disclosure controls and procedures were effective in timely alerting them to material information relating to us required to be included in our periodic SEC filings. There has been no change in our internal control over financial reporting during the quarter ended September 30, 2005, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

Contract owners participating in the Real Property Account have no voting rights with respect to the Real Property Account.

Item 6. Exhibits

  Exhibits  
       
  31.1   Section 302 Certification of the Chief Executive Officer.
       
  31.2   Section 302 Certification of the Chief Financial Officer.
       
  32.1   Section 906 Certification of the Chief Executive Officer.
       
  32.2   Section 906 Certification of the Chief Financial Officer.

26

Back to Contents

SIGNATURES

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

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
in respect of
Pruco Life of New Jersey Variable Contract Real Property Account

Date:          November 14, 2005 By: /s/ Bernard J. Jacob
     
    Bernard J. Jacob
  Chief Executive Officer
     

27