<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended September 30, 1995
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 33-20018
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
in respect of
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT
------------------------------------------
REAL PROPERTY ACCOUNT
----------------------
(Exact name of Registrant as specified in its charter)
NEW JERSEY 22-2426091
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
213 WASHINGTON STREET, NEWARK, NEW JERSEY 07102-2992
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(800) 445-4571
--------------------------------------------------
(Registrant's Telephone Number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
<PAGE>
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
(Registrant)
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
A. PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT
REAL PROPERTY ACCOUNT
Statements of Net Assets - September 30, 1995
(Unaudited) and December 31, 1994 3
Statements of Operations (Unaudited) -
Nine and Three Months Ended September 30, 1995
and 1994 3
Statements of Changes in Net Assets - Nine Months
Ended September 30, 1995 (Unaudited)
and Year Ended December 31, 1994 4
Notes to the Financial Statements (Unaudited) 5
B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY
PARTNERSHIP
Statements of Assets and Liabilities - September 30,
1995 (Unaudited) and December 31, 1994 7
Statements of Operations (Unaudited) - Nine and
Three Months Ended September 30, 1995 and 1994 8
Statements of Changes in Net Assets - Nine Months
Ended September 30, 1995 (Unaudited) and Year Ended
December 31, 1994 9
Statements of Cash Flows (Unaudited) - Nine Months Ended
September 30, 1995 and 1994 10
Schedule of Investments - September 30, 1995 (Unaudited)
and December 31, 1994 11
Notes to the Financial Statements (Unaudited) 14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Changes in Securities 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
PART III - SIGNATURES 24
2
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
STATEMENTS OF NET ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
(UNAUDITED) DECEMBER 31, 1994
--------------- -----------------
<S> <C> <C>
Investment in shares of The Prudential Variable Contract
Real Property Partnership $ 7,357,374 $ 6,851,923
--------------- ----------------
--------------- ----------------
NET ASSETS, representing:
Equity of Contract Owners $ 6,547,623 $ 6,018,239
Equity of Pruco Life Insurance Company of New Jersey 809,751 833,684
--------------- ----------------
$ 7,357,374 $ 6,851,923
--------------- ----------------
--------------- ----------------
</TABLE>
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Net Investment Income from Partnership Operations $ 415,270 $ 345,887 $ 152,422 $ 122,393
EXPENSES:
Asset Based Charges to Contract Owners (Note 3) 27,903 26,588 9,617 9,049
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME 387,367 319,299 142,805 113,344
-------------- -------------- -------------- --------------
NET UNREALIZED GAIN/(LOSS)
ON INVESTMENTS IN PARTNERSHIP 90,180 (77,642) 108,888 4,478
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 477,547 $ 241,657 $ 251,693 $ 117,822
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 5 THROUGH 6.
3
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
------------------ -----------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 387,367 $ 438,732
Net Unrealized Gain
on Investments in Partnership 90,180 57,089
-------------- ----------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 477,547 495,821
-------------- ----------------
CAPITAL TRANSACTIONS:
Net Contributions/(Withdrawals) by Contract Owners 105,752 (337,574)
Net (Withdrawals)/Contributions by Pruco Life
Insurance Company of New Jersey (77,848) 373,097
-------------- ----------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS 27,904 35,523
-------------- ----------------
TOTAL INCREASE IN NET ASSETS $ 505,451 $ 531,344
NET ASSETS:
Beginning of period $ 6,851,923 $ 6,320,579
-------------- ----------------
End of period $ 7,357,374 $ 6,851,923
-------------- ----------------
-------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 5 THROUGH 6.
4
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
September 30, 1995
(Unaudited)
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 ("The
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. On April 29, 1988, Pruco
Life of New Jersey contributed $100,000 to commence operations of the
Real Property Account.
The assets of the Real Property Account are invested in The Prudential
Variable Contract Real Property Partnership (the "Partnership"). The
Partnership is a general partnership organized under New Jersey law on
April 29, 1988, through agreement among The Prudential, 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. On April 29, 1988, the
Real Property Account initially contributed $100,000 to 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. General
The financial statements included herein have been prepared in
accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the nine
months ended September 30, 1995 are not necessarily indicative of
the results that may be expected for the year ended December 31,
1995. For further information, refer to the financial statements
and notes thereto included in the Partner's December 31, 1994
Annual Report on Form 10-K.
B. Investment in Partnership Interest
The investment in the Partnership is based on the Real Property
Account's proportionate interest of the Partnership's current
value, as discussed in Note 1 to the Partnership's financial
statements. At September 30, 1995 the Real Property Account's
interest in the Partnership, based on current value equity was
3.9% or 473,226 shares.
C. Income Recognition
The Real Property Account recognizes its proportionate share of
the Partnership's net investment income on a daily basis, as
consistent with the Partnership Agreement.
5
<PAGE>
Note 3: Asset Based Charges
Mortality risk and expense risk charges and charges for administration
are applied daily against the net assets representing equity of Contract
Owners investing in the Real Property Account, at an effective annual
rate as shown below for each of Pruco Life of New Jersey's separate
accounts investing in the Real Property Account:
-----------------------------------------------------------------------
Variable Insurance Account 0.35%
Variable Appreciable Account 0.60%
Single Premium Variable Life Account 1.25%
Single Premium Variable Annuity Account 1.25%
-----------------------------------------------------------------------
Note 4: Taxes:
Income and capital gains and losses of the Partnership are attributed,
for federal income tax purposes, to the Partners in the Partnership,
including Pruco Life of New Jersey, in respect of the Real Property
Account. The operations of the Real Property Account form a part of,
and are taxed with, the operations of Pruco Life of New Jersey. Under
the Internal Revenue Code, all ordinary income and capital gains
allocated to the Contract Owners are not taxable to Pruco Life of New
Jersey. As a result, the net asset values of the Real Property Account
are not affected by federal income taxes on the ordinary income and
capital gains and losses attributable to the Real Property Account.
Note 5: Related Party
Several actions have been brought against Pruco Life of New Jersey, on
behalf of those persons who purchased life insurance policies based on
complaints about sales practices engaged in by The Prudential and Pruco
Life of New Jersey and agents appointed by The Prudential and Pruco
Life of New Jersey. The Prudential has agreed to indemnify Pruco Life
of New Jersey for any and all losses resulting from such litigation.
6
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
(UNAUDITED) DECEMBER 31, 1994
------------------ -----------------
<S> <C> <C>
ASSETS:
Properties at current value
(cost $170,477,852 and $154,157,068
respectively) (Note 1) $144,344,223 $126,258,004
Interest in properties at current value
(cost $6,133,157 and $6,108,742
respectively) (Note 1) 6,250,643 5,726,451
Cash and cash equivalents 32,533,499 33,093,237
Marketable securities 9,022,003 15,824,199
Other assets and accounts receivable
(net of allowance for uncollectible
amounts of $7,902 and $128,336 respectively) 1,374,178 2,218,095
------------ ------------
Total Assets $193,524,546 $183,119,986
------------ ------------
------------ ------------
LIABILITIES:
Obligation under capital lease $ 3,798,889 $ 3,804,836
Accounts payable and accrued expenses 1,288,564 805,066
Due to affiliates (Note 2) 645,376 624,206
Other liabilities 654,248 645,913
------------ ------------
Total liabilities 6,387,077 5,880,021
------------ ------------
NET ASSETS:
Partners' Equity 187,137,469 177,239,965
------------ ------------
$193,524,546 $183,119,986
------------ ------------
------------ ------------
Number of shares outstanding at end of period 12,036,684 12,241,034
------------ ------------
------------ ------------
Share Value at end of period $15.55 $14.48
------ ------
------ ------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
7
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- -------------------------
1995 1994 1995 1994
-------------------------- -------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Rent from properties $14,031,856 $11,907,848 $5,028,614 $4,143,467
Income from interest in properties 472,096 2,160,472 161,647 681,831
Interest on mortgage loans 0 105,695 0 0
Interest from short-term investments 2,157,742 945,320 598,780 407,638
----------- ----------- ---------- ----------
16,661,694 15,119,335 5,789,041 5,232,936
----------- ----------- ---------- ----------
EXPENSES:
Investment management fee (Note 2) 1,730,668 1,716,648 587,984 588,419
Real estate tax expense 1,429,863 1,410,588 354,233 419,613
Administrative expenses 1,246,642 988,723 407,094 362,773
Operating expenses 1,276,795 1,275,092 444,876 451,795
Interest expense 345,434 245,250 115,145 81,750
----------- ----------- ---------- ----------
6,029,402 5,636,301 1,909,332 1,904,350
----------- ----------- ---------- ----------
NET INVESTMENT INCOME 10,632,292 9,483,034 3,879,709 3,328,586
----------- ----------- ---------- ----------
NET UNREALIZED GAIN/(LOSS)
ON INVESTMENTS 2,265,212 (2,152,548) 2,766,811 108,835
----------- ----------- ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $12,897,504 $ 7,330,486 $6,646,520 $3,437,421
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
8
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
------------------ -----------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 10,632,292 $ 12,848,199
Net Unrealized Gain on Investments 2,265,212 1,339,443
------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 12,897,504 14,187,642
------------ ------------
CAPITAL TRANSACTIONS:
Withdrawals by partners
(204,350 and 790,390,
shares respectively) (3,000,000) (11,000,000)
------------ ------------
NET DECREASE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS (3,000,000) (11,000,000)
------------ ------------
TOTAL INCREASE IN NET ASSETS $ 9,897,504 $ 3,187,642
NET ASSETS:
Beginning of period $177,239,965 $174,052,323
------------ ------------
End of period $187,137,469 $177,239,965
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
9
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $12,897,504 $ 7,330,486
Adjustments to reconcile net increase in net assets
resulting from operations to net cash provided by
operating activities:
Net unrealized (gain)/loss on investments (2,265,212) 2,152,548
Changes in assets and liabilities:
Decrease/(Increase) in other assets
and accounts receivable 843,917 (95,157)
Decrease/(Increase) in marketable securities 6,802,196 (3,952,733)
Decrease in obligation under capital lease (5,947) (4,750)
Increase in accounts payable
and accrued expenses 483,498 140,319
Increase/ (Decrease) in due to affiliates 21,170 (51,104)
Increase in other liabilities 8,335 53,813
----------- -----------
Net cash provided by operating activities 18,785,461 5,573,422
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property (15,758,699) 0
Capital improvements on real estate owned (562,085) (615,043)
Capital improvements on interest in properties (24,415) 0
Principal repayments received on mortgage loans 0 3,947,528
----------- -----------
Net cash (used in)/provided by investing activities (16,345,199) 3,332,485
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Withdrawals (3,000,000) (5,000,000)
----------- -----------
Net cash used in financing activities (3,000,000) (5,000,000)
----------- -----------
Net (decrease)/increase in cash and cash equivalents (559,738) 3,905,907
CASH AND CASH EQUIVALENTS - Beginning of period 33,093,237 23,852,233
----------- -----------
CASH AND CASH EQUIVALENTS - End of period $32,533,499 $27,758,140
----------- -----------
----------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES
Foreclosure on mortgage loan (Note 5) $ 0 $ 5,276,262
----------- -----------
----------- -----------
SUPPLEMENTAL INFORMATION:
Interest paid $ 376,450 $ 250,000
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
10
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 DECEMBER 31, 1994
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT IN PROPERTIES (PERCENT OF NET ASSETS) 77.1% 71.2%
CURRENT CURRENT
LOCATION DESCRIPTION COST VALUE COST VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Azusa, CA Warehouse $ 18,262,522 $ 14,210,318 $ 18,219,245 $ 15,426,651
Lisle, IL Office Building 17,524,421 12,900,000 17,524,421 12,000,000
Atlanta, GA Garden Apartments 15,371,496 12,501,591 15,309,193 11,903,533
Pomona, CA (a) Warehouse 23,203,880 17,128,049 23,115,589 16,353,556
Roswell, GA Retail Shopping Center 31,633,701 32,014,885 31,605,970 32,500,000
Morristown, NJ Office Building 18,592,283 9,567,572 18,443,689 9,825,401
Bolingbrook, IL Warehouse 8,948,028 7,417,450 8,915,498 7,009,907
Farmington Hills, MI Garden Apartments 13,594,950 14,221,532 13,560,049 13,538,956
Flint, MI Office Building 7,587,872 7,334,662 7,463,414 7,700,000
Raleigh, NC Garden Apartments 15,758,699 17,048,164 0 0
------------ ------------ ------------ ------------
$170,477,852 $144,344,223 $154,157,068 $126,258,004
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
(a) Includes land under capital lease of $3,412,636 representing the present
value of minimum future lease payments at the inception of the lease.
<TABLE>
<CAPTION>
INVESTMENT IN INTEREST IN PROPERTIES (PERCENT OF NET ASSETS) 3.3% 3.2%
CURRENT CURRENT
LOCATION DESCRIPTION COST VALUE COST VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jacksonville, FL Warehouse/Distribution $ 1,317,453 $ 1,250,000 $ 1,304,979 $ 1,150,000
Jacksonville, FL Warehouse/Distribution 1,002,448 1,050,000 1,002,448 1,000,000
Jacksonville, FL Warehouse/Distribution 1,442,894 1,450,000 1,442,894 1,375,000
Jacksonville, FL Warehouse/Distribution 2,370,362 2,500,643 2,358,421 2,201,451
------------ ------------ ------------ ------------
$ 6,133,157 $ 6,250,643 $ 6,108,742 $ 5,726,451
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 17.4% 18.7%
(see pages 12 and 13 for detail) FACE CURRENT FACE CURRENT
DESCRIPTION AMOUNT VALUE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Paper and Cash $ 32,652,745 $ 32,533,499 $ 33,456,969 $ 33,093,237
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 4.8% 8.9%
(see pages 12 and 13 for detail) FACE CURRENT FACE CURRENT
DESCRIPTION AMOUNT VALUE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marketable Securities $ 8,953,000 $ 9,022,003 $ 16,100,000 $ 15,824,199
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
OTHER ASSETS (PERCENT OF NET ASSETS) (2.6%) (2.0%)
(net of liabilities) $ (5,012,899) $ (3,661,926)
------------ ------------
TOTAL NET ASSETS $187,137,469 $177,239,965
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
11
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
------------------------------
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 17.4%
FACE CURRENT
DESCRIPTION AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Coca-Cola Enterprises, Inc., 6.90%, October 2, 1995 $ 1,705,000 $ 1,704,020
Corporate Asset Funding Co., Inc., 5.70%, October 2, 1995 1,000,000 990,183
Dayton Hudson Corp., 6.75%, October 2, 1995 1,726,000 1,725,029
Dean Witter, Discover & Co., 6.80%, October 2, 1995 681,000 680,614
Goldman Sachs Group L.P., 6.75%, October 2, 1995 2,000,000 1,998,875
Nynex Corporation, 6.80%, October 2, 1995 2,000,000 1,998,867
Public Service Electric & Gas Co., 6.58%, October 2, 1995 2,000,000 1,998,903
ITT Corp., 5.83%, October 3, 1995 2,000,000 1,993,522
Finova Capital Corp., 5.83%, October 11, 1995 2,000,000 1,983,482
Wal-Mart Stores, Inc., 5.70%, October 13, 1995 1,785,000 1,778,782
IBM Credit Corp., 5.80%, October 16, 1995 1,000,000 996,939
Xerox Corporation, 5.70%, October 16, 1995 1,900,000 1,892,479
Weyerhaeuser Mortgage Company, 5.70%, October 17, 1995 1,900,000 1,892,178
General Electric Capital Corp., 5.70%, October 18, 1995 1,900,000 1,891,878
Philip Morris Companies Inc., 5.72%, October 18, 1995 1,900,000 1,891,849
Smith Barney Inc., 5.75%, October 18, 1995 1,943,000 1,925,931
Aristar Inc., 5.82%, October 19, 1995 1,300,000 1,293,695
Bell Atlantic Financial Services, 5.71%, October 27, 1995 830,000 825,260
Ciesco L.P., 5.70%, October 31, 1995 1,900,000 1,888,268
----------- -----------
TOTAL COMMERCIAL PAPER 31,470,000 31,350,754
TOTAL CASH 1,182,745 1,182,745
----------- -----------
TOTAL CASH AND CASH EQUIVALENTS $32,652,745 $32,533,499
----------- -----------
----------- -----------
<CAPTION>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 4.8%
FACE CURRENT
DESCRIPTION AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Caterpillar Financial Services, 5.67%, November 21, 1995 $ 288,000 $ 280,424
Associates of North America, 6.00%, December 1, 1995 275,000 276,999
Associates of North America, 8.75%, February 1, 1996 410,000 416,810
General Motors, 8.75%, February 1, 1996 650,000 658,860
General Motors, 8.95%, February 5, 1996 350,000 362,113
General Motors, 4.75%, February 14, 1996 430,000 430,070
Household Finance, 5.75%, April 19, 1996 2,000,000 2,021,437
Society National Bank Cleveland, 6.00%, April 25, 1996 150,000 149,445
International Lease Finance Corp., 5.00%, May 28, 1996 1,000,000 1,010,731
Transamerica Financial Corp., 8.55%, June 15, 1996 400,000 411,754
John Deere Capital Corp., 6.10%, July 22, 1996 1,000,000 1,002,267
Key Bank of New York, 6.49%, September 6, 1996 1,000,000 1,000,177
Bank One Columbus, 6.08%, September 12, 1996 1,000,000 1,000,916
----------- -----------
Total Commercial Paper $ 8,953,000 $ 9,022,003
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
12
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------------
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 18.7%
FACE CURRENT
DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Chemical Bank, 6.25%, January 3, 1995 $ 90,000 $ 90,000
Amoco Corp., 5.754%, January 3, 1995 2,104,000 2,102,656
Pacificorp, 6.125%, January 12, 1995 2,000,000 1,991,867
Gateway Fuel Corp., 5.571%, January 17, 1995 1,925,000 1,900,590
Norwest Financial Inc., 5.499%, January 17, 1995 1,660,000 1,636,007
Greyhound Financial Corp., 6.215%, January 18, 1995 1,944,000 1,932,987
PHH Corp Note, 5.928%, January 19, 1995 2,400,000 2,388,593
Merrill Lynch & Company Inc., 6.056%, January 25, 1995 706,000 699,528
Associates Corp. of North Am., 5.828%, January 30, 1995 2,300,000 2,277,144
Duracell Inc., 6.310%, January 30, 1995 2,396,000 2,373,122
Ford Motor Credit Corp., 5.841%, February 1, 1995 2,300,000 2,275,997
Goldman Sachs Group, 5 .705%, February 2, 1995 1,685,000 1,654,071
Sears Roebuck Acceptance Corp., 6.120%, February 7, 1995 1,000,000 988,572
Morgan Stanley Group Inc., 6.363%, March 1, 1995 1,000,000 985,370
Beneficial Corp, 6.349%, March 14, 1995 2,400,000 2,362,500
John Deere Capital Corp., 6.349%, March 14, 1995 2,400,000 2,362,500
American General Financial Corp., 6.350%, March 15, 1995 2,400,000 2,362,084
Toronto Dominion Holdings, 6.318%, March 15, 1995 2,400,000 2,362,680
----------- -----------
TOTAL COMMERCIAL PAPER 33,110,000 32,746,268
TOTAL CASH 346,969 346,969
----------- -----------
TOTAL CASH AND CASH EQUIVALENTS $33,456,969 $33,093,237
----------- -----------
----------- -----------
<CAPTION>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 8.9%
FACE CURRENT
DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Bankers Trust NY Corp, 5.250%, January 16, 1995 $ 1,400,000 $ 1,401,680
Republic National Bank of NY, 4.300%, March 8, 1995 1,000,000 998,546
Golden Peanut Co., 6.455%, April 5, 1995 2,000,000 1,958,218
General Electric Capital Corp, 6.592%, April 18, 1995 2,400,000 2,348,400
PNC Bank N.A., 5.820%, April 21, 1995 1,400,000 1,398,775
Nationsbank North Carolina, 5.400%, May 19, 1995 1,500,000 1,511,807
Corporate Receivables Corp., 6.760%, May 23, 1995 2,400,000 2,332,548
Province of Quebec, 6.887%, June 1, 1995 2,000,000 1,937,005
Bank of America NT & SA, 6.783%, June 5, 1995 2,000,000 1,937,220
----------- -----------
Total Commercial Paper $16,100,000 $15,824,199
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SEPTEMBER 30, 1995
(UNAUDITED)
GENERAL
On April 29, 1988, The Prudential Variable Contract Real Property Partnership
(the "Partnership"), a general partnership organized under New Jersey law, was
formed through an agreement among The Prudential Insurance Company of America
("The 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 The Prudential Insurance Company of
America, Pruco Life and the 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
current value of its investments as described in Note 1B below, plus an estimate
of net income from operations reduced by any liabilities of the Partnership.
The periodic adjustments to property values described in Note 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 The Prudential Variable Contract Real
Property Account, the Pruco Life Variable Contract Real Property Account, and
the 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 current 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: GENERAL - The financial statements included herein have been prepared
in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Operating results for the nine months ended September 30,
1995 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1995. For further
information, refer to the financial statements and notes thereto
included in each Partner's December 31, 1994 Annual Report on Form
10-K.
B: REAL ESTATE OWNED AND INTEREST IN PROPERTIES - The Partnership's
investments in real estate owned and interest in properties are
initially valued at their purchase price. Thereafter, current values
are based upon appraisal reports prepared by independent real estate
appraisers (members of the Appraisal Institute or an equivalent
organization) which are ordinarily obtained on an annual basis.
The Chief Appraiser of the Prudential Comptroller's Department
Valuation Unit is responsible to assure that the valuation process
provides independent and accurate current value estimates. In the
interest of maintaining and monitoring the independence and the
accuracy of the appraisal process, the Comptroller of The Prudential
has appointed a third party firm to act as the Appraisal Management
Firm. The Appraisal Management Firm, among other
14
<PAGE>
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 The 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 current value of a
property as of a specific date. Current 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 current value generally is a correlation of three
approaches, all of which require the exercise of subjective judgement.
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 most
appropriate for the type of property in the market.
C: INCOME 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.
D: 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.
E: MARKETABLE SECURITIES - Marketable securities are highly liquid
investments with maturities of more than three months when purchased
and are carried at market value.
F: FEDERAL INCOME TAXES - The Partnership is not a taxable entity under
the provisions of the Internal Revenue Code. The income and capital
gains and losses of the Partnership are attributed, for federal income
tax purposes, to the Partners in the Partnership. The Partnership may
be subject to state and local taxes in jurisdictions in which it
operates.
G: RECLASSIFICATIONS - Certain reclassifications have been made to the
1994 financial statements to conform to those used in 1995.
NOTE 2: TRANSACTIONS WITH AFFILIATES
Pursuant to an investment management agreement, The 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 nine months
ended September 30, 1995 and 1994 management fees incurred by the Partnership
were $1,730,668 and $1,716,648, respectively.
The Partnership also reimburses The Prudential for certain administrative
services rendered by The Prudential. The amounts incurred for the nine months
ended September 30, 1995 and 1994 were $93,221 and $59,986 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 The Prudential and one of its subsidiaries.
15
<PAGE>
The Partnership has contracted with PREMISYS Real Estate Services, Inc.
(PREMISYS), an affiliate of The Prudential to provide property management
services at the Unit warehouses and the Bolingbrook, IL warehouse. The property
management fee earned by PREMISYS for the nine months ended September 30, 1995
and 1994 were $24,997 and $23,451 respectively.
NOTE 3: LINE OF CREDIT
The Partnership had established a $10 million annually renewable line of credit
with First Fidelity Bank, N.A., to be drawn upon for potential liquidity needs.
The annual cost of maintaining the line of credit was 0.1875% of the total line
of credit. Since no drawdowns had occurred and management did not anticipate the
need to draw upon this resource in the future, the line of credit was
discontinued as of October 31, 1995.
NOTE 4: COMMITMENT FROM PARTNER
On January 9, 1990, The 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 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 current value net assets of the
Partnership. The amount available under this commitment as of September 30, 1995
is approximately $ 52.5 million.
NOTE 5: FORECLOSURE ON MORTGAGE LOAN
On July 1, 1994, the Partnership foreclosed on the Flint, MI mortgage loan under
a voluntary conveyance of the property by the mortgagor. The Partnership took
title to the property at the expiration of the redemption period on January 2,
1995.
NOTE 6: EVENT SUBSEQUENT TO SEPTEMBER 30, 1995
On October 4, 1995, the Partnership acquired Westpark, a 97,000 square foot
mulit-tenant suburban office building in Nashville, TN for approximately
$8,270,000 in cash. At the time of the closing, the building was 96% leased.
16
<PAGE>
NOTE 6: PER SHARE INFORMATION (FOR A SHARE OUTSTANDING THOUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
01/01/95 07/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO TO TO
09/30/95 09/30/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Rent from properties $ 1.1579 $ 0.4171 $ 1.2754 $ 1.1659 $ 1.0727 $ 0.9899 $ 0.9479
Income from interest in properties $ 0.0390 $ 0.0135 $ 0.1838 $ 0.2139 $ 0.1970 $ 0.1791 $ 0.1533
Interest on mortgage loans $ 0.0000 $ 0.0000 $ 0.0082 $ 0.0755 $ 0.0711 $ 0.0663 $ 0.0654
Interest from short-term investments $ 0.1781 $ 0.0498 $ 0.1226 $ 0.0549 $ 0.0653 $ 0.1151 $ 0.1202
-------- -------- -------- -------- -------- -------- --------
INVESTMENT INCOME $ 1.3750 $ 0.4804 $ 1.5900 $ 1.5102 $ 1.4061 $ 1.3504 $ 1.2868
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Investment management fee $ 0.1428 $ 0.0488 $ 0.1786 $ 0.1673 $ 0.1642 $ 0.1669 $ 0.1591
Real estate tax expense $ 0.1180 $ 0.0295 $ 0.1399 $ 0.1465 $ 0.1488 $ 0.1168 $ 0.1010
Administrative expenses $ 0.1029 $ 0.0338 $ 0.1103 $ 0.1187 $ 0.1046 $ 0.0946 $ 0.0910
Operating expenses $ 0.1054 $ 0.0369 $ 0.1332 $ 0.1209 $ 0.1241 $ 0.0948 $ 0.0776
Interest expense $ 0.0285 $ 0.0096 $ 0.0255 $ 0.0236 $ 0.0215 $ 0.0193 $ 0.0186
-------- -------- -------- -------- -------- -------- --------
EXPENSES $ 0.4976 $ 0.1586 $ 0.5875 $ 0.5770 $ 0.5632 $ 0.4924 $ 0.4473
-------- -------- -------- -------- -------- -------- --------
NET INVESTMENT INCOME $ 0.8774 $ 0.3218 $ 1.0025 $ 0.9332 $ 0.8429 $ 0.8580 $ 0.8395
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Net realized loss on investments sold $ 0.0000 $ 0.0000 $(0.0966) $(0.1816) $ 0.0000 $ 0.0000 $ 0.0000
Net unrealized gain/(loss) on investments $ 0.1907 $ 0.2304 $ 0.2169 $ 0.0152 $(1.1359) $(0.7770) $(0.1543)
-------- -------- -------- -------- -------- -------- --------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS $ 0.1907 $ 0.2304 $ 0.1203 $(0.1664) $(1.1359) $(0.7770) $(0.1543)
-------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) in share value $ 1.0681 $ 0.5522 $ 1.1228 $ 0.7668 $(0.2930) $ 0.0810 $ 0.6852
Share Value at beginning of period $14.4792 $14.9951 $13.3564 $12.5896 $12.8826 $12.8016 $12.1164
-------- -------- -------- -------- -------- -------- --------
Share Value at end of period $15.5473 $15.5473 $14.4792 $13.3564 $12.5896 $12.8826 $12.8016
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Ratio of expenses to average net assets 3.34% 1.04% 4.27% 4.44% 4.47% 3.81% 3.58%
Ratio of net investment income to
average net assets 5.89% 2.12% 7.29% 7.17% 6.69% 6.63% 6.72%
Number of shares outstanding at
end of period (000's) 12,037 12,037 12,241 13,031 14,189 14,993 16,175
</TABLE>
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.
17
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All of the assets of The 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 September 30, 1995, the Partnership's liquid assets consisting of cash and
cash equivalents and marketable securities totalled $41,555,502. This is a
decrease of $7,361,934 from liquid assets at December 31, 1994, of $48,917,436.
The decrease is due primarily to the acquisition of an apartment complex for
$15,710,531 as discussed below. This was partially offset by cash received from
the operations of the Partnership's properties and interest income received from
short-term investments.
The Partnership had established a $10 million annually renewable line of credit
with First Fidelity Bank, N.A., to be drawn upon for potential liquidity needs.
Since no drawdowns had occurred and management did not anticipate the need to
draw upon this resource in the future, the line of credit was discontinued as of
October 31, 1995. The 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 The 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 $52.5 million as of September
30, 1995.
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 September 30, 1995,
21.5% of the Partnership's assets consisted of cash and cash equivalents and
marketable securities. The Partnership has retained a portion of the cash
generated by operations as well as from the sale of properties and the maturing
of the mortgage loans pending anticipated reinvestment of these funds. The
Partnership acquired an apartment complex in Raleigh, NC on June 30, 1995 at a
total cost of $15,710,531. On October 4, 1995, the Partnership acquired an
office building in Nashville, TN at a cost of approximately $8,270,000. These
were funded by cash held by the Partnership. During the first nine months of
1995, the partners withdrew $3 million. Additional withdrawals may be made
during the remainder of 1995 based upon the needs of the Partnership including
potential property acquisitions and dispositions and capital expenditures. At
September 30, 1995, and currently, the Partnership has adequate liquidity.
Management anticipates that ongoing cash flow from operations will satisfy the
Partnership's needs over the next three months and the foreseeable future.
During the quarter ended September 30, 1995, the Partnership expended
approximately $271,000 in capital expenditures, excluding a payment of
$1,950,000 related to the acquisition of the apartment complex in Raleigh.
Approximately $163,000 were for tenant improvements and leasing commissions.
The largest of these was approximately $58,000 at the Morristown, NJ office
building related to the Kodak lease signed in the first quarter of this year.
Approximately $56,000 was expended at the Pomona, CA warehouse related to an
expansion by Ashley Furniture, and approximately $10,300 was spent at the Azusa,
CA property related to the Best Buy lease signed in 1994. Approximately $24,000
was expended at the Flint, MI office property, most of which related to the
Combs lease signed in the second quarter.
Major projects comprising the remaining $108,000 of capital expenditures for the
quarter included approximately $47,000 for irrigation and sprinkler upgrades and
landscaping at the Farmington Hills, MI, Flint
18
<PAGE>
and Bolingbrook, IL properties and $18,000 for HVAC upgrades and a new
transformer at the Morristown. The Partnership also paid approximately $38,000
in costs related to the foreclosure of the Flint property in 1994.
Projected capital expenditures for the remainder of the 1995 total approximately
$347,000, all of which consist of tenant improvements and leasing commissions.
Approximately $248,000 represents the final installment of costs related to the
Best Buy lease at the Azusa warehouse. Leasing costs projected for prospective
leases at the Flint and Roswell, GA properties are $92,000 and $7,000
respectively. The actual amount of such expenditures will depend on the number
of new leases signed, the needs of the particular tenants and the timing of
lease executions.
On October 4, 1995, the Partnership purchased the Westpark Building for
approximately $8.3 million, which was funded from cash held by the Partnership.
The property is a 97,000 square foot four-story office building located in
Nashville, TN. The building was constructed in 1982. It is currently 96%
occupied.
(b) Results of Operations
The following is a brief discussion of a comparison of the results of operations
for the nine months and three months ended September 30, 1995 and 1994.
The Partnership's net investment income for the first nine months of 1995 was
$10,632,292, an increase of $1,149,258 (12.1%) from $9,483,034 for the
corresponding period of 1994. This was primarily the result of an increase in
interest income from short-term investments (approximately $1,212,000) and
higher income from property operations (approximately $157,000), partially
offset by lower interest income from mortgage loans (approximately $106,000) and
higher interest expense (approximately $100,000) and investment management fee
(approximately $14,000).
Income from property operations, including income from investment in properties
was $10,717,833 for the first nine months of 1995. This was an increase of
$157,392 (1.5%) from $10,560,441 for the same period of 1994. This was
primarily the result of increased rent from properties (approximately
$2,124,000) partially offset by lower income from interest in properties due to
the sale for the seven Unit warehouses in October 1994 (approximately
$1,688,000) and higher property administrative expenses (approximately $257,000)
and real estate taxes (approximately $19,000).
Income from interest in properties relates to the Partnership's 50% co-
investment in the Unit warehouses. On October 7, 1994, the Partnership sold its
interest in seven of the eleven warehouses. This was the major reason that
income from interest in properties decreased by $1,688,376 (78.1%) from
$2,160,472 for the first three quarters of 1994 to $472,096 for the first three
quarters of 1995.
Rent from properties increased by $2,124,008 (17.8%) from $11,907,848 for the
first three quarters of 1994 to $14,031,856 for the corresponding period of
1995. This was primarily the result of the acquisition, through foreclosure in
July 1994, of the Flint office property. For the first six months of 1994,
this investment was reported as a mortgage loan. In 1995, its operating results
are included with income from property operations. This increased rent from
properties by approximately $682,000 for the first nine months of 1995. The
acquisition of the apartments in Raleigh on June 30, 1995 also resulted in
increased rental revenue of $522,000. Increased occupancy in 1995 resulted in
an additional $661,000 in rental revenue for the Azusa and Morristown buildings
as well as the Partnership's two other apartment properties. Rental income at
the Bolingbrook warehouse was about $76,000 higher for the first nine months of
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
$156,000 higher in the first three quarters of 1995 compared to the
corresponding period of last year primarily due to increased expense recoveries
and higher rental rates.
19
<PAGE>
Real estate taxes for the first nine months of 1995 increased $19,275 (1.4%), to
$1,429,863 from $1,410,588 for the first nine months of 1994. Almost $170,000
was due to the inclusion of the Flint office buildings and the Raleigh
apartments in property operations in 1995. This includes approximately $101,000
in 1994 taxes paid in 1995 for the Flint property. This was partially offset by
decreases totalling approximately $163,000 at the two California warehouses as
a result of appealing the properties' assessments.
Property operating expenses for the first three quarters of 1995 were
$1,276,795, an increase of $1,703 (0.1%) from $1,275,092 for the corresponding
period of last year. The Flint and Raleigh properties had operating expenses
for the first three quarters of 1995 of approximately $172,000. This increase
was partially offset by lower utility costs among all properties and lower
maintenance costs, particularly at Azusa, where building exteriors were painted
in the first quarter of 1994. No similar large expenses were incurred this
year.
Administrative expenses on the statement of operations includes both property
and Partnership administrative expenses. Property administrative expenses
totalled $1,079,461 for the nine months ended September 30, 1995. This is an
increase of $257,262 (31.3%) from $822,199 for the same period last year. This
was primarily the result of the inclusion of the Flint and Raleigh properties
(almost $142,000), higher insurance premiums (approximately $51,000) primarily
at the two California properties, and an increase in bad debt expense
(approximately $63,000). The last item was primarily the result of a reduction
to bad debt expense at the Azusa warehouse in the first quarter of 1994 arising
from the application of a security deposit to amounts owed by a vacated tenant.
Professional fees also increased in 1995 due to the utilization of real estate
tax consultants to assist with the appeal of assessed values at the California
properties. The appeal generated significant tax savings as noted above.
Partnership administrative expenses for the first nine months of 1995 decreased
by $657 (0.4%) to $167,181 from $166,524 for the first nine months of 1994.
Interest expense relates to the capitalized ground leased at the Pomona
warehouse. Interest expense increased by $100,184 (40.8%) to $345,434 for the
first nine months of 1995 from $245,250 for the corresponding period of 1994.
This was due to a scheduled increase in the lease payment, effective in November
1994. The annual ground lease payments after 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 payment
increased by $126,450 to $376,450. The Partnership has the option to purchase
the land for $4,000,000 from November 1994 to November 1997. Management is
continuing to evaluate the relevant factors during the option period before
deciding whether to exercise the option.
Investment management fee expense increased by $14,020 (0.8%) for the first nine
months of 1995 to $1,730,668 from $1,716,648 for the first three quarters of
1994. The fee is computed as 1.25% of gross assets. During the first nine
months of 1995, gross assets were slightly higher than in 1994.
Interest income from short-term investments increased by $1,212,422 (128.3%) to
$2,157,742 for the first three quarters of 1995 from $945,320 for the first
three quarters of 1994. This is the result of increased amounts invested and
higher interest rates in 1995. As noted above, the Partnership is retaining
increased cash balances in anticipation of acquiring properties.
Since both of the Partnership's investments in mortgage loans matured in 1994,
there was no interest income from this source in the first nine months of 1995.
Net investment income for the third quarter of 1995 was $3,879,709. This is an
increase of $551,123 (16.6%) over $3,328,586 for the corresponding period of
1994. This is due primarily to higher income from property operations
(approximately $396,000) and interest from short-term investments (approximately
$191,000). These were partially offset by higher interest expense
(approximately $33,000). The increase in interest from short-term investments
was due to larger amounts invested and higher interest rates in 1995. Interest
expense increased in 1995 as a result of the scheduled rate increase described
above.
20
<PAGE>
Income from property operations including interest in properties increased
$396,321 (10.9%) from $3,644,668 for the three months ended September 30, 1994
to $4,040,989 for the corresponding period of 1995. This was the result of the
inclusion of the Flint and Raleigh properties in property operations in 1995 and
higher occupancy at Azusa and the apartment properties. These were partially
offset by the sale of seven of the Unit warehouses in October 1994 and the
billing of expense recoveries in the third quarter of 1994 as opposed to the
second quarter of 1995.
MARKET VALUES OF INVESTED ASSETS
The partnership experienced an unrealized gain of $2,265,212 for the first three
quarters of 1995. Increases in the values of the apartments ($2,472,895), the
warehouses ($301,382) and the office properties ($3,781) were partially offset
by a decrease of $512,846 in the market values of the Partnership's sole retail
property.
Overall, the third quarter saw a continuation of the improving conditions at
several properties resulting in an unrealized gain of $2,766,811 for the
quarter. The apartments had the largest unrealized gain for the quarter,
$2,247,328 of which $1,289,465 related to the newly acquired complex in Raleigh.
This increase is 9.4% of the property's June 30, 1995 value. The property has
performed better than expected both in terms of occupancy and rental rates. The
apartments in Farmington Hills and Atlanta experienced gains of $688,695 (5.1%
of June 30, 1995 value) and $269,168 (2.2% of June 30, 1995 value),
respectively. These resulted from high occupancy, tenant retention and rental
rates as well as strong residential markets, locally.
Unrealized gains for the Partnership's warehouse properties totalled $947,782
for the third quarter. The Pomona experienced the largest increase, $1,413,726
(9.0% of its June 30, 1995 value). This was the result of the property's being
100% leased at September 30, 1995 and improved local market conditions. The
market value of the Bolingbrook warehouse increased by $100,000 (1.4% of its
June 30, 1995 value) due to a scheduled step-up in the rental rate. The Unit
warehouses produced an unrealized gain of $138,169 (2.3% of their June 30, 1995
value) as market conditions in the Jacksonville, FL area where the properties
are located continue to improve. These gains were partially offset by an
unrealized loss at the Azusa property of $704,113 (4.7% of the property's June
30, 1995 value). This was the result of less optimistic assumptions of expense
growth, future rental rates and leasing activity as current leases expire, based
on the property's competitive position local market.
The Partnership's office properties decreased in value during the third quarter
resulting in an unrealized loss of $418,424. This was due primarily to a
decrease of $352,571 (4.6% of the property's June 30, 1995 value) at the Flint
office buildings. This was caused by reduced expectations of future rental rate
increases and leasing activity due to competition from new construction in the
Flint market. The Morristown Office Centre experienced an unrealized loss of
$65,852 (0.7%) of is June 30, 1995 value) for the quarter due to capital
expenditures which did not result in an increase in the property's value. The
market value of the office building in Lisle, IL was unchanged for the quarter.
Capital expenditures which did not add to value resulted in an unrealized loss
of $9,875 for the quarter for the King's Market Shopping Center.
PROPERTY LEASING ACTIVITY
There was little leasing activity during the third quarter of 1995 as occupancy
remained the same at each of the Partnership's non-residential properties except
for Pomona and King's Market. A new tenant, Pac Rosa, took occupancy of 33,400
square feet (6% of the property) at Pomona under a three-year lease executed in
the second quarter of 1995. Ashley Furniture expanded its space by 55,000
square feet (10% of the property). This expansion was also executed in the
second quarter. The lease on the expansion expires concurrent with the existing
lease in 2003. As a result of this activity, the property was 100% occupied at
September 30, 1995. No leases are scheduled to expire during the last quarter
of 1995.
21
<PAGE>
Occupancy at King's Market increased slightly during the third quarter, from 98%
at June 30, 1995 to 99% at September 30, 1995. Two new tenants totalling 5,450
square feet (2% of the property) took occupancy during the third quarter while
one tenant leasing 1,500 square feet (less than 1% of the property) vacated at
the expiration of their lease. One lease covering approximately 4,100 square
feet (1% of the property) is scheduled to expire during the fourth quarter.
The Flint office property was 83% occupied at September 30, up from 80% at June
30, 1995. One new lease was signed during the quarter covering approximately
3,800 square feet (3% of the property). Two leases, covering 4,400 square feet
(4% of the property), expired during the third quarter. One tenant renewed
their lease covering 1,400 square feet at the same rental rate. The other,
whose lease covers 3,000 square feet, is not interested in renewing but will
occupy the space on a month-to-month basis at their current rent. During the
fourth quarter, three leases totalling approximately 6,400 square feet (6% of
the property) are scheduled to expire. Each of the tenants has indicated that
they will renew. In addition, two tenants whose leases expire during the first
six months of 1996 have indicated that they also will renew. These leases cover
approximately 7,500 square feet (7% of the property). Another tenant whose
lease expires in March 1996, has stated that they will vacate their space at
that time. This lease covers approximately 2,000 square feet (2% of the
property).
Occupancy at the Morristown office building was 96% at both September 30, and
June 30, 1995. One lease covering 4,000 square feet (5% of the property)
expires during the fourth quarter. The tenant has indicated that they will
vacate upon lease expiration. The space is being marketed, but there are
currently no prospects. The Partnership is discussing a possible expansion with
another tenant.
The Unit warehouses and the properties located in Azusa, Bolingbrook and Lisle
were 100% leased at September 30, and June 30, 1995. No leases expire during
the remainder of 1995.
Occupancy at the Partnership's three apartment properties remained stable for
the quarter, averaging 96%, the same as at June 30, 1995. Occupancy is not
expected to change significantly during the remainder of the year.
22
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
4.1 Variable Life Insurance Contract filed as Exhibit A(5) to Form N-8B-2,
Registration Statement No. 2-81243, filed January 10, 1983, and
incorporated herein by reference.
4.2 Revised Variable Appreciable Life Insurance Contract with fixed death
benefit, filed as Exhibit 1.A.(5)(c) to Post-Effective Amendment No. 5
to Form S-6, Registration Statement No. 2-89780, filed July 11, 1986,
and incorporated herein by reference.
4.3 Revised Variable Appreciable Life Insurance Contract with variable
death benefit, filed as Exhibit 1.A.(5)(d) to 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 Insurance 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.
23
<PAGE>
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 15, 1995 By: /s/ Esther H. Milnes
------------------ ----------------------------
Esther H. Milnes
President
Date: November 15, 1995 By: /s/ Stephen P. Tooley
------------------ ----------------------------
Stephen P. Tooley
Vice President, Comptroller and
Chief Accounting Officer
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From
Statement of Assets and Liabilities; Statement of Operations; Statement
of Changes in Net Assets; Cashflows; Pershare Table and is Qualified in
its Entirety by Reference to such Financial Statements.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> PRUCO LIFE OF N.J. VARIABLE CONTRACT REAL PROPERTY ACCOUNT
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 473,226
<SHARES-COMMON-PRIOR> 473,226
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 7,357,374
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 27,903
<NET-INVESTMENT-INCOME> 387,367
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 90,180
<NET-CHANGE-FROM-OPS> 477,547
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 505,451
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 176,611,009
<INVESTMENTS-AT-VALUE> 150,594,866
<RECEIVABLES> 1,374,178
<ASSETS-OTHER> 41,555,502
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 193,524,546
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 6,387,077
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 12,036,684
<SHARES-COMMON-PRIOR> 12,036,684
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 187,137,469
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,157,742
<OTHER-INCOME> 14,503,952
<EXPENSES-NET> 6,029,402
<NET-INVESTMENT-INCOME> 10,632,292
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 2,265,212
<NET-CHANGE-FROM-OPS> 12,897,504
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 204,350
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,897,504
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,730,668
<INTEREST-EXPENSE> 345,434
<GROSS-EXPENSE> 6,029,402
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 14.479
<PER-SHARE-NII> .877
<PER-SHARE-GAIN-APPREC> .191
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.547
<EXPENSE-RATIO> .033
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
