<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 March 31, 1996
OR
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 33-20018
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
in respect of
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT
REAL PROPERTY ACCOUNT
(Exact name of Registrant as specified in its charter)
New Jersey 22-2426091
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
213 Washington Street, Newark, New Jersey 07102-2992
(Address of principal executive offices) (Zip Code)
(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)
<TABLE>
<CAPTION>
INDEX PAGE
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
A. PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
Statements of Net Assets - March 31, 1996 (Unaudited) and December 31, 1995 3
Statements of Operations (Unaudited) - Three Months Ended March 31, 1996 and 1995 3
Statements of Changes in Net Assets - Three Months Ended March 31, 1996 (Unaudited)
and Year Ended December 31, 1995 4
Notes to the Financial Statements (Unaudited) 5
B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
Statements of Assets and Liabilities - March 31, 1996 (Unaudited) and December 31, 1995 7
Statements of Operations (Unaudited) -Three Months Ended March 31, 1996 and 1995 8
Statements of Changes in Net Assets - Three Months Ended March 31, 1996 (Unaudited)
and Year Ended December 31, 1995 9
Statements of Cash Flows (Unaudited) - Three Months Ended March 31, 1996 and 1995 10
Schedule of Investments - March 31, 1996 (Unaudited) and December 31, 1995 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
</TABLE>
2
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
STATEMENTS OF NET ASSETS
<TABLE>
<CAPTION>
March 31, 1996
(Unaudited) December 31, 1995
-------------- -----------------
<S> <C> <C>
Investment in shares of The Prudential Variable Contract
Real Property Partnership $ 7,585,779 $ 7,455,048
------------- -------------
NET ASSETS, representing:
Equity of Contract Owners $ 6,588,830 $ 6,563,711
Equity of Pruco Life Insurance Company of New Jersey 996,949 891,337
------------- -------------
$ 7,585,779 $ 7,455,048
============= =============
</TABLE>
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1996 March 30, 1995
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Net Investment Income from Partnership Operations $ 155,724 $ 129,263
EXPENSES:
Asset Based Charges to Contract Owners (Note 3) 9,663 8,983
------------ ------------
NET INVESTMENT INCOME 146,061 120,280
------------ ------------
NET UNREALIZED LOSS
ON INVESTMENTS IN PARTNERSHIP (24,993) (65,548)
------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 121,068 $ 54,732
============ ============
</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>
Three Months
Ended
March 31, 1996 Year Ended
(Unaudited) December 31, 1995
-------------- -----------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 146,061 $ 538,224
Net Unrealized Gain/(Loss)
on Investments in Partnership (24,993) 24,210
------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 121,068 562,434
------------ ------------
CAPITAL TRANSACTIONS:
Net Contributions/(Withdrawals) by Contract Owners (79,536) 45,403
Net Contributions/(Withdrawals) by Pruco Life
Insurance Company of New Jersey 89,199 (7,712)
------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS 9,663 37,691
------------ ------------
TOTAL INCREASE IN NET ASSETS $ 130,731 $ 600,125
NET ASSETS:
Beginning of period $ 7,455,048 $ 6,851,923
------------ ------------
End of period $ 7,585,779 $ 7,455,048
============ ============
</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
March 31, 1996
(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. Basis of Accounting
The financial statements are prepared on a current value basis due to the
fact that the unit values under Contracts participating in the Partnership
are determined using the current value basis of investments (see General
Note to the Partnership financials). These unaudited financial statements
reflect all adjustments which are, in the opinion of management, necessary
to a fair statement of the results for the interim period presented. All
such adjustments are of a normal recurring nature.
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 March 31, 1996
the Real Property Account's interest in the Partnership, based on current
value equity was 4.0% 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. The Net Gain/(Loss) on Investment in
Partnership reflected on the Statements of Operations represents the Real
Property Account's proportionate share of the Net Gain/(Loss) on
Investments recognized by the Partnership.
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>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
March 31, 1996
(Unaudited) December 31, 1995
-------------- -----------------
<S> <C> <C>
ASSETS:
Properties at estimated market value
(cost $192,129,776 and $191,981,608
respectively) (Note 1) $ 164,144,560 $ 164,695,033
Interest in properties at estimated market value
(cost $6,133,157 and $6,133,157
respectively) (Note 1) 5,850,000 5,800,000
Cash and cash equivalents 13,852,454 14,223,265
Marketable securities 10,922,485 10,532,155
Other assets and accounts receivable
(net of allowance for uncollectible
amounts of $16,589 and $18,896 respectively) 2,072,037 1,743,305
------------- -------------
Total Assets $ 196,841,536 $ 196,993,758
============= =============
LIABILITIES:
Obligation under capital lease $ 3,633,479 $ 3,882,421
Accounts payable and accrued expenses 2,003,642 2,142,614
Due to affiliates (Note 2) 639,124 682,795
Other liabilities 638,440 664,069
------------- -------------
Total liabilities 6,914,685 7,371,899
------------- -------------
Partners' Equity 189,926,851 189,621,859
------------- -------------
Total Liabilities and Partner's Equity $ 196,841,536 $ 196,993,758
============= =============
Number of shares outstanding at end of period 11,848,275 12,036,684
============= =============
Share Value at end of period $16.03 $15.75
====== ======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
7
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Rent from properties $ 5,920,596 $ 4,472,397
Income from interest in properties 164,145 149,408
Interest from short-term investments 431,857 765,330
------------- -------------
6,516,598 5,387,135
------------- -------------
EXPENSES:
Investment management fee (Note 2) 608,075 569,088
Real estate tax expense 656,600 609,624
Administrative expenses 476,840 392,120
Operating expenses 683,285 357,501
Interest expense 138,165 115,144
-------------- -------------
2,562,965 2,043,477
-------------- -------------
NET INVESTMENT INCOME 3,953,633 3,343,658
-------------- -------------
NET UNREALIZED LOSS ON INVESTMENTS (648,641) (1,695,529)
-------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 3,304,992 $ 1,648,129
============== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
8
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Three Months
Ended
March 31, 1996 Year Ended
(Unaudited) December 31, 1995
-------------- -----------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 3,953,633 $ 14,720,271
Net Realized and Unrealized
Gain/(Loss) on Investments (648,641) 661,623
------------ --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 3,304,992 15,381,894
------------ --------------
CAPITAL TRANSACTIONS:
Withdrawals by partners
(188,409 and 204,350,
shares respectively) (3,000,000) (3,000,000)
------------ --------------
NET DECREASE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS (3,000,000) (3,000,000)
------------ ---------------
TOTAL INCREASE IN NET ASSETS 304,992 12,381,894
NET ASSETS:
Beginning of period 189,621,859 177,239,965
------------- --------------
End of period $ 189,926,851 $ 189,621,859
============= ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
9
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 3,304,992 $ 1,648,129
Adjustments to reconcile net increase in net assets
resulting from operations to net cash from
operating activities:
Net unrealized loss on investments 648,641 1,695,529
Changes in assets and liabilities:
(Increase)/Decrease in other assets
and accounts receivable (328,732) 289,431
(Increase)/Decrease in marketable securities (390,330) 2,400,226
Decrease in obligation under capital lease (248,942) (173,011)
(Decrease)/Increase in accounts payable
and accrued expenses (138,972) 100,088
(Decrease)/Increase in due to affiliates (43,671) 4,523
Decrease in other liabilities (25,629) (121,393)
-------------- --------------
Net cash from operating activities 2,777,357 5,843,522
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital improvements on real estate owned (148,168) (129,388)
Capital improvements on interest in properties 0 (11,941)
-------------- --------------
Net cash from investing activities (148,168) (141,329)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Withdrawals (3,000,000) 0
------------ ------------
Net (decrease)/increase in cash and cash equivalents (370,811) 5,702,193
CASH AND CASH EQUIVALENTS - Beginning of period 14,223,265 33,093,237
------------ ------------
CASH AND CASH EQUIVALENTS - End of period $ 13,852,454 $ 38,795,430
============ ============
SUPPLEMENTAL INFORMATION:
Interest paid $ 376,450 $ 376,450
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
10
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
March 31, 1996
(Unaudited) December 31, 1995
----------------------------------------------------------------------
INVESTMENT IN PROPERTIES (Percent of Net Assets) 86.4% 86.9%
Estimated Estimated
Market Market
Location Description Cost Value Cost Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Azusa, CA Warehouse $ 18,622,709 $ 15,160,187 $ 18,546,247 $ 15,083,725
Lisle, IL Office Building 17,524,421 11,600,000 17,524,421 11,600,000
Atlanta, GA Garden Apartments 15,407,757 12,816,211 15,371,495 12,600,000
Pomona, CA (a) Warehouse 23,205,172 16,126,000 23,205,172 17,127,292
Roswell, GA Retail Shopping Center 31,683,240 30,994,334 31,688,912 32,055,216
Morristown, NJ Office Building 18,651,095 10,106,287 18,664,969 9,572,688
Bolingbrook, IL Warehouse 8,948,028 7,400,000 8,948,028 7,400,000
Farmington Hills, MI Garden Apartments 13,594,950 14,800,000 13,594,950 14,200,000
Flint, MI Office Building 7,671,280 6,354,438 7,616,842 6,539,368
Raleigh, NC Garden Apartments 15,758,699 17,200,000 15,758,699 17,200,000
Nashville, TN Office Building 8,428,652 8,683,523 8,431,680 8,686,551
Oakbrook Terrace, IL Office Complex 12,633,773 12,903,580 12,630,193 12,630,193
------------- -------------- --------------- --------------
$ 192,129,776 $ 164,144,560 $ 191,981,608 $ 164,695,033
============= ============== =============== ==============
</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) 3.1% 3.1%
Estimated Estimated
Market Market
Location Description Cost Value Cost Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jacksonville, FL Warehouse/Distribution 1,317,453 1,250,000 1,317,453 1,225,000
Jacksonville, FL Warehouse/Distribution 1,002,448 1,000,000 1,002,448 975,000
Jacksonville, FL Warehouse/Distribution 1,442,894 1,300,000 1,442,894 1,300,000
Jacksonville, FL Warehouse/Distribution 2,370,362 2,300,000 2,370,362 2,300,000
------------- ------------ --------------- --------------
$ 6,133,157 $ 5,850,000 $ 6,133,157 $ 5,800,000
============= ============ =============== ==============
</TABLE>
<TABLE>
<CAPTION>
CASH AND CASH EQUIVALENTS (Percent of Net Assets) 7.3% 7.5%
(see pages 12 and 13 for detail) Estimated Estimated
Face Market Face Market
Description Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Paper and Cash $ 13,919,728 $ 13,852,454 $ 14,282,697 $ 14,223,265
============= ============ =============== ==============
</TABLE>
<TABLE>
<CAPTION>
MARKETABLE SECURITIES (Percent of Net Assets) 5.8% 5.6%
(see pages 12 and 13 for detail) Estimated Estimated
Face Market Face Market
Description Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marketable Securities $ 10,900,000 $ 10,922,485 $ 10,480,000 $ 10,532,155
============= ============ =============== ==============
OTHER ASSETS (2.6%) (3.1%)
(net of liabilities) $ (4,842,648) $ (5,628,594)
------------ ---------------
TOTAL NET ASSETS $189,926,851 $ 189,621,859
============ ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
11
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
March 31, 1996
(Unaudited)
-----------------------
CASH AND CASH EQUIVALENTS (Percent of Net Assets) 7.3%
Estimated
Face Market
Description Amount Value
- ----------- ---------- ----------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Engelhard Corp., 5.55%, April 1, 1996 $1,008,000 $1,008,000
Lehman Brothers Inc., 5.60%, April 1, 1996 601,000 599,972
Household International, inc., 5.24%, April 2, 1996 1,200,000 1,193,887
Morgan Stanley Group Inc., 5.60%, April 3, 1996 1,100,000 1,100,000
Nynex Corporation, 5.30%, April 8, 1996 1,200,000 1,192,050
Aristar Inc., 5.30%, April 22, 1996 1,223,000 1,213,277
Duracell Inc., 5.37%, April 25, 1996 1,260,000 1,253,234
Finova Capital Corp, 5.25%, April 26, 1996 1,225,000 1,213,745
Whirlpool Financial Corp, 5.20%, April 26, 1996 490,000 484,479
Countrywide Funding Corp, 5.39%, May 3, 1996 156,000 154,972
Countrywide Funding Corp, 5.47%, May 8, 1996 1,000,000 993,770
First Data Corp, 5.42%, May 8, 1996 1,200,000 1,192,231
Whirlpool Financial Corp, 5.43%, May 10, 1996 600,000 596,109
----------- -----------
Total Commercial Paper 12,263,000 12,195,726
Total Cash 1,656,728 1,656,728
----------- -----------
Total Cash and Cash Equivalents $13,919,728 $13,852,454
----------- -----------
----------- -----------
</TABLE>
<TABLE>
MARKETABLE SECURITIES (Percent of Net Assets) 5.8%
Estimated
Face Market
Description Amount Value
- ----------- ---------- ----------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Household Finance Corp, 5.75%, April 19, 1996 $ 2,000,000 $ 1,996,520
Ford Motor Credit Corp, 5.80%, April 22, 1996 500,000 500,658
Society National bank Cleveland, 6.00%, April 25, 1996 150,000 149,295
International Lease Finance Corp, 5.00%, May 28, 1996 1,000,000 992,120
Transamerica Financial Corp, 8.55%, June 15, 1996 400,000 409,284
John Deere Capital Corp, 5.77%, July 22, 1996 1,000,000 1,002,267
Sears Roebuck Acceptance Corp, 8.55%, August 1, 1996 1,000,000 1,018,910
Key Bank of New York, N.A., 5.33%, September 6, 1996 1,000,000 999,210
Bank One Columbus, 5.34%, September 12, 1996 1,000,000 999,297
Associates Corp of North Am, 4.48%, October 15, 1996 350,000 345,860
Caterpillar Financial Services, 5.47%, November 29, 1996 1,200,000 1,203,019
Sears Roebuck Acceptance Corp, 7.48%, February 19, 1997 100,000 104,701
General Motors Acceptance Corp, 7.48%, March 18, 1997 1,200,000 1,201,344
Total Commercial Paper $10,900,000 $10,922,485
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 17.
12
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
December 31, 1995
--------------------------
CASH AND CASH EQUIVALENTS (Percent of Net Assets) 7.5%
Estimated
Face Market
Description Amount Value
- ----------- ----------- -----------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Morgan Stanley Group, Inc., 6.10%, January 2, 1996 $ 1,146,000 $ 1,146,000
Engelhard Corp., 6.25%, January 3, 1996 1,038,000 1,038,000
Finova Capital Corp., 5.95%, January 4, 1996 800,000 792,198
Philip Morris Companies Inc., 5.80%, January 5, 1996 505,000 504,430
Gannett Co. Inc., 5.85%, January 9, 1996 1,700,000 1,696,409
Hanson Finance, 5.80%, January 12, 1996 354,000 352,175
Riverwoods Funding Corp., 5.78%, January 12, 1996 1,189,000 1,183,273
Finova Capital Corp., 5.97%, January 16, 1996 780,000 771,980
Smith Barney Inc., 5.79%, January 18, 1996 1,628,000 1,618,836
Fleet Financial Group, 5.75%, January 30, 1996 1,700,000 1,689,139
Countrywide Funding Corp., 5.82%, February 14, 1996 1,500,000 1,488,128
----------- -----------
Total Commercial Paper 12,340,000 12,280,568
Total Cash 1,942,697 1,942,697
----------- -----------
Total Cash and Cash Equivalents $14,282,697 $14,223,265
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKETABLE SECURITIES (Percent of Net Assets) 5.6%
Estimated
Face Market
Description Amount Value
- ----------- ----------- -----------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Associates Corp. of North America, 8.75%, February 1, 1996 $ 410,000 $ 416,810
General Motors Acceptance Corp., 8.75%, February 1, 1996 650,000 658,860
General Motors Acceptance Corp., 8.95%, February 5, 1996 350,000 356,370
General Motors Acceptance Corp., 4.75%, February 14, 1996 430,000 426,212
General Motors Acceptance Corp., 6.01%, February 22, 1996 240,000 240,057
Household Finance Corp., 5.75%, April 19, 1996 2,000,000 1,996,520
Ford Motor Credit Corp., 6.24%, April 22, 1996 500,000 500,658
Society National Bank Cleveland, 6.00%, April 25, 1996 150,000 149,295
International Lease Finance Corp., 5.00%, May 28, 1996 1,000,000 992,120
Transamerica Financial Corp., 8.55%, June 15, 1996 400,000 409,284
John Deere Capital Corp., 6.16%, July 22, 1996 1,000,000 1,002,267
Sears Roebuck Acceptance Corp., 8.55%, August 1, 1996 1,000,000 1,039,335
Key Bank of New York, N.A., 5.43%, September 6, 1996 1,000,000 999,210
Bank One Columbus, 5.56%, September 12, 1996 1,000,000 999,297
Associates Corp. of North America, 4.48%, October 15, 1996 350,000 345,860
----------- -----------
Total Commercial Paper $10,480,000 $10,532,155
----------- -----------
----------- -----------
</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
March 31, 1996
(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 three months ended
March 31, 1996 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1996. For further
information, refer to the financial statements and notes thereto
included in each Partner's December 31, 1995 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 have
been any significant changes related to the property since the most
recent independent appraisal.
The purpose of an appraisal is to estimate the market value of a
property as of a specific date. Estimated market value has been
defined as the most probable price for which the appraised property
will sell in a competitive market under all conditions requisite to
fair sale, with the buyer and seller each acting prudently,
knowledgeably, and for self interest, and assuming that neither is
under undue duress. This estimate of 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: Revenue Recognition - Rent from properties consists of all amounts
earned under tenant operating leases including base rent, recoveries
of real estate taxes and other expenses and charges for miscellaneous
services provided to tenants. Revenue from leases which provide for
scheduled rent increases is recognized as billed.
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
estimated market value.
E: Marketable Securities - Marketable securities are highly liquid
investments with maturities of more than three months when purchased
and are carried at estimated market value.
F: Federal Income Taxes - The Partnership is not a taxable entity under
the provisions of the Internal Revenue Code. The income and capital
gains and losses of the Partnership are attributed, for federal
income tax purposes, to the Partners in the Partnership. The
Partnership may be subject to state and local taxes in jurisdictions
in which it operates.
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 three
months ended March 31, 1996 and 1995 management fees incurred by the
Partnership were $608,075 and $569,088, respectively.
The Partnership also reimburses The Prudential for certain administrative
services rendered by The Prudential. The amounts incurred for the three
months ended March 31, 1996 and 1995 were $32,912 and $32,255 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. 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. The property management fees earned by
PREMISYS for the three months ended March 31, 1996 and 1995 were $5,974 and
$4,689 respectively.
15
<PAGE>
Note 3: 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 March 31, 1996 is approximately $ 51.6 million.
Note 4: Event Subsequent to March 31, 1996
On April 12, 1996, the Partnership sold its Azusa, California warehouse
facility. The proceeds, net of related costs, amounted to approximately
$14,640,000, resulting in a realized loss of approximately $421,000.
16
<PAGE>
Note 6: Per Share Information (For a share outstanding thoughout the period)
<TABLE>
<CAPTION>
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
to to to to to to to
03/31/96 12/31/95 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 $ 0.4938 $ 1.6387 $ 1.2754 $ 1.1659 $ 1.0727 $ 0.9899 $ 0.9479
Income from interest in properties $ 0.0137 $ 0.0527 $ 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 $ 0.0360 $ 0.2199 $ 0.1226 $ 0.0549 $ 0.0653 $ 0.1151 $ 0.1202
-------- -------- -------- -------- -------- -------- --------
INVESTMENT INCOME $ 0.5435 $ 1.9113 $ 1.5900 $ 1.5102 $ 1.4061 $ 1.3504 $ 1.2868
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Investment management fee $ 0.0507 $ 0.1936 $ 0.1786 $ 0.1673 $ 0.1642 $ 0.1669 $ 0.1591
Real estate tax expense $ 0.0548 $ 0.1602 $ 0.1399 $ 0.1465 $ 0.1488 $ 0.1168 $ 0.1010
Administrative expenses $ 0.0398 $ 0.1484 $ 0.1103 $ 0.1187 $ 0.1046 $ 0.0946 $ 0.0910
Operating expenses $ 0.0570 $ 0.1546 $ 0.1332 $ 0.1209 $ 0.1241 $ 0.0948 $ 0.0776
Interest expense $ 0.0115 $ 0.0381 $ 0.0255 $ 0.0236 $ 0.0215 $ 0.0193 $ 0.0186
-------- -------- -------- -------- -------- -------- --------
EXPENSES $ 0.2138 $ 0.6949 $ 0.5875 $ 0.5770 $ 0.5632 $ 0.4924 $ 0.4473
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
NET INVESTMENT INCOME $ 0.3298 $ 1.2164 $ 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 ($ 0.0535) $ 0.0581 $ 0.2169 $ 0.0152 $(1.1359) $(0.7770) $(0.1543)
-------- -------- -------- -------- -------- -------- --------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS ($ 0.0535) $ 0.0581 $ 0.1203 $(0.1664) $(1.1359) $(0.7770) $(0.1543)
-------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) in share value $ 0.2762 $ 1.2745 $ 1.1228 $ 0.7668 $(0.2930) $ 0.0810 $ 0.6852
Share Value at beginning of period $15.7537 $14.4792 $13.3564 $12.5896 $12.8826 $12.8016 $12.1164
-------- -------- -------- -------- -------- -------- --------
Share Value at end of period $16.0299 $15.7537 $14.4792 $13.3564 $12.5896 $12.8826 $12.8016
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Ratio of expenses to average net assets 1.35% 4.62% 4.27% 4.44% 4.47% 3.81% 3.58%
Ratio of net investment income to
average net assets 2.08% 8.08% 7.29% 7.17% 6.69% 6.63% 6.72%
Number of shares outstanding at
end of period (000's) 11,848 12,037 12,241 13,031 14,189 14,993 16,175
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.
</TABLE>
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All of the assets of The Prudential 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 March 31, 1996, the Partnership's liquid assets consisting of cash and
cash equivalents and marketable securities totalled $24,774,939. This is an
increase of $19,519 from liquid assets at December 31, 1995, of $24,755,420.
The increase is due to cash received from the operations of the Partnership's
properties and interest income received from short-term investments offset by
withdrawals by the partners of $3,000,000.
The Partnership had established a $10 million annually renewable line of
credit with First Fidelity Bank, N.A. to be drawn upon as needed for
potential liquidity needs. The line of credit had never been drawn upon.
Management did not anticipate any future needs for this credit facility and
decided to terminate the line of credit 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 $51.6 million as of March 31, 1996.
The Partnership will ordinarily invest 10-15% of its assets in cash and
short-term obligations to maintain liquidity; however, its investment policy
allows up to 30% investment in cash and short-term obligations. At March 31,
1996, 12.6% of the Partnership's assets consisted of cash and cash
equivalents and marketable securities. The partners withdrew $3 million in
March, 1996. Additional withdrawals may be made during the remainder of 1996
based upon the needs of the Partnership including potential property
acquisitions and dispositions and capital expenditures. At March 31, 1996,
and currently, the Partnership has adequate liquidity. Management
anticipates that ongoing cash flow from operations and proceeds from the sale
of properties will satisfy the Partnership's needs over the next nine months
and the foreseeable future.
On April 12, 1996, the Partnership sold the Azusa, CA warehouse. Actual cash
received from the sale was approximately $14,525,000. These funds will be
retained by the Partnership and may be used to acquire additional properties.
During the quarter ended March 31, 1996, the Partnership expended
approximately $148,000 in capital expenditures. Approximately $131,000 were
for tenant alterations and leasing commissions. The most significant of
these was approximately $77,000 at the warehouse facility located in the
Azusa, CA building relating to the lease signed by Best Buy . Approximately
$53,400 was expended at the office park in Flint, MI. These costs were
attributable to the tenant improvements being performed for the Olsten
Kimberly suites. Of the remaining $17,000 in capital expenditures,
approximately $21,000 was for access gates at the Atlanta, GA apartments.
These amounts were offset by reductions in the leasing commissions that were
charged to the partnership in the fourth quarter of 1995 at the Morristown,
N.J. and Roswell, GA properties.
Projected capital expenditures for the remainder of the 1996 total
approximately $1,532,000. Approximately $1,244,000 consists of tenant
alterations and leasing commissions. Approximately $352,000 is budgeted for
the Morristown Office Center. The property projects payments of almost
$120,000 for costs associated with the
18
<PAGE>
Spectrum Financial expansion and the budget also includes leasing the
remaining vacancies at the property. At the Lisle, IL office building, the
Partnership projects leasing commissions of $324,000 resulting from efforts
to renew the tenant prior to the November, 1997 expiration of its lease. In
addition, tenant improvements and leasing commissions are expected to be
about $162,000 at the Pomona, CA warehouse, $207,000 at the Roswell shopping
center, 86,000 at the Flint, MI office park, $47,000 at the Nashville, TN
property and about $66,000 at the Unit Distribution warehouses.
Other major capital expenditures planned for the remainder of 1996 include
$90,000 for separating the irrigation meters at the Pomona, CA warehouse,
$35,000 for recaulking of the exterior windows at the Morristown property,
$27,000 for a landscaping upgrade, new signage and carport roof replacement
at Farmington Hills, MI and $38,000 to replace exterior entrance doors and
landscaping upgrades at the Flint property. Also $27,000 is expected to be
expended to complete the fencing, entrance gates and upgrades to the exercise
room at the Atlanta, GA apartments. Approximately $70,000 was budgeted for
smaller projects among the various properties.
(b) Results of Operations
The following is a brief discussion of a comparison of the results of
operations for the three months ended March 31, 1996 and 1995.
The Partnership's net investment income for the first three months of 1996
was $3,953,633, an increase of $609,975 (18.2%) from $3,343,658 for the
corresponding period of 1995. This was largely due to income from three
acquisitions that were made in 1995 (approximately $892,000), increased
income from ongoing property operations (approximately $107,300) and a
decrease in administrative expense (about $6,000) offset by a decrease in
interest income from short-term investments (approximately $333,500), higher
interest expense (approximately $23,000), higher investment management fees
(approximately $39,000).
Income from property operations, including income from investment in
properties was $4,318,734 for the first three months of 1996. This was an
increase of $999,309 (30.1%) from $3,319,425 for the same period of 1995.
This was primarily the result of the properties acquired as noted above.
Excluding the results of the acquired properties, income from property
operations increased ($107,300 or 3.2%). Revenue at the properties held for
the comparable period increased by $33,000. The gain in revenue was
increased by lower real estate taxes (about $97,800) and lower administrative
expenses (approximately $16,300). These gains were offset by higher general
operation expenses ( approximately $55,500).
Income from interest in properties relates to the Partnership's 50%
co-investment in the Unit warehouses. Income from interest in properties
increased by $14,737 (9.9%) from $149,408 for the first quarter of 1995 to
$164,145 for the first quarter of 1996.
Rent from properties increased by $1,448,199 (32.4%) from $4,472,397 for the
first quarter of 1995 to $5,920,596 for the corresponding period of 1996.
This was primarily the result of the acquisition, of the Raleigh,NC,
($557,390) Nashville TN, ($371,066) and Oakbrook, IL ($486,861) properties.
Real estate taxes for the first three months of 1996 increased $46,976
(7.7%), to $656,600 from $609,624 for the first three months of 1995. Almost
$146,000 was due to the inclusion of the recent acquisitions. The Flint
property taxes includes approximately $101,000 of 1994 taxes which were paid
in 1995. This caused a decline of approximately $93,000 that offsets the
taxes for the newer properties. Real estate taxes were virtually unchanged at
the other properties.
19
<PAGE>
Property operating expenses for the first quarter of 1996 was $683,285, an
increase of $325,784 (91.1%) from $357,501 for the corresponding period of
last year. Excluding the newly acquired properties, operating expenses
increased $55,500 or 15.5%. The severe winter in the northeast caused the
Morristown property to experience higher utility and snow removal costs which
accounted for approximately $56,000 of the increase. Operating costs were
slightly higher at the Atlanta apartments and the Azusa, CA warehouse. These
increases were offset by lower expenses at the Flint, Pomona and Roswell
properties.
Administrative expenses on the statement of operations includes both property
and Partnership administrative expenses. Property administrative expenses
totalled $426,074 for the three months ended March 31, 1996. This is an
increase of $90,819 (27.1%) from $335,255 for the same period last year.
This was primarily the result of the inclusion of the aforementioned
acquisitions ($107,143). Excluding these properties, administrative expenses
decreased $16,323 (4.9%). Advertising and marketing was lower at the Atlanta
apartments $16,500, and Farmington Hills, MI apartments $14,200 and there
were lower professional fees at the Flint property $10,400. This was offset
by an increase in professional fees at the Pomona warehouse $22,500.
Partnership administrative expenses for the first three months of 1996
decreased by $6,100 (10.7%) to $50,766 from $56,866 for the first three
months of 1995. This was primarily due to the termination of the line of
credit facility.
Interest expense relates to the capitalized ground leased at the Pomona
warehouse. Interest expense increased by $23,021 (20.0%) to $138,165 for the
first three months of 1996 from $115,144 for the corresponding period of
1995. This was due to a scheduled increase in the lease payment, effective in
November 1995. 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 and intends to
exercise this option prior to its expiration in November, 1997.
Investment management fee expense increased by $38,987 (6.9%) for the first
three months of 1996 to $608,075 from $569,088 for the first three months of
1995. The fee is computed as 1.25% of gross assets. During the first three
months of 1996, gross assets were slightly higher than in 1995.
Interest income from short-term investments decreased by $333,473 (43.6%) to
$431,857 for the first quarter of 1996 from $765,330 for the first quarter
of 1995. This is primarily due to significantly lower cash balances as a
result of the property acquisitions and withdrawals made by the partners in
the preceding twelve months.
ESTIMATED MARKET VALUES OF INVESTED ASSETS: QUARTER ENDED MARCH 31, 1996
During the three months ended March 31, 1996, the Partnership experienced an
unrealized loss of $648,641 on its real estate investments. This was the
result of decreases in the estimated market values of the warehouse and
retail properties totalling $2,006,502 which were partially offset by
increases in the values of the office properties and apartments of $577,912
and $779,949, respectively.
During the first quarter, the Pomona warehouse decreased in value by
$1,001,292 (5.8% of its December 31, 1995 value). The decline in value
reflects a vacancy of 33,300 square feet (6%) of the property. Inter-City
Products, whose lease expired in January vacated their space. The space is
currently being marketed to a prospective tenant. Also, Structural
Composite's lease expires in November, 1996 and the there is some
uncertainty at this time as to whether they will renew. Estimated market
values at the Azusa and Bolingbrook warehouses remained stable during the
first quarter of 1996.
The Partnership's retail property in Roswell experienced an unrealized loss
of $1,055,210 during the first quarter (3.3% of its December 31, 1995
value). The decrease reflects the potential impact of a shopping center
which was constructed nearby and another center which is under construction.
20
<PAGE>
The Partnership's apartment properties experienced an unrealized gain
totalling $779,949 during the first quarter of 1996. The Farmington Hills
apartments had gains of $600,000 (4.2% of its December 31, 1995 value) and
Atlanta $179,949 (1.4% of its December 31, 1995 value). These gains are due
to increases in the rental rate assumptions for these properties and the
continued strong demand for rentals in their markets. The Raleigh property
was unchanged during the period.
The office center properties showed a net increase in unrealized appreciation
for the first quarter of 1996. This was due to increases at the Morristown
property $547,473 (5.7% of its December 31, 1995 value) and at the Oakbrook,
IL center $269,807 (2.1% of its December 31, 1996 value). These gains were
offset by a decline in value at the Flint office park $239,368 (3.7% of its
December 31, 1995 value). The Morristown increase reflects increased
prospects for signing new leases which will improve the properties
performance. The Oakbrook property is experiencing increasing rental rates in
its market which is compounded by declining vacancy rates. The Flint office
center negotiations ceased in the first quarter. The agreed upon price of
the deal was $6,300,000 and the value was set at approximately that price.
The Flint market continues to experience very soft leasing demand and
consists mostly of existing tenants.
PROPERTY LEASING ACTIVITY
Occupancy among the Partnership's properties was generally stable during the
first quarter of 1996 however, there was a slight decline at one of the
warehouses.
Occupancy at the Pomona warehouse declined to 94% as a result of Inter-City
Products lease covering 33,400 square feet (6 % of the property) expiring in
January, 1996. Currently, efforts are being made to market this space to
prospective tenants. Structural Composite's lease expires in November, 1996.
They occupy 56,450 square feet (10.6%). The Partnership is uncertain at this
time as to whether they will renew their lease. The Unit warehouses
occupancy remained at 100% at March 31, 1996. However, there are two leases
which expire in 1996. The Partnership is currently in negotiations with
Angelo Brothers, Inc, whose lease expires in April, 1996. Their lease covers
84,000 square feet (17% of the four warehouses). The Partnership has reached
a tentative agreement for a three year lease renewal. We expect the lease
agreement to be finalized by the end of May. GATX's lease expires in expires
in May, 1996. Presently, they occupy 114,240 square feet (23% of the four
warehouses). The Partnership had expected them to vacate at the end of their
term. However there are renewed negotiations concerning a new lease, during
which time they may continue to occupy the space on a month to month basis.
The warehouse in Bolingbrook continues to be fully occupied by Gillette under
a lease expiring in 2000.
Occupancy at the office properties remained stable in the first quarter of
1996. The Flint property is currently 94% leased. The property had one lease
expiration in February for 1,350 square feet. The tenant still occupies the
space, but is expected to vacate shortly. There are six additional leases
which are scheduled to expire in 1996 totalling 37,023 square feet (32.5% of
the property). Two of these tenants are not expected to renew. McLaren Sports
occupies 7,178 square feet and Spender and Robb P.C. 2,044 square feet . The
property has instituted a tenant retention program and is making efforts to
renew existing tenants and will market existing vacancies.
Occupancy at the Morristown office was intact at 94.8% on March 31, 1996.
The Partnership is currently negotiating a ten year lease for 5,800 square
feet (7% of the property) to a prospective tenant. Currently, Chase Home
Mortgage and Owens-Illinois occupies that space on a month to month basis.
There is one lease expiration in 1996. Mutual of Omaha's original lease
expired on March 31, 1996. The tenant requested a six month extension through
September, 1996. The Partnership is actively marketing the remaining
vacancies. Occupancy at the Oakbrook and Nashville properties remained at 99%.
21
<PAGE>
The office building in Lisle, Illinois continues to be fully leased to R.R.
Donnelly under a lease expiring in September,1997. The lease contains two
five-year renewal options. Discussions are being held with this tenant in an
attempt to secure an early renewal. The tenant is also evaluating
alternatives at other properties.
Occupancy at King's Market declined to 97.2% from 99% at December 31, 1995.
Parties Galore vacated in December, 1995. They had occupied 6,100 square
feet. Kids Mart vacated in January, 1996. They occupied 2,100 square feet.
There are four leases that will expire in 1996 totalling 7,864 square feet
(2.7% of the center). Two of these tenants occupying 2,882 square feet (1% of
the property) are expected to renew. The Men's Wearhouse 3,982 square feet
(2% of the center) is expected to vacate at the end of its lease in May,1996.
Atlanta Kids 1,000 square feet (.3%) of the property is also expected to
vacate. In addition, Hit or Miss has been occupying 4,000 square feet (1.3%)
of the property on a month to month basis. The Partnership expects them
to vacate at the end of April, 1996. Tenant retention and new leasing plans
are underway to maintain and improve the occupancy at the center.
Occupancy at the Partnership's apartments was generally strong during the
first quarter of 1996. The Atlanta apartments increased to 99% at March 31,
1996 from 97% at December 31, 1996. The Farmington Hills and Raleigh
apartments were 98% and 95% leased at March 31, 1996. This reflected no
change from levels at December 31,1995. Market rental rates are expected to
increase slightly in 1996 in the residential markets in which the
Partnership's are located. Occupancy at the Atlanta and Farmington Hills
properties are expected to be strong during the course of 1996. There is
some uncertainty whether the Raleigh complex can sustain its current
occupancy level.
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: May 8, 1996 By: /s/ Esther H. Milnes
-----------------------------
Esther H. Milnes
President
Date: May 8, 1996 By: /s/ Steve Tooley
-----------------------------
Steve 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; OPERATIONS; STATEMENT OF CHANGES
IN NET ASSETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000829114
<NAME> PRUCO LIFE OF NEW JERSEY
<SERIES>
<NUMBER> 1
<NAME> PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<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> 7,585,779
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 9,663
<NET-INVESTMENT-INCOME> 146,061
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (24,993)
<NET-CHANGE-FROM-OPS> 121,068
<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> 130,731
<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
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENT OF
ASSETS & 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>
<CIK> 0000829114
<NAME> PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
<SERIES>
<NUMBER> 2
<NAME> PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 198,262,933
<INVESTMENTS-AT-VALUE> 169,994,560
<RECEIVABLES> 2,072,037
<ASSETS-OTHER> 24,774,939
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 196,841,536
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 6,914,685
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 11,848,275
<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> 189,926,851
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 431,857
<OTHER-INCOME> 6,084,741
<EXPENSES-NET> 2,562,965
<NET-INVESTMENT-INCOME> 3,953,633
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (648,641)
<NET-CHANGE-FROM-OPS> 3,304,992
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 188,409
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 304,992
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 608,075
<INTEREST-EXPENSE> 138,165
<GROSS-EXPENSE> 2,562,965
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 15.754
<PER-SHARE-NII> .329
<PER-SHARE-GAIN-APPREC> (.053)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.029
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
