<PAGE>
AS FILED WITH THE SEC ON ____________. REGISTRATION NO. 33-20018
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
POST-EFFECTIVE AMENDMENT NO. 13
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
IN RESPECT OF
PRUCO LIFE OF NEW JERSEY
VARIABLE CONTRACT
REAL PROPERTY ACCOUNT
(Exact Name of Registrant)
c/o PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 778-2255
(Address and telephone number of principal executive offices)
-----------
THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 778-2255
(Name, address, and telephone number of agent for service)
Copy to:
JEFFREY C. MARTIN
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036
------------
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY FORM S-1)
<TABLE>
<CAPTION>
S-1 ITEM NUMBER AND CAPTION LOCATION
- --------------------------- --------
<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus................................................ Cover
2. Inside Front and Outside Back Cover Pages of Prospectus... Inside Front Cover
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges................................. Prospectus Cover; Summary; Risk Factors
4. Use of Proceeds........................................... Investment Policies; Current Real Estate-Related
Investments; Management's Discussion and Analysis of
Financial Condition and Results of Operations
5. Determination of Offering Price........................... Not Applicable
6. Dilution.................................................. Not Applicable
7. Selling Security Holders.................................. Not Applicable
8. Plan of Distribution...................................... Distribution of the Contracts
9. Description of Securities to be Registered................ Prospectus Cover; General Information about Pruco Life
Insurance Company of New Jersey, Pruco Life of New
Jersey Variable Contract Real Property Account, The
Prudential Variable Contract Real Property Partnership,
and The Investment Manager; The Real Property Account's
Unavailability to Certain Contracts; Valuation of
Contract Owners' Participating Interests; Charges;
Restrictions on Withdrawals; Restrictions on Contract
Owners' Investment in the Real Property Account
10. Interests of Named Experts and Counsel................... Not Applicable
11. Information With Respect to the Registrant............... General Information about Pruco Life Insurance Company
of New Jersey, Pruco Life of New Jersey Variable
Contract Real Property Account, The Prudential Variable
Contract Real Property Partnership, and The Investment
Manager; Investment Policies; Current Real
Estate-Related Investments; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Per Share Investment Income and Capital
Changes; Investment Restrictions; Conflicts of Interest;
Valuation of Contract Owners' Participating Interests;
Financial Statements; Litigation; State Regulation;
Federal Income Tax Considerations
12. Disclosure of Commission Position on Indemni-
fication for Securities Act Liabilities.................. Not Applicable
</TABLE>
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
PROSPECTUS
MAY 1, 2000
PRUCO LIFE
OF NEW JERSEY
VARIABLE CONTRACT
REAL PROPERTY ACCOUNT
This prospectus is attached to two other prospectuses. The first describes
either a variable annuity contract or a variable life insurance contract (the
"Contract") issued by Pruco Life Insurance Company of New Jersey ("Pruco Life of
New Jersey," "us," "we," or "our"), a stock life insurance company that is an
indirect, wholly-owned subsidiary of The Prudential Insurance Company of America
("Prudential"). The second prospectus describes several investment options
available under that variable contract through The Prudential Series Fund, Inc.
(the "Series Fund"). The Series Fund is registered under the Investment Company
Act of 1940 as an open-end, diversified management investment company. The
Series Fund consists of separate investment portfolios that are mutual funds,
each with a different investment policy and objective.
This prospectus describes the Pruco Life of New Jersey Variable Contract Real
Property Account (the "Real Property Account"), an additional available
investment option. Although it is not a mutual fund, in many ways it is like a
mutual fund. Instead of holding a diversified portfolio of securities, such as
stocks or bonds, it consists mainly of a portfolio of commercial and residential
real properties.
Pruco Life of New Jersey determines the price of a "share" or, as we call it, a
"participating interest" in this portfolio of properties, just as it does for
the other investment options. It is based upon our best estimate of the fair
market value of the properties and other assets held in this portfolio. The
portion of your "Contract Fund" (the total amount invested under the Contract)
that you allocate to this investment option will change daily in value, up or
down, as the fair market value of these real properties and other assets change.
The risks of investing in real property are different from the risks of
investing in mutual funds. See RISK FACTORS, page 10. Also, your ability to
withdraw or transfer your investment in this option is not as freely available
as it is for the other investment options. See RESTRICTIONS ON WITHDRAWALS, page
18.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") MAINTAINS A WEB SITE
(HTTP://WWW.SEC.GOV) THAT CONTAINS MATERIAL INCORPORATED BY REFERENCE AND OTHER
INFORMATION REGARDING REGISTRANTS THAT FILE ELECTRONICALLY WITH THE SEC.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 778-2255
PRPA-2 Ed. 5-2000
<PAGE>
PROSPECTUS CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PER SHARE INVESTMENT INCOME, CAPITAL CHANGES AND SELECTED RATIOS............................................... 1
SUMMARY........................................................................................................ 2
INVESTMENT OF THE REAL PROPERTY ACCOUNT ASSETS.............................................................. 2
INVESTMENT OBJECTIVES....................................................................................... 2
RISK FACTORS................................................................................................ 2
CHARGES..................................................................................................... 3
AVAILABILITY TO PRUCO LIFE OF NEW JERSEY CONTRACTS.......................................................... 3
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY, PRUCO LIFE OF NEW JERSEY VARIABLE
CONTRACT REAL PROPERTY ACCOUNT, THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP, AND THE INVESTMENT
MANAGER........................................................................................................ 3
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY.................................................................. 3
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT............................................ 4
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP.................................................. 4
THE INVESTMENT MANAGER...................................................................................... 5
INVESTMENT POLICIES............................................................................................ 5
OVERVIEW.................................................................................................... 5
INVESTMENT IN DIRECT OWNERSHIP INTERESTS IN REAL ESTATE..................................................... 6
INVESTMENTS IN MORTGAGE LOANS............................................................................... 7
INVESTMENTS IN SALE-LEASEBACKS.............................................................................. 8
GENERAL INVESTMENT AND OPERATING POLICIES................................................................... 9
CURRENT REAL ESTATE-RELATED INVESTMENTS........................................................................ 10
PROPERTIES.................................................................................................. 10
RISK FACTORS................................................................................................... 10
LIQUIDITY OF INVESTMENTS.................................................................................... 11
GENERAL RISKS OF REAL PROPERTY INVESTMENTS.................................................................. 11
RELIANCE ON THE PARTNERS AND THE INVESTMENT MANAGER......................................................... 12
INVESTMENT RESTRICTIONS........................................................................................ 13
CONFLICTS OF INTEREST.......................................................................................... 13
THE REAL PROPERTY ACCOUNT'S UNAVAILABILITY TO CERTAIN CONTRACTS................................................ 15
VALUATION OF CONTRACT OWNERS' PARTICIPATING INTERESTS.......................................................... 15
BORROWING BY THE PARTNERSHIP................................................................................... 17
CHARGES........................................................................................................ 17
RESTRICTIONS ON WITHDRAWALS.................................................................................... 18
RESTRICTIONS ON CONTRACT OWNERS' INVESTMENT IN THE REAL PROPERTY ACCOUNT....................................... 18
FEDERAL INCOME TAX CONSIDERATIONS.............................................................................. 19
DISTRIBUTION OF THE CONTRACTS.................................................................................. 19
STATE REGULATION............................................................................................... 19
ADDITIONAL INFORMATION......................................................................................... 19
EXPERTS........................................................................................................ 20
</TABLE>
<PAGE>
<TABLE>
<S> <C>
LITIGATION.................................................................................................... 20
REPORTS TO CONTRACT OWNERS.................................................................................... 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................... 21
FINANCIAL STATEMENTS.......................................................................................... 27
FINANCIAL STATEMENTS OF PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT...................... A1
FINANCIAL STATEMENTS OF THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP............................ B1
</TABLE>
<PAGE>
PER SHARE INVESTMENT INCOME, CAPITAL CHANGES AND SELECTED RATIOS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following information on per share investment income, capital changes and
selected ratios has been provided for your information. This page should be read
in conjunction with the financial statements and notes thereto of The Prudential
Variable Contract Real Property Partnership included in this prospectus.
<TABLE>
<CAPTION>
01/01/99 01/01/98 01/01/97 01/01/96 01/01/95
to to to to to
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue from real estate and improvements $ 2.16 $ 2.07 $ 1.82 $ 1.92 $ 1.64
Equity in income of real estate partnership $ 0.01 $ 0.00* $ 0.04 $ 0.05 $ 0.05
Dividend income from real estate investment trusts $ 0.12 $ 0.06 $ 0.01 $ 0.00 $ 0.00
Interest on short-term investments $ 0.17 $ 0.16 $ 0.20 $ 0.18 $ 0.22
------- ------- ------- ------- -------
TOTAL INVESTMENT INCOME $ 2.46 $ 2.29 $ 2.07 $ 2.15 $ 1.91
------- ------- ------- ------- -------
Investment management fee $ 0.27 $ 0.25 $ 0.22 $ 0.21 $ 0.19
Real estate taxes $ 0.26 $ 0.20 $ 0.19 $ 0.20 $ 0.16
Administrative expense $ 0.22 $ 0.17 $ 0.20 $ 0.16 $ 0.15
Operating expense $ 0.38 $ 0.34 $ 0.28 $ 0.24 $ 0.16
Interest expense $ 0.02 $ 0.00 $ 0.02 $ 0.04 $ 0.04
Minority interest in consolidated partnership $ 0.00 * $ 0.00 $ 0.00 $ 0.00 $ 0.00
------- ------- ------- ------- -------
TOTAL INVESTMENT EXPENSES $ 1.15 $ 0.96 $ 0.91 $ 0.85 $ 0.70
------- ------- ------- ------- -------
NET INVESTMENT INCOME $ 1.31 $ 1.33 $ 1.16 $ 1.30 $ 1.21
------- ------- ------- ------- -------
Net realized gain (loss) on real estate investments
sold or converted ($ 0.00)* 0.26 $ 0.03 ($ 0.13) $ 0.00
------- ------- ------- ------- -------
Change in unrealized gain (loss) on real estate
investments ($ 0.72) $ 0.15 $ 0.69 ($ 0.27) $ 0.06
Minority interest in unrealized
gain (loss) on investments ($ 0.00)* 0.00 $ 0.00 $ 0.00 $ 0.00
------- ------- ------- ------- -------
Net unrealized gain (loss) on real estate investments ($ 0.72) $ 0.15 $ 0.69 ($ 0.27) $ 0.06
------- ------- ------- ------- -------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS ($ 0.72) $ 0.41 $ 0.72 ($ 0.40) $ 0.06
======= ======= ======= ======= =======
Net change in share value $ 0.59 $ 1.74 $ 1.88 $ 0.90 $ 1.27
Share value at beginning of period $ 20.27 $ 18.53 $ 16.65 $ 15.75 $ 14.48
------- ------- ------- ------- -------
Share value at end of period $ 20.86 $ 20.27 $ 18.53 $ 16.65 $ 15.75
======= ======= ======= ======= =======
Ratio of expenses to average net assets 5.33% 4.99% 5.16% 5.26% 4.62
Ratio of net investment income to average net assets 6.12% 6.97% 6.66% 8.01% 8.08
Number of shares outstanding at
end of period (000's) 10,079 11,848 11,848 11,848 12,037
</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 2J on page B10.
* Per share amount less than $0.01 (rounded).
1 - Real Property
<PAGE>
SUMMARY
This Summary provides a brief overview of the more significant aspects of the
Real Property Account. We provide further detail in the subsequent sections of
this prospectus.
The Real Property Account is a separate account of Pruco Life of New Jersey
created pursuant to New Jersey insurance law. Under that law, the assets of the
Real Property Account are not chargeable with liabilities arising out of any
other business of Pruco Life of New Jersey. Owners of certain variable life
insurance and variable annuity contracts issued by Pruco Life of New Jersey may
allocate a portion of their net premiums or purchase payments, or transfer a
portion of their Contract Fund, to the Real Property Account. Values and
benefits under the Contracts will thereafter reflect the investment experience
of the Real Property Account. Contract owners, not Pruco Life of New Jersey,
bear the risks and rewards of the investment performance of the Real Property
Account to the extent of the Contract owner's Contract Fund invested in the Real
Property Account. This prospectus is attached to and should be read in
conjunction with the prospectus for the Contract you selected.
INVESTMENT OF THE REAL PROPERTY ACCOUNT ASSETS
The Real Property Account assets are invested primarily in income-producing real
estate through The Prudential Variable Contract Real Property Partnership (the
"Partnership") which is a general partnership that was established by Prudential
and two of its wholly-owned subsidiaries, Pruco Life Insurance Company ("Pruco
Life") and Pruco Life of New Jersey. See THE PRUDENTIAL VARIABLE CONTRACT REAL
PROPERTY PARTNERSHIP, page 4. Prudential, the ultimate parent of Pruco Life of
New Jersey and a mutual insurance company organized under the laws of New
Jersey, is the investment manager of the Partnership. See THE INVESTMENT
MANAGER, page 5. The Partnership invests at least 65% of its assets in direct
ownership interests in:
1. income-producing real estate;
2. participating mortgage loans (mortgages providing for participation in
the revenues generated by, or the appreciation of, the underlying
property, or both) originated for the Partnership; and
3. real property sale-leasebacks negotiated by Prudential on behalf of
the Partnership.
The large majority of these real estate investments will be in direct ownership
interests in income producing real estate, such as office buildings, shopping
centers, apartments, industrial properties or hotels. The Partnership may also
invest up to 5% of its assets in direct ownership interests in agricultural
land. Approximately 10% of the Partnership's assets will be held in cash or
invested in liquid instruments and securities. The remainder of the
Partnership's assets may be invested in other types of real estate related
investments, including non-participating mortgage loans and real estate
investment trusts.
INVESTMENT OBJECTIVES
The investment objectives of the Partnership are to:
1. preserve and protect the Partnership's capital;
2. compound income by reinvesting investment cash flow; and
3. over time, increase the income amount through appreciation in the
value of permitted investments and, to a lesser extent, through
mortgage loans and sale-leaseback transactions.
There is no assurance that the Partnership's objectives will be attained. See
INVESTMENT POLICIES, page 5.
RISK FACTORS
Investment in the Real Property Account, and thereby, participation in the
investment experience of the Partnership, involves significant risks. See RISK
FACTORS, page 10. These include the risk of fluctuating real estate values and
the risk that the appraised or estimated values of the Partnership's real
property investments will not be realized upon their disposition. Many of the
Partnership's real estate investments will not be quickly convertible into cash.
Therefore, the Real Property Account should be viewed as a long-term investment.
See RESTRICTIONS ON WITHDRAWALS, page 18.
Pruco Life of New Jersey has taken steps to ensure that the Real Property
Account and Partnership will be sufficiently liquid to satisfy all withdrawal or
loan requests promptly (within seven days), see LIQUIDITY OF INVESTMENTS, page
11.
2 - Real Property
<PAGE>
Prudential's management of the Partnership is subject to certain conflicts
of interest, including the possible acquisition of properties from affiliates.
See CONFLICTS OF INTEREST, page 13.
CHARGES
Prudential charges the Partnership a daily investment management fee which
amounts to 1.25% per year of the average daily gross assets of the Partnership.
The Partnership also compensates Prudential for providing certain accounting and
administrative services. See CHARGES, page 17. The portion of your Contract Fund
allocated to the Real Property Account is subject to the same Contract charges
as the portion of your Contract Fund allocated to The Prudential Series Fund,
Inc. (the "Series Fund"). The Series Fund is the underlying funding vehicle for
the other variable investment options available to Contract owners. You should
read the Contract prospectus for a description of those charges.
AVAILABILITY TO PRUCO LIFE OF NEW JERSEY CONTRACTS
The Real Property Account is currently available to purchasers of Pruco Life of
New Jersey's VARIABLE APPRECIABLE LIFE(R) Insurance Contracts, VARIABLE LIFE
INSURANCE Contracts, DISCOVERY(R) LIFE PLUS Contracts and DISCOVERY(R) PLUS
Contracts. It is not available on Contracts that are purchased in connection
with IRAs, Section 403(b) annuities, and other tax-qualified plans, that are
subject to the Employee Retirement Income Security Act of 1974 ("ERISA") or to
the prohibited transaction excise tax provisions of the Internal Revenue Code.
See THE REAL PROPERTY ACCOUNT'S UNAVAILABILITY TO CERTAIN CONTRACTS, page 15.
For example, a VARIABLE APPRECIABLE LIFE Contract owner who elects to invest
part of his or her net premiums in the Pruco Life of New Jersey Variable
Appreciable Account, a separate account of Pruco Life of New Jersey registered
as a unit investment trust under the Investment Company Act of 1940, and part in
the Real Property Account, will be subject to the same: (1) monthly sales load
charges; (2) risk charges; (3) administrative charges; (4) insurance charges;
and (5) contingent deferred sales charges without regard to what portion is
invested in the Pruco Life of New Jersey Variable Appreciable Account and what
portion is invested in the Real Property Account. The Real Property Account has
established different subaccounts, relating to the different types of variable
Contracts that may participate in the Real Property Account. These subaccounts
provide the mechanism and maintain the records whereby these different Contract
charges are made.
THIS PROSPECTUS MAY ONLY BE OFFERED IN JURISDICTIONS IN WHICH THE OFFERING IS
LAWFUL. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE
COMPANY OF NEW JERSEY, PRUCO LIFE OF NEW JERSEY
VARIABLE CONTRACT REAL PROPERTY ACCOUNT, THE
PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY
PARTNERSHIP, AND THE INVESTMENT MANAGER
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey") is a
stock life insurance company, organized in 1982 under the laws of the State of
New Jersey. It is licensed to sell life insurance and annuities only in the
States of New Jersey and New York. These Contracts are not offered in any state
in which the necessary approvals have not yet been obtained.
Pruco Life of New Jersey is a wholly-owned subsidiary of Pruco Life Insurance
Company ("Pruco Life"), which in turn is a wholly-owned subsidiary of
Prudential, a mutual insurance company founded in 1875 under the laws of the
State of New Jersey. Prudential is currently considering reorganizing itself
into a publicly trade stock company through a process known as
"demutualization". On February 10, 1998, Prudential's Board of Directors
authorized management to take preliminary steps necessary to allow Prudential to
demutualize. On July 1, 1998, legislation was enacted in New Jersey that would
permit this conversion to occur and that specified the process for conversion.
Demutualization is a complex process involving development of a plan of
reorganization, adoption of a plan by Prudential's Board of Directors, a public
hearing, voting by qualified policyholders and regulatory approval. Prudential
is working toward completing this process in 2001 and currently expects adoption
by the Board of Directors to take place in the latter part of 2000. However,
there is no certainty that the demutualization will be completed in this
timeframe or that the
3 - Real Property
<PAGE>
necessary approvals will be obtained. Also it is possible that after careful
review, Prudential could decide not to demutualize or could decide to delay its
plans.
The plan of reorganization, which has not been fully developed and approved,
would provide the criteria for determining eligibility and the methodology for
allocating shares or other consideration to those who would be eligible.
Generally the amount of shares or other consideration eligible customers would
receive would be based on a number of factors, including types, amounts and
issue years of the policies. As a general rule, owners of Prudential-issued
insurance policies and annuity contracts would be eligible, provided that their
policies were in force on the date Prudential's Board of Directors adopted a
plan of reorganization, while mutual fund customers and customers of
Prudential's subsidiaries (such as the Pruco Life insurance companies) would not
be. It has not yet been determined whether any exceptions to that general rule
will be made with respect to policyholders and contractholders of Prudential's
subsidiaries. This does not constitute a proposal, offer, solicitation or
recommendation regarding any plan of reorganization that may be proposed or a
recommendation regarding the ownership of any stock that could be issued in
connection with any such demutualization.
PRUCO LIFE OF NEW JERSEY'S FINANCIAL STATEMENTS APPEAR IN EITHER THE ATTACHED
CONTRACT PROSPECTUS OR IN THE STATEMENT OF ADDITIONAL INFORMATION FOR THE
CONTRACT PROSPECTUS, WHICH IS AVAILABLE UPON REQUEST.
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
The Pruco Life of New Jersey Variable Contract Real Property Account (the "Real
Property Account") was established on October 30, 1987 under New Jersey law as a
separate investment account. The Account meets the definition of a "separate
account" under the federal securities laws. The Real Property Account holds
assets that are separated from all of Pruco Life of New Jersey's other assets.
The Real Property Account is used only to support the variable benefits payable
under the Contracts that are funded by the real estate investment option.
The Contract obligations to Contract owners and beneficiaries are general
corporate obligations of Pruco Life of New Jersey. Pruco Life of New Jersey is
also the legal owner of the Real Property Account assets. Pruco Life of New
Jersey will maintain assets in the Real Property Account with a total market
value at least equal to the amounts credited under the real estate option to all
the Contracts participating in the Real Property Account. These assets may not
be charged with liabilities which arise from any other business that Pruco Life
of New Jersey conducts. In addition to these assets, the Real Property Account's
assets may inlude funds contributed by Pruco Life of New Jersey, and reflect any
accumulations of the charges Pruco Life of New Jersey makes against the Real
Property Account. See VALUATION OF CONTRACT OWNER'S PARTICIPATING INTERESTS,
page 15.
Pruco Life of New Jersey will bear the risks and rewards of the Real Property
Account's investment experience to the extent of its investment in the Real
Property Account. Pruco Life of New Jersey may withdraw or redeem its investment
in the Real Property Account at any time. We will not make any such redemption
if it will have a materially adverse impact on the Real Property Account.
Accumulations of charges will be withdrawn on a regular basis.
Unlike the other separate accounts funding the Contracts, the Real Property
Account is not registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 as an investment company. For state law
purposes, the Real Property Account is treated as a part or division of Pruco
Life of New Jersey. Contract owners have no voting rights with respect to the
Real Property Account. The Real Property Account is under the control and
management of Pruco Life of New Jersey. The Board of Directors and officers of
Pruco Life of New Jersey are responsible for the management of the Real Property
Account. No salaries of Pruco Life of New Jersey personnel are paid by the Real
Property Account. Information regarding the directors and officers of Pruco Life
of New Jersey is contained in the attached prospectus for the Contract. The
financial statements of the Real Property Account begin on page A1.
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
All amounts allocated to the Real Property Account are invested through The
Prudential Variable Contract Real Property Partnership (the "Partnership"), a
general partnership organized under New Jersey law on April 29, 1988. The only
partners in the Partnership (collectively, the "Partners") are Prudential and
two of its wholly-owned subsidiaries, Pruco Life and Pruco Life of New Jersey.
The Partnership was established so the assets allocated to the real estate
investment options under variable life insurance and variable annuity contracts
issued by these three companies could be invested in a commingled pool. This was
done to provide greater diversification of investments and lower transaction
costs than would be possible if the assets were separately invested by each
company. All amounts allocated to the Real Property Account are contributed by
Pruco Life of New Jersey to the Partnership. Pruco Life of New Jersey's general
partnership interest in the Partnership is held in the Real Property Account.
4 - Real Property
<PAGE>
The initial contributions to the Partnership were made on April 29, 1988.
Prudential contributed $100,000 in cash to the Partnership; Pruco Life of New
Jersey contributed $100,000 in cash to the Partnership; and Pruco Life
contributed the real estate and other assets held in its real estate separate
account, which had been actively investing in real estate for more than a year.
Those assets had an estimated market value of $91,538,737 on that date. Each
Partner is entitled to its respective proportionate share of all income, gains,
and losses of the Partnership.
The Partnership assets are valued on each business day. The value of each
Partner's interest will fluctuate with the investment performance of the
Partnership. In addition, the Partners' interests are proportionately
readjusted, at the current value, on each day when a Partner makes a
contribution to, or withdrawal from, the Partnership. When you choose to
allocate a portion of your net premiums or purchase payments, or transfer a
portion of your Contract Fund, to the Real Property Account, Pruco Life of New
Jersey will contribute that amount to the Partnership as a capital contribution.
It will correspondingly increase the Real Property Account's interest in the
Partnership. Values and benefits under the Contract will thereafter vary with
the performance of the Partnership's investments. For more information on how
the value of your interest in the Real Property Account and the value of the
Partnership's investments are calculated, see VALUATION OF CONTRACT OWNERS'
PARTICIPATING INTERESTS, page 15.
Contract owners have no voting rights with respect to the Partnership
operations. The financial statements of the Partnership begin on page B1.
THE INVESTMENT MANAGER
The Partnership has retained Prudential to act as investment manager of the
Partnership. Prudential, on behalf of its general account, separate accounts,
and other third party accounts, is one of the largest real estate investors in
North America.
Currently, Prudential directly and through affiliates invests in and manages
real estate equities and mortgages for its general account and for separate
accounts and other third party accounts. Prudential and its affiliates also
participate in real estate ventures through public and private partnerships. As
of December 31, 1999, Prudential owned or controlled $14 billion of net domestic
real estate mortgages and equities of which $1.5 billion is in the general
account and $12.5 billion is in separate accounts and other third party
accounts. Statement value for general account assets is recorded at depreciated
cost and for assets in separate accounts and other third party accounts at
market value. For a discussion of how the Partnership's real estate-related
investments are valued, see VALUATION OF CONTRACT OWNERS' PARTICIPATING
INTERESTS, page 15.
Prudential has organized its real estate activities into separate business units
within Prudential's Global Asset Management Group. Prudential Real Estate
Investors (PREI) is the unit responsible for the investments of the Real
Property Partnership. PREI's investment staff is responsible for both general
account and third party account real estate investment management activities.
PREI provides investment management services on a domestic basis and also acts
as part of a global team providing these services to institutional investors
worldwide. PREI is headquartered in Parsippany, New Jersey and has 4 field
offices across the United States. As of December 31, 1999, PREI had under
management approximately 15.9 million net rentable square feet of office real
estate, 20.3 million net rentable square feet of industrial real estate, 9.5
million net rentable square feet of retail real estate, 4,942 hotel rooms, and
23,228 multifamily residential units.
Various divisions of Prudential may provide PREI with services that may be
required in connection with the Partnership's investment management agreement.
The mortgage operation currently manages a portfolio of mortgage loans totaling
approximately $17 billion.
INVESTMENT POLICIES
OVERVIEW
The Partnership has an investment policy of investing at least 65% of its assets
in direct ownership interests in income-producing real estate, participating
mortgage loans originated for the Partnership, and real property sale-leasebacks
negotiated by Prudential on behalf of the Partnership. It is expected that the
largest portion of these
5 - Real Property
<PAGE>
real estate investments will be in direct ownership interests (including fee
interests, leasehold interests, and interests in entities holding such
interests) in income-producing real estate. The Partnership may also invest up
to 5% of its assets in direct ownership interests in agricultural land.
Approximately 10% of the Partnership's assets will ordinarily be held in cash or
invested in liquid instruments and securities, although the Partners reserve
discretion to increase this amount to meet partnership liquidity requirements,
for example. The remainder of the partnership assets may be invested in other
types of real estate-related investments, including non-participating mortgage
loans, real estate limited partnerships, limited liability companies, real
estate investment trusts, and other vehicles whose underlying investment is in
real estate.
INVESTMENT IN DIRECT OWNERSHIP INTERESTS IN REAL ESTATE
ACQUISITION. The Partnership's principal investment policy involves acquiring
direct ownership interests in existing (including newly constructed)
income-producing real estate, including office buildings, shopping centers,
apartment buildings, industrial properties, and hotels. The Partnership may also
invest up to 5% of its assets in direct ownership interests in agricultural
land. Property acquisitions will generally be carried out by the real estate
acquisition offices in PREI's network of field offices located in Parsippany,
New Jersey, Atlanta, Georgia, Chicago, Illinois and Los Angeles, California. A
field office or an affiliate of Prudential supervises the management of
properties in all of Prudential's accounts.
Proposals to acquire properties for the Partnership are usually originated by a
field office. They are reviewed and approved by the Investment Management
Committee of PREI. Depending upon the size of the acquisition and other factors,
a proposed real estate investment may also be submitted for review to the
Investment Committee of the Board of Directors of Prudential.
Although percentage limitations on the type and location of properties that may
be acquired by the Partnership have not been established, the Partnership plans
to diversify its investments through the type of property acquired and its
geographic location. The Partnership's investments will be maintained to meet
the Internal Revenue Code diversification requirements. See GENERAL INVESTMENT
AND OPERATING POLICIES, page 9.
In order for the Partnership to meet its stated objectives, it will have to
acquire properties that generate more cash than needed to pay its gross
operating expenses. To do this, a substantial portion of the Partnership's
assets will be invested in properties with operating histories that include
established rent and expense schedules. However, the Partnership may also
acquire recently constructed properties that may be subject to agreements with
sellers providing for certain minimum levels of income. Upon the expiration of
or default under these agreements, there is no assurance that the Partnership
will maintain the level of operating income necessary to produce the return it
was previously experiencing. The Partnership may purchase real property from
Prudential or its affiliates under certain conditions. See CONFLICTS OF
INTEREST, page 13.
The property acquired by the Partnership is usually real estate which is ready
for use. Accordingly, the Partnership is not usually subject to the development
or construction risks inherent in the purchase of unimproved real estate. From
time to time, however, the Partnership may invest in a developmental real estate
project that is consistent with the Partnership's objectives. The Partnership
will then be subject to those risks.
The Partnership will often own the entire fee interest in an acquired property,
but it may also hold other direct ownership interests. These include, but are
not limited to, partnership interests, limited liability company interests,
leaseholds, and tenancies in common.
PROPERTY MANAGEMENT AND LEASING SERVICES. The Partnership usually retains a
management company operating in the area of a property to perform local property
management services. A field office or other affiliate of Prudential will
usually: (1) supervise and monitor the performance of the local management
company; (2) determine and establish the required accounting information to be
supplied; (3) periodically inspect the property; (4) review and approve property
operating budgets; and (5) review actual operations to ensure compliance with
budgets. In addition to day-to-day management of the property, the local
management company will have responsibility for: (1) supervision of any on-site
personnel; (2) negotiation of maintenance and service contracts; (3) major
repair advice; (4) replacements and capital improvements; (5) the review of
market conditions to recommend rent schedule changes; and (6) creation of
marketing and advertising programs to obtain and maintain good occupancy rates
by responsible tenants. The local management company fees will reduce the cash
flow from the property to the Partnership.
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The Partnership usually retains a leasing company to perform leasing services on
any property with actual or projected vacancies. The leasing company will
coordinate with the property management company to provide marketing and leasing
services for the property. When the property management company is qualified to
handle leasing, it may also be hired to provide leasing services. Leasing
commissions and expenses will reduce the cash flow from the property to the
Partnership.
Prudential may, on behalf of the Partnership, hire an affiliate to perform
property management or leasing services. The affiliate's services must be
provided on terms competitive with unaffiliated entities performing similar
services in the same geographic area. See CONFLICTS OF INTEREST, page 13.
Annually, the field office which oversees the management of each property owned
by the Partnership will, together with the local property management firm,
develop a business plan and budget for each property. It will consider, among
other things, the projected rollover of individual leases, necessary capital
expenditures and any expansion or modification of the use of the property. The
approval of an officer of PREI is required. The field office will also
periodically report the operating performance of the property to PREI.
INVESTMENTS IN MORTGAGE LOANS
TYPES OF MORTGAGE LOANS. The Partnership is authorized to invest in mortgage
loans, including conventional mortgage loans that may pay fixed or variable
rates of interest and mortgage loans that have a "participation" (as defined
below). The Partnership will not make mortgage loans to Prudential affiliates.
The Partnership intends to give mortgage loans on: (1) commercial properties
(such as office buildings, shopping centers, hotels, industrial properties, and
office showrooms); (2) agricultural properties; and (3) residential properties
(such as garden apartment complexes and high-rise apartment buildings). These
loans are usually secured by properties with income-producing potential based on
historical or projected data. Usually, they are not personal obligations of the
borrower and are not insured or guaranteed.
1. FIRST MORTGAGE LOANS. The Partnership will primarily make first mortgage
loans secured by mortgages on existing income-producing property. These loans
may provide for interest-only payments and a balloon payment at maturity.
2. WRAPAROUND MORTGAGE LOANS. The Partnership also may make wraparound mortgage
loans on income-producing properties which are already mortgaged to unaffiliated
entities. A wraparound mortgage loan is a mortgage with a principal amount equal
to the outstanding balance of the prior existing mortgage plus the amount to be
advanced by the lender under the wraparound mortgage loan, thereby providing the
property owner with additional funds without disturbing the existing loan. The
terms of wraparound mortgage loans made by the Partnership require the borrower
to make all principal and interest payments on the underlying loan to the
Partnership, which will then pay the holder of the prior loan. Because the
existing first mortgage loan is preserved, the lien of the wraparound mortgage
loan is junior to it. The Partnership will make wraparound mortgage loans only
in states where local applicable foreclosure laws permit a lender, in the event
of the borrower's default, to obtain possession of the property which secures
the loan.
3. JUNIOR MORTGAGE LOANS. The Partnership may also invest in other junior
mortgage loans. Junior mortgage loans will be secured by mortgages which are
subordinate to one or more prior liens on the real property. They will
generally, but not in all cases, provide for repayment in full prior to the end
of the amortization period of the senior mortgages. Recourse on such loans will
include the real property encumbered by the Partnership's mortgage and may also
include other collateral or personal guarantees by the borrower.
The Partnership will generally make junior or wraparound mortgage loans only if
the senior mortgage, when combined with the amount of the Partnership's mortgage
loan, would not exceed the maximum amount which the Partnership would be willing
to commit to a first mortgage loan and only under such circumstances and on such
property as to which the Partnership would otherwise make a first mortgage loan.
4. PARTICIPATIONS. The Partnership may make mortgage loans which, in addition to
charging a base rate of interest, will include provisions permitting the
Partnership to participate (a "participation") in the economic benefits of the
underlying property. The Partnership would receive a percentage of: (1) the
gross or net revenues from the property operations; and/or (2) the increase in
the property value realized by the borrower, such as through sale or refinancing
of the property. These arrangements may also grant the Partnership an option to
acquire the property or an undivided
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interest in the property securing the loan. When the Partnership negotiates the
right to receive additional interest in the form of a percentage of the gross
revenues or otherwise, the fixed cash return to the Partnership from that
investment will generally be less than would otherwise be the case. It is
expected that the Partnership will be entitled to percentage participations when
the gross or net revenues from the property operations exceed a certain base
amount. This base amount may be adjusted if real estate taxes or similar charges
are increased. The form and extent of the additional interest that the
Partnership receives will vary with each transaction depending on: (1) the
equity investment of the owner or developer of the property; (2) other financing
or credit obtained by the owner or developer; (3) the fixed base interest rate
on the mortgage loan by the Partnership; (4) any other security arrangement; (5)
the cash flow and pro forma cash flow from the property; and (6) market
conditions.
The Partnership intends to use this additional interest as a hedge against
inflation. It assumes that as prices increase in the economy, the rental prices
on properties, such as shopping centers or office buildings, will increase and
there should be a corresponding increase in the property value. There is no
assurance that additional interest or increased property values will be
received. In that event, the Partnership will be entitled to receive only the
fixed portion of its return.
STANDARDS FOR MORTGAGE LOAN INVESTMENTS. In making mortgage loans, the
investment manager will consider relevant real property and financial factors,
including: (1) the location, condition, and use of the underlying property; (2)
its operating history; (3) its future income-producing capacity; and (4) the
quality, experience, and creditworthiness of the unaffiliated borrower.
Before the Partnership makes a mortgage loan, the investment manager analyzes
the fair market value of the underlying real estate. In general, the amount of
each mortgage loan made by the Partnership will not exceed, when added to the
amount of any existing indebtedness, 80% of the estimated or appraised value of
the property mortgaged.
DEALING WITH OUTSTANDING LOANS. The Partnership may sell its mortgage loans
prior to maturity if it is deemed advisable by the investment manager and
consistent with the Partnership's investment objectives. The investment manager
may also: (1) extend the maturity of any mortgage loan made by the Partnership;
(2) consent to a sale of the property subject to a mortgage loan or finance the
purchase of a property by making a new mortgage loan in connection with the sale
of a property (either with or without requiring the repayment of the mortgage
loan); (3) renegotiate the terms of a mortgage loan; and (4) otherwise deal with
the mortgage loans of the Partnership.
INVESTMENTS IN SALE-LEASEBACKS
A portion of the Partnership's investments may consist of real property
sale-leaseback transactions ("leasebacks"). In this type of transaction, the
Partnership will purchase land and income-producing improvements on the land and
simultaneously lease the land and improvements, generally to the seller, under a
long-term lease. Leasebacks may be for very long periods and may provide for
increasing payments from the lessee.
Under the terms of the leaseback, the tenant will operate, or provide for the
operation of, the property and generally be responsible for the payment of all
costs, including: (1) taxes; (2) mortgage debt service; (3) maintenance and
repair of the improvements; and (4) insurance. In some cases, the Partnership
may also grant the lessee an option to acquire the land and improvements from
the Partnership after a period of years. The option exercise price would be
based on the fair market value of the property, as encumbered by the lease, the
increase in the gross revenues from the property or other objective criteria
reflecting the increased value of the property.
In some leaseback transactions, the Partnership may only purchase the land under
an income-producing building and lease the land to the building owner. In such
cases, the Partnership may seek, in addition to base rents in its leasebacks,
participations in the gross revenues from the building in a form such as a
percentage of the gross revenues of the lessee above a base amount (which may be
adjusted if real property taxes increase or for other events). The Partnership
may invest in leasebacks which are subordinate to other interests in the land,
buildings, and improvements, such as a first mortgage, other mortgage, or lien.
In those situations, the Partnership's leaseback interest will be subject to
greater risks.
The Partnership will only acquire a property for a leaseback transaction if the
purchase price is equal to not more than 100% of the estimated or appraised
property value. The Partnership may dispose of its leasebacks when deemed
advisable by the investment manager and consistent with the Partnership's
investment objectives.
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GENERAL INVESTMENT AND OPERATING POLICIES
The Partnership does not intend to invest in any direct ownership interests in
properties, mortgage loans or leasebacks in order to make short-term profits
from their sale, although in exceptional cases, the investment manager may
decide to do so in the best interests of the Partnership. The Partnership may
dispose of its investments whenever necessary to meet its cash requirements or
when it is deemed to be desirable by the investment manager because of market
conditions or otherwise. The Partnership will reinvest any proceeds from the
disposition of assets (and any cash flow from operations) which are not
necessary for the Partnership's operations and which are not withdrawn by the
Partners in order to make distributions to investors pursuant to the variable
contracts issued by the Partners, or to Prudential to return its equity
interests pursuant to this prospectus. The proceeds will be reinvested in
investments consistent with the Partnership's investment objectives and
policies.
In making investments in properties, mortgage loans, leasebacks or other real
estate investments, the Partnership will rely on the investment manager's
analysis of the investment and will not receive an independent appraisal prior
to acquisition. The Partnership expects, however, that all the properties it
owns and most mortgage loans it holds, will be appraised or valued annually by
an independent appraiser who is a member of a nationally recognized society of
appraisers. Each appraisal will be maintained in the Partnership records for at
least five years. It should be noted that appraised values are opinions and, as
such, may not represent the true worth or realizable value of the property being
appraised.
The Partnership usually purchases properties on an unleveraged basis. The
properties acquired will typically be free and clear of mortgage debt
immediately after their acquisition. The Partnership may, however, acquire
properties subject to existing mortgage loans. In addition, the Partnership may
mortgage or acquire properties partly with the proceeds of purchase money
mortgage loans, up to 80% of the property value. Although this is not usually
done, the Partnership may do so if the investment manager decides that it is
consistent with its investment objectives. When the Partnership mortgages its
properties, it bears the expense of mortgage payments. See BORROWING BY THE
PARTNERSHIP, page 17.
The Partnership may also invest a portion of its assets in non-participating
mortgage loans, real estate limited partnerships, limited liability companies,
real estate investment trusts, and other vehicles whose underlying investment is
in real estate.
The Partnership's investments will be maintained in order to meet the
diversification requirements set forth in regulations under the Internal Revenue
Code (the "Code") relating to the investments of variable life insurance and
variable annuity separate accounts. In order to meet the diversification
requirements under the regulations, the Partnership will meet the following
test: (1) no more than 55% of the assets will be invested in any one investment;
(2) no more than 70% of the assets will be invested in any two investments; (3)
no more than 80% of the assets will be invested in any three investments; and
(4) no more than 90% of the assets will be invested in any four investments. All
interests in the same real property project are treated as a single investment.
The Partnership must meet the above test within 30 days of the end of each
calendar quarter. To comply with the diversification requirements of the State
of Arizona, the Partnership will limit additional investments in any one parcel
or related parcels to an amount not exceeding 10% of Partnership's gross assets,
as of the prior fiscal year end.
In managing the assets of the Partnership, Prudential will use its discretion in
determining whether to foreclose on defaulting borrowers or to evict defaulting
tenants. Prudential will decide which course of action is in the best interests
of the Partnership in maintaining the value of the investment.
Property management services are usually required for the Partnership's
investments in properties which are owned and operated by the Partnership but
usually will not be needed for mortgage loans owned by the Partnership, except
for mortgage servicing. It is possible, however, that these services will be
necessary or desirable in exercising default remedies under a foreclosure on a
mortgage loan. Prudential may engage, on behalf of the Partnership, affiliated
or unaffiliated entities to provide these additional services to the
Partnership. Prudential may engage its affiliates to provide property
management, property development services, loan servicing or other services if
and only if the fees paid to an affiliate do not exceed the amount that would be
paid to an independent party for similar services rendered in the same
geographic area. See CONFLICTS OF INTEREST, page 13.
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Prudential will manage the Partnership so that the Real Property Account will
not be subject to registration under the Investment Company Act of 1940. This
requires monitoring the proportion of the Partnership's assets to be placed in
various investments.
CURRENT REAL ESTATE-RELATED INVESTMENTS
The current principal real estate-related investments held by the Partnership
are described below. Many of these investments were originated by, and
previously held in, The Prudential Real Property Account of Pruco Life Insurance
Company (the "Pruco Life Account"), a separate account established to fund the
real estate investment option under variable contracts issued by Pruco Life.
Prior to the formation of the Partnership, the Pruco Life Account followed the
same investment policies as those followed by the Partnership. Pruco Life
contributed the assets held in the Pruco Life Account to the Partnership as its
initial capital contribution to the Partnership.
PROPERTIES
The Partnership owns the following properties as of December 31, 1999.
1. OFFICE PROPERTIES
The Partnership owns office properties in Lisle and Oakbrook Terrace,
Illinois; Morristown, New Jersey; Brentwood, Tennessee; and Beaverton,
Oregon. Total square footage owned is approximately 577,000 of which 96% or
553,000 square feet are leased between 1 and 10 years.
2. APARTMENT COMPLEXES
The Partnership owns apartment complexes in Atlanta, Georgia and Raleigh,
North Carolina. There are a total of 490 apartment units available of which
97% or 475 units are leased. Lease terms range from monthly to one year. In
addition, on September 17, 1999, the Partnership invested in an apartment
complex located in Jacksonville, FL. This joint venture investment has a
total of 458 units available of which 408 units or 89% are occupied. Lease
terms range from monthly to one year.
3. RETAIL PROPERTY
The Partnership owns a shopping center in Roswell, Georgia. The property is
located approximately 22 miles north of downtown Atlanta on a 30 acre site.
The square footage is approximately 297,000 of which 97% or 288,000 square
feet is leased between 1 and 10 years. On September 30, 1999 the
Partnership invested in a retail portfolio located in the Kansas City, KS
and Kansas City, MO areas. This joint venture investment has approximately
476,000 of net rentable square feet of which 90% or 427,000 square feet is
leased between 1 and 20 years.
4. INDUSTRIAL PROPERTIES
The Partnership owns warehouses and distribution centers in Bolingbrook,
Illinois; Aurora, Colorado; and Salt Lake City, Utah. Total square footage
owned is approximately 685,000 of which 72% or 494,238 square feet are
leased between 2 and 10 years.
5. INVESTMENT IN REAL ESTATE TRUST
The Partnership owns 386,208 shares of ProLogis REIT. ProLogis is a self
administered and self-managed equity real estate investment trust engaged
in owning, operating, marketing and leasing high quality, industrial
distribution facilities throughout North America and Europe, and developing
master-planned distribution parks and corporate distribution facilities.
The Partnership also owns smaller individual investments in various other
REIT stocks.
RISK FACTORS
There are certain risk factors that you should consider before allocating a
portion of your net premiums or purchase payments, or transferring a portion of
your Contract Fund, to the Real Property Account. These include valuation risks,
see VALUATION OF CONTRACT OWNERS' PARTICIPATING INTERESTS, page 15, certain
conflicts of interest, see CONFLICTS OF INTEREST, page 13, as well as the
following risks:
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LIQUIDITY OF INVESTMENTS
Because the Real Property Account will, through the Partnership, invest
primarily in real estate, its assets will not be as liquid as the investments
generally made by separate accounts of life insurance companies funding variable
life insurance and variable annuity contracts. The Partnership will, however,
hold approximately 10% of its assets in cash and invested in liquid securities.
The primary purposes for such investments are to meet the expenses involved in
the operation of the Partnership and to allow it to have sufficient liquid
assets to meet any requests for withdrawals from the Real Property Account. Such
withdrawals would be made in order to meet requested or required payments under
the Contracts. The Partnership may also borrow funds to meet liquidity needs.
See BORROWING BY THE PARTNERSHIP, page 17.
Pruco Life of New Jersey and Prudential have taken steps to ensure that the
Partnership will be liquid enough to meet all anticipated withdrawals by the
Partners to meet the separate accounts' liquidity requirements. It is possible
that the Partnership may need to dispose of a real property or mortgage loan
investment promptly in order to meet such withdrawal requests.
GENERAL RISKS OF REAL PROPERTY INVESTMENTS
By participating in the Real Property Account and thereby in the investment
performance of the Partnership, you will be subject to many of the risks of real
property investments. These include:
1. RISKS OF OWNERSHIP OF REAL PROPERTIES. The Partnership will be subject to the
risks inherent in the ownership of real property such as fluctuations in
occupancy rates and operating expenses and variations in rental schedules. It
may be adversely affected by general and local economic conditions, the supply
of and demand for properties of the type in which the Partnership invests,
zoning laws, and real property tax rates. Operation of property in which the
Partnership invests will primarily involve rental of that property to tenants.
The financial failure of a tenant resulting in the termination of their lease
might cause a reduction in the cash flow to the Partnership. If a lease is
terminated, there is no assurance that the Partnership will be able to find a
new tenant for the property on terms as favorable to the Partnership as those
from the prior tenant. Investments in hotels are subject to additional risk from
the daily turnover and fluctuating occupancy rates of hotel rooms and the
absence of long-term tenants.
The Partnership's properties will also be subject to the risk of loss due to
certain types of property damage (such as from nuclear power plant accidents and
wars) which are either uninsurable or not economically insurable.
2. RISKS OF MORTGAGE LOAN INVESTMENTS. The Partnership's mortgage loan
investments will be subject to the risk of default by the borrowers. In this
event the Partnership would have the added responsibility of foreclosing on or
pursuing other remedies on the underlying properties to protect the value of its
mortgage loans. A borrower's ability to meet its mortgage loan payments will be
dependent upon the risks generally inherent to the ownership of real property.
Mortgage loans made by the Partnership will generally not be personal
obligations of the borrowers. The Partnership will only rely on the value of the
underlying property for its security. Mechanics', materialmen's, government, and
other liens may have or obtain priority over the Partnership's security interest
in the property.
In addition, the Partnership's mortgage loan investments will be subject to
prepayment risks. If the terms of the mortgage loans permit, mortgagors may
prepay the loans, thus possibly changing the Partnership's return.
Junior mortgage loans (including wraparound mortgage loans) will be subject to
greater risk than first mortgage loans, since they will be subordinate to liens
of senior mortgagees. In the event a default occurs on a senior mortgage, the
Partnership may be required to make payments or take other actions to cure the
default (if it has the right to do so) in order to prevent foreclosure on the
senior mortgage and possible loss of all or portions of the Partnership's
investment. "Due on sale" clauses included in some senior mortgages,
accelerating the amount due under the senior mortgage in the case of sale of the
property, may be applied to the sale of the property upon foreclosure by the
Partnership of its junior mortgage loan.
The risk of lending on real estate increases as the proportion which the amount
of the mortgage loan bears to the fair market value of the real estate
increases. The Partnership usually does not make mortgage loans of over 80% of
the estimated or appraised value of the property that secures the loan. There
can be no assurance, that in the event of a default, the Partnership will
realize an amount equal to the estimated or appraised value of the property on
which a mortgage loan was made.
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Mortgage loans made by the Partnership may be subject to state usury laws.
These laws impose limits on interest charges and possible penalties for
violation of those limits, including restitution of excess interest,
unenforceability of debt, and treble damages. The Partnership does not intend to
make mortgage loans at usurious rates of interest. Uncertainties in determining
the legality of interest rates and other borrowing charges under some statutes
could result in inadvertent violations, in which case the Partnership could
incur the penalties mentioned above.
3. RISKS WITH PARTICIPATIONS. The Partnership may seek to invest in mortgage
loans and leasebacks with participations, which will provide the Partnership
with both fixed interest and additional interest based upon gross revenues, sale
proceeds, and/or other variable amounts. If the interest income received by the
Partnership is based, in part, on a percentage of the gross revenues or sale
proceeds of the underlying property, the Partnership's income will depend on the
success in the leasing of the underlying property, the management and operation
of such property by the borrower or lessee and upon the market value of the
property upon ultimate disposition. If the Partnership negotiates a mortgage
loan with a lower fixed interest rate and an additional percentage of the gross
revenues or eventual sale proceeds of the underlying property, and the
underlying property fails to generate increased revenues or to appreciate, the
Partnership will have foregone a potentially greater fixed return without
receiving the benefit of appreciation. State laws may limit participations. In
the event of the borrower's bankruptcy, it is possible that as a result of the
Partnership's interest in the gross revenues or sale proceeds, a court could
treat the Partnership as a partner or joint venturer with the borrower, and the
Partnership could lose the priority its security interest would have been given,
or be liable for the borrower's debts. The Partnership will structure its
participations to avoid being characterized as a partner or joint venturer with
the borrower.
4. RISKS WITH SALE-LEASEBACK TRANSACTIONS. Leaseback transactions typically
involve the acquisition of land and improvements thereon and the leaseback of
such land and improvements to the seller or another party. The value of the land
and improvements will depend, in large part, on the performance and financial
stability of the lessee and its tenants, if any. The tenants' leases may have
shorter terms than the leaseback. Therefore, the lessee's future ability to meet
payment obligations to the Partnership will depend on its ability to obtain
renewals of such leases or new leases upon satisfactory terms and the ability of
the tenants to meet their rental payments to the lessee.
PREI investigates the stability and creditworthiness of lessees in all
commercial properties it may acquire, including leaseback transactions. However,
a lessee in a leaseback transaction may have few, if any, assets. The
Partnership will therefore rely for its security on the value of the land and
improvements. When the Partnership's leaseback interest is subordinate to other
interests in the land or improvements, such as a first mortgage or other lien,
the Partnership's leaseback will be subject to greater risk. A default by a
lessee or other premature termination of the leaseback may result in the
Partnership being unable to recover its investment unless the property is sold
or leased on favorable terms. The ability of the lessee to meet its obligations
under the leaseback, and the value of a property, may be affected by a number of
factors inherent in the ownership of real property which are described above.
Furthermore, the long-term nature of a leaseback may, in the future, result in
the Partnership receiving lower average annual rentals. However, this risk may
be lessened if the Partnership obtains participations in connection with its
leasebacks.
RELIANCE ON THE PARTNERS AND THE INVESTMENT MANAGER
You do not have a vote in determining the policies of the Partnership or the
Real Property Account. You also have no right or power to take part in the
management of the Partnership or the Real Property Account. The investment
manager alone, subject to the supervision of the Partners, will make all
decisions with respect to the management of the Partnership, including the
determination as to what properties to acquire, subject to the investment
policies and restrictions. Although the Partners have the right to replace
Prudential as the investment manager, it should be noted that Pruco Life is a
direct wholly-owned subsidiary of Prudential, and Pruco Life of New Jersey is an
indirect wholly-owned subsidiary of Prudential.
The Partnership will compete in the acquisition of its investments with many
other individuals and entities engaged in real estate activities, including the
investment manager and its affiliates. See CONFLICTS OF INTEREST, page 13. There
may be intense competition in obtaining properties or mortgages in which the
Partnership intends to invest. Competition may result in increased costs of
suitable investments.
Since the Partnership will continuously look for new investments, you will not
be able to evaluate the economic merit of many of the investments which may be
acquired by the Partnership. You must depend upon the ability of the investment
manager to select investments.
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INVESTMENT RESTRICTIONS
The Partnership has adopted certain restrictions relating to its investment
activities. These restrictions may be changed, if the law permits, by the
Partners. Pursuant to these restrictions, the Partnership will not:
1. Make any investments not related to real estate, other than liquid
instruments and securities.
2. Engage in underwriting of securities issued by others.
3. Invest in securities issued by any investment company.
4. Sell securities short.
5. Purchase or sell oil, gas, or other mineral exploration or development
programs.
6. Make loans to the Partners, any of their affiliates, or any investment
program sponsored by such parties.
7. Enter into leaseback transactions in which the lessee is Prudential, Pruco
Life, Pruco Life of New Jersey, their affiliates, or any investment program
sponsored by such parties.
8. Borrow more than 33 1/3% (pursuant to California state requirements) of the
value of the assets of the Partnership (based upon periodic valuations and
appraisals). SEE VALUATION OF CONTRACT OWNERS' PARTICIPATING INTERESTS,
page 15.
CONFLICTS OF INTEREST
Prudential, as the investment manager, will be subject to various conflicts of
interest in managing the Partnership. Prudential invests in real estate equities
and mortgages for its own general account and for third parties, including
through separate accounts established for the budget of qualified pension and
profit-sharing plans. Prudential also manages, or advises in the management of,
real estate equities and mortgages owned by other persons. In addition,
affiliates of Prudential are general partners in publicly offered limited
partnerships that invest in real estate equities and mortgage loans. Prudential
and its affiliates may engage in business activities which will be competitive
with the Partnership. Moreover, the Partnership may purchase properties from
Prudential or its affiliates.
The conflicts involved in managing the Partnership include:
1. LACK OF INDEPENDENT NEGOTIATIONS BETWEEN THE PARTNERSHIP AND PRUDENTIAL. All
agreements and arrangements relating to compensation between the Partnership and
Prudential or any affiliate of Prudential will not be the result of arm's-length
negotiations.
2. COMPETITION BY THE PARTNERSHIP WITH PRUDENTIAL'S AFFILIATES FOR ACQUISITION
AND DISPOSITION OF INVESTMENTS. Prudential and its affiliates are involved in
numerous real estate investment activities for Prudential's general account, its
separate accounts, and other entities. They may involve investment policies
comparable to the Partnership's and may compete with the Partnership for the
acquisition and disposition of investments. Moreover, additional accounts or
affiliated entities may be formed in the future with investment objectives
similar to those of the Partnership. In short, existing or future real estate
investment accounts or entities managed or advised by Prudential or its
affiliates may have the same management as the Partnership and may be in
competition with the Partnership regarding real property investments, mortgage
loan investments, leasebacks, and the management and sale of such investments.
Prudential and its affiliates are not obligated to present to the Partnership
any particular investment opportunity, regardless of whether the opportunity
would be suitable for investment by the Partnership.
Prudential and its affiliates have, however, adopted procedures to distinguish
between equity investments available for the Partnership as opposed to the other
programs and entities described above. If investment accounts or entities
managed by Prudential or its affiliates have investment objectives and policies
similar to the Partnership and are in the market to acquire properties or make
investments at the same time as the Partnership, the following procedures will
be followed to resolve any conflict of interest. The Investment Allocation
Procedure ("IAP") has been established to provide a reasonable and fair
procedure for allocating real estate investments among the several accounts
managed
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by Prudential Real Estate Investors ("PREI"). The IAP is administered by
an Allocation Committee composed of the Managing Directors, Portfolio
Management. Allocation decisions are made by vote of the Allocation Committee,
and are approved by the Chief Executive Officer of PREI ("CEO"). Sufficient
information on each investment opportunity is distributed to all portfolio
managers, who each indicate to the Allocation Committee their account's interest
in the opportunity. Based on such expressions of interest, the Allocation
Committee allocates the investment opportunity to an account (and may also
determine a back-up account or accounts to receive the allocation in the event
the account, which is first allocated the opportunity, fails to pursue the
investment for any reason) after giving appropriate consideration to the
following factors and with the goal of providing each account a fair allotment
of investment opportunities: (1) the investment opportunity's conformity with an
account's investment criteria and objectives (including property type, size and
location, diversification, anticipated returns, investment structure, etc.); (2)
the amount of funds available for investment (in total and by property type) by
an account; (3) the length of time such funds (in total and by property type)
have been available for investment; (4) any limitations or restrictions upon the
availability of funds for investment; (5) the absolute and relative (to amount
of funds available) amount of funds invested and committed for the account; (6)
whether funds available for investment are discretionary or non-discretionary,
particularly in relation to the timing of the investment opportunity; (7) an
account's prior dealings or investments with the seller, developer, lender or
other counterparty; and (8) other factors which the Allocation Committee feel
should be considered in fairness to all accounts participating in the IAP.
If an account which has been allocated an investment opportunity does not
proceed with the acquisition, and either (i) no back-up account has been
determined by the Allocation Committee, or (ii) all accounts which were deemed
back-up accounts do not proceed with the acquisition, the opportunity may be
reallocated to another account by the Allocation Committee. If an investment
opportunity is appropriate for more than one account, the Allocation Committee
may (subject to the CEO's approval) permit the sharing of the investment among
accounts which permit such sharing. Such division of the investment opportunity
may be accomplished by separating properties (in a multi-property investment),
by co-investment, or otherwise.
3. COMPETITION WITH THE PARTNERSHIP FROM AFFILIATES FOR THE TIME AND SERVICES OF
COMMON OFFICERS, DIRECTORS, AND MANAGEMENT PERSONNEL. As noted above, Prudential
and its affiliates are involved in numerous real estate investment activities.
Accordingly, many of the personnel of Prudential and its affiliates who will be
involved in performing services for the Partnership have competing demands on
their time. Conflicts of interest may arise with respect to allocating time
among such entities and the Partnership. The directors and officers of
Prudential and affiliates will determine how much time will be devoted to the
Partnership affairs. Prudential believes it has sufficient personnel to meet its
responsibilities to all entities to which it is affiliated.
4. COMPETITIVE PROPERTIES. Some properties of affiliates may be competitive with
Partnership properties. Among other things, the properties could be in
competition with the Partnership's properties for prospective tenants.
5. LESSEE POSITION. It is possible that Prudential or its affiliates may be a
lessee in one or more of the properties owned by the Partnership. The terms of
such a lease will be competitive with leases with non-affiliated third parties.
The Partnership limits the amount of space that an affiliate of Prudential may
rent in a property owned by the Partnership.
6. USE OF AFFILIATES TO PERFORM ADDITIONAL SERVICES FOR THE PARTNERSHIP. The
Partnership may engage Prudential affiliates to provide additional services to
the Partnership, such as real estate brokerage, mortgage servicing, property
management, leasing, property development, and other real estate-related
services. The Partnership may utilize the services of such affiliates and pay
their fees, as long as the fees paid to an affiliate do not exceed the amount
that would be paid to an independent party for similar services rendered in the
same geographic area.
7. JOINT VENTURES WITH AFFILIATES. The Partnership may enter into investments
through joint ventures with Prudential, its affiliates, or investment programs
they sponsor. The Partnership may enter into such a joint venture investment
with an affiliate only if the following conditions are met: (1) the affiliate
must have investment objectives substantially identical to those of the
Partnership; (2) there must be no duplicative property management fee, mortgage
servicing fee or other fees; (3) the compensation payable to the sponsor of the
affiliate must be no greater than that payable to the Partnership's investment
manager; (4) the Partnership must have a right of first refusal to buy if such
affiliate wishes to sell the property held in the joint venture; and (5) the
investment of the Partnership and the affiliate in the joint venture must be
made on the same terms and conditions (although not the same percentage). In
connection with such an investment, both affiliated parties would be required to
approve any decision concerning the investment. Thus, an impasse may result in
the event the affiliated joint venture partners disagree. However, in the event
of a
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disagreement regarding a proposed sale or other disposition of the investment,
the party not desiring to sell would have a right of first refusal to purchase
the affiliated joint venture partner's interest in the investment. If this
happens, it is possible that in the future the joint venture partners would no
longer be affiliated. In the event of a proposed sale initiated by the joint
venture partner, the Partnership would also have a right of first refusal to
purchase the joint venture partner's interest in the investment. The exercise of
a right of first refusal would be subject to the Partnership's having the
financial resources to effectuate such a purchase.
If the Partnership invests in joint venture partnerships which own properties,
instead of investing directly in the properties themselves, they may be subject
to risks not otherwise present. These risks include risks associated with the
possible bankruptcy of the Partnership's co-venturer or such co-venturer at any
time having economic or business interests or goals which are inconsistent with
those of the Partnership.
8. PURCHASE OF REAL PROPERTY FROM PRUDENTIAL OR AFFILIATES. The Partnership may
acquire properties owned by Prudential or its affiliates, subject to compliance
with special conditions designed to minimize the conflicts of interests. The
Partnership may purchase property satisfying the Partnership's investment
objectives and policies from an affiliate only if: (1) the applicable insurance
regulators approve the Partnership's acquisition of real property from
Prudential or affiliates to the extent such approval is required under
applicable insurance regulations; (2) the Partnership acquires the property at a
price not greater than the appraised value, with the appraisal being conducted
by a qualified, unaffiliated appraiser; (3) a qualified and independent real
estate adviser (other than the appraiser) reviews the proposed acquisition and
provides a letter of opinion that the transaction is fair to the Partnership;
and (4) the affiliate has owned the property at least two years, the cost paid
by the affiliate is established, and any increase in the proposed purchase price
over the cost to the affiliate is, in the opinion of the independent real estate
adviser, explicable by material factors (including the passage of time) that
have increased the value of the property.
THE REAL PROPERTY ACCOUNT'S UNAVAILABILITY TO
CERTAIN CONTRACTS
Pruco Life of New Jersey has determined that it is in the best interest of
Contract owners participating in the Real Property Account to provide the Real
Property Account with the flexibility to engage in transactions that may be
prohibited if the Real Property Account accepts funds under Contracts subject to
ERISA or the prohibited transaction excise tax provisions of the Internal
Revenue Code. Accordingly, owners of Pruco Life of New Jersey Contracts that are
purchased in connection with: (1) IRAs; (2) tax deferred annuities subject to
Section 403(b) of the Code; (3) other employee benefit plans which are subject
to ERISA; or (4) prohibited transaction excise tax provisions of the Code, may
not select the Real Property Account as one of the investment options under
their Contract. By not offering the Real Property Account as an investment
option under such contracts, Pruco Life of New Jersey is able to comply with
state insurance law requirements that policy loans be made available to Contract
owners.
VALUATION OF CONTRACT OWNERS' PARTICIPATING
INTERESTS
A Contract owner's interest in the Real Property Account will initially be the
amount they allocated to the Real Property Account. Thereafter, that value will
change daily. The value of a Contract owner's interest in the Real Property
Account at the close of any day is equal to its amount at the close of the
preceding day, multiplied by the "net investment factor" for that day arising
from the Real Property Account's participation in the Partnership, plus any
additional amounts allocated to the Real Property Account by the Contract owner,
and reduced by any withdrawals by the Contract owner from the Real Property
Account and by the applicable Contract charges recorded in that Contract's
subaccount. Some of the charges will be made: (1) daily; (2) on the Contract's
monthly anniversary date; (3) at the end of each Contract year; and (4) upon
withdrawal or annuitization. Periodically Pruco Life of New Jersey will withdraw
from the Real Property Account an amount equal to the aggregate charges recorded
in the subaccounts.
The "net investment factor" is calculated on each business day by dividing the
value of the net assets of the Partnership at the end of that day (ignoring, for
this purpose, changes resulting from new contributions to or withdrawals from
the Partnership) by the value of the net assets of the Partnership at the end of
the preceding business day. The value of the net assets of the Partnership at
the end of any business day is equal to the sum of all cash held by the
Partnership plus the aggregate value of the Partnership's liquid securities and
instruments, the individual real properties and the other real estate-related
investments owned by the Partnership, determined in the manner described below,
and an estimate of the accrued net operating income earned by the Partnership
from
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properties and other real estate-related investments, reduced by the liabilities
of the Partnership, including the daily investment management fee and certain
other expenses attributable to the operation of the Partnership. See CHARGES,
page 17.
The Partnership may invest in various liquid securities and instruments. These
investments will generally be carried at their market value as determine by a
valuation method which the Partners deem appropriate for the particular type of
liquid security or instrument.
The value of the individual real properties and other real estate-related
investments, including mortgages, acquired by the Partnership will be determined
as follows. Each property or other real estate-related investment acquired by
the Partnership will initially be valued at its purchase price. In acquiring a
property or other real estate-related investment, Prudential will not obtain an
independent appraisal but will instead rely on its own analysis of the
investment's fair market value. Thereafter, all properties and most real
estate-related investments will ordinarily be appraised by an independent
appraiser at least annually. At least every three months, Prudential will review
each property or other real estate-related investments and adjust its valuation
if it concludes there has been a change in the value of the property or other
real estate-related investment since the last valuation. The revised value will
remain in effect and will be used in each day's calculation of the value of the
Partnership's assets until the next review or appraisal. It should be noted that
appraisals are only estimates and do not necessarily reflect the realizable
value of an investment.
The estimated amount of the net operating income of the Partnership from
properties and other real estate-related investments will be based on estimates
of revenues and expenses for each property and other real estate-related
investments. Annually, Prudential will prepare a month-by-month estimate of the
revenues and expenses ("estimated net operating income") for each property and
other real estate-related investments owned by the Partnership. Each day
Prudential will add to the value of the assets, as determined above, a
proportionate part of the estimated net operating income for the month. In
effect, Prudential will establish a daily accrued receivable of the estimated
net operating income from each property and other real estate-related
investments owned by the Partnership (the "daily accrued receivable"). On a
monthly basis, the Partnership will receive a report of actual operating results
for each property and other real estate-related investments ("actual net
operating income"). Such actual net operating income will be recognized on the
books of the Partnership and the amount of the then-outstanding daily accrued
receivable will be correspondingly adjusted. In addition, as cash from a
property or other real estate-related investment is actually received by the
Partnership, receivables and other accounts will be appropriately adjusted.
Periodically, but at least every three months, Prudential will review its
prospective estimates of net operating income in light of actual experience and
make an adjustment to such estimates if circumstances indicate that such an
adjustment is warranted. Prudential follows this practice of accruing estimated
net operating income from properties and other real estate-related investments
because net operating income from such investments is generally received on an
intermittent rather than daily basis, and the Partners believe it is more
equitable to participating Contract owners if such net operating income is
estimated and a proportionate amount is recognized daily. Because the daily
accrual of estimated net operating income is based on estimates that may not
turn out to reflect actual revenue and expenses, Contract owners will bear the
risk that this practice will result in the undervaluing or overvaluing of the
Partnership's assets.
Prudential may adjust the value of any asset held by the Partnership based on
events that have increased or decreased the realizable value of a property or
other real estate-related investment. For example, adjustments may be made for
events indicating an impairment of a borrower's or a lessee's ability to pay any
amounts due or events which affect the property values of the surrounding area.
There can be no assurance that the factors for which an adjustment may be made
will immediately come to the attention of Prudential. Additionally, because the
evaluation of such factors may be subjective, there can be no assurance that
such adjustments will be timely made in all cases where the value of the
Partnership's investments may be affected. All adjustments made to the valuation
of the Partnership's investments, including adjustments to estimated net
operating income, the daily accrued receivable, and adjustments to the valuation
of properties and other real estate-related investments, will be on a
prospective basis only.
The above method of valuation of the Partnership's assets may be changed,
without the consent of Contract owners, should the Partners determine that
another method would more accurately reflect the value of the Partnership's
investments. Changes in the method of valuation could result in a change in the
Contract Fund values which may have either an adverse or beneficial effect on
Contract owners. Information concerning any material change in the valuation
method will be given to all Contract owners in the annual report of the
operations of the Real Property Account.
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Although the above-described valuation methods have been adopted because the
Partners believe they will provide a reasonable way to determine the fair market
value of the Partnership's investments, there may well be variations between the
amount realizable upon disposition and the Partnership's valuation of such
assets. Contract owners may be either favorably or adversely affected if the
valuation method results in either overvaluing or undervaluing the Partnership's
investments. If a Contract owner invests in the Real Property Account at a time
in which the Partnership's investments are overvalued, the Contract owner will
be credited with less of an interest than if the value had been correctly
stated. A Contract owner withdrawing from the Real Property Account during such
time will receive more than he or she would if the value had been correctly
stated, to the detriment of other Contract owners. The converse situation will
exist if the Partnership's assets are undervalued.
BORROWING BY THE PARTNERSHIP
The Partnership may borrow for Partnership purposes, including to meet its
liquidity requirements and the leveraging of currently-owned property to buy new
property, subject to a maximum debt to value ratio of 33 1/3% (pursuant to
California state requirements) based on the aggregate value of all Partnership
assets. The Partnership will bear the cost of all such borrowings. The Real
Property Account, and Contract owners participating in it, will bear a portion
of any borrowing costs equal to their percentage interest in the Partnership.
Moreover, although the Partnership will generally make unleveraged investments,
it reserves the right to borrow up to 80% of the value of a property (with the
value of a property determined as explained under VALUATION OF CONTRACT OWNERS'
PARTICIPATING INTERESTS, page 15). Increasing the Partnership's assets through
leveraged investments would increase the compensation paid to Prudential since
its investment management fee is a percentage of the Partnership's gross assets.
Any borrowing by the Partnership would increase the Partnership's risk of loss.
It could also inhibit the Partnership from achieving its investment objectives
because the Partnership's payments on any loans would have to be made regardless
of the profitability of its investments.
CHARGES
Pursuant to an investment management agreement, Prudential charges the
Partnership a daily investment management fee which is equal to an effective
annual rate of 1.25% of the average daily gross assets of the Partnership.
Certain other expenses and charges attributable to the operation of the
Partnership are also charged against the Partnership. In acquiring an
investment, the Partnership may incur various types of expenses paid to third
parties, including but not limited to, brokerage fees, attorneys' fees,
architects' fees, engineers' fees, and accounting fees. After acquisition of an
investment, the Partnership will incur recurring expenses for the preparation of
annual reports, periodic appraisal costs, mortgage servicing fees, annual audit
charges, accounting and legal fees, and various administrative expenses. These
expenses will be charged against the Partnership's assets. Some of these
operating expenses represent reimbursement of Prudential for the cost of
providing certain services necessary to the operation of the Partnership, such
as daily accounting services, preparation of annual reports, and various
administrative services. Prudential charges the Partnership mortgage loan
servicing fees pursuant to the standards outlined in item 6 under CONFLICTS OF
INTEREST, page 13. In addition to the various expenses charged against the
Partnership's assets, other expenses such as insurance costs, taxes, and
property management fees will ordinarily be deducted from rental income, thereby
reducing the gross income of the Partnership.
As explained earlier, charges to the Contracts will be recorded in the
corresponding subaccounts of the Real Property Account. From time to time, Pruco
Life of New Jersey will withdraw from the Real Property Account an amount equal
to the aggregate amount of these charges. Aside from the charges to the
Contracts, Pruco Life of New Jersey does not charge to the Real Property Account
for the expenses involved in the Real Property Account's operation. The Real
Property Account will however bear its proportionate share of the charges made
to the Partnership as described above.
The Partnership is not a taxable entity under the provisions of the Internal
Revenue Code. The income, gains, and losses of the Partnership are attributed,
for federal income tax purposes, to the Partners in the Partnership. The
earnings of the Real Property Account are, in turn, taxed as part of the
operations of Pruco Life of New Jersey. Pruco Life of New Jersey is currently
not charging the Real Property Account for company federal income taxes. Pruco
Life of New Jersey may make such a charge in the future.
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Under current laws Pruco Life of New Jersey may incur state and local taxes (in
addition to premium taxes) in several states. At present, Pruco Life of New
Jersey does not charge these taxes against the Contracts or the Real Property
Account, but Pruco Life of New Jersey may decide to charge the Real Property
Account for such taxes in the future.
RESTRICTIONS ON WITHDRAWALS
Before allocating any portion of your net premium or purchase payments, or
transferring any portion of your Contract Fund, to the Real Property Account,
you should be aware that withdrawals from the Real Property Account may have
greater restrictions than the other variable investment options available under
the Contracts. Pruco Life of New Jersey reserves the right to restrict transfers
into or out of the Real Property Account. Apart from the limitations on
transfers out of the Real Property Account described below, Pruco Life of New
Jersey will only restrict transfers out of the Real Property Account if there is
insufficient cash available to meet Contract owners' requests and prompt
disposition of the Partnership's investments to meet such requests could not be
made on commercially reasonable terms.
Pruco Life of New Jersey will pay any death benefit, cash surrender value,
withdrawal or loan proceeds within seven days after receipt at a Pruco Life of
New Jersey Service Office of all the documents required for such a payment.
Other than the death benefit, which is determined as of the date of death for
life insurance products, the amount will be determined as of the date of receipt
of the request.
The funds necessary to pay any death benefit, cash surrender value, withdrawal
or loan proceeds funded by the Real Property Account will normally be obtained,
first, from any cash flows into the Real Property Account on the day the funds
are required. If, on the day the funds are required, cash flows into the Real
Property Account are less than the amount of funds required, Pruco Life of New
Jersey will seek to obtain such funds by withdrawing a portion of its interest
in the Partnership. The Partnership will normally obtain funds to meet such a
withdrawal request from its net operating income and from the liquid securities
and instruments it holds. If the Partners determine that these sources are
insufficient to meet anticipated withdrawals from the Partnership, the
Partnership may use a line of credit or otherwise borrow up to 33 1/3% (pursuant
to California state requirements) of the value of the Partnership's assets. SEE
BORROWING BY THE PARTNERSHIP, page 17. If the Partners determine that such a
borrowing by the Partnership would not serve the best interests of Contract
owners, Pruco Life of New Jersey may, in the event of a Contract loan or
withdrawal, rather than take the amount of any loan or withdrawal request
proportionately from all investment options under the Contract (including the
Real Property Account), take any such loan or withdrawal first from the other
investment options under the Contract.
Transfers from the Real Property Account to the other investment options
available under the Contract are currently permitted only during the 30-day
period beginning on the Contract anniversary. The maximum amount that may be
transferred out of the Real Property Account each year is the greater of: (a)
50% of the amount invested in the Real Property Account or (b) $10,000. Such
transfer requests received prior to the Contract anniversary will be effected on
the Contract anniversary. Transfer requests received within the 30-day period
beginning on the Contract anniversary will be effected as of the end of the
valuation period in which a proper written request or authorized telephone
request is received. The "valuation period" means the period of time from one
determination of the value of the amount invested in the Real Property Account
to the next. Such determinations are made when the value of the assets and
liabilities of the Partnership is calculated, which is generally at 4:15 p.m.
Eastern time on each day during which the New York Stock Exchange is open.
Transfers into or out of the Real Property Account are also subject to the
general limits under the Contracts.
RESTRICTIONS ON CONTRACT OWNERS' INVESTMENT IN THE
REAL PROPERTY ACCOUNT
As explained earlier, identification and acquisition of real estate investments
meeting the Partnership's investment objectives is a time-consuming process.
Because the Real Property Account and the Partnership are managed so they will
not become investment companies subject to the Investment Company Act of 1940,
the portion of the Partnership's assets that may be invested in securities, as
opposed to non-securities real estate investments, is strictly limited. For
these reasons, Pruco Life of New Jersey reserves the right to restrict or limit
Contract owners' allocation of funds to the Real Property Account. Any such
restrictions are likely to take the form of restricting the timing, amount
and/or frequency of transfers into the Real Property Account and/or precluding
Contract owners who have not previously selected the Real Property Account from
allocating a portion of their net premiums or purchase payments to the Real
Property Account.
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FEDERAL INCOME TAX CONSIDERATIONS
The federal income tax treatment of Contract benefits is described briefly in
the attached prospectus for the particular Contract you selected. Pruco Life of
New Jersey believes that the same principles will apply with respect to
Contracts funded in whole or part by the Real Property Account. The
Partnership's conformity with the diversification standards for the investments
of variable life insurance and variable annuity separate accounts is essential
to ensure that treatment. See GENERAL INVESTMENT AND OPERATING POLICIES, page 9.
Prudential urges you to consult a qualified tax adviser.
Under the Internal Revenue Code, the Partnership is not a taxable entity and any
income, gains or losses of the Partnership are passed through to the Partners,
including Pruco Life of New Jersey, with respect to the Real Property Account.
The Real Property Account is not a separate taxpayer for purposes of the
Internal Revenue Code. The earnings of the Real Property Account are taxed as
part of the operations of Pruco Life of New Jersey. No charge is currently being
made to the Real Property Account for company federal income taxes. We may make
such a charge in the future, see CHARGES, page 17.
DISTRIBUTION OF THE CONTRACTS
As explained in the attached prospectus for the Contracts, Pruco Securities
Corporation, an indirect, wholly-owned subsidiary of Prudential, acts as the
principal underwriter of the Contracts. Consult that prospectus for information
about commission scales and other facts relating to sale of the Contracts.
STATE REGULATION
Pruco Life of New Jersey is subject to regulation and supervision by the
Department of Insurance of the State of New Jersey, which periodically examines
its operations and financial condition. It is also subject to the insurance laws
and regulations of all jurisdictions in which it is authorized to do business.
Pruco Life of New Jersey is required to submit annual statements of its
operations, including financial statements, to the insurance departments of the
various jurisdictions in which it does business to determine solvency and
compliance with local insurance laws and regulations.
In addition to the annual statements referred to above, Pruco Life of New Jersey
is required to file with New Jersey and other jurisdictions a separate statement
with respect to the operations of all its variable contract accounts, in a form
promulgated by the National Association of Insurance Commissioners.
ADDITIONAL INFORMATION
Pruco Life of New Jersey has filed a registration statement with the Securities
and Exchange Commission ("SEC") under the Securities Act of 1933, relating to
the offering described in this prospectus. This prospectus does not include all
of the information set forth in the registration statement. Certain portions
have been omitted pursuant to the rules and regulations of the SEC. All reports
and information filed by Pruco Life of New Jersey can be inspected and copied at
the Public Reference Section of the Commission at 450 Fifth Street, Room 1024,
N.W., Washington, D.C. 20549, at certain of its regional offices: Midwestern
Regional Office, CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago,
IL 60661-2511; Northeastern Regional Office SEC, 7 World Trade Center, Suite
1300, New York, NY 10048, or by telephoning (800) SEC-0330.
The SEC maintains a Web site (http://www.sec.gov) that contains material
incorporated by reference and other information regarding registrants that file
electronically with the SEC.
Further information may also be obtained from Pruco Life of New Jersey. The
address and telephone number are on the cover of this prospectus.
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EXPERTS
The financial statements of The Partnership as of December 31, 1999 and 1998 and
for each of the three years in the period ended December 31, 1999 and the
financial statements of the Real Property Account as of December 31, 1999 and
1998 and for each of the three years in the period ended December 31, 1999
included in this prospectus have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting. PricewaterhouseCoopers LLP's
principal business address is 1177 Avenue of the Americas, New York, New York
10036.
LITIGATION
No litigation is pending, and no litigation is known to be contemplated by
governmental authorities, that would have an adverse material effect upon the
Real Property Account or the Partnership.
REPORTS TO CONTRACT OWNERS
If you allocate a portion of your Contract Fund to the Real Property Account,
Pruco Life of New Jersey will mail you an annual report containing audited
financial statements for the Partnership and an annual statement showing the
status of your Contract Fund and any other information that may be required by
applicable regulation or law.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
All of the assets of the Real Property Account are invested in the Partnership.
Correspondingly, the liquidity, capital resources and results of operations for
the Real Property Account are contingent upon the Partnership. Therefore, all
of management's discussion of these items is at the Partnership level. The
partners in the Partnership are The Prudential Insurance Company of America,
Pruco Life Insurance Company, and Pruco Life Insurance Company of New Jersey
(collectively, the "Partners").
The following analysis of the liquidity and capital resources and results of
operations of the Partnership should be read in conjunction with the Financial
Statements and the related Notes to the Financial Statements included elsewhere
herein.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Partnership's liquid assets consisting of cash,
cash equivalents and marketable securities were $16.8 million, a decrease of
$56.7 million from December 31, 1998. This decrease was due primarily to
distributions to Partners of $30 million on February 2, 1999 and $6 million on
December 23, 1999. In addition, the acquisition of two additional real estate
investments in September 1999 required funding of approximately $12.6 million.
Sources of liquidity include net cash flow from property operations, interest
from short-term investments, and dividends from REIT shares.
The Partnership's investment policy allows up to 30% investment in cash and
short-term obligations, although the Partnership generally holds approximately
10% of its assets in cash or liquid instruments. At December 31, 1999, 7% of
the Partnership's assets consisted of cash, cash equivalents and marketable
securities.
In 1986, Prudential committed to fund up to $100 million to enable the
Partnership to acquire real estate investments. Contributions to the Partnership
under this commitment have been utilized for property acquisitions, and returned
to Prudential on an ongoing basis from Contract owners' net contributions and
other available cash. The amount of the commitment is reduced by $10 million
for every $100 million in current value net assets of the Partnership. Thus,
with $225 million in net assets, the commitment has been automatically reduced
to $80 million. As of December 31, 1999, Prudential's equity interest in the
Partnership under this commitment was $45 million. Prudential does not intend to
make any contributions during the 2000 fiscal year and will begin to phase out
this commitment over the next several years.
As discussed previously, the Partners made $36 million in withdrawals during
1999 from excess cash. Additional withdrawals may be made by the Partners
during 2000 based upon the percentage of assets invested in short-term
obligations, taking into consideration anticipated cash needs of the Partnership
including potential property acquisitions, property dispositions and capital
expenditures. Management anticipates that its current liquid assets and
ongoing cash flow from operations will satisfy the Partnership's needs over the
next twelve months and the foreseeable future.
During 1999, the Partnership spent $2.6 million in capital expenditures for
tenant alterations and improvements. The majority of the capital expenditures
was associated with leasing activity at the industrial property located in
Aurora, CO and the office complex located in Morristown, NJ.
RESULTS OF OPERATIONS
The following is a brief discussion of the Partnership's results of operations
for the years ended December 31, 1999, 1998, and 1997.
21 - Real Property
<PAGE>
1999 VS. 1998
The following table presents a comparison of the Partnership's sources of net
investment income, and realized and unrealized gains or losses by investment
type, for the twelve months ended December 31, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
1999 1998
----------------------- ----------------------
<S> <C> <C>
NET INVESTMENT INCOME:
Office properties $ 7,133,356 $ 7,269,613
Apartment complexes 2,556,743 4,493,384
Retail property 2,676,387 2,702,234
Industrial properties 894,258 1,325,320
Income from interest in properties 98,375 33,642
Dividend income from real
estate investment trust 1,221,843 669,100
Other (including interest income,
investment mgt fee, etc.) (1,301,373) (659,600)
======================= ======================
TOTAL NET INVESTMENT INCOME $ 13,279,589 $15,833,513
======================= ======================
UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Office properties ($3,267,264) $ 3,034,542
Apartment complexes 607,234 657,012
Retail property (1,770,462) (1,312,296)
Industrial properties 209,503 333,630
Interest in properties (680,870) -
Real estate investment trust (2,282,044) (969,156)
REALIZED GAIN (LOSS) ON
INVESTMENTS:
Apartment complexes - 1,730,042
Industrial properties (1,485) 1,229,799
Interest in properties 45,126 91,538
Real estate investment trust (76,784) -
======================= ======================
TOTAL REALIZED AND UNREALIZED
(LOSS) GAIN ON INVESTMENTS ($7,217,046) $ 4,795,111
======================= ======================
</TABLE>
The Partnership's net investment income for 1999 was $13.3 million, a decrease
of $2.5 million from the prior year. This was primarily the result of the sales
of an industrial property in Pomona, CA and an apartment complex in Farmington
Hills, MI, offset by the acquisition of an apartment complex in Jacksonville,
FL. These transactions generated a reduction of $3.0 million in real estate
revenues but only $400,000 in expenses. As a result, investment income
decreased while investment expenses remained relatively flat.
Revenue from real estate and improvements was $21.8 million in 1999, a decrease
of $2.8 million, or 11.3%, from $24.6 million in 1998 mainly as a result of the
sales of the industrial property and apartment complex discussed
previously.
22 - Real Property
<PAGE>
Income from interest in properties increased $64,913, or 194.0%, from $33,462 in
1998 to $98,375 in 1999 primarily as a result of the Partnership investing in a
retail portfolio located in Kansas City, KS and Kansas City, MO.
On March 30, 1999, the Partnership converted 506,894 shares of Meridian REIT to
557,583 shares of ProLogis REIT, with a fair value of $10,942,566, and cash of
$1,013,796 (or total fair value of $11,956,362) as a result of ProLogis'
acquisition of Meridian Industrial Trust. The conversion resulted in a realized
gain of $401,713. Dividend income from real estate investment trusts amounted
to $1.2 million for the year ended December 31, 1999, an increase of $0.6
million, or 82.6%, compared to the corresponding period in 1998. This increase
was primarily due to an increase in the amount invested in REIT stocks.
Administrative expenses increased $283,714, or 14.5%, during 1999. This
increase was primarily due to the acquisition of the apartment complex located
in Jacksonville, FL coupled with higher expense levels experienced by the
Westpark office property located in Brentwood, TN.
Interest expense increased $145,418, or 100%, in 1999 as a result of the
Partnership's investment in the apartment complex located in Jacksonville, FL,
which was acquired subject to $10.2 million in debt.
Minority interest in consolidated partnership increased $33,746, or 100%, as a
result of the Partnership's joint venture investment in the apartment complex
located in Jacksonville, FL.
OFFICE PROPERTIES
Net investment income from property operations for the office sector decreased
approximately $136,000, or 2%, for the year ended December 31, 1999 when
compared to the corresponding period in 1998.
The six office properties owned by the Partnership experienced a net unrealized
loss of approximately $3.3 million during 1999 compared to a net unrealized gain
of $3.0 million in 1998. The largest share of this net unrealized loss was due
to the office property located in Oakbrook Terrace, IL. This $1.6 million value
decrease was due to changes in anticipated costs associated with assumed re-
leasing of the facility which were used in valuing the property. The Beaverton,
OR office property also experienced a net unrealized loss of approximately $0.8
million. This decline in value was due to a change in discounted cash flow
assumptions resulting from the large amount of Class "A" space under
construction in the local market. In addition, a lower renewal probability in
determining the valuation of the property was utilized for a major tenant
expected to be vacating their space upon expiration. The Lisle, IL office
property also experienced a net unrealized loss of approximately $0.7 million
primarily due to capital expenditures on the property that were not reflected as
an increase in market value.
The office complex located in Morristown, NJ is expected to be marketed for sale
during 2000.
Occupancy at the Beaverton, OR, Oakbrook Terrace, IL, and one of the Brentwood,
TN properties remained unchanged from December 31, 1998 at 100%. Occupancy at
the Morristown, NJ property increased from 86% at December 31, 1998 to 100% at
December 31, 1999 while occupancy at the Lisle, IL office property decreased
from 96% at December 31, 1998 to 88% at December 31, 1999. Occupancy at the
other Brentwood, TN property owned by the Partnership decreased from 100% at
December 31, 1998 to 95% at December 31, 1999. As of December 31, 1999 all
vacant spaces were being marketed.
APARTMENT COMPLEXES
Net investment income from property operations for the apartment sector was $2.6
million in 1999, a decrease of $1.9 million, or 43.1%, when compared to 1998.
This decrease was primarily due to the sale of the apartment complex located in
Farmington Hills, MI in 1998.
The apartment complexes owned by the Partnership experienced a net unrealized
gain of $0.6 million for both years ended December 31, 1999 and 1998. The net
realized gain of $1.7 million experienced in 1998 was due to the Farmington
Hill, MI apartment complex which was sold on October 8, 1998 for $16.9 million.
23 - Real Property
<PAGE>
On September 17, 1999, the Partnership invested in an apartment complex located
in Jacksonville, FL. This joint venture investment required the Partnership to
contribute $7.5 million and the partner to contribute $0.4 million. There is
$10.2 million in debt on this garden apartment complex.
The occupancy at the Atlanta, GA complex increased from 96% at December 31, 1998
to 98% at December 31, 1999. Occupancy at the apartment complex in Raleigh, NC
decreased from 93% at December 31, 1998 to 92% at December 31, 1999. Occupancy
at the Jacksonville, FL apartment complex was 89% at December 31, 1999. As of
December 31, 1999, all available vacant spaces were being marketed.
RETAIL PROPERTY
Net investment income for the Partnership's retail property located in Roswell,
GA was approximately $2.7 million for the twelve months ended December 31, 1999
and 1998.
The retail property experienced a net unrealized loss of $1.8 million and $1.3
million in 1999 and 1998, respectively. The decrease in value in 1999 was
attributable to a declining position of the property in the market, while the
decrease in 1998 was a reflection of lower rents. The complex is no longer
being actively marketed for sale.
On September 30, 1999, the Partnership invested in a retail portfolio located in
the Kansas City, KS and Kansas City, MO area. This joint venture investment
required the Partnership to contribute $5.1 million to the investment and the
partner to contribute $1.7 million. There is $21.0 million in debt on this
retail portfolio. During the twelve months ended December 31, 1999, income from
interest in this investment amounted to $98,375. This investment experienced a
net unrealized loss in 1999 of $0.6 million primarily due to capital
expenditures on the property that were not reflected as an increase in market
value.
Occupancy at the shopping center located in Roswell, GA decreased from 98% at
December 31, 1998 to 97% at December 31, 1999. The retail portfolio located in
Kansas City, KS and Kansas City, MO had an average occupancy of 90% at December
31, 1999. As of December 31, 1999, all vacant spaces were being marketed.
INDUSTRIAL PROPERTIES
Net investment income from property operations for the industrial properties
decreased from $1.3 million in 1998 to $0.9 million in 1999. The majority of
this 32.5% decrease was a result of the sale of Pomona Industrial Park,
including the land, offset by an increase in net investment income for the
industrial properties located in Aurora, CO and Salt Lake City, UT due to
increased occupancy.
The three industrial properties owned by the Partnership experienced a net
unrealized gain of approximately $210,000 and $334,000 in 1999 and 1998,
respectively. The majority of the increase for 1999 was attributable to the
Aurora, CO industrial property due to improved market conditions, higher market
rental rates, and the absorption of vacant space. The Pomona, CA property was
sold on December 17, 1998 for $21.4 million and resulted in a realized gain of
$1.2 million.
The occupancy at the Bolingbrook, IL property was 100% at December 31, 1999 and
1998. The occupancy at the Salt Lake City, Utah property increased to 34% at
December 31, 1999 from 0% at December 31, 1998. The Aurora, CO property's
occupancy rate increased from 46% at December 31, 1998 to 75% at December 31,
1999. As of December 31, 1999, all vacant spaces were being marketed.
REAL ESTATE INVESTMENT TRUSTS
During 1999, the Partnership recognized a realized gain of $401,713 from the
conversion of 506,894 shares of Meridian REIT to 557,583 shares of ProLogis
REIT. This was offset by a realized loss of $478,497 primarily as a result of
the sale of 171,375 ProLogis REIT shares and other investments in REIT stocks.
Management continued applying a 3% discount to the market value of the ProLogis
REIT shares through June 29, 1999 because of a restriction which limits the
number of shares that can be publicly traded during any six month period. The
application of the 3% discount was discontinued on June 30, 1999 because this
restriction no longer applied.
24 - Real Property
<PAGE>
OTHER
Other net investment income decreased $0.6 million during 1999 when compared to
the corresponding period in 1998. Other net investment income includes interest
income from short-term investments, investment management fees, and expenses not
related to property activities.
1998 VS. 1997
The following table presents a comparison of the Partnership's property results
of operations, and realized and unrealized gains or losses by investment type,
for the twelve months ended December 31, 1998 and December 31, 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
--------------- ---------------
<S> <C> <C>
NET INVESTMENT INCOME:
Office properties $ 7,269,613 $ 5,499,107
Apartment complexes 4,493,384 3,891,465
Retail property 2,702,234 2,856,357
Industrial properties 1,325,320 2,138,111
Income from interest in properties 33,462 435,296
Dividend income from real
estate investment trust 669,100 158,184
Other (including interest income,
Investment management fee, etc.) (659,600) (1,188,773)
=============== ===============
TOTAL NET INVESTMENT INCOME $15,833,513 $13,789,747
=============== ===============
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Office properties $ 3,034,542 $ 1,897,749
Apartment complexes 2,387,054 1,053,061
Retail property (1,312,296) 1,109,099
Industrial properties 1,563,429 1,616,942
Interest in properties 91,538 284,581
Real estate investment trust (969,156) 2,523,800
=============== ===============
TOTAL REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS $ 4,795,111 $ 8,485,232
=============== ===============
</TABLE>
The Partnership's net investment income for 1998 was $15.8 million, an increase
of $2.0 million from the prior year. This increase was primarily the result of
increased revenues from real estate and improvements partially offset by
increased operating expenses.
Revenue from real estate and improvements was $24.6 million in 1998, an increase
of $3.0 million, or 13.9%, from 1997. This increase was primarily due to higher
occupancy at the Lisle, IL office building and the Aurora, CO distribution
center coupled with increased rental rates on other properties.
Interest on short-term investments decreased $0.4 million from 1997. This was
primarily due to lower average cash and cash equivalent balances during 1998
compared to the prior year. Cash and cash equivalents through the third quarter
of 1998 averaged approximately $30 million, but increased significantly in the
last quarter of 1998 due to the sales of two properties in Pomona, CA and
Farmington Hills, MI.
25 - Real Property
<PAGE>
Property operating expenses increased $0.8 million, or 23.5%, from 1997. This
increase was due primarily to a full year's operating costs (i.e. electricity,
repair and maintenance, water, etc.) for one of the Brentwood, TN properties,
which was acquired in late 1997 in addition to operating expenses incurred by
the Partnership on vacant properties.
Administrative expenses decreased $0.3 million or 16.1%. This decrease was due
primarily to a reduction in legal expenses.
There was no interest expense during 1998 due to the Partnership exercise of its
purchase option under the capital lease obligation.
OFFICE PROPERTIES
In 1998, net investment income from property operations for the office
properties increased $1.8 million, or 32.2%, from prior year. The increase
was primarily due to a full year's net investment income for one of the
Brentwood, TN properties which was acquired in late 1997, as well as the leasing
of vacant space in the Lisle, IL office property.
Office properties experienced a net unrealized gain of $3.0 million in 1998 due
to improving office market conditions in most of the geographical areas where
the Partnership has office properties, particularly, the Oakbrook Terrace, IL
office property in suburban Chicago.
Occupancy at the Beaverton, OR; Oakbrook Terrace, IL; and Brentwood, TN
properties remained at 100% as of December 31, 1998 while occupancy at the
Lisle, IL office property increased from 37% to 96% at December 31, 1998.
Occupancy at the Morristown, NJ property decreased from 99% to 86%.
APARTMENT COMPLEXES
Net investment income from property operations for the apartment complexes
increased $0.6 million, or 15.5%, from 1997. The majority of this increase was
due to increased rental rates at the Atlanta, GA apartment complex.
Holdings in the Partnership's two apartment complexes experienced a net
unrealized gain of $0.6 million during 1998. The Atlanta, GA property was the
largest contributor to the gain as it appreciated $0.4 million. The gain was
attributable to increased rental rates at the property. The Raleigh, NC
property experienced a net unrealized gain of $0.2 million due to increased
occupancy rates. The Farmington Hills, MI property was sold on October 7, 1998
for a price of $16.9 million, which resulted in a realized gain of $1.7 million.
At the end of December 31, 1998, occupancy at the Atlanta, GA and Raleigh, NC
apartment complex was 96% and 93%, respectively.
RETAIL PROPERTY
In 1998, the retail center experienced a net unrealized loss of $1.3 million, a
reflection of lower rents. Occupancy at the shopping center was 98% at
December 31, 1998, which is an increase of 2% from the prior year.
INDUSTRIAL PROPERTIES
Net investment income from property operations for the industrial properties
decreased $0.8 million, or 38.0%, from 1997. The decrease was attributable to
the sale of Pomona Industrial Park, which accounted for 82% of the decrease.
The three industrial properties experienced a net unrealized gain of $0.3
million during 1998. The Pomona, CA property was sold on December 17, 1998 for
$21.4 million, which resulted in a realized gain of $1.2 million.
Occupancy at the Bolingbrook, IL property remained unchanged at 100%. Occupancy
at the Salt Lake City, UT and Aurora, CO property increased to 33.6% and 46%,
respectively from prior year.
26 - Real Property
<PAGE>
REAL ESTATE INVESTMENT TRUST
On September 24, 1997 the Partnership acquired 506,894 shares of Meridian
Industrial REIT. Dividend income from the REIT increased $0.5 million from 1997.
The Partnership held 506,894 shares of Meridian Industrial REIT throughout 1998.
As of December 31, 1998, these REIT shares experienced an unrealized loss of
$1.0 million. The Valuation Unit of Prudential applies a 3% discount to the
market value of the REIT shares. This discount is applied because of the
restriction which limits the number of shares that can be publicly traded during
any six month period to 30% of the total shares originally acquired.
OTHER
Other net investment loss, which includes interest income from short-term
investments, investment management fees, and expenses not related to property
activities narrowed by $0.5 million. The improved result was due to increased
investment management fee in addition to a reduction in administrative expenses.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in Management's Discussion and Analysis may
be considered forward-looking statements. Words such as "expects," "believes,"
"anticipates," "intends," "plans," or variations of such words are generally
part of forward-looking statements. Forward-looking statements are made based
upon management's current expectations and beliefs concerning future
developments and their potential effects upon the Partnership. There can be no
assurance that future developments affecting the Partnership will be those
anticipated by management. There are certain important factors that could cause
actual results to differ materially from estimates or expectations reflected in
such forward-looking statements including without limitation, changes in general
economic conditions, including the performance of financial markets and interest
rates; market acceptance of new products and distribution channels; competitive,
regulatory or tax changes that affect the cost or demand for the Partnership's
products; and adverse litigation results. While the Partnership reassesses
material trends and uncertainties affecting its financial position and results
of operations, it does not intend to review or revise any particular forward-
looking statement referenced in this Management's Discussion and Analysis in
light of future events. The information referred to above should be considered
by readers when reviewing any forward-looking statements contained in this
Management's Discussion and Analysis.
FINANCIAL STATEMENTS
Following are financial statements and independent accountant's reports of the
Real Property Account, as well as financial statements and independent
accountant's reports of the Partnership.
27 - Real Property
<PAGE>
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
ASSETS
Investment in The Prudential Variable Contract
Real Property Partnership (Note 3) $ 9,074,151 $ 9,260,250
--------------- --------------
Net Assets $ 9,074,151 $ 9,260,250
=============== ==============
NET ASSETS, representing:
Equity of contract owners (Note 4) $ 5,925,394 $ 6,428,170
Equity of Pruco Life Insurance Company of New Jersey (Note 2D) 3,148,757 2,832,080
--------------- --------------
$ 9,074,151 $ 9,260,250
=============== ==============
</TABLE>
STATEMENTS OF OPERATIONS
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------------- -------------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME
Net investment income from Partnership operations $ 579,075 $ 611,358 $ 550,770
--------------- -------------- -----------------
EXPENSES
Charges to contract owners for assuming mortality risk and
expense risk and for administration (Note 5) 35,718 38,644 38,614
--------------- -------------- -----------------
NET INVESTMENT INCOME 543,357 572,714 512,156
--------------- -------------- -----------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net change in unrealized gain (loss) on investments in Partnership (308,127) 67,858 326,681
Realized gain (loss) on sale of investments in Partnership (1,445) 117,819 12,223
--------------- -------------- -----------------
NET GAIN (LOSS) ON INVESTMENTS (309,572) 185,677 338,904
--------------- -------------- -----------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 233,785 $ 758,391 $ 851,060
=============== ============== =================
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
--------------- -------------- -----------------
OPERATIONS
Net investment income $ 543,357 $ 572,714 $ 512,156
Net change in unrealized gain (loss) on investments in Partnership (308,127) 67,858 326,681
Net realized gain (loss) on sale of investments in Partnership (1,445) 117,819 12,223
--------------- -------------- -----------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 233,785 758,391 851,060
--------------- -------------- -----------------
CAPITAL TRANSACTIONS
Net withdrawals by contract owners (Note 7) (642,611) (759,469) (524,157)
Net contributions by Pruco Life Insurance Company of New Jersey 222,727 493,113 562,771
--------------- -------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS (419,884) (266,356) 38,614
--------------- -------------- -----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (186,099) 492,035 889,674
NET ASSETS
Beginning of the year 9,260,250 8,768,215 7,878,541
--------------- -------------- -----------------
End of the year $ 9,074,151 $ 9,260,250 $ 8,768,215
=============== ============== =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A2 THROUGH A5
A1 - REAL PROPERTY
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
DECEMBER 31, 1999
NOTE 1: GENERAL
Pruco Life of New Jersey Variable Contract Real Property Account ("Real Property
Account") was established on October 30, 1987 by resolution of the Board of
Directors of Pruco Life Insurance Company of New Jersey ("Pruco Life of New
Jersey"), an indirect wholly-owned subsidiary of The Prudential Insurance
Company of America ("Prudential"), as a separate investment account pursuant to
New Jersey law. The assets of the Real Property Account are segregated from
Pruco Life of New Jersey's other assets. The Real Property account is used to
fund benefits under certain variable life insurance and variable annuity
contracts issued by Pruco Life of New Jersey. These products are Appreciable
Life ("VAL"), Variable Life ("VLI"), Discovery Plus ("SPVA"), and Discovery Life
Plus ("SPVL").
The assets of the Real Property Account are invested in The Prudential Variable
Contract Real Property Partnership (the "Partnership"). The Partnership is
organized under New Jersey law and is registered under the Securities Act of
1933. The Partnership is the investment vehicle for assets allocated to the
real estate investment option under certain variable life insurance and annuity
contracts. The Real Property Account, along with the Pruco Life Variable
Contract Real Property Account and The Prudential Variable Contract Real
Property Account, are the sole investors in the Partnership.
The Partnership has a policy of investing at least 65% of its assets in direct
ownership interests in income-producing real estate and participating mortgage
loans.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF ACCOUNTING
The accompanying financial statements are prepared in conformity with accounting
principles generally accepted in the United States ("GAAP"). The preparation of
the financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
B. INVESTMENT IN PARTNERSHIP INTEREST
The investment in the Partnership is based on the Real Property Account's
proportionate interest of the Partnership's market value. At December 31, 1999
and 1998 the Real Property Account's interest in the Partnership was 4.3% or
435,051 shares and 3.9% or 456,853 shares respectively.
C. INCOME RECOGNITION
Net investment income and realized and unrealized gains and losses are
recognized daily. Amounts are based upon the Real Property Account's
proportionate interest in the Partnership.
D. EQUITY OF PRUCO LIFE INSURANCE COMPANY Of NEW JERSEY
Pruco Life of New Jersey maintains a position in the Real Property Account for
property acquisitions and capital expenditure funding needs. The position is
also utilized for liquidity purposes including unit purchases and redemptions,
Partnership share transactions, and expense processing. The position does not
have an effect on the contract owner's account or the related unit value.
A2 - REAL PROPERTY
<PAGE>
Note 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL VARIABLE CONTRACT REAL
PROPERTY PARTNERSHIP
The number of shares (rounded) held by the Real Property Account in the
Partnership, the Partnership net asset value per share (rounded) and the
aggregate cost of investments in the Real Property Accounts' shares held at
December 31, 1999 and December 31, 1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------- ----------------------
<S> <C> <C>
NUMBER OF SHARES (ROUNDED): 435,051 456,853
NET ASSET VALUE PER SHARE (ROUNDED): $ 20.86 $ 20.27
COST: $5,058,737 $5,311,507
</TABLE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding contract owner units, unit values and total value of contract owner
equity at December 31, 1999 and December 31, 1998 by product, were as follows:
<TABLE>
<CAPTION>
1999:
- ----
VAL VLI SPVA SPVL TOTAL
---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
CONTRACT OWNER UNITS OUTSTANDING: 2,497,281 446,482 57,529 66,927
UNIT VALUE: $ 1.92825 $1.99254 $1.77073 $1.77073
---------- -------- -------- --------
TOTAL CONTRACT OWNER EQUITY: $4,815,383 $889,633 $101,868 $118,510 $5,925,394
========== ======== ======== ======== ==========
1998:
- ----
VAL VLI SPVA SPVL TOTAL
---------- --------- --------- --------- ----------
CONTRACT OWNER UNITS OUTSTANDING: 2,800,465 475,689 62,086 66,824
UNIT VALUE: $ 1.88513 $1.94314 $1.74229 $1.74229
---------- -------- -------- --------
TOTAL CONTRACT OWNER EQUITY: $5,279,240 $924,330 $108,772 $116,428 $6,428,170
========== ======== ======== ======== ==========
</TABLE>
NOTE 5: CHARGES AND EXPENSES
A. MORTALITY RISK AND EXPENSE RISK CHARGES
Mortality risk and expense risk charges are determined daily using an effective
annual rate of 0.6%, 0.35%, 0.9% and 0.9% for VAL, VLI, SPVA, SPVL,
respectively. Mortality risk is that life insurance and annuity contract owners
may not live as long as estimated or annuitants may live longer than estimated
and expense risk is that the cost of issuing and administering the policies may
exceed related charges by Pruco Life of New Jersey.
B. ADMINISTRATIVE CHARGES
Administrative charges are determined daily using an effective annual rate of
0.35% applied daily against the net assets representing equity of contract
owners held in each subaccount for SPVA and SPVL. Administrative charges
include costs associated with issuing the contract, establishing and maintaining
records, and providing reports to contract owners.
C. COST OF INSURANCE AND OTHER RELATED CHARGES
Contract owner contributions are subject to certain deductions prior to being
invested in the Real Property Account. The deductions for VAL and VLI are (1)
state premium taxes; (2) sales charges which are deducted in order to compensate
Pruco Life of New Jersey for the cost of selling the contract and (3)
transaction costs, applicable to VAL, are deducted from each premium payment to
cover premium collection and processing costs. Contracts are also subject to
monthly charges for the costs of administering the contract to compensate Pruco
Life of New Jersey for the guaranteed minimum death benefit risk.
A3 - REAL PROPERTY
<PAGE>
D. DEFERRED SALES CHARGE
Subsequent to a contract owner redemption, a deferred sales charge is imposed
upon surrenders of certain variable life insurance contracts to compensate Pruco
Life of New Jersey for sales and other marketing expenses. The amount of any
sales charge will depend on the number of years that have elapsed since the
contract was issued. No sales charge will be imposed after the sixth and tenth
year of the contract for SPVL and VAL, respectively. No sales charge will be
imposed on death benefits.
E. PARTIAL WITHDRAWAL CHARGE
A charge is imposed by Pruco Life of New Jersey on partial withdrawals of the
cash surrender value for VAL. A charge equal to the lesser of $15 or 2% will be
made in connection with each partial withdrawal of the cash surrender value of a
contract.
NOTE 6: TAXES
Pruco Life of New Jersey is taxed as a "life insurance company" as defined by
the Internal Revenue Code and the results of operations of the Real Property
Account form a part of Prudential's consolidated federal tax return. Under
current federal law, no federal income taxes are payable by the Real Property
Account. As such, no provision for the tax liability has been recorded in these
financial statements.
NOTE 7: NET WITHDRAWALS BY CONTRACT OWNERS
Contract owner activity for the real estate investment option in Pruco Life of
New Jersey's variable insurance and variable annuity products for the years
ended December 31, 1999, 1998, and 1997 were as follows:
<TABLE>
<CAPTION>
1999:
- ----
VAL VLI SPVA SPVL TOTAL
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Contract Owner Net Payments: $ 133,235 $ 44,778 $ 0 $ (9) $ 178,004
Policy Loans: (206,458) (11,382) 0 (1,005) (218,845)
Policy Loan Repayments and Interest: 295,414 10,661 0 2,140 308,215
Surrenders, Withdrawals, and Death Benefits: (278,883) (57,044) (7,957) 0 (343,884)
Net Transfers From(To) Other Subaccounts
or Fixed Rate Option: (288,687) (14,518) 0 0 (303,205)
Administrative and Other Charges: (232,010) (29,982) 43 (947) (262,896)
---------- ---------- ---------- ---------- -----------
NET WITHDRAWALS BY CONTRACT OWNERS $(577,389) $(57,487) $ (7,914) $ 179 $(642,611)
========== ========== ========== ========== ===========
1998:
- ----
VAL VLI SPVA SPVL TOTAL
---------- ---------- ---------- ---------- -----------
Contract Owner Net Payments: $ 457,528 $ 83,120 $ 0 $ 70 $ 540,718
Policy Loans: (415,907) (12,329) 0 (26,073) (454,309)
Policy Loan Repayments and Interest: 147,539 21,940 0 2,028 171,507
Surrenders, Withdrawals, and Death Benefits: (289,995) (60,417) (32,020) (11) (382,443)
Net Transfers From(To) Other Subaccounts
or Fixed Rate Option: (319,287) (17,694) 0 0 (336,981)
Administrative and Other Charges: (264,212) (32,789) (36) (924) (297,961)
---------- ---------- ---------- ---------- -----------
NET WITHDRAWALS BY CONTRACT OWNERS $(684,334) $(18,169) $(32,056) $(24,910) $(759,469)
========== ========== ========== ========== ===========
</TABLE>
A4 - REAL PROPERTY
<PAGE>
<TABLE>
<CAPTION>
1997:
- -----
VAL VLI SPVA SPVL TOTAL
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Contract Owner Net Payments: $ 533,340 $ 88,026 $ (5) $ 37 $ 621,398
Policy Loans: (171,484) (14,313) 0 (2,456) (188,253)
Policy Loan Repayments and Interest: 136,212 14,124 0 1,104 151,440
Surrenders, Withdrawals, and Death Benefits: (336,616) (74,935) (5,395) 0 (416,946)
Net Transfers From(To) Other Subaccounts
or Fixed Rate Option: (304,993) (20,526) 0 (17,463) (342,982)
Administrative and Other Charges: (315,155) (32,755) 0 (904) (348,814)
---------- ---------- ---------- ---------- -----------
NET WITHDRAWALS BY CONTRACT OWNERS $(458,696) $(40,379) $ (5,400) $(19,682) $(524,157)
========== ========== ========== ========== ===========
</TABLE>
NOTE 8: UNIT ACTIVITY
Transactions in units for the years ended December 31, 1999, 1998, 1997 were as
follows:
<TABLE>
<CAPTION>
1999:
- ----
VAL VLI SPVA SPVL
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Contract Owner Contributions: 223,951 29,238 26 1,215
Contract Owner Redemptions: (527,135) (58,445) (4,583) (1,112)
1998:
- ----
VAL VLI SPVA SPVL
--------- -------- -------- --------
Contract Owner Contributions: 428,040 59,733 3 1,240
Contract Owner Redemptions: (808,537) (69,561) (19,312) (16,223)
1997:
- ----
VAL VLI SPVA SPVL
--------- -------- -------- --------
Contract Owner Contributions: 477,493 4,305 0 758
Contract Owner Redemptions: (757,408) (88,132) (3,635) (13,874)
</TABLE>
NOTE 9: PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments in the
Partnership for the year ended December 31, 1999 were as follows:
Purchases: $ 0
Sales: $ (455,602)
A5 - REAL PROPERTY
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of the
Pruco Life of New Jersey Variable Contract Real Property Account
and the Board of Directors of
Pruco Life Insurance Company of New Jersey
In our opinion, the accompanying statements of net assets and the related
statements of operations and changes in net assets present fairly, in all
material respects, the financial position of Pruco Life of New Jersey
Variable Contract Real Property Account at December 31, 1999 and 1998, and
the results of its operations and the changes in its net assets for the
three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These
financial statements are the responsibility of Pruco Life Insurance Company
of New Jersey's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of shares owned in The Prudential Variable Contract Real
Property Partnership at December 31, 1999 and 1998, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
March 17, 2000
A6 - REAL PROPERTY
<PAGE>
INDEX
-----
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Statements of Assets and Liabilities - December 31, 1999 and 1998 B1
Consolidated Statements of Operations - Years Ended December 31, 1999, 1998 and 1997 B2
Consolidated Statements of Changes in Net Assets - Years Ended December 31, 1999, 1998 and 1997 B3
Consolidated Statements of Cash Flows - Years Ended December 31, 1999, 1998 and 1997 B4
Schedule of Investments - December 31, 1999 and 1998 B5
Notes to Financial Statements B8
Report of Independent Accountants B13
</TABLE>
INDEX - Real Property
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
ASSETS ----------------- -----------------
<S> <C> <C>
REAL ESTATE INVESTMENTS - At estimated
market value:
Real estate and improvements (cost:
12/31/99 -- $190,007,568; 12/31/98 --
$170,045,055) $171,154,516 $155,374,462
Real estate partnership (cost plus equity in
undistributed earnings: 12/31/99 -- $5,187,126;
12/31/98 -- $0) 4,506,257 0
Real estate investment trusts (cost: 12/31/99
-- $32,535,158; 12/31/98 -- $10,000,005) 29,727,085 11,554,649
------------ ------------
Total real estate investments 205,387,858 166,929,111
MARKETABLE SECURITIES - At estimated market
value (cost: 12/31/99 -- $2,805,493; 12/31/98
-- $14,967,236) 2,797,008 14,950,525
CASH AND CASH EQUIVALENTS 13,972,669 58,578,848
DIVIDEND RECEIVABLE 131,542 167,275
OTHER ASSETS (net of allowance for
uncollectible accounts: 12/31/99 -- $179,000;
12/31/98 -- $66,000) 2,853,576 3,623,513
------------ ------------
Total assets 225,142,653 244,249,272
------------ ------------
LIABILITIES
MORTGAGE LOAN PAYABLE 10,184,662 0
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 2,967,614 1,985,400
DUE TO AFFILIATES 869,477 1,598,535
OTHER LIABILITIES 525,892 504,940
MINORITY INTEREST 372,068 0
------------ ------------
Total liabilities 14,919,713 4,088,875
------------ ------------
Partners' equity 210,222,940 240,160,397
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $225,142,653 $244,249,272
============ ============
NUMBER OF SHARES OUTSTANDING AT END OF PERIOD 10,078,921 11,848,275
============ ============
SHARE VALUE AT END OF PERIOD $ 20.86 $ 20.27
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B12
B1 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Revenue from real estate and improvements $21,807,346 $24,572,642 $21,582,968
Equity in income of real estate partnership 98,375 33,462 435,296
Dividend income from real estate investment trusts 1,221,843 669,100 158,184
Interest on short-term investments 1,707,485 1,888,348 2,305,364
----------- ----------- -----------
Total investment income 24,835,049 27,163,552 24,481,812
----------- ----------- -----------
EXPENSES:
Investment management fee 2,730,713 2,900,445 2,640,470
Real estate taxes 2,616,553 2,406,624 2,208,972
Administrative 2,234,949 1,951,235 2,326,155
Operating 3,794,081 4,071,735 3,296,350
Interest 145,418 0 220,118
Minority interest in consolidated partnership 33,746 0 0
----------- ----------- -----------
Total investment expenses 11,555,460 11,330,039 10,692,065
----------- ----------- -----------
NET INVESTMENT INCOME 13,279,589 15,833,513 13,789,747
----------- ----------- -----------
REALIZED AND UNREALIZED (LOSS) GAIN ON INVESTMENTS
Net proceeds from real estate investments sold or converted 21,649,562 37,443,762 6,297,422
Less: Cost of real estate investments sold or converted 19,602,032 37,361,533 6,274,539
Realization of prior periods' unrealized gain (loss)
on real estate investments sold or converted 2,080,673 (2,969,150) (283,157)
----------- ----------- -----------
Net (loss) gain realized on real estate investments
sold or converted (33,143) 3,051,379 306,040
----------- ----------- -----------
Change in unrealized (loss) gain on real estate investments (7,145,372) 1,743,732 8,179,192
Minority interest in unrealized gain on investments (38,531) 0 0
----------- ----------- -----------
Net unrealized (loss) gain on real estate investments (7,183,903) 1,743,732 8,179,192
----------- ----------- -----------
NET REALIZED AND UNREALIZED (LOSS) GAIN ON INVESTMENTS (7,217,046) 4,795,111 8,485,232
----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,062,543 $20,628,624 $22,274,979
=========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B12
B2 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997
------------- -------------- ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income $ 13,279,589 $ 15,833,513 $ 13,789,747
Net (loss) gain realized on real
estate investments sold (33,143) 3,051,379 306,040
Net unrealized (loss) gain from
real estate investments (7,183,903) 1,743,732 8,179,192
------------ ------------ ------------
Net increase in net assets
resulting from operations 6,062,543 20,628,624 22,274,979
------------ ------------ ------------
NET DECREASE IN NET ASSETS
RESULTING FROM CAPITAL
TRANSACTIONS:
Withdrawals by partners
(1999 -- 1,769,354, 1998 -- 0,
and 1997 -- 0 shares,
respectively) (36,000,000) 0 0
------------ ------------ ------------
Net decrease in net assets
resulting from capital
transactions (36,000,000) 0 0
------------ ------------ ------------
NET INCREASE IN NET ASSETS (29,937,457) 20,628,624 22,274,979
NET ASSETS - Beginning of year 240,160,397 219,531,773 197,256,794
------------ ------------ ------------
NET ASSETS - End of year $210,222,940 $240,160,397 $219,531,773
============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B12
B3 - Real Property
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 6,062,543 $20,628,624 $ 22,274,979
Adjustments to reconcile net increase in net assets
resulting from operations to net cash provided by
operating activities:
Net realized and unrealized loss (gain) on investments 7,217,046 (4,795,111) (8,485,232)
Equity in income of real estate partnership's
operations in excess of distributions (98,376) 0 0
Minority interest from operating activities 33,746 0 0
Bad debt expense 124,059 28,264 99,929
Decrease (increase) in:
Dividend receivable 35,733 (20,276) (146,999)
Other assets 645,878 (1,704,926) 20,136
(Decrease) increase in:
Obligation under capital lease 0 0 (72,677)
Accounts payable and accrued expenses 982,214 143,373 201,667
Due to affiliates (729,058) 765,613 113,722
Other liabilities 20,952 (33,473) 71,404
------------ ----------- ------------
Net cash flows from operating activities 14,294,737 15,012,088 14,076,929
============ =========== ============
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from real estate investments sold 10,706,996 37,443,762 6,297,422
Acquisition of real estate property (7,200,743) 0 (23,417,474)
Acquisition of real estate partnership (5,088,750) 0 0
Acquisition of real estate investment trust (31,239,744) 0 (10,000,005)
Improvements and additional costs on prior purchases:
Additions to real estate owned (2,516,645) (5,736,333) (1,311,864)
Sale (purchase) of marketable securities, net 12,153,517 (1,021,229) 10,497,348
------------ ----------- ------------
Net cash flows from investing activities (23,185,369) 30,686,200 (17,934,573)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Withdrawals by partners (36,000,000) 0 0
Principal payments on mortgage loans payable (15,338) 0 0
Distributions to minority interest partners (93,425) 0 0
Contributions from minority interest partners 393,216 0 0
Principal payments on capital lease obligation 0 0 (4,000,000)
------------ ----------- ------------
Net cash flows from financing activities (35,715,547) 0 (4,000,000)
============ =========== ============
NET CHANGE IN CASH AND CASH EQUIVALENTS (44,606,179) 45,698,288 (7,857,644)
CASH AND CASH EQUIVALENTS - Beginning of year 58,578,848 12,880,560 20,738,204
------------ ----------- ------------
CASH AND CASH EQUIVALENTS - End of year $ 13,972,669 $58,578,848 $ 12,880,560
============ =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 145,418 $ 0 $ 220,118
============ =========== ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
ACTIVITY:
Assumption of Mortgage Loan Payable $ 10,200,000 $ 0 $ 0
============ =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B12
B4 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------------ ---------------------------------
ESTIMATED ESTIMATED
COST MARKET VALUE COST MARKET VALUE
------------------------------------ ---------------------------------
<S> <C> <C> <C> <C>
REAL ESTATE AND IMPROVEMENTS (PERCENT OF NET ASSETS) 81.4% 64.7%
Location Description
- -------------------------------------------------------------------------------------------------------------------------------
Lisle, IL Office Building $ 22,075,762 $ 13,895,122 $ 21,634,707 $ 14,123,742
Atlanta, GA Garden Apartments 15,646,846 16,104,268 15,601,495 15,651,216
Roswell, GA Retail Shopping Center 32,394,853 27,000,939 32,272,627 28,649,176
Morristown, NJ Office Building 20,116,694 12,337,499 19,409,490 11,596,138
Bolingbrook, IL Warehouse 8,948,028 7,000,000 8,948,028 7,000,000
Raleigh, NC Garden Apartments 15,833,928 17,004,623 15,822,682 16,804,570
Nashville, TN Office Building 8,509,908 10,000,000 8,448,026 10,152,399
Oakbrook Terrace, IL Office Complex 12,945,366 14,200,000 12,945,366 15,750,000
Beaverton, OR Office Complex 10,768,811 10,400,866 10,728,618 11,200,000
Salt Lake City, UT Industrial Building 5,640,709 5,703,419 5,388,134 5,450,000
Aurora, CO Industrial Building 10,119,072 10,520,780 9,304,171 9,497,221
Brentwood, TN Office Complex 9,606,828 9,537,000 9,541,711 9,500,000
Jacksonville, FL Garden Apartments 17,400,743 17,450,000 0 0
-------------------------------------------------------------------------
$190,007,568 $171,154,516 $170,045,055 $155,374,462
=========================================================================
REAL ESTATE PARTNERSHIPS (PERCENT OF NET ASSETS) 2.1%
Location Description
- -------------------------------------------------------------------------------------------------------------------------------
Kansas City, KS; MO Retail Shopping Center $ 5,187,126 $ 4,506,257 $ 0 $ 0
=========================================================================
REAL ESTATE INVESTMENT TRUSTS (PERCENT OF NET ASSETS) 14.1% 4.8%
- -------------------------------------------------------------------------------------------------------------------------------
Prologis REIT Shares (386,208 shares) $ 7,579,332 $ 7,434,504 - -
AMB Property Corp (42,100 shares) 933,851 839,369 - -
Alexandria Real Est Equities (30,800 shares) 874,221 979,825 - -
Apartment Inv & Mqmt Co - Class A (16,500 shares) 672,953 656,906 - -
Centerpoint Properties Corp (16,200 shares) 544,308 581,175 - -
Cousins Properties (24,800 shares) 890,459 841,650 - -
Equity Office Properties Trust (32,400 shares) 901,571 797,850 - -
Equity Residential Property Trust (13,100 shares) 623,573 559,206 - -
Excel Legacy Corp (322,300 shares) 1,479,431 1,067,619 - -
Franchise Finance Cp Amer (25,500 shares) 620,027 610,406 - -
General Growth Properties (13,600 shares) 512,353 380,800 - -
lntrawest Corporation (76,100 shares) 1,258,575 1,317,481 - -
MeriStar Hotels & Resorts Inc. (239,100 shares) 875,818 851,794 - -
Mission West Properties (116,800 shares) 938,124 905,200 - -
Philips International Realty (63,700 shares) 1,052,331 1,047,069 - -
Prime Hospitality Corp. (112,500 shares) 1,320,524 991,406 - -
Public Storage (45,100 shares) 1,269,884 1,023,206 - -
Reckson Service Industries (18,200 shares) 221,041 1,135,225 - -
Reckson Assoc Realty Corp (52,200 shares) 1,299,227 1,070,100 - -
Spieker Properties (12,000 shares) 426,078 437,250 - -
Starwood Hotels and Resorts (87,200 shares) 3,027,806 2,049,200 - -
Sun Communities Inc. (16,700 shares) 606,047 537,531 - -
Vomado Realty Trust (51,800 shares) 1,930,911 1,683,500 - -
Sun International Hotels Ltd (30,900 shares) 1,116,266 598,688 - -
Boardwalk Equities, Inc. (146,800 shares) 1,560,447 1,330,125 - -
Meridian REIT Shares (506,894 shares) - - 10,000,005 11,554,649
-------------------------------------------------------------------------
$ 32,535,158 $ 29,727,085 $ 10,000,005 $ 11,554,649
=========================================================================
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 1.3% 6.2%
Description (See next page for details)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL MARKETABLE SECURITIES $ 2,805,493 $ 2,797,008 $ 14,967,236 $ 14,950,525
=========================================================================
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 6.6% 24.4%
Description (See next page for details)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CASH AND CASH EQUIVALENTS $ 13,972,669 $ 13,972,669 $ 58,578,848 $ 58,578,848
=========================================================================
</TABLE>
* Real estate partnership accounted for by the consolidated method.
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B12
B5 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------------------------
NET ESTIMATED
FACE AMOUNT COST MARKET VALUE
-------------- ------------- ----------------
<S> <C> <C> <C>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 1.3%
J.P. Morgan and Co., Inc., 5.96%, March 13, 2000 $ 995,000 980,010 $ 980,010
Ford Motor Credit Co., 7.50%, April 6, 2000 150,000 151,779 150,654
CIT Group Inc., 6.80%, April 17, 2000 500,000 503,765 501,487
Associates Corp of North America, 6.71%, June 1, 2000 1,160,000 1,169,939 1,164,857
------------ ------------ --------------
TOTAL MARKETABLE SECURITIES $ 2,805,000 $ 2,805,493 $ 2,797,008
============ ============ ==============
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 6.6%
Duke Energy Corp., 5.00%, January 3, 2000 550,000 549,771 549,771
Bell Atlantic Financial Services, 5.20%, January 7, 2000 672,000 671,321 671,321
Household Finance Corp., 5.93%, January 18, 2000 990,000 983,314 983,314
Ford Motor Credit Co., 6.00%, January 21, 2000 847,000 840,789 840,789
American Express Cr. Corp., 6.02%, January 26, 2000 999,000 990,981 990,981
Procter & Gamble Co., 6.00%, January 26, 2000 200,000 197,867 197,867
Goldman Sachs Group L.P., 6.43%, January 31, 2000 1,000,000 991,963 991,963
Countrywide Home Loans, 6.00%, February 3, 2000 990,000 980,595 980,595
Merrill Lynch & Co., 5.98%, February 3, 2000 990,000 980,626 980,626
Unifunding Inc., 6.05%, February 3, 2000 900,000 892,135 892,135
Metlife Funding Inc., 5.90%, February 4, 2000 841,000 832,730 832,730
General Electric Cap Corp., 5.95%, February 10, 2000 350,000 346,182 346,182
GTE Funding, Inc., 6.10%, February 10, 2000 1,000,000 990,681 990,681
E.I. Du Pont De Nemours & Co. Inc., 6.00%, February 11, 2000 250,000 246,667 246,667
General Electric Capital Corp., 5.92% March 1, 2000 406,000 400,258 400,258
------------ ------------ --------------
TOTAL CASH EQUIVALENTS 10,985,000 10,895,880 10,895,880
CASH 3,076,789 3,076,789 3,076,789
------------ ------------ --------------
TOTAL CASH AND CASH EQUIVALENTS $14,061,789 $13,972,669 $ 13,972,669
============ ============ ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B12
B6 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------------------------
NET ESTIMATED
FACE AMOUNT COST MARKET VALUE
------------- ------------ --------------
<S> <C> <C> <C>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 6.2%
General Motors Acceptance Corp., 5.26%, January 26, 1999 $ 830,000 $ 817,556 $ 817,556
American Express Credit Corp., 7.375%, February 1, 1999 325,000 329,342 325,418
Canadian Imperial Bank of Commerce, 5.55%, February 10, 1999 1,000,000 999,520 999,947
Federal National Mortgage Assoc., 5.33%, February 12, 1999 100,000 99,703 99,703
Salomon Smith Barney Holdings, Inc., 5.38%, February 16, 1999 1,720,000 1,695,137 1,695,397
General Motors Acceptance Corp., 5.29%, February 17, 1999 650,000 641,501 641,501
Chrysler Financial Company LLC, 5.26%, February 22, 1999 2,400,000 2,365,700 2,365,700
International Lease Finance Corp. 7.50% March 1, 1999 500,000 508,250 501,367
Federal Home Loan Mortgage Corp., 5.505%, March 12, 1999 1,000,000 1,000,000 1,000,000
General Motors Acceptance Corp., 6.04%, March 19, 1999 1,000,000 1,003,480 1,000,707
Merrill Lynch & CO., Inc. 5.23%, March 19, 1999 1,790,000 1,758,820 1,758,820
Canadian Wheat Board, 5.14%, April 1, 1999 2,000,000 1,962,406 1,962,406
International Lease Finance Corp., 6.625%, April 1, 1999 375,000 377,419 375,721
CIT Group Holdings, Inc, 6.375%, May 21, 1999 400,000 402,120 400,873
Federal National Mortgage Assoc., 6.07%, July 1, 1999 1,000,000 1,005,426 1,004,779
----------- ----------- -----------
TOTAL MARKETABLE SECURITIES $15,090,000 $14,967,236 $14,950,525
=========== =========== ===========
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 24.4%
Countrywide Home Loans, 5.403%, January 4, 1999 $ 1,000,000 $ 999,400 $ 999,400
Fortune Brands Inc. 5.05%, January 4, 1999 3,463,000 3,461,057 3,461,057
Xerox Capital (Europe) PLC 5.303%, January 4, 1999 3,483,000 3,480,949 3,480,949
Federal National Mortgage Assoc, 5.77%, January 5, 1999 10,401,000 10,000,000 10,000,000
Ford Motor Credit Co, 5.454%, January 5, 1999 500,000 499,622 499,622
Pioneer Hi-BRED International, 5.665%, January 7, 1999 1,000,000 997,332 997,332
Ford Motor Credit Co., 6.11%, January 8, 1999 167,000 166,717 166,717
Deere & Co., 5.372%, January 13, 1999 2,520,000 2,509,514 2,509,514
E.I. Du Pont De Nemours & Co., Inc. 5.277%, January 13, 1999 648,000 644,598 644,598
Household Finance Corp., 5.356%, January 13, 1999 175,000 174,119 174,119
Household Finance Corp., 5.355%, January 15, 1999 2,343,000 2,331,899 2,331,899
Potomac Electric Power Co., 5.569%, January 15, 1999 3,122,000 3,110,930 3,110,930
Chrysler Financial Corp., 5.537%, January 25, 1999 1,164,000 1,158,121 1,158,121
Eastman Kodak Co., 5.232%, January 26, 1999 2,518,000 2,502,360 2,502,360
Cigna Corp., 5.559%, January 27, 1999 1,819,000 1,809,220 1,809,220
Cigna Group Holdings, Inc. 5.334%, January 27, 1999 1,851,000 1,835,496 1,835,496
Countrywide Home Loan, Inc. 5.506%, January 27, 1999 1,342,000 1,333,028 1,333,028
Countrywide Home Loan, Inc. 5.587%, January 27, 1999 1,177,000 1,169,197 1,169,197
General RE Corp., 5.187%, January 29, 1999 542,000 538,046 538,046
PNC Funding Corp. 5.728%, January 29, 1999 2,500,000 2,487,729 2,487,729
GTE Funding, Inc, 5.211%, February 1, 1999 2,526,000 2,506,048 2,506,048
Norwest Financial, Inc. 5.536%, February 3, 1999 3,563,000 3,539,593 3,539,593
CIGNA Corp., 5.233%, February 4, 1999 1,745,000 1,730,660 1,730,660
General Electric Capital Corp. 5.537%, February 4, 1999 3,536,000 3,539,049 3,539,049
Associates First Capital Corp., 5.241%, February 8, 1999 2,519,000 2,498,988 2,498,988
GTE Funding, Inc., 5.304%, February 11, 1999 1,000,000 993,413 993,413
----------- ----------- -----------
TOTAL CASH EQUIVALENTS 56,651,000 56,017,086 56,017,086
CASH 2,561,762 2,561,762 2,561,762
----------- ----------- -----------
TOTAL CASH AND CASH EQUIVALENTS $59,212,762 $58,578,848 $58,578,848
=========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B12
B7 - REAL PROPERTY
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
FOR YEARS ENDED DECEMBER 31, 1999 AND 1997
NOTE 1: ORGANIZATION
On April 29, 1998, 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
("Prudential"), Pruco Life Insurance Company ("Pruco Life"), and Pruco Life
Insurance Company of New Jersey ("Pruco Life of New Jersey"). The Partnership
was established as a means by which assets allocated to the real estate
investment option under certain variable life insurance and variable annuity
contracts issued by the respective companies could be invested in a commingled
pool. The partners in the Partnership are Prudential, Pruco Life and Pruco Life
of New Jersey.
The Partnership's policy is to invest at least 65% of its assets in direct
ownership interests in income-producing real estate and participating mortgage
loans.
The estimated market value of the Partnership's shares is determined daily,
consistent with the Partnership Agreement. On each day during which the New York
Stock Exchange is open for business, the net asset value of the Partnership is
estimated using the estimated market value of its assets, principally as
described in Notes 2A and 2B below, reduced by any liabilities of the
Partnership. The periodic adjustments to property values described in Notes 2A
and 2B below and other adjustments to previous estimates are made on a
prospective basis. There can be no assurance that all such adjustments to
estimates will be made timely.
Shares of the Partnership are held by Prudential Variable Contract Real Property
Account, Pruco Life Variable Contract Real Property Account and Pruco Life of
New Jersey Variable Contract Real Property Account (the "Real Property
Accounts") and may be purchased and sold at the then current share value of the
Partnership's net assets. Share value is calculated by dividing the estimated
market value of net assets of the Partnership as determined above by the number
of shares outstanding. A Contract owner participates in the Partnership through
interests in the Real Property Accounts.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A: BASIS OF PRESENTATION - It is the Partnership's policy to
consolidate those real estate partnerships in which it has a
controlling financial interest. All significant intercompany
balances and transactions have been eliminated in the
consolidation.
B: REAL ESTATE INVESTMENTS - The Partnership's investments in real
estate are initially valued at their purchase price. Thereafter,
real estate investments are reported at their estimated market
values based upon appraisal reports prepared by independent real
estate appraisers (members of the Appraisal Institute or an
equivalent organization) within a reasonable amount of time
following acquisition of the real estate and no less frequently
than annually thereafter. The Chief Appraiser of Prudential
Insurance Company's Valuation Unit (Valuation Unit) is
responsible to assure that the valuation process provides
independent and accurate market value estimates. In the interest
of maintaining and monitoring the independence and accuracy of
the appraisal process, the Comptroller of Prudential has
appointed a third party firm to act as the Appraisal Management
Firm. The Appraisal Management Firm, among other
responsibilities, approves the selection and scheduling of
external appraisals; engages all external appraisers; reviews and
provides comments on all external appraisals; prepares all
quarterly update appraisals; assists in developing policies and
procedures and assists in the evaluation of the performance and
competency of external appraisers.
The purpose of an appraisal is to estimate the market value of
real estate as of a specific date.
B8 - REAL PROPERTY
<PAGE>
Market value has been defined as the most probable price for which the
appraised real estate will sell in a competitive market under all
conditions requisite to fair sale, with the buyer and seller each acting
prudently, knowledgeably, and for self interest, and assuming that neither
is under undue duress.
The estimate of market value generally is a correlation of three
approaches, all of which require the exercise of subjective judgment. The
three approaches are: (1) current cost of reproducing the real estate less
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 space. In the reconciliation of these three approaches, the one
most heavily relied upon is the one then recognized as the most appropriate
by the independent appraiser for the type of real estate in the market.
Real estate partnerships are valued at the Partnership's equity in net
assets as reflected in the partnership's financial statements with
properties valued as described above.
The market value of real estate and real estate partnerships does not
reflect transaction costs which may be incurred at disposition.
As described above, the estimated market value of real estate and real
estate related assets is determined through an appraisal process. These
estimated market values may vary significantly from the prices at which the
real estate investments would sell since market prices of real estate
investments can only be determined by negotiation between a willing buyer
and seller. Although the estimated market values represent subjective
estimates, management believes these estimated market values are reasonable
approximations of market prices and the aggregate value of investments in
real estate is fairly presented as of December 31, 1999 and 1998.
C: INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS - Shares of real estate
investment trusts (REITs) are generally valued at their quoted market
price. These values may be adjusted for discounts resulting from
restrictions, if any, on the future sale of these shares, such as lockout
periods or limitations on the number of shares which may be sold in a given
time period. Any such discounts are determined by the Valuation Unit. On
March 30, 1999, the Partnership converted 506,894 shares of Meridian REIT
to 557,583 shares of ProLogis REIT, fair value of $10,942,566, and cash of
$1,013,796 (or total fair value of $11,956,362) as a result of ProLogis'
acquisition of Meridian. Management continued applying a 3% discount to the
market value of the ProLogis REIT shares through June 29, 1999 because of
the restriction which limits the number of shares that can be publicly
traded during any six month period to 30% of the total shares originally
acquired. The application of the 3% discount was discontinued on June 30,
1999 because this restriction no longer applied.
D: REVENUE RECOGNITION - Rent from real estate is recognized when billed.
Revenue from certain real estate investments is net of all or a portion of
related real estate expenses and taxes. Since real estate is stated at
estimated market value, net income is not reduced by depreciation and
amortization expense. Dividend income is accrued at the ex-dividend date.
E: EQUITY IN INCOME OF REAL ESTATE PARTNERSHIPS - Equity in income from real
estate partnership operations represents the Partnership's share of the
current year's partnership income as provided for under the terms of the
partnership agreements. As is the case with wholly-owned real estate,
partnership net income is not reduced by depreciation or amortization
expense. Frequency of distribution of income is determined by formal
agreements or by the executive committees of the partnerships.
F: MORTGAGE LOAN PAYABLE - Mortgage loan payable is stated at the principal
amount of the obligation outstanding.
B9-REAL PROPERTY
<PAGE>
G: CASH AND CASH EQUIVALENTS - For purposes of the Statement of Cash Flows,
all short-term investments with an original maturity of three months or
less are considered to be cash equivalents.
Cash of $72,861 and $114,745 at December 31, 1999 and 1998, respectively,
was maintained by the properties for tenant security deposits and is
included in Other Assets on the Statements of Assets and Liabilities.
H: MARKETABLE SECURITIES - Marketable securities are highly liquid investments
with maturities of more than three months when purchased and are carried at
estimated market value.
I: 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.
J: MANAGEMENT'S USE OF ESTIMATES IN THE FINANCIAL STATEMENTS - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
B10 - REAL PROPERTY
<PAGE>
NOTE 3: REAL ESTATE PARTNERSHIP
Real estate partnership is valued at the Partnership's equity in net assets as
reflected by the partnership's financial statements with properties valued as
indicated above. The partnership's financial position at December 31, 1999 and
1998, and results from operations for the years then ended are summarized as
follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
-----------------------
<S> <C> <C>
Partnership Assets and Liabilities
Real Estate as estimated market value $26,350,000 $ 0
Other Assets 1,685,059 0
------------ --------
Total Assets 28,035,059 0
------------ --------
Mortgage loans payable 20,889,782 0
Other Liabilities 1,250,146 0
------------ --------
Total Liabilities 22,139,928 0
------------ --------
Net Assets $ 5,895,131 $ 0
============ ========
Partnership's Share of Net Assets $ 4,506,257 $ 0
============ ========
<CAPTION>
December 31,
1999 1998
-----------------------
<S> <C> <C>
Partnership Operations
Rental Revenue $926,283 $33,462
Other Revenue 0 0
------------ --------
Total Revenue 926,283 33,462
------------ --------
Real Estate Expenses and Taxes 795,115 0
------------ --------
Net Investment Income $131,168 $33,462
============ ========
Partnership's Share of Net Investment Income $ 98,375 $33,462
============ ========
</TABLE>
Note 4: Debt
The mortgage loan has a variable interest rate which is adjusted annually. The
rate is equal to the 6-month Treasury rate plus 1.565%. It is subject to a
maximum of 11.345% and a minimum of 2.345%. The change from year to year may not
be more than 2%. At December 31, 1999, the rate was 6.845%.
As of December 31, 1999, the mortgage loan payable was payable as follows:
Year Ending
December 31, (000's)
------------ ---------
2000 $ 96
2001 105
2002 112
2003 120
2004 127
Thereafter 9,625
--------
Total $ 10,185
========
The mortgage payable is secured by a real estate investment with an estimated
market value of $17,450,000.
B11-REAL PROPERTY
<PAGE>
NOTE 5: LEASING ACTIVITY
The Partnership leases space to tenants under various operating lease
agreements. These agreements, without giving effect to renewal options, have
expiration dates ranging from 2000 to 2009. At December 31, 1999, the aggregate
future minimum base rental payments under non-cancelable operating leases by
year and in the aggregate are as follows (excluding apartment leases):
Year Ending
December 31, (000's)
------------ ---------
2000 $ 11,918
2001 10,543
2002 8,984
2003 5,718
2004 3,687
Thereafter 10,186
--------
Total $ 51,036
========
NOTE 6: COMMITMENT FROM PARTNER
In 1986, Prudential committed to fund up to $100 million to enable the
Partnership to acquire real estate investments. Contributions to the Partnership
under this commitment are utilized for property acquisitions, and returned to
Prudential on an ongoing basis from Contract owners' net contributions and other
available cash. The amount of the commitment is reduced by $10 million for every
$100 million in current value net assets of the Partnership. Thus, with $225
million in net assets, the commitment has been automatically reduced to $80
million. As of December 31, 1999, Prudential's equity interest in the
Partnership under this commitment was $45 million. Prudential does not intend to
make any contributions during the 2000 fiscal year and will begin to phase out
this commitment over the next several years.
NOTE 7: RELATED TRANSACTIONS
Pursuant to an investment management agreement, Prudential charges the
Partnership a daily investment management fee at an annual rate of 1.25% of the
average daily gross asset valuation of the Partnership. For the years ended
December 31, 1999, 1998 and 1997 management fees incurred by the Partnership
were $2.7 million; $2.9 million; and $2.6 million, respectively.
The Partnership also reimburses Prudential for certain administrative services
rendered by Prudential. The amounts incurred for the years ended December 31,
1999, 1998 and 1997 were $116,463; $116,128; and $115,346, respectively, and are
classified as administrative expenses in the Statements of Operations.
On February 1, 1999, Prudential and its partners withdrew $30 million from the
Partnership. On December 23, 1999, Prudential and its partners withdrew $6
million from the Partnership.
The Partnership owned a 50% interest in four warehouse/distribution buildings in
Jacksonville, Florida (the Unit warehouses). The remaining 50% interest was
owned by Prudential and one of its subsidiaries. In September 1997, the Unit
warehouses were sold as part of an industrial package for cash of $12.5 million.
The partnership's share of the proceeds was $6.3 million.
B12 - REAL PROPERTY
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Prudential
Variable Contract Real Property Partnership:
In our opinion, the accompanying consolidated statements of assets and
liabilities, including the schedule of investments, and the related consolidated
statements of operations, of changes in net assets and of cash flows present
fairly, in all material respects, the financial position of Prudential Variable
Contract Real Property Partnership (the "Partnership") at December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the management of The Prudential Insurance Company of
America; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 17, 2000
B13 - REAL PROPERTY
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<PAGE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant, in conjunction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee, or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a trustee, director, officer, employee or agent of such other
affiliated trust or corporation, against any liability asserted against and
incurred by him or her arising out of his or her position with such trust or
corporation.
New Jersey, being the state of organization of Pruco Life Insurance Company of
New Jersey ("Pruco Life of New Jersey"), permits entities organized under its
jurisdiction to indemnify directors and officers with certain limitations. The
relevant provisions of New Jersey law permitting indemnification can be found in
Section 14A:3-5 of the New Jersey Statutes Annotated. The text of Pruco Life of
New Jersey's By-law, Article V, which relates to indemnification of officers and
directors, is incorporated by reference to Exhibit 1.A.(6)(c) to its Form S-6,
Registration No. 333-85117, filed on August 13, 1999 on behalf of the Pruco Life
of New Jersey Variable Appreciable Account.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 15. NOT APPLICABLE
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
--------
<TABLE>
<S> <C>
(1A) Distribution Agreement between Pruco Incorporated by reference to Pre-Effective
Securities Corporation and Pruco Life Amendment No. 1 to Form S-6, Registration
Insurance Company of New Jersey with respect Statement No. 2-81243, filed February 17, 1983, on
to the Pruco Life of New Jersey Variable behalf of the Pruco Life of New Jersey Variable
Insurance Account. Insurance Account.
(1B) Distribution Agreement between Pruco Incorporated by reference to Form S-6,
Securities Corporation and Pruco Life Registration Statement No. 2-89780, filed March 5,
Insurance Company of New Jersey with respect 1984, on behalf of the Pruco Life of New Jersey
to the Pruco Life of New Jersey Variable Variable Appreciable Account.
Appreciable Account.
(1C) Distribution Agreement between Pruco Incorporated by reference to Post-Effective
Securities Corporation and Pruco Life Amendment No. 9 to Form S-1, Registration
Insurance Company of New Jersey with respect Statement No. 33-20018, filed April 9, 1997, on
to the Pruco Life of New Jersey Single behalf of the Pruco Life of New Jersey Variable
Premium Variable Life Account and Pruco Life Contract Real Property Account.
of New Jersey Single Premium Variable Annuity
Account.
(3A) Articles of Incorporation of Pruco Life Incorporated by reference to Post-Effective
Insurance Company of New Jersey, as amended Amendment No. 17 to Form S-6, Registration
March 11, 1983. Statement No. 2-89780, filed March 1, 1991, on
behalf of the Pruco Life of New Jersey Variable
Appreciable Account.
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
(3B) Certificate of Amendment of the Incorporated by reference to Post-Effective
Articles of Incorporation of Pruco Life Amendment No. 12 to Form S-1, Registration
Insurance Company of New Jersey, February 12, Statement No. 33-20018, filed April 16, 1999, on
1998 behalf of the Pruco Life of New Jersey Variable
Contract Real Property Account.
(3C) By-Laws of Pruco Life Insurance Company Incorporated by reference to Form S-6,
of New Jersey, as amended August 4, 1999. Registration No. 333-85117, filed on August 13,
1999 on behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(3D) Resolution of the Board of Directors Incorporated by reference to Post-Effective
establishing Pruco Life of New Jersey Amendment No. 9 to Form S-1, Registration
Variable Contract Real Property Account. Statement No. 33-20018, filed April 9, 1997, on
behalf of the Pruco Life of New Jersey Variable
Contract Real Property Account.
(4A) Variable Life Insurance Contract. Incorporated by reference to Form N-8B-2, File No.
2-81243, filed January 10, 1983, on behalf of the
Pruco Life of New Jersey Variable Insurance
Account.
(4B)(i) Revised Variable Appreciable Life Incorporated by reference to Post-Effective
Insurance Contract with fixed death benefit. Amendment No. 5 to Form S-6, Registration
Statement No.2-89780, filed July 11, 1986, on
behalf of the Pruco Life of New Jersey Variable
Appreciable Account.
(4B)(ii) Revised Variable Appreciable Life Incorporated by reference to Post-Effective
Insurance Contract with variable death Amendment No. 5 to Form S-6, Registration
benefit. Statement No. 2-89780, filed July 11, 1986, on
behalf of the Pruco Life of New Jersey Variable
Appreciable Account.
(4C) Single Premium Variable Annuity Incorporated by reference to Post-Effective
Contract. Amendment No. 9 to Form S-1, Registration
Statement No. 33-20018, filed April 9, 1997, on
behalf of the Pruco Life of New Jersey Variable
Contract Real Property Account.
(4D) Flexible Premium Variable Life Incorporated by reference to Post-Effective
Insurance Contract. Amendment No. 9 to Form S-1, Registration
Statement No. 33-20018, filed April 9, 1997, on
behalf of the Pruco Life of New Jersey Variable
Contract Real Property Account.
(5) Opinion and Consent of Clifford E. Filed herewith.
Kirsch, Esq., as to the legality of the
securities being registered.
(10A) Investment Management Agreement Incorporated by reference to Post-Effective
between The Prudential Insurance Company of Amendment No. 9 to Form S-1, Registration
America and The Prudential Variable Contract Statement No. 33-20018, filed April 9, 1997, on
Real Property Partnership. behalf of the Pruco Life of New Jersey Variable
Contract Real Property Account.
(10B) Service Agreement between The Prudential Incorporated by reference to Form S-1,
Insurance Company of America and The Registration Statement No. 33-8698, filed
Prudential Investment Corporation. September 12, 1986, on behalf of The Prudential
Real Property Account of Pruco Life Insurance
Company.
(10C) Partnership Agreement of The Incorporated by reference to Post-Effective
Prudential Variable Contract Real Property Amendment No. 9 to Form S-1, Registration
Partnership. Statement No. 33-20018, filed April 9, 1997, on
behalf of the Pruco Life of New Jersey Variable
Contract Real Property Account.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
(23A) Written consent of PricewaterhouseCoopers
LLP, independent accountants. Filed herewith.
(23B) Written consent of Clifford E. Kirsch, Filed herewith.
Esq.
(24) Powers of Attorney:
(A) W. Bethke, I. Kleinman, E. Milnes, I. Incorporated by reference to Form N-4,
Price Registration No. 333-18117, filed December 18,
1996 on behalf of the Pruco Life of New Jersey
Flexible Premium Variable Annuity Account.
Incorporated by reference to Post-Effective
(B) J. Avery Amendment No. 10 to Form S-1, Registration No.
33-20018, filed April, 9, 1998 on behalf of the
Pruco Life of New Jersey Variable Contract Real
Property Account.
Incorporated by reference to Post-Effective
(C) D. Sullivan Amendment No. 12 to Form S-1, Registration No.
33-20018, filed on April 19, 1999 on behalf of the
Pruco Life of New Jersey Variable Contract Real
Property Account.
(D) D. Odenath Filed herewith.
(27) Financial Data Schedule for The
Prudential Variable Contract Real Property
Partnership. Filed herewith.
(b) Financial Statement Schedules
Schedule III-Real Estate Owned by The
Prudential Variable Contract Real Property
Partnership and independent accountant's
report thereon. Filed herewith.
</TABLE>
ITEM 17. UNDERTAKINGS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that Section.
The undersigned Registrant hereby undertakes (a) to file any prospectuses
required by Section 10(a)(3) of the Securities Act of 1933 as Post-Effective
Amendments to this Registration Statement, (b) that for the purposes of
determining any liability under the 1933 Act, each such Post-Effective Amendment
may be deemed to be a new Registration Statement relating to the securities
offered therein and the offering of such securities at that time may be deemed
to be in the initial bona fide offering thereof, (c) to reflect in the
prospectus any facts or events after the effective date of the registration
statement (or the most recent Post-Effective Amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement, (d) to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement, (e) to remove from registration by means of a Post-
Effective Amendment any of the securities being registered which remain unsold
at such time as the offering of such securities may be terminated.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Pruco Life Insurance
Company of New Jersey has duly caused this Post-Effective Amendment No. 13 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Newark, State of New Jersey, on the
6th day of April, 2000.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
In Respect of
PRUCO LIFE OF NEW JERSEY
VARIABLE CONTRACT REAL PROPERTY ACCOUNT
By: /s/ Esther H. Milnes
--------------------------
Esther H. Milnes
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 13 to the Registration Statement has been signed below by the
following Directors and Officers of Pruco Life Insurance Company of New Jersey
in the capacities indicated on this 6th day of April, 2000.
SIGNATURE AND TITLE
-------------------
/s/ *
- --------------------------------------------
Esther H. Milnes
President and Director
/s/ *
- --------------------------------------------
Dennis G. Sullivan
Vice President and Chief Accounting Officer
/s/ *
- --------------------------------------------
James J. Avery, Jr.
Director
/s/ *
- --------------------------------------------
William M. Bethke * By: /s/ Thomas C. Castano
Director -------------------------
Thomas C. Castano
(Attorney-in-Fact)
/s/ *
- --------------------------------------------
Ira J. Kleinman
Director
/s/ *
- --------------------------------------------
David R. Odenath, Jr.
Director
/s/ *
- --------------------------------------------
I. Edward Price
Director
II-4
<PAGE>
EXHIBIT INDEX
(a)(5) Opinion and Consent of Clifford E. Kirsch, Esq. as to the legality of
the securities being registered.
(23A) Written consent of PricewaterhouseCoopers LLP, independent accountants.
(24D) Power of Attorney
(27) Financial Data Schedule for The Prudential Variable Contract Real
Property Partnership.
(b) Financial Statement Schedules
-----------------------------
Schedule III-Real Estate Owned by The Prudential Variable Contract Real
Property Partnership and independent accountant's report thereon.
II-5
<PAGE>
Exhibit 5
April 6, 2000
Pruco Life Insurance Company of New Jersey
213 Washington Street
Newark, New Jersey 07102-2992
Gentlemen:
In my capacity as Chief Counsel and Assistant Secretary of Pruco Life Insurance
Company of New Jersey ("Pruco Life of New Jersey"), I have reviewed the
establishment of Pruco Life of New Jersey Variable Contract Real Property
Account (the "Account") on October 30, 1987 by the Executive Committee of the
Board of Directors of Pruco Life of New Jersey as a separate account for assets
applicable to certain variable life insurance contracts and variable annuity
contracts, pursuant to the provisions of Section 17B:28-7 of the Revised
Statutes of New Jersey. I was responsible for the oversight of the preparation
and review of the Registration Statement on Form S-1, as amended, filed by Pruco
Life of New Jersey with the Securities and Exchange Commission (Registration No.
33-20018) under the Securities Act of 1933 for the registration of the Account.
I am of the following opinion:
(1) Pruco Life of New Jersey was duly organized under the laws of New
Jersey and is a validly existing corporation.
(2) The Account has been duly created and is validly existing as a
separate account pursuant to the aforesaid provisions of New Jersey
law.
(3) The portion of the assets held in the Account equal to the reserves
and other liabilities for variable benefits under the variable life
insurance contracts and variable annuity contracts is not chargeable
with liabilities arising out of any other business Pruco Life of New
Jersey may conduct.
(4) The variable life insurance contracts and variable annuity contracts
are legal and binding obligations of Pruco Life of New Jersey in
accordance with their terms.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as I judged to be necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/
- ----------------------
Clifford E. Kirsch
<PAGE>
Exhibit 23A
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this Post-
Effective Amendment No. 13 to the registration statement on Form S-1 (the
"Registration Statement") of our reports dated March 17, 2000 and February 17,
2000, relating to the financial statements of the Pruco Life of New Jersey
Variable Contract Real Property Account and The Prudential Variable Contract
Real Property Partnership, respectively, which appear in such Prospectus. We
also consent to the use of our report, dated February 17, 2000, to the Financial
Statement Schedules of The Prudential Variable Contract Real Property
Partnership for the three years ended December 31, 1999 listed under item 16(b)
of this Registration Statement when such schedules are read in conjunction with
the financial statements referred to in our report.
We also consent to the reference to us under the heading "Experts" in the
Prospectus.
PricewaterhouseCoopers LLP
New York, New York
April 6, 2000
<PAGE>
Exhibit 24D
POWER OF ATTORNEY
-----------------
Know all men by these presents:
That I, David R. Odenath, Jr., of Newark, New Jersey, Director of Pruco
Life Insurance Company of New Jersey, do hereby make, constitute and appoint as
my true and lawful attorneys in fact CLIFFORD E. KIRSCH, THOMAS C. CASTANO,
RICHARD E. MEADE, and ARTHUR WOODS, or any of them severally for me in my name,
place and stead to sign, where applicable: Annual Reports on Form 10-K,
registration statements on the appropriate forms prescribed by the Securities
and Exchange Commission, and any other periodic documents and reports required
under the Investment Company Act of 1940, the Securities Act of 1933, and the
Securities Exchange Act of 1934, and all amendments thereto executed on behalf
of Pruco Life Insurance Company and filed with the Securities and Exchange
Commission for the following:
The Pruco Life of New Jersey PRUvider Variable Appreciable Account and
variable life insurance contracts, to the extent they represent
participating interests in said Account;
The Pruco Life of New Jersey Variable Appreciable Account and flexible
premium variable life insurance contracts, to the extent they represent
participating interests in said Account;
The Pruco Life of New Jersey Variable Insurance Account and scheduled
premium variable life insurance contracts, to the extent they represent
participating interests in said Account;
The Pruco Life of New Jersey Single Premium Variable Life Account and
flexible premium variable life insurance contracts, to the extent they
represent participating interests in said Account;
The Pruco Life of New Jersey Single Premium Variable Annuity Account and
single payment variable annuity contracts, to the extent they represent
participating interests in said Account;
The Pruco Life of New Jersey Variable Contract Real Property Account and
individual variable life insurance contracts and variable annuity
contracts, to the extent they represent participating interests in said
Account;
The Pruco Life of New Jersey Modified Guaranteed Annuity Account and
modified guaranteed annuity contracts, to the extent they represent
participating interests in said Account; and
<PAGE>
The Pruco Life of New Jersey Flexible Premium Variable Annuity Account and
flexible premium variable annuity contracts, to the extent they represent
participating interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hand this 4th day of April, 2000.
/s/ David R. Odenath
---------------------
Signature
State of New Jersey )
) SS
County of Essex )
On this 4th day of April, 2000, before me personally appeared David R.
Odenath, Jr known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires:
July 26, 2004
/s/ Ann L. Wellbrock
---------------------
Notary Public
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS
OF ASSETS & LIABILITIES: STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 13,972,669
<SECURITIES> 2,797,008
<RECEIVABLES> 0
<ALLOWANCES> 179,000
<INVENTORY> 0
<CURRENT-ASSETS> 225,142,653
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 225,142,653
<CURRENT-LIABILITIES> 14,919,713
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 210,222,940
<TOTAL-LIABILITY-AND-EQUITY> 225,142,653
<SALES> 0
<TOTAL-REVENUES> 24,835,049
<CGS> 0
<TOTAL-COSTS> 11,555,460
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,062,543
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,062,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,062,543
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE III - REAL ESTATE OWNED: PROPERTIES
DECEMBER 31, 1999
----------------------------------------------------------------------------------------------
GROSS AMOUNT AT
WHICH CARRIED
INITIAL COSTS TO THE PARTNERSHIP COSTS AT CLOSE OF YEAR
------------------------------------------ --------------------------------------------------
CAPITALIZED
BUILDING & SUBSEQUENT TO BUILDING & 1999
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS SALES TOTAL (A)(B)(C)
- ---------------------- ------------ ------------ ------------ ------------- ---------- ------------ ----- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Properties:
Office Building
Lisle, IL None 1,780,000 15,743,881 4,551,901 1,780,000 20,295,782 22,075,782
Garden Apartments
Atlanta, GA None 3,631,212 11,168,904 846,730 (b) 3,631,212 12,015,634 15,646,846
Retail Shopping Center
Roswell, GA None 9,454,622 21,513,677 1,426,554 9,500,725 22,894,128 32,394,853
Office Building
Morristown, NJ None 2,868,660 12,958,451 4,289,583 2,868,660 17,248,034 20,116,694
Office/Warehouse
Bolingbrook, IL None 1,373,199 7,302,518 272,311 1,373,199 7,574,829 8,948,028
Garden Apartments
Raleigh, NC None 1,623,146 14,135,553 75,229 1,623,146 14,210,782 15,833,928
Office Building
Nashville, TN None 1,797,000 6,588,451 124,457 1,797,377 6,712,531 8,509,908
Office Park
Oakbrook Terrace, IL None 1,313,310 11,316,883 315,173 1,313,821 11,631,545 12,945,366
Office Building
Beaverton, OR None 816,415 9,897,307 55,089 844,751 9,924,060 10,768,811
Industrial Building
Salt Lake City, UT None 582,457 4,805,676 252,576 594,780 5,045,929 5,640,709
Industrial Building
Aurora, CO None 1,338,175 7,202,411 1,578,486 1,415,159 8,703,913 10,119,072
Office Complex
Brentwood, TN None 2,425,000 7,063,755 118,073 2,453,117 7,153,711 9,606,828
------------ ----------- ---------- ---------- ----------- ----- ------------
29,003,196 129,697,467 13,906,162 29,195,947 143,410,878 0 172,606,825
============ =========== ========== ========== =========== ===== ============
1999 1998 1997
----------- ----------- ----------
(a) Balance at beginning of year 170,045,055 201,670,248 177,082,291
Additions:
Acquisitions 0 0 23,417,474
Improvements, etc. 2,561,770 5,827,888 1,170,483
Deletions:
Sale 0 (37,453,081) 0
----------- ----------- -----------
Balance at end of year 172,606,825 170,045,055 201,670,248
=========== =========== ===========
(b) Net of $1,000,000 settlement
received from lawsuit.
<CAPTION>
--------------------------
YEAR OF DATE
DESCRIPTION CONSTRUCTION ACQUIRED
- ---------------------- ------------ ----------
<S> <C> <C>
Properties:
Office Building
Lisle, IL 1985 Apr., 1988
Garden Apartments
Atlanta, GA 1987 Apr., 1988
Retail Shopping Center
Roswell, GA 1988 Jan., 1989
Office Building
Morristown, NJ 1981 Aug., 1988
Office/Warehouse
Bolingbrook, IL 1989 Feb., 1990
Garden Apartments
Raleigh, NC 1995 Jun., 1995
Office Building
Nashville, TN 1982 Oct., 1995
Office Park
Oakbrook Terrace, IL 1988 Dec., 1995
Office Building
Beaverton, OR 1995 Dec., 1996
Industrial Building
Salt Lake City, UT 1997 Jul., 1997
Industrial Building
Aurora, CO 1997 Sep., 1997
Office Complex
Brentwood, TN 1987 Oct., 1997
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE III - REAL ESTATE OWNED: INTEREST IN PROPERTIES
DECEMBER 31, 1999
--------------------------------------------------------------------------------------------
GROSS AMOUNT AT
INITIAL COSTS TO WHICH CARRIED
THE PARTNERSHIP COSTS AT CLOSE OF YEAR
----------------------- ----------------------------------------------------
CAPITALIZED
ENCUMBRANCES BUILDING & SUBSEQUENT TO BUILDING & 1999
DESCRIPTION AT 12/31/99 LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS SALES TOTAL (A)(B)(C)
- ----------------------- ------------ --------- ------------ ------------- ---------- ------------ -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest in Properties:
Garden Apartments
Jacksonville, FL 10,184,662 2,750,000 14,650,743 0 2,750,000 14,650,743 17,400,743
Retail Shopping Center
Kansas City MO and KS* 15,968,149 5,710,916 15,211,504 232,855 5,710,916 15,444,359 21,155,275
----------- --------- ----------- ------------ ---------- ----------- ------- -------------
26,152,811 8,460,916 29,862,247 232,855 8,460,916 30,095,102 0 38,556,018
=========== ========= =========== ============ ========== =========== ======= =============
<CAPTION>
--------------------------------
YEAR OF DATE
DESCRIPTION CONSTRUCTION ACQUIRED
- ----------------------- -------------- --------------
<S> <C> <C>
Interest in Properties:
Garden Apartments
Jacksonville, FL 1973 Sept., 1999
Retail Shopping Center
Kansas City MO and KS* Various Ranging Sept., 1999
From 1972-1992
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
----------- ------------ ----------
<S> <C> <C> <C>
(a) Balance at beginning
of year 0 0 6,133,157
Additions:
Acquisitions 38,556,018 0 0
Improvements, etc. 0 0 0
Deletions:
Sale 0 0 (6,133,157)
Encumbrances on Joint
Ventures
accounted for by
the equity (15,968,149) 0 0
----------- ------------ ----------
Balance at end of year 22,587,869 0 0
=========== ============ ==========
</TABLE>
* Partnership interest accounted for by the equity method.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Partners of Prudential
Variable Contract Real Property Partnership:
Our audits of the consolidated financial statements referred to in our
report dated February 17, 2000 also included an audit of the accompanying
financial statement schedules. In our opinion, these financial statement
schedules present fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated
financial statements.
PricewaterhouseCoopers LLP
New York, New York
February 17, 2000
