PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT - FORM 10-Q

PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT - FORM 10-Q - August 12, 2011

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file	filename
EX-32.2 - SECTION 906 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER. - PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT	dex322.htm
EX-32.1 - SECTION 906 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER. - PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT	dex321.htm
EX-31.1 - SECTION 302 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER. - PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT	dex311.htm
EX-31.2 - SECTION 302 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER. - PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT	dex312.htm
EXCEL - IDEA: XBRL DOCUMENT - PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2011

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

Commission file number 033-08698

PRUCO LIFE INSURANCE COMPANY

in respect of

PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT

(Exact name of registrant as specified in its charter)

Arizona

22-1944557

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

213 Washington Street, Newark, New Jersey 07102-2992

(Address of principal executive offices) (Zip Code)

(973) 802-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer, accelerated filer, and smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT

(Registrant)

INDEX


		Page
Forward Looking Statement Disclosure			3

Part I - Financial Information
Item 1.	Financial Statements (Unaudited)
A. PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT
	Statements of Net Assets – June 30, 2011 and December 31, 2010		4
	Statements of Operations Three and Six Months Ended June 30, 2011 and 2010		4
	Statements of Changes in Net Assets – Three and Six Months Ended June 30, 2011 and 2010		4
	Notes to the Financial Statements of the Real Property Account		5
B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
	Consolidated Statements of Assets and Liabilities – June 30, 2011 and December 31, 2010		13
	Consolidated Statements of Operations – Three and Six Months Ended June 30, 2011 and 2010		14
	Consolidated Statements of Changes in Net Assets– Six Months Ended June 30, 2011 and 2010		15
	Consolidated Statements of Cash Flows – Six Months Ended June 30, 2011 and 2010		16
	Consolidated Schedules of Investments – June 30, 2011 and December 31, 2010		17
	Notes to Consolidated Financial Statements of the Partnership		19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35
Item 4.	Controls and Procedures		35

Part II - Other Information
Item 1A.	Risk Factors		36
Item 6.	Exhibits		36
Signatures			37

Forward-Looking Statement Disclosure

Certain of the statements included in this Quarterly Report on Form 10-Q, including but not limited to those in Management’s Discussion and Analysis of Financial Condition and Results of Operations, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “includes,” “plans,” “assumes,” “estimates,” “projects,” “intends,” “should,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Pruco Life Insurance Company, or the “Company”, or the Pruco Life Variable Contract Real Property Account, or the “Real Property Account”. There can be no assurance that future developments affecting the Company and the Real Property Account will be those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (1) general economic, market and political conditions, including the performance and fluctuations of fixed income, equity, real estate and other financial markets; (2) interest rate fluctuations or prolonged periods of low interest rates; (3) reestimates of our reserves for future policy benefits and claims; (4) differences between actual experience regarding mortality, morbidity, persistency, surrender experience, interest rates, or market returns and the assumptions we use in pricing our products, establishing liabilities and reserves or for other purposes; (5) changes in our assumptions related to deferred policy acquisition costs; (6) changes in our financial strength or credit ratings; (7) investment losses and defaults; (8) competition in our product lines and for personnel; (9) changes in tax law; (10) regulatory or legislative changes, including the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act; (11) adverse determinations in litigation or regulatory matters and our exposure to contingent liabilities; (12) domestic or international military actions, natural or man-made disasters including terrorist activities or pandemic disease, or other events resulting in catastrophic loss of life; (13) ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; (14) changes in statutory or “U.S. GAAP” accounting principles, practices or policies. The Company and the Real Property Account do not intend, and are under no obligation, to update any particular forward-looking statement included in this document. See “Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2010 for discussion of certain risks relating to the operation of the Partnership and investment in our securities.

FINANCIAL STATEMENTS OF

PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT

STATEMENTS OF NET ASSETS

June 30, 2011 and December 31, 2010

		December 31, 2010		December 31, 2010	December 31, 2010	December 31, 2010
	June 30, 2011 (unaudited)		December 31, 2010
ASSETS
Investment in The Prudential Variable Contract Real Property Partnership, at fair value	$	93,644,546	$	90,195,199

Net Assets	$	93,644,546	$	90,195,199


NET ASSETS, representing:
Equity of contract owners	$	66,277,932	$	63,083,109
Equity of Pruco Life Insurance Company		27,366,614		27,112,090

	$	93,644,546	$	90,195,199


Units outstanding		35,936,202		36,961,820


Portfolio shares held		3,081,657		3,178,326
Portfolio net asset value per share	$	30.39	$	28.38

STATEMENTS OF OPERATIONS

For the three and six month periods ended June 30, 2011 and 2010


	1/1/2011-6/30/2011 (unaudited)		1/1/2010-6/30/2010 (unaudited)		4/1/2011-6/30/2011 (unaudited)		4/1/2010-6/30/2010 (unaudited)
INVESTMENT INCOME
Net investment income from Partnership operations	$	2,279,030	$	2,169,205	$	1,120,420	$	1,160,171


EXPENSES
Charges to contract owners for assuming mortality risk and expense risk and for administration		193,157		177,919		98,620		89,053

NET INVESTMENT INCOME		2,085,873		1,991,286		1,021,800		1,071,118


NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net change in unrealized gain (loss) on investments in Partnership		4,090,634		203,629		1,091,847		1,791,429

NET GAIN (LOSS) ON INVESTMENTS		4,090,634		203,629		1,091,847		1,791,429


NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	6,176,507	$	2,194,915	$	2,113,647	$	2,862,547

STATEMENTS OF CHANGES IN NET ASSETS

For the three and six month periods ended June 30, 2011 and 2010


	1/1/2011-6/30/2011 (unaudited)			1/1/2010-6/30/2010 (unaudited)			4/1/2011-6/30/2011 (unaudited)			4/1/2010-6/30/2010 (unaudited)
OPERATIONS
Net investment income	$	2,085,873		$	1,991,286		$	1,021,800		$	1,071,118
Net change in unrealized gain (loss) on investments in Partnership		4,090,634			203,629			1,091,847			1,791,429


NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		6,176,507			2,194,915			2,113,647			2,862,547


CAPITAL TRANSACTIONS
Net (withdrawals) by contract owners		(1,039,282	)		(995,112	)		(520,333	)		(461,277	)
Net contributions (withdrawals) by Pruco Life Insurance Company		(1,687,878	)		(3,158,457	)		(2,301,364	)		(3,781,158	)


NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS		(2,727,160	)		(4,153,569	)		(2,821,697	)		(4,242,435	)


TOTAL INCREASE (DECREASE) IN NET ASSETS		3,449,347			(1,958,654	)		(708,050	)		(1,379,888	)

NET ASSETS
Beginning of period		90,195,199			91,924,435			94,352,596			91,345,669

End of period	$	93,644,546		$	89,965,781			93,644,546			89,965,781

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

NOTES TO THE FINANCIAL STATEMENTS OF

PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT

June 30, 2011

(Unaudited)

Note 1: General

Pruco Life Variable Contract Real Property Account (the “Account”) was established on August 27, 1986 and commenced business September 5, 1986. Pursuant to Arizona law, the Account was established as a separate investment account of Pruco Life Insurance Company (“Pruco Life” or the “Company”), a wholly-owned subsidiary of The Prudential Insurance Company of America (“Prudential”), an indirect wholly-owned subsidiary of Prudential Financial, Inc. (“PFI”) and is registered under the Securities Act of 1933, as amended. The assets of the Account are segregated from Pruco Life’s other assets. The Account is used to fund benefits under certain variable life insurance and variable annuity contracts issued by Pruco Life. These products are Appreciable Life (“VAL”), Variable Life (“VLI”), Discovery Plus (“SPVA”), and Discovery Life Plus (“SPVL”).

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

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

Note 2: Summary of Significant Accounting Policies and Pronouncements

A.	Basis of Accounting

The Unaudited Interim Financial Statements and the condensed balance sheets as of December 31, 2010, which has been derived from Audited Financial Statements, have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”).

In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Account’s Audited Financial Statements included in the Account’s Annual Report on Form 10-K for the year ended December 31, 2010.

The Account has transactions and relationships with Prudential and other affiliates. Due to these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among unrelated parties.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of 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.

The most significant estimates include valuation of Investments in the Prudential Variable Contract Real Property Partnership.

Adoption of Accounting Pronouncements

In January 2010, the FASB issued updated guidance that requires new fair value disclosures about significant transfers between Level 1 and 2 measurement categories and separate presentation of purchases, issuances, and settlements within the roll forward of Level 3 activity. Also, this updated fair value guidance clarifies the disclosure requirements about level of disaggregation and valuation techniques and inputs. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of Level 3 activity, which is effective for interim and annual reporting periods beginning after December 15, 2010. The Account adopted the guidance effective for interim and annual reporting periods beginning after December 15, 2009 on January 1, 2010. The required disclosures are provided in Note 9.

Future Adoption of New Accounting Pronouncements

In May 2011, the FASB issued updated guidance regarding the fair value measurements and disclosure requirements. The updated guidance clarifies existing guidance related to the application of fair value measurement methods and requires expanded disclosures. This new guidance is effective for the first interim or annual reporting period beginning after December 15, 2011 and should be applied prospectively. The Account expects this guidance to have a significant impact on its financial statement disclosures but limited, if any, impact on the Account’s financial position or results of operations.

NOTES TO THE FINANCIAL STATEMENTS OF

PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT

June 30, 2011

(Unaudited)

B.	Investment in Partnership Interest

The investment in the Partnership is based on the Account’s proportionate interest of the Partnership’s fair value. At June 30, 2011 and December 31, 2010 the Account’s interest in the General Partners Controlling Interest was 54.6% or 3,081,657 shares and 54.7% or 3,178,326 shares, respectively. Properties owned by the Partnership are, illiquid and their value is based on estimated fair value as discussed in the notes to the Partnership’s audited financial statements.

C.	Income Recognition

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

D.	Equity of Pruco Life Insurance Company

Pruco Life maintains a position in the Account for property liquidity purposes, including unit purchases and redemptions, Partnership share transactions, and expense processing. The position does not have an effect on the contract owners’ accounts or the related unit values.

Note 3: Charges and Expenses

A.	Mortality Risk and Expense Risk Charges

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

B.	Administrative Charges

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

C.	Cost of Insurance and Other Related Charges

Contract owner contributions are subject to certain deductions prior to being invested in the Account. The deductions for VAL and VLI are (1) state premium taxes; (2) sales charges, not to exceed 5% for VAL and 9% for VLI, which are deducted in order to compensate Pruco Life for the cost of selling the contract and (3) transaction costs, applicable to VAL, which are deducted from each premium payment to cover premium collection and processing costs. Contracts are subject to charges on each basic premium for assuming a guaranteed minimum death benefit risk. This charge compensates Pruco Life for the risk that an insured may die at a time when the death benefit exceeds the benefit that would have been payable in the absence of a minimum guarantee. These charges are assessed through the redemption of units.

D.	Deferred Sales Charge

A deferred sales charge is imposed upon the surrender of certain variable life insurance contracts to compensate Pruco Life for sales and other marketing expenses. The amount of any sales charge will depend on the number of years that have elapsed since the contract was issued but will not exceed 45% of one scheduled annual premium for VAL contracts and 9% of the initial premium payment for SPVL. No sales charge will be imposed after the sixth and tenth year of the contract for SPVL and VAL, respectively. No sales charge will be imposed on death benefits. This deferred sales charge is assessed through the redemption of units. For SPVA, there is a deferred sales charge that applies at the time of a full or partial withdrawal, and the amount of the charge (which declines over time) depends on the number of years that have elapsed since the contract was issued.

NOTES TO THE FINANCIAL STATEMENTS OF

PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT

June 30, 2011

(Unaudited)

E.	Partial Withdrawal Charge

A charge is imposed by Pruco Life 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. This charge is assessed through the redemption of units.

Note 4: Taxes

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

Note 5: Net Withdrawals by Contract Owners

Net contract owner withdrawals for the real estate investment option in Pruco Life’s variable insurance and variable annuity products for the three and six months ended June 30, 2011, and 2010 were as follows:


	Three Months Ended June 30, (Unaudited)
	2011			2010

VAL	$	(494,073	)	$	(432,022	)
VLI		(37,614	)		(24,338	)
SPVA		(16,227	)		(5,564	)
SPVL		27,581			647

TOTAL	$	(520,333	)	$	(461,277	)


	Six Months Ended June 30, (Unaudited)
	2011			2010

VAL	$	(1,041,390	)	$	(812,045	)
VLI		(56,947	)		(34,321	)
SPVA		(20,418	)		(5,799	)
SPVL		79,473			(142,947	)

TOTAL	$	(1,039,282	)	$	(995,112	)

NOTES TO THE FINANCIAL STATEMENTS OF

PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT

June 30, 2011

(Unaudited)

Note 6: Partnership Distributions

For the six months ended June 30, 2011, the Partnership made a distribution of $5 million. The Pruco Life Account’s share of this distribution was $2.9 million. During the year ended December 31, 2010, the Partnership made distributions of $10 million on October 27^th and $7.5 million on May 3^rd. The Account’s share of these distributions was $5.8 and $4.3 million respectively.

Note 7: Unit Information

Outstanding units and unit values at June 30, 2011, and December 31, 2010 were as follows:


	June 30, 2011		December 31, 2010
	(Unaudited)

Units Outstanding:		35,936,202		36,961,820
Unit Value:		2.23637 to 2.78852		2.10140 to 2.60866

Note 8: Financial Highlights

The range of total return for the three and six months periods ended June 30, 2011 and 2010, were as follows:


	Three Months Ended June 30, (Unaudited)
	2011			2010
Total Return		2.05% to 2.27	%		3.00% to 3.23	%

	Six Months Ended June 30, (Unaudited)
	2011			2010
Total Return		6.42% to 6.89	%		2.04% to 2.50	%

NOTES TO THE FINANCIAL STATEMENTS OF

PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT

June 30, 2011

(Unaudited)

Note 9: Fair Value Disclosure

FASB guidance on fair value measurements and disclosures establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. These generally provide the most reliable evidence and should be used to measure fair value whenever available.

Level 2 – Fair value is based on inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data.

Level 3 – Fair value is based on significant unobservable inputs for the asset or liability. These inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The investment in the Partnership is based on the Account’s proportionate interest of the Partnership’s fair value which approximates the Partnership’s net asset value. Properties owned by the Partnership are illiquid and fair value is based on estimates from property appraisal reports prepared by independent real estate appraisers as discussed in the notes to the Partnership’s unaudited financial statements.

The purpose of an appraisal is to estimate the fair value of real estate as of a specific date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The estimate of fair value is based on the conventional approaches to value, 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 a series of income streams and reversion at a specific yield or by directly capitalizing a single year income estimate by an appropriate factor; and (3) value indicated by recent sales of comparable real estate in the market. 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.

NOTES TO THE FINANCIAL STATEMENTS OF

PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT

June 30, 2011

(Unaudited)

In general, the input values used in the appraisal process are unobservable, therefore unless indicated otherwise; the underlying investments in the Partnership are classified as Level 3 under the fair value hierarchy. The inputs methodology used for valuing assets are not an indication of the risk associated with investing in those securities.

Table 1 below summarizes the assets measured at fair value on a recurring basis and their respective position in the fair value hierarchy.

Table 1:


	($ in 000’s) Fair Value Measurements at June 30, 2011
Assets:	Amounts Measured at Fair Value 06/30/2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Investment in The Prudential Variable Contract Real Property Partnership	$	93,645	$	—	$	—	$	93,645


	($ in 000’s) Fair Value Measurements at December 31, 2010
Assets:	Amounts Measured at Fair Value 12/31/2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Investment in The Prudential Variable Contract Real Property Partnership	$	90,195	$	—	$	—	$	90,195

Table 2 below provides a reconciliation of the beginning and ending balances for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2011 and June 30, 2010.

Table 2:


	($ in 000’s)
	Fair Value Measurements Using Significant Unobservable Inputs for the six months ending June 30, 2011
	(Level 3)

Beginning balance @ 01/01/11	$	90,195

Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership operations	$	4,091
Net Investment Income from Partnership operations	$	2,279
Acquisition/Additions		—
Equity Income		—
Contributions		—
Disposition/Settlements	$	—
Equity losses		—
Distributions	$	(2,920	)

Ending balance @ 06/30/2011	$	93,645


The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	4,091


	($ in 000’s)
	Fair Value Measurements Using Significant Unobservable Inputs for the six months ending June 30, 2010
	(Level 3)

Beginning balance @ 01/01/10	$	91,924

Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership operations	$	204
Net Investment Income from Partnership operations	$	2,169
Acquisition/Additions		—
Equity Income		—
Contributions		—
Disposition/Settlements	$	(4,331	)
Equity losses		—
Distributions		—

Ending balance @ 06/30/10	$	89,966


The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	204


	($ in 000’s)
	Fair Value Measurements Using Significant Unobservable Inputs for the three months ending June 30, 2011
	(Level 3)

Beginning balance @ 04/01/11	$	94,353

Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership operations	$	1,092
Net Investment Income from Partnership operations	$	1,120
Acquisition/Additions		—
Equity Income		—
Contributions	$	—
Disposition/Settlements
Equity losses		—
Distributions	$	(2,920	)

Ending balance @ 06/30/11	$	93,645


The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	1,092


	($ in 000’s)
	Fair Value Measurements Using Significant Unobservable Inputs for the three months ending June 30, 2010
	(Level 3)

Beginning balance @ 04/01/10	$	91,346

Total gains or losses (realized/unrealized) included in earnings (or changes in net assets) from Partnership operations	$	1,791
Net Investment Income from Partnership operations	$	1,160
Acquisition/Additions		—
Equity Income		—
Contributions		—
Disposition/Settlements	$	(4,331	)
Equity losses		—
Distributions		—

Ending balance @ 06/30/10	$	89,966


The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	1,791

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES


	June 30, 2011 (Unaudited)		December 31, 2010
ASSETS

REAL ESTATE INVESTMENTS - At estimated fair value:
Real estate and improvements (cost: 06/30/2011 - $194,977,799; 12/31/2010-$194,140,941)	$	166,549,418	$	158,900,000
Preferred equity investment (cost: 06/30/2011 - $8,551,028; 12/31/2010 - $14,166,536)		8,130,220		12,591,448


Total real estate investments	$	174,679,638		171,491,448

CASH AND CASH EQUIVALENTS		35,479,671		28,881,784

OTHER ASSETS, NET		2,655,229		2,416,157


Total assets	$	212,814,538	$	202,789,389


LIABILITIES & PARTNERS’ EQUITY

INVESTMENT LEVEL DEBT (net of unamortized discount: 6/30/11 $7,625; 12/31/10 $10,237)	$	33,886,483	$	30,565,616

ACCOUNTS PAYABLE AND ACCRUED EXPENSES		2,482,677		2,870,545

DUE TO AFFILIATES		608,508		597,136

OTHER LIABILITIES		921,075		1,028,318


Total liabilities		37,898,743		35,061,615


COMMITMENTS AND CONTINGENCIES

NET ASSETS, REPRESENTING PARTNERS’ EQUITY:

GENERAL PARTNERS’ CONTROLLING INTEREST		171,684,395		165,027,953

NONCONTROLLING INTEREST		3,231,400		2,699,821


		174,915,795		167,727,774


Total liabilities and partners’ equity	$	212,814,538	$	202,789,389


NUMBER OF SHARES OUTSTANDING AT END OF PERIOD		5,649,795		5,815,305


SHARE VALUE AT END OF PERIOD	$	30.39	$	28.38

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

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2011		2010		2011			2010
INVESTMENT INCOME:
Revenue from real estate and improvements	$	11,214,683	$	11,975,084	$	5,838,239		$	6,157,118
Interest on preferred equity investment		740,338		500,985		289,036			251,876
Interest income		17,757		12,103		8,626			6,250


Total investment income		11,972,778		12,488,172		6,135,901			6,415,244


INVESTMENT EXPENSES:
Operating		2,964,108		3,087,757		1,422,764			1,527,985
Investment management fee		1,169,290		1,145,971		595,187			570,294
Real estate taxes		955,392		1,298,122		573,898			647,419
Administrative		1,937,538		2,347,207		1,063,354			1,182,337
Interest expense		581,765		504,050		335,122			250,375


Total investment expenses		7,608,093		8,383,107		3,990,325			4,178,410


NET INVESTMENT INCOME		4,364,685		4,105,065		2,145,576			2,236,834


UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Change in unrealized gain (loss) on real estate investments held		7,966,838		655,813		1,752,919			3,399,611


INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	12,331,523	$	4,760,878	$	3,898,495		$	5,636,445


Amounts attributable to noncontrolling interest:
Net investment income (loss) attributable to noncontrolling interest		192,388		156,831		93,161			123,964
Net unrealized gain (loss) attributable to noncontrolling interest		482,693		280,530		(244,419	)		136,227

Net increase (decrease) in net assets resulting from operations attributable to the noncontrolling interest	$	675,081	$	437,361	$	(151,258	)	$	260,191


Amounts attributable to general partners’ controlling interest:
Net investment income attributable to general partners’ controlling interest		4,172,297		3,948,234		2,052,415			2,112,870
Net unrealized gain (loss) attributable to general partners’ controlling interest		7,484,145		375,283		1,997,338			3,263,384

Net increase (decrease) in net assets resulting from operations attributable to general partners’ controlling interest	$	11,656,442	$	4,323,517	$	4,049,753		$	5,376,254

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

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)


	For the Six Months Ended June 30,
	2011									2010
	General Partners’ Controlling Interest			Noncontrolling Interest			Total			General Partners’ Controlling Interest			Noncontrolling Interest			Total
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income (loss)	$	4,172,297		$	192,388		$	4,364,685		$	3,948,234		$	156,831		$	4,105,065
Net realized and unrealized gain (loss) from real estate investments		7,484,145			482,693			7,966,838			375,283			280,530			655,813


Increase (decrease) in net assets resulting from operations		11,656,442			675,081			12,331,523			4,323,517			437,361			4,760,878


INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS:
Distributions		(5,000,000	)		—			(5,000,000	)		(7,500,000	)		—			(7,500,000	)
Distributions to noncontrolling interest		—			(143,502	)		(143,502	)		—			(146,865	)		(146,865	)


Increase (decrease) in net assets resulting from capital transactions		(5,000,000	)		(143,502	)		(5,143,502	)		(7,500,000	)		(146,865	)		(7,646,865	)


INCREASE (DECREASE) IN NET ASSETS		6,656,442			531,579			7,188,021			(3,176,483	)		290,496			(2,885,987	)

NET ASSETS - Beginning of period		165,027,953			2,699,821			167,727,774			167,204,272			2,097,909			169,302,181


NET ASSETS - End of period	$	171,684,395		$	3,231,400		$	174,915,795		$	164,027,789		$	2,388,405		$	166,416,194

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

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Six Months Ended June, 30
	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets from operations	$	12,331,523		$	4,760,878
Adjustments to reconcile net increase (decrease) in net assets to net cash provided by (used in) operating activities
Net realized and unrealized loss (gain)		(7,966,838	)		(655,813	)
Amortization of discount on investment level debt		2,612			(2,463	)
Amortization of deferred financing costs		15,021			26,378
(Increase) decrease in accrued interest included in preferred equity investment		(253,153	)		38,750
Bad debt expense		27,939			23,728
(Increase) decrease in:
Other assets		(282,032	)		(624,313	)
Increase (decrease) in:
Accounts payable and accrued expenses		(792,766	)		435,314
Due to affiliates		11,372			(19,402	)
Other liabilities		(107,243	)		(139,573	)


Net cash flows provided by (used in) operating activities		2,986,435			3,843,484


CASH FLOWS PROVIDED FOR INVESTING ACTIVITIES:
Additions to real estate and improvements		(431,962	)		(1,349,819	)
Return of investment in preferred equity investment		5,868,661			—


Net cash flows provided by (used in) investing activities		5,436,699			(1,349,819	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions		(5,000,000	)		(7,500,000	)
Proceeds from investment level debt		19,000,000			429,328
Principal payments on investment level debt		(15,681,745	)		(321,216	)
Distributions to noncontrolling interest		(143,502	)		(146,865	)


Net cash flows provided by (used in) financing activities		(1,825,247	)		(7,538,753	)


NET CHANGE IN CASH AND CASH EQUIVALENTS		6,597,887			(5,045,088	)

CASH AND CASH EQUIVALENTS - Beginning of period		28,881,784			24,522,159


CASH AND CASH EQUIVALENTS - End of period	$	35,479,671		$	19,477,071

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

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULE OF INVESTMENTS


			2011 Total Rentable Square Feet			June 30,2011
			Unless Otherwise			(Unaudited)				December 31, 2010
Property Name	June 30, 2011 Ownership	City, State	Indicated (Unaudited)			Cost		Estimated Fair Value		Cost		Estimated Fair Value

OFFICES
750 Warrenville	WO	Lisle, IL		103,193		$	26,386,444	$	7,200,000	$	26,339,685	$	7,200,000
Summit @ Cornell Oaks	WO	Beaverton , OR		72,109			13,014,628		7,000,000		12,937,126		6,700,000
Westpark	WO	Brentwood, TN		97,199			14,841,402		12,349,418		14,585,669		10,400,000
Financial Plaza	WO	Brentwood, TN		98,049			12,790,644		9,500,000		12,854,615		9,500,000

		Offices % as of 6/30/11		21	%		67,033,118		36,049,418		66,717,095		33,800,000

APARTMENTS
Dunhill Trace Apartments	WO	Raleigh, NC		250 Units			16,743,350		18,100,000		16,649,083		17,400,000
Broadstone Crossing	WO	Austin, TX		225 Units			22,861,304		24,000,000		22,854,377		23,500,000
The Reserve At Waterford Lakes	WO	Charlotte, NC		140 Units			13,959,475		11,000,000		13,850,701		10,200,000

		Apartments % as of 6/30/11		31	%		53,564,129		53,100,000		53,354,161		51,100,000

RETAIL
Hampton Towne Center	WO	Hampton, VA		174,540			18,199,452		17,200,000		18,197,093		16,300,000
White Marlin Mall	CJV	Ocean City, MD		197,098			23,808,445		27,500,000		23,707,485		26,200,000
Westminster Crossing East, LLC	CJV	Westminster, MD		89,890			15,070,764		15,200,000		15,068,438		14,600,000
CARS Preferred Equity	PE	Various		N/A			8,551,028		8,130,220		14,166,536		12,591,448
Harnett Crossing	WO	Dunn, NC		193,325			6,393,271		3,300,000		6,239,696		3,300,000

		Retail % as of 6/30/11		42	%		72,022,960		71,330,220		77,379,248		72,991,448

HOTEL
Portland Crown Plaza	CJV	Portland, OR		161 Rooms			10,908,620		14,200,000		10,856,973		13,600,000

		Hotel % as of 6/30/11		8	%		10,908,620		14,200,000		10,856,973		13,600,000

Total Real Estate Investments as a Percentage of General Partners’ Controlling Interest as of 6/30/11				102	%	$	203,528,827	$	174,679,638	$	208,307,477	$	171,491,448

WO - Wholly Owned Investment

CJV - Consolidated Joint Venture

PE - Preferred equity investments

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULE OF INVESTMENTS


	June 30, 2011 (Unaudited)								December 31, 2010
	Face Amount		Maturity Date	Cost		Estimated Fair Value			Cost		Estimated Fair Value
CASH AND CASH EQUIVALENTS - Percentage of General Partner’s Controlling Interest							20.7	%				17.5	%

Federal Home Loan Bank, 0 coupon bond	$	4,281,000	July, 2011	$	4,281,000	$	4,281,000		$	8,181,000	$	8,181,000
Federal Home Loan Bank, 0 coupon bond		9,275,000	August, 2011		9,274,820		9,274,820			4,999,740		4,999,740
Federal Home Loan Bank, 0 coupon bond		5,900,000	August, 2011		5,899,769		5,899,769			4,676,891		4,676,891
Federal Home Loan Bank, 0 coupon bond		10,000,000	August, 2011		9,998,843		9,998,843			9,997,022		9,997,022
Federal Home Loan Bank, 0 coupon bond		5,000,000	August, 2011		4,999,967		4,999,967			—		—


Total Cash Equivalents					34,454,399		34,454,399			27,854,653		27,854,653

Cash					1,025,272		1,025,272			1,027,131		1,027,131


Total Cash and Cash Equivalents				$	35,479,671	$	35,479,671		$	28,881,784	$	28,881,784

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2011 and December 31, 2010

(Unaudited)

Note 1: Summary of Significant Accounting Policies

Basis of Presentation - The accompanying consolidated financial statements of The Prudential Variable Contract Real Property Partnership (the “Partnership”) included herein have been prepared in accordance with accounting principles generally accepted in the United States of America that are applicable to investment companies. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011. For further information, refer to the audited consolidated financial statements and notes of the Partnership for the year ended December 31, 2010. The Partnership has evaluated subsequent events through August 12, 2011, the date these financial statements were available to be issued.

Accounting Pronouncements Adopted - In January 2010, the FASB issued updated guidance that requires new fair value disclosures for significant transfers between Level 1 and 2 measurement categories and separate presentation of purchases, issuances, and settlements within the roll forward of Level 3 activity. Also, this updated fair value guidance clarifies the disclosure requirements about level of disaggregation and valuation techniques and inputs. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except disclosures about purchases, sales, issuances, and settlements in the roll forward of Level 3 activity, which are effective for interim and annual reporting periods beginning after December 15, 2010. The Partnership adopted the guidance effective for interim and annual reporting periods beginning after December 15, 2009 on January 1, 2010. The Partnership adopted the guidance effective for interim and annual reporting periods beginning after December 15, 2010 on January 1, 2011. The required disclosures are provided in Note 3.

New Accounting Pronouncement - In May 2011, the FASB issued updated guidance regarding the fair value measurements and disclosure requirements. The updated guidance clarifies existing guidance related to the application of fair value measurement methods and requires expanded disclosures. This new guidance is effective for the first interim or annual reporting period beginning after December 15, 2011 and should be applied prospectively. The Partnership expects this guidance to have a significant impact on its financial statement disclosures but limited, if any, impact on the Partnership’s consolidated financial position or results of operations.

Note 2: Disclosure of Supplemental Cash Flow Information and Non-Cash Investing and Financing Activity

Cash paid for interest during the six months ended June 30, 2011 and June 30, 2010, was $566,746, and $477,673 respectively.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2011 and December 31, 2010

(Unaudited)

Note 3: Fair Value Measurements

Valuation Methods:

Real estate investments are carried at fair value. Properties owned are initially recorded at the purchase price plus closing costs. Development costs and major renovations are capitalized as a component of cost, and routine maintenance and repairs are charged to expense as incurred. Real estate costs include the cost of acquired property, including all the tangible and intangible assets. Tangible assets include the value of all land, building and tenant improvements at the time of acquisition. Intangible assets include the value of any above or below market leases, in-place leases, and tenant relationships at the time of acquisition.

In general fair value estimates are based upon property 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 Real Estate Appraiser of Prudential Investment Management, Inc. (“PIM”), which is an indirectly owned subsidiary of Prudential Financial, Inc. (“PFI”), is responsible to assure that the valuation process provides independent and reasonable property fair value estimates. An unaffiliated third party has been appointed by PIM to assist the Chief Real Estate Appraiser in maintaining and monitoring the independence and the accuracy of the appraisal process. The fair value of real estate investments does not reflect the transaction sale costs, which may be incurred upon disposition of the real estate investments.

The purpose of an appraisal is to estimate the fair value of real estate as of a specific date. In accordance with FASB authoritative guidance on fair value measurements and disclosures, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The estimate of fair value is based on the conventional approaches to value, 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 a series of income streams and reversion at a specific yield or by directly capitalizing a single year income estimate by an appropriate factor; and (3) value indicated by recent sales of comparable real estate in the market. Key inputs and assumptions include rental income and expense amounts, related rental income and expense growth rates, discount rates and capitalization rates. In the reconciliation of these three approaches, the independent appraiser uses one or a combination of them, to come up with the approximated value for the type of real estate in the market.

Cash equivalents include short term investments. Short term investments are generally valued suing unadjusted quoted prices in active markets that are accessible for identical assets and are primarily classified as Level 1.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2011 and December 31, 2010

(Unaudited)

Note 3: Fair Value Measurements (continued)

Fair Value Measurements:

FASB authoritative guidance on fair value measurements and disclosures establishes a fair value measurement framework, provides a single definition of fair value and requires expanded disclosure summarizing fair value measurements. This guidance provides a three-level hierarchy based on the inputs used in the valuation process. The levels in the fair value hierarchy within which the fair value measurements falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows;

Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the entity for identical assets or liabilities. These generally provide the most reliable evidence and should be used to measure fair value whenever available.

Level 3 – Fair value is based on significant unobservable inputs for the asset or liability. These inputs reflect the entity’s own assumptions about how market participants would price the asset or liability.

For items classified as Level 3, a reconciliation of the beginning and ending balances, as shown in table 2 below, is also required.

During the six months ended June 30, 2011 and 2010, there were no transfers between Level 1 and Level 2.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2011 and December 31, 2010

(Unaudited)

Note 3: Fair Value Measurements (continued)

Table 1 below summarizes the assets measured at fair value on a recurring basis and their respective position in the fair value hierarchy.

Table 1


			(in 000’s) Fair value measurements at June 30, 2011 using
	Cost at 6/30/11		Amounts measured at fair value 6/30/2011		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Assets:
Real estate and improvements	$	194,978	$	166,550	$	—	$	—	$	166,550
Preferred equity investments		8,551		8,130		—		—		8,130
Cash equivalents		34,454		34,454		34,454		—		—

Total	$	237,983	$	209,134	$	34,454	$	—	$	174,680


			(in 000’s) Fair value measurements at December 31, 2010 using
	Cost at 12/31/10		Amounts measured at fair value 12/31/2010		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Assets:
Real estate and improvements	$	194,141	$	158,900	$	—	$	—	$	158,900
Preferred equity investments		14,166		12,591		—		—		12,591
Cash equivalents		28,882		28,882		28,882		—		—

Total	$	237,189	$	200,373	$	28,882	$	—	$	171,491

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2011 and December 31, 2010

(Unaudited)

Note 3: Fair Value Measurements (continued)

Table 2

(in 000’s)

Fair value measurements using significant unobservable inputs

for the six months ending June 30, 2011

(Level 3)


	Real estate and improvements		Preferred equity investments			Total

Beginning balance @ 1/1/11	$	158,900	$	12,592		$	171,492

Net gains (losses) realized/unrealized included in earnings (or changes in net assets)		6,813		1,154			7,967
Equity income (losses)/interest income		—		740			740
Acquisitions, issuances and contributions		837		—			837
Disposition, settlements and distributions		—		(6,356	)		(6,356	)

Ending balance @ 6/30/11	$	166,550	$	8,130		$	174,680


Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date	$	6,813	$	1,154		$	7,967

(in 000’s)

Fair value measurements using significant unobservable inputs

for the six months ending June 30, 2010

(Level 3)


	Real estate and improvements			Preferred equity investments			Total

Beginning balance @ 1/1/10	$	167,100		$	10,045		$	177,145

Net gains (losses) realized/unrealized included in earnings (or changes in net assets)		(1,201	)		1,857			656
Equity income (losses)/interest income		—			501			501
Acquisitions, issuances and contributions		2,119			—			2,119
Disposition, settlements and distributions		—			(540	)		(540	)

Ending balance @ 6/30/10	$	168,018		$	11,863		$	179,881


Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date	$	(1,201	)	$	1,857		$	656

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2011 and December 31, 2010

(Unaudited)

Note 3: Fair Value Measurements (continued)

Table 2

(in 000’s)

Fair value measurements using significant unobservable inputs

for the three months ending June 30, 2011

(Level 3)


	Real estate and improvements		Preferred equity investments			Total

Beginning balance @ 4/1/11	$	164,400	$	7,834		$	172,234

Net gains (losses) realized/unrealized included in earnings (or changes in net assets)		1,563		190			1,753
Equity income (losses)/interest income		—		289			289
Acquisitions, issuances and contributions		587		—			587
Disposition, settlements and distributions		—		(183	)		(183	)

Ending balance @ 6/30/11	$	166,550	$	8,130		$	174,680


Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date	$	1,563	$	190		$	1,753

(in 000’s)

Fair value measurements using significant unobservable inputs

for the three months ending June 30, 2010

(Level 3)


	Real estate and improvements		Preferred equity investments			Total

Beginning balance @ 4/1/10	$	165,400	$	10,312		$	175,712

Net gains (losses) realized/unrealized included in earnings (or changes in net assets)		1,828		1,571			3,399

Equity income (losses)/interest income		—		252			252
Purchases/issuances/settlements		790		—			790
Dispositions/settlements/distributions		—		(272	)		(272	)

Ending balance @ 6/30/10	$	168,018	$	11,863		$	179,881


Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date	$	1,828	$	1,571		$	3,399

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2011 and December 31, 2010

(Unaudited)

Note 4: Investment Level Debt

Investment level debt includes mortgage loans payable on wholly owned properties and consolidated partnerships and is stated at the principal amount of the obligations outstanding. At times the Partnership may assume debt in connection with the purchase of real estate. For debt assumed, the Partnership allocates a portion of the purchase price to the below/above market debt and amortizes the premium/discount over the remaining life of the debt.

Based on borrowing rates available to the Partnership at June 30, 2011 for loans with similar terms and average maturities, the Partnership’s mortgages on wholly owned properties and consolidated partnerships have an estimated fair value of approximately $34.1 million, and a carrying value (cost) of $33.9 million. Different assumptions or changes in future market conditions could significantly affect estimated fair value.

Note 5: Risk

Valuation Risk

The estimated fair value of real estate and real estate related assets is generally determined through an appraisal process. These estimated fair 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. These differences could be material to the financial statements. Although the estimated fair values represent subjective estimates, management believes that these estimated fair values are reasonable approximations of market prices and the aggregate estimated value of investments in real estate are fairly presented as of June 30, 2011 and December 31, 2010.

Financing, Covenant, and Repayment Risks

In the normal course of business, the Partnership enters into loan agreements with certain lenders to finance its real estate investment transactions. Unfavorable economic conditions could increase related borrowing costs, limit access to the capital markets or result in a decision by lenders not to extend credit to the Partnership. There is no guarantee that the Partnership’s borrowing arrangements or ability to obtain leverage will continue to be available, or if available, will be available on terms and conditions acceptable to the Partnership. Further, these loan agreements contain, among other conditions, events of default and various covenants and representations. In the normal course of business, the Partnership may be in the process of renegotiating terms for loans outstanding that have passed their maturity dates. At June 30, 2011 the Partnership had no outstanding matured loans.

A decline in market value of the Partnership’s assets may also have particular adverse consequences in instances where the Partnership borrowed money based on the fair value of specific assets. A decrease in market value of these assets may result in the lender requiring the Partnership to post additional collateral or otherwise repay these loans.

In the event the Partnership’s current portfolio and investment obligations are not refinanced or extended when they become due, management anticipates that the repayment of these obligations will be provided by operating cash flow, new debt refinancing, and real estate investment sales.

Note 6: Commitments and Contingencies

The Partnership is subject to various legal proceedings and claims arising in the ordinary course of business. These matters are generally covered by insurance. In the opinion of Partnership’s management, the outcome of such matters will not have a significant effect on the financial position of the Partnership.

Note 7: Related Party Transactions

The Partnership has transactions and relationships with PFI and other affiliates. Due to these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among unrelated parties.

Pursuant to an investment management agreement, PIM charges the Partnership a daily investment management fee at an annual rate of 1.25% of the average daily gross asset valuation of the Partnership. For the periods ended June 30, 2011 and June 30, 2010, management fees incurred by the Partnership were $1,169,290 and $1,145,971, respectively. The Partnership also reimburses PIM for certain administrative services rendered by PIM. The amounts incurred for the six months ended June 30, 2011 and June 30, 2010, were $26,814 and $26,814, respectively, and are classified as administrative expenses in the Consolidated Statements of Operations.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

June 30, 2011 and December 31, 2010

(Unaudited)

Note 8: Financial Highlights


	For The Six Months Ended June 30,
	2011			2010			2009			2008			2007
Per Share(Unit) Operating Performance:
Net Asset Value attributable to general partners’ controlling interest, beginning of period	$	28.38		$	25.88		$	31.65		$	36.55		$	33.87
Income From Investment Operations:

Net investment income attributable to general partners’ controlling interest, before management fee		0.92			0.80			0.73			1.15			1.08

Investment Management fee attributable to general partners’ controlling interest		(0.20	)		(0.17	)		(0.20	)		(0.26	)		(0.24	)
Net realized and unrealized gain (loss) on investments attributable to general partners’ controlling interest		1.29			0.06			(5.24	)		(0.19	)		0.96

Net Increase (decrease) in Net Assets Resulting from Operations attributable to general partners’ controlling interest		2.01			0.69			(4.71	)		0.70			1.80


Net Asset Value attributable to general partners’ controlling interest, end of period	$	30.39		$	26.57		$	26.94		$	37.25		$	35.67


Total Return attributable to general partners’ controlling interest, before Management Fee:		7.78	%		3.28	%		-14.27	%		2.63	%		6.05	%

Total Return attributable to general partners’ controlling interest, after Management Fee (a):		7.06	%		2.66	%		-14.89	%		1.92	%		5.32	%

Ratios/Supplemental Data:

Net Assets attributable to general partners’ controlling interest, end of period (in millions)	$	172		$	164		$	174		$	252		$	241
Ratios to average net assets for the period ended (b):
Total Portfolio Level Expenses		0.83	%		0.82	%		0.69	%		0.72	%		0.77	%
Net Investment Income, before Management Fee		3.16	%		3.06	%		2.42	%		3.14	%		3.19	%

(a)	Total Return, after management fee is calculated by geometrically linking quarterly returns which are calculated using the formula below:

Net Investment Income + Net Realized and Unrealized Gains/(Losses)

Beg. Net Asset Value + Time Weighted Contributions - Time Weighted Distributions

(b)	Average net assets are based on beginning of quarter net assets.

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

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

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

(a) Liquidity and Capital Resources

As of June 30, 2011, the Partnership’s liquid assets, consisting of cash and cash equivalents, were approximately $35.5 million, an increase of approximately $6.6 million from $28.9 million at December 31, 2010. The increase was primarily due to the following activities: (1) net cash flow generated from property operations of $2.9 million; (2) the partial capital redemption of $5.9 million from the Capital Automotive Real Estate Services (or “CARS”) preferred equity investment, and (3) net cash proceeds of $3.3 million generated from the refinancing of the loan on a retail property in Ocean City, Maryland. Partially offsetting the increase was the $5.0 million distribution to the Partners and the funding of capital expenditures to existing properties. Approximately $0.8 million of capital expenditure included $0.3 million funded for tenant improvements and leasing costs at one of the office properties in Brentwood, Tennessee; approximately $0.2 million was associated with property and roof improvements at the retail property in Dunn, North Carolina; approximately $0.3 million funded minor capital improvements and transaction costs associated with leasing expenses at various properties.

Sources of liquidity included net cash flow from property operations, capital redemptions, loan refinancings, and interest from cash equivalents. The Partnership uses cash for its real estate investment activities and for its distributions to its partners. As of June 30, 2011, approximately 16.7% of the Partnership’s total assets consisted of cash and cash equivalents.

(b) Results of Operations

The following is a comparison of the Partnership’s results of operations for the three and six month periods ended June 30, 2011 and 2010.

Net Investment Income Overview

The Partnership’s net investment income attributable to the general partners’ controlling interest for the six months ended June 30, 2011 was approximately $4.2 million, an increase of approximately $0.2 million from the prior year period. The increase in net investment income attributable to the general partners’ controlling interest was primarily due to increases of $0.4 million and $0.1 million in the retail and office sector investments’ net investment incomes from the prior year period, respectively. Partially offsetting these increases was a decrease of approximately $0.3 million from the prior year period in net investment income attributable to the general partners’ controlling interest from the apartment sector.

The Partnership’s net investment income attributable to the general partners’ controlling interest for the quarter ended June 30, 2011 was approximately $2.1 million, relatively unchanged from the prior year period. The components of this net investment income and/or loss attributable to the general partners’ controlling interest are discussed below by investment type.

Valuation Overview

The Partnership recorded net unrealized gains attributable to the general partners’ controlling interest of approximately $7.5 million for the six-month period ended June 30, 2011. This is compared with net unrealized gains attributable to the general partners’ controlling interest of approximately $0.4 million for the prior year period. The net unrealized gains attributable to the general partners’ controlling interest for the six-month period ended June 30, 2011 were due to valuation increases in all property sector investments: $5.5 million in the first quarter of 2011 and $2.0 million in the second quarter.

The Partnership recorded net unrealized gains attributable to the general partners’ controlling interest of approximately $2.0 million for the three-month period ended June 30, 2011. This is compared with net unrealized gains attributable to the general partners’ controlling interest of approximately $3.3 million for the prior year period. The net unrealized gains attributable to the general partners’ controlling interest for the three-month period ended June 30, 2011 were due to valuation increases in all property sector investments. The components of these valuation gains and/or losses attributable to the general partners’ controlling interest are discussed below by property type.

The following table presents a comparison of the Partnership’s sources of net investment income attributable to the general partners’ controlling interest, and unrealized gains or losses attributable to the general partners’ controlling interest by investment type for the six- and three-month periods ended June 30, 2011 and 2010.


	Six Months Ended June 30,						Three Months Ended June 30,
	2011			2010			2011			2010
*Net Investment Income:*

Office properties	$	1,211,642		$	1,060,795		$	636,920		$	494,339
Apartment properties		1,402,236			1,705,532			713,189			872,228
Retail properties		2,690,228			2,301,443			1,194,107			1,225,691
Hotel property		248,362			230,911			211,416			201,181
Other (including interest income, investment mgt fee, etc.)		(1,380,171	)		(1,350,447	)		(703,217	)		(680,569	)

Total Net Investment Income	$	4,172,297		$	3,948,234		$	2,052,415		$	2,112,870


*Net Unrealized Gain (Loss) on Real Estate Investments:*

Office properties	$	1,933,392		$	(1,104,412	)	$	968,390		$	25,825
Apartment properties		1,790,032			2,467,358			439,398			2,599,163
Retail properties		3,276,957			(979,734	)		529,884			643,810
Hotel property		483,764			(7,929	)		59,666			(5,414	)


Net Unrealized Gain (Loss) on Real Estate Investments	$	7,484,145		$	375,283		$	1,997,338		$	3,263,384

OFFICE PROPERTIES


Six Months Ended June 30,	Net Investment Income/(Loss) 2011		Net Investment Income/(Loss) 2010			Unrealized Gain/(Loss) 2011			Unrealized Gain/(Loss) 2010			Occupancy 2011			Occupancy 2010
Property
Lisle, IL	$	139,660	$	149,368		$	(46,760	)	$	344,694			55	%		48	%
Brentwood, TN		225,663		(224,119	)		1,693,683			300,296			97	%		68	%
Beaverton, OR		269,838		547,969			222,498			(1,746,281	)		85	%		88	%
Brentwood, TN		576,481		587,577			63,971			(3,121	)		100	%		100	%

	$	1,211,642	$	1,060,795		$	1,933,392		$	(1,104,412	)


Three Months Ended June 30,
Property
Lisle, IL	$	78,273	$	96,342		$	(24,112	)	$	(4,865	)
Brentwood, TN		133,077		(106,485	)		675,986			789,871
Beaverton, OR		134,599		230,536			220,016			(759,181	)
Brentwood, TN		290,971		273,946			96,500			—

	$	636,920	$	494,339		$	968,390		$	25,825

Net Investment Income

Net investment income attributable to the general partners’ controlling interest for the Partnership’s office properties was approximately $1.2 million and $0.6 million for the six and three months ended June 30, 2011, respectively, which represents increases of approximately $0.2 million and $0.1 million, respectively, from the prior year periods. The increases in net investment income attributable to the general partners’ controlling interest for the six and three-month periods were primarily attributable to actual occupancy and rental rate increases from new and existing leases at one of the properties in Brentwood, Tennessee. Partially offsetting these increases was a decrease in rental income at the property in Beaverton, Oregon due to a rent concession given to the building’s largest tenant.

Unrealized Gain/(Loss)

The office properties owned by the Partnership recorded net unrealized gains attributable to the general partners’ controlling interest of approximately $1.9 million during the six months ended June 30, 2011, compared with a net unrealized loss attributable to the general partners’ controlling interest of approximately $1.1 million for the prior year period. The office properties owned by the Partnership recorded net unrealized gains attributable to the general partners’ controlling interest of approximately $1.0 million during the three months ended June 30, 2011, compared with a nominal net unrealized gain attributable to the general partners’ controlling interest for the prior year period. The net unrealized gain attributable to the general partner’s controlling interest for the six and three months ended June 30, 2011 was primarily due to valuation gains at one of the properties in Brentwood, Tennessee based on lower investment rates and increased revenue due to higher occupancy and rental rates. Investment rates include direct and terminal capitalization rates, and discount rates, which reflect investors’ yield requirements on investments.

APARTMENT PROPERTIES


Six Months Ended June 30,	Net Investment Income/(Loss) 2011			Net Investment Income/(Loss) 2010		Unrealized Gain/(Loss) 2011			Unrealized Gain/(Loss) 2010			Occupancy 2011			Occupancy 2010
Property
Atlanta, GA ⁽¹⁾	$	(5,203	)	$	411,036	$	—		$	2,146,446			N/A			94	%
Raleigh, NC		501,457			390,092		605,733			(117,126	)		98	%		97	%
Austin, TX		617,799			607,011		493,073			497,268			99	%		92	%
Charlotte, NC		288,183			297,393		691,226			(59,230	)		99	%		95	%

	$	1,402,236		$	1,705,532	$	1,790,032		$	2,467,358


Three Months Ended June 30,
Property
Atlanta, GA ⁽¹⁾	$	1,461		$	208,526	$	—		$	2,034,184
Raleigh, NC		266,606			200,082		(32,709	)		97,262
Austin, TX		300,108			296,033		297,094			497,908
Charlotte, NC		145,014			167,587		175,013			(30,191	)

	$	713,189		$	872,228	$	439,398		$	2,599,163

⁽¹⁾	The Atlanta, Georgia property was sold on September 29, 2010. The loss for the six months ended June 30, 2011 is a result of post-closing adjustments. The income for the three months ended June 30, 2011 is due to a relcass from a retail property.

Net Investment Income

Net investment income attributable to the general partners’ controlling interest for the Partnership’s apartment properties was approximately $1.4 million and $0.7 million for the six and three months ended June 30, 2011, respectively, which represents decreases of approximately $0.3 million and $0.2 million, respectively, from the prior year periods. The decreases were primarily due to lost revenue as a result of the disposition of the property in Atlanta, Georgia on September 29, 2010.

Unrealized Gain/(Loss)

The apartment properties owned by the Partnership recorded net unrealized gains attributable to the general partners’ controlling interest of approximately $1.8 million and $0.4 million for the six and three months ended June 30, 2011, respectively, compared with net unrealized gains attributable to the general partners’ controlling interest of approximately $2.5 million and $2.6 million for the prior year periods, respectively. The net unrealized gains attributable to the general partners’ controlling interest for the six and three month periods ended June 30, 2011 were generally due to valuation increases at each existing property as a result of decreased investment rates and more favorable market leasing assumptions.

RETAIL PROPERTIES


Six Months Ended June 30,	Net Investment Income/(Loss) 2011			Net Investment Income/(Loss) 2010		Unrealized Gain/(Loss) 2011			Unrealized Gain/(Loss) 2010			Occupancy 2011			Occupancy 2010
Property
Roswell, GA⁽¹⁾	$	72,833		$	—	$	—		$	—			N/A			N/A
Hampton, VA		496,577			504,283		897,640			(2,310,969	)		96	%		94	%
Ocean City, MD		513,885			564,567		780,938			210,442			98	%		96	%
Westminster, MD		640,526			593,106		597,673			(720,192	)		100	%		100	%
Dunn, NC		226,069			142,523		(153,575	)		(16,194	)		35	%		36	%
CARS Preferred Equity ⁽²⁾		740,338			496,964		1,154,281			1,857,179			N/A			N/A

	$	2,690,228		$	2,301,443	$	3,276,957		$	(979,734	)


Three Months Ended June 30,
Property
Roswell, GA⁽¹⁾	$	(1,461	)	$	—	$	—		$	—
Hampton, VA		252,241			271,704		197,640			(400,169	)
Ocean City, MD		224,571			321,393		156,068			99,487
Westminster, MD		334,724			311,335		97,673			(619,558	)
Dunn, NC		94,996			71,404		(111,977	)		(7,410	)
CARS Preferred Equity ⁽²⁾		289,036			249,855		190,480			1,571,460

	$	1,194,107		$	1,225,691	$	529,884		$	643,810

⁽¹⁾	The Roswell, Georgia retail property was sold on May 1, 2009. The Income for the six months ended June 30, 2011 is a result of post-closing adjustments. The loss for the three months ended June 30, 2011 is due to a reclass from an apartment property.

⁽²⁾	A portion of the CARS Preferred Equity position was redeemed on March 11, 2011.

Net Investment Income

Net investment income attributable to the general partners’ controlling interest for the Partnership’s retail properties was approximately $2.7 million and $1.2 million for the six and three months ended June 30, 2011, respectively, which is approximately a $0.4 million increase and relatively no change from the prior year periods, respectively. The increase in net investment income attributable to the general partners’ controlling interest for the six month period ended June 30, 2011 was largely due to (a) the reconciliation of the interest rate at the CARS preferred equity investment resulting in a $0.3 million true up (b) $0.1 million post-closing income from the sale of the property in Roswell, Georgia related to a tax reconciliation.

Unrealized Gain/(Loss)

The retail properties owned by the Partnership recorded a net unrealized gain attributable to the general partners’ controlling interest of approximately $3.3 million for the six months ended June 30, 2011, compared with a net unrealized loss attributable to the general partners’ controlling interest of approximately $1.0 million for the prior year period. The retail properties owned by the Partnership recorded a net unrealized gain attributable to the general partners’ controlling interest of approximately $0.5 million for the three months ended June 30, 2011, compared with a net unrealized gain attributable to the general partners’ controlling interest of approximately $0.6 million for the prior year period. The net unrealized gains attributable to the general partners’ controlling interest for the six and three -month period ended June 30, 2011 were primarily due to (a) an increased valuation of the CARS preferred equity investment based on a reduction in the principal balance and expected remaining term of the investment, resulting in an increased present value of principal repayment, as well as decreased risk and applied market investment rate; and (b) increased valuations of the properties in Hampton, Virginia; Ocean City, Maryland; and Westminster, Maryland, generally due to improved market leasing conditions and decreased investment rates. Valuation gains were partially offset by capital expenditures incurred at several properties.

HOTEL PROPERTY


Six Months Ended June 30,	Net Investment Income/(Loss) 2011		Net Investment Income/(Loss) 2010		Unrealized Gain/(Loss) 2011		Unrealized Gain/(Loss) 2010			Occupancy 2011			Occupancy 2010
Property
Lake Oswego, OR	$	248,362	$	230,911	$	483,764	$	(7,929	)		74	%		67	%

Three Months Ended June 30,
Property
Lake Oswego, OR	$	211,416	$	201,181	$	59,666	$	(5,414	)

Net Investment Income

Net investment income attributable to the general partners’ controlling interest for the Partnership’s hotel property was approximately $0.2 million for the six and three months ended June 30, 2011, respectively, which has remained relatively unchanged from the prior year periods due to a consistent level of occupancy and average daily rates at the hotel property.

Unrealized Gain/(Loss)

The Partnership’s hotel property recorded net unrealized gains attributable to the general partners’ controlling interest of approximately $0.5 million and $0.1 million for the six and three months ended June 30, 2011, respectively, compared with slight losses during the prior year periods. The unrealized gains attributable to the general partners’ controlling interest for the six and three month periods ended June 30, 2011 were primarily due to a valuation increase caused by an increase in projected occupancy, revenue per available room, and average daily rate at the property reflecting improvements in the overall hotel market.

Other

Other net investment loss mainly includes investment management fees, other portfolio level expenses and interest income. Other net investment loss attributable to the general partners’ controlling interest was approximately $1.4 million and $0.7 million for the six and three month periods ended June 30, 2011, which remained relatively unchanged from the prior year periods, respectively.

(c) Inflation

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

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or “U.S. GAAP”, requires the application of accounting policies that often involve a significant degree of judgment. Management reviews critical estimates and assumptions on an ongoing basis. If management determines, as a result of its consideration of facts and circumstances, that modifications in assumptions and estimates are appropriate, results of operations and financial position as reported in the unaudited Financial Statements of the Account and the unaudited Consolidated Financial Statements of the Partnership may change significantly.

The following sections discuss those critical accounting policies applied in preparing the unaudited Financial Statements of the Account and the unaudited Consolidated Financial Statements of the Partnership that are most dependent on the application of estimates and assumptions.

Accounting Pronouncements Adopted

See Note 1B to the Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements.

New Accounting Prounouncement

See Note 1C to the Consolidated Financial Statements for a discussion of new accounting pronouncements.

Valuation of Investments

Real Estate Investments - Real estate investments are carried at fair value. Properties owned are initially recorded at the purchase price plus closing costs. Development costs and major renovations are capitalized as a component of cost, and routine maintenance and repairs are charged to expense as incurred. Real estate costs include the cost of acquired property, including all the tangible and intangible assets. Tangible assets include the value of all land, building and tenant improvements at the time of acquisition. Intangible assets include the value of any above and below market leases, in-place leases, and tenant relationships at the time of acquisition.

Cash equivalents include short term investments. Short term investments are generally valued using unadjusted quote prices in active markets that are accessible for identical assets and are primarily classified as Level 1.

Other Estimates

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

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk – The general partners’ controlling interest exposure to market rate risk for changes in interest rates relates to approximately 39.81% of its investment portfolio as of June 30, 2011, which consists primarily of short-term commercial paper and fixed and variable interest rate debt. The Partnership does not use derivative financial instruments. As a matter of policy, the Partnership places its investments with high quality debt security issuers, limits the amount of credit exposure to any one issuer, limits duration by restricting the term, and holds investments to maturity except under unusual circumstances.

The table below presents the amounts and related weighted interest rates of the Partnership’s cash equivalents at June 30, 2011:


	Maturity		Estimated Market Value (millions)		Average Interest Rate
Cash equivalents		0-3 months	$	34.5		1.45	%

The table below discloses the Partnership’s debt as of June 30, 2011. The fair value of the Partnership’s long-term debt is affected by changes in market interest rates. The following table presents principal cash flows based upon maturity dates of the debt obligations and the related weighted-average interest rates by expected maturity dates for the debt.


Investment level debt (in $ thousands), including current portion	2011			2012			2013			2014			2015			Thereafter			Total			Estimated Fair Value

Weighted Average Fixed Interest Rate		4.77	%		6.19	%		6.18	%		6.18	%		6.18	%		6.18	%		5.95	%
Fixed Rate	$	425		$	892		$	954		$	1,016		$	1,084		$	20,523		$	24,894		$	25,183
Variable Rate	$	0			—		$	9,000			—			—			—		$	9,000		$	8,941
Premium/(Discount) on Investment Level Debt	($	8	)		—			—			—			—			—		($	8	)		—

Total Investment Level Debt	$	417		$	892		$	9,954		$	1,016		$	1,084		$	20,523		$	33,886		$	34,124

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

ITEM 4. Controls and Procedures

In order to ensure that the information we must disclose in our filings with the Securities and Exchange Commission, or “SEC,” is recorded, processed, summarized, and reported on a timely basis, the Company’s management, including our Chief Executive Officer and Chief Financial Officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e), under the Securities Exchange Act of 1934, as amended, as of June 30, 2011. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2011, our disclosure controls and procedures were effective. No change in our internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(e), occurred during the quarter ended June 30, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1A. Risk Factors

You should carefully consider the risks described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010. These risks could materially affect our business, results of operations or financial condition, or cause our actual results to differ materially from those expected or those expressed in any forward looking statements made by or on behalf of the Company. These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under “Forward-Looking Statements” above and the risks of our business described elsewhere in this Quarterly Report on Form 10-Q.

Item 6. Exhibits


31.1		Section 302 Certification of the Chief Executive Officer.

31.2		Section 302 Certification of the Chief Financial Officer.

32.1		Section 906 Certification of the Chief Executive Officer.

32.2		Section 906 Certification of the Chief Financial Officer.

101.INS		-XBRL Instance Document.

101.SCH		-XBRL Taxonomy Extension Schema Document.

101.CAL		-XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB		-XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		-XBRL Taxonomy Extension Presentation Linkbase Document.

In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to the Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

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

PRUCO LIFE INSURANCE COMPANY

in respect of

Pruco Life Variable Contract Real Property Account

(Registrant)

Date: August 12, 2011

By:

/s/ Thomas Diemer

Thomas Diemer

Chief Financial Officer

(Authorized Signatory and Principal

Accounting and Financial Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company