UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________________________

FORM 10-Q

__________________________________________

(Mark One)



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

For the quarterly period ended ~~June~~September 30, 2015



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

Commission file number 033-20083-01

____________________________________________________

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

in respect of

THE PRUDENTIAL VARIABLE CONTRACT

REAL PROPERTY ACCOUNT

(Exact name of registrant as specified in its charter)

____________________________________________________



New Jersey	22-1211670
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

751 Broad Street

Newark, New Jersey 07102

(973) 802-6000

(Address and Telephone Number of Registrant’s Principal Executive Offices)

____________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):



Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

Table of Contents

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

(Registrant)

INDEX

		Page
Forward-Looking Statement Disclosure		3
Part I - Financial Information
Item 1.	Financial Statements (Unaudited)
A. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
	Statements of Net Assets - June 30, 2015 and December 31, 2014	4
	Statements of Net Assets - September 30, 2015 and December 31, 2014	4
	Statements of Operations - Three and Six Months Ended June 30, 2015 and 2014	4
	Statements of Operations - Three and Nine Months Ended September 30, 2015 and 2014	4
	Statements of Changes in Net Assets - Three and Six Months Ended June 30, 2015 and 2014	4
	Statements of Changes in Net Assets - Three and Nine Months Ended September 30, 2015 and 2014	5
	Notes to the Financial Statements	56
B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
	Consolidated Statements of Assets and Liabilities - June 30, 2015 and December 31, 2014	13
	Consolidated Statements of Assets and Liabilities - September 30, 2015 and December 31, 2014	14
	Consolidated Statements of Operations - Three and Six Months Ended June 30, 2015 and 2014	14
	Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2015 and 2014	15
	Consolidated Statements of Changes in Net Assets - Six Months Ended June 30, 2015 and 2014	15
	Consolidated Statements of Changes in Net Assets - Nine Months Ended September 30, 2015 and 2014	16
	Consolidated Statements of Cash Flows - Six Months Ended June 30, 2015 and 2014	16
	Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2015 and 2014	17
	Consolidated Schedules of Real Estate Investments - June 30, 2015 and December 31, 2014	17
	Consolidated Schedules of Real Estate Investments - September 30, 2015 and December 31, 2014	18
	Notes to Consolidated Financial Statements	1920
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2830
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3638
Item 4.	Controls and Procedures	3638
Part II - Other Information
Item 1A.	Risk Factors	3739
Item 6.	Exhibits	3739
Signatures		3840

Table of Contents

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 The Prudential Insurance Company of America, or the “Company”, or The Prudential 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, utilization, 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 and value of business acquired; (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 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 accounting principles generally accepted in the United States of America, or “U.S. GAAP”, practices or policies; and (15) interruption in telecommunication, information technology or other operational systems or failure to maintain the security, confidentiality or privacy of sensitive data on such systems. 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 our Annual Report on Form 10-K for the year ended December 31, 2014, for discussion of certain risks relating to the operation of The Prudential Variable Contract Real Property Partnership, or the “Partnership”, and investment in our securities.

Table of Contents

~~Part~~Throughout Ithis Quarterly Report on Form 10-Q, the "Real Property Account" and the "Registrant" refer to The Prudential Variable Contract Real Property Account. "Prudential" ~~Financial~~or ~~Information~~the "Company" refers to The Prudential Insurance Company of America.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements (Unaudited)

UNAUDITED INTERIM FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

STATEMENTS OF NET ASSETS

~~June~~September 30, 2015 and December 31, 2014

	June 30, 2015		December 31, 2014
	September 30, 2015		December 31, 2014
ASSETS
Investment in The Prudential Variable Contract Real Property Partnership	$	7982,~~517~~861,~~570~~082	$	79,093,169
Net Assets	$	7982,~~517~~861,~~570~~082	$	79,093,169
NET ASSETS, representing:
Equity of contract owners	$	6568,~~663~~288,~~986~~981	$	65,089,739
Equity of The Prudential Insurance Company of America	1314,~~853~~572,~~584~~101		14,003,430
	$	7982,~~517~~861,~~570~~082	$	79,093,169
Units outstanding	26,~~752~~806,~~681~~814		27,271,568
Portfolio shares held	1,910,381		1,954,048
Portfolio net asset value per share	$	4143.6237	$	40.48

STATEMENTS OF OPERATIONS

For the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014

Six Months Ended

Three Months Ended

Nine Months Ended

Three Months Ended

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2014

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2014

INVESTMENT INCOME

Net investment income allocated from The Prudential Variable Contract Real Property Partnership

1,~~208~~824,~~305~~509

12,~~463~~204,~~381~~466

~~644~~616,~~456~~204

~~706~~741,~~091~~085

EXPENSES

Charges to contract owners for assuming mortality and expense risk and for administration

~~251~~381,~~076~~379

~~241~~366,~~759~~907

~~126~~130,~~799~~303

~~121~~125,~~661~~148

NET INVESTMENT INCOME

~~957~~1,~~229~~443,130

1,~~221~~837,~~622~~559

~~517~~485,~~657~~901

~~584~~615,~~430~~937

NET RECOGNIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

Net unrealized gain (loss) on investments allocated from The Prudential Variable Contract Real Property Partnership

~~963~~3,~~221~~690,530

~~501~~1,~~212~~914,789

252,~~269~~727,309

~~708~~1,~~501~~413,577

Net recognized gain (loss) on investments allocated from The Prudential Variable Contract Real Property Partnership

53,008

—

~~53,008~~—

—

NET GAIN (LOSS) ON INVESTMENTS

13,~~016~~743,~~229~~538

~~501~~1,~~212~~914,789

782,~~277~~727,309

~~708~~1,~~501~~413,577

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

15,~~973~~186,~~458~~668

13,~~722~~752,~~834~~348

~~595~~3,~~934~~213,210

12,~~292~~029,~~931~~514

STATEMENTS OF CHANGES IN NET ASSETS

For the three and six months ended June 30, 2015 and 2014

	Six Months Ended						Three Months Ended
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014
OPERATIONS
Net investment income	$	957,229		$	1,221,622		$	517,657		$	584,430
Net unrealized gain (loss) on investments allocated from The Prudential Variable Contract Real Property Partnership	963,221			501,212			25,269			708,501
Net recognized gain (loss) on investments allocated from The Prudential Variable Contract Real Property Partnership	53,008			—			53,008			—
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	1,973,458			1,722,834			595,934			1,292,931
CAPITAL TRANSACTIONS
Net contributions (withdrawals) by contract owners	(1,003,206		)	(585,351		)	(542,069		)	(217,019		)
Net contributions (withdrawals) by The Prudential Insurance Company of America	(545,851		)	(967,493		)	668,868			338,680
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS	(1,549,057		)	(1,552,844		)	126,799			121,661
TOTAL INCREASE (DECREASE) IN NET ASSETS	424,401			169,990			722,733			1,414,592
NET ASSETS
Beginning of period	79,093,169			77,305,072			78,794,837			76,060,470
End of period	$	79,517,570		$	77,475,062		$	79,517,570		$	77,475,062

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

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UNAUDITED INTERIM FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the three and nine months ended September 30, 2015 and 2014



	Nine Months Ended						Three Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
OPERATIONS
Net investment income	$	1,443,130		$	1,837,559		$	485,901		$	615,937
Net unrealized gain (loss) on investments allocated from The Prudential Variable Contract Real Property Partnership	3,690,530			1,914,789			2,727,309			1,413,577
Net recognized gain (loss) on investments allocated from The Prudential Variable Contract Real Property Partnership	53,008			—			—			—
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	5,186,668			3,752,348			3,213,210			2,029,514
CAPITAL TRANSACTIONS
Net contributions (withdrawals) by contract owners	(1,006,046		)	(1,074,696		)	(2,840		)	(489,345		)
Net contributions (withdrawals) by The Prudential Insurance Company of America	(412,709		)	(2,148,802		)	133,142			(1,181,309		)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS	(1,418,755		)	(3,223,498		)	130,302			(1,670,654		)
TOTAL INCREASE (DECREASE) IN NET ASSETS	3,767,913			528,850			3,343,512			358,860
NET ASSETS
Beginning of period	79,093,169			77,305,072			79,517,570			77,475,062
End of period	$	82,861,082		$	77,833,922		$	82,861,082		$	77,833,922

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

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

~~June~~September 30, 2015

Note 1: General

The Prudential Variable Contract Real Property Account (the “Real Property Account” or the “Registrant”) was established on November 20, 1986 by resolution of the Board of Directors of The Prudential Insurance Company of America (“Prudential” or the “Company”), as a separate investment account pursuant to New Jersey law and is registered under the Securities Act of 1933, as amended. Prudential is a wholly-owned subsidiary of Prudential Financial, Inc. (“Prudential Financial”). The assets of the Real Property Account are segregated from Prudential’s other assets. The Real Property Account is used to fund benefits under certain variable life insurance and variable annuity contracts issued by Prudential. These products are Variable Appreciable Life (“PVAL”, “PVAL $100,000+ Face Value,” and “CVAL”), Discovery Plus (“PDISCO+”), and Variable Investment Plan (“VIP”).

The assets of the Real Property 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 variable annuity contracts. The Real Property Account, along with the Pruco Life 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 accompanying unaudited consolidated financial statements of the Partnership.

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

Note 2: Summary of Significant Accounting Policies


A.	Basis of Accounting

The Unaudited Interim Financial Statements as of ~~June~~September 30, 2015 and the statement of net assets as of December 31, 2014, which has been derived from Audited Financial Statements, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. 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.

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 Real Property Account’s Audited Financial Statements included in the Real Property Account’s Annual Report on Form 10-K for the year ended December 31, 2014.

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 investment in the Partnership.


B.	Investment in Partnership Interest

The investment in the Partnership is based on the Real Property Account’s proportionate interest of the Partnership’s fair value. At ~~June~~September 30, 2015 and December 31, 2014, the Real Property Account’s share of the general partners' controlling interest of the Partnership was 42.2% or 1,910,381 shares and 42.0% or 1,954,048 shares, respectively. Properties owned by the Partnership are illiquid and their fair value is based on estimated fair value as discussed in the notes to the unaudited consolidated financial statements of the Partnership.


C.	Income Recognition

Net investment income or loss, and recognized and unrealized gains and losses are allocated based upon the monthly average net assets for the investment in the Partnership. Amounts are based on the Real Property Account’s proportionate interest in the Partnership.

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

~~June~~September 30, 2015

Note 2: Summary of Significant Accounting Policies (continued)


D.	Equity of The Prudential Insurance Company of America

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

There were no cash transactions at the Real Property Account level for the ~~six~~nine months ended ~~June~~September 30, 2015 and the year ended December 31, 2014 as all of the transactions are settled by Prudential on behalf of the Real Property Account through a redemption or an issuance of units. Therefore, no statement of cash flows is presented for the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014.

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 1.2%, 0.9%, 0.6% and 1.2% for PDISCO+, PVAL, PVAL $100,000 + Face Value and VIP, respectively (for PDISCO+, the 1.2% includes a 0.20% administrative charge). CVAL used the same fees and charges as the ~~VAL~~PVAL ~~face amount over~~ $100,000 + Face Value. 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 contracts may exceed related charges by Prudential. The mortality risk and expense risk charges are assessed through reduction in unit values.


B.	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 PVAL and PVAL $100,000 + Face Value are (1) state premium taxes; and (2) transaction costs 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 Prudential 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.


C.	Deferred Sales Charge

A deferred sales charge is imposed upon the withdrawals of certain purchase payments to compensate Prudential for sales and other marketing expenses for PDISCO+ and VIP. The amount of any deferred sales charge will depend on the amount withdrawn and the number of contract years that have elapsed since the contract owner or annuitant made the purchase payments deemed to be withdrawn. As the amount of time that has elapsed since a given purchase payment made increases, the deferred sales charge applicable to that purchase payment generally decreases. No deferred sales charge is made against the withdrawal of investment income. No deferred sales charge is imposed upon death benefit payments or upon transfers made between subaccounts. This deferred sales charge is assessed through the redemption of units.


D.	Partial Withdrawal Charge

A charge is imposed by Prudential on partial withdrawals of the cash surrender value for PVAL and PVAL $100,000 + Face Value. 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.


E.	Annual Maintenance Charge

An annual maintenance charge, applicable to PDISCO+ and VIP, of $30 will be deducted if and only if the contract ~~fund~~account value is less than $10,000 on a contract anniversary or at the time a full withdrawal is effected, including a withdrawal to effect an annuity. The charge is made by reducing accumulation units credited to a contract owner’s account.

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

~~June~~September 30, 2015

Note 4: Taxes

Prudential is taxed as a “life insurance company”, as defined by the Internal Revenue Code. The results of operations of the Real Property Account form a part of Prudential Financial’s consolidated federal tax return. Under current federal, state, and local law, no federal, state or local income taxes are payable by the Real Property Account. As such, no provision for a tax liability has been recorded in these financial statements. Prudential management will review periodically the status of the policy in the event of changes in the tax law.

Note 5: Net Contributions (Withdrawals) by Contract Owners

Net contributions (withdrawals) by contract owners for the Real Property Account by product for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014 were as follows:

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2015			2014
PVAL/PVAL $100,000+ Face Value/CVAL	$	(~~962~~944,~~657~~663	)	$	(~~447~~891,~~000~~692	)
PDISCO+/VIP	(4061,~~549~~383		)	(~~138~~183,~~351~~004		)
TOTAL	$	(1,~~003~~006,~~206~~046	)	$	(~~585~~1,~~351~~074,696	)

	Three Months Ended June 30,
	Three Months Ended September 30,
	2015			2014
PVAL/PVAL $100,000+ Face Value/CVAL	$	~~(524~~17,~~997~~994	)	$	(~~208~~444,~~452~~692	)
PDISCO+/VIP	(1720,~~072~~834		)	(844,~~567~~653		)
TOTAL	$	(~~542~~2,~~069~~840	)	$	(~~217~~489,~~019~~345	)

Note 6: Partnership Distributions

For the ~~six~~nine months ended ~~June~~September 30, 2015, the Partnership distributed a total of $5.0 million, which occurred on March 30, 2015. The Real Property Account’s share of this distribution was $1.8 million. For the ~~six~~nine months ended ~~June~~September 30, 2014, the Partnership distributed a total of $510.0 million, which occurred on March 26, 2014 and September 26, 2014, for $5.0 million each. The Real Property Account’s share of ~~this~~these ~~distribution~~distributions was $1.8 million each or $3.6 million.

For the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, there were no purchases of the Partnership by the Real Property Account.

Note 7: Unit Information

All products referred to in Note 1 for outstanding units and unit values at September 30, 2015 and December 31, 2014 were as follows:

	June 30, 2015			December 31, 2014
	September 30, 2015			December 31, 2014
Units Outstanding:	26,~~752~~806,~~681~~814			27,271,568
Unit Value:	$2.~~70604~~81142	to	$3.~~13241~~25921	$2.64710	to	$3.05509

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

~~June~~September 30, 2015

Note 8: Financial Highlights

The range of total return for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014 were as follows:

	Six Months Ended June 30,
	Nine months ended September 30,
	2015			2014
Total Return	26.2321%	to	26.5368%	14.9850%	to	24.2897%

	Three Months Ended June 30,
	Three Months Ended September 30,
	2015			2014
Total Return	03.6289%	to	04.7705%	12.5647%	to	12.7163%

Note 9: Related Party

The Real Property 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.

Prudential and its affiliates perform various services on behalf of the Partnership in which the Real Property Account invests and may receive fees for the services performed. These services include, among other things, shareholder communications, postage, transfer agency and various other record keeping and customer service functions.

Note 10: Fair Value Measurements

Fair value represents 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 authoritative fair value guidance establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. 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 Real Property Account for identical assets or liabilities. These generally provide the most reliable evidence and should be used to measure fair value whenever available. The Real Property Account had no Level 1 assets or liabilities.

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. The Real Property Account had no Level 2 assets or liabilities.

Level 3 – Fair value is based on significant unobservable inputs for the asset or liability. These inputs reflect the entity's assumptions about how market participants would price the asset or liability. The Real Property Account’s Level 3 assets consist of the investment in the Partnership, which is based on the Real Property 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 consolidated financial statements. All of the Real Property Account’s assets were classified as Level 3.

The purpose of an appraisal is to estimate the fair value of real estate as of a specific date. The estimate of fair value of real estate 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 period 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 independent appraiser uses one or a combination of them, to come up with the approximate value for the type of real estate in the market.

During the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, there were no transfers between Level 1, Level 2, and Level 3.

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NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

~~June~~September 30, 2015

Note 10: Fair Value Measurements (continued)

In general, the input values 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 or methodology used for valuing securities 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 level in the fair value hierarchy.

Table 1:	($ in 000’s)
	Fair value measurements at June 30, 2015
	Total		Level 1		Level 2		Level 3
Assets:
Investment in The Prudential Variable Contract Real Property Partnership	$	79,518	$	—	$	—	$	79,518

Table 1:



	($ in 000’s)
	Fair value measurements at September 30, 2015
	Total		Level 1		Level 2		Level 3
Assets:
Investment in The Prudential Variable Contract Real Property Partnership	$	82,861	$	—	$	—	$	82,861



	($ in 000’s)
	Fair value measurements at December 31, 2014
	Total		Level 1		Level 2		Level 3
Assets:
Investment in The Prudential Variable Contract Real Property Partnership	$	79,093	$	—	$	—	$	79,093

910

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NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

~~June~~September 30, 2015

Note 10: Fair Value Measurements (continued)

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 ~~six~~nine months ended ~~June~~September 30, 2015 and 2014.

Table 2:

	($ in 000’s)
	2015
	Nine Months Ended September 30, 2015
Beginning balance, January 1, 2015	$	79,093
Net recognized and unrealized gains (losses) included in earnings (or changes in net assets) from Partnership operations	13,~~017~~744
Net investment income from Partnership operations	1,~~208~~825
Acquisitions, issuances, and contributions	—
Dispositions, settlements, and distributions	(1,~~800~~801		)
Ending balance, June 30, 2015	$	79,518
Ending balance, September 30, 2015	$	82,861
Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date	$	~~963~~3,691

	($ in 000’s)
	2014
	Nine Months Ended September 30, 2014
Beginning balance, January 1, 2014	$	77,305
Net recognized and unrealized gains (losses) included in earnings (or changes in net assets) from Partnership operations	~~501~~1,915
Net investment income from Partnership operations	12,~~464~~204
Acquisitions, issuances, and contributions	—
Dispositions, settlements, and distributions	(13,~~795~~590		)
Ending balance, June 30, 2014	$	77,475
Ending balance, September 30, 2014	$	77,834
Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date	$	~~501~~1,915

1011

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NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT

~~June~~September 30, 2015

Note 10: Fair Value Measurements (continued)

Table 3 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 months ended ~~June~~September 30, 2015 and 2014.

Table 3:

	($ in 000’s)
	2015
	Three Months Ended September 30, 2015
Beginning balance, April 1, 2015	$	78,795
Beginning balance, July 1, 2015	$	79,518
Net recognized and unrealized gains (losses) included in earnings (or changes in net assets) from Partnership operations	792,727
Net investment income from Partnership operations	~~644~~616
Acquisitions, issuances, and contributions	—
Dispositions, settlements, and distributions	—
Ending balance, June 30, 2015	$	79,518
Ending balance, September 30, 2015	$	82,861
Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date	$	252,727

	($ in 000’s)
	2014
	Three Months Ended September 30, 2014
Beginning balance, April 1, 2014	$	76,060
Beginning balance, July 1, 2014	$	77,475
Net recognized and unrealized gains (losses) included in earnings (or changes in net assets) from Partnership operations	~~709~~1,414
Net investment income from Partnership operations	~~706~~741
Acquisitions, issuances, and contributions	—
Dispositions, settlements, and distributions	—(1,796		)
Ending balance, June 30, 2014	$	77,475
Ending balance, September 30, 2014	$	77,834
Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date	$	~~709~~1,414

Note 11: Subsequent Event

On November 9, 2015, the Partnership acquired a development property in Chicago, Illinois. For further information, see note 10 of the Partnership unaudited consolidated financial statements.

On November 10, 2015, the Partnership paid off a mortgage loan on a retail property in Roswell, Georgia. For further information, see note 10 of the Partnership unaudited consolidated financial statements.

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1213

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

	June 30, 2015(Unaudited)		December 31,2014
	September 30, 2015(Unaudited)		December 31,2014
ASSETS
REAL ESTATE INVESTMENTS - At estimated fair value:
Real estate and improvements (cost: 06/30/2015 -- $248,200,497; 12/31/2014 -- $240,778,075)	$	247,580,522	$	235,689,701
Real estate and improvements (cost: 09/30/2015 -- $248,942,886; 12/31/2014 -- $240,778,075)	$	256,010,000	$	235,689,701
CASH AND CASH EQUIVALENTS	3132,~~469~~281,~~671~~659		32,308,210
OTHER ASSETS, NET	3,~~204~~267,~~005~~313		2,947,752
Total assets	$	~~282~~291,~~254~~558,~~198~~972	$	270,945,663
LIABILITIES & PARTNERS’ EQUITY
INVESTMENT LEVEL DEBT	$	79,~~647~~376,~~123~~345	$	70,006,898
ACCOUNTS PAYABLE AND ACCRUED EXPENSES	2,~~450~~791,~~362~~011		1,663,710
DUE TO AFFILIATES	~~714~~715,~~896~~848		666,963
OTHER LIABILITIES	~~628~~622,~~274~~683		934,145
Total liabilities	83,~~440~~505,~~655~~887		73,271,716
COMMITMENTS AND CONTINGENCIES
NET ASSETS, REPRESENTING PARTNERS’ EQUITY:
GENERAL PARTNERS’ CONTROLLING INTEREST	~~188~~196,~~539~~466,~~371~~975		188,251,636
NONCONTROLLING INTEREST	1011,~~274~~586,~~172~~110		9,422,311
Total partners' equity	~~198~~208,~~813~~053,~~543~~085		197,673,947
Total liabilities and partners’ equity	$	~~282~~291,~~254~~558,~~198~~972	$	270,945,663
NUMBER OF SHARES OUTSTANDING AT END OF PERIOD	4,529,591		4,650,878
GENERAL PARTNERS' SHARE VALUE AT END OF PERIOD	$	4143.6237	$	40.48

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

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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,

For the Nine Months Ended September 30,

For the Three Months Ended September 30,

2015

2014

2015

2014

INVESTMENT INCOME:

Revenue from real estate and improvements

1016,~~915~~733,~~095~~201

1219,~~652~~421,~~718~~573

5,~~602~~818,~~066~~106

6,~~260~~768,~~029~~855

Interest income

710,~~099~~449

914,~~478~~853

23,~~298~~350

45,~~214~~375

Total investment income

1016,~~922~~743,~~194~~650

1219,~~662~~436,~~196~~426

5,~~604~~821,~~364~~456

6,~~264~~774,~~243~~230

INVESTMENT EXPENSES:

Operating

12,~~759~~650,~~245~~791

24,~~725~~146,~~805~~797

~~882~~891,~~797~~546

1,~~309~~420,~~117~~992

Investment management fee

12,~~378~~085,~~984~~893

1,~~261~~914,~~889~~432

~~701~~706,~~488~~909

~~629~~652,~~344~~543

Real estate taxes

12,~~315~~143,~~210~~530

12,~~372~~046,~~522~~914

~~641~~828,~~144~~320

~~728~~674,~~631~~392

Administrative

12,~~591~~383,~~288~~267

23,~~024~~337,~~587~~210

~~821~~791,~~025~~979

1,~~010~~312,~~911~~623

Interest expense

12,~~695~~655,~~680~~366

12,~~454~~217,~~936~~763

~~865~~959,~~019~~686

~~726~~762,~~834~~827

Total investment expenses

711,~~740~~918,~~407~~847

813,~~839~~663,~~739~~116

34,~~911~~178,~~473~~440

4,~~404~~823,~~837~~377

NET INVESTMENT INCOME (LOSS)

34,~~181~~824,~~787~~803

35,~~822~~773,~~457~~310

1,~~692~~643,~~891~~016

1,~~859~~950,~~406~~853

RECOGNIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

Net proceeds from real estate investments sold

12,668,032

—

~~12,668,032~~—

—

Less: Cost of real estate investments sold

14,114,940

—

~~14,114,940~~—

—

Gain (loss) realized from real estate investments sold

(1,446,908

)

—

~~(1,446,908~~—

)

—

Less: Reversal of prior periods’ unrealized gain (loss) on real estate investments sold

(1,572,787

)

—

~~(1,572,787~~—

)

—

Net gain (loss) recognized on real estate investments sold

125,879

—

~~125,879~~—

—

Change in unrealized gain (loss) on real estate investments

210,~~895~~582,~~611~~700

15,~~484~~244,~~250~~525

~~364~~7,~~119~~687,089

13,~~851~~760,~~507~~275

NET RECOGNIZED AND UNREALIZED GAIN (LOSS)

310,~~021~~708,~~490~~579

15,~~484~~244,~~250~~525

~~489~~7,~~998~~687,089

13,~~851~~760,~~507~~275

INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

615,~~203~~533,~~277~~382

511,~~306~~017,~~707~~835

29,~~182~~330,~~889~~105

35,~~710~~711,~~913~~128

Amounts attributable to noncontrolling interest:

Net investment income (loss) attributable to noncontrolling interest

~~312~~494,~~386~~138

~~320~~502,~~706~~241

~~164~~181,~~392~~752

~~172~~181,~~393~~535

Net recognized and unrealized gain (loss) attributable to noncontrolling interest

~~603~~1,~~156~~823,905

~~287~~668,~~723~~995

~~304~~1,~~869~~220,749

~~158~~381,~~728~~272

Increase (decrease) in net assets resulting from operations attributable to noncontrolling interest

~~915~~2,~~542~~318,043

~~608~~1,~~429~~171,236

~~469~~1,~~261~~402,501

~~331~~562,~~121~~807

Amounts attributable to general partners’ controlling interest:

Net investment income (loss) attributable to general partners' controlling interest

24,~~869~~330,~~401~~665

35,~~501~~271,~~751~~069

1,~~528~~461,~~499~~264

1,~~687~~769,~~013~~318

Net recognized gain (loss) attributable to general partners' controlling interest

125,879

—

~~125,879~~—

—

Net unrealized gain (loss) attributable to general partners' controlling interest

28,~~292~~758,~~455~~795

14,~~196~~575,~~527~~530

596,~~250~~466,340

13,~~692~~379,~~779~~003

Increase (decrease) in net assets resulting from operations attributable to general partners' controlling interest

513,~~287~~215,~~735~~339

49,~~698~~846,~~278~~599

17,~~713~~927,~~628~~604

35,~~379~~148,~~792~~321

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

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)

	For the Six Months Ended June 30,
	For the Nine Months Ended September 30,
	2015									2014
	General Partners’Controlling Interest			NoncontrollingInterest			Total			General Partners’Controlling Interest			NoncontrollingInterest			Total
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income (loss)	$	24,~~869~~330,~~401~~665		$	~~312~~494,~~386~~138		$	34,~~181~~824,~~787~~803		$	35,~~501~~271,~~751~~069		$	~~320~~502,~~706~~241		$	35,~~822~~773,~~457~~310
Net recognized and unrealized gain (loss)	28,~~418~~884,~~334~~674			~~603~~1,~~156~~823,905			310,~~021~~708,~~490~~579			14,~~196~~575,~~527~~530			~~287~~668,~~723~~995			15,~~484~~244,~~250~~525
Increase (decrease) in net assets resulting from operations	513,~~287~~215,~~735~~339			~~915~~2,~~542~~318,043			615,~~203~~533,~~277~~382			49,~~698~~846,~~278~~599			~~608~~1,~~429~~171,236			511,~~306~~017,~~707~~835
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS:
Distributions to general partners	(5,000,000		)	—			(5,000,000		)	(510,000,000		)	—			(510,000,000		)
Distributions to noncontrolling interest	—			(63154,~~681~~244		)	(63154,~~681~~244		)	—			(66368,~~592~~356		)	(66368,~~592~~356		)
Increase (decrease) in net assets resulting from capital transactions	(5,000,000		)	(63154,~~681~~244		)	(5,~~063~~154,~~681~~244		)	(510,000,000		)	(66368,~~592~~356		)	(510,~~066~~368,~~592~~356		)
INCREASE (DECREASE) IN NET ASSETS	~~287~~8,~~735~~215,339			~~851~~2,~~861~~163,799			110,~~139~~379,~~596~~138			(~~301~~153,~~722~~401		)	~~541~~802,~~837~~880			~~240~~649,~~115~~479
NET ASSETS - Beginning of period	188,251,636			9,422,311			197,673,947			185,407,870			9,263,953			194,671,823
NET ASSETS - End of period	$	~~188~~196,~~539~~466,~~371~~975		$	1011,~~274~~586,~~172~~110		$	~~198~~208,~~813~~053,~~543~~085		$	185,~~106~~254,~~148~~469		$	910,~~805~~066,~~790~~833		$	~~194~~195,~~911~~321,~~938~~302

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

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
	For the Nine Months Ended September 30,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Increase (decrease) in net assets resulting from operations	$	615,~~203~~533,~~277~~382		$	511,~~306~~017,~~707~~835
Adjustments to reconcile increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities
Net recognized and unrealized loss (gain)	(310,~~021~~708,~~490~~579		)	(15,~~484~~244,~~250~~525		)
Amortization of deferred financing costs	3346,~~374~~954			1437,~~082~~220
Bad debt expense	13,~~070~~217			3852,~~732~~056
(Increase) decrease in:
Other assets	(~~290~~676,~~698~~501		)	~~880~~862,~~215~~172
Increase (decrease) in:
Accounts payable and accrued expenses	~~503~~900,~~880~~268			90181,~~930~~952
Due to affiliates	4748,~~933~~885			~~(20~~2,~~579~~619		)
Other liabilities	(~~305~~441,~~871~~835		)	(~~343~~333,~~922~~291		)
Net cash flows provided by (used in) operating activities	34,~~171~~705,~~475~~791			46,~~481~~576,~~915~~038
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from real estate investments sold	12,668,032			—
Acquisition of real estate and improvements	(20,490,522		)	(8,295,624		)
Additions to real estate and improvements	(~~764~~1,~~067~~562,196		)	(2,~~099~~430,~~355~~902		)
Net cash flows provided by (used in) investing activities	(8,586,557		)	(10,394,979		)
Restricted cash	306,769			—
Net cash flows provided by (used in) investing activities	(9,077,917		)	(10,726,526		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on investment level debt	(~~534~~805,~~776~~553		)	(~~501~~755,~~677~~828		)
Proceeds from investment level debt	10,175,000			—1,800,000
Distributions to general partners	(5,000,000		)	(5,000,000		)
Distributions to general partners' controlling interest	(5,000,000		)	(10,000,000		)
Distributions to noncontrolling interest	(63154,~~681~~244		)	(66368,~~592~~356		)
Net cash flows provided by (used in) financing activities	4,576,543			(5,568,269		)
Security deposits payable	130,372			—
NET CHANGE IN CASH AND CASH EQUIVALENTS	(838,539		)	(11,481,333		)
Net cash flows provided by (used in) financing activities	4,345,575			(9,324,184		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(26,551		)	(13,474,672		)
CASH AND CASH EQUIVALENTS - Beginning of period	32,308,210			43,962,922
CASH AND CASH EQUIVALENTS - End of period	$	3132,~~469~~281,~~671~~659		$	32304,~~481~~882,~~589~~250

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

1617

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULES OF REAL ESTATE INVESTMENTS

			2015 Total RentableSquare FeetUnless Otherwise Indicated (Unaudited)	September 30, 2015(Unaudited)	~~June 30, 2015(Unaudited)~~					December 31, 2014	~~December 31, 2014~~
Property Name	~~June~~September 30, 2015 Ownership	City, State		Cost	~~Cost~~		Estimated FairValue	~~Estimated FairValue~~		Cost	~~Cost~~		Estimated FairValue	~~Estimated FairValue~~
OFFICES
750 Warrenville Road	WO	Lisle, IL	92,209	$	$28,928,868	~~28,537,542~~	$	$6,520,000	~~6,000,000~~	$	$27,964,168	~~27,964,168~~	$	$6,200,000	~~6,200,000~~
Summit @ Cornell Oaks	WO	Beaverton, OR	—	—	—		—	—		14,072,787	~~14,072,787~~		12,500,000	~~12,500,000~~
		Offices % as of 6/30/15	3%		28,537,542			6,000,000			42,036,955			18,700,000
		Offices % as of 9/30/15	3%	28,928,868			6,520,000			42,036,955			18,700,000
APARTMENTS
700 Broadway	CJV	Seattle, WA	59 Units	22,959,048	~~22,934,425~~		26,200,000	~~26,200,000~~		22,897,489	~~22,897,489~~		26,100,000	~~26,100,000~~
Broadstone Crossing	WO	Austin, TX	225 Units	23,132,004	~~23,109,693~~		29,800,000	~~27,900,000~~		23,070,315	~~23,070,315~~		27,426,986	~~27,426,986~~
Vantage Park	CJV	Seattle, WA	91 Units	21,800,640	~~21,752,135~~		29,700,000	~~27,900,000~~		21,640,623	~~21,640,623~~		25,900,000	~~25,900,000~~
Station House Apartments of Maplewood	WO	Maplewood, NJ	50 Units	20,524,722	~~20,490,522~~		20,500,000	~~20,490,522~~		—	—		—	—
The Reserve At Waterford Lakes	WO	Charlotte, NC	140 Units	14,806,140	~~14,753,510~~		15,500,000	~~15,200,000~~		14,676,752	~~14,676,752~~		15,000,000	~~15,000,000~~
		Apartments % as of 6/30/15	62%		103,040,285			117,690,522			82,285,179			94,426,986
		Apartments % as of 9/30/15	62%	103,222,554			121,700,000			82,285,179			94,426,986
RETAIL
Hampton Towne Center	WO	Hampton, VA	174,540	18,874,997	~~18,774,787~~		21,800,000	~~21,200,000~~		18,743,265	~~18,743,265~~		20,100,000	~~20,100,000~~
White Marlin Mall	CJV	Ocean City, MD	197,098	25,699,386	~~25,680,085~~		33,800,000	~~32,600,000~~		25,610,596	~~25,610,596~~		32,600,000	~~32,600,000~~
Westminster Crossing East, LLC	CJV	Westminster, MD	89,890	15,279,569	~~15,277,959~~		19,800,000	~~18,900,000~~		15,220,559	~~15,220,559~~		18,900,000	~~18,900,000~~
Village Walk	WO	Roswell, GA	88,504	20,749,324	~~20,749,324~~		19,500,000	~~19,500,000~~		20,749,324	~~20,749,324~~		19,300,000	~~19,300,000~~
Harnett Crossing	WO	Dunn, NC	189,143	8,519,900	~~8,472,227~~		3,490,000	~~3,490,000~~		8,469,209	~~8,469,209~~		3,980,000	~~3,980,000~~
Peachtree Corners Market	WO	Norcross, GA	42,185	19,282,716	~~19,282,716~~		20,300,000	~~19,400,000~~		19,282,716	~~19,282,716~~		19,282,715	~~19,282,715~~
Publix at Eagle Landing	WO	North Fort Myers, FL	57,840	8,385,572	~~8,385,572~~		9,100,000	~~8,800,000~~		8,380,272	~~8,380,272~~		8,400,000	~~8,400,000~~
		Retail % as of 6/30/15	66%		116,622,670			123,890,000			116,455,941			122,562,715
		Retail % as of 9/30/15	65%	116,791,464			127,790,000			116,455,941			122,562,715
Total Real Estate Investments at Estimated Fair Values as a Percentage of General Partners’ Controlling Interest as of June 30, 2015			131%		$248,200,497			$	247,580,522		$	240,778,075		$	235,689,701
Total Real Estate Investments at Estimated Fair Values as a Percentage of General Partners’ Controlling Interest as of September 30, 2015			130%	$248,942,886			$	256,010,000		$	240,778,075		$	235,689,701

WO - Wholly Owned Investment

CJV - Consolidated Joint Venture

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

1718

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THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

CONSOLIDATED SCHEDULES OF REAL ESTATE INVESTMENTS

	June 30, 2015(Unaudited)								December 31, 2014
	September 30, 2015(Unaudited)								December 31, 2014
	FaceAmount		Maturity Date	Cost		EstimatedFair Value			Cost		EstimatedFair Value
CASH AND CASH EQUIVALENTS - Percentage of General Partners' Controlling Interest						16.74		%			17.2		%
Investments in PrudentialInvestment Liquidity Pool:
Federal Home Loan Bank,0 coupon bond	$	28,000,000	July, 2015	$	28,000,000	$	28,000,000		$	14,700,000	$	14,700,000
Federal Home Loan Bank, 0 coupon bond	$	4,900,000	October 2015	$	4,900,000	$	4,900,000		$	14,700,000	$	14,700,000
Federal Home Loan Bank,0 coupon bond				—		—			5,000,000		5,000,000
Federal Home Loan Bank, 0 coupon bond	6,000,000		October 2015	6,000,000		6,000,000			5,000,000		5,000,000
Federal Home Loan Bank,0 coupon bond				—		—			11,000,000		11,000,000
Federal Home Loan Bank, 0 coupon bond	10,600,000		October 2015	10,600,000		10,600,000			11,000,000		11,000,000
Total Cash Equivalents				28,000,000		28,000,000			30,700,000		30,700,000
Federal Home Loan Bank, 0 coupon bond	7,000,000		December 2015	7,000,000		7,000,000			—		—
Cash				3,469,671		3,469,671			1,608,210		1,608,210
Total Cash Equivalents				28,500,000		28,500,000			30,700,000		30,700,000
Total Cash and Cash Equivalents				$	31,469,671	$	31,469,671		$	32,308,210	$	32,308,210
Cash				3,781,659		3,781,659			1,608,210		1,608,210
Total Cash and Cash Equivalents				$	32,281,659	$	32,281,659		$	32,308,210	$	32,308,210

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

1819

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

~~June~~September 30, 2015

(Unaudited)

Note 1: Summary of Significant Accounting Policies

A. 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~~presentation have been made. Operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2015 are not necessarily indicative of the results that may be expected for the year ~~ended~~ending December 31, 2015. For further information, refer to the audited consolidated financial statements and notes of the Partnership for the year ended December 31, 2014. The Partnership has evaluated subsequent events through ~~August~~November 1312, 2015, the date these consolidated financial statements were available to be issued. 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 “General Partners”).

New Accounting Pronouncement - In February 2015, the Financial Accounting Standards Board (“FASB”) issued updated guidance in Accounting Standards Update 2015-02 Consolidations (Topic 810) that changes the rules regarding consolidation. The pronouncement eliminates specialized guidance for limited partnerships and similar legal entities, and removes the indefinite deferral for certain investment funds. The new guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The Partnership is currently assessing the impact of the guidance on the Partnership’s consolidated financial statements.

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

Cash paid for interest during the ~~six~~nine months ended ~~June~~September 30, 2015 and ~~June 30,~~ 2014 was $12,~~662~~608,~~306~~412 and $12,~~440~~180,~~854~~543, respectively.

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. ~~(“Prudential Financial”)~~, 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 the 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 period 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 approximate value for the type of real estate in the market. ~~The~~In ~~real~~general, ~~estate~~the ~~investments~~inputs ~~consist~~used ofin ~~real~~the ~~estate~~appraisal ~~and~~process ~~improvements~~are unobservable, and ~~are~~unless ~~therefore~~indicated otherwise, real estate investments are classified as Level 3 under the FASB authoritative guidance for fair value measurements.

1920

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

~~June~~September 30, 2015

(Unaudited)

Note 3: Fair Value Measurements (continued)

Cash equivalents include short-term investments with maturities of three months or less when purchased. Short-term investments are generally valued using unadjusted quoted prices in active markets that are accessible for identical assets and are primarily classified as Level 1. See below for a description of the levels of fair value hierarchy.

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 fall are 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 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 entity’s own assumptions about how market participants would price the asset or liability.

During the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, there were no transfers between Level 1, Level 2 and Level 3.

2021

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

~~June~~September 30, 2015

(Unaudited)

Note 3: Fair Value Measurements (continued)

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

Table 1

(in 000’s)

Fair value measurements at June 30, 2015 using

Fair value measurements at September 30, 2015 using

Assets:

Cost at 0609/30/2015

Amounts measured at fair value 0609/30/2015

Quoted prices inactive marketsfor identicalassets (~~level~~Level 1)

Significant otherobservableinputs (~~level~~Level 2)

Significant ~~otherobservableinputs~~unobservableinputs (~~level~~Level 3)

Real estate and improvements

248,~~200~~943

~~247~~256,~~581~~010

—

~~247~~256,~~581~~010

Cash equivalents

28,~~000~~500

—

Total

~~276~~277,~~200~~443

~~275~~284,~~581~~510

28,~~000~~500

—

~~247~~256,~~581~~010

			(in 000’s)
			Fair value measurements at December 31, 2014 using
Assets:	Cost at 12/31/2014		Amounts measured at fair value 12/31/2014		Quoted prices inactive marketsfor identicalassets (~~level~~Level 1)		Significant otherobservableinputs (~~level~~Level 2)		Significant ~~otherobservableinputs~~unobservableinputs (~~level~~Level 3)
Real estate and improvements	$	240,778	$	235,690	$	—	$	—	$	235,690
Cash equivalents	30,700		30,700		30,700		—		—
Total	$	271,478	$	266,390	$	30,700	$	—	$	235,690

2122

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

~~June~~September 30, 2015

(Unaudited)

Note 3: Fair Value Measurements (continued)

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~~nine months ended ~~June~~September 30, 2015 and ~~June 30,~~ 2014.

Table 2

(in 000’s)

Fair value measurements using significant unobservable inputs

for the ~~six~~nine months ended ~~June~~September 30, 2015

(Level 3)

	Real estate andimprovements
Beginning balance, January 1, 2015	$	235,690
Net recognized and unrealized gains (losses) included in earnings (or changes in net assets)	310,~~021~~709
Acquisitions, issuances and contributions	2122,~~538~~279
Dispositions, settlements and distributions	(12,668		)
Ending balance, June 30, 2015	$	247,581
Ending balance, September 30, 2015	$	256,010
Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date	$	2,896
Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date	$	10,583

(in 000’s)

Fair value measurements using significant unobservable inputs

for the ~~six~~nine months ended ~~June~~September 30, 2014

(Level 3)

	Real estateandimprovements
	Real estate andimprovements
Beginning balance, January 1, 2014	$	210,100
Net recognized and unrealized gains (losses) included in earnings (or changes in net assets)	15,~~484~~244
Acquisitions, issuances and contributions	1012,~~277~~065
Dispositions, settlements and distributions	—
Ending balance, June 30, 2014	$	221,861
Ending balance, September 30, 2014	$	227,409
Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date	$	1,484
Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date	$	5,244

2223

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

~~June~~September 30, 2015

(Unaudited)

Note 3: Fair Value Measurements (continued)

Table 2

(in 000’s)

Fair value measurements using significant unobservable inputs

for the three months ended ~~June~~September 30, 2015

(Level 3)

	Real estateandimprovements
	Real estate andimprovements
Beginning balance, April 1, 2015	$	238,430
Beginning balance, July 1, 2015	$	247,581
Net recognized and unrealized gains (losses) included in earnings (or changes in net assets)	~~490~~7,687
Acquisitions, issuances and contributions	~~21,329~~742
Dispositions, settlements and distributions	~~(12,668~~—		)
Ending balance, June 30, 2015	$	247,581
Ending balance, September 30, 2015	$	256,010
Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date	$	364
Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date	$	7,687

(in 000’s)

Fair value measurements using significant unobservable inputs

for the three months ended ~~June~~September 30, 2014

(Level 3)

	Real estateandimprovements
	Real estate andimprovements
Beginning balance, April 1, 2014	$	218,546
Beginning balance, July 1, 2014	$	221,861
Net recognized and unrealized gains (losses) included in earnings (or changes in net assets)	13,~~852~~760
Acquisitions, issuances and contributions	1,~~463~~788
Dispositions, settlements and distributions	—
Ending balance, June 30, 2014	$	221,861
Ending balance, September 30, 2014	$	227,409
Unrealized gains (losses) for the period relating to level 3 assets still held at the reporting date	$	1,852
Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date	$	3,760

2324

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

~~June~~September 30, 2015

(Unaudited)

Note 3: Fair Value Measurements (continued)

Quantitative Information Regarding Level 3 Assets:

The ~~table~~tables below ~~represents~~represent quantitative information about the significant unobservable inputs used in the fair value measurement of Level 3 assets. Significant changes in any of those inputs in isolation would result in a significant change in the fair value measurement.

	As of June 30, 2015
	As of September 30, 2015
Category	Fair Value(in 000’s)		Number ~~ofproperty(ies)in~~ofpropertiesin thisproperty type	Valuation Techniques	Unobservable Input	Range (Weighted Average)
Real estate and improvements:
Apartment	$	~~117~~121,~~691~~700	5	Discounted cash flow	Exit capitalization rate	54.0075% - 6.25% (5.4830%)
					Discount rate	6.5000% - 7.7550% (6.9854%)
				Market value**
Office	6,520		1	Discounted cash flow	Exit capitalization rate	8.50%
Office	6,000		1	Discounted cash flow	Exit capitalization rate	8.00% (8.00%)
					Discount rate	9.50%
					Discount rate	9.00% (9.00%)
Retail	127,790		7	Discounted cash flow	Exit capitalization rate	6.00% - 10.00% (6.86%)
Retail	123,890		7	Discounted cash flow	Exit capitalization rate	6.25% - 10.00% (7.22%)
					Discount rate	6.25% - 11.00% (7.27%)
					Discount rate	6.50% - 11.00% (7.66%)
	$	256,010
	$	247,581
** The market value approach represents assets/liabilities in which estimated fair value represents subjective estimates by management
based on the investment's specific facts and circumstances. For example development assets and recent acquisitions may heavily weight
investment cost while pending sales may heavily weight negotiated sales prices in the related fair value estimates.



	As of December 31, 2014
Category	Fair Value (in 000’s)		Number of properties in this property type	Valuation Techniques	Unobservable Input	Range (Weighted Average)
Real estate and improvements:
Apartment	$	94,427	4	Discounted cash flow	Exit capitalization rate	5.00% - 6.25% (5.49%)
					Discount rate	6.75% - 7.75% (7.12%)
Office	18,700		2	Discounted cash flow	Exit capitalization rate	7.50% - 9.00% (8.00%)
					Discount rate	8.25% - 9.25% (8.58%)
Retail	122,563		7	Discounted cash flow	Exit capitalization rate	6.50% - 10.00% (7.36%)
					Discount rate	7.00% - 11.00% (7.89%)
	$	235,690

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

~~June~~September 30, 2015

(Unaudited)

Note 3: Fair Value Measurements (continued)

Fair Value of Financial Instruments Carried at Cost:

The Partnership's financial instruments include cash, accounts payable, accrued expenses and mortgages. The carrying amount of cash, accounts payable and accrued expenses approximate their fair value due to the instruments' short term nature. As of ~~June~~September 30, 2015 and December 31, 2014, the Partnership’s mortgages on wholly-owned properties and consolidated ~~partnerships~~joint ventures have an estimated fair value of approximately $79.9 million and $70.7 million, respectively, and a carrying value (amortized cost) of $79.64 million and $70.0 million, respectively. The estimated fair value is based on the amount at which the Partnership would pay to transfer the debt at the reporting date taking into consideration the effect of nonperformance risk, including the Partnership’s own credit risk. The fair value of debt is determined using the discounted cash flow method, which applies certain key assumptions including the contractual terms of the agreement, market interest rates, interest spreads, credit risk, liquidity and other factors. Different assumptions or changes in future market conditions could significantly affect the estimated fair value. The input values used in determining the fair value on investment level debt are unobservable, and therefore, would be considered as Level 3 under the fair value hierarchy.

Note 4: Risk


A.	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 and improvements ~~are~~is fairly presented as of ~~June~~September 30, 2015 and December 31, 2014.


B.	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 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~~September 30, 2015, 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 5: Commitments and Contingencies~~26

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

September 30, 2015

(Unaudited)

Note 5: Concentration of Risk on Real Estate Investments and Other Concentrated Risks

Concentration of risk on real estate investments' represents the risk associated with investments that are concentrated in certain geographic regions and industries. The Partnership mitigates this risk by diversifying its investments in various regions and different types of real estate investments. Please refer to the Consolidated Schedules of Real Estate Investments for the Partnership's diversification on the types of real estate investments.

At September 30, 2015, the Partnership had real estate investments located throughout the United States. The diversification of the Partnership's holdings based on the estimated fair values and established National Council of Real Estate Investment Fiduciaries (NCREIF) regions is as follows:



Region		Estimated Fair Value (in 000's)	Region %
Northeast	$	20,500	8.01	%
East North Central		6,520	2.54	%
Mideast		94,390	36.87	%
Pacific		55,900	21.84	%
Southeast		48,900	19.10	%
Southwest		29,800	11.64	%

Total	$	256,010	100.00	%

The allocations above are based on 100% of the estimated fair value of wholly-owned properties and consolidated joint ventures.

At September 30, 2015 and December 31, 2014, there were two partners who each held investments in the Partnership that represented greater than 10% of the Partnership's Net Asset Value.

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 the Partnership’s management, the outcome of such matters will not have a significant effect on the financial position of the Partnership.

25The Partnership has private real estate debt and equity investments for which it is contractually obligated to fund additional capital after its initial investments as well as those in which capital is provided without being contractually obligated to do so. Such additional capital is generally provided in the ordinary course of business to fund recurring and non-recurring capital improvement activities of underlying real estate investments. For the periods ended September 30, 2015 and December 31, 2014, the Partnership funded approximately $0 and $922,191, respectively, in satisfaction of contractual obligations on committed capital. The Partnership does not typically provide material non-contractual financial support to investees.

As of September 30, 2015, the Partnership does not have debt available to be drawn related to Real Estate and Improvements and Real Estate Partnerships. Additionally, the Partnership does not have equity commitments to fund properties under development.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

~~June~~September 30, 2015

(Unaudited)

Note 67: Related Party Transactions

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 ~~six~~nine month periods ended ~~June~~September 30, 2015 and 2014, management fees incurred by the Partnership were $12,~~378~~085,~~984~~893 and $1,~~261~~914,~~889~~432, respectively. The Partnership also reimburses PIM for certain administrative services rendered by PIM. The amounts incurred for the ~~six~~nine month periods ended ~~June~~September 30, 2015 and 2014 were $2640,~~814~~221 and $0, respectively, and are classified as administrative expenses in the consolidated statements of operations. For the three month periods ended ~~June~~September 30, 2015 and 2014, management fees incurred by the Partnership were $~~701~~706,~~488~~909 and $~~629~~652,~~344~~543, respectively. The administrative services the Partnership reimburses PIM incurred for the three month periods ended ~~June~~September 30, 2015 and 2014 were $13,407 and $0, respectively.

Note 78: Share Values and Shares Outstanding

The share value and shares outstanding at ~~June~~September 30, 2015 and December 31, 2014 are as follows:

	6/30/2015		6/30/2014
	September 30, 2015		December 31, 2014
Share Value	$4143.6237		$3840.7548
Shares Outstanding	4,529,591		4,~~776~~650,~~348~~878
The capital share transactions for the six months ended are as follows:
	6/30/2015		6/30/2014
Beginning of Period	4,650,878		4,907,883
Distributions	(121,287	)	(131,535	)
End of Period	4,529,591		4,776,348

26The capital share transactions for the nine and twelve months ended September 30, 2015 and December 31, 2014, respectively, are as follows:



	For the nine months ended September 30, 2015		For the twelve months ended December 31, 2014


Beginning of Period	4,650,878		4,907,883
Distributions	(121,287	)	(257,005	)
End of Period	4,529,591		4,650,878

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF

THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

~~June~~September 30, 2015

(Unaudited)

Note 89: Financial Highlights

	For The Six Months Ended June 30,
	For The Nine Months Ended September 30,
	2015			2014			2013			2012			2011
Per Share (Unit) Operating Performance:
Per Share Operating Performance:
Net Asset Value attributable to general partners’ controlling interest, beginning of period	$	40.48		$	37.78		$	34.49		$	32.27		$	28.38
Income From Investment Operations:
Net investment income attributable to general partners’ controlling interest, before management fee	01.9340			01.9849			1.0975			01.9653			01.9238
Investment Management fee attributable to general partners’ controlling interest	(0.3146		)	(0.2640		)	(0.2538		)	(0.2233		)	(0.2031		)
Net recognized and unrealized gain (loss) on investments attributable to general partners’ controlling interest	01.5295			0.2596			0.2845			0.0331			1.2988
Increase (decrease) in Net Assets Resulting from Operations attributable to general partners’ controlling interest	12.1489			02.9705			1.1282			01.7751			2.0195
Net Asset Value attributable to general partners’ controlling interest, end of period	$	4143.6237		$	3839.7583		$	3536.6131		$	33.0478		$	3031.3933
Total Return attributable to general partners’ controlling interest, before Management Fee (a):	38.5832		%	36.2852		%	36.9942		%	35.0773		%	711.7851		%
Total Return attributable to general partners’ controlling interest, after Management Fee (a):	27.8416		%	25.5743		%	35.2732		%	24.3765		%	710.0639		%
Ratios/Supplemental Data:
Net Assets attributable to general partners’ controlling interest, end of period (in millions)	$	~~189~~196		$	185		$	~~179~~183		$	~~171~~175		$	172
Ratios to average net assets for the period ended (b):
Management fees	01.7409		%	01.6904		%	01.7006		%	01.6904		%	01.7006		%
Other portfolio level expense	0.1623		%	0.1016		%	0.1117		%	0.1320		%	0.1320		%
Total Portfolio Level Expenses	01.9032		%	01.7920		%	01.8123		%	01.8224		%	01.8326		%
Net Investment Income, before Management Fee	23.2737		%	23.6090		%	35.1603		%	24.9775		%	34.1668		%
Net Investment Income, after Management Fee	12.5327		%	12.9186		%	23.4599		%	23.2765		%	23.4359		%


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

Net Investment Income before/after management fee + Net Recognized and Unrealized Gains/(Losses)

Beginning Net Asset Value + Time Weighted Contributions - Time Weighted Distributions


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

27Note 10: Subsequent Event

On November 9, 2015, the Partnership acquired a development property located in Chicago, Illinois for a purchase price of $6,144,019.

On November 10, 2015, the Partnership paid off a mortgage loan on a retail property in Roswell, Georgia in the amount of $12,500,000.

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

All of the assets of The Prudential Variable Contract Real Property Account (the “Real Property Account”) are invested in The Prudential Variable Contract Real Property Partnership (the “Partnership”). Accordingly, the liquidity and capital resources and results of operations for the Real Property 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 The Prudential Insurance Company of America, Pruco Life Insurance Company, and Pruco Life Insurance Company of New Jersey, or collectively, the “General 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 Real Property 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~~September 30, 2015, the Partnership’s liquid assets, consisting of cash and cash equivalents, were approximately $3132.53 million, awhich ~~decrease~~remained ofrelatively ~~approximately~~flat ~~$0.8 million~~ from ~~$32.3 million as of~~ December 31, 2014. The ~~decrease~~liquid ~~was~~assets ~~primarily~~had ~~due~~offsetting toactivity resulting in decreases from the following activities: (a) $10.3 million of equity for an acquisition of an apartment complex located in Maplewood, New Jersey; (b) $5.0 million distribution to the General Partners’ controlling interest; (c) $0.68 million of principal payments made on financed properties; and (d) $01.86 million paid for capital improvements. The $01.86 million payment for capital improvements included the following items: (a) $0.39 million for leasing expenses at the office property in Lisle, Illinois; (b) $0.12 million for unit upgrades at one of the apartment properties in Seattle, Washington; (c) $0.1 million for space renovations at the retail property in ~~Ocean~~Hampton, ~~City~~Virginia; (d) $0.1 million for unit upgrades at the apartment property in Charlotte, ~~Maryland~~North Carolina; and (de) $0.3 million for capital improvements and transaction costs associated with leasing expenses at various properties. ~~Partially~~Primarily offsetting ~~this~~the decrease were increases from the following activities: (a) net cash ~~flow~~flows generated from property operations of $35.21 million; and (b) $12.7 million of proceeds from the sale of the office in Beaverton, Oregon.

Sources of liquidity included net cash flow from property operations and interest from cash equivalents. The Partnership uses cash for its real estate investment activities and for distributions to its General Partners. As of ~~June~~September 30, 2015, approximately 11.21% 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~~nine and ~~six~~three month periods ended ~~June~~September 30, 2015 and ~~June 30,~~ 2014.

Net investment income/(loss) overview

The Partnership’s net investment income attributable to the General Partners’ controlling interest for the ~~six~~nine month period ended ~~June~~September 30, 2015 was approximately $24.93 million, a decrease of approximately $0.69 million from the prior year period. The decrease in net investment income attributable to the General Partners’ controlling interest was primarily due to a decrease of $1.13 million in the office sector investments’ net investment income from the prior year period and a decrease of approximately $0.48 million in the hotel sector investments’ net investment income from the prior year period. Partially offsetting this decrease was an increase of approximately $0.68 million from the prior year period in net investment income attributable to the General Partners’ controlling interest from the retail sector and an increase of approximately $0.46 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 three month period ended ~~June~~September 30, 2015 was approximately $1.5 million, a decrease of approximately $0.23 million from the prior year period. The decrease in net investment income attributable to the General Partners’ controlling interest was primarily due to a decrease of $0.34 million in the ~~office~~hotel sector investments’ net investment income from the prior year period, a decrease of $0.32 million in the ~~hotel~~office sector investments’ net investment income from the prior year period and aan ~~decrease~~increase of approximately $0.1 million to other net investment ~~income from portfolio level~~ expenses. Partially offsetting this decrease was an increase of approximately $0.32 million from the prior year period in net investment income attributable to the General Partners’ controlling interest from the apartment sector and an increase of approximately $0.2 million from the prior year period in net investment income attributable to the General Partners’ controlling interest from the retail sector.

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Valuation overview

The Partnership recorded a net recognized and unrealized gain attributable to the General Partners’ controlling interest of approximately $28.49 million for the ~~six~~nine month period ended ~~June~~September 30, 2015. This is compared with a net unrealized gain attributable to the General Partners’ controlling interest of approximately $14.26 million for the prior year period. The unrealized gains attributable to the General Partners’ controlling interest for the ~~six~~nine month period ended ~~June~~September 30, 2015 were primarily due to valuation increases in the apartment and retail investments of $39.14 million. A net recognized gain of $0.1 million was attributable to the sale of one office investment located in Beaverton, Oregon. Partially offsetting the gains was an unrealized loss of $0.6 million in the office sector investments.

The Partnership recorded a net ~~recognized and~~ unrealized ~~gain~~gains attributable to the General Partners’ controlling interest of approximately $06.25 million for the three month period ended ~~June~~September 30, 2015. This is compared with a net unrealized gain attributable to the General Partners’ controlling interest of approximately $13.74 million for the prior year period. The unrealized gains attributable to the General Partners'’ controlling interest for the three month period ended ~~June~~September 30, 2015 were primarily due to valuation increases in the ~~apartment investments. In addition~~retail, ~~a net recognized gain $0.1 million was attributable to the sale of one office investment located in Beaverton~~apartment, ~~Oregon. Partially offsetting the gains were unrealized losses in the retail~~ and office sector investments.

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The following table presents a comparison of the Partnership’s sources of net investment income attributable to the General Partners’ controlling interest and net recognized and unrealized gains or (losses) attributable to the General Partners’ controlling interest for the three and ~~six~~nine month periods ended ~~June~~September 30, 2015 and 2014.

	Six Months Ended June 30,						Three Months Ended June 30,
	Nine Months Ended September 30,						Three Months Ended September 30,
	2015			2014			2015			2014
Net Investment Income (loss):
Office properties	$	(~~300~~358,~~404~~030	)	$	~~766~~926,~~328~~376		$	(~~196~~57,~~779~~626	)	$	~~133~~160,~~037~~048
Apartment properties	23,~~090~~092,~~064~~934			12,~~691~~495,~~539~~108			1,~~154~~002,~~416~~870			~~823~~803,~~510~~570
Retail properties	24,~~808~~170,~~064~~550			23,~~172~~331,~~862~~477			1,~~418~~362,~~175~~486			1,~~195~~158,~~721~~615
Hotel property	(5455,~~857~~440		)	~~309~~714,~~223~~321			(~~29,273~~583		)	~~266~~405,~~588~~098
Other (including interest income, investment management fee, etc.)	(12,~~673~~519,~~466~~349		)	(12,~~438~~196,~~201~~213		)	(~~818~~845,~~040~~883		)	(~~731~~758,~~843~~013		)
Total Net Investment Income	$	24,~~869~~330,~~401~~665		$	35,~~501~~271,~~751~~069		$	1,~~528~~461,~~499~~264		$	1,~~687~~769,~~013~~318
Net Recognized Gain (Loss) on Real Estate Investments:
Office Properties	$	125,879		$	—		$	125,879		$	—
Office properties	$	125,879		$	—		$	—		$	—
Net Recognized Gain (Loss) on Real Estate Investments	$	125,879		$	—		$	~~125,879~~—		$	—
Net Unrealized Gain (Loss) on Real Estate Investments:
Office properties	$	(~~773~~644,~~375~~701	)	$	~~(869~~12,~~312~~989	)	$	~~(668~~128,~~483~~674	)	$	~~(190~~882,~~572~~303	)
Apartment properties	15,~~825~~004,~~979~~005			~~888~~2,~~592~~119,286			13,~~190~~178,~~504~~026			~~860~~1,~~998~~230,693
Retail properties	14,~~239~~399,~~851~~491			~~876~~2,~~576~~144,608			~~(462~~3,~~771~~159,640		)	1,~~032~~268,~~206~~032
Hotel property	—			~~300~~298,~~671~~647			—			(92,~~853~~025		)
Net Unrealized Gain (Loss) on Real Estate Investments	$	28,~~292~~758,~~455~~795		$	14,~~196~~575,~~527~~530		$	596,~~250~~466,340		$	13,~~692~~379,~~779~~003
Net Recognized and Unrealized Gain (Loss) on Real Estate Investments	$	28,~~418~~884,~~334~~674		$	14,~~196~~575,~~527~~530		$	~~185~~6,~~129~~466,340		$	13,~~692~~379,~~779~~003

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OFFICE PROPERTIES

Six Months Ended June 30,	Net InvestmentIncome/(Loss)2015			Net InvestmentIncome/(Loss)2014		Recognized/UnrealizedGain/(Loss)2015			UnrealizedGain/(Loss)2014			Occupancy2015		Occupancy2014
Nine Months Ended September 30,	Net InvestmentIncome/(Loss)2015			Net InvestmentIncome/(Loss)2014		Recognized/UnrealizedGain/(Loss)2015			UnrealizedGain/(Loss)2014			Occupancy2015		Occupancy2014
Property
Lisle, IL	$	(59117,~~932~~558	)	$	~~373~~354,~~791~~435	$	(~~773~~644,~~375~~701	)	$	(1856,~~072,224~~522	)	55	%	38	%
Brentwood, TN #1 (1)	—			15,096		—			—			N/A		N/A
Beaverton, OR (2)	(240,472		)	~~360~~539,~~419~~823		125,879			~~202~~869,~~912~~511			N/A		100	%
Brentwood, TN #2 (1)	—			17,022		—			—			N/A		N/A
	$	(~~300~~358,~~404~~030	)	$	~~766~~926,~~328~~376	$	(~~647~~518,~~496~~822	)	$	~~(869~~12,~~312~~989	)

Three Months Ended June 30,
Three Months Ended September 30,
Property
Lisle, IL	$	(1257,~~685~~626	)	$	(6019,~~879~~356	)	$	~~(568~~128,~~483~~674	)	$	~~(302~~215,~~996~~703	)
Beaverton, OR	(184,094		)	193,916			25,879			112,424
Beaverton, OR (2)	—			179,404			—			666,600
	$	(~~196~~57,~~779~~626	)	$	~~133~~160,~~037~~048		$	~~(542~~128,~~604~~674	)	$	~~(190~~882,~~572~~303	)

(1) The Brentwood, Tennessee properties were sold on December 12, 2013. ~~2014~~The net investment income in 2014 represents post closing expense write-offs. (2) The Beaverton, Oregon property was sold on June 8, 2015.

Net investment income/(loss)

Net investment income attributable to the General Partners’ controlling interest for the Partnership’s office properties was a loss of approximately $0.34 million and $0.21 million for the ~~six~~nine and three month periods ended ~~June~~September 30, 2015, respectively, which represents a decrease of approximately $1.13 million and $0.32 million from the prior year periods, respectively. The decreases in net investment income are primarily due to lease termination fees paid in 2014 at the property in Lisle, Illinois, and expenses from the sale of the property in Beaverton, Oregon in 2015.

Recognized and Unrealized gain/(loss)

The office properties owned by the Partnership recorded a net recognized and unrealized loss attributable to the General Partners’ controlling interest of ~~approximately~~ $0.~~6 million and $0.~~5 million for the ~~six~~nine ~~and three~~ month ~~periods~~period ended ~~June~~September 30, 2015, ~~respectively,~~ compared with a net unrealized ~~loss~~gain attributable to the General Partners’ controlling interest of ~~approximately~~less ~~$0.9~~than ~~million and~~ $0.21 million ~~for~~from the prior year period~~, respectively~~. The unrealized loss attributable to the General Partners’ controlling interest for the ~~six~~nine month ~~and three month~~ period ended ~~June~~September 30, 2015 was primarily due to aleasing ~~value~~related ~~decrease and~~ capital expenditures at the property in Lisle, Illinois. Partially offsetting ~~these~~the ~~losses~~loss was a recognized gain on the sale of the property in Beaverton, Oregon. The office properties owned by the Partnership recorded a net unrealized gain attributable to the General Partners’ controlling interest of approximately $0.1 million for the three month period ended September 30, 2015, compared with a net unrealized gain attributable to the General Partners’ controlling interest of approximately $0.9 million from the prior year period. The unrealized gain attributable to the General Partners’ controlling interest for the three month period ended September 30, 2015 was primarily due to a decrease in anticipated capital expenditures at the property in Lisle, Illinois.

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APARTMENT PROPERTIES

Six Months Ended June 30,	Net InvestmentIncome/(Loss)2015		Net InvestmentIncome/(Loss)2014			UnrealizedGain/(Loss)2015			UnrealizedGain/(Loss)2014			Occupancy2015		Occupancy2014
Nine Months Ended September 30,	Net InvestmentIncome/(Loss)2015		Net InvestmentIncome/(Loss)2014			UnrealizedGain/(Loss)2015			UnrealizedGain/(Loss)2014			Occupancy2015		Occupancy2014
Property
Raleigh, NC	$	—	$	(64,926	)	$	—		$	—		N/A		N/A
Raleigh, NC (2)	$	—	$	(64,926	)	$	—		$	—		N/A		N/A
Austin, TX	~~730~~1,~~420~~045,261		~~732~~1,~~192~~086,982			~~433~~2,~~636~~311,325			81(114,~~449~~441		)	9496	%	9896	%
Charlotte, NC	~~437~~673,~~626~~289		~~421~~639,~~312~~493			~~123~~370,~~242~~612			~~429~~588,~~444~~991			9998	%	9997	%
Seattle, WA #1	~~267~~428,~~621~~516		~~295~~396,~~819~~246			5332,~~603~~674			~~149~~912,~~372~~734			9295	%	8281	%
Seattle, WA #2	~~397~~588,~~517~~844		~~307~~437,~~142~~313			12,~~215~~314,~~498~~116			~~228~~732,~~327~~002			9893	%	8199	%
Maplewood, NJ	256,880		—			—			—			86	%	N/A
Maplewood, NJ (1)	357,024		—			(24,722		)	—			80	%	N/A
	$	23,~~090~~092,~~064~~934	$	12,~~691~~495,~~539~~108		$	15,~~825~~004,~~979~~005		$	~~888~~2,~~592~~119,286

Three Months Ended June 30,
Three Months Ended September 30,
Property
Raleigh, NC	$	—	$	(64,926	)	$	—		$	—
Austin, TX	$	314,841	$	354,791		$	1,877,689		$	(195,890	)
Austin, TX	372,357		358,625			573,296			89,951
Charlotte, NC	235,663		218,181			247,370			159,547
Charlotte, NC	216,098		218,430			(41,654		)	219,403
Seattle, WA #1	160,895		100,427			(20,929		)	763,362
Seattle, WA #1	112,176		156,276			65,870			203,995
Seattle, WA #2	191,327		130,171			1,098,618			503,674
Seattle, WA #2	196,905		155,105			592,992			347,649
Maplewood, NJ (1)	100,144		—			(24,722		)	—
Maplewood, NJ	256,880		—			—			—
	$	1,002,870	$	803,570		$	3,178,026		$	1,230,693
	$	1,154,416	$	823,510		$	1,190,504		$	860,998
(1) The Maplewood, New Jersey property was acquired on April 2, 2015.
(2) The Raleigh, North Carolina Property was sold on February 25, 2013. The net investment loss in 2014 represents post closing expense write-offs.

Net investment income/(loss)

Net investment income attributable to the General Partners’ controlling interest for the Partnership’s apartment properties was approximately $23.1 million and $1.20 million for the ~~six~~nine and three month periods ended ~~June~~September 30, 2015, respectively, which represents an increase of approximately $0.46 million ~~from~~and ~~each~~$0.2 ofmillion from the prior year periods, respectively. The increase was primarily due to the acquisition of the apartment complex in Maplewood, New Jersey, ~~and~~ increased rents at aproperty #2 in Seattle, Washington, and increased occupancy at property #1 in Seattle, Washington.

Recognized and Unrealized gain/(loss)

The apartment properties owned by the Partnership recorded a net unrealized gain attributable to the General Partners’ controlling interest of approximately $15.80 million and $13.2 million for the ~~six~~nine and three month periods ended ~~June~~September 30, 2015, respectively, compared with a net unrealized gain attributable to the General Partners’ controlling interest of approximately $02.91 million ~~for~~and ~~each~~$1.2 ofmillion from the prior year periods, respectively. The unrealized gain attributable to the General Partners’ controlling interest for the ~~six~~nine ~~month~~ and three month periods ended ~~June~~September 30, 2015 was primarily due to favorable market leasing assumptions at the properties in Seattle, Washington, Austin, Texas, and ~~Seattle~~Charlotte, ~~Washington~~North Carolina.

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RETAIL PROPERTIES

Six Months Ended June 30,	Net InvestmentIncome/(Loss)2015		Net InvestmentIncome/(Loss)2014		UnrealizedGain/(Loss)2015			UnrealizedGain/ (Loss)2014			Occupancy2015		Occupancy2014
Nine Months Ended September 30,	Net InvestmentIncome/(Loss)2015		Net InvestmentIncome/(Loss)2014		UnrealizedGain/(Loss)2015			UnrealizedGain/ (Loss)2014			Occupancy2015		Occupancy2014
Property
Hampton, VA	$	~~702~~1,~~465~~011,387	$	~~598~~976,~~440~~082	$	1,~~068~~568,~~478~~268		$	~~609~~893,~~162~~518		96	%	96	%
Ocean City, MD	~~458~~702,~~658~~245		~~430~~646,~~952~~574		9618,~~807~~939			~~345~~397,~~213~~861			96	%	96	%
Westminster, MD	~~641~~1,~~827~~004,201		~~646~~992,~~175~~172		~~(57~~840,~~400~~990		)	~~(64~~635,~~247~~753		)	100	%	100	%
Dunn, NC	~~174~~137,~~789~~799		6849,~~500~~986		(~~493~~540,~~018~~691		)	(~~419~~379,~~070~~478		)	2726	%	4648	%
Roswell, GA	~~222~~374,~~987~~685		~~266~~381,~~709~~154		200,000			~~378~~570,~~642~~078			94	%	9496	%
North Fort Myers, FL	~~237~~373,~~490~~032		~~162~~285,~~086~~509		~~394~~694,700			26,876			85	%	88%
Norcross, GA	~~369~~567,~~848~~201		—		~~117~~1,~~284~~017,285			—			100	%	N/A
	$	24,~~808~~170,~~064~~550	$	23,~~172~~331,~~862~~477	$	14,~~239~~399,~~851~~491		$	~~876~~2,~~576~~144,608

Three Months Ended June 30,

Three Months Ended September 30,

Property

Hampton, VA

~~352~~309,~~634~~549

~~330~~377,~~811~~642

~~(708~~499,~~338~~790

)

~~596~~284,~~850~~356

Ocean City, MD

~~246~~252,~~140~~884

~~226~~215,~~853~~622

14609,~~611~~132

2152,~~631~~648

Westminster, MD

~~343~~362,~~585~~374

~~337~~345,~~555~~998

~~(518~~898,391

)

—700,000

Dunn, NC

85(36,~~816~~990

)

42(18,~~766~~515

)

36(47,~~774~~673

)

~~295~~39,~~349~~592

Roswell, GA

85151,697

~~130~~114,~~423~~445

~~100,000~~—

91191,~~500~~436

North Fort Myers, FL

~~114~~135,~~152~~542

~~127~~123,~~313~~423

94300,~~700~~000

~~26,876~~—

Norcross, GA

~~190~~187,~~151~~430

—

—900,000

—

1,~~418~~362,~~175~~486

1,~~195~~158,~~721~~615

~~(462~~3,~~771~~159,640

)

1,~~032~~268,~~206~~032

Net investment income/(loss)

Net investment income attributable to the General Partners’ controlling interest for the Partnership’s retail properties was approximately $24.82 million for the ~~six~~nine month period ended ~~June~~September 30, 2015, which represents an increase of approximately $0.68 million from the prior year period. The increase was largely due to the additional income provided by the property in Norcross, Georgia that was acquired in December, 2014 and the property in North Fort Myers, Florida that was acquired in March, 2014. Net investment income attributable to General Partners’ controlling interest for the Partnership’s retail properties was approximately $1.4 million for the three month period ended ~~June~~September 30, 2015, which represents an increase of approximately $0.2 million from the prior year period. The increase was primarily due to the additional income provided by the property in Norcross, Georgia that was acquired in December, 2014.

Unrealized gain/(loss)

The retail properties owned by the Partnership recorded a net unrealized gain attributable to the General Partners’ controlling interest of approximately $14.24 million for the ~~six~~nine month period ended ~~June~~September 30, 2015, compared with a net unrealized gain attributable to the General Partners’ controlling interest of approximately $02.91 million from the prior year period. The net unrealized gain attributable to the General Partners’ controlling interest for the ~~six~~nine month period ended ~~June~~September 30, 2015 was primarily due to favorable market leasing assumptions at the ~~property~~properties in Hampton, Virginia, Ocean City, Maryland, and Westminster, Maryland. Additional gains were provided by decreased operating expenses at the property in North Fort Myers, Florida~~. Partially~~ ~~offsetting~~and decreased investment rates at the ~~net~~property ~~unrealized~~in ~~gain~~North ~~was~~Fort anMyers, ~~unrealized~~Florida. Investment ~~loss~~rates atinclude ~~the~~direct ~~property~~and interminal ~~Dunn~~capitalization rates, ~~North~~and ~~Carolina~~discount ~~due~~rates, towhich ~~lower~~reflect ~~occupancy~~investors’ yield requirements on investments. The retail properties owned by the Partnership recorded a net unrealized ~~loss~~gain attributable to the General Partners’ controlling interest of approximately $03.52 million for the three month period ended ~~June~~September 30, 2015, compared with a net unrealized gain attributable to the General Partners’ controlling interest of approximately $1.03 million from the prior year period. The net unrealized ~~loss~~gain attributable to the General Partners’ controlling interest for the three month period ended ~~June~~September 30, 2015 was primarily due to ~~higher~~lower investment rates from aproperties ~~national tenant store closing at the property~~ in Hampton, Virginia~~. Investment~~, ~~rates~~Ocean ~~include~~City, ~~direct and terminal capitalization rates~~Maryland, ~~and discount rates~~Westminster, ~~which reflect investors’ yield requirements on investments. Partially offsetting this loss was a net unrealized gain at the property in Roswell~~Maryland, ~~Georgia from increased rents and a decrease in real estate tax expense at the property in~~ North Fort Myers, Florida, and Norcross, Georgia.

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HOTEL PROPERTY

Six Months Ended June 30,

Net InvestmentIncome/(Loss)2015

Net InvestmentIncome/(Loss)2014

UnrealizedGain/(Loss)2015

UnrealizedGain/(Loss)2014

Occupancy2015

Occupancy2014

Nine Months Ended September 30,

Net InvestmentIncome/(Loss)2015

Net InvestmentIncome/(Loss)2014

UnrealizedGain/(Loss)2015

UnrealizedGain/(Loss)2014

Occupancy2015

Occupancy2014

Property

Lake Oswego, OR (1)

(5455,~~857~~440

)

~~309~~714,~~223~~321

$ -

~~300~~298,~~671~~647

N/A

6785

Three Months Ended June 30,

Three Months Ended September 30,

Property

Lake Oswego, OR(1)

(~~29,273~~583

)

~~266~~405,~~588~~098

$ -

(92,~~853~~025

)

(1) The Lake Oswego, Oregon property was sold on October 29, 2014. 2015 net investment loss represents post closing expenses.

(1) The Lake Oswego, Oregon property was sold on October 29, 2014. The net investment loss in 2015 represents post closing expenses.

Net investment income/(loss)

Net investment loss attributable to the General Partners’ controlling interest for the Partnership’s hotel property was less than $0.1 million for the ~~six~~nine and three month periods ended ~~June~~September 30, 2015, respectively, which represents a decrease of approximately $0.48 million and $0.34 million from the prior year periods, respectively. The decrease was a result of the property in Lake Oswego, Oregon being sold on October 29, 2014.

Recognized and Unrealized gain/(loss)

The Partnership sold the hotel property on October 29, 2014 and did not record a net unrealized or recognized gain/loss attributable to the General Partners’ controlling interest for the ~~six~~nine and three month periods ended ~~June~~September 30, 2015, respectively, compared with an unrealized gain attributable to the General Partners’ controlling interest of approximately $0.3 million and less than $0.1 million unrealized loss for the prior year periods, respectively.

Other

Other net investment expense mainly includes investment management fees, other portfolio level expenses and interest income. Other net investment expense attributable to the General Partners’ controlling interest was approximately $12.75 million and $0.8 million for the ~~six~~nine and three month periods ended ~~June~~September 30, 2015, respectively, which ~~remained~~represents ~~relatively~~an ~~unchanged~~increase of approximately $0.3 million and $0.1 million from the prior year periods, respectively. The increases are primarily due to audit fees, property appraisals, and investment management fees.

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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 Real Property 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 Real Property Account and the unaudited consolidated financial statements of the Partnership that are most dependent on the application of estimates and assumptions.

Valuation of 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.

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. is responsible for assuring 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 Financial Accounting Standards Board ~~(“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 period 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 determine the approximate value for the type of real estate in the market.

Cash equivalents include short-term investments with maturities of three months or less when purchased.

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 Real Property 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.

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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 5754.1091% of its investment portfolio as of ~~June~~ September 30, 2015, 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 and cash equivalents at ~~June~~September 30, 2015:

	Maturity		EstimatedMarket Value(millions)				AverageInterest Rate
Cash and cash equivalents	0-3 months		$	3132.53			0.0508	%

The table below discloses the Partnership’s investment level debt as of ~~June~~September 30, 2015. The fair value of the Partnership’s long-term investment level 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 $ 000s),including current portion	2015			2016			2017			2018			2019			Thereafter			Total			EstimatedFair Value
Weighted Average Fixed Interest Rate	45.9855		%	4.1556		%	4.0951		%	4.0246		%	34.9743		%	4.53		%	4.2967		%
Future Annual Principal Payment	$	1312,~~049~~778		$	1,153		$	1,327		$	2,408		$	1,680		$	60,030		$	79,~~647~~376		$	79,875

Credit Risk - 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 Real Property Account that could adversely affect its operating results and liquidity.

ITEM 4. Controls and Procedures

In order to ensure that the information we must disclose in our filings with the Securities and Exchange Commission is recorded, processed, summarized, and reported on a timely basis, the ~~company~~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), as amended under the Securities Exchange Act of 1934 (“Exchange Act”), as of ~~June~~September 30, 2015. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~June~~September 30, 2015, 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(f), occurred during the quarter ended ~~June~~September 30, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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, 2014. 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.

101.DEF-XBRL Taxonomy Extension Definition Linkbase Document.

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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.

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

in respect of

The Prudential Variable Contract Real Property Account

(Registrant)

Date: August 13, 2015	By:	/s/ Robert M. Falzon
Date: November 12, 2015	By:	/s/ Robert M. Falzon
	Robert M. Falzon
	Executive Vice President and Chief Financial Officer
	(Authorized Signatory and Principal Financial Officer)

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