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EX-31.1 - EXHIBIT 31.1 - PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCplnjvariable3q1610-qxex311.htm
EX-32.2 - EXHIBIT 32.2 - PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCplnjvariable3q1610-qxex322.htm
EX-32.1 - EXHIBIT 32.1 - PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCplnjvariable3q1610-qxex321.htm
EX-31.2 - EXHIBIT 31.2 - PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCplnjvariable3q1610-qxex312.htm

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________________ 
FORM 10-Q
____________________________________________________  
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 033-20018
____________________________________________________ 
PRUCO LIFE INSURANCE COMPANY OF
NEW JERSEY
in respect of
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
(Exact name of registrant as specified in its charter)
____________________________________________________ 
New Jersey
 
22-2426091
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
213 Washington 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
 



PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
(Registrant)
INDEX
 
 
  Page
 
 
 
 
 

2


Forward-Looking Statement Disclosure
Certain of the statements included in this Quarterly Report on Form 10-Q, including but not limited to those in Management’s Discussion and Analysis of Financial Condition and Results of Operations, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “includes,” “plans,” “assumes,” “estimates,” “projects,” “intends,” “should,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Pruco Life Insurance Company of New Jersey, or the “Company”, or Pruco Life of New Jersey 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 financial strength or credit ratings; (6) investment losses and defaults; (7) competition in our product lines and for personnel; (8) changes in tax law; (9) regulatory or legislative changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the U.S. Department of Labor's fiduciary rules; (10) adverse determinations in litigation or regulatory matters, and our exposure to contingent liabilities; (11) 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; (12) ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; (13) interruption in telecommunication, information technology or other operational systems or failure to maintain the security, confidentiality or privacy of sensitive data on such systems; and (14) changes in statutory or U.S. GAAP accounting principles, practices or policies. The Company and the Real Property Account do not intend, and are under no obligation, to update any particular forward-looking statement included in this document. See “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2015, 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.


3


Throughout this Quarterly Report on Form 10-Q, the "Real Property Account" and the "Registrant" refer to Pruco Life of New Jersey Variable Contract Real Property Account. "Pruco Life of New Jersey" or the "Company" refers to Pruco Life Insurance Company of New Jersey. The "Partnership" refers to The Prudential Variable Contract Real Property Partnership.

PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
UNAUDITED INTERIM FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
STATEMENTS OF NET ASSETS
September 30, 2016 and December 31, 2015
 
September 30, 2016
 
December 31, 2015
ASSETS
 
 
 
Investment in The Prudential Variable Contract Real Property Partnership
$
9,397,862

 
$
9,036,785

Net Assets
$
9,397,862

 
$
9,036,785

NET ASSETS, representing:
 
 
 
Equity of contract owners
$
7,192,067

 
$
7,184,139

Equity of Pruco Life Insurance Company of New Jersey
2,205,795

 
1,852,646

 
$
9,397,862

 
$
9,036,785

Units outstanding
2,432,320

 
2,421,763

Portfolio shares held
204,595

 
204,595

Portfolio net asset value per share
$
45.93

 
$
44.17


STATEMENTS OF OPERATIONS
For the three and nine months ended September 30, 2016 and 2015
 
Nine Months Ended
 
Three Months Ended
 
September 30, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
INVESTMENT INCOME
 
 
 
 
 
 
 
Net investment income allocated from The Prudential Variable Contract Real Property Partnership
$
217,794

 
$
195,313

 
$
86,995


$
65,903

EXPENSES
 
 
 
 
 
 
 
Charges to contract owners for assuming mortality and expense risk and for administration
30,687

 
29,782

 
10,236

 
10,138

NET INVESTMENT INCOME
187,107

 
165,531

 
76,759

 
55,765

NET RECOGNIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
 
 
 
 
 
 
 
Net unrealized gain (loss) on investments allocated from The Prudential Variable Contract Real Property Partnership
154,891

 
395,597

 
85,071

 
292,175

Net recognized gain (loss) on investments allocated from The Prudential Variable Contract Real Property Partnership
(11,607
)
 
5,677

 

 

NET GAIN (LOSS) ON INVESTMENTS
143,284

 
401,274

 
85,071

 
292,175

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
$
330,391

 
$
566,805

 
$
161,830


$
347,940


STATEMENTS OF CHANGES IN NET ASSETS
For the three and nine months ended September 30, 2016 and 2015
 
Nine Months Ended
 
Three Months Ended
 
September 30, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
OPERATIONS
 
 
 
 
 
 
 
Net investment income
$
187,107

 
$
165,531

 
$
76,759

 
$
55,765

Net unrealized gain (loss) on investments allocated from The Prudential Variable Contract Real Property Partnership
154,891

 
395,597

 
85,071

 
292,175

Net recognized gain (loss) on investments allocated from The Prudential Variable Contract Real Property Partnership
(11,607
)
 
5,677

 

 

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
330,391

 
566,805

 
161,830

 
347,940

CAPITAL TRANSACTIONS
 
 
 
 
 
 
 
Net contributions (withdrawals) by contract owners
(245,026
)
 
(211,705
)
 
(114,001
)
 
(80,334
)
Net contributions (withdrawals) by Pruco Life Insurance Company of New Jersey
275,712

 
33,811

 
124,236

 
90,473

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS
30,686

 
(177,894
)
 
10,235

 
10,139

TOTAL INCREASE (DECREASE) IN NET ASSETS
361,077

 
388,911

 
172,065

 
358,079

NET ASSETS
 
 
 
 
 
 
 
Beginning of period
9,036,785

 
8,485,201

 
9,225,797

 
8,516,033

End of period
$
9,397,862

 
$
8,874,112

 
$
9,397,862

 
$
8,874,112

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

4

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS OF 
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
September 30, 2016


Note 1: General
Pruco Life of New Jersey Variable Contract Real Property Account (the “Real Property Account” or the “Registrant”) was established on October 30, 1987 by resolution of the Board of Directors of Pruco Life Insurance Company of New Jersey (“Pruco Life of New Jersey” or the “Company”), as a separate investment account pursuant to New Jersey law and is registered under the Securities Act of 1933, as amended. Pruco Life of New Jersey is a wholly-owned subsidiary of Pruco Life Insurance Company (“Pruco Life”). Pruco Life is a wholly-owned subsidiary of The Prudential Insurance Company of America (“Prudential”), which is a wholly-owned subsidiary of Prudential Financial, Inc. (“Prudential Financial”). The assets of the Real Property Account are segregated from Pruco Life of New Jersey’s other assets. The Real Property Account is used to fund benefits under certain variable life insurance and variable annuity contracts issued by Pruco Life of New Jersey. These products are Variable Appreciable Life (“VAL”), Variable Life Insurance (“VLI”), Discovery Plus (“SPVA”), and Discovery Life Plus (“SPVL”).

The assets of the Real Property Account are invested in The Prudential Variable Contract Real Property Partnership (the “Partnership”). The Partnership is 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 Prudential Variable Contract Real Property Account and the Pruco Life 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.

Note 2: Summary of Significant Accounting Policies

A.    Basis of Accounting

The Unaudited Interim Financial Statements as of September 30, 2016 and the statement of net assets as of December 31, 2015, 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, 2015.

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 measured using the Partnership's net asset value as a practical expedient. At September 30, 2016 and December 31, 2015, the Real Property Account’s share of the general partners' controlling interest of the Partnership was 4.5% or 204,595 shares for both periods.

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.





5

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS OF 
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
September 30, 2016

Note 2: Summary of Significant Accounting Policies (continued)

D.    Equity of Pruco Life Insurance Company of New Jersey

Pruco Life of New Jersey 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 nine months ended September 30, 2016 and 2015 as all of the transactions are settled by Pruco Life of New Jersey 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 nine months ended September 30, 2016 and 2015.
Note 3: Charges and Expenses

A.     Mortality Risk and Expense Risk Charges

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

B.     Administrative Charges

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

C.     Cost of Insurance and Other Related Charges

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

D.     Deferred Sales Charge

For SPVA, there is a deferred sales charge that applies at the time of a full or partial withdrawal, and the amount of the charge (which declines over time) depends on the number of years that have elapsed since the contract was issued. This deferred sales charge is assessed through the redemption of units.

E.     Partial Withdrawal Charge

A charge is imposed by Pruco Life of New Jersey on partial withdrawals of the cash surrender value for VAL. A charge equal to the lesser of $15 or 2% will be made in connection with each partial withdrawal of the cash surrender value of a contract. This charge is assessed through the redemption of units.


6

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS OF 
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
September 30, 2016

Note 4: Taxes

Pruco Life of New Jersey 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 nine months ended September 30, 2016 and 2015 were as follows: 
 
Nine Months Ended September 30,
 
2016
 
2015
VAL
$
(236,025
)
 
$
(118,893
)
VLI
(8,861
)
 
(22,410
)
SPVA

 

SPVL
(140
)
 
(70,402
)
TOTAL
$
(245,026
)
 
$
(211,705
)
 
Three Months Ended September 30,
 
2016
 
2015
VAL
$
(104,019
)
 
$
(21,450
)
VLI
(9,934
)
 
(11,150
)
SPVA

 

SPVL
(48
)
 
(47,734
)
TOTAL
$
(114,001
)
 
$
(80,334
)

Note 6: Partnership Distributions

For the nine months ended September 30, 2016, the Partnership made no distribution. For the nine months ended 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 $0.2 million.

For the nine months ended September 30, 2016 and 2015, 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, 2016 and December 31, 2015 were as follows:
 
September 30, 2016
 
December 31, 2015
Units Outstanding:
2,432,320
 
2,421,763
Unit Value:
$3.16702
to
$4.13879
 
$3.07375
to
$3.99015

7

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS OF 
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
September 30, 2016

Note 8: Financial Highlights
The range of total return for the three and nine months ended September 30, 2016 and 2015 were as follows:
 
Nine Months Ended September 30,
 
2016
 
2015
Total Return
3.03%
to
3.73%
 
6.17%
to
6.88%
 
Three Months Ended September 30,
 
2016
 
2015
Total Return
1.55%
to
1.78%
 
3.88%
to
4.11%

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 Real Property Account values its investment in the Partnership using the net asset value provided by the Partnership as a practical expedient. Effective January 1, 2016, the Real Property Account adopted Accounting Standards Update (“ASU”) 2015-07 Fair Value Measurement (Topic 820): Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which removes the requirement to classify the investment in the Partnership in the fair value hierarchy. As a result, certain tables and additional disclosures related to the leveling of assets and liabilities are no longer applicable. ASU 2015-07 was applied retrospectively to all periods presented.
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. 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.
The following is a summary of the investment strategy, risks, and redemption provisions 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, such as office buildings, shopping centers, hotels, apartments or industrial properties, and participating mortgage loans. The Partnership is subject to the risks inherent in the ownership of real property such as fluctuations in occupancy rates and operating expenses and variations in rental schedules. The Partnership properties are also subject to the risk of loss due to certain types of damage, which are either uninsurable or not economically insurable. 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. Refer to the Partnership’s unaudited consolidated financial statements for other related risks.
The Partnership allows for withdrawal of cash, in any amount up to a partner’s value of the Partnership. Ordinarily payment of the amount requested will be made on the day following the request. The Partnership reserves the right to defer such payments for a period of up to six months if the partners or the investment manager determine that there is insufficient cash available and prompt disposition of investments held by the Partnership cannot be made on commercially reasonable terms.
The Real Property Account had no unfunded capital commitments as of September 30, 2016.

8




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9


THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

September 30, 2016(Unaudited)

December 31, 2015
ASSETS



REAL ESTATE INVESTMENTS - At estimated fair value:



Real estate and improvements (cost: 9/30/2016 -- $230,876,553; 12/31/2015 -- $255,844,718)
$
266,612,008


$
264,925,433

CASH AND CASH EQUIVALENTS
48,526,674


14,423,867

OTHER ASSETS, NET
3,000,626


2,925,378

Total assets
$
318,139,308


$
282,274,678

LIABILITIES & PARTNERS’ EQUITY



INVESTMENT LEVEL DEBT, net (deferred financing costs:



9/30/2016 -- $1,108,614; 12/31/2015 -- $571,719)
$
92,831,592


$
66,026,362

ACCOUNTS PAYABLE AND ACCRUED EXPENSES
3,080,567


2,550,010

DUE TO AFFILIATES
814,759


745,769

OTHER LIABILITIES
824,032


809,256

Total liabilities
97,550,950


70,131,397

COMMITMENTS AND CONTINGENCIES



NET ASSETS, REPRESENTING PARTNERS’ EQUITY:



GENERAL PARTNERS’ CONTROLLING INTEREST
208,062,484


200,068,466

NONCONTROLLING INTEREST
12,525,874


12,074,815

         Total partners' equity
220,588,358


212,143,281

Total liabilities and partners’ equity
$
318,139,308


$
282,274,678

NUMBER OF SHARES OUTSTANDING AT END OF PERIOD
4,529,591


4,529,591

GENERAL PARTNERS' SHARE VALUE AT END OF PERIOD
$
45.93


$
44.17

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


10


THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
For the Nine Months Ended
September 30,
 
For the Three Months Ended September 30,
 
2016

2015
 
2016

2015
INVESTMENT INCOME:



 



Revenue from real estate and improvements
$
16,866,756


$
16,733,201

 
$
5,763,549


$
5,818,106

Interest income
41,728


10,449

 
10,022


3,350

Total investment income
16,908,484


16,743,650

 
5,773,571


5,821,456

INVESTMENT EXPENSES:



 



Operating
2,374,269


2,650,791

 
788,272


891,546

Investment management fees
2,378,985


2,085,893

 
814,759


706,909

Real estate taxes
1,775,510


2,143,530

 
404,176


828,320

Administrative
2,418,670


2,383,267

 
816,767


791,979

Interest expense
2,624,745


2,655,366

 
866,410


959,686

Total investment expenses
11,572,179


11,918,847

 
3,690,384


4,178,440

NET INVESTMENT INCOME (LOSS)
5,336,305


4,824,803

 
2,083,187


1,643,016

RECOGNIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:



 



Net proceeds from real estate investments sold
5,743,019


12,668,032

 



Less: Cost of real estate investments sold
28,943,348


14,114,940

 



Gain (loss) realized from real estate investments sold
(23,200,329
)

(1,446,908
)
 



Less: Reversal of prior periods’ unrealized gain (loss) on real estate investments sold
(22,943,347
)

(1,572,787
)
 



Net gain (loss) recognized on real estate investments sold
(256,982
)

125,879

 



 Change in unrealized gain (loss) on real estate investments
3,711,392


10,582,700

 
2,120,661


7,687,089

 Change in unrealized gain (loss) on interest rate cap
238



 
(411
)


         Net unrealized gain (loss) on investments
3,711,630


10,582,700

 
2,120,250


7,687,089

NET RECOGNIZED AND UNREALIZED GAIN (LOSS)
3,454,648


10,708,579

 
2,120,250


7,687,089

INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
$
8,790,953


$
15,533,382

 
$
4,203,437


$
9,330,105

Amounts attributable to noncontrolling interest:



 



Net investment income (loss) attributable to noncontrolling interest
$
514,484


$
494,138

 
$
157,166


$
181,752

Net unrealized gain (loss) attributable to noncontrolling interest
282,451


1,823,905

 
236,854


1,220,749

          Net increase (decrease) in net assets resulting from operations attributable to noncontrolling interest
$
796,935


$
2,318,043

 
$
394,020


$
1,402,501

Amounts attributable to general partners’ controlling interest:



 



Net investment income (loss) attributable to general partners' controlling interest
$
4,821,821


$
4,330,665

 
$
1,926,021


$
1,461,264

Net recognized gain (loss) attributable to general partners' controlling interest
(256,982
)

125,879

 



Net unrealized gain (loss) attributable to general partners' controlling interest
3,429,179


8,758,795

 
1,883,396


6,466,340

          Net increase (decrease) in net assets resulting from operations attributable to general partners' controlling interest
$
7,994,018


$
13,215,339

 
$
3,809,417


$
7,927,604

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

11


THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
General Partners’
Controlling Interest
 
Noncontrolling
Interest
 
Total
 
General Partners’
Controlling Interest
 
Noncontrolling
Interest
 
Total
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
 
 
 
 
 
 
 
 
 
 
 
Net investment income (loss)
$
4,821,821

 
$
514,484

 
$
5,336,305

 
$
4,330,665

 
$
494,138

 
$
4,824,803

Net recognized and unrealized gain (loss)
3,172,197

 
282,451

 
3,454,648

 
8,884,674

 
1,823,905

 
10,708,579

Increase (decrease) in net assets resulting from operations
7,994,018

 
796,935

 
8,790,953

 
13,215,339

 
2,318,043

 
15,533,382

INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS:
 
 
 
 
 
 
 
 
 
 
 
Distributions

 
(345,876
)
 
(345,876
)
 
(5,000,000
)
 
(154,244
)
 
(5,154,244
)
Increase (decrease) in net assets resulting from capital transactions

 
(345,876
)
 
(345,876
)
 
(5,000,000
)
 
(154,244
)
 
(5,154,244
)
INCREASE (DECREASE) IN NET ASSETS
7,994,018

 
451,059

 
8,445,077

 
8,215,339

 
2,163,799

 
10,379,138

NET ASSETS - Beginning of period
200,068,466

 
12,074,815

 
212,143,281

 
188,251,636

 
9,422,311

 
197,673,947

NET ASSETS - End of period
$
208,062,484

 
$
12,525,874

 
$
220,588,358

 
$
196,466,975

 
$
11,586,110

 
$
208,053,085

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


12


THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

For the Nine Months Ended September 30,

2016

2015
CASH FLOWS FROM OPERATING ACTIVITIES:



Increase (decrease) in net assets resulting from operations
$
8,790,953


$
15,533,382

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)
(3,454,648
)

(10,708,579
)
Amortization of deferred financing costs
32,250


46,954

Bad debt expense
(3,189
)

3,217

(Increase) decrease in:



Other assets
27,045


(552,598
)
Increase (decrease) in:



Accounts payable and accrued expenses
323,038


900,268

Due to affiliates
68,990


48,885

Other liabilities
77,120


(441,835
)
Net cash flows provided by (used in) operating activities
5,861,559


4,829,694

CASH FLOWS FROM INVESTING ACTIVITIES:



Net proceeds from real estate investments sold
5,743,019


12,668,032

Acquisition of real estate and improvements


(20,490,522
)
Additions to real estate and improvements
(3,767,663
)

(1,562,196
)
(Increase) decrease in investment level restricted cash
(98,867
)

306,769

Net cash flows provided by (used in) investing activities
1,876,489


(9,077,917
)
CASH FLOWS FROM FINANCING ACTIVITIES:



Principal payments on investment level debt
(856,950
)

(805,553
)
Proceeds from investment level debt
28,199,075


10,175,000

Payment of deferred financing costs
(569,146
)

(123,903
)
Distributions to general partners' controlling interest


(5,000,000
)
Distributions to noncontrolling interest
(345,876
)

(154,244
)
Increase (decrease) in security deposits payable
(62,344
)

130,372

Net cash flows provided by (used in) financing activities
26,364,759


4,221,672

NET CHANGE IN CASH AND CASH EQUIVALENTS
34,102,807


(26,551
)
CASH AND CASH EQUIVALENTS - Beginning of period
14,423,867


32,308,210

CASH AND CASH EQUIVALENTS - End of period
$
48,526,674


$
32,281,659

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


13


THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED SCHEDULES OF REAL ESTATE INVESTMENTS
 
 
 
 
 
 
2016 Total 
Rentable
Square Feet
Unless Otherwise Indicated (Unaudited)
 
September 30, 2016
(Unaudited)
 
December 31, 2015
Property Name
 
September 30, 2016 Ownership
 
City, State
 
 
Cost
 
Estimated Fair
Value
 
Cost
 
Estimated Fair
Value
OFFICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
750 Warrenville Road
 
WO
 
Lisle, IL
 
Sold
 
$

 
$

 
$
28,943,348

 
$
6,000,000

 
 
 
 
Offices % as of 9/30/16
 
—%
 

 

 
28,943,348

 
6,000,000

APARTMENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
700 Broadway
 
CJV
 
Seattle, WA
 
59 Units
 
23,058,233

 
27,900,000

 
22,982,297

 
26,300,000

Broadstone Crossing
 
WO
 
Austin, TX
 
225 Units
 
23,470,959

 
30,900,000

 
23,156,042

 
30,300,000

Vantage Park
 
CJV
 
Seattle, WA
 
91 Units
 
21,981,514

 
30,200,000

 
21,830,762

 
30,300,000

Station House Apartments of Maplewood
 
WO
 
Maplewood, NJ
 
50 Units
 
20,534,552

 
20,800,000

 
20,534,552

 
20,600,000

1325 N. Wells
 
CJV
 
Chicago, IL
 
N/A
 
7,862,008

 
7,862,008

 
6,485,433

 
6,485,433

The Reserve At Waterford Lakes
 
WO
 
Charlotte, NC
 
140 Units
 
15,013,299

 
16,800,000

 
14,852,929

 
16,100,000

 
 
 
 
Apartments % as of 9/30/16
 
65%
 
111,920,565

 
134,462,008

 
109,842,015

 
130,085,433

RETAIL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hampton Towne Center
 
WO
 
Hampton, VA
 
174,540
 
19,809,778

 
20,300,000

 
18,968,928

 
21,100,000

White Marlin Mall
 
CJV
 
Ocean City, MD
 
197,098
 
25,874,561

 
34,600,000

 
25,701,926

 
33,800,000

Westminster Crossing East, LLC
 
CJV
 
Westminster, MD
 
89,890
 
15,326,055

 
20,600,000

 
15,326,055

 
20,400,000

Village Walk
 
WO
 
Roswell, GA
 
88,504
 
20,796,113

 
20,800,000

 
20,796,113

 
20,500,000

Harnett Crossing
 
WO
 
Dunn, NC
 
189,143
 
9,466,293

 
5,550,000

 
8,598,045

 
3,640,000

Peachtree Corners Market
 
WO
 
Norcross, GA
 
42,185
 
19,282,716

 
20,900,000

 
19,282,716

 
20,300,000

Publix at Eagle Landing
 
WO
 
North Fort Myers, FL
 
57,840
 
8,400,472

 
9,400,000

 
8,385,572

 
9,100,000

 
 
 
 
Retail % as of 9/30/16
 
64%
 
118,955,988

 
132,150,000

 
117,059,355

 
128,840,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Real Estate Investments at Estimated Fair Values as a Percentage of General Partners’ Controlling Interest as of September 30, 2016
 
129%
 
$
230,876,553

 
$
266,612,008

 
$
255,844,718

 
$
264,925,433

WO - Wholly-Owned Investment
CJV - Consolidated Joint Venture
The accompanying notes are an integral part of these consolidated financial statements.

14


THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
CONSOLIDATED SCHEDULES OF INVESTMENTS
 
September 30, 2016
(Unaudited)
 
December 31, 2015
 
Face
Amount
 
Maturity Date
 
Cost
 
Estimated
Fair Value
 
Cost
 
Estimated
Fair Value
CASH EQUIVALENTS - Percentage of General Partners' Controlling Interest
 
 
 
%
 
 
 
5.7
%
Investments in Prudential
Investment Liquidity Pool:
 
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Bank, 0 coupon bond

 

 
$

 
$

 
$
10,000,000

 
$
10,000,000

Federal Home Loan Bank, 0 coupon bond

 

 

 

 
1,500,000

 
1,500,000

Total Cash Equivalents
 
 
 
$

 
$

 
$
11,500,000

 
$
11,500,000

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


15

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2016
(Unaudited)


Note 1: Summary of Significant Accounting Policies

A.
Basis of Presentation -The consolidated financial statements of The Prudential Variable Contract Real Property Partnership (the “Partnership”) have been prepared in accordance with accounting principles generally accepted in the United States of America that are applicable to investment companies. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been made. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. For further information, refer to the audited consolidated financial statements and notes of the Partnership for the year ended December 31, 2015. The Partnership has evaluated subsequent events through November 10, 2016, 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”).

As a result of adopting Accounting Standards Update (“ASU”) 2015-03, as of December 31, 2015 the Partnership reclassified $571,719 of deferred financing costs from other assets to investment level debt. The new guidance was applied retrospectively. The Partnership's adoption of the guidance did not have a significant effect on the Partnership's consolidated financial statements.

B.
New Accounting Pronouncements - In August 2016, the Financial Accounting Standards Board (“FASB”) issued updated guidance in ASU 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the emerging Issues Task Force) to address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide clarity on the treatment of eight specifically defined types of cash inflows and outflows. The new guidance is effective for financial statements issued for annual reporting periods beginning after December 15, 2017, and for interim periods within those annual periods, with early adoption permitted, provided that all of the amendments are adopted in the same period. The Partnership is currently assessing the impact of the guidance on the Partnership’s consolidated financial statements.

In February 2016, the FASB issued updated guidance in ASU 2016-02 Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. This new standard is not expected to have a significant impact on the Partnership’s consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition model requiring an entity to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, entities may use either a full retrospective or a modified retrospective approach. Additionally, this guidance modifies disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This new revenue standard applies to sales of real estate assets to customers, such as sales by homebuilders, merchant builders, land developers, condominium sellers and timeshare sellers. Sales of real estate that constitute a business, when those sales are made to customers, are also within the scope of this new standard. Leasing transactions are not within the scope of this new standard. In August 2015, the FASB issued ASU 2015-14 which deferred the original effective date of ASU 2014-09. As a result of the deferral, the guidance in ASU 2014-09 for public business entities is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. This new standard is not expected to have a significant impact on the Partnership’s consolidated financial statements.











16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2016
(Unaudited)


Note 1: Summary of Significant Accounting Policies (continued)

C.
Accounting Pronouncements Adopted - In April 2015, the FASB issued ASU 2015-03 Interest-Imputation of Interest (Subtopic 835-30) which requires entities to present debt issuance costs as a direct deduction from the carrying amount of the related debt liability. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as deferred charge assets, separate from the related debt liability. This guidance does not address how debt issuance costs related to line-of-credit arrangements should be presented on the balance sheet or amortized. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the FASB issued ASU 2015-15 Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-15 clarifies that the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The new guidance is effective for public business entities for fiscal years and interim periods beginning after December 15, 2015. The new guidance must be applied retrospectively. The adoption of this accounting guidance did not have a material impact on the Partnership’s consolidated financial statements.

In February 2015, the FASB issued updated guidance in ASU 2015-02 Consolidation (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 adoption of this accounting guidance did not have a material impact on the Partnership’s consolidated financial statements.

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

Cash paid for interest during the nine months ended September 30, 2016 and 2015 was $2,573,856 and $2,608,412, respectively.

As of September 30, 2016, $3,767,663 was paid for additions to real estate and improvements, which includes $1,376,575 related to 1325 North Wells’ development.

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 PGIM, Inc. (“PGIM”) is responsible for assuring that the valuation process provides independent and reasonable property fair value estimates. PGIM is an indirectly owned subsidiary of Prudential Financial, Inc. An unaffiliated third party has been appointed by PGIM 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

17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2016
(Unaudited)
Note 3: Fair Value Measurements (continued)

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. In general, the inputs used in the appraisal process are unobservable; therefore, unless indicated otherwise, real estate investments are classified as Level 3 under the FASB authoritative guidance for fair value measurements.

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 the fair value hierarchy.

Interest rate caps are recorded at fair value which is determined using discounted cash flow models. The models’ key assumptions include the contractual terms of the contract, along with significant observable inputs, including interest rates, liquidity, credit spreads and other factors including nonperformance risk as well as that of counterparties. These derivatives are traded in the over-the-counter ("OTC") market and are classified within Level 2 in the fair value hierarchy.

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 nine months ended September 30, 2016 and 2015 and year ended December 31, 2015, there were no transfers between Level 1, Level 2 and Level 3.

Table 1 below summarizes the assets measured at fair value on a recurring basis and their respective levels in the fair value hierarchy.
 
 
 
(in 000’s)
 
 
 
Fair value measurements at September 30, 2016 using
Assets:
Cost at
September 30, 2016
 
Amounts measured at fair value September 30, 2016
 
Quoted prices in
active markets
for identical
assets (Level 1)
 
Significant other
observable
inputs (Level 2)
 
Significant
unobservable
inputs (Level 3)
Real estate and improvements
$
230,877

 
$
266,612

 
$

 
$

 
$
266,612

Interest rate cap

 
0*

 

 
0*

 

Total
$
230,877

 
$
266,612

 
$

 
$

 
$
266,612

 
 
 
 
 
 
 
 
 
 
*Amount less than $1,000
 
 
 
 
 
 
 
 
 
 
 
 
(in 000’s)
 
 
 
Fair value measurements at December 31, 2015 using
Assets:
Cost at
December 31, 2015
 
Amounts measured at fair value December 31, 2015
 
Quoted prices in
active markets
for identical
assets (Level 1)
 
Significant other
observable
inputs (Level 2)
 
Significant
unobservable
inputs (Level 3)
Real estate and improvements
$
255,845

 
$
264,925

 
$

 
$

 
$
264,925

Cash equivalents
11,500

 
11,500

 
11,500

 

 

Total
$
267,345

 
$
276,425

 
$
11,500

 
$

 
$
264,925


18

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2016
(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 nine months ended September 30, 2016 and 2015.
(in 000's)
Fair value measurements using significant unobservable
inputs for the nine months ended September 30, 2016
(Level 3)


Real estate and
improvements
Beginning balance, January 1, 2016
$
264,925

Net recognized and unrealized gains (losses) included in earnings (or changes in net assets)
3,455

Acquisitions, issuances and contributions
3,975

Dispositions, settlements and distributions
(5,743
)
Ending balance, September 30, 2016
$
266,612

Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date
$
3,711


(in 000's)
Fair value measurements using significant unobservable
inputs for the nine months ended September 30, 2015
(Level 3)


Real estate and
improvements
Beginning balance, January 1, 2015
$
235,690

Net recognized and unrealized gains (losses) included in earnings (or changes in net assets)
10,709

Acquisitions, issuances and contributions
22,279

Dispositions, settlements and distributions
(12,668
)
Ending balance, September 30, 2015
$
256,010

Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date
$
10,583

 

19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2016
(Unaudited)
Note 3: Fair Value Measurements (continued)


(in 000's)
Fair value measurements using significant unobservable
inputs for the three months ended September 30, 2016
(Level 3)


Real estate and
improvements
Beginning balance, July 1, 2016
$
263,087

Net recognized and unrealized gains (losses) included in earnings (or changes in net assets)
2,121

Acquisitions, issuances and contributions
1,404

Dispositions, settlements and distributions

Ending balance, September 30, 2016
$
266,612

Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date
$
2,121



(in 000's)
Fair value measurements using significant unobservable
 inputs for the three months ended September 30, 2015
(Level 3)


Real estate and
improvements
Beginning balance, July 1, 2015
$
247,581

Net recognized and unrealized gains (losses) included in earnings (or changes in net assets)
7,687

Acquisitions, issuances and contributions
742

Dispositions, settlements and distributions

Ending balance, September 30, 2015
$
256,010

Unrealized gains (losses) for the period relating to Level 3 assets still held at the reporting date
$
7,687






















20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2016
(Unaudited)
Note 3: Fair Value Measurements (continued)


Quantitative Information Regarding Level 3 Assets:

The tables below 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 September 30, 2016
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
$
134,462

 
5
 
Discounted cash flow
 
Exit capitalization rate
 
5.00% - 6.25% (5.29%)
 
 
 
 
 
 
 
Discount rate
 
6.25% - 7.50% (6.66%)
 
 
 
1
 
Market Value *
 
 
 
 
Retail
132,150

 
7
 
Discounted cash flow
 
Exit capitalization rate
 
5.75% - 9.50% (6.73%)
 
 
 
 
 
 
 
Discount rate
 
6.00% - 10.50% (7.21%)
 
$
266,612

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2015
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
$
130,085

 
5
 
Discounted cash flow
 
Exit capitalization rate
 
4.75% - 6.25% (5.31%)
 
 
 
 
 
 
 
Discount rate
 
6.00% - 7.50% (6.54%)
 
 
 
1
 
Market Value *
 
 
 
 
Office
6,000

 
1
 
Discounted cash flow
 
Exit capitalization rate
 
8.75%
 
 
 
 
 
 
 
Discount rate
 
10.25%
Retail
128,840

 
7
 
Discounted cash flow
 
Exit capitalization rate
 
6.00% - 10.00% (6.65%)
 
 
 
 
 
 
 
Discount rate
 
6.25% - 11.00% (7.17%)
 
$
264,925

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

* 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.

Fair Value of Financial Instruments Carried at Cost:

The Partnership is required to disclose the fair value of certain financial instruments that are not reported at fair value. These financial instruments include cash and cash equivalents, accounts payable, accrued expenses and mortgages. The carrying amount of cash and cash equivalents, accounts payable and accrued expenses approximate their fair value due to the instruments’ short-term nature. As of September 30, 2016 and December 31, 2015, the Partnership’s mortgages on wholly-owned properties and consolidated joint ventures have an estimated fair value of approximately $93.1 million and $66.9 million, respectively, and an outstanding principal balance of $93.9 million and $66.6 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. Certain significant inputs 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.

21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2016
(Unaudited)


Note 4: Interest Rate Caps

Certain of the Partnership’s consolidated joint ventures entered into an interest rate cap transaction ("Cap") with an unrelated major financial institution. The Partnership uses Caps in order to reduce the effect of interest rate fluctuations or interest rate risk of certain real estate investments’ interest expense on variable rate debt.

The Partnership has recorded the fair value of the Cap in “Other Assets” on the Consolidated Statements of Assets and Liabilities. The resulting unrealized gain (loss) is included in the Consolidated Statements of Operations in “Change in unrealized gain (loss) on interest rate cap.”

The Partnership’s Cap is collateralized by the asset attributable to the related investment level debt. As of September 30, 2016, the estimated fair value is $238.

Note 5: 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 consolidated 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 fairly presented as of September 30, 2016 and December 31, 2015.

B.
Credit Risk

In the normal course of business, the Partnership maintains cash and cash equivalents in financial institutions, which at times may exceed federally insured limits. The Partnership is subject to credit risk to the extent any financial institution with which it conducts business is unable to fulfill contractual obligations on its behalf. The Partnership monitors the financial condition of such financial institutions to minimize credit risk exposure.

C.
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 September 30, 2016, 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.





22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2016
(Unaudited)


Note 6: 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, 2016, 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: NJ
 
$
20,800

 
7.80
%
East North Central: IL
 
 
7,862

 
2.95
%
Mideast: MD, NC, VA
 
 
97,850

 
36.70
%
Pacific: WA
 
 
58,100

 
21.79
%
Southeast: FL, GA
 
 
51,100

 
19.17
%
Southwest: TX
 
 
30,900

 
11.59
%
Total
 
$
266,612

 
100.00
%
 
 
 
 
 
 
The allocations above are based on 100% of the estimated fair value of wholly-owned properties and consolidated joint ventures. The Partnership has no significant concentrations of tenants as no single tenant has annual contract rent that makes up more than 15% of the rental income of the Partnership.

At September 30, 2016 and December 31, 2015, there were two partners who each held investments in the Partnership that represented greater than 10% of the Partnership's net asset value.

Note 7: 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.

The Partnership has private real estate 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, 2016 and December 31, 2015, the Partnership did not fund any contractual obligations on committed capital. The Partnership does not typically provide material non-contractual financial support to investees.

As of September 30, 2016, the Partnership's share of unfunded debt obligations related to real estate and improvements is $11.1 million. The Partnership does not have equity commitments to fund properties under development.

23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2016
(Unaudited)

Note 8: Related Party Transactions

Pursuant to an investment management agreement, PGIM charges the Partnership a daily investment management fee at an annual rate of 1.25% of the average daily gross asset valuation of the Partnership. For the nine months ended September 30, 2016 and 2015, management fees incurred by the Partnership were $2,378,985and $2,085,893, respectively. The Partnership also reimburses PGIM for certain administrative services rendered by PGIM. The amounts incurred for the nine months ended September 30, 2016 and 2015 were $0 and $40,221, respectively, and are classified as administrative expenses in the consolidated statements of operations. For the three month periods ended September 30, 2016 and 2015, management fees incurred by the Partnership were $814,759 and $706,909, respectively. The amounts incurred for administrative services rendered by PGIM and reimbursed by the Partnership for the three month periods ended September 30, 2016 and 2015 were $0 and $13,407, respectively.

Note 9: Share Values and Shares Outstanding

The share value and shares outstanding at September 30, 2016 and December 31, 2015 are as follows:

 
 
 
 
 
 
 
 
September 30, 2016

 
December 31, 2015

 
Share Value
 
$45.93
 
$44.17
 
Shares Outstanding
 
4,529,591

 
4,529,591

 
 
 
 
 
 
 

The capital share transactions for the nine and twelve months ended September 30, 2016 and December 31, 2015, respectively, are as follows:

 
 
Outstanding shares for the nine months ended September 30, 2016
 
Outstanding shares for the twelve months ended December 31, 2015
 
 
 
 
 
 
 
 
 
Beginning of Period
 
4,529,591

 
4,650,878

 
Distributions
 

 
(121,287
)
 
End of Period
 
4,529,591

 
4,529,591

 



24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
September 30, 2016
(Unaudited)

Note 10: Financial Highlights
 
 
    For The Nine Months Ended September 30,
 
 
2016
 
2015
 
2014
 
2013
 
2012
Per Share (Unit) Operating Performance:
 
 
 
 
 
 
 
 
 
 
Net asset value attributable to general partners' controlling interest, beginning of period
 
$
44.17

 
$
40.48

 
$
37.78

 
$
34.49

 
$
32.27

Income From Investment Operations:
 
 
 
 
 
 
 
 
 
 
Net investment income attributable to general partners' controlling interest, before management fee
 
1.59

 
1.40

 
1.49

 
1.75

 
1.53

Investment management fee attributable to general partners' controlling interest
 
(0.53
)
 
(0.46
)
 
(0.40
)
 
(0.38
)
 
(0.33
)
Net recognized and unrealized gain (loss) on investments attributable to general partners' controlling interest
 
0.70

 
1.95

 
0.96

 
0.45

 
0.31

Net increase (decrease) in net assets resulting from operations attributable to general partners' controlling interest
 
1.76

 
2.89

 
2.05

 
1.82

 
1.51

Net asset value attributable to general partners' controlling interest, end of period
 
$
45.93

 
$
43.37

 
$
39.83

 
$
36.31

 
$
33.78

Total return attributable to general partners' controlling interest, before management fee (a):
 
5.22
%
 
8.32
%
 
6.52
%
 
6.42
%
 
5.73
%
Total return attributable to general partners' controlling interest, after management fee (a):
 
4.00
%
 
7.16
%
 
5.43
%
 
5.32
%
 
4.65
%
Ratios/Supplemental Data:
 
 
 
 
 
 
 
 
 
 
Net assets attributable to general partners' controlling interest, end of period (in millions)
 
$
208

 
$
196

 
$
185

 
$
183

 
$
175

Ratios to average net assets for the period ended (b) (c):
 
 
 
 
 
 
 
 
 
 
      Management fees
 
1.18
%
 
1.09
%
 
1.04
%
 
1.06
%
 
1.04
%
     Other portfolio level expenses
 
0.26
%
 
0.23
%
 
0.16
%
 
0.17
%
 
0.20
%
     Total portfolio level expenses
 
1.44
%
 
1.32
%
 
1.20
%
 
1.23
%
 
1.24
%
     Net investment income, before management fee
 
3.56
%
 
3.37
%
 
3.90
%
 
5.03
%
 
4.75
%
     Net investment income, after management fee
 
2.38
%
 
2.27
%
 
2.86
%
 
3.99
%
 
3.65
%
(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.
(c)
The income and expense ratios are not annualized.











25


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

All of the assets of Pruco Life Insurance Company of New Jersey 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 of Financial Condition and Results of Operations 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 (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 September 30, 2016, the Partnership’s liquid assets, consisting of cash and cash equivalents, were approximately $48.5 million, an increase of approximately $34.1 million from $14.4 million as of December 31, 2015. The increase was primarily due to the following activities: (a) $28.2 million of proceeds from investment level debt; (b) $5.7 million of proceeds from the sale of an office property in Lisle, IL; and (c) $5.9 million of cash flow generated from property operations. Partially offsetting the increase was a decrease due to: (a) $0.9 million of principal payments on financed properties; (b) $0.6 million of deferred financing payments on financed properties; (c) $0.3 million in distributions to joint venture partners; (d) $0.1 million increase to restricted cash; and (e) $3.8 million paid for capital improvements. The $3.8 million paid for capital improvements included the following items: (a) $1.4 million for construction costs at the development property in Chicago, IL; (b) $0.9 million for space renovations at the retail property in Dunn, NC; (c) $0.8 million for space renovations at the retail property in Hampton, VA; and (d) $0.7 million for capital improvements and transaction costs associated with leasing expenses at various properties.

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 partners. As of September 30, 2016, approximately 15.3% of the Partnership’s total assets consisted of cash and cash equivalents.

(b) Results of Operations

The following is a comparison of the Partnership’s results of operations for the three and nine month periods ended September 30, 2016 and 2015.

Net investment income/(loss) overview

The Partnership’s net investment income attributable to the General Partners’ controlling interest for the nine month period ended September 30, 2016 was approximately $4.8 million, an increase of $0.5 million from the prior year period. The increase in net investment income attributable to the General Partners’ controlling interest was primarily due to an increase of $0.7 million in the office sector investment’s net investment income from the prior year period and an increase of approximately $0.4 million in the retail sector investments’ net investment income from the prior year period. Partially offsetting this increase was a decrease of approximately $0.2 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 $0.3 million from prior year period in portfolio level expenses.

The Partnership’s net investment income attributable to the General Partners’ controlling interest for the three month period ended September 30, 2016 was approximately $1.9 million, an increase of approximately $0.4 million from the prior year period. The increase in net investment income attributable to the General Partners’ controlling interest was primarily due to an increase of $0.3 million in the retail sector investments’ net investment income from the prior year period and an increase of approximately $0.3 million in the office sector investment’s net investment income from the prior year period. Partially offsetting this increase was a decrease of approximately $0.1 million from the prior year period in net investment income attributable to the General Partners’ controlling interest from the hotel sector and an increase of approximately $0.2 million from prior year period in portfolio level expenses.





26


Valuation overview

The Partnership recorded a net recognized and unrealized gain attributable to the General Partners’ controlling interest of approximately $3.2 million for the nine month period ended September 30, 2016. This is compared with a net recognized and unrealized gain attributable to the General Partners’ controlling interest of approximately $8.9 million for the prior year period. The unrealized gains attributable to the General Partners’ controlling interest for the nine month period ended September 30, 2016 were due to valuation increases in the apartment and retail investments of $3.4 million. Partially offsetting the unrealized gains was a recognized loss of $0.3 million in the office sector investments.

The Partnership recorded net unrealized gains attributable to the General Partners’ controlling interest of approximately $1.9 million for the three month period ended September 30, 2016. This is compared with net unrealized gains attributable to the General Partners’ controlling interest of approximately $6.5 million for the prior year period. The unrealized gains attributable to the General Partners’ controlling interest for the three month period ended September 30, 2016 were due to valuation increases in the apartment and retail sector investments.

The following table presents a comparison of the Partnership’s sources of net investment income (loss) attributable to the General Partners’ controlling interest and net recognized and unrealized gains (losses) attributable to the General Partners’ controlling interest for the nine and three month periods ended September 30, 2016 and 2015.

Nine Months Ended September 30,

Three Months Ended September 30,

2016

2015

2016

2015
Net Investment Income (Loss):







Office properties
$
280,363


$
(358,030
)

$
281,796


$
(57,626
)
Apartment properties
2,877,078


3,092,934


1,028,396


1,002,870

Retail properties
4,611,553


4,170,550


1,702,539


1,362,486

Hotel property
(102,775
)

(55,440
)

(98,188
)

(583
)
Other (including interest income, investment management fee, etc.)
(2,844,398
)

(2,519,349
)

(988,522
)

(845,883
)
Total Net Investment Income
$
4,821,821


$
4,330,665


$
1,926,021


$
1,461,264

Net Recognized Gain (Loss) on Real Estate Investments:







Office properties
$
(256,982
)

$
125,879


$


$

Net Recognized Gain (Loss) on Real Estate Investments
$
(256,982
)

$
125,879


$


$

Net Unrealized Gain (Loss) on Real Estate Investments:







Office properties
$


$
(644,701
)

$


$
128,674

Apartment properties
2,326,461


5,004,005


1,383,673


3,178,026

Retail properties
1,102,718


4,399,491


499,723


3,159,640

Net Unrealized Gain (Loss) on Real Estate Investments
$
3,429,179


$
8,758,795


$
1,883,396


$
6,466,340

Net Recognized and Unrealized Gain (Loss) on Real Estate Investments
$
3,172,197


$
8,884,674


$
1,883,396


$
6,466,340


27


OFFICE PROPERTIES
Nine Months Ended September 30,

Net Investment
Income/(Loss)
2016

Net Investment
Income/(Loss)
2015

Recognized
Gain/(Loss)
2016

Recognized and Unrealized
Gain/(Loss)
2015

Occupancy
2016

Occupancy
2015
Property












Lisle, IL (1)

$
280,363


$
(117,558
)

$
(256,982
)

$
(644,701
)

N/A

55
%
Beaverton, OR (2)



(240,472
)



125,879


N/A

N/A



$
280,363


$
(358,030
)

$
(256,982
)

$
(518,822
)





















Three Months Ended September 30,
















Property












Lisle, IL (1)

$
281,796


$
(57,626
)

$


$
128,674








$
281,796


$
(57,626
)

$


$
128,674





(1) The Lisle, IL property was sold on January 21, 2016. The net investment income represents post closing liability write-offs.
(2) The Beaverton, OR 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 approximately $0.3 million for the nine and three month periods ended September 30, 2016, respectively, which represents an increase of approximately $0.7 million and $0.3 million from the prior year periods, respectively. The increase in net investment income is due to selling the properties in Lisle, IL, and Beaverton, OR. The two properties had large vacancies and were providing negative cash flow resulting in losses in 2015. The net investment income in both periods represents post closing liability write-offs.

Recognized and unrealized gain/(loss)

The office property formerly owned by the Partnership recorded a recognized loss attributable to the General Partners’ controlling interest of approximately $0.3 million for the nine month period ended September 30, 2016, compared with a recognized and net unrealized loss attributable to the General Partners’ controlling interest of approximately $0.5 million from the prior year period. The recognized loss attributable to the General Partners’ controlling interest for the nine month period ended September 30, 2016 was due to the sale of the property located in Lisle, IL.



28


APARTMENT PROPERTIES
Nine Months Ended September 30,

Net Investment
Income/(Loss)
2016

Net Investment
Income/(Loss)
2015

Unrealized
Gain/(Loss)
2016


Unrealized
Gain/(Loss)
2015

Occupancy
2016

Occupancy
2015
Property












Austin, TX

865,557


1,045,261


285,083


2,311,325


97
%

96
%
Charlotte, NC

560,877


673,289


539,630


370,612


98
%

98
%
Seattle, WA #1

471,928


428,516


1,295,455


32,674


92
%

95
%
Seattle, WA #2

600,100


588,844


6,072


2,314,116


96
%

93
%
Maplewood, NJ

378,616


357,024


200,000


(24,722
)

92
%

80
%
Chicago, IL





221




N/A


N/A



$
2,877,078


$
3,092,934


$
2,326,461


$
5,004,005






















Three Months Ended September 30,
















Property
















Austin, TX

274,604


314,841


307,661


1,877,689







Charlotte, NC

197,840


235,663


53,365


247,370







Seattle, WA #1

173,980


160,895


731,936


(20,929
)