10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2005

OR

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

For the transition period from                                                                     to                                                                    

Commission file number 0-13518

PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2

(Exact name of registrant as specified in its charter)

Texas	75-1933081
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
751 Broad Street, Second Floor, Newark, NJ	07102-3714
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code 973-802-6000

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Units of Limited Partnership Interest

(Title of class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes        No Ö

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes        No Ö

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  Ö  No     

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, as defined in Rule 12b-2 of the Exchange Act of 1934

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  þ   

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act)   Yes        No Ö

The aggregate market value of the voting and non-voting common equity held by non-affiliates based on the estimated net asset value of the Registrant held by non-affiliates is $3,041,064. A significant secondary market for the Units has not developed, and is not expected that one will develop in the future.

DOCUMENTS INCORPORATED BY REFERENCE

Registrant’s Annual Report to Limited Partners for the year ended December 31, 2005 is incorporated by reference into Part II of this Annual Report on Form 10-K.

Amended and Restated Certificate and Agreement of Limited Partnership, included as part of the Registration Statement on Form S-11 (File No. 2-88785) filed with the Securities and Exchange Commission pursuant to Rule 424(b) of the Securities Act of 1933, as amended, is incorporated by reference into Part IV of this Annual Report on Form 10-K.

PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2

(a limited partnership)

TABLE OF CONTENTS

PART I		PAGE
Item 1	Business	3
Item 1A	Risk Factors	4
Item 2	Properties	7
Item 3	Legal Proceedings	7
Item 4	Submission of Matters to a Vote of Limited Partners	7
PART II
Item 5	Market for the Registrant’s Units, Related Limited Partner Matters and Issuer Purchases of Equity Securities	8
Item 6	Selected Financial Data	8
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	8
Item 8	Financial Statements and Supplementary Data	8
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	8
Item 9A	Controls and Procedures	8
Item 9B	Other Information	9
PART III
Item 10	Directors and Executive Officers of the Registrant	9
Item 11	Executive Compensation	10
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Matters	11
Item 13	Certain Relationships and Related Transactions	11
Item 14	Principal Accounting Fees and Services	11
PART IV
Item 15	Exhibits, Financial Statement Schedules	12
	Financial Statements and Financial Statement Schedules	12
	Exhibits	12
SIGNATURES		16

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PART I

Item 1.  Business

General

Prudential-Bache/Watson & Taylor, Ltd.-2 (the “Registrant”), a Texas limited partnership, was formed on November 14, 1983 and will terminate in accordance with a vote of the limited partners as described below. The Registrant was formed for the purpose of acquiring, developing, owning and operating mini-storage and office/warehouse facilities with proceeds raised from the initial sale of units of limited partnership interests (“Units”). The Registrant’s fiscal year for book and tax purposes ends on December 31.

In accordance with a consent statement dated September 17, 1996, the limited partners approved, during October 1996, the proposed sale to Public Storage, Inc. (“Public”) of all eight mini-warehouse facilities owned by the Registrant and the liquidation and dissolution of the Registrant.

Seven of the eight properties were sold to Public during December 1996. The Registrant continues to own the Hampton Park property located in Capitol Heights, Maryland as it was not sold to Public after Phase I and Phase II Environmental Site Assessments performed during 1996 by MACTEC Engineering and Consulting, Inc. (“MACTEC”) identified detectable levels of tetrachloroethene (“PCE”) in the soil and ground water samples collected at the site. MACTEC, at the Registrant’s request, reported the PCE release to the Maryland Department of the Environment (“MDE”).

On November 21, 2000, MDE reached a determination that it was appropriate to undertake an active remedial measure at the site. MACTEC, at the request of the Registrant, submitted an application to enter the site into MDE’s Voluntary Cleanup Program (“VCP”) during March 2001. During a meeting on May 16, 2001 between the Registrant, MACTEC and MDE, to discuss MDE’s comments on the Registrant’s application, it was determined that the Registrant would perform a non-invasive Phase I Environmental Site Assessment Update (“Phase I Activities”) and would subsequently, upon review and agreement with MDE, move to perform certain Phase II invasive sampling and analytical procedures (“Phase II Activities”) with the anticipation of entering the site into the VCP. During the first quarter of 2002, MDE notified the Registrant that Phase I Activities were satisfactorily completed. Additionally, MACTEC completed the fieldwork for Phase II activities (under a work plan that MDE reviewed) during 2002. The procedures and findings were documented in a Phase II Site Characterization and Risk Assessment Report (the “Report”) that was sent to MDE on February 13, 2003. During April 2003, MDE requested supplemental soil-gas sampling procedures be performed. These procedures were performed and reported to MDE during September 2003. MDE issued a response letter, dated October 24, 2003, in which it formally accepted the site into the VCP and informed the Registrant that some form of remedial action is required to address elevated levels of PCE in the soil and groundwater. The MDE approved the plan for remedial action (the “Plan”) on November 24, 2004. In December 2004, an agreement was entered into with ATC Associates Inc. (“ATC”), pursuant to which ATC will provide certain environmental services to perform the environmental cleanup effort as described in the Plan. As of December 31, 2005, the Statement of Net Assets in process of liquidation included in the Registrant’s annual report to the limited partners for the year ended December 31, 2005 (“Registrant’s Annual Report”) reflects an accrued liability of $314,000 which represents the Registrant’s best estimate of the obligation regarding the environmental issues mentioned above; however, it is reasonably possible that the loss exposure will be in excess of the amount accrued, and may be material to the Registrant.

On January 18, 2005, the Registrant had an irrevocable standby letter of credit established in the amount of $60,000 that expired on January 7, 2006, in favor of the MDE in connection with the Plan. The letter of credit has been extended through January 7, 2007.

The general partners of the Registrant engaged an unrelated third party real estate broker CB Richard Ellis, Inc. on April 7, 2005, to market the property on an exclusive basis for a six month period. The Registrant will seek to obtain from any potential buyer as complete an indemnification as possible for any liability in connection with remediation of the contamination of the property.

On August 5, 2005, the Registrant reported that it had concluded its bid process for its sole remaining property, Hampton Park, located in Capitol Heights, Maryland, and accepted a bid to sell the property. On November 4, 2005 the Registrant entered into a Real Estate Purchase and Sale Agreement (the “Sale Agreement”) with Recycland, LLC (the “Recycland”).

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The Sale Agreement provided that Recycland would pay approximately $3,200,000 to the Registrant, taking into account anticipated offsets under the Sale Agreement for the cost of a pollution legal liability insurance policy covering certain environmental liabilities and the cost of a “fixed price to closure” contract with Gannett Fleming Project Development Corporation and EMG Corporation to complete the environmental remediation work through and including the issuance of a Certificate of Completion by the MDE. The Sale Agreement provided that Recycland would continue the remediation work and indemnify the Registrant for certain environmental liabilities and performance obligations. Pursuant to the Sale Agreement, Recycland had an opportunity to conduct due diligence and to terminate the agreement for any reason until one business day before closing.

On November 15, 2005, Recycland terminated the Sale Agreement in accordance with sections 4.5 and 13.4 of the Sale Agreement.

In light of the termination of the Sale Agreement and other information Prudential-Bache Properties, Inc. (“PBP” or the “Managing General Partner”) has changed its estimated liquidation date of the Registrant from December 31, 2005 to December 31, 2006. As a result, at this time, the Managing General Partner has estimated an increase in future liquidating costs of approximately $475,000 or approximately $9.00 per limited and equivalent participating unit of the Registrant.

The general partners of the Registrant intend to remarket the property in 2006 once additional environmental testing and remediation work is undertaken.

Watson & Taylor Management, Inc., an affiliate of the individual general partners, is responsible for the day-to-day operation of the property, including the supervision of the on-site managers and the establishment of rental policies and rates for new rentals and renewals and directs the marketing activity for the rental of the property.

General Partners and Affiliates

The general partners of the Registrant are PBP, George S. Watson and A. Starke Taylor, III (collectively, the “General Partners”). PBP is the Managing General Partner and is responsible for the day-to-day operations of the Registrant and its investments. PBP is a wholly owned subsidiary of Prudential Securities Group Inc. (“PSG”). For further information, see Notes A and E of the financial statements in the Registrant’s Annual Report which is filed as an exhibit hereto.

Employees

The Registrant has no employees. Management and administrative services for the Registrant are performed by the General Partners and their affiliates pursuant to the Partnership Agreement. For further information, see Note E of the financial statements in the Registrant’s Annual Report which is filed as an exhibit hereto.

Item 1A.  Risk Factors

The following risks should be carefully considered. These risks could materially affect the Registrant’s net assets in process of liquidation, cause the value of the Units to decline materially or cause actual results to differ materially from those expected or those expressed in any forward looking statements made by or on behalf of the Registrant. These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned below.

The liquidation of the Partnership may extend beyond the current estimate of December 31, 2006.

The liquidation date is dependent upon the sale of the one remaining property within the Partnership. There are no assurances on if and when acceptable terms and conditions will be agreed to by a prospective purchaser. Any sale may not be completed in time to complete the liquidation by December 31, 2006.

Liquidation costs may exceed those currently recorded in the financial results of the Partnership.

The costs included in the December 31, 2005 financial report are the best estimates available at that time. Given the condition of the remaining property, if the environmental remediation plan is not completed as scheduled, a buyer is not found, or for any other reason the liquidation timeline exceeds December 31,

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2006, the costs related to property management, administration, legal fees and costs and other expenses may exceed current estimates.

Environmental remediation costs may exceed those currently recorded in the financial results of the Partnership.

As the remediation plan progresses, and additional or unknown environmental issues are uncovered, the current plan and timeline and recorded cost estimates may not be sufficient to complete the cleanup or to address additional environmental concerns and liabilities.

Environmental issues with the property may limit the number of potential buyers.

While an approved remediation plan is in place to correct the condition of the property, it may be difficult to find a buyer willing to purchase the property prior to having the remediation plan completed and a certificate issued by the Maryland Department of Environment.

Market conditions, including interest rates, may have a material impact on our ability to sell this property.

The ability to sell this property is dependent on several economic conditions:

• The real estate market values of comparable properties in the surrounding area have a direct impact on our ability to have an acceptable offer presented.

• Vacancy rates of surrounding buildings as well as vacant rental units within this property will be a key factor in attracting potential offers.

• The interest rates associated with a buyer’s financing may directly impact the ability for a potential buyer to obtain funding to purchase the property.

Our operating and financial performance and our financial condition, as well as the value of our real estate asset, are subject to the risks incidental to the ownership and operation of real estate.

Our results of operations and financial condition, and the value of our remaining real estate asset are subject to the risks normally associated with the ownership and operation of real estate properties. These risks include, but are not limited to, the following:

• bankruptcy, insolvency or credit deterioration of our tenants and our ability to collect rent from our tenants;

• increases in operating costs, including utilities, real estate taxes, state and local taxes, heightened security costs and costs incurred for periodic renovations and repairs that are necessary;

• vacancies and unfavorable changes in market rental rates and our ability to rent space on favorable terms; and

• change in the availability and affordability of insurance (particularly involving environmental concerns) on commercially reasonable terms, in levels of coverage necessary for our real remaining property.

In addition, applicable federal, state and local regulations, zoning and tax laws and potential liability under environmental and other laws may affect real estate values. Further, we must make significant expenditures, including property taxes, maintenance costs, insurance costs and related charges, throughout the period that we own our real property regardless of whether the property is producing any income, or is producing enough income to cover our costs. The risks associated with real estate investments may adversely affect our operating results and financial position, and therefore, may adversely affect the amount of distributions payable to the limited partners of the Partnership. If we are not able to renew leases or enter into new leases on favorable terms or at all as our existing leases expire, our revenue, operating results and cash flows will be reduced.

Future changes in the real estate market could affect the value of our property and business.

The value of our real property and the revenue from related sale may be adversely affected by a number of factors, including:

• national, regional, and local economic climate;

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• local real estate conditions (such as an oversupply of land or a reduction in demand for real estate in the area);

• competition from other available property;

• government regulations and changes in real estate, zoning, land use, environmental or tax laws;

• interest rate levels and the availability of financing; and

• potential liabilities under environmental and other laws

There are a number of risks inherent in owning our remaining property.

Factors beyond our control can affect the performance and value of our property. Changes in national, regional, and local economic and market conditions may affect the income of our property and its value. Local real estate market conditions may include excess supply and intense competition for tenants, including competition based on:

• rental rates;

• attractiveness and location of the property; and

• quality of maintenance, insurance, and management services.

In addition, other factors may adversely affect the performance and value of our income property, including changes in laws and governmental regulations, changes in interest rates, and the availability of financing.

We may be unable to renew leases, lease vacant space or re-lease space as leases expire, which could adversely affect our business and our ability to pay distributions to our limited partners.

If we cannot renew leases, we may be unable to re-lease our remaining property at rates equal to or above the current rate. Even if we can renew leases, tenants may be able to negotiate lower rates as a result of market conditions. Any of these factors could adversely impact our financial condition, results of operations, cash flow, and our ability to pay distributions to the limited partners.

Termination of our management arrangement could harm our business.

We are a party to a management services agreement, pursuant to which the day-to-day operations, maintenance, repair and renting of our properties is handled by a management company. Our arrangement is long-term, but may be terminated in accordance with certain notice provisions of our management services agreement. The termination of such agreement could have a material adverse effect on the Partnership’s operations, and could result in loss of revenue or increased operating expenses.

Compliance with changing regulation of corporate governance and public disclosure may result in additional expense

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations, are creating uncertainty for entities such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as a new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

The Partnership is currently operating at a loss and may continue to do so, which could reduce our cash flow and funds available for future distributions to the limited partners.

For the twelve month period, ended December 31, 2005, the Partnership experience a loss from operations. Our property is subject to increases in real estate and other tax rates, utility costs, operating

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expenses, insurance costs, repairs and maintenance and administrative expenses. The Partnership may continue to incur losses in future periods, and such losses may materially impact the amounts available for future distributions to the limited partners.

We are subject to environmental regulations and environmental compliance expenditures and liabilities

Our business is subject to many environmental laws and regulations with respect our remaining property. We have incurred and expect to continue to incur expenditures to comply with applicable environmental laws and regulations, and to continue the remediation work on our remaining property. Moreover, some or all of the environmental laws and regulations to which we are subject could become more stringent or more stringently enforced in the future. Our further evaluation of our remaining property and the discovery of currently unknown contamination may given rise to additional material remediation costs. Our failure to comply with applicable environmental laws and regulations and permit requirements could result in civil or criminal fines and penalties or enforcement actions.

A public market does not exist for our limited partnership Unit, therefore the limited partners may experience difficulty in selling their Units.

Currently there is no public market for our limited partnership Units, so limited partners may not be able to find a buyer for their Units. In addition they may not be able to sell their Units at their desired price. Also, our Amended and Restated Certificate and Agreement of Limited Partnership, as amended, contains certain restrictions on transfers of limited partnership Units, including volume limitations, among others.

Item 2.  Properties

As of December 31, 2005, the Registrant owns the following property:

Property Location	Average Occupancy Rates for the year ended December 31, 2005(1)	Land (in acres)	Rentable Units	Monthly Rental Rates Per Unit as of December 31, 2005
Hampton Park (Capitol Heights, Maryland)		5.87
Mini-warehouse	94.54		129	$42-$285
Commercial	87.65		55	$375-$1,350
			184

(1) Average occupancy rates are calculated by averaging the monthly occupancies determined by dividing occupied square footage by available square footage as of each month-end.

The General Partners believe the Registrant’s remaining property is adequately insured.

During the three years ended December 31, 2005, 2004 and 2003, the Hampton Park property rental revenues represented approximately 92%, 95% and 94% of the Registrant’s total revenue, respectively.

Item 3.  Legal Proceedings

None

Item 4.  Submission of Matters to a Vote of Limited Partners

None

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PART II

Item 5.  Market for the Registrant’s Units, Related Limited Partner Matters and Issuer Purchases of Equity Securities

As of March 15, 2006, there were 3,218 holders of record owning 51,818 Units, inclusive of 258, 130 and 130 equivalent limited partnership units held by PBP and Messrs. Watson and Taylor, respectively. A significant secondary market for the Units has not developed, and it is not expected that one will develop in the future. There are also certain restrictions set forth in Section 17.3 of the Amended and Restated Certificate and Agreement of Limited Partnership limiting the ability of a limited partner to transfer Units. Consequently, holders of Units may not be able to liquidate their investments in the event of an emergency or for any other reason.

There were no cash distributions paid to limited partners during 2005, 2004 and 2003.

A distribution of $300 per limited partnership unit was made on December 19, 1996 representing the net proceeds from the sale of seven of the Registrant’s properties, reduced by a contingency reserve and funds required to meet the anticipated current and future operating costs until the liquidation of the Registrant. The Registrant intends to liquidate, subject to the Hampton Park property first being sold (refer to Item 1 for further discussion), and will distribute any remaining funds after payment of and reserves for all expenses and liabilities.

Item 6.  Selected Financial Data

As of October 1, 1996, the Registrant adopted the liquidation basis of accounting in accordance with generally accepted accounting principles and, therefore, there is no reporting of results of operations. Total assets at December 31, 2001, 2002, 2003, 2004 and 2005 were $3,833,466, $4,061,081, $4,155,419, $4,236,871 and $3,941,613 respectively. Additionally, no distributions were made during the five years ended December 31, 2005. This data should be read in conjunction with the financial statements of the Registrant and the notes thereto on pages 3 through 9 of the Registrant’s Annual Report which is filed as an exhibit hereto.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

This information is incorporated by reference to pages 10 through 12 of the Registrant’s Annual Report which is filed as an exhibit hereto.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

None.

Item 8.  Financial Statements and Supplementary Data

The financial statements are incorporated by reference to pages 3 through 9 of the Registrant’s Annual Report which is filed as an exhibit hereto. Quarterly financial data pursuant to Item 302 of Regulation S-K is not provided as the Registrant follows the liquidation basis of accounting and has not reported results of operations subsequent to 1996 in accordance with generally accepted accounting principles.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A.  Controls and Procedures

As of the end of the period covered by this report, the Managing General Partner carried out an evaluation, under the supervision and with the participation of the officers of the Managing General Partner, including the Managing General Partner’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based upon that evaluation, the Managing General Partner’s chief executive officer and chief financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

In designing and evaluating the Registrant’s disclosure controls and procedures (as defined in Rules 13a-15(f) or 15d-15(f) of the Securities Exchange Act of 1934 (“Exchange Act”)), the Managing General Partner recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, as the Registrant’s are designed to do,

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and the Managing General Partner necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We believe that the Registrant’s disclosure controls and procedures provide such reasonable assurance.

There have not been any changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B.  Other Information

The Registrant filed Form 8-K on December 23, 2005 to report that in light of the termination of the Sale Agreement and other information, the Managing General Partner has changed its estimated liquidation date of the Registrant from December 31, 2005 to December 31, 2006. As a result, at this time the Managing General Partner has estimated an increase in future liquidating costs of approximately $475,000 or approximately $9.00 per limited and equivalent participating unit of the Registrant.

PART III

Item 10.  Directors and Executive Officers of the Registrant

There are no directors or executive officers of the Registrant. The Registrant is managed by the Managing General Partner.

Section 16(a) Beneficial Ownership Reporting Compliance

The Registrant’s General Partners, PBP’s directors and executive officers and any persons holding more than 10% of the Registrant’s Units are required to report their initial ownership of such Units and any subsequent changes in that ownership to the Securities and Exchange Commission on Forms 3, 4 and 5. Such General Partners, executive officers, directors and other persons who own greater than 10% of the Registrant’s Units are required by Securities and Exchange Commission regulations to furnish the Registrant with copies of all Forms 3, 4 or 5 they file. The filing requirements for Form 3 were not timely satisfied by the directors and executive officers of PBP and the two General Partners but all have since been filed for the last fiscal year. In making these disclosures, the Registrant has relied solely on written representations of the General Partners, PBP’s directors and executive officers or on copies of the reports they have filed with the Securities and Exchange Commission during and with respect to its most recent fiscal year. The current directors and executive officers of PBP did not hold any securities or make any transfers during the last fiscal year.

Prudential-Bache Properties, Inc., Managing General Partner

The directors and executive officers of PBP and their positions with regard to managing the Registrant are as follows:

Name	Position
Richard F. Welch	Chairman of the Board of Directors, President, and Chief Executive Officer
Warren S. Hoffman	Chief Financial Officer and Vice President
C. Edward Chaplin	Treasurer
Moon Bae Chung	Vice President and Director
Wayne R. Clarke	Vice President and Director

RICHARD F. WELCH, age 47, has been the Chairman of the Board of Directors, President and Chief Executive Officer of PBP since June 6, 2005. He is also a Vice President of Prudential, and serves in various capacities for certain other affiliated companies. Mr. Welch has been responsible for the business management of Prudential Financial Inc.’s (“Prudential”) divested and discontinued products and lines of business since 1999. Mr. Welch joined Prudential in 1983.

WARREN S. HOFFMAN, age 50, was elected Chief Financial Officer and Vice President of PBP on June 6, 2005. He is also a Vice President of Prudential, and serves in various capacities for certain other affiliated companies. Mr. Hoffman has been responsible for the financial reporting of Prudential’s divested and discontinued products and lines of business since 2000. Mr. Hoffman joined Prudential in 1978.

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WAYNE R. CLARKE, age 46, has been a Vice President of PBP since June 6, 2005. Mr. Clarke is also a Vice President of Prudential, and has managed the business support functions of its divested and discontinued products and lines of business since April 2005. From July 1998 to April 2005, Mr. Clarke held various Finance and Operations positions with PSG. He also serves in various capacities in certain other affiliated companies. Mr. Clarke joined Prudential in 1989, and is a Certified Public Accountant.

C. EDWARD CHAPLIN, age 49, was elected Treasurer of PBP in March 2004. He is also a Senior Vice President and Treasurer of Prudential. Mr. Chaplin joined Prudential in 1983 and has been the Treasurer since 1995.

MOON BAE CHUNG, age 63, was elected Vice President and Director of PBP in May 2004. He is also a Vice President of Prudential, managing its portfolio of divested and discontinued products and lines of businesses since 1999. He also serves in various capacities of certain other affiliated companies. Mr. Chung joined Prudential in 1996.

Effective June 6, 2005, Richard F. Welch was elected Chairman of the Board of Directors, President and Chief Executive Officer of PBP.

Effective June 6, 2005, Warren S. Hoffman was elected Chief Financial Officer and Vice President of PBP replacing William C. Yip.

Effective May 6, 2005 Brian J. Martin resigned as Chairman of the Board of Directors, President and Chief Executive Officer of PBP.

The Managing General Partner has adopted a code of ethics, which is posted on Prudential’s website at www.investor.prudential.com. Any amendments and any waiver under this code of ethics granted to any of the Managing General Partner’s directors or executive officers will be on that website. In addition, the Managing General Partner’s chief executive officer and chief financial officer, as well as its directors and other employees are also subject to a broader code of conduct, known as Making the Right Choices, which has been adopted by the Managing General Partner’s corporate parent.

There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing directors and executive officers have indefinite terms.

Individual General Partners

GEORGE S. WATSON, age 65, is a financial specialist and a Certified Public Accountant. He has been instrumental in the success of The Community Minority Business Advancement Program sponsored by the University of Texas at Austin College and Graduate Schools of Business. Mr. Watson is a member of the Advisory Council of the University of Texas at Austin Business School and a member of its Chancellor’s Council. Mr. Watson attended the University of Texas at Austin, graduating summa cum laude in 1963 with a BBA in accounting and finance. He received his MBA in accounting and finance from the University of Texas in 1965, graduating first in his class and summa cum laude. He also has received various awards and scholarships and is a member of many fraternal organizations including Phi Kappa Phi, the honorary scholastic society. Mr. Watson has over 25 years of experience in real estate and financial investments.

A. STARKE TAYLOR, III, age 62, holds a bachelor of business administration degree from Southern Methodist University which was awarded in 1966. He is past president of the North Dallas Chamber of Commerce. Mr. Taylor is a member of the boards of the Dallas Theological Seminary and the Northeast Texas Regional Board of Young Life. Mr. Taylor has over 25 years of experience in real estate, insurance and financial investments.

The two individual General Partners are not related.

Item 11.  Executive Compensation

The Registrant does not pay or accrue any fees, salaries or any other form of compensation to either individual General Partner or to directors and officers of the Managing General Partner for their services. Certain officers and directors of the Managing General Partner receive compensation from affiliates of the Managing General Partner, not from the Registrant, for services performed for various affiliated entities, which may include services performed for the Registrant; however, the Managing General Partner believes that any compensation attributable to services performed for the Registrant is immaterial. See also Item 13

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Certain Relationships and Related Transactions for information regarding reimbursement to the General Partners for services provided to the Registrant.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

As of March 15, 2006, there were 3,218 holders of record owning 51,818 Units, inclusive of 258,130 and 130 equivalent limited partnership units held by PBP and Messrs. Watson and Taylor, respectively.

As of March 15, 2006, no individual General Partner or director or officer of the Managing General Partner owns directly or beneficially any interest in the voting securities of the Managing General Partner.

As of March 15, 2006, no individual General Partner or director or officer of the Managing General Partner owns directly or beneficially any of the limited partnership Units issued by the Registrant.

The General Partners have contributed to the Registrant and, based on such contribution, they received “equivalent units” entitling them to participate in the distributions to the limited partners and in the Registrant’s profits and losses in the same proportion that the General Partners’ capital contribution bears to the total capital contributions of the limited partners. The Managing General Partner has retained its right to receive funds from the Registrant, such as General Partner distributions and reimbursement of expenses, but has waived its right to share in any limited partner cash distributions and allocations of Registrant’s profits and losses based upon such equivalent units.

As of March 15, 2006, no limited partner beneficially owns more than 5% of the outstanding Units issued by the Registrant.

Item 13.  Certain Relationships and Related Transactions

The Registrant has and will continue to have certain relationships with the General Partners and their affiliates. However, there have been no direct financial transactions between the Registrant and the individual General Partners or the directors or officers of the Managing General Partner during 2005.

Reference is made to Notes A and E of the financial statements in the Registrant’s Annual Report which is filed as an exhibit hereto, which identify the related parties and discuss the services provided by these parties and the amounts paid or payable for their services.

Item 14.  Principal Accountant Fees and Services

Audit Fees and All Other Fees

Audit Fees

Fees for audit services totalled approximately $62,000 and $45,000 in 2005 and 2004 respectively, including fees associated with the annual audit and the reviews of the Registrant’s quarterly reports on Form 10-Q.

Tax

Fees for tax services, including tax compliance, tax advice and printing and mailing of limited partners tax information totalled approximately $33,000 and $29,000 in 2005 and 2004 respectively.

The Board of Directors of PBP, the Managing General Partner of Registrant, approved the appointment of the independent registered public accounting firm and its fees, for 2005. The independent registered public accounting firm has full access to the senior management of PBP.

We have been advised by PricewaterhouseCoopers LLP that neither the firm, nor any member of the firm, has any financial interest, direct or indirect, in any capacity in the Registrant or its affiliates.

11

PART IV

			Page Number in Annual Report
Item 15.  Exhibits and Financial Statement Schedules
	1.	Financial Statements and Report of Independent Registered Public Accounting Firm incorporated by reference to the Registrant’s Annual Report which is filed as an exhibit hereto
		Report of Independent Registered Public Accounting Firms	3
		Financial Statements:
		Statements of Net Assets—December 31, 2005 and 2004	5
		Statements of Changes in Net Assets—Years ended December 31, 2005, 2004 and 2003	5
		Notes to Financial Statements	6
	2.	Financial Statement Schedules and Consent of Independent Registered Public Accounting Firm
		Consent of Independent Registered Public Accounting Firm
		Schedules:
		III—Real Estate and Accumulated Depreciation at December 31, 2005
		Notes to Schedule III—Real Estate and Accumulated Depreciation
		All other schedules have been omitted because they are not applicable or the required information is included in the financial statements and the notes thereto.
	3.	Exhibits
		Description:
	2.01	Consent Statement dated September 17, 1996 (1)
	3.01	Amended and Restated Certificate and Agreement of Limited Partnership (2)
	3.02	Amendment Number 8 to Amended and Restated Certificate and
		Agreement of Limited Partnership (3)
	4.01	Revised Form of Certificate of Limited Partnership Interest (4)
	10.04	Agreement Relating to General Partner Interests (2)
	10.05	Management Agreement dated March 1, 1998 by and between the Registrant and Watson & Taylor Management, Inc., a Texas corporation (5)
	10.06	Agreement to perform certain environmental services for the Response Action Plan dated December 17, 2004 by and between an affiliate of the Managing General Partner and ATC Associates Inc. (6)
	10.07	Real Estate Purchase and Sale Agreement dated November 4, 2005 by and between the Registrant and Recycland, LLC (7)
	10.08	Termination Notice dated November 15, 2005 by Recycland, LLC (filed herewith)
	13.01	Registrant’s Annual Report to Limited Partners for the year ended December 31, 2005 (with the exception of the information and data incorporated by reference in Items 7 and 8 of this Annual Report on Form 10-K, no other information or data appearing in the Registrant’s Annual Report is to be deemed filed as part of this report)

12

23.1	Consent of Ernst & Young LLP dated March 28, 2006 (filed herewith)
31.1	Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 (filed herewith)
31.2	Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 (filed herewith)
32.1	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the SARBANES-OXLEY Act of 2002 (furnished herewith)
32.2	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the SARBANES-OXLEY Act of 2002 (furnished herewith)

(1) Filed on the Registrant’s Proxy Statement on Schedule 14A and incorporated herein by reference.

(2) Filed as an exhibit to Registration Statement on Form S-11 (No. 2-88785) and incorporated herein by reference.

(3) Filed as an exhibit to Registrant’s Form 10-Q for the quarter ended March 31, 1990 and incorporated herein by reference.

(4) Filed as an exhibit to Registrant’s Form 10-K for the year ended December 31, 1988 and incorporated herein by reference.

(5) Filed as an exhibit to Registrant’s Form 10-K for the year ended December 31, 1997 and incorporated herein by reference.

(6) Filed as an exhibit to Registrant’s Form 10-K for the year ended December 31, 2004 and incorporated herein by reference.

(7) Filed as an exhibit to Registrant’s Form 10-Q for the quarter ended September 30, 2005 and incorporated herein by reference.

13

PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2

(a limited partnership)

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2005

							Amount at which carried at close of year
Description (Note A)	Initial cost to Registrant (Note B)				Costs capitalized subsequent to acquisition		Land		Buildings and Improvements		Impairment write down and accumulated depreciation (Notes C & D)		Total (Note C)		Dates of construction	Date acquired
	Land		Buildings and Improvements
Hampton Park (Capitol Heights, Maryland)	$	925,595	$	—	$	3,774,366	$	926,441	$	3,773,520	$	2,681,440	$	2,018,521	1985/86	1984

See notes on the following page.

14

PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2

(a limited partnership)

NOTES TO SCHEDULE III

December 31, 2005

NOTE A—There are no mortgages, deeds of trust or similar encumbrances against the remaining property.

NOTE B—Initial cost represents the initial purchase price of the property including acquisition fees.

NOTE C—RECONCILIATION SUMMARY OF TRANSACTIONS—REAL ESTATE

	Year ended December 31,
	2005		2004		2003
Balance at beginning of year	$	2,018,521	$	2,018,521	$	2,018,521
Additions during the year		—		—		—
Balance at close of year	$	2,018,521	$	2,018,521	$	2,018,521

The aggregate cost of land, buildings and improvements, and furniture and fixtures, net of depreciation, for Federal income tax purposes as of December 31, 2005 was $1,747,204.

NOTE D—RECONCILIATION SUMMARY OF TRANSACTIONS—ACCUMULATED DEPRECIATION

The Partnership ceased depreciating the property for financial reporting purposes when the property was reclassified as held for sale as of December 31, 1995.

15

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Prudential-Bache/Watson & Taylor, Ltd.-2
By:	Prudential-Bache Properties, Inc., A Delaware corporation, Managing General Partner
	By: /s/ Warren S. Hoffman	Date: March 31, 2006
	Warren S. Hoffman Chief Financial Officer and Vice President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities (with respect to the General Partner) and on the dates indicated.

By: /s/ Richard F. Welch	Date: March 31, 2006
Richard F. Welch Director of Prudential-Bache Properties, Inc.
By: /s/ Wayne R. Clarke	Date: March 31, 2006
Wayne R. Clarke Director of Prudential-Bache Properties, Inc.

16

EX-10.08

Exhibit 10.08

[LOGO OF RECYCLAND]

Commercial Development · Environmental Risk Management · Acquisitions · Project Management

VIA FACSIMILE AND OVERNIGHT DELIVERY

November 15, 2005

Rich Pulido

Prudential-Bache/Watson & Taylor, LTD.-2

Two Ravina Drive – 1400

Atlanta, GA 30346

w/copy to

Curtis B. Toll, Esq.

Greenberg Traurig, LLP

2700 Two Commerce Square

2001 Market Street

Philadelphia, PA 19103

RE: TERMINATION NOTICE

REAL ESTATE PURCHASE AND SALE AGREEMENT

9244 East Hampton Drive

Capitol Heights, MD

Dear Mr. Pulido

We have regrettably determined that a number of issues will not allow us to close on the purchase of the property known as 9244 East Hampton Drive, Capitol Heights, MD.

Pursuant to Sections 4.5 and 13.4 of the Real Estate Purchase and Sale Agreement dated November 4, 2005 between Recycland, LLC (“Buyer”) and Prudential-Bache/Watson & Taylor, LTD.-2 (“Seller”) we hereby give written notice that Recycland, LLC is exercising its right to terminate the Real Purchase and Sale Agreement.

Pursuant to Section 3.1.2 of the Real Estate Purchase and Sale Agreement, Village Settlements, Inc., as Escrow Holder, is to immediately return the earnest money deposit and accrued interest.

Sincerely,

RECYCLAND, LLC

/s/ Stuart D. Schooler

Stuart D. Schooler

Managing Member

cc: David D. Hahn, Esq.

Dennis A. Davison, Esq.

Daniel Bernstein

Jason Robins

Lawrence Alpert

7801 Norfolk Avenue · Suite 200 · Bethesda, MD 20814 · (301) 656-1956 · Fax: (301) 656-8540

www.recycland.com

EX-13.01

Exhibit 13.01

Prudential-Bache/

Watson & Taylor, Ltd.-2

(In Process Of Liquidation)

2005

Annual

Report

PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2

2005 Annual Report

March 2006

Enclosed are the financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations of Prudential-Bache/Watson & Taylor, Ltd.-2 (the “Partnership”) for the year ended December 31, 2005.

In accordance with a consent statement dated September 17, 1996, the limited partners approved, during October 1996, the proposed sale to Public Storage, Inc. (“Public”) of all eight mini-warehouse facilities owned by the Partnership and the liquidation and dissolution of the Partnership.

Seven of the eight properties were sold to Public during December 1996. The Partnership continues to own the Hampton Park property located in Capitol Heights, Maryland as it was not sold to Public after Phase I and Phase II Environmental Site Assessments performed during 1996 by MACTEC Engineering and Consulting, Inc. (“MACTEC”) identified detectable levels of tetrachloroethene (“PCE”) in the soil and ground water samples collected at the site. MACTEC, at the Partnership’s request, reported the PCE release to the Maryland Department of the Environment (“MDE”).

On November 21, 2000, MDE reached a determination that it was appropriate to undertake an active remedial measure at the site. MACTEC, at the request of the Partnership, submitted an application to enter the site into MDE’s Voluntary Cleanup Program (“VCP”) during March 2001. During a meeting on May 16, 2001 between the Partnership, MACTEC and MDE, to discuss MDE’s comments on the Partnership’s application, it was determined that the Partnership would perform a non-invasive Phase I Environmental Site Assessment Update (“Phase I Activities”) and would subsequently, upon review and agreement with MDE, move to perform certain Phase II invasive sampling and analytical procedures (“Phase II Activities”) with the anticipation of entering the site into the VCP. During the first quarter of 2002, MDE notified the Partnership that Phase I Activities were satisfactorily completed. Additionally, MACTEC completed the fieldwork for Phase II activities (under a work plan that MDE reviewed) during 2002. The procedures and findings were documented in a Phase II Site Characterization and Risk Assessment Report (the “Report”) that was sent to MDE on February 13, 2003. During April 2003, MDE requested supplemental soil-gas sampling procedures be performed. These procedures were performed and reported to MDE during September 2003. MDE issued a response letter, dated October 24, 2003, in which it formally accepted the site into the VCP and informed the Partnership that some form of remedial action is required to address elevated levels of PCE in soil and ground water. The MDE approved the plan for remedial action (the “Plan”) on November 24, 2004. In December 2004, an agreement was entered into with ATC Associates Inc. (“ATC”), pursuant to which ATC will provide certain environmental services to perform the environmental cleanup effort as described in the Plan. As of December 31, 2005, the Statement of Net Assets in process of liquidation reflects an accrued liability of $314,000, which represents the Partnership’s best estimate of the obligation regarding the environmental issues mentioned above; however, it is reasonably possible that the loss exposure will be in excess of the amount accrued and may be material to the Partnership.

On January 18, 2005 the Partnership had an irrevocable standby letter of credit established in the amount of $60,000 that expired on January 7, 2006, in favor of the MDE in connection with the plan. The letter of credit has been extended through January 7, 2007.

The General Partners engaged an unrelated third party real estate broker CB Richard Ellis, Inc. on April 7, 2005, to market the property on an exclusive basis for a six month period. The Partnership will seek to obtain from any potential buyer as complete an indemnification as possible for any liability in connection with remediation of the contamination of the property.

On August 5, 2005, the Partnership reported that it had concluded its bid process for its sole remaining property, Hampton Park, located in Capitol Heights, Maryland, and accepted a bid to sell the property. On November 4, 2005 the Partnership entered into a Real Estate Purchase and Sale Agreement (the “Sale Agreement”) with Recycland, LLC (the “Recycland”).

The Sale Agreement provided that Recycland would pay approximately $3,200,000 to the Partnership, taking into account anticipated offsets under the Sale Agreement for the cost of a pollution legal liability insurance policy covering certain environmental liabilities and the cost of a “fixed price to closure” contract

1

with Gannett Fleming Project Development Corporation and EMG Corporation to complete the environmental remediation work through and including the issuance of a Certificate of Completion by the MDE. The Sale Agreement provided that Recycland would continue the remediation work and indemnify the Partnership for certain environmental liabilities and performance obligations. Pursuant to the Sale Agreement, Recycland had an opportunity to conduct due diligence and to terminate the agreement for any reason until one business day before closing.

On November 15, 2005, Recycland terminated the Sale Agreement in accordance with sections 4.5 and 13.4 of the Sale Agreement.

In light of the termination of the Sale Agreement and other information, the managing general partner has changed its estimated liquidation date of the Partnership from December 31, 2005 to December 31, 2006. As a result, at this time the managing general partner has estimated an increase in future liquidating costs of approximately $475,000 or approximately $9.00 per limited and equivalent participating unit of the Partnership.

The General Partners intend to remarket the property in 2006 once additional environmental testing and remediation work is undertaken. The Partnership’s liquidation and dissolution will proceed upon the sale of the Hampton Park property and will distribute any remaining funds after payment of and reserves for all expenses and liabilities.

We encourage you to read the attached report. Should you have any questions concerning your investment or your account status, please contact the Client Services Department at (973) 802-3705.

2

Report of Independent Registered Public Accounting Firm

To the Partners of Prudential-Bache/Watson & Taylor, Ltd.-2:

In our opinion, the accompanying statements of net assets in process of liquidation and the related statement of changes in net assets in process of liquidation present fairly, in all material respects, the financial position of Prudential-Bache/Watson & Taylor, Ltd.-2 at December 31, 2005, and the changes in its net assets in process of liquidation for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the General Partners. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the General Partners, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note B to the financial statements, the Partnership adopted the liquidation basis of accounting effective October 1, 1996.

/s/  PricewaterhouseCoopers LLP

New York, New York

March 28, 2006

3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners

Prudential-Bache/Watson & Taylor, Ltd.-2

We have audited the accompanying statement of changes in net assets in process of liquidation for Prudential-Bache/Watson & Taylor, Ltd.-2 for the year ended December 31, 2003. This financial statement is the responsibility of the Partnership’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit on the Partnership’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in all material respects, the changes in net assets in process of liquidation for the year ended December 31, 2003 of Prudential Bache/Watson & Taylor, Ltd. -2, in conformity with accounting principles generally accepted in the United States.

As discussed in Note B to the financial statements, the Partnership adopted the liquidation basis of accounting effective October 1, 1996.

/s/ Ernst & Young LLP

New York, New York

January 23, 2004

4

PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2

(limited partnership)

STATEMENTS OF NET ASSETS

(in process of liquidation)

	December 31,
	2005		2004
ASSETS
Property held for sale	$	2,018,521	$	2,018,521
Cash and cash equivalents		1,608,754		1,946,498
Other assets		314,338		271,852
Total assets		3,941,613		4,236,871
LIABILITIES
Estimated liquidation costs		731,649		465,308
Estimated remediation costs		313,865		500,000
Total liabilities		1,045,514		965,308
Net assets available to limited and general partners	$	2,896,099	$	3,271,563
Limited and equivalent partnership units issued and outstanding		51,818		51,818
Net asset value per limited and equivalent units	$	56.17	$	63.45

STATEMENTS OF CHANGES IN NET ASSETS

(in process of liquidation)

	LIMITED PARTNERS			GENERAL PARTNERS		TOTAL
Net assets—December 31, 2002	$	3,107,817		$	—	$	3,107,817
Net income from liquidating activities		30,502			—		30,502
Net assets—December 31, 2003		3,138,319			—		3,138,319
Net income from liquidating activities		133,244			—		133,244
Net assets—December 31, 2004		3,271,563			—		3,271,563
Net loss from liquidating activities		(375,464	)		—		(375,464	)
Net assets—December 31, 2005	$	2,896,099		$	—	$	2,896,099

The accompanying notes are an integral part of these statements.

5

PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2

(a limited partnership)

NOTES TO FINANCIAL STATEMENTS

December 31, 2005, 2004 and 2003

A.  General

Prudential-Bache/Watson & Taylor, Ltd.-2 (the “Partnership”) is a Texas limited partnership formed on November 14, 1983 which will terminate in accordance with a vote of the limited partners as described below. The Partnership was formed for the purpose of acquiring, developing, owning and operating mini-storage and office/warehouse facilities. The general partners of the Partnership are Prudential-Bache Properties, Inc. (“PBP”), a wholly owned subsidiary of Prudential Securities Group Inc., George S. Watson, and A. Starke Taylor, III (collectively, the “General Partners”). PBP is the managing general partner of the Partnership (the “Managing General Partner”).

In accordance with a consent statement dated September 17, 1996, the limited partners approved, during October 1996, the proposed sale to Public Storage, Inc. (“Public”) of all eight mini-warehouse facilities owned by the Partnership and the liquidation and dissolution of the Partnership.

Seven of the eight properties were sold to Public during December 1996. The Partnership continues to own the Hampton Park property located in Capitol Heights, Maryland as it was not sold to Public after Phase I and Phase II Environmental Site Assessments performed during 1996 by MACTEC Engineering and Consulting, Inc. (“MACTEC”) identified detectable levels of tetrachloroethene (“PCE”) in the soil and ground water samples collected at the site. MACTEC, at the Partnership’s request, reported the PCE release to the Maryland Department of the Environment (“MDE”).

On November 21, 2000, MDE reached a determination that it was appropriate to undertake an active remedial measure at the site. MACTEC, at the request of the Partnership, submitted an application to enter the site into MDE’s Voluntary Cleanup Program (“VCP”) during March 2001. During a meeting on May 16, 2001 between the Partnership, MACTEC and MDE, to discuss MDE’s comments on the Partnership’s application, it was determined that the Partnership would perform a non-invasive Phase I Environmental Site Assessment Update (“Phase I Activities”) and would subsequently, upon review and agreement with MDE, move to perform certain Phase II invasive sampling and analytical procedures (“Phase II Activities”) with the anticipation of entering the site into the VCP. During the first quarter of 2002, MDE notified the Partnership that Phase I Activities were satisfactorily completed. Additionally, MACTEC completed the fieldwork for Phase II activities (under a work plan that MDE reviewed) during 2002. The procedures and findings were documented in a Phase II Site Characterization and Risk Assessment Report (the “Report”) that was sent to MDE on February 13, 2003. During April 2003, MDE requested supplemental soil-gas sampling procedures be performed. These procedures were performed and reported to MDE during September 2003. MDE issued a response letter, dated October 24, 2003, in which it formally accepted the site into the VCP and informed the Partnership that some form of remedial action is required to address elevated levels of PCE in soil and ground water. The MDE approved the plan for remedial action (the “Plan”) on November 24, 2004. In December 2004, an agreement was entered into with ATC Associates Inc. (“ATC”), pursuant to which ATC will provide certain environmental services to perform the environmental cleanup as described in the Plan. As of December 31, 2005, the Statement of Net Assets in process of liquidation reflects an accrued liability of $314,000, which represents the Partnership’s best estimate of the obligation regarding the environmental issues mentioned above; however, it is reasonably possible that the loss exposure will be in excess of the amount accrued and may be material to the Partnership.

On January 18, 2005, the Partnership had an irrevocable standby letter of credit established in the amount of $60,000 that expired on January 7, 2006, in favor of the MDE in connection with the Plan. The letter of credit has been extended through January 7, 2007.

The General Partners engaged an unrelated third party real estate broker CB Richard Ellis, Inc. on April 7, 2005, to market the property on an exclusive basis for a six month period. The Partnership will seek to obtain from any potential buyer as complete an indemnification as possible for any liability in connection with remediation of the contamination of the property.

6

On August 5, 2005, the Partnership reported that it had concluded its bid process for its sole remaining property, Hampton Park, located in Capitol Heights, Maryland, and accepted a bid to sell the property. On November 4, 2005, the Partnership entered into a Real Estate Purchase and Sale Agreement (the “Sale Agreement”) with Recycland, LLC (the “Recycland”).

The Sale Agreement provided that Recycland would pay approximately $3,200,000 to the Partnership, taking into account anticipated offsets under the Sale Agreement for the cost of a pollution legal liability insurance policy covering certain environmental liabilities and the cost of a “fixed price to closure” contract with Gannett Fleming Project Development Corporation and EMG Corporation to complete the environmental remediation work through and including the issuance of a Certificate of Completion by the MDE. The Sale Agreement provided that Recycland would continue the remediation work and indemnify the Partnership for certain environmental liabilities and performance obligations. Pursuant to the Sale Agreement, Recycland had an opportunity to conduct due diligence and to terminate the agreement for any reason until one business day before closing.

On November 15, 2005, Recycland terminated the Sale Agreement in accordance with sections 4.5 and 13.4 of the Sale Agreement.

In light of the termination of the Sale Agreement and other information, the Managing General Partner has changed its estimated liquidation date of the Partnership from December 31, 2005 to December 31, 2006. As a result, at this time the Managing General Partner has estimated an increase in future liquidating costs of approximately $475,000 or approximately $9.00 per limited and equivalent participating unit of the Partnership.

The General Partners intend to remarket the property in 2006 once additional environmental testing and remediation work is undertaken. The Partnership’s liquidation and dissolution will proceed upon the sale of the Hampton Park property.

Net assets in liquidation decreased approximately $375,000 during the year ended December 31, 2005. The decrease was mainly due to the increase in liquidation accruals due to the fact that the Partnership has changed its estimated liquidation date from December 31, 2005 to December 31, 2006. As a result, at this time the Managing General Partner has estimated an increase in future liquidation costs of approximately $475,000 or approximately $9.00 per limited and equivalent participating unit of the Partnership.

Watson & Taylor Management, Inc. (“WTMI”), an affiliate of the individual general partners is responsible for the day-to-day operation of the property, including the supervision of the on-site managers and the establishment of rental policies and rates for new rentals and renewals and directs the marketing activity for the property under a management agreement (“Management Agreement”) entered into with the Partnership. The Management Agreement may be terminated by either party with 60 days’ written notice, with or without cause, and can be terminated upon a sale of the property. WTMI receives 4.5% of the property’s gross revenues (as defined in the Management Agreement) as a management fee.

B.  Summary of Significant Accounting Policies

Basis of accounting

The Partnership adopted the liquidation basis of accounting effective October 1, 1996. Accordingly, the net assets of the Partnership at December 31, 2005 and 2004 are stated at liquidation value, i.e., the assets have been valued at their estimated fair values, net of selling expenses, and the liabilities include estimated amounts to be incurred through the date of liquidation of the Partnership, which is in conformity with accounting principles generally accepted in the United States. Due to the nature of the Hampton Park environmental issue, the date of liquidation is uncertain; however, the Partnership has utilized a December 31, 2006 date for purposes of estimating costs through the conclusion of liquidation reflecting the Managing General Partner’s best estimate. The actual remaining net proceeds from liquidation will depend upon a variety of factors and are likely to differ from the estimated amounts reflected in the accompanying financial statements. The Partnership’s fiscal year for both book and tax purposes ends on December 31.

The financial statements of the Partnership have been prepared on the liquidation basis of accounting in accordance with accounting principles generally accepted in the United States of America. Such principles require the General Partners to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results

7

could differ from those estimates. The Partnership’s application of these polices involves judgment regarding the estimated date of liquidation and the property held for sale. A change to the assumption date or the property value could materially impact the financial statements.

Certain balances from the prior period have been reclassified to conform with the current financial statement presentation.

Income taxes

The Partnership is not required to provide for, or pay, any Federal or state income taxes. Income tax attributes that arise from its operations are passed directly to the individual partners. The Partnership may be subject to other state and local taxes in jurisdictions in which it operates.

Profit and loss allocations and distributions

Income from a Terminating Sale, as defined in the Amended and Restated Certificate and Agreement of Limited Partnership (“the Partnership Agreement”), is allocated first to all partners having negative capital account balances, to the extent of such balances, and then to the limited partners until their capital accounts equal their Adjusted Capital Contribution plus a Cumulative Preference as those terms are defined in the Partnership Agreement. Sales proceeds from a Terminating Sale are first used for the payment of any debts or obligations of the Partnership, then any balance remaining is distributed to the partners having positive capital account balances.

PBP has waived its right to share in any limited partner cash distributions and allocations of the Partnership’s profits and losses with respect to the 258 equivalent units it holds (see Note E).

C.  Property Held for Sale

The Partnership’s property as of December 31, 2005, 2004 and 2003 consisted solely of Hampton Park, a mini-warehouse facility located in Capitol Heights, Maryland. It is uncertain at this time what the Partnership will ultimately realize from the sale of the property due to the property’s environmental issue (see Note A). However, the carrying amount of the property appears to be recoverable based on the most recent appraised valuation of the property reduced by estimated costs to sell and a discount associated with the uncertainty of costs to resolve the outstanding environmental issue.

D.  Net Income (Loss) From Liquidating Activities

Net income (loss) from liquidating activities consisted of the following:

	Year Ended December 31, 2005			Year Ended December 31, 2004		Year Ended December 31, 2003
Rental and other income	$	603,880		$	579,699	$	589,713
Property operating expenses		343,557			319,580		282,576
General and administrative expenses		6,842			2,933		1,593
Estimated liquidation expenses		628,945			123,942		275,042
		979,344			446,455		559,211
Net income (loss) from liquidating activities	$	(375,464	)	$	133,244	$	30,502

E.  Related Parties

PBP and its affiliates perform services for the Partnership which include, but are not limited to: accounting and financial management, transfer and assignment functions, asset management, investor communications, printing and other administrative services. PBP and its affiliates receive reimbursements for costs incurred in connection with these services, the type of which is limited by the provisions of the Partnership Agreement. PBP is a wholly owned subsidiary of Prudential Securities Group, Inc. (“PSG”).

Affiliates of Messrs. Watson and Taylor, the individual General Partners, also perform certain administrative and monitoring functions on behalf of the Partnership for which they receive cost reimbursement.

8

Additionally, WTMI receives 4.5% of the property’s gross revenues (as defined in the Management Agreement) as a management fee. Such management fees totaled approximately $24,000, $25,000 and $26,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

In conjunction with the liquidation basis of accounting, the Partnership has recorded an accrual as of December 31, 2005 and 2004 for the estimated costs expected to be incurred to liquidate the Partnership. Included in these estimated liquidation costs is $112,000 and $139,000 as of December 31, 2005 and 2004, respectively, expected to be payable to the General Partners and their affiliates during the anticipated remaining liquidation period. The actual charges to be incurred by the Partnership will depend primarily upon the length of time required to liquidate the Partnership’s remaining net assets, and may differ from the amounts accrued as of December 31, 2005.

PBP and the individual General Partners of the Partnership own 258, 130 and 130 equivalent limited partnership units, respectively. PBP receives funds from the Partnership, such as General Partner distributions and reimbursement of expenses, but has waived all of its rights resulting from its ownership of equivalent limited partnership units. Accordingly, the 258 units owned by PBP are not part of the 51,560 limited and equivalent units which receive distributions and allocations of the Partnership’s profits and losses.

PSG, an affiliate of PBP, owns 180 limited partnership units at December 31, 2005 for which no such waivers on profit participation are in effect.

F.  Income Taxes

The following is a reconciliation of net income (loss) for financial reporting purposes to net income for tax reporting purposes:

	For the year ended December 31
	2005			2004			2003
Net income (loss) for financial reporting purposes (a)	$	(375,464	)	$	133,244		$	30,502
Estimated liquidation costs, deducted for books not tax		628,945			123,942			275,042
Liquidation costs incurred, deducted for tax not book		(609,485	)		(175,732	)		(211,206	)
Tax depreciation and amortization in excess of book amounts		(102,608	)		(102,581	)		(139,218	)
Tax basis net loss	$	(458,612	)	$	(21,127	)	$	(44,880	)

(a) Represents net income (loss) from liquidating activities which is reflected in the Statement of Changes in Net Assets as well as Note D.

The differences between the tax basis and book basis of partners’ capital are primarily attributable to the cumulative effect of the book to tax income adjustments and the initial charge to partners’ capital of syndication costs, for book purposes, when the Partnership was formed.

9

PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2

(a limited partnership)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Critical Accounting Policies

Preparation of the financial statements and related disclosures in compliance with generally accepted accounting principles requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The Partnership’s application of these policies involves judgments which, in and of themselves, could materially impact the financial statements and disclosures. A future change in the assumptions or judgments applied in determining the following matters, among others, could have a material impact on future financial results. As such, actual results may differ from the estimates used by management.

Date of Liquidation

In light of the termination of the Sale Agreement and other information, the managing general partner has changed its estimated liquidation date of the Partnership from December 31, 2005 to December 31, 2006. Due to the nature of the environmental issue, the date of liquidation is uncertain and a change to that assumption date could materially impact the financial statements and disclosures.

Assumption Regarding the Property Held for Sale

It is uncertain at this time what the Partnership will ultimately realize from the sale of the Hampton Park property due to the property’s environmental issue (see discussion below). Additionally, there is uncertainty regarding the ultimate costs of environmental remediation at the Hampton Park property and significant changes to PBP’s assumptions could materially impact the financial statements and disclosures.

Liquidity and Capital Resources

In accordance with a consent statement dated September 17, 1996, the limited partners approved, during October 1996, the proposed sale to Public Storage, Inc. (“Public”) of all eight mini-warehouse facilities owned by the Partnership and the liquidation and dissolution of the Partnership.

Seven of the eight properties were sold to Public during December 1996. The Partnership continues to own the Hampton Park property located in Capitol Heights, Maryland as it was not sold to Public after Phase I and Phase II Environmental Site Assessments performed during 1996 by MACTEC Engineering and Consulting, Inc. (“MACTEC”) identified detectable levels of tetrachloroethene (“PCE”) in the soil and ground water samples collected at the site. MACTEC, at the Partnership’s request, reported the PCE release to the Maryland Department of the Environment (“MDE”).

On November 21, 2000, MDE reached a determination that it was appropriate to undertake an active remedial measure at the site. MACTEC, at the request of the Partnership, submitted an application to enter the site into MDE’s Voluntary Cleanup Program (“VCP”) during March 2001. During a meeting on May 16, 2001 between the Partnership, MACTEC and MDE, to discuss MDE’s comments on the Partnership’s application, it was determined that the Partnership would perform a non-invasive Phase I Environmental Site Assessment Update (“Phase I Activities”) and would subsequently, upon review and agreement with MDE, move to perform certain Phase II invasive sampling and analytical procedures (“Phase II Activities”) with the anticipation of entering the site into the VCP. During the first quarter of 2002, MDE notified the Partnership that Phase I Activities were satisfactorily completed. Additionally, MACTEC completed the fieldwork for Phase II activities (under a work plan that MDE reviewed) during 2002. The procedures and findings were documented in a Phase II Site Characterization and Risk Assessment Report (the “Report”) that was sent to MDE on February 13, 2003. During April 2003, MDE requested supplemental soil-gas sampling procedures be performed. These procedures were performed and reported to MDE during September 2003. MDE issued a response letter, dated October 24, 2003, in which it formally accepted the site into the VCP and informed the Partnership that some form of remedial action is required to address elevated levels of PCE in soil and ground water. The MDE approved the plan for remedial action (the “Plan”) on November 24, 2004. In December 2004, an agreement was entered into with ATC Associates Inc.

10

(“ATC”), pursuant to which ATC will provide certain environmental services to perform the environmental cleanup effort as described in the Plan. As of December 31, 2005, the Statement of Net Assets in process of liquidation reflects an accrued liability of approximately $314,000, which represents the Partnership’s best estimate of the obligation regarding the environmental issues mentioned above; however, it is reasonably possible that the loss exposure will be in excess of the amount accrued and may be material to the Partnership.

On January 18, 2005 the Partnership had an irrevocable standby letter of credit established in the amount of $60,000 that expired on January 7, 2006, in favor of the MDE in connection with the Plan. The letter of credit has been extended through January 7, 2007.

The General Partners engaged an unrelated third party real estate broker CB Richard Ellis, Inc. on April 7, 2005, to market the property on an exclusive basis for a six month period. The Partnership will seek to obtain from any potential buyer as complete an indemnification as possible for any liability in connection with remediation of the contamination of the property.

On August 5, 2005, the Partnership reported that it had concluded its bid process for its sole remaining property, Hampton Park, located in Capitol Heights, Maryland, and accepted a bid to sell the property. On November 4, 2005, the Partnership entered into a Real Estate Purchase and Sale Agreement (the “Sale Agreement”) with Recycland, LLC (the “Recycland”).

The Sale Agreement provided that Recycland would pay approximately $3,200,000 to the Partnership, taking into account anticipated offsets under the Sale Agreement for the cost of a pollution legal liability insurance policy covering certain environmental liabilities and the cost of a “fixed price to closure” contract with Gannett Fleming Project Development Corporation and EMG Corporation to complete the environmental remediation work through and including the issuance of a Certificate of Completion by the MDE. The Sale Agreement provided that Recycland would continue the remediation work and indemnify the Partnership for certain environmental liabilities and performance obligations. Pursuant to the Sale Agreement, Recycland had an opportunity to conduct due diligence and to terminate the agreement for any reason until one business day before closing.

On November 15, 2005, Recycland terminated the Sale Agreement in accordance with sections 4.5 and 13.4 of the Sale Agreement.

In light of the termination of the Sale Agreement and other information, the managing general partner has changed its estimated liquidation date of the Partnership from December 31, 2005 to December 31, 2006. As a result, at this time the managing general partner has estimated an increase in future liquidating costs of approximately $475,000 or approximately $9.00 per limited and equivalent participating unit of the Partnership.

The General Partners intend to remarket the property in 2006 once additional environmental testing and remediation work is undertaken. The General Partners intend to liquidate the Partnership subject to the Hampton Park property first being sold, and will distribute any remaining funds after payment of and reserves for all expenses and liabilities.

In conjunction with the liquidation basis of accounting, the Partnership has recorded an accrual as of December 31, 2005 for the estimated costs expected to be incurred to liquidate the Partnership. Due to the nature of the Hampton Park environmental issue, the date of liquidation is uncertain. However, as mentioned above, the Partnership has utilized a December 31, 2006 date for purposes of estimating costs through the conclusion of liquidation reflecting the Managing General Partner’s best estimate. The actual charges to be incurred by the Partnership will depend primarily upon the length of time required to liquidate the Partnership’s remaining net assets, and may differ from the amounts accrued as of December 31, 2005.

Net assets in liquidation decreased approximately $375,000 during the year ended December 31, 2005. The decrease was mainly due to the increase in liquidation accruals due to the fact that the Partnership has changed its estimated liquidation date from December 31, 2005 to December 31, 2006. As a result, at this time the managing general partner has estimated an increase in future liquidation costs of approximately $475,000 or approximately $9.00 per limited and equivalent participating unit of the Partnership.

As of December 31, 2005, the Partnership has cash and cash equivalents of approximately $1,609,000, which is sufficient to meet the working capital requirements of the Partnership for the foreseeable future. The future liquidation and dissolution of the Partnership will result in the sale of the Hampton Park property and any other Partnership assets and the distribution to the Limited Partners, after payment of and reserves for all expenses and liabilities, of the net sales proceeds and remaining cash.

11

Off-Balance Sheet Arrangements and Contractual Obligations

As of December 31, 2005, the Partnership had not utilized special purpose entities to facilitate off-balance sheet financing arrangements and has no loan guarantee arrangements or off-balance sheet arrangements of any kind other than those that are not likely to have a material current or future effect on the Partnership’s financial position.

The Partnership’s contractual obligations are primarily with service providers such as PBP, WTMI, ATC, registered public accounting firms, etc. A summary of the Partnership’s significant contractual obligations as of December 31, 2005, follows:

Contractual Obligations
Payments due by period
Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
$	570,000	$	467,000	$	90,000	$	13,000	$	—

Results of Operations

As a result of the Partnership adopting the liquidation basis of accounting in accordance with generally accepted accounting principles as of October 1, 1996, and thus not reporting results of operations thereafter, there is no management discussion comparing the corresponding 2005, 2004 and 2003 periods.

12

OTHER INFORMATION

The Partnership’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission is available to limited partners without charge upon written request to:

Prudential-Bache/Watson & Taylor, Ltd.-2

Enterprise Discontinued Business Solutions

751 Broad Street, 2nd Floor

Newark, NJ 07102-3714

13

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners

Prudential-Bache/Watson & Taylor, Ltd. -2

We consent to the incorporation by reference in this Annual Report (Form 10-K) of Prudential-Bache/Watson & Taylor, Ltd-2 of our report dated January 23, 2004, with respect to the financial statements of Prudential-Bache/Watson & Taylor, Ltd-2, included in the 2005 Annual Report to Partners of Prudential-Bache/Watson & Taylor, Ltd-2.

/s/ Ernst & Young, LLP

New York, New York

March 28, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Richard F. Welch, certify that:

1. I have reviewed this annual report on Form 10-K of Prudential-Bache/Watson & Taylor, LTD.-2 (the “Partnership”);

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this annual report;

4. The Partnership’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Partnership and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Partnership, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the Partnership’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the Partnership’s internal control over financial reporting that occurred during the Partnership’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting; and

5. The Partnership’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Partnership’s auditors and the board of directors of the managing general partner of the Partnership:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Partnership’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership’s internal controls over financial reporting.

Date:    March 31, 2006	/s/ Richard F. Welch
	Richard F. Welch Chairman of the Board of Directors, President, and Chief Executive Officer of the Managing General Partner of the Partnership

EX-31.2

Exhibit 31.2

I, Warren S. Hoffman, certify that:

1. I have reviewed this annual report on Form 10-K of Prudential-Bache/Watson & Taylor, LTD.-2 (the “Partnership”);

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this annual report;

4. The Partnership’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Partnership and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Partnership, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the Partnership’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the Partnership’s internal control over financial reporting that occurred during the Partnership’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting; and

5. The Partnership’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Partnership’s auditors and the board of directors of the managing general partner of the Partnership:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Partnership’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership’s internal control over financial reporting.

Date:    March 31, 2006	/s/ Warren S. Hoffman
	Warren S. Hoffman Chief Financial Officer and Vice President of the Managing General Partner of the Partnership

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Richard F. Welch, Chairman of the Board of Directors, President and Chief Executive Officer of the managing general partner, Prudential-Bache Properties, Inc. (the “Managing General Partner”), of Prudential-Bache/Watson & Taylor, Ltd.-2 (the “Partnership”), hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Partnership’s Annual Report on Form 10-K for the period ending December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

/s/ Richard F. Welch

Richard F. Welch

Chairman of the Board of Directors, President, and Chief Executive Officer of the Managing General Partner of the Partnership

March 31, 2006

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Warren S. Hoffman, Chief Financial Officer and Vice President of the managing general partner, Prudential-Bache Properties, Inc. (the “Managing General Partner”), of Prudential-Bache/Watson & Taylor, Ltd.-2 (the “Partnership”), hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Partnership’s Annual Report on Form 10-K for the period ending December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

/s/ Warren S. Hoffman

Warren S. Hoffman

Chief Financial Officer and Vice President of the Managing General Partner

March 31, 2006