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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2022

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 001-31568

New England Realty Associates Limited Partnership

(Exact name of registrant as specified in its charter)

Massachusetts

04-2619298

(State or other jurisdiction of

(I.R.S. employer

incorporation or organization)

identification no.)

39 Brighton Avenue, Allston, Massachusetts

02134

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617783-0039

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  No 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No 

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

Large accelerated filer

Accelerated Filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

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

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Class A

NEN

NYSE MKT Exchange

As of January 19, 2023, there were 95,404 of the registrant’s Class A units (2,862,128 Depositary Receipts) of limited partnership issued and outstanding and 22,658 Class B units issued and outstanding.

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP

INDEX

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

3

Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

4

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and 2021

5

Consolidated Statements of Changes in Partners’ Capital for the Nine Months Ended September 30, 2022 and 2021

6

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

7

Notes to Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

41

Item 4.

Controls and Procedures

42

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

43

Item 1A.

Risk Factors

43

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

Item 3.

Defaults Upon Senior Securities

43

Item 4.

Mine Safety Disclosure

44

Item 5.

Other Information

44

Item 6.

Exhibits

44

SIGNATURES

46

2

Table of Contents

NEW ENGLAND REALTY ASSOCIATES, L.P.

PART 1 -- FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited consolidated balance sheets, statements of income, changes in partners’ capital, and cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. The financial statements reflect all adjustments consisting only of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair presentation for the interim periods.

The consolidated balance sheet as of December 31, 2021, has been derived from the audited consolidated balance sheet at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in New England Realty Associates L.P.’s Annual Report on

Form10-K for the fiscal year ended December 31, 2021.

The results of operations for the three and nine month periods ended September 30, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

3

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30,

December 31,

    

2022

    

2021

 

 

ASSETS

(Unaudited)

Rental Properties

$

242,937,926

$

251,355,202

Cash and Cash Equivalents

 

59,473,939

 

96,083,508

Rents Receivable

 

414,659

 

935,303

Real Estate Tax Escrows

 

1,907,378

 

861,697

Investment in U.S. Treasury Bills

73,995,586

Prepaid Expenses and Other Assets

 

7,613,638

 

6,183,981

Investments in Unconsolidated Joint Ventures

 

1,439,150

 

1,455,888

Total Assets

$

387,782,276

$

356,875,579

LIABILITIES AND PARTNERS’ CAPITAL

Mortgage Notes Payable

411,475,632

370,481,390

Distribution and Loss in Excess of Investment in Unconsolidated Joint Venture

 

24,136,809

 

22,992,420

Accounts Payable and Accrued Expenses

 

4,298,250

 

4,324,879

Advance Rental Payments and Security Deposits

 

8,874,364

 

8,369,497

Total Liabilities

 

448,785,055

 

406,168,186

Commitments and Contingent Liabilities (Notes 3 and 9)

 

 

Partners’ Capital 119,324 and 121,516 units outstanding in 2022 and 2021 respectively

 

(61,002,779)

 

(49,292,607)

Total Liabilities and Partners’ Capital

$

387,782,276

$

356,875,579

See notes to consolidated financial statements.

4

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

    

2022

    

2021

    

2022

    

2021

    

  

Revenues

Rental income

$

16,974,515

$

15,832,492

    

$

50,260,258

    

$

46,145,825

    

Laundry and sundry income

 

103,868

 

114,180

 

330,461

 

336,980

 

17,078,383

 

15,946,672

 

50,590,719

 

46,482,805

Expenses

Administrative

 

696,656

 

607,478

 

2,028,319

 

1,819,481

Depreciation and amortization

 

4,114,913

 

3,956,979

 

12,212,278

 

11,806,561

Management fee

 

683,999

 

646,059

 

2,029,453

 

1,867,798

Operating

 

1,410,843

 

1,338,718

 

5,609,302

 

4,792,332

Renting

 

181,574

 

458,040

 

501,906

 

941,281

Repairs and maintenance

 

3,126,953

 

3,128,369

 

8,381,339

 

7,432,860

Taxes and insurance

 

2,302,648

 

2,259,793

 

6,879,455

 

6,688,885

 

12,517,586

 

12,395,436

 

37,642,052

 

35,349,198

Income Before Other Income (Expense)

 

4,560,797

 

3,551,236

 

12,948,667

 

11,133,607

Other Income (Expense)

Interest income

363,350

27

 

363,411

 

74

Interest expense

(3,982,445)

(3,393,518)

 

(11,060,794)

 

(10,136,630)

Income (loss) from investments in unconsolidated joint ventures

93,516

(233,130)

 

203,867

 

(796,725)

Other (expenses)

(39,994)

(874,526)

 

(3,565,573)

 

(3,626,621)

 

(11,368,042)

 

(10,933,281)

Net Income

$

995,224

$

(75,385)

$

1,580,625

$

200,326

Net Income per Unit

$

8.32

$

(0.62)

$

13.12

$

1.65

Weighted Average Number of Units Outstanding

 

119,638

 

121,756

 

120,465

 

121,756

See notes to consolidated financial statements.

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNER’S CAPITAL

(Unaudited)

Units

Partner’s Capital

 

Limited

General

Treasury

Limited

General

 

  

Class A

  

Class B

  

Partnership

  

Subtotal

  

Units

  

Total

  

Class A

  

Class B

  

Partnership

  

Total

 

Balance January 1, 2021

 

144,180

 

34,243

 

1,802

 

180,225

 

58,469

 

121,756

$

(33,203,447)

(7,852,318)

(413,280)

$

(41,469,045)

Distribution to Partners

 

 

 

 

 

 

 

(2,805,265)

(666,251)

(35,065)

 

(3,506,581)

Net Income

 

 

 

 

 

 

 

160,261

38,062

2,003

 

200,326

Balance September 30 , 2021

 

144,180

 

34,243

 

1,802

 

180,225

 

58,469

 

121,756

$

(35,848,451)

$

(8,480,507)

$

(446,342)

$

(44,775,300)

Balance January 1, 2022

 

144,180

 

34,243

 

1,802

 

180,225

 

58,709

121,516

$

(39,462,357)

$

(9,338,738)

$

(491,512)

$

(49,292,607)

Distribution to Partners

 

 

 

 

 

 

(6,498,504)

(1,543,395)

(81,231)

 

(8,123,130)

Stock Buyback

 

 

 

 

 

2,192

 

(2,192)

(4,134,773)

(981,249)

(51,645)

 

(5,167,667)

Net Income

 

 

 

 

 

 

1,264,500

300,319

15,806

 

1,580,625

Balance September 30, 2022

 

144,180

 

34,243

 

1,802

 

180,225

 

60,901

 

119,324

$

(48,831,134)

$

(11,563,063)

$

(608,582)

$

(61,002,779)

See notes to consolidated financial statements.

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30,

    

2022

    

2021

    

 

Cash Flows from Operating Activities

Net Income

    

$

1,580,625

    

$

200,326

    

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization

 

12,212,278

 

11,806,561

Amortization of deferred finance costs

350,115

179,879

(Income) Loss from investments in joint ventures

 

(203,867)

 

796,725

Allowance for doubtful accounts

906,986

Change in operating assets and liabilities

Proceeds from unconsolidated joint ventures

 

72,500

 

27,250

Decrease (Increase) in rents receivable

 

520,644

 

(498,584)

(Decrease) Increase in accounts payable and accrued expense

 

(26,636)

 

413,183

(Increase) in real estate tax escrow

 

(1,045,681)

 

(32,970)

(Increase) in prepaid expenses and other assets

 

(931,325)

 

(1,195,693)

Increase in advance rental payments and security deposits

 

504,867

 

244,888

Total Adjustments

 

11,452,895

 

12,648,225

Net cash provided by operating activities

 

13,033,520

 

12,848,551

Cash Flows From Investing Activities

Distribution in excess of investment in unconsolidated joint ventures

 

1,135,000

 

603,202

(Investment) in unconsolidated joint ventures

 

 

(40,702)

Investment in U.S. Treasury Bills

(103,995,587)

Proceeds from U.S.Treasury Bills

30,000,000

Improvement of rental properties

 

(3,708,707)

 

(2,230,442)

Net cash (used in) investing activities

 

(76,569,294)

 

(1,667,942)

Cash Flows from Financing Activities

Principal payments of mortgage notes payable

 

(1,720,335)

 

(1,704,743)

Proceeds from Mortgage Notes Payable

41,937,337

Stock buyback

 

(5,167,667)

 

Distributions to partners

 

(8,123,130)

 

(3,506,581)

Net cash provided by (used in) financing activities

 

26,926,205

 

(5,211,324)

Net (Decrease) Increase in Cash and Cash Equivalents

 

(36,609,569)

 

5,969,285

Cash and Cash Equivalents, at beginning of period

 

96,083,508

 

18,646,972

Cash and Cash Equivalents, at end of period

$

59,473,939

$

24,616,257

See notes to consolidated financial statements.

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

(Unaudited)

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

Line of Business: New England Realty Associates Limited Partnership (“NERA”, the “Company” or the “Partnership”) was organized in Massachusetts in 1977. NERA and its subsidiaries own 29 properties which include 21 residential buildings; 4 mixed use residential, retail and office buildings; 3 commercial buildings and individual units at one condominium complex. These properties total 2,892 apartment units, 19 condominium units and 108,043 square feet of commercial space. Additionally, the Partnership also owns a 40 - 50% interest in 7 residential and mixed use properties consisting of 688 apartment units, 12,500 square feet of commercial space and a 50 car parking lot. The properties are located in Eastern Massachusetts and Southern New Hampshire.

Basis of Presentation: The financial statements have been prepared in conformity with GAAP. The preparation of the financial statements in conformity with GAAP requires management 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 reported period. These estimates and assumptions are based on management’s historical experience that are believed to be reasonable at the time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgement. The Partnership’s critical accounting policies are those which require assumptions to be made about matters that are highly uncertain. Different estimates could have a material effect on the Partnership’s financial results. Judgements and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances.

Principles of Consolidation: The consolidated financial statements include the accounts of NERA and its subsidiaries. NERA has a 99.67% to 100% ownership interest in each subsidiary except for the seven limited liability companies (the “Investment Properties” or “Joint Ventures”) in which the Partnership has a 40 - 50% ownership interest. The consolidated group is referred to as the “Partnership”. Minority interests are not recorded, since they are insignificant. All significant intercompany accounts and transactions are eliminated in consolidation. The Partnership accounts for its investment in the above-mentioned Investment Properties using the equity method of consolidation. (See Note 14: Investment in Unconsolidated Joint Ventures.)

The Partnership accounts for its investments in joint ventures using the equity method of accounting. These investments are recorded initially at cost, as Investments in Unconsolidated Joint Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions. Generally, the Partnership would discontinue applying the equity method when the investment (and any advances) is reduced to zero and would not provide for additional losses unless the Partnership has guaranteed obligations of the venture or is otherwise committed to providing further financial support for the investee. If the venture subsequently generates income, the Partnership only recognizes its share of such income to the extent it exceeds its share of previously unrecognized losses. In 2013 and beyond, the carrying values of some investments fell below zero. We intend to fund our share of the investments’ future operating deficits should the need arise. However, we have no legal obligation to pay for any of the liabilities of such investments nor do we have any legal obligation to fund operating deficits. (See Note 14: Investment in Unconsolidated Joint Ventures.)

The authoritative guidance on consolidation provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIE (the “primary beneficiary”). Generally, the consideration of whether an entity is a VIE applies when either (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest, (2) the equity investment at risk is insufficient to finance that equity’s activities without additional subordinated financial support or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The primary beneficiary is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the

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variable interest entity’s performance; and (2) the obligation to absorb losses and rights to receive the returns from VIE that would be significant to the VIE.

Impairment: On an annual basis management assesses whether there are any indicators that the value of the Partnership’s rental properties or investments in unconsolidated subsidiaries may be impaired. In addition to identifying any specific circumstances which may affect a property or properties, management considers other criteria for determining which properties may require assessment for potential impairment. The criteria considered by management include reviewing low leased percentages, significant near term lease expirations, recently acquired properties, current and historical operating and/or cash flow losses, near term mortgage debt maturities or other factors that might impact the Partnership’s intent and ability to hold property. A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. The Partnership’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved.

Revenue Recognition: Rental income from residential and commercial properties is recognized over the term of the related lease. For residential tenants, amounts 60 days in arrears are charged against income. The commercial tenants are evaluated on a case by case basis. Certain leases of the commercial properties provide for increasing stepped minimum rents, which are accounted for on a straight-line basis over the term of the lease. Revenue from commercial leases also include reimbursements and recoveries received from tenants for certain costs as provided in the lease agreement. The costs generally include real estate taxes, utilities, insurance, common area maintenance and recoverable costs. Rental concessions are also accounted for on the straight-line basis.

Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the differences between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed-rate renewal options for below-market leases. The capitalized above-market lease amounts are accounted for as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases.

The Partnership evaluates the non-lease components (lease arrangements that include common area maintenance services) with related lease components (lease revenues). If both the timing and pattern of transfer are the same for the non-lease component and related lease component, the lease component is the predominant component. The Partnership elected an allowed practical expedient. For (i) operating lease arrangements involving real estate that include common area maintenance services and (ii) all real estate arrangements that include real estate taxes and insurance costs, we present these amounts within lease revenues in our consolidated statements of income. We record amounts reimbursed by the lessee in the period in which the applicable expenses are incurred.

Rental Properties: Rental properties are stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred; improvements and additions which improve or extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost of the asset and related accumulated depreciation is eliminated from the accounts, and any gain or loss on such disposition is included in income. Fully depreciated assets are removed from the accounts. Rental properties are depreciated by both straight-line and accelerated methods over their estimated useful lives. Upon acquisition of rental property, the Partnership estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities assumed, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships. The Partnership allocated the purchase price to the assets acquired and liabilities assumed based on their fair values. The Partnership records goodwill or a gain on bargain purchase (if any) if the net assets acquired/liabilities assumed exceed the purchase consideration of a transaction. In estimating the fair value of the tangible and intangible assets acquired, the Partnership considers information obtained about each property as a result of its due diligence and marketing and leasing

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activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

Other intangible assets acquired include amounts for in-place lease values and tenant relationship values, which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Partnership’s overall relationship with the respective tenant. Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses. Characteristics considered by management in valuing tenant relationships include the nature and extent of the Partnership’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals. The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases. The value of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships.

In the event that facts and circumstances indicate that the carrying value of a rental property may be impaired, an analysis of the value is prepared. The estimated future undiscounted cash flows are compared to the asset’s carrying value to determine if a write-down to fair value is required.

Leasing Fees: Leasing fees are capitalized and amortized on a straight-line basis over the life of the related lease. Unamortized balances are expensed when the corresponding fee is no longer applicable.

Deferred Financing Costs: Costs incurred in obtaining financing are capitalized and amortized over the term of the related indebtedness. Deferred financing costs are presented in the balance sheet as a direct deduction from the carrying value of the debt liability to which they relate, except deferred financing costs related to the revolving credit facility, which are presented in prepaid expenses and other assets. In all cases, amortization of such costs is included in interest expense and was approximately $350,000 and $180,000 for the nine months ended September 30, 2022 and 2021, respectively.

Income Taxes: The financial statements have been prepared on the basis that NERA and its subsidiaries are entitled to tax treatment as partnerships. Accordingly, no provision for income taxes have been recorded (See Note 13).

Cash Equivalents: The Partnership considers cash equivalents to be all highly liquid instruments purchased with a maturity of three months or less at the time of purchase.

Investments in Treasury Bills: Investments in Treasury Bills are recorded at amortized cost and classified as held to maturity as the Partnership has the intent and the ability to hold them until they mature. The carrying value of the Treasury Bills are adjusted for accretion of discounts over the remaining life of the investment. Income related to the Treasury Bills is recognized in interest income in the Partnership’s consolidated statement of income.

Segment Reporting: Operating segments are revenue producing components of the Partnership for which separate financial information is produced internally for management. Under the definition, NERA operated, for all periods presented, as one segment.

Comprehensive Income: Comprehensive income is defined as changes in partners’ equity, exclusive of transactions with owners (such as capital contributions and dividends). NERA did not have any comprehensive income items in 2022 or 2021 other than net income as reported.

Income (Loss) Per Depositary Receipt: Effective January 3, 2012, the Partnership authorized a 3-for-1 forward split of its Depositary Receipts listed on the NYSE Amex and a concurrent adjustment of the exchange ratio of Depositary Receipts for Class A Units of the Partnership from 10-to-1 to 30-to-1, such that each Depositary Receipt represents one-thirtieth (1/30) of a Class A Unit of the Partnership. All references to Depositary Receipts in the report are reflective of the 3-for-1 forward split.

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Income Per Unit: Net income per unit has been calculated based upon the weighted average number of units outstanding during each period presented. The Partnership has no dilutive units and, therefore, basic net income is the same as diluted net income per unit (see Note 7: Partner’s Capital).

Concentration of Credit Risks and Financial Instruments: The Partnership’s properties are located in New England, and the Partnership is subject to the general economic risks related thereto. No single tenant accounted for more than 5% of the Partnership’s revenues in 2022 or 2021. The Partnership makes its temporary cash investments with high-credit quality financial institutions. At September 30, 2022, substantially all of the Partnership’s cash and cash equivalents were held in interest-bearing accounts at financial institutions, and investments in U.S. Treasury bills, earning interest at rates from 0.01% to 2.19%. At September 30, 2022 and December 31, 2021, respectively approximately $45,045,000, and $96,166,000 of cash and cash equivalents, and security deposits included in prepaid expenses and other assets exceeded federally insured amounts.

Advertising Expense: Advertising is expensed as incurred. Advertising expense was $190,316 and $240,814 for the nine months ended September 30, 2022, and 2021, respectively.

Rental Property Held for Sale: When assets are identified by management as held for sale, the Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. The Partnership generally considers assets to be held for sale when the transaction has received appropriate corporate authority, and there are no significant contingencies relating to the sale. If, in management’s opinion, the estimated net sales price, net of selling costs, of the assets which have been identified as held for sale is less than the carrying value of the assets, a valuation allowance is established.

Interest Capitalized: The Partnership follows the policy of capitalizing interest as a component of the cost of rental property when the time of construction exceeds one year. During the nine months ended September 30, 2022, and 2021 there was no capitalized interest.

Extinguishment of Debt: When existing mortgages are refinanced with the same lender and it is determined that the refinancing is substantially different, then they are recorded as an extinguishment of debt. However, if it is determined that the refinancing is substantially the same, then they are recorded as an exchange of debt. All refinancings qualify as extinguishment of debt.

Reclassification: Certain reclassifications have been made to prior period amounts in order to conform to current period presentation.

NOTE 2. RENTAL PROPERTIES

As of September 30, 2022, the Partnership and its Subsidiary Partnerships owned 2,892 residential apartment units in 25 residential and mixed-use complexes (collectively, the “Apartment Complexes”). The Partnership also owns 19 condominium units in a residential condominium complex, all of which are leased to residential tenants (collectively referred to as the “Condominium Units”). The Apartment Complexes and Condominium Units are located primarily in the metropolitan Boston area of Massachusetts.

Additionally, as of September 30, 2022, the Partnership and Subsidiary Partnerships owned a commercial shopping center in Framingham, commercial buildings in Newton and Brookline and mixed-use properties in Boston, Brockton, and Newton, all in Massachusetts. These properties are referred to collectively as the “Commercial Properties.”

The Partnership also owned a 40% to 50% ownership interest in seven residential and mixed use complexes (the “Investment Properties”) at September 30, 2022 with a total of 688 apartment units, accounted for using the equity method of consolidation. See Note 14 for summary information on these investments.

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Rental properties consist of the following:

    

September 30, 2022

    

December 31, 2021

    

Useful Life

 

Land, improvements and parking lots

$

87,506,136

$

86,887,276

15

-

40

years

Buildings and improvements

 

254,618,756

 

253,952,680

15

-

40

years

Kitchen cabinets

 

17,384,297

 

16,946,916

5

-

10

years

Carpets

 

12,751,418

 

12,029,577

5

-

10

years

Air conditioning

 

501,697

 

501,697

5

-

10

years

Laundry equipment

 

613,961

 

608,271

5

-

7

years

Elevators

 

1,885,265

 

1,885,265

20

-

40

years

Swimming pools

 

1,090,604

 

1,090,604

10

-

30

years

Equipment

 

18,767,307

 

18,072,761

5

-

30

years

Motor vehicles

 

171,519

 

171,519

5

years

Fences

 

46,872

 

46,872

5

-

15

years

Furniture and fixtures

 

8,462,476

 

7,898,163

5

-

7

years

Smoke alarms

 

496,641

 

496,641

5

-

7

years

Total fixed assets

 

404,296,949

 

400,588,242

Less: Accumulated depreciation

 

(161,359,023)

 

(149,233,040)

$

242,937,926

$

251,355,202

NOTE 3. RELATED PARTY TRANSACTIONS

The Partnership’s properties are managed by The Hamilton Company, Inc. (the “Management Company”) an entity that is owned by the majority shareholder of NewReal, Inc., the general partner of the Partnership (the “General Partner”). The management fee is equal to 4% of gross receipts of rental revenue and laundry income on the majority of the Partnership’s properties and 3% on Linewt. Total fees paid were approximately $2,029,000 and $1,868,000 for the nine months ended September 30, 2022 and 2021, respectively.

The Partnership Agreement permits the General Partner or the Management Company to charge the costs of professional services (such as counsel, accountants and contractors) to NERA. During the nine months ended September 30, 2022 and 2021, approximately $583,000 and $766,000 was charged to NERA for legal, accounting, construction, maintenance, brokerage fees, rental and architectural services and supervision of capital improvements. Of the 2022 expenses referred to above, approximately $215,000 consisted of repairs and maintenance, $256,000 of administrative expense, and approximately $23,000 for renting expense. Approximately $89,000 of expenses for construction, architectural services and supervision of capital projects were capitalized in rental properties. Additionally in 2022, the Hamilton Company received approximately $567,000 from the Investment Properties of which approximately $491,000 was the management fee, approximately $38,000 was for maintenance services, approximately $14,000 was for administrative services and approximately $24,000 for construction, architectural services and supervision of capital projects. The management fee is equal to 4% of gross receipts of rental income on the majority of investment properties and 2% on Dexter Park.

The Partnership reimburses the Management Company for the payroll and related expenses of the employees who work at the properties. Total reimbursement was approximately $2,945,000 and $2,759,000 for the nine months ended September 30, 2022 and 2021, respectively. The Management Company maintains a 401K plan for all eligible employees whereby the employees may contribute the maximum allowed by law. The plan also provides for discretionary contributions by the employer. For the nine months ended September 30, 2022, the Partnership accrued $70,000 for the employer’s match portion to the plan. For the nine months ended September 30, 2021, the Partnership contributed $33,000 for the employer’s match portion to the plan.

Bookkeeping and accounting functions are provided by the Management Company’s accounting staff, which consists of approximately 14 people. During the nine months ended September 30, 2022 and 2021, the Management Company charged the Partnership $93,750 ($125,000 per year) for bookkeeping and accounting services included in administrative expenses above.

Sally Michael is a Director of New Real, Inc., and she is a Partner at Saul Ewing Arnstein & Lear LLP. Saul Ewing billed the Partnership for legal fees totaling approximately $68,000 and $8,000 for the nine months ended September 30, 2022 and 2021 respectively.

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The Partnership has invested in seven limited partnerships, which have invested in mixed use residential apartment complexes. The Partnership has a 40% to 50% ownership interest in each investment property. The other investors are the Brown family related entities, and five current and previous employees of the Management Company. The Brown Family related entities’ ownership interest was between 47.6% and 59%. See Note 14 for a description of the properties and their operations.

NOTE 4. PREPAID EXPENSES and OTHER ASSETS

Approximately $3,402,000, and $3,067,000 of security deposits are included in prepaid expenses and other assets at September 30, 2022 and December 31, 2021, respectively. The security deposits and escrow accounts are restricted cash.

Also, included in prepaid expenses and other assets at September 30, 2022 and December 31, 2021 is approximately $1,849,000 and $1,819,000, respectively, held in escrow to fund future capital improvements.

Intangible assets on the acquisition of Mill Street Apartments are included in prepaid expenses and other assets. Intangible assets are approximately $7,000 net of accumulated amortization of approximately $1,411,000 and approximately $26,000 net of accumulated amortization of approximately $1,392,000 at September 30, 2022 and December 31, 2021, respectively.

Financing fees in association with the line of credit of approximately $124,000 and $169,000 are net of accumulated amortization of approximately $55,000 and $10,000 at September 30, 2022 and December 31, 2021 respectively.

NOTE 5. MORTGAGE NOTES PAYABLE

At September 30, 2022 and December 31, 2021, the mortgages payable consisted of various loans, all of which were secured by first mortgages on properties referred to in Note 2. At September 30, 2022, the interest rates on these loans ranged from 2.97% to 4.95%, payable in monthly installments aggregating approximately $1,471,000 including principal, to various dates through 2035. The majority of the mortgages are subject to prepayment penalties. At September 30, 2022, the weighted average interest rate on the above mortgages was 3.69%. The effective rate of 3.80% includes the amortization expense of deferred financing costs. See Note 12 for fair value information. The Partnership’s mortgage debt and the mortgage debt of its unconsolidated joint ventures generally is non-recourse except for customary exceptions pertaining to misuse of funds and material misrepresentations.

Financing fees of approximately $3,213,000 and $2,709,000 are net of accumulated amortization of approximately $948,000 and $1,139,000 at September 30, 2022 and December 31, 2021, respectively, which offset the total mortgage notes payable.

The Partnership has pledged tenant leases as additional collateral for certain of these loans.

Approximate annual maturities at September 30, 2022 are as follows:

2023—current maturities

    

$

8,583,000

 

2024

 

2,749,000

2025

 

3,260,000

2026

 

25,209,000

2027

 

3,121,000

Thereafter

 

371,767,000

414,689,000

Less: unamortized deferred financing costs

(3,213,000)

$

411,476,000

On November 30, 2021, the Partnership entered into a Master Credit Facility Agreement (the “Facility Agreement”) with KeyBank National Association (“KeyBank”) dated as of November 30, 2021, with an initial advance

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in the amount of $156,000,000. Interest only on the debt at a fixed interest rate of 2.97% is payable on a monthly basis through December 31, 2031.

On June 16, 2022, the Partnership entered into an amendment to the Facility Agreement. The additional advance under the Amended Agreement is in the amount of $80,284,000, at a fixed interest rate of 4.33%. The Partnership’s obligations under the Facility Agreement are secured by mortgages on certain properties pursuant to certain Mortgage, Assignment of Leases and Rents, and Security Agreement and Fixture Filings.

The Partnership used the proceeds to pay down approximately $37,065,000 of existing debt secured by four properties, along with approximately $854,000 in prepayment penalties. The remaining balance of approximately $42,384,000 will be used for general partnership purposes.

Line of Credit

On July 31, 2014, the Partnership entered into an agreement for a $25,000,000 revolving line of credit. The term of the line was for three years with a floating interest rate equal to a base rate of the greater of (a) the Prime Rate (b) the Federal Funds Rate plus one-half of one percent per annum, or (c) the LIBOR Rate for a period of one month plus 1% per annum, plus the applicable margin of 2.5%. The agreement originally expired on July 31, 2017, and was extended until October 31, 2020. The costs associated with the line of credit extension were approximately $128,000. Prior to the line’s expiration in 2020, the Partnership exercised its option for a one-year extension until October 31, 2021. The Partnership paid an extension fee of approximately $37,500 in association with the extension.

On October 29, 2021, the Partnership closed on the modification of its existing line of credit. The agreement extends the credit line for three years until October 29, 2024. The commitment amount is for $25 million but is restricted to $17 million during the modification period. The modification period covers the current period and phases out by December 31, 2022. During this period, the loan covenants are modified from a minimum consolidated debt service ratio of 1.60 to a ratio of 1.35 until September 30, 2022; from a minimum tangible net worth requirement of $200 million to a net worth of $175 million until September 30, 2022; from a maximum consolidated leverage ratio of 65% to a ratio of 70% until September 30, 2022 and from a minimum debt yield of 9.5% to a yield of 8.5% until September 30, 2022 and a yield of 9.0% until December 31, 2022. Once the financial performance of the Partnership meets the original covenant tests for the trailing 12-month period, the commitment amount will return to $25 million. The portfolio’s debt yield fell below the minimum of 8.5% to 8.05%. As of September 30, 2022, the Partnership did not comply with the debt yield financial covenant. As such, the Partnership is unable to draw down any amount from the line of credit until the Partnership meets the required financial covenants.

The interest rate for the new term is LIBOR plus 300 basis points. The costs associated with the modification and renewal of the line of credit was approximately $179,000. On December 3, 2021, the Partnership paid off the outstanding balance of $17,000,000 on the Line of Credit.

The line of credit may be used for acquisition, refinancing, improvements, working capital and other needs of the Partnership. The line may not be used to pay dividends, make distributions or acquire equity interests of the Partnership.

The line of credit is collateralized by varying percentages of the Partnership’s ownership interest in 23 of its subsidiary properties and joint ventures. Pledged interests range from 49% to 100% of the Partnership’s ownership interest in the respective entities.

NOTE 6. ADVANCE RENTAL PAYMENTS AND SECURITY DEPOSITS

The Partnership’s residential lease agreements may require tenants to maintain a one-month advance rental payment and/or a security deposit. At September 30, 2022, amounts received for prepaid rents of approximately $2,581,000 are included in cash and cash equivalents, and security deposits of approximately $3,402,000 are included in prepaid expenses and other assets and are restricted cash.

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NOTE 7. PARTNERS’ CAPITAL

The Partnership has two classes of Limited Partners (Class A and B) and one category of General Partner. Under the terms of the Partnership Agreement, distributions to holders of Class B Units and General Partnership Units must represent 19% and 1%, respectively, of the distributions made to the total units outstanding. All classes have equal profit sharing and distribution rights, in proportion to their ownership interests.

In January 2022, the Partnership approved a quarterly distribution of $9.60 per Unit ($0.32 per Receipt), payable on March 31, 2022. In addition to the quarterly distribution, there was a special distribution of $38.40 per Class A unit ($1.28 per Receipt) payable on March 31, 2022. In April 2022, the Partnership approved a quarterly distribution of $9.60 per Unit ($0.32 per Receipt), payable on June 30, 2022. In July 2022, the Partnership approved a quarterly distribution of $9.60 per Unit ($0.32 per Receipt), payable on September 30, 2022.

In 2021, regular quarterly distributions of $9.60 per unit ($0.32 per receipt), were paid in March, June, September and December.

The Partnership has entered into a deposit agreement with an agent to facilitate public trading of limited partners’ interests in Class A Units. Under the terms of this agreement, the holders of Class A Units have the right to exchange each Class A Unit for 30 Depositary Receipts. The following is information per Depositary Receipt:

Nine Months Ended

 

September 30,

 

    

2022

    

2021

 

Net Income per Depositary Receipt

    

$

0.44

    

$

0.05

Distributions per Depositary Receipt

$

2.24

$

0.96

NOTE 8. TREASURY UNITS

Treasury Units at September 30, 2022 are as follows:

Class A

    

48,721

 

Class B

 

11,571

General Partnership

 

609

 

60,901

On August 20, 2007, NewReal, Inc., the General Partner authorized an equity repurchase program (“Repurchase Program”) under which the Partnership was permitted to purchase, over a period of twelve months, up to 300,000 Depositary Receipts (each of which is one-tenth of a Class A Unit). Over time, the General Partner has authorized increases in the equity repurchase program. On March 10, 2015, the General Partner authorized an increase in the Repurchase Program from 1,500,000 to 2,000,000 Depository Receipts and extended the Program for an additional five years from March 31, 2015 until March 31, 2020. On March 9, 2020, the General Partner extended the program for an additional five years from March 31, 2020 to March 31, 2025. The Repurchase Program requires the Partnership to repurchase a proportionate number of Class B Units and General Partner Units in connection with any repurchases of any Depositary Receipts by the Partnership based upon the 80%, 19% and 1% fixed distribution percentages of the holders of the Class A, Class B and General Partner Units under the Partnership’s Second Amended and Restated Contract of Limited Partnership. Repurchases of Depositary Receipts or Partnership Units pursuant to the Repurchase Program may be made by the Partnership from time to time in its sole discretion in open market transactions or in privately negotiated transactions. From August 20, 2007 through September 30, 2022, the Partnership has repurchased 1,486,802 Depositary Receipts at an average price of $30.09 per receipt (or $902.70 per underlying Class A Unit), 4,034 Class B Units and 212 General Partnership Units, both at an average price of $1,179.00 per Unit, totaling approximately $50,336,000 including brokerage fees paid by the Partnership.

During the nine months ended September 30, 2022, the Partnership purchased a total of 52,613 Depositary Receipts. The average price was $78.53 per receipt or $2,355.90 per unit. The cost including commission was $4,134,773.The Partnership was required to repurchase 416.52 Class B Units and 21.92 General Partnership units at a cost of $981,249 and $51,645 respectively.

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NOTE 9. COMMITMENTS AND CONTINGENCIES

From time to time, the Partnership is involved in various ordinary routine litigation incidental to its business. The Partnership either has insurance coverage or provides for any uninsured claims when appropriate. The Partnership is not involved in any material pending legal proceedings.

NOTE 10. RENTAL INCOME

During the nine months ended September 30, 2022, approximately 95% of rental income was related to residential apartments and condominium units with leases of one year or less. The majority of these leases expire in June, July and August. Approximately 5% was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at September 30, 2022 as follows:

    

Commercial

 

Property Leases

 

2023

$

1,981,000

2024

 

1,409,000

2025

 

871,000

2026

 

728,000

2027

 

406,000

Thereafter

 

1,683,000

$

7,078,000

The aggregate minimum future rental income does not include contingent rentals that may be received under various leases in connection with common area charges and real estate taxes. Aggregate contingent rentals from continuing operations were approximately $441,000 and $417,000 for the nine months ended September 30, 2022 and 2021 respectively. Staples and Trader Joe’s, tenants at Staples Plaza, are approximately 28% of the total commercial rental income.

The following information is provided for commercial leases:

    

Annual base

    

    

    

Percentage of

 

rent for

Total square feet

Total number of

annual base rent for

 

Through September 30,

expiring leases

for expiring leases

leases expiring

expiring leases

 

2023

$

430,143

55,286

22

19

%

2024

 

785,710

26,248

13

37

%

2025

 

135,210

2,461

4

6

%

2026

 

198,266

5,396

4

9

%

2027

 

269,210

11,716

5

12

%

2028

 

93,873

2,158

1

4

%

2029

 

181,324

5,104

2

8

%

2030

 

%

2031

%

Thereafter

118,245

1

5

%

Totals

$

2,211,981

 

108,369

 

52

 

100

%

Rents receivable are net of an allowance for doubtful accounts of approximately $824,000 and $832,000 at September 30, 2022 and December 31, 2021. Included in rents receivable at September 30, 2022 is approximately $76,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.

Rents receivable at September 30, 2022 also includes approximately $13,000 representing the deferral of rental concession primarily related to the residential properties.

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NOTE 11. CASH FLOW INFORMATION

During the nine months ended September 30, 2022 and 2021, cash paid for interest was approximately $10,584,000, and $9,985,000 respectively. Cash paid for state income taxes was approximately $52,000 and $70,000 during the nine months ended September 30, 2022 and 2021 respectively. During the nine months ended September 30, 2022, four properties were involved in a non-cash financing activity of approximately $37,000,000.

NOTE 12. FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

At September 30, 2022 and December 31, 2021, we do not have any significant financial assets or financial liabilities that are measured at fair value on a recurring basis in our consolidated financial statements.

Financial Assets and Liabilities not Measured at Fair Value

At September 30, 2022 and December 31, 2021 the carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable, and note payable, accounts payable and accrued expenses were representative of their fair values due to the short-term nature of these instruments or, the recent acquisition of these items. The Company considers all highly liquid investments purchased with original maturities of three months or less at the time of purchase to be cash equivalents. Cash, cash equivalents, and restricted cash include cash held in checking, U.S. Treasury Bills, and money market accounts.

The Partnership has investments in Treasury Bills some of which mature over a period greater than 90 days and are classified as short-term investments. The Treasury Bills are carried at amortized cost and classified as held to maturity as the Partnership has the intent and the ability to hold them until they mature. The carrying value of the Treasury Bills are adjusted for accretion of discounts over the remaining life of the investment. Income related to the Treasury Bills is recognized in interest income in the Partnership’s consolidated statement of income. The Treasury Bills classified within Level I of the fair value hierarchy.

At September 30, 2022 and December 31, 2021 we estimated the fair value of our mortgages payable and other notes based upon quoted market prices for the same (Level 1) or similar (Level 2) issues when current quoted market prices are available. We estimated the fair value of our secured mortgage debt that does not have current quoted market prices available by discounting the future cash flows using rates currently available to us for debt with similar terms and maturities (Level 3). The differences in the fair value of our debt from the carrying value are the result of differences in interest rates and/or borrowing spreads that were available to us at September 30, 2022 and December 31, 2021, as compared with those in effect when the debt was issued or acquired. The secured mortgage debt contain pre-payment penalties or yield maintenance provisions that could make the cost of refinancing the debt at lower rates exceed the benefit that would be derived from doing so.

The following methods and assumptions were used by the Partnership in estimating the fair value of its financial instruments:

For cash and cash equivalents, accounts receivable, other assets, investment in partnerships, accounts payable, advance rents and security deposits: fair value approximates the carrying value of such assets and liabilities.

For mortgage notes payable: fair value is generally based on estimated future cash flows, which are discounted using the quoted market rate from an independent source for similar obligations. Refer to the table below for the carrying amount and estimated fair value of such instruments.

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The following table reflects the carrying amounts and estimated fair value of our debt.

September 30, 2022

December 31, 2021

    

Carrying Value

    

Fair Value

    

Carrying Value

    

Fair Value

Assets

Cash equivalents

$

59,473,939

$

59,529,805

$

96,083,508

$

96,083,508

Treasury bills

$

73,995,586

$

74,158,935

$

$

Total Assets

$

133,469,525

$

133,688,740

$

96,083,508

$

96,083,508

Liabilities

Mortgage payable

- Partnership properties

*

$

411,475,632

$

366,891,771

$

370,481,390

$

383,244,134

- Investment properties

*

$

166,119,958

$

155,922,343

$

166,203,705

$

175,881,762

Total Liabilities

$

577,595,590

$

522,814,114

$

536,685,095

$

559,125,896

* Net of unamortized deferred financing costs

Disclosure about fair value of financial instruments is based on pertinent information available to management as of September 30, 2022 and December 31, 2021. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since September 30, 2022 and current estimates of fair value may differ significantly from the amounts presented herein.

NOTE 13. TAXABLE INCOME AND TAX BASIS

Taxable income reportable by the Partnership and includable in its partners’ tax returns is different than financial statement income because of tax free exchanges, different depreciation methods, different tax lives, other items with limited tax deductibility carryovers and timing differences related to prepaid rents, allowances and intangible assets at significant acquisitions. Federal taxable income of approximately $4,056,000 was approximately $6,756,000 more than statement income for the year ended December 31, 2021. The Federal cumulative tax basis of the Partnership’s real estate at December 31, 2021 is approximately $10,946,000 more than the statement basis. The primary reasons for the difference in tax basis are tax free exchanges, accelerated depreciation and bonus depreciation. The Partnership’s Federal tax basis in its joint venture investments is approximately $1,066,000 more than statement basis. State taxable income may be significantly different due to different tax treatments for certain items.

Certain entities included in the Partnership’s consolidated financial statements are subject to certain state taxes. These taxes are not significant and are recorded as operating expenses in the accompanying consolidated financial statements.

The Partnership adopted the amended provisions related to uncertain tax provisions of ASC 740, Income Taxes. As a result of the implementation of the guidance, the Partnership recognized no material adjustment regarding its tax accounting treatment. The Partnership expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which would be included in general and administrative expense.

In the normal course of business the Partnership or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates, where applicable. As of September 30, 2022, the tax years that generally remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2018 forward.

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NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

The Partnership has invested in seven limited partnerships and limited liability companies, the majority of which have invested in residential apartment complexes, with three Joint Ventures investing in commercial property. The Partnership has between a 40%-50% ownership interests in each investment. The other investors are the Brown Family related entities and five current and former employees of the Management Company. The Brown Family’s ownership interest was between 47.6% and 59%, with the balance owned by the others. A description of each investment is as follows:

On October 28, 2009 the Partnership invested approximately $15,925,000 in a joint venture to acquire a 40% interest in a residential property located in Brookline, Massachusetts. The property, Hamilton Park Towers LLC, referred to as Dexter Park, or Hamilton Park, is a 409 unit residential complex. The purchase price was $129,500,000. The original mortgage was $89,914,000 with an interest rate of 5.57% and was to mature in 2019. The mortgage called for interest only payments for the first two years of the loan and amortized over 30 years thereafter.

On May 31, 2018, Hamilton Park Towers, LLC , entered into a Mortgage Note with John Hancock Life Insurance Company (U.S.A.) in the principal amount of $125,000,000. Interest only payments on the Note are payable on a monthly basis at a fixed interest rate of 3.99% per annum, and the principal amount of the Note is due and payable on June 1, 2028. The Note is secured by a mortgage on the Dexter Park apartment complex located at 175 Freeman Street, Brookline, Massachusetts pursuant to a Mortgage, Assignment of Leases and Rents and Security Agreement dated May 31, 2018. The Note is guaranteed by the Partnership and HBC Holdings, LLC pursuant to a Guaranty Agreement dated May 31, 2018.

Hamilton Park used the proceeds of the loan to pay off an outstanding loan of approximately $82,000,000 and distributed approximately $41,200,000 to its owners. The Partnership’s share of the distribution was approximately $16,500,000. As a result of the distribution, the carrying value of the investment fell below zero. The Partnership will continue to account for the investment using the equity method of accounting, although the Partnership has no legal obligation to fund its’ share of any future operating deficiencies as needed. In connection with this refinancing, the property incurred a defeasance charge of approximately $3,830,000. Based on its’ ownership in the property, the Partnership incurred 40% of this charge, an expense of approximately $1,532,000. At September 30, 2022, the balance on this mortgage before unamortized deferred financing costs is $125,000,000. This investment, Hamilton Park Towers, LLC is referred to as Dexter Park.

On March 7, 2005, the Partnership invested $2,000,000 for a 50% ownership interest in a building comprising 48 apartments, one commercial space and a 50-car surface parking lot located in Boston, Massachusetts. The purchase price was $14,300,000, with a $10,750,000 mortgage. The Joint Venture planned to operate the building and initiate development of the parking lot. In June 2007, the Joint Venture separated the parcels, formed an additional limited liability company for the residential apartments and obtained a mortgage on the property. The new limited liability company formed for the residential apartments and commercial space is referred to as Hamilton Essex 81, LLC. In August 2008, the Joint Venture restructured the mortgages on both parcels at Essex 81. On September 30, 2015, Hamilton Essex 81, LLC obtained a new 10 year mortgage in the amount of $10,000,000, interest only at 2.18% plus the one month Libor rate. The proceeds of the note were used to pay off the existing mortgage of $8,040,719 and the Partnership received a distribution of $978,193 for its share of the excess proceeds. As a result of the distribution, the carrying value of the investment fell below zero. The Partnership will continue to account for this investment using the equity method of accounting. Although the Partnership has no legal obligation, the Partnership intends to fund its share of any future operating deficits if needed. At September 30, 2022, the balance on this mortgage before unamortized deferred financing costs is $10,000,000. The investment in the parking lot is referred to as Hamilton Essex Development, LLC; the investment in the apartments is referred to as Hamilton Essex 81, LLC.

On March 2, 2005, the Partnership invested $2,352,000 for a 50% ownership interest in a 176-unit apartment complex with an additional small commercial building located in Quincy, Massachusetts. The purchase price was $23,750,000. The Joint Venture sold 127 of the units as condominiums and retained 49 units for long-term investment. The Joint Venture obtained a new 10-year mortgage in the amount of $5,000,000 on the units to be retained by the Joint Venture. The interest on the new loan was 5.67% fixed for the 10 year term with interest only payments for five years and amortized over a 30 year period for the balance of the loan term. On July 8, 2016, Hamilton 1025 LLC paid off the outstanding balance of the mortgage balance. The Partnership made a capital contribution of $2,359,500 to Hamilton 1025, LLC for its share of the funds required for the transaction. After paying off the mortgage, the Partnership began to

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sell off the individual units. In 2019, all residential units were sold. The Partnership still owns the commercial building. This investment is referred to as Hamilton 1025, LLC.

In September 2004, the Partnership invested approximately $5,075,000 for a 50% ownership interest in a 42-unit apartment complex located in Lexington, Massachusetts. The purchase price was $10,100,000. On September 12, 2016, the property was refinanced with a 15 year mortgage in the amount of $6,000,000, at 3.71%, interest only. The Joint Venture Partnership paid off the prior mortgage of approximately $5,158,000 with the proceeds of the new mortgage and made a distribution of $385,000 to the Partnership. The cost associated with the refinancing was approximately $123,000. In 2018, the carrying value of the investment fell below zero. The Partnership will continue to account for this investment using the equity method of accounting, although the Partnership has no legal obligation to fund its share of any future operating deficiencies, if needed. At September 30, 2022, the balance on this mortgage before unamortized deferred financing costs is $6,000,000. This investment is referred to as Hamilton Minuteman, LLC.

In August 2004, the Partnership invested $8,000,000 for a 50% ownership interest in a 280-unit apartment complex located in Watertown, Massachusetts. The total purchase price was $56,000,000. The Joint Venture sold 137 units as condominiums. The assets were combined with Hamilton on Main Apartments. Hamilton on Main, LLC is known as Hamilton Place. In August 2014, the property was refinanced with a 10 year mortgage in the amount of $16,900,000 at 4.34% interest only. The Joint Venture paid off the prior mortgage of approximately $15,205,000 with the proceeds of the new mortgage and distributed $850,000 to the Partnership. The costs associated with the refinancing were approximately $161,000. In 2018, the carrying value of the investment fell below zero. The Partnership will continue to account for this investment using the equity method of accounting, although the Partnership has no legal obligation to fund its share of any future operating deficiencies, if needed. At September 30, 2022, the balance of the mortgage before unamortized deferred finance is $16,900,000. The investment is referred to as Hamilton on Main LLC.

In November 2001, the Partnership invested approximately $1,533,000 for a 50% ownership interest in a 40-unit apartment building in Cambridge, Massachusetts. In June 2013, the property was refinanced with a 15 year mortgage in the amount of $10,000,000 at 3.87%, interest only for 3 years and is amortized on a 30-year schedule for the balance of the term. The Joint Venture paid off the prior mortgage of approximately $6,776,000 with the proceeds of the new mortgage. After the refinancing, the Joint Venture made a distribution of $1,610,000 to the Partnership. As a result of the distribution, the carrying value of the investment fell below zero. The Partnership will continue to account for this investment using the equity method of accounting. Although the Partnership has no legal obligation, the Partnership intends to fund its share of any future operating deficits if needed. At September 30, 2022, the balance of this mortgage before unamortized deferred financing costs is approximately $8,770,000. This investment is referred to as 345 Franklin, LLC.

Summary financial information at September 30, 2022

  

  

Hamilton

  

  

  

Hamilton

  

Hamilton

  

  

Hamilton

Essex

345

Hamilton

Minuteman

on Main

Dexter

    

Essex 81

    

Development

    

Franklin

    

1025

    

Apts

    

Apts

    

Park

    

Total

ASSETS

Rental Properties

$

5,935,095

$

2,586,302

$

4,852,841

$

79,107

$

4,551,023

$

13,688,356

$

76,657,705

$

108,350,429

Cash & Cash Equivalents

 

883,219

88,190

265,808

9,882

175,451

910,242

2,220,183

 

4,552,975

Rent Receivable

 

198,014

77,561

1,240

4,906

5,299

18,832

44,830

 

350,682

Real Estate Tax Escrow

 

74,625

69,748

32,497

105,494

 

282,364

Prepaid Expenses & Other Assets  

 

321,917

56,261

117,224

757

28,665

224,845

2,298,375

 

3,048,044

Total Assets

$

7,412,870

$

2,808,314

$

5,306,861

$

94,652

$

4,792,935

$

14,947,769

$

81,221,093

$

116,584,494

LIABILITIES AND PARTNERS’ CAPITAL  

Mortgage Notes Payable

$

9,958,633

$

$

8,731,598

$

$

5,926,689

$

16,869,235

$

124,633,803

$

166,119,958

Accounts Payable & Accrued Expense

 

120,784

2,250

92,492

2,553

59,237

163,200

756,960

 

1,197,476

Advance Rental Pmts & Security Deposits

 

332,572

19,865

280,818

161,741

430,923

2,837,995

 

4,063,914

Total Liabilities

 

10,411,989

22,115

9,104,908

2,553

6,147,667

17,463,358

128,228,758

171,381,348

Partners’ Capital

 

(2,999,119)

2,786,199

(3,798,047)

92,099

(1,354,732)

(2,515,589)

(47,007,665)

 

(54,796,854)

Total Liabilities and Capital

$

7,412,870

$

2,808,314

$

5,306,861

$

94,652

$

4,792,935

$

14,947,769

$

81,221,093

$

116,584,494

Partners’ Capital %—NERA

 

50

% 

 

50

% 

 

50

% 

 

50

% 

 

50

% 

 

50

% 

 

40

% 

Investment in Unconsolidated Joint Ventures

$

$

1,393,100

$

$

46,050

$

$

$

1,439,150

Distribution and Loss in Excess of investments in Unconsolidated Joint Ventures

$

(1,499,560)

$

$

(1,899,023)

$

$

(677,366)

$

(1,257,794)

$

(18,803,066)

(24,136,809)

Total Investment in Unconsolidated Joint Ventures (Net)

$

(22,697,659)

Total units/condominiums

Apartments

 

48

 

 

40

 

175

 

42

 

148

 

409

 

687

Commercial

 

1

 

1

 

 

1

 

 

 

 

3

Total

 

49

 

1

 

40

 

176

 

42

 

148

 

409

 

690

Units to be retained

 

49

 

1

 

40

 

1

 

42

 

148

 

409

 

690

Units to be sold

 

 

 

 

 

 

 

 

Units sold through November 1, 2022

 

 

 

 

175

 

 

 

 

175

Unsold units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Table of Contents

Financial information for the nine months ended September 30, 2022

    

    

Hamilton

    

    

    

Hamilton

    

Hamilton

    

    

Hamilton

Essex

345

Hamilton

Minuteman

on Main

Dexter

Essex 81

Development

Franklin

1025

Apts

Apts

Park

Total

Revenues

Rental Income

$

1,194,570

$

235,842

$

1,107,677

$

77,935

$

899,186

$

2,725,431

$

11,014,528

$

17,255,169

Laundry and Sundry Income

 

9,839

120

472

25,402

73,452

109,285

1,204,409

235,842

1,107,797

77,935

899,658

2,750,833

11,087,980

17,364,454

Expenses

Administrative

14,512

5,798

26,052

2,142

9,297

52,028

163,891

273,720

Depreciation and Amortization

358,568

8,782

259,967

2,448

253,369

808,116

2,813,436

4,504,686

Management Fees  

58,716

9,879

43,719

3,166

35,967

108,615

230,937

490,999

Operating

169,086

54,901

1,219

95,538

282,757

853,728

1,457,229

Renting

23,823

27,857

8,988

39,844

85,229

185,741

Repairs and Maintenance

132,026

3,180

125,323

82,989

494,223

1,393,350

2,231,091

Taxes and Insurance

199,415

47,074

131,736

13,567

114,224

387,242

1,862,717

2,755,975

 

956,146

74,713

669,555

22,542

600,372

2,172,825

7,403,288

11,899,441

Income Before Other Income

 

248,263

161,129

438,242

55,393

299,286

578,008

3,684,692

5,465,013

Other Income (Loss)

Interest Expense

 

(257,574)

(263,093)

(177,129)

(568,251)

(3,817,865)

(5,083,912)

 

(257,574)

(263,093)

(177,129)

(568,251)

(3,817,865)

(5,083,912)

Net (Loss) Income

$

(9,311)

$

161,129

$

175,149

$

55,393

$

122,157

$

9,757

$

(133,173)

$

381,101

Net (Loss) Income —NERA 50%

    

$

(4,656)

$

80,565

$

87,575

$

27,697

$

61,078

$

4,879

257,136

Net Income —NERA 40%

    

$

(53,269)

(53,269)

$

203,867

Financial information for the three months ended September 30, 2022

    

    

Hamilton

    

    

Hamilton

    

Hamilton

    

    

Hamilton

Essex

345

Hamilton

Minuteman

on Main

Dexter

  

Essex 81

Development

Franklin

1025

Apts

Apts

Park

Total

Revenues

Rental Income

$

433,819

$

60,471

$

392,851

$

27,813

$

300,345

$

919,313

$

3,894,398

$

6,029,010

Laundry and Sundry Income

 

4,445

8,252

23,860

36,557

 

438,264

60,471

392,851

27,813

300,345

927,565

3,918,258

6,065,567

Expenses

Administrative

 

5,640

4,250

6,060

793

3,542

16,448

54,159

90,892

Depreciation and Amortization

 

119,789

2,927

86,776

816

84,966

270,802

947,553

1,513,629

Management Fees

 

21,620

2,353

15,610

1,112

12,438

36,098

78,267

167,498

Operating

 

49,866

18,186

54

20,336

90,931

271,977

451,350

Renting

 

9,759

10,650

1,974

14,264

12,555

49,202

Repairs and Maintenance

 

62,158

41,565

37,999

188,269

595,679

925,670

Taxes and Insurance

 

66,313

15,566

44,269

4,448

38,546

125,879

642,107

937,128

 

335,145

25,096

223,116

7,223

199,801

742,691

2,602,297

4,135,369

Income Before Other Income

 

103,119

35,375

169,735

20,590

100,544

184,874

1,315,961

1,930,198

Other Income (Loss)

Interest Expense

 

(116,185)

(86,694)

(59,000)

(191,453)

(1,283,295)

(1,736,627)

 

(116,185)

(86,694)

(59,000)

(191,453)

(1,283,295)

(1,736,627)

Net Income (Loss)

$

(13,066)

$

35,375

$

83,041

$

20,590

$

41,544

$

(6,579)

$

32,666

$

193,571

Net Income (Loss)—NERA 50%

    

$

(6,534)

$

17,688

$

41,520

$

10,295

$

20,771

$

(3,289)

80,451

Net Income —NERA 40%

    

$

13,065

13,065

$

93,516

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Future annual mortgage maturities at September 30, 2022 are as follows:

Hamilton

345

Hamilton

Hamilton on

Dexter

 

Period End

    

Essex 81

    

Franklin

    

Minuteman

    

Main Apts

    

Park

    

Total

 

9/30/2023

$

$

228,573

$

$

$

$

228,573

9/30/2024

 

237,577

16,900,000

17,137,577

9/30/2025

 

10,000,000

246,936

10,246,936

9/30/2026

256,664

256,664

9/30/2027

266,775

266,775

Thereafter

7,533,358

6,000,000

125,000,000

138,533,358

10,000,000

8,769,883

6,000,000

16,900,000

125,000,000

166,669,883

Less: unamortized deferred financing costs

(41,367)

(38,286)

(73,311)

(30,765)

(366,196)

(549,925)

$

9,958,633

$

8,731,597

$

5,926,689

$

16,869,235

$

124,633,804

$

166,119,958

At September 30, 2022 the weighted average interest rate on the above mortgages was 4.05%. The effective rate was 4.12% including the amortization expense of deferred financing costs.

22

Table of Contents

Summary financial information at September 30, 2021

  

  

Hamilton

  

  

  

Hamilton

  

Hamilton

  

  

Hamilton

Essex

345

Hamilton

Minuteman

on Main

Dexter

    

Essex 81

    

Development

    

Franklin

    

1025

    

Apts

    

Apts

    

Park

    

Total

ASSETS

Rental Properties

$

6,376,891

$

2,588,792

$

5,139,866

$

82,371

$

4,766,334

$

14,522,033

$

79,175,187

$

112,651,474

Cash & Cash Equivalents

 

230,394

 

73,049

 

154,633

 

9,776

 

231,357

 

602,344

 

2,135,096

 

3,436,649

Rent Receivable

 

65,313

 

13,744

 

23,113

 

7,081

 

7,285

 

38,832

 

236,721

 

392,089

Real Estate Tax Escrow

 

77,685

 

 

62,506

 

 

40,025

 

117,318

 

 

297,534

Prepaid Expenses & Other Assets

 

311,513

 

67,410

 

123,115

 

685

 

30,592

 

195,099

 

1,956,585

 

2,684,999

Total Assets

$

7,061,796

$

2,742,995

$

5,503,233

$

99,913

$

5,075,593

$

15,475,626

$

83,503,589

$

119,462,745

LIABILITIES AND PARTNERS’ CAPITAL

Mortgage Notes Payable

$

9,944,844

$

$

8,944,849

$

$

5,918,506

$

16,853,184

$

124,569,180

$

166,230,563

Accounts Payable & Accrued Expense

 

82,137

 

2,250

 

99,583

 

2,711

 

67,629

 

169,515

 

804,862

 

1,228,687

Advance Rental Pmts& Security Deposits

 

189,746

 

 

247,951

 

 

154,400

 

474,463

 

2,427,394

 

3,493,954

Total Liabilities

 

10,216,727

2,250

9,292,383

2,711

6,140,535

17,497,162

127,801,436

170,953,204

Partners’ Capital

 

(3,154,931)

 

2,740,745

 

(3,789,150)

 

97,202

 

(1,064,942)

 

(2,021,536)

 

(44,297,847)

 

(51,490,459)

Total Liabilities and Capital

$

7,061,796

$

2,742,995

$

5,503,233

$

99,913

5,075,593

$

15,475,626

$

83,503,589

$

119,462,745

Partners’ Capital %—NERA

 

50

% 

50

% 

 

50

% 

 

50

% 

 

50

% 

 

50

% 

 

40

% 

Investment in Unconsolidated Joint Ventures

$

$

1,370,373

$

$

48,601

$

$

$

$

1,418,974

Distribution and Loss in Excess of investments in Unconsolidated Joint Ventures

$

(1,577,467)

$

$

(1,894,576)

$

$

(532,472)

$

(1,010,769)

$

(17,719,140)

 

(22,734,423)

Total Investment in Unconsolidated Joint Ventures (Net)

$

(21,315,449)

Total units/condominiums

Apartments

48

40

175

42

148

409

862

Commercial

1

1

1

3

Total

49

1

40

176

42

148

409

865

Units to be retained

49

1

40

1

42

148

409

690

Units sold through November 1, 2021

175

175

Unsold units

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Table of Contents

Financial information for the nine months ended September 30, 2021

    

    

Hamilton

    

    

    

Hamilton

    

Hamilton

    

    

Hamilton

Essex

345

Hamilton

Minuteman

on Main

Dexter

Essex 81

Development

Franklin

1025

Apts

Apts

Park

Total

Revenues

Rental Income

$

856,569

$

168,431

$

1,019,465

$

75,148

$

865,196

$

2,491,414

$

9,513,069

$

14,989,292

Laundry and Sundry Income

 

9,194

 

 

112

 

 

4,548

 

27,837

 

73,067

 

114,758

 

865,763

168,431

1,019,577

75,148

869,744

2,519,251

9,586,136

15,104,050

Expenses

Administrative

 

70,445

 

2,103

22,651

2,140

11,485

49,372

160,336

 

318,532

Depreciation and Amortization

 

358,788

 

15,223

257,314

2,448

253,180

813,435

2,795,700

 

4,496,088

Management Fees

 

29,181

 

6,187

40,288

2,843

34,592

97,262

202,975

 

413,328

Operating

 

129,400

 

42,137

231

78,038

315,638

761,854

 

1,327,298

Renting

 

81,149

 

46,108

1,095

71,772

415,221

 

615,345

Repairs and Maintenance

 

123,467

 

520

100,182

86,566

446,677

1,506,426

 

2,263,838

Taxes and Insurance

 

195,974

 

45,037

 

131,574

 

14,535

 

107,198

 

336,333

 

1,812,549

 

2,643,200

 

988,404

 

69,070

 

640,254

 

22,197

 

572,154

 

2,130,489

 

7,655,061

 

12,077,629

Income Before Other Income

 

(122,641)

 

99,361

 

379,323

 

52,951

 

297,590

 

388,762

 

1,931,075

 

3,026,421

Other Income (Loss)

Interest Expense

 

(184,542)

(269,993)

(177,757)

(568,246)

(3,792,615)

(4,993,153)

Other (Loss)

Other Income

 

1,222

1,222

 

(184,542)

(269,993)

(177,757)

(568,246)

(3,791,393)

(4,991,931)

Net Income (Loss)

$

(307,183)

$

99,361

$

109,330

$

52,951

$

119,833

$

(179,484)

$

(1,860,318)

$

(1,965,510)

Net Income (Loss)—NERA 50%

    

$

(153,593)

$

49,681

$

54,665

$

26,476

$

59,917

$

(89,742)

 

(52,597)

Net Income —NERA 40%

    

$

(744,128)

 

(744,128)

$

(796,725)

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Table of Contents

Financial information for the three months ended September 30, 2021

    

    

Hamilton

    

    

    

Hamilton

    

Hamilton

    

    

Hamilton

Essex

345

Hamilton

Minuteman

on Main

Dexter

Essex 81

Development

Franklin

1025

Apts

Apts

Park

Total

Revenues

Rental Income

$

414,497

$

111,191

$

343,674

$

26,410

$

293,988

$

827,140

$

3,300,261

$

5,317,161

Laundry and Sundry Income

 

2,986

 

 

 

 

1,243

 

9,796

 

23,706

 

37,731

 

417,483

111,191

343,674

26,410

295,231

836,936

3,323,967

5,354,892

Expenses

Administrative

 

16,576

750

7,129

651

3,824

14,592

65,606

109,128

Depreciation and Amortization

 

120,266

5,074

86,449

816

84,827

272,874

938,058

1,508,364

Management Fees

 

17,335

6,187

13,943

1,272

11,716

32,831

73,512

156,796

Operating

 

60,232

16,060

55

23,542

101,948

260,794

462,631

Renting

 

26,272

12,174

375

20,213

222,664

281,698

Repairs and Maintenance

 

41,335

35,687

30,184

177,652

599,156

884,014

Taxes and Insurance

 

64,799

15,228

44,194

4,634

36,986

115,028

614,622

895,491

 

346,815

27,239

215,636

7,428

191,454

735,138

2,774,412

4,298,122

Income Before Other Income

 

70,668

83,952

128,038

18,982

103,777

101,798

549,555

1,056,770

Other Income (Loss)

Interest Expense

 

(61,827)

(89,248)

(59,880)

(191,453)

(1,263,383)

(1,665,791)

Other Income

 

 

(61,827)

(89,248)

(59,880)

(191,453)

(1,263,383)

(1,665,791)

Net Income (Loss)

$

8,841

$

83,952

$

38,790

$

18,982

$

43,897

$

(89,655)

$

(713,828)

$

(609,021)

Net Income (Loss)—NERA 50%

    

$

4,421

$

41,976

$

19,395

$

9,491

$

21,949

$

(44,829)

52,403

Net Income —NERA 40%

    

$

(285,533)

 

(285,533)

$

(233,130)

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Table of Contents

NOTE 15. EMPLOYEE BENEFIT 401(k) PLANS

Effective January 1, 2019, employees of the Partnership, who meet certain minimum age and service requirements, are eligible to participate in the Management Company’s 401(k) Plan (the “401(k) Plan”).  Eligible employees may elect to defer up to 90 percent of their eligible compensation on a pre-tax basis to the 401(k) Plan, subject to certain limitations imposed by federal law. 

The amounts contributed by employees are immediately vested and non-forfeitable.  Beginning January 1, 2019, the Partnership matched 50% up to 6% of compensation deferred by each employee in the 401(k) plan. The Partnership may make discretionary matching or profit-sharing contributions to the 401(k) Plan on behalf of eligible participants in any plan year.  Participants are always 100 percent vested in their pre-tax contributions and will begin vesting in any matching or profit-sharing contributions made on their behalf after two years of service with the Partnership at a rate of 20 percent per year, becoming 100 percent vested after a total of six years of service with the Partnership. Total expense recognized by the Partnership for the 401(k) Plan for the nine months ended September 30, 2022 was $70,000.

NOTE 16. IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

There have been no new accounting pronouncements applicable to the Partnership that would have a material impact on the Partnership’s consolidated financial statements.

NOTE 17. SUBSEQUENT EVENTS

From October 1, 2022, through January 19, 2023, the Partnership has purchased 1,658 Depository Receipts. The average price was $76.58 per receipt, or $2,297.40 per unit. The total cost was $127,565. The Partnership is required to purchase 13 Class B units and 1 General Partnership units at a cost of $30,154 and $1,587, respectively.

On October 3, 2022, the Management Company was the target of a ransomware attack. The Management Company has been engaged by the General Partner, to perform general management functions for the Company’s properties in exchange for management fees. After becoming aware of the incident, the Management Company conducted an initial investigation into their digital environment and discovered that all on premise computer systems were encrypted. The Management Company worked with independent third-party cybersecurity specialists through its outside counsel to help with the restoration of the environment and to return operations securely. Hamilton maintains off-site data backups, which were verified to have not been compromised by the ransomware attack and were utilized to restore the data that had been encrypted. The Management Company has successfully recovered the impacted files and rebuilt its computer systems, adding additional security features designed to protect its systems and data from future attacks. This incident was previously reported in the Company’s Current Report on Form 8-K filed with the SEC on October 11, 2022.

On October 14, 2022, the Partnership entered into a modification agreement with Brookline Bank modifying its loan on 659-665 Worcester Road, Framingham, MA. The agreement modifies the loan on the existing debt of $5,954,546.14, extending the maturity until October 14, 2032, at an interest rate of 4.6%, interest only for 2 years and amortizing using a thirty-year schedule for the balance of the term.  The agreement also allows for an earn out of up to an additional $1,495,453.86 once the property performance reaches a 1.35x debt service coverage ratio and the loan to value equates to at least 65%.

On November 15, 2022, (the Partnership received a notification letter from the Corporate Compliance Department of the NYSE American Exchange (the “NYSE American”) indicating that as of November 15, 2022, the Partnership is not in compliance with the NYSE American’s standards for continued listing of the Partnership’s Depositary Receipts on the NYSE American as set forth in Section 1007 of the NYSE American Company Guide (the “Company Guide”). The Partnership failed to timely file (the “Filing Delinquency”) the Partnership’s Form 10-Q for the quarter ended September 30, 2022 (the “Delayed Report”). The NYSE American notification letter has no immediate effect on the listing or trading of the Partnership’s Depositary Receipts on the NYSE American, nor will it have any effect on the Partnership's financial condition or results of operations.  The Filing Delinquency is the result of the above-mentioned cybersecurity incident and was previously reported in the Partnership’s Current Report on Form 8-K filed with the SEC on November 21, 2022. The Filing Delinquency will be cured via the filing of the Delayed Report, which is this Form 10-Q.

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Table of Contents

In November 2022, the Partnership approved a quarterly distribution of $9.60 per Unit ($0.32 per Receipt), payable on December 31, 2022.

On December 5, 2022, Andrew Bloch, the Chief Financial Officer (“CFO”) of the Management Company, which has been engaged by the Partnership to manage the properties of the Partnership, resigned as Chief Financial Officer. Mr. Bloch will continue to work with Hamilton on a consultative basis to ensure a smooth transition of responsibilities to the new CFO. Mr. Bloch remains a director of the General Partner, and of the Management Company. Mr. Bloch’s decision to resign as CFO is not the result of any disagreement with the Partnership on any matter relating to the Partnership’s operations, policies, or practices. Mr. Bloch has served as CFO of the Management Company since 1998.

Effective as of December 5, 2022, the Board of Directors of the Management Company elected Karen N. Zermani as CFO of the Management Company to fill the vacancy created by the resignation of Mr. Bloch as CFO.

On December 12, 2022, the Partnership signed a purchase and sale agreement to purchase a commercial retail property of approximately 20,700 square feet, located at 659 Worcester Road in Framingham, Massachusetts for the sum of approximately $10,151,000. The Partnership has made a deposit of $500,000 to secure the transaction. This acquisition will be funded from the Partnership’s cash reserves. The Partnership closed on the transaction on January 18,2023.

On December 19, 2022, a class action was commenced in the United States District Court for the District of Massachusetts against a number of parties, including the Company:  Billie Jo White v. RealPage, Inc., et al, Case No. 1:22-cv-12134, United States District Court, District of Massachusetts (“RealPage Litigation”).

The first named defendant, RealPage, Inc., is allegedly the developer of a certain software platform known as “AI Revenue Management” (previously known as “YieldStar”).  In addition to RealPage, the Complaint names as defendants several companies, including the Company, allegedly owning, operating and/or managing residential real estate in the Greater Boston Metro Area (collectively, “Defendant Property Managers”).  The Complaint alleges that through the combined use of RealPage’s revenue management services, which allegedly included collecting non-public data regarding various factors influencing rents and generating a suggested rental price for each of the units controlled by a Defendant Property Manager using its services, the Defendant Property Managers constitute a rental “price-fixing cartel” in violation of federal and state anti-trust laws.  The Complaint seeks class certification and unspecified damages, trebled, together with attorney’s fees and other injunctive relief.  No class has yet been certified.

The Company disputes the allegations made against it and intends to vigorously defend the lawsuit.

The named Defendant Property Managers are the following:  Greystar Real Estate Partners, LLC; Cushman & Wakefield, Inc.; Lincoln Property Company; Peabody Properties, Inc.; New England Realty Associates Limited Partnership; WinnCompanies LLC and WinnResidential Manager Corp., UDR, Inc., SHP Management Corp., The Related Companies, Inc. and Simpson Property Group, LLLP.

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

Forward Looking Statements

Certain information contained herein includes forward looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Liquidation Reform Act of 1995 (the “Act”). Forward looking statements in this report, or which management may make orally or in written form from time to time, reflect management’s good faith belief when those statements are made, and are based on information currently available to management. Caution should be exercised in interpreting and relying on such forward looking statements, the realization of which may be impacted by known and unknown risks and uncertainties, events that may occur subsequent to the forward looking statements, and other factors which may be beyond the Partnership’s control and which can materially affect the Partnership’s actual results, performance or achievements for 2022 and beyond. Should one or more of the risks or uncertainties mentioned below materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We expressly disclaim any responsibility to update our forward looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying

27

Table of Contents

on past forward looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

Over the last several months, the Partnership took advantage of the low interest rate environment and refinanced fifteen properties, increased their loan balances, and raised approximately $130,000,000. With interest rates rising, and a threat of an economic slowdown, the Partnership increased the debt level and built cash reserves to acquire additional properties when opportunities become available. Currently, $90,000,000 of these reserves are invested in short-term US Treasury bills maturing in 6 months or less with interest rates between 2.1% and 3.75%.

Since the Partnership’s long-term goals include the acquisition of additional properties, a portion of the proceeds from the refinancing and sale of properties is reserved for this purpose. If available acquisitions do not meet the Partnership’s investment criteria, the Partnership may purchase additional depositary receipts. The Partnership will consider refinancing existing properties if the Partnership’s cash reserves are insufficient to repay existing mortgages or if the Partnership needs additional funds for future acquisitions.

More than two years has passed since we became aware of the outbreak of COVID- 19, The World Health Organization declared a global pandemic on March 11, 2020. On March 10, 2020 the Governor of Massachusetts declared a state of emergency and ordered all non-essential businesses closed. Additionally, March of 2020 saw the closure of local colleges and universities for the balance of the academic year. Colleges in the City of Boston and the surrounding communities conducted classes in the 2020/2021 academic year remotely, or using a hybrid model of remote and limited in class learning. These educational models caused a large decrease in the student population and resulted in significant vacancies in the Partnership’s apartment portfolio.

With the introduction and roll out of COVID vaccines in the spring of 2021, the economy was opening back up. The Governor of Massachusetts rescinded the State’s COVID-19 restrictions on May 29, 2021 and terminated the State of Emergency on June 15, 2021. The local colleges and universities returned to campus in September 2021 and the rental market improved significantly as students returned to the area.

On February 24, 2022, Russia began an invasion into Ukraine. In response, nations from around the world have placed sanctions on Russia in an attempt to cripple its economy. There is no way to predict how this conflict and the Russian sanctions will affect both the global and local economies.  If there is a downturn in the economy and significant inflation to the cost of energy, goods and service, there may be material adverse effects to our business, results of operations, cash flows, and financial condition.

The vacancy rate for the Partnership’s residential properties as of November 1, 2022 was 1.8% as compared with a vacancy rate of 2.5% as of November 1, 2021. The vacancy rate for the Joint Venture properties as of November 1, 2022 was 0.9%, as compared to 2.8% for the same period last year. The current vacancy rates are in line with those experienced prior to the Pandemic.

Residential tenants generally have lease terms of 12 months. The majority of these leases will mature during the second and third quarters of the year.

During the third quarter of 2022, rents increased on average of 6.7% for renewals and increased on average of 18.2% for new leases. For the balance of 2022, management expects a strong rental market with continued rent growth.

For the third quarter of 2022, consolidated revenue increased by 7.2%, operating expenses increased by 1.0 % and Income before Other Income (Expense) increased by 28.4%, as compared to the third quarter of 2021.

On July 31, 2014, the Partnership entered into an agreement for a $25,000,000 revolving line of credit. The term of the line was for three years with a floating interest rate equal to a base rate of the greater of (a) the Prime Rate (b) the Federal Funds Rate plus one-half of one percent per annum, or (c) the LIBOR Rate for a period of one month plus 1% per annum, plus the applicable margin of 2.5%. The agreement originally expired on July 31, 2017, and was extended until October 31, 2020. The costs associated with the line of credit extension were approximately $128,000. Prior to the line’s expiration in 2020, the Partnership exercised its option for a one-year extension until October 31, 2021. The Partnership paid an extension fee of approximately $37,500 in association with the extension.

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On October 29, 2021, the Partnership closed on the modification of its existing line of credit. The agreement extends the credit line for three years until October 29, 2024. The commitment amount is for $25 million but is restricted to $17 million during the modification period. The modification period covers the current period and phases out by December 31, 2022. During this period, the loan covenants are modified from a minimum consolidated debt service ratio of 1.60 to a ratio of 1.35 until September 30, 2022; from a minimum tangible net worth requirement of $200 million to a net worth of $175 million until September 30, 2022; from a maximum consolidated leverage ratio of 65% to a ratio of 70% until September 30, 2022 and from a minimum debt yield of 9.5% to a yield of 8.5% until September 30, 2022 and a yield of 9.0% until December 31, 2022. Once the financial performance of the Partnership meets the original covenant tests for the trailing 12-month period, the commitment amount will return to $25 million. The portfolio’s debt yield fell below the minimum of 8.5% to 8.05%. As of September 30, 2022, the Partnership did not comply with the debt yield financial covenant. As such, the Partnership is unable to draw down any amount from the line of credit until the Partnership meets the required financial covenants.

From the start of the Stock Repurchase Program in 2007 through September 30, 2022, the Partnership has purchased 1,486,802 Depositary Receipts. During the nine months ended September 30, 2022, the Partnership purchased a total of 52,613 Depositary Receipts.

At November 1, 2022, the Harold Brown related entities and Ronald Brown collectively own approximately 31.7% of the Depositary Receipts representing the Partnership Class A Units (including Depositary Receipts held by trusts for the benefit of such persons’ family members). Harold Brown related entities also control 75% of the Partnership’s Class B Units, and 75% of the capital stock of NewReal, Inc. (“NewReal”), the Partnership’s sole general partner. Ronald Brown also owns 25% of the Partnership’s Class B Units and 25% of NewReal’s capital stock. In addition, Ronald Brown is the President and director of NewReal and Jameson Brown is NewReal’s Treasurer and a director. The 75% of the issued and outstanding Class B units of the Partnership are owned by HBC Holdings LLC, an entity of which Jameson Brown is the manager. The outstanding stock of The Hamilton Company, Inc. is controlled by Jameson Brown and Harley Brown. The 75% of the issued and outstanding capital stock of NewReal, is owned by the Harold Brown 2013 Revocable Trust (the “2013 Trust”), an entity of which Sally Michaels and David Reier are the trustees.

In addition to the Management Fee, the Partnership Agreement further provides for the employment of outside professionals to provide services to the Partnership and allows NewReal to charge the Partnership for the cost of employing professionals to assist with the administration of the Partnership’s properties. Additionally, from time to time, the Partnership pays Hamilton for repairs and maintenance services, legal services, construction services and accounting services. The costs charged by Hamilton for these services are at the same hourly rate charged to all entities managed by Hamilton, and management believes such rates are competitive in the marketplace.

Residential tenants sign a one year lease. During the nine months ended September 30, 2022, tenant renewals were approximately 68% with an average rental increase of approximately 6.2%, new leases accounted for approximately 32% with rental rate increases of approximately 16.1%. During the nine months ended September 30, 2022, leasing commissions were approximately $264,000 compared to approximately $642,000 for the nine months ended September 30, 2021, a decrease of approximately $378,000 (59.0%). Tenant concessions were approximately $39,000 for the nine months ended September 30, 2022, compared to approximately $34,000 for the nine months ended September 30, 2021, an increase of approximately $5,000 (14.7%). Tenant improvements were approximately $1,723,000 for the nine months ended September 30, 2022, compared to approximately $1,282,000 for the nine months ended September 30, 2021, an increase of approximately $441,000 (34.4%).

Hamilton accounted for approximately 2.6% of the repair and maintenance expenses paid for by the Partnership during the nine months ended September 30, 2022 and 2.4 % during the nine months ended September 30, 2021. Of the funds paid to Hamilton for this purpose, the great majority was to cover the cost of services provided by the Hamilton maintenance department, including plumbing, electrical, carpentry services, and snow removal for those properties close to Hamilton’s headquarters. Several of the larger Partnership properties have their own maintenance staff. Those properties that do not have their own maintenance staff and are located more than a reasonable distance from Hamilton’s headquarters in Allston, Massachusetts are generally serviced by local, independent companies

Hamilton’s legal department handles most of the Partnership’s eviction and collection matters. Additionally, it prepares most long-term commercial lease agreements and represents the Partnership in selected purchase and sale

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transactions. Overall, Hamilton provided approximately $162,000 (72.0%) and approximately $83,000 (60.5%) of the legal services paid for by the Partnership during the nine months ended September 30, 2022 and 2021 respectively.

Additionally, as described in Note 3 to the consolidated financial statements, The Hamilton Company receives similar fees from the Investment Properties.

The Partnership requires that three bids be obtained for construction contracts in excess of $15,000. Hamilton may be one of the three bidders on a particular project and may be awarded the contract if its bid and its ability to successfully complete the project are deemed appropriate. For contracts that are not awarded to Hamilton, Hamilton charges the Partnership a construction supervision fee equal to 5% of the contract amount. Hamilton’s architectural department also provides services to the Partnership on an as-needed basis. During the nine months ended September 30, 2022, Hamilton provided the Partnership approximately $89,000 in construction and architectural services, compared to approximately $413,000 for the nine months ended September 30, 2021.

Hamilton’s accounting staff perform bookkeeping and accounting functions for the Partnership. During the nine months ended September 30, 2022 and 2021, Hamilton charged the Partnership $93,750 for bookkeeping and accounting services. For more information on related party transactions, see Note 3 to the Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the consolidated financial statements, in accordance with accounting principles generally accepted in the United States of America, requires the Partnership to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. The Partnership regularly and continually evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate properties and its investments in and advances to joint ventures. The Partnership bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. The Partnership’s critical accounting policies are those which require assumptions to be made about such matters that are highly uncertain. Different estimates could have a material effect on the Partnership’s financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances. See Note 1 to the Consolidated Financial Statements, Principles of Consolidation.

Revenue Recognition: Rental income from residential and commercial properties is recognized over the term of the related lease. For residential tenants, amounts 60 days in arrears are charged against income. The commercial tenants are evaluated on a case by case basis. Certain leases of the commercial properties provide for increasing stepped minimum rents, which are accounted for on a straight-line basis over the term of the lease. Revenue from commercial leases also include reimbursements and recoveries received from tenants for certain costs as provided in the lease agreement. The costs generally include real estate taxes, utilities, insurance, common area maintenance and recoverable costs. Rental concessions are also accounted for on the straight-line basis.

Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the differences between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed-rate renewal options for below-market leases. The capitalized above-market lease amounts are accounted for as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases.

The Partnership evaluates the non-lease components (lease arrangements that include common area maintenance services) with related lease components (lease revenues). If both the timing and pattern of transfer are the same for the non-lease component and related lease component, the lease component is the predominant component. The Partnership elected an allowed practical expedient. For (i) operating lease arrangements involving real estate that include common area maintenance services and (ii) all real estate arrangements that include real estate taxes and insurance costs,

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we present these amounts within lease revenues in our consolidated statements of income. We record amounts reimbursed by the lessee in the period in which the applicable expenses are incurred.

Rental Property Held for Sale: When assets are identified by management as held for sale, the Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. The Partnership generally considers assets to be held for sale when the transaction has received appropriate corporate authority, and there are no significant contingencies relating to the sale. If, in management’s opinion, the estimated net sales price, net of selling costs, of the assets which have been identified as held for sale is less than the carrying value of the assets, a valuation allowance is established.

If circumstances arise that previously were considered unlikely and, as a result, the Partnership decides not to sell a property previously classified as held for sale, the property is reclassified as held and used. A property that is reclassified is measured and recorded individually at the lower of (a) its carrying value before the property was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the property been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell.

Rental Properties: Rental properties are stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred; improvements and additions are capitalized. When assets are retired or otherwise disposed of, the cost of the asset and related accumulated depreciation is eliminated from the accounts, and any gain or loss on such disposition is included in income. Fully depreciated assets are removed from the accounts. Rental properties are depreciated by both straight-line and accelerated methods over their estimated useful lives. Upon acquisition of rental property, the Partnership estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities assumed, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships. The Partnership allocated the purchase price to the assets acquired and liabilities assumed based on their fair values. The Partnership records goodwill or a gain on bargain purchase (if any) if the net assets acquired/liabilities assumed exceed the purchase consideration of a transaction. In estimating the fair value of the tangible and intangible assets acquired, the Partnership considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

Investments in Treasury Bills: Investments in Treasury Bills are recorded at amortized cost and classified as held to maturity as the Partnership has the intent and the ability to hold them until they mature. The carrying value of the Treasury Bills are adjusted for accretion of discounts over the remaining life of the investment. Income related to the Treasury Bills is recognized in interest income in the Partnership’s consolidated statement of income.

Intangible assets acquired include amounts for in-place lease values above and below market leases and tenant relationship values, which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Partnership’s overall relationship with the respective tenant. Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses. Characteristics considered by management in valuing tenant relationships include the nature and extent of the Partnership’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals. The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases. The value of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships.

In the event that facts and circumstances indicate that the carrying value of a rental property may be impaired, an analysis of the value is prepared. The estimated future undiscounted cash flows are compared to the asset’s carrying value to determine if a write-down to fair value is required.

Impairment: On an annual basis management assesses whether there are any indicators that the value of the Partnership’s rental properties may be impaired. A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. The Partnership’s estimates of aggregate future cash

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flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved.

Investments in Joint Ventures: The Partnership accounts for its 40%-50% ownership in the Investment Properties under the equity method of accounting, as it exercises significant influence over, but does not control these entities. These investments are recorded initially at cost, as Investments in Joint Ventures, and subsequently adjusted for the Partnership’s share in earnings, cash contributions and distributions. Under the equity method of accounting, our net equity is reflected on the consolidated balance sheets, and our share of net income or loss from the Partnership is included on the consolidated statements of income. Generally, the Partnership would discontinue applying the equity method when the investment (and any advances) is reduced to zero and would not provide for additional losses unless the Partnership has guaranteed obligations of the venture or is otherwise committed to providing further financial support for the investee. If the venture subsequently generates income, the Partnership only recognizes its share of such income to the extent it exceeds its share of previously unrecognized losses. We intend to fund our share of the investments’ future operating deficits should the need arise. However, we have no legal obligation to pay for any of the liabilities of such investments nor do we have any legal obligation to fund operating deficits.

The authoritative guidance on consolidation provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIE (the “primary beneficiary”). Generally, the consideration of whether an entity is a VIE applies when either (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest, (2) the equity investment at risk is insufficient to finance that equity’s activities without additional subordinated financial support or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The primary beneficiary is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the variable interest entity’s performance; and (2) the obligation to absorb losses and rights to receive the returns from VIE that would be significant to the VIE.

With respect to investments in and advances to the Investment Properties, the Partnership looks to the underlying properties to assess performance and the recoverability of carrying amounts for those investments in a manner similar to direct investments in real estate properties. An impairment charge is recorded if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property.

Legal Proceedings: The Partnership is subject to various legal proceedings and claims that arise, from time to time, in the ordinary course of business. These matters are frequently covered by insurance. If it is determined that a loss is likely to occur, the estimated amount of the loss is recorded in the financial statements. Both the amount of the loss and the point at which its occurrence is considered likely can be difficult to determine.

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2022 and September 30, 2021

The Partnership and its Subsidiary Partnerships earned income before interest expense, income from investments in unconsolidated joint ventures, other expense of approximately $4,561,000 during the three months ended September 30, 2022, compared to approximately $3,551,000 for the three months ended September 30, 2021, an increase of approximately $1,010,000 (28.4%).

The rental activity is summarized as follows:

Occupancy Date

 

    

November 1, 2022

    

November 1, 2021

 

Residential

Units

 

2,911

2,911

Vacancies

 

53

73

Vacancy rate

 

1.8

%  

2.5

%

Commercial

Total square feet

 

108,043

108,043

Vacancy

 

20,274

2,152

Vacancy rate

 

18.8

%  

2.0

%

    

    

Rental Income (in thousands)

    

Three Months Ended September 30,

2022

2021

Total

Continuing

Total

Continuing

Operations

Operations

Operations

Operations

Total rents

    

$

16,975

    

$

16,975

    

$

15,832

    

$

15,832

    

Residential percentage

 

95

%  

 

95

%  

 

95

%  

 

95

%

Commercial percentage

 

5

%  

 

5

%  

 

5

%  

 

5

%

Contingent rentals

$

4

$

4

$

127

$

127

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Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021:

Three Months Ended September 30,

Dollar

Percent

  

    

2022

    

2021

    

Change

    

Change

  

Revenues

  

Rental income

    

$

16,974,515

    

$

15,832,492

    

$

1,142,023

    

7.2%

  

Laundry and sundry income

103,868

114,180

(10,312)

(9.0%)

17,078,383

15,946,672

1,131,711

7.1%

Expenses

Administrative

696,656

607,478

89,178

14.7%

Depreciation and amortization

4,114,913

3,956,979

157,934

4.0%

Management fee

683,999

646,059

37,940

5.9%

Operating

1,410,843

1,338,718

72,125

5.4%

Renting

181,574

458,040

(276,466)

(60.4%)

Repairs and maintenance

3,126,953

3,128,369

(1,416)

(0.0%)

Taxes and insurance

2,302,648

2,259,793

42,855

1.9%

12,517,586

12,395,436

122,150

1.0%

Income Before Other Income (Expense)

4,560,797

3,551,236

1,009,561

28.4%

Other Income (Expense)

Interest income

363,350

27

363,323

100%

Interest expense

(3,982,445)

(3,393,518)

(588,927)

17.4%

Income from investments in unconsolidated joint ventures

93,516

(233,130)

326,646

(140.1%)

Other Income (Expense)

(39,994)

(39,994)

100.0%

(3,565,573)

(3,626,621)

61,048

(1.7%)

Net Income

$

995,224

$

(75,385)

$

1,070,609

1420.3%

Rental income for the three months ended September 30, 2022 was approximately $16,974,000, compared to approximately $15,832,000 for the three months ended September 30, 2021, an increase of approximately $1,142,000 (7.2%). The Partnership properties with the largest increases in rental income include 62 Boylston, 1144 Commonwealth, Westgate Apartments, Hamilton Green, and Mill Street Gardens with increases of $455,000, $213,000, $101,000, $89,000 and $84,000 respectively. Included in rental income is contingent rentals collected on commercial properties. Contingent rentals include such charges as bill backs of common area maintenance charges, real estate taxes, and utility charges.

Operating expenses for the three months ended September 30, 2022 were approximately $12,517,000 compared to approximately $12,395,000 for the three months ended September 30, 2021, an increase of approximately $122,000 (1.0%), The factors contributing to the increase are an increase in depreciation and amortization of approximately $158,000 (4.0%), an increase in administrative expenses of approximately $89,000 (14.7%), and an increase in operating costs of approximately $72,000 (5.4%), partially offset by a decrease in renting expenses of approximately $276,000 (60.4%).

Interest expense for the three months ended September 30, 2022 was approximately $3,982,000 compared to approximately $3,393,000 for the three months ended September 30, 2021, an increase of approximately $589,000 (17.4 %). The increase is due to the refinancing of properties, increasing the amount of the debt, which increased the interest expense for the period.

Interest income for the three months ended September 30, 2022 was approximately $363,000 compared to approximately $0 for the three months ended September 30, 2021, an increase of approximately $363,000. The increase is due to investments in Treasury Bills which mature over a period less than 180 days, with interest rates between 2.1% to 3.9%.

At September 30, 2022, the Partnership has between a 40% and 50% ownership interests in seven different Investment Properties. See a description of these properties included in the section titled Investment Properties as well as Note 14 to the Consolidated Financial Statements for a detail of the financial information of each Investment Property.

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As described in Note 14 to the Consolidated Financial Statements, the Partnership’s share of the net income from the Investment Properties was approximately $93,000 for the three months ended September 30, 2022, compared to a net loss of approximately $233,000 for the three months ended September 30, 2021, an increase in income of approximately $326,000 (140.1%). This increase is primarily due to an increase in rental revenue to approximately $2,625,000 from $2,329,000, an increase of approximately $296,000 (12.7 %) for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. Included in the income for the three months ended September 30, 2022 is depreciation and amortization expense of approximately $662,000.

As a result of the changes discussed above, net income for the three months ended September 30, 2022 was approximately $995,000 compared to a net loss of approximately $75,000 for the three months ended September 30, 2021, an increase in income of approximately $1,070,000 (1,420.3%).

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Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021:

The Partnership and its Subsidiary Partnerships earned income before interest expense, income from investments in unconsolidated joint ventures, and other expense of approximately $12,949,000 during the nine months ended September 30, 2022, compared to approximately $11,134,000 for the nine months ended September 30, 2021, an increase of approximately $1,815,000 (16.3%).

Nine Months Ended September 30,

Dollar

Percent

  

    

2022

    

2021

    

Change

    

Change

  

Revenues

  

Rental income

$

50,260,258

$

46,145,825

$

4,114,433

 

8.9%

  

Laundry and sundry income

330,461

336,980

(6,519)

 

(1.9%)

50,590,719

46,482,805

4,107,914

8.8%

Expenses

Administrative

2,028,319

1,819,481

208,838

 

11.5%

Depreciation and amortization

12,212,278

11,806,561

405,717

 

3.4%

Management fee

2,029,453

1,867,798

161,655

 

8.7%

Operating

5,609,302

4,792,332

816,970

 

17.0%

Renting

501,906

941,281

(439,375)

 

(46.7)%

Repairs and maintenance

8,381,339

7,432,860

948,479

 

12.8%

Taxes and insurance

6,879,455

6,688,885

190,570

 

2.8%

37,642,052

35,349,198

2,292,854

 

6.5%

Income Before Other Income ( Expense)

12,948,667

11,133,607

1,815,060

 

16.3%

Other Income (Expense)

Interest income

363,411

74

363,337

 

100.0%

Interest (expense)

(11,060,794)

(10,136,630)

(924,164)

 

9.1%

Income from investments in unconsolidated joint ventures

203,867

(796,725)

1,000,592

 

(125.6%)

Other (Expense) Income

(874,526)

(874,526)

100.0%

(11,368,042)

(10,933,281)

(434,761)

 

4.0%

Net Income

$

1,580,625

$

200,326

$

1,380,299

 

689.0%

Rental income for the nine months ended September 30, 2022 was approximately $50,260,000, compared to approximately $46,146,000 for the nine months ended September 30, 2021, an increase of approximately $4,114,000 (8.9%). The Partnership properties with the largest increases in rental income include 62 Boylston, 1144 Commonwealth, Westgate Apartments, Hamilton Green, and Mill Street Gardens, with increases of $1,524,000, $494,000, $282,000, 249,000 and $238,000 respectively. Included in rental income is contingent rentals collected on commercial properties. Contingent rentals include such charges as bill backs of common area maintenance charges, real estate taxes, and utility charges.

Operating expenses for the nine months ended September 30, 2022 were approximately $37,642,000 compared to approximately $35,349,000 for the nine months ended September 30, 2021, an increase of approximately $2,293,000 (6.5%), primarily due to an increase in the refurbishment of apartments, and an increase in snow removal expense during the winter. The factors contributing to this net increase are an increase in repairs and maintenance expenses of approximately $948,000 (12.8%), an increase in operating expense of approximately $817,000 (17.0%), and an increase in depreciation and amortization of approximately $406,000 (3.4%), partially offset by a decrease in renting expense of approximately $439,000 (46.7%).

Interest income for the nine months ended September 30, 2022 was approximately $363,000 compared to approximately $0 for the three months ended September 30, 2021, an increase of approximately $363,000. The increase is due to investments in Treasury Bills which mature over a period less than 180 days, with interest rates between 2.1% to 3.9%.

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Interest expense for the nine months ended September 30, 2022 was approximately $11,061,000 compared to approximately $10,137,000 for the nine months ended September 30, 2021, an increase of approximately $924,000 (9.1%). The increase is due to the refinancing of properties, increasing the amount of debt, which increased the interest expense for the period.

At September 30, 2022, the Partnership has between a 40% and 50% ownership interests in seven different Investment Properties. See a description of these properties included in the section titled Investment Properties as well as Note 14 to the Consolidated Financial Statements for a detail of the financial information of each Investment Property.

As described in Note 14 to the Consolidated Financial Statements, the Partnership’s share of the net income from the Investment Properties was approximately $204,000 for the nine months ended September 30, 2022, compared to a net loss of approximately $797,000 for the nine months ended September 30, 2021, an increase in income of approximately $1,001,000 (125.6%). This increase is primarily due to an increase in rental revenue of approximately $ 7,526,000 for the nine months ended September 30, 2022 from approximately $6,543,000 for the nine months ended September 30, 2021, an increase of approximately $983,000 (15.0 %). Included in the income for the nine months ended September 30, 2022 is depreciation and amortization expense of approximately $1,971,000.

On November 30, 2021, the Partnership entered into a Master Credit Facility Agreement (the “Facility Agreement”) with KeyBank National Association (“KeyBank”) dated as of November 30, 2021, with an initial advance in the amount of $156,000,000. Interest only on the debt at a fixed interest rate of 2.97% is payable on a monthly basis through December 31, 2031.

On June 16, 2022, the Partnership entered into an amendment to the Facility Agreement. The additional advance under the Amended Agreement is in the amount of $80,284,000, at a fixed interest rate of 4.33%. The Partnership’s obligations under the Facility Agreement are secured by mortgages on certain properties pursuant to certain Mortgage, Assignment of Leases and Rents, and Security Agreement and Fixture Filings.

The Partnership used the proceeds from the June, 2022 refinancing to pay down approximately $37,065,000 of existing debt secured by four properties, along with approximately $894,000 in prepayment penalties, which are included in other expenses. The remaining balance of approximately $42,384,000 will be used for general partnership purposes.

As a result of the changes discussed above, net income for the nine months ended September 30, 2022 was approximately $1,580,000 compared to income of approximately $200,000 for the nine months ended September 30, 2021, an increase in net income of approximately $1,380,000 (689.0%).

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LIQUIDITY AND CAPITAL RESOURCES

The Partnership’s principal source of cash during the first nine months of 2022 and 2021 was the proceeds from the refinancing of 4 properties for approximately $42,000,000 and the collection of rents. The Partnership’s principal use of cash during the first nine months of 2022 was the purchase of Treasury Bills. The majority of cash and cash equivalents of $59,473,939 at September 30, 2022 and $96,083,508 at December 31, 2021 were held in interest bearing accounts at creditworthy financial institutions.

The decrease in cash of $36,609,569 for the nine months ended September 30, 2022 is summarized as follows:

Nine Months Ended September 30,

  

    

2022

    

2021

  

Cash provided by operating activities

$

13,033,520

$

12,848,551

Cash (used in) investing activities

(76,569,294)

(1,667,942)

Cash provided by (used in) financing activities

40,217,002

(1,704,743)

Repurchase of Depositary Receipts, Class B and General Partner Units

(5,167,667)

Distributions paid

(8,123,130)

(3,506,581)

Net (decrease) increase in cash and cash equivalents

$

(36,609,569)

$

5,969,285

The change in cash provided by operating activities is due to various factors, including a change in depreciation expense, a change in income and distribution from joint ventures, and other factors. The decrease in cash used in investing activities is primarily due to improvements to rental properties, and the purchase of Treasury Bills. The change in cash used in financing activities is due to the refinancing of 4 properties, the pay down of mortgages, the repurchase of depositary receipts, and distributions paid.

During 2022, the Partnership and its Subsidiary Partnerships have completed improvements to certain of the Properties at a total cost of approximately $3,709,000. These improvements were funded from cash reserves. Cash reserves have been adequate to fully fund improvements. The most significant improvements were made at Hamilton Oaks, Captain Parker, Hamilton Green, Westside Colonial, River Drive Apartments, and Redwood Hills at a cost of approximately $747,000, $313,000, $299,000, $292,000, $282,000 and $246,000 respectively.

During the nine months ended September 30, 2022, the Partnership received distributions of approximately $1,207,500 from the investment properties. For the nine months ended September 30, 2021, the Partnership received $590,000 in distributions from the investment properties. Included in these net distributions is the amount from Dexter Park of approximately $840,000 and $80,000 for the nine months ended September 30, 2022 and 2021, respectively.

In January 2022, the Partnership approved a quarterly distribution of $9.60 per Unit ($0.32 per Receipt), which was paid on March 31, 2022. In addition to the quarterly distribution, there was a special distribution of $38.40 per Class A unit ($1.28 per Receipt) payable on March 31, 2022. In April 2022, the Partnership approved a quarterly distribution of $9.60 per Unit ($0.32 per Receipt), which was paid on June 30, 2022. In July 2022, the Partnership approved a quarterly distribution of $9.60 per Unit ($0.32 per Receipt), which was paid on September 30, 2022.

On July 31, 2014, the Partnership entered into an agreement for a $25,000,000 revolving line of credit. The term of the line was for three years with a floating interest rate equal to a base rate of the greater of (a) the Prime Rate (b) the Federal Funds Rate plus one-half of one percent per annum, or (c) the LIBOR Rate for a period of one month plus 1% per annum, plus the applicable margin of 2.5%. The agreement originally expired on July 31, 2017 and was extended until October 31, 2020. The costs associated with the line of credit extension in 2017 were approximately $128,000. Prior to the line’s expiration in 2020, the Partnership exercised its option for a one-year extension until October 31, 2021. The Partnership paid an extension fee of approximately $37,500 in association with the extension. The Partnership agreed to terms with the lender on October 29, 2021, to extend the line of credit until October 29, 2024. On December 3,

2021, the Partnership paid off the line.

The Partnership anticipates that cash from operations will be sufficient to fund its current operations, pay distributions, make required debt payments and finance current improvements to its properties. The Partnership may also sell or refinance properties. The Partnership’s net income and cash flow may fluctuate dramatically from year to year as

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a result of the sale or refinancing of properties, property improvements, increases or decreases in rental income or expenses, or the loss of significant tenants.

Off-Balance Sheet Arrangements—Joint Venture Indebtedness

As of September 30, 2022, the Partnership had a 40%-50% ownership interest in seven Joint Ventures, five of which have mortgage indebtedness. We do not have control of these partnerships and therefore we account for them using the equity method of consolidation. At September 30, 2022, our proportionate share of the non-recourse debt related to these investments was approximately $70,835,000. See Note 14 to the Consolidated Financial Statements.

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Contractual Obligations

As of September 30, 2022, we are subject to contractual payment obligations as described in the table below.

Payments due by period

2023

2024

2025

2026

2027

Thereafter

Total

 

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual Obligations

Long-term debt

Mortgage debt *

$

8,582,753

2,748,462

3,259,573

25,209,263

3,121,211

371,767,319

$

414,688,581

Total Contractual Obligations

$

8,582,753

$

2,748,462

$

3,259,573

$

25,209,263

$

3,121,211

$

371,767,319

$

414,688,581

*Excluding unamortized deferred financing costs

We have various standing or renewable service contracts with vendors related to our property management. In addition, we have certain other contracts we enter into in the ordinary course of business that may extend beyond one year. These contracts are not included as part of our contractual obligations because they include terms that provide for cancellation with insignificant or no cancellation penalties.

See Notes 5 and 14 to the Consolidated Financial Statements for a description of mortgage notes payable. The Partnerships has no other material contractual obligations to be disclosed.

Factors That May Affect Future Results

Along with risks detailed in Item 1A of the Partnership’s Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on March 11, 2022 and from time to time in the Partnership’s other filings with the Securities and Exchange Commission, some factors that could cause the Partnership’s actual results, performance or achievements to differ materially from those expressed or implied by forward looking statements include but are not limited to the following:

The Partnership depends on the real estate markets where its properties are located, primarily in Eastern Massachusetts, and these markets may be adversely affected by local economic market conditions, which are beyond the Partnership’s control.

The Partnership is subject to the general economic risks affecting the real estate industry, such as dependence on tenants’ financial condition, the need to enter into new leases or renew leases on terms favorable to tenants in order to generate rental revenues and our ability to collect rents from our tenants.

The Partnership is also impacted by changing economic conditions making alternative housing arrangements more or less attractive to the Partnership’s tenants, such as the interest rates on single family home mortgages and the availability and purchase price of single family homes in the Greater Boston metropolitan area.

The Partnership is subject to significant expenditures associated with each investment, such as debt service payments, real estate taxes, insurance and maintenance costs, which are generally not reduced when circumstances cause a reduction in revenues from a property.

The Partnership is subject to increases in heating and utility costs that may arise as a result of economic and market conditions and fluctuations in seasonal weather conditions.

Civil disturbances, earthquakes and other natural disasters may result in uninsured or underinsured losses.

Actual or threatened terrorist attacks may adversely affect our ability to generate revenues and the value of our properties.

Financing or refinancing of Partnership properties may not be available to the extent necessary or desirable, or may not be available on favorable terms.

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The Partnership properties face competition from similar properties in the same market. This competition may affect the Partnership’s ability to attract and retain tenants and may reduce the rents that can be charged.

Given the nature of the real estate business, the Partnership is subject to potential environmental liabilities. These include environmental contamination in the soil at the Partnership’s or neighboring real estate, whether caused by the Partnership, previous owners of the subject property or neighbors of the subject property, and the presence of hazardous materials in the Partnership’s buildings, such as asbestos, lead, mold and radon gas. Management is not aware of any material environmental liabilities at this time.

Insurance coverage for and relating to commercial properties is increasingly costly and difficult to obtain. In addition, insurance carriers have excluded certain specific items from standard insurance policies, which have resulted in increased risk exposure for the Partnership. These include insurance coverage for acts of terrorism and war, and coverage for mold and other environmental conditions. Coverage for these items is either unavailable or prohibitively expensive.

Market interest rates could adversely affect market prices for Class A Partnership Units and Depositary Receipts as well as performance and cash flow.

Changes in income tax laws and regulations may affect the income taxable to owners of the Partnership. These changes may affect the after-tax value of future distributions.

The Partnership may fail to identify, acquire, construct or develop additional properties; may develop or acquire properties that do not produce a desired or expected yield on invested capital; may be unable to sell poorly- performing or otherwise undesirable properties quickly; or may fail to effectively integrate acquisitions of properties or portfolios of properties.

Risk associated with the use of debt to fund acquisitions and developments.

Competition for acquisitions may result in increased prices for properties.

Any weakness identified in the Partnership’s internal controls as part of the evaluation being undertaken could have an adverse effect on the Partnership’s business.

Ongoing compliance with Sarbanes-Oxley Act of 2002 may require additional personnel or systems changes.

The foregoing factors should not be construed as exhaustive or as an admission regarding the adequacy of disclosures made by the Partnership prior to the date hereof or the effectiveness of said Act. The Partnership expressly disclaims any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss resulting from changes in interest rates and equity prices. In pursuing its business plan, the primary market risk to which the Partnership is exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Partnership’s yield on invested assets and cost of funds and, in turn, its ability to make distributions or payments to its investors.

As of September 30, 2022, the Partnership, its Subsidiary Partnerships and the Investment Properties collectively have approximately $581,358,000 in long-term debt, substantially all of which require payment of interest at fixed rates. Accordingly, the fair value of these debt instruments is affected by changes in market interest rates. This long term debt matures through 2035. The Partnership, its Subsidiary Partnerships and the Investment Properties collectively have variable rate debt of $10,000,000 (without taking out unamortized deferred financing costs) as of September 30, 2022. Interest rates ranged from LIBOR plus 195 basis points to LIBOR plus 300 basis points. Assuming interest-rate caps are not in effect, if market rates of interest on the Partnership’s variable rate debt increased or decreased by 100

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basis points, then the increase or decrease in interest costs on the Partnership’s variable rate debt would be approximately $50,000 annually and the increase or decrease in the fair value of the Partnership’s fixed rate debt as of September 30, 2022 would be approximately $24.0 million. For information regarding the fair value and maturity dates of these debt obligations, See Note 5 to the Consolidated Financial Statements — “Mortgage Notes Payable,” Note 12 to the Consolidated Financial Statements — “Fair Value Measurements” and Note 14 to the Consolidated Financial Statements — “Investment in Unconsolidated Joint Ventures”.

For additional disclosure about market risk, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results”.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. The effectiveness of the Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) have been evaluated as of the end of the period covered by this report. Based on that evaluation, under the supervision and with the participation of the Hamilton Company, Inc. (the “Management Company”), Management concluded that IT control and related procedures that support financial reporting were not effective as of September 30, 2022 due to the material weaknesses described below that prevented the recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Partnership in the reports that it files or submits under the Exchange Act.

Management Report on Internal Control over Financial Reporting. On October 3, 2022, the Management Company was the target of a ransomware attack. The Partnership did not incur any monetary damage nor any loss of financial data due to the incident. After becoming aware of the incident, the Management Company conducted an internal investigation into their digital environment and discovered that all on premise computer systems were encrypted by an outside party. The Partnership, along with the Management Company, worked with independent third-party cybersecurity specialists to help with the restoration of the environment and to return operations securely. Off-site data backups, which were verified to have not been compromised by the ransomware attack, were utilized to restore the data that had been encrypted. The Partnership, along with the Management Company, has successfully recovered the impacted files and rebuilt its computer systems. However, Management determined that the inordinate amount of time to recover this data and rebuild the financial reporting system prevented the Partnership from filing this Quarterly Report on a timely basis.

The Partnership is committed to remediating the material weaknesses in a timely manner. With the assistance of cybersecurity specialists, the Partnership and the Management Company have added additional security features designed to protect its systems and data from future attacks including multifactor authentication for domain sign-on, restricted server access, enhanced security awareness training, and updated multi-location secure backup with regular recovery testing. In addition to these steps already taken, remediation will also include the documentation and testing of the additional IT procedures implemented.

Limitations on Effectiveness of Controls. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of our financial statements for external purposes in accordance with GAAP. All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that the objectives of the internal control system are met.

Changes in Internal Control over Financial Reporting. Except for the above noted material weaknesses and the remediation activities that have already begun, there were no other changes in the Management Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 that occurred during the quarter ended September 30, 2022 that have materially affected or are reasonably likely to materially affect, the Management Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

There are no material legal proceedings, other than ordinary routine litigation incidental to its business, to which the Partnership is a party to or to which any of the Properties is subject.

Item 1A. Risk Factors

There have been no material changes to the Risk Factors in Item 1A, “Risk Factors” in our annual report on Form 10K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)

None

(b)

None

(c)

Issuer Purchase of Equity Securities during the third quarter of 2022:

    

    

    

Remaining number

  

    

    

Depositary Receipts

    

of Depositary Receipts

  

Purchased as Part

that may be purchased

Average

of Publicly

Under the Plan

Period

    

Price Paid

    

Announced Plan

    

(as Amended)

  

July 1-31, 2022

$

78.14

3,289

524,747

August 1-31, 2022

$

80.45

8,447

516,300

September 1-30, 2022

$

79.07

3,104

513,196

Total

14,840

On August 20, 2007, NewReal, Inc., the General Partner authorized an equity repurchase program (“Repurchase Program”) under which the Partnership was permitted to purchase, over a period of twelve months, up to 300,000 Depositary Receipts (each of which is one-tenth of a Class A Unit). Over time, the General Partner has authorized increases in the equity repurchase program. On March 10, 2015, the General Partner authorized an increase in the Repurchase Program from 1,500,000 to 2,000,000 Depository Receipts and extended the Program for an additional five years from March 31, 2015 until March 31, 2020. On March 9, 2020, the General Partner extended the program for an additional five years from March 31, 2020 to March 31, 2025. The Repurchase Program requires the Partnership to repurchase a proportionate number of Class B Units and General Partner Units in connection with any repurchases of any Depositary Receipts by the Partnership based upon the 80%, 19% and 1% fixed distribution percentages of the holders of the Class A, Class B and General Partner Units under the Partnership’s Second Amended and Restated Contract of Limited Partnership. Repurchases of Depositary Receipts or Partnership Units pursuant to the Repurchase Program may be made by the Partnership from time to time in its sole discretion in open market transactions or in privately negotiated transactions. From August 20, 2007 through September 30, 2022, the Partnership has repurchased 1,486,802 Depositary Receipts at an average price of $30.09 per receipt (or $902.70 per underlying Class A Unit), 4,034 Class B Units and 212 General Partnership Units, both at an average price of $1,179.00 per Unit, totaling approximately $50,336,000 including brokerage fees paid by the Partnership.

During the nine months ended September 30, 2022, the Partnership purchased a total of 52,613 Depositary Receipts. The average price was $78.53 per receipt or $2,355.90 per unit. The cost including commission was $4,134,773. The Partnership was required to repurchase 416.52 Class B Units and 21.92 General Partnership units at a cost of $981,249 and $51,645 respectively.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

On December 5, 2022, Andrew Bloch, the Chief Financial Officer (“CFO”) of The Hamilton Company, Inc., which has been engaged by the Partnership to manage the properties of the Partnership, resigned as Chief Financial Officer. Mr. Bloch remains as a director of NewReal, Inc., the general partner of the Partnership, and of Hamilton. Mr. Bloch’s decision to resign as CFO is not the result of any disagreement with the Partnership on any matter relating to the Partnership’s operations, policies, or practices. Mr. Bloch has served as CFO of Hamilton since 1998.

Effective as of December 5, 2022, the Board of Directors of Hamilton elected Karen N. Zermani as CFO of Hamilton to fill the vacancy created by the resignation of Mr. Bloch as CFO.

Prior to joining The Hamilton Company, Inc. as CFO, Ms. Zermani served as CFO of ClearPlan LLC since 2021. Prior to ClearPlan LLC, Ms. Zermani served as Vice President of Investments for Benchmark Senior Living from 2017 to 2021. Ms. Zermani served as Chief Financial Officer of Maplewood Senior Living from 2016 to 2017 and as Managing Director of Finance and Accounting for Blue Moon Capital Partners from 2015 to 2016. Ms. Zermani served as Chief Financial Officer for the Kensington Investment Company from 2012 to 2015. Ms. Zermani received her BA from the University of Pennsylvania, her MA from the University of Pennsylvania’s Fels Center of Government and her MBA from the MIT Sloan School of Management.

On December 19, 2022, a class action was commenced in the United States District Court for the District of Massachusetts against a number of parties, including the Company:  Billie Jo White v. RealPage, Inc., et al, Case No. 1:22-cv-12134, United States District Court, District of Massachusetts (“RealPage Litigation”).

The first named defendant, RealPage, Inc., is allegedly the developer of a certain software platform known as “AI Revenue Management” (previously known as “YieldStar”).  In addition to RealPage, the Complaint names as defendants several companies, including the Company, allegedly owning, operating and/or managing residential real estate in the Greater Boston Metro Area (collectively, “Defendant Property Managers”).  The Complaint alleges that through the combined use of RealPage’s revenue management services, which allegedly included collecting non-public data regarding various factors influencing rents and generating a suggested rental price for each of the units controlled by a Defendant Property Manager using its services, the Defendant Property Managers constitute a rental “price-fixing cartel” in violation of federal and state anti-trust laws.  The Complaint seeks class certification and unspecified damages, trebled, together with attorney’s fees and other injunctive relief.  No class has yet been certified.

The Company disputes the allegations made against it and intends to vigorously defend the lawsuit.

The named Defendant Property Managers are the following:  Greystar Real Estate Partners, LLC; Cushman & Wakefield, Inc.; Lincoln Property Company; Peabody Properties, Inc.; New England Realty Associates Limited Partnership; WinnCompanies LLC and WinnResidential Manager Corp.; UDR, Inc.; SHP Management Corp.; The Related Companies, Inc. and Simpson Property Group, LLLP.

Item 6. Exhibits

See the exhibit index below.

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EXHIBIT INDEX

Exhibit No.

Description of Exhibit

(31.1)

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Ronald Brown, Principal Executive Officer of the Partnership (President and a Director of NewReal, Inc., sole General Partner of the Partnership).

(31.2)

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Jameson Brown, Principal Financial Officer of the Partnership (Treasurer and a Director of NewReal, Inc., sole General Partner of the Partnership).

(32.1)

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Ronald Brown, Principal Executive Officer of the Partnership (President and a Director of NewReal, Inc., sole General Partner of the Partnership) and Jameson Brown, Principal Financial Officer of the Partnership (Treasurer and a Director of NewReal, Inc., sole General Partner of the Partnership).

(101.1)

The following financial statements from New England Realty Associates Limited Partnership Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL (eXtensible Business Property Language: (i) Consolidated Balance Sheets, (unaudited) (ii) Consolidated Statements of Income, (unaudited) (iii) Consolidated Statements of Changes in Partners’ Capital, (unaudited) (iv) Consolidated Statements of Cash Flows, (unaudited) and (v) Notes to Consolidated Financial Statements, (unaudited) (filed herewith).

(104)

Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

.

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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.

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP

By:

/s/ NEWREAL, INC.

Its General Partner

By:

/s/ RONALD BROWN

Ronald Brown, President

Dated: January 19, 2023

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 and on the dates indicated.

Signature

Title

Date

/s/ RONALD BROWN

President and Director of the General Partner

January 19, 2023

Ronald Brown

(Principal Executive Officer)

/s/ JAMESON BROWN

Treasurer and Director of the General Partner

January 19, 2023

Jameson Brown

(Principal Financial Officer and Principal Accounting Officer)

/s/ MARTINA ALIBRANDI

Director of the General Partner

January 19, 2023

Martina Alibrandi

/s/ DAVID ALOISE

Director of the General Partner

January 19, 2023

David Aloise

/s/ ANDREW BLOCH

Director of the General Partner

January 19, 2023

Andrew Bloch

/s/ SALLY MICHAEL

Director of the General Partner

January 19, 2023

Sally Michael

/s/ DAVID REIER

Director of the General Partner

January 19, 2023

David Reier

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