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 June 30, 2024

☐

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: (617) 783-0039

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 August 8, 2024, there were 93,586 of the registrant’s Class A units (2,807,590 Depositary Receipts) of limited partnership issued and outstanding and 22,227 Class B units issued and outstanding.

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	June 30,		December 31,
	2024		2023
ASSETS		(Unaudited)
Rental Properties	$	271,071,285	$	269,804,946
Cash and Cash Equivalents		13,463,294		18,230,463
Rents Receivable		1,028,438		953,761
Real Estate Tax Escrows		2,385,456		2,229,703
Investment in U.S. Treasury Bills		84,789,084		84,700,751
Prepaid Expenses and Other Assets		9,549,493		8,369,775
Investments in Unconsolidated Joint Ventures		1,413,318		1,441,291
Total Assets	$	383,700,368	$	385,730,690
LIABILITIES AND PARTNERS’ CAPITAL
Mortgage Notes Payable		407,457,271		408,660,292
Distribution and Loss in Excess of Investment in Unconsolidated Joint Venture		27,439,766		26,707,807
Accounts Payable and Accrued Expenses		5,394,443		5,720,088
Advance Rental Payments and Security Deposits		10,396,651		9,996,887
Total Liabilities		450,688,131		451,085,074
Commitments and Contingent Liabilities (Notes 3 and 9)		—		—
Partners’ Capital 117,010 and 117,431 units outstanding in 2024 and 2023 respectively		(66,987,763)		(65,354,384)
Total Liabilities and Partners’ Capital	$	383,700,368	$	385,730,690

See notes to consolidated financial statements.

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended					Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Revenues
Rental income	$	19,841,559	$	17,964,963	$	39,551,991	$	35,533,690
Laundry and sundry income		209,007		136,073		391,974		259,032
		20,050,566		18,101,036		39,943,965		35,792,722
Expenses
Administrative		651,978		867,721		1,413,997		1,604,822
Depreciation and amortization		4,277,482		3,961,432		8,505,064		7,807,693
Management fee		782,856		665,073		1,571,463		1,362,837
Operating		1,638,816		1,721,233		4,284,310		4,255,029
Renting		150,772		244,434		538,371		436,019
Repairs and maintenance		3,500,467		3,479,071		6,348,424		6,241,845
Taxes and insurance		2,510,031		2,423,722		4,992,399		4,894,401
		13,512,402		13,362,686		27,654,028		26,602,646
Income Before Other Income (Expense)		6,538,164		4,738,350		12,289,937		9,190,076
Other Income (Expense)
Interest income		1,112,988		1,292,453		2,290,536		2,267,000
Interest expense		(3,899,695)		(3,925,863)		(7,806,711)		(7,825,103)
Income from investments in unconsolidated joint ventures		321,269		119,664		762,560		347,368
		(2,465,438)		(2,513,746)		(4,753,615)		(5,210,735)
Net Income	$	4,072,726	$	2,224,604	$	7,536,322	$	3,979,341

Net Income per Unit	$	34.77	$	18.73	$	64.28	$	33.45
Weighted Average Number of Units Outstanding		117,139		118,764		117,247		118,971

See notes to consolidated financial statements.

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

(Unaudited)


	Units						Partner’s Capital
	Limited		General		Treasury		Limited				General		Accumulated
	Class A	Class B	Partnership	Subtotal	Units	Total	Class A		Class B		Partnership		Comprehensive Income	Total
Balance January 1, 2023	144,180	34,243	1,802	180,225	60,970	119,255	$	(48,160,462)		(11,403,635)		(600,191)	294,931	$	(59,869,357)
Distribution to Partners	—	—	—	—	—	—		(5,703,006)		(1,354,464)		(71,288)	—		(7,128,758)
Stock Buyback	—	—	—	—	594	(594)		(1,031,739)		(244,753)		(12,882)	—		(1,289,374)
Net Income	—	—	—	—	—	—		3,183,473		756,075		39,793	—		3,979,341
Net unrealized gain on derivative instruments for interest rate swaps	—	—	—	—	—	—		—		—		—	2,115		2,115
Balance June 30 , 2023	144,180	34,243	1,802	180,225	61,564	118,661	$	(51,711,734)	$	(12,246,777)	$	(644,568)	297,046	$	(64,306,033)
													—
Balance January 1, 2024	144,180	34,243	1,802	180,225	62,794	117,431	$	(52,503,128)		(12,433,251)		(654,383)	236,377		(65,354,384)
Distribution to Partners	—	—	—	—	—	—		(6,754,507)		(1,604,196)		(84,431)	—		(8,443,134)
Stock Buyback	—	—	—	—	421	(421)		(721,259)		(170,872)		(8,993)	—		(901,124)
Net Income	—	—	—	—	—	—		6,029,058		1,431,901		75,363	—		7,536,322
Net unrealized gain on derivative instruments for interest rate swaps	—	—	—	—	—	—		—		—		—	174,558		174,558
Balance June 30, 2024	144,180	34,243	1,802	180,225	63,215	117,010	$	(53,949,836)		(12,776,418)		(672,444)	410,935		(66,987,763)

See notes to consolidated financial statements.

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Cash Flows from Operating Activities
Net Income	$	7,536,322	$	3,979,341
Adjustments to reconcile net income to net cash provided by operating activities
Interest accrued on U.S. Treasury bills		(2,259,599)		(2,051,676)
Depreciation and amortization		8,505,064		7,807,693
Amortization of deferred finance costs		189,892		189,892
(Income) from investments in joint ventures		(762,560)		(347,368)
Change in operating assets and liabilities
Proceeds from unconsolidated joint ventures		82,500		59,000
(Increase) in rents receivable		(74,677)		(113,898)
(Decrease) in accounts payable and accrued expense		(624,234)		(1,704,508)
(Increase) in real estate tax escrow		(155,753)		(206,239)
(Increase) in prepaid expenses and other assets		(1,349,617)		(1,958,461)
Increase in advance rental payments and security deposits		399,764		845,440
Total Adjustments		3,950,780		2,519,875
Net cash provided by operating activities		11,487,102		6,499,216
Cash Flows From Investing Activities
Distribution in excess of investment in unconsolidated joint ventures		1,440,000		1,575,000
Investment in U.S. Treasury bills		(83,635,733)		(68,355,526)
Proceeds from U.S. Treasury bills		85,807,000		90,000,000
Developing of rental property and other related costs		(4,185,791)		—
Purchase of rental property		—		(8,974,242)
Improvement of rental properties		(4,942,577)		(4,865,294)
Net cash (used in) provided by investing activities		(5,517,101)		9,379,938
Cash Flows from Financing Activities
Principal payments of mortgage notes payable		(1,392,912)		(1,321,579)
Stock buyback		(901,124)		(1,289,374)
Distributions to partners		(8,443,134)		(7,128,758)
Net cash provided by (used in) financing activities		(10,737,170)		(9,739,711)
Net (Decrease) Increase in Cash and Cash Equivalents		(4,767,169)		6,139,443
Cash and Cash Equivalents, at beginning of period		18,230,463		49,560,723
Cash and Cash Equivalents, at end of period	$	13,463,294	$	55,700,166

See notes to consolidated financial statements.

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(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 31 properties which include 22 residential buildings; 5 mixed use residential, retail and office buildings; 4 commercial buildings and individual units at one condominium complex. These properties total 2,943 apartment units, 19 condominium units and approximately 130,000 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. Judgments 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 15: 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 15: 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. Costs directly related to the acquisition, development and construction of rental properties are capitalized. Capitalized development and construction costs include pre-construction costs, development and construction costs, regulatory fees, interest, property taxes, insurance, construction oversight fees, and other project costs incurred during the period of development. The Partnership considers a construction project as substantially completed and held available for occupancy upon the substantial completion of improvements, but no later than one year from cessation of major construction activity.

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 $190,000 and $190,000 for the six months ended June 30, 2024 and 2023, respectively.

Derivative Instruments: The Partnership measures derivative instruments, including certain derivative instruments embedded in other contracts, at fair value and records them as an asset or liability, depending upon the Partnership’s rights or obligations under the applicable derivative contract. For derivatives designated and qualifying as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of the derivative are reported in other comprehensive income (“OCI”) and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedging and ineffective portions of hedges are recognized in earnings in the affected period.

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 has been recorded (See Note 14).

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, including its investment in money market funds.

Investments in Treasury Bills: Investments in U.S. 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.

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Rental properties consist of the following:


	June 30, 2024		December 31, 2023		Useful Life
Land, improvements and parking lots	$	99,249,928	$	99,162,143	15	-	40	years
Buildings and improvements		276,824,808		276,167,618	15	-	40	years
Construction in Progress		8,391,993		1,818,716		N/A
Kitchen cabinets		16,593,160		16,137,828	5	-	10	years
Carpets		13,928,453		13,127,838	5	-	10	years
Air conditioning		500,000		500,000	5	-	10	years
Laundry equipment		594,010		568,716	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		21,749,687		21,348,556	5	-	30	years
Motor vehicles		232,954		232,954			5	years
Fences		91,620		91,620	5	-	15	years
Furniture and fixtures		8,791,368		8,365,039	5	-	7	years
Total fixed assets		449,923,850		440,496,897
Less: Accumulated depreciation		(178,852,565)		(170,691,951)
	$	271,071,285	$	269,804,946

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 shareholders 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 $1,571,000 and $1,363,000 for the six months ended June 30, 2024 and 2023, 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 six months ended June 30, 2024 and 2023, approximately $568,000 and $914,000 was charged to NERA for legal, accounting, construction, maintenance, brokerage fees, rental and architectural services and supervision of capital improvements. Of the 2024 expenses referred to above, approximately $29,000 consisted of repairs and maintenance, $152,000 of administrative expense, and approximately $57,000 for renting expense. Approximately $330,000 of expenses for construction, architectural services and supervision of capital projects were capitalized in rental properties. Additionally in 2024, the Hamilton Company received approximately $431,000 from the Investment Properties of which approximately $369,000 was the management fee, approximately $46,000 for construction, architectural services, and supervision of capital projects, approximately $11,000 for repairs and maintenance, and approximately $5,000 for legal expense. The management fee is equal to 4% of gross receipts of rental income on the majority of the 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 $2,086,000 and $2,050,000 for the six months ended June 30, 2024 and 2023, 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 six months ended June 30, 2024, the Partnership accrued $32,000 for the employer’s match portion to the plan. For the six months ended June 30, 2023, the Partnership contributed $32,000 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 six months ended June 30, 2024 and 2023, the Management Company charged the Partnership $62,500 ($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 $70,000 and $39,000 for the six months ended June

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30, 2024 and 2023, respectively. David Reier is a Director of New Real, Inc., who billed the Partnership approximately $7,000 for legal fees for the period ending June 30,2024.

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 15 for a description of the properties and their operations.

NOTE 4. PREPAID EXPENSES and OTHER ASSETS

Approximately $3,665,000, and $3,601,000 of security deposits are included in prepaid expenses and other assets at June 30, 2024 and December 31, 2023, respectively. The security deposits and escrow accounts are restricted cash.

Also, included in prepaid expenses and other assets at June 30, 2024 and December 31, 2023 is approximately $2,022,000 and $1,784,000, respectively, held in escrow to fund future capital improvements.

Intangible assets on the acquisition of rental properties are included in prepaid expenses and other assets. Intangible assets are approximately $383,000 and $677,000 net of accumulated amortization of approximately $1,166,000 and $872,000 at June 30, 2024, and at December 31, 2023, respectively.

Financing fees in association with the line of credit of approximately $20,000 and $52,000 are net of accumulated amortization of approximately $162,000 and $130,000 at June 30, 2024 and December 31, 2023 respectively.

NOTE 5. MORTGAGE NOTES PAYABLE

At June 30, 2024 and December 31, 2023, the mortgages payable consisted of various loans, all of which were secured by first mortgages on properties referred to in Note 2. At June 30, 2024, the interest rates on these loans ranged from 2.97% to 4.95%, payable in monthly installments aggregating approximately $1,523,000 including principal, to various dates through 2035. The majority of the mortgages are subject to prepayment penalties. At June 30, 2024, the weighted average interest rate on the above mortgages was 3.68%. The effective rate of 3.77% 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 $2,589,000 and $2,779,000 are net of accumulated amortization of approximately $1,543,000 and $1,353,000 at June 30, 2024 and December 31, 2023, 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 June 30, 2024 are as follows:


2025—current maturities	$	3,196,000
2026		21,931,000
2027		6,595,000
2028		23,165,000
2029		58,327,000
Thereafter		296,832,000
		410,046,000
Less: unamortized deferred financing costs		2,589,000
	$	407,457,000

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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 phased out as of December 31, 2022. During this period, the loan covenants were 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. As of June 30, 2024, the portfolio’s debt yield fell below the minimum of 9.5% to 9.3%, thus 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 Partnership is currently in discussions with a lender for a replacement line of credit.

The interest rate for the new term was LIBOR plus 300 basis points. The costs associated with the modification and renewal of the line of credit was approximately $179,000.

After June 30, 2023, the remaining tenors of U.S.-dollar LIBOR ceased publication, prompting the need for an alternative benchmark rate. On April 14, 2023, the partnership amended the line of credit to convert its base rate of interest from LIBOR to the Secured Overnight Financing Rate (SOFR) plus 10 basis points.

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 June 30, 2024, amounts received for prepaid rents of approximately $3,374,000 are included in cash and cash equivalents, and security deposits of approximately $3,665,000 are included in prepaid expenses and other assets and are restricted cash.

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 March 2024, the Partnership approved a quarterly distribution of $12.00 per Unit ($0.40 per Receipt), payable on March 28, 2024. In addition to the quarterly distribution, there was a special distribution of $48.00 per Class A unit ($1.60 per Receipt) payable on March 28, 2024. In May 2024, the Partnership approved a quarterly distribution of $12.00 per Unit ($0.40 per Receipt), payable on June 28, 2024.

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In 2023 the Partnership paid a total distribution of an aggregate $84.00 per Unit ($2.80 per Receipt) for a total payment of $9,954,888.

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:


	Six Months Ended
	June 30,
	2024		2023
Net Income per Depositary Receipt	$	2.14	$	1.12
Distributions per Depositary Receipt	$	2.40	$	2.00

NOTE 8. TREASURY UNITS

Treasury Units at June 30, 2024 are as follows:


Class A		50,572
Class B		12,011
General Partnership		632
		63,215

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 June 30, 2024, the Partnership has repurchased 1,542,344 Depositary Receipts at an average price of $31.59 per receipt (or $947.70 per underlying Class A Unit), 4,474 Class B Units and 236 General Partnership Units, both at an average price of $1,274.00 per Unit, totaling approximately $55,322,000 including brokerage fees paid by the Partnership.

During the six months ended June 30, 2024, the Partnership purchased a total of 10,110 Depositary Receipts. The average price was $71.16 per receipt, or $2,134.80 per unit. The cost including commission was approximately $721,000. The Partnership was required to repurchase 80.0 Class B Units and 4.2 General Partnership units at a cost of $170,872 and $8,993 respectively.

NOTE 9. COMMITMENTS AND CONTINGENCIES

The Partnership, the Subsidiary Partnerships, and the Investment Properties and their properties are not presently subject to any material litigation, and, to management’s knowledge, there is not any material litigation presently threatened against them. The properties are occasionally subject to ordinary routine legal and administrative proceedings incident to the ownership of residential and commercial real estate. Some of the legal and other expenses related to these proceedings are covered by insurance and none of these costs and expenses are expected to have a material adverse effect on the Consolidated Financial Statements of the Partnership.

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NOTE 10. RENTAL INCOME

During the six months ended June 30, 2024, approximately 94% 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 6% was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at June 30, 2024 as follows:


	Commercial
	Property Leases
2025	$	3,048,338
2026		2,812,231
2027		2,467,300
2028		2,233,941
2029		1,895,581
Thereafter		9,470,229
	$	21,927,620

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 $398,000 and $328,000 for the six months ended June 30, 2024 and 2023 respectively. Trader Joe’s and Walgreen’s, tenants at Staples Plaza and 653 Worcester Road, Framingham, Massachusetts respectively, are approximately 18% 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 June 30,	expiring leases		for expiring leases	leases expiring	expiring leases
2025	$	441,070	31,292	29	12	%
2026		304,000	8,601	10	9	%
2027		300,625	12,440	6	8	%
2028		283,478	7,651	3	8	%
2029		352,839	8,733	4	10	%
2030		291,029	12,026	1


PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	4
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2024 and 2023	5
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2024 and 2023	6
	Consolidated Statements of Changes in Partners’ Capital for the Six Months Ended June 30, 2024 and 2023	7
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosure	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
SIGNATURES		44