What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-06 · 112 added, 237 removed, 569 unchanged (38% of the section changed)

6 unchanged sentences

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 Form 10-K for the fiscal year ended December 31, 2020.

The results of operations for the three and nine month periods ended September 30, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

The results of operations for the three month period ended March 31, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30,

Rental Properties

20 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Rental income

11 unchanged sentences

( 3,450,325 )

( 10,291,255 )

( 9,145,075 )

Income from investments in unconsolidated joint ventures

Other expense

( 3,666,920 )

( 2,793,038 )

Income (Loss) from investments in unconsolidated joint ventures

( 3,689,319 )

( 2,975,651 )

Net (Loss) Income

Net (Loss) Income per Unit

Net Income (Loss)

Net Income (Loss) per Unit

Weighted Average Number of Units Outstanding

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNER’S CAPITAL

Partners’ Capital

Partners’s Capital

Balance January 1, 2020

4 unchanged sentences

( 1,169,173 )

( 3,525,701 )

Stock Buyback

( 2,944,508 )

( 3,680,570 )

Balance September 30, 2019

Balance March 31, 2020

( 30,201,652 )

7 unchanged sentences

( 1,168,860 )

( 3,506,894 )

Stock Buyback

Balance September 30, 2020

Balance March 31, 2021

( 34,373,879 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows from Operating Activities

Net income (loss)

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

1 unchanged sentence

Amortization of deferred financing costs

(Income) from investments in joint ventures

( 1,287,339 )

Loss (Income) from investments in joint ventures

Allowance for doubtful accounts

3 unchanged sentences

( 1,083,925 )

(Decrease) in accounts payable and accrued expense

(Increase) Decrease in real estate tax escrow

(Increase) in prepaid expenses and other assets

( Decrease) Increase in advance rental payments and security deposits

Increase (Decrease) in accounts payable and accrued expense

(Increase) in real estate tax escrow

Decrease in prepaid expenses and other assets

(Decrease) in advance rental payments and security deposits

Total Adjustments

5 unchanged sentences

( 1,047,185 )

( 2,593,079 )

Net cash (used in) investing activities

Net cash provided by (used in) investing activities

( 1,047,185 )

2 unchanged sentences

Proceeds of mortgage notes payable

Payment on line of credit

( 1,000,000 )

( 2,000,000 )

Payment of note payable

Principal payments of mortgage notes payable

( 1,000,000 )

( 1,591,251 )

Principal payments of mortgage notes payable

Stock buyback

( 3,680,570 )

Distributions to partners

1 unchanged sentence

( 1,169,173 )

Net cash (used in) financing activities

( 2,924,076 )

Net cash provided by (used in) financing activities

( 1,721,435 )

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

SIGNIFICANT ACCOUNTING POLICIES

56 unchanged sentences

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.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842).

ASU 2016-02 modifies the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract:

the lessee and the lessor.

ASU 2016-02 provides new guidelines that change the accounting for leasing arrangements for lessees, whereby their rights and obligations under substantially all leases, existing and new, are capitalized and recorded on the balance sheet.

For lessors, however, the new standard remains generally consistent with existing guidance, but has been updated to align with certain changes to the lessee model and ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”).

Under this standard, the Partnership evaluates the non-lease components (lease arrangements that include common area maintenance services) with related lease components (lease revenues).

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.

2 unchanged sentences

We record amounts reimbursed by the lessee in the period in which the applicable expenses are incurred.

We adopted this guidance for our interim and annual periods beginning January 1, 2019 using the modified retrospective method, applying the transition provisions at the beginning of the period of adoption rather than at the

beginning of the earliest comparative period presented.

We elected the allowable practical expedients as permitted under the transition guidance, which allowed us to not reassess whether arrangements contain leases, lease classification, and initial direct costs.

The adoption of the lease standard did not result in a cumulative effect adjustment recognized in the opening balance of retained earnings as of January 1, 2019.

The adoption of this standard does not have a material impact to the Partnership’s financial statements.

Rental Properties:

8 unchanged sentences

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.

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.

13 unchanged sentences

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 $ 180,000 and $ 282,000 for the nine months ended September 30, 2020 and 2019, respectively.

In all cases, amortization of such costs is included in interest expense and was approximately $ 60,000 and $ 60,000 for the three months ended March 31, 2021 and 2020, respectively.

Income Taxes:

18 unchanged sentences

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 2020 or 2019.

No single tenant accounted for more

than 5 % of the Partnership’s revenues in 2021 or 2020.

The Partnership makes its temporary cash investments with high-credit quality financial institutions.

At September 30, 2020, substantially all of the Partnership’s cash and cash equivalents were held in interest-bearing accounts at financial institutions, earning interest at rates from 0.01 % to 0.03 %.

At September 30, 2020 and December 31, 2019, respectively approximately $ 16,492,000 , and $ 7,407,000 of cash and cash equivalents, and security deposits included in prepaid expenses and other assets exceeded federally insured amounts.

At March 31, 2021, substantially all of the Partnership’s cash and cash equivalents were held in interest-bearing accounts at financial institutions, earning interest at rates from 0.01 % to 0.03 %.

At March 31, 2021 and December 31, 2020, respectively approximately $ 21,116,000 , and $ 18,830,000 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 $ 257,433 and $ 211,184 for the nine months ended September 30, 2020 and 2019, respectively.

Advertising expense was $ 89,350 and $ 69,056 for the three months ended March 31, 2021 and 2020, respectively.

Rental Property Held f or 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, 2020 and 2019 there was no capitalized interest.

During the three months ended March 31, 2021 and 2020 there was no capitalized interest.

Extinguishment of Debt:

5 unchanged sentences

RENTAL PROPERTIES

As of September 30, 2020, the Partnership and its Subsidiary Partnerships owned 2,892 residential apartment units in 25 residential and mixed-use complexes (collectively, the “Apartment Complexes”).

As of March 31, 2021, 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, 2020, 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.

Additionally, as of March 31, 2021, 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, 2020 with a total of 688 apartment units, accounted for using the equity method of consolidation.

The Partnership also owned a 40 % to 50 % ownership interest in seven residential and mixed use complexes (the “Investment Properties”) at March 31, 2021 with a total of 688 apartment units, accounted for using the equity method of consolidation.

See Note 14 for summary information on these investments.

Rental properties consist of the following:

September 30, 2020

March 31, 2021

December 31, 2020

11 unchanged sentences

( 134,019,906 )

On December 20, 2019, Mill Street Gardens, LLC and Mill Street Development, LLC, collectively referred to as Mill Street, a wholly-owned subsidiary of New England Realty Associates Limited Partnership closed on a Purchase Agreement dated as of September 27, 2019 with Ninety-Three Realty Limited Partnership pursuant to which Mill Street acquired Country Club Garden Apartments, a 181 unit apartment complex located at 57 Mill Street, Woburn, Massachusetts for an aggregate purchase price of $ 59,550,000 in cash.

Mill Street funded $ 18,000,000 of the purchase price out of an existing line of credit, $ 10,550,000 of the cash portion of the purchase price out of cash reserves and the remaining $ 31,000,000 from the proceeds of the Loan from Insurance Strategy Funding Corp.

LLC described below.

The closing costs were approximately $ 237,000 .

From the purchase price, the Partnership allocated approximately $ 1,282,000 for in- place leases, and approximately $ 136,000 to the value of tenant relationships.

These amounts are being amortized over 12 and 36 months respectively.

On December 20, 2019, Mill Street entered into a Loan Agreement with Insurance Strategy Funding Corp.

LLC providing for a loan in the maximum principal amount of $ 35,000,000 , consisting of the initial advance of $ 31,000,000 and a subsequent advance of up to $ 4,000,000 if certain financial conditions are met.

Interest on the Note is payable on a monthly basis at a fixed interest rate of:

(i) 3.586 % per annum with respect to the initial advance and (ii) the greater of (A) the sum of the market spread rate and the interpolated (based on the remaining term of the Loan) US Treasury rate at the time of the advance and (B) 3.500 % with respect to any subsequent advance.

The principal amount of the Note is due and payable on January 1, 2035.

The Note is secured by a mortgage on the Property and is guaranteed by the Partnership pursuant to a Guaranty Agreement dated December 20, 2019.

RELATED PARTY TRANSACTIONS

1 unchanged sentence

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 $ 1,863,000 and $ 1,788,000 for the nine months ended September 30, 2020 and 2019, respectively.

Total fees paid were approximately $ 605,000 and $ 649,000 for the three months ended March 31, 2021 and 2020, respectively.

The Partnership Agreement permits the General Partner or Management Company to charge the costs of professional services (such as counsel, accountants and contractors) to NERA.

During the nine months ended September 30, 2020 and 2019, approximately $ 816,000 and $ 852,000 , was charged to NERA for legal, accounting, construction, maintenance, brokerage fees, rental and architectural services and supervision of capital improvements.

During the three months ended March 31, 2021 and 2020, approximately $ 256,000 and $ 346,000 , was charged to NERA for legal, accounting, construction, maintenance, brokerage fees, rental and architectural services and supervision of capital improvements.

Of the 2021 expenses referred to above, approximately $ 46,000 consisted of repairs and maintenance, and $ 55,000 of administrative expense.

Approximately $ 155,000 of expenses for construction, architectural services and supervision of capital projects were capitalized in rental properties.

Additionally in 2020, the Hamilton Company received approximately $ 726,000 from the Investment Properties of which approximately $ 458,000 was the management fee, approximately $ 17,000 was for maintenance services, approximately $ 11,000 was for administrative services and

approximately $ 240,000 for architectural services and supervision of capital projects.

Additionally in 2021, the Hamilton Company received approximately $ 142,000 from the Investment Properties of which approximately $ 127,000 was the management fee, approximately $ 6,000 was for maintenance services, approximately $ 8,000 was for administrative services and approximately $ 1,000 for 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 $ 2,571,000 and $ 2,478,000 for the nine months ended September 30, 2020 and 2019, respectively.

Total reimbursement was approximately $ 843,000 and $ 822,000 for the three months ended March 31, 2021 and 2020, 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, 2020, the Partnership accrued $ 33,000 for the employer’s match portion to the plan.

For the nine months ended September 30, 2019, the Partnership contributed $ 27,000 for the employer’s match portion to the plan.

For the three months ended March 31, 2021, the Partnership accrued $ 11,000 for the employer’s match portion to the plan.

For the three months ended March 31, 2020, the Partnership contributed $ 11,000 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, 2020 and 2019, the Management Company charged the Partnership $ 93,750 ($ 125,000 per year) for bookkeeping and accounting services included in administrative expenses above.

During the three months ended March 31, 2021 and 2020, the Management Company charged the Partnership $ 31,250 ($ 125,000 per year) for bookkeeping and accounting services included in administrative expenses above.

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.

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 %.

1 unchanged sentence

PREPAID EXPENSES and OTHER ASSETS

Approximately $ 2,696,000 , and $ 2,936,000 of security deposits are included in prepaid expenses and other assets at September 30, 2020 and December 31, 2019, respectively.

Approximately $ 2,790,000 , and $ 2,830,000 of security deposits are included in prepaid expenses and other assets at March 31, 2021 and December 31, 2020, respectively.

The security deposits and escrow accounts are restricted cash.

Also, included in prepaid expenses and other assets at September 30, 2020 and December 31, 2019 is approximately $ 921,000 and $ 501,000 , respectively, held in escrow to fund future capital improvements.

Intangible assets on the acquisitions of Mill Street Apartments and Webster Green Apartments are included in prepaid expenses and other assets.

Intanbible assets are approximately $ 383,000 net of accumulated amortization of approximately $ 1,177,000 and approximately $ 1,382,000 net of accumulated amortization of approximately $ 178,000 at September 30, 2020 and December 31, 2019, respectively.

Financing fees in association with the line of credit of approximately $ 4,000 and $ 36,000 are net of accumulated amortization of approximately $ 125,000 and $ 93,000 at September 30, 2020 and December 31, 2019 respectively.

Also, included in prepaid expenses and other assets at March 31, 2021 and December 31, 2020 is approximately $ 1,225,000 and $ 1,073,000 , 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 $ 45,000 net of accumulated amortization of approximately $ 1,373,000 and approximately $ 51,000 net of accumulated amortization of approximately $ 1,367,000 at March 31, 2021 and December 31, 2020, respectively.

Financing fees in association with the line of credit of approximately $ 9,000 and $ 42,000 are net of accumulated amortization of approximately $ 16,000 and $ 6,000 at March 31, 2021 and December 31, 2020 respectively.

MORTGAGE NOTES PAYABLE

At September 30, 2020 and December 31, 2019, 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, 2020, the interest rates on these loans ranged from 3.53 % to 5.66 %, payable in monthly installments aggregating approximately $ 1,257,000 including principal, to various dates through 2035.

At March 31, 2021 and December 31, 2020, the mortgages payable consisted of various loans, all of which were secured by first mortgages on properties referred to in Note 2.

At March 31, 2021, the interest rates on these loans ranged from 3.53 % to 5.66 %, payable in monthly installments aggregating approximately $ 1,257,000 including principal, to various dates through 2035.

The majority of the mortgages are subject to prepayment penalties.

At September 30, 2020, the weighted average interest rate on the above mortgages was 4.43 %.

At March 31, 2021, the weighted average interest rate on the above mortgages was 4.43 %.

The effective rate of 4.51 % includes the amortization expense of deferred financing costs.

1 unchanged sentence

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 $ 1,405,000 and $ 1,449,000 are net of accumulated amortization of approximately $ 1,504,000 and $ 1,411,000 at September 30, 2020 and December 31, 2019, respectively offset the total mortgage notes payable.

Financing fees of approximately $ 1,285,000 and $ 1,345,000 are net of accumulated amortization of approximately $ 1,624,000 and $ 1,564,000 at March 31, 2021 and December 31, 2020, 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, 2020 are as follows:

Approximate annual maturities at March 31, 2021 are as follows:

2022—current maturities

5 unchanged sentences

The Note is guaranteed by the Partnership pursuant to a Guaranty Agreement dated March 31, 2020.

Brookside Apartments used the proceeds of the loan to pay off an outstanding loan of approximately $ 2,390,000 , with the remaining portion of the proceeds added to cash reserves.

Brookside Apartments used the proceeds of the loan to pay off an outstanding loan of approximately

$ 2,390,000 , with the remaining portion of the proceeds added to cash reserves.

In connection with this refinancing, there were closing costs of approximately $ 136,000 .

On December 20, 2019, Mill Street Gardens, LLC and Mill Street Development LLC, collectively referred to as Mill Street, wholly-owned subsidiaries of New England Realty Associates Limited Partnership closed on a Purchase Agreement dated as of September 27, 2019 with Ninety-Three Realty Limited Partnership pursuant to which Mill Street acquired Country Club Garden Apartments, a 181 unit apartment complex located at 57 Mill Street, Woburn, Massachusetts for an aggregate purchase price of $ 59,550,000 .

The closing costs were approximately $ 237,000 .

From the purchase price, the Partnership allocated approximately $ 1,282,000 for in- place leases, and approximately $ 136,000 to the value of tenant relationships.

These amounts are being amortized over 12 and 36 months respectively.

On December 20, 2019, Mill Street entered into a Loan Agreement with Insurance Strategy Funding Corp.

LLC providing for a loan in the maximum principal amount of $ 35,000,000 , consisting of an initial advance of $ 31,000,000 and a subsequent advance of up to $ 4,000,000 if certain conditions are met.

Interest on the Note is payable on a monthly basis at a fixed interest rate of:

The principal amount of the Note is due and payable on January 1, 2035.

The Note is secured by a mortgage on the Property and is guaranteed by the Partnership pursuant to a Guaranty Agreement dated December 20, 2019.

On May 31, 2019, Residences at Captain Parker, LLC (“Captain Parker”), entered into a Mortgage Note with Strategy Funding Corp., LLC in the principal amount of $ 20,750,000 .

Interest only payments on the Note are payable on a monthly basis at a fixed interest rate of 4.05 % per annum, and the principal amount of the Note is due and payable on June 1, 2029.

The Note is secured by a mortgage on the Captain Parker apartment complex located at 125 Worthen Road and Ryder Lane, Lexington, Massachusetts pursuant to a Mortgage, Assignment of Leases and Rents and Security Agreement dated May 31, 2019.

The Note is guaranteed by the Partnership pursuant to a Guaranty Agreement dated May 31, 2019.

Captain Parker used the proceeds of the loan to pay off an outstanding loan of approximately $ 20,071,000 .

In connection with this refinancing, the property incurred a prepayment penalty of approximately $ 202,000 .

This expense was included in other expense on the consolidated statement of income.

Line of Credit

1 unchanged sentence

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 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 .

Management is currently working with the lender on a three year renewal of the line of credit.

As of October 31, 2020, the Partnership had not completed the renewal and exercised a one year extension.

As of April 30, 2021, the Partnership had not completed the renewal and exercised a one year extension.

The Partnership paid an extension fee of approximately $ 37,500 in association with the extension.

5 unchanged sentences

Any unused balance of the line of credit is subject to a fee ranging from 15 to 20 basis points per annum.

The Partnership paid approximately $ 9,000 in fees for the nine months ended September 30, 2020.

The Partnership paid approximately $ 3,000 in fees for the three months ended March 31, 2021.

On December 19, 2019, the Partnership drew down on the line of credit in the amount of $ 20,000,000 , used in conjunction with the purchase of Mill Street Apartments.

1 unchanged sentence

On January 22, 2020, the Partnership paid down $ 1,000,000 .

As of September 30, 2020, the line of credit had an outstanding balance of $ 17,000,000 .

As of March 31, 2021, the line of credit had an outstanding balance of $ 17,000,000 .

The line of credit agreement has several covenants, such as providing cash flow projections and compliance certificates, as well as other financial information.

5 unchanged sentences

debt service coverage ratio of at least 1.6 to 1, as well as other items.

The Partnership is in compliance with these covenants as of September 30, 2020.

In management’s continuing discussions with the lender regarding the renewal of the line of credit for an additional three years, management expects and the lender has indicated its willingness to relax certain covenants, to test covenant compliance on the outstanding balance of the line of credit through September 30, 2022, and to give the Partnership a 90 day period to cure any covenant breach by partially paying down the balance to restore the Partnership to covenant compliance.

In exchange for the relaxation of loan covenants and other changes, the Partnership will not be allowed to make further draws upon the line of credit until December 31, 2022;

and covenant compliance then will be measured by the original covenant levels.

In addition, subject to the Partnership’s compliance with the original covenants and the lender’s sole approval, the lender may allow for draws on the line of credit prior to December 31, 2022.

The Partnership is in compliance with these covenants as of March 31, 2021.

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, 2020, amounts received for prepaid rents of approximately $ 1,924,000 are included in cash and cash equivalents, and security deposits of approximately $ 2,696,000 are included in prepaid expenses and other assets and are restricted cash.

At March 31, 2021, amounts received for prepaid rents of approximately $ 1,999,000 are included in cash and cash equivalents, and security deposits of approximately $ 2,790,000 are included in prepaid expenses and other assets and are restricted cash.

PARTNERS’ CAPITAL

2 unchanged sentences

All classes have equal profit sharing and distribution rights, in proportion to their ownership interests.

In January 2020, the Partnership approved a quarterly distribution to its Class A Limited Partners and holders of Depositary Receipts of record as of March 15, 2020 and payable on March 31, 2020, of $ 9.60 per unit ($ 0.32 per receipt).

In June 2020, the Partnership approved a quarterly distribution to its Class A Limited Partners and holders of Depositary Receipts of record as of June 15, 2020 and payable on June 30, 2020, of $ 9.60 per unit ($ 0.32 per receipt).

In September 2020, the Partnership approved a quarterly distribution to its Class A Limited Partners and holders of Depositary Receipts of record as of September 15, 2020 and payable on September 30, 2020, of $ 9.60 per unit ($ 0.32 per receipt ).

In January 2021, the Partnership approved a quarterly distribution of $ 9.60 per Unit ($ 0.32 per Receipt), payable on March 31, 2021.

In 2020, regular quarterly distributions of $ 9.60 per unit ($ 0.32 per receipt), were paid in March, June, September and December.

2 unchanged sentences

The following is information per Depositary Receipt:

Nine Months Ended

September 30,

Net Income per Depositary Receipt

Three Months Ended

Net Income (Loss) per Depositary Receipt

Distributions per Depositary Receipt

TREASURY UNITS

Treasury Units at September 30, 2020 are as follows:

Treasury Units at March 31, 2021 are as follows:

General Partnership

5 unchanged sentences

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, 2020, the Partnership has repurchased 1,428,437 Depositary Receipts at an average price of $ 28.43 per receipt (or $ 852.90 per underlying Class A Unit), 3,572 Class B Units and 188 General Partnership Units, both at an average price of $ 1,033.00 per Unit, totaling approximately $ 44,718,000 including brokerage fees paid by the Partnership.

During the nine months ended September 30, 2020, the Partnership purchased a total of 5,328 Depositary Receipts.

The average price was $ 59.14 per receipt or $ 1,774.20 per unit.

The total cost including commission was $ 315,216 .

The Partnership was required to repurchase 42.18 Class B Units and 2.22 General Partnership units at a cost of $ 74,839 and $ 3,939 respectively.

From August 20, 2007 through March 31, 2021, the Partnership has repurchased 1,428,437 Depositary Receipts at an average price of $ 28.43 per receipt (or $ 852.90 per underlying Class A Unit), 3,572 Class B Units and 188 General Partnership Units, both at an average price of $ 1,033.00 per Unit, totaling approximately $ 44,718,000 including brokerage fees paid by the Partnership.

During the three months ended March 31, 2021, the Partnership did not purchase any Depositary Receipts.

Given the economic uncertainty caused by the coronavirus issue, as of April 15, 2020, the Partnership has elected to temporarily suspend the repurchase program.

4 unchanged sentences

RENTAL INCOME

During the nine months ended September 30, 2020, approximately 95 % of rental income was related to residential apartments and condominium units with leases of one year or less.

During the three months ended March 31, 2021, 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 5 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at September 30, 2020 as follows:

Approximately 6 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at March 31, 2021 as follows:

Property Leases

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 $ 383,000 and $ 450,000 for the nine months ended September 30, 2020 and 2019 respectively.

Aggregate contingent rentals from continuing operations were approximately $ 150,000 and $ 121,000 for the three months ended March 31, 2021 and 2020 respectively.

Staples and Trader Joe’s, tenants at Staples Plaza, are approximately 25 % of the total commercial rental income.

4 unchanged sentences

annual base rent for

Through September 30,

Through March 31,

expiring leases

2 unchanged sentences

expiring leases

Rents receivable are net of an allowance for doubtful accounts of approximately $ 1,095,000 and $ 240,000 at September 30, 2020 and December 31, 2019.

Included in rents receivable at September 30, 2020 is approximately $ 96,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.

Rents receivable are net of an allowance for doubtful accounts of approximately $ 1,271,000 and $ 1,454,000 at March 31, 2021 and December 31, 2020.

Included in rents receivable at March 31, 2021 is approximately $ 84,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.

The majority of this amount is for long-term leases at 62 Boylston Street, Cypress Street, and Staples Plaza in Massachusetts.

Rents receivable at September 30, 2020 also includes approximately $ 351,000 representing the deferral of rental concession primarily related to the residential properties.

Rents receivable at March 31, 2021 also includes approximately $ 427,000 representing the deferral of rental concession primarily related to the residential properties.

CASH FLOW INFORMATION

During the nine months ended September 30, 2020 and 2019, cash paid for interest was approximately $ 9,973,000 , and $ 8,893,000 respectively.

Cash paid for state income taxes was approximately $ 82,000 and $ 77,000 during the nine months ended September 30, 2020 and 2019 respectively.

Additionally, during the nine months ended September 30, 2020, the Partnership was involved in a non-cash financing activity of approximately $ 2,393,000 in connection with the refinancing of Brookside Apartments.

During the three months ended March 31, 2021 and 2020, cash paid for interest was approximately $ 3,306,000 , and $ 3,229,000 respectively.

Cash paid for state income taxes was approximately $ 56,000 and $ 76,000 during the three months ended March 31, 2021 and 2020 respectively.

Additionally, during the three months ended March 31, 2020, the Partnership was involved in a non-cash financing activity of approximately $ 2,393,000 in connection with the refinancing of Brookside Apartments.

FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

At September 30, 2020 and December 31, 2019, 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.

At March 31, 2021 and December 31, 2020, 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, 2020 and December 31, 2019 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.

At September 30, 2020 and December 31, 2019, 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.

At March 31, 2021 and December 31, 2020 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.

At March 31, 2021 and December 31, 2020, 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, 2020 and December 31, 2019, as compared with those in effect when the debt was issued or acquired.

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 March 31, 2021 and December 31, 2020, 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.

10 unchanged sentences

Partnership Properties

At September 30, 2020

At March 31, 2021

At December 31, 2020

Investment Properties

At September 30, 2020

At March 31, 2021

At December 31, 2020

* 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, 2020 and December 31, 2019.

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, 2020 and current estimates of fair value may differ significantly from the amounts presented herein.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of March 31, 2021 and December 31, 2020.

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 March 31, 2021 and current estimates of fair value may differ significantly from the amounts presented herein.

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 and timing differences related to prepaid rents, allowances and intangible assets at significant acquisitions.

Federal taxable income of approximately $ 2,039,000 was approximately $ 4,508,000 less than statement income for the year ended December 31, 2019.

The Federal cumulative tax basis of the Partnership’s real estate at December 31, 2019 is approximately $ 5,311,000 less than the statement basis.

Federal taxable income of approximately $ 8,578,000 was approximately $ 7,153,000 more than statement income for the year ended December 31, 2020.The Federal cumulative tax basis of the Partnership’s real estate at December 31, 2020 is approximately $ 7,332,000 more than the statement basis.

The primary reasons for the difference in tax basis are tax free exchanges, accelerated depreciation and bonus depreciation.

7 unchanged sentences

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, 2020, the tax years that generally remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2016 forward.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in response to the COVID-19 pandemic.

The act, among other changes, increases the business interest expense limitation to 50% of adjusted taxable income for tax years beginning in 2020 for partnerships.

As of March 31, 2021, the tax years that generally remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2017 forward.

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

11 unchanged sentences

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.

5 unchanged sentences

Based on its’ ownership in the property, the Partnership incurred 40 % of this charge, an expense of approximately $ 1,532,000 .

At September 30, 2020, the balance on this mortgage before unamortized deferred financing costs is $125,000,000 .

At March 31, 2021, 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 October 3, 2005, the Partnership invested $ 2,500,000 for a 50 % ownership interest in a 168 -unit apartment complex in Quincy, Massachusetts.

The purchase price was $ 30,875,000 .

The Joint Venture sold 120 units as condominiums and retained 48 units for long-term investment.

In February 2007, the Joint Venture refinanced the 48 units with a new 10 year mortgage in the original amount of $ 4,750,000 with an interest rate of 5.57 %, interest only for five years .

The loan was to be amortized over 30 years with a maturity date of March 2017.

On March 1, 2017, the mortgage balance was paid in full, with the Partnership contributing its share of the mortgage balance of approximately $ 2,222,000 .

After paying off the mortgage, the Partnership sold the individual units.

3 units were sold in 2019, resulting in a gain of approximately $ 433,000 .

In 2019, all units were sold by this Joint Venture.

This investment is referred to as Hamilton Bay Apartments, LLC.

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.

12 unchanged sentences

Although the Partnership has no legal obligation, the Partnership intends to fund its share of any future operating deficits if needed.

At September 30, 2020, the balance on this mortgage before unamortized deferred financing costs is approximately $ 10,000,000 .

At March 31, 2021, the balance on this mortgage before unamortized deferred financing costs is approximately $ 10,000,000 .

The investment in the parking lot is referred to as Hamilton Essex Development, LLC;

8 unchanged sentences

After paying off the mortgage, the Partnership began to sell off the individual units.

2 units were sold in 2019, resulting in a gain of approximately $ 306,000 .

In 2019, all residential units were sold.

3 unchanged sentences

The purchase price was $ 10,100,000 .

In October 2004,

the Joint Venture obtained a mortgage on the property in the amount of $ 8,025,000 and returned $ 3,775,000 to the Partnership.

In October 2004, the Joint Venture obtained a mortgage on the property in the amount of $ 8,025,000 and returned $ 3,775,000 to the Partnership.

The Joint Venture obtained a new 10-year mortgage in the amount of $ 5,500,000 in January 2007.

4 unchanged sentences

The cost associated with the refinancing was approximately $ 123,000 .

At September 30, 2020, the balance on this mortgage before unamortized deferred financing costs is approximately $ 6,000,000 .

At March 31, 2021, the balance on this mortgage before unamortized deferred financing costs is approximately $ 6,000,000 .

In 2018, the carrying value of the investment fell below zero.

10 unchanged sentences

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 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 .

At September 30, 2020, the balance of the mortgage before unamortized deferred finance is $ 16,900,000 .

At March 31, 2021, the balance of the mortgage before unamortized deferred finance is $ 16,900,000 .

In 2018, the carrying value of the investment fell below zero.

8 unchanged sentences

Although the Partnership has no legal obligation, the Partnership intends to fund its share of any future operating deficits if needed.

At September 30, 2020, the balance of this mortgage before unamortized deferred financing costs is approximately $ 9,201,000 .

At March 31, 2021, the balance of this mortgage before unamortized deferred financing costs is approximately $ 9,097,000 .

This investment is referred to as 345 Franklin, LLC.

Summary financial information as of September 30, 2020

Summary financial information March 31, 2021

Rental Properties

14 unchanged sentences

( 42,876,620 )

( 49,475,607 )

Total Liabilities and Capital

11 unchanged sentences

Units to be sold

Units sold through November 1, 2020

Unsold units with deposits for future sale as of November 1, 2020

Financial information for the nine months ended September 30, 2020

Rental Income

Laundry and Sundry Income

Administrative

Depreciation and Amortization

Management Fees

Repairs and Maintenance

Taxes and Insurance

Income Before Other Income

Other Income (Loss)

Interest Expense

( 3,804,746 )

( 5,071,896 )

( 3,804,746 )

( 5,071,896 )

Net Income (Loss)

Net Income (Loss)—NERA 50 %

Net Income —NERA 40 %

Financial information for the three months ended September 30, 2020

Units sold through May 1, 2021

Unsold units with deposits for future sale as of May 1, 2021

Financial information for the three months ended March 31, 2021

Rental Income

10 unchanged sentences

( 1,662,666 )

Interest Income

Gain on Sale of Real Estate

4 unchanged sentences

Net Income (Loss) —NERA 40 %

Future annual mortgage maturities at September 30, 2020 are as follows:

Future annual mortgage maturities at March 31, 2021 are as follows:

unamortized deferred financing costs

At September 30, 2020 the weighted average interest rate on the above mortgages was 3.91 %.

At March 31, 2021 the weighted average interest rate on the above mortgages was 3.91 %.

The effective rate was 3.98 % including the amortization expense of deferred financing costs.

Summary financial information at September 30, 2019

Summary financial information at March 31, 2020

Rental Properties

26 unchanged sentences

Units to be sold

Units sold through November 1, 2019

Unsold units with deposits for future sale as of November 1, 2019

Financial information for the nine months ended September 30, 2019

Rental Income

Laundry and Sundry Income

Administrative

Depreciation and Amortization

Management Fees

Repairs and Maintenance

Taxes and Insurance

Income Before Other Income

Other Income (Loss)

Interest Expense

( 3,802,783 )

( 5,197,591 )

Gain on Sale of Real Estate

( 3,802,783 )

( 4,458,608 )

Net Income (Loss)

Net Income (Loss)—NERA 50 %

Net Income (Loss)—NERA 40 %

Financial information for the three months ended September 30, 2019

Units sold through May1, 2020

Unsold units with deposits for future sale as of May 1, 2020

Financial information for three months ended March 31, 2020

Hamilton Essex

Rental Income

23 unchanged sentences

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, 2020 was $ 33,000 .

Total expense recognized by the Partnership for the 401(k) Plan for the three months ended March 31, 2021 was $ 11,000 .

IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

5 unchanged sentences

Accordingly, the Partnership accounted for qualifying rent concessions as negative variable lease payments, which reduced revenue from such leases in the period the concessions were granted.

NOTE 17—SUBSEQUENT EVENTS

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 .

Management is currently working with the lender on a three year renewal of the line of credit.

As of October 31, 2020, the Partership had not completed the renewal and exercised a one year extension.

The Partnership paid an extension fee of approximately $ 37,500 in association with the extension.

See Note 5 for a description of the ongoing discussions with lender regarding renewal of the line of credit.

SUBSEQUENT EVENTS

The current outbreak of the COVID-19 virus, which was characterized on March 11, 2020 by the World Health Organization as a pandemic, has currently resulted in a worldwide health crisis, which is adversely affecting international, national and local economies and financial markets generally, and continues to have an unprecedented effect on the rental housing and commercial property markets.

4 unchanged sentences

Hamilton is providing essential services to ensure all properties are kept open, fully functioning and safe.

Hamilton has implemented a work from home policy with a skeleton staff

present at all site offices to provide for property management, maintenance, leasing and construction services.

Hamilton has implemented a work from home policy with a skeleton staff present at all site offices to provide for property management, maintenance, leasing and construction services.

Leasing is limited to unoccupied units and a web based video technology is being used to remotely show apartments.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements