What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-07 compared with 2020-11-06 · 77 added, 171 removed, 232 unchanged (52% of the section changed)

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The Partnership will consider refinancing existing properties if the Partnership’s cash reserves are insufficient to repay existing mortgages or if the Partnership needs additional funds for future acquisitions.

The current outbreak of the COVID- 19, a novel strain of coronavirus, has resulted in the World Health Organization declaring a global pandemic on March 11, 2020.

Approximately one year has passed since we became aware of the current outbreak of COVID- 19, a novel strain of coronavirus.

The World Health Organization declared a global pandemic on March 11, 2020.

On March 10, 2020 the governor of Massachusetts, Charlie Baker, declared a state of emergency and ordered all non-essential businesses closed and prohibited the gathering of 10 or more people.

The Governor’s order has since been subsequently modified, but is currently in place for the foreseeable future.

Additionally, March saw the closure of local colleges and universities for the balance of the academic year.

Colleges in the City of Boston and the surrounding communities started the 2020/2021 academic year working remotely or using a hybrid model of remote and limited in class learning.

These educational models caused a large decrease in the student population and have resulted in significant vacancies in the Partnership’s apartment portfolio.

Over time, the Governor’s order has been modified, but restrictions are currently in place for the foreseeable future.

Additionally, March of 2020 saw the closure of local colleges and universities for the balance of the academic year.

Colleges in the City of Boston and the surrounding communities are conducting classes for the 2020/2021 academic year remotely, or using a hybrid model of remote and limited in class learning.

These educational models caused a large decrease in the student population in need of local housing and have resulted in significant vacancies in the Partnership’s apartment portfolio.

The government’s measures put into place to combat the spread of the virus have caused significant disruptions to life and business operations in Massachusetts, the country and the world.

The length and severity of the current recession and the effects on the Partnership’s business are unknown at this time.

Rental collections for the third quarter for the Partnership’s wholly owned properties were approximately 95% of rents due.

Rental collections for the first quarter for the Partnership’s wholly owned properties were approximately 98% of rents due.

Residential tenants paid approximately 98% of their rent and commercial tenants paid approximately 99% of theirs.

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The rent collections for the Joint Ventures were approximately 74%.

The third quarters’ collections are not necessarily an indicator of future cash receipts.

As of September 30, 2020, gross rents receivable increased approximately $475,000 over the June 30, 2020 balances and $1,020,000 over the December 31,2019 balance.

Vacancy rates for the Partnership’s residential properties as of November 1, 2020 were 8.3% as compared with a vacancy rate of 3.4% as of November 1, 2019.

The vacancy rate for the Joint Venture properties as of November 1, 2020 is 22.8%, as compared to 0.9% for the same period last year.

The majority of the vacancies are at Dexter Park, which has 112 vacant units, or 27.4 % vacancy.

The first quarters’ collections are not necessarily an indicator of future cash receipts.

Vacancy rates for the Partnership’s residential properties as of May 1, 2021 were 6.2% as compared with a vacancy rate of 3.8% as of May 1, 2020.

The majority of the vacancies in the wholly owned properties are at 62 Boylston Street, which has 93 vacant units, or 34.6% vacancy.

The vacancy rate for the Joint Venture properties as of May 1, 2021 is 9.2%, as compared to 2.5% for the same period last year.

The majority of the vacancies in the Joint Ventures are at Dexter Park, which has 33 vacant units, or 8.1 % vacancy.

With the uncertainties with the economy and the re-opening of Colleges and Universities in the fall, this year’s rental season started off slowly and has just recently started to improve.

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The majority of these leases will mature during the second and third quarters of the year.

Given the current economic environment, it is not possible to estimate the amount of lease turnover we will experience or the amount of increases to or decreases from the current rental rates we will

realize with lease renewals or new leases.

Given the current economic environment, it is not possible to estimate the amount of lease turnover we will experience or the amount of increases to or decreases from the current rental rates we will realize with lease renewals or new leases.

However, we are currently offering reduced rental rates and significant rent concessions at certain properties.

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Hamilton and the Partnership will continue to adjust their s business practices to comply with Federal and State mandates for workplace and rental property operations.

During the third quarter of 2020, rents increased on average of 2.3% for renewals and decreased on average of 3.1% for new leases.

For the balance of 2020, due to the ongoing global coronavirus pandemic, management expects a significant softening of the local real estate market and is experiencing a decrease in rent and more rent concessions.

For the third quarter of 2020, including the purchase of Mill Street, consolidated revenue decreased by 0.1%, operating expenses increased by 8.5% and Income before Other Income (Expense) decreased by 22.7%.

Excluding the Mill Street acquisition, same store revenue decreased by 6.2%, operating expenses decreased by 3.8% and Income before Other Income (Expense) decreased by 13.3%.

For the same reporting period, vacancy was 8.3% vs 3.4%.

Excluding Depreciation and Amortization, same store revenues (excluding Mill Street) decreased by 6.2%, operating expenses decreased by 4.6% and Net Operating Income decreased by 8.0%.

In 2019, the Joint Ventures of 1025 Hancock and Hamilton Bay sold out all remaining residential condominium units.

1025 Hancock sold 2 remaining units for a gain of approximately $306,000, and Hamilton Bay sold its 3 remaining units at a gain of approximately $433,000.

The estimated profit to the Partnership for the sale of these units from 2014 through 2019 is approximately $7,168,000.

During the first quarter of 2021, rents increased on average of 0.3% for renewals and decreased on average of 5.0% for new leases.

For the balance of 2021, due to the ongoing global coronavirus pandemic, management expects a significant softening of the local real estate market and is experiencing a decrease in rent and continuing rent concessions.

For the first quarter of 2021, consolidated revenue decreased by 7.8%, operating expenses decreased by 2.8% and Income before Other Income (Expense) decreased by 21.9%.

For the same reporting period, vacancy was 6.2% in 2021 vs 3.8% in 2020.

On July 31, 2014, the Partnership entered into an agreement for a $25,000,000 revolving line of credit.

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The costs associated with the line of credit extension were approximately $128,000.

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

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

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 has 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.

On March 31, 2020, Nera Brookside Associates, LLC (“Brookside Apartments”), entered into a Mortgage Note with KeyBank National Associates ( KeyBank) in the principal amount of $6,175,000.

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In connection with this refinancing, there were closing costs of approximately $132,000.

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 .

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.

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:

(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) 3.50% 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.

In May, 2019, the Partnership refinanced the Residences at Captain Parker.

The prior mortgage of $20,071,000 had, at that time, a variable interest rate of 4.5%, which matured in February 2026, and had interest only payments until March 2021, with a thirty year amortization schedule thereafter.

The new mortgage is for $20,750,000, with a fixed rate of 4.05%, maturing in 10 years, with interest only payments for the term of the loan.

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

From the start of the Stock Repurchase Program in 2007 through September 30, 2020, the Partnership has purchased 1,428,437 Depositary Receipts.

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 0.6 Class B Units and 0.03 General Partnership units at a cost of $775 and $41 respectively.

In January 2019, the Partnership purchased 40,000 Depository Receipts from the former president of the management company.

From the start of the Stock Repurchase Program in 2007 through March 31, 2021, the Partnership has purchased 1,428,437 Depositary Receipts.

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

In March of 2020, the Board of Advisors and Board of Directors unanimously approved an extension of the Repurchase Program until March 31, 2025.

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

At November 1, 2020, the Estate of Harold Brown and his brother Ronald Brown collectively own approximately 30.9% of the Depositary Receipts representing the Partnership Class A Units (including Depositary Receipts held by trusts for the benefit of such persons’ family members).

At May 1, 2021, the Harold Brown related entities and Ronald Brown collectively own approximately 30.9% of the Depositary Receipts representing the Partnership Class A Units (including Depositary Receipts held by trusts for the benefit of such persons’ family members).

The Estate of Harold Brown also controls 75% of the Partnership’s Class B Units, 75% of the capital stock of NewReal, Inc.

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Residential tenants sign a one year lease.

During the nine months ended September 30, 2020 , tenant renewals were approximately 72% with an average rental increase of approximately 3.0%, new leases accounted for approximately 28% with rental rate decreases of approximately 1.8 %.

During the nine months ended September 30, 2020 , leasing commissions were approximately $372,000 compared to approximately $476,000 for the nine months ended September 30 , 2019, a decrease of approximately $104,000 (21.8%) .Tenant concessions were approximately $25,000 for the nine months ended September 30 , 2020, compared to approximately $52,000 for the nine months ended September 30, 2019, a decrease of approximately $27,000 (51.9%).

Tenant improvements were approximately $1,320,000 for the nine months ended September 30 , 2020, compared to approximately $1,850,000 for the nine months ended September 30 , 2019, a decrease of approximately $530,000 (28.6%).

Hamilton accounted for approximately 2.2% of the repair and maintenance expenses paid for by the Partnership during the nine months ended September 30, 2020 and 4.4 % during the nine months ended September 30, 2019.

Of the funds paid to Hamilton for this purpose, the great majority was to cover the cost of services provided by the Hamilton maintenance department, including plumbing, electrical, carpentry services, and snow removal for those properties close

to Hamilton’s headquarters.

During the three months ended March 31, 2021, tenant renewals were approximately 60% with an average rental increase of approximately 0.3%, new leases accounted for approximately 40% with rental rate decreases of approximately 5.0%.

During the three months ended March 31, 2021, leasing commissions were approximately $168,000 compared to approximately $114,000 for the three months ended March 31, 2020, an increase of approximately $54,000 (47.2%).

Tenant concessions were approximately $5,000 for the three months ended March 31, 2021, compared to approximately $12,000 for the three months ended March 31, 2020, a decrease of approximately $7,000 (58.3%).

Tenant improvements were approximately $320,000 for the three months ended March 31, 2021, compared to approximately $621,000 for the three months ended March 31, 2020, a decrease of approximately $301,000 (48.5%).

Hamilton accounted for approximately 2.3% of the repair and maintenance expenses paid for by the Partnership during the three months ended March 31, 2021 and 3.2 % during the three months ended March 31, 2020.

Several of the larger Partnership properties have their own maintenance staff.

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Additionally, it prepares most long-term commercial lease agreements and represents the Partnership in selected purchase and sale transactions.

Overall, Hamilton provided approximately $84,000 (64.3%) and approximately $190,000 (60.9%) of the legal services paid for by the Partnership during the nine months ended September 30, 2020 and 2019 respectively.

Overall, Hamilton provided approximately $24,000 (52.9%) and approximately $52,000 (86.3%) of the legal services paid for by the Partnership during the three months ended March 31, 2021 and 2020 respectively.

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

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Hamilton’s architectural department also provides services to the Partnership on an as-needed basis.

During the nine months ended September 30, 2020, Hamilton provided the Partnership approximately $493,000 in construction and architectural services, compared to approximately $262,000 for the nine months ended September 30, 2019.

During the three months ended March 31, 2021, Hamilton provided the Partnership approximately $155,000 in construction and architectural services, compared to approximately $196,000 for the three months ended March 31, 2020.

Hamilton’s accounting staff perform bookkeeping and accounting functions for the Partnership.

During the nine months ended September 30, 2020 and 2019, Hamilton charged the Partnership $97,750 for bookkeeping and accounting services.

During the three months ended March 31, 2021 and 2020, Hamilton charged the Partnership $31,250 for bookkeeping and accounting services.

For more information on related party transactions, see Note 3 to the Consolidated Financial Statements.

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However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment.

The Partnership’s critical accounting policies are those which require assumptions to be made about such matters that are highly uncertain.

The Partnership’s critical

accounting policies are those which require assumptions to be made about such matters that are highly uncertain.

Different estimates could have a material effect on the Partnership’s financial results.

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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.

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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 Property Held f or Sale:

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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.

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.

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The estimated future undiscounted cash flows are compared to the asset’s carrying value to determine if a write-down to fair value is required.

Impairment On an annual basis management assesses whether there are any indicators that the value of the Partnership’s rental properties may be impaired.

On an annual basis management assesses whether there are any indicators that the value of the Partnership’s rental properties may be impaired.

A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property.

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and (2) the obligation to absorb losses and rights to receive the returns from VIE that would be significant to the VIE.

With respect to investments in and advances to the Investment Properties, the Partnership looks to the underlying properties to assess performance and the recoverability of carrying amounts for those investments in a manner similar to direct investments in real estate properties.

manner similar to direct investments in real estate properties.

An impairment charge is recorded if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property.

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2020 and September 30, 2019

The Partnership and its Subsidiary Partnerships earned income before interest expense, income from investments in unconsolidated joint ventures, other expense of approximately $3,228,000 during the three months ended September 30, 2020, compared to approximately $4,177,000 for the three months ended September 30, 2019, a decrease of approximately $949,000 (22.7%).

Three Months Ended March 31, 2021 and March 31, 2020

The Partnership and its Subsidiary Partnerships earned income before interest expense, income from investments in unconsolidated joint ventures, other expense of approximately $3,395,000 during the three months ended March 31, 2021, compared to approximately $4,344,000 for the three months ended March 31, 2020, a decrease of approximately $949,000 (21.9%).

The rental activity is summarized as follows:

Occupancy Date

November 1, 2020

November 1, 2019

Total square feet

Rental Income (in thousands)

Three Months Ended September 30,

Three Months Ended March 31,

Residential percentage

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Contingent rentals

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019:

Three Months Ended September 30,

Rental income

Laundry and sundry income

Administrative

Depreciation and amortization

Management fee

Repairs and maintenance

Taxes and insurance

Income Before Other Income (Expense)

Other Income (Expense)

Interest income

Interest expense

Income (Loss) from investments in unconsolidated joint ventures

Other expense

Net (Loss)Income

Rental income for the three months ended September 30, 2020 was approximately $15,047,000, compared to approximately $15,039,000 for the three months ended September 30, 2019, an increase of approximately $8,000 (0.1%).

The factors that can be attributed to this increase are as follows:

the acquisition of Mill Street resulted in an increase in rental income of approximately $944,000.

Although rental income has increased at a number of properties, due to the effect of the Pandemic, a number of properties incurred a decrease in their rental income.

The Partnership properties with the largest increases in rental income include Redwood Hill, Westside Colonial, and Hamilton Battlegreen with increases of $38,000, $33,000, and $25,000 respectively.

These are offset by certain properties with the largest decreases in rental income, which include 62 Boylston, 1144 Commonwealth, and Hamilton Linewt, with decreases of approximately $416,000, $75,000, and $53,000, respectively.

Included in rental income is contingent rentals collected on commercial properties.

Contingent rentals include such charges as bill backs of common area maintenance charges, real estate taxes, and utility charges.

Operating expenses for the three months ended September 30, 2020 were approximately $11,915,000 compared to approximately $10,979,000 for the three months ended September 30, 2019, an increase of approximately $936,000 (8.5%).

Excluding the increase in expenses at Mill Street of approximately $1,347,000, Operating expenses decreased approximately $412,000 (3.8%).

The factors contributing to the decrease are a decrease in repairs and maintenance expenses of approximately $221,000 (8.3%), a decrease in administrative expenses of approximately $ 117,000, (18.9%), and a decrease in depreciation and amortization of approximately $72,000, (2.0%), partially offset by an increase in operating costs of approximately $65,000 (5.9%),

Interest expense for the three months ended September 30, 2020 was approximately $3,417,000 compared to approximately $3,011,000 for the three months ended September 30, 2019, an increase of approximately $406,000 (13.5%).

Excluding the increase in interest expense attributable to Mill Street of approximately $281,000, there was an increase in interest expense of approximately $125,000, primarily due to an increase in interest expense on the line of credit of approximately $158,000.

At September 30, 2020, the Partnership has between a 40% and 50% ownership interests in seven different Investment Properties.

See a description of these properties included in the section titled Investment Properties as well as Note 14 to the Consolidated Financial Statements for a detail of the financial information of each Investment Property.

As described in Note 14 to the Consolidated Financial Statements, the Partnership’s share of the net loss from the Investment Properties was approximately $250,000 for the three months ended September 30, 2020, compared to net income of approximately $225,000 for the three months ended September 30, 2019, a decrease in income of approximately $475,000 (210.9%).

This decrease is primarily due to the reduction in rental revenue from approximately $ 2,681,000 to $2,193,000, a decrease of approximately $488,000 (18.2%) for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

Included in the income for the three months ended September 30, 2020 is depreciation and amortization expense of approximately $652,000.

As a result of the changes discussed above, the net loss for the three months ended September 30, 2020 was approximately $439,000 compared to income of approximately $1,384,000 for the three months ended September 30, 2019, a decrease in income of approximately $1,823,000 (131.7 %).

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019:

The Partnership and its Subsidiary Partnerships earned income before interest expense, income from investments in unconsolidated joint ventures, and other expense of approximately $12,017,000 during the nine months ended September 30, 2020, compared to approximately $12,708,000 for the nine months ended September 30, 2019, a decrease of approximately $691,000 (5.4%).

Nine Months Ended September 30,

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020:

Three Months Ended March 31,

Rental income

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Income from investments in unconsolidated joint ventures

Other expense

Rental income for the nine months ended September 30, 2020 was approximately $46,947,000, compared to approximately $44,694,000 for the nine months ended September 30, 2019, an increase of approximately $2,253,000 (5.0%).

The major factor that can be attributed to this increase is the acquisition of Mill Street, which resulted in an increase in rental income of approximately $2,920,000.

Although rental income has increased at other properties, due to the effect of the Pandemic there have been a number of properties incurring a decrease in their rental income.

The Partnership Properties with the largest increases in rental income include Westside Colonial, Redwood Hill, and Hamilton Oak, with increases of approximately $122,000, $115,000, and $113,000, respectively.

These are offset by

certain properties with the largest decreases in rental income which include 62 Boylston, Hamilton Linewt, and 1131 Commonwealth, with decreases of approximately $327,000, $136,000, and $42,000, respectively.

Net Income (Loss)

Rental income for the three months ended March 31, 2021 was approximately $14,980,000, compared to approximately $16,253,000 for the three months ended March 31, 2020, a decrease of approximately $1,273,000 (7.8%).

Although rental income has increased at a number of properties, due to the effect of the Pandemic, a number of properties incurred a decrease in their rental income.

The Partnership properties with the largest increases in rental income include Hamilton Oaks, Westside Colonial, and Hamilton Green with increases of $60,000, $28,000, and $27,000 respectively.

These are offset by certain properties with the largest decreases in rental income, which include 62 Boylston, 1144 Commonwealth, and Lincoln Street, with decreases of approximately $759,000, 139,000, and $55,000, respectively.

Included in rental income is contingent rentals collected on commercial properties.

Contingent rentals include such charges as bill backs of common area maintenance charges, real estate taxes, and utility charges.

Operating expenses for the nine months ended September 30, 2020 were approximately $35,260,000 compared to approximately $32,321,000 for the nine months ended September 30, 2019, an increase of approximately $2,939,000 (9.1%).

Excluding the increase in operating expenses attributable to the acquisition of Mill Street of approximately $4,040,000, operating expenses decreased approximately $1,101,000 (3.4%).

The factors contributing to this net decrease are a decrease in repairs and maintenance expenses of approximately $439,000 (6.4%), a decrease in depreciation and amortization of approximately $ 291,000 (2.7%) due to fully depreciated assets, and a decrease in administrative expenses of approximately $289,000 (15.6%), partially offset by an increase in taxes and insurance of approximately $248,000 (4.1%).

Interest expense for the nine months ended September 30, 2020 was approximately $10,291,000 compared to approximately $9,145,000 for the nine months ended September 30, 2019, an increase of approximately $1,146,000 (12.5%).

Excluding the increase in interest expense attributable to Mill Street of approximately $844,000, there was an increase in interest expense of approximately $302,000, primarily due to an increase in interest expense on the line of credit of approximately $553,000, partially offset by a decrease in interest expense for Captain Parker of approximately $144,000, and Hamilton Highland of approximately $104,000.

At September 30, 2020, the Partnership has between a 40% and 50% ownership interests in seven different Investment Properties.

Operating expenses for the three months ended March 31, 2021 were approximately $11,694,000 compared to approximately $12,031,000 for the three months ended March 31, 2020, a decrease of approximately $337,000 (2.8%).

The factors contributing to the decrease are a decrease in depreciation and amortization of approximately $660,000, (14.4%), and a decrease in repairs and maintenance expenses of approximately $116,000 (5.6%), partially offset by an increase in operating costs of approximately $378,000 (22.6%), due to an increase in snow removal expense of approximately $270,000.

Interest expense for the three months ended March 31, 2021 was approximately $3,364,000 compared to approximately $3,450,000 for the three months ended March 31, 2020, a decrease of approximately $86,000 (2.5%).

The decrease in interest expense is primarily due to a decrease in interest expense on the line of credit of approximately $65,000.

At March 31, 2021, the Partnership has between a 40% and 50% ownership interests in seven different Investment Properties.

As described in Note 14 to the Consolidated Financial Statements, the Partnership’s share of the net income from the Investment Properties was approximately $669,000 for the nine months ended September 30, 2020, compared to net income of approximately $1,287,000 for the nine months ended September 30, 2019, a decrease in income of approximately $618,000 (48.0%).

This decrease is primarily due to the reduction in the gain realized from the sales of condominium units of approximately $739,000 with the Partnership’s share amounting to 50%, on the sale of 3 units at Hamilton Bay Apartments LLC, and the sale of 2 units at Hamilton 1025 Apartments LLC for the nine months ended September 30, 2019, compared to no units sold for the nine months ended September 30, 2020.

Included in the income for the nine months ended September 30, 2020 is depreciation and amortization expense of approximately $1,949,000.

The proportional income for the nine months ended September 30, 2020 from the investment in Dexter Park is approximately $399,000.

As a result of the changes discussed above, net income for the nine months ended September 30, 2020 was approximately $2,394,000 compared to income of approximately $4,649,000 for the nine months ended September 30, 2019, a decrease in net income of approximately $2,254,000 (48.5 %).

As described in Note 14 to the Consolidated Financial Statements, the Partnership’s share of the net loss from the Investment Properties was approximately $325,000 for the three months ended March 31, 2021, compared to net income of approximately $475,000 for the three months ended March 31, 2020, a decrease in income of approximately $800,000 (168.5%).

This decrease is primarily due to the reduction in rental revenue from approximately $ 2,755,000 to

$2,073,000, a decrease of approximately $682,000 (24.8 %) for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Included in the income for the three months ended March 31, 2021 is depreciation and amortization expense of approximately $652,000.

As a result of the changes discussed above, the net loss for the three months ended March 31, 2021 was approximately $294,000 compared to net income of approximately $1,369,000 for the three months ended March 31, 2020, a decrease in income of approximately $1,663,000 (121.5 %).

LIQUIDITY AND CAPITAL RESOURCES

The Partnership’s principal source of cash during the first nine months of 2020 was the collection of rents and the proceeds from the refinancing of Brookside Apartments.

The Partnership’s principal source of cash during the first three months of 2021 was the collection of rents.

The Partnership’s principal source of cash in 2020 was the collection of rents.

The majority of cash and cash equivalents of $16,847,883 at September 30, 2020 and $7,546,618 at December 31, 2019 were held in interest bearing accounts at creditworthy financial institutions.

The increase in cash of $9,301,559 for the nine months ended September 30, 2020 is summarized as follows:

Nine Months Ended September 30,

The majority of cash and cash equivalents of $20,822,344 at March 31, 2021 and $18,646,972 at December 31, 2020 were held in interest bearing accounts at creditworthy financial institutions.

The increase in cash of $2,175,372 for the three months ended March 31, 2021 is summarized as follows:

Three Months Ended March 31,

Cash provided by operating activities

Cash (used in) investing activities

Cash provided by (used in) financing activities

Cash (used in) provided by financing activities

Repurchase of Depositary Receipts, Class B and General Partner Units

Distributions paid

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

The change in cash provided by operating activities is due to various factors, including a change in depreciation expense due to recent acquisitions, a change in income and distribution from joint ventures, and other factors.

The decrease in cash provided by investing activities is primarily due to improvements to rental properties.

The change in cash used in financing activities is primarily due to the refinancing of the mortgage at Brookside Apartments, partially offset by the paydown of mortgages, and the pay down of the line of credit originally used for the purchase of Mill Street.

The decrease in cash used in investing activities is primarily due to improvements to rental properties.

The change in cash used in financing activities is due to the pay down of mortgages,

During 2021, the Partnership and its Subsidiary Partnerships have completed improvements to certain of the Properties at a total cost of approximately $634,000.

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Cash reserves have been adequate to fully fund improvements.

The most significant improvements were made at 62 Boylston Street, Captain Parker, Hamilton Oaks, Hamilton Green, Redwood Hills, and 1144 Commonwealth at a cost of approximately $489,000, $307,000, $287,000, $197,000, 152,000 and 134,000 respectively.

The most significant improvements were made at 62 Boylston Street, Redwood Hills, 1144 Commonwealth, Hamilton Oaks, Dean Street Associates, and Hamilton Green, at a cost of approximately $137,000, $69,000, $59,000, $52,000, $42,000 and $40,000 respectively.

On March 31, 2020, Nera Brookside Associates, LLC (“Brookside Apartments”), entered into a Mortgage Note with KeyBank National Associates ( KeyBank) in the principal amount of $6,175,000.

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

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 Gardens entered into a Loan Agreement with Insurance Strategy Funding Corp.

LLC providing for a loan (the “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 is 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.

During the nine months ended September 30, 2020 the Partnership received distributions of approximately $1,195,000 from the investment properties.

For the nine months ended, September 30, 2019, the Partnership received distributions of approximately $3,268,000 from the investment properties.

Included in these net distributions is the amount from Dexter Park of approximately $700,000 and $1,648,000 for the nine months ended September 30, 2020 and 2019, respectively.

During the three months ended March 30, 2021, the Partnership received distributions of approximately $196,000 from the investment properties.

For the three months ended March 31, 2020, the Partnership did not receive any distributions from the investment properties.

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

In June 2020, the Partnership approved a quarterly distribution of $9.60 per Unit ($0.32 per Receipt), which was paid on June 30, 2020.

In September 2020, the Partnership approved a quarterly distribution of $9.60 per Unit ($0.32 per Receipt), which was paid on September 30, 2020.

On July 31, 2014, the Partnership entered into an agreement for a $25,000,000 revolving line of credit.

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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 had 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.

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.

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

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

The Partnership anticipates that cash from operations and interest bearing accounts will be sufficient to fund its current operations, pay distributions, make required debt payments and finance current improvements to its properties.

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

The Partnership anticipates that cash from operations will be sufficient to fund its current operations, pay distributions, make required debt payments and finance current improvements to its properties.

The Partnership may also sell or refinance properties.

The Partnership’s net income and cash flow may fluctuate dramatically from year to year as a result of the sale or refinancing of properties, increases or decreases in rental income or expenses, or the loss of significant tenants.

The Partnership’s net income and cash flow may fluctuate dramatically from year to year as a result of the sale or refinancing of properties, property improvements, increases or decreases in rental income or expenses, or the loss of significant tenants.

Off-Balance Sheet Arrangements—Joint Venture Indebtedness

As of September 30, 2020 the Partnership had a 40%-50% ownership interest in seven Joint Ventures, five of which have mortgage indebtedness.

As of March 31, 2021 the Partnership had a 40%-50% ownership interest in seven Joint Ventures, five of which have mortgage indebtedness.

We do not have control of these partnerships and therefore we account for them using the equity method of consolidation.

At September 30, 2020, our proportionate share of the non-recourse debt related to these investments was approximately $71,051,000.

At March 31, 2021, our proportionate share of the non-recourse debt related to these investments was approximately $70,998,000.

See Note 14 to the Consolidated Financial Statements.

Contractual Obligations

As of September 30, 2020, we are subject to contractual payment obligations as described in the table below.

As of March 31, 2021, we are subject to contractual payment obligations as described in the table below.

Payments due by period

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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 2. Management’s Discussion and Analysis