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Item 1. Financial Statements

2021-11-08 compared with 2021-08-06 · 130 added, 106 removed, 630 unchanged (27% of the section changed)

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generally accepted accounting principles for complete financial statements.

The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in New England Realty Associates L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

The results of operations for the three and six month period ended June 30, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

Form10-K for the fiscal year ended December 31, 2020.

The results of operations for the three and nine month period ended September 30, 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

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Rental income

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( 9,621,986 )

Net Income per Unit

Net Income (Loss)

Net Income (Loss) per Unit

Weighted Average Number of Units Outstanding

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CONSOLIDATED STATEMENTS OF CHANGES IN PARTNER’S CAPITAL

Partners’s Capital

Partner’s Capital

Balance January 1, 2020

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Stock Buyback

Balance June 30, 2020

Balance September 30, 2020

( 31,492,340 )

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Stock Buyback

Balance June 30, 2021

Balance September 30, 2021

( 35,848,451 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows from Operating Activities

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Increase (Decrease) in accounts payable and accrued expense

(Increase) Decrease in real estate tax escrow

(Increase) Decrease in prepaid expenses and other assets

(Increase) in real estate tax escrow

(Increase) in prepaid expenses and other assets

( 1,195,693 )

Increase (Decrease) in advance rental payments and security deposits

8 unchanged sentences

Net cash (used in) investing activities

( 1,667,942 )

( 1,079,130 )

Cash Flows from Financing Activities

10 unchanged sentences

( 3,506,894 )

Net cash provided by (used in) financing activities

Net cash (used in) financing activities

( 5,211,324 )

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

September 30, 2021

SIGNIFICANT ACCOUNTING POLICIES

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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.

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.

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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 $ 120,000 and $ 120,000 for the six months ended June 30, 2021 and 2020, respectively.

In all cases, amortization of such costs is included in interest expense and was approximately $ 180,000 and $ 180,000 for the nine months ended September 30, 2021 and 2020, respectively.

Income Taxes:

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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 2021 or 2020.

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

At June 30, 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 June 30, 2021 and December 31, 2020, respectively approximately $ 23,473,000 , and $ 18,830,000 of cash and cash equivalents, and security deposits included in prepaid expenses and other assets exceeded federally insured amounts.

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, 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 0.02 %.

At September 30, 2021 and December 31, 2020, respectively approximately $ 26,151,000 , 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 $ 154,569 and $ 145,803 for the six months ended June 30, 2021 and 2020, respectively.

Advertising expense was $ 240,814 and $ 257,433 for the nine months ended September 30, 2021 and 2020, respectively.

Rental Property Held f or Sale:

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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 six months ended June 30, 2021 and 2020 there was no capitalized interest.

During the nine months ended September 30, 2021 and 2020 there was no capitalized interest.

Extinguishment of Debt:

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RENTAL PROPERTIES

As of June 30, 2021, 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 September 30, 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 June 30, 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.

Additionally, as of September 30, 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 June 30, 2021 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 September 30, 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:

June 30, 2021

September 30, 2021

December 31, 2020

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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 $ 1,222,000 and $ 1,265,000 for the six months ended June 30, 2021 and 2020, respectively.

Total fees paid were approximately $ 1,868,000 and $ 1,863,000 for the nine months ended September 30, 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 six months ended June 30, 2021 and 2020, approximately $ 529,000 and $ 533,000 , was charged to NERA for legal, accounting, construction, maintenance, brokerage fees, rental and architectural services and supervision of capital improvements.

During the nine months ended September 30, 2021 and 2020, approximately $ 766,000 and $ 816,000 , 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 $ 177,000 consisted of repairs and maintenance, and $ 177,000 of administrative expense.

Approximately $ 413,000 of expenses for construction, architectural services and supervision of capital projects were capitalized in rental properties.

Additionally in 2021, the Hamilton Company received approximately $ 289,000 from the Investment Properties of which approximately $ 257,000 was the management fee, approximately $ 19,000 was for maintenance services, approximately $ 12,000 was for administrative services and approximately $ 1,000 for architectural services and supervision of capital projects.

Additionally in 2021, the Hamilton Company received approximately $ 494,000 from the Investment Properties of which approximately $ 413,000 was the management fee, approximately $ 30,000 was for maintenance services, approximately $ 18,000 was for administrative services and approximately $ 33,000 for construction, architectural services and supervision of capital projects.

The management fee is equal to 4 % of gross receipts of rental income on the majority of investment properties and 2 % on Dexter Park.

The Partnership reimburses the management company for the payroll and related expenses of the employees who work at the properties.

Total reimbursement was approximately $ 1,782,000 and $ 1,738,000 for the six months ended June 30, 2021 and 2020, respectively.

Total reimbursement was approximately $ 2,759,000 and $ 2,571,000 for the nine months ended September 30, 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 six months ended June 30, 2021, the Partnership accrued $ 22,000 for the employer’s match portion to the plan.

For the six months ended june 30, 2020, the Partnership contributed $ 22,000 for the employer’s match portion to the plan.

For the nine months ended September 30, 2021, the Partnership accrued $ 33,000 for the employer’s match portion to the plan.

For the nine months ended September 30, 2020, the Partnership contributed $ 33,000 for the employer’s match portion to the plan.

Bookkeeping and accounting functions are provided by the Management Company’s accounting staff, which consists of approximately 14 people.

During the six months ended June 30, 2021 and 2020, the Management Company charged the Partnership $ 62,500 ($ 125,000 per year) for bookkeeping and accounting services included in administrative expenses above.

During the nine months ended September 30, 2021 and 2020, the Management Company charged the Partnership $ 93,750 ($ 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.

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PREPAID EXPENSES and OTHER ASSETS

Approximately $ 2,907,000 , and $ 2,830,000 of security deposits are included in prepaid expenses and other assets at June 30, 2021 and December 31, 2020, respectively.

Approximately $ 3,000,000 , and $ 2,830,000 of security deposits are included in prepaid expenses and other assets at September 30, 2021 and December 31, 2020, respectively.

The security deposits and escrow accounts are restricted cash.

Also, included in prepaid expenses and other assets at June 30, 2021 and December 31, 2020 is approximately $ 1,378,000 and $ 1,073,000 , respectively, held in escrow to fund future capital improvements.

Also, included in prepaid expenses and other assets at September 30, 2021 and December 31, 2020 is approximately $ 1,530,000 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 $ 38,000 net of accumulated amortization of approximately $ 1,379,000 and approximately $ 51,000 net of accumulated amortization of approximately $ 1,367,000 at June 30, 2021 and December 31, 2020, respectively.

Financing fees in association with the line of credit of approximately $ 19,000 and $ 42,000 are net of accumulated amortization of approximately $ 25,000 and $ 6,000 at June 30, 2021 and December 31, 2020 respectively.

Intangible assets are approximately $ 32,000 net of accumulated amortization of approximately $ 1,386,000 and approximately $ 51,000 net of accumulated amortization of approximately $ 1,367,000 at September 30, 2021 and December 31, 2020, respectively.

Financing fees in association with the line of credit of approximately $ 28,000 and $ 42,000 are net of accumulated amortization of approximately $ 34,000 and $ 6,000 at September 30, 2021 and December 31, 2020 respectively.

MORTGAGE NOTES PAYABLE

At June 30, 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 June 30, 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 June 30, 2021, the weighted average interest rate on the above mortgages was 4.43 %.

At September 30, 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 September 30, 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, 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.

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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 $ 1,225,000 and $ 1,345,000 are net of accumulated amortization of approximately $ 1,684,000 and $ 1,564,000 at June 30, 2021 and December 31, 2020, respectively, which offset the total mortgage notes payable.

Financing fees of approximately $ 1,165,000 and $ 1,345,000 are net of accumulated amortization of approximately $ 1,744,000 and $ 1,564,000 at September 30, 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 June 30, 2021 are as follows:

Approximate annual maturities at September 30, 2021 are as follows:

2022—current maturities

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The Note is secured by a mortgage on the Brookside apartment complex located at 5-12 Totman Drive, Woburn, Massachusetts pursuant to a Mortgage, Assignment of Leases and Rents and Security Agreement dated March 31, 2020.

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.

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.

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

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

Management has a signed term sheet with the lender and is working to close on a three year extension and modification of the line of credit in August 2021.

On October 29, 2021, the Partnership closed on a three year extension until October 29, 2024.

The line of credit may be used for acquisition, refinancing, improvements, working capital and other needs of the Partnership.

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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 $ 6,000 in fees for the six months ended June 30, 2021.

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

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

As of June 30, 2021, the line of credit had an outstanding balance of $ 17,000,000 .

As of September 30, 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.

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

As of June 30, 2021, the Partnership is not in compliance with the loan covenants required by the terms of the line of credit, eliminating any additional advances.

In anticipation of this, Management has been working with the lender to extend and modify the terms of the credit line.

On July 30, 2021, the Partnership signed a term sheet to modify the covenant terms and extend the maturity of the credit line.

The Partnership will be in compliance with the loan covenants under the terms of loan extension and modification.

Subsequent Events for details.

As of September 30, 2021, the Partnership was not in compliance with the loan covenants required by the terms of the line of credit, eliminating any additional advances.

The Partnership is currently in compliance with the loan covenants under the terms of the October 29, 2021 loan extension and modification.

On October 29, 2021, t he Partnership closed on the modification of its existing line of credit.

The agreement extends the credit line for three years until October 29, 2024.

The commitment amount is for $ 25 million but is restricted to $ 17 million during the modification period.

The modification period covers the current period and phases out by December 31, 2022.

During this period, the loan covenants are modified from a minimum consolidated debt service ratio of 1.60 to a ratio of 1.35 until September 30, 2022;

from a minimum tangible net worth requirement of $ 200 million to a net worth of $ 175 million until September 30, 2022;

from a maximum consolidated leverage ratio of 65 % to a ratio of 70 % until September 30, 2022 and from a minimum debt yield of 9.5 % to a yield of 8.5 % until September 30, 2022 and a yield of 9.0 % until December 31, 2022.

Once the financial performance of the Partnership meets the original covenant tests for the trailing 12-month period, the commitment amount will return to $ 25 million.

The interest rate for the new term has been reduced from LIBOR plus 350 basis points to LIBOR plus 300 basis points.

Additionally, the unused fee has been eliminated.

There was a fee $ 125,000 to modify and extend the credit line .

ADVANCE RENTAL PAYMENTS AND SECURITY DEPOSITS

The Partnership’s residential lease agreements may require tenants to maintain a one-month advance rental payment and/or a security deposit.

At June 30, 2021, amounts received for prepaid rents of approximately $ 2,097,000 are included in cash and cash equivalents, and security deposits of approximately $ 2,907,000 are included in prepaid expenses and other assets and are restricted cash.

At September 30, 2021, amounts received for prepaid rents of approximately $ 2,042,000 are included in cash and cash equivalents, and security deposits of approximately $ 3,000,000 are included in prepaid expenses and other assets and are restricted cash.

PARTNERS’ CAPITAL

The Partnership has two classes of Limited Partners (Class A and B) and one category of General Partner.

Under the terms of the Partnership Agreement, distributions to holders of Class B Units and General Partnership Units

must represent 19 % and 1 %, respectively, of the total units outstanding.

Under the terms of the Partnership Agreement, distributions to holders of Class B Units and General Partnership Units must represent 19 % and 1 %, respectively, of the distributions made to the total units outstanding.

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

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In April 2021, the Partnership approved a quarterly distribution of $ 9.60 per Unit ($ 0.32 per Receipt), payable on June 30, 2021.

In July 2021, the Partnership approved a quarterly distribution of $ 9.60 per Unit ($ 0.32 per Receipt), payable on September 30, 2021.

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

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The following is information per Depositary Receipt:

Six Months Ended

Nine Months Ended

September 30,

Net Income per Depositary Receipt

1 unchanged sentence

TREASURY UNITS

Treasury Units at June 30, 2021 are as follows:

Treasury Units at September 30, 2021 are as follows:

General Partnership

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Repurchases of Depositary Receipts or Partnership Units pursuant to the Repurchase Program may be made by the Partnership from time to time in its sole discretion in open market transactions or in privately negotiated transactions.

From August 20, 2007 through June 30, 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 six months ended June 30, 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.

From August 20, 2007 through September 30, 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 nine months ended September 30, 2021, the Partnership did not purchase any Depositary Receipts.

COMMITMENTS AND CONTINGENCIES

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The Massachusetts economy has opened significantly since the spring of 2021 with the lifting of COVID-19 restrictions and the state of emergency.

Colleges and universities are scheduled to resume on-campus learning in the fall.

Colleges and universities resumed on-campus learning in the fall.

Vacancy rates at the Partnership’s properties are back in line with pre-COVID levels.

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RENTAL INCOME

During the six months ended June 30, 2021, approximately 94 % of rental income was related to residential apartments and condominium units with leases of one year or less.

During the nine months ended September 30, 2021, approximately 95 % of rental income was related to residential apartments and condominium units with leases of one year or less.

The majority of these leases expire in June, July and August.

Approximately 6 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at June 30, 2021 as follows:

Approximately 5 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at September 30, 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 $ 290,000 and $ 251,000 for the six months ended June 30, 2021 and 2020 respectively.

Aggregate contingent rentals from continuing operations were approximately $ 417,000 and $ 383,000 for the nine months ended September 30, 2021 and 2020 respectively.

Staples and Trader Joe’s, tenants at Staples Plaza, are approximately 32 % of the total commercial rental income.

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annual base rent for

Through June 30,

Through September 30,

expiring leases

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expiring leases

Rents receivable are net of an allowance for doubtful accounts of approximately $ 1,177,000 and $ 1,454,000 at June 30, 2021 and December 31, 2020.

Included in rents receivable at June 30, 2021 is approximately $ 285,000 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 June 30, 2021 also includes approximately $ 227,000 representing the deferral of rental concession primarily related to the residential properties.

Rents receivable are net of an allowance for doubtful accounts of approximately $ 907,000 and $ 1,454,000 at September 30, 2021 and December 31, 2020.

Included in rents receivable at September 30, 2021 is approximately $ 94,000 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 53 Lincoln Street in Massachusetts.

Rents receivable at September 30, 2021 also includes approximately $ 368,000 representing the deferral of rental concession primarily related to the residential properties.

CASH FLOW INFORMATION

During the six months ended June 30, 2021 and 2020, cash paid for interest was approximately $ 6,650,000 , and $ 6,611,000 respectively.

Cash paid for state income taxes was approximately $ 60,000 and $ 81,000 during the six months ended June 30, 2021 and 2020 respectively.

Additionally, during the six months ended June 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 nine months ended September 30, 2021 and 2020, cash paid for interest was approximately $ 9,985,000 , and $ 9,973,000 respectively.

Cash paid for state income taxes was approximately $ 70,000 and $ 82,000 during the nine months ended September 30, 2021 and 2020 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.

FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

At June 30, 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.

At September 30, 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 June 30, 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 June 30, 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.

At September 30, 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 September 30, 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 June 30, 2021 and December 31, 2020, 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 September 30, 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.

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Partnership Properties

At June 30, 2021

At September 30, 2021

At December 31, 2020

Investment Properties

At June 30, 2021

At September 30, 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 June 30, 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 June 30, 2021 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 September 30, 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 September 30, 2021 and current estimates of fair value may differ significantly from the amounts presented herein.

TAXABLE INCOME AND TAX BASIS

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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 June 30, 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.

As of September 30, 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

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

At June 30, 2021, the balance on this mortgage before unamortized deferred financing costs is $125,000,000 .

At September 30, 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.

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

At June 30, 2021, the balance on this mortgage before unamortized deferred financing costs is approximately $ 10,000,000 .

At September 30, 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;

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The Joint Venture obtained a new 10-year mortgage in the amount of $ 5,000,000 on the units to be retained by the Joint Venture.

The interest on the new loan was 5.67 % fixed for the 10 year term with interest only payments for five years and amortized over a 30 year period for the balance of the loan term.

The interest on the new loan was 5.67 % fixed for the 10 year term with interest only payments for five years

and amortized over a 30 year period for the balance of the loan term.

On July 8, 2016, Hamilton 1025 LLC paid off the outstanding balance of the mortgage balance.

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

At June 30, 2021, the balance on this mortgage before unamortized deferred financing costs is approximately $ 6,000,000 .

At September 30, 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.

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The costs associated with the refinancing were approximately $ 161,000 .

At June 30, 2021, the balance of the mortgage before unamortized deferred finance is $ 16,900,000 .

At September 30, 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.

5 unchanged sentences

After the refinancing, the Joint Venture made a distribution of $ 1,610,000 to the Partnership.

As a result of the distribution, the carrying value of the investment fell below zero.The Partnership will continue to account for this investment using the equity method of accounting.

As a result of the distribution, the carrying value of the investment fell below zero.

The Partnership will continue to account for this investment using the equity method of accounting.

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

At June 30, 2021, the balance of this mortgage before unamortized deferred financing costs is approximately $ 9,043,000 .

At September 30, 2021, the balance of this mortgage before unamortized deferred financing costs is approximately $ 8,990,000 .

This investment is referred to as 345 Franklin, LLC.

Summary financial information at June 30, 2021

Summary financial information at September 30, 2021

Rental Properties

23 unchanged sentences

( 17,719,140 )

( 22,734,423 )

Total Investment in Unconsolidated Joint Ventures (Net)

3 unchanged sentences

Units to be sold

Units sold through August 1, 2021

Financial information for the six months ended June 30, 2021

Units sold through November 1, 2021

Financial information for the nine months ended September 30, 2021

Rental Income

18 unchanged sentences

Net Income (Loss) —NERA 40 %

Financial information for the three months ended June 30, 2021

Financial information for the three months ended September 30, 2021

Hamilton Essex

16 unchanged sentences

Net Income (Loss)—NERA 40 %

Future annual mortgage maturities at June 30, 2021 are as follows:

Future annual mortgage maturities at September 30, 2021 are as follows:

unamortized deferred financing costs

At June 30, 2021 the weighted average interest rate on the above mortgages was 3.91 %.

At September 30, 2021 the weighted average interest rate on the above mortgages was 3.91 %.

The effective rate was 3.97 % including the amortization expense of deferred financing costs.

Summary financial information at June 30, 2020

Summary financial information at September 30, 2020

Rental Properties

27 unchanged sentences

Units to be sold

Units sold through August1, 2020

Financial information for the six months ended June 30, 2020

Units sold through November 1, 2020

Financial information for the nine months ended September 30, 2020

Rental Income

17 unchanged sentences

Net Income (Loss)—NERA 40 %

Financial information for the three months ended June 30, 2020

Financial information for the three months ended September 30, 2020

Rental Income

20 unchanged sentences

Eligible employees may elect to defer up to 90 percent of their eligible compensation on a pre-tax basis to the 401(k) Plan, subject to certain limitations imposed by federal law.

The amounts cxontributed by employees are immediately vested and non-forfeitable.

The amounts contributed by employees are immediately vested and non-forfeitable.

Beginning January 1, 2019, the Partnership matched 50 % up to 6 % of compensation deferred by each employee in the 401(k) plan.

1 unchanged sentence

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 six months ended June 30, 2021 was $ 22,000 .

Total expense recognized by the Partnership for the 401(k) Plan for the nine months ended September 30, 2021 was $ 33,000 .

IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

6 unchanged sentences

SUBSEQUENT EVENTS

On July 30, 2021, t he Partnership signed a term sheet for the renewal and modification of its existing line of credit.

The agreement extends the credit line for three years with one 12-month extension.

On October 29, 2021, t he Partnership closed on the modification of its existing line of credit.

The agreement extends the credit line for three years until October 29, 2024.

The commitment amount is for $ 25 million but is restricted to $ 17 million during the modification period.

3 unchanged sentences

Once the financial performance of the Partnership meets the original covenant tests for the trailing 12-month period, the commitment amount will return to $ 25 million.The interest rate for the new term has been reduced from LIBOR plus 350 basis points to LIBOR plus 300 basis points.

Once the financial performance of the Partnership meets the original covenant tests for the trailing 12-month period, the commitment amount will return to $ 25 million.

The interest rate for the new term has been reduced from LIBOR plus 350 basis points to LIBOR plus 300 basis points.

Additionally, the unused fee has been eliminated.

There is a fee $ 125,000 to modify and extend the credit line.

There was a fee $ 125,000 to modify and extend the credit line .

The Partnership is currently in negotiations with KeyBank National Association (“KeyBank”), to enter into a Master Credit Facility agreement in the amount of approximately of $ 149,000,000 .

The facility will be secured by eleven of the Partnership’s properties.

The Partnership will use a portion of these proceeds to pay down approximately $ 65,000,000 of existing debt secured by the 11 properties, along with approximately $ 5,000,000 in prepayment penalties.

The remaining balance of the facility of approximately $ 79,000,000 will be used for general partnership purposes.

A deposit of approximately $ 270,000 was paid to KeyBank in conjunction with this negotiation.

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