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Item 1. Financial Statements

2022-05-06 compared with 2021-11-08 · 126 added, 220 removed, 540 unchanged (39% of the section changed)

7 unchanged sentences

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

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.

The results of operations for the three month period ended March 31, 2022 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

6 unchanged sentences

Mortgage Notes Payable

Notes Payable

Distribution and Loss in Excess of Investment in Unconsolidated Joint Venture

10 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

Rental income

11 unchanged sentences

( 3,364,170 )

( 10,136,630 )

( 10,291,255 )

Income (loss) from investments in unconsolidated joint ventures

1 unchanged sentence

( 3,689,319 )

( 10,933,281 )

( 9,621,986 )

Net Income (Loss)

11 unchanged sentences

( 1,168,860 )

( 3,506,894 )

Stock Buyback

Balance September 30, 2020

Balance March 31 , 2021

( 34,373,879 )

8 unchanged sentences

( 1,106,016 )

( 5,821,134 )

Stock Buyback

Balance September 30, 2021

( 1,070,321 )

( 1,337,814 )

Balance March 31, 2022

( 44,915,651 )

( 10,633,813 )

( 56,109,137 )

See notes to consolidated financial statements.

1 unchanged sentence

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

Depreciation and amortization

Amortization of deferred financing costs

Loss (Income) from investments in joint ventures

Amortization of deferred finance costs

(Income) Loss from investments in joint ventures

Allowance for doubtful accounts

1 unchanged sentence

Proceeds from unconsolidated joint ventures

(Increase) in rents receivable

Decrease (Increase) in rents receivable

( 1,083,925 )

Increase (Decrease) in accounts payable and accrued expense

Increase in accounts payable and accrued expense

(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

(Increase) Decrease in prepaid expenses and other assets

(Decrease) in advance rental payments and security deposits

Total Adjustments

2 unchanged sentences

Distribution in excess of investment in unconsolidated joint ventures

(Investment) in unconsolidated joint ventures

Improvement of rental properties

( 1,045,311 )

( 2,254,130 )

Net cash (used in) investing activities

( 1,667,942 )

( 1,079,130 )

Cash Flows from Financing Activities

Payment of financing costs

Proceeds of mortgage notes payable

Payment of note payable

( 1,000,000 )

Principal payments of mortgage notes payable

( 1,704,743 )

( 1,668,702 )

Stock buyback

( 1,337,814 )

Distributions to partners

1 unchanged sentence

( 1,168,860 )

Net cash (used in) financing activities

Net cash (used in) provided by financing activities

( 7,759,138 )

( 1,721,435 )

Net Increase in Cash and Cash Equivalents

Net (Decrease) Increase in Cash and Cash Equivalents

( 3,818,042 )

Cash and Cash Equivalents, at beginning of period

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

SIGNIFICANT ACCOUNTING POLICIES

88 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 $ 180,000 for the nine months ended September 30, 2021 and 2020, respectively.

In all cases, amortization of such costs is included in interest expense and was approximately $ 90,000 and $ 60,000 for the three months ended March 31, 2022 and 2021, respectively.

Income Taxes:

21 unchanged sentences

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.

At March 31, 2022, 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 March 31, 2022 and December 31, 2021, respectively approximately $ 92,421,000 , and $ 96,166,000 of cash and cash equivalents, and security deposits included in prepaid expenses and other assets exceeded federally insured amounts.

Advertising Expense:

Advertising is expensed as incurred.

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

Advertising expense was $ 73,291 and $ 89,350 for the three months ended March 31, 2022 and 2021, 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.

2 unchanged sentences

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, 2021 and 2020 there was no capitalized interest.

During the three months ended March 31, 2022 and 2021 there was no capitalized interest.

Extinguishment of Debt:

2 unchanged sentences

All refinancing qualify as extinguishment of debt.

Reclassifications:

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

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

RENTAL PROPERTIES

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”).

As of March 31, 2022, the Partnership and its Subsidiary Partnerships owned 2,892 residential apartment units in 25 residential and mixed-use complexes (collectively, the “Apartment Complexes”).

The Partnership also owns 19 condominium units in a residential condominium complex, all of which are leased to residential tenants (collectively referred to as the “Condominium Units”).

The Apartment Complexes and Condominium Units are located primarily in the metropolitan Boston area of Massachusetts.

Additionally, as of September 30, 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 March 31, 2022, the Partnership and Subsidiary Partnerships owned a commercial shopping center in Framingham, commercial buildings in Newton and Brookline and mixed-use properties in Boston, Brockton and Newton, all in Massachusetts.

These properties are referred to collectively as the “Commercial Properties.”

The Partnership also owned a 40 % to 50 % ownership interest in seven residential and mixed use complexes (the “Investment Properties”) at September 30, 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 March 31, 2022 with a total of 688 apartment units, accounted for using the equity method of consolidation.

See Note 14 for summary information on these investments.

Rental properties consist of the following:

September 30, 2021

March 31, 2022

December 31, 2021

14 unchanged sentences

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 $ 1,868,000 and $ 1,863,000 for the nine months ended September 30, 2021 and 2020, respectively.

Total fees paid were approximately $ 673,000 and $ 605,000 for the three months ended March 31, 2022 and 2021, 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, 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.

During the three months ended March 31, 2022 and 2021, approximately $ 195,000 and $ 256,000 , was charged to NERA for legal, accounting, construction, maintenance, brokerage fees, rental and architectural services and supervision of capital improvements.

Of the 2022 expenses referred to above, approximately $ 73,000 consisted of repairs and maintenance, and $ 85,000 of administrative expense.

3 unchanged sentences

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

Total reimbursement was approximately $ 2,759,000 and $ 2,571,000 for the nine months ended September 30, 2021 and 2020, respectively.

Total reimbursement was approximately $ 1,039,000 and $ 843,000 for the three months ended March 31, 2022 and 2021, respectively.

The Management Company maintains a 401K plan for all eligible employees whereby the employees may contribute the maximum allowed by law.

The plan also provides for discretionary contributions by the employer.

For the nine months ended September 30, 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.

For the three months ended March 31, 2022, the Partnership accrued $ 37,000 for the employer’s match portion to the plan.

For the three months ended March 31, 2021, 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, 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.

During the three months ended March 31, 2022 and 2021, 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.

4 unchanged sentences

PREPAID EXPENSES and OTHER ASSETS

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.

Approximately $ 3,091,000 , and $ 3,067,000 of security deposits are included in prepaid expenses and other assets at March 31, 2022 and December 31, 2021, respectively.

The security deposits and escrow accounts are restricted cash.

Also, included in prepaid expenses and other assets at September 30, 2021 and December 31, 2020 is approximately $ 1,530,000 and $ 1,073,000 , respectively, held in escrow to fund future capital improvements.

Also, included in prepaid expenses and other assets at March 31, 2022 and December 31, 2021 is approximately $ 1,971,000 and $ 1,819,000 , respectively, held in escrow to fund future capital improvements.

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

Intangible assets are approximately $ 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.

Intangible assets are approximately $ 19,000 net of accumulated amortization of approximately $ 1,399,000 and approximately $ 26,000 net of accumulated amortization of approximately $ 1,392,000 at March 31, 2022 and December 31, 2021, respectively.

Financing fees in association with the line of credit of approximately $ 154,000 and $ 169,000 are net of accumulated amortization of approximately $ 25,000 and $ 10,000 at March 31, 2022 and December 31, 2021 respectively.

MORTGAGE NOTES PAYABLE

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 %.

At March 31, 2022 and December 31, 2021, the mortgages payable consisted of various loans, all of which were secured by first mortgages on properties referred to in Note 2.

At March 31, 2022, the interest rates on these loans ranged from 2.97 % to 4.95 %, payable in monthly installments aggregating approximately $ 1,431,000 including principal, to various dates through 2035.The majority of the mortgages are subject to prepayment penalties.

At March 31, 2022, the weighted average interest rate on the above mortgages was 3.61 %.

The effective rate of 3.71 % 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 $ 1,165,000 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.

Financing fees of approximately $ 2,619,000 and $ 2,709,000 are net of accumulated amortization of approximately $ 1,229,000 and $ 1,139,000 at March 31, 2022 and December 31, 2021, respectively, which offset the total mortgage notes payable.

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

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

Approximate annual maturities at March 31, 2022 are as follows:

2023—current maturities

1 unchanged sentence

( 2,619,000 )

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 .

Interest only payments on the Note are payable on a monthly basis at a fixed interest rate of 3.53 % per annum, and the principal amount of the Note is due and payable on April 1, 2035.

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.

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

Line of Credit

2 unchanged sentences

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 .

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

Prior to the line’s expiration in 2020, the Partnership exercised its option for a one -year extension until October 31, 2021.

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

On October 29, 2021, the Partnership closed on 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.

The line may not be used to pay distributions, make distributions or acquire equity interests of the Partnership.

The line of credit is collateralized by varying percentages of the Partnership’s ownership interest in 23 of its subsidiary properties and joint ventures.

Pledged interests range from 49 % to 100 % of the Partnership’s ownership interest in the respective entities .

The Partnership paid fees to secure the line of credit.

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, 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.

On December 20, 2019, the Partnership paid down $ 2,000,000 .

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

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.

The covenants include, but are not limited to the following:

maintain a leverage ratio that does not exceed 65 %;

aggregate increase in indebtedness of the subsidiaries and joint ventures should not exceed $ 15,000,000 ;

maintain a tangible net worth (as defined in the agreement) of a minimum of $ 150,000,000 ;

a minimum ratio of net operating income to total indebtedness of at least 9.5 %;

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

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.

6 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.

Additionally, the unused fee has been eliminated.

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

The portfolio’s debt yield fell below the minimum of 8.5 % to 8.04 %.

As of March 31, 2022, the Partnership did not comply with the debt yield financial covenant.

As such, the Partnership is unable to draw down any amount from the line of credit until the Partnership meets the required financial covenants.

The interest rate for the new term is LIBOR plus 300 basis points.

The costs associated with the modification and renewal of the line of credit is approximately $ 179,000 .

On December 3, 2021, the Partnership paid off the outstanding balance of $ 17,000,000 on the Line of Credit.

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

The line may not be used to pay dividends, make distributions or acquire equity interests of the Partnership.

The line of credit is collateralized by varying percentages of the Partnership’s ownership interest in 23 of its subsidiary properties and joint ventures.

Pledged interests range from 49 % to 100 % of the Partnership’s ownership interest in the respective entities.

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, 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.

At March 31, 2022, amounts received for prepaid rents of approximately $ 2,287,000 are included in cash and cash equivalents, and security deposits of approximately $ 3,091,000 are included in prepaid expenses and other assets and are restricted cash.

PARTNERS’ CAPITAL

3 unchanged sentences

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

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 addition to the quarterly distribution, there was a special distribution of $ 38.40 per Class A unit ($ 1.28 per Receipt) payable on March 31, 2022.

In 2021, 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, 2021 are as follows:

Treasury Units at March 31, 2022 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, 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.

From August 20, 2007 through March 31, 2022, the Partnership has repurchased 1,448,321 Depositary Receipts at an average price of $ 29.189 per receipt (or $ 875.4 per underlying Class A Unit), 3,729 Class B Units and 196 General Partnership Units, both at an average price of $ 1,080.00 per Unit, totaling approximately $ 46,506,000 including brokerage fees paid by the Partnership .

During the three months ended March 31, 2022, the Partnership purchased a total of 14,132 Depositary Receipts.

The average price was $ 75.71 per receipt or $ 2,271.30 per unit.

The cost including commission was $ 1,070,321 .

The Partnership was required to repurchase 111.88 Class B Units and 5.89 General Partnership units at a cost of $ 254,118 and $ 13,375 respectively.

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

The Partnership is not involved in any material pending legal proceedings.

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 resumed on-campus learning in the fall.

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

However, the COVID-19 pandemic continues to spread as new variants emerge even as the percentage of the population who have been vaccinated increases.

There is considerable uncertainty as to when the pandemic will end and what effects it will have on the economy as it continues.

The COVID-19 pandemic may cause financial hardships to our residential and commercial tenants leading to their inability to pay rent.

The pandemic may also cause reduced demand for our commercial space and residential units which would have a negative impact on the Partnership’s financial performance.

RENTAL INCOME

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.

During the three months ended March 31, 2022, approximately 95 % of rental income was related to residential apartments and condominium units with leases of one year or less.

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

Approximately 5 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at September 30, 2021 as follows:

Approximately 5 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at March 31, 2022 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 $ 417,000 and $ 383,000 for the nine months ended September 30, 2021 and 2020 respectively.

Aggregate contingent rentals from continuing operations were approximately $ 175,000 and $ 150,000 for the three months ended March 31, 2022 and 2021 respectively.

Staples and Trader Joe’s, tenants at Staples Plaza, are approximately 31 % 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 $ 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.

Rents receivable are net of an allowance for doubtful accounts of approximately $ 805,000 and $ 832,000 at March 31, 2022 and December 31, 2021.

Included in rents receivable at March 31, 2022 is approximately $ 44,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.

Rents receivable at March 31, 2022 also includes approximately $ 183,000 representing the deferral of rental concession primarily related to the residential properties.

CASH FLOW INFORMATION

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.

During the three months ended March 31, 2022 and 2021, cash paid for interest was approximately $ 3,370,000 , and $ 3,306,000 respectively.

Cash paid for state income taxes was approximately $ 2,000 and $ 56,000 during the three months ended March 31, 2022 and 2021 respectively.

FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

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.

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

Financial Assets and Liabilities not Measured at Fair Value

At September 30, 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.

At March 31, 2022 and December 31, 2021 the carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable, and note payable, accounts payable and accrued expenses were representative of their fair values due to the short-term nature of these instruments or, the recent acquisition of these items.

At March 31, 2022 and December 31, 2021 we estimated the fair value of our mortgages payable and other notes based upon quoted market prices for the same (Level 1) or similar (Level 2) issues when current quoted market prices are available.

We estimated the fair value of our secured mortgage debt that does not have current quoted market prices available by discounting the future cash flows using rates currently available to us for debt with similar terms and maturities (Level 3).

The differences in the fair value of our debt from the carrying value are the result of differences in interest rates and/or borrowing spreads that were available to us at September 30, 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 March 31, 2022 and December 31, 2021, as compared with those in effect when the debt was issued or acquired.

The secured mortgage debt contain pre-payment penalties or yield maintenance provisions that could make the cost of refinancing the debt at lower rates exceed the benefit that would be derived from doing so.

10 unchanged sentences

Partnership Properties

At September 30, 2021

At March 31, 2022

At December 31, 2021

Investment Properties

At September 30, 2021

At March 31, 2022

At December 31, 2021

* 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, 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.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of March 31, 2022 and December 31, 2021.

Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since March 31, 2022 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 $ 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.

Taxable income reportable by the Partnership and includable in its partners’ tax returns is different than financial statement income because of tax free exchanges, different depreciation methods, different tax lives, other items with limited tax deductibility carryovers and timing differences related to prepaid rents, allowances and intangible assets at significant acquisitions.

Federal taxable income of approximately $ 4,056,000 was approximately $ 6,756,000 more than statement income for the year ended December 31, 2021.The Federal cumulative tax basis of the Partnership’s real

estate at December 31, 2021 is approximately $ 10,946,000 more than the statement basis.

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

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, 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 March 31, 2022, the tax years that generally remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2018 forward.

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

19 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, 2021, the balance on this mortgage before unamortized deferred financing costs is $125,000,000 .

At March 31, 2022, the balance on this mortgage before unamortized deferred financing costs is $125,000,000 .

This investment, Hamilton Park Towers, LLC is referred to as Dexter Park.

2 unchanged sentences

The Joint Venture planned to operate the building and initiate development of the parking lot.

In June 2007, the Joint Venture separated the parcels, formed an additional limited liability company for the residential apartments and obtained a mortgage on the property.

In June 2007, the Joint Venture separated the parcels, formed an additional limited

liability company for the residential apartments and obtained a mortgage on the property.

The new limited liability company formed for the residential apartments and commercial space is referred to as Hamilton Essex 81, LLC.

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

At March 31, 2022, 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;

4 unchanged sentences

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.

13 unchanged sentences

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

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.

The Partnership will continue to account for this investment using the equity method of accounting, although the Partnership has no legal obligation to fund its share of any future operating deficiencies, if needed.

At March 31, 2022, the balance on this mortgage before unamortized deferred financing costs is approximately $ 6,000,000 .

This investment is referred to as Hamilton Minuteman, LLC.

10 unchanged sentences

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

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.

At March 31, 2022, the balance of the mortgage before unamortized deferred finance is $ 16,900,000 .

The investment is referred to as Hamilton on Main LLC.

6 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, 2021, the balance of this mortgage before unamortized deferred financing costs is approximately $ 8,990,000 .

At March 31, 2022, the balance of this mortgage before unamortized deferred financing costs is approximately $ 8,881,000 .

This investment is referred to as 345 Franklin, LLC.

Summary financial information at September 30, 2021

Summary financial information at March 31, 2022

Rental Properties

Assets Held for Sale

Cash & Cash Equivalents

2 unchanged sentences

Prepaid Expenses & Other Assets

Financing & Leasing Fees

LIABILITIES AND PARTNERS’ CAPITAL

24 unchanged sentences

Units to be sold

Units sold through November 1, 2021

Financial information for the nine months ended September 30, 2021

Units sold through May 1, 2022

Financial information for the three months ended March 31, 2022

Rental Income

13 unchanged sentences

( 1,659,930 )

Net Income (Loss)

( 1,860,318 )

( 1,965,510 )

Net Income (Loss)—NERA 50 %

Net Income (Loss) —NERA 40 %

Financial information for the three months ended September 30, 2021

Hamilton Essex

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

( 1,263,383 )

( 1,665,791 )

( 1,263,383 )

( 1,665,791 )

Net Income (Loss)

Net Income (Loss)—NERA 50%

Net Income (Loss)—NERA 40 %

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

Net (Loss) Income

Net (Loss) Income —NERA 50 %

Net Income —NERA 40 %

Future annual mortgage maturities at March 31, 2022 are as follows:

unamortized deferred financing costs

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

At March 31, 2022 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 September 30, 2020

Summary financial information at March 31, 2021

Rental Properties

Assets Held for Sale

Cash & Cash Equivalents

13 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

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 )

Interest Income

Gain on sale of Real Estate

( 3,804,746 )

( 5,071,896 )

Net Income (Loss)

Net Income (Loss)—NERA 50 %

Net Income (Loss)—NERA 40 %

Financial information for the three months ended September 30, 2020

Units sold through February 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

( 1,264,708 )

2 unchanged sentences

Net Income (Loss)—NERA 50 %

Net Income (Loss)—NERA 40%

Net Income —NERA 40 %

EMPLOYEE BENEFIT 401(k) PLANS

5 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, 2021 was $ 33,000 .

Total expense recognized by the Partnership for the 401(k) Plan for the three months ended March 31, 2022 was $ 37,000 .

IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

In April 2020, the FASB issued a Staff Question & Answer (“Q&A”) which was intended to reduce the challenges of evaluating the enforceable rights and obligations of leases for concessions granted to lessees in response to the novel coronavirus disease (“COVID-19”), which was characterized on March 11, 2020 by the World Health Organization as a pandemic.

Prior to this guidance, the Partnership was required to determine, on a lease by lease basis, if a lease concession should be accounted for as a lease modification, potentially resulting in any lease concessions granted being recorded as a reduction to revenue on a straight-line basis over the remaining terms of the leases.

The Q&A allows both lessors and lessees to bypass this analysis and elect not to evaluate whether concessions provided in response to the COVID-19 pandemic are lease modifications.

This relief is subject to certain conditions being met, including ensuring the total remaining lease payments are substantially the same or less as compared to the original lease payments prior to the concession being granted.

The Partnership has elected to apply such relief and will therefore not evaluate if lease concessions that were granted in response to the COVID-19 pandemic meet the definition of a lease modification.

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.

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

SUBSEQUENT EVENTS

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 .

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.

From April 1, 2022 through May 5, 2022, the Partnership has purchased 9,276 Depository Receipts .

The average price was $ 82.09 per receipt, or $ 2,462.70 per unit.

The total cost was $ 762,172 .The Partnership is required to purchase 73 Class B units and 4 General Partnership units at a cost of $ 180,838 and $ 9,518 respectively.

In May 2022, the Partnership approved a quarterly distribution of $ 9.60 per Unit ($ 0.32 per Receipt), payable on June 30, 2022.

In addition to the quarterly distribution, there was a special distribution of $ 38.40 per Class A unit ($ 1.28 per Receipt) payable on March 31,2022.

On April 25, 2022, Martina N.

Alibrandi was appointed to the Board of Directors of NewReal, Inc.

and as a member of the Audit Committee of the NewReal, Inc.

On April 25, 2022, New England Realty Associates Limited Partnership (the “Partnership”) and certain affiliates of the Partnership entered into an addition to the Rate Lock Authorization Agreement (the “Agreement”) with KeyBank National Associates (“KeyBank”) dated as of November 10, 2021, and paid the requisite deposit of $ 1,599,100 .

The agreement calls for a loan of approximately $ 79,955,000 at a fixed interest rate of 4.33 %.

The Partnership intends to use the proceeds to pay down approximately $ 37,147,000 of existing debt secured by 4 properties, along with approximately $ 1,895,000 in prepayment penalties.

The remaining balance of the loan proceeds of approximately $ 40,913,000 will be used for general partnership purposes.

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