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Item 1. Financial Statements

2023-01-19 compared with 2022-08-05 · 182 added, 101 removed, 597 unchanged (32% 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 six month period ended June 30, 2022 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 and nine month periods ended September 30, 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

2 unchanged sentences

Real Estate Tax Escrows

Investment in U.S.

Treasury Bills

Prepaid Expenses and Other Assets

15 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Rental income

32 unchanged sentences

( 3,506,581 )

Balance June 30 , 2021

Balance September 30 , 2021

( 35,848,451 )

12 unchanged sentences

( 5,167,667 )

Balance June 30, 2022

Balance September 30, 2022

( 48,831,134 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows from Operating Activities

9 unchanged sentences

(Increase) in real estate tax escrow

( 1,045,681 )

(Increase) in prepaid expenses and other assets

5 unchanged sentences

Distribution in excess of investment in unconsolidated joint ventures

(Investment) in unconsolidated joint ventures

Investment in U.S.

Treasury Bills

( 103,995,587 )

Proceeds from U.S.Treasury Bills

Improvement of rental properties

2 unchanged sentences

Net cash (used in) investing activities

( 76,569,294 )

( 1,667,942 )

Cash Flows from Financing Activities

10 unchanged sentences

( 5,211,324 )

Net Increase in Cash and Cash Equivalents

Net (Decrease) Increase in Cash and Cash Equivalents

( 36,609,569 )

Cash and Cash Equivalents, at beginning of period

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

September 30, 2022

SIGNIFICANT ACCOUNTING POLICIES

Line of Business :

New England Realty Associates Limited Partnership (“NERA” or the “Partnership”) was organized in Massachusetts in 1977.

New England Realty Associates Limited Partnership (“NERA”, the “Company” or the “Partnership”) was organized in Massachusetts in 1977.

NERA and its subsidiaries own 29 properties which include 21 residential buildings;

85 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 $ 253,000 and $ 120,000 for the six months ended June 30, 2022 and 2021, respectively.

In all cases, amortization of such costs is included in interest expense and was approximately $ 350,000 and $ 180,000 for the nine months ended September 30, 2022 and 2021, respectively.

Income Taxes:

2 unchanged sentences

Cash Equivalents:

The Partnership considers cash equivalents to be all highly liquid instruments purchased with a maturity of three months or less.

The Partnership considers cash equivalents to be all highly liquid instruments purchased with a maturity of three months or less at the time of purchase.

Investments in Treasury Bills:

Investments in Treasury Bills are recorded at amortized cost and classified as held to maturity as the Partnership has the intent and the ability to hold them until they mature.

The carrying value of the Treasury Bills are adjusted for accretion of discounts over the remaining life of the investment.

Income related to the Treasury Bills is recognized in interest income in the Partnership’s consolidated statement of income.

Segment Reporting:

14 unchanged sentences

No single tenant accounted for more than 5 % of the Partnership’s revenues in 2022 or 2021.

The Partnership makes its temporary cash investments with high-

credit quality financial institutions.

At June 30, 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 June 30, 2022 and December 31, 2021, respectively approximately $ 132,102,000 , and $ 96,166,000 of cash and cash equivalents, and security deposits included in prepaid expenses and other assets exceeded federally insured amounts.

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

At September 30, 2022, substantially all of the Partnership’s cash and cash equivalents were held in interest-bearing accounts at financial institutions, and investments in U.S.

Treasury bills, earning interest at rates from 0.01 % to 2.19 %.

At September 30, 2022 and December 31, 2021, respectively approximately $ 45,045,000 , 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 $ 134,922 and $ 154,569 for the six months ended June 30, 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.

Advertising expense was $ 190,316 and $ 240,814 for the nine months ended September 30, 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 six months ended June 30, 2022, and 2021 there was no capitalized interest.

During the nine months ended September 30, 2022, and 2021 there was no capitalized interest.

Extinguishment of Debt:

1 unchanged sentence

However, if it is determined that the refinancing is substantially the same, then they are recorded as an exchange of debt.

All refinancing qualify as extinguishment of debt.

All refinancings qualify as extinguishment of debt.

Reclassification:

1 unchanged sentence

RENTAL PROPERTIES

As of June 30, 2022, 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, 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 June 30, 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.

Additionally, as of September 30, 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 June 30, 2022 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, 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:

June 30, 2022

September 30, 2022

December 31, 2021

12 unchanged sentences

RELATED PARTY TRANSACTIONS

The Partnership’s properties are managed by an entity that is owned by the majority shareholder of the General Partner.

The Partnership’s properties are managed by The Hamilton Company, Inc.

(the “Management Company”) an entity that is owned by the majority shareholder of NewReal, Inc., the general partner of the Partnership (the “General Partner”).

The management fee is equal to 4 % of gross receipts of rental revenue and laundry income on the majority of the Partnership’s properties and 3 % on Linewt.

Total fees paid were approximately $ 1,345,000 and $ 1,222,000 for the six months ended June 30, 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 six months ended June 30, 2022 and 2021, approximately $ 383,000 and $ 529,000 , was charged to NERA for legal, accounting, construction, maintenance, brokerage fees, rental and architectural services and supervision of capital improvements.

Total fees paid were approximately $ 2,029,000 and $ 1,868,000 for the nine months ended September 30, 2022 and 2021, respectively.

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

During the nine months ended September 30, 2022 and 2021, approximately $ 583,000 and $ 766,000 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 $ 215,000 consisted of repairs and maintenance, $ 256,000 of administrative expense, and approximately $ 23,000 for renting 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 $ 1,913,000 and $ 1,782,000 for the six months ended June 30, 2022 and 2021, respectively.

Total reimbursement was approximately $ 2,945,000 and $ 2,759,000 for the nine months ended September 30, 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 six months ended June 30, 2022, the Partnership accrued $ 28,000 for the employer’s match portion to the plan.

For the six months ended June 30, 2021, the Partnership contributed $ 22,000 for the employer’s match portion to the plan.

For the nine months ended September 30, 2022, the Partnership accrued $ 70,000 for the employer’s match portion to the plan.

For the nine months ended September 30, 2021, 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, 2022 and 2021, 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, 2022 and 2021, the Management Company charged the Partnership $ 93,750 ($ 125,000 per year) for bookkeeping and accounting services included in administrative expenses above.

Sally Michael is a Director of New Real, Inc., and she is a Partner at Saul Ewing Arnstein & Lear LLP.

Saul Ewing billed the Partnership for legal fees totaling approximately $ 68,000 and $ 8,000 for the nine months ended September 30, 2022 and 2021 respectively.

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 $ 3,359,000 , and $ 3,067,000 of security deposits are included in prepaid expenses and other assets at June 30, 2022 and December 31, 2021, respectively.

Approximately $ 3,402,000 , and $ 3,067,000 of security deposits are included in prepaid expenses and other assets at September 30, 2022 and December 31, 2021, respectively.

The security deposits and escrow accounts are restricted cash.

Also, included in prepaid expenses and other assets at June 30, 2022 and December 31, 2021 is approximately $ 2,331,000 and $ 1,819,000 , respectively, held in escrow to fund future capital improvements.

Also, included in prepaid expenses and other assets at September 30, 2022 and December 31, 2021 is approximately $ 1,849,000 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 $ 13,000 net of accumulated amortization of approximately $ 1,405,000 and approximately $ 26,000 net of accumulated amortization of approximately $ 1,392,000 at June 30, 2022 and December 31, 2021, respectively.

Financing fees in association with the line of credit of approximately $ 139,000 and $ 169,000 are net of accumulated amortization of approximately $ 40,000 and $ 10,000 at June 30, 2022 and December 31, 2021 respectively.

Intangible assets are approximately $ 7,000 net of accumulated amortization of approximately $ 1,411,000 and approximately $ 26,000 net of accumulated amortization of approximately $ 1,392,000 at September 30, 2022 and December 31, 2021, respectively.

Financing fees in association with the line of credit of approximately $ 124,000 and $ 169,000 are net of accumulated amortization of approximately $ 55,000 and $ 10,000 at September 30, 2022 and December 31, 2021 respectively.

MORTGAGE NOTES PAYABLE

At June 30, 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 June 30, 2022, the interest rates on these loans ranged from 2.97 % to 4.95 %, payable in monthly installments aggregating approximately $ 1,471,000 including principal, to various dates through 2035.The majority of the mortgages are subject to prepayment penalties.

At June 30, 2022, the weighted average interest rate on the above mortgages was 3.69 %.

At September 30, 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 September 30, 2022, the interest rates on these loans ranged from 2.97 % to 4.95 %, payable in monthly installments aggregating approximately $ 1,471,000 including principal, to various dates through 2035.

The majority of the mortgages are subject to prepayment penalties.

At September 30, 2022, the weighted average interest rate on the above mortgages was 3.69 %.

The effective rate of 3.80 % 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 $ 3,310,000 and $ 2,709,000 are net of accumulated amortization of approximately $ 850,000 and $ 1,139,000 at June 30, 2022 and December 31, 2021, respectively, which offset the total mortgage notes payable.

Financing fees of approximately $ 3,213,000 and $ 2,709,000 are net of accumulated amortization of approximately $ 948,000 and $ 1,139,000 at September 30, 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 June 30, 2022 are as follows:

Approximate annual maturities at September 30, 2022 are as follows:

2023—current maturities

1 unchanged sentence

( 3,213,000 )

On November 30, 2021, the Partnership entered into a Master Credit Facility Agreement (the “Facility Agreement”) with KeyBank National Association (“KeyBank”) dated as of November 30, 2021, with an initial advance in the amount of $ 156,000,000 .

in the amount of $ 156,000,000 .

Interest only on the debt at a fixed interest rate of 2.97 % is payable on a monthly basis through December 31, 2031.

2 unchanged sentences

The Partnership’s obligations under the Facility Agreement are secured by mortgages on certain properties pursuant to certain Mortgage, Assignment of Leases and Rents, and Security Agreement and Fixture Filings.

The Partnership used the proceeds to pay down approximately $ 37,065,000 of existing debt secured by 4 properties, along with approximately $ 854,000 in prepayment penalties.

The Partnership used the proceeds to pay down approximately $ 37,065,000 of existing debt secured by four properties, along with approximately $ 854,000 in prepayment penalties.

The remaining balance of approximately $ 42,384,000 will be used for general partnership purposes.

15 unchanged sentences

The portfolio’s debt yield fell below the minimum of 8.5 % to 8.05 %.

As of June 30, 2022, the Partnership did not comply with the debt yield financial covenant.

As of September 30, 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.

8 unchanged sentences

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, 2022, amounts received for prepaid rents of approximately $ 2,516,000 are included in cash and cash equivalents, and security deposits of approximately $ 3,359,000 are included in prepaid expenses and other assets and are restricted cash.

At September 30, 2022, amounts received for prepaid rents of approximately $ 2,581,000 are included in cash and cash equivalents, and security deposits of approximately $ 3,402,000 are included in prepaid expenses and other assets and are restricted cash.

PARTNERS’ CAPITAL

5 unchanged sentences

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

In July 2022, the Partnership approved a quarterly distribution of $ 9.60 per Unit ($ 0.32 per Receipt), payable on September 30, 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:

Six Months Ended

Nine Months Ended

September 30,

Net Income per Depositary Receipt

1 unchanged sentence

TREASURY UNITS

Treasury Units at June 30, 2022 are as follows:

Treasury Units at September 30, 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 June 30, 2022, the Partnership has repurchased 1,471,962 Depositary Receipts at an average price of $ 29.59 per receipt (or $ 887.70 per underlying Class A Unit), 3,917 Class B Units and 206 General Partnership Units, both at an average price of $ 1,143.00 per Unit, totaling approximately $ 48,857,000 including brokerage fees paid by the Partnership .

During the six months ended June 30, 2022, the Partnership purchased a total of 37,773 Depositary Receipts.

From August 20, 2007 through September 30, 2022, the Partnership has repurchased 1,486,802 Depositary Receipts at an average price of $ 30.09 per receipt (or $ 902.70 per underlying Class A Unit), 4,034 Class B Units and 212 General Partnership Units, both at an average price of $ 1,179.00 per Unit, totaling approximately $ 50,336,000 including brokerage fees paid by the Partnership .

During the nine months ended September 30, 2022, the Partnership purchased a total of 52,613 Depositary Receipts.

The average price was $ 78.53 per receipt or $ 2,355.90 per unit.

The cost including commission was $ 2,951,569 .

The Partnership was required to repurchase 299.04 Class B Units an15.74 General Partnership units at a cost of $ 700,523 and $ 36,870 respectively.

The cost including commission was $ 4,134,773 .The Partnership was required to repurchase 416.52 Class B Units and 21.92 General Partnership units at a cost of $ 981,249 and $ 51,645 respectively.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

RENTAL INCOME

During the six months ended June 30, 2022, approximately 95 % 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, 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 June 30, 2022 as follows:

Approximately 5 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at September 30, 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 $ 437,000 and $ 290,000 for the six months ended June 30, 2022 and 2021 respectively.

Aggregate contingent rentals from continuing operations were approximately $ 441,000 and $ 417,000 for the nine months ended September 30, 2022 and 2021 respectively.

Staples and Trader Joe’s, tenants at Staples Plaza, are approximately 28 % of the total commercial rental income.

4 unchanged sentences

annual base rent for

Through June 30,

Through September 30,

expiring leases

2 unchanged sentences

expiring leases

Rents receivable are net of an allowance for doubtful accounts of approximately $ 733,000 and $ 832,000 at June 30, 2022 and December 31, 2021.

Included in rents receivable at June 30, 2022 is approximately $ 79,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.

Rents receivable at June 30, 2022 also includes approximately $ 49,000 representing the deferral of rental concession primarily related to the residential properties.

Rents receivable are net of an allowance for doubtful accounts of approximately $ 824,000 and $ 832,000 at September 30, 2022 and December 31, 2021.

Included in rents receivable at September 30, 2022 is approximately $ 76,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.

Rents receivable at September 30, 2022 also includes approximately $ 13,000 representing the deferral of rental concession primarily related to the residential properties.

CASH FLOW INFORMATION

During the six months ended June 30, 2022 and 2021, cash paid for interest was approximately $ 6,987,000 , and $ 6,650,000 respectively.

Cash paid for state income taxes was approximately $ 49,000 and $ 60,000 during the six months ended June 30, 2022 and 2021 respectively.

During the six months ended June 30, 2022, four properties were involved in a non-cash financing activity of approximately $ 37,000,000 .

During the nine months ended September 30, 2022 and 2021, cash paid for interest was approximately $ 10,584,000 , and $ 9,985,000 respectively.

Cash paid for state income taxes was approximately $ 52,000 and $ 70,000 during the nine months ended September 30, 2022 and 2021 respectively.

During the nine months ended September 30, 2022, four properties were involved in a non-cash financing activity of approximately $ 37,000,000 .

FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

A June 30, 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.

At September 30, 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 June 30, 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 June 30, 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.

At September 30, 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.

The Company considers all highly liquid investments purchased with original maturities of three months or less at the time of purchase to be cash equivalents.

Cash, cash equivalents, and restricted cash include cash held in checking, U.S.

Treasury Bills, and money market accounts.

The Partnership has investments in Treasury Bills some of which mature over a period greater than 90 days and are classified as short-term investments.

The Treasury Bills are carried at amortized cost and classified as held to maturity as the Partnership has the intent and the ability to hold them until they mature.

The carrying value of the Treasury Bills are adjusted for accretion of discounts over the remaining life of the investment.

Income related to the Treasury Bills is recognized in interest income in the Partnership’s consolidated statement of income.

The Treasury Bills classified within Level I of the fair value hierarchy.

At September 30, 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 June 30, 2022 and December 31, 2021, 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, 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.

6 unchanged sentences

The following table reflects the carrying amounts and estimated fair value of our debt.

Carrying Amount

Estimated Fair Value

Mortgage Notes Payable

September 30, 2022

December 31, 2021

Carrying Value

Cash equivalents

Treasury bills

Mortgage payable

- Partnership properties

At June 30, 2022

At December 31, 2021

- Investment properties

At June 30, 2022

At December 31, 2021

Total Liabilities

* 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, 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 June 30, 2022 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, 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 September 30, 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 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.

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.

2 unchanged sentences

Certain entities included in the Partnership’s consolidated financial statements are subject to certain state taxes.

These taxes are not significant and are recorded as operating expenses in the accompanying consolidates financial statements.

These taxes are not significant and are recorded as operating expenses in the accompanying consolidated financial statements.

The Partnership adopted the amended provisions related to uncertain tax provisions of ASC 740, Income Taxes.

2 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 June 30, 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.

As of September 30, 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

16 unchanged sentences

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

The Partnership will

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

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

In connection with this refinancing, the property incurred a defeasance charge of approximately $ 3,830,000 .

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

At June 30, 2022, the balance on this mortgage before unamortized deferred financing costs is $125,000,000 .

At September 30, 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.

10 unchanged sentences

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

At June 30, 2022, the balance on this mortgage before unamortized deferred financing costs is approximately $ 10,000,000 .

At September 30, 2022, the balance on this mortgage before unamortized deferred financing costs is $ 10,000,000 .

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

7 unchanged sentences

The Partnership made a capital contribution of $ 2,359,500 to Hamilton 1025, LLC for its share of the funds required for the transaction.

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

After paying off the mortgage, the Partnership began to

sell off the individual units.

In 2019, all residential units were sold.

8 unchanged sentences

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 June 30, 2022, the balance on this mortgage before unamortized deferred financing costs is approximately $ 6,000,000 .

At September 30, 2022, the balance on this mortgage before unamortized deferred financing costs is $ 6,000,000 .

This investment is referred to as Hamilton Minuteman, LLC.

9 unchanged sentences

At June 30, 2022, the balance of the mortgage before unamortized deferred finance is $ 16,900,000 .

At September 30, 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 June 30, 2022, the balance of this mortgage before unamortized deferred financing costs is approximately $ 8,826,000 .

At September 30, 2022, the balance of this mortgage before unamortized deferred financing costs is approximately $ 8,770,000 .

This investment is referred to as 345 Franklin, LLC.

Summary financial information at June 30, 2022

Summary financial information at September 30, 2022

Rental Properties

19 unchanged sentences

Distribution and Loss in Excess of investments in Unconsolidated Joint Ventures

( 1,499,560 )

( 1,899,023 )

( 1,257,794 )

( 18,803,066 )

( 24,136,809 )

Total Investment in Unconsolidated Joint Ventures (Net)

3 unchanged sentences

Units to be sold

Units sold through May 1, 2022

Financial information for the six months ended June 30, 2022

Units sold through November 1, 2022

Financial information for the nine months ended September 30, 2022

Rental Income

15 unchanged sentences

Net Income —NERA 40%

Financial information for the three months ended June 30, 2022

Financial information for the three months ended September 30, 2022

Rental Income

15 unchanged sentences

Net Income —NERA 40%

Future annual mortgage maturities at June 30, 2022 are as follows:

Future annual mortgage maturities at September 30, 2022 are as follows:

unamortized deferred financing costs

At June 30, 2022 the weighted average interest rate on the above mortgages was 3.97 %.

At September 30, 2022 the weighted average interest rate on the above mortgages was 4.05 %.

The effective rate was 4.12 % including the amortization expense of deferred financing costs.

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)

2 unchanged sentences

Units to be retained

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

17 unchanged sentences

Net Income —NERA 40%

Financial information for the three months ended June 30, 2021

Financial information for the three months ended September 30, 2021

Rental Income

22 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 six months ended June 30, 2022 was $ 28,000 .

Total expense recognized by the Partnership for the 401(k) Plan for the nine months ended September 30, 2022 was $ 70,000 .

IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

1 unchanged sentence

SUBSEQUENT EVENTS

From July 1, 2022 through August 5, 2022, the Partnership has purchased 3,430 Depository Receipts .

From October 1, 2022, through January 19, 2023, the Partnership has purchased 1,658 Depository Receipts .

The average price was $ 76.58 per receipt, or $ 2,297.40 per unit.

1 unchanged sentence

The Partnership is required to purchase 13 Class B units and 1 General Partnership units at a cost of $ 30,154 and $ 1,587 , respectively.

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

The Partnership is currently in negotiations to refinance a commercial property located at 659 Worcester Road in Framingham, Massachusetts.

Subsequent to June 30, 2022, the partnership invested approximately $ 90,000,000 in short term U.S.

Treasury bills, maturing at various dates over the next six months.

On October 3, 2022, the Management Company was the target of a ransomware attack.

The Management Company has been engaged by the General Partner, to perform general management functions for the Company’s properties in exchange for management fees.

After becoming aware of the incident, the Management Company conducted an initial investigation into their digital environment and discovered that all on premise computer systems were encrypted.

The Management Company worked with independent third-party cybersecurity specialists through its outside counsel to help with the restoration of the environment and to return operations securely.

Hamilton maintains off-site data backups, which were verified to have not been compromised by the ransomware attack and were utilized to restore the data that had been encrypted.

The Management Company has successfully recovered the impacted files and rebuilt its computer systems, adding additional security features designed to protect its systems and data from future attacks.

This incident was previously reported in the Company’s Current Report on Form 8-K filed with the SEC on October 11, 2022.

On October 14, 2022, the Partnership entered into a modification agreement with Brookline Bank modifying its loan on 659-665 Worcester Road, Framingham, MA.

The agreement modifies the loan on the existing debt of $ 5,954,546.14 , extending the maturity until October 14, 2032, at an interest rate of 4.6 %, interest only for 2 years and amortizing using a thirty-year schedule for the balance of the term.

The agreement also allows for an earn out of up to an additional $ 1,495,453.86 once the property performance reaches a 1.35 x debt service coverage ratio and the loan to value equates to at least 65 %.

On November 15, 2022, (the Partnership received a notification letter from the Corporate Compliance Department of the NYSE American Exchange (the “NYSE American”) indicating that as of November 15, 2022, the Partnership is not in compliance with the NYSE American’s standards for continued listing of the Partnership’s Depositary Receipts on the NYSE American as set forth in Section 1007 of the NYSE American Company Guide (the “Company Guide”).

The Partnership failed to timely file (the “Filing Delinquency”) the Partnership’s Form 10-Q for the quarter ended September 30, 2022 (the “Delayed Report”).

The NYSE American notification letter has no immediate effect on the listing or trading of the Partnership’s Depositary Receipts on the NYSE American, nor will it have any effect on the Partnership's financial condition or results of operations.

The Filing Delinquency is the result of the above-mentioned cybersecurity incident and was previously reported in the Partnership’s Current Report on Form 8-K filed with the SEC on November 21, 2022.

The Filing Delinquency will be cured via the filing of the Delayed Report, which is this Form 10-Q.

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

On December 5, 2022, Andrew Bloch , the Chief Financial Officer (“CFO”) of the Management Company, which has been engaged by the Partnership to manage the properties of the Partnership, resigned as Chief Financial Officer.

Bloch will continue to work with Hamilton on a consultative basis to ensure a smooth transition of responsibilities to the new CFO.

Bloch remains a director of the General Partner, and of the Management Company.

Bloch’s decision to resign as CFO is not the result of any disagreement with the Partnership on any matter relating to the Partnership’s operations, policies, or practices.

Bloch has served as CFO of the Management Company since 1998.

Effective as of December 5, 2022, the Board of Directors of the Management Company elected Karen N.

Zermani as CFO of the Management Company to fill the vacancy created by the resignation of Mr.

Bloch as CFO.

On December 12, 2022, the Partnership signed a purchase and sale agreement to purchase a commercial retail property of approximately 20,700 square feet, located at 659 Worcester Road in Framingham, Massachusetts for the sum of approximately $ 10,151,000 .

The Partnership has made a deposit of $ 500,000 to secure the transaction.

This acquisition will be funded from the Partnership’s cash reserves.

The Partnership closed on the transaction on January 18,2023.

On December 19, 2022, a class action was commenced in the United States District Court for the District of Massachusetts against a number of parties, including the Company:

Billie Jo White v.

RealPage, Inc., et al, Case No.

1:22-cv-12134, United States District Court, District of Massachusetts (“RealPage Litigation”).

The first named defendant, RealPage, Inc., is allegedly the developer of a certain software platform known as “AI Revenue Management” (previously known as “YieldStar”).

In addition to RealPage, the Complaint names as defendants several companies, including the Company, allegedly owning, operating and/or managing residential real estate in the Greater Boston Metro Area (collectively, “Defendant Property Managers”).

The Complaint alleges that through the combined use of RealPage’s revenue management services, which allegedly included collecting non-public data regarding various factors influencing rents and generating a suggested rental price for each of the units controlled by a Defendant Property Manager using its services, the Defendant Property Managers constitute a rental “price-fixing cartel” in violation of federal and state anti-trust laws.

The Complaint seeks class certification and unspecified damages, trebled, together with attorney’s fees and other injunctive relief.

No class has yet been certified.

The Company disputes the allegations made against it and intends to vigorously defend the lawsuit.

The named Defendant Property Managers are the following:

Greystar Real Estate Partners, LLC;

Cushman & Wakefield, Inc.;

Lincoln Property Company;

Peabody Properties, Inc.;

New England Realty Associates Limited Partnership;

WinnCompanies LLC and WinnResidential Manager Corp., UDR, Inc., SHP Management Corp., The Related Companies, Inc.

and Simpson Property Group, LLLP.

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