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Item 1. Financial Statements

2023-05-09 compared with 2023-01-19 · 181 added, 213 removed, 566 unchanged (41% of the section changed)

Financial Statements

The accompanying unaudited consolidated balance sheets, statements of income, changes in partners’ capital, and cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”).

The accompanying unaudited consolidated balance sheets, statements of income, statements of comprehensive income, changes in partners’ capital, and cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”).

Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements.

4 unchanged sentences

Form10-K for the fiscal year ended December 31, 2022.

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.

The results of operations for the three month period ended March 31, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30,

Rental Properties

20 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

Rental income

11 unchanged sentences

( 3,454,635 )

( 11,060,794 )

( 10,136,630 )

Income (loss) from investments in unconsolidated joint ventures

Other (expenses)

( 3,565,573 )

( 3,626,621 )

Income from investments in unconsolidated joint ventures

( 2,696,990 )

4 unchanged sentences

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

Net income (loss)

Other comprehensive income (loss):

Net unrealized (loss) gain on derivative instruments for interest rate swaps

Comprehensive income (loss)

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNER’S CAPITAL

Partner’s Capital

Comprehensive Income

Balance January 1, 2022

5 unchanged sentences

( 1,106,016 )

Balance September 30 , 2021

( 5,821,134 )

Stock Buyback

( 1,070,321 )

( 1,337,814 )

Balance March 31 , 2022

( 44,915,650 )

( 10,633,813 )

( 56,109,137 )

Balance January 1, 2023

7 unchanged sentences

Stock Buyback

( 4,134,773 )

( 5,167,667 )

Balance September 30, 2022

Net unrealized (loss) on derivative instruments for interest rate swaps

Balance March 31, 2023

( 52,076,136 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows from Operating Activities

2 unchanged sentences

Amortization of deferred finance costs

(Income) Loss from investments in joint ventures

Allowance for doubtful accounts

(Income) from investments in joint ventures

Change in operating assets and liabilities

Proceeds from unconsolidated joint ventures

Decrease (Increase) in rents receivable

(Increase) Decrease in rents receivable

(Decrease) Increase in accounts payable and accrued expense

(Increase) in real estate tax escrow

( 2,176,919 )

(Increase) in real estate tax escrow

(Increase) in interest receivable U.S.

Treasury bills

(Increase) in prepaid expenses and other assets

( 1,195,693 )

Increase in advance rental payments and security deposits

Increase (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

Investment in U.S.

1 unchanged sentence

( 53,713,756 )

Proceeds from U.S.Treasury Bills

Proceeds from U.S.

Treasury Bills

Purchase of rental property

( 8,974,242 )

Improvement of rental properties

3 unchanged sentences

( 20,024,862 )

( 1,667,942 )

Cash Flows from Financing Activities

Principal payments of mortgage notes payable

( 1,720,335 )

( 1,704,743 )

Proceeds from Mortgage Notes Payable

Stock buyback

3 unchanged sentences

( 5,821,134 )

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

( 7,260,766 )

Net (Decrease) Increase in Cash and Cash Equivalents

( 7,759,138 )

Net Increase (Decrease) in Cash and Cash Equivalents

( 24,906,098 )

( 3,818,042 )

Cash and Cash Equivalents, at beginning of period

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

March 31, 2023

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 $ 350,000 and $ 180,000 for the nine months ended September 30, 2022 and 2021, respectively.

In all cases, amortization of such costs is included in interest expense and was approximately $ 95,000 and $ 90,000 for the three months ended March 31, 2023 and 2022, respectively.

Income Taxes:

10 unchanged sentences

Under the definition, NERA operated, for all periods presented, as one segment.

Comprehensive Income:

Comprehensive income is defined as changes in partners’ equity, exclusive of transactions with owners (such as capital contributions and dividends).

NERA did not have any comprehensive income items in 2022 or 2021 other than net income as reported.

Other Comprehensive Income (Loss):

Other comprehensive income (loss) includes items that are recorded in equity, such as effective portions of derivatives designated as cash flow hedges or unrealized holding gains or losses on marketable securities available for sale.

NERA had a comprehensive loss of approximately $166,000 for the three months ended March 31, 2023, but had no comprehensive income or loss for the three months ended March 31, 2022.

Income (Loss) Per Depositary Receipt:

9 unchanged sentences

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.

At March 31, 2023, 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 4.75 %.

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.

At March 31, 2023 and December 31, 2022, respectively approximately $ 25,063,000 , and $ 49,641,000 of cash and cash equivalents, and security deposits included in prepaid expenses and other assets exceeded federally insured amounts.

Of the $ 25,063,000 , approximately $ 9,885,000 is invested in U.S.

Treasury bills maturing in three months.

Advertising Expense:

Advertising is expensed as incurred.

Advertising expense was $ 190,316 and $ 240,814 for the nine months ended September 30, 2022, and 2021, respectively.

Advertising expense was approximately $ 109,000 and $ 73,000 for the three months ended March 31, 2023, and 2022, respectively.

Rental Property Held f or Sale:

4 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, 2022, and 2021 there was no capitalized interest.

During the three months ended March 31, 2023, and 2022 there was no capitalized interest.

Extinguishment of Debt:

5 unchanged sentences

RENTAL PROPERTIES

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”).

As of March 31, 2023, 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, 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 March 31, 2023, the Partnership and Subsidiary Partnerships owned two commercial shopping centers 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, 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 March 31, 2023 with a total of 688 apartment units, accounted for using the equity method of consolidation.

See Note 15 for summary information on these investments.

The Partnership purchased a commercial retail property of approximately 20,700 square feet, located at 653 Worcester Road in Framingham, Massachusetts for the sum of approximately $ 10,151,000 on January 18, 2023.

This acquisition was funded from the Partnership’s cash reserves and c losing costs were approximately $ 59,000 .

From the purchase price, the Partnership allocated approximately $ 585,000 to in- place leases, and approximately $ 378,000 to the value of tenant relationships.

The value assigned to in-place leases is being amortized over a twelve-month period.

value assigned to tenant relationships is being amortized over the individual tenant’s lease term, ranging from 20 months to 156 months .

Rental properties consist of the following:

September 30, 2022

March 31, 2023

December 31, 2022

15 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 $ 2,029,000 and $ 1,868,000 for the nine months ended September 30, 2022 and 2021, respectively.

Total fees paid were approximately $ 698,000 and $ 673,000 for the three months ended March 31, 2023 and 2022, 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.

During the three months ended March 31, 2023 and 2022, approximately $ 493,000 and $ 195,000 was charged to NERA for legal, accounting, construction, maintenance, brokerage fees, rental and architectural services and supervision of capital improvements.

Of the 2023 expenses referred to above, approximately $ 48,000 consisted of repairs and maintenance, $ 99,000 of administrative expense, and approximately $ 57,000 for renting expense.

Approximately $ 289,000 of expenses for construction, architectural services and supervision of capital projects were capitalized in rental properties.

Additionally in 2022, the Hamilton Company received approximately $ 567,000 from the Investment Properties of which approximately $ 491,000 was the management fee, approximately $ 38,000 was for maintenance services, approximately $ 14,000 was for administrative services and approximately $ 24,000 for construction, architectural services and supervision of capital projects.

Additionally in 2023, the Hamilton Company received approximately $ 181,000 from the Investment Properties of which approximately $ 171,000 was the management fee, approximately $ 4,000 for construction, architectural services and supervision of capital projects, approximately $ 3,000 for repairs and maintenance, and approximately $ 3,000 for legal expense.

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

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

Total reimbursement was approximately $ 2,945,000 and $ 2,759,000 for the nine months ended September 30, 2022 and 2021, respectively.

Total reimbursement was approximately $ 1,114,000 and $ 1,039,000 for the three months ended March 31, 2023 and 2022, 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, 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.

For the three months ended March 31, 2023, the Partnership accrued $ 16,000 for the employer’s match portion to the plan.

For the three months ended March 31, 2022, the Partnership contributed $ 37,000 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, 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.

During the nine months ended March 31, 2023 and 2022, the Management Company charged the Partnership $ 31,250 ($ 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.

Saul Ewing billed the Partnership for legal fees totaling approximately $ 37,000 and $ 0 for the three months ended March 31, 2023 and 2022 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 $ 3,402,000 , and $ 3,067,000 of security deposits are included in prepaid expenses and other assets at September 30, 2022 and December 31, 2021, respectively.

Approximately $ 3,414,000 , and $ 3,406,000 of security deposits are included in prepaid expenses and other assets at March 31, 2023 and December 31, 2022, respectively.

The security deposits and escrow accounts are restricted cash.

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 $ 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.

Also, included in prepaid expenses and other assets at March 31, 2023 and December 31, 2022 is approximately $ 2,111,000 and $ 1,979,000 , respectively, held in escrow to fund future capital improvements, and approximately $ 831,000 and $ 573,000 respectively in interest receivable, U.S.

Treasury bills.

Intangible assets on the acquisition of 653 Worcester Road are included in prepaid expenses and other assets.

Intangible assets are approximately $ 834,000 and $ 0 net of accumulated amortization of approximately $ 129,000 and $ 1,418,000 at March 31, 2023, and at December 31, 2022 respectively.

Financing fees in association with the line of credit of approximately $ 95,000 and $ 109,000 are net of accumulated amortization of approximately $ 85,000 and $ 70,000 at March 31, 2023 and December 31, 2022 respectively.

MORTGAGE NOTES PAYABLE

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.

At March 31, 2023 and December 31, 2022, 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, 2023, the interest rates on these loans ranged from 2.97 % to 4.95 %, payable in monthly installments aggregating approximately $ 1,523,000 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 %.

At March 31, 2023, the weighted average interest rate on the above mortgages was 3.69 %.

The effective rate of 3.78 % 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 $ 3,213,000 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.

Financing fees of approximately $ 3,064,000 and $ 3,159,000 are net of accumulated amortization of approximately $ 1,068,000 and $ 973,000 at March 31, 2023 and December 31, 2022, 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, 2022 are as follows:

Approximate annual maturities at March 31, 2023 are as follows:

2024—current maturities

unamortized deferred financing costs

( 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 .

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

On June 16, 2022, the Partnership entered into an amendment to the Facility Agreement.

3 unchanged sentences

The remaining balance of approximately $ 42,404,000 will be used for general partnership purposes.

On November 30, 2021, New England Realty Associates Limited Partnership (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 .

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

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 (“Mortgages”).

The Partnership used the proceeds to pay down approximately $ 65,305,000 of existing debt secured by 11 properties, along with approximately $ 2,700,000 in prepayment penalties.

The remaining balance of approximately $ 89,000,000 will be used for general partnership purposes.

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

The agreement pays down the loan on the existing debt of $ 5,954,546.14 , extends the maturity until October 14, 2032, at a variable interest rate of SOFR rate, plus 1.7 % interest only for 2 years and amortizing using a thirty-year schedule for the balance of the term.

At closing, the Partnership entered into an interest rate swap contract with Brookline Bank with a notional amount equivalent to the underlying loan principal amortization, resulting in a fixed rate of 4.60 % through the expiration of the interest rate swap contract.

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 most 65 %.

Line of Credit

8 unchanged sentences

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;

The modification period phased out as of December 31, 2022.

During this period, the loan covenants were 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;

1 unchanged sentence

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

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

As of March 31,2023, the portfolio’s debt yield fell below the minimum of 9.5 % to 8.5 %, thus 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.

1 unchanged sentence

The costs associated with the modification and renewal of the line of credit was 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.

4 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 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.

At March 31, 2023, amounts received for prepaid rents of approximately $ 2,699,000 are included in cash and cash equivalents, and security deposits of approximately $ 3,414,000 are included in prepaid expenses and other assets and are restricted cash.

PARTNERS’ CAPITAL

4 unchanged sentences

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, 2023.

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.

In 2022 the Partnership paid a total distribution of an aggregate $ 76.80 per Unit ($ 2.56 per Receipt) for a total payment of $ 9,267,981 .

The Partnership has entered into a deposit agreement with an agent to facilitate public trading of limited partners’ interests in Class A Units.

1 unchanged sentence

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, 2022 are as follows:

Treasury Units at March 31, 2023 are as follows:

General Partnership

3 unchanged sentences

On March 9, 2020, the General Partner extended the program for an additional five years from March 31, 2020 to March 31, 2025.

The Repurchase Program requires the Partnership to repurchase a proportionate number of Class B Units and General Partner Units in connection with any repurchases of any Depositary Receipts by the Partnership based upon the 80 %, 19 % and 1 % fixed distribution percentages of the holders of the Class A, Class B and General Partner Units under the Partnership’s Second Amended and Restated Contract of Limited Partnership.

the Class A, Class B and General Partner Units under the Partnership’s Second Amended and Restated Contract of Limited Partnership.

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, 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.

From August 20, 2007 through March 31, 2023, the Partnership has repurchased 1,498,809 Depositary Receipts at an average price of $ 30.44 per receipt (or $ 913.09 per underlying Class A Unit), 4,129 Class B Units and 217 General Partnership Units, both at an average price of $ 1,203.00 per Unit, totaling approximately $ 51,440,000 including brokerage fees paid by the Partnership .

During the three months ended March 31, 2023, the Partnership purchased a total of 10,349 Depositary Receipts.

The average price was $ 72.99 per receipt, or $ 2,189.70 per unit.

1 unchanged sentence

COMMITMENTS AND CONTINGENCIES

From time to time, the Partnership is involved in various ordinary routine litigation incidental to its business.

The Partnership either has insurance coverage or provides for any uninsured claims when appropriate.

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

The Partnership, the Subsidiary Partnerships, and the Investment Properties and their properties are not presently subject to any material litigation, and, to management’s knowledge, there is not any material litigation presently threatened against them.

The properties are occasionally subject to ordinary routine legal and administrative proceedings incident to the ownership of residential and commercial real estate.

Some of the legal and other expenses related to these proceedings are covered by insurance and none of these costs and expenses are expected to have a material adverse effect on the Consolidated Financial Statements of the Partnership.

RENTAL INCOME

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.

During the three months ended March 31, 2023, approximately 94 % of rental income was related to residential apartments and condominium units with leases of one year or less.

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

Approximately 5 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at September 30, 2022 as follows:

Approximately 6 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at March 31, 2023 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 $ 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.

Aggregate contingent rentals from continuing operations were approximately $ 147,000 and $ 175,000 for the three months ended March 31, 2023 and 2022 respectively.

Trader Joe’s and Walgreen’s, tenants at Staples Plaza and 653 Worcester Road, Framingham, MA.

respectively, are approximately 23 % of the total commercial rental income.

The following information is provided for commercial leases:

3 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 $ 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.

Rents receivable are net of an allowance for doubtful accounts of approximately $ 1,188,000 and $ 1,007,000 at March 31, 2023 and December 31, 2022.

Included in rents receivable at March 31, 2023 is approximately $ 86,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.

Rents receivable at March 31, 2023 also includes approximately $ 22,000 representing the deferral of rental concession primarily related to the residential properties.

CASH FLOW INFORMATION

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 .

During the three months ended March 31, 2023 and 2022, cash paid for interest was approximately $ 3,754,000 , and $ 3,370,000 respectively.

Cash paid for state income taxes was approximately $ 4,000 and $ 2,000 during the three months ended March 31, 2023 and 2022 respectively.

FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

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.

At March 31, 2023 and December 31, 2022, 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, 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, 2023 and December 31, 2022 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.

6 unchanged sentences

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 September 30, 2022 and December 31, 2021, as compared with those in effect when the debt was issued or acquired.

At March 31, 2023 and December 31, 2022 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.

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 March 31, 2023 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.

At March 31, 2023 and at December 31, 2022 the Partnership’s line of credit had an outstanding balance of zero .

The following methods and assumptions were used by the Partnership in estimating the fair value of its financial instruments:

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

September 30, 2022

December 31, 2021

March 31, 2023

Carrying Value

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* 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, 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.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of March 31, 2023 and December 31, 2022.

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, 2023 and current estimates of fair value may differ significantly from the amounts presented herein.

DERIVATIVE FINANCIAL INSTRUMENTS

Cash Flow Hedges of Interest Rate Risk

The Partnership’s objectives in using rate derivatives are to manage its exposure to interest rate movements.

To accomplish this objective, the Partnership uses interest rate swaps as part of its interest rate risk management strategy.

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Partnership making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Partnership’s variable rate debt.

During the next 12 months, the Partnership estimates $ 114,000 will be reclassified as a decrease to interest expense.

As of March 31, 2023, the Partnership had one interest rate swap outstanding with a notional amount of approximately $ 129,000 designated as cash flow hedges of interest rate risk.

As of March 31,2023, the Partnership did not have any interest rate derivatives in a net liability position.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2023 and 2022.

Asset Derivatives designated

as hedging instruments

Balance sheet location

Interest rate swaps

Prepaid Expenses and Other Assets

The table below presents the effect the Company’s derivative financial instruments on the consolidated statements of income for the quarters ended March 31, 2023 and 2022.

Derivatives in Cash Flow Hedging Relationships

Amount of Gain

or (Loss) Recognized

in OCI on Derivative

Location of Gain

OCI Into Income

Amount of Gain

from Accumulated

OCI into Income

Location of Gain

or (Loss) Recognized

Total Amount of

Interest Expense

presented in the

consolidated statements

of operations

Quarter Ended March 31,

Interest rate swaps

Interest expense

Interest and other investment income (loss)

( 3,899,240 )

( 3,454,635 )

TAXABLE INCOME AND TAX BASIS

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In the normal course of business the Partnership or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates, where applicable.

As of 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.

As of March 31, 2023, the tax years that generally remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2019 forward.

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

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

At March 31, 2023, 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 September 30, 2022, the balance on this mortgage before unamortized deferred financing costs is $ 10,000,000 .

At March 31, 2023, 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.

7 unchanged sentences

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

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, 2023, 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 September 30, 2022, the balance of the mortgage before unamortized deferred finance is $ 16,900,000 .

At March 31, 2023, 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, 2022, the balance of this mortgage before unamortized deferred financing costs is approximately $ 8,770,000 .

At March 31, 2023, the balance of this mortgage before unamortized deferred financing costs is approximately $ 8,657,000 .

This investment is referred to as 345 Franklin, LLC.

Summary financial information at September 30, 2022

Summary financial information at March 31, 2023

Rental Properties

29 unchanged sentences

Units to be sold

Units sold through November 1, 2022

Financial information for the nine months ended September 30, 2022

Units sold through May 1, 2023

Financial information for the three months ended March 31, 2023

Rental Income

15 unchanged sentences

Net Income —NERA 40 %

Financial information for the three months ended September 30, 2022

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

( 1,283,295 )

( 1,736,627 )

( 1,283,295 )

( 1,736,627 )

Net Income (Loss)

Net Income (Loss)—NERA 50%

Net Income —NERA 40%

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

Future annual mortgage maturities at March 31, 2023 are as follows:

unamortized deferred financing costs

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

At March 31, 2023 the weighted average interest rate on the above mortgages was 4.18 %.

The effective rate was 4.25 % including the amortization expense of deferred financing costs.

Summary financial information at September 30, 2021

Summary financial information at March 31, 2022

Rental Properties

28 unchanged sentences

Units to be retained

Units sold through November 1, 2021

Financial information for the nine months ended September 30, 2021

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

( 3,792,615 )

( 4,993,153 )

( 3,791,393 )

( 4,991,931 )

Net Income (Loss)

( 1,860,318 )

( 1,965,510 )

Net Income (Loss)—NERA 50%

Net Income —NERA 40%

Financial information for the three months ended September 30, 2021

Units to be sold

Units sold through May 1, 2022

Financial information for the three months ended March 31, 2022

Rental Income

10 unchanged sentences

( 1,659,930 )

Interest income

( 1,263,146 )

4 unchanged sentences

EMPLOYEE BENEFIT 401(k) PLANS

Effective January 1, 2019, employees of the Partnership, who meet certain minimum age and service requirements, are eligible to participate in the Management Company’s 401(k) Plan (the “401(k) Plan”).

Employees of the Partnership, who meet certain minimum age and service requirements, are eligible to participate in the Management Company’s 401(k) Plan (the “401(k) Plan”).

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

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

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

The Partnership matches 50 % up to 6 % of compensation deferred by each employee in the 401(k) plan.

The Partnership may make discretionary matching or profit-sharing contributions to the 401(k) Plan on behalf of eligible participants in any plan year.

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, 2022 was $ 70,000 .

Total expense recognized by the Partnership for the 401(k) Plan for the three months ended March 31, 2023 was $ 16,000 .

IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

1 unchanged sentence

SUBSEQUENT EVENTS

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

From April 1, 2023, through May 8, 2023, the Partnership has purchased 525 Depository Receipts .

The average price was $ 71.67 per receipt, or $ 2,150.10 per unit.

1 unchanged sentence

The Partnership is required to purchase 4 Class B units and 1 General Partnership units at a cost of $ 9,931 and $ 523 , respectively.

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.

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.

On May 8, 2023, the Partnership approved a quarterly distribution of $ 12.00 per Unit ($ 0.40 per Receipt), payable on June30, 2023.

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