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Item 1. Financial Statements

2023-11-09 compared with 2023-08-08 · 117 added, 106 removed, 693 unchanged (24% of the section changed)

7 unchanged sentences

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

The results of operations for the six month period ended June 30, 2023 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 period ended September 30, 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

21 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Rental income

13 unchanged sentences

( 11,060,794 )

Income (loss) from investments in unconsolidated joint ventures

Other (expenses)

Income from investments in unconsolidated joint ventures

Other income (expenses)

( 2,724,035 )

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net unrealized gain on derivative instruments for interest rate swaps

15 unchanged sentences

( 5,167,667 )

Balance June 30 , 2022

Balance September 30, 2022

( 48,831,134 )

13 unchanged sentences

Net unrealized gain on derivative instruments for interest rate swaps

Balance June 30, 2023

Balance September 30, 2023

( 52,200,280 )

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 interest receivable U.S.

1 unchanged sentence

(Increase) in prepaid expenses and other assets

( 1,958,461 )

( 1,282,943 )

Increase in advance rental payments and security deposits

6 unchanged sentences

( 146,851,429 )

( 103,995,587 )

Proceeds from U.S.

6 unchanged sentences

Net cash (used in) investing activities

( 36,518,815 )

( 76,569,294 )

Cash Flows from Financing Activities

9 unchanged sentences

( 8,123,130 )

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

( 13,200,651 )

Net Increase in Cash and Cash Equivalents

Net (Decrease) in Cash and Cash Equivalents

( 33,419,325 )

( 36,609,569 )

Cash and Cash Equivalents, at beginning of period

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

September 30, 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 $ 190,000 and $ 253,000 for the six months ended June 30, 2023 and 2022, respectively.

In all cases, amortization of such costs is included in interest expense and was approximately $ 285,000 and $ 350,000 for the nine months ended September 30, 2023 and 2022, 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 at the time of purchase, including its investment in BlackRock Liquidity Treasury Trust Fund, which invests its assets in cash, U.S Treasury bills, notes and other obligations issued or guaranteed as to principal and interest by the U.S.

Investments in Treasury Bills:

7 unchanged sentences

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 comprehensive income of approximately $2,000 for the six months ended June 30, 2023, but had no comprehensive income or loss for the six months ended June 30, 2022.

NERA had comprehensive income of approximately $265,000 for the nine months ended September 30, 2023, but had no comprehensive income or loss for the nine months ended September 30, 2022.

Income (Loss) Per Depositary Receipt:

9 unchanged sentences

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

At June 30, 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.

At September 30, 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 5.4 %.

At June 30, 2023 and December 31, 2022, respectively approximately $ 56,158,000 , 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 $ 56,158,000 , approximately $ 40,092,000 is invested in Blackrock Liquidity Funds Treasury Trust, which invests its assets in cash, U.S Treasury bills, notes and other obligations issued or guaranteed as to principal and interest by the U.S.

At September 30, 2023 and December 31, 2022, respectively approximately $ 6,103,000 , and $ 49,641,000 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 approximately $ 193,000 and $ 135,000 for the six months ended June 30, 2023, and 2022, respectively.

Advertising expense was approximately $ 281,000 and $ 190,000 for the nine months ended September 30, 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 six months ended June 30, 2023, and 2022 there was no capitalized interest.

During the nine months ended September 30, 2023, and 2022 there was no capitalized interest.

Extinguishment of Debt:

5 unchanged sentences

RENTAL PROPERTIES

As of June 30, 2023, 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, 2023, the Partnership and its Subsidiary Partnerships owned 2,944 residential apartment units in 27 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, 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.

Additionally, as of September 30, 2023, the Partnership and Subsidiary Partnerships owned two commercial shopping centers in Framingham and commercial buildings in Newton and Brookline.

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, 2023 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, 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.

1 unchanged sentence

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.

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

On July 14, 2023, the partnership purchased a 52 unit mixed use property in the South End neighborhood of Boston, MA comprised of three buildings at 26-30 Rutland Street, 105-117 West Concord Street and 475 Shawmut Avenue, and approximately 3,400 square feet of commercial space for a purchase price of approximately $ 27,500,000 .

This acquisition was funded from the Partnership's cash reserves and closing costs were approximately $ 81,000 .

Rental properties consist of the following:

June 30, 2023

September 30, 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 1,364,000 and $ 1,345,000 for the six months ended June 30, 2023 and 2022, respectively.

Total fees paid were approximately $ 2,173,000 and $ 2,029,000 for the nine months ended September 30, 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 six months ended June 30, 2023 and 2022, approximately $ 914,000 and $ 383,000 was charged to NERA for legal, accounting, construction, maintenance, brokerage fees, rental and architectural services and supervision of capital improvements.

During the nine months ended September 30, 2023 and 2022, approximately $ 1,106,000 and $ 583,000 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 $ 184,000 consisted of repairs and maintenance, $ 293,000 of administrative expense, and approximately $ 66,000 for renting expense.

Approximately $ 563,000 of expenses for construction, architectural services and supervision of capital projects were capitalized in rental properties.

Additionally in 2023, the Hamilton Company received approximately $ 398,000 from the Investment Properties of which approximately $ 334,000 was the management fee, approximately $ 5,000 for construction, architectural services and supervision of capital projects, approximately $ 43,000 for repairs and maintenance, and approximately $ 16,000 for legal expense.

Additionally in 2023, the Hamilton Company received approximately $ 585,000 from the Investment Properties of which approximately $ 514,000 was the management fee, approximately $ 5,000 for construction, architectural services and supervision of capital projects, approximately $ 43,000 for repairs and maintenance, approximately $ 22,000 for legal expense, and approximately $ 1,000 for renting 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 $ 2,050,000 and $ 1,913,000 for the six months ended June 30, 2023 and 2022, respectively.

Total reimbursement was approximately $ 3,210,000 and $ 2,945,000 for the nine months ended September 30, 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 six months ended June 30, 2023, the Partnership accrued $ 32,000 for the employer’s match portion to the plan.

For the six months ended June 30, 2022, the Partnership contributed $ 28,000 for the employer’s match portion to the plan .

For the nine months ended September 30, 2023, the Partnership accrued $ 48,000 for the employer’s match portion to the plan.

For the nine months ended September 30, 2022, the Partnership contributed $ 70,000 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 15 people.

During the six months ended June 30, 2023 and 2022, 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, 2023 and 2022, 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 $ 39,000 and $ 68,000 for the six months ended June 30, 2023 and 2022 respectively.

Saul Ewing billed the Partnership for legal fees totaling approximately $ 80,000 and $ 68,000 for the nine months ended September 30, 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 $ 3,523,000 , and $ 3,406,000 of security deposits are included in prepaid expenses and other assets at June 30, 2023 and December 31, 2022, respectively.

Approximately $ 3,687,000 , and $ 3,406,000 of security deposits are included in prepaid expenses and other assets at September 30, 2023 and December 31, 2022, respectively.

The security deposits and escrow accounts are restricted cash.

Also, included in prepaid expenses and other assets at June 30, 2023 and December 31, 2022 is approximately $ 1,547,000 and $ 1,979,000 , respectively, held in escrow to fund future capital improvements, approximately $ 957,000 and $ 573,000 respectively in interest receivable, U.S.

Treasury bills ,and respectively $ 840,000 and $ 580,000 in distributions receivable from the joint ventures.

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

Intangible assets are approximately $ 667,000 and $ 0 net of accumulated amortization of approximately $ 296,000 and $ 1,418,000 at June 30, 2023, and at December 31, 2022 respectively.

Financing fees in association with the line of credit of approximately $ 80,000 and $ 109,000 are net of accumulated amortization of approximately $ 100,000 and $ 70,000 at June 30, 2023 and December 31, 2022 respectively.

Also, included in prepaid expenses and other assets at September 30, 2023 and December 31, 2022 is approximately $ 1,665,000 and $ 1,979,000 , respectively, held in escrow to fund future capital improvements, approximately $ 689,000 and $ 573,000 respectively in interest receivable and U.S.

Treasury bills.

Intangible assets on the acquisition of rental properties are included in prepaid expenses and other assets.

Intangible assets are approximately $ 1,135,000 and $ 0 net of accumulated amortization of approximately $ 607,000 and $ 1,418,000 at September 30, 2023, and at December 31, 2022 respectively.

Financing fees in association with the line of credit of approximately $ 67,000 and $ 109,000 are net of accumulated amortization of approximately $ 115,000 and $ 70,000 at September 30, 2023 and December 31, 2022 respectively.

MORTGAGE NOTES PAYABLE

At June 30, 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 June 30, 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.

At September 30, 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 September 30, 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 June 30, 2023, the weighted average interest rate on the above mortgages was 3.68 %.

At September 30, 2023, the weighted average interest rate on the above mortgages was 3.68 %.

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 $ 2,969,000 and $ 3,159,000 are net of accumulated amortization of approximately $ 1,163,000 and $ 973,000 at June 30, 2023 and December 31, 2022, respectively, which offset the total mortgage notes payable.

Financing fees of approximately $ 2,874,000 and $ 3,159,000 are net of accumulated amortization of approximately $ 1,258,000 and $ 973,000 at September 30, 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 June 30, 2023 are as follows:

Approximate annual maturities at September 30, 2023 are as follows:

2024—current maturities

26 unchanged sentences

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;

from a minimum tangible net worth requirement of $ 200 million to a net worth of $ 175 million

until September 30, 2022;

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

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

As of June 30, 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 of September 30, 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.

9 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, 2023, amounts received for prepaid rents of approximately $ 2,919,000 are included in cash and cash equivalents, and security deposits of approximately $ 3,523,000 are included in prepaid expenses and other assets and are restricted cash.

At September 30, 2023, amounts received for prepaid rents of approximately $ 3,126,000 are included in cash and cash equivalents, and security deposits of approximately $ 3,687,000 are included in prepaid expenses and other assets and are restricted cash.

PARTNERS’ CAPITAL

5 unchanged sentences

In May 2023, the Partnership approved a quarterly distribution of $ 12.00 per Unit ($ 0.40 per Receipt), payable on June 30, 2023.

In August 2023, the Partnership approved a quarterly distribution of $ 12.00 per Unit ($ 0.40 per Receipt), payable on September 30, 2023.

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

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, 2023 are as follows:

Treasury Units at September 30, 2023 are as follows:

General Partnership

1 unchanged sentence

Over time, the General Partner has authorized increases in the equity repurchase program.

On March 10, 2015, the General Partner authorized an increase in the

Repurchase Program from 1,500,000 to 2,000,000 Depository Receipts and extended the Program for an additional five years from March 31, 2015 until March 31, 2020.

On March 10, 2015, the General Partner authorized an increase in the Repurchase Program from 1,500,000 to 2,000,000 Depository Receipts and extended the Program for an additional five years from March 31, 2015 until March 31, 2020.

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

1 unchanged sentence

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, 2023, the Partnership has repurchased 1,502,734 Depositary Receipts at an average price of $ 30.54 per receipt (or $ 916.20 per underlying Class A Unit), 4,160 Class B Units and 219 General Partnership Units, both at an average price of $ 1,209.00 per Unit, totaling approximately $ 51,785,000 including brokerage fees paid by the Partnership .

During the six months ended June 30, 2023, the Partnership purchased a total of 14,274 Depositary Receipts.

From August 20, 2007 through September 30, 2023, the Partnership has repurchased 1,517,690 Depositary Receipts at an average price of $ 30.96 per receipt (or $ 928.80 per underlying Class A Unit), 4,279 Class B Units and 225 General Partnership Units, both at an average price of $ 1,236.00 per Unit, totaling approximately $ 53,153,000 including brokerage fees paid by the Partnership .

During the nine months ended September 30, 2023, the Partnership purchased a total of 29,230 Depositary Receipts.

The average price was $ 72.71 per receipt, or $ 2,181 per unit.

The cost including commission was $ 1,031,739 .The Partnership was required to repurchase 113 Class B Units and 6 General Partnership units at a cost of $ 244,753 and $ 12,882 respectively.

The cost including commission was approximately $2,127,000 .

The Partnership was required to repurchase 232 Class B Units and 12 General Partnership units at a cost of $ 503,707 and $ 26,510 respectively.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

RENTAL INCOME

During the six months ended June 30, 2023, approximately 94 % of rental income was related to residential apartments and condominium units with leases of one year or less.

During the nine months ended September 30, 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 6 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at June 30, 2023 as follows:

Approximately 6 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at September 30, 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 $ 328,000 and $ 437,000 for the six months ended June 30, 2023 and 2022 respectively.

Aggregate contingent rentals from continuing operations were approximately $ 515,000 and $ 441,000 for the nine months ended September 30, 2023 and 2022 respectively.

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

5 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 $ 1,291,000 and $ 1,007,000 at June 30, 2023 and December 31, 2022.

Included in rents receivable at June 30, 2023 is approximately $ 199,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.

Rents receivable at June 30, 2023 also includes approximately $ 28,000 representing the deferral of rental concession primarily related to the residential properties.

Rents receivable are net of an allowance for doubtful accounts of approximately $ 1,270,000 and $ 1,007,000 at September 30, 2023 and December 31, 2022.

Included in rents receivable at September 30, 2023 is approximately $ 347,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.

Rents receivable at September 30, 2023 also includes approximately $ 51,000 representing the deferral of rental concession primarily related to the residential properties.

CASH FLOW INFORMATION

During the six months ended J une 30, 2023 and 2022, cash paid for interest was approximately $ 7,678,000 , and $ 6,987,000 respectively.

Cash paid for state income taxes was approximately $ 25,000 and $ 49,000 during the six months ended June 30, 2023 and 2022 respectively.

During the nine months ended September 30, 2023 and 2022, cash paid for interest was approximately $ 11,535,000 , and $ 10,584,000 respectively.

Cash paid for state income taxes was approximately $ 56,000 and $ 52,000 during the nine months ended September 30, 2023 and 2022 respectively.

FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

At June 30, 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.

At September 30, 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 June 30, 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.

At September 30, 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 Partnership has investments in Treasury Bills some of which mature over a period greater than 90 days and are classified as short-term investments.

3 unchanged sentences

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

At June 30, 2023 and December 31, 2022 we estimated the fair value of our mortgage payable, derivative financial instrument, 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, 2023 and December 31, 2022 we estimated the fair value of our mortgage payable, derivative financial instrument, 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, 2023 and

December 31, 2022, 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, 2023 and December 31, 2022, 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 June 30, 2023 and at December 31, 2022 the Partnership’s line of credit had an outstanding balance of zero .

At September 30, 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:

5 unchanged sentences

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

June 30, 2023

September 30, 2023

Carrying Value

7 unchanged sentences

* 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, 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 June 30, 2023 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, 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 September 30, 2023 and current estimates of fair value may differ significantly from the amounts presented herein.

DERIVATIVE FINANCIAL INSTRUMENTS

4 unchanged sentences

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.

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 $ 143,000 will be reclassified as a decrease to interest expense .

As of June 30, 2023, the Partnership had one interest rate swap outstanding with a notional amount of approximately $ 297,000 designated as cash flow hedges of interest rate risk.

As of June 30, 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, June 30, 2023 and 2022.

As of September 30, 2023, the Partnership had one interest rate swap outstanding with a notional amount of approximately $ 560,000 designated as cash flow hedges of interest rate risk.

As of September 30, 2023, the Partnership did not have any interest rate derivatives in a net liability position.

The table below presents the fair value of the Partnership’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2023 and 2022.

Asset Derivatives designated

September 30,

as hedging instruments

2 unchanged sentences

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 June 30, 2023 and 2022.

The table below presents the effect the Partnership’s derivative financial instruments on the consolidated statements of income for the quarters ended September 30, 2023 and 2022.

Location of Gain

15 unchanged sentences

of operations

Three Months Ended June 30,

Three Months Ended September 30,

Interest rate swaps

3 unchanged sentences

( 3,982,445 )

Six Months Ended

Nine Months Ended September 30,

Interest rate swaps

16 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, 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.

As of September 30, 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

2 unchanged sentences

The other investors are the Brown Family related entities and five current and former employees of the Management Company.

The Brown Family’s ownership interest was between 47.6 % and 59 %, with the balance owned by the others.

The Brown Family’s ownership

interest was between 47.6 % and 59 % , with the balance owned by the others.

A description of each investment is as follows:

12 unchanged sentences

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.

At June 30, 2023, the balance on this mortgage before unamortized deferred financing costs is $125,000,000 .

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

At September 30, 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;

15 unchanged sentences

The Joint Venture Partnership paid off the prior mortgage of approximately $ 5,158,000 with the proceeds of the new mortgage and made a distribution of $ 385,000 to the Partnership.

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

The cost associated with the refinancing was

approximately $ 123,000 .

In 2018, the carrying value of the investment fell below zero.

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

At June 30 2023, the balance on this mortgage before unamortized deferred financing costs is $ 6,000,000 .

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

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

The investment is referred to as Hamilton on Main LLC.

On August 23, 2023, Hamilton on Main Apartments, LLC (the “Borrower”), a 50 % owned joint venture of the Partnership, received notice from KeyBank, as servicer for the lender of a $ 16,900,000 loan, indicating that the Borrower failed to comply with certain terms of the loan documents pertaining to the transfer of interests in the Borrower that occurred on the occasion of Harold Brown’s death, and that such transfer constitutes an event of default under the loan documents.

While the Borrower has disputed that any events of default actually exist, it is working diligently with KeyBank to obtain KeyBank’s consent to the transfer.

In November 2001, the Partnership invested approximately $ 1,533,000 for a 50 % ownership interest in a 40 -unit apartment building in Cambridge, Massachusetts.

5 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, 2023, the balance of this mortgage before unamortized deferred financing costs is approximately $ 8,599,000 .

At September 30, 2023, the balance of this mortgage before unamortized deferred financing costs is approximately $ 8,541,000 .

This investment is referred to as 345 Franklin, LLC.

Summary financial information at June 30, 2023

Summary financial information at September 30, 2023

Rental Properties

29 unchanged sentences

Units to be sold

Units sold through August 1, 2023

Financial information for the six months ended June 30, 2023

Units sold through November 1, 2023

Financial information for the nine months ended September 30, 2023

Rental Income

15 unchanged sentences

Net Income —NERA 40 %

Financial information for the three months ended June 30, 2023

Financial information for the three months ended September 30, 2023

Rental Income

15 unchanged sentences

Net Income —NERA 40 %

Future annual mortgage maturities at June 30, 2023 are as follows:

Future annual mortgage maturities at September 30, 2023 are as follows:

unamortized deferred financing costs

At June 30, 2023 the weighted average interest rate on the above mortgages was 4.21 %.

At September 30, 2023 the weighted average interest rate on the above mortgages was 4.23 %.

The effective rate was 4.29 % including the amortization expense of deferred financing costs.

Summary financial information at June 30, 2022

Summary financial information at September 30, 2022

Rental Properties

29 unchanged sentences

Units to be sold

Units sold through August 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

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, 2023 was $ 32,000 .

Total expense recognized by the Partnership for the 401(k) Plan for the nine months ended September 30, 2023 was $ 48,000 .

IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

1 unchanged sentence

SUBSEQUENT EVENTS

From July 1, 2023, through August 8, 2023, the Partnership has purchased 1,554 Depository Receipts .

From October 1, 2023, through November 8, 2023, the Partnership has purchased 859 Depository Receipts .

The average price was $ 67.05 per receipt, or $ 2,011.50 per unit.

1 unchanged sentence

The Partnership is required to purchase 7 Class B units and 0.4 General Partnership units at a cost of $ 13,679 and $ 720 , respectively.

On July 14, 2023, the partnership purchased a 52 unit residential property in the South End neighborhood of Boston, MA comprised of three buildings at 26-30 Rutland Street, 105-117 West Concord Street and 475 Shawmut Avenue, for a purchase price of approximately $ 27,500,000 with Partnership cash reserves.

On August 3, 2023, the Partnership approved a quarterly distribution of $ 12.00 per Unit ($ 0.40 per Receipt), payable on September 30, 2023.

On November 7, 2023, the Partnership approved a quarterly distribution of $ 12.00 per Unit ($ 0.40 per Receipt), payable on December 31, 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