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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 166 added, 223 removed, 587 unchanged (40% of the section changed)

5 unchanged sentences

generally accepted accounting principles for complete financial statements.

The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in New England Realty Associates L.P.’s Annual Report on

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

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.

The results of operations for the three month period ended March 31, 2024 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

16 unchanged sentences

( 65,354,384 )

Total Liabilities and Partners’ Capital

See notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

Rental income

11 unchanged sentences

( 3,899,240 )

( 11,781,285 )

( 11,060,794 )

Income from investments in unconsolidated joint ventures

Other income (expenses)

( 2,288,178 )

( 2,696,990 )

( 7,934,770 )

( 11,368,042 )

Net Income per Unit

3 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

Nine Months Ended

September 30,

Net unrealized gain on derivative instruments for interest rate swaps

Three Months Ended March 31,

Other comprehensive income (loss):

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

Comprehensive income

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNER’S CAPITAL

Partner’s Capital

Comprehensive Income

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

Partners' Capital

Comprehensive

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

( 12,433,251 )

( 59,869,357 )

Distribution to Partners

3 unchanged sentences

Stock Buyback

( 2,127,260 )

( 2,657,477 )

Net unrealized gain on derivative instruments for interest rate swaps

Balance September 30, 2023

Balance March 31, 2024

( 55,566,297 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows from Operating Activities

Adjustments to reconcile net income to net cash provided by operating activities

Interest accrued on U.S.

Treasury bills

( 1,161,305 )

Depreciation and amortization

3 unchanged sentences

Proceeds from unconsolidated joint ventures

(Increase) Decrease in rents receivable

Decrease (Increase) in rents receivable

(Decrease) in accounts payable and accrued expense

1 unchanged sentence

(Increase) in real estate tax escrow

( 1,045,681 )

(Increase) in interest receivable U.S.

Treasury bills

(Increase) in prepaid expenses and other assets

Increase in advance rental payments and security deposits

Decrease (Increase) in prepaid expenses and other assets

(Decrease) Increase in advance rental payments and security deposits

Total Adjustments

8 unchanged sentences

Treasury bills

Developing of rental property and other related costs

( 2,111,993 )

Purchase of rental property

3 unchanged sentences

( 2,172,877 )

Net cash (used in) investing activities

( 36,518,815 )

Net cash provided by (used in) investing activities

( 19,310,875 )

1 unchanged sentence

Principal payments of mortgage notes payable

( 1,997,909 )

( 1,720,335 )

Proceeds from Mortgage Notes Payable

Stock buyback

( 2,657,477 )

( 5,167,667 )

Distributions to partners

3 unchanged sentences

( 7,987,290 )

Net (Decrease) in Cash and Cash Equivalents

( 7,260,766 )

Net Increase (Decrease) in Cash and Cash Equivalents

( 24,906,098 )

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

March 31, 2024

SIGNIFICANT ACCOUNTING POLICIES

4 unchanged sentences

4 commercial buildings and individual units at one condominium complex.

These properties total 2,944 apartment units, 19 condominium units and 137,153 square feet of commercial space.

These properties total 2,943 apartment units, 19 condominium units and approximately 130,000 square feet of commercial space.

Additionally, the Partnership also owns a 40 - 50 % interest in 7 residential and mixed use properties consisting of 688 apartment units, 12,500 square feet of commercial space and a 50 car parking lot.

7 unchanged sentences

Different estimates could have a material effect on the Partnership’s financial results.

Judgements and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances.

Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances.

Principles of Consolidation :

57 unchanged sentences

The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

Costs directly related to the acquisition, development and construction of rental properties are capitalized.

Capitalized development and construction costs include pre-construction costs, development and construction costs, regulatory fees, interest, property taxes, insurance, construction oversight fees, and other project costs incurred during the period of development.

The Partnership considers a construction project as substantially completed and held available for occupancy upon the substantial completion of improvements, but no later than one year from cessation of major construction activity.

Other intangible assets acquired include amounts for in-place lease values and tenant relationship values, which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Partnership’s overall relationship with the respective tenant.

12 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 $ 285,000 and $ 350,000 for the nine months ended September 30, 2023 and 2022, respectively.

In all cases, amortization of such costs is included in interest expense and was approximately $ 95,000 and $ 95,000 for the three months ended March 31, 2024 and 2023, respectively.

Derivative Instruments:

The Partnership measures derivative instruments, including certain derivative instruments embedded in other contracts, at fair value and records them as an asset or liability, depending upon the Partnership’s rights or obligations under the applicable derivative contract.

For derivatives designated and qualifying as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings.

For derivatives designated as cash flow hedges, the effective portions of the derivative are reported in other comprehensive income (“OCI”) and are subsequently reclassified into earnings when the hedged item affects earnings.

Changes in fair value of derivative instruments not designated as hedging and ineffective portions of hedges are recognized in earnings in the affected period.

Income Taxes:

The financial statements have been prepared on the basis that NERA and its subsidiaries are entitled to tax treatment as partnerships.

Accordingly, no provision for income taxes have been recorded (See Note 14).

Accordingly, no provision for income taxes has been recorded (See Note 14).

Cash Equivalents:

1 unchanged sentence

Investments in Treasury Bills:

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

Investments in U.S.

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

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

5 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 $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.

NERA had comprehensive income of approximately $142,000 and a comprehensive loss of approximately $166,000 for the three months ended March 31, 2024 and 2023, respectively.

Income (Loss) Per Depositary Receipt:

9 unchanged sentences

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

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 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.

At March 31, 2024, substantially all of the Partnership’s cash and cash equivalents were held in interest-bearing accounts at financial institutions, earning interest at rates from 0.01 % to 4.07 %.

At March 31, 2024 and December 31, 2023, respectively approximately $ 29,025,000 , and $ 18,711,000 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 $ 281,000 and $ 190,000 for the nine months ended September 30, 2023, and 2022, respectively.

Advertising expense was approximately $ 152,000 and $ 109,000 for the three months ended March 31, 2024, and 2023, 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, 2023, and 2022 there was no capitalized interest.

During the three months ended March 31, 2024, and 2023 there was no capitalized interest.

Extinguishment of Debt:

5 unchanged sentences

RENTAL PROPERTIES

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”).

As of March 31, 2024, the Partnership and its Subsidiary Partnerships owned 2,943 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 September 30, 2023, the Partnership and Subsidiary Partnerships owned two commercial shopping centers in Framingham and commercial buildings in Newton and Brookline.

Additionally, as of March 31, 2024, the Partnership and Subsidiary Partnerships owned two commercial shopping centers in Framingham, commercial buildings in Newton and Brookline and commercial space in 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, 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 March 31, 2024 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 .

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 $ 59,000 .

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

These amounts are being amortized over 12 and 156 months respectively.

On July 14, 2023, the Partnership purchased a 52 unit mixed use property in the South End neighborhood of Boston, Massachusetts 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 .

From the purchase price, the Partnership allocated approximately $ 525,000 for in-place leases, approximately $ 61,000 to the value of tenant relationships and $ 241,000 to the value of below-market leases.

These amounts are being amortized over 12 and 36 months respectively.

In December, 2023, the Partnership received approval from MassHousing to construct a 72 unit apartment building in accordance with Chapter 40B to include 17 affordable units on the Mill Street Development site.

In order to initiate construction, the Partnership demolished the existing building structures and started construction in January 2024.

In order to comply with the permanent financing requirements for a 40B project, Mill Street Development signed a term sheet for a loan of up to $ 15 million, to be funded upon completion of the development project.

In addition, Mill Street Development deposited $ 75,000 into escrow to comply with the 40B project requirement of a cost certification of total development costs upon completion of the project.

Total expected construction costs for the project are expected to be approximately $ 30,000,000 with construction completion anticipated during the fourth quarter of 2025.

Rental properties consist of the following:

September 30, 2023

March 31, 2024

December 31, 2023

1 unchanged sentence

Buildings and improvements

Construction in progress

Kitchen cabinets

12 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 $ 2,173,000 and $ 2,029,000 for the nine months ended September 30, 2023 and 2022, respectively.

Total fees paid were approximately $ 789,000 and $ 698,000 for the three months ended March 31, 2024 and 2023, 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, 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.

During the three months ended March 31, 2024 and 2023, approximately $ 206,000 and $ 493,000 was charged to NERA for legal, accounting, construction, maintenance, brokerage fees, rental and architectural services and supervision of capital improvements.

Of the 2024 expenses referred to above, approximately $ 22,000 consisted of repairs and maintenance, and $ 79,000 of administrative expense.

Approximately $ 105,000 of expenses for construction, architectural services and supervision of capital projects were capitalized in rental properties.

Additionally in 2023, the Hamilton Company received approximately $ 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.

Additionally in 2024, the Hamilton Company received approximately $ 213,000 from the Investment Properties of which approximately $ 188,000 was the management fee, approximately $ 18,000 for construction, architectural services, and supervision of capital projects, and approximately $ 2,000 for repairs and maintenance, and approximately $ 5,000 for legal expense.

The management fee is equal to 4 % of gross receipts of rental income on the majority of the 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 $ 3,210,000 and $ 2,945,000 for the nine months ended September 30, 2023 and 2022, respectively.

Total reimbursement was approximately $ 1,100,000 and $ 1,114,000 for the three months ended March 31, 2024 and 2023, 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, 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 .

For the three months ended March 31, 2024, the Partnership accrued $ 16,000 for the employer’s match portion to the plan.

For the three months ended March 31, 2023, the Partnership contributed $ 16,000 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, 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.

During the three months ended March 31, 2024 and 2023, 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 $ 80,000 and $ 68,000 for the nine months ended September 30, 2023 and 2022 respectively.

Saul Ewing billed the Partnership for legal fees totaling approximately $ 46,000 and $ 37,000 for the three months ended March 31, 2024 and 2023, 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 $ 3,687,000 , and $ 3,406,000 of security deposits are included in prepaid expenses and other assets at September 30, 2023 and December 31, 2022, respectively.

Approximately $ 3,582,000 , and $ 3,601,000 of security deposits are included in prepaid expenses and other assets at March 31, 2024 and December 31, 2023, respectively.

The security deposits and escrow accounts are restricted cash.

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.

Also, included in prepaid expenses and other assets at March 31, 2024 and December 31, 2023 is approximately $ 1,903,000 and $ 1,784,000 , respectively, held in escrow to fund future capital improvements.

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.

Intangible assets are approximately $ 530,000 and $ 677,000 net of accumulated amortization of approximately $ 1,019,000 and $ 872,000 at March 31, 2024, and at December 31, 2023, respectively.

Financing fees in association with the line of credit of approximately $ 36,000 and $ 52,000 are net of accumulated amortization of approximately $ 146,000 and $ 130,000 at March 31, 2024 and December 31, 2023 respectively.

MORTGAGE NOTES PAYABLE

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.

At March 31, 2024 and December 31, 2023, 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, 2024, 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, 2023, the weighted average interest rate on the above mortgages was 3.68 %.

At March 31, 2024, the weighted average interest rate on the above mortgages was 3.68 %.

The effective rate of 3.77 % 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 $ 2,874,000 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.

Financing fees of approximately $ 2,684,000 and $ 2,779,000 are net of accumulated amortization of approximately $ 1,448,000 and $ 1,353,000 at March 31, 2024 and December 31, 2023, 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, 2023 are as follows:

Approximate annual maturities at March 31, 2024 are as follows:

2025—current maturities

unamortized deferred financing costs

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

The additional advance under the Amended Agreement is in the amount of $ 80,284,000 , at a fixed interest rate of 4.33 %.

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

The Partnership used the proceeds to pay down approximately $ 37,065,000 of existing debt secured by four properties, along with approximately $ 834,000 in prepayment penalties.

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 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

On July 31, 2014, the Partnership entered into an agreement for a $ 25,000,000 revolving line of credit.

The term of the line was for three years with a floating interest rate equal to a base rate of the greater of (a) the Prime Rate (b) the Federal Funds Rate plus one -half of one percent per annum, or (c) the LIBOR Rate for a period of one month plus 1 % per annum, plus the applicable margin of 2.5 %.

per annum, plus the applicable margin of 2.5 %.

The agreement originally expired on July 31, 2017, and was extended until October 31, 2020.

7 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 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 of March 31, 2024, the portfolio’s debt yield fell below the minimum of 9.5 % to 9.0 %, 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.

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

The Partnership is currently in discussions with a lender for a replacement line of credit.

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

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

7 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, 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.

At March 31, 2024, amounts received for prepaid rents of approximately $ 3,158,000 are included in cash and cash equivalents, and security deposits of approximately $ 3,582,000 are included in prepaid expenses and other assets and are restricted cash.

PARTNERS’ CAPITAL

2 unchanged sentences

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

In January 2023, the Partnership approved a quarterly distribution of $ 9.60 per Unit ($ 0.32 per Receipt), payable on March 31, 2023.

In March 2024, the Partnership approved a quarterly distribution of $ 12.00 per Unit ($ 0.40 per Receipt), payable on March 28, 2024.

In addition to the quarterly distribution, there was a special distribution of $ 48.00 per Class A unit ($ 1.60 per Receipt) payable on March 28, 2024.

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 .

In 2023 the Partnership paid a total distribution of an aggregate $ 84.00 per Unit ($ 2.80 per Receipt) for a total payment of $ 9,954,888 .

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,

Three Months Ended

Net Income per Depositary Receipt

1 unchanged sentence

TREASURY UNITS

Treasury Units at September 30, 2023 are as follows:

Treasury Units at March 31, 2024 are as follows:

General Partnership

5 unchanged sentences

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

From August 20, 2007 through September 30, 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.

From August 20, 2007 through March 31, 2024, the Partnership has repurchased 1,535,092 Depositary Receipts at an average price of $ 31.40 per receipt (or $ 942.04 per underlying Class A Unit), 4,416 Class B Units and 233 General Partnership Units, both at an average price of $ 1,263.00 per Unit, totaling approximately $ 54,674,000 including brokerage fees paid by the Partnership .

During the three months ended March 31, 2024, the Partnership purchased a total of 2,858 Depositary Receipts.

The average price was $ 70.69 per receipt, or $ 2,120.70 per unit.

6 unchanged sentences

RENTAL INCOME

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.

During the three months ended March 31, 2024, 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 September 30, 2023 as follows:

Approximately 6 % was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at March 31, 2024 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 $ 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.

respectively, are approximately 21 % of the total commercial rental income.

Aggregate contingent rentals from continuing operations were approximately $ 211,000 and $ 147,000 for the three months ended March 31, 2024 and 2023 respectively.

Trader Joe’s and Walgreen’s, tenants at Staples Plaza and 653 Worcester Road, Framingham, Massachusetts respectively, are approximately 16 % 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 $ 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.

Rents receivable are net of an allowance for doubtful accounts of approximately $ 1,043,000 and $ 1,195,000 at March 31, 2024 and December 31, 2023.

Included in rents receivable at March 31, 2024 is approximately $ 538,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.

CASH FLOW INFORMATION

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.

During the three months ended March 31, 2024 and 2023, cash paid for interest was approximately $ 3,814,000 , and $ 3,754,000 respectively.

Cash paid for state income taxes was approximately $ 53,000 and $ 4,000 during the three months ended March 31, 2024 and 2023, respectively.

FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

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.

At March 31, 2024 and December 31, 2023, 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, 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.

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

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

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

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

At September 30, 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 March 31, 2024 and December 31, 2023 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 U.S.

Treasury bills, some of which mature over a period greater than 90 days and are classified as short-term investments.

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

The carrying value of the U.S.

Treasury bills are adjusted for accretion of discounts over the remaining life of the investment.

Income related to the U.S.

Treasury bills is recognized in interest income in the Partnership’s consolidated statement of income.

Treasury bills classified within Level I of the fair value hierarchy.

At March 31, 2024 and December 31, 2023 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 September 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 March 31, 2024 and December 31, 2023, 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 September 30, 2023 and at December 31, 2022 the Partnership’s line of credit had an outstanding balance of zero .

At March 31, 2024 and at December 31, 2023, 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.

September 30, 2023

March 31, 2024

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 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.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of March 31, 2024 and December 31, 2023.

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, 2024 and current estimates of fair value may differ significantly from the amounts presented herein.

DERIVATIVE FINANCIAL INSTRUMENTS

6 unchanged sentences

During the next 12 months, the Partnership estimates $ 123,000 will be reclassified as a decrease to interest expense .

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.

As of March 31, 2024, the Partnership had one interest rate swap outstanding with a notional amount of approximately $ 378,000 designated as cash flow hedges of interest rate risk.

As of March 31, 2024, 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 March 31, 2024 and December 31, 2023.

Asset Derivatives designated

September 30,

as hedging instruments

2 unchanged sentences

Prepaid Expenses and Other Assets

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

The table below presents the effect the Partnership’s derivative financial instruments on the consolidated statements of income for the quarters ended March 31, 2024 and 2023.

Derivatives in Cash Flow Hedging Relationships

Amount of Gain

Total Amount of

or (Loss) Recognized

in OCI on Derivative

Location of Gain

Interest Expense

OCI Into Income

Amount of Gain

OCI into Income

Location of Gain

or (Loss) Recognized

Total Amount of

Interest Expense

presented in the

Derivatives in Cash Flow

or (Loss) Recognized

from Accumulated

consolidated statements

Hedging Relationships

in OCI on Derivative

OCI Into Income

OCI into Income

of operations

Three Months Ended September 30,

Interest rate swaps

Interest expense

Interest and other investment income (loss)

( 3,956,182 )

( 3,982,445 )

Nine Months Ended September 30,

Quarter Ended March 31,

Interest rate swaps

6 unchanged sentences

Federal taxable income of approximately $ 9,989,000 was approximately $ 1,535,000 more than statement income for the year ended December 31, 2023.

The Federal cumulative tax basis of the Partnership’s real estate at December 31, 2022 is approximately $ 14,000,000 more than the statement basis.

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

The Federal cumulative tax basis of the Partnership’s real estate at December 31, 2023 is approximately $ 8,000,000 less than the statement basis.

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

The Partnership’s Federal tax basis in its joint venture investments is approximately $ 6,000,000 more than statement basis.

6 unchanged sentences

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

As of September 30, 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 March 31, 2024, the tax years that generally remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2020 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 September 30, 2023, the balance on this mortgage before unamortized deferred financing costs is $ 125,000,000 .

At March 31, 2024, 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, 2023, the balance on this mortgage before unamortized deferred financing costs is $ 10,000,000 .

At March 31, 2024, 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;

4 unchanged sentences

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

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

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

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

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

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

At March 31 2024, 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, 2023, the balance of the mortgage before unamortized deferred finance is $ 16,900,000 .

At March 31, 2024, 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.

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

On March 8, 2024, the Borrower received notice from KeyBank that it was providing ex-post facto consent to the transfer of interest subject to certain conditions being met by the Borrower.

The Partnership’s share of costs associated with the transfer of interests in the Borrower was approximately $ 107,000 .

On April 18, 2024 the Borrower and KeyBank executed amended loan documents reflecting the transfer of interest in the Borrower.

In conjunction with the execution of the amended loan documents, KeyBank provided a courtesy reduction equal to 50 % of the transfer fee.

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

At March 31, 2024, the balance of this mortgage before unamortized deferred financing costs is approximately $ 8,424,000 .

This investment is referred to as 345 Franklin, LLC.

Summary financial information at September 30, 2023

Summary financial information at March 31,2024

Rental Properties

27 unchanged sentences

Total units/condominiums

Units to be retained

Units to be sold

Units sold through November 1, 2023

Financial information for the nine months ended September 30, 2023

Financial information for the three months ended March 31, 2024

Rental Income

10 unchanged sentences

( 1,831,139 )

Interest Income

( 1,276,133 )

3 unchanged sentences

Net Income —NERA 40 %

Financial information for the three months ended September 30, 2023

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

( 1,257,252 )

( 1,789,373 )

( 1,257,252 )

( 1,789,373 )

Net Income (Loss)

Net Income (Loss)—NERA 50 %

Net Income —NERA 40 %

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

Future annual mortgage maturities at March 31, 2024 are as follows:

unamortized deferred financing costs

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

At March 31, 2024, 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 September 30, 2022

Summary financial information at March 31, 2023

Rental Properties

27 unchanged sentences

Total units/condominiums

Units to be retained

Units to be sold

Units sold through November 1, 2022

Financial information for the nine 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

( 3,817,865 )

( 5,083,912 )

( 3,817,865 )

( 5,083,912 )

Net Income (Loss)

Net Income (Loss)—NERA 50 %

Net Income —NERA 40 %

Financial information for the three months ended September 30, 2022

Financial information for the three months ended March 31, 2023

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 nine months ended September 30, 2023 was $ 48,000 .

Total expense recognized by the Partnership for the 401(k) Plan for the three months ended March 31, 2024 was $ 16,000 .

IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures ("ASU 2023-07").

The guidance requires incremental disclosures related to a public entity’s reportable segments.

ASU 2023-07 is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted.

The Partnership is currently evaluating the impact of adopting ASU 2023-07 will have on the Partnership's consolidated financial statements.

SUBSEQUENT EVENTS

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

From April 1, 2024, through May 8, 2024, the Partnership has purchased 1,764 Depository Receipts .

The average price was $ 70.51 per receipt, or $ 2,115.30 per unit.

1 unchanged sentence

The Partnership is required to purchase 14 Class B units and 0.7 General Partnership units at a cost of $ 29,016 and $ 1,527 , respectively.

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

On May 8, 2024, the Partnership approved a quarterly distribution of $ 12.00 per Unit ($ 0.40 per Receipt), payable on June 28, 2024.

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

On March 8, 2024, the Borrower received notice from KeyBank that it was providing ex-post facto consent to the transfer of interest subject to certain conditions being met by the Borrower.

The Partnership’s share of costs associated with the transfer of interests in the Borrower was approximately $ 107,000 .

On April 18, 2024, the Borrower and KeyBank executed amended loan documents reflecting the transfer of interest in the Borrower.

In conjunction with the execution of the amended loan documents, KeyBank provided a courtesy reduction equal to 50 % of the transfer fee.

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