Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

Form 10-Q

 

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2009

OR

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to

 

Commission file number 0-12138

 


 

New England Realty Associates Limited Partnership

(Exact name of registrant as specified in its charter)

 

Massachusetts
(State or other jurisdiction of incorporation or organization)

 

04-2619298
(I.R.S. employer identification no.)

 

 

 

39 Brighton Avenue,
Allston, Massachusetts
(Address of principal executive offices)

 

02134
(Zip code)

 

Registrant’s telephone number, including area code: (617) 783-0039

 

Securities registered pursuant to Section 12(b) of the Act:

 

Depositary Receipts
(Title of each Class)

 

American Stock Exchange
(Name of each Exchange on which Registered)

 

Securities registered pursuant to Section 12(g) of the Act:

 

Class A

Limited Partnership Units

(Title of class)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  o    No  o     (the Registrant is not yet required to submit Interactive Data)

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer x

 

Non-accelerated filer o
(Do not check if a smaller reporting company)

 

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x

 

As of July 28, 2009, there were 106,227 Class A units (1,062,272 Depositary Receipts) 25,229 Class B units of limited partnership units and 1,327 of General Partnership units issued and outstanding.

 

 

 



Table of Contents

 

INDEX

 

 

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008

 

 

 

 

 

Consolidated Statements of Income for the Three Months Ended June 30, 2009 and June 30, 2008, and the Six Months Ended June 30, 2009 and June 30, 2008

 

 

 

 

 

Consolidated Statement of Changes in Partners’ Capital for the Six Months Ended June 30, 2009 and 2008

 

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008

 

 

 

 

 

Notes to Financial Statements

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

 

 

Item 4.

Controls and Procedures

 

 

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

 

 

 

 

Item 1A.

Risk Factors

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

 

 

 

 

Item 5.

Other Information

 

 

 

 

Item 6.

Exhibits

 

 

 

 

SIGNATURES

 

 

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Table of Contents

 

NEW ENGLAND REALTY ASSOCIATES, L.P.

 

PART 1 — FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

The accompanying unaudited consolidated balance sheets, statements of income, changes in partners’ capital, and cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements.  The financial statements reflect all adjustments consisting only of normal, recurring adjustments, which are in the opinion of management, necessary for a fair presentation for the interim periods.

 

The consolidated balance sheet as of December 31, 2008 has been derived from the audited consolidated balance sheet at that date but does not include all of the information and footnotes required by U.S. 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 Form 10-K for the fiscal year ended December 31, 2008.

 

The results of operations for the six  month period ended June 30, 2009 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

 

(Unaudited)

 

 

 

June 30, 2009

 

December 31, 2008

 

ASSETS

 

 

 

 

 

Rental Properties

 

$

96,960,962

 

$

98,560,454

 

Cash and Cash Equivalents

 

11,050,265

 

10,752,931

 

Rents Receivable

 

625,306

 

553,392

 

Real Estate Tax Escrows

 

271,490

 

275,619

 

Prepaid Expenses and Other Assets

 

2,646,849

 

3,018,714

 

Investments in Unconsolidated Joint Ventures

 

10,300,823

 

11,023,611

 

Financing and Leasing Fees

 

1,001,986

 

1,058,736

 

Total Assets

 

$

122,857,681

 

$

125,243,457

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

Mortgage Notes Payable

 

$

137,750,601

 

$

138,160,262

 

Accounts Payable and Accrued Expenses

 

1,309,517

 

1,592,610

 

Advance Rental Payments and Security Deposits

 

3,355,764

 

3,207,767

 

Total Liabilities

 

142,415,882

 

142,960,639

 

Commitments and Contingent Liabilities (Note 9)

 

 

 

 

 

Partners’ Capital 132,783 and 135,251 units outstanding in 2009 and 2008, respectively

 

(19,558,201

)

(17,717,182

)

Total Liabilities and Partners’ Capital

 

$

122,857,681

 

$

125,243,457

 

 

See notes to consolidated financial statements.

 

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Table of Contents

 

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME

 

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

Rental income

 

$

8,179,090

 

$

7,934,836

 

$

16,544,672

 

$

15,857,659

 

Laundry and sundry income

 

97,257

 

97,854

 

192,370

 

206,998

 

 

 

8,276,347

 

8,032,690

 

16,737,042

 

16,064,657

 

Expenses

 

 

 

 

 

 

 

 

 

Administrative

 

386,417

 

456,450

 

852,347

 

882,239

 

Depreciation and amortization

 

1,504,877

 

1,609,953

 

2,921,497

 

3,228,609

 

Management fees

 

333,898

 

330,190

 

676,787

 

652,470

 

Operating

 

868,593

 

928,163

 

2,374,329

 

2,332,615

 

Renting

 

83,170

 

106,654

 

144,129

 

186,865

 

Repairs and maintenance

 

1,167,345

 

1,204,625

 

2,145,631

 

2,244,691

 

Taxes and insurance

 

926,639

 

861,150

 

1,891,506

 

1,770,140

 

 

 

5,270,939

 

5,497,185

 

11,006,226

 

11,297,629

 

Income Before Other Income and Discontinued Operations

 

3,005,408

 

2,535,505

 

5,730,816

 

4,767,028

 

Other Income (loss)

 

 

 

 

 

 

 

 

 

Interest income

 

14,228

 

32,253

 

32,591

 

80,622

 

Interest expense

 

(1,962,093

)

(1,917,353

)

(3,907,240

)

(3,843,212

)

Casualty loss

 

 

(4,151

)

 

(4,151

)

Gain on the sale of equipment

 

 

 

4,190

 

 

Mortgage prepayment penalties

 

 

(785,538

)

 

(4,487,706

)

(Loss) from investment in unconsolidated joint ventures

 

(281,733

)

(217,213

)

(555,288

)

(465,018

)

 

 

(2,229,598

)

(2,892,002

)

(4,425,747

)

(8,719,465

)

Income (loss) from Continuing Operations

 

775,810

 

(356,497

)

1,305,069

 

(3,952,437

)

Discontinued Operations

 

 

 

 

 

 

 

 

 

Gain (loss) on the sale of real estate

 

2,165

 

3,937,551

 

(7,009

)

9,990,942

 

(Loss) from discontinued operations

 

 

(7,408

)

 

(34,855

)

 

 

2,165

 

3,930,143

 

(7,009

)

9,956,087

 

Net Income

 

$

777,975

 

$

3,573,646

 

$

1,298,060

 

$

6,003,650

 

Income per Unit

 

 

 

 

 

 

 

 

 

Income (loss) before discontinued operations

 

$

5.84

 

$

(2.70

)

$

9.77

 

$

(28.06

)

Income (loss) from discontinued operations

 

0.02

 

29.72

 

(0.05

)

70.68

 

Net Income per Unit

 

$

5.86

 

$

27.02

 

$

9.72

 

$

42.62

 

Weighted Average Number of Units Outstanding

 

132,784

 

132,254

 

133,489

 

140,875

 

 

See notes to consolidated financial statements.

 

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

 

(Unaudited)

 

 

 

Unit

 

Partner’s Capital

 

 

 

Limited

 

General

 

 

 

Treasury

 

 

 

Limited

 

General

 

 

 

 

 

Class A

 

Class B

 

Partnership

 

Subtotal

 

Units

 

Total

 

Class A

 

Class B

 

Partnership

 

Total

 

Balance, January 1, 2008

 

144,180

 

34,243

 

1,802

 

180,225

 

14,109

 

166,116

 

$

1,052,816

 

$

1,531,414

 

$

80,629

 

$

2,664,859

 

Distribution to Partners

 

 

 

 

 

 

 

(1,514,276

)

(359,640

)

(18,929

)

(1,892,845

)

Stock Buyback

 

 

 

 

 

 

 

 

 

25,439

 

(25,439

)

(19,744,831

)

 

 

(19,744,831

)

Net Income

 

 

 

 

 

 

 

4,802,920

 

1,140,691

 

60,037

 

6,003,650

 

Balance June 30, 2008

 

144,180

 

34,243

 

1,802

 

180,225

 

39,548

 

140,677

 

$

(15,403,371

)

$

2,312,467

 

$

121,737

 

$

(12,969,167

)

Balance January 1, 2009

 

144,180

 

34,243

 

1,802

 

180,225

 

44,974

 

135,251

 

$

(14,173,745

)

$

(3,366,265

)

$

(177,172

)

$

(17,717,182

)

Distribution to Partners

 

 

 

 

 

 

 

(1,488,791

)

(353,588

)

(18,610

)

(1,860,989

)

Stock Buyback

 

 

 

 

 

2,468

 

(2,468

)

(1,025,734

)

(239,738

)

(12,618

)

(1,278,090

)

Net Income

 

 

 

 

 

 

 

1,038,448

 

246,631

 

12,981

 

1,298,060

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30 , 2009

 

144,180

 

34,243

 

1,802

 

180,225

 

47,442

 

132,783

 

$

(15,649,822

)

$

(3,712,960

)

$

(195,419

)

$

(19,558,201

)

 

See notes to consolidated financial statements.

 

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

Net income

 

$

1,298,060

 

$

6,003,650

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities

 

 

 

 

 

Depreciation and amortization

 

2,921,497

 

3,228,609

 

Loss from investment in joint ventures

 

555,288

 

465,018

 

Gain on the sale of equipment

 

(4,190

)

 

 

Income from the sale of real estate from discontinued operations

 

 

(9,990,942

)

Changes in operating assets and liabilities

 

 

 

 

 

(Increase) in rents receivable

 

(71,914

)

(88,527

)

(Decrease) in accounts payable and accrued expense

 

(283,094

)

(499,309

)

Decrease in real estate tax escrow

 

4,129

 

202,346

 

(Increase) Decrease in prepaid expenses and other assets

 

371,865

 

(3,082,194

)

Increase in advance rental payments and security deposits

 

147,997

 

50,610

 

Total Adjustments

 

3,641,578

 

(9,714,389

)

Net cash provided by (used in) operating activities

 

4,939,638

 

(3,710,739

)

Cash Flows provided by (used in) Investing Activities

 

 

 

 

 

Net proceeds from the sale of equipment

 

20,648

 

 

Net proceeds from the sale of rental properties

 

 

7,222,454

 

Proceeds from joint ventures

 

167,500

 

2,575,000

 

Purchase and improvement of rental properties

 

(1,275,163

)

(1,305,863

)

Net cash provided by (used in) investing activities

 

(1,087,015

)

8,491,591

 

Cash Flows provided by (used in) Financing Activities

 

 

 

 

 

Payment of mortgage notes payable

 

 

(3,224,419

)

Payment of financing costs

 

(6,549

)

(867,377

)

Principal payments of mortgage notes payable

 

(409,661

)

(389,795

)

Stock buyback

 

(1,278,090

)

(19,744,831

)

Proceeds of mortgage notes payable

 

 

27,127,100

 

Distributions to partners

 

(1,860,989

)

(1,892,845

)

Net cash provided by (used in) financing activities

 

(3,555,289

)

1,007,833

 

Net Increase in Cash and Cash Equivalents

 

297,334

 

5,788,685

 

Cash and Cash Equivalents, at beginning of period

 

10,752,931

 

6,890,525

 

Cash and Cash Equivalents, at end of period

 

$

11,050,265

 

$

12,679,210

 

 

See notes to consolidated financial statements.

 

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

JUNE 30, 2009

 

(UNAUDITED)

 

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

 

Line of Business:  New England Realty Associates Limited Partnership (“NERA” or the “Partnership” or the “Company”) was organized in Massachusetts in 1977. NERA and its subsidiaries own and operate various residential apartment buildings, condominium units and commercial properties located in Massachusetts and New Hampshire. NERA has also made investments in other real estate partnerships and has participated in other real estate-related activities, primarily located in Massachusetts.

 

Principles of Consolidation: The consolidated financial statements include the accounts of NERA and its subsidiaries. NERA has a 99.67% to 100% ownership interest in each subsidiary except for the eight limited liability companies (the “Investment Properties” or “Joint Ventures”) in which the Partnership has a 50% ownership interest. The consolidated group is referred to as the “Partnerships.” Minority interests are not recorded, since they are insignificant. All significant intercompany accounts and transactions are eliminated in consolidation. The Partnership accounts for its investment in the above-mentioned Investment Properties using the equity method of consolidation. (See Note 14: Investments in Unconsolidated Joint Ventures).

 

The Partnership accounts for its investments in joint ventures for which Financial Accounting Standards (“FASB”) Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46”) does not apply under the equity method of accounting as the company exercises significant influence, but does not control these entities. These investments are recorded initially at cost, as Investments in Unconsolidated Joint Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions.

 

Impairment:  On an annual basis management assesses whether there are any indicators that the value of the Company’s rental properties may be impaired.  A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property.  To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property.  The Company’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property.  As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved. The Partnership has not recognized an impairment loss since 1995.

 

Accounting Estimates: The preparation of the financial statements, in conformity with accounting principles generally accepted in the United State of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Accordingly, actual results could differ from those estimates.

 

Revenue Recognition:  Rental income from residential and commercial properties is recognized over the term of the related lease. For residential tenants, amounts 60 days in arrears are charged against income. The commercial tenants are evaluated on a case by case basis. Certain leases of the commercial properties provide for increasing stepped minimum rents, which are accounted for on a straight-line basis over the term of the lease.

 

Rental Properties:  Rental properties are stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred; improvements and additions are capitalized. When assets are retired or otherwise disposed of, the cost of the asset and related accumulated depreciation is eliminated from the accounts, and any gain or loss on such disposition is included in income. Fully depreciated assets are removed from the accounts. Rental properties are depreciated by

 

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both straight-line and accelerated methods over their estimated useful lives. Significant acquisitions with long term leases are evaluated to determine if a portion of the purchase price is allocable to intangibles such as non market rate rents.

 

In the event that facts and circumstances indicate that the carrying value of a rental property may be impaired, an analysis of the value is prepared. The estimated future undiscounted cash flows are compared to the asset’s carrying value to determine if a write-down to fair value is required.

 

Financing and Leasing Fees: Financing fees are capitalized and amortized, using the interest method, over the life of the related mortgages. Leasing fees are capitalized and amortized on a straight-line basis over the life of the related lease. Unamortized balances are expensed when the corresponding fee is no longer applicable.

 

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 has been recorded.

 

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

 

Segment Reporting: Operating segments are revenue-producing components of the Partnership for which separate financial information is produced internally for management. Under the definition, NERA operated, for all periods presented, as one segment.

 

Comprehensive Income: Comprehensive income is defined as changes in partners’ equity, exclusive of transactions with owners (such as capital contributions and dividends). NERA did not have any comprehensive income items in 2009 or 2008 other than net income as reported.

 

Income Per Unit: Net income per unit has been calculated based upon the weighted average number of units outstanding during each period presented. The Partnership has no dilutive units and, therefore, basic net income is the same as diluted net income per unit (see Note 7).

 

Concentration of Credit Risks and Financial Instruments: The Partnership’s properties are located in New England, and the Partnership is subject to the general economic risks related thereto. No single tenant accounted for more than 5% of the Partnership’s revenues in 2009 or 2008. The Partnership makes its temporary cash investments with high-credit-quality financial institutions. At June 30, 2009, 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 .15 % to 1.44 %. At June 30, 2009 and December 31, 2008, respectively approximately $9,500,000 and $10,300,000 of cash and cash equivalents, and cash included in prepaid expenses and other assets exceeded federally insured amounts.

 

Advertising Expense: Advertising is expensed as incurred. Advertising expense was $38,466 and $39,720 for the six months ended June 30, 2009 and 2008, respectively.

 

Discontinued Operations and Rental Property Held for Sale:  When assets are identified by management as held for sale, the Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. If, in management’s opinion, the net sales price of the assets which have been identified as held for sale is less than the net book value of the assets, a valuation allowance is established. Properties identified as held for sale and/or sold are presented in discontinued operations for all periods presented.

 

If circumstances arise that previously were considered unlikely and, as a result, the Partnership decides not to sell a property previously classified as held for sale, the property is reclassified as held and used. A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the property been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell.

 

Interest Capitalized: The Company 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, 2009 and the year ended December 31, 2008, there was no capitalized interest.

 

Extinguishment of Debt: When existing mortgages are refinanced with the same lender, EITF 96-19 “Debtors Accounting for a Modification or exchange of Debt Instruments” requires they be analyzed.  If it is determined that the

 

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refinancing is substantially different then they will be recorded as an extinguishment of debt.  However if it is determined that the refinancing is substantially the same then they will be recorded as an exchange of debt. All refinancings qualify as extinguishment of debt.

 

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

 

Subsequent Events:  The Company has evaluated subsequent events through August 7, 2009, the date the financial statements were issued.

 

NOTE 2. RENTAL PROPERTIES

 

As of June 30, 2009, the Partnership and its Subsidiary Partnerships owned 2,269 residential apartment units in 19 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, 2009, the Partnership and Subsidiary Partnerships owned a commercial shopping center in Framingham, commercial buildings in Newton and Brookline and mixed-use properties in Boston, Brockton and Newton, all in Massachusetts. These properties are referred to collectively as the “Commercial Properties.”

 

The Partnership also owned a 50% ownership interest in eight residential and mixed use complexes (the “Investment Properties”) at June 30, 2009 with a total of 392 units, accounted for using the equity method of consolidation. See Note 14 for summary information on these investments.

 

Rental properties consist of the following:

 

 

 

June  30, 2009

 

December 31, 2008

 

Useful Life

 

Land, improvements and parking lots

 

$

26,001,653

 

$

25,997,753

 

15-40 years

 

Buildings and improvements

 

110,581,526

 

110,467,865

 

15-40 years

 

Kitchen cabinets

 

4,478,227

 

4,254,120

 

5-10 years

 

Carpets

 

3,833,691

 

3,650,238

 

5-10 years

 

Air conditioning

 

907,746

 

900,610

 

7-10 years

 

Laundry equipment

 

468,253

 

216,629

 

5-7 years

 

Elevators

 

984,506

 

984,506

 

20 years

 

Swimming pools

 

152,000

 

126,275

 

10 years

 

Equipment

 

1,942,855

 

1,690,142

 

5-7 years

 

Motor vehicles

 

170,445

 

139,453

 

5 years

 

Fences

 

163,907

 

163,907

 

5-10 years

 

Furniture and fixtures

 

1,767,652

 

1,641,487

 

5-7 years

 

Smoke alarms

 

114,262

 

111,814

 

5-7 years

 

 

 

151,566,723

 

150,344,799

 

 

 

Less accumulated depreciation

 

(54,605,761

)

(51,784,345

)

 

 

 

 

$

96,960,962

 

$

98,560,454

 

 

 

 

On January 3, 2008, the Partnership sold the Oak Ridge Apartments, a 61-unit residential apartment complex located in Foxboro, Massachusetts. The sale price was $7,150,000, which resulted in a gain of approximately $6,000,000.  In November 2007, the Partnership purchased a fully occupied commercial building located in Newton, Massachusetts, known as Linewt LLC. The purchase price was $3,475,000 and the building consists of 5,850 square feet of commercial space. The Partnership utilized Section 1031 of the IRS code to affect a tax free exchange on the gain of Oak Ridge up to the purchase price of the Newton property. In accordance with Section 1031, the Newton property was owned by a Qualified Intermediary for the period from the purchase date of the Newton property and the sale date of the Foxboro property. The Qualified Intermediary borrowed $3,225,112 from Harold Brown, Treasurer of the General Partner, to purchase the Newton property. This loan was paid in full, with interest at 6% of $34,401, from the proceeds of the Oak Ridge sale on January 3, 2008. On January 22, 2008, the Partnership financed the Newton property with a first mortgage of $1,700,000 at 5.75% interest only until maturity in January 2018.

 

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In April 2008, the Partnership sold the Coach Apartments, a 48 unit residential apartment complex located in Acton, Massachusetts. The sale price was $4,600,000, which resulted in a gain of approximately $3,800,000 and recorded in the second quarter of 2008.  In October 2008, the Partnership purchased a fully occupied medical office building located in Brookline, Massachusetts, referred to as “the Barn.” The purchase price of the Barn was $7,000,000 and it consists 20,000 square feet of commercial space.  The Partnership utilized Section 1031 of the IRS code to affect a tax free exchange on the gain of Coach up to the purchase price of the Barn.  This acquisition was funded from the assumption of the existing mortgage of approximately $4,000,000, the cash from the sale of Coach of approximately $2,600,000, and the balance of $400,000 was funded from cash reserves.

 

As more fully described in Note 3, the Partnership sold the five condominiums located in Brookline, Massachusetts in 2008. The net proceeds from the sale of the five units were approximately $740,000 which resulted in a gain of approximately $240,000, which is included in gain from the sale of rental properties in the second and third quarter of 2008.

 

NOTE 3. RELATED PARTY TRANSACTIONS

 

The Partnership’s properties are managed by an entity that is owned by the majority shareholder of the General Partner. The management fee is equal to 4% of rental revenue and laundry income. Total fees paid were approximately $677,000 and $661,000 during the six months ended June 30, 2009 and 2008, respectively.

 

The Partnership Agreement permits the General Partner or management company to charge the costs of professional services (such as counsel, accountants and contractors) to NERA. During the six months ended June 30, 2009 and 2008, approximately $362,000 and $311,000 was charged to NERA for legal, accounting, construction, maintenance, rental and architectural services and supervision of capital improvements.  Of the 2009 expenses referred to above, approximately $173,000 consisted of repairs and maintenance and $168,000 of administrative expense. Approximately $21,000 of expenses for construction, architectural services and supervision of capital projects were capitalized in rental properties. Additionally in 2009, the Hamilton Company received approximately $206,000 from the Investment Properties of which approximately $136,000 was the management fee, approximately $600 was for construction supervision and architectural fees, approximately $61,000 was for maintenance services and approximately $8,000 was for administrative services

 

On January 1, 2004, all employees were transferred to the management company’s payroll. The Partnership reimburses the management company for the payroll and related expenses of the employees who work at the properties. Total reimbursement was approximately $1,115,000 and $1,108,000 for the six months ended June 30, 2009 and 2008, 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. There were no employer contributions in 2009 and 2008.

 

In 1996, prior to becoming an employee and President of the Management Company, the current President of the Management Company performed asset management consulting services to the Partnership. This individual continues to perform this service and receives an asset management fee from the Partnership, receiving $25,000 during the six months ended June 30, 2009 and 2008.

 

The Partnership has invested in eight limited partnerships, which have invested in mixed use residential apartment complexes. The Partnership has a 50% ownership interest in each investment. The other investors are Harold Brown, the President of the Management Company and five other employees of the Management Company. Harold Brown’s ownership interest is between 43.2% and 47.5%, with the balance of 6.8% and 2.5% owned by others. See Note 14 for a description of the properties and their operations.

 

On June 30, 2003, the Partnership purchased five condominium units in a 42-unit building located in Brookline, Massachusetts. These were purchased from Harvard 45 Associates LLC (“Harvard 45”) which is owned 70% by the 75% shareholder and treasurer of the General Partner, and 5% by the President of Hamilton. The total purchase price for these condominiums was approximately $2,416,000 and was approved both by the Partnership’s Advisory Committee and the General Partner. Harvard 45 realized a gain of approximately $648,000 from these sales. Harvard 45 also sold 16 units to unrelated parties; the prices for all 21 units sold were comparable.  The Partnership sold all of these units in 2008 and realized a gain of approximately $240,000.  The above mentioned gains are recorded as gain on the sale of real estate from discontinued operations.   In addition, the Partnership paid The Hamilton Company or its affiliate approximately $16,000 in legal fees and approximately $62,000 in commissions in connection with the sale of these condominiums in 2008.

 

The above 42-unit condominium building was managed by an entity wholly owned by the 25% shareholder and President of the General Partner. That entity received annual management fees from the five units of approximately $1,500, and

 

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Hamilton reduced its management fees to approximately 2%, so that the total management fee will not exceed the 4% allowed by the Partnership’s Partnership Agreement.

 

In March 2005, the Partnership sold the Middlesex Apartments to an entity wholly owned by the majority shareholder of the General Partner. The selling price was $6,500,000 which resulted in a capital gain for the Partnership of approximately $5,800,000 and an increase in the Partnership’s cash reserves of approximately $4,800,000 after paying off the existing $1,300,000 mortgage, prepayment penalties and other selling expenses. The buyer sold the property as condominium units. An entity 31% owned by the majority shareholder of the General Partner and 5% owned by the President of the management company was the sales agent and received a variable commission of 3% to 5% on each sale. Total commissions paid were approximately $138,000.  Although the buyer assumed the costs and economic risks of converting and selling the condominium units, if the net gain from the sale of these units exceeded $500,000, the excess were to be split equally between the buyer and Partnership.  The last remaining unit was sold in October 2008, which resulted in a gain of approximately $50,000.

 

On September 17, 2008, the Partnership completed the issuance of an aggregate of 6,642 Class A Units held in treasury to current holders of Class B and General Partner Units upon the simultaneous retirement to treasury of 6,309 Class B Units and 333 General Partner Units pursuant to an equity distribution plan authorized by the Board of Directors of the General Partner on August 8, 2008 and as further described under Item 3.02 of the Partnership’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on September 18, 2008, which is incorporated herein by reference. Harold Brown, the treasurer of the General Partner, owns 75% of the issued and outstanding Class B Units of the Partnership and 75% of the issued and outstanding equity of the General Partner, Ronald Brown, the brother of Harold Brown and the president of the General Partner, owns 25% of the issued and outstanding Class B Units of the Partnership and 25% of the issued and outstanding equity of the General Partner.

 

In 2008, the Partnership borrowed a total of approximately $8,510,000 from Harold Brown.  Approximately $5,285,000 was used to repurchase depositary receipts and approximately $3,225,000 was used to facilitate the purchase of Linewt.  These loans were repaid in 2008 with interest of approximately $72,300.

 

NOTE 4. OTHER ASSETS

 

As of June 30, 2009, approximately $1,440,000 and $1,382,000 of security deposits and prepaid rent deposits are included in prepaid expenses and other assets at June 30, 2009 and December 31, 2008, respectively.

 

Included in prepaid expenses and other assets at June 30, 2009 and December 31, 2008 is approximately $754,000 and $984,000, respectively, held in escrow to fund future capital improvements.

 

Financing and leasing fees of approximately $1,002,000 and $1,059,000 are net of accumulated amortization of approximately $420,000 and $363,000 at March 31, 2009 and December 31, 2008, respectively.

 

NOTE 5. MORTGAGE NOTES PAYABLE

 

At June 30, 2009 and December 31, 2008, 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, 2009, the fixed interest rates on these loans ranged from 4.84% to 8.46%, payable in monthly installments aggregating approximately $727,000, including principal, to various dates through 2023. The majority of the mortgages are subject to prepayment penalties.  At June 30, 2009, the weighted average interest rate on the above mortgages was 5.63%. The effective rate of 5.72% includes the amortization expense of deferred financing costs. See Note 12 for fair value information.

 

The Partnerships have pledged tenant leases as additional collateral for certain of these loans.

 

Approximate annual maturities at June 30, 2009 are as follows:

 

2010—current maturities

 

$

848,000

 

2011

 

4,473,000

 

2012

 

930,000

 

2013

 

19,785,000

 

2014

 

31,894,000

 

Thereafter

 

79,820,000

 

 

 

$

137,750,000

 

 

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In January 2008, the Partnership obtained a $1,700,000 mortgage on an unencumbered commercial property in Newton, Massachusetts known as Linewt LLC. The mortgage which matures in January 2018 requires interest only payments at 5.75% for the term of the mortgage.

 

In February 2008, the Partnership refinanced ten properties with outstanding 8.44% mortgages of approximately $37,800,000 with new mortgages totaling $58,000,000. The new mortgages which mature in February 2023 require interest only payments at interest rates from 5.6% to 5.7%. Deferred costs associated with these mortgages totaled approximately $710,000 and, accordingly, the effective interest rates are 5.7% to 5.8%. Prepayment penalties of approximately $3,700,000 were incurred in these transactions. After payment of existing mortgages, prepayment penalties and other costs of the transactions, approximately $16,000,000 was received by the Partnership.

 

In April 2008, the Partnership refinanced the property located at 659 Worcester Road with a mortgage balance of approximately $3,500,000 at 7.84% with a new $6,000,000 mortgage at 5.97% interest only mortgage which matures in March 2018. Deferred financing costs associated with this mortgage totaled approximately $86,000 and accordingly the effective interest rate is 6.1%. Prepayment penalties of approximately $783,000 were incurred in this transaction.  After payment of the existing mortgage and prepayment penalties, approximately $1,700,000 was received by the Partnership.

 

In June 2008, the Partnership refinanced the Westside Colonial Apartments with a balance of approximately $4,600,000 maturing in 2008 with interest at a rate of 6.52% with $7,000,000 at 5.66% interest only mortgage maturing in June 2023. Deferred financing costs associated with this mortgage totaled approximately $62,000 and accordingly the effective interest rate is 5.8%.  Closing costs were approximately $100,000. There were no prepayment penalties. After payment of the existing mortgage and closing costs, approximately $2,377,000 was received by the Partnership.

 

NOTE 6. ADVANCE RENTAL PAYMENTS AND SECURITY DEPOSITS

 

The Partnership’s residential lease agreements may require tenants to maintain a one-month advance rental payment and/or a security deposit. At June 30, 2009, amounts received for prepaid rents of approximately $1,526,000 are included in cash and cash equivalents, and security deposits of approximately $1,440,000 are included in other assets.

 

NOTE 7. PARTNERS’ CAPITAL

 

The Partnership has two classes of Limited Partners (Class A and B) and one category of General Partner. Under the terms of the Partnership Agreement, distributions to holders of Class B Units and General Partnership Units must represent 19% and 1%, respectively, of the total units outstanding. All classes have equal profit sharing and distribution rights, in proportion to their ownership interests.

 

In 2009 the Partnership approved quarterly distributions of $7.00 per unit ($0.70 per receipt) payable on March 31,  June 30, and September 30, 2009.

 

In 2008, the Partnership paid quarterly distributions of $7.00 per unit ($.70 per receipt) in March, June, September, and December for a total distribution of $28.00 per unit ($2.80 per receipt).

 

The Partnership has entered into a deposit agreement with an agent to facilitate public trading of limited partners’ interests in Class A Units. Under the terms of this agreement, the holders of Class A Units have the right to exchange each Class A Unit for 10 Depositary Receipts. The following is information per Depositary Receipt:

 

 

 

Six Months Ended
June 30,

 

 

 

2009

 

2008

 

Income (loss) per Depositary Receipt before Discontinued Operations

 

$

0.98

 

$

(2.81

)

Income (loss) from Discontinued Operations

 

(0.01

)

7.07

 

Net Income per Depositary Receipt after Discontinued Operations

 

$

0.97

 

$

4.26

 

Distributions per Depositary Receipt

 

$

1.40

 

$

1.40

 

 

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Table of Contents

 

NOTE 8. TREASURY UNITS

 

Treasury Units at June 30, 2009 are as follows:

 

Class A

 

37,953

 

Class B

 

9,014

 

General Partnership

 

475

 

 

 

47,442

 

 

On August 20, 2007, NewReal, Inc., the General Partner authorized an equity repurchase program (“Repurchase Program”) under which the Partnership was permitted to purchase, over a period of twelve months, up to 100,000 Depositary Receipts (each of which is one-tenth of a Class A Unit).  On January 15, 2008, the General Partner authorized an increase in the Repurchase Program from 100,000 to 200,000 Depositary Receipts. On January 30, 2008 the General Partner authorized an increase the Repurchase Program from 200,000 to 300,000 Depositary Receipts.  On March 6, 2008, the General Partner authorized the increase in the total number of Depositary Receipts that could be repurchased pursuant to the Repurchase Program from 300,000 to 500,000.  On August 8, 2008, the General Partner re-authorized and renewed the Repurchase Program for an additional 12-month period ending August 19, 2009.  In addition, the General Partner also authorized the expansion of the Repurchase Program to require the Partnership to repurchase a proportionate number of Class B Units and General Partner Units in connection with any repurchases of any Depositary Receipts by the Partnership based upon the 80%, 19% and 1% fixed distribution percentages of the holders of the Class A, Class B and General Partner Units under the Partnership’s Second Amended and Restate Contract of Limited Partnership.  Repurchases of Depositary Receipts or Partnership Units pursuant to the Repurchase Program may be made by the Partnership from time to time in its sole discretion in open market transactions or in privately negotiated transactions.  As of June 30, 2009, the Partnership has repurchased 387,924 Depositary Receipts at an average price of $74.22 per receipt (or $742.20 per underlying Class A Unit), 1,477 Class B Units and 78 General Partnership Units, both at an average price of $583.00 per Unit, totaling approximately $29,700,000 including brokerage fees paid by the Partnership.

 

On September 17, 2008, the Partnership completed the issuance of an aggregate of 6,642 Class A Units held in treasury to current holders of Class B and General Partner Units upon the simultaneous retirement to treasury of 6,309 Class B Units and 333 General Partner Units pursuant to an equity distribution plan authorized by the Board of Directors of the General Partner on August 8, 2008 and as further described under Item 3.02 of the Partnership’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on September 18, 2008, which is incorporated herein by reference. Harold Brown, the treasurer of the General Partner, owns 75% of the issued and outstanding Class B Units of the Partnership and 75% of the issued and outstanding equity of the General Partner, Ronald Brown, the brother of Harold Brown and the president of the General Partner, owns 25% of the issued and outstanding Class B Units of the Partnership and 25% of the issued and outstanding equity of the General Partner.

 

On January 18, 2008, 113,518 Depositary Receipts were  purchased under the Repurchase Program at a price of $75.50 per receipt. In order for the Partnership to take advantage of this opportunity, the Partnership borrowed $5,285,000 from Harold Brown, the Treasurer of the General Partner. This loan was paid in full, with interest at 6% of $37,899, on February 29, 2008.

 

During the six months ended June 30, 2009, the Partnership purchased 19,740 receipts for approximately $1,025,000, 469 Class B Units for approximately $240,000 and 25 General Partnership units for approximately $13,000.

 

As of June 30, 2009, the equity repurchase program described above resulted in the Partnership having a negative Partners’ Capital of approximately $19,558,200.

 

During the three months ended June 30, 2009, the Partnership did not purchase any Depositary Receipts, Class B Units or General Partnership Units.

 

NOTE 9. COMMITMENTS AND CONTINGENCIES

 

From time to time, the Partnerships are involved in various ordinary routine litigation incidental to their business. The Partnership either has insurance coverage or has provided for any uninsured claims which, in the aggregate, are not significant. The Partnerships are not involved in any material pending legal proceedings.

 

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Table of Contents

 

NOTE 10. RENTAL INCOME

 

During the six months ended June 30, 2009, approximately 90% of rental income was related to residential apartments and condominium units with leases of one year or less. The remaining 10% was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at June 30, 2009 as follows:

 

 

 

Commercial
Property Leases

 

2010

 

$

2,624,000

 

2011

 

2,452,000

 

2012

 

2,169,000

 

2013

 

1,576,000

 

2014

 

1,382,000

 

Thereafter

 

2,032,000

 

 

 

$

12,235,000

 

 

The aggregate minimum future rental income does not include contingent rentals that may be received under various leases in connection with percentage rents, common area charges and real estate taxes. Aggregate contingent rentals from continuing operations were approximately $307,000 for the six months ended June 30, 2009 and approximately $477,000 for the year ended December 31, 2008.

 

Rents receivable are net of an allowance for doubtful accounts of approximately $621,000 at June 30, 2009 and approximately $460,000 at December 31, 2008.  Included in rents receivable at June 30, 2009 is approximately $419,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis. The majority of this amount is for long-term leases with Staples and Trader Joe’s at Staples Plaza in Framingham, Massachusetts.

 

In 2009, rent at the commercial properties includes approximately $5,600 of amortization of deferred rents arising from the fair values assigned to in-place leases upon the purchase of Cypress Street in Brookline, Massachusetts.

 

NOTE 11. CASH FLOW INFORMATION

 

During the six months ended June 30, 2009 and 2008, cash paid for interest was $3,907,256, and $3,837,770, respectively.

 

Non-cash financing activity — exchange of depositary receipts for Class B and General Partnership Units in 2008 (Note 8).

 

NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

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

 

·                  For cash and cash equivalents, other assets, investment in partnerships, accounts payable, advance rents and security deposits: fair value approximates the carrying value of such assets and liabilities.

 

·                  For mortgage notes payable: fair value is generally based on estimated future cash flows, which are discounted using the quoted market rate from an independent source for similar obligations. Refer to the table below for the carrying amount and estimated fair value of such instruments.

 

 

 

Carrying Amount

 

Estimated Fair Value

 

Mortgage Notes Payable

 

 

 

 

 

Partnership Properties

 

 

 

 

 

At June 30 , 2009

 

$

137,750,601

 

$

127,107,329

 

At December 31, 2008

 

$

138,160,262

 

$

143,432,532

 

Investment Properties

 

 

 

 

 

At June 30, 2009

 

$

51,594,294

 

$

48,582,549

 

 

14



Table of Contents

 

Disclosure about fair value of financial instruments is based on pertinent information available to management as of June 30, 2009 and December 31, 2008. 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 December 31, 2008 and current estimates of fair value may differ significantly from the amounts presented herein.

 

NOTE 13. TAXABLE INCOME AND TAX BASIS

 

Taxable income reportable by the Partnership and includable in its partners’ tax returns is different than financial statement income because of a tax free exchanges, accelerated depreciation, different tax lives, and timing differences related to prepaid rents and allowances. Taxable income was approximately $7,500,000 less than statement income for the year ended December 31, 2008 and approximately $1,000,000 greater than statement income for the year ended December 31, 2007. The cumulative tax basis of the Partnership’s real estate at December 31, 2008 is approximately $5,000,000 less than the statement basis. The primary reason for the lower taxable income and the lower tax basis is the acquisition of Linewt and Cypress Street utilizing tax free exchanges in 2008. The Partnership’s tax basis in its joint venture investments is approximately $200,000 less than statement basis. The tax free exchanges and mortgage prepayment penalties in 2008  generated substantial tax deductions in 2008, accordingly taxable income in future years may exceed statement income.

 

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

 

Since November 2001, the Partnership has invested in eight limited partnerships, the majority of which has invested in residential apartment complexes, with one partnership investing in commercial property. The Partnership has a 50% ownership interest in each investment. The other investors are Harold Brown, the President of the Management Company and five other employees of the Management Company. Harold Brown’s ownership interest is between 43.2% and 47.5%, with the balance of 6.8% and 2.5% owned by the others. A description of each investment is as follows:

 

On October 3, 2005, the Partnership invested $2,500,000 for a 50% ownership interest in a 168-unit apartment complex in Quincy, Massachusetts. The purchase price was $30,875,000. The Partnership plans to sell the majority of units as condominium and retain 48 units for long-term investment. Gains from the sales of units will be taxed at ordinary income rates (approximately $47,000 per unit). In February 2007, the Partnership refinanced the 48 units which will be retained with a new mortgage in the amount of $4,750,000 with an interest rate of 5.57%, interest only for five years. The loan will be amortized over 30 years thereafter and matures in March 2017. In April 2008, the Partnership refinanced an additional 20 units and obtained a new mortgage in the amount of $2,368,000 with interest at 5.75%, interest only, which matures in 2013.  As of July 27, 2009, the Partnership sold 105 units, the proceeds of which went to pay down the mortgage on the property.  The balance on the new mortgage is approximately $1,668,000 at June 30, 2009. Gain from the sale of units (approximately $38,000 will be taxed at ordinary income rates.  This investment is referred to as Hamilton Bay Apartments, LLC.

 

On March 7, 2005, the Partnership invested $2,000,000 for a 50% ownership interest in a building comprising 49 apartments, one commercial space and a 50-car surface parking lot located in Boston, Massachusetts. The purchase price was $14,300,000, with a $10,750,000 mortgage. The Partnership plans to operate the building and initiate development of the parking lot.  In June 2007, the Partnership separated the parcels, formed an additional limited liability company for the residential apartments and obtained a mortgage on the property. The new limited liability company formed for the residential apartments is referred to as Hamilton Essex 81, LLC.  In August 2008, the Partnership restructured the mortgages on both parcels at Essex 81 and transferred the residential apartments to Hamilton Essex 81, LLC.  The mortgage on Hamilton Essex 81, LLC is $8,600,000 with interest only at 5.79% due in August 2015.  The mortgage on Essex Development, LLC is $2,162,000 with a variable interest rate of 2.25% over the daily Libor rate (0.31% at June 30, 2009) and is due in August 2011.  Harold Brown has issued a personal guaranty up to $1,000,000 of this mortgage. In the event that he is obligated to make payments to the lender as a result of this guaranty, the Partnership and other investors have, in turn, agreed to indemnify him for their proportionate share of any such payments.  The investment in the parking lot is referred to as Hamilton Essex Development, LLC; the investment in the apartments is referred to as Hamilton Essex 81, LLC.

 

On March 2, 2005, the Partnership invested $2,352,000 for a 50% ownership interest in a 176-unit apartment complex with an additional small commercial building located in Quincy, Massachusetts. The purchase price was $23,750,000. The Partnership plans to sell the majority of units as condominiums and retain 49 units for long-term investment. The Partnership obtained a new 10-year mortgage in the amount of $5,000,000 on the units to be retained by the Partnership. The interest on the new loan is 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.  As of June 30, 2009, all of the 127 units have been sold.  Gains from the sales of units (approximately $60,000 per unit) were taxed at ordinary income rates. This investment is referred to as Hamilton 1025, LLC.

 

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Table of Contents

 

In September 2004, the Partnership invested approximately $5,075,000 for a 50% ownership interest in a 42-unit apartment complex located in Lexington, Massachusetts. The purchase price was $10,100,000. In October 2004, the Partnership obtained a mortgage on the property in the amount of $8,025,000 and returned $3,775,000 to the Partnership. The Partnership obtained a new 10-year mortgage in the amount of $5,500,000 in January 2007. The interest on the new loan is 5.67% fixed for the ten year term with interest only payments for five years and amortized over a 30 year period for the balance of the loan. This new loan required a cash contribution by the Partnership of $1,250,000 in December 2006. The unamortized deferred financing costs of approximately $30,000 were written off in the first quarter of 2007. This investment is referred to as Hamilton Minuteman, LLC.

 

In August 2004, the Partnership invested $8,000,000 for a 50% ownership interest in a 280-unit apartment complex located in Watertown, Massachusetts. The total purchase price was $56,000,000. As of May 2008, the Partnership sold all of the 137 units as condominiums which were located in three buildings. Gains from these sales were taxed as ordinary income (approximately $50,000 per unit). The majority of the sales proceeds were applied to reduce the mortgage with the final payment made during the second quarter of 2007. With the sale of the units and the payments of the liabilities, the assets will be combined with Hamilton on Main Apartments, LLC.  An entity partially owned by the majority shareholder of the General Partner and the President of the management company, 31% and 5%, respectively, was the sales agent and will receive a variable commission on each sale of 3% to 5%. Hamilton on Main, LLC is known as Hamilton Place.

 

In 2005, Hamilton on Main Apartments, LLC obtained a new ten year mortgage on the three buildings to be retained. The new mortgage is $16,825,000, with interest only of 5.18% for three years and amortizing on a 30 year schedule for the remaining seven years when the balance is due. The net proceeds after funding escrow accounts and closing costs on the new mortgage were approximately $16,700,000, which were used to reduce the existing mortgage. Hamilton on Main LLC paid a fee of approximately $400,000 in connection with this early extinguishment of debt.  At June 30, 2009, the remaining balance on the mortgage is approximately $16,519,000.

 

In November 2001, the Partnership invested approximately $1,533,000 for a 50% ownership interest in a 40-unit apartment building in Cambridge, Massachusetts. This property has a 12-year mortgage, with a remaining balance at June 30, 2009 of approximately $7,394,000 at 6.9% which is amortized on a 30-year schedule, with a final payment of approximately $6,000,000 in 2014. This investment is referred to as 345 Franklin, LLC.

 

As required by the lender, the Treasurer of the General Partner has provided a limited repayment guaranty equal to fifty percent (50%) of the outstanding balance for the loan on the for sale units at Hamilton Bay and a limited guaranty of $1,000,000 for the loan on Hamilton Essex Development.  In the event that he is obligated to make payments to the lenders as a result of these guaranties, the Partnership and other investors have, in turn, agreed to indemnify him for their proportionate share of any such payments.

 

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Table of Contents

 

Summary balance sheet as of June 30, 2009 (unaudited)

 

 

 

Hamilton Essex 81

 

Hamilton Essex Development

 

345 Franklin

 

Hamilton 1025

 

Hamilton
Bay Sales

 

Hamilton
Bay Apts

 

Hamilton Minuteman
Apts

 

Hamilton
on Main Apts

 

Hamilton
Place Sales

 

Total

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental Properties

 

10,402,640

 

2,576,552

 

9,183,178

 

6,479,101

 

2,136,485

 

8,101,204

 

8,069,672

 

24,488,055

 

 

 

71,436,887

 

Cash & Cash Equivalents

 

49,965

 

12,480

 

3,694

 

14,674

 

65,564

 

1,215

 

12,129

 

201,073

 

 

 

360,795

 

Rent Receivable

 

16,635

 

3,050

 

1,890

 

1,000

 

1,141

 

1,679

 

(1,794

)

14,828

 

 

 

38,429

 

Real Estate Tax Escrow

 

54,935

 

 

24,702

 

24,268

 

 

49,330

 

46,941

 

98,177

 

 

 

298,353

 

Due From Investment Properties

 

100,000

 

 

 

70,000

 

100,713

 

40,000

 

 

210,000

 

 

 

520,713

 

Prepaid Expenses & Other Assets

 

68,261

 

1,095

 

80,089

 

79,571

 

223,791

 

55,924

 

64,778

 

304,337

 

 

 

877,846

 

Financing & Leasing Fees

 

130,893

 

13,555

 

36,745

 

37,238

 

19,231

 

48,509

 

30,222

 

38,902

 

 

 

355,295

 

Total Assets

 

10,823,329

 

2,606,733

 

9,330,298

 

6,705,852

 

2,546,925

 

8,297,861

 

8,221,948

 

25,355,372

 

 

73,888,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Notes Payable

 

8,600,000

 

2,162,000

 

7,393,948

 

5,000,000

 

1,668,000

 

4,750,000

 

5,500,000

 

16,519,346

 

 

 

51,593,294

 

Due to Investment Properties

 

 

 

405,000

 

 

 

44,000

 

26,713

 

25,000

 

20,000

 

 

 

520,713

 

Accounts Payable & Accrued Expense

 

103,417

 

9,236

 

67,429

 

4,497

 

18,338

 

47,103

 

42,694

 

186,482

 

 

 

479,196

 

Advance Rental Pymts & Security Dep

 

148,663

 

 

130,827

 

58,231

 

17,480

 

78,709

 

50,584

 

208,969

 

 

 

693,463

 

Total Liabilities

 

8,852,080

 

2,171,236

 

7,997,204

 

5,062,728

 

1,747,818

 

4,902,525

 

5,618,278

 

16,934,797

 

 

53,286,666

 

Partners’ Capital

 

1,971,249

 

435,497

 

1,333,094

 

1,643,124

 

799,107

 

3,395,336

 

2,603,670

 

8,420,575

 

 

20,601,652

 

Total Liabilities and Capital

 

10,823,329

 

2,606,733

 

9,330,298

 

6,705,853

 

2,546,925

 

8,297,861

 

8,221,948

 

25,355,372

 

 

73,888,318

 

Partners’ Capital—NERA 50%

 

985,625

 

217,748

 

666,547

 

821,562

 

399,553

 

1,697,668

 

1,301,835

 

4,210,287

 

 

10,300,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total units/ condominiums

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Apartments

 

48

 

 

40

 

175

 

120

 

48

 

42

 

148

 

137

 

758

 

Commercial

 

1

 

1

 

 

1

 

 

 

 

 

 

3

 

Total

 

49

 

1

 

40

 

176

 

120

 

48

 

42

 

148

 

137

 

761

 

Units to be retained

 

49

 

1

 

40

 

49

 

 

48

 

42

 

148

 

 

377

 

Units to be sold

 

 

 

 

127

 

120

 

 

 

 

137

 

384

 

Units sold through July 27, 2009

 

 

 

 

127

 

105

 

 

 

 

137

 

369

 

Balance of unsold units

 

 

 

 

 

15

 

 

 

 

 

15

 

Unsold units with deposits for future sale as of July 27, 2009

 

 

 

 

 

0

 

 

 

 

 

 

 

17



Table of Contents

 

Summary financial information for the six months ended June 30, 2009 (unaudited)

 

 

 

Hamilton Essex 81

 

Hamilton Essex Development

 

345 Franklin

 

Hamilton 1025

 

Hamilton
Bay Sales

 

Hamilton
Bay Apts

 

Hamilton Minuteman
Apts

 

Hamilton
on Main Apts

 

Hamilton
Place Sales

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental Income

 

608,507

 

148,298

 

558,956

 

403,934

 

113,977

 

399,916

 

377,985

 

1,202,838

 

 

 

3,814,411

 

Laundry and Sundry Income

 

1,892

 

 

1,293

 

 

 

 

567

 

11,165

 

 

 

14,917

 

 

 

610,399

 

149,298

 

560,249

 

403,934

 

113,977

 

399,916

 

378,552

 

1,214,003

 

 

 

3,829,328

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative

 

8,322

 

9,752

 

11,169

 

9,038

 

4,176

 

7,955

 

6,180

 

16,743

 

 

 

73,335

 

Depreciation and Amortization

 

216,111

 

1,919

 

213,238

 

156,149

 

53,068

 

199,157

 

228,756

 

749,370

 

 

 

1,817,768

 

Management Fees

 

24,942

 

5,541

 

22,591

 

16,024

 

4,478

 

15,571

 

14,308

 

49,370

 

 

 

152,825

 

Operating

 

70,264

 

 

31,680

 

1,409

 

130

 

3,718

 

46,721

 

186,701

 

 

 

340,623

 

Renting

 

15,500

 

 

22,550

 

2,998

 

 

810

 

2,615

 

7,365

 

 

 

51,838

 

Repairs and Maintenance

 

52,000

 

3,930

 

39,520

 

132,597

 

29,876

 

131,500

 

38,394

 

136,782

 

 

 

564,599

 

Taxes and Insurance

 

61,985

 

44,300

 

39,685

 

75,524

 

24,063

 

86,154

 

50,680

 

149,695

 

 

 

532,086

 

 

 

449,124

 

65,442

 

380,433

 

393,739

 

115,791

 

444,865

 

387,654

 

1,296,026

 

 

 

3,533,074

 

Income Before Other Income

 

161,275

 

82,856

 

179,816

 

10,195

 

(1,814

)

(44,949

)

(9,102

)

(82,023

)

 

296,255

 

Other Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

(251,915

)

(32,632

)

(258,482

)

(143,315

)

(50,836

)

(134,516

)

(157,348

)

(435,009

)

 

 

(1,464,053

)

Interest Income

 

2

 

 

29

 

35

 

7,510

 

 

 

2

 

 

 

7,578

 

Gain on Sale of Real Estate

 

 

 

 

 

49,646

 

 

 

 

 

 

49,646

 

 

 

(251,913

)

(32,632

)

(258,453

)

(143,280

)

6,320

 

(134,516

)

(157,348

)

(435,007

)

 

 

(1,406,829

)

Net Income (Loss)

 

(90,638

)

50,224

 

(78,637

)

(133,085

)

4,506

 

(179,465

)

(166,450

)

(517,030

)

 

(1,110,575

)

Net Income (loss)—NERA 50%

 

(45,319

)

25,112

 

(39,319

)

(66,543

)

2,253

 

(89,733

)

(83,225

)

(258,515

)

 

(555,288

)

 

 

Summary financial information for the three months ended June 30, 2009 (unaudited)

 

 

 

Hamilton Essex 81

 

Hamilton Essex Development

 

345 Franklin

 

Hamilton 1025

 

Hamilton
Bay Sales

 

Hamilton
Bay Apts

 

Hamilton Minuteman
Apts

 

Hamilton
on Main Apts

 

Hamilton
Place Sales

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental Income

 

266,179

 

72,050

 

279,904

 

199,310

 

55,567

 

204,043

 

187,040

 

590,792

 

 

 

1,854,885

 

Laundry and Sundry Income

 

1,299

 

 

691

 

 

 

 

238

 

4,928

 

 

 

7,156

 

 

 

267,478

 

72,050

 

280,595

 

199,310

 

55,567

 

204,043

 

187,278

 

595,720

 

 

 

1,862,041

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative

 

5,601

 

7,628

 

5,072

 

4,926

 

2,711

 

2,903

 

3,409

 

6,040

 

 

 

38,290

 

Depreciation and Amortization

 

108,140

 

1,563

 

107,997

 

78,239

 

26,534

 

100,775

 

114,378

 

374,806

 

 

 

912,432

 

Management Fees

 

10,503

 

2,760

 

11,063

 

7,939

 

2,125

 

7,978

 

7,103

 

24,467

 

 

 

73,938

 

Operating

 

30,264

 

 

12,504

 

706

 

69

 

300

 

18,961

 

74,233

 

 

 

137,037

 

Renting

 

9,650

 

 

7,880

 

1,733

 

 

270

 

1,716

 

3,309

 

 

 

24,558

 

Repairs and Maintenance

 

27,959

 

3,600

 

26,472

 

65,067

 

14,920

 

65,816

 

21,081

 

69,154

 

 

 

294,069

 

Taxes and Insurance

 

24,937

 

22,307

 

22,284

 

37,770

 

12,031

 

43,550

 

26,066

 

74,526

 

 

 

263,471

 

 

 

217,054

 

37,858

 

193,272

 

196,380

 

58,390

 

221,592

 

192,714

 

626,535

 

 

 

1,743,795

 

Income Before Other Income

 

50,424

 

34,192

 

87,323

 

2,930

 

(2,823

)

(17,549

)

(5,437

)

(30,815

)

 

118,246

 

Other Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

(126,641

)

(16,203

)

(128,972

)

(72,076

)

(24,673

)

(67,641

)

(79,104

)

(218,338

)

 

 

(733,648

)

Interest Income

 

 

 

14

 

18

 

2,570

 

 

 

1

 

 

 

2,603

 

Gain on Sale of Real Estate

 

 

 

 

 

49,336

 

 

 

 

 

 

49,336

 

 

 

(126,641

)

(16,203

)

(128,958

)

(72,058

)

27,233

 

(67,641

)

(79,104

)

(218,337

)

 

(681,709

)

Net Income (Loss)

 

(76,217

)

17,989

 

(41,635

)

(69,128

)

24,410

 

(85,190

)

(84,540

)

(249,152

)

 

(563,463

)

Net Income (loss)—NERA 50%

 

(38,109

)

8,995

 

(20,817

)

(34,564

)

12,205

 

(42,595

)

(42,270

)

(124,576

)

 

(281,732

)

 

18



 

Future annual mortgage maturities at June 30, 2009 are as follows:

 

 

 

Hamilton Essex 81

 

Hamilton Essex Development

 

Franklin Street

 

1025 Hamilton

 

Hamilton Bay

 

Hamilton Bay

 

Hamilton Minuteman

 

Hamilton Place

 

Hamilton Place Sales

 

 

 

Period End

 

March
2005

 

March
2005

 

November
2001

 

March
2005

 

October
2005

 

October
2005

 

August
 2004

 

August 
2004

 

August
2004

 

Total

 

June 30, 2010

 

 

 

 

 

142,244

 

 

 

 

 

 

 

 

 

244,288

 

 

 

386,532

 

June 30, 2011

 

91,070

 

 

 

152,375

 

 

 

 

 

 

 

 

 

255,069

 

 

 

498,514

 

June 30, 2012

 

115,231

 

2,162,000

 

163,228

 

35,232

 

 

 

 

 

33,648

 

271,154

 

 

 

2,780,493

 

June 30, 2013

 

122,083

 

 

 

174,853

 

63,301

 

1,668,000

 

85,018

 

69,329

 

285,743

 

 

 

2,468,327

 

June 30, 2014

 

129,342

 

 

 

6,761,248

 

67,037

 

 

 

68,027

 

73,421

 

301,117

 

 

 

7,400,193

 

Thereafter

 

8,142,274

 

 

 

 

4,834,430

 

 

 

4,596,955

 

5,323,602

 

15,161,974

 

 

 

38,059,235

 

 

 

8,600,000

 

2,162,000

 

7,393,948

 

5,000,000

 

1,668,000

 

4,750,000

 

5,500,000

 

16,519,345

 

 

51,593,294

 

 

 

Summary balance sheet as of June 30, 2008 (unaudited)

 

 

 

Essex 81
Commercial

 

Essex 81
Apartments

 

345
Franklin

 

Hamilton
1025

 

Hamilton
Bay
Sales

 

Hamilton
Bay
Apartments

 

Minuteman

 

Hamilton
on Main

 

Hamilton
Place
Sales

 

Total

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental Properties

 

2,839,274

 

10,492,129

 

9,242,705

 

7,020,145

 

2,671,332

 

8,390,370

 

8,497,267

 

25,896,582

 

 

75,049,804

 

Cash & Cash Equivalents

 

70,068

 

1,586

 

9,267

 

13,178

 

379,317

 

40,783

 

37,940

 

118,720

 

2,579

 

673,439

 

Rent Receivable

 

55,846

 

14,222

 

14,210

 

4,287

 

606

 

(1,562

)

514

 

5,635

 

 

93,757

 

Real Estate Tax Escrow

 

 

 

48,350

 

26,386

 

43,414

 

 

38,056

 

18,759

 

85,979

 

 

260,944

 

Due From Investment Properties

 

23,000

 

 

 

 

 

 

 

185,000

 

1,796,355

 

2,004,355

 

Prepaid Expenses & Other Assets

 

1,518

 

136,842

 

70,512

 

71,871

 

133,167

 

51,648

 

59,666

 

324,796

 

 

850,020

 

Financing & Leasing Fees

 

22,223

 

145,323

 

44,911

 

42,264

 

24,296

 

54,871

 

36,243

 

47,598

 

 

417,728

 

Total Assets

 

3,011,930

 

10,838,451

 

9,407,990

 

7,195,158

 

3,208,718

 

8,574,165

 

8,650,389

 

26,664,311

 

1,798,935

 

79,350,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Notes Payable

 

3,000,000

 

7,762,000

 

7,526,734

 

5,000,000

 

2,088,000

 

4,750,000

 

5,500,000

 

16,751,162

 

 

52,377,896

 

Due to Investment Properties

 

 

 

108,000

 

25,000

 

 

 

75,000

 

1,796,355

 

 

2,004,355

 

Accounts Payable & Accrued Exp

 

20,209

 

43,335

 

71,647

 

4,457

 

35,682

 

4,015

 

36,308

 

154,637

 

1,285

 

371,575

 

Advance Rental Payments & Security Deposits

 

24,000

 

112,851

 

132,231

 

59,648

 

20,281

 

79,706

 

47,255

 

176,709

 

 

652,681

 

Total Liabilities

 

3,044,209

 

7,918,186

 

7,918,186

 

5,089,105

 

2,143,963

 

4,833,722

 

5,658,563

 

18,878,862

 

 

55,406,507

 

Partners’ Capital

 

(32,279

)

2,920,265

 

1,569,378

 

2,106,053

 

1,064,755

 

3,740,444

 

2,991,826

 

7,785,448

 

1,797,650

 

23,943,540

 

Total Liabilities & Capital

 

3,011,930

 

10,838,451

 

9,407,990

 

7,195,158

 

3,208,718

 

8,574,165

 

8,650,389

 

26,664,311

 

1,798,935

 

79,350,047

 

Partners’ Capital—NERA 50%

 

(16,140

)

1,460,133

 

784,689

 

1,053,027

 

532,378

 

1,870,222

 

1,495,913

 

3,892,724

 

898,825

 

11,971,770

 

 

19



 

Summary financial information for the six months ended June 30, 2008 (unaudited)

 

 

 

Essex 81
Commercial

 

Essex 81
Apartments

 

345
Franklin

 

Hamilton
1025

 

Hamilton
Bay
Sales

 

Hamilton
Bay
Apartments

 

Minuteman

 

Hamilton
on Main

 

Hamilton
Place
Sales

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental Income

 

206,953

 

530,619

 

517,077

 

393,602

 

115,855

 

409,835

 

372,127

 

1,174,931

 

1,747

 

3,722,746

 

Laundry and Sundry Income

 

 

570

 

657

 

 

 

 

983

 

10,285

 

 

12,495

 

 

 

206,953

 

531,189

 

517,734

 

393,602

 

115,855

 

409,835

 

373,110

 

1,185,216

 

1,747

 

3,735,241

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative

 

4,323

 

3,890

 

14,456

 

8,430

 

7,834

 

4,686

 

892

 

29,556

 

3,770

 

77,836

 

Depreciation and Amortization

 

59,764

 

198,459

 

177,598

 

165,995

 

105,856

 

194,355

 

258,300

 

765,734

 

20,508

 

1,946,571

 

Interest

 

72,141

 

232,311

 

262,839

 

143,919

 

32,179

 

135,251

 

158,146

 

442,720

 

7

 

1,479,512

 

Management Fees

 

14,351

 

20,720

 

20,924

 

15,665

 

5,283

 

16,232

 

15,055

 

49,411

 

51

 

157,692

 

Operating

 

20,902

 

48,570

 

31,957

 

827

 

1,656

 

543

 

29,572

 

207,870

 

214

 

342,110

 

Renting

 

 

5,325

 

16,663

 

3,076

 

1,556

 

1,187

 

1,778

 

14,871

 

 

44,456

 

Repairs and Maintenance

 

1,579

 

48,073

 

26,787

 

162,223

 

100,236

 

152,895

 

48,674

 

227,057

 

5,828

 

773,352

 

Taxes and Insurance

 

37,370

 

51,141

 

43,891

 

76,492

 

35,727

 

68,636

 

69,860

 

162,028

 

4,861

 

550,006

 

 

 

210,428

 

608,489

 

595,114

 

576,626

 

290,329

 

573,786

 

582,277

 

1,899,248

 

35,239

 

5,371,535

 

Income (Loss) Before Other Income

 

(3,475

)

(77,299

)

(77,380

)

(183,024

)

(174,474

)

(163,951

)

(209,167

)

(714,031

)

(33,492

)

(1,636,294

)

Other Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

1,324

 

26

 

229

 

555

 

3,049

 

393

 

209

 

1,243

 

2,639

 

9,667

 

Gain on Sale of Real Estate

 

 

 

 

54,980

 

281,028

 

 

 

12,381

 

348,204

 

696,594

 

Other Income (Expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,324

 

26

 

229

 

55,536

 

284,077

 

393

 

209

 

13,624

 

350,843

 

706,261

 

Net Income (Loss)

 

(2,151

)

(77,274

)

(77,151

)

(127,489

)

109,604

 

(163,558

)

(208,959

)

(700,408

)

317,351

 

(930,034

)

P&L—NERA 50%

 

(1,076

)

(38,637

)

(38,575

)

(63,744

)

54,802

 

(81,779

)

(104,479

)

(350,204

)

158,676

 

(465,017

)

Total units/condominiums

 

1

 

49

 

40

 

176

 

120

 

48

 

42

 

146

 

137

 

758

 

Units to be retained

 

1

 

49

 

40

 

49

 

0

 

48

 

42

 

146

 

0

 

374

 

Units to be sold

 

 

 

 

127

 

120

 

 

 

 

137

 

384

 

Units sold through July 28, 2008

 

 

 

 

125

 

102

 

 

 

 

137

 

364

 

Balance of unsold units

 

 

 

 

 

 

2

 

18

 

 

 

 

 

 

 

 

20

 

Unsold units with deposits for future sale as of July 28, 2008

 

 

 

 

 

1

 

1

 

 

 

 

 

2

 

 

 

Summary financial information for the three months ended June 30, 2008 (unaudited)

 

 

 

Essex 81
Commercial

 

Essex 81
Apartments

 

345
Franklin

 

Hamilton
1025

 

Hamilton
Bay
Sales

 

Hamilton
Bay
Apartments

 

Minuteman

 

Hamilton
on Main

 

Hamilton
Place
Sales

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental Income

 

111,581

 

260,428

 

256,571

 

194,675

 

65,414

 

206,127

 

185,812

 

585,054

 

 

1,865,662

 

Laundry and Sundry Income

 

 

1,866

 

241

 

 

 

 

 

4,095

 

 

6,203

 

 

 

111,581

 

262,295

 

256,813

 

194,675

 

65,414

 

206,127

 

185,812

 

589,149

 

 

1,871,865

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative

 

557

 

2,009

 

8,237

 

4,734

 

1,512

 

2,599

 

1,696

 

11,731

 

1,304

 

34,378

 

Depreciation and Amortization

 

29,882

 

103,514

 

90,904

 

82,997

 

53,442

 

97,350

 

129,844

 

391,709

 

6,236

 

985,880

 

Interest

 

33,198

 

116,142

 

131,156

 

71,968

 

26,861

 

67,638

 

79,086

 

221,170

 

 

747,220

 

Management Fees

 

3,252

 

12,563

 

10,594

 

7,868

 

2,645

 

8,161

 

7,807

 

24,675

 

 

77,567

 

Operating

 

12,426

 

20,934

 

15,960

 

340

 

363

 

302

 

9,919

 

79,894

 

13

 

140,152

 

Renting

 

 

2,325

 

12,825

 

2,806

 

389

 

770

 

1,223

 

6,286

 

 

26,624

 

Repairs and Maintenance

 

840

 

25,353

 

14,992

 

73,639

 

22,125

 

50,555

 

23,043

 

92,950

 

(4,727

)

298,769

 

Taxes and Insurance

 

18,965

 

25,815

 

22,175

 

39,789

 

13,417

 

34,251

 

35,457

 

80,897

 

1,393

 

272,159

 

 

 

99,118

 

308,655

 

306,845

 

284,141

 

120,755

 

261,626

 

288,077

 

909,313

 

4,219

 

2,582,748

 

Income Before Other Income

 

12,463

 

(46,361

)

(50,032

)

(89,466

)

(55,341

)

(55,499

)

(102,264

)

(320,163

)

(4,219

)

(710,883

)

Other Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

597

 

21

 

103

 

10

 

3,049

 

148

 

118

 

726

 

68

 

4,840

 

Gain on Sale of Real Estate

 

 

 

 

 

204,356

 

 

 

 

67,261

 

271,617

 

Other Income (Expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

597

 

21

 

103

 

10

 

207,405

 

148

 

118

 

726

 

67,328

 

276,456

 

Net Income (Loss)

 

13,060

 

(46,340

)

(49,929

)

(89,456

)

152,064

 

(55,352

)

(102,146

)

(319,437

)

63,109

 

(434,426

)

P&L—NERA 50%

 

6,530

 

(23,170

)

(24,965

)

(44,728

)

76,032

 

(27,676

)

(51,073

)

(159,719

)

31,555

 

(217,213

)

 

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NOTE 15. NEW ACCOUNTING PRONOUNCEMENT

 

Fair Value Measurements—SFAS 157 & The Fair Value Option for Financial Assets and Financial Liabilities—SFAS 159, and FASB Staff Position No. 157-2

 

Effective January 1, 2008, the Partnership adopted Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (SFAS 157) and SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). SFAS 157 defines fair value, establishes a framework for measuring fair value under accounting principles generally accepted in the United States (GAAP) and enhances disclosures about fair value measurements. Fair value is defined under SFAS 157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. The impact of adopting both SFAS 157 and SFAS 159 was not material to the Partnership.

 

In February 2008, the FASB issued FASB Staff Position 157-2, which deferred the effective date of SFAS 157 for one-year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value on a nonrecurring basis. SFAS 157 is now effective for those assets and liabilities for years beginning after November 15, 2008.

 


FASB Statement No. 141(R)—(revised 2007), (“FASB No. 141(R)”), Business Combinations

 

In December 2007, the FASB issued FASB No. 141(R) which establishes principles and requirements for how the acquirer shall recognize and measure in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquired and goodwill acquired in a business combination. This statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The expected impact of adopting FASB No. 141(R) is not material.

 

FASB Statement No. 160 (“FASB No. 160”), Noncontrolling Interests in Consolidated Financial Statements—an Amendment of ARB No. 51

 

In December 2007, the FASB issued No. 160, which establishes and expands accounting and reporting standards for minority interests, which will be recharacterized as noncontrolling interests, in a subsidiary and the deconsolidation of a subsidiary. FASB 160 is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. This statement is effective for fiscal years beginning on or after December 15, 2008. The expected impact of adopting FASB No. 160 is not material.

 

FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets

 

The FASB Staff Position (FSP) No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible assets under FASB Statement No. 142, Goodwill and Other Intangible Assets. The intent of the FSP is to improve the consistency between the useful life of a recognized intangible asset under FASB No. 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141 (revised 2007), Business Combinations, and other U.S. generally accepted accounting principles. The FSP shall be effective be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset if this FSP shall be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. The Partnership does not believe that the adoption of this FSP will have a material effect on the financial position and results of operations.

 

FASB Staff Position No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active

 

In October 2008, the FASB issued Staff Position No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP 157-3”). FSP 157-3 clarified the application of SFAS 157 in cases where a market is not active. FSB 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The Partnership has considered the guidance provided by FSP 157-3 in its determination of estimated fair values as of December 31, 2008, and the impact was not material.

 

FASB Statement No. 161 (“FASB No. 161”), Disclosures about Derivative Instruments and Hedging Activities—an Amendment of FASB Statement No. 133

 

In March 2008, the FASB issued FASB No. 161. FASB No. 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. FASB No. 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS 133 have been applied, and the impact that hedges have on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Partnership does not anticipate the adoption of SFAS 161 will have a material impact on the disclosures contained in its financial statements.

 

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FASB Statement No. 162 (FASB No. 161”), The Hierarchy of Generally Accepted Accounting Principles

 

In May 2008, the FASB issued SFAS no. 162, “The Hierarchy of Generally Accepted Accounting Principles.”  SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States.  SFAS 162 is effective June 2009.  We do not expect any significant changes to our financial accounting and reporting as a result of the issuance of SFAS No. 162.

 

FASB Statement No. 165(“FASB No. 165”), Subsequent Events

 

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS No. 165”).  SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or available to be issued.  It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date, that is, whether that date represents the date the financial statements were issued or were available to be issued.

 

FASB Statement No. 167 (“FASB No. 167”), Amendments to FASB Interpretation No. 46R

 

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46R (“SFAS No. 167”). SFAS No. 167 amends FIN 46R to require an analysis to determine whether a variable interest gives a company a controlling financial interest in a variable interest entity.  This statement requires an ongoing reassessment of and eliminates the quantitative approach previously required for determining whether a company is the primary beneficiary.  This statement is effective for interim and annual reporting periods beginning after November 15, 2009.  Accordingly, the Company will adopt SFAS No. 167 during the first quarter of 2010.  The Company is currently evaluating the impact that SFAS no. 167 will have on its financial statements.

 

FASB Statement No. 168 (“FASB No.168”) FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles

 

In June 2009, the FASB issued No. 168, The “FASB Accounting Standards Codification” and the Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 168”).  SFAS No. 168 establishes the “FASB Accounting Standards Codification” (Codification”), which officially launched July 1, 2009, to become the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to applied by nongovernment entities.  Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants.  The subsequent issuances of new standards will be in the form of Accounting Standards Updates that will be included in the Codification.  Generally, the Codification is not expected to change U.S. GAAP.  All other accounting literature excluded from the Codification will be considered nonauthoritative.  SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009.  Accordingly, the Company will adopt SFAS No. 168 during the third quarter of 2009.  The Company is currently evaluation the effect on the financial statement disclosures as all future references to authoritative accounting literature will be references in accordance with Codification.

 

NOTE 16. DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE

 

The following tables summarize income from discontinued operations and the related realized gain and loss on sale of rental property for the six months ended June 30, 2009 and 2008:

 

 

 

June 30,

 

June 30,

 

 

 

2009

 

2008

 

Total Revenues

 

$

0

 

$

177,591

 

Operating and other expenses

 

7,009

 

164,991

 

Depreciation and amortization

 

0

 

47,455

 

 

 

7,009

 

212,446

 

Income (loss) from discontinued operations

 

(7,009

)

(34,855

)

Gain on the sale of rental property

 

0

 

9,990,942

 

Income (loss) from discontinued operations

 

$

(7,009

)

$

9,956,087

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with the financial statements and notes thereof appearing elsewhere in this Report.  This Report, on Form 10-Q, contains forward-looking statements within the meaning of the securities

 

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law.  Actual results or developments could differ materially from those projected in such statements as a result of certain factors set forth in the section below entitles “Factors That May Affect Future Results” and elsewhere in this Report.

 

The real estate market in the Greater Boston area has softened, and the Partnership anticipates the climate will remain the same in the foreseeable future. This may result in increases in vacancy rates and a reduction in some rents. The Partnership believes its present cash reserves as well as anticipated rental revenue will be sufficient to fund its current operations, finance current planned improvements to its properties, and continue distribution payments in the foreseeable future. Continued market deterioration and/or loss of a significant commercial tenant may result in the Partnership recording an impairment loss in the future.

 

Since the Partnership’s long-term goals include the acquisition of additional properties, a portion of the proceeds from the refinancing and sale of properties is reserved for this purpose. The Partnership will consider refinancing or selling existing properties if the Partnership’s cash reserves are insufficient to repay existing mortgages or if the Partnership needs additional funds for future acquisitions.

 

Management believes that the financial difficulties experienced since the lending crisis in 2007 will continue and recovery will take longer than previous recessions.  Management also believes that the national recession and the challenging credit market will continue into 2010 and the recovery will be slow and steady.  The Greater Boston Metropolitan Area, the Partnership’s primary market, continues to experience high unemployment levels and downsizing by many corporations. We believe the market conditions will not improve locally for the remaining 2009 calendar year.

 

During the six months ended June 30, 2009, the Partnership’s income rose by better than 4% and operating expenses declined overall by 2.6%.  While much of the increase in revenue is due to the 2008 acquisition in Brookline, core operating revenues continue to remain steady.  Management has been effective in reducing operating expenses with increases only in noncontrollable expenses such as real estate taxes and insurance.  Management believes that continued efforts to control operating expenses will be effective for the remaining year, however, real estate taxes are likely to continue to increase.  Bad debt remains at approximately 1% and revenue at the commercial properties has shown no sign of weakness. Early indicators in the third quarter, the busiest renewal season, show that revenue increases going forward will be modest (1% overall increase for the same period last year). Additionally, the market softness has required more free rent than in previous seasons which will have a negative impact on third quarter revenue, though not significant.  Management believes that the local economy has yet to rebound or demonstrate job growth and expects future revenue growth for 2009 and the first two quarters of 2010 to be modest.

 

The Stock Repurchase Program that was initiated in 2007 has purchased 387,924 depository receipts through June 2009.  Given the lack of alternative investments, liquidity markets and the current share price, Management continues to support the buyback program and believe it to be accretive to the remaining shareholders.  Management continues to be active bidding on commercial real estate within Massachusetts and remains poised to acquire real estate it deems opportune given the current selling and financing environment.

 

The Partnership has retained The Hamilton Company (“Hamilton”) to manage and administer the Partnership’s and Joint Ventures’ Properties. Hamilton is a full-service real estate management company, which has legal, construction, maintenance, architectural, accounting and administrative departments. The Partnership’s properties represent approximately 40% of the total properties and 70% of the residential properties managed by Hamilton. Substantially all of the other properties managed by Hamilton are owned, wholly or partially, directly or indirectly, by Harold Brown. The Partnership’s Second Amended and Restated Contract of Limited Partnership (the “Partnership Agreement”) expressly provides that the general partner may employ a management company to manage the properties, and that such management company may be paid a fee of 4% of rental receipts for administrative and management services (the “Management Fee”). The Partnership pays Hamilton the full annual Management Fee, in monthly installments.

 

At June 30, 2009, Harold Brown, his brother Ronald Brown and the President of Hamilton, Carl Valeri, collectively own approximately 38% of the Depositary Receipts representing the Partnership Class A Units (including Depositary Receipts held by trusts for the benefit of such persons’ family members). Harold Brown also owns 75% of the Partnership’s Class B Units, 75% of the capital stock of NewReal, Inc. (“NewReal”), the Partnership’s sole general partner, and all of the outstanding stock of Hamilton. Ronald Brown also owns 25% of the Partnership’s Class B Units and 25% of NewReal’s capital stock. In addition, Ronald Brown is the President and director of NewReal and Harold Brown is NewReal’s Treasurer and a director. Two of NewReal’s other directors, Roberta Ornstein and Conrad DiGregorio, also own immaterial amounts of the Partnership’s Class A Units or receipts.

 

In addition to the Management Fee, the Partnership Agreement further provides for the employment of outside professionals to provide services to the Partnership and allows NewReal to charge the Partnership for the cost of employing

 

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Table of Contents

 

professionals to assist with the administration of the Partnership’s properties. Additionally, from time to time, the Partnership pays Hamilton for repairs and maintenance services, legal services, construction services and accounting services. The costs charged by Hamilton for these services are at the same hourly rate charged to all entities managed by Hamilton, and management believes such rates are competitive in the marketplace.

 

Hamilton accounted for approximately 15% of the repair and maintenance expense paid for by the Partnership in the years six months ended June 30, 2009 and 5% for the year ended December 31, 2008. Of the funds paid to Hamilton for this purpose, the great majority was to cover the cost of services provided by the Hamilton maintenance department, including plumbing, electrical, carpentry services, and snow removal for those properties close to Hamilton’s headquarters. However, several of the larger Partnership properties have their own maintenance staff. Further, those properties that do not have their own maintenance staff and are located more than a reasonable distance from Hamilton’s headquarters in Allston, Massachusetts are generally serviced by local, independent companies.

 

Hamilton’s legal department handles most of the Partnership’s eviction and collection matters. Additionally, it prepares most long-term commercial lease agreements and represents the Partnership in selected purchase and sale transactions. Overall, Hamilton provided approximately 75% of the legal services paid for by the Partnership during the six months ended June 30, 2009 and approximately 50% for the year ended December 31, 2008.

 

Additionally, as described in Note 3 to the consolidated financial statements, The Hamilton Company receives similar fees from the Investment Properties.

 

R. Brown Partners, which is owned by Ronald Brown, managed the condominium association containing five condominium units which were sold in 2008 located in Brookline, Massachusetts. That entity received annual management fees from the five units of approximately $1,500, and Hamilton reduced its management fees to approximately 2%, so that the total management fee will not exceed the 4% allowed by the Partnership’s Partnership Agreement.

 

The Partnership requires that three bids be obtained for construction contracts in excess of $5,000. Hamilton may be one of the three bidders on a particular project and may be awarded the contract if its bid and its ability to successfully complete the project are deemed appropriate. For contracts that are not awarded to Hamilton, Hamilton charges the Partnership a construction supervision fee equal to 5% of the contract amount. Hamilton’s architectural department also provides services to the Partnership on an as-needed basis. During the six months ended June 30, 2009, Hamilton provided construction and architectural services paid for by the Partnership totaling approximately $18,000.

 

Prior to 1991, the Partnership employed an outside, unaffiliated company to perform its bookkeeping and accounting functions. Since that time, such services have been provided by Hamilton’s accounting staff, which consists of approximately 14 people. During the six months ended June 30, 2009, Hamilton charged the Partnership $62,500 ($125,000 per year) for bookkeeping and accounting services.

 

For more information on related party transactions, see Note 3 to the Consolidated Financial Statements.

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

The preparation of the consolidated financial statements, in accordance with accounting principles generally accepted in the United States of America, requires the Partnership to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. The Partnership regularly and continually evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate properties and its investments in and advances to joint ventures. The Partnership bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. The Partnership’s critical accounting policies are those which require assumptions to be made about such matters that are highly uncertain. Different estimates could have a material effect on the Partnership’s financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances. See Note 1 to the Consolidated Financial Statements, Principles of Consolidation.

 

Revenue Recognition:  Rental income from residential and commercial properties is recognized over the term of the related lease. For residential tenants, amounts 60 days in arrears are charged against income. The commercial tenants are evaluated on a case by case basis. Certain leases of the commercial properties provide for increasing stepped minimum rents, which are accounted for on a straight-line basis over the term of the lease.

 

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Real Estate and Depreciation:  Real estate assets are stated at the lower of cost or fair value, less accumulated depreciation. Costs related to the acquisition, development, construction and improvement of properties are capitalized, including interest, wages and benefits, real estate taxes and insurance. Capitalization usually begins with commencement of development activity and ends when the property is ready for leasing. Replacements and improvements, such as HVAC equipment, structural replacements, windows, appliances, flooring, carpeting and kitchen/bath replacements and renovations, are capitalized and depreciated over their estimated useful lives as follows:

 

·                  Depreciation is computed on the straight-line and accelerated methods over the estimated useful lives of the related assets. In assessing estimated useful lives, the Partnership makes assumptions based on historical experience acquired from both within and outside the Partnership. These assumptions have a direct impact on the Partnership’s net income.

 

·                  Ordinary repairs and maintenance, such as unit cleaning and painting and appliance repairs, are expensed.

 

Impairment:  On an annual basis management assesses whether there are any indicators that the value of the Company’s rental properties may be impaired.  A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property.  To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property.  The Company’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property.  As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved. The Partnership has not recognized an impairment loss since 1995.

 

Rental Property Held for Sale and Discontinued Operations:  When assets are identified by management as held for sale, the Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. If, in management’s opinion, the net sales price of the assets which have been identified as held for sale is less than the net book value of the assets, a valuation allowance is established. Properties identified as held for sale and/or sold are presented in discontinued operations for all periods presented.

 

Investments in Partnerships:  The Partnership accounts for its 50% ownership in the Investment Properties under the equity method of accounting, as it exercises significant influence over, but does not control these entities. These investments are recorded initially at cost, as Investments in Partnerships, and subsequently adjusted for the Partnership’s share in earnings, cash contributions and distributions. Under the equity method of accounting, our net equity is reflected on the consolidated balance sheets, and our share of net income or loss from the Partnership is included on the consolidated statements of income.

 

With respect to investments in and advances to the Investment Properties, the Partnership looks to the underlying properties to assess performance and the recoverability of carrying amounts for those investments in a manner similar to direct investments in real estate properties. An impairment charge is recorded if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property.

 

Legal Proceedings:  The Partnership is subject to various legal proceedings and claims that arise, from time to time, in the ordinary course of business. These matters are frequently covered by insurance. If it is determined that a loss is likely to occur, the estimated amount of the loss is recorded in the financial statements. Both the amount of the loss and the point at which its occurrence is considered likely can be difficult to determine.

 

RESULTS OF OPERATIONS

 

Comparison of the three months ended June 30, 2009 to the three months ended June 30, 2008 (as adjusted for discontinued operations)

 

The Partnership and its Subsidiary Partnerships earned income before other income and discontinued operations of approximately $3,005,000 during the three months ended June 30, 2009, compared to approximately $2,536,000 for the three months ended June 30, 2008, an increase of approximately $469,000.

 

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The rental activity is summarized as follows:

 

 

 

Occupancy Date

 

 

 

July 27, 2009

 

July 28, 2008

 

Residential

 

 

 

 

 

Units—exclusive of available for sale units

 

2,269

 

2,265

 

Vacancies

 

60

 

31

 

Vacancy rate

 

2.6

%

1.3

%

Commercial

 

 

 

 

 

Total square feet

 

114,395

 

90,848

 

Vacancy

 

0

 

0

 

Vacancy rate

 

0

%

0

%

 

 

 

Rental Income (in thousands)
Three Months Ended June 30,

 

 

 

2009

 

2008

 

 

 

Total
Operations

 

Continuing
Operations

 

Total
Operations

 

Continuing
Operations

 

Total rents

 

$

8,179

 

$

8,179

 

$

7,968

 

$

7,935

 

Residential percentage

 

90

%   

90

%   

93

%   

93

%

Commercial percentage

 

10

%

10

%

7

%

7

%

Contingent rentals

 

$

110

 

$

110

 

$

109

 

$

109

 

 

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008:

 

 

 

Three Months Ended June 30,

 

Dollar

 

Percent

 

 

 

2009

 

2008

 

Change

 

Change

 

Revenues:

 

 

 

 

 

 

 

 

 

Rental income

 

$

8,179,090

 

$

7,934,836

 

244,254

 

3.0

%

Laundry and sundry income

 

97,257

 

97,854

 

(597

)

(0.1

)%

 

 

8,276,347

 

8,032,690

 

243,657

 

3.0

%

Expenses

 

 

 

 

 

 

 

 

 

Administrative

 

386,417

 

456,450

 

(70,033

)

(15.3

)%

Depreciation and amortization

 

1,504,877

 

1,609,953

 

(105,076

)

(6.5

)%

Management fees

 

333,898

 

330,190

 

3,708

 

1.1

%

Operating

 

868,593

 

928,163

 

(59,570

)

(6.4

)%

Renting

 

83,170

 

106,654

 

(23,484

)

(22.0

)%

Repairs and maintenance

 

1,167,345

 

1,204,625

 

(37,280

)

(3.0

)%

Taxes and insurance

 

926,639

 

861,150

 

65,489

 

7.6

%

 

 

5,270,939

 

5,497,185

 

(226,246

)

(4.1

)%

Income Before Other Income and Discontinued Operations

 

3,005,408

 

2,535,505

 

469,903

 

18.5

%

Other Income (Loss)

 

 

 

 

 

 

 

 

 

Interest expense

 

(1,962,093

)

(1,917,353

)

(44,740

)

(2.3

)%

Interest income

 

14,228

 

32,253

 

(18,025

)

(55.9

)%

Casualty (loss)

 

 

(4,151

)

4,151

 

(100.0

)%

Mortgage prepayment penalties

 

 

(785,538

)

785,538

 

(100.0

)%

(Loss) from investment in unconsolidated joint ventures

 

(281,733

)

(217,213

)

64,520

 

(29.7

)%

 

 

(2,229,598

)

(2,892,002

)

662,404

 

(22.9

)%

(Loss) income from Continuing Operations

 

775,810

 

(356,497

)

1,132,307

 

(317.6

)%

Discontinued Operations:

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

 

(7,408

)

7,408

 

100.0

%

Gain on sale of real estate from discontinued operations

 

2,165

 

3,937,551

 

(3,935,386

)

(99.9

)%

 

 

2,165

 

3,930,143

 

3,927,978

 

(100.0

)%

Net Income

 

$

777,975

 

$

3,573,646

 

$

2,795,671

 

(78.2

)%

 

Rental income from continuing operations for the three months ended June 30, 2009 was approximately $8,179,000, compared to approximately $7,935,000 for the three months ended June 30, 2008, an increase of approximately $244,000 (3.0%). The Partnership’s acquisition of Cypress Street in October 2008 represents approximately $211,000 of this increase.  Other properties with significant increases include 1144 Commonwealth Avenue, an increase of approximately $33,000 and

 

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Worcester Road with an increase of approximately $16,000.  These increases are offset by decreases in rental income at properties including Executive Apartments with a decrease of approximately $23,000; North Beacon Street with a decrease of approximately $19,000 and Lincoln Street with a decrease of approximately $17,000.

 

Expenses from continuing operations for the three months ended June 30, 2009 were approximately $5,271,000 compared to approximately $5,497,000 for the three months ended June 30, 2008, a decrease of approximately $226,000 (4.1%). The most significant factor contributing to this decrease was a decrease in depreciation and amortization expense of approximately $105,000(6.5%) due to assets being fully depreciated at June 30, 2009; a decrease in administrative expenses of approximately $70,000(15.3%) due to significant legal and accounting fees paid in 2008 in connection with the stock buyback program; a decrease in operating expenses of approximately $60,000(6.4%) due to a decrease in utility costs; a decrease in renting expense of approximately $23,000 (22%) due to a decrease in rental commissions and a decrease in repairs and maintenance expenses of approximately $37,000 (3.0%) due to major repairs done at the properties in the 2008.

 

These decreases are offset by an increase in taxes and insurance of approximately $65,000 (7.6%) due to increase in property taxes.

 

Interest expense increased approximately $45,000 (2.3%) due to the refinancing of Partnership properties in 2008 resulting in a higher level of debt offset by lower interest rates.

 

At June 30, 2009, the Partnership has a 50% ownership interest in eight Investment Properties. See a description of these properties included in Note 14 to the Consolidated Financial Statements for a detail of the financial information of each Investment Property.

 

As described in Note 14 to the Consolidated Financial Statements, the Partnership’s share of the net loss from the 50% owned Investment Properties was approximately $282,000 for the three months ended June 30, 2009 compared to a loss of approximately $217,000 for the three months ended June 30, 2008, an increase of approximately $65,000.  Included in the loss at June 30, 2008 is a gain of approximately $136,000 on the sale of six units compared to a gain of approximately $25,000 on the sale of one unit during the three months ended June 30, 2009.

 

Interest income for the three months ended June 30, 2009 was approximately $14,000 compared to approximately $32,000 for the three months ended June 30, 2008, a decrease of approximately $18,000. This decrease is due to a drop in interest rates.

 

During the second quarter of 2008, the Partnership refinanced the property located at Worcester Road.   Non-recurring prepayment penalties of approximately $786,000 were incurred in these transactions and are included in other expenses for the three months ended June 30, 2008.

 

In April 2008, the Partnership sold the Coach Apartments in Acton, Massachusetts.  The gain on the sale is approximately $3,938,000 and is included in discontinued operations.

 

As a result of the changes discussed above, net income for the three months ended June 30, 2009 was $777,975 compared to $3,573,646 for the three months ended June 30, 2008, a decrease of $2,795,671(78.2%).

 

Comparison of the six months ended June 30, 2009 to the six months ended June 30, 2008

 

The Partnership and its subsidiary Partnerships earned income before other income and discontinued operations of $5,730,816 for the six months ended June 30, 2009, compared to $4,767,028 for the six months ended June 30, 2008, an increase of $963,788(20%).  The following is a summary of the Partnership’s operations for the six months ended June 30, 2009 and 2008.

 

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Table of Contents

 

 

 

Six Months Ended June 30,

 

Dollar

 

Percent

 

 

 

2009

 

2008

 

Change

 

Change

 

Revenues:

 

 

 

 

 

 

 

 

 

Rental income

 

$

16,544,672

 

$

15,857,659

 

687,013

 

4.3

%

Laundry and sundry income

 

192,370

 

206,998

 

(14,628

)

(7.1

)%

 

 

16,737,042

 

16,064,657

 

672,385

 

4.2

%

Expenses

 

 

 

 

 

 

 

 

 

Administrative

 

852,347

 

882,239

 

(29,892

)

(3.4

)%

Depreciation and amortization

 

2,921,497

 

3,228,609

 

(307,112

)

(9.5

)%

Management fees

 

676,787

 

652,470

 

24,317

 

3.7

%

Operating

 

2,374,329

 

2,332,615

 

41,714

 

1.8

%

Renting

 

144,129

 

186,865

 

(42,736

)

(22.9

)%

Repairs and maintenance

 

2,145,631

 

2,244,691

 

(99,060

)

(4.4

)%

Taxes and insurance

 

1,891,506

 

1,770,140

 

121,366

 

6.9

%

 

 

11,006,226

 

11,297,629

 

(291,403

)

(2.6

)%

Income Before Other Income and Discontinued Operations

 

5,730,816

 

4,767,028

 

963,788

 

20.2

%

Other Income (Loss)

 

 

 

 

 

 

 

 

 

Interest expense

 

(3,907,240

)

(3,843,212

)

(64,028

)

1.7

%

Interest income

 

32,591

 

80,622

 

(48,031

)

(59.6

)%

Casualty (loss)

 

 

(4,151

)

4,151

 

(100.0

)%

Mortgage prepayment penalties

 

 

(4,487,706

)

4,487,706

 

(100.0

)%

Gain on sale of equipment

 

4,190

 

 

4,190

 

NA

 

(Loss) from investment in unconsolidated joint ventures

 

(555,288

)

(465,018

)

(90,270

)

19.4

%

 

 

(4,425,747

)

(8,719,465

)

4,293,718

 

(49.2

)%

(Loss) Income from Continuing Operations

 

1,305,069

 

(3,952,437

)

5,257,506

 

(133.0

)%

Discontinued Operations:

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

 

(34,855

)

34,855

 

(100.0

)%

Gain (loss) on sale of real estate from discontinued operations

 

(7,009

)

9,990,942

 

9,997,951

 

100.0

%

 

 

(7,009

)

9,956,087

 

9,963,096

 

100.0

%

Net Income

 

$

1,298,060

 

$

6,003,650

 

$

(4,705,590

)

(78.4

)%

 

Rental income from continuing operations for the six months ended June 30, 2009 was approximately $16,545,000 compared to approximately $15,858,000 for the six months ended June 30, 2008, an increase of approximately $687,000 (4.3%). The Partnership’s acquisition of Cypress Street in October 2008 represents approximately $412,000 of this increase.  Other properties with significant increases include 1144 Commonwealth Avenue, an increase of approximately $80,000;  62 Boylston Street, an increase of approximately $82,000; Westgate Apartments, an increase of approximately $36,000; Linewt , an increase of approximately $25,000 and  Worcester Road with an increase of approximately $22,000.  These increases are offset by decreases in rental income at properties including Executive Apartments with a decrease of approximately $27,000; North Beacon Street with a decrease of approximately $24,000 and School Street with a decrease of approximately $15,000.

 

Expenses from continuing operations for the six months ended June 30, 2009 were approximately $11,006,000 compared to approximately $11,298,000 for the six months ended June 30, 2008, a decrease of approximately $291,000 (2.6%). The most significant factor contributing to this decrease was a decrease in depreciation and amortization expense of approximately $307,000(9.5%); a decrease in repairs and maintenance expenses of approximately $99,000(4.4%); a decrease in renting expenses of approximately $43,000(22.9%); and a decrease in administrative expenses of approximately $29,000(3.4%).  The reasons for these changes are discussed in the section for the results for the three months ended June 30, 2009.

 

These decreases are offset by an increase in taxes and insurance of approximately $121,000 (6.9%), and increase in operating expenses of approximately $42,000(1.8%) due to increases in utility costs.

 

Interest expense increased approximately $64,000 (1.7%) due to the refinancing of Partnership properties in 2008 resulting in a higher level of debt offset by lower interest rates.

 

At June 30, 2009, the Partnership has a 50% ownership interest in eight Investment Properties. See a description of these properties included in Note 14 to the Consolidated Financial Statements for a detail of the financial information of each Investment Property.

 

As described in Note 14 to the Consolidated Financial Statements, the Partnership’s share of the net loss from the 50% owned Investment Properties was approximately $555,000 for the six months ended June 30, 2009 compared to a loss of approximately $465,000 for the six months ended June 30, 2008, an increase of approximately $90,000.  Included in the net loss

 

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during the six months ended June 30, 2009 is a gain on the sale of one unit of approximately $24,000, compared to a gain of approximately $349,000 on the sale of ten units during the six months ended June 30, 2008.

 

Interest income for the six months ended June 30, 2009 was approximately $32,000 compared to approximately $81,000 for the six months ended June 30, 2008, a decrease of approximately $49,000(59%). This decrease is due to a drop in interest rates.

 

During the six months ended June 30, 2008, the Partnership sold the Oak Ridge Apartments in Foxboro, Massachusetts and the Coach Apartments in Acton, Massachusetts.  The gain on the sale of these two properties was approximately $9,991,000 and is included in income from discontinued operations.

 

As a result of the changes discussed above, net income for the six months ended June 30, 2009 was $1,298,060 compared to $6,003,650 for six months ended June 30, 2008, a decrease of $4,705,590(78.4%).

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Partnership’s principal source of cash during 2009 and 2008 was the collection of rents, sale of real estate, and refinancing of partnership properties. The majority of cash and cash equivalents of $11,050,265 at June 30, 2009 and $10,752,931 at December 31, 2008 were held in interest bearing accounts at creditworthy financial institutions.

 

This increase in cash of $297,334 at June 30, 2009 is summarized as follows:

 

 

 

Six Months Ended June 30,

 

 

 

2009

 

2008

 

Cash provided by (used in) operating activities

 

$

4,939,638

 

$

(3,710,739

)

Cash provided by (used in) investing activities

 

(1,087,015

)

8,491,591

 

Cash (used in) provided by financing activities

 

(416,210

)

22,645,509

 

Repurchase of Depositary Receipts, Class B and General Partner Units

 

(1,278,090

)

(19,744.831

)

Distributions paid

 

(1,860,989

)

(1,892,845

)

Net increase in cash and cash equivalents

 

$

297,334

 

$

5,788,685

 

 

The cash provided by operating activities is primarily due to the collection of rents less cash operating expenses. The increase in cash provided by operating activities is due to the $2,600,000 which was held by a Qualified Intermediary at June 30, 2008 in connection with the purchase of the medical building in Brookline, Massachusetts. The decrease in cash provided by investing activities is due to the sale of properties in 2008, as well as the reduction in the distribution received from the joint ventures in 2009. The decrease in cash provided by financing activities is due to the refinancing of Partnership properties in 2008.

 

During the six months ended June 30, 2009, the Partnership and its Subsidiary Partnerships completed improvements to certain of the Properties at a total cost of approximately $1,275,000. These improvements were funded from cash reserves and, to some extent, escrow accounts established in connection with the financing or refinancing of the applicable Properties. These sources have been adequate to fully fund improvements. The most significant improvements were made at Westside Colonial, Dean Street, Redwood Hills, Westgate Apartments and Olde English, at a cost of approximately $165,000, $129,000, $128,000, $107,000 and $105,000, respectively. The Partnership plans to invest approximately $752,000 in additional capital improvements in 2009.

 

In 2009 the Partnership repurchased 2,468 Class A Units, Class B Units and General Partnership Units at a total cost of $1,278,000.

 

On January 3, 2008, the Partnership sold the Oak Ridge Apartments, a 61-unit residential apartment complex located in Foxboro, Massachusetts. The sale price was $7,150,000, which resulted in a gain of approximately $6,000,000. In November 2007, the Partnership purchased a fully occupied commercial building located in Newton, Massachusetts, known as Linewt LLC. The purchase price was $3,475,000 and the building consists of 5,850 square feet of commercial space. The

 

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Table of Contents

 

Partnership utilized Section 1031 of the IRS code to affect a tax free exchange on the gain of Oak Ridge up to the purchase price of the Newton property.  In accordance with Section 1031, the Newton property was owned by a Qualified Intermediary for the period from the purchase date of the Newton property and the sale date of the Foxboro property. The Qualified Intermediary borrowed $3,225,112 from Harold Brown, Treasurer of the General Partner, to purchase the Newton property. This loan was paid in full, with interest at 6% of $34,401, from the proceeds of the Oak Ridge sale on January 3, 2008. On January 22, 2008, the Partnership financed the Newton property with a first mortgage of $1,700,000 at 5.75% interest only until maturity in January 2018.

 

In 2008, the Partnership obtained mortgages on 13 properties.  The new mortgages total approximately $73,000,000 with interest rates ranging 5.6% to 5.97%.  The new mortgages mature in 2023 and call for interest only payments.  After payments of existing mortgages of approximately $37,800,000 and prepayment penalties of approximately $4,400,000, the excess funds were used to repurchase Depositary Receipts.

 

In 2009, the Partnership approved distributions of $7.00 per Unit ($0.70 per Receipt) payable March 31, 2009 and June 30, 2009.

 

In 2008 the Partnership paid quarterly distributions of $7.00 per Unit ($0.70 per Receipt) in March, June, September and December 2008 for a total distribution of $28.00 per unit ($2.80 per receipt).

 

The Partnership anticipates that cash from operations and interest bearing accounts will be sufficient to fund its current operations and to finance current improvements to its properties. The Partnership’s net income and cash flow may fluctuate dramatically from year to year as a result of the sale of properties, increases or decreases in rental income or expenses, or the loss of significant tenants.

 

Off-Balance Sheet Arrangements-Joint Venture Indebtedness

 

As of June 30, 2009, the Partnership had a 50% ownership in eight joint ventures, all of which have mortgage indebtedness. We do not have control of these partnerships and therefore we account for them using the equity method. At June 30, 2009, our proportionate share of the non-recourse debt related to these investments was equal to approximately $25,797,000. See Note 14 to the Consolidated Financial Statements.

 

Contractual Obligations

 

See Notes 5 and 14 to the Consolidated Financial Statements for a description of mortgage notes payable. The Partnerships have no other material contractual obligations to be disclosed.

 

Factors That May Affect Future Results

 

Certain information contained herein includes forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Liquidation Reform Act of 1995 (the “Act”). While forward looking statements reflect management’s good faith beliefs when those statements are made, caution should be exercised in interpreting and relying on such forward looking statements, the realization of which may be impacted by known and unknown risks and uncertainties, events that may occur subsequent to the forward-looking statements, and other factors which may be beyond the Partnership’s control and which can materially affect the Partnership’s actual results, performance or achievements for 2009 and beyond. Should one or more of the risks or uncertainties mentioned below materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We expressly disclaim any responsibility to update our forward looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

 

Along with risks detailed from time to time in the Partnership’s filings with the Securities and Exchange Commission, some factors that could cause the Partnership’s actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include but are not limited to the following:

 

·                  The Partnership depends on the real estate markets where its properties are located, primarily in Eastern Massachusetts and these markets may be adversely affected by local economic market conditions, which are beyond the Partnership’s control.

 

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·                  The Partnership is subject to the general economic risks affecting the real estate industry, such as dependence on tenant’s financial condition and the need to enter into new leases or renew leases on terms favorable to tenants in order to generate rental revenues and our ability to collect rents from our tenants.

 

·                  The Partnership is also impacted by changing economic conditions making alternative housing arrangements more or less attractive to the Partnership’s tenants, such as the interest rates on single family home mortgages and the availability and purchase price of single-family homes in the Greater Boston metropolitan area.

 

·                  The Partnership is subject to significant expenditures associated with each investment, such as debt service payments, real estate taxes, insurance and maintenance costs, which are generally not reduced when circumstances cause a reduction in revenues from a property.

 

·                  The Partnership is subject to increases in heating and utility costs that may arise as a result of economic and market conditions and fluctuations in seasonal weather conditions.

 

·                  Civil disturbances, earthquakes and other natural disasters may result in uninsured or underinsured losses.

 

·                  Actual or threatened terrorist attacks may adversely affect our ability to generate revenues and the value of our properties.

 

·                  Financing or refinancing of Partnership properties may not be available to the extent necessary or desirable, or may not be available on favorable terms.

 

·                  The Partnership properties face competition from similar properties in the same market. This competition may affect the Partnership’s ability to attract and retain tenants and may reduce the rents that can be charged.

 

·                  Given the nature of the real estate business, the Partnership is subject to potential environmental liabilities. These include environmental contamination in the soil at the Partnership’s or neighboring real estate, whether caused by the Partnership, previous owners of the subject property or neighbors of the subject property, and the presence of hazardous materials in the Partnership’s buildings, such as asbestos, mold and radon gas. Management is not aware of any material environmental liabilities at this time.

 

·                  Insurance coverage for and relating to commercial properties is increasingly costly and difficult to obtain. In addition, insurance carriers have excluded certain specific items from standard insurance policies, which have resulted in increased risk exposure for the Partnership. These include insurance coverage for acts of terrorism and war, and coverage for mold and other environmental conditions. Coverage for these items is either unavailable, or prohibitively expensive.

 

·                  Market interest rates could adversely affect the market prices for Class A Partnership Units and Depositary Receipts as well as performance and cash flow.

 

·                  Changes in income tax laws and regulations may affect the income taxable to owners of the Partnership. These changes may affect the after-tax value of future distributions.

 

·                  The Partnership may fail to identify, acquire, construct, or develop additional properties; may develop or acquire properties that do not produce a desired or expected yield on invested capital; may be unable to sell poorly- performing or otherwise undesirable properties quickly; or may fail to effectively integrate acquisitions of properties or portfolios of properties.

 

·                  Risks associated with the use of debt to fund acquisitions and developments.

 

·                  Competition for acquisitions may result in increased prices for properties.

 

·                  Any weakness identified in the Partnership’s internal controls as part of the evaluation being undertaken by the Company and its independent public accountants pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 could have an adverse effect on the Company’s business.

 

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·                  Ongoing compliance with Sarbanes-Oxley Act of 2002 may require additional personnel or system changes.

 

The foregoing factors should not be construed as exhaustive or as an admission regarding the adequacy of disclosures made by the Partnership prior to the date hereof or the effectiveness of said Act. The Partnership expressly disclaims any obligation to publicly update or revise any forward- looking statement, whether as a result of new information, future events or otherwise.

 

The residential real estate market in the Greater Boston area has softened and the Partnership anticipates the climate will remain the same in the foreseeable future. This may result in increases in vacancy rates and/or a reduction in rents. The Partnership believes its present cash reserves as well as anticipated rental revenue will be sufficient to fund its current operations, and to finance current planned improvements to its properties and continue dividend payments in the foreseeable future.

 

Since the Partnership’s long-term goals include the acquisition of additional properties, a portion of the proceeds from the refinancing and sale of properties is reserved for this purpose. The Partnership will consider refinancing existing properties if the Partnership’s cash reserves are insufficient to repay existing mortgages or if the Partnership needs additional funds for future acquisitions.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As of June 30, 2009, the Partnership, its Subsidiary Partnerships and the Investment Properties collectively have approximately $138,000,000 in long-term debt, substantially all of which pays interest at fixed rates. Accordingly, the fair value of these debt instruments is affected by changes in market interest rates. These mortgages mature through 2023. For information regarding the fair value and maturity dates of these debt obligations, see Item 2 and Notes 5, 12 and 14 to the Consolidated Financial Statements.

 

For additional disclosure about market risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results”.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures.  The  management of the Partnership’s general partner, with the participation of the president and chief executive officer and chief financial officer, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.  Based on such evaluation, the president and chief executive officer and chief financial officer of the Partnership’s  general partner have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

 

Internal Control Over Financial Reporting.  There have not been any changes in the Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

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PART II—OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

The Partnership, the Subsidiary Partnerships and their properties are not presently subject to any material litigation, and, to management’s knowledge, there is not any material litigation presently threatened against them.  The Partnership and Subsidiary Partnerships are occasionally subject to ordinary routine legal and administrative proceedings incident to the ownership of residential and commercial real estate.  Some of the legal and other expenses related to these proceedings are covered by insurance and none of these costs and expenses are expected to have a material adverse effect on the Consolidated Financial Statements of the Partnership.

 

Item 1A.  Risk Factors

 

There were no material changes to the Risk Factors disclosed in our annual report on Form 10-K for the year ended December 31, 2008.

 

None.

 

Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds

 

(a)                                  None

 

(b)                                 None.

 

(c)                                  Issuer Purchases of Equity Securities during the three Months Ended June 30, 2009:

 

None

 

See Note 8 to the Consolidated Financial Statements for information concerning this repurchase program through June 30, 2009.

 

Item 3.  Defaults Upon Senior Securities

 

None.

 

Item 4.  Submission of Matters to a Vote of Security Holders

 

None.

 

Item 5.  Other Information

 

None.

 

Item 6.  Exhibits

 

(a)                                  See the exhibit index below.

 

EXHIBIT INDEX

 

Exhibit
No.

 

Description of Exhibit

(31.1)

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Ronald Brown, Principal Executive Officer of the Partnership (President and a Director of NewReal, Inc., sole General Partner of the Partnership)

 

 

 

(31.2)

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Harold Brown, Principal Financial Officer of the Partnership (Treasurer and a Director of NewReal, Inc., sole General Partner of the Partnership)

 

 

 

(32.1)

 

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Ronald Brown, Principal Executive Officer of the Partnership (President and a Director of NewReal, Inc., sole General Partner of the Partnership)

 

 

 

(32.2)

 

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Harold Brown, Principal Financial Officer of the Partnership (Treasurer and a Director of NewReal, Inc., sole General Partner of the Partnership)

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP

 

 

 

 

By:

/s/ NEWREAL, INC.

 

 

Its General Partner

 

 

 

 

By:

/s/ RONALD BROWN

 

 

Ronald Brown, President

 

Dated: August 7, 2009

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature

 

Title

 

Date

 

 

 

 

 

/s/ RONALD BROWN

 

President and Director of the General Partner

 

August 7, 2009

Ronald Brown

 

(Principal Executive Officer)

 

 

 

 

 

 

 

/s/ HAROLD BROWN

 

Treasure and Director to the General Partner

 

August 7, 2009

Harold Brown

 

(Principal and Finance Officer and Principal Accounting Officer)

 

 

 

 

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