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**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

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**FORM 10-Q**

 

**(Mark One)**

 

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

 

**For thequarterly period ended September 30, 2010**

 

**OR**

 

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

 

**For thetransition period from             to             **

 

**Commission file number 0-12138**

 

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**NewEngland Realty Associates Limited Partnership**

(Exact name of registrant as specified in itscharter)

 

| **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’stelephone number, including area code: **(617) 783-0039**

 

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

 

| **Depositary Receipts**  (Title of each Class) |   | **NYSE AMEX**  (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)

 

**Not applicable**

(Former name, former addressand former fiscal year, if changed since last report)

 

Indicate by checkmark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act.  Yes oNo x

 

Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the ExchangeAct.  Yes oNo x

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past90 days. Yes xNo o

 

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (232.405 of this chapter) during the preceding 12 months (or forsuch shorter period that the registrant was required to submit and post suchfiles).  Yes oNo o (the Registrant is not yet required to submitInteractive Data)Indicate by check mark whether the registrant is a largeaccelerated filer, an accelerated filer, a non-accelerated filer or a smallerreporting company. See definitions of “large accelerated filer,” “acceleratedfiler” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.(Check one):

 

| Large accelerated filer o                     |   | Accelerated filer o         |
|-----------------------------------------------|--------|-----------------------------|
|                                          |   |                        |
| Non-accelerated filer o                       |   | Smaller reporting company x |
| (Do not check if a smaller reporting company) |   |                        |

 

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

 

As of September 30, 2010, there were 105,188 of the registrant’sClass A units (1,051,876 Depositary Receipts) of limited partnershipissued and outstanding and 24,982 Class B units issued and outstanding.

 

 

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**NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP**

 

**INDEX**

 
| **PART I—FINANCIAL  INFORMATION** |
|---------------------------------------------|
| Item 1.                                | Financial Statements (Unaudited) |
|                                        | Consolidated  Balance Sheets as of September 30, 2010 and December 31, 2009 |
|                                        | Consolidated  Statements of Income for the Three Months Ended September 30, 2010 and  2009 and Nine Months ended September 30, 2010 and 2009 |
|                                        | Consolidated  Statements of Changes in Partners’ Capital for the Nine Months Ended  September 30, 2010 and September 30, 2009 |
|                                        | Consolidated  Statements of Cash Flows for the Nine Months Ended September 30, 2010  and September 30, 2009 |
|                                        | 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.                                | (Removed and Reserved) |
| Item 5.                                | Other Information |
| Item 6.                                | Exhibits |
| **SIGNATURES**                              |

 

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**NEWENGLAND REALTY ASSOCIATES, L.P.**

 

**PART I— FINANCIAL INFORMATION**

 

Item 1. Financial Statements

 

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

 

The consolidated balance sheet as of December 31, 2009 has beenderived from the audited consolidated balance sheet at that date but does notinclude all of the information and footnotes required by U.S. generallyaccepted accounting principles for complete financial statements.

 

The aforementioned financial statements should be read in conjunctionwith the notes to the aforementioned financial statements and Management’sDiscussion and Analysis of Financial Condition and Results of Operations andthe financial statements and notes thereto included in New England RealtyAssociates L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31,2009.

 

The results of operations for the nine month period ended September 30,2010 are not necessarily indicative of the results to be expected for theentire fiscal year or any other period.

 

**NEW ENGLAND REALTY ASSOCIATES LIMITEDPARTNERSHIP AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**

 
| ** **                                                                                   | ** ** | **September 30, 2010** | ** **  | **December 31, 2009** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------------------|-------------|---------------------------------|------------|
| ** **                                                                                   | ** ** | **(Unaudited)**                  | ** **  | **(Audited)**                   | ** ** |
| **ASSETS**                                                                                   |       |                             |        |                            |       |
| Rental Properties                                                                            |       | $                                | 93,339,779  |                            | $          | 95,971,937 |   |
| Cash and Cash Equivalents                                                                    |       | 4,814,195                        |        | 2,879,663                       |       |
| Rents Receivable                                                                             |       | 698,505                          |        | 1,038,820                       |       |
| Real Estate Tax Escrows                                                                      |       | 254,758                          |        | 311,582                         |       |
| Prepaid Expenses and Other Assets                                                            |       | 3,474,079                        |        | 2,857,288                       |       |
| Investments in Unconsolidated Joint Ventures                                                 |       | 21,084,527                       |        | 24,964,453                      |       |
| Financing and Leasing Fees                                                                   |       | 977,690                          |        | 1,065,993                       |       |
| **Total Assets**                                                                             |       | $                                | 124,643,533 |                            | $          | 129,089,736 |   |
| **LIABILITIES AND PARTNERS’ CAPITAL**                                                   |       |                             |        |                            |       |
| Note Payable                                                                                 |       | $                                | 7,168,600   |                            | $          | 7,168,600 |   |
| Mortgage Notes Payable                                                                       |       | 137,903,103                      |        | 137,641,354                     |       |
| Accounts Payable and Accrued Expenses                                                        |       | 2,235,510                        |        | 2,195,245                       |       |
| Advance Rental Payments and Security Deposits                                                |       | 3,356,160                        |        | 3,417,361                       |       |
| **Total Liabilities**                                                                        |       | 150,663,373                      |        | 150,422,560                     |       |
| ** **                                                                                   |       |                             |        |                            |       |
| Commitments and Contingent Liabilities (Notes 3 and 9)                                  |       |                             |        |                            |       |
|                                                                                         |       |                             |        |                            |       |
| Partners’ Capital 131,484 and 132,346 units outstanding in 2010 and  2009, respectively |       | (26,019,840                      | )           | (21,332,824                     | )          |
| **Total Liabilities and Partners’ Capital**                                             |       | $                                | 124,643,533 |                            | $          | 129,089,736 |   |

 

See notes to consolidated financialstatements.

 

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**NEW ENGLAND REALTY ASSOCIATES LIMITEDPARTNERSHIP AND SUBSIDIARIES**

 

**CONSOLIDATEDSTATEMENTS OF INCOME**

 

**(Unaudited)**

 
| ** **                                              | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                              | ** ** | **2010**                                             | ** ** | **2009**                                            | ** ** | **2010** | ** ** | **2009** | ** ** |
|                                                    |       |                                                 |       |                                                |       |   |   |   |   |
| Revenues                                                |       |                                                 |       |                                                |       |   |   |   |   |
| Rental income                                           |       | $                                                    | 8,119,956  |                                                | $          | 8,089,673 |   | $ | 24,432,776 |   | $ | 24,634,345 |   |
| Laundry and sundry income                               |       | 106,772                                              |       | 119,893                                             |       | 342,698 |   | 312,263 |   |
|                                                    |       | 8,226,728                                            |       | 8,209,566                                           |       | 24,775,474 |   | 24,946,608 |   |
| Expenses                                                |       |                                                 |       |                                                |       |   |   |   |   |
| Administrative                                          |       | 409,134                                              |       | 416,398                                             |       | 1,331,734 |   | 1,277,745 |   |
| Depreciation and amortization                           |       | 1,493,664                                            |       | 1,591,668                                           |       | 4,290,983 |   | 4,513,165 |   |
| Management fees                                         |       | 342,010                                              |       | 334,745                                             |       | 1,022,230 |   | 1,011,531 |   |
| Operating                                               |       | 795,912                                              |       | 689,871                                             |       | 2,902,157 |   | 3,064,201 |   |
| Renting                                                 |       | 209,277                                              |       | 262,234                                             |       | 384,273 |   | 406,363 |   |
| Repairs and maintenance                                 |       | 1,504,045                                            |       | 1,435,264                                           |       | 3,756,649 |   | 3,580,895 |   |
| Taxes and insurance                                     |       | 1,039,924                                            |       | 891,239                                             |       | 3,159,361 |   | 2,773,745 |   |
|                                                    |       | 5,793,966                                            |       | 5,621,419                                           |       | 16,847,387 |   | 16,627,645 |   |
| Income Before Other Income and Discontinued Operations  |       | 2,432,762                                            |       | 2,588,147                                           |       | 7,928,087 |   | 8,318,963 |   |
| Other Income (loss)                                     |       |                                                 |       |                                                |       |   |   |   |   |
| Interest income                                         |       | 1,898                                                |       | 15,270                                              |       | 4,411 |   | 47,861 |   |
| Interest expense                                        |       | (2,064,796                                           | )          | (1,978,591                                          | )          | (6,141,468 | ) | (5,885,831 | ) |
| Gain(Loss) on the sale of equipment                     |       | —                                               |       | 93                                                  |       | — |   | (2,726 | ) |
| (Loss) from investment in unconsolidated joint ventures |       | (1,151,355                                           | )          | (325,614                                            | )          | (3,169,926 | ) | (880,902 | ) |
|                                                    |       | (3,214,253                                           | )          | (2,288,842                                          | )          | (9,306,983 | ) | (6,721,598 | ) |
| Net Income (loss)                                       |       | $                                                    | (781,491   | )                                                   | $          | 299,305 |   | $ | (1,378,896 | ) | $ | 1,597,365 |   |
|                                                    |       |                                                 |       |                                                |       |   |   |   |   |
| Net Income per Unit                                     |       | $                                                    | (5.94      | )                                                   | $          | 2.26 |   | $ | (10.46 | ) | $ | 11.99 |   |
|                                                    |       |                                                 |       |                                                |       |   |   |   |   |
| Weighted Average Number of Units Outstanding            |       | 131,485                                              |       | 132,556                                             |       | 131,767 |   | 133,175 |   |

 

See notes to consolidated financialstatements.

 

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**NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OFCHANGES 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,  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          |       | —           |       | —                          |       | — |   | — |   | — |   | — |   | (2,229,931 | ) | (529,609 | ) | (27,874 | ) | (2,787,414 | ) |
| Stock Buyback                     |       | —           |       | —                          |       | — |   | — |   | 2,905 |   | (2,905 | ) | (1,214,734 | ) | (284,626 | ) | (14,980 | ) | (1,514,340 | ) |
| Net Income                        |       | —           |       | —                          |       | — |   | — |   | — |   | — |   | 1,277,892 |   | 303,499 |   | 15,974 |   | 1,597,365 |   |
| Balance,  September 30, 2009 |       | 144,180          |       | 34,243                          |       | 1,802 |   | 180,225 |   | 47,879 |   | 132,346 |   | $ | (16,340,518 | ) | $ | (3,877,001 | ) | $ | (204,052 | ) | $ | (20,421,571 | ) |
| Balance, January 1,  2010    |       | 144,180          |       | 34,243                          |       | 1,802 |   | 180,225 |   | 47,879 |   | 132,346 |   | $ | (17,069,520 | ) | $ | (4,050,138 | ) | $ | (213,165 | ) | $ | (21,332,823 | ) |
| Distribution to Partners          |       | —           |       | —                          |       | — |   | — |   |   |   |   |   | (2,213,767 | ) | (525,770 | ) | (27,672 | ) | (2,767,209 | ) |
| Stock Buyback                     |       | —           |       | —                          |       | — |   | — |   | 862 |   | (862 | ) | (432,920 | ) | (102,591 | ) | (5,400 | ) | (540,911 | ) |
| Net (Loss)                        |       | —           |       | —                          |       | — |   | — |   |   |   |   |   | (1,103,118 | ) | (261,990 | ) | (13,789 | ) | (1,378,897 | ) |
| Balance,  September 30, 2010 |       | 144,180          |       | 34,243                          |       | 1,802 |   | 180,225 |   | 48,741 |   | 131,484 |   | $ | (20,819,325 | ) | $ | (4,940,489 | ) | $ | (260,026 | ) | $ | (26,019,840 | ) |

 

See notes to consolidated financial statements.

 

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**NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

 

**(Unaudited)**

 
| ** **                                                                                   | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                   | ** ** | **2010**                                            | ** ** | **2009** | ** ** |
|                                                                                         |       |                                                |       |   |   |
| Cash  Flows from Operating Activities                                                        |       |                                                |       |   |   |
| Net  income (loss)                                                                           |       | $                                                   | (1,378,896 | ) | $ | 1,597,365 |   |
| Adjustments  to reconcile net income to net cash provided by (used in) operating  activities |       |                                                |       |   |   |
| Depreciation  and amortization                                                               |       | 4,290,983                                           |       | 4,513,165 |   |
| Loss  from investment in joint ventures                                                      |       | 3,169,926                                           |       | 880,902 |   |
| Gain  (loss) on the sale of equipment                                                        |       | —                                              |       | 2,726 |   |
| Changes  in operating assets and liabilities                                                 |       |                                                |       |   |   |
| (Increase)  decrease in rents receivable                                                     |       | 340,315                                             |       | (149,645 | ) |
| (Decrease)  increase in accounts payable and accrued expense                                 |       | 40,265                                              |       | (159,481 | ) |
| Decrease  in real estate tax escrow                                                          |       | 56,824                                              |       | 2,676 |   |
| (Increase)  decrease in prepaid expenses and other assets                                    |       | (616,791                                            | )          | 238,682 |   |
| (Decrease)  in advance rental payments and security deposits                                 |       | (61,201                                             | )          | (306 | ) |
| Total  Adjustments                                                                           |       | 7,220,321                                           |       | 5,328,719 |   |
| Net  cash provided by operating activities                                                   |       | 5,841,425                                           |       | 6,926,084 |   |
| Cash  Flows provided by (used in) Investing Activities                                       |       |                                                |       |   |   |
| Net  proceeds from the sale of equipment                                                     |       | —                                              |       | 13,733 |   |
| Investment  in consolidated joint venture                                                    |       | (40,000                                             | )          |   |   |
| Deposit  on future acquisition                                                               |       | —                                              |       | (2,660,500 | ) |
| Proceeds  from unconsolidated joint ventures                                                 |       | 750,000                                             |       | 282,500 |   |
| Purchase  and improvement of rental properties                                               |       | (1,563,380                                          | )          | (2,346,364 | ) |
| Net  cash (used in) investing activities                                                     |       | (853,380                                            | )          | (4,710,631 | ) |
| Cash  Flows provided by (used in) Financing Activities                                       |       |                                                |       |   |   |
| Payment  of financing costs                                                                  |       | (7,143                                              | )          | (18,687 | ) |
| Principal  payments of mortgage notes payable                                                |       | (642,372                                            | )          | (612,528 | ) |
| Stock  buyback                                                                               |       | (540,911                                            | )          | (1,514,340 | ) |
| Proceeds  of mortgage notes payable                                                          |       | 904,122                                             |       | — |   |
| Distributions  to partners                                                                   |       | (2,767,209                                          | )          | (2,787,414 | ) |
| Net  cash (used in) financing activities                                                     |       | (3,053,513                                          | )          | (4,932,969 | ) |
| Net  Increase (Decrease) in Cash and Cash Equivalents                                        |       | 1,934,532                                           |       | (2,717,516 | ) |
| Cash  and Cash Equivalents, at beginning of period                                           |       | 2,879,663                                           |       | 10,752,931 |   |
| Cash  and Cash Equivalents, at end of period                                                 |       | $                                                   | 4,814,195  |   | $ | 8,035,415 |   |

 

See notes to consolidated financial statements.

 

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**NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

 

**SEPTEMBER 30, 2010**

 

**(UNAUDITED)**

 

**NOTE 1.SIGNIFICANT ACCOUNTING POLICIES**

 

*Line ofBusiness:*  New EnglandRealty Associates Limited Partnership (“NERA” or the “Partnership”) wasorganized in Massachusetts in 1977. NERA and its subsidiaries own and operatevarious residential apartment buildings, condominium units and commercialproperties located in Massachusetts and New Hampshire. NERA has also madeinvestments in other real estate partnerships and has participated in otherreal estate related activities, primarily located in Massachusetts.

 

*AccountingStandards*: On July 1, 2009, the Financial AccountingStandards Board (“FASB”) issued the FASB Accounting Standards Codification andthe Hierarchy of Generally Accepted Accounting Principles, also known as FASBAccounting Standards Codification (“ASC 105-10”), General Accepted AccountingPrinciples (“ASC 105-10”).  ASC 105-10established the FASB Accounting Standards Codification (“Codification”) as thesingle source of authoritative U.S. GAAP recognized by the FASB to be appliedby nongovernmental entities.  Rules andinterpretive releases of the Securities and Exchange Commission (“SEC”) underauthority of federal securities laws are also sources of authoritative GAAP forSEC registrants.  The Codificationsupersedes all existing non-SEC accounting and reporting standards.  All other non -grandfathered, non-SECaccounting literature not included in the Codification will becomenon-authoritative.  Following theCodification, the FASB will not issue new standards in the form of Statements,FASB Staff Positions or Emerging Issues Task Force Abstracts.  Instead, it will issue Accounting StandardsUpdates, which will serve to update the Codification, provide backgroundinformation about the guidance and provide the basis for conclusions on thechanges to the Codification.  GAAP wasnot intended to be changed as a result of the FASB’s Codification project, butit will change the way the guidance is organized and presented.  As a result, these changes will have asignificant impact on how companies reference GAAP in their financialstatements and in their accounting policies for financial statements issued forinterim and annual periods ending after September 15, 2009.  The Partnership has implemented theCodification in this report by providing references to the Codification topics,as appropriate.

 

*Principlesof Consolidation:* The consolidated financial statements include theaccounts of NERA and its subsidiaries. NERA has a 99.67% to 100% ownershipinterest in each subsidiary except for the nine limited liability companies(the “Investment Properties” or “Joint Ventures”) in which the Partnership hasa 40 - 50% ownership interest. The consolidated group is referred to as the “Partnerships”.Minority interests are not recorded, since they are insignificant. Allsignificant intercompany accounts and transactions are eliminated inconsolidation. The Partnership accounts for its investment in theabove-mentioned Investment Properties using the equity method of consolidation.(See Note 14: Investments in Unconsolidated Joint Ventures).

 

The Partnership accounts forits investments in joint ventures using the equity method of accounting. Theseinvestments are recorded initially at cost, as Investments in UnconsolidatedJoint Ventures, and subsequently adjusted for equity in earnings and cashcontributions and distributions. The authoritative guidance on consolidationprovides guidance on the identification of entities for which control isachieved through means other than voting rights (“variable interest entities”or “VIEs”) and the determination of which business enterprise, if any, shouldconsolidate the VIE (the “primary beneficiary”).  Generally, theconsideration of whether an entity is a VIE applies when either (1) theequity investors (if any) lack one or more of the essential characteristics ofa controlling financial interest, (2) the equity investment at risk isinsufficient to finance that entity’s activities without additionalsubordinated financial support or (3) the equity investors have votingrights that are not proportionate to their economic interests and theactivities of the entity involve or are conducted on behalf of an investor witha disproportionately small voting interest.

 

On January 1, 2010, thePartnership adopted the updated provisions of ASC 810, pursuant to FASB No. 167,which amends FIN 46® to require ongoing reassessments of whether an enterpriseis the primary beneficiary of a

 

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variable interestentity.  Additionally, FASB No. 167amends FIN 46® to eliminate the quantitative approach previously required fordetermining the primary beneficiary of a variable interest entity, which wasbased on determining which enterprise absorbs the majority of the entity’sexpected losses, receives a majority of the entity’s expected residual returns,or both.  FASB No. 167 amendscertain guidance in Interpretation 46® for determining whether an entity is avariable interest entity. Also, FASB No. 167 amends FIN 46® to requireenhanced disclosures that will provide users of financial statements with moretransparent information about an enterprise’s involvement in a variableinterest entity.  The enhanceddisclosures are required for any enterprise that holds a variable interest in avariable interest entity.  The adoptionof this guidance did not have a material impact to these financial statements.

 

*Impairment*:  On an annual basis management assesseswhether there are any indicators that the value of the Partnership’s rentalproperties or investments in unconsolidated subsidiaries may be impaired.  A property’s value is impaired only ifmanagement’s estimate of the aggregate future cash flows (undiscounted andwithout interest charges) to be generated by the property is less than thecarrying value of the property.  To theextent impairment has occurred, the loss shall be measured as the excess of thecarrying amount of the property over the fair value of the property.  The Partnership’s estimates of aggregatefuture cash flows expected to be generated by each property are based on anumber of assumptions that are subject to economic and market uncertaintiesincluding, among others, demand for space, competition for tenants, changes inmarket rental rates, and costs to operate each property.  As these factors are difficult to predict andare subject to future events that may alter management’s assumptions, thefuture cash flows estimated by management in its impairment analyses may not beachieved. The Partnership has not recognized an impairment loss since 1995.

 

*AccountingEstimates:* The preparation of the financial statements, inconformity with accounting principles generally accepted in the United State ofAmerica, requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosures of contingent assetsand liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reported period. Accordingly, actualresults could differ from those estimates.

 

*RevenueRecognition:*  Rentalincome from residential and commercial properties is recognized over the termof the related lease. For residential tenants, amounts 60 days in arrearsare charged against income. The commercial tenants are evaluated on a case bycase basis. Certain leases of the commercial properties provide for increasingstepped minimum rents, which are accounted for on a straight-line basis overthe term of the lease. Concessions made on residential leases are alsoaccounted for on the straight-line basis.

 

Above-marketand below-market lease values for acquired properties are initially recordedbased on the present value (using a discount rate which reflects the risksassociated with the leases acquired) of the differences between (i) thecontractual amounts to be paid pursuant to each in-place lease and (ii) management’sestimate of fair market lease rates for each corresponding in-place lease,measured over a period equal to the remaining term of the lease forabove-market leases and the initial term plus the term of any below-marketfixed —rate renewal options for below-market leases.  The capitalized above-market lease values foracquired properties are amortized as a reduction of base rental revenue overthe remaining term of the respective leases, and the capitalized below-marketlease values are amortized as an increase to base rental revenue over theremaining initial terms plus the terms of any below-market fixed-rate renewaloptions of the respective leases.

 

*RentalProperties:*  Rentalproperties are stated at cost less accumulated depreciation. Maintenance andrepairs are charged to expense as incurred; improvements and additions arecapitalized. When assets are retired or otherwise disposed of, the cost of theasset and related accumulated depreciation is eliminated from the accounts, andany gain or loss on such disposition is included in income. Fully depreciatedassets are removed from the accounts. Rental properties are depreciated by bothstraight-line and accelerated methods over their estimated useful lives. Uponacquisition of rental property, the Partnership estimates the fair value ofacquired tangible assets, consisting of land, building and improvements, andidentified intangible assets and liabilities assumed, generally consisting ofthe fair value of (i) above and below market leases, (ii) in-placeleases and (iii) tenant relationships. The Partnership allocated the purchase price to the assets acquired andliabilities assumed based on their fair values. The Partnership records goodwill or a gain on bargain purchase (if any)if the net assets acquired/liabilities assumed exceed the purchaseconsideration of a transaction.  Inestimating the fair value of the tangible and intangible assets acquired, thePartnership considers information obtained about each property as a result ofits due diligence and marketing and leasing activities, and utilizes variousvaluation methods, such as estimated cash flow projections utilizing appropriate

 

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discount and capitalizationrates, estimates of replacement costs net of depreciation, and available marketinformation.  The fair value of thetangible assets of an acquired property considers the value of the property asif it were vacant.

 

Otherintangible assets acquired include amounts for in-place lease values and tenantrelationship values, which are based on management’s evaluation of the specificcharacteristics of each tenant’s lease and the Partnership’s overallrelationship with the respective tenant. Factors to be considered by management in its analysis of in-place leasevalues include an estimate of carrying costs during hypothetical expectedlease-up periods considering current market conditions, and costs to executesimilar leases at market rates during the expected lease-up periods, dependingon local market conditions.  Inestimating costs to execute similar leases, management considers leasingcommissions, legal and other related expenses. Characteristics considered by management in valuing tenant relationshipsinclude the nature and extent of the Partnership’s existing business relationshipswith the tenant, growth prospects for developing new business with the tenant,the tenant’s credit quality and expectations of lease renewals.  The value of in-place leases are amortized toexpense over the remaining initial terms of the respective leases.  The value of tenant relationship intangiblesare amortized to expense over the anticipated life of the relationships.

 

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

 

*Financingand Leasing Fees:* Financing fees are capitalized and amortized, usingthe interest method, over the life of the related mortgages. Leasing fees arecapitalized and amortized on a straight-line basis over the life of the relatedlease. Unamortized balances are expensed when the corresponding fee is nolonger applicable.

 

*IncomeTaxes:* The financial statements have been prepared on the basis that NERA andits subsidiaries are entitled to tax treatment as partnerships. Accordingly, noprovision for income taxes has been recorded.

 

*CashEquivalents:* The Partnership considers cash equivalents to beall highly liquid instruments purchased with a maturity of three months orless.

 

*SegmentReporting:* Operating segments are revenue producing componentsof the Partnership for which separate financial information is producedinternally for management. Under the definition, NERA operated, for all periodspresented, as one segment.

 

*ComprehensiveIncome:* Comprehensive income is defined as changes in partners’ equity,exclusive of transactions with owners (such as capital contributions anddividends). NERA did not have any comprehensive income items in 2010 and 2009other than net income as reported.

 

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

 

*Concentrationof Credit Risks and Financial Instruments:* The Partnership’sproperties are located in New England and the Partnership is subject to thegeneral economic risks related thereto. No single tenant accounted for morethan 5% of the Partnership’s revenues in 2010 or 2009.  The Partnership makes its temporary cashinvestments with high-credit quality financial institutions. At September 30,2010, substantially all of the Partnership’s cash and cash equivalents wereheld in interest-bearing accounts at financial institutions, earning interestat rates from 0.05% to 1.0%.   At September 30,2010 and December 31, 2009, respectively, approximately $5,858,000 and$4,026,000 of cash and cash equivalents, and security deposits included inprepaid expenses and other assets exceeded federally insured amounts.

 

*AdvertisingExpense:* Advertising is expensed as incurred. Advertisingexpense was $57,288 and $58,884 for the nine months ended September 30,2010 and 2009, respectively.

 

*DiscontinuedOperations and Rental Property Held for Sale:*  When assets are identified by management asheld for sale, the Partnership discontinues depreciating the assets andestimates the sales price, net of selling costs, of

 

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such assets. If, inmanagement’s opinion, the net sales price of the assets which have beenidentified as held for sale is less than the net book value of the assets, avaluation allowance is established. Properties identified as held for saleand/or sold are presented in discontinued operations for all periods presented.

 

Ifcircumstances arise that previously were considered unlikely and, as a result,the Partnership decides not to sell a property previously classified as heldfor sale, the property is reclassified as held and used. A property that isreclassified is measured and recorded individually at the lower of (a) itscarrying amount before the property was classified as held for sale, adjustedfor any depreciation (amortization) expense that would have been recognized hadthe property been continuously classified as held and used, or (b) thefair value at the date of the subsequent decision not to sell.

 

*InterestCapitalized:* The Partnership follows the policy of capitalizinginterest as a component of the cost of rental property when the time ofconstruction exceeds one year. During the nine months ended September 30,2010 and year ended December 31, 2009, there was no capitalized interest.

 

*Extinguishmentof Debt:* When existing mortgages are refinanced with thesame lender and it is determined that the refinancing is substantiallydifferent then they are recorded as an extinguishment of debt.  However if it is determined that therefinancing is substantially the same then they are recorded as an exchange ofdebt. All refinancings qualify as extinguishment of debt.

 

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

 

**NOTE 2.RENTAL PROPERTIES**

 

Asof September 30, 2010, the Partnership and its Subsidiary Partnershipsowned 2,269 residential apartment units in 20 residential and mixed-usecomplexes (collectively, the “Apartment Complexes”). The Partnership also owns19 condominium units in a residential condominium complex, all of which areleased to residential tenants (collectively referred to as the “CondominiumUnits”). The Apartment Complexes and Condominium Units are located primarily inthe metropolitan Boston area of Massachusetts.

 

Additionally,as of September 30, 2010, the Partnership and Subsidiary Partnershipsowned a commercial shopping center in Framingham, commercial buildings inNewton and Brookline and mixed-use properties in Boston, Brockton and Newton,all in Massachusetts. These properties are referred to collectively as the “CommercialProperties.”

 

ThePartnership also owned a 40% or 50% ownership interest in nine residential andmixed use complexes (the “Investment Properties”) at September 30, 2010with a total of 798 residential units, two commercial spaces and one parkinglot, accounted for using the equity method of consolidation. See Note 14for summary information on these investments.

 

Rentalproperties consist of the following:

 
| ** **                           | ** ** | **September 30, 2010** | ** ** | **December 31, 2009** | ** ** | **Useful Life**  | ** ** |
|--------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|-----------------------|------------|
| Land,  improvements and parking lots |       | $                                | 26,100,616 |                            | $          | 26,072,100            |       | 15—40 years |   |
| Buildings  and improvements          |       | 111,241,625                      |       | 111,016,179                     |       | 15—40 years |       |
| Kitchen  cabinets                    |       | 4,407,580                        |       | 3,977,528                       |       | 5—10 years  |       |
| Carpets                              |       | 4,058,564                        |       | 3,506,481                       |       | 5—10 years  |       |
| Air  conditioning                    |       | 950,546                          |       | 882,354                         |       | 7—10 years  |       |
| Laundry  equipment                   |       | 371,096                          |       | 367,209                         |       | 5—7 years   |       |
| Elevators                            |       | 1,021,676                        |       | 984,506                         |       | 20 years         |       |
| Swimming  pools                      |       | 157,489                          |       | 157,489                         |       | 10 years         |       |
| Equipment                            |       | 2,222,068                        |       | 2,087,287                       |       | 5—7 years   |       |
| Motor  vehicles                      |       | 142,520                          |       | 142,520                         |       | 5 years          |       |
| Fences                               |       | 53,182                           |       | 51,882                          |       | 5—10 years  |       |
| Furniture  and fixtures              |       | 1,138,653                        |       | 1,063,897                       |       | 5—7 years   |       |
| Smoke  alarms                        |       | 109,320                          |       | 102,123                         |       | 5—7 years   |       |
|                                 |       | 151,974,935                      |       | 150,411,555                     |       |                  |       |
| Less  accumulated depreciation       |       | (58,635,156                      | )          | (54,439,618                     | )          |                  |       |
|                                 |       | $                                | 93,339,779 |                            | $          | 95,971,937            |       |   |   |

 

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**NOTE 3. RELATED PARTYTRANSACTIONS**

 

ThePartnership’s properties are managed by an entity that is owned by the majorityshareholder of the General Partner. The management fee is equal to 4% of rentalrevenue and laundry income on the majority of the Partnership’s properties and3% on Linewt.  Total management fees paidwere approximately $1,022,000 and $1,012,000 during the nine months ended September 30,2010 and 2009, respectively.

 

ThePartnership Agreement permits the General Partner or Management Company tocharge the costs of professional services (such as counsel, accountants andcontractors) to NERA. During the nine months ended September 30, 2010 and2009, approximately $506,000 and $597,000 was charged to NERA for legal,accounting, construction, maintenance, rental and architectural services andsupervision of capital improvements.  Ofthe 2010 expenses referred to above, approximately $238,000 consisted ofrepairs and maintenance and $247,000 of administrative expense. Approximately$21,000 of expenses for construction, architectural services and supervision ofcapital projects were capitalized in rental properties. Additionally in 2010, theHamilton Company received approximately $483,000 from the Investment Propertiesof which approximately $389,000 was the management fee, approximately $ 71,000was for repairs and maintenance expenses, approximately $18,000 was foradministrative expenses and approximately $4,500 was for constructionsupervision and architectural fees.  Themanagement fee is equal to 4% of rental income at the majority of investmentproperties and 2% at Dexter Park.

 

OnJanuary 1, 2004, all employees were transferred to the Management Company’spayroll. The Partnership reimburses the Management Company for the payroll andrelated expenses of the employees who work at the properties. Totalreimbursement was approximately $2,007,000 and $1,680,000 during the ninemonths ended September 30, 2010 and 2009, respectively. The ManagementCompany maintains a 401K plan for all eligible employees whereby the employeesmay contribute the maximum allowed by law. The plan also provides fordiscretionary contributions by the employer. There were no employercontributions in 2010 and 2009.

 

Priorto 1991, the Partnership employed an outside, unaffiliated company to performits bookkeeping and accounting functions. Since that time, such services havebeen provided by the Management Company’s accounting staff, which consists ofapproximately 14 people.  During the ninemonths ended September 30, 2010, the Management Company charged thePartnership $93,750 ($125,000 per year) for bookkeeping and accounting servicesincluded in administrative expenses of $247,000 above.

 

In1996, prior to becoming an employee of the Management Company, the President ofthe Management Company performed asset management consulting services for thePartnership. This individual continues to perform this service and receives anasset management fee from the Partnership. During the nine months ended September 30, 2010, this individualreceived $75,000 which includes a bonus of $25,000, a quarterly fee of $12,500for the first quarter of 2010, and quarterly fees of $18,750 in the secondquarter and third quarters of 2010. Going forward, the quarterly fee payable tothis individual will be $18,750.

 

ThePartnership has invested in nine limited partnerships, which have invested inmixed use residential apartment complexes. The Partnership has a 40% or 50%ownership interest in each investment. The other investors are Harold Brown,the President of the Management Company and five other employees of theManagement Company.  Harold Brown’sownership interest is between 43.2% and 60%. See Note 14 for a descriptionof the properties and their operations.

 

SeeNote 8 for information regarding the repurchase of Class B and GeneralPartnership Units.

 

On October 28, 2009,the Partnership borrowed approximately $7,168,000 with an interest rate of 6%from

 

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HBC Holdings, LLC, an entityowned by Harold Brown and his affiliates (“HBC”).  The term of the loan is four years with aprovision requiring payment in whole or in part upon demand by HBC with sixmonths notice.  As of November 12,2010, the outstanding balance of principal on this loan was $5,868,600.  On August 17, 2010, HBC gave six monthswritten notice to the Partnership requesting a principal pay down of$2,500,000.  On October 12,2010  the Partnership paid HBC $1,300,000and anticipates paying the balance of the payment demanded of $1,200,000 priorto December 31, 2010. The balance of the loan, $4,668,600, will remainsubject to the original terms of the Note, including HBC’s right to demandpayment of the balance of the loan in whole or in part upon six months notice.The interest paid during the nine months ended September 30, 2010 wasapproximately $326,000 and $78,000 for the year ended December 31, 2009.This loan is collateralized by the Partnership’s 99% ownership interest in 62Boylston Street.

 

**NOTE 4.OTHER ASSETS**

 

Approximately$1,669,000 and $1,426,000 of security deposits are included in prepaid expensesand other assets at September 30, 2010 and December 31, 2009,respectively. The security deposits and escrow accounts are restricted cash.

 

Includedin prepaid expenses and other assets at September 30, 2010 and December 31,2009 is approximately $858,000 and $829,000, respectively, held in escrow tofund future capital improvements.

 

Financingand leasing fees of approximately $978,000 and $1,066,000 are net ofaccumulated amortization of approximately $511,000 and $450,000 at September 30,2010 and December 31, 2009, respectively.

 

**NOTE 5.MORTGAGE NOTES PAYABLE**

 

AtSeptember 30, 2010 and December 31, 2009, the mortgages payableconsisted of various loans, all of which were secured by first mortgages onproperties referred to in Note 2. At September 30, 2010, the fixedinterest rates on these loans ranged from 4.84% to 7.07%, payable in monthlyinstallments aggregating approximately $726,000, including principal, tovarious dates through 2023. The majority of the mortgages are subject toprepayment penalties.  At September 30,2010, the weighted average interest rate on the above mortgages was 5.55%. Theeffective rate of 5.63% includes the amortization expense of deferred financingcosts. See Note 12 for fair value information.

 

ThePartnerships have pledged tenant leases as additional collateral for certain ofthese loans.

 

Approximateannual maturities at September 30, 2010 are as follows:

 
| 2011—current  maturities |   | $          | 928,000     |   |
|-------------------------------|--------|------------|-------------|--------|
| 2012                          |   | 1,009,000  |        |
| 2013                          |   | 43,828,000 |        |
| 2014                          |   | 7,806,000  |        |
| 2015                          |   | 9,032,000  |        |
| Thereafter                    |   | 75,300,000 |        |
|                          |   | $          | 137,903,000 |   |

 

InDecember 2009, the Partnership refinanced Linhart, LLP, located in Newton,Massachusetts.  The new loan is$2,000,000, with a rate of 3.75% over the Libor rate or 4.25% whichever is greaterand matures five years from the date of closing.  The interest rate as of September 30,2010 was 4.25%.  The loan agreement callsfor interest only payments for twenty four months and principal and interestpayments for the remainder of the five year period based on a thirty yearamortization.  The loan proceeds wereused to pay off the prior loan of approximately $1,700,000, and closing costsof approximately $38,000.

 

OnMarch 25, 2010, the Partnership refinanced the Brookside Apartments.  The new loan is $2,820,000, matures in 2020and has an interest rate of 5.81%.  Theloan is a ten year note however it is being amortized over 30

 

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years. The proceeds of theloan were used to pay off the old mortgage of approximately $1,900,000.  There were no prepayment penalties.

 

**NOTE 6.ADVANCE RENTAL PAYMENTS AND SECURITY DEPOSITS**

 

ThePartnership’s residential lease agreements may require tenants to maintain aone-month advance rental payment and/or a security deposit. At September 30,2010, amounts received for prepaid rents of approximately $1,315,000 areincluded in cash and cash equivalents, and security deposits of approximately$1,670,000 are included in other assets and are restricted cash.

 

**NOTE 7.PARTNERS’ CAPITAL**

 

ThePartnership has two classes of Limited Partners (Class A and B) andone category of General Partner. Under the terms of the Partnership Agreement,holders of Class A Units, Class B Units and General Partnership Unitsmust represent 80%, 19% and 1%, respectively, of the total unitsoutstanding.  Holders of a class ofPartnership Units have equal profit sharing and distribution rights with allother holders of that class of Partnership Units in proportion to their prorata interests in such class.

 

In2010, the Partnership approved quarterly distributions of $7.00 per unit ($0.70per receipt) payable on March 31, June 30,  September 30, and December 31,2010.

 

In2009, the Partnership paid quarterly distributions of $7.00 per unit ($0.70 perreceipt) in March, June, September, and December for a total distributionof $28.00 per unit ($2.80 per receipt).

 

ThePartnership has entered into a deposit agreement with an agent to facilitatepublic trading of limited partners’ interests in Class A Units. Under theterms of this agreement, the holders of Class A Units have the right toexchange each Class A Unit for 10 Depositary Receipts. The following isinformation per Depositary Receipt:

 
| ** **                               | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                               | ** ** | **2010**                                            | ** ** | **2009** | ** ** |
| Net  (loss)income per Depositary Receipt |       | $                                                   | (1.05      | ) | $ | 1.20 |   |
| Distributions  per Depositary Receipt    |       | $                                                   | 2.10       |   | $ | 2.10 |   |

 

**NOTE 8.TREASURY UNITS**

 

TreasuryUnits at September 30, 2010 are as follows:

 
| Class A         |   | 38,993 |   |
|----------------------|--------|--------|--------|
| Class B         |   | 9,260  |   |
| General  Partnership |   | 488    |   |
|                 |   | 48,741 |   |

 

OnAugust 20, 2007, NewReal, Inc., the General Partner authorized anequity repurchase program (“Repurchase Program”) under which the Partnershipwas permitted to purchase, over a period of twelve months, up to 100,000Depositary Receipts (each of which is one-tenth of a Class A Unit). On January 15, 2008, the General Partner authorized an increase in theRepurchase Program from 100,000 to 200,000 Depositary Receipts. OnJanuary 30, 2008 the General Partner authorized an increase the RepurchaseProgram from 200,000 to 300,000 Depositary Receipts.  On March 6,2008, the General Partner authorized the increase in the total number ofDepositary Receipts that could be repurchased pursuant to the RepurchaseProgram from 300,000 to 500,000.  OnAugust 8, 2008, the General Partner re-authorized and renewed theRepurchase Program for an additional 12-month period ended August 19,2009.  On March 22, 2010, the General Partner re-authorized andrenewed the Repurchase Program that expired on August 19, 2009.  Under the terms of the renewed RepurchaseProgram, the Partnership may purchase up to 500,000 Depositary Receipts fromthe start of the program in 2007 through March 31, 2015. The RepurchaseProgram

 

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requires the Partnership torepurchase a proportionate number of Class B Units and General PartnerUnits in connection with any repurchases of any Depositary Receipts by thePartnership based upon the 80%, 19% and 1% fixed distribution percentages ofthe holders of the Class A, Class B and General Partner Units underthe Partnership’s Second Amended and Restate Contract of LimitedPartnership.  Repurchases of Depositary Receipts or Partnership Unitspursuant to the Repurchase Program may be made by the Partnership from time totime in its sole discretion in open market transactions or in privatelynegotiated transactions.  From August 20,2007 through September 30, 2010, the Partnership has repurchased 398,320Depositary Receipts at an average price of $73.59 per receipt (or $735.90 perunderlying Class A Unit), 1,724 Class B Units and 91 GeneralPartnership Units, both at an average price of $585.05 per Unit, totalingapproximately $30,480,000 including brokerage fees paid by the Partnership.

 

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

 

OnJanuary 18, 2008, 113,518 Depositary Receipts included above becameavailable to purchase at a price of $75.50 per receipt. In order for thePartnership to take advantage of this opportunity, the Partnership borrowed$5,285,000 from Harold Brown, the Treasurer of the General Partner. This loanwas paid in full, with interest at 6% of $37,899, on February 29, 2008.

 

Duringthe nine months ended September 30, 2010 the Partnership repurchased 6,896depositary receipts for $432,920, 164 Class B Units for $102,591 and 9General Partnership Units for $5,400. The Partnership did not repurchase any depositary receipts or Unitsduring the three months ended September 30, 2010.

 

**NOTE 9.COMMITMENTS AND CONTINGENCIES**

 

Fromtime to time, the Partnerships are involved in various ordinary routinelitigation incidental to their business. The Partnership either has insurancecoverage or provides for any uninsured claims when appropriate. The Partnershipsare not involved in any material pending legal proceedings.

 

**NOTE10. RENTAL INCOME**

 

Duringthe nine months ended September 30, 2010, approximately 90% of rentalincome was related to residential apartments and condominium units with leasesof one year or less. Approximately 10% was related to commercial properties,which have minimum future annual rental income on non-cancellable operatingleases at September 30, 2010 as follows:

 
| ** ** | ** ** | **Commercial  Property Leases** | ** ** |
|------------|------------|--------------------------------------|------------|
| 2011       |       | $                                    | 2,838,000  |   |
| 2012       |       | 2,377,000                            |       |
| 2013       |       | 1,858,000                            |       |
| 2014       |       | 1,605,000                            |       |
| 2015       |       | 1,071,000                            |       |
| Thereafter |       | 1,209,000                            |       |
|       |       | $                                    | 10,958,000 |   |

 

Theaggregate minimum future rental income does not include contingent rentals thatmay be received under various leases in connection with percentage rents, commonarea charges and real estate taxes. Aggregate contingent

 

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rentals from continuingoperations were approximately $490,000 for the nine months ended September 30,2010 and approximately $583,000 for the year ended December 31, 2009.

 

Rentsreceivable are net of an allowance for doubtful accounts of approximately$785,000 at September 30, 2010 and $476,000 at December 31,2009.  Included in rents receivable at September 30,2010 is approximately $332,000 resulting from recognizing rental income fromnon-cancelable commercial leases with future rental increases on astraight-line basis.  The majority ofthis amount is for long-term leases with Staples and Trader Joe’s at StaplesPlaza in Framingham, Massachusetts.

 

Rentsreceivable also includes approximately $168,000 representing the straight-lineof rental concessions.

 

In2010, rent at the commercial properties includes approximately $8,500 ofamortization of deferred rents arising from the fair values assigned toin-place leases upon the purchase of Cypress Street in Brookline, Massachusetts**.**

 

**NOTE11. CASH FLOW INFORMATION**

 

Duringthe nine months ended September 30, 2010 and 2009, cash paid for interestwas approximately $6,141,000, and $5,886,000 respectively.

 

**NOTE12. FAIR VALUE MEASUREMENTS**

 

FairValue Measurements on a Recurring Basis

 

AtSeptember 30, 2010 and December 31, 2009, we do not have any significantfinancial assets or financial liabilities that are measured at fair value on arecurring basis in our consolidated financial statements.

 

FinancialAssets and Liabilities not Measured at Fair Value

 

At September 30, 2010and December 31, 2009 the carrying amounts of certain of our financialinstruments, including cash and cash equivalents, accounts receivable, and notepayable, accounts payable and accrued expenses were representative of theirfair values due to the short-term nature of these instruments or, the recentacquisition of these items.

 

At September 30, 2010and December 31, 2009, we estimated the fair value of our mortgagespayable and other notes based upon quoted market prices for the same (Level 1)or similar (Level 2) issues when current quoted market prices areavailable.  We estimated the fair valueof our secured mortgage debt that does not have current quoted market pricesavailable by discounting the future cash flows using rates currently availableto us for debt with similar terms and maturities (Level 3).  The differences in the fair value of our debtfrom the carrying value are the result of differences in interest rates and/orborrowing spreads that were available to us at September 30, 2010 and December 31,2009, as compared with those in effect when the debt was issued oracquired.  The secured mortgage debtcontain pre-payment penalties or yield maintenance provisions that could makethe cost of refinancing the debt at lower rates exceed the benefit that wouldbe derived from doing so.

 

Thefollowing methods and assumptions were used by the Partnership in estimatingthe fair value of its financial instruments:

 

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

 

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

 

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

 
| ** **                  | ** ** | **Carrying Amount** | ** **  | **Estimated Fair Value** | ** ** |
|-----------------------------|------------|--------------------------|-------------|------------------------------------|------------|
| Mortgage  Notes Payable     |       |                     |        |                               |       |
| Partnership  Properties     |       |                     |        |                               |       |
| At  September 30, 2010 |       | $                        | 137,903,103 |                               | $          | 149,087,821 |   |
| At  December 31, 2009  |       | $                        | 137,641,354 |                               | $          | 139,997,718 |   |
| Investment  Properties      |       |                     |        |                               |       |
| At  September 30, 2010 |       | $                        | 141,013,383 |                               | $          | 150,721,122 |   |

 

Disclosureabout fair value of financial instruments is based on pertinent informationavailable to management as of September 30, 2010 and December 31,2009. Although management is not aware of any factors that would significantlyaffect the fair value amounts, such amounts have not been comprehensivelyrevalued for purposes of these financial statements since December 31,2009 and current estimates of fair value may differ significantly from theamounts presented herein.

 

**NOTE13. TAXABLE INCOME AND TAX BASIS**

 

Taxableincome reportable by the Partnership and includable in its partners’ taxreturns is different than financial statement income because of a tax freeexchanges, accelerated depreciation, different tax lives, and timingdifferences related to prepaid rents, allowances and intangible assets atsignificant acquisitions. Taxable income was approximately $300,000 greaterthan statement income for the year ended December 31, 2009 andapproximately $7,500,000 less than statement income for the year ended December 31,2008. The cumulative tax basis of the Partnership’s real estate atDecember 31, 2009 is approximately $5,200,000 less than the statementbasis. The primary reason for the lower tax basis is the acquisition of Linewtand Cypress Street utilizing tax free exchanges in 2008. The Partnership’s taxbasis in its joint venture investments is approximately $1,500,000 greater thanstatement basis.   Taxable loss for 2010is estimated to be approximately $200,000 greater than the financial statementloss due to depreciation provisions enacted in the 2010 Tax Act..  Certain entities included in the Partnership’sconsolidated financial statements are subject to certain state taxes.  These taxes are not significant and arerecorded as operating expenses in the accompanying consolidates financialstatements.

 

ThePartnership adopted the amended provisions related to uncertain tax provisionsof ASC 740, Income Taxes.  As aresult of the implementation of the guidance, the Partnership recognized nomaterial adjustments regarding its tax accounting treatment.  The Partnership expects to recognize interestand penalties related to uncertain tax positions, if any, as income taxexpense, which would be included in general and administrative expense.

 

Inthe normal course of business the Partnership or one of its subsidiaries issubject to examination by federal, state and local jurisdictions in which itoperates, where applicable.  As of September 30,2010, the tax years that remain subject to examination by the major taxjurisdictions under the statute of limitations is from the year 2003 forward.

 

**NOTE14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES**

 

SinceNovember 2001, the Partnership has invested in nine limited partnershipsand limited liability companies, the majority of which have invested inresidential apartment complexes, with three partnerships investing incommercial property. The Partnership has between a 40%- 50% ownership interestsin each investment. The other investors are Harold Brown, the President of theManagement Company and five other employees of the Management Company. HaroldBrown’s ownership interest is between 43.2% and 60%, with the balance owned bythe others. A description of each investment is as follows:

 

On October 28, 2009 thePartnership invested approximately $15,925,000 in a joint venture to acquire a40% interest in a residential property located in Brookline,Massachusetts.  The property, referred toas Dexter Park, is a 409 unit residential complex. The purchase price was$129,500,000.  The total mortgage is$89,914,000 with an interest rate of 5.57% and it matures in 2019.  The mortgage calls for interest only paymentsfor the first two years of the loan and amortized over 30 yearsthereafter.  In order to fund thisinvestment, the Partnership used approximately $8,757,000 of its cash reservesand borrowed approximately $7,168,000 with an interest rate of 6% from HBC 

 

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Holdings, LLC, an entityowned by Harold Brown and his affiliates (“HBC”).  The term of the loan is four years with aprovision requiring payment in whole or in part upon demand by HBC with sixmonths notice.  As of November 12,2010, the outstanding balance of principal on this loan was $5,868,600.  On August 17, 2010, HBC gave six monthswritten notice to the Partnership requesting a principal pay down of$2,500,000. On October 12, 2010, the Partnership paid HBC $1,300,000 andanticipates paying the balance of the payment demanded of $1,200,000 prior to December 31,2010. The balance of the loan, $4,668,600, will remain subject to the originalterms of the Note, including HBC’s right to demand payment of the balance ofthe loan in whole or in part upon six months notice. The interest paid duringthe nine months ended September 30, 2010 was approximately $326,000 and$78,000 for the year ended December 31, 2009. This loan is collateralizedby the Partnership’s 99% ownership interest in 62 Boylston Street.  A majority of the apartments were leased atthe time of the acquisition.  As aresult, the Partnership is amortizing the intangible assets associated with the“in place” leases over a 12 month period which began in November 2009.  The total monthly amortization isapproximately $407,000 which at 40% reduces the Partnership’s income byapproximately $163,000 per month. For the nine months ended September 30,2010 the total amortization in connection with these leases is approximately$3,663,000, of which the Partnership’s share is approximately $1,465,000.  In November 2010, the intangible assetswill be fully amortized which will result in lower amortization expense.   This investment, Hamilton Park Towers, LLCis referred to as Dexter Park.

 

OnOctober 3, 2005, the Partnership invested $2,500,000 for a 50% ownershipinterest in a 168-unit apartment complex in Quincy, Massachusetts. The purchaseprice was $30,875,000. The Partnership plans to sell the majority of units ascondominium and retain 48 units for long-term investment. Gains from the salesof units will be taxed at ordinary income rates (approximately $47,000 perunit). In February 2007, the Partnership refinanced the 48 units whichwill be retained with a new mortgage in the amount of $4,750,000 with aninterest rate of 5.57%, interest only for five years. This investment isreferred to as Hamilton Bay Apartments, LLC. The loan will be amortized over30 years thereafter and matures in March 2017. In April 2008,the Partnership refinanced an additional 20 units and obtained a new mortgagein the amount of $2,368,000 with interest at 5.75%, interest only, whichmatures in 2013.  As of October 26,2010, the Partnership sold 105 units, the proceeds of which went to pay down themortgage on the property.  The balance onthe new mortgage is approximately $1,668,000 at September 30, 2010. Thisinvestment is referred to as Hamilton Bay, LLC.

 

OnMarch 7, 2005, the Partnership invested $2,000,000 for a 50% ownershipinterest in a building comprising 49 apartments, one commercial space and a50-car surface parking lot located in Boston, Massachusetts. The purchase pricewas $14,300,000, with a $10,750,000 mortgage. The Partnership plans to operatethe building and initiate development of the parking lot.  In June 2007, the Partnership separatedthe parcels, formed an additional limited liability company for the residentialapartments and obtained a mortgage on the property. The new limited liabilitycompany formed for the residential apartments and commercial space is referredto as Hamilton Essex 81, LLC.  In August 2008,the Partnership restructured the mortgages on both parcels at Essex 81 andtransferred 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, orthe parking lot is $2,162,000 with a variable interest rate of 2.25% over thedaily Libor rate (0.26% at September 30, 2010) and is due in August 2011.  Harold Brown has issued a personal guarantyup to $1,000,000 of this mortgage. In the event that he is obligated to makepayments to the lender as a result of this guaranty, the Partnership and otherinvestors have, in turn, agreed to indemnify him for their proportionate shareof any such payments.  The investment inthe parking lot is referred to as Hamilton Essex Development, LLC; theinvestment in the apartments is referred to as Hamilton Essex 81, LLC.

 

OnMarch 2, 2005, the Partnership invested $2,352,000 for a 50% ownershipinterest in a 176-unit apartment complex with an additional small commercialbuilding located in Quincy, Massachusetts. The purchase price was $23,750,000.The Partnership sold 127 of the units as condominiums and retained 49 units forlong-term investment. The Partnership obtained a new 10-year mortgage in theamount of $5,000,000 on the units to be retained by the Partnership. Theinterest on the new loan is 5.67% fixed for the 10 year term with interestonly payments for five years and amortized over a 30 year period for thebalance of the loan term.   Thisinvestment is referred to as Hamilton 1025, LLC.

 

InSeptember 2004, the Partnership invested approximately $5,075,000 for a50% ownership interest in a 42-unit apartment complex located in Lexington,Massachusetts. The purchase price was $10,100,000. In October 

 

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2004, the Partnershipobtained 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 mortgagein the amount of $5,500,000 in January 2007. The interest on the new loanis 5.67% fixed for the ten year term with interest only payments for five yearsand amortized over a 30 year period for the balance of the loan. This loanrequired a cash contribution by the Partnership of $1,250,000 in December 2006.This investment is referred to as Hamilton Minuteman, LLC.

 

InAugust 2004, the Partnership invested $8,000,000 for a 50% ownershipinterest in a 280-unit apartment complex located in Watertown, Massachusetts.The total purchase price was $56,000,000. As of May 2008, the Partnershipsold 137 units as condominiums. Gains from these sales were taxed as ordinaryincome (approximately $50,000 per unit). The majority of the sales proceedswere applied to reduce the mortgage with the final payment made during thesecond quarter of 2007. With the sale of the units and the payments of theliabilities, the assets were combined with Hamilton on Main Apartments,LLC.  An entity partially owned by themajority shareholder of the General Partner and the President of the managementcompany, 31% and 5%, respectively, was the sales agent and received a variablecommission on each sale of 3% to 5%. Hamilton on Main, LLC is known asHamilton Place.

 

In2005, Hamilton on Main Apartments, LLC obtained a ten year mortgage on thethree buildings to be retained. The mortgage is $16,825,000, with interest onlyof 5.18% for three years and amortizing on a 30 year schedule for theremaining seven years when the balance is due. The net proceeds after fundingescrow accounts and closing costs on the mortgage were approximately$16,700,000, which were used to reduce the existing mortgage. Hamilton onMain LLC paid a fee of approximately $400,000 in connection with thisearly extinguishment of debt.  At September 30,2010, the remaining balance on the mortgage is approximately $16,214,000.

 

InNovember 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 September 30,2010 of approximately $7,215,000 at 6.9% which is amortized on a 30-yearschedule, with a final payment of approximately $6,000,000 in 2014. Thisinvestment is referred to as 345 Franklin, LLC.

 

Asrequired by the lender, the Treasurer of the General Partner has provided alimited repayment guaranty equal to fifty percent (50%) of the outstandingbalance for the loan on the for sale units at Hamilton Bay and a limitedguaranty of $1,000,000 for the loan on Hamilton Essex Development.  In the event that he is obligated to makepayments to the lenders as a result of these guaranties, the Partnership andother investors have, in turn, agreed to indemnify him for their proportionateshare of any such payments.

 

**Summary financial information asof September 30, 2010**

 
| ** **                                                           | ** ** | **Hamilton********Essex 81** | ** ** | **Hamilton  Essex   Development** | ** ** | **345   Franklin** | ** ** | **Hamilton   1025** | ** ** | **Hamilton   Bay Sales** | ** ** | **Hamilton   Bay Apts** | ** ** | **Hamilton  Minuteman** | ** ** | **Hamilton   on Main** | ** ** | **Dexter Park** | ** ** | **Total**       | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------------|------------|----------------------------------------|------------|-------------------------|------------|--------------------------|------------|------------------------------------|------------|-----------------------------------|------------|-------------------------|------------|----------------------------------|------------|----------------------|------------|-----------------|------------|
|                                                                 |       |                              |       |                                   |       |                    |       |                     |       |                               |       |                              |       |                    |       |                             |       |                 |       |            |       |
| **ASSETS**                                                           |       |                              |       |                                   |       |                    |       |                     |       |                               |       |                              |       |                    |       |                             |       |                 |       |            |       |
| Rental Properties                                                    |       | 9,923,795                         |       | 2,592,854                              |       | 8,740,174               |       | 6,141,924                |       | 2,027,793                          |       | 7,657,273                         |       | 7,632,705               |       | 23,058,216                       |       | 119,788,836          |       | 187,563,571     |       |
| Cash & Cash  Equivalents                                    |       | 471                               |       | 5,759                                  |       | 3,894                   |       | 4,527                    |       | 32,165                             |       | 38,884                            |       | 90,609                  |       | 84,990                           |       | 723,378              |       | 984,677         |       |
| Rent Receivable                                                      |       | 37,056                            |       | —                                 |       | 3,815                   |       | 6,422                    |       | 3,604                              |       | 2,333                             |       | 1,693                   |       | 10,154                           |       | 252,374              |       | 317,450         |       |
| Real Estate Tax Escrow                                               |       | 80,093                            |       | —                                 |       | 37,691                  |       | 24,754                   |       | —                             |       | 80,659                            |       | 33,905                  |       | 97,895                           |       | 433,243              |       | 788,240         |       |
| Prepaid  Expenses & Other Assets                            |       | 88,057                            |       | 768                                    |       | 94,723                  |       | 107,925                  |       | 229,161                            |       | 91,780                            |       | 70,758                  |       | 415,367                          |       | 1,420,411            |       | 2,518,951       |       |
| Financing &  Leasing Fees                                   |       | 101,903                           |       | 5,738                                  |       | 26,537                  |       | 30,955                   |       | 12,900                             |       | 40,557                            |       | 24,879                  |       | 30,019                           |       | 533,224              |       | 806,713         |       |
|                                                                 |       |                              |       |                                   |       |                    |       |                     |       |                               |       |                              |       |                    |       |                             |       |                 |       |            |       |
| **Total  Assets**                                                    | ** ** | **10,231,375**                    | ** ** | **2,605,120**                          | ** ** | **8,906,835**           | ** ** | **6,316,507**            | ** ** | **2,305,623**                      | ** ** | **7,911,486**                     | ** ** | **7,854,549**           | ** ** | **23,696,641**                   | ** ** | **123,151,467**      | ** ** | **192,979,603** | ** ** |
| ** **                                                           | ** ** | ** **                        | ** ** | ** **                             | ** ** | ** **              | ** ** | ** **               | ** ** | ** **                         | ** ** | ** **                        | ** ** | ** **              | ** ** | ** **                       | ** ** | ** **           | ** ** | ** **      | ** ** |
| **LIABILITIES  AND PARTNERS’ CAPITAL**                          | ** ** | ** **                        | ** ** | ** **                             | ** ** | ** **              | ** ** | ** **               | ** ** | ** **                         | ** ** | ** **                        | ** ** | ** **              | ** ** | ** **                       | ** ** | ** **           | ** ** | ** **      | ** ** |
| ** **                                                           | ** ** | ** **                        | ** ** | ** **                             | ** ** | ** **              | ** ** | ** **               | ** ** | ** **                         | ** ** | ** **                        | ** ** | ** **              | ** ** | ** **                       | ** ** | ** **           | ** ** | ** **      | ** ** |
| Mortgage Notes Payable                                               |       | 8,591,089                         |       | 2,162,000                              |       | 7,214,588               |       | 5,000,000                |       | 1,668,000                          |       | 4,750,000                         |       | 5,500,000               |       | 16,213,706                       |       | 89,914,000           |       | 141,013,383     |       |
| Accounts Payable&  Accrued Exp                                   |       | 52,813                            |       | 6,285                                  |       | 96,086                  |       | 80,185                   |       | 15,555                             |       | 8,678                             |       | 86,385                  |       | 203,577                          |       | 751,422              |       | 1,300,986       |       |
| Advance Rental  Payments & Security Deposits                |       | 126,925                           |       | —                                 |       | 111,349                 |       | 64,193                   |       | 20,224                             |       | 79,018                            |       | 62,199                  |       | 228,928                          |       | 1,632,665            |       | 2,325,500       |       |
| **Total  Liabilities**                                               |       | 8,770,827                         |       | 2,168,285                              |       | 7,422,022               |       | 5,144,378                |       | 1,703,779                          |       | 4,837,696                         |       | 5,648,584               |       | 16,646,211                       |       | 92,298,087           |       | 144,639,869     |       |
| Partners’ Capital                                               |       | 1,460,548                         |       | 436,835                                |       | 1,484,813               |       | 1,172,129                |       | 601,844                            |       | 3,073,790                         |       | 2,205,965               |       | 7,050,430                        |       | 30,853,380           |       | 48,339,734      |       |
| **Total  Liabilities and Capital**                                   | ** ** | **10,231,375**                    | ** ** | **2,605,120**                          | ** ** | **8,906,835**           | ** ** | **6,316,507**            | ** ** | **2,305,623**                      | ** ** | **7,911,486**                     | ** ** | **7,854,549**           | ** ** | **23,696,641**                   | ** ** | **123,151,467**      | ** ** | **192,979,603** | ** ** |
| **Partners’  Capital****NERA 50%**                              | ** ** | **730,274**                       | ** ** | **218,418**                            | ** ** | **742,407**             | ** ** | **586,065**              | ** ** | **300,922**                        | ** ** | **1,536,895**                     | ** ** | **1,102,982**           | ** ** | **3,525,215**                    | ** ** | ** **           | ** ** | **8,743,177**   | ** ** |
| **NERA  40%**                                                        | ** ** | ** **                        | ** ** | ** **                             | ** ** | ** **              | ** ** | ** **               | ** ** | ** **                         | ** ** | ** **                        | ** ** | ** **              | ** ** | ** **                       | ** ** | **12,341,352**       | ** ** | **12,341,352**  | ** ** |
| ** **                                                           | ** ** | ** **                        | ** ** | ** **                             | ** ** | ** **              | ** ** | ** **               | ** ** | ** **                         | ** ** | ** **                        | ** ** | ** **              | ** ** | ** **                       | ** ** | ** **           | ** ** | **21,084,529**  | ** ** |
| ** **                                                           | ** ** | ** **                        | ** ** | ** **                             | ** ** | ** **              | ** ** | ** **               | ** ** | ** **                         | ** ** | ** **                        | ** ** | ** **              | ** ** | ** **                       | ** ** | ** **           | ** ** | ** **      | ** ** |
| Total units/condominiums                                             |       |                              |       |                                   |       |                    |       |                     |       |                               |       |                              |       |                    |       |                             |       |                 |       |            |       |
| Apartments                                                           |       | 48                                |       | —                                 |       | 40                      |       | 175                      |       | 120                                |       | 48                                |       | 42                      |       | 148                              |       | 409                  |       | 1,030           |       |
| Commercial                                                           |       | 1                                 |       | 1                                      |       | —                  |       | 1                        |       | —                             |       | —                            |       | —                  |       | —                           |       | —               |       | 3               |       |
| Total                                                                |       | 49                                |       | 1                                      |       | 40                      |       | 176                      |       | 120                                |       | 48                                |       | 42                      |       | 148                              |       | 409                  |       | 1,033           |       |
| Units to be retained                                                 |       | 49                                |       | 1                                      |       | 40                      |       | 49                       |       | —                             |       | 48                                |       | 42                      |       | 148                              |       | 409                  |       | 786             |       |
| Units to be sold                                                     |       | —                            |       | —                                 |       | —                  |       | 127                      |       | 120                                |       | —                            |       | —                  |       | —                           |       | —               |       | 247             |       |
| Units sold through  Oct. 26, 2010                               |       | —                            |       | —                                 |       | —                  |       | 127                      |       | 105                                |       | —                            |       | —                  |       | —                           |       | —               |       | 232             |       |
| Unsold units                                                         |       | —                            |       | —                                 |       | —                  |       | —                   |       | 15                                 |       | —                            |       | —                  |       | —                           |       |                 |       | 15              |       |
| Unsold units with  deposits for future sale as of Oct. 26, 2010 |       | —                            |       | —                                 |       | —                  |       | —                   |       | —                             |       | —                            |       | —                  |       | —                           |       | —               |       | —          |       |

 

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**Summary financial information forthe nine months ended September 30, 2010**

 
| ** **                            | ** ** | **Hamilton   Essex 81** | ** ** | **Hamilton   Essex   Development** | ** ** | **345   Franklin** | ** ** | **Hamilton   1025** | ** ** | **Hamilton Bay  Sales** | ** ** | **Hamilton   Bay Apts** | ** ** | **Hamilton   Minuteman** | ** ** | **Hamilton on  Main** | ** ** | **Dexter Park** | ** ** | **Total**      | ** ** |
|---------------------------------------|------------|-----------------------------------|------------|----------------------------------------------|------------|-------------------------|------------|--------------------------|------------|------------------------------|------------|-----------------------------------|------------|-------------------------------|------------|----------------------------|------------|----------------------|------------|----------------|------------|
| **Revenues**                          |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                              |       |                          |       |                       |       |                 |       |           |       |
| Rental Income                         |       | 845,971                           |       | 207,000                                      |       | 816,136                 |       | 590,388                  |       | 165,092                      |       | 628,658                           |       | 574,388                       |       | 1,834,731                  |       | 8,213,675            |       | 13,876,041     |       |
| Laundry and Sundry Income             |       | 11,664                            |       | —                                       |       | 1,751                   |       | —                   |       | —                       |       | —                            |       | 265                           |       | 15,040                     |       | 71,488               |       | 100,207        |       |
|                                  |       | 857,636                           |       | 207,000                                      |       | 817,888                 |       | 590,388                  |       | 165,092                      |       | 628,658                           |       | 574,652                       |       | 1,849,771                  |       | 8,285,163            |       | 13,976,248     |       |
| **Expenses**                          |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                              |       |                          |       |                       |       |                 |       |           |       |
| Administrative                        |       | 10,305                            |       | (643                                         | )          | 27,851                  |       | 7,718                    |       | 4,319                        |       | 11,714                            |       | 7,003                         |       | 30,175                     |       | 120,222              |       | 218,664        |       |
| Depreciation and Amortization         |       | 319,980                           |       | 4,690                                        |       | 330,567                 |       | 202,510                  |       | 72,096                       |       | 268,819                           |       | 241,303                       |       | 737,678                    |       | 7,650,129            |       | 9,827,772      |       |
| Management Fees                       |       | 34,660                            |       | 8,280                                        |       | 33,579                  |       | 23,751                   |       | 6,940                        |       | 24,914                            |       | 23,784                        |       | 73,507                     |       | 181,549              |       | 410,964        |       |
| Operating                             |       | 102,208                           |       | (137                                         | )          | 46,470                  |       | 1,207                    |       | (138                         | )          | 313                               |       | 46,963                        |       | 259,188                    |       | 682,040              |       | 1,138,114      |       |
| Renting                               |       | 23,007                            |       | —                                       |       | 41,425                  |       | 3,104                    |       | 200                          |       | 3,698                             |       | 3,185                         |       | 14,166                     |       | 214,696              |       | 303,482        |       |
| Repairs and Maintenance               |       | 109,000                           |       | —                                       |       | 61,470                  |       | 255,649                  |       | 63,716                       |       | 281,938                           |       | 67,484                        |       | 253,745                    |       | 675,397              |       | 1,768,399      |       |
| Taxes and Insurance                   |       | 137,142                           |       | 35,711                                       |       | 73,680                  |       | 95,499                   |       | 32,000                       |       | 94,888                            |       | 76,238                        |       | 238,815                    |       | 1,108,115            |       | 1,890,088      |       |
|                                  |       | 736,302                           |       | 47,901                                       |       | 614,843                 |       | 589,436                  |       | 179,132                      |       | 686,284                           |       | 465,960                       |       | 1,607,274                  |       | 10,630,148           |       | 15,557,280     |       |
| **Income (Loss)Before  Other Income** |       | 121,334                           |       | 159,099                                      |       | 203,045                 |       | 953                      |       | (14,040                      | )          | (57,626                           | )          | 108,692                       |       | 242,497                    |       | (2,344,985           | )          | (1,581,033     | )          |
|                                  |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                              |       |                          |       |                       |       |                 |       |           |       |
| **Other Income  (Loss)**              |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                              |       |                          |       |                       |       |                 |       |           |       |
| Interest Income                       |       | 2                                 |       | 1                                            |       | 35                      |       | 68                       |       | 9,239                        |       | —                            |       | 2                             |       | 5                          |       | 5                    |       | 9,358          |       |
| Interest Expense                      |       | (329,724                          | )          | (46,879                                      | )          | (379,392                | )          | (216,150                 | )          | (73,224                      | )          | (203,035                          | )          | (237,346                      | )          | (644,832                   | )          | (3,827,225           | )          | (6,007,808     | )          |
| Gain on Sale of Real Estate           |       | —                            |       | —                                       |       | —                  |       | —                   |       | 195                          |       | 9,478                             |       | —                        |       | —                     |       | —               |       | 9,673          |       |
| Other Income (Expenses)               |       | —                            |       | —                                       |       | —                  |       | —                   |       | 7,526                        |       | —                            |       | —                        |       | 2,168                      |       | (17,720              | )          | (8,026         | )          |
|                                  |       | (379,722)                         |       | (46,877                                      | )          | (379,357                | )          | (216,082                 | )          | (56,264                      | )          | (193,556                          | )          | (237,346                      | )          | (642,659                   | )          | (3,844,940           | )          | (5,996,803     | )          |
|                                  |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                              |       |                          |       |                       |       |                 |       |           |       |
| **Net Income (Loss)**                 | ** ** | **(258,388**                      | **)**      | **112,222**                                  | ** ** | **(176,313**            | **)**      | **(215,129**             | **)**      | **(70,305**                  | **)**      | **(251,182**                      | **)**      | **(128,654**                  | **)**      | **(400,162**               | **)**      | **(6,189,926**       | **)**      | **(7,577,838** | **)**      |
|                                  |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                              |       |                          |       |                       |       |                 |       |           |       |
| **Net Loss - NERA  50%**              | ** ** | **(129,194**                      | **)**      | **56,111**                                   | ** ** | **(88,157**             | **)**      | **(107,565**             | **)**      | **(35,152**                  | **)**      | **(125,591**                      | **)**      | **(64,326**                   | **)**      | **(200,081**               | **)**      | ** **           | ** ** | **(693,955**   | **)**      |
| **NERA 40%**                          | ** ** | ** **                        | ** ** | ** **                                   | ** ** | ** **              | ** ** | ** **               | ** ** | ** **                   | ** ** | ** **                        | ** ** | ** **                    | ** ** | ** **                 | ** ** | **(2,475,970**       | **)**      | **(2,475,970** | **)**      |
| ** **                            | ** ** | ** **                        | ** ** | ** **                                   | ** ** | ** **              | ** ** | ** **               | ** ** | ** **                   | ** ** | ** **                        | ** ** | ** **                    | ** ** | ** **                 | ** ** | ** **           | ** ** | **(3,169,925** | **)**      |
|                                       |            |                                   |            |                                              |            |                         |            |                          |            |                              |            |                                   |            |                               |            |                            |            |                      |            |                |            |  |

 

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**Summaryfinancial information for the three months ended September 30, 2010**

 
| ** **                     | ** ** | **Hamilton**      | ** ** | **Hamilton Essex** | ** ** | **345**      | ** ** | **Hamilton** | ** ** | **Hamilton**       | ** ** | **Hamilton**      | ** ** | **Hamilton**  | ** ** | **Hamilton**     | ** ** | **Dexter**     | ** ** | ** **     | ** ** |
|--------------------------------|------------|-------------------|------------|-------------------------|------------|--------------|------------|--------------|------------|--------------------|------------|-------------------|------------|---------------|------------|------------------|------------|----------------|------------|----------------|------------|
| ** **                     | ** ** | **Essex 81** | ** ** | **Development**         | ** ** | **Franklin** | ** ** | **1025**     | ** ** | **Bay Sales** | ** ** | **Bay Apts** | ** ** | **Minuteman** | ** ** | **on Main** | ** ** | **Park**       | ** ** | **Total**      | ** ** |
|                           |       |              |       |                    |       |         |       |         |       |               |       |              |       |          |       |             |       |           |       |           |       |
| **Revenues**                   |       |              |       |                    |       |         |       |         |       |               |       |              |       |          |       |             |       |           |       |           |       |
| Rental Income                  |       | 278,486           |       | 69,000                  |       | 264,268      |       | 192,019      |       | 58,152             |       | 210,543           |       | 193,368       |       | 611,382          |       | 2,591,295      |       | 4,468,513      |       |
| Laundry and Sundry Income      |       | 3,838             |       |                    |       | 1,050        |       |         |       |               |       |              |       |          |       | 4,383            |       | 22,704         |       | 31,974         |       |
|                           |       | 282,323           |       | 69,000                  |       | 265,318      |       | 192,019      |       | 58,152             |       | 210,543           |       | 193,368       |       | 615,766          |       | 2,613,999      |       | 4,500,488      |       |
|                           |       |              |       |                    |       |         |       |         |       |               |       |              |       |          |       |             |       |           |       |           |       |
| **Expenses**                   |       |              |       |                    |       |         |       |         |       |               |       |              |       |          |       |             |       |           |       |           |       |
| Administrative                 |       | 2,583             |       | (477                    | )          | 8,879        |       | 4,032        |       | 1,739              |       | 3,638             |       | 1,641         |       | 8,385            |       | 44,138         |       | 74,557         |       |
| Depreciation and Amortization  |       | 106,978           |       | 1,563                   |       | 110,916      |       | 67,670       |       | 24,032             |       | 89,752            |       | 81,044        |       | 246,762          |       | 2,558,400      |       | 3,287,118      |       |
| Management Fees                |       | 10,485            |       | 2,760                   |       | 10,158       |       | 8,016        |       | 2,258              |       | 8,355             |       | 7,840         |       | 24,459           |       | 61,045         |       | 135,374        |       |
| Operating                      |       | 30,766            |       |                    |       | 15,839       |       | 260          |       |               |       |              |       | 10,867        |       | 78,033           |       | 191,189        |       | 326,954        |       |
| Renting                        |       | 12,594            |       |                    |       | 6,325        |       | 136          |       |               |       | 1,655             |       | 1,293         |       | 5,199            |       | 91,410         |       | 118,612        |       |
| Repairs and Maintenance        |       | 40,964            |       |                    |       | 32,297       |       | 128,982      |       | 13,587             |       | 62,668            |       | 28,065        |       | 81,201           |       | 295,524        |       | 683,288        |       |
| Taxes and Insurance            |       | 42,780            |       | 11,467                  |       | 23,114       |       | 32,076       |       | 10,476             |       | 19,623            |       | 25,737        |       | 79,282           |       | 339,298        |       | 583,854        |       |
|                           |       | 247,151           |       | 15,313                  |       | 207,528      |       | 241,172      |       | 52,091             |       | 185,691           |       | 156,488       |       | 523,321          |       | 3,581,003      |       | 5,209,758      |       |
| **Income Before Other Income** |       | 35,172            |       | 53,687                  |       | 57,790       |       | (49,153      | )          | 6,061              |       | 24,852            |       | 36,880        |       | 92,445           |       | (967,004       | )          | (709,270       | )          |
|                           |       |              |       |                    |       |         |       |         |       |               |       |              |       |          |       |             |       |           |       |           |       |
| **Other Income (Loss)**        |       |              |       |                    |       |         |       |         |       |               |       |              |       |          |       |             |       |           |       |           |       |
| Interest Income                |       |              |       |                    |       | 12           |       | 22           |       | 2,929              |       |              |       | 1             |       | 1                |       |           |       | 2,965          |       |
| Interest Expense               |       | (127,875          | )          | (15,936                 | )          | (125,815     | )          | (72,833      | )          | (24,686            | )          | (68,408           | )          | (79,974       | )          | (216,444         | )          | (1,304,571     | )          | (2,036,541     | )          |
| Gain on Sale of Real Estate    |       |              |       |                    |       |         |       | —       |       | 195                |       |              |       |          |       |             |       |           |       | 195            |       |
| Other Income (Expenses)        |       |              |       |                    |       |         |       |         |       | (195               | )          |              |       |          |       |             |       | (17,720        | )          | (17,915        | )          |
|                           |       | (127,875          | )          | (15,936                 | )          | (125,804     | )          | (72,810      | )          | (21,757            | )          | (68,408           | )          | (79,973       | )          | (216,443         | )          | (1,322,291     | )          | (2,051,295     | )          |
|                           |       |              |       |                    |       |         |       |         |       |               |       |              |       |          |       |             |       |           |       |           |       |
| **Net Income (Loss)**          | ** ** | **(92,703**       | **)**      | **37,751**              | ** ** | **(68,014**  | **)**      | **(121,963** | **)**      | **(15,697**        | **)**      | **(43,555**       | **)**      | **(43,093**   | **)**      | **(123,998**     | **)**      | **(2,289,296** | **)**      | **(2,760,565** | **)**      |
|                           |       |              |       |                    |       |         |       |         |       |               |       |              |       |          |       |             |       |           |       |           |       |
| **P&L- NERA 50%**          | ** ** | **(46,351**       | **)**      | **18,875**              | ** ** | **(34,007**  | **)**      | **(60,982**  | **)**      | **(7,848**         | **)**      | **(21,778**       | **)**      | **(21,546**   | **)**      | **(61,998**      | **)**      | ** **     | ** ** | **(235,635**   | **)**      |
| **P&L- NERA 40%**          |       |              |       |                    |       |         |       |         |       |               |       |              |       |          |       |             | ** ** | **(915,718**   | **)**      | **(915,718**   | **)**      |
|                           |       |              |       |                    |       |         |       |         |       |               |       |              |       |          |       |             |       |           | ** ** | **(1,151,353** | **)**      |

 

Future annual mortgage maturitiesat September 30, 2010 are as follows:

 
| ** **              | ** ** | **Hamilton   Essex 81** | ** ** | **Hamilton   Essex   Development** | ** ** | **345  Franklin**        | ** ** | **Hamilton  1025** | ** ** | **Hamilton   Bay Sales** | ** ** | **Hamilton   Bay Apts** | ** ** | **Hamilton   Minuteman** | ** ** | **Hamilton on  Main** | ** ** | **Dexter  Park**        | ** ** | ** **  | ** ** |
|-------------------------|------------|-----------------------------------|------------|----------------------------------------------|------------|--------------------------|------------|--------------------|------------|------------------------------------|------------|-----------------------------------|------------|-------------------------------|------------|----------------------------|------------|-------------------------|------------|-------------|------------|
| **Period End**     | ** ** | **March   2005**             | ** ** | **March  2005**                              | ** ** | **November   2001** | ** ** | **March  2005**    | ** ** | **October  2005**                  | ** ** | **October  2005**                 | ** ** | **August  2004**              | ** ** | **August 2004**       | ** ** | **October   2009** | ** ** | **Total**   | ** ** |
| September 30, 2011 |       | 110,346                           |       | 2,162,000                                    |       | 155,018                  |       |               |       |                               |       |                              |       |                          |       | 258,461                    |       |                    |       | 2.685,825   |       |
| September 30, 2012 |       | 116,907                           |       |                                         |       | 166,060                  |       | 50,135             |       |                               |       | 36,421                            |       | 49,966                        |       | 274,760                    |       | 1,093,540               |       | 1,787,790   |       |
| September 30, 2013 |       | 123,859                           |       |                                         |       | 177,887                  |       | 64,222             |       | 1,668,000                          |       | 65,250                            |       | 70,339                        |       | 289,543                    |       | 1,258,232               |       | 3,717,332   |       |
| September 30, 2014 |       | 131,223                           |       |                                         |       | 6,715,623                |       | 68,013             |       |                               |       | 68,979                            |       | 74,491                        |       | 305,121                    |       | 1,330,133               |       | 8,693,582   |       |
| September 30, 2015 |       | 8,108,754                         |       |                                         |       |                     |       | 72,028             |       |                               |       | 72,921                            |       | 78,887                        |       | 15,085,823                 |       | 1,406,143               |       | 24,824,555  |       |
| Thereafter              |       |                              |       |                                         |       |                     |       | 4,745,602          |       |                               |       | 4,506,429                         |       | 5,226,317                     |       |                       |       | 84,825,952              |       | 99,304,299  |       |
|                    |       | 8,591,089                         |       | 2,162,000                                    |       | 7,214,588                |       | 5,000,000          |       | 1,668,000                          |       | 4,750,000                         |       | 5,500,000                     |       | 16,213,706                 |       | 89,914,000              |       | 141,013,383 |       |

 

20

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**Summary balance sheet as of September 30,2009**

 
| ** **                                                              | ** ** | **Hamilton   Essex 81** | ** ** | **Hamilton   Essex   Development** | ** ** | **345   Franklin** | ** ** | **Hamilton   1025** | ** ** | **Hamilton  Bay Sales** | ** ** | **Hamilton  Bay Apts** | ** ** | **Hamilton   Minuteman** | ** ** | **Hamilton  on Main** | ** ** | **Total**      | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------------------|------------|----------------------------------------------|------------|-------------------------|------------|--------------------------|------------|------------------------------|------------|-----------------------------|------------|-------------------------------|------------|----------------------------|------------|----------------|------------|
| **ASSETS**                                                              |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                        |       |                          |       |                       |       |           |       |
| Rental Properties                                                       |       | 10,304,195                        |       | 2,576,552                                    |       | 9,121,848               |       | 6,406,791                |       | 2,111,056                    |       | 8,007,066                   |       | 7,964,514                     |       | 24,125,422                 |       | 70,617,444     |       |
| Cash & Cash  Equivalents                                       |       | 3,959                             |       | 13,547                                       |       | 872                     |       | 3,432                    |       | 12,595                       |       | 526                         |       | 25,485                        |       | 47,376                     |       | 107,791        |       |
| Rent Receivable                                                         |       | 261                               |       | —                                       |       | —                  |       | 2,893                    |       | —                       |       | —                      |       | (4,044                        | )          | 6,358                      |       | 5,468          |       |
| Real Estate Tax Escrow                                                  |       | 62,575                            |       | —                                       |       | 36,908                  |       | 25,490                   |       | —                       |       | 63,274                      |       | 51,624                        |       | 97,881                     |       | 337,751        |       |
| Due From Investment  Properties                                         |       | 80,000                            |       | —                                       |       | —                  |       | 70,000                   |       | 100,000                      |       | 24,000                      |       | —                        |       | 222,000                    |       | 496,000        |       |
| Prepaid  Expenses & Other Assets                               |       | 78,558                            |       | 796                                          |       | 85,015                  |       | 79,725                   |       | 273,366                      |       | 63,860                      |       | 65,947                        |       | 319,002                    |       | 966,268        |       |
| Financing &  Leasing Fees                                      |       | 125,095                           |       | 11,992                                       |       | 34,703                  |       | 35,981                   |       | 17,965                       |       | 46,919                      |       | 28,848                        |       | 36,881                     |       | 338,383        |       |
| **Total Assets**                                                        | ** ** | **10,654,642**                    | ** ** | **2,602,888**                                | ** ** | **9,279,346**           | ** ** | **6,624,313**            | ** ** | **2,514,982**                | ** ** | **8,205,644**               | ** ** | **8,132,373**                 | ** ** | **24,854,920**             | ** ** | **72,869,106** | ** ** |
| **LIABILITIES AND PARTNERS’  CAPITAL**                             |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                        |       |                          |       |                       |       |           |       |
| Mortgage Notes Payable                                                  |       | 8,600,000                         |       | 2,162,000                                    |       | 7,359,299               |       | 5,000,000                |       | 1,668,000                    |       | 4,750,000                   |       | 5,500,000                     |       | 16,461,242                 |       | 51,500,542     |       |
| Due to Investment  Properties                                           |       |                              |       | —                                       |       | 417,000                 |       | —                   |       | 28,000                       |       | 26,000                      |       | 25,000                        |       | —                     |       | 496,000        |       |
| Accounts  Payable & Accrued Expense                            |       | 47,890                            |       | 9,783                                        |       | 129,135                 |       | 15,283                   |       | 22,232                       |       | 14,747                      |       | 49,571                        |       | 201,294                    |       | 489,936        |       |
| Advance Rental  Pymts & Security Dep                           |       | 135,068                           |       | —                                       |       | 124,457                 |       | 55,496                   |       | 15,886                       |       | 78,620                      |       | 49,269                        |       | 203,408                    |       | 662,205        |       |
| **Total  Liabilities**                                                  |       | 8,782,958                         |       | 2,171,783                                    |       | 8,029,891               |       | 5,070,779                |       | 1,734,119                    |       | 4,869,367                   |       | 5,623,840                     |       | 16,865,945                 |       | 53,148,682     |       |
| Partners’ Capital                                                  |       | 1,871,683                         |       | 431,105                                      |       | 1,249,455               |       | 1,553,533                |       | 780,863                      |       | 3,336,277                   |       | 2,508,532                     |       | 7,988,975                  |       | 19,720,424     |       |
| **Total  Liabilities & Capital**                               | ** ** | **10,654,642**                    | ** ** | **2,602,888**                                | ** ** | **9,279,346**           | ** ** | **6,624,313**            | ** ** | **2,514,982**                | ** ** | **8,205,644**               | ** ** | **8,132,373**                 | ** ** | **24,854,920**             |       | **72,869,106** | ** ** |
| **Partners’ Capital-NERA50%**                                      | ** ** | **935,842**                       | ** ** | **215,552**                                  | ** ** | **624,727**             | ** ** | **776,767**              | ** ** | **390,432**                  | ** ** | **1,668,139**               | ** ** | **1,254,266**                 | ** ** | **3,994,487**              |       | **9,860,212**  | ** ** |
|                                                                    |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                        |       |                          |       |                       |       |           |       |
| Total units/condominiums                                                |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                        |       |                          |       |                       |       |           |       |
| Apartments                                                              |       | 48                                |       | —                                       |       | 40                      |       | 175                      |       | 120                          |       | 48                          |       | 42                            |       | 148                        |       | 621            |       |
| Commercial                                                              |       | 1                                 |       | 1                                            |       | —                  |       | 1                        |       | —                       |       | —                      |       | —                        |       | —                     |       | 3              |       |
| Total                                                                   |       | 49                                |       | 1                                            |       | 40                      |       | 176                      |       | 120                          |       | 48                          |       | 42                            |       | 148                        |       | 624            |       |
| Units to be retained                                                    |       | 49                                |       | 1                                            |       | 40                      |       | 49                       |       | —                       |       | 48                          |       | 42                            |       | 148                        |       | 377            |       |
| Units to be sold                                                        |       | —                            |       | —                                       |       | —                  |       | 127                      |       | 120                          |       | —                      |       | —                        |       | —                     |       | 247            |       |
| Units sold through  October 26, 2009                               |       | —                            |       | —                                       |       | —                  |       | 127                      |       | 105                          |       | —                      |       | —                        |       | —                     |       | 232            |       |
| Unsold units                                                            |       | —                            |       | —                                       |       | —                  |       | —                   |       | 15                           |       | —                      |       | —                        |       | —                     |       | 15             |       |
| Unsold units with  deposits for future sale as of October 26, 2009 |       | —                            |       | —                                       |       | —                  |       | —                   |       | —                       |       | —                      |       | —                        |       | —                     |       | —         |       |

 

21

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**Summary financial information forthe nine months ended September 30, 2009**

 
| ** **                          | ** ** | **Hamilton   Essex 81** | ** ** | **Hamilton Essex  Development** | ** ** | **345   Franklin** | ** ** | **Hamilton   1025** | ** ** | **Hamilton  Bay Sales** | ** ** | **Hamilton  Bay Apts** | ** ** | **Hamilton   Minuteman** | ** ** | **Hamilton  on Main** | ** ** | **Total**    | ** ** |
|-------------------------------------|------------|-----------------------------------|------------|--------------------------------------|------------|-------------------------|------------|--------------------------|------------|------------------------------|------------|-----------------------------|------------|-------------------------------|------------|----------------------------|------------|--------------|------------|
| **Revenues**                        |       |                              |       |                                 |       |                    |       |                     |       |                         |       |                        |       |                          |       |                       |       |         |       |
| Rental Income                       |       | 839,738                           |       | 214,248                              |       | 820,442                 |       | 596,044                  |       | 171,391                      |       | 602,117                     |       | 571,656                       |       | 1,805,764                  |       | 5,621,400    |       |
| Laundry and Sundry  Income          |       | 2,129                             |       | —                               |       | 1,341                   |       | —                   |       | —                       |       | —                      |       | 567                           |       | 16,265                     |       | 20,302       |       |
|                                |       | 841,868                           |       | 214,248                              |       | 821,782                 |       | 596,044                  |       | 171,391                      |       | 602,117                     |       | 572,223                       |       | 1,822,029                  |       | 5,641,703    |       |
| **Expenses**                        |       |                              |       |                                 |       |                    |       |                     |       |                         |       |                        |       |                          |       |                       |       |         |       |
| Administrative                      |       | 12,620                            |       | 12,157                               |       | 17,056                  |       | 18,142                   |       | 7,332                        |       | 12,363                      |       | 7,454                         |       | 27,332                     |       | 114,458      |       |
| Depreciation and  Amortization      |       | 324,135                           |       | 3,483                                |       | 326,096                 |       | 234,872                  |       | 79,602                       |       | 299,197                     |       | 344,364                       |       | 1,125,466                  |       | 2,737,213    |       |
| Management Fees                     |       | 35,472                            |       | 8,301                                |       | 33,246                  |       | 23,470                   |       | 6,775                        |       | 23,734                      |       | 22,089                        |       | 73,464                     |       | 226,551      |       |
| Operating                           |       | 101,052                           |       | —                               |       | 46,074                  |       | 3,185                    |       | 415                          |       | 3,915                       |       | 61,489                        |       | 252,105                    |       | 468.236      |       |
| Renting                             |       | 29,350                            |       | —                               |       | 34,795                  |       | 4,141                    |       | 369                          |       | 1,584                       |       | 3,337                         |       | 11,717                     |       | 85,294       |       |
| Repairs and Maintenance             |       | 83,989                            |       | 3,930                                |       | 80,008                  |       | 197,010                  |       | 44,391                       |       | 194,281                     |       | 56,424                        |       | 219,761                    |       | 879,795      |       |
| Taxes and Insurance                 |       | 102,155                           |       | 55,381                               |       | 59,989                  |       | 96,836                   |       | 34,629                       |       | 102,652                     |       | 76,349                        |       | 225,972                    |       | 753,962      |       |
|                                |       | 688,774                           |       | 83,252                               |       | 597,265                 |       | 577,655                  |       | 173,514                      |       | 637,726                     |       | 571,506                       |       | 1,935,816                  |       | 5,265,508    |       |
| **Income Before Other Income**      |       | 153,094                           |       | 130,996                              |       | 224,517                 |       | 18,389                   |       | (2,123                       | )          | (35,610                     | )          | 717                           |       | (113,787                   | )          | 376,195      |       |
| **Other Income (Loss)**             |       |                              |       |                                 |       |                    |       |                     |       |                         |       |                        |       |                          |       |                       |       |         |       |
| Interest Expense                    |       | (380,094                          | )          | (48,369                              | )          | (386,837                | )          | (216,120                 | )          | (75,518                      | )          | (202,915                    | )          | (237,305                      | )          | (654,846                   | )          | (2,202,004   | )          |
| Interest Income                     |       | 2                                 |       | —                               |       | 43                      |       | 54                       |       | 11,035                       |       | —                      |       | 1                             |       | 2                          |       | 11,137       |       |
| Gain on Sale of Real  Estate        |       | —                            |       | —                               |       | —                  |       | —                   |       | 52,867                       |       | —                      |       | —                        |       | —                     |       | 52,867       |       |
|                                |       | (380,092                          | )          | (48,369                              | )          | (386,794                | )          | (216,065                 | )          | (11,616                      | )          | (202,915                    | )          | (237,304                      | )          | (654,844                   | )          | (2,138,000   | )          |
| **Net Income (Loss)**               |       | (226,998                          | )          | 82,628                               |       | (162,277                | )          | (197,676                 | )          | (13,739                      | )          | (238,525                    | )          | (236,587                      | )          | (768,631                   | )          | (1,761,806   | )          |
| **Net Income (loss)—NERA 50%** | ** ** | **(113,499**                      | **)**      | **41,314**                           | ** ** | **(81,139**             | **)**      | **(98,838**              | **)**      | **(6,869**                   | **)**      | **(119,262**                | **)**      | **(118,293**                  | **)**      | **(384,316**               | **)**      | **(880,903** | **)**      |

 

**Summary financial information forthe three months ended September 30, 2009**

 
| ** **                          | ** ** | **Hamilton   Essex 81** | ** ** | **Hamilton   Essex   Development** | ** ** | **345   Franklin** | ** ** | **Hamilton   1025** | ** ** | **Hamilton  Bay Sales** | ** ** | **Hamilton  Bay Apts** | ** ** | **Hamilton   Minuteman** | ** ** | **Hamilton  on Main** | ** ** | **Total**    | ** ** |
|-------------------------------------|------------|-----------------------------------|------------|----------------------------------------------|------------|-------------------------|------------|--------------------------|------------|------------------------------|------------|-----------------------------|------------|-------------------------------|------------|----------------------------|------------|--------------|------------|
| **Revenues**                        |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                        |       |                          |       |                       |       |         |       |
| Rental Income                       |       | 231,232                           |       | 65,950                                       |       | 261,486                 |       | 192,111                  |       | 57,414                       |       | 202,201                     |       | 193,671                       |       | 602,926                    |       | 1,806,989    |       |
| Laundry and Sundry  Income          |       | 237                               |       | —                                       |       | 48                      |       | —                   |       | —                       |       | —                      |       |                          |       | 5,100                      |       | 5,385        |       |
|                                |       | 231,469                           |       | 65,950                                       |       | 261,533                 |       | 192,111                  |       | 57,414                       |       | 202,201                     |       | 193,671                       |       | 608,026                    |       | 1,812,374    |       |
| **Expenses**                        |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                        |       |                          |       |                       |       |         |       |
| Administrative                      |       | 4,299                             |       | 2,406                                        |       | 5,888                   |       | 9,103                    |       | 3,156                        |       | 4,408                       |       | 1,275                         |       | 10,589                     |       | 41,123       |       |
| Depreciation and  Amortization      |       | 108,024                           |       | 1,563                                        |       | 112,858                 |       | 78,723                   |       | 26,534                       |       | 100,040                     |       | 115,607                       |       | 376,095                    |       | 919,445      |       |
| Management Fees                     |       | 10,530                            |       | 2,760                                        |       | 10,655                  |       | 7,447                    |       | 2,298                        |       | 8,162                       |       | 7,781                         |       | 24,093                     |       | 73,726       |       |
| Operating                           |       | 30,789                            |       | —                                       |       | 14,394                  |       | 1,777                    |       | 285                          |       | 198                         |       | 14,768                        |       | 65,404                     |       | 127,613      |       |
| Renting                             |       | 13,850                            |       | —                                       |       | 12,245                  |       | 1,143                    |       | 369                          |       | 774                         |       | 722                           |       | 4,353                      |       | 33,456       |       |
| Repairs and Maintenance             |       | 31,989                            |       | —                                       |       | 40,489                  |       | 64,413                   |       | 14,515                       |       | 62,781                      |       | 18,030                        |       | 82,979                     |       | 315,195      |       |
| Taxes and Insurance                 |       | 40,170                            |       | 11,082                                       |       | 20,304                  |       | 21,311                   |       | 10,565                       |       | 16,497                      |       | 25,669                        |       | 76,276                     |       | 221,875      |       |
|                                |       | 239,651                           |       | 17,811                                       |       | 216,832                 |       | 183,916                  |       | 57,722                       |       | 192,861                     |       | 183,852                       |       | 639,789                    |       | 1,732,434    |       |
| **Income Before Other Income**      |       | (8,182                            | )          | 48,139                                       |       | 44,701                  |       | 8,194                    |       | (308                         | )          | 9,340                       |       | 9,819                         |       | (31,764                    | )          | 79,940       |       |
| **Other Income (Loss)**             |       |                              |       |                                         |       |                    |       |                     |       |                         |       |                        |       |                          |       |                       |       |         |       |
| Interest Expense                    |       | (128,179                          | )          | (15,737                                      | )          | (128,355                | )          | (72,805                  | )          | (24,681                      | )          | (68,399                     | )          | (79,957                       | )          | (219,837                   | )          | (737,951     | )          |
| Interest Income                     |       | —                            |       | —                                       |       | 14                      |       | 20                       |       | 3,525                        |       | —                      |       | —                        |       | —                     |       | 3,559        |       |
| Gain on Sale of Real  Estate        |       | —                            |       | —                                       |       | —                  |       | —                   |       | 3,221                        |       | —                      |       | —                        |       | —                     |       | 3,221        |       |
|                                |       | (128,179                          | )          | (15,737                                      | )          | (128,341                | )          | (72,785                  | )          | (17,936                      | )          | (68,399                     | )          | (79,957                       | )          | (219,837                   | )          | (731,170     | )          |
| **Net Income (Loss)**               |       | (136,361                          | )          | 32,403                                       |       | (83,640                 | )          | (64,591                  | )          | (18,244                      | )          | (59,059                     | )          | (70,138                       | )          | (251,601                   | )          | (651,230     | )          |
| **Net Income (loss)—NERA 50%** | ** ** | **(68,181**                       | **)**      | **16,201**                                   | ** ** | **(41,820**             | **)**      | **(32,295**              | **)**      | **(9,122**                   | **)**      | **(29,530**                 | **)**      | **(35,069**                   | **)**      | **(125,800**               | **)**      | **(325,615** | **)**      |

 

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**NOTE15. IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS**

 

**FASBAccounting Standards Update No. 2010-02, Consolidation (Topic 810), *Accounting and Reporting for Decreases in Ownership of a Subsidiary — aScope Clarification***

 

Theobjective of this Update is to address implementation issues related to thechanges in ownership provisions in the Consolidation — Overall Subtopic(Subtopic 810-10) of *FASB Accounting StandardsCodification*, originally issued as FASB Statement No. 160, *Noncontrolling Interests in Consolidated Financial Statements*.  Subtopic 810-10 establishes the accountingand reporting guidance for noncontrolling interests and changes in ownershipinterests of a subsidiary.  An entity isrequired to deconsolidate a subsidiary when the entity ceases to have acontrolling financial interest in the subsidiary.  Upon deconsolidation of a subsidiary, anentity recognizes a gain or loss on the transaction and measures retainedinvestment in the subsidiary at fair value. The gain or loss includes any gain or loss associated with thedifference between the fair value of the retained investment in the subsidiaryand its carrying amount at the date the subsidiary is deconsolidated.  In contrast, an entity is required to accountfor a decrease in its ownership interest of a subsidiary that does not resultin a change of control of the subsidiary as an equity transaction.  The adoption of this Update did not have amaterial impact on the Partnership’s financial position, results of operationsand disclosures contained in its financial statements.

 

**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

Thefollowing discussion should be read in conjunction with the financialstatements and notes thereof appearing elsewhere in this Report.  This Report, on Form 10-Q, containsforward-looking statements within the meaning of the securities law.  Actual results or developments could differmaterially from those projected in such statements as a result of certainfactors set forth in the section below entitles “Factors That May AffectFuture Results” and elsewhere in this Report.

 

Thereal estate market in the Greater Boston area has started to stabilize and thePartnership anticipates that the climate will remain the same in theforeseeable future. The Partnership anticipates declining concessions and tepidincreases to revenue for the coming quarter because of the minimal productionof rental housing and the improving labor market. The Partnership believes itspresent cash reserves as well as anticipated rental revenue will be sufficientto fund its current operations, finance current planned improvements to itsproperties, and continue distribution payments in the foreseeable future.Anticipated deterioration and/or loss of a significant commercial tenant mayresult in the Partnership recording an impairment loss in the future.

 

Sincethe Partnership’s long-term goals include the acquisition of additionalproperties, a portion of the proceeds from the refinancing and sale ofproperties is reserved for this purpose. The Partnership will considerrefinancing or selling existing properties if the Partnership’s cash reservesare insufficient to repay existing mortgages or if the Partnership needsadditional funds for future acquisitions. Should six months notice be given onthe loan between the Partnership and HBC Holdings and the cash reserves are notavailable, the Partnership would consider the refinancing or sale of aPartnership property to satisfy this debt.

 

Management believes that thefinancial difficulties experienced since the lending crisis in 2007 have abatedbut that the recovery will take longer than previous recessions.   Management also believes that the recoveryat the local level will be slow and steady. While Management has been effective in abating cost increases, realestate tax increases continue to be a reality for the foreseeable future.   As expected, Management has observedimproved occupancy levels in the Greater Boston Metropolitan Area, thePartnership’s primary market.  ThePartnership believes that the local business climate is improving and expectsto see increasing occupancy and revenues for the Partnership in 2011, howeverthere can be no assurance that such increases will be achieved..

 

During the nine months endedSeptember 30, 2010, the Partnership’s rental income decreasedapproximately 1.0% from the same period in 2009.  Management believes that the modest declinehas abated and that early signs of revenue increases have already beenexperienced through the renewal season. This is evidenced by October’s rentalcollections as well as a 38% decline in the vacancy rate compared to the sametime last year.  As expected, Managementsfocus on tenant retention

 

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and improved leasingstrategies has resulted in a decline in turnover expenses and leasingcommissions.  Management’s decision toshift to gas related utility operations continues to pay off and offsetincreasing real estate taxes.  Managementis satisfied with the performance of its latest Joint Venture acquisition,Dexter Park.

 

The Stock Repurchase Programthat was initiated in 2007 has purchased 398,320 Depository Receipts through September 2010.  Given the lack of alternative investments,liquidity in the capital markets and the current share price, Management continuesto support the buyback program and believes it to be accretive to the remainingshareholders.  Management continues to beactive bidding on commercial real estate within Massachusetts and remainspoised to acquire real estate it deems opportune given the current selling andfinancing environment.

 

ThePartnership has retained The Hamilton Company (“Hamilton”) to manage andadminister the Partnership’s and Joint Ventures’ Properties. Hamilton is afull-service real estate management company, which has legal, construction,maintenance, architectural, accounting and administrative departments. ThePartnership’s properties represent approximately 40% of the total propertiesand 70% of the residential properties managed by Hamilton. Substantially all ofthe other properties managed by Hamilton are owned, wholly or partially,directly or indirectly, by Harold Brown. The Partnership’s Second Amended andRestated Contract of Limited Partnership (the “Partnership Agreement”)expressly provides that the general partner may employ a management company tomanage the properties, and that such management company may be paid a fee of 4%of rental receipts for administrative and management services (the “ManagementFee”). The Partnership pays Hamilton the full annual Management Fee, in monthlyinstallments (2% at Hamilton Park Towers).

 

AtSeptember 30, 2010, Harold Brown, his brother Ronald Brown and thePresident of Hamilton, Carl Valeri, collectively own approximately 39% of theDepositary Receipts representing the Partnership Class A Units (includingDepositary Receipts held by trusts for the benefit of such persons’ familymembers). Harold Brown also owns 75% of the Partnership’s Class B Units,75% of the capital stock of NewReal, Inc. (“NewReal”), the Partnership’ssole general partner, and all of the outstanding stock of Hamilton. RonaldBrown also owns 25% of the Partnership’s Class B Units and 25% of NewReal’scapital stock. In addition, Ronald Brown is the President and director ofNewReal and Harold Brown is NewReal’s Treasurer and a director. Two of NewReal’sother directors, Roberta Ornstein and Conrad DiGregorio, also own immaterialamounts of the Partnership’s Class A Units or receipts.

 

Inaddition to the Management Fee, the Partnership Agreement further provides forthe employment of outside professionals to provide services to the Partnershipand allows NewReal to charge the Partnership for the cost of employingprofessionals to assist with the administration of the Partnership’sproperties. Additionally, from time to time, the Partnership pays Hamilton forrepairs and maintenance services, legal services, construction services andaccounting services. The costs charged by Hamilton for these services are atthe same hourly rate charged to all entities managed by Hamilton, andmanagement believes such rates are competitive in the marketplace.

 

Hamiltonaccounted for approximately 6.5% of the repair and maintenance expense paid forby the Partnership in the nine months ended September 30, 2010 and 3% forthe year ended December 31, 2009. Of the funds paid to Hamilton for thispurpose, the great majority was to cover the cost of services provided by theHamilton maintenance department, including plumbing, electrical, carpentryservices, and snow removal for those properties close to Hamilton’sheadquarters. However, several of the larger Partnership properties have theirown maintenance staff. Further, those properties that do not have their ownmaintenance staff and are located more than a reasonable distance from Hamilton’sheadquarters in Allston, Massachusetts are generally serviced by local,independent companies.

 

Hamilton’slegal department handles most of the Partnership’s eviction and collectionmatters. Additionally, it prepares most long-term commercial lease agreementsand represents the Partnership in selected purchase and sale transactions.Overall, Hamilton provided approximately 76% of the legal services paid for bythe Partnership during the nine months ended September 30, 2010 and forthe year ended December 31, 2009.

 

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

 

ThePartnership requires that three bids be obtained for construction contracts inexcess of $5,000. Hamilton may be one of the three bidders on a particularproject and may be awarded the contract if its bid and its ability tosuccessfully complete the project are deemed appropriate. For contracts thatare not awarded to Hamilton, Hamilton charges the Partnership a constructionsupervision fee equal to 5% of the contract amount. Hamilton’s architecturaldepartment also provides services to the Partnership on an as-needed basis.During the nine months ended September 30, 2010 and 2009, the constructionand architectural service provided to the Partnership by Hamilton wasinsignificant.

 

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Priorto 1991, the Partnership employed an outside, unaffiliated company to performits bookkeeping and accounting functions. Since that time, such services havebeen provided by Hamilton’s accounting staff, which consists of approximately14 people. During the nine months ended September 30, 2010, Hamiltoncharged the Partnership $93,750 ($125,000 per year) for bookkeeping andaccounting services.

 

Formore information on related party transactions, see Note 3 to theConsolidated Financial Statements.

 

**CRITICALACCOUNTING POLICIES AND ESTIMATES**

 

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

 

*RevenueRecognition:*  Rentalincome from residential and commercial properties is recognized over the termof the related lease. For residential tenants, amounts 60 days in arrearsare charged against income. The commercial tenants are evaluated on a case bycase basis. Certain leases of the commercial properties provide for increasingstepped minimum rents, which are accounted for on a straight-line basis overthe term of the lease.

 

*RentalProperties: *Rentalproperties are stated at cost less accumulated depreciation.  Maintenance and repairs are charged toexpense as incurred; improvements and additions are capitalized.  When assets are retired or otherwise disposedof, the cost of the asset and related accumulated depreciation is eliminatedfrom the accounts, and any gain or loss on such disposition is included inincome.  Fully depreciated assets areremoved from the accounts.  Rentalproperties are depreciated by both straight-line and accelerated methods overtheir estimated useful lives.  Upon acquisitionof rental property, the Partnership estimates the fair value of acquiredtangible assets, consisting of land, building and improvements, and identifiedintangible assets and liabilities assumed, generally consisting of the fairvalue of (i) above and below market leases, (ii) in-place leases and (iii) tenantrelationships.  The Partnership allocatesthe purchase price to the assets acquired and liabilities assumed based ontheir fair values.  The Partnershiprecords goodwill or a gain on bargain purchase (if any) if the net assetsacquired/liabilities assumed exceed the purchase consideration of atransaction.  In estimating the fairvalue of the tangible and intangible assets acquired, the Partnership considersinformation obtained about each property as a result of its due diligence andmarketing and leasing activities, and utilizes various valuation methods, suchas estimated cash flow projections utilizing appropriate discount andcapitalization rates, estimates of replacement costs net of depreciation, andavailable market information.  The fairvalue of the tangible assets of an acquired property considers the value of theproperty as if it were vacant.

 

Otherintangible assets acquired include amounts for in-place lease values and tenantrelationship values, which are based on management’s evaluation of therespective tenant.  Factors to beconsidered by management in its analysis of in-place lease values include aestimate of carrying costs during hypothetical expected lease-up periodsconsidering current market conditions, and costs to execute similar leases atmarket rates during the expected lease-up periods, depending on local marketconditions.  In estimating costs toexecute similar leases, management considers leasing commissions, legal andother related expenses.  Characteristicsconsidered by management in valuing tenant relationships included the natureand extent of the Partnership’s existing business relationships with thetenant, growth prospects for developing new business with the tenant, thetenant’s credit quality and expectations of lease renewals.  The value of in-place leases are amortized toexpense over the remaining initial terms of the respective leases.  The value of tenant relationship intangiblesare amortized to expense over the anticipated life of the relationships.

 

Inthe event that facts and circumstances indicate that the carrying value of arental property may be impaired, analysis of the value is prepared.  The estimated future undiscounted cash flowsare compared to the asset’s carrying value to determine if a write-down isrequired.

 

*Impairment*:  On an annual basis management assesseswhether there are any indicators that the value of the Company’s rentalproperties may be impaired.  A property’svalue is impaired only if management’s estimate of the aggregate 

 

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future cash flows(undiscounted and without interest charges) to be generated by the property isless than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as theexcess of the carrying amount of the property over the fair value of theproperty.  The Company’s estimates ofaggregate future cash flows expected to be generated by each property are basedon a number of assumptions that are subject to economic and marketuncertainties including, among others, demand for space, competition fortenants, changes in market rental rates, and costs to operate each property.  As these factors are difficult to predict andare subject to future events that may alter management’s assumptions, thefuture cash flows estimated by management in its impairment analyses may not beachieved. The Partnership has not recognized an impairment loss since 1995.

 

*RentalProperty Held for Sale and Discontinued Operations:*  When assets are identified by management asheld for sale, the Partnership discontinues depreciating the assets andestimates the sales price, net of selling costs, of such assets. If, inmanagement’s opinion, the net sales price of the assets which have beenidentified as held for sale is less than the net book value of the assets, avaluation allowance is established. Properties identified as held for saleand/or sold are presented in discontinued operations for all periods presented.

 

*Investmentsin Partnerships:*  ThePartnership accounts for its 40-50% ownership in the Investment Propertiesunder the equity method of accounting, as it does not control these entities.These investments are recorded initially at cost, as Investments inPartnerships, and subsequently adjusted for the Partnership’s share inearnings, cash contributions and distributions. Under the equity method ofaccounting, our net equity is reflected on the consolidated balance sheets, andour share of net income or loss from the Partnership is included on theconsolidated statements of income.

 

Withrespect to investments in and advances to the Investment Properties, thePartnership looks to the underlying properties to assess performance and therecoverability of carrying amounts for those investments in a manner similar todirect investments in real estate properties. An impairment charge is recordedif management’s estimate of the aggregate future cash flows (undiscounted andwithout interest charges) to be generated by the property is less than thecarrying value of the property.

 

*LegalProceedings:*  ThePartnership is subject to various legal proceedings and claims that arise, fromtime to time, in the ordinary course of business. These matters are frequentlycovered by insurance. If it is determined that a loss is likely to occur, theestimated amount of the loss is recorded in the financial statements. Both theamount of the loss and the point at which its occurrence is considered likelycan be difficult to determine.

 

**RESULTSOF OPERATIONS**

 

Comparisonof the three months ended September 30, 2010 to the three months ended September 30,2009

 

ThePartnership and its Subsidiary Partnerships incurred a loss of approximately$781,000 during the three months ended September 30, 2010, compared toincome of approximately $299,000 for the three months ended September 30,2009, a decrease in income of approximately $1,080,000.

 

Therental activity is summarized as follows:

 
| ** **         | ** ** | **Occupancy Date**        | ** ** |
|--------------------|------------|--------------------------------|------------|
| ** **         | ** ** | **October 26, 2010** | ** ** | **October 26, 2009** | ** ** |
| **Residential**    |       |                           |       |   |   |
| Units—        |       | 2,288                          |       | 2,288 |   |
| Vacancies          |       | 69                             |       | 111 |   |
| Vacancy  rate      |       | 3.0                            | %          | 4.9 | % |
| **Commercial**     |       |                           |       |   |   |
| Total  square feet |       | 114,395                        |       | 114,395 |   |
| Vacancy            |       | 0                              |       | 0 |   |
| Vacancy  rate      |       | 0                              | %          | 0 | % |

 
| ** **              | ** ** | **Rental Income (in thousands)  Three Months Ended September 30,** | ** ** |
|-------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|
| ** **              | ** ** | **2010**                                                                                              | ** ** | **2009** | ** ** |
| ** **              | ** ** | **Total  Operations**                                                                                 | ** ** | **Continuing  Operations** | ** ** | **Total  Operations** | ** ** | **Continuing  Operations** | ** ** |
| Total  rents            |       | $                                                                                                     | 8,120      |   | $ | 8,120 |   | $ | 8,090 |   | $ | 8,090 |   |
| Residential  percentage |       | 90                                                                                                    | %          | 90 | % | 90 | % | 90 | % |
| Commercial  percentage  |       | 10                                                                                                    | %          | 10 | % | 10 | % | 10 | % |
| Contingent  rentals     |       | $                                                                                                     | 175        |   | $ | 175 |   | $ | 136 |   | $ | 136 |   |

 

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ThreeMonths Ended September 30, 2010 Compared to Three Months Ended September 30,2009:

 
| ** **                                               | ** ** | **Three Months Ended September 30,** | ** ** | **Dollar** | ** ** | **Percent** | ** ** |
|----------------------------------------------------------|------------|----------------------------------------------------------|------------|------------|------------|-------------|------------|
| ** **                                               | ** ** | **2010**                                                 | ** ** | **2009**   | ** ** | **Change**  | ** ** | **Change** | ** ** |
| Revenues:                                                |       |                                                     |       |       |       |        |       |   |   |
| Rental  income                                           |       | $                                                        | 8,119,956  |       | $          | 8,089,673   |       | 30,283 |   | 0.4 | % |
| Laundry  and sundry income                               |       | 106,772                                                  |       | 119,893    |       | (13,121     | )          | (10.9 | )% |
|                                                     |       | 8,226,728                                                |       | 8,209,566  |       | 17,162      |       | 0.2 | % |
| Expenses                                                 |       |                                                     |       |       |       |        |       |   |   |
| Administrative                                           |       | 409,134                                                  |       | 416,398    |       | (7,264      | )          | (1.7 | )% |
| Depreciation  and amortization                           |       | 1,493,664                                                |       | 1,591,668  |       | (98,004     | )          | (6.2 | )% |
| Management  fees                                         |       | 342,010                                                  |       | 334,745    |       | 7,265       |       | 2.2 | % |
| Operating                                                |       | 795,912                                                  |       | 689,871    |       | 106,041     |       | 15.4 | % |
| Renting                                                  |       | 209,277                                                  |       | 262,234    |       | (52,957     | )          | (20.2 | )% |
| Repairs  and maintenance                                 |       | 1,504,045                                                |       | 1,435,264  |       | 68,781      |       | 4.8 | % |
| Taxes  and insurance                                     |       | 1,039,924                                                |       | 891,239    |       | 148,685     |       | 16.7 | % |
|                                                     |       | 5,793,966                                                |       | 5,621,419  |       | 172,547     |       | 3.1 | % |
| Income  Before Other Income and Discontinued Operations  |       | 2,432,762                                                |       | 2,588,147  |       | (155,385    | )          | (6.0 | )% |
| Other  Income (Loss)                                     |       |                                                     |       |       |       |        |       |   |   |
| Interest  expense                                        |       | (2,064,796                                               | )          | (1,978,591 | )          | 86,205      |       | 4.4 | % |
| Interest  income                                         |       | 1,898                                                    |       | 15,270     |       | (13,372     | )          | (87.6 | )% |
| (Loss)  from investment in unconsolidated joint ventures |       | (1,151,355                                               | )          | (325,614   | )          | 825,741     |       | 253.6 | % |
| Other  income (loss)                                     |       | —                                                   |       | 93         |       | (93         | )          | NA |   |
|                                                     |       | (3,214,253                                               | )          | (2,288,842 | )          | 925,411     |       | 40.4 | % |
| Net  (loss) income                                       |       | $                                                        | (781,491   | )          | $          | 299,305     |       | $ | (1,080,796 | ) | (361.1 | )% |
|                                                          |            |                                                          |            |            |            |             |            |  |  |  |  |  |

 

Rentalincome from continuing operations for the three months ended September 30,2010 was approximately $8,120,000, compared to approximately $8,090,000 for thethree months ended September 30, 2009, an increase of approximately$30,000 (0.4%).   Properties with themost significant increases in rental income in the third quarter of 2010compared to 2009 include; 62 Boylston Street, 1131 Commonwealth Avenue, RedwoodHills, Westgate Woburn, 1144 Commonwealth Avenue, 140 North Beacon Street, andCypress Street with increases of approximately $56,000, $42,000, $40,000,$38,000, $31,000, $30,000, and $18,000 respectively.  These rental income increases are offset bythe amortization of approximately $70,000 in connection with the free rentgranted to tenants.

 

Expensesfrom continuing operations for the three months ended September 30, 2010were approximately $5,794,000 compared to approximately $5,621,000 for thethree months ended September 30, 2009, an increase of approximately$172,000 (3.1%). The most significant factors contributing to this increase wasan increase in taxes and insurance of approximately $149,000 (16.7%) due to anincrease in real estate taxes as well as insurance premiums; an increase inoperating expenses of approximately $106,000 (15.4%) due to an increase in utilitycosts; an increase in repairs and maintenance expenses of approximately $69,000(4.8%) due to significant repairs at the properties in an effort to maintainoccupancy.  These increases are offset bya decrease in depreciation and amortization expense of approximately $98,000(6.2%) due to assets being fully depreciated; a decrease in renting expenses ofapproximately $53,000 (20.2%) due to a decrease in rental commissions.  Interest expense increased approximately $86,000(4.4%) due primarily to the $7,168,600 borrowed in October 2009.

 

AtSeptember 30, 2010, the Partnership has a 40 - 50% ownership interest innine Investment Properties. See Note 14 to the Consolidated FinancialStatements for a detail of the financial information of each Investment Property.

 

Asdescribed in Note 14 to the Consolidated Financial Statements, thePartnership’s share of the net loss from the Investment Properties wasapproximately $1,151,000 for the three months ended September 30, 2010compared to a loss of approximately $326,000 for the three months ended September 30,2009, an increase of approximately $826,000. Included in this loss is depreciation and amortization expense ofapproximately $1,280,000.  For the threemonths ended September 30, 2010, the loss associated with the 2009acquisition of Dexter Park is approximately $916,000, of which approximately$1,023,000 is depreciation and amortization. See the nine month discussion of Dexter Park for additional information.

 

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Interestincome for the three months ended September 30, 2010 was approximately$1,900 compared to approximately $15,000 for the three months ended September 30,2009, a decrease of approximately $13,000 (87.6%). This decrease is due to adecrease in the cash available for investment as well as a drop in interestrates.

 

Asa result of the changes discussed above, net loss for the three months ended September 30,2010 was approximately $781,000 compared to income of approximately $299,000for the three months ended September 30, 2009, a change of approximately$1,080,000.

 

**Comparison of the nine monthsended September 30, 2010 compared to nine months ended September 30,2009**

 

ThePartnership and its subsidiary Partnerships earned income before other incomeand discontinued operations of approximately $7,928,000 for the nine monthsended September 30, 2010, compared to approximately $8,319,000 for thenine months ended September 30, 2009, a decrease of approximately$391,000(4.7%).  The following is asummary of the Partnership’s operations for the nine months ended September 30,2010 and 2009.

 
| ** **                                               | ** ** | **Nine Months Ended September 30,** | ** ** | **Dollar ** | ** ** | **Percent ** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                                               | ** ** | **2010**                                                | ** ** | **2009**         | ** ** | **Change**        | ** ** | **Change** | ** ** |
| Revenues:                                                |       |                                                    |       |             |       |              |       |   |   |
| Rental  income                                           |       | $                                                       | 24,432,776 |             | $          | 24,634,345        |       | $ | (201,569 | ) | (0.8 | )% |
| Laundry  and sundry income                               |       | 342,698                                                 |       | 312,263          |       | 30,435            |       | 9.7 | % |
|                                                     |       | 24,775,474                                              |       | 24,946,608       |       | (171,134          | )          | (0.7 | )% |
| Expenses                                                 |       |                                                    |       |             |       |              |       |   |   |
| Administrative                                           |       | 1,331,734                                               |       | 1,277,745        |       | 53,989            |       | 4.2 | % |
| Depreciation  and amortization                           |       | 4,290,983                                               |       | 4,513,165        |       | (222,182          | )          | (4.9 | )% |
| Management  fees                                         |       | 1,022,230                                               |       | 1,011,531        |       | 10,699            |       | 1.1 | % |
| Operating                                                |       | 2,902,157                                               |       | 3,064,201        |       | (162,044          | )          | (5.3 | )% |
| Renting                                                  |       | 384,273                                                 |       | 406,363          |       | (22,090           | )          | 5.4 | % |
| Repairs  and maintenance                                 |       | 3,756,649                                               |       | 3,580,895        |       | 175,754           |       | 4.9 | % |
| Taxes  and insurance                                     |       | 3,159,361                                               |       | 2,773,745        |       | 385,616           |       | 13.9 | % |
|                                                     |       | 16,847,387                                              |       | 16,627,645       |       | 219,742           |       | 1.3 | % |
| Income  Before Other Income                              |       | 7,928,087                                               |       | 8,318,963        |       | (390,876          | )          | (4.7 | )% |
| Other  Income (Expense)                                  |       |                                                    |       |             |       |              |       |   |   |
| Interest  expense                                        |       | (6,141,468                                              | )          | (5,885,831       | )          | 255,637           |       | 4.3 | % |
| Interest  income                                         |       | 4,411                                                   |       | 47,861           |       | (43,450           | )          | (90.7 | )% |
| Gain  on sale of equipment                               |       | —                                                  |       | (2,726           | )          | 2,726             |       | NA |   |
| (Loss)  from investment in unconsolidated joint ventures |       | (3,169,926                                              | )          | (880,902         | )          | (2,289,024        | )          | 259.8 | % |
|                                                     |       | (9,306,983                                              | )          | (6,721,598       | )          | (2,585,385        | )          | 38.5 | % |
| Net  (loss) income                                       |       | $                                                       | (1,378,896 | )                | $          | 1,597,365         |       | $ | (2,976,261 | ) | (186.3 | )% |

 

Rentalincome from continuing operations for the nine months ended September 30,2010 was approximately $24,433,000 compared to approximately $24,634,000 forthe nine months ended September 30, 2009, a decrease of approximately$202,000 (0.8%). This decrease in rental income is due to the amortization ofapproximately $306,000 in connection with the free rent granted to tenants.  The following properties experienced rentalincome increases:  62 Boylston Street,Westgate Apartments, Redwood Hills, Westside Colonial and 1144 CommonwealthAvenue with increases of approximately $69,000, $66,000, $58,000, $45,000, and$39,000 respectively.

 

Expensesfrom continuing operations for the nine months ended September 30, 2010were approximately $16,847,000 compared to approximately $16,628,000 for thenine months ended September 30, 2009, an increase of approximately$219,000 (1.3%). The most significant factor contributing to this increase isan increase in taxes and insurance of approximately $386,000 (13.9%); anincrease in administrative expenses of approximately $54,000(4.2%); and anincrease in repairs and maintenance expenses of approximately$176,000(4.9%).  These increases areoffset by a decrease in depreciation and amortization expenses of approximately$222,000 (4.9%), a decrease in operating expenses of approximately$162,000(5.3%) and a decrease in renting expenses of approximately $22,000(5.4%).  The reasons for these changesare discussed in the section for the results for the three months ended September 30,2010.

 

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Interestexpense increased approximately $256,000 (4.3%) due to a higher level of debtoffset by lower interest rates as well as the $7,168,000 note borrowed for theDexter Park acquisition in October 2009.

 

AtSeptember 30, 2010, the Partnership has between a 40 - 50% ownershipinterest in nine Investment Properties. See a description of these propertiesincluded in Note 14 to the Consolidated Financial Statements for a detailof the financial information of each Investment Property.

 

Asdescribed in Note 14 to the Consolidated Financial Statements, thePartnership’s share of loss from these Investment Properties was approximately$3,170,000 for the nine months ended September 30, 2010 compared to a lossof approximately $881,000 for the nine months ended September 30, 2009, anincrease of approximately $2,289,000. Included in the net loss for the nine months ended September 30,2010 is depreciation and amortization of approximately $4,149,000.

 

Asdiscussed in Note 14 to the Consolidated Financial Statements, the Partnershipacquired Dexter Park in October 2009. A majority of the apartments were leased at the time of theacquisition.  As a result, thePartnership is amortizing the intangible assets associated with the “in place”leases over a 12 month period which began in November 2009.    The total monthly amortization isapproximately $407,000 which at 40% reduces the Partnership’s income byapproximately $163,000 per month. For the nine months ended September 30,2010 the total amortization in connection with these leases is approximately$3,663,000, of which the Partnership’s share is approximately $1,465,000.   In November 2010, the intangible assetswill be fully amortized which will result in lower amortization expense. Forthe nine months ended September 30, 2010, the Partnership’s share of losson Dexter Park is approximately $2,476,000.

 

Interestincome for the nine months ended September 30, 2010 was approximately$4,400 compared to approximately $48,000 for the nine months ended September 30,2009, a decrease of approximately $43,600 (90.7%). This decrease is due to adrop in interest rates.

 

Asa result of the changes discussed above, net loss for the nine months ended September 30,2010 was $1,378,896 compared to income of $1,597,365 for nine months ended September 30,2009, a decrease in income of $2,976,261(186.3%).

 

**LIQUIDITYAND CAPITAL RESOURCES**

 

ThePartnership’s principal source of cash during 2010 and 2009 was the collectionof rents and refinancing of partnership properties. The majority of cash andcash equivalents of $4,814,195 at September 30, 2010 and $2,879,663 atDecember 31, 2009 was held in interest bearing accounts at creditworthyfinancial institutions.

 

Thisincrease of $1,934,532 at September 30, 2010 is summarized as follows:

 
| ** **                                                                 | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2010**                                                | ** ** | **2009** | ** ** |
| Cash  provided by operating activities                                     |       | $                                                       | 5,841,425  |   | $ | 6,926,084 |   |
| Cash  (used in) investing activities                                       |       | (853,380                                                | )          | (4,710,631 | ) |
| Cash  (used in) provided by financing activities                           |       | 254,607                                                 |       | (631,215 | ) |
| Repurchase  of Depositary Receipts, Class B and General Partner Units |       | (540,911                                                | )          | (1,514,340 | ) |
| Distributions  paid                                                        |       | (2,767,209                                              | )          | (2,787,414 | ) |
| Net  increase (decrease) in cash and cash equivalents                      |       | $                                                       | 1,934,532  |   | $ | (2,717,516 | ) |

 

Thecash provided by operating activities is primarily due to the collection ofrents less cash operating expenses. The decrease in cash used in investingactivities is due to a deposit on a future acquisition in 2009 as well as adecrease in 2010 in improvements to the Partnerships rental properties. Theincrease in cash provided by financing activities is due to the refinancing ofa Partnership property in 2010, resulting in an increase in cash, as well as adecrease in the amount of the stock buyback in 2010.

 

Duringthe nine months ended September 30, 2010, the Partnership and itsSubsidiary Partnerships completed improvements to certain of the properties ata total cost of approximately $1,563,000. These improvements were funded fromcash reserves and, to some extent, escrow accounts established in connectionwith the financing or refinancing of the applicable properties. These sourceshave been adequate to fully fund improvements. The most significantimprovements were made at Westgate Woburn, 62 Boylston Street, Hamilton Oaks,Westside Colonial and 1144 Commonwealth Avenue, at a cost of

 

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approximately $220,000,$195,000, $150,000, $143,000 and $100,000 respectively. The Partnership plansto invest approximately $604,000 in additional capital improvements in 2010.

 

In2010, the Partnership approved quarterly distributions of $7.00 per unit ($0.70per receipt) payable on March 31, June 30, September 30, and December 31,2010.

 

In2009, the Partnership paid quarterly distributions of $7.00 per unit ($0.70 perreceipt) in March, June, September, and December for a total distributionof $28.00 per unit ($2.80 per receipt).

 

Duringthe nine months ended September 30, 2010 the Partnership repurchased 6,896depositary receipts for $432,920, 164 Class B Units for $102,591 and 9General Partnership Units for $5,400. The Partnership did not repurchase anydepositary receipts or Units during the three months ended September 30,2010.

 

On August 17, 2010, HBCHoldings, LLC, an entity owned by Harold Brown and his affiliates (“HBC”), gavesix months written notice to the Partnership requesting a principal pay down of$2,500,000 on the outstanding loan to the Partnership which had a balance of$5,868,600 on November 12, 2010.  OnOctober 12, 2010, the Partnership paid HBC $1,300,000 and anticipatespaying the balance of the payment demanded of $1,200,000 prior to December 31,2010.  The balance of the loan,$4,668,600, will remain subject to the original terms of the Note, includingHBC’s right to demand payment of the balance of the loan in whole or in partupon six months notice.

 

InDecember 2009, the Partnership refinanced Linhart, LLP, located in Newton,Massachusetts.  The new loan is$2,000,000, with a rate of 3.75% over the Libor rate or 4.25% whichever isgreater and matures five years from the date of closing.  The interest rate as of September 30,2010 was 4.25%.  The loan agreement callsfor interest only payments for twenty four months and principal and interestpayments for the remainder of the five year period based on a thirty yearamortization.  The loan proceeds wereused to pay off the prior loan of approximately $1,700,000, and closing costsof approximately $38,000.

 

OnMarch 25, 2010, the Partnership refinanced the NERA Brookside Associates,LLC.  The new loan is $2,820,000, maturesin 2020 and has an interest rate of 5.81%. The loan is a ten year note however it is being amortized over 30 years.The proceeds of the loan were used to pay off the old mortgage of approximately$1,900,000.  There were no prepaymentpenalties.

 

ThePartnership anticipates that cash from operations and interest bearing accountswill be sufficient to fund its current operations and to finance currentimprovements to its properties. The Partnership’s net income and cash flow mayfluctuate 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 significanttenants.

 

**Off-BalanceSheet Arrangements-Joint Venture Indebtedness**

 

Asof September 30, 2010, the Partnership had between a 40 - 50% ownershipinterest in nine joint ventures, all of which have mortgage indebtedness. We donot have control of these partnerships and therefore we account for them usingthe equity method.  At September 30,2010, our proportionate share of the non-recourse debt related to theseinvestments was equal to approximately $61,515,000.  See Note 14 to the ConsolidatedFinancial Statements.

 

**ContractualObligations**

 

SeeNotes 5 and 14 to the Consolidated Financial Statements for a description ofmortgage notes payable. The Partnerships have no other material contractualobligations to be disclosed.

 

**FactorsThat May Affect Future Results**

 

Certaininformation contained herein includes forward-looking statements, which aremade pursuant to the safe harbor provisions of the Private SecuritiesLiquidation Reform Act of 1995 (the “Act”). While forward looking statementsreflect management’s good faith beliefs when those statements are made, cautionshould be exercised in interpreting and relying on such forward lookingstatements, the realization of which may be impacted by known and unknown risksand uncertainties, events that may occur subsequent to the forward-lookingstatements, and other factors which may be beyond the Partnership’s control andwhich can materially affect the Partnership’s actual results, performance orachievements for 2010 and beyond. Should one or more of the risks oruncertainties mentioned below materialize, or should underlying assumptionsprove

 

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incorrect, actual resultsmay vary materially from those anticipated, estimated or projected. Weexpressly 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 lookingstatements, which are based on results and trends at the time they are made, toanticipate future results or trends.

 

Alongwith risks detailed from time to time in the Partnership’s filings with theSecurities and Exchange Commission, some factors that could cause thePartnership’s actual results, performance or achievements to differ materiallyfrom those expressed or implied by forward-looking statements include but arenot limited to the following:

 

ThePartnership depends on the real estate markets where its properties arelocated, primarily in Eastern Massachusetts and these markets may be adverselyaffected by local economic market conditions, which are beyond the Partnership’scontrol.

 

ThePartnership is subject to the general economic risks affecting the real estateindustry, such as dependence on tenant’s financial condition and the need toenter into new leases or renew leases on terms favorable to tenants in order togenerate rental revenues and our ability to collect rents from our tenants.

 

ThePartnership is also impacted by changing economic conditions making alternativehousing arrangements more or less attractive to the Partnership’s tenants, suchas the interest rates on single family home mortgages and the availability andpurchase price of single-family homes in the Greater Boston metropolitan area.

 

ThePartnership is subject to significant expenditures associated with eachinvestment, such as debt service payments, real estate taxes, insurance andmaintenance costs, which are generally not reduced when circumstances cause areduction in revenues from a property.

 

ThePartnership is subject to increases in heating and utility costs that may ariseas a result of economic and market conditions and fluctuations in seasonalweather conditions.

 

Civildisturbances, earthquakes and other natural disasters may result in uninsuredor underinsured losses.

 

Actualor threatened terrorist attacks may adversely affect our ability to generaterevenues and the value of our properties.

 

Financingor refinancing of Partnership properties may not be available to the extentnecessary or desirable, or may not be available on favorable terms.

 

ThePartnership properties face competition from similar properties in the samemarket. This competition may affect the Partnership’s ability to attract andretain tenants and may reduce the rents that can be charged.

 

Giventhe nature of the real estate business, the Partnership is subject to potentialenvironmental liabilities. These include environmental contamination in thesoil at the Partnership’s or neighboring real estate, whether caused by thePartnership, previous owners of the subject property or neighbors of thesubject property, and the presence of hazardous materials in the Partnership’sbuildings, such as asbestos, mold and radon gas. Management is not aware of anymaterial environmental liabilities at this time.

 

Insurancecoverage for and relating to commercial properties is increasingly costly anddifficult to obtain. In addition, insurance carriers have excluded certainspecific items from standard insurance policies, which have resulted inincreased risk exposure for the Partnership. These include insurance coveragefor acts of terrorism and war, and coverage for mold and other environmentalconditions. Coverage for these items is either unavailable, or prohibitivelyexpensive.

 

Marketinterest rates could adversely affect the market prices for Class APartnership Units and Depositary Receipts as well as performance and cash flow.

 

Changesin income tax laws and regulations may affect the income taxable to owners ofthe Partnership. These changes may affect the after-tax value of futuredistributions.

 

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ThePartnership may fail to identify, acquire, construct, or develop additionalproperties; may develop or acquire properties that do not produce a desired orexpected yield on invested capital; may be unable to sell poorly- performing orotherwise undesirable properties quickly; or may fail to effectively integrate acquisitionsof properties or portfolios of properties.

 

Risksassociated with the use of debt to fund acquisitions and developments.

 

Competitionfor acquisitions may result in increased prices for properties.

 

Anyweakness identified in the Partnership’s internal controls as part of theevaluation being undertaken by the Partnership and its independent publicaccountants pursuant to Section 404 of the Sarbanes-Oxley Act of 2002could have an adverse effect on the Partnership’s business.

 

Ongoingcompliance with Sarbanes-Oxley Act of 2002 may require additional personnel orsystem changes.

 

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

 

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

 

Sincethe Partnership’s long-term goals include the acquisition of additionalproperties, a portion of the proceeds from the refinancing and sale ofproperties is reserved for this purpose. The Partnership will considerrefinancing existing properties if the Partnership’s cash reserves areinsufficient to repay existing mortgages or if the Partnership needs additionalfunds for future acquisitions.

 

**ITEM 3.  QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Asof September 30, 2010, the Partnership, its Subsidiary Partnerships andthe Investment Properties collectively have approximately $286,000,000 inlong-term debt, substantially all of which pays interest at fixed rates.Accordingly, the fair value of these debt instruments is affected by changes inmarket interest rates. These mortgages mature through 2023. For informationregarding the fair value and maturity dates of these debt obligations, seeItem 2 and Notes 5, 12 and 14 to the Consolidated FinancialStatements.

 

Foradditional disclosure about market risk, see “Part I. Item 2. Management’sDiscussion and Analysis of Financial Condition and Results ofOperations—Factors That May Affect Future Results”.

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

*Disclosure Controls andProcedures*.  The Company’s management, with theparticipation of the president and chief financial officer of its generalpartner, has evaluated the effectiveness of the Company’s disclosure controlsand procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) underthe Exchange Act) as of the end of the period covered by this report.  Basedon such evaluation, the president and chief executive officer and chieffinancial officer of the Company’s general partner have concluded that, as ofthe end of such period, the Company’s disclosure controls and procedures areeffective in recording, processing, summarizing and reporting, on a timelybasis, information required to be disclosed by the Company in the reports thatit files or submits under the Exchange Act.

 

*Internal Control Over FinancialReporting*.  There have not been any changes in theCompany’s internal control over financial reporting (as such term is defined inRules 13a-15(f) and 15d-15(f) under the Exchange Act) during thefiscal quarter to which this report relates that have materially affected, orare reasonably likely to materially affect, the Company’s internal control overfinancial reporting.

 

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**PART II—OTHER INFORMATION**

 

**Item 1.  Legal Proceedings**

 

ThePartnership, the Subsidiary Partnerships and their properties are not presentlysubject to any material litigation, and, to management’s knowledge, there isnot any material litigation presently threatened against them.  The Partnership and Subsidiary Partnershipsare occasionally subject to ordinary routine legal and administrativeproceedings incident to the ownership of residential and commercial realestate.  Some of the legal and otherexpenses related to these proceedings are covered by insurance and none ofthese costs and expenses are expected to have a material adverse effect on theConsolidated Financial Statements of the Partnership.

 

**Item 1A.  Risk Factors**

 

Therewere no material changes to the Risk Factors disclosed in our annual report onForm 10-K for the year ended December 31, 2009.

 

**Item 2.  Unregistered Saleof Equity Securities and Use of Proceeds**

 

(a)           None

 

(b)           None.

 

(c)           None

 

**Item 3.  Defaults UponSenior Securities**

 

None.

 

**Item 4.  (Removed andReserved)**

 

**Item 5.  Other Information**

 

None.

 

**Item 6.  Exhibits**

 

(a)           See the exhibitindex 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) and 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**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|   | NEW ENGLAND REALTY  ASSOCIATES LIMITED  PARTNERSHIP |
|--------|-----------------------------------------------------|
|   | By:                                                 | /s/  NEWREAL, INC. |
|   |                                                | Its  General Partner |
|   | By:                                                 | /s/  RONALD BROWN |
|   |                                                | Ronald  Brown, President |

 

Dated: November 12,2010

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.

 
| **Signature**     | ** ** | **Title**                                                       | ** ** | **Date**           |
|-------------------|------------|-----------------------------------------------------------------|------------|--------------------|
| /s/  RONALD BROWN | ** ** | President and Director of  the General Partner                  | ** ** | November  12, 2010 |
| Ronald  Brown     | ** ** | (Principal Executive  Officer)                                  | ** ** |               |
| /s/  HAROLD BROWN | ** ** | Treasure and Director to  the General Partner                   | ** ** | November  12, 2010 |
| Harold  Brown     | ** ** | (Principal Financial  Officer and Principal Accounting Officer) | ** ** | ** **         |

 

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