** **

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON, D.C. 20549**

 

----

 

**Form 10-Q**

 
| **(Mark One)**                                    | ** ** | ** **                                                                                               |
|---------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|
| **x**                                             | ** ** | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934**  |
| **For the  quarterly period ended June 30, 2007** |
| **OR**                                            |
| **o**                                             | ** ** | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |

 

**For the transition periodfrom              to             Commission file number 0-12138**

 

----

 

**New England Realty AssociatesLimited Partnership**

(Exact name of registrantas specified in its charter)

 

| **Massachusetts**                                                                        | ** ** | **04-2619298**                        |
|------------------------------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization)                         |       | (I.R.S. employer  identification no.) |
|                                                                                     |       |                                  |
| **39  Brighton Avenue,  Allston, Massachusetts**(Address of principal executive offices) |       | **02134**  (Zip code)                 |

 

Registrant’s telephonenumber, including area code: **(617) 783-0039**

 

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

 

| **Depositary Receipts** |   | **American  Stock Exchange**                 |
|-------------------------|--------|----------------------------------------------|
| (Title of each  Class)  |   | (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)

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes o  No x

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non- accelerated filer. See definition of “acceleratedfiler” and “large accelerated filer” in Rule 12b-2 of the ExchangeAct. (Check one):

 
| Large  accelerated filer  o | Accelerated filer  x | Non-accelerated filer  o |
|---------------------------------------|--------------------------------|------------------------------------|

 

 

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

**DocumentsIncorporated By Reference**

None

 

As of June 30, 2007, 1,324,616 depository receipts and5,916 units of the registrant are outstanding.

 

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**INDEX**
| **PART I — FINANCIAL INFORMATION** |
|-----------------------------------------|
|                                    |   |   |
| Item 1.                                 |   | Financial  Statements |
|                                    |   |   |
|                                    |   | Consolidated Balance  Sheets as of June 30, 2007 (unaudited) and December 31, 2006 (audited) |
|                                    |   |   |
|                                    |   | Consolidated  Statements of Income for the Three Months Ended June 30, 2007 and June 30,  2006, and the Six Months Ended June 30, 2007 and June 30, 2006 (all  unaudited) |
|                                    |   |   |
|                                    |   | Consolidated  Statement of Changes in Partners’ Capital for the Six Months Ended June 30,  2007 and June 30, 2006 (all unaudited) |
|                                    |   |   |
|                                    |   | Consolidated  Statements of Cash Flows for the Six Months Ended June 30, 2007 and June 30,  2006 (all unaudited) |
|                                    |   |   |
|                                    |   | Notes to  Financial Statements |
|                                    |   |   |
| Item 2.                                 |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |
|                                    |   |   |
| Item 3.                                 |   | Quantitative  and Qualitative Disclosures About Market Risk |
|                                    |   |   |
| Item 4.                                 |   | Controls and  Procedures |
|                                    |   |   |
| **PART II — OTHER  INFORMATION**   |
| ** **                              |
| Item 1.                                 |   | Legal Proceedings |
|                                    |   |   |
| Item  1A.                               |   | Risk  Factors |
|                                    |   |   |
| Item 2.                                 |   | Unregistered sales of equity securities and use of  proceeds |
|                                    |   |   |
| Item 3.                                 |   | Defaults Upon  Senior Securities |
|                                    |   |   |
| Item 4.                                 |   | Submission of  Matters to a Vote of Security Holders |
|                                    |   |   |
| Item 5.                                 |   | Other Information |
|                                    |   |   |
| Item  6.                                |   | Exhibits |
|                                    |   |   |
| **SIGNATURES**                          |   |   |
| ** **                              |   |   |
| **Exhibit  Index**                      |   |   |

 

3

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**NEW ENGLANDREALTY ASSOCIATES, L.P.**

**PART 1 —FINANCIAL INFORMATION**

Item 1.  FinancialStatements

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

The aforementioned financial statements should be read inconjunction with the notes to the aforementioned financial statements andManagement’s Discussion and Analysis of Financial Condition and Results ofOperations and the financial statements and notes thereto included in NewEngland Realty Associates L.P.’s Annual Report on Form 10-K for the fiscal yearended December 31, 2006.

The results of operations for the six month period ended June30, 2007 are not necessarily indicative of the results to be expected for theentire fiscal year or any other period.

**NEW ENGLAND REALTYASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES**

** **

**CONSOLIDATEDBALANCE SHEETS**
| ** **                                        | ** ** | **June 30,  2007** | ** **  | **December 31,  2006** | ** ** |
|---------------------------------------------------|------------|-------------------------|-------------|-----------------------------|------------|
| ** **                                        | ** ** | **(Unaudited)**         | ** **  | **(Audited)**               | ** ** |
| **ASSETS**                                        |       |                    |        |                        |       |
| Rental Properties                                 |       | $                       | 96,204,491  |                        | $          | 98,283,838 |   |
| Cash and Cash  Equivalents                        |       | 10,049,724              |        | 9,773,250                   |       |
| Rents Receivable                                  |       | 613,287                 |        | 580,638                     |       |
| Insurance Recovery  Receivable                    |       | 300,000                 |        | —                      |       |
| Real Estate Tax Escrows                           |       | 854,703                 |        | 826,301                     |       |
| Prepaid Expenses and  Other Assets                |       | 2,380,046               |        | 2,341,653                   |       |
| Investment in Joint  Ventures                     |       | 17,329,256              |        | 18,193,178                  |       |
| Financing and Leasing  Fees                       |       | 433,666                 |        | 484,452                     |       |
| **Total  Assets**                                 |       | $                       | 128,165,173 |                        | $          | 130,483,310 |   |
| ** **                                        |       |                    |        |                        |       |
| **LIABILITIES AND PARTNERS’  CAPITAL**       |       |                    |        |                        |       |
| ** **                                        |       |                    |        |                        |       |
| Mortgage Notes Payable                            |       | $                       | 114,122,768 |                        | $          | 114,659,052 |   |
| Accounts Payable and  Accrued Expenses            |       | 1,311,804               |        | 1,289,643                   |       |
| Advance Rental Payments  and Security Deposits    |       | 2,982,237               |        | 2,892,612                   |       |
| **Total Liabilities**                             |       | 118,416,809             |        | 118,841,307                 |       |
| ** **                                        |       |                    |        |                        |       |
| Commitments and  Contingent Liabilities (Note 9)  |       |                    |        |                        |       |
|                                              |       |                    |        |                        |       |
| Partners’ Capital                            |       |                    |        |                        |       |
|                                              |       |                    |        |                        |       |
| 173,252 units  outstanding in 2007 and 2006       |       | 9,748,364               |        | 11,642,003                  |       |
| **Total Liabilities and Partners’  Capital** |       | $                       | 128,165,173 |                        | $          | 130,483,310 |   |

 

See notes toconsolidated financial statements.

4

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**NEW ENGLANDREALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF INCOME**
| ** **                                              | ** ** | **Three Months Ended  June 30,  (Unaudited)** | ** ** | **Six Months Ended  June 30,  (Unaudited)** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------------------------------|------------|------------------------------------------------------------|------------|
| ** **                                              | ** ** | **2007**                                                     | ** ** | **2006**                                                   | ** ** | **2007** | ** ** | **2006** | ** ** |
| Revenues                                                |       |                                                         |       |                                                       |       |   |   |   |   |
| Rental income                                           |       | $                                                            | 7,928,785  |                                                       | $          | 7,847,066 |   | $ | 15,963,374 |   | $ | 15,814,658 |   |
| Laundry and sundry income                               |       | 98,378                                                       |       | 107,470                                                    |       | 206,223 |   | 231,501 |   |
|                                                    |       | 8,027,163                                                    |       | 7,954,536                                                  |       | 16,169,597 |   | 16,046,159 |   |
| Expenses                                                |       |                                                         |       |                                                       |       |   |   |   |   |
| Administrative                                          |       | 387,785                                                      |       | 323,642                                                    |       | 784,045 |   | 675,294 |   |
| Depreciation and amortization                           |       | 1,756,433                                                    |       | 1,708,891                                                  |       | 3,467,889 |   | 3,357,934 |   |
| Interest                                                |       | 1,920,547                                                    |       | 1,930,677                                                  |       | 3,824,813 |   | 3,846,801 |   |
| Management fees                                         |       | 323,342                                                      |       | 325,368                                                    |       | 647,394 |   | 647,028 |   |
| Operating                                               |       | 809,902                                                      |       | 864,906                                                    |       | 2,228,196 |   | 2,156,540 |   |
| Renting                                                 |       | 103,003                                                      |       | 138,240                                                    |       | 174,510 |   | 194,106 |   |
| Repairs and maintenance                                 |       | 1,286,033                                                    |       | 1,432,409                                                  |       | 2,366,778 |   | 2,463,137 |   |
| Taxes and insurance                                     |       | 860,725                                                      |       | 883,001                                                    |       | 1,776,034 |   | 1,754,330 |   |
|                                                    |       | 7,447,770                                                    |       | 7,607,134                                                  |       | 15,269,659 |   | 15,095,170 |   |
| Income Before  Other Income and Discontinued Operations |       | 579,393                                                      |       | 347,402                                                    |       | 899,938 |   | 950,989 |   |
|                                                    |       |                                                         |       |                                                       |       |   |   |   |   |
| Other Income (Loss)                                     |       |                                                         |       |                                                       |       |   |   |   |   |
| Interest income                                         |       | 96,827                                                       |       | 109,299                                                    |       | 196,953 |   | 202,777 |   |
| Casualty (loss)                                         |       | —                                                       |       | —                                                     |       | (60,000 | ) | — |   |
| Income (loss) from investment in joint ventures         |       | 11,303                                                       |       | 127,109                                                    |       | (408,922 | ) | (118,071 | ) |
|                                                    |       | 108,130                                                      |       | 236,408                                                    |       | (271,969 | ) | 84,706 |   |
| Income From  Continuing Operations                      |       | 687,523                                                      |       | 583,810                                                    |       | 627,969 |   | 1,035,695 |   |
|                                                    |       |                                                         |       |                                                       |       |   |   |   |   |
| Discontinued  Operations                                |       |                                                         |       |                                                       |       |   |   |   |   |
| (Loss) from discontinued operations                     |       | (100,000                                                     | )          | —                                                     |       | (100,000 | ) | (10,125 | ) |
|                                                    |       | (100,000                                                     | )          | —                                                     |       | (100,000 | ) | (10,125 | ) |
| Net Income                                              |       | $                                                            | 587,523    |                                                       | $          | 583,810 |   | $ | 527,969 |   | $ | 1,025,570 |   |
|                                                    |       |                                                         |       |                                                       |       |   |   |   |   |
| Income per Unit                                         |       |                                                         |       |                                                       |       |   |   |   |   |
| Income before discontinued operations                   |       | $                                                            | 3.96       |                                                       | $          | 3.37 |   | $ | 3.62 |   | $ | 5.98 |   |
| (Loss) from discontinued operations                     |       | (0.57                                                        | )          | —                                                     |       | (0.57 | ) | (.06 | ) |
| Net Income per  Unit                                    |       | $                                                            | 3.39       |                                                       | $          | 3.37 |   | $ | 3.05 |   | $ | 5.92 |   |
| Weighted Average Number  of Units Outstanding           |       | 173,252                                                      |       | 173,252                                                    |       | 173,252 |   | 173,252 |   |

 

See notes toconsolidated financial statements.

5

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**NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIPAND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CHANGES IN PARTNERS’ CAPITAL**

**(UNAUDITED)**
| ** **                     | ** ** | **Units**        | ** ** | **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,  2006 |       | 144,180          |       | 34,243                          |       | 1,802 |   | 180,225 |   | 6,973 |   | 173,252 |   | $ | 12,062,684 |   | $ | 2,868,340 |   | $ | 150,995 |   | $ | 15,082,019 |   |
| Distribution to  Partners      |       | 3⁄4           |       | 3⁄4                          |       | 3⁄4 |   | 3⁄4 |   | 3⁄4 |   | 3⁄4 |   | (1,937,286 | ) | (460,106 | ) | (24,216 | ) | (2,421,608 | ) |
| Net Income                     |       | 3⁄4           |       | 3⁄4                          |       | 3⁄4 |   | 3⁄4 |   | 3⁄4 |   | 3⁄4 |   | 820,456 |   | 194,858 |   | 10,256 |   | 1,025,570 |   |
| Balance, June 30,  2006   |       | 144,180          |       | 34,243                          |       | 1,802 |   | 180,225 |   | 6,973 |   | 173,252 |   | $ | 10,945,854 |   | $ | 2,603,092 |   | $ | 137,035 |   | $ | 13,685,981 |   |
|                           |       |             |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 1,  2007 |       | 144,180          |       | 34,243                          |       | 1,802 |   | 180,225 |   | 6,973 |   | 173,252 |   | $ | 9,310,672 |   | $ | 2,214,737 |   | $ | 116,594 |   | $ | 11,642,003 |   |
| Distribution to  Partners      |       | 3⁄4           |       | 3⁄4                          |       | 3⁄4 |   | 3⁄4 |   | 3⁄4 |   | 3⁄4 |   | (1,937,286 | ) | (460,106 | ) | (24,216 | ) | (2,421,608 | ) |
| Net Income                     |       | 3⁄4           |       | 3⁄4                          |       | 3⁄4 |   | 3⁄4 |   | 3⁄4 |   | 3⁄4 |   | 422,375 |   | 100,314 |   | 5,280 |   | 527,969 |   |
| Balance, June 30,  2007   |       | 144,180          |       | 34,243                          |       | 1,802 |   | 180,225 |   | 6,973 |   | 173,252 |   | $ | 7,795,761 |   | $ | 1,854,945 |   | $ | 97,658 |   | $ | 9,748,364 |   |

 

See notes to consolidated financial statements.

6

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**NEWENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**
| ** **                                                                        | ** ** | **Six Months Ended  June 30,  (Unaudited)** | ** ** |
|-----------------------------------------------------------------------------------|------------|------------------------------------------------------------|------------|
| ** **                                                                        | ** ** | **2007**                                                   | ** ** | **2006** | ** ** |
| Cash Flows from  Operating Activities                                             |       |                                                       |       |   |   |
| Net income                                                                        |       | $                                                          | 527,969    |   | $ | 1,025,570 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities |       |                                                       |       |   |   |
| Depreciation and amortization                                                     |       | 3,467,889                                                  |       | 3,357,934 |   |
| Loss from investment in joint ventures                                            |       | 408,922                                                    |       | 118,071 |   |
| Changes in  operating assets and liabilities                                      |       |                                                       |       |   |   |
| (Increase) in rents receivable                                                    |       | (32,649                                                    | )          | (122,075 | ) |
| (Increase) in insurance recovery receivable                                       |       | (300,000                                                   | )          | — |   |
| (Increase) in financing and leasing fees                                          |       | (11,430                                                    | )          | — |   |
| Increase in accounts payable and accrued expense                                  |       | 22,161                                                     |       | (125,863 | ) |
| (Increase) in real estate tax escrow                                              |       | (28,403                                                    | )          | (50,690 | ) |
| (Increase) Decrease in prepaid expenses and other  assets                         |       | (38,393                                                    | )          | (187,557 | ) |
| Increase in advance rental payments and security  deposits                        |       | 89,626                                                     |       | 95,166 |   |
| Total Adjustments                                                                 |       | 3,577,723                                                  |       | 3,084,986 |   |
| Net cash provided by operating activities                                         |       | 4,105,692                                                  |       | 4,110,556 |   |
| Cash Flows Used  in Investing Activities                                          |       |                                                       |       |   |   |
| (Investment in) joint ventures                                                    |       | (45,000                                                    | )          | (450,000 | ) |
| Proceeds from joint ventures                                                      |       | 500,000                                                    |       | — |   |
| Purchase and improvement of rental properties                                     |       | (1,326,324                                                 | )          | (1,137,260 | ) |
| Net cash (used in) investing activities                                           |       | (871,324                                                   | )          | (1,587,260 | ) |
| Cash Flows Used  in Financing Activities                                          |       |                                                       |       |   |   |
| Principal payments of mortgage notes payable                                      |       | (536,286                                                   | )          | (426,647 | ) |
| Distributions to partners                                                         |       | (2,421,608                                                 | )          | (2,421,608 | ) |
| Net cash (used in) financing activities                                           |       | (2,957,894                                                 | )          | (2,848,255 | ) |
| Net Increase  (Decrease in) Cash and Cash Equivalents                             |       | 276,474                                                    |       | (324,959 | ) |
| Cash and Cash  Equivalents, at beginning of period                                |       | 9,773,250                                                  |       | 12,049,392 |   |
| Cash and Cash  Equivalents, at end of period                                      |       | $                                                          | 10,049,724 |   | $ | 11,724,433 |   |

 

See notes to consolidated financial statements

7

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**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

 

**JUNE 30, 2007**

 

** NOTE 1. SIGNIFICANT ACCOUNTING POLICIES**

*Lineof Business:*   NewEngland Realty 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. Inconnection with the mortgages referred to in Note 5, a substantial numberof NERA’s properties are owned by separate subsidiaries without any change inthe historical cost basis.

*Principlesof Consolidation:*   The consolidated financialstatements include the accounts of NERA and its subsidiaries. NERA has a 99.67%to 100% ownership interest in each subsidiary except for eight limitedliability companies (the “Investment Properties” or “Joint Ventures”) in whichthe Partnership has a 50% ownership interest. The consolidated group isreferred to as the “Partnerships.” Minority interests are not recorded, sincethey are insignificant. All significant intercompany accounts and transactionsare eliminated in consolidation. The Partnership accounts for its investment inthe above-mentioned Investment Properties using the equity method ofconsolidation. (See Note 14 for information on the Investment Properties).

*AccountingEstimates:*   The preparation of the financialstatements, in conformity with accounting principles generally accepted in theUnited State of America, requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosures ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reported period.Accordingly, actual results could differ from those estimates.

*RevenueRecognition:*   Rental income from residential andcommercial properties is recognized over the term of the related lease. Amounts60 days in arrears are charged against income. Certain leases of thecommercial properties provide for increasing stepped minimum rents, which are accountedfor on a straight-line basis over the term of the lease.

*RentalProperties:*   Rental properties are stated at costless accumulated depreciation. Maintenance and repairs are charged to expenseas incurred; improvements and additions are capitalized. When assets areretired or otherwise disposed of, the cost of the asset and related accumulateddepreciation is eliminated from the accounts, and any gain or loss on suchdisposition is included in income. Fully depreciated assets are removed fromthe accounts. Rental properties are depreciated by both straight-line andaccelerated methods over their estimated useful lives.

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

*Financingand Leasing Fees:*   Financing fees are capitalizedand amortized, using the interest method, over the life of the relatedmortgages. Leasing fees are capitalized and amortized on a straight-line basisover the life of the related lease. Unamortized balances are expensed when thecorresponding fee is no longer applicable.

*IncomeTaxes:*   The financial statements have beenprepared on the basis that NERA and its subsidiaries are entitled to taxtreatment as partnerships. Accordingly, no provision for income taxes has beenrecorded.

*CashEquivalents:*   The Partnership considers cashequivalents to be all highly liquid instruments purchased with a maturity ofthree months or less.

*SegmentReporting:*   Operating segments arerevenue-producing components of the Partnership for which separate financialinformation is produced internally for management. Under the definition, NERAoperated, for all periods presented, as one segment.

8

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*ComprehensiveIncome:*   Comprehensive income is defined aschanges in partners’ equity, exclusive of transactions with owners (such ascapital contributions and dividends). NERA did not have any comprehensiveincome items in 2007 or 2006 other than net income as reported.

*IncomePer Unit:*   Net income per unit has beencalculated based upon the weighted average number of units outstanding duringeach year presented. The Partnership has no dilutive units and, therefore,basic net income is the same as diluted net income per unit (see Note 7).

*Concentrationof Credit Risks and Financial Instruments:*   The Partnership’s properties arelocated in New England, and the Partnership is subject to the general economicrisks related thereto. No single tenant accounted for more than 5% of thePartnership’s revenues in 2007 or 2006. The Partnership makes its temporarycash investments with high-credit-quality financial institutions. At June30, 2007, substantially all of the Partnership’s cash and cash equivalents wereheld in interest-bearing accounts at financial institutions, earninginterest at rates from 2.20% to 5.25%. At June 30, 2007 and December 31, 2006, approximately $10,000,000of cash and cash equivalents, and cash included in prepaid expenses and otherassets exceeded federally insured amounts.

*Advertising Expense:*   Advertising is expensed as incurred. Advertisingexpense was $62,823 and $43,942 for the six months ended June 30, 2007, and2006 respectively.

*Discontinued Operations and Rental Property Held forSale:*   Whenassets are identified by management as held for sale, the Partnershipdiscontinues depreciating the assets and estimates the sales price, net ofselling costs, of such assets. If, in management’s opinion, the net sales priceof the assets which have been identified as held for sale is less than the netbook of the assets, a valuation allowance is established. Properties identifiedas held for sale and/or sold are presented in discontinued operations for allperiods presented.

If circumstances arise that previously were consideredunlikely and, as a result, the Partnership decides not to sell a propertypreviously classified as held for sale, the property is reclassified as heldand used. A property that is reclassified is measured and recorded individuallyat the lower of (a) its carrying amount before the property was classifiedas held for sale, adjusted for any depreciation (amortization) expense thatwould have been recognized had the property been continuously classified asheld and used, or (b) the fair value at the date of the subsequentdecision not to sell.

*InterestCapitalized:*   The Company follows the policy ofcapitalizing interest as a component of the cost of rental property when thetime of construction exceeds one year. During the six months ended June 30, 2007 and the year ended December31, 2006, there was no capitalized interest.

*Reclassifications:*   Certainreclassifications have been made to prior period amounts in order to conform tocurrent period presentation.

**NOTE 2. RENTALPROPERTIES**

As of June 30, 2007, the Partnership and itsSubsidiary Partnerships owned 2,377 residential apartment units in 22residential and mixed-use complexes (collectively, the “Apartment Complexes”).The Partnership also owns 24 condominium units in two residential condominiumcomplexes, all of which are leased to residential tenants (collectivelyreferred to as the “Condominium Units”). The Apartment Complexes andCondominium Units are located primarily in the metropolitan Boston area ofMassachusetts.

Additionally, as of June 30, 2007, the SubsidiaryPartnerships owned a commercial shopping center in Framingham, Massachusettsand mixed-use properties in Boston, Brockton and Newton, Massachusetts. Theseproperties are referred to collectively as the “Commercial Properties.”

Additionally, as of June 30, 2007, the Partnershipowned a 50% ownership interest in eight residential and mixed use complexes(the “Investment Properties”) with a total of 462 units and 10,215 square feetof commercial space, accounted for using the equity method of consolidation.See Note 14 for summary information on these investments.

9

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See Note 3 for a description of the sale of MiddlesexApartments to the majority shareholder of the General Partner in 2005.

Rental properties consist of the following:
| ** **                           | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** | **Useful Life** | ** ** |
|--------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|----------------------|------------|
| Land,  improvements and parking lots |       | $                           | 23,222,879 |                            | $          | 23,217,629           |       | 10-31 years |   |
| Buildings and  improvements          |       | 106,057,222                 |       | 105,759,848                     |       | 15-31 years          |       |
| Kitchen cabinets                     |       | 4,278,536                   |       | 3,994,136                       |       | 5-10 years           |       |
| Carpets                              |       | 3,778,353                   |       | 3,447,775                       |       | 5-10 years           |       |
| Air conditioning                     |       | 879,048                     |       | 838,324                         |       | 7-10 years           |       |
| Laundry  equipment                   |       | 200,231                     |       | 192,938                         |       | 5-7 years            |       |
| Elevators                            |       | 801,160                     |       | 748,769                         |       | 20 years             |       |
| Swimming pools                       |       | 147,082                     |       | 147,082                         |       | 10 years             |       |
| Equipment                            |       | 1,841,076                   |       | 1,629,583                       |       | 5-7 years            |       |
| Motor vehicles                       |       | 113,150                     |       | 113,150                         |       | 5 years              |       |
| Fences                               |       | 250,352                     |       | 250,352                         |       | 5-10 years           |       |
| Furniture and  fixtures              |       | 4,427,147                   |       | 4,331,597                       |       | 5-7 years            |       |
| Smoke alarms                         |       | 132,017                     |       | 130,744                         |       | 5-7 years            |       |
|                                 |       | 146,128,253                 |       | 144,801,927                     |       |                 |       |
| Less accumulated  depreciation       |       | 49,923,762                  |       | 46,518,089                      |       |                 |       |
|                                 |       | $                           | 96,204,491 |                            | $          | 98,283,838           |       |   |   |

 

**NOTE 3. RELATED PERSON TRANSACTIONS**

The Partnership’s properties are managed by an entitythat is owned by Harold Brown, the majority shareholder of the General Partner.The management fee is equal to 4% of rental revenue and laundry income. Totalfees paid were approximately $647,000 in 2007 and 2006.

The Partnership Agreement permits the General Partneror management company to charge the costs of professional services (such ascounsel, accountants and contractors) to NERA. In the six months ended June 30,2007 and 2006, approximately $419,000 and $205,000, respectively, was chargedto NERA for legal, accounting, construction, maintenance, rental andarchitectural services and supervision of capital improvements.  Of the 2007 expenses referred to above,approximately $134,000 consisted of repairs and maintenance and $128,000 ofadministrative expense. Approximately $157,000 of expenses for construction,architectural services and supervision of capital projects was capitalized inrental properties.

Additionally in 2007, the Hamilton Company receivedapproximately $270,000 from the Investment Properties of which approximately$135,000 was the management fee, $700 was for construction supervision andarchitectural fees, $121,000 was for maintenance services and $7,800 was foradministrative services.  The HamiltonCompany legal department acts as closing attorney on certain condo salesreceiving approximately $36,000 during the six months ended June 30, 2007.  As more fully described in Note 14, an entitypartially owned by Harold Brown, the majority shareholder of the GeneralPartner is the sales agent for certain condominium sales receivingapproximately $112,000 of commissions in 2007.

On January 1, 2004, all employees weretransferred to the management company’s payroll. The Partnership reimburses themanagement company for the payroll and related expenses of the employeesdirectly employed by the properties. Total reimbursement was approximately$1,074,000 and $1,333,000 for the six months ended June 30, 2007 and 2006,respectively. The Management Company maintains a 401K plan for all eligibleemployees whereby the employees may contribute the maximum allowed by law. Theplan also provides for discretionary contributions by the employer. There wereno employer contributions in 2007 and 2006.

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In 1996, prior to becoming an employee and Presidentof the Management Company, the current President of the Management Companyperformed asset management consulting services to the Partnership. Thisindividual continues to perform this service and receives an asset managementfee from the Partnership, receiving $25,000 during the six months ended June30, 2007 and 2006.

The Partnership has invested in eight limitedpartnerships, each of which has invested primarily in residential apartmentcomplexes.  The Partnership has a 50%ownership interest in each investment. The other investors are Harold Brown, the President of the ManagementCompany and five other employees of the Management Company.  Harold Brown’s ownership interest is between43.2% and 47.5%, with the balance of 6.8% and 2.5% owned by others.  See Note 14 for a description of theproperties and their operations.

On June 30, 2003, the Partnership purchased fivecondominium units in a 42-unit building located in Brookline,Massachusetts. These were purchased from Harvard 45 Associates LLC (“Harvard45”) which is owned 70% by Harold Brown, the 75% shareholder and treasurer ofthe General Partner, and 5% by the President of Hamilton. The total purchaseprice for these condominiums was approximately $2,416,000 and was approved bothby the Partnership’s Advisory Committee and the General Partner. Harvard 45realized a gain of approximately $648,000 from these sales. Harvard 45 alsosold 16 units to unrelated parties; the prices for all 21 units sold werecomparable. The majority shareholder of the general partner has guaranteed the$1,600,000 mortgage for these five units. The original mortgage of $1,600,000has been extended to August 2009. The mortgage rate of 5.25% is fixed for three years and the costassociated with this extension is approximately $8,000.

The above 42-unit condominium building ismanaged by an entity wholly owned by Ronald Brown, the 25% shareholder andPresident of the General Partner. That entity will receive annual managementfees from the five units of approximately $1,500, and Hamilton will reduce itsmanagement fees to approximately 2%, so that the total management fee will notexceed the 4% allowed by the Partnership’s Partnership Agreement.

In March 2005, the Partnership sold the MiddlesexApartments to an entity wholly owned by the majority shareholder of the GeneralPartner. The selling price was $6,500,000 which resulted in a capital gain forthe Partnership of approximately $5,800,000 and an increase in thePartnership’s cash reserves of approximately $4,800,000 after paying off theexisting $1,300,000 mortgage, prepayment penalties and other selling expenses.The buyer is selling the property as condominium units. An entity 31% owned bythe majority shareholder of the General Partner and 5% owned by the Presidentof the management company is the sales agent and will receive a variablecommission of 3% to 5% on each sale. Total commissions paid to date areapproximately $138,000. Although the buyer is assuming the costs and economicrisks of converting and selling the condominium units, if the net gains fromthe sale of these units exceed $500,000, the excess will be split equallybetween the buyer and the Partnership. The buyer estimates that the gain fromthe sale of these units will exceed $500,000. There is one remaining unitunsold at June 30, 2007.

**NOTE 4. OTHER ASSETS**

Included in prepaid expenses and other assets at June30, 2007 and December 31, 2006 is approximately $319,000 and $250,000,respectively, held in escrow to fund future capital improvements.

Financing and leasing fees of $433,666 and $484,452are net of accumulated amortization of $564,614 and $517,728 at June 30, 2007and December 31, 2006, respectively.

**NOTE 5. MORTGAGE NOTES PAYABLE**

At June 30, 2007 and December 31, 2006, themortgages payable consisted of various loans, all of which were secured byfirst mortgages on properties referred to in Note 2. At June 30, 2007, thefixed interest rates on these loans ranged from 4.84% to 8.46%, payable inmonthly installments aggregating approximately $704,000, including interest, tovarious dates through 2016. The majority of the mortgages are subject to prepaymentpenalties. At June 30, 2007, the weighted average interest rate on the abovemortgages was 6.63%. The effective rate of 6.71% includes the amortizationexpense of deferred financing costs.  SeeNote 12 for fair value information.

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

Approximate annualmaturities at June 30, 2007 are as follows:

| 2008- current  maturities |   | $          | 1,131,000   |   |
|---------------------------|--------|------------|-------------|--------|
| 2009                      |   | 5,707,000  |        |
| 2010                      |   | 13,070,000 |        |
| 2011                      |   | 33,431,000 |        |
| 2012                      |   | 1,199,000  |        |
| Thereafter                |   | 59,585,000 |        |
|                      |   | $          | 114,123,000 |   |

 

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

The Partnership’s residential lease agreements mayrequire tenants to maintain a one-month advance rental payment and/or a securitydeposit. At June 30, 2007, amounts received for prepaid rents of approximately$1,619,000 are included in cash and cash equivalents, and security deposits ofapproximately $1,234,000 are included in other assets.

**NOTE 7. PARTNERS’ CAPITAL**

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

In 2007, the Partnership approved quarterlydistributions of $7.00 per unit ($0.70 per receipt) payable on March 31, andJune 30, 2007.

In 2006, the Partnership paid quarterly distributionsof $7.00 per unit ($.70 per receipt) in March, June, September, and December2006 for a total distribution of $28.00 per unit ($2.80 per receipt).

The Partnershiphas entered into a deposit agreement with an agent to facilitate public tradingof limited partners’ interests in Class A Units. Under the terms of thisagreement, the holders of Class A Units have the right to exchange eachClass A Unit for 10 Depositary Receipts. The following is information perDepositary Receipt:

*** ***

|                                                                      | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                           | ** ** | **2007**                                      | ** ** | **2006** | ** ** |
| Income (Loss)  per Depositary Receipt before Discontinued Operations |       | $                                             | 0.39       |   | $ | 0.60 |   |
| Income (loss)  from Discontinued Operations                          |       | (.06                                          | )          | (0.01 | ) |
| Net Income per  Depositary Receipt after Discontinued Operations     |       | $                                             | 0.33       |   | $ | 0.59 |   |
| Distributions per  Depositary Receipt                                |       | $                                             | 1.40       |   | $ | 1.40 |   |

 

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**NOTE 8. TREASURY UNITS**

Treasury Units atJune 30, 2007 are as follows:

| Class A        |   | 5,681 |   |
|---------------------|--------|-------|--------|
| Class B        |   | 1,228 |   |
| General Partnership |   | 64    |   |
|                |   | 6,973 |   |

 

**NOTE 9. COMMITMENTS AND CONTINGENCIES**

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

On January 18, 2007, a pipe burst at 62 BoylstonStreet resulting in approximately 40 apartments being evacuated which will remainunoccupied for an extended period. The Partnership has insurance coverage forboth repairs and rental loss until such time as the apartments are availablefor rent.  The potential uninsured rentalloss and other miscellaneous uninsured expenses cannot be accurately estimatedand may significantly reduce the future income of the property.  An estimated recovery of $300,000 has beenrecorded at June 30, 2007 including approximately $160,000 in rental income.  The remaining loss, net of recovery,  of approximately $50,000 at June 30, 2007 isinclusive of the estimated deductible and other non reimbursable expenses.

**On July 17, 2007, there was a fire in one unit at aPartnership property located at 1148 Commonwealth  Avenue. There was smoke and water damage at an additional 10 units.  The Partnership has insurance coverage forboth repairs and rental loss until such time as the apartments are availablefor rent. The Partnership’s estimate of loss is the insurance deductible of$10,000.**

**NOTE 10. RENTAL INCOME**

During the sixmonths ended June 30, 2007, approximately 93% of rental income was related toresidential apartments and condominium units with leases of one year or less.The remaining 7% was related to commercial properties, which have minimumfuture annual rental income on non-cancellable operating leases at June 30,2007 as follows:

|            | ** ** | **Commercial  Property Leases** | ** ** |
|------------|------------|--------------------------------------|------------|
| 2008       |       | $                                    | 1,880,000  |   |
| 2009       |       | 1,788,000                            |       |
| 2010       |       | 1,464,000                            |       |
| 2011       |       | 1,272,000                            |       |
| 2012       |       | 1,120,000                            |       |
| Thereafter |       | 2,774,000                            |       |
|       |       | $                                    | 10,298,000 |   |

 

The aggregate minimum future rental income does notinclude contingent rentals that may be received under various leases inconnection with percentage rents, common area charges and real estate taxes.Aggregate contingent rentals from continuing operations were approximately$235,000 and $389,000 for the six months ended June 30, 2007 and for the yearended December 31, 2006.

Rents receivable are net of allowances for doubtfulaccounts of approximately $684,000 and $494,000 at June 30, 2007 and December31, 2006, respectively. Included in rents receivable is approximately $379,000resulting from recognizing rental income from non-cancelable commercial leaseswith future rental increases on a

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straight-line basis. Themajority of this amount is for long-term leases with Staples and Trader Joe’sat Staples Plaza in Framingham, Massachusetts.

**NOTE 11. CASH FLOW INFORMATION**

During the six months ended June 30, 2007 and 2006,cash paid for interest was $3,824,813 and $3,846,801.

**NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS**

The followingmethods and assumptions were used by the Partnership in estimating the fairvalue of its financial instruments:

·       For cash and cashequivalents, other assets, investment in partnerships, accounts payable, advancerents and security deposits: fair value approximates the carrying value of suchassets and liabilities.

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

|                            | ** ** | **Carrying Amount** | ** **  | **Estimated Fair Value** | ** ** |
|----------------------------|------------|--------------------------|-------------|------------------------------------|------------|
| Mortgage Notes  Payable    |       |                     |        |                               |       |
| At June 30, 2007           |       | $                        | 114,122,768 |                               | $          | 114,777,418 |   |
| At December 31,  2006 |       | $                        | 114,659,052 |                               | $          | 117,251,025 |   |

 

**Disclosure about fair value offinancial instruments is based on pertinent information available to managementas of June 30, 2007 and December 31, 2006**

**NOTE 13. TAXABLE INCOME AND TAX BASIS**

Taxable income reportable by the Partnership andincludable in its partner’s tax returns is different than financial statementincome because of accelerated depreciation, different tax lives, and timingdifferences related to prepaid rents and allowances. Taxable income isapproximately $400,000 greater than statement income for the six months endedJune 30, 2007 and approximately $700,000 greater than statement income for theyear ended December 31, 2006. The cumulative tax basis of the Partnership’sreal estate at December 31, 2006 is approximately $1,100,000 greater than thestatement basis. The Partnership’s tax basis in its joint venture investmentsat December 31, 2006 is approximately $400,000 less than statement basis.

**NOTE 14. INVESTMENT IN PARTNERSHIPS**

Since November 2001, the Partnership has investedin eight limited partnerships, each of which has invested primarily inresidential apartment complexes. The Partnership has a 50% ownership interestin 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 47.5%, with the balance of 6.8%and 2.5% owned by the others. A description of each investment is as follows:

On October 3, 2005,the Partnership invested $2,500,000 for a 50% ownership interest in a 168-unitapartment complex in Quincy, Massachusetts. The purchase price was $30,875,000.The Partnership plans to sell the majority of units as condominium and retain48 units for long-term investment. The proceeds from the condominium sales areprimarily to be used to reduce the above-mentioned mortgage. Gains from thesales of units will be taxed at ordinary income rates (approximately $47,000per unit).  As of July 23, 2007, 66 unitshave been sold and an additional twelve units have a signed purchase and salesagreement. In February 2007, the Partnership refinanced the 48 units which willbe retained with a new mortgage in the amount of $4,750,000 with an interestrate of 5.57%, interest only for five years and amortized over 30 yearsthereafter.  The loan will be

14

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amortized over 30 yearsand matures in March 2017. The balance on the original loan on the remainingunits held for sale is approximately $6,500,000 at June 30, 2007.  This investment is referred to as HamiltonBay, LLC.

On March 7, 2005, the Partnership invested$2,000,000 for a 50% ownership interest in a building comprising 49 apartments,one commercial space and a 50-car surface parking lot located in Boston,Massachusetts. The purchase price was $14,300,000, and a $10,750,000 30-monthmortgage with a floating interest rate (7.125%) of 2% over the 30 day LiborIndex (5.35% at December 31, 2006) was obtained to finance this acquisition.The Partnership plans to operate the building and initiate development of theparking lot. The plan may also include disposition of selected units, ascondominiums in order to reduce the above mentioned mortgage. Any profits fromthe condominium sales will be taxed at ordinary rates. In June 2007 thePartnership refinanced the property and obtained an additional mortgage.  The original mortgage with a remainingbalance of $ 3,000,000 is due in 2009 and the new 5.88% mortgage of $7,762,000matures in 2017.  This investment isreferred to as Essex Street.

On March 2, 2005, the Partnership invested$2,352,000 for a 50% ownership interest in a 176-unit apartment complexwith an additional small commercial building located in Quincy, Massachusetts.The purchase price was $23,750,000.  ThePartnership plans to sell the majority of units as condominiums and retain 49units for long-term investment.  ThePartnership obtained a new 10-year mortgage in the amount of $5,000,000 on theunits to be retained by the Partnership. The interest on the new loan is 5.67% fixed for the 10 year term withinterest only payments for five years and amortized over a 30 year period forthe balance of the loan term.  Theclosing costs associated with the new mortgage were approximately $50,000,which will be amortized over the 10-year term. As of July 23, 2007, 119 units have been sold, and three units have asigned purchase and sales agreement. Gains from the sales of units(approximately $54,000 per unit) will be taxed at ordinary income rates. Thisinvestment is referred to as Hamilton 1025, LLC.

In September 2004,the Partnership invested approximately $5,075,000 for a 50% ownership interestin a 42-unit apartment complex located in Lexington, Massachusetts. Thepurchase price was $10,100,000. In October 2004, the Partnership obtaineda mortgage on the property in the amount of $8,025,000 and returned $3,775,000to the Partnership. In January 2007, the Partnership obtained a new 10-year mortgagein the amount of $5,500,000.  Theinterest on the new loan is 5.67% fixed for the 10 year term with interest onlypayments for five years and amortized over a 30 year period for the balance ofthe loan.  This new loan required a cashcontribution by the Partnership of $1,250,000 in 2006.  The closing costs associated with the newmortgage were approximately $37,000, which will be amortized over the 10-yearterm.  The unamortized deferred financingcosts of approximately $30,000 were written off in the first quarter of2007.  This investment is referred to asHamilton Minuteman, LLC.

In August 2004, thePartnership invested $8,000,000 for a 50% ownership interest in a 280-unitapartment complex located in Watertown, Massachusetts. The total purchase pricewas $56,000,000. The Partnership plans to sell, over time, three buildings witha total of 137 units as condominiums commencing in January 2005.  As of July 23, 2007, 111 units have been soldand an additional five units were under contract. Gains from these sales willbe taxed as ordinary income (approximately $62,000 per unit).  The majority of the sales proceeds wereapplied to reduce the mortgage, final payment was made during the secondquarter of 2007.  The majority of futuresales will be available for distribution to the investors.. An entity partiallyowned by the majority shareholder of the General Partner and the President ofthe management company, 31% and 5% respectively, is the sales agent and willreceive a variable commission on each sale of 3% to 5%. This investment isreferred to as Hamilton on Main, LLC.

In 2005, Hamilton on MainApts., LLC obtained a new 10 year mortgage on the three buildings to beretained.  The new mortgage is$16,825,000, with interest only of 5.18% for three years and amortizing on a 30year schedule for the remaining seven years when the balance is due.

In November 2001,the Partnership invested approximately $1,533,000 for a 50% ownership interestin a 40-unit apartment building in Cambridge, Massachusetts. Thisproperty has a 12-year mortgage, which is amortized on a 30-yearschedule, with a final payment of approximately $6,000,000 in 2014.  This investment is referred to as 345Franklin, LLC.

15

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As required by the lenderfor the 2004 and 2005 acquisitions, the Treasurer of the General Partner hasprovided a limited guaranty for the mortgages on Essex 81 and Hamilton BaySales.. In the event that he is obligated to make payments to the lender as aresult of this guaranty, the Partnership and other investors have, in turn,agreed to indemnify him for their proportionate share of any such payments

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**Summaryfinancial information for the six months ended June 30, 2007 (unaudited)**
| ** **                                       | ** ** | **Essex 81** | ** ** | **345 Franklin** | ** ** | **Hamilton 1025** | ** ** | **Hamilton Bay Sales** | ** ** | **Hamilton Bay Apts** | ** ** | **Minuteman** | ** ** | **Hamilton on Main** | ** ** | **Hamilton Pl Sales** | ** ** | **Total**      | ** ** |
|--------------------------------------------------|------------|-------------------|------------|-----------------------|------------|------------------------|------------|----------------------------------|------------|---------------------------------|------------|---------------|------------|--------------------------------|------------|---------------------------------|------------|----------------|------------|
| ** **                                       |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |           |       |
| **ASSETS**                                       |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |           |       |
| ** **                                       |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |           |       |
| Rental  Properties                               |       | 13,724,843        |       | 9,376,708             |       | 7,937,563              |       | 8,546,487                        |       | 9,276,323                       |       | 8,973,312     |       | 26,015,416                     |       | 5,665,935                       |       | 89,516,587     |       |
| Cash  & Cash Equivalents                     |       | 49,199            |       | 49,161                |       | 88,325                 |       | 2,615                            |       | 97,975                          |       | 1,033         |       | 104,413                        |       | 240,763                         |       | 633,488        |       |
| Rent  Receivable                                 |       | 118,175           |       | 8,813                 |       | 4,214                  |       | (2,821                           | )          | 1,609                           |       | 2,846         |       | 14,283                         |       | 11,073                          |       | 158,193        |       |
| Real  Estate Tax Escrow                          |       | 38,103            |       | 35,404                |       | 19,741                 |       | —                           |       | 29,692                          |       | 18,764        |       | 401,460                        |       | —                          |       | 543,164        |       |
| Due  From Investment Properties                  |       | —            |       | —                |       | 600,000                |       | 4,113,398                        |       | —                          |       | —        |       | —                         |       | 219,214                         |       | 4,932,612      |       |
| Prepaid  Expenses & Other Assets             |       | 100,778           |       | 112,033               |       | 234,302                |       | 135,181                          |       | 34,693                          |       | 111,493       |       | 374,327                        |       | 509,423                         |       | 1,612,228      |       |
| Financing  & Leasing Fees                    |       | 179,356           |       | 53,077                |       | 47,290                 |       | 23,120                           |       | 61,024                          |       | 41,231        |       | 56,294                         |       | 9,408                           |       | 470,799        |       |
|                                             |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |           |       |
| **Total  Assets**                                | ** ** | **14,210,453**    | ** ** | **9,635,196**         | ** ** | **8,931,435**          | ** ** | **12,817,979**                   | ** ** | **9,501,316**                   | ** ** | **9,148,683** | ** ** | **26,966,193**                 | ** ** | **6,655,816**                   | ** ** | **97,867,071** | ** ** |
|                                             |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |           |       |
|                                             |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |           |       |
| **LIABILITIES AND PARTNERS’  CAPITAL**      |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |
|                                             |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |           |       |
| Mortgage  Notes Payable                          |       | 10,762,000        |       | 7,650,691             |       | 5,000,000              |       | 6,513,496                        |       | 4,750,000                       |       | 5,500,000     |       | 16,825,000                     |       | —                          |       | 57,001,188     |       |
| Due  to Investment Properties                    |       | —            |       | —                |       | —                 |       | —                           |       | 4,713,398                       |       | 150,000       |       | 69,214                         |       | —                          |       | 4,932,612      |       |
| Accounts  Payable & Accrued Exp              |       | 93,087            |       | 43,690                |       | 47,540                 |       | 175,698                          |       | 3,000                           |       | 25,144        |       | 139,910                        |       | 39,478                          |       | 567,547        |       |
| Advance  Rental Payments & Security Deposits |       | 138,849           |       | 161,867               |       | 58,019                 |       | 70,145                           |       | 84,113                          |       | 38,220        |       | 143,632                        |       | 12,371                          |       | 707,215        |       |
| **Total  Liabilities**                           |       | 10,993,936        |       | 7,856,248             |       | 5,105,559              |       | 6,759,340                        |       | 9,550,510                       |       | 5,713,364     |       | 17,177,756                     |       | 51,849                          |       | 63,208,562     |       |
|                                             |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |           |       |
| Partners’  Capital                          |       | 3,216,517         |       | 1,778,948             |       | 3,825,876              |       | 6,058,639                        |       | (49,194                         | )          | 3,435,319     |       | 9,788,437                      |       | 6,603,967                       |       | 34,658509      |       |
| **Total  Liabilities and Capital**               | ** ** | **14,210,453**    | ** ** | **9,635,196**         | ** ** | **8,931,435**          | ** ** | **12,817,979**                   | ** ** | **9,501,316**                   | ** ** | **9,148,683** | ** ** | **26,966,193**                 | ** ** | **6,655,816**                   | ** ** | **97,867,071** | ** ** |
| ** **                                       | ** ** | ** **        | ** ** | ** **            | ** ** | ** **             | ** ** | ** **                       | ** ** | ** **                      | ** ** | ** **    | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **     | ** ** |
| **Partners’ Capital - NERA 50%**            | ** ** | **1,608,259**     | ** ** | **889,474**           | ** ** | **1,912,938**          | ** ** | **3,029,320**                    | ** ** | **(24,597**                     | **)**      | **1,717,659** | ** ** | **4,894,218**                  | ** ** | **3,301,984**                   | ** ** | **17,329,255** | ** ** |

 

**Future annual mortgagematurities at June 30, 2007 are as follows:**
| ** **          | ** ** | **Essex 81** | ** ** | **345  Franklin**  | ** ** | **Hamilton 1025** | ** ** | **Hamilton Bay Sales** | ** ** | **Hamilton Bay Apts.** | ** ** | **Hamilton  Minuteman** | ** ** | **Hamilton on Main  Apts** | ** ** | ** ** | ** ** |
|---------------------|------------|-------------------|------------|--------------------|------------|------------------------|------------|----------------------------------|------------|----------------------------------|------------|-------------------------|------------|--------------------------------------|------------|------------|------------|
| **Period End** | ** ** | **March**  2005   | ** ** | **November**  2001 | ** ** | **March**  2005        | ** ** | **October**  2005                | ** ** | **October**  2005                | ** ** | **August**  2004        | ** ** | **August**  2004                     | ** ** | **Total**  | ** ** |
| June 30, 2008       |       | —            |       | 123,957            |       | —                 |       | 6,513,496                        |       | —                           |       | —                  |       | 78,717                               |       | 6,716,170  |       |
| June 30, 2009       |       | 3,000,000         |       | 132,786            |       | —                 |       | —                           |       | —                           |       | —                  |       | 244,454                              |       | 3,377,240  |       |
| June 30, 2010       |       | —            |       | 142,244            |       | —                 |       | —                           |       | —                           |       | —                  |       | 257,422                              |       | 399,665    |       |
| June 30, 2011       |       | —            |       | 152,375            |       | —                 |       | —                           |       | —                           |       | —                  |       | 271,077                              |       | 423,452    |       |
| June 30, 2012       |       | —            |       | 163,228            |       | 35,232                 |       | —                           |       | 20,668                           |       | 33,648                  |       | 285,457                              |       | 538,232    |       |
| Thereafter          |       | 7,762,000         |       | 6,969,102          |       | 4,964,768              |       | —                           |       | 4,729,332                        |       | 5,466,352               |       | 15,687,873                           |       | 45,546,428 |       |
|                |       | 10,762,000        |       | 7,650,691          |       | 5,000,000              |       | 6,513,496                        |       | 4,750,000                        |       | 5,500,000               |       | 16,825,000                           |       | 57,001,188 |       |

 

17

----

 

**Summaryfinancial information**for the sixmonths ended June 30, 2007 (unaudited)**
| ** **                                                     | ** ** | **Essex 81** | ** ** | **345 Franklin** | ** ** | **Hamilton 1025** | ** ** | **Hamilton Bay Sales** | ** ** | **Hamilton Bay Apts** | ** ** | **Minuteman** | ** ** | **Hamilton on Main** | ** ** | **Hamilton Pl Sales** | ** ** | **Total**    | ** ** |
|----------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|------------------------|------------|----------------------------------|------------|---------------------------------|------------|---------------|------------|--------------------------------|------------|---------------------------------|------------|--------------|------------|
| ** **                                                     |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |         |       |
| **Revenues**                                                   |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |         |       |
| Rental Income                                                  |       | 717,497           |       | 515,882               |       | 403,756                |       | 492,218                          |       | 247,869                         |       | 360,583       |       | 1,181,301                      |       | 183,184                         |       | 4,102,290    |       |
| Laundry and Sundry Income                                      |       | 1,571             |       | 2,446                 |       | —                 |       | —                           |       | —                          |       | 751           |       | 13,752                         |       | —                          |       | 18,519       |       |
|                                                           |       | 719,067           |       | 518,328               |       | 403,756                |       | 492,218                          |       | 247,869                         |       | 361,334       |       | 1,195,052                      |       | 183,184                         |       | 4,120,808    |       |
|                                                           |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |         |       |
| **Expenses**                                                   |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |         |       |
| Administrative                                                 |       | 7,562             |       | 10,999                |       | 13,903                 |       | 22,082                           |       | 5,796                           |       | 3,686         |       | 26,965                         |       | 6,013                           |       | 97,006       |       |
| Depreciation and Amortization                                  |       | 222,042           |       | 166,386               |       | 194,412                |       | 498,713                          |       | 45,764                          |       | 288,201       |       | 1,023,658                      |       | 166,634                         |       | 2,605,811    |       |
| Interest                                                       |       | 399,788           |       | 266,860               |       | 142,924                |       | 376,671                          |       | 102,085                         |       | 163,272       |       | 440,320                        |       | 50,001                          |       | 1,941,922    |       |
| Management Fees                                                |       | 26,690            |       | 22,432                |       | 17,972                 |       | 20,016                           |       | 13,369                          |       | 14,511        |       | 46,939                         |       | 6,927                           |       | 168,855      |       |
| Operating                                                      |       | 64,597            |       | 33,775                |       | 1,326                  |       | 14,268                           |       | 144                             |       | 33,512        |       | 153,084                        |       | 3,325                           |       | 304,029      |       |
| Renting                                                        |       | 2,600             |       | 12,983                |       | 2,999                  |       | 1,391                            |       | 2,952                           |       | 1,627         |       | 4,219                          |       | —                          |       | 28,771       |       |
| Repairs and Maintenance                                        |       | 42,615            |       | 24,362                |       | 143,126                |       | 194,478                          |       | 76,905                          |       | 33,812        |       | 147,210                        |       | 126,120                         |       | 788,627      |       |
| Taxes and Insurance                                            |       | 86,091            |       | 44,668                |       | 86,259                 |       | 112,697                          |       | 50,413                          |       | 36,314        |       | 139,630                        |       | 52,434                          |       | 608,507      |       |
|                                                           |       | 851,986           |       | 582,465               |       | 602,920                |       | 1,240,317                        |       | 297,427                         |       | 574,935       |       | 1,982,026                      |       | 411,454                         |       | 6,543,528    |       |
| **Income  Before Other Income**                                |       | (132,918          | )          | (64,137               | )          | (199,164               | )          | (748,099                         | )          | (49,558                         | )          | (213,601      | )          | (786,973                       | )          | (228,270                        | )          | (2,422,720   | )          |
|                                                           |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |         |       |
| **Other  Income (Loss)**                                       |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |         |       |
| Interest Income                                                |       | 1,081             |       | 522                   |       | 5,049                  |       | 109                              |       | 363                             |       | 5,470         |       | 441                            |       | 2,359                           |       | 15,395,      |       |
| Gain on Sale of Real Estate                                    |       | —            |       | —                |       | 473,429                |       | 624,139                          |       | —                          |       | —        |       | —                         |       | 531,584                         |       | 1,629,152    |       |
| Other Income (Expenses)                                        |       | —            |       | —                |       | (37,428                | )          | —                           |       | —                          |       | (2,248        | )          | —                         |       | —                          |       | (39,676      | )          |
|                                                           |       | 1,081             |       | 522                   |       | 441,050                |       | 624,248                          |       | 363                             |       | 3,222         |       | 441                            |       | 533,943                         |       | 1,604,870    |       |
|                                                           |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |         |       |
| **Net  Income (Loss)**                                         | ** ** | **(131,837**      | **)**      | **(63,615**           | **)**      | **241,886**            | ** ** | **(123,850**                     | **)**      | **(49,195**                     | **)**      | **(210,379**  | **)**      | **(786,532**                   | **)**      | **305,673**                     | ** ** | **(817,850** | **)**      |
|                                                           |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |         |       |
| **P&L-  NERA 50%**                                         | ** ** | **(65,919**       | **)**      | **(31,807**           | **)**      | **120,943**            | ** ** | **(61,925**                      | **)**      | **(24,597**                     | **)**      | **(105,190**  | **)**      | **(393,266**                   | **)**      | **152,836**                     | ** ** | **(408,925** | **)**      |
|                                                           |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |         |       |
| ** **                                                     | ** ** | ** **        | ** ** | ** **            | ** ** | ** **             | ** ** | ** **                       | ** ** | ** **                      | ** ** | ** **    | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **   | ** ** |
| Total units/  condominiums                                     |       | 49                |       | 40                    |       | 176                    |       | 120                              |       | 48                              |       | 42            |       | 146                            |       | 137                             | ** ** | **758**      | ** ** |
| Units to be retained                                           | ** ** | **49**            | ** ** | **40**                | ** ** | **49**                 | ** ** | **0**                            | ** ** | **48**                          | ** ** | **42**        | ** ** | **146**                        | ** ** | **0**                           | ** ** | **374**      | ** ** |
| Units to be sold                                               | ** ** | **—**        | ** ** | **—**            | ** ** | **127**                | ** ** | **120**                          | ** ** | **—**                      | ** ** | **—**    | ** ** | **—**                     | ** ** | **137**                         | ** ** | **384**      | ** ** |
| Units sold through July  23, 2007                              | ** ** | **—**        | ** ** | **—**            | ** ** | **119**                | ** ** | **66**                           | ** ** | **—**                      | ** ** | **—**    | ** ** | **—**                     | ** ** | **111**                         | ** ** | **296**      | ** ** |
| Balance of unsold units                                        | ** ** | ** **        | ** ** | ** **            | ** ** | **8**                  | ** ** | **54**                           | ** ** | ** **                      | ** ** | ** **    | ** ** | ** **                     | ** ** | **26**                          | ** ** | **88**       | ** ** |
| Unsold units with deposits for future sale as of July 23, 2007 | ** ** | **—**        | ** ** | **—**            | ** ** | **3**                  | ** ** | **12**                           | ** ** | **—**                      | ** ** | **—**    | ** ** | **—**                     | ** ** | **5**                           | ** ** | **20**       | ** ** |

** **

18

----

 

**Summaryinformation for the three months ended June 30, 2007 (unaudited)**
| ** **                      | ** ** | **Essex 81** | ** ** | **345 Franklin** | ** ** | **Hamilton 1025** | ** ** | **Hamilton Bay Sales** | ** ** | **Hamilton Bay Apts** | ** ** | **Minuteman** | ** ** | **Hamilton on Main** | ** ** | **Hamilton Pl Sales** | ** ** | **Total**  | ** ** |
|---------------------------------|------------|-------------------|------------|-----------------------|------------|------------------------|------------|----------------------------------|------------|---------------------------------|------------|---------------|------------|--------------------------------|------------|---------------------------------|------------|------------|------------|
| ** **                      |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |       |       |
| **Revenues**                    |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |       |       |
| Rental Income                   |       | 354,361           |       | 255,820               |       | 176,561                |       | 174,561                          |       | 186,098                         |       | 180,729       |       | 592,459                        |       | 80,734                          |       | 2,001,324  |       |
| Laundry and Sundry Income       |       | 295               |       | 858                   |       | (7,973                 | )          | (4,193                           | )          | —                          |       | 751           |       | 6,900                          |       | —                          |       | (3,363     | )          |
|                            |       | 354,656           |       | 256,678               |       | 168,588                |       | 170,368                          |       | 186,098                         |       | 181,480       |       | 599,359                        |       | 80,734                          |       | 1,997,961  |       |
|                            |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |       |       |
| **Expenses**                    |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |       |       |
| Administrative                  |       | 3,767             |       | 3,387                 |       | 7,317                  |       | 7,669                            |       | 3,632                           |       | (42,175       | )          | 12,682                         |       | 3,588                           |       | (133       | )          |
| Depreciation and Amortization   |       | 111,134           |       | 83,849                |       | 97,207                 |       | 252,468                          |       | 31,141                          |       | 129,266       |       | 512,345                        |       | 84,567                          |       | 1,301,975  |       |
| Interest                        |       | 198,116           |       | 133,122               |       | 71,874                 |       | 151,687                          |       | 67,544                          |       | 77,198        |       | 221,411                        |       | 11,741                          |       | 932,692    |       |
| Management Fees                 |       | 12,337            |       | 11,685                |       | 8,206                  |       | 6,885                            |       | 13,369                          |       | 7,197         |       | 23,079                         |       | 2,967                           |       | 85,725     |       |
| Operating                       |       | 28,165            |       | 15,261                |       | 652                    |       | 1,124                            |       | 144                             |       | 10,282        |       | 65,796                         |       | 2,015                           |       | 123,437    |       |
| Renting                         |       | 2,600             |       | 11,580                |       | 540                    |       | 185                              |       | 2,952                           |       | 617           |       | 1,259                          |       | —                          |       | 19,733     |       |
| Repairs and Maintenance         |       | 25,187            |       | 15,227                |       | 69,999                 |       | 87,510                           |       | 53,747                          |       | 17,116        |       | 73,586                         |       | 54,998                          |       | 397,368    |       |
| Taxes and Insurance             |       | 43,439            |       | 16,813                |       | 42,303                 |       | 41,072                           |       | 37,155                          |       | 18,281        |       | 57,443                         |       | 22,645                          |       | 279,151    |       |
|                            |       | 424,744           |       | 290,923               |       | 298,098                |       | 548,598                          |       | 209,683                         |       | 217,782       |       | 967,600                        |       | 182,520                         |       | 3,139,947  |       |
| **Income  Before Other Income** |       | (70,087           | )          | (34,246               | )          | (129,511               | )          | (378,230                         | )          | (23,584                         | )          | (36,302       | )          | (368,241                       | )          | (101,785                        | )          | (1,141,986 | )          |
|                            |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |       |       |
| **Other  Income (Loss)**        |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |       |       |
| Interest Income                 |       | 518               |       | 283                   |       | 3,049                  |       | —                           |       | 359                             |       | —        |       | 333                            |       | 334                             |       | 4,876      |       |
| Gain on Sale of Real Estate     |       | —            |       | —                |       | 332,106                |       | 460,944                          |       | —                          |       | —        |       | —                         |       | 406,332                         |       | 1,199,381  |       |
| Other Income (Expenses)         |       | —            |       | —                |       | (37,428                | )          | —                           |       | —                          |       | (2,248        | )          | —                         |       | —                          |       | (39,676    | )          |
|                            |       | 518               |       | 283                   |       | 297,727                |       | 460,944                          |       | 359                             |       | (2,248        | )          | 333                            |       | 406,666                         |       | 1,164,582  |       |
|                            |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |       |       |
| **Net  Income (Loss)**          | ** ** | **(69,570**       | **)**      | **(33,962**           | **)**      | **168,217**            | ** ** | **82,714**                       | ** ** | **(23,225**                     | **)**      | **(38,551**   | **)**      | **(367,908**                   | **)**      | **304,880**                     | ** ** | **22,595** | ** ** |
|                            |       |              |       |                  |       |                   |       |                             |       |                            |       |          |       |                           |       |                            |       |       |       |
| **P&L- NERA 50%**           | ** ** | **(34,785**       | **)**      | **(16,981**           | **)**      | **84,108**             | ** ** | **41,357**                       | ** ** | **(11,613**                     | **)**      | **(19,275**   | **)**      | **(183,954**                   | **)**      | **152,440**                     | ** ** | **11,298** | ** ** |

 

**Summary financialinformation for the six months ended June 30, 2006 (unaudited)**
| ** **                                                      | ** ** | **Franklin  Street** | ** ** | **Hamilton  Place** | ** ** | **Hamilton  Place** | ** ** | **Hamilton  Minuteman** | ** ** | **Essex 81** | ** ** | **1025  Hamilton** | ** ** | **Hamilton  Bay** | ** ** | ** **  | ** ** |
|-----------------------------------------------------------------|------------|----------------------|------------|---------------------|------------|---------------------|------------|-------------------------|------------|-------------------|------------|--------------------|------------|-------------------|------------|-------------|------------|
| **Acquisition Date**                                       | ** ** | **November  2001**   | ** ** | **August  2004**    | ** ** | **August  2004**    | ** ** | **August  2004**        | ** ** | **March  2005**   | ** ** | **March  2005**    | ** ** | **October  2005** | ** ** | **Total**   | ** ** |
| Property assets —  net                                     |       | 9,755,050            |       | 27,264,561          |       | 11,401,079          |       | 9,294,299               |       | 14,080,371        |       | 10,323,716         |       | 25,897,805        |       | 108,016,880 |       |
| Mortgages payable                                               |       | 7,766,406            |       | 16,825,000          |       | 5,561,149           |       | 7,941,811               |       | 10,750,000        |       | 6,143,719          |       | 20,519,625        |       | 75,507,710  |       |
| Total Equity                                                    |       | 1,952,448            |       | 13,696,054          |       | 3,324,080           |       | 1,496,964               |       | 3,416,402         |       | 4,520,024          |       | 4,933,550         |       | 33,339,522  |       |
| NERA — 50% equity                                          |       | 976,224              |       | 6,848,027           |       | 1,662,040           |       | 748,482                 |       | 1,708,201         |       | 2,260,012          |       | 2,466,775         |       | 16,669,761  |       |
| Summary income  statement:                                      |       |                 |       |                |       |                |       |                    |       |              |       |               |       |              |       |        |       |
| Rental income                                                   |       | 502,952              |       | 1,187,111           |       | 342,133             |       | 349,687                 |       | 725,806           |       | 461,296            |       | 939,661           |       | 4,508,646   |       |
| Operating  expenses                                             |       | 133,860              |       | 536,632             |       | 321,291             |       | 107,184                 |       | 245,308           |       | 509,113            |       | 861,809           |       | 2,715,197   |       |
| Management fees                                                 |       | 20,431               |       | 47,097              |       | 3,264               |       | 14,207                  |       | 27,212            |       | 7,030              |       | 19,308            |       | 138,549     |       |
| Interest expense                                                |       | 270,781              |       | 439,966             |       | 278,813             |       | 276,339                 |       | 378,092           |       | 278,599            |       | 841,022           |       | 2,763,612   |       |
| Depreciation &  amortization                           |       | 178,159              |       | 743,181             |       | 243,757             |       | 275,658                 |       | 221,354           |       | 270,131            |       | 603,042           |       | 2,535,282   |       |
| Financing expense                                               |       | —               |       | —              |       | —              |       | —                  |       | —            |       | —             |       | —            |       | —      |       |
| Gain on sale of  condominiums                                   |       | —               |       | —              |       | 833,591             |       | —                  |       | —            |       | 997,735            |       | 1,518,793         |       | 3,350,119   |       |
| Net profit (loss)                                               |       | (101,346             | )          | (579,765            | )          | 328,599             |       | (323,701                | )          | (146,160          | )          | 394,158            |       | 192,073           |       | (236,142    | )          |
| NERA — 50%                                                 |       | (50,673              | )          | (289,882            | )          | 164,299             |       | (161,850                | )          | (73,080           | )          | 197,079            |       | 96,036            |       | (118,071    | )          |
| Total units/  condominiums                                      |       | 40                   |       | 146                 |       | 137                 |       | 42                      |       | 49                |       | 176                |       | 168               |       | 758         |       |
| Units to be  retained                                           |       | 40                   |       | 146                 |       | 0                   |       | 42                      |       | 49                |       | 49                 |       | 48                |       | 374         |       |
| Units to be sold                                                |       | 0                    |       | 0                   |       | 137                 |       | 0                       |       | 0                 |       | 127                |       | 120               |       | 384         |       |
| Units sold  through July 24, 2006                               |       | 0                    |       | 0                   |       | 80                  |       | 0                       |       | 0                 |       | 101                |       | 30                |       | 211         |       |
| Balance of unsold  units                                        |       | 0                    |       | 0                   |       | 57                  |       | 0                       |       | 0                 |       | 26                 |       | 90                |       | 173         |       |
| Unsold units with  deposits for future sale as of July 24, 2006 |       | 0                    |       | 0                   |       | 9                   |       | 0                       |       | 0                 |       | 3                  |       | 14                |       | 21          |       |

 

19

----

 

**Summary financial information for the three monthsended June 30, 2006 (unaudited)**

 
| ** **                            | ** ** | **Franklin  Street** | ** ** | **Hamilton  Place** | ** ** | **Hamilton  Place** | ** ** | **Hamilton  Minuteman** | ** ** | **Essex 81** | ** ** | **1025  Hamilton** | ** ** | **Hamilton  Bay** | ** ** | **Total** | ** ** |
|---------------------------------------|------------|----------------------|------------|---------------------|------------|---------------------|------------|-------------------------|------------|-------------------|------------|--------------------|------------|-------------------|------------|-----------|------------|
| Summary income  statement:            |       |                 |       |                |       |                |       |                    |       |              |       |               |       |              |       |      |       |
| Rental income                         |       | 249,554              |       | 580,789             |       | 161,159             |       | 174,928                 |       | 384,576           |       | 222,760            |       | 450,387           |       | 2,224,153 |       |
| Operating  expenses                   |       | 68,982               |       | 312,043             |       | 161,136             |       | 44,951                  |       | 106,227           |       | 207,401            |       | 386,357           |       | 1,287,097 |       |
| Management fees                       |       | 10,290               |       | 22,995              |       | 1,347               |       | 7,179                   |       | 13,291            |       | 4,049              |       | 6,858             |       | 66,009    |       |
| Interest expense                      |       | 135,166              |       | 221,186             |       | 132,889             |       | 142,262                 |       | 196,408           |       | 129,025            |       | 413,066           |       | 1,370,002 |       |
| Depreciation &  amortization |       | 89,249               |       | 376,322             |       | 121,878             |       | 143,028                 |       | 111,505           |       | 130,085            |       | 329,507           |       | 1,310,574 |       |
| Financing expense                     |       | —               |       | —              |       | —              |       | —                  |       | —            |       | —             |       | —            |       | —    |       |
| Gain on sale of  condominiums         |       | —               |       | —              |       | 688,629             |       | —                  |       | —            |       | 570,602            |       | 737,782           |       | 1,997,013 |       |
| Net profit (loss)                     |       | (55,200              | )          | (351,757            | )          | 432,538             |       | (162,492                | )          | (42,855           | )          | 322,802            |       | 111,181           |       | 254,217   |       |
| NERA — 50%                       |       | (27,600              | )          | (175,878            | )          | 216,268             |       | (81,245                 | )          | (21,427           | )          | 161,401            |       | 55,590            |       | 127,109   |       |

 

Interest rates, themajority of which are variable, range from 5.18% to 7.13% at June 30, 2007.

**NOTE 15. NEW ACCOUNTING PRONOUNCEMENT**

In June 2005, the FASB ratified the consensusreached by the Emerging Issues Task Force (“EITF”) regarding EITF 04-05, “Investor’sAccounting for an Investment in a Limited Partnership When the Investor is theSole General Partner and the Limited Partners Have Certain Rights.” Theconclusion provides a framework for addressing the question of when a solegeneral partner, as defined in EITF 04-05, should consolidate a limitedpartnership. The EITF has concluded that the general partner of a limitedpartnership should consolidate a limited partnership, unless the limitedpartners have either (a) the substantive ability to dissolve the limited partnershipor otherwise remove the general partner without cause, or (b) substantiveparticipating rights. In addition, the EITF concluded that the guidance shouldbe expanded to include all limited partnerships, including those with multiplegeneral partners. We adopted EITF 04-05 as of January 1, 2006. Wehave assessed our investments in unconsolidated real estate joint ventures andhave determined that EITF 04-05 did not have an impact on our financialcondition or results of operations.

In September 2006,the FASB issued Statement No. 157, *Fair Value Measurements*(“SFASNo. 157”).  SFAS No. 157 providesguidance for using fair value to measure assets and liabilities. This statementclarifies the principle that fair value should be based on the assumptions thatmarket participants would use when pricing the asset or liability. SFAS No. 157establishes a fair value hierarchy, giving the highest priority to quotedprices in active markets and the lowest priority to unobservable data. SFAS No.157 applies whenever other standards require assets or liabilities to bemeasured at fair value. This statement is effective in fiscal years beginningafter November 15, 2007. We believe that the adoption of this standard onJanuary 1, 2008 will not have a material effect on our consolidated financialstatements.

In September 2006,the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108(“SAB 108”), which becomes effective for the first fiscal period ending afterNovember 15, 2006. SAB 108 provides guidance on the consideration of theeffects of prior period misstatements in quantifying current year misstatementsfor the purpose of a materiality assessment. SAB 108 provides for thequantification of the impact of correcting all misstatements, including boththe carryover and reversing effects of prior year misstatements, on the currentyear financial statements. The adoption of SAB 108 on December 21, 2006 did nothave a material effect on our consolidated financial statements.

In February 2007,the FASB issued statement No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities*(“SFAS No. 159”). SFASNo. 159 expands opportunities to use fair value measurement in financialreporting and permits entities to choose to measure many financial instrumentsand certain other items at

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fair value.  This Statement is effective for fiscal yearsbeginning after November 15, 2007.  Wehave not decided if we will early adopt SFAS No. 159 or if we will choose tomeasure any eligible financial assets and liabilities at fair value.

**NOTE 16.    DISCONTINUEDOPERATIONS and SALES of REAL ESTATE**

The following tables summarize income fromdiscontinued operations for the six months ended June 30, 2007 and 2006:

|                                    | ** ** | **Six Months Ended  June 30** | ** ** |
|------------------------------------|------------|----------------------------------------------|------------|
| ** **                         | ** ** | **2007**                                     | ** ** | **2006** | ** ** |
|                               |       |                                         |       |   |   |
| Total Revenues                     |       | $                                            | 0          |   | $ | 0 |   |
| Operating and  other expenses      |       | 100,000                                      |       | 10,125 |   |
| Depreciation and  amortization     |       | 0                                            |       | 0 |   |
|                               |       | 100,000                                      |       | 10,125 |   |
|                               |       | 0                                            |       | 0 |   |
| Loss from discontinued  operations |       | $                                            | (100,000   | ) | $ | (10,125 | ) |

 

Item 2 — MANAGEMENTSDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The followingdiscussion should be read in conjunction with the financial statements andnotes thereof appearing elsewhere in this Report.  This Report, on Form 10-Q, contains forward-lookingstatements 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 entitled “Factors That May Affect FutureResults” and elsewhere in this Report.

The Massachusettseconomy continues to grow at a modest pace which is slower than the nationaleconomy. Vacancy rates in both Boston and the suburbs continue to decline whichis a barometer of present and future growth. These factors, combined withexisting low residential vacancy rates for the NERA portfolio and the modestrevenue growth anticipated during the 3rd quarter rental season point to slowlyimproving growth for the portfolio. For the time being, revenue growthcontinues to be matched by increases in operating expenses. Managementcontinues to place its emphasis on tenant retention amidst the competitivehousing environment which continues to have new rental housing production andan attractive home sales market for buyers.

Managementcontinues to monitor the capital markets regarding institutional availabilityof debt and equity sources. Presently the markets are in a form of retrenchmentand seek quality debt and low leveraged assets such as NERA’s. Though thecapitals markets are in a state of flux, we have no significant short-termneeds and therefore are not subject to the wide swings currently experienced byborrowers. As these capital markets have also impacted the single family homeand condominium markets, they have not impacted our condominium sellout on thelocal level. In fact, sales have picked up and can be considered brisk despitethe increase in interest rates and decreased consumer confidence. Management isconfident that the results of these sale activities will be to substantiallysell out 2 of the 3 active condominium conversions and bring the 3rd development to over 80% sellout by the yearend.

The Partnershiphas retained The Hamilton Company (“Hamilton”) to manage and administer thePartnership’s properties.  Hamilton is afull-service real estate management company, which has legal, construction,maintenance, architectural, accounting and administrative departments.  The Partnership’s properties representapproximately 40% of the total properties and 70% of the residential propertiesmanaged by Hamilton.

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Substantially all of theother properties managed by Hamilton are owned - wholly or partially, directlyor indirectly - by Harold Brown.  ThePartnership’s Second Amended and Restated Contract of Limited Partnership (the “PartnershipAgreement”) expressly provides that the general partner may employ a managementcompany to manage the properties, and that such management company may be paida fee of 4% of rental receipts for administrative and management services (the “ManagementFee”).  The Partnership annually paysHamilton the full Management Fee, in monthly installments.

Harold Brown, hisbrother Ronald Brown and the President of Hamilton, Carl Valeri, collectivelyown approximately 22.2% of the depositary receipts representing the PartnershipClass A Units (including depositary receipts held by trusts for the benefit ofsuch persons’ family members).  HaroldBrown also owns 75% of the Partnership’s Class B Units, 75% of the capitalstock of NewReal, Inc. (“NewReal”), the Partnership’s sole general partner, andall of the outstanding stock of Hamilton. Ronald Brown also owns 25% of the Partnership’s Class B Units and 25% ofNewReal’s capital stock.  In addition,Ronald Brown is the President and director of NewReal and Harold Brown isNewReal’s Treasurer and also a director. Three of NewReal’s other directors Thomas Raffoul, Conrad DiGregorio,and Edward Sarkesian also own immaterial amounts of the Partnership’s Class AUnits or receipts.

Beyond theManagement Fee, the Partnership Agreement further provides for the employmentof outside professionals to provide services to the Partnership and allowsNewReal to charge the Partnership for the cost of employing professionals toassist with the administration of the Partnership’s properties.  In addition to the Management Fee, from timeto time the Partnership pays Hamilton for repairs and maintenance services,legal services, construction services and accounting services.  The costs charged by Hamilton for theseservices are at the same hourly rate charged to all entities managed byHamilton, and management believes such rates are competitive in themarketplace.

Hamilton accounted forapproximately 6% of the repair and maintenance expense paid for by thePartnership in the six months ended June 30, 2007, and approximately 4% for theyear ended December 31, 2006.  Of thefunds paid to Hamilton for this purpose, the great majority was to cover thecost of services provided by the Hamilton maintenance department, includingplumbing, electrical, carpentry services, and snow removal for those propertiesclose to Hamilton’s headquarters. However, several of the larger Partnership properties have their ownmaintenance staff.  Further, thoseproperties that do not have their own maintenance staff but are located morethan a reasonable distance from Hamilton’s headquarters in Allston,Massachusetts are generally serviced by local, independent companies.

Hamilton’s legaldepartment handles most of the Partnership’s eviction and collectionmatters.  Additionally, it prepares mostlong-term commercial lease agreements and represents the Partnership inselected purchase and sale transactions. Overall, Hamilton provided approximately 74 % of the legal services paidfor by the Partnership during the six months ended June 30, 2007 andapproximately 72% for the year ended December 31, 2006.

Additionally, asdescribed in Note 3 to the Consolidated Financial Statements, the HamiltonCompany received similar fees from the Investment Properties totaling approximately$264,000.

R. Brown Partners,which is owned by Ronald Brown, manages five condominium units located inBrookline, Massachusetts.  That entitywill receive annual management fees from the five units of approximately$1,500, and Hamilton will reduce its management fees to approximately 2%, sothat the total management fee will not exceed the 4% allowed by the Partnership’sPartnership Agreement.

The Partnershiprequires that three bids be obtained for construction contracts in excess of$5,000.  Hamilton may be one of the threebidders on a particular project and may be awarded the contract if its bid andits ability to successfully complete the project are deemed appropriate.  For contracts that are not awarded toHamilton, Hamilton charges the Partnership a construction supervision fee equalto 5% of the contract amount.  Hamilton’sarchitectural department also provides services to the Partnership on anas-needed basis.  During the six months

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ended June 30, 2007,Hamilton provided the Partnership approximately $21,000 in construction andarchitectural services, compared to $36,000 for the year ended December 31,2006.

Prior to 1991, thePartnership employed an outside, unaffiliated company to perform itsbookkeeping and accounting functions. Since that time, such services have been provided by the accountingstaff at Hamilton which consists of approximately twelve people.  Hamilton currently charges the Partnership$100,000 ($25,000 per quarter) per year for bookkeeping and accountingservices.

For moreinformation on related party transactions, see Note 3 to the ConsolidatedFinancial Statements.

**CRITICAL ACCOUNTING POLICIES AND ESTIMATES**

The preparation ofconsolidated financial statements, in accordance with accounting principlesgenerally accepted in the United States of America, requires the Partnership tomake estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses and related disclosures of contingent assetsand liabilities.  The Partnership regularlyand continually 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 its estimates on historicalexperience, current market conditions, and on various other assumptions thatare believed to be reasonable under the circumstances.  However, because future events and theireffects cannot be determined with certainty, the determination of estimatesrequires the exercise of judgment.  ThePartnership’s critical accounting policies are those which require assumptionsto be made about such matters that are highly uncertain.  Different estimates could have a materialeffect on the Partnership’s financial results. Judgments and uncertainties affecting the application of these policiesand estimates may result in materially different amounts being reported underdifferent conditions and circumstances. See Note 1 to the Consolidated Financial Statements, Principles ofConsolidation.

RevenueRecognition: Revenues from rental properties are recognized when due fromtenants.  Residential leases aregenerally for terms of one year and commercial leases are generally for five toten years, with renewal options at increased rents.  Significant commercial leases with steppedincreases over the term of the lease are recorded on the straight-line basis.

Real Estate andDepreciation: Real estate assets are stated at the lower of cost or fair value,less accumulated depreciation.  Costsrelated to the acquisition, development, construction and improvement ofproperties are capitalized, including interest, internal wages and benefits,real estate taxes and insurance. Capitalization usually begins with commencement of development activityand ends when the property is ready for leasing.  Replacements and improvements— such as HVACequipment, structural replacements, windows, appliances, flooring, carpetingand kitchen/bath replacements and renovations — are capitalized and depreciatedover their estimated useful lives as follows:

·                  Depreciationis computed on a straight-line basis over the estimated useful lives of therelated assets.  In assessing estimateduseful lives, the Partnership makes assumptions based on historical experienceacquired from both within and outside the Partnership.  These assumptions have a direct impact on thePartnership’s net income.

·                  Ordinaryrepairs and maintenance, such as unit cleaning and painting and appliancerepairs, are expensed.

If there is anevent or change in circumstances that indicates an impairment in the value of aproperty, the Partnership’s policy is to assess the impairment by making acomparison of the current and projected operating cash flows of the propertyover its remaining useful life, on an undiscounted basis, to the carryingamount of the property.  If the carryingvalue is in excess of the estimated projected operating cash flows of theproperty, the Partnership would recognize an impairment loss equivalent to theamount required to adjust the carrying amount to its estimated fair value.  The Partnership has not recognized animpairment loss since 1995.

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

Investments inPartnerships:  The Partnership accountsfor its 50% ownership in the Investment Properties under the equity method ofaccounting, as it exercises significant influence over, but does not controlthese entities.  These investments arerecorded initially at cost, as Investments in Partnerships, and subsequently adjustedfor the Partnership’s share in earnings, cash contributions anddistributions.  Under the equity methodof accounting, our net equity is reflected on the consolidated balance sheets,and our share of net income or loss from the Partnership is included on theconsolidated statements of income.

With respect toinvestments in and advances to the Investment Properties, the Partnership looksto the underlying properties to assess performance and the recoverability ofcarrying amounts for those investments in a manner similar to directinvestments in real estate properties. An impairment charge is recorded if the carrying value of the investmentexceeds its fair value.

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

**RESULTS OF OPERATIONS**

Comparison of the threemonths ended June 30, 2007 to the three months ended June 30, 2006 (as adjustedfor discontinued operations)

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#### The Partnership and its Subsidiary Partnerships earned income beforeother income and discontinued operations of approximately $579,000 during thethree months ended June 30, 2007 compared to approximately $347,000 for thethree months ended June 30, 2006, an increase of $232,000 (67%).

The rental activity is summarized as follows:

 
| ** **        | ** ** | **Occupancy Date** | ** ** |
|-------------------|------------|-------------------------|------------|
| ** **        | ** ** | **July 23,  2007** | ** ** | **April 30,  2007** | ** ** | **July 24,  2006** | ** ** |
|              | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Residential       |       |                    |       |   |   |   |   |
| Units             |       | 2,377                   |       | 2,377 |   | 2,402 |   |
| Vacancies         |       | 50                      |       | 40 |   | 42 |   |
| Vacancy rate      |       | 2.1                     | %          | 1.7 | % | 1.7 | % |
| Commercial        |       |                    |       |   |   |   |   |
| Total square feet |       | 84,998                  |       | 84,998 |   | 84,998 |   |
| Vacancy           |       | 0                       |       | 0 |   | 6,075 |   |
| Vacancy rate      |       | 0                       | %          | 0 | % | 7.1 | % |

 
| ** **              | ** ** | **Rental Income (in thousands)  Three Months Ended June 30,** | ** ** |
|-------------------------|------------|--------------------------------------------------------------------------------------------------|------------|
| ** **              | ** ** | **2007**                                                                                         | ** ** | **2006** | ** ** |
| ** **              | ** ** | **Total  Operations**                                                                            | ** ** | **Continuing  Operations** | ** ** | **Total  Operations** | ** ** | **Continuing  Operations** | ** ** |
| Total rents             |       | $                                                                                                | 7,929      |   | $ | 7,929 |   | $ | 7,847 |   | $ | 7,847 |   |
| Residential  percentage |       | 93                                                                                               | %          | 93 | % | 93 | % | 93 | % |
| Commercial  percentage  |       | 7                                                                                                | %          | 7 | % | 7 | % | 7 | % |
| Contingent rentals      |       | $                                                                                                | 124        |   | $ | 124 |   | $ | 111 |   | $ | 111 |   |

 

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***Three Months Ended June 30, 2007 Compared to Three Months Ended June30, 2006***
| ** **                                              | ** ** | **June 30,  2007** | ** ** | **June 30,  2006** | ** ** | **Dollar  Change** | ** ** | **Percent  Change** | ** ** |
|---------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|--------------------|------------|---------------------|------------|
| ** **                                              | ** ** | ** **              | ** ** | ** **              | ** ** | ** **         | ** ** | ** **          | ** ** |
| Revenues:                                               |       |                    |       |                    |       |               |       |                |       |
| Rental income                                           |       | $                       | 7,928,785  |                    | $          | 7,847,066          |       | $                   | 81,719     |   | 1.0 | % |
| Laundry and sundry income                               |       | 98,378                  |       | 107,470                 |       | (9,092             | )          | (8.4                | )%         |
|                                                    |       | 8,027,163               |       | 7,954,536               |       | 72,627             |       | 1.0                 | %          |
|                                                    |       |                    |       |                    |       |               |       |                |       |
| Expenses:                                               |       |                    |       |                    |       |               |       |                |       |
| Administrative                                          |       | 387,785                 |       | 323,642                 |       | 64,143             |       | 19.8                | %          |
| Depreciation and amortization                           |       | 1,756,433               |       | 1,708,891               |       | 47,542             |       | 2.7                 | %          |
| Interest                                                |       | 1,920,547               |       | 1,930,677               |       | (10,130            | )          | (0.5                | )%         |
| Management fees                                         |       | 323,342                 |       | 325,368                 |       | (2,026             | )          | (0.6                | )%         |
| Operating                                               |       | 809,902                 |       | 864,906                 |       | (55,004            | )          | (6.4                | )%         |
| Renting                                                 |       | 103,003                 |       | 138,240                 |       | (35,237            | )          | (25.5               | )%         |
| Repairs and maintenance                                 |       | 1,286,033               |       | 1,432,409               |       | (146,376           | )          | (10.2               | )%         |
| Taxes and insurance                                     |       | 860,725                 |       | 883,001                 |       | (22,276            | )          | (2.5                | )%         |
|                                                    |       | 7,447,770               |       | 7,607,134               |       | (159,364           | )          | (2.1                | )%         |
|                                                    |       |                    |       |                    |       |               |       |                |       |
| Income  Before Other Income and Discontinued Operations |       | 579,393                 |       | 347,402                 |       | 231,991            |       | 66.8                | %          |
|                                                    |       |                    |       |                    |       |               |       |                |       |
| Other  Income                                           |       |                    |       |                    |       |               |       |                |       |
| Interest income                                         |       | 96,827                  |       | 109,299                 |       | (12,472            | )          | (12.9               | )%         |
| Income from investment in joint ventures                |       | 11,303                  |       | 127,109                 |       | (115,806           | )          | (91.1               | )%         |
|                                                    |       | 108,130                 |       | 236,408                 |       | (128,278           | )          | (54.3               | )%         |
| Income from continuing operations                       |       | 687,523                 |       | 583,810                 |       | 103,713            |       | 17.8                | %          |
|                                                    |       |                    |       |                    |       |               |       |                |       |
| Discontinued  Operations:                               |       |                    |       |                    |       |               |       |                |       |
| (Loss) from discontinued operations                     |       | (100,000                | )          | —                  |       | (100,000           | )          |                |       |
|                                                    |       | (100,000                | )          | —                  |       | (100,000           | )          |                |       |
| Net Income                                              |       | $                       | 587,523    |                    | $          | 583,810            |       | $                   | 3,713      |   | 1.0 | % |

 

Rental income for thethree months ended June 30, 2007 was approximately $7,929,000 compared toapproximately $7,847,000 for the three months ended June 30, 2006, an increaseof approximately $82,000 (1%).  Theproperties with the most significant increases include 1144 Commonwealth Avenuewith an increase of approximately $30,000; Coach Apartments with an increase ofapproximately $13,000; and Dean Street with an increase of approximately$8,000.  The majority of the Partnership’sother properties experienced minimal rental income increases.

Total expenses forthe three months ended June 30, 2007 were approximately $7,447,000 compared toapproximately $7,607,000 for the three months ended June 30, 2006, a decreaseof approximately $159,000 (2.1%). The most significant decreases were inrepairs and maintenance expenses of approximately $147,000 (10.2%) due tosignificant repairs in 2006 in an effort to improve occupancy levels; adecrease in operating expenses of approximately $55,000 (6.4%) due to adecrease in utility costs; a decrease renting expenses of approximately $35,000(25.5%)due to a decrease in rental commissions; and a decrease in taxes andinsurance of approximately $22,000 (2.5%) due to a decrease in insurancepremiums.  These decreases are offset byan increase in administrative expenses of approximately $64,000 (19.8%) due toan increase in professional fees due

26

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to SEC compliance costs;and an increase in depreciation and amortization expenses of approximately$48,000 (2.7%) due to ongoing capital improvements at Partnership properties.

At June 30, 2007,the Partnership has a 50% ownership interest in joint ventures. The net incomeon these investments is $11,303 for the three months ended June 30, 2007compared to income of $127,109 for the three months ended June 30, 2006 adecrease of $115,806 (91.1%).  This decreasein income on the investment properties is due to slower than projected sales ofthe units, vacancies at the properties while preparing them for resale, anincrease in depreciation and amortization expense due to capital improvements,and professional fees associated with converting the properties intocondominium units.  See Note 14 to theConsolidated Financial Statements for financial information of these investmentproperties.  The summaries are asfollows:

345 FranklinStreet, Cambridge, Massachusetts

The Partnershipinvested in a 40-unit property in 2001. The Partnership’s share of losson this investment is $16,981and $27,600 for the three months ended June 30,2007 and 2006, respectively.  ThePartnership’s share of loss on this investment is $31,807 and $50,673 for thesix months ended June 30, 2007 and 2006, respectively.  There was one vacant unit at July 23, 2007.

Hamilton on Main,Watertown, Massachusetts

The Partnershipinvested in 146 units in three buildings in August 2004.  The Partnership plans to retain all of theseunits as a rental property.  ThePartnerships share of loss is approximately $184,000 and $176,000 for the threemonths ended June 30, 2007 and 2006 respectively.  The Partnership’s share of loss isapproximately $393,000 and $290,000 for the six months ended June 30, 2007 and2006 respectively.  The increase in lossfor both the three and six months ended June 30, 2007 is due to an increase indepreciation expense.  There were novacant units at July 23, 2007.

Hamilton Place Sales,Watertown, Massachusetts

The Partnershipinvested in 137 units in three buildings in August 2004.  The Partnership plans to sell all of theunits as condominiums.  The Partnership’sshare of income is approximately $152,000 and $216,000 for the three monthsended June 30, 2007and 2006 respectively. The income includes a gain on the sale of units of approximately$203,000 and $344,000 for the three months ended June 30, 2007 and 2006respectively.  The Partnership’s share ofincome is approximately $153,000 and $164,000 for the six months ended June 30,2007 and 2006 respectively.  ThePartnership’s share of income includes a gain on unit sales of approximately$266,000 and $417,000 for the six months ended June 30, 2007 and 2006respectively.  At July 23, 2007, 111units have been sold and five additional units have reservationagreements.  There were 13 units vacantat July 23, 2007.

HamiltonMinuteman, Lexington, Massachusetts

The Partnershipinvested in a 42-unit residential complex in September 2004. . The Partnership’sshare of loss on this investment is approximately $19,000 and $81,000 for thethree months ended June 30, 2007 and 2006, respectively. The Partnership’sshare of loss is approximately $105,000 and $162,000 for the six months endedJune 30, 2007 and 2006 respectively.  Therewere no vacant units at July 23, 2007.

Essex 81, Boston,Massachusetts

The Partnershipinvested in this property in March 2005. The property consists of 49 residential units, one commercial space, anda 50 car surface parking lot. The Partnership’s share of loss on thisinvestment is approximately $35,000 and $21,000 for the three months ended June30, 2007 and 2006, respectively. The Partnership’s share of loss on thisinvestment is approximately $66,000 and $73,000 for the six months ended June30, 2007 and 2006 respectively.  Therewere two vacant units at July 23, 2007.

 

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Hamilton 1025, Quincy,Massachusetts

The Partnershipinvested in a 176-unit property in March 2005. The Partnership plans to sell 127 units as condominiums. The Partnership’sshare of income is approximately $84,000 and $161,000 for the three monthsended June 30, 2007 and 2006 respectively. Included in the income for the three months ended June 30, 2007 and 2006is a gain of approximately $161,000 and $285,000 on the sale of units.  The Partnership’s share of income isapproximately $121,000 and $197,000 for the six months ended June 30, 2007and2006 respectively.  Included in theincome for the six months ended June 30, 2007 and 2006 is a gain ofapproximately $237,000 and $499,000 on the sale of units.  As of July 23, 2007, 119 units have been soldand three units have been reserved. There were two vacant units at July 23, 2007.

Hamilton Bay, Quincy, Massachusetts

The Partnership invested in a 168 unit apartmentcomplex in October 2005.  The Partnershipplans to sell 120 units as condominiums and retain 48 units for long-terminvestment.  The Partnership’s share ofincome is approximately $30,000 and $56,000 for the three months ended June 30,2007 and 2006 respectively.  Included inthe income for the three months ended June 30, 2007 and 2006 is the gain on thesale of units of approximately $230,000 and $369,000 respectively.  The Partnership incurred a loss ofapproximately $87,000 for the six months ended June 30, 2007 compared to incomeof approximately $96,000 for the six months ended June 30, 2006.  Included in the income and loss for the sixmonths ended June 30, 2007 and 2006 is a gain on unit sales of approximately$312,000 and $759,000 respectively.   Asof July 23, 2007, 66 units have been sold and an additional twelve units have asigned purchase and sales agreement. There are sixteen vacant units at July 23, 2007.

Interest incomewas approximately $97,000 for the three months ended June 30, 2007 compared toapproximately $109,000 for the three months ended June 30, 2006, a decrease ofapproximately $12,000 (11%).  Thisdecrease reflects a decrease in cash available for investment.

The Partnershiphas recorded a loss from of $100,000 in connection with the sale of MiddlesexApartments in Brookline, Massachusetts. The Partnership has revised their estimates  in connection with the sale of a unit andthis has resulted in a charge to income during the three months ended June 30,2007.

As a result of thechanges discussed above, net income for the three months ended June 30, 2007was $587,523 compared to income of $583,810 for the three months ended June 30,2006, an increase of $3,713 (1%).

**Comparison of the six monthsended June 30, 2007 to the six months ended June 30, 2006**

The Partnershipand its Subsidiary Partnerships earned income before other income of $899,938for the six months ended June 30, 2007 compared to $950,989 for the six monthsended June 30, 2006, a decrease of $51,051(5.4%).  The following is a summary of the Partnership’soperations for the six months ended June 30, 2007 and 2006.

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***Six Months Ended June 30, 2007 Compared toSix Months Ended June 30, 2006***

 
| ** **                                  | ** ** | **June 30,  2007** | ** ** | **June 30,  2006** | ** ** | **Dollar  Change** | ** ** | **Percent  Change** | ** ** |
|---------------------------------------------|------------|-------------------------|------------|-------------------------|------------|--------------------|------------|---------------------|------------|
| ** **                                  | ** ** | ** **              | ** ** | ** **              | ** ** | ** **         | ** ** | ** **          | ** ** |
| Revenues:                                   |       |                    |       |                    |       |               |       |                |       |
| Rental income                               |       | $                       | 15,963,374 |                    | $          | 15,814,658         |       | $                   | 148,716    |   | 0.9 | % |
| Laundry and sundry income                   |       | 206,223                 |       | 231,501                 |       | (25,278            | )          | (10.9               | )%         |
|                                        |       | 16,169,597              |       | 16,046,159              |       | 123,438            |       | 0.8                 | %          |
|                                        |       |                    |       |                    |       |               |       |                |       |
| Expenses:                                   |       |                    |       |                    |       |               |       |                |       |
| Administrative                              |       | 784,045                 |       | 675,294                 |       | 108,751            |       | 16.1                | %          |
| Depreciation and amortization               |       | 3,467,889               |       | 3,357,934               |       | 109,955            |       | 3.3                 | %          |
| Interest                                    |       | 3,824,813               |       | 3,846,801               |       | (21,988            | )          | (0.6                | )%         |
| Management fees                             |       | 647,394                 |       | 647,028                 |       | 366                |       | 0.0                 | %          |
| Operating                                   |       | 2,228,196               |       | 2,156,540               |       | 71,656             |       | 3.3                 | %          |
| Renting                                     |       | 174,510                 |       | 194,106                 |       | (19,596            | )          | (10.1               | )%         |
| Repairs and maintenance                     |       | 2,366,778               |       | 2,463,137               |       | (96,359            | )          | (3.9                | )%         |
| Taxes and insurance                         |       | 1,776,034               |       | 1,754,330               |       | 21,704             |       | 1.2                 | %          |
|                                        |       | 15,269,659              |       | 15,095,170              |       | 174,489            |       | 1.2                 | %          |
|                                        |       |                    |       |                    |       |               |       |                |       |
| Income before other income                  |       | 899,938                 |       | 950,989                 |       | (51,051            | )          | (5.4                | )%         |
|                                        |       |                    |       |                    |       |               |       |                |       |
| Other Income (Loss)                         |       |                    |       |                    |       |               |       |                |       |
| Interest income                             |       | 196,953                 |       | 202,777                 |       | (5,824             | )          | (2.9                | )%         |
| Casualty (Loss)                             |       | (60,000                 | )          | —                  |       | (60,000            | )          | —              | %          |
| (Loss) from investment in  partnerships     |       | (408,922                | )          | (118,071                | )          | (290,851           | )          | 246.3               | %          |
|                                        |       | (271,969                | )          | 84,706                  |       | (356,675           | )          | (421.1              | )%         |
| Income from continuing  operations          |       | 627,969                 |       | 1,035,695               |       | (407,726           | )          | (39.0               | )%         |
|                                        |       |                    |       |                    |       |               |       |                |       |
| Discontinued Operations:                    |       |                    |       |                    |       |               |       |                |       |
| Income (loss) from  discontinued operations |       | (100,000                | )          | (10,125                 | )          | (89,875            | )          | 887.7               | %          |
|                                        |       | (100,000                | )          | (10,125                 | )          | (89,875            | )          | 887.7               | %          |
| Net  Income                                 |       | $                       | 527,969    |                    | $          | 1,025,570          |       | (497,601            | )          | (48.5 | )% |
|                                             |            |                         |            |                         |            |                    |            |                     |            |  |  |  |

 

Rental incomefrom continuing operations for the six months ended June 30, 2007 wasapproximately $15,963,000 compared to approximately $15,815,000 for the sixmonths ended June 30, 2006, an increase of approximately $149,000 (1)%.  The properties with the most significantrental income increases include 1144 Commonwealth Avenue, with an increase ofapproximately $51,000; 62 Boylston Street, with an increase of approximately$39,000 and Worcester Road with an increase of approximately $19,000.  There were insignificant increases and/ordecreases at other properties.

Total expensesfrom continuing operations for the six months ended June 30, 2007 wereapproximately $15,270,000 compared to approximately $15,095,000 for the sixmonths ended June 30, 2006, an increase of approximately $175,000 (1.2)%.  The most significant increases were indepreciation and amortization of approximately $110,000, administrativeexpenses of approximately $109,000, operating expenses of approximately$72,000, and taxes and insurance of approximately $22,000.  These increases are offset by decreases inrepairs and maintenance expenses of approximately $96,000, interest expense ofapproximately $22,000 and renting expenses of approximately $20,000.  An explanation of these changes is includedin the discussion for the three month ended June 30, 2007.

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Interest incomewas approximately $197,000 for the six months ended June 30, 2007, compared toapproximately $203,000 for the six months ended June 30, 2006, a decrease ofapproximately $6,000.  This decrease isdue primarily to a decrease in cash available for investment.

As discussedpreviously, the Partnership has a 50% ownership interest in investmentproperties.  The net loss from theseinvestments is approximately $409,000 for the six months ended June 30, 2007compared to a loss of approximately $118,000 for the six months ended June 30,2006 an increase of approximately $291,000. The Partnership’s share of loss includes a gain on the sale of units ofapproximately $815,000 and $1,675,000 for the six months ended June 30, 2007and 2006, respectively.  (See Note 14 tothe financial statements for additional information.)

As a result of thechanges discussed above, net income for the six months ended June 30, 2007 was$527,969 compared to $1,025,570 for the six months ended June 30, 2006, adecrease of $497,601.

**LIQUIDITY ANDCAPITAL RESOURCES**

The Partnership’sprincipal source of cash during 2007 and 2006 was the collection of rents.

Themajority of cash and cash equivalents of $10,049,724 at June 30, 2007 and$9,773,250 at December 31, 2006 were held in interest bearing accounts atcreditworthy financial institutions.

This increase of$276,474 for the six months ended June 30, 2007 is summarized as follows:

|                                                       | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                            | ** ** | **2007**                                      | ** ** | **2006** | ** ** |
| Cash provided by  operating activities                |       | $                                             | 4,105,692  |   | $ | 4,110,556 |   |
| Cash (used in)  investing activities                  |       | (871,324                                      | )          | (1,587,260 | ) |
| Cash (used in)  financing activities                  |       | (536,286                                      | )          | (426,647 | ) |
| Distributions  paid                                   |       | (2,421,608                                    | )          | (2,421,608 | ) |
| Net increase (decrease)  in cash and cash equivalents |       | $                                             | 276,474    |   | $ | (324,959 | ) |

 

The cash providedby operating activities is primarily due to net income plus depreciationexpense and a non cash loss on the investment in joint ventures. The decreasein cash used in investing activities is due to a distribution from the jointventures during the six months ended June 30, 2007.  The increase in cash used in financingactivities is due to the principal payments on the mortgage notes payable.

During the sixmonths ended June 30, 2007 the Partnership received a distribution of $500,000from the joint venture compared to an investment of $450,000 in the jointventure during the six months ended June 30, 2006.   See Note 14 of the Consolidated FinancialStatements for additional information on the joint ventures and the relatedfinancial information.

The Partnershippaid a quarterly distribution of $7.00 per unit ($0.70 per depositary receipts)on March 31, and June 30, 2007 for a total distribution of $2,421,608.   Management anticipates that similardistributions will continue to be made during 2007.

During the six monthsended June 30, 2007, the Partnership and its Subsidiary Partnerships completedcertain improvements to their properties at a total cost of approximately$1,326,000.  The most significantimprovements were made at the following properties: approximately $217,000 atExecutive Apartments in Framingham,

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Massachusetts;approximately $152,000 at Redwood Hills in Worcester, Massachusetts;approximately $116,000 at Westgate Apartments in Woburn, Massachusetts;approximately $116,000 at Hamilton Oaks in Brockton,  Massachusetts; and approximately $106,000 atSchool Street in Framingham, Massachusetts; and approximately $93,000 atWestside Colonial in Brockton, Massachusetts. All such improvements were funded from the Partnership’s cash reservesand escrow accounts established in connection with the financing of applicableproperties.

In addition tothe improvements made to date in 2007, the Partnership and its SubsidiaryPartnerships plan to invest approximately $662,000 in capital improvementsduring the balance of 2007, the majority of which will be spent at 1144Commonwealth Avenue, Westside Colonial, Redwood Hills, School Street, WestsideColonial and Westgate Woburn.  Theseimprovements will be funded from escrow accounts established in connection withthe financing of applicable properties, as well as from the Partnership’s cash.

As of June 30, 2007,the Partnership had a 50% ownership in eight joint ventures, all of which havemortgage indebtedness.  We do not havecontrol of these partnerships and therefore we account for them using theequity method of consolidation.  At June30, 2007, our proportionate share of the non-recourse debt related to theseinvestments was equal to approximately $28,500,000.  See Note 14 to the Consolidated FinancialStatements for details of the investment in joint ventures including results ofoperations, equity and units sales.

The Partnershipanticipates that cash from operations and interest-bearing investments will besufficient to fund its current operations, finance current improvements to itsproperties and meet bank obligations on current mortgages.  The Partnership’s net income and cash flowmay fluctuate dramatically from year to year as a result of the sale ofproperties, mortgage financings, unanticipated increases in expenses, or theloss of significant tenants.

**Contractual Obligations**

Pleasesee Note 5 to the Consolidated Financial Statements for a description ofmortgage notes payable. The Partnerships have no other contractual obligationto be disclosed.

**Off-Balance SheetArrangements**

***The Partnership does not have anyoff-balance sheet arrangements.***

**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 statements reflect management’s good faith beliefswhen those statements are made, caution should be exercised in interpreting andrelying on such forward looking statements, the realization of which may beimpacted by known and unknown risks and uncertainties, events that may occursubsequent to the forward-looking statements, and other factors which may bebeyond the Partnership’s control and which can materially affect thePartnership’s actual results, performance or achievements for 2007 and beyond.

Along with risksdetailed from time to time in the Partnership’s filings with the Securities andExchange Commission, some factors that could cause the Partnership’s actualresults, performance or achievements to differ materially from those expressedor implied by forward-looking statements include but are not limited to thefollowing:

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

The Partnership is subject to the general economic risks affecting thereal estate industry, such as dependence on tenant’s financial condition andthe need to enter into new leases or renew leases on terms favorable to

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tenants in order to generate rental revenues.  The Partnership is also impacted by changingeconomic conditions making alternative housing arrangements more or lessattractive to the Partnership’s tenants, such as the interest rates on singlefamily home mortgages and the availability and purchase price of single-familyhomes in the Greater Boston metropolitan area.

The Partnership is subject to significant expenditures associated witheach investment, such as debt service payments, real estate taxes, insuranceand maintenance costs, which are generally not reduced when circumstances causea reduction in revenues from a property.

The Partnership is subject to increases in heating and utility coststhat may arise as a result of economic and market conditions and fluctuationsin seasonal weather conditions.

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

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

Financing or refinancing of Partnership properties may not be availableto the extent necessary or desirable, or may not be available on favorableterms.

The Partnership properties face competition from similar properties inthe same market.  This competition mayaffect the Partnership’s ability to attract and retain tenants and may reducethe rents that can be charged.

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

Insurance coverage for and relating to commercial properties is increasinglycostly and difficult to obtain.  Inaddition, insurance carriers have excluded certain specific items from standardinsurance policies, which have resulted in increased risk exposure for thePartnership.  These include insurancecoverage for acts of terrorism and war, and coverage for mold and otherenvironmental conditions.  Coverage forthese items is either unavailable, or prohibitively expensive.

Market interest rates could adversely affect the market prices forClass A Partnership Units and Depositary Receipts as well as performance andcash flow.

Changes in the tax laws and regulations may affect the income taxableto owners of the Partnership.  Thesechanges may affect the after-tax value of future distributions.

The Partnership may fail to identify, acquire, construct, or developadditional properties; may develop or acquire properties that do not produce adesired or expected yield on invested capital; may be unable to sellpoorly-performing or otherwise undesirable properties quickly; or may fail toeffectively integrate acquisitions of properties or portfolios of properties.

Risks associated with the use of debt to fundacquisitions and developments.

Competition for acquisitions may result in increasedprices for properties.

The sale of condominium units may not generate enough net proceeds topay the minimum curtailment payments required at the Investment Properties. ThePartnership may be required to fund any deficiencies.

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Any weakness identified in the Partnership’s internal controls as partof the evaluation being undertaken by the Company and its independent publicaccountants pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 couldhave an adverse effect on the Company’s business.

Ongoing compliance with Sarbanes-Oxley Act of 2002 mayrequire additional personnel or system changes.

The foregoing factorsshould not be construed as exhaustive or as an admission regarding the adequacyof disclosures made by the Partnership prior to the date hereof or theeffectiveness of said Act.  ThePartnership expressly disclaims any obligation to publicly update or revise anyforward-looking statement, whether as a result of new information, futureevents or otherwise.

The residential realestate market in the Greater Boston area continues to be competitive and thePartnership anticipates the climate will remain the same in the foreseeablefuture.  This may result in increases invacancy rates and/or a reduction in rents. The Partnership believes its presentcash reserves as well as anticipated rental revenue will be sufficient to fundits current operations, and to finance current planned improvements to itsproperties and continue dividend payments in the foreseeable future.

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

Item 3 —QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30,2007, the Partnership and its subsidiary Partnerships collectively haveapproximately $114,000,000 in long-term debt, all of which have fixed interestrates.  Accordingly, the fair value ofthese debt instruments is affected by changes in market interest rates.  For information regarding the fair value andmaturity dates of these debt obligations, see Notes 5 and 12 to theConsolidated Financial Statements.

For additionaldisclosures about market risk, see “Item 2 — Management’s Discussion andAnalysis of Financial Condition and Results of Operations — Factors that MayAffect Future Results.”

Item 4—CONTROLSAND PROCEDURES

DisclosureControls and Procedures.  The Company’smanagement, with the participation of the Company’s president and chiefexecutive officer and chief financial officer, has evaluated the effectivenessof the Company’s disclosure controls and procedures (as such term is defined inRules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of theperiod covered by this report.  Based onsuch evaluation, the Company’s president and chief executive officer and chieffinancial officer have concluded that, as of the end of such period, theCompany’s disclosure controls and procedures are effective in recording,processing, summarizing, and reporting, on a timely basis, information requiredto be disclosed by the Company in the reports that it files or submits underthe Exchange Act.

Internal ControlOver Financial Reporting.  There have notbeen any changes in the Company’s internal control over financial reporting (assuch term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)during the fiscal quarter to which this report relates that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

33

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PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

There is no materialpending legal proceedings.

Item 1A.  Risk Factors

There were nomaterial changes to the Risk Factors disclosed in our annual report on Form10-K for the year ended December 31, 2006.

None.

Item 2.    Unregistered Sale of Equity Securities andUse of Proceeds

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Submission of Matters to a Vote of SecurityHolders

On August 1, 2007,two members of the Advisory Committee resigned. In light of these resignations,the Partnership has cancelled the consent solicitation previously mailed to allof its limited partners on or about June 29, 2007, relating to thequalifications and appointment of additional members to the Advisory Committee,which consents were scheduled to be tabulated on August 6, 2007. Inaccordance with Section 14.11 of the Partnership’s Second Amended andRestated Contract of Limited Partnership, NewReal, Inc., the general partner ofthe Partnership, intends to select a revised slate of candidates to serve onthe Advisory Committee and to solicit the consent of the Partnership’s limitedpartners to qualify and appoint such candidates to the Advisory Committee. Anew consent solicitation identifying the nominees and the new record andtabulation dates for such consent will be filed by the Partnership with theSecurities and Exchange Commission under cover of Schedule 14A anddistributed to the limited partners of the Partnership within sixty (60) daysof August 1, 2007.

Item 5.    Other Information

None.

Item 6.    Exhibits

(a)                                  Seethe exhibit index below.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Actof 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.
| Date:  August 9, 2007 |                                              |
|--------------------------------------|---------------------------------------------------|
|                                 |                                              |
|                                 | NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP |
|                                 |                                              |
|                                 | By:                                               | NEWREAL, INC., |
|                                 |                                              | its General Partner* |
|                                 |                                              |
|                                 |                                              |
|                                 | By:                                               | /s/ Ronald Brown |
|                                 |                                              | Ronald Brown, President |

 

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*         Functionalequivalent of Chief Executive Officer, Principal Financial Officer andPrincipal Accounting Officer

 

35

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**EXHIBIT INDEX**
| Exhibit  No. | ** ** | **Description of Exhibit**                                                                                                                                                                                              | ** ** |
|--------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **   | ** ** | ** **                                                                                                                                                                                                                        | ** ** |
| (31.1)       |       | Certification  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Ronald Brown,  Principal Executive Officer of the Partnership (President and a Director of  NewReal, Inc., sole General Partner of the Partnership)   |       |
|         |       |                                                                                                                                                                                                                              |       |
| (31.2)       |       | Certification  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Harold Brown,  Principal Financial Officer of the Partnership (Treasurer and a Director of  NewReal, Inc., sole General Partner of the Partnership)   |       |
|         |       |                                                                                                                                                                                                                              |       |
| (32.1)       |       | Certification  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Ronald Brown,  Principal Executive Officer of the Partnership (President and a Director of  NewReal, Inc., sole General Partner of the Partnership). |       |
|         |       |                                                                                                                                                                                                                              |       |
| (32.2)       |       | Certification Pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002, of Harold Brown, Principal  Financial Officer of the Partnership (Treasurer and a Director of NewReal,  Inc., sole General Partner of the Partnership). |       |

 

36

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**SIGNATURES**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.
|        | NEW ENGLAND REALTY  ASSOCIATES LIMITED PARTNERSHIP |
|--------|----------------------------------------------------|
|   |                                               |
|   |                                               |
|   | By:                                                | /s/ NEWREAL, INC. |
|   |                                               | Its General  Partner |
|   |                                               |   |
|   |                                               |   |
|   | By:                                                | /s/ RONALD BROWN |
|   |                                               | Ronald Brown,  President |
|   |                                               |
|   |                                               |
|   | Dated:  August 9, 2007              |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated.
| Signature        | ** ** | **Title**                                                       | ** ** | **Date**             |
|------------------|------------|-----------------------------------------------------------------|------------|----------------------|
|             |       |                                                            |       |                 |
|             |       |                                                            |       |                 |
| /s/ RONALD BROWN |       | President and Director of the General Partner                   |       | August 9,  2007 |
| Ronald Brown     |       | (Principal Executive Officer)                                   |       |                 |
|             |       |                                                            |       |                 |
|             |       |                                                            |       |                 |
| /s/ HAROLD BROWN |       | Treasurer and Director of the General Partner                   |       | August 9,  2007 |
| Harold Brown     |       | (Principal Financial Officer and Principal  Accounting Officer) |       |                 |

 

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