UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549



Form 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                        toCommission file number 0-12138




New England Realty Associates Limited Partnership(Exact name of registrant as specified in its charter)

Massachusetts(State or other jurisdiction of
incorporation or organization)

04-2619298(I.R.S. employer
identification no.)39 Brighton Avenue,
Allston, Massachusetts(Address of principal executive offices)

02134(Zip code)Registrant's telephone number, including area code:(617) 783-0039


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

Depositary Receipts(Title of each Class)

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


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

Class A
Limited Partnership Units(Title of class)

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

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

Large accelerated filer o

Accelerated filer ý

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

Smaller reporting company o


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

As of October 31, 2008, there were 109,371 Class A units (1,093,712 Depositary Receipts) 26,453 Class B units of limited partnership units
issued and outstanding.

(For
this computation, the Registrant has excluded the market value of all Depositary Receipts reported as beneficially owned by executive officers and directors of the General Partner
of the Registrant; such
exclusion shall not be deemed to constitute an admission that any such person is an affiliate of the Registrant.)



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INDEX

PART IFINANCIAL INFORMATIONItem 1.

Financial Statements


3Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007 (audited)


3Consolidated Statements of Income for the Three Months Ended September 30, 2008 and September 30, 2007, and the Nine
Months Ended September 30, 2008 and September 30, 2007 (all unaudited)


4Consolidated Statement of Changes in Partners' Capital for the Nine Months Ended September 30, 2008 and September 30,
 2007 (all unaudited)


5Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and September 30, 2007 (all
unaudited)


6Notes to Financial Statements


7Item 2.

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


29Item 3.

Quantitative and Qualitative Disclosures About Market Risk


42Item 4.

Controls and Procedures


42PART IIOTHER INFORMATIONItem 1.

Legal Proceedings


43Item 1A.

Risk Factors


43Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds


43Item 3.

Defaults Upon Senior Securities


44Item 4.

Submission of Matters to a Vote of Security Holders


44Item 5.

Other Information


44Item 6.

Exhibits


44SIGNATURES


45


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NEW ENGLAND REALTY ASSOCIATES, L.P.        PART IFINANCIAL INFORMATION

Item 1.    Financial Statements

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

The
aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations and the financial statements and notes thereto included in New England
Realty Associates L.P.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

The
results of operations for the nine month period ended September 30, 2008 are not necessarily indicative of the results to be expected for the entire fiscal year or any other
period.

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS

September 30,
2008

December 31,
2007(Unaudited)

(Audited)ASSETSRental Properties

$
92,201,387

$
96,730,044Property Held for Sale





1,047,492Cash and Cash Equivalents


13,256,237


6,890,525Rents Receivable


622,443


505,869Real Estate Tax Escrows


285,217


483,010Prepaid Expenses and Other Assets


5,634,918


3,335,431Investment in Joint Ventures


11,411,416


15,011,786Financing and Leasing Fees


1,067,616


387,613Total Assets

$
124,479,234

$
124,391,770LIABILITIES AND PARTNERS' CAPITALNotes Payable

$


$
3,224,419Mortgage Notes Payable


134,343,127


113,579,904Accounts Payable and Accrued Expenses


1,651,191


1,746,266Advance Rental Payments and Security Deposits


3,126,240


3,176,322Total Liabilities


139,120,558


121,726,911Commitments and Contingent Liabilities (Note 9)Partners' Capital 139,226 units outstanding in 2008


(14,641,324
)

2,664,859Total Liabilities and Partners' Capital

$
124,479,234

$
124,391,770


See
notes to consolidated financial statements.

3

---





NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended
September 30,

Nine Months Ended
September 30,2008

2007

2008

2007(Unaudited)

(Unaudited)RevenuesRental income

$
7,981,479

$
7,611,143

$
23,778,488

$
22,851,053Laundry and sundry income


95,907


99,906


304,905


301,0678,077,386


7,711,049


24,083,393


23,152,120ExpensesAdministrative


424,363


383,960


1,305,968


1,156,627Depreciation and amortization


1,655,560


1,738,060


4,846,979


5,098,036Management fees


327,079


311,711


978,507


931,059Operating


784,581


770,835


3,117,155


2,911,567Renting


218,896


218,065


405,761


383,395Repairs and maintenance


1,429,528


1,308,607


3,653,203


3,552,584Taxes and insurance


867,119


915,819


2,630,404


2,600,5605,707,126


5,647,057


16,937,977


16,633,828Income Before Other Income and Discontinued Operations


2,370,260


2,063,992


7,145,416


6,518,292Other Income (expense)Interest expense


(1,930,302
)

(1,837,588
)

(5,725,270
)

(5,477,793
)Interest income


39,357


102,959


119,979


299,911Casualty loss











(60,000
)Mortgage prepayment penalties








(4,487,706
)

(Loss) from investment in joint ventures


(300,352
)

(121,712
)

(765,370
)

(530,634
)(2,191,297
)

(1,856,341
)

(10,858,367
)

(5,768,516
)Income (loss) from Continuing Operations


178,963


207,651


(3,712,951
)

749,776Discontinued OperationsGain on the sale of real estate


67,650





10,054,392


Income (loss) from discontinued operations


(22,229
)

11,042


(113,408
)

(3,110
)45,421


11,042


9,940,984


(3,110
)Net Income

$
224,384

$
218,693

$
6,228,033

$
746,666Income per UnitIncome (loss) before discontinued operations

$
1.35

$
1.20

$
(26.86
)
$
4.33Income (loss) from discontinued operations


0.34


0.06


71.92


(0.02
)Net Income per Unit

$
1.69

$
1.26

$
45.06

$
4.31Weighted Average Number of Units Outstanding


132,979


172,872


138,224


173,252


See
notes to consolidated financial statements.

4

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL        (UNAUDITED)

Units

Partner's CapitalLimited









LimitedGeneral
Partnership



Treasury
Units



General
PartnershipClass A

Class B

Subtotal

Total

Class A

Class B

TotalBalance, January 1, 2007


144,180


34,243


1,802


180,225


6,973


173,252

$
9,310,672

$
2,214,737

$
116,594

$
11,642,003Distribution to Partners




















(2,899,594
)

(688,654
)

(36,245
)

(3,624,493
)Stock buyback














1,199


(1,199
)

(924,634
)







(924,634
)Net Income














-


-


597,333


141,967


7,466


746,666Balance, Sept. 30, 2007


144,180


34,243


1,802


180,225


8,172


172,053

$
6,083,777

$
1,667,950

$
87,815

$
7,839,542Balance, January 1, 2008


144,180


34,243


1,802


180,225


14,109


166,116

$
1,052,816

$
1,531,414

$
80,629

$
2,664,859Distribution to Partners




















(2,376,778
)

(564,485
)

(29,710
)

(2,970,973
)Stock buyback














26,501


(26,501
)

(20,398,884
)

(156,141
)

(8,218
)

(20,563,243
)Stock transfer














389


(389
)

5,027,360


(4,775,965
)

(251,395
)

Net Income




















4,982,426


1,183,326


62,281


6,228,033Balance, Sept. 30, 2008


144,180


34,243


1,802


180,225


40,999


139,226

$
(11,713,060
)
$
(2,781,851
)
$
(146,413
)
$
(14,641,324
)


See notes to consolidated financial statements.

5

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended
September 30,2008

2007(Unaudited)Cash Flows from Operating ActivitiesNet income

$
6,228,033

$
746,666Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation and amortization


4,846,979


5,264,569Loss from investment in joint ventures


765,370


530,634(Income) loss from the sale of real estate from discontinued operations


(10,054,392
)

Changes in operating assets and liabilities(Increase) in rents receivable


(116,574
)

(34,921
)(Increase) in insurance recovery receivable





(1,554,919
)Increase (decrease) in accounts payable and accrued expense


(95,075
)

726,510(Increase) Decrease in real estate tax escrow


197,793


16,996(Increase) Decrease in prepaid expenses and other assets


(2,299,487
)

(207,313
)Increase in advance rental payments and security deposits


(50,082
)

52,435Total Adjustments


(6,805,468
)

4,793,891Net cash provided by (used in) operating activities


(577,435
)

5,540,657Cash Flows provided by (used in) Investing Activities(Investment in) unconsolidated joint ventures





(45,000
)Net proceeds from the sale of rental properties


7,423,853


Proceeds from joint ventures


2,835,000


1,850,000Purchase and improvement of rental properties


(2,250,301
)

(2,113,229
)Net cash provided by (used in) investing activities


8,008,552


(308,229
)Cash Flows (provided by) used in Financing ActivitiesPayment of mortgage notes payable


(3,224,419
)

Payment of financing costs


(867,377
)

(14,660
)Principal payments of mortgage notes payable


(566,493
)

(802,481
)Stock buyback


(20,563,243
)

(924,634
)Proceeds of mortgage notes payable


27,127,100


Distributions to partners


(2,970,973
)

(3,624,493
)Net cash provided by (used in) financing activities


(1,065,405
)

(5,366,268
)Net Increase (Decrease) in Cash and Cash Equivalents


6,365,712


(133,840
)Cash and Cash Equivalents, at beginning of period


6,890,525


9,773,250Cash and Cash Equivalents, at end of period

$
13,256,237

$
9,639,410


See
notes to consolidated financial statements

6

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        SEPTEMBER 30, 2008        (UNAUDITED)

NOTE 1.  SIGNIFICANT ACCOUNTING POLICIES

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

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

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

On
a periodic basis, management assesses whether there are any indicators that the value of the Company's investments in unconsolidated joint ventures may be impaired. An investment is
impaired only if management's estimate of the value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent
impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the value of the investment. Management does not believe that the value of any of the
company's investments in unconsolidated joint ventures is impaired.

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

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

Rental Properties:Rental properties are stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred; improvements and
additions are capitalized. When assets are retired or otherwise disposed of, the cost of the asset and related accumulated depreciation is eliminated from the accounts, and any gain or loss on such
disposition is included in income. Fully depreciated assets are removed from the accounts. Rental properties are depreciated by both straight-line and accelerated methods over their
estimated useful lives. Significant acquisitions with long

7

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term
leases are evaluated to determine if a portion of the purchase price is allocable to intangibles such as non market rate rents.

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

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

Income Taxes:The financial statements have been prepared on the basis that NERA and its subsidiaries are entitled to tax treatment as partnerships. Accordingly,
no provision for income taxes has been recorded.

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

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

Comprehensive Income:Comprehensive income is defined as changes in partners' equity, exclusive of transactions with owners (such as capital contributions and
dividends). NERA did not have any comprehensive income items in the nine months ended September 30, 2008 or the year ended December 31, 2007.

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

Concentration of Credit Risks and Financial Instruments:The Partnership's properties are located in New England, and the Partnership is subject to the general
economic risks related thereto. No single tenant accounted for more than 5% of the Partnership's revenues in 2008 or 2007. The Partnership makes its temporary cash investments with
high-credit-quality financial institutions. At September 30, 2008, substantially all of the Partnership's cash and cash equivalents were held in interest-bearing accounts at
financial institutions, earning interest at rates from 1.09% to 2.86%. At September 30, 2008 and December 31, 2007, respectively approximately $14,000,000 and $7,500,000 of cash and cash
equivalents, and cash included in prepaid expenses and other assets exceeded federally insured amounts.

Advertising Expense:Advertising is expensed as incurred. Advertising expense was $80,224 and $89,646 for the nine months ended September 30, 2008, and 2007
respectively.

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

If
circumstances arise that previously were considered unlikely and, as a result, the Partnership decides not to sell a property previously classified as held for sale, the property is
reclassified as held and used. A property that is reclassified is measured and recorded individually at the lower of (a) its

8

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carrying
amount before the property was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the property been continuously classified
as held and used, or (b) the fair value at the date of the subsequent decision not to sell.

Interest Capitalized:The Company follows the policy of capitalizing interest as a component of the cost of rental property when the time of construction exceeds
one year. During the nine months ended September 30, 2008 and the year ended December 31, 2007, there was no capitalized interest.

Extinguishment of Debt:When existing mortgages are refinanced with the same lender, EITF 96-19 "Debtors Accounting for a Modification or
exchange of Debt Instruments" requires they be analyzed. If it is determined that the refinancing is substantially different then they will be recorded as an extinguishment of debt. However if it is
determined that the refinancing is substantially the same then they will be recorded as an exchange of debt. All refinancings qualify as extinguishment of debt.

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

NOTE 2.  RENTAL PROPERTIES

As of September 30, 2008, the Partnership and its Subsidiary Partnerships owned 2,265 residential apartment units in 20 residential and
mixed-use complexes (collectively, the "Apartment Complexes"). The Partnership also owns 19 condominium units in a residential condominium complex, all of which are leased to residential
tenants (collectively referred to as the "Condominium Units"). The Apartment Complexes and Condominium Units are located primarily in the metropolitan Boston area of Massachusetts.

Additionally,
as of September 30, 2008, the Partnership and Subsidiary Partnerships owned a commercial shopping center in Framingham, a commercial building in Newton and
mixed-use properties in Boston, Brockton and Newton, all in Massachusetts. These properties are referred to collectively as the "Commercial Properties."

The
Partnership also owned a 50% ownership interest in nine residential and mixed use complexes (the "Investment Properties") at September 30, 2008 with a total of 390 units,
accounted for using the equity method of consolidation. See Note 14 for summary information on these investments.

9

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Rental
properties consist of the following:

September 30,
2008

December 31,
2007

Useful LifeLand, improvements and parking lots

$
23,393,886

$
23,829,256


10-31 yearsBuildings and improvements


105,856,140


107,200,909


15-31 yearsKitchen cabinets


4,585,659


4,164,828


5-10 yearsCarpets


3,970,754


3,441,808


5-10 yearsAir conditioning


947,775


864,564


7-10 yearsLaundry equipment


245,926


191,527


5-7 yearsElevators


951,032


896,394


20 yearsSwimming pools


126,275


126,275


10 yearsEquipment


1,955,402


1,668,493


5-7 yearsMotor vehicles


104,725


105,800


5 yearsFences


231,660


226,171


5-10 yearsFurniture and fixtures


4,419,338


4,310,312


5-7 yearsSmoke alarms


120,531


99,214


5-7 years146,909,103


147,125,551Less accumulated depreciation


(54,707,716
)

(50,395,507
)$
92,201,387

$
96,730,044


On
January 3, 2008, the Partnership sold the Oak Ridge Apartments, a 61-unit residential apartment complex located in Foxboro, Massachusetts. The sale price was
$7,150,000, which resulted in a gain of approximately $6,400,000. In November 2007, the Partnership purchased a fully occupied commercial building located in Newton, Massachusetts, known as
Linewt LLC. The purchase price was $3,475,000 and the building consists of 5,850 square feet of commercial space. The Partnership utilized Section 1031 of the IRS code to affect a tax
free exchange on the gain of Oak Ridge up to the purchase price of the Newton property. Most of the taxable gain of approximately $3,000,000 will be taxed at the capital gain rates. In accordance with
Section 1031, the Newton property was owned by a Qualified Intermediary for the period from the purchase date of the Newton property and the sale date of the Foxboro property. The Qualified
Intermediary borrowed $3,225,112 from Harold Brown, Treasurer of the General Partner, to purchase the Newton property. This loan was paid in full, with interest at 6% of $34,401, from the proceeds of
the Oak Ridge sale on January 3, 2008. On January 22, 2008, the Partnership financed the Newton property with a first mortgage of $1,700,000 at 5.75% interest only until maturity in
January 2018.

In
April 2008, the Partnership sold the Coach Apartments, a 48 unit residential apartment complex located in Acton, Massachusetts. The sale price was $4,600,000, which resulted in a gain
of approximately $3,800,000. In October 2008, the Partnership purchased a fully occupied medical office building located in Brookline, Massachusetts, referred to as "the Barn." The purchase price was
of the Barn was $7,000,000 and it consists 20,000 square feet of commercial space. The Partnership utilized
Section 1031 of the IRS code to affect a tax free exchange on the gain of Coach up to the purchase price of the Barn. This acquisition was funded from the assumption of the existing mortgage of
approximately $4,020,000, the cash from the sale of Coach of approximately $2,600,000, and the balance of $400,000 was funded from cash reserves.

NOTE 3.  RELATED PERSON TRANSACTIONS

The Partnership's properties are managed by an entity that is owned by the majority shareholder of the General Partner. The management fee is equal to 4% of
rental revenue and laundry income.

10

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Total
fees paid were approximately $976,000 and $973,000 during the nine months ended September 30, 2008 and 2007, respectively.

The
Partnership Agreement permits the General Partner or management company to charge the costs of professional services (such as counsel, accountants and contractors) to NERA. In the
nine months ended September 30, 2008 and 2007, approximately $412,000 and $970,000 respectively, was charged to NERA for legal, accounting, construction, maintenance, rental and architectural
services and supervision of capital improvements. Of the 2008 expenses referred to above, approximately $155,000 consisted of repairs and maintenance and $211,000 of administrative expense.
Approximately $46,000 of expenses for construction, architectural services and supervision of capital projects was capitalized in rental properties.

Additionally
in 2008, the Hamilton Company received approximately $385,000 from the Investment Properties of which approximately $203,000 was the management fee, $24,000 was for
construction supervision and architectural fees, $128,000 was for maintenance services and $18,000 was for administrative services. The Hamilton Company legal department acts as closing attorney on
certain condo sales receiving approximately $18,000 during the nine months ended September 30, 2008. As more fully described in Note 14, an entity partially owned by the majority
shareholder of the General Partner is the sales agent for certain condominium sales receiving approximately $43,000 of commissions in 2008.

On
January 1, 2004, all employees were transferred to the management company's payroll. The Partnership reimburses the management company for the payroll and related expenses of
the employees who work at the properties. Total reimbursement was approximately $1,672,000 and $1,610,000 for the nine months ended September 30, 2008 and 2007, respectively. The Management
Company maintains a 401K plan for all eligible employees whereby the employees may contribute the maximum allowed by law. The plan also provides for discretionary contributions by the employer. There
were no employer contributions in 2008 and 2007.

In
1996, prior to becoming an employee and President of the Management Company, the current President of the Management Company performed asset management consulting services to the
Partnership. This individual continues to perform this service and receives an asset management fee from the Partnership, receiving $37,500 during the nine months ended September 30, 2008 and
2007.

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

On
June 30, 2003, the Partnership purchased five condominium units in a 42-unit building located in Brookline, Massachusetts. These were purchased from Harvard 45
Associates LLC ("Harvard 45") which is owned 70% by the 75% shareholder and treasurer of the General Partner, and 5% by the President of Hamilton. The total purchase price for these
condominiums was approximately $2,416,000 and was approved both by the Partnership's Advisory Committee and the General Partner. Harvard 45 realized a gain of approximately $648,000 from these sales.
Harvard 45 also sold 16 units to unrelated parties; the prices for all 21 units sold were comparable.

The
Partnership sold three units during the six months ended June 30, 2008 and realized a gain of approximately $124,000 and sold the remaining two units during the third quarter
of 2008 and realized a gain of approximately $126,000 for a total gain of approximately $250,000.

The
above 42-unit condominium building is managed by an entity wholly owned by the 25% shareholder and President of the General Partner. That entity received annual
management fees from

11

---



the
five units of approximately $1,500, and Hamilton reduced its management fees to approximately 2%, so that the total management fee will not exceed the 4% allowed by the Partnership's Partnership
Agreement.

In
March 2005, the Partnership sold the Middlesex Apartments to an entity wholly owned by the majority shareholder of the General Partner. The selling price was $6,500,000 which resulted
in a capital gain for the Partnership of approximately $5,800,000 and an increase in the Partnership's cash reserves of approximately $4,800,000 after paying off the existing $1,300,000 mortgage,
prepayment penalties and other selling expenses. The buyer is selling the property as condominium units. An entity 31% owned by the majority shareholder of the General Partner and 5% owned by the
President of the management company is the sales agent and will receive a variable commission of 3% to 5% on each
sale. Total commissions paid to date are approximately $138,000. Although the buyer assumed the costs and economic risks of converting and selling the condominium units, if the net gain from the sale
of these units exceeds $500,000, the excess will be split equally between the buyer and Partnership. The Partnership previously estimated its share of the excess gain to be approximately $89,000. The
last remaining unit was sold in October 2008, which resulted in a reduction in the estimated gain to approximately $50,000.

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

NOTE 4.  OTHER ASSETS

Included in prepaid expenses and other assets at September 30, 2008 and December 31, 2007 is a provision for insurance recovery from casualty losses
of approximately $139,000 and $600,000, respectively. In addition, approximately $1,348,000 and $1,325,000 of security deposits and prepaid rent deposits are included in prepaid expenses and other
assets at September 30, 2008 and December 31, 2007, respectively.

Included
in prepaid expenses and other assets at September 30, 2008 and December 31, 2007 is approximately $757,000 and $394,000, respectively, held in escrow to fund
future capital improvements.

Also
included in prepaid expenses and other assets at September 30, 2008 is approximately $2,700,000 held by a Qualified Intermediary for the acquisition described in
Note 2.

Financing
and leasing fees of $1,067,616 and $387,613 are net of accumulated amortization of $345,198 and $609,843 at September 30, 2008 and December 31, 2007,
respectively.

12

---





NOTE 5.  MORTGAGE NOTES PAYABLE

At September 30, 2008 and December 31, 2007, the mortgages payable consisted of various loans, all of which were secured by first mortgages on
properties referred to in Note 2. At September 30, 2008, the fixed interest rates on these loans ranged from 4.99% to 8.46%, payable in monthly installments aggregating approximately
$702,000, including interest, to various dates through 2023. The majority of the mortgages are subject to prepayment penalties. At September 30, 2008, the weighted average interest rate on the
above mortgages was 5.63%. The effective rate of 5.71% includes the amortization expense of deferred financing costs. See Note 12 for fair value information.

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

Approximate
annual maturities at September 30, 2008 are as follows:

2009current maturities

$
739,0002010


2,486,0002011


2,703,0002012


862,0002013


40,045,000Thereafter


87,508,000$
134,343,000


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

In
February 2008, the Partnership refinanced ten properties with outstanding 8.44% mortgages of approximately $37,800,000 with new mortgages totaling approximately $60,000,000. The new
mortgages which mature in February 2023 require interest only payments at interest rates from 5.6% to 5.7%. Deferred costs associated with these mortgages totaled approximately $710,000 and,
accordingly, the effective interest rates are 5.7% to 5.8%. Prepayment penalties of approximately $3,700,000 were incurred in these transactions. After payment of existing mortgages, prepayment
penalties and other costs of the transactions, approximately $17,000,000 was received by the Partnership.

In
April 2008, the Partnership refinanced the property located at Worcester Road with a mortgage balance of approximately $3,500,000 at 8% with a new $6,000,000 mortgage at 5.97%
interest only mortgage which matures in March 2018. Prepayment penalties and other costs were approximately $850,000. In June, the Partnership refinanced the Westside Colonial Apartments with a
balance of approximately $4,600,000 maturing in 2008 with interest at a rate of 6.52% with $7,000,000 at 5.59% interest only mortgage maturing in June 2023. Closing costs were approximately $100,000.
There were no prepayment penalties. Approximately $4,000,000 was received by the Partnership from these refinancings.

13

---



PROFORMA INFORMATION IS AS FOLLOWS

Nine Months Ended
September 30, 2008

Year Ended
December 31, 2007Historic

Adjustment

Proforma

Historic

Adjustment

Proforma(Unaudited)





(Unaudited)RevenuesRental income


23,778,488





22,778,488


31,228,847


0


31,228,847Laundry and sundry income


304,905





304,905


396,894


0


396,89424,083,393





24,083,393


31,625,741


0


31,625,741ExpensesAdministrative


1,305,968





1,305,968


1,617,349


0


1,617,349Depreciation and amortization


4,846,979





4,846,979


6,903,790


0


6,903,790Interest


5,725,270


96,759


5,822,029


7,574,784


402,721


7,977,505Management fees


978,507





978,507


1,279,770


0


1,279,770Operating


3,117,155





3,117,155


4,121,795


0


4,121,795Renting


405,761





405,761


496,335


0


496,335Repairs and maintenance


3,653,203





3,653,203


4,869,479


0


4,869,479Taxes and insurance


2,630,404





2,630,404


3,498,347


0


3,498,34722,663,247


96,759


22,760,006


30,361,649


402,721


30,764,370Income Before Other Income and Discontinued Operations


1,420,146


(96,759
)

1,323,387


1,264,092


(402,721
)

861,371


The
above proforma information shows the effect of the Partnership's refinancing of approximately $46 million with interest at 6.52% to 8.44% with new mortgages of approximately
$71 million with interest of 5.54% to 5.97% as described above. The new mortgages are included in the September 30, 2008 balance sheet and the cash flows are included in the statement of
cash flows for the nine months then ended. Net cash flows necessary to service these new interest only mortgages is approximately $106,000 less per year than the required payments on the old mortgages
which included principal payments of approximately $500,000 per year.

NOTE 6.  ADVANCE RENTAL PAYMENTS AND SECURITY DEPOSITS

The Partnership's residential lease agreements may require tenants to maintain a one-month advance rental payment and/or a security deposit. At
September 30, 2008, amounts received for prepaid rents of approximately $1,551,000 are included in cash and cash equivalents, and security deposits of approximately $1,517,000 are included in
other assets.

NOTE 7.  PARTNERS' CAPITAL

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

In
2008, the Partnership approved quarterly distributions of $7.00 per unit ($0.70 per receipt) payable on March 31, June 30, and September 30, 2008.

14

---



In
2007, the Partnership paid quarterly distributions of $7.00 per unit ($.70 per receipt) in March, June, September, and December 2007 for a total distribution of $28.00 per unit ($2.80
per receipt).

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

Nine Months
Ended
September 30,2008

2007Income (loss) per Depositary Receipt before Discontinued Operations

$
(2.69
)
$
0.43Income from Discontinued Operations


7.19


0Net Income per Depositary Receipt after Discontinued Operations

$
4.50

$
0.43Distributions per Depositary Receipt

$
2.10

$
2.10


NOTE 8.  TREASURY UNITS

Treasury Units at September 30, 2008 are as follows:

Class A


32,799Class B


7,790General Partnership


41040,999


On
August 20, 2007, NewReal, Inc., the General Partner authorized an equity repurchase program ("Repurchase Program") under which the Partnership was permitted to purchase,
over a period of twelve months, up to 100,000 Depositary Receipts (each of which is one-tenth of a Class A Unit). On January 15, 2008, the General Partner authorized an
increase in the Repurchase Program from 100,000 to 200,000 Depositary Receipts and on January 30, 2008 the General Partner further increased the Repurchase Program from 200,000 to 300,000
Depositary Receipts. On March 6, 2008, the General Partner further increased the total number of Depositary Receipts that could be repurchased pursuant to the Repurchase Program from 300,000 to
500,00. On August 8, 2008, the General Partner re-authorized and renewed the Repurchase Program for an additional 12-month period ending August 19, 2009. In
addition, the General Partner also authorized the expansion of the Repurchase Program to require the Partnership to repurchase a proportionate number of Class B Units and General Partner Units
in connection with any repurchases of any Depositary Receipts by the Partnership based upon the 80%, 19% and 1% fixed distribution percentages of the holders of the Class A, Class B and
General Partner Units under the Partnership's Second Amended and Restate Contract of Limited Partnership. Repurchases of Depositary Receipts or Partnership Units pursuant to the Repurchase Program may
be made by the Partnership from time to time in its sole discretion in open market transactions or in privately negotiated transactions. As of September 30, 2008, the Partnership has
repurchased 334,244 Depositary Receipts at an average price of $77.12 per receipt (or $771.20 per underlying Class A Unit), 104.5 Class B Units at an average price of $766.90 per Unit,
and 5.5 General Partner Units at an average price of $766.90 per Unit, totaling approximately $25,862,000 including brokerage fees paid by the Partnership.

15

---



On
September 17, 2008, the Partnership completed the issuance of an aggregate of 6,642 Class A Units held in Treasury to current holders of Class B and General
Partner Units upon the simultaneous retirement to treasury of 6,309 Class B Units and 333 General Partner Units pursuant to an equity distribution plan authorized by the Board of Directors on
the General Partner on August 8, 2008 and as further described under Item 3.02 of the Partnership's Current Report on 8-K as filed with the Securities Exchange Commission on
September 18, 2008, which is incorporated by reference.

In
October 2008, an additional 20,100 depositary receipts were purchased at an average price of $63.41 for a total of approximately $1,288,000. Additionally, as described above
this will result in the purchase of 503 Class B and General Partnership Units for an approximate cost of $320,000.

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

As
of September 30, 2008, the repurchase of approximately $25,884,000 of Depositary Receipts described above, resulted in the Partnership having a negative Partners' Capital of
$14,641,324.

NOTE 9.  COMMITMENTS AND CONTINGENCIES

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

NOTE 10.  RENTAL INCOME

During the nine months ended September 30, 2008, approximately 92% of rental income was related to residential apartments and condominium units with leases
of one year or less. The remaining 8% was related to commercial properties, which have minimum future annual rental income on non-cancellable operating leases at September 30, 2008
as follows:

Commercial
Property Leases2009

$
1,975,0002010


1,766,0002011


1,618,0002012


1,428,0002013


1,212,000Thereafter


2,113,000$
10,112,000


The
aggregate minimum future rental income does not include contingent rentals that may be received under various leases in connection with percentage rents, common area charges and real
estate taxes. Aggregate contingent rentals from continuing operations were approximately $365,000 and $366,000 for the nine months ended September 30, 2008 and for the year ended
December 31, 2007, respectively.

Rents
receivable are net of allowances for doubtful accounts of approximately $622,000 and $505,000 at September 30, 2008 and December 31, 2007, respectively. Included in
rents receivable is approximately $449,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis.
The majority of this amount is for long-term leases with Staples and Trader Joe's at Staples Plaza in Framingham, Massachusetts.

16

---



NOTE 11.  CASH FLOW INFORMATION

During the nine months ended September 30, 2008 and 2007, cash paid for interest was $5,774,892 and $5,756,171 respectively.

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

NOTE 12.  FAIR VALUE OF FINANCIAL INSTRUMENTS

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



Carrying
Amount

Estimated
Fair ValueMortgage Notes PayableAt September 30, 2008

$
134,343,127

$
133,354,862At December 31, 2007

$
113,579,904

$
115,104,658


Disclosure
about fair value of financial instruments is based on pertinent information available to management as of September 30, 2008 and December 31, 2007. Although
management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since
December 31, 2007 and current estimates of fair value differ significantly from these amounts presented herein.

NOTE 13.  TAXABLE INCOME AND TAX BASIS

Taxable income reportable by the Partnership and includable in its partner's tax returns is different than financial statement income because of deferred gains,
accelerated depreciation, different tax lives, and timing differences related to prepaid rents and allowances. Taxable income is approximately $6,700,000 less than statement income for the nine months
ended September 30, 2008 and approximately $1,000,000 greater than statement income for the year ended December 31, 2007. The cumulative tax basis of the Partnership's real estate
at September 30, 2008 is approximately $4,000,000 less than the statement basis. The primary reason for the lower taxable income and basis is the acquisition of two properties in 2008 utilizing
tax free exchanges. The Partnership's tax basis in its joint venture investments is approximately $200,000 less than statement basis. The tax free exchanges in 2007 and 2008 and depreciation rules
that generated substantial tax deductions in prior years may result in taxable income in future years exceeding statement income.

17

---





NOTE 14.  INVESTMENT IN JOINT VENTURES

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

On
October 3, 2005, the Partnership invested $2,500,000 for a 50% ownership interest in a 168-unit apartment complex in Quincy, Massachusetts. The purchase price was
$30,875,000. The Partnership plans to sell the majority of units as condominium and retain 48 units for long-term investment. Gains from the sales of units will be taxed at ordinary income
rates (approximately $47,000 per unit). In February 2007, the Partnership refinanced the 48 units which will be retained with a new mortgage in the amount of $4,750,000 with an interest rate of 5.57%,
interest only for five years. The loan will be amortized over 30 years thereafter and matures in March 2017. In April 2008, the Partnership refinanced an additional 20 units and obtained a new
mortgage in the amount of $2,368,000 with interest at 5.75%, interest only, which matures in 2013. As of October 27, 2008, the Partnership sold 105 units, the proceeds of which went to pay down
the mortgage on the property. The balance on the new mortgage is approximately $1,808,000 at September 30, 2008. This investment is referred to as Hamilton Bay, LLC.

On
March 7, 2005, the Partnership invested $2,000,000 for a 50% ownership interest in a building comprising 49 apartments, one commercial space and a 50-car surface
parking lot located in Boston, Massachusetts. The purchase price was $14,300,000, with a $10,750,000 mortgage. The Partnership plans to operate the building and initiate development of the parking
lot. In June 2007, the Partnership separated the parcels, formed an additional limited liability company for the residential apartments and obtained a mortgage on the property. The new limited
liability company formed for the residential apartments is referred to as Hamilton Essex 81 Apartments, LLC. In August
2008, the Partnership refinanced the mortgages on both parcels at Essex 81 and transferred the commercial space to Essex 81 Apartments, LLC and the parking lot to Essex 81, LLC. The
mortgage on Essex 81 Apartments, LLC is $8,600,000 with interest only at 5.79% due in August 2015. The mortgage on Essex 81 LLC is $2,162,000 with a variable interest rate of 2.25% over
the daily Libor rate (2.57% at September 29, 2008) and is due in August 2011. The investment in the parking lot is referred to as Essex 81 LLC.

On
March 2, 2005, the Partnership invested $2,352,000 for a 50% ownership interest in a 176-unit apartment complex with an additional small commercial building located
in Quincy, Massachusetts. The purchase price was $23,750,000. The Partnership plans to sell the majority of units as condominiums and retain 49 units for long-term investment. The
Partnership obtained a new 10-year mortgage in the amount of $5,000,000 on the units to be retained by the Partnership. The interest on the new loan is 5.67% fixed for the 10 year
term with interest only payments for five years and amortized over a 30 year period for the balance of the loan term. As of October 27, 2008, 126 units have been sold, and an additional
unit has a signed purchase and sales agreement. Gains from the sales of units (approximately $56,000 per unit) will be taxed at ordinary income rates. This investment is referred to as Hamilton
1025, LLC.

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

18

---



December
2006. The unamortized deferred financing costs of approximately $30,000 were written off in the first quarter of 2007. This investment is referred to as Hamilton Minuteman, LLC.

In
August 2004, the Partnership invested $8,000,000 for a 50% ownership interest in a 280-unit apartment complex located in Watertown, Massachusetts. The total purchase price
was $56,000,000. As of October 27, 2008, the Partnership sold 137 units as condominiums which were located in three buildings. Gains from these sales will be taxed as ordinary income
(approximately $33,000 per unit). The majority of the sales proceeds were applied to reduce the mortgage with the final payment made during the second quarter of 2007. With the sale of the units and
the payments of the liabilities, the assets will be combined with Hamilton on Main Apartments. An entity partially owned by the majority shareholder of the General Partner and the President of the
management company, 31% and 5% respectively, was the sales agent and will receive a variable commission on each sale of 3% to 5%. Hamilton on Main, LLC is known as Hamilton Place.

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

In
November 2001, the Partnership invested approximately $1,533,000 for a 50% ownership interest in a 40-unit apartment building in Cambridge, Massachusetts. This property
has a 12-year mortgage, with a remaining balance at September 30, 2008 of approximately $7,494,000 at 6.9% which is amortized on a 30-year schedule, with a final payment
of approximately $6,000,000 in 2014. This investment is referred to as 345 Franklin, LLC.

As
required by the lender for the 2004 and 2005 acquisitions, the Treasurer of the General Partner has provided a limited guaranty equal to fifty percent (50%) of the outstanding
balance, reducing to zero percent (0%) upon the completion of the Curtailment Payments. The mortgage on Essex 81 Commercial is the only mortgage with a guaranty. In the event that he is obligated to
make payments to the lender as a result of this guaranty, the Partnership and other investors have, in turn, agreed to indemnify him for their proportionate share of any such payments.

19

---



Summary financial information as of September 30, 2008 (unaudited)

Essex 81
Commercial

Essex 81
Apartments

345
Franklin

Hamilton
1025

Hamilton
Bay
Sales

Hamilton
Bay
Apartments

Minuteman

Hamilton
on Main

Hamilton
Place
Sales

TotalASSETSRental Properties


1,022,820


12,200,895


9,373,786


6,844,245


2,327,118


8,294,783


8,407,271


25,551,487





74,022,406Cash & Cash Equivalents


5,478


281


5,699


69,325


28,878


6,736


2,770


29,598


66


148,830Rent Receivable


27,271


99,771


12,232


3,313


1,867


(682
)

(4,037
)

6,760





146,494Real Estate Tax Escrow





28,751


38,827


43,167


101,973


45,685


14,398


90,458





261,287Due From Investment Properties











90,000


101,973








230,000


1,798,870


2,220,843Prepaid Expenses & Other Assets


616


75,769


80,076


66,252


171,175


76,502


63,233


360,989





894,612Financing & Leasing Fees


13,889


140,109


42,869


41,007


23,030


53,281


34,738


45,424





394,346Total Assets


1,070,075


12,545,575


9,553,490


7,157,309


2,654,,041


8,476,304


8,518,374


26,314,716


1,798,935


78,088,819LIABILITIES AND PARTNERS' CAPITALMortgage Notes Payable


2,162,000


8,600,000


7,494,389


5,000,000


1,808,000


4,750,000


5,500,000


16,696,141





52,010,529Due to Investment Properties








375,000








1,973


45,000


1,798,870





2,220,843Accounts Payable & Accrued Exp


12,265


54,947


90,799


10,459


19,098


6,021


39,673


165,573


1,285


400,120Advance Rental Payments & Security Deposits





131,327


116,457


61,544


17,308


79,025


47,377


181,454





634,493Total Liabilities


2,174,265


8,786,274


8,076,645


5,072,003


1,844,406


4,837,020


5,632,050


18,842,037


1,285


55,265,985Partners' Capital


(1,104,190
)

3,759,301


1,476,845


2,085,306


809,636


3,639,284


2,886,324


7,472,679


1,797,650


22,822,834Total Liabilities & Capital


1,070,075


12,545,575


9,553,490


7,157,309


2,654,041


8,476,304


8,518,374


26,314,716


1,798,935


78,088,819Partners' CapitalNERA 50%


(552,095
)

1,879,651


738,422


1,042,653


404,818


1,819,642


1,443,162


3,736,339


898,825


11,411,417


20

---





Summary financial information for the nine months ended September 30, 2008 (unaudited)

Essex 81
Commercial

Essex 81
Apartments

345
Franklin

Hamilton
1025

Hamilton
Bay
Sales

Hamilton
Bay
Apartments

Minuteman

Hamilton
on Main

Hamilton
Place
Sales

TotalRevenuesRental Income


305,709


814,994


775,115


590,527


172,812


615,792


565,244


1,758,124


1,747


5,600,063Laundry and Sundry Income





1,587


1,013











2,426


15,115





20,141305,709


816,581


776,128


590,527


172,812


615,792


567,669


1,773,239


1,747


5,620,204ExpensesAdministrative


4,954


5,696


28,519


13,219


8,060


7,318


2,429


42,312


3,770


116,277Depreciation and Amortization


86,798


299,435


285,922


248,993


159,537


291,533


389,886


1,157,859


20,508


2,940,472Management Fees


17,024


31,366


31,352


23,741


7,480


24,284


22,094


72,863


51


230,255Operating


29,891


74,336


43,067


1,134


1,694


787


42,100


275,466


214


468,688Renting





17,339


33,959


4,394


1,556


2,116


2,218


21,828





83,410Repairs and Maintenance


2,754


90,895


63,589


257,646


118,169


213,398


74,494


325,117


5,828


1,151,891Taxes and Insurance


50,296


93,282


66,317


94,714


43,105


82,924


96,042


239,220


4,861


770,860191,716


612,449


552,726


643,842


339,601


622,360


629,262


2,134,664


35,232


5,761,853Income (Loss) Before Other Income


113,993


204,132


223,402


(53,315
)

(166,789
)

(6,568
)

(61,593
)

(361,425
)

(33,485
)

(141,649
)Other Income (Loss)Interest Expense


(103,500
)

(353,467
)

(393,332
)

(216,737
)

(59,951
)

(203,625
)

(238,129
)

(665,606
)

(7
)

(2,234,353
)Interest Income


1,444


100


245


685


3,831


475


261


1,473


2,640


11,154Gain on Sale of Real Estate











121,130


352,393








12,381


348,204


834,108Other Income (Expenses)





























(102,056
)

(353,367
)

(393,087
)

(94,922
)

296,273


(203,150
)

(237,868
)

(651,752
)

350,837


(1,389,091
)Net Income (Loss)


(11,937
)

(149,235
)

(169,685
)

(148,237
)

129,484


(209,718
)

(299,461
)

(1,013,177
)

317,352


(1,530,740
)P&LNERA 50%


(5,968
)

(74,617
)

(84,843
)

(74,118
)

64,742


(104,859
)

(149,731
)

(506,589
)

158,676


(765,370
)Total units/condominiums





49


40


176


120


48


42


146


137


758Units to be retained





49


40


49


0


48


42


146


0


374Units to be sold











127


120











137


384Units sold through Oct. 27, 2008











126


105











137


368Balance of unsold units











1


15














16Unsold units with deposits for future sale as of Oct. 27, 2008











1

















1


21

---





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

Essex 81
Commercial

Essex 81
Apartments

345
Franklin

Hamilton
1025

Hamilton
Bay
Sales

Hamilton
Bay
Apartments

Minuteman

Hamilton
on Main

Hamilton
Place
Sales

TotalRevenuesRental Income


98,755


284,375


258,038


196,925


56,957


205,957


193,117


583,193





1,877,317Laundry and Sundry Income





1,017


356











1,443


4,830





7,64698,755


285,392


258,394


196,925


56,957


205,957


194,559


588,023





1,884,963ExpensesAdministrative


631


1,807


14,064


4,789


226


2,632


1,537


12,756





38,442Depreciation and Amortization


27,034


100,975


108,324


82,998


53,681


97,178


131,586


392,125





993,901Management Fees


2,673


10,645


10,429


8,075


2,197


8,052


7,040


23,452





72,563Operating


8,989


25,767


11,110


307


37


244


12,528


67,595





126,577Renting





12,014


17,296


1,318





929


440


6,957





38,954Repairs and Maintenance


1,175


42,823


36,802


95,424


17,933


60,503


25,820


98,060





378,539Taxes and Insurance


12,926


42,241


22,425


18,222


7,378


14,288


26,181


77,192





220,85453,428


236,272


220,450


211,133


81,452


183,826


205,131


678,137





1,869,830Income Before Other Income


45,327


49,120


37,944


(14,208
)

(24,495
)

22,131


(10,572
)

(90,114
)




15,133Other Income (Loss)Interest expense


(31,360
)

(121,156
)

(130,494
)

(72,818
)

(27,772
)

(68,374
)

(79,983
)

(222,886
)




(754,841
)Interest Income


120


74


15


130


782


82


52


230


1


1,487Gain on Sale of Real Estate











66,150


71,364














137,514Other Income (Expenses)





























(31,240
)

(121,082
)

(130,479
)

(6,538
)

44,374


(68,292
)

(79,931
)

(222,656
)

1


(615,840
)Net Income (Loss)


14,087


(71,962
)

(92,535
)

(20,746
)

19,879


(46,161
)

(90,503
)

(312,770
)

1


(600,707
)P&LNERA 50%


7,044


(35,981
)

(46,267
)

(10,373
)

9,940


(23,080
)

(42,251
)

(156,385
)

0


(300,354
)


22

---





Future annual mortgage maturities at September 30, 2008 are as follows:

Essex 81

Essex 81
Apartments

345
Franklin

Hamilton
1025

Hamilton
Bay
Sales

Hamilton
Bay
Apartments

Minuteman

Hamilton
on Main

Hamilton
Place
SalesPeriod End

March
2005

March
2005

November
2005

March
2005

October
2005

October
2005

August
2004

August
2004

August
2004

TotalSeptember 30, 2009








135,090














249,593





384,682September 30, 2010





8,911


144,711














262,728





416,350September 30, 2011


2,162,000


110,346


155,018














276,561





2,703,925September 30, 2012





116,907


166,060


50,135





50,135


36,421


291,128





710,617September 30, 2013





123,859


177,887


64,222


1,808,000


64,222


65,250


306,468





2,616,025Thereafter





8,239,977


6,715,623


4,885,643





4,885,643


4,648,328


15,309,664





45,178,9302,162,000


8,600,000


7,494,389


5,000,000


1,808,000


4,750,000


5,500,000


16,696,141





52,010,529


23

---



Summary financial information as of September 30, 2007 (unaudited)

Essex 81
Commercial

Essex 81
Apartments

345
Franklin

Hamilton
1025

Hamilton
Bay
Sales

Hamilton
Bay
Apartments

Minuteman

Hamilton
on
Main

Hamilton
Place
Sales

TotalASSETSRental Properties


4,810,110


8,829,653


9,306,299


7,320,693


6,462,374


9,287,217


8,846,141


25,531,643


3,402,646


83,796,776Cash & Cash Equivalents


4,525


702


(11,650
)

14,611


(211,081
)

38,454


18,634


10,350


795,094


659,639Rent Receivable


199,186


20,093





8,050


4,072


(789
)

670


2,820


5,636


239,738Real Estate Tax Escrow





9,526


41,005


16,256





29,692


18,074


408,923





523,476Due From Investment Properties


























591


591Prepaid Expenses & Other Assets


21,154


135,953


112,638


271,787


104,671


38,030


114,730


322,049


583,726


1,704,738Financing & Leasing Fees


47,224


120,729


51,035


46,034





59,433


39,753


54,120


5,204


423,532Total Assets


5,082,199


9,116,656


9,499,327


7,677,431


6,360,037


9,452,037


9,038,000


26,329,906


4,792,898


87,438,491LIABILITIES AND PARTNERS' CAPITALMortgage Notes Payable


3,000,000


7,762,000


7,620,497


5,000,000


4,095,109


4,750,000


5,500,000


16,825,000





54,552,606Due to Investment Properties























591





591Accounts Payable & Accrued Exp


30,315


38,247


68,391


18,208


147,984


11,330


35,675


111,178


36,704


498,032Advance Rental Payments & Security Deposits


24,000


106,807


97,429


59,859


41,866


81,626


35,254


132,308


3,020


582,169Total Liabilities


3,054,315


7,907,054


7,786,317


5,078,066


4,284,958


4,842,956


5,570,929


17,069,077


39,725


55,633,396Partners' Capital


2,027,885


1,209,602


1,713,010


2,599,364


2,075,079


4,609,082


3,467,071


9,260,829


4,753,173


31,715,095Total Liabilities & Capital


5,082,199


9,116,656


9,499,327


7,677,431


6,360,037


9,452,038


9,038,000


26,329,906


4,792,898


87,348,491Partners' CapitalNERA 50%


1,013,943


604,801


856,505


1,299,682


1,037,540


2,304,541


1,733,536


4,630,414


2,376,587


15,857,547


24

---





Summary financial information for the nine months ended September 30, 2007 (unaudited)

Essex 81
Commercial

Essex 81
Apartments

345
Franklin

Hamilton
1025

Hamilton
Bay
Sales

Hamilton
Bay
Apartments

Minuteman

Hamilton
on Main

Hamilton
Place
Sales

TotalRevenuesRental Income


912,372


238,481


769,637


603,631


618,368


437,959


543,406


1,754,922


200,261


6,079,038Laundry and Sundry Income


1,571


1,054


2,858











751


29,168





35,402913,943


239,535


772,495


603,631


618,368


437,959


544,156


1,784,090


200,261


6,114,440ExpensesAdministrative


7,875


3,262


18,667


18,280


28,569


8,534


4,773


41,441


13,364


144,765Depreciation and Amortization


117,367


218,960


251,319


291,621


751,180


80,285


417,366


1,539,725


244,953


3,912,775Management Fees


32,828


7,813


32,129


26,358


24,851


21,089


21,738


70,614


7,764


245,182Operating


71,469


18,424


47,374


2,865


12,060


627


45,547


221,227


4,145


423,737Renting


2,600


9,325


30,385


3,964


1,805


4,377


3,332


8,442





64,230Repairs and Maintenance


45,365


28,577


55,897


211,292


268,302


145,162


55,978


258,814


158,457


1,227,842Taxes and Insurance


94,030


35,276


67,605


119,539


146,762


82,437


54,190


214,585


67,771


882,194371,534


321,637


503,375


673,918


1,233,528


342,511


602,923


2,354,847


496,454


6,900,726Income (Loss) Before Other Income


542,409


(82,102
)

269,120


(70,287
)

(615,160
)

95,448


58,767


(570,757
)

(296,193
)

(786,286
)Other Income (Loss)Interest expense


(442,307
)

(130,280
)

(399,469
)

(215,584
)

(481,749
)

(170,395
)

(243,084
)

(664,103
)

(50,127
)

(2,797,098
)Interest income


1,412





798


8,599


109


659


5,470


720


8,651


26,419Gain on Sale of Real Estate











730,073


872,755











932,546


2,535,374Other Income (Expenses)











(37,428
)







(2,248
)







(39,676
)(440,895
)

(130,280
)

(398,671
)

485,660


391,115


(169,736
)

(239,862
)

(663,383
)

891,070


(274,981Net Income (Loss)


101,514


(212,382
)

(129,551
)

415,372


(224,045
)

(74,288
)

(298,629
)

(1,234,140
)

594,877


(1,061,267
)P&LNERA 50%


50,757


(106,191
)

(64,776
)

207,686


(112,022
)

(37,144
)

(149,314
)

(617,070
)

297,439


(530,633
)Total units/condominiums





49


40


176


120


48


42


146


137


758Units to be retained





49


40


49


0


48


42


146


0


374Units to be sold











127


120











137


384Units sold through Oct. 27, 2007











123


79











127


329Balance of unsold units











4


41











10


55Unsold units with deposits for future sale as of Oct. 27, 2007











1


13











2


16


25

---





Summary financial information for the three months ended September 30, 2007 (unaudited)

Essex 81
Commercial

Essex 81
Apartments

345
Franklin

Hamilton
1025

Hamilton
Bay
Sales

Hamilton
Bay
Apartments

Minuteman

Hamilton
on Main

Hamilton
Place
Sales

TotalRevenuesRental Income


194,875


238,481


253,755


199,875


126,150


190,090


182,822


573,621


17,078


1,976,748Laundry and Sundry Income





1,054


413














15,417





16,884194,875


239,535


254,168


199,875


126,150


190,090


182,822


589,038


17,078


1,993,632ExpensesAdministrative


313


3,262


7,668


4,377


6,487


2,738


1,087


14,476


7,350


47,759Depreciation and Amortization


(104,675
)

218,960


84,933


97,209


252,467


34,521


129,615


516,066


78,319


1,306,964Management Fees


6,137


7,813


9,697


8,386


4,835


7,721


7,227


23,674


837


76,327Operating


6,872


18,424


13,599


1,539


(2,207
)

483


12,035


68,143


820


119,798Renting





9,325


17,403


965


414


1,425


1,705


4,222





35,459Repairs and Maintenance


2,749


28,577


31,535


68,166


73,823


68,257


22,166


111,604


32,338


439,215Taxes and Insurance


7,939


35,276


22,936


33,281


34,064


32,023


17,875


74,955


15,337


273,687(80,665
)

321,637


187,771


213,923


396,883


147,169


191,260


813,141


135,001


2,299,119Income Before Other Income


275,540


(82,102
)

66,397


(14,048
)

(243,733
)

42,921


(8,438
)

(224,103
)

(117,923
)

(305,487
)Other Income (Loss)Interest expense


(42,519
)

(130,280
)

(132,609
)

(72,659
)

(105,078
)

(68,310
)

(79,812
)

(223,783
)

(126
)

(855,176
)Interest income


331





276


3,550





297





279


6,293


11,024Gain on Sale of Real Estate











256,644


248,617











400,962


906,223Other Income (Expenses)

















-











-(42,188
)

(130,280
)

(132,333
)

187,535


143,539


(68,013
)

(79,812
)

(223,504
)

407,129


62,071Net Income (Loss)


233,352


(212,382
)

(65,936
)

173,487


(100,194
)

(25,092
)

(88,250
)

(447,607
)

289,206


(243,417
)P&LNERA 50%


116,676


(106,191
)

(32,968
)

86,743


(50,097
)

(12,546
)

(44,125
)

(223,804
)

144,603


(121,708
)


26

---



Future annual mortgage maturities at September 30, 2007 are as follows:

Essex 81
Commercial

Essex 81
Apts.

345
Franklin

Hamilton
1025

Hamilton
Bay Sales

Hamilton
Bay Apts.

Hamilton
Minuteman

Hamilton on
Main Apts

Hamilton
Place
SalesAcquisition Date Period End

March
2005

March
2005

November
2001

March
2005

October
2005

October
2005

August
2004

August
2004

August
2004

TotalSeptember 30, 2008








126,108





4,095,109








138,651





4,359,867September 30, 2009


3,000,000


29,307


135,090














247,633





3,412,030September 30, 2010





92,795


144,711














260,770





498,276September 30, 2011





98,481


155,018














274,603





528,102September 30, 2012





103,245


166,060


50,135





36,421


49,966


289,170





694,997Thereafter





7,438,172


6,893,510


4,949,865





4,713,579


5,450,034


15,614,174





45,059,3333,000,000


7,762,000


7,620,497


5,000,000


4,095,109


4,750,000


5,500,000


16,825,000





54,552,605


Interest rates, the majority of which are variable, range from 5.18% to 6.9% at September 30, 2008.

NOTE 15.  NEW ACCOUNTING PRONOUNCEMENT

In June 2005, the FASB ratified the consensus reached by the Emerging Issues Task Force ("EITF") regarding EITF 04-05, "Investor's Accounting
for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights." The conclusion provides a framework for addressing the question
of when a sole general partner, as defined in EITF 04-05, should consolidate a limited partnership. The EITF has concluded that the general partner of a limited partnership should
consolidate a limited partnership, unless the limited partners have either (a) the substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause,
or (b) substantive participating rights. In addition, the EITF concluded that the guidance should be expanded to include all limited partnerships, including those with multiple general
partners. We adopted EITF 04-05 as of January 1, 2006. We have assessed our investments in unconsolidated real estate joint ventures and have determined that
EITF 04-05 did not have an impact on our financial condition or results of operations.

In
September 2006, the FASB issued Statement No. 157,Fair Value Measurements("SFAS No. 157"). SFAS No. 157 provides
guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when
pricing the asset or liability. SFAS No. 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data.
SFAS No. 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective in fiscal years beginning after November 15, 2007.
We believe that the adoption of this standard on January 1, 2008 will not have a material effect on our consolidated financial statements.

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
after November 15, 2006. SAB 108 provides guidance on the consideration of the effects of prior period misstatements in quantifying current year misstatements for the purpose of a
materiality assessment. SAB 108 provides for the quantification of the impact of correcting all misstatements, including both the carryover and reversing effects of prior year misstatements, on
the current year financial statements. The adoption of SAB 108 on December 21, 2006 did not have a material effect on our consolidated financial statements.

27

---



In
February 2007, the FASB issued statement No. 159,The Fair Value Option for Financial Assets and Financial Liabilities("SFAS
No. 159"). SFAS No. 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial instruments and certain other
items at fair value.

FASB Statement No. 141(R)(revised 2007), ("FASB No. 141(R)"),Business Combinations

In December 2007, the FASB issued FASB No. 141(R) which establishes principles and requirements for how the acquirer shall
recognize and measure in financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquired and goodwill acquired in a business combination. This
statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The
Partnership is currently assessing the potential impact that the adoption of FASB No. 141(R) will have on its financial position and results of operations.

FASB Statement No. 160 ("FASB No. 160")Noncontrolling Interests in Consolidated Financial
Statementsan Amendment of ARB No. 151

In December 2007, the FASB issued No. 160, which establishes and expands accounting and reporting standards for noncontrolling
interests, which will be recharacterized as noncontrolling interests, in a subsidiary and the deconsolidation of a subsidiary. FASB 160 is effective for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. This statement is effective for fiscal years beginning on or after
December 31, 2008. The Partnership is currently assessing the potential impact that the adoption of FASB No. 160 will have on its financial position and results of operations.

NOTE 16.  DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE

The following tables summarize income from discontinued operations for the nine months ended September 30, 2008 and 2007:

Nine Months Ended
September 30,2008

2007Total Revenues

$
243,470

$
1,082,121Operating and other expenses


256,774


918,698Depreciation and amortization


100,104


166,533356,878


1,085,231(Loss) income from discontinued operations


(113,408
)

(3,110
)Gain on the sale of real estate


10,054,392


$
9,940,984

$
(3,110
)


28

---





Item 2MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction with the financial statements and notes thereof appearing elsewhere in this
Report. This Report, on Form 10-Q, contains forward-looking statements within the meaning of the securities law. Actual results or developments could differ materially from those
projected in such statements as a result of certain factors set forth in the section below entitled "Factors That May Affect Future Results" and elsewhere in this Report.

For
the first three quarters of 2008, the Partnership continued to meet revenue and operating expense expectations. Management had anticipated continued increases in utilities, bad debt
and vacancy. To date, bad debt has abated along with utility costs and vacancy rates. Leading into the fourth quarter, vacancy rates should continue to be at the low levels enjoyed in the past.
Management still believes that earnings power related to revenue growth and expense management will be mitigated by recession fears and growing unemployment. It is expected that bad debt and vacancy
rates will increase by mid 2009. Extensive energy management control across all aspects of utility costs will have a positive impact against rising costs associated with real estate taxes and other
operating expenses.

The
portfolio has no near term debt exposure nor condominium conversion exposure putting the portfolio in a good position to manage any near term downturn. Management continues to weigh
acquisition and disposition opportunities in contrast to its' stock repurchase program.

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

At
September 30, 2008, Harold Brown, his brother Ronald Brown and the President of Hamilton, Carl Valeri, collectively own approximately 36.4% of the Depositary Receipts
representing the Partnership's Class A Units (including Depositary Receipts held by trusts for the benefit of such persons' family members). Harold Brown also owns 75% of the Partnership's
Class B Units, 75% of the capital stock of NewReal, Inc. ("NewReal"), the Partnership's sole general partner, and all of the outstanding stock of Hamilton. Ronald Brown also owns 25% of
the Partnership's Class B Units and 25% of NewReal's capital stock. In addition, Ronald Brown is the President and director of NewReal and Harold Brown is NewReal's Treasurer and also a
director. Two of NewReal's other directors Roberta Ornstein and Conrad DiGregorio, also own immaterial amounts of the Partnership's Class A Units or receipts.

In
addition to the Management Fee, the Partnership Agreement further provides for the employment of outside professionals to provide services to the Partnership and allows NewReal to
charge the Partnership for the cost of employing professionals to assist with the administration of the Partnership's properties. Additionally, from time to time, the Partnership pays Hamilton for
repairs and maintenance services, legal services, construction services and accounting services. The costs charged by Hamilton for these services are at the same hourly rate charged to all entities
managed by Hamilton, and management believes such rates are competitive in the marketplace.

29

---



Hamilton
accounted for approximately 4% of the repair and maintenance expense paid for by the Partnership in the nine months ended September 30, 2008, and approximately 5% for the
year ended December 31, 2007. Of the funds paid to Hamilton for this purpose, the great majority was to cover the cost of services provided by the Hamilton maintenance department, including
plumbing, electrical, carpentry services, and snow removal for those properties close to Hamilton's headquarters. However, several of the larger Partnership properties have their own maintenance
staff. Further, those properties that do not have their own maintenance staff but are located more than a reasonable distance from Hamilton's headquarters in Allston, Massachusetts are generally
serviced by local, independent companies.

Hamilton's
legal department handles most of the Partnership's eviction and collection matters. Additionally, it prepares most long-term commercial lease agreements and
represents the Partnership in selected purchase and sale transactions. Overall, Hamilton provided approximately 49% of the legal services paid for by the Partnership during the nine months ended
September 30, 2008 and approximately 59% for the year ended December 31, 2007.

Additionally,
as described in Note 3 to the Consolidated Financial Statements, the Hamilton Company received similar fees from the Investment Properties.

R.
Brown Partners, which is owned by Ronald Brown, manages the 42- unit condominium association referred to as Harvard 45 located in Brookline, Massachusetts. Up until the
third quarter of 2008, the Partnership owned five units at Harvard 45. R. Brown Partners received annual management fees from the five units of approximately $3,000, and Hamilton reduced its
management fees to approximately 2%, so that the total management fee would not exceed the 4% allowed by the Partnership's Partnership Agreement.

The
Partnership requires that three bids be obtained for construction contracts in excess of $5,000. Hamilton may be one of the three bidders on a particular project and may be awarded
the contract if its bid and its ability to successfully complete the project are deemed appropriate. For contracts that are not awarded to Hamilton, Hamilton charges the Partnership a construction
supervision fee equal to 5% of the contract amount. Hamilton's architectural department also provides services to the Partnership on an as-needed basis. In 2008, Hamilton provided the
Partnership approximately $46,000 in construction and architectural services. In 2007, Hamilton provided construction and architectural services paid for by the Partnership totaling $750,000.

Prior
to 1991, the Partnership employed an outside, unaffiliated company to perform its bookkeeping and accounting functions. Since that time, such services have been provided by the
accounting staff at Hamilton which consists of approximately 14 people. During the nine months ended September 30, 2008, Hamilton charged the Partnership $75,000 ($25,000 per quarter) for
bookkeeping and accounting services and anticipates an additional $25,000 for the fourth quarter of 2008.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements, in accordance with accounting principles generally accepted in the United States
of America, requires the Partnership to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and
liabilities. The Partnership regularly and continually evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate properties and its
investments in and advances to joint ventures. The Partnership bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be
reasonable under the circumstances. However, because future events and their

30

---



effects
cannot be determined with certainty, the determination of estimates requires the exercise of judgment. The Partnership's critical accounting policies are those which require assumptions to be
made about such matters that are highly uncertain. Different estimates could have a material effect on the Partnership's financial results. Judgments and uncertainties affecting the application of
these policies and estimates may result in materially different amounts being reported under different conditions and circumstances. See Note 1 to the Consolidated Financial Statements,
Principles of Consolidation.

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

Real
Estate and Depreciation: Real estate assets are stated at the lower of cost or fair value, less accumulated depreciation. Costs related to the acquisition, development, construction
and improvement of properties are capitalized, including interest, internal wages and benefits, real estate taxes and insurance. Capitalization usually begins with commencement of development activity
and ends when the property is ready for leasing. Significant acquisitions with long term leases are evaluated to determine if a portion of the purchase price is allocable to intangibles such as non
market rate rents. Replacements and improvementssuch as HVAC equipment, structural replacements, windows, appliances, flooring, carpeting and kitchen/bath replacements and
renovationsare capitalized and depreciated over their estimated useful lives as follows:



If
there is an event or change in circumstances that indicates impairment in the value of a property, the Partnership's policy is to assess the impairment by making a comparison of the
current and projected operating cash flows of the property over its remaining useful life, on an undiscounted basis, to the carrying amount of the property. If the carrying value is in excess of the
estimated projected operating cash flows of the property, the Partnership would recognize an impairment loss equivalent to the amount required to adjust the carrying amount to its estimated fair
value. The Partnership has not recognized an impairment loss since 1995.

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

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

31

---



With
respect to investments in and advances to the Investment Properties, the Partnership looks to the underlying properties to assess performance and the recoverability of carrying
amounts for those investments in a manner similar to direct investments in real estate properties. An impairment charge is recorded if the carrying value of the investment exceeds 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 by insurance. If it is determined that a loss is likely to occur, the estimated amount of the loss is recorded in the financial statements. Both the amount of the loss and the point at which
its occurrence is considered likely can be difficult to determine.

RESULTS OF OPERATIONS

Comparison of the three months ended September 30, 2008 to the three months ended September 30, 2007 (as adjusted for
discontinued operations).

The
Partnership and its Subsidiary Partnerships earned income from continuing operations of approximately $178,963 during the three months ended September 30, 2008 compared to
approximately $207,651 for the three months ended September 30, 2007, a decrease of approximately $28,688.

The
rental activity is summarized as follows:

Occupancy DateOctober 27,
2008

July 28,
2008

October 22,
2007ResidentialUnits


2,265


2,265


2,377Vacancies


49


31


71Vacancy rate


2.1
%

1.3
%

3.0
%CommercialTotal square feet


90,848


90,848


84,998Vacancy


0


0


0Vacancy rate


0
%

0
%

0
%




Rental Income (in thousands)
Three Months Ended September 30,2008

2007Total
Operations

Continuing
Operations

Total
Operations

Continuing
OperationsTotal rents

$
7,959

$
7,981

$
7,961

$
7,611Residential percentage


92
%

92
%

93
%

93
%Commercial percentage


8
%

8
%

7
%

7
%Contingent rentals

$
134

$
134

$
45

$
45


32

---





September 30,
2008

September 30,
2007

Dollar
Change

Percent
ChangeRevenues:Rental income

$
7,981,479

$
7,611,143

$
370,336


4.9
%Laundry and sundry income


95,907


99,906


(3,999
)

(4.0
%)8,077,386


7,711,049


366,337


4.8
%Expenses:Administrative


424,363


383,960


40,403


10.5
%Depreciation and amortization


1,655,560


1,738,060


(82,500
)

(4.7
)%Management fees


327,079


311,711


15,368


4.9
%Operating


784,581


770,835


13,746


1.8
%Renting


218,896


218,065


831


Repairs and maintenance


1,429,528


1,308,607


120,921


9.2
%Taxes and insurance


867,119


915,819


(48,700
)

(5.3
)%5,707,126


5,647,057


60,069


1.1
%Income Before Other Income and Discontinued Operations


2,370,260


2,063,992


306,268


14.8
%Other Income (Loss)Interest expense


(1,930,302
)

(1,837,588
)

(92,714
)

(5.0
)%Interest income


39,357


102,959


(63,602
)

(61.8
)%Casualty loss





Mortgage prepayment penalties





(Loss) Income from investment in joint ventures


(300,352
)

(121,712
)

(178,640
)

(146.7
)%$
(2,191,297
)
$
(1,856,341
)

(334,956
)

(18.0
)%Income (loss) from continuing operations


178,963


207,651


(28,688
)

(13.8
)%Discontinued Operations:Gain on the sale of real estate


67,650





67,650


100.0
%(Loss) from discontinued operations


(22,229
)

11,042


(33,271
)

(301.3
)%45,421


11,042


34,379


311.3
%Net Income

$
224,384

$
218,693

$
5,691


2.6
%


Rental
income from continuing operations for the three months ended September 30, 2008 was approximately $7,981,000 compared to approximately $7,611,000 for the three months ended
September 30, 2007, an increase of approximately $370,000 (4.9%). The properties with the most significant increases include 62 Boylston Street with an increase of approximately $95,000;
Hamilton Linewt with an increase of approximately $67,000; 1144 Commonwealth Avenue with an increase of approximately $40,000; Westgate Apartments with an increase of approximately $38,000; Westside
Colonial with an increase of approximately $17,000 and Worcester Road with an increase of approximately $16,000. The increases at 62 Boylston Street and 1144 Commonwealth Avenue is due to vacancies in
2007 arising from fire and flooding losses. Linewt is a new acquisition in 2008. The majority of the Partnership's other properties experienced minimal rental income increases.

Total
expenses from continuing operations for the three months ended September 30, 2008 were approximately $5,707,000 compared to approximately $5,647,000 for the three months
ended September 30, 2007, an increase of approximately $60,000 (1.1%). The most significant increases were repairs and maintenance expenses of approximately $121,000 (9.2%) due to continued
maintenance at

33

---



property
in an effort to maintain occupancy; administrative expenses of approximately $40,000 (10.5%) due to an increase in professional fees due to SEC compliance costs and equity repurchase related
legal expenses; an increase in operating expenses of approximately $14,000 (1.8%) due to increases in utility costs; and an increase in the management fees of approximately $15,000 (4.9%) due to the
increase in rental income. These increases are offset by decreases in depreciation and amortization expenses of approximately $82,500 and a decrease in taxes and insurance of approximately $49,000
(5.3%) due to decreases in insurance premiums for many of the Partnership properties.

At
September 30, 2008, the Partnership has a 50% ownership interest in nine joint ventures. The loss on these investments is approximately $300,000 and $122,000 for the three
months ended September 30, 2008 and 2007, respectively, an increase of approximately $178,000 (146.7%). Included in the loss for the three months ended September 30, 2008 and 2007 is a
gain on the sale of units of approximately $69,000 and $453,000, respectively. A number of units held for sale are vacant which has resulted in the loss of rental income, as well as continued
maintenance of these units by the Partnership. See Note 14 to the Consolidated Financial Statements for financial information of these investment properties. The summaries are as follows:

345
Franklin Street, Cambridge, Massachusetts

The
Partnership invested in a 40-unit property in 2001. The Partnership's share of loss on this investment is approximately $46,000 and $33,000 for
the three months ended September 30, 2008 and 2007, respectively. The Partnership's share of loss on this investment is approximately $85,000 and $65,000 for the nine months ended
September 30, 2008 and 2007, respectively. There were two vacant units at October 27, 2008.

Hamilton
on Main, Watertown, Massachusetts

The
Partnership invested in 146 units in three buildings in August 2004. The Partnership plans to retain all of these units as a rental property. The
Partnership's share of loss is approximately $156,000 and $224,000 for the three months ended September 30, 2008 and 2007 respectively. The Partnership's share of loss is approximately $507,000
and $617,000 for the nine months ended September 30, 2008 and 2007, respectively. The decrease in loss for both the three and nine months ended September 30, 2008 is due to decreases in
depreciation as well as taxes and insurance. There were no vacant units at October 27, 2008.

Hamilton
Place Sales, Watertown, Massachusetts

The
Partnership invested in 137 units in three buildings in August 2004. At the time of the acquisition, it was the Partnership's plan to sell all of the units
as condominiums. As of October 27, 2008, all of the units have been sold. The Partnership's share of income is approximately $145,000 for the three months ended September 30, 2007. The
income includes a gain on the sale of units of approximately $200,000 for the three months ended September 30, 2007. The Partnership's share of income is approximately $159,000 and $297,000 for
the nine months ended September 30, 2008 and 2007, respectively. The Partnership's share of income includes a gain on unit sales of approximately $174,000 and $466,000 for the nine months ended
September 30, 2008 and 2007, respectively.

Hamilton
Minuteman, Lexington, Massachusetts

The
Partnership invested in a 42-unit residential complex in September 2004. The Partnership's share of loss on this investment is approximately
$42,000 and $44,000 for the three months ended September 30, 2008 and 2007, respectively. The Partnership's share of loss is approximately $150,000 and $149,000 for the nine months ended
September 30, 2008 and 2007, respectively. There were no vacant units at October 27, 2008.

34

---



Essex
81 Commercial, Boston, Massachusetts

The
Partnership invested in this property in March 2005. The property consists of 7,715 square feet of commercial space. The Partnership's share of income on
this investment is approximately $7,000 and $117,000 for the three months ended September 30, 2008 and 2007, respectively. The Partnership's share of loss for the nine months ended
September 30, 2008 is approximately $6,000 compared to income of approximately $51,000 for the three months ended September 30, 2007. On August 26, 2008, the Partnership
transferred the commercial space to Essex 81 Apartments LLC in exchange for the 50 car surface parking lot. The fluctuation in income is due to an adjustment to depreciation expense at the time
the property was divided up between the apartments and the commercial space.

Hamilton
Essex 81 Apartments, Boston, Massachusetts

The
Partnership invested in this property in March 2005. The property consists of 49 residential units and a 50 car surface parking lot. The Partnership's
share of loss on this investment is approximately $36,000 and $106,000 for the three months ended September 30, 2008 and 2007, respectively. The Partnerships share of loss on this investment is
approximately $75,000 and $106,000 for the nine months ended September 30, 2008 and 2007 respectively. There was one vacant unit at October 27, 2008.

Hamilton
1025, Quincy, Massachusetts

The
Partnership invested in a 176-unit property in March 2005. The Partnership plans to sell 127 units as condominiums. The Partnership's share of
loss is approximately $10,000 for the three months ended September 30, 2008 compared to income of approximately $87,000 for the three months ended September 30, 2007. Included in the
loss at September 30, 2008 is a gain on the sale of units of approximately $33,000. Included in the income for the three months ended September 30, 2007 is a gain on the sale of units of
approximately $128,000. The Partnership's share of loss is approximately $74,000 and income of $208,000 for the nine months ended September 30, 2008 and 2007, respectively. Included in the loss
for the nine months ended September 30, 2008 and 2007 is a gain of approximately $61,000 and $365,000 on the sale of units. As of October 27, 2008, 126 units have been sold and one unit
has a reservation agreement. There was one vacant unit at October 27, 2008.

Hamilton
Bay Apartments, Quincy, Massachusetts

The
Partnership invested in a 48 unit apartment complex in October 2005. The Partnership plans to retain these units for long term investment. The
Partnership's share of loss is approximately $23,000 and $13,000 for the three months ended September 30, 2008 and 2007, respectively. The Partnership's share of loss is approximately $105,000
and $37,000 for the nine months ended September 30, 2008 and 2007, respectively. There are two vacant units at October 27, 2008.

Hamilton
Bay Sales, Quincy, Massachusetts

The
Partnership invested in a 120 unit apartment complex in October 2005. The Partnership plans to sell all of the units as condominiums. The Partnership's
share of income is approximately $10,000 and loss is approximately $50,000 for the three months ended September 30, 2008 and 2007, respectively. Included in income for the three months ended
September 30, 2008 and 2007 is a gain on the sale of units of approximately $36,000 and $125,000, respectively. The Partnership's share of income is approximately $65,000 for the nine months
ended September 30, 2008 compared to a loss of approximately $112,000 for the nine months ended September 30, 2007. Included in the income and loss for the nine months ended
September 30, 2008 and 2007 is a gain on the sale of units of approximately $176,000 and $437,000, respectively. In April 2008, the Partnership refinanced 20 units and obtained a new mortgage
of $2,368,000, interest only at a rate of 5.75% which matures in 2013. At

35

---



October 27,
2008, 105 units have been sold and one unit has a signed purchase and sales agreement. The outstanding mortgage balances as of September 30, 2008 is $1,808,000. There are no
vacant units at October 27, 2008.

Interest
expense was approximately $1,930,000 for the three months ended September 30, 2008 compared to approximately $1,838,000 for the three months ended September 30,
2007, an increase of approximately $93,000 (5%). The increase reflects a higher level of debt offset by more favorable interest rates due to the refinancing of Partnership properties during 2008.

Interest
income was approximately $39,000 for the three months ended September 30, 2008 compared to approximately $103,000 for the three months ended September 30, 2007, a
decrease of approximately $64,000 (62%). This decrease reflects a decrease in cash available for investment as well as lower interest rates.

During
the third quarter of 2008, the Partnership sold two condominiums and realized a gain of approximately $117,000. The Partnership previously estimated its share of the excess gain
to be approximately $89,000 from the sale of Middlesex Apartments. The last remaining unit was sold in October 2008, which resulted in a reduction in the estimated gain to approximately $50,000. The
total gain from the sale of these units is approximately $68,000 and is included in discontinued operations.

As
a result of the changes discussed above, net income for the three months ended September 30, 2008 was $224,384 compared to $218,693 for the three months ended
September 30, 2007, an increase of $5,691.

36

---





Comparison of the nine months ended September 30, 2008 to the nine months ended September 30, 2007

The Partnership and its Subsidiary Partnerships earned income before other income and discontinued operations of $7,145,416 for the
nine months ended September 30, 2008, compared to $6,518,292 for the nine months ended September 30, 2007, an increase of $627,124 (9.6%). The following is a summary of the Partnership's
operations for the nine months ended September 30, 2008 and 2007.

September 30,
2008

September 30,
2007

Dollar
Change

Percent
ChangeRevenues:Rental income

$
23,778,488

$
22,851,053

$
927,435


4.0
%Laundry and sundry income


304,905


301,067


3,838


1.2
%24,083,393


23,152,120


931,273


4.0
%Expenses:Administrative


1,305,968


1,156,627


149,341


12.9
%Depreciation and amortization


4,846,979


5,098,036


(251,057
)

(4.9
)%Management fees


978,507


931,059


47,448


5.1
%Operating


3,117,155


2,911,567


205,588


7.1
%Renting


405,761


383,395


22,366


5.8
%Repairs and maintenance


3,653,203


3,552,584


100,619


2.8
%Taxes and insurance


2,630,404


2,600,560


29,844


1.1
%16,937,977


16,633,828


304,149


1.8
%Income before other income


7,145,416


6,518,292


627,124


9.6
%Other Income (Loss)Interest expense


(5,725,270
)

(5,477,793
)

(247,477
)

(4.5
)%Interest income


119,979


299,911


(179,932
)

(60.0
)%Casualty (Loss)





(60,000
)

60,000


100.0
%Mortgage prepayment penalties


(4,487,706
)




(4,487,706
)

(100.0
)%(Loss) from investment in partnerships


(765,370
)

(530,634
)

(234,736
)

(44.2
)%(10,858,367
)

(5,768,516
)

(5,089,851
)

(88.2
)%Income (loss) from continuing operations


(3,712,951
)

749,776


(4,462,727
)

(595.2
)%Discontinued Operations:Gain on the sale of real estate


10,054,392





10,054,392


100.0
%Income (loss) from discontinued operations


(113,408
)

(3,110
)

(110,298
)

(3,546.5
)%9,940,984


(3,110
)

(9,944,094
)

(319,745.8
)%Net Income

$
6,228,033

$
746,666


5,481,367


734.1
%


Rental
income from continuing operations for the nine months ended September 30, 2008 was approximately $23,778,000 compared to approximately $22,851,000 for the nine months ended
September 30, 2007, an increase of approximately $927,000 (4.0%). There were increases in rental income at many of the Partnership properties, the most significant increases are as follows:
Hamilton Linewt, with an increase of approximately $204,000; 62 Boylston Street, with an increase of approximately $204,000; 1144 Commonwealth Avenue with an increase of approximately $80,000;
Westgate Apartments with an increase of approximately $89,000; Redwood Hills with an increase of approximately $58,000; School Street with an increase of approximately $32,000 and Hamilton Oaks

37

---



with
an increase of approximately $36,000. The increases at 62 Boylston Street and 1144 Commonwealth Avenue is due to vacancies in 2007 arising from fire and flooding losses. Linewt is a new
acquisition in 2008. There were insignificant increases and/or decreases at other properties.

Total
expenses from continuing operations for the nine months ended September 30, 2008 were approximately $16,938,000 compared to approximately $16,634,000 for the nine months
ended September 30, 2007, an increase of approximately $304,000 (1.8%). The most significant increases were operating expenses of approximately $206,000 (7.1%) administrative expenses of
approximately $149,000 (12.9%) repairs and maintenance expenses of approximately $101,000 and management fees of approximately $47,000. These increases are offset by a decrease in depreciation of
approximately $251,000. An explanation of these changes is included in the discussion for the three month ended September 30, 2008.

Interest
expense was approximately $5,725,000 for the nine months ended September 30, 2008 compared to approximately $5,478,000 for the nine months ended September 30,
2007, an increase of approximately $247,000 (4.5%). The Partnership refinanced twelve properties in 2008 which resulted in a higher level of debt and lower interest rates. In connection with the
refinancing of the properties, the Partnership incurred a penalty on the early repayment of theses mortgages in the amount of $4,487,706. This is included in other income (loss).

Interest
income was approximately $120,000 for the nine months ended September 30, 2008, compared to approximately $300,000 for the nine months ended September 30, 2007, a
decrease of approximately $180,000 (60%). This decrease is due primarily to a decrease in cash available for investment as well as a decrease in the interest rates.

During
the nine months ended September 30, 2008, the Partnership sold the Oak Ridge Apartments, Coach Apartments, and five of the NERA condominiums. The net gain on the sale of
these properties is $10,054,392 and is included in discontinued operations.

As
discussed previously, the Partnership has a 50% ownership interest in investment properties. The net loss from these investments is approximately $765,000 and $531,000 for the nine
months ended September 30, 2008 and 2007 respectively, an increase of approximately $234,000 (44.2%). The Partnership's share of loss includes a gain on the sale of units of approximately
$417,000 and $1,268,000 for the nine months ended September 30, 2008 and 2007, respectively. (See Note 14 to the financial statements for additional information.)

As
a result of the changes discussed above, net income for the nine months ended September 30, 2008 was $6,228,033 compared to $746,666 for the nine months ended
September 30, 2007, an increase of $5,481,367.



The Partnership's principal source of cash during 2008 and 2007 was the collection of rents, and the sale or refinancing of Partnership
properties.

The
majority of cash and cash equivalents of $13,256,237 at September 30, 2008 and $6,890,525 at December 31, 2007 were held in interest bearing accounts at creditworthy
financial institutions.

38

---



This
increase of $6,365,712 for the nine months ended September 30, 2008 is summarized as follows:

Nine Months Ended
September 30,2008

2007Cash (used in) provided by operating activities

$
(577,435
)
$
5,540,657Cash provided by (used in) investing activities


8,008,552


(308,229
)Cash provided by (used in) financing activities


1,905,568


(1,741,775
)Distributions paid


(2,970,973
)

(3,624,493
)Net increase in cash and cash equivalents

$
6,365,712

$
(133,840
)


The
cash used in operating activities is due to an increase in prepaid expenses as well as a non cash gain on the sale of real estate. The cash provided by investing activities is due to
the sale of Partnership properties as well as distributions from the joint ventures. The increase in cash provided by financing activities is due to the refinancing of Partnership properties during
the nine months ended September 30, 2008.

During
the nine months ended September 30, 2008, the Partnership repurchased 262,887 Depositary Receipts at a total cost of $20,563,243. The purchase was funded from cash
reserves, as well as from a loan from Harold Brown. In January, the Partnership borrowed $5,825,000 from Harold Brown, at a rate of 6%. The loan was repaid in full on February 29, 2008, with
interest of $37,899.

During
the nine months ended September 30, 2008, the Partnership refinanced 12 properties. The new mortgages total approximately $71,000,000 with interest rates ranging 5.6% to
6.0%. The new mortgages mature from 2018 to 2023 and call for interest only payments. After payments of existing mortgages of approximately $46,000,000 and prepayment penalties of approximately
$4,500,000, the excess funds were used to pay the loan of $5,285,000 to Harold Brown and to purchase Depositary Receipts.

In
the nine months ended September 30, 2008, the Partnership sold the five condominium units located at Harvard Gardens, the Oakridge Apartments, and Coach Apartments. The total
gain on the sale of these properties is $10,054,392 and is included in discontinued operations.

During
the nine months ended September 30, 2008 and 2007, the Partnership received distributions from the joint venture of $2,835,000 and $1,850,000, respectively. See
Note 14 of the Consolidated Financial Statements for additional information on the joint ventures and the related financial information.

The
Partnership paid a quarterly distribution of $7.00 per unit ($0.70 per depositary receipts) on March 31, June 30, and September 30, 2008 for a total distribution
of $2,970,973. Management anticipates that similar distributions will continue to be made during 2008.

During
the nine months ended September 30, 2008, the Partnership and its Subsidiary Partnerships completed certain improvements to their properties at a total cost of
approximately $2,250,000. The most significant improvements were made at the following properties: approximately $386,000 at Westgate Apartments; approximately $322,000 at 1144 Commonwealth Avenue;
approximately $201,000 at Westside Colonial; approximately $190,000 at 62 Boylston Street; approximately $125,000 at School Street; approximately $159,000 at Hamilton Oaks; and approximately $176,000
at Redwood Hills. All such improvements were funded from the Partnership's cash reserves and escrow accounts established in connection with the financing of applicable properties.

In
addition to the improvements made to date in 2008, the Partnership and its Subsidiary Partnerships plan to invest approximately $503,000 in capital improvements during the balance of
2008,

39

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the
majority of which will be spent at 1144 Commonwealth Avenue, Westside Colonial, River Drive, and Highland Street. These improvements will be funded from escrow accounts established in connection
with the financing of applicable properties, as well as from the Partnership's cash.

The
Partnership anticipates that cash from operations and interest-bearing investments will be sufficient to fund its current operations, finance current improvements to its properties
and meet bank obligations on current mortgages. The Partnership's net income and cash flow may fluctuate dramatically from year to year as a result of the sale of properties, mortgage financings,
unanticipated increases in expenses, or the loss of significant tenants.

Off-Balance Sheet ArrangementsJoint Venture Indebtedness

As of September 30, 2008, the Partnership had a 50% ownership in nine joint ventures, all of which have mortgage indebtedness.
We do not have control of these partnerships and therefore we account for them using the equity method of consolidation. At September 30, 2008, our proportionate share of the
non-recourse debt related to these investments was equal to approximately $26,000,000. See Note 14 to the Consolidated Financial Statements for details of the investment in joint
ventures including results of operations, equity and units sales.

Contractual Obligations

Please see Note 5 to the Consolidated Financial Statements for a description of mortgage notes payable. The Partnerships have no
other contractual obligation to be disclosed.

Factors That May Affect Future Results

Certain information contained herein includes forward-looking statements, which are made pursuant to the safe harbor provisions of the
Private Securities Liquidation Reform Act of 1995 (the "Act"). While forward looking statements reflect management's good faith beliefs when those statements are made, caution should be exercised in
interpreting and relying on such forward looking statements, the realization of which may be impacted by known and unknown risks and uncertainties, events that may occur subsequent to the
forward-looking statements, and other factors which may be beyond the Partnership's control and which can materially affect the Partnership's actual results, performance or achievements for 2008 and
beyond. Should one or more of the risks or uncertainties mentioned below materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated,
estimated or projected. We expressly disclaim any responsibility to update our forward looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors
should use caution in relying on past forward looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

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



40

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41

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

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

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

Item 3QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2008, the Partnership and its subsidiary Partnerships collectively have approximately $134,000,000 in
long-term debt, all of which have fixed interest rates. Accordingly, the fair value of these debt instruments is affected by changes in market interest rates. Approximately $2,162,000 of
Investment Property mortgages payable are at a variable rate of 2.25% over the 30 day LIBOR rate (2.2% at September 29, 2008). This mortgage matures in 2011. For information regarding
the fair value and maturity dates of these debt obligations, see Notes 5 and 12 to the Consolidated Financial Statements.

For
additional disclosures about market risk, see "Item 2Management's Discussion and Analysis of Financial Condition and Results of OperationsFactors
that May Affect Future Results."

Item 4CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the
effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period
covered by this report. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of such period, our disclosure controls and
procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange
Act.

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

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PART IIOTHER INFORMATION

Item 1.    Legal Proceedings

Item 1A.    Risk Factors

There were no material changes to the Risk Factors disclosed in our annual report on Form 10-K for the year ended
December 31, 2007.

None.

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



Period

Average
Price Paid

Depositary
Receipts
Purchased as
Part of
Publicly
Announced
Plan

Remaining Number of
Depositary Receipts
that may be purchased
Under the Plan
(as amended)July 1 - 31, 2008


0


0


174,256August 1 - 31, 2008

$
77.26


3,900


170,356September 1 - 30, 2008

$
76.30


4,600


165,756Total:

$
76.74


8,500


165,756


On
August 20, 2007, NewReal, Inc., the General Partner authorized an equity repurchase program ("Repurchase Program") under which the Partnership was permitted to purchase,
over a period of twelve months, up to 100,000 Depositary Receipts (each of which is one-tenth of a Class A Unit). On January 15, 2008, the General Partner authorized an
increase in the Repurchase Program from 100,000 to 200,000 Depositary Receipts and on January 30, 2008 the General Partner further increased the Repurchase Program from 200,000 to 300,000
Depositary Receipts. On March 6, 2008, the General Partner further increased the total number of Depositary Receipts that could be repurchased pursuant to the Repurchase Program from 300,000 to
500,000. On August 8, 2008, the General Partner re-authorized and renewed the Repurchase Program for an additional 12-month period ending August 19, 2009. In
addition, the General Partner also authorized the expansion of the Repurchase Program to require the Partnership to repurchase a proportionate number of Class B Units and General Partner Units
in connection with any repurchases of any Depositary Receipts by the Partnership based upon the 80%, 19% and 1% fixed distribution percentages of the holders of the Class A, Class B and
General Partner Units under the Partnership's Second Amended and Restate Contract of Limited Partnership. Repurchases of Depositary Receipts or Partnership Units pursuant to the Repurchase Program may
be made by the Partnership from time to time in its sole discretion in open market transactions or in privately negotiated transactions. As of September 30, 2008, the Partnership has
repurchased 334,244 Depositary Receipts at an average price of $77.12 per receipt (or $771.20 per underlying Class A Unit), 104.5 Class B Units at an average price of $766.90 per Unit,
and

43

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5.5
General Partner Units at an average price of $766.90 per Unit, totaling approximately $25,862,000 including brokerage fees paid by the Partnership.

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

See
Note 8 to the Consolidated Financial Statements for information concerning this repurchase program through September 30, 2008.

Item 3.    Defaults Upon Senior Securities

None.

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

None.

Item 5.    Other Information

None.

Item 6.    Exhibits



EXHIBIT INDEX

Exhibit
No.

Description of Exhibit(31.1)

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Ronald Brown, Principal Executive Officer of the Partnership (President and a Director of NewReal, Inc., sole General Partner of the
Partnership)(31.2)

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Harold Brown, Principal Financial Officer of the Partnership (Treasurer and a Director of NewReal, Inc., sole General Partner of the
Partnership)(32.1)

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Ronald Brown, Principal Executive Officer of the Partnership (President and a Director of NewReal, Inc., sole General Partner of
the Partnership)(32.2)

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


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SIGNATURES

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

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIPBy:

/s/ NEWREAL, INC.
Its General PartnerBy:

/s/ RONALD BROWN Ronald Brown, PresidentDated: November 10, 2008


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

Signature

Title

Date/s/ RONALD BROWN Ronald Brown

President and Director of the General Partner
(Principal Executive Officer)

November 10, 2008/s/ HAROLD BROWN Harold Brown

Treasure and Director to the General Partner
(Principal and Finance Officer and Principal Accounting Officer)

November 10, 2008


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