**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON,D.C. 20549**

 

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**Form 10-Q**

**(MarkOne)**

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

 

**For the quarterly period ended September 30, 2009**

**OR**

 

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

 

**For thetransition period from             to            **

** **

**Commissionfile number 0-12138**

 

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**New England Realty AssociatesLimited Partnership**

(Exact name of registrant asspecified 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 areacode: **(617) 783-0039**

 

**Securities registered pursuant to Section 12(b) ofthe Act:**

 

| **Depositary Receipts** | ** ** | **American Stock Exchange**                  |
|-------------------------|------------|----------------------------------------------|
| (Title of each Class)   | ** ** | (Name of each Exchange on  which Registered) |

 

**Securities registered pursuant to Section 12(g) ofthe Act:**

 

**Class A**

**LimitedPartnership Units**

(Title of class)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes x  No o

 

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

 

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

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

 

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

 

As of October 26, 2009,there were 105,877 Class A units (1,058,772 Depositary Receipts) 25,146 Class Bunits of limited partnership units and 1,323 of General Partnership unitsissued and outstanding.

 

 

 

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**INDEX**

 
| ** **     |   |                                                                                                                                                                                               |   | **Page** |
|----------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
|           |   | **PART I—FINANCIAL  INFORMATION**                                                                                                                                                        |   |     |
| Item 1.   |   | Financial  Statements (unaudited)                                                                                                                                                                  |   | 3        |
|           |   | Consolidated  Balance Sheets as of September 30, 2009 and December 31, 2008                                                                                                              |   | 3        |
|           |   | Consolidated  Statements of Income for the Three Months Ended September 30, 2009 and  September 30, 2008, and the Nine Months Ended September 30, 2009  and September 30, 2008 |   | 4        |
|           |   | Consolidated  Statement of Changes in Partners’ Capital for the Nine Months Ended  September 30, 2009 and 2008                                                                           |   | 5        |
|           |   | Consolidated  Statements of Cash Flows for the Nine Months Ended September 30, 2009  and 2008                                                                                                 |   | 6        |
|           |   | Notes  to Financial Statements                                                                                                                                                                     |   | 7        |
| Item 2.   |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                        |   | 22       |
| Item 3.   |   | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                        |   | 32       |
| Item 4.   |   | Controls  and Procedures                                                                                                                                                                           |   | 33       |
|           |   | **PART II—OTHER  INFORMATION**                                                                                                                                                           |   |     |
| Item 1.   |   | Legal Proceedings                                                                                                                                                                                  |   | 33       |
| Item 1A.  |   | Risk Factors                                                                                                                                                                                       |   | 33       |
| Item 2.   |   | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                                                                                       |   | 33       |
| Item 3.   |   | Defaults  Upon Senior Securities                                                                                                                                                                   |   | 34       |
| Item 4.   |   | Submission  of Matters to a Vote of Security Holders                                                                                                                                               |   | 34       |
| Item 5.   |   | Other  Information                                                                                                                                                                                 |   | 34       |
| Item 6.   |   | Exhibits                                                                                                                                                                                           |   | 34       |
| **SIGNATURES** |   | 35                                                                                                                                                                                                 |

 

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Table of Contents

 

**NEW ENGLAND REALTY ASSOCIATES, L.P.**

 

**PART 1 — FINANCIAL INFORMATION**

 

Item 1.  Financial Statements

 

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

 

The consolidated balancesheet as of December 31, 2008 has been derived from the auditedconsolidated balance sheet at that date but does not include all of theinformation and footnotes required by U.S. generally accepted accountingprinciples for complete financial statements.

 

The aforementioned financialstatements should be read in conjunction with the notes to the aforementionedfinancial statements and Management’s Discussion and Analysis of FinancialCondition and Results of Operations and the financial statements and notesthereto included in New England Realty Associates L.P.’s Annual Report on Form 10-Kfor the fiscal year ended December 31, 2008.

 

The results of operationsfor the nine month period ended September 30, 2009 are not necessarilyindicative of the results to be expected for the entire fiscal year or anyother period.

 

 

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

 

**CONSOLIDATED BALANCE SHEETS**

 

**(Unaudited)**

 
| ** **                                                                                   | ** ** | **September 30, 2009** | ** **  | **December 31, 2008** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-----------------------------|-------------|----------------------------|------------|
| **ASSETS**                                                                                   |       |                        |        |                       |       |
| Rental Properties                                                                            |       | $                           | 96,471,172  |                       | $          | 98,560,454 |   |
| Cash and Cash Equivalents                                                                    |       | 8,035,415                   |        | 10,752,931                 |       |
| Rents Receivable                                                                             |       | 703,037                     |        | 553,392                    |       |
| Real Estate Tax Escrows                                                                      |       | 272,943                     |        | 275,619                    |       |
| Prepaid Expenses and Other Assets                                                            |       | 2,780,032                   |        | 3,018,714                  |       |
| Deposit on Future Acquisition                                                                |       | 2,660,500                   |        | —                     |       |
| Investments in Unconsolidated Joint Ventures                                                 |       | 9,860,209                   |        | 11,023,611                 |       |
| Financing and Leasing Fees                                                                   |       | 983,445                     |        | 1,058,736                  |       |
| **Total Assets**                                                                             |       | $                           | 121,766,753 |                       | $          | 125,243,457 |   |
| **LIABILITIES AND PARTNERS’  CAPITAL**                                                  |       |                        |        |                       |       |
| Mortgage Notes Payable                                                                       |       | $                           | 137,547,734 |                       | $          | 138,160,262 |   |
| Accounts Payable and Accrued Expenses                                                        |       | 1,433,129                   |        | 1,592,610                  |       |
| Advance Rental Payments and Security Deposits                                                |       | 3,207,461                   |        | 3,207,767                  |       |
| **Total Liabilities**                                                                        |       | 142,188,324                 |        | 142,960,639                |       |
| Commitments and Contingent Liabilities  (Note 9)                                        |       |                        |        |                       |       |
| Partners’ Capital 132,346 and 135,251 units  outstanding in 2009 and 2008, respectively |       | (20,421,571                 | )           | (17,717,182                | )          |
| **Total Liabilities and Partners’  Capital**                                            |       | $                           | 121,766,753 |                       | $          | 125,243,457 |   |

 

See notes to consolidated financial statements.

 

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**NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP ANDSUBSIDIARIES**

 

**CONSOLIDATEDSTATEMENTS OF INCOME**

 

**(Unaudited)**

 
| ** **                                               | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------|------------|--------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                               | ** ** | **2009**                                   | ** ** | **2008**                                  | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                               | ** ** | ** **                                 | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenues                                                 |       |                                       |       |                                      |       |   |   |   |   |
| Rental income                                            |       | $                                          | 8,089,673  |                                      | $          | 7,981,479 |   | $ | 24,634,345 |   | $ | 23,778,488 |   |
| Laundry and sundry income                                |       | 119,893                                    |       | 95,907                                    |       | 312,263 |   | 304,905 |   |
|                                                     |       | 8,209,566                                  |       | 8,077,386                                 |       | 24,946,608 |   | 24,083,393 |   |
| Expenses                                                 |       |                                       |       |                                      |       |   |   |   |   |
| Administrative                                           |       | 416,398                                    |       | 424,363                                   |       | 1,277,745 |   | 1,305,968 |   |
| Depreciation and amortization                            |       | 1,591,668                                  |       | 1,655,560                                 |       | 4,513,165 |   | 4,846,979 |   |
| Management fees                                          |       | 334,745                                    |       | 327,079                                   |       | 1,011,531 |   | 978,507 |   |
| Operating                                                |       | 689,871                                    |       | 784,581                                   |       | 3,064,201 |   | 3,117,155 |   |
| Renting                                                  |       | 262,234                                    |       | 218,896                                   |       | 406,363 |   | 405,761 |   |
| Repairs and maintenance                                  |       | 1,435,264                                  |       | 1,429,528                                 |       | 3,580,895 |   | 3,653,203 |   |
| Taxes and insurance                                      |       | 891,239                                    |       | 867,119                                   |       | 2,773,745 |   | 2,630,404 |   |
|                                                     |       | 5,621,419                                  |       | 5,707,126                                 |       | 16,627,645 |   | 16,937,977 |   |
| Income Before Other Income and Discontinued  Operations  |       | 2,588,147                                  |       | 2,370,260                                 |       | 8,318,963 |   | 7,145,416 |   |
| Other Income (loss)                                      |       |                                       |       |                                      |       |   |   |   |   |
| Interest income                                          |       | 15,270                                     |       | 39,357                                    |       | 47,861 |   | 119,979 |   |
| Interest expense                                         |       | (1,978,591                                 | )          | (1,930,302                                | )          | (5,885,831 | ) | (5,725,270 | ) |
| Casualty loss                                            |       | —                                     |       | —                                    |       | — |   | — |   |
| Gain(Loss) on the sale of equipment                      |       | 93                                         |       | —                                    |       | (2,726 | ) | — |   |
| Mortgage prepayment penalties                            |       | —                                     |       | —                                    |       | — |   | (4,487,706 | ) |
| (Loss) from investment in unconsolidated joint  ventures |       | (325,614                                   | )          | (300,352                                  | )          | (880,902 | ) | (765,370 | ) |
|                                                     |       | (2,288,842                                 | )          | (2,191,297                                | )          | (6,721,598 | ) | (10,858,367 | ) |
| Income (loss) from Continuing Operations                 |       | 299,305                                    |       | 178,963                                   |       | 1,597,365 |   | (3,712,951 | ) |
| Discontinued Operations                                  |       |                                       |       |                                      |       |   |   |   |   |
| Gain on the sale of real estate                          |       | —                                     |       | 67,650                                    |       | — |   | 10,054,392 |   |
| (Loss) from discontinued operations                      |       | —                                     |       | (22,229                                   | )          | — |   | (113,408 | ) |
|                                                     |       | —                                     |       | 45,421                                    |       | — |   | 9,940,984 |   |
| Net Income                                               |       | $                                          | 299,305    |                                      | $          | 224,384 |   | $ | 1,597,365 |   | $ | 6,228,033 |   |
| Income per Unit                                          |       |                                       |       |                                      |       |   |   |   |   |
| Income (loss) before discontinued operations             |       | $                                          | 2.26       |                                      | $          | 1.35 |   | $ | 11.99 |   | $ | (26.86 | ) |
| Income from discontinued operations                      |       | —                                     |       | 0.34                                      |       | — |   | 71.92 |   |
| Net Income per Unit                                      |       | $                                          | 2.26       |                                      | $          | 1.69 |   | $ | 11.99 |   | $ | 45.06 |   |
| Weighted Average Number of Units Outstanding             |       | 132,556                                    |       | 132,979                                   |       | 133,175 |   | 138,224 |   |

 

See notes to consolidated financial statements.

 

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

 

**CONSOLIDATED STATEMENTS OFCHANGES IN PARTNERS’ CAPITAL**

 

**(UNAUDITED)**

** **
| ** **                        | ** **               | **Unit**         | ** **               | **Partner’s  Capital** | ** **               |
|-----------------------------------|--------------------------|------------------|--------------------------|-----------------------------|--------------------------|
| ** **                        | ** **               | **Limited**      | ** **               | **General**                 | ** **               | ** ** | ** ** | **Treasury** | ** ** | ** ** | ** ** | **Limited** | ** ** | **General** | ** ** | ** ** | ** ** |
| ** **                        | ** **               | **Class A** | ** **               | **Class B**            | ** **               | **Partnership** | ** ** | **Subtotal** | ** ** | **Units** | ** ** | **Total** | ** ** | **Class A** | ** ** | **Class B** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Balance  January 1, 2008     |      | 144,180          |      | 34,243                      |      | 1,802 |      | 180,225 |      | 14,109 |      | 166,116 |      | $ | 1,052,816 |      | $ | 1,531,414 |      | $ | 80,629 |      | $ | 2,664,859 |      |
| Distribution  to Partners         |                     | —           |                     | —                      |                     | — |   | — |   | — |   | — |   | (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 |   | 6,228,033 |   |
| Balance  September 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 | ) |
| Balance  January 1, 2009     |                     | 144,180          |                     | 34,243                      |                     | 1,802 |   | 180,225 |   | 44,974 |   | 135,251 |   | $ | (14,173,745 | ) | $ | (3,366,265 | ) | $ | (177,172 | ) | $ | (17,717,182 | ) |
| Distribution  to Partners         |                     | —           |                     | —                      |                     | — |   | — |   | — |   | — |   | (2,229,931 | ) | (529,609 | ) | (27,874 | ) | (2,787,414 | ) |
| Stock  Buyback                    |                     | —           |                     | —                      |                     | — |   | — |   | 2,905 |   | (2,905 | ) | (1,214,734 | ) | (284,626 | ) | (14,980 | ) | (1,514,340 | ) |
|                              |                     |             |                     |                        |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net  Income                       |                     | —           |                     | —                      |                     | — |   | — |   | — |   | — |   | 1,277,892 |   | 303,499 |   | 15,974 |   | 1,597,365 |   |
|                              |                     |             |                     |                        |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance  September 30 , 2009 |                     | 144,180          |                     | 34,243                      |                     | 1,802 |   | 180,225 |   | 47,879 |   | 132,346 |   | $ | (16,340,518 | ) | $ | (3,877,001 | ) | $ | (204,052 | ) | $ | (20,421,571 | ) |

 

See notes to consolidated financial statements.

 

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

 

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

 

**(Unaudited)**

 
| ** **                                                                                  | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                  | ** ** | **2009**                                  | ** ** | **2008** | ** ** |
| Cash Flows from Operating Activities                                                        |       |                                      |       |   |   |
| Net income                                                                                  |       | $                                         | 1,597,365  |   | $ | 6,228,033 |   |
| Adjustments to reconcile net income to net cash  provided by (used in) operating activities |       |                                      |       |   |   |
| Depreciation and amortization                                                               |       | 4,513,165                                 |       | 4,846,979 |   |
| Loss from investment in joint ventures                                                      |       | 880,902                                   |       | 765,370 |   |
| Loss on the sale of equipment                                                               |       | 2,726                                     |       | — |   |
| Income from the sale of real estate from  discontinued operations                           |       | —                                    |       | (10,054,392 | ) |
| Changes in operating assets and liabilities                                                 |       |                                      |       |   |   |
| (Increase) in rents receivable                                                              |       | (149,645                                  | )          | (116,574 | ) |
| (Decrease) in accounts payable and accrued expense                                          |       | (159,481                                  | )          | (95,075 | ) |
| Decrease in real estate tax escrow                                                          |       | 2,676                                     |       | 197,793 |   |
| (Increase) Decrease in prepaid expenses and other  assets                                   |       | 238,682                                   |       | (2,299,487 | ) |
| (Increase) in advance rental payments and security  deposits                                |       | (306                                      | )          | (50,082 | ) |
| Total Adjustments                                                                           |       | 5,328,719                                 |       | (6,805,468 | ) |
| Net cash provided by (used in) operating  activities                                        |       | 6,926,084                                 |       | (577,435 | ) |
| Cash Flows provided by (used in) Investing  Activities                                      |       |                                      |       |   |   |
| Net proceeds from the sale of equipment                                                     |       | 13,733                                    |       | — |   |
| Net proceeds from the sale of rental properties                                             |       | —                                    |       | 7,423,853 |   |
| Proceeds from joint ventures                                                                |       | 282,500                                   |       | 2,835,000 |   |
| Deposit on future acquisition                                                               |       | (2,660,500                                | )          | — |   |
| Purchase and improvement of rental properties                                               |       | (2,346,364                                | )          | (2,250,301 | ) |
| Net cash provided by (used in) investing  activities                                        |       | (4,710,631                                | )          | 8,008,552 |   |
| Cash Flows provided by (used in) Financing  Activities                                      |       |                                      |       |   |   |
| Payment of mortgage notes payable                                                           |       | —                                    |       | (3,224,419 | ) |
| Payment of financing costs                                                                  |       | (18,687                                   | )          | (867,377 | ) |
| Principal payments of mortgage notes payable                                                |       | (612,528                                  | )          | (566,493 | ) |
| Stock buyback                                                                               |       | (1,514,340                                | )          | (20,563,243 | ) |
| Proceeds of mortgage notes payable                                                          |       | —                                    |       | 27,127,100 |   |
| Distributions to partners                                                                   |       | (2,787,414                                | )          | (2,970,973 | ) |
| Net cash provided by (used in) financing  activities                                        |       | (4,932,969                                | )          | (1,065,405 | ) |
| Net (Decrease) Increase in Cash and Cash  Equivalents                                       |       | (2,717,516                                | )          | 6,365,712 |   |
| Cash and Cash Equivalents, at beginning of period                                           |       | 10,752,931                                |       | 6,890,525 |   |
| Cash and Cash Equivalents, at end of period                                                 |       | $                                         | 8,035,415  |   | $ | 13,256,237 |   |

 

See notes to consolidated financial statements.

 

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

 

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

 

**SEPTEMBER 30, 2009**

 

**(UNAUDITED)**

 

**NOTE 1.SIGNIFICANT ACCOUNTING POLICIES**

 

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

 

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

 

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

 

ThePartnership accounts for its investments in joint ventures using the equitymethod of accounting. These investments are recorded initially at cost, asInvestments in Unconsolidated Joint Ventures, and subsequently adjusted forequity in earnings and cash contributions and distributions. The authoritative guidance onconsolidation provides guidance on the identification of entities for whichcontrol is achieved through means other than voting rights (“variable interestentities” or “VIEs”) and the determination of which business enterprise, ifany, should consolidate the VIE (the “primary beneficiary”).  Generally,the consideration of whether an entity is a VIE applies when either (1) theequity investors (if any) lack one or more of the essential characteristics ofa controlling financial interest, (2) the equity investment at risk isinsufficient to finance that entity’s activities without additionalsubordinated financial support or (3) the equity investors have votingrights that are not proportionate to their economic interests and theactivities of the entity involve or are conducted on behalf of an investor witha disproportionately small voting interest.

 

*Impairment*:  On anannual basis management assesses whether there are any indicators that thevalue of the Partnership’s rental properties or investments in unconsolidatedsubsidiaries may be impaired.  A property’svalue is impaired only if management’s estimate of the aggregate future cashflows (undiscounted and without interest charges) to be generated by theproperty is less than the carrying value of the property.  To the extent impairment has occurred, theloss shall be measured as the excess of the carrying amount of the propertyover the fair value of the property.  TheCompany’s estimates of aggregate future cash flows expected to be generated byeach property are based on a number of assumptions that are subject to

 

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economicand market uncertainties including, among others, demand for space, competitionfor tenants, changes in market rental rates, and costs to operate eachproperty.  As these factors are difficultto predict and are subject to future events that may alter management’sassumptions, the future cash flows estimated by management in its impairmentanalyses may not be achieved. The Partnership has not recognized an impairmentloss since 1995.

 

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

 

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

 

*Rental Properties:*  Rental properties are stated at cost lessaccumulated depreciation. Maintenance and repairs are charged to expense asincurred; improvements and additions are capitalized. When assets are retiredor otherwise disposed of, the cost of the asset and related accumulateddepreciation is eliminated from the accounts, and any gain or loss on suchdisposition is included in income. Fully depreciated assets are removed fromthe accounts. Rental properties are depreciated by both straight-line andaccelerated methods over their estimated useful lives. Significant acquisitionswith long term leases are evaluated to determine if a portion of the purchaseprice is allocable to intangibles such as non market rate rents.

 

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

 

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

 

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

 

*Cash Equivalents:* The Partnership considers cash equivalentsto be all highly liquid instruments purchased with a maturity of three monthsor less.

 

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

 

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

 

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

 

*Concentration of Credit Risks and Financial Instruments:* ThePartnership’s properties are located in New England, and the Partnership issubject to the general economic risks related thereto. No single tenantaccounted for more than 5% of the Partnership’s revenues in 2009 or 2008. ThePartnership makes its temporary cash investments with high-credit-qualityfinancial institutions. At September 30, 2009, substantially all of thePartnership’s cash and cash equivalents were held in interest-bearing accountsat financial institutions, earning interest at rates from 0.05 % to 1.44%.  At September 30, 2009 and December 31,2008, respectively approximately $4,723,000 and $10,300,000 of cash and cashequivalents, and cash included in prepaid expenses and other assets exceededfederally insured amounts.

 

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*Advertising Expense:* Advertising is expensed asincurred. Advertising expense was $58,884 and $80,224 for the nine months endedSeptember 30, 2009 and 2008, respectively.

 

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

 

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

 

*Interest Capitalized:* The Partnership follows thepolicy of capitalizing interest as a component of the cost of rental propertywhen the time of construction exceeds one year. During the nine months ended September 30,2009 and the year ended December 31, 2008, there was no capitalizedinterest.

 

*Extinguishment of Debt:* When existing mortgages arerefinanced with the same lender and it is determined that the refinancing issubstantially different then they will be recorded as an extinguishment ofdebt.  However if it is determined thatthe refinancing is substantially the same then they will be recorded as anexchange of debt. All refinancings qualify as extinguishment of debt.

 

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

 

*Subsequent Events*:  ThePartnership has evaluated subsequent events through November 6, 2009, thedate the financial statements were issued.

 

**NOTE 2. RENTAL PROPERTIES**

 

Asof September 30, 2009, the Partnership and its Subsidiary Partnershipsowned 2,269 residential apartment units in 19 residential and mixed-usecomplexes (collectively, the “Apartment Complexes”). The Partnership also owns19 condominium units in a residential condominium complex, all of which areleased to residential tenants (collectively referred to as the “CondominiumUnits”). The Apartment Complexes and Condominium Units are located primarily inthe metropolitan Boston area of Massachusetts.

 

Additionally,as of September 30, 2009, the Partnership and Subsidiary Partnershipsowned a commercial shopping center in Framingham, commercial buildings inNewton and Brookline and mixed-use properties in Boston, Brockton and Newton,all in Massachusetts. These properties are referred to collectively as the “CommercialProperties.”

 

ThePartnership also owned a 50% ownership interest in eight residential and mixeduse complexes (the “Investment Properties”) at September 30, 2009 with atotal of 392 units, accounted for using the equity method of consolidation. SeeNote 14 for summary information on these investments.

 

Rentalproperties consist of the following:

 
| ** **                          | ** ** | **September  30, 2009** | ** ** | **December 31, 2008** | ** ** | **Useful Life**       | ** ** |
|-------------------------------------|------------|------------------------------|------------|----------------------------|------------|-----------------------|------------|
| Land, improvements and parking lots |       | $                            | 26,017,803 |                       | $          | 25,997,753            |       | 15—40 years |   |
| Buildings and improvements          |       | 110,748,760                  |       | 110,467,865                |       | 15—40 years |       |
| Kitchen cabinets                    |       | 4,632,843                    |       | 4,254,120                  |       | 5—10 years  |       |
| Carpets                             |       | 4,119,496                    |       | 3,650,238                  |       | 5—10 years  |       |
| Air conditioning                    |       | 936,633                      |       | 900,610                    |       | 7—10 years  |       |
| Laundry equipment                   |       | 470,748                      |       | 216,629                    |       | 5—7 years   |       |
| Elevators                           |       | 984,506                      |       | 984,506                    |       | 20 years         |       |
| Swimming pools                      |       | 157,489                      |       | 126,275                    |       | 10 years         |       |
| Equipment                           |       | 2,284,832                    |       | 1,690,142                  |       | 5—7 years   |       |
| Motor vehicles                      |       | 170,445                      |       | 139,453                    |       | 5 years          |       |
| Fences                              |       | 163,907                      |       | 163,907                    |       | 5—10 years  |       |
| Furniture and fixtures              |       | 1,823,212                    |       | 1,641,487                  |       | 5—7 years   |       |
| Smoke alarms                        |       | 127,247                      |       | 111,814                    |       | 5—7 years   |       |
|                                |       | 152,637,921                  |       | 150,344,799                |       |                  |       |
| Less accumulated depreciation       |       | (56,166,749                  | )          | (51,784,345                | )          |                  |       |
|                                |       | $                            | 96,471,172 |                       | $          | 98,560,454            |       |   |   |

 

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OnJanuary 3, 2008, the Partnership sold the Oak Ridge Apartments, a 61-unitresidential apartment complex located in Foxboro, Massachusetts. The sale pricewas $7,150,000, which resulted in a gain of approximately $6,000,000.  In November 2007, the Partnershippurchased a fully occupied commercial building located in Newton,Massachusetts, known as Linewt LLC. The purchase price was $3,475,000 andthe building consists of 5,850 square feet of commercial space. The Partnershiputilized Section 1031 of the IRS code to affect a tax free exchange on thegain of Oak Ridge up to the purchase price of the Newton property. Inaccordance with Section 1031, the Newton property was owned by a QualifiedIntermediary for the period from the purchase date of the Newton property andthe sale date of the Foxboro property. The Qualified Intermediary borrowed$3,225,112 from Harold Brown, Treasurer of the General Partner, to purchase theNewton 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.

 

InApril 2008, the Partnership sold the Coach Apartments, a 48 unitresidential apartment complex located in Acton, Massachusetts. The sale pricewas $4,600,000, which resulted in a gain of approximately $3,800,000 andrecorded in the second quarter of 2008. In October 2008, the Partnership purchased a fully occupied medicaloffice building located in Brookline, Massachusetts, referred to as “the Barn.”The purchase price of the Barn was $7,000,000 and it consists 20,000 squarefeet of commercial space.  ThePartnership utilized Section 1031 of the IRS code to affect a tax freeexchange on the gain of Coach up to the purchase price of the Barn.  This acquisition was funded from theassumption of the existing mortgage of approximately $4,000,000, the cash fromthe sale of Coach of approximately $2,600,000, and the balance of $400,000 wasfunded from cash reserves.

 

Asmore fully described in Note 3, the Partnership sold the five condominiumslocated in Brookline, Massachusetts in 2008. The net proceeds from the sale ofthe five units were approximately $740,000 which resulted in a gain ofapproximately $240,000, which is included in gain from the sale of rentalproperties in the second and third quarter of 2008.

 

**NOTE 3.RELATED PARTY TRANSACTIONS**

 

ThePartnership’s properties are managed by an entity that is owned by the majorityshareholder of the General Partner. The management fee is equal to 4% of rentalrevenue and laundry income. Total fees paid were approximately $1,012,000 and$976,000 during the nine months ended September 30, 2009 and 2008,respectively.

 

ThePartnership Agreement permits the General Partner or management company tocharge the costs of professional services (such as counsel, accountants andcontractors) to NERA. During the nine months ended September 30, 2009 and2008, approximately $597,000 and $412,000 was charged to NERA for legal,accounting, construction, maintenance, rental and architectural services andsupervision of capital improvements.  Ofthe 2009 expenses referred to above, approximately $310,000 consisted ofrepairs and maintenance and $250,000 of administrative expense. Approximately$37,000 of expenses for construction, architectural services and supervision ofcapital projects were capitalized in rental properties. Additionally in 2009,the Hamilton Company received approximately $301,000 from the InvestmentProperties of which approximately $201,000 was the management fee,approximately $3,800 was for construction supervision and architectural fees,approximately $79,000 was for maintenance services and approximately $17,000was for administrative services.

 

OnJanuary 1, 2004, all employees were transferred to the management company’spayroll. The Partnership reimburses the management company for the payroll andrelated expenses of the employees who work at the properties. Totalreimbursement was approximately $1,680,000 and $1,672,000 for the nine monthsended September 30, 2009 and 2008, respectively. The Management Companymaintains a 401K plan for all eligible employees whereby the employees may contributethe maximum allowed by law. The plan also provides for discretionarycontributions by the employer. There were no employer contributions in 2009 and2008.

 

In1996, prior to becoming an employee and President of the Management Company,the current President of the Management Company performed asset managementconsulting services to the Partnership. This individual continues to 

 

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performthis service and receives an asset management fee from the Partnership,receiving $37,500 during the nine months ended September 30, 2009 and2008.

 

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

 

OnJune 30, 2003, the Partnership purchased five condominium units in a42-unit building located in Brookline, Massachusetts. These were purchased fromHarvard 45 Associates LLC (“Harvard 45”) which is owned 70% bythe 75% shareholder and treasurer of the General Partner, and 5% by thePresident of Hamilton. The total purchase price for these condominiums wasapproximately $2,416,000 and was approved both by the Partnership’s AdvisoryCommittee and the General Partner. Harvard 45 realized a gain ofapproximately $648,000 from these sales. Harvard 45 also sold16 units to unrelated parties; the prices for all 21 units sold werecomparable.  The Partnership sold all ofthese units in 2008 and realized a gain of approximately $240,000.  The above mentioned gains are recorded asgain on the sale of real estate from discontinued operations.   In addition, the Partnership paid TheHamilton Company or its affiliate approximately $16,000 in legal fees andapproximately $62,000 in commissions in connection with the sale of thesecondominiums in 2008.

 

Theabove 42-unit condominium building was managed by an entity wholly owned by the25% shareholder and President of the General Partner. That entity receivedannual management fees from the five units of approximately $1,500, andHamilton reduced its management fees to approximately 2%, so that the totalmanagement fee will not exceed the 4% allowed by the Partnership’s PartnershipAgreement.

 

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

 

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

 

In2008, the Partnership borrowed a total of approximately $8,510,000 from HaroldBrown.  Approximately $5,285,000 was usedto repurchase depositary receipts and approximately $3,225,000 was used tofacilitate the purchase of Linewt.  Theseloans were repaid in 2008 with interest of approximately $72,300.

 

SeeNote 17 — Subsequent Events for information about a $7.8 million loan from HBCHoldings, LLC.

 

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**NOTE 4.OTHER ASSETS**

 

Approximately$1,406,000 and $1,382,000 of security deposits and prepaid rent deposits areincluded in prepaid expenses and other assets at September 30, 2009 and December 31,2008, respectively.

 

Includedin prepaid expenses and other assets at September 30, 2009 and December 31,2008 is approximately $791,000 and $984,000, respectively, held in escrow tofund future capital improvements.

 

Financingand leasing fees of approximately $983,000 and $1,059,000 are net ofaccumulated amortization of approximately $449,000 and $363,000 at September 30,2009 and December 31, 2008, respectively.

 

**NOTE 5.MORTGAGE NOTES PAYABLE**

 

AtSeptember 30, 2009 and December 31, 2008, the mortgages payableconsisted of various loans, all of which were secured by first mortgages onproperties referred to in Note 2. At September 30, 2009, the fixedinterest rates on these loans ranged from 4.84% to 8.46%, payable in monthlyinstallments aggregating approximately $727,000, including principal, tovarious dates through 2023. The majority of the mortgages are subject toprepayment penalties.  At September 30,2009, the weighted average interest rate on the above mortgages was 5.63%. Theeffective rate of 5.72% includes the amortization expense of deferred financingcosts. See Note 12 for fair value information.

 

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

 

Approximateannual maturities at September 30, 2009 are as follows:

 
| 2010—current maturities |   | $          | 2,560,000   |   |
|------------------------------|--------|------------|-------------|--------|
| 2011                         |   | 2,781,000  |        |
| 2012                         |   | 944,000    |        |
| 2013                         |   | 43,752,000 |        |
| 2014                         |   | 7,726,000  |        |
| Thereafter                   |   | 79,785,000 |        |
|                         |   | $          | 137,548,000 |   |

 

InJanuary 2008, the Partnership obtained a $1,700,000 mortgage on anunencumbered commercial property in Newton, Massachusetts known asLinewt LLC. The mortgage which matures in January 2018 requiresinterest only payments at 5.75% for the term of the mortgage.

 

InFebruary 2008, the Partnership refinanced ten properties with outstanding8.44% mortgages of approximately $37,800,000 with new mortgages totaling$58,000,000. The new mortgages which mature in February 2023 requireinterest only payments at interest rates from 5.6% to 5.7%. Deferred costsassociated with these mortgages totaled approximately $710,000 and,accordingly, the effective interest rates are 5.7% to 5.8%. Prepaymentpenalties of approximately $3,700,000 were incurred in these transactions.After payment of existing mortgages, prepayment penalties and other costs ofthe transactions, approximately $16,000,000 was received by the Partnership.

 

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

 

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

 

SeeNote 17 — Subsequent Events for refinancing of Linhart Limited Partnership.

 

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

 

ThePartnership’s residential lease agreements may require tenants to maintain aone-month advance rental payment and/or a security deposit. At September 30,2009, amounts received for prepaid rents of approximately $1,426,000 areincluded in cash and cash equivalents, and security deposits of approximately$1,406,000 are included in other assets.

 

**NOTE 7.PARTNERS’ CAPITAL**

 

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

 

In2009 the Partnership approved quarterly distributions of $7.00 per unit ($0.70per receipt) payable on March 31, June 30, and September 30,2009.

 

In2008, the Partnership paid quarterly distributions of $7.00 per unit ($.70 perreceipt) in March, June, September, and December for a total distributionof $28.00 per unit ($2.80 per receipt).

 

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

 
| ** **                                                           | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                           | ** ** | **2009**                                  | ** ** | **2008** | ** ** |
| Income (loss) per Depositary Receipt before  Discontinued Operations |       | $                                         | 1.20       |   | $ | (2.69 | ) |
| Income from Discontinued Operations                                  |       | —                                    |       | 7.19 |   |
| Net Income per Depositary Receipt after  Discontinued Operations     |       | $                                         | 1.20       |   | $ | 4.50 |   |
| Distributions per Depositary Receipt                                 |       | $                                         | 2.10       |   | $ | 2.10 |   |

 

**NOTE 8.TREASURY UNITS**

 

TreasuryUnits at September 30, 2009 are as follows:

 
| Class A        |   | 38,303 |   |
|---------------------|--------|--------|--------|
| Class B        |   | 9,097  |   |
| General Partnership |   | 479    |   |
|                |   | 47,879 |   |

 

OnAugust 20, 2007, NewReal, Inc., the General Partner authorized anequity repurchase program (“Repurchase Program”) under which the Partnershipwas permitted to purchase, over a period of twelve months, up to 100,000Depositary Receipts (each of which is one-tenth of a Class A Unit). On January 15, 2008, the General Partner authorized an increase in theRepurchase Program from 100,000 to 200,000 Depositary Receipts. On January 30,2008 the General Partner authorized an increase the Repurchase Program from200,000 to 300,000 Depositary Receipts.  On March 6, 2008, theGeneral Partner authorized the increase in the total number of DepositaryReceipts that could be repurchased pursuant to the Repurchase Program from300,000 to 500,000.  On August 8,2008, the General Partner re-authorized and renewed the Repurchase Program foran additional 12-month period ended August 19, 2009.  In addition,the General Partner also authorized the expansion of the Repurchase Program torequire the Partnership to repurchase a proportionate number of Class BUnits and General Partner Units in connection with any repurchases of anyDepositary Receipts by the Partnership based upon the 80%, 19% and 1% fixeddistribution percentages of the holders of the Class A, Class B andGeneral Partner Units under the Partnership’s Second Amended and RestateContract of Limited Partnership.  Repurchases of Depositary Receipts orPartnership Units pursuant to the Repurchase Program may be made by thePartnership from time to time in its sole discretion in open markettransactions or in privately negotiated transactions.  As of September 30, 2009, thePartnership has repurchased 391,424 Depositary Receipts at an average price of$74.05 per receipt (or $740.50 per underlying Class A Unit), 1,560 Class BUnits and 82 General Partnership Units, both at an average price of $580.71 perUnit, totaling approximately $29,939,000 including brokerage fees paid by thePartnership.

 

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

 

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

 

Duringthe nine months ended September 30, 2009, the Partnership purchased 23,240receipts for approximately $1,215,000, 552 Class B Units for approximately$285,000 and 29 General Partnership units for approximately $15,000.

 

Asof September 30, 2009, the equity repurchase program described aboveresulted in the Partnership having a negative Partners’ Capital ofapproximately $20,422,000.

 

Duringthe three months ended September 30, 2009, the Partnership purchased 3,500Depositary Receipts at a price of $54.00 for a total cost of $189,000, 83 Class BUnits at a price of $540.00 for a total cost of $45,000, and 4 GeneralPartnership Units at a price of $540.00 for a total cost of $2,400.

 

**NOTE 9.COMMITMENTS AND CONTINGENCIES**

 

Fromtime to time, the Partnerships are involved in various ordinary routinelitigation incidental to their business. The Partnership either has insurancecoverage or has provided for any uninsured claims which, in the aggregate, arenot significant. The Partnerships are not involved in any material pendinglegal proceedings.

 

**NOTE10. RENTAL INCOME**

 

Duringthe nine months ended September 30, 2009, approximately 90% of rentalincome was related to residential apartments and condominium units with leasesof one year or less. The remaining 10% was related to commercial properties,which have minimum future annual rental income on non-cancellable operatingleases at September 30, 2009 as follows:

 
| ** ** | ** ** | **Commercial  Property Leases** | ** ** |
|------------|------------|---------------------------------|------------|
| 2010       |       | $                               | 2,673,000  |   |
| 2011       |       | 2,522,000                       |       |
| 2012       |       | 2,073,000                       |       |
| 2013       |       | 1,611,000                       |       |
| 2014       |       | 1,378,000                       |       |
| Thereafter |       | 1,861,000                       |       |
|       |       | $                               | 12,118,000 |   |

 

 

Theaggregate minimum future rental income does not include contingent rentals thatmay be received under various leases in connection with percentage rents,common area charges and real estate taxes. Aggregate contingent rentals fromcontinuing operations were approximately $443,000 for the nine months ended September 30,2009 and approximately $477,000 for the year ended December 31, 2008.

 

Rentsreceivable are net of an allowance for doubtful accounts of approximately$687,000 at September 30, 2009 and approximately $460,000 at December 31,2008.  Included in rents receivable at September 30,2009 is approximately $386,000 resulting from recognizing rental income fromnon-cancelable commercial leases with future rental increases on a straight-line

 

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basis.  The majority of this amount is for long-termleases with Staples and Trader Joe’s at Staples Plaza in Framingham,Massachusetts.

 

In2009, rent at the commercial properties includes approximately $8,500 ofamortization of deferred rents arising from the fair values assigned toin-place leases upon the purchase of Cypress Street in Brookline, Massachusetts**.**

 

**NOTE11. CASH FLOW INFORMATION**

 

Duringthe nine months ended September 30, 2009 and 2008, cash paid for interestwas $5,885,817, and $5,774,892, respectively.

 

Non-cashfinancing activity — exchange of depositary receipts for Class B and GeneralPartnership Units in 2008 (Note 8).

 

**NOTE12. FAIR VALUE OF FINANCIAL INSTRUMENTS**

 

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

 

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

 

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

 
| ** **                 | ** ** | **Carrying Amount** | ** **  | **Estimated Fair Value** | ** ** |
|----------------------------|------------|---------------------|-------------|--------------------------|------------|
| Mortgage Notes Payable     |       |                |        |                     |       |
| Partnership Properties     |       |                |        |                     |       |
| At September 30, 2009 |       | $                   | 137,547,733 |                     | $          | 130,486,584 |   |
| At December 31, 2008  |       | $                   | 138,160,262 |                     | $          | 143,432,532 |   |
| Investment Properties      |       |                |        |                     |       |
| At September 30, 2009 |       | $                   | 51,500,542  |                     | $          | 49,551,650 |   |

 

Disclosureabout fair value of financial instruments is based on pertinent informationavailable to management as of September 30, 2009 and December 31,2008. Although management is not aware of any factors that would significantlyaffect the fair value amounts, such amounts have not been comprehensivelyrevalued for purposes of these financial statements since December 31,2008 and current estimates of fair value may differ significantly from theamounts presented herein.

 

**NOTE13. TAXABLE INCOME AND TAX BASIS**

 

Taxableincome reportable by the Partnership and includable in its partners’ taxreturns is different than financial statement income because of a tax freeexchanges, accelerated depreciation, different tax lives, and timingdifferences related to prepaid rents and allowances. Taxable income wasapproximately $7,500,000 less than statement income for the year ended December 31,2008 and approximately $1,000,000 greater than statement income for the yearended December 31, 2007. The cumulative tax basis of the Partnership’sreal estate at December 31, 2008 is approximately $5,000,000 less than thestatement basis. The primary reason for the lower taxable income and the lowertax basis is the acquisition of Linewt and Cypress Street utilizing tax freeexchanges in 2008. The Partnership’s tax basis in its joint venture investmentsis approximately $200,000 less than statement basis. The tax free exchanges andmortgage prepayment penalties in 2008 generated substantial tax deductions in2008, accordingly taxable income in future years may exceed statement income.

 

**NOTE14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES**

 

SinceNovember 2001, the Partnership has invested in eight limited partnerships,the majority of which has invested in residential apartment complexes, with onepartnership investing in commercial property. The Partnership has a 50%ownership 

 

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interestin each investment. The other investors are Harold Brown, the President of theManagement Company and five other employees of the Management Company. HaroldBrown’s ownership interest is between 43.2% and 47.5%, with the balance of 6.8%and 2.5% owned by the others. A description of each investment is as follows:

 

OnOctober 3, 2005, the Partnership invested $2,500,000 for a 50% ownershipinterest in a 168-unit apartment complex in Quincy, Massachusetts. The purchaseprice was $30,875,000. The Partnership plans to sell the majority of units ascondominium and retain 48 units for long-term investment. Gains from the salesof units will be taxed at ordinary income rates (approximately $47,000 perunit). In February 2007, the Partnership refinanced the 48 units whichwill be retained with a new mortgage in the amount of $4,750,000 with aninterest rate of 5.57%, interest only for five years. The loan will beamortized over 30 years thereafter and matures in March 2017. In April 2008,the Partnership refinanced an additional 20 units and obtained a new mortgagein the amount of $2,368,000 with interest at 5.75%, interest only, whichmatures in 2013.  As of October 26,2009, the Partnership sold 105 units, the proceeds of which went to pay downthe mortgage on the property.  Thebalance on the new mortgage is approximately $1,668,000 at September 30,2009. Gain from the sale of units (approximately $38,000 will be taxed atordinary income rates.  This investmentis referred to as Hamilton Bay Apartments, LLC.

 

OnMarch 7, 2005, the Partnership invested $2,000,000 for a 50% ownershipinterest in a building comprising 49 apartments, one commercial space and a50-car surface parking lot located in Boston, Massachusetts. The purchase pricewas $14,300,000, with a $10,750,000 mortgage. The Partnership plans to operatethe building and initiate development of the parking lot.  In June 2007, the Partnership separatedthe parcels, formed an additional limited liability company for the residentialapartments and obtained a mortgage on the property. The new limited liabilitycompany formed for the residential apartments is referred to as Hamilton Essex81, LLC.  In August 2008, thePartnership restructured the mortgages on both parcels at Essex 81 andtransferred the residential apartments to Hamilton Essex 81, LLC.  The mortgage on Hamilton Essex 81, LLC is$8,600,000 with interest only at 5.79% due in August 2015.  The mortgage on Essex Development, LLC is$2,162,000 with a variable interest rate of 2.25% over the daily Libor rate(0.245% at September 30, 2009) and is due in August 2011.  Harold Brown has issued a personal guarantyup to $1,000,000 of this mortgage. In the event that he is obligated to makepayments to the lender as a result of this guaranty, the Partnership and otherinvestors have, in turn, agreed to indemnify him for their proportionate shareof any such payments.  The investment inthe parking lot is referred to as Hamilton Essex Development, LLC; theinvestment in the apartments is referred to as Hamilton Essex 81, LLC.

 

OnMarch 2, 2005, the Partnership invested $2,352,000 for a 50% ownershipinterest in a 176-unit apartment complex with an additional small commercialbuilding located in Quincy, Massachusetts. The purchase price was $23,750,000.The Partnership plans to sell the majority of units as condominiums and retain49 units for long-term investment. The Partnership obtained a new 10-yearmortgage in the amount of $5,000,000 on the units to be retained by thePartnership. The interest on the new loan is 5.67% fixed for the 10 yearterm with interest only payments for five years and amortized over a30 year period for the balance of the loan term.  As of September 30, 2009, all of the 127units have been sold.  Gains from thesales of units (approximately $60,000 per unit) were taxed at ordinary incomerates. This investment is referred to as Hamilton 1025, LLC.

 

InSeptember 2004, the Partnership invested approximately $5,075,000 for a50% ownership interest in a 42-unit apartment complex located in Lexington,Massachusetts. The purchase price was $10,100,000. In October 2004, thePartnership obtained a mortgage on the property in the amount of $8,025,000 andreturned $3,775,000 to the Partnership. The Partnership obtained a new 10-yearmortgage in the amount of $5,500,000 in January 2007. The interest on thenew loan is 5.67% fixed for the ten year term with interest only payments forfive years and amortized over a 30 year period for the balance of theloan. This new loan required a cash contribution by the Partnership of $1,250,000in December 2006. The unamortized deferred financing costs ofapproximately $30,000 were written off in the first quarter of 2007. Thisinvestment is referred to as Hamilton Minuteman, LLC.

 

InAugust 2004, the Partnership invested $8,000,000 for a 50% ownershipinterest in a 280-unit apartment complex located in Watertown, Massachusetts.The total purchase price was $56,000,000. As of May 2008, the Partnershipsold all of the 137 units as condominiums which were located in threebuildings. Gains from these sales were taxed as ordinary income (approximately$50,000 per unit). The majority of the sales proceeds were applied to reducethe 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 willbe combined with Hamilton on Main Apartments, LLC.  An entity partially owned by the majorityshareholder of the General Partner and the President of the management company,31% and 5%, respectively, was the sales agent and will receive a variablecommission on each sale of 3% to 5%. Hamilton on Main, LLC is known asHamilton Place.

 

In2005, Hamilton on Main Apartments, LLC obtained a new ten year mortgage onthe three buildings to be retained. The new mortgage is $16,825,000, withinterest only of 5.18% for three years and amortizing on a 30 yearschedule for the remaining seven years when the balance is due. The netproceeds after funding escrow accounts and closing costs on the new mortgagewere approximately $16,700,000, which were used to reduce the existingmortgage. Hamilton on Main LLC paid a 

 

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feeof approximately $400,000 in connection with this early extinguishment ofdebt.  At September 30, 2009, theremaining balance on the mortgage is approximately $16,461,000.

 

InNovember 2001, the Partnership invested approximately $1,533,000 for a 50%ownership interest in a 40-unit apartment building in Cambridge, Massachusetts.This property has a 12-year mortgage, with a remaining balance at September 30,2009 of approximately $7,359,000 at 6.9% which is amortized on a 30-yearschedule, with a final payment of approximately $6,000,000 in 2014. Thisinvestment is referred to as 345 Franklin, LLC.

 

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

 

**Summarybalance sheet as of September 30, 2009 (unaudited)**

 
| ** **                                                              | ** **               | **Hamilton Essex 81** | ** **               | **Hamilton  Essex Development** | ** **               | **345 Franklin** | ** **               | **Hamilton 1025** | ** **               | **Hamilton  Bay Sales** | ** **               | **Hamilton  Bay Apts** | ** **               | **Hamilton  Minuteman  Apts** | ** **               | **Hamilton  on Main Apts** | ** **               | **Hamilton  Place Sales** | ** **               | **Total**      | ** ** |
|-------------------------------------------------------------------------|--------------------------|-----------------------|--------------------------|---------------------------------|--------------------------|------------------|--------------------------|-------------------|--------------------------|-------------------------|--------------------------|------------------------|--------------------------|-------------------------------|--------------------------|----------------------------|--------------------------|---------------------------|--------------------------|----------------|------------|
|                                                                    |      |                  |      |                            |      |             |      |              |      |                    |      |                   |      |                          |      |                       |      |                      |      |           |       |
| **ASSETS**                                                              |                     |                  |                     |                            |                     |             |                     |              |                     |                    |                     |                   |                     |                          |                     |                       |                     |                      |                     |           |       |
| Rental  Properties                                                      |                     | 10,304,195            |                     | 2,576,552                       |                     | 9,121,848        |                     | 6,406,791         |                     | 2,111,056               |                     | 8,007,066              |                     | 7,964,514                     |                     | 24,125,422                 |                     |                      |                     | 70,617,444     |       |
| Cash &  Cash Equivalents                                       |                     | 3,959                 |                     | 13,547                          |                     | 872              |                     | 3,432             |                     | 12,595                  |                     | 526                    |                     | 25,485                        |                     | 47,376                     |                     |                      |                     | 107,791        |       |
| Rent  Receivable                                                        |                     | 261                   |                     | —                          |                     | —           |                     | 2,893             |                     | —                  |                     | —                 |                     | (4,044                        | )                        | 6,358                      |                     |                      |                     | 5,468          |       |
| Real  Estate Tax Escrow                                                 |                     | 62,575                |                     | —                          |                     | 36,908           |                     | 25,490            |                     | —                  |                     | 63,274                 |                     | 51,624                        |                     | 97,881                     |                     |                      |                     | 337,751        |       |
| Due  From Investment Properties                                         |                     | 80,000                |                     | —                          |                     | —           |                     | 70,000            |                     | 100,000                 |                     | 24,000                 |                     | —                        |                     | 222,000                    |                     |                      |                     | 496,000        |       |
| Prepaid  Expenses & Other Assets                               |                     | 78,558                |                     | 796                             |                     | 85,015           |                     | 79,725            |                     | 273,366                 |                     | 63,860                 |                     | 65,947                        |                     | 319,002                    |                     |                      |                     | 966,268        |       |
| Financing &  Leasing Fees                                      |                     | 125,095               |                     | 11,992                          |                     | 34,703           |                     | 35,981            |                     | 17,965                  |                     | 46,919                 |                     | 28,848                        |                     | 36,881                     |                     |                      |                     | 338,383        |       |
| **Total Assets**                                                        | ** **               | **10,654,642**        | ** **               | **2,602,888**                   | ** **               | **9,279,346**    | ** **               | **6,624,313**     | ** **               | **2,514,982**           | ** **               | **8,205,644**          | ** **               | **8,132,373**                 | ** **               | **24,854,920**             | ** **               | ** **                | ** **               | **72,869,106** | ** ** |
| **LIABILITIES AND PARTNERS’ CAPITAL**                              |                     |                  |                     |                            |                     |             |                     |              |                     |                    |                     |                   |                     |                          |                     |                       |                     |                      |                     |           |       |
| Mortgage  Notes Payable                                                 |                     | 8,600,000             |                     | 2,162,000                       |                     | 7,359,299        |                     | 5,000,000         |                     | 1,668,000               |                     | 4,750,000              |                     | 5,500,000                     |                     | 16,461,242                 |                     |                      |                     | 51,500,542     |       |
| Due  to Investment Properties                                           |                     | —                |                     | —                          |                     | 417,000          |                     | —            |                     | 28,000                  |                     | 26,000                 |                     | 25,000                        |                     | —                     |                     |                      |                     | 496,000        |       |
| Accounts  Payable & Accrued Expense                            |                     | 47,890                |                     | 9,783                           |                     | 129,135          |                     | 15,283            |                     | 22,232                  |                     | 14,747                 |                     | 49,571                        |                     | 201,294                    |                     |                      |                     | 489,936        |       |
| Advance  Rental Pymts & Security Dep                           |                     | 135,068               |                     | —                          |                     | 124,457          |                     | 55,496            |                     | 15,886                  |                     | 78,620                 |                     | 49,269                        |                     | 203,408                    |                     |                      |                     | 662,205        |       |
| **Total Liabilities**                                                   |                     | 8,782,958             |                     | 2,171,783                       |                     | 8,029,891        |                     | 5,070,779         |                     | 1,734,119               |                     | 4,869,367              |                     | 5,623,840                     |                     | 16,865,945                 |                     |                      |                     | 53,148,682     |       |
| Partners’  Capital                                                 |                     | 1,871,683             |                     | 431,105                         |                     | 1,249,455        |                     | 1,553,533         |                     | 780,863                 |                     | 3,336,277              |                     | 2,508,532                     |                     | 7,988,975                  |                     |                      |                     | 19,720,424     |       |
| **Total Liabilities & Capital**                                | ** **               | **10,654,642**        | ** **               | **2,602,888**                   | ** **               | **9,279,346**    | ** **               | **6,624,313**     | ** **               | **2,514,982**           | ** **               | **8,205,644**          | ** **               | **8,132,373**                 | ** **               | **24,854,920**             |                     |                      | ** **               | **72,869,106** | ** ** |
| **Partners’ Capital-NERA50%**                                      | ** **               | **935,842**           | ** **               | **215,552**                     | ** **               | **624,727**      | ** **               | **776,767**       | ** **               | **390,432**             | ** **               | **1,668,139**          | ** **               | **1,254,266**                 | ** **               | **3,994,487**              |                     |                      | ** **               | **9,860,212**  | ** ** |
|                                                                    |                     |                  |                     |                            |                     |             |                     |              |                     |                    |                     |                   |                     |                          |                     |                       |                     |                      |                     |           |       |
| Total  units/ Condominiums                                              |                     |                  |                     |                            |                     |             |                     |              |                     |                    |                     |                   |                     |                          |                     |                       |                     |                      |                     |           |       |
| Apartments                                                              |                     | 48                    |                     | —                          |                     | 40               |                     | 175               |                     | 120                     |                     | 48                     |                     | 42                            |                     | 148                        |                     | 137                       |                     | 758            |       |
| Commercial                                                              |                     | 1                     |                     | 1                               |                     | —           |                     | 1                 |                     | —                  |                     | —                 |                     | —                        |                     | —                     |                     | —                    |                     | 3              |       |
| Total                                                                   |                     | 49                    |                     | 1                               |                     | 40               |                     | 176               |                     | 120                     |                     | 48                     |                     | 42                            |                     | 148                        |                     | 137                       |                     | 761            |       |
| Units  to be retained                                                   |                     | 49                    |                     | 1                               |                     | 40               |                     | 49                |                     | —                  |                     | 48                     |                     | 42                            |                     | 148                        |                     | —                    |                     | 377            |       |
| Units  to be sold                                                       |                     | —                |                     | —                          |                     | —           |                     | 127               |                     | 120                     |                     | —                 |                     | —                        |                     | —                     |                     | 137                       |                     | 384            |       |
| Units  sold through October 26, 2009                               |                     | —                |                     | —                          |                     | —           |                     | 127               |                     | 105                     |                     | —                 |                     | —                        |                     | —                     |                     | 137                       |                     | 369            |       |
| Unsold  units                                                           |                     | —                |                     | —                          |                     | —           |                     | —            |                     | 15                      |                     | —                 |                     | —                        |                     | —                     |                     | —                    |                     | 15             |       |
| Unsold  units with deposits for future sale as of October 26, 2009 |                     | —                |                     | —                          |                     | —           |                     | —            |                     | —                  |                     | —                 |                     | —                        |                     | —                     |                     | —                    |                     | —         |       |

 

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**Summary financialinformation for the nine months ended September 30, 2009 (unaudited)**

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

 

**Summary financialinformation for the three months ended September 30, 2009 (unaudited)**

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

 

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

 
| ** **              | ** ** | **Hamilton  Essex 81** | ** ** | **Hamilton  Essex  Development** | ** ** | **Franklin  Street** | ** ** | **1025  Hamilton** | ** ** | **Hamilton  Bay** | ** ** | **Hamilton  Bay** | ** ** | **Hamilton  Minuteman** | ** ** | **Hamilton  Place** | ** ** | **Hamilton  Place Sales** | ** ** | ** ** | ** ** |
|-------------------------|------------|------------------------|------------|----------------------------------|------------|----------------------|------------|--------------------|------------|-------------------|------------|-------------------|------------|-------------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|
| **Period End**          | ** ** | **March  2005**        | ** ** | **March  2005**                  | ** ** | **November  2001**   | ** ** | **March  2005**    | ** ** | **October  2005** | ** ** | **October  2005** | ** ** | **August  2004**        | ** ** | **August  2004**    | ** ** | **August  2004**          | ** ** | **Total**  | ** ** |
| September 30, 2010 |       | 8,911                  |       | —                           |       | 144,711              |       | —             |       | —            |       |              |       |                    |       | 247,536             |       |                      |       | 401,159    |       |
| September 30, 2011 |       | 110,346                |       | 2,162,000                        |       | 155,018              |       | —             |       | —            |       |              |       |                    |       | 258,461             |       |                      |       | 2,685,825  |       |
| September 30, 2012 |       | 116,907                |       | —                           |       | 166,060              |       | 50,135             |       | —            |       | 36,421            |       | 49,966                  |       | 274,760             |       |                      |       | 694,249    |       |
| September 30, 2013 |       | 123,859                |       | —                           |       | 177,887              |       | 64,222             |       | 1,668,000         |       | 65,250            |       | 70,339                  |       | 289,543             |       |                      |       | 2,459,100  |       |
| September 30, 2014 |       | 131,223                |       | —                           |       | 6,715,623            |       | 68,013             |       | —            |       | 68,979            |       | 74,491                  |       | 305,121             |       |                      |       | 7,363,449  |       |
| Thereafter              |       | 8,108,754              |       | —                           |       | —               |       | 4,817,629          |       | —            |       | 4,579,349         |       | 5,305,204               |       | 15,085,823          |       |                      |       | 37,896,760 |       |
|                    |       | 8,600,000              |       | 2,162,000                        |       | 7,359,299            |       | 5,000,000          |       | 1,668,000         |       | 4,750,000         |       | 5,500,000               |       | 16,461,242          |       |                      |       | 51,500,542 |       |

 

**Summaryfinancial 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** | ** ** | **Total**  | ** ** |
|------------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|-------------------|------------|--------------------|------------|--------------------------|------------|-------------------------------|------------|---------------|------------|-----------------------|------------|----------------------------|------------|------------|------------|
| **ASSETS**                                           |       |                     |       |                     |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |       |       |
| Rental 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            |       | —                     |       | 74,022,406 |       |
| Cash & Cash Equivalents                     |       | 5,478                    |       | 281                      |       | 5,699             |       | 69,325             |       | 28,878                   |       | 6,736                         |       | 2,770         |       | 29,598                |       | 66                         |       | 148,830    |       |
| Rent Receivable                                      |       | 27,271                   |       | 99,771                   |       | 12,232            |       | 3,313              |       | 1,867                    |       | (682                          | )          | (4,037        | )          | 6,760                 |       | —                     |       | 146,494    |       |
| Real Estate Tax Escrow                               |       | —                   |       | 28,751                   |       | 38,827            |       | 43,167             |       | 101,973                  |       | 45,685                        |       | 14,398        |       | 90,458                |       | —                     |       | 261,287    |       |
| Due From Investment Properties                       |       | —                   |       | —                   |       |              |       | 90,000             |       | 101,973                  |       |                          |       |          |       | 230,000               |       | 1,798,870                  |       | 2,220,843  |       |
| Prepaid Expenses & Other Assets             |       | 616                      |       | 75,769                   |       | 80,076            |       | 66,252             |       | 171,175                  |       | 76,502                        |       | 63,233        |       | 360,989               |       | —                     |       | 894,612    |       |
| Financing & Leasing Fees                    |       | 13,889                   |       | 140,109                  |       | 42,869            |       | 41,007             |       | 23,030                   |       | 53,281                        |       | 34,738        |       | 45,424                |       | —                     |       | 394,346    |       |
| **Total 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**              |       | 78,088,819 |       |
| **LIABILITIES AND PARTNERS’ CAPITAL**           |       |                     |       |                     |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |       |       |
| Mortgage 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            |       | —                     |       | 52,010,529 |       |
| Due to Investment Properties                         |       | —                   |       | —                   |       | 375,000           |       | —             |       |                     |       | 1,973                         |       | 45,000        |       | 1,798,870             |       | —                     |       | 2,220,843  |       |
| Accounts Payable & Accrued Exp              |       | 12,265                   |       | 54,947                   |       | 90,799            |       | 10,459             |       | 19,098                   |       | 6,021                         |       | 39,673        |       | 165,573               |       | 1,285                      |       | 400,120    |       |
| Advance Rental Payments & Security Deposits |       |                     |       | 131,327                  |       | 116,457           |       | 61,544             |       | 17,308                   |       | 79,025                        |       | 47,377        |       | 181,454               |       | —                     |       | 634,493    |       |
| **Total 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                      |       | 55,265,985 |       |
| Partners’ 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                  |       | 22,822,834 |       |
| **Total 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**              |       | 78,088,819 |       |
| **Partners’ 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 |       |

 

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**Summaryfinancial 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** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|-------------------|------------|--------------------|------------|--------------------------|------------|-------------------------------|------------|---------------|------------|-----------------------|------------|----------------------------|------------|------------|------------|
| **Revenues**                                                         |       |                     |       |                     |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |       |       |
| Rental Income                                                        |       | 305,709                  |       | 814,994                  |       | 775,115           |       | 590,527            |       | 172,812                  |       | 615,792                       |       | 565,244       |       | 1,758,124             |       | 1,747                      |       | 5,600,063  |       |
| Laundry and Sundry Income                                            |       | —                   |       | 1,587                    |       | 1,013             |       | —             |       | —                   |       | —                        |       | 2,426         |       | 15,115                |       | —                     |       | 20,141     |       |
|                                                                 |       | 305,709                  |       | 816,581                  |       | 776,128           |       | 590,527            |       | 172,812                  |       | 615,792                       |       | 567,669       |       | 1,773,239             |       | 1,747                      |       | 5,620,204  |       |
| **Expenses**                                                         |       |                     |       |                     |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |       |       |
| Administrative                                                       |       | 4,954                    |       | 5,696                    |       | 28,519            |       | 13,219             |       | 8,060                    |       | 7,318                         |       | 2,429         |       | 42,312                |       | 3,770                      |       | 116,277    |       |
| Depreciation and Amortization                                        |       | 86,798                   |       | 299,435                  |       | 285,922           |       | 248,993            |       | 159,537                  |       | 291,533                       |       | 389,886       |       | 1,157,859             |       | 20,508                     |       | 2,940,472  |       |
| Management Fees                                                      |       | 17,024                   |       | 31,366                   |       | 31,352            |       | 23,741             |       | 7,480                    |       | 24,284                        |       | 22,094        |       | 72,863                |       | 51                         |       | 230,255    |       |
| Operating                                                            |       | 29,891                   |       | 74,336                   |       | 43,067            |       | 1,134              |       | 1,694                    |       | 787                           |       | 42,100        |       | 275,466               |       | 214                        |       | 468,688    |       |
| Renting                                                              |       | —                   |       | 17,339                   |       | 33,959            |       | 4,394              |       | 1,556                    |       | 2,116                         |       | 2,218         |       | 21,828                |       | —                     |       | 83,410     |       |
| Repairs and Maintenance                                              |       | 2,754                    |       | 90,895                   |       | 63,589            |       | 257,646            |       | 118,169                  |       | 213,398                       |       | 74,494        |       | 325,117               |       | 5,828                      |       | 1,151,891  |       |
| Taxes and Insurance                                                  |       | 50,296                   |       | 93,282                   |       | 66,317            |       | 94,714             |       | 43,105                   |       | 82,924                        |       | 96,042        |       | 239,220               |       | 4,861                      |       | 770,860    |       |
|                                                                 |       | 191,716                  |       | 612,449                  |       | 552,726           |       | 643,842            |       | 339,601                  |       | 622,360                       |       | 629,262       |       | 2,134,664             |       | 35,232                     |       | 5,761,853  |       |
| **Income (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                      |       | 11,154     |       |
| Gain on Sale of Real Estate                                          |       | —                   |       | —                   |       | —            |       | 121,130            |       | 352,393                  |       | —                        |       | —        |       | 12,381                |       | 348,204                    |       | 834,108    |       |
| Other 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                        |       | 758        |       |
| Units to be retained                                                 |       | —                   |       | 49                       |       | 40                |       | 49                 |       | —                   |       | 48                            |       | 42            |       | 146                   |       | —                     |       | 374        |       |
| Units to be sold                                                     |       | —                   |       | —                   |       | —            |       | 127                |       | 120                      |       | —                        |       | —        |       | —                |       | 137                        |       | 384        |       |
| Units sold through Oct.  27, 2008                          |       |                     |       | —                   |       | —            |       | 126                |       | 105                      |       | —                        |       | —        |       | —                |       | 137                        |       | 368        |       |
| Unsold units                                                         |       |                     |       | —                   |       |              |       | 1                  |       | 15                       |       | —                        |       | —        |       | —                |       | —                     |       | 16         |       |
| Unsold units with deposits for future sale as of  Oct. 27, 2008 |       |                     |       |                     |       |              |       | 1                  |       |                     |       | —                        |       | —        |       | —                |       | —                     |       | 1          |       |

 

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**Summaryfinancial 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** | ** ** | **Total** | ** ** |
|--------------------------------|------------|--------------------------|------------|--------------------------|------------|-------------------|------------|--------------------|------------|--------------------------|------------|-------------------------------|------------|---------------|------------|-----------------------|------------|----------------------------|------------|-----------|------------|
| **Revenues**                   |       |                     |       |                     |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |      |       |
| Rental Income                  |       | 98,755                   |       | 284,375                  |       | 258,038           |       | 196,925            |       | 56,957                   |       | 205,957                       |       | 193,117       |       | 583,193               |       | —                     |       | 1,877,317 |       |
| Laundry and Sundry Income      |       | —                   |       | 1,017                    |       | 356               |       | —             |       | —                   |       | —                        |       | 1,443         |       | 4,830                 |       | —                     |       | 7,646     |       |
|                           |       | 98,755                   |       | 285,392                  |       | 258,394           |       | 196,925            |       | 56,957                   |       | 205,957                       |       | 194,559       |       | 588,023               |       | —                     |       | 1,884,963 |       |
| **Expenses**                   |       |                     |       |                     |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |      |       |
| Administrative                 |       | 631                      |       | 1,807                    |       | 14,064            |       | 4,789              |       | 226                      |       | 2,632                         |       | 1,537         |       | 12,756                |       | —                     |       | 38,442    |       |
| Depreciation and Amortization  |       | 27,034                   |       | 100,975                  |       | 108,324           |       | 82,998             |       | 53,681                   |       | 97,178                        |       | 131,586       |       | 392,125               |       | —                     |       | 993,901   |       |
| Management Fees                |       | 2,673                    |       | 10,645                   |       | 10,429            |       | 8,075              |       | 2,197                    |       | 8,052                         |       | 7,040         |       | 23,452                |       | —                     |       | 72,563    |       |
| Operating                      |       | 8,989                    |       | 25,767                   |       | 11,110            |       | 307                |       | 37                       |       | 244                           |       | 12,528        |       | 67,595                |       | —                     |       | 126,577   |       |
| Renting                        |       | —                   |       | 12,014                   |       | 17,296            |       | 1,318              |       | —                   |       | 929                           |       | 440           |       | 6,957                 |       | —                     |       | 38,954    |       |
| Repairs and Maintenance        |       | 1,175                    |       | 42,823                   |       | 36,802            |       | 95,424             |       | 17,933                   |       | 60,503                        |       | 25,820        |       | 98,060                |       | —                     |       | 378,539   |       |
| Taxes and Insurance            |       | 12,926                   |       | 42,241                   |       | 22,425            |       | 18,222             |       | 7,378                    |       | 14,288                        |       | 26,181        |       | 77,192                |       | —                     |       | 220,854   |       |
|                           |       | 53,428                   |       | 236,272                  |       | 220,450           |       | 211,133            |       | 81,452                   |       | 183,826                       |       | 205,131       |       | 678,137               |       | —                     |       | 1,869,830 |       |
| **Income Before Other Income** |       | 45,327                   |       | 49,120                   |       | 37,944            |       | (14,208            | )          | (24,495                  | )          | 22,131                        |       | (10,572       | )          | (90,114               | )          | —                     |       | 15,133    |       |
| **Other 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                          |       | 1,487     |       |
| Gain on Sale of Real Estate    |       | —                   |       | —                   |       |              |       | 66,150             |       | 71,364                   |       |                          |       |          |       | —                |       | —                     |       | 137,514   |       |
| Other 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**          | **)**      | **—**                 |       | (300,354  | )          |

 

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  Sales** | ** ** | ** ** | ** ** |
|-------------------------|------------|-----------------|------------|--------------------------|------------|--------------------|------------|--------------------|------------|--------------------------|------------|-------------------------------|------------|------------------|------------|-----------------------|------------|----------------------------|------------|------------|------------|
| **Period End**          | ** ** | **March  2005** | ** ** | **March  2005**          | ** ** | **November  2005** | ** ** | **March  2005**    | ** ** | **October  2005**        | ** ** | **October  2005**             | ** ** | **August  2004** | ** ** | **August  2004**      | ** ** | **August  2004**           | ** ** | **Total**  | ** ** |
| September 30, 2009 |       | —          |       | —                   |       | 135,090            |       | —             |       | —                   |       | —                        |       | —           |       | 249,593               |       | —                     |       | 384,682    |       |
| September 30, 2010 |       | —          |       | 8,911                    |       | 144,711            |       | —             |       | —                   |       | —                        |       | —           |       | 262,728               |       | —                     |       | 416,350    |       |
| September 30, 2011 |       | 2,162,000       |       | 110,346                  |       | 155,018            |       | —             |       | —                   |       | —                        |       | —           |       | 276,561               |       | —                     |       | 2,703,925  |       |
| September 30, 2012 |       | —          |       | 116,907                  |       | 166,060            |       | 50,135             |       | —                   |       | 50,135                        |       | 36,421           |       | 291,128               |       | —                     |       | 710,617    |       |
| September 30, 2013 |       | —          |       | 123,859                  |       | 177,887            |       | 64,222             |       | 1,808,000                |       | 64,222                        |       | 65,250           |       | 306,468               |       | —                     |       | 2,616,025  |       |
| Thereafter              |       | —          |       | 8,239,977                |       | 6,715,623          |       | 4,885,643          |       | —                   |       | 4,885,643                     |       | 4,648,328        |       | 15,309,664            |       | —                     |       | 45,178,930 |       |
|                    |       | 2,162,000       |       | 8,600,000                |       | 7,494,389          |       | 5,000,000          |       | 1,808,000                |       | 4,750,000                     |       | 5,500,000        |       | 16,696,141            |       | —                     |       | 52,010,529 |       |

 

See Note 17 — Subsequent Events for information on an approximate $17.4million investment by the Partnership for a 40% interest in a new jointventure.

 

**NOTE 15. RECENT ACCOUNTING PRONOUNCEMENTS**

 

In June 2009, theFASB issued SFAS 167, “Amendments to FASB Interpretation No. 46(R) (“SFAS167”), which (1) addresses the effects of eliminating the qualifyingspecial-purpose entity concept from ASC 860, *Transfersand Servicing*(formerly SFAS 140, “Accounting for Transfers andServicing of Financial Assets and Extinguishments of Liabilities”), and 

 

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(2) responds toconcerns about the application of certain key provisions of ASC 810, *Consolidation*(formerly FASBInterpretation No. 46(R), “Consolidation of Variable Interest Entities”),including concerns over the transparency of enterprises’ involvement withvariable interest entities (“VIEs”). SFAS 167 is effective beginning on January 1,2010. The Partnership is currently assessing the impact of SFAS 167.

 

In August 2009, theFASB issued Accounting Standards Update (ASU) No. 2009-05, “MeasuringLiabilities at Fair Value” (“ASU 2009-05”), which provides amendments to Topic820. ASU 2009-05 provides additional guidance clarifying the measurement ofliabilities at fair value. ASU 2009-05 is effective in the fourth quarter 2009for a calendar year entity. The Partnership is currently evaluating the impactof ASU 2009-05 on its financial position, results of operations, cash flows anddisclosures.

 

**NOTE 16. DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE**

 

The following tables summarize income fromdiscontinued operations and the related realized gain and loss on sale ofrental property for the nine months ended September 30, 2009 and 2008**:**

 

| ** **                                  | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                  | ** ** | **2009**                                  | ** ** | **2008** | ** ** |
| Total Revenues                              |       | $                                         | —     |   | $ | 243,470 |   |
| Operating and other  expenses               |       | —                                    |       | 256,774 |   |
| Depreciation and  amortization              |       | —                                    |       | 100,104 |   |
|                                        |       | —                                    |       | 356,878 |   |
| Income (loss) from  discontinued operations |       | —                                    |       | (113,408 | ) |
| Gain on the sale of rental  property        |       | —                                    |       | 10,054,392 |   |
| Income (loss) from  discontinued operations |       | $                                         | —     |   | $ | 9,940,984 |   |

 

**NOTE 17. SUBSEQUENT EVENTS**

 

In October 2009, the Partnershipreceived a loan commitment to refinance Linhart, LLP, located in Newton,Massachusetts.  The new loan is$2,000,000, with a rate of 3.75% over the Libor rate or 4.25% which ever isgreater and matures five years from the date of closing.  The loan agreement calls for interest onlypayments for twenty four months and principal and interest payments for theremainder of the five year period based on a thirty year amortization.  The loan proceeds will be used to pay off thecurrent loan of approximately $1,647,000, and closing costs of approximately$20,000.  The Partnership plans to closeon this loan by the end of November 2009.

 

On October 28, 2009 the Partnershipinvested approximately $17,400,000 for a 40% interest in a joint venture whichacquired a residential property located in Brookline, Massachusetts.  The property, referred to as Dexter Park, isa 409 unit residential complex. The purchase price was $ 129,500,000, which wasfunded by capital contributions to the joint venture consisting of the $17.4million investment by the Partnership, $23.7 million from HBC Holdings, LLC, anentity owned by Harold Brown and his affiliates, and $89.9 million in mortgagefinancing secured by Dexter Park.  As of September 30,2009, the Partnership made a deposit of $2,660,500 in connection with theacquisition.  In order to fund thisinvestment, the Partnership used approximately $7,000,000 of its cash reservesand borrowed $7,800,000 with an interest rate of 6% from HBC Holdings,LLC.  The term of the loan is four yearswith a provision requiring payment upon six months notice.  The Partnership has pledged its ownership in62 Boylston Street as security for this note. This transaction has resulted ina reduction in the Partnership’s cash balance to approximately $2,000,000 at November 6,2009.  See Form 8-K filed on November 3,2009 for more information regarding this acquisition.

 

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

 

The following discussion should be read inconjunction with the financial statements and notes thereof appearing elsewherein this Report.  This Report, on Form 10-Q,contains forward-looking statements within the meaning of the securitieslaw.  Actual results or developmentscould differ materially from those projected in such statements as a result ofcertain factors set forth in the section below entitled “Factors That May AffectFuture Results” and elsewhere in this Report.

 

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The real estate market inthe Greater Boston area has softened, and the Partnership anticipates theclimate will remain the same in the foreseeable future.  As anticipated, the Partnership has seen anincrease in vacancies and an increase in rental concessions in the thirdquarter.  The Partnership believes itspresent cash reserves as well as anticipated rental revenue will be sufficientto fund its current operations, finance current planned improvements to itsproperties, and continue distribution payments in the foreseeable future.

 

Since the Partnership’slong-term goals include the acquisition of additional properties, a portion ofthe proceeds from the refinancing and sale of properties is reserved for thispurpose.  The Partnership will considerrefinancing or selling existing properties if the Partnership’s cash reservesare insufficient to repay existing mortgages or if the Partnership needsadditional funds for future acquisitions.

 

Managementbelieves that the financial difficulties experienced since the lending crisisin 2007 have finally shown up in the local economy as evidenced by highervacancies in the third quarter and concessions necessary to improveoccupancy.  Management believes that therental concessions will continue through 2010 but to a lesser degree.  Management believes recovery from thenational recession and the challenging credit market will continue into 2010 atthe local level.  The Partnership’sprimary market, the Greater Boston Metropolitan Area, continues to experiencehigh unemployment levels and continued downsizing by many corporations andmunicipalities.  As such, we do notforesee  improvement until mid 2010.  Despite the current financial markets, NERAand Hamilton were able to secure a $90 million long term mortgage to financethe acquisition of the 409 unit residential complex discussed in Note 17 of thefinancial statements.

 

Despitethe increased vacancies and the concessions given in the third quarter of 2009,the Partnership’s rental income rose by 3.6% and operating expenses declined by1.8% for the nine months ended September 30, 2009.  Operational successes included managingutility costs, improving efficiency through capital improvements in heating andair conditioning equipment and a concerted effort to keep curb appeal high butkeep repair and maintenance expenses in check. Management continues to be effective in reducing operating expensesexperiencing  increases only in uncontrollableexpenses such as real estate taxes and insurance.  Management believes that continued efforts tocontrol operating expenses will be effective for the remainder of theyear.  Bad debt remains at approximately1% and revenue at the commercial properties has shown no sign of weakness.  The market softness in 2009 has required morefree rent than in previous seasons which is reflected in the third quarterrevenue and Management believes that further concessions will  be necessary in the foreseeable future.  As the local economy has yet to rebound ordemonstrate job growth, Management expects revenue growth for the balance of2009 and the first two quarters of 2010 to be modest at best.

 

TheStock Repurchase Program that was initiated in 2007 and expired in August 2009has purchased 391,424 Depositary Receipts through September 2009.

 

The Partnership has retainedThe Hamilton Company (“Hamilton”) to manage and administer the Partnership’sand Joint Ventures’ Properties.  Hamiltonis a full-service real estate management company, which has legal,construction, maintenance, architectural, accounting and administrativedepartments.  The Partnership’sproperties represent approximately 40% of the total properties and 70% of theresidential 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 RestatedContract of Limited Partnership (the “Partnership Agreement”) expresslyprovides that the general partner may employ a management company to manage theproperties, and that such management company may be paid a fee of 4% of rentalreceipts for administrative and management services (the “Management Fee”).  The Partnership pays Hamilton the full annualManagement Fee, in monthly installments.

 

At September 30, 2009,Harold Brown, his brother, Ronald Brown and the President of Hamilton, CarlValeri, collectively own approximately 39% of the Depositary Receiptsrepresenting the Partnership Class A Units (including Depositary Receiptsheld by trusts for the benefit of such persons’ family members).  Harold Brown also owns 75% of the Partnership’sClass B Units 75% of the capital stock of NewReal, Inc.  (“NewReal”), the Partnership’s sole generalpartner, and all of the outstanding stock of Hamilton.  Ronald Brown also owns 25% of the Partnership’sClass B Units and 25% of NewReal’s capital stock.  In addition, Ronald Brown is the Presidentand director of NewReal and Harold Brown is NewReal’s Treasurer and a director.  Two of NewReal’s other directors, RobertaOrnstein and Conrad DiGregorio, also own immaterial amounts of the Partnership’sClass A Units or receipts.

 

In addition to theManagement Fee, the Partnership Agreement further provides for the employmentof outside professionals to provide services to the Partnership and allowsNewReal to charge the Partnership for the cost of employing professionals toassist with the administration of the Partnership’s properties.  Additionally, from time to time, thePartnership 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 hourlyrate charged to all entities managed by Hamilton, and management believes suchrates are competitive in the marketplace.

 

23

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Hamilton accounted forapproximately 10% of the repair and maintenance expense paid for by thePartnership in the nine months ended September 30, 2009 and 5% for theyear ended December 31, 2008.  Ofthe funds paid to Hamilton for this purpose, the great majority was to coverthe cost of services provided by the Hamilton maintenance department, includingplumbing, electrical, carpentry services, and snow removal for those propertiesclose to Hamilton’s headquarters.  However,several of the larger Partnership properties have their own maintenance staff.  Further, those properties that do not havetheir own maintenance staff and are located more than a reasonable distancefrom Hamilton’s headquarters in Allston, Massachusetts are generally servicedby local, independent companies.

 

Hamilton’s legal departmenthandles most of the Partnership’s eviction and collection matters.  Additionally, it prepares most long-termcommercial lease agreements and represents the Partnership in selected purchaseand sale transactions.  Overall, Hamiltonprovided approximately 76% of the legal services paid for by the Partnershipduring the nine months ended September 30, 2009 and approximately 50% forthe year ended December 31, 2008.

 

Additionally, as describedin Note 3 to the consolidated financial statements, The Hamilton Companyreceives similar fees from the Investment Properties.

 

R. Brown Partners, which isowned by Ronald Brown, managed the condominium association containing fivecondominium units which were sold in 2008 located in Brookline, Massachusetts.  That entity received annual management feesfrom the five units of approximately $1,500, and Hamilton reduced itsmanagement fees to approximately 2%, so that the total management fee will notexceed the 4% allowed by the Partnership’s Partnership Agreement.

 

The Partnership requiresthat three bids be obtained for construction contracts in excess of $5,000.  Hamilton may be one of the three bidders on aparticular project and may be awarded the contract if its bid and its abilityto successfully complete the project are deemed appropriate.  For contracts that are not awarded toHamilton, Hamilton charges the Partnership a construction supervision fee equalto 5% of the contract amount.  Hamilton’sarchitectural department also provides services to the Partnership on anas-needed basis.  During the nine monthsended September 30, 2009, Hamilton provided construction and architecturalservices paid for by the Partnership totaling approximately $35,000.

 

Prior to 1991, thePartnership employed an outside, unaffiliated company to perform itsbookkeeping and accounting functions.  Sincethat time, such services have been provided by Hamilton’s accounting staff,which consists of approximately 14 people. During the nine months ended September 30, 2009, Hamilton chargedthe Partnership $93,750 ($125,000 per year) for bookkeeping and accountingservices.

 

For more information onrelated party transactions, see Note 3 to the Consolidated FinancialStatements.

 

**CRITICAL ACCOUNTING POLICIES AND ESTIMATES**

 

The preparation of theconsolidated financial statements, in accordance with accounting principlesgenerally accepted in the United States of America, requires the Partnership tomake estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses and related disclosures of contingent assetsand liabilities.  The Partnershipregularly and continually evaluates its estimates, including those related toacquiring, developing and assessing the carrying values of its real estateproperties and its investments in and advances to joint ventures.  The Partnership bases its estimates onhistorical experience, current market conditions, and on various otherassumptions that are believed to be reasonable under the circumstances.  However, because future events and theireffects cannot be determined with certainty, the determination of estimatesrequires the exercise of judgment.  ThePartnership’s critical accounting policies are those which require assumptionsto be made about such matters that are highly uncertain.  Different estimates could have a materialeffect on the Partnership’s financial results. Judgments and uncertainties affecting the application of these policiesand estimates may result in materially different amounts being reported underdifferent conditions and circumstances.  SeeNote 1 to the Consolidated Financial Statements, Principles ofConsolidation.

 

*Revenue Recognition:*  Rental income from residential and commercialproperties is recognized over the term of the related lease.  For residential tenants, amounts 60 daysin arrears are charged against income.  Thecommercial tenants are evaluated on a case by case basis.  Certain leases of the commercial propertiesprovide for increasing stepped minimum rents, which are accounted for on astraight-line basis over the term of the lease. Concessions made on residential leases are accounted for on thestraight-line basis.

 

*Real Estate andDepreciation:*  Real estateassets are stated at the lower of cost or fair value, less accumulateddepreciation.  Costs related to theacquisition, development, construction and improvement of properties arecapitalized, including interest, wages and benefits, real estate taxes andinsurance.  Capitalization usually beginswith commencement of 

 

24

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development activity and ends when theproperty is ready for leasing.  Replacementsand improvements, such as HVAC equipment, structural replacements, windows,appliances, flooring, carpeting and kitchen/bath replacements and renovations,are capitalized and depreciated over their estimated useful lives as follows:

 

·                  Depreciation iscomputed on the straight-line and accelerated methods over the estimated usefullives of the related assets.  Inassessing estimated useful lives, the Partnership makes assumptions based onhistorical experience acquired from both within and outside the Partnership.  These assumptions have a direct impact on thePartnership’s net income.

 

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

 

*Impairment*:  On an annual basis management assesseswhether there are any indicators that the value of the Company’s rentalproperties may be impaired.  A property’svalue is impaired only if management’s estimate of the aggregate future cashflows (undiscounted and without interest charges) to be generated by theproperty is less than the carrying value of the property.  To the extent impairment has occurred, theloss shall be measured as the excess of the carrying amount of the propertyover the fair value of the property.  TheCompany’s estimates of aggregate future cash flows expected to be generated byeach property are based on a number of assumptions that are subject to economicand market uncertainties including, among others, demand for space, competitionfor tenants, changes in market rental rates, and costs to operate eachproperty.  As these factors are difficultto predict and are subject to future events that may alter management’sassumptions, the future cash flows estimated by management in its impairmentanalyses may not be achieved.  ThePartnership has not recognized an impairment loss since 1995.

 

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

 

*Investments inPartnerships:*  ThePartnership accounts for its 50% ownership in the Investment Properties underthe equity method of accounting, as it exercises significant influence over,but does not control these entities.  Theseinvestments are recorded initially at cost, as Investments in Partnerships, andsubsequently adjusted for the Partnership’s share in earnings, cashcontributions and distributions.  Underthe equity method of accounting, our net equity is reflected on theconsolidated balance sheets, and our share of net income or loss from thePartnership is included on the consolidated statements of income.

 

With respect to investments inand advances to the Investment Properties, the Partnership looks to theunderlying properties to assess performance and the recoverability of carryingamounts for those investments in a manner similar to direct investments in realestate properties.  An impairment chargeis recorded if management’s estimate of the aggregate future cash flows(undiscounted and without interest charges) to be generated by the property isless than the carrying value of the property.

 

*Legal Proceedings:*  The Partnership is subject to various legalproceedings and claims that arise, from time to time, in the ordinary course ofbusiness.  These matters are frequentlycovered by insurance.  If it isdetermined that a loss is likely to occur, the estimated amount of the loss is recordedin the financial statements.  Both theamount of the loss and the point at which its occurrence is considered likelycan be difficult to determine.

 

**RESULTS OF OPERATIONS**

 

Comparison of the three months ended September 30, 2009 to thethree months ended September 30, 2008 (as adjusted for discontinuedoperations)

 

The Partnership and its Subsidiary Partnerships earned income beforeother income and discontinued operations of approximately $2,588,000 during thethree months ended September 30, 2009, compared to approximately$2,370,000 for the three months ended September 30, 2008, an increase ofapproximately $218,000 (9%).

 

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The rental activity issummarized as follows:

 
| ** **                                        | ** ** | **Occupancy Date**        | ** ** |
|---------------------------------------------------|------------|---------------------------|------------|
| ** **                                        | ** ** | **October 26, 2009** | ** ** | **October 27, 2008** | ** ** |
| **Residential**                                   |       |                      |       |   |   |
| Units—exclusive of  available for sale units |       | 2,269                     |       | 2,265 |   |
| Vacancies                                         |       | 111                       |       | 49 |   |
| Vacancy rate                                      |       | 4.9                       | %          | 2.1 | % |
| **Commercial**                                    |       |                      |       |   |   |
| Total square feet                                 |       | 114,395                   |       | 90,848 |   |
| Vacancy                                           |       | 0                         |       | 0 |   |
| Vacancy rate                                      |       | 0                         | %          | 0 | % |

 
| ** **             | ** ** | **Rental Income (in thousands)  Three Months Ended September 30,** | ** ** |
|------------------------|------------|-------------------------------------------------------------------------|------------|
| ** **             | ** ** | **2009**                                                                | ** ** | **2008** | ** ** |
| ** **             | ** ** | **Total  Operations**                                                   | ** ** | **Continuing  Operations** | ** ** | **Total  Operations** | ** ** | **Continuing  Operations** | ** ** |
| Total rents            |       | $                                                                       | 8,090      |   | $ | 8,090 |   | $ | 7,959 |   | $ | 7,981 |   |
| Residential percentage |       | 90                                                                      | %          | 90 | % | 92 | % | 92 | % |
| Commercial percentage  |       | 10                                                                      | %          | 10 | % | 8 | % | 8 | % |
| Contingent rentals     |       | $                                                                       | 136        |   | $ | 136 |   | $ | 134 |   | $ | 134 |   |

 

**Three Months Ended September 30,2009 Compared to Three Months Ended September 30, 2008:**

 
| ** **                                                | ** ** | **Three Months Ended  September 30,** | ** ** | ** ** | ** ** | ** **         | ** ** |
|-----------------------------------------------------------|------------|--------------------------------------------|------------|------------|------------|--------------------|------------|
| ** **                                                | ** ** | **2009**                                   | ** ** | **2008**   | ** ** | **Dollar  Change** | ** ** | **Percent  Change** | ** ** |
| Revenues:                                                 |       |                                       |       |       |       |               |       |   |   |
| Rental income                                             |       | $                                          | 8,089,673  |       | $          | 7,981,479          |       | $ | 108,194 |   | 1.3 | % |
| Laundry and sundry income                                 |       | 119,893                                    |       | 95,907     |       | 23,986             |       | 25.0 | % |
|                                                      |       | 8,209,566                                  |       | 8,077,386  |       | 132,180            |       | 1.6 | % |
| Expenses                                                  |       |                                       |       |       |       |               |       |   |   |
| Administrative                                            |       | 416,398                                    |       | 424,363    |       | (7,965             | )          | (1.9 | )% |
| Depreciation and amortization                             |       | 1,591,668                                  |       | 1,655,560  |       | (63,892            | )          | (3.9 | )% |
| Management fees                                           |       | 334,745                                    |       | 327,079    |       | 7,666              |       | 2.3 | % |
| Operating                                                 |       | 689,871                                    |       | 784,581    |       | (94,710            | )          | (12.1 | )% |
| Renting                                                   |       | 262,234                                    |       | 218,896    |       | 43,338             |       | 19.9 | % |
| Repairs and maintenance                                   |       | 1,435,264                                  |       | 1,429,528  |       | 5,736              |       | 0.4 | % |
| Taxes and insurance                                       |       | 891,239                                    |       | 867,119    |       | 24,120             |       | 2.8 | % |
|                                                      |       | 5,621,419                                  |       | 5,707,126  |       | (85,707            | )          | (1.5 | )% |
| Income Before Other Income  and Discontinued Operations   |       | 2,588,147                                  |       | 2,370,260  |       | 217,887            |       | 9.2 | % |
| Other Income (Loss)                                       |       |                                       |       |       |       |               |       |   |   |
| Interest expense                                          |       | (1,978,591                                 | )          | (1,930,302 | )          | 48,289             |       | 2.5 | % |
| Interest income                                           |       | 15,270                                     |       | 39,357     |       | (24,087            | )          | (61.2 | )% |
| Gain (loss) on the sale of  equipment                     |       | 93                                         |       | —     |       | 93                 |       | NA |   |
| Mortgage prepayment  penalties                            |       | —                                     |       | —     |       | —             |       | — |   |
| (Loss) from investment in  unconsolidated joint ventures  |       | (325,614                                   | )          | (300,352   | )          | 25,262             |       | 8.4 | % |
|                                                      |       | (2,288,842                                 | )          | (2,191,297 | )          | 97,545             |       | 4.5 | % |
| (Loss) income from  Continuing Operations                 |       | 299,305                                    |       | 178,963    |       | 120,342            |       | 67.2 | % |
| Discontinued Operations:                                  |       |                                       |       |       |       |               |       |   |   |
| Income (loss) from  discontinued operations               |       | —                                     |       | (22,229    | )          | 22,229             |       | (100.0 | )% |
| Gain on sale of real  estate from discontinued operations |       | —                                     |       | 67,650     |       | (67,650            | )          | (100.0 | )% |
|                                                      |       | —                                     |       | 45,421     |       | (45,421            | )          | (100.0 | )% |
| Net Income                                                |       | $                                          | 299,305    |       | $          | 224,384            |       | $ | 74,921 |   | 33.3 | % |

 

Rental income fromcontinuing operations for the three months ended September 30, 2009 wasapproximately $8,089,000 compared to approximately $7,981,000 for the threemonths ended September 30, 2008, an increase of approximately $108,000(1.3%).  Rental income from CypressStreet in Brookline, acquired in 2008, was approximately 

 

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$202,000. A number of properties experienced decreases in rental income for thethree months ended September 30, 2009 including; 1131 Commonwealth Avewith a decrease of approximately $21,000; North Beacon Street with a decreaseof approximately $41,000; 62 Boylston Street with a decrease of approximately$69,000; Redwood Hills with a decrease of approximately $28,000; and WestgateApartments with a decrease of approximately $22,000.  These decreases are due primarily toincreases in vacancies as well as rental concessions granted to tenants in aneffort to maintain occupancy.  Rentalconcessions for the three months ended September 30, 2009 wereapproximately $275,000 compared to approximately $69,000 for the three monthsended September 30, 2008, an increase of approximately $206,000.  Rental concessions for the second quarter of2009 were approximately $75,000.  Theconcessions are accounted for on a straight-line basis where appropriate.

 

Expenses from continuingoperations for the three months ended September 30, 2009 wereapproximately $5,621,000 compared to approximately $5,707,000 for the threemonths ended September 30, 2008, a decrease of approximately $86,000(1.5%).  The most significant factorcontributing to this decrease was a decrease in depreciation and amortizationexpense of approximately $64,000 (3.9%) due to assets being fully depreciatedat September 30, 2009; a decrease in administrative expenses ofapproximately $8,000 (1.9%) due to significant legal and accounting fees paidin 2008 in connection with the stock buyback program; and a decrease inoperating expenses of approximately $95,000 (12.1%) due to a decrease inutility costs.

 

These decreases are offsetby an increase in renting expenses of approximately $43,000 (19.9%) due torental commissions paid in an effort to maintain occupancy; and an increase intaxes and insurance of approximately $24,000 (2.8%) due to real estate taxincreases as well as the acquisition of Cypress Street in October 2008.

 

Interest expense increasedapproximately $48,000 (2.5%) due to the refinancing of Partnership propertiesin 2008 resulting in a higher level of debt offset by lower interest rates.

 

During the three monthsended September 30, 2008, the Partnership sold the last two condominiumunits at Harvard 45.  The gain on thesale of these units is approximately $68,000 and is included in discontinuedoperations.

 

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

 

As described in Note 14to the Consolidated Financial Statements, the Partnership’s share of the netloss from the 50% owned Investment Properties was approximately $326,000 and$300,000 for the three months ended September 30, 2009 and 2008respectively, an increase of approximately $26,000.  Included in the loss for the three monthsended September 30, 2009 and 2008 is a gain of approximately $1,500 and$68,000 respectively, on the sale of units.

 

Interest income for thethree months ended September 30, 2009 was approximately $15,000 comparedto approximately $39,000 for the three months ended September 30, 2008, adecrease of approximately $24,000.  Thisdecrease is due to a drop in interest rates as well as less cash available forinvestment.

 

As a result of the changesdiscussed above, net income for the three months ended September 30, 2009was $299,305 compared to $224,384 for the three months ended September 30,2008, an increase of $74,921(33.3%).

 

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**Comparison of the nine months ended September 30, 2009 to the ninemonths ended September 30, 2008**

 

The Partnership and itssubsidiary Partnerships earned income before other income and discontinuedoperations of $8,318,963 for the nine months ended September 30, 2009,compared to $7,145,416 for the nine months ended September 30, 2008,an increase of $1,173,547(16.4%).  Thefollowing is a summary of the Partnership’s operations for the nine monthsended September 30, 2009 and 2008.
| ** **                                                | ** ** | **Nine Months Ended  September 30,** | ** ** | ** **  | ** ** | ** **         | ** ** |
|-----------------------------------------------------------|------------|-------------------------------------------|------------|-------------|------------|--------------------|------------|
| ** **                                                | ** ** | **2009**                                  | ** ** | **2008**    | ** ** | **Dollar  Change** | ** ** | **Percent  Change** | ** ** |
| Revenues:                                                 |       |                                      |       |        |       |               |       |   |   |
| Rental income                                             |       | $                                         | 24,634,345 |        | $          | 23,778,488         |       | $ | 855,857 |   | 3.6 | % |
| Laundry and sundry income                                 |       | 312,263                                   |       | 304,905     |       | 7,358              |       | 2.4 | % |
|                                                      |       | 24,946,608                                |       | 24,083,393  |       | 863,215            |       | 3.6 | % |
| Expenses                                                  |       |                                      |       |        |       |               |       |   |   |
| Administrative                                            |       | 1,277,745                                 |       | 1,305,968   |       | (28,223            | )          | (2.2 | )% |
| Depreciation and amortization                             |       | 4,513,165                                 |       | 4,846,979   |       | (333,814           | )          | (6.9 | )% |
| Management fees                                           |       | 1,011,531                                 |       | 978,507     |       | 33,024             |       | 3.4 | % |
| Operating                                                 |       | 3,064,201                                 |       | 3,117,155   |       | (52,954            | )          | (1.7 | )% |
| Renting                                                   |       | 406,363                                   |       | 405,761     |       | 602                |       | 0.1 | % |
| Repairs and maintenance                                   |       | 3,580,895                                 |       | 3,653,203   |       | (72,308            | )          | (2.0 | )% |
| Taxes and insurance                                       |       | 2,773,745                                 |       | 2,630,404   |       | 143,341            |       | 5.4 | % |
|                                                      |       | 16,627,645                                |       | 16,937,977  |       | (310,332           | )          | (1.8 | )% |
| Income Before Other Income  and Discontinued Operations   |       | 8,318,963                                 |       | 7,145,416   |       | 1,173,547          |       | 16.4 | % |
| Other Income (Loss)                                       |       |                                      |       |        |       |               |       |   |   |
| Interest expense                                          |       | (5,885,831                                | )          | (5,725,270  | )          | (160,561           | )          | 2.8 | % |
| Interest income                                           |       | 47,861                                    |       | 119,979     |       | (72,118            | )          | (60.0 | )% |
| Mortgage prepayment  penalties                            |       | —                                    |       | (4,487,706  | )          | 4,487,706          |       | (100.0 | )% |
| (Loss) on sale of  equipment                              |       | (2,726                                    | )          | —      |       | (2,726             | )          | NA |   |
| (Loss) from investment in  unconsolidated joint ventures  |       | (880,902                                  | )          | (765,370    | )          | (115,532           | )          | 15.1 | % |
|                                                      |       | (6,721,598                                | )          | (10,858,367 | )          | 4,136,769          |       | (38.0 | )% |
| Income(Loss) from  Continuing Operations                  |       | 1,597,365                                 |       | (3,712,951  | )          | 5,310,316          |       | (143.0 | )% |
| Discontinued Operations:                                  |       |                                      |       |        |       |               |       |   |   |
| Gain on sale of real  estate from discontinued operations |       | —                                    |       | 10,054,392  |       | 10,054,392         |       | (100.0 | )% |
| (Loss) from discontinued  operations                      |       | —                                    |       | (113,408    | )          | 113,408            |       | 100.0 | % |
|                                                      |       | —                                    |       | 9,940,984   |       | 9,940,984          |       | (100.0 | )% |
| Net Income                                                |       | $                                         | 1,597,365  |        | $          | 6,228,033          |       | $ | 4,630,668 |   | 74.4 | % |

 

Rental income fromcontinuing operations for the nine months ended September 30, 2009 wasapproximately $24,634,000 compared to approximately $23,778,000 for the ninemonths ended September 30, 2008, an increase of approximately $856,000(3.6%).  The Partnership’s acquisition ofCypress Street in October 2008 represents approximately $615,000 of thisincrease.  Other properties withsignificant increases include 1144 Commonwealth Avenue, an increase ofapproximately $64,000; 62 Boylston Street, an increase of approximately$13,000; Westgate Apartments, an increase of approximately $15,000; Linewt,with an increase of approximately $33,000 and River Drive with an increase ofapproximately $26,000.  These increasesare offset by decreases in rental income at properties including ExecutiveApartments with a decrease of approximately $26,000; North Beacon Street with adecrease of approximately $65,000 and School Street with a decrease ofapproximately $27,000.

 

Expenses from continuingoperations for the nine months ended September 30, 2009 were approximately$16,628,000 compared to approximately $16,938,000 for the nine months ended September 30,2008, a decrease of approximately $310,000 (1.8%).  The most significant factor contributing tothis decrease was a decrease in depreciation and amortization expense ofapproximately $334,000 (6.9%); a decrease in repairs and maintenance expensesof approximately $72,000 (2.0%); a decrease in operating expenses ofapproximately $53,000 (1.7%); and a decrease in administrative expenses ofapproximately $28,000 (2.2%).  The reasonsfor these changes are discussed in the section for the results for the threemonths ended September 30, 2009.

 

These decreases are offsetby an increase in taxes and insurance of approximately $143,000 (5.4%) due torate increases, and an increase in the management fee of approximately $33,000(3.4%) due to the increase in rental income.

 

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Interest expense increasedapproximately $161,000 (2.8%) due to the acquisition of Cypress Street in October 2008as well as the refinancing of Partnership properties in 2008, both of whichresulted in a higher level of debt.

 

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

 

As described in Note 14to the Consolidated Financial Statements, the Partnership’s share of the netloss from the 50% owned Investment Properties was approximately $881,000 forthe nine months ended September 30, 2009 compared to a loss ofapproximately $765,000 for the nine months ended September 30, 2008, anincrease of approximately $116,000 (15.1%). The Partnerships share of loss includes a gain on the sale of units ofapproximately $26,000 and $417,000 for the nine months ended September 30,2009 and 2008, respectively.

 

Interest income for the ninemonths ended September 30, 2009 was approximately $48,000 compared toapproximately $120,000 for the nine months ended September 30, 2008, adecrease of approximately $72,000 (60%). This decrease is due to a drop ininterest rates.

 

During the second quarter of2008, the Partnership refinanced the property located at Worcester Road.   Non-recurring prepayment penalties of approximately$786,000 were incurred in these transactions and are included in other expensesfor the nine months ended September 30, 2008.

 

During the nine months endedSeptember 30, 2008, the Partnership sold the Oak Ridge Apartments inFoxboro, Massachusetts and the Coach Apartments in Acton, Massachusetts.  The gain on the sale of these two propertieswas approximately $10,054,000 and is included in income from discontinuedoperations.  Additionally, there weresales of individual condo units with a gain of approximately $55,000.

 

As a result of the changesdiscussed above, net income for the nine months ended September 30, 2009was $1,597,365 compared to $6,228,033 for nine months ended September 30,2008, a decrease of $4,360,668 (74.4%).

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The Partnership’s principalsource of cash during 2009 and 2008 was the collection of rents, sale of realestate, and refinancing of partnership properties. The majority of cash andcash equivalents of $8,035,415 at September 30, 2009 and $10,752,931 at December 31,2008 were held in interest bearing accounts at creditworthy financialinstitutions.

 

The decrease in cash of$2,717,516 at September 30, 2009 is summarized as follows:

 

| ** **                                                                 | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                 | ** ** | **2009**                                  | ** ** | **2008** | ** ** |
| Cash provided by (used in)  operating activities                           |       | $                                         | 6,926,084  |   | $ | (577,435 | ) |
| Cash provided by (used in)  investing activities                           |       | (4,710,631                                | )          | 8,008,552 |   |
| Cash (used in) provided by  financing activities                           |       | (631,215                                  | )          | 22,468,811 |   |
| Repurchase of Depositary  Receipts, Class B and General Partner Units |       | (1,514,340                                | )          | (20,563,243 | ) |
| Distributions paid                                                         |       | (2,787,414                                | )          | (2,970,973 | ) |
| Net (decrease) increase in  cash and cash equivalents                      |       | $                                         | (2,717,516 | ) | $ | 6,365,712 |   |

 

The cash provided byoperating activities is primarily due to the collection of rents more than cashoperating expenses. The decrease in cash provided by investing activities isdue to the anticipation of an investment in a joint venture, the sale of 

 

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properties in 2008, and the reduction in thedistribution received from the joint ventures in 2009 compared to 2008. Theincrease in cash used  in financingactivities is due to the refinancing of Partnership properties in 2008.

 

During the nine months endedSeptember 30, 2009, the Partnership and its Subsidiary Partnershipscompleted improvements to certain of the Properties at a total cost ofapproximately $2,346,000. These improvements were funded from cash reservesand, to some extent, escrow accounts established in connection with thefinancing or refinancing of the applicable Properties. These sources have beenadequate to fully fund improvements. The most significant improvements weremade at Westside Colonial, Westgate Woburn, Redwood Hills, 1131 CommonwealthAve, and Brookside Colonial, at a cost of approximately $261,000, $220,000,$209,000, $199,000 and $191,000, respectively. The Partnership plans to investapproximately $500,000 in additional capital improvements in 2009.

 

In 2009 the Partnershiprepurchased 2,905 Class A Units, Class B Units and GeneralPartnership Units at a total cost of $1,514,340.

 

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

 

In 2008, the Partnershipobtained mortgages on 13 properties.  Thenew mortgages total approximately $73,000,000 with interest rates ranging 5.6%to 5.97%.  The new mortgages mature in2023 and call for interest only payments. After payments of existing mortgages of approximately $37,800,000 and prepaymentpenalties of approximately $4,400,000, the excess funds were used to repurchaseDepositary Receipts.

 

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

 

In 2008 the Partnership paidquarterly distributions of $7.00 per Unit ($0.70 per Receipt) in March, June, September andDecember 2008 for a total distribution of $28.00 per unit ($2.80 perreceipt).

 

In October 2009, thePartnership received a loan commitment to refinance Linhart, LLP, located inNewton, Massachusetts.  The new loan is$2,000,000, with a rate of 3.75% over the Libor rate or 4.25% which ever isgreater and matures five years from the date of closing.  The loan agreement calls for interest onlypayments for twenty four months and principal and interest payments for the remainderof the five year period based on a thirty year amortization.  The loan proceeds will be used to pay off thecurrent loan of approximately $1,647,000, and closing costs of approximately$20,000.  The Partnership plans to closeon this loan by the end of November 2009.

 

In October 2009 thePartnership invested approximately $17,400,000 for a 40% interest in a jointventure which to acquired a residential property located in Brookline,Massachusetts.  The property, referred toas Dexter Park, is a 409 unit residential complex. The purchase price was$129,500,000.  As of September 30,2009, the Partnership made a deposit of $2,660,500 in connection with theacquisition.  In order to fund thisinvestment, the Partnership used approximately $7,000,000 of their cashreserves and borrowed $7,800,000 with an interest rate of 6% from HBC Holdings,LLC, an entity owned by Harold Brown and his affiliates.  The term of the loan is four years with aprovision requiring payment upon six months notice.  The Partnership has pledged its ownership in62 Boylston Street as security for this note. This transaction has resulted ina reduction in the Partnership’s cash balance to approximately $2,000,000 at November 6,2009.  See Form 8-K filed on November 3,2009 for more information regarding this acquisition.

 

Although the purchase of theabove mentioned complex reduced the Partnership’s cash to approximately $2,000,000,the Partnership anticipates that cash from operations and interest bearingaccounts will be sufficient to fund its current operations and to financecurrent improvements to its properties. The Partnership’s net income and cashflow may fluctuate dramatically from year to year as a result of the sale ofproperties, increases or decreases in rental income or expenses, or the loss ofsignificant tenants.

 

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**Off-Balance Sheet Arrangements-Joint Venture Indebtedness**

 

As of September 30,2009, the Partnership had a 50% ownership in eight joint ventures, all of whichhave mortgage indebtedness. We do not have control of these partnerships andtherefore we account for them using the equity method. At September 30,2009, our proportionate share of the non-recourse debt related to theseinvestments was equal to approximately $25,750,000. See Note 14 to theConsolidated Financial Statements.

 

**Contractual Obligations**

 

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

 

**Factors That May Affect Future Results**

 

Certain informationcontained herein includes forward-looking statements, which are made pursuantto the safe harbor provisions of the Private Securities Liquidation Reform Actof 1995 (the “Act”). While forward looking statements reflect management’s goodfaith beliefs when those statements are made, caution should be exercised ininterpreting and relying on such forward looking statements, the realization ofwhich may be impacted by known and unknown risks and uncertainties, events thatmay occur subsequent to the forward-looking statements, and other factors whichmay be beyond the Partnership’s control and which can materially affect thePartnership’s actual results, performance or achievements for 2009 and beyond.Should one or more of the risks or uncertainties mentioned below materialize,or should underlying assumptions prove incorrect, actual results may varymaterially from those anticipated, estimated or projected. We expresslydisclaim any responsibility to update our forward looking statements, whetheras 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 anticipatefuture results or trends.

 

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

 

The Partnership depends onthe real estate markets where its properties are located, primarily in EasternMassachusetts and these markets may be adversely affected by local economicmarket conditions, which are beyond the Partnership’s control.

 

The Partnership is subjectto the general economic risks affecting the real estate industry, such asdependence on tenant’s financial condition and the need to enter into newleases or renew leases on terms favorable to tenants in order to generaterental revenues and our ability to collect rents from our tenants.

 

The Partnership is alsoimpacted by changing economic conditions making alternative housingarrangements more or less attractive to the Partnership’s tenants, such as theinterest rates on single family home mortgages and the availability andpurchase price of single-family homes in the Greater Boston metropolitan area.

 

The Partnership is subjectto significant expenditures associated with each investment, such as debtservice payments, real estate taxes, insurance and maintenance costs, which aregenerally not reduced when circumstances cause a reduction in revenues from aproperty.

 

The Partnership is subjectto increases in heating and utility costs that may arise as a result ofeconomic and market conditions and fluctuations in seasonal weather conditions.

 

Civil disturbances,earthquakes and other natural disasters may result in uninsured or underinsuredlosses.

 

Actual or threatenedterrorist attacks may adversely affect our ability to generate revenues and thevalue of our properties.

 

Financing or refinancing ofPartnership properties may not be available to the extent necessary ordesirable, or may not be available on favorable terms.

 

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The Partnership propertiesface competition from similar properties in the same market. This competitionmay affect the Partnership’s ability to attract and retain tenants and mayreduce the rents that can be charged.

 

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

 

Insurance coverage for andrelating to commercial properties is increasingly costly and difficult toobtain. In addition, insurance carriers have excluded certain specific itemsfrom standard insurance policies, which have resulted in increased riskexposure for the Partnership. These include insurance coverage for acts ofterrorism and war, and coverage for mold and other environmental conditions.Coverage for these items is either unavailable, or prohibitively expensive.

 

Market interest rates couldadversely affect the market prices for Class A Partnership Units andDepositary Receipts as well as performance and cash flow.

 

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

 

The Partnership may fail toidentify, acquire, construct, or develop additional properties; may develop oracquire properties that do not produce a desired or expected yield on investedcapital; may be unable to sell poorly- performing or otherwise undesirableproperties quickly; or may fail to effectively integrate acquisitions ofproperties or portfolios of properties.

 

Risks associated with theuse of debt to fund acquisitions and developments.

 

Competition for acquisitionsmay result in increased prices for properties.

 

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

 

Ongoing compliance withSarbanes-Oxley Act of 2002 may require additional personnel or system changes.

 

The foregoing factors shouldnot be construed as exhaustive or as an admission regarding the adequacy ofdisclosures made by the Partnership prior to the date hereof or theeffectiveness of said Act. The Partnership expressly disclaims any obligationto publicly update or revise any forward- looking statement, whether as aresult of new information, future events or otherwise.

 

The residential real estatemarket in the Greater Boston area has softened and the Partnership anticipatesthe climate will remain the same in the foreseeable future. This may result inincreases in vacancy rates and/or a reduction in rents. The Partnershipbelieves its present cash reserves as well as anticipated rental revenue willbe sufficient to fund its current operations, and to finance current plannedimprovements to its properties and continue dividend payments in theforeseeable future.

 

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

 

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

 

As of September 30,2009, the Partnership, its Subsidiary Partnerships and the InvestmentProperties collectively have approximately $138,000,000 in long-term debt,substantially all of which pays interest at fixed rates. Accordingly, the fair 

 

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value of these debt instruments is affectedby changes in market interest rates. These mortgages mature through 2023. Forinformation regarding the fair value and maturity dates of these debtobligations, see Item 2 and Notes 5, 12 and 14 to the ConsolidatedFinancial Statements.

 

For additional disclosureabout market risk, see “Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Factors That May AffectFuture Results”.

 

**ITEM4. CONTROLS AND PROCEDURES**

 

*DisclosureControls and Procedures*.  The Partnership management, with the participation of thepresident and chief executive officer and chief financial officer, hasevaluated the effectiveness of the Company’s disclosure controls and procedures(as such term is defined in Rules 13a-15(e) and 15d-15(e) underthe Exchange Act) as of the end of the period covered by thisreport.  Based on such evaluation, the president and chief executiveofficer and chief financial officer of the Company’s general partner haveconcluded that, as of the end of such period, the Company’s disclosure controlsand procedures are effective in recording, processing, summarizing andreporting, on a timely basis, information required to be disclosed by theCompany in the reports that it files or submits under the Exchange Act.

 

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

 

**PART II—OTHER INFORMATION**

 

**Item 1.  Legal Proceedings**

 

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

 

**Item 1A.  Risk Factors**

 

There were no materialchanges to the Risk Factors disclosed in our annual report on Form 10-Kfor the year ended December 31, 2008.

 

None.

 

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

 

(a)                                  None

 

(b)                                 None.

 

(c)                                  Issuerpurchases of equity securities during the three months ended September 30,2009:

 

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| **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)** | ** ** |
|-----------------------------|------------|-------------------------|------------|----------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|
|                        |       |                    |       |                                                                       |       | 146,016                                                                                         |       |
| July 1 - 31, 2009      |       | $                       | —     |                                                                       | —     |                                                                                            | 146,016    |   |
| August 1 - 31, 2009    |       | $                       | 54.00      |                                                                       | 3,500      |                                                                                            | 142,516    |   |
| September 1 - 30, 2009 |       | $                       | —     |                                                                       | —     |                                                                                            | 142,516    |   |
| Total:                      | ** ** | **$**                   | 54.00      |                                                                       | 3,500      |                                                                                            | 142,516    |   |

 

.

 

See Note 8 to theConsolidated Financial Statements for information concerning this repurchase programthrough September 30, 2009.

 

**Item 3.  Defaults UponSenior Securities**

 

None.

 

**Item 4.  Submission ofMatters to a Vote of Security Holders**

 

None.

 

**Item 5.  Other Information**

 

None.

 

**Item 6.  Exhibits**

 

(a)                                  See the exhibitindex below.

 

**EXHIBIT INDEX**

 
| **Exhibit  No.** | ** ** | **Description of Exhibit**                                                                                                                                                                                                                 |
|------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (10.1)           |       | Purchase  and Sale and Escrow Agreement dated September 1, 2009 by and between 175  Free Street Investors LLC, as Seller, The Hamilton Company, as Purchaser, and  First American Title Insurance Company, as Escrow Agent.           |
| (10.2)           |       | Limited  Liability Company Operating Agreement of HBC Holdings, LLC.                                                                                                                                                                       |
| (10.3)           |       | Limited  Liability Company Agreement of Hamilton Park Towers, LLC.                                                                                                                                                                         |
| (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 requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

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

 

Dated: November 9, 2009

 

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

 
| **Signature**    | ** ** | **Title**                                                                                                      | ** ** | **Date**              |
|------------------|------------|----------------------------------------------------------------------------------------------------------------|------------|-----------------------|
|             |       |                                                                                                           |       |                  |
| /s/ RONALD BROWN |       | President and Director of the General Partner (Principal Executive  Officer)                                   |       | November 9, 2009 |
| Ronald Brown     |       |                                                                                                           |       |
|             |       |                                                                                                           |       |                  |
| /s/ HAROLD BROWN |       | Treasure and Director to the General Partner (Principal and Finance  Officer and Principal Accounting Officer) |       | November 9, 2009 |
| Harold Brown     |       |                                                                                                           |

 

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