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**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**Form 10-Q**

 

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

 

**For thequarterly period ended June 30, 2009**

**OR**

 

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

 

**For the transition period from              to**

 

**Commission file number 0-12138**

 

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**NewEngland Realty Associates Limited Partnership**

(Exact name of registrant as specified in its charter)

 

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

 

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

 

Securitiesregistered pursuant to Section 12(b) of the Act:

 

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

 

Securitiesregistered pursuant to Section 12(g) of the Act:

 

**Class A**

**Limited Partnership Units**

(Title of class)

 

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

 

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

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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

 

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

 

Asof July 28, 2009, there were 106,227 Class A units (1,062,272Depositary Receipts) 25,229 Class B units of limited partnership units and1,327 of General Partnership units issued and outstanding.

 

 

 

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**INDEX**

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

 

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**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 six  month period ended June 30,2009 are not necessarily indicative of the results to be expected for theentire fiscal year or any other period.

 

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

** **

**CONSOLIDATED BALANCE SHEETS**

 

**(Unaudited)**

 
| ** **                                                                                   | ** ** | **June 30, 2009** | ** **  | **December 31, 2008** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-----------------------------|-------------|---------------------------------|------------|
| **ASSETS**                                                                                   |       |                        |        |                            |       |
| Rental Properties                                                                            |       | $                           | 96,960,962  |                            | $          | 98,560,454 |   |
| Cash and Cash Equivalents                                                                    |       | 11,050,265                  |        | 10,752,931                      |       |
| Rents Receivable                                                                             |       | 625,306                     |        | 553,392                         |       |
| Real Estate Tax Escrows                                                                      |       | 271,490                     |        | 275,619                         |       |
| Prepaid Expenses and Other Assets                                                            |       | 2,646,849                   |        | 3,018,714                       |       |
| Investments in Unconsolidated Joint Ventures                                                 |       | 10,300,823                  |        | 11,023,611                      |       |
| Financing and Leasing Fees                                                                   |       | 1,001,986                   |        | 1,058,736                       |       |
| **Total Assets**                                                                             |       | $                           | 122,857,681 |                            | $          | 125,243,457 |   |
| **LIABILITIES AND PARTNERS’  CAPITAL**                                                  |       |                        |        |                            |       |
| Mortgage Notes Payable                                                                       |       | $                           | 137,750,601 |                            | $          | 138,160,262 |   |
| Accounts Payable and Accrued Expenses                                                        |       | 1,309,517                   |        | 1,592,610                       |       |
| Advance Rental Payments and Security Deposits                                                |       | 3,355,764                   |        | 3,207,767                       |       |
| **Total Liabilities**                                                                        |       | 142,415,882                 |        | 142,960,639                     |       |
| Commitments and Contingent Liabilities  (Note 9)                                        |       |                        |        |                            |       |
| Partners’ Capital 132,783 and 135,251 units  outstanding in 2009 and 2008, respectively |       | (19,558,201                 | )           | (17,717,182                     | )          |
| **Total Liabilities and Partners’  Capital**                                            |       | $                           | 122,857,681 |                            | $          | 125,243,457 |   |

 

See notes to consolidated financial statements.

 

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**NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP ANDSUBSIDIARIES**

** **

**CONSOLIDATEDSTATEMENTS OF INCOME**

 

**(Unaudited)**

 
| ** **                                               | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------|------------|-------------------------------------|------------|
| ** **                                               | ** ** | **2009**                              | ** ** | **2008**                            | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                               | ** ** | ** **                            | ** ** | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenues                                                 |       |                                  |       |                                |       |   |   |   |   |
| Rental income                                            |       | $                                     | 8,179,090  |                                | $          | 7,934,836 |   | $ | 16,544,672 |   | $ | 15,857,659 |   |
| Laundry and sundry income                                |       | 97,257                                |       | 97,854                              |       | 192,370 |   | 206,998 |   |
|                                                     |       | 8,276,347                             |       | 8,032,690                           |       | 16,737,042 |   | 16,064,657 |   |
| Expenses                                                 |       |                                  |       |                                |       |   |   |   |   |
| Administrative                                           |       | 386,417                               |       | 456,450                             |       | 852,347 |   | 882,239 |   |
| Depreciation and amortization                            |       | 1,504,877                             |       | 1,609,953                           |       | 2,921,497 |   | 3,228,609 |   |
| Management fees                                          |       | 333,898                               |       | 330,190                             |       | 676,787 |   | 652,470 |   |
| Operating                                                |       | 868,593                               |       | 928,163                             |       | 2,374,329 |   | 2,332,615 |   |
| Renting                                                  |       | 83,170                                |       | 106,654                             |       | 144,129 |   | 186,865 |   |
| Repairs and maintenance                                  |       | 1,167,345                             |       | 1,204,625                           |       | 2,145,631 |   | 2,244,691 |   |
| Taxes and insurance                                      |       | 926,639                               |       | 861,150                             |       | 1,891,506 |   | 1,770,140 |   |
|                                                     |       | 5,270,939                             |       | 5,497,185                           |       | 11,006,226 |   | 11,297,629 |   |
| Income Before Other Income and Discontinued  Operations  |       | 3,005,408                             |       | 2,535,505                           |       | 5,730,816 |   | 4,767,028 |   |
| Other Income (loss)                                      |       |                                  |       |                                |       |   |   |   |   |
| Interest income                                          |       | 14,228                                |       | 32,253                              |       | 32,591 |   | 80,622 |   |
| Interest expense                                         |       | (1,962,093                            | )          | (1,917,353                          | )          | (3,907,240 | ) | (3,843,212 | ) |
| Casualty loss                                            |       | —                                |       | (4,151                              | )          | — |   | (4,151 | ) |
| Gain on the sale of equipment                            |       | —                                |       | —                              |       | 4,190 |   | — |   |
| Mortgage prepayment penalties                            |       | —                                |       | (785,538                            | )          | — |   | (4,487,706 | ) |
| (Loss) from investment in unconsolidated joint  ventures |       | (281,733                              | )          | (217,213                            | )          | (555,288 | ) | (465,018 | ) |
|                                                     |       | (2,229,598                            | )          | (2,892,002                          | )          | (4,425,747 | ) | (8,719,465 | ) |
| Income (loss) from Continuing Operations                 |       | 775,810                               |       | (356,497                            | )          | 1,305,069 |   | (3,952,437 | ) |
| Discontinued Operations                                  |       |                                  |       |                                |       |   |   |   |   |
| Gain (loss) on the sale of real estate                   |       | 2,165                                 |       | 3,937,551                           |       | (7,009 | ) | 9,990,942 |   |
| (Loss) from discontinued operations                      |       | —                                |       | (7,408                              | )          | — |   | (34,855 | ) |
|                                                     |       | 2,165                                 |       | 3,930,143                           |       | (7,009 | ) | 9,956,087 |   |
| Net Income                                               |       | $                                     | 777,975    |                                | $          | 3,573,646 |   | $ | 1,298,060 |   | $ | 6,003,650 |   |
| Income per Unit                                          |       |                                  |       |                                |       |   |   |   |   |
| Income (loss) before discontinued operations             |       | $                                     | 5.84       |                                | $          | (2.70 | ) | $ | 9.77 |   | $ | (28.06 | ) |
| Income (loss) from discontinued operations               |       | 0.02                                  |       | 29.72                               |       | (0.05 | ) | 70.68 |   |
| Net Income per Unit                                      |       | $                                     | 5.86       |                                | $          | 27.02 |   | $ | 9.72 |   | $ | 42.62 |   |
| Weighted Average Number of Units Outstanding             |       | 132,784                               |       | 132,254                             |       | 133,489 |   | 140,875 |   |

 

See notes to consolidated financial statements.

 

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

 

**CONSOLIDATED STATEMENTS 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      |       | —           |       | —                     |       | — |   | — |   | — |   | — |   | (1,514,276 | ) | (359,640 | ) | (18,929 | ) | (1,892,845 | ) |
| Stock  Buyback                 |       |             |       |                       |       |   |   |   |   | 25,439 |   | (25,439 | ) | (19,744,831 | ) | — |   | — |   | (19,744,831 | ) |
| Net  Income                    |       | —           |       | —                     |       | — |   | — |   | — |   | — |   | 4,802,920 |   | 1,140,691 |   | 60,037 |   | 6,003,650 |   |
| Balance  June 30, 2008    |       | 144,180          |       | 34,243                     |       | 1,802 |   | 180,225 |   | 39,548 |   | 140,677 |   | $ | (15,403,371 | ) | $ | 2,312,467 |   | $ | 121,737 |   | $ | (12,969,167 | ) |
| Balance  January 1, 2009  |       | 144,180          |       | 34,243                     |       | 1,802 |   | 180,225 |   | 44,974 |   | 135,251 |   | $ | (14,173,745 | ) | $ | (3,366,265 | ) | $ | (177,172 | ) | $ | (17,717,182 | ) |
| Distribution  to Partners      |       | —           |       | —                     |       | — |   | — |   | — |   | — |   | (1,488,791 | ) | (353,588 | ) | (18,610 | ) | (1,860,989 | ) |
| Stock  Buyback                 |       | —           |       | —                     |       | — |   | — |   | 2,468 |   | (2,468 | ) | (1,025,734 | ) | (239,738 | ) | (12,618 | ) | (1,278,090 | ) |
| Net  Income                    |       | —           |       | —                     |       | — |   | — |   | — |   | — |   | 1,038,448 |   | 246,631 |   | 12,981 |   | 1,298,060 |   |
|                           |       |             |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance  June 30 , 2009   |       | 144,180          |       | 34,243                     |       | 1,802 |   | 180,225 |   | 47,442 |   | 132,783 |   | $ | (15,649,822 | ) | $ | (3,712,960 | ) | $ | (195,419 | ) | $ | (19,558,201 | ) |

 

See notes to consolidated financial statements.

 

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

 

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

 

**(Unaudited)**

 
| ** **                                                                                  | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                                  | ** ** | **2009**                            | ** ** | **2008** | ** ** |
| ** **                                                                                  | ** ** | ** **                          | ** ** | ** ** | ** ** |
| Cash Flows from Operating Activities                                                        |       |                                |       |   |   |
| Net income                                                                                  |       | $                                   | 1,298,060  |   | $ | 6,003,650 |   |
| Adjustments to reconcile net income to net cash  provided by (used in) operating activities |       |                                |       |   |   |
| Depreciation and amortization                                                               |       | 2,921,497                           |       | 3,228,609 |   |
| Loss from investment in joint ventures                                                      |       | 555,288                             |       | 465,018 |   |
| Gain on the sale of equipment                                                               |       | (4,190                              | )          |   |   |
| Income from the sale of real estate from  discontinued operations                           |       | —                              |       | (9,990,942 | ) |
| Changes in operating assets and liabilities                                                 |       |                                |       |   |   |
| (Increase) in rents receivable                                                              |       | (71,914                             | )          | (88,527 | ) |
| (Decrease) in accounts payable and accrued expense                                          |       | (283,094                            | )          | (499,309 | ) |
| Decrease in real estate tax escrow                                                          |       | 4,129                               |       | 202,346 |   |
| (Increase) Decrease in prepaid expenses and other  assets                                   |       | 371,865                             |       | (3,082,194 | ) |
| Increase in advance rental payments and security  deposits                                  |       | 147,997                             |       | 50,610 |   |
| Total Adjustments                                                                           |       | 3,641,578                           |       | (9,714,389 | ) |
| Net cash provided by (used in) operating  activities                                        |       | 4,939,638                           |       | (3,710,739 | ) |
| Cash Flows provided by (used in) Investing  Activities                                      |       |                                |       |   |   |
| Net proceeds from the sale of equipment                                                     |       | 20,648                              |       | — |   |
| Net proceeds from the sale of rental properties                                             |       | —                              |       | 7,222,454 |   |
| Proceeds from joint ventures                                                                |       | 167,500                             |       | 2,575,000 |   |
| Purchase and improvement of rental properties                                               |       | (1,275,163                          | )          | (1,305,863 | ) |
| Net cash provided by (used in) investing  activities                                        |       | (1,087,015                          | )          | 8,491,591 |   |
| Cash Flows provided by (used in) Financing  Activities                                      |       |                                |       |   |   |
| Payment of mortgage notes payable                                                           |       | —                              |       | (3,224,419 | ) |
| Payment of financing costs                                                                  |       | (6,549                              | )          | (867,377 | ) |
| Principal payments of mortgage notes payable                                                |       | (409,661                            | )          | (389,795 | ) |
| Stock buyback                                                                               |       | (1,278,090                          | )          | (19,744,831 | ) |
| Proceeds of mortgage notes payable                                                          |       | —                              |       | 27,127,100 |   |
| Distributions to partners                                                                   |       | (1,860,989                          | )          | (1,892,845 | ) |
| Net cash provided by (used in) financing  activities                                        |       | (3,555,289                          | )          | 1,007,833 |   |
| Net Increase in Cash and Cash Equivalents                                                   |       | 297,334                             |       | 5,788,685 |   |
| Cash and Cash Equivalents, at beginning of period                                           |       | 10,752,931                          |       | 6,890,525 |   |
| Cash and Cash Equivalents, at end of period                                                 |       | $                                   | 11,050,265 |   | $ | 12,679,210 |   |

 

See notes to consolidated financial statements.

 

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

 

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

 

**JUNE 30, 2009**

 

**(UNAUDITED)**

 

**NOTE 1.SIGNIFICANT ACCOUNTING POLICIES**

 

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

 

*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 limitedliability companies (the “Investment Properties” or “Joint Ventures”) in whichthe Partnership has a 50% ownership interest. The consolidated group isreferred to as the “Partnerships.” Minority interests are not recorded, sincethey are insignificant. All significant intercompany accounts and transactionsare eliminated in consolidation. The Partnership accounts for its investment inthe above-mentioned Investment Properties using the equity method ofconsolidation. (See Note 14: Investments in Unconsolidated JointVentures).

 

ThePartnership accounts for its investments in joint ventures for which FinancialAccounting Standards (“FASB”) Interpretation No. 46 (revised December 2003),Consolidation of Variable Interest Entities (“FIN 46”) does not applyunder the equity method of accounting as the company exercises significantinfluence, but does not control these entities. These investments are recordedinitially at cost, as Investments in Unconsolidated Joint Ventures, andsubsequently adjusted for equity in earnings and cash contributions and distributions.

 

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

 

*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.

 

*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 retired orotherwise 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 

 

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bothstraight-line and accelerated methods over their estimated useful lives.Significant acquisitions with long term leases are evaluated to determine if aportion of the purchase price is allocable to intangibles such as non marketrate 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 June 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 .15 % to 1.44 %. AtJune 30, 2009 and December 31, 2008, respectively approximately$9,500,000 and $10,300,000 of cash and cash equivalents, and cash included inprepaid expenses and other assets exceeded federally insured amounts.

 

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

 

*Discontinued Operations and Rental Property Held for Sale:*  When assets are identified by management 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 heldfor sale, the property is reclassified as held and used. A property that isreclassified is measured and recorded individually at the lower of (a) itscarrying amount before the property was classified as held for sale, adjustedfor any depreciation (amortization) expense that would have been recognized hadthe property been continuously classified as held and used, or (b) thefair value at the date of the subsequent decision not to sell.

 

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

 

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

 

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refinancingis substantially 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*:  TheCompany has evaluated subsequent events through August 7, 2009, the datethe financial statements were issued.

 

**NOTE 2.RENTAL PROPERTIES**

 

Asof June 30, 2009, the Partnership and its Subsidiary Partnerships owned2,269 residential apartment units in 19 residential and mixed-use complexes(collectively, the “Apartment Complexes”). The Partnership also owns 19condominium units in a residential condominium complex, all of which are leasedto residential tenants (collectively referred to as the “Condominium Units”).The Apartment Complexes and Condominium Units are located primarily in themetropolitan Boston area of Massachusetts.

 

Additionally,as of June 30, 2009, the Partnership and Subsidiary Partnerships owned acommercial shopping center in Framingham, commercial buildings in Newton andBrookline and mixed-use properties in Boston, Brockton and Newton, all inMassachusetts. 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 June 30, 2009 with a totalof 392 units, accounted for using the equity method of consolidation. SeeNote 14 for summary information on these investments.

 

Rentalproperties consist of the following:

 
| ** **                          | ** ** | **June  30, 2009** | ** ** | **December 31, 2008** | ** ** | **Useful Life**  | ** ** |
|-------------------------------------|------------|-------------------------|------------|----------------------------|------------|------------------|------------|
| Land, improvements and parking lots |       | $                       | 26,001,653 |                       | $          | 25,997,753       |       | 15-40 years |   |
| Buildings and improvements          |       | 110,581,526             |       | 110,467,865                |       | 15-40 years |       |
| Kitchen cabinets                    |       | 4,478,227               |       | 4,254,120                  |       | 5-10 years  |       |
| Carpets                             |       | 3,833,691               |       | 3,650,238                  |       | 5-10 years  |       |
| Air conditioning                    |       | 907,746                 |       | 900,610                    |       | 7-10 years  |       |
| Laundry equipment                   |       | 468,253                 |       | 216,629                    |       | 5-7 years   |       |
| Elevators                           |       | 984,506                 |       | 984,506                    |       | 20 years    |       |
| Swimming pools                      |       | 152,000                 |       | 126,275                    |       | 10 years    |       |
| Equipment                           |       | 1,942,855               |       | 1,690,142                  |       | 5-7 years   |       |
| Motor vehicles                      |       | 170,445                 |       | 139,453                    |       | 5 years     |       |
| Fences                              |       | 163,907                 |       | 163,907                    |       | 5-10 years  |       |
| Furniture and fixtures              |       | 1,767,652               |       | 1,641,487                  |       | 5-7 years   |       |
| Smoke alarms                        |       | 114,262                 |       | 111,814                    |       | 5-7 years   |       |
|                                |       | 151,566,723             |       | 150,344,799                |       |             |       |
| Less accumulated depreciation       |       | (54,605,761             | )          | (51,784,345                | )          |             |       |
|                                |       | $                       | 96,960,962 |                       | $          | 98,560,454       |       |   |   |

 

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. In accordancewith 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.

 

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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 $677,000 and$661,000 during the six months ended June 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 six months ended June 30, 2009 and 2008,approximately $362,000 and $311,000 was charged to NERA for legal, accounting,construction, maintenance, rental and architectural services and supervision ofcapital improvements.  Of the 2009expenses referred to above, approximately $173,000 consisted of repairs andmaintenance and $168,000 of administrative expense. Approximately $21,000 ofexpenses for construction, architectural services and supervision of capitalprojects were capitalized in rental properties. Additionally in 2009, theHamilton Company received approximately $206,000 from the Investment Propertiesof which approximately $136,000 was the management fee, approximately $600 wasfor construction supervision and architectural fees, approximately $61,000 wasfor maintenance services and approximately $8,000 was for administrativeservices

 

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 $1,115,000 and $1,108,000 for the six monthsended June 30, 2009 and 2008, respectively. The Management Companymaintains a 401K plan for all eligible employees whereby the employees maycontribute the 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 performthis service and receives an asset management fee from the Partnership,receiving $25,000 during the six months ended June 30, 2009 and 2008.

 

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 of approximately$648,000 from these sales. Harvard 45 also sold 16 units to unrelatedparties; the prices for all 21 units sold were comparable.  The Partnership sold all of these units in2008 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, and 

 

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

 

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 the issuedand outstanding Class B Units of the Partnership and 25% of the issued andoutstanding 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.

 

**NOTE 4.OTHER ASSETS**

 

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

 

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

 

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

 

**NOTE 5.MORTGAGE NOTES PAYABLE**

 

AtJune 30, 2009 and December 31, 2008, the mortgages payable consistedof various loans, all of which were secured by first mortgages on propertiesreferred to in Note 2. At June 30, 2009, the fixed interest rates onthese loans ranged from 4.84% to 8.46%, payable in monthly installmentsaggregating approximately $727,000, including principal, to various datesthrough 2023. The majority of the mortgages are subject to prepayment penalties.  At June 30, 2009, the weighted averageinterest rate on the above mortgages was 5.63%. The effective rate of 5.72%includes the amortization expense of deferred financing costs. See Note 12for fair value information.

 

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

 

Approximateannual maturities at June 30, 2009 are as follows:

 
| 2010—current maturities |   | $          | 848,000     |   |
|------------------------------|--------|------------|-------------|--------|
| 2011                         |   | 4,473,000  |        |
| 2012                         |   | 930,000    |        |
| 2013                         |   | 19,785,000 |        |
| 2014                         |   | 31,894,000 |        |
| Thereafter                   |   | 79,820,000 |        |
|                         |   | $          | 137,750,000 |   |

 

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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.

 

**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 June 30,2009, amounts received for prepaid rents of approximately $1,526,000 areincluded in cash and cash equivalents, and security deposits of approximately$1,440,000 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:

 
| ** **                                                           | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                           | ** ** | **2009**                            | ** ** | **2008** | ** ** |
| Income (loss) per Depositary Receipt before  Discontinued Operations |       | $                                   | 0.98       |   | $ | (2.81 | ) |
| Income (loss) from Discontinued Operations                           |       | (0.01                               | )          | 7.07 |   |
| Net Income per Depositary Receipt after  Discontinued Operations     |       | $                                   | 0.97       |   | $ | 4.26 |   |
| Distributions per Depositary Receipt                                 |       | $                                   | 1.40       |   | $ | 1.40 |   |

 

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**NOTE 8.TREASURY UNITS**

 

TreasuryUnits at June 30, 2009 are as follows:

 
| Class A        |   | 37,953 |   |
|---------------------|--------|--------|--------|
| Class B        |   | 9,014  |   |
| General Partnership |   | 475    |   |
|                |   | 47,442 |   |

 

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 from 300,000to 500,000.  On August 8, 2008, theGeneral Partner re-authorized and renewed the Repurchase Program for anadditional 12-month period ending August 19, 2009.  In addition, theGeneral Partner also authorized the expansion of the Repurchase Program to requirethe Partnership to repurchase a proportionate number of Class B Units andGeneral Partner Units in connection with any repurchases of any DepositaryReceipts by the Partnership based upon the 80%, 19% and 1% fixed distributionpercentages of the holders of the Class A, Class B and GeneralPartner Units under the Partnership’s Second Amended and Restate Contract ofLimited Partnership.  Repurchases of Depositary Receipts or PartnershipUnits pursuant to the Repurchase Program may be made by the Partnership fromtime to time in its sole discretion in open market transactions or in privatelynegotiated transactions.  As of June 30,2009, the Partnership has repurchased 387,924 Depositary Receipts at an averageprice of $74.22 per receipt (or $742.20 per underlying Class A Unit),1,477 Class B Units and 78 General Partnership Units, both at an averageprice of $583.00 per Unit, totaling approximately $29,700,000 includingbrokerage fees paid by the Partnership.

 

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

 

OnJanuary 18, 2008, 113,518 Depositary Receipts were  purchased under the Repurchase Program at aprice of $75.50 per receipt. In order for the Partnership to take advantage ofthis opportunity, the Partnership borrowed $5,285,000 from Harold Brown, theTreasurer of the General Partner. This loan was paid in full, with interest at6% of $37,899, on February 29, 2008.

 

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

 

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

 

Duringthe three months ended June 30, 2009, the Partnership did not purchase anyDepositary Receipts, Class B Units or General Partnership Units.

 

**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.

 

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**NOTE10. RENTAL INCOME**

 

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

 
| ** ** | ** ** | **Commercial  Property Leases** | ** ** |
|------------|------------|---------------------------------|------------|
| 2010       |       | $                               | 2,624,000  |   |
| 2011       |       | 2,452,000                       |       |
| 2012       |       | 2,169,000                       |       |
| 2013       |       | 1,576,000                       |       |
| 2014       |       | 1,382,000                       |       |
| Thereafter |       | 2,032,000                       |       |
|       |       | $                               | 12,235,000 |   |

 

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 $307,000 for the six months ended June 30,2009 and approximately $477,000 for the year ended December 31, 2008.

 

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

 

In2009, rent at the commercial properties includes approximately $5,600 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 six months ended June 30, 2009 and 2008, cash paid for interest was$3,907,256, and $3,837,770, respectively.

 

Non-cashfinancing activity — exchange of depositary receipts for Class B andGeneral Partnership 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 June 30 , 2009    |       | $                   | 137,750,601 |                     | $          | 127,107,329 |   |
| At December 31, 2008 |       | $                   | 138,160,262 |                     | $          | 143,432,532 |   |
| Investment Properties     |       |                |        |                     |       |
| At June 30, 2009     |       | $                   | 51,594,294  |                     | $          | 48,582,549 |   |

 

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Disclosureabout fair value of financial instruments is based on pertinent informationavailable to management as of June 30, 2009 and December 31, 2008.Although management is not aware of any factors that would significantly affectthe fair value amounts, such amounts have not been comprehensively revalued forpurposes of these financial statements since December 31, 2008 and currentestimates of fair value may differ significantly from the amounts presentedherein.

 

**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 in 2008, accordingly taxable incomein 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 interest in each investment. The other investors are Harold Brown,the President of the Management Company and five other employees of theManagement Company. Harold Brown’s ownership interest is between 43.2% and47.5%, with the balance of 6.8% and 2.5% owned by the others. A description ofeach 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 July 27,2009, 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 June 30, 2009.Gain from the sale of units (approximately $38,000 will be taxed at ordinaryincome rates.  This investment isreferred 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(0.31% at June 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 June 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.

 

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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$1,250,000 in 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 net proceedsafter funding escrow accounts and closing costs on the new mortgage wereapproximately $16,700,000, which were used to reduce the existing mortgage.Hamilton on Main LLC paid a fee of approximately $400,000 in connectionwith this early extinguishment of debt. At June 30, 2009, the remaining balance on the mortgage isapproximately $16,519,000.

 

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 June 30,2009 of approximately $7,394,000 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.

 

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

 
| ** **                                                           | ** ** | **Hamilton  Essex 81** | ** ** | **Hamilton  Essex Development** | ** ** | **345  Franklin** | ** ** | **Hamilton  1025** | ** ** | **Hamilton  Bay Sales** | ** ** | **Hamilton  Bay Apts** | ** ** | **Hamilton  Minuteman  Apts** | ** ** | **Hamilton  on Main Apts** | ** ** | **Hamilton  Place Sales** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------------|------------|------------------------|------------|---------------------------------|------------|-------------------|------------|--------------------|------------|-------------------------|------------|------------------------|------------|-------------------------------|------------|----------------------------|------------|---------------------------|------------|------------|------------|
| **ASSETS**                                                           |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |       |       |
| Rental  Properties                                                   |       | 10,402,640             |       | 2,576,552                       |       | 9,183,178         |       | 6,479,101          |       | 2,136,485               |       | 8,101,204              |       | 8,069,672                     |       | 24,488,055                 |       |                      |       | 71,436,887 |       |
| Cash &  Cash Equivalents                                    |       | 49,965                 |       | 12,480                          |       | 3,694             |       | 14,674             |       | 65,564                  |       | 1,215                  |       | 12,129                        |       | 201,073                    |       |                      |       | 360,795    |       |
| Rent  Receivable                                                     |       | 16,635                 |       | 3,050                           |       | 1,890             |       | 1,000              |       | 1,141                   |       | 1,679                  |       | (1,794                        | )          | 14,828                     |       |                      |       | 38,429     |       |
| Real  Estate Tax Escrow                                              |       | 54,935                 |       | —                          |       | 24,702            |       | 24,268             |       | —                  |       | 49,330                 |       | 46,941                        |       | 98,177                     |       |                      |       | 298,353    |       |
| Due  From Investment Properties                                      |       | 100,000                |       | —                          |       | —            |       | 70,000             |       | 100,713                 |       | 40,000                 |       | —                        |       | 210,000                    |       |                      |       | 520,713    |       |
| Prepaid  Expenses & Other Assets                            |       | 68,261                 |       | 1,095                           |       | 80,089            |       | 79,571             |       | 223,791                 |       | 55,924                 |       | 64,778                        |       | 304,337                    |       |                      |       | 877,846    |       |
| Financing &  Leasing Fees                                   |       | 130,893                |       | 13,555                          |       | 36,745            |       | 37,238             |       | 19,231                  |       | 48,509                 |       | 30,222                        |       | 38,902                     |       |                      |       | 355,295    |       |
| **Total Assets**                                                     |       | 10,823,329             |       | 2,606,733                       |       | 9,330,298         |       | 6,705,852          |       | 2,546,925               |       | 8,297,861              |       | 8,221,948                     |       | 25,355,372                 |       | —                    |       | 73,888,318 |       |
| ** **                                                           |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |       |       |
| **LIABILITIES AND PARTNERS’ CAPITAL**                           |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |       |       |
| Mortgage  Notes Payable                                              |       | 8,600,000              |       | 2,162,000                       |       | 7,393,948         |       | 5,000,000          |       | 1,668,000               |       | 4,750,000              |       | 5,500,000                     |       | 16,519,346                 |       |                      |       | 51,593,294 |       |
| Due  to Investment Properties                                        |       | —                 |       | —                          |       | 405,000           |       |               |       | 44,000                  |       | 26,713                 |       | 25,000                        |       | 20,000                     |       |                      |       | 520,713    |       |
| Accounts  Payable & Accrued Expense                         |       | 103,417                |       | 9,236                           |       | 67,429            |       | 4,497              |       | 18,338                  |       | 47,103                 |       | 42,694                        |       | 186,482                    |       |                      |       | 479,196    |       |
| Advance  Rental Pymts & Security Dep                        |       | 148,663                |       | —                          |       | 130,827           |       | 58,231             |       | 17,480                  |       | 78,709                 |       | 50,584                        |       | 208,969                    |       |                      |       | 693,463    |       |
| Total  Liabilities                                                   |       | 8,852,080              |       | 2,171,236                       |       | 7,997,204         |       | 5,062,728          |       | 1,747,818               |       | 4,902,525              |       | 5,618,278                     |       | 16,934,797                 |       | —                    |       | 53,286,666 |       |
| Partners’  Capital                                              |       | 1,971,249              |       | 435,497                         |       | 1,333,094         |       | 1,643,124          |       | 799,107                 |       | 3,395,336              |       | 2,603,670                     |       | 8,420,575                  |       | —                    |       | 20,601,652 |       |
| **Total Liabilities and Capital**                                    |       | 10,823,329             |       | 2,606,733                       |       | 9,330,298         |       | 6,705,853          |       | 2,546,925               |       | 8,297,861              |       | 8,221,948                     |       | 25,355,372                 |       | —                    |       | 73,888,318 |       |
| **Partners’ Capital—NERA 50%**                             |       | 985,625                |       | 217,748                         |       | 666,547           |       | 821,562            |       | 399,553                 |       | 1,697,668              |       | 1,301,835                     |       | 4,210,287                  |       | —                    |       | 10,300,826 |       |
|                                                                 |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |       |       |
| Total  units/ condominiums                                           |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |       |       |
| Apartments                                                           |       | 48                     |       | —                          |       | 40                |       | 175                |       | 120                     |       | 48                     |       | 42                            |       | 148                        |       | 137                       |       | 758        |       |
| Commercial                                                           |       | 1                      |       | 1                               |       | —            |       | 1                  |       | —                  |       | —                 |       | —                        |       | —                     |       | —                    |       | 3          |       |
| Total                                                                |       | 49                     |       | 1                               |       | 40                |       | 176                |       | 120                     |       | 48                     |       | 42                            |       | 148                        |       | 137                       |       | 761        |       |
| Units  to be retained                                                |       | 49                     |       | 1                               |       | 40                |       | 49                 |       | —                  |       | 48                     |       | 42                            |       | 148                        |       | —                    |       | 377        |       |
| Units  to be sold                                                    |       | —                 |       | —                          |       | —            |       | 127                |       | 120                     |       | —                 |       | —                        |       | —                     |       | 137                       |       | 384        |       |
| Units  sold through July 27, 2009                               |       | —                 |       | —                          |       | —            |       | 127                |       | 105                     |       | —                 |       | —                        |       | —                     |       | 137                       |       | 369        |       |
| Balance  of unsold units                                             |       | —                 |       | —                          |       | —            |       | —             |       | 15                      |       | —                 |       | —                        |       | —                     |       | —                    |       | 15         |       |
| Unsold  units with deposits for future sale as of July 27, 2009 |       | —                 |       | —                          |       | —            |       | —             |       | 0                       |       | —                 |       | —                        |       | —                     |       | —                    |       | —     |       |

 

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

 
| ** **                          | ** ** | **Hamilton  Essex 81** | ** ** | **Hamilton  Essex Development** | ** ** | **345  Franklin** | ** ** | **Hamilton  1025** | ** ** | **Hamilton  Bay Sales** | ** ** | **Hamilton  Bay Apts** | ** ** | **Hamilton  Minuteman  Apts** | ** ** | **Hamilton  on Main Apts** | ** ** | **Hamilton  Place Sales** | ** ** | **Total**  | ** ** |
|-------------------------------------|------------|------------------------|------------|---------------------------------|------------|-------------------|------------|--------------------|------------|-------------------------|------------|------------------------|------------|-------------------------------|------------|----------------------------|------------|---------------------------|------------|------------|------------|
| **Revenues**                        |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |       |       |
| Rental  Income                      |       | 608,507                |       | 148,298                         |       | 558,956           |       | 403,934            |       | 113,977                 |       | 399,916                |       | 377,985                       |       | 1,202,838                  |       |                      |       | 3,814,411  |       |
| Laundry  and Sundry Income          |       | 1,892                  |       | —                          |       | 1,293             |       | —             |       | —                  |       | —                 |       | 567                           |       | 11,165                     |       |                      |       | 14,917     |       |
|                                |       | 610,399                |       | 149,298                         |       | 560,249           |       | 403,934            |       | 113,977                 |       | 399,916                |       | 378,552                       |       | 1,214,003                  |       |                      |       | 3,829,328  |       |
| **Expenses**                        |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |       |       |
| Administrative                      |       | 8,322                  |       | 9,752                           |       | 11,169            |       | 9,038              |       | 4,176                   |       | 7,955                  |       | 6,180                         |       | 16,743                     |       |                      |       | 73,335     |       |
| Depreciation  and Amortization      |       | 216,111                |       | 1,919                           |       | 213,238           |       | 156,149            |       | 53,068                  |       | 199,157                |       | 228,756                       |       | 749,370                    |       |                      |       | 1,817,768  |       |
| Management  Fees                    |       | 24,942                 |       | 5,541                           |       | 22,591            |       | 16,024             |       | 4,478                   |       | 15,571                 |       | 14,308                        |       | 49,370                     |       |                      |       | 152,825    |       |
| Operating                           |       | 70,264                 |       | —                          |       | 31,680            |       | 1,409              |       | 130                     |       | 3,718                  |       | 46,721                        |       | 186,701                    |       |                      |       | 340,623    |       |
| Renting                             |       | 15,500                 |       | —                          |       | 22,550            |       | 2,998              |       | —                  |       | 810                    |       | 2,615                         |       | 7,365                      |       |                      |       | 51,838     |       |
| Repairs  and Maintenance            |       | 52,000                 |       | 3,930                           |       | 39,520            |       | 132,597            |       | 29,876                  |       | 131,500                |       | 38,394                        |       | 136,782                    |       |                      |       | 564,599    |       |
| Taxes  and Insurance                |       | 61,985                 |       | 44,300                          |       | 39,685            |       | 75,524             |       | 24,063                  |       | 86,154                 |       | 50,680                        |       | 149,695                    |       |                      |       | 532,086    |       |
|                                |       | 449,124                |       | 65,442                          |       | 380,433           |       | 393,739            |       | 115,791                 |       | 444,865                |       | 387,654                       |       | 1,296,026                  |       |                      |       | 3,533,074  |       |
| **Income Before Other Income**      |       | 161,275                |       | 82,856                          |       | 179,816           |       | 10,195             |       | (1,814                  | )          | (44,949                | )          | (9,102                        | )          | (82,023                    | )          | —                    |       | 296,255    |       |
| **Other Income (Loss)**             |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |       |       |
| Interest  Expense                   |       | (251,915               | )          | (32,632                         | )          | (258,482          | )          | (143,315           | )          | (50,836                 | )          | (134,516               | )          | (157,348                      | )          | (435,009                   | )          |                      |       | (1,464,053 | )          |
| Interest  Income                    |       | 2                      |       | —                          |       | 29                |       | 35                 |       | 7,510                   |       | —                 |       | —                        |       | 2                          |       |                      |       | 7,578      |       |
| Gain  on Sale of Real Estate        |       | —                 |       | —                          |       | —            |       | —             |       | 49,646                  |       | —                 |       | —                        |       | —                     |       |                      |       | 49,646     |       |
|                                |       | (251,913               | )          | (32,632                         | )          | (258,453          | )          | (143,280           | )          | 6,320                   |       | (134,516               | )          | (157,348                      | )          | (435,007                   | )          |                      |       | (1,406,829 | )          |
| **Net Income (Loss)**               |       | (90,638                | )          | 50,224                          |       | (78,637           | )          | (133,085           | )          | 4,506                   |       | (179,465               | )          | (166,450                      | )          | (517,030                   | )          | —                    |       | (1,110,575 | )          |
| **Net Income (loss)—NERA 50%** |       | (45,319                | )          | 25,112                          |       | (39,319           | )          | (66,543            | )          | 2,253                   |       | (89,733                | )          | (83,225                       | )          | (258,515                   | )          | —                    |       | (555,288   | )          |

 

 

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

 
| ** **                          | ** ** | **Hamilton  Essex 81** | ** ** | **Hamilton  Essex Development** | ** ** | **345  Franklin** | ** ** | **Hamilton  1025** | ** ** | **Hamilton  Bay Sales** | ** ** | **Hamilton  Bay Apts** | ** ** | **Hamilton  Minuteman  Apts** | ** ** | **Hamilton  on Main Apts** | ** ** | **Hamilton  Place Sales** | ** ** | **Total** | ** ** |
|-------------------------------------|------------|------------------------|------------|---------------------------------|------------|-------------------|------------|--------------------|------------|-------------------------|------------|------------------------|------------|-------------------------------|------------|----------------------------|------------|---------------------------|------------|-----------|------------|
| **Revenues**                        |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |      |       |
| Rental  Income                      |       | 266,179                |       | 72,050                          |       | 279,904           |       | 199,310            |       | 55,567                  |       | 204,043                |       | 187,040                       |       | 590,792                    |       |                      |       | 1,854,885 |       |
| Laundry  and Sundry Income          |       | 1,299                  |       | —                          |       | 691               |       | —             |       | —                  |       | —                 |       | 238                           |       | 4,928                      |       |                      |       | 7,156     |       |
|                                |       | 267,478                |       | 72,050                          |       | 280,595           |       | 199,310            |       | 55,567                  |       | 204,043                |       | 187,278                       |       | 595,720                    |       |                      |       | 1,862,041 |       |
| **Expenses**                        |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |      |       |
| Administrative                      |       | 5,601                  |       | 7,628                           |       | 5,072             |       | 4,926              |       | 2,711                   |       | 2,903                  |       | 3,409                         |       | 6,040                      |       |                      |       | 38,290    |       |
| Depreciation  and Amortization      |       | 108,140                |       | 1,563                           |       | 107,997           |       | 78,239             |       | 26,534                  |       | 100,775                |       | 114,378                       |       | 374,806                    |       |                      |       | 912,432   |       |
| Management  Fees                    |       | 10,503                 |       | 2,760                           |       | 11,063            |       | 7,939              |       | 2,125                   |       | 7,978                  |       | 7,103                         |       | 24,467                     |       |                      |       | 73,938    |       |
| Operating                           |       | 30,264                 |       | —                          |       | 12,504            |       | 706                |       | 69                      |       | 300                    |       | 18,961                        |       | 74,233                     |       |                      |       | 137,037   |       |
| Renting                             |       | 9,650                  |       | —                          |       | 7,880             |       | 1,733              |       | —                  |       | 270                    |       | 1,716                         |       | 3,309                      |       |                      |       | 24,558    |       |
| Repairs  and Maintenance            |       | 27,959                 |       | 3,600                           |       | 26,472            |       | 65,067             |       | 14,920                  |       | 65,816                 |       | 21,081                        |       | 69,154                     |       |                      |       | 294,069   |       |
| Taxes  and Insurance                |       | 24,937                 |       | 22,307                          |       | 22,284            |       | 37,770             |       | 12,031                  |       | 43,550                 |       | 26,066                        |       | 74,526                     |       |                      |       | 263,471   |       |
|                                |       | 217,054                |       | 37,858                          |       | 193,272           |       | 196,380            |       | 58,390                  |       | 221,592                |       | 192,714                       |       | 626,535                    |       |                      |       | 1,743,795 |       |
| **Income Before Other Income**      |       | 50,424                 |       | 34,192                          |       | 87,323            |       | 2,930              |       | (2,823                  | )          | (17,549                | )          | (5,437                        | )          | (30,815                    | )          | —                    |       | 118,246   |       |
| **Other Income (Loss)**             |       |                   |       |                            |       |              |       |               |       |                    |       |                   |       |                          |       |                       |       |                      |       |      |       |
| Interest  Expense                   |       | (126,641               | )          | (16,203                         | )          | (128,972          | )          | (72,076            | )          | (24,673                 | )          | (67,641                | )          | (79,104                       | )          | (218,338                   | )          |                      |       | (733,648  | )          |
| Interest  Income                    |       | —                 |       | —                          |       | 14                |       | 18                 |       | 2,570                   |       | —                 |       | —                        |       | 1                          |       |                      |       | 2,603     |       |
| Gain  on Sale of Real Estate        |       | —                 |       | —                          |       | —            |       | —             |       | 49,336                  |       | —                 |       | —                        |       | —                     |       |                      |       | 49,336    |       |
|                                |       | (126,641               | )          | (16,203                         | )          | (128,958          | )          | (72,058            | )          | 27,233                  |       | (67,641                | )          | (79,104                       | )          | (218,337                   | )          | —                    |       | (681,709  | )          |
| **Net Income (Loss)**               |       | (76,217                | )          | 17,989                          |       | (41,635           | )          | (69,128            | )          | 24,410                  |       | (85,190                | )          | (84,540                       | )          | (249,152                   | )          | —                    |       | (563,463  | )          |
| **Net Income (loss)—NERA 50%** |       | (38,109                | )          | 8,995                           |       | (20,817           | )          | (34,564            | )          | 12,205                  |       | (42,595                | )          | (42,270                       | )          | (124,576                   | )          | —                    |       | (281,732  | )          |

 

18

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Futureannual mortgage maturities at June 30, 2009 are as follows:

 
| ** **          | ** ** | **Hamilton  Essex 81** | ** ** | **Hamilton  Essex Development** | ** ** | **Franklin  Street** | ** ** | **1025  Hamilton** | ** ** | **Hamilton  Bay** | ** ** | **Hamilton  Bay** | ** ** | **Hamilton  Minuteman** | ** ** | **Hamilton  Place**    | ** ** | **Hamilton  Place Sales** | ** ** | ** ** | ** ** |
|---------------------|------------|------------------------|------------|---------------------------------|------------|----------------------|------------|--------------------|------------|-------------------|------------|-------------------|------------|-------------------------|------------|------------------------|------------|---------------------------|------------|------------|------------|
| **Period End**      | ** ** | **March  2005**        | ** ** | **March  2005**                 | ** ** | **November  2001**   | ** ** | **March  2005**    | ** ** | **October  2005** | ** ** | **October  2005** | ** ** | **August  2004**   | ** ** | **August   2004** | ** ** | **August  2004**          | ** ** | **Total**  | ** ** |
| June 30,  2010 |       |                   |       |                            |       | 142,244              |       |               |       |              |       |              |       |                    |       | 244,288                |       |                      |       | 386,532    |       |
| June 30,  2011 |       | 91,070                 |       |                            |       | 152,375              |       |               |       |              |       |              |       |                    |       | 255,069                |       |                      |       | 498,514    |       |
| June 30,  2012 |       | 115,231                |       | 2,162,000                       |       | 163,228              |       | 35,232             |       |              |       |              |       | 33,648                  |       | 271,154                |       |                      |       | 2,780,493  |       |
| June 30,  2013 |       | 122,083                |       |                            |       | 174,853              |       | 63,301             |       | 1,668,000         |       | 85,018            |       | 69,329                  |       | 285,743                |       |                      |       | 2,468,327  |       |
| June 30,  2014 |       | 129,342                |       |                            |       | 6,761,248            |       | 67,037             |       |              |       | 68,027            |       | 73,421                  |       | 301,117                |       |                      |       | 7,400,193  |       |
| Thereafter          |       | 8,142,274              |       |                            |       | —               |       | 4,834,430          |       |              |       | 4,596,955         |       | 5,323,602               |       | 15,161,974             |       |                      |       | 38,059,235 |       |
|                |       | 8,600,000              |       | 2,162,000                       |       | 7,393,948            |       | 5,000,000          |       | 1,668,000         |       | 4,750,000         |       | 5,500,000               |       | 16,519,345             |       | —                    |       | 51,593,294 |       |

** **

** **

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

 
| ** **                                            | ** ** | **Essex  81  Commercial** | ** ** | **Essex  81  Apartments** | ** ** | **345  Franklin** | ** ** | **Hamilton  1025** | ** ** | **Hamilton  Bay  Sales** | ** ** | **Hamilton  Bay  Apartments** | ** ** | **Minuteman** | ** ** | **Hamilton  on Main** | ** ** | **Hamilton  Place  Sales** | ** ** | **Total**      | ** ** |
|-------------------------------------------------------|------------|---------------------------|------------|---------------------------|------------|-------------------|------------|--------------------|------------|--------------------------|------------|-------------------------------|------------|---------------|------------|-----------------------|------------|----------------------------|------------|----------------|------------|
| **ASSETS**                                            |       |                      |       |                      |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |           |       |
| Rental  Properties                                    |       | 2,839,274                 |       | 10,492,129                |       | 9,242,705         |       | 7,020,145          |       | 2,671,332                |       | 8,390,370                     |       | 8,497,267     |       | 25,896,582            |       | —                     |       | 75,049,804     |       |
| Cash &  Cash Equivalents                     |       | 70,068                    |       | 1,586                     |       | 9,267             |       | 13,178             |       | 379,317                  |       | 40,783                        |       | 37,940        |       | 118,720               |       | 2,579                      |       | 673,439        |       |
| Rent  Receivable                                      |       | 55,846                    |       | 14,222                    |       | 14,210            |       | 4,287              |       | 606                      |       | (1,562                        | )          | 514           |       | 5,635                 |       | —                     |       | 93,757         |       |
| Real  Estate Tax Escrow                               |       |                      |       | 48,350                    |       | 26,386            |       | 43,414             |       | —                   |       | 38,056                        |       | 18,759        |       | 85,979                |       | —                     |       | 260,944        |       |
| Due  From Investment Properties                       |       | 23,000                    |       | —                    |       | —            |       | —             |       | —                   |       | —                        |       | —        |       | 185,000               |       | 1,796,355                  |       | 2,004,355      |       |
| Prepaid  Expenses & Other Assets             |       | 1,518                     |       | 136,842                   |       | 70,512            |       | 71,871             |       | 133,167                  |       | 51,648                        |       | 59,666        |       | 324,796               |       | —                     |       | 850,020        |       |
| Financing &  Leasing Fees                    |       | 22,223                    |       | 145,323                   |       | 44,911            |       | 42,264             |       | 24,296                   |       | 54,871                        |       | 36,243        |       | 47,598                |       | —                     |       | 417,728        |       |
| **Total Assets**                                      | ** ** | **3,011,930**             | ** ** | **10,838,451**            | ** ** | **9,407,990**     | ** ** | **7,195,158**      | ** ** | **3,208,718**            | ** ** | **8,574,165**                 | ** ** | **8,650,389** | ** ** | **26,664,311**        | ** ** | **1,798,935**              | ** ** | **79,350,047** | ** ** |
| ** **                                            |       |                      |       |                      |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |           |       |
| **LIABILITIES AND PARTNERS’ CAPITAL**            |       |                      |       |                      |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |           |       |
| Mortgage  Notes Payable                               |       | 3,000,000                 |       | 7,762,000                 |       | 7,526,734         |       | 5,000,000          |       | 2,088,000                |       | 4,750,000                     |       | 5,500,000     |       | 16,751,162            |       | —                     |       | 52,377,896     |       |
| Due  to Investment Properties                         |       | —                    |       | —                    |       | 108,000           |       | 25,000             |       | —                   |       | —                        |       | 75,000        |       | 1,796,355             |       | —                     |       | 2,004,355      |       |
| Accounts  Payable & Accrued Exp              |       | 20,209                    |       | 43,335                    |       | 71,647            |       | 4,457              |       | 35,682                   |       | 4,015                         |       | 36,308        |       | 154,637               |       | 1,285                      |       | 371,575        |       |
| Advance  Rental Payments & Security Deposits |       | 24,000                    |       | 112,851                   |       | 132,231           |       | 59,648             |       | 20,281                   |       | 79,706                        |       | 47,255        |       | 176,709               |       | —                     |       | 652,681        |       |
| **Total Liabilities**                                 |       | 3,044,209                 |       | 7,918,186                 |       | 7,918,186         |       | 5,089,105          |       | 2,143,963                |       | 4,833,722                     |       | 5,658,563     |       | 18,878,862            |       | —                     |       | 55,406,507     |       |
| Partners’  Capital                               |       | (32,279                   | )          | 2,920,265                 |       | 1,569,378         |       | 2,106,053          |       | 1,064,755                |       | 3,740,444                     |       | 2,991,826     |       | 7,785,448             |       | 1,797,650                  |       | 23,943,540     |       |
| **Total Liabilities & Capital**              | ** ** | **3,011,930**             | ** ** | **10,838,451**            | ** ** | **9,407,990**     | ** ** | **7,195,158**      | ** ** | **3,208,718**            | ** ** | **8,574,165**                 | ** ** | **8,650,389** | ** ** | **26,664,311**        | ** ** | **1,798,935**              | ** ** | **79,350,047** | ** ** |
| **Partners’ Capital—NERA 50%**              | ** ** | **(16,140**               | **)**      | **1,460,133**             | ** ** | **784,689**       | ** ** | **1,053,027**      | ** ** | **532,378**              | ** ** | **1,870,222**                 | ** ** | **1,495,913** | ** ** | **3,892,724**         | ** ** | **898,825**                | ** ** | **11,971,770** | ** ** |

 

19

----

 

**Summary financial information for the six months endedJune 30, 2008 (unaudited)**

 
| ** **                                                           | ** ** | **Essex  81  Commercial** | ** ** | **Essex  81  Apartments** | ** ** | **345  Franklin** | ** ** | **Hamilton  1025** | ** ** | **Hamilton  Bay  Sales** | ** ** | **Hamilton  Bay  Apartments** | ** ** | **Minuteman** | ** ** | **Hamilton  on Main** | ** ** | **Hamilton  Place  Sales** | ** ** | **Total**    | ** ** |
|----------------------------------------------------------------------|------------|---------------------------|------------|---------------------------|------------|-------------------|------------|--------------------|------------|--------------------------|------------|-------------------------------|------------|---------------|------------|-----------------------|------------|----------------------------|------------|--------------|------------|
| **Revenues**                                                         |       |                      |       |                      |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |         |       |
| Rental  Income                                                       |       | 206,953                   |       | 530,619                   |       | 517,077           |       | 393,602            |       | 115,855                  |       | 409,835                       |       | 372,127       |       | 1,174,931             |       | 1,747                      |       | 3,722,746    |       |
| Laundry  and Sundry Income                                           |       | —                    |       | 570                       |       | 657               |       | —             |       | —                   |       | —                        |       | 983           |       | 10,285                |       | —                     |       | 12,495       |       |
|                                                                 |       | 206,953                   |       | 531,189                   |       | 517,734           |       | 393,602            |       | 115,855                  |       | 409,835                       |       | 373,110       |       | 1,185,216             |       | 1,747                      |       | 3,735,241    |       |
| **Expenses**                                                         |       |                      |       |                      |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |         |       |
| Administrative                                                       |       | 4,323                     |       | 3,890                     |       | 14,456            |       | 8,430              |       | 7,834                    |       | 4,686                         |       | 892           |       | 29,556                |       | 3,770                      |       | 77,836       |       |
| Depreciation  and Amortization                                       |       | 59,764                    |       | 198,459                   |       | 177,598           |       | 165,995            |       | 105,856                  |       | 194,355                       |       | 258,300       |       | 765,734               |       | 20,508                     |       | 1,946,571    |       |
| Interest                                                             |       | 72,141                    |       | 232,311                   |       | 262,839           |       | 143,919            |       | 32,179                   |       | 135,251                       |       | 158,146       |       | 442,720               |       | 7                          |       | 1,479,512    |       |
| Management  Fees                                                     |       | 14,351                    |       | 20,720                    |       | 20,924            |       | 15,665             |       | 5,283                    |       | 16,232                        |       | 15,055        |       | 49,411                |       | 51                         |       | 157,692      |       |
| Operating                                                            |       | 20,902                    |       | 48,570                    |       | 31,957            |       | 827                |       | 1,656                    |       | 543                           |       | 29,572        |       | 207,870               |       | 214                        |       | 342,110      |       |
| Renting                                                              |       | —                    |       | 5,325                     |       | 16,663            |       | 3,076              |       | 1,556                    |       | 1,187                         |       | 1,778         |       | 14,871                |       | —                     |       | 44,456       |       |
| Repairs  and Maintenance                                             |       | 1,579                     |       | 48,073                    |       | 26,787            |       | 162,223            |       | 100,236                  |       | 152,895                       |       | 48,674        |       | 227,057               |       | 5,828                      |       | 773,352      |       |
| Taxes  and Insurance                                                 |       | 37,370                    |       | 51,141                    |       | 43,891            |       | 76,492             |       | 35,727                   |       | 68,636                        |       | 69,860        |       | 162,028               |       | 4,861                      |       | 550,006      |       |
|                                                                 |       | 210,428                   |       | 608,489                   |       | 595,114           |       | 576,626            |       | 290,329                  |       | 573,786                       |       | 582,277       |       | 1,899,248             |       | 35,239                     |       | 5,371,535    |       |
| **Income (Loss) Before Other Income**                                |       | (3,475                    | )          | (77,299                   | )          | (77,380           | )          | (183,024           | )          | (174,474                 | )          | (163,951                      | )          | (209,167      | )          | (714,031              | )          | (33,492                    | )          | (1,636,294   | )          |
| **Other Income (Loss)**                                              |       |                      |       |                      |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |         |       |
| Interest  Income                                                     |       | 1,324                     |       | 26                        |       | 229               |       | 555                |       | 3,049                    |       | 393                           |       | 209           |       | 1,243                 |       | 2,639                      |       | 9,667        |       |
| Gain  on Sale of Real Estate                                         |       | —                    |       | —                    |       | —            |       | 54,980             |       | 281,028                  |       | —                        |       | —        |       | 12,381                |       | 348,204                    |       | 696,594      |       |
| Other  Income (Expenses)                                             |       | —                    |       | —                    |       | —            |       | —             |       | —                   |       | —                        |       | —        |       | —                |       | —                     |       | —       |       |
|                                                                 |       | 1,324                     |       | 26                        |       | 229               |       | 55,536             |       | 284,077                  |       | 393                           |       | 209           |       | 13,624                |       | 350,843                    |       | 706,261      |       |
| **Net Income (Loss)**                                                | ** ** | **(2,151**                | **)**      | **(77,274**               | **)**      | **(77,151**       | **)**      | **(127,489**       | **)**      | **109,604**              | ** ** | **(163,558**                  | **)**      | **(208,959**  | **)**      | **(700,408**          | **)**      | **317,351**                | ** ** | **(930,034** | **)**      |
| **P&L—NERA 50%**                                            | ** ** | **(1,076**                | **)**      | **(38,637**               | **)**      | **(38,575**       | **)**      | **(63,744**        | **)**      | **54,802**               | ** ** | **(81,779**                   | **)**      | **(104,479**  | **)**      | **(350,204**          | **)**      | **158,676**                | ** ** | **(465,017** | **)**      |
| Total  units/condominiums                                            |       | 1                         |       | 49                        |       | 40                |       | 176                |       | 120                      |       | 48                            |       | 42            |       | 146                   |       | 137                        |       | 758          |       |
| Units  to be retained                                                |       | 1                         |       | 49                        |       | 40                |       | 49                 |       | 0                        |       | 48                            |       | 42            |       | 146                   |       | 0                          |       | 374          |       |
| Units  to be sold                                                    |       | —                    |       | —                    |       | —            |       | 127                |       | 120                      |       | —                        |       | —        |       | —                |       | 137                        |       | 384          |       |
| Units  sold through July 28, 2008                               |       | —                    |       | —                    |       | —            |       | 125                |       | 102                      |       | —                        |       | —        |       | —                |       | 137                        |       | 364          |       |
| Balance  of unsold units                                             |       | —                    |       |                      |       |              |       | 2                  |       | 18                       |       |                          |       |          |       |                  |       | —                     |       | 20           |       |
| Unsold  units with deposits for future sale as of July 28, 2008 |       |                      |       | —                    |       | —            |       | 1                  |       | 1                        |       | —                        |       | —        |       | —                |       | —                     |       | 2            |       |

 

 

**Summary financial information for the three monthsended June 30, 2008 (unaudited*)***

 
| ** **                     | ** ** | **Essex  81  Commercial** | ** ** | **Essex  81  Apartments** | ** ** | **345  Franklin** | ** ** | **Hamilton  1025** | ** ** | **Hamilton  Bay  Sales** | ** ** | **Hamilton  Bay  Apartments** | ** ** | **Minuteman** | ** ** | **Hamilton  on Main** | ** ** | **Hamilton  Place  Sales** | ** ** | **Total**    | ** ** |
|--------------------------------|------------|---------------------------|------------|---------------------------|------------|-------------------|------------|--------------------|------------|--------------------------|------------|-------------------------------|------------|---------------|------------|-----------------------|------------|----------------------------|------------|--------------|------------|
| **Revenues**                   |       |                      |       |                      |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |         |       |
| Rental  Income                 |       | 111,581                   |       | 260,428                   |       | 256,571           |       | 194,675            |       | 65,414                   |       | 206,127                       |       | 185,812       |       | 585,054               |       | —                     |       | 1,865,662    |       |
| Laundry  and Sundry Income     |       | —                    |       | 1,866                     |       | 241               |       | —             |       | —                   |       | —                        |       | —        |       | 4,095                 |       | —                     |       | 6,203        |       |
|                           |       | 111,581                   |       | 262,295                   |       | 256,813           |       | 194,675            |       | 65,414                   |       | 206,127                       |       | 185,812       |       | 589,149               |       | —                     |       | 1,871,865    |       |
| **Expenses**                   |       |                      |       |                      |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |         |       |
| Administrative                 |       | 557                       |       | 2,009                     |       | 8,237             |       | 4,734              |       | 1,512                    |       | 2,599                         |       | 1,696         |       | 11,731                |       | 1,304                      |       | 34,378       |       |
| Depreciation  and Amortization |       | 29,882                    |       | 103,514                   |       | 90,904            |       | 82,997             |       | 53,442                   |       | 97,350                        |       | 129,844       |       | 391,709               |       | 6,236                      |       | 985,880      |       |
| Interest                       |       | 33,198                    |       | 116,142                   |       | 131,156           |       | 71,968             |       | 26,861                   |       | 67,638                        |       | 79,086        |       | 221,170               |       | —                     |       | 747,220      |       |
| Management  Fees               |       | 3,252                     |       | 12,563                    |       | 10,594            |       | 7,868              |       | 2,645                    |       | 8,161                         |       | 7,807         |       | 24,675                |       | —                     |       | 77,567       |       |
| Operating                      |       | 12,426                    |       | 20,934                    |       | 15,960            |       | 340                |       | 363                      |       | 302                           |       | 9,919         |       | 79,894                |       | 13                         |       | 140,152      |       |
| Renting                        |       | —                    |       | 2,325                     |       | 12,825            |       | 2,806              |       | 389                      |       | 770                           |       | 1,223         |       | 6,286                 |       | —                     |       | 26,624       |       |
| Repairs  and Maintenance       |       | 840                       |       | 25,353                    |       | 14,992            |       | 73,639             |       | 22,125                   |       | 50,555                        |       | 23,043        |       | 92,950                |       | (4,727                     | )          | 298,769      |       |
| Taxes  and Insurance           |       | 18,965                    |       | 25,815                    |       | 22,175            |       | 39,789             |       | 13,417                   |       | 34,251                        |       | 35,457        |       | 80,897                |       | 1,393                      |       | 272,159      |       |
|                           |       | 99,118                    |       | 308,655                   |       | 306,845           |       | 284,141            |       | 120,755                  |       | 261,626                       |       | 288,077       |       | 909,313               |       | 4,219                      |       | 2,582,748    |       |
| **Income Before Other Income** |       | 12,463                    |       | (46,361                   | )          | (50,032           | )          | (89,466            | )          | (55,341                  | )          | (55,499                       | )          | (102,264      | )          | (320,163              | )          | (4,219                     | )          | (710,883     | )          |
| **Other Income (Loss)**        |       |                      |       |                      |       |              |       |               |       |                     |       |                          |       |          |       |                  |       |                       |       |         |       |
| Interest  Income               |       | 597                       |       | 21                        |       | 103               |       | 10                 |       | 3,049                    |       | 148                           |       | 118           |       | 726                   |       | 68                         |       | 4,840        |       |
| Gain  on Sale of Real Estate   |       | —                    |       | —                    |       | —            |       | —             |       | 204,356                  |       | —                        |       | —        |       | —                |       | 67,261                     |       | 271,617      |       |
| Other  Income (Expenses)       |       | —                    |       | —                    |       | —            |       | —             |       | —                   |       | —                        |       | —        |       | —                |       | —                     |       | —       |       |
|                           |       | 597                       |       | 21                        |       | 103               |       | 10                 |       | 207,405                  |       | 148                           |       | 118           |       | 726                   |       | 67,328                     |       | 276,456      |       |
| **Net Income (Loss)**          | ** ** | **13,060**                | ** ** | **(46,340**               | **)**      | **(49,929**       | **)**      | **(89,456**        | **)**      | **152,064**              | ** ** | **(55,352**                   | **)**      | **(102,146**  | **)**      | **(319,437**          | **)**      | **63,109**                 | ** ** | **(434,426** | **)**      |
| **P&L—NERA 50%**      | ** ** | **6,530**                 | ** ** | **(23,170**               | **)**      | **(24,965**       | **)**      | **(44,728**        | **)**      | **76,032**               | ** ** | **(27,676**                   | **)**      | **(51,073**   | **)**      | **(159,719**          | **)**      | **31,555**                 | ** ** | **(217,213** | **)**      |

 

20

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Table ofContents

 

**NOTE15. NEW ACCOUNTING PRONOUNCEMENT**

 

**Fair Value Measurements—SFAS 157 & The Fair Value Optionfor Financial Assets and Financial Liabilities—SFAS 159, and FASB StaffPosition No. 157-2**

 

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

 

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

 

*******FASB Statement No. 141(R)*****—(revised2007), (“FASB No. 141(R)”),*Business Combinations***

 

In December 2007, theFASB issued FASB No. 141(R) which establishes principles andrequirements for how the acquirer shall recognize and measure in its financialstatements the identifiable assets acquired, liabilities assumed, anynoncontrolling interest in the acquired and goodwill acquired in a businesscombination. This statement is effective for business combinations for whichthe acquisition date is on or after the beginning of the first annual reportingperiod beginning on or after December 15, 2008. The expected impact ofadopting FASB No. 141(R) is not material.

 

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

 

In December 2007, theFASB issued No. 160, which establishes and expands accounting andreporting standards for minority interests, which will be recharacterized asnoncontrolling interests, in a subsidiary and the deconsolidation of asubsidiary. FASB 160 is effective for business combinations for which theacquisition date is on or after the beginning of the first annual reportingperiod beginning on or after December 15, 2008. This statement iseffective for fiscal years beginning on or after December 15, 2008. Theexpected impact of adopting FASB No. 160 is not material.

 

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

 

The FASB Staff Position(FSP) No. 142-3 amends the factors that should be considered in developingrenewal or extension assumptions used to determine the useful life of arecognized intangible assets under FASB Statement No. 142, Goodwill andOther Intangible Assets. The intent of the FSP is to improve the consistencybetween the useful life of a recognized intangible asset under FASB No. 142and the period of expected cash flows used to measure the fair value of theasset under FASB Statement No. 141 (revised 2007), Business Combinations,and other U.S. generally accepted accounting principles. The FSP shall beeffective be effective for financial statements issued for fiscal yearsbeginning after December 15, 2008, and interim periods within those fiscalyears. Early adoption is prohibited. The guidance for determining the usefullife of a recognized intangible asset if this FSP shall be appliedprospectively to intangible assets acquired after the effective date. Thedisclosure requirements shall be applied prospectively to all intangible assetsrecognized as of, and subsequent to, the effective date. The Partnership doesnot believe that the adoption of this FSP will have a material effect on thefinancial position and results of operations.

 

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

 

In October 2008, theFASB issued Staff Position No. 157-3, Determining the Fair Value of aFinancial Asset When the Market for That Asset Is Not Active (“FSP 157-3”). FSP157-3 clarified the application of SFAS 157 in cases where a market is notactive. FSB 157-3 was effective upon issuance, including prior periods forwhich financial statements had not been issued. The Partnership has consideredthe guidance provided by FSP 157-3 in its determination of estimated fairvalues as of December 31, 2008, and the impact was not material.

 

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

 

In March 2008, the FASBissued FASB No. 161. FASB No. 161 requires entities that utilizederivative instruments to provide qualitative disclosures about theirobjectives and strategies for using such instruments, as well as any details ofcredit-risk-related contingent features contained within derivatives. FASB No. 161also requires entities to disclose additional information about the amounts andlocation of derivatives located within the financial statements, how theprovisions of SFAS 133 have been applied, and the impact that hedges haveon an entity’s financial position, financial performance, and cash flows.SFAS 161 is effective for fiscal years and interim periods beginning afterNovember 15, 2008, with early application encouraged. The Partnership doesnot anticipate the adoption of SFAS 161 will have a material impact on thedisclosures contained in its financial statements.

 

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***FASB Statement No. 162 (FASBNo. 161”),****The Hierarchy of GenerallyAccepted Accounting Principles*

 

In May 2008, the FASBissued SFAS no. 162, “The Hierarchy of Generally Accepted AccountingPrinciples.”  SFAS No. 162identifies the sources of accounting principles and the framework for selectingthe principles used in the preparation of financial statements ofnongovernmental entities that are presented in conformity with generallyaccepted accounting principles in the United States.  SFAS 162 is effective June 2009.  We do not expect any significant changes toour financial accounting and reporting as a result of the issuance of SFAS No. 162.

 

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

 

In May 2009, the FASBissued SFAS No. 165, *Subsequent Events*(“SFAS No. 165”).  SFAS No. 165establishes general standards of accounting for and disclosure of events thatoccur after the balance sheet date but before the financial statements areissued or available to be issued.  Itrequires the disclosure of the date through which an entity has evaluatedsubsequent events and the basis for selecting that date, that is, whether thatdate represents the date the financial statements were issued or were availableto be issued.

 

***FASB Statement No. 167 (“FASBNo. 167”),****Amendments to FASBInterpretation No. 46R*

 

In June 2009, the FASBissued SFAS No. 167, *Amendments to FASBInterpretation No. 46R* (“SFAS No. 167”). SFAS No. 167amends FIN 46R to require an analysis to determine whether a variable interestgives a company a controlling financial interest in a variable interestentity.  This statement requires anongoing reassessment of and eliminates the quantitative approach previouslyrequired for determining whether a company is the primary beneficiary.  This statement is effective for interim andannual reporting periods beginning after November 15, 2009.  Accordingly, the Company will adopt SFAS No. 167during the first quarter of 2010.  TheCompany is currently evaluating the impact that SFAS no. 167 will have on itsfinancial statements.

 

***FASB Statement No. 168 (“FASBNo.168”)****FASB Accounting Standards Codification and theHierarchy of Generally Accepted Accounting Principles*

 

In June 2009, the FASBissued No. 168, The *“FASB Accounting StandardsCodification” and the Hierarchy of**GenerallyAccepted Accounting Principles* (“SFAS No. 168”).  SFAS No. 168 establishes the “FASBAccounting Standards Codification” (Codification”), which officially launched July 1,2009, to become the source of authoritative U.S. generally accepted accountingprinciples (“GAAP”) recognized by the FASB to applied by nongovernmententities.  Rules and interpretivereleases of the Securities and Exchange Commission (“SEC”) under authority offederal securities laws are also sources of authoritative U.S. GAAP for SECregistrants.  The subsequent issuances ofnew standards will be in the form of Accounting Standards Updates that will beincluded in the Codification.  Generally,the Codification is not expected to change U.S. GAAP.  All other accounting literature excluded fromthe Codification will be considered nonauthoritative.  SFAS No. 168 is effective for financialstatements issued for interim and annual periods ending after September 15,2009.  Accordingly, the Company willadopt SFAS No. 168 during the third quarter of 2009.  The Company is currently evaluation theeffect on the financial statement disclosures as all future references toauthoritative accounting literature will be references in accordance withCodification.

 

**NOTE16. DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE**

 

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

 
| ** **                                 | ** ** | **June 30,** | ** ** | **June 30,** | ** ** |
|--------------------------------------------|------------|-------------------|------------|-------------------|------------|
| ** **                                 | ** ** | **2009**          | ** ** | **2008**          | ** ** |
| Total Revenues                             |       | $                 | 0          |              | $          | 177,591 |   |
| Operating and other expenses               |       | 7,009             |       | 164,991           |       |
| Depreciation and amortization              |       | 0                 |       | 47,455            |       |
|                                       |       | 7,009             |       | 212,446           |       |
| Income (loss) from discontinued operations |       | (7,009            | )          | (34,855           | )          |
| Gain on the sale of rental property        |       | 0                 |       | 9,990,942         |       |
| Income (loss) from discontinued operations |       | $                 | (7,009     | )                 | $          | 9,956,087 |   |

 

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

 

Thefollowing discussion should be read in conjunction with the financialstatements and notes thereof appearing elsewhere in this Report.  This Report, on Form 10-Q, containsforward-looking statements within the meaning of the securities 

 

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law.  Actual results or developments could differmaterially from those projected in such statements as a result of certainfactors set forth in the section below entitles “Factors That May AffectFuture Results” and elsewhere in this Report.

 

Thereal estate market in the Greater Boston area has softened, and the Partnershipanticipates the climate will remain the same in the foreseeable future. Thismay result in increases in vacancy rates and a reduction in some rents. ThePartnership believes its present cash reserves as well as anticipated rentalrevenue will be sufficient to fund its current operations, finance currentplanned improvements to its properties, and continue distribution payments inthe foreseeable future. Continued market deterioration and/or loss of asignificant commercial tenant may result in the Partnership recording animpairment loss in the future.

 

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

 

Managementbelieves that the financial difficulties experienced since the lending crisisin 2007 will continue and recovery will take longer than previousrecessions.  Management also believesthat the national recession and the challenging credit market will continueinto 2010 and the recovery will be slow and steady.  The Greater Boston Metropolitan Area, thePartnership’s primary market, continues to experience high unemployment levelsand downsizing by many corporations. We believe the market conditions will notimprove locally for the remaining 2009 calendar year.

 

Duringthe six months ended June 30, 2009, the Partnership’s income rose bybetter than 4% and operating expenses declined overall by 2.6%.  While much of the increase in revenue is dueto the 2008 acquisition in Brookline, core operating revenues continue to remainsteady.  Management has been effective inreducing operating expenses with increases only in noncontrollable expensessuch as real estate taxes and insurance. Management believes that continued efforts to control operating expenseswill be effective for the remaining year, however, real estate taxes are likelyto continue to increase.  Bad debtremains at approximately 1% and revenue at the commercial properties has shownno sign of weakness. Early indicators in the third quarter, the busiest renewalseason, show that revenue increases going forward will be modest (1% overallincrease for the same period last year). Additionally, the market softness hasrequired more free rent than in previous seasons which will have a negativeimpact on third quarter revenue, though not significant.  Management believes that the local economyhas yet to rebound or demonstrate job growth and expects future revenue growthfor 2009 and the first two quarters of 2010 to be modest.

 

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

 

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

 

AtJune 30, 2009, Harold Brown, his brother Ronald Brown and the President ofHamilton, Carl Valeri, collectively own approximately 38% of the DepositaryReceipts representing the Partnership Class A Units (including DepositaryReceipts held by trusts for the benefit of such persons’ family members).Harold Brown also owns 75% of the Partnership’s Class B Units, 75% of thecapital stock of NewReal, Inc. (“NewReal”), the Partnership’s sole generalpartner, and all of the outstanding stock of Hamilton. Ronald Brown also owns25% of the Partnership’s Class B Units and 25% of NewReal’s capital stock.In addition, Ronald Brown is the President and director of NewReal and HaroldBrown is NewReal’s Treasurer and a director. Two of NewReal’s other directors,Roberta Ornstein and Conrad DiGregorio, also own immaterial amounts of thePartnership’s Class A Units or receipts.

 

Inaddition to the Management Fee, the Partnership Agreement further provides forthe employment of outside professionals to provide services to the Partnershipand allows NewReal to charge the Partnership for the cost of employing 

 

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professionalsto assist with the administration of the Partnership’s properties.Additionally, from time to time, the Partnership pays Hamilton for repairs andmaintenance services, legal services, construction services and accountingservices. The costs charged by Hamilton for these services are at the samehourly rate charged to all entities managed by Hamilton, and managementbelieves such rates are competitive in the marketplace.

 

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

 

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

 

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

 

R.Brown Partners, which is owned by Ronald Brown, managed the condominiumassociation containing five condominium units which were sold in 2008 locatedin Brookline, Massachusetts. That entity received annual management fees fromthe five units of approximately $1,500, and Hamilton reduced its managementfees to approximately 2%, so that the total management fee will not exceed the4% allowed by the Partnership’s Partnership Agreement.

 

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

 

Priorto 1991, the Partnership employed an outside, unaffiliated company to performits bookkeeping and accounting functions. Since that time, such services havebeen provided by Hamilton’s accounting staff, which consists of approximately14 people. During the six months ended June 30, 2009, Hamilton charged thePartnership $62,500 ($125,000 per year) for bookkeeping and accountingservices.

 

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

 

**CRITICALACCOUNTING POLICIES AND ESTIMATES**

 

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

 

*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.

 

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*Real Estate and Depreciation:*  Real estate assets are stated at the lower ofcost or fair value, less accumulated depreciation. Costs related to theacquisition, development, construction and improvement of properties arecapitalized, including interest, wages and benefits, real estate taxes andinsurance. Capitalization usually begins with commencement of developmentactivity and ends when the property is ready for leasing. Replacements andimprovements, 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. In assessing estimated useful lives, thePartnership makes assumptions based on historical experience acquired from bothwithin and outside the Partnership. These assumptions have a direct impact onthe Partnership’s net income.

 

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

 

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

 

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

 

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

 

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

 

*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 frequently covered by insurance. If it isdetermined that a loss is likely to occur, the estimated amount of the loss isrecorded in the financial statements. Both the amount of the loss and the pointat which its occurrence is considered likely can be difficult to determine.

 

**RESULTSOF OPERATIONS**

 

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

 

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

 

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Therental activity is summarized as follows:

 
| ** **                                       | ** ** | **Occupancy Date**     | ** ** |
|--------------------------------------------------|------------|------------------------|------------|
| ** **                                       | ** ** | **July 27, 2009** | ** ** | **July 28, 2008** | ** ** |
| **Residential**                                  |       |                   |       |   |   |
| Units—exclusive of available for sale units |       | 2,269                  |       | 2,265 |   |
| Vacancies                                        |       | 60                     |       | 31 |   |
| Vacancy rate                                     |       | 2.6                    | %          | 1.3 | % |
| **Commercial**                                   |       |                   |       |   |   |
| Total square feet                                |       | 114,395                |       | 90,848 |   |
| Vacancy                                          |       | 0                      |       | 0 |   |
| Vacancy rate                                     |       | 0                      | %          | 0 | % |

 
| ** **             | ** ** | **Rental Income (in thousands)  Three Months Ended June 30,** | ** **          |
|------------------------|------------|--------------------------------------------------------------------|---------------------|
| ** **             | ** ** | **2009**                                                           | ** **          | **2008** | ** ** |
| ** **             | ** ** | **Total  Operations**                                              | ** **          | **Continuing  Operations** | ** ** | **Total  Operations** | ** ** | **Continuing  Operations** | ** ** |
| Total rents            |       | $                                                                  | 8,179               |   | $ | 8,179 |   | $ | 7,968 |   | $ | 7,935 |   |
| Residential percentage |       | 90                                                                 | %    | 90 | %    | 93 | %    | 93 | % |
| Commercial percentage  |       | 10                                                                 | %                   | 10 | % | 7 | % | 7 | % |
| Contingent rentals     |       | $                                                                  | 110                 |   | $ | 110 |   | $ | 109 |   | $ | 109 |   |

 

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

 
| ** **                                                | ** ** | **Three Months Ended June 30,** | ** ** | **Dollar** | ** ** | **Percent** | ** ** |
|-----------------------------------------------------------|------------|--------------------------------------|------------|------------|------------|-------------|------------|
| ** **                                                | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change**  | ** ** | **Change** | ** ** |
| Revenues:                                                 |       |                                 |       |       |       |        |       |   |   |
| Rental income                                             |       | $                                    | 8,179,090  |       | $          | 7,934,836   |       | 244,254 |   | 3.0 | % |
| Laundry and sundry income                                 |       | 97,257                               |       | 97,854     |       | (597        | )          | (0.1 | )% |
|                                                      |       | 8,276,347                            |       | 8,032,690  |       | 243,657     |       | 3.0 | % |
| Expenses                                                  |       |                                 |       |       |       |        |       |   |   |
| Administrative                                            |       | 386,417                              |       | 456,450    |       | (70,033     | )          | (15.3 | )% |
| Depreciation and amortization                             |       | 1,504,877                            |       | 1,609,953  |       | (105,076    | )          | (6.5 | )% |
| Management fees                                           |       | 333,898                              |       | 330,190    |       | 3,708       |       | 1.1 | % |
| Operating                                                 |       | 868,593                              |       | 928,163    |       | (59,570     | )          | (6.4 | )% |
| Renting                                                   |       | 83,170                               |       | 106,654    |       | (23,484     | )          | (22.0 | )% |
| Repairs and maintenance                                   |       | 1,167,345                            |       | 1,204,625  |       | (37,280     | )          | (3.0 | )% |
| Taxes and insurance                                       |       | 926,639                              |       | 861,150    |       | 65,489      |       | 7.6 | % |
|                                                      |       | 5,270,939                            |       | 5,497,185  |       | (226,246    | )          | (4.1 | )% |
| Income Before Other Income and Discontinued  Operations   |       | 3,005,408                            |       | 2,535,505  |       | 469,903     |       | 18.5 | % |
| Other Income (Loss)                                       |       |                                 |       |       |       |        |       |   |   |
| Interest expense                                          |       | (1,962,093                           | )          | (1,917,353 | )          | (44,740     | )          | (2.3 | )% |
| Interest income                                           |       | 14,228                               |       | 32,253     |       | (18,025     | )          | (55.9 | )% |
| Casualty (loss)                                           |       | —                               |       | (4,151     | )          | 4,151       |       | (100.0 | )% |
| Mortgage prepayment penalties                             |       | —                               |       | (785,538   | )          | 785,538     |       | (100.0 | )% |
| (Loss) from investment in unconsolidated joint  ventures  |       | (281,733                             | )          | (217,213   | )          | 64,520      |       | (29.7 | )% |
|                                                      |       | (2,229,598                           | )          | (2,892,002 | )          | 662,404     |       | (22.9 | )% |
| (Loss) income from Continuing Operations                  |       | 775,810                              |       | (356,497   | )          | 1,132,307   |       | (317.6 | )% |
| Discontinued Operations:                                  |       |                                 |       |       |       |        |       |   |   |
| Income (loss) from discontinued operations                |       | —                               |       | (7,408     | )          | 7,408       |       | 100.0 | % |
| Gain on sale of real estate from discontinued  operations |       | 2,165                                |       | 3,937,551  |       | (3,935,386  | )          | (99.9 | )% |
|                                                      |       | 2,165                                |       | 3,930,143  |       | 3,927,978   |       | (100.0 | )% |
| Net Income                                                |       | $                                    | 777,975    |       | $          | 3,573,646   |       | $ | 2,795,671 |   | (78.2 | )% |
|                                                           |            |                                      |            |            |            |             |            |  |  |  |  |  |

 

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

 

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WorcesterRoad with an increase of approximately $16,000. These increases are offset by decreases in rental income at propertiesincluding Executive Apartments with a decrease of approximately $23,000; NorthBeacon Street with a decrease of approximately $19,000 and Lincoln Street witha decrease of approximately $17,000.

 

Expensesfrom continuing operations for the three months ended June 30, 2009 wereapproximately $5,271,000 compared to approximately $5,497,000 for the threemonths ended June 30, 2008, a decrease of approximately $226,000 (4.1%).The most significant factor contributing to this decrease was a decrease indepreciation and amortization expense of approximately $105,000(6.5%) due toassets being fully depreciated at June 30, 2009; a decrease inadministrative expenses of approximately $70,000(15.3%) due to significantlegal and accounting fees paid in 2008 in connection with the stock buybackprogram; a decrease in operating expenses of approximately $60,000(6.4%) due toa decrease in utility costs; a decrease in renting expense of approximately$23,000 (22%) due to a decrease in rental commissions and a decrease in repairsand maintenance expenses of approximately $37,000 (3.0%) due to major repairsdone at the properties in the 2008.

 

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

 

Interestexpense increased approximately $45,000 (2.3%) due to the refinancing ofPartnership properties in 2008 resulting in a higher level of debt offset bylower interest rates.

 

AtJune 30, 2009, the Partnership has a 50% ownership interest in eightInvestment Properties. See a description of these properties included inNote 14 to the Consolidated Financial Statements for a detail of thefinancial information of each Investment Property.

 

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

 

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

 

Duringthe second quarter of 2008, the Partnership refinanced the property located atWorcester Road.   Non-recurringprepayment penalties of approximately $786,000 were incurred in thesetransactions and are included in other expenses for the three months ended June 30,2008.

 

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

 

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

 

**Comparisonof the six months ended June 30, 2009 to the six months ended June 30,2008**

 

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

 

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| ** **                                                       | ** ** | **Six Months Ended June 30,** | ** ** | **Dollar** | ** ** | **Percent** | ** ** |
|------------------------------------------------------------------|------------|------------------------------------|------------|------------|------------|-------------|------------|
| ** **                                                       | ** ** | **2009**                           | ** ** | **2008**   | ** ** | **Change**  | ** ** | **Change** | ** ** |
| Revenues:                                                        |       |                               |       |       |       |        |       |   |   |
| Rental income                                                    |       | $                                  | 16,544,672 |       | $          | 15,857,659  |       | 687,013 |   | 4.3 | % |
| Laundry and sundry income                                        |       | 192,370                            |       | 206,998    |       | (14,628     | )          | (7.1 | )% |
|                                                             |       | 16,737,042                         |       | 16,064,657 |       | 672,385     |       | 4.2 | % |
| Expenses                                                         |       |                               |       |       |       |        |       |   |   |
| Administrative                                                   |       | 852,347                            |       | 882,239    |       | (29,892     | )          | (3.4 | )% |
| Depreciation and amortization                                    |       | 2,921,497                          |       | 3,228,609  |       | (307,112    | )          | (9.5 | )% |
| Management fees                                                  |       | 676,787                            |       | 652,470    |       | 24,317      |       | 3.7 | % |
| Operating                                                        |       | 2,374,329                          |       | 2,332,615  |       | 41,714      |       | 1.8 | % |
| Renting                                                          |       | 144,129                            |       | 186,865    |       | (42,736     | )          | (22.9 | )% |
| Repairs and maintenance                                          |       | 2,145,631                          |       | 2,244,691  |       | (99,060     | )          | (4.4 | )% |
| Taxes and insurance                                              |       | 1,891,506                          |       | 1,770,140  |       | 121,366     |       | 6.9 | % |
|                                                             |       | 11,006,226                         |       | 11,297,629 |       | (291,403    | )          | (2.6 | )% |
| Income Before Other Income and Discontinued  Operations          |       | 5,730,816                          |       | 4,767,028  |       | 963,788     |       | 20.2 | % |
| Other Income (Loss)                                              |       |                               |       |       |       |        |       |   |   |
| Interest expense                                                 |       | (3,907,240                         | )          | (3,843,212 | )          | (64,028     | )          | 1.7 | % |
| Interest income                                                  |       | 32,591                             |       | 80,622     |       | (48,031     | )          | (59.6 | )% |
| Casualty (loss)                                                  |       | —                             |       | (4,151     | )          | 4,151       |       | (100.0 | )% |
| Mortgage prepayment penalties                                    |       | —                             |       | (4,487,706 | )          | 4,487,706   |       | (100.0 | )% |
| Gain on sale of equipment                                        |       | 4,190                              |       | —     |       | 4,190       |       | NA |   |
| (Loss) from investment in unconsolidated joint  ventures         |       | (555,288                           | )          | (465,018   | )          | (90,270     | )          | 19.4 | % |
|                                                             |       | (4,425,747                         | )          | (8,719,465 | )          | 4,293,718   |       | (49.2 | )% |
| (Loss) Income from Continuing Operations                         |       | 1,305,069                          |       | (3,952,437 | )          | 5,257,506   |       | (133.0 | )% |
| Discontinued Operations:                                         |       |                               |       |       |       |        |       |   |   |
| Income (loss) from discontinued operations                       |       | —                             |       | (34,855    | )          | 34,855      |       | (100.0 | )% |
| Gain (loss) on sale of real estate from  discontinued operations |       | (7,009                             | )          | 9,990,942  |       | 9,997,951   |       | 100.0 | % |
|                                                             |       | (7,009                             | )          | 9,956,087  |       | 9,963,096   |       | 100.0 | % |
| Net Income                                                       |       | $                                  | 1,298,060  |       | $          | 6,003,650   |       | $ | (4,705,590 | ) | (78.4 | )% |
|                                                                  |            |                                    |            |            |            |             |            |  |  |  |  |  |

 

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

 

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

 

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

 

Interestexpense increased approximately $64,000 (1.7%) due to the refinancing ofPartnership properties in 2008 resulting in a higher level of debt offset bylower interest rates.

 

AtJune 30, 2009, the Partnership has a 50% ownership interest in eightInvestment Properties. See a description of these properties included inNote 14 to the Consolidated Financial Statements for a detail of thefinancial information of each Investment Property.

 

Asdescribed in Note 14 to the Consolidated Financial Statements, thePartnership’s share of the net loss from the 50% owned Investment Propertieswas approximately $555,000 for the six months ended June 30, 2009 comparedto a loss of approximately $465,000 for the six months ended June 30,2008, an increase of approximately $90,000. Included in the net loss 

 

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

 

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

 

Duringthe six months ended June 30, 2008, the Partnership sold the Oak RidgeApartments in Foxboro, Massachusetts and the Coach Apartments in Acton,Massachusetts.  The gain on the sale ofthese two properties was approximately $9,991,000 and is included in incomefrom discontinued operations.

 

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

 

**LIQUIDITYAND CAPITAL RESOURCES**

 

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

 

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

 
| ** **                                                                 | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                 | ** ** | **2009**                           | ** ** | **2008** | ** ** |
| Cash provided by (used in) operating activities                            |       | $                                  | 4,939,638  |   | $ | (3,710,739 | ) |
| Cash provided by (used in) investing activities                            |       | (1,087,015                         | )          | 8,491,591 |   |
| Cash (used in) provided by financing activities                            |       | (416,210                           | )          | 22,645,509 |   |
| Repurchase of Depositary Receipts, Class B  and General Partner Units |       | (1,278,090                         | )          | (19,744.831 | ) |
| Distributions paid                                                         |       | (1,860,989                         | )          | (1,892,845 | ) |
| Net increase in cash and cash equivalents                                  |       | $                                  | 297,334    |   | $ | 5,788,685 |   |

 

Thecash provided by operating activities is primarily due to the collection ofrents less cash operating expenses. The increase in cash provided by operatingactivities is due to the $2,600,000 which was held by a Qualified Intermediaryat June 30, 2008 in connection with the purchase of the medical buildingin Brookline, Massachusetts. The decrease in cash provided by investingactivities is due to the sale of properties in 2008, as well as the reductionin the distribution received from the joint ventures in 2009. The decrease incash provided by financing activities is due to the refinancing of Partnershipproperties in 2008.

 

Duringthe six months ended June 30, 2009, the Partnership and its SubsidiaryPartnerships completed improvements to certain of the Properties at a totalcost of approximately $1,275,000. These improvements were funded from cashreserves and, to some extent, escrow accounts established in connection withthe financing or refinancing of the applicable Properties. These sources havebeen adequate to fully fund improvements. The most significant improvementswere made at Westside Colonial, Dean Street, Redwood Hills, Westgate Apartmentsand Olde English, at a cost of approximately $165,000, $129,000, $128,000,$107,000 and $105,000, respectively. The Partnership plans to investapproximately $752,000 in additional capital improvements in 2009.

 

In2009 the Partnership repurchased 2,468 Class A Units, Class B Unitsand General Partnership Units at a total cost of $1,278,000.

 

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 Partnership purchased a fully occupied commercial building located inNewton, Massachusetts, known as Linewt LLC. The purchase price was$3,475,000 and the building consists of 5,850 square feet of commercial space.The 

 

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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.

 

In2008, the Partnership obtained mortgages on 13 properties.  The new mortgages total approximately$73,000,000 with interest rates ranging 5.6% to 5.97%.  The new mortgages mature in 2023 and call forinterest only payments.  After paymentsof existing mortgages of approximately $37,800,000 and prepayment penalties ofapproximately $4,400,000, the excess funds were used to repurchase Depositary Receipts.

 

In2009, the Partnership approved distributions of $7.00 per Unit ($0.70 perReceipt) payable March 31, 2009 and June 30, 2009.

 

In2008 the Partnership paid quarterly distributions of $7.00 per Unit ($0.70 perReceipt) in March, June, September and December 2008 for a totaldistribution of $28.00 per unit ($2.80 per receipt).

 

ThePartnership anticipates that cash from operations and interest bearing accountswill be sufficient to fund its current operations and to finance currentimprovements to its properties. The Partnership’s net income and cash flow mayfluctuate dramatically from year to year as a result of the sale of properties,increases or decreases in rental income or expenses, or the loss of significanttenants.

 

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

 

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

 

**ContractualObligations**

 

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

 

**FactorsThat May Affect Future Results**

 

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

 

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

 

·                  The Partnershipdepends on the real estate markets where its properties are located, primarilyin Eastern Massachusetts and these markets may be adversely affected by localeconomic market conditions, which are beyond the Partnership’s control.

 

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

 

·                  The Partnershipis also impacted 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 Partnershipis subject to significant expenditures associated with each investment, such asdebt service payments, real estate taxes, insurance and maintenance costs,which are generally not reduced when circumstances cause a reduction inrevenues from a property.

 

·                  The Partnershipis subject to increases in heating and utility costs that may arise as a resultof economic and market conditions and fluctuations in seasonal weatherconditions.

 

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

 

·                  Actual orthreatened terrorist attacks may adversely affect our ability to generaterevenues and the value of our properties.

 

·                  Financing orrefinancing of Partnership properties may not be available to the extentnecessary or desirable, or may not be available on favorable terms.

 

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

 

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

 

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

 

·                  Market interestrates could adversely affect the market prices for Class A PartnershipUnits and Depositary Receipts as well as performance and cash flow.

 

·                  Changes inincome tax laws and regulations may affect the income taxable to owners of thePartnership. These changes may affect the after-tax value of futuredistributions.

 

·                  The Partnershipmay fail to identify, acquire, construct, or develop additional properties; maydevelop or acquire properties that do not produce a desired or expected yieldon invested capital; may be unable to sell poorly- performing or otherwiseundesirable properties quickly; or may fail to effectively integrateacquisitions of properties or portfolios of properties.

 

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

 

·                  Competition foracquisitions may result in increased prices for properties.

 

·                  Any weaknessidentified in the Partnership’s internal controls as part of the evaluationbeing undertaken by the Company and its independent public accountants pursuantto Section 404 of the Sarbanes-Oxley Act of 2002 could have an adverseeffect on the Company’s business.

 

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·                  Ongoing compliancewith Sarbanes-Oxley Act of 2002 may require additional personnel or systemchanges.

 

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

 

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

 

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

 

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

 

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

 

Foradditional disclosure about market risk, see “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results ofOperations—Factors That May Affect Future Results”.

 

**ITEM4. CONTROLS AND PROCEDURES**

 

*DisclosureControls and Procedures*.  The  management ofthe Partnership’s general partner, with the participation of the president andchief executive officer and chief financial officer, has evaluated theeffectiveness of the Partnership’s disclosure controls and procedures (as suchterm is defined in Rules 13a-15(e) and 15d-15(e) under theExchange 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 Partnership’s  general partner have concluded that, as ofthe end of such period, the Company’s disclosure controls and procedures areeffective in recording, processing, summarizing and reporting, on a timelybasis, information required to be disclosed by the Company in the reports thatit files or submits under the Exchange Act.

 

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

 

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**PART II—OTHER INFORMATION**

 

**Item 1.  Legal Proceedings**

 

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

 

**Item 1A.  Risk Factors**

 

Therewere no material changes to the Risk Factors disclosed in our annual report 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)                                  Issuer Purchases of EquitySecurities during the three Months Ended June 30, 2009:

 

None

 

SeeNote 8 to the Consolidated Financial Statements for information concerningthis repurchase program through June 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 exhibit index below.

 

**EXHIBIT INDEX**

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

 

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**SIGNATURES**

 

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

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

 

Dated:August 7, 2009

 

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

 

| **Signature**    | ** ** | **Title**                                                         | ** ** | **Date**            |
|------------------|------------|-------------------------------------------------------------------|------------|---------------------|
|             |       |                                                              |       |                |
| /s/ RONALD BROWN |       | President  and Director of the General Partner                    |       | August 7, 2009 |
| Ronald Brown     |       | (Principal  Executive Officer)                                    |       |                |
|             |       |                                                              |       |                |
| /s/ HAROLD BROWN |       | Treasure  and Director to the General Partner                     |       | August 7, 2009 |
| Harold Brown     |       | (Principal  and Finance Officer and Principal Accounting Officer) |       |                |

 

 

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