Table of Contents

 

 

** **

**UNITEDSTATES**

**SECURITIES AND EXCHANGECOMMISSION**

**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 the quarterly period ended  March 31, 2010**                                                                                                                                                                                                                              |
| ** **                                                                                                                                                                                                                                                                           |
| **OR**                                                                                                                                                                                                                                                                               |
| ** **                                                                                                                                                                                                                                                                           |
| **o**                                                                                                                                                                                                                                                                                | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                                                                 |
| **For the transition period from                    to                    ** |

 

**Commissionfile number 0-12138**

 

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**New England Realty AssociatesLimited Partnership**

(Exact name of registrant asspecified in its charter)

 

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

 

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

 

Securities registeredpursuant to Section 12(b) of the Act:

 

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

 

Securities registeredpursuant to Section 12(g) of the Act:

 

**Class A**

**LimitedPartnership Units**

(Title of class)

 

**Notapplicable**

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

 

Indicate by checkmark if theregistrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act.  Yes o No x

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Exchange Act.  Yes o No x

 

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

 

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

 

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

 

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

 

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

 

As of March 31, 2010,there were 105,425 of the registrant’s Class A units (1,054,251 DepositaryReceipts) of limited partnership issued and outstanding and 25,038 Class Bunits issued and outstanding.

 

 

 

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**NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP**

 

**INDEX**

 
| **PART I—FINANCIAL  INFORMATION** |                                                                                                                                  |
|---------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
| Item 1.                                | Financial  Statements (Unaudited)                                                                                                     |   |
|                                        | Consolidated  Balance Sheets as of March 31, 2010 and December 31, 2009                                                     |   |
|                                        | Consolidated Statements of Income for the Three Months  Ended March 31, 2010 and  March 31, 2009                       |   |
|                                        | Consolidated Statements of Changes in Partners’  Capital for the Three Months Ended March 31, 2010 and March 31,  2009 |   |
|                                        | Consolidated Statements of Cash Flows for the Three  Months Ended March  31, 2010 and March 31, 2009                   |   |
|                                        | Notes  to Financial Statements                                                                                                        |   |
| Item 2.                                | Management’s Discussion and Analysis of Financial Condition and  Results of Operations                                           |   |
| Item 3.                                | Quantitative  and Qualitative Disclosures About Market Risk                                                                           |   |
| Item 4.                                | Controls  and Procedures                                                                                                              |   |
| **PART II—OTHER  INFORMATION**    |                                                                                                                                  |
| Item 1.                                | Legal  Proceedings                                                                                                                    |   |
| Item 1A.                               | Risk Factors                                                                                                                          |   |
| Item 2.                                | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                          |   |
| Item 3.                                | Defaults  Upon Senior Securities                                                                                                      |   |
| Item 4.                                | (Removed  and Reserved)                                                                                                               |   |
| Item 5.                                | Other  Information                                                                                                                    |   |
| Item 6.                                | Exhibits                                                                                                                              |   |
| **SIGNATURES**                              |                                                                                                                                  |

 

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

 

**PART 1— FINANCIAL INFORMATION**

 

Item 1. Financial Statements

 

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

 

The consolidated balance sheet as of December 31,2009 has been derived from the audited consolidated balance sheet at that datebut does not include all of the information and footnotes required by U.S.generally accepted accounting principles for complete financial statements.

 

The aforementioned financial statementsshould be read in conjunction with the notes to the aforementioned financialstatements and Management’s Discussion and Analysis of Financial Condition andResults of Operations and the financial statements and notes thereto includedin New England Realty Associates L.P.’s Annual Report on Form 10-K for thefiscal year ended December 31, 2009.

 

The results of operations for the three monthperiod ended March 31, 2010 are not necessarily indicative of the resultsto be expected for the entire fiscal year or any other period.

 

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

**CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                   | ** ** | **March 31, 2010** | ** **  | **December 31, 2009** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-------------------------|-------------|----------------------------|------------|
| **ASSETS**                                                                                   |       |                    |        |                       |       |
| Rental Properties                                                                            |       | $                       | 94,961,300  |                       | $          | 95,971,937 |   |
| Cash and Cash Equivalents                                                                    |       | 4,381,130               |        | 2,879,663                  |       |
| Rents Receivable                                                                             |       | 886,110                 |        | 1,038,820                  |       |
| Real Estate Tax Escrows                                                                      |       | 300,724                 |        | 311,582                    |       |
| Prepaid Expenses and Other  Assets                                                           |       | 3,022,788               |        | 2,857,288                  |       |
| Investments in  Unconsolidated Joint Ventures                                                |       | 23,644,956              |        | 24,964,453                 |       |
| Financing and Leasing Fees                                                                   |       | 1,035,085               |        | 1,065,993                  |       |
| **Total Assets**                                                                             |       | $                       | 128,232,093 |                       | $          | 129,089,736 |   |
| **LIABILITIES AND  PARTNERS’ CAPITAL**                                                  |       |                    |        |                       |       |
| Note Payable                                                                                 |       | $                       | 7,168,600   |                       | $          | 7,168,600 |   |
| Mortgage Notes Payable                                                                       |       | 138,341,418             |        | 137,641,354                |       |
| Accounts Payable and  Accrued Expenses                                                       |       | 2,342,306               |        | 2,195,245                  |       |
| Advance Rental Payments  and Security Deposits                                               |       | 3,326,715               |        | 3,417,361                  |       |
| **Total Liabilities**                                                                        |       | 151,179,039             |        | 150,422,560                |       |
|                                                                                         |       |                    |        |                       |       |
| Commitments and Contingent  Liabilities (Notes 3 and 9)                                 |       |                    |        |                       |       |
|                                                                                         |       |                    |        |                       |       |
| Partners’ Capital 131,781  and 132,346 units outstanding in 2010 and 2009, respectively |       | (22,946,946             | )           | (21,332,824                | )          |
| **Total Liabilities and  Partners’ Capital**                                            |       | $                       | 128,232,093 |                       | $          | 129,089,736 |   |

 

See notes to consolidatedfinancial statements.

 

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**NEWENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF INCOME**

 
| ** **                                                       | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                       | ** ** | **2010**                               | ** ** | **2009** | ** ** |
| Revenues                                                         |       |                                   |       |   |   |
| Rental income                                                    |       | $                                      | 8,196,616  |   | $ | 8,367,582 |   |
| Laundry and sundry income                                        |       | 121,200                                |       | 93,113 |   |
|                                                             |       | 8,317,816                              |       | 8,460,695 |   |
| Expenses                                                         |       |                                   |       |   |   |
| Administrative                                                   |       | 491,036                                |       | 465,930 |   |
| Depreciation and  amortization                                   |       | 1,378,911                              |       | 1,416,620 |   |
| Management fees                                                  |       | 338,642                                |       | 342,888 |   |
| Operating                                                        |       | 1,281,662                              |       | 1,505,737 |   |
| Renting                                                          |       | 67,050                                 |       | 60,958 |   |
| Repairs and maintenance                                          |       | 997,743                                |       | 978,286 |   |
| Taxes and insurance                                              |       | 1,077,825                              |       | 964,867 |   |
|                                                             |       | 5,632,869                              |       | 5,735,286 |   |
| Income Before Other Income  and Discontinued Operations          |       | 2,684,947                              |       | 2,725,409 |   |
| Other Income (Loss)                                              |       |                                   |       |   |   |
| Interest expense                                                 |       | (2,029,160                             | )          | (1,945,147 | ) |
| Interest income                                                  |       | 759                                    |       | 18,362 |   |
| (Loss) from investments in  unconsolidated joint ventures        |       | (999,497                               | )          | (273,555 | ) |
|                                                             |       |                                   |       |   |   |
|                                                             |       | (3,027,898                             | )          | (2,200,340 | ) |
| (Loss) Income From  Continuing Operations                        |       | (342,951                               | )          | 525,069 |   |
| Discontinued Operations                                          |       |                                   |       |   |   |
| Income (loss) from  discontinued operations                      |       | —                                 |       | (4,984 | ) |
| Gain (loss) on sale of  real estate from discontinued operations |       | —                                 |       | — |   |
|                                                             |       | —                                 |       | (4,984 | ) |
| Net (Loss) Income                                                |       | $                                      | (342,951   | ) | $ | 520,085 |   |
|                                                             |       |                                   |       |   |   |
| Income (loss) per Unit                                           |       |                                   |       |   |   |
| Income (loss) before  discontinued operations                    |       | $                                      | (2.59      | ) | $ | 3.91 |   |
| Income (loss) from  discontinued operations                      |       | —                                 |       | (0.04 | ) |
| Net Income (loss) per Unit                                       |       | $                                      | (2.59      | ) | $ | 3.87 |   |
| Weighted Average Number of  Units Outstanding                    |       | 132,315                                |       | 134,202 |   |

 

See notes to consolidatedfinancial statements.

 

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**NEWENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL**

** **
| ** **                    | ** ** | **Unit**         | ** ** | **Partner’s Capital** | ** ** |
|-------------------------------|------------|------------------|------------|----------------------------|------------|
| ** **                    | ** ** | **Limited**      | ** ** | **General**                | ** ** | ** ** | ** ** | **Treasury** | ** ** | ** ** | ** ** | **Limited** | ** ** | **General** | ** ** | ** ** | ** ** |
| ** **                    | ** ** | **Class A** | ** ** | **Class B**           | ** ** | **Partnership** | ** ** | **Subtotal** | ** ** | **Units** | ** ** | **Total** | ** ** | **Class A** | ** ** | **Class B** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Balance, January 1, 2009 |       | 144,180          |       | 34,243                     |       | 1,802 |   | 180,225 |   | 44,974 |   | 135,251 |   | $ | (14,173,745 | ) | $ | (3,366,265 | ) | $ | (177,172 | ) | $ | (17,717,182 | ) |
| Distribution to Partners      |       | —           |       | —                     |       | — |   | — |   | — |   | — |   | (745,200 | ) | (176,985 | ) | (9,315 | ) | (931,501 | ) |
| Stock Buyback                 |       | —           |       | —                     |       | — |   | — |   | 2,468 |   | (2,468 | ) | (1,025,734 | ) | (239,738 | ) | (12,618 | ) | (1,278,090 | ) |
| Net Income                    |       | —           |       | —                     |       | — |   | — |   | — |   | — |   | 416,068 |   | 98,816 |   | 5,201 |   | 520,085 |   |
| Balance, March 31, 2009  |       | 144,180          |       | 34,243                     |       | 1,802 |   | 180,225 |   | 47,442 |   | 132,783 |   | $ | (15,528,611 | ) | $ | (3,684,172 | ) | $ | (193,904 | ) | $ | (19,406,688 | ) |
|                          |       |             |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2010 |       | 144,180          |       | 34,243                     |       | 1,802 |   | 180,225 |   | 47,879 |   | 132,346 |   | $ | (17,069,520 | ) | $ | (4,050,138 | ) | $ | (213,165 | ) | $ | (21,332,824 | ) |
| Distribution to Partners      |       | —           |       | —                     |       | — |   | — |   |   |   |   |   | (741,140 | ) | (176,021 | ) | (9,264 | ) | (926,426 | ) |
| Stock Buyback                 |       | —           |       | —                     |       | — |   | — |   | 565 |   | (565 | ) | (275,850 | ) | (65,452 | ) | (3,444 | ) | (344,746 | ) |
| Net (Loss)                    |       | —           |       | —                     |       | — |   | — |   |   |   |   |   | (274,361 | ) | (65,161 | ) | (3,430 | ) | (342,951 | ) |
| Balance, March 31, 2010  |       | 144,180          |       | 34,243                     |       | 1,802 |   | 180,225 |   | 48,444 |   | 131,781 |   | $ | (18,360,871 | ) | $ | (4,356,771 | ) | $ | (229,303 | ) | $ | (22,946,946 | ) |

 

See notes to consolidatedfinancial statements.

 

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**NEWENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

 
| ** **                                                                        | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                        | ** ** | **2010**                               | ** ** | **2009** | ** ** |
| Cash Flows from Operating  Activities                                             |       |                                   |       |   |   |
| Net (loss) income                                                                 |       | $                                      | (342,951   | ) | $ | 520,085 |   |
| Adjustments to reconcile  net income to net cash provided by operating activities |       |                                   |       |   |   |
| Depreciation and  amortization                                                    |       | 1,378,911                              |       | 1,416,620 |   |
| Loss from investments in  joint ventures                                          |       | 999,497                                |       | 273,555 |   |
| Changes in operating  assets and liabilities                                      |       |                                   |       |   |   |
| (Increase) Decrease in  rents receivable                                          |       | 152,710                                |       | 65,815 |   |
| Increase (Decrease) in  accounts payable and accrued expense                      |       | 147,061                                |       | (64,147 | ) |
| (Increase) Decrease in  real estate tax escrow                                    |       | 10,858                                 |       | 4,980 |   |
| Decrease (Increase) in  prepaid expenses and other assets                         |       | (165,500                               | )          | 146,967 |   |
| Increase (decrease)in  advance rental payments and security deposits              |       | (90,646                                | )          | (2,588 | ) |
| Total Adjustments                                                                 |       | 2,432,891                              |       | 1,841,202 |   |
| Net cash provided by  operating activities                                        |       | 2,089,940                              |       | 2,361,287 |   |
| Cash Flows From Investing  Activities                                             |       |                                   |       |   |   |
| Proceeds from  unconsolidated joint ventures                                      |       | 320,000                                |       | 127,500 |   |
| Purchase and improvement  of rental properties                                    |       | (335,745                               | )          | (602,370 | ) |
| Net proceeds from the sale  of rental property                                    |       | —                                 |       | — |   |
| Net cash (used in)provided  by investing activities                               |       | (15,745                                | )          | (474,870 | ) |
| Cash Flows From Financing  Activities                                             |       |                                   |       |   |   |
| Payment of financing costs                                                        |       | (1,620                                 | )          | (3,559 | ) |
| Proceeds of mortgage notes  payable                                               |       | 912,440                                |       | — |   |
| Principal payments of  mortgage notes payable                                     |       | (212,376                               | )          | (205,660 | ) |
| Stock buyback                                                                     |       | (344,746                               | )          | (1,278,090 | ) |
| Distributions to partners                                                         |       | (926,426                               | )          | (931,500 | ) |
| Net cash provided by (used  in) financing activities                              |       | (572,728                               | )          | (2,418,810 | ) |
| Net Increase (Decrease) in  Cash and Cash Equivalents                             |       | 1,501,467                              |       | (532,393 | ) |
| Cash and Cash Equivalents,  at beginning of period                                |       | 2,879,663                              |       | 10,752,931 |   |
| Cash and Cash Equivalents,  at end of period                                      |       | $                                      | 4,381,130  |   | $ | 10,220,538 |   |

 

See notes to consolidatedfinancial statements.

 

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

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

**MARCH 31,2010**

 

**(UNAUDITED)**

 

**NOTE 1. SIGNIFICANT ACCOUNTING POLICIES**

 

*Line of Business:*  New England Realty Associates LimitedPartnership (“NERA” or the “Partnership”) was organized in Massachusetts in1977. NERA and its subsidiaries own and operate various residential apartmentbuildings, condominium units and commercial properties located in Massachusettsand New Hampshire. NERA has also made investments in other real estatepartnerships and has participated in other real estate related activities,primarily located in Massachusetts.

 

*Accounting Standards*: On July 1,2009, the Financial Accounting Standards Board (“FASB”) issued the FASBAccounting Standards Codification and the Hierarchy of Generally AcceptedAccounting Principles, also known as FASB Accounting Standards Codification (“ASC105-10”), General Accepted Accounting Principles (“ASC 105-10”).  ASC 105-10 established the FASB AccountingStandards Codification (“Codification”) as the single source of authoritativeU.S. GAAP recognized by the FASB to be applied by nongovernmentalentities.  Rules and interpretivereleases of the Securities and Exchange Commission (“SEC”) under authority offederal securities laws are also sources of authoritative GAAP for SECregistrants.  The Codification supersedesall existing non-SEC accounting and reporting standards.  All other non -grandfathered, non-SECaccounting literature not included in the Codification will becomenon-authoritative.  Following theCodification, the FASB will not issue new standards in the form of Statements,FASB Staff Positions or Emerging Issues Task Force Abstracts.  Instead, it will issue Accounting StandardsUpdates, which will serve to update the Codification, provide backgroundinformation about the guidance and provide the basis for conclusions on thechanges to the Codification.  GAAP wasnot intended to be changed as a result of the FASB’s Codification project, butit will change the way the guidance is organized and presented.  As a result, these changes will have asignificant impact on how companies reference GAAP in their financialstatements and in their accounting policies for financial statements issued forinterim and annual periods ending after September 15, 2009.  The Partnership has implemented theCodification in this report by providing references to the Codification topics,as appropriate.

 

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

 

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

 

OnJanuary 1, 2010, the Partnership adopted the updated provisions of ASC810, pursuant to FASB No. 167, which amends FIN 46® to require ongoingreassessments of whether an enterprise is the primary beneficiary of a variableinterest entity.  Additionally, FASB No. 167amends FIN 46® to eliminate the quantitative approach previously required fordetermining the primary beneficiary of a variable interest entity, which wasbased on determining which enterprise absorbs the majority of the entity’sexpected losses, receives a majority of the entity’s expected residual returns,or both.  FASB No. 167 amendscertain guidance in Interpretation 46® for determining whether an entity is avariable interest entity. Also, FASB No. 167 amends FIN 46® to requireenhanced disclosures that will provide users of financial statements with moretransparent information about an enterprise’s involvement in a variableinterest entity.  The enhanceddisclosures are required for any 

 

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enterprisethat holds a variable interest in a variable interest entity.  The adoption of this guidance did not have amaterial impact to these financial statements.

 

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

 

*Accounting Estimates:* Thepreparation of the financial statements, in conformity with accountingprinciples generally accepted in the United State of America, requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosures of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenuesand expenses during the reported period. Accordingly, actual results coulddiffer from those estimates.

 

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

 

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

 

*Rental Properties:*  Rental properties are stated at cost lessaccumulated depreciation. Maintenance and repairs are charged to expense asincurred; improvements and additions are capitalized. When assets are retiredor otherwise disposed of, the cost of the asset and related accumulateddepreciation is eliminated from the accounts, and any gain or loss on suchdisposition is included in income. Fully depreciated assets are removed fromthe accounts. Rental properties are depreciated by both straight-line andaccelerated methods over their estimated useful lives. Upon acquisition ofrental property, the Partnership estimates the fair value of acquired tangibleassets, consisting of land, building and improvements, and identifiedintangible assets and liabilities assumed, generally consisting of the fairvalue of (i) above and below market leases, (ii) in-place leases and (iii) tenantrelationships.  The Partnership allocatedthe purchase price to the assets acquired and liabilities assumed based ontheir fair values.  The Partnershiprecords goodwill or a gain on bargain purchase (if any) if the net assetsacquired/liabilities assumed exceed the purchase consideration of atransaction.  In estimating the fairvalue of the tangible and intangible assets acquired, the Partnership considersinformation obtained about each property as a result of its due diligence andmarketing and leasing activities, and utilizes various valuation methods, suchas estimated cash flow projections utilizing appropriate discount andcapitalization rates, estimates of replacement costs net of depreciation, andavailable market information.  The fairvalue of the tangible assets of an acquired property considers the value of theproperty as if it were vacant.

 

Other intangible assetsacquired include amounts for in-place lease values and tenant relationshipvalues, which are based on management’s evaluation of the specificcharacteristics of each tenant’s lease and the Partnership’s overallrelationship with the respective tenant. Factors to be considered by management in its analysis of in-place leasevalues include an estimate of carrying costs during hypothetical expectedlease-up periods considering current market conditions, and costs to executesimilar leases at market rates during the expected lease-up periods, dependingon local market conditions.  Inestimating costs to execute similar leases, management considers leasing commissions,legal and other related expenses. Characteristics considered by management in valuing tenant relationshipsinclude the nature and extent of the Partnership’s existing businessrelationships with the tenant, growth prospects for developing new businesswith the tenant, the tenant’s credit quality and expectations of leaserenewals.  The value of in-place leasesare amortized to expense over the remaining 

 

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initial terms of the respective leases.  The value of tenant relationship intangiblesare amortized to expense over the anticipated life of the relationships.

 

In the event that facts andcircumstances indicate that the carrying value of a rental property may beimpaired, an analysis of the value is prepared. The estimated futureundiscounted cash flows are compared to the asset’s carrying value to determineif a write-down to fair value is required.

 

*Financing and LeasingFees:* Financing fees are capitalized and amortized, using the interestmethod, over the life of the related mortgages. Leasing fees are capitalizedand amortized on a straight-line basis over the life of the related lease.Unamortized balances are expensed when the corresponding fee is no longerapplicable.

 

*Income Taxes:* The financialstatements have been prepared on the basis that NERA and its subsidiaries areentitled to tax treatment as partnerships. Accordingly, no provision for incometaxes has been recorded.

 

*Cash Equivalents:* ThePartnership considers cash equivalents to be all highly liquid instrumentspurchased with a maturity of three months or less.

 

*Segment Reporting:* Operatingsegments are revenue producing components of the Partnership for which separatefinancial information is produced internally for management. Under thedefinition, NERA operated, for all periods presented, as one segment.

 

*Comprehensive Income:* Comprehensiveincome is defined as changes in partners’ equity, exclusive of transactionswith owners (such as capital contributions and dividends). NERA did not haveany comprehensive income items in 2010 and 2009 other than net income asreported.

 

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

 

*Concentration of CreditRisks and Financial Instruments:* The Partnership’sproperties are located in New England and the Partnership is subject to thegeneral economic risks related thereto. No single tenant accounted for morethan 5% of the Partnership’s revenues in 2010 or 2009.  The Partnership makes its temporary cashinvestments with high-credit quality financial institutions. At March 31,2010, substantially all of the Partnership’s cash and cash equivalents wereheld in interest-bearing accounts at financial institutions, earning interestat rates from 0.05% to 1.44%.  At March 31,2010 and December 31, 2009, respectively approximately $5,569,000 and$4,026,000 of cash and cash equivalents, and security deposits included inprepaid expenses and other assets exceeded federally insured amounts.

 

*Advertising Expense:* Advertising isexpensed as incurred. Advertising expense was $16,283 and $14,384 for the threemonths ended March 31, 2010 and 2009, respectively.

 

*Discontinued Operationsand 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.

 

If circumstances arise thatpreviously were considered unlikely and, as a result, the Partnership decidesnot to sell a property previously classified as held for sale, the property isreclassified as held and used. A property that is reclassified is measured andrecorded individually at the lower of (a) its carrying amount before theproperty was classified as held for sale, adjusted for any depreciation(amortization) expense that would have been recognized had the property beencontinuously classified as held and used, or (b) the fair value at thedate of the subsequent decision not to sell.

 

*Interest Capitalized:* ThePartnership follows the policy of capitalizing interest as a component of thecost of rental property when the time of construction exceeds one year. Duringthe three months ended March 31, 2010 and year ended December 31,2009, there was no capitalized interest.

 

*Extinguishment of Debt:* When existingmortgages are refinanced with the same lender and it is determined that therefinancing is substantially different then they are recorded as anextinguishment of debt.  However if it isdetermined that the 

 

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refinancing is substantially the same thenthey are recorded as an exchange of debt. All refinancings qualify asextinguishment of debt.

 

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

 

*Subsequent Events*:  The Partnership has evaluated subsequentevents through May 5, 2010, the date the financial statements were issued.

 

**NOTE 2. RENTAL PROPERTIES**

 

As of March 31, 2010, the Partnership and its SubsidiaryPartnerships owned 2,269 residential apartment units in 20 residential andmixed-use complexes (collectively, the “Apartment Complexes”). The Partnershipalso owns 19 condominium units in a residential condominium complex, all ofwhich are leased to residential tenants (collectively referred to as the “CondominiumUnits”). The Apartment Complexes and Condominium Units are located primarily inthe metropolitan Boston area of Massachusetts.

 

Additionally, as of March 31, 2010, the Partnership and SubsidiaryPartnerships owned a commercial shopping center in Framingham, commercialbuildings in Newton and Brookline and mixed-use properties in Boston, Brocktonand Newton, all in Massachusetts. These properties are referred to collectivelyas the “Commercial Properties.”

 

The Partnership also owned a 40% or 50% ownership interest in nineresidential and mixed use complexes (the “Investment Properties”) at March 31,2010 with a total of 798 residential units, two commercial spaces and oneparking lot, accounted for using the equity method of consolidation. SeeNote 14 for summary information on these investments.

 

Rentalproperties consist of the following:

 
| ** **                           | ** ** | **March  31, 2010** | ** ** | **December 31, 2009** | ** ** | **Useful Life**       | ** ** |
|--------------------------------------|------------|--------------------------|------------|----------------------------|------------|-----------------------|------------|
| Land, improvements and  parking lots |       | $                        | 26,072,100 |                       | $          | 26,072,100            |       | 15—40 years |   |
| Buildings and improvements           |       | 111,110,283              |       | 111,016,179                |       | 15—40 years |       |
| Kitchen cabinets                     |       | 4,048,627                |       | 3,977,528                  |       | 5—10 years  |       |
| Carpets                              |       | 3,622,214                |       | 3,506,481                  |       | 5—10 years  |       |
| Air conditioning                     |       | 883,240                  |       | 882,354                    |       | 7—10 years  |       |
| Laundry equipment                    |       | 368,369                  |       | 367,209                    |       | 5—7 years   |       |
| Elevators                            |       | 984,506                  |       | 984,506                    |       | 20 years         |       |
| Swimming pools                       |       | 157,489                  |       | 157,489                    |       | 10 years         |       |
| Equipment                            |       | 2,116,745                |       | 2,087,287                  |       | 5—7 years   |       |
| Motor vehicles                       |       | 142,520                  |       | 142,520                    |       | 5 years          |       |
| Fences                               |       | 51,882                   |       | 51,882                     |       | 5—10 years  |       |
| Furniture and fixtures               |       | 1,087,203                |       | 1,063,897                  |       | 5—7 years   |       |
| Smoke alarms                         |       | 102,123                  |       | 102,123                    |       | 5—7 years   |       |
|                                 |       | 150,747,301              |       | 150,411,555                |       |                  |       |
| Less accumulated  depreciation       |       | (55,786,001              | )          | (54,439,618                | )          |                  |       |
|                                 |       | $                        | 94,961,300 |                       | $          | 95,971,937            |       |   |   |

 

**NOTE 3. RELATED PARTYTRANSACTIONS**

 

The Partnership’s propertiesare managed by an entity that is owned by the majority shareholder of theGeneral Partner. The management fee is equal to 4% of rental revenue andlaundry income on the majority of the Partnership’s properties and 3% onLinewt.  Total fees paid wereapproximately $339,000 and $343,000 during the three months ended March 31,2010 and 2009, respectively.

 

The Partnership Agreementpermits the General Partner or Management Company to charge the costs ofprofessional services (such as counsel, accountants and contractors) to NERA.During the three months ended March 31, 2010 and 2009, approximately$176,000 and $188,000 was charged to NERA for legal, accounting, construction,maintenance, rental and architectural services and supervision of capitalimprovements.  Of the 2010 expensesreferred to above, approximately $85,000 consisted of repairs and maintenanceand $87,000 of administrative expense. Approximately $4,000 of expenses for 

 

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construction, architectural services andsupervision of capital projects were capitalized in rental properties.Additionally in 2010, the Hamilton Company received approximately $173,000 fromthe Investment Properties of which approximately $129,000 was the managementfee, approximately $100 was for construction supervision and architecturalfees, approximately $38,000 was for maintenance services and approximately$5,000 was for administrative services. The management fee is equal to 4% ofrental income at the majority of investment properties and 2% at Dexter Park.

 

On January 1, 2004, allemployees were transferred to the Management Company’s payroll. The Partnershipreimburses the Management Company for the payroll and related expenses of theemployees who work at the properties. Total reimbursement was approximately$591,000 and $541,000 during the three months ended March 31, 2010 and2009, respectively. The Management Company maintains a 401K plan for alleligible employees whereby the employees may contribute the maximum allowed bylaw. The plan also provides for discretionary contributions by the employer.There were no employer contributions in 2010 and 2009.

 

Prior to 1991, thePartnership employed an outside, unaffiliated company to perform itsbookkeeping and accounting functions. Since that time, such services have beenprovided by Hamilton’s accounting staff, which consists of approximately 14people. During the three months ended March 31, 2010, Hamilton charged thePartnership $31,250 ($125,000 per year) for bookkeeping and accounting servicesincluded in administrative expenses of $87,000 above.

 

In 1996, prior to becomingan employee of the Management Company, the President of the Management Companyperformed asset management consulting services for the Partnership. Thisindividual continues to perform this service and receives an asset managementfee from the Partnership.  During thethree months ended March 31, 2010, this individual received $37,500 whichincludes a bonus of $25,000 and a quarterly fee of $12,500.  Effective April 1, 2010, the quarterlyfee payable to this individual will be $18,750.

 

The Partnership has investedin nine limited partnerships, which have invested in mixed use residentialapartment complexes. The Partnership has a 40% or 50% ownership interest ineach investment. The other investors are Harold Brown, the President of theManagement Company and five other employees of the Management Company. HaroldBrown’s ownership interest is between 43.2% and 60%. See Note 14 for adescription of the properties and their operations.

 

See Note 8 for informationregarding the repurchase of Class B and General Partnership Units.

 

On October 28, 2009,the Partnership borrowed approximately $7,168,000 with an interest rate of 6%from HBC Holdings, LLC, an entity owned by Harold Brown and hisaffiliates.  The term of the loan is fouryears with a provision requiring payment upon six month notice. The interestpaid during three months ended March 31, 2010 was approximately $108,000and $78,000 for the year ended December 31, 2009. This loan iscollateralized by the Partnerships 99% ownership interest in 62 BoylstonStreet.

 

**NOTE 4. OTHER ASSETS**

 

Approximately $1,555,000 and $1,426,000 of security deposits andprepaid rent deposits are included in prepaid expenses and other assets at March 31,2010 and December 31, 2009, respectively.

 

Included in prepaid expenses and other assets at March 31, 2010and December 31, 2009 is approximately $781,000 and $829,000,respectively, held in escrow to fund future capital improvements. The securitydeposits and escrow accounts are restricted cash.

 

Financing and leasing feesof approximately $1,035,000 and $1,066,000 are net of accumulated amortizationof approximately $451,000 and $450,000 at March 31, 2010 and December 31,2009, respectively.

 

**NOTE 5. MORTGAGE NOTES PAYABLE**

 

At March 31, 2010 and December 31,2009, the mortgages payable consisted of various loans, all of which weresecured by first mortgages on properties referred to in Note 2. At March 31,2010, the fixed interest rates on these loans ranged from 4.25% to 7.07%,payable in monthly installments aggregating approximately $723,000, includingprincipal, to various dates through 2023. The majority of the mortgages aresubject to prepayment penalties.  At March 31,2010, the weighted average interest rate on the above mortgages was 5.55%. Theeffective rate of 5.64% includes the amortization expense of deferred financingcosts. See Note 12 for fair value information.

 

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

 

Approximate annualmaturities at March 31, 2010 are as follows:

 
| 2011—current maturities |   | $          | 899,000     |   |
|------------------------------|--------|------------|-------------|--------|
| 2012                         |   | 962,000    |        |
| 2013                         |   | 1,052,000  |        |
| 2014                         |   | 43,654,000 |        |
| 2015                         |   | 16,428,000 |        |
| Thereafter                   |   | 75,346,000 |        |
|                         |   | $          | 138,341,000 |   |

 

In December 2009, thePartnership refinanced Linhart, LLP, located in Newton, Massachusetts.  The new loan is $2,000,000, with a rate of3.75% over the Libor rate or 4.25% whichever is greater and matures five yearsfrom the date of closing.  The interestrate as of March 31, 2010 was 4.25%. The loan agreement calls for interest only payments for twenty fourmonths and principal and interest payments for the remainder of the five yearperiod based on a thirty year amortization. The loan proceeds were used to pay off the prior loan of approximately$1,700,000, and closing costs of approximately $38,000.

 

On March 25, 2010, thePartnership refinanced the Brookside Apartments.  The new loan is $2,820,000, matures in 2020and has an interest rate of 5.81%.  Theloan is a ten year note however it is being amortized over 30 years. Theproceeds of the loan were used to pay off the old mortgage of approximately$1,900,000.  There were no prepaymentpenalties.

 

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

 

The Partnership’sresidential lease agreements may require tenants to maintain a one-monthadvance rental payment and/or a security deposit. At March 31, 2010,amounts received for prepaid rents of approximately $1,392,000 are included incash and cash equivalents, and security deposits of approximately $1,555,000are included in other assets and are restricted cash.

 

**NOTE 7. PARTNERS’ CAPITAL**

 

The Partnership has twoclasses of Limited Partners (Class A and B) and one category ofGeneral Partner. Under the terms of the Partnership Agreement, distributions toholders of Class B Units and General Partnership Units must represent 19%and 1%, respectively, of the total units outstanding. All classes have equalprofit sharing and distribution rights, in proportion to their ownershipinterests.

 

In February 2010, thePartnership approved a quarterly distribution of $7.00 per unit ($0.70 perreceipt) which was paid on March 31, 2010. In April 2010, the Partnership approved a quarterly distribution of$7.00 per unit ($0.70 per receipt) payable on June 30, 2010.

 

In 2009, the Partnershippaid quarterly distributions of $7.00 per unit ($0.70 per receipt) in March,June, September, and December for a total distribution of $28.00 per unit($2.80 per receipt).

 

The Partnership has enteredinto a deposit agreement with an agent to facilitate public trading of limitedpartners’ interests in Class A Units. Under the terms of this agreement,the holders of Class A Units have the right to exchange each Class AUnit for 10 Depositary Receipts. The following is information per DepositaryReceipt:

 
| ** **                                                             | ** ** | **Three Months Ended  March 31** | ** ** |
|------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                             | ** ** | **2010**                              | ** ** | **2009** | ** ** |
| Income (loss) per  Depositary Receipt before Discontinued Operations   |       | $                                     | (0.26      | ) | $ | 0.39 |   |
| Income (loss) from  Discontinued Operations                            |       | —                                |       | — |   |
| Net (loss)income per  Depositary Receipt after Discontinued Operations |       | $                                     | (0.26      | ) | $ | 0.39 |   |
| Distributions per  Depositary Receipt                                  |       | $                                     | 0.70       |   | $ | 0.70 |   |

 

**NOTE 8. TREASURY UNITS**

 

Treasury Units at March 31,2010 are as follows:

 

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| Class A        |   | 38,755 |   |
|---------------------|--------|--------|--------|
| Class B        |   | 9,204  |   |
| General Partnership |   | 485    |   |
|                |   | 48,444 |   |

 

On August 20, 2007,NewReal, Inc., the General Partner authorized an equity repurchase program(“Repurchase Program”) under which the Partnership was permitted to purchase,over a period of twelve months, up to 100,000 Depositary Receipts (each ofwhich is one-tenth of a Class A Unit).  On January 15, 2008, theGeneral Partner authorized an increase in the Repurchase Program from 100,000to 200,000 Depositary Receipts. On January 30, 2008 the General Partnerauthorized an increase the Repurchase Program from 200,000 to 300,000Depositary Receipts.  On March 6, 2008, the General Partnerauthorized the increase in the total number of Depositary Receipts that couldbe repurchased pursuant to the Repurchase Program from 300,000 to 500,000.  On August 8, 2008, the General Partnerre-authorized and renewed the Repurchase Program for an additional 12-monthperiod ended August 19, 2009.  On March 22, 2010, the GeneralPartner re-authorized and renewed the Repurchase Program that expired on August 19,2009.  Under the terms of the renewedRepurchase Program, the Partnership may purchase up to 500,000 DepositaryReceipts through March 31, 2015.  Inaddition, the General Partner also authorized the expansion of the RepurchaseProgram to require the Partnership to repurchase a proportionate number of Class BUnits and General Partner Units in connection with any repurchases of anyDepositary Receipts by the Partnership based upon the 80%, 19% and 1% fixeddistribution percentages of the holders of the Class A, Class B andGeneral Partner Units under the Partnership’s Second Amended and RestateContract of Limited Partnership.  Repurchases of Depositary Receipts orPartnership Units pursuant to the Repurchase Program may be made by thePartnership from time to time in its sole discretion in open markettransactions or in privately negotiated transactions.  As of March 31, 2010, the Partnershiphas repurchased 395,945 Depositary Receipts at an average price of $73.64 perreceipt (or $736.40 per underlying Class A Unit), 1,667 Class B Unitsand 88 General Partnership Units, both at an average price of $582.57 per Unit,totaling approximately $30,284,000 including brokerage fees paid by the Partnership.

 

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

 

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

 

During the three monthsended March 31, 2010 the Partnership purchased 4,521 receipts for$275,850, 107 Class B Units for $65,452 and 6 General Partnership unitsfor $3,444.

 

During April 2010, thePartnership purchased an additional 2,375 receipts for approximately $157,000at an average price of $65.85 per receipt. This will require the purchase of Class Band General Partnership units at a cost of approximately $39,100.

 

As of March 31, 2010, the equity repurchase program describedabove resulted in the Partnership having a negative Partners’ Capital ofapproximately $22,947,000.

 

**NOTE 9. COMMITMENTS AND CONTINGENCIES**

 

From time to time, thePartnerships are involved in various ordinary routine litigation incidental totheir business. The Partnership either has insurance coverage or provides forany uninsured claims when appropriate. The Partnerships are not involved in anymaterial pending legal proceedings.

 

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**NOTE 10. RENTAL INCOME**

 

During the three monthsended March 31, 2010, approximately 90% of rental income was related toresidential apartments and condominium units with leases of one year or less.Approximately 10% was related to commercial properties, which have minimumfuture annual rental income on non-cancellable operating leases at March 31,2010 as follows:

 
| ** ** | ** ** | **Commercial  Property Leases** | ** ** |
|------------|------------|---------------------------------|------------|
| 2011       |       | $                               | 2,792,000  |   |
| 2012       |       | 2,582,000                       |       |
| 2013       |       | 1,877,000                       |       |
| 2014       |       | 1,635,000                       |       |
| 2015       |       | 1,180,000                       |       |
| Thereafter |       | 1,387,000                       |       |
|       |       | $                               | 11,453,000 |   |

 

The aggregate minimum futurerental income does not include contingent rentals that may be received undervarious leases in connection with percentage rents, common area charges andreal estate taxes. Aggregate contingent rentals from continuing operations wereapproximately $168,000 for the three months ended March 31, 2010 andapproximately $583,000 for the year ended December 31, 2009.

 

Rents receivable are net ofan allowance for doubtful accounts of approximately $595,000 at March 31,2010 and $476,000 at December 31, 2009. Included in rents receivable at March 31, 2010 is approximately$292,000 resulting from recognizing rental income from non-cancelablecommercial leases with future rental increases on a straight-line basis.  The majority of this amount is for long-termleases with Staples and Trader Joe’s at Staples Plaza in Framingham,Massachusetts.

 

Rents receivable alsoincludes approximately $356,000 representing the straight-line of rentalconcessions.

 

In 2010, rent at thecommercial properties includes approximately $2,800 of amortization of deferredrents arising from the fair values assigned to in-place leases upon thepurchase of Cypress Street in Brookline, Massachusetts**.**

 

**NOTE 11. CASH FLOW INFORMATION**

 

During the three monthsended March 31, 2010 and 2009, cash paid for interest was approximately$2,029,000, and $1,945,000 respectively.

 

**NOTE 12. FAIR VALUE MEASUREMENTS**

 

Fair Value Measurements on aRecurring Basis:

 

At March 31, 2010 and December 31,2009, we do not have any significant financial assets or financial liabilitiesthat are measured at fair value on a recurring basis in our consolidatedfinancial statements.

 

Financial Assets andLiabilities not Measured at Fair Value:

 

AtMarch 31, 2010 and December 31, 2009 the carrying amounts of certainof our financial instruments, including cash and cash equivalents,accounts  receivable, and note payable,accounts payable and accrued expenses were representative of their fair valuesdue to the short-term nature of these instruments or, the recent acquisition ofthese items.

 

AtMarch 31, 2010 and December 31, 2009, we estimated the fair value ofour mortgages payable and other notes based upon quoted market prices for thesame (Level 1) or similar (Level 2) issues when current quoted market pricesare available.  We estimated the fairvalue of our secured mortgage debt that does not have current quoted marketprices available by discounting the future cash flows using rates currentlyavailable to us for debt with similar terms and maturities (Level 3).  The differences in the fair value of our debtfrom the carrying value are the result of differences in interest rates and/orborrowing spreads that were available to us at March 31, 2010 and December 31,2009, as compared with those in effect when the debt was issued oracquired.  The secured mortgage debt containpre-payment penalties or yield maintenance provisions that could make the costof refinancing the debt at lower rates exceed the benefit that would be derivedfrom doing so.

 

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The following methods andassumptions were used by the Partnership in estimating the fair value of itsfinancial 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.

 

Thefollowing table reflects the carrying amounts and estimated fair value of ourdebt.

 
| ** **                | ** ** | **Carrying Amount** | ** **  | **Estimated Fair Value** | ** ** |
|---------------------------|------------|---------------------|-------------|--------------------------|------------|
| Mortgage Notes Payable    |       |                |        |                     |       |
| Partnership Properties    |       |                |        |                     |       |
| At March 31, 2010    |       | $                   | 138,341,418 |                     | $          | 138,974,025 |   |
| At December 31, 2009 |       | $                   | 137,641,354 |                     | $          | 139,997,718 |   |
| Investment Properties     |       |                |        |                     |       |
| At March 31, 2010    |       | $                   | 141,220,133 |                     | $          | 139,754,958 |   |

 

Disclosure about fair valueof financial instruments is based on pertinent information available tomanagement as of March 31, 2010 and December 31, 2009. Althoughmanagement is not aware of any factors that would significantly affect the fairvalue amounts, such amounts have not been comprehensively revalued for purposesof these financial statements since December 31, 2009 and currentestimates of fair value may differ significantly from the amounts presentedherein.

 

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

 

Taxable income reportable bythe Partnership and includable in its partners’ tax returns is different thanfinancial statement income because of a tax free exchanges, accelerateddepreciation, different tax lives, and timing differences related to prepaidrents, allowances and intangible assets at significant acquisitions. Taxableincome was approximately $300,000 greater than statement income for the year endedDecember 31, 2009 and approximately $7,500,000 less than statement incomefor the year ended December 31, 2008. The cumulative tax basis of thePartnership’s real estate at December 31, 2009 is approximately $5,200,000less than the statement basis. The primary reason for the lower tax basis isthe acquisition of Linewt and Cypress Street utilizing tax free exchanges in2008. The Partnership’s tax basis in its joint venture investments isapproximately $1,500,000 greater than statement basis. Certain entitiesincluded in the Partnership’s consolidated financial statements are subject tocertain state taxes.  These taxes are notsignificant and are recorded as operating expenses in the accompanyingconsolidates financial statements.

 

The Partnership adopted theamended provisions related to uncertain tax provisions of ASC 740, IncomeTaxes.  As a result of the implementationof the guidance, the Partnership recognized no material adjustments regardingits tax accounting treatment.  ThePartnership expects to recognize interest and penalties related to uncertaintax positions, if any, as income tax expense, which would be included ingeneral and administrative expense.

 

In the normal course ofbusiness the Partnership or one of its subsidiaries is subject to examinationby federal, state and local jurisdictions in which it operates, whereapplicable.  As of March 31, 2010 ,the tax years that remain subject to examination by the major tax jurisdictionsunder the statute of limitations is from the year 2003 forward.

 

**NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES**

 

Since November 2001,the Partnership has invested in nine limited partnerships and limited liabilitycompanies, the majority of which has invested in residential apartmentcomplexes, with three partnerships investing in commercial property. The Partnership has a 40% or 50%ownership interests 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% and 60%,with the balance owned by the others. A description of each investment is asfollows:

 

On October 3, 2005, thePartnership invested $2,500,000 for a 50% ownership interest in a 168-unitapartment complex in Quincy, Massachusetts. The purchase price was $30,875,000.The Partnership plans to sell the majority of units as condominium and retain48 units for long-term investment. Gains from the sales of units will be taxedat ordinary income rates (approximately $47,000 per unit). In February 2007,the Partnership refinanced the 48 units which will be retained with a new 

 

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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 April 26,2010, 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 March 31, 2010.This investment is referred to as Hamilton Bay Apartments, LLC.

 

On March 7, 2005, thePartnership invested $2,000,000 for a 50% ownership interest in a buildingcomprising 49 apartments, one commercial space and a 50-car surface parking lotlocated in Boston, Massachusetts. The purchase price was $14,300,000, with a$10,750,000 mortgage. The Partnership plans to operate the building andinitiate development of the parking lot. In June 2007, the Partnership separated the parcels, formed anadditional limited liability company for the residential apartments andobtained a mortgage on the property. The new limited liability company formedfor 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(0.24% at March 31, 2010) and is due in August 2011.  Harold Brown has issued a personal guarantyup to $1,000,000 of this mortgage. In the event that he is obligated to makepayments to the lender as a result of this guaranty, the Partnership and otherinvestors have, in turn, agreed to indemnify him for their proportionate shareof any such payments.  The investment inthe parking lot is referred to as Hamilton Essex Development, LLC; theinvestment in the apartments is referred to as Hamilton Essex 81, LLC.

 

On March 2, 2005, thePartnership invested $2,352,000 for a 50% ownership interest in a 176-unitapartment complex with an additional small commercial building located inQuincy, Massachusetts. The purchase price was $23,750,000. The Partnership soldthe majority of units as condominiums and retained 49 units for long-terminvestment. The Partnership obtained a new 10-year mortgage in the amount of$5,000,000 on the units to be retained by the Partnership. The interest on thenew loan is 5.67% fixed for the 10 year term with interest only paymentsfor five years and amortized over a 30 year period for the balance of theloan term.  As of March 31, 2010,all of the 127 units have been sold. This investment is referred to as Hamilton 1025, LLC.

 

In September 2004, thePartnership invested approximately $5,075,000 for a 50% ownership interest in a42-unit apartment complex located in Lexington, Massachusetts. The purchaseprice was $10,100,000. In October 2004, the Partnership obtained amortgage on the property in the amount of $8,025,000 and returned $3,775,000 tothe Partnership. The Partnership obtained a new 10-year mortgage in the amountof $5,500,000 in January 2007. The interest on the new loan is 5.67% fixedfor the ten year term with interest only payments for five years and amortizedover a 30 year period for the balance of the loan. This loan required acash contribution by the Partnership of $1,250,000 in December 2006. Thisinvestment is referred to as Hamilton Minuteman, LLC.

 

In August 2004, thePartnership invested $8,000,000 for a 50% ownership interest in a 280-unitapartment complex located in Watertown, Massachusetts. The total purchase pricewas $56,000,000. As of May 2008, the Partnership sold all of the 137 unitsas condominiums which were located in three buildings. Gains from these saleswere taxed as ordinary income (approximately $50,000 per unit). The majority ofthe sales proceeds were applied to reduce the mortgage with the final paymentmade during the second quarter of 2007. With the sale of the units and thepayments of the liabilities, the assets will be combined with Hamilton on MainApartments, LLC.  An entity partiallyowned by the majority shareholder of the General Partner and the President ofthe management company, 31% and 5%, respectively, was the sales agent and willreceive a variable commission on each sale of 3% to 5%. Hamilton on Main, LLCis known as Hamilton Place.

 

In 2005, Hamilton on MainApartments, LLC obtained a ten year mortgage on the three buildings to beretained. The mortgage is $16,825,000, with interest only of 5.18% for threeyears and amortizing on a 30 year schedule for the remaining seven yearswhen the balance is due. The net proceeds after funding escrow accounts andclosing costs on the mortgage were approximately $16,700,000, which were usedto reduce the existing mortgage. Hamilton on Main LLC paid a fee of approximately$400,000 in connection with this early extinguishment of debt.  At March 31, 2010, the remaining balanceon the mortgage is approximately $16,338,000.

 

In November 2001, thePartnership invested approximately $1,533,000 for a 50% ownership interest in a40-unit apartment building in Cambridge, Massachusetts. This property has a12-year mortgage, with a remaining balance at March 31, 2010 ofapproximately $7,288,000 at 6.9% which is amortized on a 30-year schedule, witha final payment of approximately $6,000,000 in 2014. This investment isreferred to as 345 Franklin, LLC.

 

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OnOctober 28, 2009 the Partnership invested approximately $15,925,000 in ajoint venture to acquire 40% interest in a residential property located inBrookline, Massachusetts.  The property,referred to as Dexter Park, is a 409 - unit residential complex. The purchaseprice was $129,500,000.  The totalmortgage is approximately $89,914,000 with an interest rate of 5.57% and itmatures in 2019.  The mortgage calls forinterest only payments for the first two years of the loan and amortized over30 years thereafter.  In order to fundthis investment, the Partnership used approximately $8,757,000 of its cashreserves and borrowed approximately $7,168,000 with an interest rate of 6% fromHBC Holdings, LLC, an entity owned by Harold Brown and his affiliates.  The term of the loan is four years with aprovision requiring payment upon six months notice.  The Partnership has pledged its ownership in62 Boylston Street as security for this note. This investment is referred to as Dexter Park.

 

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.

 

**Summaryfinancial information as of March 31, 2010**

 
| ** **                                                            | ** ** | **Hamilton  Essex 81** | ** ** | **Hamilton  Essex Parking** | ** ** | **345  Franklin** | ** ** | **Hamilton  1025** | ** ** | **Hamilton  Bay Sales** | ** ** | **Hamilton  Bay Apts** | ** ** | **Hamilton  Minuteman** | ** ** | **Hamilton  on  Main** | ** ** | **Dexter  Park** | ** ** | **Total**       | ** ** |
|-----------------------------------------------------------------------|------------|------------------------|------------|-----------------------------|------------|-------------------|------------|--------------------|------------|-------------------------|------------|------------------------|------------|-------------------------|------------|------------------------|------------|------------------|------------|-----------------|------------|
| ** **                                                            |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
| **ASSETS**                                                            |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
|                                                                  |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
| Rental  Properties                                                    |       | 10,115,781             |       | 2,576,552                   |       | 8,949,556         |       | 6,269,852          |       | 2,071,444               |       | 7,833,058              |       | 7,784,163               |       | 23,526,217             |       | 122,393,455      |       | 191,520,079     |       |
|                                                                  |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
| Cash &  Cash Equivalents                                     |       | 20,876                 |       | 17,146                      |       | 1,363             |       | 11,140             |       | 2,304                   |       | 1,047                  |       | 39,059                  |       | 93,762                 |       | 911,937          |       | 1,098,634       |       |
| Rent  Receivable                                                      |       | 29,873                 |       | —                      |       | 1,396             |       | 5,681              |       | 1,699                   |       | 219                    |       | 2,319                   |       | 12,674                 |       | 77,070           |       | 130,932         |       |
| Real  Estate Tax Escrow                                               |       | 57,105                 |       | —                      |       | 37,166            |       | 42,922             |       | —                  |       | 77,186                 |       | 39,209                  |       | 97,288                 |       | 370,061          |       | 720,938         |       |
| Due  From Investment Properties                                       |       | —                 |       | —                      |       | —            |       | —             |       | 91                      |       | —                 |       | —                  |       | —                 |       | —           |       | 91              |       |
| Prepaid  Expenses & Other Assets                             |       | 72,644                 |       | 199                         |       | 83,121            |       | 83,986             |       | 240,894                 |       | 84,492                 |       | 65,354                  |       | 364,473                |       | 3,876,318        |       | 4,871,481       |       |
| Financing &  Leasing Fees                                    |       | 113,499                |       | 8,865                       |       | 30,620            |       | 33,468             |       | 15,433                  |       | 43,738                 |       | 26,863                  |       | 33,450                 |       | 562,883          |       | 868,819         |       |
|                                                                  |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
| **Total Assets**                                                      | ** ** | **10,409,779**         | ** ** | **2,602,762**               | ** ** | **9,103,222**     | ** ** | **6,447,049**      | ** ** | **2,331,866**           | ** ** | **8,039,740**          | ** ** | **7,956,968**           | ** ** | **24,127,864**         | ** ** | **128,191,724**  | ** ** | **199,210,974** | ** ** |
|                                                                  |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
| **LIABILITIES AND PARTNERS’ CAPITAL**                            |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
|                                                                  |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
| Mortgage  Notes Payable                                               |       | 8,600,000              |       | 2,162,000                   |       | 7,288,188         |       | 5,000,000          |       | 1,668,000               |       | 4,750,000              |       | 5,500,000               |       | 16,337,945             |       | 89,914,000       |       | 141,220,133     |       |
| Due  to Investment Properties                                         |       | —                 |       | —                      |       | —            |       | —             |       | —                  |       | 91                     |       | —                  |       | —                 |       | —           |       | 91              |       |
| Accounts  Payable & Accrued Expenses                         |       | 59,060                 |       | 5,440                       |       | 82,175            |       | 41,949             |       | 12,081                  |       | 7,841                  |       | 79,817                  |       | 211,578                |       | 732,428          |       | 1,232,371       |       |
| Advance  Rental Payments & Security Deposits                 |       | 144,011                |       | —                      |       | 117,773           |       | 64,532             |       | 16,546                  |       | 81,660                 |       | 56,563                  |       | 235,510                |       | 1,553,515        |       | 2,270,110       |       |
| ** **                                                            |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
| **Total Liabilities**                                                 |       | 8,803,071              |       | 2,167,440                   |       | 7,488,135         |       | 5,106,481          |       | 1,696,627               |       | 4,839,593              |       | 5,636,381               |       | 16,785,033             |       | 92,199,943       |       | 144,722,704     |       |
|                                                                  |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
| Partners’  Capital                                               |       | 1,606,708              |       | 435,322                     |       | 1,615,086         |       | 1,340,568          |       | 635,239                 |       | 3,200,148              |       | 2,320,587               |       | 7,342,830              |       | 35,991,781       |       | 54,488,270      |       |
| **Total Liabilities and Capital**                                     | ** ** | **10,409,779**         | ** ** | **2,602,762**               | ** ** | **9,103,222**     | ** ** | **6,447,049**      | ** ** | **2,331,866**           | ** ** | **8,039,740**          | ** ** | **7,956,968**           | ** ** | **24,127,864**         | ** ** | **128,191,724**  | ** ** | **199,210,974** | ** ** |
|                                                                  |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
| Partners’ Capital - NERA 50%                                     |       | 803,354                |       | 217,661                     |       | 807,543           |       | 670,284            |       | 317,620                 |       | 1,600,074              |       | 1,160,293               |       | 3,671,415              |       |             |       | 9,248,245       |       |
| Partners’ Capital - NERA 40%                                     |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       | 14,396,712       |       | 14,396,712      |       |
|                                                                  |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       | 23,644,957      |       |
| Total units/condominiums                                         |       |                   |       |                        |       |              |       |               |       |                    |       |                   |       |                    |       |                   |       |             |       |            |       |
| Apartments                                                            |       | 48                     |       | —                      |       | 40                |       | 175                |       | 120                     |       | 48                     |       | 42                      |       | 148                    |       | 409              |       | 1,030           |       |
| Commercial                                                            |       | 1                      |       | 1                           |       | —            |       | 1                  |       | —                  |       | —                 |       | —                  |       | —                 |       | —           |       | 3               |       |
| Total                                                                 |       | 49                     |       | 1                           |       | 40                |       | 176                |       | 120                     |       | 48                     |       | 42                      |       | 148                    |       | 409              |       | 1,033           |       |
| Units  to be retained                                                 |       | 49                     |       | 1                           |       | 40                |       | 49                 |       | —                  |       | 48                     |       | 42                      |       | 148                    |       | 409              |       | 786             |       |
| Units  to be sold                                                     |       | —                 |       | —                      |       | —            |       | 127                |       | 120                     |       | —                 |       | —                  |       | —                 |       | —           |       | 247             |       |
| Units  sold through April 26, 2010                               |       | —                 |       | —                      |       | —            |       | 127                |       | 105                     |       | —                 |       | —                  |       | —                 |       | —           |       | 232             |       |
| Unsold  units                                                         |       | —                 |       | —                      |       | —            |       | —             |       | 15                      |       | —                 |       | —                  |       | —                 |       |             |       | 15              |       |
| Unsold  units with deposits for future sale as of April 26, 2010 |       | —                 |       | —                      |       | —            |       | —             |       | —                  |       | —                 |       | —                  |       | —                 |       | —           |       | —          |       |

 

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**Summaryfinancial information for the three months ended March 31, 2010**

 
| ** **                     | ** ** | **Hamilton  Essex 81** | ** ** | **Hamilton  Essex  Parking** | ** ** | **345  Franklin** | ** ** | **Hamilton  1025** | ** ** | **Hamilton  Bay Sales** | ** ** | **Hamilton  Bay Apts** | ** ** | **Hamilton  Minuteman** | ** ** | **Hamilton  on Main** | ** ** | **Dexter  Park** | ** ** | **Total**      | ** ** |
|--------------------------------|------------|------------------------|------------|------------------------------|------------|-------------------|------------|--------------------|------------|-------------------------|------------|------------------------|------------|-------------------------|------------|-----------------------|------------|------------------|------------|----------------|------------|
| ** **                     |       |                   |       |                         |       |              |       |               |       |                    |       |                   |       |                    |       |                  |       |             |       |           |       |
| **Revenues**                   |       |                   |       |                         |       |              |       |               |       |                    |       |                   |       |                    |       |                  |       |             |       |           |       |
| Rental  Income                 |       | 280,848                |       | 69,000                       |       | 269,385           |       | 197,261            |       | 50,767                  |       | 207,266                |       | 187,227                 |       | 618,013               |       | 2,863,176        |       | 4,742,943      |       |
| Laundry and  Sundry Income     |       | 4,049                  |       | —                       |       | 463               |       | —             |       | —                  |       | —                 |       | 265                     |       | 5,360                 |       | 23,645           |       | 33,782         |       |
|                           |       | 284,897                |       | 69,000                       |       | 269,848           |       | 197,261            |       | 50,767                  |       | 207,266                |       | 187,492                 |       | 623,373               |       | 2,886,820        |       | 4,776,725      |       |
|                           |       |                   |       |                         |       |              |       |               |       |                    |       |                   |       |                    |       |                  |       |             |       |           |       |
| **Expenses**                   |       |                   |       |                         |       |              |       |               |       |                    |       |                   |       |                    |       |                  |       |             |       |           |       |
| Administrative                 |       | 2,437                  |       | (1,174                       | )          | 9,325             |       | 1,461              |       | 934                     |       | 4,537                  |       | 2,755                   |       | 11,537                |       | 45,507           |       | 77,320         |       |
| Depreciation  and Amortization |       | 106,179                |       | 1,563                        |       | 109,825           |       | 67,277             |       | 24,032                  |       | 89,594                 |       | 80,045                  |       | 244,822               |       | 2,540,358        |       | 3,263,695      |       |
| Management  Fees               |       | 11,678                 |       | 2,760                        |       | 11,119            |       | 7,962              |       | 2,234                   |       | 8,287                  |       | 8,081                   |       | 24,434                |       | 61,518           |       | 138,073        |       |
| Operating                      |       | 40,673                 |       | (137                         | )          | 17,104            |       | 104                |       | (173                    | )          | 283                    |       | 21,771                  |       | 108,501               |       | 298,100          |       | 486,226        |       |
| Renting                        |       | —                 |       | —                       |       | 6,000             |       | 135                |       | —                  |       | 604                    |       | 1,099                   |       | 3,404                 |       | 48,708           |       | 59,949         |       |
| Repairs and  Maintenance       |       | 40,858                 |       | —                       |       | 12,949            |       | 63,812             |       | 36,941                  |       | 108,567                |       | 24,533                  |       | 79,768                |       | 160,007          |       | 527,435        |       |
| Taxes and  Insurance           |       | 48,327                 |       | 11,874                       |       | 27,481            |       | 31,959             |       | 10,525                  |       | 37,763                 |       | 24,993                  |       | 77,387                |       | 382,034          |       | 652,343        |       |
|                           |       | 250,153                |       | 14,887                       |       | 193,804           |       | 172,709            |       | 74,492                  |       | 249,635                |       | 163,278                 |       | 549,852               |       | 3,536,233        |       | 5,205,041      |       |
| **Income Before Other Income** |       | 34,744                 |       | 54,113                       |       | 76,044            |       | 24,552             |       | (23,726                 | )          | (42,368                | )          | 24,214                  |       | 73,522                |       | (649,412         | )          | (428,316       | )          |
|                           |       |                   |       |                         |       |              |       |               |       |                    |       |                   |       |                    |       |                  |       |             |       |           |       |
| **Other Income (Loss)**        |       |                   |       |                         |       |              |       |               |       |                    |       |                   |       |                    |       |                  |       |             |       |           |       |
| Interest  Income               |       | 2                      |       | 1                            |       | 11                |       | 23                 |       | 3,230                   |       | 0                      |       | 1                       |       | 3                     |       | 5                |       | 3,274          |       |
| Interest  Expense              |       | (125,244               | )          | (15,134                      | )          | (127,094          | )          | (71,266            | )          | (24,134                 | )          | (66,935                | )          | (78,247                 | )          | (213,454              | )          | (1,252,117       | )          | (1,973,625     | )          |
| Gain on  Sale of Real Estate   |       | —                 |       | —                       |       | —            |       | —             |       |                    |       | 9,478                  |       | —                  |       | —                |       | —           |       | 9,478          |       |
| Other  Income                  |       | —                 |       | —                       |       | —            |       | —             |       | 7,721                   |       | —                 |       | —                  |       | 2,168                 |       | —           |       | 9,889          |       |
|                           |       | (125,243               | )          | (15,133                      | )          | (127,083          | )          | (71,243            | )          | (13,184                 | )          | (57,457                | )          | (78,246                 | )          | (211,284              | )          | (1,252,112       | )          | (1,950,984     | )          |
|                           |       |                   |       |                         |       |              |       |               |       |                    |       |                   |       |                    |       |                  |       |             |       |           |       |
| **Net Income (Loss)**          | ** ** | **(90,498**            | **)**      | **38,980**                   | ** ** | **(51,039**       | **)**      | **(46,690**        | **)**      | **(36,909**             | **)**      | **(99,825**            | **)**      | **(54,032**             | **)**      | **(137,762**          | **)**      | **(1,901,524**   | **)**      | **(2,379,300** | **)**      |
|                           |       |                   |       |                         |       |              |       |               |       |                    |       |                   |       |                    |       |                  |       |             |       |           |       |
| **Net Loss - NERA 50%**        | ** ** | **(45,249**            | **)**      | **19,490**                   | ** ** | **(25,520**       | **)**      | **(23,345**        | **)**      | **(18,455**             | **)**      | **(49,913**            | **)**      | **(27,016**             | **)**      | **(68,881**           | **)**      | ** **       | ** ** | **(238,888**   | **)**      |
| **Net Loss - NERA 40%**        | ** ** | ** **             | ** ** | ** **                   | ** ** | ** **        | ** ** | ** **         | ** ** | ** **              | ** ** | ** **             | ** ** | ** **              | ** ** | ** **            | ** ** | **(760,610**     | **)**      | **(760,610**   | **)**      |
|                           |       |                   |       |                         |       |              |       |               |       |                    |       |                   |       |                    |       |                  |       |             | ** ** | **(999,497**   | **)**      |

 

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Futureannual mortgage maturities at March 31, 2010 are as follows:

 
| ** **          | ** ** | **Hamilton  Essex 81** | ** ** | **Hamilton  Essex  Development** | ** ** | **Franklin  Street** | ** ** | **1025  Hamilton** | ** ** | **Hamilton  Bay** | ** ** | **Hamilton  Bay** | ** ** | **Hamilton  Minuteman** | ** ** | **Hamilton  Place**  | ** ** | **Hamilton  Park  Towers** | ** ** | ** **  | ** ** |
|---------------------|------------|------------------------|------------|----------------------------------|------------|----------------------|------------|--------------------|------------|-------------------|------------|-------------------|------------|-------------------------|------------|----------------------|------------|----------------------------|------------|-------------|------------|
| **Period  End**     | ** ** | **March  2005**        | ** ** | **March  2005**                  | ** ** | **November  2001**   | ** ** | **March  2005**    | ** ** | **October  2005** | ** ** | **October  2005** | ** ** | **August  2004**        | ** ** | **August 2004** | ** ** | **October  2009**          | ** ** | **Total**   | ** ** |
| March 31, 2011 |       | 63,287                 |       |                             |       | 149,776              |       |               |       |              |       |              |       |                    |       | 251,758              |       |                       |       | 464,822     |       |
| March 31, 2012 |       | 113,579                |       | 2,162,000                        |       | 160,444              |       | 19,763             |       |              |       | 5,131             |       | 16,704                  |       | 267,635              |       | 490,164                    |       | 3,235,419   |       |
| March 31, 2013 |       | 120,333                |       |                             |       | 171,872              |       | 62,402             |       |              |       | 63,462            |       | 68,345                  |       | 282,034              |       | 1,223,753                  |       | 1,992,201   |       |
| March 31, 2014 |       | 127,488                |       |                             |       | 6,806,096            |       | 66,085             |       | 1,668,000         |       | 67,089            |       | 72,379                  |       | 297,208              |       | 1,293,683                  |       | 10,398,029  |       |
| March 31, 2015 |       | 135,069                |       |                             |       |                 |       | 69,986             |       |              |       | 70,922            |       | 76,651                  |       | 15,239,310           |       | 1,367,610                  |       | 16,959,548  |       |
| Thereafter          |       | 8,040,244              |       |                             |       |                 |       | 4,781,764          |       |              |       | 4,543,395         |       | 5,265,921               |       |                 |       | 85,538,790                 |       | 108,170,115 |       |
|                |       | 8,600,000              |       | 2,162,000                        |       | 7,288,188            |       | 5,000,000          |       | 1,668,000         |       | 4,750,000         |       | 5,500,000               |       | 16,337,945           |       | 89,914,000                 |       | 141,220,133 |       |

 

**Summary financialinformation for the three months ended March 31, 2009**

 
| ** **                                                            | ** ** | **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                                                     |       | 10,491,301             |       | 2,576,552                        |       | 9,259,169         |       | 6,551,961          |       | 2,306,968               |       | 8,175,737              |       | 8,182,545                     |       | 24,858,257                  |       |                       |       | 72,402,490 |       |
| Cash & Cash Equivalents                                      |       | 34,597                 |       | 155                              |       | 6,436             |       | 38,535             |       | 723                     |       | 908                    |       | 1,251                         |       | 402                         |       |                       |       | 83,006     |       |
| Rent Receivable                                                       |       | 1,686                  |       | —                           |       |              |       | 430                |       | —                  |       | 1,206                  |       | (3,425                        | )          | 5,254                       |       |                       |       | 5,151      |       |
| Real Estate Tax Escrow                                                |       | 42,251                 |       | —                           |       | 41,472            |       | 32,674             |       | —                  |       | 40,281                 |       | 39,508                        |       | 102,655                     |       |                       |       | 298,840    |       |
| Due From Investment Properties                                        |       | 100,000                |       | —                           |       | —            |       | 90,000             |       | 100,000                 |       | 40,000                 |       | —                        |       | 210,000                     |       |                       |       | 540,000    |       |
| Prepaid Expenses & Other Assets                              |       | 67,281                 |       | 569                              |       | 77,964            |       | 63,128             |       | 233,764                 |       | 51,393                 |       | 62,982                        |       | 415,029                     |       |                       |       | 972,111    |       |
| Financing & Leasing Fees                                     |       | 136,691                |       | 15,119                           |       | 38,786            |       | 38,494             |       | 20,497                  |       | 50,100                 |       | 31,727                        |       | 41,076                      |       |                       |       | 372,490    |       |
| **Total Assets**                                                      |       | 10,873,807             |       | 2,592,395                        |       | 9,423,827         |       | 6,815,221          |       | 2,661,952               |       | 8,359,624              |       | 8,314,588                     |       | 25,632,673                  |       |                       |       | 74,674,088 |       |
| **LIABILITIES AND PARTNERS’ CAPITAL**                            |       |                   |       |                             |       |              |       |               |       |                    |       |                   |       |                          |       |                        |       |                       |       |       |       |
| Mortgage Notes Payable                                                |       | 8,600,000              |       | 2,162,000                        |       | 7,428,006         |       | 5,000,000          |       | 1,808,000               |       | 4,750,000              |       | 5,500,000                     |       | 16,579,062                  |       |                       |       | 51,827,068 |       |
| Due to Investment Properties                                          |       | —                 |       | —                           |       | 425,000           |       | —             |       | 44,000                  |       | 26,000                 |       | 25,000                        |       | 20,000                      |       |                       |       | 540,000    |       |
| Accounts Payable & Accrued Expense                           |       | 49,000                 |       | 3,416                            |       | 70,308            |       | 8,296              |       | 16,480                  |       | 26,856                 |       | 50,852                        |       | 176,133                     |       |                       |       | 401,340    |       |
| Advance Rental Pmts & Security Dep                           |       | 141,811                |       | —                           |       | 125,785           |       | 59,674             |       | 18,776                  |       | 76,241                 |       | 50,526                        |       | 187,750                     |       |                       |       | 660,563    |       |
| Total Liabilities                                                     |       | 8,790,811              |       | 2,165,416                        |       | 8,049,098         |       | 5,067,971          |       | 1,887,255               |       | 4,879,097              |       | 5,626,378                     |       | 16,962,945                  |       |                       |       | 53,428,971 |       |
| Partners’ Capital                                                |       | 2,082,997              |       | 426,980                          |       | 1,374,729         |       | 1,747,251          |       | 774,697                 |       | 3,480,527              |       | 2,688,210                     |       | 8,669,727                   |       |                       |       | 21,245,118 |       |
| **Total Liabilities and Capital**                                     |       | 10,873,807             |       | 2,592,395                        |       | 9,423,827         |       | 6,815,221          |       | 2,661,952               |       | 8,359,624              |       | 8,314,588                     |       | 25,632,673                  |       |                       |       | 74,674,088 |       |
| **Partners’ Capital—NERA 50%**                              |       | 1,041,498              |       | 213,490                          |       | 687,365           |       | 873,625            |       | 387,348                 |       | 1,740,264              |       | 1,344,105                     |       | 4,334,864                   |       |                       |       | 10,622,559 |       |
|                                                                  |       |                   |       |                             |       |              |       |               |       |                    |       |                   |       |                          |       |                        |       |                       |       |       |       |
| 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 April 27, 2009                                |       | —                 |       | —                           |       | —            |       | 127                |       | 105                     |       | —                 |       | —                        |       | —                      |       | 137                        |       | 369        |       |
| Balance of unsold units                                               |       | —                 |       | —                           |       | —            |       | —             |       | 15                      |       | —                 |       | —                        |       | —                      |       | —                     |       | 15         |       |
| Unsold units with deposits for future sale as of  April 27, 2009 |       | —                 |       | —                           |       | —            |       | —             |       | —                  |       | —                 |       | —                        |       | —                      |       | —                     |       | —     |       |

 

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** **

**NOTE 14. INVESTMENT INUNCONSOLIDATED JOINT VENTURES (Continued)**

 

**Summary Information for the ThreeMonths Ended March 31, 2009**

 
| ** **                          | ** ** | **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                       |       | 342,328                |       | 76,248                            |       | 279,052               |       | 204,624            |       | 58,410                  |       | 195,873                |       | 190,945                       |       | 612,047                    |       |                       |       | 1,959,527 |       |
| Laundry and Sundry Income           |       | 593                    |       | —                            |       | 602                   |       | —             |       | —                  |       | —                 |       | 330                           |       | 6,238                      |       |                       |       | 7,763     |       |
|                                |       | 342,921                |       | 76,248                            |       | 279,654               |       | 204,624            |       | 58,410                  |       | 195,873                |       | 191,275                       |       | 618,284                    |       |                       |       | 1,967,289 |       |
| **Expenses**                        |       |                   |       |                              |       |                  |       |               |       |                    |       |                   |       |                          |       |                       |       |                       |       |      |       |
| Administrative                      |       | 2,721                  |       | 2,124                             |       | 6,097                 |       | 4,113              |       | 1,465                   |       | 5,052                  |       | 2,771                         |       | 10,702                     |       |                       |       | 35,043    |       |
| Depreciation and Amortization       |       | 107,970                |       | 356                               |       | 105,241               |       | 77,910             |       | 26,534                  |       | 98,382                 |       | 114,378                       |       | 374,564                    |       |                       |       | 905,335   |       |
| Management Fees                     |       | 14,439                 |       | 2,781                             |       | 11,529                |       | 8,085              |       | 2,353                   |       | 7,593                  |       | 7,205                         |       | 24,904                     |       |                       |       | 78,887    |       |
| Operating                           |       | 39,999                 |       | —                            |       | 19,176                |       | 703                |       | 61                      |       | 3,417                  |       | 27,760                        |       | 112,468                    |       |                       |       | 203,586   |       |
| Renting                             |       | 5,850                  |       | —                            |       | 14,670                |       | 1,265              |       | —                  |       | 540                    |       | 899                           |       | 4,056                      |       |                       |       | 27,280    |       |
| Repairs and Maintenance             |       | 24,041                 |       | 330                               |       | 13,048                |       | 67,530             |       | 14,956                  |       | 65,684                 |       | 17,313                        |       | 67,628                     |       |                       |       | 270,531   |       |
| Taxes and Insurance                 |       | 37,048                 |       | 21,992                            |       | 17,401                |       | 37,755             |       | 12,032                  |       | 42,604                 |       | 24,614                        |       | 75,170                     |       |                       |       | 268,616   |       |
|                                |       | 232,068                |       | 27,583                            |       | 187,162               |       | 197,361            |       | 57,401                  |       | 223,272                |       | 194,940                       |       | 669,492                    |       |                       |       | 1,789,278 |       |
| **Income Before Other Income**      |       | 110,853                |       | 48,666                            |       | 92,492                |       | 7,264              |       | 1,009                   |       | (27,399                | )          | (3,665                        | )          | (51,208                    | )          |                       |       | 178,011   |       |
| **Other Income (Loss)**             |       |                   |       |                              |       |                  |       |               |       |                    |       |                   |       |                          |       |                       |       |                       |       |      |       |
| Interest Expense                    |       | (125,274               | )          | (16,429                           | )          | (129,511              | )          | (71,239            | )          | (26,164                 | )          | (66,875                | )          | (78,244                       | )          | (216,671                   | )          |                       |       | (730,407  | )          |
| Interest Income                     |       | 2                      |       | —                            |       | 15                    |       | 17                 |       | 4,940                   |       | —                 |       | —                        |       | 1                          |       |                       |       | 4,974     |       |
| Gain on Sale of Real Estate         |       | —                 |       | —                            |       | —                |       | —             |       | 310                     |       | —                 |       | —                        |       | —                     |       |                       |       | 310       |       |
|                                |       | (125,272               | )          | (16,429                           | )          | (129,496              | )          | (71,222            | )          | (20,914                 | )          | (66,875                | )          | (78,244                       | )          | (216,670                   | )          |                       |       | (729,817  | )          |
| **Net Income (Loss)**               |       | (14,419                | )          | 32,237                            |       | (37,003               | )          | (63,959            | )          | (19,905                 | )          | (94,274                | )          | (81,909                       | )          | (267,879                   | )          |                       |       | (547,111  | )          |
| **Net Income (loss)—NERA 50%** |       | (7,210                 | )          | 16,118                            |       | (18,501               | )          | (31,979            | )          | (9,953                  | )          | (47,137                | )          | (40,954                       | )          | (133,939                   | )          |                       |       | (273,555  | )          |

 

Future annual mortgage maturities at March 31,2009 are as follows:

 
| ** **          | ** ** | **Hamilton Essex 81** | ** ** | **Hamilton  Essex  Development** | ** ** | **Franklin  Street** | ** ** | **1025  Hamilton** | ** ** | **Hamilton  Bay** | ** ** | **Hamilton  Bay** | ** ** | **Hamilton  Minuteman** | ** ** | **Hamilton  Place** | ** ** | **Hamilton  Place** | ** ** | ** ** | ** ** |
|---------------------|------------|-----------------------|------------|----------------------------------|------------|----------------------|------------|--------------------|------------|-------------------|------------|-------------------|------------|-------------------------|------------|---------------------|------------|---------------------|------------|------------|------------|
| **Period  End**     | ** ** | **March  2005**       | ** ** | **March  2005**                  | ** ** | **November  2001**   | ** ** | **March  2005**    | ** ** | **October  2005** | ** ** | **October  2005** | ** ** | **August  2004**        | ** ** | **August  2004**    | ** ** | **August  2004**    | ** ** | **Total**  | ** ** |
| March 31, 2010 |       |                  |       |                             |       | 139,818              |       |               |       |              |       |              |       |                    |       | 241,117             |       |                |       | 380,935    |       |
| March 31, 2011 |       | 63,287                |       |                             |       | 149,776              |       |               |       |              |       |              |       |                    |       | 251,758             |       |                |       | 464,822    |       |
| March 31, 2012 |       | 113,579               |       | 2,162,000                        |       | 160,444              |       | 19,763             |       |              |       |              |       | 16,704                  |       | 267,635             |       |                |       | 2,740,124  |       |
| March 31, 2013 |       | 120,333               |       |                             |       | 171,872              |       | 62,402             |       |              |       | 68,593            |       | 68,345                  |       | 282,034             |       |                |       | 773,579    |       |
| March 31, 2014 |       | 127,488               |       |                             |       | 6,806,096            |       | 66,085             |       | 1,808,000         |       | 67,089            |       | 72,379                  |       | 297,208             |       |                |       | 9,244,345  |       |
| Thereafter          |       | 8,175,313             |       |                             |       |                 |       | 4,851,750          |       |              |       | 4,614,318         |       | 5,342,572               |       | 15,239,310          |       |                |       | 38,223,263 |       |
|                |       | 8,600,000             |       | 2,162,000                        |       | 7,428,006            |       | 5,000,000          |       | 1,808,000         |       | 4,750,000         |       | 5,500,000               |       | 16,579,062          |       |                |       | 51,827,068 |       |

 

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

 

**FASB Accounting Standards Update No. 2010-02, Consolidation (Topic810), *Accounting and Reporting for Decreases in Ownershipof a Subsidiary — a Scope Clarification***

 

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

 

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

 

The following tablessummarize income from discontinued operations and the related realized gain andloss on sale of rental property for the three months ended March 31, 2010and 2009**:**

 
| ** **                                  | ** ** | **March 31,  2010** | ** ** | **March 31,  2009** | ** ** |
|---------------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| Total Revenues                              |       | $                        | —     |                     | $          | — |   |
| Operating and other  expenses               |       |                     |       | 4,984                    |       |
| Depreciation and  amortization              |       | —                   |       | —                   |       |
|                                        |       | —                   |       | 4,984                    |       |
| Income (loss) from  discontinued operations |       |                     |       | (4,984                   | )          |
| Gain (loss) on sale of  rental property     |       | —                   |       | —                   |       |
| Income (loss) from  discontinued operations |       | $                        | —     |                     | $          | (4,984 | ) |

 

**ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

The following discussionshould be read in conjunction with the financial statements and notes thereofappearing elsewhere in this Report.  ThisReport, on Form 10-Q, contains forward-looking statements within themeaning of the securities law.  Actualresults or developments could differ materially from those projected in suchstatements as a result of certain factors set forth in the section belowentitles “Factors That May Affect Future Results” and elsewhere in thisReport.

 

The real estate market inthe Greater Boston area has softened, and the Partnership anticipates theclimate will remain the same in the foreseeable future. This may result inincreases in vacancy rates and/or a reduction in some rents. The Partnershipbelieves its present cash reserves as well as anticipated rental revenue willbe sufficient to fund its current operations, finance current plannedimprovements to its properties, and continue distribution payments in theforeseeable future. Continued deterioration and/or loss of a significantcommercial tenant may result in the Partnership recording an impairment loss inthe future.

 

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

 

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Managementbelieves that the financial difficulties experienced since the lending crisisin 2007 will continue and recovery will take longer than previousrecessions.  Management also believesthat while the national recession has academically ended and the credit marketshave begun to emerge from their dormancy, the recovery at the local level willbe slow and steady.  The Greater BostonMetropolitan Area, the Partnership’s primary market, continues to experiencehigh unemployment levels and continued downsizing by many corporations and webelieve the conditions will not improve until the latter half of 2010.

 

Duringthe three months ended March 31, 2010, the Partnership’s rental incomedecreased approximately 2% from the same quarter in 2009.  Management believes that the modest declinewill abate by the end of the second quarter and will be offset by a tighterrental market by the beginning of the third quarter of 2010.  Occupancy continues to remain above 97 % forthe quarter and bad debt did not rise to levels previously anticipated byManagement.  Operating expenses decreasedby 1.8%, due primarily to a milder winter which impacted both utilities andsnow removal costs.  Other aggregation ofutility expenses and capital improvements in heating equipment played asignificant role in the decline as well. Property management’s focus on tenant retention and curb appeal ishaving an impact on occupancy and lower turnover costs.  Management believes that these collectiveefforts will improve results in the third quarter of 2010.  Management is satisfied with the performanceof its latest Joint Venture of Dexter Park and the additional depreciationlowering the taxable income of the Partnership.

 

TheStock Repurchase Program that was initiated in 2007 has purchased 395,945depository receipts through March 2010. 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.

 

The Partnership has retainedThe Hamilton Company (“Hamilton”) to manage and administer the Partnership’sand Joint Ventures’ Properties. Hamilton is a full-service real estatemanagement company, which has legal, construction, maintenance, architectural,accounting and administrative departments. The Partnership’s propertiesrepresent approximately 40% of the total properties and 70% of the residentialproperties managed by Hamilton. Substantially all of the other propertiesmanaged by Hamilton are owned, wholly or partially, directly or indirectly, byHarold Brown. The Partnership’s Second Amended and Restated Contract of LimitedPartnership (the “Partnership Agreement”) expressly provides that the generalpartner may employ a management company to manage the properties, and that suchmanagement company may be paid a fee of 4% of rental receipts foradministrative and management services (the “Management Fee”). The Partnershippays Hamilton the full annual Management Fee, in monthly installments (2% atHamilton Park Towers).

 

At March 31, 2010,Harold Brown, his brother Ronald Brown and the President of Hamilton, CarlValeri, collectively own approximately 39% of the Depositary Receiptsrepresenting the Partnership Class A Units (including Depositary Receiptsheld by trusts for the benefit of such persons’ family members). Harold Brownalso owns 75% of the Partnership’s Class B Units, 75% of the capital stockof NewReal, Inc. (“NewReal”), the Partnership’s sole general partner, andall of the outstanding stock of Hamilton. Ronald Brown also owns 25% of thePartnership’s Class B Units and 25% of NewReal’s capital stock. Inaddition, 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.

 

In addition to theManagement Fee, the Partnership Agreement further provides for the employmentof outside professionals to provide services to the Partnership and allowsNewReal to charge the Partnership for the cost of employing professionals toassist with the administration of the Partnership’s properties. Additionally,from time to time, the Partnership pays Hamilton for repairs and maintenanceservices, legal services, construction services and accounting services. Thecosts charged by Hamilton for these services are at the same hourly ratecharged to all entities managed by Hamilton, and management believes such ratesare competitive in the marketplace.

 

Hamilton accounted forapproximately 7% of the repair and maintenance expense paid for by the Partnershipfor the three months ended March 31, 2010 compared to 10% for the threemonths ended March 31, 2009. Of the funds paid to Hamilton for this purpose,the great majority was to cover the cost of services provided by the Hamiltonmaintenance department, including plumbing, electrical, carpentry services, andsnow removal for those properties close to Hamilton’s headquarters. However,several of the larger Partnership properties have their own maintenance staff.Further, those properties that do not have their own maintenance staff and arelocated more than a reasonable distance from Hamilton’s headquarters inAllston, Massachusetts are generally serviced by local, independent companies.

 

Hamilton’s legal departmenthandles most of the Partnership’s eviction and collection matters.Additionally, it prepares most long-term commercial lease agreements andrepresents the Partnership in selected purchase and sale 

 

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transactions. Overall, Hamilton providedapproximately 76% of the legal services paid for by the Partnership during thethree months ended March 31, 2010 and for the year ended December 31,2009.

 

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

 

R. Brown Partners, which isowned by Ronald Brown, managed the condominium association containing fivecondominium units which were sold in 2008 located in Brookline, Massachusetts.That entity received annual management fees from the five units ofapproximately $1,500, and Hamilton reduced its management fees to approximately2%, so that the total management fee will not exceed the 4% allowed by thePartnership’s Partnership Agreement.

 

The Partnership requiresthat three bids be obtained for construction contracts in excess of $5,000.Hamilton may be one of the three bidders on a particular project and may beawarded the contract if its bid and its ability to successfully complete theproject are deemed appropriate. For contracts that are not awarded to Hamilton,Hamilton charges the Partnership a construction supervision fee equal to 5% ofthe contract amount. Hamilton’s architectural department also provides servicesto the Partnership on an as-needed basis. During the three months ended March 31,2010 and 2009, the construction and architectural service provided to thePartnership by Hamilton was insignificant.

 

Prior to 1991, thePartnership employed an outside, unaffiliated company to perform itsbookkeeping and accounting functions. Since that time, such services have beenprovided by Hamilton’s accounting staff, which consists of approximately 14people. During the three months ended March 31, 2010, Hamilton charged thePartnership $31,250 ($125,000 per year) for bookkeeping and accountingservices.

 

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

 

**CRITICAL ACCOUNTING POLICIES AND ESTIMATES**

 

The preparation of theconsolidated financial statements, in accordance with accounting principlesgenerally accepted in the United States of America, requires the Partnership tomake estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses and related disclosures of contingent assetsand liabilities. The Partnership regularly and continually evaluates itsestimates, including those related to acquiring, developing and assessing thecarrying values of its real estate properties and its investments in andadvances to joint ventures. The Partnership bases its estimates on historicalexperience, current market conditions, and on various other assumptions thatare believed to be reasonable under the circumstances. However, because futureevents and their effects cannot be determined with certainty, the determinationof estimates requires the exercise of judgment. The Partnership’s criticalaccounting policies are those which require assumptions to be made about suchmatters that are highly uncertain. Different estimates could have a materialeffect on the Partnership’s financial results. Judgments and uncertaintiesaffecting the application of these policies and estimates may result inmaterially different amounts being reported under different conditions andcircumstances. See Note 1 to the Consolidated Financial 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.

 

*Real Estate andDepreciation:*  Real estateassets are stated at the lower of cost or fair value, less accumulateddepreciation. Costs related to the acquisition, development, construction andimprovement of properties are capitalized, including interest, wages andbenefits, real estate taxes and insurance. Capitalization usually begins withcommencement of development activity and ends when the property is ready forleasing. Replacements and improvements, such as HVAC equipment, structuralreplacements, windows, appliances, flooring, carpeting and kitchen/bathreplacements and renovations, are capitalized and depreciated over theirestimated 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.

 

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

 

*Rental Property Held forSale and Discontinued Operations:*  When assets are identified by management asheld for sale, the Partnership discontinues depreciating the assets andestimates the sales price, net of selling costs, of such assets. If, 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 inPartnerships:*  ThePartnership accounts for its 50% ownership in the Investment Properties underthe equity method of accounting, as it exercises significant influence over,but does not control these entities. These investments are recorded initiallyat cost, as Investments in Partnerships, and subsequently adjusted for thePartnership’s share in earnings, cash contributions and distributions. Underthe equity method of accounting, our net equity is reflected on theconsolidated balance sheets, and our share of net income or loss from thePartnership is included on the consolidated statements of income.

 

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

 

*Legal Proceedings:*  The Partnership is subject to various legalproceedings and claims that arise, from time to time, in the ordinary course ofbusiness. These matters are 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.

 

**RESULTS OF OPERATIONS**

 

**Three Months Ended March 31, 2010 and 2009**

 

The Partnership and its Subsidiary Partnerships incurred a loss ofapproximately $343,000 during the three months ended March 31, 2010,compared to income of approximately $520,000 for the three months ended March 31,2009, a decrease of approximately $863,000 (165%).

 

The rental activity issummarized as follows:

 
| ** **                                        | ** ** | **Occupancy Date**      | ** ** |
|---------------------------------------------------|------------|-------------------------|------------|
| ** **                                        | ** ** | **April 26, 2010** | ** ** | **April 27, 2009** | ** ** |
| **Residential**                                   |       |                    |       |   |   |
| Units—exclusive of available  for sale units |       | 2,288                   |       | 2,288 |   |
| Vacancies                                         |       | 66                      |       | 90 |   |
| Vacancy rate                                      |       | 2.9                     | %          | 3.9 | % |
| **Commercial**                                    |       |                    |       |   |   |
| Total square feet                                 |       | 110,816                 |       | 110,816 |   |
| Vacancy                                           |       | 163                     |       | 0 |   |
| Vacancy rate                                      |       | 0.1                     | %          | 0 | % |

 
| ** **             | ** ** | **Rental Income (in thousands)  Three Months Ended March 31,** | ** ** |
|------------------------|------------|---------------------------------------------------------------------|------------|
| ** **             | ** ** | **2010**                                                            | ** ** | **2009** | ** ** |
| ** **             | ** ** | **Total  Operations**                                               | ** ** | **Continuing  Operations** | ** ** | **Total  Operations** | ** ** | **Continuing  Operations** | ** ** |
| Total rents            |       | $                                                                   | 8,197      |   | $ | 8,197 |   | $ | 8,368 |   | $ | 8,368 |   |
| Residential percentage |       | 90                                                                  | %          | 90 | % | 90 | % | 90 | % |
| Commercial percentage  |       | 10                                                                  | %          | 10 | % | 10 | % | 10 | % |
| Contingent rentals     |       | $                                                                   | 168        |   | $ | 168 |   | $ | 174 |   | $ | 174 |   |

 

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Three Months Ended March 31,2010 Compared to Three Months Ended March 31, 2009:

 
| ** **                                               | ** ** | **Three Months Ended  March 31,** | ** ** | **Dollar** | ** ** | **Percent** | ** ** |
|----------------------------------------------------------|------------|----------------------------------------|------------|------------|------------|-------------|------------|
| ** **                                               | ** ** | **2010**                               | ** ** | **2009**   | ** ** | **Change**  | ** ** | **Change** | ** ** |
| Revenues:                                                |       |                                   |       |       |       |        |       |   |   |
| Rental income                                            |       | $                                      | 8,196,616  |       | $          | 8,367,582   |       | (170,966 | ) | (2.0 | )% |
| Laundry and sundry income                                |       | 121,200                                |       | 93,113     |       | 28,087      |       | 30.0 | % |
|                                                     |       | $                                      | 8,317,816  |       | $          | 8,460,695   |       | (142,879 | ) | (2.0 | )% |
| Expenses                                                 |       |                                   |       |       |       |        |       |   |   |
| Administrative                                           |       | 491,036                                |       | 465,930    |       | 25,106      |       | 5.0 | % |
| Depreciation and amortization                            |       | 1,378,911                              |       | 1,416,620  |       | (37,709     | )          | (3.0 | )% |
| Management fees                                          |       | 338,642                                |       | 342,888    |       | (4,246      | )          | (1.0 | )% |
| Operating                                                |       | 1,281,662                              |       | 1,505,737  |       | (224,075    | )          | (15.0 | )% |
| Renting                                                  |       | 67,050                                 |       | 60,958     |       | 6,092       |       | 10.0 | % |
| Repairs and maintenance                                  |       | 997,743                                |       | 978,286    |       | 19,457      |       | 2.0 | % |
| Taxes and insurance                                      |       | 1,077,825                              |       | 964,867    |       | 112,958     |       | 12.0 | % |
|                                                     |       | 5,632,869                              |       | 5,735,286  |       | (102,417    | )          | (1.8 | )% |
| Income Before Other Income  and Discontinued Operations  |       | 2,684,947                              |       | 2,725,409  |       | (40,462     | )          | (1.5 | )% |
| Other Income (Loss)                                      |       |                                   |       |       |       |        |       |   |   |
| Interest expense                                         |       | (2,029,160                             | )          | (1,945,147 | )          | (84,013     | )          | 4.0 | % |
| Interest income                                          |       | 759                                    |       | 18,362     |       | (17,603     | )          | (96.0 | )% |
| (Loss) from investment in  unconsolidated joint ventures |       | (999,497                               | )          | (273,555   | )          | (725,942    | )          | 265.0 | % |
|                                                     |       | (3,027,898                             | )          | (2,200,340 | )          | (827,558    | )          | 38.0 | % |
| Income (loss) from  Continuing Operations                |       | (342,951                               | )          | 525,069    |       | (868,020    | )          | (165.0 | )% |
| Discontinued Operations:                                 |       |                                   |       |       |       |        |       |   |   |
| Income (loss) from  discontinued operations              |       | —                                 |       | (4,984     | )          | (4,984      | )          | 100.0 | % |
|                                                     |       | —                                 |       | (4,984     | )          | (4,984      | )          | 100.0 | % |
| Net (loss) income                                        |       | $                                      | (342,951   | )          | $          | 520,085     |       | (863,036 | ) | (165.0 | )% |

 

Rental income fromcontinuing operations for the three months ended March 31, 2010 wasapproximately $8,197,000, compared to approximately $8,368,000 for the threemonths ended March 31, 2009, a decrease of approximately $171,000 (2%).This decrease in rental income is due to the amortization of approximately$184,000 in connection with the free rent granted to tenants.  Properties with increases in rental income inthe first quarter of 2010 compared to 2009 include; Westside Colonial, HamiltonOaks, School Street, Avon Street, and Westgate Woburn with increases ofapproximately $22,000, $16,000, $14,000, $11,000, and $10,000 respectively.

 

Expenses from continuingoperations for the three months ended March 31, 2010 were approximately$5,633,000 compared to approximately $5,735,000 for the three months ended March 31,2009, a decrease of approximately $102,000 (1.8%). The most significant factorcontributing to this decrease was: a decrease in operating expenses of approximately$224,000 (15.0%) due to decreases in snow removal and utilities due to a milderwinter in 2010; and a decrease in depreciation and amortization expense ofapproximately $38,000 (3.0%).

 

These decreases are offsetby an increase in taxes and insurance of approximately $113,000 (12%) due tothe increases in property taxes, and an increase in administrative expenses ofapproximately $25,000 (5%) due to an increase in professional fees.

 

Interest expense increasedapproximately $84,000 (4.0%) primarily due to the approximately $7,000,000borrowed in October 2009.

 

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AtMarch 31, 2010, the Partnership has a 40 or 50% ownership interest in nineInvestment Properties. See Note 14 to the Consolidated FinancialStatements for a detail of the financial information of each InvestmentProperty.

 

As described in Note 14to the Consolidated Financial Statements, the Partnership’s share of the netloss from the Investment Properties was approximately $999,000 for the threemonths ended March 31, 2010 compared to a loss of approximately $274,000for the three months ended March 31, 2009, an increase of approximately$725,000.  Included in this loss isdepreciation and amortization expense of approximately $1,379,000.  The loss associated with the 2009 acquisitionof Dexter Park is approximately $761,000, of which approximately $1,016,000 isdepreciation and amortization.

 

Interest income for thethree months ended March 31, 2010 was approximately $800 compared toapproximately $18,000 for the three months ended March 31, 2009, adecrease of approximately $17,000. This decrease is due to a decrease in thecash available for investment as well as a drop in interest rates.

 

As a result of the changes discussed above, net loss for the three monthsended March 31, 2010 was $342,951 compared to income of $520,085 for thethree months ended March 31, 2009, a change of $863,036.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The Partnership’s principalsource of cash during 2010 and 2009 was the collection of rents and refinancingof partnership properties. The majority of cash and cash equivalents of$4,381,130 at March 31, 2010 and $2,879,663 at December 31, 2009 wereheld in interest bearing accounts at creditworthy financial institutions.

 

This increase of $1,501,467at March 31, 2010 is summarized as follows:

 
| ** **                                                                 | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                 | ** ** | **2010**                               | ** ** | **2009** | ** ** |
| Cash provided by operating  activities                                     |       | $                                      | 2,089,940  |   | $ | 2,361,287 |   |
| Cash (used in) investing  activities                                       |       | (15,745                                | )          | (474,870 | ) |
| Cash (used in) provided by  financing activities                           |       | 698,444                                |       | (209,219 | ) |
| Repurchase of Depositary  Receipts, Class B and General Partner Units |       | (344,746                               | )          | (1,278,090 | ) |
| Distributions paid                                                         |       | (926,426                               | )          | (931,500 | ) |
| Net increase (decrease) in  cash and cash equivalents                      |       | $                                      | 1,501,467  |   | $ | (532,393 | ) |

 

The cash provided byoperating activities is primarily due to the collection of rents less cashoperating expenses. The increase in cash provided by investing activities isdue to the increase in the distribution from the joint venture as well as the decreasecapital improvements to Partnership properties. The increase in cash providedby financing activities is due to the refinancing of Partnership properties in2010 resulting in an increase in cash.

 

During the three monthsended March 31, 2010, the Partnership and its Subsidiary Partnershipscompleted improvements to certain of the properties at a total cost ofapproximately $336,000. These improvements were funded from cash reserves and,to some extent, escrow accounts established in connection with the financing orrefinancing of the applicable properties. These sources have been adequate tofully fund improvements. The most significant improvements were made at 62Boylston Street, Westgate Woburn, Hamilton Oaks, and Westside Colonial, at acost of approximately $65,000, $58,000, $34,000, and $33,000, respectively. ThePartnership plans to invest approximately $1,757,000 in additional capitalimprovements in 2010.

 

In February 2010, thePartnership approved a quarterly distribution of $7.00 per unit ($0.70 perreceipt) which was paid on March 31, 2010. In April 2010, the Partnership approved a quarterly distribution of$7.00 per unit ($0.70 per receipt) payable on June 30, 2010.

 

In 2009, the Partnershippaid quarterly distributions of $7.00 per unit ($0.70 per receipt) in March,June, September, and December for a total distribution of $28.00 per unit($2.80 per receipt).

 

During the three monthsended March 31, 2010 the Partnership purchased 4,521 receipts for$275,850, 107 Class B Units for $65,462 and 6 General Partnership unitsfor $3,444.

 

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In December 2009, thePartnership refinanced Linhart, LLP, located in Newton, Massachusetts.  The new loan is $2,000,000, with a rate of3.75% over the Libor rate or 4.25% whichever is greater and matures five yearsfrom the date of closing.  The interestrate as of March 31, 2010 was 4.25%. The loan agreement calls for interest only payments for twenty fourmonths and principal and interest payments for the remainder of the five yearperiod based on a thirty year amortization. The loan proceeds were used to pay off the prior loan of approximately$1,700,000, and closing costs of approximately $38,000.

 

On March 25, 2010, thePartnership refinanced the Brookside Apartments.  The new loan is $2,820,000, matures in 2020and has an interest rate of 5.81%.  Theloan is a ten year note however it is being amortized over 30 years. Theproceeds of the loan were used to pay off the old mortgage of approximately$1,900,000.  There were no prepaymentpenalties.

 

The Partnership anticipatesthat cash from operations and interest bearing accounts will be sufficient tofund its current operations and to finance current improvements to itsproperties. The Partnership’s net income and cash flow may fluctuatedramatically from year to year as a result of the sale of properties, increasesor decreases in rental income or expenses, or the loss of significant tenants.

 

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

 

As of March 31, 2010,the Partnership had between a 40- 50% ownership in nine joint ventures, all ofwhich have mortgage indebtedness. We do not have control of these partnershipsand therefore we account for them using the equity method.  At March 31, 2010, our proportionateshare of the non-recourse debt related to these investments was equal toapproximately $61,619,000.  SeeNote 14 to the Consolidated Financial Statements.

 

**Contractual Obligations**

 

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

 

**Factors That May Affect Future Results**

 

Certain informationcontained herein includes forward-looking statements, which are made pursuantto the safe harbor provisions of the Private Securities Liquidation Reform Actof 1995 (the “Act”). While forward looking statements reflect management’s goodfaith beliefs when those statements are made, caution should be exercised ininterpreting and relying on such forward looking statements, the realization ofwhich may be impacted by known and unknown risks and uncertainties, events thatmay occur subsequent to the forward-looking statements, and other factors whichmay be beyond the Partnership’s control and which can materially affect thePartnership’s actual results, performance or achievements for 2010 and beyond.Should one or more of the risks or uncertainties mentioned below materialize,or should underlying assumptions prove incorrect, actual results may varymaterially from those anticipated, estimated or projected. We expresslydisclaim any responsibility to update our forward looking statements, whetheras a result of new information, future events or otherwise. Accordingly,investors should use caution in relying on past forward looking statements,which are based on results and trends at the time they are made, to anticipatefuture results or trends.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Insurance coverage for andrelating to commercial properties is increasingly costly and difficult to obtain.In addition, insurance carriers have excluded certain specific items fromstandard insurance policies, which have resulted in increased risk exposure forthe Partnership. These include insurance coverage for acts of terrorism andwar, and coverage for mold and other environmental conditions. Coverage forthese items is either unavailable, or prohibitively expensive.

 

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

 

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

 

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

 

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

 

Competition for acquisitionsmay result in increased prices for properties.

 

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

 

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

 

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

 

The residential real estatemarket in the Greater Boston area has softened and the Partnership anticipatesthe climate will remain the same in the foreseeable future. This may result inincreases in vacancy rates and/or a reduction in rents. The 

 

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Partnership believes its present cashreserves as well as anticipated rental revenue will be sufficient to fund itscurrent operations, and to finance current planned improvements to itsproperties and continue dividend payments in the foreseeable future.

 

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

 

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

 

As of March 31, 2010,the Partnership, its Subsidiary Partnerships and the Investment Propertiescollectively have approximately $286,730,000 in long-term debt, substantiallyall of which pays interest at fixed rates. Accordingly, the fair value of thesedebt instruments is affected by changes in market interest rates. Thesemortgages mature through 2023. For information regarding the fair value andmaturity dates of these debt obligations, see Item 2 and Notes 5, 12and 14 to the Consolidated Financial Statements.

 

For additional disclosureabout market risk, see “Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Factors That May AffectFuture Results”.

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

*DisclosureControls and Procedures*.  The Company’s management, withthe participation of the president and chief executive officer and chieffinancial officer, has evaluated the effectiveness of the Company’s disclosurecontrols and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) as of the end of the period covered bythis report.  Based on such evaluation, the president and chiefexecutive officer and chief financial officer of the Company’s general partnerhave concluded that, as of the end of such period, the Company’s disclosurecontrols and procedures are effective in recording, processing, summarizing andreporting, on a timely basis, information required to be disclosed by theCompany in the reports that it files or submits under the Exchange Act.

 

*Internal Control Over Financial Reporting*.  Therehave not been any changes in the Company’s internal control over financialreporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) underthe Exchange Act) during the fiscal quarter to which this report relates thathave materially affected, or are reasonably likely to materially affect, theCompany’s internal control over financial reporting.

 

**PART II—OTHER INFORMATION**

 

**Item 1.  Legal Proceedings**

 

The Partnership, the Subsidiary Partnerships and their properties arenot presently subject to any material litigation, and, to management’sknowledge, there is not any material litigation presently threatened againstthem.  The Partnership and SubsidiaryPartnerships are occasionally subject to ordinary routine legal andadministrative proceedings incident to the ownership of residential andcommercial real estate.  Some of thelegal and other expenses related to these proceedings are covered by insuranceand none of these costs and expenses are expected to have a material adverseeffect on the Consolidated Financial Statements of the Partnership.

 

**Item 1A.  Risk Factors**

 

There were no materialchanges to the Risk Factors disclosed in our annual report on Form 10-Kfor the year ended December 31, 2009.

 

None.

 

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

 

(a)                                  None

 

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(b)                                 None.

 

(c)                                  IssuerPurchases of Equity Securities during the First Quarter of 2010:

 
| ** **                   | ** ** | ** **             | ** ** | **Depositary Receipts**                               | ** ** | **Remaining number of Depositary  Receipts that may be purchased** | ** ** |
|------------------------------|------------|------------------------|------------|-------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| **Period**                   | ** ** | **Average Price Paid** | ** ** | **Purchased as Part of Publicly Announced Plan** | ** ** | **Under the Plan(as Amended)**                                     | ** ** |
| January 1-31, 2010      |       | $                      | —     |                                                  | —     |                                                               | 0          |   |
| February 1- 28, 2010    |       |                   | —     |                                                  | —     |                                                               | 0          |   |
| March 1 – 31, 2010 |       |                   | 60.96      |                                                  | 4,521      |                                                               | 104,055    |   |
| Total                        |       | $                      | 60.96      |                                                  | 4,521      |                                                               |       |   |

 

On August 20, 2007,NewReal, Inc., the General Partner authorized an equity repurchase program(“Repurchase Program”) under which the Partnership was permitted to purchase,over a period of twelve months, up to 100,000 Depositary Receipts (each ofwhich is one-tenth of a Class A Unit).  On January 15, 2008, theGeneral Partner authorized an increase in the Repurchase Program from 100,000to 200,000 Depositary Receipts and on January 30, 2008 the General Partnerfurther increased the Repurchase Program from 200,000 to 300,000 DepositaryReceipts.  On March 6, 2008, the General Partner further increasedthe total number of Depositary Receipts that could be repurchased pursuant tothe Repurchase Program from 300,000 to 500,000. On August 8, 2008, the General Partner re-authorized and renewedthe Repurchase Program for an additional 12-month period ending August 19,2009.  On March 22, 2010, the General Partner re-authorized andrenewed the Repurchase Program that expired on August 19, 2009.  Under the terms of the renewed RepurchaseProgram, the Partnership may purchase up to 500,000 Depositary Receipts throughMarch 31, 2015.  In addition, theGeneral Partner also authorized the expansion of the Repurchase Program torequire the Partnership to repurchase a proportionate number of Class BUnits and General Partner Units in connection with any repurchases of anyDepositary Receipts by the Partnership based upon the 80%, 19% and 1% fixeddistribution percentages of the holders of the Class A, Class B andGeneral Partner Units under the Partnership’s Second Amended and RestateContract of Limited Partnership.  Repurchases of Depositary Receipts orPartnership Units pursuant to the Repurchase Program may be made by thePartnership from time to time in its sole discretion in open markettransactions or in privately negotiated transactions.  As of March 31, 2010, the Partnershiphas repurchased 395,945 Depositary Receipts at an average price of $73.64 perreceipt (or $736.40 per underlying Class A Unit), 1,667 Class B Unitsand 88 General Partner Units both at an average price of $582.57 per Unit,totaling approximately $30,284,000 including brokerage fees paid by thePartnership.

 

See Note 8 to theConsolidated Financial Statements for information concerning this repurchaseprogram through March 31, 2010.

 

**Item 3.  Defaults UponSenior Securities**

 

None.

 

**Item 4.  (Removed andReserved)**

 

**Item 5.  Other Information**

 

None.

 

**Item 6.  Exhibits**

 

(a)                                  See the exhibitindex below.

 

EXHIBIT INDEX

 
| **Exhibit No.** | ** ** | **Description of Exhibit**                                                                                                                                                                                                                     |
|----------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (3)            |       | Second Amended and Restated Contract of Limited Partnership.(1)                                                                                                                                                                                |
|  (4)            |       | (a)   Specimen certificate representing Depositary Receipts.(2)                                                                                                                                                                      |
|                 |       | (b)   Description of rights of holders of Partnership securities.(2)                                                                                                                                                                 |
|                 |       | (c)   Deposit Agreement, dated August 12, 1987, between the  General Partner and the First National Bank of Boston.(3)                                                                                                          |
| (10.1)               |       | Purchase and Sale Agreement by and between Sally A. Starr and Lisa  Brown, Trustees of Omnibus Realty Trust, a nominee trust.(5)                                                                                                               |
| (10.2)               |       | Commitment letter from Wachovia Multifamily Capital, Inc. to The  Hamilton Company dated January 11, 2008.(6)                                                                                                                        |
| (10.3)               |       | Amendment dated February 27, 2008 to Commitment letter from  Wachovia Multifamily Capital, Inc. to The Hamilton Company dated  January 11, 2008.(7)                                                                             |
| (10.4)               |       | Purchase  and Sale and Escrow Agreement dated September 1, 2009 by and between 175  Free Street Investors LLC, as Seller, The Hamilton Company, as Purchaser, and  First American Title Insurance Company, as Escrow Agent. (8)           |
| (10.5)               |       | Limited  Liability Company Operating Agreement of HBC Holdings, LLC. (9)                                                                                                                                                                       |
| (10.6)               |       | Limited  Liability Company Agreement of Hamilton Park Towers, LLC. (10)                                                                                                                                                                        |
| (10.7)               |       | Pledge  Agreement dated October 28, 2009 by and between New England Realty  Associates Limited Partnership and HBC Holdings, LLC. (11)                                                                                                    |
| (10.8)               |       | Promissory  Note dated October 28, 2009 of New England Realty Associates Limited  Partnership in favor of HBC Holdings, LLC. (12)                                                                                                         |
| (10.9)               |       | MultiFamily  Note - CME of Hamilton Park Towers, LLC, as Borrower, in favor of Wachovia  Multifamily Capital, Inc., as Lender, in the principal amount of  $89,914,000 dated October 28, 2009. (13)                                  |
| (21)                 |       | Subsidiaries of the Partnership.(4)                                                                                                                                                                                                            |
| (31.1)               |       | Certification pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002 of Ronald Brown, Principal Executive Officer of the Partnership  (President and a Director of NewReal, Inc., sole General Partner of the  Partnership)      |
| (31.2)               |       | Certification pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002 of Harold Brown, Principal Financial Officer of the Partnership  (Treasurer and a Director of NewReal, Inc., sole General Partner of the  Partnership)      |
| (32.1)               |       | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act  of 2002, of Ronald Brown, Principal Executive Officer of the Partnership  (President and a Director of NewReal, Inc., sole General Partner of the  Partnership) and |

 

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|   |   | Harold Brown, Principal Financial Officer of the Partnership  (Treasurer and a Director of NewReal, Inc., sole General Partner of the  Partnership). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| (99.1) |   | Combined Financial Statements of Significant Subsidiaries                                                                                                 |

 

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(1)                                  Incorporated byreference to Exhibit A to the Partnership’s Statement Furnished inConnection with the Solicitation of Consents filed under the SecuritiesExchange Act of 1934 on October 14, 1986.

 

(2)                                  Incorporatedherein by reference to Exhibit A to Exhibit 2(b) to thePartnership’s Registration Statement on Form 8-A, filed under theSecurities Exchange Act of 1934 on August 17, 1987.

 

(3)                                  Incorporatedherein by reference to Exhibit 2(b) to the Partnership’s RegistrationStatement on Form 8-A, filed under the Securities Exchange Act of 1934 on August 17,1987.

 

(4)                                  Incorporated byreference to Notes 2 and 14 to Financial Statements included as part ofthis Form 10-K.

 

(5)                                  Incorporated byreference to Exhibit 2.1 to the Partnership’s Current Report on Form 8-Kdated June 30, 1995.

 

(6)                                  Incorporatedherein by reference to Exhibit 10.1 to the Partnership’s Current Report onForm 8-K dated January 11, 2008 and filed with the Securities andExchange Commission on February 6, 2008.

 

(7)                                  Incorporatedherein by reference to Exhibit 10.1 to the Partnership’s Current Report onForm 8-K dated February 27, 2008 and filed with the Securities andExchange Commission on March 4, 2008.

 

(8)                                 Incorporatedherein by reference to Exhibit 10.1 to the Partnership’s Quarterly Reporton Form 10-Q for the fiscal quarter ended September 30, 2009.

 

(9)                                 Incorporatedherein by reference to Exhibit 10.2 to the Partnership’s Quarterly Reporton Form 10-Q for the fiscal quarter ended September 30, 2009.

 

(10)                           Incorporatedherein by reference to Exhibit 10.3 to the Partnership’s Quarterly Reporton Form 10-Q for the fiscal quarter ended September 30, 2009.

 

(11)                           Incorporatedherein by reference to Exhibit 10.1 to the Partnership’s Current Report onForm 8-K as filed with the Securities and Exchange Commission on November 3,2009.

 

(12)                           Incorporatedherein by reference to Exhibit 10.2 to the Partnership’s Current Report onForm 8-K as filed with the Securities and Exchange Commission on November 3,2009.

 

(13)                           Incorporatedherein by reference to Exhibit 10.3 to the Partnership’s Current Report onForm 8-K as filed with the Securities and Exchange Commission on November 3,2009.

 

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Table ofContents

 

**SIGNATURES**

 

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

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

 

Dated: May 10, 2009

 

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

 
| **Signature**    | ** ** | **Title**                                                        | ** ** | **Date**          |
|------------------|------------|------------------------------------------------------------------|------------|-------------------|
| /s/ RONALD BROWN |       | President and Director of the General Partner                    |       | May 10, 2010 |
| Ronald Brown     |       | (Principal Executive Officer)                                    |       |              |
|             |       |                                                             |       |              |
| /s/ HAROLD BROWN |       | Treasure and Director to the General Partner                     |       | May 10, 2010 |
| Harold Brown     |       | (Principal and Finance Officer and Principal Accounting Officer) |       |              |

 

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