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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-K

(Mark One)  
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20122013

OR

o

 

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

For the transition period from                        to                       

Commission file number 001-31568



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

Massachusetts
(State or other jurisdiction of
incorporation or organization)
 04-2619298
(I.R.S. employer
identification no.)

39 Brighton Avenue, Allston, Massachusetts
(Address of principal executive offices)

 

02134
(Zip Code)

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

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

Depositary Receipts
(Title of each Class)

 

NYSE AMEXMKT
(Name of each Exchange on which Registered)

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

Class A
Limited Partnership Units

(Title of class)

          Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o    No ý

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

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 registrant was required to submit and post such files). Yes ý    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K ý

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

Large accelerated filero Accelerated fileroý Non-accelerated filero
(Do not check if a smaller
reporting company)
 Smaller reporting companyý

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

          At June 30, 2012,2013, the aggregate market value of the registrant's securities held by non-affiliates of the registrant was $57,067,931$83,054,794 based on the closing price of the registrant's traded securities on the NYSE AmexMKT Exchange on such date. For this computation, the Registrant has excluded the market value of all Depositary Receipts reported as beneficially owned by executive officers and directors of the General Partner of the Registrant; such exclusion shall not be deemed to constitute an admission that any such person is an affiliate of the Registrant. (Need to check with attorney regarding change to accelerated filer.)

          Effective January 3, 2012, the Partnership authorized a 3-for-1 forward split of its Depositary Receipts listed on the NYSE AmexMKT and a concurrent adjustment of the exchange ratio of Depositary Receipts for Class A Units of the Partnership from 10-to-1 to 30-to-1, such that each Depositary Receipt represents one-thirtieth (1/30) of a Class A Unit of the Partnership.

          All references to Depositary Receipts in the report are reflective of the 3-for-1 forward split.

          As of March 1, 2013,2014, there were 104,039103,396 of the registrant's Class A units (3,121,176(3,101,874 Depositary Receipts) of limited partnership issued and outstanding and 24,70924,557 Class B units issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:None.

   


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP

TABLE OF CONTENTS

 
  
 PAGE 

PART I

 

    

Item 1.

 

Business

  3 

Item 1A.

 

Risk Factors

  7 

Item 1B.

 

Unresolved Staff Comments

  1112 

Item 2.

 

Properties

  1112 

Item 3.

 

Legal Proceedings

  1920 

Item 4.

 

Mine Safety Disclosure

  1920 

PART II

 

  
 
 

Item 5.

 

Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

  20 

Item 6.

 

Selected Financial Data

  2223 

Item 7.

 

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

  2224 

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

  37 

Item 8.

 

Consolidated Financial Statements and Supplementary Data

  3738 

Item 9.

 

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

  3738 

Item 9A.

 

Controls and Procedures

  3738 

Item 9B.

 

Other Information

  38 

PART III

 

  
 
 

Item 10.

 

Directors, Executive Officers and Corporate Governance

  39 

Item 11.

 

Executive Compensation

  43 

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

  44 

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

  4746 

Item 14.

 

Principal Accounting Fees and Services

  47 

PART IV

 

  
 
 

Item 15.

 

Exhibits and Financial Statement Schedules

  48 

SIGNATURES

  
S-1
 

Exhibit Index

  
S-2
 

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP

PART I

ITEM 1.    BUSINESS

General

        New England Realty Associates Limited Partnership ("NERA" or the "Partnership"), a Massachusetts Limited Partnership, was formed on August 12, 1977 as the successor to five real estate limited partnerships (collectively, the "Colonial Partnerships"), which filed for protection under Chapter XII of the Federal Bankruptcy Act in September 1974. The bankruptcy proceedings were terminated in late 1984. In July 2004, the General Partner extended the termination date of the Partnership until 2057, as allowed in the Partnership Agreement.

        The authorized capital of the Partnership is represented by three classes of partnership units ("Units"). There are two categories of limited partnership interests ("Class A Units" and "Class B Units") and one category of general partnership interests (the "General Partnership Units"). The Class A Units were initially issued to creditors and limited partners of the Colonial Partnerships and have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Each Class A Unit is exchangeable for 30 publicly traded depositary receipts ("Receipts"), which are currently listed on the NYSE Amex Exchange and are registered under Section 12(b) of the Exchange Act. The Class B Units were issued to the original general partners of the Partnership. The General Partnership Units are held by the current general partner of the Partnership, NewReal, Inc. (the "General Partner"). The Class A Units represent an 80% ownership interest, the Class B Units represent a 19% ownership interest, and the General Partnership Units represent a 1% ownership interest.

        The Partnership is engaged in the business of acquiring, developing, holding for investment, operating and selling real estate. The Partnership, directly or through 24 subsidiary limited partnerships or limited liability companies, owns and operates various residential apartment buildings, condominium units and commercial properties located in Massachusetts and New Hampshire. As used herein, the Partnership's subsidiary limited partnerships and limited liabilities companies are each referred to as a "Subsidiary Partnership" and are collectively referred to as the "Subsidiary Partnerships."

        The Partnership owns between a 99.67% and 100% interest in each of the Subsidiary Partnerships, except in nine limited liability companies (the "Investment Properties" or "Joint Ventures") in which the Partnership has between a 40% and 50% ownership interest. The majority shareholder of the General Partner indirectly owns between 43.2% and 57%, the President of Hamilton owns between 2.5% and 4.5%, and five other management employees of Hamilton own collectively between 0% and 2.3%, respectively. The Partnership's interest in the Investment Properties is accounted for on the equity method in the Consolidated Financial Statements. See Note 1 to the Consolidated Financial Statements—"Principles of Consolidation." See Note 14 to the Consolidated Financial Statements—"Investment in Unconsolidated Joint Ventures" for a description of the properties and their operations. Of those Subsidiary Partnerships not wholly owned by the Partnership, except for the Investment Properties, the remaining ownership interest is held by an unaffiliated third party. In each such case, the third party has entered into an agreement with the Partnership, pursuant to which any benefit derived from its ownership interest in the applicable Subsidiary Partnerships will be returned to the Partnership.

        The long-term goals of the Partnership are to manage, rent and improve its properties and to acquire additional properties with income and capital appreciation potential as suitable opportunities arise. When appropriate, the Partnership may sell or refinance selected properties. Proceeds from any such sales or refinancing will be used to reduce debt, reinvested in acquisitions of other properties,


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distributed to the partners, repurchase equity interests, or used for operating expenses or reserves, as determined by the General Partner.

Operations of the Partnership

        The Partnership is managed by the General Partner, NewReal, Inc., a Massachusetts corporation wholly owned by Harold Brown and Ronald Brown. The General Partner has engaged The Hamilton Company, Inc. (the "Hamilton Company" or "Hamilton") to perform general management functions for the Partnership's properties in exchange for management fees. The Hamilton Company is wholly owned by Harold Brown and employs Ronald Brown and Harold Brown. The Partnership, Subsidiary Partnerships, and the Investment Properties currently contract with the management company for 4953 individuals at the Properties and 14 individuals at the Joint Ventures who are primarily involved in the supervision and maintenance of specific properties. The General Partner has no employees.

        As of February 1, 2013,2014, the Partnership and its Subsidiary Partnerships owned 2,2512,412 residential apartment units in 20 residential and mixed-use complexes (collectively, the "Apartment Complexes"). The Partnership also owns 19 condominium units in a residential condominium complex, all of which are leased to residential tenants (collectively referred to as the "Condominium Units"). The Apartment Complexes, the Condominium Units and the Investment Properties are located primarily in the metropolitan Boston area of Massachusetts.

        As of February 1, 2013,2014, the Subsidiary Partnerships also owned a commercial shopping center in Framingham, Massachusetts, one commercial building in Newton and one in Brookline, Massachusetts and commercial space in mixed-use buildings in Boston, Brockton and Newton, Massachusetts. These properties are referred to collectively as the "Commercial Properties." See Note 2 to the Consolidated Financial Statements, included as a part of this Form 10-K.

        Additionally, as of February 1, 2013,2014, the Partnership owned a 40-50% interest in nine residential and mixed use complexes, the Investment Properties, with a total of 799798 residential units, one commercial unit, and a parking lot. See Note 14 to the Consolidated Financial Statements for additional information on these investments.

        The Apartment Complexes, Investment Properties, Condominium Units and Commercial Properties are referred to collectively as the "Properties."

        Harold Brown and, in certain cases, Ronald Brown, and officers and employees of the Hamilton Company own or have owned interests in certain of the Properties, Subsidiary Partnerships and Joint Ventures. See "Item 13. Certain Relationships, Related Transactions and Director Independence."

        The leasing of real estate in the metropolitan Boston area of Massachusetts is highly competitive. The Apartment Complexes, Condominium Units and the Investment Properties must compete for tenants with other residential apartments and condominium units in the areas in which they are located. The Commercial Properties must compete for commercial tenants with other shopping malls and office buildings in the areas in which they are located. Thus, the level of competition at each Property depends on how many other similarly situated properties are in its vicinity. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Factors that May Affect Future Results."

        The Second Amended and Restated Contract of Limited Partnership of the Partnership (the "Partnership Agreement") authorizes the General Partner to acquire real estate and real estate related investments from or in participation with either or both of Harold Brown and Ronald Brown, or their affiliates, upon the satisfaction of certain terms and conditions, including the approval of the Partnership's Advisory Committee and limitations on the price paid by the Partnership for such investments. The Partnership Agreement also permits the Partnership's limited partners and the General Partner to make loans to the Partnership, subject to certain limitations on the rate of interest


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that may be charged to the Partnership. Except for the foregoing, the Partnership does not have any policies prohibiting any limited partner, General Partner or any other person from having any direct or indirect pecuniary interest in any investment to be acquired or disposed of by the Partnership or in any transaction to which the Partnership is a party or has an interest in or from engaging, for their own account, in business activities of the types conducted or to be conducted by the Partnership. The General Partner is not limited in the number or amount of mortgages which may be placed on any Property, nor is there a policy limiting the percentage of Partnership assets which may be invested in any specific Property.

Industry Segments

        The Partnership operates in only one industry segment—real estate. The Partnership does not have any foreign operations, and its business is not seasonal. See the Consolidated Financial Statements attached hereto and incorporated by reference herein for financial information relating to our industry segment.

Unit Distributions

        Effective January 3, 2012, the Partnership authorized a 3-for-1 forward split of its Depositary Receipts listed on the NYSE AmexMKT and a concurrent adjustment of the exchange ratio of Depositary Receipts for Class A Units of the Partnership from 10-to-1 to 30-to-1, such that each Depositary Receipt represents one-thirtieth (1/30) of a Class A Unit of the Partnership. All references to Depositary Receipts in the report are reflective of the 3-for-1 forward split.

        In 2012February 2014, the Partnership approved a quarterly distribution of $7.50 per Unit ($0.25 per Receipt), payable on March 31, 2014. In 2013 the Partnership paid four quarterly distributions of an aggregate $30.00 per Unit ($1.00 per Receipt) for a total payment of $3,932,410$3,893,662 in 2012.2013. In 2011,2012, the Partnership paid four quarterly distributions of an aggregate of $28.00$30.00 per Unit ($0.931.00 per Receipt) for a total payment of $3,681,566$3,932,410 in 2011. In February 2013, the Partnership approved a quarterly distribution of $7.50 per Unit ($0.25 per Receipt), payable on March 31, 2013.2012.

        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 300,000 Depositary Receipts (each of which is one-thirtieth of a Class A Unit). On January 15, 2008, the General Partner authorized an increase in the Repurchase Program from 300,000 to 600,000 Depositary Receipts. On January 30, 2008 the General Partner authorized an increase the Repurchase Program from 600,000 to 900,000 Depositary Receipts. On March 6, 2008, the General Partner authorized the increase in the total number of Depositary Receipts that could be repurchased pursuant to the Repurchase Program from 900,000 to 1,500,000. On August 8, 2008, the General Partner re-authorized and renewed the Repurchase Program for an additional 12-month period ended August 19, 2009. On March 22, 2010, the General Partner re-authorized and renewed the Repurchase Program that expired on August 19, 2009. Under the terms of the renewed Repurchase Program, the Partnership may purchase up to 1,500,000 Depositary Receipts from the start of the program in 2007 through March 31, 2015. The Repurchase Program requires the Partnership to repurchase a proportionate number of Class B Units and General Partner Units in connection with any repurchases of any Depositary Receipts by the Partnership based upon the 80%, 19% and 1% fixed distribution percentages of the holders of the Class A, Class B and General Partner Units under the Partnership's Second Amended and Restate Contract of Limited Partnership. Repurchases of Depositary Receipts or Partnership Units pursuant to the Repurchase Program may be made by the Partnership from time to time in its sole discretion in open market transactions or in privately negotiated transactions. From August 20, 2007 through December 31, 2012,2013, the Partnership has repurchased 1,219,9271,242,891 Depositary Receipts at an average price of $24.62$24.86 per receipt (or $738.60$745.80 per underlying Class A Unit), 1,9212,103 Class B Units and 101111 General Partnership Units, both at an average


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price of $613.94$658.89 per Unit, totaling approximately $31,386,000$32,481,000 including brokerage fees paid by the Partnership.

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

Property Transactions

        On May 18, 2011, the Partnership sold Avon Street Apartments, a 66 unit residential apartment complex located at 130 Avon Street, Malden, Massachusetts. The sales price was $8,750,000, which resulted in a financial statement gain of approximately $7,700,000. The net proceeds of the sale, of approximately $5,444,000 were held by a qualified intermediary in order for the Partnership to structure a tax free exchange in accordance with Section 1031 of the IRS code. This tax free exchange was completed with the purchase of Battle Green Apartments as described below.

        On June 1, 2011, the Partnership purchased the Battle Green Apartments, a 48 unit residential apartment complex located at 34-42 Worthen Road, Lexington, Massachusetts. The purchase price was $10,000,000. The Partnership used cash, the proceeds from the sale of Avon Street and borrowed $3,998,573 from Harold Brown, Treasurer of the General Partner to make this purchase. This loan had an interest rate of 6% and was secured by the Partnership's ownership interest in Battle Green Apartments, LLC. The term of the loan is four years with a provision requiring payment in whole or in part upon demand within six months of notice or prepay without penalty. On July 27, 2011, the Partnership financed the Battle Green Apartments with a new $5,000,000 mortgage at 4.95% which matures in August 2026. Principal payments will be made using a 30 year amortization schedule. Deferred financing costs associated with this mortgage totaled approximately $100,000 and accordingly the effective interest rate is 5.07%. After paying off the existing loan of $3,998,573, approximately $1,000,000 was received by the Partnership. The interest paid on this loan to Harold Brown was $38,123 in 2011.

        In May 2013 the Partnership sold the Nashoba Apartments located in Acton, Massachusetts. The sale price was $4,300,000; the net proceeds of approximately $2,100,000 were transferred to Investment Property Exchange Services, Inc. a Qualified Intermediary. These funds were held by the intermediary in order to maintain the Partnership's ability to structure a tax free exchange in accordance with the Internal Revenue Service's rules under Sec. 1031. The gain on the sale in accordance with GAAP is approximately $3,679,000. The proceeds were subsequently used in the acquisition of the Hamilton Green apartments described below.

        On July 15, 2013, Hamilton Green Apartments, LLC, a newly formed subsidiary of the Partnership, purchased Windsor Green at Andover, a 193 unit apartment complex located at 311 and 319 Lowell Street, Andover, Massachusetts. The purchase price was $62,500,000. From the purchase price, the Partnership has allocated approximately $1,656,000 to the value of the in-place leases and approximately $96,000 to the value of the tenant relationships. These amounts will be amortized over 12 and 36 months respectively. To fund this purchase, the Partnership obtained short term financing of approximately $40,000,000, used the funds of approximately $2,100,000 from the like kind exchange of the Nashoba Apartments, and the balance from the Partnership's cash reserves. The closing costs associated with this short term financing were approximately $126,000. The original mortgage matured in November 2013. On December 20, 2013, the Partnership refinanced the property owned by Hamilton Green Apartments LLP. The new mortgage is $38,500,000; the interest rate is 4.67%; interest only for 2 years and is amortized on a 30 year schedule for the balance outstanding on December 31, 2012 was $4,893,448.of the term. . The proceeds of the new mortgage as well as the Partnership's cash reserves of approximately $1,846,000 were used to pay off the prior mortgage of $40,000,000 and cover the cost of this refinancing. The costs associated with the refinancing were approximately $346,000.

        During 2012,2013, the Partnership and its Subsidiary Partnerships completed improvements to certain of the Properties at a total cost of approximately $2,360,000.$4,500,000. These improvements were funded from cash reserves and, to some extent, escrow accounts established in connection with the financing or


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refinancing of the applicable Properties. These sources have been adequate to fully fund improvements. The most significant improvements were made at Westgate Woburn, Hamilton Oaks, Redwood Hills, 62 Boylston Street, Olde English, Clovelly, 1144 Commonwealth, AveCypress Street and 140 North Beacon StreetClovelly Apartments at a cost of approximately $445,000, 280,000, $271,000, $206,000, $185,000, $133,000$1,250,000, $372,000, $343,000, $321,000, $298,000, $297,000 and $113,000$291,000 respectively. The Partnership plans to invest approximately $2,300,000$3,300,000 in capital improvements in 2013.2014.

Advisory Committee

        The AdvosryAdvisory Committee members are Gregory Dube, Robert Nahigian, and Edward Sarkesian. These Advisory Committee members are not affiliated with the General Partner. The Advisory


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Committee meets with the General Partner to review the progress of the Partnership, assist the General Partner with policy formation, review the appropriateness, timing and amount of proposed distributions, approve or reject proposed acquisitions and investments with affiliates, and advise the General Partner on various other Partnership affairs. Per the Partnership Agreement, the Advisory Committee has no binding power except that it must approve certain investments and acquisitions or sales by the Partnership from or with affiliates of the Partnership.

Available Information

        The Partnership's website is www.thehamiltoncompany.com. On its website, the Partnership makes available, free of charge, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended. These forms are made available as soon as reasonably practical after the Partnership electronically files or furnishes such materials to the Securities and Exchange Commission. In addition, the Partnership's website includes other items related to corporate governance matters, including, among other things, the Partnership's corporate governance guidelines, charters of various committees of the Board of Directors, and the Partnership's code of business conduct and ethics applicable to all employees, officers and directors. Copies of these documents may be obtained, free of charge, from the website. Any shareholder may obtain copies of these documents, free of charge, by sending a request in writing to: Director of Investor Relations, New England Realty Associates Limited Partnership, 39 Brighton Avenue, Allston, MA 02134.

ITEM 1A.    RISK FACTORS

        We are subject to certain risks and uncertainties as described below. These risks and uncertainties may not be the only ones we face; there may be additional risks that we do not presently know of or that we currently consider immaterial. All of these risks could adversely affect our business, financial condition, results of operations and cash flows. Our ability to pay distributions on, and the market price of, our equity securities may be adversely affected if any of such risks are realized. All investors should consider the following risk factors before deciding to purchase or sell securities of the Partnership.

        We are subject to risks inherent in the ownership of real estate.    We own and manage multifamily apartment complexes and commercial properties that are subject to varying degrees of risk generally incident to the ownership of real estate. Our financial condition, the value of our properties and our ability to make distributions to our shareholders will be dependent upon our ability to operate our properties in a manner sufficient to generate income in excess of operating expenses and debt service charges, which may be affected by the following risks, some of which are discussed in more detail below:


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        We are dependent on rental income from our multifamily apartment complexes and commercial properties.    If we are unable to attract and retain tenants or if our tenants are unable to pay their rental obligations, our financial condition and funds available for distribution to our shareholders will be adversely affected.

        Our multifamily apartment complexes and commercial properties are subject to competition.    Our properties and joint venture investments are located in developed areas that include other properties. The properties also compete with other rental alternatives, such as condominiums, single and multifamily rental homes, owner occupied single and multifamily homes, and commercial properties in attracting tenants. This competition may affect our ability to attract and retain residents and to increase or maintain rental rates.

        The properties we own are concentrated in Eastern Massachusetts and Southern New Hampshire.    Our performance, therefore, is linked to economic conditions and the market for available rental housing and commercial space in these states. A decline in the market for apartment housing and/or commercial properties may adversely affect our financial condition, results of operations and ability to make distributions to our shareholders.

        Our insurance may not be adequate to cover certain risks.    There are certain types of risks, generally of a catastrophic nature, such as earthquakes, floods, windstorms, act of war and terrorist attacks that may be uninsurable, or are not economically insurable, or are not fully covered by insurance. Moreover, certain risks, such as mold and environmental exposures, generally are not covered by our insurance. Should an uninsured loss or a loss in excess of insured limits occur, we could lose our equity in the affected property as well as the anticipated future cash flow from that property. Any such loss could have a material adverse effect on our business, financial condition and results of operations.


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        Debt financing could adversely affect our performance.    The vast majority of our assets are encumbered by project specific, non-recourse, non-cross-collateralized mortgage debt. There is a risk that these properties will not have sufficient cash flow from operations for payments of required principal and interest. We may not be able to refinance these loans at an amount equal to the loan


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balance and the terms of any refinancing may not be as favorable as the terms of existing indebtedness. If we are unable to make required payments on indebtedness that is secured by a mortgage, the Partnership will either invest additional money in the property or the property securing the mortgage may be foreclosed with a consequent loss of income and value to us.

        We are obligated to comply with financial covenants in our indebtedness that could restrict our range of operating activities:    The mortgages on our properties contain customary negative covenants, including limitations on our ability, without prior consent of the lender and other items. Failure to comply with these covenants could cause a default under the agreements and, in certain circumstances; our lenders may be entitled to accelerate our debt obligations. Defaults under our debt agreements could materially and adversely affect our financial condition and results of operations.

        Real estate investments are generally illiquid, and we may not be able to sell our properties when it is economically or strategically advantageous to do so.    Real estate investments generally cannot be sold quickly, and our ability to sell properties may be affected by market conditions. We may not be able to diversify or vary our portfolio promptly in accordance with our strategies or in response to economic or other conditions.

        Our access to public debt markets is limited.    Substantially all of our debt financings are secured by mortgages on our properties because of our limited access to public debt markets.

        Litigation may result in unfavorable outcomes.    Like many real estate operators, we may be involved in lawsuits involving premises liability claims, housing discrimination claims and alleged violations of landlord-tenant laws, which may give rise to class action litigation or governmental investigations. Any material litigation not covered by insurance, such as a class action, could result in substantial costs being incurred. The Partnership does not carry directors and officersofficer's liability insurance.

        Our financial results may be adversely impacted if we are unable to sell properties and employ the proceeds in accordance with our strategic plan.    Our ability to pay down debt, reduce our interest costs, repurchase Depositary Receipts and acquire properties is dependent upon our ability to sell the properties we have selected for disposition at the prices and within the deadlines we have established for each respective property.

        The costs of complying with laws and regulations could adversely affect our cash flow and ability to make distributions to our shareholders.    Our properties must comply with Title III of the Americans with Disabilities Act (the "ADA") to the extent that they are "public accommodations" or "commercial facilities" as defined in the ADA. The ADA does not consider apartment complexes to be public accommodations or commercial facilities, except for portions of such properties that are open to the public. In addition, the Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment complexes first occupied after March 13, 1990, to be accessible to the handicapped. Other laws also require apartment communities to be handicap accessible. Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigants. We may be subject to lawsuits alleging violations of handicap design laws in connection with certain of our developments. If compliance with these laws involves substantial expenditures or must be made on an accelerated basis, our ability to make distributions to our shareholders could be adversely affected.


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        Under various federal, state and local laws, an owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on, under or in the property. This liability may be imposed without regard to whether the owner or operator knew of, or was responsible for, the presence of the substances. Other law imposes on owners and operators certain requirements regarding conditions and activities that may affect human health or the environment. Failure to comply with applicable requirements could complicate our ability to lease or sell an affected property and could subject us to monetary penalties, costs required to achieve compliance and potential liability to third parties. We are not aware of any material noncompliance, liability or claim relating to hazardous or toxic substances or other environmental matters in connection with any of our properties. Nonetheless, it is possible that material environmental contamination or conditions exist, or could arise in the future, in the apartment communities or on the land upon which they are located.

        We are subject to the risks associated with investments through joint ventures.    Nine of our properties are owned by joint ventures in which we do not have a controlling interest. We may enter into joint


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ventures, including joint ventures that we do not control, in the future. Any joint venture investment involves risks such as the possibility that the co-venturer may seek relief under federal or state insolvency laws, or have economic or business interests or goals that are inconsistent with our business interests or goals. While the bankruptcy or insolvency of our co-venturer generally should not disrupt the operations of the joint venture, we could be forced to purchase the co-venturer's interest in the joint venture or the interest could be sold to a third party. We also may guarantee the indebtedness of our joint ventures. If we do not have control over a joint venture, the value of our investment may be affected adversely by a third party that may have different goals and capabilities than ours.

        We are subject to risks associated with development, acquisition and expansion of multifamily apartment complexes and commercial properties.    Development projects and acquisitions and expansions of apartment complexes are subject to a number of risks, including:

        We are subject to control by our directors and officers.    The directors and executive officers of the General Partner and members of their families and related entities owned approximately 33.84%33.94% of our depositary receipts as of December 31, 2012.2013. Additionally, management decisions rest with our General Partner without limited partner approval.

        Competition for skilled personnel could increase our labor costs.    We and our management company compete with various other companies in attracting and retaining qualified and skilled personnel who are responsible for the day-to-day operations of our properties. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel. We may not be able to offset such added costs by increasing the rates we charge our tenants. If there is an increase in these costs or if we fail to attract and retain qualified and skilled personnel, our business and operating results could be harmed.

        We depend on our key personnel.    Our success depends to a significant degree upon the continued contribution of key members of the management company, who may be difficult to replace. The loss of services of these executives could have a material adverse effect on us. There can be no assurance that


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the services of such personnel will continue to be available to us. We do not hold key-man life insurance on any of our key personnel.

        Changes in market conditions could adversely affect the market price of our Depositary Receipts.    As with other publicly traded equity securities, the value of our depositary receipts depends on various market conditions, which may change from time to time. Among the market conditions that may affect the value of our depositary receipts are the following:


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        The market value of our depositary is based primarily upon the market's perception of our growth potential and our current and potential future earnings and cash distributions. Consequently, our depositary receipts may trade at prices that are higher or lower than our net asset value per depositary receipt.

        We face possible risks associated with the physical effects of climate change.    We cannot predict with the certainty whether climate change is occurring and, if so at what rate. However, the physical effects of climate change could have a material effect on our properties, operations, and business. To the extent climate change causes changes in weather patterns, our markets could experience increases in storm intensity and rising sea levels. Over time, these conditions could result in declining demand for our buildings or the inability of us to operate the buildings at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy and increasing the cost of snow removal at our properties. Proposed federal legislation to address climate change could increase utility and other costs of operating our properties which, if not offset by rising rental income, would reduce our net income. There can be no assurance that climate change will not have a material adverse effect on our properties, operations or business.

S        Securityecurity breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.suffer    In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our tenants and business partners, including personally identifiable information of our tenants and employees, in our data centers and on our networks. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, which could adversely affect our business.

        Risk of changes in the tax law applicable to real estate partnerships.    Since the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any such legislative action may prospectively or retroactively modify our tax treatment and therefore, may adversely affect taxation to us, and/or our partners.


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ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    PROPERTIES

        The Partnership and its Subsidiary Partnerships own the Apartment Complexes, the Condominium Units, the Commercial Properties and a 40-50% interest in nine Investment Properties.

        See also "Item 13. Certain Relationships and Related Transactions and Director Independence" for information concerning affiliated transactions.

Apartment Complexes

        The table below lists the location of the 2,2512,412 Apartment Units, the number and type of units in each complex, the range of rents and vacancies as of February 1, 2013,2014, the principal amount


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outstanding under any mortgages as of December 31, 2012,2013, the fixed interest rates applicable to such mortgages, and the maturity dates of such mortgages.

Apartment Complex
 Number and Type
of Units
 Rent Range Vacancies Mortgage Balance
and Interest Rate
As of
December 31, 2012
 Maturity
Date of
Mortgage
  Number and Type
of Units
 Rent Range Vacancies Mortgage Balance
and Interest Rate
As of
December 31, 2013
 Maturity
Date of
Mortgage
 

Battle Green LLC

 48 units 0 $4,893,448  2026  48 units  0 $4,813,616 2026 

34–42 Worthen Road

 0 three-bedroom N/A    4.95%    0 three-bedroom N/A    4.95%   

Lexington, MA

 24 two-bedroom $1,860–2,150          24 two-bedroom $1,960–2,200        

 24 one-bedroom $1,490–1,710          24 one-bedroom $1,515–1,755        

 0 studios N/A          0 studios N/A        

Boylston Downtown L.P.

 

269 units

 

0

 
$

19,500,000
  
2013
  

269 units

  

1

 
$

40,000,000
 
2028
 

62 Boylston Street

 0 three-bedroom N/A    4.84%    0 three-bedroom N/A    3.97%   

Boston, MA

 0 two-bedroom N/A          0 two-bedroom N/A        

 53 one-bedroom $1,650–2,500          53 one-bedroom $1,750–2,600        

 216 studios $1,190–1,850          216 studios $1,240–1,950        

Brookside Associates, LLC

 

44 units

 

2

 
$

2,723,830
  
2020
  

44 units

  

0

 
$

2,684,432
 
2020
 

5-7–10-12 Totman Road

 0 three-bedroom N/A    5.81%    0 three-bedroom N/A    5.81%   

Woburn, MA

 34 two-bedroom $1,175–1,340          34 two-bedroom $1,210–1,400        

 10 one-bedroom $1,100–1,160          10 one-bedroom $1,125–1,210        

 0 studios N/A          0 studios N/A        

Clovelly Apartments L.P.

 

103 units

 

2

 
$

4,160,000
  
2023
  

103 units

  

0

 
$

4,160,000
 
2023
 

160–170 Concord Street

 0 three-bedroom N/A    5.62%    0 three-bedroom N/A    5.62%   

Nashua, NH

 53 two-bedroom $865–1,260          53 two-bedroom $925–1,310        

 50 one-bedroom $800–935          50 one-bedroom $825–965        

 0 studios N/A          0 studios N/A        

Commonwealth 1137 L.P.

 

35 units

 

0

 
$

3,750,000
  
2023
  

35 units

  

1

 
$

3,750,000
 
2023
 

1131–1137 Commonwealth Ave.

 29 three-bedroom $1,800–2,550    5.65%    29 three-bedroom $1,900–2,650    5.65%   

Allston, MA

 4 two-bedroom $1,625–1,800          4 two-bedroom $1,800–1,900        

 1 one-bedroom $775          1 one-bedroom $875        

 1 studio $950          1 studio $1,100        

Commonwealth 1144 L.P.

 

261 units

 

0

 
$

14,780,000
  
2023
  

261 units

  

2

 
$

14,780,000
 
2023
 

1144–1160 Commonwealth Ave.

 0 three-bedroom N/A    5.61%    0 three-bedroom N/A    5.61%   

Allston, MA

 11 two bedroom $1,050–1,450          11 two bedroom $1,075–1,650        

 109 one-bedroom $875–1,425          109 one-bedroom $900–1,625        

 141 studios $750–1,150          141 studios $925–1,300        

Courtyard at Westgate, LLC

 

20 units

 

0

 
$

2,000,000
  
2015
 

105–107 Westgate Drive

 0 three-bedroom N/A    5.25%   

Burlington, MA

 12 two bedroom $1,500–1,925         

 8 one-bedroom $1,235–1,360         

 0 studios N/A         

Dean Street Associates, LLC

 

69 units

 

0

 
$

5,213,958
  
2014
 

38–48 Dean Street

 0 three-bedroom N/A    5.13%   

Norwood, MA

 66 two-bedroom $1,150–1,325         

 3 one-bedroom $1,125         

 0 studios N/A         

Executive Apartments L.P

 

72 units

 

3

 
$

2,415,000
  
2023
 

545–561 Worcester Road

 1 three-bedroom $1,350    5.59%   

Framingham, MA

 47 two-bedroom $1,000–1,200         

 24 one-bedroom $760–1,100         

 0 studios N/A         

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Apartment Complex
 Number and Type
of Units
 Rent Range Vacancies Mortgage Balance
and Interest Rate
As of
December 31, 2012
 Maturity
Date of
Mortgage
  Number and Type
of Units
 Rent Range Vacancies Mortgage Balance
and Interest Rate
As of
December 31, 2013
 Maturity
Date of
Mortgage
 

Courtyard at Westgate, LLC

 

20 units

  

0

 $2,000,000 2015 

105–107 Westgate Drive

 0 three-bedroom N/A    5.25%   

Burlington, MA

 12 two bedroom $1,575–1,975        

 8 one-bedroom $1,200–1,400        

 0 studios N/A        

Dean Street Associates, LLC

 

69 units

  

2

 
$

5,113,360
 
2014
 

38–48 Dean Street

 0 three-bedroom N/A    5.13%   

Norwood, MA

 66 two-bedroom $1,275–1,375        

 3 one-bedroom $1,175        

 0 studios N/A        

Executive Apartments L.P

 

72 units

  

0

 
$

2,415,000
 
2023
 

545–561 Worcester Road

 1 three-bedroom $1,400    5.59%   

Framingham, MA

 47 two-bedroom $1,075–1,300        

 24 one-bedroom $825–1,150        

 0 studios N/A        

Hamilton Green Apartments LLC

 

193 units

  

13

 
$

38,500,000
 
2029
 

311–319 Lowell Street

 10 three-bedroom $1,095–3,243    4.67%   

Andover, MA

 168 two-bedroom $902–3,350        

 15 one-bedroom $1,167–1,975        

Hamilton Oaks Associates, LLC

 

268 units

 

10

 $11,925,000  2023  

 

 

 

 

 

  
 
 
 
 

30–50 Oak Street Extension

 0 three-bedroom N/A    5.59%    268 units N/A 7 $11,925,000 2023 

40–60 Reservoir Street

 96 two-bedroom $1,200–1,325          0 three-bedroom $1,225–1,375    5.59%   

Brockton, MA

 159 one-bedroom $840–1,050          96 two-bedroom $915–1,075        

 159 one-bedroom $815–865        

 13 studios $770–850          13 studios         

Highland Street Apartments L.P.

 

36 units

 

2

 
$

1,050,000
  
2023
  

36 units

  

0

 
$

1,050,000
 
2023
 

38–40 Highland Street

 0 three-bedroom N/A    5.59%    0 three-bedroom N/A    5.59%   

Lowell, MA

 24 two-bedroom $900–1,000          24 two-bedroom $950–1,030        

 10 one-bedroom $775–885          10 one-bedroom $850–920        

 2 studios $800          2 studios $825–865        

Linhart L.P

 

9 units

 

0

 
$

1,964,119
  
2014
  

9 units

  

0

 
$

1,929,123

(1)
 
2014
 

4–34 Lincoln Street

 0 three-bedroom N/A    4.25%    0 three-bedroom N/A    4.25%   

Newton, MA

 0 two-bedroom N/A          0 two-bedroom N/A        

 5 one-bedroom $1,050–1,250         

 4 studios $950–1,000         

Nashoba Apartments L.P.

 

32 units

 

1

 
$

2,000,000
  
2013
 

284 Great Road

 0 three-bedroom N/A    5.30%   

Acton, MA

 32 two-bedroom $1,165–1,500         

 0 one-bedroom N/A          5 one-bedroom $1,200–1,300        

 0 studios N/A          4 studios $1,000        

North Beacon 140 L.P.

 

65 units

 

0

 
$

6,937,000
  
2023
  

65 units

  

0

 
$

6,937,000
 
2023
 

140–154 North Beacon Street

 10 three-bedroom $2,100–2,350    5.59%    10 three-bedroom $2,225–2,450    5.59%   

Brighton, MA

 54 two-bedroom $1,550–1,870          54 two-bedroom $1,550–2,075        

 1 one-bedroom $800          1 one-bedroom $800        

 0 studios N/A          0 studios N/A        

Olde English Apartments L.P.

 

84 units

 

1

 
$

3,080,000
  
2023
  

84 units

  

0

 
$

3,080,000
 
2023
 

703–718 Chelmsford Street

 0 three-bedroom N/A    5.63%    0 three-bedroom N/A    5.63%   

Lowell, MA

 47 two-bedroom $990–1,215          47 two-bedroom $1,025–1,250        

 30 one-bedroom $900–1,125          30 one-bedroom $900–1,175        

 7 studios $825–900          7 studios $850–925        

Redwood Hills L.P.

 

180 units

 

6

 
$

6,743,000
  
2023
 

376–384 Sunderland Road

 0 three-bedroom N/A    5.59%   

Worcester, MA

 89 two-bedroom $995–1,225         

 91 one-bedroom $825–975         

 0 studios N/A         

River Drive L.P.

 

72 units

 

1

 
$

3,465,000
  
2023
 

3–17 River Drive

 0 three-bedroom N/A    5.62%   

Danvers, MA

 60 two-bedroom $1,025–1,225         

 5 one-bedroom $950–990         

 7 studios $825–890         

School Street 9, LLC

 

184 units

 

7

 
$

15,308,474
  
2013
 

9 School Street

 0 three-bedroom N/A    5.47%   

Framingham, MA

 96 two-bedroom $1,145–1,350         

 88 one-bedroom $900–1,150         

 0 studios N/A         

WCB Associates, LLC

 

180 units

 

3

 
$

7,000,000
  
2023
 

10–70 Westland Street

 1 three-bedroom $1,200    5.66%   

985–997 Pleasant Street

 94 two-bedroom $1,010–1,150         

Brockton, MA

 85 one-bedroom $825–950         

 0 studios N/A         

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Apartment Complex
 Number and Type
of Units
 Rent Range Vacancies Mortgage Balance
and Interest Rate
As of
December 31, 2013
 Maturity
Date of
Mortgage
 

Redwood Hills L.P. 

 

180 units

   

4

 $6,743,000  2023 

376–384 Sunderland Road

 0 three-bedroom N/A    5.59%   

Worcester, MA

 89 two-bedroom $1,050–1,275         

 91 one-bedroom $875–995         

 0 studios N/A         

River Drive L.P. 

 

72 units

   

1

 
$

3,465,000
  
2023
 

3–17 River Drive

 0 three-bedroom N/A    5.62%   

Danvers, MA

 60 two-bedroom $1,050–1,250         

 5 one-bedroom $950–1,025         

 7 studios $865–940         

School Street 9, LLC

 

184 units

   

1

 
$

15,000,000
  
2023
 

9 School Street

 0 three-bedroom N/A    3.76%   

Framingham, MA

 96 two-bedroom $1,175–1,495         

 88 one-bedroom $980–1,250         

 0 studios N/A         

WCB Associates, LLC

 

180 units

   

2

 
$

7,000,000
  
2023
 

10–70 Westland Street

 1 three-bedroom $1,200    5.66%   

985–997 Pleasant Street

 94 two-bedroom $1,010–1,200         

Brockton, MA

 85 one-bedroom $809–975         

 0 studios N/A         

Westgate Apartments, LLC

 

220 units

   

5

 
$

15,700,000
  
2023
 

2–20 Westgate Drive

 0 three-bedroom N/A    4.65%   

Woburn, MA

 110 two-bedroom $1,240–1,525         

 110 one-bedroom $885–1,335         

 0 studios N/A         

Apartment Complex
 Number and Type
of Units
 Rent Range Vacancies Mortgage Balance
and Interest Rate
As of
December 31, 2012
 Maturity
Date of
Mortgage
 

Westgate Apartments, LLC

 

220 units

   

1

 $7,931,885  2014 

2–20 Westgate Drive

 0 three-bedroom N/A    7.07%   

Woburn, MA

 110 two-bedroom $1,190–1,500         

 110 one-bedroom $880–1,310         

 0 studios N/A         
(1)
The loan for Linhart LP was paid off in February 2014. See Note 18—Subsequent Events.

Current free rent concessions would result in an average reduction in unit rents of less than $1.77$2.60 per month per unit. Free rent expense amortized in 20122013 was approximately $48,000$70,000 compared to approximately $231,000$48,000 in 2011.2012.

        On June 1, 2011, the Partnership purchased the Battle Green Apartments, a 48 unit residential apartment complex located at 34-42 Worthen Road, Lexington, Massachusetts. The purchase price was $10,000,000. The purchase price equates to a capitalization rate of 5.0% on the trailing 12 months actual operating income provided by the seller. Operating income is equal to earnings before interest, depreciation and income taxes. Based on the Partnerships operating expectation, the capitalization rate for this investment is 6.2%. The Partnership used cash reserves, the proceeds from the sale of Avon Street and borrowed $3,998,573 from Harold Brown, Treasurer of the General Partner to make this purchase. This loan had an interest rate of 6% and was secured by the Partnership's ownership interest in Battle Green Apartments, LLC. On July 27, 2011, the Partnership financed the Battle Green Apartments with a new $5,000,000 mortgage at 4.95% which matures in August 2026. Proceeds for the financing were used to pay off the loan from Harold Brown and the balance was deposited in the Partnerships operating account. Principal payments will be made using a 30 year amortization schedule. See Note 2 to the Consolidated Financial statements for additional information.

        On July 15, 2013, Hamilton Green Apartments, LLC, a newly formed subsidiary of the Partnership, purchased Windsor Green at Andover, a 193 unit apartment complex located at 311 and 319 Lowell Street, Andover, Massachusetts. The purchase price was $62,500,000. From the purchase price, the Partnership has allocated approximately $1,656,000 to the value of the in-place leases and approximately $96,000 to the value of the tenant relationships. These amounts will be amortized over 12 and 36 months respectively. To fund this purchase, the Partnership obtained short term financing of approximately $40,000,000, used the funds of approximately $2,100,000 from the like kind exchange of


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the Nashoba Apartments, and the balance from the Partnership's cash reserves. The closing costs associated with this short term financing were approximately $38,000. The original mortgage matured in November 2013. On December 20, 2013, the Partnership refinanced the mortgage on Hamilton Green. The new mortgage is $38,500,000; interest is fixed at 4.67% for 15 years, interest only for 2 years and is amortized on a 30 year schedule for the balance of the term. This refinancing will require an additional $1,846,000 in capital from the Partnership. The closing costs associated with this refinancing were approximately $346,000.

See Note 5 to the Consolidated Financial Statements, included as part of this Form 10-K, for information relating to the mortgages payable of the Partnership and its Subsidiary Partnerships.

Condominium Units

        The Partnership owns and leases to residential tenants 19 Condominium Units in the metropolitan Boston area of Massachusetts.

        The table below lists the location of the 19 Condominium Units, the type of units, the range of rents received by the Partnership for such units, and the number of vacancies as of February 1, 2013.2014.

Condominiums
 Number and Type
of Units Owned
by Partnership
 Rent Range Vacancies Mortgage Balance
and Interest Rate
As of
December 31, 20122013
 Maturity
Date of
Mortgage
 

Riverside Apartments

 19 units    0     

8–20 Riverside Street

 0 three-bedroom N/A          

Watertown, MA

 12 two-bedroom $1,275–1,5001,300–1,550          

 5 one-bedroom $1,250–1,3501,400–1,450          

 2 studios $1,0751,125–1,200          

Commercial Properties

        BOYLSTON DOWNTOWN LP.    In 1995, this Subsidiary Partnership acquired the Boylston Downtown property in Boston, Massachusetts ("Boylston"). This mixed-use property includes 17,218 square feet of rentable commercial space. As of February 1, 2013,2014, the commercial space had a 0% vacancy rate, and the average rent per square foot was $24.74.$24.33. For mortgage balance, interest rate and maturity date information see "Apartment Complexes," above.


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        HAMILTON OAKS ASSOCIATES, LLC.    The Hamilton Oaks Apartment complex, acquired by the Partnership in December 1999 through Hamilton Oaks Associates, LLC, includes 6,075 square feet of rentable commercial space, occupied by a daycare center. As of February 1, 2013,2014, the commercial space was fully occupied, and the average rent per square foot was $12.50.$13.00. The Partnership also rents roof space for a cellular phone antenna at an average rent of approximately $36,794 per year through November 2015. For mortgage balance, interest rate and maturity date information see "Apartment Complexes," above.

        LINHART LP.    In 1995, the Partnership acquired the Linhart property in Newton, Massachusetts ("Linhart"). This mixed-use property includes 21,55521,548 square feet of rentable commercial space. As of February 1, 2013,2014, the commercial space was fully occupied, and the average rent per square foot was $24.34.$24.32. For mortgage balance, interest rate and maturity date information see "Apartment Complexes," above. The loan was paid off in February 2014. (See Note 18—Subsequent Events)

        NORTH BEACON 140 LP.    In 1995, this Subsidiary Partnership acquired the North Beacon property in Boston, Massachusetts ("North Beacon"). This mixed-use property includes 1,050 square feet of rentable commercial space. The property was fully rented as of February 1, 2013,2014, and the average rent per square foot as of that date was $32.50.$33.25. For mortgage balance, interest rate and maturity date information see "Apartment Complexes," above.


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        STAPLES PLAZA.    In 1999, the Partnership acquired the Staples Plaza shopping center in Framingham, Massachusetts ("Staples Plaza"). The shopping center consists of 39,60038,695 square feet of rentable commercial space. As of December 31, 2012,2013, the mortgage had an outstanding balance $6,000,000 with interest rate of 5.97%, matures in 2018. As of February 1, 2013,2014, Staples Plaza was fully occupied, and the average net rent per square foot was $22.26.$24.42. For mortgage balance, interest rate and maturity date information see "Apartment Complexes," above.

        HAMILTON LINEWT ASSOCIATES, LLC.    In 2007, the Partnership acquired a retail block in Newton, Massachusetts. The property consists of approximately 6,0005,850 square feet of rentable commercial space. The property was fully rented at an average rent of $35.63 per square foot. The Partnership obtained a mortgage in January 2008 of $1,700,000 on this property. The mortgage balance at December 31, 20122013 is $1,528,429$1,474,947 the interest rate is 5.75%3.25% and matures in January 2018. The loan was paid off in February 2014. (See Note 18—Subsequent Events)

        HAMILTON CYPRESS LLC.    In 2008, the Partnership acquired a medical office building in Brookline, Massachusetts. The property consists of approximately 20,00017,607 square feet of rentable commercial space at December 31, 2012. Thespace. As of February 2, 2014, the property was 71%94% occupied at an average rent of $35.21per square foot. One lease covering 7,037 square feet is expiring on March 31, 2013 which will increase the vacancy rate to 64%. The new rents are expected to average $34.00$35.57 per square foot. The Partnership assumed a mortgage of approximately $4,011,000. The mortgage balance at December 31, 2012 is $3,686,380, the interest rate is 5.92% and matures in May 2013. This mortgage was paid off on February 25, 2013.


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        The following information is provided for commercial leases:

Thru December 31,
 Annual base rent
for expiring leases
 Total square
feet for
expiring leases
 Total number
of leases
expiring
 Percentage of
Annual base rent
for expiring leases
 

2013

 $470,463 23,773 11 17%
Through December 30,
 Annual base rent
for expiring leases
 Total square
feet for
expiring leases
 Total number
of leases
expiring
 Percentage of
annual base rent
for expiring leases
 

2014

 588,422 29,523 10 22% $364,575 18,610 11 13%

2015

 266,098 8,471 8 10% 264,567 8,471 8 9%

2016

 593,346 27,073 3 22% 610,382 27,796 5 21%

2017

 448,101 11,997 6 16% 510,074 14,134 7 17%

2018

 58,050 1,262 1 2% 298,551 8,707 6 10%

2019

 200,375 5,800 2 7% 611,721 21,586 4 21%

2020

 64,657 1,106 1 2% 64,657 1,106 1 2%

2021

 64,800 1,800 1 2% 64,800 1,800 1 2%

2022

 0   0% 0 0 0 0%

2023

 157,443 4,771 1 5%
                  

Totals

 $2,754,312 110,805 43 100% $2,946,770 106,981 44 100%
                  
         

Commercial rental income is accounted for using the straight line method. FortyFifty one percent of our commercial leases contain rent escalations which range from $0.50 – $2.00 per square foot per year.

Investment Properties

        See Note 14 to the Financial Statements and Exhibit 99.1 for additional information regarding the Investment Properties.


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        The Partnership has a 50% ownership interest in the properties summarized below:

Investment Properties
 Number and Type
of Units
 Range Vacancies Mortgage Balance
and Interest Rate
As of
December 31, 2012
 Maturity
Date of
Mortgage
 

345 Franklin, LLC

 40 Units    0 $6,850,179  2014 

345 Franklin Street

 0 three-bedroom N/A     6.90%   

Cambridge, MA

 39 two-bedroom $2,200–2,750          

 1 one-bedroom $1,900          

 0 studios N/A          

Hamilton on Main Apartments, LLC

 

148 Units

    
2
 
$

15,611,045
  
2015
 

223 Main Street

 0 three-bedroom N/A     5.18%   

Watertown, MA

 93 two-bedroom $1,350–1,750          

 31 one-bedroom $1,200–1,650          

 24 studios $1,050–1,225          

Hamilton Minuteman, LLC

 

42 Units

    
0
 
$

5,433,472
  
2017
 

1 April Lane

 0 three-bedroom N/A     5.67%   

Lexington, MA

 40 two-bedroom $1,485–1,850          

 2 one-bedroom $1,475–1,500          

 0 studios N/A          

Hamilton Essex 81 LLC

 

49 Units

    
0
 
$

8,352,317
  
2016
 

Residential

 0 three-bedroom N/A     5.79%   

81–83 Essex Street

 11 two-bedroom $1,390–2,225          

Boston, Massachusetts

 38 one-bedroom $1,315–1,575          

 0 studios N/A          

Hamilton Essex Development LLC

 

Parking Lot

      
$

2,093,184
  
2013
 

Commercial

         2.8%   

81–83 Essex Street

              

Boston, Massachusetts

              

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Investment Properties
 Number and Type
of Units
 Range Vacancies Mortgage Balance
and Interest Rate
As of
December 31, 2012
 Maturity
Date of
Mortgage
  Number and Type
of Units
 Range Vacancies Mortgage Balance
and Interest Rate
As of
December 31, 2013
 Maturity
Date of
Mortgage
 

345 Franklin, LLC

 40 Units 2 $10,000,000 2028 

345 Franklin Street

 0 three-bedroom N/A 3.87%   

Cambridge, MA

 39 two-bedroom $2,300–2,900     

 1 one-bedroom $2,100     

 0 studios N/A     

Hamilton on Main Apartments, LLC

 

148 Units

 

5

 
$

15,317,643
 
2015
 

223 Main Street

 0 three-bedroom N/A 5.18%   

Watertown, MA

 93 two-bedroom $1,350–1,900     

 31 one-bedroom $1,250–1,750     

 24 studios $1,110–1,300     

Hamilton Minuteman, LLC

 

42 Units

 

0

 
$

5,362,109
 
2017
 

1 April Lane

 0 three-bedroom N/A 5.67%   

Lexington, MA

 40 two-bedroom $1,525–1,975     

 2 one-bedroom $1,550–1,575     

 0 studios N/A     

Hamilton Essex 81 LLC

 

49 Units

 

1

 
$

8,234,548
 
2016
 

Residential

 0 three-bedroom N/A 5.79%   

81–83 Essex Street

 11 two-bedroom $1,465–2,400     

Boston, Massachusetts

 38 one-bedroom $1,415–1,700     

 0 studios N/A     

Hamilton Essex Development LLC

 

Parking Lot

 
$

2,041,146
 
2015
 

Commercial

  2.74%   

81–83 Essex Street

      

Boston, Massachusetts

      

Hamilton 1025, LLC

 

48 Units

 1 $4,934,741 2016  

48 Units

 

0

 
$

4,869,583
 
2016
 

Units to be retained

 0 three-bedroom N/A   5.67%    0 three-bedroom N/A 5.67%   

1025 Hancock Street

 32 two-bedroom $1,450–1,600        32 two-bedroom $1,500–1,700     

Quincy, Massachusetts

 16 one-bedroom $1,300–1,350        16 one-bedroom $1,300–1,450     

 0 studios N/A        0 studios N/A     

Hamilton Bay, LLC(A)

 

15 Units

 
2
 
$

1,668,000
 
2013
  

15 Units

 

2

     

Units held for sale

 0 three-bedroom N/A   5.75%    0 three-bedroom N/A     

165–185 Quincy Shore Drive

 0 two-bedroom N/A        0 two-bedroom N/A     

Quincy, Massachusetts

 15 one-bedroom $1,294–1,450        15 one-bedroom $1,350–1,550     

 0 studios N/A        0 studios N/A     

Hamilton Bay Apartments, LLC

 

48 Units

 
1
 
$

4,702,087
 
2017
  

48 Units

 

0

 
$

4,639,848
 
2017
 

165–185 Quincy Shore Drive

 0 three-bedroom N/A   5.57%    0 three-bedroom N/A 5.57%   

Quincy, Massachusetts

 24 two-bedroom $1,350–1,800        24 two-bedroom $1,400–1,900     

 24 one-bedroom $1,350–1,750        24 one-bedroom $1,375–1,550     

The Partnership has a 40% ownership interest in the property summarized below:

The Partnership has a 40% ownership interest in the property summarized below:

 

The Partnership has a 40% ownership interest in the property summarized below:

 

Hamilton Park Towers, LLC

 

409 Units

 
0
 
$

88,611,686
 
2019
  

409 Units

 

2

 
$

87,410,638
 
2019
 

175–185 Freeman Street,

 71 three-bedroom $2,075–4,020   5.57%    71 three-bedroom $2,950–4,500 5.57%   

Brookline,

 227 two-bedroom $2,025–3,325        227 two-bedroom $2,075–3,500     

Massachusetts

 111 one-bedroom $1,600–2,450        111 one-bedroom $1,775–2,450     

 0 studios        0 studios     

Current free rent concessions would result in an average reduction in unit rents of less than $1.00 per month per unit.

 

Current free rent concessions would result in an average reduction in unit rents of less than $3.35 per month per unit. Free rent amortized in 2013 was approximately $32,000 compared to $10,000 in 2012.

Current free rent concessions would result in an average reduction in unit rents of less than $3.35 per month per unit. Free rent amortized in 2013 was approximately $32,000 compared to $10,000 in 2012.

 

(A)
Represents unsold units at February 1, 2013.2014.

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        345 FRANKLIN, LLC.    In November 2001, the Partnership invested approximately $1,533,000 for a 50% ownership interest in a 40-unit apartment building in Cambridge, Massachusetts. ThisIn June 2013, the property has a 12-year mortgage,was refinanced with a remaining balance15 year mortgage in the amount of $10,000,000 at December 31, 2012 of approximately $6,850,000 at 6.9% which3.87%, interest only for 3 years and is amortized on a 30-year schedule with a final paymentfor the balance of the term. The Partnership paid off the prior mortgage of approximately $6,685,000 in 2014.$6,776,000 with the proceeds of the new mortgage. After the refinancing, the property made a distribution of $1,610,000 to the Partnership. As a result of the distribution, the carrying value of the investment fell below zero. The Partnership will continue to account for this investment using the equity method of accounting. Although the Partnership has no legal obligation, the Partnership intends to fund its share of any future operating deficits if needed. This investment is referred to as 345 Franklin, LLC.

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


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        In 2005, Hamilton on Main Apartments, LLC obtained a ten year mortgage on the three buildings to be retained. The mortgage is $16,825,000, with interest only of 5.18% for three years and amortizing on a 30 year schedule for the remaining seven years when the balance is due. The net proceeds after funding escrow accounts and closing costs on the mortgage were approximately $16,700,000, which were used to reduce the existing mortgage. Hamilton on Main LLC paid a fee of approximately $400,000 in connection with this early extinguishment of debt. At December 31, 2012,2013, the remaining balance on the mortgage is approximately $15,611,000.$15,318,000.

        HAMILTON MINUTEMAN, LLC.    In September 2004, the Partnership invested approximately $5,075,000 for a 50% ownership interest in a 42-unit apartment complex located in Lexington, Massachusetts. The purchase price was $10,100,000. In October 2004, the Partnership obtained a mortgage on the property in the amount of $8,025,000 and returned $3,775,000 to the Partnership. The Partnership obtained a new 10-year mortgage in the amount of $5,500,000 in January 2007. The interest on the new loan is 5.67% fixed for the ten year term with interest only payments for five years and amortized over a 30 year period for the balance of the loan. This loan required a cash contribution by the Partnership of $1,250,000 in December 2006. At December 31, 20122013 the remaining balance on this mortgage is approximately $5,433,000.$5,362,000. This investment is referred to as Hamilton Minuteman, LLC.

        HAMILTON ESSEX 81, LLC.    On March 7, 2005, the Partnership invested $2,000,000 for a 50% ownership interest in a building comprising 49 apartments, one commercial space and a 50-car surface parking lot located in Boston, Massachusetts. The purchase price was $14,300,000, with a $10,750,000 mortgage. The Partnership plans to operate the building and initiate development of the parking lot. In June 2007, the Partnership separated the parcels, formed an additional limited liability company for the residential apartments and obtained a mortgage on the property. The new limited liability company formed for the residential apartments and commercial space is referred to as Hamilton Essex 81, LLC. In August 2008, the Partnership restructured the mortgages on both parcels at Essex 81 and transferred the residential apartments to Hamilton Essex 81, LLC. The mortgage on Hamilton Essex 81, LLC is $8,600,000 at 5.79% amortizedapproximately $8,235,000 amortizing over 30 years at 5.79% due in August 2016. The mortgage on Essex Development, LLC, or the parking lot is $2,144,796approximately $2,041,000 with a variable interest rate of 2.25% over the daily Libor rate (0.21%(0.17% at December 31, 2012) and was originally due in August 2011.2013). This loan was extended to August 2013 with the same conditions except for the addition of fixed principal payments in the amount of $4,301


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per month. The cost associated with the extension was approximately $6,000. In September 2013, the loan was extended for an additional two years to August 2015 with the same conditions except for the increased principal payments of $4,443 per month. The costs associated with the extension were approximately $9,000. Harold Brown has issued a personal guaranty up to $1,000,000 of this mortgage. In the event that he is obligated to make payments to the lender as a result of this guaranty, the Partnership and other investors have, in turn, agreed to indemnify him for their proportionate share of any such payments. At December 31, 2012 the remaining balance on the mortgage at Essex 81 LLC is approximately $8,352,000 and the remaining balance on the mortgage at Essex Development is approximately $2,093,000. The investment in the parking lot is referred to as Hamilton Essex Development, LLC; the investment in the apartments is referred to as Hamilton Essex 81, LLC.

        HAMILTON 1025, LLC.    On March 2, 2005, the Partnership invested $2,352,000 for a 50% ownership interest in a 176-unit apartment complex with an additional small commercial building located in Quincy, Massachusetts. The purchase price was $23,750,000. The Partnership sold 127 of the units as condominiums and retained 49 units for long-term investment. The Partnership obtained a new 10-year mortgage in the amount of $5,000,000 on the units to be retained by the Partnership. The interest on the new loan is 5.67% fixed for the 10 year term with interest only payments for five years and amortized over a 30 year period for the balance of the loan term. At December 31, 2012,2013, the mortgage balance is approximately $4,935,000.$4,870,000. This investment is referred to as Hamilton 1025, LLC.

        HAMILTON BAY, LLC.    On October 3, 2005, the Partnership invested $2,500,000 for a 50% ownership interest in a 168-unit apartment complex in Quincy, Massachusetts. The purchase price was $30,875,000. The Partnership plans to sell the majority of units as condominium and retain 48 units for long-term investment. Gains from the sales of units will bewere taxed at ordinary income rates


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(approximately $47,000 per unit).rates. In February 2007, the Partnership refinanced the 48 units which will be retained with a new mortgage in the amount of $4,750,000 with an interest rate of 5.57%, interest only for five years. The loan will be amortized over 30 years thereafter and matures in March 2017. TheAs of December 31, 2013, the balance onof the mortgage is approximately $4,700,000 at December 31, 2012.$4,640,000. This investment is referred to as Hamilton Bay Apartments, LLC. In April 2008, the Partnership refinanced an additional 20 units and obtained a new mortgage in the amount of $2,368,000 with interest at 5.75%, interest only, which matures in 2013. At December 31, 2012,On October 18, 2013, the Partnership and its joint venture partner each made capital contributions to the entity of $660,000. The capital was used to pay off the outstanding mortgage. As of February 1, 2014, 15 of the 20 units are still owned by the Partnership. No unit was sold during the year ended December 31, 2012. As of February 1, 2013, the Partnership sold 105 units, the proceeds of which went to pay down the mortgage on the property. The balance on the new mortgage is approximately $1,668,000 at December 31, 2012. This investment is referred to as Hamilton Bay, LLC.

        HAMILTON PARK TOWERS, LLC    On October 28, 2009 the Partnership invested approximately $15,925,000 in a joint venture to acquire a 40% interest in a residential property located in Brookline, Massachusetts. The property, referred to as Dexter Park, is a 409 unit residential complex. The purchase price was $129,500,000. The total mortgage iswas $89,914,000 with an interest rate of 5.57% and it matures in 2019. The mortgage calls for interest only payments for the first two years of the loan and amortized over 30 years thereafter. The balance of this mortgage is approximately $88,612,000$87,411,000 at December 31, 2012.2013. In order to fund this investment, the Partnership used approximately $8,757,000 of its cash reserves and borrowed approximately $7,168,000 with an interest rate of 6% from HBC Holdings, LLC, an entity owned by Harold Brown and his affiliates ("HBC"). The term of the loan iswas four years with a provision requiring payment in whole or in part upon demand by HBC with six months notice. On August 17, 2010, HBC gave six months written notice to the Partnership requesting a principal pay down of $2,500,000. During the fourth quarter of 2010, the Partnership paid HBC $2,500,000 as requested. During 2011, the Partnership elected to make principal payments of $1,000,000 on August 1, 2011, $1,000,000 on October 3,1, 2011, and an additional $1,000,000 on December 15, 2011 reducing the loan balance to $1,668,600. This loan will remain subject$1,668,600 at December 31, 2011. In February 2012, the Partnership elected to the original termsmake an additional principal payment of the Note, including HBC's right$750,000 to demand payment ofHBC Holdings and the balance of the loan$918,600 was paid in whole or in part upon six months notice.April 2012. The interest paid during the year ended December 31, 2012 and 2011 was $18,960 and $238,673, respectively. This loan is collateralized by the Partnership's 99% ownership interest in 62 Boylston Street.$18,960. A majority of the apartments were leased at the time of the acquisition. As a result, the Partnership amortized the intangible assets associated with the "in place"


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leases over a 12 month period which began in November 2009. . The intangible asset was fully amortized effective November 2010. This investment, Hamilton Park Towers, LLC is referred to as Dexter Park.

ITEM 3.    LEGAL PROCEEDINGS

        The Partnership, the Subsidiary Partnerships, and the Investment Properties and their properties are not presently subject to any material litigation, and, to management's knowledge, there is not any material litigation presently threatened against them. The properties are occasionally subject to ordinary routine legal and administrative proceedings incident to the ownership of residential and commercial real estate. Some of the legal and other expenses related to these proceedings are covered by insurance and none of these costs and expenses are expected to have a material adverse effect on the Consolidated Financial Statements of the Partnership.

ITEM 4.    MINE SAFETY DISCLOSURE

        Not applicable.


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ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        Each Class A Unit is exchangeable, through Computershare Trust Company ("Computershare") (formerly Equiserve LP), the Partnership's Depositary Agent, for 30 Depositary Receipts ("Receipts"). The Receipts are listed and publicly traded on the NYSE AmexMKT Exchange under the symbol "NEN." There has never been an established trading market for the Class B Units or General Partnership Units.

        In 2012,2013, the high and low bid quotations for the Receipts were $30.84$46.99 and $23.02$29.00 respectively. The table below sets forth the high and low bids for each quarter of 20122013 and 20112012 and the distributions paid on the Partnership's Depositary Receipts:

        Effective January 3, 2012, the Partnership authorized a 3-for-1 forward split of its Depositary Receipts listed on the NYSE AmexMKT and a concurrent adjustment of the exchange ratio of Depositary Receipts for Class A Units of the Partnership from 10-to-1 to 30-to-1, such that each Depositary Receipt represents one-thirtieth (1/30) of a Class A Unit of the Partnership.

        All references to Depositary Receipts in the report are reflective of the 3-for-1 forward split.


 2012 2011  2013 2012 

 Low Bid High Bid Close Distributions Low Bid High Bid Close Distributions  Low Bid High Bid Close Distributions Low Bid High Bid Close Distributions 

First Quarter

 $23.02 $28.96 $27.50 $0.25 $21.35 $22.58 $22.27 $0.233  $29.00 $39.10 $38.75 $0.25 $23.02 $28.96 $27.50 $0.25 

Second Quarter

 $25.00 $28.48 $27.25 $0.25 $21.75 $23.85 $22.90 $0.233  $37.00 $43.72 $40.30 $0.25 $25.00 $28.48 $27.25 $0.25 

Third Quarter

 $25.98 $29.98 $28.97 $0.25 $20.53 $24.00 $22.98 $0.233  $40.15 $46.97 $46.00 $0.25 $25.98 $29.98 $28.97 $0.25 

Fourth Quarter

 $28.06 $30.84 $29.70 $0.25 $20.45 $24.84 $23.75 $0.233  $43.00 $46.99 $44.44 $0.25 $28.06 $30.84 $29.70 $0.25 

Distribution to Limited & General Partners were:


 2012 2011  2013 2012 

Class A—Limited Partners (80%)

 $3,145,928 $2,945,253  $3,114,930 $3,145,928 

Class B—Limited Partners (19%)

 747,158 699,497  739,796 747,158 

Class C—General Partner (1%)

 39,324 36,816  38,936 39,324 
          

Total

 $3,932,410 $3,681,566  $3,893,662 $3,932,410 
          
     

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        On March 15, 2013,17, 2014, the closing price on the NYSE AmexMKT Exchange for a Depositary Receipt was $35.50.$45.27. There were 2,990,1822,982,572 Depositary Receipts outstanding and 4,3593,963 Units (representing 130,770118,890 receipts) held by 1,063approximately 2,025 record holders.

        Any portion of the Partnership's cash, which the General Partner deems not necessary for cash reserves, is distributed to the Partners, and distributions are made on a quarterly basis. The Partnership has made annual distributions to its Partners since 1978. In 2012,2013, the Partnership made distributions of $30.00 per Unit ($1.00 per Receipt) and in 2011,2012, the Partnership made distributions of $28.00$30.00 per Unit, ($0.931.00 per Receipt). The total value of the distribution in 20122013 was $3,893,662 and $3,932,410 and $3,681,566 in 2011.2012. In February 2013,2014, the Partnership declared a quarterly distribution of $7.50 per Unit ($0.25 per Receipt) payable on March 31, 2013.2014.

        See "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" for certain information relating to the number of holders of each class of Units.


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        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 300,000 Depositary Receipts (each of which is one-tenth of a Class A Unit). On January 15, 2008, the General Partner authorized an increase in the Repurchase Program from 300,000 to 600,000 Depositary Receipts. On January 30, 2008 the General Partner authorized an increase the Repurchase Program from 600,000 to 900,000 Depositary Receipts. On March 6, 2008, the General Partner authorized the increase in the total number of Depositary Receipts that could be repurchased pursuant to the Repurchase Program from 900,000 to1, 500,000. On August 8, 2008, the General Partner re-authorized and renewed the Repurchase Program for an additional 12-month period ended August 19, 2009. On March 22, 2010, the General Partner re-authorized and renewed the Repurchase Program that expired on August 19, 2009. Under the terms of the renewed Repurchase Program, the Partnership may purchase up to 1,500,000 Depositary Receipts from the start of the program in 2007 through March 31, 2015. The Repurchase Program requires the Partnership to repurchase a proportionate number of Class B Units and General Partner Units in connection with any repurchases of any Depositary Receipts by the Partnership based upon the 80%, 19% and 1% fixed distribution percentages of the holders of the Class A, Class B and General Partner Units under the Partnership's Second Amended and Restate Contract of Limited Partnership. Repurchases of Depositary Receipts or Partnership Units pursuant to the Repurchase Program may be made by the Partnership from time to time in its sole discretion in open market transactions or in privately negotiated transactions. From August 20, 2007 through December 31, 2012,2013, the Partnership has repurchased 1,219,9271,242,891 Depositary Receipts at an average price of $24.62$24.86 per receipt (or $738.60$745.80 per underlying Class A Unit), 1,9212,103 Class B Units and 101111 General Partnership Units, both at an average price of $613.94$658.89 per Unit, totaling approximately $31,386,000$32,480,942 including brokerage fees paid by the Partnership.

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


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(c)
Issuer Purchase of Equity Securities during the fourth quarter of 2013:

Period
 Average
Price Paid
 Depositary Receipts
Purchased as Part
of Publicly
Announced Plan
 Remaining number
of Depositary Receipts
that may be purchased
Under the Plan
(as Amended)
 

October 1 - 31, 2013

      258,364 

November 1 - 30, 2013

 $43.73  92  258,272 

December 1 - 31, 2013

 $45.51  1,163  257,109 
          

Total

     1,255    
          
          

        See Note 8 to the Consolidated Financial Statements for information concerning this repurchase program.


COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among New England Realty Assoc. L.P., the NYSE MKT Composite Index,
and the FTSE NAREIT All REITs Index

*$100 invested on 12/31/0708 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

        The Partnership does not have any securities authorized for issuance under any equity compensation plans that are subject to disclosure under Item 201(d) of Regulation S-K.


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ITEM 6.    SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA

 
 Year Ended December 31, 
 
 2013 2012 2011 2010 2009 

INCOME STATEMENT INFORMATION(a)

                

Revenues

 $38,364,552 $35,169,170 $33,584,787 $31,805,472 $31,917,922 

Expenses

  27,233,135  22,389,427  22,339,029  21,591,507  21,237,662 
            

Income before other income and discontinued operations

  11,131,417  12,779,743  11,245,758  10,213,965  10,680,260 

Other (Loss)

  (9,173,918) (9,179,293) (9,767,889) (11,810,920) (9,325,841)
            

Income (loss) before discontinued operations

  1,957,499  3,600,450  1,477,869  (1,596,955) 1,354,420 

Discontinued operations

  3,697,886  33,348  7,720,459  237,723  258,118 
            

Net (Loss) Income

 $5,655,385 $3,633,798 $9,291,281 $(1,359,232)$1,612,538 
            
            

Income (loss) before discontinued operations per Unit

 $15.07 $27.44 $11.24 $(12.12)$10.19 

Discontinued operations per Unit

  28.48  0.25  59.42  1.80  1.94 
            

Net income (loss) per Unit

 $43.55 $27.69 $70.66 $(10.32)$12.13 
            
            

Distributions to Partners per Unit

 $30.00 $30.00 $28.00 $28.00 $28.00 
            
            

Net income (loss) per Depositary Receipt

 $1.45 $0.92 $2.36 $(0.34)$0.40 

Distributions to Partners per Depositary Receipt

 $1.00 $1.00 $0.93 $0.93 $0.93 

BALANCE SHEET INFORMATION

           ��    

Real Estate, gross

  221,454,286  158,624,893  159,123,799  150,818,648  150,411,555 

Real Estate, net

  152,904,661  94,973,600  98,924,534  92,744,257  95,971,937 

Total Assets

  185,345,157  121,538,490  125,376,764  121,276,735  129,089,736 

Total Debt Outstanding

  198,520,478  138,055,522  140,830,212  142,349,260  144,809,354 

Partners' Capital

  (21,848,563) (22,515,678) (21,310,852) (26,920,567) (21,332,824)

        The information required by this Item is included on page 49Partnership may purchase and/or sell properties at any time.


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        The table below reflects the totals of property available for rental at each December 31,

 
 Year Ended December 31, 
 
 2013 2012 2011 2010 2009 

Residential

                

Units

  2,431  2,270  2,270  2,288  2,288 

Vacancies

  39  39  32  79  63 

Vacancy rate

  1.6% 1.7% 1.4% 3.5% 2.8%

Commercial

                

Total square feet

  108,043  108,043  108,043  108,043  108,043 

Vacancy (in square feet)

  1,062  5,500  0  0  2,384 

Vacancy rate

  1.0% 5.1% 0% 0% 2.2%

        See Items 1A and 7 for factors that may affect future operations. The above tables may not be indicative of future results.


(a)
Certain reclassifications have been made to prior period amounts in order to conform to current period presentation.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

        Certain information contained herein includes forward looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Liquidation Reform Act of 1995 (the "Act"). Forward looking statements in this report, or which management may make orally or in written form from time to time, reflect management's good faith belief when those statements are made, and are based on information currently available to management. Caution should be exercised in interpreting and relying on such forward looking statements, the realization of which may be impacted by known and unknown risks and uncertainties, events that may occur subsequent to the forward looking statements, and other factors which may be beyond the Partnership's control and which can materially affect the Partnership's actual results, performance or achievements for 20122014 and beyond. Should one or more of the risks or uncertainties mentioned below materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We expressly disclaim any responsibility to update our forward looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.


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        Along with risks detailed in Item 1A and from time to time in the Partnership's filings with the Securities and Exchange Commission, some factors that could cause the Partnership's actual results, performance or achievements to differ materially from those expressed or implied by forward looking statements include but are not limited to the following:


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    Ongoing compliance with Sarbanes-Oxley Act of 2002 may require additional personnel or systems changes.

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

        Since the Partnership's long-term goals include the acquisition of additional properties, a portion of the proceeds from the refinancing and sale of properties is reserved for this purpose. If available acquisitions do not meet the Partnership's investment criteria, the Partnership may purchase additional depositary receipts. The Partnership will consider refinancing existing properties if the Partnership's cash reserves are insufficient to repay existing mortgages or if the Partnership needs additional funds for future acquisitions.

        Fourth quarter results reflectThe Partnership's occupancy level of approximately 98% at the high occupancy and increased rental rates that took hold during the second halfend of 2012. Demand imbalance and limited supply in September solidified the Partnerships revenue for the fourth quarter of 20122013 was as high as the previous year's fourth quarter, and this occupancy level is expected to continue through the first halfquarter of 2013. Revenues2014. Revenue gains in the fourth quarter are also expected to roll into the first and second quarters of 2014. While overall revenue growth of 9.1% was achieved for the year, exceeded those of 2011, operating expenses declined and operating income increased by approximately 13.7% for 2012 over 2011. Both national and local improvements in employment and the general business cycle continue to point to futureonly 3.7% revenue growth occurred for 2013."Same Store" sales revenues, with the balance coming from an acquisition. A further analysis of the revenue growth demonstrates that greater revenue, growth has been achieved in the urban portfolio while the suburban portfolio has experienced higher tenant retention and is more price sensitive than the urban portfolio. Management expects operating expenses for 2013 to be relatively flat resulting in another year of improvementstronger demand in the urban portfolio resulting in higher than average revenue growth than the suburban portfolio. Increases in "Same Store" operating expenses of over 10%, outpaced revenue gains resulting in a decrease in "Same Store" NOI (income before other income, discontinued operations, depreciation and amortization) of 2.3%. When including new acquisitions, overall Partnership NOI grew by 3.8%. A 15.6% increase in administration, an 11% increase in real estate taxes, a 6% increase in utilities and a 205.0% increase in snow removal expense account for over 70% of the 10% increase in "Same Store" operating expenses. The increase in administration is due to operating income. It is unclearthe related financing costs in connection with the abandoned refinancing. Excluding the one-time administrative charge and adjusting weather related expense to management if the present consumer shift to rental housing versus home ownership is permanent or temporary. However, managementthose of an average winter, Management believes that until this trend changes, upward pressure on rental rates will continue foroperating expenses would have increased in the foreseeable future. Present empirical experience regarding the Partnership's occupancy level coupled with other anecdotal experiences leadsrange of 5% to 6%. For 2014, Management to believebelieves that the next 18-24 monthsincreases in real estate tax will see positive revenue growthabate however, extreme weather and sustained high occupancy.storms in the first quarter of 2014 will again impact operations negatively for 2014. Despite these anticipated increases, Management believes overall NOI and Net Cash flow after debt service will grow for 2014.

        While revenue from continuing operations increased by over 4.7% for 2012, expenses excluding depreciation for 2012 versus 2011 have actually declined by 0.9%. Increases in administrative expenses, management fee, repairs and maintenance expenses and taxes and insurance were offset by a 49.7% reduction in renting expenses and an 11.0% reduction in operating expenses. Bad debts also decreased 47%.        The Partnership has experienced a 50% decrease in vacancy loss and an 85% decrease in rental concessions. An unseasonably warm winter and management's capitalization on energy conversion and purchasing power also led to a 6.6% reduction in utility costs.

        Management expects to refinancecompleted its refinancing campaign for 2013 raising approximately $46,000,000 of maturing debt in 2013. The amount of the new loans will be approximately total of $72,000,000 resulting$28,000,000 in additional debtcash. The purchase and refinancing of Hamilton Green consumed approximately $25,000,000. Upon receipt, management will consider deploying$21,846,000 of cash. The Partnership also paid off four mortgages, two in 2013 and two in February 2014 with approximately $8,000,000 of cash reserves. The Partnership is now in the excessprocess of negotiating the refinancing proceeds to future acquisitions, stock repurchaseof three loans which mature in 2014 and retirement of existing debt. Management will continue to balance and weigh each of these investment options.2015. It is anticipated that $2,000,000 of additional funds will be raised and that the new interest rates


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on new debt will be lesslower than the current interest rate.rates and no principal amortization will be imposed. This will result in an improved cash flow despite the increase in debt on these three loans. Management believes the existing trading range for the stock is worthyhas also used $1,094,609 of continuing its Depositary Receipt Repurchase Program. Pursuantcash reserves during 2013 to which, 9,709 shares were acquired during the first quarter of 2013 at a total cost of $321,240. When appropriate,repurchase 28,724 Depository Receipts. Management will continue to repurchase shares per its trading plan and allowed by the SEC.plan. As always, Management continues to weigh investment alternatives including acquiring additional properties againstof stock repurchase, new property acquisitions and dispositions when considering its cash liquiditybalances and the current depositary receipt price. Management believes the increase in distributions in 2012 was appropriate given the sustained performance of the portfolio and the expected future earnings of the Partnership.portfolio.

        The Stock Repurchase Program that was initiated in 2007 has purchased 1,229,6361,249,126 Depositary Receipts through March 12, 2013 or17, 2014 representing 30% of the outstanding class A Depositary Receipts. The Partnership has retained The Hamilton Company ("Hamilton") to manage and administer the Partnership's and Joint Ventures' Properties. Hamilton is a full-service real estate management


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company, which has legal, construction, maintenance, architectural, accounting and administrative departments. The Partnership's properties represent approximately 36%32% of the total properties and 42%45% of the residential properties managed by Hamilton. Substantially all of the other properties managed by Hamilton are owned, wholly or partially, directly or indirectly, by Harold Brown. The Partnership's Second Amended and Restated Contract of Limited Partnership (the "Partnership Agreement") expressly provides that the general partner may employ a management company to manage the properties, and that such management company may be paid a fee of up to 4% of rental receipts for administrative and management services (the "Management Fee"). The Partnership pays Hamilton the full annual Management Fee, in monthly installments.

        At March 1, 2013,2014, Harold Brown, his brother Ronald Brown and the President of Hamilton, Carl Valeri, collectively own approximately 40% of the Depositary Receipts representing the Partnership Class A Units (including Depositary Receipts held by trusts for the benefit of such persons' family members). Harold Brown also controls 75% of the Partnership's Class B Units, 75% of the capital stock of NewReal, Inc. ("NewReal"), the Partnership's sole general partner, and all of the outstanding stock of Hamilton. Ronald Brown also owns 25% of the Partnership's Class B Units and 25% of NewReal's capital stock. In addition, Ronald Brown is the President and director of NewReal and Harold Brown is NewReal's Treasurer and a director. One of NewReal's directors, Roberta Ornstein also owns immaterial amounts of the Partnership's Class A receipts. The 75% of the issued and outstanding Class B units of the Partnership, controlled by Harold Brown, are owned by HBC Holdings LLC, an entity of which he is the manager.

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

        Residential tenants sign a one year lease. In 2012,2013, tenant renewals were approximately 67%66% with an average rental increase of approximately 3.7%, new leases accounted for approximately 33%34% with rental rate increases of approximately 5.2%. In 2012,2013, leasing commissions decreasedwere approximately 56%$109,000 compared to approximately $95,000 in 2012, an increase of approximately $14,000 (14.8%) from 2011, while tenant2012. Tenant concessions decreasedwere approximately 36.6% from 2011.$70,000 in 2013 compared to approximately $48,000 in 2012, an increase of approximately $22,000 (45.8%). Tenant improvements were approximately $2,205,000 in 2013, compared to approximately $1,159,000 in 2012, compared to approximately $1,195,000 in 2011, a decreasean increase of approximately $36,000.$1,046,000 (90.2%).

        Hamilton accounted for approximately 5.7%5.1% of the repair and maintenance expense paid for by the Partnership in the year ended December 31, 20122013 and 4.4%5.7% in the year ended December 31, 2011.2012. Of the funds paid to Hamilton for this purpose, the great majority was to cover the cost of services


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provided by the Hamilton maintenance department, including plumbing, electrical, carpentry services, and snow removal for those properties close to Hamilton's headquarters. Several of the larger Partnership properties have their own maintenance staff. Those properties that do not have their own maintenance staff and are located more than a reasonable distance from Hamilton's headquarters in Allston, Massachusetts are generally serviced by local, independent companies.

        Hamilton's legal department handles most of the Partnership's eviction and collection matters. Additionally, it prepares most long-term commercial lease agreements and represents the Partnership in selected purchase and sale transactions. Overall, Hamilton provided approximately 83%76.3% and 69%83.0% of the legal services paid for by the Partnership during the years ended December 31, 20122013 and 2011,2012, respectively.

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


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        The Partnership requires that three bids be obtained for construction contracts in excess of $15,000. Hamilton may be one of the three bidders on a particular project and may be awarded the contract if its bid and its ability to successfully complete the project are deemed appropriate. For contracts that are not awarded to Hamilton, Hamilton charges the Partnership a construction supervision fee equal to 5% of the contract amount. Hamilton's architectural department also provides services to the Partnership on an as-needed basis. In 2012,2013, Hamilton provided the Partnership approximately $40,000$627,000 in construction and architectural services, compared to $56,000$43,000 for the year ended December 31, 2011.2012.

        Prior to 1991, the Partnership employed an outside, unaffiliated company to perform its bookkeeping and accounting functions. Since that time, such services have been provided by Hamilton's accounting staff, which consists of approximately 14 people. In 2012,2013, Hamilton charged the Partnership $125,000 per year ($31,250 per quarter) for bookkeeping and accounting services.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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


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straight-line basis over the term of the lease. Concessions made on residential leases are also accounted for on the straight-line basis.

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

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


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        Rental Properties:    Rental properties are stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred; improvements and additions are capitalized. When assets are retired or otherwise disposed of, the cost of the asset and related accumulated depreciation is eliminated from the accounts, and any gain or loss on such disposition is included in income. Fully depreciated assets are removed from the accounts. Rental properties are depreciated by both straight-line and accelerated methods over their estimated useful lives. Upon acquisition of rental property, the Partnership estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities assumed, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships. The Partnership allocated the purchase price to the assets acquired and liabilities assumed based on their fair values. The Partnership records goodwill or a gain on bargain purchase (if any) if the net assets acquired/liabilities assumed exceed the purchase consideration of a transaction. In estimating the fair value of the tangible and intangible assets acquired, the Partnership considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

        Intangible assets acquired include amounts for in-place lease values above and below market leases and tenant relationship values, which are based on management's evaluation of the specific characteristics of each tenant's lease and the Partnership's overall relationship with the respective tenant. Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses. Characteristics considered by management in valuing tenant relationships include the nature and extent of the Partnership's existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant's credit quality and expectations of lease renewals. The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases. The value of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships.

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


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        Impairment:    On an annual basis management assesses whether there are any indicators that the value of the Partnership's rental properties may be impaired. A property's value is impaired only if management's estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. The Partnership's estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter management's assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved. The Partnership has not recognized an impairment loss for the years ended December 31, 2013, 2012, 2011, and 2010.

        Rental Property Held for Sale and Discontinued Operations:    When assets are identified by management as held for sale, the Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. If, in management's opinion, the net sales price of the assets which have been identified as held for sale is less than the net book value of the assets, a valuation allowance is established. Properties identified as held for sale and/or sold are presented in discontinued operations for all periods presented.2011.

        Investments in Partnerships:Joint Ventures:    The Partnership accounts for its 40%-50% ownership in the Investment Properties under the equity method of accounting, as it exercises significant influence over, but does not control these entities. These investments are recorded initially at cost, as Investments in Partnerships,


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Joint Ventures, and subsequently adjusted for the Partnership's share in earnings, cash contributions and distributions. Under the equity method of accounting, our net equity is reflected on the consolidated balance sheets, and our share of net income or loss from the Partnership is included on the consolidated statements of income. Generally, the Partnership would discontinue applying the equity method when the investment (and any advances) is reduced to zero and would not provide for additional losses unless the Partnership has guaranteed obligations of the venture or is otherwise committed to providing further financial support for the investee. If the venture subsequently generates income, the Partnership only recognizes its share of such income to the extent it exceeds its share of previously unrecognized losses.

        With respect to investments in and advances to the Investment Properties, the Partnership looks to the underlying properties to assess performance and the recoverability of carrying amounts for those investments in a manner similar to direct investments in real estate properties. An impairment charge is recorded if management's estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property.

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

RESULTS OF OPERATIONS

Years Ended December 31, 2013 and December 31, 2012

        The Partnership and its Subsidiary Partnerships earned income before interest expense, loss from investments in unconsolidated joint ventures and other income and loss of approximately $11,131,000 during the year ended December 31, 2013, compared to approximately $12,780,000 for the year ended December 31, 2012, a decrease of approximately $1,649,000 (12.9%).

        The rental activity is summarized as follows:

 
 Occupancy Date 
 
 February 1, 2014 February 1, 2013 

Residential

       

Units

  2,431  2,270 

Vacancies

  39  39 

Vacancy rate

  1.6% 1.7%

Commercial

       

Total square feet

  108,043  108,043 

Vacancy

  1,062  5,500 

Vacancy rate

  1.0% 5.1%


 
 Rental Income (in thousands)
Year Ended December 31,
 
 
 2013 2012 
 
 Total
Operations
 Continuing
Operations
 Total
Operations
 Continuing
Operations
 

Total rents

 $38,156 $37,962 $35,244 $34,784 

Residential percentage

  92% 92% 90% 90%

Commercial percentage

  8% 8% 10% 10%

Contingent rentals

 $670 $670 $661 $661 

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        Year Ended December 31, 2013 Compared to Year Ended December 31, 2012:

 
 Year Ended December 31,  
  
 
 
 Dollar
Change
 Percent
Change
 
 
 2013 2012 

Revenues

             

Rental income

 $37,961,599 $34,784,130 $3,177,469  9.1%

Laundry and sundry income

  402,953  385,040  17,913  4.7%
          

  38,364,552  35,169,170  3,195,382  9.1%
          

Expenses

             

Administrative

  2,116,527  1,813,150  303,377  16.7%

Depreciation and amortization

  8,377,902  6,012,755  2,365,147  39.3%

Management fee

  1,570,158  1,428,052  142,106  10.0%

Operating

  4,201,928  3,580,690  621,238  17.3%

Renting

  202,787  180,574  22,213  12.3%

Repairs and maintenance

  5,815,264  5,075,037  740,227  14.6%

Taxes and insurance

  4,948,569  4,299,169  649,400  15.1%
          

  27,233,135  22,389,427  4,843,708  21.6%
          

Income Before Other Income and Discontinued Operations

  11,131,417  12,779,743  (1,648,326) (12.9)%
          

Other Income (Expense)

             

Interest income

  1,118  2,216  (1,098) (49.5)%

Interest expense

  (8,013,109) (7,695,232) (317,877) 4.1%

(Loss) from investments in unconsolidated joint ventures

  (1,166,877) (1,487,484) 320,607  (21.6)%

Other income

  4,950  1,207  3,743  310.1%
          

  (9,173,918) (9,179,293) 1,632  (0.0)%
          

Income From Continuing Operations

  1,957,499  3,600,450  (1,646,694) (45.7)%
          

Discontinued Operations

             

Income from discontinued operations          

  19,047  33,348  (14,301) (42.9)%

Gain on the sale of real estate

  3,678,839     3,678,839   
          

  3,697,886  33,348  3,664,538  10988.8%
          

Net Income

 $5,655,385 $3,633,798 $2,017,844  55.5%
          
          

        Rental income from continuing operations for the year ended December 31, 2013 was approximately $37,962,000, compared to approximately $34,784,000 for the year ended December 31, 2012, an increase of approximately $3,177,000 (9.1%). The factors which can be attributed to this increase are as follows: the acquisition of the Hamilton Green Apartments in July 2013 resulted in an increase in rental income of approximately $1,877,000 and rental rates increased approximately 4.0% in 2013. The Partnership Properties with the most significant increases in rental income include 62 Boylston Street, School Street, 1144 Commonwealth Avenue, Westgate Woburn, Redwood Hills, Westside Colonial and Hamilton Oaks with increases of approximately $300,000, $193,000, $180,000, $154,000, $94,000, $93,000 and $92,000, respectively. Included in rental income is contingent rentals collected on commercial properties. Contingent rentals include such charges as bill backs of common area maintenance charges, real estate taxes, and utility charges.

        Operating expenses from continuing operations for the year ended December 31, 2013 were approximately $27,233,000 compared to approximately $22,389,000 for the year ended December 31, 2012, an increase of approximately $4,844,000 (21.6%). The most significant factors contributing to this


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increase were an increase in repairs and maintenance expenses of approximately $740,000 (14.6%) due to ongoing repairs to properties in an effort to maintain occupancy; an increase in operating expenses of approximately $621,000 (17.3%) due to significant snow removal and heating costs due to a very harsh winter; an increase in taxes and insurance of approximately $649,000 (15.1%) due to an increase in real estate taxes; an increase in depreciation and amortization expenses of approximately $2,365,000 (39.3%) due to approximately $1,535,000 of depreciation and approximately $774,000 of amortization of in-place leases from the acquisition of Hamilton Green as well as capital improvements to Partnership properties; and an increase in administrative expenses of approximately $303,000 (16.7%) due to the expensing of the professional fees in connection with the abandoned refinancing. The total operating expenses increased by $4,844,000, of which approximately $3,083,000 is attributable to the acquisition of Hamilton Green.

        Interest expense for the year ended December 31, 2013 was approximately $8,013,000 compared to approximately $7,695,000 for the year ended December 31, 2012, an increase of approximately $318,000 (4.1%). This increase is due to the refinancing of four properties in 2013 and the acquisition of Hamilton Green which resulted in a higher level of debt in 2013 compared to 2012.

        At December 31, 2013, the Partnership has between a 40% and 50% ownership interests in nine different Investment Properties. See a description of these properties included in the section titled Investment Properties as well as Note 14 to the Consolidated Financial Statements for a detail of the financial information of each Investment Property.

        As described in Note 14 to the Consolidated Financial Statements, the Partnership's share of the net loss from the Investment Properties was approximately $1,167,000 for the year ended December 31, 2013, compared to approximately $1,487,000 for the year ended December 31, 2012, a decrease in the loss of approximately $321,000 (21.6%). This decrease in loss is consistent with the continued strength in the rental real estate market including approximately 5.4% increase in revenue. Included in the loss for the year ended December 31, 2013 is depreciation and amortization expense of approximately $3,692,000. The allocable loss for the year ended December 31, 2013 associated with the October 2009 investment in Dexter Park is approximately $844,000 of which approximately $2,311,000 is depreciation and amortization.

        Interest income for the year ended December 31, 2013 was approximately $1,100 compared to approximately $2,200 for the year ended December 31, 2012, a decrease of approximately $1,100. This decrease is due to a drop in interest rates.

        In May 2013 the Partnership sold the Nashoba Apartments located in Acton, Massachusetts. The sale price was $4,300,000; the net proceeds of approximately $2,100,000 were transferred to Investment Property Exchange Services, Inc. a Qualified Intermediary. These funds were held by the intermediary in order to maintain the Partnership's ability to structure a tax free exchange in accordance with the Internal Revenue Service's rules under Sec. 1031. The gain on the sale in accordance with GAAP is approximately $3,679,000 and is included in income from discontinued operations. The proceeds were subsequently used in the acquisition of the Hamilton Green Apartments.

        As a result of the changes discussed above, net income for the year ended December 31, 2013 was approximately $5,655,000 compared to income of approximately $3,634,000 for the year ended December 31, 2012, an increase of approximately $2,018,000 (55.5%). The increase in net income is primarily due to the gain on the sale of Nashoba Apartments.

RESULTS OF OPERATIONS

Years Ended December 31, 2012 and December 31, 2011

        The Partnership and its Subsidiary Partnerships earned income before interest expense, loss from investments in unconsolidated joint ventures and other income and loss of approximately $12,922,000 $12,780,000


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during the year ended December 31, 2012, compared to approximately $11,365,000$11,246,000 for the year ended December 31, 2011, an increase of approximately $1,557,000.


Table of Contents$1,534,000.

        The rental activity is summarized as follows:


 Occupancy Date  Occupancy Date 

 February 1, 2013 February 1, 2012  February 1, 2013 February 1, 2012 

Residential

      

Units

 2,270 2,270  2,270 2,270 

Vacancies

 39 32  39 32 

Vacancy rate

 1.7% 1.4% 1.7% 1.4%

Commercial

      

Total square feet

 110,949 110,949  108,043 108,043 

Vacancy

 5,500 0  5,500 0 

Vacancy rate

 5.0% 0% 5.1% 0%

 


 Rental Income (in thousands)
Year Ended December 31,
  Rental Income (in thousands)
Year Ended December 31,
 

 2012 2011  2012 2011 

 Total
Operations
 Continuing
Operations
 Total
Operations
 Continuing
Operations
  Total
Operations
 Continuing
Operations
 Total
Operations
 Continuing
Operations
 

Total rents

 $35,244 $35,244 $33,958 $33,609  $35,244 $34,784 $33,958 $33,160 

Residential percentage

 90% 90% 90% 90% 90% 90% 90% 90%

Commercial percentage

 10% 10% 10% 10% 10% 10% 10% 10%

Contingent rentals

 $661 $661 $633 $633  $661 $661 $633 $633 

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        Year Ended December 31, 2012 Compared to Year Ended December 31, 2011:


 Year Ended December 31,  
  
  Year Ended December 31,  
  
 

 Dollar
Change
 Percent
Change
  Dollar
Change
 Percent
Change
 

 2012 2011  2012 2011 

Revenues

          

Rental income

 $35,244,008 $33,608,799 $1,635,209 4.9% $34,784,130 $33,160,450 $1,623,680 4.9%

Laundry and sundry income

 388,401 426,803 (38,402) (9.0)% 385,040 424,337 (39,297) (9.3)%
                  

 35,632,409 34,035,602 1,596,807 4.7% 35,169,170 33,584,787 1,584,383 4.7%
                  

Expenses

          

Administrative

 1,825,951 1,707,408 118,543 6.9% 1,813,150 1,695,198 117,952 7.0%

Depreciation and amortization

 6,092,725 5,910,746 181,979 3.1% 6,012,755 5,839,312 173,443 3.0%

Management fee

 1,446,620 1,404,467 42,153 3.0% 1,428,052 1,385,917 42,135 3.0%

Operating

 3,633,619 4,080,647 (447,028) (11.0)% 3,580,690 4,014,770 (434,080) (10.8)%

Renting

 183,529 365,110 (181,581) (49.7)% 180,574 361,236 (180,662) (50.0)%

Repairs and maintenance

 5,179,408 5,056,054 123,354 2.4% 5,075,037 4,957,167 117,870 2.4%

Taxes and insurance

 4,348,492 4,146,554 201,938 4.9% 4,299,169 4,085,429 213,740 5.2%
                  

 22,710,344 22,670,986 39,358 0.2% 22,389,427 22,339,029 50,398 0.2%
                  

Income Before Other Income and Discontinued Operations

 12,922,065 11,364,616 1,557,449 13.7%

Income Before Other Income and Discountinued Operations

 12,779,743 11,245,758 1,533,985 13.6%
                  

Other Income (loss)

 

Other Income (Expense)

         

Interest income

 2,216 3,861 (1,645) (42.6)% 2,216 3,861 (1,645) (42.6)%

Interest expense

 (7,802,999) (7,965,422) 162,423 (2.0)% (7,695,232) (7,857,950) 162,718 (2.1)%

(Loss) from investments in unconsolidated joint ventures

 (1,487,484) (1,913,800) 426,316 (22.3)% (1,487,484) (1,913,800) 426,316 (22.3)%

Other income

 1,207  1,207 N/A 
         
          (9,179,293) (9,767,889) 588,596 (6.0)%

 (9,288,267) (9,875,361) 587,094 (5.9)%         

Income From Continuing Operations Discontinued Operations

 3,600,450 1,477,869 2,122,581 143.6%
                  

Income From Continuing Operations

 3,633,798 1,489,255 2,144,543 144.0%

Income from discontinued operations

 33,348 92,953 (59,605) (64.1)%

Gain on the sale of real estate

  7,720,459 (7,720,459) (100.0)%
                  

Discontinued Operations

 

Income from discontinued operations

  81,567 (81,567) (100.0)%

Gain on the sale of real estate from discontinued operations

  7,720,459 (7,720,459) (100.0)%
          33,348 7,813,412 (7,780,064) (99.6)%

  7,802,026 (7,802,026) (100.0)%         
         

Net Income

 $3,633,798 $9,291,281 $(5,657,483) (60.9)% $3,633,798 $9,291,281 $(5,657,483) (60.9)%
                  
         

        Rental income from continuing operations for the year ended December 31, 2012 was approximately $35,244,000,$34,784,000, compared to approximately $33,609,000$33,160,000 for the year ended December 31, 2011, an increase of approximately $1,635,000$1,624,000 (4.9%). There are a number of factors which can be attributed to this increase as follows: the acquisition of the Battle Green Apartments in June 2011 resulted in an increase in rental income of approximately $430,000; and rental rate increases of approximately 4.2% in 2012. The Partnership Properties with the most significant increases in rental income include 62 Boylston Street, Westgate Woburn, 1144 Commonwealth Avenue and School Street with increases of approximately $293,000, $178,000, $115,000, and $105,000, respectively. Included in rental income is contingent rentals collected on commercial properties. Contingent rentals include such charges as bill backs of common area maintenance charges, real estate taxes, and utility charges.

        Operating expenses from continuing operations for the year ended December 31, 2012 were approximately $22,710,000$22,389,000 compared to approximately $22,671,000$22,339,000 for the year ended December 31, 2011, an increase of approximately $39,000$50,000 (0.2%). The most significant factors contributing to this increase were an increase in taxes and insurance of approximately $202,000 (4.9%$214,000 (5.2%) due to increases in


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both insurance premiums and real estate taxes; an increase in depreciation and amortization expenses of approximately $182,000 (3.1%$173,000 (3.0%) due to the capital improvements to Partnership properties; an increase in repairs and maintenance expenses of approximately $123,000$118,000 (2.4%) due to repairs at the properties to maintain occupancy and an increase in administrative expenses of approximately $118,000 (6.9%(7.0%) due primarily to increases in employee benefits and administrative service fees paid.

        These increases are offset by a decrease in operating expenses of approximately $447,000 (11.0%$434,000 (10.8%) due to a milder winter in 2012 resulting in lower snow removal and utility costs and a decrease in renting expenses of approximately $182,000 (49.7%$181,000 (50.0%) due to a decrease in rental commissions and related rental expenses as a result of the increased demand for apartments and the lower vacancy levels.

        Interest expense for the year ended December 31, 2012 was approximately $7,803,000$7,695,000 compared to approximately $7,965,000$7,858,000 for the year ended December 31, 2011, a decrease of approximately $162,000 (2.0%$163,000 (2.1%). This decrease is due to a lower level of debt in 2012 compared to 2011.

        At December 31, 2012, the Partnership has between a 40% and 50% ownership interests in nine different Investment Properties. See a description of these properties included in the section titled Investment Properties as well as Note 14 to the Consolidated Financial Statements for a detail of the financial information of each Investment Property.

        As described in Note 14 to the Consolidated Financial Statements, the Partnership's share of the net loss from the Investment Properties was approximately $1,487,000 for the year ended December 31, 2012, compared to approximately $1,914,000 for the year ended December 31, 2011, a decrease in the loss of approximately $426,000 (22.3%). This decrease in loss is consistent with the continued strength in the rental real estate market including approximately 5% increase in revenue. Included in the loss for the year ended December 31, 2012 is depreciation and amortization expense of approximately $3,681,000. The allocable loss for the year ended December 31, 2012 associated with the October 2009 investment in Dexter Park is approximately $981,000 of which approximately $2,294,000 is depreciation and amortization.

        Interest income for the year ended December 31, 2012 was approximately $2,200 compared to approximately $3,900 for the year ended December 31, 2011, a decrease of approximately $1,700. This decrease is due to a drop in interest rates.

        In June 2011, the Partnership sold the Avon Street Apartments located in Malden, Massachusetts. The net income from Avon Street for 2011 was approximately $82,000 and the gain on the sale of Avon Street was approximately $7,720,000. This is included in income from discontinued operations.

        As a result of the changes discussed above, net income for the year ended December 31, 2012 was approximately $3,634,000 compared to income of approximately $9,291,000 for the year ended December 31, 2011, a decrease in income of approximately $5,657,000.


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Years Ended December 31, 2011 and December 31, 2010

        The Partnership and its Subsidiary Partnerships earned income before interest expense, loss from investments in unconsolidated joint ventures and other income and loss of approximately $11,365,000 during the year ended December 31, 2011, compared to approximately $10,339,000 for the year ended December 31, 2010, an increase of approximately $1,025,000 (9.9%).

        The rental activity is summarized as follows:

 
 Occupancy Date 
 
 February 1, 2012 February 1, 2011 

Residential

       

Units

  2,270  2,288 

Vacancies

  32  79 

Vacancy rate

  1.4% 3.5%

Commercial

       

Total square feet

  110,949  110,949 

Vacancy

  0  0 

Vacancy rate

  0% 0%


 
 Rental Income (in thousands)
Year Ended December 31,
 
 
 2011 2010 
 
 Total
Operations
 Continuing
Operations
 Total
Operations
 Continuing
Operations
 

Total rents

 $33,958 $33,609 $32,726 $31,816 

Residential percentage

  90% 90% 90% 90%

Commercial percentage

  10% 10% 10% 10%

Contingent rentals

 $633 $633 $653 $653 

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        Year Ended December 31, 2011 Compared to Year Ended December 31, 2010:

 
 Year Ended December 31,  
  
 
 
 Dollar
Change
 Percent
Change
 
 
 2011 2010 

Revenues:

             

Rental income

 $33,608,799 $31,816,175 $1,792,624  5.6%

Laundry and sundry income

  426,803  439,782  (12,979) (3.0)%
          

  34,035,602  32,255,957  1,779,645  5.5%
          

Expenses

             

Administrative

  1,707,408  1,772,599  (65,191) (3.7)%

Depreciation and amortization

  5,910,746  5,531,509  379,237  6.9%

Management fees

  1,404,467  1,330,157  74,310  5.6%

Operating

  4,080,647  3,784,401  296,246  7.8%

Renting

  365,110  528,686  (163,576) (30.9)%

Repairs and maintenance

  5,056,054  4,886,724  169,330  3.5%

Taxes and insurance

  4,146,554  4,082,588  63,966  1.6%
          

  22,670,986  21,916,664  754,322  3.4%
          

Income Before Other Income and Discontinued Operations

  11,364,616  10,339,293  1,025,322  9.9%
          

Other Income (Loss)

             

Interest expense

  (7,965,422) (8,053,628) 88,206  (1.1)%

Interest income

  3,861  5,932  (2,071) (34.9)%

(Loss) from investment in unconsolidated joint ventures

  (1,913,800) (3,869,996) 1,956,196  (50.5)%

Other (loss)

    (700) 700  (100.0)%
          

  (9,875,361) (11,918,392) 2,043,031  (17.1)%
          

Income (loss) from Continuing Operations

  1,489,255  (1,579,099) 3,068,353  (194.3)%
          

Discontinued Operations

             

Income from discontinued operations

  81,567  219,867  (138,300) (62.9)%

Gain on the sale of real estate from discontinued operations

  7,720,459    7,720,459  100.0%
          

  7,802,026  219,867  7,582,159  3,448.5%
          

Net Income (loss)

 $9,291,281 $(1,359,232)$10,650,512  (783.6)%
          

        Rental income from continuing operations for the year ended December 31, 2011 was approximately $33,609,000, compared to approximately $31,816,000 for the year ended December 31, 2010, an increase of approximately $1,793,000 (5.6%). There are a number of factors which can be attributed to this increase as follows: the acquisition of the Battle Green Apartments in June 2011 resulted in an increase of approximately $552,000; the amortization in 2010 of approximately $404,000 in connection with the free rents granted to tenants; an approximately 2% drop in the vacancies; and rental rate increases of approximately 2% – 4% in 2011. The Partnership Properties with the most significant increases in rental income include 62 Boylston Street, Hamilton Oaks, Westgate Woburn, Westside Colonial and 1144 Commonwealth Avenue with increases of approximately $184,000, $151,000, $58,000, $55,000 and $38,000, respectively. Included in rental income is contingent rentals collected on commercial properties. Contingent rentals include such charges as bill backs of common area maintenance charges, real estate taxes, and utility charges.


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        Operating expenses from continuing operations for the year ended December 31, 2011 were approximately $22,671,000 compared to approximately $21,917,000 for the year ended December 31, 2010, an increase of approximately $754,000 (3.4%). The most significant factors contributing to this increase were an increase in depreciation and amortization expenses of approximately $379,000 (6.9%) due to the acquisition of the Battle Green Apartments in June 2011; an increase in operating expenses of approximately $296,000 (7.8%) due to increases in snow removal and water and sewer charges, an increase in repairs and maintenance expenses of approximately $169,000 (3.5%) due to repairs at the properties to maintain occupancy and an increase in taxes and insurance of approximately $64,000 (1.6%) due to increases in real estate taxes.

        These increases are offset by a decrease in renting expenses of approximately $164,000 (30.9%) due to a decrease in rental commissions and related rental expenses due to the increased demand for apartments and the lower vacancy levels, and a decrease in administrative expenses of approximately $65,000 (3.7%) due to a decrease in administrative payroll.

        Interest expense for the year ended December 31, 2011 was approximately $7,965,000 compared to approximately $8,054,000 for the year ended December 31, 2010, a decrease of approximately $89,000 (1.1%). This decrease is due to a lower level of debt in 2011 compared to 2010.

        At December 31, 2011, the Partnership has between a 40% and 50% ownership interests in nine different Investment Properties. See a description of these properties included in the section titled Investment Properties as well as Note 14 to the Consolidated Financial Statements for a detail of the financial information of each Investment Property.

        As described in Note 14 to the Consolidated Financial Statements, the Partnership's share of the net loss from the Investment Properties was approximately $1,914,000 for the year ended December 31, 2011, compared to approximately $3,870,000 for the year ended December 31, 2010, a decrease in the loss of approximately $1,956,000. This decrease in loss is due to the amortization of the in place leases of approximately $1,600,000 in 2010. Included in the loss for the year ended December 31, 2011 is depreciation and amortization expense of approximately $3,707,000. The allocable loss for the year ended December 31, 2011 associated with the October 2009 investment in Dexter Park is approximately $1,152,000 of which approximately $2,279,000 is depreciation and amortization.

        Interest income for the year ended December 31, 2011 was approximately $3,900 compared to approximately $5,900 for the year ended December 31, 2010, a decrease of approximately $2,000. This decrease is due to a drop in interest rates as well as a decrease in cash available for investment.

        In June 2011, the Partnership sold the Avon Street Apartments located in Malden, Massachusetts. The net income from Avon Street for 2011was approximately $82,000 and the gain on the sale of Avon Street was approximately $7,720,000. This is included in income from discontinued operations.

        As a result of the changes discussed above, net income for the year ended December 31, 2011 was approximately $9,291,000 compared to a loss of approximately $1,359,000 for the year ended December 31, 2010, an increase in income of approximately $10,650,000.

LIQUIDITY AND CAPITAL RESOURCES

        The Partnership's principal source of cash during 20122013 and 20112012 was the collection of rents and proceeds on the sale and refinancing of real estate. The majority of cash and cash equivalents of $14,013,380 at December 31, 2013 and $6,981,906 at December 31, 2012 and $4,050,157 at December 31, 2011 were held in interest bearing accounts at creditworthy financial institutions.


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        This increase in cash of $2,931,748$7,031,474 at December 31, 20122013 is summarized as follows:


 Year Ended December 31,  Year Ended December 31, 

 2012 2011  2013 2012 

Cash provided by operating activities

 $11,951,863 $9,091,123  $13,439,139 $11,951,863 

Cash (used in) investing activities

 (1,053,399) (2,980,150) (22,912,720) (1,053,399)

Cash (used in) financing activities

 (3,128,091) (1,624,611)

Cash (used in) provided by financing activities

 21,493,326 (3,128,091)

Repurchase of Depositary Receipts, Class B and General Partner Units

 (906,214)   (1,094,609) (906,214)

Distributions paid

 (3,932,410) (3,681,566) (3,893,662) (3,932,410)
          

Net increase in cash and cash equivalents

 $2,931,748 $804,796  $7,031,474 $2,931,748 
          
     

        The cash provided by operating activities is primarily due to the collection of rents less cash operating expenses. The decreaseincrease in cash used in investing activities is due to the acquisition of BattleHamilton Green Apartments in June 2011,July 2013 of approximately $23,000,000 as well as significant improvements to Partnership properties of approximately $4,500,000. These are offset by the sale of Avon StreetNashoba Apartments in May 2011.2013. The increase in cash used inprovided by financing activities is due to the payoffrefinancing of notes payablethe mortgages on four of $1,668,600 to HBC Holdings, LLCthe Partnership properties and prepaid financing costsnet distributions from investments in unconsolidated joint ventures of $353,400approximately $2,000,000 in 2012.2013. In 20122013, the Partnership purchased 24,967 Depositary Receipts for a cost of $726,058, 198 Class B Units for a cost of $171,148 and 10 General Partnership Units for a cost of $9,008 for a total cost of $906,214.

        The Partnership did not buy any receipts, Class B Units or General Partnership Units in 2011. In 2010 the Partnership repurchased 20,68822,964 Class A Depositary Receipts, 164182 Class B Units and 910 General Partnership Units for a total cost of $540,911 ($432,920, $102,591$1,094,609.

        In 2012, the Partnership purchased 24,967 Class A Depositary Receipts, 198 Class B Units and $5,400 respectively). The purchase was funded from cash received from the refinancing10 General Partnership Units for a total cost of Partnership properties in 2010 and 2009.$906,214.

        During 2012,2013, the Partnership and its Subsidiary Partnerships completed improvements to certain of the Properties at a total cost of approximately $2,360,000.$4,500,000. These improvements were funded from cash reserves and, to some extent, escrow accounts established in connection with the financing or refinancing of the applicable Properties. These sources have been adequate to fully fund improvements. The most significant improvements were made at Westgate Woburn, Hamilton Oaks, Redwood Hills, 62 Boylston Street, Olde English, Clovelly, 1144 Commonwealth, AveCypress Street and 140 North Beacon StreetClovelly Apartments at a cost of approximately $445,000, 280,000, $271,000, $206,000, $185,000, $133,000$1,250,000, $372,000, $343,000, $321,000, $298,000, $297,000 and $113,000$291,000 respectively. The Partnership plans to invest approximately $2,300,000$3,300,000 in capital improvements in 2013.

        On June 1, 2011, the Partnership purchased the Battle Green Apartments, a 48 unit residential apartment complex located at 34-42 Worthen Road, Lexington, Massachusetts. The purchase price was $10,000,000. The Partnership used cash reserves, the proceeds from the sale of Avon Street and borrowed $3,998,573 from Harold Brown, Treasurer of the General Partner to make this purchase. This loan had an interest rate of 6% and was secured by the Partnership's ownership interest in Battle Green Apartments, LLC. The term of the loan is four years with a provision requiring payment in whole or in part upon demand within six months of notice or prepay without penalty. On July 27, 2011, the Partnership financed the Battle Green Apartments with a new $5,000,000 mortgage at 4.95% which matures in August 2026. Principal payments will be made using a 30 year amortization schedule. Deferred financing costs associated with this mortgage totaled approximately $100,000 and accordingly the effective interest rate is 5.07%. After paying off the existing loan of $3,998,573, approximately $1,000,000 was received by the Partnership. The interest paid on this loan to Harold Brown in 2011 was $38,123.

        On May 18, 2011, the Partnership sold Avon Street Apartments, a 66 unit residential apartment complex located at 130 Avon Street, Malden, Massachusetts. The sales price was $8,750,000, which resulted in a gain of approximately $7,700,000. The net proceeds of the sale, of approximately


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$5,444,000 were held by a qualified intermediary in order for the Partnership to structure a tax free exchange in accordance with Section 1031 of the IRS code. This tax free exchange was completed with the purchase of Battle Green Apartments.2014.

        On October 28, 2009 the Partnership invested approximately $15,925,000 in a joint venture to acquire a 40% interest in a residential property located in Brookline, Massachusetts. The property, referred to as Dexter Park, is a 409 unit residential complex. The purchase price was $129,500,000. The total mortgage was $89,914,000 with an interest rate of 5.57% and it matures in 2019. The mortgage calls for interest only payments for the first two years of the loan and amortized over 30 years thereafter. The balance of this mortgage is approximately $88,612,000 at December 31, 2012. In order to fund this investment, the Partnership used approximately $8,757,000 of its cash reserves and borrowed approximately $7,168,000 with an interest rate of 6% from HBC Holdings, LLC, an entity owned by Harold Brown and his affiliates ("HBC"). The term of the loan was four years with a provision requiring payment in whole or in part upon demand by HBC with six months notice. On August 17, 2010, HBC gave six months written notice to the Partnership requesting a principal pay down of $2,500,000. During the fourth quarter of 2010, the Partnership paid HBC $2,500,000 as requested. During 2011, the Partnership elected to make principal payments of $1,000,000 on August 1, 2011, $1,000,000 on October 1, 2011, and an additional $1,000,000 on December 15, 2011 reducing the loan balance to $1,668,600 at December 31, 2011. In February 2012, the Partnership elected to make an additional principal payment of $750,000 to HBC Holdings and the balance of $918,600 was paid in April 2012. The interest paid during the year ended December 31, 2012 and 2011 was $18,960 and $238,673, respectively. A majority of the apartments were leased at the time of the acquisition. As a result, the Partnership amortized the intangible assets associated with the "in place" leases over a 12 month period which began in November 2009.$18,960. This investment, Hamilton Park Towers, LLC is referred to as Dexter Park.


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        During 2013, the Partnership refinanced four properties. After paying off the existing mortgages, the net cash received from these refinancing was approximately $28,200,000. In 2013, the Partnership paid off the mortgage of approximately $3,967,000 on Hamilton Cypress, LLC.

        On July 15, 2013, the Partnership, purchased Windsor Green at Andover, a 193 unit apartment complex located in Andover, Massachusetts. The purchase price was $62,500,000. To fund this purchase, the Partnership obtained short term financing of approximately $40,000,000, used the funds of approximately $2,100,000 from the sale of the Nashoba Apartments, and the balance from the Partnership's cash reserves. The original mortgage matured in November 2013. On December 20, 2013, the Partnership refinanced the mortgage on Hamilton Green. The new mortgage is $38,500,000, interest is fixed at 4.67% for 15 years, interest only for 2 years and the mortgage is amortized over 30 years. This refinancing required additional capital of approximately $1,846,000 from the Partnership.

        During the year ended December 31, 2012,2013, the Partnership received distributions of approximately $1,366,000$2,976,000 from the investment properties of which $802,000$954,000 was from Dexter Park.

        In 20122013 the Partnership paid four quarterly distributions of $30.00$7.50 per Unit ($1.000.25 per Receipt)receipt) for a total payment of $3,932,410$3,893,662 in 2012.2013. In 2011,2012, the Partnership paid four quarterly distributions of an aggregate of $28.00$7.50 per Unit ($0.930.25 per Receipt)receipt) for a total payment of $3,681,566$3,932,410 in 2011.2012. In February 2013,2014, the Partnership approved a quarterly distribution of $7.50 per Unit ($0.25 per Receipt) payable on March 31, 2013.2014.

        The Partnership anticipates that cash from operations and interest bearing accounts will be sufficient to fund its current operations; pay distributions, make required debt payments and to finance current improvements to its properties. The Partnership may also sell or refinance properties. The Partnership's net income and cash flow may fluctuate dramatically from year to year as a result of the sale or refinancing of properties, increases or decreases in rental income or expenses, or the loss of significant tenants.

Off-Balance Sheet Arrangements—Joint Venture Indebtedness

        As of December 31, 2012,2013, the Partnership had a 40%-50% ownership interest in nine Joint Ventures, all of which have mortgage indebtedness. We do not have control of these partnerships and therefore we account for them using the equity method of consolidation. At December 31, 2012,2013, our proportionate share of the non-recourse debt related to these investments was approximately $60,267,000.$60,197,000. See Note 14 to the Consolidated Financial Statements.

Contractual Obligations

        See Notes 5 and 14 to the Consolidated Financial Statements for a description of mortgage notes payable. The Partnerships has e no other material contractual obligations to be disclosed.


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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        A Market risk is the exposure to loss resulting from changes in interest rates and equity prices. In pursuing its business plan, the primary market risk to which the Partnership is exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Partnership's yield on invested assets and cost of funds and, in turn, its ability to make distributions or payments to its investors.

        As of December 31, 2012,2013, the Partnership, its Subsidiary Partnerships and the Investment Properties collectively have approximately $276,312,000$336,396,000 in long-term debt, substantially all of which pay interest at fixed rates. Accordingly, the fair value of these debt instruments is affected by changes in market interest rates. These mortgages mature through 2026.2029. For information regarding the fair value and maturity dates of these debt obligations, see Item 2. Properties and Note 5 to the Consolidated


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Financial Statements—"Mortgage Notes Payable," Note 12 to the Consolidated Financial Statements—"Fair Value Measurements" and Note 14 to the Consolidated Financial Statements—"Investment in Unconsolidated Joint Ventures." See Notenote 18—Subsequent Events—Events for additional information about the refinancing anticipated in 2013.

        For additional disclosure about market risk, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results".

ITEM 8.    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The financial statements of the Partnership appear on pages F-1 through F-39F-38 of this Form 10-K and are indexed herein under Item 15(a)(1).

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

ITEM 9A.    CONTROLS AND PROCEDURES

        Disclosure Controls and Procedures.    We have evaluated the design and operation of our disclosure controls and procedures to determine whether they are effective in ensuring that the disclosure of required information is timely made in accordance with the Securities Exchange Act of 1934 ("Exchange Act") and the rules and forms of the Securities and Exchange Commission. This evaluation was made under the supervision and with the participation of management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of our General Partner as of the end of the period covered by this annual report on Form 10-K. The CEO and CFO have concluded, based on their reviews, that our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e), are effective to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

        Management's Report on Internal Control over Financial Reporting.    We are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15-15(f) under the Exchange Act. We assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control—Integrated Framework"Framework (1992)". Based on that assessment and those criteria, our management, with the participation of the CEO and CFO of the General Partner concluded that our internal control over financial reporting is effective as of December 31, 2012.


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        We believe that because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Changes in Internal Control over Financial Reporting.    There were no changes in our internal control over financial reporting during the fourth quarter of 20122013 that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

        Not applicable


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PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS, AND COPORATE GOVERNANCE

        Our General Partner, New Real, Inc. is a Massachusetts corporation wholly owned by Harold Brown and Ronald Brown, who are brothers. Harold Brown and Ronald Brown were individual general partners of the Partnership until May 1984, when NewReal, Inc. replaced them as the sole General Partner of the Partnership. The General Partner is responsible for making all decisions and taking all action deemed by it necessary or appropriate to conduct the business of the Partnership.

        The General Partner engages The Hamilton Company, Inc. to manage the properties of the Partnership and its Subsidiary Partnerships. The Hamilton Company, Inc. is wholly owned by Harold Brown. See "Item 11. Executive Compensation" for information concerning fees paid by the Partnership to The Hamilton Company during 2012.2013.

        Because the General Partner has engaged The Hamilton Company as the manager for the Properties, the General Partner has no employees.

        The directors of the General Partner are Ronald Brown, Harold Brown, Guilliaem Aertsen Roberta Ornstein and David Aloise. The directors of the General Partner hold office until their successors are duly elected and qualified.

        Ronald Brown and Harold Brown hold all of the executive officer positions of the General Partner. The executive officers of the General Partner serve at the pleasure of the Board of Directors.

        On June 14, 2001, the Board of Directors of the General Partner created an Audit Committee, in accordance with Section 3(a)(58)(A) of the Exchange Act, consisting of three members, and approved the charter of the Audit Committee. As of November 6, 2007,July 1, 2013, the Audit Committee consisted of Guilliaem Aertsen and David Aloise, and Roberta Ornstein.Aloise. The Board of Directors of the General Partner has determined that Guilliaem Aertsen is an audit committee financial expert, as that term is defined in Item 407 of Securities and Exchange Commission Regulation S-K.


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        The following table sets forth the name and age of each director and officer of the General Partner and each such person's principal occupation and affiliation during the preceding five years.

Name and Position
 Age Other Position
Ronald Brown, President and Director (since 1984)  7778 Co-General Partner since the Partnerships formation in 1977. Associate, Hamilton Realty Company (since 1967); President, Treasurer, Clerk and Director of R. Brown Partners Inc. (since 1985), a real estate management company; Member, Greater Boston Real Estate Board (since 1981); Director, Brookline Chamber of Commerce (since 1978); Trustee of Reservations (since 1988); Director, Brookline Music School (1997-2004); President, Brookline Chamber of Commerce (1990-1992); Director, Coolidge Corner Theater Foundation (1990-1993); President, Brookline Property Owner's Association (1981-1990); Trustee, Brookline Hospital (1982-1989); Director, Brookline Symphony Orchestra (1996-2002); Director and Treasurer, Brookline Greenspace Alliance (since 1999). Mr. Brown is a graduate of Northeastern University earning a B.A. degree in Mechanical Engineering and an M.S. degree in Engineering Management. Based on Mr. Brown's ownership interest in the Partnership, ownership interest in the Partnership's General Partner, years of experience in the real estate industry and as a long standing member of the Board of Directors of the General Partner, the Board of Directors concluded that Mr. Brown has the requisite experience, qualifications, attributes and skills necessary to serve as a member of the Board of Directors.

Harold Brown, Treasurer and Director (since 1984)

 

 

8889

 

Co-General Partner since the Partnerships formation in 1977. Sole proprietor, The Hamilton Company, Inc., manager and developer of residential and commercial real estate (since 1954); Trustee, Treasurer and Director of Wedgestone Realty Investors Trust (1982-1985); Chairman of the Board and principal stockholder of the Wedgestone Advisory Corporation (1980-1985); Director of AFC Financial Corp. (1983-1985); Director, Coolidge Bank and Trust (1980-1983). Mr. Brown is a graduate of the Massachusetts Institute of Technology. Based on Mr. Brown's ownership interest in the Partnership, ownership interest in the Partnership's General Partner, years of experience in the real estate industry and as a long standing member of the Board of Directors of the General Partner, the Board of Directors concluded that Mr. Brown has the requisite experience, qualifications, attributes and skills necessary to serve as a member of the Board of Directors.

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Name and Position
 Age Other Position

Guilliaem Aertsen, IV, Director (since 2002)

 

 
65
66

 

Director and Chairman of the Partnership's Audit Committee. Chief Executive Officer, Aertsen Ventures LLC (since 1999) a private venture capital firm focused on early stage companies engaged in technology, real estate and distressed financial assets; Director and CFO of CineCast LLC (since 1999); Member of Premier Capital LLC (since 2000); Chairman of the Board of Directors of the Massachusetts Housing Investment Corporation (since 1997) a partnership of corporate investors, housing sponsors and public agencies engaged in the financing of affordable housing and community development projects in Massachusetts and New England; Chairman of the Board of Trustees of the Old South Church (1992-2002); Executive Vice President and member of the senior management group of BankBoston Corporation (1996-1998); Executive and management assignments including corporate lending, real estate, capital markets, venture capital and asset management Bank Boston Corporation (1973-1998). Mr. Aertsen is a graduate of Harvard University. Based on Mr. Aertsen's familiarity with the Partnership as a member of the Board of Directors and as Chairman of the Audit Committee, his experience as a director with several other companies and his banking, management and financial expertise, the Board of Directors concluded that Mr. Aertsen has the requisite experience, qualifications, attributes and skills necessary to serve as a member of the Board of Directors.

Roberta Ornstein,David Aloise, Director (since 2007)

 

 

6359

 

Director and member of the Partnership's Audit Committee. Managing Director and Head of Product Development Deutsche Asset Management (2002-2005); Vice President and Managing Director, Scudder Investments (1998-2001); Director and Chief Financial Officer, Summit Partners (1997-1998); Vice President, Liberty Financial (1996-1997); Senior Vice President, Shearson Lehman Brothers (1993-1994); Senior Vice President—Treasury Group, The Boston Company (1983-1993). Previous Member of the Board of Directors of the Boston YMCA, the New England Organ Bank and the Town of Brookline, Massachusetts Advisory Committee. Ms. Ornstein is a graduate of Brown University and has earned a Master Degree in Business Administration from Boston College. Based on Ms. Ornstein's financial, managerial and investment management experience, the Board of Directors concluded that Ms. Ornstein has the requisite experience, qualifications, attributes and skills necessary to serve as a member of the Board of Directors.

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Name and Position
AgeOther Position
David Aloise, Director (since 2007)58Director and member of the Partnership's Audit Committee. Founder and principal of Aloise & Associates, LLC (since 2000) a consulting firm that provides advisory, training and credit risk management services; BankBoston Corporation (1979-2000) Director of Commercial Loan Workout, Managing Director Small Business Banking, Vice President Restructured Real Estate, Vice President C & I Loan Workout; Board of Trustees New England Banking Institute; Advisory Board Member Wells Fargo Retail Finance, LLC; Senior Advisor to Eaton Vance Bank Loan Mutual Fund Group; Member of the Turnaround Management Association. Mr. Aloise is a graduate of Boston College and the National Commercial Lending Graduate School, University of Oklahoma. Based on Mr. Aloise's experience in banking, credit markets, small business management and business turnarounds, the Board of Directors concluded that Mr. Aloise has the requisite experience, qualifications, attributes and skills necessary to serve as a member of the Board of Directors.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

        Section 16(a) of the Securities Exchange Act of 1934 requires the Partnership's directors, executive officers, and persons who own more than 10% of a registered class of the Partnership's equity securities to file with the Securities and Exchange Commission reports of ownership changes and changes in ownership of the Partnership. Officers, directors and greater-than-10% shareholders are required by SEC regulations to furnish the Partnership with copies of all Section 16(a) forms they file.


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        Based solely upon a review of Forms 3 and 4 furnished to the company under Rule 16a-3(e) of the Securities Exchange Act during its most recent fiscal year, Forms 5 furnished to the company with respect to its most recent fiscal year and any written representations received by the company from persons required to file such forms, the following persons—either officers, directors or beneficial owners of more than ten percent of any class of equity of the company registered pursuant to Section 12 of the Securities Exchange Act—failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act during the most recent fiscal year:

CODE OF ETHICS

        The Partnership, its General Partner and Hamilton, the Partnership's management company, have adopted a Code of Business Conduct and Ethics, which constitutes a "Code of Ethics" as defined by the SEC and applies to executive officers as well as to all other employees. A copy of the Code of Business Conduct and Ethics is available in the "NERA" section of the management company's website at www.thehamiltoncompany.com. To the extent required by the rules of the SEC, the Partnership and its related entities will disclose amendments to and waivers from the Code of Business Conduct and Ethics in the same place on the aforementioned website.


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REPORT OF THE AUDIT COMMITTEE

        The Audit Committee of NewReal Inc. (NewReal), which is the General Partner of New England Realty Associates Limited Partnership ("NERA" or the "Partnership"), is currently comprised of Guilliaem Aertsen, IV, and David Aloise, and Roberta Ornstein,, each of whom is an independent director of NewReal. The Audit Committee operates under a written charter.

        The Partnership's management, which consists of NERA's General Partner, is responsible for the preparation of the Partnership's financial statements and for maintaining an adequate system of internal controls and processes for that purpose. Miller Wachman LLP ("Miller Wachman") acts as the Partnership's independent auditor and is responsible for conducting an independent audit of the Partnership's annual financial statements, in accordance with generally accepted auditing standards, and issuing a report on the results of their audit. The Audit Committee is responsible for providing independent, objective oversight of both of these processes.

        The Audit Committee has reviewed and discussed the audited financial statements for the year ended December 31, 20122013 with management of the Partnership and with representatives of Miller Wachman. As a result of these discussions, the Audit Committee believes that NERA maintains an effective system of accounting controls that allow it to prepare financial statements that fairly present the Partnership's financial position and results of its operations. Discussions with Miller Wachman also included the matters required by Statement on Auditing Standard No. 6116 (Communications with Audit Committee).

        In addition, the Audit Committee reviewed the independence of Miller Wachman. We received written disclosures and a letter from Miller Wachman regarding its independence as required by Independent Standards Board Standards No. 1 and discussed this information with Miller Wachman.

        Based on the foregoing, the Audit Committee has recommended that the audited financial statements of the Partnership for the year ended December 31, 20122013 be included in the Partnership's annual report on form 10-K to be filed with the Securities and Exchange Commission.

Guilliaem Aertsen, IV
David Aloise


Roberta Ornstein

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ITEM 11.    EXECUTIVE COMPENSATION

        The Partnership does not have "Executive Compensation." As more fully described below, the Partnership employs a management company to which it pays management fees and administrative fees.

        The Partnership is not required to and did not pay any compensation to its officers or the officers and directors of the General Partner in 2012.2013. As more fully described below, the Partnership employs a management company which is solely responsible for performing all management and policy making functions for the Partnership. The only compensation paid by the Partnership to any person or entity is in the form of management fees and administrative fees paid to the General Partner, or any management entity employed by the General Partner, in accordance with the Partnership Agreement.

        Specifically, the Partnership Agreement provides that the General Partner, or any management entity employed by the General Partner, is entitled to a management fee equal to 4% (2% at Dexter Park and 3% at Linewt) of the rental and other operating income from the Partnership Properties and a mortgage servicing fee equal to 0.5% of the unpaid principal balance of any debt instruments received, held and serviced by the Partnership (the "Management Fee"). The Partnership Agreement also authorizes the General Partner to charge to the Partnership its cost for employing professionals to assist with the administration of the Partnership Properties (the "Administrative Fees"). The Administrative Fee is not charged against the Management Fee. In addition, upon the sale or disposition of any Partnership


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Properties, the General Partner, or any management entity which is the effective cause of such sale, is entitled to a commission equal to 3% of the gross sale price (the "Commission"), provided that should any other broker be entitled to a commission in connection with the sale, the commission shall be the difference between 3% of the gross sale price and the amount to be paid to such broker.

        The General Partner has engaged The Hamilton Company ("Hamilton") to operate and manage the Partnership, and in accordance with the Partnership Agreement, the Management Fee, the Administrative Fees and the Commission are paid to Hamilton. See "Item 10. Directors and Executive Officers of the Registrant." The total Management Fee paid to Hamilton during 20122013 was approximately $1,447,000.$1,578,000. The management services provided by Hamilton include but are not limited to: collecting rents and other income; approving, ordering and supervising all repairs and other decorations; terminating leases, evicting tenants, purchasing supplies and equipment, financing and refinancing properties, settling insurance claims, maintaining administrative offices and employing personnel. In addition, the Partnership engages the president of Hamilton as a consultant to provide asset management services to the Partnership, for which the Partnership paid $75,000 in 2012.2013. The Partnership does not have a written agreement with this individual.

        In 2012,2013, the Partnership and its Subsidiary Partnerships paid administrative fees to Hamilton of approximately $710,000$907,000 inclusive of construction supervision and architectural fees of approximately $43,000,$78,000, rental commissions of $25,000,$172,000, repairs and maintenance service fees of approximately $295,000,$294,000, legal fees of approximately $198,000and$214,000 and $125,000 for accounting services. The administrative fees included $24,000 that was paid by the Partnership to Ronald Brown for construction supervision services.

        Additionally, the Hamilton Company received approximately $728,000$765,000 from the 40-50% owned Investment Properties of which approximately $567,000$614,000 was the management fee, approximately $5,000$9,000 was for construction supervision and architectural fees, approximately $64,000$61,000 was for maintenance services, $76,000$61,000 for legal services, rental commissions of approximately $6,000$17,000 and $10,000$3,000 for construction costs. The Advisory Committee held 6 meetings during 2012,2013, and a total of $31,000$30,500 was paid for attendance and participation in such meetings. Additionally, the Audit Committee held 4 meetings in 20122013 and a total of $12,000$9,000 was paid for attendance and participation in such meetings.


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        The Board of Directors of our General Partner does not have a compensation committee. No member of the Board of Directors of the General Partner was at any time in 20122013 or at any other time an officer or employee of the General Partner, and no member had any relationship with the Partnership requiring disclosure as a related-person transaction under Item 404 of Regulation S-K. No officer of the General Partner has served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of the Board of Directors of the General Partner at any time in 2012.2013.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        As of March 15, 2013,1, 2014, except as listed below, the General Partner was not aware of any beneficial owner of more than 5% of the outstanding Class A Units or the Depositary Receipts, other than Computershare, which, under the Deposit Agreement, as Depositary, is the record holder of the Class A Units exchanged for Depositary Receipts. As of March 15, 2013,1, 2014, pursuant to the Deposit Agreement, Computershare was serving as the record holder of the Class A Units with respect to which 2,990,1822,982,984 Depositary Receipts had been issued to 847approximately 1830 holders. As of March 15, 2013,1, 2014, there were issued and outstanding 4,3593,963 Class A Units (not including the Depositary Receipts) held by 216193 unit holders, 24,70724,603 Class B Units and 1,300 1,295—General Partnership Units held by the persons listed below. During 2012, 782013, 396 Class A Units were exchanged for 2,34011,880 Depositary Receipts.


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        The following table sets forth certain information regarding each class of Partnership Units beneficially owned as of December 31, 20122013 by (i) each person known by the Partnership to beneficially own more than 5% of any class of Partnership Units, (ii) each director and officer of the General Partner and (iii) all directors and officers of the General Partner as a group. For purposes of this table, all Depositary Receipts are included as if they were converted back into Class A Units. The inclusion in the table below of any Units deemed beneficially owned does not constitute an admission that the


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named persons are direct or indirect beneficial owners of such Units. Unless otherwise indicated, each person listed below has sole voting and investment power with respect to the Units listed.


 Class A Class B General Partnership  Class A Class B General Partnership 
Directors and Officers
 Number of
Units
Beneficially
Owned
 % Of
Outstanding
Units
Beneficially
Owned
 Number of
Units
Beneficially
Owned
 % Of
Outstanding
Units
Beneficially
Owned
 Number of
Units
Beneficially
Owned
 % Of
Outstanding
Units
Beneficially
Owned
  Number of
Units
Beneficially
Owned
 % Of
Outstanding
Units
Beneficially
Owned
 Number of
Units
Beneficially
Owned
 % Of
Outstanding
Units
Beneficially
Owned
 Number of
Units
Beneficially
Owned
 % Of
Outstanding
Units
Beneficially
Owned
 

Harold Brown

   (1)(2)  (1)(2) 18,588(3) 75%(3)  (4) 100%(4)   (1)(2)  (1)(2) 18,452(3) 75%(3)  (4) 100%(4)

c/o New England Realty Associates
Limited Partnership
39 Brighton Avenue
Allston, MA 02134

                

Harold Brown 1999 Revocable Trust

  
(2)
 
(2)
         

Harold Brown 2013 Revocable Trust

  
(2)
 
(2)
         

c/o Saul Ewing LLP
131 Dartmouth Street
Boston, MA 02116

                

HBC Holdings, LLC

  
(1)
 
(1)
 
(3)
 
(3)
 
0
 
0
   
(1)
 
(1)
 
(3)
 
(3)
 
0
 
0
 

39 Brighton Avenue

  

Allston, MA 02134

  

39 Brighton Avenue
Allston, MA 02134

              

Ronald Brown

  
2,872

(5)
 
2.75

%(5)
 
6,196
 
25

%
 
(4)
 
100

%(4)
  
2,895

(5)
 
2.79

%(5)
 
6,151
 
25

%
 
(4)
 
100

%(4)

c/o New England Realty Associates
Limited Partnership
39 Brighton Avenue
Allston, MA 02134

                

Guilliaem Aertsen

  
0
 
0
 
0
 
0
 
0
 
0
   
0
 
0
 
0
 
0
 
0
 
0
 

160 Boylston Street
#2149 Chestnut Hill, MA 02467

                

David Aloise

  
0
 
0
 
0
 
0
 
0
 
0
   
0
 
0
 
0
 
0
 
0
 
0
 

241 Cottage Park Road
Winthrop, MA 02152

                

Roberta Ornstein

  
178
 
0.17

%
 
0
 
0
 
0
 
0
 

160 Boylston Street
#2149 Chestnut Hill, MA 02467

  

NewReal, Inc.

  
333
 
0.32

%
 
0
 
0
 
1,304
 
100

%
  
333
 
0.32

%
 
0
 
0
 
1,295
 
100

%

39 Brighton Avenue
Allston, MA 02134

                

All directors and officers as a group

  
35,311

(6)
 
33.84

%3(6)
 
24,784

(7)
 
100

%(7)
 
(4)
 
100

%(4)
  
26,823

(6)
 
25.89

%3(6)
 
24,603

(7)
 
100

%(7)
 
(4)
 
100

%(4)

5% Owners that are not Directors and Officers

5% Owners that are not Directors and Officers

  

5% Owners that are not Directors and Officers

  
 
 
 
 
 
 
 
 

Carl Valeri

  
6,478

(8)
 
6.21

%(8)
 
0
 
0
 
0
 
0
   
6,478

(8)
 
6.25

%(8)
 
0
 
0
 
0
 
0
 

50 Udine Street

  

Arlington, MA 02476

  

50 Udine Street
Arlington, MA 02476

              

Harold Brown 2009 Irrevocable Trust

  
8,333

(9)
 
8.04

%(9)
         

39 Brighton Avenue
Alston, MA 02134

              

(1)
As of March 1,December 31, 2013, 507,849 Depositary Receipts are held of record by the HBC Holdings, LLC (HBC). Harold Brown is the sole manager of HBC with sole voting and dispositive control over the Depositary Receipts. Accordingly, Mr. Brown may be deemed to beneficially own the Depositary Receipts held by HBC. Because a Depositary Receipt represents beneficial ownership of one-thirtieth of a Class A Unit, Harold Brown may be deemed to beneficially own approximately

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(2)
On October 15, 2009, the Harold Brown 1999 Revocable Trust (1999 Trust) effected an equity exchange with the NERA 1994 Irrevocable Trust (1994 Trust) pursuant to which the 1994 Trust transferred 660,000 Depositary Receipts to the 1999 Trust in exchange for property ownership interests held by the 1999 Trust. On June 4, 2010, the 1994 Trust transferred 90,000 Depositary Receipts to the 1999 Trust as consideration for a 2.18% economic interest in HBC Holdings, LLC ("HBC Holdings'). On January 12, 2011, the 1999 Trust transferred 300,000 Depositary Receipts to HBC as partial consideration for additional economic interest in HBC. As of March 1, 2013, 450,000 Depositary Receipts are held of record by the Harold Brown 1999 Revocable Trust. Harold Brown is the sole beneficiary of the 1999 Trust during his lifetime and is a co-trustee of the 1999 Trust and exercises voting and dispositive control over thedirectly owns 200,000 Depositary Receipts beneficially owned by the Trust. Accordingly, Mr. Brown may be deemed to beneficially own the Depositary Receipts held by the Trust.his spouse. Because a Depositary Receipt represents beneficial ownership of one-thirtieth of a Class A Unit, Harold Brown may be deemed to directly beneficially own approximately 15,0006,667 Class A Units (approximately 14.37%6.44% of the outstanding Class A Units) and the Trust may be deemed to beneficially own approximately 15,000 Class A Units (approximately 14.37%.

Table of the outstanding Class A Units).

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(3)
Consists of Class B Units held by HBC Holdings, LLC. See Note (1) above. Harold Brown, as Manager, has voting and investment power over the Class B Units held by the LLC, subject to the provisions of the LLC, and thus may be deemed to beneficially own the 18,58818,452 Class B Units held by the LLC. On January 12, 2011, the NERA 1994 Irrevocable Trust transferred to HBC, 18,588 Class B Units for additional economic interest in HBC.

(4)
Since Harold Brown and Ronald Brown are the controlling stockholders, executive officers and directors of NewReal, Inc., they may be deemed to beneficially own all 1,3041,295 of the General Partnership Units held of record by NewReal, Inc.

(5)
Consists of 86,16086,860 Depositary Receipts held of record jointly by Ronald Brown and his wife. Because a Depositary Receipt represents beneficial ownership of one-thirtieth of a Class A Unit, Ronald Brown may be deemed to beneficially own approximately 2,8722,895 Class A Units.

(6)
Consists of the Class A Units described in Notes (1), (2) and (4) above, plus New Real, Inc. and Ms. Ornstein,Ronald Brown, as indicated in the table.

(7)
Includes the Class B Units described in Note (2) above.

(8)
Consists of 194,346 Depositary Receipts held by Carl Valeri and his immediate family members. Because a Depositary Receipt represents beneficial ownership of one thirtieth of a Class A Unit, Carl Valeri may be deemed to beneficially own approximately 6,478 Class A Units.


(9)
Consists of 250,000 Depositary Receipts held by the Harold Brown 2009 Irrevocable Trust. Harold Brown is not a beneficiary of the Trust and he does not have a pecuniary interest. Because a Depositary Receipt represents beneficial ownership of one thirtieth of a Class A Unit, the Trust may be deemed to beneficially own approximately 8,333 Class A Units

        On November 13, 2000, the Partnership adopted a Policy for Establishment of Rule 10b5-1 Trading Plans. Pursuant to this Policy, the Partnership authorized its officers, directors and certain employees, shareholders and affiliates who are deemed "insiders" of the Partnership to adopt individual plans for trading the Partnership's securities ("Trading Plans"), and established certain procedural requirements relating to the establishment, modification and termination of such Trading Plans. On May 14, 2001, the Partnership approved a Trading Plan of Harold Brown, providing for the purchase of up to 60,000 Depositary Receipts of the Partnership as such become available during the period from May 14, 2001 through May 13, 2002. Mr. Brown amended and restated this Trading Plan on November 19, 2001 to increase the number of Depositary Receipts which were to be purchased pursuant thereto from 60,000 to 150,000, expanding the date through which purchases could be made to September 30, 2002, and to provide that purchases under his Trading Plan were to be made only if the price per Depositary Receipt was $15.00 or less. On November 7, 2007, Mr. Brown amended and restated the Trading Plan expanding the date through which Depositary Receipts may be purchased through September 30, 2009 for up to 150,000 Depositary Receipts at prices up to $33.33 each. On November 4, 2009, Mr. Brown amended and restated the Trading Plan expanding the date through which Depositary Receipts may be purchase through September 30, 2012 for up to 150,000 Depositary Receipts at price up to $28.33 each. On November 14, 2012, Mr. Brown amended and restated the Trading Plan extending the date through which Depositary Receipts may be purchased through September 30, 2016 for up to 600,000 Depositary Receipts at prices up to $45.00.

        The Partnership does not have any securities authorized for issuance pursuant to any equity compensation plans.


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ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

        Harold Brown and Ronald Brown are brothers.

        Guilliaem Aertsen and Roberta Ornstein are married.

There are no other family relationships among any of our directors. Messrs. Aertsen Aloise and Ms. OrnsteinAloise representing a majority of our directors are determined to be independent under the rules of the NYSE Amex Exchange and the SEC. The board holds regularly scheduled meetings.

        The Partnership invested approximately $34,049,000 in nine limited liability companies formed to acquire Investment Properties. The Partnership has a 40%-50% ownership interest in each of these


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limited liability companies accounted for on the equity method of consolidation. The majority stockholder of the General Partner owns between 43.2% and 57% and the President and five employees of the management company own between 0% and 6.8% in each of the Investment Properties. See Note 14 of the consolidated financial statements for a description of the Investment Properties.

        See also "Item 2. Properties," "Item 10. Directors and Executive Officers of the Registrant" and "Item 11. Executive Compensation" for information regarding the fees paid to The Hamilton Company, an affiliate of the General Partner.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

        Miller Wachman LLP served as the Partnership's independent accountants for the fiscal year ended December 31, 20122013 and has reported on the 20122013 Consolidated Financial Statements. Aggregate fees rendered to Miller Wachman LLP for the years ended December 31, 20122013 and 20112012 were as follows:


 2012 2011  2013 2012 

Audit Fees

      

Recurring annual audits and quarterly reviews

 $238,000 $236,000  $239,000 $238,000 
          

Subtotal

 238,000 236,000  239,000 238,000 
          

Other Audit Related Fees

       
          

Tax Fees

      

Recurring tax compliance for the Partnership, 25 subsidiary Partnerships and 20 General Partnerships

 80,000 80,000 

Recurring tax compliance for the Partnership, 24 subsidiary Partnerships and 20 General Partnerships

 84,000 80,000 

Tax Planning and research

      
          

Subtotal

 80,000 80,000  84,000 80,000 
          

Other Fees

       
          

Total Fees

 $318,000 $316,000  $323,000 $318,000 
          
     

        The Audit Committee's charter provides that it has the sole authority to review in advance and grant any pre-approvals of (i) all auditing services to be provided by the independent auditor, (ii) all significant non-audit services to be provided by the independent auditors as permitted by Section 10A of the Securities Exchange Act of 1934, and (iii) all fees and the terms of engagement with respect to such services. All audit and non-audit services performed by Miller Wachman during fiscal 20122013 and 20112012 were pre-approved pursuant to the procedures outlined above.


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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


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SELECTED FINANCIAL DATA

 
 Year Ended December 31, 
 
 2012 2011 2010 2009 2008 

INCOME STATEMENT INFORMATION

                

Revenues

 $35,632,409 $34,035,602 $32,255,957 $32,362,155 $31,434,943 

Expenses

  22,710,344  22,670,986  21,916,664  21,555,223  22,032,644 
            

Income before other income and discontinued operations

  12,922,065  11,364,616  10,339,293  10,806,932  9,402,299 

Other (Loss)

  (9,288,267) (9,875,361) (11,918,392) (9,433,313) (13,060,859)
            

Income (loss) before discontinued operations

  3,633,798  1,489,254  (1,579,099) 1,373,619  (3,658,560)

Discontinued operations

    7,802,026  219,867  238,919  10,240,271 
            

Net (Loss) Income

 $3,633,798 $9,291,281 $(1,359,232)$1,612,538 $6,581,711 
            

Income (loss) before discontinued operations per Unit

 $27.69 $11.33 $(11.99)$10.33 $(26.56)

Discontinued operations per Unit

    59.34  1.67  1.80  74.33 
            

Net income (loss) per Unit

  27.69  70.67  (10.32) 12.13  47.77 
            

Distributions to Partners per Unit

 $30.00 $28.00 $28.00 $28.00 $28.00 
            

Net income (loss) per Depositary Receipt

 $0.92 $2.36 $(0.34)$0.40 $1.59 

Distributions to Partners per Depositary Receipt

 $1.00 $0.93 $0.93 $0.93 $0.93 

BALANCE SHEET INFORMATION

                

Real Estate, gross

  159,876,368  159,123,799  150,818,648  150,411,555  150,344,799 

Real Estate, net

  95,435,850  98,924,534  92,744,257  95,971,937  98,560,454 

Total Assets

  121,538,490  125,376,764  121,276,735  129,089,736  125,243,457 

Total Debt Outstanding

  138,055,522  140,830,212  142,349,260  144,809,354  138,160,262 

Partners' Capital

  (22,515,678) (21,310,852) (26,920,567) (21,332,824) (17,717,182)

        The Partnership may purchase and/or sell properties at any time.


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        The table below reflects the totals of property available for rental at each December 31,

 
 Year Ended December 31, 
 
 2012 2011 2010 2009 2008 

Residential

                

Units

  2,270  2,270  2,288  2,288  2,288 

Vacancies

  39  32  79  63  67 

Vacancy rate

  1.7% 1.4% 3.5% 2.8% 3.0%

Commercial

                

Total square feet

  110,949  110,949  110,949  110,949  110,949 

Vacancy (in square feet)

  5,500  0  0  2,384  0 

Vacancy rate

  5.0% 0% 0% 2.1% 0%

        See Items 1A and 7 for factors that may affect future operations. The above tables may not be indicative of future results.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners
New England Realty Associates Limited Partnership:

        We have audited the accompanying consolidated balance sheets of New England Realty Associates Limited Partnership (the "Partnership") as of December 31, 20122013 and 20112012 and the related consolidated statements of income, changes in partners capital and cash flows for each of the years in the three-year period ended December 31, 2012. These2013. The Partnership's management is responsible for these consolidated financial statements are the responsibility of the Partnership's management.statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of New England Realty Associates Limited Partnership at December 31, 20122013 and 2011,2012, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2012,2013, in conformity with accounting principles generally accepted in the United States of America.

/s/ MILLER WACHMAN LLP    

Boston, Massachusetts
March 22, 201318, 2014

 

 

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


 December 31,  December 31, 

 2012 2011  2013 2012 

ASSETS

      

Rental Properties

 $95,435,850 $98,924,534  $152,904,661 $94,973,600 

Property Held for Sale

  462,250 

Cash and Cash Equivalents

 6,981,906 4,050,157  14,013,380 6,981,906 

Rents Receivable

 475,083 434,252  496,149 475,083 

Real Estate Tax Escrows

 449,652 401,325  375,560 449,652 

Prepaid Expenses and Other Assets

 3,073,890 3,866,652  3,895,189 3,073,890 

Investments in Unconsolidated Joint Ventures

 13,986,173 16,780,657  12,025,142 13,986,173 

Financing and Leasing Fees

 1,135,936 919,187  1,635,076 1,135,936 
          

Total Assets

 $121,538,490 $125,376,764  $185,345,157 $121,538,490 
          
     

LIABILITIES AND PARTNERS' CAPITAL

      

Note Payable

 $ $1,668,600 

Mortgage Notes Payable

 138,055,522 139,161,612  $198,520,478 $138,055,522 

Distribution and Loss in Excess of Investment in Unconsolidated Joint Venture

 1,252,346  

Accounts Payable and Accrued Expenses

 2,361,942 2,253,696  3,178,495 2,361,942 

Advance Rental Payments and Security Deposits

 3,636,704 3,603,708  4,242,401 3,636,704 
          

Total Liabilities

 144,054,168 146,687,616  207,193,720 144,054,168 

Commitments and Contingent Liabilities (Notes 3 and 9)

 
 
  
 
 

Partners' Capital 130,444 and 131,484 units outstanding in 2012 and 2011 respectively

 
(22,515,678

)
 
(21,310,852

)

Partners' Capital 129,487 and 130,444 units outstanding in 2013 and 2012 respectively

 
(21,848,563

)
 
(22,515,678

)
          

Total Liabilities and Partners' Capital

 $121,538,490 $125,376,764  $185,345,157 $121,538,490 
          
     

   

See notes to consolidated financial statements.statements


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


 Year Ended December 31,  Year Ended December 31, 

 2012 2011 2010  2013 2012 2011 

Revenues

        

Rental income

 $35,244,008 $33,608,799 $31,816,175  $37,961,599 $34,784,130 $33,160,450 

Laundry and sundry income

 388,401 426,803 439,782  402,953 385,040 424,337 
              

 35,632,409 34,035,602 32,255,957  38,364,552 35,169,170 33,584,787 
              

Expenses

        

Administrative

 1,825,951 1,707,408 1,772,599  2,116,527 1,813,150 1,695,198 

Depreciation and amortization

 6,092,725 5,910,746 5,531,509  8,377,902 6,012,755 5,839,312 

Management fee

 1,446,620 1,404,467 1,330,157  1,570,158 1,428,052 1,385,917 

Operating

 3,633,619 4,080,647 3,784,401  4,201,928 3,580,690 4,014,770 

Renting

 183,529 365,110 528,686  202,787 180,574 361,236 

Repairs and maintenance

 5,179,408 5,056,054 4,886,724  5,815,264 5,075,037 4,957,167 

Taxes and insurance

 4,348,492 4,146,554 4,082,588  4,948,569 4,299,169 4,085,429 
              

 22,710,344 22,670,986 21,916,664  27,233,135 22,389,427 22,339,029 
              

Income Before Other Income (loss) and Discontinued Operations

 12,922,065 11,364,616 10,339,293 

Income Before Other Income and Discontinued Operations

 11,131,417 12,779,743 11,245,758 
              

Other Income (loss)

 

Other Income (Expense)

       

Interest income

 2,216 3,861 5,932  1,118 2,216 3,861 

Interest expense

 (7,802,999) (7,965,422) (8,053,628) (8,013,109) (7,695,232) (7,857,950)

(Loss) from investments in unconsolidated joint ventures

 (1,487,484) (1,913,800) (3,869,996) (1,166,877) (1,487,484) (1,913,800)

Other (loss)

   (700)

Other income

 4,950 1,207  
       
        (9,173,918) (9,179,293) (9,767,889)

 (9,288,267) (9,875,361) (11,918,392)       

Income From Continuing Operations

 1,957,499 3,600,450 1,477,869 
              

Income (loss) From Continuing Operations

 3,633,798 1,489,255 (1,579,099)
       

Discontinued Operations

        

Income from discontinued operations

  81,567 219,867  19,047 33,348 92,953 

Gain on the sale of real estate

  7,720,459   3,678,839  7,720,459 
              

  7,802,026 219,867  3,697,886 33,348 7,813,412 
              

Net Income (loss)

 $3,633,798 $9,291,281 $(1,359,232)

Net Income

 $5,655,385 $3,633,798 $9,291,281 
              

Income (loss) per Unit

 

Income (loss) before discontinued operations

 $27.69 $11.33 $(11.99)
       

Income per Unit

       

Income before discontinued operations

 $15.07 $27.44 $11.24 

Income from discontinued operations

  59.34 1.67  28.48 0.25 59.42 
              

Net Income per Unit

 $27.69 $70.67 $(10.32) $43.55 $27.69 $70.66 
       
              

Weighted Average Number of Units Outstanding

 131,230 131,484 131,696  129,868 131,230 131,484 
              
       

   

See notes to consolidated financial statements.


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL


  
  
  
  
  
  
 Partners' Capital  Units Partners's Capital 

 Limited  
  
  
  
  
  
  
  
  Limited  
  
  
  
 Limited  
  
 

 Units  
  
  
  
  General
Partnership
  
 Treasury
Units
  
 General
Partnership
  
 

 Limited  
  
  Class A Class B Subtotal Total Class A Class B Total 

  
  
 General
Partnership
  
 Treasury
Units
  
 General
Partnership
  
 

 Class A Class B Subtotal Total Class A Class B Total 

Balance January 1, 2010

 144,180 34,243 1,802 180,225 47,879 132,346 $(17,069,520)$(4,050,138)$(213,165)$(21,332,823)

Distribution to Partners

       (2,950,080) (700,644) (36,876) (3,687,600)

Stock Buyback

     862 (862) (432,920) (102,591) (5,400) (540,911)

Net Loss

       (1,087,386) (258,254) (13,592) (1,359,232)
                     

Balance December 31, 2010

 144,180 34,243 1,802 180,225 48,741 131,484 $(21,539,906)$(5,111,627)$(269,033)$(26,920,566)

Balance January 1, 2011

 144,180 34,243 1,802 180,225 48,741 131,484 $(21,539,906)$(5,111,627)$(269,033)$(26,920,566)

Distribution to Partners

       (2,945,253) (699,498) (36,815)$(3,681,566)       (2,945,253) (699,498) (36,815) (3,681,566)

Net Income

       7,433,025 1,765,343 92,913 $9,291,281        7,433,025 1,765,343 92,913 9,291,281 
                                          

Balance December 31, 2011

 144,180 34,243 1,802 180,225 48,741 131,484 $(17,052,134)$(4,045,782)$(212,935)$(21,310,851) 144,180 34,243 1,802 180,225 48,741 131,484 $(17,052,134)$(4,045,782)$(212,935)$(21,310,851)

Distribution to Partners

       (3,145,928) (747,158) (39,324) (3,932,410)       (3,145,928) (747,158) (39,324) (3,932,410)

Stock Buyback

     1,040 (1,040) (726,058) (171,148) (9,008) (906,214)     1,040 (1,040) (726,058) (171,148) (9,008) (906,214)

Net Income

       2,907,038 690,422 36,338 3,633,798        2,907,038 690,422 36,338 3,633,798 
                                          

Balance December 31, 2012

 144,180 34,243 1,802 180,225 49,781 130,444 $(18,017,082)$(4,273,666)$(224,929)$(22,515,677) 144,180 34,243 1,802 180,225 49,781 130,444 $(18,017,082)$(4,273,666)$(224,929)$(22,515,677)

Distribution to Partners

       (3,114,930) (739,796) (38,936) (3,893,662)

Stock Buyback

     957 (957) (877,623) (206,137) (10,849) (1,094,609)

Net Income

       4,524,308 1,074,523 56,554 5,655,385 
                                          

Balance December 31, 2013

 144,180 34,243 1,802 180,225 50,738 129,487 $(17,485,327)$(4,145,076)$(218,160)$(21,848,563)
                     
                     

   

See notes to consolidated financial statements.


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


 Year Ended December 31,  Year Ended December 31, 

 2012 2011 2010  2013 2012 2011 

Cash Flows from Operating Activities

        

Net income (loss)

 $3,633,798 $9,291,281 $(1,359,232)

Net income

 $5,655,385 $3,633,798 $9,291,281 
              

Adjustments to reconcile net income to net cash provided by operating activities

        

Depreciation and amortization

 6,092,725 5,910,746 5,531,509  8,377,902 6,012,755 5,839,312 

Loss from investments in joint venture

 1,487,484 1,913,800 3,869,996 

Loss from investments in joint ventures

 1,166,877 1,487,484 1,913,800 

Gain on the sale of equipment

 (3,500)    

Depreciation and amortization—discontinued operations

  30,132 90,886  2,111 79,969 101,566 

(Gain) on the sale of real estate from discontinued operations

   (7,720,459)   

Gain on the sale of rental property

 (3,678,839)  (7,720,459)

Change in operating assets and liabilities

        

(Increase) Decrease in rents receivable

 (40,831) 188,692 415,876  (21,064) (40,831) 188,692 

Increase (Decrease) in accounts payable and accrued expense

 108,246 (186,445) 244,896  816,553 108,246 (186,445)

(Increase) Decrease in real estate tax escrow

 (48,327) (99,472) 9,729  74,093 (48,327) (99,472)

(Increase) Decrease in prepaid expenses and other assets

 685,772 (432,957) (480,598) 443,925 685,773 (432,957)

Increase in advance rental payments and security deposits

 32,996 195,807 (9,460) 605,696 32,996 195,807 
              

Total Adjustments

 8,318,065 (200,156) 9,672,834  7,783,754 8,318,065 (200,156)
              

Net cash provided by operating activities

 11,951,863 9,091,125 8,313,602  13,439,139 11,951,863 9,091,125 
              

Cash Flows Used in Investing Activities

 

Proceeds from unconsolidated joint ventures

 1,366,383 1,408,950 1,140,801 

(Investment in) unconsolidated joint ventures

 (59,383) (26,450) (123,301)

Purchase and improvement of rental properties

 (2,360,399) (2,618,794) (2,268,039)

Cash Flows From Investing Activities

       

Proceed from unconsolidated joint ventures

 1,288,077 1,366,383 1,408,950 

Distribution in excess of investment in unconsolidated joint ventures

 1,687,750   

Investment in unconsolidated joint ventures

 (929,327) (59,383) (26,450)

Improvement of rental properties

 (4,499,924) (2,360,399) (2,618,794)

Proceeds from the sale of equipment

 3,500   

Purchase of rental properties

  (10,041,784)   (22,601,774)  (10,041,784)

Net proceeds from the sale of rental property

  8,297,928   2,138,978  8,297,928 
              

Net cash (used in) investing activities

 (1,053,399) (2,980,150) (1,250,539) (22,912,720) (1,053,399) (2,980,150)
              

Cash Flows from Financing Activities

        

Payment of financing costs

 (353,400) (105,564) (8,161) (971,630) (353,400) (105,564)

Proceeds of mortgage notes payable

  5,000,000 904,122  28,268,115  5,000,000 

Proceeds of note payable

  3,998,573     3,998,573 

Principal payments of mortgage notes payable

 (1,106,091) (3,519,047) (864,815) (5,803,159) (1,106,091) (3,519,047)

Principal payments of note payable

 (1,668,600) (6,998,573) (2,500,000)  (1,668,600) (6,998,573)

Stock buyback

 (906,214)  (540,911) (1,094,609) (906,214)  

Distributions to partners

 (3,932,410) (3,681,566) (3,687,600) (3,893,662) (3,932,410) (3,681,566)
              

Net cash (used in) financing activities

 (7,966,715) (5,306,177) (6,697,365)

Net cash provided by (used in) financing activities

 16,505,055 (7,966,715) (5,306,177)
              

Net Increase in Cash and Cash Equivalents

 2,931,749 804,798 365,698  7,031,474 2,931,749 804,798 

Cash and Cash Equivalents, at beginning of period

 4,050,157 3,245,361 2,879,663  6,981,906 4,050,157 3,245,361 
              

Cash and Cash Equivalents, at end of period

 $6,981,906 $4,050,159 $3,245,361  $14,013,380 $6,981,906 $4,050,159 
              
       

   

See notes to consolidated financial statements.statements


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20122013

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

        Line of Business:    New England Realty Associates Limited Partnership ("NERA" or the "Partnership") was organized in Massachusetts in 1977. NERA and its subsidiaries own 24 properties which include 16 residential buildings; 4 mixed use residential, retail and office buildings; 3 commercial buildings and individual units at one condominium complex. These properties total 2,2512,412 apartment units, 19 condominium units and 110,949108,043 square feet of commercial space. Additionally, the Partnership also owns a 40-50% interest in nine9 residential and mixed use properties consisting of 799798 apartment units, 12,500 square feet of commercial space and a 50 car parking lot. The properties are located in Eastern Massachusetts and Southern New Hampshire.

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

        Principles of Consolidation:    The consolidated financial statements include the accounts of NERA and its subsidiaries. NERA has a 99.67% to 100% ownership interest in each subsidiary except for the nine limited liability companies (the "Investment Properties" or "Joint Ventures") in which the Partnership has a 40 - 50% ownership interest. The consolidated group is referred to as the "Partnership." Minority interests are not recorded, since they are insignificant. All significant intercompany accounts and transactions are eliminated in consolidation. The Partnership accounts for its investment in the above-mentioned Investment Properties using the equity method of consolidation. (See Note 14: Investments in Unconsolidated Joint Ventures).

        The Partnership accounts for its investments in joint ventures using the equity method of accounting. These investments are recorded initially at cost, as Investments in Unconsolidated Joint Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions. Generally, the Partnership would discontinue applying the equity method when the investment (and any advances) is reduced to zero and would not provide for additional losses unless the Partnership has guaranteed obligations of the venture or is otherwise committed to providing further financial support for the investee. If the venture subsequently generates income, the Partnership only recognizes its share of such income to the extent it exceeds its share of previously unrecognized losses. In 2013, the carrying value of an investment fell below zero. We intend to fund our share of the investments' future operating deficits should the need arise. However, we have no legal obligation to pay for any of the liabilities of such investments nor do we have any legal obligation to fund operating deficits. (See Note 14: Investment in Unconsolidated Joint Ventures.)

The authoritative guidance on consolidation provides guidance on the identification of entities for which control is achieved through means other than voting rights ("variable interest entities" or "VIEs") and the determination of which business enterprise, if any, should consolidate the VIE (the "primary beneficiary"). Generally, the consideration of whether an entity is a VIE applies when either (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest, (2) the equity investment at risk is insufficient to finance that entity'sequity's activities without additional subordinated financial support or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.

        On January 1, 2010, the Partnership adopted the updated provisions of ASC 810, pursuant to FASB No. 167, which amends FIN 46(R) to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. Additionally, FASB No. 167 amends FIN 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity, which was based on determining which enterprise absorbs the majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both. FASB No. 167 amends certain guidance in Interpretation 46(R) for determining whether an entity is a variable interest entity. Also, FASB No. 167 amends FIN 46(R) to require enhanced disclosures that


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

will provide userson behalf of financial statementsan investor with more transparent information about an enterprise's involvement in a disproportionately small voting interest. The primary beneficiary is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the variable interest entity. The enhanced disclosures are required for any enterpriseentity's performance; and(2) the obligation to absorb losses and rights to receive the returns from VIE that holds a variable interest in a variable interest entity. The adoption of this guidance did not have a material impactwould be significant to these financial statements.the VIE

        Impairment:    On an annual basis management assesses whether there are any indicators that the value of the Partnership's rental properties or investments in unconsolidated subsidiaries may be impaired. In addition to identifying any specific circumstances which may affect a property or properties, management considers other criteria for determining which properties may require assessment for potential impairment. The criteria considered by management include reviewing low leased percentages, significant near term lease expirations, recently acquired properties, current and historical operating and/or cash flow losses, near term mortgage debt maturities or other factors that might impact the Partnership's intent and ability to hold property. A property's value is impaired only if management's estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. The Partnership's estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter management's assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved. The Partnership has not recognized an impairment loss since 1995.

        Revenue Recognition:    Rental income from residential and commercial properties is recognized over the term of the related lease. For residential tenants, amounts 60 days in arrears are charged against income. The commercial tenants are evaluated on a case by case basis. Certain leases of the commercial properties provide for increasing stepped minimum rents, which are accounted for on a straight-line basis over the term of the lease. Contingent rent for commercial properties are received from tenants for certain costs as provided in the lease agreement. The costs generally include real estate taxes, utilities, insurance, common area maintenance and recoverable costs. Concessions made on residential leasesRental concessions are also accounted for on the straight-line basis.

        Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the differences between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management's estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed-rate renewal options for below-market leases. The capitalized above-market lease values for acquired properties are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases.


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Rental Properties:    Rental properties are stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred; improvements and additions which improve or extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost of the asset and related accumulated depreciation is eliminated from the accounts, and any gain or loss on such disposition is included in income. Fully depreciated assets are removed from the accounts. Rental properties are depreciated by both straight-line and accelerated methods over their estimated useful lives. Upon acquisition of rental property, the Partnership estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities assumed, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships. The Partnership allocated the purchase price to the assets acquired and liabilities assumed based on their fair values. The Partnership records goodwill or a gain on bargain purchase (if any) if the net assets acquired/liabilities assumed exceed the purchase consideration of a transaction. In estimating the fair value of the tangible and intangible assets acquired, the Partnership considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

        Other intangible assets acquired include amounts for in-place lease values and tenant relationship values, which are based on management's evaluation of the specific characteristics of each tenant's lease and the Partnership's overall relationship with the respective tenant. Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses. Characteristics considered by management in valuing tenant relationships include the nature and extent of the Partnership's existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant's credit quality and expectations of lease renewals. The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases. The value of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships.

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

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

        Income Taxes:    The financial statements have been prepared on the basis that NERA and its subsidiaries are entitled to tax treatment as partnerships. Accordingly, no provision for income taxes have been recorded (See Note 13).


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

        Comprehensive Income:    Comprehensive income is defined as changes in partners' equity, exclusive of transactions with owners (such as capital contributions and dividends). NERA did not have any comprehensive income items in 2013, 2012, 2011, or 20102011 other than net income as reported.

        Income (Loss) Per Depositary Receipt:    Effective January 3, 2012, the Partnership authorized a 3-for-1 forward split of its Depositary Receipts listed on the NYSE Amex and a concurrent adjustment of the exchange ratio of Depositary Receipts for Class A Units of the Partnership from 10-to-1 to 30-to-1, such that each Depositary Receipt represents one-thirtieth (1/30) of a Class A Unit of the Partnership. All references to Depositary Receipts in the report are reflective of the 3-for-1 forward split.

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

        Concentration of Credit Risks and Financial Instruments:    The Partnership's properties are located in New England, and the Partnership is subject to the general economic risks related thereto. No single tenant accounted for more than 5% of the Partnership's revenues in 2013, 2012, 2011, or 2010.2011. The Partnership makes its temporary cash investments with high-credit quality financial institutions. At December 31, 2012,2013, substantially all of the Partnership's cash and cash equivalents were held in interest-bearing accounts at financial institutions, earning interest at rates from 0.01% to 0.45%0.35%. At December 31, 20122013 and 2011,2012, respectively approximately $8,000,000$15,275,000 and $5,051,000$8,000,000 of cash and cash equivalents, and security deposits included in prepaid expenses and other assets exceeded federally insured amounts.

        Advertising Expense:    Advertising is expensed as incurred. Advertising expense was $41,285, $52,084 and $88,585 in 2013, 2012 and $70,074 in 2012, 2011, and 2010, respectively.

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

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


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(amortization) expense that would have been recognized had the property been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell.


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Interest Capitalized:    The Partnership follows the policy of capitalizing interest as a component of the cost of rental property when the time of construction exceeds one year. During the years ended December 31, 2013, 2012 2011 and 20102011 there was no capitalized interest.

        Extinguishment of Debt:    When existing mortgages are refinanced with the same lender and it is determined that the refinancing is substantially different then they are recorded as an extinguishment of debt. However if it is determined that the refinancing is substantially the same then they are recorded as an exchange of debt. All refinancing qualify as extinguishment of debt.

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

NOTE 2. RENTAL PROPERTIES

        As of December 31, 2012,2013, the Partnership and its Subsidiary Partnerships owned 2,2512,412 residential apartment units in 20 residential and mixed-use complexes (collectively, the "Apartment Complexes"). The Partnership also owns 19 condominium units in a residential condominium complex, all of which are leased to residential tenants (collectively referred to as the "Condominium Units"). The Apartment Complexes and Condominium Units are located primarily in the metropolitan Boston area of Massachusetts.

        Additionally, as of December 31, 2012,2013, the Partnership and Subsidiary Partnerships owned a commercial shopping center in Framingham, commercial buildings in Newton and Brookline and mixed-use properties in Boston, Brockton and Newton, all in Massachusetts. These properties are referred to collectively as the "Commercial Properties."

        The Partnership also owned a 40% to 50% ownership interest in nine residential and mixed use complexes (the "Investment Properties") at December 31, 20122013 with a total of 799798 units, accounted for using the equity method of consolidation. See Note 14 for summary information on these investments.


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 2. RENTAL PROPERTIES (Continued)

        Rental properties consist of the following:

 
 December 31, 2012 December 31, 2011 Useful Life 

Land, improvements and parking lots

 $27,849,721 $27,614,537  15–40 years 

Buildings and improvements

  119,579,923  119,097,186  15–40 years 

Kitchen cabinets

  3,620,196  3,542,249  5–10 years 

Carpets

  3,354,593  3,307,499  5–10 years 

Air conditioning

  764,671  788,146  7–10 years 

Laundry equipment

  378,806  368,955  5–7 years 

Elevators

  1,139,296  1,139,296  20 years 

Swimming pools

  235,242  235,242  10 years 

Equipment

  1,586,591  1,744,006  5–7 years 

Motor vehicles

  101,657  107,788  5 years 

Fences

  22,445  22,974  5–10 years 

Furniture and fixtures

  1,038,136  1,039,439  5–7 years 

Smoke alarms

  205,091  116,482  5–7 years 
         

Total fixed assets

  159,876,368  159,123,799    

Less: Accumulated depreciation

  (64,440,518) (60,199,265)   
         

 $95,435,850 $98,924,534    
         

        Real estate and accumulated depreciation as of December 31, 2012 is as follows:

 
  
 Initial Cost to
Partnerships(1)
 Cost
Capitalized
Subsequent to
Acquisition(2)
 Gross Amount at Which
Carried at Close of Period
  
  
 
 
 Encumbrances
(First
Mortgages)
  
 Buildings
Improvements
  
 Buildings
Improvements
  
 Accumulated
Depreciation(3)
  
 
 
 Land Improvements Land Totals Date Acquired 

Boylston Downtown L.P. Residential Apartments Boston, Massachusetts

 $19,500,000 $2,112,000 $8,593,111 $7,116,107 $2,112,000 $15,709,218 $17,821,218 $9,086,787  July 1995 

Brookside Associates LLC Residential Apartments Woburn, Massachusetts

 
$

2,723,830
 
$

684,000
 
$

3,116,000
 
$

492,070
 
$

684,000
 
$

3,608,070
 
$

4,292,070
 
$

1,621,108
  
Oct. 2000
 

Courtyard @ Westgate Residential Units Burlington, Massachusetts

 
$

2,000,000
 
$

44,965
 
$

4,478,687
 
$

253,696
 
$

44,965
 
$

4,732,383
 
$

4,777,348
 
$

1,465,723
  
Sep. 2004
 

Clovelly Apartments L.P. Residential Apartments Nashua, New Hampshire

 
$

4,160,000
 
$

177,610
 
$

1,478,359
 
$

1,268,279
 
$

177,610
 
$

2,746,638
 
$

2,924,248
 
$

1,981,658
  
Sept. 1977
 

Commonwealth 1137 L.P. Residential Apartments Boston, Massachusetts

 
$

3,750,000
 
$

342,000
 
$

1,367,669
 
$

933,759
 
$

342,000
 
$

2,301,428
 
$

2,643,428
 
$

1,251,632
  
July 1995
 

Commonwealth 1144 L.P. Residential Apartments Boston, Massachusetts

 
$

14,780,000
 
$

1,410,000
 
$

5,664,816
 
$

1,616,613
 
$

1,410,000
 
$

7,281,429
 
$

8,691,429
 
$

4,373,285
  
July 1995
 

Condominium Units—Riverside Residential Units Massachusetts

 
$

 
$

23,346
 
$

190,807
 
$

22,428
 
$

23,346
 
$

213,235
 
$

236,581
 
$

205,326
  
Sept. 1977
 

Executive Apartments L.P. Residential Apartments Framingham, Massachusetts

 
$

2,415,000
 
$

91,400
 
$

740,360
 
$

758,449
 
$

91,400
 
$

1,498,809
 
$

1,590,209
 
$

1,128,556
  
Sept. 1977
 
 
 December 31, 2013 December 31, 2012 Useful Life 

Land, improvements and parking lots

 $43,919,728 $27,743,726  15–40 years 

Buildings and improvements

  152,130,635  118,739,283  15–40 years 

Kitchen cabinets

  5,956,078  3,544,868  5–10 years 

Carpets

  5,820,516  3,218,975  5–10 years 

Air conditioning

  707,928  746,043  5–10 years 

Laundry equipment

  404,775  378,806  5–7 years 

Elevators

  1,139,296  1,139,296  20–40 years 

Swimming pools

  444,629  235,242  10–30 years 

Equipment

  5,038,530  1,529,904  5–7 years 

Motor vehicles

  86,657  101,657  5 years 

Fences

  24,670  22,445  5–15 years 

Furniture and fixtures

  5,564,621  1,031,348  5–7 years 

Smoke alarms

  216,223  193,298  5–7 years 
         

Total fixed assets

  221,454,286  158,624,893    

Less: Accumulated depreciation

  (68,549,625) (63,651,293)   
         

 $152,904,661 $94,973,600    
         
         

Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 2. RENTAL PROPERTIES (Continued)

        Real estate and accumulated depreciation as of December 31, 2013 is:

 
  
 Initial Cost to
Partnerships(1)
 Cost
Capitalized
Subsequent to
Acquisition(2)
 Gross Amount at Which
Carried at Close of Period
  
  
 
 
 Encumbrances
(First
Mortgages)
  
 Buildings
Improvements
  
 Buildings
Improvements
  
 Accumulated
Depreciation(3)
  
 
 
 Land Improvements Land Totals Date Acquired 

Hamilton Battle Green LLC Residential Apartments Lexington, Massachusetts

 $4,893,448 $1,341,737 $8,457,497 $31,849 $1,341,737 $8,489,346 $9,831,083 $612,568  Jun. 2011 

Hamilton Cypress LLC Commercial—1031Exchange Brookline, Massachusetts

 
$

3,686,380
 
$

2,362,596
 
$

4,613,985
 
$

51,823
 
$

2,362,596
 
$

4,665,808
 
$

7,028,404
 
$

696,283
  
Oct. 2008
 

Hamilton Linewt LLC Commercial—1031Exchange Newton, Massachusetts

 
$

1,528,429
 
$

884,042
 
$

2,652,127
 
$

50,608
 
$

884,042
 
$

2,702,735
 
$

3,586,777
 
$

353,574
  
Nov. 2007
 

Hamilton Oaks Associates LLC Residential Apartments Brockton, Massachusetts

 
$

11,925,000
 
$

2,175,000
 
$

12,325,000
 
$

1,726,607
 
$

2,175,000
 
$

14,051,607
 
$

16,226,607
 
$

7,256,645
  
Dec. 1999
 

Highland Street Apartments, L.P. Residential Apartments Lowell, Massachusetts

 
$

1,050,000
 
$

156,000
 
$

634,085
 
$

400,178
 
$

156,000
 
$

1,034,263
 
$

1,190,263
 
$

569,822
  
Dec. 1996
 

Linhart L.P. Residential/Commercial Newton, Massachusetts

 
$

1,964,119
 
$

385,000
 
$

1,540,000
 
$

1,157,151
 
$

385,000
 
$

2,697,151
 
$

3,082,151
 
$

1,769,651
  
Jan. 1995
 

Nashoba Apartments L.P. Residential Apartments Acton, Massachusetts

 
$

2,000,000
 
$

79,650
 
$

284,548
 
$

887,277
 
$

79,650
 
$

1,171,825
 
$

1,251,475
 
$

789,226
  
Sept. 1977
 

NERA Dean St. Associates LLC Residential Apartments Norwood, Massachusetts

 
$

5,213,958
 
$

1,512,000
 
$

5,701,480
 
$

426,220
 
$

1,512,000
 
$

6,127,700
 
$

7,639,700
 
$

2,477,008
  
Jun. 2002
 

North Beacon 140 L.P. Residential Units Boston, Massachusetts

 
$

6,937,000
 
$

936,000
 
$

3,762,013
 
$

1,490,223
 
$

936,000
 
$

5,252,236
 
$

6,188,236
 
$

3,120,665
  
July 1995
 

Olde English Apartments L.P. Residential Apartments Lowell, Massachusetts

 
$

3,080,000
 
$

46,181
 
$

878,323
 
$

1,161,011
 
$

46,181
 
$

2,039,334
 
$

2,085,515
 
$

1,345,108
  
Sept. 1977
 

River Drive L.P. Residential Apartments Danvers, Massachusetts

 
$

3,465,000
 
$

72,525
 
$

587,777
 
$

1,426,304
 
$

72,525
 
$

2,014,081
 
$

2,086,606
 
$

1,601,231
  
Sept. 1977
 

Redwood Hills L.P. Residential Units Worcester, Massachusetts

 
$

6,743,000
 
$

1,200,000
 
$

4,810,604
 
$

2,117,589
 
$

1,200,000
 
$

6,928,193
 
$

8,128,193
 
$

4,055,659
  
July 1995
 

School St Assoc LLC Residential Apartments Framingham, Massachusetts

 
$

15,308,474
 
$

4,686,728
 
$

18,746,911
 
$

(1,928,307

)

$

4,686,728
 
$

16,818,604
 
$

21,505,332
 
$

6,112,019
  
Apr. 2003
 

Staples Plaza Strip Mall Framingham, Massachusetts

 
$

6,000,000
 
$

3,280,000
 
$

4,920,000
 
$

36,724
 
$

3,280,000
 
$

4,956,724
 
$

8,236,724
 
$

2,235,613
  
May 1999
 

 
  
 Initial Cost to
Partnerships(1)
 Cost
Capitalized
Subsequent to
Acquisition(2)
 Gross Amount at Which
Carried at Close of Period
  
  
 
 
 Encumbrances
(First
Mortgages)
  
 Buildings
Improvements
  
 Buildings
Improvements
  
 Accumulated
Depreciation(3)
  
 
 
 Land Improvements Land Totals Date Acquired 

Boylston Downtown L.P. Residential Apartments Boston, Massachusetts

 $40,000,000 $2,112,000 $8,593,111 $7,329,225 $2,112,000 $15,922,336 $18,034,336 $9,643,251  July 1995 

Brookside Associates LLC Residential Apartments Woburn, Massachusetts

 
$

2,684,432
 
$

684,000
 
$

3,116,000
 
$

489,922
 
$

684,000
 
$

3,605,922
 
$

4,289,922
 
$

1,755,296
  
Oct. 2000
 

Courtyard @ Westgate Residential Units Burlington, Massachusetts

 
$

2,000,000
 
$

44,965
 
$

4,478,687
 
$

249,954
 
$

44,965
 
$

4,728,641
 
$

4,773,606
 
$

1,643,418
  
Sep. 2004
 

Clovelly Apartments L.P. Residential Apartments Nashua, New Hampshire

 
$

4,160,000
 
$

177,610
 
$

1,478,359
 
$

1,503,424
 
$

177,610
 
$

2,981,783
 
$

3,159,393
 
$

2,067,556
  
Sept. 1977
 

Commonwealth 1137 L.P. Residential Apartments Boston, Massachusetts

 
$

3,750,000
 
$

342,000
 
$

1,367,669
 
$

983,064
 
$

342,000
 
$

2,350,733
 
$

2,692,733
 
$

1,346,509
  
July 1995
 

Commonwealth 1144 L.P. Residential Apartments Boston, Massachusetts

 
$

14,780,000
 
$

1,410,000
 
$

5,664,816
 
$

1,764,516
 
$

1,410,000
 
$

7,429,332
 
$

8,839,332
 
$

4,550,902
  
July 1995
 

Condominium Units—Riverside Residential Units Massachusetts

 
$

 
$

23,346
 
$

190,807
 
$

19,564
 
$

23,346
 
$

210,371
 
$

233,717
 
$

204,818
  
Sept. 1977
 

Executive Apartments L.P. Residential Apartments Framingham, Massachusetts

 
$

2,415,000
 
$

91,400
 
$

740,360
 
$

700,459
 
$

91,400
 
$

1,440,819
 
$

1,532,219
 
$

1,093,190
  
Sept. 1977
 

Hamilton Battle Green LLC Residential Apartments Lexington, Massachusetts

 
$

4,813,616
 
$

1,341,737
 
$

8,457,497
 
$

80,805
 
$

1,341,737
 
$

8,538,302
 
$

9,880,039
 
$

1,009,136
  
Jun. 2011
 

Hamilton Cypress LLC Commercial—1031Exchange Brookline, Massachusetts

 
$

 
$

2,362,596
 
$

4,613,985
 
$

348,345
 
$

2,362,596
 
$

4,962,330
 
$

7,324,926
 
$

876,537
  
Oct. 2008
 

Hamilton Green Apartments Residential Apartments Andover, Massachusetts

 
$

38,500,000
 
$

16,054,336
 
$

44,794,438
 
$

125,362
 
$

16,054,336
 
$

44,919,800
 
$

60,974,136
 
$

1,534,867
  
Jul. 2013
 

Hamilton Linewt LLC Commercial—1031Exchange Newton, Massachusetts

 
$

1,474,947
 
$

884,042
 
$

2,652,127
 
$

50,608
 
$

884,042
 
$

2,702,735
 
$

3,586,777
 
$

422,799
  
Nov. 2007
 

Hamilton Oaks Associates LLC Residential Apartments Brockton, Massachusetts

 
$

11,925,000
 
$

2,175,000
 
$

12,325,000
 
$

1,898,324
 
$

2,175,000
 
$

14,223,324
 
$

16,398,324
 
$

7,684,626
  
Dec. 1999
 

Highland Street Apartments, L.P. Residential Apartments Lowell, Massachusetts

 
$

1,050,000
 
$

156,000
 
$

634,085
 
$

387,455
 
$

156,000
 
$

1,021,540
 
$

1,177,540
 
$

592,810
  
Dec. 1996
 

Linhart L.P. Residential/Commercial Newton, Massachusetts

 
$

1,929,123
 
$

385,000
 
$

1,540,000
 
$

1,239,887
 
$

385,000
 
$

2,779,887
 
$

3,164,887
 
$

1,845,936
  
Jan. 1995
 

Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 2. RENTAL PROPERTIES (Continued)

 
  
 Initial Cost to
Partnerships(1)
 Cost
Capitalized
Subsequent to
Acquisition(2)
 Gross Amount at Which
Carried at Close of Period
  
  
 
 
 Encumbrances
(First
Mortgages)
  
 Buildings
Improvements
  
 Buildings
Improvements
  
 Accumulated
Depreciation(3)
  
 
 
 Land Improvements Land Totals Date Acquired 

WCB Associates LLC Residential Apartments Brockton, Massachusetts

 $7,000,000 $1,335,000 $7,565,501 $1,083,048 $1,335,000 $8,648,549 $9,983,549 $4,552,121  Dec. 1999 

Westgate Apartments LLC Residential Apartments Woburn, Massachusetts

 
$

7,931,885
 
$

461,300
 
$

2,424,636
 
$

6,007,478
 
$

417,107
 
$

8,432,114
 
$

8,849,221
 
$

5,779,250
  
Sept. 1977
 
                     

 
$

138,055,522
 
$

25,799,080
 
$

105,534,296
 
$

28,587,184
 
$

25,754,887
 
$

134,121,480
 
$

159,876,368
 
$

64,440,518
    
                     

 
  
 Initial Cost to
Partnerships(1)
 Cost
Capitalized
Subsequent to
Acquisition(2)
 Gross Amount at Which
Carried at Close of Period
  
  
 
 
 Encumbrances
(First
Mortgages)
  
 Buildings
Improvements
  
 Buildings
Improvements
  
 Accumulated
Depreciation(3)
  
 
 
 Land Improvements Land Totals Date Acquired 

Nashoba Apartments L.P. Residential Apartments Acton, Massachusetts

 $ $ $ $ $ $ $ $  Sold May13
Sept. 1977
 

NERA Dean St. Associates LLC Residential Apartments Norwood, Massachusetts

 
$

5,113,360
 
$

1,512,000
 
$

5,701,480
 
$

561,752
 
$

1,512,000
 
$

6,263,232
 
$

7,775,232
 
$

2,685,523
  
Jun. 2002
 

North Beacon 140 L.P. Residential Units Boston, Massachusetts

 
$

6,937,000
 
$

936,000
 
$

3,762,013
 
$

1,588,914
 
$

936,000
 
$

5,350,927
 
$

6,286,927
 
$

3,295,988
  
July 1995
 

Olde English Apartments L.P. Residential Apartments Lowell, Massachusetts

 
$

3,080,000
 
$

46,181
 
$

878,323
 
$

1,252,182
 
$

46,181
 
$

2,130,505
 
$

2,176,686
 
$

1,374,075
  
Sept. 1977
 

River Drive L.P. Residential Apartments Danvers, Massachusetts

 
$

3,465,000
 
$

72,525
 
$

587,777
 
$

729,271
 
$

72,525
 
$

1,317,048
 
$

1,389,573
 
$

926,978
  
Sept. 1977
 

Redwood Hills L.P. Residential Units Worcester, Massachusetts

 
$

6,743,000
 
$

1,200,000
 
$

4,810,604
 
$

2,285,268
 
$

1,200,000
 
$

7,095,872
 
$

8,295,872
 
$

4,190,382
  
July 1995
 

School St Assoc LLC Residential Apartments Framingham, Massachusetts

 
$

15,000,000
 
$

4,686,728
 
$

18,746,911
 
$

(1,997,252

)

$

4,686,728
 
$

16,749,659
 
$

21,436,387
 
$

6,647,588
  
Apr. 2003
 

Staples Plaza Strip Mall Framingham, Massachusetts

 
$

6,000,000
 
$

3,280,000
 
$

4,920,000
 
$

46,847
 
$

3,280,000
 
$

4,966,847
 
$

8,246,847
 
$

2,403,966
  
May 1999
 

WCB Associates LLC Residential Apartments Brockton, Massachusetts

 
$

7,000,000
 
$

1,335,000
 
$

7,565,501
 
$

1,017,996
 
$

1,335,000
 
$

8,583,497
 
$

9,918,497
 
$

4,756,907
  
Dec. 1999
 

Westgate Apartments LLC Residential Apartments Woburn, Massachusetts

 
$

15,700,000
 
$

461,300
 
$

2,424,636
 
$

7,024,635
 
$

417,107
 
$

9,449,271
 
$

9,866,378
 
$

5,996,569
  
Sept. 1977
 
                     

 
$

198,520,478
 
$

41,773,766
 
$

150,044,186
 
$

29,680,527
 
$

41,729,573
 
$

179,724,713
 
$

221,454,286
 
$

68,549,627
    
                     
                     

(1)
The initial cost to the Partnerships represents both the balance of mortgages assumed in September 1977, including subsequent adjustments to such amounts, and subsequent acquisitions at cost.

(2)
Net of retirements, which are not significant.

(3)
In 2012,2013, rental properties were depreciated over the following estimated useful lives:

Assets
 Life 

Buildings and Improvements

  15–4010-39 years 

Other Categories of Assets

  5–205-10 years 

        A reconciliation of rental properties and accumulated depreciation is as follows:

 
 December 31, 
 
 2012 2011 2010 

Rental Properties

          

Balance, Beginning

 $159,123,799 $150,818,648 $150,411,555 

Additions:

          

Buildings, improvements and other assets

  2,360,399  12,444,604  2,268,039 
        

  161,484,198  163,263,252  152,679,594 

Deduct:

          

Write-off of retired or disposed assets

  1,607,830  2,437,555  1,860,946 

Rental properties held for sale and/or sold

    1,701,898   
        

Balance, Ending

 $159,876,368 $159,123,799 $150,818,648 
        

Accumulated Depreciation

          

Balance, Beginning

 $60,199,265 $58,074,391 $54,439,618 

Add:

          

Depreciation for the year

  5,849,083  5,750,989  5,495,719 
        

  66,048,348  63,825,380  59,935,337 

Deduct:

          

Accumulated depreciation of retired or disposed assets

  1,607,830  2,437,555  1,860,946 

Accumulated depreciation of rental properties held for sale and/or sold

    1,188,560   
        

Balance, Ending

 $64,440,518 $60,199,265 $58,074,391 
        

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 2. RENTAL PROPERTIES (Continued)

        A reconciliation of rental properties and accumulated depreciation is as follows:

 
 December 31, 
 
 2013 2012 2011 

Rental Properties

          

Balance, Beginning

 $158,624,893 $159,123,799 $150,818,648 

Additions:

          

Buildings, improvements and other assets

  65,349,698  2,360,399  12,444,604 
        

  223,974,591  161,484,198  163,263,252 

Deduct:

          

Write-off of retired or disposed assets

  2,505,787  1,607,830  2,437,555 

Rental properties held for sale and/or sold

  14,518  1,251,475  1,701,898 
        

Balance, Ending

 $221,454,286 $158,624,893 $159,123,799 
        
        

Accumulated Depreciation

          

Balance, Beginning

 $63,651,293 $60,199,265 $58,074,391 

Add:

          

Depreciation for the year

  7,404,120  5,849,083  5,750,989 
        

  71,844,630  66,048,348  63,825,380 

Deduct:

          

Accumulated depreciation of retired or disposed assets

  2,505,787  1,607,830  2,437,555 

Accumulated depreciation of rental properties held for sale and/or sold

    789,225  1,188,560 
        

Balance, Ending

 $68,549,625 $63,651,293 $60,199,265 
        
        

        On May 18, 2011, the Partnership sold Avon Street Apartments, a 66 unit residential apartment complex located at 130 Avon Street, Malden, Massachusetts. The sales price was $8,750,000, which resulted in a gain of approximately $7,700,000. The net proceeds of the sale, of approximately $5,444,000 were held by a qualified intermediary in order for the Partnership to structure a tax free exchange in accordance with Section 1031 of the IRS code. This tax free exchange was completed with the purchase of Battle Green Apartments described below.

        On June 1, 2011, the Partnership purchased Battle Green Apartments, a 48 unit residential apartment complex located at 34-42 Worthen Road, Lexington, Massachusetts. The purchase price was $10,000,000. The Partnership used cash reserves, the proceeds from the sale of Avon Street and borrowed $3,998,573 from Harold Brown, Treasurer of the General Partner to make this purchase. This loan had an interest rate of 6% and was secured by the Partnership's ownership interest in Battle Green Apartments, LLC. The term of the loan is four years with a provision requiring payment in whole or in part upon demand within six months of notice or prepay without penalty. On July 27, 2011, the Partnership financed Battle Green Apartments with a new $5,000,000 mortgage at 4.95% which matures in August 2026. Principal payments will be made using a 30 year amortization schedule. Deferred financing costs associated with this mortgage totaled approximately $100,000 and accordingly the effective interest rate is 5.07%. After paying off the existing loan of $3,998,573, approximately $1,000,000


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 2. RENTAL PROPERTIES (Continued)

$1,000,000 was received by the Partnership. The interest paid on this loan to Harold Brown in 2011 was $38,123.

        In May 2013 the Partnership sold the Nashoba Apartments located in Acton, Massachusetts. The sale price was $4,300,000; the net proceeds of approximately $2,100,000 were transferred to Investment Property Exchange Services, Inc. a Qualified Intermediary. These funds were held by the intermediary in order to maintain the Partnership's ability to structure a tax free exchange in accordance with the Internal Revenue Service's rules under Sec. 1031. The gain on the sale in accordance with GAAP is approximately $3,679,000. The proceeds were subsequently used in the acquisition of the Hamilton Green Apartments described below.

        On July 15, 2013, Hamilton Green Apartments, LLC, ("Hamilton Green") a newly formed subsidiary of the Partnership, purchased Windsor Green at Andover, a 193 unit apartment complex located at 311 and 319 Lowell Street, Andover, Massachusetts. The purchase price was $62,500,000. From the purchase price, the Partnership has allocated approximately $1,656,000 to the value of the in-place leases and approximately $96,000 to the value of the tenant relationships. These amounts will be amortized over 12 and 36 months respectively. To fund this purchase, the Partnership obtained short term financing of approximately $40,000,000, used the funds of approximately $2,100,000 from the sale of the Nashoba Apartments, and the balance from the Partnership's cash reserves. The closing costs associated with this short term financing were approximately $38,000. The original mortgage matured in November 2013. On December 20, 2013, the Partnership refinanced the mortgage on Hamilton Green. The new mortgage is $38,500,000, interest is fixed at 4.67% for 15 years, interest only for 2 years and the mortgage is amortized over 30 years. This refinancing required additional capital of approximately $1,846,000 from the Partnership. The closing costs associated with this refinancing were approximately $346,000.

NOTE 3. RELATED PARTY TRANSACTIONS

        The Partnership's properties are managed by an entity that is owned by the majority shareholder of the General Partner. The management fee is equal to 4% of gross receipts rental revenue and laundry income on the majority of the Partnership's properties and 3% on Linewt. Total fees paid were approximately $1,578,000, $1,447,000 and $1,420,000 in 2013, 2012 and $1,367,000 in 2012, 2011, and 2010, respectively.

        The Partnership Agreement permits the General Partner or Management Company to charge the costs of professional services (such as counsel, accountants and contractors) to NERA. In 2013, 2012 and 2011, approximately $1,431,000, $686,000 and 2010, approximately $686,000, $758,000, and $705,000, was charged to NERA for legal, accounting, construction, maintenance, rental and architectural services and supervision of capital improvements. Of the 20122013 expenses referred to above, approximately $295,000$294,000 consisted of repairs and maintenance, and $348,000$339,000 of administrative expense.expense and $172,000 for rental commission. Approximately $43,000$627,000 of expenses for construction, architectural services and supervision of capital projects were capitalized in rental properties. Additionally in 2012,2013, the Hamilton Company received approximately $728,000$765,000 from the Investment Properties of which approximately $567,000$614,000 was the management fee, approximately $15,000$12,000 was for construction, architectural services and supervision of capital projects, approximately $64,000$77,000 was for maintenance services and approximately $82,000$61,000 was for administrative services. The management fee is equal to 4% of gross receipts rental income on the majority of investment properties and 2% on Dexter Park.


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 3. RELATED PARTY TRANSACTIONS (Continued)

        On January 1, 2004, all employees were transferred to the Management Company's payroll. The Partnership reimburses the management company for the payroll and related expenses of the employees who work at the properties. Total reimbursement was approximately $2,926,000, $2,606,000 $2,537,000 and $2,599,000$2,537,000 for the years ended December 31, 2013, 2012 2011 and 2010,2011, respectively. The Management Company maintains a 401K plan for all eligible employees whereby the employees may contribute the maximum allowed by law. The plan also provides for discretionary contributions by the employer. There were no employer contributions in 2013, 2012 2011 or 2010.


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 3. RELATED PARTY TRANSACTIONS (Continued)2011.

        Prior to 1991, the Partnership employed an outside, unaffiliated company to perform its bookkeeping and accounting functions. Since that time, such services have been provided by the Management Company's accounting staff, which consists of approximately 14 people. During the years ended December 31, 2013, 2012 2011 and 20102011 the Management Company charged the Partnership $125,000 for bookkeeping and accounting services included in administrative expenses above.

        In 1996, prior to becoming an employee of the Management Company, the President of the Management Company performed asset management consulting services for the Partnership. This individual continues to perform this service and receives an asset management fee from the Partnership. The Partnership does not have a written agreement with this individual. During the years ended December 31, 2013, 2012 2011 and 20102011 this individual received a quarterly fee of $18,750 for a total fee of $75,000.

        The Partnership has invested in nine limited partnerships, which have invested in mixed use residential apartment complexes. The Partnership has a 40% to 50% ownership interest in each investment property. The other investors are Harold Brown, the President of the Management Company and five other employees of the Management Company. Harold Brown's ownership interest is between 43.2% and 60%. See Note 14 for a description of the properties and their operations.

        See Note 8 for information regarding 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 his affiliates ("HBC"). The term of the loan is four years with a provision requiring payment in whole or in part upon demand by HBC with six months notice. The Partnership may also prepay the note without penalty. On August 17, 2010, HBC gave six months written notice to the Partnership requesting a principal pay down of $2,500,000. During the fourth quarter of 2010, the Partnership paid HBC $2,500,000 as requested. During 2011, the Partnership elected to make principal payments of $1,000,000 on August 1, 2011, $1,000,000 on October 1, 2011 and $1,000,000 on December 15, 2011 reducing the loan balance to $1,668,600. In February 2012, the Partnership elected to make an additional principal paymentpayments of $750,000 to HBC Holdings and the balance of $918,600 was paid in full in April 2012. The interest paid during the yearyears ended December 31, 2012 2011 and 20102011 was $18,960 $238,673 and $414,740$238,673, respectively.

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

NOTE 4. OTHER ASSETS

        Approximately $1,919,000$2,053,000 and $1,879,000$1,919,000 of security deposits are included in prepaid expenses and other assets at December 31, 20122013 and December 31, 2011,2012, respectively. The security deposits and escrow accounts are restricted cash.

        Included in prepaid expenses and other assets at December 31, 20122013 and December 31, 20112012 is approximately $420,000$123,000 and $1,014,000,$420,000, respectively, held in escrow to fund future capital improvements.

        Financing fees of approximately $1,136,000 and $919,000 are net of accumulated amortization of approximately $772,000 and $636,000 at December 31, 2012 and December 31, 2011, respectively.


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 4. OTHER ASSETS (Continued)

        Intangible assets of $1,752,000 on the acquisition of Hamilton Green are included in prepaid expenses and other assets. On December 31, 2013, intangible assets are approximately $978,000 net of accumulated amortization of approximately $774,000.

        Financing fees of approximately $1,635,000 and $1,136,000 are net of accumulated amortization of approximately $548,000 and $772,000 at December 31, 2013 and 2012, respectively.

NOTE 5. MORTGAGE NOTES PAYABLE

        At December 31, 20122013 and 2011,2012, the mortgages payable consisted of various loans, all of which were secured by first mortgages on properties referred to in Note 2. At December 31, 2012,2013, the interest rates on these loans ranged from 4.25%3.25% to 7.07%5.97%, payable in monthly installments aggregating approximately $742,000,$835,000, including principal, to various dates through 2026.2029. The majority of the mortgages are subject to prepayment penalties. At December 31, 2012,2013, the weighted average interest rate on the above mortgages was 5.53%4.83%. The effective rate of 5.63%4.93% includes the amortization expense of deferred financing costs. See Note 12 for fair value information. The Partnership's mortgage debt and the mortgage debt of its unconsolidated joint ventures generally is non-recourse except for customary exceptions pertaining to misuse of funds and material misrepresentations.

        The Partnership has pledged tenant leases as additional collateral for certain of these loans.

        Approximate annual maturities at December 31, 20122013 are as follows:

2013—current maturities

 $41,275,000 

2014

 14,669,000 

2014—current maturities

 $8,646,000 

2015

 2,184,000  2,135,000 

2016

 194,000  1,184,000 

2017

 205,000  1,782,000 

2018

 7,860,000 

Thereafter

 79,529,000  176,913,000 
      

 $138,056,000  $198,520,000 
      
   

        On July 27, 2011,February 25, 2013, the Partnership financedpaid off the Battle Green Apartmentsmortgage of approximately $3,967,000 on Hamilton Cypress LLC. There was no penalty on the early payoff. The funds used to pay off the mortgage were from the Partnerships cash reserves.

        On March 11, 2013, the Partnership refinanced the property owned by School Street 9 LLC. The new loan is $15,000,000 with a new $5,000,000 mortgage at 4.95% which maturesan interest rate of 3.7% due in August 2026.2023. The loan calls for interest only for three years followed by principal and interest payments over the remainder of the loan term. Principal payments will be made usingon a 30 year amortization schedule. Deferred financingThe Partnership paid off the prior mortgage in the amount of approximately $15,284,000 with the proceeds of the new mortgage and the Partnership's cash reserves. The costs associated with this refinancing were approximately $159,000.

        On July 7, 2013, the Partnership refinanced the property owned by Boylston Downtown LP. The new 15 year $40,000,000 mortgage totaledhas an interest rate of 3.97%. The terms of the loan are interest only for the first three years, with a 30 year amortization thereafter until maturity in August 2028. Approximately $19,500,000 of loan proceeds was used to pay off the existing mortgage. The balance of


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 5. MORTGAGE NOTES PAYABLE (Continued)

the funds, approximately $100,000 and accordingly$20,000,000, after closing costs, was used in connection with the effectivepurchase of Hamilton Green Apartments. The costs associated with this refinancing are approximately $279,000.

        On October 1, 2013, the Partnership refinanced the property owned by Westgate Apartments LLC. The new mortgage is $15,700,000; the interest rate is 5.07%.4.65%, interest only payable in 10 years. Approximately $7,616,000 of the loan proceeds was used to pay off the existing mortgage. The mortgage matures in September 2023. The costs associated with the refinancing were approximately $190,000.

        The Partnership is currently in the process of refinancing the mortgages at Boylston Downtown LLC, Westgate Apartments LLC, School Street LLC, and Hamilton Cypress LLC. The total amount expected to be refinanced is approximately $47,000,000. As ofOn December 31, 2012,20, 2013, the Partnership has paid approximately $353,000refinanced the property owned by Hamilton Green Apartments LLP. The new mortgage is $38,500,000; the interest rate is 4.67%; interest only for 2 years. After the first two years, the monthly payments of financing costs related to$198,982 for principal and interest on a 30-year amortization schedule through January 2029. The proceeds of the expected refinancing. This amount is included in financing and leasing fees in consolidated balance sheets. The Partnership may incur prepayment penaltiesnew mortgage as well as the Partnership's cash reserves of approximately $250,000 in connection with$1,846,000 were used to pay off the prior mortgage of $40,000,000 and cover the cost of this refinancing. The Partnership has no lender commitment at this time and anticipates closing on theses mortgages incosts associated with the first half of 2013.refinancing were approximately $346,000.

NOTE 6. ADVANCE RENTAL PAYMENTS AND SECURITY DEPOSITS

        The Partnership's residential lease agreements may require tenants to maintain a one-month advance rental payment and/or a security deposit. At December 31, 2012,2013, amounts received for prepaid rents of approximately $1,339,000$1,448,000 are included in cash and cash equivalents, and security deposits of approximately $1,919,000$2,053,000 are included in prepaid expenses and other assets and are restricted cash.


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 7. PARTNERS' CAPITAL

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

        Effective January 3, 2012, the Partnership authorized a 3-for-1 forward split of its Depositary Receipts listed on the NYSE Amex and a concurrent adjustment of the exchange ratio of Depositary Receipts for Class A Units of the Partnership from 10-to-1 to 30-to-1, such that each Depositary Receipt represents one-thirtieth (1/30) of a Class A Unit of the Partnership.

        On February 4, 2013,In 2014, the Partnership announced the approval of a quarterly distribution of its Class A Limited Partners and holders of Depositary Receipts of record as of March 15, 20132014 and payable on March 31, 2013,2014, $7.50 per unit and $0.25 per receipt.

        In 2013 and 2012, the Partnership paid quarterly distributions of $7.50 per unit ($0.25 per receipt) in March, June, September, and December for a total distribution of $30.00 per unit ($1.00 per receipt). In 2011 and 2010 the Partnership paid quarterly distributions of $7.00 per unit ($0.23 per receipt) in March, June, September, and December for a total distribution of $28.00 per unit ($0.93 per receipt) each year.

        The Partnership has entered into a deposit agreement with an agent to facilitate public trading of limited partners' interests in Class A Units. Under the terms of this agreement, the holders of Class A


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 7. PARTNERS' CAPITAL (Continued)

Units have the right to exchange each Class A Unit for 30 Depositary Receipts. The following is information per Depositary Receipt:


 Year Ended
December 31,
  Year Ended
December 31,
 

 2012 2011  2013 2012 

Income per Depositary Receipt before Discontinued Operations

 $0.92 $0.38  $0.50 $0.91 

Income from Discontinued Operations

 0 1.98  0.95 0.01 
          

Net Income per Depositary Receipt after Discontinued Operations

 $0.92 $2.36  $1.45 $0.92 
     
          

Distributions per Depositary Receipt

 $1.00 $0.93  $1.00 $1.00 
          
     

NOTE 8. TREASURY UNITS

        Treasury Units at December 31, 20122013 are as follows:

Class A

  39,82540,590 

Class B

  9,4589,640 

General Partnership

  498508 
    

  49,78150,738 
    

        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 300,000 Depositary Receipts (each of which is one-tenth of a Class A Unit). On


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 8. TREASURY UNITS (Continued)

January 15, 2008, the General Partner authorized an increase in the Repurchase Program from 300,000 to 600,000 Depositary Receipts. On January 30, 2008 the General Partner authorized an increase the Repurchase Program from 600,000 to 900,000 Depositary Receipts. On March 6, 2008, the General Partner authorized the increase in the total number of Depositary Receipts that could be repurchased pursuant to the Repurchase Program from 900,000 to1, 500,000. On August 8, 2008, the General Partner re-authorized and renewed the Repurchase Program for an additional 12-month period ended August 19, 2009. On March 22, 2010, the General Partner re-authorized and renewed the Repurchase Program that expired on August 19, 2009. Under the terms of the renewed Repurchase Program, the Partnership may purchase up to 1,500,000 Depositary Receipts from the start of the program in 2007 through March 31, 2015. The Repurchase Program requires the Partnership to repurchase a proportionate number of Class B Units and General Partner Units in connection with any repurchases of any Depositary Receipts by the Partnership based upon the 80%, 19% and 1% fixed distribution percentages of the holders of the Class A, Class B and General Partner Units under the Partnership's Second Amended and Restate Contract of Limited Partnership. Repurchases of Depositary Receipts or Partnership Units pursuant to the Repurchase Program may be made by the Partnership from time to time in its sole discretion in open market transactions or in privately negotiated transactions. From August 20, 2007 through December 31, 2012,2013, the Partnership has repurchased 1,219,9271,242,891 Depositary Receipts at an average price of $24.62$24.86 per receipt (or $738.60$745.80 per underlying Class A Unit), 1,9212,103 Class B Units and 101 General111General Partnership Units, both at an average price of $613.94$658.89 per Unit, totaling approximately $31,386,000$32,481,000 including brokerage fees paid by the Partnership.


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 8. TREASURY UNITS (Continued)

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

        From January 1, 2014 through March 17th, 2014, the Partnership purchased a total of 6,235 Depositary Receipts. The average price was $45.56 per receipt or $1,366.87 per unit. The total cost including commission was $292,169. The Partnership is required to repurchase 49.36 Class B Units and 2.60 General Partnership Units at a cost of $67,470 and $3,551 respectively.

        During the year ended December 31, 2013, the Partnership purchased a total of 22,964 Depositary Receipts. The average price was $37.80 per receipt or $1,134 per unit. The total cost including commission was $877,623. The Partnership was required to repurchase 182 Class B Units and 10 General Partnership units at a cost of $206,137 and $10,849, respectively.

        During the year ended December 31, 2012, the Partnership purchased 24,967 Depositary Receipts for a cost of $726,058, 198 Class B Units for a cost of $171,148 and 10 General Partnership Units for a cost of $9,008 for a total cost of $906,214.

        From January 1, 2013 through March 14, 2013, the Partnership purchased a total of 9,709 Depositary Receipts. The average price was $32.24 per receipt or $967.20 per unit. The total cost was $321,240. The Partnership is required to repurchase76.86 Class B Units and 4.05 General Partnership units at a cost of $74,335 and $3,912, respectively.

        The Partnership did not purchase any Depositary Receipts during the year ended December 31, 2011.

        During the year ended December 31, 2010, the Partnership purchased 20,688 receipts for $432,920, 164 Class B Units for $102,591 and 9 General Partnership units for $5,400.


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 9. COMMITMENTS AND CONTINGENCIES

        From time to time, the Partnership is involved in various ordinary routine litigation incidental to their business. The Partnership either has insurance coverage or provides for any uninsured claims when appropriate. The Partnership is not involved in any material pending legal proceedings.

NOTE 10. RENTAL INCOME

        During the year ended December 31, 2012,2013, approximately 90%92% of rental income was related to residential apartments and condominium units with leases of one year or less. The majority of these leases expire in June, July and August. Approximately 10%8% was related to commercial properties, which


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 10. RENTAL INCOME (Continued)

have minimum future annual rental income on non-cancellable operating leases at December 31, 20122013 as follows:


 Commercial
Property Leases
  Commercial
Property Leases
 

2013

 $2,384,000 

2014

 2,011,000  $2,686,000 

2015

 1,583,000  2,445,000 

2016

 1,165,000  2,027,000 

2017

 485,000  1,339,000 

2018

 1,054,000 

Thereafter

 775,000  1,372,000 
      

 $8,403,000  $10,923,000 
      
   

        The aggregate minimum future rental income does not include contingent rentals that may be received under various leases in connection with common area charges and real estate taxes. Aggregate contingent rentals from continuing operations were approximately $670,000, $661,000 $633,000 and $653,000$633,000 for the years ended December 31, 2013, 2012 and 2011 respectively. Staples and 2010 respectively.Trader Joes, tenants at Staples Plaza are approximately 30% of the total commercial rental income.

        The following information is provided for commercial leases:

Thru December 31,
 Annual base
rent for
expiring leases
 Total square feet
for expiring leases
 Total number of
leases expiring
 Percentage of
Annual base
rent for
expiring leases
 

2013

 $470,463 23,773 11 17%
Through December 30,
 Annual base
rent for
expiring leases
 Total square feet
for expiring leases
 Total number of
leases expiring
 Percentage of
annual base rent for
expiring leases
 

2014

 588,422 29,523 10 22% $364,575 18,610 11 13%

2015

 266,098 8,471 8 10% 264,567 8,471 8 9%

2016

 593,346 27,073 3 22% 610,382 27,796 5 21%

2017

 448,101 11,997 6 16% 510,074 14,134 7 17%

2018

 58,050 1,262 1 2% 298,551 8,707 6 10%

2019

 200,375 5,800 2 7% 611,721 21,586 4 21%

2020

 64,657 1,106 1 2% 64,657 1,106 1 2%

2021

 64,800 1,800 1 2% 64,800 1,800 1 2%

2022

 0   0% 0 0 0 0%

2023

 157,443 4,771 1 5%
                  

Totals

 $2,754,312 110,805 43 100% $2,946,770 106,981 44 100%
                  
         

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 10. RENTAL INCOME (Continued)

        Rents receivable are net of an allowance for doubtful accounts of approximately $381,000$344,000 and $448,000.$381,000 at December 31, 20122013 and 2011.2012. Included in rents receivable at December 31, 20122013 is approximately $268,000$196,000 resulting from recognizing rental income from non-cancelable commercial leases with future rental increases on a straight-line basis. The majority of this amount is for long-term leases with Staples and Trader Joe's at Staples Plaza in Framingham, Massachusetts.

        Rents receivable at December 31, 20122013 also includes approximately $25,000$82,000 representing the deferral of rental concession primarily related to the residential properties.

        For the year ended December 31, 20122013 rent at the commercial properties includes approximately $4,100$2,000 of amortization of deferred rents arising from the fair values assigned to in-place leases upon the purchase of Cypress Street in Brookline, Massachusetts.


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 11. CASH FLOW INFORMATION

        During the years ended December 31, 2013, 2012 2011 and 2010,2011, cash paid for interest was approximately $8,062,000, $7,776,000 $8,011,000 and $8,182,000$8,011,000 respectively. Cash paid for state income taxes was approximately $60,000, $48,000 $55,000 and $35,000$55,000 during the years ended December 31, 2013, 2012 and 2011 and 2010 respectively. In 2013, the Partnership was involved in non-cash financing activities of $38,500,000 in connection with the purchase of Hamilton Green.

NOTE 12. FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

        At December 31, 20122013 and 2011,2012, we do not have any significant financial assets or financial liabilities that are measured at fair value on a recurring basis in our consolidated financial statements.

Financial Assets and Liabilities not Measured at Fair Value

        At December 31, 20122013 and 20112012 the carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable, and note payable, accounts payable and accrued expenses were representative of their fair values due to the short-term nature of these instruments or, the recent acquisition of these items.

        At December 31, 20122013 and 2011,2012, we estimated the fair value of our mortgages payable and other notes based upon quoted market prices for the same (Level 1) or similar (Level 2) issues when current quoted market prices are available. We estimated the fair value of our secured mortgage debt that does not have current quoted market prices available by discounting the future cash flows using rates currently available to us for debt with similar terms and maturities (Level 3). The differences in the fair value of our debt from the carrying value are the result of differences in interest rates and/or borrowing spreads that were available to us at December 31, 20122013 and 2011,2012, as compared with those in effect when the debt was issued or acquired. The secured mortgage debt contain pre-payment penalties or yield maintenance provisions that could make the cost of refinancing the debt at lower rates exceed the benefit that would be derived from doing so.


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 12. FAIR VALUE MEASUREMENTS (Continued)

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


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 12. FAIR VALUE MEASUREMENTS (Continued)

The following table reflects the carrying amounts and estimated fair value of our debt.


 Carrying Amount Estimated Fair Value  Carrying Amount Estimated Fair Value 

Mortgage Notes Payable

      

Partnership Properties

      

At December 31, 2013

 $198,520,478 $196,059,827 

At December 31, 2012

 $138,055,523 $155,942,880  $138,055,523 $155,942,880 

At December 31, 2011

 $139,161,612 $158,050,039 

Investment Properties

      

At December 31, 2013

 $137,875,515 $147,975,521 

At December 31, 2012

 $138,256,711 $157,983,030  $138,256,711 $157,983,030 

At December 31, 2011

 $140,159,839 $160,535,764 

        Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 20122013 and December 31, 2011.2012. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 20122013 and current estimates of fair value may differ significantly from the amounts presented herein.

NOTE 13. TAXABLE INCOME AND TAX BASIS

        Taxable income reportable by the Partnership and includable in its partners' tax returns is different than financial statement income because of tax free exchanges, accelerated depreciation, different tax lives, and timing differences related to prepaid rents, allowances and intangible assets at significant acquisitions. Taxable income was approximately $530,000 greater$4,300,000 less than statement income for the year ended December 31, 2012.2013. The primary reason for the increasedecrease is reduced tax depreciation due to tax free exchanges of approximately $3,700,000 from the sale of Nashoba and accelerated tax depreciation of approximately $1,100,000 at the related acquisition of Hamilton Green and other depreciation timing difference and accelerated depreciation in prior years. The cumulative tax basis of the Partnership's real estate at December 31, 20122013 is approximately $12,000,000,$4,800,000, less than the statement basis. The primary reasons for the lower tax basis are tax free exchanges, and accelerated depreciation. The Partnership's tax basis in its joint venture investments is approximately $1,700,000$1,300,000 less than statement basis because of accelerated depreciation.

        Certain entities included in the Partnership's consolidated financial statements are subject to certain state taxes. These taxes are not significant and are recorded as operating expenses in the accompanying consolidates financial statements.


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 13. TAXABLE INCOME AND TAX BASIS (Continued)

        The following reconciles GAAP net income to taxable income:


 For the year ended
December 31,
  For the year ended
December 31,
 

 2012 2011 2010  2013 2012 2011 

 (in thousands)
  (in thousands)
 

Financial statement ("book") net income (loss)

 $3,634 $9,291 $(1,359) $5,655 $3,634 $9,291 

Book/Tax differences from depreciation and amortization

 51 (1,024) (643) (300) 51 (1,024)

Book/Tax differences on tax free exchanges

 266 (7,707)   (4,670) 266 (7,707)

Book/Tax differences from Investment Properties

 198 (161) 403  400 198 (161)

Increase (Decrease) in prepaid rent and allowances

 (40) 29 (204) 175 (40) 29 

Other

 57 7   50 57 7 
              

Taxable income (loss)

 $4,166 $435 $(1,803) $1,310 $4,166 $435 
              
       

        Allowable accelerated depreciation deductions have been reducedexpired for 2013.2014. This may result in higher taxable income in future years. Future tax law changes may significantly affect taxable income.

        The Partnership adopted the amended provisions related to uncertain tax provisions of ASC 740, Income Taxes. As a result of the implementation of the guidance, the Partnership recognized no material adjustments regarding its tax accounting treatment. The Partnership expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which would be included in general and administrative expense.

        In the normal course of business the Partnership or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates, where applicable. As of December 31, 2012,2013, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 20042005 forward.

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

        Since November 2001, the Partnership has invested in nine limited partnerships and limited liability companies, the majority of which have invested in residential apartment complexes, with three partnerships investing in commercial property. The Partnership has between a 40%-50% ownership interests in each investment. The other investors are Harold Brown, the President of the Management Company and five other employees of the Management Company. Harold Brown's ownership interest is between 43.2% and 57%, with the balance owned by the others. A description of each investment is as follows:

        On October 28, 2009 the Partnership invested approximately $15,925,000 in a joint venture to acquire a 40% interest in a residential property located in Brookline, Massachusetts. The property, referred to as Dexter Park, is a 409 unit residential complex. The purchase price was $129,500,000. The total mortgage was $89,914,000 with an interest rate of 5.57% and it matures in 2019. The mortgage calls for interest only payments for the first two years of the loan and amortized over 30 years thereafter. The balance of this mortgage is approximately $88,612,000$87,411,000 at December 31, 2012.2013. In order to fund this investment, the Partnership used approximately $8,757,000 of its cash reserves and borrowed approximately $7,168,000 with an interest rate of 6% from HBC Holdings, LLC, an entity owned by Harold Brown and his affiliates ("HBC"). The term of the loan was four years with a


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

owned by Harold Brown and his affiliates ("HBC"). The term of the loan was four years with a provision requiring payment in whole or in part upon demand by HBC with six months notice. On August 17, 2010, HBC gave six months written notice to the Partnership requesting a principal pay down of $2,500,000. During the fourth quarter of 2010, the Partnership paid HBC $2,500,000 as requested. During 2011, the Partnership elected to make principal payments of $1,000,000 on August 1, 2011, $1,000,000 on October 1, 2011, and an additional $1,000,000 on December 15, 2011 reducing the loan balance to $1,668,600 at December 31, 2011. In February 2012, the Partnership elected to make an additional principal payment of $750,000 to HBC Holdings and the balance of $918,600 was paid in April 2012. The interest paid during the year ended December 31, 2012 and 2011 was $18,960 and $238,673, respectively.$18,960. A majority of the apartments were leased at the time of the acquisition. As a result, the Partnership amortized the intangible assets associated with the "in place" leases over a 12 month period which began in November 2009. This investment, Hamilton Park Towers, LLC is referred to as Dexter Park.

        On October 3, 2005, the Partnership invested $2,500,000 for a 50% ownership interest in a 168-unit apartment complex in Quincy, Massachusetts. The purchase price was $30,875,000. The Partnership plans to sell the majority of units as condominium and retain 48 units for long-term investment. Gains from the sales of units were taxed at ordinary income rates. In February 2007, the Partnership refinanced the 48 units with a new mortgage in the amount of $4,750,000 with an interest rate of 5.57%, interest only for five years. The loan will be amortized over 30 years thereafter and matures in March 2017. As of December 31, 2012,2013, the balance of the mortgage is approximately $4,702,000.$4,640,000. This investment is referred to as Hamilton Bay Apartments, LLC. In April 2008, the Partnership refinanced an additional 20 units and obtained a new mortgage in the amount of $2,368,000 with interest at 5.75%, interest only, which matures in 2013. We are working on refinancingOn October 18, 2013, the property withPartnership and its joint venture partner each made capital contributions to the current lender. At December 31, 2012,entity of $660,000. The capital was used to pay off the outstanding mortgage. As of February 1, 2014, 15 of the 20 units are still owned by the Partnership. As of February 1, 2013, 105 units have been sold, the proceeds of which went to pay down the mortgage on the property. No unit was sold during the year ended December 31, 2012. The balance on the new mortgage is approximately $1,668,000 at December 31, 2012. This investment is referred to as Hamilton Bay, LLC.

   ��        On March 7, 2005, the Partnership invested $2,000,000 for a 50% ownership interest in a building comprising 49 apartments, one commercial space and a 50-car surface parking lot located in Boston, Massachusetts. The purchase price was $14,300,000, with a $10,750,000 mortgage. The Partnership plans to operate the building and initiate development of the parking lot. In June 2007, the Partnership separated the parcels, formed an additional limited liability company for the residential apartments and obtained a mortgage on the property. The new limited liability company formed for the residential apartments and commercial space is referred to as Hamilton Essex 81, LLC. In August 2008, the Partnership restructured the mortgages on both parcels at Essex 81 and transferred the residential apartments to Hamilton Essex 81, LLC. The mortgage on Hamilton Essex 81, LLC is approximately $8,352,000$8,235,000 amortizing over 30 years at 5.79% due in August 2016. The mortgage on Essex Development, LLC, or the parking lot is approximately $2,093,000$2,041,000 with a variable interest rate of 2.25% over the daily Libor rate (0.21%(0.17% at December 31, 2012)2013). This loan was extended to August 2013 with the same conditions except for the addition of fixed principal payments in the amount of $4,301 per month. The cost associated with the extension was approximately $6,000. In September 2013, the loan was extended for an additional two years to August 2015 with the same conditions except for the increased principal payments of $4,443 per month. The costs associated with the extension were approximately $9,000. Harold Brown has issued a personal guaranty up to $1,000,000 of this mortgage. In the event that he is obligated to make


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

payments to the lender as a result of this guaranty, the Partnership and other investors have, in turn, agreed to indemnify him for their proportionate share of any such payments. The investment in the parking lot is referred to as Hamilton Essex Development, LLC; the investment in the apartments is referred to as Hamilton Essex 81, LLC.


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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

        On March 2, 2005, the Partnership invested $2,352,000 for a 50% ownership interest in a 176-unit apartment complex with an additional small commercial building located in Quincy, Massachusetts. The purchase price was $23,750,000. The Partnership sold 127 of the units as condominiums and retained 49 units for long-term investment. The Partnership obtained a new 10-year mortgage in the amount of $5,000,000 on the units to be retained by the Partnership. The interest on the new loan is 5.67% fixed for the 10 year term with interest only payments for five years and amortized over a 30 year period for the balance of the loan term. The balance of this mortgage is approximately $4,935,000$4,870,000 at December 31, 2012.2013. This investment is referred to as Hamilton 1025, LLC.

        In September 2004, the Partnership invested approximately $5,075,000 for a 50% ownership interest in a 42-unit apartment complex located in Lexington, Massachusetts. The purchase price was $10,100,000. In October 2004, the Partnership obtained a mortgage on the property in the amount of $8,025,000 and returned $3,775,000 to the Partnership. The Partnership obtained a new 10-year mortgage in the amount of $5,500,000 in January 2007. The interest on the new loan is 5.67% fixed for the ten year term with interest only payments for five years and amortized over a 30 year period for the balance of the loan. This loan required a cash contribution by the Partnership of $1,250,000 in December 2006. At December 31, 2012, the balance of this mortgage is approximately $5,433,000. This investment is referred to as Hamilton Minuteman, LLC.

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

        In 2005, Hamilton on Main Apartments, LLC obtained a ten year mortgage on the three buildings to be retained. The mortgage was $16,825,000, with interest only of 5.18% for three years and amortizing on a 30 year schedule for the remaining seven years when the balance is due. The net proceeds after funding escrow accounts and closing costs on the mortgage were approximately $16,700,000, which were used to reduce the existing mortgage. Hamilton on Main Apartments LLC paid a fee of approximately $400,000 in connection with this early extinguishment of debt. At December 31, 2012,2013, the remaining balance on the mortgage is approximately $15,611,000.$15,318,000.

        In September 2004, the Partnership invested approximately $5,075,000 for a 50% ownership interest in a 42-unit apartment complex located in Lexington, Massachusetts. The purchase price was $10,100,000. In October 2004, the Partnership obtained a mortgage on the property in the amount of $8,025,000 and returned $3,775,000 to the Partnership. The Partnership obtained a new 10-year mortgage in the amount of $5,500,000 in January 2007. The interest on the new loan is 5.67% fixed for the ten year term with interest only payments for five years and amortized over a 30 year period for the balance of the loan. This loan required a cash contribution by the Partnership of $1,250,000 in December 2006. At December 31, 2013, the balance of this mortgage is approximately $5,362,000. This investment is referred to as Hamilton Minuteman, LLC.

        In November 2001, the Partnership invested approximately $1,533,000 for a 50% ownership interest in a 40-unit apartment building in Cambridge, Massachusetts. ThisIn June 2013, the property has a 12-year mortgage,was refinanced with a remaining balance15 year mortgage in the amount of $10,000,000 at December 31, 2012 of approximately $6,850,000 at 6.9% which3.87%, interest only for 3 years and is amortized on a 30-year schedule with a final paymentfor the balance of the term. The Partnership paid off the prior mortgage of approximately $6,000,000 in 2014.$6,776,000 with the proceeds of the new mortgage. After the refinancing, the property made a distribution of $1,610,000 to the Partnership. As a result of the distribution, the carrying value of the investment fell below zero. The Partnership will continue to account for this investment using the equity method of accounting. Although the Partnership has no legal obligation, the Partnership intends to fund its share of any future operating deficits if needed. This investment is referred to as 345 Franklin, LLC.


Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

Summary financial information for the year ended December 31, 20122013


 Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay Apts
 Hamilton
Minuteman
Apts
 Hamilton
on Main
Apts
 Dexter
Park
 Total  Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay Apts
 Hamilton
Minuteman
Apts
 Hamilton
on Main
Apts
 Dexter
Park
 Total 

ASSETS

                      

Rental Properties

 $9,103,858 $2,610,574 $7,885,745 $5,621,970 $1,844,219 $6,975,854 $7,020,471 $21,148,813 $107,496,918 $169,708,422  $8,764,215 $2,624,325 $7,494,954 $5,389,763 $1,766,132 $6,680,834 $6,778,029 $20,253,587 $102,120,964 $161,872,803 

Cash & Cash Equivalents

 27,848 20,214 3,533 2,706 20,695 62,473 44,170 103,990 941,391 1,227,018  30,360 35,644 78,691 9,085 36,423 17,861 33,921 189,004 961,622 1,392,611 

Rent Receivable

 44,005  600 7,283 2,200 2,686 2,626 11,108 35,250 105,758  31,426  1,512 7,970 1,251 2,766  5,697 91,701 142,324 

Real Estate Tax Escrow

 49,793  20,242 74,443  41,225 43,612 70,364 424,159 723,838  101,395  16,970 80,767  45,679 41,268 72,308 427,084 785,470 

Prepaid Expenses & Other Assets

 61,895 505 75,222 33,659 127,530 14,345 48,715 154,396 1,367,274 1,883,541  77,141 555 36,979 44,737 101,507 31,435 50,721 322,667 1,529,591 2,195,335 

Financing & Leasing Fees

 64,116 4,325 8,164 19,645 5,505 26,243 15,950 14,581 399,678 558,206  46,630 14,097 96,548 14,619  19,881 11,981 7,716 340,362 551,834 
                                          

Total Assets

 $9,351,515 $2,635,617 $7,993,505 $5,759,706 $2,000,148 $7,122,825 $7,175,545 $21,503,252 $110,664,670 $174,206,783  $9,051,167 $2,674,621 $7,725,654 $5,546,941 $1,905,314 $6,798,456 $6,915,919 $20,850,980 $105,471,324 $166,940,376 
                     
                                          

LIABILITIES AND PARTNERS' CAPITAL

                      

Mortgage Notes Payable

 $8,352,317 $2,093,184 $6,850,179 $4,934,741 $1,668,000 $4,702,087 $5,433,472 $15,611,045 $88,611,686 $138,256,711  $8,234,548 $2,041,146 $10,000,000 $4,869,583 $ $4,639,848 $5,362,109 $15,317,643 $87,410,638 $137,875,517 

Accounts Payable & Accrued Expense

 34,673 6,319 93,810 49,566 7,481 49,690 58,378 204,413 843,422 1,347,752  44,299 6,084 60,638 50,279 16,993 7,570 73,289 290,008 944,140 1,493,299 

Advance Rental Pmts& Security Deposits

 175,871  140,759 80,264 25,147 86,028 71,025 273,302 1,919,573 2,771,968  167,143  169,709 92,057 24,687 85,413 74,615 291,825 2,121,509 3,026,957 
                                          

Total Liabilities

 8,562,861 2,099,503 7,084,748 5,064,570 1,700,628 4,837,806 5,562,875 16,088,760 91,374,681 142,376,432  8,445,990 2,047,230 10,230,346 5,011,919 41,680 4,732,831 5,510,013 15,899,477 90,476,287 142,395,772 

Partners' Capital

 788,654 536,114 908,757 695,135 299,520 2,285,019 1,612,669 5,414,492 19,289,989 31,830,352  605,177 627,391 (2,504,692) 535,022 1,863,634 2,065,625 1,405,906 4,951,504 14,995,037 24,544,604 
                                          

Total Liabilities and Capital

 $9,351,515 $2,635,617 $7,993,505 $5,759,706 $2,000,148 $7,122,825 $7,175,545 $21,503,252 $110,664,670 $174,206,783  $9,051,167 $2,674,621 $7,725,654 $5,546,941 $1,905,314 $6,798,456 $6,915,919 $20,850,980 $105,471,324 $166,940,376 
                                          

Partners' Capital—NERA 50%

 $394,327 $268,057 $454,379 $347,568 $149,760 $1,142,510 $806,335 $2,707,246   6,270,181 
                                        

Partners' Capital—NERA 40%

                 $7,715,996 7,715,996 

Partners' Capital %—NERA

 50% 50% 50% 50% 50% 50% 50% 50% 40%   

Investment in Unconsolidated Joint Ventures

 $302,589 $313,695 $ $267,511 $931,817 $1,032,812 $702,953 $2,475,752 $5,998,015 12,025,144 
                          

                   $13,986,177                      

Distribution and Loss in Excess of investments in Unconsolidated Joint Ventures

 $ $ $(1,252,346)$ $ $ $ $ $ (1,252,346)
                     

Total Investment in Unconsolidated Joint Ventures (Net)

                   $10,772,798 
                     
                        

Total units/condominiums

                      

Apartments

 48  40 175 120 48 42 148 409 1,030  48  40 175 120 48 42 148 409 1,030 

Commercial

 1 1  1      3  1 1  1      3 
                                          

Total

 49 1 40 176 120 48 42 148 409 1,033  49 1 40 176 120 48 42 148 409 1,033 

Units to be retained

 49 1 40 49  48 42 148 409 786  49 1 40 49  48 42 148 409 786 
                                          

Units to be sold

    127 120     247     127 120     247 
                                          

Units sold through March 1, 2013

    127 105     232 
                     

Units sold through February 1, 2014

    127 105     232 
��                     

Unsold units

     15     15      15     15 

Unsold units with deposits for future sale as of March 1, 2013

           

Unsold units with deposits for future sale as of February 1, 2014

           

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

Year ended December 31, 20122013

 
 Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay Apts
 Hamilton
Minuteman
Apts
 Hamilton
on Main
Apts
 Dexter
Park
 Total 

Revenues

                               

Rental Income

 $1,270,141 $287,537 $1,178,712 $861,998 $235,061 $886,122 $809,707 $2,623,994 $12,202,615 $20,355,887 

Laundry and Sundry Income

  15,363    1,206        2,435  20,952  98,042  137,999 
                      

  1,285,504  287,537  1,179,918  861,998  235,061  886,122  812,142  2,644,946  12,300,657  20,493,885 
                      

Expenses

                               

Administrative

  15,237  1,749  27,942  5,142  7,553  34,600  7,825  46,400  219,218  365,666 

Depreciation and Amortization

  409,488  11,638  441,704  256,696  82,287  297,737  317,231  957,452  5,733,920  8,508,153 

Management Fees

  55,308  11,502  48,596  34,517  9,894  34,659  32,615  104,807  261,355  593,253 

Operating

  112,172    62,277  816  1,251  1,190  73,092  341,054  1,006,570  1,598,421 

Renting

  18,350    5,326  6,815  1,894  4,053  3,538  10,974  74,705  125,655 

Repairs and Maintenance

  118,786  5,475  82,052  320,997  70,812  273,652  57,448  380,605  880,103  2,189,930 

Taxes and Insurance

  197,566  49,237  106,785  145,755  46,017  161,137  102,505  337,256  1,485,297  2,631,555 
                      

  926,908  79,600  774,681  770,738  219,707  807,027  594,254  2,178,549  9,661,169  16,012,632 
                      

Income Before Other Income

  358,596  207,937  405,237  91,260  15,354  79,095  217,888  466,397  2,639,488  4,481,253 
                      

Other Income (Loss)

                               

Interest Expense

  (497,631) (60,451) (486,051) (288,470) (98,361) (271,283) (317,448) (840,874) (5,092,838) (7,953,407)

Interest Income

      48  74  215          337 

Interest Income from Note

          6,180          6,180 
                      

  (497,631) (60,451) (486,003) (288,395) (91,966) (271,283) (317,448) (840,874) (5,092,838) (7,946,890)
                      

Net Income (Loss)

 $(139,035)$147,486 $(80,766)$(197,135)$(76,612)$(192,188)$(99,560)$(374,477)$(2,453,350)$(3,465,636)
                      

Net Income (Loss)—NERA 50%

 $(69,517)$73,743 $(40,383)$(98,567)$(38,306)$(96,094)$(49,780)$(187,239)    (506,143)
                        

Net Income (Loss)—NERA 40%

                         $(981,340) (981,340)
                              

                            $(1,487,483)
                               

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

Future annual mortgage maturities at December 31, 2012 are as follows:

 
 Hamilon
Essex 81
 Hamilton
Essex 81
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay Apts
 Hamilton
Minuteman
 Hamilton on
Main Apts
 Dexter
Park
  
 
Period End
 March
2005
 March
2005
 November
2001
 March
2005
 October
2005
 October
2005
 August
2004
 August
2004
 October
2009
 Total 

12/31/2013

  125,660  2,093,184  165,412  65,157  1,668,000  66,163  71,363  293,222  1,275,835  7,082,229 

12/31/2014

  133,132     6,684,767  69,003     69,944  75,575  309,178  1,348,741  10,020,473 

12/31/2015

  141,048        73,077     73,941  80,036  15,008,646  1,425,814  18,208,704 

12/31/2016

  7,952,477        4,727,503     78,166  77,128     1,507,291  15,829,060 

12/31/2017

                 4,413,873  5,129,371     1,593,424  12,708,108 

Thereafter

                          81,460,581  163,299,264 
                      

 $8,352,317 $2,093,184 $6,850,179 $4,934,741 $1,668,000 $4,702,087 $5,433,472 $15,611,045 $88,611,686 $138,256,711 
                      

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2012

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

        At December 31, 2012 the weighted average interest rate on the above mortgages was 5.65%. The effective rate was 5.65% including the amortization expense of deferred financing costs.

Summary financial information for the year ended December 31, 2011

 
 Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay
 Hamilton
Minuteman
 Hamilton
on Main
 Dexter
Park
 Total 

ASSETS

                               

Rental Properties

  9,454,959  2,613,064  8,229,651  5,863,176  1,916,445  7,257,981  7,256,528  21,939,796  112,921,940  177,453,541 

Cash & Cash Equivalents

  47,526  1,529  17,027  1,848  19,416  5,026  31,125  90,940  836,347  1,050,783 

Rent Receivable

  73,459      15,682    2,512  7,457  8,593  86,722  194,425 

Real Estate Tax Escrow

  98,610    18,360  64,464    89,760  43,864  104,505  582,028  1,001,592 

Prepaid Expenses & Other Assets

  59,508  493  54,276  88,524  167,811  95,190  54,023  180,899  1,216,214  1,916,937 

Financing & Leasing Fees

  71,108  6,987  16,330  24,672  6,570  32,605  19,918  21,442  458,995  658,626 
                      

Total Assets

  9,805,169  2,622,073  8,335,644  6,058,364  2,110,241  7,483,074  7,412,916  22,346,175  116,102,247  182,275,903 
                      

LIABILITIES AND PARTNERS' CAPITAL

                               

Mortgage Notes Payable

  8,462,041  2,144,796  7,019,119  4,995,487  1,668,000  4,750,000  5,500,000  15,887,203  89,733,192  140,159,839 

Accounts Payable & Accrued Expense

  32,238  6,309  15,323  48,236  12,682  28,690  58,596  212,224  820,603  1,234,900 

Advance Rental Pmts & Security Dep

  152,940    114,179  69,970  20,027  85,575  69,592  257,780  1,800,113  2,570,176 
                      

Total Liabilities

  8,647,219  2,151,105  7,148,621  5,113,694  1,700,709  4,864,265  5,628,188  16,357,207  92,353,908  143,964,915 
                      

Partners' Capital

  1,157,950  470,968  1,187,023  944,670  409,532  2,618,809  1,784,728  5,988,968  23,748,339  38,310,988 
                      

Total Liabilities & Capital

  9,805,169  2,622,073  8,335,644  6,058,364  2,110,241  7,483,074  7,412,916  22,346,175  116,102,247  182,275,903 
                      

Partners' Capital—NERA 50%

  578,975  235,484  593,512  472,335  204,766  1,309,404  892,364  2,994,484     7,281,325 
                        

NERA 40%

                          9,499,335  9,499,335 
                              

                             16,780,660 
                               

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 January 25, 2012

        127  105          232 
                      

Unsold units

          15          15 

Unsold units with deposits for future sale as of February 1, 2012

                     
 
 Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay Apts
 Hamilton
Minuteman
Apts
 Hamilton
on Main
Apts
 Dexter
Park
 Total 

Revenues

                               

Rental Income

 $1,362,012 $287,410 $1,258,313 $896,256 $261,949 $911,845 $858,492 $2,753,120 $12,851,259 $21,440,655 

Laundry and Sundry Income

  17,549    2,683        675  37,192  94,715  152,814 
                      

  1,379,562  287,410  1,260,996  896,256  261,949  911,845  859,167  2,790,312  12,945,974  21,593,469 
                      

Expenses

                            ��  

Administrative

  18,330  1,370  23,813  9,552  10,134  16,291  6,206  38,144  245,444  369,284 

Depreciation and Amortization

  428,609  9,803  428,003  240,658  80,697  307,546  318,095  948,478  5,778,427  8,540,316 

Management Fees

  55,813  11,496  51,706  36,066  10,538  35,831  34,129  112,749  271,505  619,833 

Operating

  114,778    68,364  1,150  2,234  1,343  83,143  347,382  1,056,919  1,675,312 

Renting

  11,106    3,788  5,378  1,425  10,986  6,350  6,273  105,593  150,898 

Repairs and Maintenance

  123,702  4,950  86,844  320,348  94,640  295,144  69,057  389,671  1,051,832  2,436,188 

Taxes and Insurance

  216,560  49,192  114,669  151,971  42,765  146,870  121,442  342,995  1,529,605  2,716,069 
                      

  968,897  76,812  777,187  765,121  242,433  814,012  638,423  2,185,692  10,039,324  16,507,900 
                      

Income Before Other Income

  410,665  210,598  483,809  131,134  19,516  97,833  220,744  604,620  2,906,650  5,085,569 
                      

Other Income (Loss)

                               

Interest Expense

  (488,369) (58,093) (453,197) (284,257) (73,819) (267,228) (312,507) (822,109) (5,016,659) (7,776,238)

Interest Income

      26  8  159        57  250 

Interest Income from Note

          3,258          3,258 

Other Income (Expenses)

      (68,588)             (68,588)
                      

  (488,369) (58,093) (521,759) (284,249) (70,402) (267,228) (312,507) (822,109) (5,016,602) (7,841,318)
                      

Net Income (Loss)

 $(77,704)$152,505 $(37,950)$(153,114)$(50,886)$(169,395)$(91,763)$(217,489)$(2,109,952)$(2,755,749)
                      
                      

Net Income (Loss)—NERA 50%

 $(38,852)$76,252 $(18,975)$(76,557)$(25,443)$(84,697)$(45,882)$(108,744)    (322,898)
                        
                        

Net Income (Loss)—NERA 40%

                         $(843,981) (843,981)
                              

                            $(1,166,879)
                               
                               

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

Year endedFuture annual mortgage maturities at December 31, 20112013 are as follows:

 
 Hamilton
Essex 81
 Hamilton Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay
 Hamilton
Minuteman
 Hamilton
on Main
 Dexter
Park
 Total 

Revenues

                               

Rental Income

  1,244,322  255,050  1,136,831  816,015  232,938  863,657  789,897  2,491,957  11,559,414  19,390,080 

Laundry and Sundry Income

  16,589    2,367        1,362  20,599  97,275  138,193 
                      

  1,260,911  255,050  1,139,198  816,015  232,938  863,657  791,258  2,512,556  11,656,690  19,528,273 
                      

Expenses

                               

Administrative

  20,839  1,339  24,424  11,258  5,396  18,625  10,249  36,155  163,511  291,796 

Depreciation and Amortization

  424,695  8,498  443,055  257,961  103,536  329,930  322,216  965,324  5,698,657  8,553,872 

Management Fees

  49,677  11,040  45,829  32,120  9,486  33,916  31,666  100,581  251,071  565,386 

Operating

  121,521    66,278  1,733  239  732  54,650  371,687  929,543  1,546,382 

Renting

  8,058    19,206  13,322  1,750  8,927  3,559  15,140  144,149  214,111 

Repairs and Maintenance

  127,528  3,050  71,479  300,534  78,167  316,782  98,904  371,109  935,839  2,303,393 

Taxes and Insurance

  184,119  47,709  97,028  143,002  45,303  155,681  92,300  325,868  1,300,995  2,392,005 
                      

  936,438  71,636  767,299  759,930  243,877  864,593  613,544  2,185,864  9,423,765  15,866,945 
                      

Income Before Other Income

  324,473  183,414  371,899  56,085  (10,939) (936) 177,714  326,693  2,232,924  3,661,328 
                      

Other Income (Loss)

                               

Interest Expense

  (503,102) (61,593) (494,468) (289,222) (98,010) (271,348) (317,927) (848,786) (5,113,523) (7,997,979)

Interest Income

      49  88  457        3,219  3,814 

Interest Income from Note

          8,904          8,904 

Gain on Sale of Real Estate

                     

Other Income (Expenses)

  (2,331)   (5,375) (3,621)   (2,271) (61,589) (1,152) (3,500) (79,839)
                      

  (505,433) (61,593) (499,793) (292,756) (88,649) (273,619) (379,515) (849,938) (5,113,804) (8,065,100)
                      

Net Income (loss)

  (180,960) 121,821  (127,894) (236,671) (99,588) (274,555) (201,801) (523,245) (2,880,880) (4,403,772)
                      

Net Income (loss)—NERA 50%

  (90,480) 60,911  (63,947) (118,335) (49,794) (137,277) (100,900) (261,622)    (761,446)
                        

                                   NERA 40%

                          (1,152,352) (1,152,352)
                              

                             (1,913,798)
                               
Period End
 Hamilon
Essex 81
 Hamilton
Essex 81
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Apts
 Hamilton
Minuteman
 Hamilton on
Main Apts
 Dexter
Park
 Total 

12/31/2014

 $139,130 $53,316 $ $69,003 $73,015 $75,575 $308,998 $1,348,742 $2,067,779 

12/31/2015

  141,048  1,987,830     73,077  73,941  80,036  15,008,646  1,425,814  18,790,391 

12/31/2016

  7,954,370     86,413  4,727,503  78,166  77,128     1,507,291  14,430,870 

12/31/2017

        183,627     4,414,727  5,129,371     1,593,424  11,321,149 

12/31/2018

        190,861              1,684,479  1,875,340 

Thereafter

        9,539,099              79,850,888  89,389,987 
                    

 $8,234,548 $2,041,146 $10,000,000 $4,869,583 $4,639,848 $5,362,109 $15,317,643 $87,410,638 $137,875,516 
                    
                    

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

        At December 31, 2013 the weighted average interest rate on the above mortgages was 5.38%. The effective rate was 5.52% including the amortization expense of deferred financing costs.

Summary financial information for the year ended December 31, 20102012


 Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay
 Hamilton
Minuteman
 Hamilton on
Main
 Dexter
Park
 Total  Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay Apts
 Hamilton
Minuteman
Apts
 Hamilton
on Main
Apts
 Dexter
Park
 Total 

ASSETS

                      

Rental Properties

 9,827,917 2,595,266 8,648,591 6,078,526 2,006,989 7,569,060 7,582,687 22,822,785 118,468,247 185,600,068  $9,103,858 $2,610,574 $7,885,745 $5,621,970 $1,844,219 $6,975,854 $7,020,471 $21,148,813 $107,496,918 $169,708,422 

Cash & Cash Equivalents

 2,833 29,596 25,617 736 48,053 57,956 51,637 19,325 754,066 989,818  27,848 20,214 3,533 2,706 20,695 62,473 44,170 103,990 941,391 1,227,018 

Rent Receivable

 24,062  8,887 10,088 2,224 2,295 683 10,686 125,475 184,400  44,005  600 7,283 2,200 2,686 2,626 11,108 35,250 105,758 

Real Estate Tax Escrow

 85,348  18,649 58,089  82,370 34,331 98,036 484,566 861,390  49,793  20,242 74,443  41,225 43,612 70,364 424,159 723,838 

Prepaid Expenses & Other Assets

 49,518 480 50,720 76,810 209,610 94,181 43,655 418,289 1,089,897 2,033,161  61,895 505 75,222 33,659 127,530 14,345 48,715 154,396 1,367,274 1,883,541 

Financing & Leasing Fees

 96,105 4,175 24,496 29,698 11,634 38,966 23,887 28,304 518,395 775,660  64,116 4,325 8,164 19,645 5,505 26,243 15,950 14,581 399,678 558,206 
                                          

Total Assets

 10,085,783 2,629,517 8,776,960 6,253,948 2,278,510 7,844,829 7,736,879 23,397,425 121,440,647 190,444,498  $9,351,515 $2,635,617 $7,993,505 $5,759,706 $2,000,148 $7,122,825 $7,175,545 $21,503,252 $110,664,670 $174,206,783 
                     
                                          

LIABILITIES AND PARTNERS' CAPITAL

                      

Mortgage Notes Payable

 8,566,871 2,162,000 7,176,827 5,000,000 1,668,000 4,750,000 5,500,000 16,151,526 89,914,000 140,889,224  $8,352,317 $2,093,184 $6,850,179 $4,934,741 $1,668,000 $4,702,087 $5,433,472 $15,611,045 $88,611,686 $138,256,711 

Accounts Payable & Accrued Expense

 33,190 6,239 36,027 43,541 6,346 5,693 65,588 206,997 787,584 1,191,205  34,673 6,319 93,810 49,566 7,481 49,690 58,378 204,413 843,422 1,347,752 

Advance Rental Pmts & Security Dep

 132,044  129,188 63,965 20,044 80,772 61,762 226,689 1,684,843 2,399,308 

Advance Rental Pmts& Security Deposits

 175,871  140,759 80,264 25,147 86,028 71,025 273,302 1,919,573 2,771,968 
                                          

Total Liabilities

 8,732,105 2,168,239 7,342,042 5,107,506 1,694,390 4,836,465 5,627,350 16,585,212 92,386,428 144,479,737  8,562,861 2,099,503 7,084,748 5,064,570 1,700,628 4,837,806 5,562,875 16,088,760 91,374,681 142,376,432 
                     

Partners' Capital

 1,353,679 461,278 1,434,918 1,146,442 584,119 3,008,364 2,109,529 6,812,213 29,054,219 45,964,761  788,654 536,114 908,757 695,135 299,520 2,285,019 1,612,669 5,414,492 19,289,989 31,830,352 
                                          

Total Liabilities & Capital

 10,085,783 2,629,517 8,776,960 6,253,948 2,278,510 7,844,829 7,736,879 23,397,425 121,440,647 190,444,498 

Total Liabilities and Capital

 $9,351,515 $2,635,617 $7,993,505 $5,759,706 $2,000,148 $7,122,825 $7,175,545 $21,503,252 $110,664,670 $174,206,783 
                                          

Partners' Capital—NERA 50%

 676,839 230,639 717,459 573,221 292,060 1,504,182 1,054,765 3,406,107   8,455,271 
                                        

NERA 40%

                 11,621,688 11,621,688 

Partners' Capital %—NERA

 50% 50% 50% 50% 50% 50% 50% 50% 40%   

Investment in Unconsolidated Joint Ventures

 $394,327 $268,057 $454,379 $347,568 $149,760 $1,142,510 $806,335 $2,707,246 $7,715,996 13,986,177 
                          

                   20,076,959                      

Distribution and Loss in Excess of investments in Unconsolidated Joint Ventures

 $ $ $ $ $ $ $ $ $  
                        

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 

Total Investment in Unconsolidated Joint Ventures (Net)

                   $13,986,177 
                                          

Units to be sold

    127 120     247 
                                          

Units sold through January 25, 2010

    127 105     232 
                     

Unsold units

     15     15 

Unsold units with deposits for future sale as of February 1, 2011

     0      

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

 
 Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay Apts
 Hamilton
Minuteman
Apts
 Hamilton
on Main
Apts
 Dexter
Park
 Total 

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 March 1, 2013

        127  105          232 
   ��                  

Unsold units

          15          15 

Unsold units with deposits for future sale as of March 1, 2013

                     

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

Year ended December 31, 20102012


 Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay
Sales
 Hamilton
Bay
 Hamilton
Minuteman
 Hamilton
on Main
 Dexter
Park
 Total  Hamilton
Essex 81
 Hamilton Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay Apts
 Hamilton
Minuteman
Apts
 Hamilton
on Main
Apts
 Dexter
Park
 Total 

Revenues

                      

Rental Income

 1,122,915 275,950 1,097,957 794,993 221,191 839,361 765,509 2,455,222 11,019,862 18,592,960  $1,270,141 $287,537 $1,178,712 $861,998 $235,061 $886,122 $809,707 $2,623,994 $12,202,615 $20,355,887 

Laundry and Sundry Income

 16,184  2,436    762 19,780 97,902 137,063  15,363  1,206    2,435 20,952 98,042 137,999 
                                          

 1,139,099 275,950 1,100,393 794,993 221,191 839,361 766,271 2,475,002 11,117,764 18,730,023  1,285,504 287,537 1,179,918 861,998 235,061 886,122 812,142 2,644,946 12,300,657 20,493,885 
                                          

Expenses

                      

Administrative

 13,709   30,904 13,038 7,073 17,324 10,288 39,289 148,097 279,724  15,237 1,749 27,942 5,142 7,553 34,600 7,825 46,400 219,218 365,666 

Depreciation and Amortization

 425,450 6,254 439,666 269,475 98,678 359,727 320,553 981,881 9,428,284 12,329,966  409,488 11,638 441,704 256,696 82,287 297,737 317,231 957,452 5,733,920 8,508,153 

Management Fees

 46,734 11,040 45,559 31,795 9,245 33,345 31,563 97,239 244,178 550,698  55,308 11,502 48,596 34,517 9,894 34,659 32,615 104,807 261,355 593,253 

Operating

 134,016   62,994 1,777   411 63,841 358,827 960,328 1,582,193  112,172  62,277 816 1,251 1,190 73,092 341,054 1,006,570 1,598,421 

Renting

 24,785  49,517 8,576 375 6,213 3,770 15,361 281,545 390,142  18,350  5,326 6,815 1,894 4,053 3,538 10,974 74,705 125,655 

Repairs and Maintenance

 134,941  80,190 376,560 76,510 344,852 99,553 342,310 859,088 2,314,005  118,786 5,475 82,052 320,997 70,812 273,652 57,448 380,605 880,103 2,189,930 

Taxes and Insurance

 179,939 46,658 98,151 127,637 42,465 132,188 96,213 318,150 1,451,017 2,492,417  197,566 49,237 106,785 145,755 46,017 161,137 102,505 337,256 1,485,297 2,631,555 
                                          

 959,574 63,952 806,981 828,857 234,346 894,061 625,780 2,153,057 13,372,537 19,939,145  926,908 79,600 774,681 770,738 219,707 807,027 594,254 2,178,549 9,661,169 16,012,632 
                                          

Income Before Other Income

 179,525 211,998 293,412 (33,864) (13,155) (54,700) 140,491 321,944 (2,254,773) (1,209,122) 358,596 207,937 405,237 91,260 15,354 79,095 217,888 466,397 2,639,488 4,481,253 
                                          

Other Income (Loss)

                      

Interest Expense

 (507,425) (62,694) (504,667) (289,042) (97,909) (271,389) (317,360) (860,500) (5,116,598) (8,027,583) (497,631) (60,451) (486,051) (288,470) (98,361) (271,283) (317,448) (840,874) (5,092,838) (7,953,407)

Interest Income

 3 2 47 90 569 2 1,780 8 5 2,505    48 74 215     337 

Interest Income from Note

     11,445     11,445      6,180     6,180 

Gain on Sale of Real Estate

              

Other Income (Expenses)

     11,021 9,478  2,168 (17,720) 4,947 
                     

 (497,631) (60,451) (486,003) (288,395) (91,966) (271,283) (317,448) (840,874) (5,092,838) (7,946,890)
                     

Net Income (Loss)

 $(139,035)$147,486 $(80,766)$(197,135)$(76,612)$(192,188)$(99,560)$(374,477)$(2,453,350)$(3,465,636)
                     
                     

Net Income (Loss)—NERA 50%

 $(69,517)$73,743 $(40,383)$(98,567)$(38,306)$(96,094)$(49,780)$(187,239)   (506,143)
                     
                     

Net Income (Loss)—NERA 40%

                 $(981,340) (981,340)
                                          

 (507,422) (62,692) (504,619) (288,952) (74,874) (261,909) (315,581) (858,323) (5,134,313) (8,008,686)                   $(1,487,483)
                                          

Net Income (loss)

 (327,897) 149,305 (211,208) (322,816) (88,029) (316,608) (175,090) (536,379) (7,389,086) (9,217,808)
                                          

Net Income (loss)—NERA 50%

 (163,948) 74,653 (105,604) (161,408) (44,015) (158,304) (87,545) (268,189)   (914,361)
                   

NERA 40%

                 (2,955,635) (2,955,635)
     

                   (3,869,995)
   

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

Summary financial information for the year ended December 31, 2011

 
 Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay Sales
 Hamilton
Bay Apts
 Hamilton
Minuteman
Apts
 Hamilton on
Main Apts
 Dexter
Park
 Total 

ASSETS

                               

Rental Properties

 $9,454,959 $2,613,064 $8,229,651 $5,863,176 $1,916,445 $7,257,981 $7,256,528 $21,939,796 $112,921,940 $177,453,541 

Cash & Cash Equivalents

  47,526  1,529  17,027  1,848  19,416  5,026  31,125  90,940  836,347  1,050,783 

Rent Receivable

  73,459      15,682    2,512  7,457  8,593  86,722  194,425 

Real Estate Tax Escrow

  98,610    18,360  64,464    89,760  43,864  104,505  582,028  1,001,592 

Prepaid Expenses & Other Assets

  59,508  493  54,276  88,524  167,811  95,190  54,023  180,899  1,216,214  1,916,937 

Financing & Leasing Fees

  71,108  6,987  16,330  24,672  6,570  32,605  19,918  21,442  458,995  658,626 
                      

Total Assets

 $9,805,169 $2,622,073 $8,335,644 $6,058,364 $2,110,241 $7,483,074 $7,412,916 $22,346,175 $116,102,247 $182,275,903 
                      
                      

LIABILITIES AND PARTNERS' CAPITAL

                               

Mortgage Notes Payable

 $8,462,041 $2,144,796 $7,019,119 $4,995,487 $1,668,000 $4,750,000 $5,500,000 $15,887,203 $89,733,192 $140,159,839 

Accounts Payable & Accrued Expense

  32,238  6,309  15,323  48,236  12,682  28,690  58,596  212,224  820,603  1,234,900 

Advance Rental Pmts & Security Deposits

  152,940    114,179  69,970  20,027  85,575  69,592  257,780  1,800,113  2,570,176 
                      

Total Liabilities

  8,647,219  2,151,105  7,148,621  5,113,694  1,700,709  4,864,265  5,628,188  16,357,207  92,353,908  143,964,915 

Partners' Capital

  1,157,950  470,968  1,187,023  944,670  409,532  2,618,809  1,784,728  5,988,968  23,748,339  38,310,988 
                      

Total Liabilities and Capital

 $9,805,169 $2,622,073 $8,335,644 $6,058,364 $2,110,241 $7,483,074 $7,412,916 $22,346,175 $116,102,247 $182,275,903 
                      
                      

Partners' Capital %—NERA

  50% 50% 50% 50% 50% 50% 50% 50% 40%   

Investment in Unconsolidated Joint Ventures

 $578,975 $235,484 $593,512 $472,335 $204,766 $1,309,404 $892,364 $2,994,484 $9,499,335  16,780,660 
                       
                       

Distribution and Loss in Excess of investments in Unconsolidated Joint Ventures

 $ $ $ $ $ $ $ $ $   
                      

Total Investment in Unconsolidated Joint Ventures (Net)

                            $16,780,660 
                               
                               

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 January 25, 2012

        127  105          232 
                      

Unsold units

          15          15 

Unsold units with deposits for future sale as of February 1, 2012

                     

Table of Contents

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2013

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Continued)

Year ended December 31, 2011

 
 Hamilton
Essex 81
 Hamilton
Essex
Development
 345
Franklin
 Hamilton
1025
 Hamilton
Bay
Sales
 Hamilton
Bay Apts
 Hamilton
Minuteman
Apts
 Hamilton
on Main
Apts
 Dexter
Park
 Total 

Revenues

                               

Rental Income

 $1,244,322 $255,050 $1,136,831 $816,015 $232,938 $863,657 $789,897 $2,491,957 $11,559,414 $19,390,080 

Laundry and Sundry Income

  16,589    2,367        1,362  20,599  97,275  138,193 
                      

  1,260,911  255,050  1,139,198  816,015  232,938  863,657  791,258  2,512,556  11,656,690  19,528,273 
                      

Expenses

                               

Administrative

  20,839  1,339  24,424  11,258  5,396  18,625  10,249  36,155  163,511  291,796 

Depreciation and Amortization

  424,695  8,498  443,055  257,961  103,536  329,930  322,216  965,324  5,698,657  8,553,872 

Management Fees

  49,677  11,040  45,829  32,120  9,486  33,916  31,666  100,581  251,071  565,386 

Operating

  121,521    66,278  1,733  239  732  54,650  371,687  929,543  1,546,382 

Renting

  8,058    19,206  13,322  1,750  8,927  3,559  15,140  144,149  214,111 

Repairs and Maintenance

  127,528  3,050  71,479  300,534  78,167  316,782  98,904  371,109  935,839  2,303,393 

Taxes and Insurance

  184,119  47,709  97,028  143,002  45,303  155,681  92,300  325,868  1,300,995  2,392,005 
                      

  936,438  71,636  767,299  759,930  243,877  864,593  613,544  2,185,864  9,423,765  15,866,945 
                      

Income Before Other Income

  324,473  183,414  371,899  56,085  (10,939) (936) 177,714  326,693  2,232,924  3,661,328 
                      

Other Income (Loss)

                               

Interest Expense

  (503,102) (61,593) (494,468) (289,222) (98,010) (271,348) (317,927) (848,786) (5,113,523) (7,997,979)

Interest Income

  0  0  49  88  457  0  0    3,219  3,814 

Interest Income from Note

          8,904          8,904 

Other Income (Expenses)

  (2,331)   (5,375) (3,621)   (2,271) (61,589) (1,152) (3,500) (79,839)
                      

  (505,433) (61,593) (499,793) (292,756) (88,649) (273,619) (379,515) (849,938) (5,113,804) (8,065,100)
                      

Net Income (Loss)

 $(180,960)$121,821 $(127,894)$(236,671)$(99,588)$(274,555)$(201,801)$(523,245)$(2,880,880)$(4,403,772)
                      
                      

Net Income (Loss)—NERA 50%

 $(90,480)$60,911 $(63,947)$(118,335)$(49,794)$(137,277)$(100,900)$(261,622)    (761,446)
                        
                        

Net Income (Loss)—NERA 40%

                         $(1,152,352) (1,152,352)
                              

                            $(1,913,798)
                               
                               

Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 15. IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

        In May 2011,January 2013, the Financial Accounting Standards Board (the "FASB")FASB issued Accounting Standards Update ("ASU") 2011-04, (2013-02,Fair Value Measurement Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U. S. GAAP and IFRS. ASU 2011-04 clarifies some existing concepts, eliminates wording differences between U.S. GAAP and International Financial Reporting Standards ("IFRS"), and in some limited cases, changes some principals to achieve convergence between U.S. GAAP and IFRS. ASU 2011-04 results in a consistent definition of fair value and common requirements for measurementof and disclosure about fair value between GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. ASU 2011-04 was effective for us asAmounts Reclassified Out of January 1, 2012. The adoption of this pronouncement did not materially impact our consolidated financial statements.

        In June 2011, the FASB issued ASU 2011-05,Presentation ofAccumulated Comprehensive Income ("ASU 2013-02"), which requires an entity to presentreport the totaleffect of comprehensive income, the componentssignificant reclassifications out of net income, and the components ofaccumulated other comprehensive income eitheron the respective line items in a single continuous statements.net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net income within the same reporting period, an entity is required to cross-reference other disclosures that provide additional detail about the reclassified amounts. The Partnership adopted the provisions of ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. ASU 2011-05 was effective for us as of2013-02 on January 1, 2012. The adoption of this pronouncement did not materially impact our consolidated financial statements.

        In August 2012, the FASB issued ASU 2012-03,Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-950, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update). This update amends a number of SEC sections in the FASB Accounting Standards Codification as a result of (1) the issuance of SAB 114, (2) the issuance of SEC Final Rule 33-9250, and (3) corrections related to ASU 2010-22. ASU 2012-03 was effective upon issuance. The adoption of this pronouncement2013, which did not have a materialsignificant impact on ourits consolidated financial statements.statements or notes thereto.

        In October 2012, the FASB issued ASU 2012-04,Technical Corrections and Improvements. The amendments in this update cover a wide range of topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. ASU 2012-04 will be effective for us as of January 1, 2013. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 16. DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE

        The following tables summarize income from discontinued operations and the related realized gain on sale of rental property for the years ended December 31, 2013, 2012 2011 and 2010:2011:


 Year Ended December 31,  Year Ended December 31, 

 2012 2011 2010  2013 2012 2011 

Total Revenues

 $ $348,997 $910,155  $193,480 $462,031 $799,813 
              

Operating and other expenses

  237,298 599,402  172,322 348,714 605,294 

Depreciation and amortization

  30,132 90,886  2,111 79,969 101,566 
              

  267,430 690,288  174,433 428,683 706,860 
              

Income from discontinued operations

 $ $81,567 $219,867  $19,047 $33,348 $92,953 
              
       

 

Gain on the sale of Avon Street:

    

Sale price

 $8,750,000 

Net book value

  (594,035)

Expense of sale

  (435,506)
    

Gain on the sale of real estate

 $7,720,459 
    

NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)

 
 Three Months Ended  
 
 
 March 31, 2012 June 30, 2012 September 30, 2012 December 31, 2012 Total 

Revenue

 $8,852,382 $8,800,416 $8,875,596 $9,104,015 $35,632,409 

Expenses

  5,861,694  5,413,735  5,730,319  5,704,596  22,710,344 
            

Income Before Other Income

  2,990,688  3,386,681  3,145,277  3,399,419  12,922,065 

Other Income (loss)

  (2,363,735) (2,339,420) (2,370,824) (2,214,288) (9,288,267)
            

Net Income

 $626,953 $1,047,261 $774,453 $1,185,131 $3,633,798 
            

Net Income per Unit before discontinued operations

 $4.77 $7.97 $5.90 $9.07 $27.69 

Income per Unit from discontinued operations

  0.00  0.00  0.00  0.00  0.00 
            

Net income per Unit

 $4.77 $7.97 $5.90 $9.07 $27.69 
            

Income per depositary receipt before discontinued operations

  0.16  0.27  0.20  0.30  0.92 

Income per depositary receipt from discontinued operations

  0.00  0.00  0.00  0.00  0.00 
            

Net Income per depositary receipt

 $0.16 $0.27 $0.20 $0.30 $0.92 
            

Gain on the sale of Avon Street in the second quarter of 2011:

    

Sale price

 $8,750,000 

Net book value

  (594,035)

Expense of sale

  (435,506)
    

Gain on the sale of real estate

 $7,720,459 
    
    

Gain on the Sale of Nashoba in the second quarter of 2013:

    

Sale price

 $4,300,000 

Net book value

  (476,766)

Expense of sale

  (144,395)
    

Gain on the sale of real estate

 $3,678,839 
    
    

Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)


 
 Three Months Ended  
 
 
 March 31, 2011 June 30, 2011 September 30, 2011 December 31, 2011 Total 

Revenue

 $8,280,894 $8,345,643 $8,648,526 $8,760,538 $34,035,602 

Expenses

  5,773,941  5,508,842  5,665,232  5,722,971  22,670,986 
            

Income Before Other Income

  2,506,953  2,836,801  2,983,294  3,037,567  11,364,616 

Income (loss) from discontinued operations

  68,599  7,736,789  (3,054) (308) 7,802,026 

Other Income (loss)

  (2,402,740) (2,480,305) (2,523,314) (2,469,002) (9,875,361)
            

Net Income

 $172,812 $8,093,285 $456,926 $568,257 $9,291,281 
            

Net Income per unit before discontinued operations

 $0.79 $2.71 $3.50 $4.33 $11.33 

Income (loss) per unit from discontinued operations

  0.52  58.84  (0.02)   59.34 
            

Net income per unit

 $1.31 $61.55 $3.48 $4.33 $70.67 
            

Income per depositary receipt before discontinued operations

  0.02  0.09  0.12  0.15  0.38 

Income per depositary receipt from discontinued operations

  0.02  1.96      1.98 
            

Net Income per depositary receipt

 $0.04 $2.05 $0.12 $0.15 $2.36 
            
 
 Three Months Ended  
 
 
 March 31, 2013 June 30, 2013 September 30, 2013 December 31, 2013 Total 

Revenue

 $9,019,693 $9,002,762 $9,967,752 $10,374,345 $38,364,552 

Expenses

  5,980,237  6,113,940  7,484,223  7,654,735  27,233,135 
            

Income Before Other Income and Discontinued Operations

  3,039,456  2,888,822  2,483,529  2,719,610  11,131,417 

Income (Loss) From Discontinued Operations

  19,731  3,678,922  (654) (113) 3,697,886 

Other Income (Loss)

  (2,157,562) (2,098,628) (2,515,749) (2,401,979) (9,173,918)
            

Net Income

 $901,625 $4,469,116 $(32,874)$317,518 $5,655,385 
            
            

Net Income per Unit before Discontinued Operations

 $6.77 $6.08 $(0.25)$2.45 $15.07 

Income per Unit from Discontinued Operations

 $0.15 $28.29 $(0.01)$0.00 $28.48 
            

Net Income Per Unit

 $6.93 $34.37 $(0.25)$2.45 $43.55 
            
            

Income Per Depositary Receipt Before Discontinued Operations

 $0.23 $0.20 $(0.01)$0.08 $0.50 

Income Per Depositary Receipt From Discontinued Operations

 $0.01 $0.94 $0.00 $0.00 $0.95 
            

Net Income Per Depositary Receipt

 $0.23 $1.15 $(0.01)$0.08 $1.45 
            
            

NOTE 18. SUBSEQUENT EVENTS

        From January 1, 2013 through March 14, 2013, the Partnership purchased a total of 9,709 Depositary Receipts. The average price was $32.24 per receipt or $967.20 per unit. The total cost was $321,240. The Partnership is required to repurchase 76.86 Class B Units and 4.05 General Partnership units at a cost of $74,335 and $3,912, respectively.

        On February 4, 2013, the Partnership announced the approval of a quarterly distribution to its Class A Limited Partners and holders of Depositary Receipts of record as of March 15, 2013 and payable on March 31, 2013 of $7.50 per unit and $0.25 per receipt.

Discontinued Operations

        At the February 4, 2013 meeting of the Advisory Committee, the Committee approved managements plan to seek a sale of the 32 unit Nashoba Apartments LP in Acton, Massachusetts. This complex will be accounted for as a discontinued operation in 2013. There is no assurance that the complex can be sold at an acceptable price. The selling price is expected to be well in excess of its book value and outstanding mortgage. Summary historical information is presented below:


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 18. SUBSEQUENT EVENTS17. QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)

        Financial Statements for Nashoba Apartments LP is as follows:


Nashoba Apartments LP
Balance Sheets
(In Thousands)

 
 December 31, 
 
 2012 2011 

Assets:

       

Rental property

 $1,283 $1,210 

Accumulated depreciation

  821  743 
      

Rental property (net)

  462  467 

Other current assets

  123  80 

Other assets

  2  6 
      

Total assets

 $587 $553 
      

Liabilities:

       

Mortgage note payable

 $2,000 $2,000 

Other liabilities

  71  70 
      

Total liabilities

  2,071  2,070 

Partner's equity

  (1,484) (1,517)
      

Total liabilities & partner's equity

 $587 $553 
      
 
 Three Months Ended  
 
 
 March 31, 2012 June 30, 2012 September 30, 2012 December 31, 2012 Total 

Revenue

 $8,733,052 $8,690,579 $8,759,026 $8,986,514 $35,169,171 

Expenses

  5,782,391  5,346,294  5,633,984  5,626,758  22,389,427 
            

Income Before Other Income and Discontinued Operations

  2,950,661  3,344,285  3,125,042  3,359,756  12,779,744 

Income (Loss) From Discontinued Operations

  13,284  14,345  (6,853) 12,572  33,348 

Other Income (Loss)

  (2,336,991) (2,311,368) (2,343,736) (2,187,198) (9,179,293)
            

Net Income

 $626,954 $1,047,262 $774,453 $1,185,130 $3,633,798 
            
            

Net Income per Unit before Discontinued Operations

 $4.67 $7.86 $5.95 $8.97 $27.44 

Income per Unit from Discontinued Operations

 $0.10 $0.11 $(0.05)$0.10 $0.25 
            

Net Income Per Unit

 $4.77 $7.97 $5.90 $9.07 $27.69 
            
            

Income Per Depositary Receipt Before Discontinued Operations

 $0.16 $0.26 $0.20 $0.30 $0.91 

Income Per Depositary Receipt From Discontinued Operations

 $0.00 $0.00 $0.00 $0.00 $0.01 
            

Net Income Per Depositary Receipt

 $0.16 $0.27 $0.20 $0.30 $0.92 
            
            


Nashoba Apartments LP
Statements of Income
(In Thousands)

 
 Years ended
December 31,
 
 
 2012 2011 2010 

Rental and other Income

 $462 $451 $450 
        

Operating Expenses

  241  260  261 

Interest Expense

  108  108  108 

Depreciation

  80  72  63 
        

Total Expenses

  429  440  432 
        

Net Income

 $33 $11 $18 
        

Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 18. 18—SUBSEQUENT EVENTS (Continued)

Nashoba Apartments LP
Cash Flow Information
(In Thousands)

 
 Years ended
December 31,
 
 
 2012 2011 2010 

Distributions from (to) Nashoba

 $1 $(72)$45 
        

Mortgage Notes Payable—Refinancing

        OnFrom January 1, 2014 through March 18, 2014, the Partnership purchased a total of 6,235 Depositary Receipts. The average price was $45.56 per receipt or $1,366.87 per unit. The total cost was $292,169. The Partnership is required to repurchase 49.36 Class B Units and 2.60 General Partnership Units at a cost of $67,470 and $3,551 respectively.

        In February 25, 2013,2014, the Partnership paid off the mortgage on Linewt in the amount of approximately $3,697,000 on Hamilton Cypress LLC.$1,465,813 and Linhart in the amount of $1,926,272. There waswere no penalty on the early payoff.prepayment penalties. The fundsPartnership's cash reserves were used to pay off the mortgage were from the Partnerships cash reserves.

        On March 11, 2013, the Partnership refinanced the property located at School Street. The new loan is $15,000,000 with an interest rate of 3.7% due in 2023. The loan calls for interest only for three years followed by principal and interest payments over the remainder of the loan term. The costs associated with this refinancing were approximately $159,000.

        Additionally, the Partnership is anticipating refinancing debt of approximately $28,000,000 in maturing debt for Boylston Downtown LP and Westgate Apartments LLC. In connection with this refinancing, the Partnership may borrow additional debt of approximately $29,000,000. These funds will be used for future acquisitions, repurchase of additional Depositary Receipts, improvements to its properties or other operating items.

Unaudited Pro Forma Financial Information

        Four of the Partnerships mortgaged properties have or will have changes to their mortgage debt during 2013. On February 25, 2013, the Partnership paid off the mortgage of approximately $3,697,000 on Hamilton Cypress LLC. On March 11, 2013, the Partnership refinanced the property held by School Street 9, LLC with a new mortgage loan in the amount of $15,000,000. For the balance of 2013, the Partnership is working towards refinancing the properties held by Boylston Downtown L.P. and Westgate Apartments, LLC. As of March 22, 2013 no firm commitment had been executed with a lender. However, the Partnership anticipates refinancing the existing Boylston Downtown loan of $19,500,000 with a new loan of $40,000,000 and refinancing the existing Westgate Apartments loan of approximately $7,932,000 with a new loan of $17,000,000. The cumulative effects of these financing activities are presented in the following unaudited pro forma financial statements.

        The following unaudited pro forma consolidated balance sheet as of December 31, 2012 has been prepared to give effect to the payoff and refinancing of mortgage debt occurring in the first quarter of 2013 and additional refinancing expected to occur during the balance of the year. The following unaudited pro forma balance sheet does not purport to reflect the actual transactions as the majority have yet to occur.mortgages.


Table of Contents


NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 20122013

NOTE 18. SUBSEQUENT EVENTS (Continued)

        The following unaudited pro forma consolidated statement of income for the twelve months ended December 31, 2012 has been prepared to give effect of the payoff and refinancing of mortgage debt occurring in the first quarter of 2013 and additional refinancing expected to occur during the balance of the year.

        The following unaudited pro forma financial statements have been prepared for informational purposes only and are not necessarily indicative of future results or actual results that would have been achieved had the Partnership structured its debt refinancing as presented.


New England Realty Associates Limited Partnership
Pro Forma Consolidated Balance Sheet
As of December 31, 2012
(Unaudited)

 
  
 Pro Forma 
 
 Historical
NERA
 Adjustments
Refinancings
 Consolidated
Totals
 

ASSETS

          

Rental Properties

 $95,435,850 $ $95,435,850 

Cash and Cash Equivalents

  6,981,906(a) 21,465,693  28,447,599 

Rents Receivable

  475,083    475,083 

Real Estate Tax Escrows

  449,652    449,652 

Prepaid Expenses and Other Assets

  3,073,890(b) 2,028,400  5,102,290 

Investments in Unconsolidated Joint Ventures

  13,986,173    13,986,173 

Financing and Leasing Fees

  1,135,936(c) 1,445,795  2,581,731 
        

Total Assets

 $121,538,490 $24,939,888 $146,478,378 
        

LIABILITIES AND PARTNERS' CAPITAL

          

Mortgage Notes Payable

 $138,055,522(d)$24,980,014 $163,035,536 

Accounts Payable and Accrued Expenses

  2,361,942    2,361,942 

Advance Rental Payments and Security Deposits

  3,636,704    3,636,704 
        

Total Liabilities

 $144,054,168 $24,980,014 $169,034,182 

Partners' Capital 130,444 units outstanding in 2012

  (22,515,678) (40,126) (22,555,804)
        

Total Liabilities and Partners' Capital

 $121,538,490 $24,939,888 $146,478,378 
        

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 18. SUBSEQUENT EVENTS (Continued)


New England Realty Associates Limited Partnership
Pro Forma Consolidated Statement of Income
For the Twelve Months Ended December 31, 2012
(Unaudited)

 
  
 Pro Forma 
 
 Historic
NERA
 Adjustments
Refinancing
 Consolidated
Totals
 

Revenues

          

Rental income

 $35,244,008 $ $35,244,008 

Laundry and sundry income

  388,401    388,401 
        

  35,632,409    35,632,409 
        

Expenses

          

Administrative

  1,825,951    1,825,951 

Depreciation and amortization

  6,092,725(e) 112,948  6,205,673 

Management fee

  1,446,620    1,446,620 

Operating

  3,633,619    3,633,619 

Renting

  183,529    183,529 

Repairs and maintenance

  5,179,408    5,179,408 

Taxes and insurance

  4,348,492    4,348,492 
        

  22,710,344  112,948  22,823,292 
        

Income Before Other Income and Discontinued Operations

  12,922,065  (112,948) 12,809,117 
        

Other Income (Loss)

          

Interest income

  2,216    2,216 

Interest expense

  (7,802,999)(f) 72,822  (7,730,177)

(Loss) from investments in unconsolidated joint ventures

  (1,487,484)   (1,487,484)

Other

       
        

  (9,288,267) 72,822  (9,215,445)
        

Income From Continuing Operations

  3,633,798  (40,126) 3,593,672 
        

Discontinued Operations

          

Income from discontinued operations

       

Gain on the sale of real estate from discontinued operations

       
        

       
        

Net Income

 $3,633,798 $(40,126)$3,593,672 
        

Income per Unit

          

Income before discontinued operations

 $27.69 $(0.31)$27.38 

Income from discontinued operations

       
        

Net Income per Unit

 $27.69 $(0.30)$27.38 
        

Weighted Average Number of Units Outstanding

  131,230  131,230  131,230 
        

Notes to unaudited pro forma consolidated balance sheet and consolidated statement of income:

(a)
Cash adjusted for new loan proceeds, existing loan payoff, financing fees, replacement reserves and changes to mortgage debt service.

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NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2012

NOTE 18. SUBSEQUENT EVENTS (Continued)

(b)
Replacement reserves required by new debt agreement

(c)
Change in prepaid financing fees between existing debt and refinanced debt

(d)
Difference between existing debt balance and refinanced debt balance

(e)
Increase in the amortization of the balance of prepaid finance costs for the existing debt and the proportionate share of prepaid finance costs for the refinanced debt

(f)
Decrease in mortgage interest expense between existing mortgage debt and refinanced debt

NOTE 19. 19—QUALIFYING ACCOUNTS

New England Realty Associates Limited Partnership

Valuation and Qualifying Accounts


  
 Additions  
  
   
 Additions  
  
 
Description
 Balance at
Beginning
of Period
 Charged to
Costs and
Expenses
 Charged to
other account
describe
 Deductions
Describe(a)
 Balance
at end
of Period
  Balance at
Beginning
of Period
 Charged to
Costs and
Expenses
 Charged to
other account
describe
 Deductions
Describe(a)
 Balance
at end
of Period
 

Year ended December 31, 2013:

           

Deducted from asset accounts:

           

Allowance for doubtful accounts

 380,708 189,946   226,849 343,805 

Year ended December 31, 2012:

            

Deducted from asset accounts:

            

Allowance for doubtful accounts

 448,119 190,032   257,443 380,708  448,119 190,032   257,443 380,708 

Year ended December 31, 2011:

            

Deducted from asset accounts:

            

Allowance for doubtful accounts

 482,518 265,807   300,206 448,119  482,518 265,807   300,206 448,119 

Year ended December 31, 2010:

 

Deducted from asset accounts:

 

Allowance for doubtful accounts

 475,684 374,597   367,763 482,518 

(a)
Uncollectible accounts written off

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP

 

 

By:

 

/s/ NEWREAL, INC.

Its General Partner

 

 

By:

 

/s/ RONALD BROWN

Ronald Brown,President

 

 

Dated: March 27, 201321, 2014

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

Signature
 
Title
 
Date

 

 

 

 

 
/s/ RONALD BROWN

Ronald Brown
 President and Director of the General Partner (Principal Executive Officer) March 27, 201321, 2014

/s/ HAROLD BROWN

Harold Brown

 

Treasurer and Director of the General Partner (Principal Financial Officer and Principal Accounting Officer)

 

March 27, 201321, 2014

/s/ GUILLIAEM AERTSEN

Guilliaem Aertsen

 

Director of the General Partner

 

March 27, 201321, 2014

/s/ DAVID ALOISE

David Aloise

 

Director of the General Partner

 

March 27, 2013

/s/ ROBERTA ORNSTEIN

Roberta Ornstein


Director of the General Partner


March 27, 201321, 2014

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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)

(10.10)

 

Purchase and sale agreement by and between Avon Street Apartments and 503-509 Pleasant Street, LLC.

(10.11)

 

Purchase and Sale Agreement dated May 20, 2011 by and between Battlegreen Apartments Trust and Hamilton Battle Green LLC(14).

(10.12)

 

Promissory Note dated June 1, 2011 by and between Avon Street Apartments Limited Partnership, as Maker, and Harold Brown, as Lender(15).

(10.13)

 

Pledge Agreement dated June 1, 2011 by and between Avon Street Apartments Limited Partnership, as Pledgor, and Harold Brown, as Pledgee(16).
(21)
(10.14)

 

Hamilton Green Purchase Agreement dated June 14, 2013

(10.15)


Loan Agreement dated July 15, 2013 complete description

(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)

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Exhibit No. Description of Exhibit
(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 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

(101.1)

 

The following financial statements from New England Realty Associates Limited Partnership Quarterly Report on Form 10-K for the year ended December 31, 20122013 formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Changes in Partners' Capital, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.

(1)
Incorporated by reference to Exhibit A to the Partnership's Statement Furnished in Connection with the Solicitation of Consents filed under the Securities Exchange Act of 1934 on October 14, 1986.

(2)
Incorporated herein by reference to Exhibit A to Exhibit 2(b) to the Partnership's Registration Statement on Form 8-A, filed under the Securities Exchange Act of 1934 on August 17, 1987.

(3)
Incorporated herein by reference to Exhibit 2(b) to the Partnership's Registration Statement on Form 8-A, filed under the Securities Exchange Act of 1934 on August 17, 1987.

(4)
Incorporated by reference to Notes 2 and 14 to Financial Statements included as part of this Form 10-K.

(5)
Incorporated by reference to Exhibit 2.1 to the Partnership's Current Report on Form 8-K dated June 30, 1995.

(6)
Incorporated herein by reference to Exhibit 10.1 to the Partnership's Current Report on Form 8-K dated January 11, 2008 and filed with the Securities and Exchange Commission on February 6, 2008.

(7)
Incorporated herein by reference to Exhibit 10.1 to the Partnership's Current Report on Form 8-K dated February 27, 2008 and filed with the Securities and Exchange Commission on March 4, 2008.

(8)
Incorporated herein by reference to Exhibit 10.1 to the Partnership's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2009.

(9)
Incorporated herein by reference to Exhibit 10.2 to the Partnership's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2009.

(10)
Incorporated herein by reference to Exhibit 10.3 to the Partnership's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2009.

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

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

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

(14)
Incorporated herein by reference to Exhibit 10.1 to the Partnership's Current Report on Form 8-K as filed with the Securities and Exchange Commission on May 26, 2011

(15)
Incorporated herein by reference to Exhibit 10.1 to the Partnership's Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 7, 2011.


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(16)
Incorporated herein by reference to Exhibit 10.2 to the Partnership's Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 7, 2011.

(17)
Incorporated by reference to Exhibit 10.1 to the Partnership's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on August 12, 2013.

(18)
Incorporated by reference to Exhibit 10.2 to the Partnership's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on August 12, 2013.