SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
_
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
- Exchange Act of 1934
For the quarterly period ended March 31, 1995 or
_
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to ___________
Commission file number 0-12138
New England Realty Associates Limited Partnership
(Exact name of registrant as specified in its charter)
Massachusetts 04-2619298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
39 Brighton Ave., Allston, Massachusetts 02134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 783-0039
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 X No
INDEX
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements.
Balance Sheets - March 31, 1995 3
and December 31, 1994
Statements of Operations - Three 4
Months Ended March 31, 1995 and
March 31, 1994
Statements of Changes in Partners' 5
Capital - Three Months Ended
March 31, 1995 and March 31, 1994
Statements of Cash Flows - Three Months 6
Ended March 31, 1995 and March 31, 1994
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of 17
Financial Condition and Results of
Operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 21
SIGNATURES 22
BALANCE SHEETS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
March 31, December 31,
1995 1994
(Unaudited)
____________ _____________
ASSETS
Rental Properties (Notes 1, 3 and 10) $ 25,496,880 $ 23,782,167
Deposit on Acquisition (Note 3) -- 1,898,200
Cash and Cash Equivalents (Notes 1 and 6) 864,368 996,353
Short-term Investments (Notes 1 and 5) 46,401 45,555
Rents Receivable (Note 10) 565,362 643,104
Real Estate Tax Escrows 41,714 23,558
Prepaid Expenses and Other Assets (Note 4) 490,648 488,783
Investment in Joint Venture (Notes 1 and 5) 157,197 165,340
Financing and Leasing Fees (Note 1) 282,688 278,756
____________ ____________
TOTAL ASSETS $ 27,945,258 $ 28,321,816
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Mortgages Payable (Note 6) $ 17,484,650 $ 17,567,909
Note Payable - Related Party (Note 3) 1,175,000 1,175,000
Accounts Payable and Accrued
Expenses (Note 5) 630,700 620,989
Advance Rental Payments and Security
Deposits (Notes 4 and 7) 590,036 556,939
____________ ___________
Total Liabilities 19,880,386 19,920,837
Commitments and Contingent
Liabilities (Note 9 and Note 12)
Partners' Capital (Note 8):
177,152 units outstanding 8,064,872 8,400,979
____________ ____________
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 27,945,258 $ 28,321,816
============ ============
See notes to financial statements.
STATEMENTS OF OPERATIONS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
Three Months Ended
March 31,
(Unaudited)
1995 1994
___________ ___________
Revenues:
Rental income (Notes 2 and 10) $ 2,244,234 $ 2,040,736
Laundry and sundry income 34,253 24,191
___________ ___________
2,278,487 2,064,927
___________ ___________
Expenses:
Administrative (Note 4) 143,609 110,554
Depreciation and amortization 421,288 404,460
Interest 480,256 397,616
Management fees (Note 4) 102,201 86,125
Operating 279,797 336,592
Renting 29,949 34,054
Repairs & maintenance 322,999 263,476
Taxes & insurance 256,977 268,173
___________ ___________
2,037,076 1,901,050
___________ ___________
Income from Operations 241,411 163,877
___________ ___________
Other Income:
Interest income 11,248 11,007
Income from investments in
partnerships and joint
venture (Note 5) 9,600 9,638
___________ ___________
20,848 20,645
___________ ___________
Net Income $ 262,259 $ 184,522
=========== ===========
Net Income per Unit (Note 8) $ 1.48 $ .96
=========== ===========
Weighted Average Number
of Units outstanding
(Note 8) 177,152 177,664
=========== ===========
See notes to financial statements.
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
Partners' Capital
_______________________________________________
Limited General
________________________ __________
Class A Class B Class C Total
___________ ___________ __________ ___________
Balance, January 1, 1994 $ 6,821,992 $ 1,648,030 $ 86,736 $ 8,556,758
Distributions to
Partners (Note 8) ( 481,085) ( 114,258) ( 6,013) ( 601,356)
Net Income 147,618 35,059 1,845 184,522
___________ ___________ __________ ___________
Balance, March 31, 1994 $ 6,488,525 $ 1,568,831 $ 82,568 $ 8,139,924
=========== =========== ========== ===========
Units authorized and
issued, net of 2,561
Treasury Units, at
March 31, 1994 142,131 33,756 1,777 177,664
======= ====== ===== =======
Balance, January 1, 1995 $ 6,717,849 $ 1,598,946 $ 84,184 $ 8,400,979
Distributions to
Partners (Note 8) ( 478,693) ( 113,690) ( 5,983) ( 598,366)
Net Income 209,807 49,829 2,623 262,259
___________ ___________ __________ ___________
Balance, March 31, 1995 $ 6,448,963 $ 1,535,085 $ 80,824 $ 8,064,872
=========== =========== ========== ===========
Units authorized and
issued, net of 3,073
Treasury Units at
March 31, 1995 141,722 33,659 1,265 177,152
======= ====== ===== =======
See notes to financial statements
STATEMENTS OF CASH FLOWS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
Three Months Ended
March 31,
(Unaudited)
1995 1994
__________ __________
Cash Flows from Operating Activities:
Net income $ 262,259 $ 184,522
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 421,288 404,460
(Income) on investment in ,
partnerships & joint venture ( 9,600) ( 9,638)
Decrease in rents receivable 77,742 218,225
(Increase) in financing and
leasing fees ( 27,108) ( 3,966)
(Decrease) in accounts payable ( 9,711) ( 34,952)
Other items, net 31,675 ( 177,744)
__________ __________
Total Adjustments 484,286 396,385
__________ __________
Net cash provided by operating
activities 746,545 580,907
__________ __________
Cash Flows from Investing Activities:
Distribution from joint venture 17,743 25,037
Payment for purchase of rental
properties - net ( 214,648) ( 196,964)
__________ __________
Net cash (used in) provided by
investing activities ( 196,905) ( 171,927)
__________ __________
STATEMENTS OF CASH FLOWS (CONTINUED)
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
Three Months Ended
March 31,
(Unaudited)
1995 1994
___________ __________
Cash Flows from Financing Activities:
Principal payments and early
repayment of mortgages payable ( 83,259) ( 74,146)
Distributions to partners ( 598,366) ( 601,356)
___________ ___________
Net cash (used in) financing
activities ( 681,625) ( 675,502)
___________ ___________
Net (Decrease) in Cash and
Cash Equivalents ( 131,985) ( 266,522)
Cash and Cash Equivalents, Beginning 996,353 1,571,964
___________ ___________
Cash and Cash Equivalents, Ending $ 864,368 $ 1,305,422
=========== ===========
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES ("NERA" OR THE "PARTNERSHIP")
Revenue Recognition: Certain leases of the commercial properties provide for
increasing stepped minimum rents which are accounted for on a straight-line
basis over the term of the lease.
Rental Properties: Rental properties are stated at cost less accumulated
depreciation. Maintenance and repairs are charged to expense as incurred;
improvements and additions are capitalized. When assets are retired or
otherwise disposed of, the cost of the asset and related accumulated
depreciation are eliminated from the accounts, and any gain or loss on such
disposition is included in income. Rental properties are depreciated on the
straight-line method over their estimated useful lives.
Investment in Joint Venture: The Partnership accounts for investment in the
joint venture on the equity method.
Financing and Leasing Fees: Financing fees are capitalized and amortized
over the life of the related mortgages. Leasing fees are capitalized and
amortized over the life of the related lease.
Income Taxes: The financial statements have been prepared under the basis
that NERA is entitled to tax treatment as a partnership. Accordingly, no
provision for income taxes on income has been recorded.
Cash Equivalents: The Partnership considers all highly liquid instruments
purchased with a maturity of three months or less to be cash equivalents.
Short Term Investments: The Partnership considers short term investments as
bank certificates of deposit, treasury obligations or commercial paper with
maturities between three and twelve months. These investments are considered
to be trading account securities and are carried at fair value.
Concentration of Credit Risks and Financial Instruments: The Partnership's
tenants 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 revenue in 1995 and 1994. The Partnership
invests its temporary cash investments with high credit quality financial
institutions or purchases U.S. Government backed commercial paper.
Basis of Presentation: The accompanying unaudited condensed financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management
the accompanying financial statements include all adjustments, consisting of
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES ("NERA" OR THE "PARTNERSHIP")
(CONTINUED)
normal recurring adjustments, necessary for a fair presentation of the
financial position, results of operations and changes in financial position
for the periods presented.
Please refer to the audited financial statements and footnotes thereto
included in the Partnership Annual Report on Form 10-K for the year ended
December 31, 1994.
NOTE 2--LINE OF BUSINESS
NERA was organized in Massachusetts during 1977. It owns and operates
various residential apartment buildings, condominium units and commercial
properties located in Massachusetts, Connecticut, New Hampshire and Maine.
NERA has also made investments in other real estate partnerships and has
participated in other real estate related activities primarily located in
Massachusetts.
NOTE 3--RENTAL PROPERTIES
Rental properties consist of the following:
March 31, December 31, Useful
1995 1994 Life
_____________ ___________ ____________
Land $ 4,538,599 $ 4,153,599 --
Buildings 22,189,836 20,649,836 25-31 years
Building improvements 9,574,857 9,426,477 15-31 years
Kitchen cabinets 1,276,866 1,270,295 5-10 years
Carpets 1,115,860 1,098,770 5-10 years
Air conditioning 135,455 135,455 7-10 years
Land improvements 427,143 423,414 10-31 years
Laundry equipment 80,592 79,490 5-7 years
Elevators 16,842 16,842 20 years
Swimming pools 42,450 42,450 10 years
Equipment 147,872 140,909 5-7 years
Motor vehicles 79,816 78,842 5 years
Fences 96,988 96,447 5-10 years
Furniture and fixtures 101,093 98,594 5-7 years
Smoke alarms 42,082 42,083 5-7 years
___________ ___________
39,866,351 37,753,503
Less accumulated
depreciation 14,369,471 13,972,472
___________ ___________
$25,496,880 $23,781,031
=========== ===========
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 3--RENTAL PROPERTIES (CONTINUED)
Included in rental properties at March 31, 1995 is a building in Newton,
Massachusetts acquired by the Partnership on January 25, 1995. The building
consists of 21,223 square feet of commercial space, 9 residential units and
29 parking spaces. The purchase price of this property was $1,925,000. This
building was acquired from an entity in which the majority shareholder of
NERA's general partner had a substantial ownership interest. The
Partnership's management company received a fee of approximately $11,000 from
the seller in this transaction.
On December 29, 1994, to facilitate this acquisition, the Partnership's
management company, an entity owned by the majority shareholder of NERA's
general partner, loaned the Partnership $1,175,000. The Partnership then
deposited a total of $1,898,200 with the closing attorneys. The $1,175,000
note payable to the Partnership's management company matures on December 31,
1995. Interest is payable monthly at the prime rate of 8 1/2% at date of
acquisition, and the note is collateralized upon acquisiton, by a mortgage on
the property. The Partnership is seeking to refinance the note with longer
term financing.
NOTE 4--RELATED PARTY TRANSACTIONS
The Partnership properties are managed by an entity which is owned by the
majority shareholder of the general partner (see Note 12). The management
fee is equal to 4% of rental revenue and laundry income. Total fees paid
were $102,201 and $86,125 for the three months ended March 31, 1995 and 1994,
respectively. Advance rental payments and security deposits are held in
escrow by the management company (see Note 7). The management company also
receives a mortgage servicing fee equal to an annual rate of 1/2% of the
monthly outstanding balance of mortgages receivable resulting from the sale
of property. There were no mortgage servicing fees paid in 1995 or 1994.
The Partnership Agreement also permits the general partner or management
company to charge the costs of professional services (such as counsel,
accountants, contractors) to NERA. Approximately $30,000 and $17,000 was
charged to NERA for legal, maintenance, architectural services, and
supervision of capital improvements for the three months ended March 31, 1995
and 1994, respectively. During the year ended December 31, 1994,
approximately $74,000 was capitalized in leasehold improvements and the
balance of $56,000 was included in administrative expense. Additionally in
1994, the Partnership paid to the management company $30,000 for accounting
services previously provided by an outside company.
The Partnership Agreement entitles the general partner or the management
company to receive commissions upon the sale of partnership property
only to the extent that total commissions do not exceed 3%. No such
commissions were paid in 1995 or 1994.
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 4--RELATED PARTY TRANSACTIONS (CONTINUED)
Included in prepaid expenses and other assets were amounts due from
related parties of $52,639 at March 31, 1995 and $55,582 at December 31, 1994
representing Massachusetts tenant security and prepaid rent deposits, which
are held for the Partnership by another entity also owned by one of the
shareholders of the general partner (see Note 7).
Also included in prepaid expenses and other assets is an insurance reserve
account funded by the Partnership and held by the management company. The
insurance reserve includes funds from other properties which are also
owned by the related parties. The balance in the reserve was $41,131
at March 31, 1995 and $39,212 at December 31, 1994.
See Note 10 for rental arrangements with the Timpany Plaza joint venture.
As described in Note 5, the Partnership has interests in certain entitites in
which the majority shareholder of the general partner is also involved.
See Note 13 for a subsequent event with a related party.
NOTE 5--INVESTMENTS
The short term investment totalling $46,401 at March 31, 1995 and $45,555 at
December 31, 1994 is carried at cost which approximates fair value. Such
investment at March 31, 1995 is a 6% certificate of deposit maturing in
February 1996. The issuer and amount of this investment is as follows:
March 31, December 31,
1995 1994
___________ __________
Citizens Bank - Certificate of deposit $ 46,401 $ 45,555
========== ==========
The carrying value of the Partnership's 50% interest in the Timpany Plaza
Joint Venture, at equity, is $157,197 and $165,340 at March 31, 1995 and
December 31, 1994, respectively.
The Partnership owns a 10% interest in four real estate partnerships
accounted for by the equity method and reduced to a carrying value of zero.
Losses in excess of cost in limited partnerships have not been recorded as
the Partnership is not liable for such amounts. The Partnership recorded a
$30,000 provision in 1990, representing the estimated liabilities allocable
to NERA in those partnerships where NERA is the general partner. No amounts
were paid as of December 31, 1994 and this provision was eliminated and
included in other income in 1994.
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 5--INVESTMENTS (CONTINUED)
The majority shareholder of the general partner is also the majority owner of
these partnerships (see Note 12). There can be no assurance that any of
NERA's partnership investments will be realizable in the future in excess of
their carrying value.
NOTE 6--MORTGAGES PAYABLE
At March 31, 1995 and December 31, 1994, the mortgages payable consisted of
various loans, substantially all of which were secured by first mortgages, on
rental properties referred to in Note 3, with interest ranging from 8.5% to
10.99% and prime plus 1.5%, payable in monthly installments currently
aggregating approximately $168,000, including interest, to various dates
through 2002.
The Partnership has pledged tenant leases as additional collateral for
certain of its mortgages.
Approximate annual maturities are as follows:
1996 - current maturities $ 4,736,040
1997 606,175
1998 5,004,349
1999 115,950
2000 127,762
Thereafter 6,894,374
___________
$17,484,650
===========
In September 1994 the Partnership refinanced the mortgage on the shopping
mall in Lewiston, Maine. The new loan of $5,060,000 is collateralized by the
Lewiston Mall and the Clovelly apartments in Nashua, New Hampshire. The loan
matures in February 1998. Interest is charged at 1.5% over the prime rate
and principle payments are based on a fifteen year amortization. The
mortgage calls for additional principle payments of $250,000 each in
July 1995 and January 1996. This loan contains certain covenants, including
an aggregate debt service coverage on the mortgaged properties of no less
than 1.3 to 1, a loan to value ratio of no greater than 70%, or have on
deposit funds at the lender bank which is adequate to cover any shortfall; a
minimum partnership net worth of $7,000,000 and minimum partnership cash and
cash equivalents of $700,000. As of March 31, 1995 the Partnership had on
deposit the required funds and was in compliance with the loan covenants.
Although there are no restrictions on the Partnership's ability to use its
cash accounts, approximately $285,000 of cash on deposit at March 31, 1995
was considered as having been utilized to satisfy the covenants.
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 6--MORTGAGES PAYABLE (CONTINUED)
Included in prepaid expense and other assets at March 31, 1995 is
$140,000 not yet received on a previously refinanced mortgage. This amount
was collected in April 1995 as a result of the completion of certain
improvements to the property underlying the mortgage.
NOTE 7--ADVANCE RENTAL PAYMENTS AND SECURITY DEPOSITS
The lease agreements for certain properties require tenants to maintain
a one-month advance rental payment and security deposits. The funds are held
in escrow by another entity owned by the majority shareholder of the general
partner (see Notes 4 and 12).
NOTE 8--PARTNERS' CAPITAL
The Partnership has two categories of limited partners (Classes A and B)
and one category of general partner (Class C). Under the terms of the
Partnership Agreement, Classes B and C 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.
The Partnership declared distributions of $3.38 per unit in the first
quarters of 1995 and 1994 respectively.
The Partnership has entered into a deposit agreement with a bank to
facilitate public trading of limited partners' interests in Class A units.
Under the terms of this agreement, the holders of Class A units have the
right to exchange each Class A unit for ten depositary receipts. The
following is information of the net income per depositary receipt:
Three Months Ended
March 31,
1995 1994
---- ----
Net Income Per Depositary Receipt $.15 $.10
==== ====
In March 1993, the Partnership announced that it would offer to purchase
Depositary Receipts from all holders of less than 100 Depositary Receipts.
A total of 23,391 depositary receipts were purchased at $5 per receipt. In
1994 the Class A, B, and C units were restored to the required percentage
relationship mentioned above by the purchase of B and C units at $50 per
unit ($5 per receipt).
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 9--COMMITMENTS AND CONTINGENCIES
From time to time, the Partnership is involved in various ordinary routine
litigation incidental to its business. The Partnership is not involved in
any material pending legal proceedings.
NOTE 10--RENTAL INCOME
In 1994, approximately 74% of rental income is related to residential
apartment and condominium units with leases of one year or less. The
remaining 26% is related to commercial properties which have minimum future
rental income on noncancellable operating leases as follows:
Commercial
Property
Leases Land Leases Total
1996 $ 1,525,000 $ 130,000 $ 1,655,000
1997 1,352,000 130,000 1,482,000
1998 1,200,000 130,000 1,330,000
1999 949,000 130,000 1,079,000
2000 709,000 130,000 839,000
Thereafter 4,564,000 1,625,833 6,189,833
___________ __________ ___________
$10,299,000 $2,275,833 $12,574,833
=========== ========== ===========
In August 1988, the Partnership entered into a land lease agreement, with an
existing tenant, in the Timpany Shopping Plaza Center in Gardner,
Massachusetts. As part of this lease, the tenant, at its cost, demolished
approximately one-third of the mall and replaced it with a new store of
comparable size. The minimum fixed term of this lease is for 20 years which
commenced with the opening of the new store in December 1989. The minimum
annual rents are $110,000 per year for the first five years and increase each
subsequent five-year period with the average being $137,500 per year for the
minimum twenty-year term. Included in rents receivable at March 31, 1995
and December 31, 1994 is $144,375 and $137,500, respectively, representing
the deferred rental income of $27,500 per year from this lease. There are
also contingent rents based upon sales volume, common area maintenance, and
other charges. This lease also provides for six extension periods of five
years each at increased rents. The minimum rents pertaining to this agreement
are reflected in the foregoing table.
The ownership of this new building addition transfers to the Partnership at
the termination of the lease. Accordingly, the Partnership included in
property assets approximately $1,400,000 of book value of the demolished
building allocable to the Partnership leasehold interest and is depreciating
this amount on a straight-line basis over a 20-year period.
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 10--RENTAL INCOME (CONTINUED)
Concurrently, the Partnership entered into a joint venture with this same
tenant relating to the space formerly leased by the tenant. Under this
arrangement, the two parties have agreed to relet space and divide the net
income or loss after paying to the Partnership an annual minimum rent of
$84,546. The Partnership's share of income was $9,600 and $9,638 for the
three months ended March 31, 1995 and 1994 respectively.
The aggregate minimum future rental income does not include contingent
rentals which may be received under various leases in connection with
percentage rents, common area charges and real estate taxes. Aggregate
contingent rentals were approximately $170,456 and $166,124 for the three
months ended March 31, 1995 and 1994 respectively.
NOTE 11--CASH FLOW INFORMATION
During the three months ended March 31, 1995 and 1994, cash paid for interest
was $469,277 and $396,550, respectively.
NOTE 12--BANKRUPTCY OF RELATED PARTIES
As described in notes 4, 5 and 7, the Partnership had transactions with and
has interests in certain entities in which the majority shareholder of the
general partner is involved. Such shareholder had guaranteed certain notes
receivable and had agreed to indemnify the Partnership for losses incurred
from certain partnerships in which New England Realty Associates Limited
Partnership is a general partner. During March 1991, this shareholder, the
Partnership's management company, and other related entities filed for
protection from their creditors under Chapter 11 of the Federal Bankruptcy
Code.
In September 1992, the U.S. Bankruptcy Court confirmed a reorganization plan
pursuant to which this shareholder was discharged of all liabilities
including all guarantees and indemnifications.
Certain of the partnership investments described in Note 5 are subject to
restructuring stipulations with their respective lenders. There can be no
assurance that the investment partnerships will realize any future value.
As part of the restructuring, management of the NERA properties was
transferred to a newly formed partnership owned 1% by the majority
shareholder of NERA's general partner. In August 1993, this majority
shareholder purchased the other 99% ownership interest.
The management of the Partnership believes that the proceedings described
above will not adversely affect the Partnership's properties or operations.
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 13--SUBSEQUENT EVENTS
In April 1995, the Partnership entered into an agreement to purchase
5 buildings located in Massachusetts. The properties consist of 809
residential units for a total purchase price of $30,000,000. The Partnership
plans to finance the purchase with a mortgage of $23,000,000 on the new
property and refinance the existing Partnership properties for a total of
$9,000,000. The excess funds will be used in conjunction with a planned
5 year capital improvement program. These properties are part of a loan pool
which is being sold by a national bank and are presently managed by an entity
which is owned by the majority shareholder of the general partner.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Results of Operations
Income from operations for the first quarter of 1995 was approximately $241,000,
compared to approximately $164,000 for the same period in 1994, an increase of
approximately $77,000. Net cash provided by operations during the three months
ended March 31, 1995 was approximately $746,000 compared to approximately
$581,000 during the same period in 1994, an increase of approximately $165,000.
This increase in net cash provided by operations is due to an increase in income
from operations, as well as an increase in advance rental payments and security
deposits.
Rental income during the first quarter of 1995 was approximately $2,244,000
compared with approximately $2,041,000 for the same period in 1994, an increase
of approximately $203,000. This increase is due to an increase in the rental
rates at the residential properties, as well as the acquisition of the Linhart
property in the first quarter of 1995.
Expenses for the first quarter of 1995 were approximately $2,037,000 compared to
approximately $1,901,000 for the same period in 1994, an increase of
approximately $136,000. This increase reflects an increase in interest expense
of approximately $82,000 due the additional debt associated with the acquisition
of the Linhart property; an increase in repairs and maintenance expenses of
approximately $60,000 due to efforts to improve the properties and maintain the
occupancy levels; an increase in administrative expenses of approximately
$33,000 due to increases in professional fees; and an increase in the management
fee of approximately $16,000 in relation to the increase in rental income. These
increases are offset by a decrease in operating expenses of approximately
$57,000 due to a decrease in the utility costs as well as snow removal due to a
milder winter in 1995.
Interest income for each of the three months ended March 31, 1995 and 1994 was
approximately $11,000. This reflects the slight decrease in cash available for
investment, offset by the increase in the interest rates.
Investment in partnerships and the Timpany Plaza joint venture represents NERA's
interest in commercial real estate not wholly-owned by the Partnership. NERA is
not liable for losses in excess of its investment in limited partnerships in
which it is a limited partner. NERA's investment in the partnerships has been
reduced to zero due to losses incurred
since the time of the investment. There has been no loss recorded on the
investment in the partnerships since 1991. The Partnership's investment in
the Timpany Plaza joint venture represents less than 1% of NERA's assets.
The Partnership's share of income in the joint venture at the Timpany Plaza
Shopping Center was approximately $9,600 for the first quarters of 1995 and
1994. This reflects a level of stability both with the occupancy levels as well
as the operating expenses.
As a result of the changes discussed above, net income for the three months
ended March 31, 1995 was $262,259 compared to $184,522 for the three months
ended March 31, 1994.
Liquidity and Capital Resources
The Partnership's principal source of cash during the first quarter of 1995 and
the year ended December 31, 1994 has been the collection of rents and the
refinancing of a Partnership property. The majority of cash and cash equivalents
totalling $864,368 at March 31, 1995 and $996,353 at December 31, 1994 is
invested in commercial paper and certificates of deposit maturing in less than
90 days. Additionally, the Partnership has purchased a short term investment
totalling $46,401 at March 31, 1995 and $45,555 at December 31, 1994. This
investment is a certificate of deposit with a maturity one year from the date of
purchase.
In January 1995, the Partnership acquired a property in Newton, Massachusetts.
The purchase price was $1,925,000. The purchase price was funded from cash
reserves as well as a loan of $1,175,000 from an entity owned by a majority
shareholder of NERA's general partner. This property, referred to as Linhart,
consists of a building with both commercial and residential units, as well as 29
outdoor parking spaces. The Partnership did not sell any properties in 1994 or
1995.
In April 1995, the Partnership entered into an agreement to purchase 5 buildings
which consists of 809 residential units located in Massachusetts. The purchase
price is $30,000,000. These properties are part of a loan pool which is being
sold by a national bank and are presently managed by an entity which is owned by
the majority shareholder of NERA's general partner. The Partnership intends to
finance the purchase with a mortgage of $23,000,000 on the new property and
refinance the existing Partnership properties for a total of $9,000,000. The
excess funds will be used in conjunction with a planned 5 year capital
improvement program.
In September 1994, the Partnership refinanced the mortgage on the shopping mall
in Lewiston, Maine. The new loan of $5,060,000 is collateralized by the shopping
mall in Lewiston, Maine and the Clovelly apartments in Nashua, New Hampshire.
The new loan calls for principal payments of $250,000 in July 1995 and $250,000
in January 1996. Interest is charged at 1.5% over the prime rate and principal
payments are amortized over 15 years. The loan also contains certain covenants
with which the Partnership must comply. The Partnership is in compliance with
these covenants at March 31, 1995 and December 31, 1994. The outstanding
principal on the mortgage at March 31, 1995 is $4,973,187.
In connection with the refinancing of the mortgage on the Westgate apartments in
July 1992, the bank is holding $140,000 in anticipation of repairs to the
mortgaged property. The bank is satisfied that the required improvements were
completed and the funds were released to the Partnership in April 1995.
During the first quarter of 1995, the Partnership completed certain improvements
to its properties at a total cost of approximately $188,000. These improvements
were funded from cash reserves. The most significant improvements were made at
the Westgate apartments in Woburn, Massachusetts for a total cost of
approximately $103,000, as well as approximately $17,000 at the shopping mall in
Lewiston, Maine, and approximately $16,000 each at the Timpany Plaza in Gardner,
Massachusetts and River Drive apartments in Danvers, Massachusetts.
The Partnership plans to invest an additional $300,000 in capital improvements
at the Westgate apartments in Woburn, Massachusetts and approximately $180,000
at the shopping mall in Lewiston, Maine. These improvements will be funded from
cash reserves.
The Partnership anticipates that available cash and interest-bearing
investments, collection of rents, and proceeds from the sale and refinancing of
Partnership properties will be sufficient to finance future routine improvements
to properties, as well as overall operations for the remainder of 1994.
Unanticipated increases in expenses or a loss of a significant tenant could have
a negative impact on the Partnership's cash flow.
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 the cash required for such
acquisition is not available as needed, the General Partner will consider
refinancing mortgaged properties which have lower debt-to-equity ratios in order
to raise the necessary cash. The General Partner will also consider refinancing
mortgaged properties in the event there is insufficient cash available from cash
reserves to repay such obligations as they mature. NERA's net income may
fluctuate dramatically from year to year as a result of the acquisition or sale
of properties.
The Partnership paid a distributions totaling $3.38 per Partnership unit ($0.34
per depository receipt) during each of the three months ended March 31, 1995 and
1994.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K.
No Current Reports on Form 8-K were filed during
the quarter ended March 31, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
NEW ENGLAND REALTY ASSOCIATES
LIMITED PARTNERSHIP
By: NEWREAL, INC.,
its General Partner*
Date: May 12, 1995 By: /s/ Ronald Brown
Ronald Brown,
President
*Functional equivalent of Chief
Executive Officer, Principal
Financial Officer and Principal
Accounting Officer.
EXHIBIT INDEX
Exhibit Number and Title Page No.
Exhibit 27 -- Financial Data Schedule