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 2021 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. Along with risks detailed in Item 1A and from time to time in the Partnership's filings with theSecurities 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:
The limited partnership depends on the real estate markets where its properties are
? located, mainly in
affected by local economic market conditions, which are beyond the Partnership's control.
The limited partnership is subject to general economic risks affecting the
? the real estate industry, such as dependence on the financial situation of tenants, the need
enter into new leases or renew leases on terms favorable to tenants in order to
generate rental income and our ability to collect rent from our tenants.
The limited partnership is also affected by changing economic conditions, which
alternative housing methods that are more or less attractive to the Partnership
? tenants, such as mortgage interest rates on single-family homes and
availability and purchase price of single-family homes in the
Metropolitan area.
The Partnership is subject to significant expenses associated with each
? investments, such as debt service payments, property taxes, insurance and
maintenance costs, which are generally not reduced when the circumstances
reduction in income from a property.
The Partnership is subject to increases in heating and utility costs which may
? arise due to economic and market conditions and fluctuations in
seasonal weather conditions.
? Civil unrest, earthquakes and other natural disasters can lead to
uninsured or underinsured losses.
? Actual or threatened terrorist attacks can affect our ability to
generate income and the value of our properties.
? Financing or refinancing of Partnership properties may not be available for the
necessary or desirable, or may not be available on favorable terms.
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Partnership properties face competition from similar properties in the same
? market. This competition may affect the ability of the limited partnership to attract and
retain tenants and may reduce the rents that may be charged.
Given the nature of the real estate activity, the limited partnership is subject to
potential environmental liabilities. These include environmental contamination
in the soil of the limited partnership or neighboring real estate, whether caused by
? the limited partnership, the former owners of the property in question or the neighbors of the
subject property, and the presence of hazardous materials in the limited partnership
such as asbestos, lead, mold and radon. Management is not aware
of any significant environmental liabilities at present.
Insurance coverage for and relating to commercial properties is increasingly
expensive and difficult to obtain. In addition, insurance companies have excluded
some specific elements of standard insurance policies, which have resulted in
? increased risk exposure to the Partnership. These include insurance coverage
for acts of terrorism and war, and cover for mold and other
conditions. Coverage for these items is not available or is prohibitively expensive
expensive.
? Market interest rates could adversely affect market prices for Class A
Limited partnership units and certificates of deposit as well as yield and cash flow.
Changes in income tax laws and regulations may affect taxable income to
? owners of the limited partnership. These changes may affect the after-tax value of
future allocations.
The limited partnership may not identify, acquire, construct or develop other
Properties; may develop or acquire properties that do not produce a
? expected return on invested capital; may be unable to sell underperforming products or
otherwise undesirable properties quickly; or may fail to integrate effectively
acquisitions of buildings or portfolios of buildings.
? Risk associated with the use of debt to finance acquisitions and developments.
? Competition for acquisitions can cause property prices to increase.
Any weakness identified in the Company’s internal controls within the framework of the
? the current assessment could have a negative effect on
business.
? Continued compliance with the Sarbanes-Oxley Act of 2002 may require
personnel or system 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. OnFebruary 24, 2019 ,Harold Brown , the owner of 75% of the outstanding voting securities ofNewReal Inc. , the general partner, ofNew England Realty Associates Limited Partnership passed away. As a result, Brown family related entities currently hold voting control over the NewReal shares.
Effective from
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electedJameson Brown as the Director, Treasurer and Chief Financial Officer of New Real to fill the vacancy created by the death ofHarold Brown , who served as both the Treasurer and a director of NewReal. Effective as ofMay 3, 2019 , the Board of Directors of the Partnership's general partner,New Real, Inc. electedAndrew Bloch as a member of the Board.Mr. Bloch is the Co-CEO and CFO of theHamilton Company, Inc. the Manager of the Partnership's properties.
Effective from
Approximately one year has passed since we became aware of the current outbreak of the COVID- 19, a novel strain of coronavirus. TheWorld Health Organization declaring a global pandemic onMarch 11, 2020 . OnMarch 10 , the governor ofMassachusetts ,Charlie Baker , had declared a state of emergency and ordered all non-essential businesses closed and prohibited the gathering of 10 or more people. Over time, the Governor's order has been modified, but restrictions are currently in place for the foreseeable future. Additionally, March of 2020 saw the closure of local colleges and universities for the balance of the academic year. Colleges in theCity of Boston and the surrounding communities are conducting classes for the 2020/2021 academic year remotely, or using a hybrid model of remote and limited in class learning. These educational models caused a large decrease in the student population in need of local housing and have resulted in significant vacancies in the Partnership's apartment portfolio. The government's measures put into place to combat the spread of the virus have caused significant disruptions to life and business operations inMassachusetts , the Country, and the World. The length and severity of the effects on the Partnership's business are unknown at this time. Rental collections for the fourth quarter for the Partnership's wholly owned properties were approximately 94% of rents due. Residential tenants paid approximately 95% of their rent and commercial tenants paid approximately 87% of theirs. Historically, commercial rents represent 5% of the Partnership's revenue. The rent collections for the Joint Ventures were approximately 95%. The fourth quarter's collections are not necessarily an indicator of future cash receipts. As ofDecember 31, 2020 , gross rents receivable was approximately$2,866,000 , 4.6% of rental income, an increase of approximately$647,000 over theSeptember 30, 2020 balance and$2,141,000 over theDecember 31, 2019 balance. The vacancy rate for the Partnership's residential properties as ofFebruary 1, 2021 was 6.2% as compared with a vacancy rate of 3.0% as ofFebruary 1, 2020 . The vacancy rate for the Joint Venture properties as ofFebruary 1, 2021 was 15.6%, as compared to 1.2% for the same period last year. Most of the vacancies for the Partnership's wholly owned properties are at62 Boylston Street which has 91 vacant units with a vacancy rate of 33.8%. At the Joint Venture propertiesDexter Park has 64 vacant units, or a vacancy rate of 15.6%, and 81Essex has 24 vacant units, or a vacancy rate of 49%. Both62 Boylston Street andDexter Park have historically had a high percentage of students. With the uncertainties with the economy and the timing of the re-opening of Colleges and Universities in the fall, the strength of the 2021 rental season is unknown. Inventory of unrented units remains higher than in past years and it is likely that the Partnership will have a high number of vacancies during the first half of 2021. In order to rent as many of these units as possible, management has reduced rent significantly and is offering up to two months free rent. Residential tenants generally have lease terms of 12 months. The majority of these leases will mature during the second and third quarters of the year. Given the current economic environment, it is not possible to estimate the amount of lease turnover we will experience, or the amount of increases or decreases from the current rental rates we will realize with lease renewals or new leases. However, we are currently offering reduced rental rates and significant rent concessions at certain properties. During the current state of emergency, TheHamilton Company , the Partnership's property manager, has taken steps to maintain the safety of its employees and tenants. Hamilton is providing essential services to ensure all properties are kept open, fully functioning, and safe. Hamilton has implemented a work from home policy with a skeleton staff present at all site offices to provide for property management, maintenance, leasing and construction services. Leasing is 30 Table of Contents limited to unoccupied units unless permission is granted by the current tenant and a web-based video technology is being used to remotely show apartments. Hamilton and the Partnership will continue to adjust their business practices to comply with Federal and State mandates for workplace and rental property operations. During the fourth quarter of 2020, rents increased on average 1.6% for renewals and decreased on average 12.3% for new leases. For all of 2020, renewal rents increased approximately 2.5% and decreased approximately 5.3% for new leases. As we enter 2021, due to the ongoing global coronavirus pandemic, management expects the local real estate market to remain soft and is expecting decreases in rent and more rental concessions. For the year endingDecember 31, 2020 , including the purchase ofMill Street , consolidated revenue increased by 2.7%, operating expenses increased by 9.1% and Income before Other Income (Expense) decreased by 13.3%. Excluding theMill Street acquisition, same store revenue decreased by 3.5%, operating expenses decreased by 3.1% and Income before Other Income (Expense) decreased by 4.7%. For the same reporting period, residential vacancy was 6.2% vs 3.0%. For 2020, excluding Depreciation and Amortization, same store revenues (excludingMill Street ) decreased by 3.5%, operating expenses decreased by 3.3% and Net Operating Income decreased by 3.7%.The Joint Ventures of 1025 Hancock andHamilton Bay in 2019 sold out all remaining residential condominium units. 1025 Hancock sold 2 remaining units for a gain of approximately$306,000 , andHamilton Bay sold its 3 remaining units at a gain of approximately$429,000 . The estimated profit to the Partnership for the sale of these units from 2014 through 2019 is approximately$7,168,000 . OnMarch 31, 2020 ,Nera Brookside Associates, LLC ("Brookside Apartments "), entered into a Mortgage Note withKeyBank National Associates (KeyBank ) in the principal amount of$6,175,000 . Interest only payments on the Note are payable on a monthly basis at a fixed interest rate of 3.53% per annum, and the principal amount of the Note is due and payable onApril 1, 2035 . The Note is secured by a mortgage on the Brookside apartment complex located at5-12 Totman Drive ,Woburn, Massachusetts pursuant to a Mortgage, Assignment of Leases and Rents and Security Agreement datedMarch 31, 2020 . The Note is guaranteed by the Partnership pursuant to a Guaranty Agreement datedMarch 31, 2020 .Brookside Apartments used the proceeds of the loan to pay off an outstanding loan of approximately$2,390,000 , with the remaining portion of the proceeds added to cash reserves. In connection with this refinancing, there were closing costs of approximately$136,000 . OnJuly 31, 2014 , the Partnership entered into an agreement for a$25,000,000 revolving line of credit. The term of the line is three years with a floating interest rate equal to a base rate of the greater of (a) the Prime Rate (b) the Federal Funds Rate plus one-half of one percent per annum, or (c) the LIBOR Rate for a period of one month plus 1% per annum, plus an applicable margin of 2.5%. The agreement originally expired onJuly 31, 2017 , and was subsequently extended untilOctober 31 , 2020.The costs associated with the line of credit extension were approximately$128,000 . Management continues to discuss with the lender the renewal of the line of credit for an additional three years. The Partnership paid an extension fee of approximately$37,500 in association with the extension. As ofDecember 31, 2020 , the credit line had an outstanding balance of$17,000,000 . See Note 5 for a description of the ongoing discussions with lender regarding renewal of the line of credit. OnDecember 20, 2019 ,Mill Street Gardens, LLC andMill Street Development, LLC , collectively referred to as Mill Street, wholly-owned subsidiaries ofNew England Realty Associates Limited Partnership (the "Partnership") closed on a Purchase Agreement dated as ofSeptember 27, 2019 withNinety-Three Realty Limited Partnership (the "Purchase Agreement") pursuant to which Mill Street acquiredCountry Club Garden Apartments , a 181 unit apartment complex located at57 Mill Street ,Woburn, Massachusetts (the "Property") for an aggregate purchase price of$59,550,000 . Mill Street funded$18,000,000 of the purchase price out of an existing line of credit,$10,550,000 of the cash portion of the purchase price out of cash reserves and the remaining$31,000,000 from the proceeds of the Loan. The closing costs were approximately$237,000 . From the purchase price, the Partnership allocated approximately$1,282,000 for in- place leases, and approximately$136,000 to the value of tenant relationships. These amounts are being amortized over 12 and 36 months respectively.
At
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initial advance of$31,000,000 and a subsequent advance of up to$4,000,000 if certain conditions are met. Interest on the Note is payable on a monthly basis at a fixed interest rate of: (i) 3.586% per annum with respect to the initial advance and (ii) the greater of (A) the sum of the market spread rate and the interpolated (based on the remaining term of the Loan)US Treasury rate at the time of the advance and (B) 3.500% with respect to any subsequent advance. The principal amount of the Note is due and payable onJanuary 1, 2035 . The Note is secured by a mortgage on the Property and is guaranteed by the Partnership pursuant to a Guaranty Agreement datedDecember 20, 2019 . OnMay 31, 2019 ,Residences at Captain Parker , LLC ("Captain Parker"), entered into a Mortgage Note withStrategy Funding Corp., LLC in the principal amount of$20,750,000 . Interest only payments on the Note are payable on a monthly basis at a fixed interest rate of 4.05% per annum, and the principal amount of the Note is due and payable onJune 1, 2029 . The Note is secured by a mortgage on the Captain Parker apartment complex located at125 Worthen Road andRyder Lane ,Lexington, Massachusetts pursuant to a Mortgage, Assignment of Leases and Rents and Security Agreement datedMay 31, 2019 . The Note is guaranteed by the Partnership pursuant to a Guaranty Agreement datedMay 31, 2019 .Captain Parker used the proceeds of the loan to pay off an outstanding loan of approximately$20,071,000 . In connection with this refinancing, the property incurred a prepayment penalty of approximately$202,000 . This expense is included in other expense on the consolidated statement of income. OnMarch 29, 2018 , the Partnership, through a wholly-owned subsidiary,Hamilton Highlands, LLC , purchasedWebster Green Apartments , a 79 unit apartment complex located at755-757 Highland Avenue ,Needham, Massachusetts . The purchase price of$34,500,000 was funded with$5,000,000 of cash,$8,000,000 drawn on the line of credit and the assumption of a$21,500,000 mortgage. Since acquiring the property, the Partnership has renovated the common areas, added energy efficient lighting to the hallways and parking areas and renovated two apartments. As part of the purchase contract, the seller was required to complete the construction of three new apartments and resurface the parking lot. OnMay 31, 2018 , the Investment Property,Hamilton Park Towers (Hamilton Park ) was refinanced for$125,000,000 with a 10 year term, interest only at a 3.99% fixed interest rate.Hamilton Park used the proceeds from the refinancing to pay off the existing mortgage of approximately$82,000,000 and distributed approximately$41,200,000 to its member owners. The Partnership's share of the distribution was approximately$16,500,000 . The proceeds from the refinancing ofHamilton Park were used to pay down the Partnership's existing Line of Credit from$25,000,000 to$5,000,000 . In October, the Partnership used excess cash reserves to pay down the balance by and additional$3,000,000 . As ofDecember 31, 2018 , the balance on the line
of credit was$2,000,000 . In association with this refinancing, there was a defeasance cost of approximately$3,830,000 . Based on its 40% ownership in the property, the Partnership incurred an expense of approximately$1,532,000 , which is accounted for in income from investments in unconsolidated joint ventures. The cash flow requirements of the new loan is approximately the same as that of the prior loan.
The share buyback program launched in 2007 made it possible to purchase 1,428,437 certificates of deposit through
In March of 2020, theBoard of Advisors and Board of Directors unanimously approved an extension of the Repurchase Program untilMarch 31, 2025 . Management believes that the$25,000,000 line of credit, net cash flow from operations and cash on hand have put the Partnership in position to capitalize on investment opportunities should they reveal themselves in the near future. As always, Management continues to weigh investment alternatives of stock repurchase, new property acquisitions and dispositions when considering its cash balances and performance of the portfolio. Given the economic uncertainty caused by the coronavirus issue, as ofApril 15, 2020 , the Partnership has elected to temporarily suspend the repurchase program.
The limited partnership retained the
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represent approximately 41% of the total properties and 48% 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
the Brown Family related entities. 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.
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 generally sign a one year lease. In 2020, tenant renewals
were approximately 71% with an average rental increase of approximately 2.5 %,
new leases accounted for approximately 29% with rental rate decreases of
approximately 5.3%. In 2020, leasing commissions were approximately $497,000
compared to approximately $578,000 in 2019, a decrease of approximately $81,000
(14.0%) from 2019. Tenant concessions were approximately $32,000 in 2020
compared to approximately $57,000 in 2019, a decrease of approximately 25,000
(43.9%). Tenant improvements were approximately $2,062,000 in 2020 compared to
approximately $2,636,000 in 2019, a decrease of approximately $574,000 (21.8%).
Hamilton accounted for approximately 2.2% of the repair and maintenance expense
paid for by the Partnership in the year ended December 31, 2020 and 4.3% in the
year ended December 31, 2019 . Of the funds paid to Hamilton for this purpose,
the great majority was to cover the cost of services 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 59.1% and 65.2% of the
legal services paid for by the Partnership during the years ended December 31,
2020 and 2019, respectively.
In addition, as described in note 3 to the consolidated financial statements, the
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 2020, Hamilton provided the Partnership approximately$668,000 in construction and architectural services, compared to$924,000 for the year endedDecember 31, 2019 . Bookkeeping and accounting functions have been provided by Hamilton's accounting staff, which consists of approximately 14 people. In 2020, 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 consolidated financial statements, in accordance with generally accepted accounting principles in
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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 straight-line basis over the term of the lease. Concessions made on residential leases 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 amounts are accounted for 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. InFebruary 2016 , theFinancial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 modifies the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract: the lessee and the lessor. ASU 2016-02 provides new guidelines that change the accounting for leasing arrangements for lessees, whereby their rights and obligations under substantially all leases, existing and new, are capitalized and recorded on the balance sheet. For lessors, however, the new standard remains generally consistent with existing guidance, but has been updated to align with certain changes to the lessee model and ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). Under this standard, the Partnership evaluates the non-lease components (lease arrangements that include common area maintenance services) with related lease components (lease revenues). If both the timing and pattern of transfer are the same for the non-lease component and related lease component, the lease component is the predominant component. The Partnership elected an allowed practical expedient. For (i) operating lease arrangements involving real estate that include common area maintenance services and (ii) all real estate arrangements that include real estate taxes and insurance costs, we present these amounts within lease revenues in our consolidated statements of income. We record amounts reimbursed by the lessee in the period in which the applicable expenses are incurred. We adopted this guidance for our interim and annual periods beginningJanuary 1, 2019 using the modified retrospective method, applying the transition provisions at the beginning of the period of adoption rather than at the beginning of the earliest comparative period presented. We elected the allowable practical expedients as permitted under the transition guidance, which allowed us to not reassess whether arrangements contain leases, lease classification, and initial direct costs. The adoption of the lease standard did not result in a cumulative effect adjustment recognized in the opening balance of retained earnings as ofJanuary 1, 2019 . The adoption of this standard does not have a material impact to the Partnership's financial statements. 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. The Partnership generally considers assets to be held for sale when the transaction has received appropriate corporate authority, and there are no significant contingencies relating to the sale. If, in management's opinion, the estimated net sales
price, net of
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selling costs, of assets that have been identified as held for sale is lower than the book value of the assets, a valuation allowance is made.
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 value 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.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. 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 analysis may not be achieved.
Investments in joint ventures: the limited partnership represents its 40% to 50% interest in investment properties using the equity method, because it exercises significant influence over them, but does not control them.
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entities. These investments are recorded initially at cost, as Investments in
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.
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 equity'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. 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's performance; and (2) the obligation to
absorb losses and rights to receive the returns from VIE that would be
significant to the VIE.
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 completed
The Partnership and its Subsidiary Partnerships earned income before interest expense, income from investments in unconsolidated joint ventures and other income and loss of approximately$14,969,000 during the year endedDecember 31, 2020 , compared to approximately$17,272,000 for the year endedDecember 31, 2019 , a decrease of approximately$2,303,000 (13.3%).
The rental activity is summarized as follows:
Occupancy Date
February 1, 2021 February 1, 2020
Residential
Units 2,911 2,911
Vacancies 181 87
Vacancy rate 6.2 % 3.0 %
Commercial
Total square feet 108,043 108,043
Vacancy 9,376 1,950
Vacancy rate 8.7 % 1.8 %
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Rental Income (in thousands)
Year Ended December 31,
2020 2019
Total Continuing Total Continuing
Operations Operations Operations Operations
Total rents $ 61,662 $ 61,662 $ 60,012 $ 60,012
Residential percentage 95 % 95 % 94 % 94 %
Commercial percentage 5 % 5 % 6 % 6 %
Contingent rentals $ 512 $ 512 $ 629 $ 629
Year ended
Year Ended December 31, Dollar Percent
2020 2019 Change Change
Revenues
Rental income $ 61,661,551 $ 60,012,174 $ 1,649,377 2.7%
Laundry and sundry income 441,159
465,140 (23,981) (5.2)%
62,102,710 60,477,314 1,625,396 2.7%
Expenses
Administrative 2,209,780 2,495,272 (285,492) (11.4)%
Depreciation and amortization 18,410,811 14,684,248 3,726,563 25.4%
Management fee 2,452,814 2,409,151 43,663 1.8%
Operating 5,766,160 5,682,264 83,896 1.5%
Renting 864,542 953,043 (88,501) (9.3)%
Repairs and maintenance 8,781,789 9,191,561 (409,772) (4.5)%
Taxes and insurance 8,647,781 7,790,008 857,773 11.0%
47,133,677 43,205,547 3,928,130 9.1%
Income Before Other Income (Expense) 14,969,033 17,271,767 (2,302,734) (13.3)%
Other Income (Expense)
Interest income 195 607 (412) (67.9)%
Interest expense (13,705,415) (12,201,966) (1,503,449) 12.3%
Income from investments in
unconsolidated joint ventures 160,715 1,678,554 (1,517,839) (90.4)%
Other Income (Expense) -
(201,710) 201,710 100.0%
(13,544,505) (10,724,515) (2,819,990) 26.3% Net Income$ 1,424,528 $
6,547,252
Rental income from continuing operations for the year endedDecember 31, 2020 was approximately$61,661,000 , compared to approximately$60,012,000 for the year endedDecember 31, 2019 , an increase of approximately$1,649,000 (2.7%). The major factor that can be attributed to this increase is the acquisition of Mill Street, which resulted in an increase in rental income of approximately$3,723,000 . Excluding he increase in rental income attributable to the acquisition of Mill Street of approximately$3,723,000 , rental income decreased by approximately$2,074,000 , (3.5%). Although rental income has increased at other properties, due to the effect of the Covid pandemic there have been a number of properties incurring a decrease in their rental income.The Partnership Properties with the largest increases in rental income includeHamilton Oaks , Westside Colonial, andRedwood Hills , with increases of approximately$179,000 ,$150,000 , and$127,000 , respectively. These are offset by certain properties with the largest decreases in rental income which include 62 Boylston, Hamilton Linewt, and 1131 Commonwealth, with decreases of approximately$1,168,000 ,$186,000 , and$130,000 , 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. Total expenses from continuing operations for the year endedDecember 31, 2020 were approximately$47,134,000 compared to approximately$43,206,000 for the year endedDecember 31, 2019 , an increase of approximately$3,928,000 (9.1%). Excluding the increase in operating expenses attributable to the acquisition of Mill Street of approximately$5,259,000 , operating expenses decreased approximately$1,331,000 (3.1%). Excluding Mill 37
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Street, factors which contributed to the decrease were a decrease in Repairs and Maintenance expense of approximately$708,000 , (7.7%), primarily due to a decrease in appliance and pool repairs, a decrease in Depreciation and Amortization expense of approximately$378,000 (2.6%), due to fully depreciated assets, and a decrease in Administrative expense of approximately$318,000 (12.8%), primarily due to a decrease in Legal fees, partially offset by an increase in Taxes and Insurance of approximately of$510,000 (6.6%). Interest expense for the year endedDecember 31, 2020 was approximately$13,705,000 compared to approximately$12,202,000 for the year endedDecember 31, 2019 , an increase of approximately$1,503,000 (12.3%). Excluding the increase in interest expense attributable to Mill Street of approximately$1,089,000 , there was an increase in interest expense of approximately$415,000 , (3.4%), primarily due to an increase in interest expense on the line of credit of approximately$678,000 , partially offset by a decrease in interest expense forCaptain Parker of approximately$144,000 , and Hamilton Highland of approximately$116,000 . AtDecember 31, 2020 , the Partnership has between a 40% and 50% ownership interests in seven 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 income from the Investment Properties was approximately$160,000 for the year endedDecember 31, 2020 , compared to a net income of approximately$1,678,000 for the year endedDecember 31, 2019 , a decrease in income of approximately$1,518,000 (90.4%). This decrease is primarily due to the reduction in the gain realized from the sales of condominium units of approximately$735,000 with the Partnership's share amounting to 50%, on the sale of 3 units atHamilton Bay Apartments LLC , and the sale of 2 units at Hamilton 1025Apartments LLC for the year endedDecember 31, 2019 , compared to no units sold for the year endedDecember 31, 2020 , and a decrease in Net Income atDexter Park from approximately$918,000 for the year endedDecember 31,2019 to approximately$105,000 for the year endedDecember 31, 2020 , a decrease of$813,000 (88.6%). Included in the income for the year endedDecember 31, 2020 is depreciation and amortization expense of approximately$2,609,000 . The proportional income for the year endedDecember 31, 2020 from the investment inDexter Park is approximately$105,000 .
Interest income for the year ended
compared to approximately
Due to the changes described above, net income for the year ended
Years completed
The Partnership and its Subsidiary Partnerships earned income before interest expense, income from investments in unconsolidated joint ventures and other income and loss of approximately$17,272,000 during the year endedDecember 31, 2019 , compared to approximately$14,918,000 for the year endedDecember 31, 2018 , an increase of approximately$2,353,000 (15.8%). 38
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The rental activity is summarized as follows:
Occupancy Date
February 1, 2020 February 1, 2019
Residential
Units 2,911 2,730
Vacancies 87 57
Vacancy rate 3.0 % 2.1 %
Commercial
Total square feet 108,043 108,043
Vacancy 1,950 1,360
Vacancy rate 1.8 % 1.3 %
Rental Income (in thousands)
Year Ended December 31,
2019 2018
Total Continuing Total Continuing
Operations Operations Operations Operations
Total rents $ 60,012 $ 60,012 $ 57,536 $ 57,536
Residential percentage 94 % 94 % 94 % 94 % Commercial percentage 6 % 6 % 6 % 6 % Contingent rentals$ 629 $ 629 $ 784 $ 784
Year ended
Year Ended December 31, Dollar Percent
2019 2018 Change Change
Revenues
Rental income $ 60,012,174 $ 57,535,734 $ 2,476,440 4.3%
Laundry and sundry income 465,140
478,330 (13,190) (2.8)%
60,477,314 58,014,064 2,463,250 4.2% Expenses Administrative 2,495,272 2,204,923 290,349 13.2% Depreciation and amortization 14,684,248 15,568,973 (884,725) (5.7)% Management fee 2,409,151 2,326,225 82,926 3.6% Operating 5,682,264 5,542,605 139,659 2.5% Renting 953,043 779,503 173,540 22.3%
Repairs and maintenance 9,191,561 9,187,714 3,847 0.0%
Taxes and insurance 7,790,008 7,485,749 304,259 4.1%
43,205,547 43,095,692 109,855 0.3%
Income Before Other Income ( Expense) 17,271,767 14,918,372 2,353,395 15.8%
Other Income (Expense)
Interest income 607 344 263 76.5%
Interest (expense) (12,201,966) (12,389,680) 187,714 (1.5)%
Income from investments in
unconsolidated joint ventures 1,678,554 1,640,054 38,500 2.3%
Other (Expense) Income (201,710) - (201,710) 100.0%
(10,724,515) (10,749,282) 24,767 (0.2)%
Net Income $ 6,547,252 $ 4,169,090 $ 2,378,162 57.0%
Rental income from continuing operations for the year ended December 31, 2019
was approximately $60,012,000 , compared to approximately $57,536,000 for the
year ended December 31, 2018 , an increase of approximately $2,476,000 (4.3%).
The factors that can be attributed to this increase are as follows: the
acquisition of Mill Street in 2019 and Hamilton Highland in 2018 resulted in an
increase in rental income of approximately $810,000 . In addition, rental income
has increased at a number of properties due to increased demand and increases in
rental rates of approximately 3.4%. The Partnership Properties with the most
significant increases in rental income include
39
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62 Boylston Street ,Hamilton Oaks ,Redwood Hills , Westside Colonial,Westgate Apartments , and 9School Street Associates , with increases of approximately$344,000 ,$163,000 ,$153,000 ,$139,000 ,$136,000 and$135,000 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. Total expenses from continuing operations for the year endedDecember 31, 2019 were approximately$43,206,000 compared to approximately$43,096,000 for the year endedDecember 31, 2018 , an increase of approximately$110,000 (0.3%). Excluding the increase in operating expenses attributable to the acquisition of Mill Street and Hamilton Highland of approximately$2,918,000 , operating expenses decreased approximately$442,000 (1.1%). Excluding Mill Street and Hamilton Highland, factors which contributed to the decrease were a decrease in Depreciation and Amortization expense of approximately$1,226,000 (8.8%), due to fully depreciated assets, partially offset by an increase in Administrative expense of approximately$288,000 (13.7%), primarily due to the installation of new property management software, an increase in Taxes and Insurance of approximately$202,000 (2.8%) and an increase in Renting expense of approximately$150,000 (20.5%). Interest expense for the year endedDecember 31, 2019 was approximately$12,202,000 compared to approximately$12,390,000 for the year endedDecember 31, 2018 , a decrease of approximately$188,000 (1.5%). Excluding the increase in interest expense attributable to Mill Street and Hamilton Highland of approximately$297,000 , there was a decrease in interest expense of approximately$485,000 , (4.1%), primarily due to the paydown of the line of credit. AtDecember 31, 2019 , the Partnership has between a 40% and 50% ownership interests in seven 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 income from the Investment Properties was approximately$1,679,000 for the year endedDecember 31, 2019 , compared to a net income of approximately$1,640,000 for the year endedDecember 31, 2018 , an increase in income of approximately$39,000 (2.3%). This increase is primarily due to a gain on the sale of real estate of approximately$735,000 in 2019 versus a gain of$4,411,000 , offset by a defeasance charge of$3,830,000 in 2018. Included in the income for the year endedDecember 31, 2019 is depreciation and amortization expense of approximately$2,587,000 . The proportional income for the year endedDecember 31, 2019 from the investment inDexter Park is approximately$918,000 .
Interest income for the year ended
compared to approximately
Due to the changes described above, net income for the year ended
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's principal sources of cash during 2020 were the collection of rents and the proceeds from the refinancing ofBrookside Apartments . In 2019, the principal sources of cash were the collection of rents and the proceeds from a mortgage for the purchase of Mill Street. The majority of cash and cash equivalents of$18,646,972 atDecember 31, 2020 and$7,546,324 atDecember 31, 2019 were held in interest bearing accounts at creditworthy financial institutions. 40 Table of Contents The increase in cash of$11,100,648 atDecember 31, 2020 is summarized as follows: Year EndedDecember 31, 2020 2019
Cash provided by operating activities$ 17,452,309 $ 22,448,895 Cash (used in) investing activities (1,715,408)
(29,277,643)
Cash provided by (used in) financing activities 433,532
14 062 201
Repurchase of Depositary Receipts, Class B and General Partner Units (394,031)
(4,050,137)
Distributions paid (4,675,754)
(4,696,893)
Net increase (decrease) in cash and cash equivalents
$ (1,513,577) The change in cash provided by operating activities is due to various factors, including recent acquisitions, a change in income and distribution from joint ventures, and other factors. The decrease in cash used in investing activities is primarily due to improvements in rental properties, partially offset by distributions from unconsolidated joint ventures. The change in cash used in financing activities is primarily due to the refinancing of the mortgage atBrookside Apartments , partially offset by the paydown of mortgages, and the pay down of the line of credit originally used for the purchase of Mill Street. During 2020, the Partnership and its Subsidiary Partnerships completed improvements to certain of the Properties at a total cost of approximately$3,240,000 . 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,62 Boylston Street , 1144 Commonwealth,Hamilton Oaks ,Captain Parker ,Hamilton Green , andRedwood Hills , at a cost of$697,000 ,$343,000 ,$331,000 ,$307,000 ,$257,000 , and$250,000 respectively. The Partnership plans to invest approximately$4,200,000 in capital improvements in 2021. OnMarch 31, 2020 ,Nera Brookside Associates, LLC ("Brookside Apartments "), entered into a Mortgage Note withKeyBank National Associates (KeyBank ) in the principal amount of$6,175,000 . Interest only payments on the Note are payable on a monthly basis at a fixed interest rate of 3.53% per annum, and the principal amount of the Note is due and payable onApril 1, 2035 . The Note is secured by a mortgage on the Brookside apartment complex located at5-12 Totman Drive ,Woburn, Massachusetts pursuant to a Mortgage, Assignment of Leases and Rents and Security Agreement datedMarch 31, 2020 . The Note is guaranteed by the Partnership pursuant to a Guaranty Agreement datedMarch 31, 2020 .Brookside Apartments used the proceeds of the loan to pay off an outstanding loan of approximately$2,390,000 , with the remaining portion of the proceeds added to cash reserves. In connection with this refinancing, there were closing costs of approximately$136,000 . OnDecember 20, 2019 ,Mill Street Gardens, LLC andMill Street Development, LLC , collectively referred to as Mill Street, wholly-owned subsidiaries ofNew England Realty Associates Limited Partnership (the "Partnership") closed on a Purchase Agreement dated as ofSeptember 27, 2019 withNinety-Three Realty Limited Partnership (the "Purchase Agreement") pursuant to which Mill Street acquiredCountry Club Garden Apartments , a 181 unit apartment complex located at57 Mill Street ,Woburn, Massachusetts (the "Property") for an aggregate purchase price of$59,550,000 . Mill Street funded$18,000,000 of the purchase price out of an existing line of credit,$10,550,000 of the cash portion of the purchase price out of cash reserves and the remaining$31,000,000 from the proceeds of the Loan. The closing costs were approximately$237,000 . From the purchase price, the Partnership allocated approximately$1,282,000 for in- place leases, and approximately$136,000 to the value of tenant relationships. These amounts are being amortized over 12 and 36 months respectively. OnDecember 20, 2019 , Mill Street Gardens entered into a Loan Agreement (the "Agreement") withInsurance Strategy Funding Corp. LLC providing for a loan (the "Loan") in the maximum principal amount of$35,000,000 , consisting of an initial advance of$31,000,000 and a subsequent advance of up to$4,000,000 if certain conditions are met. Interest on the Note is payable on a monthly basis at a fixed interest rate of: (i) 3.586% per annum with respect to the initial advance and (ii) the greater of (A) the sum of the market spread rate and the interpolated (based on the remaining term of the Loan)US Treasury rate at the time of the advance and (B) 3.500% with respect to any subsequent advance. The principal amount of the Note is due and payable onJanuary 1, 2035 . The Note is secured by a mortgage 41 Table of Contents
on the property and is guaranteed by the limited partnership under a guarantee agreement dated
OnMay 31, 2019 ,Residences at Captain Parker , LLC ("Captain Parker"), entered into a Mortgage Note withStrategy Funding Corp., LLC in the principal amount of$20,750,000 . Interest only payments on the Note are payable on a monthly basis at a fixed interest rate of 4.05% per annum, and the principal amount of the Note is due and payable onJune 1, 2029 . The Note is secured by a mortgage on the Captain Parker apartment complex located at125 Worthen Road andRyder Lane ,Lexington, Massachusetts pursuant to a Mortgage, Assignment of Leases and Rents and Security Agreement datedMay 31, 2019 . The Note is guaranteed by the Partnership pursuant to a Guaranty Agreement datedMay 31, 2019 .Captain Parker used the proceeds of the loan to pay off an outstanding loan of approximately$20,071,000 . In connection with this refinancing, the property incurred a prepayment penalty of approximately$202,000 . This expense is included in other expense on the consolidated statement of income. OnMarch 29, 2018 ,Hamilton Highlands, LLC , a wholly-owned subsidiary ofNew England Realty Associates Limited Partnership , purchasedWebster Green Apartments , a 79 unit apartment complex located at755-757 Highland Avenue ,Needham, Massachusetts . The sale was consummated pursuant to the terms of a Purchase and Sale Contract by and betweenWebster Green Apartments, LLC , the prior owner of the Property, andThe Hamilton Companies, Inc. , an affiliate of the Partnership, which agreement was subsequently assigned by Hamilton to the Purchaser. In connection with the purchase, Hamilton Highlands entered into an Assumption and Modification Agreement dated as ofMarch 29, 2018 withBrookline Bank pursuant to which Hamilton Highlands assumed a note dated as ofJanuary 14, 2016 in the principal amount of$21,500,000 and various agreements relating to the note including a Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing dated as ofJanuary 14, 2016 . The purchase price was$34,500,000 , consisting of a payment of approximately$13,000,000 in cash and the assumption of the note and mortgage. Hamilton Highlands funded$5,000,000 of the cash portion of the purchase price out of cash reserves and the remaining$8,000,000 by drawing on an existing line of credit. OnMarch 12, 2018 , the loan for659 Worcester Road was refinanced withBrookline Bank in the amount of$6,083,683 . The loan is due onMarch 12, 2023 . Interest only untilMarch 12, 2021 . Commencing in April, 2021, monthly payments of principal and interest in the amount of$32,427 are being made based on an assumed amortization period of thirty (30) years. The loan bears a fixed annual rate equal to 4.87%. The proceeds of the new loan were used to pay off the existing loan. The closing costs were approximately$69,000 . During the year endedDecember 31, 2020 , the Partnership received distributions of approximately$1,562,000 from the investment properties of which$900,000 was fromDexter Park . In 2020 the Partnership paid a total distribution of an aggregate$ 38.40 per Unit ($1.28 per Receipt) for a total payment of$4,675,754 in 2020. In 2019 the Partnership paid a total distribution of an aggregate$38.40 per Unit ($1.28 per Receipt) for a total payment of$4,696,893 in 2019. InJanuary 2021 , the Partnership approved a quarterly distribution of$9.60 per Unit ($0.32 per Receipt), payable onMarch 31, 2021 . OnJuly 31, 2014 , the Partnership entered into an agreement for a$25,000,000 revolving line of credit. The term of the line was for three years with a floating interest rate equal to a base rate of the greater of (a) the Prime Rate (b) the Federal Funds Rate plus one-half of one percent per annum, or (c) the LIBOR Rate for a period of one month plus 1% per annum, plus the applicable margin of 2.5%. The agreement originally expired onJuly 31, 2017 and was extended untilOctober 31, 2020 . The costs associated with the line of credit extension were approximately$128,000 . Management is currently working with the lender on a three year renewal of the line of credit. As ofDecember 31, 2020 , the Partnership had not completed the renewal and exercised a one year extension. The Partnership paid an extension fee of approximately$37,500 in association with the extension. See Note 5 for a description of the ongoing discussions with lender regarding renewal of the line of credit.
At
42
Table of Contents
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 Debt
As ofDecember 31, 2020 , the Partnership had a 40%-50% ownership interest in seven Joint Ventures, which all have mortgage indebtedness exceptHancock 1025, andHamilton Essex Development . We do not have control of these partnerships and therefore we account for them using the equity method of consolidation. AtDecember 31, 2020 , our proportionate share of the non-recourse debt before unamortized deferred financing costs related to these investments was approximately$71,025,000 . See Note 14 to the Consolidated Financial Statements.
Contractual obligations
As ofDecember 31, 2020 , we are subject to contractual payment obligations as described in the table below. Payments due by period 2021 2022 2023 2024 2025 Thereafter Total Contractual Obligations Long -term debt Mortgage debt$ 2,530,630 $ 2,697,120 $ 102,569,039 $
10 965 011
Line of Credit 17,000,000 - - - - - 17,000,000 Total Contractual Obligations$ 19,530,630 $ 2,697,120 $ 102,569,039 $
10 965 011
We have various standing or renewable service contracts with vendors related to our property management. In addition, we have certain other contracts we enter into in the ordinary course of business that may extend beyond one year. These contracts are not included as part of our contractual obligations because they include terms that provide for cancellation with insignificant or no cancellation penalties.
See Notes 5 and 14 to the Consolidated Financial Statements for a description of the mortgage notes payable. The Partnership has no other material contractual obligations to disclose.
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