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 June 30, 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
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements.
Balance Sheets - June 30, 1995 3
and December 31, 1994
Statements of Operations - Three and 4
Six Months Ended June 30, 1995 and
June 30, 1994
Statements of Changes in Partners' 5
Capital - Three Months Ended
June 30, 1995 and June 30, 1994
Statements of Cash Flows - Six Months 6
Ended June 30, 1995 and June 30, 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
<PAGE>
BALANCE SHEETS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
June 30, December 31,
1995 1994
(Unaudited)
____________ _____________
ASSETS
Rental Properties (Notes 1, 3 and 10) $ 55,256,969 $ 23,782,167
Deposit on Acquisition (Note 3) - 1,898,200
Cash and Cash Equivalents (Notes 1 and 6) 800,860 996,353
Short-term Investments (Notes 1 and 5) 47,399 45,555
Rents Receivable (Note 10) 588,063 643,104
Real Estate Tax Escrows 153,268 23,558
Prepaid Expenses and Other Assets (Note 4) 1,797,139 488,783
Investment in Joint Venture (Notes 1 and 5) 141,419 165,340
Financing and Leasing Fees (Note 1) 739,932 278,756
____________ ____________
TOTAL ASSETS $ 59,525,049 $ 28,321,816
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Mortgages Payable (Note 6) $ 50,388,784 $ 17,567,909
Note Payable - Related Party (Note 3) - 1,175,000
Accounts Payable and Accrued
Expenses 381,100 620,989
Advance Rental Payments and Security
Deposits (Notes 4 and 7) 586,909 556,939
____________ ___________
Total Liabilities 51,356,793 19,920,837
Commitments and Contingent
Liabilities (Note 9 and Note 12)
Partners' Capital (Note 8):
177,152 units outstanding 8,168,256 8,400,979
____________ ____________
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 59,525,049 $ 28,321,816
============ ============
See notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Unaudited) (Unaudited)
________________________ ________________________
Revenues:
Rental income (Notes 2
and 10) $ 2,274,773 $ 2,011,455 $ 4,519,007 $ 4,052,191
Laundry income 34,273 34,427 68,526 58,618
----------- ----------- ----------- -----------
2,309,046 2,045,882 4,587,533 4,110,809
----------- ----------- ----------- -----------
Expenses:
Administrative (Note 4) 171,080 170,261 314,689 280,815
Depreciation and
amortization 431,826 395,343 853,114 799,803
Interest 580,526 407,640 1,060,782 805,256
Management fees (Note 4) 96,652 82,906 198,853 169,031
Operating 191,010 202,964 470,807 539,556
Renting 42,240 34,468 72,189 68,522
Repairs & maintenance 422,013 376,784 745,012 640,260
Taxes & insurance 283,342 265,081 540,319 533,254
----------- ----------- ----------- -----------
2,218,689 1,935,447 4,255,765 3,836,497
----------- ----------- ----------- -----------
Income from Operations 90,357 110,435 331,768 274,312
----------- ----------- ----------- -----------
Other income(loss):
Interest income 13,775 13,677 25,023 24,684
Income(loss) from
investment in the joint
venture (Note 5) ( 748) 13,782 8,852 23,420
----------- ----------- ----------- -----------
13,027 27,459 33,875 48,104
----------- ----------- ----------- -----------
Net Income $ 103,384 $ 137,894 $ 365,643 $ 322,416
=========== =========== =========== ===========
Net Income per
Unit $ .58 $ .78 $ 2.06 $ 1.81
=========== =========== =========== ===========
Weighted Average Number
of Units Issued and
Outstanding (Note 8) 177,152 177,664 177,152 177,664
=========== =========== =========== ===========
See notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
Six Months Ended
June 30,
(Unaudited)
1995 1994
__________ __________
Cash Flows from Operating Activities:
Net income $ 365,643 $ 322,416
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 853,114 799,803
(Income) on investment in
partnerships & joint venture ( 8,852) ( 23,420)
Decrease in rents receivable 55,041 222,793
(Increase) in financing and
leasing fees ( 518,108) ( 8,017)
(Decrease) in accounts payable ( 239,889) ( 146,263)
Other items, net (1,407,139) ( 273,242)
__________ __________
Total Adjustments (1,265,833) 571,654
__________ __________
Net cash provided by (used in)
operating activities ( 900,190) 894,070
__________ __________
Cash Flows from Investing Activities:
Distribution from joint venture 32,773 36,980
Payment for purchase of rental
properties (30,375,585) ( 822,881)
Maturity of short-term investments - 793,787
Purchase of short-term investments - ( 395,555)
__________ __________
Net cash (used in) investing
activities (30,342,812) ( 387,669)
__________ __________
See notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (CONTINUED)
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
Six Months Ended
June 30,
(Unaudited)
1995 1994
___________ __________
Cash Flows from Financing Activities:
Principal payments and early
repayment of mortgages payable ( 3,256,125) ( 151,690)
Proceeds from refinancing of
Partnership properties 13,450,000 -
Decrease in notes payable to
related party ( 1,175,000) -
Distribution to partners ( 598,366) ( 601,356)
Increase in mortgages payable 22,627,000 -
Stock buyback (Note 8) - ( 33,520)
___________ ___________
Net cash provided by (used in)
financing activities 31,047,509 ( 786,566)
___________ ___________
Net (Decrease) in Cash and
Cash Equivalents ( 195,493) ( 280,165)
Cash and Cash Equivalents, Beginning 996,353 1,571,964
___________ ___________
Cash and Cash Equivalents, Ending $ 800,860 $ 1,291,799
=========== ===========
See notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
(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 257,933 61,259 3,224 322,416
Stock buyback (Note 8) - ( 31,860) ( 1,660) ( 33,520)
___________ ___________ __________ ___________
Balance, June 30, 1994 $ 6,598,840 $ 1,563,171 $ 82,287 $ 8,244,298
=========== =========== ========== ===========
Units authorized and
issued, net of 2,561
Treasury Units, at
June 30, 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 292,514 69,472 3,657 365,643
___________ ___________ __________ ___________
Balance, June 30, 1995 $ 6,531,670 $ 1,554,728 $ 81,858 $ 8,168,256
=========== =========== ========== ===========
Units authorized and
issued, net of 3,073
Treasury Units at
June 30, 1995 141,722 33,659 1,771 177,152
======= ====== ===== =======
See notes to financial statements
<PAGE>
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
<PAGE>
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:
June 30, December 31, Useful
1995 1994 Life
_____________ ___________ ____________
Land $ 7,538,599 $ 4,153,599 --
Buildings 49,499,354 20,649,836 25-31 years
Building improvements 9,372,675 9,426,477 15-31 years
Kitchen cabinets 1,294,555 1,270,295 5-10 years
Carpets 1,139,561 1,098,770 5-10 years
Air conditioning 135,455 135,455 7-10 years
Land improvements 427,163 423,414 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 152,268 140,909 5-7 years
Motor vehicles 79,816 78,842 5 years
Fences 99,748 96,447 5-10 years
Furniture and fixtures 106,127 98,594 5-7 years
Smoke alarms 42,083 42,083 5-7 years
___________ ___________
70,027,288 37,753,503
Less accumulated
depreciation 14,770,319 13,972,472
___________ ___________
$55,256,969 $23,781,031
=========== ===========
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 3--RENTAL PROPERTIES (CONTINUED)
On June 30, 1995, the Partnership purchased for $30,376,000 five properties
containing an aggregate of 809 residential apartments. The purchase was paid
for in part with the proceeds of the refinancing of nine of the Partnership's
properties and the issuance of new 8.375% mortgage notes payable aggregating
$22,627,000 and maturing in ten years. The properties were acquired from a
trust owned nominally by the majority shareholder of NERA's general partner.
In substance the properties were owned by the trust's secured lender under a
previous restructuring agreement whereby the lender received all of the
operating income from the properties as well as the proceeds from the sale
to NERA. The Partnership has recorded the purchase at the amount paid for
the properties.
Included in rental properties at June 30, 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 for a total purchase price of $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. 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 in December 1994. In
May 1995, the Partnership refinanced this property and obtained a mortgage
payable in 10 years with interest at 9.25%, and paid off the existing loan of
$1,175,000 to the management company.
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 $198,853 and $169,031 for the six months ended June 30, 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. In the second quarter of 1995,
approximately $42,000 was charged to NERA for legal, maintenance,
architectural services, and supervision of capital improvements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 4--RELATED PARTY TRANSACTIONS (CONTINUED)
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.
Included in prepaid expenses and other assets were amounts due from
related parties of $55,744 at June 30, 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 $44,783
at June 30, 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.
NOTE 5--INVESTMENTS
The short term investment totalling $47,399 at June 30, 1995 and $45,555 at
December 31, 1994 is carried at cost which approximates fair value. Such
investment at June 30, 1995 is a 6% certificate of deposit maturing in
February 1996. The issuer and amount of this investment is as follows:
June 30, December 31,
1995 1994
___________ __________
Citizens Bank - Certificate of deposit $ 47,399 $ 45,555
========== ==========
The carrying value of the Partnership's 50% interest in the Timpany Plaza
Joint Venture, at equity, is $141,419 and $165,340 at June 30, 1995 and
December 31, 1994, respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 5--INVESTMENTS (CONTINUED)
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 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 June 30, 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 8.25% to
10.99% and prime plus 1.5%, payable in monthly installments currently
aggregating approximately $422,000, including interest, to various dates
through 2005.
The Partnership has pledged tenant leases as additional collateral for
certain of its mortgages.
Approximate annual maturities are as follows:
1996 - current maturities $ 3,056,638
1997 912,219
1998 4,715,863
1999 510,637
2000 557,329
Thereafter 40,636,098
___________
$50,388,784
===========
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
principal payments are based on a fifteen year amortization. The mortgage
calls for additional principal payments of $250,000 each in July 1995 and
January 1996. The Partnership did not make the principal payment of $250,000
in July 1995. The Partnership intends to refinance the shopping mall located
in Lewiston, Maine in August 1995 and the bank granted the Partnership an
extension on this principal payment.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 6--MORTGAGES PAYABLE (CONTINUED)
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 June 30, 1995 the Partnership had on deposit the required
funds and was in compliance with the loan covenants.
Included in prepaid expense and other assets at December 31, 1994 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 deposit. 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:
Six Months Ended
June 30,
1995 1994
---- ----
Net Income Per Depositary Receipt $.21 $.18
==== ====
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 8--PARTNERS' CAPITAL (CONTINUED)
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).
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 1995, approximately 72% of rental income is related to residential
apartment and condominium units with leases of one year or less. The
remaining 28% is related to commercial properties which have minimum future
rental income on noncancellable operating leases as follows:
Commercial
Property
Leases Land Leases Total
1996 $1,347,168 $ 130,000 $1,477,168
1997 1,192,310 130,000 1,322,310
1998 1,007,918 130,000 1,137,918
1999 754,555 130,000 884,555
2000 531,480 130,000 661,480
Thereafter 2,126,681 1,625,833 3,752,514
__________ __________ __________
$6,960,112 $2,275,833 $9,235,945
========== ========== ==========
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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 10--RENTAL INCOME (CONTINUED)
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 June
30, 1995 and December 31, 1994 is $151,250 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.
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 approximately $9,000 and
$23,000 for the six months ended June 30, 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 $401,000 and $371,000 for the six
months ended June 30, 1995 and 1994 respectively.
NOTE 11--CASH FLOW INFORMATION
During the six months ended June 30, 1995 and 1994, cash paid for interest
was $1,114,582 and $796,108, 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP
NOTE 12--BANKRUPTCY OF RELATED PARTIES
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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
Results of Operations
Income from operations for the second quarter of 1995 was approximately
$90,000, compared to approximately $110,000 for the same period in 1994, a
decrease of approximately $20,000. For the six months ended June 30, 1995,
income from operations was approximately $332,000 compared to approximately
$274,000 for the same period in 1994, an increase of approximately $58,000. Net
cash used by operations during the six months ended June 30, 1995 was
approximately $900,000 compared to cash provided by operations of approximately
$894,000 during the same period in 1994, a decrease of approximately $1,794,000.
This change is due to the acquisition of rental properties in June 1995 which
required funding real estate tax escrow accounts and insurance reserves for
these properties. The Partnership also refinanced 9 properties in May and June
1995 and the prepaid financing fees related to the refinancing have also
affected the Partnership's cash flow.
Rental income during the second quarter of 1995 was approximately
$2,275,000 compared with approximately $2,011,000, for the same period in 1994,
an increase of approximately $264,000. For the six months ended June 30, 1995,
rental income was approximately $4,519,000 compared to approximately $4,052,000
for the same period in 1994, an increase of approximately $467,000. These rental
income increases are due primarily to the acquisition of a commercial building
in Newton, Massachusetts in January 1995, as well as increases in the occupancy
levels at the Westgate apartments in Woburn, the shopping mall in Lewiston,
Maine and the Timpany Plaza in Gardiner, Massachusetts.
Expenses for the second quarter of 1995 were approximately $2,219,000
compared to approximately $1,935,000 for the same period in 1994, an increase of
approximately $284,000. This increase reflects an increase in interest expense
of approximately $173,000 due to the significant increase in the mortgages
payable as a result of refinancing Partnership properties, as described above,
resulting in additional debt; an increase of approximately $45,000 in repairs
and maintenence expenses due to the ongoing repairs to the Partnership
properties; an increase of approximately $36,000 in depreciation and
amortization due to acquisitions and ongoing capital improvements to the
Partnership properties; an increase in taxes and insurance of approximately
$18,000 due to the additional real estate taxes and insurance on the Lincoln
Street property which was acquired in January 1995; and an increase in the
management fee of approximately $14,000 due to the increase in rental income.
<PAGE>
Expenses for the first six months of 1995 were approximately $4,256,000
compared with approximately $3,836,000 for the same period in 1994, an increase
of approximately $420,000. This represents an increase in interest expense of
approximately $256,000; an increase in repairs and maintenence expenses of
approximately $105,000; an increase in depreciation and amortization of
approximately $53,000; and an increase in the management fee of approximately
$30,000. The reason for the increase in these expenses are discussed in the
preceeding paragraph. These increases are offset by a decrease in operating
expenses of approximately $69,000 due to lower utility and snow removal costs as
a result of a milder winter in 1995.
Interest income for each of the three months ended June 30, 1995 and 1994
was approximately $14,000. Interest income for each of the six months ended June
30, 1995 and 1994 was approximately $25,000. This represents a decrease in the
cash available for investment offset by an 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
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 loss in the joint venture at the Timpany Plaza
Shopping Center was approximately $1,000 for the second quarter of 1995 compared
to income of approximately $14,000 for the second quarter of 1994. For the six
months ended June 30, 1995, the Partnership's share of income from the joint
venture at Timpany Plaza Shopping Center was approximately $9,000 compared to
approximately $23,000 for the same period in 1994. These decreases in income
represent an increase in the expenses, primarily the real estate taxes and the
common area charges, in connection with the joint venture.
As a result of the changes discussed above, net income for the three months
ended June 30, 1995 was $103,384 compared to $137,894 for the same period in
1994, a decrease of $34,510.
<PAGE>
Liquidity and Capital Resources
The Partnership's principal source of cash during 1995 and 1994 has been
the collection of rents and the refinancing of Partnerhip properties. The
majority of cash and cash equivalents totalling $800,860 at June 30, 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
purchased a short term investment valued at $47,399 at June 30, 1995 and $45,555
at December 31, 1994. This investment is a certificate of deposit which matures
in February 1996.
In June 1995, the Partnership acquired 5 buildings consisting of 809
residential units. The buildings were purchased from an entity in which the
majority shareholder of NERA's general partner had a substantial ownership
interest. The total purchase price for the 5 buildings was $30,376,000. The
Partnership obtained 5 individual mortgages which total $22,627,000. Each
mortgage has a maturity of 10 years with an interest rate of 8.375%. The balance
of $7,749,000 was paid in cash. In connection with this acquisition, the
Partnership refinanced 9 other Partnership properties for which it incurred
prepaid financing fees of approximately $498,000. The amount of this refinancing
was $13,450,000 of which approximately $3,000,000 was used to pay off the
existing debt and the remaining $10,450,000 was used in connection with the
acquisition of the new buildings. These transactions have had, and are expected
to continue to have, a negative impact on the Partnership's cash flow.
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 matures in February 1998. Interest is charged at 1.5%
over the prime rate and principal payments are based on a fifteen year
amortization. The mortgage calls for principal payments of $250,000 in July 1995
and January 1996. The Partnership did not make the principal payment in July
1995. The Partnership intends to refinance this property in August 1995 and the
bank granted the Partnership an extension on this principal payment. The loan
also contains certain covenants with which the Partnership must comply. The
Partnership was in compliance with these covenants at June 30, 1995. The
outstanding principal on the mortgage at June 30, 1995 was $4,935,303.
<PAGE>
During the second quarter of 1995, the Partnership completed certain
improvements to its properties at a total cost of approximately $349,000. 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 $150,000, as well as improvements of approximately $26,000 at
the shopping mall in Lewiston, Maine, approximately $23,000 at the River Drive
apartments in Danvers, Massachusetts and approximately $17,000 at the Timpany
Plaza Shopping Center in Gardiner, Massachusetts.
The Partnership plans to invest an additional $186,000 in capital
improvements at the Westgate apartments in Woburn, Massachusetts and an
additional $210,000 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 1995.
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 distribution of $3.38 per Partnership unit ($0.34
per depository receipt) during each of the six months ended June 30, 1995 and
1994.
<PAGE>
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.
On July 14, 1995, the Registrant filed a Form 8-K
Current Report dated June 30, 1995, including "Item 2.
Acquisition or Disposition of Assets" and "Item 7.
Financial Statements and Exhibits," with respect to its
acquisition of certain residential properties.
<PAGE>
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: August 11, 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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 800,860
<SECURITIES> 47,399
<RECEIVABLES> 588,063
<ALLOWANCES> 0
<INVENTORY> 0
<TOTAL-CURRENT-ASSETS> 3,386,729
<PP&E> 70,027,288
<DEPRECIATION> 14,770,319
<TOTAL-ASSETS> 59,525,049
<CURRENT-LIABILITIES> 968,009
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 8,168,256
<TOTAL-LIABILITY-AND-EQUITY> 59 525,049
<SALES> 4,519,007
<TOTAL-REVENUES> 4,587,533
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,194,983
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,060,782
<INCOME-PRETAX> 365,643
<INCOME-TAX> 0
<INCOME-CONTINUING> 365,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 365,643
<EPS-PRIMARY> 2.06
<EPS-DILUTED> 2.06
</TABLE>
