NOTE 5. MORTGAGE NOTES PAYABLE

Mortgages Payable

At December 31, 2015 and 2014, the mortgages payable consisted of various loans, all of which were secured by first mortgages on properties referred to in Note 2. At December 31, 2015, the interest rates on these loans ranged from 3.76% to 5.97%, payable in monthly installments aggregating approximately $808,000, including principal, to various dates through 2029. The majority of the mortgages are subject to prepayment penalties. At December 31, 2015, the weighted average interest rate on the above mortgages was 4.81%. The effective rate of 4.92% includes the amortization expense of deferred financing costs. See Note 12 for fair value information. The Partnership’s mortgage debt and the mortgage debt of its unconsolidated joint ventures generally is non‑recourse except for customary exceptions pertaining to misuse of funds and material misrepresentations.

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

Approximate annual maturities at December 31, 2015 are as follows:


2016—current maturities	$	1,183,000
2017		1,782,000
2018		7,860,000
2019		1,942,000
2020		4,343,000
Thereafter		178,829,000
	$	195,939,000

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

On March 11, 2013, the Partnership refinanced the property owned by School Street 9 LLC. The new loan is $15,000,000 with an interest rate of 3.76% due in 2023. The loan calls for interest only for three years followed by principal and interest payments over the remainder of the loan term. Principal payments will be on a 30 year amortization schedule. The Partnership paid off the prior mortgage in the amount of approximately $15,284,000 with the proceeds of the new mortgage and the Partnership’s cash reserves. The costs associated with this refinancing were approximately $159,000.

On July 7, 2013, the Partnership refinanced the property owned by Boylston Downtown LP. The new 15 year $40,000,000 mortgage has an interest rate of 3.97%. The terms of the loan are interest only for the first three years, with a 30 year amortization thereafter until maturity in August 2028. Approximately $19,500,000 of loan proceeds was used to pay off the existing mortgage. The balance of the funds, approximately $20,000,000, after closing costs, was used in connection with the purchase of Hamilton Green Apartments. The costs associated with this refinancing are approximately $279,000.

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

On December 20, 2013, the Partnership refinanced the property owned by Hamilton Green Apartments LLP. The new mortgage is $38,500,000; the interest rate is 4.67%; interest only for 2 years. After the first two years, principal is amortized on a 30‑year amortization schedule through January 2029. The proceeds of the new mortgage as well as the Partnership’s cash reserves of approximately $1,846,000 were used to pay off the prior mortgage of $40,000,000 and cover the cost of this refinancing. The costs associated with the refinancing were approximately $346,000.

In February 2014, the Partnership paid off the mortgages on Linewt in the amount of approximately $1,466,000 and Linhart in the amount of approximately $1,926,000. There were no prepayment penalties. The Partnership’s cash reserves were used to pay off these mortgages.

On June 11, 2014, the Partnership refinanced the property owned by NERA Dean Street Associates, LLC. The new mortgage is $5,687,000; the interest rate is 4.22%, interest only payable in 10 years. Approximately $5,077,000 of the loan proceeds were used to pay off the existing mortgage. The mortgage matures in June 2024. The costs associated with the refinancing were approximately $89,000.

On July 11, 2014, the Partnership refinanced the property owned by Westgate Apartments Burlington, LLC. The new mortgage is $2,500,000; the interest rate is 4.31%; interest only, payable in 10 years. Approximately $2,010,000 of loan proceeds were used to pay off the existing mortgage. The mortgage matures in August, 2024. The costs associated with the refinancing were approximately $75,000.

Line of Credit

On July 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 the applicable margin of 2.5% . The costs associated with the line of credit were approximately $125,000. As of December 31, 2015, the credit line had a balance of $25,000,000. The interest rate on the line of credit at December 31, 2015 is 3.875%.

On September 15, 2015, the Partnership, in connection with the purchase of the Residence at Captain Parker Apartments, used the entire line of credit, along with cash reserve, to purchase the property. (See Note 2: Rental Properties, for the details of the transaction.)

The line of credit may be used for acquisition, refinancing, improvements, working capital and other needs of the Partnership. The line may not be used to pay dividends, make distributions or acquire equity interests of the Partnership.

The line of credit is collateralized by varying percentages of the Partnership’s ownership interest in 23 of its subsidiary properties and joint ventures. Pledged interests range from 49% to 100% of the Partnership’s ownership interest in the respective entities.

The Partnership paid fees to secure the line of credit. Any unused balance of the line of credit is subject to a fee ranging from 15 to 20 basis points per annum. The Partnership paid approximately $36,000 during the year ended December 31, 2015.

The line of credit agreement has several covenants, such as providing cash flow projections and compliance certificates, as well as other financial information. The covenants include, but are not limited to the following: maintain a leverage ratio that does not exceed 65%; aggregate increase in indebtedness of the subsidiaries and joint ventures should not exceed $15,000,000; maintain a tangible net worth (as defined in the agreement) of a minimum of $150,000,000; a minimum ratio of net operating income to total indebtedness of at least 9.5%; debt service coverage ratio of at least 1.6 to 1, as well as other items.

The Partnership is in compliance with these covenants as of December 31, 2015.