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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

6 Months Ended

Jun. 30, 2021

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

The Partnership has invested in seven limited partnerships and limited liability companies, the majority of which have invested in residential apartment complexes, with three Joint Ventures investing in commercial property. The Partnership has between a 40%-50% ownership interests in each investment. The other investors are the Brown Family related entities and five current and former employees of the Management Company. The Brown Family’s ownership interest was between 47.6% and 59%, with the balance owned by the others. A description of each investment is as follows;

On October 28, 2009 the Partnership invested approximately $15,925,000 in a joint venture to acquire a 40% interest in a residential property located in Brookline, Massachusetts. The property, Hamilton Park Towers LLC, referred to as Dexter Park, or Hamilton Park, is a 409 unit residential complex. The purchase price was $129,500,000. The original mortgage was $89,914,000 with an interest rate of 5.57% and was to mature in 2019. The mortgage called for interest only payments for the first two years of the loan and amortized over 30 years thereafter.

On May 31, 2018, Hamilton Park Towers, LLC , entered into a Mortgage Note with John Hancock Life Insurance Company (U.S.A.) in the principal amount of $125,000,000. Interest only payments on the Note are payable on a monthly basis at a fixed interest rate of 3.99% per annum, and the principal amount of the Note is due and payable on June 1, 2028. The Note is secured by a mortgage on the Dexter Park apartment complex located at 175 Freeman Street, Brookline, Massachusetts pursuant to a Mortgage, Assignment of Leases and Rents and Security Agreement dated May 31, 2018. The Note is guaranteed by the Partnership and HBC Holdings, LLC pursuant to a Guaranty Agreement dated May 31, 2018.

Hamilton Park used the proceeds of the loan to pay off an outstanding loan of approximately $82,000,000 and distributed approximately $41,200,000 to its’ owners. The Partnership’s share of the distribution was approximately $16,500,000. As a result of the distribution, the carrying value of the investment fell below zero. The Partnership will continue to account for the investment using the equity method of accounting, although the Partnership has no legal obligation to fund its’ share of any future operating deficiencies as needed. In connection with this refinancing, the property incurred a defeasance charge of approximately $3,830,000. Based on its’ ownership in the property, the Partnership incurred 40% of this charge, an expense of approximately $1,532,000.

At June 30, 2021, the balance on this mortgage before unamortized deferred financing costs is $125,000,000. This investment, Hamilton Park Towers, LLC is referred to as Dexter Park.

On March 7, 2005, the Partnership invested $2,000,000 for a 50% ownership interest in a building comprising 48 apartments, one commercial space and a 50-car surface parking lot located in Boston, Massachusetts. The purchase price was $14,300,000, with a $10,750,000 mortgage. The Joint Venture planned to operate the building and initiate development of the parking lot. In June 2007, the Joint Venture separated the parcels, formed an additional limited liability company for the residential apartments and obtained a mortgage on the property. The new limited liability company formed for the residential apartments and commercial space is referred to as Hamilton Essex 81, LLC. In August 2008, the Joint Venture restructured the mortgages on both parcels at Essex 81. On September 28, 2015, Hamilton Essex Development, LLC paid off the outstanding mortgage balance of $1,952,286. The Partnership made a capital contribution of $978,193 to Hamilton Essex Development LLC for its share of the funds required for the transaction. Additionally, the Partnership made a capital contribution of $100,000 to Hamilton Essex 81, LLC. On September 30, 2015, Hamilton Essex 81, LLC obtained a new 10 year mortgage in the amount of $10,000,000, interest only at 2.18% plus the one month Libor rate. The proceeds of the note were used to pay off the existing mortgage of $8,040,719 and the Partnership received a distribution of $978,193 for its share of the excess proceeds. As a result of the distribution, the carrying value of the investment fell below zero. The Partnership will continue to account for this investment using the equity method of accounting. Although the Partnership has no legal obligation, the Partnership intends to fund its share of any future operating deficits if needed. At June 30, 2021, the balance on this mortgage before unamortized deferred financing costs is approximately $10,000,000. The investment in the parking lot is referred to as Hamilton Essex Development, LLC; the investment in the apartments is referred to as Hamilton Essex 81, LLC.

On March 2, 2005, the Partnership invested $2,352,000 for a 50% ownership interest in a 176-unit apartment complex with an additional small commercial building located in Quincy, Massachusetts. The purchase price was $23,750,000. The Joint Venture sold 127 of the units as condominiums and retained 49 units for long-term investment. The Joint Venture obtained a new 10-year mortgage in the amount of $5,000,000 on the units to be retained by the Joint Venture. The interest on the new loan was 5.67% fixed for the 10 year term with interest only payments for five years and amortized over a 30 year period for the balance of the loan term. On July 8, 2016, Hamilton 1025 LLC paid off the outstanding balance of the mortgage balance. The Partnership made a capital contribution of $2,359,500 to Hamilton 1025, LLC for its share of the funds required for the transaction. After paying off the mortgage, the Partnership began to sell off the individual units. In 2019, all residential units were sold. The Partnership still owns the commercial building. This investment is referred to as Hamilton 1025, LLC.

In September 2004, the Partnership invested approximately $5,075,000 for a 50% ownership interest in a 42-unit apartment complex located in Lexington, Massachusetts. The purchase price was $10,100,000. In October 2004, the Joint Venture obtained a mortgage on the property in the amount of $8,025,000 and returned $3,775,000 to the Partnership. The Joint Venture obtained a new 10-year mortgage in the amount of $5,500,000 in January 2007. The interest on the new loan was 5.67% fixed for the ten year term with interest only payments for five years and amortized over a 30 year period for the balance of the loan. This loan required a cash contribution by the Partnership of $1,250,000 in December 2006. On September 12, 2016, the property was refinanced with a 15 year mortgage in the amount of $6,000,000, at 3.71%, interest only. The Joint Venture Partnership paid off the prior mortgage of approximately $5,158,000 with the proceeds of the new mortgage and made a distribution of $385,000 to the Partnership. The cost associated with the refinancing was approximately $123,000. At June 30, 2021, the balance on this mortgage before unamortized deferred financing costs is approximately $6,000,000. In 2018, the carrying value of the investment fell below zero. The Partnership will continue to account for this investment using the equity method of accounting, although the Partnership has no legal obligation to fund its share of any future operating deficiencies, if needed. This investment is referred to as Hamilton Minuteman, LLC.

In August 2004, the Partnership invested $8,000,000 for a 50% ownership interest in a 280-unit apartment complex located in Watertown, Massachusetts. The total purchase price was $56,000,000. The Joint Venture sold 137 units as condominiums. The assets were combined with Hamilton on Main Apartments. Hamilton on Main, LLC is known as Hamilton Place. In 2005, Hamilton on Main Apartments, LLC obtained a ten year mortgage on the three buildings to be retained. The mortgage was $16,825,000, with interest only of 5.18% for three years and amortizing on a 30 year schedule for the remaining seven years when the balance is due. The net proceeds after funding escrow accounts and closing costs on the mortgage were approximately $16,700,000, which were used to reduce the existing mortgage. In August 2014, the property was refinanced with a 10 year mortgage in the amount of $16,900,000 at 4.34% interest only. The Joint Venture paid off the prior mortgage of approximately $15,205,000 with the proceeds of the new mortgage and distributed $850,000 to the Partnership. The costs associated with the refinancing were approximately $161,000. At June 30, 2021, the balance of the mortgage before unamortized deferred finance is $16,900,000. In 2018, the carrying value of the investment fell below zero. The Partnership will continue to account for this investment using the equity method of accounting, although the Partnership has no legal obligation to fund its share of any future operating deficiencies, if needed. The investment is referred to as Hamilton on Main LLC.

In November 2001, the Partnership invested approximately $1,533,000 for a 50% ownership interest in a 40-unit apartment building in Cambridge, Massachusetts. In June 2013, the property was refinanced with a 15 year mortgage in the amount of $10,000,000 at 3.87%, interest only for 3 years and is amortized on a 30-year schedule for the balance of the term. The Joint Venture paid off the prior mortgage of approximately $6,776,000 with the proceeds of the new mortgage. After the refinancing, the Joint Venture made a distribution of $1,610,000 to the Partnership. As a result of the distribution, the carrying value of the investment fell below zero.The Partnership will continue to account for this investment using the equity method of accounting. Although the Partnership has no legal obligation, the Partnership intends to fund its share of any future operating deficits if needed. At June 30, 2021, the balance of this mortgage before unamortized deferred financing costs is approximately $9,043,000. This investment is referred to as 345 Franklin, LLC.

Summary financial information at June 30, 2021


				Hamilton									Hamilton			Hamilton
	Hamilton			Essex			345			Hamilton			Minuteman			on Main			Dexter
	Essex 81			Development			Franklin			1025			Apts			Apts			Park			Total
ASSETS
Rental Properties	$	6,476,479		$	2,589,414		$	5,224,951		$	83,187		$	4,847,230		$	14,739,183		$	79,408,476		$	113,368,920
Cash & Cash Equivalents		22,648			20,622			203,017			9,049			132,985			640,754			3,846,947			4,876,022
Rent Receivable		81,081			57,240			31,630			4,627			5,580			63,123			451,301			694,582
Real Estate Tax Escrow		77,015			—			23,088			—			41,918			121,206			—			263,227
Prepaid Expenses & Other Assets		296,522			72,420			99,238			342			19,670			186,140			1,397,029			2,071,361
Total Assets	$	6,953,745		$	2,739,696		$	5,581,924		$	97,205		$	5,047,383		$	15,750,406		$	85,103,753		$	121,274,112
LIABILITIES AND PARTNERS’ CAPITAL
Mortgage Notes Payable	$	9,941,396		$	—		$	8,996,847		$	—		$	5,916,460		$	16,849,171		$	124,553,024		$	166,256,898
Accounts Payable & Accrued Expense		95,536			1,500			103,668			1,485			49,723			207,351			843,393			1,302,656
Advance Rental Pmts & Security Deposits		161,990			—			234,348			—			140,039			425,766			3,291,355			4,253,498
Total Liabilities		10,198,922			1,500			9,334,863			1,485			6,106,222			17,482,288			128,687,772			171,813,052
Partners’ Capital		(3,245,177)			2,738,196			(3,752,939)			95,720			(1,058,839)			(1,731,882)			(43,584,019)			(50,538,940)
Total Liabilities and Capital	$	6,953,745		$	2,739,696		$	5,581,924		$	97,205		$	5,047,383		$	15,750,406		$	85,103,753		$	121,274,112
Partners’ Capital %—NERA		50	%		50	%		50	%		50	%		50	%		50	%		40	%
Investment in Unconsolidated Joint Ventures	$	—		$	1,369,098		$	—		$	47,860		$	—		$	—		$	—			1,416,958
Distribution and Loss in Excess of investments in Unconsolidated Joint Ventures	$	(1,622,589)		$	—		$	(1,876,470)		$	—		$	(529,420)		$	(865,941)		$	(17,433,608)			(22,328,026)
Total Investment in Unconsolidated Joint Ventures (Net)																						$	(20,911,068)
Total units/condominiums
Apartments		48			—			40			175			42			148			409			862
Commercial		1			1			—			1			—			—			—			3
Total		49			1			40			176			42			148			409			865
Units to be retained		49			1			40			1			42			148			409			690
Units to be sold		—			—			—			175			—			—			—			175
Units sold through August 1, 2021		—			—			—			175			—			—			—			175

Financial information for the six months ended June 30, 2021


			Hamilton						Hamilton		Hamilton
	Hamilton		Essex		345		Hamilton		Minuteman		on Main		Dexter
	Essex 81		Development		Franklin		1025		Apts		Apts		Park		Total
Revenues
Rental Income	$	442,072	$	57,240	$	675,791	$	48,739	$	571,208	$	1,664,274	$	6,212,808	$	9,672,132
Laundry and Sundry Income		6,208		—		112		—		3,305		18,041		49,361		77,027
		448,280		57,240		675,903		48,739		574,513		1,682,315		6,262,169		9,749,159
Expenses
Administrative		53,869		1,353		15,522		1,490		7,660		34,780		94,730		209,404
Depreciation and Amortization		238,522		10,149		170,865		1,632		168,353		540,561		1,857,642		2,987,724
Management Fees		11,846		—		26,345		1,571		22,875		64,431		129,462		256,530
Operating		69,168		—		26,077		176		54,496		213,689		501,060		864,666
Renting		54,877		—		33,934		—		720		51,559		192,557		333,647
Repairs and Maintenance		82,132		520		64,496		—		56,381		269,025		907,270		1,379,824
Taxes and Insurance		131,175		29,811		87,380		9,901		70,212		221,305		1,197,927		1,747,711
		641,589		41,833		424,619		14,770		380,697		1,395,350		4,880,648		7,779,506
Income Before Other Income		(193,309)		15,407		251,284		33,969		193,816		286,965		1,381,521		1,969,653
Other Income (Loss)
Interest Expense		(122,715)		—		(180,745)		—		(117,877)		(376,793)		(2,529,233)		(3,327,363)
Interest Income								—
Other Income		—		—		—		—		—		—		1,222		1,222
		(122,715)		—		(180,745)		—		(117,877)		(376,793)		(2,528,011)		(3,326,141)
Net Income (Loss)	$	(316,024)	$	15,407	$	70,539	$	33,969	$	75,939	$	(89,828)	$	(1,146,490)	$	(1,356,488)
Net Income (Loss)—NERA 50%	$	(158,012)	$	7,704	$	35,270	$	16,985	$	37,969	$	(44,914)				(105,000)
Net Income (Loss) —NERA 40%													$	(458,595)		(458,595)
															$	(563,595)

Financial information for the three months ended June 30, 2021


										Hamilton		Hamilton
	Hamilton		Hamilton Essex		345		Hamilton			Minuteman		on Main		Dexter
	Essex 81		Development		Franklin		1025			Apts		Apts		Park		Total
Revenues
Rental Income	$	211,855	$	57,240	$	342,698	$	24,369	$	286,684	$	847,462	$	3,142,925	$	4,913,233
Laundry and Sundry Income		3,195		—				—		2,029		9,264		23,209		37,697
		215,050		57,240		342,698		24,369		288,713		856,726		3,166,134		4,950,930
Expenses
Administrative		39,313		500		10,719		775		4,077		14,561		47,878		117,823
Depreciation and Amortization		119,580		5,075		85,520		816		84,328		270,646		933,082		1,499,047
Management Fees		6,586		—		13,933		942		11,579		32,055		64,184		129,279
Operating		39,736		—		12,556		85		19,900		88,756		202,967		364,000
Renting		22,093		—		19,606		—		360		20,798		107,602		170,459
Repairs and Maintenance		29,585		520		41,218		—		36,977		146,578		454,376		709,254
Taxes and Insurance		65,636		14,925		43,709		5,104		35,237		111,171		600,141		875,923
		322,529		21,020		227,261		7,722		192,458		684,565		2,410,230		3,865,785
Income Before Other Income		(107,479)		36,220		115,437		16,647		96,255		172,161		755,904		1,085,145
Other Income (Loss)
Interest Expense		(61,402)		—		(90,102)		—		(59,252)		(189,415)		(1,264,525)		(1,664,696)
Other income		—		—		—		—		—		—		1,222		1,222
		(61,402)		—		(90,102)		—		(59,252)		(189,415)		(1,263,303)		(1,663,474)
Net Income (Loss)	$	(168,881)	$	36,220	$	25,335	$	16,647	$	37,003	$	(17,254)	$	(507,399)	$	(578,329)
Net Income (Loss)—NERA 50%	$	(84,441)	$	18,110	$	12,668	$	8,324	$	18,502	$	(8,627)				(35,465)
Net Income (Loss)—NERA 40%													$	(202,959)		(202,959)
															$	(238,424)

Future annual mortgage maturities at June 30, 2021 are as follows:


	Hamilton		345		Hamilton		Hamilton on		Dexter
Period End	Essex 81		Franklin		Minuteman		Main Apts		Park		Total
6//30/2022	$	—	$	217,796	$	—	$	—	$	—	$	217,796
6/30/2023		—		226,376		—		—		—		226,376
6/30/2024		—		235,293		—		—		—		235,293
6/30/2025		—		244,563		—		16,900,000		—		17,144,563
6/30/2026		10,000,000		254,197		—		—		—		10,254,197
Thereafter		—		7,865,231		6,000,000		—		125,000,000		138,865,231
		10,000,000		9,043,456		6,000,000		16,900,000		125,000,000		166,943,456
Less: unamortized deferred financing costs		(58,604)		(46,609)		(83,540)		(50,829)		(446,976)		(686,558)
	$	9,941,396	$	8,996,847	$	5,916,460	$	16,849,171	$	124,553,024	$	166,256,898

At June 30, 2021 the weighted average interest rate on the above mortgages was 3.91%. The effective rate was 3.97% including the amortization expense of deferred financing costs.

Summary financial information at June 30, 2020


				Hamilton									Hamilton			Hamilton
	Hamilton			Essex			345			Hamilton			Minuteman			on Main			Dexter
	Essex 81			Development			Franklin			1025			Apts			Apts			Park			Total
ASSETS
Rental Properties	$	6,866,502		$	2,591,904		$	5,513,615		$	86,451		$	5,160,011		$	15,570,896		$	82,374,300		$	118,163,679
Cash & Cash Equivalents		368,053			85,827			243,868			20,661			162,471			553,842			3,049,217			4,483,939
Rent Receivable		343,831			43,854			6,827			—			1,407			56,713			283,270			735,902
Real Estate Tax Escrow		62,383			—			21,487			—			25,341			72,097			—			181,308
Prepaid Expenses & Other Assets		308,350			89,788			99,498			2,341			33,062			175,465			1,857,159			2,565,663

Total Assets	$	7,949,119		$	2,811,373		$	5,885,295		$	109,453		$	5,382,292		$	16,429,013		$	87,563,946		$	126,130,491
LIABILITIES AND PARTNERS’ CAPITAL
Mortgage Notes Payable	$	9,927,607		$	—		$	9,199,730		$	—		$	5,908,276		$	16,833,120		$	124,488,401		$	166,357,134
Accounts Payable & Accrued Expense		72,016			1,599			89,688			11,438			64,549			157,567			963,724			1,360,581
Advance Rental Pmts& Security Deposits		300,200			—			308,520			—			147,506			440,458			2,682,182			3,878,866
Total Liabilities		10,299,823			1,599			9,597,938			11,438			6,120,331			17,431,145			128,134,307			171,596,581
Partners’ Capital		(2,350,704)			2,809,774			(3,712,643)			98,015			(738,039)			(1,002,132)			(40,570,361)			(45,466,090)
Total Liabilities and Capital	$	7,949,119		$	2,811,373		$	5,885,295		$	109,453		$	5,382,292		$	16,429,013		$	87,563,946		$	126,130,491
Partners’ Capital %—NERA		50	%		50	%		50	%		50	%		50	%		50	%		40	%
Investment in Unconsolidated Joint Ventures	$	—		$	1,404,887		$	—		$	49,008		$	—		$	—		$	—		$	1,453,895
Distribution and Loss in Excess of investments in Unconsolidated Joint Ventures	$	(1,175,352)		$	—		$	(1,856,321)		$	—		$	(369,020)		$	(501,066)		$	(16,228,145)			(20,129,903)
Total Investment in Unconsolidated Joint Ventures (Net)																							(18,676,009)
Total units/condominiums
Apartments		48			—			40			175			42			148			409			862
Commercial		1			1			—			1			—			—			—			3
Total		49			1			40			176			42			148			409			865
Units to be retained		49			1			40			1			42			148			409			690
Units to be sold		—			—			—			175			—			—			—			175
Units sold through August1, 2020		—			—			—			175			—			—			—			175

Financial information for the six months ended June 30, 2020


			Hamilton						Hamilton		Hamilton
	Hamilton		Essex		345		Hamilton		Minuteman		on Main		Dexter
	Essex 81		Development		Franklin		1025		Apts		Apts		Park		Total
Revenues
Rental Income	$	820,088	$	65,862	$	847,492	$	41,117	$	581,210	$	1,803,314	$	8,230,449	$	12,389,532
Laundry and Sundry Income		6,683		—		625		—		626		17,355		45,708		70,997
		826,771		65,862		848,117		41,117		581,836		1,820,669		8,276,157		12,460,529
Expenses
Administrative		11,480		2,200		16,328		11,056		6,650		29,475		92,773		169,962
Depreciation and Amortization		243,569		10,149		169,036		1,632		173,780		524,133		1,838,920		2,961,219
Management Fees		28,052		2,203		32,296		1,645		23,004		67,729		166,246		321,175
Operating		46,299		—		28,764		96		50,654		177,595		529,844		833,252
Renting		3,404		—		9,682		—		5,750		15,493		30,883		65,212
Repairs and Maintenance		67,209		3,046		43,375		—		38,950		233,991		511,248		897,819
Taxes and Insurance		129,401		30,457		79,714		8,680		72,176		232,474		1,138,952		1,691,854
		529,414		48,055		379,195		23,109		370,964		1,280,890		4,308,866		6,940,493
Income Before Other Income		297,357		17,807		468,922		18,008		210,872		539,779		3,967,291		5,520,036
Other Income (Loss)
Interest Expense		(172,091)		—		(186,408)		—		(118,502)		(382,787)		(2,536,786)		(3,396,574)
Interest Income		—		—		—				—		—		—		—
Gain on sale of Real Estate		—		—		—		—		—		—		—		—
		(172,091)		—		(186,408)		—		(118,502)		(382,787)		(2,536,786)		(3,396,574)
Net Income (Loss)	$	125,266	$	17,807	$	282,514	$	18,008	$	92,370	$	156,992	$	1,430,505	$	2,123,462
Net Income (Loss)—NERA 50%	$	62,633	$	8,904	$	141,257	$	9,004	$	46,185	$	78,496				346,478
Net Income (Loss)—NERA 40%													$	572,202		572,202
															$	918,680

Financial information for the three months ended June 30, 2020


			Hamilton						Hamilton		Hamilton
	Hamilton		Essex		345		Hamilton		Minuteman		on Main		Dexter
	Essex 81		Development		Franklin		1025		Apts		Apts		Park		Total
Revenues
Rental Income	$	380,708	$	5,391	$	419,342	$	20,558	$	290,517	$	897,613	$	4,023,946	$	6,038,075
Laundry and Sundry Income		3,298		—		171		—		626		8,606		19,966		32,667
		384,006		5,391		419,513		20,558		291,143		906,219		4,043,912		6,070,742
Expenses
Administrative		5,293		1,550		8,572		931		4,168		13,627		45,721		79,862
Depreciation and Amortization		121,927		5,075		84,541		816		86,954		263,086		921,932		1,484,331
Management Fees		10,316		—		15,829		822		11,472		32,745		79,163		150,347
Operating		20,776		—		15,776		51		28,428		83,750		219,463		368,244
Renting		629		—		929		—		2,750		7,773		14,080		26,161
Repairs and Maintenance		40,200		3,046		21,797		—		28,056		99,155		224,236		416,490
Taxes and Insurance		64,724		15,238		39,808		4,492		36,125		109,712		562,731		832,830
		263,865		24,909		187,252		7,112		197,953		609,848		2,067,326		3,358,265
Income Before Other Income		120,141		(19,518)		232,261		13,446		93,190		296,371		1,976,586		2,712,477
Other Income (Loss)
Interest Expense		(71,358)		—		(92,983)		—		(59,242)		(190,404)		(1,268,682)		(1,682,669)
Interest Income		—		—		—				—		—		—		—
Gain on sale of Real Estate		—		—		—		—		—		—		—		—
		(71,358)		—		(92,983)		—		(59,242)		(190,404)		(1,268,682)		(1,682,669)
Net Income (Loss)	$	48,783	$	(19,518)	$	139,278	$	13,446	$	33,948	$	105,967	$	707,904	$	1,029,808
Net Income (Loss)—NERA 50%	$	24,392	$	(9,759)	$	69,638	$	6,723	$	16,974	$	52,984				160,951
Net Income (Loss)—NERA 40%													$	283,162		283,162
															$	444,113