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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

6 Months Ended

Jun. 30, 2022

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, 2022, 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 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, 2022, 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. 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. 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. At June 30, 2022, the balance on this mortgage before unamortized deferred financing costs is approximately $6,000,000. 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 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. 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. At June 30, 2022, the balance of the mortgage before unamortized deferred finance is $16,900,000. 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, 2022, the balance of this mortgage before unamortized deferred financing costs is approximately $8,826,000. This investment is referred to as 345 Franklin, LLC.

Summary financial information at June 30, 2022


				Hamilton									Hamilton			Hamilton
	Hamilton			Essex			345			Hamilton			Minuteman			on Main			Dexter
	Essex 81			Development			Franklin			1025			Apts			Apts			Park			Total
ASSETS
Rental Properties	$	6,045,672		$	2,586,925		$	4,897,693		$	79,923		$	4,581,892		$	13,896,435		$	77,385,213		$	109,473,753
Cash & Cash Equivalents		709,651			113,595			217,415			13,122			252,822			808,436			1,890,452			4,005,493
Rent Receivable		208,605			75,159			3,531			4,898			16,493			29,724			136,897			475,307
Real Estate Tax Escrow		73,643			—			34,630			—			29,447			70,172			—			207,892
Prepaid Expenses & Other Assets		319,717			56,859			118,903			630			26,635			176,283			2,792,920			3,491,947
Total Assets	$	7,357,288		$	2,832,538		$	5,272,172		$	98,573		$	4,907,289		$	14,981,050		$	82,205,482		$	117,654,392
LIABILITIES AND PARTNERS’ CAPITAL
Mortgage Notes Payable	$	9,955,186		$	—		$	8,785,710		$	—		$	5,924,643		$	16,865,222		$	124,617,647		$	166,148,408
Accounts Payable & Accrued Expense		105,777			1,713			64,101			2,064			53,140			168,858			702,566			1,098,219
Advance Rental Pmts & Security Deposits		282,378			—			303,449			—			195,781			455,979			3,825,600			5,063,187
Total Liabilities		10,343,341			1,713			9,153,260			2,064			6,173,564			17,490,059			129,145,813			172,309,814
Partners’ Capital		(2,986,053)			2,830,825			(3,881,088)			96,509			(1,266,275)			(2,509,009)			(46,940,331)			(54,655,422)
Total Liabilities and Capital	$	7,357,288		$	2,832,538		$	5,272,172		$	98,573		$	4,907,289		$	14,981,050		$	82,205,482		$	117,654,392
Partners’ Capital %—NERA		50	%		50	%		50	%		50	%		50	%		50	%		40	%
Investment in Unconsolidated Joint Ventures	$	—		$	1,415,411		$	—		$	48,254		$	—		$	—		$	—			1,463,665
Distribution and Loss in Excess of investments in Unconsolidated Joint Ventures	$	(1,493,027)		$	—		$	(1,940,544)		$	—		$	(633,138)		$	(1,254,505)		$	(18,776,132)			(24,097,346)
Total Investment in Unconsolidated Joint Ventures (Net)																						$	(22,633,681)
Total units/condominiums
Apartments		48			—			40			175			42			148			409			687
Commercial		1			1			—			1			—			—			—			3
Total		49			1			40			176			42			148			409			690
Units to be retained		49			1			40			1			42			148			409			690
Units to be sold		—			—			—			—			—			—			—			—
Units sold through May 1, 2022		—			—			—			175			—			—			—			175
Unsold units		—			—			—			—			—			—			—			—

Financial information for the six months ended June 30, 2022


			Hamilton						Hamilton		Hamilton
	Hamilton		Essex		345		Hamilton		Minuteman		on Main		Dexter
	Essex 81		Development		Franklin		1025		Apts		Apts		Park		Total
Revenues
Rental Income	$	760,751	$	175,371	$	714,821	$	50,122	$	598,537	$	1,806,118	$	7,120,130	$	11,225,850
Laundry and Sundry Income		5,394		—		125		—		776		17,150		49,593		73,038
		766,145		175,371		714,946		50,122		599,313		1,823,268		7,169,723		11,298,888
Expenses
Administrative		8,873		1,548		19,992		1,349		5,755		35,579		109,732		182,828
Depreciation and Amortization		238,779		5,855		173,191		1,632		168,403		537,314		1,865,883		2,991,057
Management Fees		37,096		7,526		28,109		2,053		23,529		72,517		152,670		323,500
Operating		119,220		—		36,715		1,165		75,203		191,826		581,751		1,005,880
Renting		14,065		—		17,206		—		7,014		25,580		72,674		136,539
Repairs and Maintenance		69,868		3,180		83,758		—		44,990		305,954		797,670		1,305,420
Taxes and Insurance		133,102		31,508		87,467		9,120		75,678		261,364		1,220,611		1,818,850
		621,003		49,617		446,438		15,319		400,572		1,430,134		4,800,991		7,764,074
Income Before Other Income		145,142		125,754		268,508		34,803		198,741		393,134		2,368,732		3,534,814
Other Income (Loss)
Interest Expense		(141,388)		—		(176,400)		—		(118,129)		(376,798)		(2,534,570)		(3,347,285)
		(141,388)		—		(176,400)		—		(118,129)		(376,798)		(2,534,570)		(3,347,285)
Net (Loss) Income	$	3,754	$	125,754	$	92,108	$	34,803	$	80,612	$	16,336	$	(165,838)	$	187,529
Net (Loss) Income —NERA 50%	$	1,877	$	62,878	$	46,054	$	17,402	$	40,306	$	8,168				176,685
Net Income —NERA 40%													$	(66,334)		(66,334)
															$	110,351

Financial information for the three months ended June 30, 2022


			Hamilton						Hamilton		Hamilton
	Hamilton		Essex		345		Hamilton		Minuteman		on Main		Dexter
	Essex 81		Development		Franklin		1025		Apts		Apts		Park		Total
Revenues
Rental Income	$	318,903	$	89,269	$	368,001	$	25,752	$	304,499	$	915,736	$	3,649,413	$	5,671,573
Laundry and Sundry Income		—		—		125		—		1,076		6,599		22,538		30,338
		318,903		89,269		368,126		25,752		305,575		922,335		3,671,951		5,701,911
Expenses
Administrative		4,099		798		8,468		699		3,404		11,059		54,214		82,741
Depreciation and Amortization		119,593		2,928		86,777		816		84,443		268,850		936,748		1,500,155
Management Fees		18,611		4,208		14,306		1,095		12,136		35,145		76,298		161,799
Operating		66,248		—		14,822		(8)		19,617		83,136		234,223		418,038
Renting		8,437		—		7,046		—		3,212		10,591		14,812		44,098
Repairs and Maintenance		34,939		3,180		29,226		—		28,777		172,036		442,881		711,039
Taxes and Insurance		66,641		15,518		43,744		4,712		37,950		130,695		610,745		910,005
		318,568		26,632		204,389		7,314		189,539		711,512		2,369,921		3,827,875
Income Before Other Income		335		62,637		163,737		18,438		116,036		210,823		1,302,030		1,874,036
Other Income (Loss)
Interest Expense		(79,158)		—		(87,963)		—		(59,390)		(189,421)		(1,271,425)		(1,687,357)
		(79,158)		—		(87,963)		—		(59,390)		(189,421)		(1,271,425)		(1,687,357)
Net Income (Loss)	$	(78,823)	$	62,637	$	75,774	$	18,438	$	56,646	$	21,402	$	30,605	$	186,679
Net Income (Loss)—NERA 50%	$	(39,411)	$	31,319	$	37,888	$	9,219	$	28,324	$	10,702				78,041
Net Income —NERA 40%													$	12,242		12,242
															$	90,283

Future annual mortgage maturities at June 30, 2022 are as follows:


	Hamilton		345		Hamilton		Hamilton on		Dexter
Period End	Essex 81		Franklin		Minuteman		Main Apts		Park		Total
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
6/30/2027				264,211		—		—		—		264,211
Thereafter		—		7,601,021		6,000,000		—		125,000,000		138,601,021
		10,000,000		8,825,661		6,000,000		16,900,000		125,000,000		166,725,661
Less: unamortized deferred financing costs		(44,814)		(39,951)		(75,357)		(34,778)		(382,353)		(577,253)
	$	9,955,186	$	8,785,710	$	5,924,643	$	16,865,222	$	124,617,647	$	166,148,408

At June 30, 2022 the weighted average interest rate on the above mortgages was 3.97%. The effective rate was 4.03% including the amortization expense of deferred financing costs.

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		—			—			—			—			—			—			—			—
Units sold through August 1, 2021		—			—			—			175			—			—			—			175
Unsold units		—			—			—			—			—			—			—			—

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)
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 —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 —NERA 40%													$	(202,959)		(202,959)
															$	(238,424)