EX-99.1 7 a2183751zex-99_1.htm EXHIBIT 99.1
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Exhibit 99.1

HAMILTON ON MAIN LLC (a/k/a HAMILTON PLACE)
HAMILTON ON MAIN APARTMENTS LLC
HAMILTON 1025 LLC
Combined Financial Statements—Significant Joint Ventures
As of December 31, 2007 and 2006
and for the years ended December 31, 2007, 2006 and 2005
Together With Report of Independent
Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Joint Venture Participants
of Hamilton on Main LLC (a/k/a Hamilton Place), Hamilton on Main Apartments LLC and
Hamilton 1025 LLC

We have audited the accompanying combined balance sheets of Hamilton on Main LLC (a/k/a Hamilton Place), Hamilton on Main Apartments LLC and Hamilton 1025 LLC as of December 31, 2007 and 2006, and the related combined statements of income, changes in joint venture capital and cash flows for each of the years in the three-year period ended December 31, 2007. The combined financial statements are the responsibility of the Joint Ventures' management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Hamilton on Main LLC, Hamilton on Main Apartments LLC and Hamilton 1025 LLC at December 31, 2007 and 2006 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America.

/s/ MILLER WACHMAN LLP

Boston, Massachusetts
March 14, 2008

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

COMBINED BALANCE SHEETS

		December 31,
		2007		2006
ASSETS
Rental Properties		$	34,761,032	$	44,793,270
Cash and Cash Equivalents			519,254		324,729
Rents Receivable			9,550		6,979
Due from Joint Ventures			1,699,927		—
Real Estate Tax Escrows			463,787		374,094
Prepaid Expenses and Other Assets			383,917		456,275
Financing and Leasing Fees			99,791		133,798

	Total Assets	$	37,937,258	$	46,089,145

LIABILITIES AND JOINT VENTURE CAPITAL
Mortgage Notes Payable		$	21,825,000	$	24,205,745
Accounts Payable and Accrued Expenses			145,394		198,896
Advance Rental Payments and Security Deposits			217,169		227,251

Total Liabilities			22,187,563		24,631,892
Commitments (Note 7)
Joint Venture Capital			15,749,695		21,457,253

	Total Liabilities and Joint Venture Capital	$	37,937,258	$	46,089,145

See notes to combined financial statements.

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

COMBINED STATEMENTS OF INCOME

		Year Ended December 31,
		2007			2006			2005
Revenues
	Rental income	$	3,351,622		$	3,819,267		$	4,785,521
	Laundry and sundry income		17,144			56,039			35,609

			3,368,766			3,875,306			4,821,130

Expenses
	Administrative		90,880			158,943			187,367
	Depreciation and amortization		2,162,532			2,337,808			2,741,521
	Interest		1,226,342			1,780,049			2,370,930
	Management fees		138,566			157,214			142,337
	Operating		313,383			334,011			392,852
	Renting		18,177			48,955			115,556
	Repairs and maintenance		766,471			1,167,640			1,790,884
	Taxes and insurance		516,676			717,725			787,205

			5,233,028			6,702,345			8,528,652

Operating Loss			(1,864,262	)		(2,827,039	)		(3,707,522	)

Other Income (Loss)
	Interest income		35,615			840			357
	Gains on condominium sales		1,958,516			2,986,238			8,484,363
	Other Income (expenses)		(37,428	)		50			(404,881	)

			1,956,704			2,987,128			8,079,839

Net Income		$	92,442		$	160,089		$	4,372,316

See notes to combined financial statements.

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

COMBINED STATEMENTS OF CHANGES IN JOINT VENTURE CAPITAL

	Hamilton 1025			Hamilton on Main Apts			Hamilton Place Sales			Total
Balance, January 1, 2005	$	—		$	15,794,850		$	—		$	15,794,850
Investment by owners		4,705,000			—			—			4,705,000
Distribution to owners		(4,025,00	)		(50,000	)		—			(4,075,000	)
Net Income (loss)		3,445,866			(2,069,031	)		2,995,480			4,372,315

Balance, December 31, 2005		4,125,866			13,675,819			2,995,480			20,797,165
Transfer of equity		—			(2,550,594	)		2,550,594			—
Investment by owners		—			600,000			—			600,000
Distribution to owners		(100,000	)		—			—			(100,000	)
Net Income (loss)		558,126			(1,150,258	)		752,220			160,088

Balance, December 31, 2006		4,583,992			10,574,967			6,298,294			21,457,253
Investment by owners		—			—			—			—
Distribution to owners		(1,600,000	)		(600,000	)		(3,600,000	)		(5,800,000	)
Net Income (loss)		399,551			(1,209,113	)		902,004			92,442

Balance, December 31, 2007	$	3,383,543		$	8,765,854		$	3,600,298		$	15,749,695

See notes to combined financial statements.

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

COMBINED STATEMENTS OF CASH FLOWS

	Year Ended December 31
	2007			2006			2005
Cash Flows from Operating Activities
Net income (loss)	$	92,442		$	160,089		$	4,372,316

Adjustments to reconcile net income to net cash provided (used) by operating activities:
Gain on sale of condominiums		(1,958,516	)		(2,986,239	)		(8,484,363	)
Depreciation and amortization		2,162,532			2,337,808			2,741,521
Rent Supplement		(2,174	)		—			—
Changes in operating assets and liabilities:
(Increase) Decrease in rents receivable		(2,572	)		18,144			(12,140	)
Decrease in accounts payable and accrued expense		(53,501	)		(52,696	)		(72,315	)
Increase in real estate tax escrow		(89,694	)		(183,008	)		(191,085	)
Increase in due from joint ventures		(1,699,927	)		—			—
(Increase) decrease in financing and leasing fees		10,039			(42,205	)		(331,009	)
(Increase) decrease in prepaid expenses and other assets		72,359			114,695			(407,934	)
(Decrease) Increase in advance rental payments and security deposits		(10,082	)		(24,217	)		82,289

Total adjustments		(1,571,536	)		(817,718	)		(6,675,036	)

Net cash used in operating activities		(1,479,094	)		(657,629	)		(2,302,720	)

Cash flows provided by investing activities
Proceeds from sales of condominiums		10,593,794			11,530,646			33,037,589
Purchase and improvement of rental properties		(739,430	)		(767,392	)		(25,661,017	)

Net cash provided by investing activities		9,854,364			10,763,254			7,376,572

Cash flows used in Financing activities
Proceeds of mortgage notes payable		—			5,000,000			25,740,085
Principal payments of mortgage notes payable		—			(4,818,886	)		(26,057	)
Principal payments from sales proceeds		(2,380,745	)		(10,907,643	)		(31,019,316	)
Distributions to/investment by investors		(5,800,000	)		500,000			630,000

Net cash used in financing activities		(8,180,745	)		(10,226,529	)		(4,675,288	)

Net increase (decrease) in cash and cash equivalents		194,525			(120,904	)		398,564
Cash and cash equivalents, at beginning of year		324,729			445,634			47,070

Cash and cash equivalents, at end of year	$	519,254		$	324,730		$	445,634

See notes to combined financial statements.

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

Principles of Combination: The combined financial statements include the accounts of Hamilton on Main LLC (a/k/a Hamilton Place), Hamilton on Main Apartments LLC, and Hamilton 1025 LLC ("The Joint Ventures") or ("The Investment Properties"), each of which is owned 50% by New England Realty Associates, LP ("NERA") and are "significant subsidiaries" under Rule 3-09 of Regulation S-X requiring separate financial statements. All significant intercompany accounts and transactions are eliminated in the combined statements between these three entities.

Accounting Estimates: The preparation of the financial statements, in conformity with accounting principles generally accepted in the United State of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Accordingly, actual results could differ from those estimates.

Revenue Recognition: Rental income is recognized over the term of the related lease. Amounts 60 days in arrears are charged against income. Certain leases of commercial properties provide for increasing stepped minimum rents, which are accounted for on a straight-line basis over the term of the lease. Gain on condominium sales are recognized upon the closing of transactions.

Rental Properties: 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 other income. Fully depreciated assets are removed from the accounts. Properties are depreciated by both straight-line and accelerated methods over their estimated useful lives.

In the event that facts and circumstances indicate that the carrying value of a 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.

Financing and Leasing Fees: Financing fees are capitalized and amortized, using the interest method, over the life of the related mortgages. Leasing fees are capitalized and amortized on a straight-line basis over the life of the related lease. Unamortized balances are expensed when the corresponding fee is no longer applicable.

Income Taxes: The financial statements have been prepared on the basis that the joint ventures are entitled to tax treatment as partnerships. Accordingly, no provision for income taxes has been recorded.

Cash Equivalents: The Joint Ventures considers cash equivalents to be all highly liquid instruments purchased with a maturity of three months or less.

Segment Reporting: Operating segments are revenue-producing components of the joint venture for which separate financial information is produced internally for management. Under the definition, The Joint Ventures operated, for all periods presented, as one segment.

Concentration of Credit Risks and Financial Instruments: The Joint Venture's properties are located in Greater Boston, and are subject to the general economic risks related thereto. No single

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

tenant accounted for more than 5% of the joint ventures revenues in 2007, 2006 or 2005. The joint ventures make its temporary cash investments with high-credit-quality financial institutions.

Advertising Expense: Advertising is expensed as incurred. Advertising expense was insignificant in 2007, 2006 and 2005.

NOTE 2. RENTAL PROPERTIES

Properties consist of the following:

	Year Ended December 31,
	2007			2006			Useful Life
Land, improvements and parking lots	$	6,213,549		$	7,482,694		10–40 years
Buildings and improvements		30,708,163			38,090,014		15–40 years
Kitchen cabinets		513,409			489,276		5–10 years
Carpets		239,962			222,781		5–10 years
Air conditioning		62,308			67,821		7–10 years
Laundry equipment		5,129			11,543		5–7 years
Equipment		108,027			107,352		5–7 years
Motor vehicles		28,588			28,588		5 years
Fences		990			990		5–10 years
Furniture and fixtures		2,757,046			2,774,741		5–7 years
Smoke alarms		2,943			2,943		5–7 years

		40,640,114			49,278,743
Less accumulated depreciation		(5,879,082	)		(4,485,473	)

		34,761,032		$	44,793,270

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 2. RENTAL PROPERTIES (Continued)

A reconciliation of rental properties and accumulated depreciation is as follows:

			Hamilton Place Sales			Hamilton On Main Apts			Hamilton 1025			Total
Rental Properties at Cost
	Balance, January 1, 2005			—			56,510,778			—			56,510,778
		Purchase of and addition to property		452,871			833,263			24,374,883			25,661,017
		Transfers between affiliates		27,259,994			(27,259,994	)		—			—
		Condominium sale		(12,900,859	)		—			(11,784,720	)		(24,685,579	)

	Balance, December 31, 2005			14,812,006			30,084,047			12,590,163			57,486,216
		Purchase of and addition to property		284,603			223,090			259,699			767,392
		Transfers between affiliates		107,833			(107,833	)		—			—
		Condominium sale		(5,965,515	)		—			(3,009,349	)		(8,974,864	)

	Balance, December 31, 2006			9,238,927			30,199,304			9,840,513			49,278,744
		Purchase of and addition to property		467,245			111,503			160,063			738,811
		Transfers between affiliates		—			—			—			—
		Condominium sale		(7,427,329	)		—			(1,950,111	)		(9,377,440	)

	Balance, December 31, 2007		$	2,278,843		$	30,310,807		$	8,050,465		$	40,640,114

Accumulated Depreciation
	Balance, January 1, 2005			—			365,309			—			365,309
		Depreciation for year		649,475			1,447,897			489,665			2,587,037
		Depreciation of dispositions		(170,139	)		—			(132,353	)		(302,492	)

	Balance, December 31, 2005			479,336			1,813,206			357,312			2,649,854
		Depreciation for year		407,286			1,428,340			430,450			2,266,076
		Depreciation of dispositions		(292,127	)		—			(138,330	)		(430,457	)

	Balance, December 31, 2006			594,495		$	3,241,546		$	649,432		$	4,485,473
		Depreciation for year		207,116			1,571,145			360,554			2,138,815
		Depreciation of dispositions		(592,147	)		—			(153,059	)		(745,206	)

	Balance, December 31, 2007		$	209,464		$	4,812,691		$	856,927		$	5,879,082

Book Value			$	2,069,379		$	25,498,116		$	7,193,538		$	34,761,032

Book Value of unsold condominiums			$	2,069,379		$	—			274,669		$	2,344,048

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 2. RENTAL PROPERTIES (Continued)

NOTE 3. RELATED PARTY TRANSACTIONS

The Joint Ventures' properties are managed by an entity that is owned by the majority shareholder of the General Partner. The management fee is equal to 4% of rental revenue and laundry income. Total fees paid were approximately $113,000, $157,000 and $142,000 in 2007, 2006 and 2005, respectively.

In 2007, the Management Company also received approximately $300 for construction costs, $1,700 for construction supervision and architectural fees, $23,000 for maintenance services and $10,000 for administrative services. The Hamilton Company legal department acts as closing attorney on certain condo sales receiving approximately $45,000 during the year ended December 31, 2007. An entity partially owned by the majority shareholder of the General Partner is the sales agent for certain condominium sales receiving approximately $252,000 of commissions in 2007.

In 2006, the Management Company also received approximately $9,500 for construction costs, $9,000 for construction supervision and architectural fees, $103,000 for maintenance services and $8,000 for administrative services. The Hamilton Company legal department acts as closing attorney on certain condo sales receiving approximately $47,000 during the year ended December 31, 2006. An entity partially owned by the majority shareholder of the General Partner is the sales agent for certain condominium sales receiving approximately $213,000 of commissions in 2006.

In 2005, the Management Company also received approximately $324,000 for construction costs, $24,000 for construction supervision and architectural fees, $49,000 for maintenance services and $20,000 for administrative services. The Hamilton Company legal department acts as closing attorney on certain condo sales receiving approximately $29,000 during the year ended December 31, 2005. An entity partially owned by the majority shareholder of the General Partner is the sales agent for certain condominium sales receiving approximately $81,000 of commissions in 2005.

Inter company balances with related joint ventures are as follows:

		Due From	Due To		Total
Significant Combined Joint Ventures
	Hamilton on main due to Hamilton Place Sales		(430,591	)	(430,591	)
	Hamilton Place Sales due from Hamilton on Main	430,591			430,591
Non-Significant Joint Ventures
	Hamilton Bay Sales owns Hamilton Place Sales	600,000			600,000
	345 Franklin owns Hamilton Place Sales	25,000			25,000
	Hamilton Bay Sales owns Hamilton 1025	999,927			999,927
	Minuteman Apts owns Hamilton Place Sales	75,000			75,000

Total		2,130,518	(430,591	)	1,699,927

NOTE 4. OTHER ASSETS

Financing and leasing fees of approximately $100,000 and $134,000 are net of accumulated amortization of approximately $31,000 and $63,000 at December 31, 2007 and, 2006, respectively.

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 5. MORTGAGE NOTES PAYABLE

At December 31, 2007 and 2006, 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, 2007, the interest rates on these loans ranged from 5.18% to 5.67%, payable in monthly installments aggregating approximately $96,253, including interest, to various dates through 2016. The majority of the mortgages are subject to prepayment penalties. At December 31, 2007, the weighted average interest rate on the above mortgages was 5.29%.

The Joint Ventures have pledged tenant leases as additional collateral for certain of these loans.

Approximate annual maturities at December 31, 2007 are as follows:

	Hamilton Place Sale		Hamilton On Main Apts		Hamilton 1025		Total
2008—Current Maturities	$	—	$	199,364	$	—	$	199,364
2009		—		250,854		—		250,854
2010		—		264,161		—		264,161
2011		—		278,174		—		278,174
2012		—		292,931		4,513		297,444
Thereafter		—		15,539,516		4,995,487		20,535,003

	$	—	$	16,825,000	$	5,000,000	$	21,825,000

NOTE 6. ADVANCE RENTAL PAYMENTS AND SECURITY DEPOSITS

The Joint Ventures' residential lease agreements may require tenants to maintain a one-month advance rental payment and/or a security deposit. At December 31, 2007, amounts received for prepaid rents of approximately $130,852 are included in cash and cash equivalents; security deposits of approximately $69,167 are included with other assets.

NOTE 7. COMMITMENTS AND CONTINGENCIES

From time to time, the Joint Ventures may be involved in various ordinary routine litigation incidental to their business. The Joint Ventures either have insurance coverage or have provided for any uninsured claims, which, in the aggregate, are not significant. The Joint Ventures are not involved in any material pending legal proceedings.

NOTE 8. RENTAL INCOME

Substantially all rental income was related to residential apartments and condominium units with leases of one year of less.

Rents receivable are net of allowances for doubtful accounts of approximately $5,000, $31,000 and $23,000 at December 31, 2007, 2006 and 2005, respectively.

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 9. CASH FLOW INFORMATION

During the years ended December 31, 2007, 2006 and 2005, cash paid for interest was approximately $1,200,000, $1,800,000 and $2,400,000 respectively.

NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Joint Ventures in estimating the fair value of their financial instruments:

•: For cash and cash equivalents, other assets, investment in partnerships, accounts payable, advance rents and security deposits: fair value approximates the carrying value of such assets and liabilities.
•: For mortgage notes payable: fair value is generally based on estimated future cash flows, which are discounted using the quoted market rate from an independent source for similar obligations. Refer to the table below for the carrying amount and estimated fair value of such instruments.

	Carrying Amount		Estimated Fair Value
Mortgage Notes Payable
At December 31, 2007	$	21,825,000	$	21,213,414
At December 31, 2006	$	24,205,745	$	24,752,938

Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2007 and 2006. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 2007 and current estimates of fair value may differ significantly from the amounts presented herein.

NOTE 11. TAXABLE INCOME AND TAX BASIS

The Joint Ventures are not subject to income taxes as they file partnership tax returns whereby their income or loss is reportable by the owners.

Taxable income is different than financial statement income because of accelerated depreciation, different tax lives, and timing differences related to prepaid rents and allowances. Gains from sale of condominiums are taxable at ordinary rates. Taxable income is approximately $400,000 less than statement income for the year ended December 31, 2007. The cumulative tax basis of the Joint Ventures real estate at December 31, 2007 is approximately $90,000 greater than the statement basis.

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES

		Hamilton 1025		Hamilton on Main Apartments		Hamilton Place Sales	Total
2007 Balance Sheet
ASSETS
Rental Properties		7,193,537		25,498,116		2,069,379	34,761,032
Cash & Cash Equivalents		105,981		3,690		409,583	519,254
Rent Receivable		(499	)	9,948		102	9,550
Real Estate Tax Escrow		47,075		416,713		—	463,787
Due From Joint Venture		999,927		(430,591	)	1,130,591	1,699,927
Prepaid Expenses & Other Assets		63,405		319,805		706	383,917
Financing & Leasing Fees		44,777		51,946		3,068	99,791
							—

	Total Assets	8,454,203		25,869,625		3,613,430	37,937,258

LIABILITIES AND PARTNERS' CAPITAL
Mortgage Notes Payable		5,000,000		16,825,000		—	21,825,000
Accounts Payable& Accrued Exp		7,759		125,821		11,814	145,394
Advance Rental Pymts& Security Dep		62,903		152,948		1,318	217,169

Total Liabilities		5,070,662		17,103,769		13,132	22,187,563

Partners' Capital		3,383,543		8,765,854		3,600,298	15,749,695

	Total Liabilities and Capital	8,454,205		25,869,623		3,613,430	37,937,258

Partners' Capital—NERA 50%		1,691,772		4,382,927		1,800,149	7,874,848

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES (Continued)

		Hamilton 1025		Hamilton on Main Apartments		Hamilton Place Sales		Total
2007 Income Statement
Revenues
	Rental Income	800,740		2,345,736		205,146		3,351,622
	Laundry and Sundry Income	—		17,144		—		17,144

		800,740		2,362,880		205,146		3,368,766

Expenses
	Administrative	22,818		51,461		16,601		90,880
	Depreciation and Amortization	365,576		1,579,843		217,113		2,162,532
	Interest	288,307		887,884		50,151		1,226,342
	Management Fees	35,165		95,218		8,183		138,566
	Operating	3,387		305,128		4,869		313,383
	Renting	4,927		13,250		—		18,177
	Repairs and Maintenance	270,217		351,000		145,255		766,471
	Taxes and Insurance	151,350		288,929		76,397		516,676

		1,141,747		3,572,712		518,569		5,233,028

Income Before Other Income		(341,006	)	(1,209,832	)	(313,423	)	(1,864,262	)

Other Income (Loss)
	Interest Income	13,437		720		21,458		35,615
	Gain on Sale of Real Estate	764,548		—		1,193,968		1,958,516
	Other Income (Expenses)	(37,428	)	—		—		(37,428	)

		740,558		720		1,215,426		1,956,704

Net Income (Loss)		399,551		(1,209,113	)	902,004		92,442

P&L—NERA 50%		199,776		(604,556	)	451,002		46,221

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES (Continued)

		Hamilton 1025		Hamilton on Main Apartments		Hamilton Place Sales		Total
2007 Cash Flow Statement
Cash Flows from Oterating Activites
	Net Income (loss)	399,551		(1,209,113	)	902,004		92,442

Adjustments to reconcile net income to net cash provided (used) by operating activites:
	Gain on sale of condominiums	(764,548	)	0		(1,193,968	)	(1,958,516	)
	Depreciation and amortization	365,576		1,579,843		217,113		2,162,532
	Rent Supplement	(2,174	)	0		0		(2,174	)
Changes in operating assets and liabilities:
	(Increase) Decrease in rents receivable	7,478		(9,948	)	(102	)	(2,572	)
	Decrease in accounts payable and accrued expenses	(6,544	)	(23,369	)	(23,588	)	(53,501	)
	(Increase)in real estate tax escrow	(16,137	)	(73,557	)	0		(89,694	)
	(Increase) in due from joint venture	(999,927	)	430,591		(1,130,591	)	(1,699,927	)
	Decrease in financing and leaseing fees	0		0		10,039		10,039
	Decrease in prepaid expsenses and other assets	37,493		3,145		31,721		72,359
	(Decrease) incease in advance rental payments and security deposits	(3,270	)	10,912		(17,724	)	(10,082	)

	Total adjustments	(1,382,053	)	1,917,617		(2,107,100	)	(1,571,536	)

	Net cash provided by (used in)operating activites	(982,502	)	708,504		(1,205,096	)	(1,479,094	)

Cash flows provided by (used in) investing activites
	Proceeds from sales of condominiums	2,564,026		0		8,029,768		10,593,794
	Purchase and improvement of rental properties	(160,063	)	(111,503	)	(467,864	)	(739,430	)

	Net cash provided by (used in) investing activites	2,403,963		(111,503	)	7,561,904		9,854,364

Cash flows provided by (used in) Financing activites
	Principal payments of mortgage & notes payable	0		0		0		0
	Principal payments from sales proceeds	0		0		(2,380,745	)	(2,380,745	)
	Distributions to investors	(1,600,000	)	(600,000	)	(3,600,000	)	(5,800,000	)

	Net cash used in financing activities	(1,600,000	)	(600,000	)	(5,980,745	)	(8,180,745	)

Net increase (decrease) in cash and cash equivalents		(178,539	)	(2,999	)	376,063		194,525
Cash and cash equivalents, at beginning of year		284,520		6,689		33,520		324,729

Cash and cash equivalents, at end of year		105,981		3,690		409,583		519,254

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES (Continued)

2006 Balance Sheet

		Hamilton 1025		Hamilton on Main Apartments		Hamilton Place Sales		Total
ASSETS
Rental Properties		$	9,191,080	$	26,957,758	$	8,644,432	$	44,793,270
Cash and Cash Equivalents			284,520		6,689		33,520		324,729
Rents Receivable			6,979		—		—		6,979
Real Estate Tax Escrows			30,938		343,155		—		374,094
Prepaid Expenses and Other Assets			100,898		322,950		32,427		456,275
Financing and Leasing Fees			50,051		60,642		23,106		133,798

	Total Assets	$	9,664,467	$	27,691,193	$	8,733,484	$	46,089,145

LIABILITIES AND JOINT VENTURES' CAPITAL
Mortgage Notes Payable		$	5,000,000	$	16,825,000	$	2,380,745	$	24,205,745
Accounts Payable and Accrued Expenses			14,303		149,190		35,402		198,896
Advance Rental Payments and Security Deposits			66,173		142,036		19,042		227,251

	Total Liabilities		5,080,476		17,116,226		2,435,190		24,631,892

Joint Ventures' Capital			4,583,992		10,574,967		6,298,294		21,457,253

	Total Liabilities and Joint Ventures' Capital	$	9,664,467	$	27,691,193	$	8,733,484	$	46,089,145

Joint Ventures' Capital—NERA 50%		$	2,291,996	$	5,287,483	$	3,149,147	$	10,728,627

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES (Continued)

2006 Income Statement

		Hamilton 1025			Hamilton on Main Apartments			Hamilton Place Sales			Total
Revenues
	Rental Income	$	912,639		$	2,323,773		$	582,856		$	3,819,267
	Laundry and Sundry Income		15,782			40,256			—			56,038

			928,421			2,364,029			582,856			3,875,306

Expenses
	Administrative		85,710			64,496			8,736			158,943
	Depreciation and Amortization		478,491			1,439,203			420,114			2,337,808
	Interest		473,355			887,425			419,270			1,780,049
	Management Fees		38,870			95,319			23,025			157,214
	Operating		21,190			301,164			11,657			334,011
	Renting		15,396			31,249			2,309			48,955
	Repairs and Maintenance		442,363			353,424			371,852			1,167,640
	Taxes and Insurance		209,530			340,074			168,121			717,725

			1,764,906			3,512,354			1,425,085			6,702,345

Income Before Other Income			(836,485	)		(1,148,325	)		(842,229	)		(2,827,039	)

Other Income (Loss)
	Interest Income		533			(1,933	)		2,240			840
	Gain on Sale of Real Estate		1,394,028			—			1,592,211			2,986,239
	Other Income (Expenses)		50			—			—			50

		$	1,394,611		$	(1,933	)	$	1,594,451		$	2,987,128

Net Income (Loss)		$	558,126		$	(1,150,259	)	$	752,222		$	160,089

NERA 50%		$	279,063		$	(575,129	)	$	376,111		$	80,045

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES (Continued)

2006 Cash Flow Statement

	Hamilton 1025			Hamilton on Main Apartments			Hamilton Place Sales			Total
Cash Flows from Operating Activities
Net income (loss)	$	558,126		$	(1,150,259	)	$	752,222		$	160,089

Adjustments to reconcile net income to net cash provided (used) by operating activities:
Gain on sale of condominiums		(1,394,028	)		—			(1,592,211	)		(2,986,239	)
Depreciation and amortization		478,491			1,439,203			420,114			2,337,808
Changes in operating assets and liabilities:
(Increase) Decrease in rents receivable		6,933			11,185			26			18,144
(Decrease) increase in accounts payable and accrued expense		(28,490	)		(18,169	)		(6,037	)		(52,696	)
(Increase) in real estate tax escrow		(30,938	)		(152,070	)		—			(183,008	)
(Increase) decrease in financing and leasing fees		(50,513	)		(2,167	)		10,475			(42,205	)
(Increase) Decrease in prepaid expenses and other assets		107,796			(148,940	)		155,839			114,695
(Decrease) Increase in advance rental payments and security deposits		(10,388	)		7,948			(21,777	)		(24,217	)

Total Adjustments		(921,138	)		1,136,991			(1,033,571	)		(817,718	)

Net cash provided by (used in) operating activities		(363,012	)		(13,268	)		(281,349	)		(657,629	)

Cash Flows Used in Investing Activities
Proceeds from sales of condominiums		4,265,047			—			7,265,599			11,530,646
Transfers between affiliates		—			107,833			(107,833	)		—
Purchase and improvement of rental properties		(259,699	)		(223,090	)		(284,603	)		(767,392	)

Net cash provided by (used in) investing activities		4,005,348			(115,257	)		6,873,163			10,763,254

Cash Flows Used in Financing Activities
Proceeds of mortgage notes payable		5,000,000			—			—			5,000,000
Principal payments of mortgage notes payable		(4,818,886	)		—			—			(4,818,886	)
Principal payments from sales proceeds		(4,432,114	)		—			(6,475,529	)		(10,907,643	)
Transfers between affiliates		—			823,071			(823,071	)		—
Distributions to/investment by investors		(100,000	)		600,000			—			500,000

Net cash provided by (used in) financing activities		(4,351,000	)		1,423,071			(7,298,600	)		(10,226,529	)

Net Increase (Decrease in) Cash and Cash Equivalents		(708,664	)		1,294,546			(706,786	)		(120,904	)
Cash and Cash Equivalents, at beginning of year		993,185			(1,287,856	)		740,305			445,634

Cash and Cash Equivalents, at end of year	$	284,521		$	6,690		$	33,518		$	324,730

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES (Continued)

2005 Balance Sheet

		Hamilton 1025		Hanilton on Main Apartments			Hamilton Place Sales		Total
ASSETS
Rental Properties		$	12,232,851	$	28,270,841		$	14,332,670	$	54,836,362
Cash and Cash Equivalents			993,185		(1,287,856	)		740,305		445,634
Rents Receivable			13,912		11,185			26		25,123
Real Estate Tax Escrows			—		191,085			—		191,085
Prepaid Expenses and Other Assets			208,694		174,010			188,266		570,969
Financing and Leasing Fees			47,578		69,338			46,409		163,325

	Total Assets	$	13,496,220	$	27,428,602		$	15,307,676	$	56,232,497

LIABILITIES AND JOINT VENTURES' CAPITAL
Mortgage Notes Payable		$	9,251,000	$	16,825,000		$	8,856,275	$	34,932,274
Accounts Payable and Accrued Expense			42,793		167,359			41,439		251,591
Advance Rental Payments and Security Deposits			76,561		134,088			40,819		251,468

	Total Liabilities		9,370,354		17,126,447			8,938,533		35,435,333

Joint Ventures' Capital			4,125,866		10,302,154			6,369,143		20,797,164

	Total Liabilities and Joint Ventures' Capital	$	13,496,220	$	27,428,601		$	15,307,676	$	56,232,497

Joint Ventures' Capital—NERA 50%		$	2,062,933	$	5,151,077		$	3,184,572	$	10,398,582

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES (Continued)

2005 Income Statement

		Hamilton 1025			Hamilton on Main Apartments			Hamilton Place Sales			Total
Revenues
	Rental Income	$	1,309,804		$	2,277,266		$	1,198,451		$	4,785,521
	Laundry and Sundry Income		13,975			21,634			—			35,609

			1,323,778			2,298,901			1,198,451			4,821,130

Expenses
	Administrative		114,029			71,181			2,157			187,367
	Depreciation and Amortization		683,066			1,460,370			598,084			2,741,521
	Interest		638,370			1,041,315			691,245			2,370,930
	Management Fees		30,331			94,480			17,525			142,337
	Operating		34,988			342,926			14,938			392,852
	Renting		62,845			33,708			19,004			115,556
	Repairs and Maintenance		615,581			567,038			608,265			1,790,884

	Taxes and Insurance		224,248			352,033			210,924			787,205

			2,403,459			3,963,051			2,162,143			8,528,652

Income Before Other Income			(1,079,680	)		(1,664,150	)		(963,692	)		(3,707,522	)
Other Income (Loss)
	Interest Income		357			—			—			357
	Gain on Sale of Real Estate		4,525,190			—			3,959,173			8,484,363
	Other Income (Expenses)		—			(404,881	)		—			(404,881	)

		$	4,525,546		$	(404,881	)	$	3,959,173		$	8,079,839

Net Income (Loss)		$	3,445,866		$	(2,069,031	)	$	2,995,481		$	4,372,316

NERA 50%		$	1,722,933		$	(1,034,515	)	$	1,497,741		$	2,186,158

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES (Continued)

2005 Cash Flow Statement

	Hamilton 1025			Hamilton on Main Apartments			Hamilton Place Sales			Total
Cash Flows from Operating Activities
Net income (loss)	$	3,445,866		$	(2,069,031	)	$	2,995,481		$	4,372,316

Adjustments to reconcile net income to net cash provided (used) by operating activities:
Gain on sale of condominiums		(4,525,190	)		—			(3,959,173	)		(8,484,363	)
Depreciation and amortization		683,066			1,460,370			598,084			2,741,521
Changes in operating assets and liabilities:
(Increase) Decrease in rents receivable		(13,912	)		1,798			(26	)		(12,140	)
(Decrease) increase in accounts payable and accrued expense		42,793			(156,545	)		41,439			(72,313	)
(Increase) in real estate tax escrow		—			(191,085	)		—			(191,085	)
(Increase) decrease in financing and leasing fees		(240,979	)		75,127			(165,157	)		(331,009	)
(Increase) Decrease in prepaid expenses and other assets		(208,694	)		(10,974	)		(188,266	)		(407,934	)
(Decrease) Increase in advance rental payments and security deposits		76,561			(35,091	)		40,819			82,289

Total Adjustments		(4,186,355	)		1,143,600			(3,632,280	)		(6,675,034	)

Net cash provided by (used in) operating activities		(740,489	)		(925,431	)		(636,798	)		(2,302,718	)

Cash Flows Used in Investing Activities
Proceeds from sales of condominiums		16,177,557			—			16,860,032			33,037,589
Transfers between affiliates		—			27,259,994			(27,259,994	)		—
Purchase and improvement of rental properties		(24,374,883	)		(833,263	)		(452,871	)		(25,661,017	)

Net cash provided by (used in) investing activities		(8,197,326	)		26,426,731			(10,852,833	)		7,376,572

Cash Flows Used in Financing Activities
Proceeds of mortgage notes payable		24,200,000			578,183			961,902			25,740,085
Principal payments of mortgage notes payable		—			(26,057	)		—			(26,057	)
Principal payments from sales proceeds		(14,949,000	)		(3,012,400	)		(13,057,916	)		(31,019,316	)
Transfers between affiliates		—			(24,325,952	)		24,325,952			—
Distributions to/investment by investors		680,000			(50,000	)		—			630,000

Net cash provided by (used in) financing activities		9,931,000			(26,836,226	)		12,229,938			(4,675,288	)

Net Increase (Decrease in) Cash and Cash Equivalents		993,185			(1,334,926	)		740,307			398,566
Cash and Cash Equivalents, at beginning of year		—			47,070			—			47,070

Cash and Cash Equivalents, at end of year	$	993,185		$	(1,287,856	)	$	740,307		$	445,636

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 13. NEW ACCOUNTING PRONOUNCEMENT

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements ("SFAS No. 157"). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS No. 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective in fiscal years beginning after November 15, 2007. We believe that the adoption of this standard on January 1, 2008 will not have a material effect on our consolidated financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 ("SAB 108"), which becomes effective for the first fiscal period ending after November 15, 2006. SAB 108 provides guidance on the consideration of the effects of prior period misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 provides for the quantification of the impact of correcting all misstatements, including both the carryover and reversing effects of prior year misstatements, on the current year financial statements. The adoption of SAB 108 on December 21, 2006 did not have a material effect on our consolidated financial statements.

In February 2007, the FASB issued statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("FASB No. 159").SFASB No. 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement is effective for fiscal years beginning after November 15, 2007. We have not decided if we will early adopt SFAS No. 159 or if we will choose to measure any eligible financial assets and liabilities at fair value.

FASB No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. FASB No. 159 is expected to expand the use of fair value measurement, which is consistent with FASB's long-term measurement objectives for accounting for financial instruments. This Statement applies to all entities, including not-for-profit organizations. Most of the provisions of this Statement apply only to entities that elect the fair value option. However, the amendment to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. Some requirements apply differently to entities that do not report net income.

The following are eligible items for the measurement option established by FASB No. 159.

1.

Recognized financial assets and financial liabilities except:

a.: An investment in a subsidiary that the entity is required to consolidate;
b.: An interest in a variable interest entity that the entity is required to consolidate;

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 13. NEW ACCOUNTING PRONOUNCEMENT (Continued)

c.: Employers' and plans' obligations (or assets representing net over funded positions) for pension benefits, other postretirement benefits (including health care and life insurance benefits), post employment benefits, employee stock option and stock purchase plans, and other forms of deferred compensation arrangements, as defined in FASB Statements No. 35, Accounting and Reporting by Defined Benefit Pension Plans, No. 87, Employers' Accounting for Pensions, No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, No. 112, Employers' Accounting for Post employment Benefits, No. 123 (revised December 2004), Share-Based Payment, No. 43, Accounting for Compensated Absences, No. 146, Accounting for Costs Associated with Exit or Disposal Activities, and No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, and APB Opinion No. 12, Omnibus Opinion—1967;
d.: Financial assets and financial liabilities recognized under leases as defined in FASB Statement No. 13, Accounting for Leases (This exception does not apply to a guarantee of a third-party lease obligation or a contingent obligation arising from a cancelled lease.);
e.: Deposit liabilities, withdrawal on demand, of banks, savings and loan associations, credit unions, and other similar depositary institutions; and
f.: Financial instruments that are, in whole or in part, classified by the issuer as a component of shareholder's equity (including "temporary equity"). An example is a convertible debt security with a noncontingent beneficial conversion feature.

2.: Firm commitments that would otherwise not be recognized at inception and that involve only financial instruments.
3.: Nonfinancial insurance contracts and warranties that the insurer can settle by paying a third party to provide those goods or services.
4.: Host financial instruments resulting from separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument.

The fair value option established by FASB No. 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. FASB No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. The Company does not expect that the implementation of FASB No. 159 will have a material effect on the Company's consolidated financial position or results of operations.

FASB Statement No. 141(R)—(revised 2007), ("FASB No. 141(R)"), Business Combinations

In December 2007, the FASB issued FASB No. 141(R) which establishes principles and requirements for how the acquirer shall recognize and measure in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree and goodwill acquired in a business combination. This statement is effective for business combinations for which the

HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2007

NOTE 13. NEW ACCOUNTING PRONOUNCEMENT (Continued)

acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently assessing the potential impact that the adoption of FASB No. 141(R) will have on its financial position and results of operations.

FASB Statement No. 160 ("FASB No. 160"), Noncontrolling Interests in Consolidated Financial Statements—an Amendment of ARB No. 51

In December 2007, the FASB issued No. 160, which establishes and expands accounting and reporting standards for minority interests, which will be recharacterized as noncontrolling interests, in a subsidiary and the deconsolidation of a subsidiary. FASB 160 is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. This statement is effective for fiscal years beginning on or after December 15, 2008. The Company is currently assessing the potential impact that the adoption of FASB No. 160 will have on its financial position and results of operations.

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Exhibit 99.1