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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

3 Months Ended

Mar. 31, 2012

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

Since November 2001, the Partnership has invested in nine limited partnerships and limited liability companies, the majority of which have invested in residential apartment complexes, with three partnerships investing in commercial property. The Partnership has between a 40%-50% ownership interests in each investment. The other investors are Harold Brown, the President of the Management Company and five other employees of the Management Company. Harold Brown’s ownership interest is between 43.2% and 57%, 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, referred to as Dexter Park, is a 409 unit residential complex. The purchase price was $129,500,000. The total mortgage is $89,914,000 with an interest rate of 5.57% and it matures in 2019. The mortgage calls for interest only payments for the first two years of the loan and amortized over 30 years thereafter. The balance of this mortgage is approximately $89,452,000 at March 31, 2012. In order to fund this investment, the Partnership used approximately $8,757,000 of its cash reserves and borrowed $7,168,600 with an interest rate of 6% from HBC Holdings, LLC, an entity owned by Harold Brown and his affiliates (“HBC”). The term of the loan is four years with a provision requiring payment in whole or in part upon demand by HBC with six months notice. On August 17, 2010, HBC gave six months written notice to the Partnership requesting a principal pay down of $2,500,000. During the fourth quarter of 2010, the Partnership paid HBC $2,500,000 as requested. During 2011, the Partnership elected to make principal payments of $1,000,000 on August 1, 2011, $1,000,000 on October 3, 2011, and an additional $1,000,000 on December 15, 2011 reducing the loan balance to $1,668,600. In February 2012, the Partnership elected to make an additional principal payment of $750,000 to HBC Holdings leaving the loan balance at $918,600. The interest paid during the three months ended March 31, 2012 and 2011 was approximately $18,807 and $70,029 respectively. On April 2, 2012, the balance of the loan, $918,600 was repaid to HBC and the interest for April was $153. This loan was collateralized by the Partnership’s 99% ownership interest in 62 Boylston Street. This investment, Hamilton Park Towers, LLC is referred to as Dexter Park.

On October 3, 2005, the Partnership invested $2,500,000 for a 50% ownership interest in a 168-unit apartment complex in Quincy, Massachusetts. The purchase price was $30,875,000. The Partnership plans to sell the majority of units as condominium and retain 48 units for long-term investment. Gains from the sales of units will be taxed at ordinary income rates (approximately $47,000 per unit). In February 2007, the Partnership refinanced the 48 units which will be retained with a new mortgage in the amount of $4,750,000 with an interest rate of 5.57%, interest only for five years. The loan will be amortized over 30 years thereafter and matures in March 2017. The balance of this mortgage is $4,745,604 at March 31, 2012. This investment is referred to as Hamilton Bay Apartments, LLC. In April 2008, the Partnership refinanced an additional 20 units and obtained a new mortgage in the amount of $2,368,000 with interest at 5.75%, interest only, which matures in 2013. As of May 1, 2012, 105 units have been sold, the proceeds of which went to pay down the mortgage on the property. The balance on the new mortgage is approximately $1,668,000 at March 31, 2012. This investment is referred to as Hamilton Bay, LLC.

On March 7, 2005, the Partnership invested $2,000,000 for a 50% ownership interest in a building comprising 49 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 Partnership plans to operate the building and initiate development of the parking lot. In June 2007, the Partnership 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 Partnership restructured the mortgages on both parcels at Essex 81 and transferred the residential apartments to Hamilton Essex 81, LLC. The mortgage on Hamilton Essex 81, LLC is $8,434,538 with interest only at 5.79% due in August 2016. The mortgage on Essex Development, LLC, or the parking lot is $2,131,893 with a variable interest rate of 2.25% over the daily Libor rate (0.24% at March 31, 2012). This loan was extended to August 2013 with the same conditions except for the addition of fixed principal payments in the amount of $4,301 per month. The cost associated with the extension was approximately $10,000. Harold Brown has issued a personal guaranty up to $1,000,000 of this mortgage. In the event that he is obligated to make payments to the lender as a result of this guaranty, the Partnership and other investors have, in turn, agreed to indemnify him for their proportionate share of any such payments. 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 Partnership sold 127 of the units as condominiums and retained 49 units for long-term investment. The Partnership obtained a new 10-year mortgage in the amount of $5,000,000 on the units to be retained by the Partnership. The interest on the new loan is 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. The balance of this mortgage is $4,980,237 at March 31, 2012. 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 Partnership obtained a mortgage on the property in the amount of $8,025,000 and returned $3,775,000 to the Partnership. The Partnership obtained a new 10-year mortgage in the amount of $5,500,000 in January 2007. The interest on the new loan is 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. The balance of this mortgage is $5,483,296 at March 31, 2012. This loan required a cash contribution by the Partnership of $1,250,000 in December 2006. 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. As of May 2008, the Partnership sold 137 units as condominiums. The majority of the sales proceeds were applied to reduce the mortgage with the final payment made during the second quarter of 2007. With the sale of the units and the payments of the liabilities, the assets were combined with Hamilton on Main Apartments, LLC. 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 is $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. Hamilton on Main LLC paid a fee of approximately $400,000 in connection with this early extinguishment of debt. At March 31, 2012, the remaining balance on the mortgage is approximately $15,818,000.

In November 2001, the Partnership invested approximately $1,533,000 for a 50% ownership interest in a 40-unit apartment building in Cambridge, Massachusetts. This property has a 12-year mortgage, with a remaining balance at March 31, 2012 of approximately $6,978,000 at 6.9% which is amortized on a 30-year schedule, with a final payment of approximately $6,000,000 in 2014. This investment is referred to as 345 Franklin, LLC.

As required by the lender, the Treasurer of the General Partner has provided a limited repayment guaranty equal to fifty percent (50%) of the outstanding balance for the loan on the for sale units at Hamilton Bay and a limited guaranty of $1,000,000 for the loan on Hamilton Essex Development. In the event that he is obligated to make payments to the lenders as a result of these guaranties, the Partnership and other investors have, in turn, agreed to indemnify him for their proportionate share of any such payments.

Summary financial information as of March 31, 2012

		Hamilton Essex 81		Hamilton Essex Development		345 Franklin		Hamilton 1025		Hamilton Bay Sales		Hamilton Bay Apts		Hamilton Minuteman		Hamilton on Main Apts		Dexter Park		Total

ASSETS
Rental Properties		9,356,056		2,612,441		8,130,633		5,803,255		1,900,710		7,187,774		7,226,200		21,732,865		111,614,723		175,564,657
Cash & Cash Equivalents		728		10,310		18		36		14,195		6,335		53,389		27,052		925,695		1,037,758
Rent Receivable		38,562				4,214		12,710		662		9,517		802		8,519		71,771		146,757
Real Estate Tax Escrow		97,575				37,805		66,735		—		91,144		42,984		104,274		532,983		973,500
Prepaid Expenses & Other Assets		79,815		197		85,712		91,752		168,599		98,145		74,321		256,429		1,240,741		2,095,713
Financing & Leasing Fees		68,301		4,367		14,288		23,415		5,303		31,014		18,926		19,727		444,166		629,507
Total Assets		9,641,037		2,627,315		8,272,669		5,997,904		2,089,470		7,423,929		7,416,622		22,148,866		114,830,078		180,447,892
LIABILITIES AND PARTNERS’ CAPITAL
Mortgage Notes Payable		8,434,538		2,131,893		6,977,967		4,980,237		1,668,000		4,745,604		5,483,296		15,818,388		89,451,858		139,691,783
Accounts Payable & Accrued Expense		48,138		5,459		74,832		49,511		23,664		31,671		138,907		210,546		935,504		1,518,234
Advance Rental Pmts & Security Deposits		144,534		—		127,574		76,067		18,342		88,727		65,361		249,290		1,855,441		2,625,336
Total Liabilities		8,627,211		2,137,352		7,180,373		5,105,816		1,710,006		4,866,003		5,687,565		16,278,224		92,242,803		143,835,352
Partners’ Capital		1,013,827		489,963		1,092,296		892,089		379,464		2,557,926		1,729,057		5.870,642		22,587,275		36,612,540
Total Liabilities & Capital		9,641,037		2,627,315		8,272,669		5,997,904		2,089,470		7,423,929		7,416,622		22,148,866		114,830,078		180,447,892
Partners’ Capital — NERA 50%		506,913		244,982		546,148		446,044		189,732		1,278,963		864,529		2,935,321				7,012,632
NERA 40%																		9,034,910		9,034,910
																				16,047,542
Total units/ condominiums
Apartments		48		—		40		175		120		48		42		148		409		1,030
Commercial		1		1		—		1		—		—		—		—		—		3
Total		49		1		40		176		120		48		42		148		409		1,033
Units to be retained		49		1		40		49		—		48		42		148		409		786
Units to be sold		—		—		—		127		120		—		—		—		—		247
Units sold through May 1, 2012		—		—		—		127		105		—		—		—		0		232
Unsold units		—		—		—		—		15		—		—		—		—		15
Unsold units with deposits for future sale as of May 1, 2012		—		—		—		—		0		—		—		—		—		—

Summary financial information for the three months ended March 31, 2012

		Hamilton Essex 81		Hamilton Essex Development		345 Franklin		Hamilton 1025		Hamilton Bay Sales		Hamilton Bay Apts		Hamilton Minuteman		Hamilton on Main Apts		Dexter Park		Total
Revenues
Rental Income		292,493		72,046		291,651		210,028		51,478		219,663		196,703		647,884		3,011,578		4,993,524
Laundry and Sundry Income		3,533		—		588		—		—		—		408		5,363		22,500		32,392
		296,026		72,046		292,239		210,028		51,478		219,663		197,111		653,246		3,034,078		5,025,915
Expenses
Administrative		3,275		567		6,505		291		2,207		8,360		950		13,795		42,862		78,811
Depreciation and Amortization		103,123		3,242		109,982		63,117		19,736		74,364		78,933		236,657		1,432,044		2,121,198
Management Fees		12,818		2,882		12,002		8,552		2,050		8,393		8,038		25,509		63,261		143,505
Operating		30,322				15,144		66		671		688		24,707		104,387		303,347		479,331
Renting		1,940				139		1,669		915		894		910		2,024		30,991		39,483
Repairs and Maintenance		22,552		375		15,845		69,794		16,767		64,381		11,976		94,359		144,769		440,817
Taxes and Insurance		50,186		12,342		25,265		36,921		11,642		40,775		25,410		85,124		380,130		667,794
		224,216		19,408		184,879		180,410		53,988		197,856		150,925		561,854		2,397,403		3,970,939
Income Before Other Income		71,810		52,638		107,360		29,618		(2,510	)	21,807		46,186		91,392		636,675		1,054,976
Other Income (Loss)
Interest Expense		(124,483	)	(15,293	)	(124,599	)	(72,020	)	(24,426	)	(67,690	)	(79,357	)	(209,719	)	(1,272,739	)	(1,990,325	)
Interest Income		—		—		12		20		61		—		—		—		—		92
Interest Income from Note		—		—		—		—		1,808		—		—		—		—		1,808
		(124,483	)	(15,293	)	(124,587	)	(72,000	)	(22,557	)	(67,690	)	(79,357	)	(209,719	)	(1,272,739	)	(1,988,425	)
Net Income (loss)		(52,672	)	37,345		(17,228	)	(42,382	)	(25,068	)	(45,882	)	(33,171	)	(118,326	)	(636,064	)	(933,448	)
Net Income (loss) - NERA 50%		(26,336	)	18,672		(8,614	)	(21,191	)	(12,534	)	(22,941	)	(16,586	)	(59,163	)			(148,692	)
NERA 40%																		(254,425	)	(254,425	)
																				(403,118	)

Future annual mortgage maturities at March 31, 2012 are as follows:

		Hamilton Essex 81		Hamilton Essex Development		345 Franklin		Hamilton 1025		Hamilton Bay Sales		Hamilton Bay Apts		Hamilton Minuteman		Hamilton on Main Apts		Dexter Park
Period End		March 2005		March 2005		November 2001		March 2005		October 2005		October 2005		August 2004		August 2004		October 2009		Total
March 31, 2013		128,963		2,131,893		171,872		62,402				64,197		68,345		281,870		1,251,775		4,161,318
March 31, 2014		127,488				6,806,096		66,085		1,668,000		67,089		72,379		297,208		1,293,683		10,398,029
March 31, 2015		135,069						69,986				70,922		76,651		15,239,310		1,367,610		16,959,548
March 31, 2016		8,043,019						73,370				74,975		80,353				1,445,761		9,717,478
March 31, 2017								4,708,394				4,468,420		5,185,568				1,528,378		15,890,760
Thereafter																		82,564,652		82,564,652
		8,434,538		2,131,893		6,977,967		4,980,237		1,668,000		4,745,604		5,483,296		15,818,388		89,451,858		139,691,783

		Hamilton Essex 81		Hamilton Essex Development		345 Franklin		Hamilton 1025		Hamilton Bay Sales		Hamilton Bay Apts		Hamilton Minuteman		Hamilton on Main Apts		Dexter Park		Total

ASSETS
Rental Properties		9,741,901		2,595,466		8,544,652		6,019,739		1,986,926		7,493,466		7,528,318		22,603,616		117,082,691		183,596,776
Cash & Cash Equivalents		16,253		39,101		34,218		9,714		46,053		36,686		33,291		24,336		971,275		1,210,928
Rent Receivable		18,652				5,268		9,451		1,046		6,622		3,719		4,789		71,815		121,361
Real Estate Tax Escrow		86,163				37,496		57,224				81,503		39,025		96,324		533,430		931,166
Prepaid Expenses & Other Assets		50,450		192		48,355		77,332		198,847		82,148		40,610		444,824		1,132,034		2,074,793
Financing & Leasing Fees		90,307		2,612		22,454		28,442		10,368		37,376		22,895		26,588		503,566		744,608
Total Assets		10,003,726		2,637,371		8,692,444		6,201,902		2,243,240		7,737,800		7,667,858		23,200,479		120,294,812		188,679,631
LIABILITIES AND PARTNERS’ CAPITAL
Mortgage Notes Payable		8,539,527		2,162,000		7,138,412		5,000,000		1,668,000		4,750,000		5,500,000		16,083,855		89,914,000		140,755,793
Accounts Payable & Accrued Expense		46,235		7,769		36,118		53,786		6,547		7,792		60,308		208,125		807,720		1,234,400
Advance Rental Pmts & Security Dep		145,837				117,743		66,692		20,819		81,635		64,739		243,096		1,766,796		2,507,358
Total Liabilities		8,731,599		2,169,769		7,292,272		5,120,478		1,695,365		4,839,427		5,625,047		16,535,076		92,488,516		144,497,550
Partners’ Capital		1,272,127		467,602		1,400,171		1,081,424		547,875		2,898,373		2,042,811		6,665,403		27,806,296		44,182,081
Total Liabilities & Capital		10,003,726		2,637,371		8,692,444		6,201,902		2,243,240		7,737,800		7,667,858		23,200,479		120,294,812		188,679,631
Partners’ Capital – NERA 50%		636,064		233,801		700,086		540,712		273,937		1,449,186		1,021,405		3,332,701				8,187,893
NERA 40%																		11,122,518		11,122,518
																				19,310,411
Total units/ condominiums
Apartments		48		—		40		175		120		48		42		148		409		1,030
Commercial		1		1		—		1		—		—		—		—		—		3
Total		49		1		40		176		120		48		42		148		409		1,033
Units to be retained		49		1		40		49		—		48		42		148		409		786
Units to be sold		—		—		—		127		120		—		—		—		—		247
Units sold through May 3 , 2011		—		—		—		127		105		—		—		—		0		232
Unsold units		—		—		—		—		15		—		—		—		—		15
Unsold units with deposits for future sale as of May 3, 2011		—		—		—		—		0		—		—		—		—		—

Summary information for the three months ended March 31, 2011

		Hamilton Essex 81		Hamilton Essex Development		345 Franklin		Hamilton 1025		Hamilton Bay Sales		Hamilton Bay Apts		Hamilton Minuteman		Hamilton on Main Apts		Dexter Park		Total
Revenues
Rental Income		288,852		69,000		281,770		198,291		57,290		214,939		193,006		613,563		2,892,080		4,808,790
Laundry and Sundry Income		3,938				628										6,090		25,590		36,246
		292,790		69,000		282,398		198,291		57,290		214,939		193,006		619,653		2,917,671		4,845,037
Expenses
Administrative		4,797		382		4,373		2,041		909		3,072		6,523		10,706		32,356		65,158
Depreciation and Amortization		105,698		1,563		110,587		64,212		22,416		78,135		80,454		239,951		1,423,077		2,126,093
Management Fees		12,498		2,760		11,098		7,879		2,432		8,245		7,895		25,557		62,813		141,177
Operating		38,416				23,076		618		44		50		22,475		124,158		283,307		492,144
Renting		5,100				6,000		3,459				926		1,252		3,218		54,726		74,682
Repairs and Maintenance		26,662				13,788		77,252		14,830		63,521		21,000		71,827		164,211		453,091
Taxes and Insurance		47,185		11,908		23,659		36,597		11,366		39,102		21,834		80,881		286,440		558,973
		240,356		16,613		192,581		192,057		51,997		193,051		161,435		556,299		2,306,931		3,911,319
Income Before Other Income		52,434		52,387		89,817		6,234		5,293		21,888		31,571		63,354		610,740		933,718
Other Income (Loss)
Interest Expense		(124,604	)	(15,446	)	(124,576	)	(71,274	)	(24,150	)	(66,879	)	(78,289	)	(210,165	)	(1,261,882	)	(1,977,263	)
Interest Income						12		22		141								3,219		3,394
Interest Income from Note										2,471										2,471
		(124,604	)	(15,446	)	(124,563	)	(71,252	)	(21,538	)	(66,879	)	(78,289	)	(210,165	)	(1,258,663	)	(1,971,397	)
Net Income (loss)		(72,170	)	36,942		(34,746	)	(65,018	)	(16,245	)	(44,991	)	(46,718	)	(146,811	)	(647,923	)	(1,037,680	)
Net Income (loss) - NERA 50%		(36,085	)	18,471		(17,373	)	(32,509	)	(8,122	)	(22,495	)	(23,359	)	(73,406	)			(194,878	)

NERA 40%																		(259,169	)	(259,169	)
																				(454,047	)

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

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