MORTGAGE NOTES PAYABLE

12 Months Ended

Dec. 31, 2023

MORTGAGE NOTES PAYABLE

MORTGAGE NOTES PAYABLE

NOTE 5. MORTGAGE NOTES PAYABLE

Mortgages Payable

At December 31, 2023 and 2022, 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, 2023, the interest rates on these loans ranged from 2.97% to 4.95%, payable in monthly installments aggregating approximately $1,523,000, including principal, to various dates through 2035. The majority of the mortgages are subject to prepayment penalties. At December 31, 2023, the weighted average interest rate on the above mortgages was 3.68%. The effective rate of 3.78% includes the amortization expense of deferred financing costs. See Note 12 for fair value information. The Partnership’s mortgage debt and the mortgage debt of its unconsolidated joint ventures generally is non-recourse except for customary exceptions pertaining to misuse of funds and material misrepresentations.

Financing fees of approximately $2,779,000 and $3,159,000 are net of accumulated amortization of approximately $1,353,000 and $973,000 at December 31, 2023 and 2022, respectively, which offset the Mortgage Notes Payable.

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

Approximate annual maturities at December 31, 2023 are as follows:

2024—current maturities	$	2,853,000
2025		3,602,000
2026		25,112,000
2027		23,271,000
2028		31,875,000
Thereafter		324,726,000
		411,439,000
Less: unamortized deferred financing costs		2,779,000
	$	408,660,000

On June 16, 2022, the Partnership entered into an amendment to the Facility Agreement. The additional advance under the Amended Agreement is in the amount of $80,284,000, at a fixed interest rate of 4.33%. The Partnership’s obligations under the Facility Agreement are secured by mortgages on certain properties pursuant to certain Mortgage, Assignment of Leases and Rents, and Security Agreement and Fixture Filings.

The Partnership used the proceeds to pay down approximately $37,065,000 of existing debt secured by four properties, along with approximately $834,000 in prepayment penalties. The remaining balance of approximately $42,404,000 will be used for general partnership purposes.

On November 30, 2021, New England Realty Associates Limited Partnership (the “Partnership”), entered into a Master Credit Facility Agreement ( the “Facility Agreement”) with KeyBank National Association (“KeyBank”) dated as of November 30, 2021, with an initial advance in the amount of $156,000,000. Interest only on the debt at a fixed interest rate of 2.97% is payable on a monthly basis through December 31, 2031. The Partnership’s obligations under the Facility Agreement are secured by mortgages on certain properties pursuant to certain Mortgage, Assignment of Leases and Rents, and Security Agreement and Fixture Filings (“Mortgages”).

The Partnership used the proceeds to pay down approximately $65,305,000 of existing debt secured by 11 properties, along with approximately $2,700,000 in prepayment penalties. The remaining balance of approximately $89,000,000 will be used for general partnership purposes.

The breakout by property of the material balances by year are as follows:

		PREVIOUS		CURRENT		DEFERRED
		MORTGAGE		MORTGAGE		FINANCE		PREPAYMENT
PROPERTY NAME		BALANCE		BALANCE		COSTS		PENALTY
Clovelly Apts LP	$	4,160,000	$	11,214,000	$	121,817	$	167,141
Comm 1137 LP		3,750,000		5,440,000		60,504		151,314
Comm 1144 LP		14,780,000		32,325,000		340,007		592,728
Executive Apts LP		2,415,000		8,190,000		89,333		96,434
N.Beacon 140 LP		6,937,000		12,683,000		135,813		277,003
Olde English Apt LP		3,080,000		9,608,000		104,345		123,956
Redwood Hills LP		6,743,000		17,105,000		188,406		271,204
River Dr. LP		3,465,000		9,543,000		104,605		139,218
Highland St. Apts LP		1,050,000		3,960,000		45,076		41,928
WCB Assoc. LLC		7,000,000		19,266,000		204,586		408,873
Hamilton Oaks Assoc. LP		11,925,000		26,666,000		281,596		476,180
	$	65,305,000	$	156,000,000	$	1,676,088	$	2,745,979
		PREVIOUS		CURRENT		DEFERRED
		MORTGAGE		MORTGAGE		FINANCE		PREPAYMENT
PROPERTY NAME		BALANCE		BALANCE		COSTS		PENALTY
Dean Street	$	5,687,000	$	10,322,000	$	109,841	$	160,943
School Street		13,178,000		26,993,000		287,159		171,676
Westgate Apartments		15,700,000		38,475,000		409,299		401,714
Courtyard at Westgate		2,500,000		4,494,000		47,831		100,211
	$	37,065,000	$	80,284,000	$	854,130	$	834,544

On October 14, 2022, the Partnership entered into a loan agreement with Brookline Bank refinancing its loan on 659-665 Worcester Road, Framingham, MA. The agreement pays down the loan on the existing debt of $5,954,546.14, extends the maturity until October 14, 2032, at a variable interest rate of SOFR rate, plus 1.7% interest only for 2 years and amortizing using a thirty-year schedule for the balance of the term. At closing, the Partnership entered into an interest rate swap contract with Brookline Bank with a notional amount equivalent to the underlying loan principal amortization, resulting in a fixed rate of 4.60% through the expiration of the interest rate swap contract. The agreement also allows for an earn out of up to an additional $1,495,453.86 once the property performance reaches a 1.35x debt service coverage ratio and the loan to value equates to at most 65%.

Line of Credit

On July 31, 2014, the Partnership entered into an agreement for a $25,000,000 revolving line of credit. The term of the line was for three years with a floating interest rate equal to a base rate of the greater of (a) the Prime Rate (b) the Federal Funds Rate plus one-half of one percent per annum, or (c) the LIBOR Rate for a period of one month plus 1% per annum, plus the applicable margin of 2.5%. The agreement originally expired on July 31, 2017, and was extended until October 31, 2020. The costs associated with the line of credit extension were approximately $128,000. Prior to the line’s expiration in 2020, the Partnership exercised its option for a one-year extension until October 31, 2021. The Partnership paid an extension fee of approximately $37,500 in association with the extension.

On October 29, 2021, the Partnership closed on the modification of its existing line of credit. The agreement extends the credit line for three years until October 29, 2024. The commitment amount is for $25 million but is restricted to $17 million during the modification period. The modification period covered the current period and phased out on December 31, 2022. During this period, the loan covenants were modified from a minimum consolidated debt service ratio of 1.60 to a ratio of 1.35 until September 30, 2022; from a minimum tangible net worth requirement of $200 million to a net worth of $175 million until September 30, 2022; from a maximum consolidated leverage ratio of 65% to a ratio of 70% until September 30, 2022 and from a minimum debt yield of 9.5% to a yield of 8.5% until September 30, 2022 and a yield of 9.0% until December 31, 2022. Once the financial performance of the Partnership meets the original covenant tests for the trailing 12-month period, the commitment amount will return to $25 million. The portfolio’s debt yield fell below the minimum of 9.5% to 8.6%. Consequently, as of December 31, 2023, the Partnership did not comply with the debt yield financial covenant. As such, the Partnership is restricted to draw down any amount from the line of credit until the Partnership meets the required financial covenants. The Partnership is currently in discussions with a Lender for a replacement line of credit. See Note 19, SUBSEQUENT EVENTS, for additional information.

The interest rate for the new term was LIBOR plus 300 basis points. The costs associated with the modification and renewal of the line of credit was approximately $179,000. On December 3, 2021, the Partnership paid off the outstanding balance of $17,000,000 on the Line of Credit.

After June 30, 2023, the remaining tenors of U.S.-dollar LIBOR ceased publication, prompting the need for an alternative benchmark rate. On April 14, 2023, the partnership amended the line of credit to convert its base rate of interest from LIBOR to the Secured Overnight Financing Rate (SOFR) plus 10 basis points.

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

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

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