NEN's Q2 Loss Widens Amid Rising Costs

TL;DR

**NEN's Q2 loss is a red flag; steer clear until they can control costs and improve profitability.**

AI Summary

New England Realty Associates Limited Partnership (NEN) reported a net loss of $1,745,580 for the three months ended June 30, 2025, a significant increase from the net loss of $193,914 for the same period in 2024. This substantial decline in profitability is primarily attributed to increased operating expenses and potentially higher interest expenses on its various mortgages. The company's strategic outlook remains focused on managing its portfolio of apartment buildings, with key properties like Hamilton Park Towers LLC and Hamilton On Main Apartments LLC continuing to be central to its operations. Risks include fluctuating interest rates, particularly with mortgages tied to SOFR, and the ongoing costs associated with property maintenance and development, such as the $3,003,310 mortgage for Hamilton Essex 81 LLC. The company's financial position shows a decrease in cash and cash equivalents, indicating a tighter liquidity situation compared to the previous year. The filing highlights the company's reliance on its real estate assets, with both wholly-owned and partially-owned properties listed as significant assets.

Why It Matters

NEN's widening net loss to $1.75 million in Q2 2025 from $0.19 million in Q2 2024 signals potential operational inefficiencies or increased financial burdens, directly impacting investor returns. For employees, this could mean tighter budgets for property improvements or staffing. Customers might see less investment in property upgrades if financial performance continues to decline. In a competitive real estate market, especially for apartment buildings in New England, sustained losses could weaken NEN's ability to compete with better-capitalized rivals offering superior amenities or lower rents, potentially affecting its market share and long-term viability.

Risk Assessment

Risk Level: high — The company reported a net loss of $1,745,580 for the three months ended June 30, 2025, a substantial increase from the $193,914 net loss in the prior year, indicating deteriorating financial performance. Additionally, the company has significant mortgage obligations, including a $3,003,310 mortgage for Hamilton Essex 81 LLC, which exposes it to interest rate fluctuations, particularly with SOFR-indexed loans.

Analyst Insight

Investors should consider reducing exposure to NEN given the significant increase in net loss and potential for continued operational challenges. Monitor future filings closely for signs of cost control improvements or revenue growth before considering any new investment.

Key Numbers

• $1,745,580 — Net Loss (for the three months ended June 30, 2025, a significant increase from the prior year)
• $193,914 — Net Loss (for the three months ended June 30, 2024)
• $3,003,310 — Mortgage Amount (for Hamilton Essex 81 LLC as of June 30, 2025)
• 2025-06-30 — Period End Date (reporting period for the 10-Q)
• 2024-12-31 — Previous Fiscal Year End (comparison date for balance sheet items)

Key Players & Entities

• NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP (company) — filer of the 10-Q
• Hamilton Park Towers LLC (company) — property owner
• Hamilton On Main Apartments LLC (company) — property owner
• Hamilton Essex 81 LLC (company) — entity with a $3,003,310 mortgage
• Franklin 345 LLC (company) — entity with a mortgage paid off in June 2013
• The Hamilton Company (company) — related entity mentioned in the filing
• SOFR (regulator) — Secured Overnight Financing Rate, a benchmark for interest rates
• LIBOR (regulator) — London Interbank Offered Rate, a benchmark for interest rates

FAQ

Risk Factors

• Increased Net Loss and Deteriorating Profitability [high — financial]: The company reported a net loss of $1,745,580 for the three months ended June 30, 2025, a significant increase from the $193,914 net loss in the same period of 2024. This indicates a substantial deterioration in profitability, likely driven by rising operating and interest expenses.
• Rising Interest Rate Exposure [medium — financial]: NEN's reliance on mortgages, particularly those tied to SOFR (Secured Overnight Financing Rate), exposes the company to fluctuating interest rates. An increase in these rates could lead to higher interest expenses, further pressuring net income.
• Property Maintenance and Development Costs [medium — operational]: The company faces ongoing costs associated with property maintenance and development. A specific example is the $3,003,310 mortgage for Hamilton Essex 81 LLC, which represents a significant financial commitment and potential ongoing expense.
• Decreasing Cash Position [medium — financial]: The reported decrease in cash and cash equivalents suggests a tightening liquidity situation. This could limit the company's ability to fund operations, manage debt, or invest in new opportunities.

Industry Context

The apartment building operators industry is characterized by its sensitivity to economic cycles, interest rate fluctuations, and local market dynamics. Companies like NEN rely heavily on rental income, property management efficiency, and prudent debt management. Trends include rising construction costs, increasing demand for rental housing in certain areas, and evolving tenant expectations.

Regulatory Implications

As a publicly traded entity, NEN is subject to SEC regulations, including timely and accurate financial reporting via 10-Q filings. Compliance with real estate specific regulations, zoning laws, and environmental standards is also critical for its operations.

What Investors Should Do

1. Monitor interest rate trends and their impact on NEN's mortgage expenses.
2. Analyze operating expense trends in detail in future filings.
3. Assess the liquidity position and cash flow generation capabilities.
4. Evaluate the performance and strategic importance of key properties like Hamilton Park Towers and Hamilton On Main Apartments.

Key Dates

• 2025-06-30: Quarterly Report Filing (10-Q) — Provides the most recent financial performance and position for the period ending June 30, 2025, highlighting a significant increase in net loss.
• 2024-12-31: Previous Fiscal Year End — Serves as a comparison point for balance sheet items and year-over-year performance trends.
• 2024-08-01: Hamilton On Main Apartments LLC Mortgage Origination (approximate) — Indicates a significant debt obligation related to a key property, with a 4.34% interest rate.
• 2014-08-01: Hamilton On Main Apartments LLC Mortgage Origination (approximate) — Represents another substantial mortgage for a key property, with a 5.18% interest rate.
• 2013-06-01: Franklin 345 LLC Mortgage Paid Off (approximate) — Shows a past debt obligation that has been resolved, potentially freeing up cash flow.
• 2015-09-30: Hamilton Essex Development LLC and Hamilton Essex 81 LLC Mortgage Origination (approximate) — Marks a significant debt issuance for properties that are still relevant, as indicated by the $3,003,310 mortgage for Hamilton Essex 81 LLC as of June 30, 2025.

Glossary

SOFR (Secured Overnight Financing Rate)

A benchmark interest rate that represents the cost of borrowing cash overnight collateralized by U.S. Treasury securities. (NEN's mortgages are tied to SOFR, meaning interest expenses will fluctuate with this rate, impacting profitability.)

10-Q

A quarterly report required by the U.S. Securities and Exchange Commission (SEC) that provides a comprehensive update on a company's financial performance and position. (This document provides the latest financial data and operational insights for NEN.)

Wholly Owned Properties

Real estate assets that are fully owned by the company, with no other ownership stakes. (These are significant assets for NEN, contributing to its overall portfolio value and operational base.)

Partially Owned Properties

Real estate assets where the company holds an ownership stake but does not have full control or ownership. (These also form part of NEN's asset base, though their financial impact may be shared.)

Carrying Reported Amount Fair Value Disclosure

A disclosure requirement where companies report the carrying value of assets (what they are recorded at on the balance sheet) and their estimated fair value. (Indicates that NEN provides insights into the market valuation of its properties beyond their book value.)

Year-Over-Year Comparison

The most recent 10-Q filing for the period ending June 30, 2025, reveals a significant deterioration in financial performance compared to the prior year. The net loss widened dramatically from $193,914 in Q2 2024 to $1,745,580 in Q2 2025. While specific revenue figures are not detailed in this summary, this substantial increase in net loss suggests either declining revenues or, more likely, significantly higher operating and/or interest expenses impacting margins.

Filing Documents

• nen-20250630x10q.htm (10-Q) — 3085KB
• nen-20250630xex31d1.htm (EX-31.1) — 15KB
• nen-20250630xex31d2.htm (EX-31.2) — 15KB
• nen-20250630xex32d1.htm (EX-32.1) — 12KB
• 0001558370-25-010910.txt ( ) — 13777KB
• nen-20250630.xsd (EX-101.SCH) — 86KB
• nen-20250630_cal.xml (EX-101.CAL) — 45KB
• nen-20250630_def.xml (EX-101.DEF) — 383KB
• nen-20250630_lab.xml (EX-101.LAB) — 600KB
• nen-20250630_pre.xml (EX-101.PRE) — 557KB
• nen-20250630x10q_htm.xml (XML) — 3305KB

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION Item 1.

Financial Statements (Unaudited)

Financial Statements (Unaudited) 3 Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 4 Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2025 and 2024 5 Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024 6 Consolidated Statements of Changes in Partners' Capital for the Six Months Ended June 30, 2025 and 2024 7 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 8

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 9 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 28 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 40 Item 4.

Controls and Procedures

Controls and Procedures 40

—OTHER INFORMATION

PART II—OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 41 Item 1A.

Risk Factors

Risk Factors 41 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 41 Item 3. Defaults Upon Senior Securities 42 Item 4. Mine Safety Disclosure 42 Item 5. Other Information 42 Item 6. Exhibits 42

SIGNATURES

SIGNATURES 44 2 Table of Contents NEW ENGLAND REALTY ASSOCIATES, L.P. PART 1 -- FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements The accompanying unaudited consolidated balance sheets, statements of income, statements of comprehensive income, changes in partners' capital, and cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. The financial statements reflect all adjustments consisting only of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair presentation for the interim periods. The consolidated balance sheet as of December 31, 2024, has been derived from the audited consolidated balance sheet at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in New England Realty Associates L.P.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The results of operations for the three and six month periods ended June 30, 2025 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period. 3 Table of Contents NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, December 31, 2025 2024 ASSETS (Unaudited) Rental Properties $ 456,339,814 $ 278,516,649 Real Estate Assets Held for Sale 3,003,310 — Cash and Cash Equivalents 16,677,504 17,615,940 Rents Receivable

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (Unaudited) NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Line of Business : New England Realty Associates Limited Partnership ("NERA", the "Company" or the "Partnership") was organized in Massachusetts in 1977. NERA and its subsidiaries own 34 properties which include 22 residential buildings; 6 mixed use residential, retail and office buildings; 6 commercial buildings and individual units at one condominium complex. These properties total 3,339 apartment units, 19 condominium units and approximately 159,000 square feet of commercial space. Additionally, the Partnership also owns a 40 - 50 % interest in 7 residential and mixed use properties consisting of 688 apartment units, 12,500 square feet of commercial space and a 50 car parking lot. The properties are located in Eastern Massachusetts and Southern New Hampshire. Basis of Presentation: The financial statements have been prepared in conformity with GAAP. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. These estimates and assumptions are based on management's historical experience that are believed to be reasonable at the time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgement. The Partnership's critical accounting policies are those which require assumptions to be made about matters that are highly uncertain. Different estimates could have a material effect on the Partnership's financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different

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View this 10-Q filing on SEC EDGAR