NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP: A Year of Stable Growth and Strategic Moves

Discover how NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP performed in the past year and what lies ahead. This summary offers a clear look at the company's financial results, key strategies, and operational highlights for the fiscal year ended December 31, 2025, providing essential insights into its property portfolio and future plans.

Business Overview

NEW ENGLAND REALTY ASSOCIATES LIMITED PARTNERSHIP is a real estate operating company that acquires, owns, manages, and develops a diverse portfolio of income-producing properties. Its portfolio includes 35 properties, totaling approximately 2.5 million square feet and 2,800 residential units, primarily located in Massachusetts and New Hampshire. The Partnership strategically balances residential, commercial, and mixed-use properties to generate stable rental income and long-term capital appreciation for its limited partners.

Financial Performance Highlights (Fiscal Year Ended December 31, 2025)

NEW ENGLAND REALTY ASSOCIATES achieved stable performance, driven by consistent rental income and strategic portfolio management.

• Total Revenue: The Partnership generated total revenues of $85.5 million, primarily from rental income across its diverse property portfolio. This marks a 4.2% increase from the previous fiscal year, thanks to favorable occupancy rates and modest rent escalations.
• Net Operating Income (NOI): Property-level NOI reached $52.3 million, reflecting efficient property management and controlled operating expenses.
• Net Income: The Partnership reported net income of $18.7 million, or $1.25 per unit, after covering interest expenses, depreciation, and taxes. This compares to $17.5 million in the prior year, representing a 6.9% improvement in profitability.
• Cash Flow from Operations: Operating cash flow reached a robust $45.1 million, providing strong liquidity for debt service and distributions.
• Distributions to Partners: The Partnership distributed $1.00 per unit to its limited partners during the fiscal year, totaling $15.0 million, demonstrating its commitment to returning value to investors.

Management Discussion (MD&A Highlights)

Strong occupancy rates and modest rent growth in its residential portfolio, along with stable contributions from commercial and mixed-use assets, primarily drove the Partnership's financial performance in fiscal year 2025. The 4.2% increase in total revenue reflects effective property management and favorable market conditions in its core New England markets. Increased revenues and disciplined expense management led to the 6.9% improvement in net income, though higher interest expenses on variable-rate debt partially offset these gains.

Strategic property dispositions, detailed below, aim to optimize the portfolio and enhance future profitability and capital flexibility. The Partnership maintains robust operating cash flow, which supports its debt service obligations and provides consistent distributions to partners, underscoring its commitment to investor returns.

Financial Health (Balance Sheet Snapshot & Liquidity)

The Partnership maintains a solid financial position with a diversified asset base and prudent capital structure.

• Total Assets: Total assets totaled $780.0 million, with investment properties making up the bulk at $710.0 million (net of accumulated depreciation).
• Total Debt: Long-term debt, primarily secured by mortgages on its properties, stood at $420.0 million.
• Partners' Equity: Total partners' equity reached $330.0 million.
• Debt-to-Asset Ratio: The debt-to-asset ratio was approximately 53.8%, which indicates a moderate leverage profile for a real estate entity.
• Liquidity: Operating cash flow of $45.1 million provides strong internal liquidity. The Partnership also has access to a $50.0 million revolving credit facility, with $15.0 million drawn as of year-end, offering additional financial flexibility for operational needs and opportunistic investments.

Property Portfolio Overview

NEW ENGLAND REALTY ASSOCIATES manages a diverse portfolio of 35 properties, totaling approximately 2.5 million square feet and 2,800 residential units, primarily located in Massachusetts and New Hampshire. The portfolio is strategically balanced:

• Residential Properties (65% of NOI): With 28 apartment complexes, including key assets such as Hamilton Park Towers (350 units, 96% occupied), Mill Street Gardens (220 units, 94% occupied), and Woodland Park Apartments (180 units, 97% occupied). The average occupancy rate across the residential portfolio averaged 95.5% for the year.
• Commercial Properties (25% of NOI): Includes 5 retail and office buildings, such as Staples Plaza (120,000 sq ft, 92% occupied) and several multi-tenant office buildings in Belmont.
• Mixed-Use Properties (10% of NOI): Two properties combining residential and commercial spaces, offering diversified income streams.

The Partnership owns 25 properties outright and holds 40-50% interests in 10 joint venture properties.

Strategic Property Activity and Subsequent Events

The Partnership actively manages its portfolio through strategic acquisitions and dispositions to optimize value and reallocate capital.

• Post-Year-End Dispositions (Subsequent Events):
  • Mill Street Gardens Residential Apartments (Woburn, MA): In February 2026, the Partnership agreed to sell its wholly-owned Mill Street Gardens property for $45.0 million. This sale is expected to close in Q2 2026 and will generate a significant gain, to be recognized in the 2026 fiscal year. This sale capitalizes on strong market demand for residential assets and allows the Partnership to reallocate capital to other opportunities or debt reduction.
  • Belmont Commercial Office Buildings (Belmont, MA): In January 2026, the Partnership sold two commercial office buildings in Belmont, MA, for a combined $28.5 million. These sales align with a broader strategy to streamline the commercial portfolio and reduce exposure to older office assets, and generated approximately $12.0 million in net proceeds after debt repayment and closing costs.
• Impact: These post-year-end sales, while not impacting 2025 financials, will significantly impact the Partnership's 2026 outlook. They will reduce its asset base by approximately $73.5 million and provide substantial capital for future initiatives.

Financing and Capital Structure

The Partnership employs a mix of mortgages and credit facilities to fund its operations and investments.

• Mortgage Debt: As of December 31, 2025, the Partnership held $420.0 million in outstanding mortgage debt, secured by specific properties. The weighted-average interest rate on this debt stood at 4.8%, with maturities staggered between 2027 and 2035.
• Master Credit Facility: A $50.0 million revolving credit facility provides operational flexibility, with $15.0 million drawn as of year-end. The interest rate on this facility is variable, tied to SOFR plus a margin.
• Interest Rate Hedging: To mitigate exposure to rising interest rates, the Partnership uses financial instruments such as interest rate swaps and caps. These hedges cover approximately $150.0 million of its variable-rate debt, effectively fixing or capping interest payments on a portion of its borrowings, thereby reducing interest rate volatility and providing greater predictability in financing costs.

Related Party Transactions

The Partnership conducts various transactions with "related parties," which are entities or individuals linked to the Partnership's management or owners.

• Hamilton Company Inc.: This entity, controlled by the Partnership's general partner, provides comprehensive property management, maintenance, construction, and administrative services. For the fiscal year 2025, the Partnership paid $12.5 million in fees to Hamilton Company Inc. for these services. Independent directors review these transactions to ensure they are fair and comparable to dealings with unrelated parties.
• Other Related Parties: Transactions with individuals like Sally Michael and the Brown Family mainly involve lease agreements for certain properties or specific service contracts, totaling less than $1.0 million annually.
• Investor Consideration: While common in real estate, investors should note that related party transactions warrant careful scrutiny to ensure fairness and prevent potential conflicts of interest that might impact the Partnership's profitability.

Key Tenants and Concentration Risk

For its commercial portfolio, the Partnership faces significant tenant concentration.

• Staples and Trader Joe's: These two tenants collectively account for approximately 35% of the total commercial rental income for the fiscal year 2025.
• Risk Factor: This concentration creates a risk. The departure or financial distress of either Staples or Trader Joe's could significantly impact the Partnership's commercial rental income and occupancy rates, potentially affecting cash flow and profitability. The Partnership actively monitors these relationships and seeks to diversify its tenant base where possible.

Competitive Position

The real estate markets where the Partnership operates, primarily Massachusetts and New Hampshire, are highly competitive. The Partnership competes with numerous other real estate owners, developers, and operators, including publicly traded REITs, private equity funds, and individual investors, for tenants, property acquisitions, and development opportunities. Key competitive factors include location, property amenities, rental rates, property management services, and the overall quality of the properties.

The Partnership's competitive advantages include its established presence and deep market knowledge in its target regions, its diversified portfolio of residential and commercial properties, and its experienced management team. However, the availability of new supply, economic conditions, and demographic shifts can intensify competition. The Partnership continuously monitors market conditions and adapts its strategies to maintain occupancy rates and rental income.

Risk Factors

Investors should consider several key risks:

• Interest Rate Risk: Despite hedging, a significant and sustained increase in interest rates could increase financing costs on unhedged debt and impact property valuations.
• Real Estate Market Risk: Fluctuations in local economic conditions, property values, and rental demand in Massachusetts and New Hampshire could negatively affect the Partnership's revenues and asset values.
• Tenant Concentration Risk: As noted, reliance on a few major commercial tenants creates vulnerability.
• Liquidity Risk: While current cash flow is strong, the ability to refinance maturing debt or fund significant capital expenditures depends on market conditions.
• Related Party Risk: Potential for conflicts of interest in transactions with affiliated entities.
• Environmental Risks: The Partnership's properties are subject to various federal, state, and local environmental laws and regulations. Compliance can be costly, and the Partnership could face liability for environmental contamination, which could have a significant negative impact on its financial condition.
• Catastrophic Events: The Partnership's properties face risks from natural disasters such as severe weather events (including hurricanes, snowstorms, and floods), as well as other catastrophic events like fires or acts of terrorism. Such events may lead to uninsured losses, significant repair costs, and business interruption.

Future Outlook (Guidance, Strategy)

The Partnership anticipates continued stable performance in its residential portfolio, supported by strong demand in its core markets. The recent property dispositions represent a strategic move to optimize the portfolio and generate capital for future investments or debt reduction. Management aims to selectively acquire new properties that align with its growth strategy while maintaining a prudent capital structure.

The focus remains on maximizing cash flow from existing assets and enhancing long-term value for its limited partners. The Partnership plans to deploy capital from recent dispositions into new, higher-growth opportunities or to reduce outstanding debt, strengthening its balance sheet and improving financial flexibility for 2026 and beyond.