New England Realty Associates Partnership(NEN) - 2020 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION This section presents the unaudited consolidated financial information for the period, including statements, notes, and management's discussion and analysis Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements of New England Realty Associates Limited Partnership for the period ended September 30, 2020, prepared in accordance with GAAP for interim financial information Consolidated Balance Sheets This section provides a snapshot of the Partnership's assets, liabilities, and partners' capital at specific reporting dates Consolidated Balance Sheet Highlights (Unaudited): | Metric | Sep 30, 2020 ($) | Dec 31, 2019 ($) | | :------------------------------------ | :----------- | :----------- | | Total Assets | $293,087,027 | $294,293,649 | | Total Liabilities | $332,417,188 | $332,117,436 | | Partners' Capital | $(39,330,161) | $(37,823,787) | | Rental Properties | $267,905,211 | $278,363,988 | | Cash and Cash Equivalents | $16,847,883 | $7,546,324 | | Mortgage Notes Payable | $283,927,890 | $281,771,246 | - Total Assets decreased slightly by 0.41% from $294.3 million at December 31, 2019, to $293.1 million at September 30, 2020. Cash and Cash Equivalents significantly increased by 123.28% from $7.5 million to $16.8 million[14] Consolidated Statements of Income This section details the Partnership's financial performance, including revenues, expenses, and net income or loss over specific periods Consolidated Statements of Income Highlights (Unaudited): | Metric | 3 Months Ended Sep 30, 2020 ($) | 3 Months Ended Sep 30, 2019 ($) | 9 Months Ended Sep 30, 2020 ($) | 9 Months Ended Sep 30, 2019 ($) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenues | $15,142,266 | $15,155,901 | $47,276,955 | $45,029,449 | | Total Expenses | $11,914,630 | $10,978,884 | $35,260,418 | $32,321,599 | | Income Before Other Income (Expense) | $3,227,636 | $4,177,017 | $12,016,537 | $12,707,850 | | Net (Loss) Income | $(439,284) | $1,383,979 | $2,394,551 | $4,648,739 | | Net (Loss) Income per Unit | $(3.61) | $11.32 | $19.66 | $37.93 | - For the three months ended September 30, 2020, the Partnership reported a net loss of $439,284, a significant decrease from net income of $1,383,979 in the prior year, primarily due to increased expenses and a loss from unconsolidated joint ventures. For the nine months, net income decreased by 48.5% YoY[19] Consolidated Statements of Changes in Partners' Capital This section outlines the changes in the Partnership's equity due to net income, distributions, and other capital transactions Consolidated Statements of Changes in Partners' Capital Highlights (Unaudited): | Metric | Sep 30, 2020 ($) | Sep 30, 2019 ($) | | :------------------------------------ | :----------- | :----------- | | Balance January 1 | $(37,823,787) | $(35,624,010) | | Distribution to Partners | $(3,506,894) | $(3,525,701) | | Stock Buyback | $(394,031) | $(3,680,570) | | Net Income | $2,394,551 | $4,648,739 | | Balance September 30 | $(39,330,161) | $(38,181,542) | - Partners' Capital decreased from $(37,823,787) at January 1, 2020, to $(39,330,161) at September 30, 2020, primarily due to distributions to partners and stock buybacks exceeding net income[21] Consolidated Statements of Cash Flows This section presents the cash inflows and outflows from operating, investing, and financing activities for the reporting periods Consolidated Statements of Cash Flows Highlights (Unaudited) - Nine Months Ended September 30: | Metric | 2020 ($) | 2019 ($) | | :------------------------------------ | :----------- | :----------- | | Net cash provided by operating activities | $13,304,765 | $15,739,465 | | Net cash (used in) investing activities | $(1,079,130) | $(300,079) | | Net cash (used in) financing activities | $(2,924,076) | $(10,353,669) | | Net Increase in Cash and Cash Equivalents | $9,301,559 | $5,085,717 | | Cash and Cash Equivalents, at end of period | $16,847,883 | $14,145,618 | - Net cash provided by operating activities decreased by $2.4 million (15.5%) for the nine months ended September 30, 2020, compared to the same period in 2019. Net cash used in investing activities increased significantly due to improvements in rental properties[26] Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements NOTE 1. SIGNIFICANT ACCOUNTING POLICIES This note outlines the Partnership's core business, which involves owning and managing residential and commercial properties in Eastern Massachusetts and Southern New Hampshire, and details its significant accounting policies including basis of presentation, principles of consolidation, impairment, revenue recognition (including the adoption of ASU 2016-02 Leases), rental property valuation, deferred financing costs, income taxes, cash equivalents, segment reporting, and income per unit calculations - NERA owns 29 properties (2,892 apartment units, 19 condominium units, 108,043 sq ft commercial space) and has 40-50% interest in 7 joint ventures (688 apartment units, 12,500 sq ft commercial space, 50-car parking lot)[28] - The Partnership adopted ASU 2016-02 Leases (Topic 842) on January 1, 2019, using the modified retrospective method, which did not have a material impact on its financial statements[38][39] - Rental income from residential and commercial properties is recognized over the lease term, with amounts 60 days in arrears charged against income for residential tenants. Commercial leases are evaluated case-by-case[34] - Deferred financing costs are capitalized and amortized over the term of the related indebtedness, with amortization included in interest expense. For the nine months ended September 30, 2020 and 2019, amortization was approximately $180,000 and $282,000, respectively[43] NOTE 2. RENTAL PROPERTIES This note details the composition of the Partnership's rental properties, including wholly-owned residential and commercial units, and interests in unconsolidated joint ventures - As of September 30, 2020, the Partnership owned 2,892 residential apartment units and 19 condominium units, primarily in metropolitan Boston, and various commercial properties in Massachusetts[53][54] Rental Properties Fixed Assets (Unaudited): | Asset Category | Sep 30, 2020 ($) | Dec 31, 2019 ($) | | :------------------------------------ | :----------- | :----------- | | Total fixed assets | $400,798,833 | $398,554,000 | | Less: Accumulated depreciation | $(132,893,622) | $(120,190,012) | | Net Rental Properties | $267,905,211 | $278,363,988 | - In December 2019, the Partnership acquired Country Club Garden Apartments (181 units) for $59.55 million, funded by a line of credit, cash reserves, and a new $31 million loan[57][58] NOTE 3. RELATED PARTY TRANSACTIONS This note details transactions with related parties, primarily the management company owned by the majority shareholder of the General Partner Related Party Transactions (Nine Months Ended September 30): | Expense Category | 2020 ($) | 2019 ($) | | :------------------------------------ | :----------- | :----------- | | Management fee | $1,863,000 | $1,788,000 | | Professional services (legal, accounting, construction, etc.) | $816,000 | $852,000 | | Payroll and related expenses reimbursement | $2,571,000 | $2,478,000 | | Bookkeeping and accounting services | $93,750 | $93,750 | | Employer's 401K match | $33,000 | $27,000 | - The Partnership has 40-50% ownership in seven limited partnerships/LLCs, with other investors being Brown family related entities and current/previous employees of the Management Company[65] NOTE 4. PREPAID EXPENSES and OTHER ASSETS This note provides a breakdown of significant components within prepaid expenses and other assets, including security deposits, funds held in escrow for capital improvements, intangible assets from acquisitions, and deferred financing fees related to the line of credit Prepaid Expenses and Other Assets Components: | Component | Sep 30, 2020 ($) | Dec 31, 2019 ($) | | :------------------------------------ | :----------- | :----------- | | Security deposits (restricted cash) | $2,696,000 | $2,936,000 | | Escrow for future capital improvements | $921,000 | $501,000 | | Intangible assets (net of amortization) | $383,000 | $1,382,000 | | Financing fees (net of amortization) | $4,000 | $36,000 | NOTE 5. MORTGAGE NOTES PAYABLE This note details the Partnership's mortgage notes payable, including interest rates, maturity dates, and recent refinancing activities - As of September 30, 2020, mortgage notes payable totaled $283,927,890, with interest rates ranging from 3.53% to 5.66% and a weighted average interest rate of 4.43%[69] Approximate Annual Mortgage Maturities at September 30, 2020: | Year | Amount ($) | | :------------------------------------ | :----------- | | 2021 | $2,443,000 | | 2022 | $2,569,000 | | 2023 | $102,651,000 | | 2024 | $10,935,000 | | 2025 | $3,260,000 | | Thereafter | $163,475,000 | | Total (before unamortized deferred financing costs) | $285,333,000 | - The Partnership refinanced Brookside Apartments in March 2020 for $6.175 million at 3.53% interest, paying off an existing loan and adding proceeds to cash reserves[72] - A $25 million revolving line of credit, extended until October 31, 2020, had an outstanding balance of $17 million as of September 30, 2020. Management is negotiating a three-year renewal and expects certain covenant relaxations[76][77][80][81][82] NOTE 6. ADVANCE RENTAL PAYMENTS AND SECURITY DEPOSITS This note clarifies the accounting treatment and amounts for advance rental payments and security deposits held by the Partnership, noting that these are restricted cash Advance Rental Payments and Security Deposits (Sep 30, 2020): | Item | Amount ($) | | :------------------------------------ | :----------- | | Prepaid rents (included in cash and cash equivalents) | $1,924,000 | | Security deposits (included in prepaid expenses and other assets) | $2,696,000 | NOTE 7. PARTNERS' CAPITAL This note describes the Partnership's capital structure, consisting of Class A, Class B, and General Partner units with fixed distribution percentages - Class B and General Partnership Units represent 19% and 1% of total outstanding units, respectively, with all classes having equal profit sharing and distribution rights[84] - Quarterly distributions of $9.60 per unit ($0.32 per Depositary Receipt) were approved and paid in March, June, and September 2020[85][86][87] Per Depositary Receipt Information (Nine Months Ended September 30): | Metric | 2020 ($) | 2019 ($) | | :------------------------------------ | :----------- | :----------- | | Net Income per Depositary Receipt | $0.66 | $1.26 | | Distributions per Depositary Receipt | $0.96 | $0.96 | NOTE 8. TREASURY UNITS This note outlines the Partnership's equity repurchase program, including its history, extensions, and the number of units repurchased Treasury Units at September 30, 2020: | Class | Units | | :------------------------------------ | :----------- | | Class A | 46,775 | | Class B | 11,109 | | General Partnership | 585 | | Total | 58,469 | - The equity repurchase program was extended until March 31, 2025. From August 2007 through September 2020, the Partnership repurchased 1,428,437 Depositary Receipts at an average price of $28.43 per receipt[89] - During the nine months ended September 30, 2020, 5,328 Depositary Receipts were purchased at an average price of $59.14 per receipt, totaling $315,216. The program was temporarily suspended as of April 15, 2020, due to COVID-19 economic uncertainty[90][91] NOTE 9. COMMITMENTS AND CONTINGENCIES This note states that the Partnership is involved in routine litigation incidental to its business, which is typically covered by insurance, and there are no material pending legal proceedings - The Partnership is not involved in any material pending legal proceedings, with ordinary routine litigation covered by insurance or provided for when appropriate[93] NOTE 10. RENTAL INCOME This note provides a breakdown of rental income sources, future minimum rental income from non-cancellable commercial leases, and details on commercial lease expirations - Approximately 95% of rental income for the nine months ended September 30, 2020, was from residential apartments and condominium units with leases of one year or less[94] Minimum Future Annual Commercial Rental Income (Sep 30, 2020): | Year | Amount ($) | | :------------------------------------ | :----------- | | 2021 | $2,480,000 | | 2022 | $1,616,000 | | 2023 | $1,230,000 | | 2024 | $646,000 | | 2025 | $199,000 | | Thereafter | $547,000 | | Total | $6,718,000 | - Rents receivable are net of a $1,095,000 allowance for doubtful accounts at September 30, 2020, significantly up from $240,000 at December 31, 2019. This includes $351,000 for deferred rental concessions[95][96] NOTE 11. CASH FLOW INFORMATION This note provides supplemental cash flow information, including cash paid for interest and state income taxes, and details a significant non-cash financing activity related to the refinancing of Brookside Apartments Cash Flow Information (Nine Months Ended September 30): | Item | 2020 ($) | 2019 ($) | | :------------------------------------ | :----------- | :----------- | | Cash paid for interest | $9,973,000 | $8,893,000 | | Cash paid for state income taxes | $82,000 | $77,000 | | Non-cash financing activity (Brookside refinancing) | $2,393,000 | N/A | NOTE 12. FAIR VALUE MEASUREMENTS This note discusses the fair value measurements of the Partnership's financial instruments, noting that most short-term instruments approximate carrying value - The carrying amounts of cash and cash equivalents, accounts receivable, and notes payable approximate their fair values due to their short-term nature[99][103] Carrying Amounts and Estimated Fair Value of Debt (Unaudited): | Debt Category | Sep 30, 2020 Carrying Amount ($) | Sep 30, 2020 Estimated Fair Value ($) | Dec 31, 2019 Carrying Amount ($) | Dec 31, 2019 Estimated Fair Value ($) | | :------------------------------------ | :----------------------------- | :------------------------------ | :----------------------------- | :------------------------------ | | Partnership Properties Mortgage Notes Payable | $283,927,890 | $308,211,420 | $281,771,246 | $290,892,652 | | Investment Properties Mortgage Notes Payable | $166,332,832 | $182,015,689 | $166,404,255 | $169,988,236 | - Fair value of mortgage notes payable is estimated by discounting future cash flows using current market rates for similar debt, with differences from carrying value reflecting changes in interest rates and borrowing spreads[100][103] NOTE 13. TAXABLE INCOME AND TAX BASIS This note explains the differences between the Partnership's financial statement income and taxable income, primarily due to tax-free exchanges, depreciation methods, and timing differences - Federal taxable income for 2019 was approximately $2,039,000, which was $4,508,000 less than financial statement income, mainly due to tax-free exchanges and different depreciation methods[106] - The CARES Act, enacted in March 2020, increased the business interest expense limitation to 50% of adjusted taxable income for partnerships for tax years beginning in 2020[110] NOTE 14. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES This note provides detailed financial information and descriptions for the Partnership's seven unconsolidated joint ventures, in which it holds a 40-50% ownership interest - The Partnership holds 40-50% ownership in seven joint ventures, primarily residential apartment complexes, accounted for using the equity method. The carrying values of some investments have fallen below zero due to distributions[111][115][118][121][122][123] Summary Financial Information for Unconsolidated Joint Ventures (Sep 30, 2020): | Metric | Total ($) | | :------------------------------------ | :----------- | | Total Assets | $124,236,098 | | Total Liabilities | $170,568,141 | | Partners' Capital | $(46,332,043) | | Mortgage Notes Payable | $166,332,832 | | Net Income (Loss) (9 months) | $1,537,504 | | Net Income (Loss) (3 months) | $(585,958) | | NERA's Share of Net Income (9 months) | $669,098 | | NERA's Share of Net (Loss) (3 months) | $(249,583) | - The weighted average interest rate on joint venture mortgages was 3.91% at September 30, 2020. Total units retained by joint ventures are 690 apartments and 3 commercial units[130][125] NOTE 15. EMPLOYEE BENEFIT 401(k) PLANS This note describes the Partnership's 401(k) plan, including employee eligibility, contribution matching, and vesting schedules - Eligible employees can defer up to 90% of compensation. The Partnership matches 50% up to 6% of deferred compensation. Participants vest 20% per year after two years of service, becoming 100% vested after six years[140][141] - Total expense for the employer's 401(k) match for the nine months ended September 30, 2020, was $33,000[141] NOTE 16. IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS This note discusses the FASB's Staff Question & Answer regarding lease concessions granted in response to COVID-19 - The Partnership elected to apply FASB's Q&A relief for COVID-19 related lease concessions, bypassing lease modification evaluation. Qualifying rent concessions were accounted for as negative variable lease payments, reducing revenue in the period granted[142] NOTE 17—SUBSEQUENT EVENTS This note details events occurring after the reporting period, including the extension of the revolving line of credit, the ongoing impact of the COVID-19 pandemic on the rental market, increased vacancies, and the challenges in tenant evictions - The $25 million revolving line of credit was extended for one year until October 31, 2021, with an extension fee of $37,500, as renewal negotiations for a three-year term were not completed by October 31, 2020[143][144] - The COVID-19 pandemic has led to significant disruptions, including increased past due rents, significantly higher vacancies for the upcoming rental season, and a complicated/lengthened eviction process (estimated minimum 3 months)[145][149][150] - The pandemic has caused a significant reduction in occupancy and rental rates for buildings near Boston's colleges and universities[151] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Partnership's financial condition and operational results, highlighting the significant impact of the COVID-19 pandemic on rental collections, vacancy rates, and future market conditions Forward Looking Statements and COVID-19 Impact This section discusses the Partnership's forward-looking statements and the significant adverse impact of the COVID-19 pandemic on its operations and market conditions - The COVID-19 pandemic, declared a global pandemic on March 11, 2020, has caused significant disruptions in Massachusetts, leading to non-essential business closures and a large decrease in student population, resulting in significant vacancies in the apartment portfolio[155] - The length and severity of the current recession and its effects on the Partnership's business are currently unknown[156] Rental Collections and Vacancy Rates This section analyzes the Partnership's rental collection performance and current vacancy rates across its wholly-owned and joint venture properties Rental Collections and Vacancy Rates (Unaudited): | Metric | Q3 2020 Collections (%) | Nov 1, 2020 Vacancy Rate (%) | Nov 1, 2019 Vacancy Rate (%) | | :------------------------------------ | :------------------ | :----------------------- | :----------------------- | | Wholly-owned properties (overall) | ~95% of rents due | N/A | N/A | | Wholly-owned residential tenants | ~95% of rents due | 8.3% | 3.4% | | Wholly-owned commercial tenants | ~93% of rents due | 6.3% | 0.4% | | Joint Venture properties | ~90% of rents due | 22.8% | 0.9% | | Dexter Park (Joint Venture) | N/A | 27.4% (112 units) | N/A | - Gross rents receivable increased by approximately $475,000 over June 30, 2020, and $1,020,000 over December 31, 2019, indicating a rise in uncollected rents[157] - Management expects high vacancies for the balance of 2020 and first half of 2021, leading to reduced rents and significant concessions (up to two months free rent) to attract tenants[159][161] - For Q3 2020, renewed leases saw an average increase of 2.3%, while new leases experienced an average decrease of 3.1%[163] Results of Operations - Three Months Ended September 30, 2020 vs 2019 This section compares the Partnership's financial performance for the three months ended September 30, 2020, against the same period in 2019 Results of Operations (Three Months Ended September 30): | Metric | 2020 ($) | 2019 ($) | Dollar Change ($) | Percent Change (%) | | :------------------------------------ | :----------- | :----------- | :------------ | :------------- | | Total Revenues | $15,142,266 | $15,155,901 | $(13,635) | (0.1%) | | Total Expenses | $11,914,630 | $10,978,884 | $935,746 | 8.5% | | Income Before Other Income (Expense) | $3,227,636 | $4,177,017 | $(949,381) | (22.7%) | | Interest expense | $(3,417,348) | $(3,011,347) | $(406,001) | 13.5% | | Income (Loss) from unconsolidated joint ventures | $(249,583) | $224,993 | $(474,576) | (210.9%) | | Net (Loss) Income | $(439,284) | $1,383,979 | $(1,823,263) | (131.7%) | - Rental income increased slightly by 0.1% due to the Mill Street acquisition ($944,000 increase), offset by decreases at other properties like 62 Boylston (down $416,000)[206] - Operating expenses increased by 8.5% overall, but decreased by 3.8% excluding the Mill Street acquisition, driven by lower repairs and maintenance, administrative, and depreciation expenses[206] - The Partnership's share of net loss from Investment Properties was $250,000, a significant decline from $225,000 net income in the prior year, primarily due to an 18.2% reduction in rental revenue from these ventures[209] Results of Operations - Nine Months Ended September 30, 2020 vs 2019 This section compares the Partnership's financial performance for the nine months ended September 30, 2020, against the same period in 2019 Results of Operations (Nine Months Ended September 30): | Metric | 2020 ($) | 2019 ($) | Dollar Change ($) | Percent Change (%) | | :------------------------------------ | :----------- | :----------- | :------------ | :------------- | | Total Revenues | $47,276,955 | $45,029,449 | $2,247,506 | 5.0% | | Total Expenses | $35,260,418 | $32,321,599 | $2,938,819 | 9.1% | | Income Before Other Income (Expense) | $12,016,537 | $12,707,850 | $(691,313) | (5.4%) | | Interest expense | $(10,291,255) | $(9,145,075) | $(1,146,180) | 12.5% | | Income from unconsolidated joint ventures | $669,098 | $1,287,339 | $(618,241) | (48.0%) | | Net Income | $2,394,551 | $4,648,739 | $(2,254,188) | (48.5%) | - Rental income increased by 5.0%, primarily due to the Mill Street acquisition ($2,920,000 increase), partially offset by decreases at properties like 62 Boylston (down $327,000)[213][214] - Operating expenses increased by 9.1% overall, but decreased by 3.4% excluding the Mill Street acquisition, driven by lower repairs and maintenance, depreciation, and administrative expenses, partially offset by higher taxes and insurance[215] - Income from Investment Properties decreased by 48.0%, mainly due to no condominium unit sales in 2020 compared to $739,000 gain from sales in 2019[218] Liquidity and Capital Resources This section evaluates the Partnership's ability to meet its short-term and long-term financial obligations and fund its operations - The primary cash sources for the first nine months of 2020 were rent collections and proceeds from the Brookside Apartments refinancing. Cash and cash equivalents increased by $9,301,559 to $16,847,883 at September 30, 2020[220][221] - Improvements to properties totaled approximately $2,370,000 in 2020, funded from cash reserves[222] - The Partnership received $1,195,000 in distributions from investment properties in 2020, a decrease from $3,268,000 in 2019[228] - The $25 million revolving line of credit had an outstanding balance of $17 million as of September 30, 2020, after drawing $20 million for the Mill Street acquisition and paying down $3 million[231] - Management anticipates cash from operations and interest-bearing accounts will be sufficient for current operations, debt payments, and property improvements[232] Off-Balance Sheet Arrangements and Contractual Obligations This section details the Partnership's commitments not recorded on the balance sheet and its future payment obligations - The Partnership's proportionate share of non-recourse mortgage debt from unconsolidated joint ventures was approximately $71,051,000 as of September 30, 2020[233] Contractual Obligations as of September 30, 2020: | Period | Mortgage Debt ($) | Other Obligations ($) | Total Contractual Obligations ($) | | :------------------------------------ | :------------ | :---------------- | :---------------------------- | | 2021 | $2,443,116 | $17,000,000 | $19,443,116 | | 2022 | $2,569,186 | — | $2,569,186 | | 2023 | $102,650,433 | — | $102,650,433 | | 2024 | $10,935,461 | — | $10,935,461 | | 2025 | $3,259,573 | — | $3,259,573 | | Thereafter | $163,475,260 | — | $163,475,260 | | Total | $285,333,029 | $17,000,000 | $302,333,029 | Factors That May Affect Future Results This section outlines various internal and external factors that could potentially influence the Partnership's future financial performance and operations - Future results are subject to risks including adverse local economic conditions, dependence on tenants' financial health, competition, significant operating expenditures, increasing utility costs, and uninsured losses from disasters or terrorism[237][238] - Additional risks include financing availability, competition for properties, environmental liabilities, costly insurance (especially for terrorism/mold), market interest rate effects on unit prices, changes in tax laws, and challenges in property acquisition/development[242] Critical Accounting Policies and Estimates This section describes the significant accounting policies and estimates that require management's judgment and are crucial to the financial statements - The preparation of financial statements requires management to make estimates and judgments, particularly concerning real estate property valuations, investments in joint ventures, revenue recognition, and impairment assessments. These estimates are subject to economic and market uncertainties[182][195][196] - Key policies include recognizing rental income over lease terms, accounting for above/below-market leases, depreciating rental properties, and assessing impairment if undiscounted future cash flows are less than carrying value[183][184][191][193][194][195] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the Partnership's exposure to market risk, primarily interest rate risk. It outlines the composition of its long-term debt (fixed vs. variable rates) and quantifies the potential impact of interest rate changes on interest costs and the fair value of fixed-rate debt - The Partnership, its subsidiaries, and Investment Properties collectively have approximately $452,434,000 in long-term debt, with substantially all requiring fixed interest payments[242][243] - Variable rate debt totals $27,000,000 (excluding deferred financing costs) with interest rates ranging from LIBOR plus 195 to 350 basis points[244] - A 100 basis point increase/decrease in market interest rates on variable rate debt would result in an approximate $220,000 annual change in interest costs. The fair value of fixed-rate debt would change by approximately $19 million[244] Item 4. Controls and Procedures This section confirms the effectiveness of the Partnership's disclosure controls and procedures as of September 30, 2020. It also states that there were no material changes to internal control over financial reporting during the quarter, despite the shift to remote work due to the COVID-19 pandemic Disclosure Controls and Procedures This section assesses the effectiveness of the Partnership's controls designed to ensure timely and accurate disclosure of financial information - The Partnership's principal executive and financial officers concluded that disclosure controls and procedures were effective as of September 30, 2020, for timely recording, processing, summarizing, and reporting required information[245] Changes in Internal Control over Financial Reporting This section reports on any material changes to the Partnership's internal control over financial reporting during the most recent fiscal quarter - No material changes to internal control over financial reporting occurred during Q3 2020. The Partnership has not experienced material impacts from remote work due to COVID-19 and continues to monitor its control environment[246] PART II—OTHER INFORMATION This section provides additional non-financial information and disclosures not covered in the financial statements Item 1. Legal Proceedings This section confirms that the Partnership is not involved in any material legal proceedings beyond routine litigation incidental to its business - There are no material legal proceedings to which the Partnership is a party or to which any of its properties are subject, other than ordinary routine litigation[247] Item 1A. Risk Factors This section updates the risk factors, primarily focusing on the severe and evolving adverse impacts of the COVID-19 pandemic on the Partnership's financial condition, operations, and tenants - The COVID-19 pandemic is expected to continue to adversely affect the Partnership's financial condition, results of operations, cash flows, liquidity, and performance, as well as that of its tenants[248] - Key risks include tenants' inability to meet rental obligations, potential rent concessions/deferrals, business closures impacting commercial tenants, increased unemployment affecting residential tenants' ability to pay rent, and potential impairment in property values[252][253] - Operational challenges include limited leasing activities, difficulties in making strategic acquisitions/dispositions, new laws restricting landlord's ability to collect rent/enforce leases, and increased operating costs due to health and safety measures[253][254][255] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides details on the Partnership's equity repurchase program, including its history, extensions, and the number of Depositary Receipts and units repurchased - The equity repurchase program was extended until March 31, 2025. From August 2007 through September 30, 2020, 1,428,437 Depositary Receipts were repurchased at an average price of $28.43 per receipt[257] - During the nine months ended September 30, 2020, 5,328 Depositary Receipts were purchased at an average price of $59.14 per receipt, totaling $315,216. The program was temporarily suspended as of April 15, 2020, due to economic uncertainty from the coronavirus[258] Depositary Receipts Repurchase Program (Q3 2020): | Period | Average Price Paid ($) | Depositary Receipts Purchased (Receipts) | Remaining for Purchase (Receipts) | | :------------------------------------ | :----------------- | :---------------------------- | :--------------------- | | July 1-31, 2020 | $— | — | 571,561 | | August 1-31, 2020 | $— | — | 571,561 | | September 1-30, 2020 | $— | — | 571,561 | | Total | N/A | — | N/A | Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the third quarter of 2020[258][259] Item 4. Mine Safety Disclosure This section indicates that mine safety disclosure is not applicable to the Partnership - Mine Safety Disclosure is not applicable to the Partnership[261] Item 5. Other Information This section states that there is no other information to report - No other information is reported in this section[262] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications under the Sarbanes-Oxley Act and financial statements formatted in Inline XBRL - Exhibits include certifications pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002 by Ronald Brown (Principal Executive Officer) and Jameson Brown (Principal Financial Officer)[265] - Financial statements for the quarter ended September 30, 2020, are filed in Inline XBRL format[265] SIGNATURES This section contains the official signatures of the Partnership's principal executive and financial officers, along with other directors, certifying the report - The report was signed on November 6, 2020, by Ronald Brown as President and Director of the General Partner (Principal Executive Officer) and Jameson Brown as Treasurer and Director of the General Partner (Principal Financial Officer and Principal Accounting Officer), along with other directors[268][269]