SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K

(Mark One)

For the fiscal year ended December 31, 2002

OR

For the transition period from                                      to                                     

Commission file number 0-12138

New England Realty Associates Limited Partnership
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (617) 783-0039

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Class A
Limited Partnership Units
(Title of class)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o  No ý

        As of March 27, 2003, the aggregate market value of the registrant's securities held by non-affiliates of the registrant was $55,617,967 based on the average bid and asked price of the registrant's traded securities on such date.

PART I

ITEM 1.    BUSINESS

General

        New England Realty Associates Limited Partnership ("NERA" or the "Partnership"), a Massachusetts Limited Partnership, was formed on August 12, 1977 as the successor to five real estate limited partnerships (collectively, the "Colonial Partnerships"), which filed for protection under Chapter XII of the Federal Bankruptcy Act in September 1974. The bankruptcy proceedings were terminated in late 1984. While the Partnership terminates on December 31, 2017, the General Partner may extend, at its sole discretion, the termination date for an additional 40 years.

        The authorized capital of the Partnership is represented by three classes of partnership units ("Units"). There are two categories of limited partnership interests ("Class A Units" and "Class B Units") and one category of general partnership interests (the "General Partnership Units"). The Class A Units were issued to creditors and limited partners of the Colonial Partnerships and have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Each Class A Unit is exchangeable for 10 publicly traded depositary receipts ("Receipts"), which are currently listed on the American Stock Exchange and are registered under Section 12(b) of the Exchange Act. The Class B Units were issued to the original general partners of the Partnership. The General Partnership Units are held by the current general partner of the Partnership, NewReal, Inc. (the "General Partner"). The Class A Units represent an 80% ownership interest, the Class B Units represent a 19% ownership interest, and the General Partnership Units represent a 1% ownership interest.

        The Partnership is engaged in the business of acquiring, developing, holding for investment, operating and selling real estate. The Partnership, directly or through 23 subsidiary limited partnerships or limited liability companies, owns and operates various residential apartment buildings, condominium units and commercial properties located in Massachusetts and New Hampshire. As used herein, the Partnership's subsidiary limited partnerships and limited liability companies are each referred to as a "Subsidiary Partnership" and are collectively referred to as the "Subsidiary Partnerships".

        The Partnership owns between a 99.67% and 100% interest in each of the Subsidiary Partnerships, except that it owns a 50% interest in one of the Subsidiary Partnerships, a limited liability company (the "Investment LLC") that owns a 40-unit apartment building in Cambridge, Massachusetts (the "Investment Property"). The Partnership's interest in the Investment LLC is accounted for on the equity method of consolidation in the Consolidated Financial Statements. See Note 1 to the Consolidated Financial Statements—"Principles of Consolidation". Of those Subsidiary Partnerships not wholly owned by the Partnership, except for the Investment LLC, the remaining ownership interest is held by an unaffiliated third party. In each such case, the third party has entered into a lease agreement with the Partnership, pursuant to which any benefit derived from its ownership interest in the applicable Subsidiary Partnerships will be returned to the Partnership.

        The long-term goals of the Partnership are to manage, rent and improve its properties and to acquire additional properties with income and capital appreciation potential as suitable opportunities arise. When appropriate, the Partnership may sell or refinance selected properties with low debt-to-equity ratios. Proceeds from any such sales or refinancings will be reinvested in acquisitions of other properties, distributed to the partners, or used for operating expenses or reserves, as determined by the General Partner.

Operations of the Partnership

        The Partnership is managed by the General Partner, NewReal, Inc., a Massachusetts corporation wholly-owned by Harold Brown and Ronald Brown. The General Partner has engaged The Hamilton

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Company, Inc. (the "Hamilton Company" or "Hamilton") to perform general management functions for the Partnership's properties in exchange for management fees. The Hamilton Company is wholly owned by Harold Brown and employs Ronald Brown and Harold Brown. The Partnership and its Subsidiary Partnerships currently employ 79 individuals who are primarily involved in the supervision and maintenance of specific properties. The General Partner has no employees.

        As of March 6, 2003, the Partnership and its Subsidiary Partnerships owned 2,192 residential apartment units in 21 residential and mixed-use complexes (collectively, the "Apartment Complexes"). The Partnership also owns 19 condominium units in a residential condominium complex, all of which are leased to residential tenants (collectively referred to as the "Condominium Units"). Further, the Partnership owns a 50% interest in the Investment Property through its membership in the Investment LLC. The Apartment Complexes, the Condominium Units and the Investment Property are located primarily in the greater metropolitan Boston, Massachusetts area.

        Additionally, as of March 6, 2003, the Subsidiary Partnerships owned a commercial shopping center in Framingham, Massachusetts and commercial space in mixed-use buildings in Boston, Brockton and Newton, Massachusetts. These properties are referred to collectively as the "Commercial Properties." See Note 2 to the Consolidated Financial Statements included as a part of this Form 10-K.

        The Apartment Complexes, Investment Property, Condominium Units and Commercial Properties are referred to collectively as the "Properties."

        Harold Brown and, in certain cases, Ronald Brown, own or have owned interests in certain of the Properties and the Subsidiary Partnerships. See "Item 13. Certain Relationships and Related Transactions."

        In general, the Properties face no unusual competition. The Apartment Complexes, Condominium Units and the Investment Property must compete for tenants with other residential apartments and condominium units in the areas in which they are located. The Commercial Properties must compete for commercial tenants with other shopping malls and office buildings in the areas in which they are located. Thus, the level of competition at each Property depends on how many other similarly-situated properties are in its vicinity. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Factors that May Affect Future Results."

        The Second Amended and Restated Contract of Limited Partnership of the Partnership (the "Partnership Agreement") authorizes the General Partner to acquire real estate and real estate related investments from or in participation with either or both of Harold Brown and Ronald Brown, or their affiliates, upon the satisfaction of certain terms and conditions, including the approval of the Partnership's advisory committee and limitations on the price paid by the Partnership for such investments. The Partnership Agreement also permits the Partnership's limited partners and the General Partner to make loans to the Partnership, subject to certain limitations on the rate of interest that may be charged to the Partnership. Except for the foregoing, the Partnership does not have any policies prohibiting any limited partner, General Partner or any other person from having any direct or indirect pecuniary interest in any investment to be acquired or disposed of by the Partnership or in any transaction to which the Partnership is a party or has an interest in or from engaging, for their own account, in business activities of the types conducted or to be conducted by the Partnership. The General Partner is not limited in the number or amount of mortgages which may be placed on any Property, nor is there a policy limiting the percentage of Partnership assets which may be invested in any specific Property.

Recent Developments

        On June 28, 2002, the Partnership sold a condominium unit located in Brockton, Massachusetts for $113,000. The net taxable gain of the sale was $92,778 after deducting basis, a three percent (3%) sales

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commission paid to the management company and other closing costs. The net cash flow to the Partnership was $104,494.

        On December 16, 2002, the Partnership sold the East Hampton Mall located in East Hampton, Connecticut for $3,025,000. Net gain on the sale was $916,524 after deducting basis, mortgage prepayment penalties, a 3% sales commission paid to the management company and other closing costs. The net cash flow to the Partnership was $1,414,661 net of the mortgage payoff of $1,268,510.

        On June 17, 2002, the Partnership purchased a 69-unit residential apartment complex located in Norwood, Massachusetts for $7,200,000. The Partnership assumed a mortgage of approximately $3,650,000 with an interest rate of 7.08%, amortizing over 25 years, maturing in January 2008 and requiring a final "balloon" payment of approximately $3,300,000. The Partnership also borrowed $1,726,898 from the seller at an interest rate of 6%, for a term of five years—or a shorter period if the first mortgage is refinanced—with only accrued interest coming due during the term of the loan. The seller financing is not secured by a second mortgage on the Norwood property but rather by a mortgage on the 19 Condominium Units which were previously unencumbered. The balance of approximately $1,800,000 was funded from the Partnership's cash reserves.

        In 2002, the Partnership paid a distribution of $25.60 per Unit ($2.56 per Receipt) for a total payment of $4,428,083. In 2001, the Partnership paid a distribution of $17.70 per Unit ($1.77 per Receipt) for a total payment of $3,061,604.

        During 2002, the Partnership and its Subsidiary Partnerships completed improvements to certain of the Properties at a total cost of approximately $4,060,000. These improvements were funded from cash reserves and, to some extent, escrow accounts established in connection with the financing or refinancing of the applicable Properties. These sources have been adequate to fully fund improvements. The most significant improvements were made at 62 Boylston Street, Avon Street and Clovelly Apartments, at a cost of approximately $2,233,000, $208,451 and $161,978, respectively. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

Advisory Committee

        The Partnership has an advisory committee composed of three limited partners who are not general partners or affiliates of the Partnership. The advisory committee meets with the General Partner to review the progress of the Partnership, assist the General Partner with policy formation, review the appropriateness, timing and amount of proposed distributions, approve or reject proposed acquisitions and investments with affiliates and advise the General Partner on various other Partnership affairs. The advisory committee has no binding power except that it must approve certain investments and acquisitions by the Partnership from or with affiliates of the Partnership.

        Two members of the Advisory Committee were elected directors of the General Partner and appointed members of the General Partner's Audit Committee on March 11, 2002, and the third member was elected a director of the General Partner and appointed a member of the General Partner's Audit Committee on January 2, 2003. See "Item 10. Directors and Executive Officers of the Registrant."

ITEM 2.    THE PROPERTIES

        As of March 6, 2003, the Partnership and its Subsidiary Partnerships own the Apartment Complexes, the Condominium Units and the Commercial Properties. In addition, the Partnership owns a 50% interest in the Investment LLC, which owns the Investment Property.

        See also "Item 13. Certain Relationships and Related Transactions" for information concerning affiliated transactions.

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Apartment Complexes

        The table below lists the location of the 21 Apartment Complexes, the number and type of units in each complex, the range of rents and vacancies as of March 6, 2002, the principal amount outstanding under any mortgages as of December 31, 2002, the fixed interest rates applicable to such mortgages and the maturity dates of such mortgages.

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        See Note 5 to the Consolidated Financial Statements included as part of this Form 10-K for information relating to the mortgages payable of the Partnership and its Subsidiary Partnerships.

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Condominium Units

        The Partnership owns and leases to residential tenants 19 Condominium Units in the greater Boston, Massachusetts area.

        The table below lists the location of the 19 Condominium Units, the type of units, the range of rents received by the Partnership for such units and the number of vacancies as of March 6, 2003.

Commercial Properties

        LINHART LP.    During 1995, the Partnership acquired the Linhart property in Newton, Massachusetts ("Linhart"). This mixed-use property includes 21,555 square feet of rentable commercial space. As of March 6, 2003, the commercial space had a 0% vacancy rate, and the average gross rent per square foot was $21.30. For mortgage balance, interest rate and maturity date information, see "Apartment Complexes," above.

        BOYLSTON DOWNTOWN LP.    During 1995, this Subsidiary Partnership acquired the Boylston Downtown property in Boston, Massachusetts ("Boylston"). This mixed-use property includes 17,218 square feet of rentable commercial space. As of March 6, 2003, the commercial space had a 0% vacancy rate, and the average gross rent per square foot was $23.08. The Partnership also rents roof space for a cellular phone antenna at an average rent of approximately $19,000 per year through July, 2006. For mortgage balance, interest rate and maturity date information, see "Apartment Complexes," above.

        140 NORTH BEACON LP.    During 1995, this Subsidiary Partnership acquired the North Beacon property in Boston, Massachusetts ("North Beacon"). This mixed-use property includes 1,000 square feet of rentable commercial space. The property was fully rented as of March 6, 2003, and the average rent per square foot as of that date was $21.65. For mortgage balance, interest rate and maturity date information, see "Apartment Complexes," above.

        STAPLES PLAZA.    In May 1999, the Partnership acquired the Staples Plaza shopping center in Framingham, Massachusetts ("Staples Plaza"). The shopping center consists of 39,600 square feet of rentable commercial space. The Partnership assumed a mortgage in the amount of $5,267,949, which carries a fixed interest rate of 8.00% and matures in the year 2016. As of December 31, 2002, the mortgage had an outstanding balance of $4,662,893. As of March 6, 2003, Staples Plaza was fully occupied, and the average net rent per square foot was $20.13.

        HAMILTON OAKS ASSOCIATES, LLC.    The Hamilton Oaks Apartment complex, acquired by the Partnership in December 1999 through Hamilton Oaks Associates, LLC, includes 6,075 square feet of rentable commercial space, occupied by a daycare center. As of March 6, 2003, the commercial space was fully occupied, and the average rent per square foot was $11.00. The Partnership also rents roof space for a cellular phone antenna at an average rent of approximately $25,000 per year through November, 2005. For mortgage balance, interest rate and maturity date information, see "Apartment Complexes," above.

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Investment Property

        345 FRANKLIN LLC.    In November 2001, the Partnership acquired, through this LLC, a 50% interest in a 40-unit apartment building in Cambridge, Massachusetts summarized as follows:

        This property has a 12-year mortgage, which is amortized on a 30-year schedule, with a final payment of approximately $6,000,000 in 2014.

        See "Item 13. Certain Relationships and Related Transactions" concerning current and former ownership interests held by related parties in certain of the above properties.

ITEM 3.    LEGAL PROCEEDINGS

        The Partnership, the Subsidiary Partnerships and their properties are not presently subject to any material litigation, and, to management's knowledge, there is not any material litigation presently threatened against them. The Partnership and Subsidiary Partnerships are occasionally subject to ordinary routine legal and administrative proceedings incident to the ownership of residential and commercial real estate. Some of the legal and other expenses related to these proceedings are covered by insurance and none of these costs and expenses are expected to have a material adverse effect on the Consolidated Financial Statements of the Partnership.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of the limited partners of the Partnership during the fourth quarter of the year ended December 31, 2002.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        Each Class A Unit is exchangeable, through Equiserve LP, the Partnership's Depositary Agent, for ten Depositary Receipts ("Receipts"). The Receipts are listed and publicly traded on the American Stock Exchange under the symbol "NEN". Prior to December 13, 2002, the Receipts were listed and publicly traded on NASDAQ under the symbol "NEWRZ". There has never been an established trading market for the Class B Units or General Partnership Units.

        In 2002, the high and low bid quotations for the Receipts were $65.00 and $30.15, respectively. The table below sets forth the high and low bids for each quarter of 2002 and 2001 and the distributions paid on the Partnership's depositary receipts:

        These quotations reflect inter-dealer bids without retail markup, markdown, or commission and do not necessarily represent actual transactions.

        Any portion of the Partnership's cash which the General Partner deems not necessary for cash reserves is distributed to the Partners, and distributions are made on a quarterly basis. The Partnership has made annual distributions to its Partners since 1978. In each of 2002 and 2001, the Partnership made total distributions of $25.60 and $17.70 per Unit, respectively ($2.56 and $1.77 per Receipt, respectively). The total value of the distribution in 2002 was $4,428,083, and the total value for 2001 was $3,061,604. In February 2003, the Partnership declared a quarterly distribution of $6.60 per Unit ($0.66 per Receipt) and a special one-time distribution of $3.00 per Unit ($0.30 per Receipt), payable on March 31, 2003.

        In 2002 and 2001, respectively, taxable income, excluding capital gains, was approximately $50,000 and $500,000 greater than comparable statement income.

        See "Item 12. Security Ownership of Certain Beneficial Owners and Management" for certain information relating to the number of holders of each class of Units.

ITEM 6. SELECTED FINANCIAL DATA

        The information required by this Item is included on page 27 of this Form 10-K.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion should be read in conjunction with the financial statements and notes thereof appearing elsewhere in this Report. This Report, on Form 10-K, contains forward-looking statements within the meaning of the securities laws. Actual results or developments could differ materially from those projected in such statements as a result of certain factors set forth in the section below entitled "Factors That May Affect Future Results" and elsewhere in this Report.

        The Partnership has retained The Hamilton Company ("Hamilton") to manage and administer the Partnership's properties. Hamilton is a full-service real estate management company, which has legal, construction, maintenance, architectural and administrative departments. The Partnership's properties represent approximately 33% of the total properties and 67% of the residential properties managed by Hamilton. Substantially all of the other properties managed by Hamilton are owned—wholly or partially, directly or indirectly—by Harold Brown. The Partnership's Second Amended and Restated Contract of Limited Partnership (the "Partnership Agreement") expressly provides that the general partner may employ a management company to manage the properties, and that such management company may be paid a fee of 4% of rental receipts for administrative and management services (the "Management Fee"). The Partnership annually pays Hamilton the full Management Fee, in monthly installments.

        Mr. Brown, his brother Ronald Brown and the President of Hamilton, Carl Valeri, collectively own approximately 17.4% of the depositary receipts representing the Partnership Class A Units (including depositary receipts held by trusts for the benefit for such persons' family members). Harold Brown also owns 75% of the Partnership's Class B Units, 75% of the capital stock of NewReal, Inc. ("NewReal"), the Partnership's sole general partner, and all of the outstanding capital stock of Hamilton. Ronald Brown also owns 25% of the Partnership's Class B Units and 25% of NewReal's capital stock. In addition, Ronald Brown is the President and director of NewReal, and Harold Brown is NewReal's Treasurer and also a director. Two of NewReal's other directors, Thomas Raffoul and Conrad DiGregorio, also own immaterial amounts of the Partnership's Class A Units.

        Beyond the Management Fee, the Partnership Agreement further provides for the employment of outside professionals to provide services to the Partnership and allows NewReal to charge the Partnership for the cost of employing professionals to assist with the administration of the Partnership's properties. In addition to the Management Fee, from time to time the Partnership pays Hamilton for repair and maintenance services, legal services, construction services and accounting services. The costs charged by Hamilton for these services are at the same hourly rate charged to all entities managed by Hamilton, and management believes such rates are competitive in the marketplace.

        Hamilton accounted for approximately 7% and 6% of the repair and maintenance expenses paid by the Partnership in 2002 and 2001, respectively. Of the funds paid to Hamilton for this purpose, the great majority was to cover the cost of services provided by the Hamilton maintenance department, including plumbing, electrical and carpentry services, snow removal and the use of equipment such as fork lifts. However, several of the larger Partnership properties have their own maintenance staff. Further, those properties that do not have their own maintenance staff but are located more than a reasonable distance from Hamilton's headquarters in Allston, Massachusetts are generally serviced by local, independent companies.

        Hamilton's legal department handles most of the Partnership's eviction and collection matters. Additionally, it prepares most long-term commercial lease agreements and represents the Partnership in selected purchase and sale transactions. Overall, Hamilton provided approximately 62% of the legal services paid for by the Partnership in 2002 and approximately 67% of such services during 2001.

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        The Partnership requires that three bids be obtained for construction contracts in excess of $5,000. Hamilton may be one of the three bidders on a particular project and may be awarded the contract if its bid and its ability to successfully complete the project are deemed appropriate. For contracts that are not awarded to Hamilton, Hamilton charges the Partnership a construction supervision fee equal to 5% of the contract amount. Hamilton's architectural department also provides services to the Partnership on an as-needed basis. In 2002 and 2001, Hamilton provided all of the construction services and architectural services paid for by the Partnership.

        Prior to 1991, the Partnership employed an outside, unaffiliated company to perform its bookkeeping and accounting functions. Since that time, such services have been provided by Hamilton's accounting staff, which consists of approximately ten people. Hamilton currently charges the Partnership $80,000 per year for bookkeeping and accounting services.

        For more information on related party transactions, see Note 3 to the Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        The preparation of consolidated financial statements, in accordance with accounting principles generally accepted in the United States of America, requires the Partnership to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. The Partnership regularly and continually evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate properties and its investments in and advances to joint ventures. The Partnership bases its estimates on historical experience, current market conditions and on various other assumptions that are believed to be reasonable under the circumstances. See Note 1 to the Consolidated Financial Statements, Principles of Consolidation.

        Revenue Recognition: Revenues from rental properties are recognized when due from tenants. Residential leases are generally for terms of one year, and commercial leases are generally for five to ten years, with renewal options at increased rents. Significant commercial leases with stepped increases over the term of the lease are recorded on the straight-line basis.

        Real Estate and Depreciation: Real estate assets are stated at the lower of cost or fair value, less accumulated depreciation. Costs related to the acquisition, development, construction and improvement of properties are capitalized, including interest, internal wages and benefits, real estate taxes and insurance. Capitalization usually begins with commencement of development activity and ends when the property is ready for leasing. Replacements and improvements—such as HVAC equipment, structural replacements, windows, appliances, flooring, carpeting, kitchen/bath replacements and renovations are capitalized and depreciated over their estimated useful lives as follows:

•

Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets. In assessing estimated useful lives, the Partnership makes assumptions based on historical experience acquired from both within and outside the Partnership. These assumptions have a direct impact on the Partnership's net income.



•

Ordinary repairs and maintenance, such as unit cleaning and painting and appliance repairs, are expensed.

        If there is an event or change in circumstances that indicates an impairment in the value of a property, the Partnership's policy is to assess the impairment by making a comparison of the current and projected operating cash flows of the property over its remaining useful life, on an undiscounted basis, to the carrying amount of the property. If the carrying value is in excess of the estimated projected operating cash flows of the property, the Partnership would recognize an impairment loss

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equivalent to the amount required to adjust the carrying amount to its estimated fair value. The Partnership has not recognized an impairment loss since 1995.

        With respect to investments in and advances to joint ventures, the Partnership looks to the underlying properties to assess performance and the recoverability of carrying amounts for those investments in a manner similar to direct investments in real estate properties. An impairment charge is recorded if the carrying value of the investment exceeds its fair value.

Legal Contingencies

        The Partnership is subject to various legal proceedings and claims that arise, from time to time, in the ordinary course of business. These matters are frequently covered by insurance. If it is determined that a loss is likely to occur, the estimated amount of the loss is recorded in the financial statements. Both the amount of the loss and the point at which its occurrence is considered likely can be difficult to determine.

RESULTS OF OPERATIONS

Years ended December 31, 2002 and December 31, 2001

        The Partnership and its Subsidiary Partnerships earned income before other income and discontinued operations of $6,541,199 during the year ended December 31, 2002, compared to $5,879,624 for the year ended December 31, 2001, an increase of $661,575 (11%). This increase is largely due to an increase in rental income of $1,736,339 (6%), offset by an increase in operating expenses of $1,094,831 (5%).

        The rental activity is summarized as follows:

        Rental income from continuing operations for the year ended December 31, 2002 was approximately $29,000,000, compared to approximately $27,264,000 for the year ended December 31, 2001, an increase of approximately $1,736,000 (6%). This increase is due in large part to the acquisition of a 69-unit residential apartment complex located on Dean Street in Norwood, Massachusetts (referred to as "Dean Street"). The Dean Street property was acquired in June 2002, and the rental

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income for 2002 was approximately $480,000. In addition to the acquisition of Dean Street, the Partnership completed significant improvements at 1144 Commonwealth Avenue and 62 Boylston Street, both of which resulted in higher rental rates and increased occupancy rates in 2002 compared to 2001. Income from the Partnership's residential properties represent 91% of rental income for the years ended December 31, 2002 and 2001.

        In 2002, the Partnership sold the East Hampton Mall in East Hampton, Connecticut and a condominium unit located in Brockton, Massachusetts. In 2002, rental income from the East Hampton Mall was approximately $470,000, and income from operations was approximately $60,000. Rental income from the condominium was approximately $5,000 and income from operations was approximately $500. In 2001, the combined income from operations for these disposed properties was approximately $121,000. The operations of these properties are included in discontinued operations for all years presented.

        Expenses from continuing operations for the year ended December 31, 2002 were approximately $23,000,000, compared to approximately $22,000,000 the year ended December 31, 2001, an increase of approximately $1,000,000 (5%). Expenses related to the Dean Street acquisition represent approximately $494,000 of this increase. Unrelated to the acquisition of Dean Street, there was an increase in operating expenses of approximately $506,000 (3%). With the exception of a few of the larger properties, the rental market weakened in 2002, resulting in higher tenant turnover and an increase in vacancies. In an effort to sustain occupancy levels, the Partnership assumed responsibility for paying rental commissions to unaffiliated parties, which had previously been paid by tenants. As a result, renting expenses increased approximately $184,000 (106%) in 2002, compared to 2001. Excluding Dean Street, taxes and insurance increased approximately $487,000 (19%) due to increases in real estate taxes from reassessments and increased insurance premiums.

        The Partnership has a 50% ownership interest in a limited liability company that owns a 40-unit residential property in Cambridge, Massachusetts. For the year ended December 31, 2002, the Partnership's share of loss on this investment was $61,787. This investment was made in November 2001, so the income for 2001 was minimal. There are no vacancies at the property at March 6, 2003.

        Interest income was approximately $277,000 for the year ended December 31, 2002, compared to approximately $605,000 for the year ended December 31, 2001, a decrease of approximately $328,000 (54%). This decrease is due to a decline in interest rates in 2002.

        Included in discontinued operations for the year ended December 31, 2002 is a gain of approximately $916,000 on the sale of the East Hampton Mall and a gain of approximately $93,000 on the sale of the condominium unit in Brockton, Massachusetts. There were no sales in 2001.

        As a result of the changes discussed above, net income for the year ended December 31, 2002 was approximately $7,825,000, compared to approximately $6,647,000 for the year ended December 31, 2002, an increase of approximately $1,178,000 (18%).

Years Ended December 31, 2001 and 2000

        The Partnership and its Subsidiary Partnerships earned income before other income and discontinued operations of approximately $5,880,000 during the year ended December 31, 2001, compared to approximately $4,377,000 during the year ended December 31, 2000, an increase of approximately $1,503,000 (34%). The primary factor contributing to this increase was increased rental income resulting from continued strength in the residential real estate market in 2001.

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        The rental activity is summarized as follows:

        Rental income from continuing operations for the year ended December 31, 2001 was approximately $27,264,000, compared to approximately $25,167,000 for the year ended December 31, 2000, an increase of approximately $2,097,000 (8%). The Partnership completed significant improvements at some of the larger residential properties, including the Westgate Apartments, 62 Boylston Street and 1144 Commonwealth Avenue, resulting in the ability to charge higher rental rates at these properties. Income from the Partnership's residential properties represented approximately 91% of rental income for the year ended December 31, 2001, up from 87% for the year ended December 31, 2000.

        In 2000, the Partnership acquired the 44-unit Brookside Apartments complex in Woburn, Massachusetts. The Partnership also sold the Timpany Plaza Shopping Center in Gardner, Massachusetts and the Lewiston Mall Shopping Center in Lewiston, Maine, which had a combined total of approximately 366,000 square feet. While these three transactions, taken together, produced a decrease in rental income of approximately $646,000 in 2001, this was more than offset by a decrease in operating expenses of approximately $845,000, for a net increase in income of approximately $199,000. In addition, in 2001, the Partnership realized approximately $50,000 of income from an investment property purchased in November 2001.

        Expenses from continuing operations for the year ended December 31, 2001 were approximately $21,600,000, compared to approximately $21,040,000 for the year ended December 31, 2000, an increase of approximately $560,000 (3%). Administrative expenses increased approximately $139,000 (11%) due to an increase in salaries and wages. Repairs and maintenance expenses increased approximately $427,000 (14%) due to an increase in salaries for maintenance staff as well as significant refurbishing at certain of the residential properties. Operating expenses increased approximately $140,000 (6%) largely as a result of an increase in the cost of snow removal and utilities due to a colder and snowier winter during the first quarter of 2001 compared to 2000. Interest expense increased approximately $71,000 (1%) due to a higher level of debt. Management fees increased approximately $64,000 (6%) due to increases in rental income.

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        Depreciation and amortization expense decreased approximately $202,000 (5%) largely due to the sale of the two commercial properties in 2000. The aggregate book value of the properties sold was approximately $7,000,000. Renting expenses decreased approximately $6,000 (3%) due to lower rental commissions.

        Total interest income was approximately $605,000 for the year ended December 31, 2001, compared to approximately $425,000 for the year ended December 30, 2000, an increase of approximately $180,000 (42%). This increase was a result of the higher average cash balance available for investment in 2001, although declining interest rates offset the increase to some extent.

        Included in other income for the year ended December 31, 2000 is a gain of approximately $660,000 on the sale of the Lewiston Mall Shopping Center and a gain of approximately $1,870,000 on the sale of the Timpany Plaza Shopping Center. There were no sales in 2001.

        Operations for the properties sold in 2002 are included with discontinued operations for all periods presented. Rental income for the disposed properties was approximately $503,000 and $416,000, respectively, in 2001 and 2000, and income from operations was approximately $121,000 and $24,000, respectively.

        As a result of the changes discussed above, net income for the year ended December 31, 2001 was approximately $6,647,000, compared to approximately $5,801,000 for the year ended December 31, 2000, an increase of approximately $846,000 (15%).

LIQUIDITY AND CAPITAL RESOURCES

        The Partnership's principal source of cash during 2002 was the collection of rents and the sale of Partnership properties; its principal source of cash in 2001 was the collection of rents. The majority of cash and cash equivalents of $18,974,446 at December 31, 2002 and $16,690,943 at December 31, 2001 were held in interest-bearing accounts at creditworthy financial institutions.

        This increase of $2,283,503 at December 31, 2002 is summarized as follows:

        The increase in cash provided by operating activities was primarily due to an increase in operating income before depreciation expense. The decrease in cash used in investing activities reflects less cash being available for investment due to the acquisition of a rental property in Norwood, Massachusetts in June 2002 (discussed below) as well as capital improvements to certain of the Partnership's properties, partially offset by the proceeds from sales of Partnership properties. The increase in cash used in financing activities was due to dividend distributions and payments of mortgage debt.

        On June 17, 2002, the Partnership purchased a 69-unit residential apartment complex located in Norwood, Massachusetts for $7,200,000. The Partnership assumed a first mortgage of approximately $3,650,000, with payments of $25,271 per month, including interest at 7.08%, and a final payment of approximately $3,300,000 in February 2008. The seller financed $1,726,898 at an interest rate of 6%, with interest-only payments for five years and is collateralized by a mortgage on 19 condominium units owned by the Partnership. The balance of approximately $1,800,000 was funded from cash reserves.

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        In June 2002, the Partnership sold a condominium unit located in Brockton, Massachusetts for $113,000. The net gain on the sale was $92,778 after deducting basis, a 3% commission to the management company (see Note 3 to the Consolidated Financial Statements) and other expenses of the sale. The net cash flow to the Partnership was $104,494.

        In December 2002, the Partnership sold the East Hampton Mall located in East Hampton, Connecticut for $3,025,000. The net gain on the sale was $916,524 after deducting basis, mortgage prepayment penalties, a 3% commission to the management company (see Note 3 to the Consolidated Financial Statements) and other expenses of the sale. The net cash to the Partnership was $1,414,661 after payment of the existing mortgage and selling expenses. For the years ended December 31, 2002 and 2001, this property contributed less than 2% of rental income and less than 1% of cash flow from operations.

        The Partnership has executed a purchase and sale agreement to purchase a 184-unit residential property located in Framingham, Massachusetts. The purchase price is $23,350,000. It is anticipated that this acquisition will require approximately 25% of the purchase price to be paid from available cash reserves and the balance to be funded by a mortgage with an approximate interest rate of 5.5%. This purchase is expected to close in the second quarter of 2003.

        In February 2002, the Partnership voted to change its distribution policy from a semi-annual to a quarterly distribution and declared a quarterly distribution of $6.40 per Unit ($0.64 per depositary receipt). The distribution was payable on March 31, June 30, September 30 and December 31, 2002 and totaled $25.60 ($2.56 per depositary receipt) for 2002. Total distributions paid in 2001 were $17.70 per unit ($1.77 per depositary receipt).

        On November 8, 2001, a newly formed limited liability company in which the Partnership has a 50% ownership interest acquired a 40-unit residential property in Cambridge, Massachusetts. The remaining 50% ownership interest in this limited liability company is owned by Harold Brown and the President of the Hamilton Company. The total purchase price was $11,265,000. At closing, the Partnership paid $8,265,000, and the other owners paid $3,000,000. A mortgage of approximately $8,000,000 was obtained, and the funds in excess of the required equity were returned to the partners so that their capital contributions are proportional to their respective ownership interests in the limited liability company.

        During 2002, the Partnership and its Subsidiary Partnerships completed certain improvements to their properties at a total cost of approximately $4,060,000. The most significant improvements were made at the following properties: $2,233,000 at 62 Boylston Street in Boston, Massachusetts; $208,451 at Avon Street Apartments in Malden, Massachusetts; $118,562 at Redwood Hills in Worcester, Massachusetts; $161,978 at the Clovelly Apartments in Nashua, New Hampshire; $114,838 at Hamilton Oaks in Brockton, Massachusetts; $108,256 at 1144 Commonwealth Avenue Apartments in Allston, Massachusetts, and $107,040 at the Middlesex Apartments in Newton, Massachusetts. All such improvements were funded from the Partnership's cash reserves and escrow accounts established in connection with the refinancing of applicable properties.

        In addition to the improvements made in 2002, the Partnership and its Subsidiary Partnerships plan to invest approximately $2,500,000 in capital improvements during 2003. Approximately $440,000 of this amount is designated for 62 Boylston Street, approximately $397,000 is designated for Commonwealth 1144 Apartments, approximately $202,000 is designated for Hamilton Oaks, and approximately $204,000 is designated for Redwood Hills. These improvements will be funded from escrow accounts established in connection with the refinancing of applicable properties, as well as from the Partnership's cash reserves.

        The Partnership had plans to construct 20 additional residential units at the Westgate Apartments in Woburn, Massachusetts. As of December 31, 2002, the Partnership has put that project on hold due

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to a general softening of the residential rental market, resulting in a decrease in occupancy rates at Westgate. The pre-construction costs incurred to date of approximately $245,000 have been capitalized as construction in progress. At this point, management is unsure when the project will resume.

        The Partnership anticipates that cash from operations and interest-bearing investments will be sufficient to fund its current operations and to finance current improvements to its properties. The Partnership's net income and cash flow may fluctuate dramatically from year to year as a result of the sale of properties, unanticipated increases in expenses or the loss of significant tenants.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Forward-Looking Statements

        Certain information contained herein includes forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Liquidation Reform Act of 1995 (the "Act"). While forward-looking statements reflect management's good faith belief when those statements are made, caution should be exercised in interpreting and relying on such forward-looking statements, the realization of which may be impacted by known and unknown risks and uncertainties, events that may occur subsequent to the forward-looking statements, and other factors which may be beyond the Partnership's control and which can materially affect the Partnership's actual results, performance or achievements for 2003 and beyond.

        Along with risks detailed from time to time in the Partnership's filings with the Securities and Exchange Commission, some factors that could cause the Partnership's actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include but are not limited to the following:

•

The Partnership depends on the real estate markets where its properties are located, and these markets may be adversely affected by local economic market conditions, which are beyond the Partnership's control.



•

The Partnership is subject to the general economic risks affecting the real estate industry, such as dependence on tenants' financial condition and the need to enter into new leases or renew leases on terms favorable to tenants in order to generate rental revenues. The Partnership is also impacted by changing economic conditions making alternative housing arrangements more or less attractive to the Partnership's tenants, such as the interest rates on single-family home mortgages and the availability and purchase price of single-family homes in the greater Boston metropolitan area.



•

The Partnership is subject to increases in heating and utility costs that may arise as a result of economic and market conditions and fluctuations in seasonal weather conditions.



•

The Partnership may fail to identify, acquire, construct or develop additional properties; may develop or acquire properties that do not produce a desired or expected yield on invested capital; may be unable to sell poorly-performing or otherwise undesirable properties quickly; or may fail to effectively integrate acquisitions of properties or portfolios of properties.



•

Financing or refinancing of Partnership properties may not be available to the extent necessary or desirable, or may not be available on favorable terms.



•

Given the nature of the real estate business, the Partnership is subject to potential environmental liabilities. These include environmental contamination in the soil at the Partnership's or neighboring real estate, whether caused by the Partnership, previous owners of the subject property or neighbors of the subject property, and the presence of hazardous materials in the Partnership's buildings, such as asbestos, mold and radon gas. Management is not aware of any material environmental liabilities at this time.

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•

Insurance coverage for and relating to commercial properties is increasingly costly and difficult to obtain. In addition, insurance carriers have excluded certain specific items from standard insurance policies, which have resulted in increased risk exposure for the Partnership. These include insurance coverage for acts of terrorism and war, and coverage for mold and other environmental conditions. Coverage for these items is either unavailable, or prohibitively expensive.



•

Market interest rates could adversely affect market prices for Class A Partnership Units and depositary receipts as well as performance and cash flow.

        The foregoing factors should not be construed as exhaustive or as an admission regarding the adequacy of disclosures made by the Partnership prior to the date hereof or the effectiveness of said Act. The Partnership expressly disclaims any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

        The residential real estate market in the Greater Boston area has softened, and the Partnership anticipates the climate will remain the same in the foreseeable future. This may result in increases in vacancy rates and/or a reduction in some rents. The Partnership believes its present cash reserves as well as anticipated rental revenue will be sufficient to fund its current operations, finance current planned improvements to its properties, and continue dividend payments in the foreseeable future.

        Since the Partnership's long-term goals include the acquisition of additional properties, a portion of the proceeds from the refinancing and sale of properties is reserved for this purpose. The Partnership will consider refinancing existing properties if the Partnership's cash reserves are insufficient to repay existing mortgages or if the Partnership needs additional funds for future acquisitions.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        As of December 31, 2002, the Partnership and its Subsidiary Partnerships collectively have approximately $82,871,000 in long-term debt, all of which earns interest at fixed rates. Accordingly, the fair value of these debt instruments is affected by changes in the market interest rates. The recent decline in market interest rates has had a negative impact, but the Partnership has determined that, at this time, the benefit it would obtain by refinancing its various mortgage debts would be outweighed by the prepayment penalties that would come due upon such refinancings. For information regarding the fair values and maturity dates of these debt obligations, see Notes 5 and 12 to the Consolidated Financial Statements.

        For additional disclosure about market risk, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results".

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The financial statements of the Partnership appear on pages F-1 through F-18 of this Form 10-K and are indexed herein under Item 15(a)(1).

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The General Partner is a Massachusetts corporation wholly owned by Harold Brown and Ronald Brown, who are brothers. Harold Brown and Ronald Brown were individual general partners of the Partnership until May 1984, when NewReal, Inc. replaced them as the sole General Partner of the Partnership. The General Partner is responsible for making all decisions and taking all action deemed by it necessary or appropriate to conduct the business of the Partnership.

        From October 1992 until 1996, the General Partner engaged the Hamilton Partnership as the management company to manage the properties of the Partnership and its Subsidiary Partnerships. The Hamilton Company, a Massachusetts corporation, was the 99% General Partner of Hamilton Partnership. During 1996, the Hamilton Partnership was dissolved and its successor and general partner assumed the management functions of the Hamilton Partnership. The Hamilton Company continues to manage the Properties. The Hamilton Company was purchased by Harold Brown in August 1993. Harold Brown also owned the corporation that was the 1% limited partner of the Hamilton Partnership. See "Item 11. Executive Compensation" for information concerning fees paid by the Partnership to the Hamilton Company during 2001.

        Because the General Partner has engaged the Hamilton Company as the manager for the Properties, the General Partner has no employees.

        The directors of the General Partner are Ronald Brown, Harold Brown, Guilliaem Aertsen, Conrad DiGregorio and Thomas Raffoul. Messrs. Aertsen, DiGregorio and Raffoul were elected directors on March 11, 2002, pursuant to a joint unanimous written consent of the only two shareholders and the only two directors (at that time) of the General Partner, Ronald Brown and Harold Brown. The directors of the General Partner hold office until their successors are duly elected and qualified. On January 2, 2003, Edward Sarkisian was elected as a director of the General Partner.

        Ronald Brown and Harold Brown hold all of the executive officer positions of the General Partner. The executive officers of the General Partner serve at the pleasure of the Board of Directors.

        On June 14, 2001, the Board of Directors of the General Partner created an Audit Committee, consisting of three members, and approved the charter of the Audit Committee. The Audit Committee was not filled until March 11, 2002, on which date Messrs. Aertsen, DiGregorio and Raffoul were appointed as its members. On January 2, 2003, the Audit Committee was expanded to four members, and Edward Sarkisian was added as a member. The Board of Directors of the General Partner has determined that Guilliaem Aertsen is an audit committee financial expert, as that term is defined in Item 401 of Securities and Exchange Commission Regulation S-K.

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        The following table sets forth the name and age of each director and officer of the General Partner and each such person's principal occupation and affiliation during the preceding five years.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

        Section 16(a) of the Securities Exchange Act of 1934 requires the Partnership's directors and executive officers, and persons who own more than 10% of a registered class of the Partnership's equity securities, to file with the Securities and Exchange Commission reports of ownership changes and changes in ownership of the Partnership. Officers, directors and greater-than-10% shareholders are required by SEC regulations to furnish the Partnership with copies of all Section 16(a) forms they file.

        Based solely on review of the copies of such reports furnished to the Partnership or written or oral representations that no reports were required, the Partnership believes that during the 2002 fiscal year, all filing requirements applicable to its officers, directors and greater-than-10% beneficial owners were complied with, except that (a) Harold Brown inadvertently did not timely file