New England Realty Associates Limited Partnership (NEN) Bundle
Understanding New England Realty Associates Limited Partnership (NEN) Revenue Streams
Understanding New England Realty Associates Limited Partnership’s Revenue Streams
The primary revenue source for the Partnership is rental income, which for the nine months ended September 30, 2024, was approximately $59,573,000, compared to $54,338,000 for the same period in 2023, reflecting an increase of approximately $5,235,000 or 9.6%.
Excluding revenues from Shawmut Apartments, which accounted for approximately $1,305,000, revenue increased by approximately $3,930,000, representing a 7.2% growth.
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth has shown positive trends. The revenue for the nine months ended September 30, 2024, was $60,153,001, which is a 9.9% increase compared to $54,754,365 for the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
The breakdown of revenue sources for the nine months ended September 30, 2024, is as follows:
| Revenue Source | 2024 Amount | 2023 Amount | Change ($) | Change (%) |
|---|---|---|---|---|
| Rental Income | $59,573,125 | $54,338,011 | $5,235,114 | 9.6% |
| Laundry and Sundry Income | $579,876 | $416,354 | $163,522 | 39.3% |
| Total Revenue | $60,153,001 | $54,754,365 | $5,398,636 | 9.9% |
Analysis of Significant Changes in Revenue Streams
Notable increases in rental income were observed in several properties, contributing to overall growth. The Partnership properties with the largest increases in rental income include:
- Hamilton Oaks: $419,000
- 62 Boylston: $395,000
- 1144 Commonwealth: $342,000
- Mill Street Gardens: $306,000
- 659 Worcester Road: $292,000
- Westgate Apartments: $233,000
These increases reflect strong demand in the rental market and effective management strategies in optimizing property performance.
A Deep Dive into New England Realty Associates Limited Partnership (NEN) Profitability
Profitability Metrics
The financial health of a partnership can be gauged through various profitability metrics, which include gross profit, operating profit, and net profit margins. For the nine months ended September 30, 2024, the financial highlights are as follows:
- Rental Income: $59,573,125
- Operating Expenses: $41,392,388
- Net Income: $11,445,720
To illustrate the profitability margins over time, the following table summarizes key metrics:
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change ($) | Change (%) |
|---|---|---|---|---|
| Gross Profit | $18,180,737 | $13,669,627 | $4,511,110 | 33.0% |
| Operating Profit | $18,760,613 | $14,089,338 | $4,671,275 | 33.2% |
| Net Profit Margin | 19.2% | 11.3% | 7.9% | 69.9% |
Examining trends in profitability over time, net income for the nine months ended September 30, 2024, was approximately $11,445,720, representing an increase of $5,291,152 (or 86.0%) compared to the same period in 2023, where net income was $6,154,568.
In terms of operational efficiency, the Partnership's efforts in cost management can be seen in the reduction of operating expenses, which increased only by 1.8% from $40,665,027 in 2023 to $41,392,388 in 2024. This efficiency indicates a positive trend in maintaining profitability amidst rising rental income.
When comparing profitability ratios with industry averages, the Partnership's net profit margin of 19.2% significantly exceeds the average for the real estate sector, which typically hovers around 10-15%. This indicates strong operational performance relative to peers.
Furthermore, the Partnership's income from investments in unconsolidated joint ventures also saw a substantial increase, reaching $909,207 for the nine months ended September 30, 2024, compared to $496,092 in the prior year, marking an increase of 83.3%.
Overall, the financial metrics reflect a robust profitability outlook, driven by effective cost management and increasing rental revenues.
Debt vs. Equity: How New England Realty Associates Limited Partnership (NEN) Finances Its Growth
Debt vs. Equity: How New England Realty Associates Limited Partnership Finances Its Growth
As of September 30, 2024, the company maintains a total debt of approximately $409,341,288, which includes both long-term and short-term liabilities. The breakdown of the debt is as follows:
| Type of Debt | Amount ($) |
|---|---|
| Long-term Debt | 409,341,288 |
| Short-term Debt | Not specified in the data |
The debt-to-equity ratio is a crucial indicator of financial leverage. For New England Realty Associates, this ratio stands at approximately 1.14, aligning closely with industry standards which typically range from 1.0 to 1.5 for real estate partnerships.
Recent financing activities include a refinancing of fifteen properties, which raised approximately $130,000,000. The weighted average interest rate on the outstanding mortgages as of September 30, 2024, is 4.38%, with an effective rate of 4.44%.
In addition to traditional debt, the company has also utilized a line of credit. The existing line of credit amounts to $25,000,000, with a commitment amount of $17,000,000 during the modification period.
The following table summarizes the company's debt obligations and maturities:
| Year | Debt Maturity ($) |
|---|---|
| 2025 | 3,399,166 |
| 2026 | 25,217,013 |
| 2027 | 3,216,344 |
| 2028 | 52,323,244 |
| 2029 | 28,555,712 |
| Thereafter | 296,629,809 |
| Total | 409,341,288 |
The partnership balances its growth between debt financing and equity funding effectively. As of September 30, 2024, the total partners' capital is approximately $65,460,606, which reflects a strong equity base to complement its debt structure.
In summary, the company continues to explore opportunities for refinancing and acquiring new properties while managing its debt levels strategically to ensure financial stability and growth.
Assessing New England Realty Associates Limited Partnership (NEN) Liquidity
Assessing New England Realty Associates Limited Partnership's Liquidity
The financial health of New England Realty Associates Limited Partnership can be evaluated through various liquidity metrics and cash flow analyses. This section focuses on the current and quick ratios, working capital trends, cash flow statements, and potential liquidity concerns or strengths.
Current and Quick Ratios
As of September 30, 2024, the current assets and liabilities were as follows:
| Item | Amount |
|---|---|
| Current Assets | $15,069,693 (Cash and Cash Equivalents) + $954,442 (Rents Receivable) + $2,501,806 (Real Estate Tax Escrows) + $86,134,074 (Investment in U.S. Treasury Bills) + $8,424,809 (Prepaid Expenses and Other Assets) = $113,084,824 |
| Current Liabilities | $406,846,877 (Mortgage Notes Payable) + $29,751,455 (Distribution and Loss in Excess of Investment in Unconsolidated Joint Venture) + $6,397,947 (Accounts Payable and Accrued Expenses) + $9,820,867 (Advance Rental Payments and Security Deposits) = $452,817,146 |
| Current Ratio | 0.25 (Calculated as Current Assets / Current Liabilities) |
| Quick Assets | Current Assets - Inventory = Current Assets (as there is no inventory) |
| Quick Ratio | 0.25 (Similar to the Current Ratio) |
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is calculated as follows:
| Item | Amount |
|---|---|
| Current Assets | $113,084,824 |
| Current Liabilities | $452,817,146 |
| Working Capital | ($339,732,322) (Calculated as Current Assets - Current Liabilities) |
This negative working capital indicates liquidity challenges, as the current liabilities significantly exceed current assets.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow from operating, investing, and financing activities is as follows:
| Cash Flow Type | Amount |
|---|---|
| Cash Flows from Operating Activities | $19,965,878 |
| Cash Flows from Investing Activities | ($9,570,177) |
| Cash Flows from Financing Activities | ($9,844,390) |
The net cash provided by operating activities shows strength, while the cash used in investing and financing activities reflects outflows primarily due to property improvements and distributions to partners.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the Partnership has cash and cash equivalents of $15,069,693 compared to $18,230,463 at December 31, 2023, indicating a decrease of $3,160,770. The significant cash flow from operations of $19,965,878 is a positive sign, yet the negative working capital and reliance on external financing pose potential liquidity risks. Additionally, the Partnership has invested approximately $86,134,074 in U.S. Treasury Bills, which provides liquidity but also indicates a conservative approach to cash management amidst higher liabilities.
Is New England Realty Associates Limited Partnership (NEN) Overvalued or Undervalued?
Valuation Analysis
To assess whether New England Realty Associates Limited Partnership is overvalued or undervalued, we will analyze key financial metrics including the Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, and the Enterprise Value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The current stock price is approximately $73.28 per depositary receipt. For the nine months ended September 30, 2024, the net income was approximately $11,445,720 compared to $6,154,568 for the same period in 2023. The earnings per depositary receipt (assuming 144,180 depositary receipts outstanding) is:
- 2024: $79.43 (calculated as $11,445,720 ÷ 144,180)
- 2023: $42.73 (calculated as $6,154,568 ÷ 144,180)
This results in a P/E ratio for 2024 of:
P/E Ratio = Stock Price / Earnings per Deposit Receipt
P/E Ratio = $73.28 / $79.43 ≈ 0.92
Price-to-Book (P/B) Ratio
The book value per depositary receipt can be calculated using total partners' capital. As of September 30, 2024, total partners' capital was approximately ($65,460,606). The book value per depositary receipt is:
- Book Value = Total Partners' Capital / Total Depositary Receipts
- Book Value = ($65,460,606) / 144,180 ≈ ($454.43)
Therefore, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Deposit Receipt
P/B Ratio = $73.28 / ($454.43) ≈ -0.16
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The Enterprise Value (EV) can be calculated as follows:
- Market Capitalization = Stock Price × Total Depositary Receipts = $73.28 × 144,180 ≈ $10,563,302
- Total Debt = $166,000,690 (as of September 30, 2024)
- Cash and Cash Equivalents = $15,069,693 (as of September 30, 2024)
Thus, EV = Market Capitalization + Total Debt - Cash:
EV = $10,563,302 + $166,000,690 - $15,069,693 ≈ $161,494,299
EBITDA for the nine months ended September 30, 2024 can be derived from the net income:
- Net Income: $11,445,720
- Add Back Interest Expenses: $11,637,720
- Add Back Taxes: $0
- Add Back Depreciation & Amortization: $12,729,275
Thus, EBITDA = Net Income + Interest + Depreciation:
EBITDA = $11,445,720 + $11,637,720 + $12,729,275 ≈ $35,812,715
Therefore, the EV/EBITDA ratio is:
EV/EBITDA = $161,494,299 / $35,812,715 ≈ 4.51
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between $60.00 and $80.00, indicating volatility in investor sentiment. The average stock price during this period was approximately $70.00.
Dividend Yield and Payout Ratios
The Partnership approved a quarterly distribution of $12.00 per unit in 2024. The annualized dividend yield based on the current stock price is:
Dividend Yield = Annual Dividend / Stock Price
Dividend Yield = ($12.00 × 4) / $73.28 ≈ 0.65 or 6.5%
Analyst Consensus on Stock Valuation
Analysts have a consensus rating of Hold on the stock, reflecting a cautious outlook based on current valuation metrics and market conditions.
| Metric | Value |
|---|---|
| Stock Price | $73.28 |
| P/E Ratio | 0.92 |
| P/B Ratio | -0.16 |
| EV/EBITDA Ratio | 4.51 |
| Annual Dividend | $48.00 |
| Dividend Yield | 6.5% |
| Analyst Consensus | Hold |
Key Risks Facing New England Realty Associates Limited Partnership (NEN)
Key Risks Facing New England Realty Associates Limited Partnership
Overview of Internal and External Risks
The financial health of the Partnership is influenced by several internal and external risks. Key external risks include:
- Industry competition, particularly from other real estate investment firms and local property management companies.
- Regulatory changes impacting real estate operations, including zoning laws and rental regulations.
- Market conditions affecting rental demand and property values, including economic downturns or shifts in housing trends.
Internally, the Partnership faces operational risks such as:
- Dependency on rental income, which constituted approximately $59,573,125 of total revenues for the nine months ended September 30, 2024, an increase of 9.6% from $54,338,011 in 2023.
- Potential increases in operating expenses, which rose to approximately $41,392,388 in 2024 from $40,665,027 in 2023, reflecting a 1.8% increase.
Operational, Financial, or Strategic Risks
Recent earnings reports highlighted several strategic risks:
- Interest expense for the nine months ended September 30, 2024, was approximately $11,638,000, down from $11,781,000 in 2023, indicating a 1.2% decrease.
- The Partnership’s share of net income from investment properties was approximately $909,000 for the nine months ended September 30, 2024, compared to $496,000 in 2023, marking an increase of 83.3%.
Mitigation Strategies
The Partnership has implemented several mitigation strategies to address these risks:
- Maintaining cash reserves, which decreased to approximately $15,069,693 at September 30, 2024 from $18,230,463 at December 31, 2023.
- Investing in property improvements, with approximately $15,369,000 spent in 2024 on various properties to enhance value and attract tenants.
- Utilizing a $25,000,000 revolving line of credit, which is currently being negotiated for renewal as it expires on October 29, 2024.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Interest Rate Risk | Potential increases in interest rates affecting borrowing costs. | Interest expense decreased by $144,000 (1.2%) in 2024. |
| Market Competition | Increased competition from other real estate firms. | Rental income increased by $5,235,114 (9.6%) in 2024. |
| Regulatory Changes | Changes in laws affecting rental operations and property management. | No direct financial impact reported, but potential future costs. |
| Operational Dependency | High reliance on rental income for revenue. | 94% of rental income derived from residential properties. |
As of September 30, 2024, the Partnership's total debt obligations are approximately $409,341,000, with future mortgage maturities as follows:
| Year | Mortgage Debt |
|---|---|
| 2025 | $3,399,166 |
| 2026 | $25,217,013 |
| 2027 | $3,216,344 |
| 2028 | $52,323,244 |
| 2029 | $28,555,712 |
| Thereafter | $296,629,809 |
As of November 1, 2024, the vacancy rate for residential properties was 1.7%, compared to 0.9% the previous year, indicating a potential risk in occupancy and revenue stability.
Future Growth Prospects for New England Realty Associates Limited Partnership (NEN)
Growth Opportunities
Future growth prospects for New England Realty Associates Limited Partnership (NEN) are driven by several key factors, including market expansions, strategic initiatives, and competitive advantages.
Key Growth Drivers
- Market Expansions: As of September 30, 2024, the Partnership has a 40%-50% ownership interest in seven different investment properties, contributing to a share of net income of approximately $909,000, which reflects an increase of 83.3% compared to $496,000 in 2023.
- Rental Revenue Growth: Total rental income for the nine months ended September 30, 2024, was approximately $59,573,000, an increase of 9.6% from $54,338,000 in the same period of 2023.
- Acquisitions: In July 2023, the Partnership acquired a mixed-use property in Boston for approximately $27,500,000, enhancing its portfolio.
Future Revenue Growth Projections
Revenue growth projections for the upcoming years are optimistic, with management expecting continued but moderating rent growth. For instance, during the third quarter of 2024, average rent increases for renewals were 5.4% and for new leases, 4.6%.
Strategic Initiatives
The Partnership anticipates spending approximately $30 million on the Mill Street Development project over the next two years, with $10 million allocated for 2024. This project is expected to significantly enhance the value of the Partnership's property portfolio upon completion in late 2025.
Competitive Advantages
- Strong Liquidity Position: As of September 30, 2024, the Partnership held cash and cash equivalents of $15,069,693, providing a solid foundation for future investments.
- Low Vacancy Rates: The vacancy rate for residential properties stood at 1.7% as of November 1, 2024, compared to 0.9% in the previous year.
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Net Income | $11,445,720 | $6,154,568 | +86.0% |
| Rental Income | $59,573,000 | $54,338,000 | +9.6% |
| Net Income per Depositary Receipt | $3.26 | $1.73 | +88.4% |
| Distributions per Depositary Receipt | $2.80 | $2.40 | +16.7% |
Overall, the combination of strategic acquisitions, strong rental revenue growth, and effective management initiatives positions the Partnership favorably for future growth.
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Resources:
- New England Realty Associates Limited Partnership (NEN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of New England Realty Associates Limited Partnership (NEN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View New England Realty Associates Limited Partnership (NEN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.