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-Q, contains forward-looking statements within the meaning of the securities law. 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.

For the first three quarters of 2008, the Partnership continued to meet revenue and operating expense expectations. Management had anticipated continued increases in utilities, bad debt and vacancy. To date, bad debt has abated along with utility costs and vacancy rates. Leading into the fourth quarter, vacancy rates should continue to be at the low levels enjoyed in the past. Management still believes that earnings power related to revenue growth and expense management will be mitigated by recession fears and growing unemployment. It is expected that bad debt and vacancy rates will increase by mid 2009. Extensive energy management control across all aspects of utility costs will have a positive impact against rising costs associated with real estate taxes and other operating expenses.

The portfolio has no near term debt exposure nor condominium conversion exposure putting the portfolio in a good position to manage any near term downturn. Management continues to weigh acquisition and disposition opportunities in contrast to its' stock repurchase program.

The Partnership has retained The Hamilton Company ("Hamilton") to manage and administer the Partnership's and Joint Ventures' Properties. Hamilton is a full-service real estate management company, which has legal, construction, maintenance, architectural, accounting and administrative departments. The Partnership's properties represent approximately 40% of the total properties and 70% 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.

At September 30, 2008, Harold Brown, his brother Ronald Brown and the President of Hamilton, Carl Valeri, collectively own approximately 36.4% of the Depositary Receipts representing the Partnership's Class A Units (including Depositary Receipts held by trusts for the benefit of 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 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 Roberta Ornstein and Conrad DiGregorio, also own immaterial amounts of the Partnership's Class A Units or receipts.

In addition to 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. Additionally, from time to time, the Partnership pays Hamilton for repairs 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'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 49% of the legal services paid for by the Partnership during the nine months ended September 30, 2008 and approximately 59% for the year ended December 31, 2007.

Additionally, as described in Note 3 to the Consolidated Financial Statements, the Hamilton Company received similar fees from the Investment Properties.

R. Brown Partners, which is owned by Ronald Brown, manages the 42- unit condominium association referred to as Harvard 45 located in Brookline, Massachusetts. Up until the third quarter of 2008, the Partnership owned five units at Harvard 45. R. Brown Partners received annual management fees from the five units of approximately $3,000, and Hamilton reduced its management fees to approximately 2%, so that the total management fee would not exceed the 4% allowed by the Partnership's Partnership Agreement.

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 2008, Hamilton provided the Partnership approximately $46,000 in construction and architectural services. In 2007, Hamilton provided construction and architectural services paid for by the Partnership totaling $750,000.

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 the accounting staff at Hamilton which consists of approximately 14 people. During the nine months ended September 30, 2008, Hamilton charged the Partnership $75,000 ($25,000 per quarter) for bookkeeping and accounting services and anticipates an additional $25,000 for the fourth quarter of 2008.

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. However, because future events and their

effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. The Partnership's critical accounting policies are those which require assumptions to be made about such matters that are highly uncertain. Different estimates could have a material effect on the Partnership's financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances. See Note 1 to the Consolidated Financial Statements, Principles of Consolidation.

Revenue Recognition: Rental income from residential and commercial properties is recognized over the term of the related lease. Amounts 60 days in arrears are charged against income. Certain leases of the commercial properties provide for increasing stepped minimum rents, which are accounted for on a straight line basis over the term of the lease.

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. Significant acquisitions with long term leases are evaluated to determine if a portion of the purchase price is allocable to intangibles such as non market rate rents. Replacements and improvements-such as HVAC equipment, structural replacements, windows, appliances, flooring, carpeting and kitchen/bath replacements and renovations-are capitalized and depreciated over their estimated useful lives as follows:

º •
º 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.

º •
º 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 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 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.

Rental Property Held for Sale and Discontinued Operations: When assets are identified by management as held for sale, the Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. If, in management's opinion, the net sales price of the assets which have been identified as held for sale is less than the net book value of the assets, a valuation allowance is established. Properties identified as held for sale and/or sold are presented in discontinued operations for all periods presented.

Investments in Partnerships: The Partnership accounts for its 50% ownership in the Investment Properties under the equity method of accounting, as it exercises significant influence over, but does not control these entities. These investments are recorded initially at cost, as Investments in Partnerships, and subsequently adjusted for the Partnership's share in earnings, cash contributions and distributions. Under the equity method of accounting, our net equity is reflected on the consolidated balance sheets, and our share of net income or loss from the Partnership is included on the consolidated statements of income.

Legal Proceedings: 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

Comparison of the three months ended September 30, 2008 to the three months ended September 30, 2007 (as adjusted for discontinued operations).

The Partnership and its Subsidiary Partnerships earned income from continuing operations of approximately $178,963 during the three months ended September 30, 2008 compared to approximately $207,651 for the three months ended September 30, 2007, a decrease of approximately $28,688.

The rental activity is summarized as follows:

                                                Occupancy Date
                                    October 27,    July 28,     October 22,
                                       2008          2008          2007
             Residential
               Units                       2,265       2,265           2,377
               Vacancies                      49          31              71
               Vacancy rate                  2.1 %       1.3 %           3.0 %
             Commercial
               Total square feet          90,848      90,848          84,998
               Vacancy                         0           0               0
               Vacancy rate                    0 %         0 %             0 %




                                            Rental Income (in thousands)
                                          Three Months Ended September 30,
                                         2008                          2007
                                Total         Continuing       Total        Continuing
                              Operations      Operations     Operations     Operations
    Total rents                $    7,959      $    7,981    $     7,961    $     7,611
    Residential percentage             92 %            92 %           93 %           93 %
    Commercial percentage               8 %             8 %            7 %            7 %
    Contingent rentals         $      134      $      134    $        45    $        45

     September 30, 2007

                                  September 30,     September 30,      Dollar     Percent
                                      2008              2007           Change      Change
Revenues:
   Rental income                  $    7,981,479    $    7,611,143   $  370,336        4.9 %
   Laundry and sundry income              95,907            99,906       (3,999 )     (4.0 %)

                                       8,077,386         7,711,049      366,337        4.8 %

Expenses:
   Administrative                        424,363           383,960       40,403       10.5 %
   Depreciation and
   amortization                        1,655,560         1,738,060      (82,500 )     (4.7 )%
   Management fees                       327,079           311,711       15,368        4.9 %
   Operating                             784,581           770,835       13,746        1.8 %
   Renting                               218,896           218,065          831          -
   Repairs and maintenance             1,429,528         1,308,607      120,921        9.2 %
   Taxes and insurance                   867,119           915,819      (48,700 )     (5.3 )%

                                       5,707,126         5,647,057       60,069        1.1 %

Income Before Other Income and
Discontinued Operations                2,370,260         2,063,992      306,268       14.8 %

Other Income (Loss)
   Interest expense                   (1,930,302 )      (1,837,588 )    (92,714 )     (5.0 )%
   Interest income                        39,357           102,959      (63,602 )    (61.8 )%
   Casualty loss                               -                 -
   Mortgage prepayment
   penalties                                   -                 -
   (Loss) Income from
   investment in joint
   ventures                             (300,352 )        (121,712 )   (178,640 )   (146.7 )%

                                  $   (2,191,297 )  $   (1,856,341 )   (334,956 )    (18.0 )%

   Income (loss) from
   continuing operations                 178,963           207,651      (28,688 )    (13.8 )%

Discontinued Operations:
   Gain on the sale of real
   estate                                 67,650                 -       67,650      100.0 %
   (Loss) from discontinued
   operations                            (22,229 )          11,042      (33,271 )   (301.3 )%

                                          45,421            11,042       34,379      311.3 %

Net Income                        $      224,384    $      218,693   $    5,691        2.6 %

Rental income from continuing operations for the three months ended September 30, 2008 was approximately $7,981,000 compared to approximately $7,611,000 for the three months ended September 30, 2007, an increase of approximately $370,000 (4.9%). The properties with the most significant increases include 62 Boylston Street with an increase of approximately $95,000; Hamilton Linewt with an increase of approximately $67,000; 1144 Commonwealth Avenue with an increase of approximately $40,000; Westgate Apartments with an increase of approximately $38,000; Westside Colonial with an increase of approximately $17,000 and Worcester Road with an increase of approximately $16,000. The increases at 62 Boylston Street and 1144 Commonwealth Avenue is due to vacancies in 2007 arising from fire and flooding losses. Linewt is a new acquisition in 2008. The majority of the Partnership's other properties experienced minimal rental income increases.

Total expenses from continuing operations for the three months ended September 30, 2008 were approximately $5,707,000 compared to approximately $5,647,000 for the three months ended September 30, 2007, an increase of approximately $60,000 (1.1%). The most significant increases were repairs and maintenance expenses of approximately $121,000 (9.2%) due to continued maintenance at

property in an effort to maintain occupancy; administrative expenses of approximately $40,000 (10.5%) due to an increase in professional fees due to SEC compliance costs and equity repurchase related legal expenses; an increase in operating expenses of approximately $14,000 (1.8%) due to increases in utility costs; and an increase in the management fees of approximately $15,000 (4.9%) due to the increase in rental income. These increases are offset by decreases in depreciation and amortization expenses of approximately $82,500 and a decrease in taxes and insurance of approximately $49,000 (5.3%) due to decreases in insurance premiums for many of the Partnership properties.

At September 30, 2008, the Partnership has a 50% ownership interest in nine joint ventures. The loss on these investments is approximately $300,000 and $122,000 for the three months ended September 30, 2008 and 2007, respectively, an increase of approximately $178,000 (146.7%). Included in the loss for the three months ended September 30, 2008 and 2007 is a gain on the sale of units of approximately $69,000 and $453,000, respectively. A number of units held for sale are vacant which has resulted in the loss of rental income, as well as continued maintenance of these units by the Partnership. See Note 14 to the Consolidated Financial Statements for financial information of these investment properties. The summaries are as follows:

345 Franklin Street, Cambridge, Massachusetts

The Partnership invested in a 40-unit property in 2001. The Partnership's share of loss on this investment is approximately $46,000 and $33,000 for the three months ended September 30, 2008 and 2007, respectively. The Partnership's share of loss on this investment is approximately $85,000 and $65,000 for the nine months ended September 30, 2008 and 2007, respectively. There were two vacant units at October 27, 2008.

Hamilton on Main, Watertown, Massachusetts

The Partnership invested in 146 units in three buildings in August 2004. The Partnership plans to retain all of these units as a rental property. The Partnership's share of loss is approximately $156,000 and $224,000 for the three months ended September 30, 2008 and 2007 respectively. The Partnership's share of loss is approximately $507,000 and $617,000 for the nine months ended September 30, 2008 and 2007, respectively. The decrease in loss for both the three and nine months ended September 30, 2008 is due to decreases in depreciation as well as taxes and insurance. There were no vacant units at October 27, 2008.

Hamilton Place Sales, Watertown, Massachusetts

The Partnership invested in 137 units in three buildings in August 2004. At the time of the acquisition, it was the Partnership's plan to sell all of the units as condominiums. As of October 27, 2008, all of the units have been sold. The Partnership's share of income is approximately $145,000 for the three months ended September 30, 2007. The income includes a gain on the sale of units of approximately $200,000 for the three months ended September 30, 2007. The Partnership's share of income is approximately $159,000 and $297,000 for the nine months ended September 30, 2008 and 2007, respectively. The Partnership's share of income includes a gain on unit sales of approximately $174,000 and $466,000 for the nine months ended September 30, 2008 and 2007, respectively.

Hamilton Minuteman, Lexington, Massachusetts

The Partnership invested in a 42-unit residential complex in September 2004. The Partnership's share of loss on this investment is approximately $42,000 and $44,000 for the three months ended September 30, 2008 and 2007, respectively. The Partnership's share of loss is approximately $150,000 and $149,000 for the nine months ended September 30, 2008 and 2007, respectively. There were no vacant units at October 27, 2008.

Essex 81 Commercial, Boston, Massachusetts

The Partnership invested in this property in March 2005. The property consists of 7,715 square feet of commercial space. The Partnership's share of income on this investment is approximately $7,000 and $117,000 for the three months ended September 30, 2008 and 2007, respectively. The Partnership's share of loss for the nine months ended September 30, 2008 is approximately $6,000 compared to income of approximately $51,000 for the three months ended September 30, 2007. On August 26, 2008, the Partnership transferred the commercial space to Essex 81 Apartments LLC in exchange for the 50 car surface parking lot. The fluctuation in income is due to an adjustment to depreciation expense at the time the property was divided up between the apartments and the commercial space.

Hamilton Essex 81 Apartments, Boston, Massachusetts

The Partnership invested in this property in March 2005. The property consists of 49 residential units and a 50 car surface parking lot. The Partnership's share of loss on this investment is approximately $36,000 and $106,000 for the three months ended September 30, 2008 and 2007, respectively. The Partnerships share of loss on this investment is approximately $75,000 and $106,000 for the nine months ended September 30, 2008 and 2007 respectively. There was one vacant unit at October 27, 2008.

Hamilton 1025, Quincy, Massachusetts

The Partnership invested in a 176-unit property in March 2005. The Partnership plans to sell 127 units as condominiums. The Partnership's share of loss is approximately $10,000 for the three months ended September 30, 2008 compared to income of approximately $87,000 for the three months ended September 30, 2007. Included in the loss at September 30, 2008 is a gain on the sale of units of approximately $33,000. Included in the income for the three months ended September 30, 2007 is a gain on the sale of units of approximately $128,000. The Partnership's share of loss is approximately $74,000 and income of $208,000 for the nine months ended September 30, 2008 and 2007, respectively. Included in the loss for the nine months ended September 30, 2008 and 2007 is a gain of approximately $61,000 and $365,000 on the sale of units. As of October 27, 2008, 126 units have been sold and one unit has a reservation agreement. There was one vacant unit at October 27, 2008.

Hamilton Bay Apartments, Quincy, Massachusetts

The Partnership invested in a 48 unit apartment complex in October 2005. The Partnership plans to retain these units for long term investment. The Partnership's share of loss is approximately $23,000 and $13,000 for the three months ended September 30, 2008 and 2007, respectively. The Partnership's share of loss is approximately $105,000 and $37,000 for the nine months ended September 30, 2008 and 2007, respectively. There are two vacant units at October 27, 2008.

Hamilton Bay Sales, Quincy, Massachusetts

The Partnership invested in a 120 unit apartment complex in October 2005. The Partnership plans to sell all of the units as condominiums. The Partnership's share of income is approximately $10,000 and loss is approximately $50,000 for the three months ended September 30, 2008 and 2007, respectively. Included in income for the three months ended September 30, 2008 and 2007 is a gain on the sale of units of approximately $36,000 and $125,000, respectively. The Partnership's share of income is approximately $65,000 for the nine months ended September 30, 2008 compared to a loss of approximately $112,000 for the nine months ended September 30, 2007. Included in the income and loss for the nine months ended September 30, 2008 and 2007 is a gain on the sale of units of approximately $176,000 and $437,000, respectively. In April 2008, the Partnership refinanced 20 units and obtained a new mortgage of $2,368,000, interest only at a rate of 5.75% which matures in 2013. At

October 27, 2008, 105 units have been sold and one unit has a signed purchase and sales agreement. The outstanding mortgage balances as of September 30, 2008 is $1,808,000. There are no vacant units at October 27, 2008.

Interest expense was approximately $1,930,000 for the three months ended September 30, 2008 compared to approximately $1,838,000 for the three months ended September 30, 2007, an increase of approximately $93,000 (5%). The increase reflects a higher level of debt offset by more favorable interest rates due to the refinancing of Partnership properties during 2008.

Interest income was approximately $39,000 for the three months ended September 30, 2008 compared to approximately $103,000 for the three months ended September 30, 2007, a decrease of approximately $64,000 (62%). This decrease . . .