See notes to consolidated financial statements

2

See notes to consolidated financial statements

3

See notes to consolidated financial statements

4

See notes to consolidated financial statements

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SB PARTNERS

Notes to Consolidated Financial Statements (Unaudited)

The Partnership’s wholly owned property located in Maple Grove, Minnesota is 100% leased to a single tenant to October 31, 2024. The tenant pays fixed base rent which increases approximately 3% each year. The tenant pays directly or reimburses the Partnership for all utilities, real estate taxes, insurance and most of the property operating expenses and property management fees.

The following is a reconciliation of the beginning and ending balances for assets measured at fair value using significant unobservable inputs (Level 3) during the periods ended JuneSeptember 30, 2019 and December 31, 2018:

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Omaha was precluded from making distributions to its investors until its unsecured loan was paid in full.

During the first quarter of 2018, Omaha sold its garden apartment property in Asheville, North Carolina and its garden apartment property in Fresno, California. Net sales proceeds were used first to paying selling expenses and to pay off the mortgage securing each property. Remaining proceeds were used to fully retire the remaining balance of Omaha’s unsecured loan. Omaha was precluded from making distributions to its investors until its unsecured loan was paid in full. On October 16, 2018, following the retirement of the unsecured loan, Sentinel Omaha paid a distribution to the Partnership in the amount of $2,400,000. The Partnership used these funds to retire the Partnership’s unsecured loan.loan at a discount. During the quarter ending June 30,first nine months of 2019, Omaha sold its garden apartment property located in Independence, Missouri and its garden apartment property located in Columbus, Ohio. Net sales proceeds in each transaction were used to first pay selling expenses and retire each property’s related secured mortgage loan. Remaining net sales proceeds were used to retire Omaha’s secured mortgage loan encumbering its garden apartment property located in Charleston, South Carolina to further pay down Omaha’s debt. During 2019, Omaha paid two distributions to its investors including an aggregate of $8,400,000 to the Partnership.

General

The consolidated financial statements for the three and sixnine months ended JuneSeptember 30, 2019 and 2018 reflect the operation of one wholly owned industrial flex property located in Maple Grove, Minnesota and a 30% interest in Omaha.

Registrant’s wholly owned property located in Maple Grove, Minnesota is 100% leased to a single tenant to October 31, 2024. The tenant pays fixed base rent which increases approximately 3% each year. The tenant pays directly or reimburses Registrant for all utilities, real estate taxes, insurance and most of the property operating expenses and property management fees.

Sentinel Omaha LLC’sOmaha’s portfolio as of January 1, 2019 consisted of eight garden apartment properties located in five markets. Leases generally are for one year or less. Tenants generally pay fixed rent plus utilities used by tenant. On April 6, 2019, Omaha sold its garden apartment property in Independence, Missouri. Net sales proceeds were used to first pay selling expenses and retire the property’s related secured mortgage loan. On May 6, 2019, Omaha sold its garden apartment property in Columbus, Ohio. Net sales proceeds were used to pay selling expenses and were used to retire Omaha’s secured mortgage loan encumbering its garden apartment property located in Charleston, South Carolina to further pay down Omaha’s debt.

Results of Operations

Total revenues from continuing operations for the three months ended JuneSeptember 30, 2019 increased $2,000decreased $1,000 to approximately $279,000$280,000 as compared to approximately $277,000$281,000 for the three months ended JuneSeptember 30, 2018. Total revenues decreased due to a decrease in interest income partially offset by an increase in base rental income and other income. Interest income decreased due to a decrease in cash reserves. Base rental income increased $2,000 to approximately $190,000 for the three months ended September 30, 2019 as compared to the same period in 2018 due to a scheduled increase in base rent at Registrant’s property located in Maple Grove, MN. Other income increased due to an increase in real estate taxes charged back to the tenant.

The Registrant reported a net loss from operations of approximately $142,000 for the three months ended September 30, 2019, an increase of $26,000 as compared to a net loss from operations of approximately $116,000 for the same period in 2018. Net loss from operations consists of net income from the Maple Grove property offset by partnership income and expenses. The increase of loss from operations was primarily due to higher total expenses. Total expenses from operations for 2019 increased $24,000 to approximately $421,000 from approximately $397,000 in 2018, due primarily to an increase in management fee expense of $24,000 and an increase in repairs and maintenance expense of $12,000. This was partially offset by a decrease in administration expense of $6,000 and a decrease in professional fees expense of $6,000.

Total revenues from continuing operations for the nine months ended September 30, 2019 increased $5,000 to approximately $837,000 as compared to approximately $832,000 for the nine months ended September 30, 2018. Total revenues increased due to an increase in base rental income and other income. Base rental income increased $6,000$13,000 to approximately $190,000$569,000 for the threenine months ended JuneSeptember 30, 2019 as compared to the same period in 2018 due to a scheduled increase in base rent at Registrant’s property located in Maple Grove, MN. Other income increased due to an increase in real estate taxes charged back to the tenant. Interest income decreased due to a decrease in cash reserves.

The Registrant reported a net loss from operations of approximately $158,000$437,000 for the threenine months ended JuneSeptember 30, 2019, an increase of $31,000$68,000 as compared to a net loss from operations of approximately $127,000 for the same period in 2018. Net loss from operations consists of net income from the Maple Grove property offset by partnership income and expenses. The increase of loss from operations was due to higher total expenses partially offset by higher total income. Total expenses from operations for 2019 increased $33,000 to approximately $437,000 from approximately $404,000 in 2018, due primarily to an increase in management fee expense of $22,000, an increase in administration expenses of $10,000 and an increase in repairs and maintenance expense of $4,000. This was partially offset by a decrease of mortgage amortization expense of $2,000 and a decrease in depreciation expense of $4,000.

Total revenues from continuing operations for the six months ended June 30, 2019 increased $6,000 to approximately $557,000 as compared to approximately $551,000 for the six months ended June 30, 2018. Total revenues increased due to an increase in base rental income and other income. Base rental income increased $12,000 to approximately $380,000 for the six months ended June 30, 2019 as compared to the same period in 2018 due to a scheduled increase in base rent at Registrant’s property located in Maple Grove, MN. Other income increased due to an increase in real estate taxes charged back to the tenant. Interest income decreased due to a decrease in cash reserves.

The Registrant reported a net loss from operations of approximately $295,000 for the six months ended June 30, 2019, an increase of $42,000 as compared to a net loss from operations of approximately $253,000$369,000 for the same period in 2018. Net loss from operations consists of net income from the Maple Grove property offset by partnership income and expenses. The increase of loss from operations was due to higher total expenses partially offset by higher total revenue. Total expenses from operations for 2019 increased $49,000$73,000 to approximately $853,000$1,274,000 from approximately $804,000$1,201,000 in 2018, due primarily to an increase in management fee expense of $48,000$72,000, an increase in repairs and maintenance expenses of $7,000 and an increase in administration costs of $18,000.$12,000. This increase was partially offset by a decrease in repair and maintenance expensesprofessional fee expense of $5,000, a decrease in depreciation expense of $8,000$12,000 and a decrease in amortization cost of $7,000.

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The Registrant has a 30% non-controlling interest in Omaha that is accounted for on a fair value basis. Net increase in net assets decreased $3,409,000$4,941,000 to approximately $4,017,000$8,816,000 for the sixnine months ended JuneSeptember 30, 2019 compared to net increase in net assets of approximately $7,426,000$13,757,000 for the same period in 2018. During 2018, Omaha sold its garden apartment property located in Asheville, North Carolina, its garden apartment property located in Fresno, California and its high rise apartment property located in Omaha, Nebraska. Net sales proceeds in each transaction were used to first pay selling expenses and retire each property’s related secured mortgage loan. Remaining net sales proceeds were used to retire Omaha’s unsecured loan and were used to retire Omaha’s secured mortgage loan encumbering its garden apartment property located in Columbus, Ohio to further pay down Omaha’s debt. Retirement of the unsecured loan removed certain restrictions placed on Omaha by the lender including making distributions to its members including Registrant. During the first sixnine months of 2019, Omaha sold its garden apartment property located in Independence, Missouri and its garden apartment property located in Columbus, Ohio. Net sales proceeds in each transaction were used to first pay selling expenses and retire each property’s related secured mortgage loan. Remaining net sales proceeds were used to retire Omaha’s secured mortgage loan encumbering its garden apartment property located in Charleston, South Carolina to further pay down Omaha’s debt. During the sixnine months ended JuneSeptember 30, 2019, Omaha reported a net decrease in the value of its remaining real estate portfolio of $5,700,000.

9$2,600,000.

During 2018, the variable interest rates on Omaha loans increased as short term LIBOR rates increased. The one month LIBOR rate increased from an average of (1.4925%) during December 2017 to an average of (2.4582%) during December 2018. The one month LIBOR rate decreased slightly to an average of (2.4034%(2.0432%) during JuneSeptember 2019. Fixed mortgage interest rates for multi-family properties of similar class and location as Omaha’s portfolio also increased during 2018 from an approximate range of 4.35% to 4.50% near the end of 2017 to 5.05% to 5.10% near the end of 2018. Fixed mortgage interest rates have decreased during 2019 to an average of 3.57%3.90% to 3.89%3.97% in JuneSeptember 2019. Although changes in fixed mortgage rates do not impact the operating cash flow of the Omaha properties directly, increases in fixed and floating rates on commercial mortgage debt can have a negative impact on capitalization rates and the sales prices Sentinel Omaha may achieve in the future.

The investment in a 30% non-controlling interest is valued at a discount due to the lack of liquidity and ownership of a non-controlling (minority) interest. Registrant has reported a reserve on the value of Omaha on its books of 20% since JuneSeptember 30, 2018.

On April 11, 2019, Sentinel Omaha paid a distribution to Registrant in the amount of $5,100,000. On April 16, 2019, the general

partner declared a distribution of $400 per full unit for all partners holding units or participations on May 31, 2019. The distribution was paid on JuneSeptember 4, 2019. On May 31, 2019, Sentinel Omaha paid a distribution to Registrant in the amount of $3,300,000. The distribution was used to pay accrued investment management fees and accrued expenses and to increase cash reserves of the Registrant.

For additional analysis, please refer to the discussions of the individual properties below.

This report on Form 10-Q includes statements that constitute "forward looking statements" within the meaning of Section 27(A) of the Securities Act of 1933 and Section 21(E) of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. By their nature, all forward looking statements involve risks and uncertainties as further described in the Registrant’s latest annual report on Form 10-K. Actual results may differ materially from those contemplated by the forward looking statements.

CRITICAL ACCOUNTING POLICIES

The Registrant’s critical accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2018. There were no significant changes to such policies in 2019. There are no accounting pronouncements or interpretations that have been issued, but not yet adopted, that Registrant believes will have a material impact on its consolidated financial statements.

Liquidity and Capital Resources

As of JuneSeptember 30, 2019, the Registrant had cash and cash equivalents of approximately $1,726,000.$1,054,000. These balances are approximately $1,388,000$716,000 higher than cash and cash equivalents held on December 31, 2018. Cash and cash equivalents increased during the sixnine months ended JuneSeptember 30, 2019 due to distributions received from Omaha combined with cash flow generated from operating activities at Registrant’s wholly owned property. This increase was partially offset by a distribution paid to the partners and payments of accrued investment management fees and accrued expenses, payments to replace the roof at Registrant’s wholly owned property as well as partnership expenses paid.

Currently, Registrant’s only consistent source of cash is rental income received from the tenant that leases 100% of the leasable space at Registrant’s wholly owned property in Maple Grove. The tenant reimburses Registrant for real estate taxes, insurance and most of the properties’ operating expenses leaving a significant portion of the base rent received available to fund capital improvements and partnership administrative expenses.

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Registrant pays the General Partner and an affiliate of the General Partner fees for services performed. A portion of the fees during 2011 to 2018 were accrued while Registrant’s unsecured loan was outstanding. Since the unsecured loan has been retired, Registrant was allowed to pay the accrued fees and current fees. On April 11, 2019, Sentinel Omaha paid a distribution to Registrant in the amount of $5,100,000. On April 16, 2019, the general partner declared a distribution of $400 per full unit for all partners holding units or participations on May 31, 2019. The distribution was paid on June 4, 2019. On May 31, 2019, Sentinel Omaha paid a distribution to Registrant in the amount of $3,300,000. The distribution was used to pay accrued investment management fees and accrued expenses and to increase cash reserves of the Registrant. Registrant anticipates cash flow generated from the property located in Maple Grove and current cash reserves will be sufficient to pay ongoing operating and capital improvement costs, other working capital requirements of the Registrant and current fees due to the General Partner and its affiliates as long as the tenant remains in place.affiliate. The Registrant has no debt except normal trade accounts payable and accrued investment management fees.

During the quarter, inflation and changing prices did not significantly affect the markets in which the Registrant conducts its business, or the Registrant's business overall.

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Eagle Lake Business Center IV (Maple Grove, Minnesota)

Total revenues for the three months ended JuneSeptember 30, 2019 increased $7,000$3,000 to approximately $278,000 as compared to approximately $271,000$275,000 for the three months ended JuneSeptember 30, 2018. The property reported higher base rental income and higher other rental income. Base rental income was higher in 2019 due to a scheduled increase in the base rent. Other income increased due to an increase in real estate taxes charged back to the tenant. Net operating income, which includes deductions for depreciation, increased $5,000decreased $6,000 for the three months ended JuneSeptember 30, 2019 to approximately $164,000$167,000 from approximately $159,000$173,000 for the three months ended JuneSeptember 30, 2018 due primarily to higher total revenuesoperating expenses partially offset by higher operating expenses.total revenues. Operating expenses were higher due to higher repairs and maintenance expense and real estate tax expense.

Total revenues for the sixnine months ended JuneSeptember 30, 2019 increased $15,000$18,000 to approximately $557,000$835,000 as compared to approximately $542,000$817,000 for the sixnine months ended JuneSeptember 30, 2018. The property reported higher base rental income and higher other rental income. Base rental income was higher in 2019 due to a scheduled increase in the base rent. Other income increased due to an increase in real estate taxes charged back to the tenant. Net operating income, which includes deductions for depreciation, increased $23,000$17,000 for the sixnine months ended JuneSeptember 30, 2019 to approximately $343,000$510,000 from approximately $320,000$493,000 for the sixnine months ended JuneSeptember 30, 2018 due primarily to higher total revenues combined with lower operating expenses.revenues. Operating expenses were lowerflat due to lower repairs and maintenance expense and depreciation expense partially offset by higher real estate tax expense.expense and higher repairs and maintenance expenses.

Investment in Sentinel Omaha, LLC

Comparison of three months ended JuneSeptember 30, 2019 to JuneSeptember 30, 2018:

As of JuneSeptember 30, 2019, the Omaha portfolio consisted of six multi-family properties located in three markets. Omaha’s total revenues for the three months ended JuneSeptember 30, 2019 were approximately $6,284,000.$6,220,000. Income before net unrealized losses and net realized gains was approximately $2,287,000.$2,485,000. Major expenses included approximately $1,010,000$534,000 for interest expense, $569,000$615,000 for repairs and maintenance, $844,000$835,000 for payroll, and $468,000$767,000 for real estate taxes. Omaha reported net unrealized losses of approximately $13,290,000 and net realized gains of approximately $13,635,000$2,313,000 resulting in a net increase in net assets of approximately $2,631,000.$4,799,000. For the three months ended JuneSeptember 30, 2019, the Registrant’s 30% equity interest in the income of Omaha was approximately $796,000.$1,440,000. Registrant reserves 20% of the reported value of Omaha on its balance sheet for JuneSeptember 30, 2019. The reserve for value was adjusted in conjunction with recording the equity income for the quarter ended JuneSeptember 30, 2019. As a result, Registrant reported net income from equity interest in income of Omaha for the quarter ended JuneSeptember 30, 2019 of $2,317,000.$1,152,000.

As of JuneSeptember 30, 2018, the Omaha portfolio consisted of nine multi-family properties located in six markets Omaha’s total revenues for the three months ended JuneSeptember 30, 2018 were approximately $8,172,000.$8,224,000. Income before net unrealized income and net realized gains was approximately $3,275,000.$2,773,000. Major expenses included approximately $1,245,000$1,130,000 for interest expense, $646,000$750,000 for repairs and maintenance, $948,000$1,133,000 for payroll, and $821,000$1,061,000 for real estate taxes. Omaha reported net unrealized gains of approximately $425,000 and net realized gains of approximately $21,000$3,558,000 resulting in a net increase in net assets of approximately $3,720,000.$6,331,000. For the three months ended JuneSeptember 30, 2018, the Registrant’s 30% equity interest in the income of Omaha was approximately $1,116,000.$1,899,000. Registrant reserves 20% of the reported value of Omaha on its balance sheet for JuneSeptember 30, 2018. The reserve for value was adjusted in conjunction with recording the equity income for the quarter ended JuneSeptember 30, 2018. As a result, Registrant reported net income from equity interest in income of Omaha for the quarter ended JuneSeptember 30, 2018 of $893,000.$1,519,000.

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Comparison of sixnine months ended JuneSeptember 30, 2019 to JuneSeptember 30, 2018:

Omaha’s total revenues for the sixnine months ended JuneSeptember 30, 2019 were approximately $14,113,000.$20,333,000. Income before net unrealized losses and net realized gains was approximately $5,224,000.$7,709,000. Major expenses included approximately $2,095,000$2,629,000 for interest expense, $1,128,000$1,743,000 for repairs and maintenance, $1,889,000$2,724,000 for payroll, and $1,420,000$2,187,000 for real estate taxes. Omaha reported net unrealized losses of approximately $14,842,000$12,528,000 and net realized gains of approximately $13,635,000 resulting in a net increase in net assets of approximately $4,017,000.$8,816,000. For the sixnine months ended JuneSeptember 30, 2019, the Registrant’s 30% equity interest in the income of Omaha was approximately $1,205,000.$2,644,000. Registrant reserves 20% of the reported value of Omaha on its balance sheet for JuneSeptember 30, 2019. The reserve for value was adjusted in conjunction with recording the equity income for the quarternine months ended JuneSeptember 30, 2019. As a result, Registrant reported net income from equity interest in income of Omaha for the sixnine months ended JuneSeptember 30, 2019 of $2,644,000.$3,796,000.

Omaha’s total revenues for the sixnine months ended JuneSeptember 30, 2018 were approximately $17,514,000.$25,739,000. Income before net unrealized losses and net realized gains was approximately $6,206,000.$8,979,000. Major expenses included approximately $2,831,000$3,961,000 for interest expense, $1,352,000$2,101,000 for repairs and maintenance, $2,231,000$3,364,000 for payroll, and $2,030,000$3,091,000 for real estate taxes. Omaha reported net unrealized losses of approximately $8,720,000$5,162,000 and net realized gains of approximately $9,940,000 resulting in a net increase in net assets of approximately $7,426,000.$13,757,000. For the sixnine months ended JuneSeptember 30, 2018, the Registrant’s 30% equity interest in the income of Omaha was approximately $2,228,000.$4,127,000. Registrant reserves 20% of the reported value of Omaha on its balance sheet for JuneSeptember 30, 2018. The reserve for value was adjusted in conjunction with recording the equity income for the sixnine months ended JuneSeptember 30, 2018. As a result, Registrant reported net equity in net increase in net assets of Omaha for the sixnine months ended JuneSeptember 30, 2018 of $4,288,000.$5,807,000.

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ITEM 3.

None

ITEM 4.

CONTROLS AND PROCEDURES

PART II – OTHER INFORMATION

ITEM 6.

EXHIBITS

Exhibit No.           Description

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.