SB Partners 10-Q 2006 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q. - QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2006

Or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________________ to __________________

Commission File Number: 0-8952

SB PARTNERS
(Exact name of registrant as specified in its charter)
New York	13-6294787
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
1251 Avenue of the Americas, N.Y., N.Y.	10020
(Address of principal executive offices)	(Zip Code)

(212) 408-5000

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

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. [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definitions of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

[ ] large accelerated filer[ ] accelerated filer [x] non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). [ ] Yes [X] No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [ ] Yes [ ] No

Not Applicable

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Not Applicable

SB PARTNERS

INDEX

Part I	Financial Information
	Consolidated Balance Sheets as of September 30, 2006 (unaudited) and December 31, 2005 (audited)	1
	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2006 and 2005	2
	Consolidated Statements of Changes in Partners' Capital (unaudited) for the nine months ended September 30, 2006	3
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2006 and 2005	4
	Notes to Consolidated Financial Statements (unaudited)	5 - 6
	Management's Discussion and Analysis of Financial Condition and Results of Operations	7 - 10
	Quantitative and Qualitative Disclosures about Market Risk	11
	Controls and Procedures	11
Part II	Other Information	11
	Signatures	12
	Exhibit 31	13 - 14
	Exhibit 32	15

1

ITEM 1. FINANCIAL STATEMENTS

SB PARTNERS

(A New York Limited Partnership)

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2006			2005
	(Unaudited)			(audited)
Assets:
Investments -
Real estate, at cost
Land	$	1,985,000		$	1,985,000
Buildings, furnishings and improvements		18,166,996			18,156,163
Less - accumulated depreciation		(833,139	)		(483,464	)
		19,318,857			19,657,699
Real estate held for sale		24,306,834			27,387,386
Investment in joint venture		16,411			712,800
		43,642,102			47,757,885
Other Assets -
Cash and cash equivalents		15,373,985			7,081,976
Other		300,038			32,972
Other assets in discontinued operations		240,891			468,470
Total assets	$	59,557,016		$	55,341,303
Liabilities:
Mortgage note payable	$	10,000,000		$	10,000,000
Accounts payable and accrued expenses		259,338			227,124
Tenant security deposits		78,366			103,366
Other liabilities in discontinued operations, including $9,514,934
and $15,027,370 of mortgage notes payable, respectively		9,940,961			15,404,212
Total liabilities		20,278,665			25,734,702
Partners' Capital:
Units of partnership interest without par value;
Limited partner - 7,753 units		39,291,719			29,621,217
General partner - 1 unit		(13,368	)		(14,616	)
Total partners' capital		39,278,351			29,606,601
Total liabilities and partners' capital	$	59,557,016		$	55,341,303

See notes to consolidated financial statements.

2

SB PARTNERS

(A New York Limited Partnership)

CONSOLIDATEDSTATEMENTS OF OPERATIONS (Unaudited)

	For The Three Months						For The Nine Months
	Ended September 30						Ended Sept 30
	2006			2005			2006			2005
Revenues:
Base rental income	$	432,841		$	146,281		$	1,299,603		$	438,981
Other rental income		214,500			72,661			582,956			220,953
Interest on short-term investments		183,259			36,133			371,514			67,233
Total revenues		830,600			255,075			2,254,073			727,167
Expenses:
Real estate operating expenses		146,086			105,397			394,252			317,514
Interest on mortgage notes payable		145,000			-			483,333			-
Depreciation and amortization		117,149			27,511			351,447			82,533
Real estate taxes		71,959			40,512			370,739			123,003
Management fees		178,661			172,582			532,267			515,302
Other		7,604			125			20,472			26,079
Total expenses		666,459			346,127			2,152,510			1,064,431
Income (loss) from operations		164,141			(91,052	)		101,563			(337,264	)
Equity in net loss of joint venture		(12,574	)		(92,219	)		(18,389	)		(362,330	)
Income (loss) from continuing operations		151,567			(183,271	)		83,174			(699,594	)
Income (loss) from discontinued operations		223,801			99,440			532,193			(1,455,171	)
Net gain on sale of investment in real estate property		-			-			11,770,108			6,350,771
Net income (loss)		375,368			(83,831	)		12,385,475			4,196,006
Income (loss) allocated to general partner		48			(11	)		1,598			541
Income (loss) allocated to limited partners	$	375,320		$	(83,820	)	$	12,383,877		$	4,195,465
Earnings per unit of limited partnership interest
(basic and diluted)
Continuing operations	$	19.55		$	(23.64	)	$	10.73		$	(90.24	)
Discontinued Operations (including gain on sale)	$	28.87		$	12.83		$	1,586.78		$	631.45
Net income (loss)	$	48.42		$	(10.81	)	$	1,597.51		$	541.21
Weighted Average Number of Units of Limited
Partnership Interest Outstanding		7,753			7,753			7,753			7,753

See notes to consolidated financial statements.

3

SB PARTNERS

(A New York Limited Partnership)

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

For the nine months ended September 30, 2006 (Unaudited)

 

Limited Partners:
	Units of Partnership Interest
					Cumulative			Accumulated
	Number		Amount		Cash Distributions			Earnings		Total
Balance, January 1, 2006		7,753		119,968,973		(105,442,061	)		15,094,305		29,621,217
Cash distributions		-		-		(2,713,375	)		-		(2,713,375	)
Net income		-		-		-			12,383,877		12,383,877
Balance, September 30, 2006		7,753	$	119,968,973	$	(108,155,436	)	$	27,478,182	$	39,291,719

General Partner:
	Units of Partnership Interest
					Cumulative			Accumulated
	Number		Amount		Cash Distributions			Earnings		Total
Balance, January 1, 2006		1		10,000		(25,554	)		938		(14,616	)
Cash distributions		-		-		(350	)		-		(350	)
Net income		-		-		-			1,598		1,598
Balance, September 30, 2006		1	$	10,000	$	(25,904	)	$	2,536	$	(13,368	)

See notes to consolidated financial statements.

4

SB PARTNERS

(A New York Limited Partnership)

CONSOLIDATEDSTATEMENTS OF CASHFLOWS (Unaudited)

	For the Nine Months Ended
	September 30,
	2006			2005
Cash Flows From Operating Activities:
Net income	$	12,385,475		$	4,196,006
Adjustments to reconcile net income
to net cash from operating activities:
Net gain on sale of investment in real estate property		(11,770,108	)		(6,350,771	)
Depreciation and amortization		578,293			843,066
Equity in net loss of joint venture		18,389			362,330
Net increase in operating assets		(203,098	)		(94,293	)
Net increase (decrease) in operating liabilities		56,400			(365,663	)
Net cash provided by (used in) operating activites		1,065,351			(1,409,325	)
Cash Flows From Investing Activities:
Net proceeds from sale of investment in real estate property		14,992,289			26,581,743
Distributions received from joint venture		678,000			-
Investment in joint venture		-			(300,000	)
Decrease in cash held in escrow		132,339			87,328
Capital additions to real estate owned		(349,808	)		(524,641	)
Net cash provided by investing activites		15,452,820			25,844,430
Cash Flows From Financing Activities:
Additional borrowings under revolving credit facility		-			200,000
Retirement of mortgage notes payable		(3,383,118	)		(15,859,050	)
Principal payments on mortgage notes payable		(129,319	)		(191,642	)
Repayments of borrowings under revolving credit facility		(2,000,000	)		(4,100,000	)
Distributions paid to partners		(2,713,725	)		(310,140	)
Net cash used in financing activities		(8,226,162	)		(20,260,832	)
Net increase in cash and cash equivalents		8,292,009			4,174,273
Cash and cash equivalents at beginning of period		7,081,976			126,361
Cash and cash equivalents at end of period	$	15,373,985		$	4,300,634
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	1,217,780		$	2,544,342

See notes to consolidated financial statements.

5

SB PARTNERS

Notes to Consolidated Financial Statements (Unaudited)

(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

SB Partners, a New York limited partnership, and its subsidiaries (collectively, the "Partnership"), have been engaged since April 1971 in acquiring, operating, and holding for investment a varying portfolio of real estate interests. SB Partners Real Estate Corporation (the "General Partner") serves as the general partner of the Partnership.

The consolidated financial statements included herein are unaudited; however, the information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to a fair presentation of the financial position, results of operations and cash flows for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Partnership’s latest annual report on Form 10-K.

The results of operations for the three and nine month periods ended September 30, 2006 and 2005 are not necessarily indicative of the results to be expected for a full year.

Certain prior year amounts have been reclassified to conform to the current year presentation. For a discussion of the significant accounting and financial reporting policies of the Partnership, refer to the Annual Report on Form 10 - K for the year ended December 31, 2005.

(2) INVESTMENTS IN REAL ESTATE

As of September 30, 2006, the Partnership owned apartment communities in St. Louis, Missouri and in Greenville, South Carolina. In addition, it owns an industrial flex property in Maple Grove, Minnesota and a warehouse distribution center in Lino Lakes, Minnesota. The following is the cost basis and accumulated depreciation of the real estate investments owned by the Partnership at September 30, 2006 and December 31, 2005:

	No. of			Year of				Real Estate at Cost
Type	Prop.			Acquisition		Description		9/30/2006			12/31/2005
Industrial flex property - Eagle Lake		1			2002		60,345 sf	$	4,829,003		$	4,829,003
Warehouse distribution property - Lino Lakes		1			2005		265,516 sf		15,322,993			15,312,160
Total cost									20,151,996			20,141,163
Less: Accumulated depreciation									(833,139	)		(483,464	)
									19,318,857			19,657,699
Real estate held for sale		(a	)		1991-99		438 Apts		24,306,834			27,387,386
Total investments in real estate								$	43,625,691		$	47,045,085

(a)At September 30, 2006 real estate held for sale includes Halton Place and Le Coeur De Monde. At December 31,2005 real estate held for sale includes Halton Place, Le Coeur De Monde, Holiday Park Apartments and the adjacent 13.9 acres of undeveloped land. See note 3.

6

(3) REAL ESTATE TRANSACTION

On May 2, 2006, the Partnership sold Holiday Park Apartments, a 244-unit apartment community located in Holiday, Florida and 13.9 acres of adjacent land for $15,500,000 in an all cash transaction. The net proceeds from the sale were used, in part, to retire the mortgage note of $3,383,118 that had been secured by the property. The gain on sale of Holiday Park and the adjacent land was $11,770,108.

(4) MORTGAGE NOTES PAYABLE

Mortgage notes payable consist of the following non-recourse first liens:

						Annual				Net Carrying Amount
	Interest					Installment		Amount Due		September 30,		December 31,
Property	Rate			Maturity Date		Payments (a)		at Maturity		2006		2005
Lino Lakes		5.800	%		October, 2015	$	580,000	$	10,000,000	$	10,000,000	$	10,000,000
											10,000,000		10,000,000
Mortgage notes payable in discontinued operations:
Holiday Park		6.895	%		February 2008		-		-		-		3,405,102
Halton Place (b)		6.520	%		March, 2007		Interest Only		-		-		2,000,000
Le Coeur Du Monde		7.805	%		October, 2009		890,447		9,075,763		9,514,934		9,622,268
											9,514,934		15,027,370
										$	19,514,934	$	25,027,370

(a) Annual installment payments include principal and interest.

(b) On March 1, 2001, the Partnership entered into a revolving credit facility agreement with a bank in the amount of $7,500,000 which was secured by Halton Place Apartments. The term of the agreement was extended to March 31, 2007. Borrowings bore interest at the one-month LIBOR plus 1.95%. The agreement required the Borrower, Halton Place Carolina, LLC., a subsidiary of the Partnership, to maintain a ratio of NOI, as defined, to actual debt service, as defined, of not less than 1.2 to 1. On March 14, 2006, the Partnership repaid $2,000,000, reducing the outstanding balance to zero.

(5) DISTRIBUTIONS

On March 1, 2006, the Partnership made a cash distribution of $350 per unit to Unitholders of record as of December 31, 2005, which totaled $2,713,725 based on 7,754 units outstanding.

7

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

General

The consolidated financial statements for the three and nine months ended September 30, 2006 reflect the operations of three residential garden apartment properties, one of which, Holiday Park Apartments, was sold on May 2, 2006, a joint venture interest, whose underlying property was sold on December 22, 2005, an industrial flex property and a warehouse distribution center. The consolidated financial statements for the three and nine months ended September 30, 2005 reflect the same composition as 2006, with the inclusion of Cypress Lakes Apartments, which was sold on March 28, 2005, and except for 435 Park Court, a warehouse distribution property purchased on October 5, 2005.

Results of Operations

Total revenues from continuing operations for the three months ended September 30, 2006 increased $575,000 to approximately $830,000 from approximately $255,000. Income from continuing operations increased $335,000, to income of approximately $152,000 for the three months ended September 30, 2006, as compared to a loss of approximately $183,000 for the three months ended September 30, 2005. Income from discontinued operations for the three months ended September 30, 2006 increased by $125,000 to approximately $224,000 from an approximate income of $99,000 for the same period in 2005. Total expenses from continuing operations for the three months ended September 30, 2006 increased approximately $320,000 to approximately $666,000 from $346,000 for the three months ended September 30, 2005.

Total revenues from continuing operations for the nine months ended September 30, 2006 increased $1,527,000 to approximately $2,254,000 from approximately $727,000 for the nine months ended September 30, 2005. Income from continuing operations increased approximately $783,000 to income of approximately $83,000 for the nine months ended September 30, 2006 as compared to a loss of approximately $700,000 for the nine months ended September 30, 2005. Income from discontinued operations, including gain on sale of investment in real estate property for the nine months ended September 30, 2006, increased approximately $7,407,000 to approximately $12,302,000 from $4,895,000 for the nine months ended September 30, 2005.

Revenues generated by the apartment property owned by the partnership in which the Registrant had a 75% non-controlling joint venture interest are not included in total revenues, nor are the expenses from this investment included in total expenses. However, the equity in net loss of joint venture is the net of revenues collected and expenses incurred by Waterview Apartments for the three and nine months ended September 30, 2006 and 2005. As Waterview Apartments was sold on December 22, 2005, the results of operations from the joint venture for the three and nine months ended September 30, 2006 represents miscellaneous expenses incurred by the joint venture after the sale of the underlying property.

 The changes in revenues, expenses and net income and loss are primarily the result of the changes from 2005 to 2006 in the composition of the portfolio. 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, 2005. There were no significant changes to such policies in 2006. There are no accounting pronouncements or interpretations that have been issued, but not yet adopted, that the Partnership believes will have a material impact on its consolidated financial statements.

8

Liquidity and Capital Resources

As of September 30, 2006, the Registrant had cash and cash equivalents of approximately $15,374,000 in addition to approximately $131,000 of deposits held in escrow by certain lenders for the payment of insurance, real estate taxes and certain capital and maintenance costs, which is included in other assets in discontinued operations. These balances are approximately $8,159,000 higher than the cash, cash equivalents and deposits held in escrow on December 31, 2005. The increase in cash and cash equivalents is due primarily to the sale of Holiday Park Apartments, which provided approximately $14,992,000 after closing costs, less the $3,383,000 required to retire its related mortgage note.Cash was decreased by the payment of distributions of approximately $2,714,000 to unit holders of record as of December 31, 2005 and the reduction of the revolving line of credit balance of $2,000,000 for Halton Place.Operating activities provided approximately $1,065,000 of cash during the nine months ended September 30, 2006, of which approximately $903,000 was provided by discontinued operations. A distribution of $678,000 was received from the Registrant’s joint venture. Other uses of cash during the period included capital additions to real estate properties in continuing operations and real estate held for sale totaling approximately $11,000 and $339,000 respectively, and principal payments of approximately $129,000 made on mortgage notes payable in discontinued operations.

Total outstanding debt at September 30, 2006 consisted of approximately $19,515,000 of long-term non-recourse first mortgage notes, secured by real estate owned by the Registrant (see Note 4 to the Consolidated Financial Statements). The maturity date of the revolving credit facility, which had no outstanding balance as of September 30, 2006, was extended to March 31, 2007. Scheduled maturities through regularly scheduled monthly payments will be approximately $37,000 for the remainder of 2006. The terms of certain mortgage notes require monthly escrow of estimated annual real estate tax, insurance, and reserves for repairs, maintenance and improvements to the secured property, in addition to the payment of principal and interest. The Registrant has no other debt except normal trade accounts payable and accrued interest on mortgage notes payable.

Inflation and changing prices during the current period did not significantly affect the markets in which the Registrant conducts its business, or the Registrant's business overall.

In March 2006, the Registrant made a distribution of $350 per unit to Unitholders of record as of December 31, 2005. However, there is no requirement to make such distributions, nor can there be any assurance that future operations will generate cash available for distributions.

The Registrant's properties are expected to generate sufficient cash flow to cover operating, financing, capital improvement costs, and other working capital requirements of the Registrant for the foreseeable future.

Holiday Park Apartments (Holiday, Florida)

On May 2, 2006 the Registrant sold Holiday Park Apartments in Holiday, Florida, in addition to the adjacent 13.9 acres of undeveloped land, for $15,500,000 in an all cash transaction. The net proceeds from the sale were used in part, to retire the mortgage note of approximately $3,383,000 that had been secured by the property. The sale of Holiday Park Apartments resulted in a net gain for financial reporting purposes of approximately $11,800,000. (Please refer to the 8-K filed May 12, 2006, in connection with this transaction.) The gain for tax purposes will be computed using the tax basis of the asset sold, and will be different from the gain reported on the consolidated financial statements.

Total revenues for the nine months ended September 30, 2006 decreased approximately $565,000 to $594,000 from $1,159,000 for the nine months ended September 30, 2005 as a result of the sale of the property. Net income before gain on sale, which includes deductions for depreciation and mortgage interest expense, for the nine months ended September 30, 2006, decreased $149,000 to $9,000 from $158,000 over the nine months ended September 30, 2005.

The changes in revenue and income are a result of the sale of the property. In addition, as Holiday Park Apartments was a real estate asset held for sale as of June 22, 2005, no depreciation was charged to expense in the current period, which decreased depreciation expense $92,000, from the nine month period of the prior year. Lastly, real estate taxes decreased by $51,000 over the nine month period of 2005.

9

Halton Place Apartments (Greenville, South Carolina)

Halton Place Apartments have been designated as real estate held for sale as of April 1, 2006. As such, this investment is reflected as real estate held for sale on the accompanying consolidated balance sheets. Other assets and the liabilities of this property are reflected as other assets and liabilities in discontinued operations on the accompanying consolidated balance sheets. The results of operations from the property are reflected as income (loss) from discontinued operations in the accompanying consolidated statement of operations.

Total revenues for the three months ended September 30, 2006 increased $52,000 to $449,000 from $397,000 for the three months ended September 30, 2005. Net income, increased $126,000 to $199,000 for the three months ended September 30, 2006 from $73,000 for the three months ended September 30, 2005. The increase in revenues is due primarily to higher occupancy at the property, as vacancy loss decreased $28,000 coupled with a decrease in tenant concessions of $16,000 for the three months ended September 30, 2006. Average occupancy for the three months ended September 30, 2006 increased 6.1% to 97.1% compared to the same period last year. The increase in net income was due to increased revenues in addition to decreased expenses primarily attributable to an $83,000 decrease in depreciation, as the expense was not recorded due to the property being classified as held for sale

Total revenues for the nine months ended September 30, 2006 increased $106,000 to $1,291,000 from $1,185,000 over the nine months ended September 30, 2005. Net income, which includes deductions for depreciation through March 31, 2006 and interest expense, increased $261,000 to $431,000 for the nine months ended September 30, 2006 from $170,000 over the nine months ended September 30, 2005. The increase in revenues is due primarily to a decrease in tenant concessions of $47,000 for the nine months ended September 30, 2006 as compared to the same period last year. In addition, there was a decrease in vacancy loss of $40,000 as average occupancy for the nine months ended September 30, 2006 increased 2.7% to 96.3% from 93.6% for the same period last year. The increase in net income was due to increased revenues in addition to decreased expenses of $154,000, which are primarily attributable to a decrease in depreciation of $150,000, as the expense was not recorded as of April 1, 2006 due to the property being classified as held for sale.

Le Coeur du Monde Apartments (St. Louis, Missouri)

Le Coeur du Monde Apartments have been designated as real estate held for sale as of April 1, 2006. As such, this investment is reflected as real estate held for sale on the accompanying consolidated balance sheets. Other assets and the liabilities of this property are reflected as other assets and liabilities in discontinued operations on the accompanying consolidated balance sheets. The results of operations from the property are reflected as income (loss) from discontinued operations in the accompanying consolidated statement of operations.

Total revenues for the three months ended September 30, 2006 increased approximately $10,000 to $468,000 from the three months ended September 30, 2005. Net income, which includes a deduction for mortgage interest expense, increased $96,000 to $31,000 for the three months ended September 30, 2006 from a loss of $65,000 for the three months ended September 30, 2005. The increase in revenues was mainly due to an increase in rental rates on new and renewing leases. The increase in net income was a result of increased revenues in addition to a decrease of $87,000 in expenses. The decrease in expenses is primarily attributable to a decrease of $85,000 in depreciation expense due to the property being classified as held for sale.

Total revenues for the nine months ended September 30, 2006 increased $78,000 to $1,431,000 from $1,353,000 for the nine months ended September 30, 2005. Net income, which includes deductions for depreciation through March 31, 2006 and mortgage interest expense, increased $265,000 to $91,000 for the nine months ended September 30, 2006 from a loss of $174,000 for the nine months ended September 30, 2005. The increase in revenues was due to a $16,000 decrease in vacancy loss as a result of a 1.6% increase in average occupancy to 96.6% for the nine months ended September 30, 2006 from 95.1% for the same period in 2005. In addition, there was a $59,000 reduction in tenant concessions as compared to the same period in 2005. The increase in net income was a result of increased revenues in addition to a decrease of $187,000 in expenses. The decrease in expenses is primarily attributable to a decrease of $156,000 in depreciation expense, which was not recorded after April 1, 2006 due to the property being classified as held for sale. In addition, there was a $26,000 decrease in repairs and maintenance expense for the nine months ended September 30, 2006 compared to the same period last year.

10

Cypress Key Apartments (Orlando, Florida)

On March 28, 2005, the Registrant sold Cypress Key Apartments in Orlando, Florida, for $27,000,000 in an all cash transaction. Proceeds from the sale were used, in part, to retire the mortgage note of approximately $15,860,000 that had been secured by the property. The sale of Cypress Key Apartments resulted in a net gain for financial reporting purposes of approximately $6,351,000. (Please refer to Form 8-K filed April 21, 2005, in connection with this transaction.) The gain for tax purposes was computed using the tax basis of the assets sold, and will differ from the gain reported on the consolidated financial statements.

Due to the retirement of the mortgage note prior to the maturity date, the Registrant incurred a yield maintenance payment of $1,476,000 for the nine months ended September 30, 2005.

Eagle Lake Business Center IV (Maple Grove, Minnesota)

Total revenues for the three months ended September 30, 2006 increased $6,000 to $223,000 from $217,000 for the three months ended September 30, 2005. Net income, which includes deductions for depreciation, for the three months ended September 30, 2006 decreased $2,000 to $121,000 from $123,000 for the three months ended September 30, 2005. The increase in total revenue was due to increasing rental rates on the existing leases. The decrease in net income was primarily the result of an increase in revenue offset by an increase in operating expenses of $6,000.

Total revenues for the nine months ended September 30, 2006 increased $18,000 to $669,000 from $651,000 for the nine months ended September 30, 2005. Net income, which includes deductions for depreciation, for the nine months ended September 30, 2006 increased $6,000 to $364,000 from $358,000 for the nine months ended September 30, 2005. The increase in total revenue was due to increasing rental rates on the existing leases. The increase in net income was the result of the increase in revenues offset by an approximately $12,000 increase in various operating expenses.

435 Park Court (Lino Lakes, Minnesota)

On October 5, 2005, the Registrant acquired 435 Park Court, a 265,516 square foot warehouse distribution property located in Lino Lakes, Minnesota, for a contract price of $15,150,000 in an all cash transaction. In connection with the acquisition, the Registrant obtained a mortgage for $10,000,000, which is secured by the property. The entire property is leased to Distribution Alternatives, Inc., a Minnesota corporation, through September 30, 2017.

Total revenues for the three months ended September 30, 2006 were approximately $423,000. Net income for the three months ended September 30, 2006, which includes deductions for interest expense and depreciation, was approximately $137,000 after $286,000 of expenses. Expenses for the period were primarily interest expense, real estate taxes and depreciation of $145,000, $30,000 and $88,000, respectively. Real estate taxes were reduced in the current period by an approximately $80,000 tax refund.

Total revenues for the nine months ended September 30, 2006 were approximately $1,209,000. Net income for the nine months ended September 30, 2006, which includes deductions for interest expense and depreciation, was approximately $162,000 after $1,047,000 of expenses. Expenses for the period were primarily interest expense, real estate taxes and depreciation of $483,000, $240,000 and $265,000, respectively.

Investment in Joint Venture (West Chester, Pennsylvania)

On December 22, 2005, Waterview Apartments, the underlying property owned by the joint venture, was sold for $25,750,000 in an all cash transaction. The proceeds of the sale were used, in part, to retire the mortgage note of approximately $13,715,000 that had been secured by the property and pay the defeasance penalty of $2,064,000. The joint venture plans to liquidate in 2006.

Equity in net loss of joint venture for the three months ended September 30, 2006 decreased approximately $80,000 to $12,000 from a loss of $92,000 for the three months ended September 30, 2005. The results of operations from the joint venture for the quarter ended September 30, 2006 represents miscellaneous expenses incurred by the joint venture after the sale of the underlying property.

Equity in net loss of joint venture for the nine months ended September 30, 2006 decreased approximately $353,000 to a loss of $24,000 from a loss of $377,000 for the nine months ended September 30, 2005. The results of operations from the joint venture for nine months ended September 30, 2006 represents miscellaneous expenses incurred by the joint venture after the sale of the underlying property.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006

On March 14, 2006 the Registrant paid down the entire outstanding balance on the revolving credit facility under which interest incurred was determined based on current market rates that fluctuated with LIBOR.

ITEM 4.

CONTROLS AND PROCEDURES

(a)The President and the Principal Accounting & Financial Officer of the general partner of SB Partners have evaluated the disclosure controls and procedures relating to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2006 as filed with the Securities and Exchange Commission and have judged such controls and procedures to be effective.

(b) There have been no changes in the Registrant’s internal controls during the quarter ended September 30, 2006 that could significantly affect those controls subsequent to the date of evaluation.

PART II - OTHER INFORMATION

ITEM 6.

EXHIBITS AND REPORTS ON FORM 8-K

Exhibit 31 - Incorporated herein.

Exhibit 32 - Incorporated herein.

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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.

		SB PARTNERS
		(Registrant)
	By:	SB PARTNERS REAL ESTATE CORPORATION
		General Partner
Dated: November 14, 2006	By:	/s/ David Weiner
		David Weiner
		Principal Financial & Accounting Officer
Dated: November 14, 2006	By:	/s/ George N. Tietjen III
		George N. Tietjen III
		Chief Financial Officer & Treasurer

13

Exhibit 31

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT 0F 2002

I, David Weiner, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of SB Partners;

(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

(4) The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this quarterly report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

(5) The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation over internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: November 14, 2006	By:	/s/ David Weiner
		David Weiner

14

George N. Tietjen III, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of SB Partners;

(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report.

(4) The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this quarterly report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;

(5) The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation over internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: November 14 , 2006	By:	Principal Financing & Accounting Officer
		/s/ George N. Tietjen III
		George N. Tietjen III
		Chief Financial Officer & Treasurer

15

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SB Partners (the “Partnership”) on Form 10-Q for the period ended September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof we hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Dated: November 14 , 2006	By:	/s/ David Weiner
		David Weiner

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SB Partners (the “Partnership”) on Form 10-Q for the period ended September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof we hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Dated: November 14 , 2006	By:	Principal Financing & Accounting Officer
		/s/ George N. Tietjen III
		George N. Tietjen III
		Chief Financial Officer & Treasurer