SB Partners 10-Q 2007 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, 2007

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, 2007 (unaudited) and December 31, 2006 (audited)	1
	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2007 and 2006	2
	Consolidated Statements of Changes in Partners' Capital (unaudited) for the nine months ended September 30, 2007	3
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2007 and 2006	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,
	2007			2006
	(Unaudited)			(audited)
Assets:
Investments -
Real estate, at cost
Land	$	4,065,000		$	4,065,000
Buildings, furnishings and improvements		37,274,885			37,090,344
Less - accumulated depreciation		(1,756,021	)		(1,012,808	)
		39,583,864			40,142,536
Real estate held for sale		-			12,527,027
Investment in Sentinel Omaha, LLC		37,200,000			-
		76,783,864			52,669,563
Other Assets -
Cash and cash equivalents		2,685,330			999,342
Marketable securities		-			12,999,198
Other		177,288			210,430
Other assets in discontinued operations		200			134,728
Total assets	$	79,646,682		$	67,013,261
Liabilities:
Mortgage notes and bank loan payable	$	38,991,225		$	17,084,552
Accounts payable and accrued expenses		619,178			237,500
Tenant security deposits		97,738			92,221
Deferred revenue		-			23,314
Other liabilities in discontinued operations, including $-0-
and $9,477,741 of mortgage notes payable, respectively		23,414			9,638,501
Total liabilities		39,731,555			27,076,088
Partners' Capital:
Units of partnership interest without par value;
Limited partner - 7,753 units		39,928,414			39,950,457
General partner - 1 unit		(13,287	)		(13,284	)
Total partners' capital		39,915,127			39,937,173
Total liabilities and partners' capital	$	79,646,682		$	67,013,261

See notes to consolidated financial statements.

2

SB PARTNERS

(A New York Limited Partnership)

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

SB PARTNERS
(A New York Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
	For The Three Months						For The Nine Months
	Ended September 30						Ended September 30
	2007			2006			2007			2006
Revenues:
Base rental income	$	747,605		$	432,841		$	2,194,447		$	1,299,603
Other rental income		247,198			214,500			736,250			582,956
Interest on short-term investments		103,386			183,259			472,070			371,514
Total revenues		1,098,189			830,600			3,402,767			2,254,073
Expenses:
Real estate operating expenses		157,200			146,086			564,738			394,252
Interest on mortgage notes payable		319,994			145,000			817,432			483,333
Depreciation and amortization		246,411			117,149			758,594			351,447
Real estate taxes		159,780			71,959			469,473			370,739
Management fees		221,853			178,661			550,738			532,267
Other		7,628			7,604			27,603			20,472
Total expenses		1,112,866			666,459			3,188,578			2,152,510
(Loss) income from  operations		(14,677	)		164,141			214,189			101,563
Equity in net loss of joint venture		-			(12,574	)		-			(18,389	)
(Loss) income from continuing operations		(14,677	)		151,567			214,189			83,174
Income (loss) from discontinued operations		12,018			223,801			(40,928	)		532,193
Net gain on sale of investment in real estate property		-			-			2,518,418			11,770,108
Net (loss) income		(2,659	)		375,368			2,691,679			12,385,475
Income allocated to general partner		-			48			347			1,598
Income allocated to limited partners	$	(2,659	)	$	375,320		$	2,691,332		$	12,383,877
(Loss) earnings per unit of limited partnership interest
(basic and diluted)
Continuing operations	$	(1.89	)	$	19.55		$	27.63		$	10.73
Discontinued Operations (including gain on sale)	$	1.55		$	28.87		$	319.55		$	1,586.78
Net  income	$	(0.34	)	$	48.42		$	347.18		$	1,597.51
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, 2007 (Unaudited)

Limited Partners:
	Units of Partnership Interest
					Cumulative
	Number		Amount		Cash Distributions			Accumulated Earnings		Total
Balance, January 1, 2007		7,753	$	119,968,973	$	(108,155,436	)	$	28,136,920	$	39,950,457
Cash distributions		-		-		(2,713,375	)		-		(2,713,375	)
Net income		-		-		-			2,691,332		2,691,332
Balance, September 30, 2007		7,753	$	119,968,973	$	(110,868,811	)	$	30,828,252	$	39,928,414
General Partner:
	Units of Partnership Interest
					Cumulative			Accumulated
	Number		Amount		Cash Distributions			Earnings		Total
Balance, January 1, 2007		1	$	10,000	$	(25,904	)	$	2,620	$	(13,284	)
Cash distributions		-		-		(350	)		-		(350	)
Net income		-		-		-			347		347
Balance, September 30, 2007		1	$	10,000	$	(26,254	)	$	2,967	$	(13,287	)

See notes to consolidated financial statements.

4

SB PARTNERS

(A New York Limited Partnership)

CONSOLIDATED STATEMENTS OF CASH FLOWS  (Unaudited)

	For the Nine Months Ended
	September 30,
	2007			2006
Cash Flows From Operating Activities:
Net income	$	2,691,679		$	12,385,475
Adjustments to reconcile net income
to net cash provided by operating activities:
Net gain on sale of investment in real estate property		(2,518,418	)		(11,770,108	)
Depreciation and amortization		792,652			578,293
Equity in net loss of joint venture		-			18,389
Net decrease (increase) in operating assets		149,119			(203,098	)
Net increase in operating liabilities		226,535			56,400
Net cash provided by operating activities		1,341,567			1,065,351
Cash Flows From Investing Activities:
Net Proceeds from sale of investment in real estate property		15,085,446			14,992,289
Investment in Sentinel Omaha, LLC		(37,200,000	)		-
Distributions received from joint venture		-			678,000
Purchase of marketable securities		(19,999,226	)		-
Decrease in cash held in escrow		24,112			132,339
Proceeds from sale of marketable securities		32,998,424			-
Capital additions to real estate owned		(224,542	)		(349,808	)
Net cash (used in) provided by investing activities		(9,315,786	)		15,452,820
Cash Flows From Financing Activities:
Retirement of mortgage note payable		(9,427,012	)		(3,383,118	)
Principal payments on mortgage notes payable		(144,056	)		(129,319	)
Payment of deferred financing cost		(55,000	)		-
Proceeds of bank loan		22,000,000			-
Repayments of borrowings under revolving credit facility		-			(2,000,000	)
Distributions paid to partners		(2,713,725	)		(2,713,725	)
Net cash provided by (used in) financing activities		9,660,207			(8,226,162	)
Net increase in cash and cash equivalents		1,685,988			8,292,009
Cash and cash equivalents at beginning of period		999,342			7,081,976
Cash and cash equivalents at end of period	$	2,685,330		$	15,373,985
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	1,025,368		$	1,217,780

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, 2007 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, 2006.

(2) INVESTMENTS IN REAL ESTATE

As of September 30, 2007, the Partnership owns an industrial flex property in Maple Grove, Minnesota and warehouse distribution centers in Lino Lakes, Minnesota and Naperville, Illinois.  The following is the cost basis and accumulated depreciation of the real estate investments owned by the Partnership at September 30, 2007 and December 31, 2006:

	No. of		Year of			Real Estate at Cost
Type	Prop.		Acquisition		Description	9/30/2007			12/31/2006
Industrial flex property		1	2002		60,345 sf	$	4,973,175		$	4,901,089
Warehouse distribution property		2		2005-06	596,605 sf		36,366,710			36,254,255
Total cost							41,339,885			41,155,344
Less: Accumulated depreciation							(1,756,021	)		(1,012,808	)
							39,583,864			40,142,536
Real estate held for sale	(a)		1999		192 Apts		-			12,527,027
Total investments in real estate						$	39,583,864		$	52,669,563
(a) December 31, 2006 real estate held for sale consists solely of Le Coeur De Monde. See note 3.

(3) REAL ESTATE TRANSACTIONS

On April 24, 2007, the Registrant sold Le Coeur du Monde Apartments for $16,000,000 in an all cash transaction.  The carrying value of the property at the time of the sale was $12,567,028 which resulted in a net gain for financial reporting purchases of $2,518,418 after closing costs of $914,554, which includes a market rate brokerage commission of $320,000 paid to an affiliate  of the General Partner.  The historical cost of the property at the time of the sale was $14,871,244.  The net proceeds from the sale were used, in part, to retire the mortgage note of $9,427,012 that had been secured by the property.

On June 22, 2007, the Registrant made an initial investment in the amount of $5,000,000 in Sentinel Omaha LLC (“Omaha”), the manager of which is an affiliate of the Registrant’s General Partner.  Additionally, $2,800,000, $9,500,000 and $19,900,000 were invested on July 27, September 14 and September 17, 2007, respectively for a total investment of $37,200,000 representing a thirty percent ownership interest in Omaha.   For additional information please refer to the 8-K filed on June 27, 2007, and as amended on September 19, 2007.  For the quarter ended September 30, 2007, the investment results are de minimis, and will be included in the fourth quarter 2007 results.

6

(4) MORTGAGE NOTES PAYABLE

Mortgage notes payable and Line of Credit 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		at Maturity	2007	2006
Lino Lakes	5.800%	October, 2015	$    580,000	(a)	$ 10,000,000	$ 10,000,000	$ 10,000,000
Ambassador Drive	5.880%	October, 2010	554,178	(b)	6,508,785	6,991,225	7,084,552
Bank Loan:
Unsecured (c )	7.615%	October, 2008	n/a		22,000,000	22,000,000	-
						38,991,225	17,084,552
Mortgage notes payable in discontinued operations:
Le Coeur Du Monde (d)	7.805%	October, 2009	890,447		N/A	-	9,477,741
						$ 38,991,225	$ 26,562,293

(a)      Annual installment payments include interest only.

(b)      Annual installment payments include principal and interest.

(c)      On September 17, 2007, the Partnership entered into a bank loan (the “Loan”) with a bank in the amount of $22,000,000, that  matures on October 1, 2008 and provides for

 interest only monthly payments based upon LIBOR plus1.95%. The outstanding amount of the loan at September 30, 2007 was $22,000,000.  The loan provides for a pledge

 of the proceeds of sale or refinancing of the industrial flex property located in Maple Grove, Minnesota.

(d)      See note (3)

(5) DISTRIBUTIONS

On March 1, 2007, the Partnership made a cash distribution of $350 per unit to Unitholders of record as of December 31, 2006, 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, 2007 AND 2006

General

  The consolidated financial statements for the three and nine months ended September 30, 2007, reflect the operations of  one residential garden apartment property, Le Coeur du Monde, which was sold on April 24, 2007, an industrial flex property and two warehouse distribution centers.   The consolidated financial statements for the three and nine months ended September 30, 2006 reflect the same composition as 2007, with the inclusion of Holiday Park Apartments and Halton Place Apartments which were sold on May 2, 2006 and December 20, 2006,  respectively, and except for 175 Ambassador Drive, a warehouse distribution property purchased on November 28, 2006.

Results of Operations

Total revenues from continuing operations for the three months ended September 30, 2007 increased approximately $267,000 to approximately $1,098,000 from approximately $831,000.  Income (loss) from continuing operations decreased $167,000 to a loss of approximately $15,000 for the three months ended September 30, 2007, as compared to an approximate income of $152,000 for the three months ended September 30, 2006.  Income from discontinued operations for the three months ended September 30, 2007, decreased by approximately $212,000 to approximately $12,000 from an approximate income of $224,000 for the same period in 2006.  Total expenses from continuing operations for the three months ended September 30, 2007, increased approximately $447,000 to approximately $1,113,000 from $666,000 for the three months ended September 30, 2007.

         Total revenues from continuing operations for the nine months ended September 30, 2007, increased approximately $1,149,000 to approximately $3,403,000 from approximately $2,254,000 for the nine months ended September 30, 2006. Income from continuing operations increased approximately $131,000 to $214,000 for the nine months ended September 30, 2007, from approximately $83,000 for the nine months ended September 30, 2006.  Income from discontinued operations including gain on sale of investment in real estate property for the nine months ended September 30, 2007, decreased approximately $9,825,000 to approximately $2,477,000 from $12,302,000 for the nine months ended September 30, 2006.

    The changes in revenues, expenses and net income and loss are primarily the result of the changes from 2006 to 2007 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, 2006. There were no significant changes to such policies in 2007. 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, 2007, the Registrant had cash and cash equivalents of approximately $2,685,000. These balances are approximately $11,337,000 lower than the cash, cash equivalents, marketable securities and deposits held in escrow on December 31, 2006. The sale of Le Coeur du Monde Apartments provided approximately $5,658,000 after closing costs and the retirement of the related mortgage note of $9,427,000.   Operating activities provided approximately $1,342,000 of cash during the nine months ended September 30, 2007, of which approximately $34,000 was used in discontinued operations. The Registrant borrowed $22,000,000 under a unsecured credit facility which was used to partially finance the $37,200,000 investment  in Sentinel Omaha, LLC.  Distributions of approximately $2,714,000 were paid to unit holders of record as of December 31, 2006.  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 $184,000 and $40,000 respectively, principal payments of approximately $93,000 and $51,000 made on mortgage notes payable in continuing operations and discontinued operations, respectively, and $55,000 paid for deferred financing costs.

Total outstanding debt at September 30, 2007, consisted of approximately $16,991,000 of long-term non-recourse first mortgage notes, secured by real estate owned by the Registrant (see Note 4 to the Consolidated Financial Statements) and $22,000,000 under an unsecured credit facility  (see Note 4 to the Consolidated Financial Statements). 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 2007, the Registrant made a distribution of $350 per unit to Unit holders of record as of December 31, 2006.  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.

There was no material revenue or expenses incurred for the three months ended September 30, 2007 and 2006, as a result of the sale on May 2, 2006.

         There was no material revenue or expenses incurred for the nine months ended September 30, 2007, as a result of the sale on May 2, 2006. Total revenues for the nine months ended September 30, 2006 was approximately $594,000.  Net income before gain on sale, which includes deductions for mortgage interest expense, for the nine months ended September 30, 2006 was approximately $9,000.

Halton Place Apartments (Greenville, South Carolina)

On December 20, 2006, the Registrant sold Halton Place Apartments in Greenville, South Carolina, for $12,830,000 in an all cash transaction.  The sale of Halton Place Apartments resulted in a net gain for financial reporting purposes of approximately $606,000.  (Please refer to the 8-K filed January 3, 2007, as amended on January 30, 2007, 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.

There was no material revenue or expenses for the three months ended September 30, 2007, as a result of the sale on December 20, 2006.  Total revenues for the three months ended September 30, 2006 were approximately $449,000.  Net income for the three months, which includes deductions for interest expense, was approximately $199,000.

There was no material revenue or expenses for the nine months ended September 30, 2007, as a result of the sale on December 20, 2006. Total revenues for the nine months ended September 30, 2006, was approximately $1,292,000.  Net income for the nine months, which includes deductions for depreciation and interest expense, was $431,000.

9

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

On April 24, 2007, the Registrant sold Le Coeur du Monde Apartments for $16,000,000 in an all cash transaction. The net proceeds from the sale were used, in part, to retire the mortgage note of approximately $9,427,000 that had been secured by the property.  The sale of Le Coeur du Monde Apartments resulted in a net gain for financial reporting purposes of approximately $2,518,000.  (Please refer to the 8-K filed May 8, 2007, 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.

There was no material revenue or expenses for the three months ended September 30, 2007, as a result of the sale on April 24, 2007.  Total revenues for the three months ended September 30, 2006 were approximately $468,000.  Net income for the three months, which includes deductions for interest expense, was approximately $31,000.

         Total revenues for the nine months ended September 30, 2007, decreased $847,000 to approximately $584,000 from $1,431,000 for the nine months ended September 30, 2006 as a result of sale of the property. The loss before gain on sale, which includes deductions for depreciation and mortgage interest expense, for the nine months ended September 30, 2007, decreased $143,000 to $52,000 for the nine months ended September 30, 2007 as compared to approximately gain of $91,000 for the nine months ended September 30, 2006.

Due to the sale of the property by the Registrant, the reporting period for Le Coeur du Monde Apartments ended on April 24, 2007. The changes in revenue and income are due substantially to the shortened reporting period.  In addition, as Le Coeur du Monde Apartments was a real estate asset held for sale as of April 1, 2006, no depreciation was charged to expense, which decreased depreciation expense approximately $98,000 from the nine months ended September 30, 2006.

Eagle Lake Business Center IV (Maple Grove, Minnesota)

Total revenues for the three months ended September 30, 2007, decreased approximately $2,000 to approximately $221,000 from approximately $223,000 for the three months ended September 30, 2006.  Net income, which includes deductions for depreciation, for the three months ended September 30, 2007 decreased approximately $4,000 to approximately $117,000 from $121,000 for the three months ended September 30, 2006.

         Total revenues for the nine months ended September 30, 2007, decreased approximately $55,000 to approximately $614,000 from $669,000 for the nine months ended September 30, 2006.  Net income, which includes deductions for depreciation, for the nine months ended September 30, 2007, decreased approximately $99,000 to approximately $265,000 from approximately $364,000 for the nine months ended September 30, 2006.  The decrease in total revenue was primarily due to a rent concession of $50,000 in connection with the signing of a lease extension.  The decrease in net income was the result of the decrease in revenues and an increase in expenses of approximately $44,000.  Amortization expense and real estate tax increased approximately $31,000 and approximately $9,000, respectively, for the nine months ended September 30, 2007, as compared to the same period in 2006.

435 Park Court (Lino Lakes, Minnesota)

Total revenues for the three months ended September 30, 2007, decreased approximately $17,000 to $406,000 from $423,000 for the three months ended September 30, 2006.  The decrease in net income was primarily the result of a decrease in recovery of real estate taxes of approximately $17,000 from the tenant.  Net income, which includes deductions for interest expense and depreciation, decreased $92,000 to $45,000 as compared to $137,000 for the three months ended September 30, 2006. The decrease in net income was the result of the decrease in revenues and an increase in real estate taxes of $80,000 due to a tax refund which reduced the expense for the three months ended September 30, 2006.

       Total revenues for the nine months ended September 30, 2007, increased approximately $50,000 to $1,259,000 from $1,209,000 for the nine months ended September 30, 2006.  The increase in net income was primarily the result of $64,000 in retroactive expense recoveries, offset by decreases of $17,000 in real estate taxes. Net income, which includes deductions for mortgage interest and depreciation, for the nine months ended September 30, 2007, increased $7,000 to $170,000 as compared to $163,000. The increase in net income was the result of the increase in revenues and a $43,000 increase in expenses.  Real estate tax increased $90,000, primarily due to a tax refund which reduced the expense for the nine months ended September 30, 2006, offset by a $48,000 decrease in interest expense.

10

175 Ambassador Drive (Naperville, Illinois)

         On November 28, 2006, the Registrant acquired 175 Ambassador Drive, a 331,089 square foot warehouse distribution property located in Naperville, Illinois, for a contract price of $20,800,000 (Please refer to the 8-K filed December 4, 2006 as amended on January 30, 2007 in connection with this transaction).  In connection with the acquisition, the registrant assumed a mortgage of $ 7,107,000 which is secured by the property.

         For the three months ended September 30, 2007, total revenue was approximately $335,000.   Net income for the three months ended was approximately $71,000 which includes deductions for interest expense of approximately $103,000 and depreciation of approximately $121,000.

For the nine months ended September 30, 2007, total revenue was approximately $1,018,000.   Net income for the nine months ended was approximately $200,000 which includes deductions for interest expense of approximately $310,000 and depreciation of approximately $363,000.

11

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007

On September 17, 2007, the Registrant entered into a unsecured credit facility agreement with a bank under which interest incurred is determined based on current market rates that fluctuate with LIBOR.  As such, the Registrant has market risk to the extent interest rates fluctuate during the term of the credit facility and funds are advanced by the bank under the agreement. Based on the weighted average outstanding balance under the credit facility for the three and nine months ended September 30, 2007, a 1% change in LIBOR would impact the Registrant’s three and nine month net loss and cash flows by approximately $8,556.

ITEM 4.

CONTROLS AND PROCEDURES

(a) The Chief Executive Officer 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, 2007 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, 2007 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.

12

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, 2007	By:	/s/ David Weiner
		David Weiner
		Chief Executive Officer
		Principal Financial & Accounting Officer
Dated: November 14, 2007	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, 2007	By:	/s/ David Weiner
		David Weiner
		Chief Executive Officer

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 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, 2007	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, 2007 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, 2007	By:	/s/ David Weiner
		David Weiner
		Chief Executive Officer

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, 2007 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, 2007	By:	Principal Financing & Accounting Officer
		/s/ George N. Tietjen III
		George N. Tietjen III
		Chief Financial Officer & Treasurer